Manan Gupta (Student) (136 Points)
28 June 2011
Please Help for answering the Question:
WHAT ARE THE Legal accounting methods to reduce profit of a partnership firm so as to reduce the tax liability?
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CA SURENDRA KUMAR RAKHECHA
(Practising CA at Surat)
(26263 Points)
Replied 28 June 2011
1. No such subject/topic has been covered in the syllabus so far and future it will never be covered.
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2. If you try; you should also plan for paying penalties and remain busy in litigation if you are caught.
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3. If someone suggest you; he should also prepare himself to answer the Institute if disciplinary actions are taken against him.
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4. Professional courses are designed to comply with the legal provisions; not to reduce earned profits just because TAXES are due and PARTNERS are unhappy to pay the taxes.
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5. Future course of action can be taken :
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( i ) Either form proprietory concern and employ rest of the partners as employees!
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( Never desirable by the real partners).
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( ii ) Close the business ( No taxes will be required to be paid).
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6. You have not disclosed what is the amount of profits of the firm and how much they are ready to pay to the professional.
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( A good lesson is required to be taught ).
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Vikas
(CA)
(1135 Points)
Replied 29 June 2011
I think you are talking about tax savings and not tax evasion.
There are various things that can reduce the profit i.e., partner's salary & Interest on partner's Capital [Sec.40(b)], beacause these both would be taxed in the hands of partners and hence the slab bracket would be individual.
And yes Mr. Surendra is right Tax Evasion is not correct in law...
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