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Report No. 12

40. Amounts not deductible.-

Notwithstanding anything to the contrary in sections 30 to 39, [10(2)], the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business, profession or vocation"-

(a) in the case of any assesses-

(i) any interest chargeable under this Act which is payable outside India (not being interest on a loan issued for public subscription before the 1st day of April, 1938), on which tax has not been paid or deducted under section 202 or 204 [18] and in respect of which there is no person in India who may be treated as an agent under section 173 [43];

[Section 10(2)(iii), proviso, part]

(ii) any sum paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or otherwise on the basis of, any such profits or gains;

[Section 10(4), first para.]

(iii) any payment which is chargeable under the head "Salaries", if it is payable without India and if the tax has not been paid thereon on assessment nor deducted therefrom under section 201 [section 18] nor recovered under section 209 [ section 8 (7)];

[Section 10(4)(a)]

(iv) any payment to a provident or other fund established for the benefit of employees of the assessee, unless the assessee has made effective arrangements to secure that tax shall be deducted at source from any payments made from the fund which are chargeable to tax under the head "Salaries";

[Section 10(4)(c)]

(b) in the case of any firm, any payment of interest, salary, commission or remuneration, made by the firm to any partner of the firm;

[Section 10(4)(b)]

(c) in the case of any company-

(i) any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or a person who has a substantial interest in the company within the meaning of section 2 clause (20), Explanation [section 2(6C)(iii)];

[Section 10(4A)(a)]

(ii) any expenditure or allowance in respect of any assets of the company used by any person referred to in sub-clause (i) either wholly or partly for his own purposes or benefit, if in the opinion of the Income-tax Officer any such expenditure or allowance as is mentioned in sub-clauses (i) and (ii) is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom.

[Section 10(4A)(b)]

Explanation.-The provisions of this clause [Section 10(4A)] shall apply notwithstanding that any amount disallowed under this clause is included in the total income of any person referred to in sub-clause (i).

[Section 10(4A) Expl.]

(d) in the case of a banking company, the amounts which have been allowed as a deduction in computing its income chargeable to income-tax under the head "Interest on securities" under the provisions of section 20(1) [8 Expin. (1) (b)]

[Section 8 Expl. last lines of clauses (a) and (b)]

Income-Tax Act, 1922 Back

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