M/s. Ravi & sons, a partnership firm consisting of two partners, reports a net profit of 7,50,000 before deduction of the following items:…

(i) Computation of book profit of the firm under section 40(b) Particulars Amount (₹) Amount (₹) Net Profit (before deduction of depreciation, salary and interest) 7,50,000 Less: Depreciation under section 32 2,50,000 Interest @ 12% p.a. [being the maximum allowable as per section 40(b)] (₹ 6,00,000 × 12%) 72,000 3,22,000 Book profit 4,28,000 “Book profit” means the net profit as per the profit and loss account for the relevant previous year computed in the manner laid down in Chapter IV-D as increased by the aggregate amount of the remuneration paid or payable to the partners of the firm if the same has been already deducted while computing the net profit. Hence, brought forward loss of 50,000 of P.Y.2022-23 is not allowed to be set off for computation of “book profit”. (ii) Salary actually paid to working partners = 25,000 × 2 × 12 = 6,00,000 As per the provisions of section 40(b)(v), the maximum allowable working partners' salary for the A.Y. 2024-25 in this case would be: Particulars ₹ On the first - 3,00,000 of book profit [(₹ 1,50,000 or 90% of 3,00,000) whichever is more] 2,70,000 On the balance of book profit [60% of (₹ 4,28,000 -3,00,000)] 76,800 Maximum allowable working partners' salary 3,46,800