14.

56 By: CA Vijender A
OFITS &
GAINS OF
BUSINESS/PROFESSION

SOLUTIONS

mat Oepreciation/Additional
DepreciationSection 32
Answer1
fation of Depreciation for Gopichand Industries for Ay 2021-6 RS
Rs
Block 1: Particulars
Plant &Machinery (Rate of depreciation-157)
WDV (10 looms) as on 1s April 2020 5,00,000
Add: Additions during the year
5looms acquired on 05 07.2020 4,00,000
2looms acquired on 10.01.2021 3,00,0000
Less: Assets sold during the year (15 looms sold on 07.12.2020) (10,00,000)
WDV as on 31* March 2021 (2 looms) 2,00,000
Depreciation on Rs 2,00,000 15% (limited to 50%) 15,000
Block 2:
Buildings (Rate of depreciation 107%)
WDV as on 1s April 2020 (3 12,50,000
buildings)
Depreciation on Rs 12,50,000 10% 1,25,000
Total depreciation for the year 1,40,000
Notes:
oSing balance of Block 1 represents the looms acquired on 1o.01.2021. Since these 2 looms have been put to use fs.
ess thon 180
days during Py 2020-21, only 50% of normal depreciation is permisSible.
dditional depreciation 20% of the cost of new plant and machinery is provided in the present problemassumin
that all conditions contained u/s
32(1)(iia) have not been fulfilled.
Answer 2
Computation of Depreciation and Additional Depreciation for AY 2021-22:
Particulars P&M(15) Computer (40%)
Normal Depreciation
15% on Rs 50,00,000 [See W.N. 1] 7,50,000
e7.5% on Rs 8,00,000 (50% of 15%, since put to use for less than 180 60,000
days)
e20% on Rs 3,00,000 (50% of 40%, since
put to use for less than 180 days) 60,000
Additional Depreciation:
. 20% on Rs 20,00,000 (new P&M put for than 180
to use more days) 4,00,000 Not Applicable
10% on Rs 8,00,000 (50% of 20%, since put to use for less than 180 days) | 80,000
Total Depreciation 12,90,00o 60,000
Working Notes:
1) Computation of wDV as on 31.03.2021
Particulars P&M (Rs) Computer (Rs)
WDV as on 01.04.2o20 30,00,000
Add: Plant & Machinery purchased on 08.06.2020 20,00,000o
Add:Plant &Machinery acquired on 15.12.2020 8,00,000
Computer acquired and installed in the office premises 3,00,000
WDV as on 31.03.2021 (before depreciation) 58,00.000 3,00,000
2) Normal depreciation on plant and machinery acquired & put to use on 15.12.2020 and computer acquired & installed on
02.01.2021, is restricted to 50% of 15% and 40%, respectively since the same have been put to use for less than 180
days. The additional depreciation on the said plant and machinery is also restricted to 50% of the full amount.
3) The balance additional depreciation of Rs 8O,000 being 50% of Rs 1,60,000 (20% of Rs 8,00,000) would be allowed
as deduction in AY 2022-23.

4) Additional depreciation is not avaiiable in respect of any PáM installed in office premises, residential accommodation ofr
in any guest house. Accordingly, additional depreciationis not allowable on computer instalied in the office premises
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R O F I T S& G A I N
14.57
.GAINS OF CA Vijender Aggarwal
BUSINESS/ PROFESSION By:

AnSNer
yutationo fW o V
af WDV ofPlont ond Mochinery os on 31.03.2021
Particulars Anvouwt (Rs)
Opening WbV 5,00,000
ade of plant and mac hihery during the previous year 2.00,000
eeds of obsolete plont and mac hinery sold during the year
e s S :a l ep r o (5000)
WDV as on March 31, 2021 6,95,000

on of Nermal
ondAdditionalDepreciation.for AY 2021-22:
Particulars Amount (Rs)
ciation
Deprec
(Rs 6 95,000 x 15%) 1,04250
Nomal - *
(2,00,000 Rs 40,000) 20 32,000
Depreciation [Rs
450itional

than 180
it was to use far more
Nofes the newplant and machinery was purchased and put to use before 1.10.2020, put
ce
fuil depreciation is allowable for AY 2021-22
the year. Hence, by
addifional depreciation is allowable in the case of any new P&M acquired and installed
Section 32(1)ia), 20% of the
2) Asp
inter alia, in the business of manufacture or production of any article or thing,
See cngaged, inter
alia:
such P&M. However, additional depreciation shall not be allowed in respect of,
chuad cost of person,
outside India by any other
P&M,before ifs instalation by the assessee, was used either within or
any
house.
aryP&M installed in office premises, residential accommodation or in any guest
the above provisions, additional depreciation cannot be claimed in respect of
Tn view of
.Plant and machinery of Rs 20,000 used previously for the purpose of business by the seller.
Rs 20,000, installed in office.
.Plant and machinery of
Therefore, in given case, additional depreciation has to be
the provided only on Rs 1,60,000.

Answer4

Computationof Depreciation/Capital Gains for AY 2021-22:

Particulars Amount (Rs)
WDV of Plant X & Plant Y' as on 01.04.2017 2,00,000
15% for PY 2017-18 (30,000)
Less: Depreciation
WDV of Plant X' & Plant Y as on 01.04.2018 1,70,000
15% for PY 2018-19 (25,500)
Less: Depreciation
WDV of Plant X & Plant Y as on 01.04.2019 1,44,500

Less: Depreciation 15% for PY 2019-20 (21,675)

WDV of Plant X & Plant Y as on 01.04.2020 1,22,825
2,00,000
Add: Cost of new Plant Z acquired during PY 2020-21
Less: Sale consideration of Plant Y' Rs 4,00,000 (restricted to) (3,22,825)
WDV of Plant X and Z as on 01.04.2021 Nil

Depreciation for Py 2020-21 Nit

Sale proceeds of Plant 4,00,000
Y
Less: WDV of the block (3,22,825)
Less:Expenditure incurred in connection with transfer (10,000)
Short Term Capital Gains 67,175
Answer 5
Computationof Depreciotion Allowable for AY2021-22:
Block of Assets Amount (Rs)
Slock
Puf
1:Furniture [Rate of depreciation-10%]
touse for more than 180 days [Rs 3,00,000 107] 30,000
Block 2: Plant [Rate of depreciation -40%
a) Computer(put to use for more than 180 days) [Rs 35000 40%] 14,000
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 GAINS
OF BUSINE 12,500
40%] 5,000
& days) [Rs
14.58 PROFITS

for
more
than
180
20%]
8,600
printer (put
to use

180days)
[Rs
43,000

days) [Rs
8 , 5 0 0 @ 20%] 1,700
than
40%]
Computer

)Laptop
(put to
use
for less
to use
t h a n 180
for less
for more
than 180 days)[Rs
13,000 ,200
dComputer software
(put
publicatrons)
Total
(Put to
use

Depreciation Allowable
64,500
(nctuding annunl during the :
the a s s e t s
e)Boeks arid acquired
during
Py 2020-21
+
which have been puut to use
put
his pracfice to those
assets
for le
Mr Dhgval
commenced
of the
prescribed
rate
would apply
to 50%
Nete:Snce

restrc o n of depreciayeor,
tion kaptop
and c o m p u t e r
software.

namely
n that
than 180 days

Answer 6
PrEviusYeer 2017-18:
erticulers Amount (Rs)
Particulars 10,00,000
u s e on
O1.06.2017
to
O1 04 2017. put 12,50,000
Purchased PI on use on 01.07.2017
05.2017, put to
Purchased P2 on 01 01.09.2017 12,50,000
01 06.2017, put to use on
Purchesed P3 on put to use on
01.09.2017 17,50,000
on O1.07.2017,
Purchased P4 (5,50,000)
01.2018
Sole of P on 01 31.03.2018 47.00.000
WDV of P2, P3 and P4 on
Depreciation 15% 7,05,000

Previous Year 2018-19

Particulars Amount (Rs)
39,95,000
WDV of P2, P3 and P4 on 01.04.2018
Purchased P5 on 01.05.2018, put to use on 01.11.2018 13,00,000
10,00,000o
PurchasedP6on O1.12.2018,put touseon 31.03.2019
WDVof P2, P3, P4, P5 and Pó on 31.03.2019 62,95,000
Depreciation 7.5% on Rs 23,00,000 1,72.500
Depreciation15% on Rs 39.95,000 5,99,250
PrevieusYeor 2019-20
Particulars Amount (Rs)
WDV of P2, P3. P4, P5 and Pó on 01.04.2019 55,23,250
Purchesed P7 on 01.06.2019. put to use on 10.12.2019 5,00,000
Sale of P2 on 3103.2020 (4,50,000)
wDV of P3, P4, P5, P6 and P7 on 31.03.2020 55,73,250
Depreciation7.5% on Rs 5,00,000 37,500
Depreciation 15% on Rs 50,73,250 L 7.60,987.50
Previgus Yeor 2020-21:
Particulars Amount (Rs)
WDV of P3, P4, P5, P6 and P7 on 01.04.202o 47,74.762.50
Purchosed P8 on 0107.2020. put to use on 01.01.2021 13,50,000.00
WDV of P3, P4, P5, P6, P7 &P8 on 31.03 2021 61,24.762.50
Depreciation 7.5% on Rs 13,50,O00 1,01.250.00
Depreciation 15% on Rs 47,74,762.50 7,16,214.37
Answer 7
Intangible assets are assets which are not corporeal, ie assets which are not capabie of being touched. Such assets are
represented by rights of the persons through them Intangible assets are required to be depreciated at the rate of 25%
Following are few examples of intangible assets:
a)Know-how
b) Patents
c) Copyrights
d) Trademarks
 NS OF BUSINESS/PROFESSION Aggarwal
y g O F I T S
& G A I N

By: CA Vijender
LCenses
Franchises
Anyo t h e rb u s i n e s s
commercial rights of similar nature

A n S W e r8

preciation Alowance u/s 32 for AY 2021-22:

of Block 2
Ongtation Block 1
Particulars P&M (40%)
PAM (157)
a s on 01.04.2020 5,78,000
the year
OpeungWDv

A dP and Machinery acquired during

: l a n ta n d

2,00,000
handmachinery
on 29.12.2020 (used for less than 180 days)
Second
Y on 12.07.2(used for more than 180 days) 8,00,000
Machinery
2020 (used for more than 180 days)
office on 08.09.a
3,00,000
AC for 3,25,000
on 23.11.2020 (used for less than 180 days)
MachineryZ 2.50,000
Airp
pollution control|equipment on 31.07.2020 (used for more than 180days)
Nil
Assets sold during
the year (3,10,000) 2,50,000
Less WDV before charging depreciation 18,93,000
1,00,000
Normal Depreciation 4076 on air pollution control equipment
Normal Depreciation on
Block 1:
of Rs 2,00,000 15,000
7.5% on second hand machinery
Z of Rs 3,25,000 24,375
7.5% on machinery Rs 13,68,000 2,05,200
15% on balance
Additional Depreciation on Block 1: 50,000
control equipment of Rs 2,50,000
e 20% on air pollution
1,60,000
20% on machinery Y of Rs 8,00,000
10% on machinery Z of Rs 3,25,000 32,500
4,37,075 1,50,000
Total depreciation for Py 2020-21
14,55,9255 1,00,000
WDV after charging depreciation

Notes:
Additional depreciation is available in respect of equipment used for the purposes of power generation.

No aditional depreciation is available in respect of second hand machinery.

Answer 9
Computation of Depreciation Allowance u/s 32 for AY 2021-22:
Block 1 Block 2
Particulars
PaM(157) Computer (407%)
Opening WDV as on 01.04.2020 42,00,000
Ad: Plant and Machinery acquired during the year
New machinery purchased on 12.10.2020 (used for less than 180 days) 10,00,000
Machinery inported from Colombo on 12.04.2020 (used for more than180 days) 9,00,000
Computer installed in generation wing of the unit on 1507.2020 (used for more 2,00,000
than 180 days)_
WDV before charging depreciation 61,00,000 2,00,000
ormal Depreciation on Block 1:
e7.5% on new machinery of Rs 10 lakhs purchased on 12.10.2020 75,000
15% on balance Rs 51,00,000 7,65,000
Additional Depreciation on Block 1:
107 on new machinery of Rs 10 lakhs purchased on 12.10.2020
1,00,000
14.60 PROFITs & GAINs OF BUSINESS/PROFESSION By: CA Vijender Agpa.
Depreciation on Block 2:
Normal depreciation 40% (asset used for more than 180 days)
Additional depreciation20 (asset used for more than 180 days) 80,000
Total depreciation for Py 2020-21 ,40,000 40,000
WDV after charging depreciation 51,60,00o 1,20,000
Notes: 80.000
Additional depreciation is availatble in respect of new computer installed in generation wing of the power unit
less
Since the new machinery was purchased only on 12. 10.2020, it was put useto for than
180 days
during Py
of 20-21
there fore only 10% additional depreciation is available during PY 2020-21. Balance additional depreciation
Rs
(ue 10% of Rs 10 lakhs) shall be available during Py 2020-21. 1,00c00G
Additional depreciation is not available in respect of ay plant or machinery which, before its installation by
assessee, was used either within or outside India by any other person.herefore, additional depreciation is .
the
allowable in respect of imported machinery used previously in Colombo. not

Answer 10
Computation of Depreciation Aillowable to Honest Industry for Ay 2021-22:
Plant & Patents
Particulars Building Total (Rs)
Machinery (Intangible)
Rate of depreciation 15% 10% 25%
Opening Balance as on 1.04.2020 14,50,000 25,00,00o 15,00,000
Add: Assets acquired during the year 16,00,000 15,00,00o 5,00,000
Less: Moneys payable in respect of asset sold or destroyed (50,000) (3,00,000)
WDV as on 31.03.2021 (Before Depreciation) 30,00,000 40,00,000 17,00,00o
Asset held for less than 180 days 4,00.000 15,00,000p
Depreciation 50% of applicable rate 30,000 75,000 1,05,000
Asset held for more than 180days (Balance) 26,00,000 25,00,00O 17,00,000
Depreciation at the applicable rates 3,90,000 2,50,000 4,25,000 10,65,00o
Totai Depreciation Allowable
11,70,000
Note: Land is not a depreciable asset. Therefore, Rs 3 lacs, being the value of land, has been reduced from Rs 18 lacs.
being the value of building acquired during the year, for the purpose of computing depreciation.

Answer 11
Depreciation in Case of Succession of Business-Section 32
Statement Showing Computation of Depreciation Allowable to Sai Ltd &Shirdi Ltd for AY 2021-22:
Particulars Amount (Rs)
WDV as on 01.04.2020
40,00,00o
Addition during the year (used for les than 180 days) 14,40,000
Total 54,40,00o
Depreciation on Rs 40,00,000 15% 6,00,000
Depreciation on Rs 14,40,000 7 5% 1,08,000
bepreciation for the year 7,08,00o
APportionment between two companies:
(a) Amalgamating Compary-Sai Ltd:
Rs 6,00,000 x 275 days/365 days 4,52,055
Rs 1,08,000 x 61days/151 days 43,629
Total 4,95,684
(b) Amalgamated company-ShirdiLtd:
Rs 6,00000 x 90 days/365 days 1,47,945
Rs 1,08.000 x 90 days/151 days 64.3711
Total 2,12,316
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 OF BUSINESS/PROFESSION Aggarwal
& GAINS TS &GAINs
By: CA Vijender
PROFY The amount
of
depreciation shal be first calculated as if no amalgamo has taken place.
amalgamation, ion, inthe
case

shall be and the amalgamated company

ved
so arrived
o f epreciations
n at
at apportioned between the amalgamating company
for which the assets were used by them. The price at which the assets were tranisrerr
N g t e :

r of days numb

ofeligible depreciation.
company (ie Rs 60 lacs) has no implication in computing the amount
t h e

theamalgamated
compn
of

natio

because of conversion
ole while determining depreciation, if there is change of ownership of
AnISWerl 2
assets
3 2i sapplicable

Section3
of
soleproprretary
oprietaryconcern i into company
Particulars Amount (Rs)
01.04.2020 12,00,000
WDV as on
BlockI -
Addition during
the year (used by Gopi Pipes Pvt Ltd for less than 180 days) 10,00,000
Plant&
Total 22,00,000
Machinery

Rs 12,00,000 15% 1,80,000

Depreciation on
on Rs 10,00,.000 @ 7.5% (Fully available to Gopi Pipes Pvt Ltd)
75,000
Depreciation
e
2,55,000
Depreciation for the year
01.04.2020
25,00,000
WDV as on
Block 2 -
2,50,000
Depreciation for the year10%
Pipes Pvt Ltd
Building

Apportionment between Mr Gopi & Gopi

Predecessor -Mr 6opi: 1,07,205

(a) Rs 4,30,000x 91 days/365 days
Successor- Gopi Pipes Pvt Ltd:
(b) days/365 days
274
3,22,795
Rs 4,30,000 x 75,000
on PaM purchased in December 2020
Depreciation 3,97,795
Total
further
purchased after conversion shall be allowed to the company and
plant which
on the was
Note: The depreciation
was put to use on the date of purchase.
presumed that the plant
it is

Answer 13 for the

conversion of sole proprietary concern into acompany, the depreciation should be first calculated
In the case of depreciation should be apportioned
b/w the sole
no succession had taken place. Thereafter, the
whole year assuming that used by them.
and the company in the ratio of the
number of days for which the assets were
concern
proprietary
Particulars Amount (Rs)
3,50,000
Block1- WDV as on 01.04.2020
10%
35,000
Building Depreciation for the year
50,000
Block 2- WDV as on 01.04.2020 ,000
Furniture Depreciation for the year 10%
2,00,000
Block 3- WDVas on 01.04.2020 1,00,000
Addition on 15.10.2020 (used for less than 180 days)
Plant 50,000
Machinery Addition on 01.01.2021 (used by
Sidhant Co Ltd for less than 180days)
Total 3,50,000
(To be apportioned))
15% 30,000
Depreciation on Rs 2,00,000 7,500
Depreciation on Rs 1,00,000 7.5% (To be apportioned on the basis of
123 days by successor)
usage of 168 days- 45 days by predecessor and
Sidhant Co Ltd) 3,750
Depreciation on Rs 50.000 7.5% (Fully available to 41,250
Depreciation for the year
Sidhant Co Ltd
Apportionment between M/s Sidhant & Co and

(a) Predecessor -M/s Sidhant &Co: ,411

Rs 70 000 x 242 days/365 days
Rs 7,500 x 45 days/168 days 2,009
Totel 48,420
14.62 PROFITs & GAINs OF BUSINESS/PROFESSION By: CA Vijender Agra
(b)
Successor -Sidhant Co Ltd: 23,589
R s 70,000 x 123 days/365 days
Rs 7.500x 123 days/168 days 5,491
Depreciation on P&M purchased on O1.01.2021 ,750
Tota! 32,830
Note: Since it has not been spec1fically mentioned that M/s Sidhantá Co and sidhant Co Ltd are manufo
or companies engaged in the business of generation or generation d distriDution of power, additional depreciot:

provided for epreciation is not

Answer 14
computation of Depreciation in case of Transfer of Business:
Particulars Amount (Rs)
Biock 1 WDV as on 01.04.2020
3,00,000
Plant& Addition on 01.04.2020
Machinery Addition on 01.01.2021 (used by the company for less than 180 days) 1,20,000
1,60,000
Total
Depreciation on Rs 4,20,000 15% (To be apportioned) 5,80,000
63,000
Depreciation on Rs1,60,000e 7.57% (Fully available to the company)
Depreciation for the year 12,000
Apportionment between M/s QQ & Co and the company 75,000
(a) Predecessor -M/s QQ &Co: Rs 63,000 x153 days/365 days
Total 26,408
(b) Successor-The Company: 26,408
R s 63,000 x 212 days/365 days
Depreciation on P&M purchased on 01.01.2021 36,592
12,000
Total
Note: Since it has not been
specified that the 48,592
company is a manufacturing company or a
generation or generation and distribution of
power, additional depreciation has not been
company engaged in the
provided for.
Assets Used for Personal as well as Business Purposes
Answer 15 -Section 38
The total amount of
depreciation allowable for PY 2020-21 shall be Rs
10,500 (Rs 1,00,000 *
15%* 70%).

Investment Allowance for Notified Backward Areas- Section

Answer 16 32AD
Computation of Depreciation and Additional Depreciation for AY 2020-21:
P&M
Particulars Amount (Rs in crores)
acquired on 01.06.2019 (Used for more than 180 days) 30.00
P&M acquired on 01.11.2019 (Used for less than 180 days) 25.00
Less: Normal Depreciation for PY 2019-20:
1 5 % on Rs 30 crores
(4.50)
7.50 on Rs 25 crores
(1.875)
Less: Additional Depreciation for PY 2019-20:
35% on Rs 30 crores (10.50)
17.50% on Rs 20 crores (25 5)
(3.50)
WDV as on 01.04.2020 34.625
Computation of Deduction u/s 32AD for X Ltd for AY 2020-21:
Particulars Amount (Rs)
Deduction u/s 32AD 15% on Rs 50 crores (Since a new manufacturing unit has been set-up in
7.50 crores
notifiedbackward area of Telangana during the period from Fy 15-16 to FY 19-20)
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pROFTTS
GAINS OF BUSINESS/ PROFESSION
GAINS O
GAI

Aggarwal
al14
By: CA Vijender
anfacturing unit is ser up by a firm (ie X&Co) instead of a company (x Ltd), the answer would

aere theecause deduction available

Where for normal
depreciation, additional and
investment
allowance

r e m a ns a m e

r e m a i n s
same in case of all assessees. depreciation
depreciation

2AD

acquired
during the PY is put to use for less than 180 days in that PY, the amount of deduction
durir
asSer
Nates
an
where ciation and additional
normal
depreciati
depreciation would be restricted to 50% of amount nount computed in
as
allwable the prescribed percentage
e with
ccordancew i t

is allowable in the case of any new PáM acquired and installed by an assessee engoged in the
iation is
depreciation
Adaltiona

of
manufacture oor
production of any article or thing. Tn this case, since new plant and machinery acquired
ess
manufacturing unif set up in a notified backwardarea in the State of Telengana, additional
shall be calculate at the rate of 35%.
iation
or
epreciation and benefit u/s 32AD shall not be allowed in respect of second hand plant and machiery
Additionald e p r e c i a t

Rs 5 crores.
and machinery of Rs 20 crores was put to use for less than 180 days, additional depreciation 17.57% (908
Since planto

deduction during PY 2019-20. The additional depreciatio of Rs 3.50 crores

oas
representing 17.57%
allowable

of 35%) is
crores
would be llowed as deduction during PY 2020-21.
f Rs 20
Expenditure on Scientific Research-Section 3
ATSwer17
Particulars Amount (Rs)
Nil
a) Land
25,00,000
(o) Building
expenses of last 3 years 2,20,000
c) Revenue Plant and 5,00,000
Capital expenditure oflast 3years: machinery
(d)
32,20,000
Expenditure Allowable u/s 35(1)
revenue expenditure Rs 1,80,000 1,80,000
Current year

L007 ofRs1,80,000 is allowable u/s 35(2AB)]_

Total Deduction u/s 35 34,00,000
of business
immediately preceding the date of
commencement
during years 3
Section 351} Any expenditureincurred
materials, or capital expenditure incurred
other than expenditure on acquisition of
on poyment of saiary or purchase of business.
in the year of commencement of
land is fully allowed as deduction on scientific
Where a company engaged in
the business of biotechnology incurs any expenditure
Section 35/2AB): 100% weighted deduction.
research post commencement, it is eligible for claiming
used for other
Section 41(3) provides that where a capital asset used
for scientific research is sold without being
amount of deduction earlier
allowed u/s 35 will be treated as PGBP
purposes, the lower of sale proceeds or the total two figures
Rs 5,00,000, being the lower of the following
mCcomeof the PY in which such sale takes place. Therefore,
shall be chargeable to tax as per Section 41(3)
Saleproceeds of Rs 8,00,000; or
1otal amount of deduction earlier allowed u/s 35, ie Rs 5,00,000
In the present case,
shall be treated as capital gains.
eXCess of sale price the original cost of the asset
over
Rs 3,00,000 would also be there.
short-term capital gains of
E The asset has been sold within a period of 3 years,

Answer 18
tation of Deduction Allowable u/s 35: % of Weighted Amount of
Particulars Amount (Rs) Deduction (Rs)
Deduction
Oyment for scientific
' KResearch Ltd [See research:
Note 1]
20,00 000 100% 20,00,000
15,00,000
1007
LMN College 15,00,000
Nil Nil
*OPQ College [See Note 2 10,00,000
100% 8.00,000
ational Laboratory [See Note 3) 8,00,000

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14.64 PROFITS & GAINS OF BUSINESS/PROFESSION By: CA
Vijender Aggary
wal
in-house research ISee Note 41 25,00,0000
25,00,00b0 100
.Capital expenditure 100% 12,00,000
Revenue expenditure 12,00,000o
80,00,00o
Deduction Allowable u/s 35

Notes
1. Payment t o K Research Ltd: Any sum paid to a conpany registered in India which has as ifs main object scienss e.

weighted deduction of 100%.

fic
prescribed authority, qualifies for
a
research as is approved by the
. Payment to OPQ College: Since the question clearty mentions that only K Research Ltd and LMN Colleae on
e appr
research institutions, it is a logical conclusion that OPQ College is not an approved research institution, Then Oved

payment to OPQ College would not qualify for

deduction u/s 35.
Therefore,
3. Paynent to Nationai Laboratory: It has been assumed that donation has been given to the National Laborate

carrying out scient1fic research under an approved research programme. Accordingly, a weighted deduction or
150%
is allowed
4.
Deduction for in-house RAD: The provisions of Section 35(2AB)
are plicable only in case of company assessees
However, in this case, the assessee is an individual. Therefore, nornal provisions given u/s 35 would apply.

Answer 19
Computation of Depreciation Allowable for AY 2021-22 in the hands of Gamma Ltd:
Particulars Amount (Rs)
Total cost of P&M Rs 55 crores
(Rs 15 crores)
Less: P&M used for scientific research (Note 1) Rs 40 crores
WDV for the purposes of calculating depreciation
Normal depreciation 15% on Rs 40 crore Rs 6 crores
Additional Depreciation 20% on Rs 20 crore Rs 4 crores

No additional depreciation shall be allowed on second hand

machinery and also machinery used for scientific research)
Total Depreciation Allowable for AY 2021-22 Rs 10 crores

Note 1: No depreciation shall be allowed in respect of plant and machinery purchased for scientific research relating to
assessee's business, since deduction is allowable u/s 35 in respect of such capital expenditure.

Answer 20

Computation of Deduction Allowable u/s 35:

Particulars Amount (Rs) |% of Weighted Deduction Amount of Deduction (Rs)
Payment for scientific research:
Indian Institute of Science [See Note 1] 1,00,000 100% 1,00,000
IIT Delhi [See Note 2] 2,50,000 100% 2,50,000
XLtd [See Note 3] 4,00,000 100% 4,00000
In-house research ISee Note 41
Capitai expenditure other than land 2,50,000 100% 2,50,000
Revenue expenditure 3,00,0000 100% 3,00,000
Deduction Allowable u/s 355 13,00,00o

Notes i5
1. Payment to Indion nstituteof Science: Payment to ary approved person for carrying out any scientific research
eligible for a weighted deduction of 100%
Payment to I T Delhi: Payments to IrTs for carrying out scientific research under an approved research program
are eligible for a weighted deduction of 100%
3 Payment to x Ltd: Any sum paid to a compary registered in India which has as its main object scientific research, c
is approved by the prescribed authority. qualifies for a weighted deduction of 100%
Deduction for in-house rezearch and development: Since the assessee is a compary engaged in business of bio
research and development
technology.weighted deduction100% is available u/s 35(2A8) in
respect of in-house
expEnditure incucred Howexer expenditure an landis nat allowedta be deducted uotes
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 14.65
4.0
GAINS OF BUSINESs/PROFEssiON CA VIjender
Aggarwal

By:

as on 31 Morch 2021
atatien
e tn
f WOY Partieulers Amount (Rs)
WbV as on April 1" 2020
540000
. o s t o fP h n
teancferred from laberatory to far tory on June 14h 2020 Ni
31 03 2021 befere charging
WD
n
depreciation s,40,00
Depreciation15% 81,000

Expen
Respect of Expenditure Section 35AD
pedus tron
fien in
in Kespect
on Specified Business
ef come/Loss from Business Other Thon Specified Business u/s 39AD
Porticulers
Ameunt( R)
of setting up of warehouse for storage of edible oil
t rom buSiness

iation u/s,32)
31.00000
for deprec
Peviding
Y otionu/'s 32e 10% onRs 30 lokhs [(Rs 50L Rs 30L) Rs 10L1
(3.00000)
Incemechargeable underPGBP 28,00,000
of Income/Loss from Specifi Business u/s 35AD:
Particulars Food Grains (Rs) Sugar (Rs)
he SDecified business of setting up a warehousing facility (before providing 16,00.000 1400,000

seuchion u/'s 35AD)

Deduction u/s 35AD

Copital expenditure incurred prior to 14.2020 and capitalized in the books off (30,00,000) (20,00000)
QccOunts as on 1.4.2020 excluding the expenditure incurred on acquisition of land
Food Grains : 100% of (80L - 50L)): {Sugar = 100% of (60L - 40L)}]

(20,00.000) (15.00.000
.Capital expenditure incurred post commencement
Food Grains :100% of 20 lacs): {Sugar =100% of 15lacs)]
S from Specified Business (Tobe carried forward as per Section 73A) (34,00000) (21,00,000)
Notes
eghted deduction 100"% of the capital expenditure is avalable Ws 35AD in respect of specified businass of settng
and operating a warehousing facility for storage of agricultural produce and sugar. Food grains constitute agricultura
produce and 1herefore, the capital expenditure incurred for setting up a warehousing facility for storage of food grains
100% u/s 35AD.
andsugar is eligible for weighted deduction
seting up and operating a warehousing facility for storage of edible oils is not a specified business. Thus, Mr A is not
eigible for dediuction u/s 35ADd in respect of capital expenditure incurred in respect of such business. Mr Acan
however claim depreciation u/s 32 in respect of the capital expenditure incurred on buildings. Ir is presumed that
buldings were put to use for more than 180 days during PY 2020-21.
8sfrom a specified business can be set-off only against profits from another specified buSiness. Therefore, the loss
f Rs 55 lokhs from the specified businesses cannot be set-off against the income of Rs 28 lakhs from the normal
business The loss of Rs 55 lakhs can, however, be c/f indefinitely for set-off against profits of the same or anny other
specified business
Arower 23
Lomputation of PGBP income of MNP Ltd for AY 2021-22
n of 1007. of the capital expenditure is allowed u/s 35AD in case of business of building and operating a new
TwO star or above category, anywhere in India However, expenditure on acquisition of land does not qualify
for deduction u/s 35AD
Particulars Amount (Rs)

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 By: CA Vijender Agza-
14.66 O F I T S & GAINS OF BUSINESs/PROFESSION

the specified business of new four-star

hotel in Chennai (before providing deduction ggarwa
8000.000
o
u/s 35AD)
Less Deduc tien u/s 35AD in fhe books a s on 1,4 2020

(1,(40,
50,000,0,0000)
and capitalized
1 4 2020
incurred prior to
C a p i t a l expenditure 1,00,00,0001
00)
-

[2,50,00,000
commencement
expenditure incurred post
Capita
LOSS r o m specified bus1ness of new
four-star

bus iness of running a

hotel in Chennai

four-star hotel in Kanpur

business against profits of
(1,1,30,00,000
10,00.000
ofit from the existing of specified
Net profit from business after
business ws 73A
set-off of loss
20,00,00o
another specified
builds a hotel of fw0 -star o r above cateaar
the assessee
Section 35AD provides that where of the said hotel to another p e r s a n th
transfers the operation
contnuirng to own the hotel, arnd operating a hotel. Therefore MND 1 emed
business of building
to be carry1ng on the specified to
it transfers thee operafion of the Chennai hotel to POR Ltd
claim deduction u/s 35AD even if

Answer 24
Deduction of 100% of capita! expenditure (other than land) is allowed u/s 35AD in case of business of buildino .

in India.
ding& operating
new hotel of two-star or above categorY, anywhere
Particulars
Amount (Rs)
Profits from the specified business of new three-star hotel in Madurai (before providing
25,00,000
deduction u/s 35AD)
Less: Deduction u/s 35AD
. Capital expenditure incurred prior to 1.4.2020 & capitalized in the books as on 1.4.2020
(50,00,000)
. Capital expenditure incurred post commencement [2,00,00,000 -1,50,00,000] (50,00,000)
Lossfrom specified business of new three-star hotel in Madurai
(75,00,000)
Profit from theexisting businessof running a four-star hotel in Coimbatore 1,20,00,000
Net profit from business after set-off of loss of specified business against profits of 45,00,00o
ancther specified business u/s 73A

Answer 25
Business of operating a three-star hotel is a specified business u/s 35AD and 100% of capital expenditure (other thon
lond)is aliowed tobe deductedincludingcapitalexpenditureincurredbeforecommencement of business.
Particulars Amount (Rs)|
Cost of land (not eligible for deduction u/s 35AD) Nil
Costof construction of hotel building (Rs 30 lakhs Rs 150 lakhs) 180 lakhs
Cost of plant and machinery 30 lakhs
Deduction u/s 35AD 210lakhs
Nete: For AY 2021-22, loss from specified business of operating a three-star hotel would be Rs 130L (Rs 80L - Rs 210L)

As per Section 734, such loss can be set-off against income of any other specified business and its c/f is allowed for an

unlimited period and even in the subsequent years it can be set-off from income of specified business only.

Answer 26
Since the capital asset, in respect of which deduction of Rs 50 lacs was claimed u/s 35AD, has been transferred by Unit A

carrying on specified business to Unit B carrying on non-specified business in PY 2020-21, amount calcuiated below shal be

deemed as the PGBP income of PY 2020-21.

Particulars Amount (Rs)
Deduction allowed u/s 35AD for PY 2019-20 50,00,000
Less: Depreciation allowable u/s 32 for Py 2019-20 [10% of Rs 50 lacs] (5,00,000)
Deemed Income 45,00,00o

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 14.67
& GAINS OF BUSINESS/PROFESSION
ROFITS By: CA Vijen der Aggarwal

en in tthe
given
n
h e chapter

a n s w e r

prfer

Amertisation of Certain Preliminary Expenses Section 320

otol Incom of ABC Lidfor AY 2021-22
putotionof Particulars Amourt (Rs)
700,000
PáL A /
as p e r
Profit
Add Ineligible E x p e n d i t u r e
Net
3.00.000
Expenditure on advertisement
45000
Expendi
ture in connection with traveling and stay in hotels 4,28,000
Excessve
deduction clamed u/s 350
expenditure u/s 35D:
Eligible
Expenditure in preparation of project report Rs 85,000
Expenditure on drafting and printing of MOA & AOA Rs 4,00,000
Rs 4,85,000
Totalamount
5% of the capital employed, Rs 57,00,000 57%
u/s 35D connof exceed
Fxpenditure allowed witn
Re 285,000. Rs 2,85,000shall be allowed as deduction in 5 equal instalmentsbe starting
Rs 57,000.
Py 2020-21. Therefore, deduction allowed u/s 35D for PY 2020-21 shall added back.
deduction of Rs 4,28,000 (Rs 4,85,000 Rs 57,000) shail be
Excessive
14,73,000
Gross Total Income (ie Income u/h PGBP) Nil
Less: Deduction u/s 80C-80U 14,73,000o
Total Income
Computation of Tox Liability
of ABC Ltd:
Particulars Amount (Rs)
30% 4,41,900
Tax on Rs 14,73,000
Cess 4% 17676
Add: Health&Education
Tax Liability 4.59,576
Roundedoff u/s 288B 4,59,580

VRS-Section 35DDA
Amortisation of Expenditure in Connection with
35DDA
Answer 29 The amount deductible u/s
instalments commencing from the PY of payment.
It is equal annual
deductible in 5
for AY 2021-22 shall be Rs 24 lakhs.

Political Party-Section 37(28)

Advertisement in Publication or Newspapers of
Answer 30

Computation of PGBP income of Isac Limited for

AY 2021-22: Amount (Rs)
Particulars 15,25,890
Net profit as per Pál Alc_ 5,00,000
in-house research and development
Add: price of land used in
Purchase for 2,00,000
[Purchase of land not qualifying
notified skill developnent project
Add: Expenditure incurred on
deduction u/s 35CCD]_ a political party
not allowed 75,000
incurred on advertisement
in the souvenir published by
Add: Expenditure
as deduction as per Section 37(2B) 23,00,890
PGBP Income
party is disallowed u/s 37(2B)
in the souvenir published by political
a
incurred on advertisement
NOTe: The expenditure deduction u/s 80GGB from 6TI of the company.
would be allowed as
While computing the PGBP income but the same

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68 OFTTS && GAINs OF
LUSsINESS/PROFLSSION

e cton 4OLa)/Section 40A

Inadms sble Deductions
Answer 3
i r d h i r ierf at
disalie
Ycn u/'s
dedk
s 40(a(u) wouldanytible on sum payable to a resident aridd
steh tak 15 Tal
get attrac ied and 30% of thec expenutture is rot allowed to be dedu

the tme of payme nt Further, TDS 1s

sotrte,

deduc tibir u/s 1947

aliowar.eprair
ted

DS on salary is dedu tibie u/s 192 at

directors' remunerotron poil/payatble to a resident payee ot 1he lime of oredit or pryrment, whir heveris ed
I n the present case, saBary has been paud during PY 2020-11 ond noit ( o p e :l e fees and direr. 1 o r s 'rem arler (iv
been c dited PY 2020-21 itself tax
during m
ISnot deducted, 30% of the omount shall be dislowed i
There fore, ai he
u0
three cuges,
writle omtitirg busine
is deduc tible during
income frn
Py :

Particulars
Amount Paid
A 2021 72 (V)
( ) Salary [tax is deductusle u/s 192] (Rs)| Disallowanc
2Non compete fees to Mr Rajesh [tax is deduc 1ible u/s 194J] 12,00,000
(3) Derectors' remuneratior (tax is 1,10,000 3,60
deductible u/s 194J without any imit] 3309
Disallowance u/s 40(aXia) 28,000
If tax is de duc ted en directors' remuneration in April 2021 and A,01,400
of Rs8400 would be allowed as deduction while compufing fhe deposited with the qovernment July 2021 in
allowed in PY 2020-21 because tax Was nof acfually business income of PY
2021 22,
deduc fed during Py 2020-21 but Deductrn o t

Answer 32 Py during 2021-22

Computation of Deduction u/s 36(1Xiva) and The
Disallowance u/s 40A(9):
Basic Salary Particulars
Add: Dearness Allowance a)
40% of basic Amount (Rs)
Salary for the salary [DA forms
Actual contribution
purpose of Section 36(1)(iva) (Basic
port of pay]1 10,00,000o
(20% of basic Salary DA
forrming 4,00,000
Less: salary,
20% of Rs 10 ie part of salary)
Permissible deduction u/s 36(1)(iva) (10% lakh) 14,00,00o
of Rs
Excess Contribution 14,00.000) 2,00,000
Answer 33 Disallowed u/s 40A(9) (1,40,000)
The assessee is
a
resident 60,000 b)
obligations have to be individual
TDS Sa
and his
turnover from
) The considered bearing this fact in business during PY
his
obligation to deduct TDS from mind. 2019-20 doesn't
exceed Rs 1 crore
turnover from interest paid to a
the assessee business
during the preceding resident arises u/s Or
for PY
Hence, disallowance 2019-20 doesn't exceed Rs financial year exceeds Rs194A in the case of an The
u/s 1 1 crore. individual only whar
of interest 40(a)(ia) is not attracted in
(i) In the case crore, no TDS is to Since the
deduction of tax at paid to a non-resident, this case.
be
deducted u/s 194A business turnover f On
(ii) Section source will there is an during PY 2020 21
attract
40(a)(ia) covers ail sums in disallowance u/s obligation to deduct tax at O
bededucted u/s 192 in respect of which tax 40(a)(i). source u/s 195
source u/s 192 from case of
salary. is
deductible under the Hence, non
disallowed and the salary payment. Therefore, disallowance
(iv) The balance 70% (Rs However, only 307 u/s
40(a)(ia)
TDS
provisions. TDS Is required Ancwe
obligation (Rs is
attracted
in the case of an deduct tax at source3,50,000) shal! be allowed.1,50,000) of the amount of for folure to deduct
to Te
Comput
Since the
business
individual only where u/s 194-H from salnry paid would be for c
u/s 194
Hduring Py turnover of the
his
turnover commission paid in excess of Net pr
2020-21. assessee for Py from business Rs Add
Answer 34 Hence, disaliowance 2019 -20 daesn't during the
preced
15,000 to
resident a

exceeds Rs i crore.arises
ng Fy
) u/s
40(a)(ia) exceed Rs 1
Payment of is not
cttracted incrore., no TDOS
of the professionai
expenditure of Rs fees is
subject to this case
is to be
deduct20
i) Since the tax TDS u/s
50,000) is 194J
was
deducted in March disallowed u/s 40(oia) Since no tax is
2021 and deducted at
paid on or source, Ps
15,000 (being
before the due dote
of
fingq ROT (12
before 31 10 2i21
awC:, Ac
sin, o te
 d GAINS OF BUSINESS/PROFESSION
GAINs 14.69
yNORIT'8 By: CA Vijender Aggarwal
ture on
interior works will be allowed
on interior
deduction Hence disallowance u/s
as

tme allowable tor deposit of TbS is

m 40(a ia) is nor
uc u/s 194 I was paid af ter the due dateup to the due date of filing of
return (ie 31 10 2021)
case
e tax deduc ted 600 O00)
of filng the return, Rs 4,50,000 (
u/s 40(aK1a) for Py 2020 21
Jsallowed
deduc ted ource can be deposited on or
at sou
u/s
before the due date of
he tn this case, disallowance would not be attracted
fiing of return to avoid disallowance u
40oXd
the due date of
since tax deducted
during December 2020 was depose
2 8
021 (e before filing of return of income)
ards import of raw materials to a vendor tocated outside Indio not
Payme ome Tax is subject to tax deduction uroe
Tax Act Therefore, the expenditure of Ra 25
the Inc
lakhs shoill be allowed as deduction

Remuneration to Partners Section 40(b)

Particulars
Amount (Rs)
a lakh
Rs 3 lo
of book profit [Rs 3,00,000 x 90%] 2,70,000
furst
n nce Rs 7 lakh of book profit {Rs 7,00,000x 60%]
4,20,000
Maximum Alowable Remuneration as per Section 40(b)
6,90,000
The eNcess amount of Rs 60,000 (e, Rs 7,50,000 Rs 6,90,000) would be disallowed as per section 400)
amount

Arswer 36
the present case, the net profit given is before deduction of depreciation on plant and machinery, interest on capiTo
4artners and salary to the working partners. Therefore, the book profit shall be as follaws

Particulars Amount (Rs)

Net Profit (before deduction of depreciation, salary and interest) 7,00,000
32 (1,50,000)
Less: Depreciation u/s
Less: Interest 127. p.a. [being the maximum allowable u/s 40(b)] (5,00,000 x 12?%) (60,000)
Book Profit of the firm u/s 40(6) 4,90,000
to
Rs 20,000 x 2 12 Rs 4,80,000. As per Section 40(b), the salary paid
b)Salaryactually paid to working partners x

the working partners is allowed subject to the following limits:

On the first Rs 3 lakhs of
book profit or in case of loss Higher of Rs 1,50,000 or 907% of book profit
On the balance of book profit 60%of the balance book profit
Therefore, the maximum allowable working partners' salary for AY 2021-22 would be:
Particulars Amount (Rs)
On the first Rs 3,00,000 of book profit (90%) 2,70,000
Rs 3,00,000)] 1,14,000
60% [60% of (Rs 4,90,000-
Onthe balance of book profit 3,84,000
Maximum Allowable Partners' Salary

Answer 37

Computation of Total Income of Partnership Firm for AY 2021-22: Amount (Rs) Amount (Rs)
Particulars 27,000
Net profit as per Profit & Loss Account
Add: Inadmissible expenses
Salory and bonus to partners
3,00,000
2,50,000
1,50,000
Z
30,000
Municipal tax payable (Sec 43B)
25% pa) 40,000
Technical know-how (eligible for depreciation
Section 40(a))
70,000
Income Tax (To be added back as per
allowed, 37. to be added back)
nterest on capitol (Maximun 10% 15,000
X (Rs 65,000 x 3%/13%.)
9.000
y(Rs 39.000x 37/137) channriintfos e eoennooarwait tAFor Acressing otes
Yeleyram
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Lates
unje. t ve CsA Larest McOs et
Summories Pevtonary
bteos Amen ment
 14.70 PROFITS & GAINS OF BUSINESs/PROFESSION By: CA Vijender
Z (Rs 26 o00 x 3%./13%)
6,000 Aggarwa
1,20,000
Rent of own building
Less Eligible Expenses / Ineligible Incomes
(40,000 25% x i) (5,000)
Depreciation on technical know how x

(60,000)
Interest from Indian Company
Income tax refund
(5,000)
Book Profit 9,47,000.00
in the ratio of
kess Salary & bonus to partners (Rs 6,58,200 apportioned
3 lakhs 25 iakhs and15iakhs)
X (Rs 658. 200 x 3/7) (2,82,085.71)
V (Rs 6.58 200 x 2 5/7) (2,35,071.43)
Z (Rs 6 58 200 x 1 5/7) (1,41,042.86)
Werking Nete
Computatron of remuneration allowed to partners
= Rs 3,88,200)
(3,00,000x 90% Rs 2,70,000 (-) 6,47.000 X 60%
Total remuneration = Rs 6,58,20o
Maxinum remuneration aliowed to partners shall
be Rs 7 lakhs or

Rs 6,58 200, whichever is lowe

Income under the head Business/Profession 2,88,800
Less: Brought forward business loss (1,00,000)
Net PGBP income after adjusting b/f business losses 1,88,800o
Tncome under the head other sources (Interest from Indian company) 60,000
Total Income 2,48,80o
Computation of Tax Liability of Partnership Firm:
Particulars Amount (Rs)
Tax on Rs 2,48,800 30% 74,640.00
Add Health &Education Cess@4% 2,985.60
Tax Liability 77,625.60
Less Income tax paid (70,000)
TaxPayable 7,625.600
Tax Payable (Rounded off u/s 2888) 7,630.00o

Computation of Total Income and Tax Liability of Mr X:

Particulars Anount (Rs)
Salary from partrnership firm 2,82,085.71
Interest from partnership firm 50,000.000
Income under the head Business/Profession 3,32,085.71
Incomefrom house property 5,00,000.00
Gross Total Income 8,32,085.71
Less: Deduction u/s 80C (NSC) (80,000.00)
Total Income (Rounded off u/s 2884) 7,52,090.00
Tax on Rs 7,52,090 at slab rates 62,918.00
Add: Health &Education Cess @4% 2,516.72
Tax Liability 65,434.72
Rounded off u/s 288B 65,430.00
Computation of Total Income and Tax Liability of Mr y:
Particulars Amount (Rs)
Salary from partnership firm 2,35,071.43
Interest from partnership firm 30,00000
Income under the head Business/Profession 2,65,071 43
Income from house property 2,00,000. 00
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 AINS OF BUSINESS/PROFESSION
I T S& C G A

By: CA Vijender Aggarwnl

Gross Total Income
4,65,071.43
(NSC)
BOC
(1 00 000 00)
tron
u/s
ded off u/s 288
otal Income (Roundea
e d u c

3,65,070.00
rates
365,070 atslab 5,753 50
gRetates s87A
Rs
8. (5.753.50)
Tax Liability Nil

Total Income and Tax Liability of Mr Z:

Particulars Amount (Rs)
from partnersh1p firm
1,41,042.86
from nershipfirm 20,000.00
Re
Business/Profession
tereSt

u n g e r
the
head 1,61,042.86
e property (2,00,000)
fromhouse rward)
ne
Property Loss
(To be carried (38,957.14)
se

Actual Cost Section 43(1)

into fhe
38
brought
ethe car purchased for personal use on 10.8.2017 for Rs 5,25,000 and subsequently
was
avaiaDie in
Notional depreciation is
o f the assessee on O1.07.2020. The "actual cost" of car is Rs 5,25,000.
business
of only building
and notany otherasset. during
car was not acquired
for AY 2021-22 is Rs 78,750 (ie 15% of Rs 5,25,000). As the
rspect

dmissible depreciation 180 days during PY

20-21.
is available for Py 20-21 even if it is put to use for less than
Te

N 2020-21,
full depreciation

Certain Deductions Allowed on Actual Payment Basis- Section 43

ArSwer 39 such
shall be allowed in the year during which
interest on term loans and advances to scheduled banks
Uis 438, followed by the assessee.
terest has been paid irrespective of the method of accounting "actualy paid" shali
assessee is converted into a loan, the
interest so converted and not
interest payable by the
Tfany allowed as deduction. Therefore, interest of Rs 1.2
lakhs
not be deemed actual payment, and hence would not be
as
business expenditure.
corverted into loan cannot be claimed as

Arswer 40 actualy
the payments are
shall not be allowed as deduction unless
Szction43B provides that the following expenses
mode within the due date. for furnishing the return of income u/s 139(1):

)Any tox, duty, cess or fees under any law in force:

contribution to provident fund or superannuation fund or
way of
Ary Sum payable by the assessee as an employer by
gotuty fund or any other fund for the welfare of the employees
employees;
Any bonus or commission for services rendered payablefinancial institution
to
or state financial corporation or state

AUY iterest on ary loan or borrowings from ay public

ndustrial investment corporation,
Anerest on loans and advances from a scheduled bank' credit of his employee
pAny a i d byan employer in lieu of earned leave at the
Ethe poyment is made after the due date of filing of ROI, deduction can be clained only in the year of actual payment

Answer 41
term loans taken from specified financial institutions/scheduled banks
ection 43B, any interest payable on the
dlfowed to be deducted on actual payment Sis.
Da
In case of "On-payment of interest by the unpaid interest may be converted into loan. Such conversion
assessee, such
of unpai as payment of
interest u/s 43B. The amount of unpaid interest e
shall not be construed
d as loan shall loan
into
ednferest
onve be allowed as deduction only in the year in which fhe converted loan is actually paid

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14.72 BUSINESS/PROFESSION
By: CA Vijender Agua
OTTS & GAINS OF
d e to Andhra Prade sh
sfate Financial
sion
Corporation (APSFC) on
(An.

the unpaid interec? of Re 15 00 000

9'ven tasp
ch conversio woud
o drnount fo payment oef intere
mto lean
S
0 O0D de te Indian Ronk wwos conver ted in the such cotersion tence, claim of Hari that
wued net there fore be eligible for dedue tron year of the entir
the year of conversion is not tenable The
T deductio
to be allewed as
in
o f Rs 45 00 O00 is
deduction
tot O r d n g ' y . The amount of interee shall te
a e onty to the e x t e n t ef repmment made durng
the finane yen
22 chall tbe calk uated as follows
ligibie
er d e d p n dring AV 021
Ne of Ameunt per Installments Interest
Interest
Installment Paid Allowable (Rs)
Outstanding (Rs)Inetellments
25,000 5 1,25,000
APSFC 5 Jakhs 60
60 50 000 1,50,000
Indan Ban 30 lakhs
Totel Eliglble Deduction
2,75,000
Compulsory Maintenance ofAccounts Section 44AA
Amwer 44
Section 44AA reguires every person carrying on a notified Proression ro maintain such books of account and documens
may enable the Assessing Officer to compute his toftal income in accordance with the provisions of the Income Tay A
1961 However, a person carrying on a notified profession shall be required to maintain specified books of accounte 4
H i s gross neceipts in all 3 years immediately preceding the relevant PY has exceeded Rs 1,50,ooo: ar
()Profession has been newly setup during the year and gross receipts are likely to exceed Rs 1,50,00o in first
year
Zn the present
Vimodis apersoncarryingon profession as film artist, which is
case,
recepts have not exceeded Rs 1,50,000 in Fy 2017-18, the requirement u/s 44AA to
a notified profession. Since his
compulsorily maintain the prescribar
aras
books of account is not applicable to him. He may maintain any books of accounts so as to enable the Assessing Off cer t
Compute hes total income.

Presumptive Taxation -Section 44AD

Swer 43

)Mr Praveen is eligible to opt for

presumptive taxation scheme u/s 44AD in respect of his retail trade business since ng
tetal turnover for PY 2020-21 does not exceed Rs 2 crores.
) His income from retail trade, applying the presumptive tax provisions u/s 44AD, would be Rs 15,88,000, being 8% of
Rs 1,98.50,000
Cir) In case Mr Praveen does not opt for the presumptive taxation scheme u/s 44AD and claims that his income is iower th
the presumptive business income and such income exceeds the
basic exemption limit of Rs 2,50,000, the following
additional obligations would fall on Mr Praveen:
Maintenance of books of accounts u/s 44AA; and
Audit of books of accounts u/s 44AB and
furnishing the said report within the prescribed timelines
(w In case he opts for the presumptive taxation scheme u/s 44AD, the due date would be 31.07.2021. In case he does net
opt for the presumptive taxation scheme and clains that his income is Rs 3,90,000 as per books of accounts, then ne ns
To get his books of accounts audited u/s 44AB, in which case the due date for filing of return would be 31.10.2021.

Answer 44
Computation of Business Income of Mr Sivam for AY 2021-22 (NORMAL PROVISIONS):
Particulars Ameunt (Rs) Amount (Rs)
Net Proft as per PaL Alc
Add: Inadmissible expenses & losses/unrecognized incomes
50,000
Under valuation of closing stock
18,000
Salary paid to brother- unreasonable [Section 40A(2)] 2,000
Printing and stationery paid in cash [Section 40A(3)}
23,200
Depreciation (considered separately) 1,05,000
Short term capital loss on shares 8,100
Donation to public charitable trust 2,000 1,58,300

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