No TDS is to be deducted by partnership firm on salary or interest paid or credited to partner. TDS is not required to be deducted even when such salary or remuneration is taxable in the hands of partner. A partnership firm is assessed as a firm for income tax purpose when some conditions are fulfilled — Section Working partner means an individual who is actively engaged in conducting the affairs of the business or profession of the firm of which he is a partner.
Share on facebook. Share on twitter. Share on linkedin. Share on whatsapp. Remuneration and Interest to Partner — Section 40b. Remuneration to Partners Remuneration includes salary, bonus, commission. Remuneration in partnership firm is allowed as a deduction if following conditions are satisfied Remuneration is allowed only to working partners. Remuneration must be authorised by partnership deed and according to the terms of partnership deed.
Also the amount of salary or manner of its computation is to be mentioned in the deed. If there is not any such provision in deed then no deduction is allowed. Normally people mentions in deed that salary is allowed to partners as per maximum limit defined under this section. This clause satisfies the condition for quantum of deduction. It should be related to the period of the partnership deed. Remuneration should be within the permissible limits as mentioned below.
The assessee has made substantial investments in the partnership firm and the net investment outstanding as on There is no dispute between the assessing officer and the assessee that these borrowed funds were invested for the purpose of the partnership business as capital contribution.
The assessee claimed deduction of interest of Rs. The assessee was engaged in other business in his personal capacity viz. Vehicle hiring business, Commission Income and Consultancy services. Though the computation of income as given above does not reflect this position, the correct position is that is a claim for set off of loss under the same head of income i.
The Assessing Officer however held that no income has accrued to the assessee from the partnership business during the financial year The expenses do not have any nexus with the other source of income under the head PGBP i. The CIT A confirmed the order of the AO and he also held that the interest expense would be expenditure incurred for the purpose of earning income from the partnership firm in the form of share income and therefore the expenditure would be not allowable in terms of Sec.
We have heard the rival submissions. We have carefully considered the rival submissions. It is an undisputed fact that in AY the partnership firm incurred heavy losses from its business and was not in a position to pay any interest on capital for the investment. Due to the poor financial condition of the partnership firm, the partners of the firm mutually decided to delay the withdrawal of interest on capital from the partnership and withdraw the same only when the partnership firm starts making profits.
However, since the funds were borrowed from external sources, interest was payable by the assessee to its unsecured lenders. Vehicle hire, Commission Income and Consultancy income.
This resulted in a loss arising from one source under the head business which was set-off with another source of income under the head of PGBP in terms of section Pronounced in the open court on the date mentioned on the caption page. Your email address will not be published. Giridhar S Karandikar Team Lead 15 February you can mention either the amount and put a clause like increase in remuneration after every 4years. Leave a reply. Previous Thread.
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