Income Tax Rules, 2002

CHAPTER-II

DETERMINATION OF INCOME HEADS OF INCOME PART-II INCOME FROM BUSINESS

From: 2023-11-01 - To: 0000-00-00 13. Apportionment of expenditures 1[, deductions and allowances].- (1) This rule applies for the purposes of section 67, which provides for apportionment of expenditure 1[, deductions and allowances] incurred for more than one purposes. (2) Any expenditure 1[, deductions and allowances] that is incurred for a particular class or classes of income shall be allocated to that class or classes, as the case may be. 2[(3) (a) Any common expenditure excluding financial expenses relatable or attributable to non-business advances or loans and the amount referred to in sub-rule(2) relatable to business including presumptive and exempt income, shall be allocated to each class of income according to the following formula, namely:- A x B/C where- A is the amount of the expenditure incurred; B is the total amount of gross receipts (without deduction of expenditures) for the tax year for the class of income; and C is the total amount of gross receipts (without deduction of expenses 1[, deductions and allowances]) and net gains for the tax year of all classes of income; (b) Where, however, net gain, brokerage, commission and other income is to be taken into account on turnover of such transactions, such income shall be compared with gross profit from business for adopting figures for components “B” and “C” of the formula at (a) above 3[:] ] 4[Explanation.- The terms gross receipt means net off receipts or turnover of Sales Tax or EFD paid.] (4) Where expenditures 1[, deductions and allowances] are to be allocated among different classes of income under sub-rule (3) consideration shall be given to the nature and source of each class of income, on reasonable basis to earn each class of income (particularly, in allocating selling expenses). (5) Where the allocation of expenditures 1[, deductions and allowances] is made in accordance with sub-rule (3) a certificate by the Chartered Accountants or Cost and Management Accountant stating the basis of allocation shall be accepted unless significant variations are found; and where books 5[of accounts] are not required to be audited, the reasonable basis based on the 6[sub-rules] (3) and (4) may be…