Law of Taxation Question Compress

LAW OF Taxation - Question
Hindu Law I
3 0
LAW OF TAXATION: PAGE | 1
1. Explain the concept of income and mention any ten incomes that are
exempted from tax liability.  Define the concept of Income. Explain its
characteristics.
 Explain the concept, nature and characteristics of Income Tax.
Income tax is a tax on the total income of a person called the assessee of the previous
year relevant to the assessment year at the rates prescribed in the relevant Finance Act.
(1) Tax is a Compulsory Contribution
A tax is a compulsory payment from the person to the Government without expectation of
any direct return. Every person has to pay direct as well as indirect taxes. As it is a
compulsory contribution, no one can refuse to pay a tax on the ground that he or she does
not get any benefit from certain public services the government provides.
(2) The Assesses will be required to pay Tax if is due from him
No one can be forced by any authority to pay tax, if it is not due from him. Suppose, if there
is a tax on liquor, the state can force an individual to pay the tax only when he drinks liquor.
But, if he does not drink liquor, he cannot be forced to pay the tax on liquor. Similarly, if an
individual’s income is below the exemption limit, he cannot be forced to pay tax on income.
For example individuals earning monthly salary below birr 150 cannot be forced to pay tax
on income.
(3) Taxes are levied by the Government
No one has the right to impose taxes. Only the government has the right to impose taxes and
to collect tax proceeds from the people.
(4) Common Benefits to All
The tax, so collected by the Government, is spent for the common benefit of all the people. In
other words, when the government collects a tax, its proceeds are spent to extend common
benefits to all the people. The Government incurs expenditure on the defense of the country,
on maintenance of law and order, provision of social services such as education, health etc.
Such benefits are given to all the people- whether they are tax-payers or non-taxpayers.
These benefits satisfy social wants. But the Government also spends on subsidies to satisfy
merit wants of poor people.
(5) No Direct Benefit
In the modern times, there is no direct relationship between the payment of tax and direct
benefits. In other words, there is absence of any benefit for taxes paid to the Governmental
authorities. The government compulsorily collects all types of taxes and does not give any
direct benefit to tax-payers for taxes paid. For example, when taxable income is earned by an
individual or a corporation, he or it simply pays the tax amount at the specified rate cannot
demand any benefit against such payment.
(6) Certain Taxes Levied for Specific Objectives
Though taxes are imposed for collecting revenue for the government to meet expenditure on
social wants and merit wants, certain taxes are imposed to achieve specific objectives. For
example, heavy taxes are imposed on luxury goods to reduce their consumption so that
resources are directed to the production of essential goods, such as cheaper variety of cloth,
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less costly goods of mass consumption, etc. Thus, taxes are levied not only to earn revenue
but also for diversion of resources or saving foreign exchange. Certain taxes are imposed to
reduce inequalities of income and wealth.
(7) Attitude of the Tax-Payers
The attitude of the tax-payers is an important variable determining the contents of a good tax
system. It may be assumed that each tax-payer would like to be exempted from taxpaying,
while he would not mind if other bears that burden. In any case, he would want his share to
be within the general level of tax burden being borne by others. In other words, it is essential
that a good tax system should appear equitable to the tax-payers. Similarly, overall burden of
the tax system is of equal importance. The attitudes of the tax-payers in this regard are
influenced by a host of other factors like the political situation such as war or peace, natural
calamities like floods and droughts, economic situations like prosperity or depression and so
on.
(8) Good tax system should be in harmony with national objectives
A good tax system should run in harmony with important national objectives and if possible
should assist the society in achieving them. It should try to accommodate the attitude and
problems of tax payers and should also take into consideration the goals of social and
economic justice. It should also yield adequate revenue for the treasury and should be
flexible enough to move with the changing requirements of the State and the economy.
(9) Tax-system recognizes basic rights of tax-payers
A good tax system recognizes the basic rights of the tax-payers. The tax-payer is expected to
pay his taxes but not undergo harassment. In other words, the tax law should be simple in
language and the tax liability should be determined with certainty. The mode and timings of
payment should be convenient to the tax-payer. At the same time, a tax system should be
equitable between tax-payers. It should be progressive and burden of taxation should be
equitable on all the tax-payers.
Ment
ionedbel
ow i
sthel
istofi
ncomeexemptf
rom t
axspeci
fict
oSect
ion10:
1.Agr
icul
t
ureI
ncome[
Sect
i
on10(
1)]
2.Amountr
ecei
vedoutoff
ami
l
yinc
ome,Hi
nduUndi
vi
dedFami
l
y(H.
U.F
.)[
Sec
ti
on
10(
2)]
3.Shar
eofpr
ofi
t,[
Sec
ti
on10(
2A)
]
4.I
nter
estpai
dtoNon-
Res
ident[
Sec
ti
on10(
4)(
i)
]
5.I
nter
estt
oNon-
Res
identonNon-
Res
ident(
Ext
ernal
)Ac
count[
Sec
ti
on10(
4)(
ii
)]
6.I
nter
estpai
dtoaper
sonofI
ndi
anOr
igi
nandwhoi
sNon-
Res
ident[
Sec
ti
on10(
4B)
]
7.Leav
eTr
avel
Conc
ess
ionorAs
sis
tanc
e[Sect
i
on10(
5)]
8.Remuner
ati
onorSal
aryr
ecei
vedbyani
ndi
vi
dual
whoi
snotac
it
iz
enofI
ndi
a
[
Sec
ti
on10(
6)]a.Remuner
ati
on[
U/s10(
6)(
ii
)]b.Remuner
ati
onr
ecei
vedasan
empl
oyeeoff
orei
gnent
erpr
ise[
U/s10(
6)(
vi)
]c.Empl
oymentonaf
orei
gns
hip[
U/s
10(
6)(
vii
i
)]d.Remuner
ati
onr
ecei
vedbyanempl
oyeeoff
orei
gngov
ernment[
U/s
10(
6)(
xi)
]
9.T
axpai
dbyGov
ernmentorI
ndi
anconc
ernonI
ncomeofaFor
eignCompany
[
Sec
ti
on10(
6A)
,(6B)
,(6BB)and(
6C)
]
3 0
10.Per
qui
si
tes
/Al
l
owanc
espai
dbyGov
ernmentt
oit
sEmpl
oyeess
erv
ingout
sideI
ndi
a
[
Sec
ti
on10(
7)]
11.Empl
oyeesofFor
eignCount
ri
eswor
kingi
nIndi
aunderCooper
ati
veTec
hni
cal
As
sis
tanc
ePr
ogr
amme[
Sec
ti
on10(
8)]
12.I
ncomeofaCons
ult
ant[
Sect
i
on10(
8A)
]
2.What is Income Tax Return ? Explain different kinds of Income Tax Return.
Income Tax Return (ITR) is a form which a person is supposed to submit to
the Income Tax Department of India. It contains information about the
person’s income and the taxes to be paid on it during the year.
Information filed in ITR should pertain to a particular financial year, i.e.
starting on 1st April and ending on 31st March of the next year.
Income can be of various forms such as :
 Income from salary
 Profits and gains from business and profession
 Income from house property
 Income from capital gains
 Income from other sources such as dividend, interest on deposits,

royalty income, winning on lottery, etc.
The Income Tax Department has prescribed 7 types of ITR forms - ITR-1,
ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, ITR-7 and applicability of the form will
depend on the nature and amount of income and the type of taxpayer.
3.What is capital gain? Explain capital assets and its transfers.

Section 45 of Income Tax Act, 1961 provides that any profits or gains arising
from the transfer of a capital asset effected in the previous year will be chargeable
to income-tax under the head 'Capital Gains'. Such capital gains will be deemed
to be the income of the previous year in which the transfer took place.
Transfer, in relation to capital asset, includes:
i. the sale, exchange or relinquishment of the asset; or
ii. the extinguishment of any rights therein; or
iii. the compulsory acquisition thereof under any law; or
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iv. in a case where the asset is converted by the owner thereof into, or is
treated by him, as stockin-trade of a business carried on by him, such
conversion or treatment; or
v. the maturity or redemption of zero coupon bonds; or
vi. any transaction involving the allowing of the possession of any immovable
property to be taken or retained in part performance of a contract of the
nature referred to in section 53A of the Transfer of Property Act, 1882; or
vii. any transaction (whether by way of becoming a member of, or acquiring
shares in a cooperative society, company or other association of persons
or by way of any agreement or any arrangement or in any other manner
whatsoever) which has the effect of transferring, or enabling the
enjoyment of any immovable property.
4. Enumerate the various central sales tax authorities and explain the powers
of these authorities.
Not in syllabus.
5. Explain the Income Tax Authorities under Income Tax Act.

"Income-tax authority" means a Commissioner, a Joint Commissioner, a Director,
a Joint Director, an Assistant Director or a Deputy Director or an Assessing
Officer, or a Tax Recovery Officer, and for the purposes of clause (i) of subsection
(1), clause (i) of sub-section (3) and sub-section (5), includes an Inspector of
Income-tax.
i) Administrative [ Income Tax Authorities ][ Sec. 116 ]
a. the Central Board of Direct Taxes constituted under the Central Boards of
Revenue Act, 1963 (54 of 1963),
b. Directors-General of Income-tax or Chief Commissioners of Income-tax,
c. Directors of Income-tax or Commissioners of Income-tax or Commissioners
of Income-tax (Appeals),
1. (cc) Additional Directors of Income-tax or Additional Commissioners
of Income-tax or Additional Commissioners of Income-tax (Appeals),
2. (cca) Joint Directors of Income-tax or Joint Commissioners of
Income-tax.
d. Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or
Deputy Commissioners of Income-tax (Appeals),
e. Assistant Directors of Income-tax or Assistant Commissioners of Income-
tax,
f. Income-tax Officers,
g. Tax Recovery Officers,
h. Inspectors of Income-tax.
(ii) Assessing Officer [ Sec. 2(7A)]
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"Assessing Officer" means the Assistant Commissioner or Deputy Commissioner
or Assistant Director or Deputy Director or the Income-tax Officer who is vested
with the relevant jurisdiction by virtue of directions or orders issued under sub-
section (1) or sub-section (2) of section 120 or any other provision of this Act,
and the Joint Commissioner or Joint Director who is directed under clause (b) of
sub-section (4) of that section to exercise or perform all or any of the powers and
functions conferred on, or assigned to, an Assessing Officer under this Act;
Importance of Assessing Officer :

In the organizational setup of the income tax department Assessing Officer plays
a very vital role. He is the primary authority who initiates he proceedings and is
directly connected with the public. Form the time of filing of return till the
assessement is completed he plays a pivotal role . He can start proceedings for
non filing of return, imposition of penalties etc. Orders passed by him can be
challenged only on approval. The department can revise his orders only if it is
proved that there are prejudicial to the revenue and that too only by the
Commissioner of Income Tax.
(iii) Appointment of Income-Tax Authorities [ Sec. 117 ]
1. Power of Central Government : The Central Government may appoint

such persons as it thinks fit to be income-tax authorities. It kept with itself
the powers to appoint authorities upto and above rank of an Assistant
Commissioner of Income-Tax [ Sec. 117 (1) ]
2. Power of the Board and Other Higher Authorities : Subject to the
rules and orders of the Central Government regulating the conditions of
service of persons in public services and posts, the Central Government
may authorize the Board, or a Director-General, a Chief Commissioner or a
Director or a Commissioner to appoint income-tax authorities below the
rank of an Assistant Commissioner or Deputy Commissioner. [ Sec. 117
(2) ]
3. Power to appoint Executive and Ministerial Staff : Subject to the
rules and orders of the Central Government regulating the conditions of
service of persons in public services and posts, an income-tax authority
authorized in this behalf by the Board may appoint such executive or
ministerial staff as may be necessary to assist it in the execution of its
functions.
(iv) Control of Income-Tax Authorities [ Sec. 118 ]
The Board may, by notification in the Official Gazette, direct that any income-tax
authority or authorities specified in the notification shall be subordinate to such
other income-tax authority or authorities as may be specified in such notification
6. Explain the various types of duties imposed under Excise Act and state the
exemption if any.
Excise duty refers to the taxes levied on the manufacture of goods within the country, as
opposed to custom duty that is levied on goods coming from outside the country. Readers
should note that GST has now subsumed a number of indirect taxes including excise
3 0
duty. This means excise duty, technically, does not exist in India except on a few items such
as liquor and petroleum. The information given below pertains to the functioning of Excise
Duty in India before the implementation of GST regime.
Excise Duty is a form of indirect tax which is generally collected by a retailer or an

intermediary from its consumers and then paid to the government. Although this duty is
payable on manufacture of goods, it is usually payable when the goods are ‘removed’ from
the place of production or from the warehouse for the purpose of sale. There is no
requirement for the actual sale of the goods for imposing the excise duty because it is
imposed on the manufacture of such goods. The Central Board of Excise and Customs
(CBEC) is responsible for collecting excise duty.
Acts and Rules Governing Excise Duty in India
The legal framework around Excise Duty is majorly governed by the two acts-
 Central Excise Act, 1944

 Central Excise Tariff Act, 1985
The two acts underline the laws related to the levying of excise duty that extends to the
whole of India.
The rates of Central Excise Duty are defined by the Central Excise Tariff Act, 1985. The
Central Excise Act majorly provides the definitions related to excise while the Central Excise
Tariff Act includes an elaborate schedule of excisable goods and the tariffs on them. The
CBEC, which functions under the leadership of the Finance Minister, administers the levy of
excise and custom laws in the country.
Types of Excise Duty in India
There are three types of excise duties in India-
Basic Excise Duty- Sometimes referred to as Central Value Added Tax (CENVAT), this type
of excise duty is imposed on goods classified under the first schedule of the Central Excise
Tariff Act, 1985. This duty is imposed under Section 3(1) (a) of the Central Excise Act, 1944
and levied on all excisable goods in the country except salt.
Additional Excise Duty- According to the Section 3 of the Additional Duties of Excise
(Goods of Special Importance) Act, 1957, this duty is levied on goods listed in Schedule 1 of
the given act. Such duty is levied on some specific goods and is charged by the central and
state government as a substitute of the sales tax. The Additional Duties of Excise (Textiles
and Textile Articles) Act, 1978 also provide for a similar legislation.
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Special Excise Duty- This kind of duty is levied on special goods specified under the
Second Schedule to the Central Excise Tariff Act, 1985
7. Discuss the various powers of the Commissioner to search and arrest of a

suspected person under the Custom Act. (2)
CHAPTERXI
II-Sear
ches
,sei
zur
eandar
res
t
SECTION100.Powert osear chsuspectedper
sonsenter
ingorleavingIndia,et
c.-(1)
I
ftheproperoffic erhasr easontobeli
evet
hatanyper
sontowhom thiss
ec t
i
onapplieshas
secr
etedabouthi
sperson,anygoodsliabl
etoconfiscat
i
onoranydoc umentsrelat
i
ng
t
heret
o,hemays ear
cht hatperson.
(
2)Thi
ssec
ti
onappl
i
est
othef
oll
owi
ngper
sons
,namel
y:-
(
a)anyper
sonwhohaslandedf
rom ori
saboutt
oboar
d,ori
sonboar
danyv
essel
wit
hint
he
I
ndi
ancust
omswater
s;
(b)anyper
sonwhohasl
andedf
rom ori
saboutt
oboar
d,ori
sonboar
daf
orei
gn-
goi
ng
air
craf
t;
(
c)anypers
onwhohasgotoutof
,ori
saboutt
ogeti
nto,ori
sin,av
ehi
cl
e,whi
chhasar
ri
ved
f
rom,ori
stopr
oceedt
oanyplaceout
sideI
ndi
a;
(
d)anyper
sonnoti
ncl
udedi
ncl
aus
es(
a),(
b)or(
c)whohasent
eredori
saboutt
oleav
e
I
ndi
a;
(
e)anyper
soni
nac
ust
omsar
ea.
SECTI ON101.Powert osearchsuspect edpersonsincert
ainothercases.-(1)Wit
hout
prej
udicetothepr ovis
ionsofs ect
i
on100,i fanoffic erofcust
omsempower edi
nthi
sbehalf
bygeneralors pec i
alorderofthe1[
Princi
palCommissi
onerofCust
omsorCommi ssi
onerof
Customs ]
,hasr easont obeli
evethatanyper s
onhassecret
edabouthispersonanygoodsof
thedescri
pti
ons peci
fi edinsub-section(2)whi
charel
iabl
etoconfi scat
i
on,ordocuments
rel
ati
ngthereto,hemays earchthatperson.
(
2)Thegoodsr
efer
redt
oins
ub-
sec
ti
on(
1)ar
ethef
oll
owi
ng:-
(
a)gol
d;
(
b)di
amonds
;
(
c)manuf
act
uresofgol
dordi
amonds
;
(
d)wat
ches
;
(e)anyotherclassofgoodswhi cht
heCent r
al Gover
nmentmay ,bynoti
fi cat
ionint he
Offic ialGazette,specif
y.
SECTION102.Per sonstobesear chedmayr equir
etobet akenbeforegaz ett
edofficer
ofcustomsormagi str
ate.-(1)Whenanyofficerofc ustomsisabouttos ear
c hanyperson
undert
hepr ovi
sionsofs ecti
on100ors ect
ion101,theofficerofc ustomss hal
l,ifsuch
pers
ons orequi
r es,takehim wit
houtunnecessarydel
aytothenearestgazett
edoffic erof
cust
omsormagi st
rate.
(2) I
fsuchr
equisi
ti
onismade,theofficerofcust
omsmaydet
aint
hepersonmak
ingi
tunt
i
l
hecanbri
nghim bef
orethegaz
ettedofficerofcus
tomsort
hemagi
str
ate.
(
3) Thegaz ett
edofficerofc ust
omsort
hemagis
trat
ebefor
ewhom anysuc
hpers
onis
broughtshall
,ifheseesnoreasonabl
egr
oundfors
ear
ch,for
thwi
thdi
schar
get
heper
sonbut
otherwi
ses hal
ldirec
tthats
earc
hbemade.
(
4) Befor
emak i
ngas ear
chundert
hepr
ovi
sionsofsec
ti
on100orsect
i
on101,theoffic
er
ofcus
tomsshal
lcall
upontwoormoreper
sonstoatt
endandwit
nesst
hes ear
chandmay
3 0
i
ssueanorderi
nwri
ti
ngtothem oranyofthem s
otodo;andthesearchshal
lbemadeinthe
pr
esenceofsuc
hpersonsandal i
stofal
lt
hingssei
zedi
nthecour
s eofsuchsear
chshal
lbe
pr
eparedbysuchofficerorot herper
sonands i
gnedbysuchwitness
es.
(
5) Nof
emal
eshal
lbes
ear
chedbyanyoneex
cept
i
ngaf
emal
e.
SECTI ON103.Powert oscr eenorX- raybodi
esofsuspectedper sonsfordetect
ing
secretedgoods.-( 1)Wher etheproperoffic erhasreasontobeli
evethatanyperson
ref
erredtoinsub-sect
ion(2)ofs ec
ti
on100hasanygoodsl i
abl
etoc onfiscati
ons ec
reted
i
nsidehi sbody
,hemaydet ainsuchpersonandproduc
ehim wit
houtunnecessarydel
ay
bef
oret heneares
tmagi st
rate.
(2) Amagist
rat
ebeforewhom anyper
sonisbr
oughtunders
ub-
sect
i
on(1)shal
l,i
fhesees
noreasonabl
egroundforbel
iev
ingt
hatsuc
hpersonhasanysuc
hgoodssec
r et
edins
idehi
s
body,f
ort
hwit
hdischar
ges uc
hperson.
(3) Whereanysuchmagistr
atehasreasonabl
egroundforbel
i
evi
ngthats
uchpersonhas
anysuchgoodssecret
edinsi
dehisbodyandt hemagist
rat
eissat
isfiedt
hatf
orthepurpos
e
ofdis
cover
ingsuchgoodsiti
snecessarytohavet
hebodyofs uchper
sonscr
eenedorX-
ray
ed,hemaymak eanor dertot
hateffect .
(4) Whereamagi st
rat
ehasmadeanyor derunders ub-sect
ion(3),inrel
ati
ontoany
pers
on,theproperofficers hall
,assoonaspr acti
cable,tak
es uc hpers
onbef or
earadiol
ogi
st
possessi
ngquali
fi cat
ionsr
ecogni
zedbytheCent ralGov er
nmentf orthepurposeoft
his
sect
ion,andsuchpersonshal
lal
lowtheradi
ol
ogisttos c
reenorX- rayhisbody .
(5) Aradiologi
stbef
orewhom anypersonisbroughtundersub-
s ecti
on(4)shal
l
,aft
er
screeni
ngorX- r
ayingthebodyofsuchperson,f
orwardhisrepor
t,togetherwi
thanyX-r
ay
pic
turestakenbyhim,tothemagist
rat
ewithoutunnecessar
ydelay .
(6) Whereonr ecei
ptofar epor tfrom aradi
ologi
stundersub-secti
on(5)orotherwise,the
magist
ratei
ss at
isfiedt hatanyper sonhasanygoodsl i
abletoconfi s
cati
ons ecretedinsi
de
hisbody,hemaydi r
ectthatsuitableactionforbri
ngi
ngouts uchgoodsbet akenont he
advi
ceandundert hesuper vi
sionofar egist
eredmedicalpr
acti
tionerandsuchper s
ons hal
l
beboundt ocomplywiths uchdir ecti
on:
Provi
dedthati
nthecaseofaf
emal
enosuc hact
ionshal
lbetakenexceptont
he
adv
iceandundert
hesuperv
isi
onofaf
emal
eregi
steredmedi
calpract
i
ti
oner
.
(
7) Whereanyper
sonisbroughtbef
oreamagi
strat
eunderthi
ssect
ion,suc
hmagis
trat
e
mayf
orthepur
poseofenfor
cingthepr
ovi
si
onsofthi
ssect
ionorders
uc hper
sont
obek ept
i
nsuchcust
odyandfors
uc hperi
odashemaydirect
.
(8) Nothinginthissect
ionshallapplytoanypersonref
err
edtoinsub-sect
ion(
1),who
admitsthatgoodsl i
abl
et oconfi scati
onaresecret
edinsi
dehisbody,andwhov ol
unt
ari
l
y
submitshimselfforsui
t
abl eact
i
onbei ngtakenforbri
ngi
ngoutsuchgoods .
Explanat
ion.-Fort
hepur posesofthi
ss ect
ion,theexpress
ion"r
egi
ster
edmedical
practi
t
ioner"meansanypers onwhoholdsaqual ifi cat
i
ongr ant
edbyanauthori
tyspeci
fi edi
n
theSc heduletot
heIndianMedicalDegreesAct,1916( 7of1916),ornot
ifiedundersecti
on3
ofthatAct,orbyanauthori
tyspecifiedinanyoft heSc hedulest
ot heI
ndi
anMedicalCounci
l
Act,1956( 102of1956)
.
SECTI ON104.Powert oar r
est.–2[(1)Ifanoffic erofcust
omsempoweredinthi
sbehal
fby
3
generalorspecialorderofthe [Princ
ipal Commissi
onerofCustomsorCommissi
onerof
Customs ]hasreasont obel
ievethatanyper soninI
ndiaorwit
hintheI
ndi
ancust
omswaters
hasc ommi t
tedanoffenc epuni shableunders ect
i
on132ors ecti
on133orsect
i
on135or
sect
ion135Aors ecti
on136,hemayar res ts
uchpersonandshall
,assoonasmaybe,
i
nfor
m him ofthegr oundsforsuc harrest.
]
3 0
(
2) Ev
erypersonar
res
tedunders
ub-
sec
ti
on(
1)s
hal
l
,wi
t
houtunnec
ess
arydel
ay,bet
aken
t
oamagist
rat
e.
(
3) Whereanoffic erofcust
omshasarrest
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ubj
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t
ounderthe4CodeofCri
minalPr
ocedur
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.
5
[
(4) Not
wit
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ngcont
ainedi
ntheCodeofCr
imi
nal
Proc
edur
e,1973(
2of
1974)
,anyoffencerel
ati
ngto—
(
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ohi
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asi
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asi
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ngfi
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,
s
hal
lbecogni
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5) Saveasother
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ovi
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i
on(
4),al
lot
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esundert
heAc
tshal
lbe
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cogni
zabl
e.
6
[
(6)Not
wit
hst
andi
nganyt
hingcont
ainedint
heCodeof Crimi
nal
Procedur
e,1973,(
2of
1974)anoffencepuni
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eunders ec
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ati
ngt
o—
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asi
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asi
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upees
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) i
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8. Explain the provision relating to the registration of a dealer under Central

Sale Tax Act and state the benefits of such registration.
NOT IN SYLLABUS
9. Write short notes on the following:

 Annual value-
Theannual v
alueofapropertyist
hes um forwhi
chapr oper
tyisreas
onabl
yexpec t
edtobe
l
etfr
om yeartoyear
.Hence,t heannualvalueofapropert
yistheamountofnot
ionalrent
whi
chc ouldhavebeenderiv
ed,hadt hepropert
ybeenl et
.Theannualval
ueofapr opert
y
pl
aysani mport
antrol
einIncomeTaxr eturnfiling.Inthi
sarti
cl
e,wementi
ont heprocedur
e
f
orcalc
ulati
ngtheannualvalueofapr opert
y
 Refund of tax-
3 0
A tax refund or tax rebate is a payment to the taxpayer when the taxpayer pays more tax
than they owe. Tax Refund arises when taxes paid are higher than your actual tax
liability (including interest). It could be in the form of advance tax, self-
assessment tax, tax deducted at source, foreign tax credit etc. Given below is an
illustration showing when and how a refund arises.
 Determination of turn over under C.S.T.

NOT IN SYLLABUS.
 Short term and long term capital gains.

When you sell an investment for more than you paid for it, your profit is considered a capital
gain. If you've held the asset for a year or less, that's a short-term gain. Any profit made
after that time period is considered a long-term gain.
 Refund of Income Tax. (3)

Income tax refund is the excess tax paid by you which is refunded back by the Income Tax
Department. For eg : tax you need to pay was Rs. 10,000 but you paid 15,000 or already
deducted & deposit by the person responsible for, then after filing your income tax return
which would be showing tax refund of Rs. 5,000 the amount will be given back to you by the
Income Tax Department.
 Depreciation allowance.
Depreciation allowance under section 32 of the Income Tax Act, 1961. Depreciation is
an allowance on capital assets acquired and put to use and not an expenditure unlike
repairs to machinery, plant or furniture. It need not be incurred by the assessee during the
previous year
 Revisional powers of Income Tax Authority. (4)
3 0
.
 Objectives of VAT (2)  Salient features of Service Tax. (3)  Advantages and
disadvantages of VAT. (3)
NOT IN SYLLABUS
 Harmonised system of nomenclature.

The Harmonized System is an international nomenclature for the classification of products. It
allows participating countries to classify traded goods on a common basis for customs
purposes. At the international level, the Harmonized System (HS) for classifying goods is a
six-digit code system.
The HS comprises approximately 5,300 article/product descriptions that appear as headings

and subheadings, arranged in 99 chapters, grouped in 21 sections. The six digits can be
broken down into three parts. The first two digits (HS-2) identify the chapter the goods are
classified in, e.g. 09 = Coffee, Tea, Maté and Spices. The next two digits (HS-4) identify
groupings within that chapter, e.g. 09.02 = Tea, whether or not flavoured. The next two digits
(HS-6) are even more specific, e.g. 09.02.10 Green tea (not fermented)... Up to the HS-6
digit level, all countries classify products in the same way (a few exceptions exist where
some countries apply old versions of the HS).
 Tax evasion and Tax avoidance (3)
Tax evasion means concealing income or information from tax authorities — and it's
illegal. Tax avoidance means legally reducing your taxable income
 Deemed Wealth
These are assets, though not legally belonging to the assessee, are clubbed as his assets
while computing his net wealth. Assets transferred to Spouse otherwise than in connection
with agreement to live apart.
3 0
 Manufacturer
A manufacturer is a person or company that produces finished goods from raw materials by
using various tools, equipment, and processes, and then sells the goods to consumers
 Restrictions on exports and imports.

Under section 11 of the Customs Act, the Central Government has the power to issue
Notification under which export or import of any goods can be declared as prohibited. The
prohibition can either be absolute or conditional. As for example, import of second hand
goods and second hand capital goods is restricted.
 Goods imported or exported by Post

Goods that are imported or exported by posts are governed by Sections 82,83 and 84 of
the Customs Act, 1962 and the procedure requires for the clearance
of goods through posts is stated in Rules regarding Postal Parcels and Letter Packets from
Foreign Ports In/ Out of India of 1953.
 Input Tax
Input tax means the central tax (CGST), State tax (SGST), integrated tax (IGST) or Union
territory tax (UTGST) charged on supply of goods or services or both made to a registered
person. It also includes tax paid on reverse charge basis and integrated tax goods and
services tax charged on import of goods.
 Define the term "Service" as defined in the Finance Act, 1994
 Assets belonging to others but included in net wealth of an individual.

Asset transferred by an individual without adequate consideration to any of the following
persons shall be included in the net wealth of such individual: ... Assets transferred to a
person or an association of persons for the immediate or deferred benefit of the individual,
his/her spouse or his/her son's wife
3 0
 Direct and Indirect taxes
A direct tax is one that the taxpayer pays directly to the government. These taxes cannot
be shifted to any other person or group. An indirect tax is one that can be passed on-or
shifted-to another person or group by the person or business that owes it.
 State the incomes assessable as Income from Business or Profession.

Profits and gains of business or profession”:
i. profits and gains of any business or profession;
ii. any compensation or other payments due to or received by any person
specified in section 28(ii);
iii. income derived by a trade, professional or similar association from specific
services performed for its members;
iv. the value of any benefit or perquisite, whether convertible into money or
not, arising from business or the exercise of a profession;
v. any profit on transfer of the Duty Entitlement Pass Book Scheme;
vi. any profit on the transfer of the duty free replenishment certificate;
vii. export incentive available to exporters;
viii. any interest, salary, bonus, commission or remuneration received by a
partner from firm ;
ix. any sum received for not carrying out any activity in relation to any
business or profession or not to share any know-how, patent, copyright,
trademark, etc.;
x. fair market value of inventory as on the date on which it is converted into,
or treated as, a capital asset determined in the prescribed manner;
xi. any sum received under a Keyman insurance policy including bonus;
xii. any sum received (or receivable) in cash or kind, on account of any capital
asset (other than land or goodwill or financial instrument) being
demolished, destroyed, discarded or transferred, if the whole of the
expenditure on such capital asset has been allowed as a deduction under
section 35AD; and
xiii. income from speculative transaction.
 Appeal Provisions under I.T. Act, 1961.

Appeal against Appellate Tribunal's order lies with the High Court, Where the High Court is
satisfied that the case involves a substantial question of law.
...
Appeals Under Income Tax Act, 1961.
Sr.no Total Income determined by the Assessing Officer Appeal Fees
1 Less than Rs. 1,00,000/- Rs. 250
2 More than Rs.1,00,000/- but less than Rs.2,00,000/- Rs. 500
3 0
 Recovery of Income Tax.
Modes of Recovery of Tax [Section 122] Section-122 provides that in case assessee fails to
pay any sum imposed by way of interest, fine, penalty, or any other sum payable under the
provisions of this Act, the same shall be recoverable in the manner specified in the Act for
the recovery of arrears of tax.
 Explain the nature, scope and basis of levy of Central Excise Duty.
NOT IN SYLLABUS
 Persons requiring registration.

1. Supplier engaged in exclusive supply of goods and whose aggregate turnover in the
financial year exceed forty lakh rupees, is required to obtain GST registration in the State or
Union territory from where the supply is initiated, (notification No. 10/2019-Central Tax,
dated 07.03.2019)
2. In case of special category states, supplier engaged in providing a taxable supply of
goods are required to obtain GST registration in case the aggregate turnover exceeds INR
20/10 Lakhs in a financial year.( Some special catehgory states ie Puducherry, Meghalaya,
Mizoram, Tripura, Manipur, Sikkim, Nagaland, Arunachal Pradesh, Uttarakhand opted for
turnover limit of Rs 20 Lakhs whilst Kerala and Telangana maintained status Quo- limit of
Rs 10 Lakhs )
3. Supplier engaged in providing a taxable supply of services are required to obtain GST
registration in case the aggregate turnover exceeds 20 Lakhs in a financial year.
4. In case of special category state ,supplier engaged in providing a taxable supply of
services are required to obtain GST registration in case the aggregate turnover exceeds 10
Lakhs in a financial year.
5. Persons who are registered under the erstwhile law, on the day immediately preceding the
appointment date, is liable to obtain GST registration.
6. The registered taxable person when transfers business to another person on going
concern basis, whether on account of succession or otherwise, in such case the transferee
or the successor is liable to obtain GST registration.
7. Transfer of company in case of amalgamation or de-merger in accordance with an order
of a high court, tribunal or otherwise.
 Who are the persons exempted from registration?

Secti
on23oft
heCGSTact2017pr
ovi
desthedetai
ledl
is
tofper
sonsnotl
iabl
eforGST
regi
st
rat
i
on.Aspert
hes
aidsect
i
onthef
oll
owingaretheper
sonsnotl
i
ableforr
egist
rat
i
on
underGST:
1.Per
sonengagedex c
lusi
vel
yinsuppl
yinggoodsorser
vic
esorbot
hnotl
iabl
etot
ax.
2.Per
sonengagedex c
lusi
vel
yinsuppl
yinggoodsorser
vic
esorbot
hexemptfr
om t
ax.
3.Agr
icul
t
uri
stengagedinsuppl
yofproducecult
i
vat
edoutofl
and.
3 0
4.Anyot
herper
sonasmaybenot
i
fiedbyt
hegov
ernment
.
 Customs officer
A customs officer is a law enforcement agent who enforces customs laws, on
behalf of a government.
 Exemption from Customs officer
 Goods in transit
Goods in transit refers to merchandise and other types of inventory that have left the
shipping dock of the seller, but not yet reached the receiving dock of the buyer. The concept
is used to indicate whether the buyer or seller of goods has taken possession, and who is
paying for transport.
 Types of warehouse
 Public Warehouses. Public warehouses are owned by governmental bodies and
made available to private sector companies.
 Private Warehouses.
 Bonded Warehouses.
 Smart Warehouses.
 Consolidated Warehouses.
 Cooperative Warehouses.
 Government Warehouses.
 Distribution Centers.
 Brief collection of customs Duties.
 Basi
cCust
omsDut
y:Thi
sdut
yisi
mpos
edont
hev
alueofgoodsataspec
ifi
edr
ate
asi
ti
sfi
xedonanad-
val
orem bas
is.Af
terbei
ngamendedt
i
meandagai
n,i
ti
s
c
urr
ent
l
yregul
atedbyt
heCus
tomsT
ari
ffAc
t,1975.TheCent
ral
Gov
ernment
,
howev
er,hol
dst
her
ight
stoex
empts
pec
ifi
cgoodsf
rom t
hist
ax.
 Count
ervai
li
ngDut
y:CVDorAddi
t
ional
Cus
tomsDut
yisl
evi
edoni
mpor
tedgoods
t
hatf
all
underSec
ti
on3oft
heCus
tomsT
ari
ffAc
tof1975.I
tist
hes
ameast
he
Cent
r Ex
al c
iseDut
ywhi
chi
slev
iedons
imi
l
argoodst
hatar
epr
oduc
edi
nIndi
a.
 Educat
ionCess:Thec
essus
edt
obel
evi
edat2% andanaddi
ti
onal
1% oft
he
aggr
egat
eofc
ust
omsdut
i
es.
 Pr
otect
iveDut
y:Thi
sdut
yisi
mposedi
nor
dert
oshi
eldt
hedomes
ti
cindust
ry
agai
nstt
hei
mpor
tsatr
atest
hatar
erecommendedbyt
heT
ari
ffCommi
ssi
oner
.
3 0
 Saf
eguar
dDut
y:Ast
henames
ugges
ts,t
hisdut
yser
vesasameansof
s
afeguar
dingt
her
isei
nex
por
ts.Somet
i
mes
,ift
hegov
ernmentf
eel
sthatar
isei
n
ex
por
tscandamaget
heex
ist
i
ngdomes
ti
cindust
ry,i
tmayl
evyt
hisdut
y.
 Ant
i-
Dumpi
ngDut
y:Thi
sdut
yisbas
edont
hedumpi
ngmar
gin,i
.
e.t
hedi
ffer
enc
e
bet
weent
heex
por
tpr
iceandt
henor
mal
pri
ce.I
tisonl
yimpos
edwhent
hegoods
t
hatar
eimpor
tedar
ebel
owt
hef
airmar
ketpr
ice.
 Determination of taxable amount of turnover under CST Act  Output Tax 

basic principle of Value Added Tax.
NOT IN SYLLABUS
 Features of GST
 Single Indirect Tax. GST has been introduced as a single, unified tax reform. ...
 Input Tax Credit System. One of the most prominent GST features in India is the
input tax credit. ...
 GST Composition Scheme. SMEs with an annual turnover of up to Rs. ...
 Four-Tier Tax Structure. GST has a 4-tier tax structure of 5%, 12%, 18%, and 28%
 Residential Status
The taxability of an individual in India depends upon his residential status in India
for any particular financial year. The term residential status has been coined
under the income tax laws of India and must not be confused with an individual’s
citizenship in India. An individual may be a citizen of India but may end up being
a non-resident for a particular year. Similarly, a foreign citizen may end up being
a resident of India for income tax purposes for a particular year. Also to note that
the residential status of different types of persons viz an individual, a firm, a
company etc is determined differently. In this article, we have discussed about
how the residential status of an individual taxpayer can be determined for any
particular financial year. A taxpayer would qualify as a resident of India if he
satisfies one of the following 2 conditions :
1. Stay in India for a year is 182 days or more or
2. Stay in India for the immediately 4 preceding years is 365 days or
more and 60 days or more in the relevant financial year
 offences and penalties under Income Tax Act,1961

What are the offences punishable under the Income Tax Act:
(1) Removal, parting with or otherwise dealing with books of accounts, documents, money,
bullion, jewellery or other valuable articles or things put under restrain order as per section
proviso to sub section (1) or sub section (3) of section 132 during the search [section 275A]
3 0
(2) Failure to comply with the provisions of clause (iib) of sub section (1) of section 132 in
affording the authorized officer the necessary facility to inspect the books of account or other
documents [275B]
(3) Fraudulent removal, concealment, transfer or delivery of an property or any interest in the
property with the intention to thwart recovery of tax [section 276)]
(4) Failure on the part of a liquidator or receiver of a company to give notice of his
appointment to the Assessing Officer or failure to set apart amount notified by the Assessing
Officer, or parting away of company’s properties in contravention of income-tax provision
[section 276A]
(5) Failure to enter into written agreement or failure to furnish the statement of immovable
property intended to be transferred u/s. 269UC or failure to surrender or deliver the property
u/s. 269UE, purchased by the Appropriate Authority or doing or omitting to do anything u/s.
269UL, which will have the effect of transfer of property without the permission of the
Appropriate Authority (under the provisions of Chapter XX-C) [Section 276AB]
(6) Failure to pay to the credit of the Central Government the tax deducted at source [section
276B]
(7) Failure to pay the tax collected at source under section 206 C to the credit of Central
Government [section 276BB]
(8) Willful attempt to evade any tax, penalty or interest chargeable or imposable under the
Income Tax Act [section 276C(1)]
(9) Willful attempt to evade the payment of any tax, penalty or interest Levied under Income
Tax Act [section 276C(2)]
(10) Willful failure to furnish in due time return of income or return of fringe benefits [section
276CC]
(11) Failure to furnish return of income in search cases as required under clause (a) of
section 158BC [section 276CCC] Search upto 31/5/03
(12) Willful failure to produce accounts and documents as directed by issue of notice under
section 142(1) [section 276D]
(13) Willful failure to get the accounts audited as directed by the assessing officer under
section 142(2A) [section 276D]
(14) Making of a statement in verification or delivery of an account or statement which is
false and which the concerned person knows or believes to be false or does not believe to
be true [section 277]
(15) Falsification of books of account or document by any person willfully and with intent to
enable any other person to evade any tax or interest or penalty chargeable and imposible
under the Income Tax Act makes or causes to make any entry or statement, which is false
[section 277A]
(16) Abetting or inducing another person to make and deliver an account or statement or
declaration relating. to any taxable income or any fringe benefits, which is false and which he
either knows or believes to be false [section 278]
(17) Punishment for 2nd & subsequent offences in cases of certain defaults convicted u/s.
276B/276C/276CC/276DD/276E/277 & 278 of the Act [section 278A]
No person shall be punished for any failure u/s 276A, 276AB or 276B if he proves that there
is reasonable cause for such failure [section 278AA]
3 0
 Permanent Account Number (PAN)
PAN is a ten-digit unique alphanumeric number issued by the Income Tax
Department. PAN is issued in the form of a laminated plastic card (commonly known as PAN
card). Out of the first five characters, the first three characters represent the alphabetic
series running from AAA to ZZZ.
 Registration and clearance of goods.
 interest on the amount collected in excess of the duty under Central

Excise Act.
 Turnover and taxable turn over under Central Sales Tax Act, 1956.
NOT IN SYLLABUS
 power to grant exemption from duty under Customs Act, 1962.

25. Power to Grant Exemption from Duty. –
(1) If the Central Government is satisfied that it is necessary in the public interest so to do, it
may, by notification in the Official Gazette, exempt generally either absolutely or subject to
such conditions (to be fulfilled before or after clearance) as may be specified in the
notification goods of any specified description from the whole or any part of duty of customs
leviable thereon.
(2) If the Central Government is satisfied that it is necessary in the public interest so to do, it
may, by special order in each case, exempt from payment of duty, for reasons to be stated in
such order, any goods, of strategic or secret nature, or for charitable purpose, on which duty
is leviable .
(3) An exemption under sub-section (1) or sub-section (2) in respect of any goods from any
part of the duty of customs leviable thereon (the duty of customs leviable thereon being
hereinafter referred to as the statutory duty) may be granted by providing for the levy of a
duty on such goods at a rate expressed in a form or method different from the form or
3 0
method in which the statutory duty is leviable and any exemption granted in relation to any
goods in the manner provided in this sub-section shall have effect subject to the condition
that the duty of customs chargeable on such goods shall in no case exceed the statutory
duty.
Explanation : "Form or method", in relation to a rate of duty of customs, means the basis,
namely, valuation, weight, number, length, area, volume or other measure with reference to
which the duty is leviable .
(4) Every notification issued under sub-section (1) shall
(a) unless otherwise provided, come into force on the date of its issue by the Central
Government for publication in the Official Gazette;
(b) also be published and offered for sale on the date of its issue by the Directorate of
Publicity and Public Relations of the Board, New Delhi.
(5) Notwithstanding anything contained in sub-section (4), where a notification comes into
force on a date later than the date of its issue, the same shall be published and offered for
sale by the said Directorate of Publicity and Public Relations on a date on or before the date
on which the said notification comes into force.
 Duty drawbacks on imported raw materials in the manufacture of goods

which are to be exported.
The Central Government is empowered to grant Duty Drawback under section 74 and 75 of
the Customs Act, 1962. Under section 74 of the Customs Act, 1962 duty drawback to the
extent of 98 percent of the duty paid on imported goods can be claimed for re-export,
provided the goods are re-exported within two years of payment of import duty. Section 75 of
the Act, empowers duty drawback on export of manufactured articles.
10. Mr. Shambunath grows rose flowers in his garden as a hobby. A flower
merchant purchases all such flowers grown in the garden for one year and pays
80,000/- (Eighty thousands). Is this sum income taxable? Explain.
11. An assessee was an authorized dealer of Sony Electronic products which
were sold to different customers in Karnataka under the direct billing from
Sony Ltd. in Delhi. Is there a sale in the course of interstate trade or
commerce ? Give reason. (2)
12. "A" a resident of India earned agricultural income from England. Is he
liable to pay tax on this income under the IT Act 1961 ?
ABOVE ARE PRACTICAL BASED QUESTIONS
3 0
14.Give the format determining the taxable income from salary. (3)  Draw a
format of Taxable Income from salary after due deductions. (2)  Explain the
meaning of salary and various deductions of salary.  State the incomes
which are assessable under the head Salaries. And explain the deductions
available while computing Income from Salary. What are the incomes
chargeable under income from salary? And state the deduction from salary.
15. Give a format determining the taxable income from other sources. (4) 
State the incomes chargeable under the head income from other sources.
Salary in common parlance means any amount paid by an employer to his

employees in lieu of services rendered by them. However income tax act 1961
defines the term “ salary” u/s 17(1) to include the following monetary as well as non
monetary payments :- a) Wages. b) Annuity or pension. c) Any Gratuity
Taxable incomeOnce you have the breakup of your salary, you need to calculate your
taxable income. Taxable income is the income on which you need to pay tax which
includes all other incomes apart from your salary too.
Income Source Description
Income from Salary All income you receive from your job like salary, leave encashment,
Income from Property Income from house or land (rented or self-occupied)
Income from Business/Profession Earnings form part-time job or profession
Income from Gains Earnings from the sale of a capital asset
Income from other sources Residual income like earnings from the fixed deposit, gifts, pension,
Deductions Income tax is not just you paying money to the government. It is also about all
the savings you get to do because of the income tax deductions. These deductions available
under section 80 of the Income Tax law are subtracted to get to the taxable income.
Taxable Income = Gross Income – Deductions
3 0
(Gross income is the sum of all the incomes from all the sources)
For calculating the taxable income, you need to have detailed knowledge about
Section 80, the best friend of taxpayers. This section includes all types of deductions
like investments made on mutual funds, life insurance policies, interest on savings,
PPF, NSC, SIPs, mutual funds returns, home loans, etc. As per the latest tax regime,
your deductions can go up to 2.5 lakhs per year. If you plan your investments
carefully, you can save a lot of your annual income.
16. Explain the various types of assessments under Income Tax Act, 1961.
Every Person, who is earning, which is chargeable to tax, has to furnish his return of income
to the Income Tax Department. After filling of return of income, the next step is the
processing of income tax return by the Income Tax Department. The income tax department
examines the return of income and specifies any correction, if any. The process of
examination of the return of the Income Tax Department is called "Assessment". Assessment
includes re-assessment and best judgment assessment under section 147 and 144
respectively. We will discuss each type of assessment in detail in this article. Types of
Assessment Under Income Tax Act, 1961, there are four types of assessment as mentioned
below:
Self assessment –u/s 140A
Summary assessment –u/s 143(1)
Scrutiny assessment –u/s 143(3)

Best Judgment Assessment –u/s 144
Protective assessment Re-assessment or Income escaping assessment –u/s 147

Assessment in case of search –u/s153A
17. Explain the tax liability of an assessee's with reference to his residential
status.  Rules determining the residential status of an individual assessee. (3)
18. "The income liable to tax in the hands of an assessee is determined on the
basis of residential status." Explain.
. Another major factor that determines the tax liability of an assessee is his residential status
in the country during the financial year.
As per experts, the residential status of the taxpayer means the number of days he was
physically present in the country during a financial year and preceding ten financial years. A
Non-Resident/Resident but not ordinarily resident taxpayer has tax liability only on India
sourced income/income received in India whereas a Resident and Ordinarily Resident is
taxable on worldwide income.
3 0
test A – RESIDENT
(a) If he is in India during the relevant previous year for a period amounting in all or in
aggregate to 182 days or more.
OR
(b) If he was in India for a period or periods amounting in all to 365 days or more during
the four years preceding the relevant previous year
AND
he was in India for a period or periods amounting in all to 60* days or more in that
relevant previous year. (*182 days refer note ii)
An individual who is Resident u/s 6(1) can be subdivided into two categories
Ordinary Resident TEST B; OR Not ordinarily Resident Test C
Test B – RESIDENT (Ordinary Resident) -ROR
After fulfilling one of the above two tests, an individual becomes resident of India. Further
to become, an ordinary resident of India an individual has to in addition to Test A fulfill
both the following two conditions:
1. He has been resident of India in at least 2 previous years out of 10 previous
years immediately prior to the previous year in question.
AND
2. He has stayed in India for at least 730 days in 7 previous years immediately prior to the
previous year in question.
Notes:
i. While calculating number of days forstay in India, day of departure was not
included. But now as per decision of Authority for Advance Rulings, both, day of
departure from India and day of arrival in India are to be counted as stay in India.
ii. For persons as mentioned below test (a) remains the same but in test (b) words ‘60
days’ have been replaced by 182 days.
For Indian citizen going abroad on a job or as a member of crew of an Indian ship
In case of an Indian citizen:
♦ Who is going outside India for a job and his contract for such employment outside India
has been approved by the Central Government; or
♦ He is a member of crew of an Indian ship;
For Indian citizens and persons of Indian origin*
In case of an individual being a citizen of India, or a person of Indian origin, who being
outside India, comes on a visit to India in any previous year’
*A person shall be deemed to be of Indian origin if he or either of his parents or any of his
grandparents was born in India or undivided India
Test C – RESIDENT (NOT Ordinary Resident) – “RNOR”
After fulfilling one of the above two tests i.e TEST A , an individual becomes resident of
India. Further to become, Resident but NOT ordinary resident (‘RNOR’) an individual has
to in addition to Test A fulfill ANY the following two conditions:
3 0
An individual who is resident u/s 6(1) Test A can claim the beneficial status of RNOR, if
he can prove that:
1. He was a non-resident in India for 9 previous years out of 10 previous
years preceding the relevant previous year.
OR
2. He was in India for a period or periods aggregating in all to 729 days or less during
seven previous years preceding the relevant previous year.
19. Briefly explain the provisions relating to set-off and carry forward of losses.
Set off of losses

Set off of losses means adjusting the losses against the profit or income of that
particular year. Losses that are not set off against income in the same year can
be carried forward to the subsequent years for set off against income of those
years. A set-off could be an intra-head set-off or an inter-head set-off. a. An intra-
head set-off b. An inter-head set-off
a. Intra-head Set Off
The losses from one source of income can be set off against income from another
source under the same head of income. For eg: Loss from Business A can be set
off against profit from Business B, where Business A is one source and Business B
is another source and the common head of income is “Business”. Exceptions to
an intra-head set off: 1. Losses from a Speculative business will only be set off
against the profit of the speculative business. One cannot adjust the losses of
speculative business with the income from any other business or profession. 2.
Loss from an activity of owning and maintaining race-horses will be set off only
against the profit from an activity of owning and maintaining race-horses. 3.
Long-term capital loss will only be adjusted towards long-term capital gains.
However, a short-term capital loss can be set off against both long-term capital
gains and short-term capital gain. 4. Losses from a specified business will be set
off only against profit of specified businesses. But the losses from any other
businesses or profession can be set off against profits from the specified
businesses.
b. Inter-head Set Off

After the intra-head adjustments, the taxpayers can set off remaining losses
against income from other heads. Eg. Loss from house property can be set off
against salary income Given below are few more such instances of an inter-head
set off of losses: 1. Loss from House property can be set off against income under
any head 2. Business loss other than speculative business can be set off against
any head of income except except income from salary. One needs to also note
3 0
that the following losses can’t be set off against any other head of income: a.
Speculative Business loss b. Specified business loss c. Capital Losses d. Losses
from an activity of owning and maintaining race-horses
Carry forward of losses

After making the appropriate and permissible intra-head and inter-head
adjustments, there could still be unadjusted losses. These unadjusted losses can
be carried forward to future years for adjustments against income of these years.
The rules as regards carry forward differ slightly for different heads of income.
These have been discussed here:
Losses from House Property :
 Can be carry forward up to next 8 assessment years from the assessment

year in which the loss was incurred
 Can be adjusted only against Income from house property
 Can be carried forward even if the return of income for the loss year is
belatedly filed.
Losses from Non-speculative Business (regular business) loss :

 Can be adjusted only against Income from business or profession
 Not necessary to continue the business at the time of set off in future
years
 Cannot be carried forward if the return is not filed within the original due
date.
Speculative Business Loss :

 Can be adjusted only against Income from speculative business
date.
years
Specified Business Loss under 35AD :
 No time limit to carry forward the losses from the specified business under
35AD
years
date
 Can be adjusted only against Income from specified business under 35AD
3 0
Capital Losses :

 Long-term capital losses can be adjusted only against long-term capital
gains.
 Short-term capital losses can be set off against long-term capital gains as
well as short-term capital gains
date
Losses from owning and maintaining race-horses :

date
 Can only be set off against income from owning and maintaining race-
horses only
Points to note: 1.A taxpayer incurring a loss from a source, income from which
is otherwise exempt from tax, cannot set off these losses against profit from any
taxable source of Income 2. Losses cannot be set off against casual income i.e.
crossword puzzles, winning from lotteries, races, card games, betting etc.
20. What is Dual GST Model? Explain its features.
The Dual GST is assumed to be a simple tax with one or two Central Goods and
Service Tax (CGST) and State Goods and Services Tax (SGST) rates.
In India both Centre and State have been assigned the powers to levy and
collect taxes through appropriate legislation. Both the Centre and State
Government have distinct responsibilities to perform according to the division of
powers as prescribed in the Constitution that needs resources for
implementation. A dual GST is therefore, is appropriately aligned with the
Constitutional requirement of fiscal federalism.
Features of the proposed dual model
 GST shall have two components one levied by the Centre (referred to as
Central GST), and the other levied by the States (referred to as State
GST)
 Central GST and the State GST would be applicable to all transactions of
goods and services
 Central GST and State GST are to be paid to the accounts of the Centre
and the States individually
 Central GST and State GST are to be treated individually, therefore taxes
paid against the Central GST shall be allowed to be taken as input tax
credit (ITC)
3 0
 Cross utilization of ITC between the Central GST and the State GST would
not be permitted except in the case of inter-State supply of goods and
services Cross utilization of ITC between the Central GST and the State
GST would not be permitted except in the case of inter-State supply of
goods and services
 Credit accumulation on account of refund of GST should be avoided by
both the Centre and the States except in the cases such as exports,
purchase of capital goods, input tax at higher rate than output tax etc.
 Uniform procedure for collection of both Central GST and State GST would
be prescribed in the respective legislation for Central GST and State GST.
 Composition/Compounding Scheme for the purpose of GST should have
an upper ceiling on gross annual turnover and a floor tax rate with respect
to gross annual turnover.
 The taxpayer would need to submit periodical returns, in common format
as far as possible, to both the Central GST authority and to the concerned
State GST authorities.
 Each taxpayer would be allotted a PAN-linked taxpayer identification
number with a total of 14/15 digits
21. Discuss the method to calculate 'Income from House Property' for Income
Tax purposes.  Explain Annual value of house property and deductions from
house property income. (3)  Draw a format showing computation of taxable
income under the head "Income from House Property".  Explain the important
factors to be considered while assessing the taxable income from House
Property.  Draw a format showing computation of taxable income from let out
house property. (2)
The Income Tax Act has divided the income received by an individual in various
heads for simplification of tax computation. One of these heads is “Income from
House property”. The income earned by the ownership of a property is said to be
Income from House property. If a taxpayer owns a house property and rents it,
the rent received from that property is taxable.
Your house, building, office, or shop can be termed as house property. All the
properties are taxable be it commercial or residential.If the property is used for
residential purpose it is taxed under income from house property. On the other
hand if the property is used for business or profession then it is considered as
income from business or profession.
Self-Occupied This is the type of property that is self owned and used for own residential purposes. This may be
House occupied by the owner’s family or relative or self. A property that is unoccupied is considered as a self-
Property occupied property for the purpose of income tax. Before the Financial Year 2019-20 if taxpayer owns
3 0
more than one house property, only one is considered as self-occupied property and rest are assumed to
be let out. From 2019-20 onwards two properties are considered as self-occupied properties.
Let Out House Any house property that is rented for complete or part of the year is considered as a let out property for
Property income tax purposes.
Note :Inherited Property Any property inherited from parents, grandparents, etc, can be either considered as self-occupied
or let out house property based on the usage as discussed above.
The income tax categorises your income under 2 categories for the purpose of
taxability of house property income. These are :
22. Discuss the provisions under the Customs Act relating to dutiable goods
and valuation of goods.
Chapt
erV–LEVYOF
,ANDEXEMPTI
ONFROM,CUSTOMSDUTI
ES
SECTION12.Dut i
ablegoods .-(1)Ex ceptasother
wiseprovi
dedint
hisAct,oranyother
l
awfortheti
mebeinginforce,dutiesofc ust
omss hall
belevi
edatsuchrat
esasmaybe
spec
ifi edunder1[t
heCus tomsT ar
iffAc t
,1975(51of1975)]
,oranyotherlawforthet
ime
bei
nginforc
e,ongoodsimpor tedinto,orexport
edfrom,I
ndia.
2[(
2)Theprovi
sionsofs
ub-s
ecti
on(1)shal
lappl
yinrespectofal
lgoodsbel
ongi
ngt
o
Gover
nmentastheyappl
yinres
pectofgoodsnotbel
ongingtoGovernment
.]
SECTION13.Dut yonpilf
eredgoods.-I
fanyimportedgoodsarepil
f
eredafterthe
unl
oadingther
eofandbefor
etheproperofficerhasmadeanor derforcl
earanceforhome
consumpti
onordeposi
tinawarehouse,thei
mportershall
notbeli
abletopaytheduty
l
eviabl
eons uc
hgoodsexceptwheresuchgoodsarer es
toredt
otheimporteraft
erpil
f
erage.
3[SECTI ON14.Val uationofgoods .-(1)Fort hepurpos esoftheCus t

omsT ariffAct ,1975
(51of1975) ,oranyot herlawf ort
het i
mebei nginforce,thev al
ueoft heimportedgoodsand
exportgoodsshall bet het rans act
i
onv alueofs uchgoods ,thati
st osay,thepriceactuall
y
paidorpayablefort hegoodswhens ol
df orexportt
oI ndi
afordeliveryatthetimeandpl ac
e
ofimportat
ion,orast hecas emaybe,f orexportfr
om Indiafordeliv
eryatt het
imeandpl ace
ofexportat
i
on,wher et hebuy erands ell
erofthegoodsar enotr elatedandpr i
ceisthes ole
consi
derati
onf ort
hes al
esubj ectt
os uchot hercondi
tionsasmaybes pec i
fiedi nther ul
es
madei nthi
sbehal f:
Pr
ovidedthatsuc
htransacti
onvalueint
hec aseofi
mportedgoodsshal
lincl
ude,in
addit
iontothepri
c easafor
esaid,anyamountpaidorpayabl
eforcostsandser
vices,
i
ncludingcommi s
sionsandbrok er
age,engi
neer
ing,desi
gnwork,roy
alti
esandl
icencefees,
3 0
cost
softr
anspor
tat
iontot
heplaceofi
mpor
tat
ion,i
nsur
ance,l
oadi
ng,unl
oadi
ngand
handl
ingchar
gestotheex
tentandi
nthemannerspeci
fi edi
ntherul
esmadeinthi
sbehal
f
:
Pr
ovi
dedf
urt
hert
hatt
her
ulesmadei
nthi
sbehal
fmaypr
ovi
def
or,
-
(i
)t hecir
cumst
anc esinwhichthebuy erandthes ell
ershallbedeemedt ober elat
ed;
(i
i)t hemannerofdet er
minati
onofv alueinrespectofgoodswhent her
ei snos al
e,orthe
buy erandthesel
lerarerel
ated,orpriceisnotthes ol
econs ider
ati
onforthes al
eorinany
otherc as
e;
(i
ii
)t hemannerofac cept
anceorr ej
ect i
onofvaluedec l
aredbyt heimporterorexport
er,as
thec asemaybe,wher etheproperofficerhasr easont odoubtthetr
uthorac cur
acyofs uc
h
value,anddeter
mi nat
ionofvalueforthepurposesoft hi
ss ecti
on:
Pr ovi
dedal sothatsuchpri
ces hallbec al
c ulatedwi t
hr eferencetotherateofexchangeasi n
f
or ceont hedat eonwhichabi ll
ofent ryispr esentedunders ect
ion46,orashippingbillof
ex port
,ast hecasemaybe,i spresentedunders ect
ion50.
(2)Not withst
andinganyt
hingcont ai
nedi ns ub-sect
ion( 1),iftheBoardissat
is
fi edthatiti
s
nec essaryorex pedi
entsotodo,i tmay ,bynot i
fi cationint heOffici alGazette,fi xtari
ffv
alues
f
oranyc lassofimportedgoodsorex portgoods ,havingr egardtothetrendofvalueofs uch
orl i
kegoods ,andwher eanys uchtariffv aluesar efi xed,t hedut
ys hal
lbec hargeablewit
h
referencetos uchtari
ffv alue.
23. Define Agriculture Income. Explain its characteristics. (2)  What is

agricultural income? How agricultural income is treated for income tax purpose
under Income Tax Act?
Section 2 (1A) of the Income Tax Act, 1961 defines “agricultural income” as an income under
the following three sources:
(i) Any rent or revenue derived from land which is situated in India and is used for
agricultural purposes: The assessee will not be liable to pay tax on the rent or revenue
arising from agricultural land subject to the conditions:
(a) The land should either be assessed to land revenue in India or be subject to a local rate
assessed and collected by officers of the Government.
(b) In instances where such a land revenue is not assessed or not subject to local rate, the
land should not be situated within the jurisdiction of a municipality (whether known as a
municipality, municipal corporation, notified area committee, town area committee, town
committee or by any other name) or a cantonment board, and which has a population of
more than ten thousand (according to the last preceding census which has been published
before the first day of the previous year in which the sale of land takes place); or it should
not be situated:
 more than 2kms. from the local limits of any municipality or cantonment board and
which has a population of more than 10,000 but not exceeding 1,00,000; or
 not being more than 6kms. from the local limits of any municipality or cantonment
board and which has a population of more than 1,00,000 but not exceeding
10,00,000; or
3 0
 not being more than 8kms. from the local limits of any municipality or cantonment
board and which has a population of more than 10,00,000.
(c) The revenue must not include any income arising out of transfer of such land.
Further, a direct nexus between the agricultural land and the receipt of income by way of rent
or revenue is essential. (For instance, a landlord could receive revenue from a tenant.)
(ii) Any income derived from such land by agricultural operations including processing of
agricultural produce, raised or received as rent in kind or any process ordinarily employed by
cultivator or receiver of rent-in-kind so as to render it fit for the market, or sale of such
produce.
(iii) Any income derived from any building owned and occupied by the assessee,
receiving rent or revenue from the land, by carrying out agricultural operations: The
building must be on or in the immediate vicinity of the land. It must be used by the assesee
as a dwelling house or store-house or an out-building, in connection with the land.
Hence, we can consider income attributable to a farmhouse as an agricultural income,
subject to the above conditions. Normally, the annual value of a building is taxable as
‘income from house property’. However, in the case of a farm house, the annual value would
be deemed agricultural income and thus, be exempt from tax.
In addition to the above, income derived from saplings or seedlings grown in nursery is also
considered as agricultural income.
1. It must come from agricultural land. Basic operations comprise of cultivation which
included different activities that are performed using human skill and have an effect
on the land.
2. It must come from fundamental agricultural work. Any income is attributable to a
farmhouse which is required for operations for agriculture.
3. The marketing of products used by farmers will be a normal procedure. Any process
by the owner of the land who receives the rent in a non-monetary way or the
cultivator that results in agricultural products which can be taken to the market to be
sold.
4. Such income may arise from adjacent agricultural land. By sale of the produce of the
agricultural land.
5. Income may also arise from a sale or discarded value of agricultural machines or
plants. The building has to be situated close to the land and is required as a
warehouse or as a house for residential purposes.
6. Such income may come from such items which may partly agricultural and partly
non-agricultural.
7. Agricultural income may also arise in cash i.e., annual rental value.
24. What is meant by perquisite? Explain Tax free perquisites. (2)

1. PERQUISITES “Perquisite” may be defined as any casual emolument or benefit attached to an
office or position in addition to salary or wages. In essence, these are usually non-cash benefits given
3 0
by an employer to employees in addition to cash salary or wages. However, they may include cases
where the employer reimburses expenses or pays for obligations incurred by the employee.
Perquisites are also referred to as fringe benefits.
Broadly, “perquisite” is defined in the section 17(2) of the Income-tax Act as including:
1) Value of rent-free or concessional rent accommodation provided by the employer.
2) Value of any benefit/amenity granted free or at concessional rate to specified employees etc.
3) Any sum paid by employer in respect of an obligation, which was actually payable by the assessee.
4) Any sum paid by the employer for assurance on life of the employee or to effect a contract for an
annuity.
5) Value of any other fringe benefit as may be prescribed.
List of Tax-Free Perquisites – Income Tax Act

Aperquisit
er efer
st oanyf orm ofnon- cas hremuner ati
onmadeav ai
lablebyanempl oyerto
anempl oyee.I notherwor ds,anynon- cas hconsi
der at
ionpai
dbyanempl oyertothe
employeeisc ons ideredtobeaper qui si
te.Perquisi
tesprovi
dedbyanempl oyertoan
employeear et axableundert heheadofi ncomek nownasI ncomef rom Salari
es.Howev er
,
somet ypesofper quisi
t
esar et ax
-freeint hehandsoft heempl oyee.Foreffec ti
vetax
pl
anningandr educ ti
onoft axli
abil
ity,theempl oyerandempl oyeemus tbeawar eoftheli
st
oftax
-fr
eeper qui
si t
eswhichar epr ovidedbyt heIncomeTaxAc t
.I nthi
sar t
icl
e,wehav e
provi
dedal i
s tofs omeoft het ax-
freeper qui
sit
esment ionedundertheI ncomeT axAct.
Medical Facilities & Reimbursements

Thevalueofmedi calt
reat
mentpr ovi
dedtoanempl oyeeoranymemberofhi s/
herfami
lyi
na
hospi
t
al,dispensaryoranursinghomemai nt
ainedbytheempl oyerwillbeatax-f
ree
per
quisi
te.Also,anymoneypai dbyt heemployeforexpendi
tur
ei ncurr
edbyt heemploy
ee
onhis
/hermedi calt
reatmentortreat
mentofanymemberofhi sfamilysubjectt
oamax i
mum
ofRs.
15,000i ntheprevi
ousy earwil
l bet
reat
edasat ax-f
reeperquisit
e.
Recreational Facilities
Anyrec
reati
onalf
acil
i
typrovi
dedtoagr oupofemploy
eesbytheempl
oyeri
snottax
able.
Thus
,healt
hc l
ub,sport
sands i
milarf
acil
it
i
esprov
ideduni
for
mlyt
oall
employeesbythe
empl
oyerisatax-
fr
eeper qui
si
te.
Traininghttps://www.indiafilings.com/learn/tax-free-perquisites/
Anycos
tincur
redbytheemployerforpr
ovi
dingt
rai
ningt
otheempl
oyeesorbywayof
pay
mentoffeesorr
efres
hercoursesatt
endedbytheemploy
eescanbetr
eatedast
ax-
fr
ee
per
qui
si
te.
Telephone & Laptops
3 0
Expens
esi
ncurr
edbyanemploy
eronatel
ephone,mobil
ephoneorus
ebytheempl
oyeeor
anymemberofhi
shous
ehol
d,alapt
oporcomputerbel
ongi
ngtot
heempl
oyerc
anbe
tr
eat
edasatax-
fr
eeper
qui
si
te.
Education for Children

Anyamounti sgivenbyanempl oyert
oanempl oyeesc hi
ldasscholar
shi
pisatax-f
ree
perquisit
e.Also,i
faneducati
onalfaci
li
t
yismaintai
nedandownedbyt heemployerandfree
educationalfaci
li
t
iesar
epr ov
idedtothechi
ldr
enoft heempl oy
eeorwheresuchf r
ee
educationalfaci
li
t
iesar
epr ov
idedinanyins
tit
uti
onbyr easonofhis/
herbei
nginempl oyment
ofthatempl oyer
,thent
hev al
ueofbenefi tprovi
dedcanbet r
eatedasatax-
fr
eeper qui
sit
eif
theamountdoesnotex ceedRs .
1000perchil
dpermont h.
Food and Beverage

Fr
eefoodandnon-alcoholi
cbev eragesprovi
dedbyanempl oyertoanempl oyeeduri
ng
worki
nghoursatoffic epremisesorthroughapaidvoucherthatarenottrans
fer
ableand
usabl
eonlyatsel
ectplacesisat ax-f
reeprer
equi
si
te,pr
ovidedthev al
ueofs uchameani s
uptoRs.
50permeal .
Loan to Employees
AnyloanofanamountoflessthanRs.20,
000provi
dedasaloant
oanempl oyeecanbe
t
reat
edasat ax-
fr
eeperquis
it
e.Also,t
heloanpr
ov i
dedbyanemployerformedic
altr
eat
ment
i
nrespectofdi
seasess
pec i
fi edinRule3AoftheIncomeTaxRulesistax-
fr
ee.
Insurance Premium & Pension Contributions

Aninsurancepremi
um pai
dbyanempl oy
eronanac ci
dentpol
icytakenoutfortheemploy
ee
i
sat ax-f
reeper
quis
it
e.Als
o,employer
scont
ri
but
iontothesuperannuat
ionfundofthe
employeeprovi
dedsuchcont
ri
buti
ondoesnotex
c eedRs.1,
50,000perempl oy
eepery ear
canbet r
eatedasatax-
fr
eeperqui
sit
e.
Prerequisites Provided Outside India

Per
qui
sit
esallowedouts
ideI
ndi
abytheGover
nmentt
otheempl
oyees
,whoar
eci
t
izensof
I
ndi
aforrenderi
ngservi
cesout
sideI
ndi
awhi
char
enottax
abl
e.
Rent Free House/ Conveyance Facility

Therent
-f
reeaccommodati
onandconvey
ancefaci
l
it
iesar
epr
ovi
dedt
oaj
udgeofas
upr
eme
cour
torhighcour
tthati
snotat
axabl
eperqui
si
te.
Residence to Officials of Parliament

Therent
-fr
eef
urni
shedr
esi
denc
et hati
ncl
udesthemai
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3 0
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25. Explain the various Wealth Tax Authorities and their powers. (2)  Explain
the charge of Wealth Tax and state what the deemed assets under Wealth Tax
Act are. (3) 26. Describe the functions and powers of authorities relating to
Central Excise.27. Explain the procedure for registration of dealers under the
CST Act. (2)
NOT IN SYLLABUS
28. Explain the procedure for clearance of Imported Goods from the port under Customs Act, 1962.
(3)
. Arrival of goods and procedures prior to lodgement of goods
 Conveyances to call only at Notified Customs Ports / Airports
 Power to board conveyance, to question and to demand documents
 Delivery of Import Manifest
 General Conditions
 Amendments
 Penal Liability
 Entry Inwards
 Enclosures to Import General Manifest
 Procedure for filing IGM at Custom Houses operating EDI service centres
 Filing of Stores List
 Unloading and Loading of Goods
 Other liabilities of carriers
2. Procedure for clearance of Imported Goods
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 Bill of Entry - Declaration
 Assessment
 EDI Assessment
 Examination of Goods
 Green Channel facility
 Payment of Duty
 Amendment of Bill of Entry
 Prior Entry for Bill of Entry
 Mother Vessel/Feeder vessel
 Specialised Schemes
 Bill of Entry for Bond/Warehousing
29. Explain the provisions relating to the valuation of goods under the Customs Act 1962.
1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the
time being in force, the value of the imported goods and export goods shall be the
transaction value of such goods, that is to say, the price actually paid or payable for the
goods when sold for export to India for delivery at the time and place of importation, or as
the case may be, for export from India for delivery at the time and place of exportation where
the buyer and seller of the goods are not related and price is the sole consideration for the
sale subject to such other conditions as may be specified in the rules made in this behalf;
Provided that such transaction value in the case of imported goods shall include, in addition
to the price as aforesaid, any amount paid or payable for costs and services, including
commissions and brokerage, engineering, design work, royalties and licence fees, costs of
transportation to the place of importation, insurance, loading, unloading and handling
charges to the extent and in the manner specified in the rules made in this behalf: Provided
further that the rules made in this behalf may provide for, -
(i) the circumstances in which the buyer and the seller shall be deemed to be related;
(ii) the manner of determination of value in respect of goods when there is no sale, or the
buyer and the seller are related, or price is not the sole consideration for the sale or in any
other case;
(iii) the manner of acceptance or rejection of value declared by the importer or exporter, as
the case may be, where the proper officer has reason to doubt the truth or accuracy of such
value, and determination of value for the purposes of this section:
Provided also that such price shall be calculated with reference to the rate of exchange as in
force on the date on which a bill of entry is presented under section 46, or a shipping bill of
export, as the case may be, is presented under section 50.
(2) Notwithstanding anything contained in sub- section (1), if the Board is satisfied that it is
necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values
for any class of imported goods or export goods, having regard to the trend of value of such
or like goods, and where any such tariff values are fixed, the duty shall be chargeable with
reference to such tariff value."
30. State the incomes which are wholly exempt from Income Tax under sections 10 and 10 AA. (2)
1. Exemption under Section 10 (1) on agricultural incomeIf you earn
any type of agricultural income in a financial year, such an income would
3 0
be exempted from tax. Agricultural income, as defined under Section 2
(1A) of the Income Tax Act, 1961, would include the following types of
incomes –
 Rent or revenue earned from a land located in India which is used
for agricultural purposes
 Income earned from an agricultural land located in India by doing

agricultural activities. These agricultural activities also include
processing of the agricultural produce to make it fit for sale in the
market
 Income earned from a farmhouse provided specific conditions are

fulfilled
 Moreover, income earned from saplings or seedlings which are
grown in a nursery would also be considered as an agricultural
income
2. Exemption under Section 10 (2) on income received by a
coparcener from the HUFIf you are a coparcener in a Hindu Undivided
Family (HUF), share of income received from family income or income
received from an impartial family estate would be exempted from tax. For
instance, in a financial year, you earn INR 50,000 as salary from your HUF.
Moreover, the HUF earned an income of INR 60,000 out of which you
received INR 20,000 as your share. In this case, your salary income would
be liable to tax but the share of profit which you received from the HUF,
i.e. INR 20,000 would be exempted from tax.
3. Exemption under Section 10 (2A) on profit received by a partner

from a firmIf you are a partner in a partnership firm or in an LLP (Limited
Liability Partnership), the share of profit which you receive from the firm or
LLP would be exempted from tax. This exemption would be allowed only
on the share of profit received. Any other amount received by way of

remuneration or interest on capital would not be exempted.
4. Exemption under Section 10 (4) on interest received by a non-
residentSection 10 (4) is further divided into two sub-sections. The first
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one is Section 10 (4) (i) wherein interest received by a non-resident
individual on specific securities or bonds and the premium earned on
redemption on such bonds are allowed as an exemption. The second one
is Section 10 (4) (ii) wherein interest earned by a non-resident on the Non-

Resident External Account (NRE Account) is allowed as an exemption. The
NRE account can be maintained with any bank as per the Foreign
Exchange Management Act, 1999 (FEMA). The exemption under Section 10
(4) (ii) would be available to an individual who is a resident outside India
as mentioned in Section 2, clause ‘w’ of the FEMA or is an individual who is
allowed by the RBI to maintain an NRE Account.

5. Exemption under Section 10 (4B) on interest paid on notified
savings certificatesIf an individual is an Indian citizen or a PIO (Person of
Indian Origin) and he/she is a non-resident, interest income earned from
saving certificates which are issued by the Central Government would be

completely exempted from tax. The saving certificates should be notified
in the Official Gazette of the Central Government and the individual should
have invested in such certificates in foreign currency or foreign exchange
as specified in the Foreign Exchange Act, 1973, FEMA or any other Act
passed by the Government. However, if the securities are issued on or
after 1st June 2002, the exemption would not be allowed and the interest
income would be fully taxable.
6. Exemption under Section 10 (5) on Leave Travel Allowance

/Concession paid to an employeeA salaried employee can claim an
exemption for the Leave Travel Allowance (LTA) or Leave Travel Concession
(LTC) paid by the employer. There are various rules for claiming LTC
exemption which includes the following –

 The actual cost of travel would be allowed as an exemption subject
to the maximum allowance paid by the employer. Let’s understand
with an example. Mr Verma, an employee, receives LTA of INR
50,000 from his employer. He goes on a trip with his wife and two
kids and the total cost of travel tickets comes to INR 40,000. In this
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case, the LTA exemption would be allowed for INR 40,000 which is
the actual cost of the journey. However, if the travel tickets
amounted to INR 60,000, the exemption would have been available
only for INR 50,000 which is the maximum LTA paid by the
employer. The remaining INR 10,000 would be taxed in the hands of
the employee
 The exemption can be claimed either when the employee takes a
leave from work and travels or if the employee has retired or left
the job before travelling
 The travel should be taken within India

 The travel cost of the family members can also be claimed as an
exemption. Family members include spouse, children, parents and
siblings. In the case of children, the exemption is allowed for up to 2
children born on or after 1st October 1998. For children born earlier,
however, there is no maximum limit.
 Costs incurred on sightseeing, food, etc. would not be allowed as an
exemption under LTA
 If the journey is done by air, the maximum exemption would be the

economy class return airfare for the shortest route taken from the
place of origin to the place of destination
 If the journey is done by any other mode (except by air) when there
is train connectivity, the maximum exemption would be limited to

the return fare of first-class AC train ticket for the shortest possible
route
 If the destination is not connected by train, the exemption limit
would be limited to the return fare of first-class AC train ticket for
the shortest possible route assuming that the journey is done by
train
 The exemption can be taken for a maximum of two journeys
undertaken in a block of 4 years. The block of 4 years has been
listed by the Government and it follows the calendar, i.e., the year
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starts from January and ends in December. The current block is from
January 2018 to December 2021
 If two LTA exemptions are not claimed in a block of four years, the
unclaimed LTA can be carried forward to the next block. However, in
that case, the carried forward LTA should be claimed within the first
year of the next block. For example, for the block of 2018-2021, if
the employee claims only one LTA, the remaining LTA can be carried
forward to the 2022-2025 block. However, the carried forward
exemption should be claimed between 1st January 2022 and 31st
December 2022
7. Exemption under Section 10 (6)Section 10 (6) allows exemptions on
different types of incomes which are listed below –
 Section 10(6)(ii) – remuneration received by ambassadors and
officials of the Embassy, High Commission or Legation, consular

officer, trade commissioner or other official representative and
members of staff of these officials would be exempted from tax.
This exemption would be allowed if the individuals are not Indian
citizens and if they serve on behalf of a foreign country in India.

Moreover, the individual should not have any other source of
income in India and the country which the individual represents

should also allow similar tax exemptions to Indian Government
officials located therein.

 Section 10(6)(vi) – incomeearned byan employee of a foreign
company who is sent to India for rendering services would be

allowed as an exemption. However, to claim the exemption, the
foreign company should not have any type of business in India, the
employee’s stay in India should not be for more than 90 days in the
previous year and the remuneration paid should not be deducted

from the income of the company which is chargeable under the
Income Tax Act, 1961.
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 Section 10(6)(viii) – salary income earned by an individual who is
a non –resident when employed on a foreign ship would be

exempted from tax. However, for claiming the exemption, the
individual should not have stayed in India for more than 90 days in
the previous year.
 Section 10(6)(xi) – if an individual who is not an Indian citizen

receives a remuneration when training in India in a Government-
owned institution, a Central and/or State Government-owned
company, a subsidiary of a Central and/or State Government-owned
company or a society registered under the Societies Registration

Act, 186Q that is financed by the Central or State Government, the
remuneration received would be tax-exempt.

 Section 10(6A) – if a foreign company provides technical services
to the State or Central Government or to an Indian company and

receives an income in the form of royalty or fees for the services
provided, the tax might be paid by the Government of the company
which availed the foreign company’s services. This tax payment
would be exempted from tax provided that the foreign company

provided the service as per an agreement made before 1st June
2002, the agreement is approved by the Government and the

agreement complies with the Industrial Policy of the Government.
 Section 10(6B) – If an Indian company or the Government seeks

services of a non-resident individual or a foreign company and pays
tax on behalf of them, the tax paid would be allowed as an

exemption. It would not be included in the income earned by the
non-resident individual or the foreign company.

 Section 10(6BB) – if a foreign company or Government receives
income from an Indian company which is engaged in aircraft

operations and the income is the consideration paid for buying the
aircraft or its engine on lease and the Indian company pays taxes on
such income, the tax paid would be exempted from tax. This would
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be allowed if the foreign company has entered into an agreement
with the Indian company on or after 31st March 1996 but before 1st
April 2007 and the agreement has been approved by the Central
Government of India.
 Section 10(6C) – if a foreign company, notified by the Government
in the Official Gazette, receives an income in the form of royalty or
fees for technical services provided in or outside India for projects
related to the security of India, the income received would be tax-

exempt.
 Section 10(6D) – income which is paid to a non-resident individual
who is not a company or a foreign company in the form of royalty or
fees for services provided to the National Technical Research

Organisation whether in or outside India would be exempted from
tax.
8. Exemption under Section 10 (7) on perquisites and allowances
paid by the Government to its employees outside India If an Indian

citizen is working outside India for the Government, any perquisite or
allowance paid by the Government to such employee would be exempted
from tax. The salary of the employee would be deemed to accrue in India
on which the employee would be taxed. However, the perquisites and

allowances paid to the employee would not be taxed. To claim exemption,
the income should be charged under the head ‘Salary Income’ and it
should be paid by the Government to an Indian citizen (whether resident
or non-resident) for the services rendered outside India.

9. Exemption under Section 10 (8) on income paid to employees of
foreign countries working in India If a foreign citizen is working in
India under the scheme of co-operative technical assistance programmes
and there is an agreement between the Government of India and the
Government of the foreign State, the income earned by the individual
would be exempted from tax. The income should be paid by the
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Government of the foreign State and the individual should not have any
income arising in India.
 Section 10 (8A) – If an individual who is a non-resident, not an
Indian citizen or a citizen but not ordinarily resident in India is a
consultant from an international organization, any fee or
remuneration earned by him would be exempted from tax under

Section 10 (8A). To claim exemption, the organization for which the
consultant works should derive its fund from a technical assistance
grant which is given by the foreign Government under an
agreement. The technical assistance provided by the consultant

should be as per the agreement. The appointment of the consultant
should also be approved by specified authorities. Moreover, if the
individual has any income arising outside India, he should be liable
to pay tax to the foreign Government on such income.

 Section 10 (8B) – If the consultant mentioned under Section 10
(8A) employs and pays an individual any remuneration for services
rendered in India under the technical assistance program, such
remuneration would be tax-exempt under Section 10 (8B). The

individual should not be an Indian citizen or if he is an Indian citizen
he should not be ordinarily resident in India. Any other income of

the individual outside India would also be exempted if it is subject to
tax in a foreign country. Moreover, the individual’s service contract

should be approved by a specified authority to claim exemption.
10.Exemption under Section 10 (9) on the income of family members

of individuals working in India under the co-operative technical
assistance programsIf the family member of the individual referred
under Sections 10 (8), (8A) and (8B) comes to India with the individual and
earns an income outside India, such income would not be taxed in India.
The income would be deemed to accrue outside India for which the family
member of the individual would have to pay an income or a social security
tax to the Government of the country where the income originated.
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11.Exemption under Section 10 (10) on gratuity income received by
an employeeIf an employee has completed five years of service with an
employer, the employer pays a gratuity to the employee on retirement or
on the death of the employee. Gratuity is paid as an acknowledgement of

the past service rendered by the employee. If gratuity is paid on the
retirement of the employee, the amount of gratuity is recorded under
‘Income from salary’. However, gratuity paid to the legal heir on the death
of the employee would be recorded under the head ‘Income from other
sources’ in the tax return of the legal heir. Section 10 (10) exempts the
gratuity received by the employee up to specified limits. These limits are
as follows –

1. Section 10(10)(i) – any gratuity paid to a Government

employee on death or retirement would be tax-exempt under
this Section.
2. Section 10(10)(ii) – if gratuity is paid to a non-Government
employee by an organisation covered under the Payment of

Gratuity Act, 1972, a specific portion of the gratuity would be
exempted from tax under this Section. The exempted amount

of gratuity would be the lowest of the following –
1. Amount of gratuity received
2. 15 days’ average salary of the last three months for
each completed year of service. If in a year the

employee has worked for more than 6 months, it would
be considered to be one full year of service. In the case
of seasonal establishments, however, 7 days’ salary is
considered for calculation of exemption limit. Salary

would include basic salary and dearness allowance.
The formula to calculate the amount would be (15 or 7
* last monthly salary * years of service) divided by 26
3. INR 20 lakhs
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If, however, gratuity is paid to any other employee, i.e. non-Government
employee of an organisation not covered under the Payment of Gratuity

Act, 1972, the exempted amount would be the lowest of the following –

1.
1. Amount of gratuity received
2. Half months’ average salary for each year of service.
Average salary would mean the average salary of the

last 10 months and it would include basic salary,
dearness allowance and commission on sales.
Moreover, service rendered for a fraction of the year
would not be taken into consideration. The formula
here becomes (15 * last monthly salary * years of
service) divided by 30
3. INR 20 lakhs
31. Discuss the provisions relating to Appeal under the Income Tax Act, 1961. (2)
APPEAL BEFORE COMMISSIONER (APPEALS)

If any demand is raised by the Assessing Officer in the assessment, what’s the next
step for Assessee. Aggrieved tax payer can file appeal before the Commissioner
(Appeals) having, jurisdiction over the tax payer. Designation of the Commissioner
(Appeals), with whom appeal is to be filed is also mentioned in the notice of demand
issued by the Assessing Officer under section 156 of Income Tax Act.
Particulars 246A 254 260A 261
Appellate Authority CIT (A) ITAT High Court Supreme Court
Time limit for Appeal 30 days 60 days from 120 days from
from the the the
receipt of communication communication
the order of the Order of the order of
ITAT
Time limit for disposal 1 Year from 4 Year from the As per Court As per Court
of Appeal the end of end of the FY procedure procedure
the FY
3 0
Application Form 35 36 As per Court As per Court
procedure procedure
Stamps to be affixed 0.50P 0.50P As per Court As per Court

procedure procedure
Fees to be Paid
Returned Income upto Rs 250 Rs 500 As per Court As per Court

Rs1 Lac procedure procedure
More than 1 lac upto Rs Rs 500 Rs 1500 As per Court As per Court
2 Lac procedure procedure
More than 2 lac Rs 1000 1 % of income As per Court As per Court

(Max Rs procedure procedure
10,000)
Appeal for other than Rs 250 Rs 500 As per Court As per Court
Income procedure procedure
Stay of Demand Not Possible Possible against Possible Possible

order of CIT(A)
Recovery of Tax No power to Final order – –

stay the should be
recovery of passed within
Tax 180 days from
the stay order
so passed
32. Explain the various Custom Tax Authorities and their powers.
OFFICERS OF CUSTOMS
3. Classes of officers of customs.— There shall be the following

classes of officers of customs, namely:-
a. Chief Commissioners of Customs;
b. Commissioners of Customs;
c. Commissioners of Customs (Appeals);
(cc) Joint Commissioners of Customs;
d. Deputy Commissioners of Customs;
e. Assistant Commissioners of Customs or Deputy
Commissioner of Customs;
f. such other class of officers of customs as may be appointed
for the purposes of this Act.
4. Appointment of officers of customs. —
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a. The Board may appoint such persons as it thinks fit to be
officers of customs.
b. Without prejudice to the provisions of sub-section (1), Board
may authorise a Chief Commissioner of Custom or a Joint or
Assistant Commissioner of Customs or Deputy Commissioner
of Customs to appoint officers of customs below the rank of
Assistant Commissioner of Customs or Deputy Commissioner
of Customs.
4. Powers of officers of customs. -
a. Subject to such conditions and limitations as the Board may

impose, an officer of customs may exercise the powers and
discharge the duties conferred or imposed on him under this
Act.
b. An officer of customs may exercise the powers and
discharge the duties conferred or imposed under this Act on
any other officer of customs who is subordinate to him.
c. Notwithstanding anything contained in this section, a
Commissioner ( Appeals) shall not exercise the powers and
discharge the duties conferred or imposed on an officer of
customs other than those specified in Chapter XV and
section 108.
2. Entrustment of functions of Board and customs officers on certain
other officers. - The Central Government may, by notification in
the Official Gazette, entrust either conditionally or unconditionally
to any officer of the Central or the State Government or a local
authority any functions of the Board or any officer of customs
under this Act.
33Explain in detail the various types of Excise Duty that can be imposed under
Central Excise Act. (2)  Explain in detail the various types of Excise Duty with
illustrations.
An excise or excise tax (sometimes called an excise duty) is a type of tax charged on goods produced
within the country (as opposed to customs duties, charged on goods from outside the country). It is a
tax on the production or sale of a good. This tax is now known as the Central Value Added Tax
(CENVAT). It is mandatory to pay duty on all goods manufactured, unless exempted. Types of excise
duty There are three different types of central excise duties which exist in India which are as follows:
Basic - Excise Duty, imposed under section 3 of the 'Central Excises and Salt Act' of 1944 on all
excisable goods other than salt produced or manufactured in India, at the rates set forth in the
schedule to the Central Excise tariff Act, 1985, falls under the category of basic excise duty in India.
Additional - Section 3 of the 'Additional Duties of Excise Act' of 1957 permits the charge and
collection of excise duty in respect of the goods as listed in the schedule of this act. This tax is shared
between the central and state governments and charged instead of sales tax. Special - According to
Section 37 of the Finance Act, 1978, Special Excise Duty is levied on all excisable goods that come
under taxation, in line with the Basic Excise Duty under the Central Excises and Salt Act of 1944.
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Therefore, each year the Finance Act spells out that whether the Special Excise Duty shall or shall not
be charged, and eventually collected during the relevant financial year.
34. When is a sale or purchase of Goods said to take place out side state and in
the course of import or export. Explain with examples/case law (C.S.T. Act.) (4)
 Explain the law relating to sale or purchase in the course of inter-state trade
or commerce under Central Sales Tax Act.
NOT IN SYLLABUS
35. Explain the merits and demerits of excise duty.
36. According to Central Sales Tax Act 1956 when the sale or purchase of goods
is said to have taken place in the course of export.  When is a sale or purchase
of goods said to be sale or purchase made in the course of Export or Import
under CST Act, 1956.
NOT IN SYLLABUS
3 0
37. Define the term casual income. State the circumstances in which the casual
incomes are taxable.
Casual income means income in the nature of winning from lotteries, crossword puzzles,
races including horse races, card games and other games of any sort, gambling, betting etc.
Such winnings are chargeable to tax at a flat rate of 30% under section 115BB.
Casual Income is taxed at a flat rate of 30%. No expenditure is allowed as a

deduction from casual income. Also the benefit of basic exemption limit is not
available for casual income.
TDS @ 30% is deducted u/s 194B in case of winnings from lotteries if the
amount exceeds Rs. 10,000/-.
TDS @ 30% is deducted u/s 194BB in case of income received from race
horses.
38. Explain the power of the Commissioner of Income Tax to reduce or waive
penalty under I.T. Act.
Section 273A(1) empowers the Principal Commissioner or Commissioner to grant waiver or
reduction from penalty levied under section 270A (i.e., penalty for under-reporting and
misreporting of income) or under section 271(1 )(c) (i.e., penalty for concealment of
particulars of income or furnishing inaccurate particulars of income).
As per section 273A(3), where an order has been made under section 273A(1) in favour of
any person, whether such order relates to one or more years, he shall not be entitled to any
relief under section 273A in relation to any other year at any time after the making of such
order.
Thus, if a person has claimed relief under section 273A(1) at any time, then he cannot claim
relief under section 273A [i.e., section 273A(1) as well as section 273A(4)] thereafter.
Waiver of penalty under section 273AA
Section 273AA empowers the Principal Commissioner or Commissioner to grant immunity
from imposition of any penalty under the Income-tax Act in a case where the taxpayer has
made an application for settlement under section 245C and the proceedings for settlement
have been abated under section 245HA and penalty proceedings are initiated under the
Income-tax Act.
39. What is meant by net wealth and state the assets that are not included in
the net wealth of an assessee ? 40. Explain Net Wealth and exemptions under
Section 5 of the Wealth Tax Act, 1957
net wealth means the amount by which the aggregate value computed in accordance with
the provisions of this Act of all the assets, wherever located, belonging to the assessee on
3 0
the valuation date, including assets required to be included in his net wealth as on that date
under this Act, is in excess of the aggregate value of all the debts owed by the assessee 37 [on
the valuation date which have been incurred in relation to the said assets];
Following assets are exempt from wealth-tax, i.e., they are exempt assets:
 One house or part of a house or a plot of land (not exceeding 500 Sq. Mtrs.) in case
of Individual or HUF
 The interest of a person in the coparcenary property of any HUF of which he is a
member.
 Any property held by the taxpayer under trust or other legal obligation for any public
purpose of a charitable or religious nature in India. This exemption is not applicable
to business assets of charitable/religious trust except when business is incidental to
the attainment of the objectives of the trust or, as the case may be, institution, and
separate books of account are maintained by such trust or institution in respect of
such business or the business is carried on by an institution, fund or trust referred to
in clause (23B) or (23C) of section 10 of the Income-tax Act. Any one building in the
occupation of former Ruler, i.e., used for the residence by a former ruler.
 Jewellery in possession of a former ruler of a princely State, not being his personal
property which has been recognised by the Central Government as a heirloom before
1-4-1957 or by the CBDT after 1-4-1957.
 Certain assets belonging to a person of Indian origin or an Indian citizen who was
residing abroad and now returning with an intention of permanently residing in India
is exempt subject to following conditions:
o This exemption is available only to a person of Indian origin or a citizen of A
person will be said to be of Indian origin if he or any of his parents or
grandparents were born in un-divided India.
o Such person was residing in foreign country.
o Exemption is available at the time he returns to India, i.e., he is an Indian
repatriate.
o Exemption is available for a period 7 years (starting from the year in which he
returns to India).
The above discussed exemption is available in respect of following assets:
(1) Money brought into India at the time of his return to India.
(2) Value of assets brought into India at the time of his return to India.
(3) Money standing to the credit of such person in a Non-resident (External) Account in any
bank in India on the date of his return to India.
(4) Assets acquired by him out of money refered to in (1) and (3) above within a period of
one year prior to the date of his return and any time thereafter
41. Explain the provision and procedure relating to the registration of goods
under Excise Act.
DISSCUSSED IN THE ABOVE QUESTION
42. Discuss the provisions relating to assessment of duty under Customs Act.
3 0
SECTI
[ ON17.Assessmentofdut y.–(1)Ani mport
erenteringanyimport
edgoodsunder
secti
on46,oranexpor
terent
eri
nganyex portgoodsunders ect
ion50,shal
l
,saveas
other
wiseprovi
dedi
nsecti
on85,sel
f-as
ses stheduty
,ifany,levi
abl
eons uchgoods
.
(2)Theproperofficermayv eri
fyt
hesel
f
-assessmentofsuc
hgoodsandfort
hispur
pose,
examineortestanyi
mpor
tedgoodsorex
portgoodsorsuchpartt
her
eofasmaybe
necessar
y.
12
[
(3)Forv eri
fi cati
onofs el
f-
as sessmentunders ub-secti
on(2),theproperoffic ermayrequi
re
thei mporter
,exporteroranyot herpersontoproduc eanydoc umentorinformat
ion,whereby
thedut ylevi
ableont heimportedgoodsorex portgoods,asthec asemaybe,canbe
asc ert
ainedandt hereupon,t
hei mporter,export
erors uchotherpersons hal
lpr
oduces uch
doc umentorf ur
nishs uchinf
ormat i
on.]
(4)Wherei
tisf
oundonveri
fi c
ati
on,examinati
onortes
ti
ngofthegoodsorotherwi
set
hatt
he
self
-ass
essmenti
snotdonecorr
ect
ly
,theproperoffic ermay,wi
thoutpr
ejudi
cet
oanyother
acti
onwhic
hmaybet ak
enunderthi
sAct,re-as
sessthedutyl
evi
ableons uc
hgoods.
(5)Wher eanyr e-ass ess

mentdoneunders ub-secti
on(4)iscontr
arytot
he s el
f-asses s
ment
donebyt hei mporterorex por
terregardi
ngvaluati
onofgoods ,cl
assificati
on,ex empt i
onor
concessionsofdut yav ail
edconsequenttoanynot ificati
onissuedther
eforundert hisActand
i
nc asesot hert
hant hosewheret heimport
erorex port
er,asthecasemaybe,c onfi rmshis
acceptanceoft hes aidre-assessmentinwrit
ing,theproperoffic ershallpassas peaki
ng
orderont here-asses sment,wit
hinfi ft
eenda ysfrom t
hedateofre-ass
es smentoft hebil
lof
entryorthe shippingbi l
l
,asthec asemay be.
(6)Wherere-assess
menthasnotbeendoneoras peaki
ngorderhasnotbeenpas sedon
re-assessment,t
heproperoffic ermayaudi tt
heas s
essmentofdut
yoft heimport
edgoods
orexportgoodsathisofficeoratt hepremisesoftheimport
erorexpor
ter,asmaybe
expedi
ent,insuchmannerasmaybepr es
cribed.
43. Mr. 'M' an Indian citizen left India for the first time on 30-05-2013 for the
purpose of permanently settling down in England. Determine his residential
status for the assessment year 2014-15
51. Mr. John an American citizen was appointed as a senior scientist in India on
1st April, 2002. On 31st Jan. 2010 he went to Uganda on deputation for a
period of 3 years, but left his wife and children in India. On 1st May 2011 he
came to India and took with him his family to Uganda on 30th June 2011. He
returned to India and joined his original job on 2nd February 2013. Determine
his residential status for the Assessment Year 2013-14.
PRACTICAL QUESTIONS.
3 0
44. Explain the provisions relating to collection and recovery of Income Tax.
45. Define CENVAT Duty and explain in detail with the help of decided cases the conditions
for levy of Excise Duty. 46. Explain the importance of valuation of excisable goods for the
purpose of levying Excise Duty.  Explain the provisions with respect to valuation of excisable
goods for the purpose of charging of excise duty. 47. State the various types of exemptions
from Excise Duty.
NOT IN SYLLABUS
48. What is baggage ? Explain the provisions of the Customs Act, relating to
baggage.
Baggage
SECTI
ON77.Declar
ati
onbyownerofbaggage.-Theownerofanybaggages
hal
l
,fort
he
pur
pos
eofc
lear
ingit
,makeadec
lar
ati
onofi
tscont
entst
otheproperofficer.
SECTION78.Det erminat
ionofrateofdutyandtariffvaluat
ioni
nr espectof
baggage.-Therateofdut
yandtari
ffv al
uati
on,i
fany,appl
i
cabl
etobaggages hal
lbet
he
rat
eandv al
uat
ioninfor
ceonthedat
eonwhi chadeclarat
i
onismadei
nres pectofs
uch
baggageundersecti
on77.
SECTION79.Bonafidebaggageexempt
edfrom duty.-(
1)Thepr
operofficermay
,
subj
ectt
oanyrul
esmadeunders
ub-
sect
i
on(
2),pas
sf r
eeofduty–
(a) anyart
ic
lei
nt hebaggageofapass
engeroramemberoft
hecrewi
nres
pectof
whichthesai
dofficeri ssat
isfiedthati
thasbeeni
nhi
susef
orsuc
hminimum per
iodasmay
bespec i
fiedintherul
es;
(
b) anyarti
cl
einthebaggageofapass engeri
nr es
pectofwhi
chthesaidoffic erissat
is
fied
t
hati
tisf
ortheuseofthepassengerorhisfamil
yorisabonafi degiftors
ouveni
r;pr
ovi
ded
t
hatt
hevalueofeachsucharti
cl
eandt hetotalv
alueofal
lsuchar
ti
clesdoesnotex
ceed
s
uchli
mit
sasmaybes pecifiedintherules.
(2) t
heCentr
alGov
ernmentmaymaker ul
esf
ort
hepurpos
eofc
arr
yingoutt
hepr
ovi
si
ons
ofthi
ssec
ti
onand,i
npart
icul
ar,s
uchr
ulesmayspec
ify–
(
a) t
hemini
mum peri
odforwhi
chanyar
ti
clehasbeenusedbyapas
sengeroramemberof
t
hecr
ewfort
hepurposeofcl
ause(
a)ofsub-s
ect
ion(1)
;
(b) t
hemaximum v
alueofanyindi
vi
dualar
ti
cleandt
hemaximum tot
alval
ueofal
lt
he
art
ic
leswhi
chmaybepas sedfr
eeofdutyundercl
aus
e(b)ofsub-
secti
on(1);
(
c)thecondit
i
ons(t
obefulfi
ll
edbef
oreoraf
terc
lear
anc
e)s
ubj
ectt
owhi
chanybaggage
maybepassedfr
eeofdut
y.
(
3) Di
ffer
entr
ulesmaybemadeunders
ub-
sec
ti
on(
2)f
ordi
ffer
entc
las
sesofper
sons
.
SECTION80.Tempor arydetenti
onofbaggage.-Wher et hebaggageofapas senger
cont
ainsanyar t
icl
ewhi c
hi sdut
iabl
eort
heimpor tofwhi
chi sprohibit
edandinrespectof
whic
hat r
uedec l
arat
ionhasbeenmadeundersec ti
on77,thepr operoffic ermay ,att
he
r
eques tofthepassenger,det
ainsuchar
ti
cl
ef ort
hepurposeofbei ngret
urnedtohim onhis
l
eavingIndia1[
andifforanyreason,t
hepassengerisnotabletoc oll
ectt
hear t
i
cleatthe
3 0
ti
meofhi
sleavi
ngIndi
a,t
hear t
icl
emayberet
urnedt
ohimt
hroughanyother
pass
engeraut
hori
sedbyhim andleav
ingI
ndi
aorascar
goconsi
gnedinhisname]
.
SECTI
ON81.Regul
ati
onsi
nrespectofbaggage.-TheBoar
dmaymak
eregul
ati
ons
,-
(
a) pr
ovi
di
ngf
ort
hemannerofdec
lar
ingt
hecont
ent
sofanybaggage;
(
b) pr
ovi
di
ngf
ort
hec
ust
ody
,ex
ami
nat
i
on,as
ses
smentt
odut
yandc
lear
anc
eofbaggage;
(c
) provi
di
ngforthet
ransi
tort
rans
hipmentofbaggagef
rom onec
ust
omss
tat
i
ont
oanot
her
ortoaplaceout
si
deIndia.
Goodsi
mpor
tedorexpor
tedbypost
2
[SECTION82.Labelordeclar
ationaccompanyinggoodst
obet
reat
edasent
ry.
–[Repeal
edbyt
heFi nanceAct,2017,sect
ion104]
].
SECTION83.Rat eofdut yandt ari
ffval uat
ioninrespectofgoodsi mpor tedor
exportedbypost .-(1)Ther ateofdutyandtar
iffv al
ue,ifany
,appli
cabletoanygoods
i
mpor t
edbypos tshallbether ateandval
uati
oninfor
ceont hedateonwhi chthepos t
al
author
iti
espr
esentt otheproperoffic eralis
tcontai
ningthepart
i
cularsofsuc hgoodsf
ort
he
purposeofassessingthedutyt her
eon:
Providedthati
fsuchgoodsareimport
edbyav ess
elandthel
i
stofthegoodsc
ontai
ni
ngthe
part
ic
ularswaspresent
edbefor
et hedat
eofthearr
ival
oft
hevessel
,its
hall
bedeemedto
havebeenpr es
entedonthedateofsuchar
ri
v al
.
(2) Therat
eofdut yandtari
ffv alue,i
fany,appl
i
cabl
etoanygoodsexpor
tedbyposts
hall
betherat
eandv aluati
oninforc
eont hedateonwhichtheex
port
erdel
iv
erssuchgoodsto
thepost
alauthor
it
iesforexpor
tati
on.
SECTION84.Regul
ati
onsregar
dinggoodsi
mpor
tedort
obeexpor
tedbypost
.-The
Boar
dmaymaker egul
ati
onsprovi
dingf
or–
3
[(a)t
hefor
m andmannerinwhi
chanent
rymaybemadei
nrespectofgoods
i
mpor t
edortobeexpor
tedbypost
;]
(b) t
heexami
nat
ion,assessmentt
odut
y,andcl
ear
anceofgoodsi
mpor
tedort
obe
export
edbypost
;
(
c) t
hetransi
tort
ranshi
pmentofgoodsi
mpor
tedbypost
,fr
om onecust
omsst
ati
on
t
oanotherort
oaplaceoutsi
deIndi
a.
St
ores
SECTION85.St oresmaybeal l
owedt obewar ehousedwi t
houtassessmentt oduty.–
Whereanyi mportedgoodsareenter
edforwarehousingandtheimport
ermak esand
subsc
ribestoadec larat
i
onthatt
hegoodsaretobes uppli
edass t
orest
ov ess
elsoraircr
aft
s
wit
houtpay mentofimportdut
yunderthi
sChapter,t
heproperoffic ermaypermi tt
hegoods
t
obewar ehousedwi t
houtt
hegoodsbeingass
es sedtoduty.
SECTI ON86. Transi tandt r
anshipmentofst ores.-(1)Anystor
esi mport
edinav ess
el
orairc
raf
tmay,withoutpay mentofduty,r
emai nonboards uchvesselorai
rcraf
twhileiti
sin
Indi
a.
(2)Anys t
oresimportedinav esselorair
craf
tmay ,wit
hthepermissionoftheproperofficer,
betransf
err
edtoanyv esselorai
rcr
aftass t
oresforconsumpti
onthereinasprovidedin
sect
ion87ors ect
ion90.
SECTION87. I mpor t
edst or
esmaybeconsumedonboar daf oreign-goi
ngvesselor
air
craft
.-Anyi
mpor t
eds t
oresonboardav esselorai
rcr
aft(
otherthans t
orest
owhich
sect
ion90appl
i
es )may,wit
houtpaymentofduty,beconsumedt hereonass t
oresdur
ingt
he
peri
odsuchves
sel orai
rcr
aftisaf
orei
gn-goingvessel
orairc
raft
.
3 0
SECTION88.Appl i
cati
onofsection69andChapterXt ostores.-Theprovi
si
onsof
sec
tion69andChapterXshal
lapplyt
ostor
es(ot
herthanthoset
owhi chsec
tion90appl
i
es)
astheyappl
ytoot
hergoods,s
ubjectt
othemodificati
onsthat–
(
a) f
orthewords"
export
edt
oanyplaceouts
ideIndi
a"ortheword"
exported"
,wherever
t
heyoccur,t
hewor
ds"tak
enonboar
danyf or
eign-
goi
ngv essel
orai
rcr
aftasstor
es"shal
lbe
s
ubst
it
uted;
(b) inthecaseofdr
awbackonf
uelandlubr
icat
i
ngoi l
tak
enonboardanyf
orei
gn-goi
ng
airc
raftasst
ores
,sub-s
ect
i
on(1)ofsect
i
on74s hall
haveeffectasiff
ort
hewords"ninet
y-
eightpercent
",t
hewords"
thewhol
e"weresubsti
tut
ed.
SECTI ON89.St orest obef reeofexpor tdut y
.-Goodspr oducedormanufacturedi
n
Indi
aandr equiredass toresonanyf oreign-goingvesselorair
craf
tmaybeex portedfr
eeof
dutyinsuchquant it
iesast hepr operoffic ermaydetermine,havingr
egar
dt othesizeoft
he
vesselorair
craft,thenumberofpas sengersandc r
ewandt helengthoft
hevoyageor
j
ourneyonwhi c ht hev essel oraircr
aftisaboutt odepart
.
SECTI ON90.Concessi onsi nr espectofi mpor tedstoresfortheNavy.-(1)Imported
stor
ess peci
fiedi nsub- secti
on( 3)maywi t
houtpay mentofdutybeconsumedonboar da
shipoftheIndianNavy .
(
2) Theprovis
ionsofsect
ion69andChapt
erXshal
lapplytost
oresspeci
fi edi
n
sub-
sect
ion(
3)ast
heyappl
ytoothergoods
,s ubj
ectt
othe
modi
fi c
ationsthat–
(a) f
orthewords"ex
port
edtoanypl
aceoutsi
deIndi
a"ort
heword"expor
ted"wher
evert
hey
occur
,thewords"t
akenonboardashi
poftheIndi
anNavy"shal
lbesubst
i
tuted;
(
b) ort
hewor ds"ninety
-ei
ghtpercent"i
nsub-sect
ion(
1)ofs
ecti
on74,t
hewor
ds"
the
whol
e"shall
bes ubsti
tut
ed.
(
3) Thestoresr
eferredtoi
ns ub-
secti
ons(1)and(2)ar
ethef
oll
owing:-
(
a) s
tor
esf
ort
heus
eofas
hipoft
heI
ndi
anNav
y;
(
b) st
oress uppli
edf
reebytheGovernmentfort
heuseoft
hec
rewofas
hipoft
heI
ndi
an
Navyi
nac cordancewit
hthei
rcondi
t
ionsofservi
ce.
1.I
nsert
edbyAct22of1995,sec
ti
on63(w.e.
f.26.
05.1995)
2.Omit
tedbyt
heFinanceAct,2017,s
ect
ion104(w.e.
f.31.
03.
2017)
.Bef
oreomi
ssi
on
Sect
i
on82stoodasunder:
“82.Labelordeclarat
ionaccompanyi nggoodst obet reatedasentry.-I
nthecaseof
goodsimport
edorex port
edbypos t
,anylabelordeclarat
ionac companyi
ngthegoods
,
whichcont
ainsthedescri
pti
on,quant
it
yandv aluethereof,shallbedeemedtobeanentr
y
f
orimportorexport
,asthecasemaybe,f orthepurpos esofthisAct.
”
1.Subs
ti
tut
edbytheFinanceAct,2017,s
ect
ion105,f
orc
laus
e(a)(
w.e.
f.31.
3.2017)
.
Cl
ause(a)
,bef
oresubsti
t
uti
on,st
oodasunder:
(
a)theform andmannerinwhi chanent
rymaybemadei nr
espectofanyspeci
fi edc
las
sof
goodsimportedortobee xport
edbypost,ot
herthangoodswhic
har eaccompani
edbya
l
abel ordecl
arat
ioncont
ainingt
hedescri
pti
on,quant
it
yandvaluethereof
;
The term baggage means luggage of the passengers and it refers to all dutiable goods.
imported by a passenger or a member of a crew in his baggage As per section 2 (3)
3 0
of Customs. Act 1962, Baggage includes unaccompanied baggage but does not include
motor vehicle.
49. Describe the functions and power of authorities relating to central excise.
NOT IN SYLLABUS
50. Explain the prevention or detection of illegally imported goods under

Customs Act, 1962. (2)
"i
l
legali
mport
"meanst
heimportofanygoodsi
ncont
rav
ent
i
onoft
hepr
ovi
si
onsoft
hisActorany
ot
herlawfort
het
imebei
nginforce;
(b) "
int
imat
edpl
ace"meansaplaceint
i
matedundersub-
sect
i
on(
1),sub-
sect
i
on(
2)orsub-
sect
ion(
3),ast
hecasemaybe,ofsect
ion11C;
(
c) "not
ifieddate"
,inr
elat
iont
ogoodsofanydesc
ript
i
on,meanst
hedat
eonwhi
cht
henot
i
ficat
i
on
i
nrel
ati
ontosuchgoodsisi
ssuedundersect
i
on11B;
(
d) "
not
i
fiedgoods"meansgoodsspeci
fiedi
nthenot
i
ficat
i
oni
ssuedundersect
i
on11B.
Section11B.PowerofCent r
alGover nmentt onotifygoods.-I
f,havi
ngregardtothemagnit
udeof
theil
legali
mportofgoodsofanycl assordescri
pti
on,theCentr
alGov er
nmentissati
sfiedthatiti
s
expedienti
nthepubli
cint
eresttotakespecialmeasuresfort
hepurposeofcheckingthei
ll
egali
mpor t,
cir
culat
ionordi
sposalofsuchgoods ,orf
acili
t
ati
ngthedetect
ionofsuchgoods,itmay,bynoti
fic at
ion
i
nt heOffici alGazett
e,specif
ygoodsofsuchcl assordescri
pti
on.
Sect
ion11C.Per
sonspossessi
ngnot
ifiedgoodst
oint
imat
ethepl
aceofst
orage,et
c.-
(1) Ev erypers
onwhoowns,possess esorcontr
ols,ont
henotifieddate,anynoti
fiedgoods ,shal
l
,
withinsevendaysf
rom t
hatdat
e,deli
vertot
hepr operofficerast atement(i
nsuchform,insuch
mannerandcont ai
ningsuchpar
ti
cular
sasmaybespeci fiedbyr ul
esmadei nthi
sbehalf
)inrel
ati
onto
thenotifiedgoodsowned,possessedorcontrol
ledbyhim andthepl
acewher esuchgoodsarekeptor
stored.
(2)Ev
erypersonwhoacquires,aft
erthenoti
fieddate,anynoti
fiedgoods,shal l
,beforemaki
ngsuch
acqui
sit
i
on,deli
vert
otheproperoffic eraninti
mati
oncontai
ningtheparti
cul
arsoftheplacewher
e
suchgoodsareproposedt
obek eptorst
oredaf
tersuchacqui
si
ti
onandshal l
,immediatel
yonsuch
acqui
sit
i
on,deli
vert
otheproperoffic erastatement(
insuchform,insuchmannerandcont ai
ni
ng
suchparti
cul
arsasmaybespeci fiedbyr ul
esmadei nthi
sbehalf
)inrel
ati
ontothenot i
fiedgoods
acqui
redbyhim:
Providedthatapersonwhohasdel i
ver
edastatement,whetherundersub-
secti
on(1)orsub-sect
ion
(2),i
nr el
ati
ontoanynoti
fiedgoods,owned,pos sessed,cont
rol
ledoracqui
redbyhim,shallnotbe
requir
edtodeliveranyf
urt
herstat
ementinrel
ati
ontoanynot i
fiedgoodsacqui r
edbyhim,af t
erthe
dateofdeliver
yofthesai
ds t
atement,s
olongast henoti
fiedgoodssoacqui redarekeptorstor
edat
t
hei nti
matedplace.
(
3)I
fanypersoni
ntendstoshi
ftanynoti
fiedgoodstoanyplaceothert
hanthei
nti
matedpl
ace,he
shal
l
,befor
etaki
ngoutsuchgoodsf r
om t
heint
i
matedplace,del
i
vertothepr
operofficerani nt
imat
i
on
cont
aini
ngthepar
ti
cular
softheplacetowhi
chsuchgoodsareproposedtobeshi
ft
ed.
(4)Nopersonshall
,aft
ert
heexpi
ryofsevenday
sfrom t
henot
i
fieddat
e,k
eeporst
oreanynot
i
fied
goodsatanyplaceothert
hant
heint
imatedpl
ace.
(5)Wher
eanynot
ifiedgoodshavebeensol
dortr
ansfer
red,suchgoodsshal
lnotbet
akenf
rom one
pl
acet
oanot
herunl
esst
heyareaccompani
edbythevoucherref
err
edtoinsect
ion11F.
(6)Nonoti
fiedgoods(ot
hert
hanthosewhichhav
ebeensol
dortransf
err
ed)shal
lbet
akenfrom one
pl
acetoanot
herunl
esst
heyareaccompani
edbyat r
ans
por
tvoucher(i
nsuchfor
m andcont
aini
ng
3 0
suchpart
icul
arsasmaybespeci
fiedbyr
ulesmadei
nthi
sbehal
f
)pr
epar
edbyt
heper
sonsowni
ng,
possess
ingorcontr
oll
i
ngsuchgoods
.
Sect i
on11D.Precauti
onstobet akenbypersonsacqui
ri
ngnot i
fiedgoods.-Noper
sonshal
l
acquir
e(ex
ceptbygif
torsuccessi
on,fr
om anyot
heri
ndi
vi
duali
nIndi
a),af
tert
henot
i
fieddat
e,any
noti
fiedgoods-
(
i)unl
esssuchgoodsar
eaccompani
edby
,-
(a)t
hevoucherr
efer
redt
oinsect
i
on11Fort
hememor
andum r
efer
redt
oinsub-
sect
i
on(
2)ofsect
i
on
11G,asthecasemaybe,or
(b)i
nthecaseofaper
sonwhohashimselfi
mpor
tedanygoods
,anyevi
dences
howi
ngcl
ear
anceof
suchgoodsbytheCus
tomsAut
hor
it
ies;and
(i
i
)unl
esshehastaken,beforeacquir
ingsuchgoodsf
rom aper
sonotherthanadealerhavi
ngafix ed
pl
aceofbusi
ness
,suchr easonabl
estepsasmaybespecifiedbyrulesmadei nthi
sbehalf
,toensur
e
t
hatt
hegoodssoacquiredbyhi m ar
enotgoodswhichhavebeeni
ll
egall
yimport
ed.
Secti
on11E.Per sonspossessi ngnotifiedgoodst omaintainaccounts.-(1)Ev er
yper s
onwho,
onoraf t
erthenot i
fieddat e,owns,possesses
,contr
olsoracquir
esanynotifiedgoodsshal lmaint
ain
(insuchform andinsuchmannerasmaybespec i
fiedbyr ul
esmadei nthisbehalf)atr
ueand
completeaccountofsuchgoodsandshal l
,asoftenasheacquiresorpart
swi thanynotifiedgoods,
mak eanent ryinthesai
daccounti nrel
ati
ontosuchacquisi
t
ionorparti
ngwith,andshal l
alsostat
e
therei
nthepar ti
cular
softhepersonfrom whom suchgoodshav ebeenacquiredorinwhos efavour
suchgoodshav ebeenpar t
edwi t
h,asthecasemaybe,andsuchaccounts hallbekept,alongwit
h
thegoods ,attheplaceofst
orageofthenotifiedgoodst owhichsuchaccount sr
elate:
Provi
dedthati
tshal
lnotbenecessar
yt omaint
ainseparat
elyaccount
sinthefor
m andmanner
speci
fiedbyr ul
esmadei nthi
sbehalfint
hecas eofapersonwhoi sal
readymaint
aini
ngaccount
s
whichcont
aint
heparti
cular
sspecifiedbyt hesaidr
ules.
(2)Ever
ypersonwhoowns,possessesorcontr
olsanynotifiedgoodsandwhousesanysuchgoods
forthemanuf
actur
eofanyothergoods,shall
maintai
n(insuchform,insuc
hmannerandcontai
ning
suc hpar
ti
cul
arsasmaybespecifiedbyr ul
esmadei nthi
sbehalf)atr
ueandcomplet
eaccountoft
he
notifiedgoodssousedbyhim andshallkeepsuchaccountattheinti
mat
edplace.
Secti
on11F.Sale,et
c.,ofnotifiedgoodst obeevi dencedbyvouchers.-Onandf r
om t
henot
ified
dat
e,nopersonshal
lsel
lorotherwi
setr
ansferanynot
ifiedgoods ,unl
esseverytr
ansacti
oni
nrel
ati
on
t
othesaleortr
ansf
erofsuchgoodsisevidencedbyav oucherinsuchf
orm andcontai
ni
ngsuch
par
ti
cular
sasmaybespeci fiedbyr ul
esmadei nthi
sbehalf.
Secti
on11G.Sect
ions11C,11Eand11Fnottoappl
ytogoodsi
npersonaluse.-(
1)Not
hingi
n
sect
i
ons11C,11Eand11Fshall
appl
ytoanynot
i
fiedgoodswhi
char
e-
(
a)i
nper
sonal
useoft
heper
sonbywhom t
heyar
eowned,poss
essedorcont
rol
l
ed,or
(
b)k
epti
nther
esi
dent
i
alpr
emi
sesofaper
sonf
orhi
sper
sonal
use.
(2)Ifanyper son,whoi si
npossessionofanynotifiedgoodsrefer
redtoinsub-
sect
ion(
1),sell
s,or
otherwisetransfersforaval
uabl
econsiderati
on,anysuchgoods,heshalli
ssuet
othepurchaseror
t
ransferee,ast hecasemaybe,amemor andum cont
aini
ngsuchparti
cul
arsasmaybespecifiedby
rulesmadei nt hisbehal
fandnosuchgoodsshal lbetakenf
rom oneplacetoanot
herunl
esstheyare
accompani edbyt hesai
dmemor andum.]
52. Explain the powers and functions of Income Tax Authorities.

INTRODUCTION:
In India, the Central Government has been empowered by Entry 82 of the Union List of Schedule VII of
the Constitution of India to levy tax on all income other than agricultural income. The Income Tax Law comprises The
Income Tax Act 1961, Income Tax Rules 1962, Notifications and Circulars issued by Central Board of Direct
Taxes (CBDT), Annual Finance Acts and Judicial pronouncements by Supreme Court and High Courts. The
Government of India imposes an income tax on taxable income of all persons including individuals, Hindu Undivided
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Families (HUFs), companies, firms, association of persons, body of individuals, local authority and any other artificial
judicial person. Levy of tax is separate on each of the persons. The levy is governed by the Indian Income Tax Act,
1961. The Indian Income Tax Department is governed by CBDT and is part of the Department of Revenue under
the Ministry of Finance, Govt. of India. Income tax is a key source of funds that the government uses to fund its
activities and serve the public. The Income Tax Department is the biggest revenue mobilizer for the Government.
The Income Tax authorities are required to exercise their powers and perform their functions so as to prevent
harassment of assesses, tax-evasion, unnecessary discrimination in collection of tax. However, there have been a
number of instances of misuse of these rule- making powers which have the effect of contradicting statutory
provisions that have been given binding effect, displacing the authoritative pronouncements of the Higher Judiciary
and causing an erosion of the constitutionally-mandated effect of Supreme Court declarations under Article 141. In
this scenario, for the purpose of effective financial management it becomes imperative to understand the
functioning, the powers and the limitation on the powers of these tax authorities. This paper talks about various tax
authorities under the Income Tax Act, appointment of income tax authorities, the Central Board of Direct Taxes and
it’s powers, powers of other Income Tax authorities, jurisdiction of the Income-Tax Authorities, and a conclusive
analysis of the same.
VARIOUS TAX AUTHORITIES UNDER THE INCOME TAX:
The Government of India has constituted a number of authorities to execute the Income Tax Act and to control the
Income Tax Department efficiently. There shall be the following classes of income-tax authorities for the purposes of
the Act as given under Section 116, namely:
The Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963),
Directors-General of Income-tax or Chief Commissioners of Income-tax,
Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax (Appeals),
Additional Directors of Income-tax or Additional Commissioners of Income-tax or Additional Commissioners of

Income-tax (Appeals),
Joint Directors of Income-tax or Joint Commissioners of Income-tax.
Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy Commissioners of Income-tax

(Appeals),
Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,
Income-tax Officers,
Tax Recovery Officers,
Inspectors of Income-tax.
In this connection, it may be noted that under section 2(7A), the term ‘Assessing Officer’ means –
(a) The Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director; or (b) The Income-
tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under section 120(1) or
(2) or any other provision of the Act; and
(c) The Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under
section 120(4)(b) to exercise or perform all or any of the powers and functions conferred on, or assigned to, an
Assessing Officer.
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APPOINTMENT OF INCOME TAX AUTHORITIES:
The Central Government can appoint those persons whom it thinks are fit to become Income Tax Authorities. The
Central Government can authorize the Board or a Director-General, a Chief Commissioner or a Commissioner or a
Director to appoint income tax authorities below the ranks of a Deputy Commissioner or Assistant Commissioner,
According to the rules and regulations of the Central Government controlling the conditions of such posts.
THE CENTRAL BOARD OF DIRECT TAXES AND IT’S POWERS:
The Central Board of Direct Taxes is a statutory body constituted under the Central Board of Revenue Act, 1963. It
consists of a number of members appointed by the Central Government for the performance of such duties, as may
be entrusted to the Board from time to time. It is functioning under the jurisdiction of the Ministry of Finance. The
Central Board of Direct Taxes, besides being the highest executive authority, exercises control and supervision over all
officers of the Income-tax Department and is authorised to exercise certain powers conferred upon it by the Income-
tax Act, 1961. In particular, it has the powers, subject to the control and approval of the Central Government to make
any rules, from time to time for the proper administration of the provisions of the Income-tax Act, 1961. All the rules
under the Act are framed by the Board under section 295 of the ITA, 1961 and placed before the Parliament. In
addition to the general power of making rules and of superintendence, the Board has been given specific powers on
several matters.
The important powers of the Board and the relevant sections granting them have been detailed below.
Powers of the Board:
The Board has been empowered under Section 119 to issue instructions and circulars to it’s subordinates for the
proper administration of the Act. Under Section 118, CBDT shall control all the Income Tax Authorities subject to an
overall framework of Central Government. It is, in addition, obligatory for the various authorities and all other
persons employed in the execution of the Act to observe and follow such orders, instructions and directions of the
Board. However, the Board is not empowered to issue orders, instructions or directions in such a way as to –
1. Require any income-tax authority to make the assessment of a particular case in a particular manner, or
2. Interfere with the discretion of the Commissioner (Appeals) in the exercise of his appellate functions.
Further, the Board may, if it considers necessary or expedient to do so, for the purpose of proper and effective
management of the work of assessment and collection of revenue, issue general or special orders from time to time
in respect of any class of incomes or class of cases setting the Board may relax the provisions of Section 115P, 115S,
139, 143, 144, 147, 148, 154, 155, 234A, 234B, 271 and 273. Such order etc., may be issued by general or special
orders in respect of any class of incomes or fringe benefit or class of cases. Such orders are the guidelines, principles
or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of
revenue or the initiation of proceedings for the imposition of penalties. If the Board thinks it is necessary for public
interest to do so the Board can publish and circulate the document in the prescribed manner. Also, the Board, to
avoid genuine hardship in any case or classes of cases, may by general or specific order authorise any income tax
authority, to admit an application or claim for any exemption, deduction, refund or any other relief under the Act
after the expiry of the period specified under the Act and deal with the same on merits in accordance with law.
However, such order cannot be issued to a Commissioner (Appeals).
The Board, in addition, can relax any requirement contained in Sections 14 to 59 and 80A to 80U where
the assessee has failed to comply with any requirement. However, such default in the requirement was due to
circumstances beyond their control or if the assessee has complied with such a requirement before the completion
of assessment in relation to the previous year in which such deduction is claimed. Every such order is to be laid
before each House of Parliament.
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Moreover, the Board can exercise its powers to remove difficulties in the matter of Sections 201(1A), 210, 211, and
234C.
The Scope of the Rule- Making Powers of the Board Under Section 119 of the Income Tax Act:
The scope of the rule-making powers of the Board have been discussed below with respect to their binding value on
the Revenue Department, the assesses, the Courts/ Tribunals and the nature of the circulars.
With Respect to Binding Value of Circulars on the Revenue:
The present view is that all circulars issued by the CBDT under Section 119 of ITA, 1961 would be binding upon the
department even if they deviate from the provisions of the Parent Act. An earlier case decided by the Supreme Court
which dealt with the binding value of circulars on the Revenue was that of K.P. Varghese. The assessee had entered
into a bona fide transaction for the sale of a house, earning no profit, as it was a related party transaction. Despite
the fact that there had been no underestimation of its value, the Revenue sought to tax the assessee on the basis of
the fair market value of the house. The assessee argued on the basis of a circular issued by the CBDT, stating that the
purpose of using fair market value in certain circumstances was to prevent tax evasion through the understatement
of the full value of consideration on the transfer of a capital asset. It came to the notice of the CBDT that several
Income Tax Officers were, in violation of Section 119 of the Income Tax Act, 1961, taxing bona fide transactions based
on their fair market value. Thus, it became necessary for the Board to issue another circular, clarifying that Board
circulars shall be binding on all Officers in view of the decisions of the Supreme Court
in Navnitlal Javeri and Ellerman Lines. In view of these decisions, the Division Bench in this case held the circulars to
be binding on the Revenue, even if they deviate from the statute, holding that fair market value must only be used in
cases where consideration has been understated.
Other cases have also reiterated that it is not open to the Revenue to argue against circulars issued by it: 'It cannot
but urge the point of view made binding by the...circular'. Similarly, in Mahavir Aluminium, the Supreme Court held
the CBEC circular exempting agricultural mechanical appliances from the payment of duty to be binding on the
Board. The most recent case that deals with the question of whether circulars issued by the CBEC shall be binding on
the Department is India Cements. The Supreme Court, in 2011, held that circulars issued for the purpose of providing
sales tax deferral (to increase the production levels of industries in the State of Tamil Nadu) that are not contrary to
the provisions of the Tamil Nadu General Sales Tax Act, 1959 would be binding on the Department. In the instant
case, the circular did not conflict with either the statute or the scheme contemplated thereunder, and the question
of whether they shall be binding was thus inconsequential.
While the relevant provisions of various taxing statutes all suggest that circulars issued by taxing authorities shall be
binding on Department authorities, arguments are made that the extent to which these instructions and directions
shall be binding must be restricted in certain circumstances. Thus, the assessee can challenge the issuance of
circulars, and adjudicatory authorities are also afforded the flexibility to use their independent interpretations which
may deviate from Department circulars.
 With Respect to Binding Nature of Circulars on Assesses:
While the position regarding the binding nature of circulars upon the Revenue is well-settled, a related question that
arises for consideration is whether circulars shall be binding on assessees. It is well-established that circulars issued
by the CBDT do not bind assessees. Thus, the assessee has the right to challenge the correctness of a circular before
a quasi-judicial authority constituted under the relevant statute if it confers greater burden than the statue permits.
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A Full Bench in Uco Bank considered the effect of a certain circular issued under Section 119 of the Income Tax Act,
1961 exempting from income the interest payable on ‘sticky loans’, whose recovery is doubtful and has not been
included in the profit and loss account of the assessee. It stated: ‘Such instructions may be by way of relaxation of
any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down
the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory
powers under Section 119 of the Income-tax Act which are binding on the authorities in the administration of the
Act. Under Section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assesses.’
Therefore, the settled position of law with regard to assesses is that they can challenge the circular if it has an
adverse impact on them that deviates from the statutory position.
 With Respect to Binding Effect of on Courts and Tribunals:
According to the present position taken by the Courts, CBEC circulars shall be binding on the Courts as the
interpretation of the statue will supersede the interpretation given by Courts. According to the earlier point of view
held by the Courts, notifications issued by the Government are, in the opinion of the Court, mere understandings of
statutory provisions, and cannot be used to usurp the jurisdiction of the courts in interpreting statutory provisions.
Thus, Bengal Iron suggests that quasi-judicial authorities shall be bound only by ‘law’, which does not include
administrative instructions, opinions, clarifications and circulars. Nevertheless, the same Court in Kirloskar Oil
Engines held that while trade notices issued by the CBEC generally have no binding value, in the absence of other
evidence, the court must consider trade notices in deciding disputes. The argument that CBEC circulars shall not bind
adjudicatory authorities was raised in Paper Products, wherein the orders of the Customs Excise and Gold (Control)
Appellate Tribunal (CEGAT) were challenged by an assessee who argued that the circulars exempting certain products
of the printing industry include his products of manufacture. The Revenue argued that the impugned circulars,
though binding on the Department, would not bind the CEGAT. The Supreme Court, in deciding that the circulars
were binding on the Department, ultimately held that the Department does not have the option of making
arguments contrary to the impugned circulars. Unfortunately, it did not actually address this validity of the Revenue’s
contention. In Hindustan Aeronautics Ltd., however, a conclusive decision on this point was made. A government-
owned company aggrieved by the Revenue’s disallowance of certain deductions for its manufacture of aeroplanes
filed a revision petition before the Commissioner of Income Tax. Since the order disallowing the deduction had been
made the subject of a separate appeal before the Appellate Tribunal, the Commissioner dismissed the petition. This
decision was challenged by the assessee, who used Navnitlal Javeri and Ellerman Lines to argue that the circular
requiring the Commissioner to examine the revision of the assessee on merits would bind him. The Revenue, on the
other hand, argued that while it is unquestionable that circulars shall be binding on the Revenue, the Judiciary
cannot direct that a circular shall be given effect to rather than the Supreme Court or High Courts’ interpretation of
the law in question. The Division Bench agreed with the Revenue’s contention that a circular shall not bind
adjudicatory bodies.
In 2002, this decision was effectively overruled by a Constitution Bench requested in Dhiren Chemicals. Here, a
notification had been issued by the CBEC exempting certain products from excise duty, where duty was ‘already paid’
on the raw materials used in their manufacture, thus preventing the payment of double duty. The construction of
this exemption had, for some time, been the subject of controversy, raising the question of whether imported raw
materials which are either not liable to excise duty, or have the benefit of nil duty payable, shall be included within
the ambit of this notification. The CBEC had, consequently, issued a number of circulars clarifying that the benefit
shall not apply unless excise duty had actually been paid on the raw materials utilised. On the other hand, a Full
Bench of the Supreme Court had already, in Usha Martin, decided that the notification would apply even when a nil
rate of duty was applicable. Thus, the Court in Dhiren Chemicals was required to choose whether to follow the
precedent set by its Full Bench earlier, or the interpretation rendered by the CBEC circular issued in this regard. The
Court ultimately held: 'We need to make it clear that, regardless of the interpretation that we have placed on the
said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a
different interpretation upon the said phrase, that interpretation will be binding on the revenue.” This decision was
the first to reflect a marked shift in the Judiciary’s perspective on the extent to which circulars issued by the CBEC
shall be binding. In effect, by holding the Department strictly to the position adopted by it in the circulars it issues,
the Court unwittingly weakened the impact of its own decisions by disregarding the interpretation of the Full Bench
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in Usha Martin in favour of the interpretation rendered by the CBEC in the impugned order. This precedent-setting
statement, negating the impact of the decision rendered by a weaker bench earlier in Hindustan Aeronautics Ltd.,
was subsequently followed in 2004 in Maruti Foam, when the Supreme Court reaffirmed that CBEC circulars shall be
binding notwithstanding their conflict with the judgment rendered in Usha Martin.
 With Respect to Benevolent Circulars:
Benevolent circulars issued by the Board even if they deviate from the legal position are required to be followed by
the department since such circulars would go to the assistance of the assessee. Apart from the fact that the circulars
issued by the Board are binding on the department, the department is precluded from challenging the correctness of
the said circulars even on the ground of the same being inconsistent with the statutory provision.
In Navnitlal Javeri, a Constitution Bench of the Supreme Court addressed the question of whether a circular issued by
the Board of Revenue, granting an exemption from income tax on genuine loans advanced by companies to their
shareholders, would be binding on the Board, notwithstanding that its contents violated the parent statute. Section
2(6A) of the Income Tax Act, 1961 made no distinction between bona fide transactions and devices used for tax
avoidance (by providing shareholders tax-free loans instead of taxable dividends). The Court held that since the
circular was conferring a benefit upon assessees and diluting the stringent requirements of the Act, the Board was
required to comply with its own instructions, and could not itself contend that the circular could not be enforced.
The decision in Navnitlal Javeri was affirmed by the Division Bench in Ellerman Lines, in which the impugned
notification laid down the principles to be followed in assessing the Indian income of foreign shipping companies.
Accordingly, Ellerman Lines, a British shipping company, was by the said notification assessed by way of a certificate
issued by U.K. authorities (declaring the income of the company), allowing an investment allowance which had been
recognised by the Revenue in India as equivalent to the development rebate made available under the Income Tax
Act, 1922. Interestingly, the Court recognised the difficulties faced by shipping companies in complying strictly with
the income tax provisions of various countries in which they operate, and, as a result, considered the notification,
waiving strict compliance with the requirements of the Act, to be valid and binding on the Revenue
 With Respect to Aid to Construction:
Further a circular provides extraneous aid to construction being contemporanea exposito.
 With respect to Earlier Orders:
Where a circular is issued after the date on which the particular order is passed, the later issued circular can have no
application to the earlier passed order unless there is something in the circular making itself applicable even
retrospectively.
 With Respect to Withdrawn Circulars:
Sometimes a circular is withdrawn or the section concerned
is amended. In the case of Ellerman Lines Ltd. vs CIT, the
Supreme Court held that instructions issued by the Board
prior to the amendment of a section will hold good even if
they are not strictly in accordance with the related section
but merely lay down certain just and fair methods of approach to a difficult problem. In Tata Iron and Steel Co.
Ltd. vs Upadhyaya, it was made clear that the withdrawal of
a circular, subsequent to an assessment or any other action
3 0
in pursuance of the same, will not affect the legal position.
POWERS OF OTHER INCOME TAX AUTHORITIES:
Powers of the Income Tax Authorities vary with the nature of the position acquired. Given below are the various tax
authorities along with the powers they hold under that position.
Director General/ Director:
The Director General/ Director, appointed by the Central Government, are required to perform such functions as
maybe assigned by the Central Government, are required to perform such functions as may be assigned by the
Central Board of Direct Taxes. This position enjoys the following powers under different provisions of the Act:
a. To give instructions to the Income-Tax officers
b. To enquire or investigate into concealment
c. To search and seizure
d. To requisite books of account
e. To survey
f. To make any enquiry
Commissioners of Income Tax:
Commissioners are appointed by the Central Government. Generally, they are appointed to head income-tax
administration of a specified area. As the head of administration, a Commissioner of income-tax enjoys certain
administrative as well as judicial powers. A commissioner may exercise powers of an assessing officer. It has the
power to transfer any case from one or more assessing officers to any other assessing officer. It can grant approval
for an order issued by the assessing officer. Prior approval is required for reopening of an assessment. Its, also, has
the power to revise an order passed by an assessing officer in addition to many other powers as given in the Income
Tax Act, 1961.
Commissioner (Appeals):
Commissioners of Income-Tax (Appeals) are appointed by the Central Government. It is an appellate authority vested
with the following judicial powers:
a. Power regarding discovery, production of evidence etc.
b. Power to call information.
c. Power to inspect registers of companies.
d. Power to set off refunds against tax remaining payable.
e. Power to dispose of appeals.
f. Power to impose penalty.
Joint Commissioners:
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Joint Commissioners are appointed by the Central Government. The main function of the authority is to detect tax-
evasion and supervise subordinate officers. Under the different provisions of the Act, the Joint Commissioner enjoys
the power to accord approval to adopt fair market value as full consideration, instruct income tax officers, exercise
powers of income tax officers, the power to call information, to inspect registers of companies, to make any enquiry
among other powers.
Income-Tax Officers:
While Income-Tax officers of Class I services are appointed by the Central Government, Income-tax Officers of Class II
services are appointed by the Commissioner of Income-Tax. Powers, functions and duties of Income-Tax officers are
provided in many sections, some of which are Power of search and seizure, Power of assessment, Power to call for
information, Power of Survey etc.
Inspectors of Income-Tax:
They are appointed by the Commissioner of Income-Tax. Inspectors of Income-Tax have to perform such functions as
are assigned to them by the Commissioner or any other authority under whom they are appointed to work.
THE SCOPE OF EXERCISE OF THE POWERS GIVEN TO THE INCOME-TAX AUTHORITIES:
The Income Tax Act, 1961 specifies the scope of the powers handed to the income-tax authorities. Given below are
some of the important powers of the Income Tax Authorities and their scope as given in the Sections provided under
the Income Tax Act, 1961:
 Power to Transfer Cases [Section 127]:
CBDT can transfer the case from Assessing Officer to another A.O. subordinate to him after giving a reasonable
opportunity of being heard to the concerned assessee. However, no opportunity of being heard shall be required if
the case is to be transferred from one A.O. to another A.O. within the same city, town or locality. Disputes regarding
jurisdiction shall be resolved by the concerned CCIT or CIT on mutual understanding. However, for any disagreement,
the matter shall be referred to CBDT and CBDT shall resolve the dispute by way of issuing a notification in the Official
Gazette of India.
 Opportunity of Being Reheard [Section 129]:
Whenever, an Income Tax Authority ceases to exercise jurisdiction over a particular case and is being succeeded by
another Income Tax Authority, then the successor Income Tax Authority shall continue the pending proceeding from
the same stage at which it was left over by the predecessor Income Tax Authority. There shall be no requirement on
the part of the successor Income Tax Authority to reissue any notice already issued by his predecessor. However, if
the concerned assessee demands that before the successor Income Tax Authority continues the proceeding, he shall
be given an opportunity of being reheard to explain his case to the successor Income Tax Authority, then in such
case, an opportunity of being reheard has to be given to the assessee. (However, such an opportunity of being
reheard is required to be given only if the concerned assessee demands for it and not otherwise).The time of A.O.
lost in giving such opportunity of being reheard to the assessee, shall be excluded while calculating time limit to
complete the assessment.
 Discovery, Production of Evidence etc. [Section 131]:
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The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appeals), the Chief
Commissioner and the Dispute Resolution Panel referred to in section 144C have the powers vested in a Civil Court
under the Code of Civil Procedure, 1908 while dealing with the following matters:
(i) discovery and inspection;
(ii) enforcing the attendance of any person, including any officer of a banking company and examining him on oath;
(iii) compelling the production of books of account and documents; and
(iv) issuing commissions
 Search and Seizure [Section 132]:
Today it is not hidden from income tax authorities that people evade tax and keep unaccounted assets. When the
prosecution fails to prevent tax evasion, the department has to take actions like search and seizure. Under this
section, wide powers of search and seizure are conferred on the income-tax authorities. The provisions of the
Criminal Procedure Code relating to searches and seizure would, as far as possible, apply to the searches and
seizures under this Act. Contravention of the orders issued under this section would be punishable with
imprisonment and fine under section 275A.
 Power to Requisition Books of Account etc. [Section 132A]:
Where the Director or the Director-General or Commissioner or the Chief Commissioner in consequence of
information in his possession, has reason to believe that (a), (b), or (c) as mentioned under section 132(1) and the
book of accounts or other documents or the assets have been taken under custody by any authority or officer under
any other law, then the Chief Commissioner or the Director General or Director or Commissioner can authorize any
Joint Director, Deputy Director, Joint Commissioner, Assistant Commissioner, Assistant Director, or Income tax Officer
to require the authority to provide sue books of account, assets or any documents to the requisitioning officer, when
such officer is of the opinion that it is no longer necessary to retain the same in his custody.
 Application of Retained Assets [Section 132B]:
This section provides that the seized assets can be appropriated against all tax liabilities of the assessee. However, if
the nature of source of acquisition of seized assets is explained satisfactorily by the assessee, then, such assets are
required to be released within a period of 120 days from the date on which last of the authorisations for search
under section 132 is executed after meeting any existing liabilities. For this purpose, it has been provided that
the assessee should make an application to the Assessing Officer within a period of 30 days from the end of the
month in which the asset was seized. The assessee shall be entitled to simple interest at ½% per month or part of a
month, if the amount of assets seized exceeds the liabilities eventually, for the period immediately following the
expiry of 120 days from the date on which the last of the authorisations for search under section 132 or requisition
under section 132A was executed to the date of completion of the assessment under section 153A or under Chapter
XIV-B.
 Power to call for information [Sections 133]:
The Commissioner The Assessing Officer or the Joint
Commissioner may for the purpose of this Act:
(a) Can call any firm to provide him with a return of the addresses and names of partners of the firm and their
shares;
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(b) Can ask any Hindu Undivided Family to provide him with return of the addresses and names of members of the
family and the manager;
(c) Can ask any person who is a trustee, guardian or an agent to deliver him with return of the names of persons for
or of whom he is an agent, trustee or guardian and their addresses;
(d) Can ask any person, dealer, agent or broker concerned in the management of stock or any commodity exchange
to provide a statement of the addresses and names of all the persons to whom the Exchange or he has paid any sum
related with the transfer of assets or the exchange has received any such sum with the particulars of all such
payments and receipts;
 Power of Survey [Section 133A]:
The term 'survey' is not defined by the Income Tax Act. According to the meaning of dictionary 'survey' means
casting of eyes or mind over something, inspection of something, etc. An Income Tax authority can have a survey for
the purpose of this Act. The objectives of conducting Income Tax surveys are:
(a)To discover new assessees;
(b)To collect useful information for the purpose of assessment;
(c)To verify that the assessee who claims not to maintain any books of accounts is in-fact maintaining the
books; (d)To check whether the books are maintained, reflect the correct state of affairs.
 Power to Collect Certain Information [Section 133B]:
For the purpose of collection of information which may be useful for any purpose, the Income tax authority can enter
any building or place within the limits of the area assigned to such authority, or any place or building occupied by any
person in respect of whom he exercises jurisdiction.
 Power to Inspect Registers of Companies [Section 134]:
The Assessing Officer, the Joint Commissioner or the Commissioner (Appeals), or any person subordinate to him
authorised in writing in this behalf by the Assessing Officer, the Joint Commissioner or the Commissioner (Appeals),
as the case may be, may inspect and if necessary, take copies, or cause copies to be taken, of any register of the
members, debenture holders or mortgagees of any company or of any entry in such register.
 Other Powers [Sections 135 and 136]:
The Director General or Director, the Chief Commissioner or Commissioner and the Joint Commissioner are
competent to make any enquiry under this act and for all purposes they shall have the powers vested in an Assessing
Officer in relation to the making of enquiries. If the Investigating officer is denied entry into the premises, the
Assessing Officer shall have all the powers vested in him under sections 131(1) and (2). All the proceedings before
Income tax authorities are judicial proceedings for purposes of section 196 of the Indian Penal Code, 1860, and fall
within the meaning of sections 193 and 228 of the Code. An income-tax authority shall be deemed to be a Civil Court
for the purposes of section 195 of the Criminal Procedure Code, 1973.
JURISDICTION OF INCOME-TAX AUTHORITIES:
Income Tax authorities are required to exercise their powers and perform their functions in accordance with
directions given by the Board. Tax authority higher in rank, if directed by Board, shall exercise the powers and
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perform tie functions of the Income- Tax authority lower in rank. The directions of CBDT include direction to
authorize any Income Tax authority to issue instructions to their subordinates. In issuing instruction or orders, the
Board or the Income-Tax authority may adopt any one or more of the following criteria -
(a) Territorial area
(b) Person or classes of persons
(c) Incomes or classes of incomes
(d) Cases or classes of cases
The Board can also authorize Director General or Chief Commissioner or Commissioner to issue orders in writing to
the effect that the functions conferred or assigned to the Assessing Officer in respect of the above four criteria shall
be exercised or performed by Joint Commissioner or Joint Director.
Also, the Assessing Officer has been vested with jurisdiction over any area or limits of such area -
1. If a person carries on business or profession only in that area. In respect of that person; or
2. If a person carries on business or profession in more than one place, then the principal place of business or
profession situated in that area; or
3. In respect of any other person residing within that area.
Any dispute relating to jurisdiction to assess any person by an Assessing Officer shall be determined by Director
General /Chief Commissioner/Commissioner of Income Tax If the dispute is relating to areas within the jurisdiction of
different Director General /Chief Commissioner/ Commissioner, then such issue is to be solved mutually among
themselves. If the above authorities are not in agreement among themselves such matter has to be decided by the
Board or Director General/ Chief Commissioner/ Commissioner authorized by the Board.
CONCLUSION:
It is believed that tax-authorities are independent judicial officers who are required to pass reasoned orders based on
their own reasoning un-influenced by instructions or advice from their superior officers. The Central Excise
adjudication manual published in 1988 (that was its last publication), in para 39 directed that Board Orders and
reference numbers should not be quoted in the Adjudication Orders. It was further advised that Law Ministry’s
opinion is confidential and should never be communicated in the same language to even sub-ordinate officers. There
are several Assistant Commissioners who boast “I am an adjudicating authority and not bound by the Board orders”.
This has resulted in a considerable degree of uncertainty in financial management with respect to taxes. For example
it is hard to determine for the assesses, the binding value of circulars issued by CBDT under Section 119 of the
Income Tax Act, 1961. Also, these circulars blatantly contradict statutory provisions that have been given binding
effect, displace the authoritative pronouncements of the Higher Judiciary and cause an erosion of the
constitutionally-mandated effect of Supreme Court declarations under Article 141.
In recent times the catena of judicial pronouncements and statue provisions are creating quite a stir. However, there
is still a need to further define and redefine and implement the extent to which Income Tax authorities are required
to exercise their powers and perform their functions so as to prevent harassment of assesses, tax-evasion,
unnecessary discrimination in collection of tax and to help assesses effectively manage taxes
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53. Explain the provisions relating to duty drawback on imports as against
exports. (customs act)
ABOVE DISSCUSSED
54. Explain the composition, powers and functions of income tax tribunal.
income Tax Appellate Tribunal (ITAT) is a quasi-judicial authority to file appeals
against the orders of income tax authorities. A tax appeal can be filed by a
taxpayer who does not agree with the assessment order or any other order,
passed by an income-tax authority. Similarly, an income-tax authority can also
file an appeal against any order passed by lower income-tax authorities.
1. Nature and structure of ITAT

2. Functions of the ITAT
3. Appealable orders
4. Monetary limits applicable to the filing of appeals
5. Procedure to file an appeal before the ITAT
6. Appeal filing fees
7. Time available for filing an appeal
8. Filing memorandum of cross-objections
9. Representation before the ITAT
10.Presentation of evidence
11.Orders by the ITAT
1. Nature and structure of ITAT

The ITAT is a quasi-judicial body set up by the Central Government to deal with
appellate matters under the Income Tax Act, 1961. The ITAT functions under the
Ministry of Law and Justice. There are different benches of the ITAT for different
regions having regional jurisdiction. The President of the ITAT constitutes a bench
of an ITAT from amongst the members of the ITAT. Each bench shall consist of an
accountant member and a judicial member. However, the President or any
member of the ITAT may dispose of any appeal, where the total income as
calculated by the Assessing Officer does not exceed Rs 50 lakh. In cases where
required, the ITAT may constitute a special bench with three or more members to
dispose of appeals, with at least one accountant member and one judicial
member. The ITAT is also the final fact-finding authority. Any decision of the ITAT
is final when it concerns factual matters.
2. Functions of the ITAT

Income Tax Appellate Tribunal hears appeals concerning orders passed by the
income-tax authorities. It is the second forum to hear income-tax appeals after
the Commissioner of Income-tax (Appeals). The ITAT functions under the
supervision of the jurisdictional High Court and is subordinate to the High Court.
The ITAT should follow the precedent set by the jurisdictional High Court. That
means it is bound to follow the law laid by the High Court in a matter it is dealing
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with in appeal. Similarly, the ITAT should also follow the precedent or law laid by
the Supreme Court of India.
3. Appealable orders
The following orders are appealable before the ITAT:
1. Orders passed by the Commissioner of Income Tax (Appeals) [CIT(A)].

2. Orders passed by the jurisdictional Commissioner.
3. Orders passed by the Assessing Officer as per the directions of the Dispute
Resolution Panel.
4. Orders passed by the Assessing Officer.
5. Penalty order passed by the Commissioner.
6. Application for stay of tax demands.
7. Other miscellaneous applications for recall of orders.
4. Monetary limits applicable to the filing of appeals

The Central Board of Direct Taxes (CBDT) can issue orders or instructions or
directions to the income-tax authorities. The CBDT can also fix the monetary
limits to regulate the filing of appeal or application or reference to the ITAT,
jurisdictional High Court or Supreme Court. The CBDT vide instruction no.
17/2019 dated 8 August 2019 for filing appeals by the income tax department
before the ITAT, High Courts or Supreme Courts as follows:
1. Before the ITAT – Rs 50 lakh.

2. Before the High Court – Rs 1 crore.
3. Before the Supreme Court – Rs 2 crore.
The monetary limits are for the tax effect in a particular case. ‘Tax effect’ refers
to the difference between the tax on the assessed income and tax on the income
without the assessment adjustments. An Assessing Officer should determine the
tax effect for each assessment year for a taxpayer. Though above are the
monetary limits for filing appeals, one should check the merits of the case before
submitting a request.
5. Procedure to file an appeal before the ITAT

An appeal to the ITAT should be in Form No. 36, filed in triplicate. The appeal
submission should be in the form of a paper book consisting of:
1. Two copies of the order appealed against with one certified copy.
2. Two copies of the order of the Assessing Officer.
3. Two copies of Grounds of appeal earlier submitted before the first
appellate authority, the CIT(A).
4. Two copies of the Statement of facts provided before the CIT(A).
5. Two copies of the assessment order in a case where the appeal is against
a penalty order.
6. Two copies of the directions of the Joint Commissioner where the appeal is
against an assessment order passed according to instructions of the Joint
Commissioner.
7. Two copies of the original assessment order where the appeal is against a
reassessment order passed under section 147.
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8. A copy of the ITAT fee paid challan.
9. Two copies of the submissions, documents and papers, as submitted
earlier during the income-tax proceedings or before the CIT(A).
10.Two copies of any other documents or facts the appellant wishes to
provide.
The paper book should be in order and with due indexing. A person filing an
appeal should submit the paper book at least a week in advance before the
scheduled hearing and also furnish a copy to the respondent. The ITAT may
condone the delay in filing a paper book depending on the facts and
circumstances of a case.
6. Appeal filing fees

A person filing an appeal with the ITAT should pay the following appeal filing fee.
The fee is dependent on the income assessed by the Assessing Officer. The
income does not include the effect of the order passed by the CIT(A).
1. Total income assessed is less than Rs 1 lakh – Rs 500

2. Total income estimated is more than Rs 1 lakh but less than Rs 2 lakh – Rs
1,500
3. Total income assessed is more than Rs 2 lakh – 1% of the total income
assessed not exceeding Rs 10,000
In case the appeal relates to any other matter, the filing fee is Rs 500. And, in
the case of an application for stay of demand, the appeal filing fee is Rs 500. The
ITAT fixes and notifies both the parties about the date and place for the hearing
of the appeal. The respondent also receives a copy of the memorandum to the
appeal along with the notice. The respondent may receive a notice of appeal
before the memorandum.
7. Time available for filing an appeal

The time allowed to file an appeal is 60 days from the date of communication of
the order, which is the subject matter of the appeal.
8. Filing memorandum of cross-objections

The respondent to an appeal should file a memorandum of cross-objections with
the ITAT within 30 days of receiving notice from the ITAT. The form prescribed for
filing cross-objections in Form No. 36A. There is no fee to file the cross-
objections. The ITAT may accept a delayed submission of Form No. 36A
depending on the facts and circumstances of the appeal.
9. Representation before the ITAT

The appellant and respondent can seek representation from an authorised
person to appear for the hearing before the ITAT. Section 288 of the Income Tax
Act, 1961 prescribes the persons who can act as an authorised representative.
However, a taxpayer cannot seek representation in cases of a personal
examination on oath.
10. Presentation of evidence
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None of the parties is eligible to file additional evidence before the ITAT. In a
case, the ITAT requires any document, affidavits or seeks to examine any
witnesses, and the ITAT may allow for the production of documents or
examination of persons or other evidence.
11. Orders by the ITAT

The bench of the ITAT hears the matter of the appeal and passes the order
deciding the appeal. In a case where one or more of the parties fail to appear on
the dates fixed for hearing, the ITAT can dispose of the appeal ex-parte. In case
the other party/parties appear after the disposal and satisfy the ITAT with
reasons for non-appearance, the ITAT may set aside its earlier ex-parte order. In
general, a bench consisting of an accountant member and one judicial member
passes the order of the ITAT. However, in specific cases of importance, the
President of the ITAT may constitute a special bench consisting of three or more
members, with at least one accountant member and one judicial member. In
case the members differ in the decision on any point under consideration, the
decision of the majority prevails. In case the members of the bench are divided
in opinion, the President hears and decides the appeal.
55. Explain the goods of special importance in inter-state trade

Declared goods are the goods of special importance on which there are certain restrictions
placed under CST Act 1956 on imposition of sales tax or VAT by the states. Article286(3)(a)
of the Constitution of India authorises parliament to declare some goods as of special
importance and to impose restrictions and conditions in regard to power of the states in
regard to levy, rates and other incidence of tax on such goods. Exercising this power the
Parliament vide section 14 of the Central Sales Tax Act 1956 has declared some goods as of
special importance and has placed restrictions u/s 15 of CST Act on the imposition of sales
tax or VAT on such goods by the state Governments.
DEFINITION: Section 2(c) of CST Act defines Declared Goods as those declared u/s 14 of
the CST Act as Goods of special importance in inter state trade or commerce.
Section 14 gives the list of ‘goods of special importance’ called Declared Goods important
among them are numerated as below:
(i) cereals i.e -paddy, rice, wheat,Jowar,bajra, maize, barley etc.
(ia) coal, including coke in all its forms, but excluding charcoal:
(ii) cotton, that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured
state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton
waste;
(iia) cotton fabrics
(iib) cotton yarn, but not including cotton yarn waste;
(iic) crude oil, that is to say, crude petroleum oils and crude oils etc.
(iid) Aviation Turbine Fuel sold to a Turbo-Prop Aircraft ;
(iii) hides and skins, whether in a raw or dressed state;
(iv) iron and steel, that is to say,-
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(i) pig iron, sponge iron and cast iron including ingot the moulds, bottom plates, iron scrap,
cast iron scrap, runner scrap and iron skull scrap ;
(ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes) ;
(iii) skelp bars, tin bars, sheet bars, hoe-bars and sleeper bars ;
(iv) steel bars (rounds, rods, squares, flats, octagons and hexagons, plain and ribbed or
twisted, in coil form as well as straight lengths) ;
(v) steel structurals (angles, joists, channels, tees, sheet piling sections, Z sections or any
other rolled sections) ;
(vi) sheets, hoops, strips and skelp both black and galvanised, hot and cold rolled, plain and
corrugated, in all qualities, in straight lengths and in coil form, as rolled and in rivetted
condition ;
(vii) plates both plain and chequered in all qualities ;
(viii) discs, rings, forgings and steel castings ;
(ix) tool, alloy and special steels of any of the above categories ;
(x) steel melting scrap in all forms including steel skull, turnings and borings ;
(xi) steel tubes both welded and seamless, of all diameters and lengths, including tube
fittings ;
(xii) tin-plates, both hot dipped and electrolytic and tin free plates ;
(xiii) fish plate bars, bearing plate bars, crossing sleeper bars, fish plates, bearing plates,
crossing sleepers and pressed steel sleepers, rails-heavy and light crane rails ;
(xiv) wheels, tyres, axles and wheels sets ;
(xv) wire rods and wires-rolled, drawn, galvanised, aluminised, tinned or coated such as by
copper ;
(xvi) defective, rejects, cuttings or end pieces of any of the above categories ;
(v) jute, that is to say, the fibre extracted from plants belonging to the species Corchorus
capsularis and Corchorus olitorius and the fibre known as mesta or bimli extracted from
plants of the species Hibiscus cannabinus and Hibscus subdariffa – Var altissima and the
fibre known as Sunn or Sunn-hemp extracted from plants of the species Crotalaria juncea
whether baled or otherwise ;
(va) Liquefied petroleum gas for domestic use;
(vi) oilseeds, that is to say,-
(i) Groundnut or Peanut
(ii) Sesamum or Til
(iii) Cotton seed
(iv) Soyabean
(v) Rapeseed and Mustard-
(1) Toria
(2) Rai
(3) Jamba-Taramira (Eruca Satiya);
(4) Sarson, yellow and brown (Brassica campestris var sarson);
(5) Banarsi Rai or True Mustard (Brassica nigra);
(vi) Linseed (Linum usitatissimum);
(vii) Castor (Ricinus communis);
(viii) Coconut (i.e., Copra excluding tender coconuts) (cocosnucifera);
(ix) Sunflower (Helianthus annus);
(x) Nigar seed (Guizotia abyssinica);
(xi) Neem, vepa (Azadirachta indica);
(xii) Mahua, Illupai, Ippe (Madhuca indica M. Latifolia, Bassia, Latifolia and Madhuca
longifolia syn. M. Longifolia) ;
(xiii) Karanja, Pongam, Honga (Pongamia pinnata syn. P. Glabra);
(xiv) Kusum (Schleichera oleosa, syn. S. Trijuga) ;
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(xv) Punna, Undi (Calophyllum inophyllum) ;
(xvi) Kokum (Carcinia indica);
(xvii) Sal (Shorea robusta);
(xviii) Tung (Aleurites fordii and A. montana);
(xix) Red palm (Elaeis guinensis);
(xx) Safflower (Carthanus tinctorius);
(via) pulses, that is to say,-
(i) gram or gulab gram (Cicerarietinum L.) ;
(ii) tur or arhar (Cajanus cajan) ;
(iii) moong or green gram (Phaseolus aureus) ;
(iv) masur or lentil (Lens esculenta Moench, Lens culinaris Medic) ;
(v) urad or black gram (Phaseolus mungo) ;
(vi) moth (Phaseolus aconitifolius Jacq) ;
(vii) lakh or khesari (Lathyrus sativus L.) ;
(vii) man made fabrics
(viii) sugar and Khandsari Sugar.
(ix) un-manufactured tobacco and tobacco refuse, cigars and cheroots of tobacco, cigarettes
and cigarillos of tobacco, other manufactured tobacco covered
(x) woven fabrics of wool
There have been many cases where certain items have been held as declared goods. Some
of the goods which have been held as declared goods by the Supreme court and various
High Courts are provided below:
CAST IRON CASTING: cast iron castings have been held as declared goods by the
honurable Supreme court in Vasantham Foundry v. UOI- AIR 1995 SC 2400. In this case it
was decided that cast iron castings in its basic rough form is cast iron and hence is declared
goods.
GI PIPES, PIPES AND PIPE FITTINGS ARE DECLARED GOODS: GI pipes have been held
as declared goods by sureme court in Gujarat Steel Tubes Ltd. v. State of kerala (1989)
74STC 176(SC) and also in Mahesh Enterprises v. State of AP (2000) 119 ATC 578 (AP HC
DB).
Pipes and pipe fittings have been held as Declared Goods (1987) 65 STC 465 (All).
COAL ASH/COAL SLURRY- In Arif Transport v. CTO(1999) 116 STC 207(Karn HC) coal ash
was held to be including Coal as well as In Chandrama coal products v. State of Bihar (1999)
115 STC 639(Pat HC DB) where the coal slurry and sludge is held to be a form of coal and
held as declared goods.
Item (ia) states: Coal, including coke in all its form but excluding Charcoal. Thus all types of
coke are covered under this category. Petroleum coke has also been held as declared goods
in India Carbon Ltd. v. Supt of Taxes(1971)28 STC 603(SC).
RIM OF WHEEL IS DECLARED GOODS: Rim of Cycle wheel has been held as declared
goods in Dewan Enterprises v. CST AIR 1996 SC 2029.
SCREW DIVERS, SAWS AND PICKAXES ARE DECLARED GOODS as they are tools as
held in CST v. National Lock Stores (1996)101 STC 83 (MP HC DB)
SEWING THREAD IS DECLARED GOODS as it was held that sewing thread and cotton
yarn are same thing in State of Tamilnadu v. R V Krishniah (1994) 92 STC 262 ( MAD HC
DB)
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STAINLESS STEEL TUBES AND WIRES ARE DECLARED GOODS held in Hindustan
Wires Ltd. v. State of Tamilnadu(1992) 86 STC 1(MAD HC DB)
SUGAR IMPORTED FROM ABROAD- Sugar imported from outside India is also declared
goods- Prime Impex v. ACCT (2002) 127 STC 23 (CAL HC DB).
RESTRICTIONS ON STATE TAXATION ON DECLARED GOODS
1. Tax on Declared Goods cannot exceed 4% within the state(Section 15(a)

2. Reimbursement of local tax if declared goods are sold interstate: It has been
provided u/s 15(b) of CST Act that if the Declared goods which are purchased from
within a state or in other words on which intra state tax i.e local tax has been paid
and those Declared goods are sold interstate then the local tax paid on such goods
shall be reimbursed to the person making such interstate sale.
For obtaining the reimbursement following conditions must be fullfilled:
a. The Interstate sale of goods must be in the same form
b. If interstate sale of goods are exempt from tax, no refund of tax paid on Intra state sale is
available.
c. The word used is Reimbursement Thus the tax on local sale must have been paid.
It means that no adjustment of local tax paid at the time of purchase of declared goods is
available against the CST payable on inter state sale of such goods. Since the word used is
Reimbursement and not adjustment. Assume that a person purchases declared goods in the
state for Rs 10400 on which he has paid local tax @ 4% Rs. 400. Later on he sells such
goods in the inter state sale for Rs. 11000 and charge CST @ 4% i.e RS. 440. Now he
cannot claim adjustment of the tax paid at local leval against the CST to claim that he will
pay only RS. 40. The person will have to deposit CST of Rs 440 before claiming
Reimbursement of the local tax. as it has been held in Dhanji Kalyanji & co. v. State of
Karnatka (1978) 42 STC 272.
This is because payment of CST is condition precedent in order to claim Reimbursement-
Rallis India Ltd. v. State of A.P. (1980) 45 STC 456(SC)
In Tata Iron & Steel co Ltd. v UOI 2000 AIR SCW 4514, it was held that reimbursement
presupposes previous payment.
1. Before Taxation laws (Ammendment) Act 2007 section 8(2)(a) of the CST Act 1956
provided that if declared goods are sold to unregistered dealer in the cource of
interstate sale , the CST rate will be twice the rate applicable in case of local sales.
But after the ammendment in section 8 of CST in year 2007 the sub section 2 of
section 8 has been replaced.
Now the state rate of tax is applicable to the turnover of any dealer in so far as the turnover
or any part thereof relates to the sale of goods in the cource of interstate trade or commerce
not falling within Section 8(1). Now section 8(2) doesnot make any difference between the
Declared goods and other goods so far the rate of CST is concerned while making interstate
sale to the unregistered dealer outside the ambit of section 8(1).
SPECIAL PROVISIONS ABOUT PADDY & PULSES: If Paddy is taxed within state and rice
is also taxed then tax paid on Paddy should be given set off while levying tax on rice(Section
15(c). It means that the adjustment of local tax paid on paddy at the time of purchase can be
set off against the tax payable on sale of Rice produced from the paddy.
If the rice produced from the paddy purchased is to be exported then the paddy and the rice
shall be treated as same goods for the purpose of section 5(3) of CST Act. It means the
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LAW OF Taxation - Question

 Income from salary

 Profits and gains from business and profession

 Income from house property

 Income from capital gains

 Income from other sources such as dividend, interest on deposits,

3.What is capital gain? Explain capital assets and its transfers.

5. Explain the Income Tax Authorities under Income Tax Act.

(ii) Assessing Officer [ Sec. 2(7A)]

Importance of Assessing Officer :

(iii) Appointment of Income-Tax Authorities [ Sec. 117 ]

1. Power of Central Government : The Central Government may appoint

(iv) Control of Income-Tax Authorities [ Sec. 118 ]

Excise Duty is a form of indirect tax which is generally collected by a retailer or an

Acts and Rules Governing Excise Duty in India

 Central Excise Act, 1944

Types of Excise Duty in India

There are three types of excise duties in India-

7. Discuss the various powers of the Commissioner to search and arrest of a

8. Explain the provision relating to the registration of a dealer under Central

9. Write short notes on the following:

 Determination of turn over under C.S.T.

 Short term and long term capital gains.

 Refund of Income Tax. (3)

 Revisional powers of Income Tax Authority. (4)

 Harmonised system of nomenclature.

The HS comprises approximately 5,300 article/product descriptions that appear as headings

 Restrictions on exports and imports.

 Goods imported or exported by Post

 Define the term "Service" as defined in the Finance Act, 1994

 Assets belonging to others but included in net wealth of an individual.

 State the incomes assessable as Income from Business or Profession.

 Appeal Provisions under I.T. Act, 1961.

Sr.no Total Income determined by the Assessing Officer Appeal Fees

1 Less than Rs. 1,00,000/- Rs. 250

2 More than Rs.1,00,000/- but less than Rs.2,00,000/- Rs. 500

 Persons requiring registration.

 Who are the persons exempted from registration?

 Exemption from Customs officer

 Brief collection of customs Duties.

 Determination of taxable amount of turnover under CST Act  Output Tax 

 offences and penalties under Income Tax Act,1961

 Registration and clearance of goods.

 interest on the amount collected in excess of the duty under Central

 power to grant exemption from duty under Customs Act, 1962.

(4) Every notification issued under sub-section (1) shall

 Duty drawbacks on imported raw materials in the manufacture of goods

Salary in common parlance means any amount paid by an employer to his

Income Source Description

Income from Property Income from house or land (rented or self-occupied)

Income from Business/Profession Earnings form part-time job or profession

Income from Gains Earnings from the sale of a capital asset

Taxable Income = Gross Income – Deductions

Summary assessment –u/s 143(1)

Scrutiny assessment –u/s 143(3)

Protective assessment Re-assessment or Income escaping assessment –u/s 147

Set off of losses

a. Intra-head Set Off

b. Inter-head Set Off