remuneration to partners

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 November 2010 the partnership deed of ABC & Co provides that all working partners (A and B)shall be entitled to remuneration in proportion of 2:1. the total remuneration shall be 50% of book profits.

is this deed is valid for the purpose of section 40(b)?

if the partners mutually decides for total remuneration only 30% of book profits, the same shall be allowable?

CA.Madhusudan B.P.

CA.Madhusudan B.P. (Expert)
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19 November 2010 Yes.
The determination of the partners remuneration is mentioned.
Yes, If all the partners agree to take only 30% of profits.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 November 2010 As per query,the maximum and the proportion of sharing remuneration is mentioned in the partnership deed. However, the method of quantifying the remuneration and the minimum remuneration also should be specifically mentioned in the partnership deed. Otherwise, question of disallowance will arise from the assessing officer.

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Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2010 in the partnership deed, remuneration to be paid is mentioned not maximum remuneration.

CA.Madhusudan B.P.

CA.Madhusudan B.P. (Expert)
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20 November 2010 Anshu,
Whatever is provided in the partnership deed is the maximum or as per Sec 40b if the refeence is made in deed.

OR
Provide the exact wording of the partnership regading the partner remuneration for bette picture.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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20 November 2010 CBDT Circular 739 dated 25/03/1996 says as follows:-
From the asst year 1997-98 and onwards, no deduction u/s 40(b)(v) will be admissible unless the partnership deed either specifies the amount of remuneration payable to each individual working partner or lays down the manner of quantifying such remuneration.