PGBP - Items to be ADDED to Income (if not credited to P&L)

# PGBP — Items to be Added to Income (if not credited to P&L)

In addition to disallowances, certain incomes/recoveries chargeable as PGBP may not have been credited to the P&L. They must be added when computing PGBP.

## Rule

Add to PGBP income only if NOT already credited to the Profit & Loss Account.

## List of items to be added

### 1. Bad Debt Recovery in excess of unallowed portion (Sec 41(4))

The portion of bad debt recovery that corresponds to the previously allowed deduction is taxable.

Logic: When a bad debt was written off, a deduction was allowed up to a certain amount. When recovery happens later, the recovery is taxable to the extent of the earlier allowed deduction.

### 2. Sale proceeds of Scientific Research Asset (Sec 41(3))

When a scientific research asset (for which 100% deduction was claimed u/s 35) is sold without being used for business, the lower of (a) sale proceeds, or (b) deduction earlier allowed u/s 35, is taxable as PGBP income.

### 3. Remission or Cessation of Trading Liability (Sec 41(1))

If an assessee had taken deduction for a trading liability earlier, and that liability is subsequently remitted or ceases (e.g., creditor waives the dues), the remitted amount is taxable as PGBP in the year of remission.

### 4. Salary/Remuneration/Interest received from Firm (Sec 28(v))

A partner receiving salary, bonus, commission, remuneration or interest from a firm — to the extent allowed as deduction in the firm's hands — is taxable as PGBP in the partner's hands. The excess (disallowed in firm) is not taxable in the partner's hands.

## Quick reference