Applicability of Section 44AD for Partnership Firm

Dear all,

Came across a partnership firm having turnover of 60 lakhs and profit nullifying by way of debiting interest on partners' capital and remuneration to partners in P & L A/c. Are provisions of section 44AD not attracted as presumptive profit is to be considered before aforesaid interest and remuneration to partners?

Thanks!

CA. Sanjeev Kumar

Replies (5)
Quick Summary
This discussion examines whether Section 44AD of the Income Tax Act is applicable to a partnership firm with a turnover of 60 lakhs where profit is reduced to nil by partner remuneration and interest on capital. The query questions if presumptive profit under 44AD should be calculated before these expenses. Responses suggest that 44AD profits are typically calculated after such expenses, meaning the firm likely won't qualify for 44AD and will need to conduct a tax audit under Section 44AB due to Section 40(b) implications.

In case, sec 44AD(4) not attracted...... sec. Sec.40(b) gets attracted.

Ca sanjeev ji you have mistaken. 44ad profits are after remuneration and interest expense.

since the profit is sweeped by the interest and remuneration, the firm will have to get audit done.
Sir please provide the section where it is writtem
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INCOME TAX AUDIT REGARDING [Resolved] | Income Tax (caclubindia.com)

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