Expenses allowable under specific instructions of CBTD

Posted onAuthorCA Kumar

Expenses allowable under specific instructions of CBTD

 

  1. Diwali and Muhurat expenses: Expenses incurred on the occasion of Diwali and Muhurta are in the nature of business expenses. If the Assessing Officer is satisfied that such expenses are not a personal one. Social or religious in nature, these may be allowed as deductions. [Letter No.13 /A/20/68-IT (A-II), dated 3.10.1968].
  2. Deposit under Tatkal Telephone Deposit Scheme: The CBTD is of the view that since the amount deposited under the instant telephone deposit scheme does not earn interest, the entire amount can be treated as revenue expenditure and allowed as a deduction in the year of payment. However, when and any amount of which is refunded, it will be treated as income under section 41 (1) of the Act. [Circular No. 671, dated 27.10.1993]

iii. Payment for telephone/ telex connection: Under the OYT scheme, the amount paid to receive a telephone and a security deposit for a telephone connection is treated as a business expense and allowed as a deduction. When the amount is returned to the assessee, the refund will be treated as the income of the assessee for the year in which it is returned. [F.No. 204/70/75-IT (A-II), dated 10.5.1976].

  1. Expenditure on fluorescent tubes: Initial expenses on the first installation of fluorescent lights, including expenses on wiring and fittings, should be treated as capital expenditures as it forms an asset, but all subsequent expenses for replacement of tubes are treated as revenue in nature Should go and be allowed in it. Toto. [Circular No. 69, dated 27.11.1951].
  2. Premia paid on loss of profit policies: Premia is allowable as deduction on account of loss of profits arising out of fire, stick, lock out etc. The payment, if any, received from the insurance company on account of profit loss, will be liable to tax. [Letter No. A/2171/64/139/59-60, dated 7.4.1961].
  3. Laga Contributions: It is a practice in some areas for trade associations to collect a small amount of customary fees from their members, called laga, to be used for charitable purposes on their business transactions. If such contributions are made at a rate prevalent in the market, such contributions will be acceptable to member contributors. [Circular No. 5 dated 28.8.1962].

vii. Payment to Registrar of Companies: The fee paid to the Registrar of Companies is associated with the company’s legal obligations under company law and is an essential part of the company’s business activities and is therefore permissible. [F. No. 10/25/63-IT (A-I), dated 18.6.1994].

viii. Annual listing fee: The annual inventory fee paid to the stock exchange is acceptable. [Letter No. F-10/25/63-IT (A-I), dated 18.6.1994].

  1. Commitment charges: Commitment fees are paid by a borrower in relation to the amount of loan not taken by him but kept promptly for disbursement by the lender. Such expenses are wholly and exclusively for the purpose of business and are, therefore, permissible. [Circular No. 2P, dated 23.8.1965].
  2. Expenses on training of apprentices: Expenditure incurred by the employer on the training of trainees covered under the Apprentices Act, 1961. [Circular No. 192, dated 10.3.1976].
  3. Feature film production: The cost of producing a feature film will be reduced from the subsidy received by the filmmaker under any scheme created by the government, where any such assessment year. Conversely, the amount received by producers of regional feature films, not charged to tax, will be reduced by the cost of production of the film for the purposes of Rule 9A. [Circular No. 541, dated 25.7.1989].

xii. Civil defense expenses: Expenditure arising out of business concerns on civil security measures will not be acceptable to a reasonable extent even when there is no emergency. [Circular No. 316, dated 30.9.1981].

xiii. Professional tax: Business tax paid by a person carrying on a business or business may be allowed to be deducted under section 37 (1). [Circular Nos. 16 and 18, dated 18.9.1969].

xiv. Advertisement expenses:  A businessman advertises in more than one newspaper or magazine and also in more than one issue of the same newspaper or magazine. Spending on such advertisements would be eligible for deduction. [Circular No. 203, dated 16.7.1976].

  1. Co-operative Stores: Expenditure incurred by management in relation to setting up consumer cooperative stores for industrial workers. [F. No. 16/54/63-O.M., dated 25.4.1963].