Tds
This query is : Resolved
Nikhil Kaushik
(Expert)
09 June 2014
as such no tds is applicable on partner's salary. but the partner has to pay the tax on his own.
09 June 2014
TDS not applicable.
Partner is not an employee of the firm. In CIT v. R M Chidambaram Pillai 1976 (11) TMI 2 - SUPREME Court, it was held that a contract of employment requires two distinct firms, viz., employer and employee. A firm is not a 'legal person,' though it has some attributes of a personality. In Income-tax law, a firm is a unit of assessment, by special provisions, but is not a full person. Salary paid to partner is only profit known by a different name. In strict law, there cannot be a contract of service between a firm and one of its partners, since contract of employment requires two distinct persons, viz., employer and employee. A man cannot be his own employer.
In Regional Director, Employees State Insurance Corporation v. Ramanuja Match Industries 1984 (11) TMI 316 - SUPREME COURT , it was held that a partner is not an 'employee' of the company. - [Also see Prakash D. Shah v. UOI 2003 (9) TMI 708 - BOMBAY HIGH COURT .
Explanation 2 to section 15 of the Income-tax Act, 1961 states that any salary, bonus, commission or remuneration, by whatever name called, due to or received by a partner of a firm from the firm shall not regarded as 'salary'. Further, section 28(v) of the Income Tax Act, 1961 states that such incomes received from firm shall be treated as income chargeable to tax under the head "Profits and Gains of business or profession."
Partner is not an employee of the firm. In CIT v. R M Chidambaram Pillai 1976 (11) TMI 2 - SUPREME Court, it was held that a contract of employment requires two distinct firms, viz., employer and employee. A firm is not a 'legal person,' though it has some attributes of a personality. In Income-tax law, a firm is a unit of assessment, by special provisions, but is not a full person. Salary paid to partner is only profit known by a different name. In strict law, there cannot be a contract of service between a firm and one of its partners, since contract of employment requires two distinct persons, viz., employer and employee. A man cannot be his own employer.
In Regional Director, Employees State Insurance Corporation v. Ramanuja Match Industries 1984 (11) TMI 316 - SUPREME COURT , it was held that a partner is not an 'employee' of the company. - [Also see Prakash D. Shah v. UOI 2003 (9) TMI 708 - BOMBAY HIGH COURT .
Explanation 2 to section 15 of the Income-tax Act, 1961 states that any salary, bonus, commission or remuneration, by whatever name called, due to or received by a partner of a firm from the firm shall not regarded as 'salary'. Further, section 28(v) of the Income Tax Act, 1961 states that such incomes received from firm shall be treated as income chargeable to tax under the head "Profits and Gains of business or profession."
10 June 2014
no tds is deducted while paying to partner.
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