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DRIVE-Winter 2016
PROGRAM/SEMESTER-MBADS (SEM 3/SEM 5)MBAFLEX/ MBAN2 (SEM PGDFMN (SEM 1)
SUBJECT CODE &NAME-MF0012 &TAXATION MANAGEMENT
BK ID-B1760
CREDITS-4
MARKS-60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of
400words. Each question is followed by evaluation scheme.

Q1. Explain the objectives of tax planning. Discuss the factors to be considered in tax planning.
(Objectives of tax planning, Factors in tax planning) 5,5
Answer-1
Objectives of Tax Planning
The following are the important objectives of Tax planning.
1. Reduction of Tax liability
2. Minimisation

Q2.Explain the categories in Capital assets.

Mr. C acquired a plot of land on 15th June, 1993 for 10,00,000 and sold it on 5th
January, 2010 for 41,00,000. The expenses of transfer were 1,00,000.
Mr. C made the following investments on 4th February, 2010 from the proceeds of the plot.
a) Bonds of Rural Electrification Corporation redeemable after a period of three years,12,00,000
b) Deposits under Capital Gain Scheme for purchase of a residential house 8,00,000 (he does not own any house)
Compute the capital gain chargeable to tax for the AY2010-11.
(Explanation of categories of capital assets, Calculation of indexed cost of acquisition, Calculation of long term capital
gain, Calculation of taxable long term capital gain) 4,2,2,2
Answer-2
Categories of capital assets
For taxation purposes, the capital assets have been, divided into (a) short term capital assets and (b) long-term capital
assets.
(a) Short-term capital assets: According to Section 2(42A), a short-term capital asset means a capital asset held by an
assessed for not more than:
A. 12 months

Q3.Explain major considerations in capital structure planning. Write about the dividend policy and factors
affecting dividend decisions.
(Explanation of factors of capital structure planning, Explanation of dividend policy, Factors affecting dividend
decisions) 6, 2, 2
Answer-3

Major considerations in capital structure planning

Broadly, the following factors would be worth considering, while planning the capital structure.
1. Risk of two kinds, that is, financial risk and business risk: In the context of capital structure planning, financial
risk is more relevant.
2. Cost of capital:

Q4.X Ltd. has Unit C which is not functioning satisfactorily. The following are the details of its fixed assets:

The written down value (WDV) is ` 25 lakh for the machinery, and15 lakh for the plant. The liabilities on this Unit on
31st March, 2011 are35 lakh.
The following are two options as on 31st March, 2011:
Option 1: Slump sale to Y Ltd for a consideration of 85 lakh.
Option 2: Individual sale of assets as follows: Land ` 48 lakh, goodwill ` 20 lakh, machinery 32 lakh, Plant 17 lakh.
The other units derive taxable income and there is no carry forward of loss or depreciation for the company as a whole.
Unit C was started on 1st January, 2005.Which option would you choose, and why?
(Computation of capital gain for both the options, Computation of tax liability for both the options, Conclusion) 4,4,2
Answer-4

Option 1: Slump sale

(in lakhs)
Computation of net worth of Unit C
Land (book value) 30

Q5.Explain the Service Tax Law in India and concept of negative list. Write about the exemptions and rebates in
Service Tax Law.
(Explanation of Service Tax Law in India, Explanation of concept of negative list, Explanation of exemptions and
rebates in Service Tax Law) 5, 2 , 3
Answer-5
Service Tax Law in India
Service tax was introduced in India in 1994 by Chapter V of the Finance Act,1994. It was imposed on an initial set of
three services in 1994 and the scope of the service tax has since been expanded continuously by subsequent Finance
Acts.
The new section 65B introduced in the Finance Act, 2012 defines services in Clause 44.In 2012, and there has been a
paradigm

Q6.What do you understand by customs duty? Explain the taxable events for imported, warehoused and
exported goods. List down the types of duties in customs
An importer imports goods for subsequent sale in India at $10,000 on assessable value basis. Relevant exchange rate
and rate of duty are as follows:
Particulars Date Exchange Rate of
Rate Declared by Basic Customs
CBE&C Duty
Date of submission 25th February, 2010 45/$ 8%
of bill of entry
Date of entry 5th March, 2010 ` 49/$ 10%
inwards granted to
the vessel
Calculate assessable value and customs duty.
(Meaning and explanation of customs duty, Explanation of taxable events for imported, warehoused and exported
goods, Listing of duties in customs, Calculation of assessable value and customs duty) 2, 3, 2, 3
Answer-6

Meaning and explanation of customs duty

Customs duty is the duty imposed on goods imported into the country.
The rates of customs duties are either specific or on ad valorem basis, that is, it is based on the value of goods. Rule 3(i)
of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 states that the value of imported

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