Can anyone explain what is the impact of income side for a partner who receives salary from the firm after considering Section 40(b).
Example : If A a pertner receives Rs 6,00,000 p.a. salary from firm but actual salary allowable U/s 40(b) for the firm is say Rs 1,00,000 ( Expense allowed in firms ITR ). How do we consider the salary income from the partners point of view ?
a ) Rs 5,00,000 ( Rs 600000 - Rs 100000 ) or
b ) Rs 6,00,000 ( Actual salary received by the partner )
Ans. 1,00,000
Paid by firm 6 lakh. Allowed 1 lakh. Disallowed 5 lakh.
Since the disallowed remuneration has suffered tax in the hands of the firm, the same will not be taxed in the hands of the partner.
Proviso to Sec. 28(v) of IT Act
Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted.
As per your opinion in this case Rs 100000 is taxable right?
In my view Section 40(b) talks about disallowability of expense in the hands of the firm. Im not worried about the firm. Im worried about the partner.
My query is does Section 28(v) addresses the income portion in the hands of the partner. If so do we need to take the whole amount received by the partner as income or else any adjustment is required as mentioned above.
CCI
Pro
CAclubindia
