Income from Business

& Profession
Section 28-44

By
A. Ajay kumar
Roll No -04
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Business [Section 2(13)]
According to Section 2(13), Business includes
any (a) trade, (b)commerce, (c)manufacture,
or (d) any adventure or concern in the nature
of trade, commerce or manufacture
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Trade:- It means purchase and sale of goods
carried on with profit motive.
Commerce :- It means trade carried on a large
scale.
Manufacture :- Making of new and different
article out of input material by physical or
mechanical labour.


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Essential Features of Business.
Regularity of transactions or continuity of
activities
Objective of earning profits
Application of labour and skill

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Meaning of Profession
The expression Profession has been defined
in Section 2(36) of the Act to include any
vocation.
According to the generally accepted
principles, the meaning of the term
profession involves the concept of an
occupation requiring either intellectual skill or
manual skill controlled and directed by the
intellectual skill of the operator.
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For instance, an auditor carrying on his
practice, the lawyer or a doctor, a painter, an
actor, an architect or sculptor, would be
persons carrying on a profession and not a
business.
The common feature in the case of both
profession as well as business is that the
object of carrying them out is to derive
income or to make profit.
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INCOME CHARGEABLE TO INCOME-
TAX (SECTION 28)
1. The profits and gains of any business or
profession which was carried on by the assessee
at any time during the previous year.
2. Any compensation or other payments due to or
received by any person specified in section
28(ii).
3. Any income derived by a trade or professional or
other similar association from the specific
services performed by it for its members.
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Trade association means an association of
businessmen for the protection and
advancement of their common interest
e.g. a Chamber of Commerce. Section 28(iii)
does not apply to other social associations
e.g. a sports club or cricket club etc. Similarly
the income of a charitable trust from specific
services rendered to its members is not
assessable under Section 28(iii) but exempted
under Section 11
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4.Export Incentives:
(a) Profits on sale of a license granted under
the Imports (Control) Order, 1955, made
under the Imports and Exports (Control) Act,
1947;
(b) Cash assistance received or receivable by
any person against exports under any scheme
of the Government of India;
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5. The value of any benefit or perquisite,
whether convertible into money or not, which
arises from the carrying on of a business or
the exercise of a profession.
6. Any interest, salary, bonus, commission or
remuneration, by whatever name called, due
to or received by a partner of a firm from such
firm.
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7. Any sum, whether received or receivable in
cash or kind, under an agreement for
(a) not carrying out any activity in relation to
any business or
(b) not sharing any know-how, patent,
copyright, trade mark, license, franchise or
any other business or commercial right of
similar nature or information or technique
likely to assist in the manufacture or
processing of goods or provision of services:

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8. Any sum received under a key man Insurance
Policy including the sum allocated by way of
bonus on such policy.
9. Profits and gains of managing agency.
10. Income from speculative transaction.
11. Any profit on the transfer of the duty free
replenishment certificate;
12. Any profit on transfer of the Duty
Entitlement Pass Book Scheme.



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Expenses Expressly Allowed
1. Rent, rates, taxes, repairs and insurance for
building [Sec. 30]
2. Repairs and insurance of machinery, plant and
furniture [Sec. 31]
3. Depreciation allowance [Sec. 32]
4. Tea/coffee/rubber development account [Sec.
33AB]
5. Expenditure on acquisition of patent rights
and copyrights [Sec. 35A]

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6. Insurance premium [Sec. 36 (1) (i)]
7. Premier for insurance on health of employees
[Sec. 36(1) (ib)]
8. Bonus or commission to employees [Sec.
36(1)(ii)]
9. Interest on borrowed capital [Sec. 36(1)(iii)]
10.Employers contribution to recognized
provident fund and approved
superannuation fund [Sec. 36(1)(iv)]

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11. Contribution towards approved gratuity fund
[Sec. 36(1)(v)]
12. Employees contribution towards staff
welfare schemes
13. Bad debts [Sec. 36(1)(vii)]
14. Family planning expenditure [Sec. 36(1) (ix)]
15. Banking cash transaction tax, securities
transaction tax and commodities transaction
tax.
16. Advertisement expenses [Sec. 37(2B)].
17. General Deduction [Sec. 37(1)].

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EXPENSES NOT DEDUCTIBLE
1. Damages and penalty paid for transgressing
the terms of agreement with the State.
2. Penalty and damages paid in connection with
infringement of law.
3. Litigation expenditure incurred for curing any
defect in the title of assets or completing that
title.
4. Litigation expenses for registration of shares.

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5. Fees paid for increase of authorized capital.
6. Expenditure on raising equity share capital
and preference share capital. However,
expenditure on issue of bonus shares is
deductible.
7. Amount paid for acquiring technical know-
how which is to be utilized for the purpose of
manufacturing any new article and such
know-how is to become the property of the
assessee at the end of the stipulated period
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8. Amount expended for acquiring a business or
a right of permanent character or an asset
which generates income or for avoiding
compensation in business.
9. Payments made for acquisition of good will.
10.Expenditure incurred for acquiring right over
or in land to win minerals.
11.Fees paid to obtain license to investigate and
search minerals.


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12. Payment made in consideration of acquiring
a monopoly right to manufacturer a producer
13.Tax paid by the assessee (who is defaulter by
not deducting tax at source under section
195) on behalf of non-resident.
14.Compensation paid to contracting party with
the object of avoiding an unnecessary
investment in capital assets.

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15. Expenditure on shifting of registered office.
16. Insurance premium paid by a firm on life insurance
policies of its partners.
17. Amount paid by liquor contractor to police staff and
other officer to enable it to make unauthorized
purchases and sales of liquor.
18. Amount paid by a company to the Registrar of
Companies as filing fee for enhancement of capital
base of the company.
19. Payment made by assessee company which was
partner in a firm, to outgoing partners of firm on
account of their agreeing to restrain from carrying on
similar business for a period of 15 years.

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Thank you
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