law: Companies Act, 2013 
  198.
  
    Calculation
  
  of profits.
  1.      In computing the net
  
  profits of a company in any financial year for the purpose of section 197,Ś
  a.     
  
    credit
  
  shall be given for the sums specified in sub-section (2 ), and credit
  
  shall not be given for those specified in sub-section (3 ); and
  b.    
  
    the
  
  sums specified in sub-section (4 ) shall be deducted, and those specified
  
  in sub-section (5 ) shall not be deducted.
  1.     
  2.      In making the
  
  computation aforesaid, credit shall be given for the bounties and subsidies
  
  received from any Government, or any public authority constituted or authorized
  
  in this behalf, by any Government, unless and except in so far as the Central
  
  Government otherwise directs.
  3.      In making the
  
  computation aforesaid, credit shall not be given for the following sums,
  
  namely:Ś
  a.     
  
    profits,
  
  by way of premium on shares or debentures of the company, which are issued or
  
  sold by the company;
  b.    
  
    profits
  
  on sales by the company of forfeited shares;
  c.     
  
    profits
  
  of a capital nature including profits from the sale of the undertaking or any
  
  of the undertakings of the company or of any part thereof;
  d.    
  
    profits
  
  from the sale of any immovable property or fixed assets of a capital nature
  
  comprised in the undertaking or any of the undertakings of the company, unless
  
  the business of the company consists, whether wholly or partly, of buying and
  
  selling any such property or assets:
  Provided
  
  that where the amount for which any fixed asset is sold exceeds the
  
  written-down value thereof, credit shall be given for so much of the excess as
  
  is not higher than the difference between the original cost of that fixed asset
  
  and its written down value;
  a.     
  
  
  b.     
  
  
  c.     
  
  
  d.     
  
  
  e.     
  
    any
  
  change in carrying amount of an asset or of a liability recognised in equity
  
  reserves including surplus in profit and loss account on measurement of the
  
  asset or the liability at fair value.
  1.     
  2.     
  3.     
  4.      In making the
  
  computation aforesaid, the following sums shall be deducted, namely:Ś
  a.     
  
    all
  
  the usual working charges;
  b.    
  
    directorsÆ
  
  remuneration;
  c.     
  
    bonus
  
  or commission paid or payable to any member of the companyÆs staff, or to any
  
  engineer, technician or person employed or engaged by the company, whether on a
  
  whole-time or on a part-time basis;
  d.    
  
    any
  
  tax notified by the Central Government as being in the nature of a tax on
  
  excess or abnormal profits;
  e.     
  
    any
  
  tax on business profits imposed for special reasons or in special circumstances
  
  and notified by the Central Government in this behalf;
  f.     
  
    interest
  
  on debentures issued by the company;
  g.    
  
    interest
  
  on mortgages executed by the company and on loans and advances secured by a
  
  charge on its fixed or floating assets;
  h.     
  
    interest
  
  on unsecured loans and advances;
  i.      
  
    expenses
  
  on repairs, whether to immovable or to movable property, provided the repairs
  
  are not of a capital nature;
  j.      
  
    outgoings
  
  inclusive of contributions made under section 181;
  k.     
  
    depreciation
  
  to the extent specified in section 123;
  l.      
  
    the
  
  excess of expenditure over income, which had arisen in computing the net
  
  profits in accordance with this section in any year which begins at or after
  
  the commencement of this Act, in so far as such excess has not been deducted in
  
  any subsequent year preceding the year in respect of which the net profits have
  
  to be ascertained;
  m.   
  
    any
  
  compensation or damages to be paid in virtue of any legal liability including a
  
  liability arising from a breach of contract;
  n.     
  
    any
  
  sum paid by way of insurance against the risk of meeting any liability such as
  
  is referred to in clause (m );
  o.    
  
    debts
  
  considered bad and written off or adjusted during the year of account.
  5.      In making the
  
  computation aforesaid, the following sums shall not be deducted, namely:Ś
  a.     
  
    income-tax
  
  and super-tax payable by the company under the Income-tax Act, 1961, or any
  
  other tax on the income of the company not falling under clauses (d ) and
  
  (e ) of sub-section (4 );
  b.    
  
    any
  
  compensation, damages or payments made voluntarily, that is to say, otherwise
  
  than in virtue of a liability such as is referred to in clause (m ) of
  
  sub-section (4 );
  c.     
  
    loss
  
  of a capital nature including loss on sale of the undertaking or any of the
  
  undertakings of the company or of any part thereof not including any excess of
  
  the written-down value of any asset which is sold, discarded, demolished or
  
  destroyed over its sale proceeds or its scrap value;
  d.    
  
    any
  
  change in carrying amount of an asset or of a liability recognised in equity
  
  reserves including surplus in profit and loss account on measurement of the
  
  asset or the liability at fair value.