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What are the expressly disallowed expenses while computing income under the
head profits and gains from business or profession?
Ans.
The following expenses are expressly disallowed by the Act while computing income
chargeable under the head “Profit and Gain of business or profession.
(1) Payments outside India. Royalty fees for technical services etc. which tax is
deductible at not been paid during the previous year or in prescribed time.
Shall not ne allowed as a deduction.
• Tax on profits and gains. Any sum paid on accont 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 P.F. etc. any payment to a provident or other funds shall not
allowed a s 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.
• Capital expenditure
• Any Expenditure not incurred wholly and exclusively for the porposes fo the
business or profession.
• Payments made by an assessee in the nature of sharing the profits to the sole
selling agents under an agreement are not deductible.
• Insurance premium paid by a firm on the life insurance policies of its partners.
• Gift made on occasion of marriages in the families of friends and others with
whom assessee has business dealing cannot qualify as business expenditure
even on grounds of commercial expediency.
2. Write short notes:
a. Unabsorbed depreciation
Ans.
A. Unabsorbed Deprecation:
Deprecation allowance for particular previous year is first decutable from the profits
and gains of the business or profession, if the profits and gains of the same business or
profession are insufficient for the propose, the balance of the amount of current
depreciation allowance is deductable from the profits of any other business or
profession of the assessee. If the profits of any other business or profession are alos
unable to absorb the whole amount of depreciation allowance, the balance of such
allowance which remains unabsorbed can be set-off against any other taxable income
fo the same year. If still, the whole amount of current depreciation allowance is not
deductable on account of the insufficiency of the other taxable income the remaining
unabsorbed amount is called “Unabsorbed Depreciation”.
Under Section 37 (1), the following conditions should be fulfilled, in order that a
particular item of expenditure may be deductible under this head:
• It should have been paid out or expended wholly and exclusively for the
purpose of such business or profession.
Profit Loss
Salary Income (computed) 54.000
Income from House Property
House 1 17,000
House 2 23,000
Profit & Gains of business or Profession
Business X 7,000
Business Y 14,000
Business Z (speculative) 15,000
Business A (speculative) 19,000
Capital Gains
Short term capital gains 8,000
Short term capital loss 12,000
Long term capital gains on sale of land 24,000
Income from other sources:
Income from card games 6,000
Loss on card games 9,000
Loss on maintenance of race horses 4,500
Interest on securities 3,000
Determine the net income of Mr. Radha Krishna for the
assessment year 2009-10
Solutions: Ans.
Non-speculative
Speculative
Capital gain
Income from card games (loss from card games cannot 6,000.00
be deducted)
Note:
• Loss on maintenance of race horses can be set off only against income from
the business of owing and marinating race horses. In the absence of such
income, it cannot be set off. However, it can be carried forward to next year
for claiming set off against income from such business.
• The house property loss can be set off against salary income and / or interest
on securities. It cannot be set off against income from card games.