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Unit 9: Income under the Head Business and Profession

Notes

Task Discuss whether the following expenses allowable as deduction under section
37(1):
1. Litigation expenses for official purposes.
2. Expenses relating to purchase of stationary for official purpose.
3. Interest on loan taken for the purpose of paying income-tax.

Self Assessment

Fill in the blanks:
17. …………………………..deals with the deductions are allowed in respect of rent, rates,
taxes, repairs and insurance for premises used for the purpose of business or profession.

18. The expenditure incurred on current repairs (not being capital expenditure) and insurance
in respect of plant, machinery and furniture used for business purposes is allowable as
deduction under……………………………..

19. ………………………………….means the superstructure only and does not include site.
20. ………………………………is defined as any activity for the extension of knowledge in the
fields of natural or applied sciences including agriculture, animal husbandry or fisheries
etc.

9.6 Specific Disallowance

The following expenses given by sections 40, 40A and 43B are expressly disallowed by the
Income Tax Act while computing income chargeable under the head “Profits and gains of business
or profession”.

9.6.1 Expenses Disallowed (Section 40)

The following amounts shall not be deducted in computing the income chargeable under the
head “profits and gains of business or profession:
1. Interest Payable Outside India: Under Section 40(a)(i), deduction is not allowed in respect
of an interest (not being interest on a loan issued for public subscription before 1.4.1938),
royalty, fees for technical services or other sum chargeable under the Income-tax Act,
which is payable outside India or in India to a non-resident, not being a company or to a
foreign company and on which tax has not been deducted or after deduction, has not been
paid before the expiry of the time prescribed under Subsection (1) of Section 200. In case
where tax is paid or deducted in a subsequent year, the benefit of deduction from profit
and gains from business and professional income will be allowed in computing the income
of the previous year in which such tax has been paid.
2. TDS not Deducted on Certain Payments: Any interest, commission or brokerage, rent,
royalty, fees for professional services or fees for technical services payable to a resident,
or amounts payable to a contractor or sub-contractor, being resident, for carrying out any
work (including supply of labour for carrying out any work), on which tax is deductible at
source under Chapter XVIIB and such tax has not been deducted or, after deduction, has
not been paid on or before the due date specified in sub-section (1) of section 139.

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