Income from Business & Profession

Income from Business & ProfessionSection 28-44

ByA. Ajay kumarRoll No -041Business [Section 2(13)]According to Section 2(13), Business includes any (a) trade, (b)commerce, (c)manufacture, or (d) any adventure or concern in the nature of trade, commerce or manufacture2Trade:- It means purchase and sale of goods carried on with profit motive.Commerce :- It means trade carried on a large scale.Manufacture :- Making of new and different article out of input material by physical or mechanical labour.

3Essential Features of Business.Regularity of transactions or continuity of activitiesObjective of earning profitsApplication of labour and skill

4Meaning of ProfessionThe expression Profession has been defined in Section 2(36) of the Act to include any vocation.According to the generally accepted principles, the meaning of the term profession involves the concept of an occupation requiring either intellectual skill or manual skill controlled and directed by the intellectual skill of the operator.5For instance, an auditor carrying on his practice, the lawyer or a doctor, a painter, an actor, an architect or sculptor, would be persons carrying on a profession and not a business.The common feature in the case of both profession as well as business is that the object of carrying them out is to derive income or to make profit.6INCOME CHARGEABLE TO INCOME-TAX (SECTION 28)The profits and gains of any business or profession which was carried on by the assessee at any time during the previous year.Any compensation or other payments due to or received by any person specified in section 28(ii).Any income derived by a trade or professional or other similar association from the specific services performed by it for its members.7Trade association means an association of businessmen for the protection and advancement of their common interest e.g. a Chamber of Commerce. Section 28(iii) does not apply to other social associationse.g. a sports club or cricket club etc. Similarly the income of a charitable trust from specific services rendered to its members is not assessable under Section 28(iii) but exempted under Section 1184.Export Incentives:(a) Profits on sale of a license granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947;(b) Cash assistance received or receivable by any person against exports under any scheme of the Government of India;95. The value of any benefit or perquisite, whether convertible into money or not, which arises from the carrying on of a business or the exercise of a profession.6. Any interest, salary, bonus, commission or remuneration, by whatever name called, due to or received by a partner of a firm from such firm.107. Any sum, whether received or receivable in cash or kind, under an agreement for (a) not carrying out any activity in relation to any business or(b) not sharing any know-how, patent, copyright, trade mark, license, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision of services:

118. Any sum received under a key man Insurance Policy including the sum allocated by way of bonus on such policy.9. Profits and gains of managing agency.10. Income from speculative transaction.11. Any profit on the transfer of the duty free replenishment certificate;12. Any profit on transfer of the Duty Entitlement Pass Book Scheme.

12Expenses Expressly Allowed Rent, rates, taxes, repairs and insurance for building [Sec. 30]Repairs and insurance of machinery, plant and furniture [Sec. 31]Depreciation allowance [Sec. 32] Tea/coffee/rubber development account [Sec. 33AB] Expenditure on acquisition of patent rights and copyrights [Sec. 35A]

136. Insurance premium [Sec. 36 (1) (i)]7. Premier for insurance on health of employees [Sec. 36(1) (ib)]Bonus or commission to employees [Sec. 36(1)(ii)] Interest on borrowed capital [Sec. 36(1)(iii)] Employers contribution to recognized provident fund and approved superannuation fund [Sec. 36(1)(iv)]

1411. Contribution towards approved gratuity fund [Sec. 36(1)(v)] 12. Employees contribution towards staff welfare schemes 13. Bad debts [Sec. 36(1)(vii)]14. Family planning expenditure [Sec. 36(1) (ix)]Banking cash transaction tax, securities transaction tax and commodities transaction tax.Advertisement expenses [Sec. 37(2B)].General Deduction [Sec. 37(1)].

15EXPENSES NOT DEDUCTIBLEDamages and penalty paid for transgressing the terms of agreement with the State.Penalty and damages paid in connection with infringement of law.Litigation expenditure incurred for curing any defect in the title of assets or completing that title.Litigation expenses for registration of shares.

165. Fees paid for increase of authorized capital.Expenditure on raising equity share capital and preference share capital. However, expenditure on issue of bonus shares is deductible.Amount paid for acquiring technical know-how which is to be utilized for the purpose of manufacturing any new article and such know-how is to become the property of the assessee at the end of the stipulated period178. Amount expended for acquiring a business or a right of permanent character or an asset which generates income or for avoiding compensation in business.Payments made for acquisition of good will.Expenditure incurred for acquiring right over or in land to win minerals.Fees paid to obtain license to investigate and search minerals.

1812. Payment made in consideration of acquiring a monopoly right to manufacturer a producerTax paid by the assessee (who is defaulter by not deducting tax at source under section 195) on behalf of non-resident.Compensation paid to contracting party with the object of avoiding an unnecessary investment in capital assets.

1915. Expenditure on shifting of registered office.16. Insurance premium paid by a firm on life insurance policies of its partners. 17. Amount paid by liquor contractor to police staff and other officer to enable it to make unauthorized purchases and sales of liquor.Amount paid by a company to the Registrar of Companies as filing fee for enhancement of capital base of the company.Payment made by assessee company which was partner in a firm, to outgoing partners of firm on account of their agreeing to restrain from carrying on similar business for a period of 15 years.

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