Question

What are the four conditions that must exist before an expenditure qualifies as a trade or business expense

Answer 1

Following conditions must exist before an expenditure can be claimed as trade or business expenditure -

1) Not a peresonal expenditure - An expenditure incurred by the business should not be for the benefit of the individual, rather it should be beneficial to the business.

2) Not a capital expenditure - Any capital expenditure incurred by the business dosen't qualifies as a trade expense. Rather it is capitalized in the books and amortised over its useful life.

3) Should be a legal expenditure - The expense should be a legal expenditure i.e. expenses like bribe are not eligible trade expenses.

4) Should not be specifically disallowed - Sometimes, the expenditure is specifically disallowed is tax laws that it won't be considered as an eligible trade expense. So such an expenditure should not be allowed as business expense.