CA PCC PCE Question Papers Group II Taxation May 2011

CA PCC PCE  Question Papers Group II

Taxation May 2011

This Paper has 24 answerable questions with 0 answered

Total No. of Questions — 7]
Time Allowed : 3 Hours

Maximum Marks : 100
Q.No. 1 is compulsory.
Answer any five questions from the remaining six questions.
Working notes should form part of the answer.
Wherever necessary suitable assumptions may be made by the candidates
Marks
1. (a) Mr. Praveen engaged in retail trade, reports a turnover of Rs. 58,50,000 for thefinancial year 2010–11. His income from the said business as per books of account is computed at Rs. 2,90,000. Retail trade is the only source of income for Mr. Praveen.
(i) Is Mr. Praveen eligible to opt for presumptive determination of his income chargeable to tax for the assessment year 2011–12?
(ii) If so, determine his income from retail trade as per the applicable presumptive provision.
(iii) In case Mr. Praveen does not opt for presumptive taxation of income from retail trade, what are his obligations under the Income-tax Act, 1961?
(iv) What is the due date for filing his return of income under both the options?
4×5=20 (0)
(b) Rahul holding 28% of equity shares in a company took a loan of Rs. 5,00,000 from the same company. On the date of granting the loan, the company had accumulated profit of Rs. 4,00,000. The company is engaged in some manufacturing activity.
(i) Is the amount of loan taxable as deemed dividend in the hands of Rahul, if the company is a company in which the public are substantially interested?
(ii) What would be your answer, if the lending company is a private limited company (i.e.) a company in which the public are not substantially interested?
(0)
(c) Mr. Chandru transferred a vacant site on 28.10.2010 for Rs. 100 lakhs. The site was acquired for Rs. 9,99,300 on 30.6.2000. He deposited Rs. 50 lakhs in eligible bonds issued by Rural Electrification Corporation Ltd. (REC) on 20.3.2011.
Again, he deposited Rs. 20 lakhs in eligible bonds issued by National Highways Authority of India (NHAI) on 16.4.2011.
Compute the chargeable capital gain in the hands of Chandru for the A.Y. 2011–12.

Financial year Cost Inflation Index
2000—01 406
2010—11 711
(0)
(d) ABC & Co. furnishes the following information for the half–year ended 31.03.2011:
(i) Amount received for services provided to UNICEF, (an international organization) Rs. 2,00,000.
(ii) Advance money received from customers Rs. 4,00,600 in respect of which services were not rendered till 31.03.2011.
(iii) Services billed during the half–year excluding item (i) and (ii) above, was Rs. 15,00,000 plus service tax and cess @ 10.3%.
It consists of the following:
(a) One customer ‘X’ to whom a bill of Rs. 2,20,600 plus service tax and cess @ 10.3% raised, did not pay service tax and cess.
(b) Customer ‘Y’ to whom a bill was raised for Rs. 1,00,000 plus service tax and cess has not paid the amount till 31.03.2011.
(c) The balance amounts billed during the year were realized fully.
Compute the value of taxable service on which service tax is payable.

(0)
2. (a) Mr. Rajiv, aged 50 years, a resident individual and practicing Chartered Accountant, furnishes you the receipts and payments account for the financial year 2010–11.
Receipts Rs. Payments Rs.
Opening balance (1.4.2010)
Cash on hand and at Bank
Fee from professional services
Rent
Motor car loan from Canara
Bank (@ 9% per annum)
12,000
9,38,000
50,000
2,50,000 Staff salary, bonus and stipend to
articled clerks
Other administrative expenses
Office rent
Housing loan repaid to SBI
(includes interest of Rs. 88,000)
Life insurance premium
Motor car (acquired in Jan. 2011)
Medical insurance premium (for
self and wife)
Books bought (annual publications)
Computer acquired on 1.11.2010
(for professional use)
Domestic drawings
Public provident fund subscription
Motor car maintenance
Closing balance (31.3.2011)
Cash on hand and at Bank 1,50,000

48,000
30,000
1,88,000

24,000
4,25,000
18,000

20,000
30,000

2,72,000
20,000
10,000

15,000
12,50,000 12,50,000
Following further information is given to you:

(1) He occupies 50% of the building for own residence and let out the balance for residential use at a monthly rent of Rs. 5,000. The building was constructed during the year 1997–98.
(2) Motor car was put to use both for official and personal purpose. One–fifth of the motor car use is for personal purpose. No car loan interest was paid during the year.
(3) The written down value of assets as on 1–4–2010 are given below:
Furniture & Fittings
Plant & Machinery
(Air–conditioners, Photocopiers, etc.)
Computers =
=

= Rs. 60,000
Rs. 80,000

Rs. 50,000
Note: Mr. Rajiv follows regularly the cash system of accounting.
Compute the total income of Mr. Rajiv for the assessment year 2011–12.

12 (0)
(b) Ahmed & Co. of Srinagar rendered taxable services both within and outside the State of Jammu & Kashmir. It received Rs. 26,12,000 for the services rendered inside the State of Jammu & Kashmir and Rs. 18,00,000 for the services rendered outside the State of Jammu & Kashmir.
Compute its taxable service value and service tax liability.
In case, Ahmed & Co. was situated in Mumbai, what would be value of its taxable service and service tax liability?

4 (0)
3. (a) Shri Bala employed in ABC Co. Ltd. as Finance Manager gives you the list of perquisites provided by the company to him for the entire financial year 2010–11:
(i) Medical facility given to his family in a hospital maintained by the company. The estimated value of benefit because of such facility is Rs. 40,000.
(ii) Domestic servant was provided at the residence of Bala. Salary of domestic servant is Rs. 1,500 per month. The servant was engaged by him and the salary is reimbursed by the company (employer).
In case the company has employed the domestic servant, what is the value of perquisite?
(iii) Free education was provided to his two children Arthy and Ashok in a school maintained and owned by the company. The cost of such education for Arthy is computed at Rs. 900 per month and for Ashok at Rs. 1,200 per month. No amount was recovered by the company for such education facility from Bala.
(iv) The employer has provided movable assets such as television, refrigerator and air–conditioner at the residence of Bala. The actual cost of such assets provided to the employee is Rs. 1,10,000.
(v) A gift voucher worth Rs. 10,000 was given on the occasion of his marriage anniversary. It is given by the company to all employees above certain grade.
State the taxability or otherwise of the above said perquisites and compute the total value of taxable perquisites.

8 (0)
(b) State whether filing of income–tax return is mandatory for the assessment year 2011–12 in respect of the following cases:
(i) Research association eligible for exemption under section 10(21) having total income of Rs. 2,10,000
(ii) Registered trade union eligible for exemption under section 10(24) having following incomes:
Income from house property (computed)
Income from other sources (computed) Rs. 60,000
Rs. 40,000
(iii) A charitable trust registered under section 12AA, having total income of Rs. 1,90,000.
(iv) A Limited Liability Partnership (LLP) with business loss of Rs. 1,30,000.
4 (0)
(c) State with reasons whether the following are liable for service tax :
(i) Services rendered to Reserve Bank of India.
(ii) Services rendered by a sub-contractor.
(iii) Services provided to developer of special economic zone.
(iv) Services rendered to associated enterprise.
4 (0)
4. (a) Decide the following transactions in the context of Income–tax Act, 1961 :
(i) Mr. B transferred 500 shares of Reliance Industries Ltd. to M/s. B Co. (P) Ltd. on 10.10.2010 for Rs. 3,00,000 when the market price was Rs. 5,00,000. The indexed cost of acquisition of shares for Mr. B was computed at Rs. 4,45,000. The transfer was not subjected to securities transaction tax.
Determine the income chargeable to tax in the hands of Mr.B and M/s. B Co (P) Ltd. because of the above said transaction.
(ii) Ms. Chhaya transferred a vacant site to Ms. Dayama for Rs. 4,25,000. The stamp valuation authority fixed the value of vacant site for stamp duty purpose at 6,00,000. The total income of Chhaya and Dayama before considering the transfer of vacant site are Rs. 50,000 and Rs. 2,05,000, respectively. The indexed cost of acquisition for Ms. Chhaya in respect of vacant site is Rs. 4,00,000 (computed).
Determine the total income of both Ms. Chhaya and Ms. Dayama taking into account the above said transaction.
(iii) Mr. Chezian is employed in a company with taxable salary income of Rs. 5,00,000. He received a cash gift of Rs. 1,00,000 from Atma Charitable Trust (registered under section 12AA) in December 2010 for meeting his medical expenses.
Is the cash gift so received from the trust chargeable to tax in the hands of Mr.Chezian?
6 (0)
(b) Balamurugan furnishes the following information for the year ended 31–03–2011:
Rs.
Income from business
Income from house property
Lottery winning (Gross)
Speculation business income
Income by way of salary
Long term capital gain (1,35,000)
(15,000)
3,00,000
1,00,000
60,000
70,000
Compute his total income, tax liability and advance tax obligations. 6 (0)
(c) A manufacturer sold goods to distributor for Rs. 20,000. The distributor sold the goods to the wholesaler for Rs. 24,000. The wholesaler sold the goods to the retailer for Rs. 30,000. The retailer sold the goods to the final consumer for Rs. 40,000. The VAT rate is 12.5% which is charged separately.
Compute VAT liability under Invoice method. State, why this method is preferable. 4 (0)
5. (a) Mr. Chaturvedi having gross total income of Rs. 6,35,000 for the financial year 2010–11 furnishes you the following information:
(i) Deposited Rs. 50,000 in tax saver deposit in the name of major son in a nationalized bank.
(ii) Paid Rs. 25,000 towards premium on life insurance policy of his married daughter.
(iii) Purchased approved long-term infrastructure bonds for Rs. 25,000 in January 2011.
(iv) Contributed Rs. 10,000 to Prime Minister’s National Relief Fund.
(v) Donated Rs. 20,000 to a Government recognized institution for scientific research.
Note : Assume that the gross total income of Mr. Chaturvedi does not include any income under the head ‘Profits and gains of business or profession’.
Compute the total income of Mr. Chaturvedi for the assessment year 2011–12.

7 (0)
(b) List any 5 instances where the tax deductible at source in terms of section 194A will not apply. 5 (0)
(c) When does e–payment and e–filing of service tax return become mandatory? Explain. 4 (0)
6. (a) X Co. (P) Ltd., converted into a Limited Liability Partnership (LLP) by name All Trade LLP, with effect from 01.04.2010.
The following details are given to you:
Asst. year 2003-04 : Business loss brought forward
Asst. year 2010-11 : Business loss brought forward
(These are related to erstwhile X Co. (P) Ltd.)
Total income of All Trade LLP, for the financial year 2010–11 (Before
set off of brought forward business losses of erstwhile company i.e. X Co. (P) Ltd.) Rs. 2,00,000
Rs. 5,00,000

Rs. 6,00,000
Assume that all the conditions prescribed in section 47(xiiib) were satisfied by X Co. (P) Ltd. at the time of conversion in to LLP.
(i) Explain whether All Trade LLP can set off and carry forward the business loss of its predecessor i.e. X Co. (P) Ltd.?
(ii) State whether any change in partners of All Trade LLP at later date would have any tax consequence.
4 (0)
(b) Ramamurthy had 4 heavy goods vehicles as on 1.4.2010. He acquired 7 heavy goods vehicles on 27.6.2010. He sold 2 heavy goods vehicles on 31.5.2010.
He has brought forward business loss of Rs. 50,000 relating to assessment year 2007–08 of a discontinued business. Assuming that he opts for presumptive taxation of income as per section 44AE, compute his total income chargeable to tax for the assessment year 2011–12. 4 (0)
(c) Win Limited commenced the business of operating a three star hotel in Tirupathi on 1–4–2010.
It furnishes you the following information:
(i) Cost of land (acquired in June 2008) Rs. 60 lakhs
(ii) Cost of construction of hotel building
Financial year 2008-09
Financial year 2009-10 Rs. 30 lakhs
Rs.150 lakhs
(iii) Plant and Machineries (all new) acquired during financial
year 2009–10 Rs. 30 lakhs
[All the above expenditures were capitalized in the books of the company]
Net profit before depreciation for the financial year 2010–11 Rs. 80 lakhs
Determine the amount eligible for deduction under section 35AD of the Income-tax Act, 1961, for the assessment year 2011–12. 4 (0)
(d) How excess payment of service tax would be adjusted against service tax liability of subsequent periods? State the applicable conditions. 4 (0)
7. (a) Answer any three sub–parts out of four sub–parts of the question. 3×4=12
(i) What are the conditions to be satisfied for the allowability of expenditure under section 37 of the Income–tax Act, 1961? (0)
(ii) 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 the sum recovered, chargeable to tax?
(b) Return of income of a company was signed by the Company Secretary. Is the return a valid return?
(c) 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)?
(d) X Co. Ltd. paid Rs. 120 lakhs as compensation as per approved Voluntary Retirement Scheme (VRS) during the financial year 2010–11.
How much is deductible under section 35DDA for the assessment year 2011–12?
(0)
(iii) Ashwin doing manufacture and wholesale trade furnishes you the following information :
Total turnover for the financial year
Rs.
2009–10
2010–11 45,00,000
55,00,000
State whether tax deduction at source provisions are attracted for the below said expenses incurred during the financial year 2010–11:

Rs.
Interest paid to UCO Bank
Contract payment to Raj (2 contracts of Rs. 12,000 each)
Shop rent paid (one payee)
Commission paid to Balu 41,000
24,000
1,90,000
7,000
(0)
(iv) Y Co. Ltd. furnishes you the following information for the year ended 31.3.2011:
Rs.
Total turnover of Unit A located in Special Economic Zone
Profit of the business of Unit A
Export turnover of Unit A
Total turnover of Unit B located in Domestic Tariff Area (DTA)
Profit of the business of Unit B 100 lakhs
30 lakhs
50 lakhs
200 lakhs
20 lakhs
Compute deduction under section 10AA for the A.Y. 2011–12.

(0)
(b) Briefly state the contents of VAT invoice (any 8 items) 4 (0)
This Paper has 24 answerable questions with 0 answered.
Roll No………
Total No. of Questions — 7] [Total No. of Printed Pages — 11
Time Allowed : 3 Hours Maximum Marks : 100
Q.No. 1 is compulsory.
Answer any five questions from the remaining six questions.
Working notes should form part of the answer.
Wherever necessary suitable assumptions may be made by the candidates
Marks
1. (a) Mr. Praveen engaged in retail trade, reports a turnover of Rs. 58,50,000 for thefinancial year 2010–11. His income from the said business as per books of account is computed at Rs. 2,90,000. Retail trade is the only source of income for Mr. Praveen.
(i) Is Mr. Praveen eligible to opt for presumptive determination of his income chargeable to tax for the assessment year 2011–12?
(ii) If so, determine his income from retail trade as per the applicable presumptive provision.
(iii) In case Mr. Praveen does not opt for presumptive taxation of income from retail trade, what are his obligations under the Income-tax Act, 1961?
(iv) What is the due date for filing his return of income under both the options?
4×5=20 (0)
(b) Rahul holding 28% of equity shares in a company took a loan of Rs. 5,00,000 from the same company. On the date of granting the loan, the company had accumulated profit of Rs. 4,00,000. The company is engaged in some manufacturing activity.
(i) Is the amount of loan taxable as deemed dividend in the hands of Rahul, if the company is a company in which the public are substantially interested?
(ii) What would be your answer, if the lending company is a private limited company (i.e.) a company in which the public are not substantially interested?
(0)
(c) Mr. Chandru transferred a vacant site on 28.10.2010 for Rs. 100 lakhs. The site was acquired for Rs. 9,99,300 on 30.6.2000. He deposited Rs. 50 lakhs in eligible bonds issued by Rural Electrification Corporation Ltd. (REC) on 20.3.2011.
Again, he deposited Rs. 20 lakhs in eligible bonds issued by National Highways Authority of India (NHAI) on 16.4.2011.
Compute the chargeable capital gain in the hands of Chandru for the A.Y. 2011–12.

Financial year Cost Inflation Index
2000—01 406
2010—11 711
(0)
(d) ABC & Co. furnishes the following information for the half–year ended 31.03.2011:
(i) Amount received for services provided to UNICEF, (an international organization) Rs. 2,00,000.
(ii) Advance money received from customers Rs. 4,00,600 in respect of which services were not rendered till 31.03.2011.
(iii) Services billed during the half–year excluding item (i) and (ii) above, was Rs. 15,00,000 plus service tax and cess @ 10.3%.
It consists of the following:
(a) One customer ‘X’ to whom a bill of Rs. 2,20,600 plus service tax and cess @ 10.3% raised, did not pay service tax and cess.
(b) Customer ‘Y’ to whom a bill was raised for Rs. 1,00,000 plus service tax and cess has not paid the amount till 31.03.2011.
(c) The balance amounts billed during the year were realized fully.
Compute the value of taxable service on which service tax is payable.

(0)
2. (a) Mr. Rajiv, aged 50 years, a resident individual and practicing Chartered Accountant, furnishes you the receipts and payments account for the financial year 2010–11.
Receipts Rs. Payments Rs.
Opening balance (1.4.2010)
Cash on hand and at Bank
Fee from professional services
Rent
Motor car loan from Canara
Bank (@ 9% per annum)
12,000
9,38,000
50,000
2,50,000 Staff salary, bonus and stipend to
articled clerks
Other administrative expenses
Office rent
Housing loan repaid to SBI
(includes interest of Rs. 88,000)
Life insurance premium
Motor car (acquired in Jan. 2011)
Medical insurance premium (for
self and wife)
Books bought (annual publications)
Computer acquired on 1.11.2010
(for professional use)
Domestic drawings
Public provident fund subscription
Motor car maintenance
Closing balance (31.3.2011)
Cash on hand and at Bank 1,50,000

48,000
30,000
1,88,000

24,000
4,25,000
18,000

20,000
30,000

2,72,000
20,000
10,000

15,000
12,50,000 12,50,000
Following further information is given to you:

(1) He occupies 50% of the building for own residence and let out the balance for residential use at a monthly rent of Rs. 5,000. The building was constructed during the year 1997–98.
(2) Motor car was put to use both for official and personal purpose. One–fifth of the motor car use is for personal purpose. No car loan interest was paid during the year.
(3) The written down value of assets as on 1–4–2010 are given below:
Furniture & Fittings
Plant & Machinery
(Air–conditioners, Photocopiers, etc.)
Computers =
=

= Rs. 60,000
Rs. 80,000

Rs. 50,000
Note: Mr. Rajiv follows regularly the cash system of accounting.
Compute the total income of Mr. Rajiv for the assessment year 2011–12.

12 (0)
(b) Ahmed & Co. of Srinagar rendered taxable services both within and outside the State of Jammu & Kashmir. It received Rs. 26,12,000 for the services rendered inside the State of Jammu & Kashmir and Rs. 18,00,000 for the services rendered outside the State of Jammu & Kashmir.
Compute its taxable service value and service tax liability.
In case, Ahmed & Co. was situated in Mumbai, what would be value of its taxable service and service tax liability?

4 (0)
3. (a) Shri Bala employed in ABC Co. Ltd. as Finance Manager gives you the list of perquisites provided by the company to him for the entire financial year 2010–11:
(i) Medical facility given to his family in a hospital maintained by the company. The estimated value of benefit because of such facility is Rs. 40,000.
(ii) Domestic servant was provided at the residence of Bala. Salary of domestic servant is Rs. 1,500 per month. The servant was engaged by him and the salary is reimbursed by the company (employer).
In case the company has employed the domestic servant, what is the value of perquisite?
(iii) Free education was provided to his two children Arthy and Ashok in a school maintained and owned by the company. The cost of such education for Arthy is computed at Rs. 900 per month and for Ashok at Rs. 1,200 per month. No amount was recovered by the company for such education facility from Bala.
(iv) The employer has provided movable assets such as television, refrigerator and air–conditioner at the residence of Bala. The actual cost of such assets provided to the employee is Rs. 1,10,000.
(v) A gift voucher worth Rs. 10,000 was given on the occasion of his marriage anniversary. It is given by the company to all employees above certain grade.
State the taxability or otherwise of the above said perquisites and compute the total value of taxable perquisites.

8 (0)
(b) State whether filing of income–tax return is mandatory for the assessment year 2011–12 in respect of the following cases:
(i) Research association eligible for exemption under section 10(21) having total income of Rs. 2,10,000
(ii) Registered trade union eligible for exemption under section 10(24) having following incomes:
Income from house property (computed)
Income from other sources (computed) Rs. 60,000
Rs. 40,000
(iii) A charitable trust registered under section 12AA, having total income of Rs. 1,90,000.
(iv) A Limited Liability Partnership (LLP) with business loss of Rs. 1,30,000.
4 (0)
(c) State with reasons whether the following are liable for service tax :
(i) Services rendered to Reserve Bank of India.
(ii) Services rendered by a sub-contractor.
(iii) Services provided to developer of special economic zone.
(iv) Services rendered to associated enterprise.
4 (0)
4. (a) Decide the following transactions in the context of Income–tax Act, 1961 :
(i) Mr. B transferred 500 shares of Reliance Industries Ltd. to M/s. B Co. (P) Ltd. on 10.10.2010 for Rs. 3,00,000 when the market price was Rs. 5,00,000. The indexed cost of acquisition of shares for Mr. B was computed at Rs. 4,45,000. The transfer was not subjected to securities transaction tax.
Determine the income chargeable to tax in the hands of Mr.B and M/s. B Co (P) Ltd. because of the above said transaction.
(ii) Ms. Chhaya transferred a vacant site to Ms. Dayama for Rs. 4,25,000. The stamp valuation authority fixed the value of vacant site for stamp duty purpose at 6,00,000. The total income of Chhaya and Dayama before considering the transfer of vacant site are Rs. 50,000 and Rs. 2,05,000, respectively. The indexed cost of acquisition for Ms. Chhaya in respect of vacant site is Rs. 4,00,000 (computed).
Determine the total income of both Ms. Chhaya and Ms. Dayama taking into account the above said transaction.
(iii) Mr. Chezian is employed in a company with taxable salary income of Rs. 5,00,000. He received a cash gift of Rs. 1,00,000 from Atma Charitable Trust (registered under section 12AA) in December 2010 for meeting his medical expenses.
Is the cash gift so received from the trust chargeable to tax in the hands of Mr.Chezian?
6 (0)
(b) Balamurugan furnishes the following information for the year ended 31–03–2011:
Rs.
Income from business
Income from house property
Lottery winning (Gross)
Speculation business income
Income by way of salary
Long term capital gain (1,35,000)
(15,000)
3,00,000
1,00,000
60,000
70,000
Compute his total income, tax liability and advance tax obligations. 6 (0)
(c) A manufacturer sold goods to distributor for Rs. 20,000. The distributor sold the goods to the wholesaler for Rs. 24,000. The wholesaler sold the goods to the retailer for Rs. 30,000. The retailer sold the goods to the final consumer for Rs. 40,000. The VAT rate is 12.5% which is charged separately.
Compute VAT liability under Invoice method. State, why this method is preferable. 4 (0)
5. (a) Mr. Chaturvedi having gross total income of Rs. 6,35,000 for the financial year 2010–11 furnishes you the following information:
(i) Deposited Rs. 50,000 in tax saver deposit in the name of major son in a nationalized bank.
(ii) Paid Rs. 25,000 towards premium on life insurance policy of his married daughter.
(iii) Purchased approved long-term infrastructure bonds for Rs. 25,000 in January 2011.
(iv) Contributed Rs. 10,000 to Prime Minister’s National Relief Fund.
(v) Donated Rs. 20,000 to a Government recognized institution for scientific research.
Note : Assume that the gross total income of Mr. Chaturvedi does not include any income under the head ‘Profits and gains of business or profession’.
Compute the total income of Mr. Chaturvedi for the assessment year 2011–12.

7 (0)
(b) List any 5 instances where the tax deductible at source in terms of section 194A will not apply. 5 (0)
(c) When does e–payment and e–filing of service tax return become mandatory? Explain. 4 (0)
6. (a) X Co. (P) Ltd., converted into a Limited Liability Partnership (LLP) by name All Trade LLP, with effect from 01.04.2010.
The following details are given to you:
Asst. year 2003-04 : Business loss brought forward
Asst. year 2010-11 : Business loss brought forward
(These are related to erstwhile X Co. (P) Ltd.)
Total income of All Trade LLP, for the financial year 2010–11 (Before
set off of brought forward business losses of erstwhile company i.e. X Co. (P) Ltd.) Rs. 2,00,000
Rs. 5,00,000

Rs. 6,00,000
Assume that all the conditions prescribed in section 47(xiiib) were satisfied by X Co. (P) Ltd. at the time of conversion in to LLP.
(i) Explain whether All Trade LLP can set off and carry forward the business loss of its predecessor i.e. X Co. (P) Ltd.?
(ii) State whether any change in partners of All Trade LLP at later date would have any tax consequence.
4 (0)
(b) Ramamurthy had 4 heavy goods vehicles as on 1.4.2010. He acquired 7 heavy goods vehicles on 27.6.2010. He sold 2 heavy goods vehicles on 31.5.2010.
He has brought forward business loss of Rs. 50,000 relating to assessment year 2007–08 of a discontinued business. Assuming that he opts for presumptive taxation of income as per section 44AE, compute his total income chargeable to tax for the assessment year 2011–12. 4 (0)
(c) Win Limited commenced the business of operating a three star hotel in Tirupathi on 1–4–2010.
It furnishes you the following information:
(i) Cost of land (acquired in June 2008) Rs. 60 lakhs
(ii) Cost of construction of hotel building
Financial year 2008-09
Financial year 2009-10 Rs. 30 lakhs
Rs.150 lakhs
(iii) Plant and Machineries (all new) acquired during financial
year 2009–10 Rs. 30 lakhs
[All the above expenditures were capitalized in the books of the company]
Net profit before depreciation for the financial year 2010–11 Rs. 80 lakhs
Determine the amount eligible for deduction under section 35AD of the Income-tax Act, 1961, for the assessment year 2011–12. 4 (0)
(d) How excess payment of service tax would be adjusted against service tax liability of subsequent periods? State the applicable conditions. 4 (0)
7. (a) Answer any three sub–parts out of four sub–parts of the question. 3×4=12
(i) What are the conditions to be satisfied for the allowability of expenditure under section 37 of the Income–tax Act, 1961? (0)
(ii) 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 the sum recovered, chargeable to tax?
(b) Return of income of a company was signed by the Company Secretary. Is the return a valid return?
(c) 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)?
(d) X Co. Ltd. paid Rs. 120 lakhs as compensation as per approved Voluntary Retirement Scheme (VRS) during the financial year 2010–11.
How much is deductible under section 35DDA for the assessment year 2011–12?
(0)
(iii) Ashwin doing manufacture and wholesale trade furnishes you the following information :
Total turnover for the financial year
Rs.
2009–10
2010–11 45,00,000
55,00,000
State whether tax deduction at source provisions are attracted for the below said expenses incurred during the financial year 2010–11:

Rs.
Interest paid to UCO Bank
Contract payment to Raj (2 contracts of Rs. 12,000 each)
Shop rent paid (one payee)
Commission paid to Balu 41,000
24,000
1,90,000
7,000
(0)
(iv) Y Co. Ltd. furnishes you the following information for the year ended 31.3.2011:
Rs.
Total turnover of Unit A located in Special Economic Zone
Profit of the business of Unit A
Export turnover of Unit A
Total turnover of Unit B located in Domestic Tariff Area (DTA)
Profit of the business of Unit B 100 lakhs
30 lakhs
50 lakhs
200 lakhs
20 lakhs
Compute deduction under section 10AA for the A.Y. 2011–12.

(0)
(b) Briefly state the contents of VAT invoice (any 8 items) 4 (0)

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