M/s Strong Private Limited is a domestic company engaged in the business of manufacturing steel. The statement of Profit and Loss for the previous…

Computation of total income of M/s Strong Private Limited for the A.Y. 2026-27 under regular provisions of the Act Particulars Amount in ₹ I Profits and gains of business and profession Net profit as per Statement of profit and loss 85,20,000 Add: Items debited but to be considered separately or to be disallowed (a) Depreciation as per books 10,15,000 (b) Employee's contribution to EPF [Since employee's contribution to EPF has not been deposited on or before the due date under the PF Act, the same is not allowable as deduction under section 36(1)(va). Since the same has been debited to statement of profit and loss, it has to be added 8,00,000 back while computing business income. (b) Employer's contribution to EPF [As per section 43B, employer's contribution to EPF is allowable as deduction since the same has been deposited on or before the due date of filing return of income under section 139(1). Since the same has been debited to statement of profit and loss, no further adjustment is required.] (c) Contribution to National Laboratory [Contribution to National laboratory for scientific research qualifies for deduction under section 35(2AA). Since the same has been debited to the statement of profit and loss, no adjustment is required.] (d) Advertisement expenses [The amount of 55,000 paid for advertisement in the souvenir issued by a political party attracts disallowance under section 37(2B). Since the expenditure has been debited to statement of profit and loss, the same has to be added back while computing business income. However, such expenditure is eligible for deduction u/s 80GGB] 55,000 (e) Provision for gratuity [Provision of 5lakhs for gratuity based on actuarial valuation is not allowable as deduction as per section 40A(7). However, actual gratuity of 3,80,000 1,20,000 paid is allowable as deduction. Hence, the difference is added back] (f) Overvaluation of Opening and Closing stock [The difference between - 10,35,000, being overvaluation in opening inventory -8,85,000 being cost included in closing inventory is added back] 1,50,000 (i) Loss of cash in transit [Since the loss is due to theft which took place when cash was withdrawn from bank and taken to administrative office, it is incidental to business and thus, allowable as revenue expenditure. Since the same has already been charged as revenue expenditure, no further adjustment is required] - Al. (iii) Expenditure pertaining to last year paid in cash [Since the expenditure was allowed on due basis in last year and the payment exceeding - 10,000 is made in cash in a day, the - 85,000 will be deemed as income under section 40A(3A) in P.Y. 2025-26.] 85,000 Al. (iv) Waiver of liability [Amount waived by the supplier of raw materials is a deemed income under section 41(1), as the expenditure was allowed as deduction in the last year and there is a benefit by way of remission or cessation of a trading liability] 4,00,000 28,85,000 1,14,05,000 Less: Items credited but chargeable to under another head/expenses tax allowed but not debited (g) Dividend received from foreign company [Dividend received from foreign company is taxable under the head "Income from other sources". Since the said dividend has been credited to the statement of profit and loss, the same has to be deducted while computing business income.] 3,00,000 (h) Profit on sale of units of the equity oriented fund [Profit on sale of units of the equity oriented fund 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.] 7,00,000 10,00,000 1,04,05,000 Less: Depreciation as per Income-tax Rules, 1962 - Depreciation given in the question 8,50,000 - Depreciation on power generation plant Normal Depreciation [₹ 15,00,000 x 15%] (₹ 25,00,000 -3,00,000 -7,00,000 = 15,00,000) 2,25,000 - Additional Deprecation [₹ 15,00,000 × 20%] [As per second proviso to section 43(1), any amount more than - 10,000 3,00,000 13,75,000 paid in a single day to a single person otherwise by account payee cheque or account payee bank draft or electronic clearing system then it should not be part of actual cost, so advance paid to supplier is not part of actual cost. As per Explanation 10 of section 43(1), Government grant related to acquisition of asset shall be reduced while calculating actual cost] 90,30,000 II Capital Gain Long term capital gain on sale of units of the equity oriented fund [Since units were held for more than 12 months] Full value of consideration 11,00,000 Less: Cost of acquisition 4,00,000 7,00,000 III Income from Other Source Dividend received from foreign company 3,00,000 Gross Total Income 1,00,30,000 Less: Deduction under Chapter VI-A Deduction u/s 80GGB [Contribution to Political party] 55,000 Deduction u/s 80M in respect of inter corporate dividends [Since M/s Strong Private Limited distributed dividend after the due date, being the date one month prior to the date for furnishing return of income specified u/s 139(1), no deduction will be allowed during the P.Y. 2025-26 Total Income 99,75,000 Computation of tax liability as per normal provisions of the Act Particulars Amount (₹) Tax on long-term capital gains in excess of 1.25 lakhs @12.5% u/s 112A [₹ 5,75,000 x 12.5%] 71,875 Tax on business income @25% of 92,75,000 [since the turnover for the previous year 2023-24 does not exceeds 400crores] 23,18,750 23,90,625 Add: Health and education cess @4% 95,625 Tax liability 24,86,250 Computation of total Income of M/s Strong Private Limited chargeable to tax for the A.Y. 2026-27 under concessional regime u/s 115BAA Particulars Amount (₹) Total Income under regular provisions of the Act 99,75,000 Add: Additional depreciation on plant [Not allowable u/s 115BAA] 3,00,000 Add: Contribution to National Laboratory [Deduction u/s 35(2AA) is not allowable u/s 115BAA 1,50,000 Add: Deduction under Chapter VI-A Under section 80GGB [Not allowable under section 115BAA] 55,000 Total Income as per section 115BAA 1,04,80,000 Computation of tax liability Tax on long-term capital gains in excess of 1.25 lakh @12.5% u/s 112A [₹ 5,75,000 x 12.5%] 71,875 Tax on other income of 97,80,000 @ 22% 21,51,600 22,23,475 Add: Surcharge @ 10% 2,22,348 24,45,823 Add: Health and education cess @4% 97,833 Tax liability 25,43,656 Tax liability (Rounded off) 25,43,660 Since the tax liability of M/s Strong Private Limited computed under regular provisions of the Act is lower than the tax liability computed under section 115BAA, it is beneficial for M/s Strong Private Limited not to opt for the special provisions under section 115BAA for A.Y.2026-27.