SRM UNIVERSITY

(Under section 3 of UGC Act, 1956)

SCHOOL OF MANAGEMENT
ASSIGNMENT
On

BUSSINESS TAXATION
SUBMITTED TO: Mr. GOPAL SHASWAT
MBA (2008-10)

SUBMITTED BY:

AARADHANA PRIYADARSHANI
MBA 2ND SEMESTER
ROLL NO:-01
SEC :- A
Q1. Define tax planning:-
Answer- Tax planning is an arrangement of once
financial economic affairs by taking complete
legitimate benefits of all deductions, exemptions,
rebates and allowances so that the tax liability reduce
to minimum.
It is necessary for the tax planner that he should have a
profound knowledge of tax laws in order to help the
intensives knowledge of exemptions, deductions,
concessions, relieves, rebates and incentives available
under the law.
Tax planning should be done in such a way so that the
planner may avail maximum tax relief rebates and
deductions.

Characteristics of tax planning are as

under:

1. It is legally recognized

2. It is the connection with income expenditure and

investment.
 3- It must follow government rules and regulations
4- It reduces the tax liability and maximize the
after tax profit
5- It is a continuous process
6- Tax planning is scientific as it is based on rules
regulations and processes

Q.How tax planning can be effective in

the case of Indirect taxes?
Ans- It is a standard conversation in any board
meeting of companies to ask the chief financial
officer to find out how the income tax could be
reduced. It is a done thing. There are chartered
accountants who rack their brains only to achieve
income tax planning. But nobody talks of tax
planning on the reducing indirect tax side. The
reason is in the difference in the nature of their
taxable events.
The taxable event in income tax is the act of
generation of income, which is measured in terms
of net profit. It is an accounting concept. The
taxable events in the case of indirect taxes are
transaction based. In the case of Customs duty it is
the act of import or export. In the case of Excise
duty it is the act of manufacture. In the case of VAT,
it is the act of adding value. In the case of service
tax, it is the act of providing service.
These are all precise and physical concepts. Import
is bringing things into India from a foreign country,
which is a very precise concept. Manufacture is a
physical concept. The act of addition of value for the
purpose of value added tax is reflected on paper but
it is a simple concept. The act of providing service is
also a clear concept with few controversies about
whether something is a service or not.
Thus, we find that the taxable events on indirect
taxes are much more precise. Either they are
physical or easily identifiable. On the other hand,
net profit can be shown as less or more due to
manipulation of accounts. There are very many
provisions in the income tax law to provide for bad
debts or other receivables which can suitably lead
to a lesser net profit.
But a tax advisor on the indirect tax side cannot
reduce the amount of indirect tax by manipulation of
the production or manufacture or import etc. He can
only correctly interpret the law to come to the proper
taxable amount.
Evasion is not the same as tax planning. If a
manufacturer does not show his production in the
register and thereby avoid tax, it is evasion, pure
and simple. It is not tax planning. In income tax,
some people argue that legal avoidance is different
from evasion. I however, hold that there is no such
concept.
There is nothing like legal avoidance. Legal
avoidance is a contradiction in terms. If it is legal, it
is compliance to law. If it is illegal, it is evasion.
There is a legendary judgement known as
MacDowell case[1][1] in which Justice Chenappa
Reddy and Justice Ranganath Misra observed that
the notion that tax avoidance is legal is wrong.
This judgment has been quoted by many
subsequent judgements even on the indirect taxes
side only to emphasise that interpretation should
not encourage evasion.
It is important to clarify that availing of an exemption
is neither evasion not tax planning. An exemption
for opening a factory in a designated area such as
Uttarakhand or for using some special types of input
is clearly available to the manufacturers. If they
avail of it, it is just legal and not an evasion. This
cannot be called tax planning. The word tax
planning has a shady connotation. It smacks of
suitable manipulation of accounts.
The conclusion is that tax planning can be done on
the direct tax side by manipulating net profit but
there is no such scope on the indirect tax side as it is
transaction based
Q2.What is indirect tax and what are
the different liabilities of the central
excise duty?
Answer- indirect tax can be defined as the charge
that is collected by the intermediary (retail stores)
from the individuals who owns the actual burden of
the tax (like customers).
The intermediaries file the tax
returns and eventually pass to the government but
excise tax is an indirect tax levelly on the sales of
specific goods. It is wider source of revenue for the
Indian government.

Different liabilities of the excise duty

Duties of excise, all tobacco and other goods

manufactured or produced in India except alcoholic
lickers. For human consumptions opium, narcotics
but including medical and toilet preparations.
Basic conditions for excise liability:

1- Article must be goods (the articles

2- Must be movable and marketable).

3- Article must be excisable goods

4- Article must be produced or manufactured.

5- Article must be manufactured, new and

identifiable product known in the market must
emerge.

6- Article must be produced or manufactured in

India.