Deduction not admissible in certain cases under Section 55(ITA-2023)

 

Deduction not admissible in certain cases under Section 55 | Bangladesh Income Tax Act -2023:

As per section-55(ITA-2023),

Deduction not admissible in certain cases.

Notwithstanding anything contained in this Chapter, no deduction shall be allowed from income under the head “business” in respect of the following expenditures or payments:

(a) Any expenditure or payment for which the requirements of Part 7 have not been properly complied with;

(b) Interest, salary, commission, or remuneration paid by a firm or an association of persons to any of its partners or members;

(c) Any commission paid or discount allowed by a company to its shareholder-director;

(d) Any amount exceeding Taka 10 (ten) lakh paid to an employee as perquisites as defined in section 32:

Provided that, this clause shall not apply where perquisites are paid pursuant to a Government decision published in the official Gazette for implementing Wage Board recommendations;

(e) Any expenditure exceeding 10% of net profit disclosed in the financial statements relating to royalties, license fees, technical service fees, technical know-how fees, technical assistance fees, or similar charges for use of intangible assets;

(f) Any expenditure exceeding 10% of net profit shown in the accounts, incurred by a non-resident company by way of head office or intra-group charges, however described;

(g) Any overseas travel expenditure for business purposes exceeding 0.5% of disclosed turnover:

Provided that this limit shall not apply to an assessee providing services to the Government;
Provided further that the limit shall not apply where supporting evidence is provided and commercial justification is established;

(h) Any entertainment expenditure exceeding:

(i) 4% of the first Taka 10 lakh of computed business income (before deducting entertainment expenses); and
(ii) 2% of the remaining computed business income (before such deduction);

(i) Any excess expenditure on distribution of free samples beyond the following limits:

In the case of pharmaceutical industries:

• Up to Taka 5 crore turnover: 2%
• Above Taka 5 crore and up to Taka 10 crore: 1%
• Above Taka 10 crore: 0.5%

In the case of food, cosmetics, and toiletries industries:

• Up to Taka 5 crore turnover: 1%

(r) Any expenditure not related to business activities;

(s) Any depreciation or interest claimed on Right of Use assets recognized under International Financial Reporting Standards(IFRS):

Provided that rent, development, and maintenance expenses for assets used in business shall be allowable;

(t) Impairment losses;

(u) Any contribution to a fund requiring approval under this Act, where such approval has not been obtained;

(v) Any unverified or unsupported expenditure where accounts are not maintained in the prescribed manner.

Explanation:For the purposes of this section:

(i) “Net business profit” means direct business profit of an entity and excludes profits from subsidiaries, associates, or joint ventures;

(ii) “Promotional expense” means any business expense incurred in cash, kind, or otherwise to provide benefit to any person for business purposes, but does not include advertisement expenses.

Frequently Asked Question(FAQ):

1. What is Section 55 of the Bangladesh Income Tax Act 2023?

Section 55 defines specific cases where tax deductions are not allowed under the Bangladesh Income Tax Act 2023.

2. When is deduction not admissible under Section 55?

Deductions are not admissible when expenses are non-compliant, personal, or not related to taxable income activities.

3. What types of expenses are disallowed under Section 55?

Expenses that are illegal, personal, or not properly documented are generally disallowed under Section 55.

4. Can business expenses be fully deducted under Section 55?

No, only allowable business expenses are deductible; non-qualifying expenses are restricted under Section 55 rules.

5. Why are deductions restricted under the Income Tax Act?

Deductions are restricted to prevent misuse, ensure compliance, and maintain transparency in taxable income reporting.

6. How does Section 55 impact taxpayers in Bangladesh?

It directly affects taxable income calculation by disallowing certain expenses, increasing tax liability in some cases.