Section 40(b)

This query is : Resolved

Ansari (Querist)
Follow

03 December 2009 1- Status- Firm
2- No of Partners- Two
3- Total Capital on 01.04.08- Rs. 10,00,000
4- Profit bfor intt.on capital & remun.
Rs. 1,42,000 upto 31.12.08
5- One partner retire from the firm on
31.12.08
6- Remaining one partner continue the
business.

Calculate Interest on Capital,
Remuneration allowable U/S 40(b)
& taxable profit of the firm on
31.12.08

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

03 December 2009 1) Interest on capital @ 12% for 9 months= Rs.90,000/-
2) Remuneration:-
net profit 1,42,000/-
Less: interest 90,000/-
---------
Book profit 32,000/-
=========
3) Remuneration 32,000/-
4) Taxable income NIL

PROVIDED THE INSTRUMENT OF PARTNERSHIP CONTAINS PROVISIONS TO THIS EFFECT. IF NOT THE CALCULATION MAY BE IGNORED.

Ansari

Ansari (Querist)
Follow

03 December 2009 I think there is some caculation mistake.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

03 December 2009 Yes there is a mistake.Book profit is corrected as Rs.52,000/-
Remuneration is Rs.50,000/-
Taxable income Rs.2000/-
Mistake is regretted.

Zeeshan

Zeeshan (Expert)
Follow

03 December 2009 whether it will remain firm at the end of the year (STATUS).
as as single person is operating the business?

and what about remuneration if there is no partnership at the end of the year? whether section 40b will be applied?

Ansari

Ansari (Querist)
Follow

03 December 2009 remuneration wud not b based on months.

Ansari

Ansari (Querist)
Follow

03 December 2009 Hi Mr. Zeeshan
In my opinion status wud changed bcauz it has become a proprietorship concern.
No. Sec 40(b) wud not apply.