Income From Business Chapter- 09
Where animals which have been used for the purposes of business or profession (other than as
stock in trade) and have died or become permanently useless, the [a deduction shall be allowed
equal to difference between the actual cost of the animals and the amount, if any, realized in
respect of the carcasses of animals.4.3 Special provisions regarding normal depreciation, initial allowance and amortization of
intangible assets [U/s 20(2)]
Where the expenditure is incurred in acquiring a depreciable asset or an intangible with a useful life
of more than one year or is pre-commencement expenditure, the person must depreciate or amortize
the expenditure in accordance with sections 22, 23, 24 and 25.
4.4 Legal, financial and administrative expenditure on amalgamation [U/s 20(3)]
Expenditure incurred by an amalgamated company on legal and financial advisory services and other
administrative cost related to amalgamation shall be allowed as expenditure.
Example: Following information is related to Mr. Kaleem who carries on the business of Dairy farm.
Rs.
Sale of milk and other dairy products 740,000
Amount realized on sale of died cow 2,000
Cost of died cow 40,000
Other expenses 350,000
Note: 20% of other expenses are not related to the business.
Required: Compute taxable income of the taxpayer by taking tax depreciation at Rs.15,000.
Solution:
Mr. Kaleem
Computation of taxable income: Rs. Rs.
Income from business:
Sales 740,000
Less: expenses
Cost of died cow 40,000
Less sale value of died cow (2,000)
38,000
Other expenses (350,000 x 80%) 280,000
Depreciation 15,000
333,000
Profit before tax 407,000
Note: 20% of the other expenses were not for the purpose of business, therefore, these expenses
were not allowed.
Other deduction available in the Income tax Ordinance and Income Tax Rules- Entertainment expenditure [Rule 10]
Entertainment expenditure (including meals, refreshments and reasonable leisure facilities as per
norms and customs of the business in Pakistan) related directly to the business on satisfaction of
the following conditions:
expenditure incurred outside Pakistan on entertainment or where such expenditure related to
head office expenditure;
expenditure incurred in Pakistan on entertainment of foreign customers and suppliers,
customers and clients at business premises;
expenditure incurred on entertainment at a meeting of shareholders, agents, directors or
employees; or
expenditure incurred on entertainment at the opening of branches.- Agriculture produce used as raw materials [Rule 11]