Query 1]
Sir, Kindly suggest on treatment of prior period expenses under Income Tax Act, 1961. Whether the Deduction of prior period expenses is allowed under Income Tax Act?  If so, under which section deduction can be claimed?  [dineshsinghgaharwar@rediffmail.com]
  1. There is no specific provision in the Income Tax Act allowing or disallowing the prior period expenses under the Income Tax Act-1961.
  2. Section 30 to 36 of the Income tax Act-1961 enumerates the various items of expenditure which can be claimed as deduction from the income of the assessee.
  3. There is a residuary section 37(1) under which the deduction can be claimed by the assessee. Section 37 (1) is the residuary provision which provides for the deduction of all expenditures laid out or expended wholly and exclusively for the purposes of the business or profession and not specifically or described in section 30 to 36 and not being in the nature of capital expenditure or personal expenditure of the assessee. Thus deduction under section 37(1) is a general deduction and as such all the expenses which are not deductible under the specific provisions are deductible under section 37(1).


Query 2]
Please refer to your reply to query made by Shri Shivdeo Gupta in Tax Talk column in the Hitavada dated 12-7-2010. You have mentioned in your opinion that investment under SSSC is eligible for deduction under section 80C and immediately below that the deposit made in Senior Citizen Savings Scheme is never eligible for deduction u/s 80C. I, being a senior citizen would like to have clarification from you on the above. Please elucidate. [satishtikekar@rediffmail.com]


  1. Investment in an account under the senior citizens Savings Scheme Rules-2004 & Five year time deposits in an account under the post office Time Deposits Rules-1981 is eligible for deduction u/s 80C.
  2. The Interest income from
    a) post office-MIS or
    b) Deposit made in the Senior citizen saving scheme is never eligible for deduction u/s 80C
  3. The second point as mentioned in the reply to query 1(2) dated 12.07.2010 is about interest income which is not eligible for deduction u/s 80C.


Query 3]
I am a diabetic patient. My wife too is a diabetic patient. I have to spend about Rs. 2,000/- to Rs. 3,000/- per month towards regular treatment/ precaution. I am not getting any medical aid/ reimbursement. Please advise if can claim this expenditure while filing my income tax return? If yes, up to what extent & under which section of the Income Tax Act? [A. Ambadas, Amravati]
  1. Deduction u/s 80DDB is available on expenses on medical treatment of diseases and ailments specified in Rule 11D of the Income Tax Rules, 1962.
  2. Diabetes is not cover under Rule 11D and so deduction cannot be claim u/s 80DDB.


Query 4]

Sir, Mr. X purchase the land on 1/6/2006 for Rs. 519000/- & complete the construction of house on 1/10/2007 for Rs 14,00,000/- & he sold house on 1/11/2009 for Rs 25,00,000/-.

In this case, indexation is allow in the case of land only and not on construction? Why? What are the provision regarding indexation. [sayl.wat@gmail.com]

  1. U/s 48 of the Income Tax Act-1961, while computing capital gain, Indexation benefit is available only on transfer of long term capital assets and not on transfer of short term capital assets.
  2. In the Instant case, Plot and Building are two separate and distinct capital assets while computing capital gain.
  3. Plot, in the given case, is a long term capital assets since it is hold for a period of more than 36 months prior to its transfer. House structure constructed thereon is a short term capital assets as its holding period doesn’t exceed 36 months.
  4. X need to bifurcate the sale consideration of Rs 25 Lacs in to two parts i.e., against plot and against House constructed thereon.

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