Exp incurred during the year of comml. Prod. Or one or more of the 4 years preceding that year shall be excluded. Exp on acquisition of site or on acquisition of deposits of minerals or on any building, mach, plant or furniture shall not be regarded as eligible exp.
Exp incurred during the year of comml. Prod. Or one or more of the 4 years preceding that year shall be excluded. Exp on acquisition of site or on acquisition of deposits of minerals or on any building, mach, plant or furniture shall not be regarded as eligible exp.
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Exp incurred during the year of comml. Prod. Or one or more of the 4 years preceding that year shall be excluded. Exp on acquisition of site or on acquisition of deposits of minerals or on any building, mach, plant or furniture shall not be regarded as eligible exp.
Copyright:
Attribution Non-Commercial (BY-NC)
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(1) An Indian co or a res. ‘A’ engaged in prospecting for or extraction or production of any minerals who incurs exp specified in sub sec. (2) after 31-3-1970, shall be entitled to deduction of 1/10th of such exp in the relevant P.Y.s. (2) Exp is incurred during the year of comml. prod. or one or more of the 4 years preceding that year on prospecting of minerals specified in Part A or Part Bof the Seventh Schedule. Exp met by any person or authority and sale, salvage, compensation or insurance money realised from any property shall be excluded. (3) Exp on acquisition of site or on acquisition of deposits of minerals or on any building, mach, plant or furniture on which depreciation is admissible u/s. 32 shall not be regarded as eligible exp.u/sub sec.(2). (4) Deduction of 1/10th of the exp specified in sub sec. (2) or amount sufficient to reduce the income from comml. prod. To NIL shall be allowed for 10 years. Amount remaining unallowed shall be allowed in subsequent year(s) up to the 10th year. It shall not be c/f. beyond the 10th year. (5) ‘Operation relating to prospecting’,’year of commercial production’ and ‘relevant previous year’ defined. (6) ‘A’ other than a co. or co op. soc. required to get the A/cs audited and submit audit report along with the return of the first year in which deduction under this section is claimed. (7)&(7A) In case of amalgamation or demerger of an Indian co eligible for deduction under this section before expiry of 10 years, amalgamated co or demerged co shall be entitled to deduction for the balance no of years from the year of amalgamation or demerger. (8) No deduction under any other provision of the Act shall be allowed in respect of exp aloowed as deduction under this section. Deductions u/s. 36(1) - (i) any insurance premium against risk of damage or destruction of stocks or stores used for business or profession. (ia) any premium paid by a Federal Milk Co- op. Society for insurance on the life of cattle owned by a member of a primary society. (ib) any premium paid by any mode of payment other than cash by an employer for insurance on health of his employees under a scheme framed by G.I.C. or by I.R.D.A. (ii) any bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividends. (iii) interest paid on capital borrowed for the purposes of business or profession. However, interest paid on capital borrowed for acquisition of an asset for extension of existing business or profession from the date on which capital was borrowed till the date on which the asset was first put to use shall not be allowed as deduction. Some decisions – Interest paid is not subject to the test of reasonableness (unless covered by S. 40A(2)) or necessity. Ram Kishan Oil Mills v. CIT 56 ITR 186 (MP) CIT v. Sundaram Fastners Ltd. 149 ITR 773 (Mad.) If more than one activities are carried on as the same business and the activity for which capital was borrowed is closed down, interest on such loan for the period after the activity is closed down is allowable. Veecumseen v. CIT 86 Taxman 243 (S.C.) Where borrowed money is invested in tax free securities, interest on such part of borrowed money is allowable. CIT v. Indian Bank Ltd. 59 ITR 77 (S.C.) (Decision will not apply after the introduction of S. 14A). Capital means money only. Bombay Steam Navigation Co. 56 ITR 52 (S.C.) Borrowals diverted to meet personal/business obligation is not allowable. Madhav Prasad Jatia v. CIT 118 ITR 200 (S.C.) Where money borrowed by a co. was advanced to its directors free of interest as a matter of business expediency, it was held as allowable. CIT v. Coimbatore Salem Transport Pvt. Ltd. 61 ITR 480 (Mad.) Interest on money borrowed for payment of Income-tax not allowable. Bharat Commerce & Inds. Ltd. v. CIT 230 ITR 733 (S.C.) East India Pharmaceutical Works Ltd. v. CIT 224 ITR 627 (S.C.) Where advance tax is paid out of overdraft account in which profits are pumped in and they are sufficient to pay advance tax, it cannot be said that advance tax is paid out of the overdraft. Woolcombers of India Ltd. v. CIT 134 ITR 219 (Cal.) (iiia) the pro-rata amount of discount on zero coupon bond having regard to the period of life of such bond calculated in the manner as prescribed. (iv) employer’s contribution to a recognised provident fund or an approved superannuation fund subject to the prescribed limit. (subject to S. 43B) (v) employer’s contribution to an approved gratuity fund created for exclusive benefit of employees under an irrevocable trust. (va) any sum received from employees towards their contribution to provident fund, if it is credited to his account in the relevant fund or funds on or before the due date under the relevant Act, rule, order, award or contract of service or otherwise. (vi) Difference between the cost of animals to the ‘A’ and the amount realised in respect of the carcasses of the animals. (vii) Bad debt or part thereof written off as irrecoverable in the accounts of the ‘A’ for the P. Y. For the ‘A’ to which clause (viia) applies, the deduction shall be restricted to such debt and the credit balance in Provision for Bad and Doubtful Debts. Explanation – Bad debt shall not include any provision for bad and doubtful debts. Bad debts w/o. should have been recorded as the income of the ‘A’ earlier or should be the loans / advances made by the ‘A’ engaged in the business of money lending. It is not for the ‘A’ to establish that the debt had become bad in the P.Y., it will suffice if the debt is w/o. in the P. Y. Newdeal Finance & Investment Ltd. v. DCIT 74 ITD 469 (Chen.) (viia) Any provision for bad debt made by - (a) a scheduled or non scheduled bank other than a foreign bank or a co op. bank other than a primary agricultural credit society or a primary co op agricultural & rural development bank – upto 7 ½% of total income before this deduction and deductions u/ch. VIA and amount not exceeding 10% of aggregate average advances made by the rural branches. (b) a foreign bank, a Public Financial Instn., a State Financial Corpn. or a State Industrial Investment Corpn. – upto 5% of the total income before this deduction and deductions u/ch. VIA. (viii) Any special reserve created, not exceeding 20% of profit from the business of providing long term finance by a financial corporation, fin. Corpn. Which is a public sector co., a banking co., a co op bank, a housing fin. Co. and any other fin. Corpn. engaged in providing long-term finance for industrial, agricultural or infrastructure development in India or constn. Or purchase of houses in India for res. Purposes. No allowance under this clause, if the aggregate reserves exceed twice the amount of paid up share capital and general reserves of the corporation or the co. (ix) Any expenditure by a co. for promoting family planning amongst its employees. If the expenditure is of capital nature, 1/5th of such expenditure shall be deducted in the P. Y. in which incurred and the balance in 4 equal annual installments, in 4 subsequent P.Y.s. Ss. 32(2) and 72(2) shall apply to deduction under this clause as they apply to depreciation. Ss. 35(2), 35(5), 41(3) and Expln. 1 to S. 43(1) shall apply to cap. exp. on family planning. (xi) Not relevant – Y2K exp. Between 1.4.1999 and 31.3.2000. (xii) Expenditure other than cap. exp. incurred by a corporation or body corporate, if it is constituted or established by a Central, State or Provincial Act, is notified by the Central Govt. in Official Gazette for the purposes of this clause and exp. Is incurred for the purposes authorised by the Act under which it was established.
(xiii) anyinancia banking cash transaction tax
paid by the ‘A’ during the P.Y. (xiv) Any sum paid by a public financial institution by way of contribution to such credit guarantee fund trust for small industries as the central government may,by notification in the official gazette,specify in this behalf. Business Expenditure S. 37(1) – Any expenditure not being expenditure described in Ss. 30 to 36 and not being in the nature of cap. exp. or personal exps. of the ‘A’, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing Income from Business or Profession. Explanation – Any exp. incurred by an ‘A’ for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction shall be made of such exp. Some decisions – (8)Provision to be construed liberally. CIT v. Kalyanji Mavji & Co. 122 ITR 49 (S.C.) (2) The burden of proof that the exp. falls u/s. 37(1) is on the ‘A’. CIT v. Calcutta Agency Ltd. 19 ITR 191 (S.C.) (3) It is not open to the Department to go into the necessity (propriety) of the exp. CIT v. Dhanrajgiri Raja Narasingirji 91 ITR 544 (S.C.) Sasson J. Davis & Co. Pvt. Ltd. v. CIT 188 ITR 261 (S.C.) (4) Contingent Liabilities do not constitute exp. allowable under this section. Shree Sajjan Mills Ltd. v. CIT 156 ITR 585 (S.C.) (5) Where an ‘A’ carries on several independent businesses and one of such businesses is closed before the P.Y., he cannot claim deduction u/s. 37(1) in respect of exp. attributable to the closed bus. against income of other bus. L.M. Chhabda & Sons v. CIT 65 ITR 638 (S.C.) Deferred Revenue Exp. – (6) Discount on issue of debentures – allowed over the life of debentures. Madras Ind. Corpn. v. CIT 225 ITR 802 (S.C.) (7) Cost of constn. of a buil. on leasehold prem. allowed in the year of completion of constn. CIT v. Madras Auto Services Pvt. Ltd. 233 ITR 468 (S.C.) Share Issue Exps. – (8) R.O.C. fees to increase authorised share capital is cap. exp. and is not allowable as deduction. Punjab State Ind. Corpn. Ltd. v. CIT 225 ITR 792 (S.C.) (9) Share issue expenses even for raising working capital is cap. exp. Brook Bond India Ltd. v. CIT 225 ITR 798 (S.C.) (10) Exps. for issue of shares for effecting renewal of technical collaboration agreement is allowable as revenue expenditure. CIT v. Glaxo Laboratories (I) Ltd. 218 ITR 59 (Bom.) (11) Exps. on issue of convertible debentures held as allowable proportionately as a part of the exp. is for augmentation of equity base of the co. Banco Products (I) Ltd. v. CIT 63 ITD 370 (Ahd.) (12) However, Mumbai ITAT held that the entire exp. on issue of convertible deb. is allowable as deduction as at the time of issue, the debentures constitute debt. Voltas Ltd. v. Dy. CIT 61 TTJ 543 (Mum.) Software Expenditure – (13) Software was held as technical know how and., hence, cap. Exp. IAC v. Commission & General Agency 17 ITD 6 (Bang.) (14) Where software was provided alongwith electronic typewriter which would not work without the software, cost of software shall form part of cost of typewriter/computer. (See AS-10) Indian Communication Network Ltd. v. IAC 50 ITD 411 (Del.) (15) Cost of applications software which is not required for ‘any’ use of computer does not give rise to a capital asset and is in the revenue field although it gives enduring benefit. Therefore, it is possible to contend that it is allowable u/s. 37(1) as held by the S.C. in Empire Jute Co. Ltd. 124 ITR 1. Even if, software exp. is regarded as cap. Exp., the ‘A’ would be entitled to depreciation on the software under the Block ‘Intangible Assets’ as software is a licence. Warranty Provisions – (16) So long as provision for warranty is made on scientific basis, it is allowable as deduction u/s. 37(1). Voltas Ltd. v. Dy. CIT 61 TTJ 546 (Mum.) Commr. of Inland Rev. v. Mitsubishi Motors Newzealand Ltd. 222 ITR 697 (Priv. Council). Amounts not deductible S. 40(a) – (iii)Interest, royalty, fees for technical services payable outside India – Conditions – (a) The aforesaid amount is taxable in the hands of the recipient (b) Amount is paid / payable – Outside India to a resident or non- res. or in India to a non-res. or foreign co. (c) On the aforesaid amount tax is deductible but has not been deducted or tax has been deducted but has not paid to the Govt. in the same P.Y. or by the due date u/s.200(1) after the end of the P.Y. However, if the aforesaid amount is paid after the end of the P.Y. in which it was incurred and after the due date u/s. 200(1), deduction shall be allowed in the P.Y. in which it is paid. (ia) Interest, commission or brokerage, fees for technical services and professional services, payment to contractors/sub-contractors, rent or royalty paid/payable to a resident, if tax is not deducted at source or after having deducted, is not paid during the P.Y. or after the end of the P.Y., by the due date u/s. 200(1). Such amount shall be allowed in the P.Y. in which it is paid, if it is paid after the end of the P.Y. and after the due date u/s. 200(1) Provisions of S. 40(a)(i) and 40(a)(ia) summarised – (1) Sum on which tax Allowable in the same deducted at source P.Y. in which and paid during the incurred. P.Y. by due date u/s. 200(1) (2) Sum on which tax Allowable in the same deducted at source P.Y. in which and paid during the incurred. P.Y. after due date u/s.200(1) (3) Sum on which tax Allowable in the deducted at source and same P.Y. in which paid after the end of the incurred. P.Y. within due date u/s. 200(1).
(4) Sum on which tax Allowable in the
deducted at source and P.Y. in which paid after the end of the T.D.S. paid to P.Y. after due date Govt. u/s.200(1).
(5) Tax deducted at Not allowable.
source remaining unpaid. (ib) Securities Transaction Tax is not deductible while calculating business income. (ic) Fringe Benefit Tax is not deductible. (ii) Any sum paid on account of any rates or taxes levied on the profits or gains of any bus. or prof. or assessed at a proportion of or otherwise on the basis of any such profits and gains is not deductible. Any sum paid outside India and eligible for relief of tax u/ss. 90/90A/91 is not allowable. The taxpayer will be eligible for tax credit in respect of income-tax paid in a foreign country according to the provisions of S. 90/90A/91. (iia) Wealth tax payable under the Wealth-tax Act, 1957 or any tax of similar nature chargeable in any foreign country. (iii) Salary taxable under the head salaries in the hands of recipient payable outside India to a resident or non-res. or in India to a non-res. on which no tax has been deducted at source and not paid to the Govt. (iv) Any payment to a provident or other fund established for the benefit of employees of the ‘A’ is not deductible, if the ‘A’ has not made effective arrangements to deduct tax at source from payments made from the fund which are taxable under the head salaries. (v) Tax on non monetary perquisites to employees paid by the employer which is exempt u/s. 10(10CC) in the hands of employees is not deductible in the hands of the employer. Ss. 40(b) and 40(ba) discussed in Taxation of Firms, A.O.P.s, Private Trusts’. Payments to relative – S. 40A(2) – Any exp. paid to a person who is a relative of the ‘A’, shall be disallowed in computing business income to the extent such exp. is considered excessive or unreasonable having regard to the F.M.V. of goods, services or facilities. Expenses paid otherwise than by A/c Payee Cheque/Draft S.40A(3)- Where payment for exp. exceeding Rs.20,000incurred by the ‘A’ is made otherwise than by crossed cheque/draft(A/c Payee Cheque/draft w.e.f. 13-7-2006), no deduction Shall be allowed in respect of such exp.. Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any exp.and subsequently during any previous year the assessee makes payment in respect there of,otherwise than by an account payee cheque drawn on a bank or account payee bank draft,the payment so made shall be deemed to be the profits and gains of bus. Or profession and accordingly chargeable to income tax as income of the subsequent year if the amount of payment exceeds twenty thousand rupees. No disallowance shall be made and no payment shall be deemed to be the profits and gains of bus. or profession under this sub-section where any payment in a sum exceeding twenty thousand rupees is made otherwise than by an account payee cheque drawn on a bank or account account payee bank draft, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available,consideration of bus. Expediency and other relevant factor. Provision for Gratuity S 40A(7)- Gratuity is deductible only in the following cases- (1) Gratuity is paid during the P.Y. or provision is made for gratuity which has become payable during the P.Y. (2) Provision is made for payment to an approved Gratuity Fund, it is allowable subject to the provisions of S 36(1)(v). Contribution to Fund,etc. S 40A(9)- No deduction is allowable for payment made for setting up of or as contribution to any fund, trust, co., AOP, BOI, society or instn. for any purpose except u/s. 36(1)(iv) or (v) or as required under any law.
SAP PS for general Planning , Bottom up (extrapolated from bottom to top level), Free planning and Strict bottom up,Assigned during execution phase, by dragging mouse in project planning date, and one can compare actual and plan basic dates.