INCOME FROM SALARIES

1. Mr Sai, an employee furnished the following particulars for PY ending 31.03.08.

(Nov 01, 6M)
(a) salary income as computed ( after all deductions)
for the year 2,52,000
(b) during the year arrears of salary received
(not included in the above) relate to the FY 1998-99 15,000
(c) Assessed income of financial year 1998-99 66,000
(d) On month 25.03.09 amount deposited in PPF 80,000
You are requested to compute relief u/s 89 in terms of tax payable.

2. Raghav furnished the following particulars and requests you to compute his taxable
income for the PY ending 31.03.09: (May 02, 5M)
(i) joined service on 1.10.08, on a consolidated salary of Rs 15,000 p.m.
(ii) he was paid Rs 30,000 in sep 2008, so that he should not join elsewhere
(iii) he contributed towards:
(a) Life insurance premium 20,000
(b) National saving certificates 10,000
3. Mrs lakshmi aged about 66 years is a finance manager of M/s Lakshmi & Co Pvt ltd
based at culcutta. She is in continuous service since 1954 and receives the following salary
and perks from the company during the year ending 31.03.09:
(i) Basic Salary (50,000 x 12) Rs 6,00,000
(ii) DA (20,000x 12) Rs 2,40,000
(iii) Bonus -2 months basic pay.
(iv) commission-0.1% of the turnover of the company. The turnover for the FY 2008-09 was
Rs 15.00 crores. Mrs lakshmi is not concerned with mentality department.
(v) contribution of the employer and employee to the PF account Rs 3 laks each
(vi) interest credited to PF account at 9.5% -Rs 60,000
(vii) Rent free unfurnished accommodation provided by the company for which company
pays a rent of Rs 1,40,000 p.a.
(viii) entertainment allowances- Rs 30,000
(ix) children’s education allowances to meet the hostel expenditure of the children-Rs 5,000
each.
She makes the following investments:
(i) premium paid to insure the life of her major son –Rs 15,000
(ii) Medical insurance premium for self Rs 5,000, spouse- Rs 5,000.
(iii) Donation to a public charitable institution registered under 80G Rs 2,00,000.
(iv) LIC pension fund RS 12,000
Determine the tax liability for the AY 2009-10. ( Nov 02, 15M)

4. (a) Smt savitha rani born on 01.07.1940. she is a Deputy manager in a Company in
Mumbai. She is getting a monthly salary and DA of Rs 45,000 and Rs 12,000 respectively,
she also gets a House rent allowance of Rs 6,000 per month. She is a member of
Recognise PF wherein she contributes 15% of her salary and half DA. Her employer also
contributes an equal amount.
(b) She is living in the house of her minor son in mumbai
(c ) during the PY 2008—09 her minor son has earned an income of Rs 30,000 (computed)
as rent from a house property, which had been transferred to him by Smt Savitha Rani
without consideration a few years back.

1
 (d) During the PY 2007-08 she sold Government of India Capital Indexed bonds for RS
1,50,000 on 30.09.08, which she purchased on 01.07.02 for Rs 80,000 ( cost of inflation
index-FY 2002-03-447 and for the FY 2006-07-519.FY 2007-08-551,2008-09-582)
(e) her employer gave her an interst free loan of Rs 1,50,000 on 01.10.07 to one of her
son’s wife for the purchase of an Alto maruti Car. Nothing has been repaid to the company
towards the loan.
(f) during the PY 2008-09 she paid rs 15,000 by cheque to GIC towards Medical insurance
premium of her dependent mother.
Compute the taxable income and tax liability of Mrs Savitha rani for the AY 2009-10.(Nov04,14M)

5. Following benefits have been granted by Ved Software Ltd to one of its employees Mr
Badri:
(i) Housing loan @6% p.a. Amount outstanding on 01.04.08 is Rs 6,00,000. Mr Badri pays
Rs 12,000 per month, on 5th of each mont.
(ii) Air conditioners purchased 4 years back for rs 2,00,000 have been given to Mr Badri for
Rs 90,000.
Compute the chargeable perquisite in the hands of Mr Badri for the AY 2009-10.
The lending rates of SBI as on 01.04.08 for housing loan may be taken as 10%( May 08,6M)

6. Mr Narendra, who retired from the services of Hotel Samode Ltd, on 31.01.09 after
putting on service for 5 years, received the following amounts from the employer for the year
ending on 31.03.09.
(i) Salary @ Rs 16,000 pm comprising of basic salary of Rs 10,000, DA of Rs 3,000. City
compensatory allowances of Rs 2,000 and Night duty allowance of Rs 1,000.
(ii) Pension @30% of basic salary from 01.02.09
(iii) Leave salary of Rs 75,000 for 225 days of leave accumulated during 5 years @ 45 days
in each year.
(iv) Gratuity of Rs 50,000.
Compute the total income of Mr Narendra for the AY 2009-10. (may 08, 6M)

7. Mr M is a area manager of M/s N.Steels co ltd. during the financial year 2007-08, he
gets following emoluments from his employer:
Basic Salary
Upto 31.08.07 20,000pm
From 1.09.07 25,000 pm
Transport allowance 2,000 pm
Contribution to recognized PF 15% of Basic salary & DA
Children education allowance 500 pm for two children
City compensatory allowance 300 pm
Hostel expense allowances 380 pm for two children
Tiffin allowances 5,000 p.a (actual expense Rs 3,700)
Tax paid on employment 2,500
Compute taxable salary of Mr M for the AY 2009-10 (Nov 08,6M)

INCOME FROM HOUSE PROPERTY

1. Mr Rahul Jadav furnishes the following particulars relating to his house properties and
other incomes and expenditure for the year 2009-10:
(i) First house: this house is taken by him onlease for 10 years which is let to a tenant , for
his resisdence, at a monthly rent of rs 2,400.

2
 He has incurred the following expenses during this year:
Lease rent Rs 1,000 pm
Salsry of Durban Rs 200 pm
Interest onloan taken to pay for the acquisition of the lease Rs 200 pm
(ii) Second house: This house was constructed by him in 1989, but was transferred to his
wife in 1993 out of love and affection. He, however, continues to stay in this house with
his wife till date. He has taken a loan for the construction of this house for which interest
of Rs 6,000 becomes due for the year , but had not been paid by him. He has paid repair
expenses of Rs 1,000 during the year.
(iii) Taxable income from business for this year amounts to Rs 64,000.
Compute gross total income of Mr rahul Jadav for the AY 2009-10. (Nov 98, 9M)

2. Pritam occupied two flats for his residential purposes, particulars of which are as follows:

Flat 1 Flat 2

Municipal valuation 90,000 45,000

Fair rent 1,20,000 40,000

Fair rent under rent control Act 80,000 NA

Municipal taxes paid 10% 10%

Fire insurance 1,000 600

Interest payable on capital borrowed for purchase of flat 40,000 Nil

Income of Pritam from his proprietory business- Pritam Ware housing Corporation is Rs
6,50,000. Determine the taxable income and tax liability for the AY 2009-10, on the assumption
that he contributes Rs 60,000 towards the PPF and Rs 20,000 towards LIC premium a life policy
of Mrs Pritam. You are informed that Pritam could not occupy Flat 2 for two months
commencing from December 1, 2008 and that he has attained the age of 66 on 23rd August,
2008 (Nov 99, 14M)

3. Arvind commenced construction of a residential house intended exclusively for his residence
on 1.11.2000. He raised a loan of Rs 5,00,000 at 16% interest for the purpose of construction
on 1.11.2000. Finding that there was an over run in the cost of construction he raised a further
loan of Rs 8,00,000 at the same rate of interest on 1.10.2006. what is the interest allowable
under sec 24 , assuming that the construction was completed by 31.03.2008. (may 00, 7M)

4. Mr A & B constructed their houses on a pieces of land purchased by them at New Delhi. The
built up area of each house was 1,000 sq ft (ground floor and an equal area in the first floor). A
started construction on 01.04.06 and completes on 31.03.07. B starts the construction on
1.04.06 and completes on 30.06.07. A occupied the entire house on 01.04.06. However B
occupies the ground floor on 01.07.07 and letout the first floor for a rent of Rs 15,000 pm. The
tenant vacated the house on 31.12.07 and B occupies the entire house during the period
01.01.08-31.03.08.

3
Following are the other informations:
(i) Fair rental value of each unit
(ground floor/ first floor) (per annum) 1,00,000
(ii) Municipal value of each unit
(ground floor/ first floor) (per annum) 72,000

(iii) Municipal taxes paid by

A 8,000
B 8,000
(iv) repairs and maintenance charges paid by
A 28,000
B 30,000
A has availed a housing loan of rs 20.00 lakhs @ 12% p.a. on 01.04.06. B has availed a
housing loan of Rs 12.00 lakhs @ 10% p.a. on 1.07.06.No repayment was made by either of
them till 31.03.08. compute Income from House Property for A & B for the PY 2008-09
( AY 09-10) (Nov 03, 12M)

5. Mr x owns one residential house in Mumabi. The house is having two units. 1st unit is self
occupied by Mr X and another unit in rented for Rs 8,000 p.m. The rented unit was vacant for 2
months during the year. The particulars of house for the PY 2008-09 are as under:
Standard rent 1,62,000 p.a

Municipal valuation 1,90,000 p.a

Fair rent 1,85,000 p.a

Municipal tax 15% of municipal valuation

Light & water charges 500 p.m

Interest on borrowed capital 1,500 pm

Lease money 1,200 p.a

Insurance charges 3,000 p.a

Repairs 12,000 p.a

Compute income from house property of mr X for the AY 2009-10 ( Nov 08, 9M)

Profits & Gains of business and profession

1. The following is the Profit and loss account for the year ended 31sy march 2009 of
Western Sugar Mills of which Shri Daga is the owner.

701,000 1,162,30
To Manufacturing expenses .00 By Sale of Sugar & Molases 0.00
92,79 9
" Excise duty 5.00 " Rent from agricultural land 50.00
49,20 4,0
" Establishment Charges 0.00 " Revenue from Fisheries 00.00

4
 2,00 605,05
" Fine paid to Excise dept 0.00 " Sale proceeeds from canes 5.00
121,445 3,2
" salary and wages .00 " Profit on sale of motor truck 30.00
16,75
" General charges 0.00
21,00
" Interest on bank loan 0.00
38,75
" Daga's remuneration 0.00
91,00
" Depreciation 0.00
25,00
" Income Tax 0.00
437,500
" Cultivation Expenses .00
179,095
" Netprofit .00
1,775,535 1,775,53
Total .00 Total 5.00
Compute the income from business of Shri Daga from the Sugar Mill for the assessment
year 2009-10 after taking the following information into consideration:

i) Sale proceeds of cane included Rs 5,32,000 on account of cane produced and

consumed in the factory and debited to manufacturing expenses, the average market
price of such cane being Rs 6,00,000.

ii) The motor truck sold during the year for Rs 7,230 was purchased in the past for Rs
19,000. Depreciation claimed in respect thereof in past assessments was Rs 15,000.

iii) General Charges include (a) Rs 2,000 being the legal expenses incurred in defending a
suit regarding the company’s title to certain agricultural lands and (b) Rs 10,000 paid to
Shri Daga’s son who is an employee in the Sugar Mill for a trip to Hawai to Study
modern methods of manufacture.

iv) Depreciation in respect of all assets has been ascertained at Rs 50,000 as per IT rules.

(Nov 98, 11marks)

2. The Net profits of Sastri Brothers, a partnership firm, consisting of three partners
carrying on business for the accounting year ended 31st march 2008 was Rs 5,20,000. The
said net profits ware after charging salary payable to all partners amounting to Rs 1,08,000,
but before crediting interest to partners’ accounts on their fixed capital amounting to Rs 10
lakhs totally. The partnership deed provided for payment of interest on fixed capital at 22%
p.a.

The deed does not, however , specify any salary entitlement to partners. On this
information, you are required to:

5
 (i) Compute the taxable income of the firm;

(ii) Calculate the remuneration allowable under the provisions of Income Tax Act to all
partners, if the partnership deed has provided for the payment of remuneration to
them.

( May 99, 6M)

3. Mr Sivam, a retailer trader of cochin gives the following Trading & profit & loss account
for the year ended 31st march 2009:

Trading & P&L account for the year ended 31.03.09

T 90,0 B 1,211,
o Opening Stock 00.00 y Sales 500.00
1,004,0 2
" Purchases 00.00 " Income from UTI ,400.00
306,0 Other business 6
" Gross Profits 00.00 " receipts ,100.00
180,
" Closing Stock 000.00
1,400,0 1,400,
Total 00.00 Total 000.00
60,0 306,
" Salary 00.00 " Gross Profits B/d 000.00
36,0
" Rent & rates 00.00
15,0
" Interst on loan 00.00
105,0
" Depreciation 00.00
23,2
" Printing & stationery 00.00
1,
" postage & telegram 640.00
Loss on sale of shares 8,
“ ( short term) 100.00
7,
" Other General expenses 060.00
50,0
“ Net Profit 00.00
306,0 306,
Total 00.00 Total 000.00

Additional Information:

6
 (i) It was found, that some stocks were omitted to be included in both the opening & closing
stock; the values of which were:

Opening stock Rs 9,000

Closing stock Rs 18,000

(ii) Salary includes rs 10,000 paid to his brother, which is unreasonable to the extent of rs
2,000.

(iii) The whole amount of printing & stationery was paid in cash.

(iv) The depreciation provided in the profit and loss account rs 1,05,000 was based on the
following information:

The written down value of plant and machinery is Rs 4,20,000.

A new plant falling under the same block of depreciation of 25% was bought on 1.07.07
for the rs 70,000. Two old plants were sold on 1.10.07 for Rs 50,000.

(v) Rent & rates includes sales tax liability of Rs 3,400 paid on 7.04.08.

(vi) Other business receipts include Rs 2,200 received as refund of sales tax relating to
2007-08.

(vii)Other general expenses

(viii) Include Rs 2,000 paid as donation to a public charitable trust.

You are required to advise Mr sivam whether ha can offer his business income U/S 44AF ie
presumptive taxation.

( May 03, 15M)

4. Following is the Profit and loss account of Mr A for the year ended 31.03.09:

T 130,0 B 6
o Repairs on building 00.00 y Gross profit 01,000.00
51,0
" Advertisement 00.00 " I.T. refund 4,500.00
Amount paid to scientific interest from
" research " company deposits 6,400.00
100,0
association approved u/s 35 00.00 " dividends 3,600.00
110,0
" Interest 00.00
130,0
" Travelling 00.00

" Banking cash transaction tax 550.00

7
 93,9
" net profit 50.00
615,5 6
Total 00.00 Total 15,500.00
Following additional information:

(1) Repairs on building includes Rs 95,000 being cost of raising a compound wall for
the own business premises.

(2) Interest payments include payable outside India to a resident Indian on which TDS
has not been deducted of Rs 12,000 and penalty for contravention of central sales Tax of
Rs 24,000.

Compute the income chargeable under the head ‘ Profits and gains of business or profession’
of Mr A for the year ended 31.03.09 (2006 May, 7M)

Capital Gains
1. Raghavan owned a residential house at Madurai, the original cost of which was Rs
1,00,000. It was acquired on 1.09.91. He sold the house on 1.06.05 for Rs 8,00,000 and
purchased another house on 30.05.07 at Tiruchi for Rs 6,00,000. The second house at
Tiruchi was sold by him for Rs 8,00,000 on 30.06.08. Discuss the Impact of these
transcation with regard to AY to capital gains.
( May 2000, 7M)

2. Arjun furnishes the following and requests your advise as to the liability to capital
gains for the AY 2009-10:

(i) Jewellery purchased by him on 10.03.95 for Rs 1,05,000 was sold by him for a
consideration of rs 2,85,000 on 02.11.08.

(ii) He incurred expenses:

(a) At the time of purchase Rs 2,000

(b) At the time of sale ( for brokerage) Rs 4,000

(iii) He invested Rs 50,000 in bonds with NHAI out of sale consideration.

On these facts:

(a) Compute the capital gains chargeable to tax.

8
 (b) Whether arjun would be entitled to any exemption? ( Nov 01, 6M)

3. Mr Y submits the following information pertaining to the year ended 31.03.09:

(i) On 30.11.08, when he attained the age of 60, his friends in India gave a flat at Surat as a
gift, each contributing a sum of rs 20,000 in cash. The cost of the flat purchased using the
various gifts was Rs 3.4 lacs.

(ii) His close friend abroad sent him a cash gift of Rs 75,000 through his relative, for the
occasion.

(iii) Mr Y sold the above flat on 30.01.09 for Rs 3.6 lacs. The registrar’s valuation for stamp
duty purpose was Rs 3.7 lacs. Neither Mr Y nor the buyer questioned the value fixed by
registrar.

(iv) He had purchased some euity shares in X pvt Ltd on 5.2.07 for Rs 3.5 lacs. The shares
were sold on 15.03.08 for Rs 2.8 lacs.

You are requested to calculate the total income of Mr Y for the AY 2009-10. (May 05, 6M)

4. Mr A who transfers land and building on 02.01.09, furnishes the following

information:

(i) Net consideration received Rs 10 lacs

(ii) Value adopted by stamp valuation authority, which was not contested by Mr A Rs
12 lacs.

(iii) Value ascertained by valuation officer on reference by Assessing Officer Rs 13

lacs

(iv) This land was distributed to Mr A on the partial partition of his HUF on 1.04.81. Fair market
value of the land as on 1.04.81 was RS 1.10.00.

(v) A residential building was constructed on the above land by Mr A at a cost of Rs 3,20,000
( construction completed on 1.12.04) during the FY 2004-05.

(vi) Short term capital loss incurred on sale of shares during the FY 2004-05 rs 2,05,000.

Mr A seeks your advice as to the amount to be invested In NABARD bonds so as to be

exempt from clutches of capital gain tax. Cost inflation indices for the FYs:1981-82,2004-05 &
2009-10 are 100,480, 582 respectively (May 06, 8M)

5. Mrs malini hari shifted her industrial undertaking located in Corporation limits of
Faridabad, 2A SEZ on 01.12.08. following particulars are available:
Rs

9
(i) Land purchased on 20.01.03 4,26,000

Sold for 22,00,000

(ii) Building ( construction completed on 14.03.06)

WDV of building as on 01.04.08 8,20,000

Sold for 11,89,000

(iii) WDV of cars as on 01.04.08 7,40,000

Sold for 6,00,000

(iv) Expenses on shifting the undertaking 1,15,000

(v) Assets acquired for the undertaking in the SEZ

( on or before 25.06.09)

(a) Land 3,00,000

(b) Building 5,00,000

(c) Computers 1,00,000

(d) Car 4,20,000

(e) Machinery (second hand) 2,00,000

(f) Furniture 50,000

There is no intention of investing in any other assets in this undertaking.

Compute the exemption available U/s 54 GA for the AY 2009-10

Cost inflation indices are

Financial year index

2002-03 447

2007-08 551

2008-09 582 (Nov 07, 8M)

6. Mr Thomas inherited a house in Jaipur under will of his father in may 2003. The
house was purchased by his father in Jan 1980 for Rs 2,50,000. He invested an amount of
Rs 7,00,000 in construction of one more floor in this house in june 2005. The house was
sold by him in Nov 2008 for rs 37,50,000. The valuation adopted by the registration

10
 authorities for charge of stamp duty was rs 47,25,000 which was not contested by the
buyer , but as per Assesse’s request the AO made a reference to valuation officer. The
valuie determined by the VO was Rs 47,50,000. Brokerage @ 1% of sales consideration
was paid by Mr Thomas to mr sunil. The market value of house as on 01.04.81 was Rs
2,70,000. You are required to compute the amount of capital gain chargeable to tax for AY
2009-10with the help of given information.
(Nov 07 9M)

7. Mrs Vasumati purchased 10,000 equity shares of Rajesh Co pvt ltd on 28.02.05 fo
Rs 1,20,000. The company was wound up on 31.07.08. the following is the summarized
financial position of the company as on 31.07.08.

LIABILITIES Rs.Ps ASSETS Rs.Ps

600,0 AGRICULTURAL 4,200,00
60,000 EQUITY SHARES 00.00 LANDS 0.00
4,000,0 650,0
GENERAL RESERVES 00.00 CASH AT BANK 00.00
PROVISION FOR 250,0
TAXATION 00.00
4,850,0 4,850,00
TOTAL 00.00 TOTAL 0.00
The tax liability (towards dividend distribution tax) was ascertained at Rs 3,00,000 after
considering refund due to the Company. The remaining assets were distributed to the share
holders in the proportion of their share holdings. The market value of 6 acres of agricultural
land ( in an urban area) as on 31.07.08 is Rs 10 lakhs per acre.

The agricultural land received above was sold by Mrs Vasumati on 29.02.09 for rs 15 lakhs.
Discuss the tax consequences in the hands of the company and mrs vasumati

Cost inflation indices are:

Financial year index no

2004-05 480

2008-09 582 (may 08, 8M)

CLUBBING OF INCOME

1. Mr Singh is a trader. Particulars of his income and those of the members of his family are
given below. These income relate to the PY ended 31.03.09. Rs

a) Income from business- Mr Singh 90,000

11
 b) Salary derived from an educational inst by Mrs Singh.

She is the principal of the inst 50,000

c) Interest on company deposits derived by Master Deep Singh

(minor son). These deposits were made in the name of Deep Singh

By his father’s father about 6 years ago 12,000

d) Receipts from sale of paintings and drawings made by minor

Deepali Singh (minor daughter of mr & Mrs Singh, a noted child

Artist) 60,000

e) Income by way of lottery earnings by master Dipinder Singh

(minor son of Mr singh) 6,000

Discuss whether the above will form part of the assessable income of any individual and
also compute the assessable income of Mr Singh. (Nov 98, 9M)

2. Balu is the karta of a HUF whose members derive income as below:

(i) Income from Balu’s own business 50,000

(ii) Mrs Balu, a dermatologist, draws salary 80,000

(iii) Minor Son , Deepak, (earning interest on FD with ABC ltd

Which were gifted by his Grand father) 15,000

(iv) Minor daughter Priya gave a dance performance and received

remuneration 1,00,000

(v) Deepak got winnings from lottery( gross) 2,00,000

Explain how the above will be taxed. (Nov 99, 10 M)

3. A proprietary business was started by Smt Rani in the year 2007. As on 1.04.08 her
capital in the business was Rs 3,00,000.

Her husband gifted Rs 2,00,000 on 10.04.08, which Smt Rani invested in her business on the
same date. Smt Rani earned profits from her business for the FY 2007-08 , rs 1,50,000 and
FY 2008-09 rs 3,90,000. Compute the income to be clubbed in the hands of Rani’s husband
for the AY 209-10 with reasons. (Nov 04, 6M)

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 4. Compute the total income of Mr & Mrs A from the following information: (Nov 05, 7M)

(a) Salary income (computed ) of Mrs A 2,30,000

(b) Income from profession of Mr A 3,90,000

(c) Income of minor son D from company deposit 15,000

(d) Income of minor daughter C from special talent 32,000

(e) Interest from bank received by C on deposits made out of

Her special talent 3,000

(f) Gift received by C on 30.09.08 from friend of Mrs A 2,500

Brief working is sufficient. Detail computation under various heads of income is not required.

5. Mr dhaval & his wife, Mrs hethal furnish the following information:

(a) Salary income ( computed) of Mrs Hethal 4,60,000

(b) Income of Minor Son B who suffers from disability specified in 80U1,08,000

(c) Income of minor daughter from singing 86,000

(d) Income from preofession of mr Dhaval 7,50,000

(e) Cash gifted received by C on 02.10.08 from friend of Mrs Hethal

On winning of singing competition 48,000

(f) Income of minor married daughter A from company deposit 30,000

Compute the total income of Mr Dhaval and Mrs Hethal for the AY 2009-10 (May 08, 8M)

SET OFF & CARRY FORWARD OF LOSSES

1. Mr Yashwant submits the following information for the FY ending 31.03.09. he desires that
you should (a) compute the gross total income and (b) ascertain the amount of losses that can
be carried forward: ( May 99, 14M)

(i) He has two houses:

Rs

(a) House no I –after all statutory deductions (NAV) 36,000

(b) House No II- current year loss 10,000

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 (c) Brought forward losses of AY 1998-99 of second house representing

Unadjusted interest on borrowed capital 30,000

(ii) He has three proprietary businesses:

(I) Textile business:

(a) Discontinued from 31.10.2008- current year loss

25,000

(b) B/f business loss of the year 2004-05

80,000

(II) Chemical business:

(a) Discontinued from 01.03.08 – hence no profit NIL

(b) Bad debts allowed in earlier years recovers during the year 30,000

(c) Carried forward business loss for the AY 2007-08 20,000

(III) Leather Business

Profit for the current year 70,000

(a) Short term capital gains 20,000

(b) Long term capital loss 15,000

2. Simran, engaged in various types of activities, gives the following particulars of her
income for the year ended 31.03.09: ( may
07, 6M)

(a) Profit for the business of consumer and house-hold products

50,000

(b) Loss of business of readymade garments 10,000

(c) Brought forward loss of catering business which was closed in AY 2008-09
15,000

(d) Short term loss on sale of securities and shares

15,000

(e) Profit of speculative transactions entered into during the year

12,500

(f) Loss on speculative transaction of AY 2004-05 not set off till AY 2008-09 15,000

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 3. M/S vivitha & co , a partnership firm, with four partners A.B, C, D having equal
shares, furnishes the following details, summarized from the valid returns of income filed
by it:

Assessment Year Items eligible for carry forward and set off

2007-08 unabsorbed business loss Rs 1,20,000

2008-09 unabsorbed business loss Rs 1,90,000

2008-09 unabsorbed depreciation Rs 1,20,000

2008-09 unabsorbed long term capital gains:

- From shares Rs 1,10,000

- From building Rs 1,90,000

C, who was a partner during the last three years, retired from the firm with effect from
01.04.08.

The summarized results of the firm for the AY 2009-10 are as under:

Income from house property 70,000

Income from business

Speculation 2,20,000

Non speculation (50,000)

Capital gain

Short term ( from sale of shares) 40,000

Long term ( from sale of building) 2,10,000

Income from other sources 60,000

Briefly discuss, how the items brought forward from earlier years can be set off in the hands of the
firm for the AY 2009-10 (may 08, 9M)

4. Mr P, a resident individual, furnishes the following particulars of his income and

other details for the PY 2007-08:

(i) Income from salary 18,000

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 (ii) Net annula value taxable under income from house property 70,000

(iii) Income from business 80,000

(iv) Income from speculative business 12,000

(v) Long term capital gain on sale of land 15,800

(vi) Loss on maintenance of horse race 9,000

(vii)Loss on gambling 8,000

Depreciation allowable under the Income tax act comes to Rs 8,000 for which no
treatment is given above.

The other details of unabsorbed depreciation and brought forward losses are :

(i) Unabsorbed depreciation 9,000

(ii) Loss from speculative business 16,000

(iii) Short term capital loss 7,800

(iv) Unrealized rent 17,000

(v) Compute the gross total income of Mr P for the AY 2008-09 and amount of loss
that can or cannot be carried forward. (Nov 2008, 6M)

GROSS TOTAL INCOME

1. Discuss the allowability of the following: ( nov 02)

(1) Rajan has to pay to a hospital for treatment Rs 42,000 and spent nothing for life
insurance or for maintenance of handicapped dependent. (1Mark)

(2) Rajan has incurred for treatment Rs Nil in the previous year and deposited Rs 25,000
with LIC for maintenance of handicapped dependents. (1 Mark)

(3) Rajan has incurred Rs 20,000 for treatment and Rs 25,000 was deposited with LIC for
maintenance of handicapped dependents.(1Mark)

2. For the AY 2009-10, the GTI of Mr chaturvedi was Rs 1,68,240 which includes long term
capital gain of Rs 45,000 and Short term capital gain of Rs 8,000. The Gross total income
also includes interest income from banks of Rs 12,000. Mr chaturvedi has invested in PPF
Rs 60,000 and also paid a medical insurance premium Rs 11,000. Mr chhaturvdi has also
contributed Rs 15,000 to public charitable trust eligible for deduction u/s 80G. Compute the
total income and tax thereon of Mr chaturvedi, who is 70 years old as on 31.03.2008.
(Nov
02, 12M)
CHALLENGE QUESTIONS
1. X, a manufacturer gives following profit and loss account. Determine income from business.:

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T 7,0 B 9,0
o Cost of goods sold 00,000 y Sales 00,000
6
" Salaries & allowances 00,000 " Rent received 150,000
1
" Rent of godown 80,000 " Interest received 50,000
" STT paid ( on share

held as investment) 4,000

1
" Freight charges 20,000

" Rates & taxes 30,000

" Travelling expenses 56,000

" Income Tax paid 10,000

" LIC premium 50,000

" Insurance Premium 10,000

4
" Interest on loan 00,000

" Advertisement Charges 40,000

" Bonus to employees 20,000

" Penalty for VAT default 10,000

2
" Depreciation 00,000
4
" Net profit 70,000
9,2 9,2
Total 00,000 Total 00,000

1. It is found that closing stock and opening stock were undervalued by Rs 1,00,000 and
Rs 1,20,000 respectively.
2. Salaries include employer contribution to RPF payable RS 50,000 which is paid as under

i. Rs 30,000 on 11/09/2010
ii. Rs 20,000 on 11/10/2010

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 3. Rent from godown is Rs 15,000. No tax was deducted up to 30.09.09. But tax for the
month up to January 2010 was deducted and remitted on 30.03.2010. TDS for February and
march 2010 was remitted on 31.08.10.
4. Freight charges includes Rs 30,000 single payment to the transporter in cash
5. Advertisement charges includes Rs 20,000 paid to concern owned by Mr X for
advertisement. But charges quoted by another publicity concern is Rs 15,000.
6. Travelling expenses include Rs 40,000 being expenditure on 5 day trip to Delhi for
canvassing business. But 2 days were spend by Mr X for leisure and sports. Rs 6000 relate
to petrol expense of car and balance Rs 10,000 employee travel expenses.
7. Employee Contribution to RPF for the month of Jan 2010 collected from employees was
remitted only on 1/03/2010 Rs 10,000.
8. Penalty was paid for non filing of VAT returns.
9. Breakup of interest on loan

i. Interest on building loan 3,00,000

ii. Interest on Plant & machinery loan 60,000
iii. Interest on O/D 40,000

10. Building loan was taken on 1/10/2007 for constructing a building comprising of 3
identical units. Total cost of construction was Rs 30 lacs which was completed on 31/5/08.
Since then U1 is self occupied, U2 used for locating business H.O. u3 is let out for monthly
rent of Rs 15,000. During the year U3 was vacant for 2 months. Fair rent of the building is Rs
3,00,000. Municipal tax paid on the building is Rs 24,000. Since assessee follows mercantile
system, entire municipal tax due on building rs 30,000 was debited to P&L.
11. Asset eligible for depreciation @ 15%

a) Plant & Machinery on 1.04.09 Rs 8,00,000

Additions on 11.08.09 Rs 4,00,000

“ ” on 11.01.10 Rs 1,00,000

b) Motor car WDV on 1.04.09 Rs 2,00,000 ( 25% of car usage for personal
purpose)

12. Cost of goods sold includes Rs 1,00,000 being Single payment in cash made on 26.01.2010

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 2. Compute taxable income and tax liability of Sri Hari for the AY 2010-11.

(Rs in Lakhs)

To Cost of goods sold 23.00 By sales 46.00

" Salary 2.00 " Interest 1.00

" rent 1.50 " H.P. rent received 1.20

" Interest on loan 2.40 " Didvidend 0.30

" repiars & maintenance 1.80 " lottery winings 0.70

" printing & stationery 0.50 (net of TDS 30,000)

" Advertising 1.20

" rates, Taxes & electricity 0.50

" PF paid 1.25

" Insurance premium 1.00

" Bonus 1.00

" Sales promotion expenses 3.00

" Know how purchased 4.00

" Depreciation 2.00

" net profit 4.05

49.20 49.20

1. This is the first year of Audit u/s 44 AB.

2. Advertisement payment was to single party. No tax was deducted on the same day
during the year.

3. House property rent Rs 1.2 lakh relates to property let out on monthly rent of Rs
12,000 p.m. (property vacant for 2 months) fair rent is Rs 1.5 lakhs

4. rates, taxes & electricity include Rs 10,000 muncipal tax on building let out

5. Interest on loan include (a) rs 30,000 paid to bank on 14.08.09 in cash (b) rs
30,000 payable paid as follows—Rs 20,000 on 1/08/10 and rs 10,000 on 03.10.10
(c) Rs 44,000 total interest on loan taken for plant & machinery purchase on 1/5/09
for rs 4,00,000 and put to use on 1/12/09.

6. Repairs and maintenance include Rs 40,000 being single payment in cash.

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 7. PF include PF payable Rs 30,000 employer share for the month of march 2010
which along with employee share ( not included else where0 Rs 40,000 for same
month paid on 31/08/2010.

8. Particulars of asset eligible for depreciation:

(a) building WDV on 1.04.09 rs 8,00,000

(b) Plant & machinery WDV on 1.04.09 rs 6,00,000

9. Insurance premium in clued Rs 40,000 annual premium on LIC policy for self
( Sum Assured) 1.5L) and rs 20,000 as medicalim premium for self and spouse.

10. know how was purchased on 1.12.09

11. sales promotion expenses include rs 50,000 being donation paid to registered
charitable trust.

12. during the year he sold listed Govt of India capital Indexed Bond for Rs 3,00,000.
The bond was purchased on 1.06.06. for Rs 1,00,000.

3. Compute taxable income and tax liability:

i. income from house property

H1- self occupied- interest Rs (1,70,000)

H2 – let out ( computed) rs 1,00,000

ii. Business :

Speculative business Rs (40,000)

Other business Rs 2,80,000

iii. Capital gains:

LTCG Rs 2,20,000

STCG Rs (80,000)

iv. Income for other sources:

Others rs ( 40,000)

Lottery winnings) rs 50,000

v. B/forward business loss related to AY 2008-09 rs 1,30,000

vi. He makes following payment

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( 1) repayment of housing loan principal- Rs 60,000 LIC premium paid Rs 50,000 of
major Son who is working as a Software engginer.

(2) medicaliam premium paid of self and spouse Rs 10,000 and above Son Rs
5,000.

(3) medical treatment and maintenance of handicapped brother who is

dependant on assessee Rs 30,000.

(4) rent paid for residential accommodation rs 4000 pm.

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