Is deduction of partner remuneration and interest paid to partners, is not deductible from AY2016-17

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  1. ZED

    ZED Well-Known Member

    I agree with you on the definition as mentioned in S.4 of the Partnership Act. But when we are applying S.44AD or S.28 , we are not applying partnership Act, we are applying Income Tax Act.
    The definition in partnership Act has a different purpose and objective whereas the purpose and objective of Income Tax Act is different.

    As per sub section (7) to section 2
    "assessee" means a person by whom any tax or any other sum of money is payable under this Act.

    Tell whether the firm and the partner have separate PAN or not

    Now further tell whether both the partners and the firms are assessee or not? And whether they will be treated a distinct entity or not?

    I am fully agreeing to it.

    Its good to see your interest in the matter. Let me know if you have other views. I will like to take them all.
  2. ZED

    ZED Well-Known Member

    Before this amendment came, how was the disallowed and allowed salary etc treated?

    It was taxed in the hands of firm only and was not taxed in the hands of partner.
    Where the salary etc were within the limits of S.40(b), the same was allowed as deduction to the firm but was chargeable to tax u/s 28 in the hands of partners.
    Were in such cases where the salary etc were within the limit of S.40(b), the S.44AD benefit claimed by the partner?
  3. ZED

    ZED Well-Known Member

    Further you submit that "partners are carrying the business in the name of Firm" as the S.4 of the partnership Act says
    "the name under which their business is carried on is called the "firm-name"."

    So, if its the partner who is carrying out the business on behalf of the firm, then why is firm claiming S.44AD?

    Now, on your firms turnover of 2 Crores I will disallow S.44ADs application and will not treat income as mere 16 Lacs and will do computation normally and according to which (in general) your income would be much higher than 16 Lacs [which would be taxable at flat 30% and not on slab basis as in case of a partner.]

    [Kindly read all my three posts together.]
    Last edited: Jun 23, 2016
  4. H Shrinath Bhat

    H Shrinath Bhat New Member

    If firm has only partner, it is proprietary company. In this case, Proprietary company and owner do not have separate pan number. In case of firm, there are more than one person handling business and hence firm is provided with a separate PAN number.

    If, whatever money received by the partner from the firm, has to be treated as salary income only, then what we should do with section 28 (v).
  5. ZED

    ZED Well-Known Member


    You mean proprietary firm ,right?

    When did I said it has to be treated as salary income?
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