44 ad and partnership income after salary and interest

" Whether return can be filed U/s 44 AD with Rs. 21.00 lacs profit.?"

No.

Yes......... with 83 lakhs profit.........

• Section 44AD(2) prior to Finance Act 2016 amendment, specifically mentioned that while determining the income deemed to be profits and gains of business under Section 44AD of the Act, deduction under Section 40(b) shall be allowed subject to the limits specified.
• Therefore, Section 44AD of the Act which appeared to be a separate self-contained code, specifically used the term contrary in its non-obstante clause so as to enable the eligible assessee to avail the deduction under Section 40(b) of the Act prior to Finance Act 2016.
• The new Section 44ADA of the Act does not provide for any deduction while determining the presumptive profits and this may be considered the reason for the absence of the word contrary in the non obstante clause.

• One may contend that pursuant to deletion of proviso to Section 44AD (2) by Finance Act 2016, Section 40(b) which specifies the amounts not deductible has been deemed to have been disallowed.

Thus. whatever salary or remuneration to be paid or payable has to be added back to the profits of the firm.........

My Dear ........

How can you justify......... when a (partnership) firm declared profits of  Rs. 21 lakhs....... but pays interest to partners at 22 lakhs along with salaries of Rs. 40 Lakhs !!!

So, there could have been confusion..........

To remove that confusion, in Finance bill 2016, the section was amended that the partners' salary and remunerations are not allowed before presumptive assessment !!!

Otherwise it will be added back to the profit.

Earlier the salary & interest were taxed in the hands of partners..... which now taxed in the hands of firm, ........... that's all......

And answer to the query is already given that section 44AD is applicable but not at profit declaration of 21 lakhs.......

Ji.. , How it will reflect in partners individual assessment? Again they have to add interest and salary as income for them and pay tax?

' The Querist / me Show the profit 83 lakhs and pay the Tax... After paying tax we can use taxable amount as remuneration and Interest...."

Yes, after payment of tax on 83 lakhs......... firm can distribute the tax paid funds/capital to partners without any objection from the  department.............. Objection would have arised only if firm paid tax over 21 lakhs and distributed 83 lakhs !!!

Originally posted by : MURALIDOSS
	Ji.. , How it will reflect in partners individual assessment? Again they have to add interest and salary as income for them and pay tax?

No, after the payment of tax over the profits of firm......... when the same is distributed amongst partners, by whatever means, it would be tax-free.

IN THIS CASE WE CAN STRAIGHTLY ADD INTEREST AND SALARY RECEIVED FROM FIRM TO OUR CAPITAL/CURRENT ACCOUNT ?

Yes, to partners' capital accts.