Rent paid by firm on behalf of partner for residence of part

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Rent paid by a partnership firm for a partner's personal residence is not allowable as business expense under Section 37 as it is personal in nature. Even if agreement is in firm's name, it remains disallowed. Only business-related accommodation (like guest house for official use) may be considered.

Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2015 Is rent paid by firm on behalf of partner for the residence of partner & his family will allowable as deduction under income tax act in the books of the partnership firm, please confirm. Note :- Rent Agreement is between landloard & the partnership firm (& not with partner).

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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25 September 2015 It is in the nature of personal expenditure of the partner. This is not deductible as per section 37 of the IT Act.

Moreover as per Section 40(a) and 40A only remuneration (subject to limits specified) and interest on capital (up to 12%) if the same are as per the terms of the Partnership Deed, then only those two are allowable in Income Tax Act. No other expenditure of personal nature is deductible.

CA Parul Saxena

CA Parul Saxena (Expert)
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25 September 2015 if instead of firm co is paying rent for its directors residence then what would be the scenario sir??

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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25 September 2015 Company cannot pay for a non-executive director, if paying, shall be treated as personal exp. and is disallowed.

In case of executive director and the payment is as per terms of employment, then, will be treated as perquisite. Valuation of perquisite rules are applicable.

Querist : Anonymous

Querist : Anonymous (Querist)

07 October 2015 Can Rent paid for Gust House taken on lease (Rental basis) for the stay of the partners of the firm be allowed as expenses in the books of the firm, please suggest.

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