Orient Pharmaceuticals Private Limited is an Indian Company, engaged in the business of manufacturing and providing access to affordable and…

Computation of Total Income of Orient Pharmaceutical Pvt. Ltd. for the A.Y. 2024-25 Particulars Amount (in ₹) I Profits and gains of business or profession Net profit as per statement of profit and loss 95,00,000 Add: Items debited but to be considered separately or to be disallowed (1) Depreciation as per Companies Act 11,90,000 (2) Bonus transferred to the trust for making payment to the employees after settlement of the dispute [The bonus would be allowable as deduction u/s 36(1)(ii), even though the amount of bonus payable was initially remitted to the trust created for the purpose of avoiding late payment of bonus, since the actual payment of bonus made to the employees is 31 st August, 2024 i.e., on or before due date of filing return of income. Since the same has been already debited to the statement of profit and loss, no further adjustment is required] --/Nil (3) Regularization fee for violating a law [Regularization fee paid for violating a law as prescribed by Medical Council of India is a payment to compound an offence. Such expenditure is considered to be the expenses prohibited by the law. Hence, it does not qualify for deduction u/s 37. As the same has been debited to the statement of profit and loss, it has to be added back] 9,50,000 (4) Late fees to Government for failure in performance of a contract [Late fees of 45,000 paid for non-fulfilment of a contract within the stipulated time is not for the breach of law but was paid for breach of contractual obligations and therefore, is an allowable expense. Since it is already debited in statement of profit and loss, no further adjustment is required] --/Nil (7) Bank guarantee towards disputed tax liabilities [As per section 43B any tax, duty, cess or fee is allowed as deduction if they are actually paid on or before the due date of filing return of income under section 139(1). Mere furnishing of bank guarantee by the assessee towards tax liabilities does not mean actual payment of taxes. Hence, it is not treated as payment to be eligible for deduction under section 43B. As the same has been debited to the statement of profit and loss, it has to be added back] 11,00,000 (8) Payment of Interest to a company incorporated in USA [Since the tax has been deducted in March, 2024 and deposited by the company on 14.7.2024 i.e., on or before due date of filing return of income, no disallowance would be attracted under section 40(a)(i). Since the interest has been already debited to the statement of profit and loss, no further adjustment is required] --/Nil (9) Contribution to electoral trust [Contribution to electoral trust is not allowable as deduction while computing business income of the company. Since the contribution has been debited to statement of profit and loss, the same has to be added back while computing business income] 65,000 33,05,000 1,28,05,000 Less: Items credited but not taxable or chargeable to tax under another head (5) Profit on sale of plot of land to 100% subsidiary [Capital Gain arising on sale of plot of land is taxable under the head "Capital Gains". Since the profit on sale of plot of land has been credited to the statement of profit and loss, the same has to be deducted while computing business income] 7,50,000 (6) Profit on sale of shares of M/s Stadel Ltd. [Capital Gain arising on sale of shares of M/s Stadel Ltd. is taxable under the head "Capital Gains". Since the profit on sale of shares has been credited to the statement of profit and loss, the same has to be deducted while computing business income] 4,50,000 Al(1) Cost of machinery spares included in closing stock [The cost of imported machinery spares is to be capitalised as per ICDS V. Since cost of machinery spares is included in purchases as well as forms part of closing stock, no adjustment is required to be made. Therefore, the cost of machinery spares has to be added to the machinery cost and depreciation has to be allowed thereunder.] [Note – The cost of imported machinery spares is capitalised as per ICDS V considering such spares can only be used in connection with a tangible fixed asset and their use is expected to be irregular. Accordingly, normal depreciation and additional depreciation has been provided. However, it is possible to assume that the use of such machinery spares are regular in which case it will be dealt with as per ICDS II (Inventories). As per ICDS II, inventories shall be valued at $25 per piece, being lower of cost of $ 25 per piece or NRV as on 31.3.2024 of $ 27 per piece. As per ICDS VI, non-monetary items being inventory shall be converted into the reporting currency by using the exchange rate on the transaction date i.e., on 15.9.2023 being the date of purchase. In such a case, no adjustment is required to be made for closing stock while computing business income and no depreciation/ additional depreciation would be provided. Accordingly, the business income and total income would be - 83,60,000 and - 85,57,500, respectively]. --/Nil 12,00,000 1,16,05,000 Less: Depreciation as per Income-tax Act, 1961 Normal depreciation On fire-fighting equipment's 1 [Eligible for depreciation even though such equipment's were not used during the previous year.]On new machinery [₹ 75,00,000 x 15% since it is put to use for more than 180 days]On machinery sold and reacquired [15% of actual cost of 35,00,000, being lower of WDV at the time of sale (i.e.,35 lakhs) or price paid for re-acquisition (i.e.,65 lakhs)On imported machinery spares (to be added to cost of machinery as per ICDS V) [₹ 24,86,400 (1200 x $25 x 82.88) x 15%] 95,000 11,25,000 5,25,000 3,72,960 Additional depreciation On new machinery [₹ 75,00,000 x 20%]On imported machinery spares [₹ 24,86,400 x 20%] 15,00,000 4,97,280 41,15,240 74,89,760 II Capital Gains Profit on sale of plot of land to 100% subsidiary [Short-term capital gains arise on sale of plot of land held for less than 24 months. However, in this case, since the transfer is to a 100% subsidiary company and the subsidiary company is an Indian company, the same would not constitute a transfer for levy of capital gains tax] --/Nil Long term capital gain on sale of shares of M/s. Stadel Ltd. [Since shares were held for more than 12 months] [Full value of consideration (2,500 x 280)] Less: Cost of acquisition - Higher of (i) and (ii) (i) Actual cost of acquisition (2,500 x 100) ₹ 2,50,000 (ii) ₹ 4,37,500, being lower of fair market value as on 31.1.2018 (i.e.,4,37,500, being 2,500 x 175) and sale consideration (i.e.,7,00,000) 7,00,000 4,37,500 2,62,500 2,62,500 Gross Total Income 77,52,260 Less: Deduction under Chapter VI-A Under section 80GGB [Contribution by a company to an electoral trust is allowable as deduction, since payment is made otherwise than by cash] 65,000 Total Income 76,87,260 1 Assuming depreciation of 95,000 is computed applying the depreciation rate similar to the rate specified in the Income-tax Rule, 1962.