business income

This query is : Resolved

vicky grewal (Querist)
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26 September 2010 hi to all
whether the follwing expenses are permissibble deduction while computing the business income of mr x & co. a partnership firm engaged in fertilizer business.
1. interest to partners a, b &c (to each)rs 6,00,000 calculated at 15% simple interest, as provided for in the partership deed. C is a non-resident. the firm has not deducted tax at sourace from there these int. payment.
2.salaries paid to resident employess rs.4,20,000 of this in respect of salary payment of rs. 3,20,000 the required TDS was remitted only on 2-10-2010.
3. on a bulding takrn on lease the firm has incurred exenditure on wooden partition & laying of floor tiles to the tune of rs 3,60,000.

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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26 September 2010 1.Interest will be allowed to the extent of 12%. Remaining amount shall be disallowed. There is no requirement of deduction of tax at source.

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CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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26 September 2010 2. 40(a) disallows certain expenditure on which tax has not been deducted at source. However salary to a resident is not covered in those expenditure. Salary paid to a resident shall be allowed even if TDS is not made.

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CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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26 September 2010 3. Explanation 1 to section 32(1) provides that where an assessed holds a building on lease and any capital expenditure is incurred by the assessed for constru of structure, doing of any work or in relation to renovation or improvement, then the provisions of section 32 shall apply as if the said structure or work is a building owned by the assessee.
The capital expenditure incurred by the assessee on a building over which he has lease rights is eligible for depreciation.

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