Salary to partners in case of Unabsorbed Depriciation

salary paid through books shall be allowable exp. as there is no book profit.

Dear Manmeet,

Assuming your query is for A.Y. 2009-10.

Book profit as explained vide explaination 3 of section 40(b), include profit after giving effect of Chapter IV-D i.e. section 28 to 44DD and so Depriciation/unabsorbed Depriciation as allowable undersection 32 shall be deducted while contruing book profit.

In your case, your book profit shall be;

Profit as per P&L                                                                                    (720000)

Add: Donation disallowed under section 37(1)                                    21000

Add: Salary/Remuneration to Partners                                                 xxxxxxxxxx

Add/less difference in Depriciaion/unabsorbed Depriciation as per books and as per IT      xxxxxxxxx

Book profit

Plz note, if book profit is negetive the maximum remuneration shall be given to all partner shall not exceed Rs. 50,000/-

For your reference;

Explanation 3.—For the purposes of this clause, “book-profit” means the net profit, as shown in the profit and loss account for the relevant previous year, computed in the manner laid down in Chapter IV-D as increased by the aggregate amount of the remuneration paid or payable to all the partners of the firm if such amount has been deducted while computing the net profit.

Thanks