computation of tax

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Priyanka Mahajan (Querist)
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22 September 2010 wht should be considered while coputing tax from balance sheet and tax audit report.

and is preliminary exp written off allowed under income tax and wht abt loss by theft

Aditya Maheshwari

Aditya Maheshwari (Expert)
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22 September 2010 all the disallowances and allowances should be computed as per income tax provisions.

Preliminary expenses are allowable to the extent stated in section 35D.

Loss must have arisen out of carrying on of business - If employment of agents is incidental to the carrying on of business, it must logically follow that losses which are incidental to such employment are also incidental to the carrying on of the business. The loss arising from misappropriation by employee must be held to arise out of the carrying on of business and to be incidental to it. It should, however, be emphasised that the loss for which a deduction could be made must be one that springs directly from the carrying on of the business and is incidental to it and not any loss sustained by the assessee, even if it has some connection with his business - Badridas Daga v. CIT [1958] 34 ITR 10 (SC)/Sassoon J. David & Co. (P.) Ltd. v. CIT [1975] 98 ITR 50 (Bom.).

Allowance of loss due to embezzlement by employee is not dependent on his position - While considering the deductibility of loss due to embezzlement by an employee it would make no difference in the admissibility of the deduction whether the employee occupies a subordinate position in the establishment or is an agent with large power of management - Badridas Daga v. CIT [1958] 34 ITR 10 (SC).

Where the assessee’s employee defalcated moneys entrusted to him for disbursement of wages, the loss sustained was allowable as trading loss - Commonwealth Trust (India) Ltd. v. CIT [2000] 242 ITR 593 (Ker.).

So long as reasonable chance of restitution exists, loss cannot be allowed - So long as reasonable chance of obtaining restitution exists, loss may not in a commercial sense be said to have resulted. It cannot be said that as soon as the embezzlement takes place of the employer’s funds, whether the employer is aware or not of the embezzlement, there results a trading loss - Associated Banking Corpn. of India Ltd. v. CIT [1965] 56 ITR 1 (SC).