DS-1484

V Semester B.B.M. E~illation,

< ,
NovemberlDecember 2009
'

(Semester Scheme)
BUSINESS MANAGEMENT
5.1 : Income Tax

1. Answer any ten questions. Each carrying two marks.

a) Who is a Deemed to be an Assessee? Give an example.

b) What is a capital loss ? Give an example.

c) Under which head of income the following are taxable.

i) Rent from vacant land let out
ii) Income from sub-letting.

d) What is unrealised rent? How is it treated when recovered?

e) Define the term 'person'.

t) Define the term 'profession'.

h) How is the reimbursement of medical expenses treated for incomeJax purposes?

i) What are the provisions of Section 80 D ?

j) Give the meaning of bond washing transactions.

k) Mention any two examples of deemed incomes.

1) What do you mean by transfer in relation to capital asset?

Answer any five questions. Each question carries fiVe trlarks.

2. What is Provident Fund? Differentiate b~tweenR.p;F arid S.P.F.

3. DefineAgricultural income. Discuss whether the following are Agricultural incomes

or not.

i) Rent from house property situated in avillag~.

ii) Income from agriculture in Burma.

iii) Rent from farm house.

4. Briefly explain the following:

i) Cost of acquisition in relation to a capital asset.

ii) Municipal rental value of property.

iii) Fair rent of property.

iv) Standard rent of property.

5. Determine the residential status of Mr. Khali for lAAlpreviousyear 2008-2009 who
left India for the first time on 15-9-2004 and came back on 1-9-2007. He again left
for Dubai on 15-6-2008 and came back on February 14th, 2009 to settle in India for
ever.

6. Mr. Mohan is a non-government employee who receives Rs. 58,000 as earned leave
salary at the time of retirement on lOth March, 2009 on the basis of the following
information. Determine the amount of taxable earned leave salary.
a) Basic pay 4,000 p.m. since 1-1-2008.
b) Duration of services 16 years, 4 months.
c) Leave at the credit of employee at the time of retirement is 7 months ..
d) Entitlement of leave salary 45 days for every completed year of service.
e) Leave availed while in service is 17 months.
 Mr. Madan is an employee in a private company at Bangalore, drawing a basic
~,salary of Rs. 20,000 p.m. Dearness Allowances at Rs. 8,000 p.m. (80%, taken for
~/(l.8lculationof service benefits). Commission at Rs. 10,000 p.a. Bonus Rs. 8,000
~,'''t\~

. fIxedMedical Allowance Rs. 500 p.m. He jsprovided with a rent fr:ee furnished
house which is owned by the employer. The cost of furnishings Rs. 1,10,000 and
. r

the cost of air conditioner provided is Rs. 50,000.Colllpute the taxable value of
rent free house for the Assessment year 2009-2010.

8. Mr. Ravi retired from government service on 30th April, 2008. He gets a pension of
Rs. 5,000 p.m. upto 31st December 2008. With effect from 1-1-2009 he got ~ of
his pension, commuted and received Rs. 1,20,000. Find out the taxable value of
pension of Mr. Ravi for the Assessment year 2009-2010.

9. From the following particulars of Mr. Kumar compute ,his total income for the
Assessment year 2009-2010. His gross total income for the previous year
2008-2009 is Rs. 12,00,000. During the year, he made the following payments and
contributions:
i) Paid Rs. 40,000 as life insurance premium on his own life.
ii) Paid life insurance premium of Rs. 20,000 on his fathers life.
iii) He contributed Rs. 800, p.m. to R.P.F and Rs. 800 p.m. to U.R.:P.F.
iv) Paid Rs. 20,000 as medical insurance premium.
v) Donated Rs. 30,000 to Prime Ministers National Relief Fund and donations of
Rs. 50,000 in kind for a charitable institution.

10. Following are the particulars furnished by Mr. lagan, a citizen of India and resident
for year ending 31 st March, 2009. Net salary recei ved Rs. 1,74,000 after deduction of
a) His contribution to R.:P.F. 16;800
b) Income tax of Rs. 20,000,
 c) Housing loan instalment ofRs. 12,000
Other components of his salary are:
a) Employers contribution to RPF 16,800
b) Interest on RPF (on accumulated balance of Rs. 1,50,000) Rs. 15,000

c) House RentAllowance of Rs. 24,000 (the house is in Chennai and rent p

by him is Rs. 50,000).

d) Conveyance Allowance Rs. 1,000 p.m. (60% spent for official duties)
e) Entertainment allowance Rs. 500 p.m.
t) Education allowance for his 3 children Rs. 48,000.

g) Transport allowance Rs. 8,000.

h) He paid life insurance premium on his own life policy Rs. 10,000.
i) Hostel allowance for his 3 children Rs. 20,000.

j) Professional tax paid by the employer Rs. 300 p.m and paid by lagan
Rs. 200 p.m.
k) Reimbursement of medical expenses Rs. 25,000 (treatment taken in a recognised
hospital).

11. Following are the particulars of Mr. Praful for the previous year 2008-2009.
i) Profit on sale of plant at Singapore (on-half is received in India) Rs. 2,50,000.

ii) Profit on sale of property at Bangalore (one-half received in Hong-Kong)

Rs.50,000.
iii) Interest on U.K. Development Bonds Rs. 2,OO,~ of which Rs. 1,00,000 remitted
to India.
iv) Profit from business in Mangalore, the control is from U.S.A. Rs. 30,000.
v) Income from business in Mysore but received in Holland Rs. 5,00,000.
 .111111

vi) Profit from business in Pakistan controlled from India (40% profit received in
India) Rs. 6,00,000. .
vii)Dividends from domestic company Rs. 2,00,000.
viii)Interest on post office Savings Bank Account Rs. 10,000.
ix) Past untaxed foreign income brought to India during previous year Rs. 2,00,000.
x) Rural agricultural income in India Rs. 3,00,000.
xi) Salary and allowances from V.N.a. Rs. 3,00,000..
xii) Interest and dividends from units of D.T.!. Rs. 20,000
xiii)Income earned inAustralia and received there but brought to India Rs. 2,00,000.
xiv) Salary received in India for services rendered in Srilanka Rs. 1,50,000.

12. Dr. Sharma is a medical practitioner. He furnishes his Receipts and Payments
Account for the previous year 2008-2009.

Rs. Rs.
To Balance bId 35,000 By Rent of Clinic
ToConsultation fees: 2006 - 2007 16,000
2007-2008 50,000 2007 - 2008 14,800
2008 - 2009 70,000 2008 - 2009 16,600
2009 - 2010 12,000 By Electricity and water 12,000
To Visiting fees 30,000 By Purchase of professional books 18,000
To Loan from bank By Household expenses 7,800
for professional purposes 1,75,000 By Sales tax on medicines 2,800
To Sale of medicines 70,000 By Municipal tax on house property 2,000
To Sales tax on medicines 3,000 By Purchase of motor car 1,45,000
To Gifts from patients 50,000 By Fire Insurance on house property 2,000 .
To Remunerationfrom articles By Surgical equipments 47,000
publishedin a magazine 16,000 By Advance income tax 13,000
To Rent from house proJ?erty 11,OOOBf{
Sa_:tshtl~se
To Interest on post office By Entertainment expenses

National Savings Certificate 7,000 By '~haJe oIJx;..ray machines

ByEi~~
0"1 . _.":,'

of income tax
, ". .. " : ._.~.

'fP~~~""
BY~Wtt~,premium
By Q~,tor~jff ..."
BYInte~e~tonJoan
• ,':<, _ •• ~ ',I ) <.; ~ \. )

BY:Loan w'c:-ip,sw.hnentpaid
.< L i.h, i 4)f\ n -; I'

By Don~tioD,o~opoliticalparty
} J<~ i/ ~ ..

By Car expenses
~Y':Pu~~~~~es, nw~ic,ines
> ,; : ~
of ,;

By Balance c/d

i) ~ of car expenses in for personal use.

ii) Depreciation on motor car is at 15%.

ill) Opening stock of medicines is valued at Rs. '8,000.
iv) Outstanding consultation fees is Rs. 8,000 and outstanding electricity and water
charges is Rs.3,OOO. ' ,
v) Remuneration from articles include Rs. 3,000 for writing articles in a local news
paper.
Compute the income from profession of Dr: Sharma for Assessment Year
2009-2010.
DS - 1484 -6-

To Rent from house property 11,000 By Salary to a nurse

To Interest on post office By Entertainment expenses
National Savings Certificate 7,000 By Purchase of x-ray machin

By Expenses of income tax

proceedings
By Life insurance premium
By Gifts to wife
By Interest on loan
By Loan alc -instalment paid
By Donation to political party
By Car expenses
By Purchases of medicines
By Balance c/d

i) X of car expenses in for personal use.

ii) Depreciation on motor car is at 15%.

iii) Opening stock of medicines is valued at Rs. 8,000.

iv) Outstanding consultation fees is Rs. 8,000 and outstanding electrici

charges is Rs.3,000.

v) Remuneration from articles include Rs. 3,000 for writing articles in

paper.

Compute the income from profession of Dr. Sharma for Assessment )'i
2009-2010.
· Following is the Profit and Loss Account of Mr. Charitya
Rs. Rs.
To Rent 60,000 By Gross profit 5,23,000
To Rates 6,000 By Interest on Debtors 28,000
To Salary of staff 54,000 By Rent from Property ·24,000
ToDiwali Puja expenses 2,000 By Sunday income 16,000
To Interest on loan 1,25,000 By Commission 37,000
To Sunday expenses 55,000 By Bad debts
To Bad debts 6,000 recovered (disallowed earlier)
To Charity 1,000
To Reserve for bad debts 2,000
To Entertainment 8,500
To Loss by theft 14,000
To Sales tax penalty 10,000
To Net profit 2,94,500

Additional Information
a) Rent includes Rs. 12,000 of a shop belonging to assessee himself.
b) Salary of staff includes salary of Rs. 24,000 of a son, who is a B.Com. student
and who casually helps in business and proprietor's salary of Rs. 1,000 p.m.
c) A loan of Rs. 60,000 at 15% p.a. is taken from his wife out of funds advanced
by him and interest is included in interest on loan.
d) Sunday expenses include Rs. 9,000 being expenses incurred on pilgrimage to
Haridwar.
e) Entertainment includes Rs. 1,500 spent on tea of same guests of a local M.L.A.
t) Loss by theft tool place when somebody pretending to be a customer stole a
necklace worth Rs. 6,000 in his shop, Rs ..8,000 were stolen from his house in
the night by delocking.
g) He earned Rs. 40,000 in gold smuggling not shown in books.
h) Rates include Rs. 4,000 for the property let.
i) Sales tax paid and depreciation not taken to Profit and Loss Account Rs. 8,000
and Rs. 5,000 respectively.
14. Following are the particulars of Sri Keshav, he's the owner of house property ..
has been let out for Rs. 1,05,000 p.a. The municipal taxes payable by the owne'
comes to Rs. 10,000, but the tenant has agreed to pay directly to the municipali
The municipal value of the property is Rs. 90,000. The landlord bears the
, following expenses on the amenities provided to the tenant under an agreement.
Water' charges Rs. 1,500
Lift maintenance Rs. 1,500
Lighting of stairs Rs. 1,000
Gardeners salary Rs. 1,000

The following are the other expenses:

Repairs Rs. 10,000
Collection charges Rs. 2,000
Interest on loan for construction Rs. 12,000

Note: Rent of Rs. 1,05,000 is a composite rent. He had a transaction for the sal
of another residential house. The following are the particulars: House purchased in
the year 1982-83 for Rs. 3,80,000, sold in November 2008 for Rs. 24,00,000.
Purchased another house in December 2008. Rs. 8,00,000 deposited in the Capital
Gain Alc scheme in January 2009 Rs. 1,40,000. The cost of inflation index for
1982-1983 and 2008~2009 was 109 and 582 respectively. His other details are :
i) Dividend from a co-operative society Rs. 5,000.
Ii) Dividends from Indian companies Rs. 8,000.

ill) Rent from factory building and machineryRs. 60,000. Depreciation and insurance
on building and machinery Rs. 6,000 and Rs'. 2,000 respectively.
iv) Rs. 60,000 invested in 7% debentures of J\lt~ Mills Ltd. and interest on 10%,
Rs. 1,00,000 National Defence Certificates.
Compute his Gross Total Income for assessment year 2009-2010.