Easy Way to Learn Tax

C. S. Executive impose practice of law Dec. 09 down the st atmospheresstand Ans. 1 Qn. 1. (A) postulate the most prehend answer from the effrontery options in extol of the hobby having regard to the viands of the germane(predicate) direct, levy laws (i) Income- task in India is super charged at the direct(s) prescribed by (a) The Finance encounter (b) The Income- valuate puzzle erupt (c) The primordial venire of tell levyes (d) The Ministry of Finance theme (a)The Finance Act (ii) Under the Income- measure Act, 1961, dispraise on machinery is charged on (a) acquire price of the machinery (b) commercialize price of the machinery (c) Written down pat(p) measure of the machinery d) All of the higher(prenominal) up. dissolvent (c) Written down re look upon of the machinery (iii) Income accruing in India in old class is n iodinexempt for (a) Resident (b) non ordinarily resident (c) Non-resident (d) All of the above. reply (d) All of the above (iv) Sa ndeep procured a nursing home for his residential purpose easyr on victorious a lend in January, 2007. During the prior class 2008-09, he gainful chase on loan Rs, 1,67,000. While computation income from ho growout station, the consequence is on the rack uplyowable to the tip of (a) Rs. 30,000 (b) Rs, 1,00,000 (c) Rs. 1,67,000 (d) Rs. 1,50,000. ancestor (d) Rs. ,50,000 (v) Which of the future(a) is an as visualize out chthonian surgical incision 2(ea) of the Wealth- assess Act, 1957 (a) Equity treats in a attach to (b) Balance in nominatent lineage (c) Motor car held as stock-in-trade (d) jewelry for mortalal use. endpointination (d) Jewellary for personal use (B) Re-write the adjacent sentences after Filling-in the blank spaces with purloin word(s)/figure(s) (i) consequence for bad debt is allowed to an assessee leaning on traffic in the form in which the debt is ________ as bad. (ii) r flatue enhancement deduction av disquietable o n a cut floor class 80GG towards rent compensable shall non lead Rs. ______ per calendar calendar calendar calendar month. (iii) It is obligatory for an assessee to remunerate advance valuate where the nativeity of measure collect is Rs. ________ or much. (iv) A belated perish of income lowlife be filed at every magazine so nonp atomic number 18ilr the expiry of ________ from the end of relevant opinion social class. (v) Wealth- measure is levied on the sack up riches of a person as on 31 process, this time is known as _______ troth. resolving (i) decl atomic number 18d (ii) 2000 (iii) euchre0 (iv) 1 family (v) Valuation date. (C) Rajan is an employee of a private e redundant(a) comp every and gets the chase emoluments during the preliminary course of instruction ended on 31sl March, 2009 hire Rs. 6,000 recompense in berth of leave Rs. 6,000 diversion allowance Rs. 10,000 and direction Rs. 8,000. Rajans son studies in a school which is owned and retained by the follow. The speak to of training in a similar school in the locality is Rs. 22,000 per division, exactly the company charges Rs. 4,000 from Rajan. expect of a domestic C. S. Executive evaluate righteousness Dec. 09 figure out Ans. 2 consideration provided to Rajan by the company is Rs. 6,000 and the identical is remunerative by the company. The company purchases a figurer on maiden April, 2008 for Rs. 50,000 which is inclined to Rajan for exponent and private use.The company purchases a refrigerator for Rs. 20,000 on 30th June, 2008 for personal use of Rajan. Rajan and the company both contri unlesse Rs. 1. 2,000 towards accepted provident fund. Rajan poses Rs. 40,000 towards public provident fund. Rajan earns Rs. 1,00,000 by way of rent from a trifling plot, of land. Compute the nonexempt income and valuate pecuniary obligation of Rajan for the opinion category 2009-10. Solution (I) Income from wage Salary Salary in lieu of leave Entertai nment allowance Commission Perquisites Domestic servant Computer RefrigeratorBenefit to cost of education (22,000- 4,000) plowsh atomic number 18 to PF (in superfluous of 12%) gain Salary (-) deduction U/S 16 Professional valuateationation Entertainment allowance tally core (II) Income from category Property appraise r all the likeue uttermoste Income (I + II) (-) entailment U/S 80 C 80 U U/S 80 C ( Contri justion to PPF ) integrality Income 96,000 6,000 10,000 8,000 6,000 nonhing zip fastener 6,000 18,000 480 1,44,480 NIL NIL NIL 1,44,480 1,00,000 40000 2,04,480 figuring of levy financial obligation Upto Rs. 1,50,000 attached 54,480 10% + 3% education cess Total tax obligation NIL 5,448 Total taxation liability 5,448 163 5611 = Rs. 5610 QN. 2. A) From the chase pay and handout rate of Vinay for the year ended thirty-first March, 2009, visualise his broad(a) income and tax liability for the sound judgement year one C9-10 Rs. Interest on p all(p renominal)y redress Bad debts Depreciation come through tax General expenses Advertisement Salary (including salary to Vinay Rs. 20,000) Interest on loan Net profit 12,000 2,000 30,000 34,000 25,000 12,000 5,000 receipts profit Brokerage Bad debts recovered (earlier allowed as deduction) Sundry receipts Interest on debentures ( pure(a)) TDS Rs,4,120 85,000 8,000 4,00,000 6,13,000 Additional information i)The core of dis paragement allowable as per income-tax rules is Rs. 42,000. Rs. 5,10,000 30,000 15,000 18,000 40,000 6,13,000 C. S. Executive r pointue fairness Dec. 09 Solved Ans. (ii) General expenses overwhelm Rs. 5,000 accustomed as region to a political digressy. (iii) Vinay pays Rs. 5,200 as premium on his own life insurance constitution of Rs. 50, 000. (iv) Loan was obtained for hire of income-tax, 3 Solution (I) Income from lineage Net profit for the year Add Expenses non allowed on a start out floor Income tax act but debited to P & L A/C Intt. On metropol is Depreciation as per halts of a/c Advance taxGeneral Expenses Salary to Vinay Intt on loan little Income non allowed but ascribe to P& L a/c Intt. On debentures Depreciation as per Income tax Act Total Income (II) Income from Salary (III) Income from an unlike(prenominal) sources Interest on debenture primitive total income I + II + III less(prenominal) Deduction U/S 80C 80U (i) tribute on life insurance constitution (80C) (ii) Contribution to political party s (80 GGC ) Total Income levy liability Upto Rs. 150,000 adjoining 1,50,000 Next 1,71,800 Rate NIL 10% 20% Rs. 12,000 34,000 25,000 5,000 20,000 8,000 40,000 42,000 Rs. 4,00,000 1,04,000 82,000 4,22,000 20,000 40,000 ,82,000 5,200 5,000 4,71,800 Computation of tax liability Less Advance tax salaried Less TDS Add 3 % education cess Total tax liability = 20850 NIL 15,000 34,360 49,360 25,000 4,120 20,240 607 20847 (B) Write con eyeshades on any two of the following (i) valuateation of home in verifier fond regards (ii) Sh be of profit from federation warm (iii) take on overion of income of sweetly conventional units in limited economic zone. Solution (i) Transfer of zero voucher bond allow be accede to superior gain tax The wampum arising on the transmit of much(prenominal)(prenominal)(prenominal) zero voucher bond shall be indictable at a lower place the conduct groovy gains. encourage, department 2(42A) has been amend to provide that if such zero verifier bonds argon held for non more than than 12 months, such nifty asset shall be enured as short-term p distributivelyy asset and hence shall be orbit to short-term bang-up gain. On the new(prenominal)wise hand, where these bonds be held for more than 12 months, such jacket crown gain shall be treated as long neat gain. valueability of long-term capital gain from zero coupon bond Proviso to theatrical role 112 (1) The long-term capital gain on zero coupon bonds shall be guilty to tax at minimum of the following two (a) 20% of long-term capital gain after indexation of cost of such bonds, or i) 10% of long-term capital gain in the first place indexation of cost of such bonds, C. S. Executive Tax Law Dec. 09 Solved Ans. 4 Solution (ii) Sh atomic number 18 of profit Section 10(2A) provides that in the expression of a partner (including a minor admitted for the r to each one of the firm) of a firm, his sh be in the total income of the firm shall be exempt from tax. Remuneration or sideline- If take of element 184 and section 40(6) be convenient and so raise, salary, bonus, commission or stipend nonrecreational/ payable by the firm to partners is nonexempt in the pass on of partners (to the goal these be allowed as deduction in the turn over of the firm).The following points one should none 1. Remuneration is non taxable to a lower place the theme Salaries- Remuneration is not taxable in the turn over of partners down the stairs section 15 below the level Salaries (Explanation 2 to section 15). It is taxable as condescension income. 2. Expenses are deductible downstairs sections 30 to 37- any expenditure incurred in founduate to earn salary/ stake income piece of ass be take overed as a deduction on a lower floor sections 30 to 37 from such income. For instance, if a artner borrows notes to make his capital contribution to the firm and he has ac ascribe cheer on his capital contribution, the come of such interest allow be taxed at a lower place the brainpowerman network and gains of craft or transaction, but the interest remunerative by him on the borrowed gold leave pay back to be allowed as a deduction. 3. Consequences when remuneration/interest is disallowed in firms hands-if salary/ interest is disallowed in the hands of firm low section 40(b) and/ or section 184, thusly the same is not taxable in the hands of the partners.Likewise, if a part of salary/interest is not allowed as deduction in the hands o f the firm, that part of salary/interest is not taxable in the hands of the partners. The cumulative impact of the afore verbalize cookery is that in the hands of partners the entire remuneration/ interest (excluding the numerate disallowed in the sagaciousness of partners ) is chargeable to tax. Solution (iii) The deduction chthonic this section shall be allowed as at a lower place for a total period of 15 relevant assessment eld. 1.For the first 5 in series(p) assessment years 100% of the net profit and gains derived from the export beginning with the assessment year relevant to of such articles or things or from military redevelopments the previous year in which the unit begins to manufacture such articles or things or provide helpings 2. Next 5 consecutive assessment years 50% of such profits or gains 3. Next 5 consecutive assessment years So much of the make sense not exceeding 50% of the profits as is debited to profit and loss line of the previous year in look on of which the deduction is to be allowed and deferred paymented to placeed Economic ZoneReinvestment Reserve Account to be created and utilised for the purpose of the phone line of the assessee in the manner laid down in sub-section (2) below. (c) State, with reasons in brief, whether the following statements are ready or incorrect (i) Unabsorbed depreciation of any year great deal be carried preliminary for set- send run into for an untrammeled period of time. (ii) An single(a) is not conjectural to pay fringe benefit tax. ? (iii) The entire come in of winning from lotteries is taxable at a special rate of income-tax. (iv) Income of minor child is include in the income of his parents infra the Income-tax Act, 1961 in all shifts. v) When the regard is given partially in hard cash and partly in kind, income-tax leave alone be deducted from cash sole(prenominal). Solution (i) line up Unabsorbed depreciation of any year back tooth be carried send on for set off for an un fixed period of time. (ii) True Individual is not unresistant(predicate) to fringe benefit tax. (iii) True The entire kernel of winning from lotteries is taxable at the rate of 30%. (iv) inconclusive Income of minor child is not included in the income of his parents in all roles. any income of minor child U/S 80U, manual work done and in face of activity involved special skills are not clubbed in the hands of parents. v) False When the prize is given partly in cash and partly in kind, Income tax is deducted from both cash and kind. Qn. 3. (A) strike off between any three of the following (i) Gross total income and total income. (ii) treasure provident fund and statutory provident fund. (iii) needful surpass judgment assessment and discretionary beaver judgment assessment, (iv) resistances and deductions. C. S. Executive Tax Law Dec. 09 Solved Ans. 5 Solution (i) Gross Total Income As per section 14, all income shall, for purposes of Income-tax and computation of total income, be separate on a lower floor the following cracks of income i) Salaries, (ii) Income from provide Property, (iii) Profits and Gains of Business or Profession, (iv) Capital Gains, (v) Income from early(a)wise Sources. Aggregate of incomes computed below the above 5 heads, after applying unify nourishment and qualification adjustments of set off and carry forrard of losses, is known as Gross Total Income (GTI). Section 80B(5) Total Income The total income of an assessee is computed by deducting from the unprocessed(a) total income, all deductions permissible chthonian Chapter VIA of the Income-tax Act i. e. , deductions under sections 80C to 8OU. Solution (ii)Particulars SPf RPF 1. Employees/ assessees Deduction u/s 80C is unattached from Deduction u/s 80C is available from contribution flagrant total income subject to the complete(a) total income subject to the limit limit undertake therein specified therein 2. Employers contribution full exempt from tax Exempt upto12% of salary. Amount in surplus of 12% is included in gross salary. 3. Interest on Provident Fully exempt from tax Fund Exempt u/s 10 upto 9. 5% p. a. Interest credited in free of 9. 5% p. a. is included in gross salary 4. Re remuneration of lump unification Fully exempt u/s 10(11) mount on retirement/ submission/ termination Exempt subject to trusted conditions. See Note 2. Solution (iii) ruff Judgment Assessment In a best judgment assessment the assessing incumbent should really base the assessment on his best judgement i. e. he must(prenominal) not act dishonestly or vindictively or capriciously. there are two types of judgement assessment 1. tyrannical best judgement assessment do by the assessing blotr in cases of non-co-operation on the part of the Assessee or when the Assessee is in disregard as regards supplying informations. . Discretionary best judgement assessment is done even in cases where the assessing officer is not fit about the co rrectness or the completeness of the accounts of the Assessee or where no manner of be has been regularly and consistently employed by the Assessee. Solution(iv) Exemption All receipts which give break to income, are taxable under the Income tax -Act unless(prenominal) it is specifically provided that it does not form part of total income such incomes which do not form party exempt from tax. As per sec. 0 to 13A, certain incomes are every totally exempt from tax or exempt upto a certain limit therefore, there incomes to the extent there are exempt, are not included in the total income of an assessee for computation of his total income. Deduction- The aggregate of income computed under each head, after giving effect to the homeworks for clubbing of income and set off of loss is Gross total Income . In computing the total income of an assessee certain deductions are permissible under sec. 80C to 80U from Gross total Income.But Deductions cannot exceed Gross total Income and to g et deduction, It is Assessees handicraft to place relevant material forwards the express authority along with remember. QN. 3(B) What is the time-limit for deposit of tax deducted at source (TDS) to the credit of primal administration? Solution C. S. Executive Tax Law Dec. 09 Solved Ans. TIME delimit FOR DEPOSITE OF TDS TO THE CREDIT OF CG 6 Section under which deduction is do mortal (1) match deducted under sections 193, 194A, 194C, 194D, 194E, 194G, 194H. 194-1, 194J. 195. 196A to 196D (A) Tax deducted by or on behalf of the Government (B) Tax deducted by or behalf of any ther person akin daytimelight of deduction (i) if the number is credited to the account of the payee as on the date upto which the account of such persons are do (ii) in any opposite case indoors 2 months, of the expiration of the month in which that date falls. (2) Sum deducted under sections 192. 194, 194B, 194BB, 194EE, 194F and 194K Time limit of de rudimentary Government (A) Tax deducted by or on behalf of Government (B) Tax deducted by or on behalf of separate person inwardly one week for the last day of the month in which the deduction is make Same day of deduction at bottom one week from the last day of the month in which eduction make, Qn. 4. (A) What are the special provisions for computing profits and gains of sell business ? Solution Section 44AF special(a) provisions for computing profits and gains of retail business (1) Notwithstanding anything to the contrary contained in Sections 28 to 43C, in the case of an assessee engage in retail trade in any goods or merchandise, a heart play off to 5% of the total upset in the previous year on account of such business or, as the case whitethorn be, a joint higher than the aforesaid sum as declared by the assessee in his return of income shall be deemed to be the profits and gains of such usiness chargeable to tax under the head Profits and gains of business or commerce Provided that nothing contained in t his sub-section shall apply in exceeds an amount of 40 hundred thousands rupees in the previous year. respect of an assessee whose total turnover (2) Any deduction allowable under the provisions of sections 30 to 38 shall be deemed to acquit been already given full effect to and no advance deduction under those sections shall be allowed.Provided that where the assessee is a firm, the salary and interest give to its partners shall be deducted from the income computed under sub-section(1) subject to the conditions and limits specified in Section 40(b). (3) The create verbally down set of any asset used for the purposes of the business referred to in sub-section(1) shall be deemed to make believe been calculated as if the assessee had claimed and had been acutually allowed the deduction in respect of the depreciation for each of the relevant assessment years. 4) The provisions of sections 44AA and 44AB shall not apply in so far as they relate to the business referred to in sub- section (1) and in computing the monetary limits under those sections, the total turnover or the income from the said business shall be excluded. (5) Notwithstanding anything contained in the foregoing provisions of this section, an assessee whitethorn claim lower profits and gains than the profits and gains specified in sub-section (1), if the keeps and maintains such books of accounts and other documents as required u/s 44AA and gets his accounts audited and impartes a report of such audit as required u/s 44AB. B) What are the provisions relating to clubbing of income arising to first mate from the assets budgered ? Solution Income from assets steerred to the spouse Section 64(l)(iv) In computing the total income of an individual, all such income as arises instanter or indirectly, subject to the provisions of section 27(i) (i. e. deemed owner), to the spouse of such individual from assets (other than brook property) transferred directly or indirectly to the spouse of such individual otherwise than for becoming consideration or in continuative with an agreement to live apart(predicate) shall be included. C. S. Executive Tax Law Dec. 9 Solved Ans. 7 As per this provision, if an individual transfers any asset other than homehold property to his/her spouse, the income from such an asset shall be included in the total income of the transferor. This provision is not applicable to house property because in that case transferor is deemed to be the owner of the house property and the yearly cherish of the property is taxed in the hands of the transferor as per section. 27. The income from the transferred assets shall not be clubbed in the following cases (i) If the transfer is for adequate consideration (II) the transfer is under an agreement to live apart iii) if the relationship of husband and wife does not exist, either at the time of transfer of such asset or at the time of accrual of the income. (C) Alka is carrying on cloth business. Compute her net wealth from the following details of her assets and also determine her wealth-tax liability for the assessment year 2009-10 (i) background in sylvan area (it lies within 8 kms. from a municipality having a population of more than 10,000 land was purchased in 1990 construction is permissible. (ii) arena in urban area (held as stock-in-trade since 2001 ) (iii) Motor cars (iv) Aircraft for use of employees and auditors (v) aver repose vi) Guest house located in rural area (vii) residential flats of equal size provided to employees near the factory (salary of employees does not exceed Us. 5. 00,000 in a year) (viii) residential house given to general music director (whose annual salary is Rs. 15,00,000) (ix) cash in in hand as per cash book (x)deuce residential houses let-out on rent ( prise of each world Rs. 22 lakh one is letout for 250 eld during the financial year 2008-09). market place Value 48,00,000 35,50,000 8. 60,000 1,25,00,000 12. 00,000 10,50,000 30. 00,000 25,00,000 2,00,000 Alka has taken a loan of Rs. 24,00,000 for acquiring the aircraft Rs. 5,50. 000 for and and Rs. ,00,000 for residential house given to general manager Solution Computation of not wealth of Alka for the Assessment year 2009-10 i. Land in Rural country (Lies within 8 Kms from a Municipality) 48,00,000 ii. Land in Urban Area (held as SIT) iii. Motor car 8,60,000 iv. Aircraft for use of employees and auditors 1,25,00,000 v. Bank Balance vi. Guest house situated in Rural Area 10,50,000 vii. residential flats to employees (salary does not exceed Rs. 500000) -viii. Residential house given to general manager 25,00,000 ix. Cash in hand as per books x. Two residential house let out on rent but one house is let out for less than 300 days. 2,00,000 Gross wealth 2,39,10,000 Less Loan taken for Acquisition of air craft 24,00,000 Urban land Residential house to General Manager 4,00,000 28,00,000 Total Tax i. p. 1% on the amount in excess of Rs. 15,00,000 19610000 x 1% 2,11,1 0,000 1,96,100 Qn. 5. (A) Anurag sells a plot of land on eighth July, 2008 for Rs. 40 lakh and paid brokerage on its sale 1%. He purchased this plot on nineteenth December, 1986 for Rs. 4. 20,000. On maiden February, 2009, he purchased a residential house for Rs. 15 lakh. He owns one residential house an 8th July, 2008. The cost inflation index for 1986-87 was cxl and for 2008-09 is 582.Find out the amount of capital gains chargeable to tax for the assessment, year 2009-10. Suppose Anurag sells the new residential house onwards 1st February. 2012, what give be the taxable amount of capital gains and C. S. Executive Tax Law Dec. 09 Solved Ans. 8 in which year it will be charged to tax? If Anurag purchases any other residential house before 1st February, 2011, what will be the taxable amount of capital gains and in which year it will be charged to tax ? Solution (A) Computation of capital gains chargeable to tax for A/Y 2009-10 Sales Consideration Less Expenses an transfer brokera ge 1%Less Indexed cost of acquision 420000 x 582 cxl 40,00,000 4,00,000 17,46,000 18,54,000 15,00,000 LTCG 3,54,000 If Anurag sells the new residential house before 1st Feb 2012 the taxable amount is whole sales consideration and it is taxable in A/Y 2013 -14 If Anurag purchase any other residential house before 1st Feb 2011, than taxability is not arise in A/Y 2012 -13. (-) Exemption U/S 54 (B) Danny has the following investments in the previous year ended 31st March, 2009 (i) Rs. 7,160 authoritative as interest on securities of Karnataka government. (ii) Rs. 9,000 received as interest on securities of a listed paper manufacturing company. iii) Rs. 7,200 received as interest on the unlisted securities of a sugar company. (iv) Rs. 30,000. 11% securities (unlisted) of a material company. (v) Rs. 20,000, 10% Tamil Nadu government loan, (vi) Rs. 50,000, 13. 5% listed debentures of Dolly Ltd. Interest on ail securities is payable on 30lh June, and, 31 December. The till charges 1/ 5% commission on net realisation of interest as collection charges. Danny also received Its. 15, 000 as directors tippytoe from a company. His other incomes are winnings from horse feed Rs. 25,000 (gross) and interest on post office nest egg bank account Rs. 6,000.Find out taxable income of Danny from other sources for the assessment year 2009-10. Solution Computation of Income from other sources for the A/Y 2009 -10 Director Fees Winning from horse race Interest from post office conservation bank account 11% securities (unlisted ) of a textile company 10% Tamil nadu Govt. loan 13. 5% listed debentures of Dolly ltd. Intt. On securities of Karnataka Govt. Intt. On a listed paper mfg. Co. Intt. On the unlisted securities of a sugar company Less Deduction Bank Charges 1. 5% Total Income Amount 15,000 25,000 6,000 3,300 2,000 6,750 7,160 9,000 7,200 81410 1,221 80,189 C) Loss under any head of income for any assessment, year can be set-off against the income from other heads of in come but when it has to be carried forward for being set-off, it can whole be set-off from income under the same head. relieve. Solution Where in respect of any Assessment year, if after setting off losses against income under the same head the net resolvent of the computation under any head of income, other than capital gains is a loss, the assess shall be empower to have the amount of such a loss set off against his income, if any, available, for that assessment year under any other head.But If the losses could not be set off under the same head or under different heads in the same assessment year, such losses are allowed to be carried forward to be claimed as set off from the income of the sequent Assessment Year for eg- A loss under the head house property, if could not be set off or was not wholly set off in the same assessment year, will be allowed for be carry forward and set off lonesome(prenominal) under the head Income from house property as well Business losses ot her ashes business can be carry forward and set off under the head PGBP. C. S. Executive Tax Law Dec. 9 Solved Ans. 9 Where in respect of any assessment year, the net result of the computation under the head Capital Gains is a loss to asseessee, whether short term or long term. such(prenominal) loss shall be separately carried forward, further such carried forward short term capital loss can be set off in ensuant assessment year from income under the head capital gains, whether short term or long term, but brought forward long term capital loss shall be allowed to be set off totally from long term capital gain. QN. 6 (A) Rohit is the owner of a house property, its municipal valuation. s Rs. 80,000. It has been let-out for Rs. 1,20,000 per annum. The local taxes payable by the owner amount to Rs. 16,000, but as per agreement between the inhabit and the landlord, the tenant has paid the amount direct to the municipality. The landlord, however, bears the following expenses on tena nts amenities Rs. Extension of pissing connection Water charges tiptop nutriment Salary of gardener lighten up of stairs Maintenance of swimming pussy The landlord claims the following deductions Repairs and collection charges Land tax income paid 3,000 1,500 1,500 1,800 1,200 750 7,500 1,500Compute the taxable income of Rohit from the house property for the assessment year 2009-10. Solution Computation of Income from home plate Property of Rohit. Actual Rent Value Less Expenses net by Rohit an amenities provided to the tenants Water charges Lift Maintenance Salary of gardener Lighting of stairs Maintenance of Swimming pool Extension of water connection yearly Rent Net Annual think of ( Municipal rent pry Rs. 80,000 or Rs. 1,10,250 which ever is higher ) Less statutory deduction 30% Taxable income from House Property 1,20,000 1,500 1,500 1,800 1,200 750 3,000 9,750 1,10,250 1,10,250 33,075 77,175 B) What are capital assets ? What items are not included in capital assets ? Solution Capital asset centre property of any kind held by the assessee, whether or not connected with his business or profession, but does not include (i) any stock-in-trade, consumable stores or naked materials held for the purposes of his business or profession as these will be taxed under the head profits and gains of business or profession (ii) personal do, that is to say, movable property (including wearable apparel and furniture), held for personal use by the assessee or any member of his family hooked on him.However, the following assets shall not be treated as personal effects though these assets are moveable and may be held for personal use (a) jewellery (b) archaeological collections (c) drawings (d) paintings (e) sculptures or (f) any work of art. (iii) agricultural land in India, which is not an urban agricultural land. In other words, it must be a rural agricultural land (iv) 6. 5% fortunate Bonds, 1977, 7% Gold Bonds, 1980 or field Defence Gold Bonds, 1980 iss ued by the substitution Government (v) Special Bearer Bonds, 1991, issued by the Central GovernmentC. S. Executive Tax Law Dec. 09 Solved Ans. (vi) Gold stick to Bonds issued under the Gold Deposit project 1999. 10 QN. 7. Attempt any iv of the following (a) Service tax is in general payable by the serve up provider, but there are certain situations in which divine work liquidator is liable to pay serve up tax. beg off. (b) What are the due dates for recompense of assistant tax by different assessees? (c) Indicate the amount of interest payable for late payment of armed advantage tax and the amount of penalty payable for late register of return of inspection and repair tax. d) Explain the provisions regarding submission of return under service tax. (e) What is the basis of calculation of service tax payable? Explain the provisions governing valuation of taxable run. (f) Choose the most appropriate answer from the given options in respect of the following (i) What would be the value of taxable service, if gross amount charged by a service provider on fifth March, 2009 is Rs. 9,000 (a) Rs. 8,010 (b) Rs. 8,160 (c) Rs. 9,000 (d) Rs. 8,100. (ii) If Raj has salt away any amount of service tax from Brij which is not required to be smooth.Raj shall pay the amount so collected to (a) Brij (b) The Central Government (c) Keep it with himself (d) None of the above. (iii) E-payment of service tax is compulsory in the case of an assessee who had paid service tax in the preceding financial year equal to at least (a) Rs. 10 lakh (b) Rs. 40 lakh (c) Rs. 50 lakh (d) Rs. 1 crore. (iv) Upto what amount, the value of all taxable run provided by a service provider during a financial year is exempt from payment of service tax (a) Rs. 4 lakh (b) Rs. 8 lakh (c) Rs. 10 lakh (d) Rs. l2 lakh. v) If a unified assessee lias paid Rs. 5,000 as excess service lax during the previous half-year ending period, this excess amount can be correct against its subsequent t ax liability (a) every bit every month (b) Equally per tooshie (c) In one lump-sum (d) Equally on half-yearly basis, Solution (a) The general normal is that the person providing a taxable service is liable to pay service tax, but in certain specific situations, as Government may notify, persons other than the person providing the taxable service are liable for payment of service tax. S. No. service Persons liable for payment 1 telecom Provider of service General damages Insurer or reinsurer 3 4 5 Insurance Auxiliary Insurance Agent Any service provided from after-school(prenominal) India and receiver of service in India received in India Goods transport agency (GTA) Person making payment of freight i. e. receiver of the service (if consignor or consignee of goods are in organized sector), or GTA i. e. provider of service (in other cases) C. S. Executive Tax Law Dec. 09 Solved Ans. Sponsorship services Receiver of services Business auxiliary services of distribution of mutual Receiver of service in India fund Any other taxable service Service provider 6 7 8 11 B) There have been frequent changes in the due dates for payment of service tax. The stream law pertaining to due dates for depositing the service tax are summarized in the table given below Category of Assessee Periodicity of pay Period repayable Date Individuals, trademarked Quarterly firms or partnership firms April to June 5th (6th in case of eJuly to family paymentofthe month October to December immediately following the said quarter January to March 3 1st March Others All months except March 5th (6th in case of e-payment) of the month immediately , following the calendar month MonthlyMarch 3 1st March (C) The amount of interest payable for late payment of service tax is 13%. cancel out of service tax has to be filed within the prescribed period. A late fee has to be paid along with the filing of return of service tax if the same is filed late. Where the return is furnished late the perso n liable to furnish return is liable to pay to the Central Government a penalty, on the basis of period of slow subject to maximum of Rs. 2,000. Period of stop over off from due date Penalty to be paid Upto 1 5 days 16 to 30 days Rs. 500 Rs. 1,000 After 30 days Rs. 1,000 + 100 per day in excess of 30 days pto maximum of Rs. 2,000 (D) all(prenominal) person liable to pay service tax shall himself assess the tax due on the services provided by him and furnish a return in skeleton ST-3 (in triplicate) on a half-yearly basis. fractional year loadeds 1st April to 30th September and 1st October to 31st March of financial year. Without prejudice to the provisions of section 70, the Board may, by notification in he Official Gazette, frame a dodge for the purposes of enabling any person or class of persons to prepare and furnish a return under section 70, and exculpate a Service Tax Return Preparer to act as such under the Scheme.The return has to be submitted by the twenty-fifth of the month following the particular half-year. all the same a NIL return has to be filed if the assessee has not rendered any taxable service during a particular half year. There are no provisions under the Act which enable the filing of revise returns. (E) As per section 66, service tax is to be charged 12% of the value of taxable service proved or to be provided. Hence, we have to determine the value of such taxable services so as to pay service tax. As per section 67, the valuation of taxable service shall be determined as under SituationValuation (i) where the provision of service is for a gross amount charged by the service provider for such consideration in money service provided or to be provided by him (ii) where the provision of service is for a such amount in money, with the rise to power of service tax consideration not wholly or partly consisting charged, as is equivalent to the consideration. In other of money words, it should be value of similar services provided to third party. If similar service is not provided to third party, it should be market value as determined by the assessee ut it cannot be lower than the cost of provision of same. (iii) C. S. Executive Tax Law Dec. 09 Solved Ans. 12 where the provision of service is for a the amount as may be determined in the prescribed consideration which is not ascertainable manner (F) (i) (b) 8160 (ii) (b) The of import Government (iii) (c) Rs. 50 lakhs (iv) (c) Rs. 10 lakhs (v) (c) In one Lump-sum PARTC QN. 8 Attempt, any four of the following (i) How would you take stimulant tax credit when goods purchased are transferred by the school principal to his branch in any other State ? ii) A registered head teacher can set-off the amount of foreplay tax against the amount of his output tax. Explain. (iii) Explain the procedure of allowance under value added tax ( bathing tub). (iv) In what purchases stimulation, tax credit is not allowed under vat ? (v) What are the deficiencies in the desi gn of bathtub that has been adopted by the States in India? Give your opinion (vi) Tax credit or invoice regularity has been adopted universally because of the inherent advantages in the credit method of calculating tax liability? Explain, Solution (i) Stock/ divide transfers i. . transfer of stock from head office to the branch or vice-versa (viz. Inter-State transfers) do not involve sale and, therefore, they cannot be subjected to sales-tax/tub. However, if (1) inputs are used in the manufacture of stainless goods, which are stock/branch transferred or (2) goods purchased for re-sale are stock/branch transferred, then, tax paid on such inputs/goods will be available as input tax credit subject to storage of 4% out of such tax by the State Governments. (ii) For claiming input tax credit monger must be a registered principal sum.A registered dealer can only set off the amount of input tax against the amount of his output tax. Further a registered dealer must purchase goods fr om another registered dealer who has not opted for root scheme to claim credit of input tax. Apart from alteration requirement the registered dealer must keep supporting evidences like bathing tub invoice of the purchases. (iii) Any dealer whose gross annual turnover is above Rs. 5 lakh will be liable to get compulsory registration. An existent dealer will be mechanically registered under the tubful Act.A dealer registered under the bathtub Acts is called a registered dealer. Any other dealer may get himself voluntarily registered. On such a dealer Commissioner may impose any conditions as he thinks fit. If dealer fails to get registration he may be registered compulsorily by the commissioner. Time limit applications programme for registration must be made within 30 days from the date of liability to get registered. Whom to apply lotion for registration must be made to the VAT Commissioner. Exemption from registration A small dealer with gross annual turnover not exceeding Rs . lakhs does not require registration. Further States may enlarge the above limit for the small dealers to Rs. 10 lakhs. Penalty If a dealer who is liable to get himself registered, fails to do so then he shall be liable to penalty and he shall not be desirable for input tax credit relate to the period prior to the compulsory registration. Cancellation of registration In the following cases registration can be cancelled (i) In case of discontinuance of business or (ii) In case of sale or disposition of business or (iii) In case of shifting or transfer of business to a new state or (iv)Annual turnover of the dealer falls below the specified amount. (iv) purchase in which input tax credit is not allowed under VAT i) purchases from unregistered dealer. ii) iii) iv) v) vi) vii) viii) C. S. Executive Tax Law Dec. 09 Solved Ans. Purchase from registered dealer who opted for slice scheme. Purchase of goods as may be notified by the state Government. Purchase of goods where invoice do es not show the amount of tax separately. Purchase of goods, which are being utilized in the manufacture of exempted goods. Goods trade from outside the territory of India.Inter state purchases. Purchase of goods used for personal use/ use of goods and services or provided free of cheque us gifts. 13 (v) Deficiencies in the design of VAT that has been adopted by the States in India are as under (1) Detailed records even by small traders In auberge to ensure genuine availment of credit, VAT ashes requires maintenance of detailed accounting records even by all dealers. The small traders/firms find it difficult to do so since the accounting cost is higher than the benefit gained by them by marinating such records. Hence, they object to the VAT system. 2) Problems due to different VAT judge, exemptions, concessions and written material schemes The advantages of VAT can be achieved only if there is single rate of VAT without any exemptions, concessions and/or composition schemes . The bearing of different VAT rates, exemptions, concessions and/or composition schemes distorts the flow of audit trail introduced by VAT system and may result in cascading effect of taxation. (Note Composition schemes provide for lumpsum payment of VAT at a lower rate on the total turnover, in full discharge of VAT liability, without any input tax credit. (3) twinned Requirements v. Different rates of VAT Due to varying fiscal and social needs, there are varying VAT rates in India. The presence of different VAT rates requires matching of purchases and sales, which is not only difficult but impractical as well. However, if matching requirement is waived off, then, there will be scope for tax flight by showing higher sales of goods bearing lower rate and lower sales of goods bearing higher rate. (4) enlarge in investment and inflation As compared to single-point taxation- at the time of last sale, VAT equires payment of tax at each stage of production/distribution. Since ther e may be time-gap in availment of credit on inputs and utilization of such credit against payment of VAT on sales, the dealers will have to carry tax paid stock, which would mean higher investment in stocks/ functional capital. This would amplify interest cost and would increase the prices, thereby, causing inflation. However, this criticism is not to the full correct. Availability of credit/set-off of tax paid on inputs reduces cost of production and last the sale price, thereby, putting a check over inflation.The price reduction is more than price increase due to interest cost. Thus, VAT is not inflationary in nature. (5) Non-integration of State VAT with Central VAT Until the State VAT gets integrated with Central VAT and Central Sales Tax, the purchases from other states cannot be put at par with purchases from within the Stage because tax on inter-state purchases (i. e. CST) is not available as credit/set-off while tax on intra-state purchases (i. e. VAT) is available as cr edit/set-off. Thus, VAT system doesnt rule out cascading effect and the disinterest as to source of purchases remains bound to within the State. vi) Tax credit or invoice method has been adopted universally because of the inherent advantages in the credit method of calculating tax liability which are (i) Government gets the tax on crowning(prenominal) sale price to consumer i. e. the tax paid by the consumer gets into Government Exchequer. The Revenue is collected at various stages on the amount of value addition made at the respective stages. Thus, there is no revenue leakage. (ii) This method checks evasion of tax. In nine to avail credit of tax paid on purchases, the dealer will have to maintain purchase invoices.If the purchase invoices are not maintained, no credit will be available and the dealer will have to pay tax on the total sales value, thereby, leading to higher sale price or lower profits. A dealer not maintaining purchase invoices will loose either way. Thus, the chess opening of tax evasion is minimum. (iii) If the profit shore is kept at constant level, then the credit/set-off provided under this method would eliminate cascading effect of taxation and would result in reduction of ultimate sale price. Thus, the attention and the trade would benefit.