Payment to partner

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 August 2010 Our firm has Two Partners. One of them has proprietorship business of job work. The firm has paid job wrok charges to partner about Rs. 800000/- whether it is disallowed U/S 40(b). or under any other section. or it can be alloed under which section. Plz. reply immediately.

CA Kalpesh Gokani

CA Kalpesh Gokani (Expert)
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25 August 2010 If such job work charges are excessive or unreasonalbe to fair market value, then AO can disallow these exps. u/s 40A. If it is reasonable to fair market value, it may be allowed u/s 37, proveded these are incurred for business of firm and are of revenue nature.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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25 August 2010 If the expenses are as per the prevailing market rates and in relation to business carried out by the company then the same cannot be disallowed by the A. O.

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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25 August 2010 Section 40 (b) will not attract provided you have to establish that it is a payment on account of business deal between the two concerns.

Querist : Anonymous

Querist : Anonymous (Querist)

25 August 2010 ok Thank for your valuble quick reasponse