PREFACE

In he graduation degree course of commerce there is provision to under go a training

and make a report after one year.
This training is very essential for us so as to understand the practical aspect the
subject. The main purpose of this training is to learn that how theoretical concept can
be put to practical use and to know about the taxation procedure in much detail and
working as tax consultants.
To server this purpose I have done my training on Income Tax and sales tax Practices
from Mr. Anil Kapoor. During the training, my main aim was to acquire as much
knowledge and to develop a through understanding to get familiar with actual
working conditions prevailing in taxation procedures. AT all, It gave me a great sense
of knowledge which will be going to help me a lot I n my future.

ACKNOWLEDGEMENT
A Training Report is never the sole product of the in person whose name appears on
the cover. Even the best efforts may not prove successful without the proper guidance.
For making good report one needs proper time energy, coordination, efforts, patience
and knowledge. But without guidance, it remains unsuccessful.
I take this opportunity to express my deep sense of gratitude to Dr. Vijay Tomer,
Principal of C.M.K. National P.G. Girls' College, for following me to undergo the
training. I am indebted to Mr. Anil Kapoor for his valuable guidance by providing
practical tips of Income Tax & Sales Tax. 1 am thankful to Mrs. Luxmi Phutela,
H.O.D. of Commerce Department, for Commerce Department, to successfully
complete the Report.
I am also thankful to my Lecturers, . for their stimulated
discussion, constructive criticism & valuable suggestions which will help me in the
endeavor. In actual fact,
they made me able to grasp the 11mclumemals of Income Tax & Sales Tax.
I cannot conclude the acknowledgement without thanking chose numerous authors
whose writings have extended a great help to me in the preparation of this Report.
Lastly, no words adequately express my debt of gratitude parents for arousing in me
personal interest in studies in I.T. & S.T.

(Ghazal Bansal)

CONTENTS

Firms Overview

Direct And Indirect Taxes

Income Tax

Assessment of Company

Central Sales Tax

Haryana Sales Tax

Conclusion

Suggestions

Bibliography

Annxure

DIRECT
&
INDIRECT TAXES

FIRMS PROFILE

MAIN Amendments
(For A.Y. 2007-08)
1.

Rate of Tax

For the assessment year 200708, there is no change in rates of interest.

2.

Definition of Income

With effect from assessment year 2007-08 any profits and gains of any business of
banking carried on by a co-operation society with its members shall constitute part of
income.
3.

Expenses allowed U/S 36

Any expenditure incurred on premium paid by employer to insure the health of its
employee under a scheme framed by general insurance cooperation of India or any
other insurer approved by Insurance Regulatory Authority of India shall be fully
allowed to be debited.
4.

Exemption U/s 54 EC

It shall be allowed only if LTCG is reinvested in bonds issued by national highway

authority of India or by Rural electrification corporation of india.
5.

Deduction U/s 80 C

Any amount deposited with a bank as term deposit for a period not less than 5 years
shall also quality than 5 years shall also quality.
6.

Deduction U/s 80 CCC

The limit of Rs. 10000 has been zones has been extended form 31-03-2006 to 31-32007

Introduction
Taxation is the major source of income of the Govt. of a country.The Govt. collects a
large portion of its revenuers by way of taxes.
According to Annabel Manad,
Tax is a compulsory payment made by a person or a firm to the Govt. without
reference to any benefit the payer may derive from Government.
Objectives of Taxation:To get income
To regulate and control
Allocation of resources
Reduction of Inequality
Economic Development
Control over prices.
As per the system of taxation, the tax is divided into two parts i.e. direct tax and
Indirect tax. The Classification is most important because it effects production,
exemption and consumption.

DIRECT TAX :
A Direct tax is really paid by the person on whom it is legally imposed. These are
those taxes which cannot be shifted. It means it falls directly on the person from
whom the govt. extracts the payment.

TYPES OF DIRECT TAXES

Income Tax
Corporation Tax
Estate Duty
Gift Tax
Wealth Tax (not applicable now)

INDIRECT TAX :
Indirect taxes are those taxes which have their primary burden or impact on a single
person. But that person succeeds in shifting his burden on to others. It means taxes
that are levied against goods and services and indirectly n people are indirect taxes.
TYPES OF INDIRECT TAXES
Sales Tax.
Custom Duty
Excise Duty
These taxes are held by both central & state Government.

INCOME TAX

INTRODUCTION
Income tax is a very important direct tax. It is the most significant source of revenue
of the govt. it bridges the gap between the rich and the poor. The administration and
collection of income tax is vested in the central govt. but the net proceeds of the tax
are apportioned between the centre and the state. Every person whose taxable income
for the previous financial year exceeds the minimum taxable limit is liable to pay the
tax to the central govt. the income tax act 1961 has been brought into force w.e.f., 1
April, 1962.
BASIS OF CHARGE OF INCOME TAX
It is an annual tax on income.
Tax is charged on the total income computed according to the provision of the
income tax.
Income of the previous year is taxable in the next followings assessment year, at
the rate so applicable to the assessment year, Tax rates are fixed by the annual finance
act.
Income tax is to be deducted at the sources or paid in advance as provided under
provisions of the act.
Who is liable to pay tax
WHO IS LIABLE TO PAY TAX
That person whose income for the previous year exceed taxable limit. The total
income is computed on the basis of the residential status of the assesses in the manner
provided hereunder and is classified into the following heads:1. Income from salary.
2. Income from house property
3. Income from business and profession
4. Income from capital gains.
5. Income from other sources.

RESIDENTIAL STATUS OF AN INDIVIDUAL

Residential Status of
Individual (Section 6)

Resident (Section 6(I)

Ordinary Resident

1.

Non- Resident (Section 2 (30)

Not Ordinary Resident

Resident (Section 6 (I)

An individual who fulfils any one of the following two tests is called resident under
the provisions of this act. These tests are
a)

If he is India during the relevant previous year for a period amounting

in all to 182 days or more

b)

If he was in India for a period amounting in all the 365 days or more

during the of four years preceding the relevant previous years and he was in India for
a period amounting in all to 60 days or more in that relevant previous year.
2.

Non-Resident (Section 2 (30)

If an assesse does not fulfil any of the two conditions given in section (6) I (a) or (b)
would be regarded as Non-Resident assesse during the relevant previous year.

TAX INCIDENCE ACCORDING TO

RESIDENTIAL STATUS
Incomes
O.R

Whether Taxable Or
N.O.R

N.R

1. Income received in India whether

Taxable

Taxable

Taxable
accrued or arisen in India or outside India
2.

Income deemed to be received in India Taxable

Taxable

Taxable

whether received in India or outside India

3.

Income accruing or arising in India whether

Taxable

Taxable

Taxable

Taxable

Taxable
received in India or outside India
4.

Income deemed to accrue or arise in India

Taxable
whether received in India or outside India
5. Income received and accrued or arisen

Taxable

Taxable

outside India from a business controlled

Not
Taxable

in or a profession set up in India

6. Income received and accrued or arisen

Taxable

outside India from a business controlled

Not

Not

Taxable

Taxable

from outside India or a profession set up outside

India
7. Income received and accrued or arisen outside Taxable Not
India from any other source

Not
Taxable

Taxable
8. Income accrued or arisen and received

Not

Not

outside India in earlier years but later on

Taxable

Taxable

Not
Taxable

remitted to India during previous year .

HEADS OF INCOME
FIRST HEAD--INCOME FROM SALARIES [sec-15 to 17]
SALARY:

Any remuneration paid by an employer to his employee in consideration

of his services is called salary. It includes monetary value of those benefits and

facilities provided by the employer, which are taxable. It must be noted that there
must exist the relation of employer and the employee.

SALARY

Salary(17)1

Allowances(17)3 (ii) +

Perquisites (17)2+ Profit in Lieu

of Salary
(17)3

LESS
Entertainment allowance [16(ii) +

Income under the head Salary

Tax on Employment [16 (iii)]

SECOND HEAD - INCOME FROM HOUSE PROPERTY (Section 22 to 27)

Annual value of a property consisting of any buildings or lands appurtenant there to of
which assessee is the owner is chargeable to tax under Head Income from House
Property
Three conditions for rental income to be taxable under head House property
(i)

Property should consist of any building or land appurtenant thereto

(ii)

Assessee should be the owner.

(iii)

Property should not be used for Business or Profession.

Computation of income from a let out House Property

Gross Annual Value
Less Municipal Taxes

xxx
xxx
------------------

Net Annual Value

xxx
------------------

Less : Deduction u/s 24

Standard Deduction

Int. on borrowed capital xxx

xxx
-----

Income from House Property

000

THIRD HEAD - PROFITS AND GAINS BUSINESS OR PROFESSION

(SECTION 22 TO 27)
The tax payable by an assesse on his income under this head is in this respect of the
profits and gains of any business or profession carried on by him.
Profit a per P & L A/C

xxx

(+) Income not recorded in P & L A/c

xxx

(-) Income credited to P & L A/C

xxx

But not chargeable under this head

(+) Expenses debited to P & L A/c But

xxx

not allowed
(-) Expenses allowed but not debited to P&L A/c

xxx

----------Income from Business or Profession

xxx
=======

FOURTH HEAD - CAPITAL GAINS

BASIS OF CHARGE :

Sec. 45(1)

Any income and gains arising from the transfer of a capital asset shall be charged to
tax under the head Capital Gains in the previous year in which the transfer took
place.
COMPUTATION OF SHOUT TERM CAPITAL GAIN
Sales consideration

xxx

LESS : Expenses on transfer

xxx

LESS : Indexed cost of acquisition

xxx

LESS : Indexed cost of improvement

xxx
----

-----Long term capital Gain

xxx

======
FIFTH HEAD - INCOME FROM OTHER SOURCES (Sections 56 to 59)
Any income, profit and gains, ineludible in total income of an assesse which cannot
be included under any of preceding heads is chargeable under Income from other
sources.
Computation of Income
General Income

xxx

Specific Income

xxx

Less Deduction u/s 57

xxx
xxx
Xxx

Income from Other Sources

xxx

CLUBBING OF INCOME {SEC 60 to 65}

Income of other persons is included in assessee total income in the following cases :

 Transfer of income without transfer of the assets.[60]

Revocable of transfer of assets.[61]
Income of individual to inculde the income of his spouse from firm and from
assets transferred, and income of minor child, etc.(Section 64)
Income of Minor. [64(i)(ii)]
Transfer of individuals self acquired property to the HUF of which he is a
member (Section 69 (2).

DEEMED INCOMES
Cash credit.(68)
Unrecorded & Unexplained income.(69)
Unrecorded & unexplained money.(69B)
Amount of investment not fully disclosed in books of accounts.(69B)
Unexplained expenditure.(69C)
Hundi borrowals & repayments.(69D)
SET- OFF OF LOSSES
1. Inter - source set - off loss from one source of income can be set - off against
income from other source of income under the same head.
2. Inter head set off - loss from one head of income can be set - off against under the
head of income except speculation loss, capital loss, unrealised rent of house property
and losses from owing and maintaining race horses.
3. Speculation losses - These losses can be set off against speculation losses.
4. Capital losses
(a)

Short term-such losses can be set-off against the gain from any other short

term capital assets or long term capital assets only.

(b)

Long term The long term capital loss can be set-off against long term capital

gains only.
5.

Set Off Losses from casual incomes.

CARRY FORWARD AND SET - OFF LOSSES

The followings losses can be carried forward to be set - off in subsequent year if they
cannot be set - off fully in the year in which they occurred :
1. Loss of House Property - It can be carried forward for 8 years and it can be set off
only against in come from House Property.
2. Losses of non speculation B/P - They can be carried forward for 4 year & can be
set off against any business income. They can be setoff speculation profit also.
3. Losses of Speculation Business - They can be carried forward for 8 years & can be
setoff against speculation profit also.
4. Short term or long term capital losses - They can be carried forward for 8 years &
can be setoff against capital gains also.

5. Loss from activity of owing and maintaining race horses - It can be carried
forward for 4 years and can be setoff only against income from the same head.
6. Unabsorbed Depreciation - It can be carried forward for 8 years and can be setoff
only against any business profit.
DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME [u/s 80CC80U]
The various important deduction are as follows:1.

For saving to individual and HUF (U/S 80 C)

2.

Pension Fund for a Govt. Employee [U/S 80CCD]

3.

Health Insurance [U/S 80D]

4.

Medically handicapped dependent and deposit with LIC or UTI [U/S 80DD]

5.

Expenses on treatment [U/S 80DDb)

6.

Interest on loan taken for higher education [U/S 80 E]

7.

Donation to approved funds and institutions [U/S 80G]

8.

Payment of house rent in certain cases [U/S 80GG]

9.

Authors of books of artistic, scientific nature [U/S 80 QQB)

10.

Medically handicapped or mentally reiterated assesses. [U/S 80U]

Rebates :1.

Rebate u/s 86 on share from AOP

2.

Rebate u/s 88 E in respect of securities transaction tax.

Concept of Total Income

Gross Total Income
Salaries

House

Sections 15 Property
to 17

Profit

and Capital

gains

of Gains

Other

Carry

Deduction

Sources

forward

under

Sections 22 Business or sections 45 sections 56 and set off sections 80

to 27

profession

to 55

to 59

of

losses

sections 28

under

to 44

sections 70
to 79

Deductions

Deductions

Deductions

Deductions

Deductions

u/s 16

u/s 24

u/ 30 to 37

u/s 48

u/s 57

Rates of Tax
1. In case of individual, or HUF pr AOP or BOI
Rates of Income Tax
1. Where total income does not exceed rs. Nil
100000
2. Where total income does not exceed rs. 10% of amount of which total income exceeds
100000 but does not excced Rs. 150000
rs. 100000
3. Where total income does not exceed rs. Rs. 5000 plus 20% of amount of which total
150000 but does not excced Rs. 250000
4. Where total income exceeds Rs. 250000

income exceeds rs. 150000

Rs. 25000 plus 30% of amount by which total
income exceeds rs. 250000

For Senior Citizen (65 years or above

1. Where total income does not exceed rs. Nil
185000
2. Where total exceed rs. 185000 but does not 20 % of income exceeding Rs. 185000
excced Rs. 250000
3. where total income exceeds rs. 250000

Rs. 13000+ 30% of income exceeding rs.

250000

3.

For Female resident assesses

1. Where total income does not exceed Rs. Nil

135000

2. Where total income exceeds rs. 135000 but 10% of income exceeding Rs. 135000
does not exceed Rs. 150000
3.Where total income exceeds 150000 but does Rs. 1500 + 20% of income exceeding Rs.
not exceed rs. 25000
4. Where total income exceeds Rs. 250000

150000
Rs. 21500 +30% of income exceeding Rs.
250000

Surcharge(a) IT is tevied only if total income exceeds Rs, 1000000.

(b) Rate of surcharge is 10% tax after allowing rebate u/s 88 E if any.
(c) The Total amount of income tax and surcharge on total income exceeding rs.
1000000 cannot exceed the amount payable as income tax on a total the income that
exceeds Rs. 100000.
Education case:It is to be levied @2% of tax and surcharge for all persons irrespective of income

Assessment of Companies

MEANING OF A COMPANY
As per compenies act , 1956
According to Section 3 (I), a company means a company formed and registered
under this act or an existing company.
Under Section 2 (17) of Income Tax Act , 1961, a company means
1)

Any Indian company; or

2)

Any body corporate incorporated by or under the law of a country outside

india, or
3)

Any institution or association or body which was assessed under income tax

act, 1961 is a company for any assessment year up to and including the assessment
year 1970-71; or
4)

Any institution, association or body whether incoporated or not and whether

indina or non indian which is declared by central board of direct taxs to be a company.
Company Taxation
Corporate sector is the most widely used form of business organization particularly
for medium and large scale business under corporate sector, a business is carried on
by floating a company duly registered with appropriate authority.
Corporate taxation refers to taxation of companies and is a major source of revenue to
the Government.
TYPES OF COMPANIES
1)

Indian Company [section 2(26)]

Indian company means a company formed and registered under the companies act,
1956 and includes :
i)

A company formed and registered under any law relating to

companies.
ii)

A corporation established by or under central, state or provincial act

iii)

Any institution, association or body which is declared by the board to

be a company.
2)

Company in which public are substantially interested [section 2(18)]

A company is said to be a company in which public are substantially interested, if

i)

It is a company owned by central or state Govt.

ii)

Atleast 40% of its shares are held by Govt. or the reserve bank of india.

iii)

Company registered u/s 25 of companies act, 1956

iv)

Company having no share captial

v)

It is a mutual benefit finance company

vi)

Society participating company.

3)

Widely Held Company

A company in which the public are substantially interested is known as widely held
company.
4)

Closely held company

A company in which public are not substantially interested is referred to as a closely

held company
5)

Domestic Company [section 2(22a)]

Domestic company means an Indian company or any other company, which in respect
of its income liable to tax under this act, has made the prescribed arrangements for the
declaration and payment, within India of the dividends payable out of such income.
6)

Foreign company [section 6(4)]

A company which is not a domestic company

Residential status of a company [ sections 6(4)]
On the basis of residential status, companies can be classified in to two categories:a)

Resident Companies [section 6(3)]

A company is said to be resident in India in any previous year.

1)

It is an Indian Company ; or

2)

During the relevant previous year the control and management of its

affairs it situated wholly in India.

b)

Non Resident [Section 2 (30)]

A company shall be non-resident if it is non-resident in India during the relwant

previous year.
Incidence of Tax Scope of Total Income

a)
a)

Resident : u/s 5(1) the total income of resident shall include:Any income, which is received or is deemed to be received in India

during relevant previous year.

b)

Any income, which accrue and it received outside India during

relevant previous year

b)
a)

Non-resident : u/s 5 (2) the total income of non-resident shall includes :Any income, which is reveived or is deemed to be received in India during

relevant previous year.

b)

Any income, which accrues or arises or is deemed to accrue or arise in

India during relevant previous year.

Computation of Gross Total Income of a Company:1)

Head incise calculation

The income of a company is to be computed under following five heads of income

under various provisions of the Income Tax act, 1961.
These heads of income are as follows:a)

Income under the head Salaries

b)

Income under the head House Property

c)

Income under the head Profit and Gains of Business or Profession

d)

Income under the head Capital Gains

e)

Income under the head Income from other sources

2)

Agricultural income of a company

It is totally exempt under section 10(1). Even there is no integration of agricultural

with non-agricultural income for companies
SET off and carry forward of Losses of Companies :1.

Inter source set off of losses (within head)

Loss from one source of income can be, set off from income of another source within
the same head of income except:
a)

Speculation Loss:- It can be set off only from speculation gain and not

from any other income.

b)

Expenses on maintenances of horses for race purposes can be set off

only from income of such activity or race winnings from horses.

c)

Loss under the head capital gains.

2.

Inter-head set off (Outside Head)

A loss which could not be set off within the same head of income shall be allowed to
be set off out of income of any other head in the same assessment year but subject to
certain exceptions.
a)

Speculation loss

b)

Expenses on maintenance of horses

c)

Loss under the head capital gains

3.

Loss under the head capital gains

a)

Short Term capital loss can be set off from either short term or from

long term capital gain.

b)

Long term capital loss can be set off only from long term capital gains

and not from any other income.

c)

Loss from any other head can be set off from income from capital

gains, if any
Carry forward of Losses
1.

House Property

Loss under this head can be carried forward for 8 succeeding previous years to be set
off from income under House Property only.
2.

Profit and gains of business or profession :-

a)

Business loss can be carried forward for 8 seceding previous years to

be set off only out of income under the same head.

b)

Speculation loss can be carried forward for 4 succeeeding previous

years to be set off only out of speculation gain of future years.

c)

Unabsorbed depreciation :- It can be adjusted from any other income

of that year
d)

Unabsorbed capital expenditure on scientific research can be carried

forward in the same manner as in case of unabsorbed deprecation.

3.
a)

Loss under the head capital gains

Short term capital loss can be c/s for 8 secceeding previous years to be

set off from either short term or from long term capital gain.
b)

Long term capital loss can be c/os for 8 succeeding previous years to

be set off only from long term capital gains.

4.

Other Sources

Loss due to maintenance of horses for race purposes can be carried forward for 4
succeeding previous years to be set off only from sinilar type of income.

Special provisions regarding losses relating to companies only

Provision relating to carry forward and set off of accumulated loss and unabsorbed
depreciation in certain cases of amalgamation section 72A
In case f a company owing all industrial undertaking amalgamates with another
company, the accumulated and the unabsorbed depreciation of amalgamating
company shall be deemed to be the loss or depreciation of the in which amalgamation
company for the previous year in which amalgamation was effected and the other
provisions of this act raelating to set off and carry forward of loss and unabsorbed
depreciation shall apply accordingly provided the following conditions are fulfilled:1.

That the amalgamation company accumulated loss before amalgamation

exceeds fifty per cent of the aggragate of its paid-up share capital; that the
amalgamating company was not, immediately before its amalgamation financially
viable; that the amalgamation was in public interest; that such other conditions as
central government may notify in the official gazette (section 72 (a)(I).
2.

The benefit of set off or carry forward shall not be available to the

amalgamated company if it carried on the business of amalgamating company after

making any modification or reorganization and such modifications are not approved
by prescribed authority (section 72 (a) 2)

Provisions relating to carry forward and set off of accumulated loss and
unabsorbed deprecation allowance in scheme of amalgamation of banking
company in certain cases (section 72 (aa)
Notwithstanding anything contained in 72 (a) (1b) (I) to (iii) where there has been an
amalgamation of a banking company with any other banking institution under a
scheme sanctioned and brought into force by the central government under section 45
(7) of the banking regulation act 1949 the accumulated loss and unabsorbed
deprivation of such banking company shall be deemed to be the loss or, as the case
may be, allowance for depreciation of such banking institution for the previous year
in which the scheme of amalgamation was brought into force and other provisions of
this act relating to set off and carry forward of loss and allowance for depreciation
shall apply approvingly.
Carry forward and set off losses of certain companies [section 79]
Where change in shareholding has take place in a previous year in the case of a
company no loss incurred in any year prior to the title previous year shall be carried
forward and set off against the income of previous year unless:
1)

On last day of previous year the shares of the company not less than 50% of

the voting power were being beneficially held by persons who beneficially held shares
of company.
2)

The assessing officer is satisfied that the change in shareholding was not

effected with a view of avoiding liability of tax.

Deductions out of Gross Total Income
Company assesses are entitled to claim following deceptions u/s 80 out of gross total
income.
1)

Deduction u/s 80 G for donations.

2)

Deduction u/s 80 GGA for certain payments

3)

Deduction u/s 80 GGA for donation to polemical parties.

4)

Profit From new infrastructure undertaking u/s 80IA

5)

Profit from development of special economic zones u/s802 I AB

6)

Profit from new industrial undertaking u/s80 IB

7)

Deduction for setting up undertaking in special states u/s 80 IC

8)

Profits from processing of bio-depreciable waste u/s 80 JJA

9)

Deduction in respect of employment of new worker u/s 80 JJAA

10)

Deduction for income of off share funds u/s 80 LA.

Rates of Tax for Companies (AY 2006-07)

a)

In case of domestic company

INCOME

RATE OF TAX

(i) On short-term capital gain on shears covered under STT

10%

(ii) On long-term capital gain

20%

(iii) On winnings from lotteries, race, crossword puzzles, card

gains

(section 115 BB)

30%

(iv) On any other income

30%

(v) On any other Income

30%

(vi) On Profit declared, paid as dividend

12.5%

B)

In case of Non-domestic Company

(i) On short term capital gain on shares covered under STT

10%

(ii) On Long term capital gain

20%

(iii) On income from units purchased in foreign exchange

10%

section 115 AB)

(iv) On Winnings from lotteries, races and other gains

30%

(section 115 BB)

(v) On any other income
Surcharge :

40%

10% of tax as calculated above is also to be charge in each case

Education Less 2% of tax and surcharge as calculated above

Special provision for payment of income tax by certain companies or minimum

alternate
Applicability :-

Section 115 Jb is applicable on companies with effect from

assesment year
2001-02.
Scheme of MAT

:-

In case of an assesse being a company, if the income tax

payable on
the total income computed under this act is less than 7.5 % of its book profits, the tax
payable for the relevant prior one year shall be deemed to 7.5% of such book profits
(section 115 JB I))
Explanation

:- As we all know that a company is liable to pay income tax on

its total
income. The total of income of four heads , after applying provisons of set off and
carry forward of losses , etc is called gross total income.
Out of this gross total income, deductions are allowed under section 80 of income tax
act. The amount so arrived at is called total income of the company and company is
liable to pay tax on the total income at prescribed rates.
Tax Liability of Company:(i)

Tax on total income of company as per normal provisions of income tax act, or

(ii)

Tax @7.5 % on book profits whichever is higher.

Illustration :- The total income of XYZ Ltd. A domestic company, computed under
the normal provisions of Income tax Act uis rs. 250000.However the book profits of
the company amount of Rs. 1222500.Compute the tax liability of company for
assessment year 2006.07.
Solution :(i)

Computation of tax liability of the company

Tax on total income at normal rate (with surcharge)

Total Income

Rs.

Rs

Tax @30% pf Rs. 250000

250000

75000

Or
(ii)

Tax under MAT Book Profit

1225000

Tax @ 7.5% of Book Profit

91875

Tax under MAT is more than normal tax on total income as such tax payable by co.
shall be
Tax payable under MAT

91875

Add. Surcharge @ 10% of Rs. 91875

9188

Total

101063

Add: Education cess 2%

2021

Total Tax liability under MAT

103084

Calculation of Book Profits (section 115JB(2)

The term book profit is the key term on which system of MAT is based.
For the purpose of MAT, Book Profit means the net profit as shown in profit and loss
account for the relevant previous year.
It can be calculated as follow:Net Profit or loss as per P & L A/c

(+) or (-) xxxx

Add: Statutory Additions

(i)

Amt. Of Income tax paid or Payable

xxxx

(ii)

Amt. Set aside to make provision for meeting liabilities

xxxx

(iii)

Amt. By way of provision for losses of subsidiary companies

xxxx

(iv)

Amt. Of expenditure relatable to any income to

xxxx

which section 10 or section 10 A or section 10 B or

section 11 or 12 apply.
Total

xxxxx

Less : Statutory Deductions

(i)

Amt. Withdrawn from any reserve

xxxx

(ii)

Amt. Of income to which any of provision of section

xxxx

10 or 10A or 10B Or 11 or 12 apply.

(iii)

Amt. Of loss brought forward or unabsorbed depreciation xxxx

whichever is less as per books of accounts

 (iv)Amt. Of profit of such industrial company

xxxx

Book profit for MAT

xxxx

Furnishing a report from chartered accountant (section 115 JB/4)

The company shall furnish a report in the prescribed form from an accountant
certifying that the book profit , has been computed in accordance with the provisions
of this section. This report has to be furnished along with the return of income filed
u/s 139 (I) or along with the return of income furnished in response to a notice u/s
142(I)
MAT Provisions not to affect c/f and set off provision provided under Income Tax
Act.
Section 15 JB (I) shall not affect in any way the following amounts to be carried out
to the subsequent year as provided:1.

Brought forward unabsorbed depreciation u/s 32(2)

2.

Investment allowance as provided u/s 32 A (3

3.

Business loss as provided u/s 72 (I) (ii)

4.

Losses in speculation business u/s 73.

5.

Loss under the head Capital Gains

6.

Losses from activity of owing and maintaining of race horses.

These amounts of can be carried forward and set off against future year or years as per
previsions contained in respective sections.
Divided Tax:
Special Provisions relating to tax on distributed profits of domestic companies
1. Tax on distributed profits of companies (section 1150)
Through this previsions an effort has been made to tax dividend in the hands of
dividend paying companies rather than dividend receiving shareholders. When
dividend paying company is paying tax on distributed or declared u/s 10 in the hands
of the recipient of dividents.

In addition to income tax chargeable on the total income of a domestic company,

where such company has declared, distributed or paid some amount of way of
dividend on or after 1-6-1997 but before 1-4-2002 and again from 1-4-2003 onwards
whether out of current or accumulated profits, it had to pay additional income tax on
the amount of dividend so declared distributed or paid such tax shall be known as tax
on distributed profits.
2. Responsibility to deposit tax:
The principal officer of such domestic company shall be liable to deposit tax on
distributed profits to the credit of central government within 14 days of the date of
declaration of dividend.
3.

Rate of Tax u/s 1150

Period

Dividend Tax

Surcharge

Education

case
From 1-6-1997 to 31-5-2000 Nil

Nill

From 1-6-2000 to 31-5-2001 10% of Tax

Nil

From 1-6-2001 to 31-5-2002 12% or 17%

Nil

From 1-4-2002 to 31-3-2003 Nil

Nil

From 1-4-2003 onwards

12.5%

10% of tax

of tax and
Surcharge
4. Final Payment
The amount of tax on distributed profits deposited as per above shall be considered as
final and no further credit shall be claimed by such domestic company or any other
person.
5. No Deduction
The company or any shareholder of such company shall not have any right to claim
any deduction for the amount of tax paid under this section.
6. Interest payable for non-payment of tax (section 115 P)
It the principal officer of the company or the company fails to pay the tax under the
above provisions, such person or company shall have to pay interest @1.25 % of the
tax due for the period from the last date.
7. Assesse in Default (section 115Q)

In case the principal officer of the company or company fails to pay tax such person
shall be deemed as assesse in default.
Illustration :From the following particulars compute total income of Z ltd., an indian Company:(i)

Interest on Securities

ii) business Income

2000
300000

(iii) Int. on debentures of

a) Indian paper Mills ltd.

50000

b)Another indian Company B

20000

Compute total income of Z ltd. For the A/y 2006-07 It is a small scale undertaking
and it started manufacturing in 2000-01.
Solution computation of Total Income of Z ltd.

Rs.

Profit And gains of business or profession

Rs.
300000

Income from Other sources

Int. on debentures of Indian Paper mill ltds.

50000

Int. on debentures of Indian Company b

20000

Int, on securities

2000

72000
Gross total Income

372000

Deductions
U/S 80 IB 30% profit of Rs. 30000
Total Income
282000

90000

 The Central Sales Tax 1956 :

Indirect Taxes are those taxes which have their primary burden or impact on a single
person, but that person succeeds in shifting his burden on to others. Consequently, the
final or real burden of taxes, of the incidence has to be borne by the third person.
It is an act to formulate the principles for determining when a sale or purchase of
goods takes place in the course of inter-state trade of commerce or outside a state or in
the course of import into or export from India, to provide for the levy. Collection and
distribution of taxes on sale of goods in the course of inter-state trade or commerce
and to declare certain goods to be of special importance in inter-state trade or
commerce and specify the restriction and condition to which the sales laws imposing
taxes on the sale or purchase of such goods of special importance shall be subject.
OBJECTS
The objects of Central Sales Taxes Act are : To provide for the levy, collection and distribution of goods in the course of
interstate trade or commerce.
To declare certain goods to be of special importance in inter-state trade of
Commerce and to specify the various restrictions and condition to which the state
laws are imposing texes on the sale or purchase of such goods of special important
shall be subject.
To formulate principles for determining when a sale or purchase of goods taken
place in the course of inter state teade or commerce or outside or in the course of
import from India.
IMPORTANT DEFINATIONS
1. APPROPRIATE STATE means
I. In relation to a dealer who has one or more places of business situated in the same
state.
II. In relation to a dealer who has places of business situated in different states, every
such state.
With respect to the place or place of business situated within its territory.
2.

DEALER means

Any person who carries on the business of buying, selling, supplying or distributing
goods for cash or for deferred payment or for commission, remuneration, or other
valuable consideration.
3. BUSINESS means
I. Any trade, commerce or manufacture or any adventure or concern in the nature of
trade, commerce or manufacture, whether or not it is carried on with a motive to make
profit and whether or not any gain or profit accrues from it,
II. Any transaction in connection with or incidental or ancillary to such trade,
commerce, manufacture, adventure or concern.
4.

PLACE OF BUSINESS includes

I. In any case where dealer carries on business through an agent, the place of such
agent.
II. A warehouse, godown or other places where a dealer stores his goods.
III. A place where dealer keeps his books of accounts.
5. REGISTERED DEALER means
who is registered under section 7 of C.S.T
6. GOODS includes
all material, articles, commodities, and all other kind of movable property, but does
not includes newspaper, stocks, shares, actionable claims etc.
7. SALES means
Any transfer of property in goods by one person to another for cash or for deferred
payment of or any other valuable consideration and includes a transfer of goods on the
hire-purchase or other system of payment by instalments.
8. TURNOVER means
The aggregate of the sale prices received and receivable by a dealer in respect of sales
of any goods in the course of inter-state trade of commerce made during the
prescribed and determined in accordance with the provisions of this act and this rules
made thereunder
9. DECLARED GOODS means
Any goods declared u/s 14 to be of special importance as follows :

Coal

Cereal

Cotton Fabrics

Jute

Oil Seeds

Tobacco

Woollen Clothes

Woven Fabrics Of Wool

Iron and Steel

Hide and Skins etc.

Determination of Turnover (Section 8 (a)

The turnover is determined on the basis of sale price. The following three deductions
shall be made from aggregate of sales price in determining the turnover of the dealer.
(a) CST included in the aggregate of sale price provided it was separately charged.
The formula for deduction of such sales tax included in the sale price is as
Rate of tax

Aggregate of Sale Price

-------------------------------------------------------100+ rate of tax

Where the turnover of the dealer is taxable at different rates the formula shall apply
separately
b)

Goods returned within six months the Sale price of all goods returned o the

dealer by the purchaser of such goods, within a period of six months from the date of
the delivery of the goods, shall also be deductible from the aggregate of such sale
price provided satisfactory evidence of such return of goodsand refund of amount or
adjustment in the accounts of sale price is produced before the assessing authority.
c)

Such other deductions as may be prescribed by the central Government:- This

power has been bestowed upon the central Govt. only and may be exercised having
regard to the marketing conditions, for facility of trade and in the interest of the
consumer.

Computation of Tax

Determination of Taxable turnover

Gross turnover including value of goods transferred to other places of business or
agents or principals outside the state otherwise than by way of sale.
Debuct :a)

Turnover of goods sold outside India

b)

Turnover of goods sold in the course of export out of India

c)

Turnover of goods gold within the state

d)

Value of goods transferred to other places of business outside the state

Turnover of goods sold in the course of inter-state trade or commerce

Debut:a)

Turnover of goods unconditionally exempt under a state sales tax act sold in

the course of inter state trade or commerce.

b)

Purchased and sold by transfer of documents title thereto

c)

Turnover of goods sold to registered dealers.

Taxable turnover in respect of inter-state sales

Turnover taxable
i)

At . % Rs. .. on which tax amounts to on declared goods.

ii)

At % Rs. on which tax amounts to on other goods.

INTRODUCTION
THE HARYANA GENERAL SALES tax act (HGST) 1973 received the assent of
governor of Haryana 3rd May 1973 and was published in Haryana government
Gazette. It comes in to effect from 5th May.
Subsequently, the HGST Act 1975 was published on 25th November, 1975 and come
in to effect from 1 April 1976.
Before enactment of HGST Act 1973, Punjab General Sales Tax Act, 1948 was in
force in the state of Haryana. Being an indirect tax it provides tax on sale or purchase
of certain goods in Haryana. The act is deemed to have come in to force on specified
days, except from some provisions which have come in to force at once.
DEFINATIONS
1. Business (sec 2(aaa))
Includes any trade, commerce or manufacturer, or any adventure or concern in nature
of trade, commerce or manufacturer carried on with a motive to make profit or gain
and whether in connection with or ancillary to such trade, commerce or manufacture
or concern.
2. Export (sec 2 (c)
Means the taking out of goods from the state to any place outside it otherwise than by
way of sale in the course of inter state trade or commerce, but despatching of goods
out of territory of Indian boundaries.
3. Goods (sec2(f))
Means every kind of movable property other than newspapers, actionable claims,
stocks, shares but includes growing crops, grass, trees, and things to or forming part
of the land which are agreed to be served before sale or under the contract of sale.
4. Import (sec 2 (h)
means the bringing or receiving of any goods in the state from any place outside.
5. Purchase
means mortgage, charge of pledge, acquisition of goods for cash and deferred
payment and exchange of goods for valuable consideration which are described in
schedule C.

6. Sale
means transfer of property or goods for cash, deferred payment or exchange of goods
for valuable consideration except goods described in schedule C transfer of
ownership, but does not includes mortgage, Pledge or charge for taxable sale, it
requires following elements:
Goods and transfers to buyer
Goods are sold
Sold on general order of business
7. Gross Turnover
means the aggregates of the amount of sale and purchase made by any dealer either as
a principal agent or in any other capacity during the given period less than any sum
allowed as cash discount.
8. Assessing Authority
means any person authorised by the state Govt. to make any assessment under this act
and to perform such other duties as may be required.
REGISTRATION OF DEALER
Every such person who is liable to pay tax under the Haryana General Sales Tax is
liable to get him registered at proper time. The registration of dealer for the purpose of
sale tax is described into the following three patterns.
1.

COMPULSORY REGISRATION (SEC. 19)

2.

VOLUNTARY REGISTRATION (SEC. 20)

3.

PROVISIONAL REGISRATION (SEC. 21)

Compulsory Registration
Under this every dealer liable to pay tax under this act shall make an application for
registration with in such time, in such form and manner and to such fees as may be
prescribed If the authority is satisfied that the application is a bonafied dealer and the
application money made by him is in order, he will grant him a certificate of
registration in the prescribed Form. Such a certificate of registration will be valid
from prescribed date.

Where a dealer manufactures or produce any goods for sale, the presr:riIjt:d
authorities shall in the certificate of registration specify:The goods for use in manufacturing or producing the goods The container and packing material.
The commissioner may, from time to time, by order, cancel any Certificate of
registration, Misuse of forms
Violated any provision.
On information furnished under sec. 58
Voluntary Registration
Any dealer, Excepting on dealing exclusively in goods specified in schedule whose
gross turnover during a year exceeds 15000 rupees may, notwithstanding that he may
not be pay tax under the section 6, apply for registration such form, in and manner,
and to such authority along with fees of 50 RS, as may be prescribed.
Provisional Registration
For any person who is intending to establish a business in Haryana Slate for the
purpose of manufacturing goods of value exceeds 10000 RS. A year sale may make an
application for registration under section 19 to the assessing authority, whether he is
liable to pay tax or no. He should make an application in form & such a manner along
with such tees not exceeding 50 RS A dealer who has obtained provisional registration
will be liable to pay tax under this act. He can not apply for compulsory registration
certificate till this provisional registration certificate is in force.

VALUE ADDED TAX (VAT)

Value added tax is a general consumption tax assessed on the value added to goods
and services. It is a general tax that applies, in principle to all commercial activities
involving the production and distribution of goods and the prevision of services. It is a
consumption tax because it is borne ultimately by the final consumer.
It is collected fractionally via a system of deductions whereby taxable persons can
deduct from their VAT liability. This neutral regardless of how many transactions are
involved.
Over 130 countries world wide have introduced VAT over the past three decades and
India is amongst the last few to introduce it.
The mechanism of VAT is such that, for goods that are imported and consumed in a
particular state, the first seller pays the first point tax, and the next seller pays tax only
on the value addition done leading to a total tax burden exactly equal to last point tax.

CONCLUSION
From the above I have got to know that the subject of Tax is not easy but it is also
cannot be stated as tough although it is a bit tricky and puzzling, one factor is whirled
with the other. To have the knowledge of tax one should have a sagacious mind and
also be well informed about the changes brought in it. Taxation in a state is levied to
raise public revenue for carrying out multifarious activities. Thus, taxation helps in
regulating the economy in accordance with the needs of the country.

SUGGESTION:
As you know very well that, who am I to suggest income tax law and sales tax law
but during my training period., I observed some drawbacks. As my contribution, I
world like to point out of following suggestion.

To discourage tax evasion in India, necessary step should be taken. Those found
quilts of evading tax be heavily penalised and taxation administration should be more
efficient and honest.

To higher authorities should ensure that lower authorities are dealing with
the general public in good manner or not.

Luxury Books shsould be tax at higher rate i.e. rich may be burdened with more
tax.

BIBLIOGRAPHY
BOOKS:
Dr. H.C. Mehrotra
Direct Taxes
Sahitya Bhawan Publication, Agra
SINGHANIA:
Income Tax Law
The Taxman's publications, New Delhi
Girish Ahuja & Ravi Gupta
Systematic Approach to Income Tax &
Central Sales Tax
Bharat House Pvt. Ltd. New Delhi
V.P. Gaur, D.B Narang, S.K. Nayyar
Central Sales Tax. 1956
Kalayani Publishers, Lubhiana