Ad Free CAclubindia and Daily Updates on your Mobile. Subscribe Now!

Partnership

31 December 2014

whether husband & wife can form a partnership firm ( trading )-

remuneration to spouse will attract clubbing provisions but kindly confirm whether interest on partners capital will also attract clubbing provisions ,

thanks

M.Saraf

Reply
Follow
Share

1 Replies

Gagan Deep Singh (CHARTERED ACCOUNTANT) (1190 Points)
Replied 31 December 2014

Remuneration(salary,fees, commission or any other form of remuneration)of spouse from a concern in which other spouse has substantial interest will attract clubbing provision u/s 64(1).

Substantial interest in case of partnership firm means if he along with his relative is entitled to atleast 20% of the profits of such concern at any time during the previous year.

Where husband and wife both have substantial interest in the concern and both are in receipt of remuneration then clubbing provision will apply in hands of that spouse whose total income, before including such remuneration is greater.

Therefore, interest received shall not be clubbed provided capital introduced by the spouse from its own i.e. capital should not be contributed from any gift received by spouse from the other spouse. Otherwise interest will be clubbed u/s 64(1)(iv).