We are a partnership firm. We follow fixed capital method of accounting. According to the deed partners are entitled to interest @ 12% on Capital account credit balance, calculated on actual duration of credit balance. now as per 40(b) interest should be in accordance with the the terms of the deed s.t @ 12% upper limit. it does not mention the word" interest on capital", it says "any payment of interest to any partner". So, my question is do i need to take into account partners current account debit balance to calculate allowable interest for income tax purposes? if yes please provide me with the relevant section.
Thanks
CAclubindia
