Krisha, Kinara and Komal were three partners in a partnership firm, KKK Enterprises. The firm carried on the business of running banquet halls for…

Computation of Total Income and tax payable by KKK Pvt. Ltd. for the A.Y. 2025-26 Particulars Amount (in ₹) I Profits and gains of business or profession Net profit as per statement of profit and loss 1,19,25,000 Add: Item debited but to be considered separately or to be disallowed (i) Cash payment to transporter [Cash payment to transporter exceeding - 35,000 would be disallowed under section 40A(3). Since the same has been debited to the statement of profit and loss, the same has to be added back while computing business income.] 37,000 (ii) Payment to transporter without deducting tax at source [Since Mr. Milan, a transporter submitted certificate u/s 197(1) for no deduction of tax at source, KKK Pvt. is not required to deduct tax at source on payment made for transporter. Hence, no disallowance for non-deduction of tax would be attracted under section 40(a)(ia). Since the same has been debited to the statement of profit and loss, no adjustment is required to be made] NIL (iii) Depreciation as per books 13,56,000 (iv) Bad debt of erstwhile firm [Where the business of the firm has been transferred to the company and the successor has suffered loss on account of it turning bad, the successor would be entitled to deduction, if the required conditions are complied with. Since the same has been debited to the statement of profit and loss, no further adjustment is required.] NIL A (i) Commission for purchase of shares without deduction of TDS [Commission for purchase of shares will form part of cost of acquisition of listed shares and not allowable as deduction from business income. Further, no tax is required to be deducted under section 194H in respect of commission on securities. Moreover, commission for purchase of shares is not in relation to business, non-deduction of tax will not impact the business income. Since the same has not been debited to the statement of profit and loss, no further adjustment is required to be made.] NIL 1,33,18,000 Less: Items credited but not taxable or chargeable to tax under another head (ii) Dividend received from listed companies [Dividend received from listed companies is taxable under the head "Income from Other Sources". Since the same has been credited to the statement of profit and loss, the same has to be deducted while computing business income.] 5,40,000 1,27,78,000 Less: Depreciation as per the Income-tax Rules, 1961 [Depreciation on discarded machinery will be allowed assuming that this machinery is not the only asset in that block and that the dissertation is not permanent in nature. Under the block concept, since no amount has been received or receivable due to such dissertation, no amount needs to be deducted.] 15,78,000 1,12,00,000 Less: Brought forward business loss of A.Y. 2020-21 [Not allowed since one of the conditions of section 47 (xiii) of being shareholding of partners of the firm in the company should not be less than 50% of the total voting power for 5 years from the date of succession is violated.] NIL 1,12,00,000 II Capital Gains Long term capital gain on transfer of capital assets at the time of succession [Since Krisha sold 95% of her holding i.e., 28.5% shares in the company, the shareholding of partners of the firm i.e., Krisha, Kinara and Komal in the company becomes less than 50% of the total voting power i.e., 46.5% within a period of 5 years from the date of succession. In such a case, the LTCG would be taxable in the year of violation of this condition.] 55,00,000 III Income from Other Sources Dividend received from listed companies 5,40,000 Deemed dividend [Since the company holds 10% or more voting power of the Adar Hospitality Services Pvt. Ltd., loan of 15lakhs received from such company would be deemed as dividend under section 2(22)(e) to the extent of accumulated profit even if the loan is repaid in the same F.Y.] 15,00,000 20,40,000 Gross total income/ Total income 1,87,40,000 Computation of tax payable Tax on long term capital gains of 55,00,000 @20% 11,00,000 Tax on other income of 1,32,40,000 @30%, since the turnover of the company for the previous year 2022-23 exceeds 400crores 39,72,000 50,72,000 Add: Surcharge @7%, since total income exceeds 1crore. 3,55,040 54,27,040 Add: Health and education cess @4% 2,17,082 Tax liability 56,44,122 Less: TDS u/s 194 2,04,000 Tax payable 54,40,122 Tax payable (Rounded off) 54,40,120 Computation of Total Income and tax payable by KKK Pvt. Ltd. for the A.Y. 2025-26 under concessional regime u/s 115BAA Particulars Amount (in ₹) Total Income under regular provisions of the Act/ Total Income as per section 115BAA 1,87,40,000 Computation of tax payable Tax on long term capital gains of 55,00,000 @20% 11,00,000 Tax on other income of 1,32,40,000 @22% 29,12,800 40,12,800 Add: Surcharge @10% 4,01,280 44,14,080 Add: Health and education cess @4% 1,76,563 Tax liability 45,90,643 Less: TDS u/s 194 2,04,000 Tax payable 43,86,643 Tax payable (Rounded off) 43,86,640 Conclusion Since the tax payable of KKK Pvt. Ltd. computed under section 115BAA is lower than the tax payable computed under regular provisions of the Act, it is beneficial for KKK Pvt. Ltd. to opt for the special provisions under section 115BAA for A.Y. 2025-26. However, once it opted for the concessional tax regime u/s 115BAA, it cannot withdraw such option in subsequent years.