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Income from Business or Profession
SET OFF AND CARRY FORWARD OF UNABSORBED
DEPRECIATION (Section 32 (2)

Depreciation is allowed to be debited to the P&L A/c only to the extent income is available under the head business or profession and the remaining depreciation shall be called unabsorbed depreciation and it will be allowed to be set off from any income under any head except the income from gambling Activities.
If the assessee do not have sufficient income under any other head , the depreciation shall be allowed to be carried forward for unlimited period and brought forward depreciation can be set off from any income under any head except the income from gambling activities.

SET OFF & CARRY FORWARD OF BUSINESS LOSSES U/S 72
If any person has loss under the head of Business or profession is allowed to be set off from any Income under any head except income from gambling activities.
If income under of total head is not sufficient, the loss shall be allowed to be carried forward but for a maximum period of 8 years starting from the year next to the year in which the loss was incurred and brought forward loss can be set off only from the income under the head of business profession.
Note :
From the Assessment year 2008-2009 additional Depreciation will be provided only for plant & Machinery if acquired and put to use after 31st March 2008 subject to the following conditions:
(i) Assessee should be engaged in the Manufacture or production of any article or thing.
(ii) New plant and Machinery acquired and installed after 31st March 2008.
(iii) Following plant and Machinery are not eligible for additional depreciation.
      a. Ships and air crafts
      b. P&M before installation used either within India or outside any other person.
      c. P&M installed in Office premises, residential house or Guest house.
      d. Office appliances or road transport vehicle.
(iv) Certificate from Chartered Account in form No. 3AA.
(v) Rates of additional depreciations will by 15% of cost but if assets used for less than 180 days then 7.5% of Cost.

Note :
UNABSORBED DEPRECIATION
1. Current depreciation
2. B/f business Loss
3. Unabsorbed depreciation.
DEPRECIATION
COMPUTATION OF WRITTEN DOWN VALUE
Section 43(6)

WRITTEN DOWN VALUE MEANS
In the case of any block of assets, w.d.v shall be computed in the following steps.
(i) Written down value of the block of the asset at the beginning of the year.
(ii) Add the actual cost of any asset of that block, acquired during the year.
(iii) Less amount received in respect of any asset which is sold or discarded or demolished or destroyed during the year together with the amount of the scrap value, if any.
BASIC CONDITIONS LAID DOWN FOR CLAIMING DEPRECIATION UNDER THE INCOME-TAX ACT 1961.
BASIC CONDITIONS FOR CLAIMING DEPRECIATION
For the purpose of claiming depreciation, the assessee must satisfy the following conditions:
(a) The assessee must be the owner of the asset. The ownership may be whole or fractional.
(b) The asset must be used for the purpose of carrying on the business or profession of the assessee.
(c) In the year of acquisition, if the asset is put to use for less than 180 days, then it is eligible for only 50% of the normal depreciation.
(d) The asset in respect of which deprecation is claimed should fall within the eligible classification of assets i.e.
Tangible assets-being buildings, machinery, plant and furniture.

TEA / COFFEE / RUBBER DEVELOPMENT ACCOUNT
Section 33AB

FOLLOWING CONDITIONS MUST BE SATISFIED TO GET THE DEDUCTION.
1. Where an assessee in carrying on the business of growing and manufacturing Tea. Coffee or rubber plantation in India.
2. Deposited an amount with NABARD or in Tea deposit Account or in coffee board or in Rubber Board.
3. The aforesaid amount shall be deposited within 6 month from the end of the previous year or before the due date of furnishing the return of income, whichever is earlier.
4 The account of the taxpayer should by audited by a chartered accountant and the report of the auditor in Form No. 3Acis to be filed along with the return of the relevant assessment year.

AMOUNT OF DEDUCTION
He shall be allowed a deduction lower of;
(i) Amount deposited or
(ii) 40% of PGBP before 33AB and before adjustment of B/f business loss
Note 1 : - Where deduction claim under this section will be allowed on the same amount in any other previous year
Note 2 : - Where deduction allowed to AOP or BOI, then deduction will not allowed to his members.
Note 3 : - Any excess deposit in special account more during a previous year is not treated as deposit made in the next year or any other year
5. The amount deposited can be withdrawn for the purpose specified in the Tea board However it can not be utilised for purchase of
(i) Plant & Machinery to be installed in office.
(ii) Any appliance other than computer
(iii) Plant & Machinery the whole of cost of with is allowed as a deduction in computing PGBP.
(iv) P&M for manufacturing an article specified in XI schedule.
6. If the asset acquired is sold before 8 year from the end of previous year in which it was acauired the deduction allowed shall be withdrawn. But this rule is not applicable in following two cases: -
a Transfer to the Central Government, state Government, LA, SC or Govt Company.
b. Transfer in a scheme of succession of a firm by company.
7. Consequences in case of closure of business: -
When amount withdrawn from Deposit Account treated as taxable profit (in case of closure of business or Dissolution of firm) When amount withdrawn deposit Account and not treated as taxable profit (in case of Death of the taxpayer, Partition of HUF and Liquidation of company)
Note : Tea income is partly agriculture (60% - Agriculture and 40%-non-agriculture).

Q.1. Business Profit of X Ltd., A tea growing and manufacturing company, is Rs. 70 lakh for the assessment year 2014-15. It deposits Rs. 25 lakh in the “special account” for claiming deduction under section 33AB. It wants to claim set-off of brought forward business loss of Rs. 12,00,000. Find out the amount of for the previous year 2013-14 and how much
income is taxable under business or profession ? 
Ans. Deduction allowed Rs. 25 Lakh and Income is Rs. 6 Lakh.

Q.2. In above question, if X Ltd. withdraw Rs. 20 Lakh on January 20, 2014 from special account for Purchase of Non-depreciable assets of Rs. 18 Lakh according to the scheme framed by the Tea Board. The remaining amount not utilized up to March 31, 2014. Find out the taxable income under the head of business ? 
Ans. 80,000.

Q.3. In above question, The asset which is purchased for Rs. 18 Lakh is sold to Y for Rs. 31 Lakh on December 3, 2014. Find out the taxable amount ?
Ans. Business Income 18 Lakh, STCG 13 Lakh11.

SITE RESTORATION Section 33ABA

ASSESSEE MUST HAVE TO SATISFY THE FOLLOWING CONDITIONS TO GET THE DEDUCTION:
1. The must be engaged in production of Petroleum/natural gas in India.
2. The assessee has an agreement with the Central Government.
3. It must make a deposit in “special account” (Deposit with SBI for the purpose specified in a scheme approved by the government of India in the Ministry of Petroleum and Natural Gas).
Or
Deposit any amount in an account opened by the assessee in accordance with scheme framed by the Ministry of Petroleum and Natural Gas.
4. The deposit should be made within specified time-limit. (The amount should be deposited before the end of previous year)
5. The account of assesseee should be audited (Account should be audited by C.A. And the report of auditor should be submitted along with the return in Form No. 3AD)

AMOUNT OF EDUCATION
1. Amount Deposit in special account or
2. 20% of Profit of such business before deduction under section 33ABA and b/f business loss.
Whichever is less allowed as deduction.

EXPENDITURE ON SCIENTIFIC RESEARCH
There are five amounts which can be claimed as deduction under this section.
Expenditure on research carried on by
assessee
Expenditure by contribution to outsider’s
agencies
1. Revenue expenses
2. Capital expenses
3. Expenses on an approved in-house
Research
1. Contriubution to an approved
scienctific research association.
2. Contribution to National Laboratory
Fund.

MAINTENANCE OF ACCOUNTS

SECTION 44AA

1. PERSON CARRYING ON SPECIFIED PROFESSION
If gross receipts of the profession exceed Rs. 1,50,000 any of the three years preceding the P/Y or if profession is newly set up in the P/Y, if gross receipts likely to exceed the said amount then person is required to maintain prescribed books by rule 6F.
(i) If gross receipts does not exceed the amount then person is required to maintain such books of accounts and other documents as may enable AO to compute taxable income.

2. PERSON CARRYING ON NON SPECIFIED PROFESSION OR MY ANY BUSINESS
(i) If total income exceeds Rs. 1,20,000 or total sales / receipts exceeds 10,000 in any of three years preceding the P/Y or if profession in newly set up in the P/Y the specified amounts and other documents as may enable AO to compute income.
(ii) If the specified amounts are not exceeds then not required to maintain any books of accounts.

SPECIFIED PROFESSION
Legal, medical, engineering accountancy film artists company secretaries etc. Prescribed books: -
(i) Cash book
(ii) Journal if accrual method adopted
(iii) Ledger
(iv) Carbon copies of bills exceeding Rs. 25 issued by person etc.

In case of medical profession additional books.
(1) Daily cash register
(2) Stock register.

COMPULSORY AUDIT OF ACCOUNTS
(SECTION 44AB)
1. In case of business: if total sales of gross receipts of business exceed Rs. 40,00,000.
2. In case of profession: If gross receipts are more than Rs. 10,00,000.
Audit report of CA to be furnished along with return.

FILL IN THE BLANK QUESTIONS WITH ANSWER

Q.1. According to sec. 2 (36), profession means

Q.2. Profits and gains of any business carried on by assessee at any time is taxable U/H

Q.3. Export Incentives includes...................and

Q.4. Salary received by a partner of a firm from such firm is taxable U/H PGBP subject to provisions U/S..........

Q.5. Paid means actually paid or incurred. (True / False)

Q.6. Depreciation is allowed on the.............of the block of assets.

Q.7. The aggregate depreciation allowed in respect of any asset for different................years shall not exceed the.............cost of the asset.

Q.8. If S.P. is.............WDV, then such deficit shall be written off as...............depreciation.

Q.9. Is it mandatory to claim depreciation?

Q.10. Any capital Expenditure for research related to business carried on by the assessee for land is allowed / not allowed?

Q.11. Write short note on Preliminary expenses U/S 35D.

Q.12. What are the conditions for allowance U/S 37(1).

Q.13. An assessee make payment to a person by an account payee Bank draft worth Rs.21,000. Will the deduction of such expenditure is allowed? Give reasons for your answer.

Q.14. Write any 5 expenditures which are allowed as deduction in the previous year in which they are actually paid.

Q.15. Write any 5 expenditure which are specifically disallowed while computing business income.

Q.16. Any Interest/Salary etc. which is not allowed to be deducted U/S 40 (b), the income of the partners shall be adjusted to the extent of the amount so disallowed. (True / False)

Q.17. Taxable profits or gains should be real and not notional. (True / False)
Q.18. Business or profession should be carried on throughout previous year. There are certain exceptions to this rule List down.
Q.19. Profits from activity of purchasing & selling real estate properties are taxable U/H PGBP / U/H House Property?

Q.20. Interest on securities held as investment is charged to tax U/H………..However, Interest on securities held as stock-in-trade is charged U/H.........

Q.21. If asset is purchased with the intention of letting it out without using it in business, the Income is chargeable U/H.......

Q.22. Profits are ascertainable even before venture is completed. (True/False)

Q.23. Any sum paid on account of land revenue, local rates or municipal taxes are allowed as deduction. (True / False)

Q.24. Amount paid on account of current repairs on machinery used for business cannot be claim as deduction (True / False)

Q.25. Deduction is allowable according to the

Q.26. In case of assets acquired in the Previous Year, WD V is the..........cost to the assessee.

Q.27. Where the block of assets ceases to exist, the WDV amounts to

Q.28. Where an asset is acquired by the assessee during the P.Y., and is put to use for less than 180 days, the depreciation is allowed..........of the normal rate.

Q.29. In case of amalgamation or de-merger of any company, depreciation is allowed on .............basis.

Q.30. Unabsorbed depreciation can be carried forward

Q.31. Unabsorbed depreciation can be set off not only against PGBP but also against income under………………

Q.32. Write a note on Sec.38.

Q.33. The cost to be calculated for the purpose of depreciation allowance is the cost to the assessee and not the person who makes the sale. (True / False)

Q.34. Rate of depreciation on purely temporary erections such as wooden structures is

Q.35. Motor buses used for business of running on hire, the ROD is

Q.36. "Commercial vehicle" includes maxi-cab, motor-cab, and tractor. (True/False)

Q.37. Roads inside factory are 'Buildings'. (True / False)

Q.38. Assessee fall under 'Notified Professions' required to maintain Books of Accounts. (True / False)

Q.39. In case of medical practitioner, some additional books are to be maintained. Name them.

Q.40. A person carrying on business where total sales turnover or gross receipts exceed 40,00,000 has to go for compulsory audit of Accounts. (True / False)

Q.41. In case of Income from the manufacture of coffee............of income is deemed to be business income and..........of such income is deemed to be agricultural income.

Q.42. What is the actual cost in following cases:
(a) Assets acquired by way of gift or inheritance.
(b) Assets acquired out of borrowed funds.
(c) Assets acquired for scientific Research subsequently brought into business use.

Q.43. In case of Intangible assets, the ROD is

Q.44. Only owner can claim depreciation. (True / False)

Q.45. Any capital expenditure incurred on acquisition of patent rights before 31.3.98 used for business, shall be allowed in equal instalments spread over...........years.

Q.46. Where an assessee incurs expenditure by way of payment to association of institution for carrying out Rural Development Programme will be allowed as deduction of the amount of .......... during previous year.

Q.47. Deduction U/S 35Dis allowed only in case of..........or a person.........in India.

Q.48. Deduction U/S 35 D is allowed in..........equal Installments.

Q.49. Give the admissibility of the following expenditures-
(a) Advertisement expenditure
(b) Bad debts
(c) Expenditure incurred by company for promoting family planning amongst employees.
(d) Special reserve created and maintained by finance corporation.
(e) Bonus / Commission to employees.

Q.50. Where any business is discontinued in any year, any sum received after discontinuation shall be deemed to be the income of the assessee & charged to tax in the year of receipt. (True/False)

Q.51. Deduction is allowed in 5 equal instalments in case of
(1) Amalgamation expenses
(2) De-merger expenses
(3) Voluntary Retirement Scheme
(4) Family Planning expenses as capital expenditure
(5) All of the above

Q.52. Additional Depreciation is allowed
(1) 15%
(2) 20%
(3) 40%
(4) 10%

Q.53. Under Keyman insurance Policy money is taxable u/h PGBP, if it is received by
(a) CEO
(b) Employee
(c) Legal heir of Employee
(d) Company

Q.54. Speculative Business should be kept separate from Non-speculative Business. (True / False).

Q.55. Deduction U/S 33 AB is allowed if assessee is engaged in
(1) Growing tea in India
(2) Growing & manufacturing of tea in India
(3) Manufacturing of tea in India
(4) None of above

Q.56. 125% of sum paid allowed as deduction if donations/ contribution is made to
(1) Company
(2) Scientific Research Association Or university college etc.
(3) University, College etc. for social science or statistical research.
(4) All of the above

Q.57. STT is not allowed as deduction while computing the income U/H P/G/B/P (True/ False)

Q.58. Commodity transaction tax is allowed as deduction U/S 36.

Q.59. Payment to DON as Hafta for running business smoothly are allowed as deduction (True / False)

Q.60. Donation to Political Parties are allowed as deduction U/S
(1) 37
(2) 36
(3) 80GGB & 80GGC
(4) None of the above

Q.61. Any sum received in cash or in kind under an agreement for not carrying out any activity in relation to any business is taxable U/H.........

Q.62. Trading in derivatives carried out in recognised stock exchange as investment is taxable U/H
(a) PGBP
(b) Other Sources
(c) Capital gains
(d) None of the above

Q.63. Amount paid on account of current repairs shall not include any...............expenditure.

Q.64. Where the asset is put to use for business for less than.........days, the depreciation shall be restricted to 50% of the normal rate during the P.Y.

Q.65. The aggregate depreciation allowed in respect of any asset for different assessment years shall not exceed the..........cost of the asset.

Q.66. In case of an electricity co., if the sale price exceeds the cost of acquisition of the asset, then excess shall be treated as............and is taxable U/H.............

Q.67. If an asset is used in business after it ceases to be used for scientific research, the actual cost shall be reduced by deduction U/S................

Q.68. Any capital expenditure for research related to business for.............is not allowed.

Q.69. Deduction for payment of telecom license is allowed in..............installments.

Q.70. Any installments remaining U/S 35E (expenditure for prospecting minerals) unallowed can be carried forward for............years.

Q.71. Give the admissibility of the following
(a) Wealth tax
(b) Insurance Premium paid against risk of damage of Business and Profession.
(c) Income tax
(d) Amount of Interest paid for the capital Borrowed for Business and Profession.

Q.72. For getting benefit of deduction U/S 37 the expenditure should be of capital nature (True / False)

Q.73. Expenditure on Neon Sign is a.........expenditure and is not allowed and depreciation is Allowed @...........

Q.74. Give any 4 exceptions to Sec. 40A (3) under Rule 6DD.

Q.75. Under Sec. 44 AE the income is estimated @ Rs..........p.m. for Heavy Good Vehicles and Rs..........p.m. for others.

Q.76. Under Sec. 44 AD, Income is estimated @...........or more of turnover.

Q.77. Sec. 44 AD/AE/AF is applicable to assessee whose gross receipts are not more than

Q.78. If the audit report U/S 44 AB is not submitted along with return, then assessing officer may treat the return as
(a) Belated Return
(b) Defective Return
(c) Revised Return
(d) None of the above

Q.79. Name any 2 activities carried on by the assesse fall under Notified profession.

Q.80. Assessing officer cannot direct maintenance of additional books of accounts. (True/ False)

Q.81. The travel expenses of spouse are allowed if such travel is not for business consideration. (True / False)

Q.82. According to Sec. 41 (3), any amount realised on transfer of an asset used for scientific research is taxable as business income to the extent of deduction allowed in Sec. 35 in the year in which.........took place.

Q.83. Amount credited in business books can normally be presumed as business receipts where the assessee offers no explanation about it. (True / False)

Q.84. What is the cost of acquisition in case of
(a) Will Gift

Q.85. Amount received from members of trade, by way of subscription, falls short of expenditure incurred, the deficit will not be allowed as deduction under PGBP. (True / False)

Q.86. Machinery and Plants includes pipes needed for delivery from the source of supply. (True / False)

Q.87. Interest for pre-production period forms part of the 'actual cost'. (True / False)

Q.88. Profits and gains from selling of gold biscuits are chargeable to tax U/H PGBP (True / False)

Q.89. Methods of accounting followed by the assessee in computing income from Business and Profession can be changed from year to year. (True / False)

Q.90. Profits can be computed even if a particular trade adventure is not completed. (True / False)

Q.91. Once the option as to method of depreciation is exercised, it shall be final and applied to all subsequent Assessment years. (True / False)

Q.92. Under Sec. 43 A (1), the year in which asset is acquired is relevant. (True / False)

Q.93. In case of succession of a partnership firm by a company, depreciation is allowed on
(a) WDV
(b) SLM
(c) Proportionate Basis
(d) None of the above

Q.94. Expenses on acquisition and installation are to be added in the total cost of asset U/S 43 (1). (True / False)

Q.95. Rate of depreciation on computers is

Q.96. Rate of depreciation on furniture & fittings let out on hire for use on the occasion of marriages and similar functions is......

Q.97. Deduction U/S.........is available to any assessee who is carrying on business of growing and manufacturing tea in India.

Q.98. Expenditure on issue of Bonus Shares is a Revenue Expenditure. (True / False)

Q.99. Expenses or payment provided in Sec. 40 A (2) are not deductible. (True / False)

Q.100. Where an assessee incurs any expenditure in respect of which payment has been made to any relative, the unreasonable shall not be allowed as deduction. (True / False)

Q.101. Negligence is a business expenditure. (True / False)

Q.102. Theft is unavoidable and is allowed as deduction. (True / False)

Q.103. Any interest, royalty, fees for technical services which is payable outside India, on which TDS has not paid is allowed as deduction (True / False)

Q.104. Any interest royalty, fees which is payable to resident on which TDS has not been paid is allowed as deduction if TDS is paid after the due date. (True / false)

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