sec 40(b) of income tax act

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santosh kumar huded (Querist)
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12 May 2010 in the partnership deed we have specified that the remunaration of partners will be paid according to section 40(b)and specified the details of sec 40(b)of the amount,but for the AY 2010-2011, the amount is changed in sec 40(b), whether this change is to incorporated in the deed or this change will be automatically applied kindly reply .

Rahul Gupta

Rahul Gupta (Expert)
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12 May 2010 NO there is no requirement to make any changes in the deed. The deed says that section 40(b) will apply. so if section changes itself the changes will also be applied itself.
No need to make changes in deed.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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13 May 2010 CBDT Circular 739 dated 25/03/1996 says " no deduction under section 40(b)(v) 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".

In view of the above, as per my understanding, change in the deed is warranted.

CA Shiv

CA Shiv (Expert)
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13 May 2010 Agree.....
Change in deed is required. Amount of remuneration should be according to what is specified in the partnership deed.
Section 40(b) just specifies the deduction and condition. but the remuneration should be according to the deed. OR else it will be disallowed....
And if we do like that, than what is the importance of the partnership deed?

taxindiaconnect

taxindiaconnect (Expert)
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17 May 2010 The interpretation by my friend BC is correct, Infect the earlier deed is also defective and be amended suitability.

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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17 May 2010 Thank you Rajesh Sir for confirming my understanding.

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Rahul Gupta

Rahul Gupta (Expert)
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17 May 2010 Experts. Thanks a lot for updation.

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