CHRIST DEEMED TO BE UNIVERSITY,BENGALURU - 560029
End Semester Examination September/October - 20 19
Master of Commerce III SEMESTER
Code: MCO342A Max.Marks: 10 0
Course: ADVANCED TAXATION Duration: 3Hrs
SECTION A
Answer any 7 questions. Each answer carries 5 marks. 7X5=35
1 Explain briefly the taxability of Charitable Trusts.
2 Write a short on Due dates for payment of Advance Tax.
3 Explain the treatment of Unabsorbed depreciation carrried forward in the books of
amalgamating company at the time of amalgamation.
4 During the PY 2018-19, a charitable trust gets the following incomes:
a. Voluntary contributions (with specific direction that they shall form part of the
corpus of the trust) Rs 12,90,000.
b Voluntary contribution (without any specific direction) Rs 18,30,000.
c. Income from property held under the trust Rs 8,66,000.
During the, the trust spends Rs 8,90,000 for charitable purposes in India. Besides, it
gives donation of Rs 85,480 to other public charitable trusts. It sets apart Rs
14,00,000 for the purpose of construction of a charitable hospital up to March 31,
2020.
Determine the taxable income of the trust assuming that the trust utilises Rs 8,70,000
up to March 31, 2020 for the purpose of completing the construction of the
charitable hospital. Besides, out of the accumulated amount, the trust gives a
donation of Rs 1,00,000 to another charitable trust.
5 XYZ Ltd is engaged in Textile business. it furnishes the following information with
respect to its financial position
PY Tot al income u nder IT Act book profit s u /s 115JB
I 3,00,000 20,00,000
II 7,00,000 10,00,000
IIII 10,00,000 8,00,000
Determine the amount of MAT credit that can be availed by XYZ Ltd for the AY
2019-20
6 What is arms length price? What are the different methods to determine price?
7 Mr. Smarajit, whose income consists of Salary income only, files his return of
Income for Assessment year 2019-20 on 2.10.2019. Is the return a valid return?
8 Interests are chargeable under the Act for delay in payment of taxes. Discuss in
detail.
9 As a tax consultant, analyse the tax aspects of own or lease decisions.
10 Explain the consequences of filing Belated returns.
SECTION B
Answer any 5 questions. Each answer carries 10 marks. 5X10 =50
11 What is SEZ ? Explain the essential conditions to claim deduction U/S 10 AA.
12 From the information, calculate Business Income of Wahoo Ltd. Co. as per normal
provisions of Income Tax Act, 1961
Profit and Loss A/c for the year ending 31-3-2019
Opening Stock 1, 50, 000 Sales 50, 60, 000
Purchases of raw
15, 00, 000 Closing stock 2, 00, 000
material
Manufacturing
12, 00, 000 Refund from supplier 50, 000
expenses
Refund of Income tax
GST paid 2, 00, 000 (including interest on 12, 000
Refund of Rs. 2, 000)
Bad debts recovered(
Salary and wages 4, 00, 000 Previously allowed) 20, 000
Rent from quarters let
Carriage inward 30, 000 30, 000
out to workers
Profit on sale of
Provision for Bad debt 20, 000 20, 000
delivery van (Tata 407)
Advertisement
1, 50, 000
Expenses
Provision for Income
30, 000
Tax
Provisions for losses of
1, 00, 000
subsidiary
Travelling expenses 50, 000
Railway demurrage
10, 000
charge
Donation to Congress
30, 000
party
Donation to rural
20, 000
development
N et Profit c/d 15, 02, 000
53, 92, 000 53, 92, 000
Purchas es include purchas es of Rs . 1, 00,000 from a s ole
proprietary concern owned by Mr. Sudhir who holds 25% s hare in
the company. The market value of the goods is lower by Rs . 20,
000 and the payment was made to him by way of a bearer cheque.
On 1-8-2018, the company purchas ed a new machine for factory in
Delhi at a cos t of Rs . 6, 00, 000.
Travelling expens es include Rs . 20, 000 expens es on travelling of
a director to Delhi for 10 days out of which 3 days expenditure is
attributable to purchas e of above machine and 7 days expenditure
in res pect of his s tay there for a family function which the director
had agreed to bear pers onally.
Carriage inwards als o include Rs . 10, 000 for trans portation of
above machine.
Advertis ement includes a cas h payment of Rs . 50, 000 to Jhony
Lever for acting in Company’s Advertis ement.
GST paid included: Rs . 1, 75, 000 for previous year 2018-19 and
Rs . 25, 000 for the previous year 2017-18.
Both opening and clos ing s tocks have been undervalued by 20%
of cos t.
Refund from the s upplier is on account of amount given to him
earlier for s upplying a machine, which he failed to s upply.
Manufacturing expens es include Rs . 10, 000 paid to an advocate
for Income tax proceedings .
Details of assets: WDV as on 1-4-2018 (in Rs. )
Plant and Machinery (15%) 10, 60, 000
Furniture (10%) 1, 50, 000
Computers (40%) 3, 00, 000
13 Give the meaning of DTAA. What are its Effects and purposes.?
14 Fancy Garments Limited is a domestic company, in which the public are substantially
interested. For the year ended 31-3-2019 the Profit and Loss Account of the
company shows a net profit of Rs. 20 lakhs. On inquiries it has given the following
information:
Amounts debited to Profit and Loss Account:
(a) Rs. 18,000 spent by the managing director on his visit to Canada. The visit was
for studying the market for exports.
(b) Rs. 20,000 representing cost of garments donated to an approved charitable
trust.
(c) Rs. 23,000 on account of expenditure of maintenance of guest house at factory.
(d) Rs. 18,000 paid to an associate member of the Institute of Chartered Accountant
of India for attending to income tax appeals for two years before the Income Tax
Appellate Tribunal.
(e) Rs. 9,500 paid to a money-lender as interest on loan taken to meet the company’s
income tax liabilities.
(f) Penalty of Rs. 4,000 paid for importing garments manufacturing machinery in
contravention of import regulations.
Other information:
(g) The company has not set up a gratuity fund. A sum of Rs. 50,000 has been debited
for accrued liability to staff. The provision has been made in the accounts. The
quantum of the liability has been worked out on well recognized actuarial basis.
(h) Rs. 25,000 credited in the Profit and Loss Account on account of dividend
received from a foreign company. The shares in the foreign company were allotted
in consideration of technical know-how under a collaboration agreement approved
by the Central Board of Direct Taxes.
(i) The company suffered long-term capital loss in earlier year as under:
Assessment Years
2014-15 2015-16 2016-17 2017-18
Rs. 50,000 N IL N IL Rs. 75,000
(j) The book profit as per Section 115 JB Rs. 70,00,000.
Compute the Gross Total income of the company for the assessment year 2019-20
15 The balance sheet of JB opticals ltd as 31st march 2019 reads as under:
Paid up capital 2,52,00,000
Unit A Unit B
Fixed assets 1,00,00,000 1,50,00,000
Debtors 1,00,00,000 75,00,000
Liabilities 28,00,000 50,00,000
Stock in trade 50,00,000 25,00,000
Reserves 1,48,00,000
Share premium 22,00,000
The company acquired unit B on 1.04.2015. They made certain additions in the form
of generator set and additional building etc. for 25 lakhs during the year 2015-16.
The members of the company have authorized the board in the meeting held on
28.01.2017 to dispose of unit B. The company decides to sell unit B by the way slump
sale for 225 lakhs as consideration. JB opticals ltd has offered 1% discount if the
buyer closes the sale and makes payment before 31.03.2019. However, this discount
would not be available if the sale is completed (and payment is made) after
31.03.2019. You are required to advice the company as a measure of tax planning to
determine the date of sale keeping in view the capital gains tax. Assume that the
written down value of the fixed assets as per section 43(6) is 120 lakhs.
16 Write a note on self -assessment tax under section 140A.
17 XYZ Ltd. requires an equipment costing 10,00,000; the same will be utilized over a
period of 5 years. It has two financing options in this regard :
(i) Arrangement of a loan of Rs.10,00,000 at an interest rate of 13 percent per
annum; the loan being repayable in 5 equal year end installments along with interest;
the equipment can be sold at the end of fifth year for 1,00,000.
(ii) leasing the equipment for a period of 5 years at a rent of Rs 330,000 payable at
the end of the year.
The rate of depreciation is 15% on WDV. Income tax rate is 35%. Discounting rate
is 12%. Advise which of the options should XYZ exercise and why?
SECTION C
Compulsory Question. The answer carries 15 marks. 1X15=15
18 Compute the Final tax liability in each year showing the amounts to be carried
forward every year.
Previous years
2012-13 2013-14 2014-15 2015-16 2016-17
Business income before
making the following -8 10 12 45 -10
deductions
Brought forward business
-10
Loss of the PY 2006-07
Brought forward
-15
depreciation
Current depreciation
-8 -1 -2 -4 --5
allowance
Book profit u/s 115JB 18 -2 3 40 100
