Professional Documents
Culture Documents
33AB
33ABA
35
35ABB
35AC
35AD
35CCA
35CCC
35CCD
35D
35DD
35DD
A
35E
36
37(1)
37(2B)
38
40
40A
41
42
43
43A
43B
Particulars
Profits and Gains of Business or Profession - Scope of Income under
this Head
Income from Profits and Gains of Business or Profession - how
computed ?
Rent, Rates, Taxes, Repairs and Insurance for Buildings
Repairs and Insurance of Machinery, Plant and Furniture
Depreciation
Incentive for acquisition and installation of new plant or machinery
by manufacturing Company
Manufacturing industries set up in the notified backward areas of
specified States to be eligible for a deduction @ 15% of the actual
cost of new plant & machinery acquired and installed during the
previous year.
Tea Development Account / Coffee Development Account and
Rubber Development Account
Site Restoration Fund
Expenditure on Scientific Research
Expenditure for obtaining licence to operate telecommunication
services
Expenditure on eligible projects or schemes
Deduction in respect of expenditure on specified business
Expenditure by way of payment to association or institutions for
Rural Development Programmes
Weighted Deduction of 150% for expenditure incurred on
agricultural extension project
Weighted Deduction of 150% for expenditure incurred by a
Company on Skill development project.
Amortisation of certain preliminary expenses
Amortisation in case of amalgamation or demerger
Amortisation of expenditure under Voluntary Retirement Scheme
(VRS)
Deduction for expenditure on prospecting etc., for certain minerals
Other Deductions
General Deductions
Advertisement to political parties
Building etc., partly used for business, etc., or not exclusively so
used
Amounts not deductible
Expenses or payments not deductible in certain circumstances
Deemed profits chargeable to tax
Special provisions for deductions in the case of business for
prospecting etc., for mineral oil
Definitions
Exchange Rate fluctuation
Certain deductions to be allowed only on actual payment
24
43C
43CA
Particulars
Block of Assets - defined
Business - defined
Profession - defined
Manufacture - defined
Method of Accounting
Method of Accounting in certain cases
Introduction
Section 2(13) - Business:
Section 2(13) defines "Business" to include any trade, commerce or manufacture
or any adventure or concern in the nature of trade, commerce or manufacture.
25
26
The scope of the head "Profits and Gains of Business or Profession" is governed
by Section 28, Section 41 and Section 176 of the Income Tax Act, 1961.
As per Section 28, Income from Business or profession carried on during the
previous year shall be chargeable to tax.
Section 41 identifies items which normally would not have the character of
income but are deemed as Income as they have been earlier allowed as a
deduction.
Section 176, relates to a situation where income is earned after discontinuance
of business or profession.
As per Section 28, the following items of income shall be chargeable to tax under
the head "Profits and gains of business or profession":
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
Income arising to any person by way of profits and gains from the
business, profession or vocation carried on by him at any time during the
previous year.
Any compensation or other payment due to or received by:
a) Any person, by whatever name called, managing the whole or
substantially the whole of (i) the affairs of an Indian company or (ii)
the affairs in India of any other company at or in connection with
the termination of his management or office or the modification of
any of the terms and conditions relating thereto;
b) any person, by whatever name called, holding an agency in India
for any part of the activities relating to the business of any other
person at or in connection with the termination of the agency or the
modification of any of the terms and conditions relating thereto;
c) any person, for or in connection with the vesting in the Government
or any corporation owned or controlled by the Government under
any law for the time being in force, of the management of any
property or business ;
Income derived by any trade, professional or similar associations from
specific services rendered by them to their members.
Profits on sale of a license granted under the Imports (Control) Order, 1955
made under the Imports and Exports (Control) Act, 1947.
Cash assistance (by whatever name called) received or receivable by any
person against exports under any scheme of the Government of India.
Any Customs duty or Excise duty drawback repaid or repayable to any
person against export under the Customs and Central Excise Duties
Drawback Rules, 1971.
Any profit on the transfer of the Duty Entitlement Pass Book Scheme,
being Duty Remission Scheme, under the export and import policy
formulated and announced under section 5 of the Foreign Trade
(Development and Regulation) Act, 1992.
Any profit on the transfer of Duty Free Replenishment Certificate, being
Duty Remission Scheme, under the export and import policy formulated
and announced under section 5 of the Foreign Trade (Development and
Regulation) Act, 1992.
27
ix.
x.
xi.
xii.
xiii.
Section 29 - Income from Profits and Gains of Business or Profession how computed ?
The provisions of Section 29 makes it clear that income referred to in Section 28
shall be computed in accordance with the provisions contained in Section 30 to
43D. It must, however, be remembered that in addition to the specific allowances
and deductions stated in sections 30 to 36, the Act further permits allowance of
items of expenses under the residuary section 37(1), which extends the
28
29
Note:
Assets may be wholly or partly owned by the assessee. i.e. Fractional
ownership is recognized u/s 32 for claiming Depreciation.
Exceptions to the condition that assessee must be owner of the asset:
1. If the assessee is occupying any building as a tenant for the
purpose of carrying on his business or profession, any capital
expenditure
incurred
towards
renovation,
extension,
or
improvement to such building can be treated as the value of
building belonging to him and depreciation can be claimed on such
amount. - Explanation 1 to Section 32.
2. In the case of hire purchase contract by which assessee acquires an
asset for the purpose of business or profession, depreciation can be
claimed by capitalising the value equivalent to cash price of such
asset. In these types of contract, the assessee becomes the owner
only after paying the last installment. Notwithstanding that,
Depreciation can be claimed.
3. It is not mandatory for the assessee to have the legal ownership of
a property. Merely because the title deed is not yet registered in the
assessee's name, depreciation cannot be denied. Beneficial
ownership in terms of possession, usage and control is sufficient to
claim depreciation u/s 32.
Usage includes "passive use" and not necessarily "active use".
If assets are continued in block (under the WDV method), so long as the
block is in use or available for use, normal depreciation can be claimed.
However, if an asset acquired during the previous year is put to use for
less than 180 days during that previous year, then, only 50% of the normal
depreciation is permissible in respect of that asset.
The asset in respect of which depreciation is claimed should fall within the
eligible class of assets. i.e. either under the Tangible assets or under the
Intangible assets.
Section 2(11) - Block of assets:
"Block of assets" means a group of assets falling within a class of assets
comprising of
a) 'tangible assets' being buildings, machinery, plant or furniture;
b) 'intangible assets' being know-how, patents, copyrights, trademarks,
licenses, franchises or any other business or commercial rights of similar
nature,
in respect of which the same percentage of depreciation is prescribed.
This concept of Block of assets is applicable only when depreciation is computed
according to Written Down Value (WDV) Method.
How to group assets into block ?
1. Assets are to be first classified as Tangible assets and Intangible assets.
31
2. All the tangible assets used for the purpose of business or profession and
eligible for depreciation shall then be classified into building, machinery,
plant and furniture.
3. After such segregation of tangible assets under these four classifications
of assets, grouping needs to be done within each such classification on the
basis of the rate of depreciation prescribed in the Income Tax Rules.
4. Each such group of assets will be identified as a block of assets.
5. Similar exercise has to be followed for intangible assets also.
Note:
Buildings:
'Building' is not defined in the Act. Taking its general meaning
Buildings includes road, bridges, culverts, wells and tube wells.
Machinery:
Machinery is not defined in the Act but it is to be understood as any
asset which is directly connected with the production or
manufacture or processing of a product or an article or a thing.
Furniture:
Furniture is also not defined in the Act. It is generally understood
that furniture refers to assets used for convenience and decoration.
Plant - Section 43(3) - Plant defined:
Section 43(3) defines Plant. According to Section 43(3), "Plant"
includes ships, vehicles, books, scientific apparatus and surgical
equipments used for the purpose of business or profession, but
does not include tea bushes or live stock or buildings or furniture
and fittings. The term 'Plant' is to be understood in a wider sense so
as to include any assets not falling under other classifications but
which is essential or inevitable to carry on the business or
profession of a person. However, theatre building, hospital building
and hotel building though specially equipped for purposes of
business are still buildings and cannot be treated as plant for the
purpose of claiming depreciation.
The expression actual cost means the actual cost of the asset to the assessee
as reduced by that portion of the cost thereof, if any, as has been met directly or
indirectly by any other person or authority
Actual cost in certain special situations [Explanations to section 43(1)]
Explanation 1
Where an asset is used for the purposes of business after it ceases to be
used for scientific research related to that business, the actual cost to the
assessee for depreciation purposes shall be the actual cost to the
assessee as reduced by any deduction allowed under section 35(1)(iv).
Explanation 2
Where an asset is acquired by way of gift or inheritance, its actual cost
shall be the written down value to the previous owner.
Explanation 3
Where, before the date of its acquisition by the assessee, the asset was at
any time used by any other person for the purposes of his business or
profession, and the Assessing Officer is satisfied that the main purpose of
the transfer of the asset directly or indirectly to the assessee was the
reduction of liability of income-tax directly or indirectly to the assessee (by
claiming depreciation with reference to an enhanced cost) the actual cost
to the assessee shall be taken to be such an amount which the Assessing
Officer may, with the previous approval of the Joint Commissioner,
determine, having regard to all the circumstances of the case
Explanation 4
Where any asset which had once belonged to the assessee and had been
used by him for the purposes of his business or profession and thereafter
ceased to be his property by reason of transfer or otherwise, is re-acquired
by him, the actual cost to the assessee shall be :
(a) the written down value at the time of original transfer; or
(b) the actual price for which the asset is re-acquired by him whichever is
less
Explanation 4A:
Where before the date of acquisition by the assessee say, Mr. A, the assets
were at any time used by any other person, say Mr. B, for the purposes of
his business or profession and depreciation allowance has been claimed in
respect of such assets in the case of Mr. B and such person acquires on
lease, hire or otherwise, assets from Mr. A, then, the actual cost of the
transferred assets, in the case of Mr. A, shall be the same as the written
down value of the said assets at the time of transfer thereof by Mr. B
Explanation 5:
Where a building which was previously the property of the assessee is
brought into use for the purposes of the business or profession, its actual
cost to the assessee shall be the actual cost of the building to the
assessee, as reduced by an amount equal to the depreciation calculated at
the rates in force on that date that would have been allowable had the
33
building been used for the purposes of the business or profession since the
date of its acquisition by the assessee
Explanation 6:
When any capital asset is transferred by a holding company to its
subsidiary company or by a subsidiary company to its holding company
then, if the conditions specified in section 47(iv) or (v) are satisfied, the
transaction not being regarded as a transfer of a capital asset, the actual
cost of the transferred capital asset to the transferee company shall be
taken to be the same as it would have been if the transferor company had
continued to hold the capital asset for the purposes of its own business
Explanation 7:
In a scheme of amalgamation, if any capital asset is transferred by the
amalgamating company to the amalgamated company, the actual cost of
the transferred capital assets to the amalgamated company will be taken
at the same amount as it would have been taken in the case of the
amalgamating company had it continued to hold it for the purposes of its
own business
Explanation 7A:
In the case of a demerger, where any capital asset is transferred by the
demerged company to the resulting company, the actual cost of the
transferred asset to the resulting company shall be taken to be the same
as it would have been if the demerged company had continued to hold the
asset. However, the actual cost shall not exceed the WDV of the asset in
the hands of the demerged company.
Explanation 8:
Certain taxpayers have, with a view to obtain more tax benefits and
reduce the tax outflow, resorted to the method of capitalizing interest paid
or payable in connection with acquisition of an asset relatable to the
period after such asset is first put to use. Certain judicial rulings also
favored this approach. This capitalization implies inclusion of such interest
in the Actual Cost of the asset for the purposes of claiming depreciation,
investment allowance etc. under the Income-tax Act, 1961. This was never
the legislative intent nor was it in accordance with recognized accounting
practices. Therefore, with a view to counter-acting tax avoidance through
this method and placing the matter beyond doubt, Explanation 8 to
section 43(1) provides that any amount paid or payable as interest in
connection with the acquisition of an asset and relatable to period after
asset is first put to use shall not be included and shall be deemed to have
never been included in the actual cost of the asset
Explanation 9:
Where an asset is or has been acquired by an assessee, the actual cost of
asset shall be reduced by the amount of duty of excise or the additional
duty leviable under section 3 of the Customs Tariff Act, 1975 in respect of
34
which a claim of credit has been made and allowed under the Central
Excise Rules, 1944
Explanation 10:
Where a portion of the cost of an asset acquired by the assessee has been
met directly or indirectly by the Central Government or a State
Government or any authority established under any law or by any other
person, in the form of a subsidy or grant or reimbursement (by whatever
name called), then, so much of the cost as is relatable to such subsidy or
grant or reimbursement shall not be included in the actual cost of the
asset to the assessee.
However, where such subsidy or grant or reimbursement is of such nature
that it cannot be directly relatable to the asset acquired, so much of the
amount which bears to the total subsidy or reimbursement or grant the
same proportion as such asset bears to all the assets in respect of or with
reference to which the subsidy or grant or reimbursement is so received,
shall not be included in the actual cost of the asset to the assessee.
Explanation 11:
Where an asset is acquired outside India by an assessee, being a nonresident and such asset is brought by him to India and used for the
purposes of his business or profession, the actual cost of asset to the
assessee shall be the actual cost the asset to the assessee, as reduced by
an amount equal to the amount of depreciation calculated at the rate in
force that would have been allowable had the asset been used in India for
the said purposes since the date of its acquisition by the assessee
Explanation 12:
Where any capital asset is acquired under a scheme for corporatisation of
a recognized stock exchange in India approved by the SEBI, the actual cost
shall be deemed to be the amount which would have been regarded as
actual cost had there been no such corporatization
Explanation 13:
Explanation 13 has been inserted in section 43(1) to provide that the
actual cost of any capital asset, on which deduction has been allowed or is
allowable to the assessee under section 35AD, shall be NIL. This would be
applicable in the case of transfer of asset by the assessee where:
1. the assessee himself has claimed deduction under section 35AD; or
2. the previous owner has claimed deduction under section 35AD. This
would be applicable where the capital asset is acquired by the
assessee by way of a) gift, will or an irrevocable trust;
b) any distribution on liquidation of the company;
c) any distribution of capital assets on total or partial partition of a
HUF;
35
XXX
XXX
XXX
(XXX)
XXX
XXX
XXX
1. In the case of slump sale, the block value shall be reduced by the WDV of
the assets, which are subjected matter of slump sale in the hands of the
transferor.
2. WDV in the case of demerger shall be entitled to claim depreciation, after
demerger, in respect of the value arrived at by reducing the written down
value of assets prior to demerger by the WDV of assets transferred
pursuant to demerger.
3. In the case of resulting company, depreciation shall be allowed in respect
of assets transferred from the demerged company pursuant to demerger
on the WDV of such transferred assets of the demerged company
immediately before the demerger.
4. Where the WDV of any block comprise of assets with opening values as
well as the additions made during the year (which are put to use for more
than or less than 180 days) depreciation shall be computed in the
following manner:
a) 50% of the applicable rate of depreciation in respect of assets put to
use for less than 180 days; and
b) Depreciation at the normal rates on the balance amount in the
block.
Rates of Depreciation:
As per Appendix I to the Income Tax Rules, 1962 the various rates of depreciation
prescribed for the assets are as follows:
A
I
Block
1
Block
2
Block
3
Block
4
II
Block
1
III
Block
1
Block
2
Block
3
TANGIBLE ASSETS
BUILDING
Buildings (other than covered by sub-item (3) below)
which are
used mainly for residential purposes
Buildings which are not used mainly for residential
purposes
and not covered by sub-items (1) above and (3) below
Buildings acquired on or after the 1st September, 2002.
For installing machinery and plant forming part of water
supply project or water treatment system and which is put
to use for the purpose of business of providing
infrastructure facilities
under clause (i) of sub-section (4) of section 80-IA
Purely temporary erections such as wooden structures
FURNITURE AND FITTINGS
Furniture and fittings including electrical fittings
PLANT AND MACHINERY
Motors buses, motor lorries, motor taxis used in the
business of running them on hire
Aero planes, aero engines
RATE
%
5%
10%
100%
100%
10%
30%
40%
Block
4
Block
5
Block
6
Block
Annual publications owned by assessee carrying on a
7
profession
Block
Books owned by assessee carrying on business in running
8
lending libraries
Block
Books, other than annual publications, owned by assessee
9
carrying on a profession
Block 10Windmill (installed on or after 01.04.2014)
Block 11Plant & machinery (General rate)
IV
SHIPS
Block
Ocean going Ships
1
Block
Vessels ordinarily operating on inland waters not covered
2
by
sub-item (3) below
Block
Speed boats operating on inland water
3
PART
INTANGIBLE ASSETS
B
Block
Know-how, patents, copyrights, trademarks, licences,
1
franchises or any other business or commercial rights
of similar nature
100%
100%
60%
80%
15%
20%
20%
20%
25%
Note:
1. Appendix IA to the Income Tax Rules contains percentage of depreciation
prescribed for undertakings generating or generating and distributing
power which are following Straight Line Method on individual asset basis
as provided under Rule 5(1A).
2. According to Section 38, where any asset is used partly for business and
partly for personal purposes, only proportionate expenses and
depreciation as determined by the Assessing Officer can be claimed as
deduction. It is very important to note that depreciation disallowed cannot
go reduce the WDV.
Depreciation computation as per Straight Line Method (SLM):
The only method of depreciation that is recognized under Income Tax Law is WDV
method. However, undertakings engaged in the business of generation or
generation and distribution of power shall depreciate their capital assets under
Straight Line Method on individual asset basis instead of the block of assets
basis. The percentage of depreciation allowable asset wise is prescribed in
Appending IA of the Income Tax Rules. It is open to such an undertaking to opt
for claiming depreciation under the WDV method on the basis of percentage
prescribed in Appending I. Such an option has to be exercised before the due
date for furnishing the Return of Income u/s 139(1) of the Income Tax Act, 1961
for the assessment year relevant to the previous year in which it begins to
38
generate power. Such an option once exercised shall be final and shall apply to
all subsequent years.
Where an undertaking generating or generating and distributing power avails
depreciation on Straight Line Method in respect of each individual asset, the
'block of assets' concept does not apply. It needs mention that whether an
assessee claims depreciation as per SLM or WDV method only 50% of normal
depreciation is permissible in respect of the asset which is put to use for less
than 180 days during the previous year in which it is acquired.
Sale of assets by power sector following SLM method of depreciation:
Where any asset is sold, the following three provisions exclusively apply:
1. Where sale value or moneys payable is less than WDV:
Where any asset in respect of which SLM method of depreciation has been
claimed is sold, discarded, demolished or destroyed in the previous year,
the short gall, if any, in the moneys payable in respect of any such asset
as compared to the WDV shall be allowed as "Terminal Depreciation" in
that year. For this purpose, such deficiency is actually required to be
written off in the books of account of the assessee.
This treatment shall not apply if the asset is sold, discarded, demolished or
destroyed in the same previous year in which it is first brought into use. In
such a situation, the difference between the sale proceeds and actual cost
shall be treated as short term capital gain or loss, as the case may be.
2. Where sale value or moneys payable is more than WDV but less than the
Actual Cost:
As per Section 41(2), where any such asset used in the business in respect
of which depreciation has been claimed is sold, discarded, demolished or
destroyed and the moneys realizable thereof together with the amount of
scrap value, if any, exceeds the WDV then the excess to the extent of the
depreciation already allowed shall be assessable as 'balancing charge'
under the head 'Profits and gains of business or profession'
3. Where sale value or moneys payable is more than WDV as well as Actual
Cost:
Where any such asset used in the business in respect of which
depreciation has been claimed is sold, discarded, demolished or destroyed
and the moneys realizable thereof together with the amount of scrap
value, if any, exceeds the WDV then the excess to the extent of the
depreciation already allowed shall be assessable as 'balancing charge'
under the head 'Profits and gains of business or profession' and the
surplus over and above the actual cost if any, shall be assessed as Capital
Gains u/s 50A of the Income Tax Act, 1961.
Important Note:
It is to be noted that in respected of cases, other than undertaking engaged in
power sector and opting for SLM Method of Depreciation, "block of assets"
concept applies and depreciation shall be computed only on WDV basis. The
concept of 'Terminal Depreciation' u/s 32, 'Balancing Charge' u/s 41(2) and the
39
provisions of Section 50A as explained above shall apply only in respect of power
sector undertakings opted for SLM method of Depreciation.
40
41
Section 32AC was inserted by the Finance Act, 2013 w.e.f. A.Y.2014-15 to provide
a tax incentive by way of investment allowance to encourage huge investment in
plant or machinery.
As per section 32AC(1), a manufacturing company is entitled to deduction@15%
of aggregate investment in new plant and machinery if it is (a) engaged in the business of manufacture of an article or thing; and
(b) invests a sum of more than 100 crore in new plant or machinery during
the period beginning from 1st April, 2013 and ending on 31st March, 2015.
For A.Y. 2014-15, a manufacturing company was entitled to deduction of 15% of
aggregate amount of actual cost of new assets acquired and installed during the
financial year 2013-14, if the aggregate cost of such assets exceed 100 crore.
For A.Y.2016-17, a deduction of 15% of aggregate amount of actual cost of new
assets, acquired and installed during the period beginning on 1st April, 2013 and
ending on 31st March, 2015, as reduced by the deduction allowed, if any, for A.Y.
2014-15.
The deduction@15% under this section is in addition to the depreciation and
additional depreciation allowable under section 32(1). Further, the deduction
under section 32AC would not be reduced to arrive at the written down value of
plant and machinery.
Additional benefit under subsection (1A) inserted in Section 32AC by Finance (No.
2) Act, 2014, with effect from Assessment Year 2015-16:
This year, considering that growth of the manufacturing sector is critical for
employment generation and development of an economy, the deduction
available under section 32AC has been extended for investment made in plant
and machinery up to 31.03.2017.
Further, in order to rationalize the existing provisions of section 32AC and also to
make medium size investments in plant and machinery eligible for deduction,
new sub-section (1A) has been inserted to provide that deduction under section
32AC would be available if the company, on or after 1st April, 2014, invests more
than Rs. 25 crore in plant and machinery in a previous year.
Note:
Comparative analysis of Section 32AC(1) and Section 32AC(1A):
Assessment
Year
2014-15
2015-16
2016-17
2017-18
acquired
and
installed
between
01.04.2013
and
31.03.2015,
where
the
aggregate cost of new asset
exceeds Rs. 100 Crores, as
reduced by the amount
allowed as deduction under
this
section
for
the
Assessment Year 2014-15
Not Applicable - since Subsection 1 is applicable only till
Assessment Year 2016-17
Not Applicable - since Subsection 1 is applicable only till
Assessment Year 2016-17
43
44
45
assets, then the whole of such amount utilised shall be chargeable to tax
in the year in which such utilisation is done. For this purpose, non-eligible
assets means
a) plant and machinery used in any office or residence or guest house
or for manufacture of eleventh schedule items,
b) office appliances excluding computers,
c) Plant and machinery the cost of which are 100% deductible in one
year.
4. Where any asset acquired in accordance with the scheme is sold or
otherwise transferred before the expiry of 8 years from the end of the
previous year in which it was acquired, then the cost of the asset relatable
to the deduction shall be deemed to be the business income of the year in
which the asset is sold or otherwise transferred and shall accordingly be
charged to tax.
5. Audit of accounts and submission of audit report is necessary to avail
deduction under Section 33ABA.
Section 35 - Expenditure on scientific research
Section 43(4) - Definition of Scientific Research:
Scientific Research means any activity for the extension of knowledge in the
fields of natural or applied sciences including agriculture, animal husbandry or
fisheries.
Deduction u/s 35 is available in the following two ways:
a) Expenditure incurred by the assessee for own business
b) In case of contribution to outsiders
a) Expenditure incurred by the assessee for own business:
1. In all cases of in-house research, deduction shall be 100% of the following
expenses:
i.
any revenue expenditure and capital expenditure (other than cost
of acquisition of any Land) on scientific research incurred during the
year;
ii.
any expenditure incurred during the 3 years immediately preceding
the commencement of business, being salary to employees; or
purchase of materials used in such scientific research or any capital
expenditure (except cost of acquisition of any Land) shall be
allowed as deduction in the year of commencement of business.
2. In case of Companies in specified business - Section 35(2AB)
i.
200% of any expenditure shall be allowed in the case of companies
engaged in the business of bio-technology or in any business of
manufacture or production of any article or thing other than those
specified in the Eleventh Schedule.
ii.
Expenditure on cost of land is not allowed as deduction;
iii.
Cost of Building is eligible for 100% deduction;
iv.
No Company will be entitled to this deduction unless it enters into
an agreement with the prescribed authority for co-operation in such
research and development facility and fulfills the prescribed
47
v.
(b)
(c)
Contribution made
to
Research
association
Company
Research
association
National Laboratory,
University or Indian
Institute
of
Section
Reference
35(1)(ii)
To be used for
35(1)(ii a)
35(1)(iii)
Scientific research
Social
science
or
statistical research
Scientific
research
under a programme
35(2AA)
48
Scientific research
%
of
deduction
175
125
125
200
Technology
or
specified person
'Research Association'
Research Association for the purpose of sections 35(1)(ii) and 35(1)(iii) can be a
university, college or other institution or approved research association and
notified by the Central Government.
Company engaged in scientific research and receiving contribution as referred to
in Section 35(1)(iia) shall fulfill the following conditions:
a) Company should be registered in India;
b) Company should have scientific research and development as its main
object;
c) Company is approved by the prescribed authority in the prescribed
manner;
d) Sum paid to the Company shall be used for scientific research;
e) Company shall carry on scientific research through its own employees
using its own assets;
f) Company maintains separate statement of donations and books of
account in respect of sum received for scientific research, get the same
audited and furnish by the due date for filing the return of income.
Note:
1. Where deduction is allowed u/s 35 for any previous year in respect of a
capital asset, then no depreciation shall be allowed on such asset u/s 32.
2. Unabsorbed expenditure u/s 35 can be carried forward for an indefinite
period and can be set off against any of the other heads of Income.
Section 35ABB - Expenditure for obtaining license to operate
telecommunication services
1. Any capital expenditure actually paid for obtaining license to operate
telecommunication services shall be allowed as deduction in equal
installments during the number of years for which the license is in force. If the
payment is made before the commencement of the business, the deduction
shall be allowed beginning with the year of commencement of business. In
any other case, it will be allowed commencing from the year of actual
payment.
2. Treatment in case of sale of license:
a) If part of the license is sold for a consideration which is less than the
amount remaining to be allowed, then the balance shall be allowed as
deduction during the remaining number of years in equal installments.
b) If the entire license is sold for a consideration which is less than the
amount remaining to be allowed as deduction, then the balance shall be
allowed as deduction in the year of transfer.
c) If the whole or part of the license or the entire license is transferred for a
consideration which is more than the amount remaining to be allowed,
then:
i.
no further deduction shall be allowed;
49
ii.
iii.
Note:
1. Any expenditure for which deduction is allowed u/s 35ABB shall not
qualify for depreciation u/s 32 for any previous year.
2. In a scheme of amalgamation or demerger, if the license is transferred
then the amalgamated company / resulting company would be entitled
to get the deduction which could have been availed by the
amalgamating company / demerged company had it continued to exist.
Section 35AC - Expenditure on eligible projects / schemes
1.
2.
3.
4.
5.
6.
Quantum of Deduction:
The qualifying amount shall be allowed as deduction over a period of 5
years in equal installments, beginning from the year of commencement of
production or operation or the year in which extension is completed, as
the case may be.
Note:
1. In case of amalgamation or demerger of an Indian Company, the
amalgamated or resulting company are entitled to deductions from the
previous year in which the amalgamation or demerger takes place.
2. Audit of accounts is mandatory in case of assessee other than Company or
co-operative society and the assessee furnishes along with the return of
income for the first year in which the deduction is claimed, the report of
audit in the prescribed form.
Section 35DD - Amortisation of expenditure in case of amalgamation or
demerger
Where an Indian Company incurs any expenditure, wholly and exclusively for the
purposes of amalgamation or demerger of an undertaking, the assessee shall be
allowed the expenditure as a deduction over a period of 5 years in equal
installments beginning with the previous year in which the amalgamation or
demerger takes place.
Section 35DDA - Amortisation of expenditure incurred under VRS
Where any expenditure is incurred by way of payment of any sum to an
employee in accordance with any scheme of voluntary retirement, a deduction
over a period of 5 years in equal installments shall be allowed beginning with the
year in which such amount is paid.
Where an assessee pays the VRS compensation in installments or in part
payments, each such payment is independently eligible for amortization over a
period of 5 years.
56
57
1. If insurance policy has been taken out against risk, damage or destruction
of the stock or stores of the business or profession, the premia paid is
deductible. But the premium in respect of any insurance undertaken for
any other purpose is not allowable under the clause.
2. Deduction is allowed in respect of the amount of premium paid by a
Federal Milk Co-operative Society to effect or to keep in force an insurance
on the life of the cattle owned by a member of a co-operative society
being a primary society engaged in supply of milk raised by its members
to such Federal Milk Co-operative Society. The deduction is admissible
without any monetary or other limits
3. This clause seeks to allow a deduction to an employer in respect of premia
paid by him by any mode of payment other than cash to effect or to keep
in force an insurance on the health of his employees in accordance with a
scheme framed by (i) the General Insurance Corporation of India and
approved by the Central Government; or (ii) any other insurer and
approved by the IRDA.
4. Bonus or Commission are deductible in full provided the sum paid to the
employees as bonus or commission shall not be payable to them as profits
or dividends if it had not been paid as bonus or commission. It is a
provision intended to safeguard against a private company or an
association escaping tax by distributing a part of its profits by way of
bonus amongst the members, or employees of their own concern instead
of distributing the money as dividends or profits.
5. Under section 36(1), deduction of interest is allowed in respect of capital
borrowed for the purposes of business or profession in the computation of
income under the head "Profits and gains of business or profession".
Capital may be borrowed for several purposes like for acquiring a capital
asset, or to pay off a trading debt or loss etc. The scope of the expression
for the purposes of business is very wide. Capital may be borrowed in the
course of the existing business as well as for acquiring assets for
extension of existing business. Explanation 8 to section 43(1) clarifies that
interest relatable to a period after the asset is first put to use cannot be
capitalised. Interest in respect of capital borrowed for any period from the
date of borrowing to the date on which the asset was first put to use
should, therefore, be capitalised.
Section 36(1)(iii) provides that no such deduction shall be allowed in
respect of any amount of interest paid, in respect of capital borrowed for
acquisition of new asset (whether capitalised in the books of account or
not) for any period beginning from the date on which the capital was
borrowed for acquisition of the asset till the date on which such asset was
first put to use.
ICDS IX on Borrowing Costs also requires borrowing costs which are
directly attributable to the acquisition, construction or production of a
qualifying asset to be capitalised as part of the cost of that asset.
6. Section 36(1)(iiia) provides deduction for the discount on Zero Coupon
Bonds (ZCB) on pro rata basis having regard to the period of life of the
58
Note:
a) "Gross Total Income" means total income before making deductions under
this clause and Chapter VIA.
In addition to the above limits, a scheduled / non-scheduled bank shall be
allowed a further deduction of an amount not exceeding the income
derived from redemption of securities in a scheme framed by the Central
Government. No deduction shall be allowed unless such income is
disclosed in the return of income under the head "Profits and gains of
Business or Profession".
b) For scheduled commercial banks, the amount of deduction in respect of the
bad debts actually written off u/s 36(1)(vii) shall be restricted to the
amount by which such bad debts exceeds the credit balance in the
provision for bad & doubtful debts account, without any distinction
between rural advances and other advances.
It is clarified that there shall be only one account in respect of provision for
bad & doubtful debts u/s 36(1)(viia) and such account relates to all types of
advances including advances made by rural branches - Explanation to
Section 36(1)(vii). Thus, there is no distinction made in respect of provision
for bad & doubtful debts under clause (viia) between rural and urban
advances.
14. Special Reserve Account:
60
Specified Entity
LIC, UTI, IDFC; or a financial
corporation in the public sector;
or a banking company; or a cooperative bank other than a
primary
agricultural
credit
society/ primary co-operative
agricultural
and
rural
development Bank
A housing finance company
Eligible Business
The business of providing longterm finance for industrial or
agricultural
development
or
development of infrastructure
facility in India; or development
of housing in India.
Any loan or advance where the terms provide for repayment of the same
along with interest thereof during a period of not less than 5 years shall be
regarded as "long term finance".
15.Any expenditure incurred by a Company for promoting family planning
among employees shall be allowed as a deduction. If the expenditure
incurred is of a capital nature, deduction shall be allowed over a period of
5 years in equal installments. Unabsorbed expenditure on family planning,
if any, shall be carried forward for set-off similar to that of unabsorbed
depreciation.
16.Any expenditure incurred by a Statutory corporation is allowed as
deduction if the following conditions are satisfied:
a) the tax payer is a corporation or a body corporate constituted or
established by a Central, State or Provincial Act;
b) the above mentioned corporation or body corporate is notified by the
Government having regard to the objects and purposes of the Act
under which it is constituted or established;
c) the expenditure is incurred for the objects and purposes of the Act
under which it is constituted or established;
d) the expenditure is not capital expenditure.
17. Any sum paid by a public financial institution by way of contribution to
notified credit guarantee fund trust for small industries shall be allowed as
deduction.
18.Securities transaction tax (STT) paid in respect of the taxable securities
transactions entered into in the course of business
61
Such Company to spend in every financial year, at least 2% of its average net
profits made in the immediately three preceding financial years, on the CSR
activities specified in Schedule VII to the Companies Act, 2013.
This expenditure incurred on activities relating to Corporate Social Responsibility
referred to in Section 135 of the Companies Act, 2013 shall not be allowed as
deduction. - Explanation 2 to Section 37.
The rationale behind the disallowance is that CSR expenditure, being an
application of income, is not incurred wholly and exclusively for the purpose of
carrying on business.
However, the Explanatory Memorandum to the Finance (No.2) Bill, 2014 clarified
that CSR expenditure, which is of the nature described in sections 30 to 36, shall
be allowed as deduction under those sections subject to fulfillment of conditions,
if any, specified therein.
Circular No. 5/2012 dated 1-8-2012 - Inadmissibility of expenses incurred in
providing freebees to medical practitioner by pharmaceutical and allied health
sector industry
Section 37(1) provides for deduction of any revenue expenditure (other than
those falling under sections 30 to 36) from the business income if such expense
is laid out or expended wholly or exclusively for the purpose of business or
profession. However, the Explanation below section 37(1) denies claim of any
such expenses, if the same has been incurred for a purpose which is either an
offence or prohibited by law.
The CBDT, considering the fact that the claim of any expense incurred in
providing freebees to medical practitioner is in violation of the provisions of
Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations,
2002, has clarified that the expenditure so incurred shall be inadmissible under
section 37(1) of the Income-tax Act, 1961, being an expense prohibited by the
law. The disallowance shall be made in the hands of such pharmaceutical or
allied health sector industry or other assessee which has provided aforesaid
freebees and claimed it as a deductible expense in its accounts against income.
This circular has also clarified that a sum equivalent to value of freebees enjoyed
by the aforesaid medical practitioner or professional associations is also taxable
as business income or income from other sources, as the case may be,
depending on the facts of each case.
Section 37(2B) - Advertisement in publications of a political party
No allowance shall be made in respect of expenditure incurred by an assessee on
advertisement in any souvenir, brochure, tract, pamphlet or the like published by
a political party. However, donation given to political party shall be allowed as
deduction u/s 80GGB or 80GGC, as the case may be.
Section 38 - Building etc., partly used for business, etc., or not
exclusively so used:
63
According to Section 38, where any asset is used partly for business and partly
for personal purposes, only proportionate expenses and depreciation as
determined by the Assessing Officer can be claimed as deduction.
Inadmissible Expenditure - Sections 40, 40A and 43B
The provisions of Sec 40, 40A and 43B provide for certain disallowances. Certain
expenses are totally disallowable and certain other expenses are disallowable
either due to non-fulfillment of certain conditions or on account of exceeding
certain limits prescribed.
Section 40(a) - Disallowance in the case of all assessees:
Section 40(a)(i) - Payment made to Non-residents:
1. According to Sec 40(a)(i), any Interest, royalty, fees for technical services
or other sum chargeable under this Act, which is payable outside India; or
in India to a non-resident or to a foreign company, on which tax is
deductible at source shall be disallowed ifa) such tax has not been deducted; or
b) such tax, after deduction, has not been paid during the previous
year or the subsequent year before expiry of time limit prescribed in
Section 139(1).
2. In case the tax is deducted in any subsequent year or has been deducted
in the previous year but paid after the due date specified in Section
139(1), such sum shall be allowed as a deduction in computing the income
of the previous year in which such tax has been paid.
Section 40(a)(ia) - Payment made to Residents:
1. According to Section40(a)(ia), any sum payable to a resident on which tax
is deductible at source shall be disallowed to the extent of 30% of such
sum, if the assessee:
a) fails to deduct tax at source; or
b) deducts tax at source but has not paid the same on or before the
due date for filing the return of income u/s 139(1).
2. Where tax is deducted in any subsequent year or where the tax deducted
during the previous year is paid after the due date for filing the return of
income, 30% of such sum which was earlier disallowed shall be allowed as
a deduction in computing the income of the previous year in which such
tax has been paid.
3. Where an assessee fails to deduct tax at source as referred above, he is
not deemed to be an assessee in default if the following conditions are
satisfied:
a) The payee resident has furnished his return of income u/s 139;
b) He has taken into account such sum for computing his total
income;
c) He has paid tax due on the income declared by him in such return
of income; and
d) the person who failed to deduct tax at source furnishes a certificate
of a Chartered Accountant in Form 26A that the payee has fulfilled
the above mentioned conditions.
64
then such assessee shall be deemed to have deducted and paid the tax on
the date of furnishing the return of income by the resident payee. - proviso to
Sec 40(a)(ia)
Section 40(a)(ii) & Section 40(a)(iia):
Income tax and Wealth tax paid are not deductible. Income tax also includes
Interest paid on delayed payment of Income tax, Interest paid on delayed filing
of Income tax and TDS returns, tax paid in any other country for which the relief
is available under sections 90, 90A, 91 of the Income Tax Act, 1961.
Section 40(a)(iib) - Payment made to State Government:
1. According to Sec. 40(a)(iib), deduction shall not be allowed in respect of
any amount paid by way of royalty, licence fee, service fee, privilege fee,
service charge, or any other fee or charge by whatever name called, which
is levied exclusively on a State Government undertaking by the State
Government even if any such amount is appropriated, directly or
indirectly, from a State Government undertaking by the State
Government.
2. For this purpose, a State Government Undertaking includesa) a Corporation established by or under any Act of the State
Government.
b) a Company in which more than 50% of the paid up equity share
capital is held by the State Government.
c) a Company in which more than 50% of the paid up equity share
capital is held by any of the above mentioned entities (whether
singly or taken together).
d) a Company or Corporation in which the State Government has the
right to appoint the majority of the directors or to control the
management or policy decisions directly or indirectly in any manner.
e) an authority, a board or an institution or a body established or
constituted by or under any Act by State Government or owned or
controlled by the State Government.
Section 40(a)(iii) - Salary payable outside India or to a non-resident:
Any salary payable outside India or to a non-resident shall be disallowed, if tax
has not been deducted or paid.
Section 40(a)(iv):
Any payment to a Provident Fund or other fund for the benefit of the employee
shall be disallowed unless the employer has made effective arrangements to
secure that tax shall be deducted at source from any payments made from the
fund which are chargeable to tax under the head "Salaries"
Section 40(a)(v):
Any tax on non-monetary perquisites borne by the employer, on behalf of the
employee which is exempt u/s 10(10CC) in the hands of the employee shall be
disallowed.
Section 40(b) - Disallowance in the case of partnership firms:
65
In the case of any firm assessable as such or a limited liability partnership (LLP)
the following amounts shall not be deducted in computing the income from
business of any firm/LLP:
1. Any salary, bonus, commission, remuneration by whatever name called,
to any partner who is not a working partner.
2. Any remuneration paid to the working partner or interest to any partner
which is not authorised by or which is inconsistent with the terms of the
partnership deed;
3. It is possible that the current partnership deed may authorise payments
of remuneration to any working partner or interest to any partner for a
period which is prior to the date of the current partnership deed. The
approval by the current partnership deed might have been necessitated
due to the fact that such payment was not authorised by or was
inconsistent with the earlier partnership deed. Such payments of
remuneration or interest will also be disallowed. However, it should be
noted that the current partnership deed cannot authorise any payment
which relates to a period prior to the date of earlier partnership deed.
Next, by virtue of a further restriction contained in sub-clause (iii) of
section 40(b), such remuneration paid to the working partners will be
allowed as deduction to the firm from the date of such partnership deed
and not for any period prior thereto. Consequently, if, for instance, a firm
incorporates the clause relating to payment of remuneration to the
working partners, by executing an appropriate deed, say, on July 1, but
effective from April 1, the firm would get deduction for the remuneration
paid to its working partners from July 1 and onwards, but not for the
period from April 1 to June 30. In other words, it will not be possible to
give retrospective effect to oral agreements entered into vis a vis such
remuneration prior to putting the same in a written partnership deed.
4. Any interest payment authorised by the partnership deed falling after
the date of such deed to the extent such interest exceeds 12% simple
interest p.a.
5. Any remuneration paid to a partner, authorised by a partnership deed
and falling after the date of the deed in excess of the following limits:
Book Profits
On the first Rs. 3,00,000/- or in case of
a loss
On the balance
Explanation 2:
Explanation 2 provides that where an individual is a partner in a firm otherwise
than in a representative capacity, interest paid to him by the firm shall not be
taken into account if he receives the same on behalf of or for the benefit of
any other person.
Explanation 3:
Explanation 3 defines the term book profit. It means the net profit as shown
in the P & L A/c for the relevant previous year computed in accordance with
the provisions for computing income from profits and gains.
The above amount should be increased by the remuneration paid or payable
to all the partners of the firm if the same has been deducted while computing
the net profit.
Explanation 4:
Explanation 4 defines a working partner.
Accordingly, it means an individual who is actively engaged in conducting the
affairs of the business or profession of the firm of which he is a partner.
Section 40(ba) - Disallowance in the case of association of persons
and body of individuals:
Any payment of interest, salary, commission, bonus or remuneration made by
an association of persons or body of individuals to its members will also not be
allowed as a deduction in computing the income of the association or body.
There are three Explanations to section 40(ba):
Explanation 1 - Where interest is paid by an AOP or BOI to a member who has
paid interest to the AOP/BOI, the amount of interest to be disallowed under
clause (ba) shall be limited to the net amount of interest paid by AOP/BOI to
the partner.
Explanation 2 - Where an individual is a member in an AOP/BOI on behalf of
another person, interest paid by AOP/BOI shall not be taken into account for
the purposes of clause (ba). But, interest paid to or received from each person
in his representative capacity shall be taken into account.
Explanation 3 - Where an individual is a member in his individual capacity,
interest paid to him in his representative capacity shall not be taken into
account
Sec 40A - Expenses or payments not deductible
There are certain expenses or payments which are not deductible in certain
circumstances as provided in sub-section (2), (3), (7) and (9) of Sec 40A. The
provisions of Sec. 40A shall have overriding effect over other provisions of the
Income Tax Act in computation of income chargeable under the head "Profits
and gains of business or profession".
Sec. 40A(2) - Excessive or unreasonable expenditure:
67
Sub-section (2) of section 40A provides that where the assessee incurs any
expenditure in respect of which a payment has been or is to be made to a
relative or to an associate concern so much of the expenditure as is
considered to be excessive or unreasonable shall be disallowed by the
Assessing Officer. While doing so he shall have due regard to :
a) the market value of the goods, service of facilities for which the
payment is made; or
b) the legitimate needs of the business or profession carried on by the
assessee; or
c) the benefit derived by or accruing to the assessee from such a
payment.
The word relative as defined in the section 2(41) means, in relation to
individual, the spouse, brother or sister of any lineal ascendant or
descendant of that individual. Whether the assessee is a firm, H.U.F. or
an association of persons the relationship will have to be reckoned for
the purpose, with reference to the partners of the firm and the
members of the family or association. Similarly, where the assessee is a
company the relationship will have to be reckoned with reference to the
directors or persons having substantial interest in the company.
The related person as mentioned in section 40A(2) includes, inter alia, a
company, firm, association of persons or Hindu undivided family having
a substantial interest in the business or profession of the assessee or
any director, partner or member of such company, firm, association or
family, or any relative of such director, partner or member. Further, the
related person in relation to a company shall include any other
company carrying on business or profession in which the first
mentioned company has substantial interest.
A person shall be deemed to have a substantial interest in a business or
profession if a) in a case where the business or profession is carried on by a company,
such person is, at any time during the previous year, the beneficial
owner of equity shares carrying not less than 20% of the voting power
and
b) in any other case such person is, at any time during the previous year,
beneficially entitled to not less than 20% the profits of such business or
profession.
Sec. 40A(3) - Payment made otherwise than by way of account payee
cheque or account payee draft:
Where the assessee incurs any expenditure in respect of which a payment or
aggregate of payments made to a person in a day otherwise than by an
account payee cheque drawn on a bank or by an account payee bank draft
exceeds Rs. 20,000, such expenditure shall not be allowed as a deduction.
In case of an assessee following mercantile system of accounting, if an
expenditure has been allowed as deduction in any previous year on due basis,
and payment has been made in a subsequent year otherwise than by account
payee cheque or account payee bank draft, then the payment so made shall
be deemed to be the income of the subsequent year if such payment or
68
j.
Non
statutory
unrecognised
welfare
fund
the Explanation to section 11(5), that is, the State Bank of India (SBI), a
subsidiary of SBI, a nationalised bank or any other bank included in the Second
Schedule to the Reserve Bank of India Act, 1934.
"State Industrial Investment Corporation" means:
"State Industrial Investment Corporation" means a Government company within
the meaning of section 617 of the Companies Act, 1956, engaged in providing
long-term finance for industrial projects and eligible for deduction under section
36(1)(iii).
Explanation 3B provides that where a deduction in respect of earned leave
encashment paid to any employee is allowed in computing the business income
of the employer for the previous year in which the liability to pay was incurred
(applicable for previous year 2000-2001 or any earlier year), no deduction shall
be allowed in respect of such sum in the previous year in which the sum is
actually paid.
Explanation 3C & 3D clarifies that if any sum payable by the assessee as interest
on any such loan or borrowing or advance referred to in (d) and (e) above, is
converted into a loan or borrowing or advance, the interest so converted and not
actually paid shall not be deemed as actual payment, and hence would not be
allowed as deduction.
The clarificatory explanations only reiterate the
rationale that conversion of interest into a loan or borrowing or advance does not
amount to actual payment.
The manner in which the converted interest will be allowed as deduction has
been clarified in Circular No.7/2006 dated 17.7.2006. The unpaid interest,
whenever actually paid to the bank or financial institution, will be in the nature of
revenue expenditure deserving deduction in the computation of income.
Therefore, irrespective of the nomenclature, the deduction will be allowed in the
previous year in which the converted interest is actually paid.
Section 41 - Deemed Profit
This section enumerates certain receipts which are deemed to be income under
the head Business or profession. Such receipts would attract charge even if the
business from which they arise had ceased to exist prior to the year in which the
liability under this section arises. The particulars of such receipts are given
below:
Section 41(1) - Remission or cessation of trading liability:
Where deduction was allowed in respect of loss, expenditure or trading liability
for any year and subsequently during any previous year the assessee or
successor of the business has obtained any amount in respect of such loss or
expenditure or some benefit in respect of such trading liability by way of
remission or cessation thereof, the amount obtained or the value of benefit
accrued shall be deemed to be the income.
Successor in Business:
The provisions are applicable even to the successor who receives the amount.
The successor in business for this purpose, means:
a. Where there has been an amalgamation of a company with
another company, the successor will be the amalgamated
company.
72
2.
Mode of Acquisition
Amalgamation
Gift
Partition of HUF
Will
Irrevocable Trust
Cost of Acquisition
1) Cost to the amalgamating Company
2) cost of improvement
3) Expenses incurred for transfer
1) Cost to the donor
2) Cost of improvement
3) Expenses incurred for accepting the
gift and the gift tax paid by the donor
1) Cost to the HUF.
2) Cost of improvement
3) Expenses incurred for partition
1) Cost to the previous owner
2) Cost of improvement
3) Expenses incurred for probating the
will
1) Cost to the previous owner
2) Cost of improvement
3) Expenses incurred for establishing the
trust.
a. Where the assessee claims before any Assessing Officer that the
value adopted or assessed or assessable by the authority for
payment of stamp duty exceeds the fair market value of the
property as on the date of transfer and
b. the value so adopted or assessed or assessable by such authority
has not been disputed in any appeal or revision or no reference
has been made before any other authority, court or High Court.
6. Where the value ascertained by the Valuation Officer exceeds the value
adopted or assessed or assessable by the Stamp Valuation Authority, the
value adopted or assessed or assessable shall be taken as the full value of
the consideration received or accruing as a result of the transfer.
The term assessable covers transfers executed through power of
attorney. The term assessable has been defined to mean the price which
the stamp valuation authority would have, notwithstanding anything to the
contrary contained in any other law for the time being in force, adopted or
assessed, if it were referred to such authority for the purposes of the
payment of stamp duty.
Section 43D - Special provisions in case of income of public financial
institutions etc.,
In the case of a public financial institution or a scheduled bank or a State
financial corporation or a State industrial investment corporation, the
income by way of interest on such categories of bad and doubtful debts, as
may be prescribed having regard to the guidelines issued by the Reserve
Bank of India in relation to such debts, shall be chargeable to tax in the
previous year in which it is credited to the profit and loss account by the
said institutions for that year or in the previous year in which it is actually
received by them, whichever is earlier. This provision is now applicable to
co-operative banks also.
In the case of a public company, the income by way of interest in relation
to such categories of bad and doubtful debts as may be prescribed having
regard to the guidelines issued by the National Housing Bank established
under the National Housing Bank Act, 1987 in relation to such debts shall
be chargeable to tax in the previous year in which it is credited to the
profit and loss account by the said public company for that year or in the
previous in which it is actually received by it, whichever is earlier.
Section 44 - Insurance Business:
The profits and gains of a mutual insurance company or a co-operative
society carrying on the business of insurance shall be computed under the
head "Profits and gains of business or profession" in accordance with the
rules contained in the First Schedule to the Income Tax Act.
Section 44A - Special provision for deduction in the case of trade,
professional or similar association:
The concept of 'mutuality' means that the contributors and the
beneficiaries are identical. Since one cannot make profit by dealing with
himself, there is no taxable profit involved wherever such concept applies.
77
required to be maintained.
a) a cash book;
b) a journal, if accounts are maintained on mercantile basis ;
c) a ledger;
d) Carbon copies of bills and receipts issued by the person whether machine
numbered or otherwise serially numbered, in relation to sums exceeding
Rs. 25;
e) Original bills and receipts issued to the person in respect of expenditure
incurred by the person, or where such bills and receipts are not issued,
payment vouchers prepared and signed by the person, provided the
amount does not exceed Rs. 50. Where the cash book contains adequate
particulars, the preparation and signing of payment vouchers is not
required.
In case of a person carrying on medical profession, he will be required to
maintain the following in addition to the list given above:
a. a daily case register in Form 3C.
b. an inventory under broad heads of the stock of drugs, medicines and
other consumable accessories as on the first and last day of the
previous year used for his profession.
The above books of account and documents shall be kept and maintained for a
minimum of 6 years from the end of the relevant assessment year. However,
where the assessment in relation to any assessment year has been reopened
under section 147 within the period specified in section 149, all the books of
account and other documents which were kept and maintained at the time of
reopening the assessment shall continue to be so kept and maintained till the
assessment so reopened has been completed.
The books and documents shall be kept and maintained at the place where the
person is carrying on the profession, or where there is more than one place, at
the principal place of his profession. However, if he maintains separate set of
books for each place of his profession, such books and documents may be kept
and maintained at the respective places.
Section 44AB - Compulsory Audit of accounts:
It is obligatory in the following cases for a person carrying on business or
profession to get his accounts audited before the specified date by a Chartered
Accountant:
1. if the total sales, turnover or gross receipts in business exceeds Rs. 100
lakh in any previous year; or
2. if the gross receipts in profession exceeds Rs. 25 lakh in any previous year;
or
3. where the assessee is covered under section 44AE, 44BB or 44BBB and
claims that the profits and gains from business are lower than the profits
and gains computed on a presumptive basis. In such cases, the normal
monetary limits for tax audit in respect of business would not apply.
4. where the assessee is covered under section 44AD, and he claims that the
profits and gains from business are lower than the profits and gains
computed on a presumptive basis and his income exceeds the basic
exemption limit.
80
The person mentioned above would have to furnish by the specified date a report
of the audit in the prescribed forms. For this purpose, the Board has prescribed
under Rule 6G, Forms 3CA/3CB/3CD containing forms of audit report and
particulars to be furnished therewith.
In cases where the accounts of a person are required to be audited by or under
any other law before the specified date, it will be sufficient if the person gets his
accounts audited under such other law before the specified date and also furnish
by the said date the report of audit in the prescribed form in addition to the
report of audit required under such other law. Thus, for example, the provision
regarding compulsory audit does not imply a second or separate audit of
accounts of companies whose accounts are already required to be audited under
the Companies Act, 2013. The provision only requires that companies should get
their accounts audited under the Companies Act, 2013 before the specified date
and in addition to the report required to be given by the auditor under the
Companies Act, 2013 furnish a report for tax purposes in the form to be
prescribed in this behalf by the CBDT.
However, the requirement of audit under section 44AB does not apply to a
person who derives income of the nature referred to in sections 44B and 44BBA.
Specified date:
The expression specified date in relation to the accounts of the previous year
or years relevant to any assessment year means the due date for furnishing the
return of income under section 139(1).
It may be noted that under section 271B, penal action can be taken for not
getting the accounts audited and for not filing the audit report by the specified
date.
Note:
In case of an assessee carrying on more than one business activity, the
aggregate sales, turnover and / or gross receipts of all businesses carried on
would be taken into consideration for the limit of Rs. 1 crore.
Section 44AD - Special provisions for computing profits and gains of any
business (excluding the business covered under section 44AE):
1. In the case of an assessee, being a resident individual, HUF or a firm other
than a LLP, carrying on any business whose gross receipts from such
business does not exceed Rs. 1 crore, a sum equal to 8% of the gross
receipts paid or payable to the assessee or such higher sum as declared
by the assessee in the return of income shall be deemed to be the income
from such business.
2. This presumptive scheme of taxation shall not apply to an assessee who
has availed deduction u/s 10AA or any other deductions claimed under
Chapter VIA specifically relating to income based deductions.
3. An assessee who is covered under the provisions of Sec 44AD is not
required to pay advance tax.
4. Where the profits and gains from the business are deemed to be the
profits and gains of the assessee u/s 44AD and the assessee has claimed
his income lower than the income prescribed u/s 44AD and during such
previous year his income exceeds the basis exemption limit, he shall
maintain books of account as per Sec 44AA and get the same audited u/s
81
44AB.
5. the provisions of Section 44AD shall not apply to :
a) a person carrying on any profession referred to in Sec 44AA
b) a person earning income in the nature of commission or brokerage
c) a person carrying on any agency business.
Further Sec 44AD shall not apply to business of plying, hiring or leasing
goods carriage
referred to in Sec 44AE.
Section 44AE - Special provisions for computing profits and gains of
business of plying, hiring or leasing goods carriages:
1. In the case of an assessee who carries on the business of plying, hiring or
leasing goods carriages and who owns not more than 10 goods carriages
at any time during the year, the income shall be deemed to be Rs. 7,500/from goods vehicle for every month or part of the month during which
such goods vehicle is owned by the assessee in the previous year or such
higher sum as declared in the return of income by the assessee.
2. An assessee who is in possession of a goods carriage, whether taken on
hire purchase or on installments and for which the whole or part of the
amount payable is still due shall be deemed to be the owner of such goods
carriage.
3. Where the profits and gains from the business are deemed to be the
profits and gains of the assessee u/s 44AE and the assessee has claimed
his income lower than the income prescribed under this section , assessee
shall maintain books of account as per Sec 44AA and get the same audited
u/s 44AB.
4. In computing the monetary limits for Sec 44AA and Sec 44AB, the gross
receipts or the income from the business covered by Sec 44AE shall be
excluded.
Common points for Sec 44AD and Sec 44AE:
1. All deductions u/s 30 to 38 including depreciation shall be deemed to have
been allowed.
2. WDV of assets used for the purposes of such business shall be calculated
as if the depreciation has been actually allowed.
3. In the case of an assessee which is a firm to which the provisions of Sec
44AD or Sec 44AE are applied, the salary and interest paid to its partners
shall be deducted from the income computed under these provisions. The
allowance of the salary and interest shall be subject to the conditions and
limits specified in Sec. 40(b).
Section 44B - Special provision for computing the profits and gains of
shipping business in case of non-residents:
1. This section provides for computation of the profits and gains of the
business of shipping carried on by non-residents to the extent they are
chargeable to income-tax in India. According to this, a sum equal to 7%
of the aggregate of the following amounts must be deemed to be the
profits and gains of the business of shipping chargeable to tax under the
head profits and gains of business or profession.
a) The amount paid or payable, whether within India or
outside, to the assessee or to any person on his behalf on
account of the carriage of passengers, livestock, mail or
goods shipped at any port in India.
82
84
Average Adjusted Total Income meansa) in cases where the total income of the assessee is assessable for each of
the three assessment years immediately preceding the relevant
assessment year - one-third of the aggregate amount of the adjusted total
income of the previous years relevant to the aforesaid three assessment
years.
b) where the total income of the assessee is assessable for only two of the
aforesaid three assessment years - one-half of the aggregate amount of
the adjusted total income in respect of the two previous years relevant to
the aforesaid two assessment years;
c) in cases where the total income of the assessee becomes assessable only
for one of the three assessment years, aforesaid - the amount of adjusted
total incomes in respect of the previous year relevant to that assessment
year.
Head Office Expenditure:
Head Office Expenditure means the executive and general administration
expenditure incurred by the assessee outside India.
Section 44DA - Special provision for computing income by way of
royalties, etc., in case of non-residents:
1. The income by way of royalty or fees for technical services received from
Government or an Indian concern in pursuance of an agreement made by
a non-corporate non-resident or a foreign company with Government or
the Indian concern after the 31st March, 2003 in respect of such noncorporate non-resident or a foreign company which carries on business in
India, shall be computed on the basis of books of accounts required to be
maintained under the Act.
2. Such business should be carried on through a permanent establishment, or
the assessee should perform professional services from a fixed place of
profession in India.
3. They should keep and maintain books of account and other documents in
accordance with the provisions contained in section 44AA.
4. They should get their accounts audited by an accountant as defined in the
Explanation below section 288(2) and furnish along with the return of
income, the report of such audit in the prescribed form duly signed and
verified by such accountant.
5. No deduction will be allowed while computing income of such nonresident, of the expenditure which is not wholly and exclusively incurred
for the business of such permanent establishment or fixed place and also
of any amount paid by the permanent establishment to its head office or
any of its offices.
6. There have been legal decisions which have expressed contradictory views
regarding the scope and applicability of section 44BB vis--vis section
44DA on the issue of taxability of fee for technical services relating to the
exploration sector.
7. In order to reflect the correct legislative intention regarding taxation of
income by way of fee for technical services, section 44BB has been
amended to exclude the applicability of section 44BB to the income which
is covered under section 44DA. A similar amendment has been made in
section 44DA to provide that provisions of section 44BB would not be
applicable in respect of the income covered under section 44DA.
8. Therefore, if the income of a non-resident is in the nature of fees for
85
Q1:
A car purchased by Dr. Soman on 10.08.2013 for Rs.5,25,000 for personal use is brought into
professional use on 1.07.2015 by him, when its market value was Rs.2,50,000.
Compute the actual cost of the car and the amount of depreciation for the assessment year 201617 assuming the rate of depreciation to be 15%.
Q2:
M/s. Dollar Ltd., a manufacturing concern, furnishes the following particulars:
Particulars
Rs.
Opening Written down value of plant and machinery (01.04.2015) (15% block)
5,00,000
2,00,000
Sale proceeds of plant and machinery which became obsolete- the plant and
machinery was purchased on 01-04-2013 for Rs.5,00,000.
5,000
Q3:
87
Mr. Abhimanyu is engaged in the business of generation and distribution of power. He always opts
to claim depreciation on written down value for income-tax purposes. From the following details,
compute the depreciation allowable as per the provisions of the Income-tax Act, 1961 for the
assessment year 2016-17:
(Rs.in
lacs)
Opening WDV of block (15% rate)
42
10
This machine had been used only in Colombo earlier and the assessee is
the first user in India.
New computer installed in generation wing of the unit on 15-7-2015
Q4:
Harish Jayaraj Pvt. Ltd. is converted into Harish Jayaraj LLP on 1.1.2016. The following particulars
are available to you:
Particulars
Rs
Cost of land
WDV of machinery as on 1.4.2015
Patents acquired on 1.6.2015
Building acquired on 12.3.2014 for which deduction was allowed U/s.35AD.
Above building was revalued as on the date of conversion into LLP as
Unabsorbed business loss as on 1.4.2015 (Related to A.Y. 2012-13)
5,00,000
3,30,000
3,00,000
7,00,000
12,00,000
9,00,000
Though the conversion into LLP took place on 1.1.2016, there was disruption of business and the
assets were put into use by the LLP only from 1st March, 2016 onwards.
The company earned profits of Rs.8 lacs prior to computation of depreciation.
Assuming that the necessary conditions laid down in section 47(xiiib) of the Income-tax Act, 1961
have been complied with, explain the tax treatment of the above in the hands of the LLP.
Q5:
Sai Ltd. has a block of assets carrying 15% rate of depreciation, whose written down value on
01.04.2015 was Rs.40 lacs. It purchased another asset (second-hand plant and machinery) of the
same block on 01.11.2015 for Rs.14.40 lacs and put to use on the same day. Sai Ltd. was
amalgamated with Shirdi Ltd. with effect from 01.01.2016.
You are required to compute the depreciation allowable to Sai Ltd. & Shirdi Ltd. for the previous
year ended on 31.03.2016 assuming that the assets were transferred to Shirdi Ltd. at Rs.60 lacs.
Q6:
Mr.Gopi carrying on business as proprietor converted the same into a company by name Gopi Pipes
(P) Ltd. from 01-07-2015. The details of the assets are given below:
Particulars
12,00,000
25,00,000
The Company Gopi Pipes (P) Ltd. acquired plant and machinery in December 2015 for Rs.
10,00,000/-. It has been doing the business from 01-07-2015.
88
Compute the quantum of depreciation to be claimed by Mr. Gopi and successor Gopi Pipes Private
Limited for the assessment year 2016-17.
Note: Ignore additional depreciation.
Q7:
M/s Sidhant & Co., a sole proprietary concern is converted into a company, Sidhant Co. Ltd. with
effect from November 29, 2015. The written down value of assets as on April 1, 2015 is as follows:
Items
Rate of Depreciation
Building
Furniture
Plant and Machinery
10%
10%
15%
Rs.3,50,000
Rs.50,000
Rs.2,00,000
Further, on October 15, 2015, M/s Sidhant & Co. purchased a plant for Rs.1,00,000 (rate of
depreciation 15%). After conversion, the company added another plant worth Rs.50,000 (rate of
depreciation 15%).
Compute the depreciation available to (i) M/s Sidhant & Co. and (ii) Sidhant Co. Ltd. for
Assessment Year 2016-17.
Q8:
What are intangible assets? Give four examples. What is the rate of depreciation on a block of
intangible assets?
Q9:
A car purchased by S on 10.8.2010 for Rs.3,25,000 for personal use is brought into the business
of the assessee on 01.12.2015, when its market value is Rs.1,50,000.
Compute the actual cost of the car and the amount of depreciation for the Assessment year 201617 assuming the rate of depreciation to be 15%.
Q10:
Gopichand Industries furnishes you the following information:
Block I
Rs.
5,00,000
12,50,000
4,00,000
10,00,000
3,00,000
Q11:
M/s. QQ & Co., a sole proprietary concern, was converted into a company on 1.9.2015. Before the
conversion, the sole proprietary concern had a Block of Plant and Machinery (Rate of depreciation
15%), whose WDV as on 1.4.2015 was Rs.3,00,000. On 1st April itself, a new plant of the same
block was purchased for Rs.1,20,000. After the conversion, the company has purchased the same
type of Plant on 1.1.2016 for Rs.1,60,000.
Compute the depreciation that would be allocated between the sole proprietary concern and the
successor company.
Note: Ignore additional depreciation.
Q12:
89
Honest Industry furnishes you the following details pertaining to the financial year 2015-16
Plant &
Description
Machinery
Rate of depreciation
Opening balance as on 01-04-2015
15%
Rs.14,50,00
0
Rs.12,00,00
0
Rs.4,00,000
Building
Intangible
assets (patents)
10%
Rs.25,00,00
0
Nil
25%
Rs.15,00,000
Rs.18,00,00
0
-
Nil
Rs.5,00,000
Rs.3,00,000
A machinery acquired in July 2015 original cost Rs.1,50,000 was destroyed by fire and the
assessee received compensation of Rs.50,000 from the insurance company.
Newly acquired building given above includes value of land of Rs.3,00,000.
Calculate the eligible depreciation claim for the assessment year 2016-17.
Note: Ignore additional / accelerated depreciation.
Q13:
Mr. Praveen Kumar has furnished the following particulars relating to payments made towards
scientific research for the year ended 31.3.2016:
Particulars
Rs.(in lacs)
20
15
10
8
25
12
Note: K Research Ltd. and LMN College are approved research institutions and these payments
are to be used for the purposes of scientific research.
Compute the amount of deduction available under section 35 of the Income-tax Act, 1961 while
arriving at the business income of the assessee.
Q14:
Vivitha Bio-medicals Ltd. is engaged in the business of manufacture of bio-medical items. The
following expenses were incurred in respect of activities connected with scientific research:
Year ended
Item
Amount (Rs.)
31.03.2013
(Incurred after 1.9.2012)
31.03.2014
31.03.2015
31.03.2016
Land
Building
Plant and machinery
Raw materials
Raw materials and salaries
10,00,000
25,00,000
5,00,000
2,20,000
1,80,000
90
Q15:
Swadeshi Ltd., which follows mercantile system of accounting, obtained licence on 1.4.2014 from
the Department of telecommunication for a period of 10 years. The total licence fee payable is
Rs.18,00,000. The relevant details are:
Year ended
Payments made
31st March
Date
Amount (Rs.)
2015
10,00,000
2016
8,00,000
30.03.2015
15.05.2015
28.02.2016
3,70,000
6,30,000
5,40,000
Q16:
Win Limited commenced the business of operating a three star hotel in Tirupati on 1-4-2015.
It furnishes you the following information:
Cost of land (acquired in June 2013)
Cost of construction of hotel building
Financial year 2013-14
Financial year 2014-15
Plant and Machineries (all new) acquired during financial year 2014-15
[All the above expenditures were capitalized in the books of the company]
Net profit before depreciation for the financial year 2015-16
Rs.60 lakhs
Rs.30 lakhs
Rs.150 lakhs
Rs.30 lakhs
Rs.80 lakhs
Determine the amount eligible for deduction under section 35AD of the Income-tax Act, 1961, for
the assessment year 2016-17.
Q17:
MNP Ltd. commenced operations of the business of a new four-star hotel in Chennai on 1.4.2015.
The company incurred capital expenditure of Rs.40 lakh during the period January, 2015 to March,
2015 exclusively for the above business, and capitalized the same in its books of account as on 1st
April, 2015. Further, during the previous year 2015-16, it incurred capital expenditure of Rs.2.5
crore (out of which Rs.1 crore was for acquisition of land) exclusively for the above business.
Compute the income under the head Profits and gains of business or profession for the
assessment year 2016-17, assuming that MNP Ltd. has fulfilled all the conditions specified for
claim of deduction under section 35AD and has not claimed any deduction under Chapter VI-A
under the heading C. Deductions in respect of certain incomes. The profits from the business of
running this hotel (before claiming deducting under section 35AD) for the assessment year 201617 is Rs.80 lakhs. Assume that the company also has another existing business of running a fourstar hotel in Kanpur, which commenced operations 5 years back, the profits from which was
Rs.130 lakhs for assessment year 2016-17.
Would MNO Ltd. be entitled to deduction under section 35AD if it transfers the operation of the
hotel in Chennai to PQR Ltd, while continuing to own the said hotel?
Q18:
Briefly discuss about the provisions relating to deductibility of interest on capital borrowed for the
purpose of business or profession.
Q19:
Comment on the allowability of the following claim made by the assessee:
91
Mr. Achal, a hotelier, claimed expenditure on replacement of Linen and carpets in his hotel as
revenue expenditure.
Q20:
What are the conditions to be satisfied for the allowability of expenditure under section 37 of the
Income-tax Act, 1961?
Q21:
State with reasons, for the following sub-divisions, whether the following statements are true or
false having regard to the provisions of the Income-tax Act, 1961:
a) For a dealer in shares and securities, securities transaction tax paid in a recognized stock
exchange is permissible business expenditure.
b) Where a person follows mercantile system of accounting, an expenditure of Rs.25,000 has
been allowed on accrual basis and in a later year, in respect of the said expenditure, assessee
makes the payment of Rs.25,000 through a cheque crossed as "& Co., disallowance of
Rs.25,000 under section 40A(3) can be made in the year of payment.
c)
It is mandatory to provide for depreciation under section 32 of the Income-tax Act, 1961,
while computing income under the head Profits and Gains from Business and Profession.
d) The mediclaim premium paid to GIC by Mr. Lomesh for his employees, by a draft, on
27.12.2015 is a deductible expenditure under section 36.
e) Under section 35DDA, amortization of expenditure incurred under eligible Voluntary
Retirement Scheme at the time of retirement alone, can be done.
f)
An existing assessee engaged in trading activities, can claim additional depreciation under
Section 32(1)(iia) in respect of new plant acquired and installed in the trading concern, where
the increase in value of such plant as compared to the approved base year is more than 10%.
Q22:
State, with reasons, the allowability of the following expenses under the Income-tax Act, 1961
while computing income from business or profession for the Assessment Year 2016-17:
a) Provision made on the basis of actuarial valuation for payment of gratuity Rs.5,00,000.
However, no payment on account of gratuity was made before due date of filing return.
b) Purchase of oil seeds of Rs.50,000 in cash from a farmer on a banking day.
c)
Q23:
Ramji Ltd., engaged in manufacture of medicines (pharmaceuticals), furnishes the following
information for the year ended 31.03.2016:
a) Municipal tax relating to office building Rs.51,000 not paid till 30.09.2016.
b) Patent acquired for Rs.20,00,000 on 01.09.2015 and used from the same month.
c)
d) Amount due from customer X, outstanding for more than 3 years, written off as bad debt in
the books Rs.5,00,000.
e) Income-tax paid Rs.90,000 by the company in respect of non-monetary perquisites provided
to its employees.
f)
92
Q24:
Answer the following with reference to the provisions of the Income-tax Act, 1961:
a.
Bad debt claim disallowed in an earlier assessment year, recovered subsequently. Is the
sum recovered chargeable to tax?
b.
Tax deducted at source on salary paid to employees not remitted till the due date for filing
the return prescribed in section 139. Is the expenditure to be disallowed under section 40(a)
(ia)?
c.
X Co. Ltd. paid Rs.120 lakhs as compensation as per approved Voluntary Retirement Scheme
(VRS) during the financial year 2015-16. How much is deductible under section 35DDA for the
assessment year 2016-17?
d.
Bad debt of Rs.50,000 written off and allowed in the financial year 2013-14 recovered in the
financial year 2015-16.
Q25:
State with reasons, whether the following statements are true or false, with regard to the
provisions of the Income-tax Act, 1961:
a) Payment made in respect of a business expenditure incurred on 16th February, 2015 for
Rs.25,000 through a cheque duly crossed as "& Co." is hit by the provisions of section 40A(3).
b)
It is a condition precedent to write off in the books of account, the amount due from debtor to
claim deduction for bad debt.
Failure to deduct tax at source in accordance with the provisions of Chapter XVII-B,
inter alia,
Co-operative banks are not allowed to claim provision for bad and doubtful debts in respect of
advances made by rural branches of such banks.
Q26:
Write short notes on:
a) Restrictions on deductions allowable to the partnership firm in respect of salary and interest to
its partners under section 40(b) of the Income-tax Act, 1961.
b) Carry forward and set off of unabsorbed depreciation.
c)
Additional depreciation.
Q27:
Rao & Jain, a partnership firm consisting of two partners, reports a net profit of Rs.7,00,000 before
deduction of the following items:
i.
Salary of Rs.20,000 each per month payable to two working partners of the firm (as
authorized by the deed of partnership).
93
ii.
iii.
Interest on capital at 15% per annum (as per the deed of partnership). The amount of
capital eligible for interest Rs.5,00,000.
Compute:
a) Book-profit of the firm under section 40(b) of the Income-tax Act, 1961.
b) Allowable working partner salary for the assessment year 2016-17 as per section 40(b).
Q28:
During the financial year 2015-16, the following payments/expenditure were made/incurred by Mr.
Yuvan Raja, a resident individual (whose turnover during the year ended 31.3.2015 was Rs.99
lacs):
a) Interest of Rs.12,000 was paid to Rehman & Co., a resident partnership firm, without
deduction of tax at source;
b) Interest of Rs.4,000 was paid as interest to Mr. R.D. Burman, a non-resident, without
deduction of tax at source;
c)
Rs.3,00,000 was paid as salary to a resident individual without deduction of tax at source;
d) Commission of Rs.15,000 was paid to Mr. Vidyasagar on 2.7.2015. without deduction of tax at
source.
Briefly discuss whether any disallowance arises under the provisions of section 40(a)(i)/40(a)(ia)
of the Income-tax Act, 1961.
Q29:
M/s. Arora Ltd., submits the following details of expenditure pertaining to the financial year 2015-16:
a) Payment of professional fees to Mr. Mani Rs.50,000. Tax was not deducted at source.
b) Interior works done by Mr. Hari for Rs.2,00,000 on a contract basis. Payment made in the
month of March 2016. Tax deducted in March 2015 was paid on 30.06.2016.
c)
Factory Rent paid to Mr. Rao Rs.15,00,000. Tax deducted at source and paid on
01.10.2016.
d) Interest paid on Fixed Deposits Rs.2,00,000. Tax deducted on 31.12.2015 and paid on
28.09.2016.
Examine the above with reference to allowability of the same in the assessment year 2016-17
under the Income-tax Act, 1961. You answer must be with reference to section 40(a) read with
relevant tax deduction at source provisions. Assume that the due date of filing the return of
income is 30.09.2016.
Q30:
Vinod is a person carrying on profession as film artist. His gross receipts from profession are
as under:
Financial year 2013-14
1,15,000
1,80,000
2,10,000
What is his obligation regarding maintenance of books of accounts for each Assessment Year under
section 44AA of Income-tax Act, 1961?
Q31:
Ramamurthy had 4 heavy goods vehicles as on 1.4.2015. He acquired 7 heavy goods vehicles on
27.6.2015. He sold 2 heavy goods vehicles on 31.5.2015.
94
He has brought forward business loss of Rs.50,000 relating to assessment year 2012-13 of a
discontinued business. Assuming that he opts for presumptive taxation of income as per section
44AE, compute his total income chargeable to tax for the assessment year 2016-17.
Q32:
Mr. Praveen engaged in retail trade, reports a turnover of Rs.98,50,000 for the financial year 201516. His income from the said business as per books of account is computed at Rs.7,20,000. Retail
trade is the only source of income for Mr. Praveen.
a) Is Mr. Praveen eligible to opt for presumptive determination of his income chargeable to tax
for the assessment year 2016-17?
b) If so, determine his income from retail trade as per the applicable presumptive provision.
c)
In case Mr. Praveen does not opt for presumptive taxation of income from retail trade,
what are his obligations under the Income-tax Act, 1961?
d) What is the due date for filing his return of income under both the options?
Q33:
Mr. Sukhvinder is engaged in the business of plying goods carriages. On 1st April, 2015, he owns
10 trucks (out of which 6 are heavy goods vehicles). On 2nd May, 2015, he sold one of the heavy
goods vehicles and purchased a light goods vehicle on 6th May, 2015. This new vehicle could
however be put to use only on 15th June, 2015.
Compute the total income of Mr. Sukhvinder for the assessment year 2016-17, taking note of the
following data:
Particulars
Rs.
Rs.
12,70,00
0
6,25,000
1,85,000
15,000
8,25,000
4,45,00
0
70,000
Q34:
X Ltd. follows mercantile system of accounting. After negotiations with the bank, interest of Rs.4
lakhs (including interest of Rs.1.2 lakhs pertaining to year ended 31.03.2016 has been converted
into loan. Can the interest of Rs.1.2 lakhs so capitalized be claimed as business expenditure?
Q35:
Mr. B.A. Patel, a non-resident, operates an aircraft between London to Ahmedabad. For the
Financial year ended on 31st March, 2016, he received the amounts as under:
a) For carrying passengers from Ahmedabad Rs.50 lacs.
b) For carrying passengers from London Rs.75 lacs received in India.
c)
The total expenditure incurred by Mr. B.A. Patel for the purposes of the business for the financial
year 2015-16 was Rs.1.4 crores.
Compute the income of Mr. B.A. Patel under the head Profits and Gains from business or
profession for the financial year ended on 31st March 2016 relevant to assessment year 2016-17.
Q36:
95
List six items of expenses which otherwise are deductible shall be disallowed, unless payments are
actually made within the due date for furnishing the return of income under Section 139(1). When
can the deduction be claimed, if paid after the said date?
Q37:
Mr. Asim, a 60 year old individual, engaged in the business of roasting and grounding of coffee,
derives income of Rs.10 lacs during the financial year 2015-16. Compute the tax payable by him
assuming he has not earned any other income during the financial year 2015-16. What would be
your answer if Mr. Asim is also engaged in the business of growing and curing coffee?
Q38:
Mr. Tenzingh is engaged in composite business of growing and curing (further processing) coffee in
Coorg, Karnataka. The whole of coffee grown in his plantation is cured. Relevant information
pertaining to the year ended 31.3.2016 are given below:
Particulars
Rs.
3,00,000
15,00,000
3,10,000
3,00,000
22,00,000
Besides being used for agricultural operations, the car is also used for personal use; disallowance
for personal use may be taken at 20%. The expenses incurred for car running and maintenance
are Rs.50,000. The machines were used in coffee curing business operations.
Compute the income arising from the above activities for the assessment year 2016-17. Show the
WDV of the assets as on 31.3.2016.
Q39:
Miss Vivitha, a resident and ordinarily resident in India, has derived the following income from
various operations (relating to plantations and estates owned by her) during the year ended
31.03.2016:
Particulars
Rs.
Income from sale of centrifuged latex processed from rubber plants grown in Darjeeling.
Income from sale of coffee grown and cured in Yercaud, Tamilnadu
Income from sale of coffee grown, cured, roasted and grounded, in Colombo. Sale
consideration was received at Chennai.
Income from sale of tea grown and manufactured in Shimla.
Income from sapling and seedling grown in a nursery at Cochin.
Basic operations were not carried out by her on land.
3,00,000
1,00,000
2,50,000
4,00,000
80,000
You are required to compute the business income and agricultural income of Miss Vivitha for the
assessment year 2016-17.
Q40:
Mr. Tony has estates in Rubber, Tea and Coffee. He derives income from them. He has also a
nursery wherein he grows and sells plants. For the previous year ending 31.3.2016, he furnishes
the following particulars of his sources of income from estates and sale of plants.
You are requested to compute the taxable income for the Assessment Year 2016-17:
Particulars
Rs.
Manufacture of Rubber
Manufacture of Coffee grown and cured
Manufacture of Tea
Sale of plants from Nursery
5,00,000
3,50,000
7,00,000
1,00,000
96
Q41:
Mr. Gupta is having a trading business and his Trading and Profit & Loss Account for the financial
year 2015-16 is as under:
Particulars
Rs.
Particulars
Rs.
To Opening stock
To Purchase
To Gross profit
Total
1,00,000
49,00,000
20,50,000
70,50,00
0
5,00,000
1,00,000
50,000
50,000
50,000
20,000
By Sales
By Closing stock
70,00,000
50,000
Total
70,50,000
20,50,000
Total
20,50,000
30,000
1,00,000
To Net profit
11,50,000
Total
20,50,00
0
Other information:
a) Depreciation allowable Rs.40,000 as per Income-tax Rules, 1962.
b) No deduction of tax at source on payment of interest on bank loan has been made.
c)
Payment of bonus to workers made in the month of October, 2015 on the occasion of Diwali
festival.
d) Out of salary, Rs.25,000 pertains to his contributions to recognized provident fund which was
deposited after the due date of filing return of income. Further, employees contribution of
Rs.25,000 was also deposited after the due date of filing return of income.
Calculate gross total income of Mr. Gupta for the Assessment Year 2016-17.
Q42:
Mr. Raju, a manufacturer at Chennai, gives the following Manufacturing, Trading and Profit & Loss
Account for the year ended 31.03.2016:
Manufacturing, Trading and Profit & Loss Account for the year ended 31.03.2016
Particulars
Rs.
Particulars
Rs.
To
To
To
To
71,000
16,99,000
5,70,000
10,60,000
34,00,00
0
3,26,000
5,000
By Sales
By Closing stock
32,00,000
2,00,000
Opening Stock
Purchase of Raw Materials
Manufacturing Wages & Expenses
Gross Profit
To Administrative charges
To State VAT penalty
To State VAT paid
To General Expenses
To Interest to Bank (On machinery
term loan)
1,10,000
54,000
60,000
97
34,00,000
By Gross Profit
By Dividend from domestic
companies
By Income from agriculture (net)
10,60,000
15,000
1,80,000
To Depreciation
To Net Profit
2,00,000
5,00,000
12,55,00
0
12,55,000
Following are the further information relating to the financial year 2015-16:
a) Administrative charges include Rs.46,000 paid as commission to brother of the assessee. The
commission amount at the market rate is Rs.36,000.
b) The assessee paid Rs.33,000 in cash to a transport carrier on 29.12.2015. This amount is
included in manufacturing expenses (Assume that the provisions relating to TDS are not
applicable to this payment.)
c)
A sum of Rs.4,000 per month was paid as salary to a staff throughout the year and this has
not been recorded in the books of account.
d) Bank term loan interest actually paid upto 31.03.2016 was Rs.20,000 and the balance was
paid in October 2016.
e) Housing loan principal repaid during the year was Rs.50,000 and it relates to residential
property occupied by him. Interest on housing loan was Rs.23,000. Housing loan was taken
from Canara Bank. These amounts were not dealt with in the profit and loss account given
above.
f)
Depreciation allowable under the Act is to be computed on the basis of following information:
Plant & Machinery (Depreciation rate @ 15%)
Rs.
12,00,000
2,00,000
4,00,000
Compute the total income of Mr. Raju for the assessment year 2016-17.
Note: Ignore application of section 14A for disallowance of expenditures in respect of any exempt
income.
Q43:
Mr. Sivam, a retail trader of Cochin gives the following Trading and Profit and Loss Account for the
year ended 31st March, 2016:
Trading and Profit and Loss Account for the year ended 31.03.2016
Particulars
Rs.
Particulars
Rs.
To Opening stock
To Purchases
To Gross Profit
90,000
10,04,000
3,06,000
14,00,000
60,000
36,000
15,000
1,05,000
23,200
1,640
8,100
7,060
50,000
By Sales
By Income from UTI
By Closing stock
12,11,500
2,400
1,86,100
14,00,000
3,06,000
To
To
To
To
To
To
To
To
To
Salary
Rent and rates
Interest on loan
Depreciation
Printing & stationery
Postage & telegram
Loss on sale of shares (Short term)
Other general expenses
Net Profit
3,06,000
Additional Information:
98
3,06,000
a) It was found that some stocks were omitted to be included in both the Opening and Closing
Stock, the values of which were:
Opening stock
Rs. 9,000
Closing stock
Rs.18,000
b) Salary includes Rs.10,000 paid to his brother, which is unreasonable to the extent of
Rs.2,000.
c)
The whole amount of printing and stationery was paid in cash by way of onetime payment.
d) The depreciation provided in the Profit and Loss Account Rs.1,05,000 was based on the
following information :
The written down value of plant and machinery is Rs.4,20,000 as on 01.04.2015. A new plant
falling under the same block of depreciation was bought on 1.7.2015 for Rs.70,000. Two old
plants were sold on 1.10.2015 for Rs.50,000.
e) Rent and rates includes sales tax liability of Rs.3,400 paid on 7.4.2016.
f)
Other general expenses include Rs.2,000 paid as donation to a Public Charitable Trust.
You are required to advise Mr. Sivam whether he can offer his business income under section 44AD
i.e. presumptive taxation.
Q44:
Following is the profit and loss account of Mr. Q for the year ended 31-03-2016:
Particulars
Rs.
Particulars
Rs.
To Repairs on Building
To Amount paid to IIT, Mumbai for an
approved scientific research programme
To Interest
To Travelling
To Net Profit
1,81,000
1,00,000
By Gross Profit
By I.T. Refund
6,01,000
8,100
1,10,000
1,30,550
93,950
6,400
6,15,500
6,15,500
Q45:
Following is the profit and loss account of Mr. A for the year ended 31.3.2016:
Particulars
Rs.
Particulars
Rs.
To Repairs on building
To Advertisement
To Amount paid to Scientific Research
Association approved u/s.35
To Interest
To Traveling
To Net Profit
1,30,000
51,000
1,00,000
By Gross profit
By Income Tax Refund
By Interest from company
deposits
By Dividends
6,01,000
4,500
6,400
1,10,000
1,30,000
94,500
6,15,50
0
99
3,600
6,15,50
0
(1) Repairs on building includes Rs.95,000 being cost of raising a compound wall for the own
business premises.
(2) (2) Interest payments include interest of Rs.12,000 payable outside India to a non-resident
Indian on which tax has not been deducted and penalty of Rs.24,000 for contravention of
Central Sales Tax Act.
Compute the income chargeable under the head Profits and gains of business or profession of
Mr. A for the year ended 31.3.2016 ignoring depreciation.
Q46:
Briefly explain the term "substantial interest". State three situations in which the same assumes
importance.
Q47:
Raghav Industries Ltd. furnishes you the following information for the year ended 31-03-2016:
a) Scientific research expenditure related to its business Rs.2,40,000 fully revenue in nature.
b) Building acquired for scientific research (including cost of land Rs.5,00,000) in June 2015 for
Rs.12,00,000.
c)
Amount paid to Indian Institute of Science, Bangalore for scientific research Rs.50,000.
Amount recovered from employees towards provident fund contribution Rs.12,00,000 of which
amount remitted upto the end of the year was Rs.7,00,000 and the balance was remitted
before the 'due date' for filing the return prescribed in Section 139(1).
Q48:
Explain the tax treatment of Limited Liability Partnership under the Income-tax Act, 1961.
Q49:
XYZ Ltd., a manufacturing concern, furnishes the following particulars:
Sl.N
o
Particulars
Amount (Rs)
30,00,000
20,00,000
8,00,000
3,00,000
Compute the amount of depreciation and additional depreciation as per the Income Tax Act, 1961
for the Assessment Year 2016-17.
Q50:
A newly qualified Chartered Accountant Mr. Dhaval, commenced practice and has acquired the
following assets in his office during F.Y. 2014-15 at the cost shown against each item. Calculate the
amount of depreciation that can be claimed from his professional income for A.Y.2016-17:
100
Sl.
No.
Description
Date
of
acquisition
Amount
(in Rs)
1.
Computer
27 Sept., 15
1 Oct., 15
35,000
2.
Computer software
2 Oct., 15
8 Oct., 15
8,500
3.
Computer printer
1 Oct., 15
1 Oct., 15
12,500
4.
1 Apr., 15
13,000
5.
Office furniture
1 Apr., 15
1 Apr., 15
3,00,000
26 Sep., 15
8 Oct., 15
43,000
(Acquired from a
practising C.A.)
6.
Laptop
Q51:
Gamma Ltd. was incorporated on 1.1.2015 for manufacture of tyres and tubes for motor
vehicles. The manufacturing unit was set up on 1.5.2015. The company commenced its
manufacturing operations on 1.6.2015. The total cost of the plant and machinery installed in
the unit is Rs. 120 crore. The said plant and machinery included second hand plant and
machinery bought for Rs. 20 crore and new plant and machinery for scientific research
relating to the business of the assessee acquired at a cost of Rs. 15 crore.
Compute the amount of depreciation allowable under section 32 of the Income-tax Act, 1961
in respect of the assessment year 2016-17.
Q52:
Lights and Power Ltd. engaged in the business of generation of power, furnishes the following
particulars pertaining to P.Y.2015-16. Compute the depreciation allowable under section 32 for
A.Y.2016-17, while computing its income under the head Profits and gains of business or
profession. The company has opted for the depreciation allowance on the basis of written
down value.
1.
2.
3.
4.
5.
6.
7.
Particulars
Opening Written down value of Plant and Machinery (15% block) as on
01.04.2015 (Purchase value Rs 8,00,000/-)
Purchase of second hand machinery (15% block) on 29.12.2015 for
business purpose
Machinery Y (15% block) purchased and installed on 12.07.2015 for the
purpose of power generation
Acquired and installed for use a new air pollution control equipment on
31.7.2015
New air conditioner purchased and installed in office premises on 8.9.2015
New machinery Z (15% block) acquired and installed on 23.11.2015 for
the purpose of generation of power
Sale value of an old machinery X, sold during the year (Purchase value
Rs. 4,80,000, WDV as on 01.04.2015 Rs 3,46,800)
Rs.
5,78,000
2,00,000
8,00,000
2,50,000
3,00,000
3,25,000
3,10,000
Q53:
B Ltd., a Company engaged in the business of manufacture of sports equipments, furnishes the
following particulars pertaining to P.Y.2014-15 and P.Y.2015-16. Compute the depreciation
allowable under section 32 as well as the deduction allowable under Section 32AC for A.Y2015-16
101
and A.Y.2016-17, while computing its income under the head "Profits and gains of business or
Profession". Also, compute the written down value of Plant and Machinery as on 01.04.2015 and
01.04.2016.
Sl.No
Particulars
Rs. in Crore
25.00
4.00
12.00
0.40
90.00
0.15
15.00
Q54:
X Ltd. set up a manufacturing unit in notified backward area in the State of Telangana on
01.06.2015. It invested Rs. 30 Crore in new plant and machinery on 01.06.2015. Further, it
invested Rs. 25 Crore in the Plant and Machinery on 01.11.2015, out of which Rs. 5 Crore was
second hand plant and machinery. Compute the depreciation allowable under section 32. Is X Ltd.,
entitled for any other benefit in respect of such investment ? If so, what is the benefit available ?
Would your answer change where such manufacturing unit is set up by a firm, say X & CO., instead
of X Ltd.?
Q55:
A Ltd. furnishes the following particulars for the P.Y.2015-16. Compute the deduction allowable
under section 35 for A.Y.2016-17, while computing its income under the head Profits and gains of
business or profession.
1.
2.
3.
4.
(a)
(b)
Particulars
Rs
Amount paid to Indian Institute of Science, Bangalore, for scientific 1,00,000
research
Amount paid to IIT, Delhi for an approved scientific research programme 2,50,000
Amount paid to X Ltd., a company registered in India which has as its 4,00,000
main object scientific research and development, as is approved by the
prescribed authority
Expenditure incurred on in-house research and development facility as
approved by the prescribed authority
Revenue expenditure on scientific research
3,00,000
Capital expenditure
(including
cost
of
acquisition
7,50,000
of
land Rs. 5,00,000) on scientific research
Q56:
102
Mr. A commenced operations of the businesses of setting up a warehousing facility for storage of
food grains, sugar and edible oil on 1.4.2015. He incurred capital expenditure of Rs. 80 lakh, Rs.
60 lakh and Rs 50 lakh, respectively, on purchase of land and building during the period January,
2015 to March, 2015 exclusively for the above businesses, and capitalized the same in its books of
account as on 1st April, 2015. The cost of land included in the above figures are Rs 50 lakh, Rs 40
lakh and Rs 30 lakh, respectively. Further, during the P.Y.2015-16, it incurred capital expenditure
of Rs 20 lakh, Rs 15 lakh & Rs 10 lakh, respectively, for extension/ reconstruction of the building
purchased and used exclusively for the above businesses. Compute the income under the head
Profits and gains of business or profession for the A.Y.2016-17 and the loss to be carried
forward, assuming that Mr. A has fulfilled all the conditions specified for claim of deduction under
section 35AD and has not claimed any deduction under Chapter VI-A under the heading C.
Deductions in respect of certain incomes. The profits from the business of setting up a
warehousing facility for storage of food grains, sugar and edible oil (before claiming deduction
under section 35AD and section 32) for the A.Y. 2016-17 is Rs 16 lakhs, Rs 14 lakhs and Rs 31
lakhs, respectively.
Q57:
XYZ Ltd. commenced operations of the business of a new three-star hotel in Madurai, Tamil Nadu
on 1.4.2015. The company incurred capital expenditure of Rs 50 lakh during the period January,
2015 to March, 2015 exclusively for the above business, and capitalized the same in its books of
account as on 1st April, 2015. Further, during the P.Y.2015-16, it incurred capital expenditure of Rs
2 crore (out of which Rs 1.50 crore was for acquisition of land) exclusively for the above business.
Compute the income under the head Profits and gains of business or profession for the A.Y.201617, assuming that XYZ Ltd. has fulfilled all the conditions specified for claim of deduction under
section 35AD and has not claimed any deduction under Chapter VI-A under the heading C.
Deductions in respect of certain incomes. The profits from the business of running this hotel
(before claiming deduction under section 35AD) for the A.Y.2016-17 is Rs 25 lakhs. Assume that
the company also has another existing business of running a four-star hotel in Coimbatore, which
commenced operations 5 years back, the profits from which are Rs 120 lakhs for the A.Y.2016-17.
Q58:
ABC Ltd. is a company having two units Unit A carries on specified business of setting up and
operating a warehousing facility for storage of sugar; Unit B carries on non-specified business of
operating a warehousing facility for storage of edible oil. Unit A commenced operations on
1.4.2014 and it claimed deduction of Rs 100 lacs incurred on purchase of two buildings for Rs 50
lacs each (for operating a warehousing facility for storage of sugar) under section 35AD for
A.Y.2015-16. However, in February, 2016, Unit A transferred one of its buildings to Unit B.
Examine the tax implications of such transfer in the hands of ABC Ltd.
Q59:
X Ltd. contributes 20% of basic salary to the account of each employee under a pension scheme
referred to in section 80CCD. Dearness Allowance is 40% of basic salary and it forms part of pay of
the employees. Compute the amount of deduction allowable under section 36(1)(iva), if the basic
salary of the employees aggregate to Rs 10 lakh. Would disallowance under section 40A(9) be
attracted, and if so, to what extent?
Q60:
The following are the particulars in respect of a scheduled bank incorporated in Indiah
Particulars
103
` in
lakh
(i)
Provision for bad and doubtful debts under section 36(1)(viia) upto A.Y.2015-16
100
(ii)
800
(iii)
300
(iv) Bad debts written off (for the first time) in the books of account (in respect of
urban advances only) during the previous year 2015-16
210
Compute the deduction allowable under section 36(1)(vii) for the A.Y.2016-17.
Q61:
Isac limited is a company engaged in the business of biotechnology. The net profit of the company
for the financial year ended 31.03.2016 is Rs 15,25,890 after debiting the following items:
S.No.
Particulars
1.
2.
(1)
3.
4.
Land
5,00,000
3,00,000
(2) Building
Expenditure incurred on notified agricultural extension project
1,50,000
2,00,000
2,50,000
`
1,80,000
Compute the income under the head Profits and gains of business or profession for the A.Y.
2016-17 of Isac Ltd.
Q62:
Delta Ltd. credited the following amounts to the account of resident payees in the month of March,
2016 without deduction of tax at source. What would be the consequence of non-deduction of tax
at source by Delta Ltd. on these amounts during the financial year 2015-16, assuming that the
resident payees in all the cases mentioned below, have not paid the tax, if any, which was required
to be deducted by Delta Ltd. ?
Sl.No
Particulars
12,00,000
1,10,000
28,000
Would your answer change if Delta Ltd. has deducted tax on Director's Remuneration in April, 2016
at the time of payment and remitted the same in July, 2016 ?
Q63:
104
A firm has paid Rs 7,50,000 as remuneration to its partners for the P.Y.2015-16, in accordance
with its partnership deed, and it has a book profit of Rs 10 lakh. What is the remuneration
allowable as deduction?
Q64:
Hari, an individual, carried on the business of purchase and sale of agricultural commodities like
paddy, wheat, etc. He borrowed loans from Andhra Pradesh State Financial Corporation and Indian
Bank and has not paid interest as detailed hereunder:
`
(i)
(ii)
15,00,000
30,00,000
45, 0 0, 00 0
Both Andhra Pradesh State Financial Corporation and Indian Bank, while restructuring the loan
facilities of Hari during the year 2015-16, converted the above interest payable by Hari to them as
a loan repayable in 60 equal installments. During the year ended 31.3.2016, Hari paid 5
installments to Andhra Pradesh State Financial Corporation and 3 installments to Indian Bank.
Hari claimed the entire interest of Rs. 45,00,000 as an expenditure while computing the income
from business of purchase and sale of agricultural commodities. Discuss whether his claim is valid
and if not what is the amount of interest, if any, allowable.
Q65:
An assessee owns a light commercial vehicle for 9 months 15 days, a medium goods vehicle for 9
months and a medium goods vehicle for 12 months during the previous year. Compute his income
applying the provisions of section 44AE.
Q66:
Mr. X commenced the business of operating goods vehicles on 1.4.2015. He purchased the
following vehicles during the P.Y.2015-16. Compute his income under section 44AE for A.Y.201617.
(1)
(2)
(3)
Type of Vehicle
Number
Date
of
purchase
10.4.2015
15.3.2016
16.7.2015
2.1.2016
29.8.2015
23.2.2016
Would your answer change if the two light goods vehicles purchased in April, 2015 were put to use
only in July, 2015?
Q67:
Mr. Tiwari, a non-resident, operates an aircraft between Bangkok and Mumbai. He received the
following amounts in the course of the business of operation of aircraft during the year ending
31.3.2016:
(i) Rs. 3 crore in India on account of carriage of passengers from Mumbai.
(ii) Rs. 2 crore in India on account of carriage of goods from Mumbai.
(iii) Rs. 1 crore in India on account of carriage of passengers from
105
Bangkok.
(iv) Rs. 2 crore in Bangkok on account of carriage of passengers
from Mumbai.
The total expenditure incurred by Mr. Tiwari for the purposes of the business during the year
ending 31.3.2016 was Rs. 1.8 crore.
Compute the income of Mr. Tiwari chargeable to tax in India under the head Profits and gains of
business or profession for the assessment year 2016-17
Q68:
Alpha Co-operative Bank amalgamated with Beta Co-operative Bank on 1.12.2015. The
depreciation for the year ended 31.3.2016 calculated as per Income-tax Rules, 1962, allowable to
Alpha Co-operative Bank had the amalgamation had not taken place amounts to Rs 2,40,000.
Compute the deduction on account of depreciation allowable in the hands of Alpha Co-operative
Bank and Beta Co-operative Bank for A.Y. 2016-17.
106