FATEMA (CHARTERED ACCOUNTANT) (719 Points)
28 September 2010Dear all,
Our client, a partnership firm, says not to provide interest on capital @ 12% p.a. inspite of it being specified in the deed.The partners have not ammended the deed for the same.Now my query is that is it mandatory to provide interest @ 12% on capital if it is provided in the patnership deed.If yes,then should e qualify our report for not providing interst on capital?under which clause should we disclose the qualification regarding interest?
Fatema
k n v v s k sri kanth
( )
(564 Points)
Replied 28 September 2010
Fatema Ji,
First of all there is no mandatory to provide interest on capital to the partners even though if it is mentioned in the deed, but in reality any firm will like to provide interest as an expense in order to cut off the income earned to avoid tax burden but in this case if the firm did not want to claim an expense it would ultimately benifit the IT Department as they only concentrate on the issues of excess declaration of expenses or incomes and not on these cases. To be more clear, interest on capital @ 12% (as its max. limit IT dept. allows) is an optional expense.
Regards
Sunshine
(Helping All)
(10575 Points)
Replied 28 September 2010
yes its not mandatory but its benefitial for the assessee to claim interest on capital as an expense..(max.12% allowed)...
Hitesh Patil
(ERP Finance Consultant)
(30 Points)
Replied 28 September 2010
IN CASE OF PARTNERSHIP, THINGS MUST BE DONE ACCORDING TO THE DEED. IF THERE IS ANY THING MATERIAL CONTRARY TO THE DEED, THE AUDITOR NEEDS TO DISCLOSE THE SAME. IF P.DEED CONTAINS PROVISION FOR INTEREST, IT HAS TO BE PROVIDED OR ELSE, IT WEILL TANTAMOUNT TO CONTRAVENING THEIR OWN FRAMED REGULATIONS.
SO AUDITOR SHALL HAVE TO QUALIFY THE REPORT AS PARTNERS HAVE NOT FOLLOWED THEIR OWN REGULATION.
FATEMA
(CHARTERED ACCOUNTANT)
(719 Points)
Replied 28 September 2010
Where should the qualification be disclosed in Form 3CD? Which clause?
JINESH SHAH
(PRACTICING CA)
(151 Points)
Replied 28 September 2010
NO NEED TO QUALIFY REPORT.... NOT MANDATORY TO PROVIDE INTEREST..
Sunshine
(Helping All)
(10575 Points)
Replied 28 September 2010
auditor need not qualify the report but the fact needs to be disclosed by him separately,..
CA FaIyaZ PaTrAwaLa
(CA)
(276 Points)
Replied 28 September 2010
Hitesh Patil
(ERP Finance Consultant)
(30 Points)
Replied 28 September 2010
FROM 3CD HAS FIXED REPORTING REQUIREMENTS.
NO NEW CLAUSE TO BE ADDED. THE FACT THAT INTEREST HAS NOT BEEN PAID TO PARTENERS DESPITE THE CLAUSE IN P.DEED NEEDS TO BE DISCLOSED BY WAY OF NOTES TO ACCOUNT.
IT IS A PART OF REPORT.
patilhit
Ahmedabad
CAclubindia
