admissible and inadmissable deductions

[suleman sheikh]

asalam o alikum
hope all are fine
i having some problems in understanding the adjustment column in Income Tax return forum 2009
11.inadmissible Deduction?? (including accounting depreciation)
12.Admissible Deductions?? (excluding tax depreciation/including proportionate PTR income)
13.unadjusted Loss from business for previous year(s)
14.un-absorbed Tax Depreciation fro previous/current year(s)

i m aslo adding sum amount showing in income statement n balance sheet
net profit = 2317630

accounting depreciation = 537573
tax depreciation = 211931
financial charges on leasing = 308538
lease rental paid during the year = 956808
captail gain = 653717

also help in calculating buisness income??

[faisal_desperado]

Dear,

Inadmissible deductions are those deductions, which may not be deducted from the total income to arrive at the taxable income.

Admissible deductions are those which are allowed to be deducted from total income to arrive at the taxable income.
Read section 21 of ITO 2001 to know about such deductions, list is provided therein.

Unadjusted loss/depreciation is that portion, which had not been set off in full in earlier years due to lesser amount of profits as compare to expenses/losses.

Calculate your taxable income in the following manner;

Net Profit-------------------------------------------XXXX
Add Accounting depreciation --------------------------XXX
Less Tax Depreciation -------------------------------(XXX)
Less finance charges on lease -----------------------(XXX)
Add Capital Gains ------------------------------------XXX

Net Taxable income ----------------------------------XXXX.

It should be ensured that amount of tax depreciation does not include depreciation on those assets, which are on finance lease.
Capital gains are assumed to be on owned assets, rather than leased asset.

Let me know if confusion still exists.


Best Regards,

Faisal.

[bilalfca]

salam.
well faisal, u r right but one thing is missing in ur calculations, according to my knowledge, i.e., Lease Renatls are admissible deductions which should be deducted and Finance Charges should be added in Net Profit (Accounting Profit) along with other adjustments which u've elaborated.

Net Profit------------------------------------------- XXXX

Add Accounting depreciation ------------------------ XXX
Add finance charges on lease ----------------------- XXX
Add Capital Gains ---------------------------------- XXX

Less Tax Depreciation ------------------------------ (XXX)
Less Lease Rentals---------------------------------- (xxx)

Net Taxable income ---------------------------------- XXXX.

Regards.

[faisal_desperado]

Thanks Bilal, You are correct in rectifying me, i inadvertently forgot to mention the same, although, i have replied the similar query at the following thread.

http//www.accountancy.com.pk/forum/topic.asp?TOPIC_ID=7487


Best Regards,

Faisal.