PROFITS AND

GAINS OF
BUSINESS OR
PROFESSION
 (SEC. 28-44D)
 Income from any business or profession is
taxable under this head.

 Business implies purchase and sale of goods

or rendering of services with a view to make
profit. It includes manufacturing also.

 Profession requires “Special Knowledge” or

manual skill like work of lawyer, doctor, CA
etc.

 it includes vocation also.

 Section 28
 Profits of any business or profession
which was carried by assessee at any
time during P/Y.
 Compensation due or received –
 for termination or modification of
agreement for managing a
company.
 for termination or modification of
terms of agency.
 Profit on sale of license
 Cash assistance
 Value of any benefit or perquisite arising during
the course of carrying on of any business or
profession.
 Interest, salary, bonus, commission or
remuneration due or received by a partner of a
firm in which he is a partner.
 Value of any benefit in lieu of services by a
professional like gifts for a doctor by his
patients.
 Income from Speculation
 Any sum received under key man insurance
policy including bonus on such policy.
 Any other income incidental to business or
profession.
 METHOD OF
 There
ACCOUNTING
are two system of accounting:-

Cash System of Accounting

Mercantile (Accrual) System of Accounting

Note:- U/s 145 the assessee can use any of

above method to compute PGBP but once
chosen it is not allowed to be changed.
 HOW TO COMPUTE
PGBP
Profit as per P&L A/c XXX
Add: 1. Exp. Debited to P&L A/c
but not allowed XXX
2. Income not shown in P&L A/c XXX

Less: 1. Expenses allowed but not

deducted XXX
2. Income credited to P&L A/c but
taxable under other head or Tax
free income XXX
Business Income XXX
 EXPENSES/DEDUCTION
ALLOWED
Section – 30
Expenses in respect of Business Premises :-
As a Tenant :- Rent, Repair, Municipal Taxes,
Insurance Premium etc.

As a Landlord :- Repair, Municipal Taxes, Insurance

Premium

Note :- Repair does not include any capital

expenditure.
 Section – 31
Expenses on Plant, Machinery, Furniture etc. :-
§ Repair, Insurance Premium, Hire Charges etc.

Section – 32
Depreciation :-
Dep. is allowed on
viii.Block of Assets
ix. Owned by Assessee(Wholly or Partly)
x. Used for B or P
xi. on WDV
xii. at prescribed rates.
i. Block of Assets :- Under Income Tax Act, dep. is not
allowed on single asset. It is allowed on group of
assets having same rate of dep., which is called
block of assets.
However power undertakings have the option
to claim depreciation either on WDV or SLM
method.

Block of Assets (Sec. 2(11)) term used for a group of

assets following:-
e) Tangible assets being buildings, machinery, plant,
furniture.
f) Intangible assets being know-how patents,
copyright, trade mark, license etc.
on which same rate of dep. has been prescribed.
Thus, there are four types of assets in the Act i.e.,
b) Building
c) Furniture
d) Plant, Machinery
e) Intangible Assets

Rates of Depreciation :-
Residential Buildings : 5%
Building Temporary Erection (like
mud house) : 100%
Other Buildings(Factory,
godown, office etc.) : 10%
Furniture : 10%
General P & M : 15%
Ships & Vessels : 20%
Motor Cars (other than taxis) : 15%
Buses, Taxis, Aeroplanes : 30%
Computer(including Software) : 60%
Books :
P & M Annual Publication of prof-
essionals, Library Books : 100%
Other Books : 60%
Rollers, Energy Saving
Devices, Gas Cylinders etc. : 80%
Pollution control equipments,
Cinematograph Films, Match
Factories, Salt Works : 100%
Intangible assets acquired after : 25%
31 March, 1998
( Know-how, Patents, Copyrights,
Trademarks, License, Franchises
etc.)

viii. Owned By Assessee :- Dep. is allowed to the owner

of the asset. The following points may be noted-
q Asset may be owned wholly or partly.
q Registered ownership is not necessary.
q If a tenant incurs any capital expenditure by way
of addition to let out building he is entitled to claim
Dep. on it.
iii. Used for B or P :- Dep. is allowed if asset is used
for the purpose of business or profession during
previous year.
if the asset is kept ready for use it, would
amount to use for the purpose of B or P even if it
has not been actually used for the purpose of
business.
DEPRECIATION AT HALF RATE :- if any asset is
acquired during P/Y and put to use for less than
180 days during that year, depreciation shall be
allowed at half the normal rate.