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CA Intermediate · Taxation · Profits and Gains of Business or Profession

Meera Hardware's profit for tax year 2026-27 is Rs 6,00,000 after debiting all of the following cash payments, each made by cash: (a) Rs 8,000 and Rs 7,000 to supplier A on the same day for goods purchased; (b) Rs 9,000 to supplier B in one day for goods; (c) Rs 30,000 to a transporter on one day for plying goods carriage hired by it. Assuming no other adjustments, what is its business income? (Cash payment to a transporter for goods carriage is permitted up to Rs 35,000 a day; for other payees the limit is Rs 10,000 a day.)

Business income is Rs 6,15,000. The two cash payments to supplier A on the same day total Rs 15,000, over the Rs 10,000 daily limit, so the whole amount is added back. Payments to supplier B and the transporter are within their limits and remain allowed.

  1. ARs 6,00,000
  2. BRs 6,07,000
  3. CRs 6,15,000Correct
  4. DRs 6,45,000

Explanation

Payments to one person in a day are aggregated, so A's Rs 15,000 exceeds Rs 10,000 and the whole amount is disallowed. B's Rs 9,000 is within the limit, and the transporter's Rs 30,000 is within Rs 35,000. Income = 6,00,000 + 15,000 = Rs 6,15,000. Disallowing only the excess Rs 5,000 or the transport payment is wrong.

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