Profits and Gains of Business

1. Profits and Gains of Business or Profession

2. Business
Definition: “Any trade,
commerce, manufacture or any
adventure or concern in the
nature of trade, commerce and
manufacture”
Economic
activity
carried on
for earning
profits

3. Profession
Section
2(36)
Lawyer, Doctor,
Accountant,
Engineer, Surgeon,
author etc.,
It is an occupation requiring
purely intellectual skill or
manual skill controlled by
the intellectual skill of the
operator.

4. Business
Income

9. Particulars ₹ ₹
Net profit as per profit/loss account 1,39,000
Add: Inadmissible expenses
**** Xx
**** xx Xx
Xxx
Less: Expenses allowed but not debited in P/L a/c
*** Xx
*** xx Xx
Xxx
Less: Exempted income and income not taxable under this head
*** Xx
*** xx Xx
Business Income xxx
Computation of Business Income

10. Problems

12. Particulars ₹ ₹
Net profit as per profit/loss account 1,39,000
Add: Inadmissible expenses
Advertisement in cash (100% of 22,250) 22,250
Proprietors salary 1,12,500
Interest on capital 2,000
Income tax 1000
Advance income tax 1,000
Donation 500
Motor car expenses 375
Help to poor student 2,200
Depreciation 2,000 1,43,825
2,82,825
Computation of Business Income

13. Particulars ₹ ₹
Less: Expenses allowed but not debited
Depreciation 2,900
2,79,925
Less: Income not taxable under this
head
Bad debts recovered disallowed earlier 4,000
Interest on government securities 4,000 8,000
Business Income 2,71,925

15. Particulars ₹ ₹
Net profit as per profit/loss account 1,90,000
Add: Inadmissible expenses
Drawings 24,000
Interest on proprietors capital 7,000
Bonus to proprietor 4,000
Car purchased 72,000
Donations 2,000
Provision for bad debts 6,000
Legal charges (being capital expenses) 3,000
Computation of Business Income

16. Particulars ₹ ₹
Repairs on let out building 1,250
Depreciation 15,000
Advertisement expenses paid in cash 24,000 1,58,250
3,48,250
Less: Income to be treated under separate heads
Income from interest on securities 14,000
Income from house property 25,000 39,000
3,09,250
Less: Allowable depreciation 14,400
Income from business 2,94,850
Computation of Business Income

19. Particulars ₹ ₹
Net profit as per profit/loss account 1,25,000
Add: Inadmissible expenses
Income tax 25,000
Depreciation 30,000
Bad debt reserve 5,000
Salary to partner beta 10,000
Salary to partner alpha 24,000
Legal charges regarding partnership deed (being capital
expenditure)
500
Computation of Business Income

20. Particulars ₹ ₹
Penalty (it is not allowable deduction) 4,500
Furniture purchased (being capital
expenditure)
3,000
Cash shortage (being capital loss) 200
Conveyance expenses (50% being personal
expenses of partner)
4,000
Purchases made with bearer cheque
exceeding Rs. 10,000 (100% disallowed)
60,000 1,66,200
2,91,200

21. Particulars ₹ ₹
Less: Depreciation 35,500
Book Profit 2,55,700
Less: Allowable remuneration u/s
40(b)
24,000
Business Profit 2,31,700

24. Particulars ₹ ₹
Net profit as per profit/loss account 2,03,000
Add: Inadmissible expenses
Patents (1/4th part) 7,000
Provision for bad debts 11,000
Expenditure on promotion of family planning amongst
employees
14,000
Donation to an approved institutions 15,000
Sales tax penalty 12,000
Depreciation 1,20,000
Computation of Business Income

25. Particulars ₹ ₹
Income tax 40,000
Provision for income tax 20,000
Health insurance premium of employees –
50% paid in cash
8,000
Advertisements – cost of sign board being
capital expenditure
15,000 2,62,000
4,65,000

26. Particulars ₹ ₹
Less: Expenses allowed but not debited
Depreciation
On Patent rights 7000*14/1=98,000*25%*1/2year 12250
On neon sign boards 15000*15% 2,250
Factory Building 2,00,000*10% 20,000
Non- Factory Building 3,00,000*5% 15,000
P*M old 3,00,000*15% 45,000
P*M New 2,00,000*15%*1/2 15,000
Additional depreciation on new P&M
2,00,000*20%*1/2
20,000
1,29,500

27. Particulars ₹ ₹
Amount given to university for research allowed
@100% of 40,000 40,000
Less: Already debited 40,000 NIL 1,29,500
3,35,500
Less: Income credited but not allowed under this
head
Rent from let out house 30,000
Profit from sale of old medicine 16,000
Interest on Govt. Securities (Investment) 20,000
Interest on Income tax refund 8,000 74,000
2,61,500

28. Particulars ₹ ₹
Add: Income accrued but not credited 20,000
Taxable Business Income 2,81,500

30. Particulars ₹ ₹
Net profit as per profit/loss account 40,100
Add: Inadmissible expenses
Income tax 2,600
Depreciation 600
Municipal Tax 1,625
Repair to house 5,000
Commission paid to collect interest on security 25
LIC Premium 1,320 11,170
51,270
Computation of Business Income

31. Particulars ₹ ₹
Less: Expenses allowed but not debited
Depreciation on assets 4,500
46,770
Less: Exempted income
Bank interest 450
Rent from house property 4,800
Interest on commercial security 2,000 7,250
39,520

34. Particulars ₹ ₹
Net profit as per profit/loss account 24,375
Add: Inadmissible expenses
Household expenses 3500
Fire Insurance 300
Reserve for bad debts 1000
LIC 1000
Donation 1000
Income tax 3300
Computation of Business Income

35. Particulars ₹ ₹
Repair (house property) 500
Depreciation 1000
Interest on capital 200 11800
36175
Less: Expenses allowed but not debited in
P/L a/c
Depreciation 500
35675

36. Particulars ₹ ₹
Less: Income is not taxable under
this head and exempted income
Rent from HP 6,000
Dividend from Indian company 2,400 8,400
Business Income 27,275

37. Particulars ₹ ₹
House property Income
Let out
Rent - NAV 6000
(-) Standard deduction 30% of NAV 1800
Let out income 4200
Self occupied income
NAV Nil
(-) Interest on loan 12000
Self occupied loss (12000)
House property income (7800)

38. Particulars ₹ ₹
Gross total income
House property loss (7800)
Business Income 27,275
Income From other sources:
Dividend from Indian Company
2400
GTI 21,875

39. 39