Dr.JAYARAM.A.

Surana College, Centre for Post-Graduation Studies CHAPTER-1

Contact num- 9620843555 Bangalore University, Bangalore

Calculation of Income from Business

Assessee: Previous Year: 2019 - 2020

Status: Assessment Year: 2020 -

2021

Particulars Amount Amount

Net Profit as per P&L A/c XXX
Add:
a. Inadmissible expenses debited to P&L A/c XXX
b. Business Income not credited to P&L A/c XXX
(Adjustment) XXX
c. Overvaluation of Opening Stock (Adjustment) XXX XXX
d. Undervaluation of Closing Stock (Adjustment)

XXX
Less:
a. Admissible expenses not debited to P&L A/c XXX
(Adjustment) XXX
b. Tax free incomes credited to P&L A/c XXX
c. Non-Business Income credited to P&L A/c XXX
d. Under valuation of Opening Stock (Adjustment) XXX XXX
e. Over valuation of Closing Stock (Adjustment)

Taxable Income from Business XXX

Calculation of Taxable Income from House Property

Particulars Amount
Rent from House Property XXX
Less : Municipal tax XXX
Net Annual Value XXX
Less : Standard Deduction u/s 24 XXX
a. 30 % of NAV
Taxable Income from House Property XXX

Calculation of Total Taxable Income

Particulars Amount Amount

(Rs.) (Rs.)
a. Income from House Property XXX
b. Income from Business and Profession XXX
c. STCG (other than STT) XXX
d. Income from other sources XXX
Gross Total Income XXX
Less: Deductions u/s 80 G to 80 JJA XXX
Other Taxable Income XXX
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
Add:
a. STCG (Liable to STT) XXX
b. LTCG XXX
c. Casual Income XXX XXX
Total Taxable Income XXX

Calculation of Tax Liability

1. Tax on Other Taxable Income (25%)

2. Tax on LTCG (20%)
3. Tax on STCG (15%)
4. Tax on Casual Income (30%)
Sub Total
Add: Surcharge, if applicable
Sub Total
Add: Edu.cess and SHEC (4%)
Tax liability of the firm

LIST OF DISALLOWED EXPENSES / INADMISSIBLE EXPENSES (to be added

back to NP)
1) Household exp.
2) Rent of residential Building.
3) Repair of Residential Building.
4) Insurance of Residential Building.
5) Electricity of Residential Building.
6) Depreciation of personal Car
7) Expenses of personal car
8) Medical exp. of owner
9) Salary of domestic servant
10) Any donation except for (Business association)
11) Wealth Tax paid
12) Income tax paid
13) Advance tax paid
14) Int. as personal loan
15) Charity
16) Reserve for Bad-debt
17) Gifts and present (except given to clients)
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
18) Life Insurance Premium (self)
19) Interest on capital
20) Interest as personal loans
21) Reserve for Sales tax
22) Fire Insurance of let out
23) Any other expenses of let out
24) Proprietor Salary
25) Aid to poor student
26) Gift to son
27) Education exp of children
28) Welfare fund
29) Contribution to sinking fund
30) Proposed dividend
31) Gift to relatives
32) Any exp (if TDS not deducted)
33) Loss as sale of any asset
34) Reserve for any loss
35) Provisions for gratuity
36) Wife Salary
37) Outstanding sale tax
38) Outstanding excise duty
39) Agricultural exp
40) Acquisition of any fixed Asset (capital exp)
41) Acquisition of any intangible asset (capital exp)
42) Transfer of any reserve/fund/provisions

LIST OF INCOMES OF OTHER HEADS/ DEDUCTIBLE EXPENSES (TO BE

DEDUCTED FROM NP)

1) Interest as securities
2) Dividend received
3) Rent of house property
4) Sale of any asset
5) Profit on sale of any asset
6) Gift received (personal)
7) Refund of tax
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
8) Bad debt recovered (after deduction of bed debt allowed earlier)
9) Interest as post office deposits
10) Proceeds from life insurance policy
11) Sale of agricultural product
12) Custom duty or sale tax recovered
13) Income from lottery
14) Income from House Races
15) Capital gain as any Asset

Problems on Income from Business

1. The following profit and loss a/c

Particular Amount Particular Amount

To Provision for tax 1,50,000 By Gross profit 6,50,000
To Rent and taxes 15,000 By profit on sale of 18,000
To fire insurance 8,500 machinery 12,500
To establishment expenses 1,35,000 By interest on securities
To depreciation 30,000 By dividend received from 50,000
To donation and charity 3,500 Indian company
To general expenses 32,500
To reserve for doubtful debts 5,500
To entertainment 7,500
To Net profit 3,43,000
7,30,500 7,30,500

Additional Information:
a. Allowable depreciation as per IT Rs. 20,000.
b. Machinery were purchased in August 2018 and sold in march 2020

Solution:
Assessee: Previous Year: 2019 - 2020
Status: Resident Assessment Year: 2020 - 2021

Particulars Amount Amount

Net Profit as per P&L A/c 3,43,000
Add:
Inadmissible expenses debited to P&L A/c
 Provision for Tax
 Depreciation as per P&L A/c 1,50,000
 Donation and charity 30,000
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
 Reserve for doubtful debts 3,500
5,500
Business Income not credited to P&L A/c
(Adjustment) --
Overvaluation of Opening Stock (Adjustment) -- 1,89,000
Undervaluation of Closing Stock (Adjustment) --
5,32,000
Less:
Admissible expenses not debited to P&L A/c
(Adjustment) 20,000
 Depreciation as per IT

Non-Business Income credited to P&L A/c 18,000

 Profit on sale of machinery 12,500
 Interest on securities 50,000
--
 dividend received from Indian company
-- 1,00,500
Under valuation of Opening Stock (Adjustment)
Over valuation of Closing Stock (Adjustment)
Taxable Income from Business 4,31,500

Problem – 1
X ltd. is engaged in the business of manufacture of garments:
Particulars Rs.
Sale proceeds of goods (domestic sale) 22,23,900
Sale proceeds of goods (export sale) 5,76,100
Amount withdrawn from general reserve (reserve was created in 1996-97
by debiting P&L A/C) 2,00,000
Amount withdrawn from revaluation reserve 1,50,000
Total 31,50,000
Less: Expenses
Depreciation (normal) 6,16,000
Depreciation (extra depreciation because of revaluation) 2,70,000
Salary and wages 2,10,000
Wealth tax 10,000
Income tax 3,50,000
Outstanding customs duty (not paid as yet) 17,500
Proposed dividend 60,000
Consultation fees paid to a tax expert 21,000
Other expenses 1,39,000
Net Profit 14,56,500
For tax purposes the company wants to claim the following:
- Deduction u/s 80 IB (30 percent of Rs.14,56,500)
- Deprecation u/s 32 Rs. 5,36,000

The company want to set off the following losses/allowances:

Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
Particulars Tax purposes Accounting
purposes
Brought forward loss of 2013-14 14,80,000 4,00,000
Unabsorbed depreciation ---- 70,000

Compute the net income and tax liability of X ltd. For the assessment year 2019-20 assuming
that X ltd. has a (deemed) long term capital gain of Rs. 60,000 under provision (i) to section
54D (2) which is not credited in profit and loss account.
Problem 2
Given below is the profit and loss account of Deepika Ltd., whose shares are quoted on stock
exchange for the previous year 2018-19.
Particulars Rs. Particulars Rs.
Salaries and wages 5,00,000 Gross Profit b/d 17,54,110
General expenses 2,00,000 Dividends from Indian
Commission and brokerage 50,000 companies in July 2018 76,890
Advertisement 3,00,000 Dividends on shares allotted by
Welfare expenses 30,000 foreign company in
Promotion of family planning consideration of technical 1,50,000
expenses 70,000 know-how
Depreciation on assets 1,00,000 Royalty received in convertible
Fine and penalties 6,400 foreign exchange from Uganda 1,00,000
Interest on debentures 17,600 Government for using its patent
Donation to Prime minister rights
drought relief fund 6,000 Long term capital gain on sale
Income tax 20,800 of land 2,50,000
Contribution to unrecognized
provident fund 50,200
Legal expenses 30,000
Loss on sale of shares
purchased in April 2018 80,000
Entertainment expenses 1,20,000
Purchase of new machinery 70,000
General reserve 80,000
Net profit 6,00,000
Total 23,31,000 Total 23,31,000

a. Advertisement expenses include Rs. 21,000 paid to an advertising firm by a bearer

cheque.
b. General expenses include Rs. 2,000 paid as commission to a broker for arranging the
purchase of the machinery.
c. Family Planning expenses include Rs.20,000 expenditure of capital nature.
d. During 2018-19, the company has declared dividends of Rs. 1,00,000 but it has paid
dividends only amounting to Rs.60,000.
e. Excise duty for 2017-18, Rs. 50,000 was paid on 1-01-2019, but not charged to profit
and loss account.
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
f. Details regarding assets:
i. Written down value of factory building on 1-4-2018 Rs. 4,00,000
ii. Written down value of plant and machinery on 1-4-2018 Rs. 4,40,000
iii. Written down value of motor cars on 1-4-2018 Rs. 60,000.
Compute the taxable income and tax liability for the assessment year 2019-20.
Problem 3
Balaji Ltd., a well-diversified group, gives below its profit and loss account for the accounting
year 2018-19:
Particulars Rs. Particulars Rs.
Manufacturing expenses 10,00,000 Sale of manufactured goods 30,00,000
Salaries/Wages 5,50,000 Sale of agricultural produce 10,00,000
Cultivation expenses 4,00,000 Receipt from generation
Power generation/distribution /distribution of power 15,00,000
expense 4,00,000 Receipt from water supply/
Irrigation expenses 6,00,000 irrigation projects 15,00,000
Expenses of I.U. located in Receipt from I.U. located set
backward district. 5,00,000 up in backward district in July 10,00,000
Provision for losses of 2015
subsidiary co. 4,00,000 Transfer from capital reserve 9,50,000
Sundry expenses 30,000 Receipts from UTI 50,000
Provision for bad and Withdrawal from Revaluation
doubtful debts 2,00,000 Reserve Account 90,000
Provision for bills under
discount 50,000
Provision for sales tax,
wealth tax against demand
notice 3,30,000
Income tax provision against
demand notice 3,00,000
Dividend paid on preference
shares 2,00,000
Proposed dividend on equity
shares 4,00,000
Corporate dividend tax 75,000
Securities transaction tax 15,000
Transfer to general reserve 1,00,000
Dividend equalization reserve 2,00,000
Penalties under direct tax
laws 60,000
Goodwill written off 50,000
Depreciation 2,00,000
Amortization of patent rights 30,000
Net profit 30,00,000
Total 90,90,000 Total 90,90,000

The following additional information is provided:

Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
a. Capital reserve was directly created by transferring capital profits on the sale of land
during the previous year 2013-14.
b. Depreciation of Rs. 2,00,000 includes extra depreciation of Rs. 60,000 on account of
revaluation of assets.
c. Past year losses/profits before depreciation are given below:
Year Loss (Rs.) Depreciation (Rs.)
2014-2015 5,00,000 6,00,000
2015-2016 Nil 5,00,000
2016-2017 7,00,000 4,00,000
2017-2018 5,00,000 Nil

Compute Book Profits for the previous year 2018-2019 for MAT under section 115JB.

Problem 4
The Net profit of AJ Ltd., as per profit and loss account for the previous year 2018-19 is Rs. 100 Lakhs
after debiting/Crediting the following items:
I. Provision for income tax Rs. 15 Lakhs.
II. Provision for deferred tax Rs. 8 Lakhs
III. Proposed dividend Rs. 20 Lakhs
IV. Depreciation debited to profit and loss Account is Rs. 12 Lakhs. This includes depreciation on
revaluation of assets to the tune of Rs. 2 Lakhs.
V. Profit from unit established in special Economic Zone Rs. 30 Lakhs
VI. Provision for permanent diminution in value of investments Rs. 2 Lakhs.
Brought forward losses and unabsorbed deprecation as per books of the company are as follows:

Previous Year Brought Forward Loss(in Lakh) Unabsorbed Depreciation (in Lakh)
2015-16 2 5
2016-17 -- 3
2017-18 10 2
Compute book profit of the company u/s 115 JB for Assessment 2019-20.
Problem 5
DJ Ltd., a closely- held Indian company, is engaged in the business of manufacture of chemical goods
(value of plant and machinery owned by the company is Rs.55 Lakhs). The following information for
the financial year 2018-19 are given:

Sale Proceed of goods (domestic use) 20,00,000

Sale proceeds of goods (export sale) 5,00,000
Amount withdrawn from general reserve (reserve was created in 1996-97 by debiting
P&L A/c) 1,50,000
Amount withdrawn from Revaluation Reserve 1,00,000
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
Total 27,50,000
Less: Expenses
Deprecation (normal) 5,50,000
Depreciation (extra depreciation because of Revaluation) 1,70,000
Salary and wages 1,30,000
Wealth-tax 20,000
Income-tax 1,80,000
Outstanding custom duty (not paid as yet) 15,500
Proposed dividend 40,000
Consultation fees paid to a tax expert 11,000
Other expenses 1,39,000
Net Profit 14,94,500
For tax purposes the company wants to claim the following:
 Deduction u/s 80 IB (30% of Rs. 14,94,500).
 Depreciation u/s 32 is Rs. 4,50,000
The company wants to set-off the following losses/allowances:

For Tax Purposes For Accounting Purposes

Brought forward loss 2012-13 9,80,000 3,00,000
Unabsorbed Depreciation 20,000 30,000
Compute the tax liability of the company for the assessment year 2019-20 assuming that DJ ltd., gets
a long-term Capital gain of Rs. 50,000 which is not credited in profit and loss account.
Problem 6
JD Ltd., engaged in diversified activities, earned a net profit of 14,25,000 after debit / credit of the
following items to its profit and loss account for the year ended 31.03.2019.

Items debited to Profit and Loss account

Expenses relating to exempted incomes 2,10,000
Provision for loss of subsidiary 70,000
Provision for sales tax demand (paid before due date) 75,000
Provision for wealth tax demand 90,000
Provision for income tax demand 1,05,000
Expenses on purchase or sale of equity shares 15,000
Depreciation 3,60,000
Interest on bank loan, inadmissible according to section 43B 90,000
Items credited to Profit and Loss account
Exempted incomes 2,70,000
Profits from speculation 60,000
Long-term capital gain on sale of equity shares liable for STT 3,60,000
Income from Units of UTI 75,000

The company provides the following information:

a. Depreciation includes Rs. 1,50,000 on account of revaluation of fixed assets.
b. Depreciation allowable as per income tax rules is Rs. 2,80,000.
c. Brought forward loss and unabsorbed depreciation
Amount as per books Amount as per Income-Tax
Loss Depreciation Loss Depreciation
2011-12 2,50,000 3,00,000 2,00,000 2,50,000
2015-16 Nil 2,70,000 1,00,000 1,80,000
2016-17 3,50,000 3,15,000 1,20,000 2,10,000
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore

You are required to :

i. Compute the total income of the company for the assessment year 2019-20
ii. Compute the book profit and tax payable by the company.
Problem 7 (QP-2016)
The following is the P & L A/C of the Indian co. ltd. for the year ended 31st March 2019.

Particulars Rs. Particulars Rs.

To Salaries and Wages 6,00,000 By Domestic Sales 50,00,000
To Rent and Rates 4,00,000 By Export Sales 20,00,000
To Repairs 2,40,000 By Transfer from General Reserve 4,00,000
To Selling expenses 7,00,000
To Depreciation 10,00,000
To Income tax 7,20,000
To Proposed Dividend 5,40,000
To Net Profit 32,00,000
74,00,000 74,00,000
Other Information:
1. The company has LTCG of Rs. 2,00,000 which is not credited to P&L A/C.
2. Foreign Exchange remittance of Rs.14,00,000.
3. Depreciation u/s 32 is Rs. 9,00,000.
4. The company wants to set of the following:
Particulars For Tax Purpose For Accounting
Purpose
Brought forward loss of 2014-15 10,00,000 8,00,000
Unabsorbed depreciation 4,00,000 4,00,000

You are required to compute:

a. Book Profit as per 115JB.
b. Total Income of the company.
c. Tax Liability of the company.

Problem 8 – Case Study (QP- 2018)

Statement of Profit and Loss
(for the year ended 31st march 2019)
Particulars Note Figures as at the end of
no. current reporting period
I. Revenue from operations: 17,61,300
II. Other Income :
Rent from agricultural lands 950
Revenue from fisheries 3,700
Sale proceeds of cane 6,07,055
Transfer fees 300
Profit on sale of motor 1,230
III. Total Revenue (I+II) 23,74,535
IV. Expenses:
Cost of materials consumed --
Change in inventories of finished goods,
work-in-progess and stock in trade ---
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
Employee benefits expenses:
Salaries and Wages 1,20,495
Finance Costs:
Interest on Debentures 25,000
Depreciation and Amortization expenses 69,000
Other expenses:
Manufacturing expenses 8,85,295
Excise duty 1,07,500
Establishment charges 50,150
General charges 13,750
Directors fees 1,750
Managing directors remuneration 41,000
Cultivation expenses 4,57,500
Taxation reserve 25,000
Total Expenses 17,96,440
Profit for the period (III-IV) 5,78,095

Compute the total income of the company and net tax liability for the assessment year 2019-20 after
taking the following information’s into consideration:
a. Sales included cost of cane Rs. 6,12,000 on account of can produced and consumed in the
factory, the average market price of such cane being Rs. 6,75,000.
b. The motor sold during the year Rs.3230 was purchased in the pas for Rs.17,000 the depreciation
claimed in respect thereof in past assessment being Rs.15,000.
c. General charges include (i) Rs. 750 legal expenses incurred in defending a suit regarding the
companies’ title to certain agricultural lands and (b) Rs. 9,000 Paid to a director for a trip to
Hawali to study modern methods of confectionery manufacture.
d. Depreciation in respect of all assets has been agreed at Rs. 50,000.
e. The company has paid advance tax of Rs. 1,20,000.

Problem 9
Calculate tax payable for each of the following years, giving effect for tax credit and set-off:

Assessment Year Tax Liability Minimum Alternate Tax

2013-14 3,09,000 6,18,000
2014-15 3,70,800 12,36,000
2015-16 7,41,600 23,91,660
2016-17 27,81,000 19,05,500
2017-18 4,63,500 5,71,650
2018-19 21,63,000 11,43,300
2019-20 26,26,500 7,62,200

Problem 10
The projected profit and loss accounts of X ltd. and Y ltd. (which are under the same management)
for the previous year 2018-19 are given below:

X Ltd.
Rs. Rs.
Cost of Goods Sold 45,00,000 Sale 65,00,000
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
Depreciation @ 15.3% on Rs. 10,00,000 1,53,000
Other expenses 2,00,300
Net profit 16,46,700
65,00,000 65,00,000

The company has set up an industrial undertaking in a notified industrial park and qualified for 100%
deduction u/s 80IA. Written down value of plant and machinery for income tax purpose is Rs.
12,50,000.

Y Ltd.
Rs. Rs.
Cost of Goods Sold 61,00,000 Sale 86,00,000
Depreciation @ 13.91% on Rs. 14,30,000 1,98,913 Profit on sale of a plot of
Net profit 24,21,087 land (LTCG determined 1,20,000
u/s 48)
87,20,000 87,20,000
Y ltd is not entitled to any deduction u/s 80-IA. Written down value of assets for income tax purpose
is Rs. 18,76,670.

Problem 11
Following is the Profit and Loss A/c of Satish Co. Ltd. a domestic company for the year ending 31st
March 2019.
Profit and Loss A/C

Particulars Amount Particulars Amount

To Salaries 8,00,000 By Gross Profit 25,00,000
To Advertisement 2,00,000 By Sale of Shares(Purchased in
To Provision for doubtful debts 50,000 Aug 2018 through Recognized 1,00,000
To Depreciation 1,00,000 Stock Exchange)
To Income Tax 50,000 By Sale of Shares(Purchased in
To Provision for Contingent Dec 2018) 55,000
Liability 96,000 By LTCG 1,45,000
To Proposed Dividend 5,00,000 By Betting, Gambling and Horse 75,000
To Losses of Subsidiary Company 5,00,000 Race
To Loss on Sale of Shares (STT) 25,000 By Rent from House Property 1,25,000
To Municipal Tax on HP 35,000
To Legal Expenses 2,00,000
To Net Profit 4,44,000
30,00,000 30,00,000

Additional Information:
a. Provision for doubtful debts includes Bad debt Rs. 10,000.
b. The company has various depreciable assets. During the year, a block of plant and machinery
20% was revalued at the start of current previous year from Rs.4,00,000 to 6,00,000.
c. Depreciation as per sec 32 of Income tax is Rs.50,000.
d. The brought forward losses as per accounting records is Rs. 1,20,000 and as per income tax
records amounted to Rs. 1,70,000.
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
e. The unabsorbed depreciation as per accounting records is Rs. 60,000 and as per income tax
records amount to Rs.1,00,000.
You are required to compute:
d. Book Profit as per 115JB.
e. Total Income of the company.
f. Tax Liability of the company.

Problem 12
Pasha Co. Ltd., engaged in the business of manufacture of computer components. The profit and loss
account of the company for the year ending 31-3-2019 is given below:

Particulars Amount Particulars Amount

To Establishment expenses 30,000 By Gross Profit 30,00,000
To Salary to staff 3,25,000 By Amount withdrawn from
To Audit fee 12,000 General Reserve which was created
To Bad debts 15,000 in 1997-98 by debiting to P & L 1,60,000
To Depreciation 1,62,500 account
To Income Tax 75,000 Dividend from Infosys Co. 5,000
To Dividend distribution tax 62,500 Dividend from Indian company
To Donation to NDF 60,000 whose 80% income is agriculture 10,000
To Wealth tax 75,000 income
To Customs duty payable 62,000 Fee from an Indian company for
To Sales tax paid 20,000 technical advice 3,500
To General expenses 15,000 Rent Received
To Donation to NRDF 10,000 Bad Debt Recovered 15,500
To Provision for doubtful debts 5,000 Interest on Govt Securities 1,000
To Fire Insurance 2,500 Profit on sale of machinery 2,500
To Director Fees 7,500 25,000
To Net Profit 22,83,500
32,22,500 32,22,500

Other Information

 Depreciation allowable as per IT rules works out to Rs. 1,45,500

 Brought forward business loss Rs. 3,50,000
 Brought forward unabsorbed depreciation Rs. 1,45,000
 Of the custom duty payable Rs.12,000 was paid before filing the return.
 Machinery were purchased in August 2018 and sold in march 2019.
 General expenses include
a. Rs. 5,000 as compensation to retrenched employee as his continuation is business is
harmful.
b. Rs. 3,000 as interest on loan from the canara bank, which is inadmissible.
c. Rs. 6,000 as contribution paid to the govt for laying electric cable for the company’s plant.
d. Rs. 1,000 paid towards municipal tax of the house property.
 Company is eligible for following deductions:
a. Deduction u/s 80IB (25% of 22,83,500)
Calculate the Total Income of rising sun co. ltd., and Tax liability for the assessment year 2019-20.
Problem 13
Dr.JAYARAM.A.
Surana College, Centre for Post-Graduation Studies CHAPTER-1
Contact num- 9620843555 Bangalore University, Bangalore
The following is the manufacturing company and its profit and loss account of a sugar mill company
for the year ended 31/03/2019.

Particulars Amount Particulars Amount

To opening stock 3,64,000 By sales 49,00,000
To cost of crushing can 25,00,000 By miscellaneous receipts 12,000
To manufacturing expenses 15,00,000 By Taxable Income from HP 50,000
To repairs and renewals 80,000 By Income from Horse Race 10,000
To establishment charges 82,000 By STCG 6,000
To miscellaneous expenses sales 34,000 By closing stock 3,66,000
To commission 1,20,000
To Depreciation 2,60,000
To directors fees 3,000
To Long term Capital Loss 500
To auditors fees 1,50,000
To transfer to reserve fund 50,000
To net profit 1,34,500
52,78,000 52,78,000

Compute company’s business income after considering the following information:

1. Manufacturing expenses include:-
a. Rs. 8,00,000 for excise duty paid.
b. Rs. 12,000 spent on scientific research.
2. Miscellaneous expenses include Rs. 10,000 for donations to local educational institutions and
Rs. 4,000 for donations to public hospital where the company’s employee are treated free and
4,000 commission in connection with issue share for setting up a new industrial unit.
3. Establishment chares include Rs. 2,400 for contribution to unrecognized provided fund.
4. Cane crushed includes Rs. 3,00,000 the cost of cane grow on company’s own farm the market
price of the same being Rs. 4,00,000.
5. Amount of depreciation, admissible as per income tax rules Rs. 1, 00,000.
6. Sugar worth Rs. 1,000 was distributed free on Diwali puja, which is not included in the above
profit and loss account.
7. Rs. 15,000 cost of addition to factory buildings has been charged to revenue account.