Intermediate Paper 3: Taxation
Section A: Income-tax Law
January, 2025 Examination
Summary of clarifications
General Notes
In computational questions, give credit for NIL adjustments even if shown by way of
working note and not shown in the body of computation.
Specific Notes
Q.No. Clarification
1 Basic pay and transport allowance if computed on combined basis, due
credit of 1 mark to be given. (AB4 Pg.7)
Transport allowance when stated Rs.24,000, give due credit even if there is
some additional amount which is not given in the question is added later on.
However, if deducts say, Rs.12,000 or any amount from transport allowance
then the net amount is wrong, so it is not to be awarded.
Medical treatment for saying ‘nil’, no mark to be given. However, if
supported by reasoning such as it is (i) a tax-free perquisite; or (ii) a benefit
not taxable or (iii) a perquisite not taxable; or (iv) excluded from the
definition of perquisite, due credit of ½ mark is to be given.
If stated medical treatment in employer’s hospital hence exempt being a
direct answer due credit of ½ mark to be given. (AB2 Pg.14)
In computing PGBP salary to sister-in-law if stated as not a relative and
hence no disallowance is attracted, then only due credit of 1 mark to be
given. Merely mentioning fact and putting ‘nil’ or ‘—’ in outer column is
not eligible for any mark. Not even ½ mark.
So, the due credit of 1 mark is for saying salary paid to sister-in-law and
since she is not a relative there is no disallowance. You cannot award ½
mark for this part of the answer.
Note: Correct answer by way of working note is also eligible for due credit.
Depreciation computed on the total amount (i.e., including the additions
made during the year) and applying 15%, due credit to be given since Rs.
15,000 is included in it. (AB4 Pg.8)
Computing depreciation but giving wrong treatment by addback means
conceptually wrong, no mark. (AB8 Pg.5)
For addition to asset: If stated no depreciation allowed on 25K paid in cash
due credit is 1 mark. (AB5 Pg.11)
Both, payment was made in cash and not eligible for depreciation are to be
stated for ½ + ½ mark.
Merely putting ‘—’ or ’nil’ without any explanation is not eligible for any
credit.
So, it is either 0 or 1 mark for addition to equipment. You cannot award ½
mark for this part of the answer.
Note: Correct answer by way of working note is also eligible for due credit.
Section 80C and section 80D need not be mentioned for giving credit both
in question 1 and question 4 (a).
Loss from house property Rs. 41,500 if written in the outer column, due
credit of ½ mark to be given since it can be set off against income under any
other head.
If basic exemption limit is considered impliedly and Rs.10,000 is mentioned
as tax for income of Rs.5 lakhs, due credit for basic exemption limit of Rs.3
lakhs also to be given.
Deducting expenses for transfer in unrelated part of answer not to be given
2(a) marks. (AB8 Pg.8)
Transfer expenses should be reduced from the full value of consideration to
arrive at the ‘net consideration’ in order to give due credit of ½ mark. (AB 6
Pg. 8)
Mention of long-term capital gain is eligible for ½ mark. However, mere
mention of capital gain is not eligible for any credit. (AB3 Pg.6)
Comparison of FMV of capital assets and monetary consideration by putting
upward arrow to indicate whichever is higher, is also eligible for credit of 1
mark.
If instead of computing net worth, assets and liabilities(both)are adjusted
from net sales consideration for computing LTCG, give due credit for the
items correctly mentioned therein. If only assets are deducted from the net
sale consideration, which is conceptually a wrong answer, no mark to be
awarded for the assets so deducted.
If there is totaling error in computing net worth then also due credit must be
with reference to what is stated and not be lenient for the error. (AB2 Pg.7)
If other assets figure is taken as Rs.3 lakhs give due credit even if later the
student shows goodwill of Rs.60,000 separately.
2(b) In (i) if stated the threshold limit of Rs.30,000 due credit to be given even
though the subsequent answer may be incorrect. (AB6 Pg.9). This is
applicable for (iii) also. (AB 10 Pg.5)
If stated no TDS is required to be deducted, without reasons – no marks to
be awarded for such conclusion. The conclusion is to be supported by
backup reasoning.
In (ii) TDS is not applicable for payments by individual must be mentioned
for awarding due credit. A general statement of no TDS is attracted without
backup reason will not deserve any credit.
In (iv) the word ‘personal’ is compulsory. (AB 6 Pg.10). Since the allocation is
1 mark it can be either 1 or 0. It cannot be ½ mark in this case.
3(a)(A) Mention of plant and machinery or equipment is required. Mention of ‘value
of assets’ or ‘capital assets’ would not deserve marks. (AB 1 Pg.3)
For monetary limits for micro and small enterprises, if stated due credit has
to be given ignoring the symbols of less than or equal to.
If puts limit range in case of small enterprise investment in Plant &
Machinery or Equipment as 1 crore to Rs.10 crore then also give due credit.
Similarly for turnover, if Rs. 5 crore to Rs.50 crore, then also give due
credit.
3(a)(B) For depreciation on laptop mention of 40% is eligible for ½ mark even
though the amount computed may be wrong.
For temporary wooden structure if 40% is stated due credit of ½ is to be
given. If stated 20% being ½ of regular rate which means the same then
also, due credit of ½ mark to be given. (AB 4 Pg.6) (AB 9 Pg.8)
½ mark has been earmarked specifically for mentioning ‘less than 180 days.’
3(b) For dining tables and chairs due credit to be given when stated as “Not a
capital asset” or it is a “personal effect”. Mere mention of `nil’ without
backup reasoning, no mark to be awarded.
Note: It could be either 1 or 0 for the answer and cannot be ½.
If stated reverse mortgage as exempt, due credit ½ mark. It can be by way of
a note also. (AB 9 Pg.9)
In case, all the items are written without mentioning the heads of income, if
IFOS is written without inserting other incomes due credit to be given. In
other words, without mentioning heads of income if the incomes are written
in sequence of every head, due credit to be given.
Mention of basic limit for super senior citizen due credit ½ mark. Such limit
how it was treated subsequently, not to be considered for awarding the
credit. (AB 9 Pg.10)
Showing income from dairy farming under PGBP is also correct and deserves
the due credit of ½ mark.
4(a) If loss from house property is set off against STCG, then also due credit of ½
mark to be given for set off of HP loss. In other words, the emphasis is for
Rs.80,000 set off and not for the net income from salary given in the model
solution.
If LTCL is set off against STCG of Rs.2,80,000 in whatever manner, due credit
for Rs.2,80,000 is to be denied.
For loss from textile business not eligible for carry forward if says it has
lapsed then also due credit of ½ to be given. (AB 1 Pg.8)
Share of loss from firm stated as exempt or stated as not eligible for set off
or carry forward due credit of ½ mark to be given. (AB 2 Pg.5)
If the b/fd textile business loss has not been adjusted at all against income
from textile business, no credit to be given for stating that it is not eligible
for carry forward. Even mention of 8 th year of loss would not be eligible for
any mark. (AB9 Pg.4).
If speculation business loss is stated as eligible for c/fd without mentioning
the amount, due credit to be given if the amount was not set off anywhere.
When setting off loss mention of amount say, Rs.1,20,000 or Rs.2,00,000
which are more than the income of Rs.1 lakh and Rs. 60,000 respectively,
due credit of 0.5 mark each to be given. (AB 6 pg.10); (AB 8 pg.10); (AB 7
Pg.7)
In the question, age of Rakesh is not given. If a student assumes him to be a
senior citizen and claims enhanced deduction for health insurance premium
due credit to be given. But he must have mentioned the assumption for
awarding credit.
4(b) (i) Mention of ‘due date’ deserves ½ mark. Alternatively, it can be 31 st July and
First 31st October for awarding ½ mark. Mentioning only 31 st July or only 31st
Alt. October means, no mark.
If says ‘capital losses’ no mark to be awarded. (AB 2 Pg.6) (AB 6 Pg.11). It
should be ‘loss under the head ‘Capital gains’ or long-term / short-term
capital loss for awarding due credit.
(ii) Loss cannot be carried forward is the emphasis for giving ½ mark and not
due date in this case.
Since the requirements of both the parts (i) and (ii) are same, if a smart
student answers the second part as, ‘same as answered in part (i)’, give due
credit.
It must be ‘activity of owning and maintaining race horses’ and not ‘loss
from horse race’.
‘Losses except HP loss and unabsorbed depreciation cannot be carried
forward’ does not deserve any mark. (AB 10 Pg.10)
4(b) (i) Mention of ‘due date’ deserves ½ mark. Alternatively, it can be 31 st July and
Second 31st October for awarding ½ mark. Mentioning only 31 st July or only 31st
Alt. October means, no mark. (AB 1 Pg.9) (AB 7 Pg.8)
3 months before the end of the assessment year or 31 st December, any one
is eligible for ½ mark. (AB 1 Pg.9) (AB 5 Pg.7).
Stating ITR filed ‘after the due date’ is eligible for ½ mark.
But stating ‘within next 3 months that is 31 st December’ means it is a wrong
reference hence, no mark (AB 8 Pg.12).
Before completion of assessment year is a wrong answer, no marks (AB 3
Pg.5) (AB 4 Pg.4)
(ii) Results in refund or increases the refund due – any one is eligible for ½
mark.
An updated return cannot be filed after 24 months deserves no mark. (AB 4
Pg.4)
No mark for saying that you cannot update a loss return. Rather, the answer
should say that an updated return cannot be a loss return. (AB 1 Pg.9)
