SREENIVASA COACHING CENTRE

INCOME TAX MODEL PAPER - 1

MODEL TEST PAPER 1

NAME OF THE SUBJECT: TAXATION MAXIMUM MARKS: 100 TIME ALLOWED: 3 Hrs

INSTRUCTIONS a) Answer to all the questions. b) Wherever required, suitable assumptions may be made by the candidate and stated clearly in the answer. c) Working notes should form part of the answer.
Q: 1. Answer any five out of the following six sub divisions, with reference to the provisions of the Income

tax Act, 1961 for the Assessment year 2009 10: a) Can an assessee make e payment of taxes from the account of any other person? b) When will tax not required to be deducted at source on interest payable to a resident on any bond or security issued by a company though the aggregate amount of interest exceeds Rs. 2,500, the basic exemption limit under section 193 of the Act ? c) A trust is unable to apply the minimum of 85% of its income during the previous year. What is the remedy available to it? State with reason, whether the following statements are true or false: d) Partnership firms deriving loss need not file return of income. e) Rural branches of the co-operative banks are not allowed to claim provision for bad and doubtful debts. f) A legal practitioner who is entitled to practice in any civil court in India is qualified to be a tax return preparer. (5 X 2 = 10 Marks)
Q: 2. Mr. Sanjay, a noted lawyer of Chennai High court, furnishes his receipt and payment a/c for the year 2008

2009 as follows. Particulars To balance b/d Fees from clients Salary from law college as part time lecture Interest on bank deposits Dividends from cooperative society Dividends from UTI Sale proceeds from house property, used for residence Rent from house property (Municipal value Rs. 5,00,000) Royalty income received on books covered by section 80QQB Rs. 5,00,000 20,00,000 1,00,000 30,000 10,000 10,000 8,50,000 Particulars Purchase of Law books Rent of Chamber Municipal taxes for house property Rs. 20, 000 1,50,000 90,000 10,000 8,00,000 5,00,000 6,00,000 2,00,000 1,00,000 10,000 20,000 2, 40,000 1,00,000 18,60,000 47,00,000

Total

Membership fee paid to bar council Office expenses Salaries to Staff Motor car purchased in December 2008 4,00,000 Electricity and telephone expenses Advance income tax paid Donation to PMs Tsunami relief fund 8, 00,000 Life insurance premium paid Expenditure for earning Royalty Infrastructure bond purchased By balance c/d 47,00,000 Total

SREENIVASA COACHING CENTRE

INCOME TAX MODEL PAPER - 1

Additional information: Rs. i. Outstand legal fees 50, 000 ii. Fees from clients include retainer fees for financial year 2009 2010. 1, 00,000 iii. Rent of chamber outstanding. 30,000 iv. Law books include subscription for annual law periodical Rs. 5,000 and other laws books purchased in December 2008. v. House property remained vacant for one month and tenant did not pay one month rent. Conditions of Rule 4 were satisfied in respect of unrealized rent. vi. The house property, used for residence, was purchased in 1996 1997 for Rs. 2, 00,000. vii. Royalty received in lump sum from abroad and amount remitted to India till 30.09.2009 is Rs. 7, 00,000. Compute Sanjays total income for the previous year 2008 2009 and his tax liability for the assessment year 2009 2010. (20 Marks)
Q: 3.

a) Mr. Rakesh Jain is Director of Maxwell Ltd. drawing a salary of Rs. 30,000 p.m. (Basic Pay). In addition to his regular salary he also received the following amounts during year ended 31.03.2009 Particulars Director Fees for attending meetings Income from agricultural land in Sri Lanka Children Education Allowance at Rs. 60 p.m. for two children Entertainment Allowance received (fixed since 1954) i. Rs. 15,000 15,200 1,440 10,000

It is learnt that Mr. Rakesh Jain was a member of Recognized Provident Fund and during the year ended 31.03.2009, 12% was contributed by the employer; he also made the same contribution. Interest credited to the fund at 13% p.a. was Rs. 7,995. ii. He was given a car of 15 HP by his employer and he uses the car both for private and for official purposes. A driver is also provided by the employer. iii. Mr. Rakesh Jain paid Rs. 12,000 as premium on a policy taken on his life for Rs. 1 Lakh and Rs. 1,000 as a premium on his wifes policy of Rs. 20,000. iv. He had paid during the year to his 5 year post office recurring deposit scheme Rs. 2,000 including an advance payment of Rs. 500. He deposited in National Savings Certificate Rs. 2,000 and paid premium of Rs. 1,000 on LIC Jeewan Dhara Policy. Compute Mr. Rakesh Jains total income if he had income from other sources Rs. 10,000 for Assessment Year 2009 2010. (7 Marks) b) Mr. Manohar owns a factory building on which he had been claiming depreciation for past few years. It is the only asset in the block. The factory building and the land appurtenant thereto were sold during the year. The following details are available Particulars Building completed in September, 2004 for Land appurtenant thereto purchased in April, 2003 for Advance received from a prospective buyer for land in May, 2004, forfeited in favor of assessee, as negotiations failed WDV of the building block as on 01.04.2008 Sale value of Factory Building in November, 2008 Sale value of Appurtenant Land Rs. 10,00,000 12,00,000 50,000 8,74,800 8,00,000 16,00,000

SREENIVASA COACHING CENTRE

INCOME TAX MODEL PAPER - 1

The Assessee is ready to invest in Long term specified Assets under Section 54 EC, within the specified time. Compute the amount of taxable Capital Gains for the Assessment Year 2009 2010 and the amount to be invested under Section 54EC for availing the maximum exemption. (8 Marks)
Q: 4.

a) Miss Spandana, a person with disability, is suffering from hearing impairment which is certified by medical authority. However, she is a practicing lawyer of good standing. She earned Rs. 5, 00,000 during PY 2008 2009. She has also earned interest from following sources: Particulars Interest on deposit with a cooperative land mortgage bank, notified by the Central Government. Interest on deposits under Post Office (Monthly Income Accounts, Rules 1987 Dividends from Indian Companies Interest on deposits with financial corporation providing long term finance for industrial development Dividends from cooperative society Interest on government securities She has incurred the following expenses: Particulars Amount Payment to LIC Pension fund 40,000 School fees for daughter 12,000 Payment of medical insurance a) On her life 8,000 b) On the life of her grandmother, 75 years of age, resident in India 4,000 c) On the life of adopted daughter 4,000 d) On the life of her sister, dependent on her 3,000 Expenditure incurred on medical treatment of nephew, a person with severe disability 60,000 certified by medical authority Expenditure incurred on medical treatment of sister, dependent on her, suffering with 50,000 specified disease and certified by medical authority However she has misplaced certain vouchers of Rs. 35, 000 Donation of Zila Saksharta Samiti of her town, having population of 1, 00,000. Samiti is 50,000 duly registered as a society under Society Registration Act, 1860 and approved by the Commissioner of Income tax Compute her total income for the previous year 2008 2009. (6 Marks) Amount 4,000 3,000 2,000 4,000 3,000 5,000

b) Mrs. Sandhya Rani shifted her industrial undertaking located in corporation limits of Special Economic Zone (SEZ) on 01.12.2008. The following particulars are available Particulars Amount in Rs. Land: Purchased on 20.01.2004 4,26,000 Sold for 22,00,000 Building (construction completed on 14.03.2006) WDV of building as on 01.04.2008 8,20,000 Sold for 11,39,000 WDV of cars as on 01.04.2008 7,40,000 Sold for 6,00,000 Expenses on shifting the undertaking 1,15,000

SREENIVASA COACHING CENTRE

INCOME TAX MODEL PAPER - 1

Assets acquired for the undertaking in the SEZ (on or before 25.06.2009) Land Building Computers Car Machinery (Second hand) Furniture

3,00,000 5,00,000 1,00,000 4,20,000 2,00,000 50,000

There is no intention of investing in any other asset in this undertaking. Compute the exemption available under section 54 GA for the Assessment year 2009 2010. (8 Marks)
Q: 5.

Answer any four of the following five sub divisions with regard to the provisions of the Income tax act, 1961: a) Explain marginal relief and compute the maximum total income limit for (i) Resident Individuals, (ii) Resident Women and (iii) Resident Senior Citizen. b) Write short notes on Defective or Incomplete Return of Income u/s 139(9). c) T, an individual whose Total Sales in business during the year ending 31.03.2008 was Rs. 1.20 Crores paid Rs. 9 Lakhs by Cheque on 01.01.2009 to a contractor for construction of his business premises in full and final settlement. No amount was credited earlier to the account of the contractor in the books of T. Examine the obligation of the person responsible for paying the income to deduct tax at source and indicate the due date for payment of such tax wherever applicable in respect of the above. d) A firm made the following payment of advance tax during the financial year 2008 2009 Rs. in Lakhs 15.09.2008 10.0 15.12.2008 10.0 15.03.2009 13.7 33.7 The income returned by the firm is Rs. 100 Lakhs under the head Business and Rs. 10 Lakhs by way of Long term Capital Gains on sale of a property effected on 1.3.2009. What is the interest payable by the assessee u/s 234 B and 234 C of the Income Tax Act for Assessment Year 2009 2010? Assume that the return of income was filled on 31.7.2009 and tax was fully made upon self assessment. e) Write a brief note on anonymous donations. (4 x 4 = 16 Marks)

Q: 6.

Answer any five of the following:

(5 x 2 = 10 Marks)

a) Write a brief note on goods covered by VAT Law. b) Pramod has paid the amount of service tax for the quarter ending June 30, 2009 by cheque. The date of presentation of cheque to the designated bank is July 5, 2009 and it is realised by the bank on July 7, 2009? What is the date of payment of service tax in this case? Whether any interest and penalty is attracted in this case? c) Explain the role of Directorate of Service Tax. d) What are the challenges before the service tax administration in India? e) Explain the penal consequences for delayed payment and nonpayment of Service Tax. f) CAs play a significant role in the matters involving service tax Explain.

SREENIVASA COACHING CENTRE

Q: 7.

INCOME TAX MODEL PAPER - 1

a)

Explain the circumstances that call for multiple registrations? Can Vijay & Co., providing services from different locations and billing the clients from each location, opt for centralized service tax registration? Whether value of material supplied by service provider excluded for the purpose of payment of service tax? What are the conditions? (3 x 2 = 6 Marks) Answer all of the following: a) What are the methods for computation of VAT? b) What are the variants of VAT? c) Summarize the demerits of VAT?

b)

Q: 8.

(3 x 3 = 9 Marks)