Budget 2012 -INCOME FROM BUSINESS OR PROFESSION

[Swati Dodhi]

Budget 2012 -INCOME FROM BUSINESS OR PROFESSION  

DEPRECIATION

• Section 32(1)(iia): It is proposed to allow initial depreciation of 20% on new

   machinery or plant acquired and installed in a previous year and used in the

           business of generation and distribution of power. Thus, this

           allowance was restricted to manufacturing or production of any article or thing.

EXPENDITURE ON SCIENTIFIC AND OTHER RESEARCH

• Section 35: This section allows weighted deduction @ 200% for expenditure incurred on approved in house research and development facilities up to 31^st March  2012. The allowability of weighted deduction under this section has been extended for a further period of 5 years i.e. up to 31st March 2017.

INVESTMENT LINKED DEDUCTION IN RESPECT OF SPECIFIED BUSINESS

• Under Section 35AD, an assessee is entitled to deduction @ 100% of Capital Expenditure (other than Land, Goodwill and Financial Instrument) incurred on specified businesses . The definition of specified business has been widening to include the following businesses also:-

1. Setting up and operating an inland depot or a container freight station notified or approved under the Customs Act, 1962;
2. Bee Keeping and production of honey and beeswax; and
3. Setting up and operating a warehouse facility for storage of sugar.

• The date of commencement of the above business operations shall be on or after1 st April 2012 to be eligible for deduction subject to conditions.

• However, the assessee engaged in the following specified business shall be allowed deduction @ 150% of Capital Expenditure (other than Land, Goodwill and  Financial Instrument) incurred:-

• Setting up and operating a cold chain facility;
• Setting up and operating a warehousing facility for storage agricultural produce;
• Building and operating, anywhere in India, a hospital with at least one hundred beds for patients;
• Developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and  notified by the Board in this behalf in accordance with the guidelines as may be  prescribed; and
• Production of fertilizer in India.

• An assessee who builds a hotel of two-star or above category as classified by the  Central Government and subsequently, while continuing to own the hotel, transfers  the operation thereof to another person shall be deemed to be carrying on the specified business of building and operating hotel.

EXPENDITURE ON AGRICULTURAL EXTENTION PROGRAM

• It is proposed to insert a new section i.e. Sec 35CCC to allow the benefit of weighted deduction @ 150% on expenditure incurred by the assessee on approved agricultural extension project notified by the Board.

EXPENDITURE ON SKILL DEVELOPMENT EXPENDITURE

• It is proposed to insert a new section i.e. Sec 35CCD to allow the benefit of weighted deduction @ 150% on expenditure incurred by the assessee (not being  expenditure in the nature of cost of any land or building) on approved skill  development project notified by the Board.

APPLICABILITY OF TAX AUDIT

• Section 44AB: Every person carrying on business is required to get his accounts  audited under section44AB if his total sales, turnover or gross receipts in business  exceed Rs. 60 Lacs in the previous year. In case of professionals, the said limit is  Rs.15 Lacs. It is proposed to increase the said turnover/receipt ceiling to Rs. 1 Crore and Rs. 25 Lacs respectively.
• For the purposes of presumptive taxation under section44AD for computing profits  and Gains of business of civil construction, etc, the threshold limit is proposed to be  increased to Rs. 1 Crore from Rs. 60 Lacs.

SEC 40A : TRANSACTIONS WITH RELATED PARTIES

• Section 40A(2) specifies disallowance of certain expenditure, where payments are  made to related parties defined therein. It is proposed to amend Sec 40A(2) by enlarging the definition of relatives to include the transactions by a company, firm,  association of persons or Hindu undivided family having a substantial interest in the  business or profession of any other company within its ambit.
• Further, no disallowance shall be made with respect to any expenditure being excessive or unreasonable having regard to the fair market value in respect of a specified domestic transaction under section 92BA if such transaction is at ALP.

Discussions to this article

[Naresh Bhatia]

Is not this mandatory for every business /professional to have  its account .audited under section 44AB irrespective of limits of Rs. 60lakhs  or Rs. 15 lakhs when not opting for Presummtive Tax under sectrion 44AD.(Assesment year 2012-13 for   bussiness activities done in 2011-12)

In Budget  EFFECTIVE APRIL1,2012 WHAT IS THE POSITION ON MANDATORY AUDTING UNDER SECTION 44AB.

Naresh Bhatia