Q5.

Explain the provisions relating to Section 43 and 44 and its taxability under Profit and Gains from Business and Profession A5. The above provisions are enumerated as under: Actual Cost of Asset All expenses related to acquisition of the asset e.g., carriage inward, installation charges shall be added to the cost of the asset. 43(1) Excise duty which is eligible for CENVAT credit shall not form part of cost of asset. Government Subsidy shall be subtracted from the Cost of asset. Expenses allowed only if payment made by due date of filing of return: Following expenses shall be allowed only if payment is made by due date of filling of return (i.e., 31st July or 30th September). Taxes to Government. Bonus or commission to employees. Leave encashment to employees Employer's contribution to Provident Fund, Gratuity fund, 43B pension fund etc. Interest to Bank or Financial institution. Note: If the payment is made in the latter period it shall be allowed in the year of payment. Advance payment is not governed by section 43B. In other words advance payment shall be allowed in the year in which expense is incurred. Maintenance of Accounts Specified profession: Lawyer, CA, CS, CWA, Doctors etc. If gross receipt of the past 3 years exceed Rs 1.5 lacs than he has to prepare the account as per rule 6F. 44AA In other case: Such an account to enable the Assessing officer to compute its income. Penalty: Rs 25000 and best Judgment Assessment. Preservation: These accounts must be preserved for 6 years. Tax Audit of Books of Account Audit is compulsory in case of: Business if turnover exceed 40 lacs and Profession if gross receipt exceeds Rs 10 lacs. Penalty: 44AB % of turnover/gross receipt; or Rs 1 lacs whichever is lower. If assessee is engaged in more than one business/professional activity than the turnover/gross receipt of all of them shall be aggregated for the purpose of this section. Business of Civil construction Applicable to: All assessee. 44AD Conditions:

44AE

44AF

44B

44BBA

Assessee is engaged in Civil Construction business, i.e., road construction, dams, bridges, etc. Gross receipt of the assessee does not exceed Rs 40 lacs Presumptive income: 8% of the gross receipt. Business of plying, hiring or leasing of goods carrier. Applicable to: All assessee Conditions: Assessee must be engaged in the business of plying, leasing, and hiring if trucks transport business as above. He does not own more than 10 vehicles at any time during the year. Presumptive income: For heavy weight vehicles Rs 3500 pm per vehicles For non heavy weight vehicles Rs 3150 pm per vehicles Note: Part of the month shall be considered. Computation shall be made as soon as assets is purchased, no matter when it is put to use. Remaining same as Sec 44AF. Hire purchaser shall be treated as owner. Business of Retail Traders Applicable to: All assessee Conditions: Assessee is engaged in the retail trading business Turnover of assessee does not exceed 40 lacs Presumptive income: 5% of turnover. Notes: (applicable to 44AD, 44AE, 44AF) This scheme is optional. No expenditure, deduction shall be allowed as expenditure. However remuneration to partner, interest to partner shall be allowed as deduction. Chapter VI A deduction shall be allowed. Set off and carry forward of losses shall be allowed. Assessee can show higher income. Assessee can show lower income but in such case he will have to prepare such an account to enable assessing officer to compute his income and get his account audited. Shipping Business Applicable to: Non-resident. Conditions: Assessee must be engaged in operation of ship in India Presumptive income: 7.5% (Revenue earned in India + Revenue received in India) Aircraft Business Applicable to: Non resident Conditions: Assessee must be engaged in the business of operating of Air Craft in India Presumptive income: 5% of (revenue earned in India or Revenue

received in India)