Payment to wife from proprietorship concern

This query is : Resolved

Tushar (Querist)
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10 September 2010 A person and his wife are running 2 separate proprietorship companies and are filing returns independantly. The earnings are not stable. The income fluctuates in such a way that some year wife's company earns much higher whereas in another year husband's company earns higher.

If in one year, the profit made by the company run by wife is low, then can husband make payment as proffessional charges to wife from his own company and claim that as expense?

Both have loans to be paid and need regular income. At the same time though the total income (husband+wife) is same over last few years, the taxation is higher because one company earns almost 70-80% of total.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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10 September 2010 you are not asked your query

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)
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10 September 2010 Although you have not mentioned your query , however i feel in this case sec 40A will attract and assessing officer may opined expenditure as excessive and also not reasonable.

I could not understand your second query i.e. payment of laon and excessive tax burden.