Section 28:
Profits and gains of business or profession.
The following income shall be chargeable to
income-tax under the head “Profits and gains of business or profession”,—
(i) the profits and gains of any business or profession which was carried on by the assessee at any
time during the previous year;
(ii) any compensation or other payment due to or received by,—
(a) any person, by whatever name called, managing the whole or substantially the whole of
the affairs of an Indian company, at or in connection with the termination of his management or
the modification of the terms and conditions relating thereto;
(b) any person, by whatever name called, managing the whole or substantially the whole of
the affairs in India of any other company, at or in connection with the termination of his office or
the modification of the terms and conditions relating thereto;
(c) any person, by whatever name called, holding an agency in India for any part of the
activities relating to the business of any other person, at or in connection with the termination of
the agency or the modification of the terms and conditions relating thereto ;
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(d) any person, for or in connection with the vesting in the Government, or in any
corporation owned or controlled by the Government, under any law for the time being in force, of
the management of any property or business;
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(e) any person, by whatever name called, at or in connection with the termination or the
modification of the terms and conditions, of any contract relating to his business;
(iii) income derived by a trade, professional or similar association from specific services
performed for its members ;
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(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under
the Imports and Exports (Control) Act, 1947 (18 of 1947);
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(iiib) cash assistance (by whatever name called) received or receivable by any person against
exports under any scheme of the Government of India;
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(iiic) any duty of customs or excise re-paid or re-payable as drawback to any person against
exports under the Customs and Central Excise Duties Drawback Rules, 1971;
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(iiid) any profit on the transfer of the Duty Entitlement Pass Book Scheme, being the Duty
Remission Scheme under the export and import policy formulated and announced under section 5 of
the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);
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(iiie) any profit on the transfer of the Duty Free Replenishment Certificate, being the Duty
Remission Scheme under the export and import policy formulated and announced under section 5 of
the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);
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(iv) the value of any benefit or perquisite, whether convertible into money or not, arising from
business or the exercise of a profession;
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(v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or
received by, a partner of a firm from such firm:
Provided that where any interest, salary, bonus, commission or remuneration, by whatever name
called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the
income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted;
10(va) any sum, whether received or receivable, in cash or kind, under an agreement for—
(a) not carrying out any activity in relation to any business 11or profession; or
(b) not sharing any know-how, patent, copyright, trade-mark, licence, franchise or any other
business or commercial right of similar nature or information or technique likely to assist in the
manufacture or processing of goods or provision for services:
Provided that sub-clause (a) shall not apply to—
(i) any sum, whether received or receivable, in cash or kind, on account of transfer of the
right to manufacture, produce or process any article or thing or right to carry on any
business 12
or profession, which is chargeable under the head “Capital gains”;
(ii) any sum received as compensation, from the multi-lateral fund of the Montreal
Protocol on Substances that Deplete the Ozone layer under the United Nations Environment
Programme, in accordance with the terms of agreement entered into with the Government of
India.
Explanation.—For the purposes of this clause,—
(i) “agreement” includes any arrangement or understanding or action in concert,—
(A) whether or not such arrangement, understanding or action is formal or in writing; or
(B) whether or not such arrangement, understanding or action is intended to be
enforceable by legal proceedings;
(ii) “service” means service of any description which is made available to potential users and
includes the provision of services in connection with business of any industrial or commercial
nature such as accounting, banking, communication, conveying of news or information,
advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate,
construction, transport, storage, processing, supply of electrical or other energy, boarding and
lodging;
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(vi) any sum received under a Keyman insurance policy including the sum allocated by way of
bonus on such policy.
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(via) the fair market value of inventory as on the date on which it is converted into, or treated
as, a capital asset determined in the prescribed manner;
Explanation.—For the purposes of this clause, the expression “Keyman insurance policy” shall
have the meaning assigned to it in clause (10D) of section 10;
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(vii) any sum, whether received or receivable, in cash or kind, on account of any capital asset
(other than land or goodwill or financial instrument) being demolished, destroyed, discarded or
transferred, if the whole of the expenditure on such capital asset has been allowed as a deduction
under section 35AD.
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* * * * *
Explanation 2.—Where speculative transactions carried on by an assessee are of such a nature as
to constitute a business, the business (hereinafter referred to as “speculation business”) shall be
deemed to be distinct and separate from any other business.
Notes:
1. Ins. by Act 21 of 1973, s. 4 (w.e.f. 1-4-1972).
2. Ins. by Act 13 of 2018, s. 9 (w.e.f. 1-4-2019).
3. Ins. by Act 12 of 1990, s. 6 (w.e.f. 1-4-1962).
4. Ins. by s. 6, ibid. (w.e.f. 1-4-1967).
5. Ins. by s. 6, ibid.(w.e.f. 1-4-1972).
6. Ins. by Act 55 of 2005, s. 3 (w.e.f. 1-4-1998).
7. Ins. by s. 3, ibid. (w.e.f. 1-4-2001).
8. Ins. by Act 5 of 1964, s. 7 (w.e.f. 1-4-1964).
9. Ins. by Act 18 of 1992, s. 11 (w.e.f. 1-4-1993). Earlier clause (v) was inserted by Act 4 of 1988, s. 9 (w.e.f. 1-4-1989) and
later omitted by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989).
10. Ins. by Act 20 of 2002, s. 13 (w.e.f. 1-4-2003).
11. Ins. by Act 28 of 2016, s. 12 (w.e.f. 1-4-2017).
12. Ins. by Act 28 of 2016, s. 12 (w.e.f. 1-4-2017).
13. Ins. by Act 33 of 1996, s. 10 (w.e.f. 1-10-1996).
14. Ins. by Act 13 of 2018, s. 9 (w.e.f. 1-4-2019).
15. Ins. by Act 33 of 2009, s. 10 (w.e.f. 1-4-2010).
16. Explanation 1 omitted by 4 of 1988, s. 9 (w.e.f. 1-4-1989).