Question 3 (a) (A) What is the meaning of Micro arid Small Enterprise u/s 43B of Income Tax Act, 1961? (B) Mr. Prem has following assets as on 01.0...

Question

Question 3 (a) (A) What is the meaning of Micro arid Small Enterprise u/s 43B of Income Tax Act, 1961? (B) Mr. Prem has following assets as on 01.04.2023 : (i) A machinery costing 4 lakh, which was used for scientific research related to business and deduction u/s 35 was allowed 40,000. (ii) A laptop received as a gift from his friend costing 60,000. It was purchased on 01.04.2022 by his friend. (iii) A temporary wooden structure costing 70,000 erected in Dec. 23 which was used for business purposes. Compute the depreciation allowed on these assets for F.Y. 2023-24. (b) Mr. X, age 83 years, a resident individual, gives the following particulars of his receipts for A.Y. 2024-25 : 1. Installment received from the bank under reverse mortgage arrangement 1,50,000 2. Interest on bank term deposits 2,00,000 3. Interest on bank saving a/c 45,000 4. Pension from Central Govt. 4,50,000 5. STCG on sale of dining table and chairs 1,00,000 6. Income from dairy farming on his rural agricultural land 50,000 Compute his total income and Income Tax thereon for A.Y. 2024-25 considering that assessee has opted out of Default tax regime.

Accepted Answer

Option descriptive: Correct Option. Solution: Part (a) (A) Meaning of Micro and Small Enterprise under Section 43B(h) Under Section 43B(h) of the Income-tax Act, 1961, any sum payable by an assessee to a Micro or Small Enterprise beyond the time limit specified in Section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, is allowed as a deduction only in the previous year in which such sum is actually paid. - Micro Enterprise: An enterprise where the investment in plant and machinery or equipment does not exceed ₹1 text{ Crore} and annual turnover does not exceed ₹5 text{ Crores}. - Small Enterprise: An enterprise where the investment in plant and machinery or equipment does not exceed ₹10 text{ Crores} and annual turnover does not exceed ₹50 text{ Crores}. - Note: Medium enterprises are not covered under Section 43B(h). (B) Computation of Depreciation Allowed to Mr. Prem for P.Y. 2023-24 | Asset Class | Computation | Depreciation (₹) | | :--- | :--- | :--- | | Machinery used for scientific research | WDV is ₹3,60,000 (₹4,00,000 cost less ₹40,000 Section 35 deduction allowed). Depreciation @ 15% on ₹3,60,000 | 54,000 | | Laptop received as a gift | Actual cost to the previous owner was ₹60,000 on 01.04.2022. The WDV in hands of the assessee is ₹60,000 - (40% x ₹60,000) = ₹36,000. Depreciation @ 40% on ₹36,000 | 14,400 | | Temporary wooden structure | Cost is ₹70,000. Erected in Dec 23 (used for less than 180 days in P.Y.). Depreciation @ 40% restricted to 50% (i.e. 20%) on ₹70,000 | 14,000 | | Total Depreciation Allowed | | 82,400 | Part (b) Computation of Total Income and Tax Liability of Mr. X (aged 83 years) for A.Y. 2024-25 (Assessee has opted out of Default Tax Regime) | Particulars | Amount (₹) | Amount (₹) | | :--- | :--- | :--- | | Income from Salary | | | | - Pension from Central Government | 4,50,000 | | | - Less: Standard Deduction under Section 16(ia) | (50,000) | 4,00,000 | | Capital Gains | | | | - STCG on sale of dining table and chairs (exempt personal effects) | | 0 | | Income from Other Sources / Business | | | | - Installment received under reverse mortgage (exempt u/s 10(43)) | 0 | | | - Interest on bank term deposits | 2,00,000 | | | - Interest on bank savings account | 45,000 | | | - Income from dairy farming on rural agricultural land (taxable business income) | 50,000 | 2,95,000 | | Gross Total Income | | 6,95,000 | | Less: Deduction under Section 80TTB (restricted to maximum limit) | | (50,000) | | Total Taxable Income | | 6,45,000 | Tax Computation: - Tax on first ₹5,00,000 = Nil (for Resident Super Senior Citizen aged 80+) - Tax on ₹5,00,001 to ₹6,45,000 (₹1,45,000) @ 20% = ₹29,000 - Add: Health and Education Cess @ 4% = ₹1,160 - Total Tax Liability = ₹30,160

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Depreciation

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