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computation u/s 44af

divyesh (Partner) (107 Points)

19 August 2010

Dear all

I am e-filling retrun for partnership firm for A Y 10-11, wherein i have opted for presemtive u/s 44af details as mentioned below

total turnover : 2080000

5% of above : 104000 (Deemed Gross Profit)

Interest on partners capital amount s to Rs. 106000

So now do i have to reduce interest on partner capital to amount equal to deemed profit or keep it as it is and show the loss, also in above case do i have to show partner remuneration ?

Regards

Divyesh

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8 Replies

CA. BIJENDER KR. BANSAL (ACA, B.COM) (8143 Points)
Replied 19 August 2010

As per section 44 AF ,AnyInterest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.

Section 40(b)

40. Notwithstanding anything to the contrary in sections 30 to ¹[38], the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",—

[(b) in the case of any firm assessable as such,—

iv) any payment of interest to any partner which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as such amount exceeds the amount calculated at the rate of 18 % simple interest per annum;

i;e if interst rs. 106000/- is accordance to terms of deed, then you can claim it as whole and loss will be c/f .

Manoj (Tax Manager) (26 Points)
Replied 19 August 2010

DEVVYESH,

WHILE CALCULATING DEEMED INCOME U/S 44AF, ALL THE DEDUCTION FROM SECTION 30 TO 38 HAS BEEN DEEMED TO HAVE ALREADY BEEN ALLOWED AND NO SEPERATE DEDUCTION WOULD REQUIRED AGAIN. FURTHER, SINCE THE INTEREST ON PARTNERS CAPITAL AND PARTNER'S REMUNERATION IS OUTSIDE THE PURVIEW OF THE SEC 30 TO 38, U WILL GET THE DEDUCTION FOR THE FULL AMOUNT. FURTHER, AFTER ALLOWING SUCH DEDUCTIONS, IF U INCURRED A LOSS, IT WILL BE ALLOWED YOU TO SET OFF/ CARRY FORWARD SUCH LOSS. THUS, U CAN SHOW A LOSS

REGARDS,

MANOJ

Dheeraj (Learner) (1100 Points)
Replied 19 August 2010

YES

U CAN SHOW LOSS AND C/F TO NEXT YEAR

& EVEN U CAN C/F THE LOSSES IF NEXT YR ALSO COME UPTO 8 YRS.

PANKAJ KHURANA (PARTNER) (447 Points)
Replied 19 August 2010

Originally posted by : CA. BIJENDER KR. BANSAL
	As per section 44 AF ,AnyInterest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40. Section 40(b) 40. Notwithstanding anything to the contrary in sections 30 to 1[38], the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",— [(b) in the case of any firm assessable as such,— iv) any payment of interest to any partner which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as such amount exceeds the amount calculated at the rate of 18 % simple interest per annum; i;e if interst rs. 106000/- is accordance to terms of deed, then you can claim it as whole and loss will be c/f .

CA Sanat Pyne (F.C.A. & M.COM) (19992 Points)
Replied 19 August 2010

/experts/computation-u-s-44af-464055.asp

CA HARISH KUMAR (ACA, B.Com(Hons.)) (80 Points)
Replied 19 August 2010

Agree with Mr. Bijender

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 19 August 2010

A slight correction in bansalji reply to the extent that the rate of interest “eighteen” has been substituted for twelve by the Finance Act, 2002, w.e.f. 1-6-2002.