Share |
 

Losses incidental to Business Allowed to be Debited

 

Legal expenses incurred in the interest of the business are allowable expenses. The following types of legal expenses incurred in the interest of the business or profession are allowed under section 37

(i) Legal expenses incurred in the normal course of the business;

(ii) To avoid a business liability, i.e., compensation paid for breach of a contract in the interest of the business;

(iii) Legal expenses spent to defend the assessee’s title of his business; and

(iv) To terminate a disadvantageous trading relationship.

The expenses which are of personal nature of the partner of the assessee are not treated as business expenses. Expenses incurred in criminal proceeding are also not considered to be incurred for a business purpose and so disallowed.

Expenses incurred on Raising Loans

According to a Supreme Court decision, the expenses incurred in connection with the raising of loans, issuing of debentures etc. (long-term or short-term) are an admissible deduction because these were incurred for the purpose of the business. The expenses included cost of stamps, registration fees, lawyer’s fees etc. [Orissa Cements Ltd. v. C.I. T. (1969) 73 ITR 14 (Delhi)]

On the other hand, expenses incurred on raising capital (e.g., issuing of shares) are treated under preliminary expenses.

 
More Topics .... " Business or Profession"
Definition of the Head ' Business or Profession'-[Sec.-28]
Compensation Received as Business Income(Section-28(ii))]
Income of a Trade or Professional Association [Section 28(iii)]
Income from Export Incentives is chargeable to Income Tax
Any Amount Received Under certain Agreement for not to Carry on Business [Section 28(va)]
Speculation Business [Explanation to Section 28]
Profit Earned from an Illegal Business
Transfer of certain Assets Specified u/s 35AD in certain circumstances [Section 28(vii)]
Certain Incomes relating to business but not taxable under the head ‘Profits Gains of Business or Profession .
Computation of Income of Business or Profession - General Important Points
General Principles - for Deductions Allowed from Gross Income of Business and Professions
Deductions from Gross Income of Business or Profession [ Section 30 to 44DB]
Expressly Admissible Deductions from Gross Income from Business or Profession [Section 30-36]
Expenditure Incurred in the Field of Scientific Research [Section 35]
Expenses on Research Activities carried on by the assessee himself
Contribution to Approved Institutions to carry on Research is Allowed as Weighted Deductions for Calculating Profits and Gains of Business or Professions.
Expenditure incurred on the acquisition of Patents Rights or Copy Rights [Section 35A] [Applicable for expenditure incurred before 1-4-1998]
Expenditure on know-how [Section 35 AB] [Applicable for expenditure incurred before 1-4-1998]
Expenditure for obtaining License to operate Telecommunication Services [Section 35 ABB]
Expenditure on eligible projects or schemes [Section 35 AC]
Deduction in respect of expenditure incurred on setting up of a Specified Business [Sec. 35AD]
Any amount given to an institution or association [Section-35CCA]
Expenditure on Notified Agricultural Extension Project [Section-35 CCC] [w.e.f. A.Y. 2013-14]
Expenditure on Notified Skill development project [Section-35 CCD] [w.e.f. A.Y. 2013-14]
Amortisation of Certain Preliminary Expenses [Section 35D]
Expenditure on demerger or amalgamation [Section 35DD]
Amortisation of Expenditure Incurred Under Voluntary Retirement Scheme [Section 35DDA]
Expenditure on Prospecting etc., for certain Minerals [Section 35E]
Other Deductions Allowed to Compute Income from Business or Profession   [Section-36]
Interest on Borrowed Capital [Sec. 36(1)(iii)].
Deduction of discount on Zero Coupon Bond [Section 36(iiia)]
Contribution to Provident and Superannuation Fund [Sec. 36(1)(iv)].
Employee’s contribution towards staff welfare schemes [Sec. 36(1)(va)]
Bad debts [Sec. 36(1)(vii)]
Bad debts of Banks, financial institution and industrial investment corporation etc. [Section 36(1)(viia)]
Special Reserve Created and Maintained by Financial Corporation [Section 36(1)(viii)].
Expenditure on Family Planning [Section-36(1)(ix)].
General Or Allowable Deductions [Section 37]
Commission earned by the agents of Life Insurance Corporation, Unit Trust of India, Post Office or Mutual Funds
Legal Expenses in the Interest of Business are Allowable Expenses
Losses incidental to Business Allowed to be Debited.
Expenses Expressly Disallowed In the Case of any ‘Assessee’ [ Section-40a]
Expenses Expressly Disallowed In the Case of any Firm [Section 40(b)]
Expenses Expressly Disallowed In General Cases [Section 40(b)]
Disallowing of certain Expenses under certain circumstances like ‘Payments to Relatives’
Payments exceeding ` 20,000 by cash/bearer cheque [Section 40A (3)].
Provision for the Payment of Gratuity – [Section-40A(7)]
DEEMED PROFITS Under Profits and Gains of Business or Professions [Section 41]
VALUATION OF STOCK for Profit and Gains of Business or Professions
Deduction Of Certain Payments Only If Actually Paid [Section 43B]
Maintenance Of Accounts By Certain Persons Carrying On Profession Or Business. [Sec. 44AA]
Compulsory Audit For The Non-Corporate Assessees [Section-44 AB]
Computation of Income on Estimated Basis [Section 44AD]
Profit from the business of carriage of goods for truck owners [Section 44 AE]
Special provision for computation of income from royalties in case of nonresidents [Section 44DA]
Partly Agricultural and Partly Business Income
Adjustment In The Profit And Loss A/C Prepared By The Assessee
Computation of Profits and Gains of a Non-Resident from Shipping Business— [Section 44B]
Computation of Profits and Gains of business of Oil Exploration [Section 44BB]
Computation of Profits and Gains of the Business of operation of Aircrafts by Non-Resident [Section 44 BBA]
Computation of Profits of Foreign Enterprises [Section 44BBB]
Ceiling Limits in respect of Head Office Expenses [Section 440]
Special Provisions in case of Income of Public Financial Institutions etc. [Section 43D]
 
Get Updated ...
Tax Tutorials
E-Payment Of Direct Taxes
Filing Of Return Of Income
Interest for Delay in Filing the Return of Income [Section 234 A]
Interest for default in Payment of Advance Tax [Section 234B]
Provisions Of 'Income-Tax Law' Useful For Non-Residents
MAT (Minimum Alternate Tax)
AMT ( Alternative Minimum Tax)
Tax On Long-Term Capital Gains (LTCG)
Tax On Short-Term Capital Gains (STCG)
Exemption[ Section-54] For Capital Gains Arising On Transfer Of Residential House Property
Tax Treatment Of Gifts Received By An Individual Or HUF
Set Off And Carry Forward Of Loss Under The Income-Tax Act
Interest For Delay In Payment of TDS/TCS And For Non-Payment Of Tax Demanded
Tax Deduction/Collection Account Number (TAN)
How to apply for PAN ?
Refund Of Excess Tax Paid By The Taxpayer (Sections - 237 to 245 )
Presumptive Taxation Scheme of Section 44AD
Presumptive Taxation Scheme of Section 44ADA
Presumptive Taxation Scheme of Section 44AE
Deduction in respect of Life Insurance Premium, PPF, NSC, etc. [Section 80C]
Deduction in respect of Medical Insurance Premium [Section 80D]
Tax Deducted at Source (TDS) from Interest, other than Interest on Securities (Section-194A)
Tax Deducted at Source (TDS) from Interest on Securities (Section 193)
Late Filing Fees And Penalty For Failure To Furnish/Delay In Furnishing The TDS/TCS Statements
LIBRARY @ Tax Management
TAX & INVESTMENT GUIDE FOR "NRI"- Non-Resident Indians !
GUIDE & FAQ @ TAX
GRAPHICAL PRESENTATION @ TAX
TIPS & TRICKS @ TAX
MANAGERIAL & FINANCIAL DECISIONS @ TAX
5 GOLDEN RULES OF TAX PLANNING
FAMILY TAX PLANNING
DEDUCTIONS FROM YOUR INCOME
EXEMPTED INCOMES
HUF - FORMATION, MANAGEMENT & TAX PLANNING
COMPUTATION OF GROSS TOAL INCOME
INCOME TAX @ GLANCE
MULTIPLE KNOWLEDGEBASE ON TAX
51 TIPS ON TAX PLANNING
APPEALS UNDER INCOME TAX
ASSESSMENTS
PENALTIES UNDER IT DEPATMENTS
TAX SAVING SCHEMES
TAX READY RECKONER
TAX RATES
PROSECUTIONS UNDER INCOME TAX DEPARTMENT
TAXATION SYSTEM IN INDIA
CHARITABLE & RELIGIOUS TRUST - TAXATION
PRESCRIBED FORMS WITH with Section / Rules
KNOWLEDGE BASE !
New Topics @ Tax KnowledgeBase...
 
 

Most Popular Topics :

Corporate Tax ( Taxation in Companies)
FAQ on TDS on Salaries
FAQ on Taxable Income
FAQ on Filing of Income Tax Return
Graphical Chat Presentation of Provision of Motor Car / Other Vehicles [Rule 3(2)(A)&(B)]
'Appeals' Under Income Tax Act. 1961.
'Assessments' Under Income Tax Act. 1961.
List of Exempted Incomes (Tax-Free) Under Section-10
Income Under the Head ' Business and Professions' [Section 28 to 44]
Income Under the Head ' Capital Gain'
Income Under the Head ' House Property '[Section- 22 - 25 ]
Income Under the Head "Salary"
[Section 15-17]
Income Tax on 'Partnership Firms'
PENALTIES Under Income Tax Act. 1961.
Tax Saving Schemes for Individual-Instant Guide
New Tax Rates For FY 2017-18 & AY 2018-19
"Exempted Incomes" under Income Tax Act.
Charitable & Religious Trust :Formation, Registration, & Taxation
Hindu Undivided Family [HUF] - Formation, Management and Taxation
 

Most Popular Links :

Clubing of Income Deduction U/s 80C
Allowances Us-17(3) Exemption-Salary
Tax Amendment-2015 Taxable Income
Clubing of Income Tax Deductions
HUF Deduction HUF Investment
Gift by HUF HUF Tax Planning Tips
Tax Saving Schemes Tax Planning Tips
Refund of Tax Fringe Benefit Tax-FBT
Return Filing Assessment / Scrutiny
Notice from I.T. Dept. Incomes Types @ TDS
Exemptions-Tax Returns “Summon” U/s 131
'Black Money' @ I.Tax Big Gifts To Be Taxed
'Appeals' under I.Tax Assessment @ I.Tax
Exempted Incomes Capital Gain
Business & Professions House Property
Salaries @ I.Tax Partnership Firm
'Penalty' under I.Tax Act. Tax Ready Reckoner
Charitable Trust Useful Links @ I.Tax
 
Guide & FAQ on Tax Knowledgebase @ Taxation Income Tax @ Glance HUF - Formation, Planning & Taxation
Charitable & Religious TRUST NRI (Tax Planning,Saving,Investemnt) Budget 2017-2018 GST (FAQ, Law, Act. Rules, Schedule, Enrollment)
FAQs - Income Tax India Tax Tutorials    

Disclaimer:
All efforts are made to keep the content of this site correct and up-to-date. But, this site does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.

The visitors may click here to visit the web site of Income Tax Department for resolving their doubts or for clarifications