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of Rs. 20,000/- applies to the payment made to a party at ta time and not the

aggregate of the payments made to a party in the course of a day.

No deduction shall be allowed in respect of any sum paid by the assessee as an

employer towards the setting up of, or as contribution to, any unapproved

fund.

Drawing of proprietor or partners.

Personal expenses of the proprietor for partner.

Capital expenditure

Any provision or transfer to reserve except transfer to reserves as provident in

the ACT.

Amounts paid as charity or presents.

Past losses charges to Profit & Loss Account.

Any Expenditure not incurred wholly and exclusively for the porposes fo the

business or profession.

Income tax, wealth tax and other taxes on income.

Expenditure incurred to buy off competition, e.g a sum paid by a company to

retiring director or a managing agent in consideration of their agreement not tocomplete with the company.

Penalties paid by the assessee for infringement of law.

Payments made by an assessee in the nature of sharing the profits to the sole

selling agents under an agreement are not deductible.

Contribution to a political party where there is no direct relationship between

contribution and the business of the assessee.

Insurance premium paid by a firm on the life insurance policies of its partners.

Expenditure incurred in violating of another statute.

Gift made on occasion of marriages in the families of friends and others with

whom assessee has business dealing cannot qualify as business expenditure

even on grounds of commercial expediency.

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2. Write short notes:

a. Unabsorbed depreciation

b. General deductions (Section 37(1) )

Ans.

A. Unabsorbed Deprecation:

Deprecation allowance for particular previous year is first decutable from the profits

and gains of the business or profession, if the profits and gains of the same business or

profession are insufficient for the propose, the balance of the amount of current

depreciation allowance is deductable from the profits of any other business or

profession of the assessee. If the profits of any other business or profession are alosunable to absorb the whole amount of depreciation allowance, the balance of such

allowance which remains unabsorbed can be set-off against any other taxable income

fo the same year. If still, the whole amount of current depreciation allowance is not

deductable on account of the insufficiency of the other taxable income the remaining

unabsorbed amount is called Unabsorbed Depreciation.

If Unabsorbed depreciation cannot be wholly set-off, the amount of depreciation not

set-off shall be carried forward to the following assessment year.

B. General Deduction Sec 37 (1)

Under Section 37 (1), the following conditions should be fulfilled, in order that a

particular item of expenditure may be deductible under this head:

The Expenditure should not be of the nature described in section 30 to 36.

It should be in respect of a business or profession carried on by the assessee

and the profit and gains of which are to be computed and assessed.

It should not be in the nature of personal expenses of the assessee.

It should have been paid out or expended wholly and exclusively for the

purpose of such business or profession.

It should not be in the nature of capital expenditure.

It should relate to the previous year concerned.

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3. Mr. Radha Krishna, an individual submits the following information

relevant for the assessment year 2009-10

Profit Loss

Salary Income (computed) 54.000

Income from House Property

House 1 17,000

House 2 23,000

Profit & Gains of business or Profession

Business X 7,000

Business Y 14,000

Business Z (speculative) 15,000

Business A (speculative) 19,000

Capital Gains

Short term capital gains 8,000

Short term capital loss 12,000

Long term capital gains on sale of land 24,000

Income from other sources:

Income from card games 6,000

Loss on card games 9,000

Loss on maintenance of race horses 4,500

Interest on securities 3,000

Determine the net income of Mr. Radha Krishna for theassessment year 2009-10

Solutions: Ans.

Computation of total Income for the assessment year 2009-10

Income from Salary 54,000.00

Income from House property:

House X (+) 17,000.00

House Y (-) 23,000.00 (-) 6,000.00

Profit and gains of business or profession

Non-speculative

Business A (+) 7,000.00

Business B (-) 14,000.00

Non- speculative loss

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Rs. 4,000/- C/f to next year (-) 3,000.00

Speculative

Business Z (+) 15,000.00

Business A (-) 19,000.00

It will be carried forward to the next year (-) 4,000.00

Capital gain

Short term Capital gains 8,000.00

Short term Capital loss (-) 12,000.00

Short term Capital Loss (-) 4,000.00

Long term Capital gain on sale of land 24,,000.00 20,000.00

Income from other source:

Income from card games (loss from card games cannot

be deducted)

6,000.00

Interest on Securities 3,000.00 9,000.00

Loss on maintenance of race horses c/f 4,500.00

Net Income 74,000.00

Note:

Loss on maintenance of race horses can be set off only against income from

the business of owing and marinating race horses. In the absence of such

income, it cannot be set off. However, it can be carried forward to next year

for claiming set off against income from such business.

The house property loss can be set off against salary income and / or interest

on securities. It cannot be set off against income from card games.

Business loss (non-speculative) can be set off against interest on securities. It

cannot be set off against salary income and income from card games.