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4. tax laws

KS: The Tax-Age
VIVEK SONI
REVISIONARY TEST PAPER 1
BASIC SUMS ON TAX COMPUTATION
Question 1: Compute Tax Liability of Mr. X from the following information`
A. SALARIES
15,00,000
B. HOUSE PROPERTY
10,00,000
C. BUSINESS/PROFESSION
15,00,000
D. CAPITAL GAINS
LTCG on listed equity shares (STT) Exempted
LTCG on building
4,00,000
STCG on building
3,00,000
STCG on listed equity shares (STT) 2,00,000
E. OTHER SOURCES
Interest income
Winning from lotteries
1,00,000
4,00,000
Question 2: Compute Tax Liability of Mr. X from the following information`
A. Business Income
1,00,000
B. LTCG on Building
15,00,000
Question 3: Compute Tax Liability of Mr. X from the following informationLTCG ON BUILDING
` 20,00,000
Question 4: Compute Tax Liability of Mr. X from the following informationWinning from lotteries
` 10,00,000
Question 5: Compute Tax Liability of Mr. X from the following informationA. Business Income
B. LTCG on Building
` 20,00,000
` 5,00,000
Deduction under Chapter VIA
` 2,00,000
Question 6: Compute Tax Liability of Mr. X from the following informationLTCG on Building
Deduction u/s. 80C
` 10,00,000
` 70,000
Question 7: From the following particulars, you are required to work out the tax payable by Mrs. Pinto, aged
70 years
(i)
Family Pension Gross
`75,000
(ii)
Income from House Property (Net)
`3,24,000
(iii)
Income from Other Sources :
(a)
Interest on Bank Deposits
`15,000
(b)
Income from Horse Racing
`20,000
(iv)
Capital gains on transfer of Land - Long-term
`15,000
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Question 8: Compute tax liability of Mrs. X from the following information:
Short term Capital Gain on Sale of Shares(STT)
4,50,000
Business Income
90,000
Deduction U/s 80C
70,000
Deduction U/s 80GGC
60,000
Question 9: Mr. X is having Business Income ` 450000 and Agricultural income ` 120000. Compute tax
payable for the A.Y 2015-16.
Question 10: Mrs. X is having Business Income ` 500000 and Agricultural income ` 80000. Compute tax
payable for the A.Y 2015-16.
Question 11: Mr. X is engaged in growing of sugarcane & manufacturing sugar following are other details:
`
(1) Sale of Sugar
8,00,000
(2) Market value of sugar cane grown
80,000
(3) Cost of sugar cane grown
76,000
(4) Other expenses
2,00,000
Question 12: Compute Tax liability of Mr. X in the following cases(1) Total Income is ` 1,20,00,000
(2) Total Income is ` 1,50,00,000
(3) Total Income is ` 1,02,00,000
(4) Total Income is ` 1,04,20,000
(5) Total Income is ` 1,05,00,000
----------------------------------------------------------------------------------------------------------------------------------SOLUTION TO RTP 1
Solution to Question 11:
Computation of Tax Liability
`
Profit or gains from business or profession
Sale of Sugar
8,00,000
Less: Market value of sugar cane grown
Other expenses
80,000
2,00,000
PGBP/GTI/TI
2,80,000
5,20,000
Add: Agricultural income for rate purposes
` (80,000 – 76,000) = 4,000
[as it does not exceed ` 5,000]
NIL
________
5,20,000
Tax on Total Income
Upto `2,50,000
Next ` 2,50,000 @ 10%
Bal. 20,000 @ 20%
NIL
25,000
4,000
29,000
870
29,870
Add: EC & SHEC @ 3%
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KS: The Tax-Age
VIVEK SONI
REVISIONARY TEST PAPER 2
DEDUCTION UNDER CHAPTER VI A
Question 1: X is a salaried employee. His basic salary is `40,000 p.m. He gets one month salary as bonus.
He has been provided with rent free unfurnished accommodation which is owned by the employer company
at the place of his posting i.e. Chennai. Both employer and employee contribute 15% of salary to Recognised
Provident Fund. He gets bank interest on Fixed Deposit of `10,000. He made the following investments
during the year:
Life insurance premium on his own life (sum assured `80,000)
9,000
Notified equity linked saving scheme of UTI
12,000
Repayment of principal amount of housing loan (self occupied property)
27,000
Payment of interest on the above loan
2,60,000
Tuition fees of two children (14,000 + 26,000)
40,000
Deposit in Home loan account scheme of NHB
12,000
Pension fund of LIC
14,000
---------------------------------------------------------------------------------------------------------------------------------Question 2: Mr. X is a Central Government employee having a basic salary of `2,25,000 p.a. and `75,000
Dearness Allowance (Forming part of salary). Both he and the employer each contributed `40,000 each to
the Pension Fund referred to section 80CCD. Amount invested in PPF ` 130000. Compute his Total Income.
---------------------------------------------------------------------------------------------------------------------------------Question 3: Mr. Prasad is the Karta of HUF. The family declares a gross total income `4,00,000 for the
assessment year . The gross total income includes taxable long-term capital gain `65,000 and short-term
capital gain `35,000 which is taxable @ 15% u/s. 111A of the Income-tax Act, 1961. The details of HUF
fund investment made during the year 2014-15 are:
`
`
i) Amount deposited in PPF in the name of members of HUF
19,000
ii) Contribution made to (a) Indira Gandhi Memorial Trust
(b) Delhi University (declared as an institution of national eminence)
(c) Zila Saksharta Samiti
(d) An approved charitable trust
(e) Government for the purpose of promoting family planning
(f) Hanuman Temple in Mohalla
7,000
3,000
5,000
30,000
10,000
20,000
75,000
Compute total income of HUF chargeable to tax for the assessment year .
---------------------------------------------------------------------------------------------------------------------------------Question 4: Mr. X furnishes you the following information to compute his total income, given that his Gross
Total Income ` 5,60,000.
 Premium paid ` 20,000 on LIP of ` 1,00,000 on the life of the assessee. [policy issued after
1.4.2012]

Premium paid ` 10,000 on a LIP of ` 1,50,000 on the life of his wife.
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
Premium paid ` 5,000 on LIP of ` 50,000 on the life of the mother of the assessee.

Contribution to Recognised Provident Fund ` 15,000

Contribution to ULIP ` 10,000

Repayment of housing loan taken from the State Bank of India ` 15,000 (`9,000 as the principal
and ` 6,000 as interest). The loan was utilised by the assessee to purchase a flat for his own
residential purpose in the year 1994.

Subscription to units of Mutual Fund notified u/s 10(23D) ` 18,000

Contribution to 15 year Post office Savings Bank (Cumulative Time Deposits) ` 8,000.

Tuition fees of Children for three children ` 15,000 each

Contribution to LIC Pension Fund ` 1,85,000
---------------------------------------------------------------------------------------------------------------------------------Question 5: Mr. A, a business man submits the following particulars:
a) Income from House property at Kolkata `30,000
b) Business income
`40,000
c) Long term capital gains
`30,000
d) Deduction U/s 80C
`12,000
He pays `2,000 p.m. as rent for his residential accommodation in Delhi. Neither, he nor his family owns any
residential accommodation. Compute Total income.
--------------------------------------------------------------------------------------------------------------------------------Question 6: Compute Total Income of Mr. X from the following information for the A.Y 2015-16.
`
Salaries
5,00,000
Post office saving A/c. interest
8,000
Bank saving A/c. interest
12,000
(1) LIC premium paid for dependent parents ` 10,000 and for major son (disabled u/s. 80U) ` 16,000. Policy
is taken on 1.5.2014 and the assured sum is ` 2,00,000 and ` 1,00,000 respectively.
(2) Amount donated for scientific research in cash ` 12,000.
(3) Amount donated in cash for National Children’s Fund ` 8,000.
(4) Amount given as donation to political party in cash ` 5,000
(5) Medical insurance premium paid in cash for self ` 8,000 and also expenses incurred in cash for
preventive health check up parents ` 8,000.
(6) Mr. X is a retail investor invested for the first time in the notified listed equity shares u/s. 80CCG `
70,000.
(7) Loan taken from bank for purchase of House property ` 20 lakhs on 1.1.2014. The value of property `
35 lakhs. The property is self occupied and the assessee does not own any other house. Total Interest on
loan ` 2,50,000.
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KS: The Tax-Age
VIVEK SONI
SOLUTION TO RTP-2
Answer to Question 2:
(I) Salaries
Computation of Total Income
`
Basic salary
Dearness Allowances
Employers contribution to pension Fund - taxable
Gross Total Income
`
2,25,000
75,000
40,000
3,40,000
Less: Deduction under Chapter VIA:
a) Under section 80C:
Amount invested in PPF
1,30,000
b) Under section 80CCD:
Employees contribution to pension Fund –
(i) Amount contributed
` 40,000
(ii) 10% of salary (2,25,000 + 75000)
` 30,000
(iii) Maximum (W.e.f A.Y 2015-16)
` 1,00,000
Whichever is lower
Maximum limit u/s. 80CCE
c) Under section 80CCD:
Employer’s contribution to pension Fund –
Amount contributed
` 40,000
Maximum (10% of 3,00,000)
` 30,000
Whichever is lower
30,000
30,000
1,60,000
1,50,000
30,000
Total Income
1,80,000
1,60,000
Solution to Question 4:
Gross Total Income
Less: Deduction Under Chapter VIA
Deduction U/s 80C
Insurance Premium on his life [20,000 or 10% of 1,00,000, lower]
Insurance Premium on the life of his wife
Insurance Premium on the life of his mother
Contribution to Recognised Provident Fund
Contribution to ULIP
Repayment of housing loan to SBI- principal amount only
Contribution to Post office savings Bank – CTD
Tuition fees of maximum 2 children
Mutual Fund referred to u/s 10(23D)
Maximum ` 1,50,000
Deduction U/s 80CCC for contribution to
LIC Pension Fund – amount contributed or
`1,00,000 whichever is lower
5,60,000
10,000
10,000
--15,000
10,000
9,000
8,000
30,000
18,000
1,10,000
1,10,000
1,00,000
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2,10,000
Maximum Deduction U/s 80CCC and 80C
- `1,00,000 as per Section 80CCE
1,50,000
Total Income 
Solution to Question 5:
a) Income from House property
b) Business income
c) Long term capital gains
Gross Total Income
Less: Deductions under chapter VIA
i) Deduction u/s. 80C
ii) u/s. 80GG (Note 1)
1,50,000
----------4,10,000
Amount (`)
30,000
40,000
30,000
1,00,000
12,000
14,500
73,500
Total Income
Note 1: Deduction u/s. 80GG shall be the minimum of the following three amounts –
a) Rent paid – 10% of Adjusted Gross Total Income = 24,000 – 5,800 =
18,200
b) 25% of Adjusted Gross Total Income
=
14,500
c) `2,000 p.m.
=
24,000
Adjusted Gross Total Income = GTI – LTCG – Deduction u/s. 80C to 80U except u/s. 80GG
= 1,00,000 – 30,000 – 12,000 = 58,000
Solution to Question 6:
`
5,00,000
(1) Salaries
(2) House property
Net Annual Value
Less: Interest on loan (maximum)
(2) Other Sources
Post office saving A/c. interest
Less: Exempted u/s. 10(15(i)
Bank saving A/c. interest
Gross Total Income
Nil
2,00,000
8,000
3,500
4,500
12,000
Less: Deduction Under Chapter VIA
Refer working Notes
Total Income
(2,00,000)
16,500
3,16,500
1,13,000
2,03,500
Working Notes: Computation of Deduction allowed under chapter VIA
(1) Section 80C: LIC premium paid
For parents: Not allowed
For Major son: Allowed
Maximum 15% of sum assured
on policy taken on or after 1.4.2013 for disabled person
(2) Section 80CCG:
Amount invested in notified listed equity shares
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VIVEK SONI
50% of 70,000 or 25,000; lower
[Since the GTI of Mr. X does not exceed ` 12 lakhs]
25,000
(3) Section 80D:
Mediclaim premium paid in cash – not allowed
Preventive health check up of parents – allowed
even if paid in cash – ` 8,000 or maximum ` 5,000; lower
5,000
(4) Section 80G:
Donation to National Children’s Fund (100% without
ceiling limit) – upto ` 10,000 cash payment allowed
8,000
(5) Section 80GGA
Donation for Scientific research – not allowed since
cash payment exceeds ` 10,000
NIL
(6) Section 80GGC
Donation to political party – 100% - not allowed
Where payment made in cash
NIL
(7) Section 80TTA: Saving A/c. interest included in GTI
(i) Post office ` 4,500
(ii) Bank
` 12,000
16,500
Maximum limit 10,000; lower
(8) Deduction u/s. 80EE
Interest on House Loan
2,50,000
Less: Already deducted u/s. 24(b) 2,00,000
50,000
Maximum deduction u/s. 80EE
1,00,000
Lower
Total Deduction under chapter VIA
10,000
50,000
1,13,000
259
KS: The Tax-Age
VIVEK SONI
REVISIONARY TEST PAPER 3
ADVANCE SUMS ON TAX LIABILITY
Question 1: Following details are furnished by Sundaram for the year ending March 31, 2015
Rupees
Director’s Remuneration (net of tax and own contribution to Provident Fund)
5,00,000
Sundaram's contribution to Provident Fund
30,000
Employer's contribution to Provident Fund
30,000
Leave Travel Allowance received
(entire amount spent in traveling)
10,000
Free use of car of 1500 cc provided by the company.
(Expenses borne by employer – partly personal and partly official)
Medical expenses reimbursed by the company
18,000
Tax deduction at source on Salary
12,000
Sundaram was occupying a bungalow on rent at New Delhi since November, 1986. He agreed to transfer his
tenancy right in the said bungalow in favour of Bala Ltd. for a sum of `2,00,000. He invested `80,000 in
bonds of NHAI.
Sundaram acquired 2,000 shares of `5 Lakhs during 1985-86 . Company allotted him Bonus shares in March
2014 @ 1:1. The entire shares held in the company have been sold by him during November, 2014 @`1,100
per share.[STT 0.125%]
On 1/12/2014 Sundaram received from his friend 10,000 shares in ABC Ltd. as gift Market Value `2,00,000.
He also received `3,00,000 as gift from Spouse of his Father brother on his birthday on 1/1/2015
Dividends from ACC Ltd., an Indian Company
2,500
Dividend collection charge
200
Question 2: Smt. Savita Rani born on 1.7.1943. She is a Deputy Manager in a company in Mumbai. She is
getting a monthly salary and D.A. of `45,000 and 12,000 respectively [Only 50% of DA forms part of
salary] . She also gets a House Rent Allowance of `6,000 per month. She is a member of Recognized P.F.
wherein she contributes 15% of her salary and half D.A. Her employer also contributes an equal amount.
(b) She is living in the house of her minor son in Mumbai.
© During the previous year her minor son has earned an income of `30,000(computed) as Rent from a
House Property, which had been transferred to him by Smt. Savita Rani without consideration a few years
back.
(d) During the previous year she sold Govt. of India Capital Indexed Bonds for `1,50,000 on 30.9.2014,
which she purchased on 1.7.2000 for `80,000
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(e) Her employer gave her an interest free loan of `1,50,000 on 1.10.2014 to one of her son’s wife for the
purchase of an Alto Maruti Car. Nothing has been paid to the company towards the loan. Take 10.5% as SBI
Rate]
(f) During the previous year she paid `15,000 by cheque to GIC towards Medical Insurance Premium of her
dependent mother.
Compute the taxable income and tax liability of Mrs. Savita Rani.
[Answer: Salaries ` 7,82,235;House Property ` 30,000;]
Question 3: The following is the profit & loss account for the year ended 31/3/2015 M/s. ABC of which Sri
Daga is the owner:
`
`
5,00,000 By Sales
12,00,000
92,795 By Rent from agricultural
1,000
land
To Fine paid to excise department
2,000 By Interest Income (net of
16,000
TDS of ` 4000)
To Salary & Wages
1,21,445 By Dividend Received from
10,000
Indian Company
To General Charges
16,750 By Sale of listed shares
50,000
subjected to STT (long
Term)
To Interest on Bank Loan
21,000
To Daga’s Remuneration
38,750
To Depreciation
91,000
To Advance Tax
25,000
To Donation to Electoral Trust
16,000
To Net Profit
3,52,360
12,77,000
12,77,000
Compute the income from business of Sri Daga from the Sugar Mill after taking into account the following
information into consideration:
To Manufacturing Expenses
To Excise Duty
(i) Depreciation in respect of all assets has been ascertained at `50,000 as per Income Tax rules.
Question 4: From the following information, compute tax liability:
Director’s Remuneration in a company having only Agricultural Income
Share of Profit from a partnership firm
`
1,50,000
80,000
Income from business of letting cars on hire
1,40,000
Salary received as a partner from a firm manufacturing tea
36,000
Lease rent received from lands given to tenants for agricultural
Operations
In cash
In Kind
30,000
18,000
Sale of agricultural produce
60,000
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Share of Income from HUF
40,000
Sale proceeds of agricultural lands situated in a village
Fixed deposit interest received
1,20,000
18,000
Dividends from an Indian Company having rubber plantations
6,000
Payment of government tax on agricultural lands
16,000
Purchase of seeds – in cash
21,000
Tractor hire charges (for agricultural operations)
2,500
Question 5: Mr. Tenzingh is engaged in composite business of growing and curing (further processing)
Coffee in Coorg, Karnataka. The whole of coffee grown in his plantation is cured. Relevant information
pertaining to year ended 31.3.2015 are given below:
(`)
WDV of Car as on 1.4.2014
3, 00, 000
WDV of machinery as on 31.3.2014(15% rate)
15, 00, 000
Expenses incurred for growing coffee
3, 10, 000
Expenditure for curing coffee
3, 00, 000
Sale value of cured coffee
22, 00, 000
Besides being used for agricultural operations, the car is also used for personal use; disallowance for
personal use may be taken at 20%. The expenses incurred for car running and maintenance are ` 50, 000.
The machines were used in coffee curing business operations.
He also has estates in Rubber and Tea. He derives income from them as under:
 Manufacture of rubber
 Manufacture of Tea
 Sale of seedlings from Nursery
5,00,000
7,00,000
1,00,000
Compute the income arising from the above activities for the assessment year.
Question 6: Mrs. X, an American national came to India on 15th October, 2014 and returned on 1st March,
2015. While in India, she had purchased a show room which was leased out to a company on a rent of
`25,000 per month from Nov 1, 2014. She had taken loan from a bank for purchased of this show room on
which bank had charged interest of ` 95,000 up to March 31, 2015. She had received the following gifts in
India:
`
- From parents of husband
51,000
- From married sister of husband
11,000
- From friends
3,50,000
Income from Business in USA and received there:
`2,00,000
Determine her residential status and compute the total income chargeable to tax along with the amount of tax
payable on such income for the assessment year .
Question 7: Mrs. X of Canada, aged 60 years, furnishes the following information for the previous year
ended March 31, 2015
Particulars
`
Pension received from Canadian Government received in Canada
20,000
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Long-term capital gain on sale of land at Mumbai
1,00,000
Short-term capital gain on sale of shares of Indian listed companies in respect of
which STT was paid
20,000
Premium paid to Canadian Life Insurance Corporation at Canada
10,000
Mediclaim policy premium paid
2,000
Tax saving bond purchased in March 2015
30,000
Rent received in respect of house property at Mumbai
70,000
2,000
Amount spent for medical treatment of disabled brother
Compute the tax liability.
----------------------------------------------------------------------------------------------------------------------------------Solution to Question 2:
Particulars
Amount
Amount
A. Salary
(i)
Basic salary (45000 ×12)
5,40,000
(ii)
Dearness Allowances (12000 ×12)
1,44,000
(iii) House Rent Allowances(6000 ×12)
72,000
(iv)
Employer’s contribution to RPF
91,800
Less Exempted upto 12% of salary
73,440
18,360
(v)
Perquisite value of interest free loan
7,875
Salary (A)
7,82,235
B. House Property
Income from house property (B)
30,000
(Deemed owner)
C. Capital Gain
Full value of consideration
1,50,000
Less:
(i)
Selling Expenses
NIL
(ii)
Indexed cost of Acquisition
(80000 ×1024)
2,01,773
(2,01,773)
406
Long term capital loss to be c/f
(51,773)
Gross Total Income (A + B)
8,12,235
Less: Deduction under Chapter VIA
(i) Deduction u/s 80C
Employee’s contribution to RPF
(ii) Deduction u/s 80D
Medical insurance premium
Total Income
Rounded off u/s 288A
91,800
15,000
Tax on Normal Income of ` 7,05,440 :Upto ` 2,50,000
NIL
Next ` 2,50,000 @ 10%
25,000
Bal. 2,05,440 @ 20%
41,088
66,088
Add: EC & SHEC @ 3%
1,983
68,071
Rounded off u/s. 288B
68,070
263
1,06,800
7,05,435
7,05,440
KS: The Tax-Age
VIVEK SONI
REVISIONARY TEST PAPER 4
Question 1: Mr. Malik owns a factory building on which he had been claiming depreciation for past few
years. It is the only asset in the block. The factory building and land appurtenant there to were sold during
the year. The following details are available:
`
Building completed in September, 2002 for
….
10,00,000
Land appurtenant thereto purchased in April, 2001 for
….
12,00,000
Advance received from a prospective buyer for land in May, 2002
forfeited in favour of Assessee, as negotiations failed
….
50,000
WDV of the building block as on 01-04-2014
….
8,74,800
Sale value of Factory building in November, 2014
….
8,00,000
Sale value of Appurtenant land
60,00,000
The Assessee is ready of invest in long-term specified Assets under section 54EC, within specified time.
Compute the amount of taxable capital gain and the amount to be invested under section 54EC for availing
the maximum exemption. [CII 2001-02: 426]
Question 2: Mr. Rajesh is serving in a Public Limited Company as General Manager (Finance). His total
emoluments for the year ended 31st March, 2015 are as follows :
`5,40,000
`1,80,000
` 12,400
Basic Salary
HRA (Computed)
Transport allowance
Apart from the above, his employer has sold the following Assets to him on 1st January, 2015
(i)
(ii)
Laptop computer for `20,000 (Acquired in September, 2012 for `1,20,000).
Car 1800 cc for `3,20,000 (Purchased in April, 2011 for `8,50,000)
He also owns a residential house, let out for a monthly rent of `15,000. The fair rental value of the property
for the let out period is `1,50,000. The House was self-occupied by him from 1st January, 2015 to 31st
March, 2015. He has taken a loan of `20 lacs for the construction of the property, and has paid interest
`40,000 during the year.
He is also engaged in the business of retail trade for which sales amounted to `10,00,000. His father was
engaged in the business of electronic goods. His father died in 2007-08. During the year he received `10,000
from a customer relating to his father’s business.
Mr. Rajesh sold shares of different Indian companies on 14th April, 2014:
Name
A Ltd.
B Ltd.
Sale value
(per share)
`150
`82
Purchase price
(per share)
`120
`65
Acquired on
2nd May, 2011
16th April, 2014
No. of
shares
200
125
Sale proceeds were subject to brokerages of 0.1% and securities transaction tax of 0.085% on the gross
consideration. He received I.T. refund of `5,750 (including interest `750) relating to the Asst. Year 2008–
09. Vacant site lease rent received amounted to `20,000. Interest income of minor child amounted to `2,500.
Compute the tax liability of Mr. Rajesh. [CII OF 2010-11: 711, 2011-12: 785; 2012-13 = 852]
[Answer: Salaries ` 8,48,000; Gross Total Income ` 10,61,865]
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Question 3: Dr. Krishna furnishes you the following information : Income and Expenditure Account for the
year ended 31st March, 2015
To Medicines consumed
To Staff Salary
To Hospital consumables
To Rent paid
To Administrative
expenses
To Net Income
`
242000
165000
47500
60000
By Fee receipts
By Rent
By Dividend from Indian
companies
`
847500
27000
9000
123000
246000
883500
883500
i) Rent paid includes rent for his residential accommodation of `30000 (paid by Cheque).
ii) Hospital equipments
1.4.2014 Opening WDV
`5,00,000
7.12.2014 Acquired (Cost)
`2,00,000
iii) Medicines consumed include medicines (cost) `10,000 used for Dr. Krishna’s family.
iv) Rent received --- relates to a property situated at Mysore (Gross Annual Value). The municipal tax of
`2,000 paid in December, 2014 has been included in the administrative expenses”.
v) He received `5,000 per month as salary from Full Cure Hospital. This has not been included in the “fee
receipts” credited to income and expenditure account. Compute Gross Total Income.
Question 4: R retired from Government service in March 2014 and got a sum of `20 Lakhs on account of
retirement benefits. Out of the aforesaid sum R purchased on 26th April, 2014, two heavy goods vehicles for
`8 Lakhs, four medium goods vehicles for `4 Lakhs and two light commercial vehicles for `2 Lakhs for the
purpose of carrying on business of plying, hiring and leasing goods carriages. However R could actually start
business of plying the aforesaid vehicles on 4th July, 2014, only though R had got the delivery of the
aforesaid vehicles on the date of purchase itself. However, he did not maintain any regular books of accounts
and also the vouchers in respect of the aforesaid business. As per R's Diary his gross receipts during the
financial year ending 31st March, 2015 are `1,77,600 and the sum total of the entire business expenditure
(other than Depreciation) is `52,100.
R had inherited a house from his father. During financial year 2014-15 R was able to let out this house only
for eight months at a monthly rent of `5,000. R has also furnished the following information in relation to
this house :

Municipal taxes paid by the tenant during financial year,
2014-15, based on Municipal Valuation of `53,000
`5,300

Interest paid on loan taken for renovation of the house
`12,000


Actual repair & renovation expenses incurred during
Water taxes levied and paid to Municipal Corporation
working under the State Government
`8,000
`400
On 4th April, 2014, R was able to recover the unrealised rent of `22,000, but R had to pay a sum of `11,000
on account of Litigation expenses with the old tenant (including Advocate's fee) during financial year, 201415
During financial year 2014-15, R received `60,000 on account of pension from Government. R requires you
to compute his total income.
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Question 5: Ram owns a building consisting of three identical units, the construction of which was
completed on 1/4/2014. The building was occupied from 1/4/2014. The particulars pertaining to the 3 units
for the year ended 31/3/2015 are given below:
PARTICULARS
Fair Rent
Rent Received
Municipal Taxes Paid
Outstanding Municipal Taxes
Land revenue due but not paid
Ground Rent paid
Nature of occupation
UNIT I
50,000
3,000
3,000
1,200
2,400
Self
occupied
UNIT II
50,000
72,000
5,000
5,000
1,200
2,400
Let out
UNIT III
50,000
3,000
3,000
1,200
2,400
Used for
business
On 1/4/2013 Ram had borrowed a sum of `5,00,000 bearing interest @ 12% p.a. for construction of the
building. The total construction cost came to `12,00,000. The business income before considering any item
connected with property was `2,10,000. Municipal Taxes and Land revenue due on 31/3/2015 were
however paid on 1/7/2015. [Due date of return 31/7/2015] Compute tax liability.
[Answer  HP (-) 1,100; Profits or Gains of Business or Profession 1,38,400]
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Solution to Question 5:
Note 1: Pre construction interest from 1/4/2012 to 31/3/2013 = ` 5,00,000 x 12% = ` 60,000
For each unit = ` 20,000 (1/3rd of ` 60000)
Particulars
(A)INCOME FROM HOUSEPROPERTY
Amount(`)______________
Unit1
Annual value
Less: Interest on loan
Current year interest (60,000 x 1/3)
Pre construction interest (1/5th of 20,000)
UNIT 1 (A)
Unit 2
Fair rental value
Rent received
Gross annual value
Less: Municipal taxes paid
Net annual value
Less : standard deduction u/s 24(a)
Interest on loan u/s 24(b) [20000+ 4000]
UNIT2 (B)
INCOME FROM HOUSE PROPERTY (A+B)
Nil
20,000
4,000
50,000
72,000
72,000
5,000
67,000
(20,100)
(24,000)
22,900
(1,100)
(B) BUSINESS AND PROFESSION
Income from business
Less:
(1)
(2)
(3)
(4)
(5)
24,000
(24,000)
2,10,000
Municipal Taxes
Land revenue
Ground rent
Interest on loan
Depreciation [10% of (4,0000+20000)]
[pre-construction interest capitalized under PGBP]
6,000
1,200
2,400
20,000
42,000
71,600
INCOME FROM PGBP
1,38,400
GROSS TOTAL INCOME (A + B)
1,37,300
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REVISIONARY TEST PAPER 5 (SOLVED)
SALARIES
Question 1: Compute the taxable salaries of Mr. X for the P.Y 2014-15 from the following informationi) Basic Salary (` 12,000-2,000-14,000-4,000-22,000) date of Joining 1.7.2012. Bonus allowed one month’s
basic salary based on salary at the end of the year.
ii) Medical facility worth ` 18,000 given to his Spouse in a hospital owned by the company.
iii) The actual cost of LCD; furniture and air conditioner provided for personal use of the employee is `
1,80,000.
iv) A gift voucher worth ` 10,000 in kind received on the occasion of his marriage anniversary.
v) Employer provides Free education to his two children A and B. The cost of such education in a similar
Institute for A is ` 900 per month and for B is ` 1,200 per month.
vi) Salary of watchman is ` 1,500 per month is reimbursed by the employer.
Question 2: From the Following information compute taxable salaries.
(a) Basic Salary 3,60,000
(b) D.A – 15% [Forming part of retirement benefits]
(c) RFA provided by the employer. Rent paid by the employer ` 12,000 p.m.
(d) Laptop provided for personal use costing ` 40,000.
(e) Reimbursed the medical treatment bill of dependent brother of ` 20,000.
(f) Conveyance allowance of ` 1,200 per month is given by the company towards actual reimbursement.
(g) Premium on Personal accident policy ` 5,000 paid by the employer.
(h) Telephone allowance received ` 500 per month.
(i) Medical insurance premium of his family paid by employer ` 10,000
(j) Contribution to RPF both the employer and employee 15% of salary.
Question 3: Mr. X retired from the services on 31.1.2015 after doing service for 5 years. He received the
following amounts from the employer for the P.Y 2014-15. Compute his Taxable Salaries.
(i) Basic Salary ` 12,000 p.m
(ii) D.A ` 6,000 p.m [does not form part of retirement benefit],
(iii) City compensatory allowance ` 1,000 p.m
(iv) Night duty allowance of `1,000.
(V) Pension @ 20% of basic salary from 1.2.2015.
(vi) Leave salary of received ` 1,00,000 for 225 days of leave accumulated during 5 years @ 45 days leave
in each year. He has not availed any earned leave during his tenure of 5 years.
(vii) Gratuity of ` 1,50,000.[ Assuming employee is not covered under Payment of Gratuity Act]
-----------------------------------------------------------------------------------------------------------------------------------
HOUSE PROPERTY
Question 4: X and Y are co-owners of a house property with equal share. The property was constructed
during the financial year 1998-1999. The property consists of eight identical units.
During the financial year 2014-15, each co-owner occupied one unit for residence and the balance of six
units were let out at a rent of ` 10,000 per month per unit. The municipal value of the house property is `
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12,00,000 and the municipal taxes are 20% of municipal value, which were paid during the year. The other
expenses were as follows:
(i) Repairs 40,000
(ii) Depreciation 15,000
(iii) Interest payable on loan taken for construction of house 4,00,000
One of the let out units remained vacant for four months during the year.
Compute the income under the head ‘Income from House Property’ of X and Y.
----------------------------------------------------------------------------------------------------------------------------------PROFIT OR GAINS FROM BUSINESS OR PROFESSIONS
Question 5: Mr. X is engaged in wholesale trade. The turnover from such business amounts to ` 98,50,000
and income as per books of accounts is ` 5,90,000 for the financial year 2014-15. Discuss the following(i) Is the assessee eligible to opt for presumptive taxation scheme u/s. 44AD for the A.Y ? If yes, then
determined the business income under such scheme.
(ii) In case the assessee does not opt for presumptive taxation scheme, what are the obligations under the
Income-tax Act, 1961?
(iii) What is the due date for filing his return of income under both the options?
Question 6: Answer the following with reference to the provisions of the Income-tax Act, 1961 :
(a) Bad debt claim disallowed in an earlier assessment year, recovered subsequently. Is this recovery is
taxable ?
(b) Tax deducted at source on salary paid to employees not remitted till the ‘due date’ for filing the return
prescribed in section 139. Is the expenditure to be disallowed under section 40(a)(ia)?
(c) A Ltd. paid ` 100 lakhs as compensation as per approved Voluntary Retirement Scheme (VRS) during
the financial year 2014-15. How much is deductible under section 35DDA for the assessment year ?
Question 7: Compute Taxable Income of X Ltd. under the head “Profit or gains from business and
professions”. From the following information(1) Commenced the business of operating a three star hotel on 1-4-2014.
(2) Following Expenditures were capitalized on 1.4.2013 in the books of the company (i) Cost of land (acquired in June 2012) ` 60 lakhs
(ii) Cost of construction of hotel building
Financial year 2013-13 ` 30 lakhs
Financial year 2014-15 ` 150 lakhs
(3) New Plant and Machineries acquired during financial year 2014-15 ` 40 lakhs.
Net profit before depreciation for the financial year 2014-15 ` 100 lakhs
Question 8: Compute the Income Taxable under the head “ Profit or gains from Business or professions”
from the following Trading and Profit & Loss Account for the year ended 31.03.2015.
Trading and Profit & Loss Account for the year ended 31.03.2015
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To Opening Stock
To Purchase of Raw Materials
To Manufacturing costs
To Gross Profit
91,000
16,79,000
5,70,000
10,60,000
34,00,000
By Sales
By Closing stock
30,00,000
4,00,000
To Other business expenses
To State VAT penalty
To State VAT paid
To General Expenses
To Interest to Bank
To Depreciation
To Net Profit
3,20,000
5,000
1,12,000
58,000
60,000
2,00,000
5,00,000
12,55,000
By Gross Profit
10,60,000
By Dividend from domestic Companies1,80,000
By Income tax refund
15,000
_________
34,00,000
________
12,55,000
Additional information: (i) Other business expenses include ` 38,000 paid as commission to sister. Fair market value ` 24,000.
(ii) The assessee paid ` 33,000 in cash to a transport carrier on 29.12.2014. This amount is included in
manufacturing expenses (Assume that the provisions relating to TDS are not applicable to this payment.)
(iii) ` 60,000 was paid to a staff but wrongly omitted to be recorded in the books.
(iv) Bank term loan interest actually paid upto 31.03.2015 was ` 20,000 and the balance was paid in
December 2015.
(v) Depreciation allowable under the Act is to be computed on the basis of following information:
Plant & Machinery (Depreciation rate @ 15%)
`
Opening WDV (as on 01.04.2014)
12,00,000
Additions during the year (used for more than 180 days)
2,00,000
Total additions during the year
4,00,000
Sales during the year
1,00,000
Note: (i) Ignore additional depreciation under section 32(1)(iia);
Question 9: State with reasons, whether the following statements are true or false, with regard to the
provisions of the Income-tax Act, 1961:
(a) Payment made in respect of a business expenditure incurred on 16th February, 2014 for ` 25,000 through
a cheque duly crossed as "& Co." is hit by the provisions of section 40A(3).
(b) (i) It is a pre-requisite condition that the assessee is required to write off in the books of account, the
amount due from debtor to claim deduction for bad debt.
(ii) Failure to deduct tax at source in accordance with the provisions of Chapter XVII-B, inter alia, from the
amounts payable to a resident as rent or royalty, will result in disallowance while computing the business
income.
Question 10: X Ltd., which follows mercantile system of accounting, obtained telecom license on 1.6.2014
for 10 years. The total license fee payable is ` 18,00,000. The relevant details are:
Year ended 31st March
License fee payable for the year
Date
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Payments Made
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2015
10,00,000
2016
8,00,000
30.03.2015
15.05.2015
28.02.2016
3,70,000
6,30,000
5,40,000
Balance of ` 2,60,000 is pending as on 31.3.2016.
Compute the amount of deduction available to the assessee under section 35ABB for the assessment years
2015-16 and A.Y 2016-17. Can assessee also claim depreciation on license fees?
Question 11: State with reasons, for the following sub-divisions, whether the following statements are true
or false having regard to the provisions of the Income-tax Act, 1961:
i) For a dealer in shares and securities, securities transaction tax paid in a recognized stock exchange is
permissible business expenditure.
(ii) An existing assessee engaged in trading activities, can claim additional depreciation under Section
32(1)(iia) in respect of new plant acquired and installed in the trading concern, where the increase in value of
such plant as compared to the approved base year is more than 10%.
(iii) It is mandatory for an assessee to claim depreciation under section 32 of the Income-tax Act, 1961.
(iv) The mediclaim premium paid to GIC by Mr. Lomesh for his employees, by a draft, on 27.12.2014 is a
deductible expenditure under section 36.
(v) Under section 35DDA, amortization of expenditure incurred under eligible Voluntary Retirement
Scheme at the time of retirement alone, can be done.
(vi) Where a person follows mercantile system of accounting, an expenditure of ` 25,000 has been allowed
on accrual basis and in a later year, in respect of the said expenditure, assessee makes the payment of `
25,000 through a cheque crossed "& Co.”, disallowance of ` 25,000 under section 40A(3) can be made in
the year of payment.
Question 12: Mr. X furnishes you the following information for the year ended 31.03.2015.
(i) Income from plying of vehicles (computed as per books) (He owned 5 heavy goods vehicle throughout
the year) ` 2,10,400
(ii) Income from retail trade of garments (Computed as per books) (Sales turnover ` 21,70,000) ` 75,000
(iii) He has brought forward depreciation relating to A.Y. 2013-14 ` 1,00,000
Compute taxable income of Mr. X for A.Y .
----------------------------------------------------------------------------------------------------------------------------------CAPITAL GAINS
Question 13: X ` 25,00,000 on 23.02.2015 on transfer of his residential building in a transaction of reverse
mortgage under a scheme notified by the Central Government. The building was acquired in March 1991 for
` 8,00,000. Is the amount received on reverse mortgage chargeable to tax in the hands of X under the head
‘Capital gains’? CII for F.Y 1990-91 – 182, F.Y 2015-16 – 1024.
Question 14: From the following particulars compute income under the head “Capital gains” of Mr. X for
the A.Y -
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Mr. X owned a residential house at Pune. It was acquired on 10.10.1986 for ` 4,00,000. It was sold for `
55,00,000 on 4.11.2014. The State stamp valuation authority fixed the value of the property at ` 65,00,000.
The assessee paid 2% of the sale consideration as brokerage for the sale of said property.
Mr. X acquired a residential house at Mumbai on 10.12.2014 for ` 15,00,000 and deposited ` 10,00,000 on
10.4.2015 in the capital gain bond of Rural Electrification Corporation Ltd. (RECL). He deposited `5,00,000
on 6.07.2015 in the Capital Gain Deposit Scheme in a nationalized bank for construction of additional floor
on the residential house property acquired at Mumbai. CII: F.Y 1986-87 = 140; F.Y: 2014-15 = 1024
Question 15: State, with reasons, whether the following statements are True or False.
(i) Alienation of a residential house in a transaction of reverse mortgage under a scheme made and notified
by the Central Government is treated as "transfer" for the purpose of capital gains.
(ii) Zero coupon bonds of eligible corporation, held for more than 12 months, will be longterm capital assets.
(iii) In the case of a dealer in shares, income by way of dividend is taxable under the head "Profits and gains
of business or profession".
(iv) Where an urban agricultural land owned by an individual, continuously used by him for agricultural
purposes for a period of two years prior to the date of transfer, is compulsorily acquired under law and the
compensation is fixed by the State Government, resultant capital gain is exempt.
Question 16: Mr. X gets a land on the partial partition of his HUF on 1.4.1981. FMV on 1.4.1981 was `
1,10,000. Later on a residential building was constructed by Mr. X on this land at a cost of ` 3,20,000
during the F.Y 2003-04. Both Land and building has been transferred on 2.01.2015 for ` 12 lakhs. Value
adopted by stamp valuation authority, which was not contested by Mr. A `20 lakhs. Value ascertained by
Valuation Officer on reference by the Assessing Officer ` 22 lakhs.
Mr. X seeks your advice as to the amount to be invested in NHAI/RECL bonds so as to be exempt from
clutches of capital gain tax. CII for the financial years 1981-82, 2003-04 & 2014-15 are 100, 463 and 1024
respectively.
-----------------------------------------------------------------------------------------------------------------------------------
OTHER SOURCES
Question 17: Compute amount taxable of the following gifts received by Mrs. X during the previous year
2014-15.
(i) Received a cash gift of ` 22,000 from a friend.
(ii) Received a cell phone worth ` 37,000 as gift from a friend.
(iii) On the occasion of his marriage, ` 70,000 as gift out of which ` 30,000 from relatives and balance from
friends.
(iv) Received cash gift of ` 18,000 from cousin of her mother.
(v) Cash gift of ` 25,000 from the elder brother of her husband's grandfather.
----------------------------------------------------------------------------------------------------------------------------------CLUBBING
Question 18: Mr. X gifts cash of ` 1,00,000 to his brother’s wife Mrs. Y. Mr. Y gifts cash of ` 1,00,000 to
Mrs. X. From the cash gifted to her, Mrs. Y invests in a fixed deposit, income there from is ` 10,000.
Aforesaid ` 10,000 will be included in the total income of ………….
Fill up the blanks.
Question 19: Compute the total income of Mr. & Mrs. X from the following information.
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(a) Salary income (computed) of Mrs.X 2,30,000
(b) Income from profession of Mr.X 3,90,000
(c) Income of minor son B from company deposit 15,000
(d) Income of minor daughter C from special talent 32,000
(e) Interest from bank received by C on term deposit made out of her special talent 3,000
(f) Gift received by C on 30.09.2014 from friend of Mrs.X 2,500
Question 20: Mr. X has four minor children consisting 2 daughters and 2 sons. The annual income of 2
daughters was ` 7,500 (lottery income) and ` 5,000 and of sons was ` 5,500 (Interest on FD) and ` 1,250
(from Interest on FD) respectively. The daughter who was having income of ` 5,000 was suffering from a
disability specified u/s. 80U. Compute the Gross Total income of Mr. X. Salary income of Mr. X ` 4,00,000
(computed).
----------------------------------------------------------------------------------------------------------------------------------SET OFF & CARRY FORWARD OF LOSSES
Question 21: Ms. X, a resident individual, provides the following details of her income / losses for the
year ended 31.3.2015:
(i) Salary received as a partner from a partnership firm ` 7,50,000.
(ii) Loss on sale of shares listed in BSE ` 3,00,000. Shares were held for 15 months and STT paid on sale.
(iii) Long-term capital gain on sale of land ` 5,00,000.
(iv) ` 70,000 received in cash from friends in party.
(v) ` 30, 000, received towards dividend on listed equity shares of domestic companies.
(vi) Brought forward business loss of assessment year 2014-15 ` 12,50,000. The return for assessment year
2015-16 was filed in time.
----------------------------------------------------------------------------------------------------------------------------------DEDUCTION UNDER CHAPTER VIA
Question 22: From the following details Compute the total income of Mr. X for the A.Y (i) Gross Total Income ` 8,00,000 [does not include any income under the head ‘Profits and gains of
business or profession, including interest on saving bank deposit of ` 5,000]
(ii) Deposited ` 70,000 in tax saver deposit in the name of major son in a nationalized bank.
(iii) Paid ` 30,000 towards premium on life insurance policy of his married daughter. Minimum sum assured
` 2,00,000.
(iv) Contributed ` 10,000 to Prime Minister's National Relief Fund.
(v) Donated ` 20,000 to a Government recognized institution for scientific research.
Question 23: Discuss the allowability of the following of Mr. X:
(i) Paid for hospital treatment ` 32,000 and spent nothing for life insurance or for maintenance of
handicapped dependent.
(ii) Incurred for treatment ` Nil in the previous year and deposited ` 15,000 with LIC for maintenance of
handicapped dependant.
(iii) Incurred ` 10,000 for treatment and ` 15,000 was deposited with LIC for maintenance of handicapped
dependant.
Question 24: Mr. X, an individual, made payment of health insurance premium to GIC in an approved
scheme. Premium paid on his health is ` 10,000 and his spouse’s health is ` 15,000 during the year 2014-15.
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He also paid health insurance premium of ` 25,000 on his father’s (age 68) health and not dependent on him.
The payments have not been made by cash. Compute the amount of deduction under section 80D, available
to Mr. X for the assessment year .
----------------------------------------------------------------------------------------------------------------------------------TAX DEDUCTION AT SOURCE
Question 25: Mr. X is engaged in manufacture and wholesale trade furnishes you the following information
:
Total turnover for the financial year 2013-14 ` 105,00,000 and for 2014-15 ` 85,00,000. State whether tax
deduction at source provisions are attracted for the below said expenses incurred during the financial year
2014-15:
i) Interest paid to UCO Bank ` 41,000
ii) Contract payment to Mr. Y (2 contracts of ` 12,000 each) 24,000
iii) Shop rent paid (one payee) ` 1,90,000
iv) Commission paid to Mr. A ` 7,000
Question 26: Mr X, a landlord, derived income from rent from letting a house property to M/s Y
Corporation Ltd. of ` 1,00,000 per month. Mr. X charged service tax @ 12.36% on lease rent charges.
Calculate the deduction of tax at source (TDS) to be made by M/s Y Corporation Ltd. on payment made to
Mr. X.
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SOLUTIONS TO REVISIONARY TEST PAPER 5
SALARIES
Answer to Question 1: Computation of Salary of Mr. X for the P.Y 2014-15
`
Particulars
i) Basic Salary [Note 1]
2,04,000
Bonus
18,000
ii) Medical facility to family members at owned hospital -Exempted
iii) Perquisite value of use of movable assets- 10% of 1,80,000
iv) Perquisite value of gift – taxable in excess of ` 5,000
v) Perquisite value of Education facility –
For A- NIL – since cost of education in similar institution does not exceeds ` 1,000.
For B- fully taxable since cost of education in similar institution exceeds ` 1000
[case of Delhi Public School] – 1200 x 12
vi) Reimbursement of Salary of watchman – taxable perquisites[1500 x 12]
Taxable Salary
NIL
18,000
5,000
14,400
18,000
2,77,400
Note 1: Basic salary For 2014-15
1.7.2012 to 30.6.2013 = 12,000
1.7.2013 to 30.6.2014 = 14,000
1.7.2014 to 30.6.2015= 18,000
For P.Y 2014-15 = April 14 to June 14 – 14,000 x 3 = 42,000
July 14 to March 15 –18,000 x 9 = 1,62,000
2,04,000
Answer to Question 2: Computation of Income Taxable under the head Salaries for the P.Y 2014-15
`
(a) Basic Salary
3,60,000
(b) D.A – 15% of 3,60,000
54,000
(c) Perquisite value of Rent Free Accommodation [Note 1]
63,000
(d) Perquisite value of Laptop provided for personal use- exempted
NIL
(e) Perquisite value of the medical treatment
of dependent brother . [ ` 15,000 exempted balance taxable]
5,000
(f) Conveyance allowance of ` 1,200 per month.
Exempted upto amount incurred for official purpose
NIL
(g) Premium on Personal accident policy ` 5,000. Exempted perquisites
NIL
(h) Telephone allowance- fully taxable [500 x 12]
6,000
(i) Medical insurance premium of his family ` 10,000 – Exempted perquisites
NIL
(j) Employer’s Contribution to RPF in excess of 12 % taxable
[ 3% of (3,60,000 +54,000)]
12,420
Taxable salary
5,00,420
Note 1:
Salary for the purpose of RFA = 3,60,000 + 54,000 + 6,000 = 4,20,000
Perquisites Value = 15% of salary (15% of 4,20,000) = 63,000; or Rent paid by the employer i.e, 1,44,000;
whichever is lower = = ` 63,000
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----------------------------------------------------------------------------------------------------------------------------------Answer to Question 3: Computation of Taxable Salaries
Assessee: Mr. X
A.Y 2015-16
P.Y 2014-15
`___
`
Particulars
Basic salary [12,000 x10]
Taxable allowances:
Dearness Allowances [6000 x 10]
City compensatory allowance [1000 x 10]
Night duty allowance [1000 x 10]
1,20,000
60,000
10,000
10,000
Pension – uncommuted pension fully taxable [2400 x 2]
Leave salary received at retirement
Less: least of the following Exempted u/s. 10(10AA)
i) Amount actually received
1,00,000
ii) Last 10 months total salary
1,20,000
iii) Leave encashment as per IT
60,000
Gross leave = 30 days x 5 = 150 days
Less: leave availed
Nil_____
Unavailed leave
150 days
12000/30 x 150 = ` 60,000
iv) maximum limit
3,00,000
Gratuity received
Less: least of the following exempted u/s. 10(10)
i) Amount actually received
4,800
1,00,000
60,000
1,50,000
40,000
30,000
1,20,000
1,50,000
ii) ½ x Avg. salary of last 10 months x completed year of service
[1/2 x 12,000 x 5]
30,000
iii) Maximum limit
10,00,000
Taxable Salaries
3,64,800
HOUSE PROPERTY
Answer to Question 4:
Let out unit [Note 1]
Self occupied Unit [Note 2]
Taxable Income From House Property
X
1,02,000
(30,000)
72,000
Y___
1,02,000
(30,000)
72,000
Note (1): Let out unit [6/8: 75% of the total Area]
Gross Municipal Value [75% of 12,00,000]/Expected Rent
Annual rent 10,000 x 12 X 6
7,20,000
Less: Vacancy [10,000 x 4]
40,000
Gross Annual Value
[Actual rent is lower than expected rent but not due to vacancy,
Therefore Expected rent is the GAV]
9,00,000
6,80,000
9,00,000
Less: Municipal tax paid [20% of 9,00,000]
1,80,000
Net Annual value
7,20,000
Less: Standard Deduction @ 30% u/s. 24(a)
2,16,000
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Interest on loan (75% of 4,00,000)
3,00,000
5,16,000
2,04,000
Share of Mr. X (50%) ` 1,02,000
Share of Mr. Y (50%) ` 1,02,000
Note 2: Self occupied unit [2/8- 25% of Total Area]:
Net Annual value
Less: Interest on loan u/s. 24(b)
25% of 4,00,00 x 50% = 50,000 for each co-owner
But maximum limit for each co-owner
Income From self occupied unit
Nil
NIL
30,000
(30,000)
30,000
(30,000)
Note 3: Repair and Depreciation is not allowed as deduction under House property.
PROFIT OR GAINS FROM BUSINESS OR PROFESSIONS
Answer to Question 5:
(i) Since the turnover of the assessee does not exceeds ` 100 lakhs, therefore the assessee is eligible to opt
presumptive taxation scheme u/s. 44AD and his business income u/s. 44AD should be 8% on 98,50,000 = `
7,88,000.
(ii) In case the assessee does not opt for the presumptive taxation scheme u/s. 44AD, and claims that his
income under normal provisions is lower than the income under presumptive taxation scheme i.e., `
5,90,000 < ` 7,88,000, then the assessee is required to maintain his books of accounts as per section 44AA.
Further, he is also required to gets his accounts audited u/s. 44AB of the Income Tax Act, since his total
income exceeds the basic exemption limit i.e, ` 2,00,000.
(iii) If the assessee opts for the presumptive taxation scheme u/s. 44AD: the due date would be 31st July,
2014.
If the assessee opt for normal provisions by claiming income under presumptive taxation scheme is higher ,
then he has to get his accounts audited u/s. 44AB and therefore the due date of filing of returns would be 30th
September, 2015.
Answer to Question 6: (a) Section 41(4) provides that if bad debt was allowed as deduction earlier and
latter on its recovery is taxable. However, if earlier it was not allowed for deduction then now its recovery is
not taxable. Therefore, in the given case the recovery amount is not taxable.
(b) Section 40(a)(ia):- The Finance (No.2) Act, 2014 has extended the scope in relation to any payment
instead of some specified payment as provided before. Now, the amended sections reads as under Where any sum is payable to resident, then tax must be deducted at source as per the TDS provisions and
paid within the previous year or return filing date.
If the above condition is satisfied then the expenditure shall be allowed as deduction. If the condition is not
satisfied then 30% of the expenditure shall not be allowed as deduction. However, if paid in subsequent year,
then it shall be allowed as deduction in such subsequent year.
Since the assessee fails to deposit the tax therefore 30% disallowance will attracted in the F.Y 2014-15.
(c) As per section 35DDA 1/5th of VRS expenditure shall be allowed as deduction over 5 successive years.
Therefore, in the given case deduction for P.Y 2014-15 is allowed ` 20 lakhs [1/5th X 100 lakhs]
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Answer to Question 7: Student should first write the provisions of section 35AD. Accordingly, the
computation is as underNet profit before depreciation
100 lakhs
Less: Deduction allowed u/s. 35AD
Pre-commencement expenditure capitalized on 1.4.2014
Land: not allowed
NIL
Building: 100% of 180 lakhs =
180 lakhs
Current year expenditure
Plant & Machinery @ 100% of 40 lakhs = 40 lakhs
Business loss
To be c/f for unlimited period u/s. 73A for set off
with income of any specified business.
(220 lakhs)
120 lakhs
Note: No depreciation shall be allowed u/d. 32, since the entire cost of plant and machinery and building
qualifies for deduction u/s. 35AD.
Answer to Question 8:
Computation of income from PGBP
PARTICULARS
AMOUNT
Net profit as per P/L a/c
AMOUNT
5,00,000
Add: Items debited but not allowed
State VAT penalty –
[Disallowed under explanation to sec. 37(1)]
5,000
Depreciation as per books
2,00,000
Excess commission to sister
14,000
(Excess payment to relatives disallowed u/s40A(2)
Interest on bank loan- disallowed u/s. 43B
40,000
2,59,000
7,59,000
Less: Items credited but not an income or
Expenses allowed but not debited
Dividend from domestic companies-exempted
Income tax refund – not taxable
Salary paid but not recorded
Depreciation as per Income Tax Act (Note 1)
Income from business and profession
NOTE 1 – Calculation of depreciation
Opening WDV
Add
Additions during the year
For more than 180 days – 2,00,000
Less than 180 days – 2,00,000
Less
Sale proceeds during the year
Depreciation allowable
1,80,000
15,000
60,000
2,10,000
4,65,000
2,94,000
12,000,00
4,00,000
16,00,000
1,00,000
15,00,000
13,00,000 x 15%
2,00,000 x 7.5%
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1,95,00
15,000
2,10,000
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Note 2: In case cash payment is made to transporter, then disallowances u/s. 40A(3) is attracted if the
amount exceeds ` 35,000. Since in the given case payment does not exceed ` 35,000, therefore allowable as
deduction. Since, it is already debited to P/L A/c, no adjustment is required.
Answer to Question 9:
(a) True: Disallowances u/s. 40A(3) attracts where payment in excess of ` 20,000 is made other than through
A/c. payee cheque. Therefore, payment through crossed cheque is disallowed u/s. 40A(3).
(b) (i) True : As per section 36(1)(vii), in order to get deduction for bad debts the assessee is required to
write off such amount in the books first.
(ii) True: Section 40(a)(ia) provides that failure to deduct tax at source from rent or royalty payable to a
resident, in accordance with the provisions of TDS, will result in disallowance of such expenditure.
Answer to Question 10: First write provisions of Section 35ABB. Accordingly, the deduction u/s. 35ABB
are as underFor A.Y 2015-16: Amount paid/un expired lease period = 3,70,000/10 = ` 37,000 (Allowed for 10 years
starting from P.Y 14-15)
For A.Y 2016-17: ` 37,000 + Amount paid/un expired lease period = ` 37,000 + 11,70,000/9 = ` 1,67,000
(allowed for 9 years starting from P.Y 2015-16)
Note: Depreciation u/s. 32 is not allowed where deduction u/s. 35ABB is allowed.
Answer to Question 11:
(i) True : Since, it is incurred in the course of business, therefore allowable.
ii) False : Since assessee is engaged in trading activities and not in manufacturing activity, therefore
additional depreciation is not allowed.
(iii) True : According to the Explanation 5 to section 32(1), allowance of depreciation is mandatory.
Therefore, depreciation has to be provided mandatorily while calculating income from business / profession
whether or not the assessee has claimed the same while computing his total income.
(iv) True : Section 36(1)(ib) provides deduction in respect of premium paid by an employer to keep in force
an insurance on the health of his employees under a scheme framed in this behalf by GIC or any other
insurer. The medical insurance premium can be paid by any mode other than cash, to be eligible for
deduction under section 36(1)(ib).
(v) False : Amortisation of VRS expenditure is allowed as 1/5th over 5 years from the year in which payment
is made and not when employee retires.
(vi) True : As per section 40A(3), in the case of an assessee following mercantile system of accounting, if an
expenditure has been allowed as deduction in any previous year on due basis, and payment exceeding `
20,000 has been made in the subsequent year otherwise than by account payee cheque or account payee bank
draft, then the payment so made shall be deemed to be the income of the subsequent year in which such
payment has been made.
Answer to Question 12:
I) Profit or gains from Business or professions
`
a) Plying of vehicles:
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Normal provisions ` 2,10,400
As per section 44AE: 5 x 7500 x 12= ` 4,50,000
Whichever is lower [Note 1]
2,10,400
b) Income from retail trade
Normal provisions ` 75,000
As per sec. 44AD: 21,70,000 x 8% = 1,73,600; lower
[Note 1]
75,000
2,85,400
Less: B/f. unabsorbed depreciation of A.Y 2012-13
To be set off against normal income
Income from Business or profession
1,00,000
85,400
Note 1: Since the normal income is lower, therefore assessee Must opt for normal income. However, he is
required to Maintains accounts u/s. 44AA and gets his accounts audited as per section 44AB.
----------------------------------------------------------------------------------------------------------------------------------CAPITAL GAINS
Answer to Question 13: As per section 47(xvi), any transfer of a capital asset in a transaction of Reverse
Mortgage under a scheme made and notified by the Central Government will not be regarded as a transfer.
Therefore, capital gains tax liability is not attracted. Further, Section 10(43) provides that the amount
received by a senior citizen as a loan, either in lump sum or in installments, in a transaction of Reverse
Mortgage would be exempt from income tax. Therefore, the amount received by X in a transaction of
Reverse Mortgage of his residential building is exempt under section 10(43).
Answer to Question 14: Computation of taxable Capital gains
Nature of Assets: Residential House
Period of Holding: 10.10.1986 to 4.11.2014 [Long-term]
Particulars
Full value of consideration
[Since the sale value is lower than the value adopted or assessed
or assessable by the stamp valuation authority, therefore as per
section 50C, the value of stamp valuation authority should
be considered]
Less: (a) Selling expenses [2% of 55,00,000]
(b) Indexed Cost of Acquisition
[4,00,000 x 1024/140]
A.Y- 2015-16
P.Y- 2014-15
`
`
65,00,000
1,10,000
29,25,714
Gross Long term capital gains
30,35,714
34,64,286
Less: Exemptions
1) Under section 54:
i) Residential house purchased at Mumbai
ii) Amount Deposited in CGDS before return filing date
for construction of additional floor on the residential house
purchased at Mumbai
15,00,000
5,00,000
20,00,000
2) Under section 54EC:
Amount deposited in the bonds of RECL within 6 months
Taxable Long-term capital Gains
280
10,00,000
30,00,000
4,64,286
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Answer to Question 15:
i) False : As per section 47(xvi), such alienation in a transaction of reverse mortgage under a scheme made
and notified by the Central Government is treated as exempted transfer.
(ii) True : Section 2(42A) defines the term 'short-term capital asset'. Under the proviso to section 2(42A),
zero coupon bond held for not more than 12 months will be treated as a short-term capital asset.
Consequently, such bond held for more than 12 months will be a long-term capital asset.
(iii) False : Dividend, if not exempted shall always be taxable under the head “Other Sources”.
(iv) False: As per section 10(37), where an individual owns urban agricultural land which has been used for
agricultural purposes for a period of two years immediately preceding the date of transfer, and the same is
compulsorily acquired under any law and the compensation is determined or approved by the Central
Government or the Reserve Bank of India, resultant capital gain will be exempt. In this case, the
compensation has been fixed by the State Government and hence the exemption will not be available.
Answer to Question 16: Computation of Capital Gains of Mr. X for the A.Y
Nature of Capital Asset: Land & building
Period of holding: Land: 1.4.1981 to 2.01.2015 (Long-term)
Building: 2003-04 to 2.01.2015 (Long-term)
`
`
Full value of consideration
[Deemed value as per section 50C]
20,00,000
Less: Indexed Cost of Acquisition
Land: 1,10,000 x 1024/100
Building: 3,20,000 x 1024/463
Lon-term capital gains
11,26,400
7,07,732
18,34,132
1,65,868
Amount to be invested in NHAI / RECL bonds ` 1,65,868 in order to get full exemptions.
Notes :
1. In the case of Land or Building or both where the value of Stamp Valuation authority assessed or assessable or
adopted exceeds the Sales Value then the Value of Stamp Valuation authority shall be regarded as Full value of
consideration. Further, In case the assessee requests the A.O. to get FMV of the asset done then the Full Value of
Consideration shall be the value of Stamp Valuation authority or FMV, whichever is lower. Therefore, in the given
case the ` 20 lakh is considered as FVC.
2. Transfer of assets to members by HUF on partition is exempted transfer. Further, as per section 49(1) the
cost of land for Mr. X is cost of previous owner, but since asset was acquired before 1.4.1981, therefore
original cost or FMV on 1.4.1981, higher is taken. Further, period of holding and Indexation also to be
considered as that of previous owner. Since date and cost of acquisition to the previous owner are not given,
fair market value as on 1.4.1981 is taken as the cost and indexed.
3. Section 54EC provides exemption is respect of long-term capital gains, if the assessee invest within 6
months in the bonds of NHAI/RECL from the date of transfer of the assets.
----------------------------------------------------------------------------------------------------------------------------------INCOME FROM OTHER SOURCES
`
Answer to Question 17:
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i) Cash gift from friend – taxable
ii) Received cell phones- Not taxable[Since cell phone is not an assets u/s. 56(2)(vii)]
iii) Gift received on the occasion of marriage – Exempted.
[Exempted whether received from relatives or friends]
22,000
NIL
iv) Gift received from mother’s cousin – taxable
18,000
v) cash gift from elder brother of husband’s Grandfather – taxable
since not a relative
Total
25,000
65,000
NIL
Since the aggregate cash gift exceeds during the year ` 50,000, therefore the entire amount is taxable u/s.
56(2)(vii).
----------------------------------------------------------------------------------------------------------------------------------CLUBBING
Answer to Question 18: Mr. Y [ case of cross transfer]
Answer to Question 19: Section 64(1A) provides that, the income of a minor child has to be clubbed in the
hands of that parent whose total income (excluding the income of the minor) is higher. In the given case,
total income of Mr. X excluding the income of minor child is higher than Mrs. X, therefore the income of
minor child has to be clubbed in the hands of Mr. X after giving an exemption of ` 1500 for each minor
child u/s. 10(32).
Further, income of minor child earned through special skill/ talent is not to be clubbed but taxable in the
hands of such minor child. Therefore, in the given case income of minor daughter earned though special
talent will not be clubbed in the hands of Mr. X but it is taxable in the hands of daughter C. However,
interest from bank deposit has to be clubbed even when deposit is made out of income arising from
application of special talent.
Accordingly, the computation is as underParticulars
Mr. X
Mrs. X
Daughter C
1. Income from salaries
2. Income from profession
3. Income from other sources
Minor son BIncome from company deposits
Less: Exemption u/s. 10(32)
3,90,000
2,30,000
-
32,000
-
-
2,30,000
32,000
15,000
1,500
Minor daughter C:Interest on bank deposits
3,000
Cash Gift from friend
nil
Of Mrs. X - not taxable
[Since the aggregate amount does
not exceeds ` 50,000]
______
3,000
Less: Exemption u/s. 10(32)
1,500
Gross total income
13,500
1,500
4,05,000
Answer to Question 20: Computation of Gross Total Income of Mr. X
`
282
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1. Income from Salaries
2. Income from other sourcesDaughter 1
Less: Ex. u/s. 10(32)
4,00,000
7,500
1,500 5,500
Daughter 2 – would not be clubbed
NIL
Son 1: Interest on FD
Less: Ex. u/s. 10(32)
5,000
1,500 3,500
Son 2: Interest On FD
Less: Ex. u/s. 10(32)
Gross Total Income
1,250
1,250
Nil
9,000
4,09,000
Note: The income of daughter suffering from disability specified under section 80U is not to be clubbed with
the income of Mr. X.
----------------------------------------------------------------------------------------------------------------------------------SET OFF & CARRY FORWARD OF LOSSES
`
Answer to Question 21:
Income from Business/professions
Salary received from partnership firm
[assuming the firm has got full deduction
In computing Business Income]
Less: B/f. business loss of A.Y 14-15-` 12,50,000
Balance to be c/f ` 5,00,000
`
7,50,000
7,50,000
Capital Gains
Long-term capital gain on sale of land
Long term capital loss on shares (STT) paid
Benefit of loss is not allowed, since income is
Exempted. Neither set off, nor c/f.
NIL
5,00,000
NIL
________
Other sources
Cash gift from friend- taxable u/s. 56(2)(vii)
Since exceeds ` 50,000.
5,00,000
70,000
Dividend from Indian company- Exempted u/s. 10(34)
NIL__
70,000
Gross Total income
5,70,000
----------------------------------------------------------------------------------------------------------------------------------DEDUCTION UNDER CHAPTER VIA
Answer to Question 22: Computation of Total Income of Mr. X
`
Gross Total Income
Less: Deduction under chapter VIA
i) Under section 80C
Tax saving deposit - [in name of son not allowed,
only in the name of assessee is allowed
NIL
LIC premium of married daughter 30,000 20,000
20,000
(Subject to 10% of 2,00,000)
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ii) u/s. 80G
100% of amount contributed to
Prime minister National relief fund
10,000
iii) u/s. 80GGA
100% of amount contributed for scientific research
(Assuming payment is made by mode other than cash)
iv) u/s. 80TTA
Interest on bank saving A/c.
Maximum
Lower of the above
Total Income
20,000
5,000
10,000
5,000
55,000
7,45,000
Answer to Question 23: In all the above cases deduction allowable u/s. 80DD to Mr. X shall be ` 50,000. In
the case of dependant with severe disability, the deduction allowable is ` 1,00,000. It is assumed that
dependent has not claimed deduction u/s. 80U.
Answer to Question 24: As per section 80D,the assessee will be eligible to get deduction on payment of
health insurance premium to GIC in a medical insurance scheme approved by the Central Government. The
premium is paid otherwise than by way of cash and hence qualifies for deduction under section 80D.
i) For self and Spouse (10,000 + 15,000 = 25,000)
Maximum allowed
` 15,000
ii) For father (whether dependent or not) ` 25,000
maximum allowed
` 20,000
Total Deduction u/s. 80D
` 35,000
----------------------------------------------------------------------------------------------------------------------------------TAX DEDUCTION AT SOURCE
Answer to Question 25: Since the payer is an Individual, therefore he can only be liable to deduct tax at
source if during the preceding year i.e. 2013-14, the turnover exceeds ` 100 lakhs (means the assessee is
required to tax audit u/s. 44AB during 2013-14). In the given case, the turnover of the assessee during 201314 is ` 105 lakhs, therefore in 2013-14 the assessee is required to tax audit u/s. 44AB. Hence, responsible to
deduct tax at source as per the provisions of the Act.
i) Interest paid to UCO Bank: NIL. The provisions of TDS is not attracted where payment is made to Banks
ii) Contract payment of ` 12,000 each. Total ` 24,000: No deduction u/s. 194C, since section 194C is
attracted if the single contracts exceeds ` 30,000 or the aggregate payment exceeds ` 75,000 during the year.
iii) Shop Rent paid to one payee – TDS u/s. 194I attracts @ 10% on ` 1,90,000= 19,000, since the amount of
rent exceeds ` 1.8 lakhs.
iv) Commission paid: TDS u/s. 194H @ 10% on ` 7,000 i.e, ` 700, as the amount of commissions exceeds `
5,000.
Answer to Question 26: Since the aggregate payment during the year exceeds ` 1,80,000 i.e, in the given
case ` 12,00,000. Therefore TDS u/s. 194I gets attracted in the case. Further, as per Circular No. 4/2008
dated 28/4/2008, Tax has to be deducted excluding the amount of service Tax.
Accordingly, TDS per month would amount to ` 10,000. [` 1,00,000 @ 10%]
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REVISIONARY TEST PAPER 6 (SOLVED)
Question 1: R who does not maintain books of account for the year ended 31-03-2015 requests you to
compute his total income and the tax payable thereon for the assessment year from the following:
(i) Basic salary
CCA
HRA
20,000 p.m.
1,000 p.m.
5,000 p.m.
(ii) R resides in Chennai paying a rent of `6,000 p.m.
(iii) R is paid an education allowance of `500 p.m. per child for all the three of his children. Actual
expenses (tuition fees only) amounts to `15,000, `10,000 and `5,000 respectively.
(iv) Employer’s contribution to Staff Group Insurance Scheme `5,440.
(v) He brought a heavy goods vehicle on 07-06-2014 and has been letting it on hire from the same date.
He declares as income of `34,900 from the same.
(vi) Interest from company deposits is `15,000 and bank interest on saving A/c. is `5,000.
(vii) Interest is payable on bank loans availed for buying the truck and making company deposits as
follows:
Purpose
Date of Loan
Amount
Interest rate
Truck purchase
01.04.2014
5,00,000
10% p.a
Company deposit
01.10.2014
1,00,000
9% p.a
(viii) Loss carried forward arising from speculating in shares during the preceding previous year and
eligible for setoff is `1,00,000.
(ix) R has invested `12,000 in notified equity linked saving scheme of UTI, `52,000 In NSC , `9,000 as
life insurance premium on his own life (sum assured `80,000) and `15,000 towards pension fund of LIC.
Question 2: Compute the total income and tax liability of Harish for the A.Y.2015-16 from the following
particulars:
Particulars
`
(1) Income from house property (computed)
3,15,000
(2) Income from textile business before adjusting the following:
1,20,000
(a) Business loss brought forward
80,000
(b) Current depreciation
40,000
(c) Unabsorbed depreciation brought forward
1,20,000
(3) Short-term capital gains on sale of land
1,25,000
(4) Long-term capital loss on sale of shares sold through a recognised
stock exchange (securities transaction tax paid)
25,000
(5) Long term capital gain on sale debentures
50,000
(6) Dividend on shares held as stock-in-trade
5,000
(7) Dividend from a company carrying on agricultural operation
7,000
(8) Income from growing and manufacturing coffee (cured and roasted)
80,000
During the previous year 2014-15, Harish has donated `50,000 to an approved Local Authority for
promotion of family planning and repaid `90,000 towards principal portion of housing loan.
Question 3: Mr. Raman is a co-owner of a house property along with his brother.
Municipal value of the Property
` 1,60,000
Fair Rent
` 1,50,000
Standard rent under Rent Control Act
` 1,70,000
Rent received
` 15,000 p.m.
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The loan for the construction of this property is jointly taken and the interest charged by the bank is ` 25,000
out of which ` 21, 000 have been paid. Interest on the unpaid interest is ` 450. To repay this loan, Raman
and his brother have taken a fresh loan and interest charged on this loan is ` 5, 000.
The Municipal Taxes of `5,100 have been paid by the tenant.
Compute the income from this property chargeable in the hands of Mr. Raman.
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SOLUTIONS TO RTP 6
Solution to Question 1: Computation of total income and tax payable by R for the A.Y. 2015-16 .
`
Income from salary
(1) Basic salary (20,000 x 12)
(2) CCA (`1,000 x 12)
(3) HRA actual amount received
Less: Exempt: Minimum of following (a) 50% of salary
1,20,000
(b) Rent paid – 10% of salary
(`72,000- 24,000)
48,000
(c) Actual HRA received
60,000
(4) Education allowance (`500 x 5 x 12)
Less: Exempt ( (`100 x 2 x 12)
(5)staff group insurance – Exempt
`
2,40,000
12,000
`
60,000
48,000
18,000
2,400
Less: Deduction
12,000
15,600
Nil____
2,79,600
NIL__
2,79,600
75,000
Income from business
Presumptive income u/s 44AE (7500 x 10)
Income from other sources
Interest on Company deposits
15000
Less: Interest paid
4500
Bank interest
Gross total income
Less: Deductions
(1) U/s 80C
(i)Tuition fee
25000
(ii)Equity linked saving scheme
12000
(iii)NSC
52000
(iv)LIP (Limited to 10% of sum assured)
8000
(2) U/s 80 CCC
Pension fund `15,000
However as per section 80CCE, the aggregate of deduction
under section 80C and 80CCC cannot exceed `1,50,000
(3) U/s 80 TTA
Interest from saving bank
Total income
Tax on ` 2,53,000
On first `2,50,000
Nil
Balance `3,000@10%
300
300
Less: Rebate u/s. 87A
300
NIL
Solution to Question 2: Computation of total income of Mr. Harish for A.Y
Particulars
`
Income from house property
287
10,500
5,000
15,500_
3,70,100
97,000
15,000
112000
5000
1,05,000
`
1,17,000
2,53,000
-----------
`
3,15,000
KS: The Tax-Age
VIVEK SONI
Profits and gains of business or profession
Income from textile business
Income from coffee business (40% of `80,000)
Less: (1) Current year depreciation
(2) Brought forward business loss
Capital Gains
Short term capital gain-land
Long-term capital gain- debentures
Income from other resources
Dividend on shares held as stock-in-trade [Exempt u/s 10(34)]
Dividend from agricultural company [Exempt u/s 10(34)]
Less: Unabsorbed depreciation
Gross total income
Less:
Deduction u/s 80C – Repayment of housing long
Deduction u/s 80G @ 100% of `50,000 subject to
[10% of (4,02,000 – 90,000 (80C) – 50,000(LTCG))
Total income
1,20,000
32,000
40,000
80,000
1,52,000
1,20,000
32,000
1,25,000
50,000
1,75,000
-
-
5,22,000
1,20,000
4,02,000
90,000
26,200
1,16,200
2,85,800
Computation of tax liability
Particulars
Tax on non-agricultural income plus agricultural income i.e. `48,000
(i.e. 60% of `80,000) + `2,85,800 = `3,33,800
Tax on LTCG of `50,000 @ 20%
Tax on balance income `2,83,800
Less: Tax on agricultural income plus basic exemption limit i.e.
(`48,000 + `2,50,000) = `2,98,000
Tax payable
Less: Rebate u/s. 87A
`
10,000
3,380
`
13,380
__4,800
8,580
2,000
6,580
Add: Education Cess @ 2%
132
Add: Secondary and higher education Cess @ 1%
66
Total Tax payable
6778
Total tax payable (rounded off)
6780
Note: Loss from an exempt source cannot be set-off against income from a taxable source. Therefore, longterm capital loss on sale of shares cannot be set-off against long-term capital gains on sale of debentures.
Solution to Question 3:
`
(a) Expected Rent:
Higher of MV or Fair rent but subjected to Standard rent
1,60,000
(b) Actual rent
1,80,000
Gross Annual value ½ of higher of “a” or “b” (½ of 1,80,000)
Less:
Standard deduction @ 30%
27,000
Interest on borrowed capital (1/2 of 25,000+5,000)
15,000
Income from house property
288
`
90,000
42,000
48,000
KS: The Tax-Age
VIVEK SONI
REVISIONARY TEST PAPER 7 (SOLVED)
Question 1: Mr. Dinesh Karthik, a resident individual aged 45, furnishes the following information
pertaining to the year ended 31.3.2015:
(i) He is a partner in Badrinath & Co. He has received the following amounts from the firm:
Interest on capital at 15%
` 3, 00, 000
Salary as working partner (at 1% of firm’s sales)
` 90, 000
(ii) He is engaged in a business in which he manufactures wheat. The Profit and Loss account pertaining to
this business (summarized form) is as under:
To
Salaries
Bonus
Car expenses
Machinery repairs
Advance tax
Depreciation:
Car
Machinery
Net Profit
`
By
`
1, 20, 000 Gross profit
12, 50, 000
48, 000 Interest on Bank FD
(Net of TDS 5, 000)
45, 000
50, 000 Agriculture Income
60, 000
2, 34, 000 Pension from LIC Jeevandhara 24, 000
70, 000
3, 00, 000
1, 25, 000
4, 32, 000
13, 79, 000
__________
13, 79, 000
Depreciation as per IT Rules ` 2,74,750.
One-fifth of the car expenses are towards estimated personal use of the assessee.
(iii) In March, 2009, he had sold a house at Chennai. Arrears of rent relating to this house amounting to ` 75,
000 was received in February, 2015.
`
(iv) Details of his Savings and Investments are as under:
Life Insurance premium for policy in the name of his major son employed in LMN Ltd.
at a salary of ` 6 lakh p.a. sum assured ` 4, 00, 000
50, 000
Contribution to Pension Fund of National Housing Bank
70,000
Medical Insurance premium for his father aged 70, who is not dependent on him
22, 000
(v) Rent received from vacant site ` 60,000
You are required to compute the total income of Mr. Dinesh Karthik for the assessment year and the tax
payable by him.
Question 2:Dr. Shuba is medical practitioner. Her age is 60 as on 1 Jan 2015. The Receipts
account of 2014-15 of her is as under:
To
By
Balance B/f :
10,000 Purchase of commercial vehicle
Receipts from sale of Medicine
2,50,000 (Before 30 Sep. 2014)
Consultation fee
50,000 Drawing
Visiting fee
2,00,000 Deposit in bank for 5 years
289
and payments
4,00,000
2,50,000
1,50,000
KS: The Tax-Age
Lecturers
Family pension
Saving bank interest
Loan from bank
Share from HUF
Agriculture income
Income from lottery
(net after deduction of
TDS @ 30%)
VIVEK SONI
5,000
2,80,000
1,000
3,00,000
50,000
1,00,000
35,000
Surgical instrument purchased
Before 30 Sep. 2014
Installment of loan paid
(including interest ` 22,333)
Medical insurance premium
Installment of housing loan
(Principal component ` 48,000)
Advance tax paid
Purchase of medicine
Payment for medical journal
Vehicle expenses
Balance C/f :
Total 12,81,000
50,000
1,21,000
32,000
1,08,000
20,000
47,000
5,000
50,000
48,000
Total 12,81,000
Other relevant information is as under :
(i)
She resides in her own house which was constructed in 1998 with a loan from LIC Housing of
10,00,000 out of which 6,00,000 was still due. She got it refinanced from SBI on 01.04.11 at the rate
of10%. One fourth portion of the house is used for clinic purposes. (WDV as on 1.4.2014 ` 2,82,430)
(ii)
She invested in term deposit 1,50,000 in Bank of Baroda on 01.07.14 for a period of 5 years in the
name of her minor daughter at 9% interest p.a.
(iii)
She purchased a commercial vehicle on 1 July 2014 at 4,00,000. A loan of 3,00,000 was taken to
buy the van at 8% interest. One fourth use of vehicle is estimated to be personal.
(iv)
She paid medical insurance premium for herself of 16,000 and for her mother 16,000. Her mother is
dependent on her.
(v)
She got her share from HUF’s income of 50,000.
Compute Total Income.
Question 3: Mr. Raj Kumar sold a house to his friend Mr. Dhruv on 1/11/2014 for a consideration of
`25,00,000. The Sub-Registrar refused to register the document for the said value, as according to him,
stamp duty had to be paid on `45,00,000, which was the Government guideline value. Mr. Raj Kumar
preferred an appeal to the Revenue Divisional Officer, who fixed the value of the house as ` 32,00,000
(`22,00,000 for land and balance for building portion). The differential stamp duty was paid, accepting the
said value determined. Assuming that the fair market value is ` 32,00,000, what are the tax implications in
the hands of Mr. Raj Kumar and Mr. Dhruv for the assessment year ? Mr. Raj Kumar had purchased the land
on 1st June, 2007 for ` 5,19,000 and completed the construction of house on 1st October, 2012 for `
14,00,000.
Question 4: Rao & Jain, a partnership firm consisting of two partners, reports a net profit of ` 7,00,000
before deduction of the following items
(i) Salary of ` 20,000 each per month payable to two working partners of the firm (as authorised by the deed
of partnership).
(ii) Depreciation on plant and machinery under section 32 (Computed) ` 1,50,000
(iii) Interest on capital at 15% per annum (as per the deed partnership). The amount of capital eligible for
interest `5,00,000
Compute the business Income of the Firm.
290
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VIVEK SONI
Question 5: Mr. X (age 45) is a resident individual. His Profit and Loss account for the year ending 31 st
March, 2015 is given below:
To
Amount
By
Amount
`
`
General charges
35, 650
Gross Profit
4,64,660
Fire Insurance
3, 500
Commission
68,000
Safety salary
1, 12, 560
Rent received
37,500
Donation to political party
1, 000
Interest on debentures
Wealth tax
2, 400
(Net amount ` 22, 450
Depreciation
1, 25, 656
plus TDS ` 2,550)
25,000
Administrative expenses
42, 500
Agricultural income
45,000
Advance Tax
17, 000
Short-term Profit on sale
Net Profit
3, 44, 894
on investment (STT)
33,200
Dividend from
Indian Company
11,800
6, 85, 160
6,85, 160
i) Depreciation has been calculated as per the Income Tax Rules at ` 75, 000.
ii) He has deposited ` 35, 000 in a notified scheme under Post Office Time Deposit Rules, 1981 for five year
time.
iii) Income tax department refunds ` 42,580 (including interest of ` 1, 470) which were directly credited in
his personal savings account.
iv) He incurred expenditure of ` 40,000 on treatment of his dependent father who was suffering from
specified disease as defined in rule 11DD of Income Tax Rules, 1962. The payment of medical expenses was
made by cheque and an amount of ` 7,500 was reimbursed to him by an insurance company.
v) Bad debt of a business which was discontinued in earlier years, recovered during the year ` 15, 000.
Compute total Income and Tax payable there on by Mr. X for the assessment year .
----------------------------------------------------------------------------------------------------------------
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VIVEK SONI
SOLUTION TO RTP 7
Solution to Question 1:
Computation of total income for the A.Y 2015-16
Particulars
`
(1) Income from House property
Arrear of rent – taxable u/s. 25B
75,000
Less: Standard deduction 30%
22,500
52,500
(2) Profit and gains from business or professions
(a) Firm –
Interest on capital taxable only to the extent of
12% which is exempted in the hands of firm.
Salary of working partner – taxable assuming fully deducted in the hands of firm
2,40,000
90,000
3,30,000
5,33,250
(b) own Business – Note 1
(3) Income from other sources:
Interest on bank fixed deposit (gross)
Pension from LIC Jevandhara
Rental income from vacant site
Gross Total Income
50,000
24,000
60,000
8,63,250
1,34,000
10,49,750
Less: Deduction under Chapter VIA
Section 80C Life Insurance premium (subject to 10% of sum assured)
Contribution to Pension Fund of NHB
Section 80D
Medical Insurance premium for his father aged 70,
(even though not dependent)- restricted to 20,000
Total Income
Add: Agricultural Income for rate purpose
40, 000
70,000
1,10,000
20, 000
Income Tax on agricultural and non-agricultural income
Less: Income tax on Agricultural Income
and Basic exemption (60,000 +2,50,000)
6,000
1,14,950
3,449
1,18,399
70,000
5,000
43,399
43,400
Add: EC & SHEC @ 3%
Tax liability
Less: Advance Tax
TDS
Tax Payable
Rounded off
Note 1: Computation of income from wheat business
Net profit as per P/L a/c.
Less: Item credited but treated separately
Interest on Bank FD
45,000
Agricultural income
60,000
Pension from LIC
24,000
292
1,30,000
9,19,750
60,000
9,79,750
1,20,950
4,32,000
1,29,000
KS: The Tax-Age
VIVEK SONI
3,03,000
ADD: Item debited to P/L a/c. to be disallowed.
Advance tax
70,000
Depreciation as per books
4,25,000
Car expenses being 1/5th of total expense 10,000
5,05,000
8,08,000
2,74,750
5,33,250
Less: Depreciation as per IT Rules
Income from wheat business
Solution to Question 2: Computation of total income of Dr. Shuba for A.Y. 2015-16
Particulars
`
`
Income from house property:
Annual value of self-occupied house
Nil
Less: Interest on loan [`45,000,
being [3/4th of `60,000] (Restricted to `30,000) (30,000)
(30,000)
Income from profession:
Sale of medicine
Consultation fees
Visiting fee
Total income (a)
Less: Expenses
Medicine purchases
Medical journal
DepreciationSurgical instrument (15% of `50,000)
Vehicle (3/4th of 15% of `4,00,000)
On House (1/4 10% of 2,82,430)
Vehicle expenses (3/4th)
Interest on loan (3/4th )
Interest on housing loan(1/4th)
Total expenses
(b)
Income from profession (a-b)
Income from other sources
2,50,000
50,000
2,00,000
5,00,000
47,000
5,000
7,500
45,000
7,061
37,500
16,750
15,000
1,80,811
3,19, 189
Family Pension
Less : 33 1/3% or `15,000 whichever is lower
2,80,000
15,000
2,65,000
Lecture fees
5,000
Savings bank interest
1,000
Interest on bank FD in the name of minor daughter
[1,50,000 x 9% x 9/12]
10,125
Less: Exempt u/s 10(32)
1,500
8,625
Winnings from lottery
50,000
Gross Total Income
Less: Deductions under Chapter VI-A
U/s. 80C Repayment of housing loan (48,000 x 3/4)
U/s. 80D
Medical Insurance Premium:
Own (Senior Citizen, hence fully allowed
since premium is less than `20,000)
16,000
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3,29,625
6,18,814
36,000
KS: The Tax-Age
VIVEK SONI
Mother (Senior Citizen, hence fully allowed
since premium is less than `20,000)
U/s 80TTA
Interest On Savings Bank Deposit
Total income
Rounded off u/s. 288A
16,000
32,000
1,000
5,49,814
5,49,810
Notes: (1) Since the residential house was constructed before 01.04.1999,the deduction for interest is
restricted to `30,000.
(2) Since 1/4th portion of house is used for business purposes, therefore, 1/4th share of interest paid is
deductible while computing business income.
(3) Agricultural income is exempt u/s. 10(1) and share of income from HUF is exempt u/s. 10(2).
(4) Term deposit of `1,50,000 in the name of minor daughter does not qualify for deduction under section
80C. However, principal repayment of housing loan (3/4th) would qualify for deduction under section 80C.
Therefore, the deduction under section 80C would be `36,000 (i.e. 3/4th of `48,000).
Solution to Question 3:
In the hands of Raj Kumar
In this case land has been held for a period exceeding 36 months and building for a period less than 36
months. Therefore, land is long term and building is short term.
`
22,00,000
9,64,530
12,35,470
Long term capital gain for sale of land
Sale consideration as per section 50C
Less: Indexed cost of Acquisition (5,19,000 x 1024/551)
LTCG
Short term capital gain on sale of building
Sale consideration as per section 50C
Less: Cost of Acquisition
STCL
STCL can be set off against LTCG .
Net taxable LTCG
10,00,000
14,00,000
(4,00,000)
__________
8,35,470
In the hands of Dhruv: Since the difference between the purchase price and stamp duty value of
immovable property exceeds ` 50,000. Therefore the entire difference i.e, 32,00,000 – 25,00,000 = 7,00,000
is taxable under the head “other sources” by virtue of section 56(2)(vii).
Solution to Question 4: Computation of business income of Firm for the P.Y 2014-15
Net profit
7,00,000
Less:
(1) Depreciation as per IT Rules
1,50,000
(2) Interest on capital- 12% of ` 5,00,000
60,000
2,10,000
Profit before deducting remuneration (Book Profit)
Less: Allowable Remuneration –lower of the following
(a) Actual Remuneration ` 20,000 x 12 x 2 = 4,80,000
(b) Remuneration allowed u/s. 40(b)
On first 3,00,000 of book profit @ 90% =
2,70,000
On balance 1,90,000 of book profit @ 60% = 1,14,000
3,84,000
4,90,000
3,84,000
_______
1,06,000
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VIVEK SONI
Solution to Question 5:
`
(I) Income From House property Net Annual Value
Less: Standard Deduction @ 30%
(II) Income from Business
Net profit
Add: Adjustments
(a)Item debited to P/L. but not allowed
Donation to political party
1,000
Wealth tax disallowed u/s. 40(a)
2,400
Advance tax
17,000
Depreciation as per books
1,25,656
(b) Recovery of bad debts -deemed income 15,000
Less: Adjustments
(a) Item credited but treated separately
Rent received
Interest on debenture
Agricultural Income –exempted u/s. 10(1)
Short term profit on sale of investment
Dividend from Indian company -exempted
(b) Depreciation as per IT Rules
Income from Business
37,500
25,000
45,000
33,200
11,800
75,000
37,500
11,250
`
26,250
3,44,894
1,61,056
5,05,950
2,27,500
2,78,450
(III) Income from Capital Gains
Net short term capital gain (STT)
(IV) Income From Other Sources
Interest on Debentures
Interest on income tax refund
Gross Total Income
Less: Deduction under chapter VIA
Section 80C – Post office term deposit
Section 80DDB ( ` 40,000 – ` 7500)
Section 80GGC – Donation to political party
(assuming other than cash)
Total Income
Add: Agricultural income for rate purpose
33,200
25,000
1,470
35,000
32,500
1,000
26,470
3,64,370
68,500
2,95,870
45,000
3,40,870
Income tax on above –
Special tax 15% on short term capital gains
on transfer of shares on which STT is paid (15% x 33,200)
on balance 3,07,670 – Normal tax rate
Less: Income tax on (45,000 + 2,50,000)
Less: Rebate u/s. 87A
Add: EC and SHEC
Tax liability (Rounded off)
Less: Advance tax paid
Less: TDS
Net tax Refundable
295
4,980
5,767
10,747
4,500
6,247
2,000
4,247
127
4,374
4,370
17,000
2,550
15,180
KS: The Tax-Age
VIVEK SONI
REVISIONARY TEST PAPER 8 (SOLVED)
Question 1: From the following details compute the Gross total income of Siddhant of Delhi for the A.Y
2015-16 :
`
Salary including dearness allowance
3,35,000
Bonus
11,000
Salary of Servant provided by the employer
12,000
Bills paid by the Employer for Gas, Electricity and Water provided free of cost at the above flat
11,000
Siddhant was provided with Company’s Car (1.6 ltr cubic capacity -Self driven) also for personal use and it
is not possible to determine expenditure on personal use and all expenses were borne by the employer.
Siddhant purchased a Flat in Co-operative Housing Society for ` 4,75,000 in April, 1990, which was
financed by a loan from Life Insurance Corporation of India of ` 1,60,000 @ 15% interest, his own savings
of ` 85,000 and a deposit from a nationalized bank for ` 2,50,000 to whom this flat was given on lease for
ten years. The rent payable was ` 3,500 per month. The following particulars are relevant:
`
(a) Municipal Taxes paid
4,300 (per annum)
(b) Society charges for passage lights, watchman’s salary
(c) Insurance
1,900 (per annum )
860
(d) He earned ` 2,700 in share speculation business and lost ` 4,200 in Cotton Speculation business.
(e) In the year 2011-12 he had gifted ` 30,000 to his wife and ` 20,000 to his minor son. The gifted amounts
were advanced to Mr. Rajesh, who was paying interest @ 19% per annum.
(f) Siddhant received a gift of ` 25, 000 each from four friends.
(h) He received national award for humanitarian work from the Central Government in the form of land
whose fair market value is ` 5,00,000 as on 31st March, 2014.
Question 2: Mr. X gifted to his wife Mrs. X 200 listed shares on 21-3-2014, which had been bought by him
on 19-4-2013 ` 2,000 per share. On 1-6-2014, bonus shares were allotted in the ratio of 1:1. All these shares
were sold by Mrs. X as underDate of sale Manner of sale
No. of
Net sales
shares
value (`)
21.5.2014
Sold in recognized stock exchange, STT paid
100
2,20,000
21.7.2014
Private sale to an outsider
All bonus
1,25,000
share
28.2.2015
Private sale to her friend Mrs. Z(market value on this
100
1,70,000
date was ` 2,10,000)
Briefly state the income tax consequences in respect of the sale of the shares by Mrs.X showing clearly the
person in whose hands the same is chargeable, the quantum and the head of income in respect of the above
transactions. Detailed computation of total income is not required.
Net sales value represents the amount credited after all taxes, levies, brokerages, etc., and the same may be
adopted for computing the capital gains.
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VIVEK SONI
Question 3: Mr. Selvan, acquired a residential house in January, 2000 for ` 10,00,000 and made some
improvements by way of additional construction to the house, incurring expenditure of ` 2,00,000 in
October, 2004. He sold the property in October, 2014 for ` 75,00,000. The value of property was adopted as
` 80,00,000 by the state stamp valuation authority for registration purpose. He acquired a residential house
in January, 2015 for ` 25,00,000. He deposited ` 20,00,000 in capital gain bonds issued by National
Highways Authority of India (NHAI) in June 2015.
Compute the capital gain chargeable to tax for the assessment year .
What would be the tax consequence and in which assessment year it would be taxable, if the house property
acquired in January 2015 is sold for ` 40,00,000 in March, 2016 ?
Cost of Inflation Index: F.Y. 1999-2000 = 389; F.Y. 2004-2005 = 480; F.Y. 2014-15 = 1024.
Question 4: Ramji Ltd. engaged in manufactured of medicines (pharmaceuticals furnishes the following
information for the year ended 31-03- 2015.
(i) Municipal tax relating to office building ` 51,000 not paid till 30-09- 2015.
(ii) Patent acquired for ` 20,00,000 on 01-09-2014 and used from the same month.
(iii) Capital expenditure (other than building) on scientific research ` 10,00,000 which includes cost of land
` 2,00,000.
(iv) Amount due from customer X outstanding for more than 3 years written off as bad debt in the books `
5,00,000.
(v) Income-tax paid ` 90,000 by the company in respect of non-monetary perquisites provided to its
employees.
(vi) Provident fund contribution of employer ` 5,50,000 remitted in July 2015.
(vii) Expenditure towards advertisement in souvenir of a political party ` 1,50,000.
(viii) Refund of sales tax ` 75,000 received during the year, which was claimed as expenditure in an earlier
year.
State with reasons the taxability or deductibility of the items given above under the income-tax Act, 1961.
Note: Computation of total income is not required
Question 5: From the following information of Mrs. X for the year ending 31.3.2015. Compute the income
taxable under the head “other sources”
(a) Cash gift of ` 51,000 received from friend on the occasion of “Shastipatha Poorthi”, a wedding function
celebrated on her husband completing 60 years of age. This was also her 25th wedding anniversary.
(b) On the above occasion, a diamond necklace worth ` 2 lacs was presented by her sister living in Dubai.
(c) When she celebrated her daughter’s wedding on 21.2.2015, her friend assigned in Mrs. X favour, a fixed
deposit held by the said friend in a schedule bank; the value of the fixed deposit and the accrued interest on
the said date was ` 51,000.
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SOLUTION TO RTP 8
Solution to Question 1:
(I) Income from salary
Basic Salary including DA
Bonus
Salary of servant provided by employer
Perquisite value of gas, electricity, water etc.
Perquisite value of motor car (1800 x 12)
Income under the head salaries
(II) Income under the head House property
Gross annual value (3500 x 12)
Less: Municipal tax paid
Net annual value
Less: Deduction u/s. 24
Standard deduction @ 30%
11,310
Interest on borrowed capital
(15% of 1,60,000)
24,000
`
3,35,000
11,000
12,000
11,000
21,600
`
3,90,600
42,000
4,300
37,700
35,310
(III) Income under the head Business/ Profession
Speculative income from share business
2,700
Speculative loss from cotton business
(4,200)
Speculative loss can be Set off against speculative
income and balance to be carried forward
(1500)
2,390
NIL
(IV) Income from Other sources
Interest income on gift to wife to be clubbed –
(30,000 x 19%)
5,700
Interest income on gift to minor child to be clubbed –
20,000 x 19% = 3,800
less: Exemption 1,500
2,300
Gift from friends (25,000 x 4)
1,00,000
1,08,000
Note 1: Assumption – Loan taken from LIC is not paid so far.
Solution to Question 2: Where an asset has been transferred by an individual to his spouse otherwise than
for adequate consideration, the income earned by the spouse from sale of the said assets will be clubbed and
taxable in the hands of the individual.
However, where there is any accretion to the asset transferred, income arising to the transferee from such
accretion will not be clubbed.
Therefore, in the given case capital gains arising from sale of original shares has to be clubbed in the hands
of Mr. X, and the capital gains arising from the sale of bonus shares would be taxable in the hands of Mrs. X.
A) Computation of long term capital gain/loss to be clubbed in the hands of Mr. X
`
i) 100 shares sold on 21-5-2014 in a recognized stock exchange, STT paid –
Exempted u/s. 10(38)
ii) Shares sold to a friend on 28.2.2015
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P.H: From 19.4.2013 to 28.2.2015 (Long term since exceed 12 months)
Full value of consideration
Less: Indexed cost of acquisition of 100 shares
[2000 x 100 x 1024/852]
Long term capital loss
1,70,000
2,40,376
(70,376)
Note: In case the asset is acquired by way of gift, the period of holding and cost of acquisition of the
previous owner is considered. Further, as per the case of Manjula J. Shah, the indexation is also to be done
when the previous owner had acquired the assets.
B) Short-term capital gains taxable in the hands of Mrs. X (on sale of 100 bonus shares)
`
Full value of consideration
1,25,000
Less: Cost of Acquisition
Nil
Short term capital gains
1,25,000
C) No tax u/s. 56(2)(vii) under the head “other sources” is liable in the hands of Mrs. Z since the difference
between the fair market value of shares and actual sale consideration does not exceed ` 50,000.
Solution to Question 3: Computation of Capital Gains for the A.Y 2015-16.
Period of Holding: Jan, 2000 to October 2014 (Long term)
Nature of Asset: Residential House
Full value of consideration (by virtue of section 50C)
Less:
Indexed cost of acquisition (10,00,000 x 1024/389)
Indexed cost of Improvement (2,00,000 x 1024/480)
`
80,00,000
26,32,391
4,26,667
30,59,058
Gross Long Term Capital Gains
49,40,942
Less:
Exemption u/s. 54 = cost of new residential house purchased
Exemption u/s. 54EC- no exemption shall be available
Since invested after 6 months from the transfer of assets,
25,00,000
NIL_____
Taxable LTCG
24,40,942
Note: Students are required to write provisions of section 50C and Section 54 and section 54EC.
Consequences if new house is sold within 3 years from its purchase
Section 54 provides that in order to avail the exemption the assessee should not sold the new house within 3
year from the date of its purchase. However, if the assessee sold it within 3 years then the earlier exemption
granted shall be reduced from the cost of acquisition of new house.
Computation of capital Gains on sold of new house in A.Y 16-17
Period of Holding – Jan 2015 to March 2016 (short term)
Full value of consideration
Less: Cost of acquisition
25,00,000
Capital gain exempted earlier 25,00,000
40,00,000
Short term capital Gain
40,00,000
NIL____
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Solution to Question 4:
i) Disallowed u/s. 43B since not paid within the return filing date i.e., in this case 30.9.2014.
ii) Patent being an intangible assets is eligible for depreciation u/s. 32 @ 25% . since used for more than 180
days during the first year of acquisition, therefore full rate of 25% on ` 20,00,000 i.e, ` 5,00,000 shall be
allowed as depreciation for the P.Y 2014-15.
iii) As per section 35(2AB) deduction @ 200% shall be allowed on In house scientific research expenditure
other than land to a company assessee engaged in manufacturing goods other than goods of 11th schedule.
However, on building 100% deduction shall be allowed.
In the given case the company is manufacturing goods other than goods of 11th schedule and assuming it has
entered with an agreement with department for co-operation and audit. Hence, deduction u/s. 35(2AB) shall
be 200% of ` 8,00,000 (` 10,00,000 - ` 2,00,000) = ` 16,00,000.
iv) Bad debt written off is allowed as deduction u/s. 36(1)(vii).
v) Income tax Paid on non-monetary perquisites of employees shall not be allowed as deduction in the hands
of company by virtue of section 40(a)(v).
vi) Since paid before return filing date, therefore allowed as deduction in P.Y 2014-15.
vii) Expenditure towards advertisement in souvenir of a political party shall not be allowed as deduction u/s.
37(2B) while computing business income. However, the same shall be allowed as deduction u/s. 80GGB
from Gross Total Income.
viii) Refund of sales tax paid of earlier year shall be taxable in the year of receipts as deemed income by
virtue of section 41.
Solution to Question 5:
Particulars
a) Any sum of money received by an individual on the occasion of the individual
marriage is exempt. However, exemption is not available in case cash gift is
received during a wedding function celebrated on completion of 60 years of age.
Further, since the gift is received from a non-relative, therefore chargeable to tax
u/s. 56(2)(vii)
b) since the gift is received from a relative therefore the provisions of section
56(2)(vii) is not attracted. Hence nothing taxable
`
51,000
Nil
c) Exemption from section 56(2)(vii) is attracted when gift is received on the
occasion of the marriage of the individual and not that of individuals son’s or
daughter. Therefore, this exemption provision is not attracted in this case.
Further, the word “sum of money” has, however, not been defined u/s. 56(2)(vii),
therefore there are two possible view –
View 1: Since fixed deposit does not fall under meaning of “ sum of money” and
also it is not included in the definition of “property” , therefore section 56(2)(vii)
shall not be attracted . hence nothing taxable
Or
View 2: Fixed deposit falls within the meaning of “sum of money” . hence taxable
Income from other sources if view-1 is followed
Income from other sources if view-2 is followed
300
Nil
51,000
51,000
Or 1,02,000
KS: The Tax-Age
VIVEK SONI
REVISIONARY TEST PAPER 9 (SOLVED)
Question 1: Mr A, a resident individual aged 64, is a partner in ABC & CO., a partnership firm. He also
runs a wholesale business in medical products. From the following details compute the total income of the
assessee for the A.Y 2015-16.
Particulars
1) Interest on capital received from ABC & Co. at 15%
`
`
1,50,000
2) Interest from bank on fixed deposit (Net of TDS of `
1500)
13,500
3) Income-tax refund received relating to A.Y 2011-12
including interest of ` 2,300
34,500
4) Net profit from wholesale business
Amount debited include the following Depreciation as per books
Motor car expenses [20% used for personal purpose]
Municipal taxes for the shop
(for two half years; payment for one half year made on
12.6.2015 and for the other on 14.11.2015)
Salary to manager for whom single cash payment was made
for
5,60,000
5) Depreciation as per IT Rules
34,000
40,000
7000
21,000
1,10,400
6) LIP paid for major son
60,000
PPF of his wife
70,000
Question 2: On 10-10-2014, Mr. Govind (a bank employee) received ` 5,00,000 towards interest on
enhanced compensation from State Government in respect of compulsory acquisition of his land effected
during the financial year 2005-06.
Out of this interest, `1,50,000 relates to the financial year 2009-10; ` 1,65,000 to the financial year 2010-11
and ` 1,85,000 to the financial year 2011-12. He incurred ` 50,000 by way of legal expenses to receive the
interest on such enhanced compensation.
How much of interest on enhanced compensation would be chargeable to tax for the assessment year ?
Question 3: During the financial year 2014-15, the following payments/ expenditure were made/incurred by
Mr. A, a resident individual (whose turnover during the year ended 31.3.2014 was ` 39 lacs)
a) Interest of ` 12,000 was paid to M/s. B & Co., a resident partnership firm, without deduction of tax at
source;
b) interest of ` 4,000 was paid as interest to Mr. C, a non-resident, without deduction of tax at source.
c) ` 3,00,000 was paid as salary to a resident individual without deduction of tax at source;
d) He had sold goods worth ` 5 lacs to Mr. D. he gave Mr. D a cash discount of ` 12,000 later. Commission
of ` 15,000 was paid to Mr. E on 2.7.2014. In none of these transactions, tax was deducted at source.
301
KS: The Tax-Age
VIVEK SONI
Briefly discuss whether any disallowances arises under the provisions of section 40(a)(i)/40(a)(ia) of the
Income-tax Act, 1961.
Question 4: Mr. Chandran (aged 38) owned 6 heavy goods vehicles as on 01-04-2014. He acquired 2 more
heavy goods vehicle on 01-07-2014.He is solely engaged in the business of plying goods vehicles on hire
since financial year 2008-09.
He did not opt. for presumptive provision contained in section 44AE for the financial year 2013-14. His
books were audited under section 44AB and the return of income was filled on 05-08-2014. He has
unabsorbed depreciation of ` 70,000 and business loss of ` 1,00,000 for the financial year 2013-14.
Following further information is provided to you:
(i) Deposited ` 20,000 in Tax Saver Deposit with UCO bank in the name of married son.
(ii) Paid medical insurance premium of ` 23,000 for his parents (both aged above 70) by means of bank
demand draft.
(iii) Paid premium on life insurance policy of his married daughter ` 25,000.
(iv) Repaid principal of ` 40,000 and interest of `15,000 to Canara Bank towards education loan of his
daughter, who completed B.E. two years ago. She is employed after completion of her studies.
Assuming that Mr. Chandran has opted for presumptive provision contained in section 44 AE of the Incometax Act, 1961.Compute the total income of Mr. Chandran for the assessment year 2015-16.
Question 5: State the applicability of TDS provisions and TDS amount in the following cases –
a) Rent paid for hire of machinery by B Ltd. to Mr. Raman ` 2,10,000
b) Fee paid to Dr. Srivatsan by Sunder (HUF) ` 35,000 for surgery performed to a member of the family.
-----------------------------------------------------------------------------------------------------------------------SOLUTION TO RTP 9
Solution to Question 1: Computation of total income of Mr. A for the A.Y
`
Particulars
(1)Profit and gains of business or profession
Income from own business
Net profit as per books
Add: Items not allowed but debited to P/L Account
Depreciation as per books
Disallowance of municipal taxes paid for the second half year u/s. 43B,
since the same was paid after the due date of filing of return (` 7000/2)
Disallowance u/s. 40A(3) in respect of salary paid in cash since the same
exceeds ` 20,000
20% of car expenses for personal use
Less: Depreciation allowable as per IT Rules
Income from firm
Interest on capital from partnership firm (Note 1)
`
5,60,000
34,000
3,500
21,000
8000
66,500
6,26,500
1,10,400
5,16,100
1,20,000
302
KS: The Tax-Age
VIVEK SONI
6,36,100
(2)Income from other sources
Interest on bank fixed deposit (Gross)
Interest on income tax refund
Gross total income
Less: Deduction under chapter VIA (Note 2)
Total Income
15,000
__2,300
__17,300
6,53,400
_1,30,000
5,23,400
(1) Only to the extent the interest is allowed as deduction in the hands of the firm, the same is includible as
business income in the hands of the partner. Maximum interest allowable as deduction in the hands of the
firm is 12% p.a. It is assumed that the partnership deed provides for the same and hence is allowable to this
extent in the hands of the firm. Therefore, interest @ 12% p.a. amounting to ` 1,20,000 would be treated as
the business income of Mr. A.
(2) Deduction under chapter VI-A
Particulars
Under section 80C
LIP for major son
PPF paid in wife’s name
`
`
60,000
70,000
1,30,000
Maximum deduction u/s. 80C and 80CCE ` 1,50,000
Solution to Question 2: Interest on enhanced compensation shall be taxable under the head “other sources”
in the year receipt and also the assessee will get a standard deduction of 50% on such income. However,
actual expenses shall not be allowed for deduction. Therefore, legal expenses is not deductible.
Computation of income under the head ‘other sources’
Interest on enhance compensation taxable u/s. 56(2)(viii)
Less: Deduction u/s. 57(iv) 50% of 5,00,000
5,00,000
2,50,000
2,50,000
Solution to Question 3: Disallowances u/s 40(a)(i)/40(a)(ia) is attracted where the assessee fails to deduct
tax at source as is required under Act, or having deducted tax at source, fails to remit the same to the credit
of the Central Govt. within the stipulated time limit.
The assessee is a resident individual, who was not subjected to tax audit during the immediately preceding
previous year i.e, in 2013-14 (as his turnover is less than ` 100 lacs in that year) and the TDS provisions
have to be considered bearing this in minda) The obligation to deduct tax at source from interest paid to resident arises u/s. 194A in the case of
individual, only where he was subjected to tax audit u/s. 44AB in the immediately preceding
previous year, i.e. P.Y 2013-14. Hence, in the given case disallowable u/s. 40(a)(i) is not attracted.
b) In the case of interest paid to a non-resident, there is obligation to deduct tax at source u/s. 195, hence
non-deduction of tax at source will attract 100% disallowances u/s. 40(a)(i).
c) 30% Disallowances u/s. 40(a)(ia) will attracted by virtue of amendment made by the Finance (No. 2)
2014, where any payment made to a resident on which tax was required to be deductible but not so
deducted/deposited. Therefore, in the given case 30% of ` 3, 00,000 is disallowed. Further, in respect
of payment of salary the payer shall liable to deduct tax whether or not the payer was liable for tax
audit in the preceding F.Y.
d) The obligation to deduct tax at source u/s. 194-H from commission paid in excess of ` 5,000 to a
resident arises in case of an individual, only where he was subjected to tax audit u/s. 44AB in the
immediately preceding previous year. In the given case, the assessee was not liable to tax audit u/s.
44AB in the P.Y 2013-14. Hence, there is no obligation to deduct tax at source u/s. 194H during the P.Y
2013-14. Therefore, disallowances u/s. 40(a)(ia) is not attracted in this case.
303
KS: The Tax-Age
VIVEK SONI
Solution to Question 4:
I) Business Income
As per section 44AE – 7500 x 12 x 6 = 5,40,000
7500 x 9 x 2 = 1,35,000
`
6,75,000
Less: B/F Business loss of P.Y 2013-14
Less: Unabsorbed depreciation of 2013-14
[Any deduction u/s. 30 to 38 shall not be allowed. since
Unabsorbed depreciation is allowed u/s. 32 therefore
not allowed]
Business Income/ Gross Total Income
Less: Deduction under Chapter VIA
Section 80C :
Fixed deposit in the name of married son
(not allowed for deduction)
NIL
Life insurance premium paid for insurance of
married daughter
1,00,000
NIL__
5,75,000
25,000
25,000
Section 80D
Medical Insurance paid for insurance of parents
Since parents are senior citizen therefore maximum
deduction
20,000
Section 80E
Interest paid on education loan taken for higher
Studies of children (whether dependent or not).
However, no deduction is available on principal
amount.
Total Income
15,000
60,000
5,15,000
Solution to Question 5:
(a) Since the rent paid on hire of machinery exceeds ` 1,80,000 therefore B Ltd. is required to deduct tax @
2% on ` 2,10,000 as per section 194I i.e, ` 4,200.
Note: Incase the deductee does not furnish PAN No. to the deductor the tax shall be deducted tax at source
@ 20% on ` 2,10,000 by virtue of section 206AA.
(b) HUF is required to deduct tax at source only when it is subjected to tax audit during the immediately
preceding financial year.
However, as per section 194J where payment for professional service is made exclusively for the personal
purpose of any members of HUF, then Tax shall not be deductible on such payment. Hence, in the given
case provisions of TDS shall not be applicable.
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