PGBP

Question 1

CHARGING SECTION

Answer 1

SECTION 28

Question 2

SECTION 37

Answer 2

GENERAL DEDUCTION

Question 3

GENERAL DEDUCTION

Answer 3

● It should have been incurred wholly and exclusively for business or profession.
● The expenditure should not be capital in nature
● It should have been incurred during the previous year.
● It should not be covered by section 30 to 36.
● Reserves/provisions for contingencies cannot be claimed as a deduction.

Explanation 1 to Section 37
➔ Any expenditure for any activity
➔ which is an offence or which is prohibited under any law
➔ Shall not be allowed as deduction.
➔ Therefore, penalties paid under any Act shall not be allowed deduction.
➔ But penalty for breach of contract shall be allowed deduction because that is not imposed under Act.

Explanation 2 CSR expenditure - Not Deductible.

Explanation 3: ● for any purpose which is an offence under, or which is prohibited by, any law for the time being in force, in
India or outside India; or

●Expenditure incurred by assessee to provide benefit to a person and
acceptance of such benefit by person was in violation of any law etc

● to compound an offence under any law for the time being in force, in India or outside India

Question 4

SECTION 30

Answer 4

Rent, Rates, Taxes, Repairs and Insurance for Buildings

Question 5

Rent, Rates, Taxes, Repairs and Insurance for Buildings

Answer 5

If the premises are owned by the assessee himself, he will be allowed to debit the following amounts–
● Current repairs.
● Municipal tax or local tax or land revenue (but on payment basis as per section 43B)
● Premium for insurance of building
● If the building is owned by the assessee, he is not allowed to debit rent on notional basis (No income shall
be computed with regard to this house property under the head house property).
If the building has been taken on rent, the assessee shall be allowed to debit the following expenses –
● Rent for the premises
● If he has undertaken to bear the cost of repairs, the amount of such repairs
● Municipal tax or local tax or land revenue (but on payment basis as per section 43B), if borne by the lessee.
● Premium for insurance of house, if borne by the lessee.
● If any capital expenditure has been incurred he can claim depreciation on the same.
Where the premises are used partly for business and partly for other purposes, only a proportionate part of the
expenses for that part of the premises used for purposes of business will be allowed as a deduction.

Question 6

SECTION 31

Answer 6

Repairs and insurance of machinery, plant and furniture.
In respect of repairs and insurance of machinery, plant or furniture used for the purposes of the business or
profession, the following deductions shall be allowed—
1. The amount paid on account of current repairs.
2. Any premium paid for insurance.

Question 7

Section 36

Answer 7

●Payment of premium for the insurance of stocks
●Payment of premium in connection with Mediclaim policy
●Bonus and Commission
●Payment of Interest

Question 8

Employee’s contribution received by the employer

Answer 8

● If the employer has received contribution from the employee towards provident fund or Superannuation Fund or Employees State Insurance or towards any other welfare scheme of employees,
● It will be considered to be income of the employer under the head business/profession
● But if the employer has credited the amount to the relevant account within the time allowed in the relevant
Act (Provident Fund Act etc),
● Employers can debit the amount to the profit and loss account otherwise expenditure is disallowed.

As per the Employees Provident Funds Scheme, 1952, the amounts under consideration in respect of wages of the employees for any particular month shall be paid within 15 days of the close of every month.

Question 9

BAD DEBTS

Answer 9

The amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year shall be allowed as deduction.
● If any assessee has written off bad debts as irrecoverable in the books of accounts
● The debt has been taken into account as per income tax while computing the income of the assessee or it should represent the money lent in the ordinary course of business of banking or money lending carried on by the assessee.

Question 10

RECOVERY OF BAD DEBTS

Answer 10

If any amount was debited as bad debts with regard to particular debt and subsequently some amount was received in final settlement of the debt, in this case any deficiency shall be allowed as bad debt and any excess shall be considered to be deemed income under section 41(4).

Bad debts recovered shall be taxable under the head PGBP in the year in which they were recovered.
This shall apply irrespective of the fact that whether the business or profession is in existence
or not in the year of recovery.

Question 11

SECTION 43B

Answer 11

CERTAIN DEDUCTIONS TO BE MADE ONLY ON ACTUAL PAYMENT

Question 12

CERTAIN DEDUCTIONS TO BE MADE ONLY ON ACTUAL PAYMENT

Answer 12

Deduction of the following will be allowed in the previous year in which they are incurred only when paid by the assessee on or before the due date for furnishing the return of income under section 139(1) in respect of the
previous year in which the liability to pay such sum was incurred, otherwise deduction will be allowed in the year in
which it is paid.
(a) tax, duty, cess or fee
(b) employer by way of contribution to any provident fund or superannuation fund or gratuity fund
(c) Bonus or Commission
(d) interest on any loan or borrowing from any public financial institution or a State Financial Corporation or a State Industrial Investment Corporation, or
(e) any loan or borrowing from notified class of non-banking financial companies
(f) employer in lieu of earned leave of his employee
(g) the Indian Railways for use of Railway assets