Which business expense is generally allowable as a deduction when computing business income under the ordinary principle of business taxation?
Correct answer: B. An expense incurred wholly for business purposes
- A. A private household expense of the owner
- B. An expense incurred wholly for business purposes
- C. A personal gift given by the proprietor
- D. A penalty imposed for breaking the law
Explanation
An expense incurred wholly and exclusively for business purposes is generally considered deductible, subject to the relevant tax law and documentation. Personal expenses and many penalties do not qualify merely because they are paid by the business owner.
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About Taxation
Taxation covers the principles used to assess and collect taxes from individuals, businesses and transactions, with emphasis on income tax and sales tax concepts in Pakistan. Questions involve taxable income, exemptions, deductions, tax liability, withholding, returns, assessment, tax avoidance versus evasion, and the distinction between direct and indirect taxes.
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