Answers to Ca PCC May 2010 Taxation Paper

Computation of Mr. Raman (HUF)

Income From House Property (Sec. 22)

Particulars                                                          Self Occupied        Let Out

Gross Annual Value (sec 23)                                 NIL                       96000

Less : Muncipal Taxes                                            N.A                        NIL

Net Annual Value                                                     NIL                        96000

Less : Standard Deduction U/s. 24 a                   nil                          28800

Less : Interest U/s. 24 b (2:1)                               24000                    12000

Add : Arrears of rent received U/s. 25b (70%)     Nil                          84000

Income from House Property                             (24000)                   139200

sET OFF FROM THE SAME HEAD AVAILABLE UNDER THE SAME HEAD U/S. 70

IHP = 139200-24000 = 115200

PGBP (Sec. 28)

Poultry Farming (not a Agri Income)        400,000

Income from share trading biz.                   88,500

Note : STT is allowed as biz expenditure U/s. 36 (1) XV

Biz. Loss                                                           NIL

This loss cannot be setoff against any other income other than income from such biz. also there is no time limit to carry forward the loss for set off just like unabsorbed depreciation.

Total PGBP = 488,500

IFOS (sec 56)

Income From Horse Race(115 BB)     30,000

Interest on company Deposits               15,100

Rent of furniture (Clubbed u/s. 64)        26,000

TOtal IFOS =  71,100

GTI = 674,800

Less: Deduction

u/s. 80 C

LIC for member = 22,500

Pension fund (available only for Individuals)

PPF for member of HUF = 20,000

Housing loan repayment = 30000

Total = 72,500

TI = 602,300

Tax at normal rate (on 602300-30000) = 75690

Tax at Special Rates (115 BB)                =  9000

Total                                                             =  84690

Add : Education Cess (2+1)%                =    2540

Total Tax Payable                                      = 87,230

Note : The tax slabs as applicable to individuals will only apply to huf and the information about the age of kartha for this matter is irrelevant.

3.A

Opening Capital on 1.4.08 = 600,000

Add : Profits for the year = 300,000

Add : Gift Received   = 200,000

Closing capital as on 31.03.09 = 11,00,000

Note: Since sec. 64 says that where a gift is received  from the spouse income will be clubbed in the proportions of the amount of gift received and invested in the business and capital of the spouse receiving gift as on the first day of the relevant financial year. Gift Received is on 10.04.2008 - no cluubing in FY 08-09

on 1.4.9 porportion of amount of gift received to total capital is 2 : 11

therefore 440,000*2/11 =  80,000 will be clubbed in the hands of  Mrs. John and the rest i.e., 360,000 will be taxable in the hands of mr. John for FY 09-10

Total Tax Payable =

500000* 20.6% = 103000

360000               =  26,780

Total                    = 129,780

Advance Tax payable when tax payable including cess exceeds 10,000/-

and for CG tax has to be paid only when it accrues i.e., in the final quater in the current case.

on or before 15th Sept - 30 % of 26780 = 8034

on or before 15th December - 60 % of 26780 = 8034

on or before 15th March - 100% including CG = 1,13,712

Total                                                                          129780

3. B

PGBP (Sec. 28)

Poultry Farming (not a Agri Income)        400,000

Income from share trading biz.                   88,500

Note : STT is allowed as biz expenditure U/s. 36 (1) XV

Biz. Loss                                                           NIL

This loss cannot be setoff against any other income other than income from such biz. also there is no time limit to carry forward the loss for set off just like unabsorbed depreciation.

Total PGBP = 488,500

What is reasoning for the highlighted part above  ??,

Wont the normal sec 72 provisions apply ?? w8ing for a quick reply............. thanx.....

4. Note for the FY 09-10 due the amendments brought in by the finance act 2009 (2) the rates have changed w.e.f 01.10.2009 and also there will not be any Cess deduction from 01.10.2010 from any payment other than salaries. Also surcharges will be required to be deducted only from payments to Companies.

I) TDS is required to be deducted @ 10% if the payment of insurance agent's commission exceeds rs. 5000 in a financial year. Therefore the company will have to deduct rs. 4500 rs. as TDS from payment made to hari.

II)  The receipient is an individual and as per sec 194 C tax will have to be deducted @ 1% if the payment is made after 30.09.2009 and 2% if its before the said date.

III) The provisions for tds contained in the sections 192 to 195 does not provide for deduction of tax on the amount of discount allowed and therefore there is no need to deduct any tax for the same

IV) from 01.10.2009 gifts in kind are also taxable. For lotteries payment in cash tax has to be deducted upfront and remmited to the government @ 30%. However since kind is also taxable from 01.10.2009 the company must ensure that the tax equal to 30 % of the value of the car is deposited as advance tax and only then the company shall give the delivery of the car to the winner of the lucky dip.

Originally posted by : Himanshu Chhabra
	PGBP (Sec. 28) Poultry Farming (not a Agri Income)        400,000 Income from share trading biz.                   88,500 Note : STT is allowed as biz expenditure U/s. 36 (1) XV Biz. Loss                                                           NIL This loss cannot be setoff against any other income other than income from such biz. also there is no time limit to carry forward the loss for set off just like unabsorbed depreciation. Total PGBP = 488,500         What is reasoning for the highlighted part above  ??, Wont the normal sec 72 provisions apply ?? w8ing for a quick reply............. thanx.....

Thats as per some provisions relating to discountinued operations. Currently my book is not with me will have to refer to the particular provision and only the provide u the section number . i dont remember the section number.

5

I) Manufacture

“manufacture”, with its grammatical variations, means a change in a non-living physical object or article or thing,—

      (a)  resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or

      (b)  bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure;

II)

Revocable transfer of Assets - (Section 61)

All Income arising to any person by virtue of a revocable transfer of assets will be included in the income of the transferor.

        Meaning of transfer

Transfer includes any settlement, trust, covenant, agreement or arrangement.

Meaning of Revocable transfer (Sec. 63):

Transfer will be regarded as revocable if:

a)   The transferor has right of transfer directly or indirectly on the whole or part of the Income or assets. (or)

b)    The transferor has a right to re-assume power directly or indirectly over  the  whole or any part of the income or assets.

When Section 61 will not apply (Section 62)

The Provisions of Sec. 61 shall  not apply if

III)

Deductions for Hotels and Convention Centres in specified areas and Specified Districts having a World heritage Site [Sec.80 ID]

Meaning of specified area -    Territory of Delhi and districts of Faridabad, Gurgaon, Gautam Budh Nagar and Ghaziabad

Specified Districts having a World Heritage Site -  Districts like Agra, Kancheepuram, Puri, Thanjavur, Nilgiri, Gaya, Bhopal, Bellary etc

IV) On the basis of the return that is being filed u/s 139 or in response to notice
u/s 142(1) or under section 148 or under section 158BC or under chapter XII H  the assessee is required to compute the tax payable by him after considering what is paid under any provision of the Act. After a regular assessment under section 143 or section 144 or an assessment under section 158BC has been made, any amount of self assessment tax paid shall be deemed to have been paid towards such regular assessment or assessment, as the case may be.       Self-assessment tax (section 140A) is amended to provide for payment of self-assessment tax based on the return filed u/s 153A. For the purpose of computing the Self Assessment tax relief U/S 90, 90A and 115JAA shall be allowed as a deduction and the same would be considered for computing the Advance Tax payable by the Assessee. (with effect from 1^st April 2007.)

      If any assessee fails to pay the self-assessment tax, he shall be deemed to be an assessee in default.

6

I) As per sec 67 of the finance act 1994, assessable value is consideration (in monetary + non monetary ) terms received before, during and after providing an service. Therefore when there is no consideration the tax payable will also be nil.

II)

5th July

5th october

5th January

31st March

for first 3 dates if the payment is made by electronic transfers then the same will be extended to 6th. However march payment must be made within the month of march

III)

Service tax is Consumption oriented and the place of service is of mose relevance and not where the service provder is registered and therefore the person providing service in New delhi will be liable to service tax dues.

IV)

Altough tax can still be evaded the loss of revenue will be minimized since input will be allowed only on production of proper invoice...

V)

5th July 2010

7.

Taxable amounts = 10,00,000/-  (6 +4 ) Total amounts received

Tax to be paid

Q1 = 600,000*10.3/110.3 = 56029

Q2 = 400000 * 10.3/110.3 = 37353

The excess amount then can be claimed after repayment to the service reciever in two quaters equally  and must also intimate the department in 15 days ofnsuch self adjustments. Also while filling the half yearly ST-3 returns it must be ensured that the proof of payment must be enclosed with the returns.

8.

a

Purchase = 65000/1.04 = 62500

add: other Costs                  =     750

                                                      1750

Total Costs                            = 65000

Add : 5 % profit                      =  3250

Sale Price                                   68250

12.5% thereon = output Vat = 8531

Less ; Input Credit                    2500

Vat Payable                                 6031

b.

If assesses is unable to estimate tax amount correctly, he may apply to provisional assessment, wherein department arrives at the tax liability on service provided before complete assessment.

Attachments to be filed along with return:

1. Memorandum of ST-3A, incase of provisional payment of tax.
2. When payments are made, GAR-7 challans.

   
   

   C.

   An Explanation about Gross Product variant(only RM inputs allowed)

   income variant ( RM + CG based on depreciation allowed)

   Consumption Variant - RM+CG

    

guys just confirm the answers.. please...

thanks for the detailed answers...

@ janani

welcome... ur answers match r they correct???????

Hi

If you've really written all that in your paper, you can be ready for a rank ! They all perfectly right. Except for the part where you've not given credit to the b/f loss from discontinued biz. I don't think there's anything in the Act that stops one from taking advantage of such a loss.

The HUF problem was specifically a tester. I made a good deal of mistakes in that sum, and also on the clubbing problem. Anyways, all the best.

Sangeetha

Pls solve my doubt : In the question of GTI(20 Marks) as per the computation of income from house property the rent was 8000*12=96000 but arrears of rent was 120000 of 12 month so by that we can say that per month is 10000 and can be deemed as fair value.So here the rent taken for computation would be 8000*12 or 1000*12.