X Ltd. grows sugarcane to manufacture sugar. Data for 2012-2013 is as follows:
Cost of cultivation of sugarcane = 6 lacs
Market value of sugarcane when sugarcane is transferred to factory = 10 lacs
other manufacturing cost - 6 lacs
sales turnover of sugar = 25 lacs
salary of managing directir who looks after agriculture as well as non agrriculture operations of the company = 3lacs
Compute agriculture income and income from business
Refer Rule 7 of Income Tax rules:
Agriculture Income:
Market value of produce - cost of cultivation = 10 lacs - 6 lacs = 4 lacs - This is agriculture income, hence exempt
Business Income :
[Sales] - cost of manufacturing - MD salary = [25 lacs - 10 lacs] - 6 lacs - 3 lacs = 6 lacs - This is Business income.
Notes:
1. Out of sales reciepts of Sugar, Mkt value of Sugar cane is deducted so as to arrive at the non-agriculture income
2. MD salary is deducted wholly from business income as R.7 says that after deducting the Mkt. value of agriculture produce, not other exp. relating to cultivation shall be deducted. Hence, MD salary is wholly charged to Business income.
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- Ashish
(8802999731)
Naveen Fintech Pvt Ltd
Kolkata
CA Inter
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