CAF-2 · Chapter 12 · Question 5 of 15
An Association of Persons (AOP) operates a business. During the tax year, it paid a salary of Rs. 600,000 to one of its partners and a commission of Rs. 200,000 to another partner. How will these payments be treated when computing the AOP's taxable income?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) C) Both the salary and the commission are inadmissible deductions and must be added back to the AOP's taxable income.
Explanation
Any profit on debt, brokerage, commission, salary, or other remuneration paid by an Association of Persons to a member of the association is not allowed as an expense and must be added back to the taxable income of the AOP.
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