Category: Income from Business & Profession

To claim deduction u/s 33AB the assessee should satisfy the following conditions:-

1. The assessee must engage in tea, coffee & rubber plantation
   
2. The amount should be deposited in a special account
   
3. The amount should be deposited within specified time-limit
   
4. The accounts should be audited
   

• Deposit-
  

1. Deposit with NABARD any amount in accordance with, a scheme approved by tea board or coffee board
   
2. Deposit any amount in deposit account opened by the assessee with, approved scheme framed by tea board or coffee board or rubber board with the previous approval of central government.
   

• Time limit- Amount should be deposited within 6 months from end of the previous year or before due date of return of income, whichever is earlier.
  

Amount of deduction-

1. Amount deposited in special account
   
2. 40% of profit computed under profits and gain of business or profession before any deduction u/s 33AB.
   

   Whichever is less.

For claiming deduction u/s sec 35A the following conditions should be fulfilled-

1. The know-how, secret formula, design and specifications are either patient or copy right
   
2. Expenditure is of capital nature and used for business and profession
   
3. The expenditure is incurred on acquisition of the patents right / copyright:
   
4. patents right / copyrights are used for business and profession of the taxpayer
   
5. Expenditure is done prior to April 1 , 1998
   

If all the above conditions not fulfilled –

1. In respect of capital expenditure incurred on or after April 1, 1998, can claim depreciation under section 32;
   
2. In respect of any other capital other capital expenditure, no deduction is available;
   
3. In respect of revenue expenditure, one can claim u/s 37(1)
   

Amount of deduction-

The expenditure incurred in acquiring patent or copy right used for the purpose of business is allowed in equal installment over a period of 14 years

EX- x purchase patient on Nov 1, 1997 for manufacturing art paper for Rs 140000. A sum of Rs 10000 is deductible under sec 35A over a period of 14 years form 1998-99 to 2011-12.

“The term scientific research means any activity for the extension of knowledge in the field of natural or applied sciences including agriculture, animal husbandry or fisheries.”

Revenue expenditure done by the assessee himself [sec35 (1) (¡)]

If assessee himself carries on scientific research, deduction is allowed only if it relates to the business.

Contribution made to outsiders [sec. 35(1) (¡¡)/ (¡¡¡)]

Where the assessee does not himself carry on research but make contribution to other institutions the deduction is allowed –

Capital expenditure incurred by assessee himself [sec35 (2)}

Where any expenditure of capital nature on scientific research related to his business, the whole expenditure incurred in any previous year is allowed as deduction in previous year.

Note:-

1. Capital expenditure on conducting scientific research is deductible at rate of 100 % in the year in which expenditure is incurred.
   
2. Deduction is not available if expenditure is incurred on land
   
3. No deduction by way of depreciation is allowed in respect of an asset used in scientific research
   

Contribution to national laboratory [sec. 35(2AA)]

Amount of deduction:-

The taxpayer is eligible for deduction equal to 175%. Such contribution is not eligible for any other deduction.

Expenditure on In-House Research and Development Expenses

Condition

1. The taxpayer is a company.
   
2. The company should be engaged in the business of manufacturing or production of any article or thing
   
3. The above expenditure is incurred on in-house research and development facility up to march 31, 2012
   
4. The expenditure is approved by prescribed authority.
   

Amount of deduction:-

If above conditions are satisfied then a sum equal to 200 % of the expenditure so incurred shall be allowed as deduction.

Any expenditure incurred by company for promoting family planning among its employee is allowable as deduction. If expenditure is of capital nature, 1/5 of such expenditure is allowed as deduction in previous year and balance is allowed in next four year in equal installment.

Advertisement expenses [sec.37 (2B)]

No deduction is available to assessee in respect of expenditure done on advertisement in any souvernir, brochure, tract, pamphlet, or the like published by political party.

Contribution to a political party is deductible under sec 80GGB or under sec 80GGC.

For claiming deduction u/s 40(b) following conditions shall be fulfilled:-

• Payment should be made to working partner only
  
• Remuneration must be authorized by partnership deed
  
• It should not pertain to the period prior to partnership deed
  
• Remuneration should not exceed the permissible limit-
  

If the above conditions are satisfied, remuneration to partner is allowable as deduction in the hand of the firm. However the maximum amount of such payment to all the partners during the previous year should not exceed the limit given below –

How to compute book profit:-

1. Compute net profit of firm as per profit & loss a/c
   
2. Make adjustment as provided by section 28 to 44DB
   
3. Add remuneration to partner if debited to profit and loss a/c.
   

The resulting amount is book profit.

Deduction to an employer in respect of Voluntary Retirement Scheme payment to his employee.

Some more provisions of this section are-

1. Employer may claim deduction even its VSS/VRS scheme is not in accordance with Rule 2BA.
   

   (However under salary head employee can claim exemption of Rs. 500000 only when employer’s scheme is as per Rule 2BA.)
   

2. Deduction is available only when VRS amt is actually paid i.e. not on accrual basis.
   
3. Actual paid amount is deductible in five equal annual installments- i.e. one fifth of the amount so paid shall be deducted in computing the profits and gains of business for that previous year in which payment is made, and balance shall be deductible in equal installments for each of the four immediately succeeding previous year.    

The provisions of section 44AD will be applicable if following conditions are satisfied:-

CONDITIONS:-

1. The assessee for this purpose should be an individual, Hindu undivided family or partnership firm
   
2. No deduction is allowed u/s sec-10A, 10AA ,10B,10BA, 80HH to 80RRB
   
3. The assessee can engage in any business (retail or civil construction) except of business of plying, hiring, or leasing goods covered under section 44AE.
   
4. The turnover/gross receipt in previous does not exceed Rs 60 lakh Rs.
   

If above conditions are satisfied then income will be calculated at 8% of gross receipt or total turnover.

Is it Possible to declare lower income

The following conditions will occur if he declares lower income than the deemed profit and gain stated above-

1. The assessee will have to maintain books of accounts as per section 44AA
   
2. The assessee will have to gets books audited under section 44BB