EKATVAM ACADEMY

CA/CMA FINAL TEST PAPER 1 SOLUTIONS

BASICS OF INCOME TAX CALCULATION + RETURN OF INCOME
SOLUTION 1
Computation of tax liability of Mr. Raja for the A.Y. 2022-23
(A) Tax payable including surcharge on total income of ₹ 51,50,000
₹ 2,50,000 – ₹ 5,00,000@5% ₹ 12,500
₹ 5,00,000 – ₹10,00,000@20% ₹ 1,00,000
₹ 10,00,000 – ₹ 51,50,000@30% ₹ 12,45,000
Total ₹ 13,57,500
Add: Surcharge @10% ₹1,35,750 ₹ 14,93,250
(B) Tax Payable on total income of ₹ 50 lakhs
(₹ 12,500 plus ₹ 1,00,000 plus ₹ 12,00,000) ₹ 13,12,500
(C) Total Income less ₹ 50 lakhs ₹ 1,50,000
(D) Tax payable on total income of ₹ 50 lakhs plus the excess of total income over ₹ 50 lakhs (B+C) ₹ 14,62,500
(E) Tax payable: Lower of (A) and (D) ₹ 14,62,500
Add: Health and education cess @4% ₹58,500
Tax Liability ₹ 15,21,000
(F) Marginal Relief (A – D) ₹ 30,750

Alternative Method:
(A) Tax payable including surcharge on total income of ₹ 51,50,000
₹ 2,50,000 – ₹ 5,00,000@5% ₹ 12,500
₹ 5,00,000 – ₹10,00,000@20% ₹ 1,00,000
₹ 10,00,000 – ₹ 51,50,000@30% ₹ 12,45,000
Total ₹ 13,57,500
Add: Surcharge @10% ₹ 1,35,750 ₹ 14,93,250
(B) Tax Payable on total income of ₹ 50 lakhs(₹ 12,500 plus ₹1,00,000 plus ₹ 12,00,000) ₹ 13,12,500
(C) Excess tax payable (A)-(B) ₹ 1,80,750
(D) Marginal Relief (₹ 1,80,750 – ₹ 1,50,000, being the amount of income in excess of ₹ 30,750
₹ 50,00,000)
(E) Tax payable (A)-(D) ₹ 14,62,500
Add: Health and education cess @4% ₹ 58,500
Tax Liability ₹ 15,21,000

SOLUTION 2 Computation of tax liability of Mr. Rajesh for the A.Y. 2022-23

(A) Tax payable including surcharge on total income of ₹ 5,02,00,000

₹ 2,50,000 – ₹ 5,00,000@5% ₹ 12,500
₹ 5,00,000 – ₹ 10,00,000@20% ₹ 1,00,000
₹ 10,00,000 – ₹ 5,02,00,000@30% ₹ 1,47,60,000
Total ₹ 1,48,72,500
Add: Surcharge @37% ₹ 55,02,825 ₹ 2,03,75,325
(B) Tax Payable on total income of ₹ 5 crore(₹ 12,500 plus ₹ 1,00,000 plus ₹
1,47,00,000) ₹ 1,48,12,500
Add: Surcharge @25% ₹ 37,03,125
₹ 1,85,15,625
(C) Total Income less ₹ 2 crore ₹ 2,00,000

CA VIJAY SARDA | 8956784251/52/53 www.ekatvamacademy.com

 Tax payable on total income of ₹ 5 crore plus ₹ 1,87,15,625
(D) the excess of total income over ₹ 5 crore (B+C)
(E) Tax payable: Lower of (A) and (D) ₹ 1,87,15,625
Add: Health and education cess @4% ₹ 7,48,625
Tax Liability ₹ 1,94,64,250
(F) Marginal Relief (A – D) ₹ 16,59,700

Alternative Method:

(A) Tax payable including surcharge on total income of ₹ 5,02,00,000

₹ 2,50,000 – ₹ 5,00,000 @5% ₹ 12,500
₹ 5,00,000 – ₹ 10,00,000 @20% ₹ 1,00,000
₹ 10,00,000 – ₹ 5,02,00,000 @30% ₹ 1,47,60,000
Total ₹ 1,48,72,500
Add: Surcharge @37% ₹ 55,02,825 ₹ 2,03,75,325
(B) Tax Payable on total income of ₹ 5 crore
(₹ 12,500 plus ₹ 1,00,000 plus ₹ 1,85,15,625
₹ 1,47,00,000) plus surcharge @15%
(C) Excess tax payable (A)-(B) ₹ 18,59,700
(D) Marginal Relief (₹ 18,59,700 – ₹ 2,00,000,being the amount of income in excess
of ₹ 5,00,00,000) ₹ 16,59,700
Tax payable (A) - (D) ₹ 1,87,15,625
Add: Health and education cess @4% ₹ 7,48,625
Tax Liability ₹ 1,94,64,250

SOLUTION 3
The tax payable on total income of ₹1,01,00,000 of X Ltd. computed @32.1%(including surcharge @7%) is ₹ 32,42,100.
However, the tax cannot exceed
₹ 31,00,000 (i.e., the tax of ₹ 30,00,000 payable on total income of ₹ 1 crore plus
₹ 1,00,000, being the amount of total income exceeding ₹ 1 crore). Therefore, thetax payable on ₹ 1,01,00,000 would be ₹
31,00,000. The marginal relief is
₹ 1,42,100 (i.e., ₹ 32,42,100 - ₹ 31,00,000).

SOLUTION 4
As per the provisions of section 139(3), any person who has sustained loss under the head ‘Profit and gains of business or profession’ is
allowed to carry forward such a loss under section 72(1) or section 73(2), only if he has filed the return of loss within the time allowed under
section 139(1). Also, the provisions of section 80 specify that a loss which has not been determined as per the return filed under section
139(3) shall not be allowed to be carried forward and set-off under, inter alia, section 72(1) (relating to business loss) or section 73(2) (losses
in speculation business) or section 74(1) (loss under the head “Capital gains”) or section 74A(3) (loss from the activity or owning and
maintaining race horses) or section 73A (loss relating to a “specified business”). However, there is no such condition for carry forward
of loss from house property under section71B or unabsorbed depreciation under section 32.
In the given case, the assessee has filed its return of loss in response to notice under section 142(1). As per the provisions stated above,
assessee furnished return in response to notice under section 142(1) after the due date specified under section 139(1) and therefore, the
benefit of carry forward of business loss under section 72(1) or section 73(2) or section 73A shall not be available.
The assessee shall, however be entitled to carry forward the unabsorbed depreciation as per provisions of section 32(2).

CA VIJAY SARDA | 8956784251/52/53 www.ekatvamacademy.com

SOLUTION 5
This proposition is correct. A return of income filed within the due date under section 139(1) or a belated return filed under section 139(4)
may be revised by filing a revised return under section 139(5) where the assessee finds any omission or wrong statement in the original
return subject to satisfying other conditions. There is no provision in the Income-tax Act, 1961, to make changes or modification in the
return of income by filing a letter before the Assessing Officer. The revisedreturn can be filed at any time before three months
prior to the end of the relevant assessmentyear or before completion of assessment, whichever is earlier. In a case where a return of
income has been filed within the due date under section 139(1) or a belated return is filed under section 139(4), the only option available
to the assessee to make an amendment to such return is by wayof filing a revised return under section 139(5). Therefore, a fresh claim
can be made before the Assessing Officer only by filing a revised return and not otherwise. The Supreme Court, in Goetze (India) Ltd. vs.
CIT (2006) 284 ITR 323, has held that there is no power available under the provisions of the Income-tax Act, 1961 enabling the Assessing
Officer to allow a claim made by the assessee except by way of filing a revised return.

CA VIJAY SARDA | 8956784251/52/53 www.ekatvamacademy.com