Which items are prohibited under Section 40(b) from being deducted from the computation of the firm’s income from business or profession?
What items are disallowed as deduction in computation of firm’s income from business or profession under Section 40(b)?
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Disallowance of Deductions Under Section 40(b) of the Income Tax Act:
1. Introduction:
Section 40(b) of the Income Tax Act specifies certain items that are disallowed as deductions while computing the income from business or profession of a firm. These disallowances are aimed at ensuring that firms do not claim inappropriate deductions that could reduce their taxable income.
2. Disallowed Items:
2.1. Remuneration to Partners:
2.2. Interest on Capital:
2.3. Interest on Borrowed Capital:
2.4. Payment to a Partner Who is Not a Working Partner:
3. Exceptions and Special Cases:
3.1. Small Firms and Certain Professions:
4. Conclusion:
Section 40(b) of the Income Tax Act specifies certain items that are disallowed as deductions while computing the income from business or profession of a firm. These disallowances are aimed at ensuring that firms do not claim inappropriate deductions that could reduce their taxable income. It is important for firms to comply with these provisions to avoid penalties and legal consequences.