CA PCC question Papers Group II Taxation
Time Allowed : 3 Hours Maximum Marks : 100
Answer all questions
Working notes should form part of the answer.
1. Answer any five out of the following six sub–divisions, with reference to the provisions of the Income–tax Act, 1961 for the assessment year 2009–2010: 5×2=10
(a) Whether the income derived from saplings or seedlings grown in a nursery is taxable under the Income – Act, 1961? (0)
(b) When will tax not required to be deducted at source on interest payable to a resident on any bond or security issued by a company though the aggregate amount of interest exceeds Rs.2,500, the basic exemption limit under section 193 of the Act? (0)
(c) When is a charitable trust required to file its audit report alongwith return of income? (0)
State with reason, whether the following statements are True or False:
(d) A notice under section 143(2) of the Act for scrutiny/regular assessment shall not be issued on an assessee after the expiry of six months from the end of the financial year in which the return is furnished. (0)
(e) Mr. X, Karta of HUF, claims that the HUF is non-resident as the business of HUF is transacted from UK and all the policy decisions are taken there. (0)
(f) Mr. P, a shareholder of a closely held company, holding 16% shares, received advances from that company which is to be deemed as dividend from an Indian Company, hence exempted under section 10(34) of the Income–tax Act, 1961. (0)
2. Mr. X is a resident individual. His Profit and Loss account for the year ending 31st March, 2009 is given below:
To Amount By Amount
Donation to political party
Fringe benefit tax
Net Profit 35,650
3,44,894 Gross Profit
Interest on debentures (Net amount
Rs.22,450 plus TDS Rs. 2,550)
Short term capital gain on sale of
Dividend from Indian Company 5,25,860
(i) Depreciation has been calculated as per the Income Tax Rules at Rs. 75,000
(ii) He has deposited Rs. 35,000 in a notified scheme under Post Office Time Deposit Rules, 1981 for five year time.
(iii) He had bought 200 shares of AB Co. Ltd. on 5.12.2007 @ Rs. 75 each, 150 shares of PQ Co. Ltd. on 3.8.2008 @ Rs. 112 each and 150 shares of AB Co. Ltd. on 05.09.2008 @ Rs. 60 each. He sold all the shares of AB Co. Ltd. on 15.12.2008 @ Rs. 98 each and sold the shares of PQ CO. Ltd. on 10.3.2009 @ Rs. 102 each. All shares were sold in National Stock Exchange through a registered broker.
(iv) One of his life insurance policies was matured on 14.6.2008. The sum assured was Rs. 1,00,000 and amount received on maturity was Rs. 1,62,850.
(v) Donation to the political party represented the contribution made to a political party registered under section 29A of the Representation of the People Act, 1951.
(vi) Income tax department refunds Rs. 42,580 (including interest of Rs. 1,470) which was directly credited in his personal savings account.
(vii) He incurred expenditure of Rs. 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 Rs. 7,500 was reimbursed to him by an insurance company.
(viii) Bad debt of a business which was discontinued in earlier years, recovered during the year Rs. 15,000.
Compute total income and tax payable thereon by Mr. X for the assessment year 2009 – 2010.
3. (a) Mr. Ashok Kumar, an employee of a PSU, furnishes the following particulars for the previous year ending 31.3.2009:
iii. Salary income for the year
Salary for Financial Year 2006–07 received during the year
Assessed Income for the Financial Year 2006–07 5,25,000
You are requested by the assessee to compute relief under section 89 of the Income–tax Act, 1961, in terms of tax payable for assessment year 2009–10.
The rates of Income–tax for the assessment year 2007–08 are:
Tax Rate (%)
On first Rs. 1,00,000
On Rs. 1,00,000 – Rs. 1,50,000
On Rs. 1,50,000 – Rs. 2,50,000
Above Rs. 2,50,000
Education cess Nil
(b) Mr. Kumar is the owner of a residential house which was purchased in September, 1992 for Rs. 50,00,000. He sold the said house on 5th August, 2008 for Rs. 24,00,000. Valuation as per stamp valuation authority of the said plot of land was Rs. 35,00,000. He invested Rs. 8,00,000 in NHAI Bonds on 12th January, 2009. He purchased a residential house on 8th September, 2008 for Rs. 12,00,000. He gives other particulars as follows:
Interest on Bank Deposit
Investment in public provident fund Rs. 32,000
You are requested to calculate the taxable income for the assessment year 2009–2010 and the tax liability, if any.
Cost inflation index for F.Y. 1992–93 and 2008–09 are 223 and 582 respectively.
4. (a) (i) Mr. Abhik, an individual, made payment of health insurance premium to GIC in an approved scheme. Premium paid on his health is Rs. 10,000 and his spouse’s health is Rs. 15,000 during the year 2008-09. He also paid health insurance premium of Rs. 25,000 on his fatherâ€™s health who is a senior citizen and not dependent on him. The payments have not been made by cash. Compute the amount of deduction under Chapter VI – A of the Act, available to Mr. Abhik from his gross total income for the assessment year 2009–10. 3 (0)
(ii) Mr. Abhik’s father, who is a senior citizen had pledged his residential house to a bank under a notified reverse mortgage scheme. He was getting loan from bank in monthly installments. Mr. Abhik’s father did not repay the loan on maturity and gave possession of the house to the bank to discharge his loan. How will the treatment of long-term capital gain be made on such reverse mortgage transaction? 3 (0)
(b) Ms. Geeta, a resident individual, provides the following details of her income / losses for the year ended 31.3.2009:
(i) Salary received as a partner from a partnership firm Rs. 7,50,000.
(ii) Loss on sale of shares listed in BSE Rs. 3,00,000. Shares were held for 15 months and STT paid on sale.
(iii) Long–term capital gain on sale of land Rs. 5,00,000.
(iv) Rs. 51,000 received in cash from friends in party.
(v) Rs. 55,000, received towards dividend on listed equity shares of domestic companies.
(vi) Brought forward business loss of assessment year 2007 – 08 Rs. 12,50,000.
The return for assessment year 2007–08 was filed in time.
Compute gross total income of Ms. Geeta for the assessment year 2009 – 10 and ascertain the amount of loss that can be carried forward.
5. Answer any four of the following five sub-divisions with regard to the provisions of theIncometax Act, 1961: 4×4=16
(a) Explain “Previous year” for undisclosed sources of income. (0)
(b) Define the meaning of “Infrastructure Capital Fund” as per section 2(26B) of theIncometax Act, 1961. (0)
(c) Explain the meaning of expression “advancement of any other object of general public utility” in the context of “Charitable Purpose” defined under section 2(15) of the Act. (0)
(d) What is the meaning of ‘Incorrect claim’ apparent from any information in the return of income which needs prima face adjustment under section 143(1) of the Act? (0)
(e) Enlist the installments of advance tax and due dates thereon in case of companies. (0)
6. Answer any five of the following: 5×2=10
(a) Mr. X, a service provider who pays service tax regularly, was of the opinion that a particular service was not liable for service tax. He, therefore, did not charge service tax in his bill. He received the bill amount without service tax. How will service tax liability of Mr. X be determined in such case? (0)
(b) Whether service tax return can be furnished after the due date? (0)
(c) How can the excess payment of service tax be adjusted? (0)
(d) Discuss the accountability of an “input service distributor” who may not be liable to pay service tax. (0)
(e) Discuss the word “transparency” in the context of VAT system. (0)
(f) When does a small service provider require to register under the Finance Act, 1994, but not liable to collect and pay service tax? (0)
7. (a) Compute the VAT amount payable by Mr. A who purchases goods from a manufacturer on payment of Rs. 2,25,000 (including VAT) and earns 10% profit on sale to retailers. VAT rate on purchase and sale is 12.5%. 3 (0)
(b) An unregistered “service provider” provides following details in respect of taxable services provided during the financial year 2008–09:
Date Particulars Amount
30.6.2008 Advance received from a customer 1,00,000
30.9.2008 Part payment received against a bill of Rs.
9,50,000 raised on a customer 5,00,000
31.12.2008 Money received against taxable services provided
during December, 08 3,00,000
31.1.2009 Taxable services rendered during January, 09 1,00,000
31.3.2009 Taxable services rendered during March, 09 2,00,000
The service tax provider complies with the provisions of registration and collection of service tax as per service tax laws. He gets registered during the year. He received the money against the bills raised during the month of January and March 2009. Compute the service tax liability of service provider for the year 2008–09 considering service tax @ 12.36%.
8. Answer any three of the following: 3×3=9
(a) How is the value of taxable services is determined when the consideration against taxable services is received in other than monetary terms? (0)
(b) What are the sources of Service Tax Law? (0)
(c) How can an auditor play role to ensure that the tax payers discharge their tax liability properly under the VAT system? (0)
(d) Discuss the ‘subtraction method’ for computation of VAT. (0)