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Commission to partners

TELUGU SATYANARAYANA (ADVOCATE and TAX CONSULTANT) (172 Points)

30 March 2013

sir

can any one pls help me ! in the partnership firm whether the commission is allowed to business partners. is there any restirction to the partners.

i came to know that the decision "shantilal jain vs CIT" wherein it was held that brokerage parted with relative customers will attract sec 40A (2) (b) and will be disallowed as it is diversion of income.

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4 Replies

CA BHUMIT SHAH (Consultant ) (270 Points)
Replied 30 March 2013

ANY COMMISSION PAID TO BUSINESS PARTNERS WILL BE INCLUDED IN HIS SALARY AND THUS RESTRICTION OF ALLOWANCE OF DEDUCTION U/S 40(B) WILLBE APPLICABLE......

Nitesh Matta (Nothing) (198 Points)
Replied 30 March 2013

commission can be paid to the working partner of the firm subject to conditions laid down in section 40(b)

CA Jatin Kacha (Chartered Accountant) (230 Points)
Replied 30 March 2013

My dear friend,

It is as like the company.

Commissione would be considered as part of remuneration and would be subject to section40(b) of the income tax act.

Atul Deep Gupta (AGM) (30 Points)
Replied 01 April 2013

in the case of any firm assessable as such,— (i) any payment of salary, bonus, commission or remuneration, by whatever name called (hereinafter referred to as “remuneration”) to any partner who is not a working partner; or (ii) any payment of remuneration to any partner who is a working partner, or of interest to any partner, which, in either case, is not authorised by, or is not in accordance with, the terms of the partnership deed; or (iii) any payment of remuneration to any partner who is a working partner, or of interest to any partner, which, in either case, is authorised by, and is in accordance with, the terms of the partnership deed, but which relates to any period (falling prior to the date of such partnership deed) for which such payment was not authorised by, or is not in accordance with, any earlier partnership deed, so, however, that the period of authorisation for such payment by any earlier partnership deed does not cover any period prior to the date of such earlier partnership deed; or (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 7[twelve] per cent simple interest per annum; or 8(v) any payment of remuneration to any partner who is a working 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 the amount of such payment to all the partners during the previous year exceeds the aggregate amount computed as hereunder :— 9[(a) on the first Rs. 3,00,000 of the book-profit or in case of a loss Rs. 1,50,000 or at the rate of 90 per cent of the book-profit, whichever is more; (b) on the balance of the book-profit at the rate of 60 per cent :]