CA Inter Taxation Income Tax Case Studies – CA Inter Taxation Study Material is designed strictly as per the latest syllabus and exam pattern.
CA Inter Taxation Income Tax Case Studies – CA Inter Taxation Study Material
Question 1.
Mr. X entered into an agreement with Y to purchase a vacant plot for ₹ 140 lacs on 1st April 2020, when its stamp duty value was ₹ 160 lacs. He advanced a sum of ₹ 30 lacs by account payee cheque to Mr. Y, against the agreement on 1st April 2020. However final transfer of plot occurred on 1st March 2021, when stamp value of plot increased to ₹ 175 laes. Mr. Y had purchased the plot on 1st May 2018 for ₹ 90 lacs (stamp duty value same). The cost inflation index for PY 2018-19 was 280; PY 2019-20 was 289 and for PY 2020-21 is 301.
With reference to above, answer the following questions:
(i) Taxable income in the hands of X (Purchaser):
(a) ₹ 20 lacs
(b) ₹ 35 lacs
(c) ₹ 30 lacs
(d) Nil
Answer:
(b) ₹ 35 lacs
(ii) Taxable Capital gain in hands of Y (Seller):
(a) ₹ 20 lacs
(b) ₹ 35 lacs
(c) ₹ 50 lacs (Short Term)
(d) Nil
Answer:
(c) ₹ 50 lacs (Short Term)
(iii) Whether TDS is applicable U/s 194-IA?
(a) No
(b) Purchaser (X) is required to deduct tax
(c) Seller (Y) is required to deduct tax
(d) Both x and y are required to deduct tax
Answer:
(b) Purchaser (X) is required to deduct tax
(iv) Cost of acquisition of Plot for Mr. X in previous year 2020-21
(a) ₹ 140 lacs
(b) ₹ 160 lacs
(c) ₹ 175 lacs
(d) ₹ 145 lacs
Answer:
(c) ₹ 175 lacs
Question 2.
Mr. X, aged 58 years, was working in a company PQ Limited for past 26 years from where he retired on 30th June 2020 and joined another company SR Limited with effect from 1st July 2020.
I Income from PQ Limited for 3 months during previous year ending on 31st March 2021 [Assessment year 2021-22]
Basic salary ₹ 40,000 per month, Dearness Allowance ₹ 10,000 per month (forming part of basic salary); House rent allowance ₹ 8,000 per month; Actual rent paid ₹ 10,000 per month at Patna; Entertainment allowance ₹ 3,000 per month; Fixed medical allowance ₹ 2,000 per month; Provided sweeper, Gardner, servant, cook and Watchmen at salary of ₹ 2,000 per month each paid by employer. He received ₹ 2,86,000 from recognised
provident fund and ₹ 2,60,000 as gratuity on retirement.
II Income from SR Limited for 9 months during same previous year.
Basic salary ₹ 45,000 per month; Dearness Allowance ₹ 15,000 per month (Not part of salary); Rent free unfurnished house at Delhi (house is owned by employer). Employer provided him a car of 1.6 litre for official and personal both use. Mr. X is Paying 10% of his salary in recognised provident fund (Same contribution by employer). He paid medical insurance premium for self and spouse ₹ 30,000 and for senior citizen parents (Not dependent upon Mr. X) ₹ 60,000. Employer gives children hostel allowance for three children at the rate of ₹ 1,500 per month for each child. The company spent ₹ 12,000 for refresher course to Mr. X In respect of above information, mention correct answer:
(i) Taxable amount of house rent allowance in I:
(a) ₹ 5,000
(b) ₹ 9,000
(c) ₹ 8,000
(d) ₹ 10,000
Answer:
(b) ₹ 9,000
(ii) Taxable value of Rent-free house in II:
(a) ₹ 60,750
(b) ₹ 40,500
(c) ₹ 20,250
(d) ₹ 45,000
Answer:
(a) ₹ 60,750
(iii) Taxable amount of car perquisite in II:
(a) ₹ 18,000
(b) ₹ 16,200
(c) ₹ 21,600
(d) ₹ 10,800
Answer:
(b) ₹ 16,200
(iv) Deductible Medical Insurance Premium under section 80D in II:
(a) ₹ 60,000
(b) ₹ 90,000
(c) ₹ 75,000
(d) ₹ 50,000
Answer:
(c) ₹ 75,000
Question 3.
Ms. Chanchal, aged 45, provides the following data of her gross receipts for the financial years 2019-20 and 2020-21. She is engaged in agency business along with providing services as tarot card reader.
| Financial Year | Receipts from Business (₹) | Receipts from Profession (₹) | Total Gross Receipts (₹) |
| 2019 – 2020 | 78,00,000 | 43,00,000 | 1,21,00,000 |
| 2020 – 2021 | 85,00,000 | 47,00,000 | 1,32,00,000 |
During the F.Y. 2020-21, she paid an amount of ₹ 1,20,000 to a contractor for polishing her old furniture. She has taken services from renowned interior designers for her self-occupied residential house property for which she paid ₹ 2,50,000.
Further, on 28.05.2020 she sold one commercial property for ₹ 50,00,000. The value adopted for stamp duty was ₹ 52,00,000. It was purchased for ₹ 40,00,000 on 28.04.2018. (Cost Inflation Index for F.Y. 2020-21: 301, F.Y. 2018-19: 280).
The brought forward long-term capital loss from unlisted shares of F.Y. 2019-20 is ₹ 7,80,000. During the year, Ms. Chanchal incurred a loss of ₹ 70,00,000 while trading in the agricultural commodity derivatives (no CTT paid).
From the details given above, choose the most appropriate option to the questions given below: [RTP Nov. 2020]
(i) Is Ms. Chanchal liable to tax audit under the Income-tax Act, 1961 for the P.Y. 2020-21?
(a) Yes, as the total gross receipts exceeds ₹ 1,00,00,000.
(b) No, as the gross receipts from business or profession are below the specified threshold limits.
(c) Yes, as the gross receipts from business exceed ₹ 50,00,000.
(d) Yes, as the gross receipts from profession exceed ₹ 25,00,000.
Answer:
(b) No, as the gross receipts from business or profession are below the specified threshold limits.
(ii) What is the total amount of tax to be deducted by Ms. Chanchal for P.Y. 2020-21?
(a) ₹ 1,200
(b) ₹ 26,200
(c) Nil
(d) ₹ 27,400
Answer:
(c) Nil
(iii) What is the amount and nature of Capital gain chargeable to tax in the hands of Ms. Chanchal?
(a) ₹ 10,00,000 and Short-term capital gain
(b) ₹ 12,00,000 and Short-term capital gain
(c) ₹ 7,10,000 and Long-term capital gain
(d) ₹ 9,50,000 and Long-term capital gain
Answer:
(c) ₹ 7,10,000 and Long-term capital gain
(iv) What is the amount of losses which can be carried forward to A.Y. 2022-23, assuming that business income is ₹ 45,00,000 and income from profession is ₹ 25,00,000 for the P.Y. 2020-21?
(a) ₹ 7,80,000 under section 74
(b) ₹ 70,00,000 under section 73
(c) ₹ 30,000 under section 74
(d) ₹ 30,000 under section 74 and ₹ 70,00,000 under section 73
Answer:
(c) ₹ 30,000 under section 74
Question 4.
Mr. X (age 65 Years) has submitted following particulars of his income for previous year ending on 31.3.2021 (Assessment Year 2021-22):
| 1 | Income from salary (Computed) | 15,80,000 |
| 2 | Income from house property (Computed) | 1,60,000 |
| 3 | Short-term capital gain | 2,10,000 |
| 4 | Short-term capital loss | (-70,000) |
| 5 | Income from rural agricultural land | 4,00,000 |
| 6 | Interest from fixed deposit in bank | 1,65,000 |
| 7 | Net receipts from lottery after TDS 30% | 35,000 |
| 8 | Loss from owing and maintaining race houses | (-40,000) |
1. Life insurance premium ₹ 18,000 (Sum assured ₹ 2,00,000)
2. Repayment of housing loan prin-cipal ₹ 1,00,000
3. Deposit in PPF ₹ 50,000
4. Medical insurance premium for self ₹ 27,000
5. Medical insurance premium for senior citizen father ₹ 40,000
6. House rent paid at another city ₹ 1,84,000
You are required to answer the following:
(i) Net Taxable Income
(a) ₹ 20,95,000
(b) ₹ 18,80,000
(c) ₹ 18,40,000
(d) ₹ 22,80,000
Answer:
(b) ₹ 18,80,000
(ii) Deductions under section 80D
(a) ₹ 67,000
(b) ₹ 50,000
(c) ₹ 65,000
(d) ₹ 40,000
Answer:
(c) ₹ 65,000
(iii) Deductions under section 80GG
(a) ₹ 1,84,000
(b) ₹ 60,000
(c) ₹ 70,000
(d) Nil
Answer:
(d) Nil
(iv) Carried forward sums of :
(a) Short-term capital loss
(b) Loss from owing and main-taining race horses
(c) Under section 80C
(d) None
Answer:
(b) Loss from owing and main-taining race horses
Question 5.
Mr. A (aged 52 years), is a CEO of XYZ Enterprise Limited. During the previous year 2020-21, he earned salary of ₹ 1,65,00,000 and long-term capital gain on sale of listed equity shares amounting to ₹ 1,06,500. He earned interest of ₹ 4,82,778 on saving account.
Further, he has provided the following other information for filing his return of income:
He does not receive house rent allowance from his employer. Mr. A took a loan from State Bank of India on 27th October 2018 for repairing his house (self-occupied) at Delhi and paid interest on such borrowings of ₹ 80,000 and ₹ 1,50,000 towards principal amount during the previous year 2020-21.
Mr. A has made the following payments towards medical insurance premium for health policies taken for his family members:
Medical premium for his brother: ₹ 13,500 (by cheque)
Medical premium for his parents: ₹ 17,670 (by cheque)
Medical premium for self and his wife: ₹ 21,000 (by cheque).
He also incurred ₹ 6,400 towards preventive health check-up of his wife in cash. He deposited ₹ 1,00,000 towards PPF. He also deposited ₹ 50,000 and 2,50,000 towards Tier I and Tier IINPS A/c, respectively.
He has paid ₹ 5,30,000 as advance tax. His employer has deducted tax at source of ₹ 51,89,000. He is of the opinion the balance amount of tax, if any he will pay on 27 July 2021 (i.e. before the due date for filing of return of income).
From the details given above, choose the most appropriate option to the questions given below: [RTP Nov. 2020]
(i) Compute the amount of deduction available to Mr. A under Chapter VI-A for the assessment year 2021-22 :
(a) ₹ 2,04,070
(b) ₹ 1,93,670
(c) ₹ 2,52,670
(d) ₹ 2,43,670
Answer:
(d) ₹ 2,43,670
(ii) Assuming Mr. A pays rent of ₹ 65,000 per month for his rented house at Mumbai to Mr. C, a resident individual, is Mr. A liable to deduct TDS on such rent. If so, what would be the rate and amount of TDS?
(a) Yes, Mr. A is liable to deduct TDS @5% amounting to ₹ 3,250 every month ie., at the time of payment of such rent
(b) Yes, Mr. A is liable to deduct TDS @10% amounting to ₹ 6,500 every month ie., at the time of payment of such rent
(c) Yes, Mr. A is liable to deduct TDS @5% amounting to ₹ 39,000 in the month of March 2021
(d) No, Mr. A is not liable to deduct TDS, since he is not required to get his books of account audited under section 44AB
Answer:
(c) Yes, Mr. A is liable to deduct TDS @5% amounting to ₹ 39,000 in the month of March 2021
(iii) What would be the amount of net tax payable for the assessment year 2021-22 in the hands of Mr. A?
(a) Tax payable of ₹ 78,230
(b) Tax payable of ₹ 60,290
(c) Tax payable of ₹ 49,530
(d) Tax payable of ₹ 67,470
Answer:
(c) Tax payable of ₹ 49,530
(iv) Compute the amount of interest chargeable under section 234B on account of short payment of advance tax:
(a) ₹ 1,980
(b) ₹ Nil
(c) ₹ 3,130
(d) ₹ 2,410
Answer:
(b) ₹ Nil
Question 6.
Mr. X has filed his return of income for previous year ending on 31-3-2021 (Assessment Year 2021-22).
| 1 | Income from salary (Computed) | 3,10,000 | |
| 2 | Income from house property (computed) | ||
| “House A” income | 75,000 | ||
| “House B” income | 55,000 | ||
| “House C” loss | -3,80,000 | -2,50,000 | |
| 3 | Profits and gains of business or profession: | ||
| Normal Business A | 1,60,000 | ||
| Normal Business B | 1,40,000 | ||
| Normal Business C loss | -90,000 | 2,10,000 | |
| Speculative Business D | 35,000 | ||
| Speculative Business E loss | -80,000 | -45,000 | |
| 4 | Long term capital gain | 1,70,000 | |
| Short term capital gain | 2,00,000 | ||
| Short term capital Loss | -2,50,000 | -50,000 | |
| 5 | Income from other sources | ||
| Income from owing and maintaining Race horses | 40,000 | ||
| Loss from owing and maintaining Race horses | -70,000 | -30,000 | |
| Income from Card Games | 15,000 | ||
| Loss from card games | -10,000 | 5,000 |
From above particulars, You are required to answer the following:
(i) Loss from house property to be carried forward
(a) ₹ 2,50,000
(b) ₹ 3,80,000
(c) ₹ 50,000
(d) Nil
Answer:
(c) ₹ 50,000
(ii) Speculative business loss to be carried forward
(a) ₹ 80,000
(b) ₹ 45,000
(c) ₹ 35,000
(d) Nil
Answer:
(b) ₹ 45,000
(iii) Short term capital loss to be carried forward
(a) ₹ 2,50,000
(b) ₹ 50,000
(c) ₹ 1,20,000
(d) Nil
Answer:
(d) Nil
(iv) Loss from owing and maintaining race horses to be carried forward
(a) ₹ 80,000
(b) ₹ 30,000
(c) ₹ 25,000
(d) Nil
Answer:
(b) ₹ 30,000
Question 7.
Mr. Sarthak (age 37 years) a share broker, sold a building to his friend Anay, who is a dealer in automobile spare parts, for ₹ 120 lakh on 10-11-2020, when the stamp duty value was ₹ 150 lakh. The agreement was, however, entered into on 1.9.2020 when the stamp duty value was 1140 lakh. Mr. Sarthak had received a down payment of ₹ 15 lakh by a crossed cheque from Anay on the date of agreement. Mr. Sarthak purchased the building for ₹ 95 lakh on 10-5-2018. Further, Mr. Sarthak also sold an agricultural land (situated in a village which has a population of 5,800) for ₹ 60 lakhs to Mr. Vivek on 1-3-2021, which he acquired on 15.06.2015 for ₹ 45 lakhs, Stamp duty value of agricultural land as on 1.3.2021 is ₹ 75 lakhs.
CII for F.Y. 2015-16 is 254; F.Y. 2018-19 = 280; F.Y. 2020-21 = 301.
In the light of the above facts, you are required to answer the following: [RTP May 2020]
(i) Is there any requirement to deduct tax at source on consideration paid or payable on transfer of building and agricultural land?
(a) No; no tax is required to be deducted at source on transfer of any capital asset
(b) Yes; Mr. Anay is required to deduct tax at source under section 194-IA.
(c) Yes; Mr. Sarthak is required to deduct tax at source under section 194-IA.
(d) Yes; Mr. Vivek is required to deduct tax at source under section 194-IA.
Answer:
(b) Yes; Mr. Anay is required to deduct tax at source under section 194-IA.
(ii) In respect of transfer of building, capital gains chargeable to tax in the hands of Mr. Sarthak would be –
(a) Long-term capital gains of ₹ 47,87,500
(b) long-term capital gains of ₹ 39,06,250
(c) Short-term capital gains of ₹ 45,00,000
(d) Short-term capital gains of ₹ 55,00,000
Answer:
(a) Long-term capital gains of ₹ 47,87,500
(iii) Assuming that Mr. Sarthak has other income exceeding basic exemption limit, the tax payable (excluding surcharge and health and education cess) on transfer of building and agricultural land, would be –
(a) ₹ 7,81,250
(b) ₹ 13,97,500
(c) ₹ 9,57,500
(d) ₹ 10,97,500
Answer:
(c) ₹ 9,57,500
(iv) In respect of purchase of building from Mr. Sarthak, income charge-able to tax in the hands of Mr. Anay would be-
(a) ₹ 20 lakh
(b) ₹ 30 lakhs
(c) ₹ 15 lakhs
(d) ₹ Nil
Answer:
(b) ₹ 30 lakhs
Question 8.
Mr. X has submitted following particulars of his income for previous year ending on 31.3.2021 (Assessment Year 2021-22):
| 1 | Actual rent received from house property “A” | 1,80,000 |
| 2 | Expenses incurred on repairs of self-occupied house “B” | 60,000 |
| 3 | Income from profession of Chartered Accountancy (computed) | 12,55,000 |
| 4 | He owned a part of property in a commercial complex which he purchased on 1-4-2015 for ₹ 10,00,000. He sold it on 31-03-2021 for ₹ 17,00,000 (Stamp duty value ₹ 20,00,000). Cost inflation index for PY 2015-2016=254; PY 2020-21=301. | |
| 5 | Brought forward long term capital loss for PY 2017-2018 | -3,80,000 |
| 6 | Income from gambling | 75,000 |
| 7 | Loss from gambling | -90,000 |
| 8 | He incurred ₹ 42,000 on medical treatment and maintenance of a dependent relative having 40% disability under section 80DD. |
You are required to answer the following:
(i) Taxable Income from house property
(a) ₹ 1,20,000
(b) ₹ 96,000
(c) ₹ 66,000
(d) ₹ 84,000
Answer:
(b) ₹ 96,000
(ii) Amount of taxable long term capital gain
(a) ₹ 5,14,961
(b) ₹ 7,00,000
(c) ₹ 1,34,961
(d) Nil
Answer:
(c) ₹ 1,34,961
(iii) Amount of Deduction under section 80DD
(a) ₹ 42,000
(b) ₹ 75,000
(c) ₹ 1,25,000
(d) Nil
Answer:
(b) ₹ 75,000
(iv) Taxable income of Mr. X
(a) ₹ 14,85,960
(b) ₹ 16,95,960
(c) ₹ 16,80,960
(d) ₹ 16,53,960
Answer:
(a) ₹ 14,85,960
Question 9.
Mr. Hardik (age 45 years) is appointed as senior executive officer in Sky India Limited, Mumbai on 01.02.2020 in the scale of ₹ 35,000-3500-65,000. He is paid dearness allowance @ 40% of salary forming part of retirement benefits.
He is given rent free unfurnished accommodation on 01.5.2020 which he occupied only from 01.10.2020. The company pays lease rent of 5,000 p.m. He has been provided a car of 2000 cc capacity which is used by him for private purposes only. The actual cost of the car is ₹ 8,00,000. The monthly expenditure of car is ₹ 5,000, which is fully met by the employer.
He pays lump sum premium of ₹ 1,50,000 towards health insurance for self and his wife for 48 months on 01.10.2020 by account payee cheque. He also contributes ₹ 1,50,000 towards PPF.
In the light of above facts, you are required to answer the following: [Mock Test Paper- May 2020 Series]
(i) Value of rent-free accommodation chargeable to tax in the hands of Mr. Hardik, would be :
(a) ₹ 44,835
(b) ₹ 44,100
(c) ₹ 45,570
(d) ₹ 44,100
Answer:
(d) ₹ 44,100
(ii) Mr. Hardik would be eligible for deduction in respect of health in-surance premium paid during the previous year 2020-21, for :
(a) ₹ 30,000
(b) ₹ 18,750
(c) ₹ 25,000
(d) ₹ 37,500
Answer:
(c) ₹ 25,000
(iii) Perquisite value of car chargeable to tax in the hands of Mr. Hardik would be :
(a) ₹ 28,800
(b) ₹ 21,600
(c) ₹ 60,000
(d) ₹ 1,40,000
Answer:
(d) ₹ 1,40,000
Question 10.
Mr. Rajesh Sharma, aged 54 years, an Indian citizen, is working as Assistant Manager in ABC India Ltd. He is getting basic salary of ₹ 58,000 per month. He used to travel frequently out of India for his office work. He left India from Delhi Airport on 5th Oct, 2020 and returned to India on 2nd April, 2021.
For previous year 2020-21, following . information are relevant:
(a) Dearness Allowance -10% of Basic Pay (considered for retirement purposes)
(b) Bonus – ₹ 98,000
(c) Medical allowance paid during P. Y. 2020-21 amounting to ₹ 60,000
(d) He was also reimbursed medical bill of his mother amounting to ₹ 15,000.
(e) He was also transferred a laptop by company for ₹ 15,000 on 31st Dec. 2020. The laptop was acquired by company on 1st Oct., 2017 for ₹ 1,00,000. Company was charging depreciation at 31.666% assuming useful life of laptop as 3 years.
(f) He was also reimbursed salary of house servant of ₹ 4,000 per month during P.Y. 2020-21.
(g) Professional Tax paid by employer during P.Y. 2020-21 amounting to ₹ 2,400.
(h) 400 equity shares allotted by ABC India Ltd. during P.Y. 2020-21 at the rate of ₹ 250 per share against fair market value of share of ₹ 350 on the date of exercise of option.
(i) Short-term capital gain on sale of shares of listed company on which STT is paid amounting to ₹ 94,000.
(j) Mr. Rajesh was also found owner of ₹ 5 lakh worth jewellery, of which he could not provide any satisfactory explanation.
Based on the above information, choose the most appropriate option of the following Multiple Choice Questions (MCQs) for A.Y. 2021-22:- [Mock Test Paper- October 2020 Series]
(i) What is Mr. Rajesh Sharma’s resi-dential status for the A.Y. 2021 -22?
(a) Resident but can’t determine resident and ordinarily resident or resident but not ordinarily resident from the given information
(b) Non-Resident
(c) Resident but not ordinarily resident
(d) Resident and ordinarily resident
Answer:
(a) Resident but can’t determine resident and ordinarily resident or resident but not ordinarily resident from the given information
(ii) What is his taxable perquisite for A.Y. 2021-22?
(a) ₹ 55,000
(b) ₹ 90,400
(c) ₹ 1,05,400
(d) ₹ 1,90,400
Answer:
(c) ₹ 1,05,400
(iii) What is the income chargeable under the head “Salaries” in the hands of Mr. Rajesh Sharma for A.Y. 2020-21?
(a) ₹ 9,76,000
(b) ₹ 9,86,600
(c) ₹ 9,71,600
(d) ₹ 9,61,600
Answer:
(a) ₹ 9,76,000
(iv) The total tax liability of Mr. Rajesh Sharma for A.Y. 2021-22 is
(a) ₹ 5,16,800
(b) ₹ 5,18,880
(c) ₹ 4,38,800
(d) ₹ 4,40,880
Answer:
(c) ₹ 4,38,800