M/s NovaMotion Vehicles Ltd. is engaged in assembling and manufacturing of automobiles and auto components in Nagpur, Maharashtra. The net profit…

Computation of Total Income of M/s NovaMotion Vehicles Ltd. for the A.Y. 2025-26 as per the normal provisions of the Act Particulars Amount in ₹ Profits and gains of business and profession Net profit as per Statement of Profit and Loss 8,25,00,000 Add: Items debited but to be considered separately or to be disallowed (i) Depreciation as per the Companies Act, 2013 1,80,00,000 (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] 10,70,000 (iv) Loss due to hedging contract in respect of machinery imported from Japan [Loss from hedging contracts entered for mitigating loss arising due to fluctuation in foreign currency payment towards import of machinery has to added to the actual cost of the machinery as per section 43A. Since the same is debited to statement of profit and loss, same has to be added back] 2,00,000 (v) Conversion of Interest into equity shares [Conversion of outstanding interest liability into loan did not amount to actual payment. Accordingly, the amount was disallowed under section 43B on the ground that the same was not actually paid. However, in the case of Frontier Information Tech Ltd. v. DCIT (ITA 239/2008, Judgment, Telangana High Court held that as the liability of the assessee to pay interest ceased to exist on issue of shares, the same would tantamount to actual payment within the meaning of section 43B. Hence, the assessee, is entitled to claim the deduction under section 43B. Since the same is debited to statement of profit and loss, no adjustment is required] - (vi) Interest on borrowing paid to HDFC Bank Ltd. [10% x 674 lakhs x 10/12] [Interest on borrowing from HDFC upto 1.2.2025, 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 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] 56,16,667 (vii) 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. Since the same is debited to statement of profit and loss, no adjustment is required] - 2,48,86,667 10,73,86,667 Less: Items credited but not chargeable to tax or chargeable to tax under other head of income/expenses allowed but not debited (iii) 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] 6,18,000 (viii) Bad debt recovered [The excess amount recovered i.e.,2,30,000 (₹ 9,80,000 over - 7,50,000, being the amount due of 18,50,000 less bad debt allowance of 11,00,000) will be taxable as business income u/s 41(4). Since entire amount of 9.80 lakhs is credited to the profit and loss account,7,50,000 has to be reduced] 7,50,000 13,68,000 10,60,18,667 Add/Less: As per details in Additional Information 1. Depreciation as per Income-tax Rules, 1962 1,18,50,000 2. Amount paid for Purchase made with M/s GreenPower Components (MSMED) [As per section 43B(h), no deduction shall be allowed for any sum payable by an assessee to a micro or small enterprise unless such sum is paid within the time specified in the written agreement. However, deduction is allowed in that previous year in which such sum is actually paid. In this case, the actual date of payment is 14.04.2025 i.e. after 30 days from 13th March 2025. Hence, purchase of 12lakhs shall not be allowed as deduction in the P.Y. 2024-25. Since the same is not debited to the profit and loss account, no adjustment is required] - Profits and gains from business or profession 9,41,68,667 Capital Gains Long-term capital gain on listed equity shares 6,18,000 6,18,000 Gross Total Income 9,47,86,667 Less: Deduction under Chapter VI-A Deduction under section 80GGB [Donation to political party is allowable as deduction to NovaMotion Vehicles Ltd.] 10,70,000 Total Income 9,37,16,667 Total Income (rounded off) 9,37,16,670 Computation of Tax Liability of M/s NovaMotion Vehicles Ltd. for A.Y. 2025-26 Amount in ₹ Tax on LTCG @12.5% u/s 112A on 4,93,000, being the LTCG in excess of 1,25,000 61,625 Tax @ 30% on 9,30,98,670 2,79,29,601 2,79,91,226 Add: Surcharge @ 7%, since total income exceed 1crore but does not exceed 10crores 19,59,386 2,99,50,612 Add: Health and education cess @4% 11,98,024 Tax liability 3,11,48,636 Tax liability (rounded off) 3,11,48,640 Computation of Total Income of M/s NovaMotion Vehicles Ltd. for the A.Y. 2025-26 as per section 115BAA Particulars Amount in ₹ Gross Total Income under regular provisions of the Act 9,47,86,667 Add: Contribution to research institution approved and notified by the Central Government for scientific research [Deduction in respect of this contribution is not allowed under section 115BAA] 63,00,000 Add: Additional Depreciation Imported Machinery from Japan @10% of 67,00,000 (₹ 65,00,000 +2,00,000 of loss on hedging contract) [only 50% of the 20% is allowable since machinery is put to use for less than 180 days] Machinery purchased from fund borrowed from HDFC bank @10% of 7,18,93,333 [₹ 6,74,00,000 +44,93,333 (₹ 6,74,00,000 x 10% x 8/12) being the interest till Machinery put to use]. [only 50% of the 20% is allowable since machinery is put to use for less than 180 days] 6,70,000 71,89,333 1,41,59,333 Gross Total Income 10,89,46,000 Less: Deduction under Chapter VI-A Deduction under section 80GGB in respect of donation to political party is not allowable under section 115BAA] - Total Income 10,89,46,000 Computation of Tax Liability of M/s NovaMotion Vehicles Ltd. for the A.Y. 2025-26 as per section 115BAA Amount in ₹ Tax on LTCG @12.5% u/s 112A on 4,93,000, being the LTCG in excess of 1,25,000 61,625 Tax @ 22% on 10,83,28,000 2,38,32,160 2,38,93,785 Add: Surcharge @ 10% 23,89,379 2,62,83,164 Add: Health and education cess @4% 10,51,327 Tax liability 2,73,34,491 Tax liability (rounded off) 2,73,34,490 Since tax liability as per the regular provisions of the Act is higher than the tax liability under the provisions of section 115BAA, it would be beneficial for NovaMotion Vehicles Ltd. to opt for section 115BAA. However, once option has been exercised, it cannot be subsequently withdrawn.