Fundamentals of Taxation

Income from Business or Profession

Section 28 & 29
Business is defined by Sec. 2(14) as including “any trade, commerce or
manufacture or any adventure or concern in the nature of trade,
commerce or manufacture”. “Profession involves the idea of an occupation
requiring either purly intellectual skill, or if any manual skill, as in painting
and sculpture, or surgery, skill controlled by the intellectual skill of the
operator, as distinguished from an operation which is substantially the
production or sale, or arrangements for the production or sale of
commodities’
It is not necessary to consider whether a particular activity amounts to
business or profession or vocation, since for the purpose of assessment
under the Ordinance profits from these three sources are treated and taxed
alike under the same head. The section uses here only the words
business” or “profession” since “profession” includes vocation under the
Ordinance. Sec.2(49)
Fundamentals of Taxation
Income from Business or Profession Section 28 & 29
Definition Sec.28(1).

Sec.28(1).
The following income of an assessee shall be clasified and
computed under the head”Income from business or
profession” namely
(a). Profits and gains of any business or profession carried
on, or deemed to be carried on, by the assessee at ant
time during the income year;
(b). Income derived from any trade or professional association
or other association of like nature on account of specific
services performed for its members;
( c). Value of any benefit or perquisite, whether convertible
into money or not, arising from business or the exercise of
a profession;
Fundamentals of Taxation
Income from Business or Profession Section 28 & 29
Definition Sec.28(1).

(d). Receipt back of loss, bad debtor expenditure and

unpaid trading liability as referred to in Sec.19(15)
(e). Income from sale of depreciated asset as referred
to in sec19(16).
(f). Income of receipt of insurance, salvage or
compensation moneys as referred to in Sec.19(18).
(g). Income from sale of asset of capital nature as
referred to in Sec. 19(20).
(h). Income from transfer of export quota as rerred to
in Sec. 19(23)
Fundamentals of Taxation
Income from Business or Profession
Allowable Deductions Sec. 29
As per the provisions of the ordinance, tax is lavied on the
net profit earned out of any business or profession. The
expenditures , deductable for determining the amount of net
profit are not defined elaborately. A few heads of
expenditures have been specified under Sec. 29(1)(i) to Sec.
29(1)(xxxi). In practice many other can be claimed as admissible
expenditures under clause 29(1)(xxvii)which is generally known as
“omni-bus” clause.
Clause 29(1)(xxvii) “ Any expenditure, not being in the nature of
capital expenditure or personal expenses of the assessee laid out
or expended wholly and exclusively for the purpose of the busine

or profession of the assessee ”

Fundamentals of Taxation
Income from Business or Profession
Allowable Deductions Sec. 29
Clause (i) to (xxxvii) of Sec.29(1) of the Ordince expressly provide for certain
deductions. These provisions for deductions should not be liberally construed(New
Shorrock Sp. & mfg. co. ltd. V. C.I.T.[1956]30 I.T.R. 338. Before dealing with the
express allowances, it will be convenient to note certain general principles regarding
allowances and deductions permissible in computing business profit.

The Supreme Court of India in the case of C.I.t. v. Malayalan Plantations Ltd.[1964]53
I.T.R. 140 held that the expression “for the purpose of business “ is wider in scope
than the expression “for purpose of earning profits”. It was held that the expression
“for the purpose of business” may take in not only the day to day running of the
business , but also the rationalisation of its administration and mordinasation of its
machinery. It may include measures for the preservation of and for the protection of
Its assets. It was further held that the expenditure shall be for the purpose of the
business, that is to say, the expenditure incurred shall be for the carrying on of the
business and the assessee shall incur it in his capacity as a person carrying on the
business case