QUESTION BANK TAX PLANNING UNIT - I

I (a) Test Your Skills: State Whether the Following Statements are True or False:

Introduction 1 A person may not have assessable income but may still be assessee. 2 In some cases assessment year and previous year can be same financial year. 3 SHEC is half of the education cess. Residential status 4 A resident in India cannot become resident in any other country for the same assessment year. 5 A foreign company is always non-resident in India. Heads of Income 6 Salary received by the partner from the firm in which he is a partner is taxable under the head salary. 7 Municipal tax is a deduction from net annual value. 8 Cost of acquisition is always indexed if there is any long term capital gain. 9 Interest on securities is always taxable under the head Income from Other Sources. (b) Multiple Choice Questions:

Introduction 1 Income tax extends to: (a) Whole of India (b) Whole of India except Jammu and Kashmir (c) Whole of India except Sikkim (d) Whole of India except Jammu and Kashmir and Sikkim 2 A.O.P should consist of: (a) Individuals only (b) Persons other than individuals only (c) Both the above 3 Education cess is leviable on: (a) Income tax (b) Income tax + surcharge (c) Surcharge

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Residential status 4 Residential status is to be determined for: (a) Previous year (b) Assessment year (c) Accounting year 5 Total income of a person is determined on the basis of his: (a) Residential status in India (b) Citizenship in India (c) None of the above (d) Both of the above Heads of income 6 Gratuity shall be fully exempt in the case of: (a) Central and State Govt. employee (b) Central and State Govt. employees and employees of local authorities (c) Central and State Govt. employees and employees of local authorities and employee of statutory corporation. 7 X has two house properties. Both are self-occupied. The annual value: (a) of both house shall be nil (b) one house shall be nil (c) of no house shall be nil 8 Where a company purchases its own shares there will be capital gain to the: (a) Company (b) Shareholder (c) Neither to the company nor to the shareholder (d) Both to the company and the shareholder 9 Preliminary expenses incurred are allowed deduction in (a) 10 equal instalments (b) 5 equal instalments (c) full 10 Brought forward unabsorbed capital expenditure on scientific research can be carried forward : (a) for any number of years (b) 8 years (c) 10 years (c) Fill in the Blanks:

Introduction 1 Previous year means the __________ ___________ immediately proceeding the assessment year. 2 A person leaves India permanently on 15-7-2010. The assessment year for income earned till 15-7-2010 in this case shall be __________.

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Residential status 3 Income which accrue or arise outside India from a business controlled from India is taxable in case of ______________. 4 A Ltd. is a foreign company whose part of control and management of its affairs is situated outside India. A Ltd. shall be ____________. Heads of Income 5 Monthly pension received by a govt. employee is _____________. 6 Interest on capital borrowed for repairs of self-occupied house property is deductible to the maximum extent of __________. 7 Total income for A.Y. 2011-12 of an individual including long term capital gain of Rs. 60,000 is Rs. 1,90,000. The tax on total income shall be _________. 8 Salary, bonus, commission or remuneration due to or received by a working partner from the firm is taxable under he head _____________. 9 A firm’s business income is nil/negative. It shall still be allowed a deduction on account of remuneration to working partner to the extent of _____________. 10 The lottery, cross word puzzle, races, card games income, etc. are taxable at the rate of ________. II Short Answer Type Questions:

Introduction 1 Define the term ‘Income. 2 Write short note on person as defined in the Income Tax Act. 3 Define assessee. 4 State with reasons whether the following companies are those in which public are substantially interested: (i) X Ltd. is a public company with a share capital of Rs. 3,00,000. It consists of 20,000 equity shares of Rs. 10 each and 1,000 - 8% Preference Shares of Rs. 100 each. Of this 5,000 equity shares and 900 preference shares are held by Govt. of India. (ii) A Ltd., a private company, has issued 15,000 equity shares of which 4,000 are held by 2 directors, 500 by another director, 2,500 by two public men and balance 8,000 by forty persons equally. (iii) B & Co. Ltd., whose shares are listed on Mumbai Stock Exchange. (iv) Z & Co. Ltd. is registered u/s 25 of the Indian Companies Act, 1956 for promotion of commerce. It has been detected that it distributes a part of its profits to its members.

Residential Status 5 Write short note on income received in India. 6 ‘A’ was born in Dhaka in 1945. He has been staying in Canada since 1974. he comes to visit India on 13-10-2009 and returns on 29-3-2010. Determine his residential status for assessment year 2011-12. Heads of Income 7 “Salary is taxable either on due basis or on receipt basis.” Discuss. 8 Distinguish between a recognized provident fund and unrecognized provident fund. 3

Define annual value. Discuss the tax treatment with the help of a simple illustration. a foreign citizen. 2011-12.” Do you fully agree with this statement? If not. (ii) Mrs. (iii) During 2004-05 and 2003-04. State the main incomes which are included under this head. Distinguish between short term capital gain and long term capital gain. 9 What do you understand by ‘Income from other sources’. when a house property is owned by two or more persons. 10 Explain the provisions relating to taxation of winning from lotteries and horse races. X is resident in India for A. stayed in India for just 69 days. 8 Although there is a transfer of capital asset and there are capital gains. Explain the concept of grossing up. Determine his residential status for the A. 7 Indexed cost of acquisition is not required for computation of long term capital gain. with the help of examples.9 10 11 12 13 14 III Write short note on unrealized rent. 2011-12 on the basis of the following information: (i) During 2007-08. X was in Japan for 359 and 348 days respectively and for the balance period in India. X. 5 Ownership itself is the criterion for assessment under the head ‘Income from House Property’. Discuss. List some incomes to be included under the head ‘Income from other sources’. Write short note on capital asset. 4 . Discuss. 6 Discuss the tax treatment. 3 How does the tax liability of a not ordinarily resident person differ from that of a resident and ordinarily resident person under the Income Tax Act? Explain. X was present in India for 365 days. what are the exceptions? Residential Status 2 The residential status is determined for each category of persons separately. Long Answer Type Questions: Introduction 1 “Income tax is charged on income of the previous year. Heads of Income 4 What is “transferred balance” when unrecognized provident fund is recognized. Discuss in detail how would you determine the residential status for each category.Y. Computation of taxable income 11 Explain in detail the procedure for computation of income of an individual.Y. but they are exempt from tax. IV Practical Questions: Residential Status 1 During the previous year 2010-11.

Detail Rs. 80% of the total income of the company is from the business in London. (3) non-resident. 2011-12 on the basis of the following information: (i) During 2009-10. X during the financial year 2010-11.45.75.000 remitted to India e) Interest from deposits with an Indian company received in 40. S. The entire control and management of A Ltd. No.000 h) Interest payable by Punjab Government. What is the residential status of A Ltd.2 A Ltd.00.000 c) Income from a business in Bangalore controlled from USA 3. determine his total income for the assessment year 2011-12 if he is (1) resident and ordinarily resident. Detail Rs.20. During the previous year 2010-11.000 previous year f) Income from agricultural land in Nepal received there and then 30. (iv) Earlier to 2003-04. he had been regularly coming to India for 100 days every year.000 received there The following are the particulars of income of X for the previous year 2010-11. S.000 USA f) Profits for the year 2008-09 of a business in USA remitted to 1. a) Capital gain on sale of property in Delhi received in USA 1. X.000 in India d) Income from property situated in Pakistan received there 20. received in USA 1. 12.000 b) Income from a business in USA controlled from Delhi 2.80.000 India during the previous year 2009-10 (Not taxed earlier) g) Gifts received from his parents 4. (2) not ordinarily resident. stayed in India for just 69 days.000 5 4 5 . is situated outside India. 3 From the following incomes earned by Mr.K.Y. is an Indian company.60. Government bonds half of which is received 4. X was present in India for 90 days. No. (3) non-resident. Determine his total income for the assessment year 2011-12 if he is (1) resident and ordinarily resident. (2) not ordinarily resident. Determine his residential status for the A.000 brought to India g) Income from profession in Kenya which was set up in India. (ii) During 2007-08. a foreign citizen.000 b) Pension for services rendered in India but received in Burma 15. It carries on business in New Delhi and London. a) Profits from a business in Bombay managed from London 1. X was in India for 359 and 348 days respectively.000 e) Past foreign untaxed income brought to India during the 7.000 d) Rent from property in USA received there but subsequently 6.80. (iii) During 2004-05 and 2003-04.000 c) Interest on U.00. he was not present in India but during 2008-09 he came to India for 276 days.

4. for 1995-96 is 281. 1-1-2011.000.000 on 28-12-2010. 10. Municipal taxes Rs. Compute the income chargeable to tax in the hands of Mr. 3. Rs.000.000 to his wife Mrs.000. Land revenue Rs.000. Mrs. He contributes 11% of basic salary and dearness allowance to recognized provident fund and his employer also contributes the same amount. Rent paid by him during the previous year 2010-11 is as under: April and May.e. X and Mrs.000 per month for an accommodation in Ghaziabad November. Compute his gross salary for A. 2011-12. 2011-12. The plot was sold for Rs. The remaining amount was paid by her out of her own funds.e. Find out his taxable income from house property for the A. company at Jabalpur.000 and invested the same in a plot for Rs. As per the contract.000. 50. 7 A is Dy. 2.4 litre capacity which is used for official and his private purposes both. Compute his salary income for the A. 500 in his basic salary w. 4. 1-2-2011.500 on 1-1-2004. 8 Z owns a house at Delhi of the fair rent of Rs. 2011 – Rs. The driver’s salary and all the xexpenses relating to official use of car are borne by his employer. 2010 – Nil. Assume population of Jabalpur is less than 25 lakhs but more than 10 lakhs. he gets 30% Dearness Allowance and 10% City Compensatory Allowance of his basic salary.500 per month w. These were acquired by him on 1-4-1981 for Rs. During the previous year 2010-11. On 1-4-2010.000. 4. owned by the employer. The professional tax Rs.000 was taken on 1-4-2005 @10% p. X on 1-11-1995. The monthly fair rent of the house is Rs.00.000 was paid towards the loan account on 1-4-2007. for the construction of the house which was completed on 1-1-2008.Heads of Income 6 X is employed with ABC Ltd. 9 6 . 2. 800 per month respectively. (ii) He has also been provided a motor car of 1. They are paid Rs. fire insurance premium Rs. 7.00. 3. General Manager in a Private Ltd.I. 6. X sold these diamonds for Rs. Ground rent Rs. 50% of which is included in salary for as per terms of employment. as he stayed with his parents June to October.00.Y.000 per month for an accommodation in Delhi. 2.Y. and the cost of furniture was Rs.00. (Municipal value Rs.500 – 250 – 9. The following facilities have also been provided by the company: (i) A furnished house. X on the sale of diamonds as well as plot if C.100. 5. 3.m. 3.f. 2010 – Rs.Y. 6.000 and collection charges Rs.6.I. 2011-12. 3. (iii) He is given a facility of a watchman and a cook. X gifted diamonds worth Rs. The company gives him HRA of Rs. 3.00. the salary becomes due on the last day of every month. 1.000 was deducted from his salary. on a basic salary of Rs. 1. He was appointed in the grade of Rs.000 from 1-4-2010 to 30-6-2010 and self-occupied fro residential purpose for the remaining part of the year. 650 and Rs. 600 were paid during the year.000 per month. 50. He is also entitled to dearness allowance @100% of basic salary. A loan of Rs. 2009 to March. the house is let out for residential purpose on a monthly rent of Rs.600 p. 30. is provided to him for residence.a. He also got an increment of Rs.000).000 per month which was increased to Rs.f.

5 lakh has been charged off to P&L A/C.00.A. 80. A for A. the company incurred an expenditure of Rs. 15. (iii) capital expenses on scientific research related to business Rs.000 on extension of and improvements to this building. 5. 2011. He bought fresh jewellery for Rs.000 for importing yarn in contravention of import regulations. 2010 for Rs.000 spent by the managing director on his visit to : (i) Canada to buy machinery and finalise a collaboration agreement for a new independent undertaking proposed to be set-up (cement factory) Rs. 70. 3. 8.000. Its fair market value as on 1-4-1981 was Rs. 2.00. (c) Interest amounting to Rs. 24.S. 2 lakh paid to the shareholders.000. Computation of taxable income 11 XYZ Ltd. (h) Penalty of Rs.00.Y. 50. . The agricultural land measuring 10 hectares is being cultivated by his father for over 15 years.000 paid to legal advisers in respect of proceedings before income-tax authorities. He owns not only house properties in Bangalore but cultivable land near Mangalore. (g) Rs. Agricultural land is also sold for Rs. 1.00. 1. (e) Company sold a block of assets at a loss of Rs. 10.000 was debited by the company to its P&L A/C. is a public company engaged in the business of printing and publication of books. The sum of Rs.00.000.000 in December. For the year ending 31st March.25. Profit and Loss Account showed a net profit of Rs. 2011-12. (b) Interest amounting to Rs. 30 lakh to acquire technical know-how from a laboratory owned by the government.000 to be used for residential purposes. Particulars noted from the company’s accounts and obtained on enquiry from the company are given below: (i) The head office of the company is situated in a building taken on lease.000 as' follows : (i) advertisement in newspaper: Rs. a domestic company manufactures textiles. Its profit and loss account for the year ended 31-3-2010 disclosed a net profit of Rs.00. 2010 and another house bought within three months at a price of Rs.000. he bought another agricultural farm for Rs. (d) Rs. 25. (ii) advertisement in Souvenir of a political party: Rs.000 within six months of sales. This is being treated as a deferred revenue expenditure and a sum of Rs. (i) The company has paid during the year a lumpsum amount of Rs.00.000. (ii) U.00.5 lakh.31.000.000 in January 2011. 1.000 paid on the loan taken to make donation to an approved charitable institution. This included the following debits to the Profit and Loss Account: (a) Dividends amounting to Rs. 50.000. 10. 12 7 . 3. 9. 14. 1986 for Rs. X Ltd.000. 55. 1. 50.20.00. CII of financial year 1985-86 and 2009-10 is 133 and 632 respectively.000 paid on the loan taken for the payment of company's income-tax liability. You are required to compute taxable capital gains of Mr. Compute the total income and tax liability of the company. to study export market for textiles: Rs. The residential house is sold by him for Rs. He lives in a house which had been bought by him in January. 30. on 30-6-2011.000. During the year. Gold ornaments were also sold by him in November.000.00.10 Mr.000 the fair market price thereof as on 1-4-1981 being Rs. (f) Company incurred expenditure of Rs. 2.. 8. A lives in Bangalore.000 which will be cultivated by him.

8. Company had to pay penalty for 4 months delay @ Rs.000 paid as penalty to government for the company’s failure to perform the job of printing and supply of text books within the stipulated time. (e) Rs. 16. 2 Deduction u/s 80U shall be allowed only when the assessee is suffering from a permanent disability at the beginning of the previous year.000. the company used to value its closing stock at cost. the shareholders have to pay tax. Dividend Policy 5 At the time of payment of dividend. The company has resolved that it will henceforth adopt this method of valuation.000 paid fro shifting of business premises from the original site to the present site which is more advantageously located.000 regarding expenditure incurred for printing invitation cards and hiring and transport charges of furniture and shamiana in connection with the inauguration of a new branch opened for expanding the business. Give reasons for additions made or deductions allowed in respect of the various items.(ii) In the past. 10. (c) Rs.000 which was also the written down value of the car at the beginning of the year. This year the closing stock was valued at 105 below the cost at Rs. UNIT . 80. (iii) A motor car purchased by the company in the past for Rs.II I (a) Test Your Skills: State Whether the Following Statements are True or False: Deductions from Gross Total Income 1 Deduction u/s 80E for payment by way of interest on loan is allowed for 10 years. (v) Debits to the P&L A/C included the following: (a) Rs. (iv) Credits to the P&L A/C included dividend of Rs.000. contribution to PF. Compute the total income of the company for the A.Y. 90.000 received from an Indian company. etc. 4. 25.000 was sold to an employee of the company for Rs. 4 There is no sectorial cap in case of payment/investment made for claiming deduction u/s 80C. (b) Rs. 1. The market value of the car on the date of sale was Rs.000 deposit made under own telephone scheme.000 being interest paid to bank on monies borrowed to pay income-tax Rs. 12. (b) Multiple Choice Questions: Deductions from Gross Total Income 1 Deduction u/s 80C in respect of LIP. 2011-12. 20.000. 5. is allowed to: (a) Any assessee 8 . 3 Deductions u/s 80C to 80U are not available for a long-term capital gain but the same is available from short term capital gain other than STCG on shares sold through recognized stock exchange. 24. 5.000 per month as per agreement with the government.000 and wealth tax Rs. consistently from year to year. (d) Rs.

000 Deduction u/s 80D in respect of medical insurance premia is allowed to: (a) any assessee (b) an individual or HUF (c) individual or HUF who is resident in India (d) individual only The overall limit in case of deduction under Sec 80G is: (a) 10% of gross total income (b) 10% of total income (c) 10% of gross total income as reduced any portion thereof on which income tax is not payable under any provisions of the Act and by any amount in respect of which the assessee is entitled to as a deduction under Chapter VIA except deduction u/s 80G. Deduction u/s 80IA in respect of an undertaking which is engaged in providing telecommunication service. spouse and dependent children (e) Himself.e. is allowed if it is owned by: (a) an Indian company 9 3 4 5 6 7 8 .10. 20. spouse and minor children (d) Himself. 25.000 (b) Rs.00.000 (c) Rs.000 during the previous year for a policy of Rs. 1. 1. 1. 80CCC and 80CCD cannot exceed: (a) Rs.00.000 (c) Be allowed deduction for the entire premium as per the provisions of Sec 80C Deduction in respect of contribution for annuity plan to certain pension fund u/s 80CCC is allowed to: (a) Any assessee (b) Individual assessee only (c) Individual or HUF (d) Individual who is resident in India As per Sec 80CCE deduction u/s 80C. 1.000. etc. Rs.50. spouse and any child An assessee has paid life insurance premium of Rs. He shall: (a) Not be allowed any deduction under Sec 80C (b) Be allowed deduction under Sec 80C to the extent of 20% of the capital sum assured i.(b) (c) (d) 2 Individual assessee only Individual or HUF Individual or HUF who is resident in India For claiming deduction u/s 80C In respect of life insurance premium can be paid by assessee for: (a) Himself only (b) Himself or the spouse (c) Himself.

12. II Short Answer Type Questions: Deductions from Gross Total Income 1 Discuss the provisions relating to Sec 80CC and 80U.45.000. 2 X.e. 15. aged 66 years a resident in India has GTI of Rs. 20. 80C to 80U will be allowable (b) all deductions under Chapter VIA i. The total income computed as per the provisions of Income Tax Act is Rs. He deposited Rs. 2. any industrial park allowed if such undertaking is owned by: (a) an Indian company (b) an Indian company or a consortium of such companies (c) any assessee Where the return of income is filed after the due date specified u/s 139(1): (a) all deductions under Chapter VIA i.000 in PPF account during the previous year. 2.e. 80-IC. a company has correctly worked out its book profit as per section 115JB as Rs. Minimum Alternate Tax on companies 3 For the assessment year 2011-12. 80-ID.e. 10 . It desires to know the amount to be shown in the final accounts as ‘provision for taxation’. Compute his tax liability for the A.Y. 80-IAB.600. 2010-11. Amalgamation and mergers of companies 4 Amalgamation has been defined under the Income Tax Act u/s ______. securities amounting to Rs. This includes long-term capital gains of Rs. maintains.450.000 and interest on govt. 80-IE will be allowable (d) all deductions under Chapter VIA i. 95. 80C to 80U except 80-IA will be allowable Fill in the Blanks: 10 (c) Deductions from Gross Total Income 1 The deduction u/s 80E is allowed for payment by way of interest on loan to the extent of ________ _________.87.000. etc. 80C to 80U will not be allowable (c) all deductions under Chapter VIA i. 80IB. 80C to 80U excepting 80-IA.e. 4 Explain the evolution of the concept of MAT. Dividend Policy 3 Tax on distributed profits under the Income Tax Act is covered u/s ________.(b) (c) 9 any assessee an Indian company or consortium of such companies Deduction to undertaking which develops. 2 Deduction in respect of rent paid u/s 80GG shall be allowed to ______ _________.90.

Amalgamation and mergers of companies 7 Explain the meaning of the term amalgamation as per Income Tax Act. under Sec.Dividend Policy 5 R holds shares in a domestic company in which public are not substantially interested On 1. he obtained a loan of Rs. Dividend Policy 5 Explain the provisions relating to deemed dividend as per Sec.8. 6 Discuss the applicability of tax on dividend distributed by a company for the shareholder and company. 80G of Income Tax Act? 3 Discuss the conditions to be fulfilled for allowability of deductions u/s 80-IB in respect of profits and gains from newly established industrial undertakings set up in India. 11 What are the conditions to be satisfied for a merger to qualify as ‘amalgamation’ for the purpose of Income Tax Act. 6 Discuss the provisions relating to tax on distributed profits of domestic companies. Also. explain the necessary adjustments to be made to net profit of the company to convert it to book profit for computation of Minimum Alternate Tax. 8 Define demerger. charitable institutions. Minimum Alternate Tax on companies 4 Discuss the provisions regarding Minimum Alternate Tax. the company had accumulated profits of Rs.00. III Long Answer Type Questions: Deductions from Gross Total Income 1 Explain the provisions relating to deductions from Gross Total Income in respect of 80C of Income Tax Act.000 @ 14% interest per annum from the company. As on that. 10 Explain the provisions relating to computation of capital gains in case of slump sale. 9 Discuss the term slump sale. etc. 5. Amalgamation and mergers of companies 7 Explain the consequences of amalgamation for : (a) Shareholders of amalgamating company (b) Amalgamating company (c) Amalgamated company (d) Banking company IV Practical Questions: Deductions from Gross Total Income 11 . 4. 2(22). Explain the tax implications of the transaction on R and also the company. 2 What are the provisions relating to deductions from GTI in respect of donations to certain funds.2004.00.000.

2011-12.000 to the school for blind which is approved as a charitable institution.500 p.000 to National Children Fund. However. 50 lakhs in 2008-09. Basic Salary Rs. 12. 20. a) Salary for working as a telephone operator in a company 17. He is also provided with a furnished accommodation in Delhi. b) Honorarium from school of blind for giving his service 47. 9 lakhs. engine capacity which he uses partly for official purposes and partly for his personal use.000 Compute the total income of X for A. The running and maintenance expenses of the motor car are met by the employer. His father is also a person with disability and is dependent on him for medical treatment and rehabilitation. The cost of furniture provided is Rs.000 being legal expenses incurred in connection with criminal proceedings launched by the Income Tax Department against the Managing Director for fabrication of accounts in the case of a firm in which he is a partner. The company obtained from the foreign supplier Rs.000 He has contributed Rs. the employer recovers Rs. Compute his total income for the A. 2.000. The following further information is also given: (a) The company had imported machinery at a cost of Rs.000 per month b.000 to Prime Minister National Relief Fund and donated Rs.000 during the year on him. 3. 5 lakhs). 10. 90. 2 Minimum Alternate Tax on companies 3 R (P) Ltd. gives you a draft of its Profit and Loss Account for the year ended 31-3-2011 showing a net profit of Rs.000 in Public Provident Fund. assuming he has deposited Rs. 14.500 paid to solicitors for attending income-tax appeals for 3 years before Income-tax Appellate Tribunal.000 p. (b) The Enforcement Directorate had detected that the company had over invoiced imports of raw materials to the extent of Rs. he has earned the following income: i) Interest on bank deposits Rs. He has also paid Rs. This sum had been spent by the Managing Director during his business visit to the foreign country for personal purposes.000 by cheque as premium of medi-claim policy. who is working in Delhi as a manager of A Ltd.000. He provides the following particulars of his income for the year ending 31-3-2011.000 d) Income from unit trust of India (gross) 5.000 ii) Winnings from card games Rs. 2.1 X. X spends Rs. Besides salary. furnishes the following particulars of his income for the previous year 2010-11: a. This has been credited to a reserve account.Y. Depreciation on the original cost at 10 per cent on the straight-line basis is provided in the accounts (Rs.Y. who is resident in India. 7. 50. 500 per month from the employee for use of such motor car.m.m. The house has been taken on rent by the company at Rs. is a person of disability. 8. (ii) Rs. 10. 7.000 in 2008-09 by way of compensation for the defective machinery supplied. 20.000 c) Interest on government securities (gross) 44. 12 . 2011-12 assuming that he donates Rs.8 ltr. 90. DA (forming part of salary for retirement benefits) 30% of basic salary He has been provided with a motor car of 1. X. (c) Professional charges included: (i) Rs. Provision for depreciation on other assets in the books is on the same basis as provided in the Income-tax Act.

11. 1. (f) As per the Payment of Bonus Act. The company wants to set off the following losses/allowances: 13 4 .00 Deferred tax liability 1.50 Audit fee 0. (ii) Payment to an advertising agent Rs. following past practice. The payment is supported by proper voucher.43 lakhs. 2.000 paid by way of interest to a non-resident and Rs.000. (ii) Rs. Custom duty of Rs. 1 lakh paid to depositors all of whom were shareholders of the company. on fixed deposits and Rs. 5. A profit and loss account for the year ending 31-3-2011 is given below: PROFIT AND LOSS ACCOUNT Rs. Please indicate. 1. (iii) Rs. 2010): (i) Advertisement in Malaysia for exploring the possibilities of export to that country.20. ABC Ltd. 3.00 Postage and telegram 0.00 Provision for future losses 0.25 Director remuneration 8. is engaged in the business of manufacture of paints in India.35 Net profit 21. Rs. (g) The Profit and Loss Account shows a credit of Rs.50 Depreciation 5. 10.00 Total 51. a closely held Indian company.000 paid to bank on loan taken for meeting income-tax liabilities.(d) Advertisement expenses included (incurred on January. 9. The excise duty due on 31-3-2011 was paid on 2-12-2011.000 paid as interest on fixed deposits from a relative of the Managing Director without deduction of tax at source. Depreciation as per income tax is Rs.00 Wealth tax 0. (e) Interest payment included the following: (i) Rs. for the financial year 2010-2011 on 1-10-2011 is Rs. the bonus liability worked out to Rs. the reasons for any adjustments that you make in support of your computation.00 Income tax 4. in brief.00 Additional information: 1.000 for dividend on 1-6-2010 from a company engaged in the manufacture of cement.50. Rs. 4. 4 lakhs.60 Proposed dividend 0.. 3 lakhs. the company paid Rs. Salary and wages 7.00 general reserve Traveling and conveyance 0. which worked out to 20 per cent of salaries of staff.000 in cash.5 Sales 48.40 Amount withdrawn from 3.80 Loss of subsidiary company 0.10 Excise duty due 1.00 Total 51. 5. Dividend distributed by R (P) Ltd.000 which was due on 31-3-2008 was paid during the financial year 2010-11.000 Compute the total income of the company. However. 4. 3. 2 lakhs to a bank on overdraft account.

000.00.Y.00.00.00. 2011-12.000 .00. For tax purposes 5 The business income of the assessee before claiming depreciation. and the tax liability for A. 8.000 By long term capital gain business By sale To Income tax paid 20.000 Compute the tax liability of the company fro the A. 60.000 1.000 9.00. the profits of which have been merged in the net profit of the company as per Profit and Loss Account prepared in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. the other details are as under: 1) Current year depreciation 2. 1.000.000 (iv) Brought forward loss under the head capital gains (computed as per Incoem Tax Act) Rs.000 (ii) Brought forward unabsorbed depreciation as per income tax Rs.000 3) Brought forward unabsorbed depreciation 5. 2011-12 : Profit and Loss Account To Expenses relating to 4.00.00. has an undertaking newly established for export of Computer Software in a free trade zone.00.000 10.000 diminution in value of an asset To proposed Dividend 50.000 2. You are also required to compute the total income and tax payable Net profits as per Profit and Loss Account as per Schedule VI 14 2. 3.000 Compute the total income of the assessee and the tax liability for the assessment year 2011-12.000 contingent liability To Provision for 50.000 3.000 Unabsorbed depreciation 3. R Ltd. 7 A domestic company. 80.000 2) Brought forward business loss 8.50.00.20.00.000 Additional information: (i) Brought forward loss as per books of account Rs.000 7.00. 6 From the following information compute the total income of X Ltd. for the financial year 2010-11 is Rs.00. 15..50.00.00.000.000 To Balance c/d 9.00. The book profit of the company as per the provisions of Sec 115JB is Rs. Y. It furnishes the following particulars in respect of assessment year 2011-12 and seeks your opinion on the application of section 115JB.000 1.80.For accounting purposes Brought forward loss of assessment year 2009-10 12.000 By deferred tax To General Reserve 40.000 (iii) Brought forward depreciation as per books of account Rs.000 To provision for 40.

00. Dividend Policy 8 An Indian company with a paid-up (for cash) share capital of Rs 10. The liquidator realised the assets at prices considerably in excess of their book values and after meeting and providing for all liabilities including the liability for taxation had a distributable sum of Rs. Company S. the company declared dividends to its shareholders. Ram amounting Rs. the company reduces Rs. 1.10 per share.00. The accumulated profits of the company were Rs. On the date of loan and paying the premium.00. 2.000 share capital at Rs. 5. The cost inflation index for 1981-82 was 100 and for 200910 was 632.50.00. You will have to deal with this issue. 2011.00.50. Ramesh holds 500 shares of the company.9.00.000 share capital of Rs.000. bonus shares of Rs. Ram took a loan of Rs. .000 on 10.000 (4) Capital gains as computed under Income-tax Act 40.4.000 was set-off against the amount of loan etc.000 (3) Depreciation allowable as per Income-tax Act and Rules 1. 15 10 11 .Profit and Loss Account includes: (a) Credits: Dividend income 20. 1. He holds 25% equity shares of the company. 30.00.000 divided into 10.000 Excess realized on sale of land held as investment 30. Compute the amount taxable as dividend if the market value of the asset on the date of the distribution is: (a) Rs.000 excluding capitalized profits i. 80.000 Provision of losses of subsidiary company 60.000.000 approaches you for advice as to the treatment for income tax purposes for the amount received by it from the liquidator. a holder of 500 shares acquired by it on 1st July.000 and the balance to the credit of its' profit and loss account was Rs. Compute the amount that should be included in the income of Mr. 100 per share. The company also paid insurance premium Rs.1981 was Rs.00. The fair market value of shares of Company S on 1. 26. Mr. 10.000 (b) Debits. 3.00. 2010.50. 20. Ram.000 Unabsorbed depreciation 60. 1. Depreciation on straight line method basis 1.00.000 issued in the past. 3. R Ltd.00. the accumulated profits of the company were Rs.000 Net profit of the undertaking for export of computer software 1.000.000 The company has represented to you that the excess realized on sale of land cannot form part of the book profit for purpose of section 115JB. 1976 at a cost of Rs.e.00. Subsequently in the same year.000 which he duly distributed to shareholders on 1st March. has accumulated profits of Rs. 9 Out of Rs.000 equity shares of Rs.000 (5) Losses brought forward as per books of account Business loss 50. 50.000 on his behalf.Mr. 2. 15. On that date its reserves created out of profits amounted to Rs. 7.00. 100 each went into liquidation on 30th June.00.00.00.50. Compute the amount of deemed dividend u/s 2(22)(d).2010 from a company in which the public are not substantially interested.000.000 to the shareholders. The dividends on the shareholding of Mr.00.00.00.000. The company distributed assets of Rs.

000.50. 4. 16 . (c) Rs.000.(b) Rs.3.50.

2 There is element of malafide intention involved in tax avoidance. brought forward capital loss: Rs. the company issuing bonus shares has to pay tax. on the date on which the option vests with the employee 17 . Unabsorbed depreciation allowance of the previous year 2009-10 : Rs.000 of the previous year 2008-09.000. amalgamated company).00. The company could not claim deduction in respect of such expenses in previous years 2009-10 and 2010-11. Tax Planning with reference to location of undertaking. 10. (an industrial undertaking) wants to amalgamate with PQ Ltd. (an Indian Company) on June 30.000. 15.000 of the previous year 2009-10.000 in 2008-09 for promoting family planning amongst its employees. 40. UNIT . Bonus shares 6 At the time of sale of bonus shares by the shareholder. 5 To decide about the form of organization tax liability under different organization forms must be compared.Amalgamation and mergers of companies 12 XY Ltd. own or lease 7 In case of purchase of asset out of borrowed funds. 50.III I (a) Test Your Skills: State Whether the Following Statements are True or False: Tax Planning. incurred capital expenses Rs.. 8 Lease rentals can be claimed as admissible expenditure against the business income. brought forward speculative loss: Rs. 10 The Act. provides that the fair market value of the specified security or sweat equity shares. 2. 86. (i. Tax evasion and Tax Management 1 Tax avoidance is legitimate arrangement of affairs in such a way so as to minimize tax liability. Tax Consideration in respect of specific managerial decisions like Make or buy. XY Ltd. the assessee can claim only depreciation as deduction. Tax avoidance. Expected bad debts: Rs.00. You are required to find out the tax implications in respect of the following losses/allowances of XY Ltd. brought forward business loss of the previous year 2009-10 : Rs. for valuation of ESOPs. in the assessment of PQ Ltd.000. 3 Tax planning and tax avoidance are synonymous.e. Managerial Remuneration 9 The tax planning in case of employees’ remuneration requires the study from employee’s point of view only. 2010. Type of activity and ownership pattern 4 Aggregate amount of tax liability of a firm and partners is generally higher than that in case of same income generated in sole proprietorship.

own or lease 18 . 2 The objective of tax management is to ___________. Tax avoidance. (a) Location of undertaking (b) nature of business (c) form of organization (d) all of the above Bonus shares 5 At the time of issue of bonus shares. or recovered from the employee in respect of such security or shares. (b) Multiple Choice Questions: Tax Planning.as reduced by the amount actually paid by. Tax evasion and Tax Management 1 The benefits arising out of tax planning are substantial particularly for the _______ run. Bonus shares 3 When bonus shares are issued the tax liability in the hands of the shareholders is _____. shall be the value of fringe benefits. Type of activity and ownership pattern 3 Remuneration should be paid to ____ (a) working partner only (b) dormant partner only (c) both of the above 4 Considerations like _____ need to be considered while setting up a new organization. Tax avoidance. tax liability arises in the hands of (a) the shareholder (b) the company issuing bonus shares (c) Both of the above (d) None of the above (c) Fill in the Blanks: Tax Planning. Tax evasion and Tax Management 1 A company wants to reduce the tax liability by making incorrect statement about the location of manufacturing process. it is ____ (a) Tax Planning (b) Tax Avoidance (c) Tax Evasion 2 Tax evasion is ____ (a) legal (b) illegal Tax Planning with reference to location of undertaking. Tax Consideration in respect of specific managerial decisions like Make or buy.

19 . 3 Define tax avoidance giving its essential features. gratuity is taxable when it is due or paid. Managerial Remuneration 7 Under section 15. 6 Explain the provisions relating to location of undertaking for setting up a new business organization. II Short Answer Type Questions: Tax Planning. Type of activity and ownership pattern 5 Explain the tax considerations relating to deciding on the nature of the business to be set up. own or lease 8 What are the considerations to be kept in mind for making a decision regarding financing of a capital asset. 7 What is the tax treatment in the hands of the shareholders at the time of sale of bonus shares by the shareholder. Tax evasion and Tax Management 1 What are the objectives of tax planning? 2 Differentiate between tax avoidance and tax evasion. Tax Planning with reference to location of undertaking.4 For determining effective tax savings in case of purchase of asset out of own funds or borrowed capital __________ and ________ have to be considered. 10 What all factors should be considered for tax planning in case of own or lease. 9 Explain how tax planning can be done in case of make or buy decision. Tax evasion and Tax Management 1 Define tax planning and explain its need and benefits. Bonus shares 6 Discuss the provisions relating to capital gain on bonus shares as given under Income Tax Act. read with section 17(1). 5 Discuss the provisions relating to salary and interest payment to partners by a partnership firm. Tax Consideration in respect of specific managerial decisions like Make or buy. III Long Answer Type Questions: Tax Planning. Managerial Remuneration 5 Fringe benefit tax is paid by the __________. Type of activity and ownership pattern 4 How can you reduce tax incidence on companies. Tax avoidance. Comment. Tax avoidance. 2 What is ‘tax planning’? How does it differ from ‘tax management’? 3 Tax management is essential for every assessee but tax planning is optional. 6 FBT is levied @ _______ on the value of fringe benefits. Tax Planning with reference to location of undertaking.

she invested Rs..25.000 p. 2008 state.000. m. 3. @ Rs. and share profits in the ratio 2 : 1 . Out of the sale consideration. each member will be receiving salary Rs. 3. if the expected business income is Rs. the other member will receive salary of Rs. As an income tax expert you are approached by A.: 1. 10.000. 2 lakh and interest @ 12% on 6. m. They wish (i) to charge interest on their capital/loan @ 12% p. (iv) Other income of partners Rs.m. while B and C becoming employees and moneylenders to the concern so that they can reduce their tax liability? What is your advice and what arguments would you give in support of your advice? 2 There are two members A and B in a joint Hindu family having a capital of Rs.000. 2007 but gratuity is received on April 4.00.000 (ii) Remuneration to partners Rs.00.50. 3. 1.000 (before charging interest on capital/ loan) during the relevant year. For this purpose A. On the basis of the following information suggest to A and B whether they should invest their funds in their own partnership firm @ 12% p.whichever is earlier. 6.a. Type of activity and ownership pattern 1 A.U.a. and (c) when relief under section 89 could be claimed IV Practical Questions: Tax Planning with reference to location of undertaking.100 per share and paid brokerage etc. B and C for considered opinion as to whether they should have a firm or a sole proprietary concern of A. 8. 20 . Mrs. Under section 10(10) gratuity is exempt from tax when it is received. Mrs.a.00.. (ii) If the business is run as a H. X was allotted 600 bonus shares.00.000 p. 12. (iii) Funds for investment Rs. Suggest which form of business organisation should be adopted from tax point of view.000 p.000 each. 100 per share.a.Y 2011 – 12. They can run a business as a business of an individual by joining the other as an employee and money-lender or as a H.00. U. (the market rate of interest) and accept deposits of C and D @ 15% p.000 and Rs. (b) when exemption under section 10(10) will be allowed. 3. On 3-10-2010. or invest it in the firm of C and D @ 15% p. B and C have decided to set-up a business. X sold all the 1. issued bonus shares. B and C are having Rs. (i) If the business is run as of an individual. Salary A Rs. 5. 1.000 each 3 Issue of bonus shares 4 On 1-8-1976. 10. for their firm : (i) Profits of firm before interest and remuneration to partners Rs. or (ii) B and C to receive half the income as salary nominating A as the sole owner of the business.50.000.F. ABC Ltd. 20. B: Rs.00.000 shares @ Rs.50.F.00. 6.00. Rs. The fair market value of the shares on 1-4-1981 was Rs. X purchased 400 shares of ABC Ltd. C Rs. 4. @ 2% on sale consideration. If a person retires on March 14..000 respectively.m. each. They expect the income of Rs. 10.000 for P.000 p. Mrs.000 in the construction of a residential house which was completed before 30-6-2011. 150 per share. as to (a) when gratuity will be taxed. On 31-121980.

000 each along with interest @ 14% p. He sold 100 bonus shares in November.000 after five years. Rate of interest 10%.Compute the taxable income from capital gains of Mrs.000 A manufacturer offers to sell the same part @Rs.000 Fixed factory overhead 80.751 . The second one is leasing the asset for which annual lease rental is Rs.00. In May 1993.000 units of a part of car engines. Residual value Rs. 1. 2009 at Rs. 2010 he gets 100 right shares for Rs. 15 were paid as securities transaction tax. In September.000 Direct labour 80. An asset costing Rs. 20. Repayment of loan by the assessee Rs. Assuming that lease rentals processing fees.9%. 20 rach.000 up to five years. 40 per share in 1989-90 and incurs an expenditure of Rs. 5 P purchases 500 listed equity shares of Rs. interest as well as the principal amounts are payable at the year end.683 . 1.000 p. 400 on brokerage.000 units Direct material 20. 2011-12 assuming that he does not own any other residential house and the above shares are not sold through recognized stock exchange.00. Find out the capital gains for the assessment year 2011-12. it does not require any additional facility. Profit of the assessee Rs. Rate of tax 30. There are two alternatives available to the entrepreneur. X for the A.00. 30 per share and 100 right shares @ 30 per share in December 2010. Rate of depreciation 15%.000 before depreciation.a.826 .a.000.909 . the bonus shares as well as right shares have kept in a separate depository. Rs. 20.00. Lease rent Rs.1. Assume the internal rate of return to be 10% and the present value factor at 10% is: Years 1 2 3 4 5 PV Factor . 1. 20 per unit. 30. he receives 100 bonus shares.20.000 Variable factory overhead 40. 7 A motor car company requires 10. suggest to the company whether it should make the part itself or buy it from the market: Total cost of 10.000 Total cost 2.621 21 8 .Y.a. interest and tax/before lease rent and tax. From the following information. 10 each for Rs.000 p. 30. 20.000 is to be acquired.000 repayable in five equal installments of Rs. The lessor charges 1 % as processing fees in the first year. If the company manufactures the part. own or lease 6 From the following information determine whether the assessee should purchase an asset or take on lease: Cost of asset Rs.. Tax Consideration in respect of specific managerial decisions like Make or buy. First one is buying the asset by taking a loan of Rs. Both the sales were made through the stock exchange.

Materials required cost Rs. Material requirement is 25. 14 per unit X Ltd.675. 1.877.351 and Year Nine-0. The company has enough cash reserves to finance the purchase.519. 300 per year afterwards. Year One-0. On the basis of the following particulars.000 units of a component every year for next five years.000. 2 4. 5. Labour cost per unit Rs. 20. and wages Re.000 kgs. manufactures electric pumping sets. 1 lakh with a life of 10 years. The cash price of the machine is Rs. Year Five0. The component is available in the market at Rs. (iv) Lease rent: Rs. If the company decides to make the product itself. The relevant depreciation rate is 15 per cent. 9 The management of X Ltd. l. 1. The salary of the foreman employed is Rs. 1. It is contemplating the proposal to either make or buy the aforesaid component.769.000. The machine will be sold for Rs. it has to purchase a machine by taking a loan from the bank. it should buy the machine or get it on lease. The component is available in the market at (a) Rs.400. If the company manufactures the part.30 per piece. wants to acquire a new machine. The company has the option to either make or buy from the market component Y used in manufacture of the sets. 0. (b) Rs. Will it be profitable to make or to buy the component? Does it make any difference if the component can be manufactured on an existing machine? XYZ Ltd. 1 lakh at the beginning of the sixth year.000 labour hours. needs a component in an assembly operation.000 per annum for the first five years and Rs. then it would need to buy a machine for Rs. 16 1akh. Year Two-0. 31. Year Eighth-0. Rs. Year Three0. From the following information suggest to the company whether it should make the component or buy it from the market: 1. it seeks your advice. Manufacturing costs in each of the five years would be Rs. 8 lakh which would be used for 5 years. Variable overhead cost per unit Rs.000 for manufacturing 25. 6 3. 12. and requires 50. The component can either be manufactured by the company in its factory or be purchased from the market. (i) Rate of Income Tax : 35%. (ii) Rate of depreciation under the Income Tax Act : 25%. whether from the point of view of tax planning. 25 lakh respectively. (v) Present value of Re. 12 lakh.30 per hour. However. Rs. 1 discounted at 14%.592. 20 lakh and Rs.308. A company requires 20.00. Material cost per unit Rs. The following details are available: The component will be manufactured on new machine costing Rs.99% and rate of depreciation @ 15%.00. 14 lakh. 2 per kg. Year Four-0. 4. 22 10 11 12 . explain the suitability of each alternatives. (iii) Expected life of the machine: 9 years.000 components per year. 4 2. Year Six-0. Year Seven-O.500 per month and other variable overheads include Rs.456.Suggest which alternative is better in the above case. Rs.5 per unit. The present value of net cash outflow in this regard in five years will be Rs. Assume the tax rate to be 33.

000 1.000 with expected life of 8 years.A. 22 lakh. 28 lakh and Rs.2175 per cent respectively. Rs. X in order to minimise her tax bill? ( ans 49392 ). 15. 60. is considering the purchase of a new machine costing Rs. 24. Other allowances according to rules of the company are: dearness allowance: 18 per cent of basic pay (not forming part of salary for calculating retirement benefits). The company gives Mrs.50. The present market value of this old machine is Rs. 12. The entire money can be raised either by issue of equity shares or by issue of 10% debentures. Should XYZ Ltd make the component or buy from outside? 13 XYZ Lt/d. 18 lakh.000. 30. As a tax consultant. Mr. or to accept a house rent allowance of Rs. 3. Assume the after tax cost of capital (discounting rate) to be 14 per cent. 50 lakh would be needed.000 per month and find out own accommodation. Because of the purchase of new machinery.60.000 with an expected life of 5 years with salvage value of Rs. X is offered an employment by PQR Ltd. 99 per cent. 15.000. 14 Managerial Remuneration 15 Mrs.000 D. 1. If Mrs. at a basic salary of Rs. 15. If the company decides to buy the component from a supplier the component would cost Rs. whose existing capital is Rs. They decide in favour of issue of equity shares. The relevant depreciation rate for the machine is 15 per cent on written down value basis and the tax rate is 33. in replacement of an old machine purchased 3 years ago for Rs. proposes to expand its business for which an additional investment of Rs. Rs.000 per month as rent. do you approve the proposal? Assume that rate of return is 20% and rate of income tax is 30%.000 . she will have to pay Rs.000 per month. X opts for house rent allowance. Rs.00. the annual profits before depreciation are expected to increase by Rs.000 23 16 Offer B 7. The relevant discounting rate and tax rate are 14 per cent and 33. The directors of a domestic company. bonus: 1 month basic pay. 35. 1 crore all in equity shares.44.000.000 per month. Advise the company suitably. A received offers from companies of Jaipur fro service as under: Offer A Salary 6. 20 lakh. 34 lakh respectively in each of the five years. X an option either to take a rent-free unfurnished accommodation at Bhopal for which the company would directly bear the rent of Rs.2. project allowance: 6 per cent of basic pay. Additional depreciation is not available. Which one of the two options should be opted by Mrs.

The rate of tax to be deducted at source in case of fee for professional service is 10%.200 14.000 1.O.000 60. 139(1). 1.200 7. Advance Tax 3 Advance tax can be paid in the assessment year before filing the return of income.000 15. 2 Once a return of income is revised. 3. Multiple Choice Questions: Return of Income and Procedure of Assessment 1 As per Sec. 4 TDS 5 6 (b) Advance tax is payable only when notice of demand is issued by the A.00.000 2. 70 per day for 250 days) Lunch allowance Large car for official and private purposes (estimated expenses) Transport allowance for commuting between place of residence and the place of work and personal purposes Contribution of employer to RPF 12% of salary (subscription of employee to RPF 12% of salary) Contribution of employer to approved superannuation fund Education allowance for two children Hostel allowance for two children Telephone including mobile phone Which offer should he accept keeping in view his tax liability. a company shall have to file return of income: (a) When its total income exceeds Rs. 3. 3.000 24 . Tax deducted at source for the month of March should be deposited on or before the date prescribed under Sec 139(1).400 7.IV I (a) Test Your Skills: State Whether the Following Statements are True or False: Return of Income and Procedure of Assessment 1 Due date of filing the return of income in case of non-company assessee is 31 st July of the relevant assessment year.00.50.000 20.000 UNIT .00.000) House rent allowance (Rent payable Rs.00.000 3.00.000 90.500 1.00.Rent free house (Rent payable Rs.000 14.000) Medical reimbursement upto Medical allowance Tea and snacks during working hours Free food during working hours (cost Rs.700 17.00.000 25. it cannot be revised further.000 72.000 4.25.

concealment.000 respectively. shall be: (a) Rs. 10. 500 and Rs. 10.000 and Rs. transfer or delivery of property to thwart tax recovery shall be: (a) Any period upto 1 year and fine (b) Any period upto 2 years and fine (c) Any period upto 3 years and fine The minimum and maximum penalty under Sec 272A(1)(d) for failure to apply for allotment of PAN under Sec 139A or quote such number in challan. etc. 25.000 25 3 4 5 6 7 8 . The minimum and maximum period of rigorous imprisonment under Sec.000 (c) Rs. the assessee in this case could file the belated return till: (a) 14-1-2009 (b) 15-1-2009 (c) 18-1-2009 (d) 19-1-2009 (e) 31-3-2009 Penalties and Assessments The minimum and maximum penalty for failure to comply with a direction regarding getting of accounts audited under Sec 142(2A) shall be: (a) Rs. 139(1) (b) At any time before the end of the relevant assessment year (c) At any time before the expiry of one year from the end of the relevant assessment year The assessee could not file his return of income for assessment year 2007-08 within the time allowed as per Sec. 500 (b) Rs. His assessment u/s 144 was completed on 15-1-2009 and it was communicated to him on 19-1-2009. 25. 5. 1. the return of loss must be submitted: (a) On or before the due date mentioned in Sec.000 (b) Rs.(b) (c) 2 When its total income exceeds the maximum amount which is not chargeable to income tax In all cases irrespective of any income or loss earned by it E-filing of return in case of a office of the government/company and a firm whose accounts are liable to be audited assessee is: (a) Mandatory (b) Optional The filing of return of loss is: (a) Mandatory (b) Not mandatory (c) Mandatory if the assessee has to carry forward the loss which are allowed to be carried forward and set off If the assessee has to carry forward the loss. 139(1).000 (c) Rs. 276 for removal.

000 or more 14 A company assessee has to make the payment of advance tax: (a) In 3 instalments (b) In 4 instalments (c) Every month The deduction of tax at source from the salary shall be made at the time of: (a) Accrual of salary (b) Payment of salary (c) Credit or payment of the salary.000 (c) Is Rs.000 (b) 1% of the assessed income (c) 1% of the assessed income subject to maximum of Rs. 10. 5.9 10 Appeals and Revisions The first appeal against the order of the AO lies with: (a) Deputy Commissioner (Appeals) (b) Commissioner (Appeals) (c) Appellate Tribunal The first appeal can be filed by: (a) The assessee only (b) A. 1.O. whichever is earlier The liability to deduct tax at source in case of income from interest on securities arises at the time of: (a) Payment of interest (b) Accrual of interest (c) Credit of interest to the account of the payee / interest payable account or payment thereof whichever is earlier.O. 10.500 (b) Exceeds Rs. Fill in the Blanks: 26 TDS 15 16 (c) . 5. The maximum fee for filing an appeal to Appellate Tribunal is: (a) Rs.000 The Commissioner shall not revise the order under Sec 264: (a) Where an order has been made more than one year previously (b) Where an order has been made more than 2 years previously (c) Where an order has been made more than 4 years previously 11 12 Advance Tax 13 The advance tax is payable by the assessee if the advance tax payable during the financial year: (a) Exceeds Rs. only (c) Either by the assessee or by the A.

3 The advance tax is payable in the _________ itself.Return of Income and Procedure of Assessment 1 Loss under the head capital gain can be carried forward for a maximum of ________ assessment years. Advance Tax 2 The first instalment of advance tax in case of a company assessee is payable on or before ________. 27 .

Is the return valid? 2 X. His total income for the assessment year 2011-12 is Rs. has got his books of account for the year ending 31-3-2010 audited under Sec 44AB. 7 Discuss the provisions relating to payment of advance tax as per order of the AO.000. He desires to know if he can furnish his return of income for the assessment year 2011-12 through a Tax Return Preparer. 28 . if the winning from lottery exceeds Rs. The assessing Officer passed the order under Section 144 on 31-5-2011 which was received by the assessee on 5-6-2011. III Long Answer Type Questions: Return of Income and Procedure of Assessment 1 What do you mean by reassessment? State the provisions under the Income Tax Act relating to assessment. A could not file the return within the due date. Short Answer Type Questions: Return of Income and Procedure of Assessment 1 For the A. what are the circumstances under which it can be revised? What is the time limit for submission of such revised return? 4 Discuss in detail the various types of assessments.90. _________. 1. an individual. A return of income was filed within the statutory time provided under the Act. the assessee filed the return on 2-6-2011. Is the AO justified? Define self-assessment. 2010-11. without making the payment of self-assessment tax due as per return. 3 4 Advance Tax 5 What are the due dates for payment of installments of advance tax? 6 Write short note on payment of advance tax on income estimated by the assessee himself.TDS 4 II Tax is to be deducted at source. The same was paid before completion of assessment. 2 What is a defective return? What is the procedure to be adopted by the AO if the return is found to be defective? 3 Can a return submitted by the assessee be revised? If so. Advance Rulings 8 Define advance ruling 9 Explain the meaning of applicant under Sec 245N (b) Avoidance of Double Taxation 10 Explain ‘relief for double taxation’ with sections.Y. The AO wants to declare the return as invalid. Appeals and Revisions 6 Discuss the procedure for redressal of grievances.

during the previous year. R brings Rs. 6. R. A paid medical insurance premia Rs.000 by cheque. Advance Tax 8 What do you understand by ‘Payment of Advance Tax’ or ‘Pay as you Earn Scheme’. Practical Questions: Penalties and Prosecution 1 For the A. 29 . 30. 12 What is ‘Advance Ruling’? When does a ruling become void? Avoidance of Double Taxation 13 Briefly explain the provisions of Sec. What happens in case of default in payment of advance tax? TDS 9 10 Explain the provisions relating to deduction of tax at source from salary. Discuss the provisions of TDS given in IT Act regarding interest other than interest on securities. at the time of assessment. 2 A notice to levy penalty under Sec 271(1)(c) was issued on 11-6-2010. The remuneration was Rs.67. discovered a concealment of income of Rs. an individual and citizen of India earned remuneration in foreign currency from a University in London during her stay in that country in the previous year 2010-11. 91 of the Income Tax Act relating to avoidance of double taxation. 4. in India. 14 IV Explain unilateral relief as given u/s 91.Y. 2010-11. 1.00. who succeeded him passed the penalty order without providing any further opportunity. The AO before whom this reply was filed retired on 31-7-2010 and the officer. 55. but by taking into cognizance the reply filed by the assessee.7 Explain the procedure for filing an appeal.00.000.000 in India in convertible foreign exchange by 30 – 9 – 2010. 10. 3. R.000 was deducted at source by the University. 1.95.000 which includes interest on bank deposit Rs.000. A filed his return showing loss of Rs.O.000. Compute the relief available to her under section 91 assuming that Mrs. Calculate the penalty imposable u/s 271(1)(c). the A.000 and Rs. Other incomes of Mrs.10. Whether the order by the AO is valid? Avoidance of Double Taxation 3 Mrs. Advance Rulings 11 Discuss in detail the procedure for filing application for advance ruling . 3. The assessee in response thereto filed on 13-7-2010 a written submission requesting to decide the matter. were Rs.

30. 42. business income of Rs. X has deposited Rs.Y.000 45.000 1. provides you the following particulars of his 2011-12.000 in his public provident fund account (out of which Rs. such income can be included for computation of tax rate.000 3. 32. X. According to the tax laws of the foreign country. 10. income for the A.000 is deposited out of foreign income). Business income 4. Mr. Income from a foreign country with which no agreement for relief or avoidance of double taxation exists 5. 1. According to ADT agreement.00.000 from a business in a foreign country with whom India has ADT agreement.000 20. 1.4.92. However. Income tax paid on income mentioned in 4 Compute the amount of income tax payable in India. He has also received an interest of Rs. X (28 years) is resident and ordinarily resident in India.92.1. 1.000 from a business in a foreign from a business in India and Rs.46. Interest on government securities 2.000 is taxable @ 23%. a resident of India. 25. His income is Rs. Find out X’s liability under the Income Tax Act for the assessment year 2011-12 Cost inflation data of 20 years Financial Year 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 100 109 116 125 133 140 150 161 172 182 199 223 244 CI Index Financial Year 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 30 305 331 351 389 406 426 447 463 480 497 519 551 582 CI index .92. Income from house property (computed) 3.000 5.000 from a business in India and Rs. 3.000 on government securities. During the pervious year. income is taxable in the country in which it is earned and not in the other country. in the other country.

4 Singhania V. 43 rd Edition. Singhania Monica.Financial Year 1994-95 1995-96 259 281 CI Index Financial Year 2009-10 2010-11 632 711 CI index References: 1 Ahuja Girish. Bharat Law House Pvt.. Bharat Law House Pvt. Service Tax. Gupta Ravi. Taxmann Publications (P) Ltd. Ltd. Taxmann Publications (P) Ltd. Practical Approach to Income Tax. 11th Edition. 5 Singhania V. Corporate Tax Planning and Business Tax Procedures. Ltd 3 Ahuja Girish. Ltd. Student’s Guide to Income Tax. 21st Edition. Service Tax and VAT. Gupta Ravi. VAT. 31 . 2010. 2010-11. CST and Wealth Tax. Simplified Approach to Corporate Tax Planning and Management. Gupta Ravi. Bharat Law House Pvt..K. 24th Edition. 2 Ahuja Girish. 201011. 14th Edition. Systematic Approach to Income Tax. Singhania Monica.K. 2010-11.

(iii) On 16th July. Is Mr. 2008 he had gone to Srilanka and came back to India after staying 100 days. 2010 and returned India on 15th February. 8. (iv) Dividend of a England based company received in India Rs.000 received in Japan for the services given in India. he had to stay there just after shooting. 5. (v) Profit. (b) Rs. (d) Rs.40. (c) Rs. 1. Mr. when M is : (i) Resident. (e) Rs. 10.000. Following are the incomes of M: (a) Received Rs. 2000. which accrued in England. (v) In the Previous year 2010-11 he was out of India for 180 days. 2010 he had gone to Nepal for 85 days.000.000 were earned and received in Japan from a business which was controlled and managed in Japan and this amount was not brought to India.000. 2010 for a film shooting. Due to ill health.000 were earned and received in Africa but brought to India. He had to go again on 8th December. A resident in India for the assessment year 2011-12 ? If not. 1. Determine residential status of Mr. Which of the above incomes are taxable. B give the following informations: (i) He first time went to Japan on 10th January. He submits the following details of his incomes for the previous year: (i) Salary Rs. 2000 and came back to India on 22nd June.00. why? Q3. (iii) Non-Resident? Q2. (ii) Not Ordinarily Resident.000. (iii) House rent of the house situated in Nepal received in India Rs. 80. 2003 he went to England and came back to India after 90 days. A went to America on 1st April. of the business situated in Japan brought to IndiaRs. He came back to India on 25th September. which was brought to India in previous year. 6. 2010. (ii) On 30th September. B for the previous year 2010-11 and explain 32 . 2011.000 was untaxed foreign incomes of some earlier year. 75. (iv) On 2nd December.000 earned in India but received in England. (ii) Commission received in India for the services given in Srilanka Rs. .000 in India.INCOME TAX QUESTION BANK FOR CLASS PRACTICE (FOR PRIVATE CIRCULATION ONLY) RESIDENTIAL STATUS Q1. 2. 30.

(ii) Not Ordinarily Resident.S. Q4.000 (3) Income from property in Canada received in U.000 (2) Income from agriculture in Bangladesh.000 (11) Interest received from Mr.000 (10) Profit from business in Indonesia.000 (6) Royalty received in Singapore from Mr. business being controlled from Mumbai (Rs.A.50. this business is controlled from Singapore 1. a non-resident. but received in Nepal 2. a resident in India. if he is : (i) Resident. 30.00.A.000 (7) Profit from a business in Chennai.000 is received in India) 65. A furnishes the following particulars of his income earned during the previous year relevant to the assessment year 2011-12 : Rs. He again left for Dubai on 15-6-2010 and came back on 14-2-2011 to settle in India. 1. 1. Particulars of income of Shri A who is resident but not ordinarily resident for the Assessment Year 2011-12 are given below: (a) Profit from business in U. this business is controlled from Delhi (60% of the profit deposited in a bank there and 40% is remitted to India) 40. 25.that on which income he is liable to pay tax in India. remitted to India 31.000 (5) Dividend from an Indian Company 15. R for the previous year 2010-11 who left India for the first time on 15-9-2006 and came back on 1-9-2009.S. on the loan provided to him for a business in India 28. Mr.000 (9) Income from agriculture in Punjab. Q6.10.000 Compute his Gross Total Income. Determine the residential status of Mr. received in Mumbai. (iii) Non-Resident. 33 . D.25.000 (8) Profit on sale of a building in India. Q5.000. Rs. for technical services provided for a business carried on in Singapore 25. (1) Interest on German Development Bonds (one-third is received in India) 51. David.000 (4) Income earned from business in Kuwait. received in India.

000 Income from house property in Paris received there Rs. Determine the Gross Total Income of Mr. 1. 87.F.000. (vi) Gift in foreign currency from a relative received in India-Rs. Rs. X a foreign national(not being a person of Indian origin) came to India for the first time on November 15.000.a. (iv) Income from property in U. Entertainment Allowance Rs.1. (ii) Pension from former employer in India.000 after deducting contribution to RP. received in U.000. 40.2011. 1.00.000 Interest on saving bank deposit in American Express Bank. (v) Past untaxed foreign income brought into India during the previous year-Rs. Free gas and electricity provided by the employer at a cost of Rs.m. 5. 1. Employer's contribution to R. (c) Income from house property in U. but deducts only Rs.Y. (B) Not Ordinarily Resident..000. D for the A.5% p.000.F.000.000 You are required to compute his total income for the assessment year 2011-12.500 p. (iii) Income from agriculture in Pakistan and brought to India-Rs. (f) Profit from business in U.000. 2011-12. 500 p.m.400.:P. Rs. which is controlled from India but deposited in a Bank Account in U.000 Income from Business in Bhutan being controlled from India Rs. and (C) Non-Resident Q 8. 70. 40.Rs. and received there-Rs. 60. Mr. 5.000. Q7. X had the following incomes during the previous year ended March 31.60. 45. 7.000. Account balance@9.000. 32.500.F. 1. as rent.000. 50. Rs.000. from his salary. K. 8. New Delhi Rs. Unfurnished house at Dharwar for which the employer pays Rs. (e) Past untaxed foreign income brought to India during 2010-11. Rs.K.(b) Share of profit from a firm in India.000.m. half of the profits being received in India-Rs.000 Income from Agriculture in Indonesia being invested there Rs. 40.000 (d) Income from agriculture in Srilanka received in India. Travelling allowance for tour Rs. 150 p. 80. Bonus Rs.K. Calculate Gross Total Income of Shri A for the assessment year 2011-12.2010 for a visit of 200 days . Rs.A. if he is (A) Resident.S. INCOME FROM SALARIES Q1. Rs. 5000. City Compensatory allowance Rs.000. 50. Mr. 6.S.A. 32. K furnishes the following particulars of his income for the financial year 2010-11 : Net salary received Rs. Interest on P. 2. 50. deposited there. D earns the following incomes during the financial year 2010-11 : (i) Profits earned from business in Paris which is controlled from India.20. Rs.-Rs.00. The 34 . Salary before standard deduction received in India for three months Rs.

5. 10.9. X has furnished the following details with regard to his salary income for the year ended 31st March..000 per month and furniture and fittings of the value of Rs. For this revision in his terms. 12. The rent paid by the employer is Rs. which is taken into account for retirement benefits.m. 9. submits the following particulars of his income for the Assessment Year 2011-12 and you are required to compute his gross income from salary : (1) Basic salary on 1. The cost of furniture on 1. Q2. 1.000 p.600 per annum.employer has provided a small car but expenses are met by Kishore.m. his employer paid him a lump-sum of Rs. when he agreed to such revision. from 1.2007 was Rs. an employee with a Furniture dealer. Assume that salary is due on the last day of the month.000 per month and the employer contributes an equal sum. 700 p.000.4. (ii) Entertainment and travelling allowance in full.m. 3.000 p. (2) Dearness allowance at Rs.4.5%. On 1st September. X. (3) No accommodation to be provided. (v) Commission equal to four months' pay. 1. 300 per month. 2011 : Compute his taxable salary. (iii) Travelling allowance for tour at Rs. Mr. 6. (i) Salary at Rs. (ii) Bonus at six months' salary. His employer also sold him on 1.6. (2) Dearness Allowance Rs.m. 250 per month. 3. (b) He claims: (i) Electricity and water charges incurred by him for his residence Rs.2009 Rs. The revised terms were: (1) Basic Salary Rs. (c) His contribution to company's Recognised Provident Fund is at Rs. 20.000. 2010 his employer requested him to revise terms of employment due to the bad financial position of the company. The interest credited to the Provident Fund Account is Rs.000. 1. 40 per meal for 300 working days.000. Compute his taxable Salary for the assessment year 2011-12. 35 . Mr.000 at 9. 12.000 p.000 p. 10. Q3. (a) He is also provided with free furnished quarters at Kota valued at Rs.000 per month. (iv) Entertainment allowance ofRs.2010 old furniture for Rs.2010..m. (3) Free unfurnished accommodation in Mumbai. He is also provided with free lunch at the company valued at Rs.

respectively.5% p.000 (f) City Compensatory Allowance (g)Medical Allowance 1.m. 36 . the expenses for private use are borne by himself. 13.000 p. Assuming that the salary becomes due on . The house is owned by the employer.a. 5.m.900 each.m (c) Entertainment Allowance p.000 p. 15. The car is used for both official and personal purposes. 200 p. (e) Interest from provident fund @ 9. 200 p.m 5.Q4.m. (i) He has been provided with the facility of an unfurnished house by the employer in a small town for which the employer charges Rs.m. Furniture costing Rs.000 as medical allowance. Except the driver's salary. Q5.000 p. (h) He has been provided by his employer a large car. He has been provided with a furnished accommodation by the employer owned by it of the estimated rental value of Rs.m. 1.000 60 p.000 per annum. He has been given a small car.the first day of the next month.m. 7. dearness allowance and Rs. 1.400 since 1 st January.. 2007. Shri P is employed in Mumbai in the grade of Rs. 4. 1. He has been provided with the facility of a gardener. Interest amounting to Rs. The fair rent of the house is Rs. Rs. which is used by him for his personal purpose also. He contributes 15% of his pay and dearness allowance to the Recognised Provident Fund towards which the employer contributes Rs.Sri R furnished the following particulars of his income for the financial year 2010-11: Rs. Compute the taxable income under the head salary for the assessment year 2011-12. (j) The employer has employed for him a sweeper @ Rs.m. 600 p. 4. a watchman and a servant who are paid by the employer @ Rs.m (b) Dearness Allowance p. determine his salary income for the assessment year 201112.200 p.400-100-5.m.980 has been credited on the balance ofRs. 9. (a) Salary p. He gets Rs. and Rs. The driver's remuneration and all the expenses relating to the official use of the car are borne by the employer.000 standing to the credit of his Provident Fund Account. 200 p.m.m. 2.000 250 100 (d) Employer's and employee's contribution to a recognised provident fund Rs. 750 p. and a servant @ Rs.000 has also been provided by the employer. 22..

Rs.200 would have been payable during the year. 700 p. but deducts only Rs. (He received the pension in Nepal and deposited in a bank there) (vii) He has been provided with a furnished house for which the employer pays Rs. (a) She owns a house.m.Q6.m. who is a retired employee of the Nepal Government. 5.000. Sri S. He furnished the following particulars of his income for the financial year 2010-11 : (i) Salary 1. 2. Smt. Compute the salary income of Sri Sultan Chand for the Assessment Year 2011-12. but the company has provided her the following amenities: (1) A gardener.000. She receives every month Rs.000..m. and the employer also contributes an equal amount. (He received one month's salary in Nepal while on leave) (ii) Planning Allowance (iii) Medical Allowance (iv) Entertainment Allowance (v) Travelling Allowance for tour 100 p. (2) Free use of the refrigerator costing Rs.000 as dearness allowance.m. (b) The following obligations of her were paid by the company: (1) Gas. R is the manager of the Delhi Cloth Mill. Rs. 100 p. 300 per month. 1.200 p. The furniture provided to him costs Rs.000 as basic pay. 300 per month from his salary. The car is used for. 2. (vi) Pension from Nepal Government 600 p. Q7. 300 p.400. (e) She proceeded on one month's leave to Shimla by car where she stayed in the 37 . started service in a private firm at Meerut. (c) The company has provided the facility of a small car. (2) Annual membership fee of Rotary Club Rs. 500 as entertainment allowance and Rs.600 but he had been sent for education to a similar school a sum of Rs. a sweeper and a servant who are each paid Rs. (viii) His own contribution to Unrecognised Provident Fund is Rs. He was not ordinary resident during the previous year. (d) Her son is studying in a school run by the company. electricity and water bills amounting to Rs. The annual expenses incurred by the company per student is Rs. Delhi.private purposes also besides official purposes and all the expenses including the driver's salary are borne by the company. 2. 1.m. 250 p. 9.m.500 p.m. 10. 3.m.

Other informations relating to cars 'are : Cost of each car Rs.000 p. Compute her taxable income from salary for the Assessment Year 201112. 350. From Y Ltd. 3.000 p.m. . 1. 1. Q8. ...15. N is the Manager of a Jute Mil in Kolkata.000 and refrigerator costing Rs.a. the expenses relating to the official use are borne by the Mill. 40.000).000. The company has provided the amenity of free lunch and free refreshment in office. 2. the fair rent of which is Rs. The cost of which is Rs. The market value per share on the date of acceptance of offer was Rs. 3. Mr.500 p. He has been also provided by the Mill with the facility of free use of furniture costing Rs. N's salary income for the Assessment Year 2011-12.7.m.000. got the following emoluments during the previous year ending on March 31. 60 and Rs. 60.000 p.000 p. : 4 months 'basic pay @ Rs. 100 each as per guidelines of the Central Government. for a child. Nair and his family members in a private hospital (not owned by the employer) were reimbursed by the Mill. he lived in his own 38 . 350 p. house rent allowance @ Rs.Holiday Home maintained by the company. : 6 months basic pay @ Rs. dearness allowance @ Rs. and education allowance Rs. Q9.2011: From X Ltd.m.: 2 months salary @ Rs. dearness pay forming part of basic pay @ Rs.. The salary of the drivers is paid by the Mill. From Z Ltd. and house rent allowance @ Rs.500 p.m.. .m.000 p.000 p.000 p. entertainment allowance @ Rs.000 p. 1. . 8. Shri R who resides in Allahabad. During this period. 1.m.m. (f) The company allotted her 100 shares at Rs. Compute Mr.m.500 p.m.m.m..m. He has been provided with a rent-free house by the Mills. 4. Rs. The Mill has provided him two small cars. dearness allowance @ Rs. 20 per day respectively for 250 days...000 on the treatment of Mr. The cars' are used partly for private purposes also.00. house rent allowance Rs. He gets basic pay @ Rs.00. 3. dearness allowance @ 25% of basic pay.000 p. 250 p. He as well as the company contributes 14% of full basic pay and half of the dearness allowance towards Recognised Provident Fund. commission on sale @ 5% (on sales effected during four months Rs.m. 2. 5. 8. Salary to each driver Rs. .

The State Bank of India charges interest on such loans @ 8% p.000 p. 10. Rs. 1. Three children of Mr.000 on entertainment of the company's customers.000 interest free loan from the company to construct the house before one year. 250 p.. Q10. 4. 1. Its fair rental value is Rs.m. He paid Rs. 800 p. which runs the college for which he paid nothing. During the year he gets Rs. P submits the following particulars of his income and you are required to compute his gross income from salary for the previous year ended on 31st March.000. maintenance and driver are met by the company. 3. The house is owned by the company. Interest credited to his provident fund @ 12% amounted to Rs. plus 10% of his salary as dearness pay. 4.000 p. on a monthly salary of Rs.00. During the year Mr. Mr. is also paid by the college. Mr. Compute the taxable salaries income of Mr. Q12.m. The college paid Rs. 2. leave with full pay to his home at Jaipur. as additional D.A. A gardener for the up keep of the garden on the back side of the house is also provided.500 p. 2011. entertainment allowance and Rs. for one student. V is reader in a college.000. V for the year ending on 31st March.m. V are studying in an institution run by the society. 3. 2011 assuming that salary is due on the last day of the month: (1) Employed in Q Ltd.500 being the air fair to and from Jaipur for him and his wife for this purpose.500 p. D. He is getting entertainment allowance of Rs. D borrowed Rs. Q11.m. The salary of gardener amounting to Rs. is drawing a salary of Rs.000 39 . V is provided with a rent-free accommodation which is owned by the college.m. run by a society. upto 30th September. He has spent Rs. Besides salary he also gets 43% of salary as dearness allowance.000 p.m. He is also provided with a small car for his personal and official use and all expenses of its running. 8. an employee in a company at Delhi. 5. He contributes 10% of his salary to Provident Fund.m. 1.000 p. as proctor's allowance. Determine the amount of house rent allowance taxable for the assessment year 201112.m. D for the assessment year 2011-12. Normally expenditure in an institution of that standard comes to Rs. Mr.a.m. 14. 400 p. He is provided with a rent-free unfurnished house of the fair rental value of Rs.house. V proceeded on two months. The college contributes an equal amount.m. 200 p. 2010 at a basic salary of Rs. Calculate the value of perquisites of Mr. Mr. as house rent throughout the previous year except two months when he lived in his own house.

m (ii) Dearness allowance Rs. (d) She is provided by her employer with a rent-free (unfurnished) house in a small town of the Annual Value of Rs. 500 p. and dearness allowance of Rs. (e) Proceeds of an endowment policy Rs. G of Kanpur for the assessment year 201112 from the following particulars: (i) Basic salary Rs. 30.p. (b) Her contribution to provident fund was at 14% of Salary. and medical allowance of Rs.m. the employer also contributes a similar amount. (vi) Her contribution to Recognized Provident Fund is at 15%.000.a. 8.m.600 p. Driver is also provided by the employer. (vii) Employer's contribution to Recognized Provident Fund is Rs.m. (v) Entertainment allowance Rs.600p. The cost of the furniture provided therein Rs. Compute the taxable salary of Smt.000 p. 2010 at a monthly basic salary of Rs.m. (iv) Rent-free accommodation provided by the employer. Following are the particulars of the income of a woman for the previous year ended 31st March. from 1st December.m. 1. (2) Joined R Ltd.000 and dearness allowance of Rs. Q15.000 p.000 p.000 per month. (c) Interest credited to her provident fund account at 9. 2. he resigned from this service. Find out her taxable salary for the assessment year 2011-12. (which enters the retirement benefit as per the terms of employment). 4. (ix) Free use of a large Motor-car for both official and personal purposes. 10. He also received transport allowance at Rs.m.000. 2010. (iii) Bonus Rs.m. Q13.a. 2011 : (a) Salary Rs. 1.m. Q14. 500 p.000. 2. (viii) Interest on Recognized Provident Fund balance at 9. On 1st October. She paid Rs.000 p. 15.5% per annum Rs. the fair rental value of which is Rs. is Rs. and dearness allowance of Rs. 10.000 p. 19. 8.a.900. 600 as Employment Tax of the State Government.m. 25.250 p. and bonus equal to 10% of his salary plus dearness allowance from this company. 10. if (i) the provident fund is recognized. X is working in a Company at Hyderabad on a salary of Rs.a. He 40 . 500 p.000.5% p.500 p. 1. 9. and (ii) it is unrecognized.

400 4. 700 in connection with purchase of Books. X is a pilot in Indian Airlines. Q16.000) and Rs.5% (v) House Rent Allowance Rent paid for the house (vi) Medical Allowance 1.received Rs. Q17. Rs. 250.m. 4. Compute his taxable salary for the assessment year 2011-12. 9.3. 41 .800 p. Interest credited to the provident fund @ 9. 18. (b) He paid Rs.a. 10. He is contributing 15% of his salary to Recognized Provident Fund. He is given a rent-free unfurnished house.200 (viii) He was provided with a cook whose salary was borne by the employer 7.000 as dearness allowance. 3. Rs.800 1.000. 5. Rs. 70. (i) Basic Salary (ii) Contribution to Recognized Provident Fund (iii) Employer's contribution (iv) Interest on P.2011. 7.000 as conveyance allowance (actual expenses Rs.000 as salary. to which his employer is contributing 14%. 2. 72.000 as his membership fee of Rotary Club for the year ending 31.000 as flight allowance to meet personal expenses while on duty.000 2.F.200 (ix) Sri B was provided with a motor-car by his employer for official and personal use. (x) He claims the following deductions: (a) Rs. 12. Employer paid Rs. owned by the employer.200 as educational allowance for his three children studying in a public school.632 9. The house is also provided with a gardener on a monthly salary of Rs.632 p.500 as bonus for the year 2010-11. From the following particulars of Sri B. 60 for State Employment Tax. Determine the taxable value of the allowances paid to him. working in a firm at Jaipur. He has taken a loan of Rs.000 (vii) Free service of water & gas for which the payment was done by the employer 1. during the year is Rs.000 from his employer for purchasing a motor-cycle.a 2. @ 9.5% p. compute his taxable income from salary for the previous year 2010-11: Rs. He draws Rs.

A. the fair rent of the house is Rs..A. engine capacity for both official and personal use. If Mrs.000 per month .Y.X a finance manager of Y Ltd.(no repayment made during the year)(rate of State Bank of India is 10%) . 350.000 per month.4 ltr. Q. she will have to pay Rs. Rs. each.000. The company has incurred the following expenses in respect of this house from July 2010 to March 2011. 2002 for Rs.m. 24. 2. 150 p.00.m. She makes the following payments and investments during the year : Life insurance premium paid on the life of her major son Rs. Electricity Bills Rs. On 1 – 10 – 2010. 4.Q. 15. Telephone Bills Rs. Water Bills Rs. 1.20 Mrs.. 20.000 at the interest rate of 6% p. as rent. B for the A. B an option either to take a rent-free unfurnished accommodation at Bhopal for which the company would directly bear the rent of Rs.m. 6.000 p. Rs. are paid by the company. Housing loan of rs.000 p. commission Rs. allowance to meet cost of education and hostel expenditure of three children @ Rs.m.a.000. his conveyance allowance was stopped and he was given a motor car of 1. entertainment allowance Rs.80. 1. 5. other allowances according to rules of the company are: Dearness Allowance: 18% of basic pay (not forming part of the salary). 15.a. B opts for H. He as well as the company contributes 14 ½ % of his pay to a recognized provident fund.000.000. bonus 3 month’s basic salary. Calculate the income of Mrs. At a basic salary of Rs. 5. Interest credited during the previous year to his provident fund A/C @ 12 ½ % p. 2.2011-12 and state which one of the two options should be opted by her? Her income from other sources is Rs. 10. 42 . A was appointed as the Branch Manager of a company at Jaipur on 1 – 2 – 2009 in the pay scale of Rs.000 each. He also receives 10% of his pay as D. 16. 800. 1. All the expenses of running and maintenance of car including salary of driver. The electricity and water bills are in the name of the employer but the telephone bill was in the name of the employee.70. B is offered an employment by XYZ Ltd. or to accept a house rent allowance of Rs.000 – 100 – 7.000 per annum. Mrs. The company has given him a rent free residential house since 1 – 7 – 2010.000 p.000 p. 2010 for Rs.000. bonus one month’s basic pay. The company gives Mrs.000 per month. 12. Compute his taxable income under the head salaries for the assessment year 2011-12 assuming that he has not spent any amount of conveyance allowance for official duties. 15. 28. 4.m.00. is advanced on October 1. dearness allowance Rs.800 is gifted by the company on the foundation day of the company and a maruti swift car which was purchased by the company on August 10. 1.250. Titan watch costing Rs. project allowance: 6% of basic pay. Repairs Rs.19 .a. 2008.a. and find out own accommodation.18 Mr. Q. contribution of the employer and employee to recognized provident fund is Rs. Rent free unfurnished accommodation provided in Delhi by the company for which company pays a rent of Rs.000 p.000 is sold to the employee on September 16.000 p. New Delhi furnishes the following particulars for the previous year 2010-11: Basic salary Rs.600 per month. 2. 300 as conveyance allowance. 200.R. as medical allowance and Rs.

000 per month. 2. (iii) ULIP premium paid Rs. 6.000 per annum to an outside agency. Basic Salary Rs.000 per annum.400. Interest on RPF 12% is Rs.000 and PPF Rs. 10.000 p. The assessee has travelled with his family members to Mumbai which is his native place.m. 1. 800 p.000 which was taken on the life of his wife and children. 90 each). (v) Contribution to RPF @12% of salary. 5. HRA Rs. The details of his income for the financial year 2010-11 are as under: Basic Salary Dearness Allowance (forming part of salary) City compensatory allowance 43 Rs. . X for the assessment year 2011-12 Q. Mr. 100 per month. The assessee is supplied with free gas. (iv) Contribution to group insurance scheme Rs. 2.21 Mr. Contribution to RPF 12% of salary (by employees and employer both) City compensatory allowance Rs. 1. 3. 30. Rent paid by the assessee for the house he is living in is Rs.Infrastructure Bonds for Rs.000 per month.600.500. 1.000. The assessee's 2 children are studying in the school run by the employer. Compute his total taxable income and tax payable by him for the assessment year 2011-12. 1. 100 per month.m.500 per month. Entertainment allowance Rs. 10.000. The assessee is provided with free lunch during working days. The value of travel concession received from the employer is Rs. Compute tax payable by Mrs. 2.000 on a policy of Rs. 2. The following are his savings during the previous year: (i) Life Insurance premium paid Rs. 200 per month.500. (ii) Contribution to PPF Rs.000 per month. The assessee has encashed one month's earned leave in the previous year Rs. He has been provided with a 1800 cc car for both official and private purposes. Q22. (In all 300 lunches of Rs. water and electricity for which the employer pays Rs.20.m. X is a principal in a college of Delhi university. Dearness allowance Rs. A has submitted the following data regarding his income. 10. The assessee pays for the running and maintenance for the personal use of the car. 200 p. The cost of education in similar institution per student is Rs. 1.

Entertainment allowance Rs. (forming part of salary) 30% of basic. She has been provided with a rent-free house owned by the company. 1. 9. is 15% of Basic Salary and D. Interest on accumulated P.000 p. She contributes 10% (of salary and 50% of DA) to a recognized provident fund to which her employer contributes an equal amount.A. 4.m. 10. Cost of furniture provided is Rs.000 20.300 p. 40% of salary forming part of salary for retirement benefits. which he uses partly for his official purposes and partly for personal purposes. (for commuting from residence to office and back out of which he spends Rs.) Medical allowance 500 p.f. Q.200 p.000 – 400 – 18.000 on the treatment of his brother not dependent on him Education allowance (for one child) 130 p. the fair rent of which is Rs. half of which enters into retirement benefits.F. scheme. The college has also provided him a domestic servant @ Rs. He pays rent of Rs. D.A. Transport allowance 1. 1-12011 in the grade of Rs. She is getting a Transport allowance of Rs. 1. 3. Compute his income under the head salary.m..House rent allowance Examiner ship remuneration from various universities Income received from U.000 – 600 – 27. He is also provided with the rent free furnished accommodation by the employer the FRV of which is Rs.5 ltrs) with driver. 1.f. Besides the above.I. 3.200. She was placed in the grade of Rs. He donated Rs.T.m.000 on the treatment of his wife in a private hospital in Delhi. 6. 2. The medical bill was fully reimbursed by the college.m.000 p. he has been given a free telephone at his domestic.m.m. The expenses of running and maintenance were met by the employer. and was entitled to a salary of Rs. 14. 1.A.m. Entertainment allowance w. the fair rental value of which is Rs.m. in respect of accommodation occupied by him for his residence. the rate of interest being 13%. 1. He resigned on 31-12-2010 and joined RBI w.200-500-18.000 for his travel to Kashmir under L. He was also entitled to the following allowances/ perquisites.. motor car of (1. During the year. X is the Director of a tyre company at Bangalore since 1-1-1992. He was also entitled to D.000 p. costing the college Rs. is Rs.a.m. 4.200. he was entitled to the following allowances/ perquisites.1000 p. Compute (i) his salary income (ii) Total Income (iii) tax payable.C.T.m He was also entitled to a rent free unfurnished accommodation in Delhi. His own contribution to P.m. 600 p.000 p.000 to National Defence Fund. He spends Rs.e.300. Q.000.72.000 p.000 during the year to the Government for the promotion of family planning and Rs.20. 1-5-2010 500 p. He is a member of Statutory Provident Fund to which the college contributes 8% of his salary. for traveling from residence 44 . 200 per month. the college also reimbursed him Rs. 10.000 on his medical treatment and Rs. He spent Rs.e. 21. 20.F.000.000 plus a Dearness Allowance @ 20% of her basic pay.000 Being principal of the college. 10.000 p.000-400-15.14.23 X was employed with a Private company G Ltd.m.24 Mrs. Medical reimbursement of the expenses incurred on the treatment of his wife Rs.

Basic Salary 20. Rs. She has been provided with the facility of a gardener and a cook who are each paid Rs. Commission 4.30. for official use only.f 1-12-2008.10. 48.f 1-2-2009 and received a sum of Rs. He was also entitled to pension of Rs.000 pm w.to office and back.000 p.X are studying in an institute run by the employer for which no fees is paid.m.m.m. 2.000 for 120 days leave standing to his credit and Rs.40. He got 60% of the pension commuted w. He contributed 15% of his salary to a recognised provident fund to which his employer contributed an equal amount. He was provided with rent free accommodation in Delhi by the company which it had taken on a rent of Rs. Her club bills worth Rs. Rs.m. Two children of Mrs.000 p. Rs. He retired from his service.m. 45 .000 as commuted pension. He was covered under Payment of Gratuity Act and was entitled to 35 days leave for each completed year of service.e.000 p.40. 1-12-2010 as he did not vacate the house till date.000 were also paid by the company. since 1-5-1995.m. Calculate the tax payable by her for the assessment year 2011-12. DA (not forming part of salary for retirement benefits) 2. on the following terms Rs.m. W. Normal expenditure per student in such an institution is Rs. w.000 on the life insurance premium on the life of self (Sum assured Rs.3. 6.1000 p.000). .f. Q25 .150 p.000 towards IDBI’s infrastructure bonds.000 as gratuity. She has also been provided with a car of 2000 cc by the employer.m.e. HRA 8. 2.000 towards her PPF account. w.5.20. She deposited a sum of Rs.000 towards NSC VIII th issue and Rs.000 p. 1. by the employer. Rs. Compute the tax payable by A for the Assessment Year 2011-12.e.f. Medical Allowance of Rs.000 p.m.200 p. Besides the above. 1-2-2011 he took employment with Y Ltd.e.000 p.000 p.00.m. and Servant Allowance of Rs. he received Rs.000 p. A has been employed with PQR Ltd. Dearness Allowance (60% is part of salary for retirement benefits) 2.e.f. Basic Salary 12.40.8. 112-2010 and received the following from the company. 12.000 from recognised provident fund.m.m.500 p. He has been paying rent to his former employer @ Rs 13.

On 1.000 and it was used as follows: Remodeling Building No. R owns house property.4. (ii) (iii) Expenses for the recovery of rent of Rs. He has a scooter for going to office and spends for petrol.400 per month.000. Details related to the properties are given below: Rs. where Mr. Q3 Mr. J owns a house which is let out for residential purposes. 20. Its annual letting value is Rs. Nothing has been repaid out of this loan so far. 30. He claimed the following expenses actually incurred by him : (i) Municipal taxes Rs. Compute his income from House Property and also his Total Income for the Assessment Year 2011-12. The construction of the house was completed in June 2007.INCOME FROM HOUSE PROPERTY Q1. X owned two buildings -in Chennai. on an average Rs. Mr. 80.000 on White washing. 300 per month.000 annually which was a charge on the property according to his father's will. Mr. 7. 600. Q2.000.000 12. 12. 20.000 48. The Annual letting value of the house is Rs. He spent Rs.000 Taxes paid Repairs-Actual Building II Rent collected for 12 months Taxes paid Interest paid on Mortgage loan on building 8. Municipal Taxes paid Rs.000.2005 he had borrowed Rs.000 10.000 5. 50.. 96.000.000 . 24. Maintenance Allowance paid to the step-mother Rs. During the previous year it was let out to a tenant on a monthly rent of Rs. free of interest.000. etc. The house remained vacant for one month during the previous year. J earns salary of Rs. Building I (used as residence) Annual rental value 45. X is a partner. Find out the income from house property for the assessment year 2011-12. Mr.000 Personal use and meeting cost of education of son 46 5. II for getting a higher rent 25. 7. 8.000 The Mortgage loan was Rs.000 Advanced to Firm XYZ.000 on pro-note at 12% interest and spent it on the construction of the house.

Rs.100 8.You are requested to work out the income from house property of Mr.600 650 750 Salary received Rent from house property: Property B Property C Less: Municipal Taxes paid: Property A Property B Property C Repairs to Properties: Property A Property C Interest on Mortgage of Property B for Rs.000 Fire Insurance Premium: Property A Property B Property C 50 75 100 47 225 . 1.600 1. Q4.000 5. X for assessment year 2011-12.36.100 400 500 700 400 250 Rs. From the following particulars furnished by Shri H. compute his total income for the Assessment Year 2011-12: Rs. 3. Rs. 5.

000 48 10.00. which remaining 25% of the floor area is utilised for the purpose of his residence. 2011. 2009.000 (ii) Standard Rent 9. 5. 80. Lal for the assessment year 2011-12. 90. (c) According to Municipal records the annual value of properties A. the construction of which was completed in May.000 per annum. Rs. Dr.500. Q5.000 .000 (v) Interest on capital borrowed for repairs 3.925 4. Band Care Rs. (b) All the house properties are at Kolkata. the income from which is exempt from Income tax.000 raised on the mortgage of Property B was utilized for purchase of agricultural lands.500 and Rs.40. (d) The assessee was on leave for three months during previous year ended 31st March.500. (e) Rs.175 Rs. Q6. 4. Properties B and C are let out for residential purposes. Lal owns a big house. 2.500 respectively. P constructed a big house in July. 2. 50% of the floor area is let out for residential purposes on a monthly rent of Rs.00.000 (vii) Annual Charges (viii) Fire Insurance Premium 12. (i) Municipal Valuation 6. which municipal valuation is Rs. while its standard rent under Rent Control Act is Rs. 2000. Other particulars of the house are as follows: Rs.000 Compute the taxable income from house property of Mr. 1.000 (iv) Repairs 30. Property A is for self-occupation. Mr.000 (vi) Ground Rent 8. During that period he resided in the Property A.00.775 (a) The assessee has settled in Mumbai for purpose of his employment where he resides in a rented house.Collection charges for all properties Total Income 700 3.000 (iii) Municipal Taxes Paid 80. No other benefit was derived from that property during the previous year. 25% of the floor area is used by the owner for the purpose of his profession. 22.

(ii) Repairs Rs. He has taken a loan from housing board to construct the house @ 12% per annum Rs.500. 6.000).000 (created by will by his father).000 p. R is the owner of four houses in Bangalore. 9. 2. (ii) Ground rent Rs. 4. Sri R. 2. Compute income from house property for the assessment year 2011-12. (vi) Rent collection charges Rs. Sri. particulars of these properties: Use of House Rent received (Rs. 1. Q7.800.) Other particulars of the house are as follows: (i) Municipal corporation tax Rs. (iv) Annual charge Rs.000 during the previous year.) Fair rental value(Rs) tenant deducted from Repairs (Rs. 2 lakh. The house was used in following manner during the previous year: (a) 25% portion for self residence (b) 25% portion for self office.800 (actual payment during the previous year 2008-09 Rs.000 p.400 paid But --1 month Rent -300 --by Additional information: 1. 12.annual.600 paid by IV house Let out for business 5.500. 49 . 2. Out of which Rs.000. 20. Interest was due Rs. 2. 6. (v) Fire insurance premium Rs.) Interest on loan Vacancy period 500 -2 months 300 ------Ist House Self --llnd House Self Business --- He gives the following III House Let out for Residential Purpose Rs. 24. . Interest was paid on loan obtained by mortgaging the 4 th house for the purpose of his daughter’s education in computers.) (d) 25% portioillet out to commercial firm (Rs.m. along with his family stayed in Mysore for two months.m.000 was paid. 4. (c) 25% portion let out for residential purpose (Rs.

20.000.000 Insurance premium paid 6.000 For financial year 2010-11 30.000 Rs. interest on capital borrowed by mortgaging the property for daughter’s marriage: Rs. 1. interest on capital borrowed to construct the property: Rs. C: Repairs: Rs. The following expenses are incurred by Mr.000. However.000.76.Q. 40. Mr. Municipal value of the property is Rs. 10.000 pm.e.10.66. 2. 1-1-2011 the entire house was let out for Rs.000 For financial year 2008-09 20. Q. 1.000 Rs. 1. 48.36. municipal tax: Rs. whereas fair rent is Rs. A owns a house property at Delhi.10 Compute Income from house property: Annual rent Standard Rent Municipal valuation Vacancy Recovery of unrealized rent for earlier year allowed as deduction Fair Rent 50 Rs. 20.8.000. 50. 20.000 Rs. 60.000.50. . 25.1999).9. The let out portion was also self-occupied from 1-10-2010 to 31-12-2010. C from business is Rs. w. 1.000 Calculate income under the head house property of A for the assessment year 2011-12.500.000 (in either case capital is borrowed before April 1. 7. During the year he won Rs. 60% of the house property is self-occupied for residence and 40% is let out on a monthly rent of Rs.22. Mr.000 and standard rent is Rs. Q. insurance: Rs. 16. Find out the net income for assessment year 2011-12. Find out income from house property and income from other sources.000 from bettings and received salary Rs. It is used by him throughout the previous year 2010-11 for his (and his family members) residence.000.000.000 Land revenue due 18.000.000 Interest on money borrowed for construction of house property 36. C owns a house property.000 . 1. The following expenses were incurred for the above house property during the year ending on 31-3-2011.f. 2. The construction of the house property was completed on 31-121994.3.000 one month Rs. Municipal tax paid: For financial year 2007-08 10. Income of Mr.

000 36.000 3.000 38.000 38.000 Unit II of Property B remained vacant for the month of June 2010. Unit I was also self-occupied but unit II was let out for residential purposes.000 30. Property B has two identical units.000 16.Mr.000 Collection charges 2. X has two house properties situated at New Delhi.800 24.000 _____ Insurance premium 5.000 80.000 Ground rent 1.Municipal taxes Interest paid on loan taken for house property 20% Rs.000 Self occupied Municipal value 1. The other particulars of the property are given below: Property A Property B Municipal Valuation 60.12 .000 Q11.000 Interest on loan taken for Renovation of house 4.000 Interest on money borrowed for construction 20.000 51 .000 Municipal Tax paid by X 12. Actual Rent received 70.000 12.000 55. particulars of which for the year ended 31-3-2011 are as below: Ist house 2nd house 3rd house Date of construction 31-12-1997 31-1-1997 31-12-1992 Rs. X is the owner pf three house properties in Delhi. Property A was self-occupied for his residence.600 Standard Rent 90.000 p. recovered During the previous year 4.800 6.20.000 3.000 Municipal Tax paid by Tenant 2.000 Municipal Taxes paid 10. Date of completion 1-6-1983 30-9-93 Expenses on repairs 5. 15.000 5. Rs. Calculate his taxable income for the relevant assessement year.000 14.000 -------Collection Charges 3.000 90. Rs. Mr.000 5. Q.000 Rent for property let out 4.000 11.000 Unrealized Rent allowed In the past.m.

Mr.X resides in Mumbai for three months during the previous year in connection with his business and for all three months the house remained vacant. 52 . Compute his income taxable under the Income from House Property. During the period of his stay in Delhi he did not occupy any other house of his own.

From the following Profit and Loss Account of Mr.00. Compute the tax liability of X Ltd.000 4.000 8.000 Brought forward unabsorbed depreciation is Rs. By Gross Profit 1.000 10.000 that was not charged to above P&L A/C.000 8. for the assessment year 2011-12. 3. Rs.40.000 36.000.00.20.50.500 Rs. Q2.40.000 By interest on Post-Office 53 . X Y a partnership firm for the year ending 31st March.000 5.05. Brought forward loss as per books of account is Rs.000 4) Brought forward loss under the head capital gain Rs.000 14. Y.50.000 36.000 By rent received 3.000 16.000 14. The Profit and Loss Account of Mr.000 60.22.60.000 5. 80.000 while the brought forward depreciation as per books of account is Rs.000 2.000 Other relevant information are as follows: 1) 2) 3) An outstanding liability related to sales tax for 2002-03 paid during 2010-11 Rs.50. due to lack of evidence) 2. ascertain his income from business and Gross Total Income for the assessment year 2011-12.000 30.000 15.40.000 8. 4.000 Sale of goods manufactured by the company Sale of other goods Long term capital gain Amount withdrawn from general reserve 20.PROFIT AND GAINS FROM BUSINESS AND PROFESSION Q1.60. To salary (including proprietor’s salary) To general expenses To advertisements To interest on proprietor’s capital To interest on bank loan 45.000 By bad debt recovered (Not allowed earlier by A.000 30. 2011 is given below: Profit and Loss Account Expenses related to goods manufactured Expenses related to sale of other goods Proposed dividend Provision for unascertained liabilities General Reserve Income Tax Paid Wealth Tax paid Fringe Benefits Tax Net Profit 40.70.O.

To provision for bad debts 2.000 12. 11.000 8.000 9. 1. Motorcar expenses include Rs.500 1.40.000 7.200 Cost of medicines Surgical equipments Motor car Car expenses Salaries Rent of dispensary General Expenses Personal expenses 54 Rs.000 savings bank A/C 1.200 600 23.000 2. 20. 3.000 4. 300 for personal purposes. securities Rent from property (not subject to local taxes) Rs. Mr. He keeps his books on cash basis. Central Library is an approved institution.000 50.10.28.000 To advance income tax 2. by way of salary.900 Net Profit 27. 5.48. Depreciation is in excess by Rs.500. 300 given to a poor student to enable him to pursue his studies.000 To stationery 1.000 6.000 Other information: 1.500 To income tax 4.000 48. Q3.000 To wealth tax paid 3. 500 p.28.000 To reserve for sales tax 10.200 3. 4.500 1.000 To donation to Central Library 1.000 To Fire insurance Premium (on house property) 100 To depreciation 4. and his summarized cash account for the year ended 31-3-2011 is as under: Balance b/d Loan from bank for private purpose Sale of medicines Consultation fees Visiting fees Interest on govt. B is a registered medical practitioner. 4.000 63.m. The proprietor draws Rs. Advertisement includes one neon-sign of Rs.000 To corporation tax on house property 500 To motor car expenses 1. General expenses include Rs.200 .000 1.

Opening stock and closing stock of medicines was Rs.000 Interest on govt.000 Household Expenses 47.4. 40. Balance brought forward 44. Rs. Both the assets were purchased in December 2006.000 55 . The following is the receipts and payments account for the financial year 2010-11: Rs.000 Purchase of professional books 40.200 2004-05 1.700 Compute his income from profession for the assessment year 2011-12 taking into account the following further information: i) ¼ th of motor car expenses are in respect of his personal use.000 Income tax 10.000 2005-06 1.78.700 6.78.000 95.000 respectively.800 2003-04 5. Dr.000 Q.35.800 Sale of medicines 60.000 and Rs.25.000 Surgical equipment purchased 24.000 Rent of clinic Consultation Fees 2004-05 24. securities 7.000 Salary to staff 15.500 6.000 Loan from bank 1.000 Water & Electricity Bills 2. A is a renowned medical practitioner who maintains books of accounts on cash basis.800 Dividend 10.000 Collection charges for Gifts and presents 5.000 dividend income 100 Royalties for articles published Motor car purchased 1. Life insurance premium Interest on loan from bank Insurance of property Telephone expenses Balance c/d 6. 24.000 Visiting Fees 30.600 400 6.30. ii) Depreciation allowable on car is 15% and surgical equipments is 15%.000 in various journals 6.

000 from patients in appreciation of his medical service and Rs.25.000 45.000 respectively.000 Gross Profit 7.000 Mark in May 2008 41. 4) Gifts and presents include Rs.000 15.2.500 Staff salary 4. 2) Car was purchased on 1-1-2011 and the surgical equipment on 4-9-2010. Debit Rent of business premises 96.3. 3) It is estimated that 1/3 of the use of car is for his personal use.000 56 .000 Compute his income from profession for the assessment year 2011-12 after taking into account the following information: 1) Books worth Rs.000 11. Life Insurance Premium Gift to son Interest on loan Car expenses Purchase of medicines Balance c/d Q.000 Scholarship for a poor but deserving student 5.000 Unclaimed credit balance Printing and Stationery 15.000 Audit fees 5. Telephone 20.000 transferred 42.000 Loss of stock in trade due to Interest on Post office White ants 3.500 Purchase of Trade Mark Refund of custom penalty 25.20.The following is the Profit and Loss Accoount of Mr.000 received as birthday gifts.000 4.000 were purchased on 15-5-2010 and the balance on 5-2-2011.27.27.5 .500 Dividend from UTI 5.15. 5) Opening and closing stock of medicines amounted to Rs.000 saving bank 2. X for the year ended 31-3-2011.000 5.300 4.000 and Rs.6.000 40.38.000 Prize from Lottery (gross) 37.10.000.

The unclaimed credit balance of Rs.50. A provides the following data regarding his transaction for the sale of his residential house for assessment year 2011-12. The fixed deposits are as follows: Asset WDV Additions Dep: Date of Additions Furniture and fittings 60.000 (b) Deposits made by a person who in not traceable Rs.000 1.000 represents: (a) Due to a trade creditor no longer payable.000 20. 27.600 15% 1-12-2010 Machine 12.00.00.000 28.50.000 ---15% -----Compute tax payable be Mr.76.000 ----------8. Q 2 From the following data.000 25.1.50. 1988 in January 2009 4. Rs.000 10% 5-10-2010 Typewriters and Calculators 80. 15.000 ------15% ---------Cycle ----1.000 The cost inflation indices for 1987-88 and 2010-11 were 150 and 711 respectively.000 30. you are required to work out the capital gains for Assessment Year 2011-12 : 57 .Life insurance premium Depreciation on fixed assets Gifts and presents Gratuity Reserve Net Profit 10. 2.50.000 ----------- -------------8.000 Purchased another house in September 2010 Deposited in the Capital Gains Alc Scheme. Life insurance premium is in respect of a deferred annuity for Rs.000 ------------ Notes. 3. Compute the amount of Capital Gain to be included in the Total Income for the assessment year 2011-12 : House purchased in 1987-88 Sold in November 2010 5. 1 Mr.000.50.000. X for the Assessment year 2011-12 CAPITAL GAINS Q. 1.000 3.000 3. 42.

(i) Site purchased in 1975 value Rs.0.33 lakh (ii)Market value of site on 1.4.1981 Rs.0.75 lakh (iii) Ground floor-Cost of construction in 1981 Rs.1.50 lakh (iv)First floor-Cost of construction in 1985 Rs.2.66 lakh (v) Sale consideration received in 2010 (vi) Investment in new property Rs. 33.00 lakh Rs. 10.00 lakh

Assume that the property being sold and the new property being acquired are both residential: Index 1985-86-133, 2010-11-711. Q.3 M/s. P. Bros. Chennai running an industrial undertaking were ordered by City Corporation, Chennai- to shift their unit from urban area of Chennai. They shifted their concern during 2010-11 and in the process sold some of the assets whose details are given below: Assets P &M Land Building Acquired in 1989 June 1983 1989 Rs. Rs. Rs. Sale proceeds 10,00,000 7,00,000 12,00,000 W.D.V. on 1.4.2010 [cost U/S 50(2)] 4,40,000 7,32,500 Cost of acquisition 6,00,000 1,40,000 10,00,000 Amount invested during Dec. 2010 due to shifting . 8,00,000 2,00,000 5,00,000 Compute the taxable capital gain for the assessment year 2011-12 (C.I.I. for 1983-84 is 116; 1988-89 is 161; 2010-11 is 711)

Q.4. During the previous year 2010-11, Mr. Ramesh sells the following capital assets: Sale Cost of Year of Fair Market proceeds Acquisition Acquisition Value as on 1 - 4 – 1981 (Rs.) (Rs.) (Rs.) Land 1,58,00,000 18,50,000 1977 28,00,000 Gold 9,86,000 2,40,000 1980 2,41,000 Listed Debentures 1,57,000 75,000 1975 40,000 Assume that his business income is Rs. 1,46,000, determine his net income for the assessment year 2011-12. Q5. Mr. A lives in Bangalore. He owns not only house properties in and around Bangalore but also cultivable land near Mangalore. He lives in a house which had been bought by him in January, 1986 for Rs. 2,31,000. The agricultural land measuring 10 hectares is being cultivated by his father for over 15 years. Its fair market value as on 1-4-1981 was Rs. 58

8,00,000. The residential house is sold by him for Rs. 14,00,000in December 2010 and another house bought within 3 months at a price of Rs. 3,00,000 to be used for residential purposes. Agricultural land is also sold for Rs. 46,00,000 in January 2011. on 30-6-2011 he bought another agricultural farm for Rs. 5,00,000 which will be cultivated by him. Gold ornaments were also sold by him in November, 2010 for Rs. 2,00,000 the fair market price thereof as on 1-4-1981. being Rs. 30,000. He bought fresh jewellery for Rs. 80,000 within 6 months of sales. You are required to compute taxable capital gains of Mr. A for the A. Y. 2011-12. (Capital Gain Index No. of the year 1981-82 = 100, 1986-87 = 133, 2010-11 = 711) Q6 You are required to compute the total income for the assessment year 2011-12. ‘P’ sold a house property on 30-11-2010 for Rs.3,50,000. He had acquired this property from ‘O’ under a will on 1-6-1991 and expended Rs.19,900 on its improvement in 1991-92. Compute P’s income under the head ‘Capital Gains’ for the assessment year 2011-12 assuming that ‘O’ had acquired this property at the cost of Rs.40,000 in 1981-82 and further spent Rs.15,000 during the same year on its improvements. The cost inflation indices are as under: 1981-82  100, 1991-92  199, 2010-11  711. Q.7 X was the owner of the following assets: Gold purchased on 15th December 1977 for Rs. 1,40,000 (market price as on 1-4-1981 Rs.1,82,000) Land purchased on 15th Dec. 1979 for Rs. 31,60,000 (market price as on 1-4-1981 Rs.5,60,000) Listed Debentures purchased on 15th December 1976 for Rs. 3,14,000 (market price as on .1-41981 Rs. 2,00,000) He sold these assets in financial year 2010-11 as follows; Gold for Rs. 38,00,000, Land for Rs. 1,54,00,000 and Debentures for Rs. 5,10,000). Compute Capital gain taxable for Mr. X for the assessment year 2011-12. (Capital gain Index no. 1981-82 ;100 and 2010-11 ;711 ) Q8. X owns several assets but does not own any residential house. He sells the following assets and requests you to compute his capital gains for the assessment year 2011-12. (1) Shares (purchased in April, 1992 for Rs. 1,20,000) sold through recognised stock exchange on 15-12-2010 for Rs. 2,00,000. (2) On 1-4-1981, he had agreed to sell the jewellery to Y for Rs. 5,60,000 which was purchased in 1975 for Rs. 3,00,000. However, the sale could not be effected as Y backed out. He now sold the jewellery on 15-7-2010 for Rs. 32,40,000 and incurred Rs. 40,000 incidental selling expenses on account of brokerage and commission. He also invested Rs. 3,00,000 on 20-10-2010 in a Deposit Account with a public sector bank under the Capital Gains Deposit Account Scheme. In December, 2010 he also purchased a small residential house for Rs. 3,80,000. (3) Debentures (listed) (purchased in September, 1993 for Rs. 1,00,000) sold on 1-12-2010 for Rs. 1,60,000. (4) Sold his motor car (purchased in August, 1992 for Rs. 1,40,000) on 15-3-2011 for Rs. 1,60,000. 59

( Capital Gain Index No.: 1981-82 = 100, 1992-93 = 223, 2010-11 = 711 )

INCOME FROM OTHER SOURCES Q1. Mr. X has the following investments in the previous year ended on 31st March, 2011 : (i) Rs. 750 received as interest on Post Office Recurring Deposit. (ii) Rs. 25,000, 12% Haryana State Electricity Board Bonds. (iii) Rs. 20,000, 13% Allahabad Development Bonds. (iv) Family Pension Rs. 24,000. (v) Rs. 1,751 received interest on tax-free Secured Securities of Chits India (P) Ltd. Co. (vi) Rs. 30,000, 10% (Tax-free) Listed Debentures of a Company. 60

the source of 61 . X.. a resident individual.000. 15. 36.000 on books. (3) Salary for a part-time job with a firm Rs.00. a resident individual. 12% Debentures of Goa Development Authority.000. half of which he has sub-let at Rs. 3. He took a loan to purchase Goa Development Authority Debentures Rs. etc.m. etc. 1. submits the following particulars of her income from other sources for the year ended 31stMarch. stationery. Q3.P. 3.000.200 p. 17. She has written a book for schools on which she gets a royalty of Rs. Mr. She has received remuneration for doing invigilation in Examination Rs. 5. Remuneration for acting as examiner Rs. Shri N. 5. 3. 2011: 1. Bank charged 2% as collection charges on realisation of interest on all securities. 15.000. X's income from other sources for the assessment year 2011-12. 1. (2) Agricultural income in Pakistan Rs. 20. Cash worth Rs. (4) Salary as Member of Parliament Rs. Family pension from the Government of Uttar Pradesh Rs.(vii) Rs. (ii) Rs. 1. 4. 21. 42.000 p.000 from the publisher.000 spent for earning and collecting royalty income. (5) Daily Allowance as M.000.000 @ 11% on which interest has become due but not yet paid in the previous year.000.m. 100 for collecting dividends.000. (7) Dividend received from a co-operative society Rs. submits the following particulars of his incom~ for the year ended 31st March. 1. which were reimbursed by the University. during the previous year. in connection with the examination work. (6) His residential house has been taken on a rent of Rs. 2. She has spent Rs.000. 2011 : (1) Royalty from a coal mine Rs. 1.000 was found in the previous year in her bank locker. 40.800. 75 on postage. (8) He has incurred the following expenses: (i) Paid collection charges Rs. Rs.000. Interest being payable in each case on 1st January and 1st July. Calculate his income from interest on securities under the head 'Income from Other Sources'. She incurred Rs. Compute Mr. 20. typing. Q2.

Determine the income chargeable under the head 'Income from other sources' for the assessment year 2011-12. 500 p. 4. Tax deducted at source Rs. 23. 30. submits the following particulars of income for the previous year ending March 31. Mrs. 11. (Gross) Rs.m. 55. Ltd. 20. Half portion of this house was sub-let on a monthly rent of Rs. 2. Interest credited to her recurring deposit account and cumulative time deposit account in post office was Rs.000 (vi) He has rented a residence of Rs. A furnishes the following particulars of his income for the financial year ending 31-32011: (i) Dividends in September. Interest credited to her savings bank account in Allahabad Bank Rs. interest paid on capital borrowed for the purpose of investment in shares of Sundaram Finance Ltd. 4.104. Rs. 2010 Rs.800.520. Winnings from card games Rs.000 respectively. 2010 from UTI Rs. a resident individual. 2. 700 and Rs. R. 7. Q4. Compute his taxable income for the assessment year 2011-12.500.which could not be explained by her. Rs. 6. Interest on securities issued by the Government of Singapore Rs. Q5 Mr. 500 per month. collection charges in respect of dividend Rs. 2011 : Dividend from REC International Ltd. 800. 4.600. (Iv) Amount received on 1-12-2010 in connection with winning from lottery Rs. Compute her taxable income from other sources for the assessment year 2011-12.700. 7. Winnings from lottery net amount Rs.000 (ii) Dividends received in July. 2010 from Assam Tea Co.570. 4. Cost of lottery tickets purchased Rs.400.. Dividend from Sundaram Finance Ltd. (v) Directors fees received in August. 40. 460.200.160 (60% of income of the company is agricultural income) (iii) Amount received on 1-12-2010 in connection with winning from a horse race Rs. Rs. 62 .000. 69.

The annual letting value of the house according to municipal valuation is Rs. (b) Entertainment allowance from 1st April. Taxable profits from dairy business Rs. X out of his own pocket on Life Insurance policies on his own life Rs. Mr. (g) Own house in his own town (built in 1966) was occupied by his brother-in-law free ofrent.000 The full amount of 8 months' salary was spent in London and nothing was brought to India. @ Rs.2009 : (1) Taxable profits from Poultry farming business Rs. . Compute the total income of Mr. 400.3. His bank interest in India was Rs. a Government employee and a citizen of India. During the period of his stay in London the house was occupied by his wife and children.200. . 9. X.000 donation to a charitable institution to which section 80G applies. 20. 75. 5. 600. 200. 400.000 taken on his life and for his benefits Rs. 90.000 1.000 per month and D. Q2. (a) Salary from 1st April. The salary and allowance drawn by him during this period are given below:. 8 months' salary in London Overseas allowance 72. X. Compute his total income. 5. Annual rental value of the house is Rs. (h) The employer had provided him a small car both for his official use and private use for the above period. The maintenance expenses are met by the employer. Rs.600.000 Free residence in London (Rent Rs.000.000. 63 .000 and municipal taxes for the year are Rs.000 per month for 8 months) 80. 2010 @ Rs. .A.500. 4. is sent to London on office duty on 1st June.000 per month. Municipal taxes paid in respect of this house during the year 2010-11 were Rs. 600 and ground rent paid Rs. Mr. (e) Interest on Savings Account with Bank Rs. 2.44'. B. (f) Interest on National Plan Certificates Rs. 2010.000 p.INDIVIDUALS Q1. 2010 to 31st December. 10. Q3. 3. He stays there upto 31st January. (c) Premium paid by the employer to Life Insurance Corporation on a policy for Rs. He owns property in Delhi which he uses for his residence. 2011. 500. 5. has furnished the following particulars of his income for the year ended 31st March. Mr. He paid Rs. 2010@ Rs.m. 2010 to 31st December. . presents the following information regarding previous year ended 31. X for the assessment year 2011-12. 4 months' salary in India.000' 96. 2011 : . an employee of a company. (d) Premium paid by Mr. 1.

1981 was Rs.000. for which he pays Rs. The industry produces article listed in schedule 11 of Income Tax Act. 2. 2.000 Loss in flash (card game) with friends 7. Rs.000 Profits from speculation in silver 9.000. Cost inflation index for the year 2008-09 was 582.000 Loss from short-term capital assets 5.500.000. Brought down losses of this business for previous year is Rs.(8) Loss from cloth production business (before deducting allowable depreciation Rs. Roy for the assessment year 2011-12.000 You are required to compute the Gross Total Income for the relevant A. (6) Sale proceeds of a residential plot Rs. Y. Roy resides in a rental bungalow at Indore.250.000) Rs.000 First prize from Kerala State lottery 1. 22. 1.60. Dividend received from co-operative society Rs. 5.000. (3) .000 Dividends on TISCO shares (Gross) 1. (5) Income from units of M. 49. Q4.000 Gains from playing bridge in the club 5.000 Expenditure in maintaining race horse 40. This plot was purchased in 1975 for Rs. . 21. 1.500 Gains from playing rummy in the office 1. (7) Mr.00. The market value of plot on 1. Mrs.000 Loss in race course on betting 20.500 Interest on securities (Gross) 7.F. (10) Interest accrued on National Savings Certificates (VIII issue) Rs. Rs.000. 6. Compute the total income of Mr.000 were spent on registration.the following particulars of her income for the assessment year 2011-12 : Salary from Aristocracy Private Ltd. 64 .000 Stake money received in respect of the horse 90.700. 32.000 Maharashtra'State lottery tickets bought 10.4.200 Profits from agency business 10. (9) Interest on post office saving a/c Rs.(2) Taxable profits from small-scale industry in rural area (established in 200102) Rs.000.685. 2. 20. 3.500.500 per month. (4) Dividend received from a domestic company Rs.500 Interest on fixed deposits in SBI 3.000 Loss from speculation in shares 20. M submits . (computed) 50. 2.33.

000 (ii) Interest from Government Securities 17.60. The following are the particulars of Mr.200 Q6.000 Casual Income from crossword puzzles 1. You are asked to compute his net tax liability or amount refundable. 2011-12 65 . (i) Income from profession as musician: (a) Earned and received in India 1.000 Long-term capital gains 15. (i) National Saving Certificates VIII issue purchased 10.000 (b) Earned and received in foreign country and brought in India.Q5.000 Lottery winning from Kerala State 50.39.000 Life Insurance premium paid 10.000 During the previous year he has made the following payments: Rs.000 Compute his total income and tax payable by him for A.000 (ii) Premium on self insurance policy 6.000 (iii) Deposited in Public Provident Fund Account 10.000 (v) House rent paid for rented house of his own residence 36. X for the previous year 2010-11.000 Municipal tax on property paid 1.Y.99. as the case may be : Business Income 1.000 Agricultural Income 10. Shri Ravi who is 70 years old has submitted the following particulars of his income for the previous year 2010-11 : Rs.46. 1.000 (iii) Accrued interest on National Saving Certificates during the previous year 17.000 Contribution to Public Provident Fund 15.000 (iv) Health Insurance premium of his children paid by cheque 9.900 Rent of property 10.000 2.

2.500 After debiting the following items: (a) Salary of Rs.90. who is a chemist and is incharge of the firm’s laboratory. Q2.000. 9.000 each from funds belong to them.9. 2011 disclosed a net profit of Rs. 1. and 1 respectively. It consists of three partners. He owns immovable property. 2 of capital contribution have been accepted by the Assessing Officer.000 paid for the purchase of lpatent right to manufacture a drug for cancer. 39.000. The partnership firm. Mrs. (b) Rent of Rs. Compute the total income of the firm giving briefly the reasons for inclusion and exclusion of each item. Depreciation was debited to the Profit and Loss Account as permissible under the Act.B.9000 paid to partner B for the portion of his building in which the firm’s office was situated.15.000 paid to partner C. The net profit of Rs.90.and C sharing profits and losses in proportion of 3. the Net Municipal Value of which is Rs. 15. 5000. M & Co.000. The net profit of Rs. Ground rent Rs. on partners’ capital but it does not pay any remuneration to partners. 1. who is a chemist and is incharge of the firm’s laboratory.ASSESSMENT OF FIRM’S AND ASSOCIATION OF PERSONS Q1 A firm is engaged in the manufacture of basic drugs.000. 65. (d) Rs.100 paid as interest to partner A on a loan advanced by him to the firm @ 13% p.000 paid to partner C.a. 6. The partners have contributed capital equally and share profits and losses in equal proportion.000 after tax.00. The profit of the firm for the assessment year 2011-12 are settled with the Assessing Officer at Rs. 1.000 paid to partner B for the portion of his building in which the firm’s office was situated. 1.a.500 included Rs. The partners have other sources of income as given below: M: Dividend Rs.1. (b) Rent of Rs. M and N. (d) Rs. Depreciation was debited to the Profit and Loss Account as permissible under the Act.15.65. 1.000was purchased and installed in July 2010. The firm pays interest @ 12% p.00.80.500 after debiting the following items: (a) Salary of Rs. 30. The firm’s accounts for the year ended 31st March. Mrs M has contributed her share of the capital Rs. The total gross receipts on account of rent during the year amount to Rs. 1. (c) Rs.100 paid to partner B for the portion of his building in which the firm’s office was situated. 10.90. being interest on fixed deposit with the State Bank of India.000 paid for the purchase of patent right to manufacture a drug for caner.. 9.000 from the amount of Rs. 1. consists of M. (c) Rs. M and N paid their capital of Rs. Expenses incurred on the property are as under: 66 . Its cost has not been charged against the Profit and Loss Account. New machine costing Rs. A.

50. 2011 was Rs. 500.Municipal Tax Rs. Insurance Rs. he also did speculation business which resulted in a loss of Rs. 3. of this scooter. (v) Rs. (iv) Rs. Prepare the Statement of Total Income of the firm for the Assessment Year 2011-12 and also compute the income tax payable by the firm on its total income 67 .000 spend on scientific research including Rs. 30. 30. 2008.’ sharing profits in the ratio 5:3:2:.N was engaged in speculation of shares which resulted in a profit of Rs. (iii) Rs. 2. which is used wholly for the business of the firm and Rs. (ii) Rs. 3. 8.00. 3. she received a legacy of Rs. (vi) . 2008.000 spent by the firm for the purpose of promoting family planning amongst its employees including Rs.60.000 The debits to the Profit and Loss Account included the following: (i) Rs. 15 . Mr.000 paid as Commission to Smt. 6. 300 per month for meeting the cost of petrol and repairs etc.Rs.000. Shri Avinash. Mrs. Collection Charges Rs.000 on Ist April.000. 15.000.000. 2000 paid as fees to Smt. wife of Shri Ajay. 12./ 10. N: During the year. Besides. Account for the year ending 31st March.000. 30. Mr. Shri Ajay and Shri Abhay are partners in a partnership firm “Avinash & Co.000. Vijay.000. 4.000 capital expenditure. 2. He paid Rs.& L. Alka. 3. The net profit of the firm as per its P.lRepairs Rs.Prepare statements showing the respective assessable incomes of the three partners for the assessment year 2011-12. Ground Rent Rs. 20. wife of Shri Abhay for appearing as an advocate in an appeal filed by the firm in the Rajasthan High Court. 3000 paid in proportion of 5:3::2 to the Life Insurance Corporation for getting each partner’s life insured for Rs. 2. Q3.000 as life insurance e premium on a policy of Rs. Interest on Loan utilized for making substantial extensions to the property Rs.000.000 for depreciation of scooter purchased by Avinash for Rs.000.000 left to her by her grandmother and paid life insurance premium of Rs. 30. for acting as the Sole selling agent of the firm. M: Interest on Government Securities Rs. 600. 500.600 for Scoooter Allowance to Avinash at Rs.000 for the construction of research laboratory completed on 30th September.

for the previous year ending on 31dst March 2011 is as follows: Rs.000 ________ __________ Additional information is given below: (1) Other expenses include the following: (i) Entertainment expenses Rs.60.000 40.000 1.000 Interest to Partners Other expenses Sales tax outstanding Net profit __________ 11.00.500 each given to ten customers who exceeded the sales target fixed under sales promotion scheme.Q4. (iii) Rs.70.000 (ii) V.000 10.000 20.000 (iv) Interest 9. (2) Outstanding sales tax was paid as 14th July. costing Rs.000 (ii) Bonus 60. working partners.50. Cost of goods sold 9. 32. bags. Rs. (4) The detailed particulars of remuneration and interest to A and B.000 Sales Dividends Long term Capital gain . 2009 (3) The firm is not evidenced by instrument.000 1. sharing profits and losses in the ratio of 3:2.00.45.90.000 Remuneration of partners 20.000 80. 1.000 ________ 5.000 30.000 11.000 68 15. 20. The profit and loss account of the Firm of M/s A and B.000 3.000 (iii) Commission 20.000 6. are given below: Amount actually paid A B (i) Salaries 70.000 Remuneration to employees 1.P.I.500 paid in cash to an advertising agency.60.

_____________________________________________________________ 69 .(v) Other incomes You are required to compute for the assessment year 2011-12: total income and tax liability of the firm.

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