Interest on partner's capital

This query is : Resolved

Shanth Raj B (Querist)
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13 March 2014 Sir,
1. The assessee is Partnership Firm, engaged in the business of manufacturing activity.
2. However, during the year there is no business activity.
3. Further the firm has let out its property and in receipt of rental income.
4. Therefore, letting out income is treated as Income from Other Sources.

So,
1. Is Interest on Partners Capital and remuneration allowed as expenditure, even though income is taken under the head Income from Other Sources?
2. what about applicability of provisions of Sec. 40(b), 269SS, 269T of the I.T. Act, 1961?

Thank you.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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18 March 2014 Income from letting out of property is taxable under the head Income from House Property.

So, no deduction is allowed in respect of interest on partner's capital or salary to partner's.