Dear member
Please tell me that can a partnership firm running construction business give remunaration (Sec 40b) to its partners even in the first and second year there is no sale of any unit i.e. no profit?
Thanks in advance
9 Replies
Aditya Maheshwari
(CA in Practice)
(35867 Points)
Replied 14 November 2009
No profit no remuneration to partners
swohra
(none)
(537 Points)
Replied 14 November 2009
But Aditya sir there is a provision in which a firm can give remunaratio to its partner even in case of loss. Further my query is that all the expenses on consturction are being debited in the WIP a/c and I want to know whether firm can give remunaration to partner as per provisions of IT act and debited to the WIP a/c as other expenses.
Vijay
(CA)
(119 Points)
Replied 14 November 2009
A minimum remuneration of Rs.50,000/- to partners is permissable under Income tax Act,1961even when the business has no profit. But the partnership deed should authorise it.
Dhara
(CA)
(204 Points)
Replied 14 November 2009
In case of Construction business, profit is divided during the project period & there will be no loss as such in any year [AS - 7]
So,you will be able to give remuneration.
Deepak Tapse
(Accounts Manager - Taxation)
(1771 Points)
Replied 14 November 2009
W.e.f. AY 2010-11, can provide 150000/- as remuneration to partners even if book profit is negative.
Rahul Ramesh
(CA Final, BCom, MBA)
(1084 Points)
Replied 14 November 2009
Remuneration of Rs.50000/- can be allowed for AY 2009-10 and Rs.150000/- wef AY 2010-2011 even if a loss is incurred.
Deepak Goel
(Tax Consultant)
(1166 Points)
Replied 15 November 2009
Agree with Sunil, Deepak and Rahul
FATEMA
(CHARTERED ACCOUNTANT)
(719 Points)
Replied 16 November 2009
FROM THE A.Y. 2010-11 ONWARDS,
1.IF BOOK PROFIT IS NEGATIVE - Rs. 150,000
2.IN CASE BOOK PROFIT IS POSITIVE
i) ON THE FIRST Rs. 3 LACS OF BOOK PROFIT -Rs 1,50,000 OR 90 PERCENT OF BOOK
PROFIT ,WHICHEVER IS MORE
ii) ON THE BALANCE OF THE BOOK PROFIT - 60 PERCENT OF THE BOOK PROFIT
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