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Question Paper

Taxation Duration: 65

Details: Test- 6 (CH- 4 Units 3) Marks: 35

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Q-1

MR. J is a franchise of Mc Donald’s and has paid Rs. 9,00,000 in FY 2018-2019 for the franchise
fee. He provides you following profit and loss account for the AY 2023-2024 i.e. PY 2022-2023.

Particulars Amount Particulars Amount in Rs.

in Rs.

Opening stock 3,20,000 Outward supply 35,00,000

Inward supply 18,23,000 Closing stock 3,50,000

Household expenses 21,000

Deposit in PPE account 70,000

Salaries and wages 1,18,100

Donation gives to IIT for the 35,000

research approved by the
government

Purchase of plant and machinery on 3,00,000

15/7/PY

Purchase of computer on 15/7/PY 40,000

Custom duty payable 37,900

Purchase of car on 15/7/PY 9,00,000

Profit 1,85,000

Total 38,50,000 Total 38,50,000

Addition information:

1. The opening value of various blocks as on 1/4/PY are

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 Particulars Rs.

(a) Franchise 3,11,000

(b) plant and machinery 1,85,000

(c ) car 2,23,000

2. Both opening and closing stock have been overvalued by 10% and 15% respectively

3. Inward supply includes the cash inwards supply of Rs. 23,000

4 salaries and wages includes the salaries given to wife who is working as an
employee.Assessing officer has deemed Rs. 2,500 as excessive in nature

5. New plant and machinery and car were put to use 15/7/PY

6. Rs. 11,000 of car expenses have been incurred but not been recorded in the books of
accounts

7. Only Rs, 25,000 of the custom duty payable was paid before the due date of filing of ITR

8. Mr. J has also given donation of Rs. 10,000 to PMNRF on 31/3/PY

Calculate the PGBP income for the AY 2023-24 i.e. PY 2022-23

(6 Marks)

Q-2

A Ltd. is a manufacturing company and started the business on 1/4/PY. it gives you the
following information from which calculate its business income and total income

Profit and loss account

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Particulars Amount in Particulars Amount
(Rs.) in (Rs.)

Adjusted purchases 21,80,000 Outward supply 45,70,000

Salaries and wages 2,00,000 Dividend of Indian 5,000

company

Electricity expenses 80,000 Interest on debentures 30,000

Telephone expenses 20,000 Rent of house property 2,40,000

Municipal taxes for house 21,000

property, payable

Interest for the house property 18,500

Preliminary expenses 78,000

Donation to political party 22,000

Purchase of new plant and 2,00,000

machinery

Purchase of car 3,00,000

Personal expenses of directors 50,000

Office expenses 75,500

Purchase of non- residential 10,00,000

building

Donation paid to IIT 2,00,000

income tax paid 1,00,000

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 audit expenses 75,000

Customs duty paid 75,000

Penalty for the late payment of 50,000

custom duty

Profits 1,00,000

Total 48,45,000 Total 48,45,000

Additional information:

(a) A ltd. owns a building of which ground floor is used for business purpose and first floor is
let out

(b) Rs. 1,00,000 of purchases are cash purchases

(c )electricity and telephone expense outstanding are Rs. 20,000 and are not recorded in the
books of accounts

(d)Plant and machinery was purchased on 15/7/PY but was put to use on 5/12/PY

(e) Car and non- residential building were put touse on 15/4/ PY

(f)A donation to IIT was given with the specific directions to use the money for the research
in pollution control which has been approved by the central government

(g) Company had given a donation to PMNRF of a Rs.25,000, which has not been recorded in
the books accounts

(h) As On 31/3 PY the company has capital employed of Rs. 15,40,000 and total cost of fixed
asssts is Rs. 15,00,000

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(i)Municipal taxes and interest on the borrowed capital for the house have been paid between
1/4/PY and 31/7/PY

(8 Marks)

Q-3

Mr. Raju, a manufacturer at Chennai, gives the followings Manufacturing, Trading and Profit
and Loss Account for the year ended 31-03-2023.

Manufacturing, Trading and Profit and Loss Account for the year ended 31-03-2023.

Particulars Rs. Particulars Rs.

To Opening Stock 71,000 By Sales 32,00,000

To Purchases of Raw materials 16,99,000 By Closing Stock 2,00,000

To Manufacturing Wages & 5,70,000

Expenses

To Gross Profit 10,60,000

34,00,000 34,00,000

To Administrative Charges 3,26,000 By Gross Profit 10,60,000

To GST penalty paid 5,000 By Dividend from domestic 15,000

companies (Gross )

To GST paid 1,10,000 By Income from agriculture 1,80,000

(Net )

To General Expenses 54,000

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 To Interest to Bank (On 60,000
machinery term loan )

To Depreciation 2,00,000

To Net Profit 5,00,000

12,55,000 12,55,000

Following are the further information relating to the financial year 2022-23

(i) Administrative Charges include Rs.46,000 paid as commission to brother of the assessee.
The Commission amount at the market rate is Rs.36,000.

(ii) The Assessee paid Rs. 33,000 in cash to a transport carrier on 29-12-2022. This amount is
included in manufacturing expenses. (Assume that the provisions relating to TDS are not
applicable to this payment.

(iii) A sum of Rs.4,000 per month was paid as salary to a staff throughout the year and this
has not been recorded in the books of account.

(iv) Bank term loan Interest actually paid upto 31-03-2023 was Rs.20, 000 and the balance
was paid in Nov.2023.

(V) Housing loan principal repaid during the year was Rs.50,000 and it relates to residential
property occupied by him. Interest on housing loan was Rs.23,000. Housing loan was taken
from Canara Bank. These amounts were not dealt with in the profit and loss account given
above.

(vi) Depreciation allowable under the act to be computed on the basic of following
information

Particulars Amount

Plant & Machinery (Depreciation rate @ 15%)

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 Opening WDV ( as on 01-04-2022) 12,00,000

Additional during the year ( used for more than 180 days ) 2,00,000

Total additions during the year 4,00,000

Note : Ignore additional depreciation u/s 32(1) (iia)

Compute the total income of Mr. Raju for the assessment year 2023-24

Note: Ignore application of Section 14A for disallowance of expenditure in respect of any
exempt income.

(6 Marks)

Q-4

Discuss the taxability of the following transactions giving reasons, in the light of relevant
provisions for your conclusion

1. Mr. Rajpal took a land on rent from Ms. Shilpa on monthly rent of Rs. 10,000 He sublets the
land to Mr. Manish for a monthly rent of Rs. 11,500. Manish uses the land for grazing of cattle
required for agricultural activities. Mr. Rajpal wants to claim deduction of Rs.10,000 (being
rent paid by him Ms. Shilpa ) from the rental income received by a Mr. Manish.

2. Mr. Pratham, a non-resident in India, received a sum of Rs. 1,14,000 from Mr. Rakesh, a
resident and ordinarily resident in India. The amount was paid to Pratham on account of
transfer of right to use the manufacturing process developed by Pratham. The manufacturing
process was developed by Mr. Pratham in Singapore and Mr. Rakesh uses such process for his
business carried on by him in Dubai.

3. Mr. Netram grows paddy on land. He market, He then employs mechanical operations on
grain to make it fit for sale in the market, like removing hay and chaff from the grain , filtering
the grain and finally packing the rice in gunny bags. He claims that entire income earned by
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him from sale of rice is agricultural income not liable to income tax since paddy as grown on
land is not fit for sale in its original form.

(5 Marks)

Q-5

Prakash is in the business of operating goods vehicles. As on 1.4.2022, he had the followings
vehicles:

Vehicle Gross vehicle weight (in Date of purchase Put to use during
Kgs.) F.Y. 2022-23
A 8,500 02.04.2021 Yes
B 13,000 15.5.2021 Yes
C 12,000 04.08.2021 No (as under repairs )

During P.Y. 2022-23, he purchased the following vehicles:

Vehicle Gross vehicle weight (in Kgs.) Date of purchase Date on which put to use

D 11,000 30.4.2022 10.5.2022

E 15,000 15.5.2022 18.5.2022

Compute his income u/s 44 AE of the income-tax Act,1961 for A.Y. 2023-24.

(5 Marks)

Q-6 MCQ.

1. As per section 38(2), when asset is not used exclusively for the purpose of business, then
deduction………

(a) Shall be restricted to a fair proportionate part.

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(b) May be restricted to a fair proportionate part.

(c) Shall not be restricted to a fair proportionate part and allowed fully.

(d) Shall be restricted to a fair proportionate part thereof which assessing officer may
determine having regard to use of such asset for the purposes of business or profession.

2. U/s 44 AE, presumptive taxation is applicable at a particular rate provided the assesse is
the owner of a maximum of certain number of goods carriages, the rate pm or part of the
month relevant for AY 2023-2024 i.e., PY 2022-2023 and the maximum number of vehicles
specified under the section are

(a)Rs. 7,500 for each goods carriage in the case of an assesse owning not more than 10 goods
carriages at any time during the year.

(b)Rs. 7,500 for each goods carriage in the case of an assesse owning less than 10 goods
carriage at any time during the year.

(c) Rs. 1,000 per ton of gross vehicle weight for pm or part of month for a goods carriage for
an assesse owning not more than 10 goods carriages at the end of the previous year.

(d) Rs. 1,000 per ton of gross vehicle weight or unladen weight, as the case may be, for pm or
part of a month for a heavy goods carriage and Rs. 7,500 pm or part of a month for other
goods carriages in the case of an assessee owning not more than 10 goods carriages at any
time during the previous year.

3. Section 44 AD reating to presumptive income of a business (excluding business covered

u/s 44 AE) is applicable in case of:

(a) any assesse

(b) any assesse being an individual or HUF or a firm.

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(c)any assesse being an individual or HUF or a firm who is resident but excluding limited
liability partnership firm.

(d) Any assesse being and individual or HUF or a firm other than LLP.

4. Jagan purchased 10 equipment’s of Rs. 50,000 each on 14.6.2022 for his production
business, entitled to 15% rate of depreciation. Five equipment’s were put to use immediately.
Two could be put to use only from 10.5.2023 One equipment was installed at his residence
for personal use. One equipment was put to use on 1.12.2022. One equipment was not
unboxed since it was purchased in excess of requirements. There were no assets in the
relevant block as on 1.4.2022. Depreciation allowable for PY 2022-23 will be:

(a) 75,000

(b) 41,250

(c) 45,000

(d) 60,000

5. Interest on capital or loan from partner of a firm is allowed as deduction to the firm to the
extent of:

(a) Rate mentioned in the partnership deed.

(b) 12% pa even if it is not mentioned in partnership deed.

(c) 12% pa or at the rate mentioned in partnership deed whichever is less.

(d) Any rate at the choice of partner.

(1 × 5 = 5 Marks)

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