LLP & Section 40(b) of I.T.Act

Tax queries 4287 views 4 replies

CA Sanjay Baheti

PROPRIETOR

1160 Points Joined January 2010

Query regarding Section 40(b) of Income Tax Act, 1961 Whether provisions of Section 40(b) applicable to partnership firms would also apply to LLP? If LLP agreement doesn’t have a specific clause with regard to designated partner’s remuneration whether a resolution is sufficient to allow remuneration under section 40b? Or the LLP Agreement itself has to be amended.? What are the detailed procedure to be followed in this regard?

Replies (4)

POONAM P PANDYA

ARTICAL ASSISTANT

31 Points Joined August 2009

Here, LLP Agreement is sufficient. Hence, no need to pass any resolution .

Sumit Soni

Accounts & Taxation

44 Points Joined November 2008

For allowance under sec 40 (b) it is necessary to follow certain conditions. As per that it is necessary to provide quantum & manner of remuneration in LLP agreement itself.

POONAM P PANDYA

ARTICAL ASSISTANT

31 Points Joined August 2009

Even u can go for www.llp.gov.in

Nupur Sharma

431 Points Joined November 2008

I have a query to ask here. What if the partnership firm is based on a slightly different business model? Like in case there are 3 partners and they undertake IT projects from overseas clients. Suppose, Project A has been undertaken by first partner and project B by the second partner, Project C by the third partner and a Project D on which first and second partners are working. Now first partner will get all the income generated from project A plus 50 % from Project D and similarly second partner will get all income generated from Project B plus 50% from Project D.

Will limits of section 40(b) apply here as well? But under what head? This is not salary. Should all this sharing of income from projects be simply treated as sharing of profits because this cannot be treated as remuneration in my opinion.

I would really appreciate if somebody could guide me on this. Quite a technical issue for me.

Thanks in advance