Page 281 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes

Notes

1. No depreciation shall be charged on the block of asset in the following two situations:
Situation1: Section 50(1) when Block of assets is not empty but it’s written down
value is nil at end of the previous year,
Situation 2: Section 50(2) when Block of assets is empty at end of previous year.
2. Depreciation is chargeable in respect of an asset at 50% of Normal rate of depreciation
applicable to the block to which such asset belongs if the following conditions are
satisfied:
Condition 1: asset is acquired during a previous year and it is put to use in same
previous year and
Condition 2: asset is put to use for less than 180 days in such year.

Task If a factory of an assessee is shifted to new site, the expenses of shifting the depreciable
asset or its installation would form part of the actual cost?

Examples of Computation of Income from Business and profession are given below:

Example: Advise an assessee about the admissibility or otherwise of the claims, with
regard to the following items, giving reasons:

1. Compensation paid to an employee for premature termination of his services.
2. Amount spent in a successful suit filed against another for infringing the assessee’s
trademark.

3. Penalty paid to customs authorities for importing prohibited goods which yielded a large
margin of profits.
4. Travelling expenses of a director who went to Europe for negotiating the purchase of new
heavy machinery which was eventually installed next year.
5. Cost of erecting a medical annexe to the factory for the emergency treatment of the
employees.
6. Lump-sum consideration paid for acquiring know-how 6,00,000.
7. Loss of ` 1,000 which were snatched away from the khazanchee’s possession while going
to bank to deposit the amount.
8. Loss due to embezzlement by an employee.
9. Brokerage paid for raising loan for the business.
10. ` 1,000 spent in connection with installation of a new telephone connection.

11. Fees paid to lawyer for drafting the Deed of Agreement with an outsider relating to the
setting-up the business.
12. Pension paid to the window and children of a deceased engineer of the factory voluntarily.

13. Interest paid for funds borrowed specifically for the acquisition of a capital asset.

276 LOVELY PROFESSIONAL UNIVERSITY