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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI 600 034
M.Com.DEGREE EXAMINATION -COMMERCE
SECOND SEMESTER APRIL 2018
17PCO2MC01- DIRECT TAX PLANNING AND MANAGEMENT
Date: 17-04-2018 Dept. No. Max. 100 Marks
Time: 01:00-04:00
SECTION
ANSWER ALL (10 x 2 20)
1. What is an Assessment Year?
2. What do you mean by residential status?
3. What is meant by tax-free incomes?
4. What is meant by Gratuity?
5. How is the vacancy loss dealt with, while calculating Annual value?
6. Define the term 'Profession'.
7. What do you mean by Block of Assets?
8. State the meaning of short term capital gain.
9. What do you mean by income from other sources?
10. What is meant by set-off of losses?
SECTION B
ANSWER ANY FOUR x 10 40)
11. Explain any 12 incomes exempt from income tax.
12. Who is an Assessing Officer? Explain his functions and powers.
13. For assessment year 2017-18, X (whose previous year is 2016-17) receives the following income:
Royalty received in Nepal but received on May 17, 2016 in India
Dividend from a foreign company received in India on July 2016
Share of profit of a business situated in Sri Lanka, received in Dhaka on June 10, 2016 but controlled from India
Rent of 2016-17 of a house property situated in Sri Lanka and received thereon December 2016
Speculation profit earned and received outside India on May 15, 2017
Rs.
96,000
1,05,000
82,000
1,85,000
93,000
Determine the gross total income of X for the AY 2017-18 if he is
a. Resident and ordinarily resident;
b. Resident but not ordinarily resident; and
c. Non resident
14. X 67 years), a director of PQR Ltd, gives the following particulars of his income of the previous year ending March 31, 2017:
Basic salary: Rs. 1,45,000 pm.
Bonus: one month's basic salary.
Commission: two month's basic salary.
Entertainment allowance: Rs. 60,000 pa.
A rent-free unfurnished house has been provided in Mumbai, lease rent of the house: Rs. 5,12,000 pa.
Income from other sources: Rs. 1,57,000.
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Employer has provided free use of a 1798cc car with driver for official and personal purpose;
expenses of the employer: Rs. 2,80,000 of which is attributable towards official
purposes and 20% is attributable towards the journey between office and residence). The
employer also provides subsidised tea and snacks (expenditure incurred: Rs. 12,000) and pays
mobile phone bills of X (total payment being Rs. 24,000; bill is in the name of employer and
telephone is partly used for office purposes and partly for personal purposes)
Employer's contribution towards recognised provident fund: 15% of basic salary.
contribution towards provident fund Rs. 40,000 pa.
Payment of insurance premium on life policy of Mrs. X Rs. 9,000 (sum assured of policy
taken in May 2016: Rs. 40,000).
During the year, X has invested Rs. 90,000 in debentures of a company which is engaged in
operating an approved infrastructure facility and pays school fees of Rs. 17,000 of his
daughter.
Determine the taxable income and tax liability of Mr. X for the AY 2017-18.
15. For the assessment year 2017-18, X 46 years) submits the following information:
Income from business: Rs. 7,37,000
Interest on debentures: Rs. 2,25,000
Contribution to public provident fund: Rs. 60,000
Investment in NSC IX issue: Rs. 1,30,000
Property income:
Fair rent
Municipal valuation
Annual rent
Municipal taxes paid
Standard rent
Repairs
Land revenue
Insurance
Unrealised rent of 2015-16
Unrealised rent of 2016-17
Interest on capital borrowed for purchase of
house property
Repayment of loan taken from a friend for the
purpose of purchasing House I
Vacant period (number of months)
Loss on account of vacancy
Nature of occupation
Date of completion of construction
House I House II
4,50,000
4,55,000
7,80,000
25,000
4,23,000
37,000
6,000
4,000
26,000
17,000
12,000
3,000

1,30,000
Let out for
residence of
managing
director of A
Ltd.
March 31, 2011
6,90,000
7,10,000
9,00,000
70,000
12,00,000
74,000
80,000
18,000
12,000
5.80,000
1,90,500
Nil

2,25,000
Let out for
profession.
May 15, 1974
Determine the taxable income and tax liability of X for the assessment year 2017-18. Also calculate
the amount of unrealised rent which can be claimed as deduction in the assessment year 2018-19.
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16. X Ltd. A sugar manufacturing company, owns the following assets on April 2016:
Assets WDV on April 2016
Rs.
Rate of Depreciation
Plant A
Plant B
Plant C
Plant D
4,20,000
17,80,000
8,70,000
1,23,000
15%
15%
15%
40%
On March 25, 2017, it sells plant D for Rs. 4,97,000. On November 10, 2016, it acquires the
following assets:
Assets Costs Rs. Rate of Depreciation
Plant E (second-hand)
Plant F (foreign made car)
Plant G (Indian car)
Building A
Know-how
Plant H (office telephone system)
Plant I (office machine)
Computer
95,000
6,80,000
2,00,000
40,00,000
21,00,750
91,200
18,000
47,170
40%
15%
15%
10%
25%
40%
100%
60%
Determine the amount of depreciation admissible for the assessment year 2017-18.
17. X submits the following particulars of income/loss for the assessment year 2017-18:
Profits of Business I carried on in India
Loss of Business II carried on in India
Profits of Business III carried on in Germany (though income is earned
and received in Germany, business controlled from Bombay).
Loss of Business IV (exclusive of unabsorbed depreciation allowance
mentioned below) carried on in Germany (though income is earned and
received in Germany, business is partly controlled from Germany and
partly from Canada).
Unabsorbed depreciation of the AY 2008-09:
Business I
Business III
Business IV
Income from property situated in India
Income from property situated in Germany (rent is received in
Germany)
Rs.
8,00,000
2,25,000
3,90,000
86,000
90,000
1,10,000
2,70,000
8,00,000
11,55,000
Determine the net income of X for the assessment year 2017-18 on the assumption that he is
a. Resident and ordinarily resident in India,
b. Resident not ordinarily resident in India, and
c. Non-resident in India.
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SECTION C
ANSWER ANY TWO x 20 40)
18. Mr. X (40 years) is a Chartered Accountant in practice. Income and expenditure account of X for the
ending March 31, 2017 is given below:
Particulars Rs. Particulars Rs.
Salary of staff
Advertisement expenditure
Depreciation
Rent of office paid to Mrs. X
Donation to Prime Minister
Relief fund
Interest on loan taken to set up
profession
Income-tax, advance tax and
penalty paid
Car expenses including
depreciation
Miscellaneous expenses
Excess of income over
expenditure
Personal expenses
6,00,000
30,000
2,10,000
75,000
20,000
3,000
8,000
90,000
1,30,000
32,14,500
17,000
43,97,500
Audit fees
Tax consultancy fees
VAT consultancy fees
Gift from mother-in-law
Dividend of preference shares
from Indian companies
Dividend on equity shares
received from foreign
companies
Profit on sale of unquoted
debentures purchased in 1987
Refund of income-tax
received on behalf of clients
but not remitted to them
27,15,000
8,50,000
3,25,000
65,000
87,000
2,36,500
84,000
35,000
43,97,500
Additional information:
i. Advertisement expenditure is payment given to a magazine for classified advertisement.
However, the magazine is owned by a political party.
ii. Depreciation debited is Rs. 2,10,000. However, under section 32 it comes to Rs. 2,40,000.
iii. Market rent of office taken from Mrs. is Rs.80,000. However, rent is paid without TDS. Out
of Rs. 75,000, Rs. 35,000 is paid by a bearer cheque.
iv. Car is partly used for official purposes and partly for personal purposes. Approximately, 10%
expenditure is attributable towards private use of the car.
v. Salary of staff includes salary of Rs. 5,000 pm paid to car driver for 3 months.
vi. Miscellaneous expenditure includes electricity bills of Rs. 25,000 paid on April 10, 2017.
vii. Out of the VAT consultancy fee, Rs. 35,000 is received on May 2017.
viii. Gift from mother-in-law is received in cash.
ix. Dividend from foreign company is received outside India on July 24, 2016. The amount of
dividend was US 5,000. On July 24,2016, the telegraphic transfer buying rate of US dollar
offered by SBI was Rs. 47.3. Amount recorded in books is Rs. 2,36,500 (US 5,000 x Rs.
47.3). However, the telegraphic transfer buying rate of US dollar on March 31, 2017 is Rs.
43. This amount is deposited in a bank outside India with the permission of RBI and most
probably it will be remitted during January 2018.
x. Profit on sale of debentures is calculated after indexation. Without indexation it comes to Rs.
2,20,000.
xi. X is of the view that refund of income-tax received on behalf of clients of Rs. 35,000 credited
in the above income statement is not chargeable to tax under sec as the same was not
allowed ad deduction to X or his client when the payment was made. X is not likely to remit
this amount to his clients.
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xii. X maintains books of account on cash basis.
Find out the income and tax liability of X for the assessment year 2017-18, assuming that X pays
life insurance premium of his major married son not dependent upon him of Rs. 1,80,000 (sum
assured Rs. 7,00,000). This policy was taken by son in 2006 and till last year premium was
paid by his son.
19. X (63 years), a resident individual, transfers the following long-term capital assets during the
previous year 2016-17:
Date of transfer
Sale consideration (in Rs.)
Indexed cost of
acquisition (in Rs.)
Expenditure on transfer
(in Rs.)
Agricultural
land in urban
area
Silver Debentures Gold
Apr 12, 2016
22,75,000
19,32,000
5,000
Oct 2016
68,86,000
56,10,000
6,000
Jan 2017
15,76,000
7,76,276
1,000
Feb 26, 2017
23,10,000
11,78,000
10,000
Debentures were purchased in 2012-13. Other assets were purchased before April1, 2012. Indexed
cost of acquisition is calculated by applying cost inflation index notified by the Government. On
April 2016, X owns only one residential house property which is used for his own residence. For
acquiring this property, a loan was taken from a friend in 2015 and interest on loan for the year 2016-
17 is Rs. 1,46,000.
X makes following investments:
1. A residential house property of Rs. 18,00,000 is acquired on April 14, 2015.
2. NHAI bonds of Rs. 4,10,000 are purchased on October 2016.
3. REC bonds of Rs. 9,00,000 are purchased on June 2017.
Determine the amount of capital gain chargeable to tax for the assessment year 2017-18. Cost of
inflation index of 2012-13 is 852.
20. Mrs. X 62 years) is a part-time lecturer in a college of Delhi University. The details of her
salary and other income for the PY 2016-17 are as follows:
Basic salary Rs. 7,86,000
Dearness allowance (forming part of salary) Rs. 72,000
Education allowance for two children (expenditure being Rs. 3,600) Rs. 9,400
Hostel expenditure allowance for one child (expenditure being Rs. 10,000) Rs. 11,800.
House rent allowance Rs.96,000
Remuneration from the Calcutta University for acting as examiner Rs. 41,540.
Allowances for research which is to be completed during January-April 2017 (actual
expenditure incurred for completing the research: up to March 31, 2017: Rs. 2,500; during
April 2017: Rs.700) Rs. 10,000
She is a member of statutory provident fund to which she contributes 13% of her salary and
similar amount is contributed by the college. Besides, the college reimburses Rs. 17,000
being expenditure incurred by Mrs. X on medical treatment of her daughter in a private
clinic. Bills are issued in the name of Mrs. X but paid by the employer.
During the year she spent Rs. 3,000 on purchase of books for her teaching purposes. She has
maintained a scooter for the whole year for office as well as private purposes. She has been
living in a rented house and paying Rs. 15,000 pm as rent.
For the year 2016-17, she paid Rs. 9,000 as insurance premium on his life policy taken in
2005, sum assured being Rs. 30,000 (date of payment: April 2017).
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Compute the total income and tax liability for the AY 2017-18 in case of Mrs. X is:
a. Resident and ordinarily resident in India,
b. Resident not ordinarily resident in India, and
c. Non-resident in India.
21. X 31 years) owns four houses (outside the jurisdiction of the Rent Control Act) particulars of
which are as follows:
Municipal valuation
Fair rent
Rent (if property is let out
throughout the year)
Unrealised rent
Municipal tax paid by X
Date of completion of construction
Repairs
Collection charges
Land revenue
Interest on capital borrowed for
repairs of house property
Interest on capital borrowed for
construction of house property
Interest on capital borrowed for
payment of municipal taxes
Nature of occupation
House I
Rs.
House II
Rs.
House III
Rs.
House IV
Rs.
2,00,000
2,50,000


17,000
June 16,
1991
Nil

800
2,000
5,700
200
Self
occupied
for
residence
16,000
22,000


800
June
1974
2,000


800


Self
occupied
for
business
86,000
92,000


3,000
June 14,
1997
950

230
810

600
Self
occupied
for
residence
5,00,000
5,55,000
5,72,000
90,000
45,000
March 31,
1998
Nil
400
900
10,000

100
Let out
for
residence
House IV remains vacant for the month of January 2017. Business income of X for the previous year
2016-17 is Rs. 12,03,000 (it has been computed as per the provisions of Income-tax Act). Determine
the taxable income and tax liability of X for the assessment year 2017-18 on the assumption that he
could not occupy House III for 2 months during the previous year and X pays insurance premium of
Rs.85,000 on his insurance policy of Rs. 9,00,000. He also deposits Rs. 50,000 in his public
provident account.