This Paper has 41 answerable
questions with 0 answered.
I—P7(ADT)
Syllabus 2008
Time Allowed : 3 Hours
Full
Marks : 100
The
figures in the margin on the right side indicate full marks
Answer
Question No. 1 which is compulsory and any five from the rest.
Working
notes should form part of the answer.
Wherever
required, the candidate can make suitable assumptions and
state the same clearly in the answer.
Marks
1.
(a)
State with reasons whether the
following statements are true or false (No credit will be given for mere
conclusions:)
2x7=14
(i)
For the purpose of transfer
pricing provisions, arm’s length price is determined by the taxpayer in
consultation with qualified accountant.
(0)
(ii)
As per section 194–C of the
Income-tax Act, 1961, all Association of Persons and Body of Individuals are
liable to deduct tax at source from specified payments made to resident
contactors.
(0)
(iii)
Where a person does basic
operations in lands and later sells the saplings grown by him in a nursery
owned by him, the same will be agricultural income. If the basic operations
are not done by the assessee and the saplings are sold in his nursery, the
same will still be regarded as agricultural income.
(0)
(iv)
Short–term capital gains arising
from sale of listed shares through a recognized stock exchange, for which
security transaction tax has been paid, will be charged to tax at a
concessional rate of 10%.
(0)
(v)
For the purposes of computing
minimum alternate tax(MAT) under section 115JB(2) of the Income–tax Act,
1961, the book profit need not be increased, by inter alia, the amount of
deferred–tax or provision for deferred–tax debited to the profit and loss account.
(0)
(vi)
A political partly is exempt from
paying wealth–tax.
(0)
(vii)
The maximum amount of penalty
leviable under section 18(1)(c) of the Wealth–tax Act, 1957, for concealing
the particulars of any asset chargeable to wealth–tax is five times the
amount of tax sought to be evaded.
(0)
(b)
Fill up the blanks:
1x4=4
(i)
As per section 2(ea)(i) the
Wealth–tax Act, 1957, "asset" means, inter alia, farmhouse situate
within _________ kilometers of only municipality.
(0)
(ii)
Service tax return can be revised
within a period of ________ days.
(0)
(iii)
Interest on refund on Income–tax
paid in excess is a _______ receipt.
(0)
(iv)
An assessee, after sale of house
property, receiving arrears or rent _________–(is/is not) chargeable to tax;
the same computed in the stipulated manner, is chargeable to tax as
____(income from other sources/income from house property).
(0)
(c)
Choose the correct answer:
1x7=7
(i)
Where the Karta is not available,
the return of wealth of a HUF can be signed by
(1)
Any adult member of the family;
(2)
Any adult coparcener of the
family;
(3)
The male member who is next in
seniority to the karta;
(4)
None of the above.
(0)
(ii)
The following is capital receipt:
(1)
Dividend from investments;
(2)
Bonus shares;
(3)
Sale of technological know–how;
(4)
Compensation received for
compulsory evacuation of place of business.
(0)
(iii)
In case of assesses other than
companies, the following is advance tax rate to be payable on or before of
15th September on the current fringe benefits.
(1)
15 per cent;
(2)
30 per cent;
(3)
45 per cent;
(4)
60 per cent.
(0)
(iv)
Cash gifts received under section
56(2)(vi) from non-relatives are not taxable upto
(1)
Rs.1,00,000;
(2)
Rs.75,000;
(3)
Rs.50,000;
(4)
Rs.25,000
(0)
(v)
Mr. A has three minor children
deriving interest from bank deposits to the tune of Rs.2,000, Rs.1,300 and
Rs.1,600 respectively. Exemption available under section 10(32) of the
Income–tax Act, 1961 is
(1)
Rs.4,900
(2)
Rs.4,300
(3)
Rs.4,500
(4)
None of the above.
(0)
(vi)
Miss Femina, aged 17, is married
to Mr. Masculine. Her mother alone is alive. Income by way of interest on
loans, of Miss Femina will be.
(1)
Assessed to tax in the hands of
Mr. Masculine;
(2)
Assessed to tax in the hands of
her mother;
(3)
Taxable in her own hands;
(4)
None of the above.
(0)
(vii)
Mr. X gifts Rs.60,000 to the HUF
of which he is member; said amount will be treated as income of
(1)
Mr. X;
(2)
The HUF;
(3)
None, as it is exempt;
(4)
None of the above.
(0)
2.
(a)
The Hyderabad Co–operative Society
has the following sources of income during the financial year 2008–09:
Income from processing with the
aid of power
Income from collective disposal of labour of its members
Interest from another Co-operative society
Chargeable income from house property
Income from other business
Rs.
Rs.
Rs.
Rs.
Rs.
8,000
15,000
25,000
60,000
55,000
Find its total income, showing the
computation under proper heads of income, and the tax payable, as per the
provisions of the Income–tax Act, 1961.
6
(0)
(b)
Discuss the consequence of
non–compliance of TDS provisions of the Income–tax Act, 1961.
5
(0)
(c)
Is commodities transaction tax a
permissible business expenditure? Explain.
4
(0)
3.
(a)
Write a brief note on deduction
available under section 80DD of the Income-tax Act, 1961.
6
(0)
(b)
Mrs. Vasudha is running a cotton
ginning factory. Raw cotton is grown in the lands owned by her and the same
is used for ginning in her factory. The ginned cotton is sold subsequently
for Rs.12,00,000. The following data are also available:
Rs.
Cost of cultivation
Selling price of raw cotton when sent to the ginning factory
Expenses of ginning factory
4,00,000
6,00,000
3,40,000
You are required to ascertain the
agricultural income and business income of Mrs. Vasudha.
5
(0)
(c)
The urban lands of Mr. A were
required by the State Government 10 years back and compensation was paid. Mr.
A took up the matter before the Court. Enhanced compensation of Rs.10 lakhs
was awarded by the Court in Februaty, 2008 and the same was received in May,
2008.
State the consequences under the Income-tax Act, 1961, showing clearly the
year of taxability. What will happen if Mr. A dies and Mr. L, his legal heir
receives the enhanced compensation?
4
(0)
4.
(a)
Discuss the provisions of the
Income–tax Act, 1961 with regard to interest payable by the Department on
refund.
5
(0)
(b)
M, N and O are partners in the
firm Upadhyay & Co. sharing profit and losses in the ratio of 2:1:1
respectively. The summarized profit and loss account for the year ended
31.03.2009 is given below:
Rs.
Rs.
Office salaries
Interest on loan from M
Telephone, telegram, etc.
Local taxes (let-out property)
Salary to working partner N
Commission to partners:
5,680
2,000
2,000
1,000
3,000
Gross profit
Rent received
Interest on securities
60,570
6,000
4,000
M
N
O
4,000
5,000
6,000
15,000
Collection charges of interest
on securities
Provision for bad debts
Net profit to partners:
50
1,000
M
N
O
20,420
10,210
10,210
40,840
70,570
70,570
Compute total income of the firm
for the assessment year 2009–10 and tax payable thereon.
10
(0)
5.
(a)
Mr. Y
submits the following particulars for the year ended 31.03.2009:
(i)
On 30.04.2008, when he attained
the age of 60, his friends gave him a new flat at Surat, each contributing
Rs.40,000 in cash. The cost of the flat was Rs.6.4 lakhs.
(ii)
Another friend sent cash gift of
Rs.75,000 for the occasion.
(iii)
Mr. Y sold the flat on
30.01.2009 for Rs.8.9 lakhs. The Registrar’s valuation for stamp duty
purposes was Rs.9.2 lakhs. Neither the buyer, nor Mr. Y questioned this
value.
(iv)
He had purchased equity shares
in X Ltd. On 05.02.2008 for Rs.3.5 lakhs. These were sold on 15.03.2009 for
Rs.2.8 lakhs.
(v)
He has paid life insurance
premium of RS.90,000 for his major son who is not dependent on him.
You are
required to calculate the total income of Mr. Y for the assessment year
2009–10. Cost inflation indices are 551 for financial year 2007–08 and 582
for financial year 2008–09.
7
(0)
(b)
State
briefly the exemptions available under section 5 of the Wealth–tax Act.1957.
6
(0)
(c)
Mr. A, is
engaged in retail trade and is a distributor for the products of Mr. X. In
appreciation of high turnover effected by Mr. A, Mr. X presented him a new
car worth Rs.4 lakhs. Discuss the exigibility to tax of the above receipt in
the hands of Mr. A.
2
(0)
6.
(a)
The
following details of income of Mr. X and his wife , for the assessment year
2009–10 are made available to you:
Mr.
X
Rs.
Mrs.
X
Rs.
Income from own
business/profession
Income from other sources
Interest received from Z & Co.
Salary received form Z & co.
1,20,000
2,10,000
20,000
96,000
90,000
1,10,000
4,10,000
84,000
Mr. X and
Mrs. X are partners in Z & Co. each having 10% share in profits.
Determine the total income of Mr. X and Mrs. X.
Will your answer be different, (a) If each one of them hold 8% shares in
profits of Z & Co.? (b) If Mr. X and Mrs. X both possess professional
qualifications.
11
(0)
(b)
Can
income–tax return be filed through computer readable media?
4
(0)
7.
Write
short notes on any three of the following:
5x3=15
(a)
Amendment
by the Finance Act, 2008 to "Charitable purpose" as defined in
section 2(15) of the Income tax Act, 1961;
(0)
(b)
Reverse
mortgage and its income–tax implications;
(0)
(c)
Advance
payment of service tax and its subsequent adjustment;
(0)
(d)
"Employer"
for FBT purposes;
(0)
(e)
Factors
affecting determination of the most appropriate method in arriving at Arm’s
Length Price in transfer pricing regulations.
(0)
8.
(a)
Is there
any option available to a service provider to pay a lower rate of service
tax, based on the gross amount, in relation to purchase or sale of foreign
currency? Brifly explain.
3
(0)
(b)
Janak
Ltd., is an associated enterprises of Takoya Inc., Tokyo; the latter has a
permanent establishment in India. This company rendered service to Janak Ltd.
For which tax was deducted at source and remitted. The Arm’s Length Price of
Takoya Inc. was recomputed during the course of transfer pricing assessment.
Janak Ltd. Wants to know whether there will be a corresponding re–computation
in its hands also. Advice.
2
(0)
(c)
Discuss
whether the following payments are permissible as business expenditure:
(i)
For an existing business on
10.05.2008, and assessee had borrowed Rs.25 lakhs for acquiring a
machinery. Interest paid Rs.1,10,000/–. The machinery was not put to use
during the year ended 31.03.2009.
(ii)
Payment of Rs.60,000/– was made
to a Don for ensuring that the employees will not indulge in strike. The
Don had threatened initiating a labour strike.
2x2=4
(0)
(d)
Distinguish
between Association of persons and Body of Individuals as envisaged in the
Income-tax Act. 1961.
2
(0)
(e)
Is it
possible for the net annual value of a house property to be negative? What
will be tax treatment if income under the head "income from house
property" is negative?
This Paper has 44 answerable
questions with 2 answered.
I—P7(ADT)
Syllabus 2008
Time Allowed : 3 Hours
Full
Marks : 100
The
figures in the margin on the right side indicate full marks
Answer
Question No. 1 which is compulsory and any five from the rest.
Working
notes should form part of the answer.
Wherever
required, the candidate can make suitable assumptions and
state the same clearly in the answer.
Marks
1.
(a)
Fill up the blanks:
7
(i)
Sec. 139(1) applies to all persons
whether they are _____________ or ________________.
(1)
(ii)
Receipts from TV serial shooting
in Farm house ____________ agricultural income.
(1)
(iii)
Sec. ______________ defines
various income which are chargeable to tax under the head “Profits and gains
of business or profession ”
(0)
(iv)
For the applicability of clubbing
provisions of the Wealth Tax Act,
1957, the expression ‘child’ includes _______ child and __________ child.
(0)
(v)
The rate of tax in case of Minimum
Alternate Tax has been increased to _______ % with effect from Assessment
year 2010—11.
(0)
(vi)
The basis of chargeability under
the head ‘ income from house property ’ is _________.
(0)
(vii)
_____________ salary is taxable,
while ________________ against salary is not taxable.
(0)
(b)
(i)
“Capital Gains arises on sale of
Capital Assets” is — Comment.
2x5
(0)
(ii)
Income earned by an Association of
Trade Unions is not taxable.— Comment.
(0)
(iii)
Non–allowing of interest to
rectification order is appealable.– Discuss.
(0)
(iv)
Undertaking in the context of
“DEMARGER COMPANY” indicates any part of undertaking or a unit or division of
an undertaking or a business activity taken as a whole including individual
assets or liabilities or combination of both.—Comment.
State with reasons whether the
following statements are True or False(answers without reasoning will not
receive any credit):
1x8
(i)
An assessee owns 11 trucks. One
truck is always kept as a spare vehicle and is never plied on the road. Since
only 10 vehicles are piled on the road at any given point of time, the
provisions of section 44AE of the Income Tax Act, 1961, can be availed by the assessee.
(0)
(ii)
Mr. Janak has received as gift,
gold bullion bars worth Rs. 70,000 from his friend on his birthday on
15.3.2010. The same is not to be treated as income from other sources.
(0)
(iii)
Mr. Saravanan follows mercantile
system of accounting. On 13.3.2010, he has received from the State
Government, in respect of lands acquired, interest on enhanced compensation
of Rs. 1,50,000 which includes a sum of Rs. 20,000 relatable to this year.
The amount assessable is Rs. 20,000.
(0)
(iv)
The period for setting off the MAT
credit under section 115JB is seven years.
(0)
(v)
The rate of TDS applicable for
payment made on 28.2.2010 to non-individual sub-contractor, as per section
194C, is 2%.
(0)
(vi)
Only in the TDS certificate
furnished by the deductor, quoting the PAN of deductor is compulsory and not
in other correspondences between the deductor and the deductee.
(0)
(vii)
An individual himself has to sign
the return of wealth and whatever be the contingency, cannot authorize
another persons to sign on his behalf.
(0)
(viii)
A company owns a plot of urban
land comprising of area of 500 square metres. Exemption is not available in
respect of this asset under the provision to section 5(vi) of the Wealth Tax
Act, 1957.
(0)
2.
(a)
Discuss whether the expenditure
incurred by an assessee to remove an encumbrance be claimed as a deduction
under section 48, while computing the capital gains, in the following cases:
(i)
Where the mortgage was created
by the assessee himself;
(ii)
Where the mortgage was created
by the previous owner.
5
(0)
(b)
Ramesh an individual, is engaged
in manufacture of fertilizers. He is following mercantile system of
accounting. He borrowed loans from Tamil Nadu Industrial Development
Corporation and Indian Bank and has not paid interest as detailed below:
Rs.
(i)
Tamil Nadu Industrial
Development Corporation
(P.Y.2008—09 & 2009—10)
15,00,000
(ii)
Indian Bank (P.Y. 2009—10)
30,00,000
45,00,000
Both Tamil Nadu Industrial
Development Corporation and Indian Bank, while rephasing the loan facilities
of Ramesh during the year ended 31.3.2010, converted the above outstanding
interest due to them from Ramesh as a loan repayable in 30 equal installments.
During the year ended 31.03.2010, Ramesh paid 4 installments to Tamil Nadu
Industrial Development Corporation and 3 installments to Indian Bank.
Ramesh claimed the entire interest
of Rs. 45,00,000 as an expenditure with computing the income from fertilizer
business. Discuss whether his claim is valid and if not what amount of
interest, if any, allowable, while computing the business income.
6
(0)
(c)
What are the due dates for filing
the return of incomes as envisaged by section 139(1) of the Income Tax Act. 1961?
4
(0)
3.
(a)
During the year ended 31.3.2010,
Mr. Subramani has following income and the brought forward losses:
Particulars
Rs.
Short—term capital gain on sale
of shares
Long—term capital loss of A.Y.2008—09
Short—term capital loss of A.Y.2009—10
Long—term capital gain
Income from lotteries
Cost of lottery tickets purchased
Loss from betting
Income from card games
Briefly compute the gross total
income and loss eligible for carry forward in the hands of Mr. Subramani for
the A.Y.2010—11.
7
(0)
(b)
Discuss the allowability of the
following expenditure while computing income under the head ”Profit and gains
of business or profession”
(i)
Expenses incurred on partly
convertible debentures, and
2
(0)
(ii)
Expenditure incurred on MS office
software.
2
(0)
(c)
(i)
If two or more persons jointly own
a property and if their shares are definite and ascertainable, can the income
from such property be taxed as income of an association of persons?
2
(0)
(ii)
Where an urban agricultural land
owned by an individual, continuously used by him for agricultural purposes
for a period of two years prior to the date of transfer, is compulsorily
acquired under law and the compensation is fixed by the State Government, is
the resultant capital gain chargeable to tax?
2
(0)
4.
(a)
Mr. Srinivasan, aged 66 years,
furnishes the following particulars for the year ending 31.3.2010:
(i)
Life Insurance premium paid Rs.
40,000, actual capital sum of the policy assured for Rs. 1,50,000;
(ii)
Contribution to Public Provident
Fund Rs. 50,000 in the name of father;
(iii)
Tuition fees payment Rs.5,000
each for 3 sons pursuing full time graduation course in Mumbai; Tuition fee
paid for daughter pursuing Ph.D. in Melbourne University, Australia Rs.
3.50 lakhs;
(iv)
Housing loan principal repayment
Rs. 30,000 to HDFC Bank. This property is under construction at Bangalore
as on 31.03.2010;
(v)
Principal repayment of housing
loan taken from a relative Rs. 60,000. The property is self—occupied and
situated at Chennai;
(vi)
Deposit under Senior Citizens
Savings Scheme Rs.15,000;
(vii)
Five year deposits in an account
under Post Office Time Deposit Scheme Rs. 20,000;
(viii)
Investment in National Saving
Certificate Rs. 25,000;
(ix)
Subscription to bonds issued by
NABARD Rs. 30,000.
Compute the quantum of eligible
deduction under section 80C of the Income Tax Act, 1961 for A.Y.2010—11.
7
(0)
(b)
Briefly explain marginal relief
allowable while computing tax payable by certain assessees.
3
(0)
(c)
Discuss whether there is any
exemption for voluntary contributions received by electoral trusts, Can an
assessee giving such donation claim the same as deduction?
5
(0)
5.
(a)
Compute
the total income of Mr. Pankaj Dhimani from the information given below:
Particulars
Rs.
Net income for house property
Income from business(before providing for depreciation)
Short—term capital gain on sale of shares
Long—term capital loss from sale of property (brought forward A.Y.2009—10)
Income from integrated activities of growing tea crops and manufacturing
tea
Dividends from Indian companies carrying on agricultural operations
Current year depreciation
Brought forward business loss(loss incurred six years ago)
Expenditure incurred on medical treatment of dependant with severe
disability
Is it
correct to say that section 50C can be invoked only in situations in which
transfer of land building or both takes place through a registered deed of
conveyance and that the section cannot be invoked where the no registered
deed of conveyance, like in power of attorney transactions and agreements to
sell?—Discuss.
4
(0)
(c)
What are
the due dates for payment of advance income tax by corporate assessees?
4
(0)
6.
(a)
Kidwai
Club is a private members club which provides entertainment to its members by
offering accommodation, library, reading room, etc. The club also earned income by letting out its marriage
hall to non—members by making them as temporary members. The club contends
that the “doctrine of mutuality” would apply in such a case and hence, its
income would not be taxable. Discuss the correctness or otherwise of the
contention of the assessee club.
4
(0)
(b)
Mrs.
Hemalatha, working in a public sector company, opted for voluntary retirement
scheme and received Rs. 7 lakhs as VRS compensation. she claimed relief under
section 10(10C) and in respect of the balance amount of Rs. 2 lakh, she
claimed under section 89(1). Advise Mrs. Hemalatha as to correctness of the
aforesaid tax treatment.
7
(0)
(c)
In the
following cases, state the head of income under which the relevant receipt is
to be assessed, along with reasons:
(i)
Vibhisana let out his property
to Bharath. Bharath sublets it. How is subletting receipt to be assessed in
hands of Bharath?
(ii)
Ashok has constructed a house on
a leasehold land. He has let–out the said property and has treated the rent
from such property under the head "Income from other sources" and
deducted expenses on repairs, security charges, insurance and collection charges
in all amounting to 35% of receipts.
2+2
(0)
7.
Write
short notes on any three of the following:
5x3
(a)
Capital
gains on buy back of shares;
(0)
(b)
Restriction
under section 79 of the Income Tax Act, 1961 for carry forward and set off
losses in case of certain companies;
(0)
(c)
Deduction
under section 80RRB of Income Tax Act, 1961 towards royalty of a patient;
(0)
(d)
Wealth
escaping assessment;
(0)
(e)
Liability
of charitable trusts under Wealth Tax Act, 1957.
(0)
8.
(a)
Royal
Construction Ltd., engaged in promoting residential houses, flats, etc.
furnishes the following particulars of its wealth as on 31st March, 2010;
Particulars
Rs.
Land in rural area(within 7 kms.
from the local limits of a municipality) on which construction is
permissible
45,00,000
Land in urban area (on which
construction is not permitted)
35,00,000
Land in urban area (held as
stock—in—trade for 8 years)
35,00,000
Motor cars(including one
imported car worth Rs. 5 lakhs)
12,00,000
Gold jewellery
21,00,000
Shares in private limited
companies
9,20,000
Cash at bank
2,30,000
Guest house and land appurtenant
thereto in rural area
12,00,000
Cash in hand
45,00,000
Residential flats of identical
size provided to three employees for their use near factory in rural
area(Salaries of one such employee exceed Rs. 5,00,000 p.a.)
27,00,000
Residence provided to Managing
Director
(whose salary is Rs. 8,00,000 p.a.)
22,00,000
Flats constructed remaining
unsold
40,00,000
The company has taken the
following loans:
For purchase of gold jewellery
10,00,000
For flats constructed remaining
unsold
10,00,000
Compute the Company‘s net wealth
as on 31.3.2010. (Brief note on treatment of each item is required).
