Partners have given on rent their own Office Building ( registered in the name of the Partners) to the Firm. My question : (1) Whether the Firm can pay RENT to the Partners and (2) whether such expenses on account of Rent would be allowable as business expenses .
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Allowability of Rent : Taxation of Partnership
Replies (3)
Company can pay rent to the Patrner. If company pay rent to the Partner then it can be allowabl business expense otherwise not.
The firm can pay rent to partners and it is very well allowable. But it should be at "arm's lenght price", i.e. at par with the market rate or with slight accepatble deviation. Say suppose, the market trend for similar kind of property on rent is Rs. 10,000.00 p.m. then, the rent that the firm pays cant be very huge like Rs. 25000 or so.
Thanks a lot Mr. Kabra. Position is clear to me.
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