Exemptions on Business income, Treatment of Speculation Business

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Taxation Management FIN 623

MODULE 8

LESSON 8.32

INCOME FROM BUSINESS & ITS COMPUTATION

Business Defined Section 2(9)

"Business includes any trade, commerce, manufacture, profession, vocation but doesn't include

employment"

Following incomes (except exempt income) shall be charged to tax under the head `Income from Business'.

a) Profits & Gains from any business in a tax year.

b) Income derived from any trade, profession, sale of goods or provision of any services.

c) Income from hire or lease of tangible movable property.

d) FMV of Perquisites derived by a person by virtue of business relationships.

e) Management Fee derived by a management company.

Income from Business also includes:

· Any profit on debt derived by a person. (it is only applicable to such person, whose is business is to

derive such income. e.g.; a banking company)

· Any amount received by schedule bank from mutual fund, as share of profit.

· Profit earned on debts in course business shall be chargeable to `income from business'.

· Income on leasing by lessor, being banks, leasing companies etc.

Income derived from any trade, profession, sale of goods or provision of any services.

· Income from hire or lease of tangible movable property

· FMV of Perquisites derived by a person by virtue of business relationships.

· Management Fee derived by a management company

Exemptions on Business income Under Part 1 of second schedule

Clause

Exempt Income

(91)

Income of a Text-Book Board.

(92)

University or Educational Institution established not for profit purpose.

(93)

Recognized Computer Training Institution.

(93A)

Recognized Vocational Institute.

(98)

Income of Recognized Sports Board.

(100)

Income of Modaraba Companies.

Speculation Business shall be charged under the head income from business (Separate Treatment)

Treatment of Speculation Business (Sec 19):

· To be treated as distinct and separate from other business carried on by the person.

· Expenditures/deductions incurred on account of speculation business shall be apportioned in light

of section 67.

· Profit and gains arising out of speculation business shall be included in the person's income

chargeable under the head "Income from Business".

Speculation Business Sec.19:

· Speculation means any business in which a contract for the purchase and sale of any commodity

(including [stocks] and shares) is periodically or ultimately settled otherwise than by the actual

delivery or transfer of the commodity, but does not include a business in which:

A contract in respect of raw materials merchandise is entered into by a person in the course of

a manufacturing or mercantile business to guard against loss through future price fluctuations

for the purpose of fulfilling the person's other contracts for the actual delivery of the goods to

be manufactured or merchandise to be sold;

A contract in respect of stocks and shares is entered into by a dealer or investor therein to

guard against loss in the person's holding of stocks and shares through price fluctuations; or

A contract is entered into by a member of a forward market or stock exchange in the course of

any transaction in the nature of jobbing [arbitrage] to guard against any loss which may arise in

the ordinary course of the person's business as such members.

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