Remuneration u/s 40(b)

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CA. Komal Savaliya (Querist)
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01 May 2008 What will be the allowable remuneration under Income Tax Act in following situation, if firm is carring on more than one business?
Non speculation profit fr0m one business-Rs. 400000/-, Non speculation loss from second business-Rs. 200000/- and Speculation loss- Rs. 200000/-. What will be remuneration? Rs. 50000/-??

CA. Yayati Tyagi

CA. Yayati Tyagi (Expert)
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02 May 2008 U/s 73, speculation losses can be adjusted only against speculation gains. If there is no speculation gain, loss will be carried forward for following four A.Y.

For computing remuneration allowable we compute book profit which is actually taxable income before deducting allowable remuneration. Hence, here firm's book profit comes to Rs. 2,00,000/- (assuming no remuneration is deducted) on which remuneration allowable is Rs. 1,32,500/-. Pls verify other conditions like continuity of loss making business etc.

CA. Yayati Tyagi

CA. Yayati Tyagi (Expert)
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02 May 2008

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CA Hemant T Dewani

CA Hemant T Dewani (Expert)
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02 May 2008 CA. Komal Savaliya
as per your quiry non speculation loss is rs 200000/-& profit is rs 400000/- so net profit is rs 200000/- this amount is distributed to partners as per income tax act.
for speculation loss this can not be set off any other income only loss is set off against speculation profit so you will pay tax & carryforward speculation loss to next year return should be submitted u/s 139(1) of the income tax act

R.V.RAO

R.V.RAO (Expert)
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02 May 2008 IF IT IS A PARTNERSHIP FIRM,AND WHEN THE FIRM IS TAXED ,THE SHARE OF PROFITS WILL NOT BE INCLUDED IN PARTNER'S INCOME AGAIN.
IF THE FIRM PAYS TAX ON RS 200000/ BOOK PROFIT,(RS 4 LAKHS NON SPEC,.PROFIT MINUS NON SPEC.LOSS OF RS. 2 LAKHS) THEN PARTNERS WONT GET TAXED AGAIN.
REMUNERATION ALLOWED(SEC 184 OF IT ACT) ON BOOK PROFITS
ON FIRST RS.75000 (90%)= RS.67500
ON NEXT RS.75000(60%) = RS.45000
ON BALANCE RS 50000(40%) = RS.20000
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TOTAL RS.132500
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SPEC.LOSS CAN BE CARRIED FORWARD FOR 4 YEARS,UNLESS IT IS SET OFF AGAINST SPEC.PROFITS.
R.V.RAO