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About Sec. 40(b) of IT Act 1961

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(Querist)
23 June 2009 Wheter Interest on enhanced capital of Partners due to revaluation is allowable or not?
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Ratan Sharma

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Ratan Sharma (Expert)
23 June 2009 Hi Amit,
There is no prohibition as such in sec. 40(b). Although your question is interesting but according to my view interest should be allowed. The important point is that it should be in accordance with the partnership deed. Therefore it is better to amend the partnership deed accordingly and then pay the interest on such increased capital.
Experts please clarify, if any alternate view is there.
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CA Nitin Wadhwani

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CA Nitin Wadhwani (Expert)
26 June 2009 In my opinion, it is not allowed.
There is a case law on it, I will try to post it as soon as get it.
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