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Propietor-salary not allowed why ?

Eswar Reddy S (CFO- at NHTF) (58270 Points)

04 January 2014

Hi All, As per business entity concept business is different and owner is different. In that case Why the amount paid to proprietor as salary not allowed as expenditure for managing business?

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12 Replies

CA KARAN MAINI (Practising CA) (106 Points)
Replied 04 January 2014

Salary to the proprietor is not allowed as expenditure for managing business because the proprietor conducts the business on its own motion.Salary to the partners are allowed bcz there are acting as agents of the firm who manage business on behalf of firm.All the profits of sole proprietorship firm belongs to the prop.That's y salary to prop. is not allowed.

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CA KARAN MAINI (Practising CA) (106 Points)
Replied 04 January 2014

Business entity concept is relevant only for accounting purposes. The legal status of proprietorship firm is nothing.

ARJUN ASHOK (CA Industrial Trainee) (125 Points)
Replied 04 January 2014

proprietorship business doesnt have a seperate identity, its status is nothing but Individual. in case of firms and other entity it had a seperate constitution and act.

chandrakant p labana (article) (30 Points)
Replied 04 January 2014

Business income, proprietor ke income tax return me dikhaya jata hai.. To jaahir hai ki proprietor khud ko salary nai de sakta na..

CA O.P. SINGH (O P Singh & Co.) (426 Points)
Replied 04 January 2014

The basic reason is same entity. In case of partnership legal entity is different of firm and there partners. it is not possible to give salary to your self since in case of proprietorship entity is same.

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Rahul (student) (25 Points)
Replied 05 January 2014

For salary, 1.Employee and employer both are required, the proprietor cannot give salary to himself 2. In proprietorship business, although the business entity concept applies yet the separate legal entity is not applied.

pulak (india) (31 Points)
Replied 05 January 2014

In case of proprietor ship its a kind a drawing for him self as he is only the owner..nd business entity concept is not apply..drawing made by him is just like salary...

kantijain (Chartered Accountant in Practice) (385 Points)
Replied 05 January 2014

Because their is no employer employee concept n agreement...u cannot pay to urself concept

CA. KAPILJAIN (Audit Manager) (105 Points)
Replied 05 January 2014

if it received salary then the amount of salary allowed as expenditure but when he prepare his return the total income of proproietor include both income salary as well as profit from proprietor ship. Due to this legal status is same as individual. As per income tax act Partner and partnership firm both are different. si that the salart is allowed to partnership firm as expenses. partner and firm both have different PAN number, both are seperately assessed.

Gaurav (student) (21 Points)
Replied 05 January 2014

propreitor and business r a single entity in the eyes of law

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Eswar Reddy S (CFO- at NHTF) (58270 Points)
Replied 05 January 2014

Hi Kantijain and Rahul, Will the proprietor eligible for professional services for monthly accounting,income tax ,service tax matters and other consultancy

b.t.malliarjunarao (Accountant) (68 Points)
Replied 09 January 2014

your answer is in ur question simple owner is nothing but employer.he doesn't want to getting the salary from him self bez employer and employees same.