Problems on Residential Status (1) Mr. Z leaves India for the first time on 10th June 2006 and comes back on 1-06-2009. He again leaves India on 15-07-2010 to come back on 1-3-2011. At present he is in India. Determine his residential status for the previous year 2010-11 (2) Mr, Raj Mohan, scientist from USA was appointed as senior scientist in India for the first time on 11-03-2003. On 31st January 2008 he went to Pakistan on deputation but left his family (wife and children) in India. On 1st may 2009 he came to India and took his family on 31 st October 2009. He returned to India and joined original post on 5 th Feb 2011. Determine his residential status for the Assessment Year 20011-12. (3) Mr. X left India for the first time on May 20, 2011. During the financial year 2011-12, he came to India once on May 27 for a period of 53 days. Determine his residential status for the A.Y 2012-13. (4) Mr. X a German tourist comes to India for the first time on May 17, 2011. He leaves India on September 15, 2011. Determine his residential status for the A.Y 2012-13. (5) Mr. X an Italian citizen comes to India for the first time (After 20 years) on May 28, 2011 and stays up to December 5, 2011. Determine his residential status for the A.Y 2012-13. (6) Mr. X comes to India for the first time, on April 16, 2009. During his stay up to October 5 2011, he stays at Delhi up to April 10, 2011 and thereafter remains in Chennai till his departure from India. Determine his residential status for the A.Y 2012-13. (7) Mr. X a foreign citizen (not being a person of Indian origin), comes to India, for the first time in the last 30 years on March 20, 2011. On September 1, 2011, he leaves India for Nepal on a business trip. He comes back on February 26, 2012. Determine his residential status for the A.Y 2012-13. (8) Mr. X a foreign citizen comes to India for the first time on June 20, 2011. On September 6, 2011, he leaves India Burma on a business trip,. He comes back on January 1, 2012. He maintains a dwelling place in India from the date of his arrival in India (i.e., June, 20, 2011) till January 15, 2012 when he leaves for Kuwait. Determine his residential status for the A.Y 2012-13. Does it make any difference if X is a person of Indian Origin? (9) Mr. X an Indian citizen, who is appointed as senior taxation officer by the Govt of Nigeria, leaves India, for the first time, on September 26, 2011 for joining his duties in Nigeria. During the previous year 2012-13, he comes to India for 176 days. Determine his residential status for the A.Y 2012-13. (10) Mr. X an Indian citizen, who is appointed as senior taxation officer by the Govt of Libya, leaves India, for the first time, on November 03, 2011 for joining his duties in Libya.. During the previous year 2012-13, he comes to India for 190 days. Determine his residential status for the A.Y 2012-13 and 2013-14. (11) Mr. X a foreign citizen comes to India for the first time on June 22, 2006. From June 22, 2006 to march 31, 2013, he is present in India for 1795 days (2006-07:183 days; 2007-08: 365 days; 2008-09: 365 days; 2009-10: 365 days; 2010-11: 366 days; 2011-12: 59 days and 2012-13: 92 days). Determine his residential status for the A.Y 2012-13. Problems on Incidence of Tax (1) The following are the incomes of Shri Ram Prasad for the previous year 2011-12 • Profit from business in Iran received in India Rs. 5,000 • Income from house property in Iran received in India Rs. 500 • Income from house property in Pakistan deposited in a bank there Rs. 1,000 • Profit from business established in Pakistan deposited in a bank there Rs. 20,000 (out of Rs. 20,000 a sum of Rs. 10,000 is brought to India) – this business is controlled from India. • Accrued income in India but received in England Rs. 2,000 • Profit earned from business in Kanpur Rs.6,000. • Income from agriculture in England- it is all spent on the education of children in London Rs. 5,000, and • Past untaxed foreign income brought into India during the previous year Rs. 10,000 Form the above particulars ascertain the taxable income of Shri Ram Prasad for the Assessment Year 2011-12 if he is (i) A resident (ii) a not ordinarily resident and (iii) a non resident. (2) Shankar a foreign national furnishes the following particulars for the Assessment year 2012-13
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Profit on sale of plant at London (one-half is received in India) Rs. 1,46,000 Profit on sale of plant at Delhi (one-half is received in London) Rs. 1,02,000 Salary income from an Indian company received in London (one-half is paid for rendering services in India) Rs. 60,000 • Interest on U.K Development bonds (entire amount is received in London) Rs. 40,000. • Income from house property in London received there Rs. 30,000 • Profit from a business in Delhi managed from India Rs. 49,000 • Income from agriculture in London received there, half of which is used for meeting hostel expenses of Shankar’s son in England and remaining amount is later on remitted to India Rs. 25,000. • Dividend (gross) received in London form a company registered in India but mainly operating in U.K. • Rental income from a property in Nepal deposited by the tenant in a foreign branch of an Indian bank operating there. • Gift from a relative in foreign currency (one third of which is received in India and remaining amount is used for meeting education expenses of Shankar’s son in USA. Form the above particulars ascertain the taxable income of Shankar for the Assessment Year 2011-12 if he is (i) A resident (ii) a not ordinarily resident and (iii) a non resident. (3) Mr. X furnishes the following particulars of his income earned during the previous year relevant to the assessment year 2012-13. • Interest on German Development Bonds (two-fifth is received in India) Rs. 60,000 • Income from agriculture in Bangladesh, received there but later on Rs. 50,000 is remitted on India (agriculture activity is controlled form Bangladesh) Rs. 1,81,000. • Income from property in Canada received outside India (Rs. 76,000 is used in Canada for meeting educational expenses of X’s daughter in USA and Rs. 10,000 is later on remitted to India) Rs. 86,000 • Income earned from business in Kampala (Uganda) which is controlled from Delhi (Rs. 15,000 is received in India) Rs. 65,000. • Dividend paid by a foreign company but received on India on April 10, 2008 Rs. 46,500 • Past untaxed profit of 1999-2000 brought to India in 2008-0-9 Rs. 10,43,000. • Profits from a business in Chennai and managed from outside India Rs. 27,000. • Profit on sale of building in India but received in Srilanka Rs. 14,80,000. • Pension from a formed employer in India, received in Rangoon Rs. 36,000 • Gift in foreign currency from a friend received in India on January 20, 2009 Rs. 80,000 Form the above particulars ascertain the taxable income of Mr. X for the Assessment Year 2011-12 if he is (i) A resident (ii) a not ordinarily resident and (iii) a non resident. Encashment of Earned leave or Leave salary: (1) Mr. X an employee of the Himachal Pradesh Government retires on January 3, 2012 and receives Rs. 60,000 as cash equivalent of earned leave to his credit. Is Rs. 60,000 fully exempt from tax? (2) Mr. X, an employee of the Central Government, receives Rs. 31,600 as cash equivalent of earned leave to his credit at the time of his retirement on August 31, 2011. He joins a private sector organisation on October 1, 2011. The assessing officer is of the view that since Mr. X has joined a private sector organisation, the amount of eared leave received by his is fully taxable. Do you agree with him? (3) Sri Om Prakash was manager in a company. He sought premature retirement from service on November 1 2011 after completing 25 years of service. From August 1, 2010 his pay scale was Rs. 6,000-300-8100 and he was getting dearness allowance of Rs. 600 per month which was treated as salary for the purpose of retirement benefits. He has 7 months earned leave to his credit (on the basis of 30 days per year) which was approved; hence he was paid Rs. 44,100 as salary and Rs. 4,200 as dearness allowance. Compute the amount exempt from tax regarding encashment of earned leave for the assessment year 2012-13, if he joined another company on January 1, 2012 at Rs. 7,500 per month. (4) Sri Amarnath was employed in a company. He took voluntary retirement on December 1, 2011 after completing 25 years of service. On January 1, 2011 his salary was Rs. 6,000 per month after adding the annual increment. In this company tow months’ leave accrued every.
Compute the amount exempt regarding encashment of earned leave, if his other particulars were as under. A B C Total leave availed during the 10 months Nil 30months service Actual amount received 2,40,000 3,00,000 1,20,000
(5) Determine the amount exempt from tax regarding encashment of earned leave from the following particulars. Employee is retiring form a limited company on December 31, 2011 A B Monthly salary at the time of 3,000 3,000 retirement paid regularly since Jan 2009 Duration of service 30 years 30 years Total leave availed during the 10 months Nil service Leave at the credit of 45 months 25 months employee on retirement Actual amount received 2,40,000 3,00,000 Note: Leave entitlement is at the rate of 1.5 months for each year’s service
C 3,000 30 years 30months 13 months 1,20,000
(6) Mr. X was employed by PQR Ltd up to March 15, 1988. At the time of retirement from PQR
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Ltd he was paid Rs. 3,50,000 as leave salary out of which Rs. 57,000 was exempt from tax under section 10 (10AA)(ii). Thereafter he joined ABC (P) Ltd. and received Rs. 4, 14,000 as leave salary at the time of his retirement on December 31, 2011. determine the amount of taxable leave salary from the following information: • Salary at the time retirement (per month) Rs. 22,900 • Average salary received during 10 months ending on December 31, 2011 i. From March 1, 2011 to July 31, 2011 (per month) Rs. 22,600 ii. From August, 2011 to December 31, 2011 (per month) Rs. 22,900 • Duration of service (a) 14 ¾ years • Leave entitlement for every year of service (b) 45 days • Leave availed while in service (c) 90 days • Leave at the credit of employee at the time of retirement (14*45 – 90)/30 = 18 months • Leave salary paid at the time of retirement (22,900 *18) Rs. 4,12,200 Mr. X a non government employee receives Rs. 2,50,000 as leave salary at the time of retirement on February 20, 2012. On the basis of following information, determine the amount of taxable leave salary: Basic pay 15,000 per month since 2003; duration of service: 26 years; leave at the credit of Mr. X at the time of retirement: 25months; entitlement of leave salary: 60 days’ salary for every year of service and leave availed while in service: 27 months. Mr X retires on March 16 2012 fro a private sector company. According to the service rule, he is entitled to 24 days leave for each year of service completed. The following information is available from the records of the employer-company Duration of service 32 years Gross leave entitlement (32yrs*24) 768 days Less: Leave actually availed while in service 108 days Balance 660 days Less: leave encashment taken during 1999-2000 390 days Balance 270 days Less: leave encashment paid on May 10, 2010 (at Rs. 15,000 per month) 60 days Leave standing to the credit of X at the time of Retirement 210 days
Salary and dearness allowance paid to Mr. X prior to his retirement are as follows Basic salary per D.A per month( 62% is month(Rs) part of salary for retirement benefits) January 1, 2011 to October 31, 2011 14,000 1,000 November 1, 2011 to march 31, 2012 15,000 1,250 Accordingly, he has been paid Rs. 1, 23,750 (i.e., 16,250*210/30) at the time or retirement on March 16, 2012. find out the amount of leave salary chargeable to tax for the assessment year 2011-12 taking into account the following points raised by Mr. X – (a) “Average salary” for the purpose of section 10(10AA) should be calculated on the basis of salary drawn during the 10months immediately preceding the retirement. (b) The word month has not been defined in the Act, as per section 3(35) of the General Clauses Act, 1897, month shall mean a month reckoned according to the British Calendar. Consequently, in this case (according to X), average salary should be calculated on the basis of salary drawn during 10 months ending February 28, 2011. (i.e., from may 1, 2010 to February 28, 2010) (9) From the following information, find out the amount chargeable to tax for the A.Y 2012-13 Date of retirement of X from a private job November 15, 2011 Basic salary from Jan 1, 2011 to April 30, 2011 Rs. 10,000 per month Basic salary from May 1, 2011 onwards Rs. 12,000 per month Dearness allowance Nil Commission Nil Leave standing to the credit at the time of Retirement according to service rules) 660 days Rate of leave entitlement according to The service rule 60 days for every Of service Duration of service 16 years Amount of leave encashment given at the time of Retirement Rs. 2,64,000
Problems of Gratuity (1) Mr. X, a government employee, receives Rs. 78,600 as gratuity at the time of his retirement on September 30, 2011. Is gratuity fully exempt from tax?
(2) Mr. X, a government employee, receives Rs. 2,10,000 as gratuity at the time of his (3)
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retirement on April 30, 2011; he joins a private sector on a monthly salary or Rs. 23,000. Is gratuity fully exempt from tax? Mr. X, an employee of PQ Co. Ltd., receives Rs. 78,000 as gratuity. He is covered by the payment of Gratuity Act, 1972. he retires on December 12, 2011 after rendering service of 38 years and 8m months. At the time of retirement his monthly basic salary and dearness allowance was Rs. 2,400 and Rs. 800 respectively. Is the entire amount of gratuity exempt from tax? Mr. X, an employee of LMN Ltd receives Rs. 45,000 as gratuity under the payment of gratuity act 1972. He retires on November 10, 2011 after rendering service of 30 years and 4 months. At the time of retirement monthly salary was Rs. 2,340 (inclusive of dearness allowance of Rs. 200 per month). Calculate amount of gratuity chargeable to tax. After serving for 33 years and 9 months in Bharath Chemicals Ltd., Mr. X who is covered by the Payment of Gratuity Act retires from service on 30th November, 2011. The employer pays him a gratuity of Rs. 3,00,000. His monthly basic salary at the time of retirement was Rs. 10,000, D.A Rs. 3,000 and HRA Rs. 1,300. C. Lewis retired on 20th February, 2012, from the post of Manager of a Canteen after 25 years of service. During the ten months ending on 31st January 2012 he was drawing a monthly salary of Rs. 10,000 and conveyance allowance of Rs. 500. He was eligible to receive a gratuity of Rs. 1,55,000 from his employer and was paid the same net of tax. Early in his career, Lewis had received Rs. 40,000 as gratuity from a previous employer in respect of which he enjoyed full exemption for tax. Compute the taxable part of gratuity he has now received.
(7) Sri A.K Roy, who is not covered by the Payment of Gratuity Act, 1972, receives a gratuity of Rs. 3,88,000 when he retires on 23rd June, 2011 after a service of 34 years 9 months and 23 day. His last drawn emoluments are as follows. i. Basic salary Rs, 25,000 per month ii. Dearness allowance Rs. 6,600 per month (not as per terms of employment) iii. Servant allowance Rs. 600 per month (fixed) iv. Annual increment of basic salary Rs. 1,000 per month falls due on 1st January every year. What amount of Gratuity is exempt from tax in the A.Y 2012-13.
(8) Mr. X, who is not covered by the Payment of Gratuity Act, 1972, retires o
n November 20, 2011 from ABC Ltd and receives Rs. 1,86,000 as gratuity after service of 38 years and 10 months. His salary is Rs. 8,000 per month up to July 31, 2011 and Rs. 9,000 per month from August 1, 2011. Besides, he gets Rs. 500 per month as dearness allowance (69% of which is part of salary for computing retirement benefits). What amount of gratuity will be exempt from tax? (9) Mr. X, not being covered by the Payment of Gratuity Act, 1972, retires on January 6, 2012 from PQR Ltd and receives Rs. 1,24,000 as gratuity after service of 29 years and 11 months. His average monthly salary during March 1, 2011 to December 31, 2011 is Rs. 8,500. Determine the amount of taxable gratuity. (10) Mr. X a marketing specialist of Bombay is working with two companies, viz., A company Ltd and B Company Ltd. He retires from A company Ltd on November 30, 1988 (salary at the time of retirement: Rs. 2,600) and receives Rs. 22,000 as gratuity out of which Rs. 20,000 is exempt under section 10(10AA). He also retired from B company Ltd on December 10, 2011 after 38 years and 8 months of service and receives Rs. 3,90,000 as death cum retirement gratuity. His average basic salary drawn from B Company Ltd for the preceding 10 months ending on November 30, 2011 is Rs. 18,200 per month. Besides, he has received Rs. 1,000 per month as dearness allowance, 80% of which forms part of salary for the purpose of computation of retirement benefits and 6% commission on turnover achieved by him. Total turnover achieved by him during the 10 months ending on November 30, 2011 is Rs. 2,00,000. Determine the amount of gratuity exempt under section 10(10AA) for the A.Y 2012-13. (11) Mr. X a marketing specialist of Madras is working with two concerns, viz., P Co and Q Co. he retires from P Co on June 30, 1998 (salary at the time of retirement Rs. 2,800) and receives Rs. 16,000 as gratuity out of which Rs. 4,000 is exempt form tax under section 10(10AA), He retires from Q Co on January 10, 2012 after 8 years and 7 months service and receives Rs. 192,000 as gratuity. Basic salary (average) drawn from Q Co for preceding 10 months ending December 31, 2011 is Rs. 19,000. Besides he has received Rs. 200 per month as dearness allowance which forms part of salary for the purpose of computation of retirement benefits and 3% commission on turnover achieved by him. Total turnover achieved by him during the period of 10 months ending December 31, 2011 is Rs. 2,87,500. Determine the amount of gratuity taxable for the A.Y 2012-13. (12) Mr. X is the marketing manger of A Ltd. He retires on November 30, 2011 after service of 22 years and 10months. At the time of retirement he has been paid Rs. 2,80,000 as gratuity, although A Ltd is not covered b y the payment of gratuity act, 1972. Find out the taxable gratuity for the A.Y 2012-13. The following additional information is available; Salary and allowances • Basic salary at the time of retirement Rs. 8,000 • Month from which increment is allowed: from the salary • payable for the month of July • Amount of last increment Rs. 1,000 • Dearness allowance (fixed since 2007 and only 15% is considered for retirement benefits) : Rs. 2,000 per month
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Commission (fixed per month basis since 2007) : Rs. 500 per month Besides, he gets 0.5% commission on turnover achieved by him. Turnover for different months is as follows. January 2011 Rs. 70,000 February 2011 Rs. 80,000 March 2011 Rs. 85,000 April 2011 to June 2011 Rs. 2,70,000 July 2011 to October 2011 Rs. 3,70,000 November 2011 Rs. 95,000 As per service rules, salary, allowances and commission becomes due on the first day of the next month and paid on the same day.
Problems of commutation of pension: (1) Determine the amount of pension taxable for the A.Y 2012-13 in the following cases on the assumption that it becomes due on the last day of each month. • X receives Rs. 18,250 per month as pension from the Central Government during the previous year 2011-12 • X receives Rs. 21,000 per month as pension from the Government of Punjab during the previous year 2011-12. • X receives Rs. 20,000 per month as pension from ABC Ltd., a public Ltd company in the private sector, during the previous year 2011-12. (2) Determine the amount of pension taxable for the A.Y 2012-13 in the following cases on the assumption that it becomes due on the last day of each month. • X retires from the central government service on May 31, 2011. He gets pension of Rs. 15,000 per month up to November 30, 2011 (i.e., Rs. 15,000*6). With effect from December 1, 2011, he gets one-third of his pension commuted for Rs. 7,18,000. • X retires from ABC Co. on June 30, 2011. He gets pension of Rs. 20,000 per month up to January 31, 2012. With effect from February 1, 2012, he gets 60%of pension commuted for Rs. 10,71,000. Find out taxable value of pension chargeable to tax if he receives gratuity and does not receive gratuity. (3) Determine the amount of pension taxable for the A.Y 2012-13 in the following cases on the assumption that it becomes due on the last day of each month. • X retires from the Indian Economic Service on August 31, 2011 and receives Rs. 10,000 per month as pension. • X retires from PQR Ltd in December 2007 and receives Rs. 7,000 per month up to February 29, 2012 when he dies (4) Determine the amount of pension taxable for the A.Y 2009-10 in the following cases on the assumption that it becomes due on the last day of each month • X retires from Indian Administrative Service on May 31, 2010. He gets pension of Rs. 19,000 per month up to June 30, 2011. With effect from July 1, 2011, he gets 30% of his pension commuted for Rs. 3,00,000. • X retires from PQR Ltd on March 31, 2011. PQR Ltd pays Rs. 14,000 per month as pension. On the request of X, PQR Ltd pays Rs. 2,00,000 in lieu of commutation of 20% of pension with effect from February 1, 2012. Find out taxable value of pension chargeable to tax if he receives gratuity and does not receive gratuity. Problems on H.R.A (1) X who resides in Madras, gets Rs. 3,00,000 per annum as basic salary. He receives Rs. 50,000 per annum as HRA. Rent paid by him is Rs. 40,000 per annum. Find out the amount of taxable HRA for the A.Y 2012-13. (2) X, who resides at Poona, gets Rs. 2,00,000 per annum as basic salary. He receives Rs. 55,000 per annum as HRA, though he pays Rs. 50,000 per annum as house rent. Determine the amount of HRA chargeable to tax for the A.Y 2012-13.
(3) X, (who is posted in Delhi but resides in NOIDA) gets Rs. 60,000 per annum as basic salary.
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He gets Rs. 9,000 per annum as HRA, though he pays Rs. 12,000 per annum as rent. During the previous year 2011-12, he receives Rs. 5,000 as advance salary of April 2012. Can he claim the entire amount of HRA as exempt from tax for the A.Y 2012-13? X, who lives in Meerut, gets Rs. 80,000 per annum as basic salary and Rs. 30,000 per annum as dearness allowance (one-third of which is part of salary for computation of retirement benefits). During the previous year 2011-12, X received salary of 11 months; salary of March 2012 is received in April 2012. Besides basic salary, he receives Rs. 12,000 as HRA, though he pays RS. 20,000 as house rent to the land lord. He claims that the entire HRA is exempt from tax. Is he legally correct? If not, find out the amount of HRA exempt from tax. X, a resident of Ajmer, receives RS. 1,92,000 per annum as basic salary during the previous year 2011-12. in addition, he gets Rs. 19,200 per annum as dearness allowance forming part of salary, 7% commission on sales made by him (sales made by him during the previous year 2011-12 is Rs. 86,000) and Rs. 24,000 per annum as HRA. He, however, pays Rs, 21,500 per annum as house rent. Determine the quantum of HRA exempt from tax. X, a resident of Mandi, receives Rs. 3,80,000 per annum as basic salary. In addition, he gets Rs. 30,000 per annum as dearness allowance, which does not form part of basic salary, 4% commission on turnover achieved by him (turnover achieved by him during the relevant previous year 2011-12 is Rs. 60,00,000) and Rs. 60,000 per annum as HRA. He, however, pays Rs. 70,000 per annum as house rent. Determine the quantum of HRA exempt from tax. X, who resides in Pune, receives Rs. 42,000 per annum as basic pay during the previous year 2008-09. He stays in his father’s house up to October 31, 2011 for which he does not pay any rent and thereafter he takes an accommodation on a monthly rent of Rs. 2,000. The employer, however, pays, Rs, 250 per month as HRA throughout the previous year. As the sum of HRA paid is the least of the three sums [i.e., (a) Rs. 16,800, i.e., 40% of salary, (b) Rs. 3,000 i.e., HRA, and (c) Rs. 5,800, i.e., excess of rent paid over 10% of salary], he claims that the entire HRA is exempt from tax under section 10(13A) read with rule 2A. Is he legally correct? X, who resides at Calcutta, receive Rs. 2,000 per month as basic salary and Rs. 1,250 per month as dearness allowance (32% of it forms part of salary for computing retirement benefits) during the previous year 2011-12. He stays at his father’s house up to December 31, 2011 for which he does not pay any rent and thereafter in an accommodation taken on a monthly rent of Rs. 1,200. The employer, however, pays Rs. 300 per month as HRA. He claims that the entire amount of HRA is exempt from tax as the HRA received form the employer (i.e., Rs. 300*12) has been paid to the landlord as house rent (i.e., Rs. 1,200*3). Do you agree with him? If not, find out the amount of HRA chargeable to tax.
Problems on Valuation Rent free accommodation: (1) X, an employee of ABC (P) Ltd., posted a Ajmer (population 18 lakhs), draws Rs. 3,00,000 as
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basic salary, Rs. 10,000 as dearness allowance (forming part of salary) and Rs. 5,000 as commission. Besides, the company provides a rent-free unfurnished accommodation in Ajmer. The house is owned by the company. Fair rent of the accommodation is Rs. 50,000 per annum. Determine the taxable value of the perquisite for the A.Y 20012-13. X, an employee of PQR Ltd., draws Rs. 2,00,000 as basic pay, Rs. 15,000 as dearness allowance (not forming part of salary) and Rs. 20,000 as bonus. Besides the company provides a rent free unfurnished house in Goa. The house is not owned by the company. Determine the taxable value of perquisite for the A.Y 2012-13 if lease rent of the house is (a) Rs. 20,000 (b) Rs. 48,000 and (c) Rs. 2,600 per annum. X, a director employee of a private company based at Indore (population: 24 lakhs), drawing Rs. 90,000 per month as basic salary. Other allowance and benefits attached to his office are : dearness allowance(forming part of salary) 20% of basic salary; bonus: 30% of basic salary; commission : Rs. 800 per month, transport allowance: Rs.1100 per month for commuting between the office and his residence (actual expenditure Rs. 170per month) ; tribal area allowance Rs. 8,400 and rent free house (lease rent paid by the employer Rs. 40,000 per month). Income tax paid by the company on behalf of X is Rs. 6000. During the previous year, X draws salary of April and May 2012 (i.e., Rs. 1,80,000) in advance. Determine the value of the perquisite in respect of rent free house for the A.Y 2012-13. X, A sales manager of a paper company at Brajrajnagar (Orissa) (population 9.60 lakshs as per 1991 census but 11.40 lakhs as per 2001 census), draws Rs. 4,80,000 per annum as basic
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salary. Besides, he gets Rs. 6,000 per annum as travelling allowance (fully utilised for official purposes), Rs. 18,000 per annum as bonus, and Rs. 30,000 as special allowance. His employer provides a rent free unfurnished house in Brajrajnagar which is owned by the employer. Fair rent of the house is Rs. 80,000 per annum. During the previous year 2011-12, S has also received Rs. 10,000, as arrears of bonus of the financial year 2008-09. Determine the value of the perquisite in respect of rent free house for the A.Y 2011-12. X, a purchase manager of a private sector company, gets the following emoluments during the previous year 2011-12: Basic salary: Rs. 8,60,000; bonus: Rs. 6,000; project allowance Rs. Rs. 5,000; commission on purchase by him : Rs. 16,500; dearness pay (not forming part of salary) : Rs. 3,000; education allowance (including allowance for hostel expenditure) for two children of X who are medical students at Delhi: Rs. 12,600 and gas bills paid by the employer on behalf of X: Rs. 4,500. Besides, the employer provides a rent free house owned by it in Bombay to X for his residential purposes. The house is allotted on September 15, 2011, though it is occupied by X only from October 1, 2011. While municipal valuation of the house is Rs. 34,000 per annum, market rent of a similar house in the same locality is Rs.37,000. The employer company maintains the garden attached to the house (salary of the gardener and other maintenance expenses Rs. 2,000). Standard rent under Bombay Rent Control Act is Rs. 36,000. Determine the value of perquisite in respect of rent free accommodation for the assessment year 2012-13. X, a non government employee, gets the following emoluments during the previous year 2011-12: Basic salary Rs. 1,08,000; dearness allowance (forming part of salary): Rs. 9,400; commission on sales : Rs. 10,800; advance salary of April 2012 : Rs. 9,000; electricity bill paid by the employer on behalf of X : Rs. 5,000; and education allowance : Rs. 13,200 (for two children who are school at Delhi). Besides, the employer provides a rent free house in Delhi for residential purposes to X with effect from January 1, 2012. Lease rent is Rs. 48,000 per annum. Determine the taxable value of the perquisite in respect of rent free house for the A.Y 2009-10 on the assumption that lease rent for the period ending March 31, 2012 is still unpaid.
Problems on tax treatment of Provident funds: (1) For the previous year 2011-12, X submits the following information: Basic salary Rs.
(2)
(3)
1,20,000; D.A Rs. 40,000 (46% of which is part of salary for computation of retirement benefits);commission Rs. 6,000 (i.e.,. 1% of Rs. 6,00,000, being turnover achieved by him ) and children education allowance for two children Rs. 7,200. The emp0loyer contributes Rs. 20,000 towards provident fund to which matching contribution is made by X. Interest credited in the provident fund account on December 31, 2011 @ 11% comes to Rs. 93,500. Income of X from other sources is Rs. 86,000. Find out the net income of X for the assessment year 2012-13 if the provident fund is (a) SPF, (b) RPF and (c) URPF. For the previous year 2011-13, X submits the following information: Basic salary Rs. 1,20,000; D.A Rs. 40,000 (61% of which is part of salary for computation of retirement benefits);commission Rs. 6,000 (i.e., at Rs. 500 per month ) and children education allowance for two children Rs. 7,200. The emp0loyer contributes Rs. 20,000 towards provident fund to which matching contribution is made by X. Interest credited in the provident fund account on December 31, 2011 @ 11% comes to Rs. 93,500. Income of X from other sources is Rs. 86,000. Find out the net income of X for the assessment year 2009-10 if the provident fund is (a) SPF, (b) RPF and (c) URPF. X retires on June 30, 2011. He submits the following information:- Basic salary (since January 2011) : Rs. 20,000 per month, dearness allowance : Rs. 6,000 per month (1/3 of which is part of salary for retirement benefits), employer’s contribution towards PF : Rs. 3,000 per month (X makes a matching contribution) ; interest credited at the rate of 15% on April 30, 2011 : Rs. 7,500; pension after retirement Rs. 10,000 per month; and payment of PF at the time of retirement (Rs. 7,60,000 (out of which employer’s contribution : Rs. 3,30,000, interest there on Rs. 44,000, X’s contribution Rs. 3,40,000, interest thereon Rs. 46,000). Salary and pension becomes due on the last day of each month. X has deposited the entire provident fund payment with a company (rate of interest 9% per annum). Find out the net income of X for the assessment year 2012-13 if the provident fund is (a) SPF, (b) RPF and (c) URPF.
Section 80C:
(1) X (age 42 years) is a salaried employee (salary being Rs. 40,000 per month). During the previous year 2011-12, he makes the following investment deposits or payments. a. Life insurance premium on the life of his married daughter Rs. 6,000 (sum assured Rs. 20,000). b. Life insurance premium on his own life Rs. 2,700 (sum assured Rs. 20,000) c. Life insurance premium on the life of his dependant sister Rs. 10,000 d. Contribution towards RPF Rs. 9,000. e. Contribution towards PPF Rs. Rs. 30,000 f. Repayment of loan taken from LIC for purchase of residential house property: Rs. 30,000. g. Contribution towards notified equity – linked savings scheme of UTI (i.e., MEP 2009) Rs. 14,000. Find out the tax liability of X for the A.Y 2012-13 assuming that income from house property is Rs. 18,600.
(2) Find out the amount of tax liability in the cases given below for the assessment year 2012-13 X (age 42 Y (age 31 Z(age 25 A (age 65 years) years) years) years) Gross Total Income 8.60,000 11,96,000 12,10,000 9,26,000 Investments/contribution for deduction u/s 80C Public provident fund 70,000 50,000 40,000 Recognised provident fund 40,000 16,000 6,000 Notified equity linked savings scheme 15,000 15,000 Notified bonds of infrastructure company 1,00,000 26,000 2,000 (3) Find out the tax liability for the A.Y 2012-13 in the cases of resident individuals given below. Name of tax payer X Y Mrs. Z Mrs. A Age of the tax payers 65 years 60 years 68 years 50 years during the P.Y 2011-12 Rs. Rs. Rs. Rs. Income from business ---------40,000 ----Income from profession 90,000 5,80,000 ----10,10,000 Salary income and other incomes 3,00,000 86,000 4,20,000 2,20,000 Contribution towards NSC VIII issue 80,000 90,000 10,000 65,000 PPF 2,000 2,000 2000 6,000 Investment in notified infrastructure -----5,000 1,000 33,000
Problems on computation of taxable salary:
(1) Mrs. X (age 51 years) is a part time lecturer in a private college Delhi owned by A Ltd. During year 2011-12, she gets basic salary of Rs. 52,300 per month up to June 30, 2011 and Rs. 62,700 after wards. Besides, she gets 30% of basic salary as HRA, Rs. 16,300 per month as dearness allowance (71% of if forms part of salary for computation of retirement benefits.) and Rs, 5,000 per month as conveyance allowance which is entirely used for personal purposes. On July 10, 2011 the employer transfers a music systems to Mrs. X on her completing 10 years of service (cost of music system purchases on September 1, 2010 : Rs. 22,470) for Rs. 7,500. She is member of RPF to which both the employer and employee contributes @ 12% of basic salary. Apart from the minimum contribution, she makes an additional contribution of Rs. 6,000 per month to the P.F. During the previous year 2011-12, Rs. 65,698 is paid to her for checking answer sheets of different universities. Determine the taxable income and tax liability of Mrs. X for the A.Y 2012-13 on the assumption that she pays rent of Rs. 14,000 per month. (2) X, (26 years) is an employee of a Co-operative society of Varanasi. During the previous year 2011-12, he gets Rs. 65,000 per month as basic salary, Rs. 8,000 per month as bonus and Rs. 4,500 per month as dearness allowance (32% of it forms part of salary for computation retirement benefits) and Rs. per month as medical allowance (medical expenses, is, however, more than Rs. 2,000 per month). X gets an interest free loan (repayable within 8 years) of Rs. 82,330 from the employer for purchase of a hose (SBI lending rate: 10.25%). Besides, he gets Rs. 10,30,760 as interest on company deposit from a private sector undertaking. Determine the taxable income and tax liability of X for the A.Y 2012-13. (3) Mr. X (age 30 years) is in the teaching staff of a well known private college in Pune owned by B Ltd. during the previous year 2011-12, he gets the following emoluments : Basic salary Rs. 4,86,000; Dearness allowance Rs. 92,300 (forming part of salary); CCA Rs. 33,100; Children’s’ education allowance Rs. 2,340 (Rs. 65 per month for 3children); HRA Rs. 46,200 (rent paid Rs. 58,000) and remuneration from Delhi University for acting as paper setter and examiner Rs. 36,400 (expenditure incurred by X Rs. 3,400) he gets Rs. 18,890 as reimbursement from the employer in respect of expenditure incurred on medical treatment of his family members from a doctor. Besides, he gets Rs. 12,600 as reimbursement from the employer in respect of books and journals purchased by him for discharging his official work. The employer provides 1200cc car for official and private purposes. The entire expenditure on salary of driver and running maintenance of car (which approximately comes to Rs. 52,300) is borne by the employer. He contributes 11%of his salary to RPF to which a matching contribution is made by the employer. During the year, he spends Rs. 3,000 on purchase of books for teaching purposes (not being reimbursed by the employer). Besides, he makes an expenditure of Rs. 16,000 as insurance premium on own life insurance policy (sum assured Rs. 50,000). Determine the income and tax liability of X for the A.Y 2012-13. (4) Mrs. X (age 29 years) is a part time lecturer in a college of Delhi University. The details of her salary and other income for the P.Y 2011-12 are as follows. • Basic alary Rs. 2,60,000 • D.A (forming part of salary) Rs. 52,400 • Education allowance for two children
• • • • •
(Expenditure Rs. 600) Rs. 3,600 Hostel expenditure allowance for one Child (exp being Rs. 7,000) Rs. 6,800 HRA Rs. 80,800 Remuneration from the Calcutta University for acting as examiner Rs. 62,180 • Allowance for research which is to be completed during January-April 2012 (actual expenditure incurred for completing the research : up to March 31, 2012 Rs. 1,500; during April 2012 Rs. 3,000) Rs. 6,000. • She is a member of SPF to which he contributes 12% of his salary and similar amount is contributed by the college. Besides, the college reimburses Rs. 21,000 being expenditure incurred by Mrs. X on medical treatment of her daughter in a private clinic. Bills are issued in the name of Mrs. X but paid by the employer. • During the year, she spent Rs. 700 on the purchase of books for her teaching purposes. She has maintained a scooter for the whole year for office as well as private purposes. She has been living in a rented house and paying Rs. 9,000 per month as rent. • For the year 2011-12, he paid Rs. 6,500 as insurance premium on his life policy for Rs. 40,000 (date of payment is April 3, 2009). Compute the total income and tax liability for the A.Y 2012-13. (5) Mr. X (age 42 years) receives the following incomes during the year ending march 31, 2012. • Salary at Rs. 52,500 per month for 12 monthsRs. 6,30,000 • Leave travel concession for proceeding on leave (actual expenditure on rail fare Rs. 14,100) Rs. 13,800. • Tiffin allowances (actual expenditure Rs. 2,700) Rs. 4,000 • Reimbursement of ordinary medical expenses for treatment of X and his family members in a private clinic Rs. 31,300 • Rent free unfurnished house at Noida (population 16 lakhs). House is owned by the employer. Employer incurs an expenditure of Rs’ 40,000 for maintenance of garden attached to the house. Expenditure of Rs. 40,000 includes salary of Rs. 24,000 paid by the employer to the gardener. • The employer provides two watchmen (salary Rs. 700 per month per person) • Free use of Maruti 800 car for official purposes. Car can also be used for journey between office and residence and back and for other domestic purposes (log book is not maintained by the employer). • Free meal (at the place of work) Rs. 14,700 (i.e., Rs. 70 per mean for 210 days, amount is directly paid to the canteen by the employer) • Interest free loan for purchasing appliances (amount Rs. 1,20,000; date of taking loan is March 1, 2008, amount outstanding between April 1, 2011 and November 30, 2011 : Rs. 76,000 and after November 30, 2011 : Rs. 50,000). The SBI lending rate for similar loan on April 1, 2011 is 16.75%. • Though the salary falls due on last day of each month, salary of March 2012 is received on April 15, 2012.
(6) Mrs. X (44 years) received the following income from B Ltd. during the year ending March 31, 2012. • Salary @ Rs. 19,000 per month Rs. 2,28,000 • Leave travel concession for proceeding on leave (expenditure on air fare: Rs. 26,000) Rs. 24,000. • Medical allowances (expenditure Rs. 42,000) Rs. 49,400 • Lunch allowance @ Rs. 2,250per month (actual expenditure : Rs. 27,000) • Allowance for purchase and maintenance of uniform for official use (expenditure incurred by X is Rs. 8,000) Rs. 22,000. • Free unfurnished flat in Bombay for which employer is paying a monthly rent of Rs, 29,500. • Free use of a Maruti Car with driver for personal and official use. Car can also be used by the family members of Mrs. X. • Free services of personal attendant (salary Rs. 4,400) and sweeper (salary Rs. 4,600). • Free use of employer’s DVD player (costs to the employer Rs. 25,000; year of purchase 2009-10) • Mrs. X’s salary and allowances for march 2012, though due on march 31, 2012 were received by her only in the month of April 2012. Compute net income of Mrs. X for the A.Y 2012-13, on the assumption that her income from other sources is Rs. 25,760.
Problems of Depreciation: (1) Compute the WDV from the following information for the A.Y 2012-13. Block of Assets Rate of Depreciation Depreciated values (%) on 01/04/2011 (Rs) Plant and machinery A,B and C 15 10,40,000 Plant D and E 40 2,60,000 Plant F 50 70,000 Building A, B, C and D 10 10,90,600 Building E, F, and G 5 7,10,200 Building H, I, J and K 100 16,90,000 After April 1, 2011, the company purchases the following assets. Assets Date of purchase Rate of Depn Actual cost (%) (Rs) Plant G April 6, 2011 50 6,000 Plant H May 11, 2011 15 18,000 Furniture June 06, 2011 10 56,000 Car July 07, 2011 15 2,56,000 Building L September 26, 2011 05 7,28,700 Computer September 27, 2011 60 90,000 Copyright September 30, 2011 25 17,50,000 The following assets are transferred Assets Date of sale Sale consideration Plant B December 20, 2011 25,10,000 Plant D January 31, 2012 12,000 Building L March 6, 2012 6,00,000
(2) Find out WDV for different blocks of assets on March 31, 2012 (i.e., the assessment year 2012-13) in the case of X Ltd from the following information given below. Block of Assets Rate of Depreciated Depreciation (%) values on 01/04/2011 (Rs) Plant A and B 15 3,40,000 Building A 10 16,92,000 After April 1, 2011, the company purchases the following assets. Assets Date of purchase Rate of Depn Actual cost (%) (Rs) Plant C April 1. 2012 15 19,26,000 Building B March 30, 2012 10 5,00,00 Patent A April 10, 2011 25 15,000 The following assets are transferred Assets Date of sale Sale consideration Plant B November 1, 2011 4,10,000 Building A May 10, 2011 22,00,000 Patent A March 1, 2012 15,500 (3) Consider the following examples: X Ltd purchases an old plant (rate of depreciation: 15%) on may 10, 2011. it is put to use on January 10, 2012. Y Ltd. purchases a plant (being an office appliance) (rate of depreciation being 15%) on may 10, 2011. It is put to use on January 10, 2013. X Ltd. owns two buildings A and B on April 1, 2008 (rate of depreciation 10%, depreciated value Rs. 14,15,700). It purchases on December 1, 2008 building C for Rs. 3,10,000 (rate of depreciation 10%)and sells building A during the previous year 2008-09 (say January 10, 2009) for Rs. 8,70,000 ABC Ltd. owns two buildings A and B on April 1, 2011 (rate of depreciation 10%, depreciated value Rs. 14,15,700). It purchases on December 1, 2011building C for Rs. 3,10,000 (rate of depreciation 10%)and sells building A during the previous year 2011-12 (say January 10, 2012) for Rs. 15,87,000. (4) The depreciated value of a block of assets (consisting of plant A and B) (rate of depreciation 30%) is Rs. 1,17,000 on April 1, 2011 (plant A : Rs. 1,00,000 and plant B : Rs. 17,000). The following information is available. Assets Rate of Date of purchase When it is put to use Actual cost Depreciation (Rs) (%) Plant C 30 March 10, 2011 April 10, 2011 20,000 Plant D 30 March 1, 2011 December 3, 2011 30,000 Plant E 30 May 6, 2011 May 6, 2011 40,000 Plant F 30 May 15, 2011 January 2. 2012 60,000 Plant G 30 June 6, 2011 April 6, 2012 80,000 Plant A is sold on August 16, 2011 for Rs. 86,000. Compute the total depreciation allowable for the assessment year 2012-13.
(5) X Ltd. owns the following assets on April 1, 2011
Assets
Actual Cost (Rs)
WDV as on April Rate of 1, 2008 Depreciation (%) Building A 30,00,000 13,50,000 10 Building B 6,00,000 2,25,000 10 Building C 8,00,000 40,000 5 Plant A 1,70,000 45,100 15 Plant B 3,10,000 68,000 15 Plant C 30,000 7,000 40 Plant D 50,000 31,000 40 The company acquires the following assets after April 1, 2011 Assets Actual Date of purchase When it is put to use Rate of cost (Rs) Depreciation (%) Building D 6,00,000 May 28, 2011 June 1, 2011 10 Building E 4,00,000 June 8, 2011 June 8, 2011 5 Plant E 4,90,000 August 12, 2011 July 1, 2011 15 Plant F 2,10,000 September 18, 2011 September 19, 2011 15 Plant G 1,50,000 September 19, 2011 October 30, 2011 40 Building F 2,00,000 May 10, 2011 May 10, 2011 10 Plant H 1,30,500 June 5, 2011 July 6, 2011 15 The company sells the following assets after April1, 2011 Assets Date of sale Sale consideration Building A May 11, 2011 13,00,000 Plant B May 16, 2011 20,000 Plant D December 18, 2011 2,15,000 Plant C December 6, 2011 32,000 Determine the amount of depreciation for the A.Y 2012-13 on the assumption that additional depreciation is not available. (6) X owns the following assets on April 1, 2011 Assets WDV as on April Rate of 1, 2011 Depreciation (%) Plant A 50,400 40 Plant B 6,10,415 15 Plant C 15,450 15 Plant D 14,714 40 Furniture 42,700 10 Building A 5,37,570 10 Building B 4,28,429 10 Building C 75,835 5 He acquires the following second hand assets during the previous year 2008-09: Assets Actual Date of purchase When it is put to use Rate of cost (Rs) Depreciation (%) Plant E 35,000 April 10,2011 May 1, 2011 15 Plant F 75,000 April 30, 2011 May 15, 2011 15 Plant G 4,67,000 May 17, 2011 June 1, 2011 40 Plant H 15,25,680 June 15, 2011 June 15, 2011 15 Building D 2,00,000 July 18, 2011 November 30, 2011 10
Building E
4,00,000
September 7, 2011
September 8, 2011
5
He sells the following assets during 2011-12: Assets Sale consideration Plant B 11,20,000 Plant D 3,000 Plant C 72,000 Building A 3,20,000 Building C 15,80,000 Determine the amount of depreciation for the A.Y 2012-13. (7) X owns the following assets April 1, 2011 Assets WDV as on Rate of April 1, 2011 Depreciation (%) Furniture 20,170 10 Building 9,00,500 10 Plant and machinery 2,10,000 20 Plant and machinery 64,00,000 15 Plant and machinery 2,05,000 40 During the previous year 2011-12, the following assets are purchases by X: Date of purchase October 1, 2011 June 20, 2011 November 30, 2011 December 6, 2011
Date When it is put to use October 9, 2011 June 22, 2011 December 1, 2011 December 10, 2011
Assets Trade mark Plant(second hand) Foreign made car Books for professional use
Actual cost (Rs) 15,000 1,90,000 1,40,000
Rate of Depreciation (%) 25 40 15
2.700
100
Determine the amount of Depreciation for the A.Y 2012-13. (8) X Ltd., a sugar manufacturing company, owns the following assets on April 1, 2011 Assets WDV as on Rate of April 1, 2011 Depreciation (%) Plant A 3.15,000 15 Plant B 16,20,000 15 Plant C 8.05,000 15 Plant D 97,000 40 On March 25, 2012, it sells plant D for Rs. 3,05,000. On November 10, 2011, if acquires the following assets. Assets Cost (Rs) Rate of depreciation (%) Plant E (second hand) 5,000 40 Plant F (foreign made car) 3,80,000 15 Plant G (Indian Car) 75,000 15 Building A 4,85,000 10 Know-how 16,00,000 25 Plant H (office telephone system) 15,000 40 Plant I(fax machine) 55,000 100 Computer 46,000 60 Determine the amount of depreciation admissible for the A.Y 2012-13.
(9) X Ltd. is engaged in the business of manufacturing of computer hardware since 1995. During the previous year 2011-12, the following assets are acquired and put to use. Block 1 Block 2 Block 3 Rate of Depreciation 15% 30% 60% Number of assets in block 11 12 17 Depreciated value of block on April 1, 2011 18,00,000 25,00,000 5,00,000 Additions of plants (new) during the previous year 2011-12 Plant A 57,00,000 Plant B 4,00,000 Plant C 17,00,000 Sale of old plants (one in each block) 8,00,000 28,70,000 42,00,000 Plants A, B and C are acquired during May 2008 and put to use during September 2008. However, plant B is put to use in the last week of March 2009. Find out the amount of depreciation and additional depreciation.
Problems on Profits and Gains of Business or Profession: (1) From the following Profit and Loss account of X (age : 31 years) for the year ending march 31, 2012, ascertain his total income and tax liability for the assessment year 2012-13. General expenses 13,400 Gross profits 3,15,500 Bad debts 22,000 Commission 8,600 Advance tax 8,000 Brokerage 37,000 Insurance 600 Sundry receipts 2,500 Salary to staff 26,000 Bead debts recovered (earlier Salary to X 45,000 allowed as deduction) 11,000 Interest on overdraft 4,000 Interest on debentures (i.e., net Interest on loan to Mr. X 42,000 amount Rs. 22,425 +TDS Interest on capital of X 23,000 Rs.2,575) 25,000 Depreciation 48,000 Interest on debentures with a Advertisement 7,000 company (non-trade) (net Contribution to employees, RPF 13,000 interest Rs. 11,161+TDSRs. Net profit 1,60,600 1,339) 13,000 4,12,600 4,12,600 Other information: 1. The amount of depreciation allowable is Rs. 37,300 as per the I T rules. It includes depreciation on permanent sign board. 2. Advertisement expenses include Rs. 3,000 being cost of permanent sign board fixed on office premises. 3. Income of Rs. 4,500, accrued during the previous year, is not recorded in the Profit and Loss Account. 4. X pays Rs. 6,000 as premium on own life insurance policy of Rs. 70,000. 5. General expenses include (a) Rs. 500 given to Mrs. X for arranging party in honour of a friend who has recently come from Canada (b) Rs. 1,000 being contribution to a political party. 6. Loan was taken from Mrs. X for payment of arrears of income tax. 7. Interest on debentures is paid to X on December 31, 2011. (2) From the following Profit and Loss account of X (age : 31 years) for the year ending march 31, 2012, ascertain his total income and tax liability for the assessment year 2012-13.
Household expenses Bad debts Provision for bad debts Fire insurance Salary to staff Salary to X Contribution towards URPF Interest on overdraft taken for payment of sales tax Interest on capital of X Interest on loan taken from X’s brother Depreciation on building and furniture Advertisement Revenue expenditure Capital expenditure on a Sign board General Expenses Net profit
11,200 600 4,800 1,000 2,08,000 3,000
Gross profits Commission Sundry receipts Interest on investment Bead debts recovered (earlier allowed as deduction) Interest on securities (gross)
5,69,000 5,000 8,000 11,000 2,000 6,000
32,000 6,000 13,000 1,000 13,600 3,800 1,000 4,700 2,97,300 6,01,000
6,01,0000
Other information: 1. 2.
General expenses include medical expenditure of X Rs. 1,700 Income of Rs. 3,000, accrued during the previous year ending march 31, 2009, is not recorded in the Profit and Loss Account. 3. X contributes Rs. 4,000 annually towards PPF. 4. Depreciation on building, furniture and sign board comes to Rs. 3,000 according to tax provisions. Determine the taxable income and tax liability of X for the A.Y 2012-13. (3) X (age: 66 years), a resident individual, furnishes the following particulars relevant for the A.Y 2012-13. Profit and Loss Account for the year ending March 31, 2012 Salary to staff 34,000 Gross profit 6,86,000 General expenses 48,000 Commission and discount 2,17,200 Bad debts written off 15,000 Sundry receipts 43,000 Reserve for losses 2,000 Short term profit on sale of Fire insurance premium 2,200 investment 31,000 (office premises) Advertisement 2,400 Add: Outstanding 1,600 4,000 Interest on X’s capital 3,500 Interest on bank loan 14,500 Expenditure on acquisition of patent right acquired and put to use on June 30, 2008 17,000 Lump sum consideration for acquiring know how on March 3, 2012 60,000 depreciation on plant and machinery 28,000 Provision for outstanding sales tax and excise duty 13,000 Net profit 7,34,000 9.77.200 9,77,200 Other information:
1. Advertisement expenditure include Rs. 3,400, being cost of 2 diaries (cost of each being Rs. 1,700) presented to customers. Depreciation on plant and machinery according to income-tax provisions comes to Rs. 29,700. 3. Salary to staff includes payment of Rs, 8,000 to a relative which is unreasonable to the extent of Rs. 3,000. 4. General expenses include (a) expenditure of Rs. 4,800, incurred by X on training of his employees, (b) commission of Rs. 10,000 for securing business orders, and (c) compensation of Rs. 6,000 paid to an employee while terminating his services in the business interest. 5. Out of outstanding sales tax and excise duty, Rs. 3,000 is paid on July 10, 2012 and Rs. 8,000 is paid on October 3, 2012. The balance is not yet paid. Due date of filing return of income is July 31, 2012. 6. Income of X from company deposit is Rs. 12,000, which is not shown in the Profit and Loss Account. Determine the taxable income and tax liability of X for the A.Y 2012-13, assuming that insurance premium paid by X on the life insurance policy of Mrs. X is Rs. 3,200 2.
(4) X (age: 66 years), a resident individual, furnishes the following particulars for the previous year relevant for the assessment year 2012-13. Profit and Loss Account for the year ended March 31, 2012 Salary to staff Staff welfare expenditure General expenditure Bad debts Advance tax for A.Y 2012-13 Fire insurance Advertisement expenses Interest on X’s capital and loan Expenditure on acquisition of copyright incurred on march 1, 2012 (it is put to use on the same day) Lump sum consideration for acquiring know-how incurred on march 10, 2012 (it is put to use on April 1, 2012). Depreciation on other business assets Provision for income tax Contribution to political party Net profit
13,000 6,000 6,500 3,000 400 4,000 11,000 3,600
Gross profit Sundry receipts Short-term capital gains
4,49,700 4,400 3,000
2,800
12,000 6,000 2,000 1,000 3,85,800 4,57,100
4,57,100
Other information: (1) salary to staff includes salary paid to a relative which is unreasonable to the extent of Rs. 3,400 (2) Advertisement expenses include Rs. 8,000 being cost 8 dairies presented to customers. (3) Depreciation on other assets according to income tax provision comes to Rs. 9,600. (4) Provision for income tax is excessive to the extent of Rs. 600 (5) During the year 2011-12, X has purchased NSC VIII issue of Rs. 10,000. (6) General expenses include an expenditure of Rs. 1,780 for arranging a long tern-m loan. (7) During the previous year 2011-12, the following payments are made a. Rs. 7,000 paid on may 5, 2011 on account of outstanding customs duty of the previous year 2010-11; and
b. Rs. 5,000 paid on January 3, 2012 on account of outstanding sales tax of the previous year 2010-11. Find out the taxable income and tax liability of X for the A.Y 2012-13. due date of filing the return of income is July 31, 2011 (for the assessment year 2011-12) and July 31, 2012 (for the assessment year 2012-13).
(5) X (age: 29years) furnishes the following information relevant for the A.Y 2012-13. Profit and Loss Account for the year ending March 31, 2012 Office expenses 45,000 Gross profits 8,03,000 Sundry expenses 39,000 Sundry receipts 11,000 Entertainment expenses 5,000 Bad debts recovered (not Audit fees 12,000 allowed as deduction earlier) 7,100 Legal charges/expenses 4,000 Customs duties recovered Extension of buildings 6,000 from the government (earlier Depreciation of P & M 23,000 allowed as deduction) 32,500 Salary to staff 43,000 Gift received from father 43,000 Bonus 36,000 Contribution towards employees’ RPF 15,000 Contribution to unapproved gratuity 4,000 Sales tax 38,000 Provision for sales tax 25,000 Payment to approved scientific research association for carrying out scientific research 19,000 Net profit 5,82,600 8.96,600 8,96,600 Other information: (1) As shown in the Profit and Loss Account, Rs. 19,999 is paid to a scientific research association for the purpose of carrying out an approved scientific research in natural science, not related to the business of X. Besides, X purchases a plant of Rs. 30,000 for the purpose of carrying on scientific research related to his business. Neither cost of the plant nor depreciation thereon is debited to profit and loss account. (2) Out of the bonus of Rs. 36,000, Rs. 4,000 is paid during 2011-12, and Rs. 26,000 is paid by July 31, 2012 (being the due date of furnishing return of income). The balance of Rs. 6,000 is, however, paid on November 11, 2012. (3) Depreciation on plant and machinery and extension of building as per income tax provisions is Rs. 19,000. (4) Sales tax of Rs. 38,000 includes (a) interest for late payment of sales tax Rs. 1,200; (b) penalty for evading sales tax Rs. 10,000.
(5) Provision for sales tax represents an outstanding sales tax liability, which is, however, paid on July 10, 2012. (6) Salary to staff includes a payment of pension of Rs, 5,000 to the widow of former employee. Ascertain the net income and tax liability of X for the A.Y 2012-13, assuming that he deposits Rs. 20,000 in PPF account during the previous year 2011-12 and his income from other sources is Rs. 1,06,000.
(6) Mr. X (age: 35 years) a resident individual, furnishes the following particulars for the A.Y 2012-13 Profit and Loss Account for the year ending March 31, 2012 Office expenses 2,400 Gross profits 8,98,000 Audit fees 8,000 Sundry receipts 9,000 Legal expenses 1,000 Customs duties recovered Cost of extension of from the government (earlier buildings 10,000 not allowed as deduction) 5,300 Depreciation on machinery Bad debts recovered ( allowed and extension of building 11,000 as deduction earlier) 3,000 Salary to staff 21,000 Gift received from a friend 10,000 Bonus to staff 15,000 Contribution to an approved gratuity fund 6,000 Outstanding liability in respect of interest payable to IDBI 8,000 General expenses 21,000 Net profit 8,21,900 9,25,300 9,25,300 Other relevant information: (1) Bonus is outstanding on March 31, 2012 Rs. 10,500 is, however, paid on July 31, 2012 (being the due date of furnishing the return of income). (2) Depreciation on machinery and extension of building shown in the profit and loss account is calculated according to income tax provisions. (3) General expenses include payment of Rs. 9,000 to an approved institute for the purpose of carrying on a scientific research in natural science. The research is, however, not related to the business of the assessee. (4) During the previous year 2011-12, X also makes a capital expenditure of Rs. 25,000 for the purpose of carrying on a scientific research related to his business. This expenditure is, however, not recorded in the profit and loss account. (5) Outstanding interest is payable to IDBI is paid as follows: Rs. 500 on April 10, 2012, Rs. 1,000 on May 10, 2012. Rs. 2,000 on June 30, 2012 and Rs. 1,000 on September 10, 2012, Rs. 3,500 is still outstanding.
(6) Salary to staff includes Rs. 2,000 being compensation paid for premature retirement of an employee. Determine the net income and tax liability of X for the A.Y 2012-13, assuming that he annually deposits Rs. 2,000 in the PPF. (7) X (age: 24 years), a resident individual, furnishes the following information for the A.Y 201213. Profit and Loss Account for the year ending March 31, 2012 Office expenses 11,000 Gross profit 8,78,000 Telephone under OYT Sundry receipts 8,000 scheme 8,000 Salary to staff 42,000 Depreciation 28,000 Travelling expenses 43,000 Loss of cash by an employee through embezzlement 5,000 Amount transferred to special reserve account 7,500 Expenditure on the occasion of diwali 7,100 Interest an legal charges 44,000 Sundry expenses 8,500 Net profit 6,81,900 8,86,000 8.86,000 Other information: (1) Salary to staff includes payment of Rs. 12,000 out of India on which tax has not been deducted at source nor paid to the government. (2) Depreciated value of plant and machinery on April 1, 2011 is Rs. 1,10,000 (rate of depreciation 15%). a. A plant whose WDV on April 1, 2011 is Rs. 17,440 is sold during the previous year for Rs. 11,000 b. A machinery (cost price Rs. 20,000) whose WDV on April 1, 2011 is Rs. 2,350 is sold during the previous year for Rs. 15,000. c. During the year, X purchases a new plant for office for Rs. 1,22,670 which is eligible for depreciation at the rate of 15%. The plant is installed and put to use on may 15, 2011. (3) Travelling expenses include Rs. 10,000 being hotel expenditure on an employee in respect of an official visit to Bombay for 5 days. (4) Expenditure on the occasion of Diwali includes a gift of Rs. 2,000 to Mrs, X (5) Interest includes a payment of Rs. 3,000 out of India on which tax has not been deducted. (6) Sundry expenses include expenditure of Rs. 1,000 on maintenance of guest house in Delhi for the purpose of carrying on business and Rs. 4,000 being employer’s contribution towards ESI out of which Rs. 600 is paid after the due date of submission of return on income. (7) Legal expenses include the following payments: a. Payment of Rs. 4,000to B, an employee of X, for filing income tax appeal. b. Payment of Rs. 5,000 to C, not being an employee of X, for preparation of return of income c. Payment of Rs. 11,000 to D, an advocate who is not employee of X, for filing income tax appeals and giving tax advice. d. Payment of Rs. 2,000 to E, a chartered accountant who is not an employee of X, for obtaining tax advice. Determine the taxable income and tax liability of Mr. X for the A.Y 2012-13 assuming that sundry receipts include Rs. 5,000,being amount of endowment insurance policy received from the LIC of India at the time of maturity of the policy (i.e., December 5, 2011) (amount of insurance premium last paid on June 5, 2011 : Rs. 400) (8) X (age 26 years), a resident individual, furnishes the following particulars for the A.Y 2012-13 Profit and Loss Account for the year ending March 31, 2012
Office expenses Salary to staff Depreciation Travelling expenses for business Loss of cash by an employee through embezzlement Amount transferred to special reserve account Expenditure on festival Interest an legal charges Sundry expenses Deposit under Tatkal Telephone Scheme Net profit
9,000 24,000 15,000
Gross profit Sundry receipts
8.86,575 38,000
9,000 6,000 1,875 2,000 22,600 5,000 25,000 8,05,100 9,24,575
9,24,575 Other information: (1) Salary to staff includes payment of Rs. 6,000out of which tax has not been deducted at source nor paid to the government. (2) Depreciated value of plant and machinery on April 1, 2011 is Rs. 70,000 (rate of depreciation 15%). a. An air conditioner (cost price Rs. 7,500) whose written down value on April 1, 2011 is Rs. 2,450, is disposed of for Rs. 7000 b. A typewriter whose WDV on April 1, 2011 is Rs. 570 is sold for Rs. 200 c. X Purchases a telephone set for Rs. 10,000 on November 1, 2011 which is eligible for deprecation at the rate of 15%. (3) Travelling expenses include Rs. 7,600 being hotel expenditure on an employee in respect of an official visit to Madras for 5 days. (4) Amount debited as expenditure on festival is cost of a gift presented to a relative. (5) Sundry expenses include expenditure of Rs. 4,000 on maintenance of a guest house at Bombay, (6) Legal expenses include cash payment of Rs. 12,000 to an advocate (who is not an employee of X) for giving income tax advice. Determine the taxable income and tax liability of X for the A. 2012-13, assuming ha sundry receipts included Rs. 12,000, being amount of a loan taken from PPF to which X annually contributes Rs. 12,000. (9) XYZ Ltd. an Indian company furnishes the following particulars for the A.Y 2012-13: Profit and Loss Account for the year ending March 31, 2012 Salary to staff 2,40,000 Gross profit 15,58,000 Expenses on issue of shares Rent of flats given to officers 12,000 for setting up an industrial Sundry receipts 5,000 undertaking (cost of RS. 10 Interest on bank deposits 17,000 lakh) 18,000 Capital gains on sale of shortExpenditure on promotion term investments 3,000 of family planning among the employees. 3,000 Sales tax 2,000 Contribution to a National Laboratory for carrying out approved scientific research. 1,06,000 Gratuity fund 5,000 Reserve for future losses 20,000 Bad debts written off 3,000 Reserve for payment of advance income tax 13,000 Car expenses 9,000
Depreciation Machinery Car Furniture Buildings Office expenses. Rent and repairs of building Municipal taxes and ground rent of flats given to officers Sundry expenses Fringe Benefit Tax Banking cash transaction tax Income tax Dividend tax Net profit.
18,000 3,000 5,000 3,000 7,500 3,000 7,000 13,000 10,500 3,000 500 700 11,01,800 15,95,000
15,95,000
Other information: (1) Expenditure on family planning includes capital expenditure of Rs. 2,500. (2) Car is utilised partly for private purposes by a director. In the past years, one –fourth of this expenditure was disallowed. (3) Sundry expenses include Rs. 9,000 being payment of printing bill to relative of the managing director; payment is unreasonable to the extent of Rs. 4,700 (4) Salary includes payment of Rs. 21,000 in cash to an employee. It also includes mediclaim insurance premium for the benefit of employees of Rs. 1,000 out of which Rs. 6,000 is paid in cash. (5) Though amount of depreciation on building, car and furniture is calculated as per tax provisions, depreciation in respect of machinery is excessive to the extent of Rs. 2,000. (6) Rs. 1,06,000 being payment to National Laboratory is qualified for weighted deduction under section 35(2AA). (7) The company has deposited Rs. 2,40,000 with Maruti Udyog Ltd. on March 1, 2012 for purchasing Maruti 800 car. The car is likely to be delivered by June 2012. The said amount is not debited to profit and loss account. (8) During the previous year 2011-12, the company pays Rs. 15,00,000 as compensation to employees on voluntary retirement under the voluntary retirement scheme of the company. The amount is not debited to the profit and loss account. (9) The company deposits Rs. 10,000 in National Housing Bank. (10) On March 16, 2012, the company gets a refund of sales tax of Rs. 3,000 (it was allowed as deduction for the previous year 2007-08). The amount is not credited to the profit and loss account, as the Commissioner’s appeal against the refund is still pending in the Delhi High Court. Determine the taxable income of the assessee company for the assessment year 2012-13.
(9) X (age: 34 years) is a businessman in Mumbai. Determine his net income and tax liability on the basis of the following profit and loss account for the year ending March 31, 2012. Trading and Profit and Loss Account for the year ending March 31, 2012
Opening stock Purchases Salaries and wages Rent and rates Commission Household expenses Income tax for 2011-12 Advertisement Postage and telegram Interest on own capital Reserve for bad debts Depreciation on furniture Net profit
1,04,000 80,08,750 1,75,000 1,31,000 21,500 20,000 36,100 5,000 4,000 84,000 3,400 18,000 8,50,250 94,61,000
Sales Closing stock
92,51,000 2,10,000
94,61,000
Other information: (1) Closing stock and opening stock has consistently been valued at 10% below the cost price. (2) Depreciation on furniture, as per tax provisions, is Rs. 17,200. (3) Amount of sales includes a sum of Rs. 41,250 representing the value of goods withdrawn for the use of X’s family members. These goods were purchased at cost of Rs. 27,850. Market value of these goods is Rs. 45,240. (4) Household expenses include a contribution of Rs. 1,000 towards PPF. (5) On September 20, 2008, X has received a gift of Rs. 96,000 from a friend settled in U.K. (6) X purchased notified bonds of an infrastructure company on April 2, 2012 for Rs. 1.02,000.
(10)
X (age: 34 years) is a businessman in Mumbai. Determine his net income and tax liability on the basis of the following profit and loss account for the year ending March 31, 2012. Trading and Profit and Loss Account for the year ending March 31, 2012 Opening stock 3,60,000 Sales 49,00,000 Purchases 41,00,000 Closing stock 4,50,000 Salaries and wages 1,20,000 Rent and rates 40,000 Household expenses 18,000 Commission 27,000 Income tax for 2008-09 42,000 Advertisement 10,000 Postage and telegram 4,000 Interest on own capital 6,000 Reserve for future losses 5,000 Depreciation on furniture 1,000 Net profit 6,17,000 53,50,000 53,50,000 The following additional particulars are furnished.
(1) Stock of goods at the opening as well as the closing day of the accounting year had consistently been valued at 10% below the cost price. (2) The amount of house holds expenses include a contribution of Rs. 7,000 towards PPF. (3) Sales include a sum of Rs. 50,000 representing goods withdraws for the use of X’s family members. These goods were purchased at a cost of Rs. 60,000. Market value of these goods is Rs. 63,000. (4) Depreciation according to the Income tax rules works out to Rs. 500. (5) Salary and wages include Rs. 12,000 being entertainment allowance paid to employees. (12) X (age 26 years), a leading tax consultant, who maintains books of accounts on cash basis furnishes the following particulars of income and expenditure for the assessment year 2012-13. Receipts and payments Account for the year ended march 31, 2012 Balance B/d 12,400 Purchase of a typewriter 6,000 Fees from clients Car expenses 18,000 Of 2011-12 7,30,500 Office expenses 40,000 Of 2010-11 1,11,500 Salary to staff Of 2012-13 1,13,000 Of 2011-12 32,000 Presents from clients 24,000 Of 2012-13 11,000 Interest free loan from a Expenses in respect of let out client for purchase of a car 2,38,000 property [municipal tax : Rs. Winnings from-m lottery 46,000 2,000; repairs Rs. 1,000 and Interest from UTI (received insurance Rs. 3,000] 6,000 on September 11, 2011) 12,000 Car purchased on December Rent of let out property 60,000 10, 2011 2,40,000 Share of income from a firm 15,000 Repairs of office 12,000 Interest on loan 10,000 Income tax payment 2,000 Life insurance premium 8,000 Balance C/d 2,77,400 13,62,400 13,62,400 Car is partly used for official purposes (40%) and partly for private purposes (60%). Compute the professional income of X for the assessment year 2012-13.
(13) X, (age 32 years), a lawyer, who maintains books of accounts on cash basis, furnishes the following particulars of his income for the previous year ended march 31, 2012. Receipts and payments Account for the year ended march 31, 2012 Balance B/d 21,000 Purchase of a typewriter 7,000 Fees from clients Car expenses 8,000 Of 2011-12 2,40,000 Office expenses 7,000 Of 2010-11 2,03,000 Salary to staff 18,000 Presents from clients 4,000 Interest on loan 1,000 Loan from a client 8,000 Income tax penalty 2,000 Contribution to PPF 60,000 Purchase of notified bonds of infrastructure company. 42,000 Balance C/d 3,31,000 4,76,000 4,76,000 Notes: (1) 20% of car expenses are attributable towards the use of car for personal purposes. (2) Fees due but outstanding is Rs. 40,000. (3) Depreciation of car is Rs. 3,000
(4) Income of X from other sources is Rs. 1,45,000 (5) X purchased a computer for Rs. 80,000 on March 10, 2011. It is, however, put to use on December 3, 2011 (rate of depreciation 60%) Determine the taxable income and tax liability of X for the A.Y 2012-13. 14) Mr. Bhagawandas is a registered medical practitioner. He keeps his books of accounts on a cash basis and his summarised cash account for the year ended march 31, 2012 is as under. Balance b/d 1,22,000 Cost of medicines 10,000 Loan from bank for private Surgical equipments 8,000 purposes 3,000 Motor car 1 ,20,000 Sale of medicines 25,250 Car expenses 6,000 Consultation fees 1,55,000 Salaries 4,600 Visiting fees 24,000 Rent of dispensary 1,600 Interest on Govt securities 4,500 General expenses 300 Rent from property (not Personal expenses 1,11.800 subject to local taxes 3,600 Life insurance premium 3,000 Interest on bank loan 300 Insurance of property 200 Balance c/d 71,550 Compute his income from profession for the previous year 2011-012taking into account the following further information. (1) one-third of motor car expenses are in respect of his personal use (2) Depreciation allowable on motor car and surgical equipments is 15%.
(15) Shri Ram Prasad is a registered medical practitioner. He has prepared the following income and expenditure account for the year ended march 31, 2012. You are required to prepare a statement showing his income from profession. Income and Expenditure Account for the year ending March 31, 2012 Household expenses 1,20,000 Consultation fees 1,10,000 Car purchased 1,30,000 Visiting fees 1,20,000 Travelling expenses for 4,000 Gains on race (gross) 10,000 private journey 1,000 Share in the sales proceeds of Charity and donation 2,000 ancestral property. 34,000 Income tax 1,000 Profit on sale of securities 6,000 Salaries 2,000 Dividend on shares 5,000 Gift to daughter 8,000 Interest from P.O.S.B A/c 600 Establishment Expenses 7,000 Gifts from Father-in-law 4,000 Surgical equipments 1,000 Interest on Fixed Deposits 1,300 Books (annual publications) 1,200 Life insurance premium 2,000 Wealth tax 1,000 Interest on capital 1,000 Surplus 8,700
2,90,900
2,90,900
Rate of depreciation allowable on car and surgical equipments is 15% and on books (annual publications) is 100%. (16) X is a company secretary and has prepared the following income and expenditure account for the year ended march 31, 2012. Income and Expenditure Account for the year ending March 31, 2012 Office expenses 10,000 Professional fee 70,500 Employees salary 5000 Gift from father in law 5,050 Magazines 600 Dividend 8,000 Personal expenses 17,000 Profit on sale of investment 6,450 Donation to NDF 500 Consultancy fees 50,000 Interest 600 Income tax 13,300 Car expenses 2,000 Net surplus 91,000 1,40,000 1,40,000 You are required to compute his professional income for the assessment year for the assessment year 2012-13 considering the following points. (1) The car is used equally for official and personal purposes. (2) Rs. 1,000 for domestic servant’s salary is included in employee’s salary. (3) X is the owner of a building. Its WDV is Rs. 80,000 on April 1, 2011. The building is used for office purposes. Besides this, furniture having WDV of Rs. 25,000, as on April 1, 2011 is also used for profession.
(17) Sri Nehru is the proprietor of a business. His profit and loss account for the year ended march 31, 2009 is as follows. Profit and Loss Account for the year ending March 31, 2012
Establishments Rent, rates and taxes Household expenses Discount and allowance Provision for bad debts Law charges Advertising Fire insurance premium (for goods) Sales tax Repairs and renewals (nor for business premises) Loss on sale of motor car(used for private purposes) Life insurance premium on the life of his grandson. Wealth tax Interest on capital Audit fees Interest on bank loan Provision for depreciation Provision for income tax Net profit
7,320 2,900 51,730 450 1,200 450 1,550
Gross profit Interest on government securities Rent from house property
1,50,840 5,400 5,400
360 1,450 630 1,800 1,790 740 350 300 1,380 2,500 3,900 80,840 1,61,640
1,61,640 Following further information is given: (1) Actual bed debts written off during the year amounted to Rs. 550. (2) Amount of income tax actually paid during the year is Rs. 4,200. (3) Depreciation allowable is Rs. 1,700 as per income tax rules. (4) Advertisement expenses include Rs. 550 spent on special advertising campaign to open anew shop in market. (5) Law charges are in connection with a trademark. (6) Shri Nehru carries on his business from rented premises, half of which is used as his residence. Rent, rates and taxes include Rs. 2,400 paid as rent of the premises during the year. Compute the business income of Shri Nehru for the A.Y 2012-13. (18) Mr. X, a retailer of Bangalore given the following Revenue Statement for the year ended march 31, 2009. Trading and Profit and Loss Account for the year ending March 31, 2012 Opening stock 90,000 Sales 12,11,500 Purchases 10,04,000 Income from UTI 2,400 Gross profit c/d 3,06000 Other receipts (business) 6,100 Stock 1,80,000 14,00,000 14,00,000 3,06,000 Salary Gross profit b/d 60,000 Rent and rates 36,000 Interest on loan 15,000 Depreciation 1,05,000 Printing and stationery 23,200 Postage and telegram 1,640 Loss on sale of shares (short term) 8,100 Other general expenses 7,060 Net profit 50,000 3,06,000 3.06,000 Additional information: (1) It was found that opening stock of 9,000 and closing stock of 28,000 were omitted from original stack statements.
(2) Salary include Rs. 10,000 paid to his brother, which is unreasonable to the extent of Rs. 2,000 (3) The whole amount of printing and stationery was paid in cash. (4) The depreciation as per profit and loss account Rs. 1,05000 was based on the following information: The WDV of plant and machinery is Rs. 4,20,000. A new plant under the same block of depreciation of 15% was brought on 01.07.2011 for Rs. 70,000. Plant sold during the year on 1.10.2011 was for Rs. 50,000. (5) Rent and rates includes sales tax liability of Rs. 3,400 paid on 07.04.2012. (6) Other business receipts included Rs, 2,200 received as refund of sales tax relating to 2010-10. (7) Other general expenses included Rs. 2,000 paid as donation to public charitable trust. You are required to advice Mr. X whether he can offer his business income us 44AF i.e., presumptive taxation.
Problems of capital gains: (1) X purchases a house property for Rs. 76,000 ob June 30, 1967. The following expenses are incurred by him for making addition/alteration to the house property. Cost of construction of first floor in 1975-76 Rs. 1,10,000 Cost of construction of second floor in 1983-84 RS. 3,40,000 Alteration/reconstruction of the property in 1992-93 Rs. 2,90,000 Fair market value of the property on April 1, 1981 is Rs. 4,50,000. The house property is sold by X on June 15, 2011 for Rs. 69,50,000 (expenses incurred on transfer RS. 10,000). (2) X purchases a house property on September 1, 1979 for Rs. 2,16,000. FMV of the property as on April 1, 1981 is Rs. 1,70,000. he incurs the following expenses. Construction of a room on the ground floor during 1980-81. Rs. 40,000 Renewals/reconstruction in 1993-94 Rs. 92,000 The property is transferred on march 31, 2012 for Rs. 26,45,000, find out the amount of long term capital gains for the A.Y 2012-13. (3) X purchases a house property on September 8, 1979 for Rs. 81,000 (brokerage paid : 1%) for his own residence. On April 4, 1985, he enters into an agreement to sell the house to A for Rs. 4,50,000 (after receiving an advance of Rs. 20,000). On A’s failure to pay the balance within the stipulated period of 35 days, X forfeits the advance money. X dies on October 12, 1985and as per his will the property is given to Mrs. X. Mrs. X enters into an agreement on January 13, 1991 to sell the property to B after receiving an advance of Rs. 80,000 and on B’s failure to pay the balance within 2months, as per the agreement, the advance money is forfeited by Mrs. X. Mrs. X ultimately sells the property to Y on April 29, 2011 for Rs. 12,90,000(brokerage pair ½ %). Find out the chargeable capital gain for the A.Y 2012-13 on the assumption that the FMV of the property on April 1, 1981 is (a) Rs. 60,000 and b) Rs. 3,90,000. Discuss whether advance forfeited by X and Mrs. X is chargeable to tax. (4) X purchases a house property for Rs. 26,000 on May 10, 1962. He gets the first floor of the house constructed in 1967-68 by spending Rs. 40,000. He dies on September 2, 1978. The property is transferred to Mrx. X by his will. Mrx. X spends Rs. 30,000 and Rs. 26,700 during 1979-80 and 198586 respectively for renewal and reconstruction of the property. Mrs. X sells the house property for Rs. 21,50,000 on march 15, 2012 (brokerage paid by Mrx. X is Rs. 11,500). The FMV of the house on April 1, 1981 is Rs. 1,60,000. (5) X Ltd purchases a plot of land for Rs. 25,000 on June 6, 1974. The company spends Rs.80,000 on construction of a residential building in 1976-77on the plot of land. In 1979-80, the building is transferred to A Ltd. (a 100% Indian subsidiary company of X Ltd.) for a consideration of Rs. 1,50,000. FMV of the building on April 1, 1981 is Rs 2,00,000. A Ltd sells the building for Rs. 15,96,000 on May 10, 2011. Find out the capital gain chargeable to tax for the assessment year 201213. (6) X purchases a property on april 1, 1976 for Rs. 95,000. He enters into an agreement for sale of the property to A on November 1, 1983 and receives Rs. 10,000 as advance. A could not, however, keep his promise and advance of Rs. 10,000 given by him is forfeited by X. Later on e gifts the property to his friend Y on May 15, 1985. The following expenses are incurred by X and Y for renewal of the property. Addition of two rooms by X during 1978-79 at a cost of Rs. 25,000 Addition of first floor by X during 1983-84 at a cost of Rs. 40,000 Addition of second floor by Y during 1990-91 at cost of Rs. 1,15,000 FMV of the property on April 1, 1981 is Rs. 1,15,000. Y enters into an agreement to sell the property for Rs. 8,50,000 to B on April 1, 1993 after receiving an advance of Rs. 50,000. B could not pay the balance within the stipulated time of two
months and Y forfeits the advance of Rs. 50,000 as per the agreement with B. Y ultimately finds a buyer in C to whom property is transferred for Rs.12,75,000 on December 1, 2008. Compute the capital gains chargeable to tax for the A.Y 2012-13. (7) X sells the following capital assets during the previous year 2011-12. Non-listed shares House property (Rs) (Rs) Sale consideration 24,00,000 6,80,000 Year of acquisition 1992-93 1985-86 Cost of acquisition 2,90,000 18,000 Cost of improvement in 1991-92 -----70,000 (8) A company (a partnership firm) sells a commercial building on may 10, 2011 for Rs. 14,47,500. From the data given below, find out the income under the head capital gains for the assessment year 2012-13. Cost of plot of land (acquired in 1984-85) Rs. 50,000 Cost of construction (incurred in 1985-86) Rs. 1,70,000 Cost of additional construction (incurred in 1989-90) Rs. 20,000 Expenditure on transfer. Rs. 2,500 (9) X purchases the following capital assets: Assets Year of purchase Cost FMV on 01.04.1981 Gold 1974-75 20,000 60,000 Shares in A Ltd (unlisted) 1979-80 1,10,000 70,000 X dies on August 5, 1997 and as per his will these assets are transferred to his son B. B sells these assets on June 5, 2011 for a total consideration of Rs. 11,50,000 (gold Rs. 7,40,000 and shares Rs. 4.10,000). Find out the amount of capital gains chargeable to tax for the A.Y 2012-13. (10) X and Y form a partnership firm. Soon after the formation of the firm X brings on July 10, 2011, the following assets as his capital contribution. Gold (Rs) Silver (Rs) Fair market value on the date of transfer by X to firm 5,40,000 72,000 Amount recorded in the books of accounts 6,00,000 50,000 Actual cost 30,000 12,000 Year of acquisition 1984-85 2006-07 Rs. 6,50,000 is credited in the capital account of X in the firm. Is X chargeable to tax? (11) X and Y are two partners of a firm: A Co. On January 1, 2009, B joins the firm and brings shares in a company as his capital contribution. FMV of these shares on January 1, 2009 is Rs. 86,000, where as amount credited in B’s account is Rs. 2,90,000. Assuming that cost of acquisition in 1983-84 of these shares is Rs. 45,000, find out the amount of chargeable capital gains for the A.Y 2009-10. (12) X, Y and Z are three partners of a firm. On March 10, 2012, the firm is dissolved. The following assets are distributed to partners. Residential Listed Govt Car (taken by Z) house (taken by Securities (taken Rs. X( Rs. by Y) Rs. FMV on March 10, 2012 26,60,000 50,000 30,000 Agreed value as per dissolution deed 11,70,000 46,000 32,000 Cost of acquisition 40,000 5,000 ----Cost of acquisition as per section 50 (WDV) -----------8,000 Year of acquisition 1949-50 1993-94 1983-84 FMV on April 1, 1981 3,00,000 N.A N.A Determine the amount of chargeable capital gains for the A.Y 2012-13, (13) A Co. (a firm which deals in chemical goods and has three partners: X, Y and Z) acquires gold on ay 10, 1982 for Rs. 40,000. this is taken over at the time of dissolution by Y on March 31, 2009. Though on march 31, 2009 its market value is Rs. 3,60,000, agreed value as per the dissolution deed is Rs. 2,40,000. Determine the amount of capital gains chargeable to tax for the A.Y 2009-10. (13) Mr. Keshav Deo forms a partnership firm with Mr. Bal Deo and Mr. Satya Deo on 1stjune 2008 for the purpose of starting a manufacturing business. Mr. Keshav Deo transferred the under mentioned assets to the firm as his capital contribution.
Buildings (Rs)
Ornaments of gold and silver (Rs)
Shares (Rs)
FMV on the date of transfer by Keshav Deo 20,00,000 8,00,000 4,00,000 Amount recorded in the books 25,60,000 12,50,000 10,00,000 Date of acquiring these assets 01.03.1940 15.05.2006 10.12.206 Cost of acquisition 2,000 4,00,000 2,50,000 FMV as on April 1, 1981 2,00,000 ---------Mr. Keshav Deo deposits Rs. 9,30,000 on 30.04.2009in capital gains account scheme in SBI for claiming the exemption u/s 54F (he does not own any residential house). He purchased a house on 15.05.2010 for Rs. 6,20,000 by withdrawing from the deposit account. Compute the taxable amount of capital gains for the A.Y 2009-10 and 2011-12. (14) Residential house property situated at Delhi. X (Rs) Y (Rs) Date of Transfer July 10, 2008 September 19, 2008 Date of purchase October 6, 1984 April 10, 1983 Sale consideration 20,00,000 17,50,000 Cost of acquisition 50,000 90,000 Expenses on transfer 10,000 6,000 To get the exemption u/s 54, the following residential house properties are purchased by X and Y at Noida Date of purchase December 20, 2008 March 1, 2008 Cost of acquisition 2,00,000 16,00,000 X and Y transfer their house properties at Noida as follows Sale consideration 2,90,000 16,85,000 Date of transfer April 10, 2010 May 20, 2010 Find out the capital gains chargeable to tax in the hands of X and Y for different Assessment years. (15) X and Y give the following information. Residential house property situated at Kolkata X (Rs) Y (Rs) Date of Transfer Date of purchase Sale consideration Cost of acquisition Expenses on transfer Amount deposited in capital gains accounts scheme on July 20, 2009 To get the exemption u/s 54, the following residential house properties are purchased by X and Y at Chennai by withdrawing the amount from deposit account Date of purchase Cost of acquisition
December 30, 2008 June 30, 1992 35,00,000 2,00,000 40,000
September 05, 2008 April 26, 1986 27,50,000 74,000 12,000
21,00,000
12.00.000
June 20, 2010 15,00,000
March 1, 2010 9,00,000
Find out the following in the case of X and Y (1) capital gains chargeable to tax for different Assessment years (2) X does not want to purchase or construct another property, what is the earliest date when he can withdraw the unutilised amount from the deposit account. (3) Is it possible to take back the exemption given u/s 54 in a subsequent year?
(16) X sells agricultural land situated within the municipal limits of Calcutta for Rs. 34,00,000 on july 4, 2008,which was purchased by him on march 1, 1986 for Rs. 4,00,000. On July 15, 2009,he purchased agricultural land in rural area for Rs. 4,30,000 and deposits Rs. 10,80,000
in a deposit account for availing exemption u/s 54B. he purchased another agricultural land (situated within the limits of Delhi Municipal Corporation ) on June 30, 2010 for Rs. 8,47,000 by withdrawing from the deposit account. Amount left in the deposit account is withdrawn on July 10, 2010. The agricultural land in the rural area is transferred on April 1, 2011for Rs. 4,90,000 and the land in Delhi is transferred on July 17, 2011 for Rs. 8,70,000. Determine the amount of capital gain. (17) X sells agricultural land in municipal limits of Delhi for Rs. 6,00,000 on August 13, 2008 which was acquired by him in 1920. FMV of the land on April 1, 1981 was Rs 40,000. To avail exemption under section 54B, he deposits Rs. 5,10,000 on July 31, 2009 in a deposit account. By withdrawing from the deposit account, he purchases agricultural land on august 15, 2010 for Rs. 4,45,000. Determine the amount of capital gains chargeable to tax for the A.Y 2009-10 and 2011-12. Does it make any difference if the land was sold on August 13, 2008, is situated in rural area? (18) X Ltd., a manufacturing company, purchases a factory building on may 6, 1998 for Rs. 20,00,000 (prior to this the company used the same building as a tenant for about 5 years). The building is compulsorily acquired by the Government on April 20, 2008 for which a sum of Rs. 60,00,000 is paid as compensation on march 14, 2009. compute the amount of capital gains chargeable to tax for the A.Y 2009-10 taking into account the following information:a. On April 1, 2008, the company owns two buildings (rate of depreciation: 10%) one of which is acquired by the Government during 2008-09. The depreciated value of the block on April 1, 2008 is Rs. 21,35,000. b. The company purchases a factory building on April 6, 2009 for Rs. 15,00,000 . Does it make any difference if the factory building is purchased on March 31, 2009? (19) On November 2, 2008, X sells gold for Rs. 11,85,000 (cost of acquisition on march 10, 1993 : Rs. 1,05,000). Expenses on purchase and transfer are Rs. 100 and 200, respectively. On may 1, 2009, he acquires bonds of National Highways Authority of India (investment being Rs. 5,00,000). These bonds are redeemable after 42 months. Find out the amount of exemption under section 54EC. (20) X sells a commercial house property on march 10, 2009 for Rs. 9,40,000 (indexed cost of acquisition : Rs. 2,00,000). On April 17, 2009, he purchases the following assets; a. Commercial house property : Rs. 6,00,000; b. Bonds of Rural Electrification Corporation (redeemable on may 10, 2013) : Rs. 3,40,000. Find out the amount of capital gains chargeable to tax for the Assessment Year 2009-10. (21) X Ltd. sells the following assets Agricultural land
Bonus shares House property (unlisted) (let out) Date of sale January 31, 2009 November 7, 2008 March 25, 2009 Date of acquisition May 9, 1993 April 4, 1983 June 6, 1982 Sale consideration 9,00,000 2,50,000 5,40,000 Purchase consideration 70,000 nil 1,00,000 The agricultural land is situated in an urban area and used for agricultural purposes since 1993. X Ltd. invests in the following assets on April 2, 2009:(a) Bonds of NHAI (redeemable on June 1, 2012): Rs. 4,00,000. (b) Non-convertible debentures (redeemable on may 10, 2016) of the Rural Electrification Corporation Rs. 5,00,000. (c) Agricultural land: Rs. 75,000. Find out the capital gains chargeable to tax.
(22) X and Y give the following information (they do not own any residential house property)Transfer of Gold:
X (Rs) Y (Rs) Date of Transfer May 10, 2008 February 15, 2008 Date of purchase June 23, 1982 June 18, 1981 Sale consideration 36,55,000 13,14,000 Cost of acquisition 3,00,000 90,000 Expenses on transfer 55,000 14,000 To get the exemption u/s 54F, the following residential house properties are purchased by X and Y at Pune Date of purchase May 12, 2008 January 3, 2009 Cost of acquisition 27,00,000 6,50,000 X and Y transfer their house properties at Pune as follows Sale consideration 30,00,000 14,70,000 Date of transfer June 29, 2010 January 1, 2012 Find out the capital gains chargeable to tax in the hands of X and Y for different Assessment years. (23) X sells (non-listed) shares in a private company on July 10, 2008 for Rs. 8,05,000 (cost of acquisition on June 15, 1984 :Rs. 60,000, expenses on sale : Rs. 5,000). On July 10, 2008he owns one residential house property. To get the benefit of exemption under section 54F, X deposits on may 30, 2009 Rs. 6,00,000 in Capital Gains Accounts Scheme. By withdrawing from the Deposit Account, he purchases a residential house property at Delhi on july 6, 2010 for Rs. 4,80,000. Ascertain; (a) The amount of capital gain chargeable to tax for the A.Y 2009-10. (b) Tax treatment of the unutilised amount. (c) When can he withdraw the unutilised amount; and (d) What X has to do to ensure that the exemption under section 54F is never taken back? (24) X purchases 1,000 (non-listed) shares in Y Ltd. on august 16, 1990 for Rs. 8,000. on may 17, 1992, he gets 500 bonus shares. On October 20, 2007, he acquires 1,500 right shares at the rate of Rs. 11 per share. He sells 3,000 (non-listed) shares in Y Ltd. on February 12, 2009 at the rate of Rs. 110 per share (brokerage on sale : 1%). He owns one residential house property. He purchases a residential house on June 29, 2009 for Rs. 2,90,000. Ascertain the amount of capital gains chargeable to tax for the A.Y 2009-10. (25) X sells agricultural land situated in an urban area for Rs. 10,31,000 (brokerage paid @ 2%) on march 31, 2009 (cost of acquisition : Rs. 1,05,000 on march 1, 1987 ; it was used for agricultural purposes since 1990). On March 31, 2009, he owns one residential house property. On April 6, 2009, he purchases the following assets; Agricultural land: Rs. 1,50,000; and A residential house property: RS. 5,00,000 Find out the capital gains chargeable to tax for the A.Y 2009-10. (26) X ltd. owns an industrial undertaking at Kanpur which is situated in urban area. As per policy of the state government, the industrial concern is shifted to a rural area. In the process of shifting, the company sells the following assets. Plant and Buildings Furniture Land machinery Rate of depreciation 15% 10% 10% ------Year of acquisition 1977 1978 1976 1975 WDV of the block on 01.04.2008 9,50,000 10,75,000 25,000 ----Cost of acquisition of land (FMV on 01.04.1981 : Rs. 60,000) --------------20,000 Sale proceeds (date of sale June 25, 2008) 47,92,000 88,90,000 17,32,000 60,00,000 Cost of assets acquired during Aprilmay 2009 for the purpose of shifting the undertaking to rural area 30,50,000 4,00,000 3,70,000 50,70,000 Assuming that the industrial undertaking is transferred to rural area by June 15, 2009, ascertain the capital gains chargeable to tax for the A.Y 2009-10. Does it make any difference if the assets are acquired by March 31, 2009. (27) X Co., a partnership firm, owns an industrial undertaking. One of the factories of the undertaking is situated within the municipal limits of Indore Municipal Corporation. As per policy of the state
government, the factory is shifted to a rural area. In the process of shifting, the firm sells the following depreciable assets. Plant and Factory Furniture machinery Buildings Year of acquisition 1985 1985 1985 Sale proceeds (date of sale June 30, 6,00,000 12,10,000 40,000 2008) Cost of acquisition (being WDV of the block on 01.04.2008 as per section 50)
3,40,000
7,62,500
Cost of assets acquired during May 2009 for the purpose of shifting the undertaking to rural area
13,00,000
--------
17,000
1,60,000
Determine the amount of capital gain chargeable to tax for the A.Y 2009-10 on the assumption that factory is shifted to rural area before June 15, 2009. Is it possible to reduce the tax liability if plant and machinery and/or furniture are purchased during March 2009? (28) The following information is given by X (29 years and Y (31 years) for the A.Y 2009-10 --X (Rs) Y (Rs) Sale consideration on transfer of equity shares 2,00,000 1,90,000 Indexed cost of acquisition (purchased in 1981-82) 1,43,000 1,35,000 Other incomes 7,50,000 7,70,000 PPF Contribution 20,000 10,000 Find out net income and tax liability of X for the A.Y 2009-10 firstly on the assumption that equity shares are transferred privately to a friend on April 10, 2008 and, secondly, on the assumption that equity shares are transferred on October 10, 2008 in the Bombay Stock Exchange.
Set off and carry forward of losses: (1) X, an individual, submits the following information relevant for the A.Y 2009-10. Profit (Rs.) Loss (Rs.) Salary income 1,42,000 Income from house property House A 1,15,000 House B 1,17,000 House C 1,21,000 Profits and gains of business or profession Business A 1.08,000 Business B 1,23,000 Business C (speculative) 1,11,000 Business C (speculative) 1,23,000 Capital gains Short-term capita gains 1,06,000 Short-term capital loss 1,28,000 Long-term capital gain on sale of building 12,500 Income from other sources Income from card games 1,08,000 Loss from card games 1,07,010 Loss on maintenance of race horses 1,06,000 Interest on securities 1,04,000 Determine the net income of X for the A.Y 2009-10.
(2) X, a resident individual, submits the following information, relevant for the previous year ending March 31, 2009.
Rs. Income from house property 1,30,000 Income from house property House I 106,000 House II (-) 1,25,000 House III (self-occupied) (-) 1,05,000 Profits and gains of business or profession: Business I 1,08,000 Business II (-) 1,06,000 Business III (speculative) (-) 1,32,000 Business IV (speculative) (-) 1,18,000 Capital gains: Short term capital loss (-) 1,30,000 Long-term capital loss on transfer of pref shares 1,27,000 Income from other sources Income from card games 1,13,000 Income from betting 1,12,000 Loss on maintenance of race horses (-) 1,23,000 Income from owning and maintenance of race camels 1,90,000 (3) X, a resident individual submits the following information for the A.Y 2009-10. Business A Loss of the previous year 2008-09 (-) 1,20,000 Brought forward loss of previous year 2007-08 (-) 1,45,000 Business B Profits of previous year 2008-09 1,35,000 Business C (previous year ends on March 31, business discontinued on April 10, 2008) Profits of the period April 1, 2008 to April 10, 2008 Nil Brought forward loss of previous year 2007-08 (-) 1,16,000 Business D (previous year ends on March 31, business discontinued on March 31, 2008) Brought forward loss of previous year 2007-08 (-) 1,04,000 Other income: Interest on debentures held as stock in trade 1,48,000 Interest on bonds held as investment 1,60,000 Long-term capital loss on sale of shares (-) 1,46,400 Income from house property 1,17,000 Dividend (deemed dividend u/s 2(22)(e) on September 3, 2008 held as investment. 1,80,000 Determine the net income of X for the A.Y 2009-10. also calculate the amount of loss which can be carried forward for being set off to the next assessment year. (4) X, a resident individual, submits the following information for the A.Y 2009-10. Business I (discontinued on April 15, 2008) Loss of the period April 1, 2008 to April 15, 2008 (-) 1,01,000 Brought forward loss of previous year 2007-08 (-) 1,21,000 Business II (not in existence during P.Y (2008-09) Brought forward loss of previous year 2007-08 (-) 1,40,000 Business III Loss of the previous year 2008-09 (-) 1,08,000 Brought forward loss of the P.Y 2007-08 (-) 1.22.000 Business IV Profit of the previous year 2008-09 2,30,000 Other incomes/losses: Interest on securities held as stock in trade 1,50,000 Interest on debentures held as investments 1,55,000 Dividend (deemed dividend u/s 2(22)(e) on August 23, 2008 on shares held as stock in trade 4,40,000 Long term capital loss in respect of shares (-) 1,15,100
Determine the net income for the A.Y 2009-10 and also calculate the amount of loss which can (or which cannot) be carried forward.
(5) X, a businessman of Delhi, furnishes the following information relevant for the A.Y 2009-10. Income from house property (computed) 2,60,000 Business profits (before claiming the following deductions) Current depreciation allowance 2,34,000 Unabsorbed depreciation allowance for the P.Y 2002.3 13,000 1993.94 3,500 Unabsorbed business loss of the previous year: 2002.3 9,000 1993.94 4,000 Current scientific research expenditure 1,06,000 Determine the net income of X for the A.Y 2009-10. (6) X submits the following information relevant for the A.Y 2009-10. Interest on non-government securities (held as investments) 1,50,000 Business profits (before claiming the following deductions) Current depreciation allowance 58,000 Current scientific research expenditure 24,000 Unabsorbed business loss of previous years 1982.83 11,000 2000.1 9,000 2003.4 15,000 Dividend on equity shares in A Ltd., an Indian company 1,30,000 Dividend on preference shares in B Ltd., an Indian company 1,40,000 Dividend from a foreign company 1,20,000 Long term capital loss brought forward from the A.Y 2006-07 40,700 Determine the net income of X for the A.Y 2009-10. (7) X submits the following information relevant for the previous year ending March 31, 2009. Profits of business A carried on in India 1,80,000 Loss of business carried on in India (-) 1,30,000 Profits of business C carried on in Canada (income is earned and Received in Canada and business is controlled from Delhi) 1,40,000 Loss of business D carried on in Canada (though profits are not Received in India, business is controlled from Delhi) (-) 1,70,000 Unabsorbed depreciation of Business D 1,52,000 Income from property situated in India 1,12,000 Income from property situated in Canada (rent is received in Canada) 1,17,000 Determine the net income of X for the A.Y 2009-10 on the assumption that he is (a) resident and ordinary resident in India (b) resident and not ordinarily resident in India, and (c) non resident in India. (8) X submits the following particulars of income/loss for the assessment year 2009-10: Rs. Profits of Business I carried on in India 2,42,000 Loss of Business II carried on in India (-) 1,26,000 Profits of Business III carried on in Germany (though income is earned and received in Germany, business controlled from Bombay) 2,17,000 Loss of business IV (exclusive of unabsorbed depreciation allowance mentioned below) carried on in Germany (though income is earned and received in Germany, business is partly controlled from Germany and partly from Canada). (-)1,56,000 Unabsorbed depreciation of the assessment year 2000-01 Business I (-)1,07,000 Business II (-)1,08,000 Business IV (-)2,15,000 income from property situated in India 1,18,000 Income from property situated in Germany (rent is received in Germany) 1,20,000
Determine the net income of X for the A.Y 2009-10 on the assumption that he is (a) resident and ordinary resident in India (b) resident and not ordinarily resident in India, and (c) non resident in India. (9) For the A.Y 2009-10, X (age: 30 years). A non-resident individual furnishes the following information: Income from house property 2,18,500 Business income 1,05,000 Short-term capital gains 4,22,000 Long-term capital gains 2,02,500 Income from owning and maintaining race horses 1,15,000 Income from card games 2,16,000 Besides, X has the following brought forward losses/allowances: Brought forward business loss of the A.Y 2004-05 1,12.000 Unabsorbed depreciation allowance of the A.Y 2002-03 2,06,000 Long-term capital loss in respect of the A.Y 2007-08 2,47,200 Brought forward loss from the activity of owning and maintaining Race horses for the A.Y 2006-07 1,25,000 Speculation losses of the A.Y 2005-06 30,000 Determine the net income of X for the A.Y 2009-10. (10) For the A.Y 2009-10, X (age: 30 years). A non-resident individual furnishes the following information: Income from house property 1.18,000 Business income 1,06,000 Income from speculative business 1,03,000 Short-term capital gains 55,000 Long-term capital gains 1,88,000 Loss from betting (-) 20,000 Winnings from betting 2,13,000 Winnings form horse races 4,23,000 Besides, X wants to set off the following losses/allowances of earlier years Business loss of the A.Y 2002-03 2,14,000 Unabsorbed depreciation allowance of the A.Y 1993-94 2,000 short-term capital loss in respect of the A.Y 2006-07 1,74,000 Long term capital loss of A.Y 2004-05 8,000 Los from betting of the A.Y 1,26,000 Loss from the business of owning and maintaining of race horses of the A.Y 2005-06 2,38,000 Determine the net income of X for the A.Y 2009-10.
Permissible Deductions: (1) X (age: 32 years), posted at Bombay, receives a salary of Rs. 36,000 per month during 2008-09 from A Ltd. His employer contributes Rs. 53,000 towards provident fund. His other allowances are : special allowance Rs. 2,28,000 and medical allowance Rs. 22,200 and 0.5% commission on sales achieved by him. During the year, turnover achieved by X is Rs. 9,60,000. Employer provides a Maruti 800 car with a chauffer for his private and official purposes with effect from November 10, 2008. The amount of interest credited to provident fund on may 10, 2008 @ 11% per annum comes to Rs. 25,660. Income of X from other sources is Rs. 7,54,00. Payments/contributions: Insurance premium paid on own life (sum assured: Rs. 22,500) 6,500 Insurance premium paid on life of mother 3,800 Insurance premium paid on the life of father 500 Insurance paid on the life of Mrs, X (sum assured Rs. 1,00,000) 4,000 Insurance premium paid on the life of his major son (sum assured Rs. 20,000) 3,100 Insurance premium due before March 31, 2009 but paid on April 4, 2009 on own life 1,000 Contribution towards employees’ provident fund 50,000 Contribution to PPF 1,000 Contribution made for participating in unit-linked insurance plan 2,000 Repayment of loan taken from LIC for purchase of house (whose construction is Completed on March 31, 1987 and used by him for his residence) 22,000 Tution fees of X’s son 12,500 Investments in units of a notified Mutual Fund for financing infrastructural facility 2000
Determine the amount of tax liability on the assumption that provident fund is (a) SPF, (b) RPF and (c) URPF. (2) X (age: 45years), a salaried employee, wants to know the amount of tax liability in respect of his following income and investments: Income: Basic salary 11,20,000 Dearness allowance (forming part of salary) 1,06,000 Special allowance 1,19,000 Conveyance allowance (fully utilised for official purposes) 1,06,500 Interest on non-government securities (computed) 1,05,500 Income from house property 2,34,030 Investments: Insurance premium paid on the life of major daughter (sum assured: Rs. 3,00,000) 30,000 Insurance premium on the life of father dependent upon X 15,000 Insurance premium (due but unpaid on March 31, 2009) on own life 18,500 Investments in shares of an infrastructural facility companies 30,000 Contribution towards RPF 22,000 Part payment of cost of construction of a house to the Delhi Development Authority 1,80,000 Contribution towards PPF 21,000
Problems of Assessment of Firms: (1) Profit and loss account of X Co. [a firm of X, Y and Z which satisfies all conditions of sections 184 and 40(b)] for the year ending March 31, 2009 is as follows. Cost of goods sold 7,90,000 Sales 13,50,000 Remuneration to partners Rent of house property (half X 1,50,000 portion) 50,000 Y 1,00,000 Interest on debentures 60,000 Z 55,000 Fringe benefit tax 8,000 Interest to partners @ 13% X 40,000 Y 10,000 Z 60,000 Municipal tax of house property 5,000 (entire property) Other expenses 2,10,000 Net profit 32,000 _________ 14,60,000 14.60,000 Other information: (1) out of other expenses, Rs. 48,500 is not deductible under section 36, 37(1) and 43B (2) On January 15, 2009, the firm pays an outstanding sales tax liability of Rs. 2,922 of the previous year 2006-07. as this amount pertains to the previous year 2006-07, it has not been debited to the aforesaid profit and loss account. (3) Z is not a working partner. (4) The firm owns a house, the ground floor is used for business purposes, and the first floor is given on rent. Municipal tax is paid on May 10, 2009. Find out net income of the firm (and tax treatment of the payments to partners in their hand) for the assessment year 2009-10.
(2) Profit and Loss Account of XY Co. [a firm which satisfies all conditions of sections 184 and 40 (b)] for the year ending March 31, 2009 is as follows. Cost of goods sold 4,05,000 Sales 18,10,000 Remuneration to partners 6,50,000 Interest on company deposits 2,70,000 Remuneration to employees 1,70,000 (being income from other sources) Fringe benefit tax 52,500 Interest to partners 1,20,000 Other expenses 60,000 Sales tax outstanding 1,10,000 Net profit 5,12,500 20,80,000 20,80,000 Other information: (1) out of other expenses, Rs. 25,500 is not deductible by virtue of section 37(1) (2) Outstanding sales tax is paid on October 1, 2009. (3) Interest to partners is not deductible to the extent of Rs. 15,000. Find out the book profit and maximum remuneration to partners which is deductible under section 40 (b) for the assessment year 2009-10. (3) Profit and loss account of A Co. [a firm of chartered accountants which satisfies all the conditions of sections 184 and 40 (b) ] for the year ended march 31, 2009. Expenses 2,88,000 Receipts from clients for tax Depreciation 2,32,000 advice 3,60,000 Remuneration to partners 2,75,000 Audit fees 2,72,000 Interest on capital to partners 55,000 Net loss 2,18,000 8,50,000 8,50,000 Other information: (1) Out of expenses of Rs. 88,000, Rs. 57,250 is not deductible under sections 36 and 37. (2) Depreciation as per section 32 is Rs. 3,23,100. (3) Interest on capital to partners, not deductible under section 40 (b) is Rs. 17,900 (4) Profit and loss account of ABC Co. [a firm of chartered accountants which satisfies all the conditions of sections 184 and 40 (b)] for the year ended march 31, 2009. Expenses 2,10,000 Receipts from clients & Audit Depreciation 1,40,000 fees 5,00,000 Remuneration to partners 3,80,000 Dividend fro foreign companies 1,05,000 Interest on capital to partners 1,25,000 Net loss 2.50,000 855,000 8,55,000 Other information: (1) Out of expenses of Rs. 210,000, Rs. 63600 is not deductible under sections 36 and 37. (2) Depreciation as per section 32 is Rs. 1,27,500 (3) Interest on capital to partners is fully deductible under section 40 (b). (4) The firm satisfies all conditions sections 184 and 40 (b). Find out the amount of net income of the firm for the assessment year 2009-10. (5) Profit and Loss Account of XY Co for the year ending March 31, 2009 is as follows. Cost of goods sold 2,80,000 Sales 7,92,000 Interest to partners 3,91,000 Net loss 2,72,000 Remuneration to partners 1,25,000 Other expenses 2,68,000 10,64,000 10,64,000 Out of other expenses debited to profit and loss account, Rs. 63,600 is not deductible under sections 30, 36 and 37 (1). Interest to partners is not deductible to the extent of Rs. 17,100. The firm satisfies all the conditions of sections 184 and 40(b).
(6) Profit and Loss Account of XY Co (a firm of X, Y and Z) for the year ending March 31, 2009 is as follows. Cost of goods sold 2,69,000 Sales 1,78,000 Remuneration to partners 40,000 Net loss 2,45,000 Interest to partners 64,000 Other expenses 50,000 4,23,000 4,23,000 Out of other expenses of Rs. 50,000, Rs. 18,700 is not deductible under sections 30, 36 and 37 (1). Interest to partners is not deductible to the extent of Rs. 24,000. The firm satisfies all the conditions of sections 184 and 40(b). Find out the amount of net income of the firm for the A.Y 2009-10. (7) X (28 years) and Y (26 years) are two partners of XY Co. (a firm of chartered accountants). On March 31, 2008, there is no provision for payment of salary and interest to partners. On April 1, 2008, the deed of partnership has been amended to provide salary and interest as follows. X Y Salary Rs. 8,000 per month Rs. 12,000 per month Interest 24% per annum 24% per annum The income and expenditure account of XY Co. for the year ending March 31, 2009 is as follows. Office expenses 2,10,000 Receipts from clients 7,00,000 Salary to employees 70,000 Interest recovered from X and Y Fringe benefit tax 42,000 on drawings 3,000 Salary to X 96,000 Salary to Y 1,44,000 Interest on capital to X @ 24% p. a 16,000 Interest on capital to Y @ 24% p. a 19,000 Net profit (shared by X and Y equally as per the terms of partnership deed) 1,06,000 ________ 7,03,000 7,03,000 Other information: 1. Out of office expenses, Rs. 18,800 is not deductible by virtue of sections 30 to 37. 2. During the previous year 2008-09 the firm sells a capital asset for Rs. 7,10,000 (indexed cost of acquisition being Rs. 1,45,865). 3. Personal income and investments of partners are as follows; X Y Interest from Govt securities 4,70,000 4,23,000 Bank interest 6,00,000 1,02,000 Deposit in P.P. F 70,000 45,000 Mediclaim insurance premium 12,000 11,000 Find out the net income and tax liability of the firm and partners for the A.Y 2009-10 on the assuming that a. conditions of sections 184 and 40(b) are satisfied; b. conditions of sections 184 and 40(b) are not satisfied;
(8) X (28 years) Y (32 years) and Z (32 years) are three partners (1:2: 3) of X Co., a firm engaged in manufacturing leather goods. The profit and loss account of the firm for the year ended march 1, 2009 is as follows. Cost of goods sold 13,43,000 Sales 38,41,000 Salary to staff 12,05,000 Long term capital gains Fringe benefit tax 1,10,000 (according to section 48) 1,10,000 Depreciation 2,70,000 Other business receipts 1,10,000 Remuneration to partners Net loss 1,09,500 X 2,04,000 Y 1,20,000 Z 1,44,000 Interest on capital @ 20% p. a X 86,000 Y 1,40,000 Z 8,000 Other expenses 5,40,000 41,70,500 41.70,500 Other information: 1. The firm is not eligible for deduction under section 80-IA/80-IB. 2. The firm has given donation of Rs. 40,000 to a notified public charitable trust which was not debited to the profit and loss account. 3. Salary and interest are paid to partners as per the partnership deed. 4. Personal income and investments of partners are as follows; X Y Z Interest on company deposits 4,20,000 4,05,000 4,46,000 Dividend from foreign companies 1,06,000 1,13,000 1,05,000 Contribution towards Masters Equity Plan 2009 of UTI 1,10,000 1,04,000 1,07,000 Find out the net income and tax liability of the firm and partners for the A.Y 2009-10 on the assuming that c. conditions of sections 184 and 40(b) are satisfied; d. conditions of sections 184 and 40(b) are not satisfied; (9) A, B and C are partners in a firm sharing profit and looses in the ratio of 2:3:5. the profit and loss account of the firm for the previous year ended march 31, 2009 was as follows. Opening stock 3,00,000 Sales 25,00,000 Purchases 18,00,000 Closing stock 5,00,000 Gross profit c/d 9,00,000 30,00,000 30,00,000 1,50,000 9,00,000 Operating expenses Gross profit b/d 1,00,000 Remuneration to partners 80,000 Miscellaneous income A 60,000 B 1,20,000 C Interest to partners @ 12% 14,400 A 28,800 B 43,200 C 5,03,600 Net profit 10,00,000 10,00,000 Other incomes of partners: Interest on Govt securities Interest on company deposits Deposited in PPF
A 20,000 7,000 15,000
B 10,000 2,000 10,000
C 60,000 7,000 15,000
Compute the total income and gross tax liability of the firm and partners assuming that the firm fulfils the conditions of sections 184 and 40(b).
(10) A, B and C are working partners in a firm sharing profits and losses in the ratio of 3:2:1. from the following particulars compute the total income of the firm, tax payable by the firm on its total income and the taxable income of the partners from the firm for the A.Y 2009-10. Sundry expenses 1,69,500 Gross profit 2,00,000 Salaries Interest on securities (gross) 18,000 A 10,000 Dividend (gross) 10,000 B 15,000 Income from house property Commission to C 24,000 (computed) 20,000 Interest on capital @ 20% Capital gain A 6,000 Short-term 8,000 B 8,000 Long-term 10,000 C 1,000 Net profit 32,500 2,66,000 2,66,000 (1) sundry expenses include: a. outstanding sales tax Rs. 800 b. Expenses incurred for obtaining the loan Rs. 1,000 c. Payment of Rs. 22,000 in cash d. Customs penalty Rs. 2,500 e. Interest on loan paid t the wife of partner A Rs. 4,000 f. Depreciation on car at 15% Rs. 25,000 and depreciation on computers at 25% Rs. 10,000. The car was used for personal purposes to the extent of 40%. g. LIC premium on the lives of partners Rs. 10,000 (2) A paid Rs. 3,000 as interest on money borrowed for investment in the firm. (3) Depreciation allowable on computers under Income Tax rules is 60%. (11) Mahesh, Anil and Sunil are partners sharing profits and losses in the ratio of 3:2:1. the profit and loss account of the firm shows the net profit of Rs. 2,00,000 for the year ending march 31, 2009 after adjusting the following items. (a) Items debited to the profit and loss account. • Salary to partners Anil Rs. 50,000 Mahesh Rs. 30,000 Sunil Rs. 30,000 Mr, Sunil is dominant partners and other are active partners. • Interest on capital @ 20% p. a Mahesh 20,000 Anil 10,000 Sunil 15,000 • Rent of a shop building paid to Anil Rs. 25,000 (but its fair rental value is Rs. 20,000). • Interest paid on Mahesh’s loan at 15% p. a Rs. 15,000 • Loss of stock in trade by theft Rs. 5,000. • Repairs include Rs. 5,000 being repairs to buildings hired from Anil for business. • Miscellaneous expenses include Rs. 1,000 being find imposed for late filing of tax returns. (b) Items credited to profit and loss account: • Interest on fixed deposits with banks (net) Rs. 8.878. • Interest on listed debentures of the company (net) Rs. 8,878. • Interest on S.B A/c Rs. 3,680. Compute the taxable business income of the firm for the A.Y 2009-10.
(12) Following is the profit and loss account of R, G and S a partnership firm which is assessed as a firm for the year ended 31.03.2009. Salary to staff 40,000 Gross profit b/d 2,92,000 Business expenses 13,800 Interest on Govt security 15,000 Interest on bank loan 12,000 Interest from bank 13,000 Salary to partners R 48,000 G 36,000 S 30,000 Commission to S 12,000 Provision for bad debts 3,200 Depreciation 26,000 Interest on capital R 9,000 G 6,000 S 6,000 Donation to CM’s flood relief fund 21,000 Share of profit R 37,000 G 25,500 S 12,500 3,20,000 3,20,000 (1) Depreciation allowable as per I.T rules is Rs. 31,000. (2) On 15.12.08 the firm paid sales tax liability of Rs. 20,000 relating to the previous year 200708 (3) Both opening and closing stock of Rs. 81,000 and Rs. 90,000 respectively are undervalued at 10%. (4) The partnership deed provides : a. Partners will share profit and losses in the ratio of 3:2:1. b. Partnership salary payable to R, G and S @ Rs. 4,000, Rs. 3,000 and Rs. 2,500 per month. c. Interest on capital payable to R, G and S @ 12%. d. Commission will be payable to S @ ¼ % of purchase which amounted to Rs. 48,00,000. Compute taxable income of the firm for the A.Y 2009-10.
Problems on assessment of companies (MAT) (1) From the following information compute the tax liability of X & Co, keeping in view the provisions of MAT u/s 115JB for the A.Y 2009-10. Profit and loss account Expenses relating to business 4,50,000 Long term capital gains 1,00,000 I.T paid 20,000 sales 7,00,000 General reserve 40,000 Provision for contingent liability 40,000 Proposed dividend 1,00,000 Balance c/d 1,50,000 8,00,000 8,00,000 • B/F loss as per books of accounts Rs. 1,00,000 • B/F depreciation as per books of accounts Rs. 80,000 • B/F loss under the head capital gains (computed as per I.T Act) Rs. 60,000. • B/F unabsorbed depreciation Rs. 3,00,000
(2) From the following profit and loss account of a company for the previous year 2008-09 and other information, compute tax liability for the A.Y 2009-10. Cost of sales & other expenses Cost of agricultural produce Water supply expenses Expenses of I.U. located in backward state Power generation expenses Provision for losses of subsidiary compay Bad debts provision Provision for sales tax against demand notice Income tax provision against demand notice Dividend paid Penalties under Customs Act Goodwill written off Deprecation Amortization of preliminary expenses Net profit
