SH Ltd. is a listed company located in Delhi. It is engaged in multiple activities at different locations. Books of account are maintained by each…

Computation of total income and tax liability of SH Ltd. for A.Y. 2026-27 under the regular provisions of the Act Particulars Particulars ₹ Profits and gains of business or profession Net profit from Chemical manufacturing unit, Hissar 3,00,00,000 Add: Items debited but to be disallowed Royalty on which tax is not deducted [30% of 10lakhs, being payment of royalty without deduction of tax would be disallowed under section 40(a)(ia) while computing the business income of A.Y.2026-27. However, since the payee has admitted the income, paid tax and filed his return of income before due date, the same would be allowable in the P.Y. 2026-27 relevant to A.Y.2027-28, being the year in which tax was deducted and paid] 3,00,000 Employer's contribution to notified pension scheme [As per section 36(1)(iva), employer's contribution to the account of an employee under a Pension Scheme as referred to in section 80CCD would be allowed as deduction while computing business income only to the extent of 14% of salary and DA of the employee in the previous year. Therefore,11,20,000 representing the excess 1% (i.e.,1,68,00,000 x 1%/15%) debited to profit and loss account has to be added back while computing business income] 11,20,000 3,14,20,000 Net profit from Furniture manufacturing unit, Faridabad 90,00,000 Add: Items debited but to be disallowed or to be treated separately Trademark [Trademark is an intangible asset which is eligible for depreciation as per section 32. Since purchase cost of trademark has been debited to profit and loss account, the same has to be added back while computing business income] 25,00,000 Interest on loan taken from a non-resident [No disallowance under section 40(a)(i) is attracted in respect of interest, since tax has been deducted during the P.Y. 2025-26 and remitted on or before the due date of filing of return of income for A.Y. 2026-27] NIL Income-tax paid on non-monetary perquisites [As per section 40(a)(v), tax paid by employer on non-monetary perquisites is not allowable as deduction. Since the same has been debited to profit and loss account, the same has to be added back while computing business income] 7,00,000 1,22,00,000 Less: Depreciation on trademark u/s 32 [25lakhs x 25%] 6,25,000 1,15,75,000 Net profit from Fertilizer producing unit, Surat 2,20,00,000 Add: Items debited but to be disallowed or to be treated separately Depreciation on building of 25lakhs and on plant and machinery of 45lakhs [As per section 35AD, no deduction would be allowed under any other section in any previous year in respect of capital expenditure referred to in section 35AD. Hence, depreciation on building and plant and machinery is not allowable as deduction and the same has to be added back.] 70,00,000 2,90,00,000 Less: Deduction u/s 35AD [Since fertilizer unit commenced operation on or after 1.4.2011, it is a specified business eligible for 100% deduction u/s 35AD in respect of capital expenditure. However, deduction is not available on expenditure incurred on acquisition of land. Deduction u/s 35AD is 5.50 crores, being - 2.50 crore on building and 3crores on plant and machinery. Since it is more beneficial for the company to claim deduction u/s 35AD, it is assumed that the company has opted to claim such deduction.] 5,50,00,000 As per section 73A, loss from the specified business u/s 35AD can be set-off only against profits from another specified business. Since there is no other specified business, such loss has to be carried forward to A.Y. 2027-28. (2,60,00,000) Net profit from Warehousing facility for storage of edible oils at Rohtak 70,00,000 Less: Depreciation u/s 32 On building of 3crores@10% 30,00,000 On Plant & machinery of 5crores@15% 75,00,000 1,05,00,000 As per section 70(1), Business loss from one source is allowed to be set off from other source under the same head. (35,00,000) Net profit of SH Ltd. 3,94,95,000 Add: Interest on share application money deposited in bank [The interest on share application money deposited in a bank is not liable to be taxed, as the deposit was not for making additional income but to comply with the statutory requirement. The interest accrued on such deposit is merely incidental. The interest is eligible for set-off against share issue expenses. 1 ] Income from Other Sources Dividend from ABC Inc., a foreign company 56,00,000 Gross Total Income 4,50,95,000 Less: Deduction under section 80M [In respect of inter-corporate dividends to the extent of dividend distributed by it one month prior to the date for filing return of income u/s 139(1)] 40,00,000 Total Income 4,10,95,000 Computation of tax liability under the regular provisions of the Act Tax liability on 4,10,95,000@25% [Since the turnover of the company for the previous year 2023-24 does not exceed 400crores] 1,02,73,750 Add: Surcharge @ 7%, since the total income of the company > 1crore but ≤ 10 crores 7,19,163 1,09,92,913 Add: Health and education cess @ 4% 4,39,717 Tax liability 1,14,32,630 Computation of tax liability of SH Ltd. for the A.Y. 2026-27 under section 115JB Particulars ₹ Minimum Alternate Tax @15% on book profit of 5,20,00,000 78,00,000 Add: Surcharge@7%, since the book profit of the company > 1crore but ≤ 10 crores 5,46,000 83,46,000 Add: Health and Education cess@4% 3,33,840 Tax liability under section 115JB 86,79,840 Since the regular income-tax liability is more than the minimum alternate tax liability, SH Ltd. is liable to pay tax under normal provisions of the Act. Particulars ₹ Tax liability under the regular provisions of the Income-tax Act, 1961 1,14,32,630 Less: MAT Credit of A.Y. 2018-19 20,00,000 94,32,630 Note - SH Ltd. is eligible for concessional rate under section 115BAA, @25.168% i.e., tax@22% plus surcharge@10% plus HEC@4% subject to tax at the rates mentioned in the said sections in Chapter XII. In case SH Ltd. opted for concessional rate of tax u/s 115BAA, it would not be eligible for deduction u/s 35AD in respect of fertilizer producing unit, however, it can claim depreciation u/s 32 on building and plant and machinery. In that case, its total income u/s 115BAA would be - Particulars ₹ Profit from Chemical manufacturing unit, Hissar 3,14,20,000 Profit from Furniture manufacturing unit, Faridabad 1,15,75,000 Profit from Fertilizer producing unit, Surat 2,20,00,000 Profit from Warehousing facility for storage of edible oils at Rohtak (35,00,000) 6,14,95,000 Dividend from ABC Inc., a foreign company 56,00,000 Gross Total Income 6,70,95,000 Less: Deduction under section 80M [In respect of inter-corporate dividends to the extent of dividend distributed by it one month prior to the date for filing return of income u/s 139(1)] 40,00,000 Total Income 6,30,95,000 Tax liability under section 115BAA (22% + surcharge 10% + HEC 4%) = 25.168% on 6,30,95,000 Tax liability 1,58,79,750 Suggestion to SH Ltd. SH Ltd. should not opt for section 115BAA for assessment year 2026-27, since the tax liability under section 115BAA is higher under the regular provisions of the Act and section 115JB.