Dear Viewers this presentation for Profits and Gains of Business or Profession

1. `

2. COURSE TEACHER
Dr.K.Chellapandian
Assistant Professor of Commerce
Vivekananda College.

3. Dr.K.CHELLAPANDIAN
M.Com., MBA., M.Sc (Psy)., M.Phil., B.Ed., PGDCA., DGT., Ph.D., NET
Assistant Professor of Commerce
Vivekananda College
Tiruvedakam West
Madurai

4. Income Tax - Law & Practice - iI

5. Income Tax - Law & Practice - iI

6. TAX-MEANING
Tax is the financial charge imposed by the
Government on Income, Commodity or Activity.
Tax is a price which each citizen pays to the
state to cover his share of the cost of the
general public services which he will consume.

7. Tax
Direct
Tax
Indirect
Tax
TYPES OF TAXES
Tax can be classified in to two types…..

8. CLASSIFICATION OF TAX
Government Imposes two types of taxes namely Direct Taxes
and Indirect Taxes.
 A direct tax is a form of tax is collected directly by the
government from the persons who bear the tax burden.
Examples of direct tax is IT (Income Tax)

9. CLASSIFICATION OF TAX….
Government Imposes two types of taxes namely Direct Taxes
and Indirect Taxes..
An indirect tax is a form of tax collected by mediators who
transfer the taxes to the government, and also perform
functions associated with filing tax returns. The customers
bear the final tax burden.
Examples of indirect taxes are GST (Goods and Services
Tax) & Custom Duty.

10. INCOME TAX….
1. Direct Tax: Income is a Direct Tax. Direct Tax means
such tax which is paid by a person who bears tax burden.
2. Central Tax: Income Tax is imposed and recovered by
Central Government.
3. Tax on Total Income: Income Tax is calculated on total
income. Total income is also called taxable income.
Total income is calculated according to the provisions of
Income Tax Act.

11. BASIS OF CHARGE OF INCOME TAX
(SEC. 4)
 Income tax is an annual tax on income.
 Income of Previous Year is taxable in the next following Assessment Year
at the rate or rates applicable to that assessment year.
 Tax rates are fixed by the Annual Financial Act.
 Tax is charged on every person as defined in section 2(31).
 It is charged on the Total Income of every person for the previous year.
 Total Income is to be computed as per the provisions of the Act.
 Income tax is to be deducted at source or paid in advance wherever
required under the provision of the Act.

12. Heads of Income
1.Salaries
3.Business &
Profession
2.House property
4.Capital Gains
5. Other Sources
Aggregate of all the 5 heads of income is
known as gross total income

13. COMPUTATION OF TOTAL INCOME
The total income is computed on the basis of the
residential status of the assessee. The income is
classified into the following five heads:
1. Income from Salaries Sec 15 to 17
2. Income from House Property Sec 22 to 27
3. Profits and Gains of Business or Profession Sec 28 to 44
4. Income from Capital Gains Sec 45 to 55
5. Income from Other Sources Sec 56 to 59

14. COMPUTATION OF GTI & TI
1. INCOME FROM SALARIES - Sec 15 to 17 XXXX
2. INCOME FROM HOUSE PROPERTY – Sec 22 to 27 XXXX
3. PROFITS AND GAINS OF BUSINESS OR PROFESSION- Sec 28 to 44 XXXX
4. INCOME FROM CAPITAL GAINS - Sec 45 to 55
(A) LONG TERM CAPITAL GAINS ****
(B) SHORT TERM CAPITAL GAIN **** XXXX
5. INCOME FROM OTHER SOURCES
(A) CASUAL INCOMES
(LOTTERY,CARD GAME, etc) **** - Sec 56 to 59
(B)OTHER INCOMES – CLUBBING **** - Sec 60 to 65 XXXX
LESS: SET OFF AND CARRY FORWARD LOSSES – Sec 70 to 79 XXXX
GROSS TOTAL INCOME (GTI) XXXXX
LESS: DEDUCTIONS U/S 80 C to 80 U XXX
TOTAL (OR) TAXABLE INCOME (TI) XXXXX


15. SEMESTER – IV
(For those who joined in June 2018 and after)
PART – III : Core Course Theory
Course Title : INCOME TAX LAW & PRACTICE – II
Course Code: 04CT42 Hours per week: 5 Credit: 4
CIA: 25 Marks ESE: 75 Marks Total Marks: 100
Preamble
To Enable the students to learn the various provisions of heads of
income and assessment procedures of individuals and firm.
Course Outcomes
After the completion of the course, students will be able to
No. Course Outcomes Knowledge Level
CO 1 Compute the profits and gains from business / profession and capital gains. K1, K2, K3
CO 2 Apply the provisions of clubbing of income and set-off and carry forward of
losses.
K1, K2,K3
CO 3 Apply the various deductions from Gross Total Income. K1, K2, K3
CO 4 Assess the income of individuals and firms. K1, K2, K3
CO 5 Explain the powers of various income tax authorities and assessment
procedure.
K1, K2, K3

16. UNIT-I [15 Hours]
Computation of Profits and Gains from Business / Profession – Capital Gains.
UNIT-II [15 Hours]
Income of other Persons including Assessee‟s Total Income -Aggregation of
Incomes and Set-off and Carry Forward of Losses.
UNIT-III [15 Hours]
Deductions from Gross Total Income.
UNIT-IV [15 Hours]
Assessment of Individual – Assessment of Firm.
UNIT-V [15 Hours]
Income Tax Authorities -Different Types of Assessments.
Pedagogy
Power point presentations, Group Discussion, Seminar, Quiz , Assignment,
Experience Discussion, Brain storming, Activity, Case Study

17. TEXT BOOK:(Current Edition Relevant to the Assessment Year)
Dr. Mehrotra and Dr. Goyal., “Income-tax Law and Accounts”, Sahitya Bhavan
Publication, Agra.
REFERENCE BOOKS: (Current Edition Relevant to the Assessment Year)
1. T.S. Reddy & Y.Hari Prasad Reddy, “Income Tax Theory, Law & Practice”, Margham
Publications, Chennai.
2. Dr. Vinod K. Singhania., “Direct Taxes – Law and Practice”, Taxman publication, New
Delhi.
3. B.B. Lal., “Direct Taxes”, Konark Publisher (P) ltd, New Delhi.
4. Bhagwathi Prasad., “Direct Taxes – Law and Practice”, Wishwa Prakashana, New
Delhi.
5. Gaur V.P., and Narang D.B., “Income Tax Law and Practice”, Kalyani Publishers, New
Delhi.
Note:
 Questions shall be set as between theory and problems in the ratio of 40% and 60%
respectively
 Amendments made upto 6 months prior to the date of examination is to be followed

21. PROFITS AND GAINS OF BUSINESS OR PROFESSION
(SECTION 28 TO 44D)
 The provision regarding income chargeable under the
head „Profits and Gains of Business or Profession‟ are
contained in section 28 to 44D of the Income Tax Act,
1961.
 Before studying these provisions it is necessary to
understand the meaning of certain terms.

22. BUSINESS….
 Business means the purchase and sale or manufacture of
a commodity with a view to make profit.
 It includes any trade, commerce or manufacture or any
adventure or concern in the nature of trade, commerce
or manufacture.
 It is not necessary that there should be a series of
transactions in a business and that it should be carried
on permanently.

23. BUSINESS….
 Neither repetition nor continuity of similar
transactions is necessary. Profit of an isolated
transaction is also taxable under this head,
provided that it is a venture in the nature of
business or trade.
 In this connection, it is important that the
intention of purchase or manufacture should be
to sell at a profit.

24. PROFESSION
 Profession means the activities for earning
livelihood which require intellectual skill or
manual skill, e.g., the work of a lawyer, doctor,
auditor, engineer and so on, are in the nature of
profession.

25. PROFESSION…
 Profession includes vocation.
 Vocation means activities which are performed in order
to earn livelihood, e.g., brokerage, insurance agency,
music, dancing, etc.
 As the rules for the assessment of business,
profession or vocation are the same, there is no
importance of making any distinction between them for
income tax purposes.

26. BUSINESS & PROFESSION….
 Business:
Includes any Trade, Commerce or Manufacture or
any adventure in the nature of Trade, Commerce or
Manufacture.
 Profession:
Means an occupation requiring specialised Knowledge
and Skill.
 Vocation:
Is an activity in which an assessee has specialised
skill for earning Income.

27. BASIS OF CHARGE [SEC. 28]
The following income is chargeable to tax
under the head “Profits and gains of business or
profession”:
1. Profits and gains of any business or profession;
2. Any compensation or other payments due to or
received by any person specified in section
28(ii);

28. BASIS OF CHARGE [SEC. 28]
The following income is chargeable to tax under
the head “Profits and gains of business or profession”:
3. Income derived by a trade, professional or similar
association from specific services performed for its
members;
4. The value of any benefit or perquisite, whether
convertible into money or not, arising from business
or the exercise of a profession;

29. The following income is chargeable to tax under
the head “Profits and gains of business or
profession”:
5. any profit on transfer of the Duty Entitlement Pass
Book Scheme.
6. Any profit on the transfer of the duty free
replenishment certificate;
BASIS OF CHARGE [SEC. 28]

30. The following income is chargeable to tax under
the head “Profits and gains of business or
profession”:
7. Export incentive available to exporters;
8.Any interest, salary, bonus, commission or
remuneration received by a partner from firm; Any
sum received for not carrying out any activity in
relation to any business or not to share any
know-how, patent, copyright, trademark, etc.
BASIS OF CHARGE [SEC. 28]

31. The following income is chargeable to tax under the
head “Profits and gains of business or profession”:
9. Any sum received under a Keyman insurance policy
including bonus;
10. Profits and gains of managing agency; and
11. Income from speculative transaction.
Income from the aforesaid activities is computed
in accordance with the provisions laid down in
section 29 to 44D.
BASIS OF CHARGE [SEC. 28]

32. What is the meaning of „Business‟?
Business refers to any kind of economic activity
done by an assessee for earning profits.
The term business/economic activity includes “
any trade, commerce, manufacturing activity or any
adventure or concern in the nature of trade,
commerce, and manufacture”.
There are two types of business,
1. Speculative and
2. Non-speculative.

33. Speculative business income: Income from intraday equity trading is
considered a speculative business income. Intraday trading simply means
the buying and selling of financial instruments on the same day.
In other words, the amount (net amount from it) is not fixed and it can
change from time to time. For example, share trading business.
Non-speculative business income: It is the income from trading Futures
& Options is taken as a non-speculative business. F&O is also considered as
non-speculative as these instruments are used for hedging and also for
taking/giving delivery of the underlying contract.
In other words, the amount (net profit/loss from it) is fixed and does not
change for a period of time. For example, any manufacturing/trading or
any business.
It is not compulsory to have a series of permanent transactions in
a business. In other words, the repetition or continuity of business
transactions is not essential.

34. 'Speculation Business'
Where speculative transactions carried on by an assessee are of
such a nature as to constitute a business, the business shall be
called 'Speculation Business' and it shall be deemed to be distinct
and separate from any other business.
'Speculative transactions' means transactions in which a
contract for the purchase or sale of any commodity including
stocks and shares is settled otherwise than by the actual deliver
or transfer of the commodity or scrips.

35. IMPORTANT RULES REGARDING ASSESSMENT OF PROFITS
AND
GAINS OF BUSINESS OR PROFESSION

36. (1) Business or Profession carried on by the assessee.
Tax is chargeable from the person who arries on
the business or profession. It is immaterial if the
assessee (owner of the business) arries on the business
through a manager or other servant, or any other agent
duly authorized by him.
IMPORTANT RULES

37. (2)Tax is chargeable on the aggregate income from all
businesses or professions carried n by an assessee.
The profits and gains of different businesses or
professions carried on by an assessee are not taxable
separately; but tax is chargeable under one head on the
aggregate income from all businesses or professions
carried on by the assessee.
IMPORTANT RULES

38. (3) Profits and Losses of speculation business are kept
separate. Profits and losses of a peculation business carried on
by an assessee are kept separate, i.e., if there is a loss in a
peculation business it can be set-off only against profits of
speculation business.
(4) The business or profession is carried on by an assessee for
any time during the previous year. The assessee should have
carried on the business or profession for any time during the
business year, i.e., whether for a full year or for a part of the
previous year only.
IMPORTANT RULES

39. (5) Profits on the sale of assets on the winding up of a
business.
Profits made in winding p of a business by the sale of
assets in one lot are not taxable as business profit but as a
capital sun.
(6) No tax is payable on anticipated or notional profits.
Tax is levied on the actual profit in the previous year
and not on the anticipated profits. If in a business there is an
expectation .' earning some profits in the near future no tax
can be levied on such profits.
IMPORTANT RULES

40. (7) Expenses of an isolated transaction.
An isolated transaction of purchase and sale is in
nature of trade. For determining the profit earned by the
assessee in such a transaction, the expenses incurred by
him in respect of that transaction during the years prior
to the year of account shall be allowed as a deduction.
IMPORTANT RULES

41. (8) Income of illegal business or profession.
Tax is payable on the income of every business . profession
whether legal or illegal. The expenses incurred to earn income from
an illegal business which are incidental to such business are to be
allowed as deduction out of the income earned from illegal business.
However, penalties levied for infraction of law and expenses
incurred in defense of criminal proceedings are not allowed. Loss
computed under an illegal business cannot be set-off against the
profits of legal business,
IMPORTANT RULES

42. (9) Expenses incurred before setting up a business.
These expenses are not admissible. In case of a company
expenses incurred before incorporation are not allowable but those
incurred after incorporation but before the commencement of
business are allowable. However. Specified preliminary expenses
incurred by an Indian Company or any other resident person is lowed
under section 35D.
IMPORTANT RULES

43. (10) General commercial principles to be kept in view while
determining the real profits of business.
It is essential to keep in view the general commercial
principles while determining e real profits of a business.
(11) Deductible Business Losses.
Business losses which are not of a capital nature and
which have been sustained during the previous year and which
are incidental to the business carried by the assessee are
deductible while computing income under the head 'Business or
Profession‟.
IMPORTANT RULES

44. 12) Sums previously allowed as deduction are taxable if recovered
during the previous year.
If an assessee receives during the previous year any sum
connected with the business.
13) 'Dharmada' collected from customers is not a trading receipt
and hence not liable to tax .
14) The underwriting commission earned by the assessee on the
shares subscribed by' the public is assessable as business income
whereas the underwriting commission on shares subscribed by the
underwriter himself reduces the cost of shares and is not taxable.
IMPORTANT RULES

45. COMPUTATION OF PROFITS OF BUSINESS OR PROFESSION
The profits and gains of business or profession are
computed in accordance with the provisions contained in sections
30 to 43D.
(Sec. 29) sections 30 to 37 contain those deductions which
are expressly allowed while computing profits of business or
profession.
Section 40 provides those expenses which are expressly
disallowed. Besides these, there are some other deduction which
are allowed on the basis of general commercial principles while
computing profits of business or profession. It is necessary to
know those principles before studying the deductions expressly
allowed while computing profits of business or profession.

46. The general commercial principles are as under:
1) Profits should be computed according to the method of
accounting regularly employed by the assessee, provided that actual
profit can be ascertained by this method.
2) Only those expenses and losses are allowed as deductions which
were incurred or sustained during the relevant previous year.
3) These losses and expenses should be incidental to the operation
of the business. For example, embezzlement by an employee during
the course of business is a loss incidental to the business Similarly,
loss from dacoity in a bank is also a loss incidental to the business
of a bank.
4) Only the expenses incurred in connection with the business of
the assessee are allowed as deductions.

47. 5) If a business has been discontinued before the commencement of
the previous year. its expenses cannot be allowed as a deduction
against the income of any other running business of the assessee.
6) There are some essential expenses, though neither expressly
allowed nor disallowed, but are deductible while computing the
profits of business or profession on the basis of general commercial
principles provided that these are not expenses or losses of a capital
nature or personal nature.
7) Any expenditure incurred in consideration of commercial
expediency is allowed as deduction.
8) A deduction can be made from the income of that business only
for which the expenses were incurred. The expenses of one business
cannot be charged against the income of any other business.

48. RULES FOR ADJUSTMENT OF PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSEE
The Profit and Loss Account prepared by the assessee is not
correct from the income tax point view as
(i) several such expenses are charged to it which are wholly or
partly inadmissible under the Income Tax Act,
(ii) some admissible expenses are omitted from it,
(iii) some taxable incomes are not credited to it, and
(iv) some such incomes are credited which are either not taxable
under head 'Profits and Gains of Business or Profession' or are
not taxable at all, Hence, this Profit and Loss Account has got to
be adjusted from the income tax point of view so that the profit
taxable under the head 'Business or Profession' is determined
correctly.

49. Method of calculating taxable profits or Losses of Business:
Sec 29
Particulars Rs. Rs.
Profit as per P & L A/c xxx
Add i Expenses or losses disallowed but charged in P & L A/c xxx
ii Incomes taxable as business income but not credited to the P & L A/c xxx
iii Expenses in excess of the allowed amount charged to
P & L A/c
xxx
iv Under valuation of closing stock or over valuation of opening stock xxx xxx
xxx
Deduct i Expenses or losses allowed but not debited to P & L A/c xxx
ii Incomes not taxable as business income but credited to the P & L A/c xxx
iii Income exempt from tax but credited in P & L A/c xxx
iv Over valuation of closing stock and under valuation of opening stock xxx xxx
Taxable income from Business xxx
According to Section 29, the profits and gains of any business or
profession are to be computed in accordance with the provisions contained
in Section 30 to 43D.

50. Deductions Expressly Allowed (Sec. 30 to 37)
Sec. 30 : Expenses in respect of business premises : Revenue expenses
for use of premises for business or profession is allowed.
a) Premises are occupied as tenant : Rent, Repair, Insurance and Tax.
b) Premises are occupied as owner : Repair, Insurance and Tax.
Note : 1. If the business premise belongs to the assessee no deduction in
respect of rent will be allowed.
2. If the assessee is a partnership firm and the business premises
belongs to a partner of the firm, the rent payable to the partner will be
an allowable deduction.

51. Sec. 31 : Revenue Expenditure on Plant and Machinery / Furniture
and Fixture :
Revenue expenditure incurred on current repairs and insurance
premium incurred on plant and machinery / furniture and fixture is
allowed. [Rent and taxes are allowed u/s 37]
Note : Capital expenditure shall not included in repairs

53. Sec. 33AB : Tea, Coffee and Rubber Development Account
a) The assessee should deposit in special account with the National Bank
for Agricultural and rural Development.
b) The deposit should be made within a period of six months from the end
of the PY or before furnishing the return of his income, whichever is
earlier.
c) Limit : Sum equal to deposited or 40% of profits of such business
(before making deduction under this section and before setting off
brought forward business losses), whichever is less.
d) Utilization of funds : Must be used in the same previous year in which it
is withdrawn.

54. Sec 33ABA : Site Restoration Fund : Deduction will be allowed in respect
of prospecting, extraction or production of petroleum or natural gas in
India. It is necessary that, agreement with central government.
a) The assessee should deposit in special account with the State Bank of
India.
b) The deposit should be before the end of the previous year.
1) Building Residential Purpose (5%) Business Purpose (10%) Installing
Plant and Machinery / Temporary Building (40%)
2) Furniture and Fittings (10%)
3) Plant and Machinery General (15%) Motor Car used on hire (15%)
Motor Car used for own business (30%) Remaining Assets (40%)
[Books, Computers /etc]
4) Ships (20%) 5) Intangible Assets (25%) Income from PGBP
c) Limit : Sum equal to deposited or 20% of profits of such business
(before making deduction under this section and before setting off
brought forward business losses), whichever is less.

55. Section 35 : Expenditure on Scientific Research :
a) Scientific Research : It means activities for the extension of
knowledge in the fields of natural or applied science including
agriculture, animal husbandry or fisheries.
b) Scientific Research Expenditure : It means expenditure incurred on
scientific research would include all expenditure incurred for the
prosecution or the provision of facilities for the prosecution of
scientific research but does not include any expenditure incurred in the
acquisition of right in or arising out of scientific research.
c) In-house Research : A deduction of an amount equal to 150% of
expenditure (excluding land or building) shall be allowed.

56. Sec. 35D : Amortization (paying off) of Preliminary Expenses :
Preliminary expenses includes –
1. Preparation of feasibility report,
2. Preparation of project report
3. Conducting market survey.
4. Legal charges for drafting any agreement.
5. Printing charges for the Memorandum and Articles of Association.
6. Fees paid for registering the company.
7. Expenses regarding issue of shares or debentures e.g. underwriting
commission, brokerage, typing, printing, advertisement of prospectus
etc.
Deduction : Deduction is allowed is 1/5 of such expenditure for each of
the five successive previous year beginning with the previous year in
which the business is commences.

57. Sec. 35DD : Expenditure for amalgamation or demerger of an
undertaking :
Allowed deduction of 20% of such expenditure for each of five
successive previous years beginning with the year in which amalgamation
or demerger takes place.
Section 35DDA : Expenditure on voluntary retirement :
Allowed deduction of 20% of such expenditure for each of five
successive previous years beginning with the year in which the
expenditure was incurred.

58. Sec. 35 AD : Expenditure on Specified Business :
100% expenditure of capital nature is allowed [Excluding land,
goodwill, financial instrument] - Deduction is allowed in the year in which
business is commenced –
a) Expenditure incurred prior to commencement of its operations.
b) The amount is capitalised in the books of accounts on the date of
commencement of its operations.
Payment of Rs. 10,000 in a day should not be made in cash.

59. Specified Business :-
1. Setting up and operating of cold chain facility. Cold chain facility means a
chain of facilities for storage or transportation of:
a) Agriculture and forest produce,
b) Meat and meat products,
c) Poultry d) Marine and dairy products
e) Products of horticulture, floriculture and apiculture
f) Processed food items.
2. Warehousing facility – for storage of agricultural produce.
3. Laying and operating of petroleum oil pipeline.
4. At least one hundred beds hospital.
5. Building for slum redevelopment or rehabilitation framed by Central or
State Government.

60. 6. Housing project under a scheme for affordable housing framed by
Central or State Government.
7. Two-star or above category hotel.
8. Production of fertilizer in India.
9. Inland container depot / container freight station.
10. Bee-keeping and production of honey and beeswax.
11. Warehousing facility for storage of sugar.
12. Infrastructure facility – toll road, bridge, water supply, water
treatment, irrigation project, sanitation, port, airport, etc.
13. Semiconductor wafer fabrication manufacturing unit.

61. Sec. 36 : Other deduction :
1. Insurance premium paid for stock which is used for purpose of
business / profession.
2. Insurance premium for cattle, Paid by federal milk co-operative
society.
3. Insurance premium paid (any mode other than cash) for the health of
employees.
4. Bonus or commission to employee. (On actual payment basis)
5. Interest paid on borrowed capital for purpose of business / profession
(On actual payment basis). No deduction of „interest paid‟ for
acquisition of asset from the date of borrowing till the date of „put to
use‟. (It would be added to cost of asset).
6. Discount on Zero Coupon Bond allowed as deduction on pro-rata basis.
7. Bad debts – The debt should be incidental to the business.

62. Sec. 36 : Other deduction :
8. Loss regarding animals (Not for stock in trade) – allowed as deduction.
[Cost of animal – carcasses of animals]
9. Employers contribution to provident Fund – only Recognized provident
fund or approved superannuation fund. [Subject to Sec. 43B]
10. Employees contribution to provident fund or superannuation fund etc.
[Subject to Sec. 43B].
11. Approved gratuity fund. [Subject to Sec. 43B].
12. Expenditure on family planning (Only when assessee is company) :
Capital expenditure = 5 equal installments; Revenue expenditure – in the
same previous year.
13. Entertainment expenses, advertisement expenses (Except section
37(2B) i.e. advertisement in political party).
14. Security Transaction Tax (STT).

63. Sec. 37 : General Deduction (Residuary section) :
Conditions should be fulfilled –
a) Expenses not covered under section 30 to 36.
b) Revenue nature expenditure.
c) Not of capital nature
d) Not of personal nature
e) Expenses incurred for running of business / profession.
f) Expenditure shall be made during the previous year.
Explanation 1 : Expenditure incurred on protection money, hafta, bribes,
etc. will not be allowed.
Explanation 2 : Expenditure incurred on CSR activities will not be
allowed.

64. Sec. 37 : General Deduction (Residuary section) :
Examples of expenses allowed :
1. Expenses incurred in the purchase, manufacture and sale of goods.
2. Expenses incurred on day to day running of the business.
3. Expenses incurred on breach of contract.
4. Amount of Value Added Tax / GST, excise duty, professional tax.
5. Compensation paid for retrenchment of undesirable employee.
6. Contribution made to provident fund.
7. Commission paid for securing orders.

65. Sec. 37 : General Deduction (Residuary section) :
8. Compensation paid to employees due to accident on duty.
9. Royalties paid for mines.
10. Insurance premium paid for policy of its employees for compensation
during work.
11. Compulsory subscription to an association.
12. Legal expenses for – normal course of business, to avoid business
liability, defend for title of his assets, terminate a disadvantageous
trading relationship, and resist a winding-up petition by some
shareholders.
13. Annual listing fee paid to stock exchange.
14. Expenditure on inauguration ceremony.

66. Sec. 40(a) : Expenses not allowed in any circumstances :
1. Expenditure on advertisement in any souvenir, etc. published by a
political party.
2. Payments outside India, in India to a non resident or a foreign
company on which TDS is not deducted and has not paid on or before
the due date specified.
3. Payment to residents – on which TDS has not been deducted or before
the due date of filing the return of income – 30% of such sum shall
not allowed as deduction.
4. Wealth tax : Wealth tax chargeable under the Wealth Tax Act shall
not be allowed as deduction.
5. Tax on Profits and Gains : Any sum paid on account of any tax levied
on the profits and gains of any business or profession shall not be
allowed as a deduction.
6. Income Tax
7. Contribution to unrecognized provident fund.

67. Sec. 40A : Expenses not deductible in certain circumstances :
1. Excessive payment to relatives.
2. Payment in Cash : Payment made to a person in a day is made exceeding
Rs. 10,000 other than account payee cheque, bank draft or use of
electric clearing system, it will be disallowed. Entire amount will be
disallowed. Exception : Where payment is made for plying, hiring or
leasing goods carriages, the limit of disallowance shall be exceeding Rs.
35,000.
Sec. 43B : Deductions allowable only on actual payment :
1. Any sum payable by the assessee by way of tax, duty, cess or fee.
2. Any sum payable by him as an employer by way of contribution to any
provident fund, superannuation fund or gratuity fund or any other fund
for the welfare of employees.