Get Answers to 3 GST Queries FREE with Expert CA guidance from CAclubindia Pro. Subscribe Now!

40b remuneration to partners

Tax queries 497 views 1 replies

Krishna Prasad

Partner

260 Points Joined August 2009

I HAVE A CLIENT AND THE STATUS OF THE CLIENT IS PARTNERSHIP FIRM.

IN THE PARTNERSHIP DEED, THE MONTHLY REMUNERATION TO PARTNERS MENTIONED AS RS.16,000/- TO PARTNERS. HENCE AN AMOUNT OF RS.1,92,000/-(16000*12) DEBITED TO PROFIT & LOSS ACCOUNT.

WHILE COMPUTING THE TAXABLE INCOME, REMUNERATION ALLOWABLE AS PER SEC-40b COMES TO RS.2,80,000/-.

THE FIRM TAKEN REMUNERATION DEDUCTION OF RS.2,80,000/- EVEN THOUGH THE PROFIT AND LOSS ACCOUNT WAS DEBITED WITH RS.1,92,000/-.

IS THE FIRM CORRECT IN DOING SO?. PLEASE ADVICE ME IN THIS REGARD.

Replies (1)

Shivani Mittal

Practice

425 Points Joined September 2009

No..the said claim of Rs. 280,000/- is not correct as Sec 40b states the maximum permissible partner's remuneration i.e Rs. 280,000 or Rs 192,000 whichever is lower. Hence, Rs. 88,000 will be disallowed by the department in intimation u/s 143(1) unless it escapes their sight.