06 May 2009
B) State with reasons, how the following will be deal with by you in your company’s tax returns while computing the income under the head profits and gains of business:
a. Write off advances paid to sugar cane growers who used to sell sugar cane crop exclusively to the company.
b) Expenditure on replacement of old roofs of the employees’ quarters owned by the company by using new tiles.
c) Cost of shifting a part of factory to another site.
d) Contribution made towards construction of government-owned roads which would facilitate supply of sugarcane to factories.
e) Interest paid on outstanding amount of cess, imposed under the State Sugarcane Cess Act
07 May 2009
See my response below - Write off advances paid to sugar cane growers who used to sell sugar cane crop exclusively to the company- Not allowed as revenue expenditure as not being the debtors in normal course of business.
b) Expenditure on replacement of old roofs of the employees’ quarters owned by the company by using new tiles – 100% Revenue expenditure as no new assets is coming in the existence, The expenditure incurred for efficient utilization of an existing assets.
c) Cost of shifting a part of factory to another site – 100% Revenue expenditure as no new assets is coming in the existence, The expenditure incurred for efficient utilization of an existing assets.
d) Contribution made towards construction of government-owned roads which would facilitate supply of sugarcane to factories – Revenue expenditure under section 37(1) Expense incurred for wholly for the purpose of Business / Business expediency. No Assets can be capitalised in the books as the roads are the assets of the municipal corporation and not of the assessee.
e) Interest paid on outstanding amount of cess, imposed under the State Sugarcane Cess Act – Not allowed a deductible as being penal in nature.
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