Taxation Management The compendious and complex nature of our law relating to direct taxes makes the task of

students, who have not only to understand it but have also to develop the ability to apply it in

given situations, extremely onerous and difficult. They have to acquire a familiarity with and

awareness of the nature and scope of the main provisions of the direct taxes. They also require an

up to date knowledge of how a statutory provisions have been interpreted by different courts of

law on different occasions. Hence the course ‘Tax Management’ is being offered to the Finance

specialization students by the PES University to acquire the knowledge of tax in order to manage

OR to run the Business enterprises with respect to tax procedure and practices.

Course Code UM15MB622

Chief Course Instructor

Course Instructor

Dr. C Sivashanmugam, Associate Professor

Course Credits 4

No. of Hours 52

Credit pattern

Lecture Tutorial Practical/

Seminar

Self

study Credits

4 - - - 4

ISA 40% (30% for two tests + 5% for activities +5% for attendance)

ESA 60%

Course Objectives The course provides a thorough knowledge, critical understanding of the

concepts in the law of income tax, including the capital gains provisions.

Course Outcome

At the end of the course the students are able to :

1. Explain the concepts of Assessment year, Previous year, Residential

status of an individual and Company, exemptions and deductions under

Direct tax laws.

2. Exhibit skills in assessing, evaluating the taxable income of an

individual and the company and their tax liability.

3. Develop experience in identifying tax issues and applying the income

tax law to arrive at reasoned solutions to problems.

Pedagogy/Andragogy/Di

dactics

Each unit will have 60% of time in Lecture, 20% in case and 20%

learning through GD, Flip classes, Audio-visuals and other activities.

COURSE PLAN (39 Hours)

No. Session Topics Coverage

Didactics %age Cum

UNIT-1

1 Basic concepts: Assessment Year, Previous Year,

Person, Assessee, Income, Charges on income, Gross

Total Income

2.56 2.56 Lecture with PPT/Discussion

2 Taxable Income, Capital and Revenue Receipts,

Receipt and Accrual of Income 2.56 5.12 Lecture with

PPT/Discussion

3 Connotation of Income Deemed to Accrue or arise in

India. 2.56 7.68 Lecture with

PPT/Discussion

4 Tax Planning, Tax Evasion and Tax Management. 2.56 10.24 Lecture with

PPT/Discussion

5 residential Status of an Individual assessee, firm &

Company 2.56 12.8 Problems solving

6 Problems on residential Status of an Individual assessee 2.56 15.36 Problems solving

7 Problems on Tax incidence of an Individual assessee 2.56 17.92 Problems solving

8 Problems on Tax incidence of an Individual assessee 2.56 20.48 Problems solving

ASSIGNMENT 1

Unit 2

9 Explanation under various Heads of Income: Income

from salary 2.56 23.04 Lecture with

PPT/Discussion

10 Discussion on various components of salary 2.56 25.6 Lecture with

PPT/Discussion

11 Problems on salary Components-Basic, DA/DP, Bonus,

Commission, Provisions of Leave salary, 2.56 28.16 Problems solving

12 Problems on leave salary

13 Retrenchment Compensation, Provisions of Gratuity 2.56 30.72 Problems solving

14 Problems on gratuity

15 Allowances 2.56 33.28 Problems solving

16 Problems on Taxable allowances

17 Perquisites

18 Problems on taxable Perquisites

19 Pension & deductions under salary head 2.56 35.84 Problems solving

20 Deductions under the head ‘Salary’

21 Computation of Taxable Salary

2.56 38.4 Case Study

22 Computation of Taxable Salary

23 Income from House Property (Theory Only) 2.56 40.96 Lecture with PPT/Discussion

ASSIGNMENT 2

Unit 3 24 Income under the head Profit and Gains of Business or

Professions and its Computation Basis- Method of

Accounting-

2.56 43.52 Lecture with

PPT/Discussion

25 Scheme of Business Deductions/ Allowance- 2.56 46.08 Lecture with

PPT/Discussion

26 Deemed Profits maintenance Of books 2.56 48.64 Lecture with

PPT/Discussion

27 Problems on computation of Income from Business of

Individual Assessee 2.56 51.2 Problems solving

28 Problems on computation of Income from Business of

Individual Assessee 2.56 53.76 Problems solving

29 Problems on computation of Income from Profession

of Individual Assessee

2.56 56.32 Problems solving

30 Problems on computation of Income from Profession

of Individual Assessee 2.56 58.88 Problems solving

31 Problems on computation of Depreciation 2.56 61.44 Problems solving

ASSIGNMENT 3

Unit 4 32 Income under Capital Gains: Basis of Charge,

Transfer of Capital Asset, 2.56 64 Lecture with

PPT/Discussion

33 Inclusion & Exclusion from Capital Asset, Capital

Gain,

2.56 66.56 Lecture with

PPT/Discussion

34 Provisions on Cost of acquisition, cost of

improvement & selling expenses

2.56 69.12 Lecture with

PPT/Discussion

35 Deductions from Capital Gains. 2.56 71.68 Lecture with

PPT/Discussion

36 Deductions from Capital Gains. 2.56 74.24 Lecture with

PPT/Discussion

37 Computation of Short term Capital Gain 2.56 76.8 Problems solving

38 Computation of Long term Capital Gain 2.56 79.36 Case Study

39 Computation of Capital Gain 2.56 81.92 Case Study

40 Tax liability of Capital gains

41 Income from Other Sources:

42 Permissible Deductions Under Section 80C to 80U

43 Permissible Deductions Under Section 80C to 80U

44 Computation of Taxable Income of an individual

ASSIGNMENT 4

Collect the necessary details of sale of capital assets Income from an Individual and Compute capital gain

tax on that.

Unit 5 45 Setoff and Carry forward of losses (Theory Only) 2.56 84.48 Lecture/Discussion

46 Clubbing of Incomes. (Theory Only) 2.56 87.04 Problems solving

47 Introduction to Indirect Taxation: Sale, Goods and Sales Tax 2.56 89.6 Problems solving

48 Value Added Tax, Central Sales Tax, 2.56 92.16 Lecture with

PPT/Discussion

49 Service Tax, (Theory) 2.56 94.72 Lecture with

PPT/Discussion

50 Central Excise Tax (Theory) 2.56 97.28 Case Study

51 Customs Duty (Theory Only)

2.56 100 Case Study

52 Salient features of upcoming GST in India

ASSIGNMENT 5

Field work: Collect the Details of Income from all

sources of an Individual and the Company, .Compute

tax liability and prepare the Income tax returns

document.

Recommended Books:

1 Direct Taxes, Vinod Singhania and Kapil Singhania, Taxmann Publications

2.Direct Tax-Law and Practice, H C Mehrotra & S P Goyal, Sahitya Bhavan Publications

3. Indirect Taxes-V S Datey, Taxman Publications

Reference Books

1. Students Guide to Income Tax, Vinod K Singhania & Kapil K Singhania, Taxman Publications.

2. Students Guide to Income Tax – Manoharan T. N, Snow White publication.

3. Direct Taxation – Meena Goyal, Biztantra publication.

Note: Each session is one hour duration

Suggested Journals for reading:

1. The Journal of American Taxation Association

2. Journal of Accounting and Taxation

3. Journal of Taxation

Tax Lab

1. Understanding the usage of software package while calculating different taxes

2. Studying the online submission of Income tax returns

QUESTION BANK

Unit-1

1. Define the following terms a s per IT Act:

a. Casual Income b. Income c. charitable purpose

2. Define the following terms a s per IT Act:

a. Previous year b. Assessee c. Agricultural Income

3. How would you differentiate a capital receipt from a reserve receipt?

4. In what way does the liability of tax of a ‘not ordinary resident’ differ from that of a

‘resident’ under the income tax act?

5. “Income tax is a tax on income and not on receipts” Discuss this statement and give the

essential characteristics of the term ‘Income’

6. “Income tax is charged on income but there is no definition of the term ‘income’ under

the Income Tax Act: rather it only provides as to what is included in income” Discuss.

7. Income tax is charged on the income of the” Previous year’. Do you agree? If not what

are the exceptions?

8. What is gross total income?

9. State the general rules for taxation of previous year Income during the same year.

10. Distinguish between Direct and Indirect Tax

11. State the bases of charging income tax

12. Elucidate the procedure of computing Total income of an individual

13. Distinguish between A.Y & P.Y

14. Under what circumstances both A.Y and the P.Y will be the same?

15. Distinguish between the Assessee and Deemed Assessee. Give Example

16. Define person u/s 2(31)

17. Define assessee in default

18. Distinguish between GTI & TI

19. Distinguish between Maximum Marginal Rate & Average rate of Income tax.

20. What are the different categories into which the assesses are divided with regard to

residence? Give a brief account of each of them.

21. How is residence of assessee determined for income tax purpose? Explain the incidence

of residence on tax liability

22. Define Agricultural income under IT Act. List out any 6 Non-agricultural incomes from

land

23. What is Tax planning? Explain the need and limitations of Tax planning.

24. Mr. X is a foreign national, furnishes the following particulars of his income relevant for

the previous year 2014-15.

SL

No.

Particulars Rs.

1 Profit on sale of plant at London (1/3 is received in India) 120000

2 Profit on sale of plant at Delhi (1/4 received in London) 100000

3 Salary from an Indian Company received in London (1/5 is paid for rendering

service in India)

120000

4 Interest on UK Development Bonds (entire amount is received in London) 70000

5 Income from property in London received there 10000

6 Income from agriculture in London received there, half of which is used for

meeting hostel expenses of X’s son in England and remaining amount is later on

remitted to India.

50000

7 Dividend received in London on May 6, 2014 from a company registered in India

but mainly operating in UK

15000

8 Profit from a business in Delhi managed from India 230000

9 Rental Income from a property in Nepal deposited by the tenant in a foreign

branch of on Indian bank operating there.

18000

10 Gift in foreign currency received on September 20, 2014 from a friend (1/3 of

which is received in India and remaining amount is received outside India and

utilized for meeting education expenses of X’s son in USA)

900000

Determine GTI of Mr. X for the A.Y 2015-16, if he is (a) Resident (b) Resident but not

ordinarily resident, and (c) Non-resident.

25. Mr. Umesh, aged about 59, working in a private Company, Bangalore furnishes to you

the details of his GTI of Rs. 920000 (from all the sources of Income). Being an

Assessing Officer of IT, you are required to assess his net tax liability for the A.Y 2015-

16 assuming that his employer already deducted tax from his salary as TDS of Rs. 12270.

26. What is Tax Evasion? What are the ways of Tax Evasion.

27. Mr. Vishwas is an Indian citizen left for Japan first time on 1.4.2005. He returns to India

on 31.3.2007 and again left for Australia on 15.4.2007 and stayed up to 5.1.2008. On

6.1.2008 he returns to India and stayed up to 25.03.2008. He left on 26.3.2008 on official

duty to U.K and stayed up to 5.5.2012. He came back to India on 6.05.20012 and again

left for U.S on Family Tour on 01.01.20113. He comes to India on 12.04.2014 and again

left for China on Office tour on 12.10.2014.

Determine the Residential status of Mr. Vishwas for the A.Y. 2015-16.

28. Under what circumstances the income of one person is treated as the income of another?

29. Distinguish between Tax Evasion and Tax Avoidance.

30. Mr. Bharat Pathak gives the following informations:

i. Mr. Pathak first time went to Japan on 10th

Jan 1999 and came back to India on

22nd

June 1999.

ii. On 30th

Sept. 2003 he went to England and came back to India after 90days.

iii. On 16th

July 2006 he had gone to Srilanka and came back to India after staying

100 days.

iv. On 2nd

Dec. 2008 he had gone to Nepal for 85 days.

v. In the Previous year 2014-15 he was out of India for 180 days.

He submits the following details of his incomes for the previous year:

i. Salary Rs. 80000 received in Japan for the services given in India

ii. Commission received in India for the services given in SrilankaRs. 140000

iii. House Rent of the house situated in Nepal received in India Rs. 30000.

iv. Dividend of a England based company received in India Rs. 75000

v. Profit of the business situated in Japan brought to India Rs.500000.

Determine residential status of Mr. Pathak for the previous year 2014-15 and explain that on

which income he is liable to pay tax in India. (10)

31. E an Employee of XYZ Pvt. Ltd., retired from the company on 30th

Nov. 2014. At the

time of his retirement, he received Rs.144000 as leave salary from his employer. The

following information is provided by the employee:

i. Salary at the time of retirement (per month) Rs. 9000

ii. Period of Service 20 years & 8 months

iii. Leave encashment Rs. 144000

iv. Leave availed while in service 14 months

v. Balanced unavailed leave at the time of retirement 16 months

vi. Average Salary for the month of Feb. 2014 to Nov. 2014 Rs. 8800

vii. Leave entitlement1 ½ months of every completed year of service.

Compute the amount of taxable leave encashment.

32. . Determine the taxable amount of the encashment of earned leave from the following

particulars:

Employee’s retiring from a Limited Co., on 31st Dec, 2014

Other particulars A B C

Monthly salary at the time of retirement paid

regularly since Jan, 2013

Rs. 3000 Rs. 3000 Rs. 6000

Duration of service 30 years 30 years 30 years

Leave availed during service - 20 months 32 months

Leave entitlement is at the rate of 1.5 months for

each year’s service

- - -

Leave at the credit of employee at retirement 45 months 25 months 13 months

Leave salary paid on retirement @ Rs. 3000 p.m. Rs. 135000 Rs.75000 Rs. 39000

Unit-2

33. Define salary according to income tax act 1961.

34. What are the permissible deductions in computing income under the head salaries?

35. Maharastra power Corporation Ltd., supplied 2500 units of electricity to Mr. Akash, an

employee of that Company @ Rs. 1.00 per unit. The Company charges Rs. 3.25 per unit

to its consumers. The actual manufacturing cost per unit of electricity is Rs. 2.50.

Compute of value of perquisites. (His taxable salary exceeds Rs. 50000)

36. State the items of income from House property which are not liable to tax.

37. Mr. Anand retired from ACA Ltd., on 30th

June 2012. He gets pension of Rs.4000 per

month up to 31st December 2014. On 1

st Jan 2015, he gets 40 % of pension commuted

for Rs. 52800. Calculate taxable Pension. What difference it will make if he gets Rs.

45000 as Gratuity along with pension?

38. Mr. A has retired from a private company on 30th

November 2014. He was working

since 1st March 1988. He received Rs. 200000 as gratuity. His salary grade was 5000-

110-8000-200-15000, since 1st March 2003. He was also getting DA @ 25% of basic

salary. Calculate his exempted gratuity (A) if he comes under Gratuity Act, (B) If he

doesn’t come under Gratuity Act.

39. Ganesh is working in Edwar Jute Mills, Kolkotta. He gets basic pay Rs. 7000 p.m.,

Dearness allowance Rs. 2500 p.m., Entertainment allowance @ Rs. 1500 p.m. and

education allowance Rs. 350 p.m. for a child. He has been provided with a rent free

house by the Mill, the fair rent of which is Rs. 60000 p.a. He also has been provided the

facility of use of furniture costing Rs.40000 and Refrigerator costing Rs.8000.

Rs. 15000 for medical expenses of family members for treatment in a private hospital

were reimbursed by the Mill. The Company has provided the amenity of free lunch and

free refreshment in office. The cost of which is Rs. 60 and Rs. 20 per day respectively

for 250 days.

He as well as the company contributes 14% of full basic pay and half of the dearness

allowance towards RPF.

Compute Mr. Ganesh’s taxable salary for the A.Y 2015-16.

40. Compute the Income under the Head ‘Salary’ of R the A.Y.2015-16 from the following

Information submitted to you.

i. Basic Salary 20000 p.m.

ii. D.A (60% of which is part of retirement benefits) 10000 p.m.

iii. Children Education Allowance (for 2 children) 200p.m. per child

iv. Free Lunch for 300 days in the office during office hours 80 per meal

v. Reimbursement of expenses incurred on credit card provided by the employer 10000

vi. Gift of Titan Watch 12000

vii. Rent free unfurnished accommodation at Delhi, The fair rent value of which is Rs. 84000

p.a.

viii. Motor Car of 1.8 ltr. with Driver both for official and private purposes.

ix. Watchman facility by the employer. Wages of watchman paid by the employer 1000 p.m.

Telephone facility at his residence. The employer has incurred expenses of Rs. 15000 for

the same.

41. Mr.AShok is the principal of a college in Bangalore. He furnishes the following details.

Compute his taxable salary for the A.Y 2015-16.

Sl.No. Particulars

1 Basic Pay Rs. 60000 per month

2 Dearness Allowance under the terms of employment Rs. 15000 per month

3 He contributes 10% of his basic pay to RPF. The Employer also contributes the same

amount.

4 Education allowance for 3 children Rs. 6000

5 Medical allowance Rs. 8000 actual amount spent Rs.3000

6 Telephone bills Rs. 6000 paid by the employer for providing the same for official use.

7 Sweeper, Servant, Watchman at a salary of Rs. 300 per month per person appointed by

Mr. Ashok and their salary paid by the employer.

8 LIC premium paid by the employer on the life of Mr. Ashok Rs. 5000

9 Mr. Ashok paid professional tax Rs. 2000

10 Group insurance premium also being paid by the employer Rs. 1560

42. Mr. Raj Kumar is employed in ABC Ltd., Bangalore. He gets the following emoluments.

Basic salary Rs. 12500 per month

DA (forming part) Rs. 6000 per month

Bonus Rs. 5000

Fees Rs. 1000

2% commission on turnover achieved (turnover achieved Rs. 150000)

HRA Rs. 7250 per month (rent paid Rs. 6400 per month)

Entertainment Allowance Rs. 4000 per month

Calculate Gross salary.

43. Mr. Rajeev furnished the following particulars of his income for the financial year 2014-

15

SL Particulars Rs.

(i) Basic Salary 15000 p.m.

(ii) Dearness Allowance 1250 p.m.

(iii) Entertainment Allowance 1000 p.m.

(iv) Employer’s and employee’s contribution to RPF 24000 each

(v) Interest from RPF@ 9.5% 19000

(vi) City Compensatory Allowance 200 p.m

(vii) Medical Allowance 10000

(viii) He has been provided with the facility of an unfurnished house

by the employer in a town (population less than 10 lakh) for

which the employer charges Rs.500 p.m. The fair rent of the

house is Rs. 30000 p.a. The house is owned by the employer.

(ix) The employer has employed for him a sweeper @ Rs. 200 p.m

and a servant @ Rs. 750 p.m.

44. Compute the taxable income under the head ‘Salary’ for the A.Y.2015-16.

45. Sri BishanNarian is a District Magistrate of Agra. He is living in a furnished Bungalow

provided by the Government free of rent. His salary is Rs. 60,000 p.m. The rent of the

bungalow as per government rules is Rs. 2,000 p.m but the fair rental value is Rs.

17,500p.m. He is provided with Furniture costing Rs. 1,70,000. Find out the value of

Rent free accommodation as a perquisite for Income tax.

46. A company has provided a residential accommodation to an employee from the following

information find the value of the perquisite.

Fair rent of the house (Annual ) Rs. 70,000

Salary Rs. 6,00,000

i. The house is situated in a city whose population is more than 25 lakhs

ii. The house is situated in a city whose population is less than 10 lakhs

47. A company took a house on rent & allotted it to its employee. From the following

information find out the value of the perquisite.

i. Rent Paid for the year: Rs. 60,000

ii. Salary Rs. 5,00,000

iii. Cost of Furniture Rs. 60,000

iv. Rent Charged from employee per month Rs. 1,000

48. X is appointed in kolkatta. He stayed in a hotel for 25 days & thereafter shifted to a house

provided by the employer. From the following data determine the taxable value of

perquisite, stay in hotel

a. Room rent in hotel is Rs.1000 per day

b. Salary for valuation of accommodation during the PY Rs. 3,65,000

c. The employer recovered Rs.100 per day from X regarding stay in hotel.

49. An employer has taken a house on rent @ Rs. 15,000 p.m. He allotted half the house to

Mr. & other half to Mr. B for residential purpose. The annual income of Mr. A is Rs.

3,00,000& Mr. B is Rs. 7,00,000. Find out the value of rent free house for Mr. A & Mr.

B.

Unit-3

50. Differentiate between business, profession and vocation.

51. What are the books to be maintained by a business firm under income Act?

52. What is SLUMP SALE?

53. AB& Co. a partnership firm engaged in the business of civil construction has a gross

receipt of Rs. 32, 00,000 from each business. The partnership deed provides for payment

of salary of Rs. 3,000 PM to each of the partners. i.e., A & B. The firm uses machinery

for the purpose of itsbusiness and the WDV of the Machinery as on 1st April 2011 is Rs.

200000. The machinery is eligible for depreciation @15%. Compute the profits from the

business, if the firm opts for the scheme under section 44AD.

What will be profit from the business, if each partner is paid Rs. 7000p.m. as salary

Instead of Rs. 3000 p.m.

54. Following is the profit and loss account of Mr. Sridhar for the year ending 31.3.15

Rs. Rs.

To Salaries

“ Office expenses

“ Depreciation

“ Sales tax

“ Legal expenses

“ Income tax

“ Expenses on acquisition of

patent rights

“ Donations

“ Repairs

“ Provisions for bad debts

“ General Expenses

“ Net Profit

330000

36000

28000

18000

16000

14000

24000

4000

12000

6000

24000

88000

By Gross Profit

“ bad debts recovered

“ Dividend

“Rent from House Property

550000

20000

12000

18000

600000 600000

Additional Information:

i. Salaries include Rs. 12000 paid to the workers employed at home.

ii. Depreciation includes Rs. 6000 being unabsorbed depreciation of earlier years.

iii. Legal expenses include Rs. 2000 paid to the Lawyer in connection with personal

case.

iv. General expenses include Rs. 8000 as contribution to staff welfare Fund.

v. Out of bad debts recovered only Rs. 8000 were allowed as deduction earlier.

Calculate the income of Mr. Sridhar from the business for the assessment year 2015-16

55. Following is the profit and loss account of Chandan for the year ending 31.3.15

Rs. Rs.

To Salaries

“ Office expenses

“ Depreciation

“ Sales tax

“ Legal expenses

“ Income tax

“ Expenses on acquisition of

patent rights

“ Donations

“ Repairs

“ Provisions for bad debts

“ General Expenses

“ Net Profit

330000

36000

28000

18000

16000

14000

24000

4000

12000

6000

24000

88000

By Gross Profit

“ bad debts recovered

“ Dividend

“Rent from House Property

550000

20000

12000

18000

600000 600000

Additional Information:

i. Salaries include Rs. 12000 paid to the workers employed at home.

ii. Depreciation includes Rs. 6000 being unabsorbed depreciation of earlier years.

iii. Legal expenses include Rs. 2000paid to the Lawyer in connection with personal

case.

iv. General expenses include Rs. 8000 as contribution to staff welfare Fund.

v. Out of bad debts recovered only Rs. 8000 were allowed as deduction earlier.

Calculate the income of Chandan from the business for the assessment year 2015-16

Unit-4

56. Distinguish between long term capital gains and short-term capital gains.

57. Name the Assets, which are excluded from the scope of capital assets under IT

Act

58. What are the deductions allowed to a businessman in computing his business

Income?

59. Discuss the provisions of section 44AA, regarding maintenance of account, by a

Business or profession.

60. What are inclusions & exclusions from the capital asset?

61. What is a capital gain? How capital gains are computed?

62. What is ‘Block of Assets’?

63. Mr. Rajesh purchased a rented residential house in 1968 for Rs.2,00,000 which he sold in

October 2014 for Rs. 36,60,000. FMV of the House as on 1.4.1981 was Rs. 3,00,000.

He purchased a new house on 31.12.2014 for Rs. 4,10,000. Compute Capital Gain. (CII

for the year 2014-15 is 1024 and for 81-82 is 100)

64. [CASE STUDY]

From the following information provided by Mr. Singh, calculate his taxable capital Gains for

the current A.Y. [CII for 81-81 is 100, 1999-00 is 389, 2004-05 is 480, 2005-06 is 497, 2010-11

is 711 and 2013-14 is 939, 2014-15 is 1024]

a. Machinery purchased in 1999-00 for Rs. 3,00,000 is sold on 11.10.2014 for Rs.

16,00,000. There was an addition during the year 2004-05 for Rs. 1,50,000

b. Furniture purchased on 22.12.2011 for Rs. 85,000 was sold on 22.01.2015 for Rs.

2,10,000

c. Agricultural land in Coimbatore purchased in 1979-80 for Rs. 2,50,000 was sold on

21.03.2015 for Rs. 40,00 000. The FMV as on 1.4.1981 for the Land being Rs. 4,00,000

d. Depreciable Machinery purchased in 2000-01 was sold for Rs. 2,25,000 on 3.4.2014.

The WDV as on 1.4.2014 was Rs. 45,000

e. House property costing Rs. 16,00,000 purchased in 2004-05, was sold for Rs. 50,00,000

on 22.12.2014. Another House property was purchased for Rs. 3,00,000 on 12.01.2015

from the sales consideration.

65. Mr. P sold a House property on 30th Nov 2014 for Rs. 8.50000. He had acquired this

property from Mr. O under a will on 1.6.1991 and expanded Rs. 19,900 on its

improvement in 1991-92. Compute P’s taxable income under the head ‘Capital Gain’ for

the A.Y. 2015-16 assuming that Mr. O had acquired this property at a cost of Rs. 40000

in 1981-82 and further spent Rs. 15000 during the same year on its improvement.

The Cost of inflation indices are as under:

1981-82-100, 1991-92-199, 2014-15- 1024.

66. Mr.X (40 years) is resident individual. He gets salary income of Rs. 70, 40,000 during the

Previous year ending March 31, 2015. His business income is Rs. 60, 00,000 without

claiming deduction of depreciation. During the P.Y. 2014-15 he transfers following

capital assets.

1. Transfer of 2500 equity shares in A Ltd., by way of gift to a friend.

2. Transfer of a residential house property for Rs. 47,80,000 to B (cost of acquisition in

1984-85: Rs. 1,54,988, Cost of improvement in 1990-91: Rs. 25000, Stamp duty value at

the time of transfer; Rs. 60,20,000, expenditure on transfer incurred by X and recovered

from B Rs. 11500)

On April 1, 2014, X owns plant A and Plant B (rate of depreciation 15%). Depreciated

value of the block on April 1, 2014 is Rs. 800000. Plant B is transferred on October 15,

2014 for Rs. 26, 00,000. Plant C is purchased on March 10, 2015 for Rs. 20, 00,000.

However, Plant C is put to use for the first time on September 2, 2015, expenditure on

transfer of Plant B is Rs. 24,000.

X contributes Rs. 90000 annually in RPF. Besides during the year, he has paid Rs. 25000

for purchasing an annuity plan (which is qualified for deduction under Section 80CCC)

from LIC.

Determine the amount of net income and tax liability of X for the A.Y 2015-16. Is it

possible to reduce tax on capital gain by acquiring another asset?

67. Mr X (not a senior citizen) is resident and ordinarily resident in India. He submits the

following information pertaining to the A.Y 2015-16.

i. Income from House property Rs. 940000

ii. Short term capital gain on transfer of unquoted debentures Rs. 11500

iii. Capital gain on transfer of quoted debenture (acquired on May 10, 2012 and transferred

on June 6, 2014) Rs. 242000.

iv. Capital gain on transfer of equity shares (STT is applicable) (acquired on May 30, 2013

and transferred on June 26, 2014) Rs. 32,00,000

v. Capital gain on transfer of quoted equity shares to a friend (outside stock

exchange)(acquired on July15, 2013 for Rs. 76000 and transferred on August20, 2014 for

Rs. 110000) Rs. 34000

vi. Capital gain on transfer of agricultural land situated in a village with population of 4000;

Rs. 276000

vii. Capital gain on transfer of residential flat (acquired on July 17, 2000 for Rs. 210000 and

transferred on September 20, 2014 for Rs. 87,90,000) (stamp duty value Rs. 9000000)

Compute net income and tax liability of X for the A.Y 2015-16 on the assumption that X

has made the following investments-

a. PPF deposit on March 31, 2015 (cheque is encashed by deposit office on April 4,

2015): Rs. 70000 and

b. Purchase of a residential flat in Dubai on September 1, 2014 for Rs. 57,00,000.

Unit-5

68. What are the different terms, which can be included under the head income from other

sources?

69. Mention permissible deductions under sec 80CCC to 80U.

70. What are the provisions regarding set off of the following losses

a. Long term capital loss b. Speculation loss c. Losses of lottery & cash

71. What is ‘Set off’ of losses? Mention any 5 provisions for set off of losses

72. What is MAT?

73. Who can be a Dealer?

74. What do you mean by tax credit?

75. State the salient features of Centr4al Sales Tax.

76. Distinguish between the Central Excise Duty and Central Custom Duty.

77. R furnishes the following particulars of his income for the previous year 2014-15

Rs.

i. Income from Salary (Computed) 68,000

ii. Income from House A 36,000

iii. Loss from House B 24,000

iv. Loss from House C 22,000

v. Profit from Business A 60,000

vi. Profit from Business B 70,000

vii. Profit from Share Business (Speculative) 82,000

viii. Loss from Silver Business (Speculative) 94,000

ix. Long-term, Capital gain on sale of shares on

Which transaction tax has been paid 22,000

x. Short tem capital loss on sale of land 44,000

xi. Income from card games 22,000

xii. Winnings from lotteries (gross) 60,000

xiii. Income from horse races in Delhi (Gross) 40,000

xiv. Loss from horse races in Bangalore 21, 000

Compute the Gross Total Income of R for the assessment year 2015-16

78. From the particulars given below, compute the total income for the previous year 2014-

15

Rs.

i. Income from let-out house (computed) 6000

ii. Annual rental value of his self occupied house 4000

iii. Municipal taxes 400

iv. Profit from electric goods business after depreciation 10000

v. Profit from agency business 3000

vi. Speculation gains from gold 2000

vii. Long term Capital Gain 7000

viii. Short Term Capital gain 2000

Following losses have been brought forward from 2014-2015 P.Y.

i. Loss from Electric goods business 6000

ii. Loss from Agency Business 1000

iii. Speculation loss from silver 4000

iv. Unabsorbed depreciation 1000

v. Long term capital loss 4400

Short term Capital Loss 3000

79. If you are appointed as a Assesseing Officer, how do you help an Individual assessee in

reducing his tax liability.

80. X has the following income during the previous year 2014-2015.

Gross income from Salary 489000

Income from other sources 6000

X also submits the following particulars of the savings / payments made by him during the

Previous year:

i. Payment of Life insurance premium (whole policy) 15000

ii. Contributions to RPF 38000

Compute the tax liability of X for the A.Y. 2015-16.

81. Case study

Mr. X is a lawyer of Delhi High court. He keeps his accounts on cash basis. His receipts and

payments account for the year ending 31st March 2015 is given below.

Rs Rs.

Balance b/d

Legal fees

Special Commission Fees

Salary from Law College as part

time Lecturer

Exam Remuneration

Interest on Bank deposits

Sale proceeds of Residential

Property

Dividend from co-operative Society

Dividend from units of UTI

Rent from House Property

3820

145000

5500

87000

1480

3500

292000

1000

2000

15000

Subscriptions & Membership

Purchase of Legal Books

Rent

Car Expenses

Office Expenses

Electricity Expenses

Income Tax

Gifts to Daughter

Domestic Expenses

Donations to Institutions approved

u/s 80G

Car Purchased

LIC Premium

Balance c/d

4500

7500

47500

14000

8500

4000

8000

12000

25000

2000

220000

6000

197300

556300 556300

Following information’s are available:

i. The rent and electric expenses are related to a house, of which half portion is used for

self- residence and remaining half portion is used for office.

ii. Car is used only for professional purpose.

iii. Outstanding legal fees Rs. 10000

iv. Rent has been paid for 10 months only.

v. Car was purchased on 25.9.2014. Law books are purchased are annual publications

out of which books of Rs. 2000 were purchased on 6.4.2014 and balance on

31.10.2014.

vi. The house was purchased in Jan 1984 for Rs. 50000 and sold on 1.7.2010.

vii. Rent of the Property which has been sold was Rs. 5000 p.m. the property was vacated

by the tenant on 30.6.2014

For the Assessment year 2015- 16

i. Compute his salary

ii. Compute his professional Income

iii. Compute his capital gains Income

Iv What is his Gross Total Income and total Income

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