1.

What are the expressly disallowed expenses while computing income under the
head profits and gains from business or profession?

Answer.

The following expenses are expressly disallowed by the act while computing income
under the head profits and gains from business or profession;

Expenditure on advertisement in any souvenir, published by a political party in the case

of any assessee. This includes;

Payments made outside India. Royalty, fees for technical services. Which tax is
deductible, but not been paid during the previous year or in prescribed time, shall not be
allowed as a deduction.

Payments made to residents. Any interest, commission or brokerage, fees for professional
services or feeds for technical and such tax has not been deducted or, after deduction.

Any sum paid on account of securities transaction tax.

Any sum paid on account of fringe benefit tax.

Wealth tax. Chargeable under Wealth Tax Act.

Tax on profits and gains. Any sum paid on account of any tax levied on the profits and
gains of any business or profession.

Salaries payable outside India or to a non resident, if tax has not been paid thereon nor
deducted at source.

Payment to provident fund. Any payment to a provident fund or other funds shall not be
allowed as a deduction unless it is ensured that tax shall be deducted at source from any
payment made from the fund provided it is chargeable to tax.

Tax on perquisite of employees. This includes bonuses and any other privileges.

The entire above, are the various expenses expressly disallowed

 2. Write short notes:

a. Unabsorbed depreciation

Answer:

Unabsorbed depreciation refers to the whole amount of current depreciation allowance

that is no deductible on account of insufficiency of the other taxable incomes, thus
remaining unabsorbed.

Usually depreciation is supposed to be deducted on the profits and gains of an asset for a
particular previous year. If no gains were made, then this depreciation amount is
deductible on any other business of the assessee. If still this can not absorb the whole
amount, the amount is set off against any other taxable income of the same year. If all
these options can not absorb the depreciation amount, then it carried forward to another
year of assessment.

b. General deductions (Section 37(1) )

Answer:

This is a residuary section and specifies certain conditions which must be fulfilled in
order for a particular item of expenditure to be deductible under the general deductions
section. This qualifies expenditures in the nature not described in section 30 to 36,
ranging from; expenses in respect of business, repairs and insurances, depreciation,
expenditure on scientific research, to revenue expenditures to the assessee him self.
General deductions are made in respect of a business or profession carried on by the
assessee and the profits and gains of which are to be computed and assessed.

General deductions also affect expenses which are paid out or expended wholly and
exclusively for the purpose of such a business or profession. The expenditure should
however, not be in the nature of personal expenses of the assessee, not be a capital
expenditure, and should relate to the previous year concerned.

3. Mr. Radha Krishna, an individual submits the following information relevant for
the assessment year 2009-10

Solution:

Computation of total income for Radha Krishna for the assessment year 2009-10
Salary Income (computed) +54,000
Income from House Property
House 1 +17,000
House 2 (-)23,000 (-) 6,000
Profit & Gains of business or Profession
Business X +7,000
Business Y (-) 14,000
Non speculative loss Rs. 7000 c/f to next year +1,000
Business Z (speculative) +15,000
Business A (speculative) (-)19,000
c/f to next year (-)4,000
Capital Gains
Short term capital gains 8,000
Short term capital loss (-)12,000
Short term capital loss (-) 4,000
Long term capital gains on sale of land 24,000
Carried forward to the next year +20000
Income from other sources:
Income from card games +6,000
Interest on securities +3,000 +9,000
Loss on maintenance of race horses-c/f next year. (-) 4,500
Net income 58,000