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CMA Intermediate · Direct and Indirect Taxation · Salaries

Mr. Dev Malhotra is a partner in Malhotra & Co., a partnership firm. During the tax year the firm paid him Rs. 3,00,000 as salary and Rs. 50,000 as commission under the partnership deed. He also works as a salaried manager in an unrelated company, Orion Pvt. Ltd., earning Rs. 6,00,000 for the year, all due and paid in that year. What amount is chargeable under the head Salaries in his hands under section 15?

Rs. 6,00,000 is chargeable under Salaries. Remuneration, salary, bonus or commission received by a partner from his firm is not treated as salary under section 15, so only the Rs. 6,00,000 earned from the unrelated company is included.

  1. ARs. 6,00,000Correct
  2. BRs. 9,00,000
  3. CRs. 6,50,000
  4. DRs. 9,50,000

Explanation

Section 15(4) says salary, bonus, commission or remuneration due to or received by a partner from the firm is not salary. So Rs. 3,00,000 and Rs. 50,000 are excluded from Salaries (they are dealt with under business income). Only the Orion Pvt. Ltd. pay of Rs. 6,00,000 is Salaries. Rs. 9,50,000 adds all amounts wrongly.

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