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It any expenses is not covered under any other section of PGBP then it is allowed as deduction under this general section

 

Conditions to be fulfilled to claim deduction

(a) It should not be a capital expenditure (like Purchase of fixed assets )

(b) It should be incurred within the Financial Year (Prepaid expenses not allowed)

(c) It should not be of personal nature (like drawings)

(d) It should be incurred wholly and exclusively for the purpose of  business

(e) It should not be Illegal Expense (like bribe)

 Not Covered in Any other Section

+Not Capital Exp

+ Not personal Exp

+ Not Illegal

+For Business

+Incurred in Financial Year 

=Deduction under Section 37

Note:

Deduction for CSR Expenditure

CSR means Corporate Social Responsibility Expenditure.i,e,expenditure on social work etc.

As per new Companies Act, Certain companies have to compulsorily incur such expense 

As per Section 37(1),this expenditure shall not be allowed as deduction as it is not incurred wholly and exclusively for the purpose of  business.

However if CSR expenditure is of nature Section 30-36,then deduction may be allowed under those sections subject to fulfillment of conditions mentioned in that section.

 

Example of expenditure not allowed as deduction under section 37(1)

(1) Fee paid to registrar for company incorporation / increase in capital etc.

(2) Penalty paid under any law

(3) Expenditure on dismantling of any asset

(4) Any bribe paid .

 

Example of expenditure Allowed as deduction

(1)Diwali expenses

(2)Mahurat/Inaugration expense

(3)Expenditure for the phone connection

(4)Professional tax paid by business

(5)Stock exchange annual membership fees

(6)Expenditure on raising loans

(7)Interest or penalty which is compensatory in nature

  

 Q1

Proft and Loss of A Ltd
SALES 1500000
Less  
EXPENSES 800000
PROFIT 700000

Suppose 30000 expenses illegal

View Answer

Q2

Proft and Loss of A Ltd
SALES 150000
Less  
EXPENSES 75000
PROFIT 75000

Suppose 10000 worth of furniture purchased and included in above expenses.

Depreciation on Furniture is 10%

View Answer

Q3

Proft and Loss of A Ltd  
SALES 350000
Less  
EXPENSES 150000
PROFIT 200000

Suppose 4000 worth of  personal expenses paid through office, which is included in above expenses

View Answer

Q4

Proft and Loss of A Ltd  
SALES 200000
Less  
EXPENSES 60000
PROFIT 140000

suppose a penalty of Rs 9000 is levied because of violation of law which is included in above expenses

View Answer

 

  1. Income Tax
  2. PGBP Income
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About the Author

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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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