Partner salary distribution ratio to be same or not???
This query is : Resolved
05 July 2013
A partnership firm have a remuneration clause in partnership deed in a same way as normally every deed contains like compliance of Sec 40b.
Say for a FY max allowable salary is 30lac, and firm distribute among partner in ratio of 5:3:2 but profit sharing ratio is 3:1:1 My query is whether firm can distribute salary in this manner(5:3:2)??
Does income tax alllow it??
secondly can same partnership firm distribute salary in next year in 77:13:10, but again profit sharing ratio remain 3:1:1??? Does consistency have to be followed every year for income tax???
Partnership deed doesnot contain any clause regarding distribution of salary among partner, but defined only max amount allowed.
Please help and clarify
Say for a FY max allowable salary is 30lac, and firm distribute among partner in ratio of 5:3:2 but profit sharing ratio is 3:1:1 My query is whether firm can distribute salary in this manner(5:3:2)??
Does income tax alllow it??
secondly can same partnership firm distribute salary in next year in 77:13:10, but again profit sharing ratio remain 3:1:1??? Does consistency have to be followed every year for income tax???
Partnership deed doesnot contain any clause regarding distribution of salary among partner, but defined only max amount allowed.
Please help and clarify
08 July 2013
1) Profit sharing ratio and remuneration sharing ratio need not be same.
2) Please note that from asst year 1997-98 onwards, no deduction u/s 40(b) will be admissible unless the partnership deed either specifies the amount of remuneration payable to each individual 'working partner' or lays down the manner of quantifying such remuneration.
Ref :- CBDT Circular No. 739 dated 25-03-1996 reported in 218 ITR (St) 131.
2) Please note that from asst year 1997-98 onwards, no deduction u/s 40(b) will be admissible unless the partnership deed either specifies the amount of remuneration payable to each individual 'working partner' or lays down the manner of quantifying such remuneration.
Ref :- CBDT Circular No. 739 dated 25-03-1996 reported in 218 ITR (St) 131.
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