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Business
BUSINESS / PROFESSION
Particulars Amount Amount
Net profit as per P&L a/c XXX
ADD:1) Inadmissible expense Debited to P&L A/c XXX
2) Business Income not credited to P&L A/c XXX
3) Overvaluation of Opening stock & undervaluation of XXX
closing stock.
XXXXX
Less: 1) Admissible expenses not Debited to P&L A/c XXX XXXXX
2) NonBusiness Income credited to P&L A/c XXX
3) Undervaluation of Opening stock & overvaluation of XXX
closing stock.
Profits & Gains from Business XXXXX
Notes on Admissibility or Inadmissibility of Expenses or Income:
1. Fines and penalty are inadmissible
2. Donation and charities inadmissible
3. Contribution made to any political party and including Advertisement in soverign of
political party is inadmissible.
4. Repairs to plant and Machinery, Building and Furniture allowed (admissible).
5. Bad debts are allowed, how ever Reserve or provision for bad debts not allowed.
6. Purchase of Fixed asset [Capital Expenditure] Inadmissible, however depreciation as
per IT act on above assets are allowed.
7. Preliminary expenses is 1/5 th allowed in the year of incurred and balance 4/5th is
disallowed. I.e. the preliminary expense incurred is allowed on an average five successive
years in which it is incurred.
8. Advertisement :
Revenue expenditure: fully allowed
Capital Expenditure: allowed over a period of 5 years (1/5th allowed in the year of
incurrence)
9. Staff welfare expenses are allowed. Contribution to staff welfare fund is disallowed.
10. Direct taxes such as Income tax, Wealth tax, Gift tax are not allowed. Indirect tax
such as sales tax, Customs, etc is allowed.
11. Bad debts recovered (allowed earlier is a business income and its allowed. However if
it was disallowed earlier it is not treated as business income.)
12. Cash payment made in excess of Rs.20000 the entire sum is inadmissible.
13. Family planning expenses: If it is Revenue in nature completely allowed. If it is
capital nature 1/5th is allowed in the current year. (It is allowed over 5 equal annual
installments)
14.Interest on bank loan is allowed if the loan is taken for business purpose , however if it
is for personal purpose is disallowed.
15. Insurance premium paid on employees life is allowed, however Insurance premium
on proprietors life is disallowed.
16. Loss on account of theft and embezzlement is allowed.
17. Gifts given to customers are allowed, however Gifts given to employees or relatives
are not allowed.
18. Commission and bonus is allowed only if it is paid with in the previous year. If it is
due or proposed disallowed.
19. Depreciation u/s 32
To Claim depreciation u/s 32 the following condition should be satisfied.
1. Assessee should be the owner of the asset.
Block of Assets:
Assets belonging to same class (class 1 Tangible and Class2 Intangible asset) and
same rate of depreciation are grouped together into single block of asset.
Depreciation u/s 32 is allowed based on block of asset concept.
Calculation of WDV @ end of the year
Particulars Rs.
WDV as on 1.4.2008 XXX
Add : Purchases made during PY 2008-09 XXX
XXX
Less : Sale made during PY 2008-09 XXX
WDV as on 31.3.2009 XXX
Rates of Depreciation:
1. Residential Building = 5%
4. Furniture - 10%
9. Computer – 60%