profit and gains from business,profession

what's the reason for penalty

penalty is of 2 type
1) compensatory nature
2) penalty nature

1) penalty nature is disallowed
2)compensatory nature is allowed as deduction

what Amit said is CORRECT

given in question is ' panalty imposed by customs authorities for breach law' then its allowed or disallowed expenses??

send full questions

net profit 200000
contributions to upf 40000
provision for income tax 50000
advertisement expenses ,including adv.... for 4000 in souvenir published by a political party 20000
provision for excise duty 30000
holiday home expenses 35000
insurance premium for health of employees 10000
penalty imposed by customs authorities for breach law 25000
interest for late payment of VAT 1000

compute business income.

1)penalty of 25000 will be disallowed because it is for breach of law
no one can claim deduction for the penalty because breach of law

kk
plzzz can u calculate this question? bcz my ans..wrong

PENALTY PAID FOR ANY BREACH OF LAW

For the removal of the doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. Therefore , the following expenditures are disallowable as deduction :

1.         Expenses incurred in defending the assessee in any proceeding for breach of any law relating to Sales Tax, Income Tax etc. (However, penalty or damages paid for breach of contract is allowed as deduction)

2.         Penalty paid for non-payment of Sales Tax, Excise, Custom etc. within prescribed time. (However, damage or penalty paid for infringement of law is not allowed as deduction).

kk
thanx

In order calculate income of business, Net profit is derived after considering all expenses Or additional information after calculation of net profit