M/s Joshi Ranga & Sons, a partnership firm consisting of two partners, reports a net profit of ₹12,25,000 for the financial year 2024-25, before deduction of the following items: Salary of ₹32,000 each per month paya

Computation of Book Profit of the Firm under section 40(b) for Assessment Year 2025-26 Particulars Amount (₹) Net Profit (before deduction of depreciation, salary and interest) 12,25,000 Less: Depreciation under section 32 (1,75,000) Less: Allowed interest on partner capital @ 12% (being maximum allowed as per section 40(b). ₹6,00,000 x 2 x 12%) (1,44,000) Book Profit 9,06,000 Working Note "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 ₹85,000 of P.Y.2023-24 is not allowed to be set off for computation of "book profit".