Section 41 DEEMED PROFITS. CHARGEABLE TO TAX
The receipts under the following sections
shall be taxable
u/h PGBP whether
or not the
business is in existence in the
year of recovery.
Section 41(1) - Recovery Against Any
Recovery against any deduction:
This section applies if both the
conditions listed below
Any expenditure or loss
or trading liability has been allowed
as a deduction in any previous year;
is a recovery of such
expenditure or loss
or trading liability either in cash or in any other manner (ie by way of remission of liability).
of recovery is chargeable to tax in the year
of receipt whether
the business is in existence or not in the
Example: ABC Ltd has paid sales
tax of Rs 5,00,000 under
protest during PY 2014-15. During
PY 2017-18, the matter was finally decided by the Supreme Court
of India and the case was decided
in favour of ABC Ltd and the
amount was refunded to ABC Ltd.
The amount of Rs 5,00,000
shall be treated
as an income of ABC
Ltd for PY 2017-18.
Example: XYZ Ltd has recognized an expenditure of Rs 5,000
during PY 2016-17
towards purchases of raw materials on credit. During PY 2017-18, the creditor allows
a rebate of Rs 500
at the time
of payment and
only Rs 4,500
is actually paid to the creditor.
The amount of Rs 500 shall be treated as income of XYZ Ltd
for PY 2017-18.
Section 41(2) -
This provision applies only to companies which
are engaged in generation or generation and
distribution of power which have opted
to charge depreciation on SLM basis.
The difference between the WM/ of the
asset and its sale price
is taxable u PGBP as balancing charge
if the asset is subject to depreciation on SLM basis.
of sale price
over the actual
cost of the asset is not treated
as balancing charge.
Such excess amount
is subject to capital gains.
Scientific research asset sold without using for the
purpose of any other business:
any asset which has been used for scientific research
is sold without
using for the purposes of any other business, least of the following shall be taxable
as PGBP income:
Ø Sale price of asset; or;.
Ø Deduction allowed u/s 35
gains shall arise
if the sale price exceeds
the cost of the asset.
Capital gains shall
be long term if the asset
was sold after a period of 3 years;
otherwise capital gains
shall be short-term.
41(4) - Recovery
of Bad Debts
of bad debts:
Where any debt has
been allowed as bad debts
u/s 36(1)(vii) and
subsequently the assessee recovers any amount
in respect of such bad debt, the
amount of recovery
shall be taxable
in the year of recovery.
ABC Ltd has sold
some goods for Rs 1 lakh to Mr X on credit.
The debt has become bad during PY 2014-15 for
which a deduction was allowed during
during PY 2017-18, there is a recovery of Rs 5,000 from Mr X's estate.
In this case,
Rs 5,000 shall
be treated as business income
of ABC Ltd for PY 2017-18
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