CWA ICWA Question Papers Inter Group I
Applied Direct Taxes December 2009
This Paper has 44 answerable questions with 2 answered.
Time Allowed : 3 Hours Full Marks : 100
The figures in the margin on the right side indicate full marks
Answer Question No. 1 which is compulsory and any five from the rest.
Working notes should form part of the answer.
Wherever required, the candidate can make suitable assumptions and
state the same clearly in the answer.
1. (a) Fill up the blanks: 7
(i) Compensation received from an insurer on account of damagee to the crops is __________ income. (1)
(ii) Time limit for filing revised return when assessment has not been completed is __________ from the end of the relevant assessment year. (0)
(iii) A ____________ means A Company which is not a domestic company. (1)
(iv) The deduction for amortisation of preliminary expenses under section 35D is allowable at ___________ of the qualifying expenditure in each of the ___________ successive years beginning with the year in which business commences. (0)
(v) __________ is a non–recurring expenditure whereas ___________ is normally a recurring one. (0)
(vi) The term business would include ______________ and accordingly the term business used in section _____________ would also include a professional connection. (0)
(vii) Any commission due or received by a partner of a firm from the firm shall ___________ be regarded as _________ under Sec. ___________ . (0)
(b) State with reasons, whether the following statements are True or False : 6
(i) Depreciation is allowed only when it is claimed. (0)
(ii) X is employed in complex Ltd. as a Chartered Accountant. The annual membership fee of X paid by complex Ltd is not a perquisite and hence not chargeable to tax. (0)
(iii) In the case of a dealer in shares, Income by way of dividend is taxable under the heads “profits and gains of business or profession”. (0)
(iv) In case of an artificial juridical person, no surcharge is payable where the total income exceeds Rs.10,00,000. (0)
(v) Partnership firm deriving loss need not file return of income. (0)
(vi) The term ‘Individual’ as defined in the wealth tax act, 1957 means only a single human being. (0)
(c) Expand abbreviations:
(i) ITAT (ii) MAT
(d) (i) Is it compulsory to file a claim for refund? discuss. 5×2 (0)
(ii) Income earned by a mutual concern from mutual activities is not taxable comment. (0)
(iii) Whether profit arises on the valuation of closing stock is a source of income? Discuss. (0)
(iv) A company which has its head office in India operated in Pakistan declared dividend subject to remittance from Pakistan. During the previous year relevant to the assessment year, the remittance could not be recovered from Pakistan. What is the tax liability in the hands of shareholder? Discuss. (0)
(v) The tax liability under the wealth tax act is determined solely on the basis of residential status of an assessee. Comment. (0)
2. (a) Raja who was born on 1.06.1943 is a retired Government Officer. Approximately he earns Rs.1,80,000 as interest on Company deposits. Besides, he gets Rs.1,00,000 pension. He invested Rs.1,00,000 in securities and other investments qualified for deduction u/s 80C. He also paid Rs.20,000 as Medical Claim Insurance Premium. Can he submit the declaration in Form No.15H to the Company which will pay interest on company deposits so that tax is not deducted by the payer company u/s 194A read with Section 197A. 3 (0)
(b) Miss. Rama sells a residential building at Jodhpur for Rs.15,00,000 on July 1, 2008. The building was acquired for Rs.1,50,000 on June 1, 2001.
She pays brokerage @ 2% at the time of sale of the Building. She invests Rs.7 lakh in purchase a residential building on December, 2008 and deposit Rs.2 lakh under Section 54EC in bonds of NHAI (Redeemable after 3 years) on March, 2009.
Compute the capital gain Chargeable to tax for the assessment year 2009–10.
(c) State the assessee whose net wealth is not chargeable to tax u/s 45. 4 (0)
(d) A single letter of enquiry was issued by the Income Tax Department to X of Mumbai. In this letter there was no specific mention of any provision of the Income Tax Act. Can X be treated as an ‘Assessee’ ? 2 (0)
(e) What are the assets defined in Section 2(EA) of the Wealth Tax Act. 3 (0)
3. (a) The total income of Mrs. Z computed for the assessment year 2009–10 is Rs.2,00,000 which includes the following:
Long term capital gains
Winning from lotteries
Short term capital gains covered by Section IIIA 30,000
Agricultural Income earned by her was Rs.50,000. Compute the tax payable by Mrs. Z.
(b) State briefly the deduction available under Sec.80E in respect of interest on loan taken for Higher Education. 5 (0)
(c) From the following information compute the total income of Mr. Ramesh for the assessment year 2009–10:
Income from salary
Income from House Property
Business loss (non speculative)
Short–term capital loss
Long–term capital gain 2,60,000
4. (a) X, a retail trader of Mumbai gives the following Trading and Profit and Loss Account for the year ended 31st March, 2009.
Trading and Profit and Loss Account for the year ended 31.03.2009
To Opening Stock
” Gross profits 86,000
3,06,000 By Sales
” Other business receipts
” Income from UTI
” Closing Stock 12,11,500
” Rent and rates
” Interest on Loan
” Postage and Telegram
” Printing and Stationary
” Loss on sale of Shares
” General Expenses
” Net Profit 60,000
50,000 By Gross Profit B/D 3,06,000
(i) Some stocks were found to be not included in both the opening and Closing Stock, the value of which were: Opening Stock Rs.12,000, Closing stock Rs.21,000.
(ii) Salary include Rs.18,000 paid to his brother, which is unreasonable to the extent of Rs.2,000.
(iii) The whole amount of Printing and Stationary was paid in cash.
(iv) Depreciation as per Income Tax rules is Rs.66,000.
(v) Rent and Rates includes Sales Tax Liability of Rs.5,000 paid on April, 4,2009.
(vi) Other Business Receipts include Rs.3,000 received as refund of Sales Tax relating to the year, 2007–08.
(vii) General expenses include Rs.1,500 paid as donation to A Public Charitable Trust.
You are required to Advise X whether he can offer his Business Income under sec 44 AF, i.e. presumptive Taxation.
(b) Sate briefly with regard to deduction allowable under Sec.57 of the Income Tax Act, 1961 in respect of income from other sources. 5 (0)
5. (a) P.K. retired as General manager of XYZ Co Ltd. on November 30, 2008 after rendering service for 20 years and 10 months. He received Rs.3,20,000 as gratuity from the employer. He is not covered by the payment of Gratuity Act, 1972.
His salary particulars are given below:
(Eligible for Retirement Benefits)
Transport Allowance Rs.10,000p.m. up to June 30, 2008
Rs.12,000 p.m. from July 1, 2008
50% of basic pay
He resides his own house. Interest on moneys borrowed for the self occupied house is Rs.20,000 for the year ended March 31, 2009.
From a fixed deposit with a Bank he earned interest income of Rs.14,000 for the year ended 31.03.09.
Compute taxable income of P.K. for the year ended March 31, 2009.
(b) An employee instructs his employer to pay a certain portion of his salary to a charity and claims it as exempts as it is diverted by overriding charge or title. Comment. 2 (0)
(c) Discuss the treatment of the following items for the purpose of Wealth Tax Assessment.
(i) A three storied residential house at Kolkata – One floor is occupied by the Assessee for his residence and the other floors are let out.
(ii) A personal motor car of the assessee transferred to Hindu Undivided Family of which he is a member without any adequate consideration.
(iii) By profession A is an architect and the value of the tools and instruments required by him for his professional use is Rs.50,000
6. (a) P, Q and R are partners in a firm sharing profits and losses in the ratio of 1:1:2 provide the following information. Find firm’s Net Income assuming that salary and interest are not paid to partners.
(i) Net income of the firm is (–) Rs.1,20,000, out of which unadjusted depreciation is Rs.40,000.
(ii) On 31.05.08 R retires from the firm and the other partners carry on the same business.
(iii) The firm’s income for the Assessment Year 2009–10 before adjusting the aforesaid loss and depreciation is Rs.1,20,000.
(b) A firm filed a Return of Income disclosing an income of Rs.60,000 on June 30, 2009 in respect of Assessment Year 2007‘08. The Assessing Officer completed the assessment on September 30, 2009 under Sec. 143(3) on an income of Rs.90,000. A part from questioning the merits of the addition made by the Assessing Officer, on what other ground will you challenge the assessment? 4 (0)
(c) Mr. D.K. is employed with X Ltd. drawing salary of Rs.75,000 per month (Eligible deduction under Sec.80C Rs.1,00,000). He furnishes the following particulars of income and losses from other sources as follows:
Loss from House property
Bank interest (after deduction of tax Rs.3,090)
Dividend from Reliance Industries Rs.25,400
Compute the liability of X Ltd. to deduct Tax at source.
(d) X got an employment in Singapore during the previous year 2008–09. He left for Singapore on August 9, 2008.
He is an Indian Citizen. Determine the residential status for the Assessment Year 2009–10. 2 (0)
7. (a) C is the minor child of Mr. and Mrs. X Mr. X has business income of Rs.2,80,000. Mrs. X has salary income of Rs.2,20,000. C earns income of Rs.60,000 from a dancing programme. C also earns interest of Rs.20,000 from a fixed deposit with a Bank. Compute total income of Mr. X, Mrs. X and C. 3 (0)
(b) Amount received from superannuation fund on resignation before specified age is exempt from income tax. Comment 2 (0)
(c) Simplex Ltd. a company providing telecommunication service, obtain a Telecom License on April 20, 2008 for a period of 10 years which ends on March 31, 2018 (License Fee being Rs.18 lakh). Find out the amount of deduction under Sec.35ABB if –
(i) The entire amount is paid on May 6, 2008; or
(ii) The entire amount is paid on April 1, 2009; or
(iii) The entire amount is paid in 3 equal installments on April 30, 2008, April 30, 2009 and April 30, 2010.
(d) Is there any option for an employer, not to deduct Tax at Source, in respect of perquisites portion of salaries paid to an employee? Discuss. 5 (0)
8. (a) Indicate, with reasons whether the following expenses are deductible in computing income from business for the Assessment Year 2009–10.
(i) Rs.10,000 paid to a Lawyer to examine the Title Deed which the Assessee intends to purchase.
(ii) Compensation of Rs.20,000 paid to an employee who has been retrenched for continuously committing some fraudulent Acts.
(iii) Rs.5,000 paid for shifting the factory from one place to another for easier supply of raw materials.
(iv) Penalties of Rs.10,000 paid to the West Bengal Government for the non–fulfillment of contract entered into with the said Government.
(b) Distinguish between foregoing of salary and surrender of salary. 4 (0)
(c) Under what circumstances will urban land be not considered as an ‘Asset’ for Wealth Tax purposes? 3 (0)
(d) X and Y are co–owners of two houses with equal share of both the houses. While the first house is used by them for their residence, the second house is let to a tenant at a monthly rent of Rs.2,500. The other relevant particulars of the houses for the year 2008–09 are as follows:
First House Second House
Construction completed on
Interest on loan 30.06.91
Compute income from house property of X and Y for the relevant assessment year.