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Report No. 12

Notes to clause 28

D. Profits and gains of business etc.-Section 10 of the existing Act, relating to profits and gains of business, profession or vocation is cumbersome in the form and illogical in arrangement. It is proposed to split up the section, so as to deal separately with the charging provisions, deductions, amounts not deductible, and provisions in the nature of interpretation.

The opening clause1 deals with the charging provisions and enumerates the various categories of income to be classified as profits and gains of business. In order to make the enumeration exhaustive, the provisions at present contained in section 10(5A) for treating payments received for termination of managing agency or other agency etc, as profits and gains of business, have been transferred to this clause as sub-clause (ii). For the same reason, the provision in existing section 10(6) regarding income of a trade association rendering services to its members has been transferred to this clause as sub-clause (iii).

1. Clause 28.

Draft Explanation 1 is intended to clarify the position regarding classification of profits of managing agency, and does not mark any departure from the present practice. Draft Explanation 2 incorporates the Explanation 1 to section 24(1), as it should be appropriately placed here.

Notes to clause 29

This clause gives the general scheme of arrangement of the sections in the draft dealing with profits and gains of business etc. The object is to give a bird's-eye view of the main provisions and to enable the reader to know at a glance how they are arranged. The inspiration for this kind of arrangement is derived from the U.S. Internal Revenue Code.

Notes to clause 30

This clause deals with deduction for rents, repairs and insurance charges for buildings. The expression "building used for the business" has been used throughout the whole clause for uniformity [as in the existing section 10(2)(iv) and (ix), in contrast to "building in which business is carried on" used in section 10(2)(i) of the existing Act].

Draft Clause (a) (i)- Collects together the deductions allowable for premises used for the business, where the assessee is a tenant.

Cases where, only a part of the premises is so used, have been dealt with separately.1

1. See draft clause 38(1).

Draft clause 30(a)(ii)-Deals with the deduction for repairs to a building, where the assessee is not a tenant.

Draft clause 30(b)- Corresponds to section 10(2)(ix), earlier part. Cases where only a part of the premises is used for the business, are dealt with separately.1

1. See draft clause 38(2).

Draft clause 30(c)- needs no comments.

Notes to clause 31

This clause collects together the deductions for repairs, etc., of machinery, plant, etc. and does not need any comments, as the changes made are verbal and consequential on the scheme adopted in the draft.

Income-Tax Act, 1922 Back

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