Profits and gains of business profession-Chapter1
Chapter 1
Profits and gains of business profession
I.Along with reasons state whether the following expenses are admissible or inadmissible
1.Travelling expenses including a sum of rs.15000incurred by a director for travelling abroad for negotiating the price of plant and machinery
It is a capital expenditure and hence disallowed
2.Amount paid to the union leader to call off the strike
As it is paid against public policy it is disallowed
3.Compensation paid to an employee for termination of his service
As it is paid in interest of business it is allowed
4.Loss due to embezzlement by an employee
Allowed as it has been incurred during the course of the business
5.Interest paid for funds borrowed for purchase of building rs.5000
It will be capitalized from the date of borrowing till the date of asset put into use
6.Purchase of land for the purpose of research rs.4,00,000
Disallowed as per section 35(2)
7.Fee paid to the lawyer Rs 10000 for drafting the business commencement agreement deed
As it is a preliminary expenditure , 1/5 of it is allowed for 5 successive previous years
8.Purchase of building for research purpose Rs 5,00,000
It is a capital expenditure and it is fully allowed U/S 35(2).
Under alternative tax regime it is disallowed.
9.Rs.1,20,000 paid as salary to the employee engaged in research in 1.5.2011 but business commenced on 1.5.2012
Salary paid to the employees within 3 years before the commencement of business is fully allowed
10.Payment of VAT in cash to the state government Rs.35000
Allowed
11.Due to bank strike Mr.A paid rs 30000 to the supplier in cash
As the banks were closed due to strike or holiday it is allowed.
click here for notes of unit 1-International financial management
Exercises
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