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When a business concern requires a product or any part or...

This question belongs to Commerce Income Tax And Corporate Tax
Income Tax and Corporate Tax
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When a business concern requires a product or any part or component of the product for its existing unit, it has to decide whether it should make the product or buy it from other manufacturers. Various tax considerations with respect to these decisions are:
1. If the organization has surplus capacity and even decide to buy a product it may require to sell surplus plant and machinery. In such a case it may be liable to capital gains tax.
2. If a new undertaking is established to make the product which fulfils the conditions of section 80-IB/80-IC of the Act, a deduction is allowed to such undertakings.
3. If the product is a capital asset, its cost will not be allowed as a deduction in computing the income in both cases. But in both cases, the organization can claim depreciation.

Answer & Solution
Correct Answer: Option D
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