VIII. DESCRIPCIÓN DEL MERCADO OBJETIVO
8.18 TENDENCIAS DE LA INDUSTRIA Y OTROS FACTORES DEL MERCADO
Answer:
Bad Debts [Sec. 36(1)(vii)]
Any debt or part thereof, which becomes bad shall be allowed as deduction.
Taxpoint: It is the assessee, who decides whether a debt has became bad or not and the Assessing Officer can never insist the assessee for production of proof that the debt had became bad.
Conditions:
1. Debt must be incidental to the business or profession of the assessee. There must be a close nexus between the debt and the business of the assessee.
2. The debt has been considered as income of the assessee of that previous year or of earlier previous years.
Exception: Bad debt arising due to insolvency of borrower is allowed as deduction provided money has been lent in ordinary course of money lending business (even though such money lent had never been a part of income)
3. It must have been written off in the accounts of the assessee.
Taxpoint: Provision for bad debt is not allowed as deduction.
Exception: Where the amount of such debt has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt becomes irrecoverable or of an earlier previous year on the basis of notified Income Computation and Disclosure Standards (ICDS) without recording the same in the accounts, then, such debt shall be allowed in the previous year in which such debt becomes irrecoverable and it shall be deemed that such debt has been written off as irrecoverable in the accounts.
4. Business must be carried on during the previous year or any part of the previous year.
Taxpoint: Bad debt of a discontinued business is not allowed as deduction even though the assessee has any other business continued.
5. It must be of a revenue nature
Taxpoint: Bad debt arising due to insolvency of a debtor for sale of an asset (not goods) is not allowed as deduction.
3. (a) State any five businesses specified u/s 35AD.
Answer:
Following are the specified business:
a. setting up and operating a cold chain facility;
b. setting up and operating a warehousing facility for storage of agricultural produce; or
c. laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network
d. building and operating, anywhere in India, a hotel of two-star or above category as classified by the Central Government;
e. building and operating, anywhere in India, a hospital with at least 100 beds for patients;
f. developing and building a notified housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government (or a State Government)
g. developing and building a notified housing project under a scheme for affordable housing framed by the Central Government (or a State Government)
h. production of fertilizer in India;
i. setting up and operating an inland container depot or a container freight station notified or approved under the Customs Act, 1962;
j. bee-keeping and production of honey and beeswax;
k. setting up and operating a warehousing facility for storage of sugar l. laying and operating a slurry pipeline for the transportation of iron ore
m. setting up and operating a semi-conductor wafer fabrication manufacturing unit, and which is notified by the Board in accordance with such guidelines as may be prescribed
n. developing or maintaining and operating or developing, maintaining and operating a new infrastructure facility by an Indian company (or consortium thereof) / authority / board / corporation having agreement with Central Government or State Government or local authority or any statutory body
3. (b) Name any four expenses which are deductible only on payment basis under section 43B.
Answer:
Deduction in respect of following expenses are allowed only if payment is made on or before the due date for furnishing return of income u/s 139(1)of the previous year in which such liability is incurred:
1. Any sum payable by way of tax, duty, cess, fee, by whatever name called, under any law for the time being in force.
2. Any sum payable as bonus or commission to employees for services rendered.
3. Any sum payable as interest on loan or borrowing from any
• public financial institutions (i.e., IFCI, LIC, etc.);
• a State financial corporation; or
• State industrial investment corporation.
4. Any sum payable by the assessee as interest on any loan or borrowing from a deposit taking non-banking financial company or systemically important non-deposit taking non-banking financial company, in accordance with the terms and conditions of the agreement governing such loan or borrowing
Systemically important non-deposit taking non-banking financial company means a non-banking financial company which is not accepting or holding public deposits and having total assets of not less than ` 500 crore as per the last audited balance sheet and is registered with the RBI.
Deposit taking non-banking financial company means a non-banking financial company which is accepting or holding public deposits and is registered with the RBI.
5. Any sum payable as interest on any loans and advances from a scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank in accordance with the terms and conditions of the agreement governing such loan or advances
6. Any sum payable by an employer in lieu of any leave at the credit of employee (i.e. leave encashment).
7. Any sum payable by an employer by way of contribution to any provident fund, superannuation fund, gratuity fund or any other fund for the welfare of employees.
8. Any sum payable by the assessee to the Indian Railways for the use of railway assets
4. (a) Discuss the admissibility or otherwise of the following items in computation of income under the head
“Profits and Gains of Business or Profession” for the assessment year 2021-22:
(i) A machine worth ` 45,000 was purchased for scientific research relating to the business carried on by the assessee.
(ii) A cash payment of ` 30,000 made to a creditor who refused to accept a cheque.
(iii) Penalty of ` 5,000 paid to customs authority for violation of customs law.
(iv) Brokerage of ` 10,000 paid for raising a loan for the purpose of business.
(v) ` 15,000 paid to an Income-tax advisor for conducting Appeal before the Income Tax Appellate Tribunal.
Answer:
(i) Capital expenditure incurred by the assessee for scientific research is fully allowed u/s 35.
(ii) Expenses of ` 30,000 shall be disallowed u/s 40A(3)
(iii) Any penalty paid for violation of law is disallowed u/s 37(1)
(iv) Brokerage paid for raising loan for the business purpose is an allowable expenditure provided tax has been deducted at source.
(v) Advisory fees shall be allowed as expenditure.
4. (b) Sara Jahan Ltd. has following assets as on 1/4/2020
Assets ` Depreciation Rate
Building A 50,000 10%
Furniture B 30,000 10%
Building C 10,000 10%
Machinery A 40,000 15%
Machinery B 50,000 15%
(i) During the year, building was purchased on 1/5/2020 for ` 50,000. Depreciation @ 10%.
(ii) Machinery A sold for ` 60,000 on 1/11/2020.
(iii) Furniture B sold for ` 50,000 on 1/6/2020.
Compute depreciation allowed u/s 32 for the A.Y.2021-22.
Answer:
Computation of Depreciation Allowed u/s 32 for the A.Y.2021-22
Particulars Amount Amount
Block 1: Building @ 10%
W.D.V. as on 1/4/2020 60,000
Add: Purchase during the year 50,000
1,10,000
Less: Sold during the year Nil
1,10,000
Depreciation @ 10% 11,000
Block 2: Furniture @ 10%
W.D.V. as on 1/4/2020 30,000
Add: Purchase during the year Nil
30,000
Less: Sold during the year 50,000
Short term capital gain 20,000
Block 3: Machinery @ 15%
W.D.V. as on 1/4/2020 90,000
Add: Purchase during the year Nil
90,000
Less: Sold during the year 60,000
30,000
Depreciation @ 15% 4,500
Depreciation allowed u/s 32 15,500
5. (a) On 01-04-2020, Everrise Ltd. owns plants A, B, C and D (rate of depreciation: 15%). Depreciated value of the block as on 01-04-2020 is ` 4,60,000. On 14-06-2020, Plant E which was initially purchased for ` 51,000 for conducting scientific research is transferred from laboratory to the factory. No other asset is purchased or sold. Find out the written down value as on 31-03-2021.
Answer:
Computation of written down value as on 31-3-2021
Particulars Amount
Block 1: Plants @ 15%
W.D.V. as on 1/4/2020 4,60,000
Add: Addition during the year being plant earlier used for scientific research Nil
Less: Sale made during the year Nil
Less: Depreciation allowed u/s 32 @ 15% 69,000
W.D.V. as on 31.3.2021 3,91,000
5. (b) East India Pharmaceuticals Ltd., a manufacturer, submitted the following list of expenses incurred in connection with research during the previous year 2020-21:
For in-house research relating to its business
Cost of land ` 50,000, purchase of machinery ` 75,000 and ` 80,000 towards salary of research personnel.
Contribution for carrying out approved research
` 40,000 to Calcutta University for carrying out approved social research project.
Calculate the amount of deduction admissible for scientific research.
Answer:
Computation of amount of deduction admissible u/s 35 for Scientific Research
Particulars If assessee is covered u/s 35(2AB) If assessee is not covered u/s 35(2AB)
Working Amount Working Amount
Contribution to Calcutta University 40,000 40,000
Expenditure on in-house research
Cost of land Not eligible Nil Not eligible Nil
Purchase of machinery 100% of ` 75,000 75,000 75,000
Salary of research personnel 100% of ` 80,000 80,000 80,000
Total deduction u/s 35 1,95,000 1,95,000
Weighted deduction u/s 35(2AB) is not available from A.Y. 2021-22
6. (a) Discuss the provision relating to allowability of provision for bad debts in hands of banks and financial institutions.
Answer:
Provision for Bad Debts [Sec. 36(1)(vii)]
In the case of following person, provision for bad debts shall be allowed to the extent of specified amount:
Person To that extent PBDD is allowed
A. Scheduled bank [not being a foreign bank] or a non-scheduled