Taxation -I

1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – OCTOBER 2014

B.COM (Travel & Tourism) – V Semester

TAXATION – I

Duration: 3 Hours                                                                                          Max. Marks: 100

      Section – A

 

1. Answer all the questions. Each carries 2 marks.                               (10 x 2 =20)

 

• Discuss with reasons, the admissibility of the following steps while computing profits and gains of business.

1. a) Interest paid on loan taken for daughter’s marriage Rs 16,000.
2. b) Sales tax paid during the year Rs 40,000.

• Who is an ‘assessee’?
• Mention any 4 cannons of taxation.
• State the exceptions to the basic conditions of residential status.
• Calculate the amount of basic salary of a Lecturer for the previous year 2013-14 who is appointed on 1-1-2008 in the grade of Rs 18,000-500-30,000.He gets increment after every 12 months and salary is due on 1^st of every month.
• Explain the terms – ‘application of income’ and ‘ diversion of income’
• Calculate the taxable amount of annual accretion to RPF if the following information is provided by the assessee:

1. Basic pay @ Rs 7,500 p.m
2. Commission received by him on the basis of turnover achieved by him Rs 6,000
3. Employer’s contribution to RPF @ 14% of salary
4. Interest credited during the year to RPF balance @ 12% is Rs 24,000.

• What is meant by composite rent?
• State whether the following is capital or Revenue Loss

1. a) Loss on sale of machinery.
2. b) Theft in office premises.
3. c) Embezzlement of cash by an employee.
4. d) Issue of the shares less than the face value.

10)  Calculate GAV from the following details Municipal values Rs 1,20,000; Fair Rental value Rs 1,30,000 Standard Rent Rs 1,10,000; Annual Rent Rs 1,00,000 & Vacancy period 2 months Unrealized rent is Rs 10,000.

 

Section – B

 

1. II) Answer any FOUR Each carries 5 marks.                          (4 x 5 =20)

 

11)  Distinguish between revenue and capital expenditure.

12) Mrs. Mangala a citizen of India went to England on 2-10-2006 for higher studies for a period of two years. After she came back she was employed in a Multinational company in India. The company sent her for 6 months training to Germany on 1-3-2009. She was transferred to the company’s Head office in New York on 15-8-2009. However she left India on 2-10-2009 and reported for duty on 15-10-2009. She visited India during the months of Nov, and Dec 2011. The company transferred her back to her original post in India and she returned to India on 26-1-14. Determine her residential status for the AY- 2014-2015.

 

13) Mr. Satish an employee of a private publicity agency gets Rs 16,800 as basic pay p.a. Rs 3,000 as commission on his turnover Rs 4,000 as bonus, Rs 8,000 as project allowance and Rs 6,000 as conveyance allowance (one third of which is utilized for official purpose). His employer also pays Professional Tax of Rs 2,000 on behalf of Satish. Besides this his employer provides a rent free unfurnished house in Agra [Population is presumed to be 15 lakhs], Fair rent of the house is Rs 35,950. Determine the taxable value of the perquisite for the assessment year 2014-15.

 

14) An individual received House rent allowance Rs 300 p.m from his employer. He paid house rent @ Rs 500 p.m for his hired accommodation at Bhuvaneshwar. His basic pay was Rs 1,600 p.m and dearness allowance was Rs 1,000 p.m. Find out his taxable house rent allowance for the assessment year 2014-15.

 

15) From the following details find out Income from House Property

	Rs
Municipal Valuation Fair Rent Standard Rent Annual Rent Unrealized Rent Vacancy Period	70,000 72,500 71,000 84,000 7,000 1.5 Months

Interest for the Loan for the current year is Rs 6,000. Interest for the Loan for the   preconstruction period is Rs 15,000.

 

16) From the following information of Bhaskar, Chartered accountant, compute taxable income from profession for the AY- 2013-14

Receipts: Consultation fees- Rs 25,000 gifts from clients – Rs 10,000 gifts from father- Rs 15,000 appellate tribunal appearance- Rs 6,000 and fees for drafting memorandum of association – Rs 5,000

Payments: office rent- Rs 12,000 stipend to article clerks- Rs 10,000 professional books purchased- Rs 6,000 charitable donations- Rs 2,000 and professional tax Rs 1,000.

 

 

 

 

Section – C

 

III) Answer any THREE questions.  Each carries 15 marks.                       (3 x 15 =15)

 

17) Shri Nehru is the proprietor of a business. His Profit and Loss Account for the year ended March 31, 2014 is as follows:

	Rs		Rs
To Establishment To Rent, Rates and Taxes To General Charges To Household Expenses To Commission To Discount and Allowances To Provision for Bad Debts To Postage and Telegrams To Law Charge To Advertising To Gifts and Presents To Fire Insurance Premium(for goods) To Sales Tax To Repairs and Renewals (not for business premise) To Loss on Sale of Motor car (used for Private Purpose) To Life Insurance Premium To Wealth Tax To Interest on Capital To Audit Fee To Interest on Bank Loan To Provision for Depreciation To Provision for Income tax To Net Profit transferred to Capital Account	4,800 2,900 750 1,730 1,500 450 1,200 270 450 1,550 150 360   1,250 480   1,800   1,790 740 350 300 1,380 2,500 3,900   30,840	By Gross Profit By Interest on Govt Securities By Rent From House Property	50,840 5,200   5,400
	61,440		61,440

Following further information is given below:

• Actual Bad Debts written off during the year amount to Rs 550.
• Amount of income tax actually paid during the year is Rs 4,200
• Depreciation allowable is Rs 1,700 as per Income tax Rules.
• Advertising Expenses include Rs 550 spent on special advertising campaign to open a new shop in the market.
• Law Charges are in connection with a trade mark.
• Nehru carries on his business from rented premises half of which is used as his residence.
• Rent, rates and taxes includes Rs 2,400 paid as rent of the premises during the year.

Compute the business income of Shri Nehru for the assessment year 2014-15. Workings are to form part of your answer.

 

18) Mr. Sen employed at Kolkata with a mercantile firm as a sales manager. From the following particulars compute his taxable income under the head salary for AY 2014-15:

1. a) Basic salary – Rs 90,000 (7,500 x 12)
2. b) Dearness allowance @ 20% of the basic salary but only 10% of salary is eligible for service benefit.
3. c) Incentive commission @ 1%of the turnover achieved by him but not exceeding 50% of monthly salary of Rs 7,500. The turnover achieved by him for the relevant previous year was Rs 2, 72, 800.
4. d) Mr. Sen’s contribution to RPF is Rs 15, 000 for the year and the employer also contributes an equal amount
5. e) Interest credited to PF at the rate of 11% per annum amounted to Rs 4,400.
6. f) The employer pays Mr. Sen a house rent allowance of Rs 1,700 per month and Mr. Sen lives in a rented house for which he pays a rent of Rs 2000 per month
7. g) He is provided with a car of more than 1.8 ltr capacity which he uses both for private and office purposes. The employer pays all expenses of the said car including driver’s salary of Rs 1,250 per month
8. h) He took a loan of Rs 1,50,000 on 1.4.2013 from his employer to purchase a car. Rate of interest being 8.45%. Prescribed rate of interest by SBI as 1.4.2013 is 10.45%
9. i) He has been getting entertainment allowance of Rs 8,000 per year.
10. j) His son is a medical student of Kolkata Medical college and his employer paid Rs 24,000 as his education fee

 

19) What are the important types of provident fund of which a person may be a member and state the income tax provisions dealing with each type of provident fund?

 

20) From the following particulars of Mr. Nagaraj compute his Gross total income for the A.Y 2012-13 if he is (1) Resident (2) Not Ordinarily Resident (3) Non-Resident.

(a) Income from business from Raichur Rs 50,000.

(b) Profit from business in U.K controlled from India Rs 60,000.

(c) Income from house property in Japan not received in India Rs 30,000.

(d) Income from business in India but received in Pakistan Rs 50,000.

(e) Salary received in India for service rendered in USA Rs 70,000.

(f) Interest on deposit with State Bank in Bangalore Rs 10,000.

(g) Profit from business in Ceylon controlled from India (1/3 profit received in India) Rs 30,000

(h) Salary received in India for service rendered in Kuwait Rs 35,000.

(i) Past untaxed foreign income brought into India Rs 8,000.

(j) Dividend received from Domestic Company Rs 5,000.

(k) Interest on Post Office Savings Bank A/c Rs 1,000.

(l) Agriculture income earned in Nepal Rs 25,000.

 

21) Ramesh & his family members have occupied 3 houses for their residential purpose. The houses were constructed by Ramesh. The particulars of the houses were as under:

	House 1 (rs)	House 2 (Rs)	House 3 (Rs)
Standard rent	30,000	36,000	60,000
Fair rent	36,000	45,000	55,000
Municipal valuation	16,000	30,000	45,000
Municipal taxes paid	2,400	3,000	5,400
repairs	–	3,000	6,000
Fire insurance premium
i)       paid	1,600	2,400	–
ii) due but not paid	–	–	2,000
Ground rent	1,500	–	4,500

Ramesh borrowed Rs 2,00,000 at 10% per annum for construction of House 3 (date of borrowing 1/4/2007 and date of repayment of loan 11/8/2014).

Construction of all these houses was completed on 1/5/2012. Compute the taxable income of Ramesh for AY 2014-15.He has asked to treat the 3^rd house as his self occupied house.

 

SECTION – D

1. IV) COMPULSORY QUESTION. (15 marks)

 

22) Shri A.K.Gupta was employed in a factory in Faridabad. He retired on 1-1-2014 after completing a service of 26 years and 5 months. He had been getting a salary of Rs 23,000 per month and a dearness allowance of Rs 2,000 per month (forming part of retirement benefits) for the last four years. His pension was determined @ Rs 9,000 p.m and ¾ portion of it was commuted for Rs 2,70,000. In addition to this he received a gratuity of Rs 4,00,000 and as per entitlement of 30 days earned leave each year of service, he also received Rs 3,00,000 for encashment of earned leave of 12 months during the previous year. Compute gross income from salaries of Shri Gupta for the assessment year 2014-15 assuming he is not covered under Payment of Gratuity Act.

 

 

ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)
END SEMESTER EXAMINATION – SEPT/OCT. 2015
B.COM (T.T.) – V SEMESTER
C2 12 501: TAXATION – I
Duration: 3 Hours                                                                                             Max. Marks: 100
SECTION – A
I)	Answer ALL the questions.  Each carries 2 marks.                                        (10×2=20)
	1.	How do you ascertain the residential status of a Company?
	2.	Distinguish between exemption and deduction.
	3.	Define Assessee.
	4.	Explain provision in respect of commuted pension with regard to non government employees.
	5.	X took a loan of Rs 25 lakhs from his employer @ 5% p.a  where as the SBI rate is 12%. Determine the value of taxable perk.
	6.	State the provisions of perk w.r.t transfer of electronic asset.
	7.	How do you tax the following: a)      Club facility provided b)     Free use of laptop and mobile
	8.	Give the conditions to be satisfied for unrealized rent deduction.
	9.	How do you tax arrears of rent recovered in the previous year
	10.	Give any four incomes which are fully exempt.
SECTION – B
II)	Answer any FOUR questions.  Each carries 5 marks.                                      (4×5=20)
	11.	Compute the income from house property of Mr. Anil and Mr. Sunil from the following information for the year ending 31st March, 2015: Mr. Anil and Mr. Sunil are brothers and they have inherited equally the house property from their father. Rent realizable from the property is ` 27,000 per annum. Municipal Taxes (To be borne by the landlord) are  `9,000 per annum. The property is on a leasehold plot of land and the annual lease rent is   ` 3,000. Rent collector is paid   `100 per month. Property was mortgaged for taking a loan of   ` 50,000 at 10% per annum for the purpose of partnership business of Mr. Anil and Mr. Sunil.  The loan was taken on 1st October, 2011. One of the Flats in the Building fetching monthly rent of   `500 was vacant for two months.
	12.	Mr. V Raju a surgeon in a government hospital retired on 31.7.2014.  He joined as adviser (part time) from 1.9.2014.  His other particulars for the year ending 31.3.2015 are:         ` Salary during government service 1,44,000 House Rent Allowance (living in own House) 24,000 Gratuity received 2,72,000 Leave encashment on retirement 1,20,000 Commuted value of pension 1,50,000 Expenses on Books and Journals 6,000 Pension 1,08,000 Amount received as adviser 70,000 Compute his income under the head ‘Salary’
	13.	Mr. R is working with Reliance Industries Ltd. at Ahmedabad (population above 25 lakhs).  The particulars of his salary income are as under:   ` Salary 30,000 p.m. D.A. (Treated as part of salary for calculation of Provident Fund) 5,000 p.m. Bonus 10,000 Commission 2,00,000 Employee’s and Employer’s contribution to RPF (Each) 3,000 p.m. The employer has provided a rent free house.  Calculate the value of the perquisite of rent free house it:  House is owned by employer and its FRV is   `45,000 p.a. House is hired by employer at   `4,000 p.m.
	14.	Mr. B. married citizen of India left for Germany for the first time on 15-9-2013 on a business trip.  He returned to India on 5-6-2014.  During his absence from India he maintained a dwelling house for himself in Calcutta.  What will be his residential status for the assessment year 2015-16.
	15.	Give 5 examples each for Capital Expenditure and Revenue income.
	16.	Mr. G retires on 31-10-14 after 20 years service and received Rs. 1,80,000 as leave encashment for 12 months. His employer allows him one and a half months of leave for every one year of service. He has already encashed leave for 18 months. His salary for 13-14 was Rs. 15,000 and from1-4-14 it was raised to Rs. 16,000 p.m. Compute his taxable amount of leave encashment.
SECTION – C
III)	Answer any THREE questions.  Each carries 15 marks.                                (3×15=45)
	17.	Mr. Sri Kant owns two houses, the particulars of which are given below for the previous year 2014-15: Particulars House A ` House B ` Rent Received NIL 1,72,000 p.a. Standard Rent 5,00,000 p.a. 1,50,000 p.a. Municipal Valuation 4,90,000 p.a. 1,60,000 p.a. Fair Rent 5,00,000 p.a. 1,80,000 p.a. Municipal Taxes paid during the year 49,000 p.a. 16,000 p.a. Fire Insurance (due) 5,000 p.a. 3,000 p.a. Ground Rent paid 4,500 p.a. 3,900 p.a. Interest on money borrowed during 98-99 for construction of houses (50% paid) 36,000 p.a. 48,000 p.a. Unrealised rent (Pertaining to this year) NIL 6,000 Nature of occupation Self occupied Let out Compute income from house property for the assessment year 2015-16 assuming that the Assessing Officer is satisfied with the non-recovery of rent.
	18.	Shri Sukhwasi is Secretary to Hamesha Nuksan Ltd. Pune (Population 20 lakhs) and for the period between 1.4.2014 and 31.3.2015 has received the following salary and other payments from his company: ` Salary 18,000 p.m. Dearness allowance 2500 p.m. City compensatory allowance 800 p.m. Entertainment allowance 12,000 p.a. Commission on sales achieved by him 24,000 Rent –free accommodation of building (furnished) for which Co. pays a municipal tax on  ` 60,000 per annum and furniture value is   ` 1,20,000.    Medical bills reimbursed by company.  Treatment taken from a private hospital. 2,000 He is provided with a car of 1.8 lt. capacity which is partly used for personal and partly for employment purposes.  During the year company incurred    `24,000 on maintenance of car.  Normal depreciation on car is  ` 30,000 and driver’s salary is   ` 12,000 p.a.  It was agreed by the Assessing Officer that 40% of the car time is used for personal purposes. As per terms of agreement his professional tax of ` 2,000 was paid by the employer. During the year he travelled in connection with his job and was paid   `16,000 as travelling allowance and  `  12,000 as daily allowance. He and his employer contributed  ` 35,000 p.a. (each) to R.P.F. Compute his income under the head Salaries.
	19.	Following are the particulars of income of Mr. RTM for the assessment year 2015-16:       ` Income from business in Mumbai 80,000 Income from house property in Pune 20,000 Pension from former employer for service rendered in India but received in U.K. 24,000 Profit from business in UK but controlled from Mumbai 1,60,000 Dividend from an Indian company but received in UK 18,000 Income from agriculture in Nepal: received there but later on remitted to India 60,000 Interest on Bonds issued by U.K. Government out of which 50% is received in India 40,000 Past untaxed income of 2011-12 to 2013-14 brought into India during 2014-15 4,00,000 Income from house property in U.K. and donated there to a notified charitable institution 70,000 Compute the total income for the assessment year 2015-16 if Mr. RTM is (a) Resident,  (b)  Resident but not ordinarily resident; and (c) Non resident.
	20.	Explain in detail   Provision of  SPF, RPF, URPF and PPF.
	21.	Dr. Nagendra is a renowned medical practitioner who maintains books of account on cash basis, furnishes receipt and payment account for the previous year 2014-15: Receipts ` ` Payments ` ` To Balance b/d   14,000 By Rent of clinic     To Consultation Fees:                2013-14 600              2013-14 3,000               2014-15 4,800               2014-15 15,000               2015-16 600   2015-16 2,000       6,000     20,000 By Electricity & Water   2,000 To visiting fees   30,000 By House hold Exp   7,800 To Loan from Bank   25,000 By Purchase of Professional Books   4,000 To sale of Medicines   60,000 By Collection charges on Dividend   100 To Gift & Presents   5,000 By Motor Car purchased   30,000 To Remuneration from Journals   6,000 By surgical Equipment purchased   4,800 To Dividend   10,000 By Income-tax   10,000 To Interest on Post Office Savings Bank A/c   7,000 By Salary to Staff   15,000       By Life Insurance Premium   15,000       By Gift to wife   5,000       By Interest on loan (for profession)   2,000       By Car expenses   15,000       By Purchase of Medicine   40,000       By Balance c/d   2,300                         Total   1,77,000     1,77,000 Compute  his taxable professional income for the assessment year 2015-16 after considering the following: 1/3 of the use of car relates to his personal use. Depreciation on car is to be allowed @ 15% and on books @ 60%. Gifts include  `3,000 from patients and   `2,000 from relatives. Closing stock of medicine is   `5,500
SECTION – D
IV)	Case Study                                                                                                                     (1×15=15)
	22.	From the Profit and Loss account of Mr. Ramanathan for the year ending 31-3-2015.  Compute his business income:   `   ` General expenses 63,400 Gross Profit 2,65,500 Bad debts 22,000 Commission 18,600 Provision for bad debts 21,000 Brokerage 27,000 Insurance (House) 600 Sundry receipts 22,500 Salary to Staff 36,000 Bad debts recovered (earlier disallowed as deduction) 1,000 Salary to Ramanathan 22,000     Interest on loan (Bank overdraft) 62,000 Interest on deposit with a Trust 15,000 Interest on loan taken from Mrs. Ramanathan 4,000 Interest on units of U.T.I. 13,000 Interest on capital of Ramanathan 13,000 House Property 12,000 Depreciation on building 60,000     Advertisement expenditure 8,000     Contribution of employees RPF 12,000     Net Profit 50,600       3,74,600   3,74,600 Other information: The amount of depreciation allowable on building is  `40,200 as per Income –tax Rules. Advertisement expenditure includes ` 5,000 being cost of advertisement in newspaper. Income of  ` 10,000 accrued during the year is not recorded in the Profit and Loss Account. Ramanathan pays  ` 12,000 as premium on own life insurance policy of    `90,000 General expenses includes  ` 4,500 given to Mrs. Ramanathan for arranging a party in honour of a friend. Employer’s contribution to provident fund for last 2 months @  ` 1,000 p.m. has not been paid to appropriate authority within due date.

 

&&&&&&&&&&&&&&&&&&&&&&&&&&