Raju

CMA Inter Direct Tax Study Material MCQs – CMA Inter Direct Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

CMA Inter Direct Tax Study Material MCQs

Question 1.
Choose the most appropriate alternative:
(i) The basic exemption limit for a non-resident super senior citizen above the age of 80 years for the assessment year 2023-24 is
A. ₹ 2,00,000
B. ₹ 2,50,000
C. ₹ 5,00,000
D. ₹ 1,60,000
Answer:
B. ₹ 2,50,000
₹ 2,50,000. Basic exemption limit for all non resident assessee is ₹ 2,50,000.

Question 2.
(ii) When patent is transferred, the amount received is
A. Not chargeable to tax
B. Chargeable under the head ‘Profits and gains of business or profession’
C. Taxable under the head ‘Income from other sources’
D. Adjusted towards the patent value in the block of assets
Answer:
D. Adjusted towards the patent value in the block of assets
Patent is an intangible asset. As per Section 2(11) of the Income Tax Act, there is a block for intangible assets, and it the
asset is transferred, the amount should be adjusted in the same block of assets.

Question 3.
(iii) Rent derived from land located outside India, used exclusively for agricultural purpose is
A. Agricultural income
B. Exempt income
C. Taxable as business income
D. Taxable under the head ‘Income from other sources’.
Answer:
D. Taxable under the head ‘Income from other sources’.
Taxable under the head ‘Income from Other Sources’. As per Section 10(1) of the Income Tax Act, agricultural income in India is fully exempt from tax. Foreign agricultural income will not fall under Section 10(1), hence taxable under the head ‘Income from Other Sources’.

Question 4.
(iv) Ram introduced his building costing ₹ 10,00,000 acquired in April, 2015 into the business newly commenced by him from 01.04.2022. The actual cost of building for the purpose of depreciation for the assessment year 2023-24 would be ₹
A. 10,00,000
B. 5,90,490
C. 6,56,100
D. None of these.
Answer:
C. 6,56,100
(10,00,000 – 10% of 10,00,000 = 9,00,000
9,00,000 – 10% of 9,00,000 = 8,10,000
8,10,000 – 10% of 8,10,000 = 7,29,000
7,29,000 – 10% of 7,29,000 = 6,56,100)

Question 5.
(v) Motor car with more than 1.6 litres cubic capacity is given to the employee both for official and personal use with expenditure on running and maintenance met by the employer. The car was self driven by the employee. The perquisite value shall be
A. ₹ 1,200 p.m.
B. ₹ 1,800 p.m.
C. ₹ 2,400 p.m.
D. Nil
Answer:
C. ₹ 2,400 p.m.
₹ 2,400 pm. As per Rule 3(2)(a) of the Income Tax Act, if employer is providing car with more than 1600 cc capacity to his employee and running and maintenance is borne by employer, the taxable value of perquisite is ₹ 2,400 pm

Question 6.
(vi) The liability for payment of advance tax would arise only when the tax liability of the taxpayer after reducing tax deductible at source exceeds
A. ₹ 10,000
B. ₹ 5,000
C. ₹ 20,000
D. None of these
Answer:
A. ₹ 10,000
As per Section 208 of Income Tax Act, 1961, liability of advance tax arises when estimated tax liability of tax payer exceeds ₹ 10,000.

Question 7.
(vii) Amount is received under the notified reverse mortgage scheme, is
A. Taxable as ‘Income from other sources’
B. Exempt from tax
C. 50% taxable
D. Taxable as capital gain
Answer:
(B) Exempt from tax.

Question 8.
(viii) Azhar, being an employee in a transport company, received ₹ 10,000 per month by way of allowance to meet his personal expenses in the course of running such transport system from one place to another. The amount chargeable to tax is
A. Nil
B. 3,000 p.m.
C. Fully-taxable
D. Fully exempt
Answer:
(B) 3,000 pm.
As per Section 10(14), allowance given to transport employees are exempt to the extent of least of following
i. 70% of allowance or
ii. ₹ 10,000. p.m.

Question 9.
(ix) Rajiv received scholarship of ₹ 20,000 to meet the cost of education. The amount of scholarship chargeable to tax is ₹.
A. Nil
B. ₹ 20,000
C. ₹ 10,000
D. ₹ 5,000
Answer:
(A) Nil, The scholarship granted to meet the cost of education is exempt from tax u/s 10 (16).

Question 10.
(x) Sita received family pension of ₹ 10,000 per month in the capacity of widow of the deceased spouse who died in the course of operational duties in Indian army. The amount c family pension chargeable to tax is
A. ₹ 1,20,000
B. ₹ 1,05,000
C. Nil
D. ₹ 30,000.
Answer:
(C) Nil, the family pension received by the family members of armed forces is exempted from tax u/s 10(19).

Question 11.
(xi) A religious trust received ₹ 2,00,000 by way of anonymous donation. The total amount of donation received during the year was ₹ 15,00,000. The amount of anonymous donation chargeable to tax is
A. ₹ 2,00,000
B. ₹ 1,00,000
C. ₹ 75,000
D. Nil. Not taxable
Answer:
(D) Nil. Not Chargeable. The anonymous donation received for religious purposes is excluded from the ambit of taxable
donation.

Question 12.
(xii) Fees paid to Registrar of Companies for increasing the authorized capital of a company is
A. Capital expenditure
B. Fully deductible
C. 50% deductible
D. 75% deductible (Dec 2012, 1 x 12 = 12 marks)
Answer:
(A) Capital Expenditure. A fee paid to ROC is non-recurring expenses. Hence it is capital expenditure.

(b) Fill up the blanks:

(i) Interest received on delayed payment of enhanced compensation shall be deemed to be ……………………………. (income/not an
income/interest relating to the concerned year alone is income) of the year in which it is received.
Answer:
Income

(ii) Gift received from a trust is ……………………………. (included/not included) in the taxable income of an individual.
Answer:
Included

(iii) Dividend received from a company having only agricultural income is ………………………. (agricultural income/non-agricultural income/50% taxable) in the hands of its shareholder.
Answer:
Nonagricultural income

(iv) There are two schools of Hindu Law, one in Mitakshara and the other is ……………….. .
Answer:
Dayabhaga

(v) The depreciation allowable in respect of an asset used for the purpose of business for less than 180 days shall be restricted
to …………………. (50%/25%/75%) of the normal rate of depreciation.
Answer:
50%

(vi) The rate of TDS will be ………………………….. in all cases, if PAN is not furnished by the deductee.
Answer:
20%

(vii) The minimum alternate tax u/s 115JB for the AX. 2023-24 shall be …………………………………… % of book profit [Basic rate excluding surcharge, educationcess, etc.].
Answer:
15%

(viii) The minimum penalty levied u/s 271A for not maintaining books of account, documents as required u/s 44AA is ……………….. .
Answer:
₹ 25,000

(ix) Prima facie, revision of any order can be made by the Commissioner of Income-tax within ………………………. years.
Answer:
4

(x) Unabsorbed loss under the head ‘Capital gains’ shall be carried forward for a period of ……………………… , assessment years immediately following the assessment year in which such loss was incurred.
Answer:
8

(xi) Loss from gambling ……………………………. (can/cannot) be carried forward and set off in subsequent years under profits from gambling. (Dec 2012, 1 x 12 =12 marks)
Answer:
Cannot

Question 13.
Choose the most appropriate alternative:
(i) The basic Exemption limit for a female below the age of 60 years for the assessment year 2023-24 is
(a) ₹ 1,80,000
(b) ₹ 1,90,000
(c) ₹ 2,00,000
(d) ₹ 2,50,000
Answer:
(d) ₹ 2,50,000

Question 14.
(ii) Under Rule 7A of the Income Tax.Rules, the following %age of income from manufacture of Rubber shall be deemed to be business income and liable to tax
(a) 15%
(b) 25%
(c) 35%
(d) 50%
Answer:
(c) 35%

Question 15.
(iii) Interest is payable to assessee on Refund under the Income Tax Act, 1961 at the rate of
(a) 5%
(b) 6%
(c) 9%
(d) 12%
Answer:
(b) 6%

Question 16.
(iv) The maximum penalty leviable for failure to keep or maintain books of account or document as required u/s. 44AA of the Income Tax Act, 1961 is
(a) ₹ 25,000
(b) ₹ 75,000
(c) ₹ 1,00,000
(d) ₹ 1,50,000
Answer:
(a) ₹ 25,000
The correct answer is ₹ 25,000 u/s. 271A.

Question 17.
(v) Tax on non-monetary benefit paid by the employer is
(a) Fully-taxable
(b) Taxable to the extent of 50%
(c) Taxable to the extent of 60%
(d) Fully exempted from Tax.
Answer:
(d) Fully exempted from Tax.

Question 18.
(vi) The maximum amount of deduction from Gross Total Income available to an individual for interest on savings bank deposit is
(a) ₹ 5,000
(b) ₹ 7,500,
(c) ₹ 10,000
(d) ₹ 12,000
Answer:
(c) ₹ 10,000

Question 19.
(vii) Loss from activity of owning and maintaining race horses can be carried forward for: (Assessment years)
(a) 4
(b) 6
(c) 8
(d) 5
Answer:
(a) 4
4 Assessment years

Question 20.
(viii) Annual value of house property it is not let out s taken as ……………………. .
Answer:
Nil

Question 21.
(ix) No tax is deductible if the amount of rent credited or paid during the financial year does not exceed rupees …………………… u/s 194 I of the Income Tax Act, 1961.
Answer:
₹ 2,40,000

Question 22.
(x) When entire net consideration has been invested by an individual towards subscription of shares of an eligible company the exemption, u/s. 54GB of the Income Tax Act,1961 would be
(a) NIL
(b) 10% of capital gain
(c) 50% of capital gain
(d) 100% of capital gain
Answer:
(d) 100% of capital gain

Question 23.
(xi) Amount received towards share application money when not properly explained it is ……………………. .
(a) taxable u/s. 68
(b) exempt u/s. 10
(c) fully taxable but deduction at 50% u/s. 57 (iii) is allowable
(d) None of the above
Answer:
(a) taxable u/s. 68

Question 24.
(xii) Book profit u/s. 115JB of a domestic company was ₹ 52 lakhs. The tax liability of the company for the assessment year 2023-24 would be
(a) 18.54% including cess
(b) 15.60% including cess
(c) 20% including cess surcharge at 5%
(d) 19.431 % including cess and surcharge at 2% (June 2013, 1 x 12 = 12 marks)
Answer:
(b) 15.60% including cess

(b) Fill up the blanks:
(i) Any sum paid to an approved university, college or other institutions u/s. 35(1) (iii) of the Income Tax Act, 1961 the allowable deduction is ……………………….. (100%/125%)
Answer:
100%

(ii) Interest payable to a partner by a firm shall not exceed …………………………. (18%/12%) per annum.
Answer:
12%

(iii) An assessee ………………………….. (can/cannot) spread over the arrears of rent over the past several years.
Answer:
Cannot

(iv) Chapter VI-A deduction …………………………. (shall/shall not) be allowed in respect of income from short term capital gain.
Answer:
Chapter VIA deduction shall be allowed in respect of short-term capital gain, generally. However, in case it is short-term capital gaiñ in respect of transaction in equity shares in a company chargeable to STT (u/s 111 A) deduction under Chapter VIA shall not be allowed. The question does not mention the type of transaction. Hence, both answers would be possible.

(v) Dividend receives by an Indian Company on shares of a Foreign Company is ……………………. (taxable/exempted)
Answer:
Taxable

(vi) Salary received by Mr. P a foreign national and a non-resident out-side India for services rendered in India for 150 days is …………………….. (chargeable/not chargeable) to tax in India.
Answer:
Chargeable

(vii) Deduction for provision for bad and doubtful debts made by a public financial institution is allowed up to …………………………… % of total income before allowing such deduction and deduction under chapter VIA.
Answer:
5

(viii) Z. Ltd. awarded three contracts for repair work of ₹ 22,000, ₹ 23,000 and ₹ 30,000 respectively to L. Ltd. in the year 2022-23. Z. Ltd. is …………………………. (required/not required) to deduct tax at source under Section 194C of the Income Tax Act 1961.
Answer:
Not Required

(ix) In case of slum sale of any undertaking indexation benefit is ……………………………….. (allowed/not allowed) for the purpose of computation of capital gain.
Answer:
Not allowed

(x) Annual value of any one palace in the occupation of a former ruler is ………………… .
Answer:
Exempt

(xi) A charitable trust must apply at least ……………………….. percent of its income towards its objects.
Answer:
85

(xii) The time limit for issue of notice to assess the income in relation to assets located outside India for reassessment purposes is …………………………… years from the end of the relevant assessment year. (June 2013, 1 x 12 = 12 marks)
Answer:
16

Question 25.
(b) Choose the most appropriate alternative:
(i) Travel expenditure of the patient and the attender for medical treatment abroad is fully exempted, ¡f gross total income before including reimbursement of toreign travel expenditure is
(A) ₹ 2,00,000
(B) ₹ 2,50,000
(C) ₹’ 3,00,000
(D) ₹ 5,00,000
Answer:
(A) ₹ 2,00,000

Question 26.
(ii) Audit of accounts u/s 44AB of the Income-tax Act, 1961 is mandatory for a person carrying on profession where his gross receipts exceed
(A) ₹ 40,00,000
(B) ₹ 60,00,000
(C) ₹ 20,00,000
(D) ₹ 50,00,000
Answer:
(D) ₹ 50,00,000

Question 27.
(iii) Long-term capital gain arising from sale of listed shares in a recognized stock exchange (SU paid) is exempt under Section
……………………….. of the Income-tax Act, 1961:
(A) 10(35)
(B) 10(37)
(C) 112A
(D) 10(36)
Answer:
(C) 112A

Question 28.
(iv) Deduction in respect of interest on deposits in savings account is allowed under Section 80 TTA of the Income-tax Act, 1961 to the maximum extent of
(A) ₹ 5,000
(B) ₹ 10,000
(C) ₹ 15,000
(D) ₹ 20,000
Answer:
(B) ₹ 10,000

Question 29.
(v) An assessee who has no income from business or profession will not be required to pay any advance tax ¡f the said assessee is alan
(A) Firm
(B) AOP
(C) Senior citizen
(D) Indian Company (Dec 2013,1 x 5 = 5 marks)
Answer:
(C) Senior citizen

(a) Fill up the blanks:
(i) Mr. A, a senior citizen, has total income of 8 lacs, earned by way of interest from secured debentures. The advance tax payable by him is ₹ ………………….. .
Answer:
Zero

(ii) A partnership firm will be treated as nonresident, only if the ………………………… of the control and management of its affairs is situate outside India.
Answer:
Whole

(iii) An employee of a partnership firm is treated as “specified employee” if the income under the head “Salaries”, excluding non-monetary perquisites exceeds ₹ ……………………… .
Answer:
50,000

(iv) The maximum amount of retrenchment compensation exempt u/s 10 (10B) in the hands of a person, when received from a private scheme not approved by the Board, is ₹ …………………………. .
Answer:
5,00,000

(v) Where any unrealized rent, earlier allowed as deduction is realized subsequently, the deduction available therefor is ₹ ………………………. .
Answer:
30% deductIon u/s 25A is available

(vi) In the case of a payee not having PAN for whom tax ¡s to be deducted at source u/s 1 94A, the rate applicable is ……………………………… . (June 2014, 6 marks)
Answer:
20%

(b) Choose the most appropriate alternative:

Question 30.
(i) For an employee in receipt of fixed medicál allowance, the maximum amount which is exempt is ₹
(A) 12,000
(B) 15000
(C) 18,000
(D) Nil
Answer:
(D) Nil

Question 31.
(ii) Disallowance for ependìture incurred in relation to exempt income is made under Section
(A) 14A
(B) 14
(C) 80A
(D) 10(33)
Answer:
(A) 14A

Question 32.
(iii) Where any land is located within aerial distance of 7 kms. from municipal limits, to be regarded as capital asset u/s 2(14), the population of the municipality as per last census done before 1.3.2013 should be more than
(A) 9 lacs
(B) 8 lacs
(C) 10 lacs
(D) None of these
Answer:
(C) 10 lacs

Question 33.
(iv) To avail exemption u/s 54, an individual should purchase a new residential house within …………………………. years from the date of sale
(A) 2
(B) 3
(C) 1
(D) 4
Answer:
(A) 2

Question 34.
(v) For an assessee engaged ¡n manufacturing activity, additional depreciation u/s 32(1 )(iv) for second-hand machinery costing ₹ 3 lacs, installed on 12.05.2015 is ₹
(A) 30,000
(B) 45,000
(C) 60,000
(D) Nil (June 2014, 5 marks)
Answer:
(D) Nil.

(a) Fill up the blanks:
(i) Deduction under Section 80G for donation to National Children’s Fund is ……………………… percent.
Answer:
100

(ii) Life Insurance premium paid in excess of ……………. percent of the actual capital sum assured LS not deductible under Section 80C, in respect of policies issued on or after 01.04.2013.
Answer:
10

(iii) Commodities transaction tax is ………………….. even if it is incurred in the course of business.
Answer:
Deductible

(iv) Buyback of unlisted shares by a company is ………………. in the hands of the shareholder.
Answer:
Exempt

(v) Rebate under Section 87 is to be calculated ………………………. the levy of education cess.
Answer:
Before

(vi) Rate of income-tax applicable for foreign institutional investors in respect of income from notified bonds and government securities is ………………………… .
Answer:
20%

(vii) The due date for furnishing Annual Information Return is …………………… .
Answer:
31st August

(viii) Sale of gold coin in excess of ………………………… is liable for tax collection at source. (Dec 2014, 1 x 8= 8 marks)
Answer:
₹ 2 lakhs

(b) Choose the most appropriate alternative:

Question 35.
(i) Deduction for investment in new plant or machinery under Section 32AC is applicable for
(A) all assessees
(B) companies
(C) partnership firms
(D) individuals
Answer:
(B) companies

Question 36.
(ii) Income of securitization trust from the activity of securitization is
(A) exempt [Section 10(23 DA)]
(B) taxable at 20%
(C) taxable at 5%
(D) taxable at the regular rates
Answer:
(A) exempt [Section 10(23 DA)]

Question 37.
(iii) Royalty paid by State Government undertaking to the State Government is
(a) deductible
(B) inadmissible
(C) 50% deductible
(D) 20% deductible
Answer:
(B) inadmissible

Question 38.
(iv) Time limit for setting up undertaking for generation of power to avail deduction under Section 80-IA is available upto
(A) 31.03.2019
(B) 31.03.2018
(C) 31.03.2017
(D) 31.03.2016
Answer:
(C) 31.03.2017

Question 39.
(v) The maximum deduction under Rajiv Gandhi Equity Savings Scheme is
(A) ₹ 10,000
(B) ₹ 50,000
(C) ₹ 1,00,000
(D) ₹ 25,000 (Dec 2014, 1 x 5 = 5 marks)
Answer:
(D) ₹ 25,000

(a) Fill up the blanks:
(i) A company incorporated outside India is said to be resident in India if control and management is …………………. situated in India.
Answer:
Wholly

(ii) A foreign company is liable to surcharge at 5%, if the total income exceeds ……………………. .
Answer:
₹ 10 crores

(iii) A Zero coupon bond is a long-term capital asset, it it is held for more than …………………………… months before transfer.
Answer:
12 months

(iv) If statement of deduction of tax at source is not filed within due date, the deductor is liable to a fee of …………….. per day of default or the amount of tax deductible, whichever is less.
Answer:
200

(v) Maximum amount of exemption under section 10(10C) of the Income-tax Act in respect of compensation received for voluntary retirement is ₹ ……………………. .
Answer:
₹ 5 lacs

(vi) A manufacturing company investing more than ₹ …………………. in new plant and machinery in the previous year 2022-23 is entitled to investment allowance @ 15%.
Answer:
₹ 25 crores

(vii) An assessee can contest an order of the Income-tax Appellate Tribunal on any substantial question of law of filing appeal to the jurisdictional High Court within ……………………. days from the date of receipt of the said order.
Answer:
120

(viii) Royalty payable by Government to a non-resident is liable to be taxed at …………………. % on gross amount of royalty. ( June 2015, 1 x 8 = 8 marks)
Answer:
25

(b) Choose the most appropriate alternative:

Question 40.
(i) Subject to fulfilment of other conditions, remuneration received by a foreign national as an employee of a foreign enterprise for services rendered by him during his stay in India is exempted from income tax, if his stay in India does not exceed a period of
(A) 30 days
(B) 60 days
(C) 90 days
(D) 120 days
Answer:
(B) 60 days

Question 41.
(ii) Long-term capital gain on off-market sale of shares of a listed company without availing of indexation benefit is taxed at
(A) 5%
(B) 10%
(C) 15%
(D) 20%
Answer:
(B) 10%

Question 42.
(iv) Deduction under section 80 JJAA ¡n respect of employment of new workmen can be claimed by a company for an amount equal to
(A) 15% of additional wages to new workmen
(B) 20% of additional wages to new workmen
(C) 25% of additional wages to new workmen
(D) 30% of additional wages to new workmen
Answer:
(D) 30% of additional wages to new workmen

Question 43.
(v) A return of income for Assessment Year 2023-24 filed within the due date specified ¡n Section 139(1) can be revised by the assessee at any time before expiry of
(A) 31 March, 2023
(B) 318t March, 2024
(C) 31st December, 2022
(D) 31st December, 2023 (June 2015, 1 x 4 = 4 marks)
Answer:
(D) 31st December, 2023

(a) Fill up the blanks:
(i) Assessee’s own contribution to the National Pension Scheme is eligible for a maximum deduction of ………………….. .
Answer:
₹ 50,000

(ii) Any payment received from an account opened under Sukanya Samriddhi Açcount Rules, 2014 is ……………………….. .
Answer:
Exempt (Sec. 10(IIA)]

(iii) A charitable trust in order to be eligible for exemption under section 11 must not have more than …………………….. % of aggregate receipts from any activity in the nature of trade, commerce or business.
Answer:
20

(iv) The amount of deduction towards health insurance premium paid by an individual (not being a senior citizen) is limited to ₹ ……………………. .
Answer:
25,000

(v) Fee under section 234E for delay in filing of quarterly TDS/TCS return is ₹ ……………………. per day. . (June 2016, 1 x 5 = 5 marks)
Answer:
200

(b) Choose the most appropriate alternative:
Question 44.
(i) A senior citizen having total income consisting of pension and let out property income aggregating to ₹ 6 lakhs must have paid advance tax during the financial year 2022-23 of
(a) NIL
(b) 90% of ₹ 28,840
(c) 90% of ₹ 44,290
(d) 90% of ₹ 39,140
Answer:
(a) NIL

Question 45.
(ii) Mr. Ramji is employed in ABC Ltd who maintained a hospital for treatment of employees. During the financial year 2022-23, the value of medical benefits availed by Ramji’s family from the hospital was ₹ 2,10,000. The amount of medical perquisite chargeable to income tax would be
(a) ₹ 2,10,000
(b) ₹ 1,05,000
(c) ₹ 21,000
(d) NIL
Answer:
(d) NIL

Question 46.
(iii) Mr. Laxman occupied his apartment till December 2022 and thereafter occupied the quarters provided by the employer. The apartment of Mr. Laxman was let out at ₹ 20,000 per month from 1st January, 2023. The annual value of the property would be
(a) ₹ 60,000
(b) ₹ 2,40,000
(c) ₹ 1,80,000
(d) Nil
Answer:
(a) ₹ 60,000

Question 47.
(iv) When a company paid ₹ 5 lakhs to Indian Institute of Technology to carry on research in a field unrelated to the activity of the company, the amount eligible for deduction paid by way of donation would be
(a) ₹ 5,00,000(100%)
(b) ₹ 6,25,000 (125%)
(c) ₹ 7,50,000 (150%)
(d) ₹ 7,50,000 (150%)
Answer:
(a) ₹ 5,00,000(100%)

Question 48.
(v) Mr. A has loss from regular business of ₹ 8 lakhs and income from speculation business of? 11 lakhs. His total income chargeable to tax would be
(a) ₹ 3,00,000
(b) ₹ 11,00,000
(c) ₹ 7,00,000
(d) ₹ 2,50,000 (June 2016, 1 x 5 = 5 marks)
Answer:
(a) ₹ 3,00,000

(c) State without indicating reason whether the following statements are true or false:
(i) Share of a private limited company held for 15 months before its sale is,a long-term capital asset.
Answer:
False

(ii) A return of income filed without payment of self-assessment tax is a defective return.
Answer:
True

(iii) Profit from growing and manufacturing tea in India is fully exempted from income tax under section 10(1) of the Income-tax Act.
Answer:
False

(iv) Tax is required to be deducted at source from salary at the time of payment and not at the time of crediting salary to the account of the employee.
Answer:
True

(v) Capital gain arising from compulsory acquisition of a property under law is taxab’e in the year of receipt of compensation or part thereof. (June 2016, 1 x 5 = 5 marks)
Answer:
True.

(a) Fill up the blanks:
(i) The maximum amount deductible under section 88 TTA in respect of interest on savings bank account is ₹ ………………. .
Answer:
₹ 10,000

(ii) Monetary limit for exemption in the case of encashment of earned leave on superannuation received by private sector employees is ₹ …………………… .
Answer:
₹ 3,00,000

(iii) When unrealized rent of 50,000 in respect of a let-out property is realized subsequently, the amount liable to tax would be ₹ ………………….. .
Answer:
₹ 35,000

(iv) Interest on enhanced compensation received by Mr. A, a resident individual is ₹ 4,00,000 of which 75% pertains to earlier financial years. The amount of such interest to be included in the total income under the head ‘income from other sources’ is ₹ ……………………… .
Answer:
₹ 2,00,000

(v) Medical expenditure of ₹ 40,000 was incurred by Mr. A on his mother (being a senior citizen). The amount eligible for deduction under section 80D would be …………………….. . (Dec 2016, 1 x 5 = 5 marks)
Answer:
₹ 40,000.

Question 49.
(b) Choose the most appropriate alternative:
(i) When a person having agricultural lands sells the seeds taken from such lands in a nursery, which is pert of the said lands, the income from such sale is treated as
(A) Business income
(B) Agricultural income
(C) Income from other sources
(D) None of the above
Answer:
(B) Agricultural income.

Question 50.
(ii) An employer has paid medical insurance premium of ₹ 12,000 in respect of a salaried employee drawing annual salary of ₹ 6 lakhs. The amount of perquisite charged in the hands of emploiee is
(A) Nil
(B) ₹ 6,000
(C) ₹ 12,000
(D) None of the above
Answer:
(A) Nil

Question 51.
(iii) The rate of depreciation for a block of assets consisting of buildings used as factory is
(A) 2.5%
(B) 5%
(C) 10%
(D) None of the above
Answer:
(C) 10%

Question 52.
(iv) In case of a Hindu Undivided Family, where the return of income cannot be signed by the Karta, the same can be signed by
(A) the next senior-most male member.
(B) Karta’s wife.
(C) any male member of the family.
(D) any adult member of the family.
Answer:
(D) any adult member of the family.

Question 53.
(v) In case of an individual or HUF, to determine whether certain TDS provisions are attracted, what has to be seen is whether the person is subject to tax audit under section 44AB in
(A) the immediately preceding financial year.
(B) current year.
(C) last two continuous financial years.
(D) None of the above. (Dec 2016, 1 x 5 = 5 marks)
Answer:
(A) the immediately preceding financial year.

Question 54.
(c) Match the following:

(i) Securities Transaction Tax	(a) Maximum limit ₹ 50 lakhs
(ii) Contribution of Employer to Pension Fund of Central Government	(b) Includible as Salary income of employee
(iii) Donation in kind	(c) Not deductible while computing income from property
(iv) Ground rent	(d) Deductible as business expenditure
(v) Bonds specified in Section 54EC	(e) Not eligible for deduction under section 80G

(Dec 2016, 1 x 5 = 5 marks)
Answer:

(i) Securities Transaction Tax	(d) Deductible as business expenditure
(ii) Contribution of Employer to Pension Fund of Central Government	(b) Includible as Salary income of employee
(iii) Donation in kind	(e) Not eligible for deduction under section 80G
(iv) Ground rent	(c) Not deductible while computing income from property
(v) Bonds specified in Section 54EC	(a) Maximum limit ₹ 50 lakhs

Question 55.
(a) Find the most suitable alternative for the following:
(i) The number of identities included in the definition of persons is
(a) five
(b) six
(c) seven
(d) eight
Answer:
(c) seven

Question 56.
(ii) A trust shall not be considered as charitable trust for according the benefits of Section II when the commercial activities in the previous year exceed ₹ ………………… .
(a) 1o lakhs
(b) 25 lakhs
(c) 15 lakhs
(d) 30 lakhs
Answer:
(ii) There is no option in respect of correct answer as it should be 20% of gross receipt.

Question 57.
(iii) Deduction available under section 24(a) is of NAy.
(a) 30%
(b) 50%
(c) 15%
(d) 70%
Answer:
(a) 30%

Question 58.
(iv) Expenditure incurred by a businessman for ready-to-use software is entitled to benefit of
(a) 15% as depreciation
(b) 30% as depreciation
(c) 60% as depreciation
(d) 100% as revenue expenditure
Answer:
(d) 100% as revenue expenditure

Question 59.
(v) The basic exemption limit for a resident super senior citizen above the age of 80 is
(a) ₹ 2,00,000
(b) ₹ 2,50,000
(c) ₹ 5,00,000
(d) None of the above
Answer:
(c) ₹ 5,00,000

Question 60.
(vi) The provisions relating to interest on delay in payment of refund are given in section
(a) 234A
(b) 234B
(c) 244A
(d) 244B
Answer:
(c) 244A

Question 61.
(vii) Which of the following can be corrected while processing the return of income under section 143(1)?
(a) Any arithmetical error in the return
(b) Any mistake in the return of income
(c) Any error of principle in the return of income
(d) Any claim by the taxpayer which is against law
Answer:
(a) Any arithmetical error in the return

Question 62.
(viii) Notice under section 156 is given for
(a) failure to submit return
(b) tax demand
(c) deferment of tax
(d) None of the above
Answer:
(b) tax demand

Question 63.
(ix) As per Section 271 H, where a person fails to file the statement of tax deducted/collected at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he shall be liable to pay penalty under section 271 H. Maximum penalty that can be levied is ₹ ………………… .
(a) 1,00,000, but not exceeding the amount of TDS/TCS.
(b) 2,00,000
(c) 3,00,000
(d) 3,00,000
Answer:
(a) 1,00,000 but not exceeding the amount of TDS/TCS

Question 64.
(x) The threshold exemption limit for Equalization levy is
(a) ₹ 5 lakh
(b) ₹ 3 lakh
(c) ₹ 2 lakh
(d) ₹ 1 lakh (June 2017, 1 x 10 = 10 marks)
Answer:
(d) ₹ 1 Lakh

(b) Match the following:

(i) Section 87A	(A) ₹ 5,000
(ii) Section 80GG	(B) ₹12,500 (or) Actual Tax (w.e.l.)
(iii) Sukanya Samrudhi Scheme	(C) ₹ 1,500
(iv) Minor child exemption	(D) 30% deduction
(V) Arrears of rent	(E) Section 80 C

(June 2017, 1 x 5 = 5 marks)
Answer:

(i) Section 87A	(B) ₹12,500 (or) Actual Tax (w.e.l.)
(ii) Section 80GG	(A) ₹ 5,000
(iii) Sukanya Samrudhi Scheme	(E) Section 80C
(iv) Minor child exemption	(C) ₹ 1,500
(v) Arrears of rent	(D) 30% deduction

(c) State whether true or false:
(i) An Indian company is always resident in India.
Answer:
True

(ii) Salary received by a member of Parliament is exempt.
Answer:
False

(iii) Income of a self-occupied property cannot be negative.
Answer:
False

(iv) Preliminary expenditures are allowed deduction in 10 equal instalments.
Answer:
False

(v) Capital gain arises from the transfer of any capital asset. (June 2017, 1 x 5 = 5 marks)
Answer:
True

(d) Fill in the blanks:
(i) In case of an Indian citizen who leaves India during the previous year for employment outside India, the period f 60 days shall be substituted by ………………………. days.
Answer:
182 days

(ii) Scholarship received by a student was ₹ 2,000 p.m. He spends ₹ 16,000 for meeting the cost of education. The Balance ₹ 8,000 is ……………………. .
Answer:
Exempt

(iii) Generally, income is taxable under the head, house property only when the assesse is the ……………………… of such house property.
Answer:
Owner

(iv) Salary, bonus, commission or remuneration due to or received by a working partner from the firm is taxable under the head …………………….. .
Answer:
Profits and gains of Business or profession

(v) Period for holding bonus shares or any other financial asset without any payment shall be reckoned from the date of …………………………. . (June 2017, 1 x 5 = 5 marks)
Answer:
Allotment

(a) Choose the most appropnate alternative:
Question 65.
(i) When Mr. Balu paid royalty to Dr. Peter of Sweden for use of know-how in India, such payment is
(a) exempt from tax.
(b) accruing in India.
(c) accrues in Sweden.
(d) received in India.
Answer:
(b) accruing in India.

Question 66.
(ii) In the case of foreign company with total income of more than ₹ 1 crore but less than 10 crores the surcharge liveable is at
(a) 5%
(b) 12%
(c) 2%
(d) 1%
Answer:
(c) 2%

Question 67.
(iii) Mr. Han resident in India received ₹ 11 lakhs by way of dividend from Indian companies. Such dividend is
(a) exempt from tax.
(b) taxable at regular rates.
(c) taxable at maximum marginal rate.
(d) taxable at 10%.
Answer:
(d) taxable at 10%.

Question 68.
(iv) When an employee receives money on closure of national pension System trust it is
(a) chargeable to tax.
(b) exempt from tax.
(c) 40% is exempt from tax.
(d) 60% is exempt from tax.
Answer:
(c) 40% is exempt from tax.

Question 69.
(v) When employer contributes to approved superannuation fund it is chargeable to tax as perquisite when the contribution exceeds
(a) ₹ 1,50,000
(b) ₹ 1,00,000
(c) ₹ 50,000
(d) ₹ 20,000
Answer:
(a) ₹ 1,50,000

Question 70.
(vi) When the shares are held in unlisted company, it is treated as long-term capital asset when the holding period exceeds
(a) 36 months.
(b) 24 months.
(c) 12 months.
(d) 6 months.
Answer:
(b) 24 months.

Question 71.
(vii) Long-term capital gain arising from transfer of unlisted securities in the hands of non-resident/foreign company is chargeable to tax at
(a) 10%
(b) 20%
(c) 30%
(d) 40%
Answer:
(a) 10%

Question 72.
(viii) Interest on housing loan taken by individual being his first residential house is eligible for deduction under section 80EE up to a maximum of
(a) ₹ 30,000
(b) ₹ 50,000
(c) ₹ 1,50,000
(d) ₹ 72,00,000
Answer:
(b) ₹ 50,000

Question 73.
(ix) A start-up can claim deduction under section 80 – IAC for ……………………. consecutive years beginning from the year in which the eligible start-up was incorporated.
(a) 1
(b) 2
(c) 3
(d) 5
Answer:
(c) 3

Question 74.
(x) When the return of income for the assessment year 2023-24 is filed under section 139(4), the assessee can revise the return on or before
(a) 31.03.2024
(b) 31.12.2023
(c) 31.03.2025
(d) 31.12.2024 (Dec 2017, 1 x 10 = 10 marks)
Answer:
(b) 31.12.2023

(b) Match the following:

(i) Additional depreciation for plant used for more than 180 days	(a) 40%
(ii) Basic exemption limit of income for resident individual being senior citizen	(b) ₹ 40,000
(iii) Rate of tax for LLP	(c) ₹ 3,00,000
(iv) Depreciation for computers	(d) 30%
(v) Exemption in respect of Post office SB interest	(e) 20%

(Dec 2017, 1 x 5 = 5 marks)
Answer:

(i) Additional depreciation for plant used for more than 180 days	(e) 20%
(ii) Basic exemption limit of income for resident individual being senior citizen	(c) ₹ 3,00,000
(iii) Rate of tax for LLP	(d) 30%
(iv) Depreciation for computers	(a) 40%
(v) Exemption in respect of Post office SB interest	(b) ₹ 40,000

(c) State whether the following are True or False:
(i) Interest on deposit certificates issued under Gold Monetization Scheme. 2015 is exempt from tax.
Answer:
The Statement is true: Interest on deposit certificates issued under Gold Monetization scheme 2015 is exempt from tax u/s 10(15)(vi).

(ii) The monetary limit of ₹ 5 lakhs in respect of gratuity received by an employee covered by Payment of Gratuity Act, 1972 is exempt from tax.
Answer:
The Statement is false: The Monetary limit is ₹ 20 lakhs.

(iii) Medical insurance premium paid by son for parents who are senior citizens is deductible up to a maximum of ₹ 35,000.
Answer:
The Statement is false: Medical insurance premium paid by son for parents who are senior citizen is deductible upto a maximum of ₹ 50,000. (iii) (ci) Rate of tax for LLP is 30%.

(iv) In order to avail carry forward loss from house property, the return of income must be filed before the due date specified in Section 139(1).
Answer:
The Statement Is false: In order to avail carry forward loss from house property, ¡t Return of income is furnished after the due date.

(v) 30% of the additional employee cost incurred by the employer is deductible under section 80JJAA. (Dec 2017, 1 x 5 = 5 marks)
Answer:
Statement is true: 30% of the additional employee cost incurred by the employer is deductible u/s 80JJAA.

(d) Fill up the blanks:
(i) When a director of a company received ₹ 30 lakhs by way of non-complete fee, it is taxable under the head ……………….. .
Answer:
Profit and Gains of Business or Professional.

(ii) When unrealized rent is received based on court decree but at the time of receipt the property was not owned by the assessee, it is taxable under the head …………………….. .
Answer:
Income from House Property

(iii) When Mr. Ashwin received ₹ 20,000 as scholarship for meeting the cost of education it is ………………….. .
Answer:
Exempt

(iv) The Income Computation Disclosure Standards (ICDS) will apply only when the assesse adopts ……………………… method of accounting.
Answer:
Mercantile

(v) Speculation loss can be carried forward for a maximum period of (number of) years after the year of such loss.
(Dec 2017, 1 x 5 = 5 marks)
Answer:
Four

(a) Choose the most appropriate alternative:
Question 75.
(i) Which of the following ¡s not a case of deemed ownership of house property?
(a) Transfer to spouse for inadequate consideration
(b) Transfer to minor child for inadequate consideration
(c) Co-owner of a Property
(d) None of the above.
Answer:
(c) Co-owner of a Property

Question 76.
(ii) Where assessment has not been completed, belated income tax return for the A.Y. 2023-24 can be filed up to:
(a) 31.03.2024
(b) 31.12.2023
(c) 31.03.2025
(d) Cannot be filed belatedly.
Answer:
(b) 31.12.2023

Question 77.
(iii) An individual estimates that he is required to pay ₹ 1,00,000 as advance tax. By 15th of December, how much amount must be paid by the individual? .
(a) ₹ 30,000
(b) ₹ 75,000
(c) ₹ 1,00,000
(d) Nil.
Answer:
(b) ₹ 75,000

Question 78.
(iv) Section 80 RRB the Income-tax Act, 1961 deals with deduction from gross total income in respect of income by way of
(a) Interest on debentures of a government company
(b) Royalty income on authors
(c) Royalty on patents
(d) Royalty from textbooks.
Answer:
(c) Royalty on patents

Question 79.
(v) Preliminary expenses that can be amortized under the Income-tax Act 1961 has to be restricted to ……………………… of the cost of the Project.
(a) 5%
(b) 15%
(c) 20%
(d) None of the above.
Answer:
(a) 5%

Question 80.
(vi) Maximum Marginal Rate for the AY. 2023-24 is
(a) 34.5%
(b) 33.99%
(c) 42.74%
(d) None of the above.
Answer:
(c) 42.74%

Question 81.
(vii) Rebate u/s 87A can be claimed by
(a) Any resident
(b) Resident Individual
(c) Any person
(d) Any person other than non resident
Answer:
(b) Resident lndividual

Question 82.
(viii) As per Section 115 BBDA dividend from lndian companies is taxable in the hands of certain recipients at ………………….. when the aggregate dividend exceeds ……………………. .
(a) 10%, 1 lakh
(b) 15%, 10 lakhs
(c) 10%, 10 lakhs
(d) 5%, 5 lakhs
Answer:
(c) 10%, 10 lakhs

Question 83.
(ix) ICDS VIII deals with …………………….. .
(a) Government Grants
(b) Securities
(c) Revenue recognition
(d) Construction Contract
Answer:
(b) Securities

Question 84.
(x) Income escaping assessment is covered under section
(a) 144
(b) 156
(c) 143 (3)
(d) 147 (June 2018, 1 x 10 = 10 marks)
Answer:
(d) 147

(b) Match the following:

(i) ALTERNATE MINIMUM TAX	(A) SECTION 44AD
(ii) RETURN BY WHOM TO BE VERIFIED	(B) SECTION 263
(iii) REVISION BY COMMISSIONER	(C) SECTION 140
(iv) PRESUMPTIVE TAX	(D) SECTION 80EE
(v) ₹ 50,000	(E) SECTION 115JC

(June 2018, 1 x 5 = 5 marks)
Answer:

(i) Alternate Minimum Tax	(E) Section 115JC
(ii) Return by Whom to be Verified	(C) Section 140
(iii) Revision by Commissioner	(B) Section 263
(iv) Presumptive Tax	(A) Section 44AD
(v) ₹ 50,000	(D) Section 88EE

(c) State whether True or False:
(i) All incomes that accrue to a minor child will be included ¡n the total income of that parent whose total income is greater.
Answer:
False

(ii) Caution money forfeited by the assessee is taxable in the year of forfeiture under the head capital gains.
Answer:
False

(iii) Paintings are not considered as rersonal effects in the context of “capital asset” definition.
Answer:
True

(iv) In the hands of a manufacturer, factory building newly constructed is not eligible for additional depreciation.
Answer:
True

(v) Income from assets acquired by spouse out of pin money or household savings ¡s not subject to clubbing. (June 2018, 1 x 5 = 5 marks)
Answer:
True.

(d) Fill in the blanks:
(i) Deduction under section 80GGB in respect of house rent paid is applicable to ………………………. .
Answer:
Individual (Note: Deduction for house rent paid is under Section 80GG, not under Section 80GGB.)

(ii) Unabsorbed depreciation shall be allowed to be carried forward for any number of years and such carried forward unabsorbed depreciation may be set off against any income, other than …………………….. .
Answer:
Income from salary, winning from lotteries, crossword puzzles, etc.

(iii) Income referred to in Sec. 68 to Sec. 69D shall be taxable @ …………………………. (Excluding SC and Cess)
Answer:
60%.

(iv) ……………………………… received by an electoral trust shall be exempted.
Answer:
Any voluntary contributions.

(v) Income from sub-letting of a house property by a salaried employee is taxable under the head …………………… .
(June 2018, 1 x 5 = 5 marks)
Answer:
Income from other sources.

(a) Choose the most appropriate alternative:
Question 85.
(i) Short-term capital gain on sale of listed shares (STT paid) in a recognized stock exchange is chargeable to income-tax @ …………………………….. %.
(a) 10
(b) 15
(c) 20
(d) 30
Answer:
(b) 15

Question 86.
(ii) When the total income of an individual exceeds ₹ 50 lakhs, the surcharge is payable @
(a) 5%
(b) 7%
(c) 10%
(d) 12%
Answer:
(c) 10%

Question 87.
(iii) When the amount is withdrawn from National Pension System Trust, it is chargeable to tax to the extent the withdrawal exceeds ……………………. % of the contribution of the assessee.
(a) 10
(b) 25
(c) 15
(d)20
Answer:
(b) 25

Question 88.
(iv) Ms. Jothi (aged 23) got married and left India to join her husband in the United Kingdom on 10.06.2022. She had never left India earlier. Her residential status for the assessment year 2023-24 is:
(a) Resident and ordinarily resident
(b) Resident but not ordinarily resident
(c) Non-resident
(d) None of the above.
Answer:
(a) Resident and Ordinary Resident

Question 89.
(v) While computing TDS on salary paid to employees, the losses given below to the applicable extent would be considered by the employer:
(a) Loss from business
(b) Loss from house property
(c) Long-term capital loss
(d) Short-term capital loss
Answer:
(b) Loss from house property

Question 90.
(vi) When tax is not deducted at source on annual rent of ₹ 2 lakhs paid to landlord by a company, the amount liable for dis allowance under section 40(a) (ia) is
(a) Nil
(b) ₹ 2,00,000
(c) ₹ 20,000
(d) ₹ 60,000
Answer:
(d) ₹ 60,000

Question 91.
(vii) When the assessee has loss, from house property, the maximum amount of such loss eligible for set of against other permissible incomes would be
(a) ₹’ 30,000
(b) ₹ 1,50,000
(c) ₹’ 2,00,000
(d) No Limit
Answer:

Question 92.
(viii) When a capital asset was acquired on 01.04.2001 and sold in June, 2022, the cost of acquisition or the fair market value of the asset as on at the option of the assessee is to be adopted for indexation purpose:
(a) 01.04.2012
(b) 01.04.2001
(c) 01.04.1992
(d) 01.04.1982
Answer:

Question 93.
(ix) When a motor car is sold for ₹’ 12 lakhs by a dealer to a buyer holding PAN the amount of tax collectible as source shall be ……………………… .
(a) ₹’ 12,000 (1%)
(b) ₹’ 24,000 (2%)
(c) ₹’ 1,20,000 (10%)
(d) Nil
Answer:

Question 94.
(x) Cash donation given to a charitable trust (approved under section 80G) is eligible for deduction under that section, when the amount of donation does not exceed ₹’ …………………………. .
(a) 2,000
(b) 5,000
(c) 7,000
(d) 10,000 (Dec 2018, 1 x 10 = 10 marks)
Answer:
(a) 2,000

(b) Match the following (Sufficient to give the corresponding item in column 3 for column 1; reproducing columns 2 and 4
are not required):

(i) Depreciation on patents	(A) 40%
(ii) Amount received by an individual as a loan in a reverse mortgage	(B) Valuation of inventories
(iii) Interest partner on capital	(C) 25%
(iv) Depreciation on solar power generating system	(D) Exempted since there is no transfer
(v) ICDS II	(E) Allowed up to 12% p.a.

(Dec 2018, 1 x 5 = 5 marks)
Answer:

(i) Depreciation on patents	(c) 25%
(ii) Amount received by an individual as a loan in a reverse mortgage	(d) Exempted, since there is no transfer
(iii) Interest partner on capital	(e) Allowed up to 12% p.a.
(iv) Depreciation on solar power generating system	(a) 40%
(v) ICDS II	(b) Valuation of inventories

(c) State whether following statements are True or False.
(i) Cost of self-generated goodwill of business is deemed to be Nil.
Answer:
True

(ii) Reimbursement of ordinary medical expenses’by the employer is fully exempted.
Answer:
False

(iii) Where capital gain arises to an individual from the transfer of a capital asset, being immovable property under a joint developmen agreement, the capital gain ¡s chargeable to tax in the previous year in which the certificate of completion for whole or part of the project is issued by the competent authority.
Answer:
True

(iv) In order to avail carry forward of unabsorbed depreciation, the assessee must lurnish the return of income within the due date specified in section 139(1).
Answer:
False

(v) In order to claim exemption under section 54B, the agricultural land, which is transferred, must have been used by the assessee or his parents for at least 3 years prior to the date of transfer. (Dec 2018, 1 x 5 = 5 marks)
Answer:
False

(d) Fill in the blanks.
(i) The total income computed will have to be rounded off to the nearest multiple of …………………….. .
Answer:
10

(ii) Domestic company means alan …………………………. company.
Answer:
Indian

(iii) Additional depreciation on factory building for ₹ 30 lakhs, acquired by a manufacturer on 1 Dec., 2022 is …………………….. .
Answer:
Nil

(iv) Unabsorbed depreciation can be carried forward for ………………………. years.
Answer:
any number of

(v) An assessee, who receives leave encashment during continuation of his service, can also claim . (Dec 2018, 1 x 5 = 5 marks)
Answer:
Relief under Section 89

(a) Choose the most appropriate alternative for the following (option to be given only in capital letter A, B, C or D; entire
answer need not be reproduced):
Question 95.
(i) In the case of a domestic company (turnover/gross receipts ₹ 70 crores), the basic rate of income-tax applicable for computing as per normal provisions would be ……………………….., when the turnover of the company has been ₹ 45 crores in the previous year relevant to the assessment year 2020-21. (Note: ignore surcharge, education cess, etc.)
(a) 30%
(b) 29%
(c) 25%
(d) 35%
Answer:
(c) 25%

Question 96.
(ii) The maximum marginal rate of tax applicable for individual taxpayer having total income of ₹ 1.5 crore (including surcharge and health & education cess) is ………………………. .
(a) 34.32%
(b) 35.88%
(c) 34.944%
(d) 29.12%
Answer:
(b) 35.88%

Question 97.
(iii) When a charitable trust pays ₹ 50,000 per month towards rent to a resident for the premises occupied by it without deduction of tax at source for the entire previous year 2022-23, the amount of rental expenditure liable for disallowance would be ……………………. .
(a) Nil
(b) ₹ 6,00,000
(c) ₹ 4,20,000
(d) ₹ 180,000
Answer:
(d) ₹ 18,00,00

Question 98.
(iv) The lock-in-period for capital gain bonds issued by National Highway Authority of India for the purpose of deduction under section 54EC is ……………….. .
(a) 5 years
(b) 3 years
(c) 7 years
(d) 1 year
Answer:
(a) 5 years

Question 99.
(v) The TDS rate for payments made to a non-resident sportsman is …………………………….. %.
(a) 20
(b) 20.8
(c) 30
(d) Nil
Answer:
(b) 20.8

Question 100.
(vi) Where a partner of a firm transfers any capital asset to the firm by way of capital contribution, for the purpose of computing capital gain in the hands of the partner, the amount of deemed consideration is
(a) cost to the partner.
(b) fair market value of the asset on the date of transfer.
(c) the amount recorded in the books of the firm.
(d) value as determined by the Stamp Valuation Authority.
Answer:
(c) the amount recorded in the books of the firm.

Question 101.
(vii) When the gross receipts from profession exceed …………………………. lakhs, it is liable for audit under section 44AB and the provisions of section 44ADA will not apply.
(a) 50
(b) 25
(c) 100
(d) 20
Answer:
(a) 50

Question 102.
(viii) Medical insurance premium incurred for senior citizen is eligible for deduion up to ₹ ………………………. under section 80D.
(a) 30,000
(b) 50,000
(c) 1,00,000
(d) 60,000
Answer:
(b) 50,000

Question 103.
(ix) When a resident senior citizen having gross total income of ₹ 5,56,000, has derived interest from savings account in a nationalized bank of ₹ 8,200 and fixed deposit interest of ₹ 47,000 from such bank, he is eligible for deduction of ………………………….. from the gross total income.
(a) 55,200
(b) 8,200
(c) 47,000
(d) 50,000
Answer:
(d) 50,000

Question 104.
(x) Seshan, a retired civil servant received monthly pension of ₹ 60,000 during the previous year 2022-23. The amount of pension liable to tax after standard deduction would be ₹ ………………………….. .
(a) 7,10,000
(b) 7,00,000
(c) 6,70,000
(d) 6,30,000 (June 2019, 1 × 10 = 10 marks)
Answer:
(c) 6,70,000

(b) Match the following (sufficient to give the corresponding item in column 3 for column 1; reproducing columns 2 and 4
are not required):

(i) ICDS IX	A. Quoting of A adhaar number
(ii) Section 139AA	B. ₹1500 per child u/s 10(32)
(iii) Minor son/daughter clubbing	C. Borrowing cost
(iv) Sec 45(2)	D. Exempted from tax u/s 10(17)
(v) Any allowance received by MP/MLA	E. Conversion of Capital asset into Stock in trade

(June 2019, 1 x 5 = 5 marks)
Answer:

(i) ICDS IX	(C) Borrowing Cost
(ii) Section 139 AA	(A) Quoting of Aaclhar number
(iii) Minor son/daughter clubbing	(B) ₹ 1500 per child u/s 10(32)
(iv) Sec 45(2)	(E) Conversion of Capital asset into stock in trade
(v) Any allowance received by MP/MLA	(D) Exempted from tax u/s 10(17)

(c) State whether the following are True or False:
(i) In applicable situations of TDS, such TDS is to be deducted on amount including GST component.
Answer:
False

(ii) Contribution made to political party by way of cash to the extent of ₹ 10,000 is allowed as business expenditure.
Answer:
False

(iii) Unabsorbed depreciation can be carried forward for any number of years.
Answer:
True

(iv) Interest on normal compensation/enhanced compensation is fully chargeable to tax in the year of receipt.
Answer:
False

(v) Long-term capital gain arising from sale of Usted shares (STT paid) is not fufly exempted from tax. (June 2019, 1 x 5 = 5 marks)
Answer:
True

(d) Fill up the blanks:
(i) Payment of royalty to a person resident in India requires deduction of tax at source at the rate of ………………………. .
Answer:
10%

(ii) The amount of wages paid to eligible new workmen by an assessee engaged in non-seasonal manufacturing activity is deductible u/s 80JJAA @ ……………………………… % of the wages so paid.
Answer:
30

(iii) An expenditure, for which cash payment is made for a sum exceeding …………………… on a single day is disallowed.
Answer:
10,000

(iv) If a return of income is not furnished within the due date prescribed in Section 139(1), such return can be filed on or before …………………… provided the assessment is not completed.
Answer:
31st December 2022

(v) Maximum amount of exemption under section 10(10C) in respect of compensation received for voluntary retirement is ₹ ………………………… . (June 2019, 1 x 5 = 5 marks)
Answer:
₹ 5,00,000.

(a) Choose the most appropriate alternative for the following (Option to be given only ¡n capital letter A,B,C or D; entire
answer need not be reproduced):
Question 105.
(i) Mr. Atul (aged 63), a resident Indian, paid for himself through account payee cheque, health insurance premium of ₹ 2,10,000 for 5 years in one lump sum on 28.03.2023. The eligible amount of deduction under section 80-D for the Assessment Year 2023-24 would be ₹ …………………….. .
(a) 50,000
(b) 30,000
(c) Nil
(d) 42,000
Answer:
(d) 42,000

Question 106.
(ii) Ramesh Tea Ltd., acquired a motor car for ₹ 6,20,000 on 30.08.2022. The company is engaged in manufacture of tea in India. The amount of depreciation allowable on such motor car would be.
(a) 93,000
(b) 37,200
(c) 46,500
(d) Nil
Answer:
(a) 93,000

Question 107.
(iii) When an individual non-resident has total income exceeding ₹ 50 lakhs, the amount of surcharge payable on income tax would be
(a)17%
(b) 15%
(c) 12%
(d) 10%
Answer:
(d) 10%

Question 108.
(iv) When a charitable trust paid rent of ₹50,000 per month throughout the previous year 2022-23 and no tax was deducted at source, the amount of expenditure to be considered for computing the application of income by the trust would be ……………………….. .
(a) 6,00,000
(b) 1,80,000
(c) 3,00,000
(d) 4,20,000
Answer:
(d) 4,20,000

Question 109.
(v) Manoj a resident employee in ABC Ltd., an Indian Company, has gross annual salary income of ₹ 20,60,000. Tue standard deduction available under section 16(1) would be ₹ …………………… .
(a) Nil
(b) 30,000
(c) 40,000
(d) 50,000
Answer:
(d) 50,000

Question 110.
(vi) Shares in unlisted companies, in order to be treated as long-term capital asset, should be held for a minimum period of …………………… immediately prior to the date of transfer.
(a) 365 days
(b) 12 months
(c) 24 months
(d) None of the above
Answer:
(c) 24 months

Question 111.
(vii) Padmaja Power Co. (P) Ltd. is engaged in generation and distribution of electrical power. It avails deduction under section 80-IA. The gross receipts of the company is ₹ 89 lakhs. The last date for filling the return of income in order to be eligible to avail deduction under section 80-IA is …………………… . (Note: Assume there is no extension of time for filing the return of income)
(a) 31.10.2023
(b) 31.07.2023
(c) 30.11.2023
(d) 31.03.2024
Answer:
(a) 31.10.2023

Question 112.
(viii) Mr. Harivallabh incurred medical expenditure of ₹ 1,20,000 in respect of the disease specified in rule 11 DD for his father (aged 66) who is wholly dependent on him. The amount eligible for deduction from his gross total income would be ………………………. .
(a) 40,000
(b) 60,000
(c) 80,000
(d) 1,00,000
Answer:
(d) 1,00,000

Question 113.
(ix) When Mr. Avinash earned long-term capital gain of ₹ 1,80,000 on sale of listed shares, his total income being ₹ 10 lakhs, the amount of income-tax (including cess) on the said long-term capital gain would be ……………………. .
(a)Nil
(b) 18,720
(c) 8,320
(d) 10,400
Answer:
(c) 8,320

Question 114.
(x) Mr. Seshan received a loan of ₹ 2 Lakhs from Seshan Trading (P) Ltd. in which he has 35% equity shareholding (with voting power). The accumulated profits of the company on the date of loan was ₹ 10 lakhs. The amount of tax (ignore cess) payable on such loan would be ₹ ……………………….. .
(a) @ 10% by Mr. Seshan
(b) @ 20% by the company
(c) @ 30% by the company
(d) depended upon other income earned by Mr. Seshan. (Dec 2019, 1 x 10=10 marks)
Answer:
(c) @ 30% by the company

(b) Match the following (Sufficient to give the corresponding item in column 3 for column 1; reproducing columns 2 and 4 are not required):

(i) Threshold limit for TDS deduction on commission/brokerage under section 194H	(A) 18,000
(ii) Rate of tax on royalty from registered patent in india.	(B) 2,000
(iii) Rate of tax deduction at source for participating in a Television channel game show in case of residents.	(C) 10%
(iv) Cash donation exceeding this amount is not admissible under section 80G.	(D) 30%
(v) Taxable amount where enhanced compensation of ₹ 36,000 has been received.	(E) ₹ 15,000

(Dec 2019, 1 x 5 = 5 marks)
Answer:

(i) Threshold limit for T.D.S deduction on commission/brokerage under Section 194-H	(E) ₹ 15,000
(ii) Rate of tax on Royalty from registered patent in India	(C) 10%
(iii) Rate of tax deduction at Source for participating in a Television Channel game show in case of residents	(D) 30%
(iv) Cash donation exceeding this amount is not admissible under Section 80-G	(B) 2,000
(v) Taxable amount where enhanced compensation of ₹ 36,000 has been received	(A) 18,000

(c) State whether the following statements are True or False:
(i) Income from sale of seeds derived from a nursery adjacent to agricultural lands is an agricultural income.
Answer:
Income from sale of seeds derived from a nursery adjacent to agricultural lands is an agricultural income – True

(ii) Unabsorbed depreciation can be carried forward for a maximum period of eight assessment years.
Answer:
Unabsorbed depreciation can be carried forward for a maximum period of eight assessment year – False

(iii) Cash gifts of ₹ 1,00,000 received from uncle’s son by a resident individual is taxable as income from other sources.
Answer:
Cash gift of ₹ 1,00,000 received from uncle’s son by a resident individual is taxable as income from other sources – True

(iv) A firm, resident in India, having total income of ₹ 1,46,000 is eligible to claim deduction u/s 80D.
Answer:
A firm, resident in India, having total income of ₹ 1,46,000 is eligible to claim deduction u/s 80-D – False

(v) For adjusting brought forward business loss with current year business income, one of the conditions is that such business must be continued during the current year. (Dec 2019, 1 x 5 = 5 marks)
Answer:
For adjusting brought forward business loss with current year business income, one of the conditions is that such business must be continued during the current year – False.

(d) Fill in the blanks:
(i) A resident Indian aged 62, who has received interest of ₹ 12,000 from savings bank account and ₹ 43,000 as interest on bank fixed deposits, is eligible to a deduction of ………………………. from his gross total income.
Answer:
A resident Indian aged 62, who has received interest of ₹ 12,000, from saving bank account and ₹ 43,000 as interest on bank deposits, is eligible to a deduction of ₹ 50,000 from his gross total income.

(ii) Daily allowance received by a member of parliament is ………………………….. .
Answer:
Daily allowance received by a member of parliament is exempt.

(iii) An expenditure, for which cash payment is made for a sum exceeding ₹……………………. on a single day is disallowed u/s 40A(3).
Answer:
An expenditure for which cash payment is made for a sum exceeding ₹ 10,000 on a single day is disallowed u/s 40A(3).

(iv) If a return of income for the AY 2023-24 is not filed within the due date prescribed in section 139(1), such return can be filed on or before ………………………….. provided assessment is not completed.
Answer:
If a return of income for the A.Y. 2023-24 is, not filed within the due date prescribed in Section 139(1), such return can be filed on or before 31.12.2023, provided assessment is not completed.

(v) Maximum amount of exemption under section 10(10C) in respect of compensation received for voluntary retirement is ₹ ……………………….. . (Dec 2019, 1 x 5 = 5 marks)
Answer:
Maximum amount of exemption under Section 10(10C) in respect of compensation received for voluntary Retirement is ₹ 5,00,000.

Question 115.
When ₹ 4 lakh is paid by resident Mr. X (having PAN) towards overseas tour program, how much must be collected by the tour operator by way of TCS?
(1) @20% ₹ 80,000
(2) @ 10% ₹ 40,000
(3) @ 0.50% ₹ 2,000
(4) @ 5% ₹ 20,000
Answer:
(3)@ 0.50% ₹ 2,000

Question 116.
When a member of AOP receives share income it is exempt from tax when
(1) When shares of members in the AOP is determinate.
(2) AOP paid tax at the maximum marginal rate .
(3) When AOP does not pay tax.
(4) AOP paid tax at the regular rates
Answer:
(2) AOP paid tax at the maximum marginal rate.

Question 117.
When the resident individual has total income of ₹ 60 lakhs, the rate of surcharge applicable is
(1) 10%
(2) 15%
(3) 37%
(4) 25%
Answer:
(1) 10%

Question 118.
When a company opts for section 115BAB for the assessment year 2023-24, the maximum rate of depreciation allowable for
the eligible assets owned by it is
(1) NIL
(2) 40%
(3) 30%
(4) 15%
Answer:
(2) 40%

Question 119.
R gifted his house property to his married minor daughter. The income from such house properly shall be included in the hands of:
(1) it will be first computed as minor daughter’s income and clubbed in the income of the R or Mrs R depending upon whose total income is higher.
(2) income of married minor daughter
(3) R as deemed owner
(4) R. However, ¡t will be first computed as minor daughter’s income and then clubbed in the income of R
Answer;
(1) it will be first computed as minor daughter’s income and clubbed in the income of the R or Mrs R depending upon whose total income is higher.

Question 120.
When an employee receives ₹ 18,700 from the employer by way of reimbursement of medical expenditure incurred by him for his family, the amount liable for inclusion by way of perquisite is:
(1) ₹ 18,700
(2) ₹ 15,000
(3) ₹ 3,700
(4) NIL
Answer:
(4) NIL

Question 121.
Gift of money amounting to ₹ 2,00,000 given in India by a resident on 16.08.2022 to a non-resident (non-relative) shall be:
(1) taxable to the extent of ₹ 1,50,000
(2) exempt
(3) be fully taxable in the hands of the resident
(4) fuLly taxable in the hands of non-resident
Answer:
(4) fully taxable ¡n the hands of non-resident

Question 122.
In the case of charitable trust registered under section 12AA when the amount of anonymous donation received is Z20 Iakhs, the quantum of anonymous donation liable to tax would be:
(1) ₹ 1 lakh
(2) ₹ 19 lakhs
(3) ₹ 20 lakhs
(4) Nil
Answer:
(2) ₹ 19 lakhs

Question 123.
Where a part of the block of asset is sold for a price less than the opening W.D.V. plus cost of assets, if any, acquired during the year, the balance amount shall be treated as:
(1) Terminal/balancing depreciation
(2) None of the given options
(3) W.D.V for the purpose of charging current year deprecation
(4) short-term capital loss
Answer:
(3) W.D.V for the purpose of charging current year deprecation

Question 124.
The following income shan be exempt under Section 10(23FC) of Income-tax Act, 1961:
1. Interest received from special purpose vehicle
2. Dividend received or receivable from a special purpose vehicle
(1) Both 1 and 2
(2) 2 only
(3) Neither 1 nor 2
(4) 1 only
Answer:
(1) Both 1 and 2

Question 125.
What is the monetary limit for transactions between eligible holding company and subsidiary company to trigger the provisions of
specified domestic transactions?
(1) ₹ 200 lakhs
(2) ₹ 500 lakhs
(3) ₹ 2000 Iakhs
(4) ₹ 100 lakhs
Answer:
(3) ₹ 2000 lakhs

Question 126.
A business loss can be curried forward and set off in the subsequent assessment year when the business on account of which this
loss has arisen:
(1) None of the given options
(2) is continued for any part of the previous year
(3) is continued or not
(4) is continued in the assessment year in hick the such loss is set off
Answer:
(3) is continued or not

Question 127.
Alternate Minimum Tax is applicable in case of
(1) individual or HUF
(2) Firm and individual
(3) any person other than a company
(4) firm and a company
Answer:
(3) any person other than a company’

Question 128.
Suresh incurred ₹’ 90,000 by way of salary paid to employees which has not been accounted for in th business. The amount
of income-tax payable on such salary (Ignore HEC but consider surcharge)
(1) NIL
(2) None of the given options
(3) ₹’ 67,500
(4) ₹ 54,000
Answer:
(3) ₹’ 67,500

Question 129.
While computing the capital gains, an eligible assessee is allowed to opt for market value as on 1.4.2022 in case of:
(1) all capital assets other than depreciable assets, goodwill of a business, trademark or brand name, right to manufacture, right to carry on any business or profession tenancy rights, loom hours, and route permits.
(2) all capital assets other than depreciable asset
(3) None of the given options
(4) all capital assets
Answer:
(1) all capital assets other than depreciable assets, goodwill of a business, trademark, or brand name, right to manufacture, right to carry on any business or profession tenancy rights, loom hours, and route permits.

Question 130.
An undertaking was owned and operated for 28 months before it was sold on slump sale basis. Land and buildings form part of its assets. The resultant gain would be
(1) Short-term capital gain
(2) Exempted income
(3) Long-term capital gain
(4) Business income
Answer:
(1) Short-term capital gain

Question 131.
An award of ₹ 1,00,000 was announced for tracing a missing person. R traced the person and received the award amount. In the hands of R, such receipt shall be:
(1) exempt up to ₹ 50,000
(2) casual income
(3) fully taxable
(4) fully exempt
Answer:
(3) fully taxable

Question 132.
Which of the following propositions are correct for availing deduction under section 80-IAC:
(1) 80-IAC provides for a deduction of an amount equal to 100% of the profits or gains derived from an eligible startup for 3 consecutive assessment years out of 10 years beginning from the year of incorporation.
(2) The deduction shall be available to an eligible start-up if the total turnover of its business does not exceed ₹ 25 crores in any of the previous years beginning from the year of incorporation
(1) 1 only
(2) Neither 1 nor 2
(3) 2 only
(4) Both 1 and 2
Answer:
1 only

Question 133.
Ram commenced construction of residential building on 01.04.2016. Interest on housing loan up to 31.03.2022 was ₹ 4,40,003. Interest for the period from 01.04.2022 to 30.09.2022 (being the date of completion of construction of the residential house) was ₹ 60,000. Interest for the period from 01.10.2022 to 31.03.2023 amounts to ₹ 50,000. How much is the interest eligible for deduction under section 24 for the assessment year 2023-24 for this let-out property?
(1) ₹ 1,50,000
(2) ₹ 1,98,000
(3) ₹ 5,00,000
(4) ₹ 1,00,000
Answer:
(2) ₹ 1,98,000

Question 134.
A company makes regular payments of brokerage to a person for purchase of raw materials. When does the company become liable to deduct tax at source on such brokerage?
(1) When the aggregate brokerage paid or payable exceeds ₹ 50,000
(2) When the aggregate brokerage paid or payable exceeds ₹ 15,000
(3) When the brokerage payable exceeds ₹ 10,000
(4) When the aggregate brokerage paid exceeds ₹ 30,000 (Dec 2021, 1 x 20 =20 marks)
Answer:
(2) When the aggregate brokerage paid or payable exceeds ₹ 15,000

Question 135.
Maintenance of specified books of accounts compulsory if gross receipts in all three preceding PY exceeds ………………….. in case of
persons carrying on the profession of technical consultancy.
Answer:
₹ 1,50,000.

Question 136.
Compensation received under Voluntary Retirement Scheme by an individual shall be regarded as …………………. while computing the income under the head USalariesI
Answer:
Profit in lieu of salary

Question 137.
The rate (excluding surcharge and Cess) of tax applicable on the total income of local authority is …………………….. .
Answer:
30%

Question 138.
A surgeon (doctor) has aggregate annual receipt of ₹ 48 lakhs (₹ 20 lakhs through cash and rest through bank) for the year ended 31.03.2023. His presumptive income under section 44ADA is ₹ …………………………. .
Answer:
₹ 24 lakhs

Question 139.
When a partnership firm pays salary to working partners of ₹ 6 lakhs when the partnership deed permits payment of 5,40,000. The Book profit of the firm is ₹ 6,00,000. The quantum of remuneration allowable in the hands of firm will be …………………… .
Answer:
₹ 4,50,000

Question 140.
An agricultural land situated beyond ………………….. from the limits of municipality is not regarded as a capital asset, even though the population of municipality as per the last preceding census exceeds ₹ 1 lakh but less than ₹ 10 lakhs.
Answer:
6Kms

Question 141.
When the assessment under section 143(3) is made on 10th December, 2022 by the National Faceless Assessment Centre (NFAC), the time limit for filing petition for rectification of mistake under section 154 would expire by (date).
Answer:
31 .3.2027

Question 142.
When a senior resident individual incurs medical expenditure of ₹ 60,000 towards cataract surgery to his mother (super senior citizen) the amount eligible for deduction under section 80-D is ……………………. if there is no health insurance policy coverage for her.
Answer:
₹ 50,000.

Question 143.
In case of a capital asset, being land or building or both, the fair market vafue of such asset on 1-04-2023 shall not exceed the ……………………… of such asset as on 1- 04-2023 where such stamp duty value is available.
Answer:
Stamp duty value

Question 144.
Royalty of ₹ 1oo lakhs was paid outside India to Andrew, a non-resident for sale of his cinematographic films; -iL such films are to be telecasted in Indian TV channels then the said amount shall be …………………….. (taxable/exempt! partially taxable) ¡n the hands of Andrew
Answer:
Taxable

Question 145.
Mr. Veer, a salaried employee made own contribution to the National Pension Scheme of 50,000 when his basic salary and DA in the previous year is ₹ 480,000. Where the employer contribution is Nil, then he is eligible for a maximum deduction of …………………. under section 80CC D (1).
Answer:
₹ 48,000

Question 146.
Loss from speculation business is eligible for carry forward and set off for subsequent …………………. assessment years
Answer:
4

Question 147.
When an Indian company earns ₹ 20 lakhs by way of income from transfer of carbon credits, the rate of tax applicable on such
income would be ……………………… % (ignore surcharge and cess)
Answer:
10

Question 148.
Person authorized to verity the Return of Income [Section 140] for Political party is ………………… of such party
Answer:
The chief executive officer

Question 149.
Mr. A, a resident individual has sold his vacant site to his friend Mr. B, for ₹ 60,00,000. The stamp duty valuation of the house is ₹ 62,00,000. The amount assessable as income in the hands of Mr. B is …………………. as per section 56(2)(viib) of Income tax Act, 1961.
Answer:
Nil

Question 150.
Mr. A, a senior citizen (Resident), having total income of 8 lacs, earned by way of interest from secured debentures. The advance tax payable by him is ₹ …………………… .
Answer:
NIL

Question 151.
When the actual rent is (per annum) ₹ 72,000, fair rent is ₹ 96,000 and standardrent is ₹ 84,000 and no property tax has been paid, the chargeable income from house property is ………………….. .
Answer:
₹ 58,800.

Question 152.
In case of assessee who has securities partly in physical form and partly in dematerialized form, FlEO method will be applied in respect of the …………………… .
Answer:
Dematerialized holding

Question 153.
When a domestic company deriving business income pays ₹ 30,000 to an approved institution engaged in scientific research it is eligible for deduction of ………………………… % under section 35 of Income tax Act,1 961.
Answer:
100%

Question 154.
When fees for cost audit paid to a resident was ₹ 40,000, the amount of income-tax deductible at source on the said amount would be
Answer:
₹ 4,000 (Dec 2021, 1 × 20 = 20 marks)

Self-Assessment & Intimation – CMA Inter Direct Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Self-Assessment & Intimation – CMA Inter Direct Tax Study Material

Short Notes

Question 1.
Write short note on the following:
Adjustments required to be made while processing the return of income, u/s 143 (1). (June 2017, 5 marks)
Answer:
Section 143(1):
Scheme of Processing of Returns Adjustment to be made by software to the returned income while processing under section 143(i):
Where a return has been made under section 139, or in response to a notice under section 142(1), the total income or loss shall to computed after making the following adjustments, namely:

• any arithmetical error in the return: or
• an incorrect claim, if such incorrect claim is apparent from any information in the return;
• disallowance of loss claimed if return of the previous year for which set off of less is claimed was furnished beyond the due date specified under section 139(1);
• disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total Income in the return;
• disallowance of deduction claimed [Under Section 10AA or under any of provisions of Chapter VI-A under the heading “C-Deductions in respect of certain incomes” if] the return is furnished beyond the due date specified under section 139 (1).
• addition of income appearing in Form 26AS or form 1 GA or form 16 which has not been included in computing the total income in the return.

However, no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in
writing or in electronic made.

Further, the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within 30 days of the issue of such intimation, such adjustments shall be made.

Question 2.
Write short note on the following:
Best judgment assessment under section 144 (Dec 2018, 5 marks)
Answer:
Best judgment assessment [Section 144]
If any person:-
(a) fails to make the return required under section 139(1) and has not made a return or a revised return under section 139(4) or section 139(5) or an updated return under sub-section (8A) of that section, or
(b) fails to comply with all the terms of a notice issued under section 142(1) or fails to comply with a direction issued under section 142(2A), or
(c) having made a return, fails to comply with all the terms of a notice issued under section 143(2), the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment:
Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment:
Provided further that it shall not be necessary to give such opportunity in a case where a notice under section 142(1) has been issued prior to the making of an assessment under this section.

Question 3.
Write short note on the following:
Scrutiny assessment under section 143(3) (June 2019, 5 marks)
Answer:
Where the Assessing Officer or the prescribed income-tax authority (here-in-after collectively referred to as ‘Assessing Officer’) considers it necessary to ensure that the assessee has not –

• understated his income; or
• declared excessive loss; or
• underpaid the tax
  he can make a scrutiny in this regard and gather such information and evidence as he deems fit. And on the basis of such information and evidence so collected, he shall pass an assessment order. Such order shall be treated as regular assessment order.

Conditions for scrutiny assessment:

• A return has been furnished u/s 139 or in response to a notice u/s 142(1); and
• Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated his income, declared excessive loss or under-paid the tax.

Question 4.
Write short note on the following:
Best Judgement Assessment under section 144 (Dec 2019, 5 marks)
Answer:
Best judgment assessment [Section 144]
If any person:-
(a) fails to make the return required under section 139(1) and has not made a return or a revised return under section 139(4) or section 139(5) or an updated return under sub-section (8A) of that section, or

(b) fails to comply with all the terms of a notice issued under section 142(1) or fails to comply with a direction issued under section 142(2A), or

(c) having made a return, fails to comply with all the terms of a notice issued under section 143(2), the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment: Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment: Provided further that it shall not be necessary to give such opportunity in a case where a notice under section 142(1) has been issued prior to the making of an assessment under this section.

Question 5.
Write short note on Intimation or Assessment by income tax department? (Dec 2021, 3 marks)
Answer:
Intimation and Assessment by income tax department. After submission of return of income or on non-submission of return of income by the assessee, assessment is made by the Income tax department. The Assessing Officer can assess the income of the assessee in any of the following manner:

1. Intimation u/s 143(1);
2. Scrutiny Assessment u/s 143(3);
3. Best Judgment Assessment u/s 144;
4. Income Escaping Assessment u/s 147 for making assessment.

Question 6.
Write short note on the following:
Best Judgement Assessment (Dec 2022, 5 marks)

Descriptive Question

Question 7.
Briefly discuss the provisions of Section 142(2A) of the Income-tax Act, 1961 relating to special audit. (Dec 2012, 4 marks)
Answer:
Special Audit [u/s 142 (2A)]-
1. Power of Assessing Officer: At any stage of the proceeding, the Assessing Officer having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the approval of the Chief Commissioner or Commissioner, direct the assessee to get his accounts audited by an accountant and to furnish a report of such audit.

2. Extension of Time Limit: Assessing Officer may suo moto or on the application made by the assessee in behalf extend period for furnishing the audit report upto 180 days from the date of directions.

3. Audit under Other Law: Assessing officer can direct the assessee to get his accounts audited under this section even it the accounts are already audited under this Act or under any other law.

4 Prior Approval: Prior approval of the Chief Commissioner or Commissioner must be obtained before directing such audit.

5. Appointment: The Chief Commissioner/Commissioner shall nominated the auditor.

6. Form of Report: The Audit Report containing prescribed particulars must be furnished in the prescribed Form No. 6B.

7. Opportunity of being heard: The Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee had been given a reasonable opportunity of being heard.

8. Penalty: On failure to comply with direction issued u/s 1 42(2A): A penalty for ₹ 10,000 u/s 271(1) (b) can be levied and Best judgment assessment u/s 144 can be made.

Question 8.
State the time limit prescribed for passing the following orders under the Income Tax Act:
(i) An order of assessment by the Assessing Officer under Section 143(3);
(ii) An order of assessment by the Assessing Officer under Section 143(3), where reference has been made to Transfer Pncing Officer for determination of arm’s length price in international transactions;
(iii) An order of assessment by the Assessing Officer under Section 147;
(iv) An order of revision by the Commissioner of Income Tax under Section 263; (June 2013, 4 marks)
Answer:
(i) As per Section 153 an assessment order under Section 143(3) is to be passed within 12 months from the end of the assessment year in which the income was first assessable.

(ii) Where a reference has been made to the Transfer Pricing Officer for determination of arms-length price in international transactions, assessment order under Section 143(3) is to be passed within 33 months from the end of the relevant assessment year.

(iii) An order of assessment under Section 147 is to be passed by the Assessing Officer within 9 months from the end of the financial year in which the notice under Section 148 was served.

(iv) An order for revision under Section 263 is to be passed by the Commissioner within 9 months from the end of. the financial year in which such order u/s 263 is passed by the PC or CIT as the case may be.

Question 9.
In the course of assessment proceedings, the Assessing Officer enhanced the value of closing stock and added the difference to the total income. In the assessment year subsequent to this, the assessee wants the A.O. to enhance, by the same amount, the value of the opening stock of the year. Discuss the validity of the claim. (June 2013, 3 marks)
Answer:
The value of the closing stock of the preceding year must be the opening stock of the succeeding year. Hence, if the value of the closing stock is enhanced, the enhanced value should be taken as the value of opening stock of the next year for purposes of the IT. The claim of the assessee is therefore valid.

Question 10.
Answer the following question with brief reason/working:
A foreign company cannot approach Dispute Resolution Panel in respect of its assessment. Is this statement correct? (Dec 2015, 2 marks)
Answer:
This is a false statement. The Scheme of Dispute Resolution Panel is available only to a foreign company and to any person who has entered into an international transaction and whose assessment has been referred to transfer pricing officer (Section 144C).

Question 11.
State the scope and time limit for rectification of order passed by the Assessing Officer under the Income-tax Act. (Dec 2015, 3 marks)
Answer:
Section 154 states that the Income-tax assessing officer ¡s empowered to rectify any order of assessment or of refund or any other order passed by him. Further, the AO is also empowered to amend any intimation or deemed intimation u/s 143(1) or amend any intimation u/s 200A (1).

Rectification of an order can be made only within 4 years from the end of financial year in which the order sought to be amended was passed. In case of amendment made U/sl 54(8); If an application for amendment is made by the assessee, the AC shall pass an order within a period of 6 months from the end of the month in which the application is received.

Question 12.
State the procedures to be adopted by the Income-tax Authorities for rectification of mistakes under section 154 of the Income-tax Act and the time limit for such rectification. (June 2016, 7 marks)
Answer:
Procedure for rectification of mistake u/s 154
An amendment of the following nature can be made only after the concerned authority has given notice in this respect and also a reasonable opportunity of being heard to the assessee or deductor or the collector.

• amendment which enhances an assessment
• Amendment which reduces a refund
• Amendment which otherwise increases the liability of the assessee or deductor or the collector.

It any amendment enhances the assessment or reduces a refund already made, a notice of demand is served on the assessee or deductor or the collector. Such notice is deemed to be a notice u/s 156. If any amendment reduces the assessment, refund due to the assessee is made unless it is withheld u/s 241.

Time Limit for Rectification:
Period of limitation for making rectification as prescribed in sub-section (7) of Section 154 is as follows:
No amendment under this section can be made after the expiry of 4 years from the end of the financial year in which the order sought to be amended was passed. It may be noted that an amendment is made when related order is passed.

This period of limitation ¡s not applicable in case the provision of Section 155 are applicable. However, if a valid application has been made by the assessee for rectification within the statutory time limit but is not disposed of by the concerned authority within the time specified, it may be disposed of even after the expiry of such time limit [Circular No. 73, dated 7th January, 1972]. This relief is, however, not admissible ¡n case rectification proceedings are initiated by the department itself.

Short Notes

Question 13.
Write short note on the following:
Features of ICDS. (June 2017, 3 marks)
Answer:
Features of ICDS:
The following are the main features of ICDS:

• ICDS are to be followed by all assessees following the mercantile system of accounting.
• ICDS are applicable to the computation of income chargeable to income tax under the head “Profit and gains of business or profession” or “Income from other sources.”
• This standard is not applicable for maintenance of books of account, AS ICDS are meant for computation of income only, there is no need for maintenance of books of account for this purpose.
• In the case of conflict between the provision of the Income-Tax Act, 1961 and ICDS, the provisions of the Act shall prevail to that extent.
• Non-compliance of ICDS will lead to be judgment assessment.

Question 14.
Write short note on the following:
State the type of assesses to whom the Income Computation Disclosure Standards (ICDS) apply? (Dec 2017, 5 marks)
Answer:
ICDS are applicable to the computation of income chargeable to income tax under the head profits and gains of business or profession and income from other sources.

Question 15.
Write short note on the following:
ICDS: Accounting policies (June 2018, 5 marks)
Answer:
Accounting Policies:
Accounting policies adopted by a person shall be such so as to represent a true and fair view of the state of affairs and income of the business, profession or vocation. The treatment and presentation of transactions and events shall be governed by their substance and not merely by the legal form. Marked to market loss or an expected loss shall not be recognised unless the recognition of such loss is in accordance with the provisions of any other income Computation and Disclosure standard.

Disclosure of Accounting Policies:
All significant accounting policies adopted by a person shall be disclosed.
Any change in an accounting policy which has a material effect shall be disclosed (with quantum of the effect, if ascertainable) where such amount is not ascertainable, the fact shall be indicated.
Disclosure of accounting policies or of changes therein cannot remedy a wrong or inappropriate treatment of the item.

Fundamental Accounting Assumptions:
The fundamental accounting assumptions i.e. Going concern, Consistency, and Accrual are assumed as followed. No specific disclosure is required, if these assumptions are followed, however, if such assumptions are not followed, the fact shall be disclosed.

Question 16.
Write short note on the following:
ICDS – I on “Accounting Policies” (Dec 2018, 5 marks)
Answer:
ICDS-I “Accounting Policies”
Accounting policies are the specific accounting principles and method of applying those principles in the preparation and presentation of financial statement

There are 3 fundamental accounting principles.

1. Going Concern
2. Consistency
3. Accrual

Question 17.
Write short note on the following:
Items to be excluded in determining the cost of inventories under ICDS-II. (June 2019, 5 marks)
Answer:
Items to be excluded ên determining the cost of Inventories under ICDS-II:
The cost of inventories is governed by ICDS-II not only for the purpose of valuation on the closing date but also when the inventories are purchased for the purpose of manufacture or trade.

The following costs shall be excluded in determining the cost of inventories:

• Abnormal amounts of wasted materials, labour or other production costs.
• Storage costs, unless those costs are necessary in the production process prior to a further production stage.
• Administrative overheads that do not contribute to bringing the inventories to their present location and condition.
  Selling costs.

Question 18.
Write short note on Disclosures to be made as per ICDS IV Revenue recognition (Dec 2021, 3 marks)
Answer:
Following disclosures shall be made in respect of revenue recognition:

• in a transaction involving sale of goods, total amount not recognised as revenue during the previous year due to lack of reasonable certainty of its ultimate collection along with nature of uncertainty;
• the amount of revenue from service transactions recognised as revenue during the previous year;
• the method used to determine the stage of completion of service transactions in progress; and
• for service transactions in progress at the end of previous year:

i. amount of costs incurred and recognised profits (less recognised losses) up to end of previous year
ii. the amount of advances received; and
iii. the amount of retentions.

Return and PAN – CMA Inter Direct Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Return and PAN – CMA Inter Direct Tax Study Material

Short Notes

Question 1.
Revised return of income: Meaning and interplay of Section 139(5). (June 2017, 5 marks)
Answer:
Revised Return: Section 139 (5)
Law effective from Assessment year 2021 -22 [Finance Act, 2021]:
If any person having furnished a return under section 139(1) or under section 139(4), discovers any omission or wrong statement therein, then he may furnish a revised return up to 31st December of the relevant Assessment year or before the completion of assessment, whichever is earlier.

Law up to Assessment Year 2016-17:
Upto Assessment Year 2016-17, the return filed under section 139(4) could not have been revised under section 139(5).
As per Finance Act, 2016 w.e.f. Assessment Year 2017-18, the return filed under section 139(4) can be revised under section 139(5).

Notes:

1. The revised return substitutes the original return from the date the original return was filed. Once a revised return is filed, the original return is deemed to have been withdrawn and the revised return is deemed to have been filed on the date the original return was filed.
2. As assessee can revise a return any number of times provided that the revised return is filed within the time prescribed under section 139(5).

Question 2.
Write short notes on the following:
Who must sign the return of income in the following cases:
(i) Hindu undivided family when karta is bedridden.
(ii) Local authority.
(iii) Political party.
(iv) Limited Liability Partnership.
(v) Association of persons (Dec 2017, 5 marks)
(c) Revised return. (Dec 2017, 5 marks)
Answer:
(b)
(i) If the karta is absent from India or is mentally incapacitated, then by any adult member of the family.
(ii) In case of a Local Authority, by the Principal Officer thereof.
(iii) In case of Political Party, by the Chief Executive Officer of the Party.
(iv) In case of a Limited Liability Partnership:

• By the Designated partner thereof, or
• Where there is no designated partner as such, or where for any unavoidable reason such designated partner is not able to verify the return, by any partner thereof.

(v) In case of Association of Person by, any member or the Principal Officer thereof.

(c) Revised Return: Law Effective from Assessment year 2021-22 [Finance Act, 2021]
If any person having furnished a return under section 139(1) or under section 139 (4), discovers any omission or wrong statement therein, then he may furnish a revised return at any time up to 31 December of the relevant Assessment year or before the completion of the assessment, whichever is earlier.

Last Date for Filing of Belated or Revised Returns of Income Reduced by Three Months:
Currently, belated and revised ITRs can be fed voluntarily after the normal deadline, up to March 31st of the assessment year.
From FY 2021-22 onwards, belated returns are to be filed three months before the end of the relevant assessment year (up to December 31) or before the completion of the assessment, whichever is earlier.

Question 3.
Write short notes on the following:
(a) Fee for delay in furnishing the return of income;
(d) Adjustments during the course of processing of return of income u/s 139(1). (June 2018, 5 marks each)
Answer:
(a) Fee for Default in Furnishing Return of Income (Introduced by Finance Act, 2021)
1. Without prejudice to the provisions of this Act, where a person required to furnish a return of income under section 139 fails to do so within the time prescribed in sub-section (1) of the said Section, he shall pay, by way of fee, a sum of:
(a) ₹ 5,000, if the return is furnished after the due date of the assessment year; provided that if the total income of the person does not exceed ₹ 5 lakhs, the fee payable under this section shall not exceed ₹ 1,000.

2. The provision of this section shall apply in respect of return of income required to be furnished for the assessment year 2021-22 and future Assessment years.

(d) Scheme of processing of Returns:
(1) Where a return has been made under section 139, or response to a notice under section 142(1), such return shall be processed in the following manner, namely:
(a) the total income or loss shall be computed after making the following adjustments namely:

• any arithmetical error in the return; or
• an incorrect claims, if such incorrect claim is apparent from any information in the return;
• disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond due date specified, under section 139(1);
• disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return;
• disallowance of deduction claimed [Under Section 10AA or under any of provisions of Chapter VI-A under the heading “C-Deductions in respect of certain incomes” if] the return is furnished beyond the due date specified under section – 139(1).
• addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return;

Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made.

(b) the tax and interest and fee under section 234F, if any shall be computed on the basis of the total income computed under clause (a);

(c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax and
interest and fee under section 234F, if any, computed under clause (b) by any tax deducted at source, any tax collected at
source, any advance tax paid any relief allowable under section 89/90/90/91, any tax paid on self-assessment, and any amount paid otherwise by way of tax or interest and fee under section 234F;

(d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and

(e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee. With effect from 1.4.2020 (A.Y. 2020-21): Enlarging the Tax Base:
To enhance the scope of this provision a proviso inserted in the subsection (1) so as to provide for furnishing of return by a person referred to in clause (b) of the sub-section (1), who is not required to furnish a return under the said sub-section, if such person during the previous year:

• has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current account
  maintained with a banking company or a cooperative bank; or
• has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or
• has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or
• fulfills such other conditions as may be prescribed. 6th proviso of the said sub-section amended so as to provide for the furnishing of return by a person who is claiming rollover benefit of capital gains, for investment in a house or a bond or any other asset under sections 54,54B, 54D, 54EC, 54F, 54G, 54GA and 54GB.

Question 4.
Write short notes on the following:
(a) Verification of return of income in the case of an individual, HUF, and political party (Dec 2018, 5 marks)
(b) Any five transactions where quoting PAN is mandatory (Dec 2018, 5 marks)
Answer:
(a) Verification of Return of income in the case of:
Individual:
By the individual himself, in case he ¡s absent from India, by the individual himself or by some person duly authorised by him in this behalf.

HUF:
By the Karta and where the Karta ¡s absent from India or is mentally incapacitated from attending to his affair, by any other adult member of such family

Political Party:
By the chief executive officer of such party.

(b) Following are the five transactions where quoting PAN Is mandatory:

1. Cash exceeding ₹ 50,000 during any one day
2. Opening a Bank A/c with bank
3. Making application for issue of a credit or debit card
4. Sale or purchase of goods or service of any nature other than those specified above for an amount exceeding ₹ 2 lakh/transaction
5. A contract for sale or purchase of security (other than share) for amount exceeding ₹ 1 lakh/transaction.

Question 5.
Write short note on the following:
Verification of return of income for company assessee under section 140. (June 2019, 5 marks)
Answer:
Verification of ROI for corporate assessee:

In general	Managing Director
If due to any reason, it is not possible for MD to verify or where there is no MD	Any director
Where an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under Insolvency and Bankruptcy Code, 2016	Insolvency professional appointed by such Adjudicating Authority
Non-resident company	A person holding a valid power of attorney. Copy of such power of attorney must be attached with the return.
Company in the process of winding up Where the management of the company has been taken over by the Central or State Government.	Liquidator of the company Principal officer

Question 6.
Write short notes on the following:
Belated return under section 139(4)
Quoting of Aadhar number under section 139AA (Dec 2019, 5 marks each)
Answer:
Belated Return under Section 139 (4)
If Assessee fails to file return within due date then he can file belated return within following time limit
(a) 31st December of the Relevant Assessment year
or
(b) Before Completion of Assessment whichever is earlier.

Belated return filed u/s 139 (4) can be revised u/s 139(5) w.e.f A.Y. 2017-18
Last Date for Filing of Belated or Revised Returns of income Reduced by Three Months:
Currently, belated and revised lTRs can be filed voluntarily after the normal deadline, up to March 31 of the assessment year.
From FY 2021-22 onwards, belated return are to be filed three months before the end of the relevant assessment year (up to
December 31) or before the completion of the assessment, whichever is earlier.

(c) Quoting of Aadhaar number under Section 139 AA
Every person who is eligible to obtain Aadhaar number shall on or after the 15th July 2017, quote Aadhaar number:

• In the application form for allotment of permanent account Number.
• In the return of income if Aadhaar Number not available then that person should quote application – ID of Aadhaar.

As per Central Govt. Notification, provision of Section 139 AA not apply to an individual who does not possess the Aadhaar Number is:

• Resident in the states of J&K, Meghalaya and Assam;
• A non-resident as per Income Tax Act;
• Of the age of 80 years or more at any time during the P.Y;
• Not a Citizen of India.

Descriptive Question

Question 7.
State ten instances/transactions where Permanent Account Number (PAN) has to be compulsorily quoted. (Dec 2012, 5 marks)
Answer:
The following are the transactions for which quoting of PAN is mandatory.
1. Amount exceeding ₹ 10 lakh or valued by stamp valuation authority referred to in section 50C at an amount exceeding ₹ 10 lahks;

2. Sale or purchase of a motor vehicle or vehicle, which requires registration by a registering authority;
Note: The sale or purchase of a motor vehicle or vehicle does not include two-wheeled vehicles, inclusive of any detachable side car having an extra wheel attached to the motor vehicle.

3. A time deposit, exceeding ₹ 50,000 (fifty thousand rupees), with a bank;

4. A time deposit with post office, exceeding ₹ 50,000 (fifty thousand rupees) or aggregating to more than 5 Lakh during the financial year;

5. A contract of a value exceeding ₹ 1,00,000 (one Lakh rupees) for sale or purchase of securities;

6. Opening an account (other than basic saving A/c or time deposit not exceeding ₹ 50,000/-) with a banking company;

7. Payment to hotels and restaurants against their bills for an amount exceeding ₹ 50,000 (Fifty thousand rupees) at any one time;

8. Payment in cash for purchase of bank drafts or pay orders or banker’s cheques from a bank for an amount aggregating ₹ 50,000 (fifty thousand rupees) or more during any one day;

9. Deposit in cash aggregating ₹ 50,000 (fifty thousand rupees) or more, with a bank during any one day;

10. Payment in cash in connection with travel to any foreign country of an amount exceeding ₹ 50,000 (Fifty thousand rupees) at any one time.

Note:

• “payment in cash in connection with travel” includes payment in cash towards fare, or to a travel agent or for the purchase of foreign currency;
• “travel to any foreign country” does not include travel to the neighboring countries or to such places of pilgrimage

11. Making an application to any bank orto any other company or institution, for issue of a credit or debit card;

12. Payment of an amount of ₹ 50,000 (fifty thousand rupees) or more to a mutual fund for purchase of its units;

13. Payment of an amount of ₹ 50,000 (fifty thousand rupees) or more to a company for acquiring shares issued by it;

14. Payment of an amount of ₹ 50,000 (fifty thousand rupees) or more to a company or an Institution for acquiring debentures, or bonds issued by it;

15. Payment of an amount of ₹ 50,000 (fifty thousand rupees) or more to the Reserve Bank of India (RBI), for acquiring bonds issued by it;

16. payment of an amount aggregating ₹ 50,000 (fifty thousand rupees) or more in a year as life insurance premium to an insurer;
17. Sale or purchase, by any person, of goods or services of any nature any amount exceeding ₹ 2,00,000.

18. A time deposit with a Nidhi referred in section 406 of the Companies Act 2013, exceeding ₹ 50,000 (Fifty thousand rupees) or aggregating to more than ₹ 5 Lakh during the financial year.

19. A time deposit With a NBFC which holds a certificate of registration under section 45-IA of the RBI Act, 1934 to hold or accept deposit from public, exceeding ₹ 50,000 (Fifty thousand rupees) or aggregating to more than ₹ 5 Lakh during the financial year.

Question 8.
What are the consequences if a person fails to comply with the provisions of Section 139A of the Income Tax Act, 1961?
(June 2013, 2 marks)
Answer:
As per Sec. 272 B (2) if a person fails to comply with the provisions of Sec. 139A, the assessing officer may direct such person to pay by way of penalty a sum of ₹ 10,000/-

Question 9.
Answer the following question with brief reasons/working:
Every return of income filed by the assessee cannot be revised is the statement correct? (June 2016, 1 mark)
Answer:
Effective from: AY. 2021 -22
If any person, having furnished a return under section 139(1) or belated return under section 139(4), discovers any omission or any wrong statement therein he may furnish a revised return at any time up to 31st December of the relevant assessment year or before the completion of the assessment whichever is earlier.

Therefore Answer Should be True:
Return furnished in pursuance of a notice issued under section 142(1) cannot be revised.

Question 10.
Track the importance of furnishing the Return of Loss with special reference to the provisions of section 80 read with section 139(3). (Dec 2021, 4 marks)
Answer:
Importance of Return of income as per section 139(3)
1. ROI is required to be furnished if a person wants to carry forward his losses.
2. If any person has sustained any loss in PY & he wants to carry forward following losses:

• Normal business loss u/s 72(1);
• Speculation business loss u/s 73(2);
• Loss from specified business u/s 73A(2);
• Loss u/h “Capital Gains” u/s 74(1);
• Loss from the activity of owning & maintaining race horses u/s 74A(3); he shall mandatorily furnish a ROL within the time prescribed u/s 139(1) to carry forward loss.

3. Section 139(3) nw sec. 80 require the assessee to file ROL in same manner as that of ROI within the time a’owed u/s 139(1) & all the provisions of this Act shall apply to ROL as if it is a ROI u/s 139(1).
Note: It is not mandatory to file ROI (Except in case of Company/Firm) as there is No Income.

Practical Questions

Question 11.
Powell Ltd. filed its return of loss beyond the ‘due date’ prescribed in Section 139(1) read with Section 80 of the Act. It has business loss of ₹ 20,50,000. It approaches you for advice regarding the course of action to be taken to secure the benefit of carry forward of business loss for set off against future profits. Advise suitably. (June 2014, 3 marks)
Answer:
Generally, return filed beyond the due date specified in Section 139 (1) would deprive the taxpayer the benefit of carry forward of business loss. However, in extraordinary circumstances, the CBDT has the powers to condone the delay in filing return having carry forward of business loss to the future years.

[Associated Electro Ceramics vs. CBDT 201 ITR 501 (Kar)].
As per Circular No. 8 of 2001 monetary limits have been prescribed for condonation of delay in filling loss returns. In cases where the refund is less than ₹ 10,000, the Assessing Officer can condone the delay with the approval of CIT. for refunds from ₹ 10,001 to ₹ 1,00,000 the Assessing Officer can condone the delay with the approval of CCIT/DGIT. Where the refund
claim exceeds ₹ 100,000 only the CBDT has the power to condone the delay.

Therefore, the loss return of Powell Ltd. could be condoned by CBDT. However, Powell Ltd. has to file a condonation petition to the CBDT to carry forward the business loss.

Question 12.
Mr. A (non-resident) aged 66 has total income (computed) ₹ 2,60,000 comprising income from house property and income
from other sources. Is he required to file his return of income for the assessment year 2023-24? Also compute the total amount of tax payable by him. (Dec 2014, 3 marks)
Answer:
Mr. A is a senior citizen but non-resident. The basic exemption limit applicable to him is ₹ 2,50,000. As the total income exceeded the basic exemption limit, he is liable to file his return of income.

He is not eligible for rebate under section 87A because it is applicable to resident assessee (ordinary or not ordinary) only.

Question 13.
You are requested to state whether the following will attract penalty provisions for the financial year 2022-23.
(i) Mr. Jayant whose turnover was ₹ 150 lakhs for the financial year 2021- 22 admitted income as per books of account as ₹ 6,50,000. The return was filed without getting the books of account audited under section 44AB.
(ii) Mr. Maheswari received ₹ 5 lakhs by cash on 01.10.2022 for sale of an a partment at Thane to Mr. Mahesh. As the agreement between the parties got cancelled, Mr. Maheswari refunded the advance by account payee cheque on 01.02.2023. (Dec 2017, 4×2 = 8 marks)
Answer:
(i) Yes, u/s 271 B failure to get accounts audited or furnish a report of audit as required under section 44 AB:
½% of Total sales, turnover, or gross receipts, etc, or ₹ 1,50,000 whichever is less. In the present case, Total penalty will be ₹ 75,000.

(ii) Yes, u/s 271D – Taking or accepting certain Loans and deposits or specified sum in contravention of the provisions of Section 269SS:
Amount equal to loan or deposit or specified sum is taken or accepted. In the present case, Maximum penalty u/s 271 D will be ₹ 5,00,000.

Question 14.
State with one line reason, the due date for tiling the return of income in the throwing cases:
(i) Mr. Solkar, engaged in trade, has total turnover of ₹ 220 lakhs for the year ended 31.03.2023.
(ii) Krish Srikanth, an advocate, has aggregate professional receipts of ₹ 12,40,000 opting to admit income under section 44ADA.
(iii) Mr. Abid Ah, having 5 heavy goods transport vehicles which are run on hire, opting to admit income under section 44AE.
(iv) M/s Jayantilal & Mankaci, a firm engaged in hotel business with annual turnover of ₹ 130 lakhs preferring to offer income based on applicable presumptive provisions.
(v) Vaman Kumar Charitable Trust having total income of ₹ 12 lakhs. (before giving effect to the provisions of Section 11 and 12, and before seeking accumulation of income for application in the future years.) (June 2018, 6 marks)
Answer:
Every person:
(a) being a company or a firm, or
(b) being a person other then a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to tax.

All those taxpayers, who have opted for the presumptive income scheme as per Section 44AD, Section 44ADA, and Section 44AE of the Income-Tax Act bile his return before;

• A person (other than a company) where accounts are required to be audited under the Income-tax Act or under any other low; The due date for filing the return is 31st October of the assessment year.
• Mr. Krish Sri Kanth, an advocate, who opting presumptive income scheme u/s 44ADA shall file before 31 October, if Audit are applicable and 31st July if Audit are not applicable.
• Mr. Abid All, having goods transport vehicles opting presumptive income scheme u/s 44AE shall file before 31 St October, if Audit are applicable and 31st July if Audit are not applicable.
• M/s Jayantilal and Mankad, a partnership firm engaged in hotel business with annual turnover of 130 lakhs, opting presumptive income scheme U/S 44AD shall file before 31st October if Audit are applicable and 31st July if Audit are not applicable.
• Vaman Kumar Charitable Trust having total income of ₹ 12 Lakhs. (Before giving effect to the provision of sections 11 and 12) shall file return of income u/s 139(4A) before 31st October of the assessment year.

Advance Tax – CMA Inter Direct Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Advance Tax – CMA Inter Direct Tax Study Material

Short Notes

Question 1.
Write short note on the following:
Advance tax for senior citizens being resident/non-resident. (Dec 2017, 5 marks)
Answer:
Advance Tax ¡s not payable by:
An individual, Resident India, who does not have any Income chargeable under the head “Profits and Gains of Business or profession” and is of the age of 60 years or more at any time during the previous year. Advance tax is payable by senior citizen being non-resident.

Descriptive Question

Question 2.
Enumerate the conditions for exemptions of senior citizens from payment of advance tax u/s 207. (June 2013, 4 marks)
Answer:
Every assessee is required to pay Advance Tax if the tax liability for the previous year is ₹ 10,000/- or more. From the financial year 2017-18. Section 207 has been amended to provide that Advance Tax need not be payable in the case of senior citizens if the following conditions are satisfied.

Question 3.
Answer the following question with brief reason/working:
Is a company liable to pay advance tax when it is required to pay tax on “book profit” under section 115JB? (Dec 2015, 2 marks)
Answer:
There is specific provision in Section 115JB(5) providing that all other provisions of the Income-tax Act shall apply to every assessee, being a company mentioned in that section. Section 115JB is a self-contained code pertaining to MAT and by virtue of sub-section (5) thereof, the liability for payment of advance tax would be attracted.

Question 4.
Answer the following questions in the context of the provisions relating to advance tax:
(i) Who is not liable to pay advance tax, in case of individual assesses?
(ii) State the due dates of instalment for payment of advance tax and the amount of instalment for such assessees who are not covered under the provisions of Section 44AD. (June 2017, 6 marks)
Answer:
(i) Advance Tax Is not payable by:

• An Individual
• Resident in India
• Who does not have any income chargeable under the head “Profits and Gains of Business or Profession” And is of the age of 60 years or more-at any time during the previous year.

(ii) Advance Tax is payable in the following Installments:
In case of all Assessees except those who are covered under section 44AD

Due date of Instalment	Amount Payable (₹)
On or before 15th June	Not less than 15% of the advance tax liability.
On or before 15th September	Not less than 45% of the advance tax liability as reduced by the amount, if any, paid in earlier instalment.
On or before 15th December	Not less than 75% of the advance tax liability as reduced by the amount, if any, paid in earlier instalment.
On or before 15th March	The whole of the advance tax liability as reduced by the amount, if any, paid in the earlier instalments.

Question 5.
State the due dates for payments of advance tax, along with the quantum of amount payable in each instalment. Present your answer in the fomi of a table. (Dec 2018, 7 marks)
Answer:
Advance tax is payable in the following installment:
In case of all assessee except those who are covered under Section 44 AD or 44 DA

Due date of Installment	Amount Payable
On or before 15th June	Not less than 15% of the advance tax liability
On or before 15th September	Not less than 45% of the advance tax liabilities as reduced by the amount it any paid in earlier installment
On or before 15th December	Not less than 75% of the advance tax liability as reduced by the amount, if any paid in earlier installment
On or before 15th March	The whole amount of the advance tax liability as reduced by the amount, it any paid in earlier installment

In case of Eligible Assessee in respect of an eligible business referred to in Section 44AD or eligible profession referred to ¡n Section 44ADA. On or before 15th March – The whole amount of the advance tax liability.

Question 6.
What are the conditions to be satisfied for issuing notice of demand u/s 156 requiring the assessee to pay advance tax and when can it be passed by the Assessing Officer? (Dec 2021, 4 marks)
Answer:
Conditions for seeking advance tax from tax payer by the AO
The. A.O. may pass an order and issue a notice of demand u/s 156 requiring the assessee to pay advance tax.

Conditions to be satisfied for issuing such order

• The assessee has already been assessed by way of a regular assessment in any previous year.
• The Assessing Officer is of opinion that such person ¡s liable to pay advance tax.
• Such order can be passed at any time during the financial year but not after last day of February.
• Such order must be made in writing.
• Such order also specifies the amount of advance tax and the installments thereof to be paid by the assessee.

Note: Such order can be issued even if assessee has paid any installment of advance tax during the year, which is, in the opinion of the Assessing Officer, not as per the provision of sec. 211.

Practical Questions

Question 7.
Vijay, a resident individual aged 59, is running a wholesale business in fertilisers, whose turnover for the year ended 31.03:2023 is ₹ 70 lacs. Is he liable to pay advance tax, if he maintains books of accounts and gets his accounts audited under section 44AB of the Income-tax Act, 1961 (business income is ₹ 5.2 lacs)? Will your answer be different if he opts for presumptive taxation? He has no other income. (June 2015, 3 marks)
Answer:
Liability to pay advance tax:
Where the assessed tax payable by an individual who is not a senior citizen, exceeds ₹ 10,000, he is liable to pay advance tax.
In the first situation, since the tax payable on total income exceeds ₹ 10,000 he is liable to pay advance tax. Where he opts for presumptive tax, the obligation to pay advance tax will not arise at all.

Question 8.
Compute the amounts of. advance tax installments, payable in the financial year 2022-23 in respect of the following cases:
(i) A domestic company with tax liability of ₹ 3,90,000.
(ii) A super senior citizen (age above 80) having pension income of ₹ 3 lakhs and property income (computed) ₹ 5 lakhs. (Dec 2016, 4 marks)
Answer:
(i) Calculation of Installment of Advance Tax for a domestic company with Tax Liability of ₹ 3,90,000
15% of Tax Liability upto 15th June ₹ 58,500
45% of Tax liability upto 15th September ₹ 1,17,000(1,75,500 – 58,500)
75% of Tax Liability upto 15th December ₹ 1,17,000(29,25,00 – 1,75,500)
100% of Tax Liability upto 15th March ₹ 97,500. (3,90,000 — 2,92,500)

(ii) A super senior citizen (age above 80) having pension income of ₹ 3 lakhs and property income (computed) ₹ 5 lakhs. In the case of senior citizens and super senior citizens as per section 207(2) no advance tax is payable where they do not have income chargeable under the head ‘profits and gains of business or profession’.
Thus advance tax liability = ‘NIL’.

Question 9.
Mr. Madavan (aged 35 years), a resident individual, is a dealer of garments. During the previous year 2022-23, total turnover of his business was ₹ 135 lakhs (out of which ₹ 22.5 lakhs were received by way of account payee cheques and balance in cash). Mr. Madavan does not opt to pay tax as per the provisions-of section 115BAC. What would be your advice to Mr. Madavan relating to the provisions of advance tax with its due date, along with the amount payable, assuming that he wishes to make maximum tax savings without getting his books of account audited. (Dec 2021, 5 marks)
Answer:
Computation of advance tax of Mr.Madavan under Presumptive Income scheme as per section 44AD. The total turnover of Mr. Madavan, a dealer of garments, is ₹ 135 lakhs. Since his total turnover from such business is less than ₹ 200 lakhs and he does not wish to get his books of account audited, he can opt for presumptive tax scheme under section 44AD.

Profits and gains from business under section 44AD = ₹ 10,35,000
An eligible assessee opting for computation of profits and gains of business on presumptivR basis under section 44AD in respect of eligible business is required to pay advance tax of the whole amount on or before 15th March of the financial year.
Tax liability of Mr. Madavan as per normal provisions of Income-tax Act, 1961 = ₹ 1,27,920

Accordingly, he is required to pay advance tax of ₹ 1,27,920 on or before 15th March of the financial year. However, any amount by way of advance tax on or before 31st March of the financial year shall also be treated as advance tax paid during the financial year ending on that day for all the purposes of the Act.

Assessment of Various Persons – CMA Inter Direct Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Assessment of Various Persons – CMA Inter Direct Tax Study Material

Practical Questions

Question 1.
ABC LLP furnishes you the following details pertaining to the financial year 2022-23:

	₹
Net Profit as per Profit and Loss Account	90,00,000
Depreciation debited in the Profit and Loss Account	7,00,000
Depreciation allowable under Section 32	9,00,000
inadmissible/disallowable expenses	5,00,000
Deduction under Section 10 AA (computed)	12,00,000
Deduction under Section 80 IA (computed)	60,00,000

Compute total income, adjusted total income under Section 11 5JC and tax liability of ABC LLP for the assessment year 2023-24. (June 2014, 6 marks)
Answer:

Question 2.
(a) The Profit & Loss Account of M/s. Saxena & Chaturvedi, Cost Accountants, shows a net profit of ₹ 25,50,000 after debiting/crediting the following items:
(i) Interest of ₹ 1,40,000 on capital of Mr. Saxena, partner calculated at 14% per annum.
(ii) Remuneration ₹ 35,00,000 to Mr. Saxena and Mr. Chaturvedi, who are working partners.
(iii) Salary of ₹ 40,000 to Mr. Chatterjee, Manager for February, 2023 was paid by bearer cheque on 1st March, 2023.
(iv) Depreciation ₹ 1,20,000.
(v) Professional fee of ₹ 45,000 was paid to a lawyer for obtaining a legal opinion. No tax was deducted at source.
(vi) A sum of ₹ 30,000 was paid to a trainee as a special award for ranking first in Final Examination of the Institute of Cost Accountants of India.
(vii) Refund of penalty ₹ 35,000 paid in the financial year 2020-21 relating to delayed payment of Goods & Service tax, after decision of the appellate authority in favour of the assessee.
(viii) Interest on fixed deposit ₹ 5,00,000.
The firm is entitled to depreciation of ₹ 1,45,000 under Section 32. Compute total income of the firm for the assessment year 2023-24. (Dec 2014, 9 marks)
Answer:

Notes:
1. Penalty for infractions of law is never allowed as deduction under section 37(1). Therefore, penalty for delayed payment of GST was disallowed in financial year 2020-21. As penalty was disallowed, refund of such penalty as a result of favourable appeal order does not attract deeming provision of Section 41(1). Hence, it is not taxable.

2. Special award was given to trainee for excelling in final examination of the institute to motivate him and in recognition of his caliber. Payment was made to boost his morale so that he could contribute more to the assessee firm. Thus, it has a nexus with the profession carried on by the firm and hence, the same is allowable is deduction under section 3 7(1). As it is debited to profit & loss account, no further adjustment is required.

Question 3.
Mohit Sharma gives you the following information for the year ended 31.03.2023:
Owns 3 goods carriages throughout the financial year 2022-23
Retail trade turnover ₹ 36,00,000
Has eligible brought forward depreciation of the assessment year 2020-21 ₹ 60,000 relating to retail trade.
Deposited ₹ 80,000 in PPF account and ₹ 90,000 in tax saver deposit. Assume that he wants to offer income by opting for Sections 44AD and 44AE. Compute his total income for the assessment year 2023-24 (June 2015, 5 marks)
Answer:
Computation of total income of Mr. Mohit Sharma for the Assessment Year 2023-24

Note:
Amendment to [Section-44AE]
Section 44AE(2) has been substituted (with effect from the assessment year 2019-20) so as to provide that for a heavy goods vehicle, the profits and gains shall be an amount equal to ₹ 1,000 per ton of gross vehicle weight (or unladen weight) for every month (or part of a month) during which the heavy goods vehicle s owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher.

In the case of a goods carriage other than heavy vehicle, the profits an gains shall be an amount equal to ₹ 7,500 for every month (or part of a month) during which the goods carriage is owned by the assessee in the previous year or an amount claimed to have been actually earned from such goods carriage, whichever is higher. For this purpose, “heavy goods vehicle” means any goods carriage the gross vehicle weight of which exceeds 12,000 kilograms.

Question 4.
Mr. Shiva (age 62) having 4 heavy goods vehicles and 3 non-heavy goods vehicles wants to show the income chargeable to tax on presumptive basis. During the year 2022-23, he received interest on enhanced compensation of ₹ 5 lakhs relating to compulsory acquisition of land (made in the year 1991). He borrowed ₹ 3 lakhs for renovation of a let-out property from which he earned rental income of ₹ 10,000 per month. Interest on borrowed for house renovation for the year is ₹ 30,000. Compute his total income and income tax liability for the assessment year 2023-24. (Dec 2015, 5 marks)
Answer:

Working Notes:
1. Income from business:
Income = 7 truck 4 heavy & 3 Non heavy goods vehicles
= (3 × 7,500 × 12) + (4 × 12,000 × 12)
= 8,46,000

Note: Amendment to (Section-44AE1
Section 44AE (2) has been substituted (with effect from the assessment year 201 9-20) so as to provide that for a heavy goods vehicle, the profits and gains shall be an amount equal to ₹ 1,000 per ton of gross vehicle weight (or unladen weight) for every month (or part of a month) during which the heavy goods vehicle is owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher.

In the case of a goods carriage other than heavy vehicle, the profits and gains shall be an amount equal to 7.500 for every month (or part of a month) during which the carriage of the goods is owned by the assessee in the previous year or an amount claimed to have been actually earned from such goods carriage, whichever is higher. For this purpose, heavy goods vehicle” means any goods carriage the gross vehicle weight of which exceeds 12,000 kilograms.

Question 5.
Mr. Suresh Raina sold a residential building for ₹ 75,00,000 on 1st July, 2022. It was acquired for ₹ 22,04,000 on 1st June,
2013. The stamp duty valuation of the property at the time of acquisition was ₹ 25,00,000 and at the time of transfer was ₹ 85,00,000. He paid brokerage at 1 % at the time of transfer. He deposited ₹ 40,00,000 in bonds of Rural Electrification Corporation Ltd. In March, 2023 and deployed the balance in a business commenced by him. He has business loss of ₹ 5,00,000 for the year ended 31st March, 2023. Compute total income of Mr. Suresh Raina and advise by what date he must file his return of income. Cost inflation index – F. Y. 201 3-1 4: 220; F. Y. 2022-23: 331 (Dec 2015, 5 marks)
Answer:

As per Sec. 56 (2)(x) the difference of stamp duty valuation and cost of acquisition is more than ₹ 50,000 (positive) the excess of stamp duty valuation over such cost of acquisition shall be taxed under head “income from other sources”.

Question 6.
From the following particulars compute total income of Mr. Chatterjee for the assessment year 2023 – 24:
(i) Basic salary ₹ 50,000 per month.
(ii) Bonus for the year 2021-22 received in October 2020 ₹ 30,000.
(iii) Commission for the year 2022-23 but not received till 31.03.2023 ₹ 70,000.
(iv) Reimbursement of medical expenses on production of bills ₹ 20,000.
(y) Education allowance for 2 children paid by the employer ₹ 24,000.
(vi) Maid servant’s salary reimbursed by the employer ₹ 30000.
(vii) Income from cultivation and manufacture of rubber in the rubber estate owned in Kerala ₹ 1,00,000.
(viii) Tax on non-monetary perquisites paid by the employer ₹ 35,000. (June 2016, 9 marks)
Answer:

Question 7.
Mr. Anjan, an individual, aged 40 years having gross total income of ₹ 5,00,000 (including long-term capital gain from sale of land amounting to ₹ 3,90,000) during previous year 2022-23. He is entitled to get deduction under Chapter Vi-A for ₹ 1,79,000 consisting of deductions permissible under sections 80C, 80D and 80DD for ₹ 95,000, ₹ 4,000 and ₹ 80,000 respectively. Compute income tax payable by Mr. Anjan for assessment year 2023-24. (June 2016, 5 marks)
Answer:
Computation of income tax payable by Mr. Anjan for assessment year 2023-24

Particulars	₹
Gross Total Income	5,00,000
Less: Deduction under chapter VI-A Eligible deduction	₹ 1,79,000
Deduction under chapter VI-A cannot be claimed from long-term capital gain. Hence deduction is restricted to other income i.e. ₹ 5,00,000 – ₹ 3,90,000= ₹ 1,10,000	1,10,000
Total Income (representative long-term capital gain only)	3,90,000
Tax on other income	Nil
On long-term capital gain @ 20% of (₹ 3,90,000 – ₹ 2,50,000)	28,000
Less: Rebate under section 87A	12,500
	15,500
Add: Health and Education Cess @ 4%	620
Total Tax Liability	16,120.

Question 8.
Mr. Manoj gives you the following particulars of his income for the year ended 31st March, 2023:

Particulars	₹
1. interest on loan given to a friend (non-relative)	80,000
2. Interest on public provident fund	21,500
3. Winning from crossword puzzle (net)	70,000
4. Directors fee from a company	25,000
5. Royalty on a book written by him	1,50,000
6. Expenses for typing the manuscript of the book	15,000
7. Cash gift from father-in-law	2,00,000

Compute the income of Mr. Manoj for the assessment year 2023-24. (June 2016, 8 marks)
Answer:
Computation of Total Income of Mr. Manoj for the Assessment year 2023-24

Particulars	₹	₹
Income from Other sources:
Interest on loan		80,000
Interest on public provident fund	21,500
Less: Exemption U/s.10(15)	21,500
		Nil
Winning from crossword puzzle ₹ 70,000 x 100/70		1,00,000
Directors fee from a company		25,000
Royalty on book	1,50,000
Less: Expenses allowable U/s. 57	15,000
		1,35,000
Cash gift father-in-law – relative hence not taxable		Nil
Total Income		3,40,000

Question 9.
Determine the total income of Mr. Raman from the following details for the Assessment Year 2023-24:

Particulars	₹ In lakhs
Loss from house property	3.20
Income from salary	2.20
Income from non-speculation business	1.60
Loss from speculation business	5.40
Long-tern capital gain from sale of land	2.40
Long-term capital gain from sale of listed shares in recognised stock exchange	1.80
Short-term capital loss from sale of listed shares in recognised stock exchange	2.80
Family pension received	2.20
Lottery winnings (net of TDS)	2.10
Lottery tickets purchased	0.30

Show clearly the items to be carried forward and those which cannot be carried forward. (Dec 2016, 6 marks)
Answer:

Losses to be carried forward

1. Loss from Speculation Business 5,40,000
2. ST CL on Sale of Listed Securities 40,000
3. Loss from house property 1,20,000

Note: As per section 112A, Long-term capital gain on sale of listed equity shares, in excess of ₹ 1 lakh taxable @ 10%.

Question 10.
Rao and Jam is a partnership firm, consisting of 5 partners, with turnover of ₹ 1,20,00,000 for the year ended 31.03.2023. The
partnership deed provides for interest on capital at 14% per annum on the capital contribution of 5 lakhs each made by all the partners. All the partners are eligible for monthly working partner salary of ₹ 10,000 each. The firm provides you the following additional information:

Depreciation eligible under Income-tax Rules, 1962	₹ 2,00,000
Interest paid on unsecured loans for which no tax was deducted at source during the year or before the due date for filing return of income u/s 139(1)	₹ 5,00,000
Contract payments made during the year for which tax was deducted but remitted in financial year 2023-24 and before ‘due date’ for filing the return of income specified in Section 139(1).	₹ 4,00,000

Rent paid to a partner Mr. Jam for premises occupied by the firm ₹ 1,20,000 on which no tax was deducted at source. The reasonable rent for similar premises was determined at ₹ 1,80,000.

The Net Profit of the firm before charging interest on capital and working partner salary as per books was ₹ 8,40,000. Depreciation notionally computed and provided in the books amounts to ₹ 1,60,000. The partners of the firm want you to compute income under section 44AD and also as per regular provisions, and suggest which option would be beneficial to them. (June 2017, 9 marks)
Answer:

Note: .
Deduction of Remuneration to partners and Interest on capital to partners will not allowed from Deemed Income u/s 44AD w.e.f. AY. 2023-24.
Computation of Total Income of partnership firm Rao & Jam for the A.Y. 2023-24 (under Normal Provisions of the Income Tax Act.)

Note: It is in the interest of the firm to maintains the Books of Accounts and get done tax Audit because the Tax liability in case of computation of Total Income and tax under regular provisions of Income Tax Act is less.

Question 11.
Ms. Vidya residing in Chennai acquired a residential house for ₹ 15,25000 on 28th May, 2011. It was sold for loo Iakhs in July
2022. The stamp duty valuation on the date of sale was ₹ 110 Iakhs. She paid brokerage @2% of sale consideration and on which no tax was deducted at source.

She deposited ₹ 40 lakhs in REG Capital Gain Bonds in September, 2022 and ₹ 20 lakhs in NHAI Capital Gain bonds in February 2023. She acquired a residential property in Colombo for ₹ 50 lakhs and left for Colombo in August 2022 and occupied the said property. She returned to India in September 2022 leaving the property vacant till the date of sale.
Her other incomes include (i) ₹ 1,50,000 by way of interest on capital @ 15% from a firm at Salem; and (ii) income from rubber estates and manufacture of rubber in Kerala amounting to ₹ 3 lakhs., where rubber is grown and processed by her.

She paid ₹ 35,000 towards health insurance of her parents who are senior citizens through credit card and paid in cash ₹ 8,000 towards master health checkup for herself.
Cost Inflation Index: F.Y. 2011-12 = 184; F.Y.2022-23:331
Compute the total income of Ms. Vidya for the Assessment Year 2022-23 under proper heads of income. Ignore DTAA provisions. (June 2017, 8 marks)
Answer:

Notes:
1. DeductIon under Section 80D: Maximum upto ₹ 30,000 including preventive health checkup for self.
2. Exemption U/s 54EC: Maximum up to ₹ 50 lakhs subject to investment made within 6 months from the date of transfer of Capital Asset.

Question 12.
Mr. Chirag has given the following details relating to financial year 2022-23:
(i) Received ₹ 56,000 by way of gift from his friends on the occasion of his marriage.
(ii) Purchased a land at Kanpur for ₹ 12,50,000 for construction of a residential house from a friend. The stamp duty value of the land on the date of purchase was ₹ 15,00,000.
(iii) Interest amounting to ₹ 1,80,000 relating to earlier years, on enhanced compensation received during the year. Legal expenses incurred ₹ 25,000.
(iv) Received loan of ₹ 3,50,000 from CNK Private Limited in which Mr. Chirag holds 12% voting power. The accumulated profit in the hands of the company at the time receipt of loan was ₹ 2,90,000.
Briefly narrate the tax consequences of the aforesaid items, sharing clearly the amount to be taxed in each case. (June 2017, 9 marks)
Answer:
(i) Gift Received from friends of ₹ 56,000 on the occasion of his marriage is not taxable U/s 56(2)(vii).
(ii) Since the Difference between stamp duty value and actual purchase price is more than ₹ 50,000 i.e. (15,00,000 -12,50,000=2,50,000) is liable to tax Under the head Income from other sources U/s 56(2)(vii).
(iii) Interest on enhanced compensation received ₹ 1,80,000 is taxable under the head Income from other sources under section 56(2)(vill) and 50% of such interest is eligible for deduction u/s 57Qv).
(iv) Loan Received by Mr. Chirag from CNK Private Limited will be treated as dividend U/s 2(22)(e) upto the amount of Accumulated profit in the hands of the company on the date of loan given by the company if Mr. Chirag holds 10% or more voting power in the company. In the given case Amount of ₹ 2,90,000 out of ₹ 3,50,000 will be treated as dividend U/s 2(2)(e).

Question 13.
Mr. Sen G. Gupta (aged 65 years) is a retired person drawing a monthly pension of ₹ 6,000. His taxable long-term capital gain
from sale of paintings during the previous year 2022-23 is ₹ 2,75,000. He has no other income during the year. Compute his tax liability for Assessment Year 2023-24 (i) it he is resident and (ii) if he is non-resident. (June 2017, 8 marks)
Answer:

Note:
Where the individual assessee is non-resident, he is not entitled to deduct the excess of basic exemption limit over other income from long-term capital gain for computing tax liability (Section 112).

Question 14.
State the implications of the following transactions carried out by Kalai & Co. a partnership firm (Whose turnover always exceeded ₹ 500 lakhs) with reverence to the provisions applicable for the assessment year 2023-24:
(i) Audit fees of ₹ 35,000 paid by electronic transfer but no tax was deducted at source.
(ii) Arrear salary of 60,000 paid in cash to an employee who was posted in a ship for 10 days continuously. Tax was deducted at source on the total salary paid to the employee during the year.
(iii) Lorry freight paid by cash ₹ 30,000.
(iv) ₹ 3 lakhs freight paid to Indian Railways without deduction of tax at source.
(v) Salary paid to a son of a partner ₹ 20,000 per month. The market rate of such salary for similar qualifications is found to be ₹ 15,000 per month.
(vi) Income tax paid in cash ₹ 22,000.
(vii) Interest on term loan paid to Canara Bank ₹ 18,000 without deduction of tax at source.
(viii) interest on capital paid to partners at 15% in accordance with the condition contained in the partnership deed.
(ix) Keyman insurance policy premium paid ₹ 40,000. (Dec 2017, 9 marks)
Answer:
(i) 30% of Audit fees of ₹ 35.000. i.e. ₹ 10,500 will be disallowed.
(ii) Arrear of salary of ₹ 60,000 paid in cash will be disallowed, there is no need of adjustment.
(iii) Lorry freight paid by cash upto ₹ 35,000 allowed therefore no adjustment required.
(iv) TOS providers are not applicable to payment made in respect of Railway freight.
(v) Excess salary paid to a son of a partner disallowed i.e. ₹ 5,000 per month will be disallowed.
(vi) Income tax is a personal liability of partnership firm, not an expense. Therefore not allowed as expense.
(vii) Interest on term loan paid to Canara Bank of ₹ 18,000 is an allowed expense. There is no need of TDS.
(viii) Interest on capital paid to partners allowed at 12%, therefore 3% interest will be disallowed and added to profit.
(ix) Keyman insurance policy premium paid ₹ 40,000 is an allowed expense. There is no need of adjustment.

Question 15.
Mr. Rajiv. a resident individual, engaged in a wholesale business of health products. He is also a partner In XYZ & Co., a partnership firm. The following details are made available for the year ended 31.03.2023:

You are required to compute the total income of the Mr. Rajiv for the assessment year 2023-24 and the closing WDV of each block of assets. (Dec 2017, 9 marks)
Answer:

Question 16.
Following is the Profit and Loss Account of Mr. Abdul for the year ended 31.03.2023:

Particulars	₹	Particulars	₹
To Staff Salary	4,85,000	By Gross Profit	14,48,800
To Shop rent	1,20,000	By Post office SB A/c interest	14,200
To Admin. Expenses	2,96,000	By Dividend from listed Indian Companies	43,000
To Drawings	96,000
To Depreciation	2,22,000
To Medical Expenses	37,000	By Bank SB interest	12,000
To Net Profit	2,62,000
	15,18,000		15,18,000

Additional information:
(i) Shop rent was paid to wife of Mr. Abdul and ₹ 60,000 is found to be excessive payment considering its size and location.
(ii) Depreciation allowable under the income-tax rules works out to ₹ 1,81.000.
(iii) Medical expenses include expenditure for family members of ₹ 16,000. Balance relates to staff medical expenses.
(iv) Drawings denote personal expenses of the proprietor.
(b) During the year he acquired a residential house for ₹ 20 lakhs which included stamp duty and registration fee of ₹ 1,60,000.
You are requested to compute the total income of Mr. Abdul for the assessment year 2023-24. (Dec 2017, 7 marks)
Answer:

Note-1: There is a change in the dividend taxation regime with the abolishment of dividend distribution tax in case of dividends paid/distributed by domestic companies after 1st April 2020, hence, Section 10(34) which provided exemption from dividend received (after payment of Dividend Distribution Tax) is provided with a sunset clause i.e., the exemption would not be applicable on income received by way of dividend on or after 1st April 2020. Hence, such deemed dividend will be taxable in the hands of recipient.

Question 17.
Compute the tax liability of Sri A. Hari Chandra Prakash whose total income is
(a) 49,62,500
(b) 51,00,000
Note : (Source of income is Salary only) (June 2018, 5 marks)
Answer:

Note: In case of individual and HUF, where total income exceeds ₹ 50 lakhs but does not exceed ₹ 1 crore, the aggregate of income tax and surcharge shall be restricted to: Tax on 50 lakhs + (Total income – 50 lakhs)

Question 18.
Mr. Ashwin of Chennai sold a vacant site for ₹ 30 lakhs to Mr. Raina on 01.05.2022. The value of land for stamp duty purposes was ₹ 25 lakhs. The vacant site was acquired in April, 2006 for ₹ 3 lakhs. The fair market value of the vacant site on 01.04.2006 was ₹ 4 lakhs. The entire sale consideration plus a housing loan of ₹ 38 lakhs from a nationalized bank was availed for acquiring a residential building for ₹ 68 lakhs in Pune on 01.07.2022. The stamp duty paid for the purpose of acquisition was ₹ 2,90,000. The property was let out for a monthly rent of ₹ 10,000 from 01.07.2022. Interest on housing loan during the year till its closure amounted to ₹ 2,80,000.

Mr. Ashwin sold yet another vacant site for ₹ 28 lakhs on 21.01.2023. This vacant site was acquired in October, 2020 for ₹ 20 lakhs. He utilized the entire sale proceeds realized in January 2023 for repaying the housing loan. His other incomes are (i) Income from business (computed) ₹ 3,90,000 and (ii) Bank interest of ₹ 60,000 from term deposits and ₹ 15,000 from SB account. Compute the total income of Mr. Ashwin for the assessment year 2022-23. Cost inflation index: F.Y. 2006-07 = 122; F.Y. 2020-21 = 301; E.V. 2022-23 = 331. (June 2018, 7 marks)
Answer:

Note No 1:
a. As per Section 50C where the consideration received or accruing as a result of the transfer by an assessee of a capital assets, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the “Stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purpose of Section 48, be
deemed to be the full value of the consideration received or accruing as a result of such transfer.

b. As amended by Finance Act, 2020, that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed 110% of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purpose of section 48 be deemed to be the full value of the consideration.

And where the value adopted or assessed or assessable by the stamp valuation authority is exceed 110% of the consideration received or accruing as a result of the transfer then Stamp Duty Value shall, for the purpose of section 48. be deemed to be the full value of the consideration.

Note No: 2
According to Section 54F subject to sub-section (4), where in the case of an assessee being an individual or HUF, the capital gain arises from the transfer of any long-term capital assets, not being a residential house (hereinafter in this section referred to as the original assets) and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three year after that date constructed, one residential house in India and cost of new asset is more than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under Section 45.

With effect from Assessment Year 2020-21 corresponding to FY 2019-20, a capital gain exemption is available for purchase of two residential houses in India. However, the exemption is subject to the capital gain not exceeding ₹ 2 crore. Also, the exemption is available only once in the lifetime of the seller.

Question 19.
Mr. Kamal is employed in Rajini Mfg. Co. Ltd. Mumbai as General Manager furnishes the following information for the year ended 31.03.2023:

Particulars	Amount (₹)
Basic salary (per month)	50,000
Dearness Allowance (eligible for retirement benefits)	80% of basic salary
House Rent Allowance (per month)	10,000
Rent paid by him ₹ 15,000 per month for 6 months and ₹ 20,000 per month for balance 6 months (at Mumbai)
City Compensatory Allowance (per month)	2,500
Medical reimbursements (annual)	13,000
Gymkhana club annual membership fee reimbursed by employer	20,000
Mobile phone bill reimbursed by the employer (Used for both official and personal use)	37,500
Motor car (cubic capacity of engine 2.2 liters) owned by the employee but the maintenance expenses fully met by the employer (Motor car was used both for personal and official use)	85,800
Cash gift paid by the employer in appreciation of performance on 01.01.2023	30,000

Contribution to recognized provident fund:

You are requested compute the total income of Mr. Kamal for the assessment year 2023-24. (June 2018, 10 marks)
Answer:
Computation of total income of Mr. Kamal for the Assessment Year 2023-24

	₹
Basic Salary (50,000 x 12)	6,00,000
Dearness allowance (80% of 6,00,000)	4,80,000
House rent allowance (Note 1)	18,000
City compensatory allowance	30,000
Medical reimbursement (Annual)	13,000
Annual membership fee	20,000

Working Note: 1
House rent allowance received 1,20,000
Less. Exemption u/s 10(13A)
(a) Actual house rent allowance received 1,20,000
(b) Rent paid over 10% of salary 2,10,000 – 1,08,000 = 1,02,000
(c) 50% of salary = 5,40,000
Least of the above exempt i.e. = 1,02,000
Taxable H.A. = Actual – Exempt = 1,20,000 – 1,02,000 = 18,000

Working Note: 2
Any amount contributed to recognized provident fund by employee shall be allowed as deduction u/s 80C from gross total income subject to the limit specified therein and contribution of employer shall be exempted up to 12% of salary.

Working Note : 3
Any contribution by an individual to any pension fund set up by any mutual Fund referred U/S 10(230) shall be allowed as deduction U/S 80C.

Question 20.
The Profit & Loss Account of ABC & Associates, a partnership firm for the previous year 2022-23 is given below:

Additional information:
(i) Establishment expenses include bonus ₹ 2,40,000 which was paid on 30-12-2023.
(ii) The firm is eligible for deduction under section 80-IC.
(iii) Establishment expenses also included securities transaction tax of ₹ 2,000.
Compute the tax liability of the firm for the assessment year 2023-24.
Assume that no extension of time has been granted u/s 139 (1) for filing the return of Income. (June 2018, 10 marks)
Answer:
Computation to total income and tax liability of the firm for the assessment year 2023-24

Note: 1
Interest and remuneration paid to the partners by a firm are not deductible. However, the interest and remuneration paid to partners by a firm are deductible if all the following conditions are satisfied:
(i) Payment of salary, bonus, commission or remuneration, by whatever name called (hereinafter referred as remuneration) is to a working partner. If it is paid to a non-working partner, the same shall be disallowed.

Note: 2
The payment of interest to a partner should not exceed the amount calculated at the rate of 12% per annum simple interest (any amount in excess will be disallowed).

Note : 3
As per section 11 2A, long-term capital gain on an equity share of a company taxable @ 10% in excess of 1 lakh without providing indexation.

Note: 4
Bonus received by an employee is charged to tax in the year of receipt relief under Section 89 can be claimed in respect of arrears of bonus received during the year.

Question 21.
Discuss the taxability or otherwise in the hand of the recipient:
Nilay, a member of his father’s HUF, gifted a house property to the HUF. The stamp duty value of the house is ₹ 8 lakhs. (2 marks)

ABC & Co., a partnership firm, consisted of 4 equal partners up to 31.03.2022. It had accumulated business losses of ₹ 8 lakhs and unabsorbed depreciation of ₹ 6 lakhs relating to assessment year 2021-22. On 01.04.2022 one partner retired. The firm, for the previous year ended 31st March, 2023, made a turnover of ₹ 150 lakhs. The firm wishes to opt for presumptive taxation. The entire sale proceeds were realized through banking channel. Compute the total income of the firm for the assessment year 2023-24. (June 2018, 5 marks)
Answer:
(a) Since the HUF is covered under the definition of relative, therefore, gift of house property tÕ the HUF by its member is exempt from Tax.
(b) Computation of total income of the firm ABC & Company for the Assessment Year 2023-24

Note: An individual HUE or partnership firm, who is a resident, whose total turnover or gross receipt in the previous year does not exceed on amount of two crore rupees are eligible for opting pres-emptive taxation scheme.

Question 22.
Mr. Raghavan, aged 57, is a person with disability. He furnishes you the following information for the year ended 31.03.2023.
(i) Income from business (computed) ₹ 7,00,000
(ii) Dividend from an Indian company ₹ 10,50,000
(iii) Interest on Saving bank account with a nationalized bank ₹ 17,000
(iv) Medical insurance premium paid by account payee cheque For self ₹20,000
For brother, wholly dependent on him ₹ 15,000
Compute his total income for the Assessment Year 2023-24. (Dec 2018, 5 marks)
Answer:

Note-1: There is a change in the dividend taxation regime with the abolishment of dividend distribution tax in case of dividends paid/distributed by domestic companies after 1st April 2020, hence, Section 10(34) which provided exemption from dividend received (after payment of Dividend Distribution Tax) is provided with a sunset clause i.e., the exemption would not be applicable on income received by way of dividend on or after 1st April 2020. Hence, such dividends will be taxable.

Question 23.
CMA Anup Banerjee is in practice as Cost Accountant. He follows mercantile basis of accounting. His income & expenditure account for the year ended 31st March, 2023 is given below:

Expenditure	₹	Receipts	₹
Salary and stipends	10,50,000	Professional fees	45,00,000
Bonus to staff	1,00,000	Share of profit from a partnership firm	2,00,000
Meeting Conference and seminars	2,50,000	Interest on fixed deposit in a bank (Net of TDS)	27,000
Fees to consultants	1,50,000	Honorarium for valuation of answer papers of various institutes (Net of TDS)	54,000
Travelling and conveyance	4,60,000
Rent for office premises	6,00,000
Provision for bad debts	40,000
Depreciation	1,45,000
Provision for income tax	7,02,000
Excess of income over expenditure	12,84,000
	47,79,000		47,79,000

Other information:
(i) Depreciation as per the Income-tax Act ₹ 2,00,000.
(ii) Salary and stipends include ₹ 40,000 paid to one trainee for passing CMA final examination with rank.
(iii) Bonus to staff was paid in November 2023.
(iv) In the financial year 2021-22, a sum of ₹ 15,000 was due to a consultant, which was allowed. The said amount was paid on 14th May, 2022 in cash.
Compute the total income of CMA Anup Banerjee for the assessment Year 2023 -24. He has not opted for presumptive taxation scheme under section 44ADA. The due date for furnishing the return of income under section 139(1) may be taken as 31st Oct, 2023. (Dec 2018, 15 marks)
Answer:

Particulars	₹	₹
Profits & gains of business or profession Net surplus as per Income & Expenditure A/c Add: Payment to a trainee for passing CMA Final examination with rank is in the nature of incentive to boost the morale of the staff. The expenditure is wholly and exclusively for the purpose of profession of the assessee and allowable u/s 37(1). As the amount has already been debited to income & expenditure account, no adjustment is necessary		12,84,000
Bonus to staff not paid before the due date of filing return of income disallowed u/s 43B	1,00,000
Under Section 36(1)(vii), bad debt does not include provision for bad debts. Hence, provision for bad debts is disallowed	40,000
Depreciation debited to profit & loss account	1,45,000
Provision for income-tax disallowed u/s 40(a)	7,02,000

Question 24.
Compute the total income of Mr. Jagari, a resident, from the following details:

Particulars	Amount (₹)
(i) Income under head Salaries’	3,50,000
(ii) Income from owning and maintaining race horses	(3,00,000)
(iii) Long-term capital gain from sale of house plot	(90,000)
(iv) Income from house property-X	50,000
(v) Business Income-Medicines	(5,00,000)
(vi) Speculative business – A	2,00,000
(vii) Business Income-Textile	3,50,000
(viii) Speculative business-B	(1,00,000)
(ix) Income from horse races	1,50,000
(x) Income from house property – Y	(3,10,000)
(xi) Short-term capital gain from sale of immovable property	1,00,000

(June 2019, 9 marks)

(b) Brindavan & Co. is a partnership firm consisting of 4 partners viz., Ram, Rahim, Robert and Rakesh. The firm made turnover exceeding ₹ 100 lakhs and the net profit of firm was ₹ 9,50,000 before considering the following items:
Answer:

Question 25.
Madhav is a sole proprietor of Han Silks. He reports turnover of ₹ 240 lakhs for the previous year 2022-23 and a net profit of
₹ 8,10,000 as per books of account. The following items are debited and credited to Profit and Loss Account.
(i) Bonus to employees ₹‘60,000 Provision made on 31.03.2023 and was paid on 30.11.2023 after the due date for filing the return.
(ii) Interest on private loan ₹ 12,000 was paid by account payee crossed cheque on 10.08.2022. No tax was deducted at source. Turnover of Raghav for the previous year 2021-22 also exceeded ₹ 200 lakhs.
(iii) Dividend train Indian Companies (listed in recognized stock exchange) received during the year ₹ 21,000.
(iv) PPE interest credited 27,000 and savings bank interest ₹ 13,500 from UCO Bank.
(v) One Generator was purchased for ₹ 90,000 on 10.01.2023. Subsidy received from Government @ 20%. The subsidy is credited to P&L Account. No depreciation is charged in the books for generator.
(vi) Rent received from let out property  ₹ 1,65,000 credited to profit and toss account. Municipal tax to the said property 1 ₹ 5,000 was paid on 10.03.2023 which is debited to profit and loss account.
(vii) Salary paid to wife 30,000 per month during the year 2022-23. (Reasonable monthly salary considering her qualifications and experience is ₹ 20,000 per month.)
You are requested to compute the income from business of Madhav taking note to the above adjustments. Brief reason is to be given for treatment of each item given above. (Dec 2019, 9 marks)
Answer:

Question 26.
The total income of Mr. M is ₹ 10 lakhs. In this income, ₹ 50000 was earned by way of Interest on which the payer of Interest
deducted tax at source @ 10% (₹ 5,000). He paid advance Tax of ₹ 25,000 in different installments. TCS collected at source was ₹ 10,000. Calculate the self-assessment tax to be paid under section 140A at the time of filing the Return of income.
[Note: Compute the tax as per old regime.] (Dec 2021, 3 marks)
Answer:

Question 27.
Following is the profit arid loss account of Ashok (age 56) a resident for the year ended 31.03.2023:

To Rent	2,70,000	By Gross Profit	10,50,000
To Car repair & running expenses	10,000	By Cash Gift from friend	35,000
To Income tax	15,000	By Profit on sale of car	20,000
To Medical expenses	20,000	By Interest on income tax refund	1,300
To Administration expenses	1,30,000
To Salary	90,000
To Net Profit	5,71,300
	11,06,300		11,06,300

Other information:
(i) He bought a motor car on 1st March, 2023 for ₹ 2 lakhs by paying cash.
(ii) He sold his old motor car on 8th September, 2022 whose WDV as on 01.04.2022 was ₹ 60,000 and book value ₹ 80,000 for ₹ 97,000.
(iii) Medical expenses given above includes medical expenses for wife ₹ 7,000.
(iv) Let out a residential property for a monthly rent of ₹ 25,000 to Amin through out the financial year 2022-23. Municipal tax of ₹ 30000 was paid in cash in December, 2022
(v) Incurred ₹ 50,000 towards medial expenditure for employees due to fire accident in business premises. This amount is included in administrative expenses given above.
(vi) Paid health insurance premium for himself and wife ₹ 20,000 by crossed cheque. Also paid health insurance premium for his two children by net banking ₹ 12,000.
(vii) Repaid housing loan principal by cash ₹ 1,05,000 and life insurance premium of his brother ₹ 22,00,000 and of himself ₹ 25,000.
Compute the total income of Ashok for the assessment year 2023-24. (Dec 2022, 15 marks)

Deductions, Rebate, and Reliefs – CMA Inter Direct Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Deductions, Rebate, and Reliefs – CMA Inter Direct Tax Study Material

Short Notes

Question 1.
Write short flotes on deduction under Section 😯 TTA in respect of interest from banks. (June 2014, 4 marks)
Answer:
80TTA
Individual/HUF – Eligible Assessee
Interest on savings account with a Scheduled Bank, or a Co-operative Bank or Post Office Upto ₹ 10,000.
Section – 80 TTB
(Deduction in respect of Interest on Deposits in case of Senior Citizens) Deduction under section 8OTTB is available (from the assessment year 2019-20) if the following conditions are satisfied –

1. The assessee is a senior citizen (i.e., a resident individual who is at least 60 years of age at any time during the previous year).
2. His income includes interest on deposits with a bank/co-operative bank post office (it may be interest on fixed deposits, interest on savings account or any other interest).

Amount of deduction – If these conditions are satisfied, the assessee can claim deduction under section 8OTTB which is equal to ₹ 50,000 or the amount of aforesaid interest, whichever is lower.

Note: with effect from the A.Y. 2019-20, a senior citizen who can avail deduction u/s 8OTTB, shall not be eligible for the deduction u/s 80TTA.

Descriptive Question

Question 2.
What is the effect of contribution made by an individual to electoral trust on his taxable income? (June 2013, 2 marks)
Answer:
The scope of Section 8OGGC has been widened so as to enable an individual to claim deduction from gross total income in respect of amount of contribution made by him to an electoral trust during the year.

Question 3.
Write a brief note on the deduction available under Section 8ODDB. (June 2014, 4 marks)
Answer:
80TTA
Resident individual/ HUF – Eligible Assessee
Medical Treatment of Specified Disease of Self, Spouse, Parent, Children, Brother, Sister. Amount received from Insurance Company shall be deducted from ₹ 40,000 or ₹ 1,00,000 if incurred in respect of Senior Citizen or in respect of very senior citizen. The Assessee must furnish a certificate in form No. 10-l along with the return of Income.

Question 4.
Who are not ‘Regular Workmen, u/s 80 JJAA of the Income Tax Act, 1961? (June 2014, 3 marks)
Answer:
Following are not regular workmen u/s 80 JJAA –

1. Casual workmen and workmen employed through contract labour.
2. Other workmen if employed for less than 150 days during the previous year.

Practical Questions

Question 5.
Determine the eligibility and quantum of deduction under Chapter VI-A in the following cases:
(ii) Contribution to notified pension scheme (referred to Section 80 CCD) by the employer ₹ 40,000 for an employee whose basic salary plus dearness allowance was ₹ 3,00,000 for the year. (Dec 2012, 4 marks)
Answer:
An assessee who is an individual employed by central Govt. (or any other employer) make any contribution to his account under a pension scheme notified (or as may be notified by Central Govt.) the assessee shall be allowed a deduction in computation of his total income, the deduction is subjected to amount of 10% of his salary in previous year. (Sec. 80CCD)

Contribution to Notified Pension Scheme
Amount of deduction u/s 80CCD(2)
(least of the following)
1. Actual Amount Paid – ₹ 40,000
2. 10% of Salary 3,00.000 x 10% – ₹ 30,000
Hence, Amount of Deduction is ₹ 30,000.

Question 6.
Answer the following sub-divisions briefly in the light of the provisions of the Income-tax Act, 1961:
A life insurance policy was taken in April, 2022 for a capital sum assured of ₹ 8 lakhs. The annual premium amounts to ₹ 1,10,000 for 10 years. How much is deductible under Section 80C? (Dec 2013, 1 mark)
Answer:
Only 10% of the premium on the capital sum assured is eligible for deduction. Amount Deductible u/s 80C = 8,00,000 × 10% = ₹ 80,000.

Question 7.
Compute the quantum of deduction under Section 80C for Mr. Niraj for the assessment year 2023-24.

	₹
Life Insurance premium
Own – Capital sum assured 2,00,000 (being the first premium paid)	25,000
Brother’s life – dependent on Niraj	10,000
Major son – doing business	5,000
Contribution to recognized provident fund	15,000
Repayment of bank loan for purchase of residential apartment-let out	60,000
Tuition fees for M.Com (part-time) pursued by wife	12,000

(Dec 2013, 3 marks)
Answer:
Computation of deduction u/s 80c

Particulars	₹
Life insurance premium
Own- capital sum assured ₹ 2,00,000 (being the first premium paid) – limited to 10°/o i.e. ₹ 2,00,000 × 10%	20,000
Major son – doing business – allowed	5,000
Contribution to recognized provident fund – allowed	15,000
Repayment of loan for purchase of residential apartment -let out – allowed	60,000
Total amount eligible for deduction u/s 80 C	1,00,000

Note: Brother’s Life – Dependent on Niraj & Tuition fees for M.Com (part-time) pursued by wife will not be allowed as Deduction u/s 80 C.

Question 8.
Mr. Praveen Kumar (aged 59 years) having gross total income of ₹ 27,50,000 during previous year 2022-23 incurred expenditure of ₹ 1,30,000 during the said year on medical treatment of his dependant father (aged 80 years) who is suffering from chronic disease specified in Section 8ODDB of the Income-tax Act and also paid medical insurance premium of ₹ 26,000. Determine total income of Mr. Praveen Kumar for Assessment Year 2023-24. (Dec 2016, 4 marks)
Answer:
Computation of Total Income of Mr. Praveen Kumar for A.Y. 2023-24:

Gross Total Income	27,50,000
Less: Deductions u/s 80 D
For medical insurance premium for self under section 80D-
maximum allowable is ₹ 25,000	25,000
u/s 80 DDB	1,00,000
Total Income	26,25,000

Note: Amendment to (Section-800DB)
Section 800DB has been amended (with effect from the assessment year 2020-21) so as to raise the above monetary limit of deduction to ₹ 1,00,000 for both senior citizens and super senior citizens.

Question 9.
Mr. Gangai Amaran (age 50) incurred following expenditures during the financial year 2022-23:

Particulars	₹
(i) Medical expenditure on the treatment of his non-dependent father (age 82)	30,000
(ii) Medical expenditure on treatment of his non-dependent mother (age 73)	25,000
(iii) Medical expenditure for a surgery undergone by himself	50,000
(iv) Medical insurance premium for non-dependent mother (age 73)	35,000
(v) Medical insurance premium for self (paid by cheque)	27,000
(vi) Preventive medical health check-up paid in cash for himself.	7,000

Computer the amount eligible for deduction under section 80-D for the financial year 2022-23. (Dec 2017, 7 marks)
Answer:

Note: Amendment to [Section – 80D]
The following amendments have been made to the scheme of section 80D with effect from the assessment year 20 19-20 as follows:
Section 80D, inter alla, provides that for medical insurance (or preventive health ‘of a senior citizen), deduction of ‘₹ 30,000
shall be allowed. Further, in the case of supersenior citizens, the said section also provides for a deduction of medical expenditure within the overall limits of ₹ 30,000.
The above monetary limits have been extended so as to provide that the deduction of ₹ 50,000 in aggregate shall be allowed to senior citizens in respect of medical insurance or preventive health check-ups or medical expenditures.

In case of single premium health insurance policies having cover of more than one year, deduction under section 80D shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the specified monetary limit.

Question 10.
With brief reasons compute the quantum of eligible deduction in the following independent cases:
(i) Ranjit made tax saver deposit in SBI of ₹ 80,000 in his wife’s name and paid life insurance premium of 25,000 on a sum assured policy of ₹ 2,00,0O0 taken on 01.06.2019.
(ii) Vikas having basic pay and DA (forming part of retirement benefits) of ₹ 4,50,000 contributed ₹ 50,000 to a pension scheme notified under section 80 CCD and repaid education loan of SBI of ₹ 60,000 for son’s education outside India. The education loan was taken in the financial year 2017-18.
(iii) Ms. Madhuri engaged in manufacturing activity paid ₹ 30,000 to National Urban Poverty Eradication Fund on 31.12.2023. She also paid rent for residential premises @ ₹ 25,000 per month. She does not own any house property. Her gross total income (computer) is ₹ 6,50,000. She has not claimed any other deduction under Chapter VI-A. (Dec 2019, 2 x 3= 6 marks)
Answer:
Quantum of eligible deduction
(i) Deduction under Section 80C
Tax Saver Deposit in the name of wife is not eligible for deduction under section 80C.

(ii) Deduction u/s 80CCD
Amount of deduction = Lower of following:
1. employee contribution (50,000)
2. 10% of Salary (45,000)
Deduction = 45,000

Deduction u/s 80E
deduction in respect of interest on loan for higher education in India or abroad
Amount of Deduction = ₹ 60,000

(iii) Deduction u/s 8OGG = Rent paid of House property
Amount of deduction:
Lower of following

• ₹ 5,000 1 month [5 x 12,000] 60,000
• 25% of 6,50,000 1,62,500
• Rent paid 10% of GTI = (3,00,000 – 65,000) 2,35,000
• Amount of deduction = ₹ 60,000

Question 11.
Determine the quantum of deduction under the applicable provisions of Chapter VI-A for the assessment year 2023-24 in the following cases:
(i) Rahul engaged in manufacture of household utensils applied for housing loan for the first house property for self-residential use. The loan was sanctioned in June, 2022 of ₹ 40 lakhs and the balance ₹ 8 lakhs was met from his own source. Interest on loan for the year ended 31.03.2023 amounts to ₹ 2,40,000.
(ii) Prarnod employed in a listed company availed loan from SBI for the purpose of purchase of electric car. The cost of electric car was ₹ 15,00,000 for which he borrowed loan of ₹ 12 lakhs. Interest payable on loan for the financial year 2022-23 amounts to ₹ 1,70,000.
(iii) Priti (P) Ltd. contributed ₹ 5 lakhs to an electoral trust and incurred ₹ 90,000 on advertisement in a brochure of a recognized political party.
(iv) The gross total income of Everest (P) Ltd. includes profits and gains of ₹ 11 lakhs from the collecting and processing of bio-degradable waste for producing biogas. The company began the business in the financial year 2019-20. (Dec 2022, 8 marks)

Descriptive Question

Question 12.
Briefly explain marginal relief allowable while computing tax payable by certain assessee. (June 2010, 3 marks)
Answer:
Marginal Relief: In case of Surcharge
A.

1. In case of individual and HUE, where total income exceeds ₹ 50 lakhs but does not exceed ₹ 1 crore, the aggregate of income tax and surcharge shall be restricted to. (Tax on ₹ 50 lakhs) + (Total Income – ₹ 50 lakhs)
2. In case of individual and HUF, where total income exceeds ₹ 1 crore but does not exceed ₹ 2 crore, the aggregate of income tax and surcharge shall be restricted to: (Tax on ₹ 1 crore with surcharge of 10%) + (Total Income – ₹ 1 crore)
3. In case of individual and HUE, where total income exceeds ₹ 2 crore but does not exceed ₹ 5 crore, the aggregate of income tax and surcharge shalt be restricted to: (Tax on ₹ 2 crore with surcharge of 15%) + (Total Income – ₹ 2 crore)
4. In case of individual and HUF, where total income exceeds ₹ 5 crore, the aggregate of income tax and surcharge shall be restricted to: (Tax on ₹ 5 crore with surcharge of 25%) + (Total Income – ₹ 5 crore)

B. In case of Local authority and Firm, where the total income exceeds ₹ 1 crore, then the aggregate of income tax and surcharge shalt be restricted to: (Tax on ₹ 1 crore) + (Total Income – ₹ 1 crore)

C. In case of domestic/Foreign company, where the total income exceeds ₹ 1 crore but does not exceed? 10 crores, then the aggregate of income tax and surcharge shall be restricted to: (Tax on ₹ 1 crore) + (Total Income – ₹ 1 crore)

D. In case of domestic company, where the total income exceeds ₹ 10 crore, then the aggregate of income tax and surcharge shall be restricted to: (Tax on ₹ 10 crore with surcharge of 7%) + (Total Income – ₹ 10 Crore)

E. In case of foreign company. where the total income exceeds ₹ 10 crore, then the aggregate of income tax and surcharge shall be restricted to: (Tax on ₹ 10 crore with surcharge of 2%) + (Total Income – ₹ 10 Crore).