Report No. 12

41. Profits chargeable to tax.-

(1) Amounts received in respect of loss etc.-

Where for the purposes of computing income under the head "Profits and gains of business, profession or vocation" an allowance or deduction has been made in the assessment for any year in respect of any loss, expenditure or trading liability incurred by the assessee and, subsequently during any previous year, the assessee has received, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or has obtained some benefit in respect of such trading liability by way of remission or cessation thereof, the amount received by him or the value of the benefit accruing to him shall be chargeable to income-tax as the income of the business, profession or vocation of that previous year.

[Section 10(2A)]

(2) Profits on sale of depreciable assets.- Where any building, machinery or plant: which is owned by the assessee and which was or has been used for the purposes of business, profession or vocation, is sold, discarded, demolished or destroyed in the previous year, and the moneys received in respect of such building, machinery or plant, as the case may be, together, with the amount of scrap value, if any, exceed the written down value, so much of the excess as does not exceed the difference between the original cost and the written down value shall be chargeable to income-tax as income of the business, profession or vocation of the previous year in which the moneys are received......

[Section 10(2)(vii), 2nd proviso, part, and 4th proviso, part simplified]

Explanation 1.-For the purposes of this sub-section, the expression "moneys received" in respect of any building, machinery or plant has the same meaning as in section 32(1) (iv) [section re: depreciation clause for loss on sale]

[Section 10(2)(vii), 4th proviso part]

Explanation 2.-The provisions of this sub-section shall apply notwithstanding that the business, profession, or vocation for the purposes of which the building, machinery or plant was being used is no longer in existence at the time when the building, machinery or plant is sold, discarded, demolished or destroyed.

[Section 10(2)(vii), 2nd proviso words "whether thereof ]

Explanation 3.-For the purposes of this sub-section, the original cost of a building, the written down value of which is determined in accordance with section 42 clause (7)(b), proviso [Section 10(5)(b), 1st proviso] shall be deemed to be the written down value so determined as at the date of its being brought into use for the purposes of the business, profession or vocation.

[Section 10(2)(vii) 5th proviso]

(3) Profits on sale of scientific research assets.-Where an asset representing expenditure of a capital nature on scientific research within the meaning of section 35(1) (iv) read with section 42 clause (5) [Section 10 (2) (xiv)1 is sold whether during the continuance of the business or after the cessation thereof without having been used for other purposes and the proceeds of the sale to together with the total amount of the deductions made under section 35(2)(i) [section 10(2) (xiv) first para., latter part] exceed the amount of the capital expenditure, the excess or the amount of the deductions so made, whichever is the less, shall be chargeable to income-tax as income of the business, profession or vocation of the previous year in which the sale took place.

(4) Where a deduction has been allowed in respect of a bad debt or part of debt under the provisions of section 36 clause (6) [section 10(2) (xi) first para.] then if the amount ultimately recovered on any such debt or part is greater than the difference between the debt or part of debt and the amount so allowed, the excess shall be chargeable to income-tax as income of the business, profession or vocation of the previous year in which it is recovered.

[Section 10(2)(xi), proviso earlier half]