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PROFITS AND GAINS OF BUSINESS OR PROFESSION

Qn 1 The company is engaged in trading of goods. Compute WDV from the following information for AY
2024-25
Block Depreciation Rate Opening WDV 1.4.2023
Plant A, B, C 15 10,40,000
Plant D, E 40 2,60,000
Plant F 50 70,000

After 1.4.2023, the company purchases the following assets

Asset Date of purchase Depreciation Rate Actual Cost
Plant G 6.4.2023 50 6,000
Plant H 11.5.2023 15 18,000
Furniture 6.6.2023 10 56,000
Car 7.7.2023 15 2,56,000

The following assets are transferred

Assets Date of Sale Sale Consideration
Plant B 20.12.2023 25,10,900
Plant D 31.1.2024 12,000

Qn 2: Homework – Assignment On 1st April, depreciated value of a block of assets (depreciation = 15%)
is Rs 80,000. It consists of plants A and B. The assessee purchases plant C (deprecation = 15%) during
the year for Rs 30,000 and sells Plant A on 3rd May for Rs 1,80,000. Find:
i. WDV of the block as at the end of the year
ii. Depreciation for the year
iii. CG if any
Answers: 0, 0, Rs 70000

Qn 3: X Ltd owns 2 plants – A and B as on 1.4.2023 (dep = 15%, depreciated value on 1.4.2023 = Rs
2,37,000). The company purchases plant C on 31.5.2023 for Rs 20,000 and sells Plant A (on 10.4.2023),
Plant B (on 12.12.2023) and Plant C (on 1.3.2024) for Rs 10,000, Rs 15,000, Rs 24,000 respectively. Find:
i. WDV of the block as on 31.03.2024
ii. Depreciation for the PY 2023-24
iii. CG if any

Qn 4: X ltd owns 2 buildings A and B on 1.4.2023 (rate of dep: 10%, depreciated value = Rs 14,15,700). It
purchases on 1.12.2023 building C for Rs 3,10,000 (rate of depreciation 10%) and sells building A during
the PY 2023-24 for Rs 8,70.000. Calculate opening WDV (as on 1.4.2024). What will your answer be if
Selling Price = Rs 15,87,000?

Qn 5: R borrowed a sum of Rs 20 lacs on 1.4.2021 @ 12% p.a. to construct a building for the purpose of
his business. The construction of the house property is completed on 30.6.2023 and put to use
immediately. The loan is still outstanding. Cost of construction of building is Rs 50 lacs. Calculate the
actual cost of the building which shall be eligible for depreciation.

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Qn 6: HOMEWORK - ASSIGNMENT The opening WDV of a block of assets was Rs 8,00,000. An asset
of the same block was acquired during the year for Rs 3,00,000. Thereafter, all assets of the block were
sold for Rs 12,00,000. Compute the depreciation for the year, and also indicate if there is any STCG/
STCL
Would your answer be different if the sale consideration is Rs9,00,000?
Answers: STCG = Rs 1,00,000, STCL = Rs 2,00,000

Qn 7: HOMEWORK – ASSIGNMENT X owns machineries A, B and C. Opening WDV = Rs 3,18,000.

Depreciation = 15%. He acquires a new machinery on 2nd Nov for Rs 60,000. Machinery B and C are sold on
15th March for Rs 1,80,000 and Rs 40,000 respectively. Compute depreciation, STCG/ STCL
Answers: Depreciation: Rs 19,200. Opening WDV for next year: Rs 1,38,800. STCG/ STCL = 0

Qn 8 An existing industrial undertaking has acquired the following assets during the previous year 2023-
24
Date of Date when Cost of
Asset
acquisition put to use acquisition
Factory Buildings 4.4.2023 1.9.2023 50,00,000

Plant & Machinery

Air Pollution control equipment 4.5.2023 1.9.2023 4,00,000

Machinery A 5.5.2023 1.9.2023 2,00,000

Machinery B 7.6.2023 1.9.2023 5,00,000

Machinery C 30.8.2023 1.9.2023 10,00,000

Machinery D 1.9.2023 31.10.2023 4,00,000

Machinery E 1.1.2024 28.2.2024 3,00,000

Machinery F (second hand) 11.1.2024 13.1.2024 2,00,000

Motor Car 1.2.2024 1.2.2024 5,00,000

Air- Conditioner (installed in office) 1.2.2024 2.2.2024 1,00,000

Compute depreciation allowable for AY 2024-25 and WDV as on 1.4.2024 assuming WDV on block of
factory building and 15 % plant & machinery was ₹10,00,000 and ₹6,00,000 respectively. Assume assessee
has opted out of the default tax regime u/s 115BAC.

Qn 9 – HOMEWORK – ASSIGNMENT Rahul Ltd. has started a new business of manufacturing paints on
1.4.2023. The company has purchased the following assets during the financial year 2023-24:
Date on which
Actual cost of Date of Rate of
Asset asset is put to
acquisition Purchase Depreciation
use
Furniture 2,00,000 10.4.2023 10% 10.4.2023
Air-conditioner installed in
1,00,000 16.6.2023 15% 18.6.2023
office

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Car 8,00,000 12.7.2023 15% 12.7.2023

Plant X 50,00,000 11.4.2023 15% 28.4.2023

Plant Y 20,00,000 15.9.2023 15% 16.11.2023

Plant Z 80,000 1.8.2023 100% 15.9.2023

Computer for office 1,00,000 1.7.2023 60% 1.7.2023

Computer for factory 1,50,000 2.7.2023 60% 4.7.2023

Compute the amount of normal and additional depreciation for the assessment year 2024-25. Assume
assessee has opted out of the default tax regime u/s 115BAC.
Answers: Normal depreciation: Rs 12,85,000. Additional depreciation: Rs 12,30,000

Qn 13:X submits the following particulars:

Previous Years
2023-24 2024-25
Income from salary 1,00,000 2,00,000
Business profits (before depreciation) 16,000 18,000
Current depreciation 1,34,000 1,32,000
IFOS 10,000 80,000
Determine the taxable income of X for AY 2024-25 and AY 2025-26

Qn 14 HOMEWORK – ASSIGNMENT An electricity company which was charging depreciation on SLM

basis and whose actual cost of the asset was Rs 5,00,000 and WDV Rs 4,50,000, sold the said asset during
the year after 2 years. What will be the tax treatment if the asset is sold for:
(i) Rs 3,50,000
(ii) Rs 4,80,000
(iii) Rs 6,00,000
Hints: (Rs 1,00,000 TD, Rs 30,000 BC, Rs 50,000 BC and Rs 1,00,000 STCG)

Qn 15 A Ltd engaged in the business of generation and distribution of power, had claimed depreciation
on SLM basis for IT purposes. You are informed that a second-hand plant was acquired for Rs 60 lacs and
depreciation @ 8.24% was claimed for 2 years on SLM basis. Assuming that the said plant is sold for a
consideration as given below, during the year, determine the tax treatment under Income Tax.
(a) Rs 36,00,000
(b) Rs 55,00,000
(c) Rs 62,00,000

Qn 16: Lights and Power Ltd. engaged in the business of generation of power, furnishes the following
particulars pertaining to P.Y.2023-24. Compute the depreciation allowable under section 32 for A.Y. 2024-
25, while computing its income under the “Profits and gains of business or profession”. The company has
opted for depreciation allowance on the basis of written down value. Assume assessee has opted out of
the default tax regime u/s 115BAC.
Particulars ₹
Opening written down value of Plant and Machinery (15% block) as on 01.04.2023
1. 5,78,000
(Purchase value ₹8,00,000)

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Purchase of second hand machinery (15% block) on 29.12.2023 for business

2. 2,00,000
purpose
Machinery Y (15% block) purchased and installed on 12.07.2023 for the purpose
3. 8,00,000
of power generation
4. Acquired and installed for use a new air pollution control equipment on 31.7.2023 2,50,000

5. New air conditioner purchased and installed in office premises on 08.09.2023 3,00,000
New machinery Z (15% block) acquired and installed on 23.11.2023 for the
6. 3,25,000
purpose of generation of power
Sale value of an old machinery X, sold during the year (purchase value ₹4,80,000,
7. 3,10,000
WDV as on 01.04.2023 ₹3,46,800)

Qn 17 Mr. Venus., engaged in manufacture of pesticides, furnishes the following particulars relating to
its manufacturing unit at Chennai, for the year ending 31-3-2024:

Additional information:
• All assets were purchased by A/c payee cheque.
• All assets were put to use immediately.
• New machinery purchased on 1-12-2023 and computer have been installed in the office.
• During the year ended 31-3-2023, a new machinery had been purchased on 31-10-2022, for Rs 10 lakhs.
Additional depreciation, besides normal depreciation, had been claimed thereon.
• Depreciation rate for machinery may be taken as 15%.
• The assessee has no brought forward business loss or unabsorbed depreciation as on 1.4.2023.
Compute the depreciation available to the assessee as per the provisions of the Income-tax Act, 1961 and
the WDV of different blocks of assets as on 31-3-2024 if -
(i) he exercises the option of shifting out of the default tax regime provided under section
115BAC(1A)
(ii) she pays tax under the default tax regime under section 115BAC.

Qn 19 Mr. A, furnishes the following particulars for the P.Y.2023-24. Compute the deduction allowable
under section 35 for A.Y.2024-25, while computing his income under the head “Profits and gains of
business or profession”, if.
(i) he is paying tax under default tax regime under section 115BAC
(ii) he has exercised the option of shifting out of the default tax regime provided under S. 115BAC(1A)
Particulars ₹

1 Amount paid to Indian Institute of Science, Bangalore, for scientific research 1,00,000

2 Amount paid to IIT, Delhi for an approved scientific research programme 2,50,000

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Amount paid to X Ltd., a company registered in India which has as its main object
3 4,00,000
scientific research and development, as is approved by the prescribed authority
Expenditure incurred on in-house research and development facility as approved by the prescribed
4
authority
(a) Revenue expenditure on scientific research 3,00,000
Capital expenditure (including cost of acquisition of land ₹5,00,000) on scientific
(b) 7,50,000
research

Qn 20 Aparna Ltd. commenced production of paper on December 1, 2023. The company has made the
following expenditure on scientific research up to the year ending on March 31, 2024:
1. On December 13, 2023, the company pays ₹80,000 to the Indian Agricultural Research Institute,
New Delhi, being an approved research institute under 35(1)(ii), for the purpose of carrying out
scientific research in natural science.
2. On December 21, 2023, the company pays ₹70,000 to the Indian Institute of Management,
Ahmedabad, being an approved institute under 35(1)(iii), for the purpose of carrying out research in
social or statistical science.
3. On January 10, 2024, the company pays ₹40,250 to an approved National Laboratory for carrying out
programmes of scientific research.
4. On December 23, 2023, the company purchases a plot of land for ₹6,00,000. Later on, a laboratory
building is constructed (cost of construction: ₹4,70,000, date of completion of construction: March
1, 2024) to start an in-house research.
5. Before the commencement of the production, the company had made the following revenue
expenditure for its research laboratory -
 Expenditure on salary and perquisite to research personnel and research material during the 12
months ending on November 30, 2020: ₹30,000
 Expenditure on salary of research professional from December 1, 2020 to November 30, 2023:
₹91,000 (out of which amount certified by the prescribed authority is ₹32,000).
 Expenditure on providing rent free flat and club facility to research personnel from December 1,
2020 to November 30, 2023: ₹18,000.
 Expenditure on research material from December 1, 2020 to November 30, 2023: ₹76,800 (out of
which amount certified by the prescribed authority is ₹44,800).

Qn 21: Business income of Bhumika Ltd before allowing expenditure on scientific research during the
year is Rs 2,50,000. The company has incurred the following expenses on scientific research:
Revenue expenditure on scientific research – Rs 2,60,000
Capital expenditure on scientific research- Rs 5,00,000
Compute deduction available on account of scientific research assuming that the company does not have
any other income.

Qn 22 Mr. Gamma, a proprietor started a business of manufacture of tyres and tubes for motor vehicles
on 1.1.2023. The manufacturing unit was set up on 1.5.2023. He commenced his manufacturing operations
on 1.6.2023. The total cost of the plant and machinery installed in the unit is Rs 120 crore. The said plant
and machinery included second hand plant and machinery bought for Rs 20 crore and new plant and
machinery for scientific research relating to the business of the assessee acquired at a cost of Rs 15
crore. Compute the amount of depreciation allowable under section 32 of the Income-tax Act, 1961 in
respect of the assessment year 2024-25. Assume that all the assets were purchased by way of account

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payee cheque and Mr. Gamma has exercised the option of shifting out of the default tax regime provided
under section 115BAC(1A).

Qn 23 Mr. Praveen Kumar has furnished the following particulars relating to payments towards made
towards scientific research for the year. Assume assessee has opted out of the default tax regime u/s
115BAC.
Sl.No Particulars (₹ in lacs)

(i) Payments made to K Research Ltd. 20

(ii) Payment made to LMN College 15

(iii) Payment made to OPQ College 10

(iv) Payment made to National Laboratory 8

(v) Machinery purchased for in-house scientific research 25

Salaries to research staff engaged in in-house scientific
(vi) 12
research
Note: K Research Ltd. and LMN College are approved research institutions and these payments are to be
used for the purposes of scientific research. Compute the amount of deduction available under section 35
of the Income-tax Act, 1961 while arriving at the business income of the assessee

Qn 24 On 1.4.2023, Madhumita ltd commences the operation of a warehousing facility in AP for storage
of agricultural produce. The following information is available from the records of the company:
Expenses incurred prior to 1.4.2023:
Purchase of land for warehouse 50,00,000
Construction cost of warehouse 8,00,000
Purchase of know-how for warehouse 10,00,000
Salary to staff 78,000
These expenses are capitalised on 31.3.2023
Expenses incurred during 2023-24
Construction cost of warehouse 60,00,000
Purchase of old P&M (from domestic market) 2,00,000
Purchase of old P&M (from Germany) 4,00,000
Purchase of new plant & Machinery 9,00,000
Purchase of goodwill 3,50,000
Profit & Loss a/c for the year 2023-24:
Depreciation of building (5%) 3,40,000 Amt collected from persons using w/h 78,00,000
Depreciation of machinery (23.33%) 3,50,000
Cost of know-how (amt written off) 10,00,000
Other operating expenses 7,51,000
Donation to political party 10,000
Net Profit 53,49,000
78,00,000 78,00,000
Out of other expenses, a payment of Rs 40,000 is made in cash. Other operating expenses are deductible
u/s 37. Find out the taxable income of X Ltd for AY 2024-25 on the assumption that Madhumita Ltd has

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the following income from other sources – income from the business of commission agency: Rs 20,15,000
(computed under the provisions of IT Act) and dividend from a foreign company: Rs 50,000

Qn 25 Mr. A commenced operations of the businesses of setting up a warehousing facility for storage of
food grains, sugar and edible oil on 1.4.2023. He incurred capital expenditure of Rs 80 lakh, Rs 60 lakh
and Rs 50 lakh, respectively, on purchase of land and building during the period January, 2023 to March,
2023 exclusively for the above businesses, and capitalized the same in its books of account as on 1st April,
2023. The cost of land included in the above figures is Rs 50 lakh, Rs 40 lakh and Rs 30 lakh, respectively.
During the P.Y. 2023-24, he incurred capital expenditure of Rs 20 lakh, Rs 15 lakh & Rs 10 lakh,
respectively, for extension/reconstruction of the building purchased and used exclusively for the above
businesses. Compute the income under the head “Profits and gains of business or profession” for the
A.Y.2024-25 and the loss to be carried forward, assuming that Mr. A is exercising the option of shifting
out of the default tax regime provided under section 115BAC(1A) and has fulfilled all the conditions
specified under section 35AD and wants to claim deduction under section 35AD and has not claimed any
deduction under Chapter VI-A under the heading “C – Deductions in respect of certain incomes”. The
profits from the business of setting up a warehousing facility for storage of food grains, sugar and edible
oil (before claiming deduction under section 35AD and section 32) for the A.Y. 2024-25 is Rs 16 lakhs, Rs
14 lakhs and Rs 31 lakhs, respectively. Also, assume in respect of expenditure incurred, the payments are
made by account payee cheque or use of ECS through bank account.

Qn 26 – HOMEWORK - ASSIGNMENT Mr. Harish commenced operations of the business of setting

up a warehouse facility for storage of food grains, sugar and edible oil on 1.4.2023
Food Grains Sugar Edible Oil
Particulars
₹ in lakh
Profits from business (computed) before allowing
(1) 125 60 30
deduction under section 35AD/Section 32
Capital expenditure on land and building purchased
exclusively for the business (January 2023 – March
(2) 120 90 75
2023) and capitalized in the books of account as on 1st
April, 2023
(3) Cost of land in (2) above 75 60 45
Capital expenditure incurred during P.Y.2023-24 on
(4) extension/reconstruction of building purchased and used 30 20 10
exclusively for the business
Compute Mr. Harish’s total income for the A.Y.2024-25, assuming he does not have any income other than
income from the above businesses. Assume assessee has opted out of the default tax regime u/s 115BAC.
Answer:

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Qn 27a Mr. Suraj, a proprietor, commenced operations of the business of a new three-star hotel in
Madurai, Tamil Nadu on 1.4.2023. He incurred capital expenditure of Rs 50 lakh during the period January,
2023 to March, 2023 exclusively for the above business, and capitalized the same in his books of account
as on 1st April, 2023. Further, during the P.Y. 2023-24, he incurred capital expenditure of Rs 2 crore (out
of which Rs 1.50 crore was for acquisition of land) exclusively for the above business.
Compute the income under the head “Profits and gains of business or profession” for the A.Y.2024-25,
assuming that he has fulfilled all the conditions specified under section 35AD and opted for claiming
deduction under section 35AD; and he has not claimed any deduction under Chapter VI-A under the
heading “C – Deductions in respect of certain incomes”. He has exercised the option of shifting out of the
default tax regime provided under section 115BAC(1A). The profits from the business of running this hotel
(before claiming deduction under section 35AD) for the A.Y.2024-25 is Rs 25 lakhs. Assume that he also
has another existing business of running a four-star hotel in Coimbatore, which commenced operations
fifteen years back, the profits from which are Rs 120 lakhs for the A.Y.2024-25. Also, assume that
payments for capital expenditure were made by net banking.

Qn 27b Mr. Arnav is a proprietor having two units – Unit A carries on specified business of setting up and
operating a warehousing facility for storage of sugar; Unit B carries on non-specified business of operating
a warehousing facility for storage of edible oil.
Unit A commenced operations on 1.4.2022 and it claimed deduction of Rs 100 lacs incurred on purchase of
two buildings for Rs 50 lacs each (for operating a warehousing facility for storage of sugar) under section
35AD for A.Y.2023-24. However, in February, 2024, Unit A transferred one of its buildings to Unit B.
Examine the tax implications of such transfer in the hands of Mr. Arnav. Assume assessee has opted out
of the default tax regime u/s 115BAC.

Qn 28 Deepa Ltd. is incorporated in Bangalore on September 6, 2023. It commences production on March

15, 2024, the following expenses are incurred by the company before commencement of business—
a. Expenses on incorporation, issue of shares, etc: ₹92,000.
b. Preparation of feasibility report, project report and conducting market survey (the work is completed by
the taxpayer itself): ₹1,40,000.
c. Engineering services (work is carried on by a concern which is not approved by the Board): ₹1,30,000
Determine the amount of deduction under section 35D assuming the following figures of fixed assets and
capital on March 31, 2024 (i.e., the last day of the year in which the taxpayer starts production) —
Particulars ₹ in lakh
Cost of fixed asset 55
Share capital 40
Debentures 12
Long-term borrowings from a financial institution (repayable fro not less than 7 years) 8

Qn 29: The profit and loss account for the year is as follows—
Particulars ₹ Particulars ₹
Cost of goods sold 75000 Sale proceeds of goods 2,30,000
Salary to employees 99,000
Other expenses 10,000
Net Profit 46,000
2,30,000 2,30,000

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The salary of ₹99,000 comprises of ₹9,000 as employee’s contribution towards recognised provident fund.
Out of the ₹9,000, ₹6,000 is credited in the employee’s provident fund within “due date” and ₹3,000 is
credited after “due date”. Compute the net income of X.

Qn 30 Rishab, a trader, sells goods on credit to Dinesh (outstanding balance on April 1, 2023: ₹40,000
and total bills issued during 2023-24: ₹60,000). Out of ₹1,00,000, he recovers on ₹10,000 from Dinesh
during 2023-24. On March 31, 2024, he writes off ₹32,000 as bad debts. However, on December 19, 2024
Rishab recovers from Dinesh as full and final payment (a) ₹15,000, or (b) ₹55,000, or (c) ₹70,000. Find
out the tax consequences for different assessment years.

Qn 31 Business income of Sunita Ltd. before allowing expenditure on family planning is ₹2,00,000. The
company had incurred the following expenditure on family planning amongst its employees during the year:
i. Revenue expenses on family planning ₹1,10,000
i. Capital expenses on family planning ₹6,00,000.
(a) Compute the deduction available for expenditure on family planning to the company assuming the
company has IFOS amounting to ₹20,000.
(b) What will be your answer if revenue expenditure on family planning is ₹2,15,000 instead of ₹1,10,000?

Qn 34 From the following information submitted by Mayur, a sole proprietor whose due date for filing
return of income is 31.10.2024, compute the amount disallowed u/s 40(a)(ia). Further, determine in which
year the amount so disallowed shall be allowed as a deduction:
1. Salary ₹6,00,000 which includes ₹2,00,000 paid on 16.3.2024 from which tax was deducted at source on
31.3.2024 but the same was deposited on 15.10.2024
2. Interest on loan ₹4,40,000 credited on 31.3.2024. Tax @10% was deducted at source on 5.4.2024 and
the same was deposited on 31.5.2024
3. Payment to contractor ₹3,40,000 on 15.6.2023. Tax was deducted at source on 31.3.2024 and the same
was deposited on 18.9.2024
4. Commission and brokerage ₹6,40,000. Tax was deducted at source on 15.2.2024 amounting to ₹64,000.
Out of this ₹32,000 was deposited on 18.9.2024, ₹19,200 was deposited on 15.2.2025 and balance ₹12,800
was deposited on 5.4.2025.
5. Rent ₹3,60,000 credited on 31.3.2024 which includes ₹2,50,000 from which tax deducted at source on
5.5.2024 and the same was deposited on 30.5.2024

Qn 35 – HOMEWORK – ASSIGNMENT A firm has paid Rs 7,50,000 as remuneration to its partners for
the year, in accordance with its partnership deed, and it has a book profit of Rs 10 lakh. What is the
remuneration allowable as deduction?
Answer: to be allowed: Rs 6,90,000. To be disallowed: Rs 60,000

Qn 36 Rao & Jain, a partnership firm consisting of two partners, reports a net profit of Rs 7,00,000
before deduction of the following items:
(1) Salary of Rs 20,000 each per month payable to two working partners of the firm (as authorized by the
deed of partnership).
(2) Depreciation on plant and machinery under section 32 (computed) Rs 1,50,000.
(3) Interest on capital at 15% per annum (as per the deed of partnership). The amount of capital eligible
for interest is Rs 5,00,000.
Compute: (i) Book-profit of the firm under section 40(b) of the Income-tax Act, 1961.
(ii) Allowable working partner salary for the A.Y. 2024-25 as per section 40(b).

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Qn 37 Determine the amount of disallowance in the cases given below -

1. Generally, X pays salary to his employees by account payee cheques. Salary of December 2023 is however,
paid to three employees A, B and C by bearer cheques (payment being ₹6,000, ₹20,000 and ₹20,500,
respectively)
2. X Ltd. purchases goods on credit from Y Ltd. on May 6, 2023 for ₹76,000 which is paid as follows-
a. ₹5,000 in cash on May 11, 2023;
b. ₹30,000 by bearer cheque on May 31, 2023;
c. ₹41,000 by an account payee cheque on May 16, 2023;
3. Z Ltd. purchases goods on credit from A Ltd. on May 10, 2023 for ₹6,000 and on May 30, 2023 for ₹5,000.
The total payment of ₹11,000 is made by crossed cheque on June 1, 2023.
4. A Ltd. purchases goods on credit from a relative of a director on June 20, 2023 for ₹50,000 (market
value: ₹42,000). The amount is paid in cash on June 25, 2023.
5. B Ltd. purchases raw materials on credit from A who holds 20% equity share capital in B Ltd. (amount of
bill: ₹16,000. Market price: ₹9,000). It is paid in cash on 26.7.2023

Qn 38 Hari, an individual, carried on the business of purchase and sale of agricultural commodities like
paddy, wheat, etc. He borrowed loans from Andhra Pradesh State Financial Corporation (APSFC) and
Indian Bank and has not paid interest as detailed hereunder:
Andhra Pradesh State Financial Corporation (P.Y. 2022-23 & 2023-24) Rs 15 lacs
Indian Bank (P.Y. 2023-24) Rs 30 lacs
Both APSFC and Indian Bank, while restructuring the loan facilities of Hari during the year 2023-24,
converted the above interest payable by Hari to them as a loan repayable in 60 equal instalments. During
the year ended 31.3.2024, Hari paid 5 instalments to APSFC and 3 instalments to Indian Bank.
Hari claimed the entire interest of Rs 45,00,000 as an expenditure while computing the income from
business of purchase and sale of agricultural commodities. Examine whether his claim is valid and if not
what is the amount of interest, if any, allowable.

Qn 39 – HOMEWORK – ASSIGNMENT An analysis of the profit and loss account and the balance sheet
of Aman as at 31.3.2024 reveals that the following expenses which were due, were though debited to the
profit and loss account but have been paid after 31.3.2024
₹ ₹
20,000 paid on 14.7.2024
(i) Sales tax 50,000
30,000 paid on 1.10.2024
40,000 paid on 14.7.2024
(ii) Excise Duty 1,20,000 40,000 paid on 1.10.2024
40,000 paid on 1.11.2024
58,000 paid on 10.7.2024
(iii) Bonus to Staff 60,000
2,000 paid on 15.12.2024
25,000 paid on 15.7.2024
(iv) Employer’s contribution to provident fund 55,000 10,000 paid on 31.7.2024
20,000 paid on 15.1.2025
The due date of filing of return is 31.7.2024. In which previous years can the above payments be claimed
as a deduction?

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Qn 40: Sherlock Ltd. is a manufacturing company (not having any international or specified domestic
transaction). The profit & loss a/c of Sherlock Ltd. for the year ending March 31, 2024 is given below—
Particulars ₹ Particulars ₹
Opening Stock 17,000 Sales 52,55,000
Manufacturing expenses 32,56,500 Income-tax refund 2,000
Salary to employees 5,16,000 Excise duty refund (earlier allowed 7,000
as deduction)
Employer’s contribution to 30,000 Custom duty refund (not being 8,000
provident fund allowed as deduction earlier)
Employer’s contribution towards 10,000 Interest on income-tax refund, 1,000
gratuity fund excise duty refund and customs duty
refund
Taxes 1,50,000 Closing stock 33,000
Interest 2,12,000
Audit fees to chartered 20,000
accountant
License fees to municipal 25,000
authority
Other expenses 86,000
Net Profit 9,83,500
53,06,000
53,06,000
Notes:
1. Salary to employees is calculated as follows—
Payment made Paid from April
during 2023- 1, 2024 to
Different component Amount
24 October 31,
2024
Basic salary, allowances and perquisites 4,68,000 2,00,000 2,60,000
Bonus 10,000 1,000 8,500
Commission on sales 20,000 2,000 17,000
Commission on purchases 18,000 500 12,000
Total 5,16,000
Less:
Employees’ contribution towards provident
28,000 28,000 —
fund
Tax deducted at source 2,000 1,900 100
Balance 4,86,000
1. Out of employees’ contribution towards provident fund of ₹28,000, ₹25,000 is credited in the provident
fund account of employees on or before the due date of making payment under the provident fund
regulation.
2. Out of employer’s contribution towards provident fund of ₹30,000. ₹26,000 is paid during the previous
year 2023-24, ₹3,500 is paid on May 16, 2024 and ₹500 is paid on December 10, 2024. Provident fund is
recognised provident fund.
3. Gratuity fund is approved gratuity fund and the amount is contributed during the relevant year.

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4. Taxes and interest are calculated as follows-

Payment made from April
Payment made
Different Component Amount 1, 2024 to October 31,
during 2023-24
2024
Excise duty, sales tax,
customs duty and municipal 1,10,000 32,500 32,000
tax
Income-tax 40,000 2,000 38,000
Interest from loan taken
87,000 4,000 2,000
from a relative of director
Interest on term loan taken
1,25,000 15,000 98,000
from State Bank of India
5. Outstanding sales tax of ₹30,000 is converted by the Karnataka Government into loan on March 31,
2024.
6. Out of the outstanding interest, ₹10,000 is converted by SBI into fresh loan.
7. License fee to municipal authority and fees to chartered accountant are not paid till October 31, 2024.
Determine the amount of taxable income of X Ltd. for the assessment year 2024-25. Assume assessee
has opted out of the default tax regime u/s 115BAC.

Qn 41: Simple Ltd. is a manufacturing company (not having any international or specified domestic
transaction). The profit and loss account of Simple Ltd. for the year ending March 31, 2024 is given
below—
Particulars ₹ Particulars ₹
Sales Tax 50,000 Sales 20,10,000
Other expenses 14,15,000
Net Profit 5,45,000
20,10,000 20,10,000
Other information—
1. Out of sales tax of ₹50,000 only ₹47,000 is paid. The payment is made as follows:
a. ₹40,000 on September 2, 2023;
b. ₹4,000 on September 5, 2024; and
c. ₹3,000 on November 1, 2024
2. Return of income is submitted on November 10, 2024
3. During the previous year 2023-24, the following payments are made in respect of expenses pertaining
to earlier years —
a. Bonus to employees pertaining to P.Y. 2021-22 paid on April 30, 2023: ₹15,000;
b. Customs duty pertaining to P.Y. 2021-22 paid on December 1, 2023: ₹25,000;
c. Electricity bill payable BSES pertaining to P.Y. 2021-22 paid on May 3, 2023: ₹35,000;
d. Excise duty pertaining to the P.Y. 2022-23 paid on May 20, 2023: ₹40,000; &
e. Leave salary payable to employees pertaining to P.Y. 2022-23 paid on December 2, 2023: ₹45,000.
These payments do not pertain to Previous year 2023-24. Consequently, these are not recorded in the
profit and loss account given above. Find out the net income of X Ltd. for the assessment year 2024-25.
Assume assessee has opted out of the default tax regime u/s 115BAC.

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Qn 42 Amrit is practicing as a CA in Delhi. He deposits all receipts in his bank account and pays all
expenses by cheque. Following is the analysis of his bank account for the year ending 31.3.2024:
Particulars ₹ Particulars ₹ ₹
Balance b/f 7,250 Salaries 10,14,000
Professional receipts 31,40,000 Rent of Chamber 6,84,500
Dividend from UTI 8,000 Audit fee 23,000
Rent from RHP 72,000 Telephone expenses 51,000
Share of income of HUF 6,750 Misc. Office Exp. 55,500
Motor car expenses 8,000
Advance income-tax 40,000
Personal Expenses 45,500
House Property Exp.
Taxes 5,000
Repairs 1,500
Insurance collection 1,500
Charges 2,000 10,000
Balance c/d 13,02,500
32,34,000 32,34,000
Other information:
(i) Written down value of the car as on 1.4.2023 was ₹6,00,000.
(ii) He stays in his house, the municipal value of which is ₹8,000. Following are the expenses which have
been included in the above account is respect of this house; Insurance premium ₹500; Municipal Tax
₹2,400
Compute the Gross Total Income of Satish after assuming that :
(a) He does not opt for presumptive income under section 44ADA
(b) He opts for presumptive income under section 44ADA
Assume assessee has opted out of the default tax regime u/s 115BAC.

Qn 43 Mr. X commenced the business of operating goods vehicles on 1.4.2023. He purchased the following
during the P.Y.2023-24. Compute his income under the section 44AE for the A.Y. 2024-25
Gross Vehicle Weight (in kgs) Number Date of Purchase
(1) 7,000 2 10.04.2023
(2) 6,500 1 15.03.2024
(3) 10,000 3 16.07.2023
(4) 11,000 1 02.01.2024
(5) 15,000 2 29.08.2023
(6) 15,000 1 23.02.2024
Would your answer change if the goods vehicles purchased in April, 2023 were put to use only in July,
2023? Assume assessee has opted out of the default tax regime u/s 115BAC.

Qn 44 Mr. Praveen engaged in retail trade, reports a turnover of Rs 2,98,50,000 for the financial year
2023-24. Amount received in cash during the P.Y. 2023-24 is Rs 14,00,000 and balance through prescribed
electronic modes on or before 31st October 2024. His income from the said business as per books of
account is Rs 15,00,000 computed as per the provisions of Chapter IV-D “Profits and gains from business
or Profession” of the Income-tax Act, 1961. Retail trade is the only source of income for Mr. Praveen.

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A.Y. 2023-24 was the first year for which he declared his business income in accordance with the
provisions of presumptive taxation u/s 44AD.
(i) Is Mr. Praveen also eligible for presumptive determination of his income chargeable to tax for the
assessment year 2024-25?
(ii) If so, determine his income from retail trade as per the applicable presumptive provision.
(iii) In case Mr. Praveen wants to declare profits as per books of account from retail trade, what are
his obligations under the Income-tax Act, 1961?
(iv) What is the due date for filing his return of income under both the options?

Other Problems on PGBP

Qn 1 From the Profit and Loss account of Mohan (age: 31 years, resident) for the year, ascertain his
total income:
Particulars ₹ Particulars ₹
General expenses 13,400 Gross profits 4,15,500
Bad debts 22,000 Commission 8,600
Advance Tax 2,000 Brokerage 37,000
Insurance 600 Sundry receipts 2,500
Salary to staff 26,000 Bad debts recovered (earlier allowed as a 11,000
deduction)
Salary to Mohan 51,000 Interest on debentures (i.e., net amount 25,000
₹22,500 + tax deducted at source: ₹2,500)
Interest on overdraft 4,000 Interest on deposit with a company (non- 13,000
trade) (net interest : ₹11,700 + tax deducted
at source : ₹1,300)
Interest on loan to Mrs. Mohan 42,000
Interest on capital of Mohan 23,000
Depreciation 48,000
Advertisement expenditure 7,000
Contribution to employees’ 13,000
recognized provident fund
Net Profit 2,60,600
5,12,600 5,12,600
Other information:
1. The amount of depreciation allowable is ₹37,300 as per the Income-tax rules. It includes depreciation
on permanent sign board.
2. Advertisement expenditure includes ₹3,000 being the cost of permanent sign board fixed on office
premises.
3. Income of ₹4,500 accrued during the previous year, is not recorded in the Profit and Loss Account.
4. Mohan pays ₹6,000 as premium on own life insurance policy of ₹70,000.
5. General expenses include
(a) ₹500 given to Mrs. Mohan for arranging a party in honour of a friend who has recently come from
Canada.
(b) ₹1,000 being contribution to a political party.
6. Loan was taken from Mrs. Mohan for payment of arrears of income tax.
Assume assessee has opted out of the default tax regime u/s 115BAC.

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Qn 2 Sameer (age: 64 years), a resident individual, furnishes the following particulars:

Particulars ₹ ₹ Particulars ₹
Salary to staff 34,000 Gross profit 16,86,000
General expenses 48,000 Commission and discount 2,17,200
Bad debts written off 15,000 Sundry receipts 43,000
Reserves for losses 2,000 Short-term profit on 31,000
sale of investment
Fire Insurance premium (office 4,200
premises)
Advertisement ₹2,400
Add: Outstanding ₹1,600 4,000
Interest on Sameer’s capital 3,500
Interest on bank loan 14,500
Expenditure on acquisition of 17,000
a patent right acquired and put
to use on June 30, 2023
Lump sum consideration for 60,000
acquiring know-how on
March 3, 2024
Depreciation on plant and 28,000
machinery
Provision for outstanding sales tax 13,000
and excise duty
Net Profit 17,34,000
19,77,200 19,77,200
Other information:
1. Advertisement expenditure includes ₹3,400 being cost of 2 diaries (cost of each being ₹1,700)
presented to customers.
2. Depreciation on plant and machinery according to income-tax provisions comes to ₹29,700.
3. Salary to staff includes payment of ₹8,000 to a relative which is unreasonable to the extent of ₹3,000
4. General expenses include (a) expenditure of ₹4,800, incurred by Sameer on training of his employees,
(b) commission of ₹10,000 for securing a business order, and (c) compensation of ₹6,000 paid to an
employee while terminating his service in the business interest.
5. Out of outstanding sales tax and excise duty, ₹3,000 is paid on July 10, 2024 and ₹8,000 is paid on
October 3, 2024. The balance is not paid as yet. Due date of filing return of income is July 31, 2024.
6. Income of Sameer from company deposit is ₹12,000, which is not shown in the Profit and Loss Account.
Determine the taxable income of Sameer for the assessment year 2024-25, assuming that insurance
premium paid by Sameer on the life insurance policy (since 2012) of Mrs. Sameer is ₹1,03,200 (sum
assured: ₹10,00,000). Assume assessee has opted out of the default tax regime u/s 115BAC.

Qn 3: Rihaan (age: 29 years), furnishes the following particulars:

Particulars ₹ Particulars ₹
Office expenses 45,000 Gross Profits 8,03,000
Sundry expenses 39,000 Sundry receipts 11,000
Entertainment expenditure 5,000 Bad debts recovered (not 7,100
allowed as a deduction)

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Audit fees 12,000 Customs duties recovered from 32,500

the Government (earlier allowed
as a deduction)
Legal charges/ expenses 4,000 Gift received from father 43,000
Extension of building 6,000
Depreciation on plant and 23,000
machinery
Salary to staff:
a) Salary 43,000
b) Bonus 36,000
Contribution towards:
a) Employees’ RPF 15,000
b) Unapproved gratuity fund 4,000
Sales Tax 38,000
Provision for sales tax 25,000
Payment to an approved 19,000
research association for
carrying on scientific research
Net Profit 5,82,600
8,96,600 8,96,600
Other information:
1. As shown in the Profit and Loss Account, ₹19,000 is paid to a research association for the purpose of
carrying on approved scientific research in natural science, not related to the business of Rihaan. Besides,
Rihaan purchases a plant of ₹30,000 for the purpose of carrying on scientific research to his business.
Neither cost of plant nor depreciation thereon is debited to the profit and loss account.
2. Out of bonus of ₹36,000, ₹4,000 is paid during 2023-24 and 26,000 is paid by July 31, 2024 (being the
due date of furnishing return of income). The balance of ₹6,000 is, however, paid on November 11, 2024
3. Depreciation on plant and machinery and extension of building as per income-tax provisions is ₹19,000.
4. Sales tax of ₹38,000 includes (a) interest for late payment of sales tax: ₹1,200; (b) penalty for evading
sales tax: ₹10,000.
5. Provision for sales tax represents an outstanding sales tax liability, which is, however, paid on July 10,
2024.
6. Salary to staff includes a payment of pension of ₹5,000 to the widow of a former employee.
Ascertain the net income of Rihaan, assuming that he deposits 1,20,000 in public provident fund account
and his income from other sources is ₹2,06,000. Assume assessee has opted out of the default tax regime
u/s 115BAC.

Qn 4 HOMEWORK – ASSIGNMENT – TO BE DISCUSSED IN CLASS Loss of cash + depreciation:

Kapil (age: 24 years), a resident individual, furnishes the following particulars
Particulars ₹ Particulars ₹
Office expenses 11,000 Gross profits 8,78,000
Telephone 8,000 Sundry receipts 8,000
Salary to staff 42,000
Depreciation 28,000
Travelling expenses 43,000

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Loss of cash by an employee 5,000

through embezzlement
Amount transferred to special 7,500
reserve account
Expenditure on the occasion of 7,100
Diwali
Interest and legal expenses 44,000
Sundry expenses 8,500
Net Profit 6,81,900
8,86,000 8,86,000
Others information:
1. Salary to staff includes payment of ₹12,000 out of India on which tax has not been deducted at source
nor paid to the Government.
2. Depreciation value of plant and machinery in the beginning of the year is ₹1,10,000 (rate of depreciation:
15%).
 A plant whose opening WDV is ₹17,440 is sold during the previous year for ₹11,000.
 A machinery (cost price ₹20,000) whose opening WDV is ₹2,350 is sold during the previous year for
₹15,000.
 During the year, Kapil purchases a new plant for office for ₹1,22,670 which is eligible for depreciation at
the rate of 15 per cent. The plant is installed and put to use on May 15, 2023
3. Travelling expenses include ₹10,000 being hotel expenditure of an employee in respect of an official
visit to Bombay for 5 days.
4. Expenditure on the occasion of Diwali includes gift of ₹2,000 to Mrs. Kapil
5. Interest includes a payment of ₹3,000 out of India on which tax has not been deducted.
6. Sundry expenses include expenditure of ₹1,000 on maintenance of guest house in Delhi for the purpose
of carrying on the business and ₹4,000 being employer’s contribution to ESI out of which ₹600 is paid
after the due date of submission of return of income.
Determine the taxable income of Kapil, assuming that sundry receipts include ₹5,000, being amount of
endowment insurance policy received from the Life Insurance Corporation of India at the time of maturity
of the policy (i.e., December 5, 2023). Assume assessee has opted out of the default tax regime u/s
115BAC.

Qn 5:Ambrose Ltd., an Indian company, furnishes the following particulars

Particulars ₹ Particulars ₹
Salary to staff 12,40,000 Gross profits 25,58,000
Expenses on issue of shares 18,000 Rent of flats given to officers 12,000
for setting up an industrial
undertaking (cost of project:
₹10 lakh)
Expenditure on promotion of 3,000 Sundry receipts 5,000
family planning among the
employees
Sales tax 28,500 Interest on bank deposits 17,000
Contribution to a National 79,500 Capital gains on sale of short term 3,000
Laboratory for carrying an investment
approved scientific research

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Gratuity fund 5,000

Reserve for future losses 20,000
Bad debts written off 3,000
Reserve for payments of 13,000
income tax
Car expenses 9,000
Depreciation:
Machinery 18,000
Car 3,000
Furniture 5,000
Building 3,000
Office expenses 7,500
Rent and repairs of building 3,000
Municipal taxes and ground 7,000
rent of flats given to officers
Sundry expenses 16,000
Income-tax 11,000
Dividend tax 700
Net Profit 6,81,900
25,95,000 25,95,000
Other expenses:
1. Expenditure on family planning includes capital expenditure of ₹2,500.
2. Car is utilised for non-business purposes by a friend of a director. In the past years, one-fourth of this
expenditure was disallowed.
3. Sundry expenses include ₹9,000 being payment of printing bill to a relative of the managing director;
payment is unreasonable to the extent of ₹4,700
4. Salary includes payment of ₹21,000 in cash to an employee. It also includes “mediclaim” insurance
premium for the benefit of employees of ₹15,000 out of which ₹6,000 is paid in cash. It further includes
salary of ₹4,00,000 paid to an employee on which tax was deductible but not deducted.
5. Though amount of depreciation on building, car and furniture is calculated as per tax provisions
depreciation in respect of machinery is excessive to the extent of ₹2,000.
6. ₹79,500 being payment to National Laboratory is qualified for weighted deduction under section
35(2AA)
7. The company has deposited ₹2,40,000 with Maruti Udyog Ltd. on March 1, 2024 for purchasing Maruti
Alto car. The car is likely to be delivered by June 2024. The said amount is not debited in the Profit and
Loss account.
8. During the previous year, the company pays ₹15,00,000 as compensation to employees on voluntary
retirement under the voluntary retirement scheme of the company. The amount is not debited in the
Profit and Loss account.
9. the company deposits ₹10,000 in National Housing Bank.
10. On March 16, 2024, the company gets a refund of sales tax of ₹3,000 (it was allowed as deduction for
some preceding previous year). The amount is not credited in the Profit and Loss account, as the
Commissioner’s appeal against the refund is still pending in the Delhi High Court.
Determine the taxable income of the assessee-company

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Qn 6: Akbar (age: 40 years), furnishes the following particulars

Particulars ₹ Particulars ₹
Salary to staff 2,31,000 Gross profit 10,86,000
Advertisement 8,000 Rent of house property 2,40,000
Dividends from a foreign
Repairs to house property 20,000 12,500
company
Municipal tax house property 30,000 Profit on sale of import license 63,800
Fire Insurance
a) House property 16,000
b) Office and godown 20,000
Office expenses 4,500
Life insurance premium on own life 3,000
Depreciation
a) House property 60,000
b) Business assets 13,400
Wealth Tax 6,000
Patent rights (1/2 of ₹70,000
being cost of such right
35,000
acquired on April 6, 2023)
Income-tax penalty 1,000
Interest on capital borrowed
a) For business 3,800
b) For reconstruction of House 50,000
property
c) For investment in shares 2,000
Rent paid to Akbar (for using 25%
1,00,000
Portion of business purposes)
Net Profit 7,98,600
14,02,300 14,02,300
Akbar owns a house property (outside the jurisdiction of any Rent Control Act), erection of which was
completed in March 1999. There are three residential units in the house. Unit 1 (consisting of 50% of the
carpet area) is let out to a tenant at ₹20,000 per month. Unit 2 (25% of the carpet area) is used by Akbar
for own residential purposes. Unit 3 (25%) is utilised by him for his business purposes. Determine the
taxable income of Akbar. Akbar also received a gift of ₹3,79,500 by cheque from his non-resident friend
out of which he deposits ₹1,00,000 in his minor son’s PPF a/c . Assume assessee has opted out of the
default tax regime u/s 115BAC.

Qn 7: Naman (age: 29 years), a tax consultant, who maintains books of account on cash basis furnishes
the following particulars of income and expenditure for the assessment year 2024-25:
Particulars ₹ Particulars ₹
Balance b/d 12,400 Purchase of a type-writer 6,000
Fee from clients:
 of 2023-24 7,30,500
Car expenses 18,000
 of 2022-23 1,11,500
 of 2024-25 1,13,000
Presents from clients 24,000 Office expenses 40,000

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Salary to staff:
Interest free loan from a client
2,38,000  of 2023-24 32,000
for a purchase of a car
 of 2024-25 11,000
Expenses in respect of let out
property [municipal tax: ₹2,000,
Winnings from lottery 46,000 6,000
repairs: ₹1,000 insurance:
₹3,000]
Car purchased on December 10,
Interest from UTI 12,000 2,40,000
2023
Rent of a let out property 60,000 Repairs of office 12,000
Share of income from a firm 15,000 Interest on loan 10,000
Income-tax payment 2,000
Life insurance premium 2,08,000
Balance c/d 7,77,400
13,62,400 13,62,400
Car is partly used for official purposes (40%) and partly for private purposes (60%)
Determine the taxable income of Naman for assessment year 2024-25. Assume assessee has opted out
of the default tax regime u/s 115BAC.

Qn 8: Zain (age: 34 years) is a businessman in Mumbai. Determine his net income

Particulars ₹ Particulars ₹
Opening stock 1,04,000 Sales agency business 92,51,000
Purchases 80,08,750 Closing stock 2,10,000
Salaries and wages 1,75,000
Rent and rates 1,31,000
Commission 21,500
Household expenses 20,000
Income-tax 36,100
Advertisement 5,000
Postage and telegram 4,000
Interest on own capital 84,000
Reserve for bad debts 3,400
Depreciation on furniture 18,000
Net profit 8,50,250
94,61,000 94,61,000
Other particulars:
1. Closing stock and opening stock has been valued at 10% below cost price.
2. Depreciation on furniture, as per tax provisions, is ₹17,200.
3. Amount of sales includes a sum of ₹41,250 representing the value of goods withdrawn for the use of
Zain’s family members. These goods were purchased at the cost ₹27,850. Market value of these goods is
₹42,240.
4. Purchases includes a consultancy bill of ₹1,00,000 (out of ₹1,00,000, tax of ₹10,000 was deducted at
source but it is deposited only on January 10, 2025)
5. Household expenses include a contribution of ₹6,000 towards public provident fund.
6. Zain has received gift of ₹96,000 from a friend settled in UK. The entire amount is invested in NSC
IX issue. Assume assessee has opted out of the default tax regime u/s 115BAC.

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Qn 9 – DISCUSS: Find out the gross total income of Shri Shyam Lal on the basis of the following
particulars. Assume assessee has opted out of the default tax regime u/s 115BAC.
Particulars ₹ Particulars ₹
Interest 1,800 Gross profit b/d 1,22,700
Interest on debenture of an
Repairs and Renewals 2,200 10,000
institution (Gross)
Insurance 4,200 Rent from house property 36,000
Depreciation 5,600
Compensation 10,200
Law charges 5,100
Labour Welfare expenses 3,800
Subscriptions 5,800
Net Profit 1,30,000
1,68,700 1,68,700
Other information:
a) (i) Interest includes ₹200 on loan taken for purchasing debentures of a company and ₹300 on
loan taken for reconstruction of house property let out.
(ii) The expenses relating to house property let out are 40% of the repairs and renewal expenses.
(iii) Depreciation includes ₹1,200 on house property let out.
(iv) Compensation was paid to an employee whose dismissal was in business interest.
(v) Insurance includes 30% for fire insurance of the house property let out, 30% for workers
accident insurance and the balance for life insurance.
(vi) Law charges includes ₹2,000 relating to a petition filed against breach of contract and the
balance regarding sales tax appeal.
(vii) Subscription includes ₹2,000 given for election purpose to political parties.
b) The amount not debited to profit and loss account are as follows: —
(i) Expenses incurred on the occasion of Diwali ₹500
(ii) Theft of cash from iron safe ₹1,500
(iii) Expenses for new telephone connection in the business ₹2,000
Hints

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Qn 10 – Homework: Shri Ram Gopal is the owner of business. Following is his P&L A/c for the year
Particulars ₹ Particulars ₹
Establishment charges 5,110 Gross profit 50,870
Interest on Govt. Securities
Rent, rates and taxes 2,900 5,350
(Gross)
Sundry expenses 7,050 Rent from property 5,400
Household expenses 1,880
Provision for bad debts 1,200
Loss on sale of motor car
1,800
(used for private purposes)
Insurance premium (including
2,880
life insurance of ₹1,790)
Interest on bank loan 1,380
Provision for depreciation 6,400
Net profit 31,020
61,620 61,620
Additional information:
(i) Bad debts written off during the year — ₹650
(ii) Admissible depreciation as per Income-tax rules — ₹1,600
(iii) The assessee is running his business in a rented property half of which is used by him for his own
residence. Rent of ₹2,400 in respect of entire house is included in rent, rates and taxes. The balance of
₹500 is on account of municipal tax paid for the property given on rent. Compute GTI of Shri Ram Gopal
for the year. Assume assessee has opted out of the default tax regime u/s 115BAC.
Hints

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Qn 11: State with reasons whether the following expenses are admissible as deduction while computing
income from business or profession:
i. An expenditure of ₹20,000 incurred towards cost of neon signs fixed towards office premises for
advertising the products of the assessee.
ii. Stock-in-trade was lost in fire, amounting to ₹12,000 and was debited to Profit and Loss Account.
iii. Amount spent of successful suit filed against a person for infringing trade mark of the assessee —
₹10,000
iv. Interest paid to bank ₹15,000 in connection with overdraft obtained for paying dividend.
v. Entertainment expenses ₹28,000 incurred during the previous year.
vi. Capital expenditure of ₹1,00,000 has been incurred towards promotion of family planning amongst
the employees of ABC Ltd.
vii. ₹20,000 was spent in the previous year in connection with statutory income tax proceedings
viii. ₹3,000 spent in connection with installation of a new telephone connection.
ix. Travelling expenses of a director of ABC Ltd. ₹20,000 incurred on tour to U.S.A. in connection with
the negotiation of a purchase of a new machinery.
x. Compensation paid to the widow and children of deceased employee of the factory on the orders of
the Labour Court.
Hints

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Qn 13 – HOMEWORK: Mr. Ranganathan carries on his own business. His Trading/Profit and Loss Account
is as follows: —
Particulars ₹ Particulars ₹
Opening stock 2,20,000 Sales 2,12,89,000
Purchases 1,86,09,000 Closing stock 2,52,000
Interest on Jay Co.Ltd.
Salaries 2,56,000 2,000
Debentures
Rent 2,31,000 Dividend from UTI 2,000
Audit fee 3,30,000 Discount received 12,000
Bonus 3,000 Race winning (Gross) 12,000
Printing, postage & stationery 4,000
Misc. Expenses 4,000
Advertisement expenses 22,000
Drawings 12,000
LIC premium 5,000
Car expenses:
 Drivers salary 6,000
 Petrol and repairs 12,000
Property tax 4,000
Cost of NSC (VIII series) 6,000
Net Profit 18,45,000
2,15,69,000 2,15,69,000
Additional Information:
(a) Advertisement expenses included cost of 20 gift packs of ₹1,100 each presented to leading esteemed
customers on occasion of Diwali.
(b) The car was used for both business and personal purposes. 2/3rd is for business purposes.
(c) The property tax of ₹4,000 was in respect of his self-occupied home whose rental value is ₹18,000.
(d) Rent paid includes ₹4,00,000 from which tax was deducted at source on 31.3.2024 but the same was
deposited on 16.10.2024.
Compute the Gross Total Income and Total Income of Mr. Ranganathan for the assessment year 2024-25
showing the incomes under various heads. Assume assessee has opted out of the default tax regime u/s
115BAC.
Hints

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Qn 14: A car purchased by Sudhir Mehta on 10.8.2021 for Rs 5,25,000 for personal use is brought into
professional use on 1.7.2023 by him, when its market value was Rs 2,50,000. Compute the actual cost of
the car and the amount of depreciation for the AY 2024-25 assuming rate of depreciation is 15%.

Qn 15 HOMEWORK – ASSIGNMENT: Mr. Armaan is engaged in the business of generation and

distribution of electric power. He always opts to claim depreciation on written down value for income tax
purposes. From the following details, compute the depreciation allowable as per the provisions of the
Income Tax Act, 1961 for AY 2024-25
Particulars (₹ in lacs)
Opening WDV of block (15% rate) 42
New machine purchased on 12.10.2023 10
Machine imported from Colombo on 12.4.2023. 9
This machine had been used only in Colombo earlier and the assessee is the first user
in India
New computer installed in generation wing of the unit on 15,7.2023 2
Hints

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Qn 16 HOMEWORK – ASSIGNMENT Sai Ltd. has a block of assets carrying 15% rate of depreciation,
whose written down value on 1.4.2023 was ₹40 lacs. It purchased another asset (second-hand plant and
machinery) of the same block on 01.11.2023 for ₹14.40 lacs and put to use on the same day. Sai Ltd was
amalgamated with Shirdi Ltd. with effect from 01.01.2024.
You are required to compute the deprecation allowable to Sai Ltd Shirdi Ltd. for the previous year ended
31.3.2024 assuming the assets were transferred to Shirdi Ltd. at ₹60 lacs. Assume assessee has opted
out of the default tax regime u/s 115BAC.
Hints: total depreciation for Sai Ltd: Rs 4.96 lacs; Shirdi Ltd: Rs 2.12 lacs

Qn 17 HOMEWORK – ASSIGNMENT: Ranjini Industries furnishes you the following information:

Block Particulars (₹)
WDV of Plant and Machinery (consisting of 10 looms)
Block I 5,00,000
Rate of depreciation 15%
WDV of Buildings (consisting of 3 buildings)
Block II 12,50,000
Rate of depreciation 10%
Acquired on 5.7.2023 — 5 looms for 4,00,000

Sold on 7.12.2023 – 15 looms for 10,00,000

Acquired on 10.01.2024 — 2 looms for 3,00,000

Compute depreciation claim for the assessment year 2024-25. Assume assessee has opted out of the
default tax regime u/s 115BAC.
Hints

Qn 18 HOMEWORK – ASSIGNMENT Honest Industry furnishes you the following details pertaining to
the financial year 2023-24:
Plant & Intangible assets
Description Building
Machinery (patents)
Rate of depreciation 15% 10% 25%

Opening Balance as on 01.04.2023 ₹14,50,000 ₹25,00,000 ₹15,00,000

Acquired before 30.09.2023 ₹12,00,000 — ₹5,00,000

Acquired after 1.12.2023 ₹4,00,000 ₹18,00,000 —

Transferred in March 2024, one of the
— — ₹3,00,000
patents held for the past 2 years
A machinery is acquired in July 2023 (original cost: ₹1,50,000) was destroyed by fire and the assessee
received compensation of ₹50,000 from the insurance company.

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Newly acquired building given above includes value of land of ₹3,00,000.

Calculate the eligible depreciation claim for the assessment year 2024-25.
Note: Ignore additional/accelerated depreciation.
Hints

Qn 19: Vivitha Bio-medicals Ltd. is engaged in the business of manufacturing bio-medical items. The
following expenses were incurred in respect of activities connected with scientific research:
Year ended Item Amount (₹)
31.03.2021 Land 10,00,000
(Incurred
Building 25,00,000
after 1.9.2020)
31.03.2022 Plant and machinery 5,00,000
31.03.2023 Raw materials 2,20,000
1.9.2023 to
Raw materials and salaries 1,80,000
31.3.2024
The business was commenced on 01.09.2023
In view of availability of better model of plant and machinery, the existing plant and machinery were sold
for ₹8,00,000 on 01.03.2024.
Discuss the implications of the above for the assessment year 2024-25 along with the brief computation
of deduction permissible under section 35 assuming that necessary conditions have been fulfilled.

Qn 20 HOMEWORK – ASSIGNMENT: Win Ltd. commenced business of operating a three start hotel in
Tirupati on 1.4.2023. It furnishes you the following information:
Particulars ₹
Cost of land (acquired in June 2021) ₹60 lakh
Cost of construction of hotel building
 Financial year 2021-22 ₹30 lakh
 Financial Year 2022-23
Plant and Machineries (all new) acquired during the financial year
₹150 lakh
2022-23
[All the above expenditures were capitalized in the books of the company]
Net profit before depreciation for the financial year 2023-24 ₹80 lakh
Determine S.35AD deduction.
Hints

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Qn 21: State with reasons, the allowability of the following expenses incurred by MN Ltd, a wholesaler
dealer of commodities under the Income-tax Act, 1961 while computing profit and gains from business or
profession.
i. Construction of school building in compliance with CSR activities amounting to ₹5,60,000.
ii. Purchase of building for setting up a warehousing facility for storage of food grains amounting to
₹4,50,000.
iii. Interest on loan paid to Mr. X (a resident) ₹50,000 on which tax has not been deducted.
iv. Commodities transaction tax paid ₹20,000 on sale of bullion.
Hints

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Qn 22: State with reasons, for the following sub-divisions, whether the following statements are true or
false having regard to the provisions of the Income-tax Act, 1961:
i. For a dealer in shares and securities, securities transaction tax paid in a recognised stock exchange
is permissible business expenditure.
ii. Where a person follows mercantile system of accounting, an expenditure of ₹25,000 has been allowed
on accrual basis and in a later year in respect of the said expenditure, assessee makes the payment
of ₹25,000 through a cheque crossed as “& Co.”, disallowance of ₹25,000 under section 40A(3) can
be made in the year of payment.
iii. It is mandatory to provide for depreciation under section 32 of the Income-tax Act, 1961 while
computing income under the head “Profits and Gains from Business and Profession”.
iv. The medi-claim premium paid to GIC by Mr. Lomesh for his employees, by a draft, on 27.12.2017 is a
deductible expenditure under section 36.
v. Under section 35DDA, amortisation of expenditure incurred under eligible Voluntary Retirement
Scheme at the time of retirement alone can be done.
vi. An individual engaged in trading activities and exercising the option of shifting out of
the default tax regime provided under section
115BAC(1A) can claim additional depreciation under section 32(1)(iia) in respect of new plant acquired and
installed in the trading concern, where the increase in value of such plant as compared to the approved
base year is more than 10%.Hints

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Qn 23: State, with reasons, the allowability of the following expenses under the Income-tax Act,
1961 while computing income from business or profession
i. Provision made on the basis of actuarial valuation of payment of gratuity ₹5,00,000. However, no
payment on account of gratuity was made before the due date of filing return.
ii. Purchase of oil seeds for ₹50,000 in cash from a farmer on a banking day.
iii. Tax on non-monetary perquisites provided to an employee ₹20,000
iv. Payment of ₹50,000 by using credit card for fire insurance.
v. Salary payment of ₹2,00,000 outside India by a company without deduction of tax
vi. Payment made in cash Rs 30,000 to a transporter in a day for carriage of goods.

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Qn 24: Ramji Ltd., engaged in manufacturing of medicines (pharmaceuticals), furnishes the following
information for the year ended 31.03.2024:
i. Municipal tax relating to office building ₹51,000 not paid till 30.10.2024
ii. Patent acquired for ₹20,00,000 on 01.09.2023 and used from the same month.
iii. Capital expenditure on scientific research ₹10,00,000 which includes cost of land ₹2,00,000
iv. Amount due from customer X, outstanding for more than 3 years, written off as bed debt in the books
₹5,00,000
v. Income-tax paid ₹90,000 by the company in respect of non-monetary perquisites provided to its
employees.
vi. Provident fund contribution of employees ₹5,50,000 remitted in July, 2024
vii. Expenditure towards advertisement in souvenir of a political party ₹1,50,000.
viii. Refund of sales tax ₹75,000 received during the year, which was claimed as expenditure in an earlier
year.
State with reasons the taxability or deductibility of the items given above under the Income-tax Act,
1961.
Note: Computation of total income is not required

Qn 25: State with reasons whether the following statements are true or false, with regard to the
provisions of Income-Tax Act, 1961 for AY 2024-25:
a. Payment made in respect of a business expenditure incurred on 16th February, 2024 for ₹25,000
through a cheque duly crossed as “& Co.” is hit by the provisions of section 40A(3).
b. (i) It is a condition precedent to write off in the books of account, the amount due from debtor
to claim deduction for bad debt.
(ii) Failure to deduct tax at source in accordance with the provisions of Chapter XVII-B, inter
alia, from the amounts payable to a resident as rent or royalty, will result in disallowance while
computing the business income where the resident payee has not paid the tax due on such income.

Qn 26: Mr. Raju, a manufacturer at Chennai, gives the following Manufacturing, Trading and Profit& Loss
Account for the year ended 31.03.2024:
Particulars ₹ Particulars ₹
Opening stock 71,000 Sales 2,32,00,000
Purchase of Raw Materials 2,16,99,000 Closing stock 2,00,000
Manufacturing wages &
5,70,000 Dividend from domestic company 15,000
expenses
Administrative charges 3,26,000 Income from agriculture (net) 1,80,000
State VAT penalty 5,000
State VAT paid 1,10,000
General expenses 54,000
Interest to Bank(on machinery
60,000
term loan)

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Depreciation 2,00,000
Net Profit 5,00,000
2,35,95,000 2,35,95,000
Following are the further information relating to the financial year 2023-24:
i. Administrative charges include Rs 46,000 paid as commission to brother of the assessee. The commission
amount at the market rate is Rs 36,000.
ii. The assessee paid Rs 33,000 in cash to a transport carrier on 29.12.2023. This amount is included in
manufacturing expenses. (Assume that the provisions relating to TDS are not applicable to this payment)
iii. A sum of Rs 4,000 per month was paid as salary to a staff throughout the year and this has not been
recorded in the books of account.
iv. Bank term loan interest actually paid upto 31.03.2024 was Rs 20,000 and the balance was paid in
November 2024.
v. Housing loan principal repaid during the year was Rs 50,000 and it relates to residential property occupied
by him. Interest on housing loan was Rs 23,000. Housing loan was taken from Canara Bank. These amounts
were not dealt with in the profit and loss account given above.
vi. Depreciation allowable under the Act is to be computed on the basis of following information:
Plant and Machinery (Depreciation rate @ 15%) ₹
Opening WDV (as on 01.04.2023) 12,00,000
Additions during the year (used for more than 180 days) 2,00,000
Total additions during the year 4,00,000
Note: Ignore additional depreciation under section 32(1)(iia)
Compute the total income of Mr. Raju for the A.Y. 2024-25 assuming he pays tax under default tax regime.
Note: Ignore application of section 14A for disallowance of expenditure in respect of any exempt income.

Qn27: Mr. Tenzingh is engaged in composite business of growing and curing (further processing) coffee
in Coorg, Karnataka. The whole of coffee grown in his plantation is cured. Relevant information pertaining
to the year ended 31.3.2024 are given below:
Particulars ₹
WDV of car as on 1.4.2023 3,00,000
WDV of machinery as on 1.4.2023 (15% rate) 15,00,000
Expenses incurred for growing coffee 3,10,000
Expenses for curing coffee 3,00,000
Sale value of cured coffee 22,00,000
Besides being used for agricultural operations, the car is also used for personal use; disallowance for
personal use may be taken at 20%. The expenses incurred for car running and maintenance are at ₹50,000.
The machines were used in coffee curing business operations.
Compute the income arising from the above activities for the assessment year 2024-25. Show the WDV
of the assets as on 1.4.2024

Qn28: Mr. Shivam, a retailer of Cochin gives the following Trading and Profit and Loss Account
Particulars ₹ Particulars ₹
Opening stock 90,000 Sales 1,12,11,500
Purchases 1,10,04,000 Closing stock 1,86,100
Salary 60,000 Income from UTI 2,400

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Rent and rates 36,000

Interest on Loan 15,000
Depreciation 1,05,000
Printing and Stationery 23,200
Postage and Telegram 1,640
Loss on sale of shares (ST) 8,100
Other general expenses 7,060
Net Profit 50,000
1,14,00,000 1,14,00,000
Additional Information:
1) It was found that some stocks were omitted to be included in both the opening and closing stock, the
value of which were
a) Opening stock ₹9,000
b) Closing stock ₹18,000
2) Salary includes ₹10,000 paid to his brother, which is unreasonable to the extent of ₹2,000.
3) The whole amount of printing and stationery was paid in cash by way of one-time payment.
4) The depreciation provided in the Profit and Loss Account ₹1,05,000 was based on the following
information:
The written down value of plant and machinery is ₹4,20,000 as on 01.04.2023, A new plant falling under
the same block of depreciation was brought on 1.7.2023 for ₹70,000. Two old plants were sold were sold
on 1.10.2023 for ₹50,000.
5) Rent and rates includes sales tax liability of ₹3,400 paid on 7.4.2024
6) Other general expenses include ₹2,000 paid as donation to a Public Charitable Trust.
You are required to compute the profits and gains of Mr. Sivam under presumptive taxation u/s 44AD and
profits and gains as per the regular provisions of the Act assuming he has exercised the option of shifting
out of the default tax regime provided under section 115BAC(1A). Assume that the whole of the amount
of turnover received by account payee cheque or use of
electronic clearing system through bank account during the previous year.

Qn 29 Raghav industries Ltd. furnishes you the following information

i.Scientific Research expenditure related to its business ₹2,40,000 fully revenue in nature.
ii.Building acquired for scientific research (including cost of land ₹5,00,00) for ₹12,00,000.
iii.Amount paid to Indian Institute of Science, Bangalore for scientific research ₹50,000
iv.Demerger expenses incurred in financial year 2020-21 ₹5,00,000
v.Contribution to the account of employees as per pension scheme referred to in section 80CCD amounted
to ₹30,00,000. Amount above 10% of the salary of employees is ₹7,00,000.
vi.Amount recovered from employees towards provident fun contribution ₹12,00,000 of which amount
remitted upto the end of the year was ₹7,00,000 and the balance was remitted before the “due date” for
filing the return prescribed is Section 139(1).
vii.Tax on non-monetary perquisites provided to the employees, borne by the employer ₹4,50,000
viii.Gain due to the change in rate of exchange of foreign currency ₹1,00,000 related to import of machinery.
The machinery was acquired two years ago and put to regular use since then.
Explain in brief how the above said items would be dealt with.
Note: Computation of total income not required.

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Qn 30 Mr. Raja, a proprietor, commenced operation of the business of a new three star hotel in Mumbai
on 1.7.2021. He had made a total investment of Rs 7.58 crores till 30.6.2021. Out of total investment of
Rs 7.58 crores, Rs 1.58 crores was used for purchase of land in P.Y.2020-21. Rs 4.70 crores was used for
constructing Hotel and balance of Rs 1.30 used for purchasing the furniture in P.Y. 2021-22. He wants to
avail the benefit of deduction under section 35AD as he satisfied with all the conditions prescribed u/s
35AD. His profit and gains from the business for P.Y. 2021-22 is Rs 50 lakhs before claiming deduction
u/s 35AD. He wants to file his income-tax return on 12.12.2022. How much deduction Mr. Raja can claim
for A.Y. 2022-23 and the losses which he can carry forward to A.Y. 2023-24?
(a) He can claim the deduction of Rs 7.58 crores from his business income but he would not be able to
carry forward the business loss of Rs 7.08 crores
(b) He can claim the deduction of Rs 6.00 crores from his business income and can carry forward the
business loss of Rs 5.50
(c) He can claim the deduction of Rs 6.00 crores from his business income but cannot carry forward the
business loss of Rs 5.50
(d) He can claim the deduction of Rs7.58 crores from his business income and can carry forward the
business loss of Rs 7.08 crores
C

Qn 31: Mr. A engaged in the retail trading of toys, has acquired a motor vehicle – A for Rs. 4lakhs on
20.08.2021, put to use on 04.10.2022 and another motor vehicle – B for Rs. 3lakhs on 19.02.2022, PR to
use on 03.09.2022. On 01.04.2022, Mr. A took a vehicle loan of Rs. 5lakhs, @10%p.a and acquired the
motor vehicle – C for Rs.5lakhs on 31.05.2022, put to use on 30.06.2022. On 30.07.2023 the same vehicle-
C was sold for Rs. 5.50 lakhs and reacquired back it on 28.08.2023 for Rs. 6lakhs.
Assuming the above mentioned assets are the only assets in the block of assets for Mr.A ,what would be
the total depreciation claim u/s 32 for P.Y. 2023 -24.
A. Rs. 1,66,594
B. Rs. 162,094
C. Rs. 137,438
D. Rs. 160,500

Qn 32: Compute the quantum of depreciation available u/s 32 of IT Act, 1961 in respect of the following
items of plant and machinery purchased by Gupta Textile Ltd which has set up a manufacturing unit in
Notified Backward Area of Andhra Pradesh to manufacture textile fabric during the year 2023-24. Also
compute the WDV of the block of assets as at the year end.
Particulars Amount (Rs. In crore)
New Machinery installed on 01-05-2023 84
th
Items purchased after 30 November,2023:
Lorries for transporting good to sales depots 3
Fork lift trucks, used inside factory 4
New imported machinery 12
The new imported machinery arrived at Chennai port on 30-03-2024 and was installed on 03-04-2024. All
other items are installed and put to use during the year ended 31-03-2024.

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