Calcultion of Book Profit in Partnership Firm

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 September 2010 If a firm is paying Interest on capital to partners and also salary to partners then

(i) for calculating the Book profit whether interest on capital will add back into Net profit

(ii) can firm charge both interest on capital and salary to partners

(iii) will it affect the tax audit report

Pls advise

Aditya Maheshwari

Aditya Maheshwari (Expert)
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04 September 2010 1. book profit for salary interest not to be added back.
2. yes
3. No. Only if the same is to be disallowed to be reported. It will form part of 40A(2)(b) parties.

Adv. R. B. Munot

Adv. R. B. Munot (Expert)
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04 September 2010 (i) No need to add back interest on capital for calculating Book Profit.
(ii) Yes, if partnership deed provides such clause clearly.
(iii) only reporting of dis-allowances under section 40A(2)(b) shall be made in tax audit report.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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04 September 2010 I think only disallowance u/s 40(b) if any to be stated under clause 17(g) only and any amount paid to persons covered under section 40A(2)(b) to be reported even if the same is not disallowable under that section under clause 18.

Only while preparing ITR the amount of disallowance u/s 40A(2)(b) needs to be stated and not amount paid.

Kindly confirm.

Adv. R. B. Munot

Adv. R. B. Munot (Expert)
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05 September 2010 i kindly agree with Mr. Aditya.
Thanks for elaborating provisions.

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