ONE OF MY CLIENT WHOS BUILDER BY PROFFESSION HAD START ONE PROJECT IN FY 2012-13. THERE WAS ONLY CONSTRUCTION IN THE YEAR 12-13 , SO QUESTION OF SALE DOES NOT ARISE. MY QUESTION SI THAT , SINCE THERE IS NO SALES AND NO PROFIT , CAN WE CHARGE INTEREST ON PARTNERS CAPITAL @ 12 % AND ADD FOR CLOSING WIP ALONG WITH OTHER CONSTRUCTION COST?
OR PROFIT IS MUST TO TAKE INTEREST CHARGING PROVISION ON PARTNERS CAPITAL ?
PLEASE RESOLVE MY THIS QUARRY
Yes, The interest can be paid on partners capital. There are two points needs to be kept in mind.
1. The interest which is paid on partners capital must not be more than any other interest paid on loans
2. The Interest on partners capital must not be added to Capital WIP as it would maintain the Profit Percentage on Profit after appropriation which can be dangerous in the later years
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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