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Intermediate Examination Syllabus 2016 Paper 7: Direct Taxation (DTX)
Intermediate Examination Syllabus 2016 Paper 7: Direct Taxation (DTX)
Intermediate Examination Syllabus 2016 Paper 7: Direct Taxation (DTX)
INTERMEDIATE EXAMINATION
Syllabus 2016
There are Sections A, B, C and D to be answered subject to instructions given against each.
(Time allotted for Sections A and B shall be limited to a maximum of 50 minutes)
Section A 20
Marks
1. You are required to answer all the questions. Each question carries 1 mark. 20 X 1
Instructions: Each question is followed by 4 Answer choices and only one is correct. You are required to = 20
select the choice which according to you represents the correct answer.
b. The basic exemption limit for a resident super senior citizen above the age of 80 is
(i) 200,000
(ii) 2,50,000
(iii) 5,00,000 A
(iv) None of the above
c. When Mr. B paid royalty to Dr. P of Sweden for use of know-how in India, such payment is
(i) Exempted income
(ii) Income accruing in India A
(iii) Income accrues in Sweden
(iv) Income received in India
d. When an employee receives money on closure of National Pension System Trust Account it is
(i) chargeable to tax
(ii) exempt from tax
(iii) 40% is exempt from tax A
(iv) 60% is exempt from tax
e. When the shares are held in unlisted company, it is treated as long term capital asset when the
holding period exceeds
(i) 36 months
(ii) 24 months A
(iii) 12 months
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(iv) 6 months
g. An individual estimates that he is required to pay Rs. 100,000 as advance tax. By 15th of December,
how much amount must be paid by the individual?
(i) Rs. 30,000
(ii) Rs. 75,000 A
(iii) Rs. 100,000
(iv) Nil
h. Preliminary expenses that can be amortized under the Income-tax Act, 1961 has to be restricted to
________ of the cost of the Project.
Fill in the above blank from among the choices as below.
(i) 5% A
(ii) 15%
(iii) 20%
(iv) None of the above
l. Paintings are not considered as______ in the context of “capital asset” definition
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(i) Liability
(ii) capital gains
(iii) Expenditure
(iv) personal effects A
o. Additional depreciation for plant used for more than 180 days
(i) 10%
(ii) 20% A
(iii) 30%
(iv) 25%
p. Which of the following can be corrected while processing the return of income under section
(i) Any arithmetical error in the return A
(ii) Any mistake in the return of income
(iii) Any error of principle in the return of income
(iv) Any claim by taxpayer which is against law
s. Mr. H resident in India received Rs. 11 lakhs by way of dividend from Indian companies. Such
dividend is
(i) exempt from tax
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t. Speculation loss can be carried forward for a maximum period of ____ years after the year of such
loss.
Fill in the above blank from among the choices as below.
(i) 4 A
(ii) 5
(iii) 8
(iv) 10
Section B 20
Marks
2. You are required to answer all the questions. Each question carries 1 mark. 20 X 1
Instructions: Each question is followed by a space where you are required to type your answer. = 20
a. As per section 115BBDA dividend from Indian companies is taxable in the hands of certain
recipients at _____ when the aggregate dividend exceeds ______________ .
State the word(s) and/or figure(s) according to you which most appropriately fills the above blanks.
Type your answer here 10%, Rs.10 lakhs
b. Section 80 RRB the Income-tax Act, 1961 deals with deduction from gross total income in respect
of income by way of _______________________ .
State the word(s) according to you which most appropriately fills the above blank.
Type your answer here Royalty on patents
d. Unabsorbed depreciation shall be allowed to be carried forward for any number of years and such
carried forward unabsorbed depreciation may be set off against any income, other than … .
Complete the sentence.
Type your answer here Income under the head “Salaries”, Winning from lotteries, cross word
puzzles, etc.
e. Income referred to in sec. 68 to sec. 69D shall be taxable @ ___________ (excluding Surcharge
and Cess).
State the % according to you which most appropriately fills the above blank.
Type your answer here 60%
f. When unrealized rent is received based on court decree but at the time of receipt the property was
not owned by the assessee, it is taxable under the head ________.
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State the word(s) according to you which most appropriately fills the above blank.
Type your answer here Income from house property
g. The Income Computation Disclosure Standards (ICDS) will apply only when the assessee
adopts____________________method of accounting.
State the word(s) according to you which most appropriately fills the above blank.
Type your answer here Mercantile (or accrual)
h. A start-up can claim deduction under section 80-IAC for_________consecutive years beginning
from the year in which the eligible start-up was incorporated.
State the figure according to you which most appropriately fills the above blank.
Type your answer here 3
i. When the return of income for the assessment year 2021-22 is filed under section 139(4), the
Assesse can revise the return on or before ______________ .
State the date in DD.MM.YYYY format according to you which most appropriately fills the above
blank.
Type your answer here 31.03.2023
j. Scholarship received by a student was Rs. 2,000 p.m. He spends Rs. 16,000 for meeting the cost of
education. The Balance Rs. 8,000 is ________________ .
State the word according to you which most appropriately fills the above blank.
Type your answer here exempt
k. Period for holding bonus shares or any other financial asset without any payment shall be reckoned
from the date of ______________ .
State the word according to you which most appropriately fills the above blank.
Type your answer here allotment
m. As per section 271H, where a person fails to file the statement of tax deducted/ collected at source
i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he shall be liable to
pay penalty under section 271H. Maximum penalty that can be levied is … .
Complete the sentence.
Type your answer here Rs.1,00,000, but not exceeding the amount of TDS/TCS.
n. A trust shall not be considered as charitable trust for according to the benefits of section II, when
the commercial activities in the previous year exceed_______.
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State the word(s) and/or figure(s) according to you which most appropriately fills the above blank.
Type your answer here 20% of Gross Receipt
p. In the case of foreign company with total income of more than Rs. 1 crore but less than Rs. 10
crores the surcharge leviable is @ __________ .
State the % according to you which most appropriately fills the above blank.
Type your answer here 2%
r. Long term capital gain arising from transfer of unlisted securities in the hands of non-resident/
foreign company is chargeable to tax @ ____________ .
State the % according to you which most appropriately fills the above blank.
Type your answer here 10%
s. Interest on housing loan taken by individual being his first residential house is eligible for deduction
under section 80EE up to a maximum of Rs. _________ .
State the figure(s) according to you which most appropriately fills the above blank.
Type your answer here 50,000
t. When a director of a company received Rs. 30 lakhs by way of non-compete fee, it is taxable under
the head _ ____________ .
State the word(s) according to you which most appropriately fills the above blank.
Type your answer here Profits and Gains of Business or Profession
Section C 40
Marks
You are required to answer any 4 out of 6 questions in this section 10 X 4
Instructions: Each question is followed by a space where you are required to type your answer. = 40
3. a. State whether the following transactions attract tax deduction at source (TDS) provisions and the 2x3=6
rate of tax & the amount of tax deductible in applicable cases.
(i) Interest on recurring deposit of Rs. 12,000 paid by a nationalized bank to Mr. D.
Type your answer here
Section 194A is applicable for recurring deposit interest paid by bank when it exceeds Rs. 10,000.
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b. State the taxability of the following transactions for the Assessment Year 2021-22: 4
(i) Mrs. J got a gift of 500 listed equity shares of a company from her husband when the market
value of the share was Rs. 150 per share. After a month, the company issued bonus shares in 1:1
ratio. The original shares were acquired by her husband 4 months before the date of gift for Rs.
50,000. All the 1000 shares were sold for Rs. 1,50,000 through off-market transaction. How much is
taxable and in whose hands it is taxable as income?
Type your answer here
Short-term capital gain arising from sale of original shares gifted i.e., Rs. 25,000 (Rs.75,000 - Rs.
50,000) shall be taxed in the hands of husband of Ms. J under section 64.
Capital gain attributable to bonus shares will not be liable for clubbing under section 64 since it is
an accretion to the original shares. Therefore, Rs. 75,000 being the sale consideration from sale of
bonus shares whose cost of acquisition is Nil is taxable in the hands of Mrs. J as short-term capital
gain.
(ii) R & Co. a partnership firm engaged in trading of vacant lands. It sold vacant land for Rs. 40 lakhs
when the stamp duty valuation of the lands was Rs. 55 lakhs.
Type your answer here
Even where the immovable property being land or building or both is dealt with as stock-in-trade
of a business, as per section 43CA the difference between stamp duty value and the actual
consideration would be taxable as income from business.
Hence, Rs. 15 lakhs would be taxable as business income under section 43CA in the hands of R &
Co.
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Working Notes:
It is also possible to take the view that for computing depreciation, the position of the block, as at
the year-end is to be taken.
Alternatively,
Value of any asset sold can first be deducted from assets purchased during the year and used for
less than 180 days and only if required, from the balance value in the block in such case,
depreciation will be:
Particulars Machinery Computers Furniture
(Rs.) (Rs.) (Rs.)
For assets used for more than 180 days:
Amount 23,00,000 7,00,00 21,00,000
Rate of Depreciation (Full) 15% 60% 10%
Amount of Depreciation (A) 3,45,000 4,20,000 2,10,000
For assets used for less than 180 days:
Amount Nil 1,00,000 Nil
Rate of Depreciation (Half) 7.5% 30% 5%
Amount of Depreciation (A) Nil 30,000 Nil
Total Depreciation [(A) + (B)] 3,45,000 4,50,000 2,10,000
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5. a. Mr. A of Chennai sold a vacant site for Rs. 30 lakhs to Mr. R on 01.05.2020. The value of land for 7
stamp duty purposes was Rs. 25 lakhs. The vacant site was acquired in April, 2000 for Rs. 3 lakhs.
The fair market value of the vacant site on 01.04.2001 was Rs. 4 lakhs. The entire sale
consideration plus a housing loan of Rs. 38 lakhs from a nationalized bank was availed for acquiring
a residential building for Rs. 68 lakhs in Pune on 01.07.2020. The stamp duty paid for the purpose
of acquisition was Rs. 2, 90,000. The property was let out for a monthly rent of Rs. 10,000 from
01.07.2017. Interest on housing loan during the year till its closure, amounted to Rs. 2, 80,000.
Mr. A sold yet another vacant site for Rs. 28 lakhs on 21.01.2021. This vacant site was acquired in
October, 2015 for Rs. 20 lakhs. He utilized the entire sale proceeds realized in January 2018 for
repaying the housing loan.
His other incomes are
(i) Income from business (computed) Rs. 3,90,000 and
(ii) Bank interest of Rs. 60,000 from Term Deposits and Rs. 15,000 from Savings Bank Account.
Compute the total income of Mr A for the assessment year 2021-22.
Cost Inflation Index : F. Y. 2001-02 = 100; F.Y. 2015-16 = 254; F.Y. 2017-18 = 272; F.Y. 2018-19 =
280; F.Y. 2019-20 = 289; F.Y. 2020-21 = 301
Type your answer here
Computation of Total Income Mr. A for Assessment Year 2021-22
Rs. Rs.
Income from House Property:
Rent for 9 months (Rs.10,000 × 9) 90,000
Less: Deduction U/s. 24 @ 30% 27,000
Interest on money borrowed 2,80,000
3,07,000
2,17,000
Loss from House Property - but limited to (2,00,000)
Capital Gains:
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Other Sources:
Interest from Term Deposits 60,000
Savings Bank Interest 15,000
75,000
Gross Total Income 2,65,000
Deduction under Chapter Vl A
(i) Section 80 C in respect of stamp duty limited to Rs. 1,50,000 1,50,000
(ii) Section 80TTA for Savings Bank Interest 10,000
1,60,000
Total Income 1,05,000
Working Notes
As the new residential house was acquired for Rs. 58 lakhs and the entire sale consideration is also
Rs. 58 lakhs, the entire capital gain is exempt U/s.54 F
b. State with brief reasons whether the following are agricultural income either in whole or in part. 3
(i) Purchase of standing sugarcane crop by Mr. A for Rs. 2 lakhs and after cutting the canes, selling
them for Rs. 2, 50,000.
Type your answer here
To term an income as agricultural income, both basic operations and subsequent operations must
be present. A standing crop purchase will not lead to agricultural activity and hence the profit
earned cannot be termed as agricultural income.
(ii) Income from sale of plants Rs. 1, 00,000 earned by Mr. J who maintains a nursery by name
Soundarya Nursery.
Type your answer here
Running a nursery with plants seeks both basic operations and subsequent operations; Further, as
per definition, it is deemed to be agricultural income and therefore the entire income would be
agricultural income.
(iii) Income from sale of rubber Rs. 3,20,000 realized by Mr. R who owns the rubber estate and
cultivates rubber.
Type your answer here
Income from rubber cultivation is partly agricultural income and partly non- agricultural income.
65% of the income is agricultural income and 35% of the income is non-agricultural income which is
chargeable to income-tax.
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6. a. Mr. S (aged 65 years) is a retired person drawing a monthly pension of Rs. 6,000. His taxable long- 7
term capital gain from sale of painting during the previous year 2020-21 is Rs. 2, 75,000. He has no
other income during the year.
Compute his tax liability for Assessment Year 2021-22 (i) if he is Resident and (ii) if he is Non-
Resident.
Type your answer here
(i) Tax Liability of Mr. S for the A.Y. 2021-22 if he is Resident
Particulars Rs. Rs.
Pension Income (Rs. 6,000 X 12) 72,000
Other Income: Long-term capital gain from sale of painting (Taxable) 2,75,000
Total income 3,47,000
Tax on income other than long-term capital gain Nil
Tax on long-term capital gain:
Excess of basic exemption limit on Other Income 2,28,000
20% of (Other Income – Excess of Basic Exemption Limit) 9,400
Education HEC @ 4% 376
Tax Liability 9,776
Working Notes:
Excess of basic exemption limit on other income (Rs.3,00,000 - Rs. 72,000) = Rs. 2,28,000
20% of (Other Income – Excess of Basic Exemption Limit) = 20% of (Rs. 2,72,000 – Rs. 2,28,000)
(ii) Tax Liability of Mr. S for the A.Y. 2021-22 if he is Non-Resident
Particulars Rs.
Tax on income other than long-term capital gain Nil
Tax on long-term capital gain: 20% of Rs. 2,75,000 55,000
Education HEC @ 4% 2,200
Tax Liability 57,200
Working Notes:
Non-residents Individuals do not enjoy any basic exemption limit.
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b. State the due dates of installment for payment of advance tax and the amount of installment for 2
such assesses who are not covered under the provisions of section 44AD.
Type your answer here
Due date of installment Amount payable
On or before 15th June of the previous year Not less than 15% of such advance tax
On or before 15th September of the previous Not less than 45% of such advance tax, as
year reduced by the amount paid in the earlier
installment
On or before 15th December of the previous Not less than 75% of such advance tax, as
year reduced by the amount paid in the earlier
installment
On or before 15th March of the previous year The whole amount of such advance tax, as
reduced the amount or amounts paid in the
earlier installment or installments
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In course of processing the return of income the Assessing Officer shall make the following
adjustments:
a) any arithmetical error in the return.
b) an incorrect claim, if such incorrect claim is apparent from any information in the return.
c) disallowance of loss claimed, if the return of the previous year for which set off of loss is
claimed was furnished after due date.
d) disallowance of expenditure indicated in the audit report but not taken into account in
computing the total income in the return.
e) Disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80- IC, 80-ID
or 80-IE, if the return is furnished after the due date.
f) addition of income appearing in Form 26AS or Form 16A or Form 16 which had not been
included in computing the total income in the return.
Such adjustments shall not be made unless an intimation is given to the assessee of such
adjustments either in writing or in electronic mode. The response received from the assessee, if
any shall be considered before making any adjustment and in a case where no response is received
within 30 days of the issue of such intimation, such adjustments shall be made.
c. Revised Return
Type your answer here
When a person has furnished a return under section 139(1) (i.e. within prescribed time limit) or a
belated return under section 139(4) he can file a revised return.
The filing of revised return is to correct any omission or wrong statement therein.
The time limit is any time before expiry of one year from the end of the assessment year or before
the completion of assessment, whichever is earlier.
Assessment for this purpose means regular assessment under section 143(3) or best judgment
assessment under section 144. In other words the assessee can file a revised return of income after
completion of summary assessment under section 143(1) but before completion of regular
assessment under section 143(3) or best judgment assessment under section 144.
The assessee can revise his return for more than once within the time prescribed in section 139(5).
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Section D 20
Marks
You are required to answer all the questions in this section 10 X 2
Instructions: Each question is followed by a space where you are required to type your answer. = 20
Marks
9. Mr. K is an engineer aged 37 years, who recently joined the company R Manufacturing Co. Ltd., of
Mumbai as the General Manager after an experience of over a decade in the industry.
The company holds a bright prospect for Mr. K offering a higher pay package, health policy
reimbursement schemes, gym allowances, retirement benefits like contributions towards National
Pension scheme, Provident Fund and other benefits.
The company is known for its performance rewards, congenial work environment and ample
opportunities for individual growth.
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He initially lived in Thane area to save on rent and it was convenient for him to travel to his
previous work. After he joined the new company, travelling expenses increased due to the distance
from Thane to Navi Mumbai.
He thereby shifted to a new space in Navi Mumbai on 1st October, 2020.
Although the rent is higher here, by about Rs 5000 per month, yet it is convenient and saves him
time.
He gifted himself a brand new Honda City car for his success and hard work.
Given his role as the General Manager that requires numerous business meets in and around the
city, the employer agreed to reimburse the maintenance expenses of the car along with the mobile
phone bill expenses.
Within a year of joining the company, he was able to exhibit results which were highly appreciated
by the management.
At the end of the year he furnishes the following information for the year ended 31.03.2021:
Particulars Amount (Rs.)
Basic Salary (per month) 50,000
Dearness Allowance (eligible for retirement benefits) 80% of Basic Salary
House Rent Allowance (per month) 10,000
Rent paid by him Rs. 15,000 per month for 6 months and Rs. 20,000
per month for balance 6 months (at Mumbai)
City Compensatory Allowance (per month) 2,500
Medical reimbursements (annual) 13,000
Gymkhana club annual membership fee reimbursed by employer 20,000
Mobile phone bill reimbursed by the employer (Used for both official 37,500
and personal use)
Motor car (cubic capacity of engine 2.2 litres) owned by the employee 85,800
but the maintenance expenses fully met by the employer (Motor car
was used both for personal and official use)
Cash gift paid by the employer in appreciation of performance on 30,000
01.01.2021
Employees’ Contribution to Recognized Provident Fund 1,20,000
Employer’s Contribution to Recognized Provident Fund 90,000
Medical Insurance Premium paid by cheque 18,000
a. You are required to compute the Taxable portion of House Rent Allowance of Mr. K for the 2
Assessment Year 2021-22.
Type your answer here
Computation of Taxable Portion of House Rent Allowance
Particulars Rs. Rs. Rs.
House Rent Allowance received 1,20,000
50% of Salary (Basic Salary + DA) 5,40,000
Actual HRA 1,20,000
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b. You are required to compute the Taxable portion of Motor Car Perquisite of Mr. K for the 2
Assessment Year 2021-22.
Type your answer here
Computation of Taxable Portion of Motor Car Perquisite
Particulars Rs.
Motor car (cubic capacity of engine 2.2 litres) owned by the employee but the 85,800
maintenance expenses fully met by the employer (Motor car was used both for
personal and official use)
Tax free @ Rs. 2,400 per month (assuming chauffeur is not provided) 28,800
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d. You are required to compute the Gross Total Income of Mr. K for the Assessment Year 2021-22. 4
Type your answer here
Computation of Gross Total Income of Mr. K for the Assessment Year 2021-22
Particulars Rs.
Basic Salary 6,00,000
Dearness Allowance 4,80,000
City Compensatory Allowance 30,000
House Rent Allowance (Taxable) 18,000
Medical Reimbursements Nil
Gymkhana Club Membership Fee – Reimbursed by employer 20,000
Mobile Phone Bill - Reimbursed by employer 37,500
Motor Car Perquisite (Taxable) 57,000
Cash Gift paid by employer 30,000
Employees’ Contribution to Recognized Provident Fund NIL
Employer’s Contribution to Recognized Provident Fund (Taxable) NIL
Medical Insurance Premium paid by cheque NIL
Gross Total Income 12,15,500
10. Mr. R is a resident individual who is engaged in a wholesale business of health products in Gujarat.
He has ventured into the business since his graduation. Since then he has expanded his current
business and has been successfully running it.
Mr. R recently became a partner in XYZ & Co., a partnership firm that deals in cosmetic products.
This has only allowed him to increase his income and has been regularly receiving an interest on
capital of 15% on capital.
His capital in the partnership firm stood at Rs. 10,00,000 throughout the financial year 2020-21.
He has made some judicious investments in fixed deposit from where he earns an annual interest.
He has taken a life insurance policy on his only son who recently completed his MBA and has joined
a reputed MNC.
He has invested in Public Provident Fund but in the name of his wife.
He pays all his dues regularly in time, but due to shortage in cash, he was unable to pay the second
installment of Municipal Tax within the due date.
He was hoping there would be some relief provided by the government, given the uncertain
scenario in the country.
He recently received an Income Tax refund, which has helped him to ease some financial pressure
and immediately used it to pay the due Municipal Tax and made a cash payment of Rs. 21,000 to
clear the Manager’s salary.
He now provides the following details to you for the year ended 31.03.2021 to aid him in return
filing:
SI. No. Particulars Rs. Rs.
(i) Interest on capital received from XYZ & Co. 1,50,000
(ii) Interest form bank on fixed deposit (Net of TDS Rs. 1,500) 13,500
(iii) Income-tax refund received relating to assessment year 2019-20 34,500
including interest of Rs. 2,300
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(iv) Net Profit from wholesale business as per P&L A/c 5,60,000
(v) Amounts debited to P&L A/c include the following:
Depreciation as per books 34,000
Motor car expenses 40,000
Municipal Taxes for the shop (two half-yearly payments - one 7,000
made on 12.07.2020 and the other made after due date for filing
of return of income)
Salary to manager by way of a single cash payment 21,000
(vi) The WDV of the assets (as on 01.04.2020) used in the above
wholesale business is as under:
Computers (Depreciation: 60%) 1,20,000
Motor Car of which 20% used for personal use (Depreciation: 3,20,000
15%)
(vi) LIP paid for independent son 60,000
(vii) PPF contribution in his wife’s name 70,000
a. Calculate the amount of Depreciation and Closing WDV of Computer for the Assessment Year 2
2021-22.
Type your answer here
Computation of Depreciation and Closing WDV of Assets used in the Wholesale Business of
Health Products of Mr. R for the Assessment Year 2021-22
Particulars Computer (Rs.)
Opening WDV 1,20,000
Additions/Disposals during the year NIL
Rate of Depreciation (%) 60
Amount of Depreciation 72,000
Closing WDV 48,000
b. Calculate the amount of Depreciation and Closing WDV of Motor Car for the Assessment Year 2
2021-22.
Type your answer here
Computation of Depreciation and Closing WDV of Assets used in the Wholesale Business of
Health Products of Mr. R for the Assessment Year 2021-22
Particulars Motor Car
(Rs.)
Opening WDV 3,20,000
Additions/Disposals during the year NIL
Rate of Depreciation (%) 15
Amount of Depreciation 38,400
Closing WDV 2,81,600
Working Note:
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Amount of Depreciation on Motor Car, being used 80% for business = 80% of 15% of Rs.3,20,000
d. Compute the Profits from Wholesale Business of Health Products of Mr. R for the Assessment Year 4
2021-22.
Type your answer here
Computation of Profits from Wholesale Business of Health Products of Mr. R for the Assessment
Year 2021-22
Particulars Rs. Rs.
Net Profit as per books 5,60,000
Add:
Depreciation as per P&L A/c 34,000
Disallowed Expenditure: Municipal Tax paid after the due date for 3,500
filing the return of income
Disallowed Expenditure: Manager’s salary paid in single cash 21,000
payment exceeding Rs. 20,000
Disallowed Expenditure: Motor Car expenses for personal use 8,000
66,500
6,26,500
Less:
Depreciation allowable under the Income-tax Act 1,10,400
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END
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