Salary to partners

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

06 August 2012 Dear expert,
If the net profit of the firm is 178000/- and 90% of profit comes to 160200/-. There are three working patners.
clause in partnership deed is as -
on the first 3 lacs - 150000/- or 90% whichever is more
Above 3 lacs - 60%
and salary so calculated shall be distributed in profit & loss ratios.
There ratios are
1st- 60% and remain whole year
2nd- 20% and remain whole year
3rd- 20% and remain only 4 months
now please tell me how to distribute said profit as salary among the partners.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 August 2012 Assuming that 178000/- as said by you as net profit is book profit of the firm.
.
Is there any information available as regards the remuneration prior to the entry of the 3rd partner ?
.
In the absence of any information -
3rd partner will get 20% remuneration in respect of 4 months only. 160200*20/100*4/12
i.e. Rs 10680.
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Rs. 21360/- can not be given to 3rd partner .
By virtue of earlier deed this remuneration may be allocated to 1st and 2nd partner. Otherwise the same will not be allowable to the firm.
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1st Partner will get 160200*.6
2nd partner will get 160200*.2
.

Querist : Anonymous

Querist : Anonymous (Querist)

06 August 2012 actually firm was formed on 25/04/2011 and on 30/08/2011 that 3rd partner has been retired from the firm.

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 August 2012 1. How can you say that the partner has been retired?
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2. DO you have the Deed of Retirement?
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3. Please go through the remuneration clause in the new deed subsequently executed.
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Querist : Anonymous

Querist : Anonymous (Querist)

06 August 2012 In the new reconstitution deed 1st partner remain with intact 60% P&l ratio and 2nd partner P&l ratio extend to 40% and salary clause also following this ratio for salary distribution.

Querist : Anonymous

Querist : Anonymous (Querist)

06 August 2012 And in retirement deed 3rd retiring partner explicitly expressed that remaing two partners are free to carry on the business of the firm.

srinath

srinath (Expert)
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07 August 2012 Hi,

it should be calculated like this

as you tolsay on 160,200 first calculate the salary for the 3rd partner on the proportionate basis.

Let say for eg it comes to 25,000 deduct this 25,000 from 160,200 and on the balance calculate 60% for first partner and 40% for second partner

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2012 Sir one more thing to ask -
As shown profit is calculated u/s 44AD and therefore return is non account case, then in column 51 of part P&L of itr 5, where to put this salary of partners.

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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07 August 2012 In the ITR you have to show Turnover and Net Profit of the firm only.
.

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2012 I am in doubt that cpc can quetion on percentage of net profit, as it definitely go down to 8% after providing salary to partners and how to tackle the this situation.