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CMA Intermediate · Direct and Indirect Taxation · Profits and Gains of Business or Profession

Dhruv Oil Partners, a firm, carries on petroleum production in India under a Central Government agreement and claims a deduction under Schedule X for amounts deposited in the site restoration account. Which statement is correct?

The deduction is not allowed to the partners in computing their own income. Schedule X permits the firm to claim the site restoration deduction, but specifically bars the partners or members of a firm, association of persons or body of individuals from claiming it again.

  1. AThe partners can claim the same deduction again in their own income computation
  2. BThe deduction is not allowed to the partners in computing their own incomeCorrect
  3. CThe deduction is not allowed to a firm at all
  4. DThe deduction is allowed to partners only if the firm is not audited

Explanation

Paragraph 2(4) provides that where the assessee is a firm, AOP or BOI, the deduction is not allowed in computing the income of any partner or member. The firm itself may claim it, so the option denying it to the firm is wrong, and double claiming by partners is barred.

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