Section 27 is the framework provision establishing the methodology for computing PGBP income — by reference to ss. 28-44, the ensuing computational provisions for deductions / disallowances / depreciation / cost / valuation. STATUTORY…
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ITA 2025 · Section 27
Section 27 — MANNER OF COMPUTING PROFITS AND GAINS OF BUSINESS OR PROFESSION
Section 27 is the framework provision establishing the methodology for computing PGBP income — by reference to ss. 28-44, the ensuing computational provisions for deductions / disallowances / depreciation / cost / valuation.
STATUTORY ARCHITECTURE
Section 27 is a bridge provision. Computation proceeds via the following structure: Gross receipts → Less: deductions u/ss 28-32 (rent, employee, premium, bad debt, other) → Less: depreciation (s. 33) → Subject to general conditions (s. 34) and specific disallowances (ss. 35-37) → Plus: deemed receipts (s. 38) → Plus: cost / WDV adjustments (ss. 39-41) → Plus: forex (ss. 42-43) → Less: amortisation / specialised deductions (ss. 44-66).
JUDICIAL EVOLUTION — Method of Accounting
CIT v. Bilahari Investment (P.) Ltd., (2008) 299 ITR 1 (SC) — held that the assessee's regularly-employed method of accounting (mercantile / cash) governs PGBP computation u/s 145 of 1961 Act (preserved as s. 29 of 2025 Act). The AO can only reject the books if defects render true profit incomputable.
PLANNING NOTES
(i) Document method of accounting in audited financials and Form 3CD; consistency across years is critical. (ii) For real-estate / construction / long-gestation businesses, evaluate AS-7 / Ind-AS 115 percentage-completion vs. completed-contract method — once chosen, change requires CBDT approval. (iii) For ICDS departures, disclose in Form 3CD; adjustments flow into computation.
CROSS-REFERENCES