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Mba-Iii Semester Mf0003 - Taxation Management (B0769) Assignment Set 1 - (30 Marks)
Mba-Iii Semester Mf0003 - Taxation Management (B0769) Assignment Set 1 - (30 Marks)
MBA-III SEMESTER
(B0769)
1. Following are the taxable income of Sri. Akash for the previous year 2008-09
provided for a
business carried
on in London.
2. Compute income from house property from the following particulars for the assessment
year 2009-10
I II III IV
Municipal Value 40,000 45,000 50,000 52,500
Fair Rental Value 35,000 46,000 54,000 65,000
Rent received 32,000 37,000 45,000 55,000
Standard Rent 36,000 40,000 48,000 57,000
Vacancy Period 3 months - - -
Repairs 15,000 14,000 17,000 19,000
Municipal Tax:
- Paid 6,000 3,500 - -
- Due 1,800 2,400
The assessee had borrowed on 1.10.2002 Rs.3,50,000 at 14% for the construction of
the second house which was completed on 31-12-2005. As on 1-4-2008 Rs.3, 00,000
was outstanding. In respect of the fourth house one month rent was unrealized. The
claim was genuine and satisfied the conditions: and the recent received was for 10
months.
=159250*1/5
Fall 2009
Computation of income from house property for the assessment years 2009-10
I House:
G.A.V. 32,000
II House:
III House:
IV House:
The word ‘Provident’ means to provide for the future, hence this fund is to provide for
the future. This fund is created by an amount deducted from the salary of the employee
every month at a certain rate. The employer also makes his own contribution to this
fund. These contributions are invested to earn interest, which is also credited to the
employee’s provident fund account. When an employee retires from his service,
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he receives this amount in lump-sum along with interest on it and is a great help to
him at that time. If unfortunately, the employee dies during the tenure of his service,
the amount of this fund is received by his wife and children or legal heirs, which is of
great help to them.
Statutory Provident Fund. It is that Provident fund to which the Indian Provident
Fund Act, 1925 applies. Generally, this Provident Fund is maintained by
Government or Semi-Government offices, like local authorities, universities, other
recognized educational institutions, statutory corporations and nationalized banks, etc.,
Unrecognised Provident Fund: It is that provident fund which is neither statutory nor
recognized. Any institution or organization can maintain this fund. It is approved by the
P.F. commissioner but not by the commissioner of income tax.
Public Provident Fund: The Public Provident Fund Scheme was started from Ist July,
1968, under the provision of PPF Act, 1968. Every individual (including a salaried
employee) can subscribe to this fund any amount being not less than Rs.500 and not
more than Rs.70, 000 in year. He can also deposit money in installments which
cannot exceed 12 in a year. An individual can open a public provident fund account
either on his own behalf or on behalf of a minor of whom he is the guardian. However,
an individual can open only one account in his own name. An account under this
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scheme can be opened at a branch of the State Bank of India or its subsidiaries or at a
branch of any of the nationalized banks authorized for this purpose by the Central
Government.
A withdrawal is permissible every year from the seventh financial year of the date
of opening the account, of an amount not exceeding 50% of the balance at the end
of the 4 preceding year or year immediately preceding the year of the withdrawal,
whichever is lower, less the amount of loan if any.PF scheme allows the
assessee to withdraw the entire amount at his credit, after adjustment of the dues if
any to government, on completion of 15 years after the end of the year in which the
account is opened. The first loan can be taken in the third financial year, upto
25% of the amount at the credit at the end of the first financial year. This facility can be
availed only before the expiry of 5 years from the end of the year in which the initial
subscription was made. The loan is repayable either in lump sum or in convenient
installments. The account can be transferred to any other accounts office. The interest
credited to the fund and amount standing to the credit of subscribers are
exempted from income tax and wealth tax respectively. Nomination facility is available.
NRI are not permitted to open account under this scheme.
MBA-III SEMESTER
(B0769)
Fall 2009
1. What are the expressly disallowed expenses while computing income under the head
profits and gains from business or profession?
The following expenses are expressly disallowed by the Act while computing income
chargeable under the head’ profits and gains of business or profession’.
(i) Payments outside India. Royalty, fees for technical services, etc. which tax is
deductible at not been paid during the previous year or in prescribed time. Shall
not be allowed as a deduction.
(ia) Payments to residents. any interest, commission or brokerage, fees for professional
services or feeds for technical and such tax has not been deducted or, after deduction.
Tax on Profits and Gains. Any sum paid on account of any tax levied
Salaries Payable outside India or to a non-resident, if tax has not been paid thereon nor
deducted at source.
Payment to P.F., etc. Any payment to a provident or other funds shall not be
allowed as a deduction unless it is ensured that tax shall be deducted at
source from any payment made from the fund provided it is chargeable to tax Tax
on perquisites of employee.
a. Unabsorbed depreciation
Unabsorbed Depreciation
Depreciation allowance for a particular previous year is first deductible from the profits
and gains of the business or profession. If the profits and gains of the same business
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or profession are insufficient for this purpose, the balance of the amount of current
depreciation allowance is deductible from the profits of any other business or profession
of the assessee. If the profits of any other business or profession are also unable
to absorb the whole amount of depreciation allowance, the balance of such
allowance which remains unabsorbed can be set-off against any other taxable income
of the same year. If still, the whole amount of current depreciation allowance is not
deductible on account of the insufficiency of the other taxable income, the remaining
unabsorbed amount is called “Unabsorbed Depreciation”. If unabsorbed depreciation
cannot be wholly set-off, the amount of depreciation not set-off shall be carried forward
to the following assessment year. The unabsorbed depreciation shall be added to the
depreciation allowance for the following previous year or for the succeeding previous
years till such time it is fully deducted. In other words the unabsorbed depreciation shall
be treated as part of the current year’s depreciation.
It is a residuary section:
Under section 37(1), the following conditions should be fulfilled, in order that a particular
item of expenditure may be deductible under this head: The expenditure should not be of
the nature described in section 30 to 36. It should be in respect of a business or
profession carried on by the assessee and the profits and gains of which are to be
computed and assessed. It should not be in the nature of personal expenses of the
assessee. It should have been paid out or expended wholly and exclusively for the
purpose of such business or profession. It should not be in the nature of capital
expenditure. It should relate to the previous year concerned. The following are the few
examples of admissible general deduction under section 37:
under an Act and with the previous approval of a state Government may not be
allowable u/s 36(1)(iv) but allowable u/s 37(1).
10) Insurance premium paid under a policy insuring its employees against injury or
against liability for compensation in respect of accident to its workmen.
15) Interest on unpaid purchase price of any business assets purchased by an assessee
and put to use will be allowed.
19) Penalty paid by the assessee for saving from confiscation the good which he
purchased from a third party without knowing that they had been illegally imported.
23) Guarantee fee paid to him Government for loan obtained for purchase of
machinery.
Fall 2009
25) If an asseessee stand ss surety for the debt of another and it is usual in this trade to
guarantee debts, any payment made as a result of such guarantee may be allowed as
a business loss.
26) Professional tax levied by local authorities the payment of which is a necessary
condition for the carrying on the business within the area of a local authority.
27) Rebate granted by co-operative stores to their members on the value of the
purchases made by them.
28) The interest payable on arrear of cess is in the nature of compensation paid
to the Government of delay in the payment of cess and not as penalty, hence it is
deductible. Similarly, interest paid for delay in payment of municipal taxes is also
allowable as deduction.
30) Amount paid as damages to the Government Department for delay in the
execution of contracts was held to be allowable deduction, if the delay was inherent in
the nature of business carried on by the assessee.
31) Annual listing fee paid to Stock Exchange by public limited company is allowable.
32) Interest levied for failure to pay installment of the assets purchased on hire-purchase
basis is allowable.
36) Liability to pay debenture premium is to be spread over the years between
date of issue and date of redemption.
3. Mr. Radha Krishna, an individual submits the following information relevant for the
assessment year 2009-10
Profit Loss
Salary Income (computed) 54.000
Income from House Property
House 1 17,000
House 2 23,000
Profit & Gains of business or Profession
Business X 7,000
Business Y 14,000
Business Z (speculative) 15,000
Business A (speculative) 19,000
Capital Gains
Short term capital gains 8,000
Short term capital loss 12,000
Long term capital gains on sale of land 24,000
Income from other sources:
Income from card games 6,000
Loss on card games 9,000
Loss on maintenance of race horses 4,500
Interest on securities 3,000
Determine the net income of Mr. Radha Krishna for the
assessment year 2009-10
Non- speculative
Fall 2009
Capital gains
Income from card games (loss from card games cannot be deducted)6,000
Net Income
58,000