A firm's net profit is Rs 17,00,000 before deducting partner salary of Rs 9,60,000, depreciation of Rs 1,50,000 and interest at 15 per cent per annum on partners' capital of Rs 5,00,000. For section 40(b)(v), the book profit is:

1. Book profit means the net profit of the firm computed under Chapter IV-D, WITHOUT deducting working-partner remuneration. 2. Depreciation is deductible in full: 17,00,000 - 1,50,000 = Rs 15,50,000. 3. Interest to partners is deductible only up to 12% simple interest: 12% x Rs 5,00,000 capital = Rs 60,000 (the 15% actually charged is capped). 4. Book profit = 17,00,000 - 1,50,000 - 60,000 = Rs 14,90,000. 5. Partner salary of Rs 9,60,000 is NOT deducted at this stage — that is what book profit exists to measure. Option C wrongly deducts it; option B forgets the allowable interest; option D deducts nothing at all. 6. The remuneration ceiling then becomes 5,40,000 + 60% x (14,90,000 - 6,00,000) = Rs 10,74,000, so the actual Rs 9,60,000 is fully allowable. _Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 3 PGBP, PDF p. 86_