| Roll No………………… | |
| Total No. of Questions— 8] | [Total No. of Printed Pages—4 |
| Time Allowed : 3 Hours | Maximum Marks : 100 |
| WT | |
| Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued. | |
| Answer all questions. | |
| Marks | |
| 1. | M/s. HIG, a firm consisting of three partners namely, H, I and G, carried on the business of purchase and sale of television sets in wholesale and manufacture and partners in their individual capacity. The deed of partnership provided for payment of salary amounting to Rs. 1,25,000 each to H and G, who were the working partners. A new deed of partnership was executed on 1.10.2006 which, apart from providing for payment of salary to the two working partners as mentioned in the deep of partnership executed on 1.4.2002, for the first time provided for payment of simple interest @ 12% per annum on the balances standing to the credit of the Capital accounts of partners from 1.4.2006. The firm was dissolved on 31.3.2007 and the Capital assets of the firm were distributed among the partners on 20.4.2007. The net profit of the firm for the year ending 31.3.2007 after payment of salary to the working partners and debit/credit of the following items to the Profit and Loss Account was Rs. 1,50,000.
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| 2. | (a) | Examine whether the following items of expenditure incurred/payments made by a company in the course of its business during the year ending 31.3.2007 are liable to fringe benefit tax for the assessment year 2007–08;
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| WT | P.T.O. |
( 2 )
| WT | Marks |
| (b) | Discuss the taxability or otherwise of the following gifts received by M, an individual, during the financial year 2006–07;
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| (c) | T, an individual, filed his return of income for the assessment year 2006–07 on 15.6.2006 declaring a total income of Rs. 1,20,000. He later discovered that he had not claimed a particular deduction amounting to Rs. 2,10,000 while computing his business income in the said return. He filed a revised return on 3.1.2007 declaring a total loss of Rs. 90,000. The Assessign Officer proposes to disallow the claim of T for carry forward of the business loss amounting to Rs. 90,000 for the reason that the revised return declaring loss for the first time was filed beyond the time prescribed under section 139(3). Examine the validity of the proposed action of the Assessing Officer. | 3 | |||||||||
| 3. | (a) | V, an individual,owned three residential houses which were let out. Besides, he and his four brothers co–owned a residential house in equal shares. He sold one residential house owned by him during the previous year relevant to the assessment year 2007–08. Within a month from the date of such sale, the four brothers executed a release deed in respect of their shares in the co-owned residential house in favour of V for a monetary consideration. V utilised the entire long–term capital gain arising out of the sale of the residential house for payment of the said consideration to this four brothers. V is not using the house, in respect of which his brothers executed a release deed, for his own residential purposes, but has let it out to another person, who is using it for his residential purposes. Is V eligible for exemption under section 54 of the Income–tax Act, 1961 for the assessment year 2007–08 in respect of the long–term capital gain arising from the sale of his residential house, which he utilised for acquiring the shares of his brothers in the co–owned residential house? Will the ownership of two more houses by him on the date of sale of the residential house and non–user of the new house for his own residential purposes disentitle him to exemption? | 6 | ||||||||
| (b) | ABC Ltd. took on sub–lease a building from J, an individual, with effect from 1.9.2006 on rent of Rs. 10,000 per month. It also took on hire machinery from J with effect from 1.10.2006 on hire carges of Rs. 9,000 per month. ABC Ltd. entered into two separate agreements with J for sub–lease of building and hiring of machnery. The rent of building and hire charges of machinery for the financial year 2006–07 amounting to Rs. 70,000 and Rs. 54,000 respectively were credited by ABC Ltd. to the account of J in its books of account on 31.3.2007. Examine the obligation of ABC Ltd. to deduct tax at source in respect of the rent and hire charges. | 4 | |||||||||
| (c) | P, an individual, borrowed Rs. 20,00,000 for repair and reconstruction of his self–occupied house property and paid interest of Rs. 1,60,000 thereon during the year ending 31.3.2007. What is the amount of interest allowable as a deduction under section 24 for the assessment year 2007–08? | 3 | |||||||||
| 4. | (a) | The following trusts claim that anonymous donations received by them during the financial year 2006–07 are not liable to tax under section 115BBC:
Examine the validity of the claim made by the trusts. |
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| (b) | PQR Co–operative Bank, a co–operative society, having its area of operation confined to Gubbi Taluk and principal object of which is to provide for long–term credit for agricultural and rural development activities, has received the following amounts during the year ending 31.3.2007:
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| (c) | MNO Ltd. is a company in which the public are not substantially interested. K is a shareholder of the company holding 15% of the equity shares. The accumulated profits of the company as on 31.3.2006 amounted to Rs. 10,00,000. The company lent Rs. 1,00,000 to K by an account payee bank draft on 1.10.2006. The loan was not connected with the business of the company. K repaid the loan to the company by an account payee bank draft on 30.3.2007. Examine the effect of the borrowal and repayment of the loan by K on the computation of his total income for the assessment year 2007–08. | 3 | |||||||||
| WT | Contind... |
( 3 )
| PJ | Marks |
| 5. | (a) | XYZ Ltd. incurred expenditure amounting to Rs. 3,00,000 in connection with the issue of rights shares and Rs. 2,00,000 in connection with the issue of bonus shares during the year ending 31.3.2007. The company seeks your opinion in the matter of eligibility for deduction of the expenditure incurred from its business profits for the assessment year 2007–08. | 4 | |||||||||
| (b) | X an individual, has got his books of account for the year ending 31.3.2007 audited under section 44AB. His total income for the assessment year 2007–08 is Rs. 1,90,000. He desires to know if he can furnish his return of income for the assessment year 2007–08 through a Tax Return Preparer. | 3 | ||||||||||
| (c) | Mr. Q, a non–resident, operates an aircraft between Singapore and Chennai. He received the following amounts in the course of the business of operation of aircraft during the year ending 31.3.2007.
The total expenditure incurred by Mr. Q for the purposes of the business during the year ending 31.3.2007 was Rs. 6.75 crores. Compute the income of Mr. Q chargeable to tax in India under the head "Profits and gains of business or profession" for the assessment year 2007–08. |
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| 6. | (a) | State briefly the provisions relating to furnishing of annual information return under the Income–tax Act, 1961. What are the consequences of not furnishing the annual information return? | 7 | |||||||||
| (b) | S, an individual, carried the business of purchase and sale of agricultural commodities like paddy, wheat, etc. He borrowed loans from Punjab State Financial Corporation and State Bank of India and has not paid interest as detailed hereunder:
Both Punjab State Financial Corporation and State Bank of India while restructuring the loan facilities of S during the year ended 31.3.2007, converted the above interest payable by S to them as loan repayable in 36 equal instalments. During the year ended 31.3.2007, S paid six instalments to Punjab State 'Financial Corporation and five instalments to State Bank of India. S claimed the entire interest of Rs. 1,08,00,000 as an expenditure while computing the income from business of purchase and sale of agricultural commodities. Discuss whether his claim is valid and if not, What is the amount of interest, if any, allowable. |
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| (c) | R, an individual, filed his return his return of income for the assessment year 2006–07 on 15.6.2006. He later discovered that he had not claimed deduction under section 80–C in the said return. He claimed the said deduction through a letter addressed to the Assessing Officer. The Assessing Officer completed the assessment without allowing the deduction claimed by R. Is the Assessing Officer justified in doing so? | 2 | ||||||||||
| WT | P.T.O. |
( 4 )
| WT | Marks |
| 7. | (a) | The directors of a private company are personally liable to pay the income tax due from the company. Discuss. | 4 | ||||||||||||||||||||||||||||||||||||||||
| (b) | GP Ltd. was incorporated on 31.12.2005 for manufacture of Tyres and Tubes for motor vehicles. The manufacturing unit was set up on 30.4.2006. The company commenced its manufacturing operations on 1.5.2006. The total cost of plant and machinery installed in the unit is Rs. 100 crores. The said plant and machinery included second hand plant and machinery for scientific research relating to the business of the assessee acquired at a cost of Rs. 10 crores.
Compute the amout of depreciation allowable under section 32 of the Income tax Act, 1861 in respect of the assesment year 2007–08. Furnish explanations in support of your computation. |
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| (c) | The Assessing Officer lodged a complaint against M/s. KLM, a firm, under section 276CC of the Income–tax Act, 1961 for failure to furnish its return of income for the assessment year 2005–06 within the prescribed time. The tax payable on the assessed Income, as reduced by the advance tax paid and tax deducted at source, was Rs. 60,000. The appeal level filed by the firm against the order of assessment was allowed by the Commissioner (Appeals). The Assessing Officer passed an order giving effect to the order of the Commissioner (Appeals). The tax payable by the firm as per the said order of the Assessing Officer was Rs. 1,000. The Assessing Officer has accepted the order of the Commissioner (Appeals) and has not preferred an appeal against it to the Income Tax Appellate Tribunal. The firm desires to know the maintainability of the prosecution proceedings in the facts and circumstances of the case. | 3 | |||||||||||||||||||||||||||||||||||||||||
| 8. | (a) | S gifted Rs. 2,00,000 to his wife on 10.4.2006. His wife bought gold jewellery on 31.1.2007 out of the said sum of Rs. 2,00,000. The fair market value of the gold jewellery as on 31.3.2007 was Rs. 2,50,000. S claims that since his wife has not held on 31.3.2007 the sum of Rs. 2,00,000 which he gifted to her, no amount is includible in his net wealth for the assessment year 2007–08. Examine the claim of S. | 3 | ||||||||||||||||||||||||||||||||||||||||
| (b) | Wealth tax is not payable by an assessee in respect of any property held under trust or other legal obligation for any public purpose of a charitable or religious nature in India. Do you agree with the statement> | 2 | |||||||||||||||||||||||||||||||||||||||||
| (c) | Compute the net wealth of UMV Ltd. (carrying on the business of running cars in hire and also dealing in jewellery) which furnishes the following particulars of its assets and liabilities as on 31.3.2007:
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| WT |