TaxTMI 
TaxTMI 
A partnership firm has rented building to Bank.Now whether interest on Partners capital is deduductible as interest paid from rental income after deducting municipal taxes and 30 percent .
Rent received from Bank Building
23 Sep 2013 
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Deductibility of partners' capital interest: allowed only with written interest clause and payee certificate proving nexus to property.
Deductibility of interest on partners' capital against rental income requires that partners' funds be specifically used to acquire or construct the building, that the partnership deed contain a written interest provision specifying rate and payment, and that the firm obtain a certificate from the payee evidencing the interest payable; absent these elements the nexus to the property will be questioned and the deduction may be disallowed. (AI Summary)
Deductibility of interest on partners' capital against rental income requires that partners' funds be specifically used to acquire or construct the building, that the partnership deed contain a written interest provision specifying rate and payment, and that the firm obtain a certificate from the payee evidencing the interest payable; absent these elements the nexus to the property will be questioned and the deduction may be disallowed. (AI Summary)