1.Company Sec 2(17)Company is defined to mean following: An Indian Company; or Any body corporate incorporated under the laws of aforeign country; or Any institution , association or a body whetherincorporated or not , whether Indian or not which isdeclared by a general or specific order as a companyby CBDT; or Any institution, association or a body whetherincorporated or not and whether Indian or non-Indian,which is declared by general or special order of thecentral board of direct taxes to be a company.

2. Types of CompanyTypes of companies Indian company Domestic company Foreign company Industrial company (electricity, power, shipping ormining) Company in which public are substantiallyinterested / widely held companies owned byGovernment/ RBI Section 25 companies: A company without sharecapital declared by CBDT as such Nidhi / MutualBenefit Society Company owned by a cooperativesociety Listed companies 3. Indian Company An Indian Company means a company formed &registered under the Companies Act,1956 Besides itincludes the following: A corporation established by or under a Central or Stateor Provincial Act Any Institution ,association, or body which is declaredby the Board to be a Company u/s 2 (17). A company formed & registered under any law in forcein the State of J & K . A company formed & registered under any law for thetime being in force in Union Territories of Dadra ,Nagar,Haveli, Goa, Diu. In the afore said case ,a company will be treated as anIndian Company only if its registered office is in India. 4. Domestic Company Domestic Company means an Indian Company whichin respect of its income liable to tax under the Act,hasmade prescribed arrangement for the declaration &payment of dividends within India in accordance withthe sec 194. Indian Company will automatically be considered as adomestic Company. In order to become domestic company it is essentialthat the said other company may have made prescribearrangement for declaration & payments within India ofdividends out of such income. Foreign Company means a company which is not adomestic Company. 5. Industrial Company It means a Company which is mainly engaged in thebusiness of generation or distribution of electricity orany other form of power or in the construction of shipsor in the manufacture or processing of goods or inmining. 6. Profits and Gains of Business orProfessionBusiness includes trade, commerce or manufactureor any adventure or concern in the nature of trade,commerce or manufacture. Profession means vocation,attainment of specialknowledge. Business/profession should be carried on by theassessee. 7. Allowable expensesSec 30- Rent,rates,taxes repairs,insurance for building.Sec 31- Repairs & insurance of machinery, plant & furniture.Sec 32 - DepreciationSec 36(1)- Insurance Premium on stock ,building ,employeesSec 36(1)(ii) Bonus Commission to employeesSec 36(1)(iii) Interest on borrowed capitalSec36(1)(iv)- Employers contribution to PF ,Super Annuation FundSec 36(1) (iva) Employers Contribution to notified pension Scheme Subject to 10% of salarySec 36(1)(vii)- Bad DebtsSec 36(1) (V)-Contribution towards approved Gratuity Fund.Sec 36(1)(ix)-Family planning expenditure ,Capital expenditure one fifth of the expenditure is allowed as 8. Allowable expensesSec 37(2B)- Any expenditure incurred by an assesseeon advertisment in any souvenir,brochure,pamphletpublished by political party is not deductible,any otheradvertisment is deductible. Sec 37(1) General Deduction Expenditure should not be in nature of capitalexpenditure. It should not be personal expenditure of assessee. It should have been incurred in the previous accountingyear. It should be in the respect of business carried on by theassessee. It should have been expended wholly & exclusively forpurpose of such business. It should not have been incurred for any purpose whichis an offence or is prohibited by law. 9. Amount expressly disallowed under Act Sec 40(a) Interest,royalty,fees for technical servicespayable outside India or payable to non resident,TDSneed to be deducted & deposited before due date withGovernment,if not, then no deduction. Sec 40 (a)(ia)-In case of resident assesseeCase 1-Tax is deductible but not deducted ,no deductionin the current previous year, If tax is deducted in anysubsequent year the expenditure will be deducted in theyear in which TDS will be deposited by the assesseewith Government.Case II- Tax is deductible & so deducted during thecurrent financial year but it is not deposited on or beforethe due date of submission of return of income u/s139(1),then no deduction in the previous year. If tax isdeposited with the Government after the due date ofsubmission of return of income ,the expenditure will bedeductible in that year in which tax will be deposited. 10. Amount expressly disallowed under Act Sec 40(a)(ia) covers the following expensesInterest193/194 ACommission or Brokerage 194 HFees for Technical services 194 JFees for Professional 194JServicesPayment to194 Ccontractor/subcontractorsRent194 IPayment of royalty to194 J Sec 40 (a)(ic) Fringe BenefitResidentTax is not deductible. Sec 40(a) (ii) Income tax is not deductible.Also interestu/s 234 A,234 B,234C is not allowed. Sec 40(a)(iia) Wealth Tax is also not deductible. Sec 40 (a) (iii)-salary payable outside India without Taxdeduction is not deductible. 11. Amount expressly disallowed under Act Sec 40(a)(iv)- Any payment to Provident Fund or the otherfund established for the benefit of the employees of theassessee is not deductible if the assessee has not madeeffective arrangements to secure that tax shall be deductedat source from any payments made from the fund which arechargeable to tax under the head Salaries. Sec 40(a)(v)-Tax on perquisite paid by employer notdeductible. Sec 40 A(2) payments to relative is disallowed to theextent such expenditure is considered to be excessive orunresonable having regard to the fair market value of goodsor services or facilities.e.g x purchases goods from hisbrother.A,B,C are three Directors of X Ltd .X Ltd employesMrs A or Mrs B for her tax advise. Sec 40A(3) Payments exceeding Rs 20,000 paid otherwisethan by account payee cheque or bank drafts.(not allowedby cash,bearer cheque,crossed cheque,crossed demanddraft),100% of such payment will be disallowed.Exception tothe above are mentioned Rule 6DD 12. Amount expressly disallowed under Act Rule 6DD is as follows Payment made to banking & other credit institution suchas Reserve Bank,commercial Bank. Payment to the Government ,such payment is requiredto be made for legal tender ,direct taxes,customduty,excise,railway freight,sales tax. Payment through banking system e.g letter ofcredit,mail or telegraphic transfer. Payment made to a person who resides in a village notserved by Bank. 13. Related party Transaction X purchases goods from his brother. A,B,C are three directors of X Ltd. X Ltd employs Mrs Ais paid by X Ltd for her tax advise. A & B are the two partners of AB & Co. The firmpurchases raw material from sister of B. X holds 20% equity share capital in X Ltd. X Ltd hirestruck owned by the brother of X & pays rent. Y Ltd holds 20% equity shares in X Ltd .A & B aredirectors of Y Ltd. X Ltd pays salary to Mrs B. 14. Amount expressly disallowed under Act Sec 40 A(7) Gratuity is deductible only is the followingcases: Where gratuity is paid during the previous year or wherethe gratuity has become payable during the previous year(if no deduction was claimed on the basis of provisionearlier) Where any provision for gratuity (to meet liability of gratuityin future) is made by way of any contribution towards anapproved gratuity fund. An employee retires during the current year,Gratuity is paidto him during the current year.It is deductible during thecurrent year if no deduction was claimed earlier. A company has 50 employees .To meet future liability topay them gratuity at the time of retirement,a gratuity fund iscreated & employer makes contribution,it is deductible onlyif the fund is approved. Sec 40A(9) If any contribution or payment is madetowards trust,company,not being recognised PF/gratuity,then it is not deductible. 15. Sec 43 B Disallowance of Unpaid liability The following expenses are deductible on paymentbasis- Any sum payable by way of tax ,duty ,cess or fee Any sum payable by an employer by way of contributionto PF or superannuation fund Any sum payable as bonus or commission toemployees for services rendered. Any sum payable as interest on any loan or borrowingfrom Public financial institution,state Financialcorporation Interest on any loan or advance taken from aScheduled Bank including a co-operative Bank. Any sum payable by an employer in lieu of leave at thecredit of his employee. Exception If payment in respect of the aforesaidexpenses is actually made on or before the due date ofsubmission of return of income & the evidence of suchpayment is submitted along with the return of income. 16. Examples of Deductible Expenditure Interest paid on delayed payment of tax e.g purchase tax, municipal tax, sales tax, service tax , a delayed payment of provident fund 17. Examples of Non Deductible Expenditure Interest paid under any provision of Income Tax,Wealth tax ,Fringe Benefit tax ,Advance Tax or SelfAssessment Tax,for late payment or short paymentof regular tax. Interest on loan taken to meet personal expenses. Where a penalty is incurred for contravention of anyspecific statutory provision. Banking Transaction Tax, Securities TransactionTax,Commodities Transaction Tax are deductible. 18. Profits and Gains of Business or ProfessionProfit and Loss account:Net profit as per P&L accountxxxxAdd: expenses disallowed xxxxAdd: incomes related to business but not recordedxxxx VLess: incomes not taxable under this headxxxxLess: expenses related to business but not recordedxxxx V 19. Set off & Carry forward of losses The process of setting off of losses & their carryforward may be covered in the following steps:Step 1Inter-source adjustment under the same headof incomeStep 2Inter head adjustment in the same assessmentyear. Step 2 is applied only if a loss cannot be setoff under Step 1.Step 3Carry forward of a loss .Step 3 is applied only if aloss cannot be set off under step 1 & 2. 20. Inter source Adjustment Sec 70 If the net result for any assessment year ,in respect ofany source under any head of income, is a loss , theassessee is entitled to have the amount of such lossset off against his income from any other sourceunder the same head of income for the sameassessment year. 21. Inter source Adjustment Sec 70Following are the exceptions to the aforesaid rule. Loss in a speculation business can be set off onlyagainst the profit in a speculation business. Long term capital loss can be set off only againstlong term capital gain . Loss incurred in the business of owning &maintaining race horses cannot be set off against anyincome except income from such business. By virtue of section 58, a loss cannot be set offagainst winning from lotteries ,cross word puzzles,races including horse races, card games & othergames of any sort or from gambling or betting of anyform or nature. 22. Inter source Adjustment Sec 70One should note the following points: Loss from house property can be set off againstincome from any other house property. Loss from a non-speculation business can be set offagainst income from speculation or non-speculationbusiness. Short term capital loss can be set off against anycapital gain (Whether long term or short term) Under the head Income from other Sources lossfrom activity ( other than the business of owning &maintaining race horses ) can be set off against anyincome but other than winning from lotteries,crossword puzzles.etc. 23. Inter source Adjustment Sec 70 If income from a particular source is exempt from tax e.g income exempt from tax under section 10,loss from such source cannot be set off against income chargeable to tax. If there is income from one source & loss from another source within same head of income , one has to set off the loss against income . 24. Inter source Adjustment Sec 70 X Y Z Speculativ Non- Speculati Non-Speculati Non- especulativ vespeculati vespeculateveive A 140000160000150000 B (-) 50000 (-) (-)60000 180000 C200000 400000 2,10,000 D(-)80000 (-)90000 (-)2,20,000 90000120000 (-)2000031000090,000 (-)10000 25. Inter source Adjustment Sec 70 In this case , loss from speculative business can be set off only against income from speculative business. However loss from non-speculative business can be set off against income from any business speculative or non-speculative. For instance ,in case of Y loss of RS 20000/- from speculative business can not be set off against income of Rs 310000/- from non-speculative business. In case of Z , loss of RS 10000/- from non- speculative business should be set off against speculative business income of Rs 90000/-.It may be noted that Z does not have any option to set off (or not to set off) the loss of RS 10000/- against income of Rs 90000/-. 26. Inter source Adjustment Sec 70CapitalA B Cassetwhich istransferredShort Term Long Term Short Term Long TermShort Term Long TermP 250000 460000312000Q (-) 90000(-)490000 (-) 80000R 400000 80000 556000S (-) 380000 (-) 15000 (-) 590000Total 16000020000(-)3000065000 232000(-) 34000 27. Inter source Adjustment Sec 70 Long term capital loss can be set off only against long term capital gains. However short term capital loss can be set off against long term as well as short term capital gains.In case of B short term capital loss of Rs 30000/- should be set off against long term capital gains of Rs 65000/-.In case of C However ,long term capital loss of Rs 34000/- can not be set off against short term capital gains of Rs 232000/-.It may be noted that B does not have any option to set off (or not to set off ) short term capital loss against long term capital gains. 28. Inter Head Adjustment Sec 71The provisions of sec 71 are given below. Where the net result of computation made for any assessment year in respect of any head of income is a loss, the same can be set off against the income from other heads. 29. Inter Head Adjustment Sec 71Following are the exception to heads: Loss in speculation business can not be set off againstany other income. Loss under the head capital gains can not be set offagainst income under other heads of income. Loss from the business of owning & maintaining racehorses can not be set off against any other income. A loss can not be set off against winning from lotteries,crossword puzzle, races, card games & other gamesof any sort or from gambling or betting of any form ornature. Loss from business or profession (includingunabsorbed depreciation) can not be set off againstincome under the head salaries. Before adjusting loss under section 71,one has to set 30. Inter Head Adjustment Sec 71 Any loss can be set off against income under otherheads of income for the same year .House propertyloss can be set off against speculative profit. No order of priority is given in the Act. One should tryto first set off those losses which cannot be carriedforward to next year. A loss has to first adjusted against available incomeunder other heads of income .No option is available toset off a loss or not to set off a loss . 31. Set of & Carry forward of losses If tax payer has the following income/loss: Current YearNext Year( Rs)(Rs) Business Income(-) 1,00,000 8,00,000Long Term Capital Gain 2,30,0003,00,000 In this case ,after adjusting business loss of Rs1,00,000/- on the remaining balance income Rs1,30,000/- he will have to pay tax during the currentyear. Where income from a particular source is exemptfrom tax e.g income exempt under section 10,lossfrom such source can not be set off against incomechargeable to tax. For the purpose of section 71,lossof profit must be loss of taxable profits. 32. Carry forward of losses If a loss can not be set off either under the same heador under the different heads because of absence orinadequacy of the income of the same year ,it may becarried forward & set off against the income ofsubsequent year. Under the Act, the following losses can be carriedforward : Loss under the head Income from House Property (Sec 71B) Loss under the head Profits & Gains of Business orProfession(i.e loss from Speculative or non-speculative business) (Sec 72,73) Loss under the head Capital Gains (i.e Short term orlong term capital loss) (Sec 74) Loss from the activity of owning & maintaining race 33. Sec 71 B Loss from House Property When the net result of computation for any assessmentyear under the head Income from House Property is aloss & such loss can not be or is not fully set off againstincome under the other heads u/s 71 ,such loss can becarried forward for set off against income from HouseProperty in the subsequent assessment years. Such loss can be carried forward for 8 assessmentyears. 34. Carry forward & set off of business loss (Sec 72)Such loss can be set off only against BusinessIncome: It is not necessary that business loss of year oneshould be set off against income from the samebusiness in year two. Loss of Business A of year onecan be set off against profit of business A or someother business in year two. A loss can be set off against profits of any business inthe subsequent year. Loss can be carried forward for eight Assessmentyear. Unabsorbed depreciation carried forward u/s 32 (2)will be set off only after setting off of the broughtforward losses under this section. Loss can be carried forward & set off even if the 35. Return of loss should be filed under section 139(3): A loss can not be carried forward unless it is determined in pursuance of a return filed within the time allowed under section 139(3) .If an assessee fails to file his return of loss on or before the due date of furnishing return of income ,then following losses can not be carried forward: Loss of speculative or non-speculative business(not being unabsorbed depreciation). Short term or long term capital loss. Loss (not being unabsorbed depreciation) from the activity of owning & maintaining race horses. In case where the profits are insufficient to absorb brought forward losses, current depreciation, current business loss the same should be deducted in following order. Current Depreciation Brought Forward Business loss Unabsorbed Depreciation 36. Carry forward & Set off of Speculationloss (Sec 73) Loss from a speculative business can be set off only against income from a speculative business Speculative transaction means a transaction in which a contract for the purchase or sale of any commodity including stocks & shares is periodically settled, otherwise than by actual delivery or transfer of commodity or scrips. Loss in a speculation business can be carried forward to the subsequent year & set off only against the profits of a speculation business carried on in that year. Such loss can be carried forward for 4 assessment years. 37. Carry forward & Set off of CapitalLoss(Sec 74) Long Term capital loss can be set off only againstlong term capital gains . Short Term capital loss can be set off against shortterm or long term capital gains. Such loss can be carried forward for eightassessment year immediately succeeding theassessment year in which loss was first computed. Such loss can not be carried forward unless return isfiled within the time limit of section 139(1). 38. Carry forward & Set off of Capital Loss(Sec 74)Provisions Illustrated During the previous year 2011-12,X Ltd hasgenerated short term capital gains of Rs 80,000/- .Ithas brought forward capital loss short term Rs10,000/-& Long Term Rs 15,000/-In this case, whileshort term capital loss of Rs 10,000/- can be set offagainst short term capital gains of Rs 80,000/-.Longterm capital loss of Rs 15,000/- can not be adjustedagainst short term capital gains. During the previous year 2011-12,X has long termcapital gains of Rs 1,16,000/-.He has broughtforward loss long term Rs 40,000/- & short term Rs8,000/-.In this case,long term as well as short termloss can be set off against long term gains. 39. Carry forward & Set off of loss from activity ofowning & maintaining of race horses(Section 74A(3) Losses incurred by owner of race horses in theactivity of owning & maintaining race horses can beset off only against income ,if any, from the activity ofowning & maintaining race horses in the sameassessment year. Such unabsorbed loss can be carried forward to asubsequent year & set off only against income fromthe activity of owning & maintaining race horses. Such loss can be carried forward for fourassessment years . 40. Carry forward & Set off of loss from activity ofowning & maintaining of race horses(Section 74A(3)Business IncomeAny other Income Income from theAny other business activity of owning & income (including maintaining race income from the horses activity of owning &maintaining anyother animal horses)Case of XIncome of the80,000 90,000 12,000Current YearLess:B/F Business(-) 70,000 (-) 95,000loss pertaining toA.Y 2011-12Total10,000 (-) 5,00012,000 41. Carry forward & Set off of loss from activity ofowning & maintaining of race horses(Section 74A(3)Business IncomeAny other Income Income from theAny other business activity of owning & income (including maintaining race income from the horses activity of owning &maintaining anyother animal horses)Case of YIncome of current1,90,000 70,000 60,000yearLess: B/F Business (-) 2,10,000 (-) 55,000loss pertaining toA.Y 2011-12Total(-) 20,000 15,000 60,000 42. Carry forward & Set off of loss from activity ofowning & maintaining of race horses(Section 74A(3) In the case of Y, the brought forward loss from theactivity of owning & maintaining race horses (to theextent it could not be set off against income from suchactivity i.e Rs 20000/- can not be set off againstincome from other business .It can be carried forwardup to the A.Y 2015-16. However in case of X, the brought forward loss fromother business to the extent it is not set off Rs 5000/-can be set off against income from the activity ofowning & maintaining race horses. 43. Carry forward & Set off of lossType of IncomeHow manyShould theIs itLossagainst yrs loss to business be necessarywhich c/f be c/fcontinued to submitloss can be forward the return inset off time ?1.House Income from 8 yrs NANopropertyHP2.Speculation Speculation 4 yrs Not YeslossprofitNecessary3.Non-speculationloss3.1 Any incomeNo time limit Not NoUnabsorbedother thanNecessaryDepreciationSalary3.2 BusinessAny Business 8 yrsNot YeslossprofitNecessary 44. Carry forward & Set off of lossType ofIncomeHow manyShould theIs itLoss against yrs loss to business be necessary which c/f be c/fcontinued to submit loss can be forward the return in set off time ?4.CapitalLoss4.1 ShortAny income8 yrs Not YesTerm from CapitalNecessary gain4.2LongLong Term 8 Yrs Not YesTerm LossCapital GainNecessary5.Loss fromIncome from 4 yrs Yes Yesrace horsessame activity 45. Carry forward & Set off of loss in case of Discontinued Business The Business or profession is discontinued. Loss of such business pertaining to that period couldnot be set off . Such business is not a speculation business After discontinuance of such business ,there is areceipt which is deemed business income u/s 41. Then such loss can be carried forward even after 8years & can be set off even if the return of loss is notsubmitted in time. 46. Loss on sale of shares ,securities or units [Sec94(7)] Record Date means such a date as may be fixed bycompany/mutual fund/UTI for the purpose ofentitlement of the holder of the securities/shares/units to receive the dividend (or income). Section 94(7) is applicable if the following conditionsare satisfied:1. Any Person buys or acquires anySecurities/shares/units within a period of 3 monthsbefore the record date.2. Such a person sells or transfers suchsecurities/shares/units within a period of 3 months(9 months in the case of units ,after the record date)3. The dividend or income on such securities/shares/units received (or receivable) by suchperson is exempt from tax. 47. Loss on sale of shares ,securities or units [Sec94(7)] If the above conditions are satisfied then provisionsof sec 94(7) are applicable as follows: Find out the amount of loss from a transaction whichsatisfies the above condition. Find out the amount of dividend receivable on therecord date which is exempt from tax. If (a) is less than or equal to (b) ,then loss can not beadjusted .Conversely ,if (a) is more than (b) ,then (a)minus (b) can be set off against income under thehead capital gains. 48. Taxation of Export Undertaking Sec 10A Undertaking established in Free Trade Zone : Conditions to be satisfied: Must begin manufacture or production in Free TradeZone It has begin to manufacture /produce article orthings or computer software during the followingyears: Location Year Free Trade ZoneFrom the A.Y 81-82 or any subsequentyear Electronic HardwareFrom the A.Y 94-95 or any subsequent Technology park or year software Technology Park Special Economic Before April 1,2005 Zone In the case of units which begins to manufacture orproduce an article or thing or computer software on orafter April1,2005 in SEZ, deduction will not be 49. Taxation of Export Undertaking Sec 10A Free Trade Zones are Kandla, Santacruez, Falta,Madras, Cochin, Noida. Electronic software /hardware Technology Park: Itmeans any park set up in accordance with thescheme notified by the GOI. Computer Software meansAny computer programme recorded on any disc,tape, perforated media or other information storagedevice. Any customized electronic data or any product orservice of similar nature as may be notified by theBoard. Which is transmitted or exported from India toany place outside India by any means. 50. Taxation of Export Undertaking Sec 10A The CBDT has specified the following informationTechnology enabled products or services for thispurpose only: Back office Operations Call Centers Animation Data Processing Engineering & Design Human Resource Services Insurance Claim Processing Payroll Revenue Accounting. 51. Taxation of Export Undertaking Sec 10A Should not be formed by Splitting /reconstruction ofBusiness. Should not be formed by Transfer of Old Machinery Sale proceeds of articles or things or computersoftware exported out of India must be received inIndia by the assessee in convertible foreign exchangeduring the previous year or within a period of sixmonths from the end of relevant previous year. Assessee should furnish audit report in Form No 56Falong with the return of income. Deduction u/s 10A is not available if return of incomeis not submitted on or before due date of submissionof return of income u/s 139(1) or in the return ofincome deduction u/s 10A is not claimed. 52. Taxation of Export Undertaking Sec 10AAmount of Deduction: Profits of the business * Export Turnover of undertaking Total Turnover of the Business carriedon by the assessee. Export Turnover : It means consideration in respect of export by the undertaking of articles or things or computer software received in India by the assessee in convertible foreign exchange within the prescribed period but does not include the following: Freight Telecommunication Charges Insurance attributable to the delivery of the articles or things or Computer software outside India. Expenses if any, incurred in foreign exchange in providing the technical service outside India. 53. Taxation of Export Undertaking Sec 10A Site Development : On site development of computer software(including services for development of software outside Indiashall be deemed to be export of computer software outside India. Loss of other undertakings: Profit for the business ofundertaking shall be calculated without adjusting losses &unabsorbed depreciation of other undertaking. e.g if assesseehas four units (all are qualified for deduction u/s 10A ).Threeunits have returned a profit during the course of assessmentyear ,while one unit has returned a loss. The assessee is entitledto a deduction in respect of the profits of the three eligible unitswhile the loss sustained by the fourth unit can be set off againstthe normal business income. Brought Forward losses: Deduction under sec 10A will beavailable in respect of profit of an eligible undertaking withoutsetting off of brought forward losses. 54. Taxation of Export Undertaking Sec 10A Period of Deduction: For an undertaking which was initiallylocated in Free Trade Zone or export Processing Zone & issubsequently located in a SEZ by the reason of conversion ofsuch Zones into a special economic Zone ,the deduction shall beavailable for 10 years from the previous year in which theundertaking begins to manufacture or produce such articles orthings or computer software in such free trade zone or exportprocessing zone. Amount of Deduction Special Provisions :The deductionunder section 10A in case of undertaking which begins tomanufacture or produce articles or things or computer softwareduring April 1,2002 & March 31,2005 in any SEZ shall be asfollows:It is available for first 10 A.Y First 5 years- 100% of profits & gains derived from the export ofsuch articles or things or computer software is deductible for aperiod of 5 consecutive assessment year. Sixth & Seventh assessment year -50% of such profits & gains is 55. Taxation of Export Undertaking Sec 10A Eighth ,ninth & tenth Year For next 3 yrs, a further deductionwould be available to the extent of 50% of profits provided anequivalent amount is debited to profit & loss account of theprevious year & credited to SEZ Re-investment allowanceReserve Account .subject to the following condition to besatisfied : The special Reserve Account should be utilized for the purposeof acquiring new Plant & machinery. The new plant & machinery should be first put to use before theexpiry of 3 years from the end of the year in which the SpecialReserve Account was created.Until the acquisition of new plant & machinery the SpecialReserve Account can be utilized for the business purpose of theundertaking but it can not be utilized for distribution ofdividends/profits or for remittance outside India as profits or forcreating an asset outside India Prescribed particulars should be submitted in respect of newplant & machinery along with the return of income for theprevious year in which such plant & machinery was first put to 56. Taxation of Export Undertaking Sec 10A If the special Reserve Account is misutilised then the deductionshould be taken back in the year in which the Special ReserveAccount is misutilised. If the special Reserve Account is not utilized for acquiring newplant & machinery within three years as stated above then thededuction should be taken back in the year immediatelyfollowing the period of three years. 57. Taxation of Export Undertaking Sec 10A Consequences of amalgamation /demerger : If a companywhich is entitled for deduction under sec 10A is amalgamated/demerged with another company , the amalgamated companycan avail the benefit under sec 10A for unexpired period of a taxholiday..This facility is available only when the transferor transferee company is Indian company. The A.O has power to recomputed profit in the following twosituation: Transfer between two business/units owned by the tax payerTax payer carries on two or more business .At least one of themis qualifies for deduction u/s 10A/10B or vice versa. From the business which is eligible for deduction u/s 10A/10B,some goods are transferred to any other business carried on bythe taxpayer which is not eligible for deduction undersec10A/10B or vice versa. The consideration for such transfer, which is recorded in thebooks of account, is not equal to the market value of such goodson the date of transfer. 58. Taxation of Export Undertaking Sec 10A If the aforesaid conditions are satisfied, the A.O will recomputethe profits of the business qualified for deduction u/s 10A/10B asif the transfer in either case had been made at the market valueof the goods on date of transfer. 59. Units in Special Economic Zone (Section 10AA) The assessee is an entrepreneur as defined in sec 2 (j) of SEZAct, 2005. He is a person who has been granted a letter ofapproval by the Development Commissioner to set up a unit inSEZ. The unit in SEZ begins to manufacture or produce article orthings or provide services during the financial year 2005-06 orany subsequent year. Manufacture for this purpose means toproduce, make, fabricate, assemble or process or bring intoexistence by hand or machine It is not formed by the splitting up or reconstruction of a businessalready in existence. It is not formed by the transfer to new business, of old plant &machinery. The assessee has income from export of articles or things orfrom services from such unit. The assessee has exported goodsor provided services out of India from SEZ by land, sea, air or byany other mode. Books of account of the taxpayer should be audited .The tax 60. Units in Special Economic Zone (Section 10AA)Deduction u/s 10AA is not available unless it is claimed in return of income. Amount of Deduction: Profits of the business * Export Turnover of undertaking Total Turnover of the Business carriedon by the assessee. Deduction for First Five Assessment years: 100% of the profit & gains derived from export of articles or things or from services is deductible for a period of 5 consecutive assessment years. Deduction for Sixth Assessment Year to Tenth Assessment Year: 50% of profit & gains derived from export of articles or things or from services is deductible for next 5 years. 61. Units in Special Economic Zone (Section 10AA) Deduction for Eleventh A.Y to Fifteenth A.Y: For the next 5 years ,a further deduction would be available tothe extent of 50% of the profit provided an equivalent amount isdebited to the profit & loss account of the previous year &credited to Special Economic Zone Re-investment AllowanceReserve Account (Above mentioned conditions should besatisfied). 62. Hundred per cent export oriented Undertaking (10B) It must be an approved Hundred per cent export orientedUndertaking. It must manufacture or produce any article or thing or computersoftware. (Any computer programmes recorded on any disc,tape, perforated media. ,Any electronic data or any product orservice of similar nature exported from India) It should not be formed by splitting/Reconstruction of Business. It should not be formed by transfer of old machinery There must be repatriation of sale proceeds into India. Audit Report should be submitted in Form No 56G. All other conditions mentioned above. 63. Hundred per cent export oriented Undertaking (10B) Subsequent conversion into export oriented undertaking:There is an undertaking set up in Domestic Tarrif Area. It derivesprofit from export of articles or things or computer softwaremanufactured or produced by it. It is subsequently converted intoexport oriented undertaking .It shall be eligible for deduction u/s10B, on getting approval as 100% EOU. The deduction shall beavailable only for the remaining period of ten consecutive A.Y 64. Tea /Coffee/rubber Development Account Sec 33ABThe assessee must satisfy the following conditions. The assessee must be engaged in tea, coffee, rubberplantation It must make a deposit in Special Account i.e depositwith National Bank for Agriculture & RuralDevelopment or any amount in accordance with ascheme approved by the Tea Board or Coffee Boardor Rubber Board. The deposit should be deposited within 6 months fromthe end of the previous year or before due date offurnishing the return of income whichever is earlier. The accounts of assessee should be audited.(Auditreport in Form No 3AC) 65. Tea /Coffee/rubber Development Account Sec 33AB A sum equal to amounts deposited in special accountor 40% of profit of such business computed under thehead profits & gains of business or profession before making any deduction under section 33AB &before adjusting brought forward business loss undersection 72.Whichever is less. Amount can be withdrawn for the purpose ofScheme:The amount standing to the credit of SpecialAccount may be withdrawn only for the purposespecified in approved Scheme. If the amount releasedfrom the special account is not utilized in the sameprevious year for the purpose for which it is released, 66. Consequences in the case of closure ofBusiness Sec 33ABWhen the amount can beWhen the amount canwithdrawn & it is treated be withdrawn & it is notas taxable profit treated as income.1.Closure of Business 1.Death of the taxpayer2.Dissolution of firm 2.Partition of HUF3.Liquidation of company. 67. Consequences if the new asset is transferred within 8 years. The deduction allowed under this section shall be withdrawn ifthe asset acquired out of the money withdrawn from thespecial account is sold or otherwise transferred.To whom it isTransfer within 8 yrs Transfer after 8transferredfrom the end of the years. previous year in which asset is transferred.Transfer to the Deduction will not beDeduction will not beCentral Gov,a State withdrawnwithdrawnGo,a localauthority,aStatutoryCorporationTransfer in aDeduction will not be Deduction will not bescheme ofwithdrawn withdrawnsuccession of a firmby companyTransfer in anyDeduction will be Deduction will not be 68. Site Restoration Fund Sec 33ABA The Assessee must satisfy the following condition to claimdeduction u/s 33ABA. The assessee must be engaged in production of petroleum/natural gas in India. The assessee has an agreement with the CentralGovernment It must make a deposit in Special account. The deposit should be made within specified time limit The accounts of the assessee should be audited. The taxpayer is engaged in the business of the prospectingfor or extraction or production of ,petroleum or natural gas orboth in India . The Central Government has entered into an agreement withthe taxpayer for such business. 69. Site Restoration Fund Sec 33ABA It must deposit with SBI any amount in an account (hereinafter referred to as Special account) maintained by theassessee with that bank . (a scheme approved by GOI in theMinistry of Petroleum & natural Gas). Deposit any amount in an account (referred to as siterestoration account) opened by the assessee in accordancewith scheme framed by GOI. The aforesaid amount shall be deposited before the end ofthe previous year. Books of account of the tax payer should be audited Form No3AD 70. Site Restoration Fund Sec 33ABA Amount of Deduction: A sum equal to amount deposited or 20% of the profit of such business computed under headProfits & Gains of Business or profession before making anydeduction u/s 33ABA & before adjusting brought forwardbusiness loss u/s 72.whichever is less.Amount can be withdrawn for the purpose of the Scheme A depositor shall be entitled to withdraw from the amt standing to the credit of the account only such amt as is necessary to meet any expenditure to be incurred by him on the expiry or the termination of the agreement or relinquishment of part of the contract area,towards removal of all equipments & installation. 71. Site Restoration Fund Sec 33ABA Consequences of non-utilisation If the amount released orwithdrawn in a year is not utilised in the same previous yearfor the purpose for which it is released ,the amt not so utilisedwill be treated as taxable profits of that year & taxedaccordingly. Consequences in the case of closure of the business:whereany amt is withdrawn from Site Restoration Account on theclosure of the business ,then such income is chargeable totax. Consequences if the new asset is transferred within 8 years. 72. Expenditure on Scientific Research Sec 35 Scientific Research means any activities for theextension of knowledge in the fields of natural or appliedsciences including agriculture,animal husbandary orfisheries. With a view to accelerating scientific research,sec 35 provides tax incentives. Revenue Expenditure incurred by an assessee whohimself carries on Scientific Research Sec 35 (1) Where assesse himself carries on scientific research &incurs the revenue expenditure during the previous year,deduction is allowed for such research . Capital expenditure incurred by an assessee whohimself carries on scientific research Sec 35(2) Conditions to be satisfied (i) expenditure has been incurred during the year. (ii) that it is of capital nature 73. Expenditure on Scientific Research Sec 35 The following are some of the examples of capitalexpenses deductible u/s 35 Expenditure on the purchase of plants & equipmentsfor laboratory & on purchase of construction of abuilding for conducting research. Expenditure on the purchase of air-conditioners forlaboratory. Expenses on purchase of cars & buses which areused to transport employees engaged in the scientificresearch.The expenditure should be allowedfully.(Expenditure on Land is not deductible.) 74. Expenditure on Scientific Research Sec 35Sec 35(1)(ii)(iii)-where the assessee makescontribution to the following institution for this purpose,a weighted deduction is allowed as follows.To whom contribution can be givenWeighted DeductionAn approved research association which 175%has ,as its object ,undertaking of scientificresearch related or unrelated to thebusiness of assessee.An approved university,college,or other175%institution for the use of scientific researchrelated or unrelated to the business.An approved university,college,or other125%institution for the use of research in socialsciences or statistical research 75. Contribution to National Laboratory Sec 35 (2AA) The following condition should be satisfied:1. The payment is made to a. National Laboratory orb. University orc. Indian Institute of Technology The above payment is made under specific direction that it should be used by the aforesaid person for undertaking a scientific research programme approved by the prescribed authority. If the aforesaid condition are satisfied the taxpayer is eligible for weighted deduction which is equal to 200% 76. Amortization of Telecom licence fees (Sec 35 ABB)Deduction under section 35ABB is available iffollowing conditions are satisfied. The expenditure is capital in nature. It is incurred for acquiring any right to operatetelecommunication services. The expenditure is incurred either before thecommencement of business or thereafter at anytime during any previous year. The payment for which has actually been made. 77. Amortization of Telecom licence fees (Sec 35 ABB) Amount of deduction: The payment will be allowedas deduction in equal installments over the periodstarting from the year in which such payment hasbeen made & ending in the year in which the licensecomes to an end. It may be noted that the deductionstarts from the year in which actual payment ofexpenditure is made irrespective of the previous yearin which the liability for the expenditure is incurredaccording to the method of accounting regularlyemployed by the assessee. 78. Amortization of Telecom licence fees (Sec 35 ABB)Profit or Loss on Sale of telecom license: Different Situation Tax Treatment Entire telecom license is transferred 1.When sale consideration is less thanWDV minus sale consideration is allowed as WDV deduction under section 35ABB in the year of sale.2.When sale consideration is more than WDV The excess of sale consideration over WDV is taxable business income in the year of sale(Subject to rule)When a part of telecom license istransferred1.When sale consideration is less than WDV WDV minus sale consideration will be allowed as deduction over the unexpired period.2.When sale consideration is more than WDV WDV minus sale consideration will be allowed as deduction over the unexpired period. 79. Amortization of Telecom licence fees (Sec 35 ABB)Depreciation u/s 32 is not available: Where a deduction for any previous year is claimed &allowed under section 35ABB,then no deduction of the sameexpenditure shall be allowed under section 32 for the sameprevious year or any subsequent previous year. 80. Amortization of preliminary Expenses Sec 35 DDeduction is available in case of Indian Company or residentnon-corporate assessee. Examples are: Legal charges for drafting any agreement between theassessee & any other person relating to the setting up of thebusiness of the assessee. Legal charges for drafting the memorandum & articles ofassociation if the tax payer is a company. Printing expenses of memorandum & articles of associationof company. Registration fees of the company. Expenses in connection with the public issue of share ordebentures of company ,underwriting commission,brokerage& charges for drafting ,printing,typing,advertisment ofprospectus. 81. Amortization of preliminary Expenses Sec 35 DThe expenditure can not exceed the following: In case of corporate Assessee In case of non-corporate assessee 5% of cost of project or5% of cost of project 5% of capital employed whichever is moreOne fifth of the qualifying expenditure is allowable as deduction in each of the five successive years beginning with the year in which business commences 82. Recovery against any Deduction u/s 41(1) If in any of the earlier years a deduction was allowed to thetax payer in the respect of loss,expenditure & During the current previous year the tax payer-a. Has obtained a refund of such trading liabilityb. Has obtained some benefit in respect of such trading liabilityby way of remission or cessation thereof.If both conditions are satisfied ,the amt obtained by such personshall be deemed to be profits & gains from business orprofession. 83. Maintenance of accounts by certain persons Sec 44AA Specified Profession For the purpose of Sec 44AA &rule 6F legal,medical,engineering,architectural,accountancy,technical consultancy,or interiordecoration ,film artist,company secretary,are specifiedProfession. Non-Specified Profession A non-specified professionother than a specified profession mentioned above. 84. Maintenance of accounts by certain persons Sec 44AA Specified Profession For the purpose of Sec 44AA &rule 6F legal,medical,engineering,architectural,accountancy,technical consultancy,or interiordecoration ,film artist,company secretary,are specifiedProfession. Non-Specified Profession A non-specified professionother than a specified profession mentioned above. 85. Maintenance of accounts by certain persons Sec 44AACategory Taxpayer who come under Requirement of maintenance of this category books of accountsAPersons carrying on SpecifiedPersons coming under this category Profession if their grossare required to maintain such books receipts in the profession do not of account & other document as exceed Rs 1,50,000 in any ofmay enable the AO to compute their the three years immediately taxable income. The Board has not preceding the previous year (or prescribed specified books of where the profession is newly account which should be maintained set up in the previous year,his for the persons falling under this gross total receipts in the category. profession for that year are not likely to exceed the said amount). 86. Maintenance of accounts by certain persons Sec 44AACategory Taxpayer who come underRequirement of maintenance of this categorybooks of accountsBPersons carrying on specified Persons coming in this category are profession if their gross required to maintain such books of receipts in the profession accounts as are prescribed by rule exceed Rs 1,50,000 in all the6F three years immediately preceeding the previous year(or where the profession has been newly set up in the previous year ,his gross total receipt in the profession for that year are likely to exceed the said amount) 87. Maintenance of accounts by certain persons Sec 44AACategory Taxpayer who come underRequirement of maintenance of this categorybooks of accountsCPersons carrying on a non-Persons coming under this category specified profession. It also are not required to maintain any includes persons carrying on books of account. any business if their income from such profession or business does not exceed Rs 1,20,000 & total sales/turnover or gross receipt thereof are not in excess of Rs 10,00,000 in all the three years immediately preceeding the previous year . 88. Maintenance of accounts by certain persons Sec 44AACategory Taxpayer who come under Requirement of maintenance of this category books of accountsDPersons carrying on a non- Persons falling under this category specified profession.It also are required to maintain such books includes persons carrying onof accounts & other documents as any business if their incomemay enable the AO to compute their from such profession or taxable income under IT Act. business exceeds Rs 1,20,000 or the total sales,turnover,gross receipts are in the excess of Rs 10,00,000 in any of three years immediately preceeding the previous year. 89. Specified Books of account Sec 44AAThe Board has specified certain books of account under rule 6F for the professional falling under Category B. The prescribed books are as follows. A cash book (record of all cash receipts & payments, kept &maintained from day to day & giving the cash balance in handof each day or at the end of a specified period not exceedinga month) A journal, if the accounts are maintained according to themerchantile system of accounting A ledger Carbon copies of bills exceeding Rs 25 issued by the person& carbon copies otherwise serially numbered receipts issuedby the person. 90. Specified Books of account Sec44AA Apart from this, person carrying on medical profession isrequired to keep the following additional books A daily case register in Form No 3C showing date ,patientsname,nature of professional services rendered ,feesreceived& date of receipt. An inventory under broad head ,as on the first & last days ofprevious year,of stock of drugs ,medicines & otherconsumable accessories used for the purpose of hisprofession 91. Audit of certain persons (Sec 44AB) The following persons are required to get their accountscompulsorily audited by a Chartered Accountant. A person carrying on the business if total sales, turnover orgross receipt in business for the previous year relevant to theassessment year exceed or exceeds Rs 60 lakhs. A person carrying on profession if gross receipts in professionfor the previous year relevant to the assessment year exceedRs 15 lakhs. 92. Due Date for getting books audited/submission of auditReport & Form NoDifferent Tax Payers Audit Statement Due Date forDue Date Form No Particulars getting books forauditedSubmission of audit reportIn case of person who3CA 3CDSept 30th of Sept 30th of thecarries on businesss or the A.YA.Yprofession & who isrequired by or under anylaw to get his accountsauditedIn case of a person who3 CB3CDSept 30th of Sept 30th ofcarries on a business orthe A.Ythe A.Yprofession but not beinga person referred above. 93. Due Date for getting books audited/submission of auditReport & Form No If any person fails to get his accounts audited or to furnish areport of such audit as required under the aforesaid provision,AO may impose penalty .The penalty can be a sum equal toone half percentage of total sales, turnover or gross receiptssubject to maximum of Rs 1 lakhs. If income is exempt under section 10 to 13A,then audit undersection 44AB is not required.If however income is chargeableto tax ,audit under section 44AB is applicable.(when turnoveris above Rs 40 lakhs or gross receipts is above Rs 10 lakhs)even if in a particular year no tax is payable. 94. Computation of income on estimated basis in the case oftaxpayers engaged in certain business (Sec 44 AD)Conditions: The assessee should be an eligible assessee .Eligibleassessee for this purpose is a resident individual,a residentHUF or resident partnership firm The assessee has not claimed any deduction under section10A,10AA,10B,10BA,80HH,80RRB. The assessee should be engaged in any business (whether itis retail trading or wholesale trading or civil construction )except the business of plying,hiring ,or leasing goodscarriages referred to in section 44AE. Total turnover /gross receipt in the P.Y should not exceed Rs60 lakhs. 95. Computation of income on estimated basis in the case oftaxpayers engaged in certain business (Sec 44 AD)Consequences if the above conditions are satisfied If the above conditions are satisfied ,income from eligible business isestimated at 8% of the gross receipt or total turnover. All deductions under section 30 to 38,including depreciation & unabsorbeddepreciation, are deemed to have been already allowed & no furtherdeduction is allowed under these section. In case of firm ,the normaldeduction in respect of salary & interest to partners under section 40(b)shall be allowed.Also it will be assumed that disallowance if any undersection 40,40A,43B has been considered. An assessee opting for the above scheme shall be exempted from thepayment of advance tax related to such business. An assessee opting for the above scheme shall be exempted frommaintenance of books of account related to such business as requiredunder section 44AA. An individual/HUF opting for the above scheme can submit his return ofincome in ITR -4S (which is simplified return form Sugam) 96. Computation of income on estimated basis in the case oftaxpayers engaged in certain business (Sec 44 AD)Consequences if the above conditions are satisfied If the above conditions are satisfied ,income from eligible business isestimated at 8% of the gross receipt or total turnover. All deductions under section 30 to 38,including depreciation & unabsorbeddepreciation, are deemed to have been already allowed & no furtherdeduction is allowed under these section. In case of firm ,the normaldeduction in respect of salary & interest to partners under section 40(b)shall be allowed.Also it will be assumed that disallowance if any undersection 40,40A,43B has been considered. An assessee opting for the above scheme shall be exempted from thepayment of advance tax related to such business. An assessee opting for the above scheme shall be exempted frommaintenance of books of account related to such business as requiredunder section 44AA. An individual/HUF opting for the above scheme can submit his return ofincome in ITR -4S (which is simplified return form Sugam) 97. Computation of income on estimated basis in the case of taxpayers engagedin business of plying,leasing or hiring trucks (Sec 44 AE) The tax payer may be anIndividual,HUF,AOP,BOI,firm,company,co-operative society orany other person. Taxpayer is engaged in the business of plying, hiring,orleasing goods carriage. Taxpayer owes not more than 10 goods carriages at any timeduring the previous year. All other condition are the same as per Sec 44AD. 98. Computation of income on estimated basis in the case of taxpayers engagedin business of plying,leasing or hiring trucks (Sec 44 AE) Income to be calculated on estimated Basis: Types of goods carriageEstimated income Heavy goods vehicleRs 5000 for every monthduring which the goodscarriage is owned by thetaxpayer. Other than Heavy Goods Rs 4500 for every month Vehicle. during which the goodscarriage is owned by thetaxpayer. 99. Deduction from Gross Total Income 80G Donations to Charitable institutions & Funds 80GGA Donation for Scientific research or ruraldevelopment. 80GGB Contribution to political parties 80 IA Profits & Gains from Industrial undertakingengaged in infrastructure activity 80 IAB Profits & Gains from Industrial undertakingengaged in Special Economic Zone.80 IB Profits & Gains from Industrial undertakingother than infrastructure development undertaking 80 IC Profits & gains from undertaking in certain States. 80 ID Profits of hotels & Convention Centers. 80 JJA Profits & Gains Business of collecting & Processingbiodegradable waste. 80JJAA Employment of New Workmen 80 LA Income of offshore Banking Units 100. 80 GGA Donation for Scientific research or rural development. An Assessee (other than an assessee whose gross total incomeincludes income chargeable under the head Profits & gains ofbusiness or profession ) is entitled to deduction .Sum paid to a scientific research association, or to a university,college, or other institution as approved. Including social science or statistical research. Sum paid for training persons for rural development programme. Sums paid to National Fund for rural development set up andnotified by central government Sum paid to a public sector company,local authority or an approvedassociation or institution for carrying out any eligible project orscheme ,referred to in sec 35 AC Sums paid to the notified National urban poverty eradication fund 101. 80GGB Contribution to political parties or electoral trustby companies In computing the total income of an IndianCompany,any sum contributed by it to anypolitical party or electoral trust is deductible. Expenditure by way of advertisment to amagazine owned by a political party isdeductible u/s 80GGB. 102. 80GGB: deduction in respect of contributions given bycompanies to political parties or electoral trust In respect of contribution to political parties. W.e.f. A.Y. 2012-13, contribution to Electoral Trustalso eligible for deduction. Indian companies = 100% of sum contributed Political parties should be registered with theElection commission of India. 103. 80 IA Profits & Gains from Industrial Undertakingengaged in the infrastructure Development.Deduction under sec 80 IA is available only to the following business carried on by the undertaking. Case 1 Provision of Infrastructure facility Case 2 Telecommunication Services Case 3 Industrial Parks Case 4 Power generation,transmission & distribution Case 5 Undertaking set up for reconstruction of a power unit 104. 80 IA Profits & Gains from Industrial Undertakingengaged in the infrastructure Development. An undertaking providing infrastructure facility must satisfythe following conditions- It should provide infrastructure facility It should be owned by an Indian Company There should be an agreement with the centralGovernment It should start operation on or after April 1,1995 Deduction should be claimed in the return of income &return of income should be submitted on or before the duedate of submission of return of income. 105. 80 IA Profits & Gains from Industrial Undertakingengaged in the infrastructure Development. Power of AO to recompute the profit in following condition: The taxpayer carries on two or more business ,at least oneof them is qualified for deduction under section 80 IA/80IB. From the Business which is eligible for deduction undersection 80IA/80IB ,some goods are transferred to anyother business carried on by the taxpayer Which is noteligible for deduction under section 80 IA/80IB or viceversa The consideration for such transfer ,which is recorded inthe books of account ,is not equal to market value of suchgoods on the date of transfer. When the aforesaid conditions are satisfied ,AO willrecomputed profits of the business qualified for deductionunder section 80IA/80IB as if the transfer in either casehad been made at the market value of the goods on thedate of transfer. 106. 80 IA Profits & Gains from Industrial Undertakingengaged in the infrastructure Development. Consequences of Merger/Amalgamation: If companywhich is entitled for deduction under section 80 IA isamalgamated/demerged with another company ,theresulting company can avail benefit under section 80 IA forthe unexpired period of tax liability provided the transferor& transfree company is Indian Company. Infrastructure facility means: A road including toll road ,bridge or a rail system A highway project including housing or other activitiesbeing an integral part of the highway project A water supply project, water treatment system, irrigationproject, sanitation & sewerage system or solid wastemanagement system A port ,airport, inland waterway or inland port 107. 80 IA Profits & Gains from Industrial Undertakingengaged in the infrastructure Development. Amount of Deduction: 100 % of the profit is deductiblefor the first 10 years commencing from the initial A.Y. Incase of highway projects, only that part of profit which istransferred to a special reserve account is eligible profit. The enterprise has an option to choose initial A.Y . It canbe any year within a period of 15 years (20 years in caseof highway project/road/water treatment etc.) from the yearin the enterprise begins operating/maintaininginfrastructure facility. However the benefit of deduction is available only for 10consecutive years from the A.Y in which the enterprisebegins operating/maintaining the infrastructure facility Audit Report: The deduction under section 80 IA isavailable only if the accounts of the undertaking have beenaudited by a Chartered Accountant & Audit Report in FormNo 10 CCB is furnished along with the return of income. 108. 80 IA Profits & Gains from Industrial Undertakingengaged in the Telecommunication Services An undertaking providing above services has to satisfy thefollowing condition: It should be new undertaking It should not be formed by transfer of old plant &machinery Deduction should be claimed in the return of income &return of income should be submitted on or before the duedate of submission of return of income. It should start providing services after March 31,1995 butbefore March 31,2005.Domestic Satellite for this purpose means a satellite owned& operated by an Indian company for providingtelecommunication service. 109. 80 IA Profits & Gains from Industrial Undertakingengaged in the Telecommunication ServicesAmt of Deduction in case of TelecommunicationService Enterprise % of profit Deductible Period of deduction commencing from initial A.Y Owned by a 100First 5 Years company or any other30 Next 5 years person 110. 80 IA Profits & Gains from Industrial Undertakingengaged in the Special Economic Zone or IndustrialPark An undertaking which develops & operates industrial park or SEZ must satisfy the following condition to avail benefit of Section 80IA It develops ,operates &maintains & operate an industrial park or a SEZ The industrial park must start operating during April 1,1997 & March 31,2011 or the SEZ must start operating during April 1,1997 & March 31,2005. Deduction should be claimed in the return of income & return of income should be submitted on or before the due date of submission of return of income. If all the aforesaid conditions are satisfied then 100% of the profit is deductible for 10 years commencing from initial assessment years. 111. 80 IA Profits & Gains from Industrial Undertakingengaged in the power generation/distributionThe following condition should be satisfies: It should be new undertaking It is set up in any part of India for generation /distribution ofpower. It should not be formed by transfer of old plant &machinery. Deduction should be claimed in the return of income &return of income should be submitted on or before the duedate of submission of return of income If all the aforesaid conditions are satisfied then 100% ofthe profit is deductible for 10 years commencing frominitial assessment years. 112. 80 IA Profits & Gains from Industrial Undertakingengaged in the reconstruction of power unitsFollowing conditions should be satisfies. It should be owned by an Indian company & set up forreconstruction or revival of power generating plant. It should be formed before November 30,2005 with themajority equity participation by public sector companies. Such undertaking begins to generate or transmit ordistribute power before March 31,2011. Deduction should be claimed in the return of income &return of income should be submitted on or before the duedate of submission of return of income If all the aforesaid conditions are satisfied then 100% ofthe profit is deductible for 10 years commencing frominitial assessment years. 113. 80 IAB Profits & Gains from Industrial Undertaking or enterpriseengaged in development of Special Economic Zone The following condition should be satisfied The taxpayer is a developer of Special economic Zone The Gross Total Income of the tax payer includes profits &gains derived by an undertaking from any business ofdeveloping a Special economic Zone. Such Special economic Zone is notified on or after April1,2005 The books of account of the taxpayer are audited. Deduction should be claimed in the return of income &return of income should be submitted on or before the duedate of submission of return of income. Amount of Deduction: Tax payer can claim 100%deduction for 10 consecutive assessment years.Thededuction may be claimed ,at the option of the taxpayer,for any 10 consecutive assessment years out of 15 yearsbeginning from the year in which the SEZ has beennotified by the Central Government. 114. 80 IB Deduction in respect of profits & Gains from certainindustrial undertaking other than infrastructure developmentDeduction under section 80IB is available to differentindustrial undertakings as follows: Business of an industrial undertaking Operation of Ship Industrial Research Production of Mineral oil Developing & Building housing projects The business of processing ,preservation & packaging offruits or vegetables or integrated ,handling ,storage &transportation of food grain units Convention Centre Operating & maintaining a hospital in rural area. Hospitals located in certain areas. 115. 80 IB Deduction in respect of profits & Gains from certainindustrial undertaking other than infrastructure development It should be a new undertaking It should not be formed by transfer of old plant &machinery It should manufacture or produce articles other than non-priority sector items Manufacture or production should be started within astipulated time limit. It should employ 10/20 workers. Deduction should be claimed in the return of income &return of income should be submitted on or before the duedate of submission of return of income. Recomputation of profit by Assessing Officer Consequences of Merger /Amalgamation 116. 80 IB Deduction in respect of profits & Gains from certainindustrial undertaking other than infrastructure development Amount Of Deduction: Operation of Ship 30% of profit is deductible for the first 10years. Industrial Research If the company is approved by theprescribed authority at any time before April 1,1999 100%of profit for 5 years beginning with the initial A.Y. If thecompany is approved by the prescribed authority afterMarch 31,2000 but before April 1,2007 100% of profit fromsuch business for 10 years beginning with the initial A.Y Mineral Oils:100% of profit is deductible for the first 7years commencing with the year in which the undertakingcommences commercial production of mineral oil orrefining of mineral oil. In case of business of processing, preservation &packaging of fruits or vegetables 100% deductible for 5years & 30% for next 5 years. 117. 80 IB Deduction in respect of profits & Gains from certainindustrial undertaking other than infrastructure development Hospitals located in certain areas ,100% profits ofbusiness shall be deductible for a period of 5 A.Y. Developing & building Housing Project:100 % of profitderived from such project is deductible. 118. Deduction in respect of profits & gains of certainundertakings in certain special category of States. Section80ICAn industrial undertaking must satisfy the followingconditions: Should not have been formed by splitting up orreconstruction of a business already in existence. Not formed by transfer of old plant & machinery Industrial undertaking should be set up inSikkim,Himachal Pradesh,Northen EasternState. Industrial undertaking should manufacture/produce specified goods/articles. The books of account should be audited & auditreport in Form No 10CCB should be submitted. 119. Deduction in respect of profits & gains of certainundertakings in certain special category of States. Section80IC Amount of Deduction: Sikkim -- 100% of profits & gains of theindustrial undertaking for 10 years commencingfrom initial assessment years. H.P/Uttaranchal--- 100% of profits & gains of theIndustrial undertaking for the first 5 years & 25%for the next five years. North Eastern State--- 100% of profits & gainsof the industrial undertaking for 10 yearscommencing from initial assessment years. 120. Deduction in respect case of hotels & Convention CentreSec 80ID The tax payer engaged in the business of hotellocated in a specified area(Delhi,Faridabad,Gurgaon,Ghaziabad,Agra,Jalgoan,etc)Alternatively,the tax payer is engaged inthe business of building ,owning & operating aconvention centre located in specifiedarea.Convention Centre means a completelycentrally air-conditioned building of a minimum25000 sq.ft equiped with modern public addresssystem,LCD projector to be used for holdingconferences & seminars. 121. Deduction in respect case of hotels & ConventionCentre Sec 80ID Should not have been formed by splitting up or reconstruction of a business already in existence . Not formed by transfer of old plant & machinery 100% of profits & gains derived from the aforesaid business is deductible for five consecutive assessment years. Audit report in Form No 10CCBBA should be submitted on or before the due date of submission of return of income. 122. profits & gains from the business of collecting &processing of Bio-degradable waste Sec 80JJA This section is applicable where the gross total income of an assessee includes any profit & gains derived from the business of collecting ,processing or treating of biodegradable waste for generating power or producing bio-fertilizer,or other biological agents or for producing bio-gas. The whole of the profits & gains of the above activities shall be deductible for a period of five consecutive assessment year relevant to the previous year in which such business commences. 123. Deduction in respect of employment of newworkmen Sec 80JJAA Following condition should be satisfied. The tax payer is an Indian Company Income of tax payer includes any profits & gains derived from any industrial undertaking engaged in the manufacture or production of article or thing. The industrial undertaking is not formed by splitting up or reconstruction of an existing undertaking or amalgamation with another industrial undertaking. The assessee furnishes along with the return of income the report of a Chartered Accountant in Form No 10DA. Deduction should be claimed in the return of income. 124. Deduction in respect of employment of newworkmen Sec 80JJAA Amount of Deduction: The amount of deduction is equal to 30% of additional wages paid to new regular workmen employed by the assessee in the previous year.The deduction is available for three assessment years including the assessment year relevant for previous year in which such employment is provided. For the aforesaid purpose workmen means any person employed in any industry to do any manual,unskilled,skilled,technical, clerical or supervisory work but does not include the following A person who is in the Air-force,Military or Navy or in Police Service. A person who is employed in Managerial or administrative capacity A person who is employed in supervisory capacity & draw wages exceeding Rs 1600 per month. 125. Deduction in respect of employment of newworkmen Sec 80JJAA Regular workman does not include the following A casual workmen A workman employed for contract labour or Any other workman employed for a period of less than 300 days during the previous year. 30% of the additional wages paid to new regular workmen . Such deduction is available for a period of 3 years from the year of provision of employment. 126. Deduction in respect of employment of newworkmen Sec 80JJAA Meaning of Additional Wages: In case of new Undertaking :It means wages paid to new regular workmen in excess of 100 workmen employed during the year. In the case of existing undertaking: It means wages paid to new regular workmen in excess of 100 workmen employed during the year.Additional wages shall be nil if the increase in number of regular workmen employed during the year is less than 10% of existing number of workmen employed in the undertaking as on last day of the preceding year. 127. Deduction in respect of employment of newworkmen Sec 80JJAA Employees are categorised under Category Nature of employment followingcategories.A Employees employed in managerialcapacity,drawing salary exceeding Rs 1600 permonth.B It includes casual workmen employed throughcontract labour (not coming under A)C Other workmen if employed for less than 300days during the previous year ( not coming underA & B)D Other workmen (not coming under A & B) ifemployed for 300 days or more than 300 daysduring the previous year. 128. Deduction in respect of certain income of Offshore BankingUnits & International Financial Services Centre ( Section80LA) The following condition should be satisfied The assessee is a scheduled bank & having anoffshare banking unit in a special economiczone.or A foreign bank & having an offshare banking unitin a special economic zone or A unit of International Financial Services Centre. The report from Chartered Accountant in FormNo 10CCF certifying that the deduction has beencorrectly claimed in accordance with theprovision A copy of permission obtained under BankingRegulation Act should be submitted along withthe return of income. 129. Deduction in respect of certain income of Offshore BankingUnits & International Financial Services Centre ( Section80LA) If the above conditions are satisfied ,then 100%of the aforesaid income is deductible for 5consecutive assessment years beginning withthe assessment year relevant to the previousyear. For next 5 years,50% of such incomewould be deductible. 130. Computation of income & Tax Liability ofcompany First ascertain income under the different heads ofincome Current & brought forward losses should be adjustedaccording to the provision of section 70 to 80. Total of income so computed under the differentheads is Gross Total Income. From the gross total income so computed ,thefollowing deductions are permissible under Sec 80 Cto 80U. 131. Tax Liability of company under the Normal Provision (1)Find out the total income under normalprovision. (2)Find out the income tax at the rate of 30%(40% in case of foreign co.) (3) Add Surcharge at the rate given below if netincome exceeds Rs 1 crore. Domestic Co5% Foreign Co 2% (4) Find out (2) + (3) (5) Add education cess at the rate of 2% &SHEC @ 1% (6) Deduct tax rebate or tax credit u/s86,90,90A,91 132. Tax Liability of company under Minimum Alternate Tax (8) find out book profit (9)Find out 18.5% of book Profit (10) Add Surcharge at the rate given below if netincome exceeds Rs 1 crore.Domestic Co 5%Foreign Co 2% (11) Find out (9) + (10) (12) Add EC @2% & SHEC 1% (13) Find out (11) + (12) Tax Liability of a company is (7) or (13)whichever is more . MAT applicable to SEZ units from A.Y 2012-13onwards. 133. Minimum Alternate Tax Sec 115 JB The extra tax which the company has to paybecause of MAT ( Step 13 minus step 7) will beavailable for tax creditu/s 115 JAA. Tax creditcan be set off against future tax liability of thecompany .It is available only in that year in whichtax computed at Step 7 is more than taxcomputed at step 13. 134. How to compute the Book Profit Net profit as shown in Profit & Loss A/Cprepared in accordance with the provisions ofPart II & III of VI Schedule to Companies Act ) isto be increased by the following amounts ifdebited to profit & Loss account. Income tax paid or payable & the provisionsthereof. Interest under IT Act, dividend tax undersec 115-O .No adjustment is required in respectof the following taxes Securities TransactionTax,Banking cash transaction tax, commoditiestransaction tax,wealth tax,gift tax, fringe benefittax,indirect taxes,penalties/fine under IT act. 135. How to compute the Book Profit Amounts carried to any reserves by whatevername called Amounts set aside to provisions made formeeting liabilities other than ascertain liabilities. Amounts by way of provision for losses ofsubsidiary companies Amount of dividend paid or proposed. Amount of expenditure relatable to any exemptincome Amount of depreciation Amount of deferred tax & provisions thereof &amounts set aside as provision for value ofdiminution in value of any asset. 136. How to compute the Book Profit Net Profit as shown in the P & L is to be reducedby the following. Amount withdrawn from reserves or provisions ifany such amount is credited to the profit & lossaccount Income exempt from tax Depreciation (other than revaluation of asset) Amount withdrawn from revaluation reservecredited to profit & loss account to the extent itdoes not exceed the amount of depreciation onaccount of revaluation of asset. Amount of loss(before depreciation)broughtforward or unabsorbed depreciation whichever isless as per books of accounts. 137. How to compute the Book Profit Profit of sick industrial unit The amount of deferred tax, if any such amountis credited to the profit & loss account. 138. MAT Every company to which section 115JB appliesshall furnish a report (Form No 29 B) fromChartered Accountant certifying that the bookprofit has been computed in accordance with theprovisions of section 115JB.The report should besubmitted along with the return of income. MAT can be carried forward for 10 assessmentyear.Tax credit is allowed even if the tax paidwas late. ( see Question No 1)