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Chapter - 3
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 DIRECT TAX LAWS AND INTERNATIONAL TAXATION

CH-3

PROFITS AND GAINS OF BUSINESS OR PROFESSION

1. Section 28 - Income chargeable to tax under the head 'Profits and gains of business or
profession'. Includes various receipts like profits from business, compensation on
termination of agency, commission, etc.

2. ICDS - Income Computation and Disclosure Standards notified under section 145(2) to be
followed by specified assessees for computation of income under the head 'Profits and gains
of business or profession'.

3. Speculation business - Business where contract for purchase/sale of commodity is settled

otherwise than by actual delivery. Special provisions for set off of losses.

4. Written down value (WDV) - Actual cost less depreciation allowed till date. Basis for
calculation of depreciation under section 32.

5. Additional depreciation - Extra depreciation under section 32(1)(iia) @20% on new plant
and machinery acquired by specified assessees.

6. Current repairs - Expenditure for repair/reconditioning of plant and machinery. Allowed

as revenue expenditure under section 31.

7. Section 32 - Allows depreciation on tangible/intangible assets based on written down

value method.

8. Balancing charge - Taxability of excess amount if sale proceeds of depreciable asset

exceed the written down value. Taxed under section 41(2).

9. Amortisation - Writing off expenditure gradually over a period of time. Eg. Preliminary
expenses under section 35D.

10. Section 43B - Certain expenses like tax/duty, employer's contribution, interest payable
to Banks/FIs, etc. allowed only on actual payment basis.

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11. Disallowance - Expenses/payments not allowed while computing income under 'Profits
and gains of business or profession'. Eg. Section 40, 40A, 43B.

12. Deemed income - Certain receipts considered as income though not actually arising
from carrying on the business. Section 41.

13. Section 44AD - Presumptive taxation scheme at 8%/6% of turnover for eligible small
businesses.

14. Section 44ADA – Presumptive taxation at 50% of gross receipts for eligible professionals.

15. Section 44AE - Presumptive taxation scheme for transporters based on type and usage
of vehicles.

16. Section 44AA - Compulsory maintenance of regular books of account if turnover/gross

receipts exceed specified limits.

17. Section 44AB - Tax audit compulsory if turnover/gross receipts exceed specified limits.

18. Section 35 - Deduction for expenditure incurred on scientific research related to

assessee's business.

19. Tea development account - Deduction allowed for deposit in such account set up as per
Tea Board's scheme - Section 33AB.

20. Site restoration fund - Deduction for deposits to fund set up under scheme approved by
Government - Section 33ABA.

21. Section 35CCC - Deduction for expenditure incurred on notified agricultural extension
project.

22. Section 35AD - Deduction for investment in specified infrastructure businesses like cold
storage chains, warehousing facility, hospitals etc.

23. Section 80GGB - Deduction for contributions given to political parties. Disallowance
under section 37(2B).

24. Section 35D - Amortization of certain preliminary expenses like feasibility report, project
report expenses.

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25. Provision for bad debts - Deduction allowed to specified Banks/FIs/NBFCs subject to
limits under section 36(1)(viia).

26. Deduction under section 36 - Specific business expenses allowed as deduction like
insurance, bonus to employees, employer's contributions, bad debts etc.

27. Section 37 - Residuary section for deductibility of business expenses not covered in
sections 30-36 like audit fees, consultancy charges etc.

28. Section 40 - Amounts not deductible in case of Firm/AOP - Like payments to partners
beyond permissible limits.

29. Section 40A - Restriction on deductibility of certain expenses like excessive payments to
relatives or payments exceeding ₹10,000 made in cash.

30. Section 35CCC - Deduction for expenditure incurred on notified agricultural extension
project.

31. Section 36(1)(va) - Deduction for employee welfare fund contribution amount received,
if such sum is credited to employee account on or before due date.

32. Fair Market Value (FMV) - Value of inventory as per rule 11UAB when inventory is
converted into capital asset. Taxability u/s 28(iva).

33. Section 145 - Method of accounting - ICDS also relevant.

34. Section 43B - Actual payment (on or before due date of filing ROI) required for specific
expenses, not mere provision.

35. Section 41 - Taxability of certain receipts - Like remission of liability, balancing charges,
withdrawal from reserves.

36. Section 35ABA - Taxability of expenses incurred on obtaining spectrum licence.

37. Section 35ABB - Taxability of expenses incurred on licence to operate telecom services.

38. Section 40A(3A) - Cash payments exceeding ₹10,000 deemed as income of subsequent
year, if allowed as expenditure in any previous year.

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39. Section 43AA - Taxability of mark to market losses or gains as per ICDS on foreign
exchange rates.

40. Section 43CA - Deemed consideration where sale value of land/building (held as stock) is
less than stamp duty value.

41. Percentage completion method - Revenue recognition based on percentage of

completion of contract. Applicable for section 43CB.

42. Section 44DB - Special provisions for deduction in case of reorganization of cooperative
banks.

43. Rule 6F - Compulsory books and documents to be maintained by professionals if

turnover is more than ₹1.5 lakhs.

44. Rule 6DD - Payments in cash not disallowed in certain cases under section 40A(3) like
payment to banks or for purchase of agricultural produce.

45. Section 35DDA - Amortization of voluntary retirement scheme expenses.

46. Rule 6ABA - Manner of computation of aggregate average advances made by rural
branches of banks.

47. Section 43D - Method of recognizing interest income by Banks/Financial Institutions on

income recognition and asset classification norms of RBI.

48. Section 35CCA - Deduction for contribution to notified rural development fund or
NUPEF.

49. Section 9B - Taxability of stock-in-trade transferred to a partner on dissolution or

reconstitution of firm/AOP/BOI.

50. Section 35CCD - Deduction available to company in respect of notified skill development
project.

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