Section 67

Method of computing a partner's share in the income of the firm.

67. (1) In computing the total income of an assessee who is a partner of a firm, whether the net result of the computation of total income of the firm is a profit or a loss, his share (whether a net profit or a net loss) shall be computed as follows :—

(a) any interest, salary, commission or other remuneration paid to any partner in respect of the previous year, and, where the firm is ¹[a registered firm or an unregistered firm assessed as a registered firm under clause (b) of section 183], the income-tax, if any, payable by it in respect of the total income of the previous year, shall be deducted from the total income of the firm and the balance ascertained and apportioned among the partners ;

(b) where the amount apportioned to the partner under clause (a) is a profit, any salary, interest, commission or other remuneration paid to the partner by the firm in respect of the previous year shall be added to that amount, and the result shall be treated as the partner's share in the income of the firm ;

(c) where the amount apportioned to the partner under clause (a) is a loss, any salary, interest, commission or other remuneration paid to the partner by the firm in respect of the previous year shall be adjusted against that amount, and the result shall be treated as the partner's share in the income of the firm.

(2) The share of a partner in the income or loss of the firm, as computed under sub-section (1) shall, for the purposes of assessment, be apportioned under the various heads of income in the same manner in which the income or loss of the firm has been determined under each head of income.

(3) Any interest paid by a partner on capital borrowed by him for the purposes of investment in the firm shall, in computing his income chargeable under the head "Profits and gains of business or profession" in respect of his share in the income of the firm, be deducted from the share.

(4) If the share of a partner in the income of a registered firm or ¹[an unregistered firm assessed as a registered firm under clause (6) of section 183], as computed under this section, is a loss, such loss may be set off, or earned for ward and set off, in accordance with the provisions of this Chapter.

Explanation : In this section, "paid" has the same meaning as is assigned to it in clause (2) of section 43.

 

 

 

[As Amended by the Finance Act, 1976]