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VU Past Papers, MCQs and More

Q1: Doesthe individual partners are liable to pay tax on interest received fromthe partnership firm? Justify your answer in either case.

Ans:Anysalary drawn by a partner in partnership, is appropriation of profitsand chargeable to tax as “Income from business” being share of apartner in the total income of partnership.

The share of a partner in total income of partnership shall comprise on the
following amounts received by him:
• Share in divisible income of partnership,
• Profit on debit,
• Brokerage,
• Commission,
• Interest,
• Salary, and
• Any other remuneration received or due from AOP.
Therefore,the amount of interest will be added in the “Income of Business” as aninadmissible expense for computation of taxable Income and taxliability. Because of which, the partner will not be liable to pay taxon interest received from the partnership, as the partnership firm hasalready been paid tax on it.

Q2: Alocal company has hired services of private security guards forsecurity of its key management personnel. Should the management staffbe taxed for this benefit?

Ans:Accordingto section [13(5)] the total amount of salary paid by the employer tothe domestic servant of an employee (e.g. house keeper, driver,gardener or other domestic servant) shall be included in the salaryincome of the employee for the tax year in which the services arerendered.

Inthe above mentioned case, the local company has hired services ofprivate security guards for security of its key management personnel,therefore the security guards will be treated as domestic servants ofthe management staff and hence staff will be taxed for this benefit.

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