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as per the latest syllabus of NTA UGC-NET.
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NTA UGC‑NET
(Paper-II)
(Commerce)

Drishti Publications
(A Unit of VDK Publications Pvt. Ltd.)

641, First Floor, Dr. Mukherjee Nagar, Delhi-110009

Telephone: 011-47532596, 8750187501

Website: www.drishtiIAS.com
e-mail: englishsupport@groupdrishti.in
 Contents
1. Business Environment and International Business.............................................1-76

2. Accounting and Auditing............................................................................................77-203

3. Business Economics..................................................................................................204-256

4. Business Finance.......................................................................................................... 257-314

5. Business Statistics and Research Methods....................................................315-372

6. Business Management and Human Resource Management................ 373-497

7. Banking and Financial Institutions..................................................................... 498-569

8. Marketing Management ..........................................................................................570-637

9. Legal Aspects of Business..................................................................................... 638-694

10. Income-Tax and Corporate Tax Planning......................................................... 695-732

 Business
1 Environment and
International Business
CONCEPT AND ELEMENTS
OF BUSINESS ENVIRONMENT
The total surroundings that have a direct or indirect
bearing on business activities are referred to as the business
environment. In this context, the business environment
refers to all the external factors that may have an impact
on how the business operates. However, some experts
have defined the term “business environment” in a much
broader sense. They believe that business activities are
influenced not only by external environmental forces, but
also by the internal environment that exists in a business
organisation, such as the resources at its command, the
value system, the mission and objectives, and so on, that
its management has.
The external environment includes economic,
sociocultural, political, technological, ecological, and
legal factors., etc. while the internal environment
includes value system, vision, mission and objectives,
organizational structure, corporate culture, human
resources, the survival and success of any business is
determined by both internal and external environmental
factors.
Important Features of Business Environment
z Business environment is dynamic.
z Business environment is complex, multifaceted and
has a far-reaching impact.
z It helps in identifying the opportunities for, and
threats to, the business.
z It helps in identifying firm’s strengths and weaknesses
in view of the technological and global developments.
z It enables the firm to analyze competitors’ strategies
and formulate the necessary counter strategies.
z It helps in evaluating the present strategies,
formulating long-term policies, and developing
future strategies.
Types of Business Environment
There are two types of business environment which
can be defined as follows:
Business
Environment
Internal External
Environment Environment
Micro Macro
Environment Environment
Internal Environment
There are a number of internal environmental
factors that influence the strategic decisions in a
business. Some of these factors are: value system and
ethical standards, mission, goals and objectives of the
companies, physical assets and facilities like nature of
available technology, production capacity; financial
factors such as financial position, composition of funds,
sources of funds, capital structure.
External Environment
The external environment encompasses a variety of
factors which are largely beyond the control of individual
firms and which may provide opportunities and impose
threats to an organisation. For example: economic,
demographic, political, legal, socio-cultural, technological.
The External environment can be broadly classified into
micro environment and a macro environment.
z Micro Environment: The micro environment refers
to the environmental forces which are in the immediate
contact of the business such as customers, competitors,
marketing intermediaries, suppliers, workers and the
public.
z Macro Environment: Macro environment, are the
larger societal or physical forces which may have an
impact not only on the business but also on its micro
environmental players. These are economic, politico-
legal, socio-cultural, demographic, technological,
Drishti Publications 1
 Accounting
2 and
Auditing
BASIC ACCOUNTING PRINCIPLES
Over the centuries, accounting has remained
confined to the financial record-keeping functions of
the accountant. But, today’s rapidly changing business
environment has forced the accountants to reassess their
roles and functions both within the organization and the
society. In 1941, The American Institute of Certified Public
Accountants (AICPA) had defined accounting as the art
of recording, classifying, and summarising in a significant
manner and in terms of money, transactions and events
which are, in part at least, of financial character, and
interpreting the results thereof’. With greater economic
development resulting in changing role of accounting,
its scope, became broader.
In 1966, the American Accounting Association
(AAA) defined accounting as ‘the process of identifying,
measuring and communicating economic information to
permit informed judgments and decisions by users of
information’. In 1970, the Accounting Principles Board of
AICPA also emphasized that the function of accounting
is to provide quantitative information, primarily financial
in nature, about economic entities, that is intended to be
useful in making economic decisions.
Accounting can therefore be defined as the process
of identifying, measuring, recording and communicating
the required information relating to the economic
events of an organization to the interested users of such
information. There are some branches of accounting
which are as follows:
z Financial Accounting: The purpose of this branch of
accounting is to keep a record of all financial
transactions so that:
 The profit earned or loss sustained by the business
during an accounting period can be worked out.
 The financial position of the business as at the end
of the accounting period can be ascertained.
 The financial information required by the
management and other interested parties can be
provided.
z Cost Accounting: The purpose of cost accounting is
to analyze the expenditure so as to ascertain the cost
of various products manufactured by the firm and fix
the prices. It also helps in controlling the costs and
providing necessary costing information to
management for decision-making.
z Management Accounting: The purpose of
management accounting is to assist the management
in taking rational policy decisions and to evaluate the
impact of its decisions and actions.
z Stewardship Accounting: In earlier times in history,
wealthy people employed ’stewards’ to manage their
property. These stewards rendered an account of their
stewardship to their owners periodically. This notion
lies at the root of financial reporting even today which
essentially involves the orderly recording of business
transactions, commonly known as ‘book-keeping’.
Indeed, the accounting concepts and procedures in
use today for systematic recording of business
transactions have their origin in the practices
employed by merchants in Italy during the 15th
century. The Italian method which specifically began
to be known as ‘double entry book-keeping’ was
adopted by other European countries during the 19th
century. Stewardship accounting, in a sense, is
associated with the need of business owners to keep
records of their transactions, the property and tools
they owned, as well as the debts they owed, and the
debts others owed them.
z Social Responsibility Accounting: Social
responsibility accounting is a new phase in the
development of accounting and owes its birth to
increasing social awareness which has been
particularly noticeable over the last two decades or
so. Social responsibility accounting widens the scope
of accounting by considering the social effects of
business decisions, in addition to the economic effects.
Several social scientists, statesmen, and social workers
all over the world have been drawing the attention
of their governments and the people in their countries
to the danger posed to environment and ecology by
Drishti Publications 77
 Business
3 Economics
MEANING, OBJECTIVES AND
SCOPE OF BUSINESS ECONOMICS
Business economics is a field of study that reviews
the implementation of the economic system in business
operations. It assists in utilizing the nature and importance
of financial analysis to clarify business problems. The
branch of Business Economics covers all the issues which
any business owner or firm can face concerning the
management of the organization. Several factors can
affect the working of a business, ranging from internal
matters to external issues such as the environment. Since
this branch of study covers a wide spectrum of possibilities
in business management, we can say that the scope of
the subject is large. We can understand the scope of
business economics in details by a diagram below:
Demand Analysis
and Forecasting
Cost and Production
Scope of Business
Analysis
Economics
Costing Decision
and Strategies
Profit Management
Wealth Management
z Demand Analysis and Forecasting: This aids in
directing the organization to arrange production
schedules and harness resources. Additionally, it
assists the leadership preserve and boosting the
revenue base and market position through discerning
various factors affecting the product demand.
z Cost and Production Analysis: The business
economics definition entails the production of cost
assessment of various outputs and recognizing
204 Drishti Publications
elements behind the deviations in estimated costs.
That is to say, the manager selects cost reduction
output levels and also avoids the time and material
wastage to attain the desired profit percentage. This
also constitutes the implementation of Break-even
analysis.
z Costing Decisions and Strategies: Valuation is the
root of the company’s earnings since its success is
mostly based on the accuracy of costing decisions.
Moreover, the key aspects incorporate pricing
methods, price discovery in numerous market forms,
product line pricing, and differential pricing.
z Profit Management: The manager must be able to
devise a more or less precise evaluation of the
company’s expected gains and pricing at distinct
output levels. To clarify, uncertainty reduction assists
the firm in achieving higher revenues. While
comprehending the importance of business economics,
profit calculation and profit planning are the most
difficult concepts.
z Wealth Management: It infers regulation and drafting
of capital expenses due to the involvement of a huge
amount. Disposing of the capital assets is quite
complicated and hence, demands a substantial
amount of labour and time. Subsequently, this
requires the business to manage current assets and
current liabilities properly.
Objectives of Business Firm
It is clear from the above discussion that the modern
approach to financial management is to give answers for
three questions: where to invest and in what amounts
how to raise and in what amount, and when to pay
dividends. These aspects relate to the firm's investment,
financing and dividend policies. In order to meet them
rationally, the firm must have an objective. It is generally
agreed that the financial objective of the firm should be
the maximisation of owners' economic welfare. However,
there is a disagreement as to how the economic welfare
of the owners can be maximised. The two well known
and widely discussed criteria in this respect are:
 Business
4 Finance
SCOPE AND SOURCES OF FINANCE
Finance as a resource, refers to monetary means of
financing assets of an entity. Finance as a discipline or
subject of study describes how individuals, governments
and corporate organisations manage the flows of money
through an organisation.
At the present state, the academic discipline of finance
includes the following specialised areas in its scope.
z Public Finance: Like business organisations,
governments(local, state or federal) raise and spend
a large sum of money, but unlike business
organisations, they pursue non-profit goals. To deal
with governmental financial matters, a separate and
specialised field of finance has emerged as public
finance.
z Securities and Investment Analysis: This area is of
interest to individuals and institutional investors. It
covers mainly measurement of risk and returns on
investment in securities.
z Institutional Finance: Institutional finance deals with
issues of capital formation and the organisations that
perform the financing function of the economy.
Therefore, it mainly studies saving and capital
formation and institutions involved in this process
such as banks, insurance companies, provident and
pension funds, etc.
z International Finance: International finance studies
economic transactions among nations, corporations
and individuals internationally. It is concerned with
flows of money across international boundaries.
z Investment Decisions: Managers need to decide on
the amount of investment available out of the existing
finance, on a long-term and short-term basis.
z Financial Management: Business firms face problems
dealing with the acquisition of funds and optimum
methods of employing the funds. Thus, financial
management studies financial problems in individual
firms, seeks low-cost funds and profitable business
activities.
Sources of Finance
A business can raise funds from various sources.
Each of the source has unique characteristics, which must
be properly understood so that the best available source
of raising funds can be identified. There is not a single
best source of funds for all organisations. Depending on
the situation, purpose, cost and associated risk, a choice
may be made about the source to be used. For example, if
a business wants to raise funds for meeting fixed capital
requirements, long term funds may be required which
can be raised in the form of owned funds or borrowed
funds. Similarly, if the purpose is to meet the day-to-day
requirements of business, the short term sources may
be tapped. Some important sources of finance has given
below in detail:
Commercial Paper
Commercial Paper (CP) is an unsecured money
market instrument issued in the form of a promissory
note. It was introduced in India in 1990 for enabling highly
rated corporate borrowers to diversify their sources of
short-term borrowings and to provide an additional
instrument to investors. Subsequently, primary dealers
and all-India financial institutions were also permitted
to issue CP to enable them to meet their short-term
funding requirements for their operations. Individuals,
banking companies, other corporate bodies (registered
or incorporated in India) and unincorporated bodies,
Non-Resident Indians (NRIs) and Foreign Institutional
Investors (FIIs) etc. can invest in CPs. CP can be issued for
maturities between a minimum of 7 days and a maximum
of up to one year from the date of issue in denominations
of `5 lakh or multiples thereof. However, the maturity
date of the CP should not go beyond the date up to which
the credit rating of the issuer is valid.
Foreign Currency Convertible Bonds (FCCBs)
Foreign currency convertible bonds are equity linked
debt securities that are to be converted into equity or
depository receipts after a specific period. Thus, a holder
Drishti Publications 257
 Business
5 Statistics and
Research Methods
MEASURES OF CENTRAL TENDENCY Illustration-2:
The following data shows the weekly income of 10
Central tendency is a numerical method to explain families.
the data in brief. There are several statistical measures Family
of central tendency or “averages”. The three most A B C D E F G H
commonly used averages are: Arithmetic Mean, mode, I J
median. Weekly Income (in `)
850 700 100 750 5000 80 420 2500
Arithmetic Mean
400 360
Arithmetic Mean is simply the mean or average for Compute mean family income using assumed mean
a set of data. There are two more types of averages i.e. method.
Geometric Mean and Harmonic Mean Arithmetic mean Solution:
is the most commonly used measure of central tendency.
Income d = (X–
It is defined as the sum of the values of all observations Families d = X–850
(X) 850)/10
divided by the number of observations and is usually
A 850 0 0
denoted by X . There are some methods to Calculate
B 700 –150 –15
Arithmetic Mean
C 100 –750 –75
z Direct Method: Arithmetic mean by direct method
D 750 –100 –10
is the sum of all observations in a series divided by
E 5000 +4150 +415
X
the total by using this formula X  F 80 –770 –77
N
G 420 –430 –43
z Assume Mean Method: If the number of observations
H 2500 +1650 +165
in the data is more and/or figures are large, it is
I 400 –450 –45
difficult to compute arithmetic mean by direct
method. The computation can be made easier by using J 360 –490 –49
assumed mean method. 11160 +2660 +266
Sd
Illustration-1: X =A + =850 + (2,660) / 10
N
Calculate Arithmetic Mean by direct method from
the data showing marks of students in a class in an = `1,116.
economics test: 40, 50, 55, 78, 58. Thus, the average weekly income of a family by
both methods is `1,116. You can check this by using the
Solution:
direct method.
X 40  50  55  78  85
X   56.2
N 5 Calculation of Arithmetic Mean for Grouped Data
Grouped data are data formed by aggregating
where,
individual observation of a variable into groups, so
∑ X = sum of all observations and
that a frequency distribution of these groups serve as a
N = total number of observations. Convenient means of summarizing or analyzing the data.

Drishti Publications 315

 Business Management
6 and Human Resource
Management
PRINCIPLES AND
FUNCTIONS OF MANAGEMENT
Managing is the art of creation and maintenance of an
internal environment in an enterprise where individuals,
working together in groups, can perform efficiently and
effectively towards the attainment of group goals.
The essential features of management reveal its
nature and importance. These are discussed below:
z Universality: Management is an universal
phenomenon in the sense that it is common and
essential element in all enterprises. Managers perform
more or less the same functions irrespective of their
position or nature of the organisation. The basic
principles of management can be applied in all
managerial situations regardless of the size, nature
and location of the organisation. Universality of
managerial tasks and principles also implies that
managerial skills are transferable and managers can
be trained and developed.
z Purposeful: Management is always aimed at
achieving organisational goals and purposes. The
success of management is measured by the extent to
which the desired objectives are attained. In both
economic and non-economic enterprises, the tasks of
management are directed towards effectiveness (i.e.,
attainment of organisational goals), and efficiency (i.e,
goal attainment with economy of resource use).
z Social Process: Management essentially involves
managing people organised in work groups. It includes
retaining, developing and motivating people at work,
as well as taking care of their satisfaction as social
beings. All these interpersonal relations and interactions
makes the management as a social process.
z Coordinating Force: Management coordinates the
efforts of organisation members through orderly
arrangement of inter-related activities so as. to avoid
duplication and overlapping. Management reconciles
the individual goals with the organisational goals and
integrates human and physical resources.
z Intangible: Management is intangible. It is an unseen
force. Its presence can be felt everywhere by the
results of its effort which comes in the form of
orderliness, adequate work output, satisfactory,
working climate, employees satisfaction, etc.
z Continuous Process: Management is a dynamic and
an on-going process. The cycle of management
continues to operate so long as there is organised
action for the achievement of group goals.
z Composite Process: Functions of management cannot
be undertaken. sequentially, independent of each
other. Management is a composite process made up
of individual ingredients. All the functions are
performed by involving several ingredients.
Therefore, the whole process is integrative and
performed in a network fashion.
z Creative Organ: Management creates synergetic
effect by producing results which are more than the
sum of the individual efforts of the group members.
It provides sequence to operations, matches jobs to
goals, connects work to physical and financial
resources. It provides creative ideas, new imaginations
and visions to group efforts. It is not a passive force
adopting to external environment but a dynamic life
giving element in every organisation.
Managerial Functions
A function is a type of work activity that can be
identified and distinguished from other work. Experts
have identified several managerial functions as important
elements of management. While Newman and Summer
have identified four functions namely, organising,
planning, leading and controlling, Henry Fayol has
recommended five basic functions namely, planning,
organising, commanding, coordinating and controlling.
Most authors present the following five as the essential
functions: planning, organising, staffing, directing and
controlling. Luther Gulick and L. Urwick have coined an
acronym for seven functions namely POSDCORB which
stands for Planning, Organising, Staffing, Directing,
Coordinating, Reporting and Budgeting.
Drishti Publications 373
 Banking
7 and Financial
Institutions
OVERVIEW OF INDIAN FINANCIAL SYSTEM
The word ‘system’ in the term ‘Financial System’
implies a set of complex and closely connected or
intermixed instructions, agents, practices, markets,
transactions, claims and liabilities in the economy.
Finance is the study of money, its nature, creation,
behaviour, regulations and administration. Therefore,
Financial System includes all those activities dealing in
finance, organised into a system.
In other words, Financial system is a system, which
facilitates the process of the Basics system of capital
accumulation by transferring financial resources from
savers to the investors. With financial resources, the
investors create physical assets, viz. land, buildings,
plants and machineries. The important component of
the Indian financial system can be understood through
the figure given below:
z Financial Institutions: These are institutions which
mobilise and transfer the savings or funds from surplus
units to deficit units. It can be seen from figure given
below. These institutions can be classified into,
Regulatory, Intermediaries, Non-intermediaries and
Banking
Institutions
Financial Institutions
Non-banking
Institutions
Financial System
Unorganized
Financial Markets
Organized
Financial Assets/
Instrument
Fund Based
Service
Financial Services
Fee-Based
Service
Component of Indian Financial System
Others. These institutions unlike commercial
Organisations deal with only financial assets like;
deposits, securities, loans, etc. These institutions
participate in financial markets and mobilise the savings
from the surplus units either directly or indirectly.
z Financial Markets: This is a place or mechanism
where funds or savings are transferred from surplus
units to deficit units. These markets can be broadly
classified into money markets and capital markets.
Money market deals with short-term claims or
financial assets (less than a year) whereas capital
markets deal with those financial assets which have
maturity period of more than a year This classification
is artificial as both these markets perform the same
function of transferring surplus funds to needy units.
Another classification could be primary markets and
secondary markets. Primary markets deal in new
issue of securities whereas secondary markets deal
with securities which are already issued and available
in the market. Primary markets by issuing new
securities mobilise the savings directly. Secondary
markets provide liquidity to the securities and thereby
indirectly help in mobilising the savings
Private Bank
Commercial Banks
Public Bank
Co-operative Bank
Regional Rural banks
Foreign Bank
Secondary Market
Capital Market
Primary Market
Money Market
Leasing, Hire Purchase, Consumer Credit,
Bill Discounting, Factoring, Insurance etc.
Issue Management, Merchant Banking, Credit
Rating, Debt Restructuring Stock Broking etc.
 Marketing
8 Management
MARKETING
According to the American Marketing Association
“marketing is the performance of business activities that
directs the flow of goods and services from producer to
consumer or user “.
Philip Kotler, a well-known author in the area of
marketing, defines marketing as “a human activity
directed at satisfying needs and want through exchange
processes".
Based on the above statements we can develop a
process-oriented definition of marketing, as “the process
of ascertaining consumer needs converting them into
products or services, and moving the product or service
Marketing Functions
Buying Production Selling Financing Transportation
Market Information System Preservation and Storage
According to diagram if we see the another definition
which describes marketing as an organised set of activities
initiated by business people to determine market demand
and supply of the goods and services to the consumer to
his/her satisfaction. Marketing term has been explained
by many other authors as given below:
z Marketing is a process of Planning and control of
activities related to flow of materials from suppliers
to the end user.
z Marketing is a process of planning and executing
policies for primary production and distribution of
goods and services to satisfy the needs of individuals
and groups known as consumers.
to the final consumer or user to satisfy certain needs and
wants of specific consumer segment or segments with
emphasis on portability, ensuring the optimum use of
the resources available to the organisation." In other
words, Marketing can be described as a process that
involves all such activities that ensure the supply of goods
and services from the producer to consumer. Contrary
to general understanding, marketing is no longer simple
selling and buying of different products. In a broader
sense, a viable marketing involves a series of decision-
makings at various levels right from production,
handlings, storage, packaging and transportation etc., to
the final stage of sale to the consumer. These activities/
functions can be understand by the below diagram.
Marketing Intelligence Pricing
Sorting and Grading
Packing Decision Making
z Marketing is a totality of all the management process
that identifies and supplies consumer requirements
efficiently and profitably.
z Marketing is relates to various steps taken to identify
largest group of consumers, produce the required
product or service and distribute them to the
consumers efficiently.
z Marketing is gathering and displaying the commodities
for sale in the markets and selling them in the original
or in any other form suiting the consumer.
z Marketing is summation of all activities involved in
transfer of goods from producer or seller to the consumer,
including packaging, storing, transporting etc.
 Legal Aspects
9 of Business
INDIAN CONTRACT
Broadly speaking, a contract is an agreement made
between two or more people to do or to abstain from
doing a particular act. A contract invariably creates a
legal obligation between the parties by which certain
rights are given to one party and a corresponding duty
is imposed on the other party. A contract has been defined
by different authorities in various ways. Some of the
important definitions of contract are as follows:
According to Salmond “A contract is an agreement,
creating and describing the obligations between parties”
According to Sir William Anson “A contract is an
agreement enforceable of law made between two or more
persons by which rights are acquired by one or more to
acts or forbearance on the part of others.”
Elements of a Valid Contract
An agreement enforceable by law is a contract.
An agreement in order to be enforceable must have
certain essential elements. According to Section 10 – All
agreements are contracts if they are made by the free
‘consent of the parties competent to contract, for a lawful
consideration and with a lawful object, and are not hereby
expressly declared to be void.
Thus, an agreement becomes a valid contract if it has
the following elements:
z Proper Offer and Proper Acceptance: In order to create
a valid contract it is necessary that there must be at
least two parties, one making the offer and the other
accepting it. The law has prescribed certain rules for
making the offer and its acceptance that must be
satisfied while entering into an agreement. For example,
the offer must be definite and duly communicated to
the other party. Similarly, the acceptance must be
unconditional and communicated to the offered in the
prescribed mode, and so on. Unless such conditions
with regard to the offer and the acceptance are satisfied
the agreement does not become enforceable.
z Intention to Create Legal Relationship: There must
be an intention among the parties to create a legal
relationship, if an agreement is not capable of creating
638 Drishti Publications
a legal obligation it is not a contract. In case of social
or domestic agreements, generally there is no intention
to create legal relationships. For example, in an
invitation to dinner there is no intention to create a
legal relationship and therefore, it is not a contract.
Similarly, certain agreements between husband and
wife do not become contracts because there is no
intention to create a legal relationship. This point can
well be illustrated by the famous case of Balfour v.
Balfour. Mr. Balfour had promised to pay 30 per
month to his wife living in England when she could
not accompany him to Caulon where he was employed.
Mr. Balfour failed to pay the promised amount. Mrs.
Balfour filed a suit against her husband for breach of
this agreement, It was held that she could not recover
the amount as it was a social agreement and the parties
never intended to create any legal relations.
In commercial or business transactions the usual
presumption is that the parties intend to create legal
relations. However, this presumption may be negatived
by express terms to the contrary. The case of Rose & Frank
Co. v. Crompton Brothers is relevant here. In this case
there was an agreement between Rose & Frank Company
and Crompton Brothers Ltd. whereby the former was
appointed as selling agents in North America. One of
the clauses in the agreement read, “This agreement is
not entered into as a formal or legal, agreement and shall
not be subject to legal jurisdiction in the law courts.” It
was held that this agreement was not a legally binding
contract as there was no intention to create legal relations.
You must note that whether intention to create legal
relationship exists in an agreement or not is a matter
for the court to decide which may look at the terms and
conditions of the agreement and the circumstances under
which the agreement was made.
z Free Consent: For a contract to be valid, it is essential
that there must be free and genuine consent of the
parties to the contract. They must have made the
contract of their own free will and not under any fear
or pressure. According to Section 14, consent is said
to be free when it is not caused by (i) coercion (ii)
undue influence, (iii) fraud, (iv) misrepresentation,
 Income-Tax and
10 Corporate Tax
Planning
Income tax is one of the direct taxes levied by the
Central Government. It is considered direct as it is payable
in the Assessment Year, directly by the Individual, Hindu
Undivided Family, Firms and Corporate Bodies on the
income earned during the previous ear(Accounting/
Financial Year). Therefore, any student of income tax
must know the meaning of the terms income, previous
year, assessment year, total income and who are the
persons liable to income tax in India.
Income tax in India is a tax paid by individuals or
entities depending on the level of earnings or gains
during a financial year. The earnings may be both actual
and notional.
Meaning of Income
Section 2(24) of the Act defines 'Income' to include
the following items :
z Profits and Gains: This is one of the major sources of
income.
z Dividends: The definition of dividend has been given
in Sec. 2(22) which expands the meaning of the term.
z Voluntary Contributions received by a trust created
wholly or partly for charitable or religious purposes
or by an institution established wholly or partly for
such purposes, or by a scientific research association
or sports association.
z The value of perquisite or profit in lieu of salary. These
have been defined. in Sec. 17 and will be dealt with
while discussing income from ‘salaries’.
z Any special allowance or benefit, other than perquisite
included in above specifically granted to the assessed
to meet expenses wholly, necessarily and exclusively
for the performance of the duties of an office or
employment of profit.
z Any allowances granted to the assessed either to meet
his personal expenses at the place where the duties
of his office or employment of profit are ordinarily
reformed by him or at a place where lie ordinarily
resides to compensate him for the increased cost.
z The value of any benefit or perquisite obtained from
a company either by a director, or by a person who
has substantial interest in the company or by a relative
of such director or person.
z The value of any benefit or perquisite, whether
convertible into money or not which is obtained by a
beneficiary or a trustee from a trust will be treated as
taxable income in the hands of the beneficiary or the
trustee, as the case may be.
z Any compensation or other payment made to the
person managing the affairs of a company in
connection with the termination of his office and
income derived by a trade, professional or similar
association for specific services rendered or done to
its members and chargeable profit under Section 59.
z The value of any benefit or perquisite whether
convertible into money or not, arising from business
or the exercise of a profession under section 28 (iv).
z Capital gains from the transfer of a capital asset.
z The profits and gains of any business of insurance
carried on by a mutual insurance company or by a
co-operative society computed in accordance with
Section 44.
z Any sum chargeable to income tax as profits and gains
of business or profession or as recovery of losses,
expenses or trading liability in respect of which the
assessed had been granted a deduction in a previous
year or deemed profits.
z Profit on sale of a license granted under the Imports
(Control) Orders, 1955.
z Any cash assistance received or receivable by any
person against exports under any scheme of the
Central Government.
z Any duty of customs or excise repaid or repayable to
any person against exports.
z Any winnings from lotteries, crossword puzzles, races
including horse races, card games and other games of
any sort and betting of any form or nature whatsoever.
z Any sum received by the assesse from his employees
as contributions.
Drishti Publications 695