Search Results For: 40(b)


QUERY: A HUF is a partner in partnership firm in capacity of HUF, whether remuneration is allowable for deduction u/s. 40(b) of the Income-tax Act, 1961 in the hands of partnership firm?
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No remuneration is allowable to HUF. Remuneration can be paid to Karta of the HUF, if he is a working partner in his individual capacity.

The Supreme Court in CIT vs. Trilok Nath Mehrotra & Others [231 ITR 278] has held as under:

“If a member of a Hindu Undivided Family joins a partnership

QUERY: In a partnership firm, the remuneration to the partners are calculated and paid as per Sec. 40(b)(v) and according to the slabs prescribed in the Income Tax Act, 1961, which is authorized by, and in accordance with, the terms of partnership deed and relates to the period falling after the date of such partnership deed.

Now a Finance Bill is passed on 27-7-2009 in which an amendment is carried out in Sec. 40(b)(v) in respect of remuneration of partners and is made applicable for entire Financial Year 2009-10 i.e. from 1-4-2009 onwards.

Since Finance Bill was passed on 27-7-2009, the amendment to remuneration clause can be carried out in supplementary partnership deed only after 27-7-2009.

Now in the circumstances, whether such amendment to partnership deed can be applicable to remuneration for the entire Financial Year 2009-10 so for the new limits or whether the amendment can only be prospective from the date of amendment in Partnership Deed?
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The payment of remuneration within the prescribed limits to working partners is allowable. Such remuneration is allowable on the basis of ‘book profit’ as defined in Explanation 3 to section 40(b) of the Act.