« Principles and Practice of Direct Tax ‘ = — —.._*. Computation of business income ii Problem 8.24 Shri P. K. Nag, a spare parts dealer, furnishes the following particulars of his income for the Previg ended on 31st March, 2019. 7 o Profit and Loss Account To Salaries By Gross profit b/d He ” Rent, rates and taxes « ” Dividend “Sony ”" Legal chargés + Interest on post office Sy ” Interest on loan savings bank account : ” Office expenses» “ ” Provision for bad debts ”"Income-tax paid ” Depreciation " Donation to the PM's National Relief Fund To Net profit 2.5600 On scrutiny, the following was found (2) One-half of the premises is used by him for his own residence (©) Legal charges include @ 1,000 in connection with incomie-tax proceedings. (©) Office expenses include & 1,000 as daily puja expenses in the shop. ~ (d) Depreciation as per Income-tax Rules is 15,000. Compute Shri Nag’s income from business for the assessment year 2018-2019, Ss > Solution Computation of income under the head “Profits and gains of business or profession” of Shri P. K, Nag, ares! individual, for the assessment year 2019-2020 relating to the previous year 2018-2019. ‘Net profit as per Profit and Loss Account Add: Expenses disallowed : Provision for bad debts Income-tax Depreciation (treated separately) Donation to the P.M’s National Relief Fund Rent, rates and taxes [€ 12,000 x 1/2] Less: Expenses allowed under the |. T. Act. Depreciation as per I. T. Rules Less: Incomes not chargeable under the head Dividend Interest on post office savings bank account Business Incomebeing for Personal use ofthe proprietor, has been disallowed. othe np rent,ratesand taxes, i daily puj 'Y Puja expenses and legal charges for income tax proceedings are ) of the courts, ag decision 0 wr as deduction ws 371), Jo 2 athe assessment year 2004-2005, dividends from indian co a Jie savings bank is exempt ws 10(15), 20) “Sy mpanies are exempt ws 10(34). Interest on - pote 825 =“ se tolowing Profit and Lass A/c and other relevant information, compute total income of Shr Aa the assessment Year 2019-20. Profit and Loss Account forthe year ended 31-319 z g 1,10,000. | By Sales 5,20,000 2,50,000 | ,, Dividend from foreign 50,000 | ,, Company 4,000 7500 | ,, Bad debt recovery ei 8,500 (Disallowed in 2014-15) 35,000 Foes aid to Excise Dept. 12000 | ,, Bank interest 15,000 povson for bad debts 000 |, Closing sock ap. Tivelling expenses , Advertisement _ Net Profit Mitional Information : | Both opening and closing stocks have been valued at 10% above cost; ) Depreciation as per Income Tax Rules is ® 22,000. ) Donations comprise € 8,000 donated to PM’s Drought Relief Fund and & 2,000 to National Children Fund, ) Sales tax. amounting to & 12,000 were paid on September 14, 2019. ) Purchases include a payment of 840,000 made in cash ; ies Paid include % 24,000 paid to Shri Ratan. chases of Scientific research asset worth ® 70,000 included in purchases. (CU. B.Com. (H) 2008 — adapted}iples and Practice of Dire, « Princip! ct Tay : . Solution : Computation of total income of Shri Ratan for the assessment year 2019-2020 relating 1, t 2018-2019. ie Pro, a Profits and gains of business or profession : Net profit as per P/L Account 120,009 Add : Expenses disallowed 8,500 Income tax 1 2 Fines paid to Excise Department 8000 Provion for bad debt 27,000 reciation (treated separately) st Porsacdat 10,000 Sale tax (paid after the due date of submission of return [u/s 43B] 12,000 Purchase exceeding € 20,000 made in cash [u/s 40A(3)] ye Salaries paid to self ed Purchase of scientific research assets (treated separately) 70.000 Over valuation of stock [(1,10,000 ~ 66,000) x 10/110] 4000 _|(+)2,15,500 | Less: Expenses allowed under the Act : Depreciation as per IT Rules 22,000 | Capital expenditure on scientific research [u/s 35(2)(ia)] |__70,000 | (-)92,000 Less ; Incomes not taxable under the head : Dividend from foreign company 4,000 Recovery of bad debt (disallowed earlier) 35,000 interest 15,000_| (-) 54,000 | 1; Income from other sources : | Divident from foreign company 4,000 Bank interest 15,000 Gross total income Less: Deduction in respect of donations 80G (50% of € 10,000) Total income FA Prop : Probk 26 - Iii Problem 8.26 The following is the profit and loss account of Shri K. Kundu for the year ended 31st Marc Compute taxable income from business for the relevant assessment year > Profit and Loss Account : : To Opening stock 28,000 | By Sales ber » Purchases 2,37,500 » Closing stock ‘a i Wages 2 ~ 17,500 Bank interest |. @) Household expenses 7,600 . ”, Rent 6,000 Salaries 12,500 ”, Bad debts 2,850 *) Provision for bad debts ~ 3,650 | % General expenses 2,150 & Audit fees 2,500 ) Income-tax 3,900 ‘ Interest on capital 3,100 ", Depreciation 5,250 . Ne prot 37,600 371,1003 > Profits and Gains of Business or Profession : » Ql] Q information ¢ a vation as per Income-tax Rules amounts to & 7,350, 0 a) Pes nclude € 3,600 paid tothe domestic servant of Shri K, Kundu, Y IT.U. B.Com. (G) 2000 — adapted] atonal Solution = icome under the head “Profits and gains of business or profession” of Shri K. Kundu, a resident in cm or the assessment year 2019-2020 relating to the previous year 2018-2019. ; z z rofit as per Profit and Loss Account : wise vit Expenses disallowed : Household expenses seb Provision for bad debts ia Income-tax 3,900 Interest on capital 3,100 Depreciation (treated separately) 250 Wages of domestic servant 3/600 | 28,100 Las: Expenses allowed under the IT. Act : 65,700 Depreciation as per LT. Rules 7.350 Ls: Incomes not chargenble under this head : . —38°350- Bank interest 4,000 Business Income _ iii, Problem 827° 1 The profit and loss account and other information in relation to the business of Shri Sanjib Dharia are given. below. You are required to compute his taxable business income for the assessment year 2019-2020. Profit and Loss account for the year ended 31st March, 2019 : z To Business expenses + 48,000 | By Gross profit b/d "0.00 » Interest on bank loan oop keene eee Se oo + Repairs to furniture 3,000 + Purchase of furniture one » Bad debts + ooo » Provision for bad debts ae » Bre insurance premium a ” life insurance premium. — Income-tax = * Donation to approved institution [u/s 80G(5)] ee ation to Prime Minister’s National Fin’ lief Fund ve i Pe 5,000 Test on capital be reciation so et profite/a aoe Tsao 1,60,000 aGas « princes and Pract of Dec Tax Other information : (a) Depreciation as per income-tax rules works out to % 2,500. (©) 60% of the bad debts are allowable. (©) In arriving at-gross pfofit the opening stock and closing stock have been valued at z 7) | % 90,000 respectively both being 10% below cost. " (d) Business expenses included wages of domestic servant @ 350 p.m. [T.U. B.Com. (G) 2091. 0 a apts | .) > Solution Computation of income under the head.”’Profits and gains of business or profession " of Shri Sanjib Dhar, an individual, for the assessment year 2019-2020 relating to the previous year 2018-2019. * 7. Net profit as per Profit and Loss Account ay Add; Expenses disallowed a Salary of domestic servant 4,200 Purchase of furniture [capital expenditure] 5,000 Bad debts [40% of € 1,400] 560 Provision for bad debts 3,200 ? Life insurance premium [personal expenses] 3,600 _Income-tax 3,500 Donations [& 8000 + € 6,000] 14,000 /Fines 5,000 / Tnterest on capital 3,000 | Depreciation (treated separately) 3,000 | sin Less: Expenses allowed under the Act : 106380 Depreciation 258 ‘oko Less: Income not taxable under this head : |___ 1001 Dividend from UTI 54H Add: Decréase in profit due to undervaluation | of opening and closing stock (Note 1) : 20 Business income/taxable income from business 68 Note 1. Effect of over undervaluation of stock : Stock Amount Amount of Effect on prof undervaluation Opening stock 72,000 72,000 X 1/5 =% 8,000 7 Increase 4 Closing stock 90,000 90,000 x 1/y =% 10,000 Decrease Net decrease in profit due to undervaluation of stocks = & (10,000 - 8,000) = ¥ 2,000. Iii Problem 8.28 ~~ | i fae M ‘The profit and loss account of Samar for the previous year 2018-2019 shows a net profit of $3000)" 7! providing for depreciation on assets € 18,000. The following further information was available: Conf business income of Samar for the assessment year 2019-2020 giving reasons : reo i" (a) Anamount of 12,000 on account of sundry creditors written off, was directly credited in # ‘A/c. The said amount was charged in the Revenue A/c of earlier year and was allowed 25 ©sits and Gains of Business or Profession : a > Pro ] tion allowance of € 18,000 included depreciation amounting to ® 8,000 on addition to plant “4 ep costing € 40,000 during the year (purchased on 1.1.2019 and put to use on the same and 0% @ 20%. 7 date) ‘amed an income of € 24,000 during the year from his money lending business which was gamat € 1 charges debited to the profit and loss A/c included % 3,000 paid i nar rd. Legal ,000 paid to a lawyer in © (plcenced. ee secution of Samar for this business oer il connection General charges included @ ) € 2,000 towards donation to political party’s election fund. @ . i) 3,000 for family planning expenses among the employees. i) Repairs to building included € 15,000 towards cost of addition to premises, construction was Ge ompleted on 1.7.2018. [B.U. B. Com. (Hons.) 2001— adapted] W Solution : onputaton of income under the head “Profits and gains of business or profession” of Samar, a resident individual, sorte assessment year 2019-2020 relating to the previous year 2018-2019, z z Net profit as per Profit and Loss Account 3,00,000 ‘Add: Expenses disallowed : Depreciation (treated separately) 18,000 Sundry creditors written off which was allowed earlier 12,000 Legal expenses in connection with illegal money lending business 3,000 Donation to political party : 2,000 Extension to building. 15,000 50,000 3,50,000 less: Expenses allowed under the Act 15,500 Depreciation as per I. T. Rules = Business Income “| 334,500 Notes :(1) Depreciation allowed under the Act : © Depreciation on plant purchased during the year ( 8,000 x 1/2) 4,000 {as it is used for less than 180 days during the previous year © Depreciation on remaining assets & (18,000 - 8,000) 10,000 Depreciation on extension to building @ 10% on % 15,000 1,500 (full year’s depreciation as it is used for more than 180 days during the previous year) Total 215,500 (©) Family planning expenditure has been presumed to be revenue expenditure. It is, therefore, allowed ws 37(1), \ { Legal charges in relation to illegal business are not allow8d, although the profits of such business are taxable. It is presumed here that the profit of € 24,000 is includezhin the net profit of & 3,00,000. ‘Ws 80GGC, a non-corporate assessee can claim deduction from gros${otal income on account of donation |_| ‘9 political parties @) (a)businessman submits the following Principles and Practice of Direct Tax profit and loss account for the year ended 3) 32019 - . fo Salaries 70,000 | By Gross profit |, Travelling expenses 25,900 | ,,. Dividend aye ® Rent and taxes 3,000 | ,, Discount 7 », interest on capital 5,000 a ” Depreciation 25,000 “ ” Income-tax 50,000 Birthday gift to son 25,000 Net profit 40,000 | 243,000 he follows ; 248 © following additional information was available : 3) Salaries include 15,000 Paid to the proprietor‘s.wife-who was an engineer and before foining usiness of her husband was ‘employed in.a Government concern and was drawing a 8% © 10,000 p.m. She joined here on 18.2.2019. a b) The proprietor went to foreign tour for business purposes and stayed there for 18 days, of whi, Spent 3 days for sight-seeing, Total expenses incurred in foreign country was € 18) 1 which included in travelling expenses a/c. ™ {c) Depreciation as per IT Rules was & 40,000. (a) Compute x’ Sol n Birthday gift presented to son in cash was invested in accrued up to 31-3-2019 was ® 2,500. His son is a minor. @ nationalised bank, interest on the sam 8 taxable income from business for the assessment year 2019-2020. [B.U. B.Com. (Hons.) 1997 — adapti computation of income under the head “Profits and gains of business or ‘te assessment year 2019-2020 relating to the previous year 2018-2019, profession” of X, a resident individua, jr let profit as per Profit and Loss Account dd: Expenses disallowed : Travelling expenses [personal exper Interest on capital Depreciation (treated separately) Income-tax Birthday gift to son sss: Expenses allowed under the Act : Depreciation as per IT Rules sss: Income not chargeable under this heads : Dividend Business Income nses € 18,000 3/,,] Yotes : (1) Salaries paid to wife for technical services for one ye emolu drawn by her from previous employment, and a half months being at par with a no disallowance will be made u/s 40A@))- @) Travelling expenses on sight-seeing being personal expenses of the assessee, itis disall_| ( Daring the year an ol 1) AA a of B.B. Lal, i Loss Account of B. B. Lal, the proprietor of Calcutta Store for the year ended z 2,500 | By Gross profit b/d 0 900 | ,, Interest on investment oe c 420 (after deduction of tax at jar source @ 20%) prem 800 |, Bad debis recovergd to cometex 1,250 | _,, Profit on sale of ma 73,000 id debts 20 : memnent 1,900 exper Yo00 2,300 14,220 30,840 S080 iol information = Jude % 200 due from a customer against whom a suit for realisation of debt is pending, red was in respect of a claim of € 2,000 in the preceding year, out of which a sum of that year. - 1d machine was sold for % 8,000 and its written down value for income-tax purpose on the date of sale was € 5,000. The written down value of the entire block of assets prising plant and machinery was & 30,000. (@ During the year a new machine costing % 5,000 was installed. All the machines belong to the same block carrying a depreciation rate of 15%. From the information above, compute business income of Shri B. B. Lal, a resident individual, for the assessment year 2019-2020, [B.U. B.Com. (Hons.) 1990 — adapted] W solution : Computation of income under the head “Profits and gains of business or profession” of B. B. Lal, a resident {Bad debts inc Bad debts recover (£1500 was allowed ‘ual, for the assessment year 2019-2020 relating to the previous year 2018-2019. Fa z Na refit 8 per Profit and Loss Account _™ “Apenses disallowed : Iereston capital a kf insurance premium é = ni debts (vet to be settled) - = revision for income-tax y ‘st vision for bad debts it ation to club 30 | ssp lex, pe Pttiation (treated separately) ae mses allo; = rec wed under the Act : a ion as per IT Rules (Note 3) 3 hheomes . Wes tn {able under this hend : 500 ba lee festment x 000 oft eeowered (Note 4) 580 : of 4 ae ein Tree machinery : = ; ‘ (35 5« Notes :(1) Loss due to embezzlement b Mr. Inder Kumar Vasudeva furnishes the following Trading and Profit and Loss Account for the previous (soy), @) xy an employee or other person is allowable [Bodridns Daga ys crs Entertainment expenses for the purposes of business @)_ Depreciation as per IT Rules : WDV of the block of assets comprising machinery (Rate of Depreciation 15%) as on 1.4.2018 Add : Machinery purchased during the previous year Less : Sale of machinery during the year WDV of machinery as on the end of the previous year Depreciation @ 15% (assumed that the new machine has been Put into use during the previous year for more than 180 days) (4) Taxable amount of bad debt recovered : Amount of claim for bad debt Less : bad debt allowed earlier Difference remaining unallowed Less : Recovery in the previous year Excess recovery being taxable as business income Recovery of bad debt to the extent of & 500 (® 700 - & 200) is not taxable, | Problem 8.32. year ended 31.3.2019. Trading Account fully allowable u/s 37(1) Tey isis Ss &. 3 | 2 130 8 lele sl Stocks Purchases Freight and duty Manufacturing wages Factory rent, rates and taxes Depreciation. Gross profit z 11,000 180,000 5,000 60,000 30,000 15,000 By Sales ” Stocks Principles and Practice of Direct Tax ¢ oNProfit and Loss Account 9 z salaries 27,000 | By Gross profit b/d 109,900 amen ExPenSeS 6,100 |” Rent of staff quarters built in 2004 19,000 at pital \ 3300 |” Refund of income-tax penalty 1,100 ge premium 200 |” Sale price of old machinery 25,000 ae 7,000 | Recovery of bad debts not eee 6,000 | __ allowed to be deducted in ones on sales tax proceedings 2,000 earlier years 6,000 baemees on income-tax ” Sundry receipts 35,000 " proceedings 13,000 nll expenses 4,000 pl expenses 7,000 wil expenses of proprietor — 3,000 gif welfare expenses 2,000, gis to staff quarters 4,000 seurty deposit for telex connection | 10,000 tus payable to employees~ 20,000 Hrovision for taxes : Sales tax and excise duty 25,000 Municipal taxes for staff quarters 4,000 |General reserve __ 26,000 Entertainment expenses 6,000 Ne profit anit 1,96,000 1,96,000 ‘required to compute the taxable profits from business after taking the following into consideration Furchases include a purchase of € 55,000. It was paid by a bearer cheque. = has always valued the stocks at cost price but since 2018-19 he has valued it at market price ich was in excess of the cost price by 10%-—~ Utice salaries paid include & 12,400 to the proprietor of the business. Diwali expenses include gifts of @ 1,000 paid to the relatives. ee of the block of assets consisting of factory buildings as on 1.42017 is € 90,000. An addition a 2 buildings on 1.8.2018 ata cost of € 12,000. The newly added building was destroyed by ‘ance company paid % 5,000 as compensation. hg, DV of the block of assets consisting of machinery as on 1.4.2018 is € 59,000. “'8x and excise duties amounting to only & 20,000 were paid on or before 256.2019, (D.U. B.Com. (Hons.) 1991 — adapted]>| ae « Principles and Practice of Dect Tax ¢ 4) We > Solution : uf Computation of income under the head “Profits and guns of business or profession” of Mr. Inder k; \,é és Umar Yas i avresident individual, forthe assessment year 2019-2020 relating to the previous year 2018-2019,” Veug/* a Net profit as per Profit and Loss Account Add: Expenses disallowed : Overvaluation of opening stock (Note 1) Nil “Burchases (Note 2) 55,000 Depreciation (treated separately) 15,000 £ Salaries paid to self included in office expenses 12,400 7 Interest on capital 33300 -Income-tax 6,000 Pinal expenses (includes pitts to relatives) a - 1,000 ical expenses (personal expenses of proprietor) 3 Repairs to staff quarters (fully allowed) Nil SEcutity deposit for telex (fully allowed) (Note 4 Nil Bonus (not yet paid) 20,000 Provision for sales tax and excise duties (mount not paid before filing of retura ie, 825,000 -¥ 20,000) 5,000 Provision for municipal tax (amount not actually paid) 4,000 General reserve 26,000 + Expenses allowed under the Act: ‘ervaluation of closing stock [& 26,000 x ng) 2,400 Depreciation as per IT Rule (Naw 3) 14800 | ny Less: Incomes not taxable under the Act: 153% j Refund of income-tax penalty 1,100 Sale price of old machiner 25,000 i: Recovery of bad debt disallowed . 6.000 | 2. in earlier years Business Income inigheo "sr Notes :(1) Since method of ‘valuation of stock was changed during the revious year 2018-2019, itis assumed! , opening stockhas notbeen overt gS ans mee * == he (2) Since the payment for purchase of € 55,000 has been made otherwise than ‘by an account payee ces li, an account payee bank draft, 100%. of the payment has’ ‘been disallowed ws 40A(3), | 3) Depreciation as per IT Rules ee (@) Block of assets consisting of plant and machinery (Depreciation rate 15%): Nhe WDV as on 14.2018 ‘lou Less : Sale price of old machine h WDV as on 313.2018 ‘ty {assumed that the block is not empty) ait Depreciation @ 15% 2 % () Block of assets consaing of buildings ce of depreciation 10%) IDV as on 1.4.2018 90,000 ‘Add: Additions during the year 12,000 1,02,000 Less : Amount received as compensation from insurance company 5.000 WDV as on 313.2019 27.00 %, Depreciation @ 10% ist Total depreciation nt ref (® Security deposit for telex is allowable expenditure as per CBDT oe ae / however, taxable w/s 41(). ad3.33 | problem va and Loss Account forthe year ended on 31st March, 2019 of Mr. Saha a sole nes the Prof E 7 ; 80,000 | By Sales 12,00,000 ving #2 9,20,000 | ,, Closing stock 99,000 i 2,90,000 cess 12,90,000 12,90,000, 55,000 i Gross profit b/d 2,90,000 jslaies 25,000 » Bank interest 500 est 5,000 anmision oa i charges acts written off 14,500 [face for bad debt 11,500 achinery 1,500 esta perciation on fixed assets 26,500 2,000 |orer expenses pcometax — 20,000 |perpoft 125,000 28,70,500 28,70,500 [jas ncome under the head “Profits and gains of business or profession” of Mr. Saha for the vent year 2019-2020 after taking into consideration the following information sues include the value of goods worth 50,000 which were drawn by Mr. Saha for his personal use "| The cost price of such goods was & 45,000 and the market price of such goods on the date of transfer was valued at © 56,000. *) Rent includes € 3,600 which was charged by Mr-Saha for part of his own residence used as godown + forthe business. Bad debts include % 3,000 which were not finally settled as irrecoverable, but the same were included in the last year’s sales. ) Legal charges include % 500, the fees paid for the registration of title deeds of a land acquired for the business last year. Depreciation allowable as per Income-tax Rules for the year was € 30,000. Both opening and closing stocks of the year were undervalued at 20% below cost. IC.U. B.Com. (Hons.) 1981 —adapted] «|iNd Solution : Computation of income under the individual, for the assessment year head “Profits and gains of business or profession 2019-2020 relating to the previous year 2018-2019 Net profit as per Profit and Loss Account Add: Expenses disallowed Rent paid to self Legal charges (legal charges for registration of land being capital expenditure) Bad debts (written off before maturity) Reserve for bad debts Depreciation (treated separately) Income-tax. Less : Expenses allowed under the Act Depreciation as per IT Rules Less : Incomes not taxable : Excess of sales price over the cost of goods drawn by the proprietor (® 50,000 - & 45,000) (Note 1) Income not taxable under this head Bank interest Less : Add: Undervaluation of stocks (Note 2) Business Income ‘Notes:(I) As per the Supreme Court's decision in Kitablai Prmuh rice/market price over the cost price of the goods with tad vs. CIT [24 ITR 506 (SC)), (2) Adjustment for undervaluation of stocks. the es drawn from own stock is not income us Undervaluation of opening stock = € 80,000 x 2/9 = et Undervaluation of closing stock ® 90,000 x 20/5 = eg * Netundervaluation closing stock resulting in decrease in profit a Till Problem 8.34 /~ \« Following is the Profit and Loss Account of Shri Uttam Kumar for the year ended 31 March, - z ! To Opening stock 24,000 | By Sates \4 ” Purchases: 60,000 | ” Closing stock q ” Wages 10,000 | Rent of staff quarters | ” Salaries 10,000] ” Bad debts recovered " Legal expenses 3,000 | "Dividend (Net) | ” Audit fees 5,000 | (ax deducted & 400) | 4 ” Welfare expenses 4000 | Interest on drawings ” General charges 6,000 | ” Bad debts 1,500 | | “ Income-tax 4,000 " Reserve for bad debts 1,000 | “ Commission 500 | "Interest on capital 2,000 | ” Depreciation 10,000 " Net profit 36,000 177,000) Profits and Gains of Business or Profession ou are required to compute the income of Uttam wee akirg nto consideration the following information 7 : » 3) Kumar from business for the assessment year 2018-2019 a) Wages include labour charges of 8400 incurred in installation of a new machine during the year which 15%). costs € 80,000. Written down value of other machines on 1.4.2018 was & 40,000 (rate of depreciation {) Legal expenses include & 2,000 paid for defending the assessce's ttle to the factory building, ()_ Audit fees include & 1,000 paid to the auditor for conducting income-tax appeal (d) Bad debts in relation to a debtor against whom a suit is pending before a court of law. (¢) Commission is paid to a broker for raising a loan. The loan is repayable after five years. (?) Bad debt recovered is in relation to bad debts which were disallowed in the earlier years. » Solution [C.U. B.Com. (Hons.) 1984 —adapted] Computation of income under the head "Profits and gains of business or profession” of Shri Uttane Kusnar, a resident invdual, forthe assessment year 2019-2020 relating to the preveus year 2018-2019. z x Net profit as per Profit and Loss Account 36,000 Add: Expenses disallowed : Wages for installation of new machine (capital expenditure) 400 Bad debts (written off before maturity) 1,500 Income-tax 4,000 Reserve for bad debts 1,000 Interest on capital 2,000 Depreciation (treated separately) 10,000 18,900 Less: Expenses allowed under the Act 54,900 Depreciation as per IT Rules 18,060 Luss: Incomes not taxable Bad debts recovered which was disallowed in the earlier years 500 Interest on drawings 200 700 Less: Incomes not chargenble under this head : Dividend 2,000 20,760 Business Income 34,140 Notes: (1) Depreciation as per IT Rules : WDV of the block of assets consisting of plant and machinery z as on 14.2018 (Depreciation rate 15%) 40,000 Add : Purchased during the year (® 80,000 + ® 400) 80,400 1,20,400 Luss: Sale during the year Nil WDV as on 31.3.2019 1,20,400 Depreciation @ 15% 18,060 (ltis assumed that all the machines belong to the same block and the new machine has been put into use during the previous year for more than 180 days.) (2) Commission on raising loan is allowable as deduction, (3) Legal charges for defending assesses title to the existing assets are allowable as deduction (4) From the assessment year 2005-2006 dividends are exempt w/5 10(34),