Treatment of interest paid on partner’s capital

The Pune Bench of the Income-tax Appellate Tribunal held that interest paid with respect to a partner’s capital is not an “expenditure” but is an amount in the nature of a deduction under section 40(b) of the Income-tax Act, 1961. The case also involved an investment in mutual funds generating tax-free income and the treatment of the related interest paid to partners. The case is: Quality Industries. Read Complete KPMG Report an October 2016 report [PDF 338 KB]