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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Business Restructuring

A company incurs the following during restructuring: (i) Rs 10 lakh for compounding an offence under a law, (ii) Rs 6 lakh as CSR spend under the Companies Act, 2013, (iii) Rs 4 lakh of revenue expenditure wholly and exclusively for business, not of the kind covered in sections 28 to 33. Which amount is allowable under section 34(1)?

Only Rs 4 lakh is allowable. Expenditure on compounding an offence and CSR spending under the Companies Act are excluded from wholly-and-exclusively business expenditure, while the Rs 4 lakh of revenue expenditure incurred wholly and exclusively for the business meets the general condition.

  1. ARs 20 lakh
  2. BRs 14 lakh
  3. CRs 4 lakhCorrect
  4. DRs 10 lakh

Explanation

Compounding an offence is treated as expenditure for a prohibited purpose and is excluded under section 34(3)(c). CSR expenditure under section 135 of the Companies Act is excluded under section 34(2)(b). Only the Rs 4 lakh of revenue expenditure incurred wholly and exclusively for business qualifies. Rs 14 lakh wrongly adds the CSR spend.

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