Shipa Ltd. is engaged in the business of manufacturing fabrics since 1st April, 2012 and earned a profit of ₹ 750 lakh for the previous year ended 31st March, 2021 after debiting or crediting the following items : (a) In

Computation of Total Income of Shipa Limited for AY 2021-22 Particulars Amount (₹) Amount (₹) I. Profits and Gains from Business and Profession Net profit as per the Profit and Loss Statement 7,50,00,000 Add: Items of expenditure being debited to Profit & Loss Statement to be disallowed: Depreciation as per Companies Act 52,00,000 Provision for wages payable to workers [since the provision is based on a fair estimate of wages payable with reasonable certainty, the provision is allowable as deduction. ICDS X requires a reliable estimate of the amount of obligation and 'reasonable certainty' for recognition of a provision, which is present in this case. As, the provision of ₹ 18 lakhs has been debited to P&L statement, no adjustment is required while computing business income] Loss due to destruction of machinery by fire [Loss of ₹ 17 lakhs due to destruction of machinery caused by fire is not deductible since it is capital in nature.] Since the loss has been debited to statement of profit and loss, the same is required to added back while computing business income] 17,00,000 Provision for gratuity [Provision of ₹ 320 lakhs for gratuity based on actuarial valuation is not allowable as deduction. [Section 40A(7)] However, actual gratuity of ₹ 160 lakhs paid is allowable as deduction. Hence, the difference has to be added back to income i.e. ₹ 320 Lakhs - ₹ 160 Lakhs] 1,60,00,000 Advertisement in souvenir of a Political Party [Advertisement charges paid in respect of souvenir published by a political party is not allowable as deduction from business profits of the company.] 2,30,000 Interest on deposit credited on 31.3.2021 on which TDS has not been deducted [30% disallowed u/s 40(a)(ia) since tax is not deducted and deposited to government] (₹ 2,00,000 x 30%) 60,000 2,31,90,000 9,81,90,000 Add: Income taxable but not credited to Profit and Loss Statement: GST not refunded to customers out of GST refund received from the State Government. [The amount of GST refunded to the company by the Government is a revenue receipt chargeable to tax. Out of the refunded amount of ₹ 3 lakhs, the amount of ₹ 2 lakhs stands refunded to customers would not be chargeable to tax. Hence, The balance amount of ₹ 1 lakh lying with the company would be chargeable to tax] - [Note 2] 1,00,000 Sub-Total 9,82,90,000 Less: Items credited to Statement of Profit and Loss, but not includible in business income / permissible expenditure and allowances: Industrial power tariff concession received from State Government [Any assistance in the form of inter alia, concession received from the Central or State Government would be treated as income.] (4,80,000) Dividend received from domestic Company [Dividend received from domestic company is now taxable w.e.f. 1.4.2020, under Income from Other Sources.] (12,00,000) Scrap value of Machinery destroyed [Scrap value of machinery being capital in nature, has to be reduced from WDV of machinery. Since the same has been credited to the statement of profit and loss, it has to be deducted while computing business income.] [Note 1] (3,00,000) Long term capital gains on sale of equity shares [The taxability of long term capital gain on sale of equity shares has to be considered while computing income under the head Capital Gains.] (3,00,000) Depreciation as per Income tax Rules, 1961 (71,00,000) (89,00,000) Profits and gains from Business or Profession 8,93,90,000 Capital Gains Long term capital gain on sale of equity shares on which STT is paid at the time of acquisition and sale [The gain in excess of ₹ 1,00,000 is taxable flat @10% u/s 112A without indexation benefit] 3,00,000 Income from Other Sources Dividend received from domestic company [w.e.f. 1.4.2020, dividend received from a domestic company is chargeable to tax under the head Income from other Sources] 12,00,000 Gross Total Income 9,08,90,000 Less: Deduction Under Chapter VI-A: Under Section 80GGB (Contribution by a company to a registered political party is allowable as deduction, since payment is made otherwise than by cash. Expenditure incurred by an Indian company on advertisement in souvenir published by such political party shall be considered as contribution to such political party) [Note 3] (2,30,000) Total Income 9,06,60,000 Note: Since scrap value has been credited to the statement of Profit and Loss, it is possible to take a view that the amount of scrap value is not reduced while computing the value of the assets. In such a case, depreciation allowable would be ₹ 70,55,000 (i.e. ₹ 71,00,000 - ₹ 45,000, being 15% of ₹ 3,00,000). The business income and total income would be ₹ 8,94,35,000 and ₹ 9,07,05,000 respectively. GST not refunded to customers out of GST refund received from the State Government is a revenue receipt chargeable to tax. Hence, the GST amount not refunded to customer i.e. ₹ 1 lakh lying with the company would be chargeable to tax. However, there may be view that it will be paid in future and would not considered as remission of liability and therefore in such cases, ₹ 1,00,000 would not be taxable. Any advertisement expenses of a company on a platform owned by a political party would be considered as a contribution u/s 80GGB and therefore eligible for deduction.