 The word business defined in section 2(13) to

include any trade, commerce or manufacture

or any adventure or concern in trade,
commerce or manufacture.
 Profession involves the idea of an
occupation requiring purely intellectual skill
or manual skill on the basis of some special
learning .
 The should be a business or profession ;
 The business should be carried on by the
assessee;
 The business or profession should be carried
on for some time during previous year;
 The charge is in respect of the profits and
gains of the previous year of the business or
profession; and
 The charge extends to any business or
profession carried on.
A trading loss of business is deductible in computing
profit earned by the business even though there is no
specific provisions in the Act for allowances thereof.
Such trading losses can be claimed as a deduction
provided the following conditions are satisfied:
 It should be a real loss ;

 It should be revenue loss;

 It must have actually arisen and have been incurred;

 It should be incurred to the carrying on of the

business ;
 The should be no prohibition in the Act, express or
implied against the deductibility thereof.
 The losses sustained before the commencement
of business
 Losses sustained in the closing down of the
business.
 Losses due to damage of capital assets.
 Losses which are not incidental to the carrying
on of the business of the assessee.
 Loss due to sale of securities held as investments
 Loss cause by forfeiture of advance given for
purchase of capital assets.
 Anticipated loss of subsequent years.
 Expenses incurred as penalty for infraction of
law is not deductible.
For the purpose of taxation there is no
discrimination between legal and illegal
business. Profits from an illegal business
are subject to tax just as from legal
business.
 Rent, rates, taxes, repairs and insurance for
building(Sec. 30)
(a) where the premises are occupied by the assessee:
(i) as a tenant- the rent paid for such premises
and further amount paid for repairs.
(ii) otherwise than as a tenant- the amount paid
by him for current repairs
(b) any sum paid as rates, land revenue or municipal
tax
(c) any insurance premium paid.

 Repairs and insurance of machinery, plant & furniture

(Sec. 31)
Depreciation is diminution in the value of an
asset due to normal wear and tear and due
to obsolescence. There are different
methods for calculation of depreciation
under financial accounting. The methods
commonly used are:
1. Straight Line Method
2. Written Down Value Method
i. Depreciation is allowed on tangible as well as intangible
assets
ii. Allowed to the owner of the assets.
iii. It is allowed even if the asset is wholly or partly owned
by the assessee
iv. It is allowed only when the asset is used for the purpose
of business or profession
v. Allowed on the basis of actual cost to the owner
vi. Allowed on the system of Block of Assets, but not in
case of electricity companies.
vii. Allowed on the basis of written down value method,
except in the case of company engaged in the power
generation & distribution.
viii. Computed on WDV of the asset as on the last day of the
previous year
“Block of Assets” means a group of assets falling
within a class of assets comprising,-
a. Tangible assets, being building, machinery,
plant & furniture;
b. Intangible assets, being know-how, patent,
copyright, trademark, licences, franchises or
any other business or commercial rights.
In respect of which same percentage of
depreciation is prescribed.
Assets eligible for depreciation have been classified
into four class:-
a. Building;
b. Plant & Machinery;
c. Furniture;
d. Intangible assets acquired on or after 1/04/08
Each class of assets other than intangible assets may
have different blocks or groups on which separate
rates of depreciation are prescribed and for each
such rate, separate block will be formed.
In the case of intangible assets there will be only one
block as only one rate i.e. 25% has been prescribed
for all such intangible assets.
W.D.V. of block of assets for purpose of charging depreciation of
current year means:
i. In the case of assets acquired before the P.Y., the actual cost to
the assessee of all the assets falling within the block less all
depreciation actually allowed to him;
ii. In the case of assets acquired in the P.Y. the actual cost to the
assessee
Computation of WDV if any asset of the block sold during the
year
In such cases to compute the W.D.V. of the block of the asset
following steps to be followed:
i. Determine the WDV of the entire block at the beginning of the P.
Y. which will be the WDV of that block of the asset in the
immediately preceding P.Y. as reduced by the depreciation
actually allowed in respect of that block of asset
continued…..
ii. Add the actual cost of any asset falling within the block,
acquired during the P.Y.
iii. Deduct the money payable (consideration) in respect of
the asset of the same block , which is sold or discarded
during the previous year together with the scrap value;
iv. The resultant figure will be WDV of the block at the end of
the year for the purpose of charging current year
depreciation .
Notes:
The deduction under step III cannot exceed the aggregate
amount of step I and step II. If it exceed such amount,
there will be no WDV for the purpose of charging
depreciation. The excess amount is subject to provisons of
capital gains
What is ‘Slump Sale’?
According to section 2(42C) of Income Tax Act 1961
“ slump sale means transfer of one or more
undertakings as a result of the sale for a lumps sum
consideration without values benign assigned to the
individual assets and liabilities in such sale”
in order to come within the purview of the definition,
one should satisfy the following conditions
1. Taxpayer owns an undertaking;

2. He/she transfers undertaking by way of sale;

3. The transfer is for lump sum consideration without

assigning values to individual assets and liabilities.
WDV of the block of assets in case of slum sale is to be
determined in following steps:
I. Determine the WDV of the entire block at the beginning of
the P. Y. which will be the WDV of that block of the asset
in the immediately preceding P.Y. as reduced by the
depreciation actually allowed in respect of that block of
asset
II. Add the actual cost of any asset falling within the block,
acquired during the P.Y
III. Deduct the money payable (consideration) in respect of
the asset of the same block , which is sold or discarded
during the previous year together with the scrap value;
1. The amount of reduction under step 3 can not exceed
the value of assets computed under step 1 & 2
2. However in the case of slump sale, the following shall
be reduced from the value determined after step 2
Actual cost of assets falling in the block transferred by
“slump sale”
Less :
a) Depreciation actually allowed in respect of that asset
in respect of any previous year relevant to the
assessment year commencing before 1988-89;
b) Depreciation that would have been allowable from
the Assessment year 1988-89 onward as if that asset
was the only asset in the relevant block of assets.