allowance given by partnership firm to partner???

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This query is : Resolved

madhur gupta (Querist)

04 December 2009 hello friendzzz
there is one partnership firm which gives travelling allowance of rs.1500 per day on which partner go to outstation for firm's work.it records as an expense all expenses of hotel,travel tickets etc and this rs.1500 also
now my quest is.
1) can firm book this 1500 as an expense,bcoz there is no detail where this amount has been expended bcoz all expenses of tour are already booked in actual.this amount is in addition
2)will this amount of allownace will come under 40(b) limit
3)is this amount will be taxable in hands of partner in his individual balancesheet??
plz answer
thanx.....

CA.B.K. Jha

CA.B.K. Jha (Expert)

04 December 2009 Any payment in the nature of salary or allowance to partner has to be authorised by partnership deed to be eligible for deduction u/s 40(b). Assuming that it has not been authorized by partnership deed, the tax and accounting implication of above will be as follows:
1. It can not be booked as an expenses and hence has to be added back to net profit for income tax purpose.
2. It will not be considered for section 40(b).
3.It will not be taxable in the hand of partner, as the firm will pay tax on these.

HUZAIFA HUSSAIN

HUZAIFA HUSSAIN (Expert)

04 December 2009 I AGree with expert

Murtaza I Bhagat

Murtaza I Bhagat (Expert)

05 December 2009 Payment of any Expenditure made by Firm whether its allowed or disalloweb by IT Dept., it will not be Taxable to any Partner of Firm...
but Remunaration Paid to any Partner is to be include in his other income. so it may create difference in his personal IT.

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