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MF0012

MF0012

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Published by Kusum Ahuja

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Published by: Kusum Ahuja on Dec 16, 2012
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Master of Business Administration - MBA Semester 3Subject Code – MF0012Subject Name – Taxation Management4 Credits(Book ID: B1210)Assignment Set- 1 (60 Marks)
Q.1 Tax evasion is a menace to the people, economy and the country. In the wakeof recent Swiss bank account scandal give your views on the following:a. How does it affect the Indian economy and the growth prospects?b. Does black money cause Inflation?Answer:
Tax evasion is sheer non-payment of tax even when it is due to be paid in thecircumstances of the case. It should be remembered that while tax planning is perfectlylegal, Tax Evasion is illegal and can result into penalties and prosecution for theperpetrator. When financial transactions are arranged in a way that it becomes obviousthat they were entered with a malafide intention of either not paying taxes or with a viewto defeat the genuine spirit of law, they cannot be accepted as legitimate Tax Planning.Twisting of facts or taking a very strict and literal interpretation of law withoutunderstanding the basic purpose of the law can only lead to punishable offence.
a. Swiss bank account scandal affects the Indian economy and the growth
asfollows:1. Substantial loss of much needed public revenue, particularly a welfare state like ours.2. Serious disturbance caused to the economy of the country by piling up of blackmoney directly causing inflation.3. Large hidden loss to the community by some of the best brains in the country beinginvolved in the perpetual war waged between tax avoider and his expert team of advisers, lawyers, and accountants on one side, and the Tax adviser and his perhapsnot so skilful advisers on the other side.4. Sense of injustice and inequality which tax avoidance arouses in the breasts of thosewho are unwilling or unable to profit by it.5. Ethics (or lack of it) of transferring the burden of tax liability to the shoulders of guideless, good citizens from those of artful dodgers. As to the ethics of Taxation, the learned judge observed: We now live in a welfare Statewhose financial needs, if backed by the law, have to be respected and met. We mustrecognize that there is behind taxation laws as much moral sanction as behind any
 
other welfare legislation and it is pretence to say that avoidance of taxation is notunethical and that it stands on no less moral plane than honest payment of taxation.
b.
Yes, Serious disturbance caused to the economy of the country by piling up of blackmoney directly causing inflation.
Q.2 Detail death cum retirement gratuity under Sec 17(1)iii of IT Act. Iscommutation of pension a viable option in terms of tax planning?Answer: 
 
 Tax planning:
If an employee is due for retirement shortly, it is better to go for commutation of pension as per the above stated rules. Because pension (un-commuted) received by all employees (govt. and non govt.) during their life time isincluded in the salary income and chargeable to tax.
Q.3 Explain the essential conditions to be satisfied by a firm to be assessed asfirm under Section 184.Answer:
Essential conditions to be satisfied by a firm to be assessed as firm (Section184)
1.
In the first assessment year:
The firm will be assessed as a firm, also known as„Firm Assessed as Such
(FAAS) if the following conditions are satisfied:(a) Partnership is evidenced by an instrument i.e. there is a written document giving theterms of partnership.(b) The individual share of the partners is specified in that instrument.(c) Certified copy of partnership deed must be filed: A certified copy of the saidinstrument of partnership shall accompany the return of income in respect of theassessment year for which the assessment as a firm is first sought.Where certified copy is not filed with the return there is no provision for condonation of delay. However where the return itself is filed late then there is no problem if thecertified copy is filed along with such return as the condition that it shall accompany thereturn of income is satisfied.Further Delhi ITAT in the case of 
Ishar Dass Sahini & Sons v CIT 
held that whereuncertified Photostat copy of the instrument of partnership is submitted along with thereturn of income and the certified copy is produced at the time of assessment, it willsatisfy this condition.2.
In the subsequent assessment years:
If the above three conditions are satisfiedthe firm will be assessed as such (FAAS) in the first assessment year. Once the firm isassessed as firm for any assessment year, it shall be assessed in the same capacity for every subsequent year if there is no change in the constitution of the firm or the share of the partners.

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