SUMMARY of PGBP Part of SUMMARY PDF

© SATISH MANGAL (9350647377, satishmangal@aldine.edu.
in) DT- SUMMARY NOTES
SUMMARY
OF
“PGBP”
Including DIVIDEND & BONUS STRIPPING, etc.
(PART OF SUMMARY MODULE)

APPLICABLE FOR NOVEMBER 2018 EXAMS of
OLD COURSE as well as NEW COURSE
“PREPARED BY”
CA. SATISH MANGAL

[Ph: 93506-47377] (M.COM. F.C.A., LL.B)
© SATISH MANGAL (9350647377, satishmangal@aldine.edu.in) PGBP – SUMMARY
"PROFITS AND GAINS OF BUSINESS OR PROFESSION"
Section 28: Chargeability:-
The following incomes shall be chargeable to tax under this head:
(1) Profits and gains of any business or profession.

(2) Export incentives, which includes-.
 Profits on sale of Import Entitlement License.
 Cash assistance received or receivable against export (i.e. Cash Compensatory Support)
 Duty drawbacks of customs and central excise duties.
(3) Value of any benefit or perquisite arising from any business or profession.
(4) Any interest, salary, bonus, commission or remuneration of a partner from his firm [but only upto the
extent to which it is allowed to the firm considering the provisions of section 40(b)].
(5) Income derived by a trade, professional or similar association from specific services performed for its
members.
(6) Any sum received under a key man insurance policy including bonus on such policy.
(7) Any sum received under an agreement in the nature of:
(a) Non-compete fees (i.e. for not carrying out any activity in relation to any business/profession); or
(b) Non-compete fees (i.e. for not sharing any patent, copyright, etc.).
 Provided, such sum, should not be chargeable under the head "capital gains”.
EXPLANATORY REMARK:
Where such agreement (i.e. for not carrying out any activity….. OR for not sharing any
patent….) has been done on temporary basis (say for 5 years), then such receipt will be taxable
under the head PGBP, but if it has been done for forever i.e. on permanent basis, in such a case,
such sum will be taxable under the head Capital Gains.
In both the cases, for payer, such payment is for acquisition of right (whether temporary or
permanent) i.e. intangible asset and hence, eligible for depreciation u/s 32. [Judicial View]
Explanation: Speculative business shall be deemed to be distinct and separate from any other business.
Section 29: Computation of income under the head P/G/B/P:-

The profits and gains of business or profession shall be computed as per sections 30 to 43D.
Section 30: Rent, Rates, Taxes, Repairs and Insurance for Building:-
Where the premises are occupied by the assessee as a –

Nature of Expense
Tenant otherwise as a tenant(Owner)
1
Rent paid Allowed -

Amount paid on account of revenue repairs Allowed Allowed
Amount paid on account of capital repairs Not Allowed u/s 30 Not Allowed u/s 30
But, it is Deemed Building But, it can be capitalized
as per Explanation to Sec. with cost of building, and
32, hence, depreciation can depreciation can be
be claimed. claimed.
Municipal taxes or local rates paid Allowed Allowed
Insurance premium paid Allowed Allowed
Section 43(2): “Paid” means actually paid or payable as per the method of accounting followed for “PGBP”
Section 31: Repairs and Insurance of machinery, plant and furniture:-
Where the machinery, plant and furniture used by assessee were -

Nature of Expense
Taken on Hire In otherwise case (i.e. Owner)
Insurance premium paid Allowed Allowed
Cost of revenue repairs Allowed Allowed
Cost of capital repairs Not Allowed u/s 31 Not Allowed u/s 31
No special provision like But, Capitalized with cost of such item,
Building, hence, DEAD LOSS and depreciation can be claimed.
Rent / Hire charges paid Not Allowed u/s 31, BUT CAN BE CLAIMED AS BUSINESS EXPENSE u/s 37.
Section 32 (1)(ii): DEPRECIATION ALLOWANCE (WDV Method):-
(1) Depreciation is allowed in respect of-

(a) Tangible assets;
(b) Intangible assets,
(2) Such asset should be owned and used for the purpose of the business or profession by the assessee.
(3) Depreciation shall be allowed on the written down value of the block of assets at the prescribed
percentage.
(A) RELEVANT NOTE WITH REFERENCE TO POINT NO. 1 OF SECTION 32 (1) (ii):-
 Depreciation will be allowed on payment for goodwill (like, goodwill paid by amalgamated company
to amalgamating company, or in any other case). [CIT v/s Smifs Securities Ltd. (SC)]
(B) RELEVANT NOTES WITH REFERENCE TO POINT NO. 2 OF SECTION 32 (1) (ii):-
 In case of "Lease" ir-respective of type of lease, lessor will be entitled for depreciation provided he is
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engaged in leasing business. [K.M. Sugar Mills Ltd. (All.-HC)]

 In case of hire purchase system, depreciation shall be allowed to hire purchaser, in view of the CBDT
Circular No. 9 dated 23.03.1943, on cash price (i.e. value for which such asset would have been sold on
cash basis at the time of hire purchase agreement. [Kaveri Engg. Industries (Mad.-HC)]
 Beneficial ownership has to be seen. Registration of name under the Registration Act is not determinative of
ownership. After taking possession of a building in pursuance of an agreement to sell, he shall be
considered as deemed owner, and depreciation shall be allowed even if building is not registered in his
name. [Mysore Minerals Limited (SC)]
 General Rule: Assets which are ready for use but not actually put into use during the relevant previous
year, are not entitled for depreciation. [Dinesh Kumar Gulab Chand Aggarwal (Bom.-HC)]
Exceptions:
 If asset is of such a nature which requires its special use (i.e. on demand) like gen-set, fire
extinguisher, emergency spares, standby machine, etc. then depreciation shall be allowed on the
basis of its ready to use.
 If assessee couldn’t put to use an asset because of extraneous reason (like, paucity of funds / raw
material, lack of labour, etc.), assessee will be entitled to claim depreciation.
 Residential accommodation, ACs, refrigerators etc. provided by the employer to its employees, shall be
regarded as used for the purpose of employer's business/profession. [BOARD CIRCULAR]
(C) RELEVANT NOTES WITH REFERENCE TO POINT NO. 3 OF SECTION 32 (1) (ii):-
 It is mandatory for the assessee to claim depreciation. [Explanation 5 to section 32 (1)]
Second Proviso to Section 32(1):
Assessee Acquired Put to use in Period 180

in Same of < Days
“Asset” Relevant (+) Previous (+) Use
Previous Year Year
Normal Allowable Depreciation X 50% = --------- Quantum of Dep.

()
 As per sixth proviso to Section 32(1):-
- In case of succession of business / amalgamation / demerger taking place during the previous year,
- the amount of depreciation* will be calculated as if the succession or amalgamation or demerger had not
taken place.
- such depreciation* is to be apportioned between the predecessor / amalgamating company / demerged
company and the successor / amalgamated company / resulting company in the ratio of the number of days
for which the assets were used by them (i.e. in usage days ratio).
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Here, succession refers to:

 Succession of partnership firm or proprietorship concern by company;
 Succession of private company / unlisted company by LLP;
 Any other succession other than inheritance.
Effect of 6th Proviso to Section 32(1):

275 days 1/1/2017 90 days
e.g.
Amalgamation, or
Demerger, or
Succession 31/3/2017
1/4/2017
X Ltd.
* Y Ltd.
Depreciation Depreciation
Transferor () Transferee ()
e.g. Amalgamation:
Amalgamating Co. = Normal Depreciation X 275 = -------
365
Amalgamated Co. = Normal Depreciation X 90 = -------

365
Section 43(6): Written Down Value:-

WDV of the block of assets at the beginning of the previous year
[i.e. Actual cost less depreciation actually allowed to him in earlier year(s)] **
Add: Actual cost of the assets acquired during the previous year **
Less: Moneys payable in respect of any asset of the same block which is sold,
discarded, demolished or destroyed during the previous year and the
amount of scrap value. **
Less: Notional WDV (i.e. WDV computed as if the asset was only asset in the block)
of asset transferred by way of slump sale ###
W.D.V. of the Block of Assets for relevant assessment year: ***
### Such Notional WDV shall be limited to the actual WDV immediately before such adjustment.
KEY POINTS:-
(1) WDV can not be negative in any case. Meaning there by, If the amount of moneys payable exceeds the
WDV then reduction of moneys payable shall only be to the extent that WDV becomes NIL.
(2) Moneys payable means sale price of the asset and includes any insurance, salvage or compensation payable
in respect of the asset.
IMPORTANT RULING: CIT v/s Kasturi & Sons Ltd. (SC):-
It was held that moneys payable has to be interpreted only as actual moneys payable in
cash or by cheque/ draft and not any other thing or benefit which can be converted into money.
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Section 50: Computation of capital gain on transfer of depreciable assets on which

depreciation is allowed on WDV basis:
“Block of Assets”
Where entire block is transferred Where block, in part, transferred
SC > Cost SC < Cost SC > Cost SC < Cost
STCG=SC-Cost STCL=Cost-SC STCG=SC-Cost No Chargeability in CG head.

If, SC < Cost:
In all these four cases, Cost means-
W.D.V. of the block of assets at the beginning of the year - NEW WDV:
Add: Actual cost of any asset acquired during the year and belonging Opening WDV -
to the same block of assets - (+) AC of asset acquired -
Add: Expenses on transfer - (-) Sales consideration -
COST - -
Section 43(1): Actual Cost:-

It means the actual cost of the asset to the assessee, as reduced by that portion of the cost which has been
directly or indirectly met by any other person or authority. [Revaluation of asset shall not be considered]
If assessee acquires an asset in respect of which…….
Payment or In To Other than through Exceed

aggregate of (+) a (+) a (+) a Banking Channel (+) `10,000/-
payments day Person (like, in cash)
Such expenditure shall be ignored for the purposes of determination of actual cost.
RELEVANT JUDGMENTS:-
(1) Expenses including cost of raw materials incurred on test runs of machinery prior to the production, are
part of the actual cost of plant & machinery. [Food Specialties Ltd. (Del.-HC)]
 Where, any product generated by such trial run is sold, then amount received, (whether it is less or
more of cost of trial run), will be deducted from cost of asset.
(2) Salaries, expenses of guest house maintained for erection staff, traveling and general expenses pertaining
to setting up of the plant forms part of the actual cost. [Hindustan Polymers Ltd.(Bom.-HC)]
Principle: Any expenditure as incurred before first put to use of an asset will be added to actual cost.
(3) Interest paid before the commencement of production on the amounts borrowed by the assessee for
acquisition and installation of P&M shall form part of actual cost. [Challapalli Sugar Mills Ltd. (SC)]
(4) Interest received on surplus fund before commencement of business would not reduce cost but shall be
chargeable under the head I/O/S. [Tuticorin Alkali Chemicals Fertilizers Ltd.(SC)]
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(5) Interest on deposit to open letter of credit for purchase of machine would reduce the cost because it is
directly linked with the purchase of machine and it can't be said that surplus money was lying idle.
[Karnal Co-operative Sugar Mills Ltd. (P&H-HC)]
Section 43A: Special provisions consequential to changes in rate of exchange:-

Conditions for applicability of this section:
(1) Assessee has acquired an asset from a country outside India* on credit or through a foreign currency loan.
(2) After the acquisition of such asset, at the time of making actual payment**–
(a) To foreign supplier of such asset; or
(b) Repayment of such foreign currency loan,
due to change in rate of exchange, there is an increase or reduction in liability of the assessee as
expressed in Indian currency.
THEN such increment or reduction in liability shall be added/ deducted from the actual cost of asset.
Explanatory Remarks:
* if an assessee has acquired asset in India, even if through a foreign currency loan, this section will not
apply as a result of which excess payment due to foreign exchange fluctuation will become dead loss.
**Under this section, NO YEAR END UPDATION (i.e. change in amount of asset and corresponding
liability with the help of rate of exchange of 31st march) IS PERMITTED.
 Where the assessee has entered into a forward contract with an authorised dealer the amount, if any, to be
added or to be deducted from the actual cost of the asset shall be computed with reference to such rate
specified in the contract.
IMPORTANT RULING:-
(1) Elecon Engineering Co. Ltd. (SC): Roll-over premium charges (i.e. forward contract charges) in respect
of foreign exchange forward contracts related to acquisition of fixed assets were to be capitalized in terms of
section 43A.
(2) Arvind Mills Ltd. (SC): It was held that adjustment for increase or decrease in liability shall be done from
actual cost of the assets. Since every adjustment is done at the time of making the payment, actual cost should
be taken of that point of time. As per supreme court- "Actual cost" referred to in section 43A should be read as
“actual cost minus depreciation allowed earlier.”
(3) Woodward Governor India (P) Ltd. (SC): If an assessee converts the outstanding liability related to the
revenue item like import of raw material, using the closing rate of exchange as per AS-11 as on 31st march
and such conversion results in a loss, then such loss is allowable u/s 37.
(4) Jagatjit Industries Ltd. (Del.): Assessee Company raised share capital in foreign country and repatriated
when required. There have been gains due to fluctuation in foreign currency. The entire gain is a capital
receipt and not chargeable to tax.
“DETERMINATION OF ACTUAL COST IN SPECIAL CASES [EXPLANATIONS TO SEC. 43(1)]”
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Explanation To
CIRCUMSTANCE ACTUAL / NOTIONAL COST
Section 43(1)
Asset is used for normal business
1 purpose after is ceases to be used for Actual Cost less deduction allowed u/s 35.
scientific research.
2 Asset acquired by way of gift or WDV to the previous owner at the time of
inheritance. transfer.
Asset acquired by assessee from any
other person (who has used the asset for Actual cost as determined by Assessing
his business or profession), to reduce his Officer with prior approval of Joint
3
tax liability by claiming excess Commissioner.
depreciation on enhanced cost.
Asset once belonged to the assessee
4 which was used by him for business and WDV at the time of earlier transfer or
is transferred and subsequently actual price for which the asset is
reacquired by him. reacquired, whichever is less.
[i.e. Sale & Re-purchase Transaction]
Asset acquired by an assessee (suppose,
4A Mr. B) from another person (suppose, The written down value of the asset to the
Mr. A) who had claimed depreciation on transferor (suppose, Mr. A) at the time of
such asset and the asset is leased back to transfer to the assessee (suppose, Mr. B).
such other person (suppose, Mr. A).
[i.e. Sale & Lease-back Transaction]
The Actual cost of the building as reduced
5 Building previously held as property by the notional depreciation that would
and subsequently brought into use have been allowable since the date of its
business purpose. acquisition by using depreciation rate as
applicable to year of bringing such
building into business use.
Explanation 6* Asset* / Block of assets# transferred by
to a Holding Company to its 100% Actual Cost* / WDV# to the transferor
Section 43(1)
Subsidiary Company or by a 100% Company will be taken as the actual cost
and
Explanation 2# Subsidiary Company to Holding Co., to the transferee company.
to Provided the Transferee Co. should be
Section 43(6) an Indian Company.
Explanation 7*
to
7
Section 43(1) Asset* / Block of assets# transferred in a Actual Cost* / WDV# to the
and
scheme of amalgamation by amalgamating company will be taken as
Explanation 2#
to amalgamating company to Indian the actual cost to the amalgamated
Section 43(6) amalgamated company. company
Explanation 7A*
to
Asset* / Block of assets or part theirof # Actual Cost* / WDV# to the demerged
Section 43(1)
and transferred by a demerged company to company will be taken as the actual cost
Explanation 2B# the Indian resulting Company. to the resulting company.
to
Section 43(6)
# In all the aforesaid cases, wherever term WDV occurs will include Notional WDV (which will be
relevant in case of transfer of part of block of asset.
If excise duty or additional customs The amount of duty in respect of which a
9 duty is leviable on asset acquired in claim of credit has been made and
respect of which CENVAT Credit is allowed shall be reduced from the actual
claimed and allowed. cost of asset.
Such subsidy shall be reduced from the
10 Asset acquired where a portion of the actual cost of such asset in respect of
cost is met directly or indirectly by which it is received.
Government or any other person in the If subsidy is with reference to the various
form of a subsidy or grant or assets: then proportionate subsidy shall
reimbursement. be reduced, from the actual cost of each
particular asset, which will be calculated
asset-wise in the following manner:
Actual Cost of that particular asset
Proportionate = Total X
Subsidy Subsidy Total cost of all assets with reference to which such
subsidy has been received
Section 2(24)(xviii):
− Assistance in the form of
− a subsidy or grant or cash incentive or duty drawback or waiver or concession
or reimbursement (by whatever name called)
− by the Central Government / a State Government / any authority / body / agency
− in cash or kind to the assessee
− will be taxable as income.
Exceptions:
(a) the subsidy or grant or reimbursement which is being considered for determination of
actual cost under Explanation 10 to section 43(1),or
8
(b) the subsidy or grant by the Central Government for the purpose of the corpus of a
trust or institution established by the Central Government or a State Government.
EXPLANATORY REMARK:
 LPG or other welfare subsidy received by an individual in his personal capacity
and not in connection with his business or profession carried on by him will not
be taxable. Press Release dated 5-5-2015
Actual cost as reduced by the amount of
Asset acquired outside India by a Non-
Explanation notional depreciation calculated at the
resident and brought into India for use
rate in force as if the asset was used in
11 in his business or profession.
India since the date of acquisition.
Any capital asset acquired by company Amount which would have been regarded
12 from AOP/BOI (RSE) under a scheme as actual cost, had there been no such
of corporation of a recognised stock corporatisation (i.e. Actual cost to the
exchange in India, approved by SEBI. transferor AOP/BOI).
The actual cost of such asset shall be Nil:
13 Actual cost of capital asset has been (a) For same assessee.
(b) For transferee in a case where such
allowed as deduction u/s 35AD.
asset is transferred by way of
transactions referred to in section 47.
Interest relating to the period after the
8 Payment of interest in connection with
asset is first put to use shall not be
acquisition of asset.
included in actual cost.
 Additionally that may be claimed as
revenue expense u/s 36(1)(iii).
Similarly, by virtue of Proviso to section 36(1)(iii), if interest paid relates to a period
beginning from the date on which the amount was borrowed for acquisition of asset till
the date on which such asset was first put to use, shall not be allowed as deduction u/s
36(1)(iii).
 Additionally that may be added / included in the actual cost of the asset.
Crux of Explanation 8 of section 43(1) and Proviso to section 36(1)(iii):
 Interest upto first put to use of an asset: will be added with actual cost.
 Interest after the first put to use of an asset: may be claimed as revenue expense.
Explanation 2C Block of assets transferred by company WDV of such block of assets as on the
to to LLP under conversion of such company date of conversion will be treated as
Section 43(6)
into LLP [as covered u/s 47(xiiib)] actual cost for LLP.
Explanation 7 In the case of ‘composite income’ (i.e. To calculate depreciation for current
9
to where partly income is exempt and year, opening WDV will be computed on
Section 43(6) remaining part is taxable by virtue of the assumption that total depreciation
Rule 8, 7, and 7B) would have been allowed in earlier years.
Section 2 (11): Block of assets means -
− A group of assets
− falling within a class of assets
− in respect of which same rate of depreciation is prescribed.
Rule 5: Prescribed Percentage for depreciation-

Residential =5%
(1) Building Non-residential =10%
Purely temporary erection = 40%
(2) Furniture & Fitting = 10%
(3) Plant* & Machinery:
(i) General = 15%
(ii) Motor cars [Except (iii)] = 15%
(iii) Motor cars, Motor buses, Motor lorries, Motor taxies, Motor vans used in the business of running
them on hire = 30%
(iv) Books owned by assessee carrying on a profession, or owned by a library = 40%
(v) Computers = 40%
(vi) Aeroplane = 40%
(vii) Moulds used in rubber and plastic goods factories = 30%
(viii) Windmills and any specifically designed device which run on windmills = 40%
(ix) Air pollution control equipment, water pollution control equipments = 40%
(x) Ship = 20 %
(xi) Oil Well = 15%
(4) Intangible assets = 25%

*As per section 43(3)- "Plant" includes ships, vehicles, books, scientific apparatus and surgical equipments
used for the purpose of business or profession but does not include tea bushes or livestock or buildings or
furniture and fittings.
Section 32 (1) (iia): Additional Depreciation:-

Assessee (i.e. any person)
Should be engaged in the manufacturing business of any article or thing, Has acquired and installed
or in the business of generation, transmission or distribution of power
(+) new plant & machinery
Then, Additional depreciation @ 20% of the actual cost shall be allowed as deduction u/s 32 (1)(ii).
10
Proviso to Section 32 (1) (iia):

Sets up new manufacturing / production unit… (+) has acquired & installed new plant & machinery
On or after In any notified backward area For Between 1st April,

1st April, in A.P., Bihar, Telangana, Such 2015 to 31st March,
2015 and West Bengal. Unit 2020
Then, Additional depreciation shall be allowed @ 35% (instead 20%) as deduction u/s 32 (1)(ii).
EXPLANATORY REMARK:
This higher rate of additional depreciation (i.e. 35%) will not be applicable in respect of plant and
machinery acquired in the business of generation or generation & distribution of power, in such a case,
older rate of additional depreciation (i.e. 20 %) shall apply as usual.
COMMON POINTS FOR ADDITIONAL DEPRECIATION WHETHER CLAIMED @ 20% OR @ 35% :-

(1) If PERIOD OF USE IN FIRST YEAR of its acquisition is LESS THAN 180 DAYS:
50% additional depreciation will Balance 50% additional depreciation will be allowed
be allowed in this first year itself. in the immediately succeeding previous year.
(2) Additional depreciation shall not be allowed in respect of:

(i) Second hand plant and machinery; or
(ii) Any machinery or plant installed in any office premises or any residential accommodation; or
(iii) Any vehicle i.e. road transport vehicles; or
(iv) Ships or aircraft; or
(v) Any plant or machinery, of which 100% cost is allowed as a deduction in any one previous year.
Section 32(2): Unabsorbed Depreciation:-

1. Shall be setoff against profits & gains of any business or profession.
Current year depreciation 2. Balance (if any) shall be setoff against Income of any other head.
3. Balance (if any) shall be carried forward to next asstt. year (s).*
Set off against P/G/B/P**
*In next asstt. year(s): Unabsorbed dep. of last year(s)
Balance (if any) shall be set off against-
- income of any other head.
** In the next year(s), priority of set off shall be as follows:-
1. Current year depreciation.
2. Brought forward business losses.
3. Brought forward unabsorbed Depreciation.
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KEY POINTS:-
 Unabsorbed depreciation can be carried forward infinitely.
 Assessee who claimed the depreciation and who wants to carry forward the depreciation must
be same (like, unabsorbed depreciation of firm / deceased can’t be carried forward by partner / legal heir
respectively).
EXCEPTION: As per section 72A & 72AA & 72AB:– [Refer to Set-off Chapter]
In the following circumstance, depreciation can be carried forward even when the assessee has changed –
(i) Succession of firm or proprietary concern by a company as referred to in section 47(xiii)/(xiv).
(ii) Succession of private company /unlisted company by a LLP as referred to in section 47(xiiib).
(iii) Amalgamation or Demerger.
Section 38: Deduction of proportionate expenditure:-

Where an asset is partly used for the purpose of the business or profession, then deduction of its
expenditure (including depreciation) shall be restricted upto a reasonable proportion having regard to its use for
the purpose of business or profession.
Note:
In computing opening WDV of such asset for second / subsequent years, instead total depreciation,
reasonable proportionate depreciation which has actually been allowed in earlier years will be reduced by
virtue of section 43(6) [which deals with the definition of WDV].
Mr. X
“1/5/17”
Date Of Purchase “P/Y”

“Business” : 40%
of 18 – 19
“Motor Car”
Actual cost: 10L “Dep. On” 10L
Motor Car (-) 1.5L
“Personal” : 60%
WDV : 8.5L
( )
P.Y. 17 – 18 “Opg. WDV”
Dep. On Motor Car

AC : 10L
AC : 10L
X “Chiranjee
(-) Dep.
15% Lal”
actually
1.5L (Del. – HC)
allowed : 0.6L
earlier
40% 60% WDV : 9.4L
As on 1/4/2018
0.6L 0.9L
Allow ( ) “Disallow” Dep. For 2018-19
will be calculated
NOTE: Since its not a case of composite income, therefore Explanation 7 of section 43(6) which
provides that total depreciation will be deemed to have been allowed will not be applicable here.
Section 32(1) (i): Depreciation in case of power generating undertakings :-

An assessee engaged in the business of generation or generation and distribution of power can claim
depreciation according to any one of the following methods-
(i) Straight-line method on each asset, or
(ii) Written down value method on block of assets.
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OTHER RELEVANT POINTS WHICH ARE TO BE NOTED:-

(1) Once an option is exercised, that shall be final and shall apply to all subsequent assessment years.
 If the option is not exercised then depreciation shall be allowed on SLM basis.
(2) Depreciation can be claimed in respect of tangible assets (i.e. Building, P&M, or furniture) & intangible
assets, owned wholly or partly by the assessee and used for the purpose of such business.
(3) Asset acquired (+) Put to use in same previous year (+) Period of use is less than 180 days, then Half of
normal depreciation shall be allowed.
Provisions relating to transfer of asset depreciated under SLM:

Section 32(1)(iii) : Terminal Depreciation:-
Applicability: Where sale price < WDV of asset (under SLM)
“Written Down Value” LESS “Sale Price”
TERMINAL DEPRECIATION*
 AND *IT (i.e. TERMINAL DEPRECIATION) SHALL BE ALLOWED IN THE YEAR OF TRANSFER.
Section 41(2) and section 50A: Balancing Charge and capital gain:-
Applicability: Where sale price > WDV of asset (under SLM).
Where, SP < AC: Following shall be taxed under the head P/G/B/P:-
SITUATIONS “SALE PRICE” LESS “WRITTEN DOWN VALUE” = BALANCING CHARGE
Where SP > AC: Following shall be taxed under the head-
P/G/B/P AND CAPITAL GAINS

“Depreciation allowed in earlier years” Sale Proceeds Less AC (Subject to indexation)
LTCG / STCG (as the case may be)
Section 50A
---------------------------------------------------------------------------------------------------------------------------------------
Section 32AD: Investment allowance for acquisition and installation of new P & M :-
Sets up new manufacturing / production unit… (+) Has acquired and installed new asset...
On or after In any notified backward area For Between 1st April,

1st April, in A.P., Bihar, Telangana, Such 2015 to 31st March,
2015 and West Bengal. Unit 2020
QUANTUM OF DEDUCTION:-
15% of the actual cost of such “new assets” in the year of installation of such new asset.
“New asset” for this purpose is a new plant or machinery.
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But it does not include the following:

(i) Second hand plant & machinery; or
(ii) Any machinery or plant installed in any office premises or any residential accommodation; or
(iii) Any vehicle i.e. road transport vehicles; or
(iv) Ships or aircraft; or
(v) Any plant or machinery, of which 100% cost is allowed as a deduction in any one previous year.
WITHDRAWL OF INVESTMENT ALLOWANCE:-

 Lock in period for new asset: 5 years from the date of its installation.
 If the new asset is sold or transferred within 5 years from its installation, investment allowance allowed shall
be deemed to be the income under the head “PGBP” of the previous year in which such asset is sold or
otherwise transferred.
BUT in case of AMALGAMATION / DEMERGER / BUSINESS RE-ORGANISATION (i.e. SUCCESSION OF FIRM /
PROPRIETARY CONCERN INTO COMPANY OR CONVERSION OF A PRIVATE COMPANY / UNLISTED PUBLIC
COMPANY INTO LLP).
The above restriction will not apply (means, benefit allowed to transferor will not be taken back).
However, the transferee (i.e. amalgamated company or the resulting company or the successor) should
not transfer such new asset as received under amalgamation / demerger / succession within 5 years (from its
installation by the amalgamating company or demerged company or predecessor).
If it is sold or otherwise transferred within 5 years by the amalgamated / resulting company / successor
(i.e. transferee), the investment allowance allowed to transferor will be taxable in the hands of transferee.
EXPLANATORY REMARKS IN RELATION TO INVESTMENT ALLOWANCE:-

(1) For claiming deduction under this section, it is not necessary that such new asset should be actually
put to use.
(2) Investment allowance allowed under this section shall not be deducted from the WDV of block of asset.
(3) This deduction is not available to power generating units.
(4) By virtue of an amendment of Finance Act, 2017 in definition of actual cost u/s 43(1), assessee can not
claim investment allowance in respect of payment as covered by such amendment (Broadly, cash
payment for acquisition of any asset to a person in a day exceeding `10,000/-).
Section 33AB: Deduction in respect of Tea Development Account, etc.:-
CONDITIONS FOR ALLOWANCE OF DEDUCTION UNDER THIS SECTION:
(1) Assessee should engage in the business of growing and manufacturing tea, coffee or rubber in India.
(2) He has deposited any amount:
 with NABARD: Under a scheme approved by Tea Board or Coffee Board or Rubber Board or
 In Deposit Account: As per the scheme framed by Tea Board or Coffee Board or Rubber Board
with previous approval of the Central Government.
14
(3) Time-limit for deposit: 30th September of the relevant assessment year.
(4) Accounts must be audited by the Chartered Accountant and audit report should be submitted with ROI.
QUANTUM OF DEDUCTION:- Least of the following -
“Amount deposited” OR “40% of Profit of such business before deduction under section 33AB”
WITHDRAWL OF DEPOSIT:-
Any amount can be withdrawn from NABARD/ Deposit Account for the purposes** specified in the
scheme of Tea Board / Coffee Board / Rubber Board or in the following circumstances:
(a) Closure of business
Amount withdrawn will be taxable at the time of receipt.
(b) Dissolution of firm.
(c) Partition of HUF.
(d) Death of an assessee Amount withdrawn will NOT be taxable at the time of receipt.
(e) Liquidation of a company.
** Where amount in the NABARD / Deposit Account is utilised as per the scheme for the purposes of any
expenditure, such expenditure shall not be allowed as a deduction in computing P/G/B/P.
Note: Where amount in the NABARD / Deposit Account is utilised for any asset, then, in absence of any
specific restriction, depreciation u/s 32 can be claimed.
PROHIBITION OF UTILIZATION:-
Where any deposited amount with NABARD/ Deposit Account is utilized for the purchase of:
(i) A machinery or plant to be installed in any office premises or residential accommodation;
(ii) Any office appliances (not being computers);
(iii) Any machinery or plant, of which 100% cost is allowed as a deduction in any one previous year;
Then, such mis-utilised amount shall be deemed to be the profits and gains of business of that previous year.
 Amount withdrawn from NABARD / Deposit Account must be utilised in same previous year in
which it is withdrawn, in otherwise case, unutilized amount shall be deemed to be the profit / gain of
business of the previous year in which it is withdrawn.
WITHDRAWAL OF EXEMPTION:-
Such Asset*
Amount withdrawn Asset* Within 8 Years from the
utilised (As per Transfer# end of the year of its
from
for… Scheme) () Acquisition
NABARD/Deposit A/C
Then
Cost of such asset related to withdrawn amount (which has been claimed earlier as deduction u/s 33AB)
Shall be deemed to be the Profits & gains of business of the previous year in which asset is transferred.
# Exceptions: (1) Transfer to Government/ Govt. Company/ Local authority.
(2) Transfer under succession of Firm by the Company.
15
Tea (Rule 8) Coffee (Rule 7B) Rubber (Rule 7A)

Activity
PGBP Agriculture PGBP Agriculture PGBP Agriculture
Income Income Income
(i) Growing and manufacturing 40% 60% 25% 75% 35% 65%
(ii) Roasting and grounding - - 40% 60% - -
STEPS TO REMEMBER:
(1) First of all, allow deduction u/s 33AB along with other deductions as allowable under the head PGBP to
obtain Net result* from such business (i.e. Tea / Coffee / Rubber Activity).
(2) After that, percentage as prescribed in Rule 8 / Rule 7A / Rule 7B shall be applied on such Net result*.
(3) If assessee has any brought forward loss, then, that can be set off from taxable proportion as arrived at by
applying the aforesaid % as given in Rule 8 / Rule 7A / Rule 7B as the case may be.
Note:
If, due to any reason, deduction u/s 33AB is withdrawn (like, case of utilization of withdrawn
amount in prohibited capital purpose, etc.), then deemed income under section 33AB will be computed by
applying the percentage as given in Rule 8 / Rule 7A / Rule 7B, as the case may be, (for the purpose of
taxation of income under the head PGBP).
Section 33ABA: Site Restoration Fund:-
CONDITIONS FOR ALLOWANCE OF DEDUCTION UNDER THIS SECTION:
(1) Assessee should engage in business consisting of the prospecting for, or extraction or production of,
petroleum or natural gas in India.
(2) An agreement must be between assessee and Central Government in relation their to.
(3) Assessee has deposited any amount-

 with the SBI: as per the scheme approved by the Ministry of Petroleum and Natural Gas; or
 in Site Restoration Account: As per scheme framed by the Ministry of Petroleum and Natural Gas,
(4) Such amount must be deposited before the end of the previous year.
QUANTUM OF DEDUCTION:- Least of the following -
“Amount deposited” OR “20% of Profit of such business before deduction under section 33ABA”
 REMAINING PROVISIONS (like of AUDIT, WITHDRAWAL, etc.) are EXACTLY SAME as given in SECTION 33AB.
Section 35: Expenditure on Scientific Research:-

(A) EXPENDITURE BASED DEDUCTION.
(B) CONTRIBUTION BASED DEDUCTION.
(A) Expenditure Based deduction:

16
Section 35(1)(i) Section 35(1)(iv)

Timing of Incurrence Capital expenditure on Revenue expenditure on
scientific research scientific research
(100% deduction) (100% deduction)
(1) If incurred during the relevant previous year All capital expenses All revenue expenses
(whether in case of new business/existing business) (Other than land)
(2) If business is newly commenced then expenses All capital expenses Only Salary and Material
incurred during 3 years prior to the date of (other than Land) expenses relating to
commencement of the business scientific research upto the
approved extent (by
Due to deduction u/s 35(1)(iv), business loss cannot be computed, If profit is
Prescribed Authority)
inadequate, then, same treatment, as of unabsorbed depreciation, will be provided.
(3) Special Case [Section 35(2AB)]:-

Incurs expenses on In-house research and
engaged Manufacturing development facility (approved)
Company in…. business of any item (+)
except non-priority Enter into an agreement for co-operation
items as given under with Prescribed Authority and fulfill
Schedule XI prescribed conditions of accounts and audit.
Then, allowable deduction = 150% of total expenses [whether revenue or capital (except land and building)].
EXPLANATORY REMARKS
(1) Special Situations:
Transfer
(a) Asset* used in Regular Business Scientific Research Cell
(i.e. brought in…..)
Then, written down value of such asset* shall be allowed as deduction u/s 35.
(b)
Scientific research asset
Ceased to be used as such and then…..
Sold Used in regular business
For depreciation:
Sale Price > Original Cost Sale Price > Original Cost
Sale price will be Actual cost will

taxable under the Upto benefit claimed be taken as Nil.
Sale price : 
PGBP. earlier in respect of such (-) Actual / Indexed Cost :  Explanation 1 of
(as the case may be) Section 43(1)
Taxable u/s PGBP. LTCG / STCG :  17
(2) If cost of an asset is claimed u/s 35, then, no depreciation will be allowed on such asset.
(3) If land and building is purchased through a composite agreement, then, the cost of the land and building
shall be bifurcated on the basis of their Fair Market Value. Cost of land is not allowable as deduction
and cost of building shall be allowed as deduction u/s 35(1)(iv).
(4) In case of Amalgamation: Unavailed benefit will be allowed to the amalgamated company.
(B) Contribution based deduction:

Contribution to……….
Notified bodies  National Laboratory Indian Company
(by Central Government)  IIT (having main object of
For use in For use in  University scientific research and
 Persons approved by development) approved by
Scientific research Social Science or
Prescribed Authority Chief Commissioner
statistical research
150% Deduction 100% Deduction 150% Deduction 100% Deduction
35(1)(ii) 35(1)(iii) 35(2AA) 35(1)(iia)
Section 35CCC and Section 35CCD: Expenditure on agricultural extension project: and
Expenditure on skill development project:-
Section 35CCC Section 35CCD
 Eligible assessee Any person Company
 Eligible Project Agriculture Extension Project Skill development Project
Notified by the Board as per prescribed guidelines
 Qualifying Expenditure Any expenditure except land & building
 Quantum of deduction 150% of such expenditure
 Double deduction Not possible
Section 35ABB:- Expenditure for obtaining a license to operate telecommunication services:-
If telecommunication license fee has If telecommunication license fee has

Deduction u/s 35ABB…. actually been paid before actually been paid after
commencement of business commencement of business
 Shall begin…………… From year of commencement of From year of actual payment of such
business fee
 Shall be allowed upto... the year in which the license comes to an end
License fee Paid License fee paid
 Quantum of deduction
Previous year of actual payment to the Year of Commencement of business
previous year in which license expires to the year in which license expires
18
 In case of Amalgamation / Demerger:

Outstanding installments (i.e. unavailed benefit) will be allowed to the amalgamated/resulting company
(instead amalgamating company/demerged company) from the year of amalgamation/demerger.
 Sale of License:
Sales
Consideration < Unamortized License : In the Year of Transfer:
Fee
Entire Deduction u/s : U/L/ Fee (-) S/C

License 35 ABB : ……….
Trf.
Sales Consideration
< Unamortized License Fee
***
< <
Sale of License
AC
< S/C U/L/Fee AC
< S/C U/L/Fee
“PGBP” : S/C – U/L/Fee

: ………
“PGBP” “CG”
“Part of
License”
Deduction S/C : 
allowed (-) AC
“Trf”
earlier or : 
( )
I/C
CG : 
<
<
S/C of U/L/Fee S/C of U/L/fee
Part of of Part of
License Entire of entire
License License License
Here,
U/L/Fee = Unamortized License fee.
Ded . : U/L/Fee – S/C *** Same Treatment
S/C = Sales consideration. u/s (as discussed above in case
AC = Actual cost. 35ABB Unexpired Life of transfer of entire license).
I/C = Indexed cost. No further deduction
............ will be allowed u/s 35ABB.
Section 35ABA: Expenditure for obtaining right to use spectrum for telecom services:-
 Manner to compute the amount of deduction and determine the period for deduction under this
section is same as was discussed u/s 35ABB.
 Alike section 35ABB, this deduction is also available only when spectrum fees has actually been paid.
But, under this section, “has actually been paid” means:
- Actual payment of such fees has been made; OR
- It becomes payable in the prescribed manner (Rule 6A).
 Students may kindly note here that - u/s 35ABB, there is no possibility of deduction of payable amount of
license fees in any case, but u/s 35ABA, since specific meaning of “has actually been paid” provides that
spectrum fees payable in prescribed manner will be treated as “has actually been paid”, therefore in
such a case, deduction u/s 35ABA will be available even if actual payment of spectrum fees has not been
made to the Government.
19
If spectrum fees which becomes payable in the prescribed manner (i.e. deemed “has
actually been paid”) but Department of Telecom has deferred such payment subject to certain
conditions, and assessee violated any condition subsequently, then-
(a) Deduction under this section which has been allowed earlier on the basis of payable in prescribed
manner basis, will be deemed to have been wrongly allowed;
(b) The Assessing Officer may re-compute the total income of the assessee for the said previous year
and make the necessary rectification;
(c) Such rectification can be made with in 4 years from the end of the previous year in which the
failure to comply with the provisions of this section takes place.
 TREATMENT RELATING TO AMALGAMATION OR DEMERGER AND SALE OF LICENCE, AS GIVEN IN
SECTION 35ABB, SHALL APPLY AS IF FOR WORD “LICENSE” THE WORD “SPECTRUM” HAD BEEN
SUBSTITUTED.
Section 35AD: Deduction in respect of expenditure on specified business:-
(A) Deduction shall be allowed to the assessee who is carrying on the following specified business:
(1) Setting up and operating cold chain facilities for specified products (like agriculture produce, etc.);
 Cold chain facility” means a CHAIN OF FACILITIES for storage or transportation under
scientifically controlled conditions including refrigeration and other facilities necessary for the
preservation of specified products.
(2) Setting up and operating warehousing facilities for storage of agriculture produce.
(3) Laying and operating cross-country natural gas or petroleum oil pipeline network.
(4) Building and operating, anywhere in India, a hotel of two star or above category.
 Where the assessee builds a hotel of two-star or above category and subsequently, while continuing to
own the hotel, transfers the operation thereof to another person, the assessee shall be deemed to be
carrying on this specified business.
(5) Building and operating, anywhere in India, a hospital with at least 100 beds for patients.
(6) Developing and building a housing project under a Government scheme -
 for slum redevelopment or rehabilitation; or
 for affordable housing.
(7) Production of fertilizer in India.
(8) Setting up and operating an inland container depot or a container freight station.
(9) Bee-keeping and production of honey and beeswax.
(10) Setting up and operating a warehousing facility for storage of sugar.
20
(11) Laying and operating a slurry pipeline for the transportation of iron ore.
(12) Setting up and operating a semi conductor wafer fabrication manufacturing unit.
(13) Developing or/and maintaining & operating a new infrastructure facility (like, road including toll
road, highway, water supply project, port, airport, etc.)
(B) SALIENT FEATURES OF SECTION 35AD:
(1) Quantum of Deduction:-

100% OF CAPITAL EXPENDITURE ALLOWED IN THE YEAR OF ITS INCURRENCE ITSELF.
But, if expenditure is incurred
Prior to commencement of business operations (and) which is capitalised in the books
Will be allowed in the year of commencement of business operations.

(2) Deduction under this section shall not be allowed in respect of:
(i) Any expenditure incurred on acquisition of any land or goodwill or financial instrument;
(ii) Any expenditure in respect of which:
Payment or In To Other than through Exceed

aggregate of (+) a (+) a (+) a Banking Channel (+) `10,000/-
payments day Person (like, in cash)
(3) Conditions for applicability of this section:-

(a) Such specified business should not be spt up by splitting up, or reconstruction, of existing business.
(b) Such specified business should not be set up by the transfer to the specified business of second hand
machinery or plant.
EXCEPTIONS:
(1) Any machinery or plant which was used outside India by any other person shall not be
regarded as second hand, provided-
“Such Plant or Machinery”
Prior to installation by the assessee (+) Imported into India.
Not used at any time in India (+) No depreciation under this Act was allowed to any person on it.
(2) Total value of previously 20% total value of All machinery or plant
used machinery or plant > used in the business
Then it shall be deemed that the above condition (b) has been complied with.
21
(c) If specified business is of -
Laying & operating pipeline network….. Developing or / and maintaining and

operating a new infrastructure facility
Assessee should make available for use on  Assessee should enter into an agreement
common carrier basis: with the Government or a local authority or
− at least 1/3 of its total pipeline capacity any other statutory body in relation to
in case of natural gas pipeline network, development of such new infrastructure
and facility.
− at least 1/4 of its total pipeline capacity  Such infrastructure facility should commence
in case of petroleum pipeline network. its operations on or after 1st April, 2017.
Such specified business should be owned by an Indian company or by group of such companies
or by an authority or a corporation established or constituted under any Central or State Act.
(4) No depreciation or any other deduction shall be allowed in respect of the expenditure which is
allowed under this section.
claimed u/s 80IA to 80RRB
(5) If assessee Deduction Then No deduction &
u/s u/s 10AA
35AD
In respect of such Specified Business.
LOCK IN PERIOD FOR RETENTION OF DEDUCTION CLAIMED ASSET IN THE SPECIFIED BUSINESS:
Asset claimed as deduction Should be used Upto 8 years from the year of its
under this section Only for the acquisition
specified business
If violation, then-
Deduction allowed u/s 35AD (less) Notionally allowable depreciation (in absence of deduction u/s 35AD)
= ----- ------------------ (i.e. Notional WDV)
Will be deemed as income u/s PGBP Will be treated as actual cost of that asset and
for the year of violation will be added with corresponding block of asset
[Part of Explanation 13 of section 43(1)]
 If asset is sold, destroyed with in the aforesaid lock in period of 8 years, then, that will not be treated a
case of violation, and no consequence will arise.
But, in such a case, total amount received as sale consideration or insurance claim, as the case may be, will
be taxable under the head PGBP by virtue of special provisions of section 28(vii).
22
OTHER CONSEQUENTIAL AMENDMENTS:-

(1) Section 73A: Loss from any specified business:-
 Can be set-off only from income of any other specified business.
 If unabsorbed, then, can be carried forward infinitely but set-off will be allowed against income of any
specified business only.
(2) If asset (of section 35AD) is transferred under slump sale u/s 50B, then, in computing CG, cost of such
asset will be taken as Nil.
(3) Explanation 13 of section 43(1):

If an asset which is claimed as deduction u/s 35AD, then cost of such asset will be treated as Nil –
For
Such assessee and Recipient

[If received such asset under circumstances covered u/s 47 (like, Gift, etc.)]
Section 35D: Amortisation of certain preliminary expenses:-
 Eligible assessee ANY RESIDENT PERSON.
 Should incurs expenditure on Either OR After commencement

specified purposes*. before of business
[*like, expense on project report, commencement For For
feasibility report, Engg. service, market of business**
survey, Memorandum / Article, etc.] Extension New Unit
 Qualifying limit for such expenses: Capital Employed:

 In case of company: Issued share capital (+) Debenture (+) Long-term borrowings.
5% of capital employed Cost of project:
or Actual cost of fixed assets.
5% of cost of project Figures (of share capital, fixed assets etc.) for capital
whichever is higher employed and cost of project will be considered:
 In case of any other person:
In totality** Only connected from…
5% of cost of Project
Such Extension Such New Unit
 Yearly quantum of deduction:
As exist on the last day of first year of deduction
Actual preliminary expenses
which is as follows:
1/5 of or
In case of new business: Year of commencement of business.
Qualifying Limit
In case of Extension: Year of completion of extension.
whichever is lower
In case of new unit: Year of start of operations by new unit.
23
Deduction will be allowed in 5 years Year of Year of Year of start of

commencing from….. commencement completion of operations by new
of business Extension unit
In case of Amalgamation / Demerger Outstanding Installment will be allowed to transferee company
Section 35DD and Section 35DDA: Expenditure for Amalgamation or Demerger, and
Expenditure on Voluntary Retirement:-
Section 35DD Section 35DDA
 Eligible assessee Indian company Any person
 Eligible Expenditure Expense on Amalgamation Expense on VRS of his employee
or Demerger
 Quantum of deduction (Yearly) 20% of such expenditure
 Period of deduction 5 Years*
 Deduction will start from: Year of Amalgamation or Year of incurrence of such
Demerger expense.
 In case of Amalgamation
Outstanding installments will be
Demerger, succession, or - allowed to transferee.
conversion before such 5 years*
Section 44DB: Special provision for computing deductions in the case of business
reorganization of co-operative banks:-
 Applicable in case of: Business re-organisation (i.e. Amalgamation / Demerger) of a Co-operative Bank.
 Deduction u/s 32, 35D, 35DD, and 35DDA allowable for the year of business re-organisation to the
predecessor co-operation bank will be allocated between predecessor co-operative bank and successor
co-operative bank in the following days ratio:
1st April of the previous year TO the day immediately Date of business re-organisation TO
preceding the date of business re-organisation
: 31st March of the previous year
 Outstanding installments of section 35D, 35DD, and 35DDA related from upcoming years will be
allowed to successor co-operative bank.
Meaning:
 Predecessor co-operative bank means: Amalgamating co-operative bank or demerged co-operative bank.
 Successor co-operative bank Means: Amalgamated co-operative bank or resulting co-operative bank.
Section 35E: Expenditure on prospecting etc. for certain minerals:-

24
 Eligible assessee ANY RESIDENT PERSON.
 Qualifying Expenditure Any expenditure on prospecting for, or extraction or

production of any mineral or development of mines.
 Timing of insurance of such expenditure During the year of commercial production and 4 years
immediately preceding that year.
 Quantum of deduction (yearly) 1/10 of such expenditure (except on the acquisition of the
site of the source of any mineral and depreciable asset).
 Deduction will be allowed in 10 years Year of Commercial Production.
commencing from…
 If installment (i.e. of 1/10) of any That shall be carried forward and added to the
previous year is unallowed installment of next year and so on but upto 10th year
commencing from the year of commercial production.
 In case of Amalgamation / Demerger Outstanding Installments will be allowed to transferee
company.
Section 36: Other deductions:-
(1) The following deductions are allowable under this section -
(i)  Premium paid on insurance of stocks or stores.

 Premium paid by any mode but other than cash for insuring the health of the employees.
(ii) Bonus or commission paid to employees
(iii) Interest paid in respect of money borrowed for the purpose of business or profession.
(iv) Employer’s contribution to recognized provident fund or approved superannuation fund.
(iva) Employer’s contribution towards a Notified Pension Scheme (NPS) on account of an employee to
the extent it does not exceed 10% of the salary of the employee in the previous year.
(v) Employer’s contribution to an approved gratuity fund.
(vi) In respect of animals which are used for the purpose of business or profession and have died or
become permanently useless, then following shall be allowed as deduction:
= Actual cost – Amount realized from carcasses (i.e. death body) or sale of animals.
(vii) Bad debts
 Must be written off as ir-recoverable in the accounts of the assessee for the previous year.
 It should have been taken into account in computing the income of the assessee of that previous
year or any earlier previous year, OR
25
 It should represent money lent in the ordinary course of banking or money lending business.
 No need to prove it that debt, infact, has become ir-recoverable. [T.R.F. Ltd. (SC)]
 The successor of the business is entitled to claim deduction in respect of debt created by the
predecessor. [T. Veerabhadra Rao (SC)]
 Provision for bad or doubtful debts – Not allowable u/s 36(1)(vii).
 If as per ICDS, an income has been offered for taxation without recording the same in the
accounts, and subsequently such amount becomes ir-recoverable, then, such amount shall be
deemed to be written off as ir-recoverable in the accounts and it will be allowed as deduction
in the previous year in which such debt becomes irrecoverable.
Section 41(4): Recovery of Bad debts :-
If an amount is recovered out of the bad debt allowed earlier, then, such amount will be taxable in
the year of such recovery but subject to the condition that the assessee who claimed the deduction of
bad debt and the assessee who recovers the bad debt must be same. [P.K.Kaimal (SC)]
(viia) Provision of bad & doubtful debts:-
Eligible Assessee Quantum of deduction
8.5% of GTI 10% of AGGREGATE

 Indian Banks
(Before deduction AND AVERAGE ADVANCES as
under this clause) made by rural branches.
 Foreign Banks
 Public Financial Institutions; or 5%
State Financial Corporations; of
or State Industrial Investment Gross Total Income
Corporations. (Before deduction under this clause)
 Non banking financial company
KEY POINT:-
If actual amount of bad debts Opening balance in Current year Provision
(whether out of urban
advances or rural advances)
> Provision of bad &
doubtful debts
+ of bad & doubtful debts
u/s 36(1)(viia)
Then, such excess bad debt written off can only be claimed as deduction u/s 36(1)(vii).
(viii) Transfer to Special Reserve:
Eligible assessee Eligible business

 A financial corporation Business of providing long-term finance for-
26
 A banking company  Industrial or agricultural development or development of

infrastructure facility in India,
 A co-operative bank
OR
 A housing finance company  Development of Housing in India.
Quantum of deduction: 20% of profits of eligible business, as carried to a special reserve account.
But, if:
200% OF
Opening balance in Current year transfer Paid-up General
special reserve account + to such reserve > Share capital + Reserve
Then, such excess portion will be allowed as deduction u/s 36(1)(viii).
Section 41(4A):- In the year of withdrawn.

subsequently Amount Taxable
Special Reserve
withdrawn ()
Section 36(1)(viii)() As PGBP.
(ix)
 Eligible Assessee Company
 Qualifying expenses Expenses on promoting family planning among employees.
 Quantum and period of Revenue expenses = 100%
deduction Capital expense = 20% each year over a period of 5 years.
 Unallowed portion (if any) Will be dealt as unabsorbed depreciation u/s 32(2).
(xv) Securities transaction tax.
(xvi) Commodities transaction tax.
(xvii)  Eligible Assessee Co-operative society engaged in the business of manufacture of sugar.
 Expenses covered Expenses for purchase of sugarcane.
 Allowable upto… The price fixed or approved by the Government.
Section 37: General Deductions:-

Expenditure
Should not be… Should be incurred…
Capital Personal Covered Solely for Business Not for any ill-legal
u/s or
Expenditure Expenses. or Profession.
30 to 36. Unlawful Purpose**
27
**Notes:
(1) Payment to Mafia Don (like hafta), bribe, etc. - NOT allowable.
(2) Penalty for infraction of Law - NOT allowable.
 If Penalty is in the nature of damage which is paid in normal course of business for breach of contract
(like, payment for delay in completion of construction contract) is allowable.
(3) Providing of freebees like gifts, or other benefits by pharmaceutical companies to medical
practitioner (which is in violation of the Regulations of Medical Counsel of India) - NOT allowable.
 It may additionally be noted here that value of freebees enjoyed by the medical practitioner will be
taxable as income for him.
New Explanation as inserted in section 37:

 CSR Expenditure shall not be treated as expense for business / profession, hence, not allowable u/s 37.
EXPLANATORY REMARK:
If CSR expenditure falls with in the scope of section 30 to 36 or under Chapter VI-A deductions
i.e. 80C – 80U, the same will be allowed and not hit by this new explanation.
---------------------------------------------------------------------------------------------------------------------------------------
“EXPENSES EXPRESSLY DISALLOWED”
Section 37(2B):
Any expenditure by the assessee on advertisement in any publication (like magazine, etc.) of a political
party is disallowable.
But, it may be noted here that in case of company, such expenditure is deemed as contribution to
political party u/s 80GGB, hence, company can claim deduction u/s 80GGB in respect of that expenditure.
Section 40(a): Amounts not deductible:-

Notwithstanding anything contained in section 30 to 38, no deduction shall be allowed in respect of
the following:
(ii) Income tax (including tax paid outside India in respect of which double taxation relief u/s 90, 90A or 91
is available).
EXPLANATORY REMARK:
 Interest on money borrowed for payment of income tax is NOT allowable.
 Interest on delay in payment of income tax / TDS / TCS, or other interest leviable under Income-tax
Act (like, interest for delay in filing of ROI) is NOT allowable.
 Interest for delay in payment of GST, Custom/Excise duty, etc. i.e. under any other Act is allowable.
 Penalty for violation of any Law whether Income-tax Act or any other Law is NOT allowable.
(iib) State
Fee / other charge levied exclusively upon……
State Government
Government Payment of such fee or other charge undertaking
Disallowable ()
28
Section 40(a)(i) Section 40(a)(ia) Section 40(a)(ib) Section 40(a)(iii)

- Any chargeable sum (except salary) - Any chargeable sum - Consideration for specified services Salary payable:
- which is payable to - which is payable to - which is paid or payable to - outside India; or
- a Foreign company or other NR - a Resident - a non-resident - to a non-resident
On which tax is deductible under chapter of TDS (or on which equalisation levy is deductible), On which tax at source has not
But, been deducted or paid thereon
(a) such tax (or levy) has not been deducted or with in the time prescribed
(b) after deduction, has not been paid on or before the due date specified in section 139(1). under the chapter of TDS.
100% Disallowance of such sum 30% Disallowance 100% Disallowance of such sum 100% Disallowance of Salary
Proviso: -
- If such tax (or levy, as the case may be) has been deducted in any subsequent year, or If deduction or payment is
- has been deducted during the previous year but has been paid after the due date specified in section 139(1), delayed by one day then such
- Then such sum shall be allowed in the previous year in which such tax (or levy) has been deposited. sum shall never be allowed.
A relief has been given u/s 40(a)(ia) ONLY [i.e. Not in section 40(a)(i) and 40(a)(ib)] on fulfillment of following conditions:
Tax is deductible on the aforesaid sum but it is not deducted AND The Payer is not deemed to be an assessee-in-default u/s 201(1).
Then,
- for the purpose of section 40(a)(ia), it shall be deemed that
- the payer has deducted and paid the tax on such amount
- on the date of the furnishing of return of income by the resident recipient.
Under the first proviso to section 201(1), the payer is not deemed to be an assessee-in-default if,-
Resident payee has Resident payee has taken into Resident payee has paid tax Payer furnishes a certificate to
furnished his return due on the income declared this effect from a Chartered
+ account the above income in + +
of income u/s 139. such return of income. in such return of income. Accountant in a prescribed form.
** The Supreme Court in the case of Palam Gas Service has held that word “Payable” occurring in section 40(a)(ia) includes the case of PAID also.
29
CONCEPT OF EQUALISATION LEVY:

“ SPECIFIED SERVICES”
Online Digital Cyber

1. Indian resident carrying Advertisement Marketing space
on business / profession “N R”
OR
CONSIDERATION Permanent
2. Non-resident having Establishment
Permanent Establishment In India
i.e. fixed place of e.g. Google
business in India.
To collect some By virtue of Double Taxation
revenue on Income Tax Avoidance Agreement
“PAYER” such receipt…
.”
Exp Sec. 10(50)
“ ” “F.A.2016”
ow
ll )
a
“ ( CH VIII
“Equalization Levy” [@ 6% on consideration for specified services]
Personally liable to pay If service provider NR has PE in India (i.e. such
such equalisation levy Not Applicable consideration is chargeable to income tax in India).
Fails If Payer has availed such services for his personal
Penalty equal to the amount to purposes i.e. payment is not allowable as expense.
If applicable, then
of such equalisation levy deduct
“Duty of PAYER” If aggregate amount of consideration for specified
services as made by payer do not exceed `1,00,000/-.
Interest @1% P.M. or part of
the month on such equalisation To deduct Equalization Levy @ 6% of consideration for specified services.
levy for period of delay
To Deposit such Equalization Levy Upto 7th of Next Month.
Fails Consequences for the failure on the part of Payer:
Penalty @ 1,000/- per day to
for period of delay deposit
Section 40(a)(v):
Tax on non-monetary perquisites (like, tax on value of rent free house, etc.) as paid by employer,
which is exempt in the hands of employee u/s 10(10CC).
---------------------------------------------------------------------------------------------------------------------------------------
Section 40A(2):- Payment made to relatives etc.:-
Goods Services Facilities

supplied rendered provided Specified Person
Assessee like, relative etc.
Payment (i.e. Expense)
FMV of such goods, services or facilities;

having
Can disallow Excessive or OR
AO regard
such expense upto…. Unreasonable Legitimate (i.e. real / actual) need of
extent to ….
business or profession.
30
Section 40A(3): Disallowance out of cash expenditure:-
>
in To a person
Payment 10,000/-
incurs Any respect (+)
or
If assessee Expenditure In a day `35,000/-
of Aggregate
which (+) In case of
payments
Otherwise than by payment to
made
A/C Payee cheque Transport
or draft or ECS Operator.
 No deduction will be allowed in respect of such amount of expenditure.

If deduction in respect of any expenditure has been claimed in any year on the basis of its incurrence and in any
subsequent year assessee did the aforesaid violation in respect of such expenditure, then, such violated amount
shall be taxable as income under the head PGBP for the year of such violation. Section 40A(3A)
EXCEPTIONAL CASES (RULE 6DD: In the following cases, no part of the payment shall be disallowed:
WHERE PAYMENTS IS MADE:
(i) To Government or banks and financial institutions.

(ii) Through a bank (like, by way of Net banking, RTGS, NEFT, Debit card or Credit card, etc.).
(iii) Through book entry (i.e. Bookish Adjustment).
(iv) For the purchase of-
» Agricultural or forest produce; or
» The produce of animal husbandry (including hides and skins) or dairy or poultry farming; or
» Fish or fish products (including crab, lobster and other marine product); or
» The products of horticulture or apiculture; or
» Products manufactured or processed without the aid of power in a cottage industry,
to the cultivator, grower or producer of such articles, produce or products.
EXPLANATORY REMARK:
 Payment to any headman of fishermen would not be liable for disallowance.
 Payment to trader or any other middleman (like, hawker) will be liable for disallowance.
(v) At a place (like village) where on the date of such payment banking facility is not available.
(vi) Against retirement benefit (like, gratuity) and aggregate of such benefits does not exceed ` 50,000/-.
(vii) To his employee on a temporarily posted place / ship, where he has not bank account.
(viii) which was required to be made on a day on which the banks were closed.
Section 40A(4): No person can enforce that payment exceeding ` 10000/- (or ` 35,000/- in case of
payment to transport operator) should be made in cash.
31
No deduction shall be allowed in respect of Provision For Gratuity in any case

Section 40A(7)
(even if it is made as per actuarial valuation).
It may be noted that Payment of contribution to Approved Gratuity Fund, or
Gratuity actually paid or becomes payable during the current year will be allowed.
No deduction shall be allowed in respect of contribution made by the assessee to
Section 40A(9)
unrecognized or non-statutory welfare fund / trust (like employees welfare trust).
Section 43B: Certain deduction to be only on actual payment:-

If any sum payable by way of –
(a) Any tax, duty, cess, fee under any law in force;
(b) Any bonus or commission to employees;
(c) Any interest on loan or borrowing or advance from any public financial institution or state financial
corporation or state industrial investment corporation or schedule bank or co-operative bank;
(d) Leave Salary;
(e) Employer’s Contribution to any provident fund or superannuation fund or gratuity fund or any other
fund for the welfare of the employees (like NPS); or
(f) Any sum payable to the Indian Railways for the use of railway assets
Is actually paid either during the relevant previous year If the payment is made after the due date for ROI
or on or before the due date for furnishing of ROI
Deduction can be claimed only in the year of
Deduction shall be allowed for the year from actual payment not for the year from which
which such expense relates (i.e. incurred). such expense relates (i.e. incurred).
In case of receipt of employee’s contribution towards RPF, ESI or any other welfare fund:
First of all, It will be treated as an income of such employer u/s 2(24)(x),
And, Then
If employer deposit such amount upto the If Employer does not deposit such amount
expiry of due date of such relevant fund Effect upto the expiry of due date of such
(Not due date of ROI) Of relevant fund.
Section
Deductible in the hands of Employer in 36(1)(va) Employee contribution as received by
the same P.Y. in which such amount is employer shall never be allowed as
being treated as Income of Employer. deduction in the hands of Employer.
Contrary Decisions: Delhi High Court in case of Aimill Ltd., and Uttarakhand High Court in case
of Kichha Sugar Co. Ltd., has held that Payment of Employee contribution after the due date of Relevant
Acts like, EPI Act, but before the due date of filing of ROI will be allowable as deduction. 32
EXPLANATORY REMARKS (in relation to section 43B):-

(1) If interest payable is converted into loan, then that shall not be deemed as actual payment, hence, not
allowable in the year of such conversion, but, that can be claimed as deduction in the year of actual
payment of such amount.
(2) Furnishing of bank guarantee will not be treated as actual payment for the purpose of section 43B.
Section 41(1): Deemed Income:-

Where deduction has been made in respect of loss / expenditure / trading liability for any year,
AND
Subsequently the assessee or successor of the business
has obtained
Any amount in respect of OR some benefit in respect of such trading liability

such loss or expenditure by way of remission or cessation thereof,
the amount obtained OR the value of benefit accrued

shall be deemed to be income, Even if the business has been discontinued.
 Remission or cessation of a trading liability, which was earlier allowed as deduction, may be effected
by a unilateral act (i.e. one sided act) also.
 Section 41(1) shall apply on waiver of the working capital loan which was utilised for day to day
operations, because it amount to remission of trading liability. [Rollatainers Ltd. (Delhi-HC)]
 Section 41(1) shall not apply on waiver of loan as given to assessee to meet the capital cost of the asset,
because it can’t be treated as remission of trading liability but that shall be reduced from actual cost
of the asset. [Steel Authority of India (Delhi-HC)]
In case of dispute:
 Remission or cessation of trading liability will take place only when the dispute is finally settled in the
favour of the assessee and accordingly section 41(1) shall apply.
 But, if assessee has already paid the demand (like of excise duty) and subsequently if assessee has
obtained any amount in respect of such expenditure, then, such amount will be taxable in the year of its
receipt ir-respective of the fact that still dispute is going on such matter.
Section 43D: Tax of Intt. Income on Doubtful Debts of Public Financial Institutions etc:-
 ELIGIBLE ASSESSEE Public Financial Institution or Scheduled Bank or Co-operative bank or a
State Financial Corporation or State Industrial Investment Corporation or
Housing Finance Company.
 ELIGIBLE INCOME Income by way of interest on prescribed categories of bad and doubtful debts.
33
 YEAR OF TAXATION Previous year in which it is credited to the profit and loss account OR in the
previous year in which it is actually received, WHICHEVER IS EARLIER.
Section 42: Computation of income in case of business for Prospecting of Mineral Oil :-
Eligible assessee
Any person carrying on the business With whom the Government of India has entered
of prospecting for or extraction or AND into an agreement* for association or
production of mineral oil participation duly approved by the Parliament,
Such agreement* shall prevail over the entire Income-tax Act.

 Meaning there by, the deduction or allowances stipulated in such agreement will be permissible even if they
are not provided for under the Income-Tax Act, 1961.
Explanation: For the purposes of this section, “mineral oil” includes petroleum and natural gas.
Section 44AA: Maintenance of books of account :-
Person If Gross receipts in ALL 3 Immediate preceding year exceeds ` 1,50,000 Require to maintain
carrying OR specified books of
In case of newly set-up profession: account
on
Gross Receipts in the year of setup exceeds ` 1,50,000/-
specified
In otherwise case Books as may enable AO
profession
to compute taxable income
Other If: Total income > `1,20,000/- (`2,50,000/- in case of Individual/HUF) Books
Person or
i.e. as may enable
Turnover > `10,00,000/- (` 25,00,000/- in case of Individual/HUF)
Person the AO
carrying in ANY of the 3 immediate preceding year,
to compute
on non- OR
- specified In case of newly setup business or non-specified profession: taxable income
profession Total income /Turnover in the year of setup exceeds the aforesaid limit
or
Business In otherwise case No need to maintain books
Specified profession:
Legal, medical, engineering, architectural, accountancy, interior decoration, authorized representative, film
artist, technical consultancy, information technology, company secretary.
Specified books of account: Cash book, ledger, journal (if mercantile system is adopted), Bills & vouchers.
34
Specified books of account and other documents shall be kept and maintained for a period of six years from
the end of the relevant assessment year.
Section 44AB: Compulsory audit of Accounts:-
Category of person Condition for requirement to get his accounts audited

(i) Person covered u/s 44AE or 44BB or Claims his income lower than the income prescribed under
44BBB the relevant section.
(ii) Person covered u/s 44ADA Claims his income lower than the income prescribed under
this relevant section and if his total income exceeds the basic
exemption limit.
(iii) In case [other than (i) & (ii) above]
 Carrying on profession Gross receipts exceeds ` 50 Lakhs .
 Carrying on business Total sales, turnover / gross receipts exceeds ` 100 Lakhs.**
**For person declaring income as per section 44AD, this limit of
100 lacs shall be construed as ` 200 lacs.
(iv) Person carrying on business is If his total income exceeds the maximum amount which is not
covered u/s 44AD(4) chargeable to tax.
 In the aforesaid cases, assessee shall get his accounts audited and furnishes the report of such audit duly signed
and verified by a Chartered Accountant, on or before the due date for filing the return of income u/s 139(1).
“VARIOUS PROVISIONS RELATING TO PENALTY”
Section Nature of default Penalty leviable

271A Failures to keep, maintain, or retain books
` 25000/-
of account, etc., as required u/s 44 AA.
271B Failure to get accounts audited or furnish a ½ % of total sales, turnover, or gross receipts, etc.
report of audit as required u/s 44 AB. or ` 1,50,000, whichever is less.
“PRESUMPTIVE TAXATIONS”
Section 44AE*: Special provision for computing profits and gains of business of plying, hiring
or leasing goods carriages:- (Overriding effect* on Section 28 To 43C)
*Means, after computation of presumptive income, effect of disallowance u/s 40, etc. will not be given.
Applicability Any Person carrying on business of plying, hiring or leasing

goods carriages and not owning more than 10 goods carriages
at any time during the previous year.
Minimum amount of presumptive income ` 7,500/- per month or part of a month for a goods carriage.
35
Allowability of deduction u/s 30 to 38 Deemed to be allowed.

Computation of presumptive income in Compute presumptive income as above -
case the assessee is a firm Less: Interest and remuneration to partners -
[Subject to the provision of section 40(b)]
Income Chargeable Under The Head PGBP: -
Option for lesser amount of Income Books of accounts to be maintained u/s 44AA and audit u/s
44AB have to be fulfilled.
Section 44AD: Special Provisions For Computing Profits & Gains Of BUSINESS On
Presumptive Basis Conditions:- (Overriding effect on Section 28 To 43C)
Essential conditions: Assessee
Must be: Should be engaged Should NOT: Turnover of

Not claimed
 Individual deduction in  Carry on Profession. Eligible business
 HUF u/s ANY business  Commission Agent/Broker. should not
 Firm − 10AA, Except business exceed
 Carry on agency business.
(Except LLP). − 80IA - 80RRB covered u/s 44AE. ` 2 crores.
If ALL above conditions are satisfied then presumptive income will be: 8% of total turnover / gross receipts.
BUT
In case of Payment
which is received before the due date of ROI (+) By Account payee cheque / draft or use of ECS
through a bank account
In such a case, Deemed business profit would be computed @ 6% (instead 8%).
CONSEQUENCES FOR ADOPTION OF PRESUMPTIVE TAXATION
All deductions (including Required to pay his No need to maintain Books

partners Interest & remuneration) his total Advance tax (consequently no question to
th
are deemed to have been allowed. on or before 15 March. get his accounts audited).
---------------------------------------------------------------------------------------------------------------------------------------
OPTION TO DECLARE LOWER INCOME AND ITS CONSEQUENCES
If assessee declares profit for any AND

Declares profit for any of the 5 consecutive
previous year as per this section subsequent previous years not as per this section
Then 36
He shall not be eligible to claim the benefit of this section in the 5 years subsequent to the previous year in
which he did not be declare income as per this section. [Section 44AD(4)]
If section 44AD(4) applies Total Income > Basic Exemption Limit

(+)
Then, assessee will have to……
Keep and maintain his books of accounts and Get them audited u/s 44AB (ir-respective of turnover).
Section 44ADA: Special provision for presumptive income computation of profession :-
(Overriding effect on Section 28 To 43C)

Assessee
Resident (+) Engaged in specified profession as referred (+) Gross receipts > 50 Lacs
to in section 44AA(1) [like, Medical, etc.] from profession
Presumptive income (PGBP) = 50% of Gross receipts (Net of all deductions u/s 30-38).
If assessee declare lower income (+) His Total Income > Basic Exemption Limit
Then, assessee will have to……

Keep and maintain his books of accounts and Get them audited u/s 44AB (ir-respective of turnover).
---------------------------------------------------------------------------------------------------------------------------------------
Section 44C: Deduction of Head Office expenditure in the case of non-residents:-
 Deduction in respect of any head office expenditure shall be allowed as follows:
The actual amount of Head Office An amount equal to 5% of the adjusted

expenditure attributable to the OR total income of the assessee for the
business/profession in India relevant year
Whichever is lower.
 The term ‘adjusted total income’ means:

The total income without giving effect to:
− unabsorbed depreciation, or
− any brought forward loss, or
− any deduction under section 80C to 80U.
---------------------------------------------------------------------------------------------------------------------------------------
37
“DIVIDEND & BONUS STRIPPING”

Section 94(7): Loss on shares, securities or units: -
Where any person
Acquires any securities / And Such person transfers such securities The dividend / income
And
unit within 3 months / unit within 3 months (or 9 months in on such securities /
prior to the record date case of units) after such date unit is exempt
THEN,
The loss arising on account of such purchase and sale of securities / unit,
Equal to amount of dividend / income received or receivable by him
Shall be ignored.
“Record Date” means:
Such date as may be fixed by a Company or a MF or the UTI for purposes of entitlement of the holder of
the securities or unit, to receive dividend or income or any other benefit.
Section 94(8): Bonus Stripping:-
Where any person
Acquires any units He is Such person transfers He continues

(i.e. original units) And allotted And all or any of the And to hold all or
within 3 months prior Bonus original units within 9 any of the
to the record date units months after such date Bonus units
THEN,
Loss arising from the transfer of original units shall be ignored
and
it shall be deemed to be the cost of acquisition of such Bonus units held on the date of such transfer.
---------------------------------------------------------------------------------------------------------------------------------------
38
MEANING OF AMALGAMATION [Section 2(1B)]:-

It means either -
- Merger of one or more companies with another company, or
- Merger of two or more companies to form one company in such a manner that-
All the properties and liabilities of Shareholders having at least 75% share capital in
the amalgamating company(s) amalgamating company(s) [other than shares held therein
immediately before the And immediately before the amalgamation by the amalgamated
amalgamation becomes the property company or by its nominee or its subsidiary] become
of the amalgamated company. shareholders of the amalgamated company.
EXCEPT
Where the property of the company which Where the company which merges is wound
merges is sold to the other company and the up in liquidation and the liquidator
merger is a result of a transaction of sale. distributes its property to the other company.
Section 2(19AA): Meaning of Demerger:-

Transfer by a demerged company of its one or more undertakings to any resulting company
subject to the fulfillment of the following conditions:
(1) All the property and liabilities of the transferred undertaking becomes the property and liabilities
of the resulting company.
(2) Such transfer of property and liabilities should be made at book value (other than revaluation).
(3) The resulting company issue in consideration its shares to the shareholders of the demerged
company on a proportionate basis except where the resulting company itself is a shareholder of
the demerged company.
(4) Shareholders having at least 75% share capital in demerged company [other than shares held therein
immediately before the demerger by the resulting company or by its nominee or its subsidiary]
become shareholders of the resulting company except by way of receipt of shares which has been
issued in consideration of demerger.
(5) The transfer of the undertaking is on a going concern basis.
(6) The demerger is in accordance with the conditions if any notified u/s 72A(5) by the Central Govt.
in this behalf.
Meaning of Demerged company:- A company whose undertaking is transferred pursuant to demerger,
to resulting company.
Meaning of Resulting company:- The company to which the undertaking of the demerged company is
transferred in a demerger.
39

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© SATISH MANGAL (9350647377, satishmangal@aldine.edu.

in) DT- SUMMARY NOTES

(PART OF SUMMARY MODULE)

CA. SATISH MANGAL

"PROFITS AND GAINS OF BUSINESS OR PROFESSION"

Section 28: Chargeability:-

The following incomes shall be chargeable to tax under this head:

(1) Profits and gains of any business or profession.

Section 29: Computation of income under the head P/G/B/P:-

Where the premises are occupied by the assessee as a –

Rent paid Allowed -

Section 31: Repairs and Insurance of machinery, plant and furniture:-

Where the machinery, plant and furniture used by assessee were -

Section 32 (1)(ii): DEPRECIATION ALLOWANCE (WDV Method):-

(1) Depreciation is allowed in respect of-

engaged in leasing business. [K.M. Sugar Mills Ltd. (All.-HC)]

Second Proviso to Section 32(1):

Assessee Acquired Put to use in Period 180

Normal Allowable Depreciation X 50% = --------- Quantum of Dep.

Here, succession refers to:

Effect of 6th Proviso to Section 32(1):

Amalgamated Co. = Normal Depreciation X 90 = -------

Section 43(6): Written Down Value:-

Section 50: Computation of capital gain on transfer of depreciable assets on which

Where entire block is transferred Where block, in part, transferred

SC > Cost SC < Cost SC > Cost SC < Cost

STCG=SC-Cost STCL=Cost-SC STCG=SC-Cost No Chargeability in CG head.

Section 43(1): Actual Cost:-

Payment or In To Other than through Exceed

Section 43A: Special provisions consequential to changes in rate of exchange:-

Rule 5: Prescribed Percentage for depreciation-

(4) Intangible assets = 25%

Section 32 (1) (iia): Additional Depreciation:-

Proviso to Section 32 (1) (iia):

On or after In any notified backward area For Between 1st April,

COMMON POINTS FOR ADDITIONAL DEPRECIATION WHETHER CLAIMED @ 20% OR @ 35% :-

(2) Additional depreciation shall not be allowed in respect of:

Section 32(2): Unabsorbed Depreciation:-

Section 38: Deduction of proportionate expenditure:-

Date Of Purchase “P/Y”

Dep. On Motor Car

Section 32(1) (i): Depreciation in case of power generating undertakings :-

OTHER RELEVANT POINTS WHICH ARE TO BE NOTED:-

Provisions relating to transfer of asset depreciated under SLM:

Where SP > AC: Following shall be taxed under the head-

P/G/B/P AND CAPITAL GAINS

On or after In any notified backward area For Between 1st April,

But it does not include the following:

WITHDRAWL OF INVESTMENT ALLOWANCE:-

EXPLANATORY REMARKS IN RELATION TO INVESTMENT ALLOWANCE:-

Section 33AB: Deduction in respect of Tea Development Account, etc.:-

CONDITIONS FOR ALLOWANCE OF DEDUCTION UNDER THIS SECTION:

Tea (Rule 8) Coffee (Rule 7B) Rubber (Rule 7A)

Section 33ABA: Site Restoration Fund:-

CONDITIONS FOR ALLOWANCE OF DEDUCTION UNDER THIS SECTION:

(3) Assessee has deposited any amount-

Section 35: Expenditure on Scientific Research:-

(B) CONTRIBUTION BASED DEDUCTION.

(A) Expenditure Based deduction:

Section 35(1)(i) Section 35(1)(iv)

(3) Special Case [Section 35(2AB)]:-

Sold Used in regular business

Sale price will be Actual cost will