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CS Executive · Tax Laws and Practice · Profits and Gains from Business and Profession

An assessee withdrew ₹6,00,000 from its site restoration account on closure of the account in a tax year. The agreement with the Central Government requires ₹1,50,000 to be paid as profit share. What amount is deemed to be business profits of that tax year under Schedule X of the Income-tax Act, 2025?

The deemed business profit is ₹4,50,000. On closure of the account, the amount withdrawn, ₹6,00,000, is reduced by the amount payable to the Central Government as profit or production share, ₹1,50,000, and the balance is charged to tax for that year.

  1. A₹7,50,000
  2. B₹6,00,000
  3. C₹1,50,000
  4. D₹4,50,000Correct

Explanation

On closure, the deemed profit is the amount withdrawn minus the amount payable to the Central Government as profit or production share: ₹6,00,000 − ₹1,50,000 = ₹4,50,000. Taxing the whole ₹6,00,000 ignores the permitted reduction.

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