Drafting an entire comprehensive checklist for residuary business expenses is not feasible. However, every professional should know about the allow ability/non-allow ability of some important expenses. Here we pulled some of important expenses are brief below here:
1. Advertisement: Expenditure on advertisements in print media/electronic media is allowable as revenue expenditure. However, any expenditure on advertisement in any souvenir, brochure tract, pamphlet or the like published by a political party is not deductible (Sec. 37(2B)].
2. Annual day celebrations: The expenditure incurred in connection with the annual day celebrations is allowable as business expenditure [CIT v. Mehsana Distt. Cooperative Milk Producers Union Ltd. [1994] 207ITR140 (Cuj.)l.
3. Payment for consultancy fees: Consultancy fee paid, for the benefit of increasing the manufacturing efficiency and formulating incentives schemes would be allowable as revenue expenditure [CIT v. Praga Tools Ltd. (1986) 157 ITR 282 f AP)].
4. Fines: Fines and penalties paid for traffic offences by the assesse company's truck drivers being penalty for infringement of law, could not be allowed as deduction [CIT v. Jaipur Golden Transport (1997) 226 ITR 399 (Del.)].
5. Penalties: Penalty paid for infraction of law, not deductible - If an assessed is penalized under one Act, he cannot claim that amount to be set-off against his income under another Act, because that will frustrate the entire object of imposition of penalty. Penalty for non-payment of sales tax is not deductible [Malwa Vanaspati & Chemical Co. V. CIT (1997) 225 ITR 383(SC)].
6. Foreign tour/travel expenses: Foreign travel expenses connected with exploratory missions and finalization of collaboration agreements are revenue expenditure [Antifriction Bearings Corporation Ltd. v. CIT (1978) 114 ITR 335 (Bom.)].
Tour expenses connected with survey of new methods or for purchase of machinery are capital expenditure [Ambica Mills Ltd. v. CIT (1964) 54 ITR 167 (Guj.)].
Tour expenses connected with initiation of new business is not deductible |CIT v. Flour & Food Ltd. (1988) 170 ITR 469 (MP)].
Tour expenses by surgeon for studying latest techniques in surgery are deductible [Dr. P. Vadamalayan v. CIT (1960) 40 ITR 501 (Mad.); CIT v. Dr. M.S. Shroff (1971) 80 ITR 687 (Del.)].
7. Foundation ceremonies: Expenditure on foundation-laying of factory is revenue expenditure [CIT v. Merck Sharp & Dohme of India Ltd. (1983) 140 ITR 332 (Bom.)].
8. Pu)a expenses: Expenditure incurred on customary Ganesh Puja at the lime of opening books of accounts, is primarily in the nature of advertisement for the assessor’s business and hence is a permissible deduction [Brijraman Das & Sons p. CTT (1983) 142 ITR 509 (All.)].
9. Diwali and muhurat expenses: Expenses incurred on the occasion of Diwali and Mahurat are in nature of business expenditure. Such expenses are deductible if the Assessing Officer is satisfied that they are not of a personal, social or religious nature (Circular Letter No.131 A/20/681TCA-J1 dated)/October 1968].
10. Interest payments: Interest for late filing of returns is not deductible [Bharat Commerce & Industries Ltd. v. CIT (1998) 230 ITR 733], Interest paid under Sec. 220(2) for late payment of income tax is not deductible as revenue expenditure [CIT v. Ashoka Mills Ltd. (1996) 218 ITR 526 (Guj.)].
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1. Advertisement: Expenditure on advertisements in print media/electronic media is allowable as revenue expenditure. However, any expenditure on advertisement in any souvenir, brochure tract, pamphlet or the like published by a political party is not deductible (Sec. 37(2B)].
2. Annual day celebrations: The expenditure incurred in connection with the annual day celebrations is allowable as business expenditure [CIT v. Mehsana Distt. Cooperative Milk Producers Union Ltd. [1994] 207ITR140 (Cuj.)l.
3. Payment for consultancy fees: Consultancy fee paid, for the benefit of increasing the manufacturing efficiency and formulating incentives schemes would be allowable as revenue expenditure [CIT v. Praga Tools Ltd. (1986) 157 ITR 282 f AP)].
4. Fines: Fines and penalties paid for traffic offences by the assesse company's truck drivers being penalty for infringement of law, could not be allowed as deduction [CIT v. Jaipur Golden Transport (1997) 226 ITR 399 (Del.)].
5. Penalties: Penalty paid for infraction of law, not deductible - If an assessed is penalized under one Act, he cannot claim that amount to be set-off against his income under another Act, because that will frustrate the entire object of imposition of penalty. Penalty for non-payment of sales tax is not deductible [Malwa Vanaspati & Chemical Co. V. CIT (1997) 225 ITR 383(SC)].
6. Foreign tour/travel expenses: Foreign travel expenses connected with exploratory missions and finalization of collaboration agreements are revenue expenditure [Antifriction Bearings Corporation Ltd. v. CIT (1978) 114 ITR 335 (Bom.)].
Tour expenses connected with survey of new methods or for purchase of machinery are capital expenditure [Ambica Mills Ltd. v. CIT (1964) 54 ITR 167 (Guj.)].
Tour expenses connected with initiation of new business is not deductible |CIT v. Flour & Food Ltd. (1988) 170 ITR 469 (MP)].
Tour expenses by surgeon for studying latest techniques in surgery are deductible [Dr. P. Vadamalayan v. CIT (1960) 40 ITR 501 (Mad.); CIT v. Dr. M.S. Shroff (1971) 80 ITR 687 (Del.)].
7. Foundation ceremonies: Expenditure on foundation-laying of factory is revenue expenditure [CIT v. Merck Sharp & Dohme of India Ltd. (1983) 140 ITR 332 (Bom.)].
8. Pu)a expenses: Expenditure incurred on customary Ganesh Puja at the lime of opening books of accounts, is primarily in the nature of advertisement for the assessor’s business and hence is a permissible deduction [Brijraman Das & Sons p. CTT (1983) 142 ITR 509 (All.)].
9. Diwali and muhurat expenses: Expenses incurred on the occasion of Diwali and Mahurat are in nature of business expenditure. Such expenses are deductible if the Assessing Officer is satisfied that they are not of a personal, social or religious nature (Circular Letter No.131 A/20/681TCA-J1 dated)/October 1968].
10. Interest payments: Interest for late filing of returns is not deductible [Bharat Commerce & Industries Ltd. v. CIT (1998) 230 ITR 733], Interest paid under Sec. 220(2) for late payment of income tax is not deductible as revenue expenditure [CIT v. Ashoka Mills Ltd. (1996) 218 ITR 526 (Guj.)].
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We are domain consultant in taxation software development company which is provides Online eTDS Software, efiling income tax software, XBRL Software and various utility product for chartered accountant and corporates. Also ask for free demo "Office Management Software".
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