Important (types of) Questions
CA Final May 2020 Exam
Most important Questions for May 2020
These shortlisted questions are selected based on past data of examination and future expected questions in exams. These are the Types of questions that student must know well.
We will publish shortlisted TOP 10 questions on our website 60 days before exams. Stay Tuned.
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Selection Process of questions in Top 10
Types / Topics of questions asked in recent 3 years are excluded
Questions with combine interpretation of more then one chapter is included.
Types of questions based on amendments of last 3 years are included.
Old exam types repeated in old exams questions are included.
Questions based on recent legal updates are included.
Questions types of other institutes but unique type are included.
The Question ID Number is used for reference and questions are not serially numbered for the reason it can be easily identified from our study notes.
Important Questions - Part A
10 Mark Type Questions Top - 10
Question 4 (ID 57) (computation of business income)
X Ltd. is engaged in the business of manufacturing, plastic bottle. Its profit and loss account shows a net profit of Rs. 60 lakh for the year, after debiting/crediting the following items –
Rs 5 lakh, being expenses incurred on the travelling of the wife of managing director, who accompanied him on tour to Beijing on invitation of Trade and Commerce Chamber, China.
Rs. 10,000 and Rs. 15,000 paid in cash on October 15, by two separate vouchers to a contractor who carried out certain repair work in the office premises.
One time license fee of Rs. 10 lakh paid toa foreign company for obtaining a franchise on July 1,.
Rs. 5 lakh paid to S Ltd. towards feasibility study conducted for examining proposals for technological advancement relating to existing business, where the project was abandoned without creating a new asset.
Dividend of Rs. 3,50,000 received from a foreign company, in which X Ltd. holds 28 per cent nominal value of equity share capital of the company. Rs. 25,000 spent on earning this income.
Depreciation on tangible fixed assets Rs. 1,50,000.
Rs. 5,00,000 and Rs. 1,50,000, being amounts waived by a bank out of principal and arrear interest, respectively in one time settlement. The loan was obtained for meeting working capital requirements two years back.
Provision for gratuity based on actuarial valuation is Rs. 5,00,000. Actual gratuity paid Rs. 1,50,000 was debited to provision for gratuity account.
The opening and closing stock of the year were Rs, 18,00,000 and 18,72,000 respectively and were undervalued 10 per cent on cost.
Additional information –
Provision for audit fee of Rs. 1,00,000 was made in the books of the last year , without deducting tax at source. Such fee was paid to the auditors in September, after deducting tax under section 194J and the tax so deducted was deposited on October 7 afte the due date of filing of return of income.
During the year, the company purchased 5,000 shares of RK Private Ltd. at Rs. 20 per share. The fair market value of such shares on the date of transaction was Rs. 40 per share.
Depreciation on tangible fixed assets as per Income-tax rules : Rs. 1.75 lakh.
A debt of Rs. 8 lakh was claimed as bad debt in the previous year 2013-14. But the assessing Officer allowed only Rs. 4 lakh as bad debt in the previous year. Rs 3 lakh was recovered ultimately in respect of the debt during year. The effect of recovery of bad debt was not given in the books of account.
Compute the total income, giving the reasons for treatment of each item. Ignore MAT provisions.
Question (corporate taxation) (ID 04)
Netherlands oil Corporation is a Foreign Company engaged in the exploration of Oil and Gas in all countries including India. In respect of its Indian Business, the company has prepared the Profit and Loss Account in accordance with Part II and III of Schedule VI to the Companies Act, 1956 and such Profit and Loss Account for the previous year shows a Net Profit of Rs. 65 lakhs. The Net profit from activities in all other countries stands at Rs. 550 lakhs. The company informs that while arriving at the Net Profit as indicated above in respect of Indian business, the following debits / credits have been made in its Profit and loss Account.
| Credits to the Profit and Loss Account | Rs. In Lakhs |
(i) | Net agricultural income in India | 16 |
(ii) | Share of Profits from a firm engaged in business in India | 15 |
(iii) | Amount withdrawn from Reserve created few years back (book Profit was not increased by the amount transferred to such reserve) | 3 |
(iv) | Profits from an Industrial Undertaking covered and qualified for deduction under section 10B of Income – tax Act, 1961 | 30 |
(v) | Profits from an Industrial undertaking covered and qualified under section 80-1C (in the state of Sikkim) of Income – tax Act, 1961 | 6 |
| Debits to the Profit and Loss Account | Rs.(in lakhs) |
(i) | Expenditure relating to 10 B undertaking | 12 |
(ii) | Depreciation for current year under Companies Act, 1956 | 24 |
(iii) | Interest to Financial Institutions not paid up to the date of filing the return | 6 |
(iv) | Penalty for infraction of law | 1 |
(v) | Proposed Dividend | 3 |
(vi) | Provision for taxation 1 (Income-tax) + RBD 1 | 2 |
(vii) | Transfer to General Reserve | 5 |
(vii) | Provision for Unascertained liabilities | 2 |
(ix) | Expenditure relating to 80-IC undertaking (in the state of Sikkim) | 5 |
Particulars | Rs. (lakhs) |
Brought forward Book Loss | 12 |
Depreciation allowable under Income-tax rules | 30 |
Brought forward Business Loss and unabsorbed depreciation as per Income-tax law (Loss Rs. 7 lakhs and Depreciation Rs. 10 lakhs) | 17 |
The company has brought forward tax credit from 3 years back Rs. 500,000.
You are requested to compute the total tax liability of the company.
Question (ID 18) (corporate taxation)
The profit and loss account of Indian Branch of Bank of UK, a bank incorporated in United Kingdom, for the year shows a net profit of Rs. 60 crore after debiting/crediting the following items –
Particulars | Rs. in crore |
Depreciation | 10 |
Interest on fixed deposit from which tax was deducted at source under section 194A, but was deposited before due date of furnishing of return of income. | 2 |
Interest on Government Securities accrued but not due | 3 |
Reversal of interest income recognised in the previous year 2 years back in respect of term loan which was classified as substandard asset in that year as per the prudential norms of Reserve Bank of India. The reversal of interest was made on the basis of inspection report of Reserve Bank of India in September. | 0.20 |
Profit on sale of a vacant land situated in Noida. Uttar Pradesh to a company incorporated in New Zealand pursuant to an agreement entered into in UK for which payment was also made in UK | 10 |
Net depreciation on investments under “held for trading” and “available for sale” categories on lower of cost or market price as per the prudential guidelines of Reserve Bank of India | 12 |
Bad debts written off in respect of advances classified as “loss assets’. | 13 |
Provision for non-performing assets as per prudential norms of Reserve Bank of India. | 120 |
Indian branch’s share of executive and general administration expenses as per debit note raised by the Head Office. | 4 |
Other relevant information –
Interest on Government Securities accrued but not due for last year Rs. 5 crore, which was credited to the Profit & Loss Account for the last year
Depreciation allowable under Income - tax Rules: Rs. 12 crore.
The assessee was allowed deduction of Rs. 10 crore for provision for bad debts under section 36(1)(viia) till last year and it wrote off bad debts for the first time in PY.
Interest on Sub-Standard and doubtful categories of advances not recognised as income as per prudential norms of Reserve Bank of India : Rs. 15 crore.
Land at Noida was acquired by the branch at a cost of Rs. 9 crore (indexed cost 14.58 crore) few years back.
Compute total income and tax payable by the Indian Branch of Bank of UK ignoring the applicability of the provision relating to minimum alternate tax. Give explanation for treatment of each item.
Question (ID 07) (full computation of firm)
M/s HIG, a firm, consisting of three partners namely H , I and G, carried on the business of purchase and sale of television sets in wholesale and manufacture and sale of pens under a deed of partnership executed on 1-4-2004. H, I and G were partners in their individual capacity. The deed of partnership provided for payment of salary amounting to Rs 2,00,000 each to H and G who were the working partners. A new deed of partnership was executed on 1-10-PY which, apart from providing for payment of simple interest @ 12% p.a on the balance standing to the credit of the capital accounts of partners from 1-4-PY. The firm was dissolved on 31-3-PY and the capital asset of the firm were distributed among the partners on 20-4-AY. The net profit of the firm for the year after payments of salary to the working partners and debit /credit of the following items to the profit and loss account was 1,50,000.
(i) | Interest amounting to Rs 1,00,000 paid to the partners on the balances standing to the credit of their capital accounts from 1-4-PY to 31-3-PY |
(ii) | Interest amounting to Rs 50,000 paid to the partners on the balance standing to the credit of their accounts from 1-4-PY to 31-3-PY |
(iii) | Interest amounting to Rs 20,000 paid to the Hindu undivided family of partner H @18% p.a. |
(iv) | Payment of Rs 25,000 towards purchase of television sets made by crossed cheque on 1-11-PY. |
(v) | Rs. 30,000 being the value of gold jewelry received as gift from a manufacturer for achieving sales target. |
(vi) | Depreciation amounting to Rs 15,000 on motor car bought and used exclusively for business purpose, but not registered in the name of the firm. |
(vii) | Depreciation under section 32(1) (ii) amounting to Rs 37,500 of new machinery bought and installed for manufacture of pens on 1-11-PY at a cost of Rs 5,00,000. There was no increase in the installed capacity as a result of the installation of the new machinery. |
(viii) | Interest amounting to Rs 25,000 received from bank on fixed deposits made out of surplus funds. |
The firm furnishes the following information relating to it:
(a) | Closing stock –in-trade was valued at Rs 60,000 as per the method of lower of cost or market rate consistently followed by it. The market value of the closing stock-in-trade was Rs 65,000. |
(b) | Brought forward business loss of 3 years back Rs 50,000. |
(c) | The fair market value of the capital assets as on 31-3-PY was Rs 20,00,000 and the cost of their acquisition was Rs 15,00,000. |
Compute the total income of M/s HIG. You are required to furnish explanations for treatment of the various items given above.
Question (ID 08) (full computation of firm)
X, Y and HUF of Z (represented by Z) are partners with equal shares in profits and losses of a firm, ABC, which is engaged in the production of TV serials and tele-films. Two years back, one partner A retired, but his dues have been settled in the previous year.
The earlier partnership deed did not authorize payment of remuneration or interest to partners. The partnership deed was revised by the partners on June 1, to authorize payment of remuneration of Rs. 1 lakh per month to each working partner and simple interest at 15 percent per annum to X and Y on their capital. X, Y and Z are actively associated with the affairs of the firm. The profit and loss account of the firm for the year ending March 31, shows a net profit of Rs. 10 lakh after debiting/crediting the following:
Interest amounting to Rs. 15 lakh paid to X and Y on the balances standing to their capital accounts from April 1, to March 31,
Remuneration to the partners including partner in representative capacity Rs. 30 lakh.
Interest amounting to Rs. 2 lakh paid to Z on loan provided by him in his individual capacity at the rate of 16 percent per annum.
Royalty of Rs. 5 lakh paid to partner X, who is a professional scriptwriter, for use of his scripts as per an agreement between the firm and X.
Two separate payments of Rs. 18,000 and Rs. 15,000 made in cash on February 7, to P, a hair dresser against his bill for services rendered in January, and two payments of Rs. 19,000 and Rs. 10,000 made in cash on February 7, and February 8, respectively to Q, assistant cameraman against her bill for services provided in January.
Amount of Rs. 5 lakh provided in the books on March 31, as liability for remuneration to S, a film artist and a non-resident. Tax deducted at source under section 195 from the amount so credited was paid on June 3 AY.
Amount of Rs. 6 lakh provided as gratuity for the year on the basis of actuarial valuation. Gratuity paid to retired employees in Rs. 1.50 lakh.
Interest of Rs. 1.20 lakh received on income tax refund under section 244(1A) in respect of two years back.
Mrs. X, Mrs. Y and Mrs. Z are looking after some administrative work of the firm, they are paid 8,000 annually each. They do not possess any professional or technical qualification but in the course of the assessment assessing officer considers the payment as reasonable.
The firm has also provided the following additional information:
The amount due to A, the former partner was Rs. 15 lakh. The dues were settled on September 30, by transferring a plot of land purchased two years back having a book value of Rs. 10 lakh. The difference of Rs. 5 lakh was credited to the partners’ capital accounts in their profit sharing ratio. The fair market value of the plot on the date of transfer was Rs. 16 lakh.
Compute total income of the firm stating the reasons for treatment of each item.
Question (ID 06)
The profit and loss account of the AOP viz. M/s R and S, sharing profit and losses in the ratio of 2:1 for the previous year is as follows:
Cost of goods sold | 42,45,000 | Sales | 51,00,000 |
Remuneration of member R | 1,80,000 | Dividends | 25,000 |
Remuneration of member S | 1,20,000 | Long-term capital gain | 4,40,000 |
Remuneration to employees | 2,70,000 | | |
Interest to R | 48,000 | | |
Interest to S | 36,000 | | |
Other expenses (Includes Retrenchment | 1,60,000 | | |
Compensation Rs. 25,000 paid to employees (in violation of their terms of employment) for | | | |
Shutting down one of line of Manufacturing process during the year.) | | | |
GST outstanding | 30,000 | | |
Net Profit | 4,76,000 | | |
| 55,65,000 | | 55,65,000 |
Additional information is given below:
(1) | Other expenses include the following: |
(i) | Entertainment expenses Rs. 40,000 |
(ii) | Watches costing of Rs. 2,500 each given to 12 dealers who exceed the sales target fixed under sales promotion scheme. |
(iii) | Employer’s contribution to provident fund included in other expenses, amounting to Rs. 6,000 was paid by cheque on 15-11-AY. |
(2) | Rs. 30,000 paid as advance in cash to Mr. Sunder who is supplier of raw material. Mr. Sunder has supplied the material on 21st June of AY and has raised invoice Rs. 68,000 on that date. Balance Payment is made to him in cash on 12th December of AY however in the next year material could not be used in production process and it was shown as closing stock of next year. |
(3) | Outstanding GST was paid on 3-9-PY |
(4) | Other incomes of R and S 9,64,000 and 1,56,000 |
You are required to compute.
(i) Total income of the AOP (ii) Tax liability of the AOP (iii) Tax liability of the members.
Question 3 (Business ID 72) (computation of business income) (Special treatment for companies)
X,Y and Z carried on a business of running hotels in partnership firm. In order to increase its scale of operation and meet its fund requirement, the firm decided to carry on its business through corporate route. For that purpose, a company under the name and style XYZ Hospitality (P.) Ltd. Was formed 2 years back and the business of the partnership firm as a whole was succeeded by the company. The company’s profit and loss account for the year shows a net profit of Rs. 450 lakh after debit / credit of the following items
Interest of Rs. 3 lakh paid to Allahabad Bank on a term loan taken for the purpose of acquiring a land a Bhubaneswar for a new hotel to be set up.
Depreciation charged: Rs. 40 lakh.
Rs. 2 lakh credited on account of waiver of dues obtained from a supplier of the erstwhile firm against supply of certain materials.
Rs. 1.18 lakh being the aggregate of amounts paid in cash to D, a transport contractor, as follows-
Date of payment | Rs. In lakh |
June 5, | 0.15 |
July 20, | 0.21 |
September 20, | 0.22 |
November 3, | 0.26 |
November 5, | 0.36 |
Tax was not deducted at source as D submitted a certificate under section 197(1), which he had obtained from TDS circle of the Income-tax Department.
Rs. 50,000 being proportionate part of the cost of animals (purchased and kept for entertainment of the guests of hotel), is debited in the profit and loss account as amortization of expenditure as per the accounting policy of the company.
Rs. 10,000 is credited on account of sale proceeds of carcass of animal which died during the year.
Provision for bad and doubtful debts: Rs. 12 lakh
Payment of Rs. 25 lakh to some employees as compensation for voluntary retirement, as per scheme.
Foreign exchange fluctuation loss (net) amounting to Rs. 30 lakh arising from restatement of the year end liabilities to foreign suppliers of provisions and beverages as per the requirement of AS-11 of ICAI.
Other information-
Depreciation as per the Income-tax Act: Rs. 65 lakh.
Cost of animal died as referred to in (6) above was Rs. 2 lakh.
Debt of Rs. 4 lakh due from one corporate customer for three months has been written off during the year after giving few reminders by debiting provision for bad and doubtful debts account.
The erstwhile firm was allowed exemption of Rs. 50 lakh under section 47(xiii) in respect of long-term capital assets transferred to the company.
The company’s voting rights till 01-04-PY were held as follows:
X | 40 percent |
Y | 30 percent |
Z | 15 percent |
Others | 15 percent |
During the year, shares constituting 36 percent voting rights are transferred by X to his son-in-law.
Unabsorbed business loss and unabsorbed depreciation of Rs. 10 lakh each have been carried forward from 9 years back.
The company has subsidiary company, PQR Ltd. (a closely held company). During the year the company obtains a temporary loan of Rs. 12 lakh from its subsidiary company. Accumulated profit of the subsidiary company is Rs. 30 lakh at the time of payment of the loan. The loan is repaid by the company before the end of the year.
Compute total income of XYZ (P.) Ltd. indicating reason for treatment of each of the items.
Ignore the provisions relating to the minimum alternate tax.
Problem 5 (ID 62) (Section 36 Other Deductions)
The profit and loss account of East West Bank Ltd. operating in India contains, inter alia, the following particulars:
| Crores |
Profit before taxation | 100 |
Depreciation as per books | 25 |
Depreciation admissible as per income-tax rule | 40 |
Corporation tax disputed by the bank and not paid | 10 |
Bad debts written off | 45 |
Provision for non-performing assets as per prudential norms of Reserve Bank of India | 250 |
Provision for standard assets as per 2 per cent of such advance as per the above norms | 5 |
Net depreciation on investments under “held for trading” and “available for sale” categories calculated on lower of cost price or market price basis as per guidelines of Reserve Bank of India | 30 |
Other information:
Two years back provision for doubtful debts allowed in assessment amounted to Rs. 35 crore only.
The assessment for preceding year resulted in a loss and unabsorbed depreciation amounting to Rs. 30 crore and Rs. 40 crore respectively and the bank was not allowed deduction on account of provision for doubtful debts.
Unrealized interest income not recognized in the accounts in respect of non-performing assets as per assets classification norms of RBI amounts to Rs. 65 crore.
The aggregate average rural advances calculated as per section 36(1)(viia) read with rule 6ABA amounts to Rs. 30 crores.
From the above information compute total income of the bank.
Question 3 (specific computations, company in liquidation) (CG ID 87)
X holds 10 per cent of equity shares of ABC Ltd. (cost of acquisition on April 1, 1969 of 1,500 shares : Rs. 75,000; fair market value on April 1, 2001 : Rs. 80,000). ABC Ltd. goes into liquidation on December 31,. Balance sheet of ABC Ltd. as on December 31, is given below. Determine the net income of (a) the company, and (b) X.
Capital and liabilities | Rs. | Assets and properties | Rs. |
Share capital (15,000 shares of Rs100) | 15,00,000 | Total assets comprising land and building on Which no depreciation is claimed | |
P & L Account | 75,000 | (amount Realized on December 20, | |
General reserve | 8,25,000 | Rs. 1,41,00,000 | |
Sundry creditors | 26,00,000 | And cost of liquidation : Rs.45,000) (acquired On April 1, 1997 : Rs. 43,93,091) | 50,00,000 |
| 50,00,000 | | 50,00,000 |
Question (ID 51)
An Indian company Ximc Private Limited (The Company) profit and loss as per books of account is 30.25 lakhs. Following amounts have been debited and credited to its profit and loss account. Company equity shares consist of 10,00,000 shares of fully paid face value 10 each issued for premium of 30 per share.
The Company has borrowed from Anonymous Lender 10 lakhs. Name and address of the lender is not available. The amount is credited to liability account in balance sheet. The foreign travelling expense for travel of one of the directors for business purpose is 10,000 however officer has considered reasonable air fare and hotel stay for 10 days at 2,10,000. The assessing officer is of the view that it is bogus transactions and requires additions to income.
Additional Information
The Company acquired for 25 lakhs one flat at Baroda, Gujarat for the purpose of Re-sale. However company has decided to give it to one of its directors Mr. Bhardwaj to stay and now it does not have any intention to sale it. Company has converted it in to capital asset on 15th March. FMV of the flat on 15th March is 35 lakhs. However Broker in Baroda has indicated that its Market value on 31st of March is 36 Lakhs.
The company advanced loan of Rs. 28 lakhs to one of its director Mr. Amit Shah on 12 October (holding 25 % shares in company). The accumulated profits on that date is 16 lakhs. The company has not declared any dividends during the year. The loan to the tune of 25 Lakhs have been paid off up to 15 Feb.
The company is habitually executing contract on behalf of Foreign company DIER Inc. The company is duly authorised by DIER Inc for such execution of contract. The income of DIER Inc is Rs. 200,000 out of the execution of such contract through the company.
Question A
You are required to compute (ignore the provision of MAT)
Tax Liability of Ximc Limited.
Tax liability of Mr. Amit Assuming that he has dividend income of 15,00,000 from other Indian companies.
Question B
Assuming that pursuant to resolution plan approved under the Insolvency and Bankruptcy Code, 2016 and considering following additional information you are also required to compute the tax liability of the company. One of the shareholder Mr. Nimish holding 60 % shares in the company has sold his shares to Mr. Jain during the year.
Brought forward loss – as per books of accounts 4 lakhs
Brought forward depreciation – as per books of accounts 3 lakhs
Brought forward business loss from 2 years back – as per income tax act – 60 lakhs
You are required to compute (applying the provision of MAT)
Question C
Assuming company has declared dividend of Rs. 2 each on equity shares on 15 Feb and accumulated profits are 250 lakhs. You are required to calculate dividend tax liability. The company has adjusted the dividend of Rs. 2 payable to Mr. Amit against the loan remain unpaid on 15 Feb.
Question (ID 53)
SDK Ltd. is engaged in the manufacture of textile since 01-04-2010. The company has issued 20,00,000 shares of face value 10 each fully paid up at premium of 20 each. One of the shareholder Mr. Rajesh is holding 500,000 shares in the company. New Pension System Trust covered by 10(44) is holding 100,000 shares in SDK Ltd. Accumulated Reserves of the company is 250 Lakhs. Its Statement of profit and loss for the previous year ended 31st March, shows a profit of Rs. 600 lakhs after debiting or crediting the following items:
Depreciation charged on the basis of useful life of assets as per Companies Act is Rs. 62 lakhs.
Industrial power tariff concession of Rs. 3.5 lakhs, received from State Government was credited to P & L Account.
The company had provided Rs. 25 lakhs being sum fairly estimated as payable with reasonable certainty, to workers on agreement to be entered with the workers union towards periodical wage revision once in every three years.
Dividend received details are as under
From Zahir Inc Incorporated in Singapore in which SDK Ltd is holding 35 % shares 7 lakhs.
From Moxizm Inc Incorporated in Cayman Islands in which SDK ltd is holding 60 % shares 3 lakhs.
From Atul Ltd, Domestic company 21 lakhs.
From RIMS Ltd, domestic company in which SDK ltd is holding 70 % shares 1 Lakh.
Loss Rs. 25 lakhs, due to destruction of a machine worth Rs. 30 lakhs by fire due to short circuit and Rs. 5 lakhs received as scrap value. The insurance company did not admit the claim of the company on charge of gross negligence.
Provision for gratuity based on actuarial valuation was Rs.400 lakhs. Actual gratuity paid debited to gratuity provision account was Rs. 275 lakhs.
The company has purchased 500 tons of industrial paper as packing material at a price of Rs. 30,000 per ton from M/S. Shiv Bramha, a firm in which majority of the directors of SDK Ltd. are partners. The firm’s normal selling price of the same material in market is Rs. 28,000 per ton.
Advertisement charges Rs. 1.5 lakhs, paid by cheque for advertisement published in the souvenir of a political party registered with the Election Commission of India.
Long term capital gain Rs. 4.5 lakhs on sale of equity shares on which Securities Transaction Tax (STT) was paid at the time of acquisition and sale.
Additional information:
Normal depreciation as per Income-tax Rules is Rs. 65 lakhs.
The GST Rs. 11 Lakhs collected from its customers was paid by the company on the due dates. On an appeal, the High Court directed the sales tax department to refund Rs. 4 Lakhs to the company. The company in turn refunded Rs. 3 lakhs to the customers from whom it was collected and the balance Rs. 1 lakh is still lying under the head “Current Liabilities”.
SDK limited has given loan of 25,00,000 on 16th May to M/s Adinath a Registered Firm in which Mr. Rajesh is partner for 40%. M/s Adinath has repaid Loan to extent of 23,50,000 up to 12 September. SDK limited has declared the dividend to its shareholder at Rs. 1.9 per share on 12 September.
You are required to:
Compute the total income, tax liability and dividend tax liability of SDK Ltd. by analysing and applying the relevant provisions of income-tax law.
Compute the tax Liability of Mr. Rajesh on the assumption that his total dividend income from domestic companies is Rs. 17,00,000 and he has received loan from Funjik Inc registered in Thailand in which he his holding 35 % of shares Rs. 12,00,000.
Briefly explain the reasons for treatment of each item. Ignore the provisions relating to Minimum Alternate Tax.
Question (ID 54)
BG (P) Ltd. is engaged in multiple businesses. The Net Profit as per the statement of profit and loss was Rs. 52 lakhs for the year. Company total issued share capital is 9,00,000 shares at face value of Rs. 10 Each as on 01st April. New Pension system trust covered by 10(44) is holding 150,000 shares in the company. Miss Radha is one of the directors of the company holding 250,000 shares.
A scrutiny of the statement of profit and loss revealed the following items which were debited / credited therein:
Share income @ 25% from a partnership firm ABC & Co. of Pune Rs. 9,50,000.
The company paid Rs. 1 lakh as service charges to a call centre for attending the calls of customers and suppliers. Tax was deducted at source on such payment @ 2%.
Expenditure incurred Rs. 8 lakhs for digging of wells near the factory for use by public under Corporate Social Responsibility Scheme as per the Companies Act,2013.
Grant received from State Government for acquisition of generator Rs. 10 lakhs. The generator was acquired on 01.06. for Rs. 35 lakhs. A sum of Rs. 5 lakhs was paid as advance by cash to the supplier of generator. The grant amount received is credited to statement of profit and loss. Depreciation charged on Rs. 35 lakhs@15%.
Note : Assume that the company is not eligible for additional depreciation.
During the year, the company bought textile goods from local suppliers. Cash payment was made exceeding Rs. 10,000 but below Rs. 20,000 in a day to 15 suppliers aggregating to Rs. 2,00,000.
Depreciation debited to statement of profit and loss Rs. 10 lakhs (it includes Rs. 8 lakhs being depreciation on assets revalued).
Provision for deferred tax debited to statement of profit and loss Rs. 6,50,000.
Trade creditors Rs.5,00,000 were outstanding for more than 5 years and there is no business relationship with them. The amount was unilaterally transferred to credit of statement of profit and loss.
Royalty income in respect of patents chargeable under section 115BBF Rs.12,00,000.
Depreciation eligible under section 32 (before considering adjustment of any of the items described above) Rs.12,25,000.
Additional Information :
The assessee executed only one civil construction contract of the value of Rs. 15 lakhs. The contractee withheld 20% of the contract amount which would be released only after 2 years. The amount withheld has not been credited to statement of profit and loss.
On 15 May 1,00,000 equity shares of Rs.10 each was issued for Rs. 25 per share. The fair market value of the shares as per rule 11UA of the Income-tax Rules. 1962 was determined @ Rs. 17 per share.
During the year, the company advanced Rs. 15,50,000 on 12 November to one of the partnership firm M/s RFG in which Miss Radha is having 30 % share. The Loan is repaid to the extent of 14,00,000 up to 15 Jan. The company has accumulated profit of Rs. 250 lakhs.
Miss Radha has visited London for personal trip with her friends for 20 days. The expense debited in her books of accounts is 50,000 which is shown as her personal drawings. However assessing officer has ascertained that Fair amount of Air ticket is 50,000 and 20 days stay is reasonably 500,000.
You are required to compute the total income, tax liability and dividend tax liability for the year stating clearly the reasons for treatment for each of the items given above. The company has declared Rs. 1 per share dividend on 15 Jan. Ignore the provisions of minimum alternate tax.
You are also required to compute the tax liability of Miss Radha.
Important Questions - Part B
6 - 8 Mark Type Questions Top - 10
Question (ID 07) (Dividend tax)
X Ltd is a manufacturing company located in India. Business income of the company for year under section 28 is Rs. 40 lakh. X Ltd holds shares in few companies. Amount of dividend received from these companies and other related information are given below-
Investee companies (i.e companies in which X ltd is a shareholder) | Country of incorporation of investee companies | Shareholding of X Ltd in investee companies (in %) | Dividend received during the previous year | Weather investee companies paid tax on such dividend under section 115-O |
A Ltd. | India | 51% | 40,000 | Yes |
B Ltd. | India | 26% | 50,000 | Yes |
C Ltd. | Country C | 51% | 60,000 | No |
D Ltd. | Country C | 26% | 70,000 | No |
E Ltd. | Country C | 25% | 80,000 | No |
On September 1, X Ltd declares a dividend of Rs. 5 lakh for its own shareholders. Find out income-tax and dividend tax liability of X ltd for the year on the assumption that India has ADT agreement with Country C and as per agreement dividend income is taxable in India and not in Country C.
Question 1 (specific computations, Non resident) (CG ID 46)
Refer this Question in Chapter of Non resident – F51
Mr. N (non resident) purchased shares of Reliance industries on 01-01-2005 by remitting US $. The following data is given.
Cost of acquisition : 5,85,000 (Dated : 1.1. 2005)
Sale price : 9,00,000 (Dated : 1.1. PY)
Expense on transfer : 6,600 (Dated : 28.12. PY)
On 24.04.AY 6,15,000 was invested out of above sale proceeds and it was sold on 18.08.AY for value of 10,50,000.
Date | TT BR | TT SR |
01-01-2005 | 38 | 40 |
28-12-PY | 42 | 44 |
01-01-PY | 39 | 41 |
24-04-AY | 40 | 42 |
18-08-AY | 41 | 43 |
Question 1 (slump sale) (CG ID 20)
Your client, A Ltd. has two industrial undertakings-one engaged in production of audio music CDs and cassettes and the other engaged in production of video CDs. As a restructuring drive, the company has decided to sell its undertaking producing video CDs as a going concern by way of slump sale for Rs. 450 lakhs to new company called T Ltd., in which it holds 75% equity shares. The balance sheet of A ltd. as on 31-3-PY reads as follows: (Rs. In lakhs)
| Audio Unit | Video Unit |
Fixed assets | 150 | 225 |
Debtors | 150 | 112.5 |
Inventories | 75 | 37.5 |
Liabilities | 42 | 75 |
Paid up share capital | Rs. 378 lakhs |
General Reserve | Rs. 222 lakhs |
Share premium | Rs. 33 lakhs |
Revaluation Reserve | Rs. 140 lakhs |
The company set up the video unit on 1-4-2005. The written down value of the block of assets for tax purposes as on 31-3-PY is Rs. 200 lakhs of which Rs. 85 lakhs are attributable to video unit.
Determine the capital gains which would arise to A Ltd. from slump sale;
Suggest modification of the restructuring plan of A Ltd. without changing the amount of consideration so as to make it more tax efficient.
Question 1 (exemptions) (CG ID 24)
X Ltd. located within the corporation limits decided in December-PY to shift its industrial undertaking to non-urban area. The company sold some of the assets and acquired new assets in the process of shifting. The relevant details are as follows:
| | (Rs. In lakhs) |
| Particulars | Land | Bldg. | P/M | Fur. |
(i) | Sale proceeds (Sale effected in March,-PY) | 8 | 18 | 16 | 3 |
(ii) | Indexed cost acquisition | 4 | 10 | 12 | 2 |
(iii) | Cost of acquisition in terms of section 50 | 1 | 4 | 5 | 2 |
(iv) | Cost of new assets purchased in July-PY for the purpose of business in the new place | 4 | 7 | 17 | 2 |
Compute the capital gains of R Ltd.
Question 3 (Penalty) (ID - 11)
For the previous year, the Assessing Officer makes the following observations:
The assessee has purchased on June 3, gold of Rs. 2 lakh for which he is unable to offer any explanation. On his daughter’s marriage, the assessee spends Rs. 12 lakh on May 15, and the assessee fails to explain the source of expenditure.
1. Can the Assessing Officer levy penalty ?
2. Is it possible for the assessee to argue in the penalty proceedings that the aforesaid investment/expenditure have been made out of following additions made by the Department in earlier years.
Assessment years | Additions made | Whether penalty was levied |
B5 | 20,00,000 | Yes only on Rs. 1,20,000 |
B4 | 3,00,000 | Yes only on Rs. 80,000 |
B3 | Nil | - |
B2 | 7,00,000 | No |
B1 | 50,000 | No |
B1 is before year of assessment year (earlier year)
Question 2 (ID 03)
An order of assessment was made by a Deputy Commissioner of Income Tax on 20.3.2018, disallowing, among others, the following claims of an assessee :
| 8,40,000 |
| 1,60,000 |
| 2,00,000 |
| 1,80,000 |
The assessee filed an appeal to the Commissioner of Income Tax (Appeals) against disallowances mentioned against items (i), (ii) and (iii) above.
In the course of the appeal proceedings, it was ascertained that the assessee had paid totally Rs. 16,80,000 as technical fees under a collaboration agreement, but the Assessing Officer after examining the evidence produced, decided that 50% of the payment was capital expenditure. The assessee, in appeal, claimed that the interpretation placed by the Assessing Officer on the agreement was wrong and that the entire payment must be allowed as a deduction. Commissioner (Appeals) accepted this argument and deleted the addition of Rs. 8,40,000 made by the Assessing Officer. He also allowed in full the claim against item no. (ii) and upheld the disallowance of the claim against item No. (iii) above.
Commissioner of Income Tax issued a notice u/s 263 on 20.04.2020 of the Income Tax Act proposing to review the order of the assessment made by DCIT., in regard to the claim of technical fees. He felt that the Assessing Officer must have concluded that the entire payment of technical fees was capital expenditure and to that extent, therefore, the order of assessment was prejudicial to the revenue.
Was the CIT justified in this action? Give reasons for your answer.
Question 5 (SLID 07) (search)
The business premises of Ram Bharose Ltd. and the residence of two of its directors at Delhi were searched under section 132 of the Act by the DDI, Delhi. The search was concluded on 9-8-PY and following were also seized besides other papers and records:
Papers found in drawer of an accountant relating to Shri Krishna Ltd., Mumbai indicating details of various business transactions. However, Ram Bharose Ltd. is not having any direct or indirect connection of any nature with these transactions and Shri Krishna Ltd., Mumbai and its directors.
Jewellery worth Rs. 5,00,000 from the bedroom of one of the director, which was claimed by him to be of his married daughter.
Papers recording certain transactions of income and expenses having direct nexus with the business of the company for the period from 16-4-2011 to date of search. It was admitted by the director that the transactions recorded in such papers have not been incorporated in the books.
You are required to answer on the basis of the aforesaid and the provisions of Act, following questions:
What action the DDI shall be taking in respect of the seized papers relating to Shri Krishna Ltd., Mumbai ?
Whether the contention raised by the director as to jewellery found from his bedroom will be acceptable ?
What presumption shall be drawn in respect of the papers which indicate transactions not recorded in the books ?
Proceedings for how many years shall now be taken up and within which time limit the assessment thereof be completed by the Assessing Officer ?
Can the company move an application for settlement of case as per chapter XIX-A of the Act ?
Problem 4 (Section 36 Other Deductions) (Business ID 31) (Revision / Home work)
Atul Housing Finance Co. Ltd., engaged in the business of providing long – term finance for construction or purchases of houses in India for residential purposes, provides you the following particulars from its accounts for the year and seeks your opinion as to availability of deduction under section 36(1)(viii) and the amount thereof :
Profits from the business computed as per Part D of Chapter IV of the Income – tax Act, 1961, but before claiming deduction under section 36(1)(viii) is 560 lacs.
Paid – up share capital - 500 lacs
General Reserve - 100 lacs
Opening Balance in reserve created u/s 36(1)(viii) - 1,100 lacs
Question (ID 06) (withholding tax)
Indo Krishna Limited an Indian Company has profit as per profit and loss account 80 lakhs after considering the following debits and credits to its profit and loss account.
In order to create an advertisement campaign it appointed a sports person Mr. Tim Paine an Australian cricket team captain to endorse the company’s brand and paid Rs. 400,000. Mr. Tim Paine had come to India for playing the world cup matches in the month of October for 14 days. The amount was paid to Mr. Tim Paine in India.
It has paid to Zombbie Ltd a foreign company on account of transfer of rights of video tapes for use in connection with television and other tapes for use in connection with radio broadcasting Rs. 600,000. The agreement for transfer for right was entered in to Malaysia. This tapes will be used for advertisement broadcasting of the company’s product.
It has taken a premises on hire at Mumbai BKC from Swastik Limited an Indian Company, for which the rent is Rs. 10,00,000 per annum. The rent was remitted to London in HSBC bank account of swastika Limited.
It has appointed an Indian Company Classic Printers Limited as its premier supplier for printed material like letter heads, visiting cards, printed brochures etc. Aggregate payment to classic Printers limited for the printed material during the year is 10,00,000.
It has paid salary to its CEO 18,00,000 per annum, however CEO has paid the advance tax accordingly on his own and filed the return of return of income and tax there on has already been paid adequately.
Tax has not been deducted on the above transactions. You are required to compute the total income of Indo Krishna Limited.
Important Questions - Part C
4 - 6 Mark Type Questions Top – 10
Problem 5 (Depreciation Basics) (Business ID 49)
Compute the quantum of depreciation available under section 32 and any other benefit available in respect of the following items of plant and machinery purchased by X Ltd , which is engaged in the manufacture of textile fabrics
| (Rs. In crore) |
New machinery installed on May 1, | 84 |
New windmill purchased and installed on June 18, | 22 |
Items purchased after November 30, – Lorries for transporting goods and sales deposits Fork-lift-trucks, used inside factory Computers installed inside office premises Computers installed in factory New imported machinery (arrived at Chennai port on March 30, and was installed after 1 week)
| 3 4 1 2 12 |
Except new imported machinery, all other items were installed during the year.
X Ltd has commenced operation during the year.
Question: 04 (ID 04) (concept of mutuality)
A is an association governed by the provisions of Section 44A. The subscription receipts was Rs.60,000. The expenditure in the normal course of its activities was Rs.85,000. Its other income taxable under the Income Tax Act works out to Rs. 75,000. On these facts you are consulted as to:
How A's taxable income will be determined?
In case the association did not have the other income taxable, will there be any difference in the computation of its income?
Question (ID 03)
Prakash, a member in two AOPs, namely, “AOP & Co.” and “Prakash & Akash”, provides the following details of his income:
“AOP & Co”, assessed at normal rates of tax, had credited in his account, amount of Rs. 2,96,000 as salary and Rs. 20,000 as share of profit and 96,000 as interest.
A house property located at Jaipur was purchased on 1.7.2001 with the borrowed capital in “Prakash & Akash” jointly shared equally and occupied by both of them for self residential purposes. Total interest paid for the year on the borrowed capital was Rs. 1,00,000.
Compute the income and the tax liability thereon and support your answer with brief reasons and the provisions of the Act.
Question 8 (ID 032 001) (Private Trust)
Welfare trust is a private discretionary trust, which derived income from the following sources.
Income from House Property | 25,000 |
Interest from Indian Companies | 175,000 |
Other Incomes / Business Income (Net) | 150,000 |
Capital gains - Long term | 30,000 |
What will be the tax liability of the trust ?
Question (ID 032 020) (Charitable Trust)
Varinder Charitable Trust, a charitable Trust registered u/s 12A of the Income Tax Act, 1961 has sold the plot acquired two years back. The purchase price was Rs. 2,00,000. The sale consideration was Rs. 3,60,000. A sum of Rs. 10,000 was incurred in connection with the sale. The Trust acquired English mortgage [worth Rs. 3,10,000] of an Immovable property utilizing the sale proceeds. Is the Trust entitled to exemption u/s 11(1A)?
Question (ID 65) (Charitable Trust)
An institution having its main object as advancement of general public utility received 30 lakhs in aggregate during year from an activity in the nature of trade. The total receipts of the institution, including donations, was 140 lakhs. It applied 85% of its total receipts from such activity during the same year for its main object i.e. advancement of general public utility
1) What would be the tax consequence of such receipt and application thereof by the institution?
2) Would your answer be different if the institutions total receipts had been 150 lakhs (instead of 140 lakhs) in aggregate
3) What would be your answer if the main object of the institution is ‘relief of the poor’ and the institution receives 30 Iakhs from a trading activity, when its total receipts are 140 lakhs and applies 85% of the said receipts for its main object’
Question (Producer Company) (ID 21)
Company P a producer company as per 581A of the companies act, having turn over of 46 crore has the following incomes. You are required to compute the tax liability of the company.
(a) the marketing of agricultural produce grown by the members; - 10 Lakhs
(b) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to the customers in Gujarat who are not the member of company; - 23 Lakhs
(c) the processing of the agricultural produce of the members; - 17 Lakhs
(d) Interest on Bank deposits – 4 lakhs
Ignore the provision of MAT.
Question 1 (Taxation of 112, 111A) (CG ID 09)
R acquires 10,000 equity shares of R Ltd., listed in stock exchanges in India and abroad and a constituent of BSE 500 on 15-3-2013 @ Rs. 2,250 per share. Fair market value of the shares on 31st January 2018 is 1600 per share. He transfers the shares at Rs. 5,000 per share on 31-12-PY. The brokerage and securities transactions tax deducted were at 0.5% and 0.1% respectively. Examine the liability of R to income tax. Will your answer be different, if instead of selling the shares in the market R privately transferred the shares to his son at the same price ?
Will your answer be different if Fair market value of the shares on 31st January 2018 is 3600 per share or may be even 6600 per share.
Question 2 (specific computations, advance money) (CG ID 15)
R received a house in may, 2010 by way of Gift from Mr. G who had purchased the same in April, 1979 for Rs. 12,00,000. The cost of improvements incurred by G were Rs. 2,55,000 in March, 2000 and Rs. 3,40,000 in November, 2008. The fair market value of the house as on 1-4-2001 was Rs. 9,14,000. Before this house was gifted to R, G had received an advance of Rs. 3,00,000 in March, 2006 towards sale of this house from S but the sale did not materialize and the advance was forfeited by G. the house was sold by R in March-PY for Rs. 48,00,000. Ascertain the capital gains chargeable to tax.
Question 3 (exemptions) (CG ID 23)
R owns a residential house which is self-occupied and also a house plot. He sells the house on 31-1-PY and the house plot on 15-2-PY for Rs. 20,00,000 and Rs. 9,00,000 respectively. The house was purchased on 15-1-2005 for Rs. 4,00,000 and the plot on 30-5-2005 for Rs. 2,00,000. R has purchased a new residential house on 25-4-PY for Rs. 15,00,000. Compute the income chargeable under the head ‘Capital gains’.
Question 1 (exemptions) (CG ID 28)
Mrs. X, resident woman, transfers a house property (received without consideration from her husband in 1991) on January 16,. On the said transaction she earns a long-term capital gain of Rs. 1,01,50,000. She invests a sum of Rs. 50,00,000 in capital gains bonds specified in section 54EC on January 5 out of the advance monies received on account of transfer,. She further invests a sum of Rs. 50,00,000 in the same bonds after 3 months of the first investment in bonds. She has raised Funds of 40,00,000 on the security of above bonds of Value 50,00,000 in the month of March of next year. Her other income for year is Rs. 46,000. Discuss the tax consequence of the above transactions.
Question 1 (exemptions) (CG ID 22)
V, an individual, owned three residential houses which were let out. Besides, he and his four brothers co-owned a residential house in equal shares. He sold one residential house owned by him during the previous year. Within a month from the date of such sale, the four brothers executed a release deed in respect to their shares in the co-owned residential house in favour of V for a monetary consideration. V utilized the entire long-term capital gain arising out of the sale of the residential house for payment of the said consideration to his four brothers. V is not using the house, in respect of which his brothers executed a release deed, for his own residential purposes, but has let it out to another person, who is using it for his residential purposes. Is V eligible for exemption under section 54 of the Income-tax Act, 1961 in respect of the long-term capital gain arising from the sale of his residential house, which he utilized for acquiring the shares of his brothers in the co-owned residential house ? Will the ownership of two more houses by him or the date of sale of the residential house and non-use of the new house for his own residential purposes disentitle him to exemption ?
Question 1 (Companies in liquidation) (ID – 10)
Imperial Chit Funds (P) Ltd. was under liquidation. On completion of assessment the official liquidator informed the I.T.O. that tax dues determined constituted debt provable in the winding up proceedings. I.T.O. however, issued a certificate to the T.R.O. and demanded the tax dues immediately and issued a demand notice. Can the income tax department be treated as a secured creditor' and the amount set aside by official liquidator U/s 178(3)(b) fall outside the area of winding up proceedings? Can the A.O. be entitled to payment of tax demand otherwise than as U/s 530 of Companies Act ?
Question 1 (ID 01)
X Ltd. grows sugarcane to manufacture sugar. Data is as follows
| Rs. |
Cost of cultivation of sugarcane | 6 |
Market value of sugarcane when sugarcane is transferred to factory | 9 |
Other manufacturing cost | 6 |
Sales turnover of sugar | 22 |
Salary of managing director who looks after agriculture as well as non-agricultural operations of the company | 2 |
You are required to find out the agricultural income of the company.
Question 5 (Revision / Home work)
X Ltd. has an undertaking (Unit X) in Special Economic Zone (SEZ) and another undertaking (Unit Y) in Free Trade Zone (FTZ) for manufacturing of computer software. It furnishes the following particulars of its 2nd year of operations ending March 31, 2018 –
Rs. (in Lakh)
| Unit X | Unit Y |
Total Sales | 180 | 120 |
Export sales (inclusive of Rs. 10 lakh onsite development of computer software outside India by Unit X) | 120 | 10 |
Profit earned (after claim of bad debts under section 36(1)(vii) in Unit X) | 63 | 36 |
Plant and machinery used in business has been depreciated at 15 percent on straight line method (SLM) basis and depreciation of Rs. 9 lakh was charged to Profit and Loss Account in the proportion of sales during the previous year. Rs. 100 lakh were realized out of export sales in time and balance of Rs. 20 lakh becomes irrecoverable due to bankruptcy of one of the foreign buyers in Unit X.
Compute the deduction under section 10AA and taxable income of X Ltd. for the assessment year 2018-19.
Question 2 (SLID 019) (Dividend and bonus stripping)
R, an individual resident in India bought 1,000 equity shares of Rs. 10 each of A Ltd at Rs. 50 per share on 30.05. He sold 700 equity shares at Rs. 35 per share on 30.9 and the remaining 300 shares at Rs. 25 per share on 20.12. A Ltd declared a dividend of 50% the record date being 10.08. R sold on 01.02 a house from which he derived a long term capital gain of Rs. 75,000. Compute the capital gain.
Question (GAAR and Tax Avoidance) (ID 07)
A Ltd. is incorporated in country F1 as a wholly owned subsidiary of company Y Ltd. which is not a resident of F1 or of India. The India-Fl tax treaty provides for non-taxation of capital gains in India (the source country) and country F1 charges no capital gains tax in its domestic law. Some shares of X Ltd., an Indian company are acquired by A Ltd in the year after date of coming into force of GAAR provisions. The entire funding for investment by A Ltd. in X Ltd. was done by Y Ltd. These shares are subsequently disposed of by A Ltd after 5 years. This results in capital gains which A Ltd. claims as not being taxable in India by virtue of the India-F1 tax treaty. A Ltd. has not made any other transaction during this period. Can GAAR be invoked ?
Question 1 (ITA) (SLID 16)
The assessment of B, an individual, for the year was made under section 143(3) of the Income-tax Act, 1961 on 18.3. and the penalty was initiated. The assessment has become final and is not the subject-matter of an appeal or revision. The Assessing Officer issued a show cause notice for levy of penalty to B on 25.3. B furnished a reply to the said notice on 30.3. There was a change in incumbent and the Assessing Officer, who made the assessment and issued the show cause notice, was succeeded by another. The successor-Assessing Officer, suo moto, issued a notice under section 129 to B on 20.9. B did not respond to the said notice. The successor-Assessing Officer passed an order on 24.10 levying penalty. Examine the validity of the order of penalty passed with reference to the aspect of limitation.
Question 1 (power to call for documents, summons etc.) (SLID 15)
An Assessing Officer entered a hotel run by a person, in respect of whom he exercises jurisdiction, at 8 p.m. for the purpose of collecting information, which may be useful for the purposes of the Act. The hotel is kept open for business every day between 9 a.m. to 9 p.m. The hotelier claims that the Assessing Officer could not enter the hotel after sunset. The Assessing Officer wants to take away with him the books of account kept at the hotel. Examine the validity of the claim made by the hotelier and the proposed action of the Assessing Officer with reference to the provisions of section 133B of the Income – tax Act, 1961.
Question (ID 06)
A company submitted the return of income for assessment year on 10th July, AY. The Assessing Officer served a notice u/s 143(2) on the company on 14th August, AY in order to make assessment under section 143(3). Thereafter, on 1st September, AY, the Assessing Officer issued an intimation under section 143(1). Such intimation shows a demand for Rs.10,500 towards tax and interest. The company argues that the issue of intimation under section 143(1) is bad in law. Discuss.
Question 4 (ID 04) (Revision / Home work)
R Bros., an AOP, had submitted its return of income on 31-7-AY showing an income of Rs. 47,200. No assessment was made on the return. Two of the members of the AOP had been assessed in respect of the share income from the AOP. In August of AY , the audit party points out of the Assessing Officer that R Bros. have claimed excessive depreciation of Rs. 3,000. The Assessing Officer has issued under section 148 on R Bros. seeking to assess the income of the AOP. Can this be done ?
Question 2 (ID 03)
EIH Private Ltd’s assessment for year was completed under Section 143(3) on last due date of passing order. The company went in appeal on the same day of passing order to the Commissioner (Appeals) and the appeal was decided on 16th August after 4 years, and the appeal effect was duly given by the Assessing Officer on 25th August,. Thereafter, on 1st September, the Assessing Officer noticed a mistake in calculation of depreciation on a particular block of assets, which reduced the income by Rs.1.10 lakh. The assessing officer issued notice under section 154 for the purpose of rectifying the mistake. Is such rectification permissible ?
Question 11 (ID 13)
The Commissioner of Income-tax issued notice to revise the order passed by an Assessing Officer under section 143. During the pendency of proceedings before the Commissioner, on the basis of material gathered during survey under section 133A after issue of the first notice, the Commissioner of Income-tax issued a second notice, the contents of which were different from the contents of the first notice. State with reasoning whether the action of the Commissioner is justified as to the second notice.
Question 04 (ID 23) (Appeals to CIT) (Revision / Home work)
Assessment of Bhajan Ltd. was completed U/s. 143(3) with an addition of 15 lakhs to the returned income. The assessee-company preferred appeal before the Commissioner (Appeals) which is pending now. In this backdrop, answer the following:
Based on fresh information that there was escapement of income for the same assessment year, can the Assessing Officer initiate reassessment proceedings when the appeal is pending before Commissioner (Appeals) ?
Can the Assessing Officer pass an order U/s. 154 for rectification of mistake in respect of issues not being subject matter of appeal ?
Can the assessee-company seek revision U/s. 264 in respect of matters other than those preferred in appeal?
Can the Commissioner make a revision U/s. 263 both in respect of matters covered in appeal and other matters?
Question 05 (ID 15) (Appeals to ITAT / HC)
An assessee, who is aggrieved by all or any of the following orders, is desirous to know the available remedial recourse and the time limit against each under the Income-tax Act, 1961:
passed under section 263 by the Commissioner of Income-tax.
passed under section 272A by the Director General.
passed under section 254 by the ITAT.
Question 05 (ID 21) (Power to stay)
A petition for stay of demand was filed before ITAT by XYZ Ltd. in respect of a disputed demand for which appeal was pending before it, on which stay was granted by the ITAT vide order dated 1.1.2018. The bench could not function thereafter till 1.2.2019 and therefore, the disputed matter could not be disposed off The Assessing Officer attached the bank account on 16.2.2019 and recovered the amount of 15 lacs against the arrear demand of 25 lacs. The assessee requested the Assessing Officer to refund back the amount as it holds stay over it. The Assessing Officer rejected the contention of the assessee. Now the assessee seeks your opinion.
