The net profit of Mahi Ltd. as per its statement of profit and loss for the year ended 31.03.2026 amounted to ₹ 27,22,000 after debiting/ crediting…

Computation of total income of Mahi Ltd. for A.Y.2026-27 Particulars ₹ ₹ Profits & Gains of Business of Profession Net Profit as per Statement of Profit & Loss 27,22,000 Add: Items debited but to be considered separately or to be disallowed Interest on money borrowed for construction of factory building [As per section 36(1)(iii), interest on borrowed capital till the asset is put to use has to be capitalized. Hence, interest on moneys borrowed is not allowable under section 36(1)(iii). Since it is already debited to statement of profit and loss, the same has to be reduced.] 2,00,000 Commission paid in February, 2026 [Commission paid in February, 2026 after deduction of tax is allowable as deduction during the P.Y. 2025-26 since TDS has been deposited before the due date of filing return of income. Since commission is already debited to statement of profit and loss, no adjustment is required.] Nil Commission paid in March, 2026 [30% of commission paid in March 2026 on which TDS was deducted and paid in subsequent year would be disallowed during the P.Y. 2025-26 and would be allowed as deduction in the year in which such tax has been paid. Hence, 30% of commission debited to statement of profit and loss would be added back.] 37,500 Travelling expenses on foreign tour in connection with new line of business [Travelling expenses incurred on foreign tour of a director for initiating a new line of business is a capital expenditure. The same is, therefore, not deductible under section 37(1). Since it is already debited to statement of profit and loss, the same has to be reduced.] 90,000 Interest on term loan converted into new term loan [Under section 43B, interest on loan due to any scheduled bank, etc. is allowed as deduction, if such interest is actually paid irrespective of the method of accounting followed by the assessee. Conversion of arrear interest into a fresh loan by a bank cannot be considered as actual payment of interest. However, the amount of funded interest (i.e., converted loan) actually paid is allowable as deduction. Hence, out of 3 lakhs, only 50,000, being the funded interest was actually paid which is allowable as deduction while computing business income of P.Y.2025-26. The balance of ₹2,50,000 has to be added back.] 2,50,000 Excess depreciation provided on EPABX & Mobile phones not allowable as deduction [EPABX and mobile phones are not computers and therefore, are not entitled to depreciation @ 40%. It was so held by the Kerala High Court in Federal Bank Ltd. v. ACIT (2011) 332 ITR 319. Therefore, EPABX and mobile phones would be entitled to depreciation of ₹ 6,75,000, calculated by applying the rate of 15%, being the general rate applicable to plant and machinery, on the cost of ₹ 45,00,000 (₹ 18,00,000 × 100/40). The excess depreciation of 11,25,000 (being 18,00,000 – ₹ 6,75,000), debited to statement of profit and loss, has to be added back.] 11,25,000 Contribution to South Ltd. (wholly owned subsidiary company) [Contribution to a wholly owned subsidiary company for construction of a school for the benefit of its employees is allowable under section 37(1).] - Provision for gratuity ₹6,00,000 Less: Gratuity paid ₹1,50,000 [Under section 40A(7), no deduction is allowed in respect of any provision made for the payment of gratuity to the employees on retirement or termination of employment for any reason. However, gratuity actually paid is admissible as deduction. Therefore, provision for gratuity of ₹ 6,00,000 is to be disallowed. Actual gratuity paid ₹ 1,50,000 debited to provision for gratuity account is allowable. Hence, only the net sum of ₹ 4,50,000 has to be added back.] 4,50,000 Depreciation on commercial vehicle [Depreciation on commercial vehicle has been calculated @15% and, consequently, 1,20,000 has been debited to statement of profit and loss. Since it was acquired in March 2026 only, 50% of normal depreciation is allowable. The excess depreciation of ₹60,000 is, hence, disallowed.] 60,000 22,12,500 Less: Items credited but to be considered separately and those not charged but to be allowed 49,34,500 Long term capital gain on sale of equity shares [Taxable under the head “Capital gains”] 3,00,000 Bonus paid on 15.11.2025 in respect of previous year 2024-25 disallowed last year but allowable in P.Y. 2025-26 [Provision for bonus for the previous year 2024-25 would have been disallowed under section 43B for non-payment by due date for filing of return of income for assessment year 2025-26. Payment of bonus made after the said date is allowed in the year of actual payment. However, such deduction allowable in the year of payment is subject to the provisions of section 40A(3). Hence, the sum of 34,000, being bonus paid by bearer cheque shall not be allowed as deduction in the year of payment.] 64,000 Dividend from P Ltd. [Dividend is taxable under the head "Income from Other Sources"] 1,00,000 4,64,000 44,70,500 II Capital Gains Long term capital gain on sale of equity shares [Taxable @12.5% on sum exceeding ₹1,25,000] Sale consideration [10,000 x ₹ 130] 13,00,000 Less: Cost of acquisition Higher of Actual cost of 10 lakhs [10,000 x 100] Lower of fair market value as on 31.1.2018 of 11 lakhs or sale consideration of 13 lakhs 11,00,000 2,00,000 III Income from Other Sources Dividend from P Ltd. [Dividend is taxable under the head "Income from Other Sources"] 1,00,000 Total Income 47,70,500