ASSOCIATION OF PERSONS (AOP) |
Question (ID 01)
X, Y, and Z are three members of B & Co. (an AOP). Profit and loss account of the firm for the year ending is as follows:
Cost of goods sold | 1,34,000 | Sales | 4,00,000 |
Interest to the members : |
| Short term capital gain | 2,10,000 |
X | 9,000 | Interest on drawings |
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Y | 27,000 | X | 2,000 |
Z | 35,000 | Y | 1,000 |
Salary to members |
| Z | 3,000 |
Y | 65,000 |
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Z | 70,000 |
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Other expenses | 60,000 |
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Net profit | 2,16,000 |
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Total | 6,16,000 | Total | 6,16,000 |
Other information:
1. The AOP gives a donation of Rs.46,000 to a public charitable trust (not debited to P & L Account) which is eligible for section 80G deduction.
2. Out of other expenses, Rs.26,000 is not deductible by virtue of section 43B.
Find out the tax liability of the AOP and members under the following situations:
Situation 1-
The profit sharing ratio of X, Y and Z is 2 : 3 : 5. Other incomes of members are given below:
| Amount | Nature of income | Investment sections 80C and 80U | PPF contribution |
X | 130,000 | Bank interest | Rs. 6,000 mediclaim | 14,000 |
Y | 206,000 | Interest on Government securities | ------ | 16,000 |
Z | 25,000 | Interest on company deposit | Rs.3,000 mediclaim | 28,000 |
Situation 2 –
The profit sharing ratio of X, Y and Z is 3 : 2: 5. Other incomes of members are given below:
| Amount of income | Donation Paid | PPF deposit |
X | 1,30,000 | 6,000 | 2,000 |
Y | 1,06,000 | 26,000 | 36,000 |
Z | 4,25,000 | 15,000 | 6,000 |
Situation 3 –
One of the members X is a closely – held foreign company and the profit- sharing ratio of X. Ltd. Y and Z
is 5 : 3 : 2. Other income of the members is as follows:
X. Ltd. (foreign company) | Nil |
Y | 32,000 |
Z | 40,000 |
Situation 4 –
From the available information, it is not possible to find out the profit-sharing ratio.
Other income of members is:
| Amount | Nature of income |
X | 40,000 | Bank interest |
Y | 60,000 | Rent (taxable) |
Z | 8,65,000 | Interest on company deposit |
Z | 15,000 | Being 60% share from D & Co. (An AOP which has not paid tax because its taxable income is lower than the basic amount not chargeable to tax.) |
Situation 5 –
It is not possible to determine the profit-sharing ratio of members. One of the members, X is closely held foreign company. Other income of members is as follows:
X Ltd. | 1,17,000 |
Y | 3,60,000 |
Z | 9,30,000 |
Question (ID 05)
Two individuals A & B and one foreign company X Ltd. who are sharing profits and losses in the ratio of 2:2:1 are members of an AOP. The total income of AOP has been determined at Rs. 2,00,000. The separate income of members of AOP was s under.
A | 90,000 |
B | 1,10,000 |
X Ltd. (a foreign company) | Nil |
Compute the tax leviable on the income of AOP.
What will be your answer if instead of X Ltd., C (an individual) had been the member of AOP
Questions 7-12 mark types
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.
Home work
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 |
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Interest to R | 48,000 |
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Interest to S | 36,000 |
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Other expenses (Includes Retrenchment | 1,60,000 |
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Compensation Rs. 25,000 paid to employees (in violation of their terms of employment) for |
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Shutting down one of line of Manufacturing process during the year.) |
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GST outstanding | 30,000 |
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Net Profit | 4,76,000 |
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| 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.
C.A. Kalpesh Sanghavi | Association of Persons -Page | F9-B . 6 |
EXTRA QUESTIONS |
C.A. Kalpesh Sanghavi | Black Money Act -Page | F60-B . 8 |
A M T (Alternate Minimum Tax) |
Question (ID 01) (AMT)
X & Co. is a partnership firm. The firm is eligible for deduction under section 35AD of Rs. 14.00,000 (because of this deduction the firm cannot claim depreciation under section 32 of Rs. 80,000). Business income of the firm before deduction under section 35AD and before depreciation of Rs. 80,000 is Rs. 15,00,000. Deduction available under section 80-IB is Rs. 50,000. Income from other sources is Rs. 1,00,000. The firm has given a donation of Rs. 90,000 to a political party. Find out the tax liability of the firm.
Question (ID 02) (AMT)
X (31 years) is a resident individual. For the previous year, his business income is Rs. 50,50,000. He does not have any other income. He is eligible for deduction of Rs. 1,50,000 under section 80C, Rs. 15,000 under section 80D, Rs. 80,000 under section 80G and Rs. 45,00,000 under section 80-IB. find out the tax liability of X
List of Important Question to be glanced for Revision before exam.
Ch-ID | Q-ID | Type of Question | Status |
F09 – A | 03 | Computation of Member | V.Imp |
F09 – A | 06 | Full computation with tax liability | V.Imp |
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F09 – C | 01 | AMT |
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Wishing You all the best for exams.