Kalpesh Classes

Question 7 (Carry forward and set off) (SLID 007) (Revision ​​ / Home work)​​ 

Mr. Madhukant was carrying on proprietary business of speculation in shares, cotton and other commodities. He died leaving behind his widow, a son​​ and a daughter. Three heirs of Madhukant entered into a partnership and executed a partnership deed wherein they agreed to carry on the said business of speculation. In the said speculation business carried on in the name of the M/s MM a partnership firm,​​ profits were earned and the assessee sought to carry forward and set off the losses incurred by the deceased in his proprietary business against the income from the speculation business of the partnership firm. Assessee M/s MM was of the opinion that there​​ was succession by inheritance and, therefore, the assessee is entitled to carry forward and set off the deceased Shri Madhukant’s loss in business against the income.

OR

Smt. Bhanu succeeded to the business of her husband Sri. Bhavesh who died on 10 September. She carried on the business as proprietrix. The business of Bhavesh up to the date of his death resulted in a loss. Smt. Bhanu earned profit in business for the year. Bhanu wants to set off the loss of her husband for the period ending 10 September against her income.

Question 9 (Carry forward and set off) (SLID 013) (Revision ​​ / Home work)​​ 

X provides the following information:

X purchases 20,000 shares of A.Co. Ltd., declares 1 : 1 bonus on January 1, 2003.

X sells 1,000 bonus shares in September of previous year for Rs.1,20,000.

X gets Rs.50,000 on February 12, ​​ being amount​​ due from Y relating to electronic goods supplied by X’s father, which was written off as bad debt by his father 4 years back and allowed as deduction. X’s father died 2 years back.

X’s father has brought business loss relating to discontinued automobile business of 3 years back : Rs.2,00,000; brought forward depreciation relating to the same business : Rs.1,50,000.

Compute gross total income of X.

Question 10 (Carry forward and set off) (SLID 017) (Revision ​​ / Home work)​​ 

From the following data, you are​​ required to work out the total income chargeable to tax and ascertain the tax thereon of X Ltd., a domestic company.:

Special treatment for Firms​​ 

Question 1 (special treatment for partnership firms) ​​ (SLID 011)​​ 

R, S and G are equal partners of a firm. The firms c/f loss was determined as Rs. 78,000. S retired from the firm and P joined on 1-4 of previous​​ year as an equal partner. The firm made a profit of Rs. 84,000 for the previous year but it wants to set off the carried forward loss of Rs. 78,000 of the previous year against this profit. Examine the validity of the firms claim and allocate the shares of​​ R, Sand G.

Problem 2 (special treatment for partnership firms) (ID 12)

X, Y and Z (1:1:2) are three partners of a firm. Brought Forward income of the firm is (-) Rs. 1,30,000 (out of which unadjusted depreciation is Rs. 40,000). On April 30, Z retires from the firm and the other partners carry on the same business. The income of the firm for the year before adjusting of the aforesaid loss and depreciation is Rs. 1,08,000. Compute the net income of the firm after adjustment of loss and depreciation. Assume​​ that salary and interest are not paid to partners.

Special treatment for companies

Question 1 (Special treatment for companies) (SLID 010)​​ 

X (P.) Ltd. has share capital in the form of equity share capital. The shares were held up to March 31, 2003 by​​ four members A, B, C, & D equally. The company made losses/ profits for the past three assessment years as follows:

The above figures have been accepted by the tax department.​​ 

During the previous year ending March 31,2004, A sold his shares to y and during the previous year March 31, 2005, B sold his​​ shares to Z. The profits for past two previous year are as follows:

For the year ending March 31, 2004: Rs.18,00,000 (before charging depreciation Rs.9,00,000)

For the year ending March 31, 2005: Rs.45,00,000 (before charging depreciation Rs.7,50,000)

Compute the taxable income for assessment year 2005-06. Workings must form part of your answer.

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-

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:

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.

Dividend and bonus stripping

Question 1 (SLID 018) (Dividend and bonus stripping)

W purchase 1,000 Units of UTI Rs. 12,500 on 1.4. UTI declares dividend on 31.5 (record date) at Rs. 3 per unit. W sells the entire 1,000 units on 30.9 for Rs. 9,000. You are required to compute the capital loss.

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. ​​ 

Problem 3 (Dividend and bonus stripping) (Revision ​​ / Home work) (ID 21)

X purchases on May 10, 1000 ​​ preference shares of Rs. 10 each in A Ltd. @ Rs. 55.55. On October 20, ​​ he transfers 800 shares @ Rs. 37 per share and remaining 200 shares are transferred on December 20, @ Rs. 20 per share. A Ltd. Declares 50 per cent dividend (record date : August 3,). During previous year, he has generated long term capital gain of Rs. 76,000 on sale of gold.

List of Important Question to be glanced for Revision before exam.

Wishing You all the best for exams.​​