A Research Report Submitted to Mzumbe University – Mbeya Campus College in Partial Fulfillment of Requirements for Award of Bachelor Degree of Laws (LLB) of Mzumbe University Mbeya Campus Collage.This research discusses the “The general principles relating to deduction of expenditure incurred wholly and exclusively in the production of income, the law and practice”. The research has five chapters in which chapter one gives the general introduction of the research study including background of the problem, statement of the problem which the researcher is investigating on the concept of deduction of expenditure incurred wholly and exclusively in the production of income in relation to taxation of income from business, general objective of the study which is to analyze the general principles relating to deduction of expenditure incurred wholly and exclusively, and specific objective of the study is to analyze the awareness on such deductions and the efficacy of the law. The methodology which was involved in collecting, presenting, and analyzing data was mainly interview and questionnaire where qualitative and quantitative methods were used and documentary review where sampling was made purposively. In chapter two it includes conceptual frame work on the principles regarding deduction of expenditure incurred wholly and exclusively in the production of income in mainland Tanzania. Chapter three discussed legal and institutional frame work governing deduction of expenditure incurred wholly and exclusively in the production of income. Chapter four discusses data presentation, analysis, and findings. The researcher reveals that the deduction of expenditure incurred wholly and exclusively can create tax avoidance and also it may shift burden to taxpayers. Chapter five is all about conclusion and recommendations. The researcher recommend that; there shall be emphasize on the keeping records of the business, the use of EFD machines in business transactions, the review on the concepts of wholly and exclusively, consideration on the nature of business and expenditure incurred, and education to taxpayers. The study proves that; the principles on deduction of expenditure incurred wholly and exclusively and practice in the production of income are not favorable in both to the taxpayers in paying tax and also it creates a room for the taxpayers to avoid tax or to reduce their liability to tax.