Income From Business And Profession In India

For charging the income under the head ''Profits and Gains of business,'' the following conditions should be satisfied:

• There should be a business or profession.
• The business or profession should be carried on by the assessee.
• The business or profession should have been carried on by the assessee at any time during the previous year.

Income which is chargeable to income tax under the head Profits and gains of business or profession.
The following income would be chargeable under the head "Profits and gains of business or profession":

• The profits and gains of any business or profession, which was carried on by the assessee at any time during the previous year;
• Any compensation or other payment, due or received by the following:-
  • Any person, by whatever name called, managing the whole or substantially the whole of the affairs of an Indian company, at or in connection with the termination of his management or the modification of the terms and conditions relating thereto.
  • Any person, by whatever name called, managing the whole or substantially the whole of the affairs in India of any other company, at or in connection with the termination of his office or the modification of the terms and conditions relating thereto.
  • Any person, by whatever name called, holding an agency in India for any part of the activities relating to the business of any other person, at or in connection with the termination of any agency or the modification of the terms and conditions relating thereto.
  • Any person, for or in connection with the vesting in the Government, or in any corporation owned or controlled by the Government, under any law for the time being in force, of the management of any property or business.
• Income, derived by a trade, professional or similar association from specific services performed for its members.
• Profits on sale of a license granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947.
• Cash assistance (by whatever name called), received or receivable by any person against exports under any scheme of the Government of India.
• Any duty of customs or excise repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971.
• The value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession.
• Any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm.

Interest Income is either assessed as ''Business Income'' or as ''Income from other sources'' depending upon the activities carried on by the assessee. If the investment yielding interest were part of the business of the assessee, the same would be assessable as ''business income'' but where the earning of the interest income is incidental to and not the direct outcome of the business carried on by the assessee, the same is assessable as ''Income from other sources''. Business implies some real, substantial and systematic or organized course of activity with a profit motive. Interest generated from such an activity is considered Business Income. Otherwise, it would be interest from other sources.

Where an owner lets out premises along with other assets or provides amenities, the income in respect of premises would be taxable as income from house property and, the balance would be taxed as income from other sources. The contract, letting out the premises along with other assets and providing amenities, is severable.

If an assessee is employed in a company where he is called Managing Agent but is in fact, the Chief Manager of the company, under what head would the remuneration that he is paid be charged
Even though he may be called a Managing Agent, the remuneration earned by him will be charged under the head of Salaries and not as Business Income. The fact that he is actually the Chief Manager of the company will make the remuneration earned by him chargeable to tax under the head Salaries. It is the true nature of the contract that will determine the relationship between the assessee and the company. Once it is established that the managing director functions subject to the control and supervision of the Board of Directors, the inevitable corollary is that an employer -- employee relationship exists and that being so, his remuneration is assessable under the head "salary".

Deductions which are allowed in computing income from profits and gains of business or profession.

Deductions which are allowable in respect of rent, rates, taxes, repairs and insurance for premises, which are used for the purpose of business or profession.

Deductions which will be allowed in respect of repairs and insurance of machinery, plant and furniture