Finance Act, 2023Business Income Income From Business or Profession VisaVis Finance Act, 2023

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The Tax Publishers Finance Act, 2023--Business Income Income From Business or Profession Vis-a-Vis Finance Act, 2023 CA. Nisha Bhandari The present write up analyses the amendments made by the Finance Act, 2023 in relation to provisions dealing with computation of profits and gains from business or profession. 1. Clarification as to chargeability as business income where benefit or perquisites involves cash section 28 provides for income that shall be chargeable to income-tax under the head 'Profits and gains of business or profession'. Clause (iv) of this section brings to chargeability the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. This provision was inserted through the Finance Act, 1964 and the Circular No. 20D, dated 7^th July 1964 issued to explain the provisions of this Act stated clearly that the benefit could be in cash or in kind. Therefore, the intention of the legislation while introducing this provision was also to include benefit or perquisite whether in cash or in kind. However, Courts have interpreted that if the benefit or perquisite are in cash, it is not covered within the scope of this clause of Section 28. In CIT v. Alchemic (P) Ltd. (1981) 130 ITR 168 (Guj), it was observed that what is received either by way of benefit or perquisite is money, there is no question of considering the value of such monetary benefit or perquisite under clause (iv) and including the value of such benefit or perquisite under the head 'Profits and gains of business or profession'. It is only if the benefit or the perquisite is not in cash or money but is non-monetary benefit or non-monetary perquisite that the question of including the value of such benefit or perquisite would ever arise. In ITO v. Bhavnagar Vegetable Investments (1983) 3 ITD 330 (Ahd-Trib),it was held that where no business is earned on by the assessee in the relevant accounting year or the transaction is in cash, Section 28(iv) cannot be applied. [See also, Padamshi Meghji v. ITO (1994) 205 ITR 69 (Bom-Trib)(TM). To align the provision with the intention of legislature, it is provided by the Finance Act, 2023 to amend clause (iv) of Section 28 w.e.f. assessment year 2024-25 to clarify that provisions of this clause also applies to cases where benefit or perquisite provided is in cash or in kind or partly in cash and partly in kind. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Finance Act, 2023--Business Income

Income From Business or Profession Vis-a-Vis Finance Act, 2023

CA. Nisha Bhandari

The present write up analyses the amendments made by the Finance Act, 2023 in relation to provisions dealing with computation of profits and gains from business or profession.

1. Clarification as to chargeability as business income where benefit or perquisites involves cash

section 28 provides for income that shall be chargeable to income-tax under the head 'Profits and gains of business or profession'. Clause (iv) of this section brings to chargeability the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. This provision was inserted through the Finance Act, 1964 and the Circular No. 20D, dated 7^th July 1964 issued to explain the provisions of this Act stated clearly that the benefit could be in cash or in kind. Therefore, the intention of the legislation while introducing this provision was also to include benefit or perquisite whether in cash or in kind. However, Courts have interpreted that if the benefit or perquisite are in cash, it is not covered within the scope of this clause of Section 28.

In CIT v. Alchemic (P) Ltd. (1981) 130 ITR 168 (Guj), it was observed that what is received either by way of benefit or perquisite is money, there is no question of considering the value of such monetary benefit or perquisite under clause (iv) and including the value of such benefit or perquisite under the head 'Profits and gains of business or profession'. It is only if the benefit or the perquisite is not in cash or money but is non-monetary benefit or non-monetary perquisite that the question of including the value of such benefit or perquisite would ever arise.

In ITO v. Bhavnagar Vegetable Investments (1983) 3 ITD 330 (Ahd-Trib),it was held that where no business is earned on by the assessee in the relevant accounting year or the transaction is in cash, Section 28(iv) cannot be applied. [See also, Padamshi Meghji v. ITO (1994) 205 ITR 69 (Bom-Trib)(TM).

To align the provision with the intention of legislature, it is provided by the Finance Act, 2023 to amend clause (iv) of Section 28 w.e.f. assessment year 2024-25 to clarify that provisions of this clause also applies to cases where benefit or perquisite provided is in cash or in kind or partly in cash and partly in kind.