M/s Suraj Industries Ltd., an Indian company, is engaged in manufacturing and assembling of automobiles and auto components in Pune, Maharashtra.…

Computation of total income and tax liability of M/s Suraj Industries Ltd. for the A.Y. 2025-26 as per section 115BAA Particulars Amount in ₹ I Profits and gains of business and profession Net profit as per Statement of Profit and Loss 9,50,00,000 Add: Items debited but to be considered separately or to be disallowed (i) Depreciation as per useful life of assets 2,80,00,000 (ii) Donation to political party [Since donation to political party is not wholly and exclusively for the purpose of business or profession, it is not allowable as deduction u/s 37. Since the amount of contribution is debited to statement of profit and loss, the same has to be added back] 12,00,000 (iii) Contribution to research institution approved and notified by the Central Government for scientific research [As per section 35(1)(ii), 100% deduction is allowed for amount paid to a research institution undertaking scientific research, if such institution is approved for this purpose and notified by the Central Government. However, since company is opting for section 115BAA, deduction in respect of this contribution is not allowed. Since the amount of contribution is debited to statement of profit and loss, the same is required to be added] 50,00,000 (vi) Interest on borrowing to State Bank of India (SBI) [10% x 420 lakhs x 10/12] [Interest on borrowing from SBI upto 31.12.2024, being the date when machinery is installed and put to use, is not allowable as deduction since it has to be capitalized as part of the cost of the asset. Interest for January, February and March 2025 is disallowed as per section 43B since it is not paid on or before the due date of filing return of income i.e., 31.10.2025. Since the entire interest has been debited to the statement of profit and loss, it has to be added back while computing business income] 35,00,000 (viii) Salary for installation of machinery [As per ICDS V, expenses which are specifically attributable for bringing the fixed asset to its working condition would form part of actual cost. Therefore, salary to foreign technicians for installation of machinery is a capital expenditure and not allowable as deduction. Since it has been debited to the statement of profit and loss, it has to be added back while computing business income] 1,00,00,000 4,77,00,000 14,27,00,000 Less: Items credited but not chargeable to tax or chargeable to tax under other head of income/expenses allowed but not debited (iv) Dividend received from foreign company [Dividend received from foreign company is taxable under the head "Income from other Source". Since the same has been credited to Statement of Profit and loss, it has to be deducted while computing business income. 15,00,000 (v) Long-term capital gain on sale of equity shares [Long-term capital gain on sale of equity shares is taxable under the head "Capital Gains". Since the same has been credited to Statement of Profit and loss, it has to be deducted while computing business income. 4,00,000 (vii) Profit on sale of plot of land [Capital gains arising on sale of plot of land are taxable under the "Capital Gains". Since the same has been credited to the statement of profit and loss, the same has to be reduced while computing business income] 8,00,000 (ix) Bad debt recovered [The deduction of bad debt allowed u/s 36 was 12lakhs out of the total debt of 22lakhs; The excess of amount recovered i.e.,11 lakhs over the amount due after bad debt allowance i.e.,10 lakhs will be taxable as business income. Since the entire amount of 11lakhs recovered has been credited to the statement of profit and loss,10 lakhs has to be reduced while computing business income.] 10,00,000 37,00,000 13,90,00,000 Less: Depreciation as per Income-tax Rules, 1962 1,50,00,000 Depreciation on assets acquired during the P.Y. 2024-25 Office building Purchased and put to use on 15.12.2024 [300lakhs x 10% x 50%, since it has been put to use for less than 180 days during the year] 15,00,000 Computer Purchased and put to use on 11.5.2024 [25lakhs x 40%, since it has been put to use for 180 days or more during the year] 10,00,000 Plant and machinery On P & M installed and put to use on 31.12.2024 [₹ 624.5 lakhs (500lakhs +100 lakhs of salary for installation +24.5 lakhs, being interest from 1.6.2024 to 31.12.2024) x 15% x 50%, since it has been put to use for less than 180 days during the year] 46,83,750 Additional depreciation (since company is opting for section 115BAA, additional depreciation is not allowed) Profits and gains from business or profession 11,68,16,250 II Capital Gains Profit on sale of plot of land [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, which is an Indian company, the same would not constitute a transfer for levy of capital gains tax as per section 47(iv)] - Long-term capital gain on listed equity shares 4,00,000 III Income from Other Sources Dividend received from a foreign company 15,00,000 Gross Total Income 11,87,16,250 Less: Deduction under Chapter VI-A Deduction under section 80GGB [Donation to political party is not allowable as deduction to Suraj Industries Ltd., since the company is opting for section 115BAA] - Deduction under section 80M allowable, even if, company is opting for section 115BAA, to the extent of lower of dividend received and dividend distributed. Therefore,12,00,000, being the amount of dividend distributed allowable as deduction 12,00,000 Total Income 11,75,16,250 Computation of tax liability as per section 115BAA Particulars Amount in ₹ Tax payable on LTCG @10% u/s 112A on 2,75,000, being the LTCG in excess of 1,25,000 27,500 Tax @ 22% on 11,71,16,250 2,57,65,575 2,57,93,075 Add: Surcharge @ 10% [Domestic company opting for section 115BAA, rate of surcharge is 10%] 25,79,308 2,83,72,383 Add: Health and education cess @4% 11,34,895 Tax liability 2,95,07,278 Tax liability (rounded off) 2,95,07,280