Welcome to a new episode of Dharamvayee
As you know, in the last lecture we discussed that the
partnership firms
What are you looking at? Do I have a mask on?
The partnership firms get deductions for certain expenses
and to what limit
Interest deduction is maximum 12% and the deduction for
salaries we set a limit according to book profit that if
book profit was upto 3 lakhs then 90% or 1.5 lakhs,
whichever is higher and if my book profit used to exceed 3
lakhs then on the remaining 60% we deducted
What is book profit?
Whatever was our net profit we added remuneration to that
and I reduced unabsorbed depreciation
There was some reading left
If you want to do then you can see what is there
Remuneration to non-working partner is not allowed
Remuneration to working partner was not authorized by deed
I threw this deed in the last lecture
Remuneration to working partner but if it is not authorized
by deed then you will not get it
Remuneration to working partner or interest and it is
authorized by deed but old time period before deed that was
also not allowed in that case
See this
Example 6
See this
If a firm incorporates a clause relating to remuneration
that too to working partners by executing partnership deed
on 1st July 2022 but what did they say? that we are making
deed on 1st July 2022 but when do we make it effective? 2-3
months before that means 1st April 2022 we make it effective
So what did I tell you?
You will get interest and salary after that date in that
style but did you get anything before that?
Answer was No
The firm would get deduction for the remuneration to the
partners from 1st July onwards but not for the period 1st
April to 30th June
In other words
See this in red letters
It will not be possible to give retrospective effect to
oral agreements entered into entered into vis-a-vis such
remuneration prior to putting the same in a written
partnership deed This was the point
Is the point clear?
Let's move ahead
Interest in excess of 12% will be added back
Remuneration in excess of prescribed limit
Remuneration in excess of prescribed limit will be added
back
See this example
Remuneration of Rs 7.5 Lakh and book profit of Rs 10 Lakh
So what was to be done?
Rs 3 Lakh, 90% of Rs 3 Lakh
Rs 2.70 Lakh or Rs 1.5 Lakh whichever is higher
Rs 2.70 Lakh
Remaining Rs 7 Lakh, 60%
Rs 4 Lakh, Rs 20,000
Calculate on calculator
Calculate on mobile
Rs 3 Lakh, 90%
Rs 2.70 Lakh
Rs 1.5 Lakh
Rs 2.70 Lakh
Rs 7 Lakh, 60%
Rs 4 Lakh, Rs 20,000
Limit of Rs 6 Lakh, 90%
Payment of Rs 7 Lakh, 50,000
Rs 60,000 will be disallowed
Profit will be added
Rs 60,000
Assume that you have paid more than the limit to reduce the
profit
Next Remission of Trading Liability
Remission of Trading Liability
What is Remission of Trading Liability?
Try to understand
For example,
If 2020 is going on
Sir, now it is 2023
Try to understand
For example,
Why don't you listen to me?
Why don't you listen to me? 2020 is going on
In 2020, you have shown
I have paid GST of Rs 1 Crore
It is related to business
You will get the expense
You will put GST payment in your Profit and Loss account
You will get the expense
Suppose, after two years
The officer of GST which you have put in your Profit
The officer of GST which you have put in your Profit calls
you to tell you that the GST payment that I have taken from
you due to that GST
GST payment which I have taken from you
The GST payment which I have mounted should benefit me
Should benefit me
Who will be paying it all back?
I will be paying it all back
I am the one who is returning the money to you
In the year 2020, you gave me 1 crore as a GST
Not bribe, as a GST
I said yes, give it
It used to be 20 lakhs
I just got to know about it in 2022-23
So take 80 lakhs from me as a refund
Take 80 lakhs as a refund
Now friends, tell me one thing
At that time, would I have put 1 crore in my Profit and
Loss account as an expense or not?
My profit would have decreased by that in 2020
Now I have come in 2022
And I have received 80 lakhs
When at that time I considered the 1 crore tax payment as
my expense
So should I not consider the 80 lakhs as my income? 80
lakhs will be my income
The year I get the refund
There was a liability
I took the expense of the liability
The government allowed me
The income tax people allowed me
My profit decreased by that
Later I came to know that there was no liability
Some money is recovered from there
So the year you recover that money
You show it in your PGVP income
It will become taxable in your hands
This is the point
Any problem?
Should I move ahead?
Come sir, next
Come Let's catch the next topic
The name of the next topic is 43B Sir, what is this 43B?
Sir, this is a very important section
Section 43B
It says that
See what we generally do
Sir, where are you looking?
I am removing the section, I am not getting the section
Where are you looking?
I am removing the section
I have so much content
You don't understand my compulsion
And then you tell me
Sir, where are you looking?
I am looking
I got the section
I got the 43B section
What were you saying?
I got the section
This master will not get the section
I know everything about you
The school from where you have learned all this
The headmaster of that school
He touches my feet in the morning
My head is too much
I am coming
See what we generally do
The profit and loss account that we make
We put our expenses in it
It is also possible that
Some of the expenses are like this
Which I have not paid
Actually Sir, what are you saying?
Remember, in the 11th class
What were those prepaid expenses?
Outstanding expenses?
Don't you remember?
You used to do prepaid and outstanding expenses
What we used to do
For example, I am making my P&L account
And my books of accounts
My books of accounts are made
On a mercantile basis
On a due basis
The expenses have come
The salary is due on 1st
Of an employee
I put the expenses of that employee
It is also possible that I have not paid his salary
If I had paid his salary
You are saying
You understand what I am trying to say
You understand
All the expenses that I put here
And my system is running on a mercantile basis
I work on a due basis
So whether I pay
Or I am payable
I have not paid yet
I can show both as expenses
Now it is on a mercantile basis
The expenses have come
But I have not paid yet
So can I put the expenses here
If I make my accounts on a due basis
The answer is yes
My accounts are made on a due basis
We work on a mercantile basis
Have you heard the word
Accrual basis of accounting?
We work on an accrual basis
So the expenses are due
The expenses are due
Or I have not paid
I can show both as expenses
If I work on an accrual basis
Then when I make an actual payment then I would have put it
here.
On a due basis, there is more benefit by doing accounting
according to income tax also.
If I have not made a payment of any expense yet, but I have
shown it here on a due basis.
On a due basis, I have not made a payment of any expense
yet, but if the expense is due, then I have shown it here.
What is more than that? Expense is more, profit is less. If
profit is less, then income tax is also less.
Is the point clear?
But friends, some expenses are like this.
Some expenses are like this. Till now, we were allowing you
to reduce the expense.
The government was also saying that your expenses are on a
due basis.
It is possible that you have not made their payment yet.
For example, your salary is due for 6 months.
You have not given salary to your employees for 6 months.
They are working without salary.
So, you have shown your 6-month salary as an expense on a
due basis.
You had to pay. Salary was due. You have not made payment.
But you have shown the expense.
And you have also got a deduction of some expense.
But there are some expenses whose deduction or expenses
will be allowed only when you make their actual payment.
If you make their actual payment on a particular date, not
on a due basis,
then you will be allowed that expense only.
Otherwise, you will have to deduct that expense from here.
How will it be deducted?
It will be deducted in such a way that whatever profit you
get, you will add it back.
That some expense is not paid.
Not actually paid.
Sir, does this apply to all expenses?
Salary, rent, electricity, postage, courier, printing.
Does this apply to all expenses?
No, sir.
There are 5-6 expenses where this provision applies that
you will get the deduction only when you make their actual
payment.
What are those 5-6 expenses?
Let's discuss them in detail.
Please focus on the screen.
Section 43B is a very important section.
Sir, you say that every section is an important section.
It is important because you are taking the expenses on a
due basis and reducing the profit.
If you put this on a due basis by mistake, all the expenses
will be disallowed.
You are thinking that your profit has reduced.
Then you get a notice from the income tax department.
They increase your income.
You have increased so much profit.
No, sir, you have not paid for these expenses.
We are increasing your profit.
Read what it says.
It says that the following sums are allowed as deduction
only on the basis of actual payment within the time limit
specified under section 43B.
We will discuss the time limit later.
If you actually pay the expenses till the time limit, you
will get the deduction.
Sir, you have repeated the same thing 15 times.
Son, I repeat it so that if you miss it for the first time,
you will listen to it for the second time.
If you miss it for the second time, you will listen to it
for the third time.
That is why I repeat it.
A mad dog has not bitten me.
Sir, what are you saying?
The following sums are allowed as deduction only on the
basis of actual payment.
If you actually pay the expenses, you will get the
deduction.
Tax, duty, cess or fees by whatever name is called.
If there is a small tax, income tax for example.
If you have to pay a custom duty, cess or GST cess.
If there is any tax, you have to pay its payment till a due
date.
Which due date?
Wait, I will tell you which due date.
Any sum payable by the assessee as employer by way of
contribution to PF or gratuity fund or any other fund.
Employer's contribution to PF.
If the employer's contribution goes to the PF fund, then if
he actually pays, then only he will get the deduction.
Because it is also possible that he has shown in the books
that put the expenses on due basis.
Put the expenses of the employer.
I am the owner.
He will show that yes, I have given money on behalf of the
employee.
But if you have not paid till that due date, then you will
not get that expense.
It is possible that you have put that expense in your books
by making false claims.
Such a false expense has been put.
And if you have not actually paid for that expense.
Which expense?
Employer's contribution to the provident fund.
Then you will not get the deduction for that expense.
There you will have to miter its payment.
The third point is also important.
It is bonus or commission to the employees.
Sir, what is bonus commission?
Sir, remember.
You get a bonus on Diwali.
A person works all year that when Diwali comes, then I will
get my salary of 15 days, 10 days, 5 days, any money.
My boss will give me as a bonus.
With that bonus money, I will buy crackers for my children.
With that bonus money, I will buy a saree for my wife.
With that bonus money, I will buy sweets for my family.
Employer was clever.
What did that employer do?
He told that employee.
What did he say?
He said that your bonus is coming.
Diwali has come.
Your bonus is due.
Don't take tension.
I am sitting.
Your bonus is still due.
I have in mind that it is due.
I work because it is due.
And I am making my P&L account.
So, I need expenses.
As much as I can get.
So, I will show the bonus here.
Bonus.
On what basis did I show this?
I showed it on due basis.
Sir, Diwali has come.
And Rupalla came out of the employer's pocket.
In the name of bonus, he did not give anything.
Yes, he did show in the books that it is due to give bonus
to the employees.
An employee went to him and said that
I have to buy crackers for my children.
The employer said that your money is not in your pocket.
You will get that money later.
We have shown expenses in our books.
You will get that money.
The year has ended.
One year has passed.
Two years have passed.
The bonus is still in the books.
And the employee is waiting at the crackers shop.
When will I get the bonus money?
And when will I buy crackers, pomegranates and flowers for
my children?
Even today, that person will be standing at the cracker
shop under the peepal tree.
Because he has not got the bonus yet.
The employer is taking advantage.
He is showing the bonus on due basis.
This is the bonus of the first year.
This is the bonus of the second year.
This is the bonus of the third year.
He is taking advantage of this every year.
Should this useless employer be punished?
Yes or no?
Should justice be served to my poor brother who is still
waiting for the bonus under the peepal tree?
The answer is yes.
So how did this useless employer punish this person?
The government said that if this person actually pays the
Diwali bonus and not in the books, but actually pays the
bonus till a particular date, then only he will get the
deduction of the expenses.
And what better day do you want than this?
Sir, justice was served to that employee.
The employer gave the bonus to the employee standing under
the peepal tree.
The employer took the deduction of the bonus because he
actually paid the bonus.
And the employee happily took the crackers and celebrated
Diwali with his children.
It is different that Holi had come till then.
But still that man happily left the crackers.
Sir, this was the point of bonus and commission.
Come sir, next.
If you have to pay an interest, for example, a businessman
is very smart.
He has taken a loan from different banks, be it a
government bank, a private bank, a scheduled bank, or an
NBFC.
He took a loan from there.
He took the loan.
What will the expenses show?
Interest.
Interest is getting due.
Interest is getting due every month.
Interest is getting due.
Banks are calling him and asking, your interest is getting
due.
When will you pay the payment?
We have given you a loan to do business.
And you are taking the deduction of the interest in Section
36.
As Mr.
Gupta said, in Section 36, if a person pays the interest,
I did not say payment.
I said it is the expense of the interest.
The expense can be due or you have paid the actual expense.
What is he doing here?
He took the word due.
Interest is getting due.
they are claiming their expenses. P&L is showing that
interest. Profit is decreasing.
The organization of bankers is in a mess.
One bank is talking to another bank, that are you getting
this interest? They say, no sir, he has not given interest.
Interest is being shown as expenses in books on due basis.
All the banks have gathered and reached to Nirvana madam.
Finance minister says, madam, may I come in?
She says, yes, come in.
Madam says, aiyo, what is the matter?
He says, madam, the problem is that we have given loan to
this person to do business and what is he doing? He is
putting interest expense in P&L.
He is showing more expenses. Profit is decreasing.
But we are not getting the money for interest.
Our bank will go down like this.
He will become Vijay Mallya and go abroad.
His profit will not be saved when he is putting interest.
Madam says, is this the matter?
He will fight with us, useless. Come here.
Madam has put a section that if any interest is there, if
that person has given loan and his interest payment has to
be paid,
then he will get the interest expense only when he will
actually pay it to a particular date.
I will tell you which date it is.
If he actually pays interest to a particular date, then
that businessman will get its deduction.
Otherwise, he will not be able to claim its deduction.
Look at this. D, E and F point are talking about this only.
Is there interest on loan?
All the banks are covered here.
Different banks have come in D, E and F.
All the banks have come here.
Interest on the loan.
Come sir, next point.
Any sum paid by the SSE?
Any sum paid by the SSE as employer in lieu of earned leave?
Leave encashment.
If you remember in the chapter on salary,
I told you what is leave encashment.
You were allowed 12 leaves in the whole year.
You were allowed one month's leave.
If you take leave, your money will not be deducted.
I was a hardworking employee.
He did not take leave that was allowed for him.
At the end of the year, he goes to the employer and says,
Sir, give me money for these 12 leaves.
Give me money for leave encashment.
Now this expense, he will put it in his P&L account.
Employer.
And he will reduce his profit.
But suppose if I did not get the actual payment, then how
did he put the expense?
Ultimately, the expense he is putting on due basis, he is
claiming the expense on due basis and reducing his profit.
But whose loss is it?
The loss in this case is of the employee.
Did the employee get the money for leave encashment?
It has been 2-3 years.
He did not get the money.
What should I do?
So in this case, the government said,
Don't get angry at all, my dear.
We will do justice and justice will be done.
And for justice, we have made Section 43B, which says that
if there is money for leave encashment, then you will get
it only when you actually pay it.
Otherwise, it will not be deducted.
It will be disallowed if you have put it in the P&L account.
Is the point clear?
Come to the last point.
Any sum payable by the SSC to the Indian Railways for the
use of railway assets?
Tell me one thing, for the railway, for the train coach,
for the Indian Railways, are these boxes of trains assets
or liabilities for them?
Are they assets?
Because it is because of them that the Indian Railways is
able to do business.
If there is no train, then the train will not run.
Revenue will not come from anywhere.
No one will buy a ticket.
When the train box is an asset for it.
In the train, you must have gone somewhere to meet someone.
And you must have seen, found, understood, heard that you
must have seen an advertisement for something on the train
box.
You go to the metro station, there are boards there.
In the metro train coach, there is also an advertisement of
Deepika Padukone talking on the phone.
And what is written below?
OPPO, the selfie expert.
These are all advertisements that run inside the train.
By running inside the train, I mean that there must be an
advertisement on the roof or window of the train.
If there is a box of rail, then outside that box, see, if
there is a box of rail, if there is a box of rail, then
there is a lady in front of the box of rail and she is
saying Indulekha.
These Indulekha people have run their ad on the train box.
It is written Indulekha.
So in this case also, expense, the businessman will put in
it, marketing expense or advertisement expense, in the
profit and loss account, he will reduce his profit.
But it was a conspiracy.
Advertisement expenses were put on due basis, but the
actual payment to the Indian Railways, he did not do it.
Who can have a bigger loss than this?
Indian Railways.
Assume that the payment of 10-20 crores is stuck.
What is the benefit to the businessman?
He put the expense on due basis and reduced the profit.
But did the money reach the Indian Railways in reality?
It did not reach.
Ultimately, what about the government?
When the money did not reach the government, will the
government be able to bring good days?
Then you will reach the government office and say, good
days are not coming.
Good days are not coming because of the businessman.
Go and catch that businessman.
Okay sir, we will catch him.
How to catch him? With the help of Section 43B.
When you can catch that businessman for bonus and
commission, then why can't you catch him for this payment?
Put this point.
He put this point.
To the Indian Railways.
For the use of railway assets.
He is using railway assets.
He is getting his name written on the metro station.
As an advertisement.
Assume that he does not pay the railway.
He does not pay the actual payment till a particular date.
He does not pay the actual payment.
In that case, the expense will be disallowed.
If he has put his expense in the Profit and Loss account,
then add that expense in the Profit.
And remove that expense from there.
There are 5-6 points.
1. Interest on Loan.
2. Employer's Contribution.
3. Bonus Commission.
4. Railway Assets.
The payments for the use of railway assets are done.
Are these points clear?
If you pay the actual, then only you will get the deduction.
Sir, what is the date till when you have to pay?
You have to pay the due date.
You have to pay the due date of furnishing the return of
income.
The date on which you get your return file.
If you are an individual, then it will be 31st July.
If you are a company, then it will be October.
The date of your return filing.
The date of your own return filing.
The date of the businessman's return filing.
If till the date of your return filing, this Diwali bonus,
your employer's contribution, if someone is using railway
assets, if someone is paying interest on the loan, if he
pays the loan till the date of his own return filing, then
he will get the deduction of that expense.
Otherwise, the deduction of that expense, he will keep
wandering to get it.
He will keep wandering from temple to temple.
Temple, mosque, gurudwara, church, he will go to every
place and bow his head.
The income tax department will also come.
He will reach the finance ministry.
But sir, no one has the power to get the deduction of that
expense.
Because he has done very bad deeds.
He has made the person standing under the peepal tree cry.
He has taken money from Indian Railways.
He has taken money from the bank.
The deduction of the expense will be only when he will
actually pay.
It is a simple point.
Look at it.
On the screen.
If he pays the loan till the due date of his own return
filing, then he will get the deduction.
But if he pays the loan on the next day of the due date or
after 2 months or later, then the deduction of the expense
will be only when he actually pays the loan.
2022, 1st April 2022, 22nd to 31st March 2023.
When will the return go?
If it is individual, then 31st July.
If he pays the loan till July, then the deduction will be
taken.
If he cannot pay the loan till 31st July, then what should
he do?
If he goes in 2024 and pays the loan of 2022 and 23, then
he will get the deduction when he actually pays the loan.
Because the government also says that we cannot upset the
businessmen.
It is fine.
They also pay some tax.
So, when he actually pays the loan, we will give the
deduction at that time.
We will give.
Is this point clear?
Did you understand the story?
Now, look at one point.
Do you remember the partnership firm?
Chatur, Chatur Associates, Chatur Associates was the name,
and there was a partner of Tejbuddhi, what was his name,
Ranchoddas Chanchad, that Ranchoddas Chanchad had closed
the partnership firm at that time and went to Ladakh, now
he will be called back, that don't be upset, you come back
my brother, and guide us a little more, we taught him this
provision, and Chatur
Associates, Chatur Associates had a huge debt, because
their business was not going on, they had taken a loan of 1
crore rupees, and its interest was due, that was of 15
lakhs, okay.
Now we called Chatur and said that our interest is due, we
have not paid yet, if we do not pay this, then Mr.
Gupta has said that if you are not doing the actual
payment, then you will not get the deduction, tell me
Ranchoddas Chanchad, what will you do, you have Tejbuddhi,
what should you do?
He said, he read the section first, he said show me the
book first, show me the provision first, where is it?
So we said, this is the provision, read it, he said, oh,
okay, oh my friend, is this provision?
So Farhan and Raju asked him, what happened, he said, I
came to know of a thing, from which
I will take the deduction of my interest, he said, this is
what is written in the act, that if you do not pay the
interest, then you will not get the deduction, why not I do
this, that I make this interest my loan, I go to the bank
and say, bank, bank, bank, I want interest, bank will say,
yes sir, so do one thing, this 15 lakhs, I had to pay you,
and I could not pay you, in a way, you gave me a loan, what
did I say, I had to pay for one thing, I could not, so in a
way, I have a loan,
I have to pay, he said, yes, so why don't you do one thing,
you make this interest your loan, one loan is going on, of
one crore rupees, and make this interest your loan, of 15
lakhs, now you will get two loans, he said, yes, this is
fine, the amount of the loan, how much was it earlier, tell
me, how much was it earlier, how much was it earlier, 1
crore rupees, now how much will it be, 1 crore 15 lakhs,
because I made this also a loan, so that
guy went to the finance minister and said, madam, now tell
me, finance minister madam, now tell me madam, you said
that you have to make an interest payment, you used to make
an interest payment, there was an interest of 15 lakhs, now
where is the interest, now that loan has been made,
interest payment has been made, madam said, this is right,
there was an interest of 15 lakhs, now that interest is not
seen anywhere in the books, because now that loan has been
made, sir, an interest of which I
not made a payment, which I have made a loan, now that loan
has been made again, now again interest will be put on it,
then I will come again next year, then I will say, this
interest, make this also a loan, like this on my loan, on
my loan, loans will be made, interest payment will not be
made at all, the punishment of this cunning man, the Income
Tax Department should get, if in the country, tax will not
come like this, so will the country have good days, madam
said, the thing is very true,
person did nothing, and unnecessarily and for no reason
showed his interest payment and made him pay the loan
So my dear citizens, from the next day Madam said, my dear
citizens
This rascal
If a person does this, that he converts the interest and
makes it his loan then he will get the deduction of the
interest only when he will make the actual payment of this
loan
Now tell me, Ranshod Das Chanchad
Now tell me
You are paying loan after loan
You are making the actual payment, but you are not
Come to me, you won't get the deduction
Now tell me, you have put 15 lakhs in the account
You have put 15 lakhs in the account, add it back
I am Nirmala Sita Ramanu, I will only believe when I will
destroy you and send you to Ladakh You stay there
That is your status, don't come here to do business Because
you don't know who all you have to mess with to do business
You have converted 15 lakhs of interest into a loan
Now you will get the deduction only when you will actually
pay this loan
Ranshod Das Chanchad said, it is possible that
I will make 15 instalments of this loan
I will keep on paying in 15 instalments
I will keep on paying 1 lakh every month
Or I will keep on paying 1 lakh every year
I will keep on paying for 15 years
Madam said, okay, are you getting the actual payment?
The actual payment that you are getting I will give you the
same amount of deduction
You are right up to this point
You have made the actual payment You have made 1 lakh, take
1 lakh deduction
You have made 2 lakh, take 2 lakh deduction
But, make the actual payment
The trickery that you are doing
You are converting your interest into a loan and taking the
deduction
We don't want this drama
These rascals
Sir, after that day, where did Ranshod Das Chanchad go?
Who did he meet?
Where does he live? What does he eat? What does he drink?
And where did he disappear? We are not able to find him
If you have his address, then do let us know
Because he was like a floating wind
He is lost now, where did he go? Find him
His name and address is missing
And even today, people are looking for Ranshod Das Chanchad
These were the points
I hope that you have cleared these points
If not, then read it again
Rewind the lecture
Although, I will make some revisions in between
With this, I take your leave.
Thank you very much