Bhagya Achievers Test Series

CA Inter

Paper 4: Taxation

Test 2: Detailed Test Series

Total Marks: 40

Time: 72mins

Question1. (5 Marks)

a) A proprietary business was started by Smt Sugandha in 2014. As on

01.04.2022, her capital in business was Rs 4,00,000. Her husband, Mr
Saurabh, gifted Rs 3,00,000 on 01.04.2022 which Smt Sugandha invested
in her business on the same date. Profits earned from business for
different years are as follows:

Financial Year 2022-23 Rs 2,00,000

Financial Year 2023-24 Rs 2,40,000
Financial Year 2024-25 Rs 2,80,000
Financial Year 2025-26 Rs 3,00,000
Amount of profit was further invested in the business. Compute the amount to
be clubbed in the income of Mr Saurabh in each of the year.
b) Presume that the amount was gifted by Mr Saurabh to Smt Sugandha on
10.04.2022 and was invested in the business on the same day.

Answer1. (5 Marks)

The profit earned on the amount of gift is to be clubbed provided the gift
amount has been invested on the first day of the relevant previous year. Profit
on profit is not to be clubbed.

Part(a): Amount to be clubbed in various years shall be as given below:

Previous Capital as Profit Amount(Rs)

year on 1st earned(Rs)
April(Rs)

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PY 2022-23 7,00,000 2,00,000 85,714.29(2,00,000/7,00,000×3,00,000)
PY 2023-24 9,00,000 2,40,000 80,000.00(2,40,000/9,00,000×3,00,000)
PY 2024-25 11,40,000 2,80,000 73,684.21(2,80,000/11,40,000×3,00,000)
PY 2025-26 14,20,000 3,00,000 63,380.28(3,00,000/14,20,000×3,00,000)
Part(b): Amount to be clubbed in various years shall be as given below:

Particular Capital as Profit Amount(Rs)

Year on 1st Earned
April(Rs) (Rs)
PY 2022-23 4,00,000 2,00,000 Nil, since the amount of gift was not
invested in business as on 1/4/2022
PY 2023-24 9,00,000 2,40,000 80,000.00(2,40,000/9,00,000×3,00,000)
PY 2024-25 11,40,000 2,80,000 73,684.21(2,80,000/11,40,000×3,00,000)
PY 2025-26 14,20,000 3,00,000 63,380.28(3,00,000/14,20,000×3,00,000)

Question2. (6 Marks)

Mrs Indu, a resident individual, owns a house in USA. She receives rent @
$2,000 p.m. She paid municipal taxes of $1,500 during FY 2022-23. She also
owns a two storied house in Mumbai, ground floor is used for her residence
and first floor is let out at a monthly rent of Rs 10,000. Standard rent for each
floor is Rs 11,000 p.m. Municipal taxes paid for the house amounts to Rs 7,500.
Mrs Indu had constructed the house by taking a loan from a nationalized bank
on 20.06.2018. She repaid the loan of Rs 54,000 including interest of Rs 24,000.
The value of one dollar is to be taken as Rs 60. Compute total income from
house property of Mrs Indu.

Answer2. (6 Marks)

Computation of income from house property of Mrs Indu for AY 2023-24:

Particulars Amount(Rs) Amount(Rs)

Property 1- House property in USA
GAV {Rent received treated as GAV}($2,000 14,40,000
p.m×Rs60 per USD×12 months)
Less: Municipal taxes paid($1,500×Rs60 per (90,000)

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USD)
Net Annual Value (NAV) (13,50,000)
Less: Deduction u/s 24(a)(30% of NAV) (4,05,000)
Income from House Property in USA 9,45,000
Property2-House Property in Mumbai(Let-out
portion-First Floor):
Gross Annual Value(GAV) 1,32,000
Step-1: Compute expected Rent (‘ER’){Rs
11,000×12 months=Rs1,32,000}
{In the absence of any information about fair
rent and municipal rent, standard rent shall be
taken as expected rent}
Step2: Compute Actual Rent
Received/Receivable {Rs
10,000×12M=Rs1,20,000
Step3: GAV is higher of ER and Actual rent
received/Receivable. GAV=1,32,000
Less:Municipal taxes paid (50% of Rs 7,500) (3,750)
Net Annual Value
Less: Deduction u/s 24(a) (30% of NAV) 1,28,250
Less: Deduction u/s 24(b) {Interest on housing
loan(50% of Rs 24,000) (38,475)
Income from Let out Portion(Mumbai House) (12,000) 77,775
Property3-House Property in Mumbai(Self –
occupied portion-Ground Floor):
Gross Annual Value Nil
Less: Municipal texes Nil
Net Annual Value(NAV) Nil
Less: Deduction u/s 24(a)(30%of NAV) Nil
Less: Deduction u/s 24(b){Interest on housing
loan(50% of Rs 24,000) (12,000)
Loss from Self-occupied Portion(Mumbai (12,000)
House)
Total Income u/h House Property 10,10,775

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Question3. (3 Marks)

Mr Vineet submits his return of income on 12.09.2023 for AY 2023-24

consisting of income u/h house property and income u/h other sources. On
21.11.2023, he realized that he had not claimed deduction u/s 80TTA in
respect of his interest income on a Savings Bank Account. He wants to revise
his return of income since the relevant assessment year has not expired.
Discuss.

Answer3. (3 Marks)

Since Mr Vineet has income from house property and other sources, he does
not fall under the category of a person whose accounts are required to be
audited under the Income Tax Act or any other law for the time being in force.
Therefore, the due date of filing return for AY 2023-24 u/s 139(1), in his case, is
31.07.2023. Since Mr Vineet had submitted his return on 12.09.2023, the
return filed by Mr Vineet is a belated return u/s 139(4).

A belated return u/s 139(4) can be revised u/s 139(5) at any time before three
months prior to the end of the relevant assessment year or completion of
assessment, whichever is earlier. Since the relevant AY has not expired, Mr
Vineet can revise the belated return filed by him u/s 139(4) to claim deduction
u/s 80TTA.

Question4. (4 Marks)

State with reasons whether you agree or disagree with the following
statements: (a) Return of income of Limited Liability Partnership (LLP) can be
verified by any partner.

(b) Time limit for filing return u/s 139(1) in case of Mr A having total turnover
of Rs 160 lakhs for the year ended 31.03.2023, whether or not opting to offer
presumptive income u/s 44AD, is 31.10.2023.

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Answer4. (4 Marks)

(a) Disagree: The return of income of LLP should be verified by the

designated partner. Any other partner can verify return only in the
following two cases:
 where for any unavoidable reason such designated partner is not able to
verify the return; or
 where there is no designated partner.
(b) Disagree: If Mr A opts to offer his income as per the presumptive
taxation provisions of Section 44AD, then the due date u/s 139(1) for
filing return of income for the year ended 31.03.2022 shall be
31.07.2022. However, if Mr A does not opt for presumptive taxation
provisions u/s 44AD, he would have to get his accounts audited u/s 44AB
in which case the due date for filing return would be 31.10.202.

Question5. (4 Marks)

From the following particulars submitted by Mr S, compute his income from

other sources for AY 2023-24.

Particulars Amount
Director’s meeting fees received from Y Ltd 3,000
Agricultural income from land situated in India 10,000
Agricultural income from Nepal 15,000
Dividend from A Ltd(declared on 25.08.2022) 8,000
Interest:
From bank on FDR (Net of 10% TDS) 9,000
Government securities 1,200
Public Provident Fund A/C 4,000
National Savings Certificate VIII issue 3,000
Lottery prize received after 30% TDS (S had spent Rs 10,000 28,000
on purchase of various lottery tickets out of which he
received prize on one ticket)
Rent received from sub-letting of a flat 12,000
(S had paid Rs 6,000 as rent to the owner and Rs 600 for

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 realizing the rent)

Answer5. (4 Marks)

Computation of income from other sources of Mr S(AY 2023-24)

Particulars Amount(Rs)
Director’s meeting fees 3,000
Agriculture income from land situated in India{Exempt u/s Nil
10(1)}
Agricultural income from Nepal(assumed not taxable u/h 15,000
PGBP )
Dividend from A Ltd 8,000
Interest
From bank on FDR (Rs 9,000/90%) 10,000
Government securities 1,200
PPF A/C (interest received on PPF is exempt from Tax) Nil
NSC 3,000
Lottery(Rs 28,000×100/70) 40,000
Net income from sub-letting of flat (Rs 12,000-Rs 6,600) 5,400
Income from other sources 85,600

Question6. (5 Marks)

Ms Apaarna co-owns a residential house property in Calcutta along with her

sister Ms Dimple, where her sister's family resides. Both of them have equal
share in the property and the same is used by them for self-occupation.
Interest is payable in respect of loan of Rs 50,00,000 @ 10% taken on 1.4.2021
for acquisition of such property.

In addition, Ms Aparna owns a flat in Pune in which she and her parents reside.
She has taken a loan of Rs 3L @ 12% on 1.10.2021 for repairs of this flat.
Compute the deduction which would be available to Ms Aparna and Ms Dimple
u/s 24(b) for AY 2023-24.

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Answer6. (5 Marks)

Interest on loan taken for acquisition of residential house property at Calcutta

= Rs 50L x 10% = Rs 5L

In the present case, loan has been taken on or after 1st April 1999 for purchase
of the property has also been purchased within the stipulated time period of 5
years from the end of the year in which loan has been taken. Assuming that
the requisite certificate has been obtained from the lender, each co-owner of
the property is eligible for maximum deduction of Rs 2L u/s 24(b) in respect of
this property.

Therefore, both Ms Aparna & Ms Dimple would be entitled to claim a

deduction of Rs 2L each u/s 24(b) in respect of the interest paid on loan taken
for acquisition of residential house property at Calcutta.

Computation of Deduction u/s 24(b) Available to Ms Aparna for AY 2023-24:

> Interest on loan taken for repair of flat at Pune = Rs 36,000 (Rs 3,00,000 x
12%). However, deduction of maximum Rs 30,000 shall be available because
the loan hasn't been taken for purchase/construction of the property.

> Total Deduction u/s 24(b) = Rs 2L for Calcutta Property (+) Rs 30,000 for Pune
Property = Rs 2,30,000

➤ Deduction u/s 24(b) in respect of both the houses has to be restricted to Rs

2,00,000.

Deduction of Rs 2L available u/s 24(b) to Ms Dimple for AY 2023-24.

Question7. (3 Marks)

State with brief reasons whether the following receipts are chargeable to
income tax or not for AY 2023-24 (if chargeable, the amount taxable is to be
mentioned):

(i) Rent received for letting out agricultural land for a movie shooting Rs
72,000.

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 (ii) Agricultural income earned by a resident of India from a land situated
in Malaysia.

Answer7. (3 Marks)

(i) Rent received from an agricultural land let out for a movie shoot does
not constitute agricultural purpose and hence, such income is
taxable. Therefore, income of Rs 72,000 shall be taxable u/h other
sources,
(ii) Agricultural land from a land in any foreign country is taxable in the
case of a resident taxpayer as income u/h "income from other
sources". Exemption u/s 10(1) is not available in respect of such
income.

MCQS
Mr Ganesha (a salaried person) has three houses. One in Thane (Maharashtra),
second in Jaipur (Rajasthan) and third in Ratlam (Madhya Pardesh). Details of
the flats/houses are as follows:

Thane Flat: 3 BHK flat purchased in April 2004 for Rs 90 lakhs. Afterwards,
interior work done in 2007 of Rs 15 lakhs. Mr Ganesha took loan of Rs 65 lakhs
for purchase of this flat in 2003 and settled full loan in 2020
Jaipur House: Purchased in July 2018 of Rs 62 lakhs and interior work done in
September 2019 of Rs 15 lakhs. Loan taken for purchase of this house of Rs 15
lakhs in June 2018. As per interest certificate, he paid Rs 12,00,500 and Rs
43,500 towards principal and interest, respectively.

Ratlam House: Purchased in December 2019 for Rs 70 lakhs (SDV of Rs 65

lakhs). For acquiring this house, he took loan of Rs 40 lakhs from Canara Bank,
Loan was sanctioned on 1.8.2019. He pays EMI of Rs 38,100 per month. As per
interest certificate, for PY 2022-23, he paid Rs 60,900 and Rs 3,96,300 towards
principal and interest, respectively.

Particular Thane House Jaipur Ratlam House

House(Apr22 to
Dec 22)

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Municipal Taxes Rs 18,574 Rs 8,090 Rs 6,909
Paid
Municipal Rs 30,500 Rs 6,800 Rs 7,200
Value(per month)
Fair Rent(per Rs 33,000 Rs 7,000 Rs 7,500
month)
Standard Rent(per Rs 32,000 Rs 8,000 Rs 7,300
month)
Other details are as follows:

He has sold Jaipur house on 5th January 2023 for Rs 100 lakhs and invested Rs
15 lakhs in RECL bonds issued by the Central Government on 10th August
2023.
Mr Ganesha is working in WinDoor Exports Pvt Ltd, Mumbai and self-occupied
Thane flat. He earned salary of Rs 22,50,350 for PY 2022-23.
He has no other income from any source for PY 2022-23.

He has given Ratlam house on rent for FY 2022-23 to Mr Pratap on a monthly

rent of Rs 8,500.

He has given Jaipur house on rent for the period of April 2022 to June 2022 to
Mrs Madhura Mahto on monthly rent of Rs 7,100 and vacant for remaining
period from July 2022 to December 2022, Mr Ganesha would not like to opt
concessional tax rates available u/s 115BAC,Cost inflation index (CII) for FY
2018-19 is 280; for FY 2019-20 is 289 and for FY 2022-23 is 331

Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:

1. What would be Net Annual Value of each house for PY 2022-23?

(a) Thane-Nil, Jaipur-Rs 13,210. Ratlam - Rs 95,091
(b) Thane-Nil, Jaipur - Rs 54,910, Ratlam - Rs 95,091
(c) Thane-Nil: Joipur - Rs 21,300: Ratlam - Rs 1,02,000
(d) Thane-Nil: Jaipur-Rs 13,210: Ratiam Rs 80,691 (2 Marks)

Answer1. (a)

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2. What would be income/loss under the head "Income from house property"
in the hands of Mr Ganesha?

(a) Loss of Rs 1,67,689

(b) Loss of Rs 2,86,236
(c) Loss of Rs 3,20,489
(d) Loss of Rs 3,63,989 (2 Marks)

Answer2. (d)

3. How much amount will be carried forward as loss from house property for
the subsequent AY 2024-25?

(a) Rs 3,63,989
(b) Rs 1,63,989
(c) Rs 2,00,000
(d) Rs 1,50,000 (2 Marks)

Answer3. (b)

4. What would the amount of capital gains chargeable to tax in the hands of
Mr Ganesha during PY 2022-23?

(a) Short-term capital gains of Rs 23,00,000

(b) Long-term capital gains of Rs 26,70,714
(c) Long-term capital gains of Rs 9,52,721
(d) Long-term capital gains of Rs Nil, since he is eligible for deduction u/s
54EC in respect of amount invested in RECL bonds issued by Central
Government (2 Marks)

Answer4. (c)

5. What would be the gross total income of Mr Ganesh for AY 2023-24

(a) Rs 30,03,071

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 (b) Rs 28,03,071
(c) Rs 29,53,071
(d) Rs 39,48,020 (2 Marks)

Answer5. (c)

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