Answer :
To compute the taxable income and tax liability for Mishra Traders, we need to make specific adjustments to the net profit as per accounting rules and taxation laws. Let's break it down step by step:
Net Profit as per P&L Account: ₹41,900
Add: Expenses disallowed under tax laws
- Managing Partner's Salary: ₹12,000 (Salaries to partners are generally added back unless specified conditions are met)
- Rent paid to Partner: ₹6,000 (For personal use of partner-premises)
- Municipal Taxes borne by partner: ₹1,000
- Legal Expenses for partner's property: ₹500
- Diwali Pooja Expenses: ₹1,000 (Personal in nature)
- Donations: ₹1,500 (Only certain deductions allowed under specific rules and often need specific allowances different from actual expenditure listed)
- Excise Penalty Refund: ₹2,500 (Previously disallowed, now back as income)
Total Disallowances: ₹24,500
Add: Business Income not credited to P&L Account
- Income-Tax Refund: Considered a tax-related item, not usually a business income.
Total Adjusted Profits:
Adjusted Profit = Net Profit + Disallowances
[tex]41,900 + 24,500 = 66,400[/tex]
Thus, the taxable income is ₹66,400.
Tax Calculation: To compute the exact tax liability, you would apply the prevailing tax rate for partnership firms for the assessment year 2023-24, which would typically include specific percentages of tax based on slabs or thresholds, depending on regional laws.
This structured adjustment helps to ensure only business-related, allowable expenses impact the earning and that income and profits are correctly calculated for tax purposes.