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Remuneration to company

CA Siddhi (PRACTICE) (257 Points)

10 January 2012

Can any one tell me whether Remuneration to company can be paid if it is a partner in partner ship firm.Would it make any difference if it is a limited company? Also provide case-laws, if any available for such case.

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2 Replies

Argha Ghosh (Article Assistant) (21 Points)
Replied 10 January 2012

CA PCC student, starts study after 5 long years break, lost my 7 due attempts for some unavoidable reasons, never do I lost my courage to became a CA. Preparing for my 1st attempt on 8th due schedule, committed not to give up till death. Grateful to my batchmate ROUSHAN MOULIK to let me remind of what I'm in actual, may I have stop communicates with him, this never laid back my tone of gratitute. Besh wishes for his next examinations and shall pray his dream comes to be true.

MD (AAA) (117 Points)
Replied 13 January 2012

A company is a juristic person and therefore can become a partner in a partnership firm, if it is authorised to do so by its objects.

However, remuneration should be paid only to a working partner. For this purpose working partner means an individual who is actively engaged in conducting the affairs of the business or profession of the firm of which he is a partner - Explanation 4 to section 40(b) of the Income tax Act.

Hence, in view of above the remuneration cannot be paid to a partner being a company.