Question

Explain the expenses which are expressly disallowed when computing total income

Answer 1

The followings are the expense, allowances and losses which are also not allowed as deduction while computing income under the head ‘profits and gains of business or profession’

(i) Drawings private or personal expenses of the proprietors partners etc.

(ii) Any expenditure in the nature of capital expenditure.

(iii) The amount paid as charity and presents. However, subscription is allowed.

(iv) Any provision or reserve except the special reserve of the approved financial corporations.

(v) Past losses (i.e., loss of the past previous years) charged to profit and loss account.

(vi) Any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by any law, shall not be allowed to be debited as business expenditure out of any income. This amendment has been made by the Finance Act (2) 1998 with retrospective effect from 1-4-1962.

Answer 2

Answer:

There are several expenses that are not considered while calculating the profit and earnings from a business or profession.

Explanation:

The following sums cannot be subtracted from income when calculating it:

• Payment of Interest, Royalties, and Fees for Technical Services to Non-Residents or Outside of India without TDS Deduction and Payment.
• To any resident person without TDS and its payment, interest, commission, brokerage, fees for professional services, or costs for technical services.
• Fringe Benefit Tax.
• Income Tax.
• Wealth Tax.
• Any payment that is chargeable under the heading "Salaries," if it is due outside India or to a non-resident, and the tax has not been paid in India or deducted there from.
• Any tax on non-cash benefits that the company has actually paid on the employee's behalf.

Therefore, the assesses are compelled to pay taxes on such expenditures by adding them back to the net profits and the income tax department does not permit the advantage of such expenditures.

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