Paper IV Tax | Capital Gains Tax | Expense


EXAMINATION OF ARTICLED CLERKS PAPER IV TAXATION MONDAY-5/11/2011 Time : 3 HOURS (Total Marks – 100) Notes: 1. Figures in the bracket indicate full marks. 2. Answers should be legible, precise and to the point. 3. Answers to every question should be on a fresh sheet of paper. 4. No tax computations are required under any of the questions. 5. Reference to the Act means Income Tax Act, 1961. Marks 15


Answer EITHER of the following :-

A) What are the conditions which must be fulfilled before a search can
be authorized under section 132 of the Act ?

B) What is the provision for making a block assessment after the
completion of the search? OR

A) What are the appealable orders against which an appeal can be
filed before the Commissioner (Appeals)?

B) What are the powers of the Commissioner (Appeals) while
deciding the appeal? 2. Discuss briefly the types of income of other persons that are to be included in the income of the assessee. 3. Name and discuss briefly seven types of income which do not form part of the total income 4. Answer ANY SIX of the following: A) Who is an “Assessee”? Who is a “Deemed Assessee”? Who is an “Assessee in Default”? Explain with suitable examples. B) An individual, who is an Indian resident, is allowed to hold two different citizenship simultaneously. Is the citizenship a 36 10 10

determining factor for residential status of an individual? C) D) When can a charitable trust avail benefits under sections 11 & 12 of the Income-tax Act, 1961? Discuss the following issues relating to income from house property. i. ii. E) F) Income earned by residents from house properties situated in foreign countries. Properties which are used for agricultural purposes. Explain briefly the tax treatment of compensation received in restraint of trade, under section 28(va). Discuss the tax implications arising consequent to conversion of a capital asset into stock-in-trade of business and its subsequent sale. G) H) I) J) Explain the provisions of carry forward and set off of business losses under section 72 of the Income-tax Act, 1961 Briefly discuss the provisions relating to payment of advance tax on income arising from capital gains and casual income. Explain in brief short term capital assets, long term capital assets & their taxability Explain briefly the principles underlying Best Judgement assement 5. Write short notes on any two of the following: A) Binding nature of CBDT circulars B) Tax planning vs. Tax avoidance C) Previous Year D) Dividend Distribution Tax 6. Answer ALL of the following: A) Choose the correct answer with reference to the provisions of the Income-tax Act, 1961: i. Income accruing in Japan and received there is taxable in India in the case of (a) Resident and ordinarily resident only (b) Both resident and ordinarily resident and resident but not ordinarily resident (c) Both resident and non-resident 8


(d) Non-resident. ii. A company other than an Indian company would be treated as a resident in India for the previous year 2010-11 if, during that year, its control and management is situated: (a) Wholly in India (b) Partly in India (c) Wholly or partly in India B) (d) None of the above Choose the correct answer with reference to the provisions of the Income-tax Act, 1961. i. Rakesh received Rs.70,000 from his friend on the occasion of his birthday. (a) The entire amount of Rs.70,000 is taxable (b) Rs.20,000 is taxable (c) The entire amount is exempt (d) None of the above. ii. Family pension received by a widow of a member of the armed forces where the death of the member has occurred in the course of the operational duties in the circumstances and subject to prescribed conditions, is (a) Exempt upto Rs.3,00,000 (b) Exempt upto Rs.3,50,000 (c) Totally exempt under section 19(19) (d) Totally chargeable to tax. iii. Gift of Rs.5,00,000 received on 10th July, 2010 through account payee cheque from a non-relative regularly assessed to income-tax, is (a) A capital receipt not chargeable to tax (b) Chargeable to tax as income from other sources (c) Chargeable to tax as business income (d) Exempt upto Rs.50,000 and balance chargeable to tax as income from other sources. 3

C) ← ← Income arising to a minor married daughter is (a) to be assessed in the hands of the minor married daughter (b) to be clubbed with the income of that parent whose total income, before including minor’s income, is higher (c) completely exempt from tax (d) to be clubbed with the income of her husband. D) Fill in the blanks having regard to the provisions of the Incometax Act, 1961: i. Business loss is ………… (eligible/not eligible) for set off against income from salaries. ii. The maximum period for which speculation loss can be carried forward is ……… years. iii. The first item in the order of priority of set off as between unabsorbed capital expenditure on scientific research, current year depreciation and brought forward business loss is ……… E) ← ← Mr. B incurred short-term capital loss of Rs.10,000 on sale of shares through the National Stock Exchange. Such loss can be set-off – (a) Only against short-term capital gains (b) Against both short-term capital gains and long-term capital gains (c) Against any head of income (d) None of the above. F) What are the due dates of installments and the quantum of 2 Choose the correct answer with reference to the provisions of the Income-tax Act, 1961: 1 3 Choose the correct answer with reference to the provisions of the Income-tax Act, 1961: 1

advance tax payable by companies? G) The assessee was engaged in the business of construction of buildings. The assessee entered into an agreement with AFPL to takeover by assignment and complete all the pending projects/contracts/work-in-progress remaining to be completed by the transferor company. For the A.Y 1993-94, the assessee claimed deduction of the payment of Rs.3,20,00,000/- made to AFPL as revenue expenditure. The Assessing officer disallowed the claim holding that the expenditure is capital expenditure. Please advise the assessee. H) The assessee was a tenant of 5000 sq.ft. in a building which 3 was declared as unsafe. The assessee contributed Rs.1.5 Crore for reconstruction of the building with the understanding that it will continue as a tenant at Rs.11,300 per month. In the Assessment Year 2003-04, the assessee claimed the deduction of the said expenditure of Rs.1.5 Crore. Will it be treated as capital expenditure or revenue expenditure? I) J) What are intangible assets? Give four examples. Choose the correct answer with reference to the provisions of the Income Tax Act, 1961: 2 1 3

← Assessment Year 2011-12 is: ← (a) (b) (c) (d) 31 July 2011 30 September 2011 31 October 2011 31 August 2011 The due date for filing of a return of income for a company for

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