Tag: Profit and Gains from Business & Professions

Amount not deductible under section 40A (3)

The provisions of section 40A (3) are given below – RULE – The following conditions should be satisfied – Condition one – The assessee incurs any expenditure, which is otherwise deductible under the other provisions of the Act for computing business/profession income (e.g., expenditure for purchase of raw material, trading goods, expenditure on salary, etc.).

Amount not deductible under section 40A (2)

Any expenditure incurred by an assessee in respect of which payment has been made to the specified persons is liable to be disallowed in computing business profit to the extent such expenditure is considered to be excessive or unreasonable, having regard to the fair market value of goods or services or facilities, etc. As per

Amount not allowable under section 40(a)

In the case of any assessee, the following expenses are expressly disallowed under section 40(a): INTEREST, ROYALTY, FEES FOR TECHNICAL SERVICES PAYABLE TO A NON-RESIDENT [SEC. 40(a) (i)] – Disallowance under section 40(a) (i) is attracted if the following conditions are satisfied Condition one The amount paid is interest (not being interest on any loan

Interest on borrowed capital

Interest on capital borrowed is allowed as deduction if the following conditions are satisfied —   Condition one The assessee must have borrowed money. Condition two The money so borrowed must have been used for the purpose of business. Condition three Interest is paid or payable on such borrowing. Condition one The assessee must have

Bonus or commission to employees

Bonus or commission paid to an employee is allowable as deduction subject to certain conditions: Admissible only if not payable as profit or dividend – One of the conditions is that the amount payable to employees as bonus or commission should not otherwise have been payable to them as profit or dividend.. Deductible on payment

Amortization of preliminary expenses

Amortization of preliminary expenses means deduction under section 35D is available in case of an Indian company or a resident non-corporate assessee. A foreign company even if it is resident in India, cannot claim any deduction under section 35D. TIME AND PURPOSE OF PRELIMINARY EXPENSES – Expenses incurred at the following two stages are qualified


The term “scientific research” means “any activity for the extension of knowledge in the fields of natural or applied sciences including agriculture, animal husbandry or fisheries”. With a view to accelerating scientific research, section 35 provides tax incentives. Under this section amount deductible in respect of scientific research may be classified as under: Expenditure on


Depreciation shall be determined according to the provisions of section 32. CONDITIONS FOR CLAIMING DEPRECIATION – In order to avail depreciation, one should satisfy the following conditions: Condition 1 Asset must be owned by the assessee. Condition 2 It must be used for the purpose of business or profession. Condition 3 It should be used