Skip to content

CS Executive · Tax Laws and Practice · Deductions

Under the Income-tax Act, 2025, an eligible unit of Kaveri Ltd transfers goods to another business of the same company at Rs 6,00,000 recorded in the unit's accounts, while the market value on the date of transfer is Rs 9,00,000. The cost of the goods to the unit was Rs 5,00,000 and the unit has no other transactions. For computing the profits of the unit for the Part C deduction, what profit is taken from this transfer?

The profit is Rs 4,00,000. Where goods are transferred between an eligible unit and another business of the assessee at a price not matching market value, the unit's profits are computed as if the transfer were at market value: 9,00,000 less cost 5,00,000.

  1. ARs 1,00,000, being the profit at the recorded price
  2. BRs 4,00,000, being the profit computed at market valueCorrect
  3. CRs 3,00,000, being the difference between market value and recorded price
  4. DRs 9,00,000, being the market value itself

Explanation

Section 122(6) requires profits to be computed as if the transfer were made at market value where the recorded consideration does not correspond to it. Profit = 9,00,000 - 5,00,000 = Rs 4,00,000. Rs 1,00,000 uses the recorded price, which is wrong; Rs 3,00,000 is only the pricing gap.

Did you get it right without looking?

One question tells you little. A timed set on Deductions shows your real accuracy, how long you take and where you lose marks.

Practise DeductionsFree diagnostic mock

More Deductions questions