CAF-2 · Chapter 11 · Question 11 of 15
Mr. Ahmed cultivates cotton on his own agricultural land and uses it as raw material in his textile factory. The market value of the cotton at the time it was used in the factory was Rs. 2,000,000, but his actual cost of cultivation was Rs. 1,200,000. For the purpose of computing his 'Income from Business', what amount will be allowed as a deduction for this raw material?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) B) Rs. 2,000,000 (Market value)
Explanation
Rule 11 states that where a person uses their own agricultural produce as raw material in their business, the *market value* of the agricultural produce at the time it is used is allowed to be deducted from business income.
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