Professional Documents
Culture Documents
PGBP1
PGBP1
PGBP1
Business – Meaning
1. Section 2(13) - Business includes any trade, commerce or manufacture or any adventure or
concern in the nature of trade, commerce or manufacture.
2. ‘business’ denotes an activity capable of producing a profit which may be taxed.
3. Pari Mangaldas Girdhardas v CIT
1. Intention of acquisition of subject matter
2. Treatment of subject matter
3. Whether company documents authorise purchase/ sale of article in question
4. Volume and frequency
Profession – Meaning
• Section 2(36) – profession includes vocation
• Involves the idea of an occupation requiring either intellectual skill or any manual skill. E.g.
service rendered by a lawyer, engineer, doctor etc.
Section 28
The following income shall be chargeable to income-tax under the head "Profits and gains of
business or profession",—
1. The profits and gains of any business or profession which was carried on by the assessee at any
time during the previous year ;
i. Net profit is chargeable to tax under this head and to arrive at net profit certain losses
and expenditures are to be deducted from gross profits.
ii. Business is not required to have been carried on by the assessee throughout the whole
year or till the end of the previous year
iii. Business need not necessarily be carried on by the assessee personally
iv. Income derived from letting out of asset of a business is regarded as business income if
the letting is temporary and not permanent
v. Illegal business is also business for the purpose of this section. If assessee carried on a
business which is illegal, tax cannot be avoided on the ground that the business is
illegal
3. Income derived by a trade, professional or similar association from specific services performed
for its members.
4. Import-Export Incentives - Cash assistance received against exports; Duty draw back against
export etc.
5. The value of any benefit or perquisite whether convertible into money or not, arising from
business or the exercise of profession.
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6. Any interest, salary, bonus, commission or remuneration due to or received by a partner of a
firm from the firm provided that it has been allowed as deduction in computing the taxable
profits of such firm.
7. Non-compete fees [fee under an agreement for not carrying out any activity in relation to any
business or profession or not sharing any know-how, patent, copyright, trademark etc.]
8. Any amount received by employer from KIP;
9. Conversion of SIT into capital asset then FMV of such stock is taxable under head PGBP
10. Any sum received on account of any capital asset (other than land or goodwill or financial
instrument) being demolished, destroyed, discarded or transferred, if the whole of the
expenditure on such capital asset has been allowed as deduction u/s 35AD.
(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of
expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet
or the like published by a political party.
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Section 30 – Rent, Taxes, Repairs and Insurance of Building
Section 31 – Repair and Insurance of Machinery, Plant and Furniture
Section 32 – Depreciation
Assessee should be the owner of asset
Allowed on all tangible assets except land and all intangible assets except goodwill
Asset must be put to use at any point during the previous year by assessee for business/
profession
System - Block of asset [means group of asset having same rate of depreciation within same
class of asset]. Method of depreciation followed is WDV method.
The assets in respect of which depreciation is claimed must belong to either of the following
categories
I II III IV
Building Furniture @ 10% Plant and machinery Intangible Asset @
1. Residential 1. Motor vehicle 25%
building - 5% used for hiring
1. General building - business – 30%
10% 2. Other motor
2. Temporary vehicle – 15%
building - 40% 3. Ship – 20%
4. Air craft – 40%
5. Computer and
computer
software – 40%
6. Books – 40%
7. Pollution control
equipment – 40%
8. Oil well – 15%
9. Other plant and
machinery –
15%
[Section 38] Asset partly used for business and partly for other purpose - If any asset is partly used
for business purpose and partly for personal purpose then expenses related to that asset like fuel,
insurance, depreciation etc. are allowed for business use only.
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Section 50 – Computation of capital gains in case of depreciable assets
1) In case of depreciable asset, there is always STCG
2) In any block, there can be either depreciation or STCG but not both
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Section 35AD
Note -
1. Deduction is allowed only if business is new
2. Depreciation is not allowed if deduction claimed u/s 35AD
3. Sale proceeds of asset u/s 35AD shall be treated as PGBP income
4. Any expenditure incurred before commencement of business is also allowed as deduction in the
year in which business is commenced
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Provision for payment for gratuity under section 40A(7) - No deduction is allowed in computing
business income in respect of a mere provision made by the assesse in his books of account for
the payment of gratuity to his employees on retirement
Section 43B – deductions on payment basis
Tax, etc payable to govt
Bonus or commission to EE
Leave salary to EE
ER’s contribution to PF etc.
Interest on loan from scheduled bank
Sum payable to Indian railways for the use of railway asset
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