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biz income query

Osheen Bhattacharya (CA Final) (241 Points)

25 April 2010

pls tell me the treatment of the following adjustments (income from business'profession)

1. Rs 40000 to a competitor to avoid underbidding in a tender

2. Rs 60000 towards foreign tour expenses of director with the object of negotiating a collaboration agreement wid foreign manufacturer. the negotiation however, was failed..

3. festival bonus of 5 lakhs to its workman in addition to the bonus payable under payment of bonus act.

4. cost of statue of founder erected within the factory compound

5.contributio to govt for construction of health centre adjacent to the factory where employees can ge treatment alongwith other public Rs 35000

6.payment of late filing of return of income Rs 5000

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6 Replies

Dhruv (Chartered Accountant) (308 Points)
Replied 25 April 2010

1. Rs 40000 to a competitor to avoid underbidding in a tender

- Not sure whether it will be deduction, but the party receiving it has to classify this as business income under section 28.

2. Rs 60000 towards foreign tour expenses of director with the object of negotiating a collaboration agreement wid foreign manufacturer. the negotiation however, was failed..

-Does not matter whether negotiation succeeded or not, as long as foreign tour was with the purpose of business and ordinary course of business, it is allowable.

3. festival bonus of 5 lakhs to its workman in addition to the bonus payable under payment of bonus act.

- Allowable, although FBT will be payable on the same.

4. cost of statue of founder erected within the factory compound

- Not allowable, does not pertain to the business or ordinary course of business as per section 37

5.contributio to govt for construction of health centre adjacent to the factory where employees can ge treatment alongwith other public Rs 35000

- Staff welfare expenses basically, allowable. ( Unless the contribution is in the form of a donation and the company wants to claim it as one under 80G)

6.payment of late filing of return of income Rs 5000

- Not allowable.

Osheen Bhattacharya (CA Final) (241 Points)
Replied 25 April 2010

thankyou dhruv..all the best

CA Shiv (Business Controller) (2987 Points)
Replied 26 April 2010

1. 40000INR, charge to the sales and promotion expenses as it is in the same nature. May be ITo will disallow it but can take such risk. ( i think its paid in cash)

2. 60000 INR. as a travel expenses. Negotiations dont matter whether it worked or not.

3. 5 Lakhs, charged to Employees welfare expenses. And now there is no FBT also..

4. Try to get in Misc. Exp. It wont be allowed as deduction but can try for it.

5. Allowable as exp. in employee welfare.

6. 5000 is not allowable and will be disallowed. Kindly disallowed at the time of filing return...