Pushkraj Sathe (Chartered Accountant) (203 Points)
22 October 2008A firm has 3 partners,2partners are having credit balance in thier Capital account the third partner has a debit balance.The firm pays interest @ 12%pa on the capital of the partners,it does not charge interest on the debit balance of the partner having Dr Balance in his capital account.
The Income Tax officer says it is mandatory to charge such interest and cerdit it to P&L account of the firm.Is he correct? If yes ,why?
CA CS Akashdeep Singh
(Practicing CA)
(1394 Points)
Replied 22 October 2008
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Interest charged over & above 12% of average monthly balance will be disallow.
It is not mandatory to give interest to partners on their capital.
Originally posted by :Pushkraj Sathe |
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| " | A firm has 3 partners,2partners are having credit balance in thier Capital account the third partner has a debit balance.The firm pays interest @ 12%pa on the capital of the partners,it does not charge interest on the debit balance of the partner having Dr Balance in his capital account. The Income Tax officer says it is mandatory to charge such interest and cerdit it to P&L account of the firm.Is he correct? If yes ,why? |
" |
CA Annie
(Chartered Accountant )
(747 Points)
Replied 22 October 2008
If payment of interest is provided in the partnership deed, then it will be taken. However interest in excess of 12% will be disallowed subject to sec.40 b(IV)
| Originally posted by :Pushkraj Sathe | ||
| " | A firm has 3 partners,2partners are having credit balance in thier Capital account the third partner has a debit balance.The firm pays interest @ 12%pa on the capital of the partners,it does not charge interest on the debit balance of the partner having Dr Balance in his capital account. The Income Tax officer says it is mandatory to charge such interest and cerdit it to P&L account of the firm.Is he correct? If yes ,why? |
" |
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