{"id":19083,"date":"2023-03-29T10:04:20","date_gmt":"2023-03-29T04:34:20","guid":{"rendered":"https:\/\/gstguntur.com\/?p=19083"},"modified":"2023-03-29T10:05:08","modified_gmt":"2023-03-29T04:35:08","slug":"deductions-from-gross-total-income-ca-final-dt-question-bank","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/deductions-from-gross-total-income-ca-final-dt-question-bank\/","title":{"rendered":"Deductions from Gross Total Income \u2013 CA Final DT Question Bank"},"content":{"rendered":"

Deductions from Gross Total Income \u2013 CA Final DT Question Bank<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Deductions from Gross Total Income \u2013 CA Final DT Question Bank<\/h2>\n

Question 1.
\nGurudev Engineers Pvt. Ltd. is running an industrial undertaking whose profits are eligible for deduction u\/s 80-IA. During the year ended 31.03.2021, the undertaking was engaged in eligible business referred to in section 80-IA(4), which however, consisted solely of executing works contract awarded by the State Government. Is the assessee eligible to claim deduction u\/s 80-IA(4) in respect of profits derived from this undertaking? [CA Final May 2010] [2 Marks]
\nAnswer:
\nSection 80-IA(l) provides a ten year tax holiday in respect of profits and gains derived by an undertaking or an enterprise from an eligible business i.e., business referred to in sub-section (4).<\/p>\n

The Explanation to the said section clarifies that the tax holiday u\/s 80-IA would not be available in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the C.G. and S.G.) and executed by the undertaking or enterprise referred to in section 80-IA(1).<\/p>\n

Therefore, the assessee cannot claim deduction u\/s 80-IA(4) in respect of the profits derived from this undertaking for the A.Y. 2021 -22, since, during the year ended 31.3.2021, the undertaking was solely engaged in executing works contract awarded by the State Government.<\/p>\n

\"Deductions<\/p>\n

Question 2.
\nFollowing issues have been raised by Navi Limited in connection with its eligibility for claiming deduction under section 80-IB for your consideration and advice for the assessment year 2021 -22:
\n(i) It operates two separate industrial units. One unit is eligible for deduction under section 80-IB, while the other unit is not eligible for such deduction. If the eligible unit has profit and the other unit has loss, should it claim deduction after setting off the loss of the other unit against profit of the eligible unit?<\/p>\n

(ii) Its profit from one unit includes sale of import entitlement, duty drawback and interest from customers for delayed payment. Is it permissible to claim deduction on these items of income? [CA Final May 2010] [7Marks]
\nAnswer:
\n(i) Section 80-IB(13) provides that the provisions contained in section 80-IA(5) shall, so far as may be, apply to the eligible business u\/s 80-IB. Accordingly, for the purpose of computing the deduction under section 80-IB, the profits and gains of an eligible business shall be computed as if such eligible business was the only source of income of the assessee. Therefore, Navi Limited should claim deduction under section 80-IB on profit from the eligible unit without setting off loss suffered in the other unit. It may be noted that the aggregate deduction under Chapter VIA, however, cannot exceed the gross total income of the assessee.<\/p>\n

(ii) Under section 80-IB, where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking referred to in the section, there shall be allowed, in computing the total income of the assessee, a deduction from such profits and gains at the specified percentage and for such number of years as specified in the section. In CIT vs. Sterling Foods (1999)(SQ and Liberty India vs. CIT2009)(SQ), it was held that sale of import entitlement and duty drawback cannot be construed as income derived from industrial undertaking. Therefore, such income cannot be included in computing income for the purpose of deduction under section 80-IB.<\/p>\n

Interest income derived by an undertaking on delayed collection of sale proceeds shall be treated as income derived from the industrial undertaking, and therefore, the same would be eligible for deduction under section 80-IB.<\/p>\n

\"Deductions<\/p>\n

Question 3.
\nMadhvi, a resident individual and self-employed, furnished the following particulars for year ended 31-03-2021:<\/p>\n\n\n\n\n\n\n\n
<\/td>\n\u20b9<\/td>\n<\/tr>\n
Gross total income<\/td>\n6,00,000<\/td>\n<\/tr>\n
Housing loan principal repayment. The property is under construction at Jaipur as on 31-3-2021.<\/td>\n1,10,000<\/td>\n<\/tr>\n
Principal repayment of housing loan from a relative. This property is self-occupied situated at Jodhpur.<\/td>\n50,000<\/td>\n<\/tr>\n
Contribution to Public Provident Fund in the name of her mother.<\/td>\n70,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

She deposited \u20b9 15,000 per month in her account under a pension scheme notified by the Central Government.<\/p>\n

Compute total income of Ms. Madhvi for the Assessment Year 2021-22 stating reasons for the deduction eligible under appropriate provisions of Chapter VI-A. [CA Final Nov. 2011] [5 Marks]
\nAnswer:
\nComputation of total income of Ms. Madhvi for the A.Y. 2021-22
\n\"Deductions<\/p>\n

Notes:
\n(i) As per section 80C, the deduction for principal repayment of housing loan is provided only in respect of a house property whose income is chargeable to tax under the head \u2018Income from house property\u2019. As the house property at Jaipur is still under construction, no income is chargeable to tax under the head \u201cIncome from house property\u201d. Hence, no deduction would be available under section 80C for principal repayment of the housing loan for property under construction.<\/p>\n

(ii) The deduction for principal repayment of housing loan under section 80C is provided only in respect of the loan taken from the specified institutions (like banks, Life Insurance Corporation of India, National Housing Bank, specified employer etc.). Thus, loan from, a relative does not qualify for deduction u\/s 80C.<\/p>\n

(iii) The contribution to public provident fund (PPF) is allowed as deduction only if it is in the name of specified persons mentioned in section 80C, namely, self, spouse or any child of such individual. Since mother of the individual is not a specified person as per section 80C, no deduction would be available.<\/p>\n

(iv) The deduction u\/s80CCD(1) shall be an amount not exceeding 20% of the gross total income for a self-employed individual. Therefore, Ms. Madhvi shall be allowed deduction of \u20b9 1,20,000 (\u20b9 6,00,000 X 20%).<\/p>\n

(v) The total amount deposited to pension scheme notified by the Central Government is \u20b9 1,80,000 (\u20b9 15,000 \u00d7 12 months). Out of which \u20b9 1,20,000 has been claimed as deduction u\/ s 80CCD(1). So for remaining \u20b9 60,000, Ms. Madhvi is eligible for additional deduction to the extent of \u20b9 50,000 u\/s 80CCD(1B) in respect of such amount deposited.<\/p>\n

\"Deductions<\/p>\n

Question 4.
\nA company which is entitled to claim deduction under section 80-IB has received duty drawback under a scheme framed by the Central Government under the Customs Act, 1962. Can such duty drawback form part of the profit of eligible undertaking for the purpose of deduction u\/s 80-IB? [CA Final Nov. 2012] [3 Marks]
\nAnswer:
\nSection 80-IB provides for allowing deduction in respect of profits and gains derived from eligible business of the industrial undertaking. The issue under consideration is whether duty drawback can be regarded as \u201cprofits and gains derived from eligible business of the industrial undertaking\u201d.<\/p>\n

For a receipt to be treated as having been \u201cderived from” the industrial undertaking, the same should be directly and inextricably connected with the business of the industrial undertaking. The connection should be direct and not remote.<\/p>\n

The facts of the case are similar to the facts in Liberty India v. CIT (2009), where the Supreme Court held that export incentives like duty drawback receipts, DEPB benefits are on account of statutory provisions or schemes framed by the Central Government and do not form part of profits of the eligible undertaking for the purposes of Sec. 80-IA and 80-IB.<\/p>\n

Applying the same rationale to the present case, duty drawback would not form part of profit of eligible undertaking for the purpose of deduction under section 80-IB.<\/p>\n

\"Deductions<\/p>\n

Question 5.
\nMr. K, who has attained 63 years, has the following income during the previous year 2020-21:<\/p>\n

    \n
  • Salary Income (computed) \u20b9 6,80,000<\/li>\n
  • Interest on savings bank account with Allahabad Bank \u20b9 16,000<\/li>\n<\/ul>\n

    Other particulars given by Mr. K are as under:<\/p>\n

      \n
    1. Insurance premium paid to Max Life Insurance Ltd. amounting to \u20b9 25,000 under a policy taken on life of his son. The policy was taken on 20th July, 2011 and the sum assured is \u20b9 1,80,000.<\/li>\n
    2. Insurance premium paid to Life Insurance Corporation of India amounting to \u20b9 22,000 under a policy taken on his life on 20th April, 2014 and the sum assured is \u20b9 2,00,000.<\/li>\n
    3. Premium of \u20b9 48,000 paid by cheque on health insurance for self to Central Government Health Scheme and payment in cash of ? 5,000 to a hospital for preventive health check-up for self.<\/li>\n<\/ol>\n

      Compute the total income of Mr. K for Assessment Year 2021-22 on the basis of the above particulars. [CA Final May 2013] [6 Marks]
      \nAnswer:
      \nComputation of Total Income of Mr. K for the A.Y. 2021-22
      \n\"Deductions<\/p>\n

      Notes:
      \n(1) Mr. K can claim deduction u\/s 80C in respect ol insurance premium paid by him in respect of a policy taken on the life of his son. Since the policy was issued before 1.4.2012, the premium paid shall be allowed as deduction upto 20% of sum assured (i.e., upto \u20b9 36,000, being 20% of \u20b9 1,80,000). Since the insurance premium of \u20b9 25,000 paid is within this limit, the same is fully allowable as deduction u\/s 80C.<\/p>\n

      (2) In respect of premium of \u20b9 22,000 paid by Mr. K to LIC under an insurance policy taken on his own life, the deduction u\/s 80C would be restricted to 10% of sum assured, since the premium is paid in respect of a life insurance policy taken on or after 1.4.2012. Therefore, the deduction under section 80C in respect of this policy would be restricted to \u20b9 20,000, being 10% of \u20b9 2,00,000.<\/p>\n

      (3) Deduction u\/s 80D is allowable in respect of health insurance premium paid by any mode other than cash and expenses on preventive health check-up (upto \u20b9 5,000) paid by any mode, including cash. Therefore, both the premium of \u20b9 48,000 paid by cheque and preventive health check-up of \u20b9 5,000 paid by cash qualifies for deduction u\/s 80D. However, the deduction would be restricted to \u20b9 50,000, which is the overall limit u\/s 80D in respect of an individual, who is of the age of 60 years or more at any time during the previous year.<\/p>\n

      (4) As per section 80TTB, deduction shall be allowed from the gross total income of an individual who is a senior citizen in respect of income by way of deposit in the savings bank account included in the assessee\u2019s gross total income, subject to a maximum of \u20b9 50,000.<\/p>\n

      \"Deductions<\/p>\n

      Question 6.
      \nX Ltd. has two units, unit \u2018N\u2019 and unit \u2018Y\u2019. Unit \u2018N’ engaged in the business of power generation installed a windmill and had a profit of \u20b9 100 lakhs in A.Y. 2021-22. X Ltd. has claimed depreciation of \u20b9 120 lakhs on windmill against the profit of \u20b9 100 lakhs from power generation business which was eligible for deduction u\/s 80-IA. Unit \u2018Y engaged in manufacturing of wires, non-eligible business, had a profit of \u20b9 70 lakhs for A.Y. 2021-22.<\/p>\n

      The loss of \u20b9 20 lakhs, i.e. balance depreciation not set off pertaining to unit ‘NT’ was set-off against the profits of unit \u2018Y\u2019 carrying on non-eligible business, by the assessee, X Ltd. The A.O. was of the view that depreciation relating to a business eligible for deduction u\/s 80-IA cannot be set-off against non-eligible business income. Hence, unabsorbed depreciation should be carried forward to the subsequent year to be set off against eligible business income of the assessee of that year. Give your views on the correctness of the action of the A.O.[C4 Final Nov. 2014] [4 Marks]
      \nAnswer:
      \nThe facts of the case are similar to the facts in CIT v. Swarnagiri Wire Insulations Pvt. Ltd. (2012), the Karnataka High Court observed that it is a generally accepted principle that the deeming provision of a particular section cannot be breathed into another section. Therefore, the deeming provision contained in section 80-IA(5) cannot override the provisions of section 70(1).<\/p>\n

      Where the assessee incurs loss in eligible business on account of claiming depreciation, section 80-IA becomes insignificant, since there is no profit from which this deduction can be claimed. It is thereafter that section 70(1) comes into play, whereby an assessee is entitled to set oil the losses from one source against income from another source under the same head of income.<\/p>\n

      Therefore, the court held that the assessee was entitled to the benefit of set off of loss of eligible business against the profits of non-eligible business. However, once set-off is allowed under section 70(1) against income from another source under the same head, a deduction to such extent is not possible in any subsequent assessment year i.e., the loss (arising on account of balance depreciation of eligible business) so set-oil under section 70(1) has to be first deducted while computing profits eligible for deduction under section 80-IA in the subsequent year.<\/p>\n

      In this case, X Ltd. had incurred loss in eligible business (power generation) on account of claiming depreciation of \u20b9 120 lakhs. Accordingly, X Ltd. is entitled to the benefit of set off of loss of \u20b9 20 lakhs (representing balance depreciation not set-off) pertaining to Unit N engaged in eligible business of power generation against profit of \u20b9 70 lakhs of Unit Y carrying on non-eligible business. Therefore, the net profit of \u20b9 50 lakhs would be taxable in the A.Y. 2021-22. Also, in the A.Y. 2022-23, the net profits of Unit N have to be reduced by \u20b9 20 lakhs for computing the profits eligible for deduction under section 80-IA in that year.<\/p>\n

      Therefore, the action of the Assessing Officer in not permitting set-off of loss of eligible business against profits of non-eligible business in this case is, therefore, not correct.<\/p>\n

      \"Deductions<\/p>\n

      Question 7.
      \nWith brief reasons answer the following in terms of Chapter VI-A of, the Income-tax Act, 1961:
      \n(1) Mr. Jaju deposited \u20b9 65,000 with Life Insurance Corporation for the maintenance of his mother who suffers from disability of 90%. She is wholly dependent on him. How much is deductible?
      \n(2) Mr. Shiva has gross total income of \u20b9 3,75,000. Compute deduction available u\/s 80G<\/p>\n\n\n\n\n\n\n\n
      Donations made to<\/td>\n\u20b9<\/td>\nPayment mode<\/td>\n<\/tr>\n
      National Children\u2019s Fund<\/td>\n25,000<\/td>\nBy cheque<\/td>\n<\/tr>\n
      Prime Minister\u2019s Drought Relief Fund<\/td>\n30,000<\/td>\nBy cheque<\/td>\n<\/tr>\n
      National Blood Transfu\u00adsion Council<\/td>\n40,000<\/td>\nBy cash<\/td>\n<\/tr>\n
      National Illness Assistance Fund<\/td>\n4,000<\/td>\nEqually by cash and cheque.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

      (3) Mr. Manoj, a computer software engineer, co-authored a book on advanced computer programming along with his friend. He received \u20b9 4,10,000 as lump sum royalty in March, 2021. How much of royalty is taxable? [CA Final May 2015] [6 Marks]
      \nAnswer:
      \n(1) As per Sec. 80DD, an assessee would be eligible I or deduction u\/s 80DD for the amount paid or deposited under a scheme framed by LIC or an v other insurer approved by the CBDT in respect of medical treatment including nursing, training and rehabilitation for the maintenance of a dependent relative with disability. The amount of deduction shall be \u20b9 75,000 [FLAT] (in case of severe disability \u20b9 1,25,000 [FLAT]), irrespective of actual amount of expenditure incurred on maintenance or treatment.<\/p>\n

      In this case, Mr. Jaju would be eligible for deduction u\/s 80DD in respect of amount deposited with LIC for maintenance of his mother. As his mother is suffering from severe disability (i.e. 80% or more of one or more disabilities) and is wholly dependent on him, he would be eligible for deduction of \u20b9 1,25,000.<\/p>\n

      \"Deductions<\/p>\n

      (2) Mr. Shiva would be eligible for deduction u\/s 80G in respect of the donations as follows:<\/p>\n\n\n\n\n\n\n\n
      Donation to<\/td>\nDona\u00adtion (\u20b9)<\/td>\nMode of donation<\/td>\nDonation eligible for Deduction (%)<\/td>\nDeduction (\u20b9)<\/td>\n<\/tr>\n
      National Children\u2019s Fund<\/td>\n25,000<\/td>\nCheque<\/td>\n100%<\/td>\n25,000<\/td>\n<\/tr>\n
      Prime Minister’s Drought\u00a0 Relief Fund<\/td>\n30,000<\/td>\nCheque<\/td>\n50%<\/td>\n15,000<\/td>\n<\/tr>\n
      National Blood Transfusion Coun\u00adcil<\/td>\n40,000<\/td>\nCash<\/td>\n100%<\/td>\nNil (as cash donation in excess of \u20b9 2,000 disqualifies entire deduction)<\/td>\n<\/tr>\n
      National Illness As\u00adsistance Fund<\/td>\n20,000<\/td>\n\u20b9 2,000 by cheque \u20b9 2,000 by\u00adcash.<\/td>\n100%<\/td>\n4,000 (The whole amount qualities for deduction, since cash donation in this case- does not exceed \u20b9 2,000)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

      Notes:<\/p>\n

        \n
      • All the above investments made are eligible for deduction u\/s ; 80G without any limit of 10% of adjusted Gross total income.<\/li>\n
      • Cash donations exceeding \u20b9 2,000 are not eligible for deduction under section 80G.<\/li>\n<\/ul>\n

        (3) Mr. Manoj is eligible for deduction from gross total income u\/s 80QQB, for the income derived by him on account of any lump sum consideration in the form of royalty in respect of a book, being a work of literary or scientific nature.<\/p>\n

        As the book on Advanced computer programming would fall within the description of work of literary or scientific nature, he is eligible for deduction of \u20b9 3,00,000 or actual amount of royalty received, whichever is less.
        \nHence, Royalty of \u20b9 1,10,000 is taxable.<\/p>\n

        Note: It has been assumed that Mr. Raju, Mr. Jaju and Mr. Manoj arc resident Indians.<\/p>\n

        \"Deductions<\/p>\n

        Question 8.
        \nVKS Ltd. is engaged in developing, operating and maintaining infrastructure facility, which qualifies for deduction u \/ s 80-IA of the Income-Tax Act. The company is also engaged in producing cement. Business of the infrastructure facility was commenced in the financial year 2017-18. During the financial years 2018-19, 2019-20 and 2020-21 profits\/losses of the two businesses are as follows:<\/p>\n\n\n\n\n\n\n
        Financial Year<\/td>\nInfrastructure facility<\/td>\nCement manufacturing<\/td>\n<\/tr>\n
        2018-19<\/td>\n(-) 100<\/td>\n120<\/td>\n<\/tr>\n
        2019-20<\/td>\n60<\/td>\n140<\/td>\n<\/tr>\n
        2020-21<\/td>\n75*<\/td>\n100<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

        * includes freight subsidy of \u20b9 10 lakhs under the scheme of the Central Government<\/p>\n

        Further Information:
        \n(i) Cement manufacturing unit transferred cement of certain quality for an aggregate price of \u20b9 20 lakhs. Similar quantity was sold to outside customers for \u20b9 25 lakhs.
        \n(ii) Profit of infrastructure facility business for financial year 2019-20 has been arrived at after charging purchase of consumable stores amounting to \u20b9 10 lakhs from RR Ltd., a subsidiary company of VKS Ltd. as against fair market value of such items amounting to \u20b9 7 lakhs.<\/p>\n

        Compute the amount admissible as deduction under section 80-IA for A.Y. 2021-22. Give working notes and the reasons in the context of statutory provisions for giving treatment to each of the items. [CA Final Nov 2017] [6 Marks]
        \nAnswer:
        \nComputation of the taxable profit and amount admissible as deduction u\/s 80-IA
        \n\"Deductions
        \nTherefore, the amount admissible as deduction under section 80-IA is \u20b9 30 lakh.<\/p>\n

        Notes:
        \n1. As per Sec. 80-IA(5) for the purpose of computing deduction under this section, the profits and gains of the eligible business shall be computed as if such eligible business were the only source of income of the assessce during the relevant previous years.<\/p>\n

        Accordingly, the loss incurred in F.Y. 2018-19 would have been set off against profit from cement unit in that same year while preparing income tax computation for F.Y. 2018-19. But, for the purpose of computation of profit of the eligible business admissible for deduction u\/s 80-IA for subsequent years, we have to consider that the loss of \u20b9 100 lakh is carried forward in the next years. Now, in subsequent years, the entire profit of eligible business will not be admissible for deduction u\/s 80-IA but only balance profit, if any, after set off of this loss would be eligible for deduction.<\/p>\n

        Thus, in the given question, tor computing the profit eligible for deduction u\/s 80-IA, loss of \u20b9 100 for F.Y. 2018-19 will be considered
        \nto be set off to the extent of \u20b9 60 lakh in F.Y. 2019-20 and balance of \u20b9 40 lakhs against profit of F.Y. 2020-21.<\/p>\n

        \"Deductions<\/p>\n

        As per Sec. 80-IA(8), where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer had been made at the market value of such goods or services as on that date. Since, in the given case, we have made inter-unit purchase of cement at the value less than the market value by \u20b9 5 lakh, the excess profit of eligible unit will not be considered while computing profit of such eligible business for the purpose of deduction u\/s 80:IA.<\/p>\n

        A similar adjustment needs to be done u\/s 80-IA(10) in case of transaction in goods or services with an assessee having close connection with the assessee. In the given case, we have purchased consumable stores from Subsidiary Company. However, the said transaction has not inflated the profit of eligible business but has rather reduced the profit. And so the same shall be disallowed u\/s 40A(2) but no adjustment needs to be done for computing profit of such eligible business for the purpose of deduction u\/s 80-IA.<\/p>\n

        So, out of the profit of \u20b9 75 lakh of the eligible business, the profit of the eligible business for the purpose of deduction would be only \u20b9 70 lakh after adjustment of excess profit of \u20b9 5 lakh as per 80-IA(8). Now, we will have to first set off the balance loss of F.Y. 2017-18 of 40 lakh against this amount of 70 lakh and therefore profit eligible for deduction u\/s 80-IA would be only \u20b9 30 lakh.<\/p>\n

        Quantum of deduction u\/s 80-IA is 100% of the profit eligible for deduction for 10 consecutive assessment years out of initial 20 assessment years. So, 100% of \u20b9 30 lakh i.e. \u20b9 30 lakh would be the amount admissible as deduction u\/s 80-IA.<\/p>\n

        2. The Supreme Court, in CIT v. Meghalaya Steels Ltd. (2016), has held that the freight subsidy arising out of the scheme of Government can be treated as a \u201cProfit derived from the business\u201d for the purpose of section 80-IA. Thus, freight subsidy of \u20b9 10 lakh would form part of the profit eligible for deduction u\/s 80-IA.<\/p>\n

        \"Deductions<\/p>\n

        Question 9.
        \nGovind Charitable Trust registered u\/s 12AA is engaged in imparting Yoga to the public. Its aggregate annual receipt was \u20b9 60 lakhs and it spent only \u20b9 40 lakhs by way of remuneration to Yoga teachers and by way of administration expenses. The trust applied for approval u\/s 80G to the CIT. The application was rejected on the ground that it had not spent 85% of its income for charitable purposes. Decide the validity of the rival contentions. [CA Final May 2018 (Old & New Syllabus)] [4 Marks]
        \nAnswer:
        \nThe issue under consideration is whether the Commissioner can reject an application for grant of approval u\/s 80G on the ground that the trust has failed to apply 85% of its income for charitable purposes.<\/p>\n

        The facts of the case are similar to the case of CIT v. Shree Govindbhai Jethalal Nathavani Charitable Trust (2015), where the Gujarat High Court has referred to its own decision in the case of N.N. Desai Charitable Trust v. CIT (2000) in which it was observed that, while considering the application for the purpose of Section 80G, the authority cannot act as an assessing authority and the enquiry should be confined to finding out if the institution satisfies the prescribed conditions.<\/p>\n

        The High Court also observed that Sec. 80G does not relate to assessment of the trust or the institution whose income is not liable to be included in the computation of taxable income under various provisions of the Act instead it is related to giving deduction in respect of donations made by a person to such trusts and institutions. The High Court, therefore, set aside the order passed by the Commissioner refusing to grant registration u\/s 80G(5) to the assessee-trust due to the reason that it has not applied 85% of its income for charitable purposes.<\/p>\n

        By applying the Gujarat High Court decision in this case, the action of the Commissioner to reject the application on the ground that it had not spent 85% of its income [or charitable purposes is not valid.<\/p>\n

        \"Deductions<\/p>\n

        Question 10.
        \nThe Gross Total Income of Mr. Bharadwaj who is a resident of Varanasi for the year ended 31-03-2021 is \u20b9 15 lakhs.
        \nFurther:<\/p>\n

          \n
        1. He has contributed \u20b9 2 lakh towards Clean Ganga Fund set up by the Central Government.<\/li>\n
        2. He has incurred medical expenditure of \u20b9 55,000 towards surgery for his grandmother who is 85 years of age. (No Premium is paid to keep In force an Insurance on her health)<\/li>\n
        3. He has donated \u20b9 2 lakhs in cheque and \u20b9 50,000 in cash to a political party during Its annual conference of which he is a member.<\/li>\n
        4. Repayment of housing loan instalment of 1 lakh during the financial year to his employer XYZ Private Limited.<\/li>\n<\/ol>\n

          Discuss the allowable deduction to Mr. Bharadwaj from the above information. [CA Final May 2018 {New Syllabus)] [6 Marks]
          \nAnswer:
          \nComputation of Total Income of Mr. Bharadwaj for the A.Y. 2021-22<\/p>\n\n\n\n\n\n\n\n\n
          <\/td>\n\u20b9<\/td>\n<\/tr>\n
          Gross Total Income<\/td>\n15,00,000<\/td>\n<\/tr>\n
          Less: Deductions under Chapter VI-A<\/td>\n<\/td>\n<\/tr>\n
          Deduction u\/s 80G (Note 1)<\/td>\n2,00,000<\/td>\n<\/tr>\n
          Deduction u\/s 80GGC (Note 3)<\/td>\n2,00,000<\/td>\n<\/tr>\n
          Total Income<\/td>\n11,00,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

          Notes:
          \n1. As per Sec. 80G, where the assessee makes a contribution to the Clean Ganga Fund, then he shall be eligible for deduction of the whole of the amount deposited in such fund without any qualifying limit provided the contribution has been made by any mode other than cash except for the cash donations not exceeding \u20b9 2,000. In this case, Mr. Bharadwaj has contributed \u20b9 2,00,000 to the Clean Ganga Fund set up by the C.G. and therefore, he shall be eligible for 10096 of the amount contributed to such fund, by assuming that the amount has been contributed by any mode other than cash.<\/p>\n

          \"Deductions<\/p>\n

          2. As per Sec. 80D, the assessee shall be eligible for deduction upto \u20b9 50,000 in respect of payment made of medical expenditure for himself or spouse or dependent children or parents who is a senior citizen, provided no payment has been made to keep in force’ an insurance ” on the health of such person. Senior citizen means an individual who is resident in India and has completed the age of 60 years or more at any time during the previous year. However, in this case, no deduction shall be available to Mr. Bharadwaj u\/s 80D, since he incurred medical expenditure towards the surgery of his grandmother.<\/p>\n

          3. As per Sec. 80GGC, the deduction shall be available to any person, except local authority and every artificial juridical person wholly or partly funded by the Government, for the amount contributed to the political party. However, no deduction shall be allowed in respect of any sum contributed by way of cash. Therefore, Mr. Bharadwaj shall be eligible for deduction of \u20b9 2,00,000 u\/ s 80GGC in respect of amount donated to the politic party by cheque and no deduction- shall be available in respect of \u20b9 50,000 donated by cash.<\/p>\n

          4. As per Sec. 80C, the individual-assessee shall be eligible for deduction in respect of repayment of housing loan made to his employer where such employer is a public company or public sector company. However, in this case, Mr. Bharadwaj has made repayment to his employer XYZ Pvt. Ltd, and since, the employer is a private company, Mr. Bharadwaj shall not be eligible for deduction u\/s 80C.<\/p>\n

          \"Deductions<\/p>\n

          Question 11.
          \nDenim Ltd. was incorporated on 01.04.2020 to carry on the business of innovation, development, deployment and commercialization of new processes driven by technology. It holds a certificate of eligible business from the notified IBMC (Inter Ministerial Board of Certification).<\/p>\n

          Its total turnover and the profits and gains from such business for the P.Y. 2020-21 and expected turnover and profits and gains in the following years are as follows:<\/p>\n\n\n\n\n\n
          Particulars<\/td>\nP.Y. 2020-21<\/td>\nP.Y. 21-22<\/td>\nP.Y. 22-23<\/td>\nP.Y. 23-24<\/td>\nP.Y. 24-25<\/td>\nP.Y. 25-26<\/td>\nP.Y. 26-27<\/td>\n<\/tr>\n
          Total Turnover in Crores<\/td>\n50<\/td>\n55<\/td>\n62<\/td>\n68<\/td>\n78<\/td>\n88<\/td>\n96<\/td>\n<\/tr>\n
          Profits (Losses) in Crores<\/td>\n(2.52)<\/td>\n(1.5)<\/td>\n6.5<\/td>\n8.25<\/td>\n9.5<\/td>\n8<\/td>\n9.50<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

          Is Denim Ltd. eligible for any benefit under the provisions of the Income Tax Act, 1961? If yes, what is the benefit available? [CA Final May 2018 (New Syllabus)] [5 Marks]
          \nAnswer:
          \nAs per Sec. 80-IAC, the deduction is available to the assessee, being an eligible start-up whose gross total income includes any profits and gains from eligible business of innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.<\/p>\n

          \u201cEligible start-up\u201d means a company or a LLP engaged in eligible business and fulfils the following conditions:
          \n(a) it is incorporated on or after 01.04.2016 but before 01.04.2021;
          \n(b) the total turnover of its business does not exceed \u20b9 100 crores in the previous year relevant to the assessment year for which deduction is claimed;
          \n(c) it holds a certificate of eligible business from the Inter Ministerial Board of Certification as notified by the Central Government.<\/p>\n

          \"Deductions<\/p>\n

          Deduction shall be 100% of the profits and gains derived from such eligible business for any 3 Consecutive Assessment Years out of 10 Assessment Years beginning from the year in which eligible start-up is incorporated and the : deduction shall not exceed the profits derived from the business of start-up.<\/p>\n

          If Mr. Sarthak invest whole of the sale proceeds from sale of residential house in Surat in shares of eligible start-up, he will be eligible for exemption for whole of the long term capital gains from sale of such residential house property in Surat and there will be no taxable capital gains.<\/p>\n

          If he does not invest such sale proceeds in the equity shares of eligible start-up, he shall not be eligible to claim exemption u\/s 54GB and has to pay tax @ 10% u\/s 112 on such long term capital gains from sale of residential house property in Surat. If he pays tax on such long term capital gains, he has to borrow more amount from the bank or has to asked Miss Juhi to contribute more amount than \u20b9 2 crores, as the case may be.<\/p>\n

          If Mr. Sarthak borrows \u20b9 2 crores from bank, then he has to pay interest @ 13% p.a. on such borrowing and can claim deduction u\/s 36(1)(iii). In this case, whole of the profits from eligible start-up will be of Mr. Sarthak. But, there will be risk that Mr. Sarthak may not be able to pay interest amount on such borrowings.<\/p>\n

          However, if Mr. Sarthak accepts Miss Juhi as co-promoter, he does not have to pay any interest but have to share profits from eligible start-up with Miss Juhi. Also, there will be no risk of non-payment of interest amount.<\/p>\n

          \"Deductions<\/p>\n

          Question 13.
          \nABC Ltd., a developer, is engaged in the business of developing of Special Economic Zones, notified on or after 1st April 2005 under the – SEZ Act, 2005. It was established in the previous year 2015-16. It had exercised its option for claiming deduction under section 80-IAB from the Assessment Year 2018-19. It received the following incomes during the previous year 2020-21:<\/p>\n

          Income from the maintenance of SEZ : \u20b9 50,40,000
          \nIncome from lease rent from letting out of buildings along with other amenities in SEZ : \u20b9 14,25,000
          \nInterest received from bank deposits (from the refundable security deposits received from lessees) : \u20b9 9,50,000<\/p>\n

          (1) Calculate the amount of deduction available to ABC Ltd. for the A.Y. 2021-22.
          \n(2) On 1st April, 2021, it transferred the operation and maintenance of the SEZ to another company, DEF Ltd. Now, DEF Ltd. wants to claim deduction u\/s 80-IAB in respect of the income derived from such maintenance of SEZ as was available for ABC Ltd. Comment whether the contention of DEF Ltd. is valid in law? [CA Final Nov. 2019 (New Syllabus)] [4 Marks]
          \nAnswer:
          \n(1) As per Sec. 80-IAB, Developer of a SEZ, notified on or after 01.04.2005 shall be eligible for deduction of 100% of the profits from the business of developing SEZ.<\/p>\n

          Deduction shall be available for any 10 consecutive assessment years out of 15 assessment years beginning from the year in which SEZ is notified.<\/p>\n

          Since, ABC Ltd., a SEZ developer, has exercised the option for claiming deduction u \/ s 80-IAB from A.Y. 2018-19, it is eligible to claim deduction of 100% of the profits from business of developing SEZ<\/p>\n

          Computation of Deduction available to ABC Ltd. for A.Y. 2021-22
          \n\"Deductions
          \nNote: Interest received from bank deposits from the refundable security deposits received from lessees is not an activity relating to SEZ development and thus shall not be eligible for deduction.<\/p>\n

          \"Deductions<\/p>\n

          (2) Where the assessee transfers the operation or maintenarice of SEZ to another developer, then the transferee shall be entitled to deduction for the unexpired period of total 10 years. On 01.04.2021, ABC Ltd. has transferred the operations & maintenance of SEZ to another company, DEF Ltd. and as per provisions of 80-IAB the transferee, (i.e. DEF Ltd.) can claim deduction of income derived from such maintenance of SEZ but only for the remaining period out of 10 years.<\/p>\n","protected":false},"excerpt":{"rendered":"

          Deductions from Gross Total Income \u2013 CA Final DT Question Bank is designed strictly as per the latest syllabus and exam pattern. Deductions from Gross Total Income \u2013 CA Final DT Question Bank Question 1. Gurudev Engineers Pvt. Ltd. is running an industrial undertaking whose profits are eligible for deduction u\/s 80-IA. During the year …<\/p>\n

          Deductions from Gross Total Income \u2013 CA Final DT Question Bank<\/span> Read More »<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[169],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/19083"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=19083"}],"version-history":[{"count":1,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/19083\/revisions"}],"predecessor-version":[{"id":19091,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/19083\/revisions\/19091"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=19083"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=19083"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=19083"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}