Interest on partner capital

This query is : Resolved

C.A Tarun Shah (Querist)
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03 August 2011 Suppose partner Mr.X is earning interest of RS.65.00 Lacs from the firm during a particular financial year then is he liable for Tax Audit under section 44AB

CA Navin Jain

CA Navin Jain (Expert)
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03 August 2011 interest is neither a income for carrying business and nor income from carrying professional therefore sec 44AB is not applicable.

CA Navin Jain

CA Navin Jain (Expert)
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03 August 2011 Interest Income is either assessed as ''Business Income'' or as ''Income from other sources'' depending upon the activities carried on by the assessee. If the investment yielding interest were part of the business of the assessee, the same would be assessable as ''business income'' but where the earning of the interest income is incidental to and not the direct outcome of the business carried on by the assessee, the same is assessable as ''Income from other sources''. Business implies some real, substantial and systematic or organized course of activity with a profit motive. Interest generated from such an activity is considered Business Income. Otherwise, it would be interest from other sources.

C.A Tarun Shah

C.A Tarun Shah (Querist)
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08 August 2011 thanks mr.navin

CA Ashwani Agarwal

CA Ashwani Agarwal (Expert)
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08 August 2011 This is interest to a Partner according to Mr. Tarun Shah, so it is always included in Income from B&P.

But as the firm gets itself audited, therefor the partner is not required to get its receipts audited.

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