Question Paper Economic Legislation-II (162) : October 2004 • • • • 1.
Answer all questions. Marks are indicated against each question.
The maximum period before which the assessee has to file a claim for the refund of the excise duty, under the < Answer > Central Excise Act is (a) Six months from the relevant date (c) Three months from the relevant date (e) Ten months from the relevant date.
(b) One year from the relevant date (d) Five months from the relevant date (1 mark)
2.
The maximum exemption limit in respect of the retrenchment compensation received by an employee as per the < Answer > provisions of the section 10(10B) of the Income Tax Act, 1961 is (a) Rs.5,00,000
(b) Rs.3,50,000
(c) Rs.2,50,000
(d) Rs.3,00,000
(e) Rs.4,00,000. (1 mark)
3.
Which of the following savings /contributions qualify for rebate under the section 88 of the Income Tax Act, < Answer > 1961? (I) Investments in National Savings Certificates made by a firm. (II) Tuition fees in respect of the children’s full time education paid to any university, college or educational institution for a maximum of two children, subject to a limit of Rs.12,000 per child per year. (III) Payment in respect of the non-commutable deferred annuity. (IV) Subscriptions to the notified units of the mutual fund or the UTI subject to a maximum of Rs.10,000 by an individual. (a) Only (I) above (c) Both (II) and (IV) above (e) (I), (II), (III) and (IV) above.
(b) Only (III) above (d) (II), (III) and (IV) above (1 mark)
4.
Which of the following costs cannot be included in the Customs value? (a) (b) (c) (d) (e)
The tools, dies and moulds used in the production of the imported goods supplied by the buyer License fees and the transfer of the technology fees for operating the machinery Value of the subsequent resale payable to the foreign supplier Charges for the reproduction of the software in India The charges for the dismantling and the transportation of the old machinery including its inspection charges in the case of the import of the second hand machinery.
< Answer >
(1 mark) 5.
The duty drawback allowed on the goods that are re-exported without being used in India is (a) 85 percent
(b) 70 percent
(c) 60 percent
(d) 30 percent
(e) 98 percent.
< Answer >
(1 mark) 6.
Share of profit received by a partner from a partnership firm (assessed as a firm) (a) (b) (c) (d)
Is taxable as business income in the hands of the partners Is not taxable in the hands of the partners Is exempt upto 20% of the amount received Is exempt upto 50% of the amount received
< Answer >
(e)
Is taxable as salary in the hands of the partners. (1 mark)
7.
Which of the following persons is not considered as deemed owner, for the computation of ‘income from house < Answer > property’? (a) Holder of impartible estate (b) Person who transferred the house property to the spouse without adequate consideration (c) Person who transferred the house property to the married daughter, otherwise than for an adequate consideration (d) A person who is allowed to take possession of any building in part performance of contract (e) A member of co-operative society to whom a building is allotted under house building scheme. (1 mark)
8.
Interest on the borrowed capital for the pre construction period, payable by the assessee is deductible in (a) Three equal installments commencing from the previous year in which the house is acquired or constructed (b) Four equal installments commencing from the previous year in which the house is acquired or constructed (c) Five equal annual installments commencing from the previous year in which the house is acquired or constructed (d) Five equal installments commencing from the assessment year in which the house is acquired or constructed (e) One installment in the previous year in which it is incurred.
< Answer >
(1 mark) 9.
< Answer >
Which of the following goods are not taxable under the Sales Tax Act? (a) Advance license (b) Lottery tickets (c) SIM card sold by the cellular companies (d) Stocks, shares and debentures (e) Sale of the copyright. (1 mark)
< Answer >
10. Which of the following statements constitutes a revenue receipt? (a) (b) (c) (d) (e)
Capital sum payable in installments Compensation received by a partner from another partner for relinquishing all his rights Surplus left with the seller due to reduction in the export duty Consideration received by an assessee for vacating the business premises A receipt on account of the fixed capital.
in the partnership
(1 mark) 11. Which of the following goods cannot be obtained by the registered dealer under Central Sales Tax Act, at the < Answer > concessional rate? (a) (b) (c) (d) (e)
The goods which are used in the manufacture or processing for sale Goods for resale Goods in telecommunication network Containers and the packing materials Building materials like sand, lime and cement, required for the construction of the building. (1 mark)
12. Exemption from the income tax is allowed to a non-resident foreign national, in respect of the salary received as a < Answer > member of the ship’s crew, if his total stay in India (a) (b) (c) (d) (e)
Does not exceed 90 days during the previous year Does not exceed 120 days during the previous year Does not exceed 180 days during the previous year Does not exceed 120 days during the previous year and 90 days during the last previous year Does not exceed 180 days during the previous year and 90 days during the last previous year.
(1 mark) < Answer >
13. The penalty in respect of the goods which have been imported against the prohibition in force is (a) (b) (c) (d) (e)
The actual value of the goods Two times the value of the goods Five times the value of the goods or Rs.1,000 whichever is greater The value of goods or Rs.5,000 whichever is greater Five times the duty sought to be evaded on such goods or Rs.1,000 whichever is greater. (1 mark)
14. Under the Customs Act, 1962, a person who owns or controls on the notified date any notified goods will be < Answer > required to deliver a statement to the proper officer within (a) One month
(b) Fifteen days
(c) Two months
(d) Forty five days (e) Seven days. (1 mark)
15. Which of the following statements is false in respect of the arrears of the rent received by an assessee? (a) The arrears shall be deemed to be the income chargeable under the head ‘income from house property’ (b) The arrears are taxable in the previous year in which it is received (c) The arrears so received are taxable in the previous year in which it is received if it were not taxed in the earlier years (d) The arrears are taxable only if the assessee is the owner of the property in the previous year in which it is received (e) The standard deduction of 30% is allowed even on the arrears, whenever the same is taxable.
< Answer >
(1 mark) < Answer >
16. Rectification of the mistake u/s 154 can be made under the Income Tax Act, within a period of (a) (b) (c) (d) (e)
2 years from the end of the financial year in which the return of income was filed 2 years from the end of the financial year in which the order sought to be rectified was passed 4 years from the end of the financial year in which the order sought to be rectified was passed 3 years from the end of the financial year in which the order sought to be rectified was passed 4 years from the end of the financial year in which the return of income was filed. (1 mark)
17. Which of the following is not taxable under the head income from other sources? (a) (b) (c) (d) (e)
Interest on securities Remuneration received by a lawyer in his capacity of an official receiver Winnings from lotteries Family pension Income from the letting of plant, machinery and furniture by an assessee not engaged in the said business.
< Answer >
(1 mark) 18. Which of the following donations does not qualify for a deduction under section 80G of the Income Tax < Answer > Act,1961? (a) (b) (c) (d) (e)
Donations given from the non-taxable income Donations given to the National Defence Fund Donations given to the Prime Minister’s Relief Fund Donations given to an approved educational institution Donations given to Zila Saksharta Samiti. (1 mark)
19. The minimum income to be declared by an assessee who is a retail trader, under section 44AF of the Income Tax < Answer > Act, 1961.
(a) 10% of the gross receipts (c) 8% of the gross receipts
(b) 20% of the gross receipts (d) 5% of the gross receipts
(e) Rs.5 lakhs. (1 mark)
20. Which of the following statements is false in respect of the perquisite value of the motorcar? (a)
When the car is owned by the employer but the running and maintenance expenses are met by the employee, the perquisite value is nil if it is solely used for the official purposes (b) Where the employee owns the car and the expenses are met by the employer, the value is taxable in the hands of only the specified employees when the car is used for both official and private purposes (c) When the car is owned and maintained by the employee himself, the value of the perquisite is nil (d) When the car is owned and maintained by the employer and used only for the official purposes by the employee, perquisite value is nil (subject to certain conditions) (e) When any automotive conveyance (other than car) is owned and maintained by the employer and used only for the official purposes by the employee, perquisite value is nil (subject to certain conditions).
< Answer >
(1 mark) 21. Which of the following statements are true with respect to the rebate under section 88 of the Income Tax Act, < Answer > 1961? (a) (b) (c) (d) (e)
The rebate under section 88 can be claimed by the association of persons No rebate under section 88 is allowed from the tax on the long term capital gains Rebate under section 88 is not available from the tax on the winnings from lotteries, races etc. There is no limit of the gross total income to claim the rebate under section 88 Annuity plan can be taken on the dependant parent or siblings. (1 mark)
22. Mr.Anand who works for the electricity board, is provided with official quarters and free electricity for domestic < Answer > use. The value of the perquisite is equal to (a) (b) (c) (d) (e)
10% of the basic salary of Anand 5% of the basic salary of Anand Actual expenditure incurred by the employer 10% of the basic salary of Anand or actual expenditure incurred by the employer, whichever is lower 5% of the basic salary of Anand or actual expenditure incurred by the employer, whichever is lower. (1 mark)
23. The expected rent of a property, for the computation of gross annual value is calculated taking into consideration (a) (b) (c) (d) (e)
Fair rental value Municipal value Standard rent as fixed under the Rent Control Act Fair rental value or municipal value, whichever is higher Fair rental value or municipal value, whichever is higher subject to a maximum of the standard rent as fixed under the Rent Control Act.
< Answer >
(1 mark) 24. Which of the following losses are not deductible from the business income?
(I)
(I) Losses relating to any business or profession discontinued before the commencement of the previous year. (II) (II) Loss of the advances made for setting up of a new business and which could not be started. (III) (III) Losses incurred on the sale of the shares held as investments. (IV) (IV) Loss arising from the non-recovery of the tax paid by an agent on behalf of the non-resident. (a) (I), (II) and (III) above (b) (I), (II), (III) and (IV) above (c) (II), (III) and (IV) above (d) (I), (III) and (IV) above (e) Both (III) and (IV) above.
< Answer >
(1 mark) 25. Mrs.Brown is a shareholder in Black Ltd., having substantial interest in that company. She is also a director in < Answer > Yellow Ltd.. Black Ltd., supplies raw material to Yellow Ltd., at a price, which is 10% lower than the market price. What is the amount that is disallowed under the Income Tax Act, 1961? (a) No amount can be disallowed as Black Ltd. and Yellow Ltd. are not related (b) The entire transaction value has to be disallowed as both the companies are related (c) The difference between the actual price paid by Yellow Ltd. and the market price of the same goods is disallowed, as both the companies are related (d) 10% of the value at which the goods are sold to Yellow Ltd. by Black Ltd. is to be disallowed (e) 20% of the value at which the goods are sold to Yellow Ltd. by Black Ltd. is to be disallowed. (1 mark) 26. Y, a practicing consultant has an income of Rs.12,25,000 for the previous year 2003-04. The due date for the filing < Answer > of the return of income for the assessment year 2004-05 is (a) June 30, 2004 (c) September 30, 2004
(b) July 31, 2004 (d) October 31, 2004
(e) August 31, 2004. (1 mark)
27. The income from the property transferred to the wife, with an agreement to live apart is taxable in the hands of the < Answer (a) Transferor as the deemed owner (c) Either the transferor or the transferee whose income is higher (d) Both the transferor and the transferee equally
>
(b) Transferee (e) Transferee’s legal heir. (1 mark)
28. The unabsorbed depreciation, brought forward from the previous years, can be setoff in the order of (a) (b) (c) (d) (e)
Business loss brought forward, current year depreciation and the unabsorbed depreciation Business loss brought forward, unabsorbed depreciation brought forward and the current year depreciation Current year depreciation, brought forward business loss and the unabsorbed depreciation Current year depreciation, unabsorbed depreciation brought forward and the brought forward business loss Unabsorbed depreciation brought forward, current year depreciation and the brought forward business loss.
< Answer >
(1 mark) 29. The income transferred to another person without the transfer of the relevant source, is taxable in the hands of the (a) Transferor (c) Transferor, if the transfer is revocable (e) Both the transferor and the transferee.
(b) Transferee (d) Transferee, if the transfer is revocable
< Answer >
(1 mark) < Answer >
30. An appeal to the CESTAT should be filed within (a) (b) (c) (d) (e)
45 days from the date of communication of the order 15 days from the date of communication of the order 2 months from the date of communication of the order 3 months from the date of communication of the order 1 month from the date of communication of the order. (1 mark)
31. In case of the sales returns, the sale price will be deducted from the aggregate sale price only if the goods are < Answer > returned within a period of (a) 3 months of sale (d) 8 months of sale
(b) 6 months of sale (e) 10 months of sale.
(c) 5 months of sale
(1 mark) < Answer >
32. Which of the following is not an indirect tax? (a) Octroi (d) Service tax
(b) Expenditure tax (e) Entry tax.
(c) Gift tax (1 mark)
33. Which of the following statements is false in respect of the term ‘manufacture’ under the Central Excise Act, for < Answer > the duty to be levied? (a)
The term ‘manufacture’ includes the processes incidental and ancillary for the completion of the main product (b) Manufacture need not result in the new substance having the distinct name, character or use (c) Manufacture implies a change but every change is not a manufacture (d) If the process of assemble results in the new product that is movable and marketable, the same is treated as manufacture (e) Even if an article is mentioned in the tariff, no duty is leviable if there is no manufacture. (1 mark) 34. The maximum time allowed for keeping the inputs outside the factory for the purpose of job work as per the < Answer > provisions of the Central Excise Act is (a) 30 days
(b) 45 days
(c) 60 days
(d) 90 days
(e) 180 days. (1 mark) < Answer >
35. Which of the following is treated as an asset? (a) (b) (c) (d) (e)
A house held as stock-in-trade A house allotted to a director who is not a whole time director and draws a salary of Rs.1,50,000 A commercial complex A house used for own business or profession A house used for the residential purposes. (1 mark)
< Answer >
36. Failure to furnish the wealth tax return within the due date can attract the interest of (a) 1% per month (c) 1.25% per month or part thereof (e) 2.5% per month or part thereof.
(b) 2% per month (d) 1.5% per month or part thereof (1 mark)
37. To avail exemption from sales tax under section 5 (3) of the Central Sales Tax Act, 1956, the penultimate seller < Answer > has to obtain a certificate from the exporter in (a) Form C
(b) Form D
(c) Form F
(d) Form G
(e) Form H. (1 mark) < Answer >
38. Which of the following can be included in the assessable value? (a) (b) (c) (d) (e)
Cost of the computer software supplied with the machine Erection, test and the commissioning charges Demurrage charges payable to the Port Trust authorities for the delay in the clearing of the goods Cost of transport after importation The pre-detention landing charges in case of the ship demurrage. (1 mark)
39. A ‘person’ as defined under ‘Related person’ for the purpose of the customs valuation provisions includes
< Answer >
(a) A trust (d) A company and a trust
(b) A company (c) A partnership firm (e) A company, partnership firm and a trust. (1 mark) < Answer >
40. According to the provisions of Central Sales Tax Act, 1956, sales tax is collected in the state (a) (b) (c) (d) (e)
Where movement of goods commences Where the goods are agreed for sale Where the goods are received Where the dealer has place of business and maintains books of accounts Where the goods are resold. (1 mark)
41. Lambda Computers Ltd. is a 100% export oriented unit established for the purpose of exporting computers. For < Answer > the assessment year 2004-05, it has the following income: Particulars Rs. Total turnover 18,00,000 Export turnover 15,00,000 Net Profit 3,00,000 What Lambda Computers Ltd., can claim under section 10B of the Income Tax Act, 1961? (a) Rs.2,25,000
(b) Rs.2,50,000
(c) Rs.3,00,000
(d) Rs.3,60,000
is
the
deduction
that
(e) Rs.3,75,000. (2 marks)
42. XYZ Ltd. is an infrastructure capital company approved by the central government incorporated during the year < Answer > 2000. For the previous year 2003-04, it has the following income: Particulars Income from capital gains Income from dividends (not covered by section 115-O) Fees received for giving guarantee to an enterprise approved by the government taxable income of XYZ Ltd. for the assessment year 2004-05? (a) Rs.2,10,000
(b) Rs.3,75,000
(c) Rs.5,85,000
(d) Rs.1,95,000
Rs. 3,75,000 1,20,000 90,000 What
is
the
(e) Rs.Nil. (2 marks)
43. Mr.Dhruv is an employee of a private company and has the salary emoluments for the previous year 2003-04 as < Answer > under: Particulars Rs. Basic 1,60,000 Dearness allowance 42,000 Commission 24,000 Arrears of salary for the year previous 2002-03 received now 85,000 Bonus 15,000 Total Income 3,26,000 The arrears of salary were included in the taxable income for the assessment year 2003-04.What is the gross amount taxable under the head salaries for the assessment year 2004-05? (a) Rs.3,26,000
(b) Rs.2,96,000
(c) Rs.2,11,000
(d) Rs.2,41,000
(e) Rs.2,83,500. (2 marks)
44. Mrs.Manasa is an employee of a XYZ Ltd., (private company) and has retired from service after a period of 15 < Answer > years on March 31, 2004. She had claimed an amount of Rs.65,000 as leave salary exemption when she left her former employer prior to joining XYZ Ltd.. Consider the following information for the previous year 2003-04:
Particulars Salary at the time of retirement (per month) Rs.22,000 Average salary received during the period of 10 months before retirement Rs.21,500 Leave entitlement for each year of service 35 days Leave availed during the service 60 days Balance leave to the credit of the employee at the time of retirement 465 days Leave salary paid at the time of retirement Rs.3,41,000 What is the amount of leave salary that is exempted from tax for the assessment year 2004-05? (a) Rs.2,15,000
(b) Rs.3,41,000
(c) Rs.2,35,000
(d) Rs.2,79,500
(e) Rs.1,26,000. (2 marks)
45. Ms.Rajani is employed during the previous year 2003-04 only for 45 days and her salary for the said period is < Answer > Rs.65,000. What is the standard deduction she is eligible to claim for the assessment year 2004-05? (a) Rs.30,000
(b) Rs.Nil
(c) Rs.26,000
(d) Rs.13,000
(e) Rs.16,250. (2 marks)
46. Ms.Radha and Ms.Ramani are the co-owners of a property, sharing in the ratio of 7:3. The property has been self < Answer > occupied and the municipal taxes paid are Rs.27,000. The interest on the loan borrowed for the purpose of the said house is Rs.75,000. The loan was borrowed in the year 1998.What is the annual value of the property chargeable in the hands of Ms.Radha for the assessment year 2004-05? (a) Rs.52,500 (loss) (c) Rs.22,500 (loss)
(b) Rs.30,000 (loss) (d) Rs.52,500
(e) Rs.30,000. (2 marks)
47. A large manufacturing unit A Ltd. undertook the job of manufacturing certain goods on the job work basis and the < Answer > raw material for the same was supplied by the buyer under the CENVAT challan at a cost of Rs.146,000. The job work charges amounted to Rs,50,000. What is the amount of the duty payable by A Ltd. if the goods manufactured by him attract the duty at 15%? (a) Rs.21,900
(b) Rs.29,400
(c) Rs.14,100
(d) Rs.14,400
(e) Rs.Nil. (2 marks)
48. Mr. Mahavir owns a house property (self occupied) for the purpose of his residence. The fair rent of the property < Answer > is Rs.1,95,000, municipal value Rs.2,10,000 and the standard rent Rs.1,98,000. He incurred Rs.75,000 on repairs, Rs.18,000 on municipal taxes and Rs.5,750 on the insurance. The interest on the capital borrowed for the repairs is Rs.65,000. What is the income from the property in respect of the assessment year 2004-05? (a) Rs.30,000 (Loss) (c) Rs.66,000 (Loss)
(b) Rs.65,000 (Loss) (d) Rs.32,250
(e) Rs.Nil. (2 marks)
49. Mr.Arun who lives in Chennai, was employed with two employers during the previous year 2003-04. His < Answer > emoluments for the said period are as under:
Particulars Period of employment Basic pay Commission (8% on sales of Rs.2,50,000) Dearness allowance (20% of basic) (Part of retirement benefits) House rent allowance Actual rent paid
Employer I April to November, 2003 (Rs.)
Employer II December, 2003 to March, 2004 (Rs.)
1,80,000
Total (Rs.)
99,000 -
20,000
2,79,000 20,000
36,000
19,800
40,000 32,000
24,000 16,000
55,800
64,000 48,000 What is the amount of the house rent allowance chargeable to tax in the hands of Mr. Arun for the assessment year 2004-05? (a) Rs.43,900
(b) Rs.51,480
(c) Rs.64,000
(d) Rs.49,480
(e) Rs.Nil. (2 marks) < Answer >
50. Which of the following perquisites are taxable in the hands of all the employees? I. II. III. IV. V. (a) (c) (e)
Rent free accommodation Employees obligation met by the employer Interest free loan Gift in kind upto Rs.5,000 in a year Motorcar (owned by the employer) for both official and personal purposes (car of 1300c.c). (I), (II), (III) and (IV) above (b) (I) and (II) above (I), (II) and (III) above (d) (III), (IV) and (V) above (I), (II), (III), (IV) and (V) above. (2 marks)
51. Mr.Mahesh is an employee of the Central Government, posted at Mumbai. He draws an amount of Rs.1,40,000 < Answer > per annum and is provided a rent free furnished flat by the Government. The fair rental value of the flat is Rs.2,000 per month and the license fee as determined by the Central Government for the flat is Rs.1,750 per month. What is the value of the perquisite rent-free accommodation in the hands of Mr. Mahesh for the assessment year 2004-05? (a) Rs.24,000
(b) Rs.21,000
(c) Rs.14,000
(d) Rs.10,000
(e) Rs.7,000. (2 marks)
52. An assessee took up manufacture of goods on the job work basis and incurred the following expenses: Cost of the raw materials supplied by the buyer Rs.12,000 Freight charges to bring the material to the factory Rs. 750 Job work charges billed by the assessee Rs. 3,000 Freight charges to send the finished goods to the buyer Rs. 800 What is the assessable value of the goods for the purpose of the excise duty? (a) Rs.12,750 (b) Rs.13,550 (c) Rs.12,000 (d) Rs.16,550
< Answer >
(e) Rs.15,750. (2 marks)
53. Mr.Srinath has the following sources of income for the previous year 2003-04:
< Answer >
Particulars Income from long term capital gains Income from profession Deposit in the PPF Investment in the infrastructure company Investment in the MEP 2004 for the assessment year 2004-05? (a) Rs.52,200 (b) Rs.55,000
Amount (Rs.) 2,75,000 1,10,000 12,000 70,000 10,000 What is the tax liability of Mr.Srinath (c) Rs.47,600
(d) Rs.66,000
(e) Rs.75,700. (2 marks)
54. As on March 31, 2004, Mr.Sanjay, who is a resident and ordinarily resident Indian national, has the following < Answer > assets; Particulars Jewellery in India Assets held outside India Residential property in India let out for 325 days Loan taken for the purpose of buying the jewellery Loan taken for the purchase of the property Personal loan taken against the security of the property Motor car Loan to buy the car Sanjay for the assessment year 2004-05. (a) Rs.18,94,000
(b) Rs.43,94,000
(c) Rs.50,69,000
(Rs.) 35,00,000 25,00,000 15,00,000 2,56,000 4,75,000 3,50,000 4,25,000 2,75,000 Compute the taxable wealth of Mr. (d) Rs.49,19,000
(e) Rs.58,94,000. (2 marks) < Answer >
55. What is the net income from the property in the following case for the assessment year 2004-05? Particulars Amount (Rs.) Fair rent 1,50,000 Municipal value 1,52,000 Standard rent 1,55,000 Rent per month 13,000 Vacancy period 2.5 months Unrealised rent 13,000 Municipal taxes 12,000 Interest on the loan 25,000 (a) Rs.73,000 Rs.75,800 (e) Rs.66,700.
(b) Rs.75,100
(c) Rs.71,600
(d)
(2 marks) 56. An assessee, who is an individual trader, has the following details in respect of his export business for the < Answer > previous year 2003-04: Particulars (Rs.) Export sales (Entire money received in India in convertible foreign exchange) 35,00,000 Total sales 72,00,000 Cost of goods sold (Exports) 18,00,000 Expenses related to the exports (allocated) 3,00,000 Export incentives 6,00,000 What is the amount the assessee can claim under section 80HHC in respect of the export sales for the assessment year 2004-05? (a) Rs.4,98,750
(b) Rs.10,50,000
(c) Rs.4,20,000
(d) Rs.9,30,000
(e) Rs.6,00,000. (2 marks)
57. Mrs. Bhanu owns a house property, which has 2 equal units, one of which is self-occupied and the other let out. < Answer > The fair rent of the entire property is Rs.1,60,000, municipal value is Rs.1,65,000 and the standard rent fixed by the rent controller is Rs.1,64,000. The rent received from the tenant is Rs.6,000 per month. Interest on the capital (borrowed in 2002 for the construction of the property) is Rs.72,000. What is the annual income from the property to be taxed in the hands of Mrs.Bhanu? (a) Rs.14,600 (loss) (b) Rs.36,000 (loss) (c) Rs.21,400
(d) Rs.22,800
(e) Rs.14,600. (2 marks)
58. D Ltd. furnishes the following information in respect of the newly acquired assets during the year 2003-04 (being < Answer > the third year of its operations) and requests you to ascertain the depreciation that it can claim on these new assets for the previous year 2003-04 at the rate of 25%. Name of the asset Plant A Plant B Plant C (a) Rs.11,68,750
Date of acquisition Additional capacity Cost of the asset (Rs.) May 15, 2003 18% 12,50,000 June 10, 2003 26% 18,75,000 October 25, 2003 22% 15,50,000 (b) Rs.7,01,250 (c) Rs.18,70,000 (d) Rs.12,56,250 (e) Rs.14,50,000. (2 marks)
59. The gross maintainable rent of a house according to Part B of Schedule III of the Wealth Tax Act, 1957 is < Answer > Rs.2,50,000. If the tenant pays the municipal taxes of Rs.7,000 for the year 2003-2004, the net maintainable rent of the house for wealth tax purpose as on March 31, 2004 is (a) Rs.2,43,000 (b) Rs.2,50,000 (c) Rs.2,57,000 (d) Rs.2,12,500 (e) Rs.2,05,500. (2 marks) 60. PQR Ltd., purchased a building for industrial undertaking on January 1, 2001, at a cost of Rs.6,00,000. The above < Answer > property was compulsorily acquired by the State Government at a compensation of Rs.7,00,000 in the month of January, 2004. The company purchased another building for its industrial undertaking at a cost of Rs.4,00,000 in the month of March, 2004. What is the amount of the capital gains (short term) chargeable to tax in the hands of the company for the assessment year 2004-05? (a) Rs.Nil (b) Rs.1,00,000 (c) Rs.7,00,000 (d) Rs.3,00,000 (e) Rs.2,00,000. (2 marks) < Answer >
61. What is the total taxable income of a resident individual as computed from the following details: Particulars Income from the house property Short term capital loss on the sale of shares Long term capital gain on the sale of the building Interest on the Government securities Unabsorbed depreciation (Business discontinued) (c) Rs.24,000 (d) Rs.21,000
(Rs.) (20,000) (96,000) 1,85,000 17,000 50,000 (a) Rs.71,000 (e) Rs.1,17,000.
(b) Rs.36,000 (2 marks)
62. The following are the details of the assets held by a company as on April 1, 2003: Plant X Plant Y Plant Z
WDV WDV WDV
Rs.10,50,000 Rs.4,50,000 Rs.2,75,000
Rate of depreciation 25% Rate of depreciation 25% Rate of depreciation 25%
The additions after April 1, 2003 were as under: Plant E Plant F Plant G
Cost Rs.7,50,000 Cost Rs.3,50,000 Cost Rs.1,75,000
Rate of depreciation 40% Rate of depreciation 40% Rate of depreciation 40%
During the end of the year, Plants X,Y,Z were sold for an amount of Rs.16,00,000. What are the capital gains
< Answer >
chargeable to tax for the assessment year 2004-05? (a) (b) (c) (d) (e)
Short term capital gain Short term capital loss Long term capital gain Long term capital loss No capital gain.
Rs.1,75,000 Rs.1,75,000 Rs.1,75,000 Rs.1,75,000 (2 marks)
63. As on March 31, 2004, Mr.Suraj, who is a non-resident Indian national, has the following assets: Particulars Jewellery in India Gold and silver held outside India Residential property in India let out for 250 days Loan taken for the purpose of buying the gold held abroad Loan taken for the purchase of the property Personal loan taken for the daughter’s marriage against the security of the jewellery Compute the taxable wealth of Mr.Suraj for the assessment year 2004-05. (a) Rs.46,25,000
(b) Rs.71,69,000
(c) Rs.62,19,000
(d) Rs.72,25,000
(Rs.) 56,00,000 26,00,000 15,00,000 56,000 9,75,000 9,50,000
< Answer >
(e) Rs.71,94,000. (2 marks) < Answer >
64. Compute the gross turnover of a dealer under the Central Sales Tax Act, from the details given below: Particulars (Rs.) Gross turnover 15,00,000 Installation charges (Included in the invoice) 40,000 Excise duty 35,000 Freight and transport charges (shown separately) 60,000 Goods returned within 6 months 25,000 Cash discount 20,000 (a) Rs.15,00,000 (b) Rs.13,75,000 (c) Rs.13,65,000 (d) Rs.14,35,000
(e) Rs.13,20,000. (2 marks)
65. Mrs.Jain, a salaried employee furnishes the following information for the previous year 2003-04: Particulars Income from salary (gross) Interest on deposits from private companies Income from long term gains Income from other sources Donation to the Prime Minister National Relief Fund Donation to a charitable institute Payment of the medical insurance premium for grandmother Mrs.Jain for the assessment year 2004-05?
(Rs.) 90,000 40,000 10,000 20,000 15,000 20,000 5,000 What is the taxable income of
(a) Rs.1,09,000
(d) Rs.1,03,000
(b) Rs.1,30,000
(c) Rs.1,16,500
< Answer >
(e) Rs.97,000. (2 marks)
66. Ms.Laasya purchased a property on October 1, 1979 for an amount of Rs.2,25,000. She incurred an additional < Answer > expenditure of Rs.1,25,000 for the improvement of the house during the year 1992-93. Cost of construction of the first floor in the year 1997-98 was Rs.4,50,000. The property was sold in the month of February, 2004 for Rs.17,50,000. The fair market value of the property as on April 1, 1981 was Rs1,75,000. What is the amount of capital gains chargeable to tax in the hands of Ms.Laasya for the assessment year 2004-05?
Cost of inflation index: 1981-82 1992-93
100 1997-98 331 223 2003-04 463 (a) Rs.50,765 (Long term gain) (b) Rs.1,80,735 (Long term loss) (c) Rs.3,93,862 (Long term loss) (d) Rs.4,97,674 (Long term gain) (e) Rs.9,50,000 (Long term gain). (2 marks) 67. Compute the wealth of a limited company, which is in the business of the construction and the sale of the < Answer > residential flats, from the information given below for the assessment year 2004-2005: Particulars (Rs.) Land in a rural area (within 8 kilometres from Hyderabad and on which the construction is 56,00,000 permitted) Land in the urban area on which the construction is not permitted 33,00,000 Aircraft for the use of the management 96,00,000 Bank balance 3,75,000 Cash as per the books 2,00,000 Flat used as a residence of the director (not whole time) (salary Rs.3,50,000) 5,00,000 Four flats held as stock-in-trade 25,00,000 (a) Rs.1,42,00,000 (b) Rs.1,43,50,000 (c) Rs.1,67,00,000 (d) Rs.1,75,00,000 (e) Rs.1,45,75,000. (2 marks) 68. Y Ltd., had purchased a building on May 15,1975, for Rs.1,15,000 and incurred an amount of Rs.75,000 on < Answer > repairs. The said building was transferred to its wholly owned subsidiary in the year 1979 for an amount of Rs.2,25,000 and the fair market value of the property on April 1, 1981 was Rs.2,40,000. The said building was sold by the subsidiary in August, 2003, for an amount of Rs.8,75,000. Compute the capital gains taxable in the hands of the subsidiary for the assessment year 2004-05? Cost of inflation index: 1981-82 100 2003-04 463 (a) Rs.2,36,200 (Long term gain) (b) Rs.2,36,200 (Long term loss) (c) Rs.1,66,750 (Long term gain) (d) Rs.1,66,750 (Long term loss) (e) Rs.4,700 (Long term loss). (2 marks) 69. A dealer in the state of Tamilnadu made certain interstate sales to X, Y and Z. The local sales tax rate on these < Answer > goods is 6%, 8% and 2%, respectively in the states of X, Y and Z. If X and Y are registered dealers and Z is an unregistered dealer, what is the sales tax rate applicable to them? (a) (b) (c) (d) (e)
6%, 8% and 2% to X, Y and Z respectively 6%, 4% and 4% to X, Y and Z respectively 4%, 4% and 2% to X, Y and Z respectively 4%, 4% and 10% to X, Y and Z respectively 6%, 8% and 4% to X, Y and Z respectively. (2 marks)
70. Mrs.Mala transfers the self generated goodwill of her profession for an amount of Rs.1,75,000 in the month of < Answer > February, 2004.The profession was started in the year 1985-86 with an investment of Rs.20,000. What is the amount of capital gains chargeable to tax? (a) Rs.1,75,000
(b) Rs.1,55,000
(c) Rs.1,05,376
(d) Rs.Nil
(e) Rs.20,000. (2 marks)
Suggested Answers Economic Legislation-II (162) : October 2004 1.
Answer : (b) Reason : The refund claim has to be filed within one year from the end of the relevant date and no application can be accepted after that period.
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2.
Answer : (a) Reason : As per the provisions of section 10(10B) of the Income Tax Act, 1961, the maximum amount that is exempt from tax in respect of the retrenchment compensation received by an employee is Rs.5,00,000.
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3.
Answer : (d) Reason : The benefit under the section 88 can only be availed by the individuals and the HUF. Hence the investments in National Savings Certificates made by a firm do not qualify for the rebate. All the other three alternatives qualify for the rebate. Hence the option (d) is correct.
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4.
Answer : (d) Reason : The following costs can be added to the customs value : The tools, dies and moulds used in the production of the imported goods supplied by the buyer, Licence fees and the transfer of the technology fees for operating the machinery, Value of the subsequent resale payable to the foreign supplieres The charges for the dismantling and the transportation of the old machinery including its inspections charges in the case of the import of the second hand machinery. The option (d) Charges for the reproduction of the software in India cannot be included.
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5.
Answer : (e) Reason : The duty draw back allowed on the goods that are exported without being used in India is 98%.
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6.
Answer : (b) Reason : As per the provisions of section 10(2A) of the Income Tax Act, 1961, the share of profit received by a partner from a firm which is assessed as a firm, is not taxable in the hands of the partners.
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7.
Answer : (c) Reason : Holder of impartible estate, person who transferred house property to spouse without adequate consideration, person who is allowed to take possession of any building in part performance of contract and a member of co-operative society to whom a building is allotted under house building scheme are considered as deemed owners. But the person who transferred house property to son’s wife without adequate consideration is not considered as deemed owner though the income from such house property is taxable in the hands of transferor under section 64(1)(vi).
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8.
Answer : (c) Reason : The interest pertaining to the pre construction period on the funds borrowed for the purpose of the house construction can be deducted in five equal annual installments starting from the previous year in which the said property is either acquired or constructed.
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9.
Answer : (d) Reason : The share certificatees, securities and debentures are not taxable under the sales tax act. All the other goods are taxable.
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10 .
Answer : (c) Reason : Capital receipt means a receipt from the capital source i.e like the sale of an asset etc. Revenue receipt is the return from any regular source of income. The option (c), the surplus due to the reduction in export duty was adjudged revenue in the case of General Fibre Dealers Ltd., vs. CIT.
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11. Answer : (e)
< TO
Reason : The following goods are eligible for the concessional tax rate : a) The goods which are used in the manufacture or processing for sale(b) Goods for resale(c) Goods in telecommunication network(d) Containers and the packing materials. Whereas the building materials like sand, lime and cement required for the construction of the building cannot be obtained at the concessional rate as the building is not considered as a goods. DATEY PG.NO.759
P >
12 .
Answer : (a) Reason : Salary received by a non-resident foreign national as a member of a ship’s crew is exempted from income tax, by virtue of section 10(6)(viii), provided the stay of such person in India does not exceed 90 days during the previous year. Hence the option (a) is the answer.
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13 .
Answer : (d) Reason : The penalty in respect of the goods which have been imported against the prohibition in force is the value of the goods or Rs.5,000 whichever is greater as per the provisions of section 112 of the Customs Act.
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14 .
Answer : (e) Reason : According to section 11C of the Customs Act 1962, a person who owns, possesses or controls on the notified date any notified goods, will be required, within seven days from that date to deliver to the proper officer a statement as prescribed, in relation to the notified goods owned, and where such goods are proposed to be kept or stored to the proper officer.
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15 .
Answer : (d) Reason : The alternatives in (a) to (c) , (e) are all correct. The arrears are taxable even if the assessee is not the owner of the property in the year of the receipt. Hence the option(d) is the answer.
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16 .
Answer : (c) Reason : Rectification of the mistake can be made under the Income Tax Act, within a period of 4 years from the end of the financial year in which the order sought to be rectified was passed. Section 154.
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17 .
Answer : (b) Reason : The options (a), (c), (d), (e), are all covered by the income from other sources. (a) Interest on securities (c) Winnings from lotteries (d) Family pension (e) Income from the letting of plant, machinery and furniture by an assessee not engaged in the said business. Option (b) Remuneration received by a lawyer in the capacity of an official receiver is not taxable under the head income from other sources.
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18 .
Answer : (a) Reason : Any donation given from the non-taxable income does not qualify for the deduction under the section 80G. Hence the option (a) is the answer. All the other options qualify for a deduction under section 80G.
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19 .
Answer : (d) Reason : The minimum income that has to be declared by an assessee who is a retail trader is 5% of the gross receipts as per the provisions of the section 44AF.
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20 .
Answer : (b) Reason : The alternatives (a), (c), (d) and (e) are all true statements. The option (b) Where the employee owns the car and the expenses are met by the employer, the value is taxable in the hands of only the specified employees when the car is used for both official and private purposes is incorrect as the said perquisite is taxable in the hands of both specified and the non-specified employees.
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21 .
Answer : (b) Reason : Option (b) no rebate under section 88 is allowed from the tax on the long term capital gains is the true
< TO P
statement. All the other statements are false The rebate under section 88 can be claimed by the association of persons – is wrong as the rebate is allowed only to individuals and HUF. Rebate under section 88 is not available from the tax on the winnings from lotteries, races etc. – only on the capital gains tax it is not allowed but it is allowed from the tax on the winnings from the lotteries. There is no limit of the gross total income to claim the rebate under section 88. Gross total income in excess of Rs.5,00,000 does not qualify for claiming the rebate Annuity plan can be taken on the dependant parent or siblings. – Annuity plan should be taken only in the name of the self, spouse, any child but not in the name s of the dependant parents or siblings.
>
22 .
Answer : (c) Reason : the value of the perquisite in respect of the free gas, electricity or water given by the employer from its own sources is taken to be the actual expenditure incurred by the employer.
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23 .
Answer : (e) Reason : The expected rent is taken as the fair rent or the municipal value of the property whichever is higher subject to a maximum of the standard rent as fixed by under the Rent Control Act. Hence the option (e) is the answer.
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24 .
Answer : (b) Reason : The following losses are not deductible from the business income : (I) Losses relating to any business or profession discontinued before the commencement of the previous year (II) Loss of the advances made for setting up of a new business and which could not be started Losses incurred on the sale of the shares held as investments Loss arising from the non-recovery of the tax paid by an agent on behalf of the non-resident Hence the option (d), which states that all the four alternatives are not deductible, is the answer.
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25 .
Answer : (c) Reason : As Mrs. Brown who has a substantial interest in Black Ltd. is a director in Yellow Ltd, both the companies are presumed to be related. Hence any transaction between the related parties is disallowed to the extent it is unreasonable. The difference between the actual price paid by Yellow Ltd., and the market price of the same is disallowed, as both the companies are related
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26 .
Answer : (d) Reason : A professional having the income above Rs.10,00,000 has to get the tax audit done and hence the return on income is to be filed on or before October 31, 2004.
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27 .
Answer : (b) Reason : In the case of the transfer of the property to a wife with an agreement to live apart, the income from the said property is taxable in the hands of the transferee.
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28 .
Answer : (c) Reason : The brought forward unabsorbed depreciation can be setoff against the business income only after setting off the current years depreciation and the brought forward business loss.
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29 .
Answer : (a) Reason : In the case of a transfer of income only without the transfer of the relevant asset or the source, if is taxable in the hands of the transferor only.
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30 .
Answer : (d) Reason : An appeal to the CESTAT in respect of an order has to be filed within 3 months for the date of the communication of the order.
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31 .
Answer : (b) Reason : In case of the sales returns, only in respect of the goods returned within a period of 6 months, the sale price is deducted from the aggregate sale price.
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32 .
Answer : (c) Reason : Except the gift tax, all the other taxes are indirect taxes. Gift tax, which has been abolished now, is a part of the direct taxes.
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33 .
Answer : (b) Reason : The statement that the ‘Manufacture need not result in the new substance having the distinct name, character or use’ is false. Only if the manufacture results in a new, distinct product, which is movable and marketable, it is treated as manufacture for the purposes of the CE Act.
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34 .
Answer : (e) Reason : The goods removed for the job work must be returned to the factory within 180 days.
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35 .
Answer : (b) Reason : Only a house allotted to a whole time director drawing a salary of less than Rs.5,00,000 is not treated as an asset for the purposes of the wealth tax. The house given to any other director is not an asset within the meaning of sec [2(ea)]. The other options (a), (c) and (d) are exemptions.
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36 .
Answer : (c) Reason : Failure to furnish the wealth tax return within the due date can attract the interest of 1.25% per month or part thereof
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37 .
Answer : (e) Reason : To avail exemption from sales tax the penultimate seller has to obtain a certificate in form H from the actual exporter
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38 .
Answer : (e) Reason : All the following expenses are not to be added to the assessable value : (a) Cost of the computer software supplied with the machine (b) Erection, test and the commissioning charges (c) Demurrage charges payable to the Port Trust authorities for the delay in the clearing of the goods (d) Cost of transportation after importation. (e) But the pre-detention charges paid in case of the ship demurrage are includible as per the CBE&C circular no.14/2001 – Cus. dated 02-03-2001
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39 .
Answer : (e) Reason : A ‘person’ for the purposes of the customs includes Trust A company A partnership firm
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40 .
Answer : (a) Reason : Basically, the provisions of Central Sales Tax Act, aim at levying of tax on interstate sales, and it is payable in the state from where movement of goods begin (a) The Sales Tax is not payable in the state where the goods are manufactured (b), where the goods are received(c), where the goods are imported (d) or where the goods are resold (e).
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41 .
Answer : (b) Reason : The deduction under section 10B is calculated as under :
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Profits of the business of the undertaking x Export turnover / Total turnover of the undertaking Rs.3,00,000 x Rs.15,00,000/ Rs.18,00,000 = Rs.2,50,000 42 .
Answer : (e) Reason : As per the provisions of section 10(23G) of the Income Tax Act, 1961, the income of the infrastructure company by way of dividends, interest, capital gains, fees or commission for the guarantee given is fully exempt. Hence the option (e) is the answer.
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43 .
Answer : (d) Reason : The gross taxable salary of Mr.Dhruv for the assessment year 2004-05 is :
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Particulars Basic
Rs. 1,60,000
Dearness allowance
42,000
Commission
24,000
Bonus
15,000
Total income
2,41,000
The arrears of salary for the previous year 2002-03 is not to be included as the same has been included in the gross total income of the assessment year 2003-04.
44 .
Answer : (e) Reason : Calculation of the exempted leave salary of Mrs. Manasa : Leave entitlement as per the rules (Max. of 30 days per year of service) 15 x 30 days = 450 days Less leave availed during the service 60 days Balance leave that can be encashed = 390 days Average salary for the period of 10 months before the date of retirement Rs.21,500 The least of the following is exempt from tax : (i) Cash equivalent of the leave to the credit of the employee at the time of retirement
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390 30
Rs.21,500 x days = Rs.2,79,500 (ii) 10 months average salary (Rs.21,500 x 10 ) Rs.2,15,000 (iii) Maximum amount exempted as per the rules (Rs.3,00,000 – Rs.65,000) Rs.2,35,000 (iv) Actual amount received from the employer Rs.3,41,000 10 months average salary being the least of the above is exempt from tax and the balance amount of the actual receipt is taxable. (Rs.3,41,000 – Rs.2,15,000) = Rs.1,26,000 , taxable leave salary. 45 .
Answer : (c) Reason : Ms.Rajani is entitled to claim 40% of her salary as standard deduction or Rs.30,000 whichever is lower. 40% of Rs.65,000= Rs.26,000 is the standard deduction.
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46 .
Answer : (b) Reason : The annual value of the property for the assessment year 2004-05 is as under : Ms.Radha Ms.Ramani Net annual value Nil Nil Less Standard deduction Nil Nil Less deduction in respect of the interest on the loan* Rs.30,000 Rs.22,500 Income from the house property (Rs.30,000) (Rs.22,500) *The share of the
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interest on the loan is as under Radha Rs.75,000 x 7/10 = Rs.52,500 Ramani Rs.75,000 x 3/10 = Rs.22,500 The interest on the loan in respect of Ms.Radha is restricted to Rs.30,000 as the loan was borrowed in the year 1998. 47 .
Answer : (e) Reason : Job work is exempt from the duty, if the inputs are received under CENVAT.
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48 .
Answer : (a) Reason : The annual value in respect of the self occupied property is taken as nil. The fair rent, municipal value and the standard rent are irrelevant in respect of the self occupied property. Also no deduction is allowed in respect of the various expenses incurred by the assessee. In respect of the interest on the capital borrowed for the purposes of repairs, the maximum amount that can b e claimed is Rs.30,000 since for renovation. Hence the income from the property is calculated as under : Annual value Nil. Less deduction in respect of the interest on loan (Rs.30,000) Net income from the property (Rs.30,000)
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49 .
Answer : (b) Reason : Particulars Employer I Employer II Basic Pay ( per month) 22,500 24,750 Dearness allowance (per month) 4,500 4,950 Commission on sales (per month) 2,500 House rent allowance received 5,000 6,000 Actual rent paid 4,000 4,000 HRA Exemption is calculated on a monthly basis as there is a change in the employment and the emoluments are different.
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50% of the salary Actual HRA Received Excess of rent paid over 10% of salary Least of the above is exempt from tax Taxable HRA per month Total taxable HRA Rs.51,480. 50 .
Employer I 14,750 5,000 1,050 1,050 3,950 31,600
Employer II 14,850 6,000 1,030 1,030 4,970 19,880
Answer : (c) Reason : The perquisites in (I) Rent free accommodation (II) Employees obligation met by the employer (III) Interest free loan Are taxable in the hands of all the employees (IV) Gift in kind upto Rs.5,000 in a year is an exempted perquisite
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(V) Motorcar (owned by the employer)for both official and personal purposes (car of 1300c.c). is taxable only in the hands of the specified employees. Hence the option (c) is the correct answer. 51 .
Answer : (b) Reason : The value of the rent free accommodation in respect of the central/ state government employees is taken to be the licence fees which is fixed by the government in accordance with the rules framed by the government for allotment of the house to its officers. Hence in the given case the value of the perquisite is equal to Rs.21,000 (Rs.1,750 x 12).
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52 .
Answer : (e) Reason : The assessable value in the case of the goods manufactured on the job work basis is the cost of the raw material supplied by the buyer, plus the freight incurred to bring the material to the factory premises and the job work charges levied by the manufacturer. It does not include the freight incurred to take to the goods from the factory to the buyer place. Hence in the given case, the answer is Rs.15,750.
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53 .
Answer : (b) Reason : Calculation of the tax liability of Mr.Srinath for the assessment year 2004-05 : Particulars Amount Rs. Income from long term capital gains 2,75,000 Income from profession 1,10,000 Gross taxable income 3,85,000 Tax liability thereon Tax on the long term capital gains 55,000 Tax on other income 11,000 Total tax liability 66,000 Rebate under section 88 Deposit in the PPF 12,000 Investment in the infrastructure company 70,000 Investment in the MEP 2004 10,000 Total 92,000 Rebate at 15% on Rs.92,000 = 13,800 Entire rebate cannot be claimed as the same is not available against the tax on the long term capital gains. Hence the rebate is restricted to the tax 11,000 payable on the business income Balance tax payable 55,000
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54 .
Answer : (b) Reason : Computation of the taxable wealth of Mr.Sanjay for the assessment year 2004-05 As he is a resident and ordinarily resident Indian national, both the assets held in India and outside India are taxable
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Jewellery held in India Less the loan taken for buying the jewellery Residential property let out for 325 days ( not an asset) Less the loan taken for the purchase of the property not allowed as the property is not taxable (The personal loan taken against the security of the property is disallowed) Motor car Less the loan taken for buying the car Taxable wealth in India Add the wealth held outside India Total taxable wealth Less the amount exempted Taxable wealth 55 .
35,00,000 2,56,000
4,25,000 2,75,000
32,44,000
1,50,000 33,94,000 25,00,000 58,94,000 15,00,000 43,94,000 < TO P >
Answer : (a) Reason : Step I Fair rental value or the Municipal value subject to a maximum of the standard rent Step II actual rent received (Rs.1,56,000-13,000-32,500) ** Gross annual value is the higher of the above two Less municipal taxes Net annual value Standard deduction@30% Less interest on the house loan Net income from the property
1,52,000 1,10,500 1,52,000 12,000 1,40,000 42,000 25,000 73,000
Note : The actual rent received is calculated after deducting the unrealized rennet and the vacancy period allowance from the rent receivable.
56 .
Answer : (a) Reason : The deduction an assessee can claim under section 80 HHC is calculated as under : 30%((Profits of the trading goods) + (90% of the export incentive x Export turnover / total turnover) 30%( (35,00,00018,00,000-3,00,000) + 90% (6,00,000 x 35,00,000 /72,00,000))= 30%(14,00,000+2,62,500) = 4,98,750
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57 .
Answer : (a) Reason : When a portion of the property is self-occupied and the other is let out, the income from the both is to be calculated separately.
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Particulars Step I – Fair rent or the municipal value whichever is higher subject to a maximum of the standard rent Step II – Actual rent received Gross annual value (higher of the above two) Less municipal taxes Net annual value of the property Less standard deduction@ 30% Less Interest on the capital borrowed Net income from the property Total income from the property 58 .
Answer : (d)
Self-occupied N.A. N.A. Nil Nil Nil Nil 36,000 (36,000) (14,600)
Let out 82,000 72,000 82,000 nil 82,000 24,600 36,000 21,400 < TO
Reason : The depreciation that can be claimed by D Ltd., for the year 2003-04 is as under : Name of the asset Plant A Plant B Plant C
Additional Cost of the asset Normal Additional capacity depreciation depreciation May 15, 2003 18% 12,50,000 3,12,500 Nil June 10, 2003 26% 18,75,000 4,68,750 2,81,250 October 25, 2003 22% 15,50,000 1,93,750 Nil The total depreciation that can be claimed is Rs.12,56,250 (Rs.3,12,500+4,68,750+1,93,750+2,81,250) Plant A & C are not eligible for the additional depreciation as the same do not result in an additional capacity in excess of 25%. Also the Plant C is eligible only for 50% of the normal depreciation as it has been put to use for less than 180 days.
59 .
Date of acquisition
Answer : (e) Reason : Gross maintainable rent Less : Municipal taxes 15% of gross maintainable rent Net maintainable rent
Rs.2,50,000 Rs. 7,000 Rs.37,500
P >
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Rs. 44,500 Rs.2,05,500
60 .
Answer : (a) Reason : There are no short term capital gains as the asset has been sold only after the expiry of 3 years. Even the long-term gains are not taxable as the investment in the new industrial undertaking by the assessee is more than the capital gains received. Hence the answer is NIL (Availed under section 54(1)).
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61 .
Answer : (d) Reason : The total income of the assessee for the assessment Year 2004-05 is calculated as under :
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Income from the house property Short term capital loss on the sale of the shares Long term capital gains on the sale of the building Interest on the Government securities Total Income (gross) Less the unabsorbed depreciation brought forward Less deduction under section 80 L Net taxable income
(20,000) (96,000) 1,85,000 17,000 86,000 50,000 15,000 21,000
62 .
Answer : (b) Reason : Only the block of assets on which the depreciation is 25% is sold and the other block of new assets with deprecation at 40% is still with the company. Hence while calculating the capital gains , the cost of acquisition of the new assets is not considered as the same is in the block of 40% depreciation. Sale proceeds of the assets Rs.16,00,000 WDV of the block Rs.17,75,000 Short term capital loss Rs. 1,75,000
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63 .
Answer : (a) Reason : Computation of the taxable wealth of Mr.Suraj for the assessment year 2004-05 As he is a non-resident Indian national, only the assets held in India are taxable and those held outside India are tax free.
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Jewellery held in India (The personal loan taken against the security of the jewellery is disallowed) Residential property let out for 250 days Less the loan taken for the purchase of the property Taxable wealth in India Less the amount exempted Taxable wealth
56,00,000 56,00,000 15,00,000 9,75,000
5,25,000 61,25,000 15,00,000 46,25,000
64 .
Answer : (b) Reason : Following deductions are permissible from Gross Turnover (GTO) of Rs 15 lakhs –(b) Installation Charges – Rs 40,000 (included in GTO) (c) freight and insurance shown separately – Rs 60,000 (d) Goods returned within 6 months – Rs 25,000. = Rs.13,75,000
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65 .
Answer : (a) Reason : The taxable income of Mrs.Jain for the assessment year 2004-05 is as under :
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Income from salary Gross salary Less standard deduction Income from the other sources Interest on deposits from the companies Other income Income from the Long term capital gains Gross Total Income Less deduction : Under section 80 D (Grandmother does not qualify) Under section 80 G Donation to the PM National Relief Fund (100%) Donation to the charitable institute (See note 1) Total deduction Taxable Income Calculation of the deduction under section 80G Gross total income (excluding the long term gains) 10% of the above Actual donation given Least of the above two qualifies Deduction (@50%) 66 .
67 .
90,000 30,000 40,000 20,000
60,000
60,000 10,000 1,30,000
0 15,000 6,000 21,000 1,09,000
1
:
1,20,000 12,000 20,000 12,000 6,000
Answer : (b) Reason : The capital gains are calculated as under : Cost of acquisition (Either the actual cost or the fair market value as on April 1, 1981 which ever is higher) (Rs.2,25,000 x 463/100) Cost of the improvement in 1992-93 (Rs.1,25,000 x 463/223) Cost of construction of first floor in 1997-98 (Rs.4,50,000 x 463/331) Total cost of the acquisition Sale consideration Long term capital loss Answer : (a)
Note
10,41,750
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2,59,529 6,29,456 19,30,735 17,50,000 1,80,735 < TO P
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Reason : The taxable wealth of the limited company is calculated as under : Land in the rural (within 8 kilometres) Land in the urban area on which the construction is not permitted Aircraft (Used by the management and hence taxable) Bank balance Cash balance exempted as the entire amount is recorded in the books Flat used as residence by a director (not being a whole time director) Flat held as stock-in-trade Gross taxable wealth Less the exempted amount Net taxable wealth 68 .
56,00,000 Exempted 96,00,000 Exempted Exempted 5,00,000 Exempted 1,57,00,000 15,00,000 1,42,00,000
Answer : (b) Reason : The capital gains are calculated as under : Cost of acquisition (Either the actual cost or the fair market value as on April 1, 1981 which ever is higher) (Rs.2,40,000 x 463/100) Sale consideration Long term capital loss (11,11,200-8,75,000)
11,11,200
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8,75,000 2,36,200
69 .
Answer : (d) Reason : Inn the case of the goods sold to the ergistered dealers, the rate applicable is the local sales tax rate or 4%, whichever is lower. In the cae of the unregistered dealers, it is the local sales tax rate or 10% whichver is higher. Hence in the case of X and Y, as their local sales tax rates are more than the CST , the tax is payable at 4% and in the case of Z being the unregistered dealer, the rate applicable is the local rate or CST at 10% whichever is higher.
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70 .
Answer : (d) Reason : The capital gains chargeable to tax on the transfer of the self generated goodwill is nil. CIT v B C Srinivas setty.
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