Nett profit and interest on capital

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TARIQUE RIZVI (Querist)
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22 July 2016 IF NETT PROFIT IS RS ONE LACS INTEREST ON CAPITAL IS RS 2 LACS AND FINALLY NETT LOSS OF RS ONE LACS ARRIVES IN PROFIT & LOSS ACCOUNT WHETHER THIS LOSS OF RS ONE LACS IS ALLOWED OR DIS-ALLOWED PLS GUIDE ME WHAT TO DO IN THIS CASE

Amol S Joglekar

Amol S Joglekar (Expert)
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22 July 2016 hope, your query is with respect to Partnership firm.
The loss will be allowed.......no issues.

TARIQUE RIZVI

TARIQUE RIZVI (Querist)
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22 July 2016 Thank you Mr Amol well one more thing I would like to know whether ITR-5 on account of Rental Income from Plant can be filed u/s 44-Ad by showing 8% net profit against the total rent receipt from Plant. Total Rent Receipt is Rs 18,00,000 ( 18 Lacs ) Nett Profit will then arrive at Rs 1,44,000/ ( 1.44 Lacs ) @ 8%

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Amol S Joglekar

Amol S Joglekar (Expert)
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22 July 2016 yes, it can be done that way.....mind well this 8 % shall be deemed to be after interest, commission, salary, bonus and remuneration of partners.......

TARIQUE RIZVI

TARIQUE RIZVI (Querist)
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22 July 2016 Thanks Lot of thanks to you Amol Sir.

Amol S Joglekar

Amol S Joglekar (Expert)
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23 July 2016 you are most welcome.

CA. Sunil Gokhale

CA. Sunil Gokhale (Expert)
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23 July 2016 I beg to differ. Profit u/s 44AD is after deductions u/s 30 to 38 only. A firm can claim deduction for remuneration to partners u/s 40(b)

TARIQUE RIZVI

TARIQUE RIZVI (Querist)
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24 July 2016 Thank you Mr Sunit but someone has advised me to do as follows:

Ay 2016-17 : ITR-5 u/s 44-AD : Partnership Firm
===================================
Gross Rental Receipt from Plant & Machinery is Rs 18,00,000 { 18 Lacs }

Nett Profit @ 8% will arrive at Rs. 1,44,000/= { 1.44 Lacs }

I have been advised that in P&L of ITR-5 remuneration or interest on capital u/s 40 (b) should not be reflected and the nett profit of Rs. 144,000/- should be reflected in P&L account in ITR-5. Later in schedule BP at point no. 31 put the total value of remuneration or interest on capital or both on account of any other allowable deduction. Pay the total tax liability if income is observed and if loss is observed, loss can be claimed. Is the adviser right or wrong ? But simultaneously remuneration or interest on capital or both should be reflected in your books of accounts so that investment of the partners as per their personal accounts should be matched with their capital account with the partnership firm.

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TARIQUE RIZVI

TARIQUE RIZVI (Querist)
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24 July 2016 Thank you Mr Sunit but someone has advised me to do as follows:
Ay 2016-17 : ITR-5 u/s 44-AD : Partnership Firm ===================================
Gross Rental Receipt from Plant & Machinery is Rs 18,00,000 { 18 Lacs } Nett Profit @

8% will arrive at Rs. 1,44,000/= { 1.44 Lacs }

I have been advised that in P&L of ITR-5 remuneration or interest on capital u/s 40 (b) should not be reflected and the nett profit of Rs. 144,000/- should be reflected in P&L account in ITR-5. Later in schedule BP at point no. 31 put the total value of remuneration or interest on capital or both on account of any other allowable deduction. Pay the total tax liability if income is observed and if loss is observed, loss can be claimed. Is the adviser right or wrong ? But simultaneously remuneration or interest on capital or both should be reflected in your books of accounts so that investment of the partners as per their personal accounts should be matched with their capital account with the partnership firm.