{"id":80908,"date":"2023-11-21T15:13:53","date_gmt":"2023-11-21T09:43:53","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?post_type=act&#038;p=80908"},"modified":"2023-11-21T15:13:53","modified_gmt":"2023-11-21T09:43:53","slug":"section-198","status":"publish","type":"act","link":"https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-198\/","title":{"rendered":"Section 198. Calculation Of Profits"},"content":{"rendered":"\n<p>(1) In computing the net profits of a company in any financial year for the purpose of section 197,&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(a) credit shall be given for the sums specified in sub-section (2), and credit shall not be given for those specified in sub-section (3); and<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(b) the sums specified in sub-section (4) shall be deducted, and those specified in sub-section (5) shall not be deducted.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(2) In making the computation aforesaid, credit shall be given for the bounties and subsidies received from any Government, or any public authority constituted or authorised in this behalf, by any Government, unless and except in so far as the Central Government otherwise directs.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(3) In making the computation aforesaid, credit shall not be given for the following sums, namely:&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(a) profits, by way of premium on shares or debentures of the company, which are issued or sold by the company\u00a0<span id='easy-footnote-1-80908' class='easy-footnote-margin-adjust'><\/span><span class='easy-footnote'><a href='https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-198\/#easy-footnote-bottom-1-80908' title='Ins. by s. 68, iibid., (w.e.f. 12-9-2018).'><sup>1<\/sup><\/a><\/span>[unless the company is an investment company as referred to in clause (a) of the Explanation to section 186];<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(b) profits on sales by the company of forfeited shares;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(c) profits of a capital nature including profits from the sale of the undertaking or any of the undertakings of the company or of any part thereof;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(d) profits from the sale of any immovable property or fixed assets of a capital nature comprised in the undertaking or any of the undertakings of the company, unless the business of the company consists, whether wholly or partly, of buying and selling any such property or assets:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>Provided that where the amount for which any fixed asset is sold exceeds the written-down value thereof, credit shall be given for so much of the excess as is not higher than the difference between the original cost of that fixed asset and its written-down value;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(e) any change in carrying amount of an asset or of a liability recognised in equity reserves including surplus in profit and loss account on measurement of the asset or the liability at fair value.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><span id='easy-footnote-2-80908' class='easy-footnote-margin-adjust'><\/span><span class='easy-footnote'><a href='https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-198\/#easy-footnote-bottom-2-80908' title='Clause (f) ins. by s. 68, ibid., (w.e.f. 12-9-2018).'><sup>2<\/sup><\/a><\/span>[(f) any amount representing unrealised gains, notional gains or revaluation of assets.]<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(4) In making the computation aforesaid, the following sums shall be deducted, namely:&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(a) all the usual working charges;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(b) directors remuneration;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(c) bonus or commission paid or payable to any member of the company&#8217;s staff, or to any engineer, technician or person employed or engaged by the company, whether on a whole-time or on a part-time basis;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(d) any tax notified by the Central Government as being in the nature of a tax on excess or abnormal profits;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(e) any tax on business profits imposed for special reasons or in special circumstances and notified by the Central Government in this behalf;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(f) interest on debentures issued by the company;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(g) interest on mortgages executed by the company and on loans and advances secured by a charge on its fixed or floating assets;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(h) interest on unsecured loans and advances;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(i) expenses on repairs, whether to immovable or to movable property, provided the repairs are not of a capital nature;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(j) outgoings inclusive of contributions made under section 181;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(k) depreciation to the extent specified in section 123;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(l) the excess of expenditure over income, which had arisen in computing the net profits in accordance with this section in any year&nbsp;<sup>1<\/sup>***, in so far as such excess has not been deducted in any subsequent year preceding the year in respect of which the net profits have to be ascertained;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(m) any compensation or damages to be paid in virtue of any legal liability including a liability arising from a breach of contract;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(n) any sum paid by way of insurance against the risk of meeting any liability such as is referred to in clause (m);<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(o) debts considered bad and written off or adjusted during the year of account.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(5) In making the computation aforesaid, the following sums shall not be deducted, namely:&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(a) income-tax and super-tax payable by the company under the Income-tax Act, 1961 (43 of 1961), or any other tax on the income of the company not falling under clauses (d) and (e) of subsection (4);<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(b) any compensation, damages or payments made voluntarily, that is to say, otherwise than in virtue of a liability such as is referred to in clause (m) of sub-section (4);<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(c) loss of a capital nature including loss on sale of the undertaking or any of the undertakings of the company or of any part thereof not including any excess of the written-down value of any asset which is sold, discarded, demolished or destroyed over its sale proceeds or its scrap value;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(d) any change in carrying amount of an asset or of a liability recognised in equity reserves including surplus in profit and loss account on measurement of the asset or the liability at fair value.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>(1) In computing the net profits of a company in any financial year for the purpose of section 197,&#8211; (a) credit shall be given for the sums specified in sub-section (2), and credit shall not be given for those specified in sub-section (3); and (b) the sums specified in sub-section (4) shall be deducted, and [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":79763,"parent":79755,"menu_order":0,"template":"","format":"standard","meta":[],"categories":[11445],"tags":[1007],"acf":{"service_id":false},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Section 198. Calculation Of Profits - Enterslice<\/title>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-198\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Section 198. Calculation Of Profits - Enterslice\" \/>\n<meta property=\"og:description\" content=\"(1) In computing the net profits of a company in any financial year for the purpose of section 197,&#8211; (a) credit shall be given for the sums specified in sub-section (2), and credit shall not be given for those specified in sub-section (3); and (b) the sums specified in sub-section (4) shall be deducted, and [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-198\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:author\" content=\"enterslice\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/act\/80908"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/act"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/act"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/4"}],"version-history":[{"count":1,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/act\/80908\/revisions"}],"predecessor-version":[{"id":80909,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/act\/80908\/revisions\/80909"}],"up":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/act\/79755"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/79763"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=80908"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=80908"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=80908"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}