CA PCC Exam Papers Group II Taxation
Time Allowed : 3 Hours
Maximum Marks : 100
Answer all questions
Working notes should form part of the answer.
1. State with reasons, for any five out of the following six sub–divisions, whether the following statements are true or false having regard to the provisions of the Income–tax Act, 1961 for the Assessment Year 2008–09: 5×2=10
(a) Compensation on account of disaster received from a local authority by an individual or his/her legal heir is taxable. (0)
(b) Filing of belated return under section 139(4) of the Income–tax Act, 1961 will debar an assessee from claiming deduction under sections 80–lD or 80–IE of the Act. (0)
(c) Rural branches of the co–operative banks are not allowed to claim provision for bad and doubtful debts. (0)
(d) Income deemed to accrue or arise in India to a non–resident by way of interest, royalty and fee for technical services is taxable in India irrespective of territorial nexus. (0)
(e) Depreciation is allowed only when it is claimed. (0)
(f) Capital gain of Rs.75 lakh arising from transfer of long term capital assets will be exempt from tax if such capital gain is invested in the bonds redeemable after three years, issued by NHAI under section 54EC of the Act. (0)
2. Dr. Smt. Niranjana, a resident individual, aged 60 years is running a clinic. Her Income and Expenditure Account for the year ending March 31st, 2008 is as under:
Rs. Income Amount
To Medicine consumed
To Staff salary
To Clinic consumables
To Rent paid
To Administrative expenses
To Amount paid to scientific
research association approved
under section 35
To Net profit 5,38,400
4,38,570 By Consultation and Medical charges
By Income–tax refund (Principal
Rs.5,000, interest Rs.450)
By Dividend from units of UTI
By winning from game show on
T.V. net of TDS (TDS Rs. 16,830)
By Rent 18,85,850
(i) Rent paid includes Rs.30,000 paid by cheque towards rent for her residential house.
(ii) Clinic equipments are:
1. 4. 2007
7. 12. 2007 Opening W.D.V.
Acquired (cost) – Rs.5,00,000
(iii) Rent received relates to property situated at Surat. Gross Annual Value Rs.27,000. The municipal tax of Rs.2,000, paid in December, 2007, has been included in “administrative expenses”.
(iv) She received salary of Rs.7,500 p.m. from “Full Cure Hospital” which has not been included in the “consultation and medical charges”.
(v) Dr. Niranjana availed a loan of Rs.5,50,000 from a bank for higher education of her daughter. She repaid principal of Rs.1,00,000, and interest thereon Rs.55,000 during the year 2007–08.
(vi) She paid Rs.1,00,000 as tuition fee (not in the nature of development fees/ donation) to the university for full time education of her daughter.
(vii) An amount of Rs.18,000 has also been paid by cheque on 27th March, 2008 for hermedical insurance premium.
From the above, compute the total income and tax payable thereon by Dr. Smt. Niranjana for the Assessment year 2008–09.
3. (a) Mr. M is an area manager of M/s N. Steels Co. Ltd. During the financial year 2007–08, he gets the following emoluments from his employer:
Up to 31.8.2007
Contribution to recognised provident fund
Children education allowance
City compensatory allowance
Hostel expenses allowance
Tiffin allowance (actual expenses Rs. 3,700)
Tax paid on employment
Rs. 20,000 p.m.
Rs. 25,000 p.m.
Rs. 2,000 p.m.
15% of basic salary and D.A.
Rs. 500 p.m. for two children
Rs. 300 p.m.
Rs. 380 p.m. for two children
Rs. 5,000 p.a.
Compute taxable salary of Mr. M for the Assessment year 2008–09.
(b) Mr. X owns one residential house in Mumbai. The house is having two units. First unit of the house is self occupied by Mr. X and another unit is rented for Rs.8,000 p.m. The rented unit was vacant for 2 months during the year. The particulars of the house for the previous year 2007–08 are as under:
Light and water charges
Interest on borrowed capital
Repairs Rs. 1,62,000 p.a.
Rs. 1,90,000 p.a.
Rs. 1,85,000 p. a
15% of municipal valuation
Rs. 500 p.m.
Rs. 1,500 p.m.
Rs. 1,200 p.a.
Rs. 3,000 p.a.
Rs. 12,000 p.a.
Compute income from house property of Mr. X for the A.Y. 2008–09.
4. (a) Mr. P, a resident individual, furnishes the following particulars of his income and other details for the previous year 2007–08:
- Income from salary
- Net annual value of house property
- Income from business
- Income from speculative business
- Long term capital gain on sale of land
- Loss on maintenance of race horse
- Loss on gambling 18,000
Depreciation allowable under the Income–tax Act comes to Rs.8,000 for which no treatment is given above.
The other details of unabsorbed depreciation and brought forward losses are:
(iv) Unabsorbed depreciation
Loss from speculative business
Short term capital loss
Unrealised rent 9,000
Compute the gross total income of Mr. P, for the Assessment year 2008–09, and the amount of loss that can or cannot be carried forward.
(b) Mr. Prasad is the Karta of Hindu undivided family. The family declares gross total incomeRs. 4,00,000 for the assessment year 2008–09. The gross total income includes taxable long term capital gain Rs. 65,000 and short term capital gain Rs. 35,000 which is taxable @ 10% under section 111A of the Income–tax Act, 1961. The details of HUF fund investmentmade during the year 2007–08 are:
(i) Amount deposited in public provident fund in the name of
members of HUF
(ii) Medical insurance premium paid by cheque –
(a) in the name of Karta
(b) in personal name “Prasad”
(iii) 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 institute
(e) Government for the purpose of promoting family planning
(f) Hanuman Temple in Mohalla
Compute the total income of HUF chargeable to tax for the Assessment year 2008–09
5. Answer any four of the following five sub–divisions with regard to the provisions of theIncometax Act, 1961: 4×4=16
(a) Mrs. X, an individual resident woman, wanted to know whether income–tax is attracted on sale of gold and jewellery gifted to her by her parents on the occasion of her marriage in the year 1979 which was purchased at a total cost of Rs.2,00,000? (0)
(b) Can an Assessing Officer make a request for withdrawal of approval which was granted to an institution by the National Committee for carrying out any eligible project or scheme, under section 35AC of the Income–tax Act, 1961? (0)
(c) Explain the concept of “Marginal Relief” under the Income–tax Act, 1961. (0)
(d) Briefly explain provisions of section 80U of the Income–tax Act, 1961, in respect of deduction available on permanent physical disability. (0)
(e) Explain with brief reason whether the return of income can be revised under section 139(5) of the Income–tax Act, 1961 in the following cases:
(i) Defective or incomplete return filed under section 139(9). (0)
(ii) Belated return filed under section 139(4). (0)
(iii) Return already revised once under section 139(5). (0)
(iv) Return of loss filed under section 139(3). (0)
6. Answer any five of the following: 2×5=10
(a) Can we say that levy of VAT will have effect on retail price of goods? (0)
(b) Explain as to how and when the amendments made in Finance Bill, in respect service tax matters come into force? (0)
(c) Who is responsible to pay service–tax when the recipient of sponsorship services is located outside India? (0)
(d) Whether “free services” after sale of motor vehicles, given by the authorized dealers, for which they are reimbursed by the vehicle manufacturers, are subject to service tax? (0)
(e) Who is liable to pay E–payment of service tax? (0)
(f) Whether life insurer carrying on life insurance business has option to calculate service tax at different rate? (0)
7. (a) Mr. X, the owner of a property had entered into an agreement with a bank. The agreement was entered into on 1st April, 2007 to give ground floor of the property on rent on monthly rent of Rs. 75,000 p.m. The bank had taken the property for commercial purpose. Explain whether Mr. X is liable to pay service tax on the transaction with bank? 3×2=6 (0)
(b) Mr. Y, a consulting engineer raised a bill of Rs. 2,24,720 (including service tax) on his client for consulting services rendered by him in the month June, 2007. A partial payment of Rs. 1,68,540 was received by Mr. Y in the month March, 2008. Compute the service tax amount payable by Mr. Y and the due date by which service tax can be deposited. (0)
8. Answer any three of the following: 3×3=9
(a) Can service–tax return be revised by a person? (0)
(b) Explain “Input Tax Credit” in context of VAT. (0)
(c) What are the exceptions to input tax credit? (0)
(d) What are the due dates for payment of Service tax? (0)