02D. Cma Inter Direct Tax Practice Test Series - Ay 2020-21

THANKS TO MY FAMILY &
STUDENTS FOR CONTINUOUS

SUPPORT & LOVE.
CA SURAJ AGRAWAL
Updated on 30.04.2020 (17th Edition – 1st Print)

CMA INTER EXAM STUDENTS – JULY & DEC 2020 EXAM
PREFACE
Taxation is a dynamic subject, which is not only a vast subject but also difficult to
comprehend in view of frequent amendments. Yet it is the scoring subject of your
syllabus. In addition, practice in the field of Taxation is also highly remunerative.
My association with the students has helped me to bring this Question Bank cum
Practice Test Series (Assessment Year 2020-21) in its present form – simplified,
comprehensive and easy to understand.
Hope this Question Bank (17th Edition - 1st Print) serves the purpose of the students. I
shall be thankful to the readers for their suggestions, criticism and feedback if any.
Question Bank is updated on 30th April 2020 for CMA Inter Group 1 students
appearing in July & Dec 2020 Exam.
All questions are updated as per current law applicable for exam.
Email: suraj.agrawal@hotmail.com; Mobile: 85272 30445 Office: 011-47542530
ACKNOWLEDGEMENT
This Question Bank is a result of sincere efforts of our family members, colleagues,
associates, well-wishers and students, whose contribution cannot go unacknowledged.
Master Reyaan, my wife CA Monika Agrawal and my mother deserve special mention
for the time (on which they had the first right) they allowed me for this book.
I dedicate this book to my beloved late grandparents & Papa.
CA Suraj Agrawal
“One more step towards success”

PROFILE – CA SURAJ AGRAWAL
CA Suraj Agrawal is a Commerce Graduate [B.Com (H)] from Kolkata University and has
qualified CA in November 2005 in First Attempt from Kolkata. He has also secured All India 27th
Rank in CA-Foundation – 1st level (First Attempt – 70% marks).
Besides CA, he has completed Certification Course of International Taxation of the ICAI in
2009. He has also qualified CPA (Certified Public Accountant) examination from AICPA
(USA) in 2009 with more than 90 Marks in each of four papers in First Attempt [Presently, he is
inspired to complete CIMA, London as well as LLM in International Taxation (UK) by Year
2024]
He has started his career by joining Direct Tax Department of Reliance Industries Limited,
Mumbai and worked for near 2 years in core tax team. He has also worked in Taxation Division
of Chaturvedi & Shah (Chartered Accountants), Delhi followed by Tax Division of Ernst &
Young, Gurgaon, India (A Leading Big 4 Firm having International Presence). During the
working tenure of more than 4 years, he is exposed to in-depth theoretical and practical
knowledge of Direct Taxation & has a consultancy exposure in various industries including
Energy - Oil & Gas, Airlines, Retail, Infrastructure and Shipping Industries.
With the above academic and practical knowledge, he is in teaching profession from more than
10 years to serve professional students (taught 15,000 CA/CMAs Students till date). His in-
depth coverage of legal provisions in Tax with practical approach is very well recognized
among the students. He is also an associate member of ICAI and is also providing services as
Tax Consultant to various organisations.
He was also a member in WTO, FEMA & International Tax Study Group of the NIRC of the
ICAI for the year 2011-12 and was member of International Taxation & FEMA Research
Study Group of NIRC of the ICAI for the year 2010-11. He is regularly contributing tax articles
and various opinions on subjects of Direct Taxation including International Taxation in various
leading magazines [Taxmann] and professional forums.
CA Suraj Agrawal
“CA Rank Holder, Qualified CPA (USA), B.Com(H)”
Email: suraj.agrawal@hotmail.com
Contact: +91 85272 30445 / 011 4754 2530
FB: http://www.facebook.com/suraj.agrawal.564
https://www.youtube.com/channel/UCv-ybxFp_X9EWiei7YhZQmw
https://www.facebook.com/Surajagrawaltaxationclasses.satc
REVISED FEE STRUCTURE – CMA EXAM
OFFER - VALID TILL 15.05.2020
(PRICES ARE DISCOUNTED DUE TO LOCKDOWN)
SURAJ AGRAWAL TAX CLASS

8527230445 (WHATSAPP – 11am to 6pm)
TEAM – VANSH & JATIN
ONLINE PAYMENT – ONLINE CLASS DELIVERY
(Pay in 2 monthly installments)
CLASS VALIDITY TILL CLASS VALIDITY TILL CLASS VALIDITY TILL
SUBJECTS
31.07.2020 31.12.2020 30.06.2021
INTER - DT 4,000 6,000 7,500
INTER - IDT 4,000 5,000 6,500
INTER - OMSM 3,000 5,000 6,000
INTER - DT+IDT 7,000 10,000 12,000

(BEST OFFER)
INTER - IDT+OMSM 6,500 9,500 12,000
INTER -DT+IDT+OMSM 10,000 15,000 17,000

(BEST OFFER)
FINAL - DT 4,500 7,000 8,000
FINAL - IDT 4,000 5,000 6,500
FINAL - DT + IDT 7,500 11,000 12,000

(BEST OFFER)
NOTE:
1. E-BOOKS WILL BE PROVIDED (100%). No Restrictions. Open Files.
2. PRINTED BOOKS COST ARE NOT INCLUDED IN ABOVE FEE
3. COURIER CHARGES & PRINTED BOOK COST WILL BE DICUSSED AT THE TIME OF ADMISSION.
CONGRATULATIONS
CMA INTER DT RESULT AT SATC
JUNE 2018 to DEC 2019 EXAM (LAST 4 EXAMs)
40+ Students have scored exemptions in DT Subjects (60+ marks)
S.NO NAME REG. NO DT MATKS
1 MOHAMMAD ZOHAIB `04181033459 77
2 VAISHALI CHAUHAN `04171009980 72
3 SONALI `04151008330 67
4 SIMRAN SINHA `04171006940 67
5 RIDHI SINGH `01452001869 67
6 DEEPAK KR PANDEY `04131001662 67
7 DEEPAK KUMAR PANDEY `04131001662 67
8 GURPREET SINGH `01142000864 65
9 AYUSH DHOUNDIYAL `04172018516 65
10 MOHD. SHAHBAZ `04161000406 65
11 VIDYA P - 65
12 VIKALP KUMAR `04161000373 65
13 MOHAMMAD MOMIN `04142002305 65
14 EKTA SINGH `04171006108 65
15 RISHABH GOYAL `04182641048 65
16 VARSHA `04141006563 65
17 NISHITHA JAIN `04181030186 65
18 ADARSH KUMAR UPADHYAY `04152003297 65
19 ROHIT KUMAR `04191050156 65
20 SIMPI GARG `04151004924 64
21 RAHUL `04151000891 64
22 SHIVAM SINGH `04171006774 64
23 BHARTI `04171014248 64
24 NEELABH SRIVASTAVA `04151002871 64
25 MD. ZAYAUL HAQUE `03151008179 64
26 MD. ZEYAUL HAQUE `03151008179 64
27 SUNNY `04191055669 64
28 MIHIR KUMAR `04172020200 63
29 DEEPANJALI `04181035932 62
30 NEHA RANA `0418131694 62
31 PUNEET TIWARI `04162005106 62
32 GAGAN CHAUHAN `04112021154 62
33 SURAJ BISHT `04181025181 62
34 RAM SHARMA `04151007483 62
35 SHEENA `03152003100 61
36 PRAPTI BANSAL `04151004685 61
37 MOHIT ARYA `04172018239 61
38 PUNIT KUMAR `14092007508 61
39 SHASHIKANT - 61
40 DEEPAK KATHAYAT `04152002482 61
41 KAVITA RAWAT `04171006492 60
42 PURUSHOTAM KUMAR `03152004176 60
43 MOHIT BATRA `04182040268 60
44 AMIT GUPTA `04152005292 59
45 KIRAN `041562006169 59
46 VISHAL KESARWANI `04171014398 59
47 ANKIT SHARMA `04152003376 59
48 HIMANSHU SINGH BASNAL `04181023904 59
49 NANCY JAIN `04171012943 59
50 SAMARJEET SINGH `04181027869 58
51 SHALENDER SEMWAL `04142005213 58
52 ABHISHEK PARASHAR `04171008310 58
53 ANURAG `04171013969 58
54 OMKAR SINGH `04112018993 57
55 ANURADHA MISHRA `03162004159 57
56 NEHA SHARMA `04162003239 57
57 PANKAJ `04162002704 57
58 DEEPAK KR KAMAT `04142006457 57
59 RAHUL NEGI `04142001226 57
60 AMANDEEP `04191056094 57
61 RAVINDRA KUMAR SHAKYA `04191048134 57
62 VISHAL AGRAWAL `04171010078 56
63 KARAN PANESHAR `04171013462 56
64 OMKAR SINGH `04151007144 56
65 RAHUL MAITHANI `04151000047 56
66 RAHUL MAITHANI `04151000047 56
67 NISHI RAWAT `04191050973 56
68 AVINASH KUMAR `04132003466 55
69 GARGI LATWAL `04171012717 55
70 LAVKUSH MAURYA `04191052370 55
71 KANCHAN JHA `04191057402 55
73 KARAN PANESHAR `04171013462 54
74 MANISH KR. MISHRA `04182039272 54
75 TAUSIF ANSARI `04152003211 53
76 KAVITA `04151000769 53
77 NEHA KASHYAP `04161002757 53
78 SAMPANN SALUJA `04181025328 53
79 SHIVAM BHADALA `04152005828 53
80 SUNAINA `04171008399 53
81 VARUN MOR `01172016485 52
82 VARUN MOR `01172016485 52
83 SHIVAM CHAUHAN `04181033342 52
84 DEEPANSHU SAINI `04182041338 52
85 ANANT TYAGI `04181023907 52
86 DEEPAK KUMAR RAWAT `04142006457 51
87 PRIYA RAHI `04162003080 51
88 BUNTI/VINAY `04171007024 51
89 AKASH BHARDWAJ `04181030641 51
90 SAURABH JAIN `04151006110 50
91 ANKIT PARASHAR `04152000664 50
92 AKSHAY VERMA `04152000529 51
93 VINAY SHARMA `04162000208 50
94 ISHIKA KHANDELWAL `04181033400 50
95 DHARMESH SHARMA `04152004215 50
96 MADHURI KUMARI `04162000460 50
97 RAMAN KUMAR `04182040490 50
98 SHUBHAM CHAUHAN `04182045127 50
99 KISHAN KASHYAP `04181023519 50
100 VIVEK GUPTA `04151005101 49
101 AMRITA VIDWAN `04161001976 49
102 VINAY PATHNEJA `04191052148 49
103 ANKIT SINGH `04131000362 48
104 GUNDEEP SINGH GILL `04161006711 48
105 VARSHA `04141006563 48
106 VIPUL KR. TIWARI `04162003793 48
107 LOKESH KUMAR `04161001512 48
108 KAJAL NEGI `04161002549 47
109 PANKAJ RAWAT `04162002704 45
110 PRIYA AGRAWAL `04152002867 45
111 ARVIND KR. MAURYA `04181023520 45
112 RAJIV KUMAR `04151008445 44
113 BHARTI `04171014248 42
114 MAYANK BATRA `04171010401 42
115 KRISHNA HARI `04152006557 41
116 SHIVANI RAWAT `04161000302 40
117 SHUBHAM `04182037106 40
118 SAMARTH SOOD `04172019235 40
119 KOMAL PAL `04151007518 40
YOUTUBE CHANNEL NAME - "CA SURAJ AGRAWAL - SATC"

CONGRATULATIONS
CMA INTER IDT RESULT AT SATC
JUNE 2018 to DEC 2019 EXAM (LAST 4 EXAMs)
85+ Students have scored exemptions in GST/IDT Subjects (60+ marks)
S.NO NAME REG. NO IDT MATKS
1 PREETI RAWAT `04171007477 79
2 ASHISH SHIYANI `04151005102 76
3 CHANDA `04161002144 75
4 RAJNESH GUPTA `04151004925 74
5 NEHA VASHISHT (AIR 43) `04191056393 74
6 GAURANG RAJPAL `04152005198 73
7 MAYANK BATRA `04171010401 73
8 ATUL JAYANT `04132002741 71
9 MD.SHAHBAZ IDDRISI `04161000406 71
10 AMIT SHARMA `04161001090 70
11 ROHAN HEERA `04152006198 70
12 PRADEEP SINGH KANDARI `04171006214 69
13 ABHINAV PANNU `04152006249 69
14 SOUVAGYA GERU `04162003079 69
15 DEEPANJALI `04181035932 69
16 GAURAV SINGH `04161002697 69
17 VARUN GIRI `04151000294 69
18 RAHUL `04142005518 69
19 YASHODA RAWAT `04181025326 69
20 MAHIMA THREJA `04171007005 68
21 HITESHEE SHARMA `04162000658 68
22 VIABHAV SRIVASTAVA `04152003904 68
23 RAHUL KR. SONI `04171006939 68
24 KARAN KHANDELWAL `04171008770 68
25 PRIYA AGRAWAL `04152002867 67
26 ANKUSH GUPTA `04162003134 67
27 SHUBHAM `04131000312 67
28 MINAKSHI SINGH `04181031103 67
29 SNEHA `04152003288 66
30 NEELABH SRIVASTAVA `04151002871 66
31 RAJESH SHAH `04171015785 66
32 SUMMI `04121013160 66
33 YATIN BISHT `04181023861 66
34 MOHIT UPADHYAY `04171011775 65
35 NANCY JAIN `04171012943 65
36 SANJOLI JAIN `04151004777 65
37 MOHIT UPADHYAY - 65
38 DHARMESH SHARMA `04152004215 65
39 MD. ZEYAUL HAQUE `03151008179 65
40 NANCY JAIN `04171012943 65
41 NIKHIL SOLANKI `04152004440 65
42 VAISHALI CHAUHAN `04171009980 65
43 RAHUL RANJAN SINGH `04162004494 65
44 RAHUL NEGI `04142001226 64
45 AVINASH KUMAR `04132003466 64
46 KARTIK BHATT `04162003301 64
47 HIMANI AGGARWAL `04171009548 64
48 SHIVAM SINGH `04171006774 64
49 SWADHA CHITRANSH `04162000395 64
50 KARAN PANESHAR `04171013462 64
51 ANAMIKA DIXIT `04171006352 64
52 AMRITA VIDWAN `04161001976 63
53 ANKIT SINGH `04131000362 63
54 PANKAJ RAWAT `04162002704 63
55 AMAN GUPTA `04171011461 63
56 ANURAG `04171013969 63
57 SALONI MITTAL `04171007814 63
58 ANKIT SINGH `04131000362 63
59 PANKAJ `04162002704 63
60 ABHISHEK PARASHAR `04171008310 63
61 DEEPIKA KIROULA - 63
62 NEHA SHARMA `04162003239 62
63 KULDEEP RAWAT `04152004253 62
64 ROHIT SATI `04141004707 62
65 SHOBHIT KR. YADAV `04162002512 62
66 DINESH SINGH `04152004116 62
67 SAURABH JAIN `04151006110 62
68 IRSHAD `04161002726 62
69 RAVINDRA KUMAR SHAKYA `04191048134 62
70 MOHD. IRASHAD `04161002726 62
71 VAISHALI `04181036455 62
72 FAHREEN NAAZ `04171015009 61
73 OMKAR SINGH `04112018993 61
74 NANDINI ANAND `04171015462 61
75 FARHEEN NAAZ `04171015009 61
76 KRATIKA KIRAR `01142009362 61
77 RAM SHARMA `04151007483 61
78 DIVYANSH VERMA `04172017078 61
79 NEHA SINGH `04151007353 61
80 KOMAL PAL `04151007518 61
81 VINAY SHARMA `04162000208 60
82 PARVEJ ALAM `04162000312 60
83 VIVEK UPADHYAY `04171006249 60
84 BHARTI `04171014248 60
85 ANAND VALLABH OLI `04161004350 60
86 DEEPAK KUMAR PANDEY `04131001662 60
87 LOKESH KUMAR `04161001512 60
88 NEHA SURATIYA `04142001231 59
89 VIKALP KUMAR `04161000373 59
90 PRINCE GOYAL `04152006085 59
91 TAUSIF ANSARI `04152003211 59
92 SHWETA RANI `04181035559 59
94 NISHA KUMARI `04142001150 58
95 KISHAN KASHYAP `04181023519 58
96 KAMINI `04161000149 57
97 ROHIT `04181024640 57
98 APOORV GHILDIYAL `04151004798 56
99 KRISHNA HARI `04152006557 56
100 MOHAMMAD MOMIN `04142002305 56
101 DEEPAK KR KAMAT `04142006457 55
102 SIMRAN SINHA `04171006940 54
103 VIVEK PRASAD `04171009533 54
104 MOHINI AGRAWAL `04152005687 53
105 SONALI `04151008330 53
106 SAMPANN SALUJA `04181025328 53
107 REETU `04181028730 53
108 MOHIT ARYA `04172018239 52
109 BUNTI/VINAY `04171007024 52
110 VIKRANT JHA `04162002126 52
111 KAVITA RAWAT `04171006492 52
112 VIPUL KR. TIWARI `04162003793 52
113 PUNEET TIWARI `04162005106 51
114 SAURAV KUMAR `04161001645 51
115 KAVITA `04151000769 51
116 VISHAL KESARWANI `04171014398 51
117 GARGI LATWAL `04171012717 51
118 VARUN MOR `01172016485 50
119 SHALENDER SEMWAL `04142005213 49
120 ROHIT `04181024640 49
121 PRIYA RAHI `04162003080 48
122 NEHA KASHYAP `04161002757 48
123 YOGESH `04172018166 48
124 UJWAL CHAND RAMOLA `04171007621 48
125 JAYED SAIFI `04171011777 47
126 GUNDEEP SINGH GILL `04161006711 46
127 RAHUL `04151000891 45
128 RAMAN KUMAR `04182040490 44
129 ANKIT KUMAR RAJPUT `04182039949 43
130 NISHTHA JAIN `04181030186 42
131 SHIVANGI BISHT `04171008407 41
132 ARVIND KR. MAURYA `04181023520 40
THANKS ALL FOR SUCH WONDERFUL PERFORMANCE

WHATSAPP/CALL - 8527230445
CONGRATULATIONS
CMA INTER IDT RESULT FROM SATC
DEC 2017 EXAM RESULT
1. ARUN KUMAR 76 Marks in IDT DEC 2017
2. HEENA KAPOOR 73 Marks in IDT DEC 2017
3. VISHAL SINGH 73 Marks in IDT DEC 2017
4. RINKU 72 Marks in IDT DEC 2017
5. PARDEEP KUMAR 70 Marks in IDT DEC 2017
6. VAISHALI CHAUHAN 70 Marks in IDT DEC 2017
7. POONAM KHEKMA 68 Marks in IDT DEC 2017
8. OM PRAKASH 67 Marks in IDT DEC 2017
9. GANU RAJ DHODY 66 Marks in IDT DEC 2017
10. KANCHAN 66 Marks in IDT DEC 2017
11. GURPREET 65 Marks in IDT DEC 2017
12. HIMANSHU SAJWAN 63 Marks in IDT DEC 2017
13. OM PRAKASH JHA (AIR 17) 62 Marks in IDT DEC 2017
14. SUMIT SAINI (AIR 35) 60 Marks in IDT DEC 2017
15. PRAPTI BANSAL 59 Marks in IDT DEC 2017

16. MD. SHADAB ARYUM 56 Marks in IDT DEC 2017
17. JYOTI ADHIKARI 56 Marks in IDT DEC 2017
18. DURGA PRASAD 55 Marks in IDT DEC 2017
19. ANURAG CHAUDHARY 55 Marks in IDT DEC 2017
20. SIMRAN KAUR 53 Marks in IDT DEC 2017
21. PARVESH KUMAR 52 Marks in IDT DEC 2017
22. ASHIT SINGH NEGI 52 Marks in IDT DEC 2017
23. MANOJ KUMAR 51 Marks in IDT DEC 2017
…….& Many More
SURAJ AGRAWAL TAX CLASSES

CONGRATULATIONS
CMA INTER IDT/GST RESULT FROM SATC
June 2018 EXAM - 1st GST BATCH
1. PREETI RAWAT (VIDEO) 79 Marks in IDT/GST June 2018
2. ASHISH SHIYANI (F2F) 76 Marks in IDT/GST June 2018
3. CHANDA (F2F) 75 Marks in IDT/GST June 2018
4. RAJNESH GUPTA (Video) 74 Marks in IDT/GST June 2018
5. GAURANG RAJPAL (F2F) 73 Marks in IDT/GST June 2018
6. ATUL JAYANT (Video) 71 Marks in IDT/GST June 2018
7. AMIT SHARMA (F2F) 70 Marks in IDT/GST June 2018
8. ROHAN HEERA (Video) 70 Marks in IDT/GST June 2018
9. ABHINAV PANNU (Video) 69 Marks in IDT/GST June 2018
10. SOUVAGYA GERU (Video) 69 Marks in IDT/GST June 2018
11. PRADEEP SINGH KANDARI (Video) 69 Marks in IDT/GST June 2018
12. MAHIMA THREJA (Video) 68 Marks in IDT/GST June 2018
13. VAIBHAV SRIVASTAVA (Books) 68 Marks in IDT/GST June 2018
14. HITESHEE SHARMA (Video) 68 Marks in IDT/GST June 2018
15. ANKUSH GUPTA (F2F) 67 Marks in IDT/GST June 2018
16. SNEHA (Video) 66 Marks in IDT/GST June 2018
17. MOHIT UPADHYAY 65 Marks in IDT/GST June 2018
18. SANJOLI JAIN (F2F) 65 Marks in IDT/GST June 2018
19. SHIVAM SINGH (F2F) 64 Marks in IDT/GST June 2018
20. KARTIK BHATT (Video) 64 Marks in IDT/GST June 2018
21. HIMANI AGGARWAL (F2F) 64 Marks in IDT/GST June 2018
22. ANURAG 63 Marks in IDT/GST June 2018
23. ANKIT SINGH 63 Marks in IDT/GST June 2018
24. SALONI MITTAL (F2F) 63 Marks in IDT/GST June 2018
25. SHOBHIT KUMAR YADAV (Video) 62 Marks in IDT/GST June 2018
26. DINESH SINGH 62 Marks in IDT/GST June 2018
27. ROHIT SATI (Video) 62 Marks in IDT/GST June 2018
28. KRATIKA KIRAR (F2F) 61 Marks in IDT/GST June 2018
29. NANDINI ANAND (Video) 61 Marks in IDT/GST June 2018
30. FARHEEN NAAZ (Video) 61 Marks in IDT/GST June 2018
31. VINAY SHARMA 60 Marks in IDT/GST June 2018
32. PARVEJ ALAM 60 Marks in IDT/GST June 2018
…….& Many More

ADMISSION/INQUIRY - 8527230445
CA/CMA - NOV/DEC 2019 EXAM RESULT (ONE EXAM RESULT)
EXEMPTION HI EXEMPTION (FROM REGISTERED STUDENTS BATCH)
S.NO NAME REGISTRATION NO MARKS SUBJECT COURSE
1 KUNAL AGGARWAL 623158 81 TAX CA INTER
2 DEEPESH HOIYANI `01171005959 80 IDT CMA FINAL
3 YATIN BISHT `04181023861 76 OM & SM CMA INTER
4 NEHA VASHISHT (AIR 43) `04191056393 74 IDT CMA INTER
5 SATISH JANGRA `04142010658 72 IDT CMA FINAL
6 PRANSHU SINGAL `01171007386 72 IDT CMA FINAL
7 JAI PRAKASH GUPTA 523034 70 TAX CA INTER
8 RAHUL `04142005518 69 IDT CMA INTER
9 YASHODA RAWAT `04181025326 69 IDT CMA INTER
10 KISHAN KASHYAP `04181023519 69 OM & SM CMA INTER
11 RAMAN KUMAR `04182040490 68 OM & SM CMA INTER
12 REETU `04181028730 68 OM & SM CMA INTER
13 POONAM KHEMKA `04161003969 68 IDT CMA FINAL
14 GARIMA `14101014557 68 IDT CMA FINAL
15 MINAKSHI SINGH `04181031103 67 IDT CMA INTER
16 ATUL VISHVAKARMA 522810 67 TAX CA INTER
17 YATIN BISHT `04181023861 66 IDT CMA INTER
18 VARUN KHATTAR (AIR 30) `04141003976 66 IDT CMA FINAL
19 ADARSH KUMAR UPADHYAY `04152003297 65 DT CMA INTER
20 NISHITHA JAIN `04181030186 65 DT CMA INTER

21 ROHIT KUMAR `04191050156 65 DT CMA INTER
22 RAHUL RANJAN SINGH `04162004494 65 IDT CMA INTER
23 MINAKSHI SINGH `04181031103 65 OM & SM CMA INTER
24 NEHA VASHISHT `04191056393 65 OM & SM CMA INTER
25 ANAMIKA DIXIT `04171006352 65 OM & SM CMA INTER
26 SUNNY `04191055669 64 DT CMA INTER
27 ANAMIKA DIXIT `04171006352 64 IDT CMA INTER
28 TUSHAR KHATTAR `04131000398 63 IDT CMA FINAL
29 RITIKA 63 TAX CA INTER
30 RAVINDRA KUMAR SHAKYA `04191048134 62 IDT CMA INTER
31 VAISHALI `04181036455 62 IDT CMA INTER
32 MOHD. IRSHAD `04161002726 62 IDT CMA INTER
33 RAHUL KUMAR OJHA `03122001946 62 IDT CMA FINAL
34 RAJAN KUMAR PANDEY 624360 62 TAX CA INTER
35 MEENAKSHI JAIN 624144 62 TAX CA INTER
36 KISHAN SHARMA 626257 62 TAX CA INTER
37 DEEPAK KATHAYAT `04152002482 61 DT CMA INTER
38 KOMAL PAL `04151007518 61 IDT CMA INTER
39 LOKESH KUMAR `04161001512 61 OM & SM CMA INTER
40 KHUSHBOO BANSAL 620832 61 TAX CA INTER
41 MOHIT BATRA `04182040268 60 DT CMA INTER
42 LOKESH KUMAR `04161001512 60 IDT CMA INTER
43 AMITA NEGI `04142011566 60 IDT CMA FINAL
44 ROHIT SAINI `04171006308 60 IDT CMA FINAL

CONGRATULATIONS
CMA FINAL DT RESULT AT SATC
DT Marks IDT Marks
S. No. Name Status
at SATC at SATC
1 PARVEEN DUTT SHARMA (AIR 3) 67 - NOW CMA
2 MOHIT GARG (AIR 7) 51 - NOW CMA
3 ARUN SHEKHAR (AIR 22) 57 - NOW CMA
4 SACHIN ARORA (AIR 22) 42 - NOW CMA
5 ANURAG PANT (AIR 25) 61 56 NOW CMA
6 VARUN KHATTAR (AIR 30) 40 66 NOW CMA
7 SONU KUMAR (AIR 38) 51 - NOW CMA
8 PARAS JAIN (AIR 42) 40 84 NOW CMA
9 BHARAT BHUSAN (AIR 45) 54 - NOW CMA
10 RAHUL YADAV - 60 NOW CMA
11 DIVYA KHANDELWAL 74 - NOW CMA
12 RUCHI GOEL 72 - NOW CMA
13 SANJAY 66 - NOW CMA
14 JAVED AKHTAR 65 63 NOW CMA
15 HIMANSHU JAIN 65 54 NOW CMA
16 AVISH BAJAJ 65 - NOW CMA
17 BHARTI BHATIA 65 - NOW CMA
18 LAVI KUMBUJ 65 - NOW CMA
19 MOHD. ADIL 65 61 NOW CMA
20 SANDEEP KUMAR 65 - NOW CMA
21 SANDEEP MOHOR 65 - NOW CMA
22 SIMAN SARKAR 65 - NOW CMA
23 SUDHANSHU MITTAL 65 - NOW CMA
24 NITU 64 - NOW CMA
25 AQIB NAZAR 63 - NOW CMA
26 HIMANSHU SHARMA 62 - NOW CMA
27 LALIT SINGH JEENA 62 - NOW CMA
28 RAHUL GARG 61 - NOW CMA
29 SURAJ NATHANI 61 - NOW CMA
30 ANIL SHARMA 60 - NOW CMA
31 RICHA AGARAWAL 60 - NOW CMA
32 RITU BHATT 60 - NOW CMA
33 Pooja Negi 59 49 NOW CMA
34 ANITA SHARMA 59 - NOW CMA
35 DIVYA SAINI 59 - NOW CMA
36 SANKET GUPTA 59 - NOW CMA
37 Rohit Saini 58 60 NOW CMA
38 SHREY GUPTA 57 77 NOW CMA
39 ANJALI RANA 57 - NOW CMA
CONGRATULATIONS
40 AMARDEEP 57 79 NOW CMA
41 ANKITA NAGPURKAR 56 58 NOW CMA
42 MEGHA SHARMA 56 - NOW CMA
43 SHUBHAM GUPTA 56 - NOW CMA
44 SHWETA KUMARI 56 - NOW CMA
45 SUMEET KUMAR 56 - NOW CMA
46 KETAN JAIN 55 64 NOW CMA
47 EKTA BATRA 55 - NOW IN GROUP 4
48 GAURAV JINDAL 55 - NOW CMA
49 KAPIL DHINGRA 55 - NOW CMA
50 PRABHAKAR JOSHI 55 - NOW CMA
51 SHALINI KAMBOJ 55 - NOW CMA
52 SHEKAR KUMAR 55 - NOW CMA
53 SURBHI PATHANIA 55 - NOW CMA
54 Rinku Kumar Bind 54 - NOW IN GROUP 4
55 Apoorv Jaiswal 54 55 NOW CMA
56 GAYATRI VAISHYA 54 - NOW CMA
57 INDU SHARMA 54 - NOW CMA
58 PRANSHU SINGHAL 53 72 NOW CMA
59 AJAY KAUSHIK 53 - NOW CMA
60 MOHD. SHAHNAWAZ HUSSAIN 53 - NOW CMA
61 Shivam Garg 52 49 NOW CMA
62 ABHISHEK GUPTA 52 - NOW CMA
63 ABHISHEK KUMAR SINGH 52 - NOW CMA
64 ABHISHEK VERMA 51 - NOW CMA
65 UJJWAL JAIN 51 - NOW CMA
66 VARUN GERA 51 - NOW CMA
67 SYED SHABAD ALAM 50 60 NOW CMA
68 ANSHIKA TYAGI 50 - NOW CMA
69 JYOTI GUPTA 50 - NOW CMA
70 KAPIL 50 - NOW CMA
71 KHUSHBOO MISHRA 50 - NOW CMA
72 ROHAN KR SHARMA 50 - NOW CMA
73 SUBHASH BAJAJ 50 - NOW CMA
74 VISHAL CHAUHAN 49 57 NOW CMA
75 GARIMA 49 68 NOW CMA
76 AFROZ ALAM 49 - NOW CMA
77 MUKUL BANSAL 49 - NOW CMA
78 RAHUL KUMAR 49 - NOW IN GR-4
79 SHUBHAM GUPTA 48 64 NOW CMA
80 NISHTHA AGRAWAL 48 55 NOW CMA
CONGRATULATIONS
81 ABHISHEK YADAV 48 - NOW CMA
82 SADAN KUMAR 48 - NOW CMA
83 SHIVAM KESHARI 48 - NOW CMA
84 VIKAS KUMAR JHA 47 53 NOW CMA
85 POONAM KHEMKA 47 68 NOW CMA
86 SHIVAM KAUSHAL 47 - NOW CMA
87 MOHD. SAIF 46 63 NOW CMA
88 MANISHA BHATIA 46 61 NOW CMA
89 SAVITA 46 - NOW CMA
90 VASUDEVAN 45 75 NOW CMA
91 AMIT KUMAR KASHYAP 45 52 NOW CMA
92 AKANSHA TYAGI 45 - NOW CMA
93 ARCHANA SHAH 45 - NOW CMA
94 BABITA 45 - NOW CMA
95 LALIT SHARMA 45 - NOW CMA
96 SONAM VERMA 45 - NOW CMA
97 SUNIL 45 - NOW CMA
98 NIKHIL 44 58 NOW CMA
99 ANUBHAV 44 - NOW CMA
100 KUNJIT JAIN 44 - NOW CMA
101 VINOD ARORA 44 - NOW CMA
102 TUSHAR KHATTAR 43 63 NOW CMA
103 KAPIL SHARMA 43 63 NOW CMA
104 ANANT 43 - NOW CMA
105 CHINU ARORA 43 - NOW CMA
106 DEEPAK KR CHAUBEY 43 - NOW CMA
107 PUSKAR SINGH 43 - NOW CMA
108 V VARSHA 42 - NOW CMA
109 SANJEEV 41 - NOW CMA
110 HIMANSHU TYAGI 41 55 NOW CMA
111 SURAJ KANOJIA 41 - NOW CMA
112 AVINASH RAJBHAR 41 - NOW CMA
113 ROHAN KUMAR VAISHY 41 - NOW CMA
114 PANKAJ KR TRIVEDI 40 68 NOW CMA
115 SHILPA AGGARWAL 40 54 NOW CMA
116 SALONI GOEL 40 - NOW CMA
117 SHILPA SINGHAL 40 - NOW CMA
118 VIKAS AHLAWAT 40 - NOW CMA

“Thanks to all of you for making us proud”
Congratulations to all of you
CMA FINAL DT & IDT RESULT – DEC 2019 EXAM
SATC – 01147542530 / 8527230445
(NO FACE TO FACE CLASS IN CMA FINAL)
S. No. Name IDT Marks DT Marks Status Remarks
1 Varun Khattar (BOTH) 66 40 now CMA A.I.R. - 30
2 Deepesh Hoiyani 80 - now CMA IDT Highest in 4 Paper
IDT 2nd Highest in 4
3 Satish Jangra 72 - now CMA Paper
4 Pranshu Singhal 72 - now CMA IDT Highest in 4 Paper
5 Poonam Khemka 68 - now CMA IDT Highest in 4 Paper
6 Garima 68 - now CMA IDT Highest in 4 Paper
7 Tushar Khattar (BOTH) 63 43 now CMA IDT Highest in all 8 Paper
8 Rahul Kumar Ojha 62 - Now in Group 3 -
9 Amita Negi 60 - Now in Group 3 IDT Highest in 4 Paper
10 Rohit Saini (BOTH) 60 58 now CMA IDT Highest in all 8 Paper
11 Pooja Negi - 59 now CMA DT Highest in 4 Paper
12 Brijesh Kumar 54 - Now in Group 3 -
13 Rinku Kumar Bind - 54 Now in Group 4 DT Highest in 4 Paper
14 Apoorv Jaiswal - 54 now CMA -
15 Vikas Kumar Jha 53 - now CMA -
16 Shivcharan Singh S. 53 - Now in Group 3 -
17 Prateek Kumar Masih 49 - Now in Group 3 -
18 Shivam Garg (BOTH) 49 52 now CMA -
19 Sachin Sharma (BOTH) 48 - now CMA -
20 Ashmeet 47 - Now in Group 3 -
NOTICE: ALL ABOVE STUDENTS ARE REGISTERED STUDENTS OF SATC IN REGULAR

CMA FINAL DT/IDT/BOTH PENDRIVE/VIDEO CLASS & NOT ONLY A YOUTUBE OR
TELEGRAM CHANNEL SUBSCRIBER OR MERELY REFERRED OUR BOOKS.
CONGRATULATIONS
CMA FINAL INDIRECT TAX/GST RESULT FROM SATC
S. NO. NAME OF STUDENTS REGISTRATION NUMBER MARKS IN IDT EXAM
1 PARAS JAIN (AIR 42) 4141009584 84 Jun-19
2 AMARDEEP 4151002203 79 Dec-18
3 SHREY GUPTA 4151004191 77 Dec-18
4 VASUDEVAN KALASHASTHY 4161004499 75 Jun-19
5 ASHISH SINGH 4142005774 74 Dec-18
6 PANKAJ TRIVEDI 14092006037 68 Jun-19
7 RAVI GUPTA 4132003787 65 Dec-18
8 SHUBHAM GUPTA 4151001994 64 Dec-18
9 KETAN JAIN 4112022182 64 Dec-17
10 JAVED AKHTAR 4122012930 63 Dec-18
11 KAPIL SHARMA 4152003027 63 Jun-19
12 MD. SAIF 4142003895 63 Dec-17
13 MOHD. ADIL 4142010375 61 Jun-18
14 MANISHA BHATIA 4162001141 61 Jun-19
15 RAHUL YADAV 4151003566 60 Jun-19
16 SYED SHABAD ALAM 3151001485 60 Jun-19
17 SHIVEK MADAAN 4152000047 59 Jun-19
18 ANKITA NAGPURKAR 4151008311 58 Jun-18
19 NIKHIL 4152006069 58 Jun-19
20 VISHAL CHAUHAN 4122005659 57 Dec-18
21 NAVEEN GOSWAMI 414100550 56 Jun-19
22 ANURAG PANT 4132012214 56 Dec-17
23 NISHTHA AGRAWAL 4121009440 55 Jun-18
24 HIMANSHU TYAGI 4132000652 55 Jun-18
25 APOORV JAISWAL 4142003143 55 Jun-19
26 SHILPA AGGARWAL 4151003054 54 Jun-18
27 HIMANSHU JAIN 4142010175 54 Jun-18
28 ANUP 4121013398 53 Dec-18
29 MD. SHAHNAWAZ HUSSAIN 4132009413 53 Dec-17
30 AMIT KR KASHYAP 4142005646 52 Dec-18
31 SUMIT 4131008313 49 Jun-19
32 AMIT YADAV 4121000259 44 Jun-19

LAXMINAGAR I 8527230445 , 01147542530
INDEX
INCOME TAX PRACTICE SETs
S. No. Particulars Page No.
1. Practice Test Paper - 1 1.1 – 1.16

INCOME TAX TEST SERIES By CA Suraj Agrawal 1.1
SATC - INCOME TAX TEST SERIES – SET 1

(APPLICABLE FOR EXAM IN YEAR 2020 - ASSESSMENT YEAR 2020-21)
1. Mr. Sahil, a citizen of India, serving in the Ministry of Human Resources in India, was transferred to Indian
Embassy in Germany on 15th March 2019. His income during the financial year 2019-20 is given here
under:
Particulars `
Rent from a house situated at Australia, received in Australia. Thereafter, 4,80,000
remitted to Indian bank account.
Interest accrued on National Saving Certificate 25,600
Interest on Post office savings bank account 3,200
Salary from Government of India 8,65,000
Foreign Allowances from Government of India 9,00,000
Mr. Sahil did not come to India during the financial year 2019-20. Compute his Gross Total Income for the
Assessment year 2020-21.
Solution:
Mr. Sahil is a non-resident for the A.Y. 2020-21, since he was not present in India at any time during the previous
year 2019-20 [Section 6(1)].
As per section 5(2), a non-resident is chargeable to tax in India only in respect of following incomes:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or income deemed to accrue or arise in India.
Computation of Gross Total Income of Mr. Sahil for A.Y. 2020-21
Particulars `
Salaries (8,65000 – 50,000) 8,15,000
Salary from Government of India
(Income chargeable under the head ‘Salaries’ payable by the Government to a
citizen of India for services rendered outside India is deemed to accrue or arise in India
under section 9(1)(iii). Hence, such income is taxable in the hands of Mr. Sahil, a citizen
of India, even though he is a non-resident and rendering services outside India)
Foreign Allowances from Government of India
[Any allowances or perquisites paid or allowed as such outside India by the
Government of India to a citizen of India for rendering service outside India is Nil
exempt under section 10(7)].
Income from House Property Nil

Rent from a house situated at Australia, received in Australia (Income from property
situated outside India would not be taxable in India in the hands of a non-resident, since
it is neither accruing or arising in India nor is it deeming to accrue or arise in India nor is
it received in India)
Income from Other Sources
Interest accrued on National Savings Certificate is taxable 25,600
Interest on Post office savings bank account – exempt upto ` 3,500 Nil
Gross Total Income 8,40,600
*It is assumed that Mr. Sahil follows mercantile system of accounting.
SURAJ AGRAWAL TAX CLASSES I LAXMINAGAR I 011-47542530 I 8527230445

2. IMPORTANT: Mr. Charan grows paddy and uses the same for the purpose of manufacturing of rice in his
own Rice Mill. He furnished the following details for the financial year 2019 -20:
Cost of cultivation of 40% of paddy produce is ` 9,00,000 which is sold for ` 18,50,000.
Cost of cultivation of balance 60% of paddy is ` 14,40,000 and the market value of such paddy is
` 28,60,000.
Incurred ` 3,60,000 in the manufacturing process of rice on the balance (60%) paddy. The rice was sold
for ` 38,00,000.
Compute the Business income and Agricultural Income of Mr. Charan for A.Y. 2020-21.
Solution:
Computation of Business Income and Agriculture Income of Mr. Charan for A.Y. 2020-21
Business
Particulars Agricultural Income
Income
Sale of Rice - Business income
Sale Proceeds of Rice 38,00,000
Less: Market Value of paddy (60%) 28,60,000
Less: Manufacturing expenses 3,60,000
Business income 5,80,000
Agricultural Income
Market value of paddy (60%) 28,60,000
Less: Cost of cultivation 14,40,000
Sale of Paddy 14,20,000
Agricultural Income
Sale proceeds of paddy produce (40%) 18,50,000
Less: Cost of cultivation 9,00,000
9,50,000
Agricultural Income 23,70,000
3. You are required to compute the income chargeable under the head Salaries in the hands of Mr. Narayan
for the assessment year 2020-21 from the following details pertaining to the financial year 2019-20:
Particulars Amount
Basic salary 7,20,000
Dearness allowance 3,60,000
Commission 60,000
Entertainment allowance 7,500
Medical expenses reimbursed by the employer 10,000
Profession tax (of this, 50% paid by employer) 3,000
Health insurance premium paid by employer 9,000
Gift voucher given by employer on his birthday 15,000
Life insurance premium of Narayan paid by employer 42,000
Laptop provided for use at home. Actual cost of Laptop to employer 45,000
[Children of the assessee are also using the Laptop at home]
Employer company owns a motor car, which was provided to the assessee,
both for official and personal use. All repair and maintenance expenses are fully
reimbursed by the employer. No driver was provided. (Engine cubic capacity less
than 1.6 litres).
Annual credit card fees paid by employer [Credit card is not exclusively used for
official purposes] 5,000
Solution:
Computation of income chargeable under the head “Salaries” of Mr. Narayan for A.Y. 2020-21
Particulars
Basic Salary 7,20,000
Commission 60,000
Medical expenses reimbursed by the employer 10,000
Professional tax paid by the employer is a taxable perquisite as per section 17(2)(iv), since
it is an obligation of the employee which is paid by the employer 1500
Health insurance premium of ` 9,000 paid by the employer is an exempt perquisite [Clause
(iii) of proviso to section 17(2)] Nil
Gift voucher given by employer on Mr. Narayan’s birthday (entire amount is taxable since
the perquisite value exceeds ` 5,000) as per Rule 3(7)(iv) [See Note below] 15000
Life insurance premium of Mr. Narayan paid by employer is a taxable perquisite as per
section 17(2)(v) 42000
Laptop provided for use at home is an exempt perquisite as per Rule 3(7)(vii) Nil
Provision of motor car (engine cubic capacity less than 1.6 litres) owned by employer to
employee for both official and personal purposes – perquisite value would be ` 21,600
[` 1,800 ×12] as per Rule 3(2) 21600
Annual credit card fees paid by employer is a taxable perquisite as per Rule 3(7)(v) since
the credit card is not exclusively used for official purposes. 5000
Gross Salary 12,42,600
Less: Deductions under section 16
Statutory Deduction u/s 16(ia) 50,000
Entertainment allowance (deduction under section 16(ii) not allowable since Mr.
Narayan is not a Government employee) Nil
Professional tax paid allowable as deduction as per section 16(iii) 3,000
Income chargeable under the head “Salaries” 11,89,600
Note: As per Rule 3(7)(iv), the value of any gift or voucher received by the employee or by member of his
household on ceremonial occasions or otherwise from the employer shall be determined as the sum equal to the
amount of such gift. However, the value of any gift or voucher received by the employee or by member of his
household below ` 5,000 in aggregate during the previous year would be exempt as per the proviso to Rule
3(7)(iv). In this case, the gift voucher of ` 15,000 was received by Mr. Narayan from his employer on the occasion
of his birthday.
Since the value of the gift voucher exceeds the limit of ` 5,000, the entire amount of 15,000 is liable to tax as
perquisite.
An alternate view possible is that only the sum in excess of ` 5,000 is taxable in view of the language of Circular
No.15/2001 dated 12.12.2001, which states that such gifts upto 5,000 in the aggregate per annum would be
exempt, beyond which it would be taxed as a perquisite. As per this view, the value of perquisite would be `
10,000.
In such case, the gross salary and net salary would be, ` 12,37,600 and ` 11,84,600, respectively.

4. Mr. Ranjan owns a shop whose construction got completed in August 2018. He took a loan of ` 22 lakhs
from Bank of Baroda on 1-8-2017 and had been paying interest calculated at 9% per annum.
During the financial year 2019-20, the shop was let out at a monthly rent of ` 45,000. He paid municipal tax
of ` 18,000 each for the financial year 2018-19 and 2019-20 on 25-5-2019 and 15-4-2020, respectively.
Compute income under the head 'House Property' of Mr. Ranjan for the Assessment year 2020-21,
assuming that the entire amount of loan is outstanding on the last day of the current previous year.
Solution:
Computation of income under the head “House Property” of Mr. Ranjan for A.Y. 2020-21
Particulars ` `
Gross Annual Value (` 45,000 x 12) 5,40,000
Less: Municipal taxes (See Working Note 1) 18,000
Net Annual Value (NAV) 5,22,000
(i) 30% of NAV 1,56,600
(ii) Interest on housing loan (See Working Note 2) 2,24,400 3,81,000
Income chargeable under the head “House Property” 1,41,000
Working Notes:
1. Municipal taxes deductible from Gross Annual Value

As per proviso to section 23(1), municipal taxes actually paid by the owner during the previous year is allowed
to be deducted from Gross Annual Value. Accordingly, only ` 18,000 paid on 25.05.2019 is allowed to be
deducted from Gross Annual Value, while computing income from house property of the previous year
2019-20.
2. Interest on housing loan allowable as deduction under section 24

As per section 24(b), interest for the current year (` 22,00,000 x 9%) ` 1,98,000
Pre-construction interest
For the period 01.08.2017 to 31.03.2018
(` 22,00,000 x 9% x 8/12) = ` 1,32,000
` 1,32,000 allowed in 5 equal installments (` 1,32,000/5) from ` 26,400

P.Y. 2018-19 to P.Y. 2022-23 ` 2,24,400
3. Deduction under section 24(b), in respect of interest on housing loan for let out property, fully allowed without
any limit.
In the absence of information related to municipal value, fair rent and standard rent, the rent receivable has
been taken as the Gross Annual Value
The municipal tax of ` 18,000 paid on 15.4.2020 would be allowed as deduction while computing income
from house property of the previous year 2020-21.

5. Mr. Chauhan is having a trading business and his Trading and Profit & Loss Account for the financial year
2019-20 is as under:
Particulars Amount Particulars Amount
To Opening stock 1,50,000 By Sales 2,70,00,000
To Purchase 2,49,00,000 By Closing stock 1,00,000
To Gross profit 20,50,000
Total 2,71,00,000 Total 2,71,00,000
Salary to employees 5,00,000 By Gross Profit b/d 20,50,000
(Including Contribution to PF)
Donation to Prime Minister Relief
Fund 1,00,000
Provision for bad debts 50,000
Bonus to employees 50,000
Interest on bank loan 50,000
Family planning expenditure 20,000
incurred on employees
Depreciation 30,000
Income-tax 1,00,000
To Net profit 11,50,000
Total 20,50,000 Total 20,50,000
Other information:
(i) He incurred expenditure on furniture & fixtures of ` 35,000, which is paid in cash on 25.7.2019 to M/s
Décor World.
(ii) Depreciation allowable ` 40,000 [excluding depreciation on furniture & fixtures refer in (i) above] as per
Income-tax Rules, 1962.
(iii) No deduction of tax at source on payment of interest on bank loan has been made.
(iv) Out of salary, ` 25,000 pertains to his contributions to recognized provident fund which was deposited
after the due date of filing return of income. Further, employees contribution of ` 25,000 was also
deposited after the due date of filing return of income.
Compute business income of Mr. Chauhan for the Assessment Year 2020-21.
Solution:
Computation of Business Income of Mr. Chauhan for the A.Y. 2020-21
Particulars ` `
Net profit as per Profit and Loss Account 11,50,000
Add: Expenses not deductible
Donation to Prime Minister Relief Fund (Refer Note 1) 1,00,000
Provision for bad debts (Refer Note 2) 50,000
Family planning expenditure incurred on employees (ReferNote 3) 20,000
Depreciation as per Profit and Loss Account 30,000
Income-tax (Refer Note 4) 1,00,000
Employer’s contribution to recognized provident fund 25,000 3,25,000
(Refer Note 5)
14,75,000

Less: Expense allowed
Depreciation as per Income-tax Rules, 1962 (Refer Note 6) 40,000
14,35,000
Add: Employee’s contribution included in income as per Section
2(24)(x) (Refer Note 7) 25,000
Business Income 14,60,000
Notes:-
1. Donation to Prime Minister Relief Fund is not allowed as deduction from the business income, since it is not
incurred wholly and exclusively for business. It is allowed as deduction under Section 80G from the gross total
income.
2. Provisions for bad debts is allowable as deduction under Section 36(1)(viia) (subject to the limits specified
therein) only in case of banks, public financial institutions, State Financial Corporation and State Industrial
Investment Corporation. Therefore, it is not allowable as deduction in the case of Mr. Chauhan.
3. Expenditure on family planning is allowed as deduction under Section 36(1)(ix) only to a company assessee.
Therefore, such expenditure is not allowable as deduction in the hands of Mr. Chauhan.
4. Income-tax paid is not allowable as deduction as per the provisions of Section 40(a)(ii).
5. Since Mr. Chauhan’s contribution (Employer’s Contribution) to recognized provident fund is deposited after the
due date of filing return of income, the same is disallowed as per provisions of Section 43B, in computing
business income of A.Y. 2020-21.
6. As per second proviso to Section 43(1), the expenditure for acquisition of asset, in respect of which payment to
a person in a day exceeds ` 10,000 has to be ignored for computing actual cost, if such payment is made
otherwise than by way of A/c payee cheque/ bank draft or ECS. Accordingly, depreciation on furniture &
fixtures would not be allowed, since payment exceeding ` 10,000 (` 35,000 in this case) is made in cash.
Therefore, no adjustment is required to be made in the amount of depreciation computed as per Income-tax
Rules, 1962, since such amount does not include depreciation on furniture & fixtures.
7. Employee’s contribution is includible in the income of the employer by virtue of Section 2(24)(x). The deduction
for the same is not provided for as it was deposited after the due date under the Provident Fund Act.
8. TDS provisions under Section 194A are not attracted in respect of payment of interest on bank loan. Therefore,
disallowance under Section 40(a)(ia) is not attracted in this case.
6. IMPORTANT: Mr. Sahu entered into an agreement with Mr. Devansh to sell his residential house located at
New Delhi on 27.07.2019 for ` 82,00,000. Mr. Devansh was handed over the possession of the property on
16.12.2019 and the registration process was completed on 24.02.2020. Mr. Devansh had paid the sale
proceeds in the following manner;
(i) 25% through account payee bank draft on the date of agreement.
(ii) 50% on the date of the possession of the property.
(iii) Balance after the completion of the registration of the title of the property.
The value determined by the Stamp Duty Authority on 27.07.2019 was ` 92,00,000 whereas on 24.02.2020 it
was ` 94,50,000.
Mr. Sahu had acquired the property on 01.04.2002 for ` 21,00,000. After recovering the sale proceeds from
Devansh, he purchased another residential house property in Navi Mumbai for ` 33,20,000.

Cost Inflation Index for Financial Year(s)
2001-02 - 100
2002-03 - 105
2019-20 - 289
Compute the total income of Mr. Sahu for the Assessment Year 2020-21 and his net tax liability/refund due
for that year, assuming that he has earned income of ` 12,000 from Savings Bank A/c and received income
of ` 84,000 (Net of TDS) from lotteries. Assume that the tax deductible at source, if any, on consideration
for sale of residential house has been deducted.
Solution:
Computation of income chargeable under the head “Capital Gains” for A.Y. 2020-21
Particulars `
Capital Gains on sale of residential house
Actual sale consideration ` 82 lakhs
Value adopted by Stamp Valuation Authority ` 92 lakhs
Full value of sale consideration [Higher of the above] 92,00,000
[As per section 50C, in case the actual sale consideration declared by the assessee is
less than the value adopted by the Stamp Valuation Authority for the purpose of
charging stamp duty, then, the value adopted by the Stamp Valuation Authority shall
be taken to be the full value of consideration.
In a case where the date of agreement is different from the date of registration, stamp
duty value on the date of agreement can be considered provided the whole or part of
the consideration is paid by way of account payee cheque/bank draft or by way of ECS
through bank account on or before the date of agreement. In this case, since 25% of 82
lakhs was paid through account payee bank draft on the date of agreement, stamp duty
value on the date of agreement can be adopted as the full value of consideration]
Less: Indexed cost of acquisition of residential house 57,80,000

[` 21 lakhs x 289/105]
Long-term capital gains [Since the residential house property was held by Mr. Sahu for 34,20,000
more than 24 months immediately preceding the date of its transfer]
33,20,000
Less: Exemption under section 54
The capital gain arising on transfer of a long-term residential property shall not be
chargeable to tax to the extent such capital gain is invested in the purchase of one
residential house property in India within one year before or two years after the
date of transfer of original asset.
Long-term capital gains chargeable to tax 1,00,000
Interest on Savings Bank A/c 12,000
Income from lotteries [` 84,000 x 100/70] 1,20,000
1,32,000
[Under section 194B, tax @ 30% is required to be deducted at source on lottery
income at the time of payment, if the amount exceeds ` 10,000]
Less: Deduction under Chapter VI-A: Under section 80TTA, in respect of interest on
Savings bank a/c, restricted to 10,000
Total Income 2,22,000
Tax Liability
Tax on total income of ` 2,000 i.e., excluding LTCG & lotteries income Nil
Tax on long-term capital gains of ` 100,000 – NIL as it does not exceeds unexhausted
basic exemption limit of ` 2,48,000 [` 2,50,000 - ` 2,000, NIL
being total income excluding LTCG & income from lotteries]
Tax on income from lotteries @ 30% 36,000
Total 36,000
Less: Rebate u/s 87A 12,500
Tax before cess 23,500
Add: Health & Education cess @ 4% 940
Tax liability 24,440
Less: Tax deducted at source
- under section 194B on income from lotteries 36,000
- under section 194-IA on transfer of residential house (1% of ` 82,00,000) 82,000
Tax refundable 93,560
7.
(a) Mr. Pranav has 15% shareholding in TRP (P) Ltd. (engaged in trading business of toys) and has also
50% share in Pranav & Sons, a partnership firm. The accumulated profit of TRP(P) Ltd. is ` 30 lakh.
Pranav & Sons had taken a loan of ` 35 lakh from TRP(P) Ltd.
Examine whether the above loan can be treated as dividend as per the provisions of the Income-tax
Act, 1961.
Solution:
Section 2(22)(e) provides that any payment by a company, not being a company in which public are substantially
interested, of any sum by way of advance or loan
to a shareholder, being a person who is the beneficial owner of shares holding not less than 10% of voting
power, or
to any concern in which such shareholder is a partner and in which he has a substantial interest (i.e., he is
beneficially entitled to not less than 20% of the income of such concern)
is deemed as dividend, to the extent the company possesses accumulated profits.
In the present case, the loan given by TRP(P) Ltd. to Pranav & Sons, a partnership firm would be deemed as
dividend, since Mr. Pranav is the beneficial owner of 15% shareholding in TRP(P) Ltd. and also has substantial
interest in Pranav & Sons (as he is beneficially entitled to 50% of the income of the firm).
However, the amount of loan would be deemed as dividend only to the extent TRP(P) Ltd. possesses accumulated
profits. Therefore, out of the loan of ` 35 lakhs given to Pranav & Sons, only ` 30 lakhs, i.e., to the extent of
accumulated profit of TRP(P) Ltd., would be deemed as dividend.
(b) Discuss the taxability or otherwise in the hands of the recipients, as per the provisions of the Income-
tax Act, 1961:
(i) MNS Private Limited, a closely held company, issued 12,000 shares at ` 125 per share. (The face
value of the share is ` 80 per share and the fair market value of the share is ` 110 per share).
(ii) Mr. Arun received an advance of ` 56,000 on 11-09-2019 against the sale of his house. However,
due to non-payment of instalment in time, the contract has cancelled and the amount of ` 56,000
was forfeited.
(iii) Mr. Nitin, transferred a house property to his son Mr. Raj without consideration. The value of the
house is ` 12 lacs as per the Registrar of stamp duty.
(iv) Mr. Tanmay gifted a refrigerator to his sister’s daughter Tannu on her marriage. The fair market
value of the refrigerator is ` 75,000.

Solution:
S.No. Taxable / Reason

Not Taxable
(i) Taxable Since MNS Private Limited, a closely held company, issued 12,000 shares at a
premium (i.e., issue price exceeds the face value of shares), the excess of the
issue price of the shares over the fair market value would be taxable under section
56(2)(viib) in its hands under the head “Income from other sources”.
Therefore, ` 1,80,000 [12,000 × ` 15 (` 125 –` 110)] shall be taxable as income in

the hands of MNS Private Limited under the head “Income from other sources”.
(ii) Taxable Any sum of money received as an advance or otherwise in the course of
negotiations for transfer of a capital asset would be chargeable to tax under the
head “Income from other sources”, if such amount is forfeited and the negotiations
do not result in transfer of such capital asset [Section 56(2)(ix)].
Therefore, the amount of ` 56,000 received as advance would be chargeable to

tax in the hands of Mr. Arun under the head “Income from other sources”, since it
is forfeited on account of cancellation of contract for transfer of house, being a
capital asset, due to non-payment of installment in time.
(iii) Not Taxable As per section 56(2)(x), immovable property received without consideration by any
person from his relative is not taxable.
In the present case, since Mr. Nitin is the father of Mr. Raj, ` 12 lakhs, being the
stamp duty value of house property received, without consideration, would not be
chargeable to tax in the hands of Mr. Raj.
(iv) Not Taxable Refrigerator is not included in the definition of “property”, for the purpose of
taxability under section 56(2)(x) in the hands of the recipient under the head
“Income from other sources”.
Further, the same has been received by Tannu on occasion of her marriage from
her maternal uncle, being a relative.
Hence, ` 75,000, being the fair market value of refrigerator received without
consideration from a relative on the occasion of a her marriage is not taxable in the
hands of Tannu, even though its value exceeds ` 50,000.
8. Saharsh gifted ` 12 lakhs to his wife, Sandhya on her birthday on, 1st February, 2019. Sandhya lent `
6,00,000 out of the gifted amount to Karuna on 1st April, 2019 for six months on which she received
interest of ` 60,000. The said sum of ` 60,000 was invested in shares of a listed company on 3rd October,
2019, which were sold for ` 85,000 on 30th March, 2020. Securities transactions tax was paid on such sale.
The balance amount of gift was invested on 1st April 2019, as capital by Sandhya in her new business. She
suffered loss of ` 25,000 in the business in Financial Year 2019-20.
In whose hands the above income and loss shall be included in Assessment Year 2020-21, assume that
capital invested in the business was entirely out of the funds gifted by her husband. Support your answer
with brief reasons.
Solution:
In computing the total income of any individual, there shall be included all such income as arises directly or
indirectly, to the spouse of such individual from assets transferred directly or indirectly, to the spouse by such
individual otherwise than for adequate consideration or in connection with an agreement to live apart.

Interest on loan: Accordingly, ` 60,000, being the amount of interest on loan received by Mrs. Sandhya, wife of
Mr. Saharsh, would be includible in the total income of Mr. Saharsh, since such loan was given by her out of the
sum of money received as gift from her husband.
Loss from business: As per Explanation 2 to section 64, income includes loss. Thus, clubbing provisions would
be attracted even if there is loss and not income.
Thus, the entire loss of ` 25,000 from the business carried on by Mrs. Sandhya would be includible in the total
income of Mr. Saharsh, since as on 1st April 2019, the capital invested was entirely out of the funds gifted by her
husband .
Short-term capital gain: The short-term capital gain of ` 25,000 (` 85,000, being the sale consideration less `
60,000, being the cost of acquisition) arising in the hands of Mrs. Sandhya from sale of shares acquired by
investing the interest income of ` 60,000 earned by her (from the loan given out of the sum gifted to her by her
husband), would not be included in the hands of Mr. Saharsh. Since securities transaction tax has been paid, such
short-term capital gain on sale of listed shares is taxable@15%
Income from the accretion of the transferred asset is not liable to be included in the hands of the transferor and,
therefore, such income is taxable in the hands of Mrs. Sandhya.
9. From following information furnished for the year ended 31-03-2020, compute the total income of Mr.
Arihant for A.Y. 2020-21 and show the items eligible for carry forward and upto which assessment year:
Particulars Amount (`)
Long-term capital gain from sale of urban land 2,30,000
Long-term capital loss on sale of shares (STT not paid) 85,000
Loss from speculative business X 25,000
Income from speculative business Y 15,000
Loss from specified business covered under section 35AD 40,000
Income from salary (computed) 3,50,000
Loss from house property 2,20,000
Income from trading business 75,000
Following are details of unabsorbed depreciation and the brought forward losses:
(1) Unabsorbed depreciation of ` 11,000 pertaining to A.Y 2019-20.
(2) Losses from owning and maintaining of race horses pertaining to A.Y. 2019-20 - ` 5,000.
(3) Brought forward loss from trading business ` 8,000 relating to A.Y.2016-17.
Solution:
Computation of total income of Mr. Arihant for the A.Y. 2020-21
Particulars ` `
Salaries
Income from Salary 3,50,000
Less: Loss from house property set-off against salary income as per
section 71(3A), restricted to 2,00,000 1,50,000
Profits and gains of business or profession
Less: Brought forward loss from trading business of A.Y. 2016-17 can be set off
against current year income from trading business, as per section 72(1), since
the eight-year time limit as specified under section 72(3), within which set- off is
permitted has not expired. 8,000
67,000
Less: Unabsorbed depreciation 11,000 56,000
Income from speculative business Y 15,000
Less: Loss from speculative business X to be set-off as per section 73(1) 15,000
Loss from speculative business X to be carried forward to A.Y. 2021-22 as per
section 73(2) 10,000
Capital Gains
Long term capital gain on sale of urban land 2,30,000
Less: Long term capital loss on sale of shares (STT not paid) set-off as per
section 70(3)] 85,000 1,45,000
Items eligible for carried forward to A.Y.2021-22
Particulars `
Loss from House Property
As per section 71(3A), Loss from house property can be set –off against any other
head of income to the extent of ` 2,00,000 only. As per section 71B, balance loss not set-
20,000
off can be carried forward to the next year for set-off against income from house property
of that year. It can be carried forward for a maximum of eight assessment years i.e., upto
A.Y. 2028-29, in this case.
Loss from speculative business X
Loss from speculative business can be set-off only against profits from any other
speculation business. As per section 73(2), balance loss not set-off can be carried forward
to the next year for set-off against speculative business income of that year. Such loss can 10,000
be carried forward for a maximum of four assessment years i.e., upto A.Y. 2024-25,
in this case, as specified under section 73(4).
Loss from specified business under section 35AD

Loss from specified business under section 35AD can be set-off only against profits of any
other specified business. If loss cannot be so set-off, the same has to be carried forward
40,000
to the subsequent year for set off against income from specified business, if any, in that
year. As per section 73A(2), such loss can be carried forward indefinitely for set-off against
profits of any specified business .
Loss from the activity of owning and maintaining race horses
Losses from the activity of owning and maintaining race horses (current year or
brought forward) can be set-off only against income from the activity of owning and
maintaining race horses. If it cannot be so set-off, it has to be carried forward to the next
5,000
year for set-off against income from the activity of owning and maintaining race
horses, if any, in that year. It can be carried forward for a maximum of four assessment
years, i.e., upto A.Y.2023-24, in this case as specified under section 74A(3).
10. IMPORTANT: Mr. Anay manufactures toys in a factory located in Noida. His profit from the manufacture of
toys for Assessment year 2020-21 is ` 1.85 crore and total turnover is ` 18.70 crore. On 1st April 2019,
there were 100 employees engaged in his factory. Due to increase in demand of his products, he employed
140 additional employees during the previous year 2019-20 comprises of:
15 casual employees employed on 15th April 2019 till 31st January 2020 on monthly emolument of `
22,000 per month
40 regular employees employed on 1st May, 2019 on monthly emolument of ` 22,000 per month
25 contractual employees employed on 1st July 2019 for 2 years on monthly emolument of ` 15,000 per
month
35 regular employees employed on 1st August, 2019 on monthly emolument of 30,000 per month
25 regular employees employed on 1st October, 2019 on monthly emolument of 22,000 per month
Compute the deduction under Section 80JJAA, if available to Mr. Anay for Assessment year 2020-21,
assuming that monthly emoluments were paid by use of ECS. The regular and contractual employees
participate in the recognised provident fund while casual employees do not.
Would your answer be different if Mr. Anay is engaged in the manufacture of apparel? Examine.
[Note - Ignore the amount of deduction available under section 80JJAA to Mr. Anay, for the employees
employed in preceding previous years, while computing the deduction under 80JJAA for the assessment
year 2020-21]
Solution:
Computation of deduction under section 80JJAA
Mr. Anay is eligible for deduction under section 80JJAA since he is subject to tax audit under section 44AB for
A.Y.2020-21, as his total turnover from business exceeds ` 1 crore and he has employed “additional employees”
during the P.Y.2019 -20.
Additional employee cost = [` 22,000 × 40 new regular employees × 11 months] + [` 15,000 per month × 9 months
× 25 new contractual employees]
= ` 96,80,000 + ` 33,75,000 = ` 1,30,55,000
Deduction under section 80JJAA = 30% of ` 1,30,55,000 = ` 39,16,500.
Working Note: Number of Additional employees employed during the P.Y. 2019-20
No. of
additional
Particulars employees
Total number of additional employees employed during the year 140
Less: Casual workmen employed on 15th April 2019, who do not participate in
the recognised provident fund 15
Regular employees employed on 1st August 2019, since their total monthly
emoluments exceed ` 25,000 35
Regular employees employed on 1st October 2019, for a period of less than 240
days during the P.Y.2019-20 25 75
Total number of additional employees employed during the P.Y. 2019-20 65
Yes, the answer would be different, if Mr. Anay is engaged in the business of manufacture of apparel. Since the
number of days of employment in a year has been relaxed from 240 days to 150 days in case of apparel industry,
wages paid to regular employees employed on 1.10.2019 would also qualify for deduction under section 80JJAA
for A.Y. 2020-21.
Additional employee cost = ` 1,30,55,000 + ` 33,00,000 (` 22,000 x 6 x 25)

` 1,63,55,000
Deduction under section 80JJAA = 30% of ` 1,63,55,000 = ` 49,06,500

11. IMPORTANT: You are required to compute the total income and tax liability of Mr. Anoop, a resident
individual aged 55 years, for the Assessment Year 2020-21 from the following information shown in his
Profit and Loss Account for the year ended 31st March 2020:
(i) The net profit was ` 8,40,000.
(ii) Depreciation debited in the books of account was ` 1,05,000.
(iii) The following incomes were credited in the Profit & Loss Account :
(a) Interest on notified government securities ` 32,000
(b) Dividend from a foreign company ` 28,000.
(c) Gold chain worth ` 78,000 received as gift from his mother.
(iv) Interest on loan amounting to ` 82,000 was paid in respect of capital of ` 8,20,000 borrowed for the
purchase of new plant & machinery which has been put to use on 12th April, 2020.
(v) General expenses included:
(a) An expenditure of ` 18,500 which was paid by a bearer cheque.
(b) Compensation of ` 4,500 paid to an employee while terminating his services in business unit.
Additional Information:
(i) Depreciation allowable as per Income-tax Act, 1961 was ` 1,16,000 [without considering depreciation on
new plant & machinery referred to in (iv) above] .
(ii) He contributed the following amounts by cheque:
(a) ` 48,000 in SukanyaSamridhi Scheme in the name of his minor daughter Anya.
(b) ` 23,000 to the Clean Ganga Fund set up by the Central Government.
(c) ` 28,000 towards premium for health insurance and ` 2,500 on account of preventive health check up
for self and his wife.
(d) ` 30,000 on account of medical expenses of his father aged 82 years (no insurance scheme had been
availed on the health of his father).
Solution:
Computation of total income of Mr. Anoop for the Assessment Year 2020-21
Particulars ` ` `
Profits and gains from business or profession
Net profit as per profit and loss account 8,40,000

Less: Income credited to profit and loss account but not
taxable under this head
Interest on notified government securities 32,000
Dividend from foreign company 28,000
Gift of gold chain received from his mother 78,000 1,38,000
7,02,000
Add: Depreciation debited in the books of account 1,05,000
8,07,000
Add: Expenses debited to profit and loss account but not
allowable as deduction
Interest on capital borrowed for purchase of plant & machinery 82000
[As per the proviso to section 36(1)(iii), the interest on loan

borrowed for purchase of new asset which is not put to use upto
31.3.2020 not allowable as deduction. The said amount has to be
added to the cost of the asset. Since the amount has been
debited to profit and loss account, it has to be added back].
Expenditure in excess of ` 10,000 paid by bearer cheque to be 18500

disallowed as per section 40A(3)
Compensation paid to an employee on termination of his services -

in the business unit is allowable on the grounds of commercial
expediency. Hence, no disallowance is attracted 100500
907500
Less: Depreciation allowable under the Income-tax Act, 1961 116000 791500
[Depreciation on new plant & machinery would not be allowed,

since it was not put to use during the previous year 2019-20]

Interest on notified Government Securities, exempt under section
10(15) -
Dividend from foreign company [(not exempt under section

10(34)] 28000
Gift of gold chain received from his mother is not taxable, since -
mother is a relative [clause of proviso to section 56(2)(x)]
- 28000
Less: Deductions under Chapter VI-A
Under Section 80C

Deposit in Sukanya Samridhi Scheme 48,000
Under Section 80D
Medical insurance premium

Self and wife ` 28,000 + ` 2,500
preventive health check up, subject to a maximum of 25,000
Medical expenses of father, being a very senior citizen, 30,000

since there is no insurance policy in his name, 55,000
Under section 80G

Donation to Clean Ganga Fund
(qualifies for 100% deduction) 23,000 1,26,000
Tax on total income @ 5% on ` 2,50,000

(` 5,00,000 less ` 2,50,000, being the basic exemption limit) plus 51200
@20% on ` 1,93,500 (in excess of ` 5,00,000)
Add: Health & Education cess @4% 2048
Tax Payable 53,248

Tax Payable (rounded off) 53,250
12. Shurya Bank Ltd., a banking company to which the Banking Regulations Act, 1949 applies, has paid
interest of ` 7,000 to Mr. Bhuwan, a resident Indian, from its Lucknow branch and ` 8,000 from Kanpur
branch. If the bank has not adopted core banking solutions, is tax required to be deducted at source from
such interest payments made on 31-3-2020? Examine the provisions of the Income-tax Act, 1961 in this
regard. Will your answer be different if the bank has adopted core banking solutions?

Solution:
No depreciation is allowable on such amount since the asset was not put to use during the P.Y. 2019-20.
Tax is deductible @10% under section 194A in respect of interest credited or paid by a banking company, if the
same exceeds ` 10,000.
This threshold is with reference to interest credited or paid by a branch of the bank, where the bank has not
adopted core banking solutions.
On the other hand, if the bank has adopted core banking solutions, then, the threshold of ` 10,000 would apply in
respect of the aggregate interest credited or paid by all the branches of the bank.
Therefore, if Shurya Bank Ltd. has not adopted core banking solutions, it need not deduct tax on interest of ` 7,000
and ` 8,000 paid by its Lucknow Branch and Kanpur Branch, respectively, to Mr. Bhuwan, since the interest paid
by each branch does not exceed 10,000.
However, if Shurya Bank Ltd. has adopted core banking solutions, it has to deduct tax at source@10% on ` 15,000
(` 7,000 + ` 8,000) under section 194A, since the aggregate interest paid by its Lucknow and Kanpur branches
exceed ` 10,000.
13. IMPORTANT: Mr. Shikhar, aged 52 years, provides you the following information and requests you to
determine his advance tax liability with due dates for the financial year 2019-20.
Estimated tax liability for the financial year 2019-20 ` 85,000

Tax deducted at source for this year ` 15,000
(i) Would your answer change if Mr. Shikhar is eligible for and has opted for presumptive tax provisions
under section 44AD and his tax liability is entirely on account of such income (ignore TDS)?
(ii) What would be your answer if, instead of section 44AD, he is eligible for and has opted for presumptive
tax provisions under section 44AE?
Solution:
Determination of Advance Tax Liability of Mr. Shikhar
Particulars
Estimated tax liability for the financial
year 2019-20 85,000
Less: Tax deducted at source 15,000
Tax payable 70,000
Due Date of installment Amount payable

Not less than 15% of
On or before 15th June, 2019 advance tax liability 10,500
advance tax liability Less 21,000
amount paid in earlier (` 31,500, being 45% of `
On or before 15th September, 2019 installment 70,000 - ` 10,500)
advance tax liability Less 21,000
amount paid in earlier (52,500, being 60% of `
On or before 15th December, 2019 installment 70,000 - ` 31,500)
17,500
(70,000, being 100% of `
On or before 15th March, 2020 70,000 - ` 52,500)
In case he is eligible for presumptive tax provisions under section 44AD and his entire tax liability is on account of
such income, he can pay his entire advance tax liability in one installment on or before 15.3.2020, without
attracting interest under section 243C.
This benefit would, however, not be available if he is eligible for and has opted for presumptive tax provisions
under section 44AE, in which case he has to pay his advance tax in four installments as indicated above, failing
which interest under section 234C would be attracted.
14. When and at what rate, a seller is required to collect tax source on sale of motor vehicle. Also, discuss
whether tax is required to be collected at source on sale of motor vehicle by manufacturers to dealers.
Solution:
As per section 206(1F), every person, being a seller, who receives any amount as consideration for sale of a motor
vehicle of the value exceeding ` 10 lakhs, shall collect tax from the buyer@1% of the sale consideration.
In case of sale of a motor vehicle, tax shall be collected at the time of receipt of such amount. The CBDT has
clarified that tax is required to be collected at source on all transactions of retail sales and accordingly, it will not
apply on sale of motor vehicles by manufacturers to dealers/distributors.
15. Mr. Atharv filed his return of income on 30th September, 2020 related to Assessment Year 2020-21. In the
month of October 2020, his tax consultant found that the interest on fixed deposit was omitted in the tax
return. Can Mr. Atharv file a revised return?
Assume that the due date for furnishing return of income in his case, was 31st July, 2020 and the
assessment was not completed till the month of October 2019.
Solution:
As per section 139(5), if any person, having furnished a return under section 139(1), within the due date or a
belated return under section 139(4), discovers any omission or any wrong statement therein, he may furnish a
revised return at any time –
before the end of the relevant assessment year or

before the completion of assessment,
whichever is earlier.
For assessment year 2020-21, the belated return has to be furnished before 31st March 2021 or before completion
of assessment, whichever is earlier.
Since Mr. Atharv has filed his return after 31.7.2020, being the due date of filing return of income under section
139(1) in his case, but before 31.3.2021/completion of assessment, the said return is a belated return.
Thus, in the present case, Mr. Atharv can file a revised return as of October 2020, since he has found an omission
in the belated return filed by him for A.Y. 2020-21 and assessment is yet to be completed and 31.3.2021, being the
end of A.Y. 2020-21 has not elapsed


1. Mr. Kavin, a non-resident, entered into the following transactions during the financial year 2019-20:
(a) Received ` 20 lakhs from a non-resident for use of patent for a business in India.
(b) Received foreign currency equivalent to ` 15 lakhs from a non-resident Indian for use of know-how for
a business in Sri Lanka and this amount was received in Korea.
(c) Received ` 7 lakhs from RR Ltd., an Indian company as fees for providing technical services in India.
(d) Received ` 5 lakhs from R & Co., Mumbai, resident in India, for conducting the feasibility study for a
new project in Nepal and the payment was made in Nepal.
(e) Received ` 8 lakhs towards interest on moneys borrowed by a non-resident for the purpose of
business within India. Amount was received in Korea.
Examine briefly whether the above receipts are chargeable to tax in India.
Solution:
Taxability of certain receipts in the hands of Mr. Kavin, a non-resident, for A.Y. 2020-21
Taxability Reason
(a) Taxable Amount of ` 20 lakhs received from a non-resident is deemed to accrue or arise in
India by virtue of section 9(1)(vi)(c), since the patent was used for a business in India.
Therefore, the amount is chargeable to tax in India.
(b) Not Taxable Foreign currency equivalent to ` 15 lakhs received in Korea from a non-resident for
use of know-how for a business in Sri Lanka is not deemed to accrue or arise in India
as per section 9(1)(vi)(c), since it is in respect of a business carried on outside India.
Also, the amount was received outside India. Therefore, the same is not chargeable to
tax in India.
(c) Taxable Amount of ` 7 lakhs received from RR Ltd., an Indian Company, is deemed to accrue
or arise in India by virtue of section 9(1)(vii)(b), since it is for providing technical
services in India. Therefore, the same is chargeable to tax in India.
(d) Not Taxable Amount of ` 5 lakhs received in Nepal from R & Co., a resident, for conducting
feasibility study for the new project in Nepal is not deemed to accrue or arise in
India as per section 9(1)(vii)(b), since such study was done for a project outside
India. The amount was also received outside India. Therefore, the same is not
chargeable to tax in India.
(e) Taxable Amount of ` 8 lakhs received in Korea towards interest on moneys borrowed by a non-
resident for the purpose of business within India is deemed to accrue or arise in India
by virtue of Section 9(v)(c), since money borrowed was used for the purpose of
business in India. Therefore, the same is chargeable to tax in India.
2. Examine with reasons whether the following receipts are taxable or not under the provisions of Income-tax
Act, 1961.
(a) Mr. Akash received a sum of ` 3,00,000 as compensation from “Sahayata Foundation” towards the loss
of property on account of Flood Disaster at Chennai.
(b) Rent of ` 60,000 received for letting out agricultural land for a movie shooting.
(c) Dividend of ` 17 lakhs received by Mr. Yatin during P.Y. 2019-20 from A Ltd., a domestic company.
(d) Agricultural income of ` 1,30,000 of Mr. Sunil from a land situated in Canada.

Solution:
Taxability of receipts under the provisions of Income-tax Act, 1961
Taxability Reason
(a) Taxable As per Section 10(10BC), any amount received or receivable by an individual as
compensation, on account of any disaster, from the Central Government, State
Government or a local authority is exempt from tax, to the extent the individual has
not been allowed deduction under any other provision of Income-tax Act, 1961 on
account of any loss or damage caused by such disaster.
However, in this case, since Mr. Akash has received a compensation of

` 3,00,000 from Sahayata Foundation, and not from the Central Government or
State Government or local authority, no exemption will be available under section
10(10BC) and the same is chargeable to tax.
(b) Taxable Agricultural income is exempt from income-tax as per Section 10(1). Agriculture
income means, inter alia, any rent or revenue derived from land which is situated in
India and is used for agricultural purposes. In this case, rent is being derived from
letting out of agricultural land for a movie shoot, which is not an agricultural
purpose. In effect, the land is not being put to use for agricultural purposes.
Therefore, ` 60,000, being rent received from letting out agricultural land
for movie shooting, is not exempt under Section 10(1) and the same is chargeable
to tax.
(c) Partly Dividend received from a domestic company is subject to dividend distribution
taxable tax in the hands of domestic company under section 115-O. Dividend income
received from an Indian company, which is subject to dividend distribution tax, is
exempt under section 10(34). However, dividend in excess of `10 lakhs received,
inter alia, by a resident individual is chargeable to tax under section 115BBDA and
not exempt under section 10(34).
Therefore, in this case, dividend received upto ` 10 lakh is exempt in the hands of
Mr. Yatin under section 10(34). ` 7 lakh, being dividend in excess of ` 10 lakh, is
taxable in his hands @10% as per section 115BBDA.
(d) Taxable Agricultural income from a land situated in any foreign country is not exempt under
section 10(1) and hence, it is chargeable to tax - ` 1,30,000
Therefore, in this case, agricultural income of of Mr. Sunil from land situated in
Canada is taxable.
3. Mr. Kashyap retired from the services of M/s ABC Ltd. on 31.01.2020, after completing service of 30 years
and one month. He had joined the company on 1.1.1988 at the age of 30 years and received the following
on his retirement:
(i) Gratuity ` 5,50,000. He was covered under the Payment of Gratuity Act, 1972.
(ii) Leave encashment of ` 3,30,000 for 330 days leave balance in his account. He was credited 30 days
leave for each completed year of service.
(iii) As per the scheme of the company, he was offered a car on 31.01.2020 which was purchased on
01.03.2017 by the company for ` 5,00,000. Company has recovered ` 2,00,000 from him for the car.
Company depreciates the vehicles at the rate of 15% on Straight Line Method.
(iv) An amount of ` 3,00,000 as commutation of pension for 2/3 of his pension commutation.
(v) Company presented him a gift voucher worth ` 8,000 on his retirement.

Following are the other particulars:
(i) He has drawn a basic salary of ` 20,000 and dearness allowance @50% of basic salary for the period
from 01.04.2019 to 31.01.2020. Dearness allowance does not form part of pay for retirement benefits.
(ii) Received pension of ` 7,000 per month for the period 01.02.2020 to 31.03.2020 after commutation of
pension.
Compute his Gross Salary for Assessment Year 2020-21.
Solution:
Computation of income chargeable under the head “Salaries” of Mr. Kashyap for A.Y. 2020-21
Particulars `
Basic Salary = ` 20,000 x 10 2,00,000
Dearness Allowance = 50% of basic salary 1,00,000
Gift Voucher (See Note - 1) 8,000
Transfer of car (See Note - 2) 1,20,000
Gratuity (See Note - 3) 30,769
Leave encashment (See Note - 4) 1,30,000
Uncommuted pension (` 7000 x 2) 14,000
Commuted pension (See Note - 5) 1,50,000
Notes:
(i) As per Rule 3(7)(iv), the value of any gift or voucher or token in lieu of gift received by the employee or by
member of his household not exceeding ` 5,000 in aggregate during the previous year is exempt. In this case,
the amount was received on his retirement and the sum exceeds the limit of ` 5,000.
Therefore, the entire amount of ` 8,000 is liable to tax as perquisite.
Note - An alternate view is possible that only the sum in excess of ` 5,000 is taxable in view of the language
of Circular No.15/2001 dated 12.12.2001. Gifts upto ` 5,000 in the aggregate per annum would be exempt,
beyond which it would be taxed as a perquisite. As per this view, the value of perquisite would be ` 3,000
and gross total income would be ` 7,47,769.
(ii) Perquisite value of transfer of car: As per Rule 3(7)(viii), the value of benefit to the employee arising from the
transfer of an asset, being a motor car, by the employer is the actual cost of the motor car to the employer as
reduced by 20% on a written down value basis for each completed year during which such motor car was put
to use by the employer. Therefore, the value of perquisite on transfer of motor car, in this case, would be:
Particulars `
Purchase price (1.3.2017) 5,00,000
Less: Depreciation @ 20% 1,00,000
WDV on 29.2.2018 4,00,000
Less: Depreciation @ 20% 80,000
WDV on 28.2.2019 3,20,000
Less: Amount recovered 2,00,000
Value of perquisite 1,20,000
Under Rule 3(7)(viii), while calculating the perquisite value of benefit to the employee arising from the transfer
of any movable asset, the normal wear and tear is to be calculated in respect of each completed year during
which the asset was put to use by the employer. In the given case, the third year of use of car is completed on
28.2.2020 whereas the car was sold to the employee on 31.1.2020. Accordingly, wear and tear has to be
calculated @20% on reducing balance method for only two years.
The rate of 15% as well as the straight line method adopted by the company for depreciation of vehicle is not
relevant for calculation of perquisite value of car in the hands of Mr. Kashyap.
(iii) Taxable gratuity
Particulars `
Gratuity received 5,50,000
Less: Exempt under section 10(10) - Least of the following:
(i) Notified limit = ` 20,00,000
(ii) Actual gratuity received = ` 5,50,000
(iii) 15/26 x last drawn salary x no. of completed years or part in excess of 6 months
15/26 x 30,000 x 30 = ` 5,19,231 5,19,231
Taxable Gratuity 30,769
Note – As per the Payment of Gratuity Act, 1972, dearness allowance is included in the meaning of salary.
Since, in this case, Mr. Kashyap is covered under the Payment of Gratuity Act, 1972, dearness allowance has
to be included within the meaning of salary for computation of exemption under Section 10(10).
(iv) Taxable leave encashment
Particulars `
Leave Salary received 3,30,000
Less: Exempt under Section 10(10AA) - Least of the following:
(i) Notified limit ` 3,00,000
(ii) Actual leave salary received ` 3,30,000
(iii) 10 months x ` 20,000 ` 2,00,000
(iv) Cash equivalent of leave to his credit (330/30*20000) ` 2,20,000 2,00,000
Taxable Leave encashment 1,30,000
Note - Salary, for the purpose of exemption under Section 10(10AA), would include dearness allowance only if
it forms part of pay for retirement benefits. Therefore, in this case, since dearness allowance does not form
part of pay for retirement benefits, only basic salary has to be considered for computing exemption under
section 10(10AA).
(v) Commuted Pension

Since Mr. Kashyap is a non-government employee in receipt of gratuity, exemption under Section 10(10A)
would be available to the extent of 1/3rd of the amount of the commuted pension which he would have
received had he commuted the whole of the pension.
4. In August 2018, Mr. Kailash, a first-time home buyer, borrowed a sum of ` 35 lakhs from the National
Housing Bank for construction of a residential house for ` 48 lakhs. The loan was sanctioned on
12.5.2018. The loan amount was disbursed directly to the flat promoter by the bank. The construction was
completed in May, 2020 and repayments towards principal and interest commenced immediately after
disbursement of loan.
In the light of the above facts, examine:
(i) Whether Mr. Kailash can claim deduction under section 24 in respect of interest for the A.Y. 2020-21?
(ii) Whether deduction under Section 80C can be claimed by him for the A.Y. 2020-21?
(iii)

Solution:
(i) As per Section 24(b), interest payable on loans borrowed for the purpose of acquisition, construction, repairs,
renewal or reconstruction of house property can be claimed as deduction. Interest payable on borrowed capital
for the period prior to the previous year in which the property has been acquired or constructed, can be
claimed as deduction over a period of 5 years in equal annual installments commencing from the year of
acquisition or completion of construction.
It is stated that the construction is completed only in May, 2019. Hence, deduction under Section 24 in respect
of interest on housing loan cannot be claimed in the assessment year 2020-21.
(ii) Deduction under section 80C cannot be claimed
Clause (xviii) of Section 80C is attracted where there is any payment for the purpose of purchase or
construction of a residential house property, the income from which is chargeable to tax under the head
‘Income from house property’. Such payment covers repayment of any amount borrowed from the National
Housing Bank.
However, deduction is prima facie eligible only if the income from such property is chargeable to tax under the
head “Income from House Property”. During the assessment year 2020-21, there is no such income
chargeable under this head. Hence, deduction under section 80C cannot be claimed for A.Y. 2020-21.
5. Mr. Abhay has furnished the following particulars relating to payments made and expenditure incurred
towards scientific research for the year ended 31.3.2020:
Sl. Particulars ` (in lakhs)

No.
(i) Payments made to an approved Agro Research Association 25
(ii) Payment made to RR University, an approved University 15
(iii) Payment made to XY College 17
(iv) Payment made to IIT, Madras (under an approved programme for scientific research) 10
(v) Machinery purchased for in-house scientific research 20
(vi) Salaries to research staff engaged in in-house scientific research 14
Compute the deduction available under section 35 of the Income-tax Act, 1961 for A.Y. 2020-21, while
determining his income under the head “Profits and gains of business or profession”.
Solution
Computation of deduction allowable under Section 35
Amount % of Amount of
Particulars (`
` in Section weighted deduction
lakhs) deduction (`
` in
lakhs)
Payment for scientific research
Approved Agro Research 25 35(1)(ii) 150% 37.5
Association
RR University, an approved 15 35(1)(ii) 150% 22.5
University
XY College [See Note 1] 17 - NIL NIL
IIT Madras (under an approved 10 35(2AA) 150% 15
programme for scientific research)
In-house research [See Note 2]
Capital expenditure – Purchase of 20 35(1)(iv) 100% 20

Machinery r. w.
35(2)
Revenue expenditure - Salaries to 14 35(1)(i) 100% 14
research staff engaged in in-house
scientific research
Deduction allowable under section 35 109
Notes:-
1. Payment to XY College: Since the question clearly mentions that only Agro Research Association and RR
University (mentioned in item (i) and (ii), respectively) are approved research institutions, it is logical to
conclude that XY College mentioned in item (iii) is not an approved research institution. Therefore, payment to
XY College would not qualify for deduction under section 35.
2. Deduction for in-house research and development: Only company assessees are entitled to weighted
deduction @150% under section 35(2AB) in respect of expenditure on scientific research on in-house research
and development facility. However, in this case, the assessee is an individual. Therefore, he would be entitled
to deduction@100% of the revenue expenditure incurred under section 35(1)(i) and 100% of the capital
expenditure incurred under section 35(1)(iv) read with section 35(2), assuming that such expenditure is laid out
or expended on scientific research related to his business.
6. Mr. Arjun bought a vacant land for ` 80 lakhs in March 2005. Registration and other expenses were 10% of
the cost of land. He constructed a residential building on the said land for ` 100 lakhs during the financial
year 2006-07.
He entered into an agreement for sale of the above said residential house with Mr. Jerry (not a relative) on
9th April 2019 and received ` 20 lakhs as advance in cash on that date. The stamp duty value on that date
was ` 740 lakhs. The actual sale consideration was, however, fixed at ` 700 lakhs.
The sale deed was executed and registered on 10-6-2019 for the agreed consideration. However, the State
stamp valuation authority had revised the values, hence, the value of property for stamp duty purposes
was ` 770 lakhs on the date registration. Mr. Arjun paid 1% as brokerage on sale consideration received.
Subsequent to sale, Mr. Arjun made following investments:
(i) Acquired a residential house at Mumbai for ` 110 lakhs.

(ii) Acquired a residential house at London for ` 150 lakhs.
(iii) Subscribed to NHAI bond: ` 45 lakhs on 29-8-2019 and ` 50 lakhs on 12-10-2019.
Compute the income chargeable under the head “Capital Gains” for A.Y. 2020-21. The choice of exemption
must be in the manner most beneficial to the assessee.
Cost Inflation Index: F.Y. 2004-05 113

F.Y. 2006-07 122
F.Y. 2019-20 289
Solution:
Particulars ` (in lakhs) ` (in lakhs)

Capital Gains on sale of residential building
Value adopted by Stamp Valuation Authority ` 770 lakhs
Gross Sale consideration 770.00

[In case the actual sale consideration declared by the assessee is less
than the value adopted by the Stamp Valuation Authority for the purpose
of charging stamp duty, then, the value adopted by the Stamp Valuation
Authority shall be taken to be the full value of consideration as per section
50C.
In a case where the date of agreement is different from the date of

registration, stamp duty value on the date of agreement can be
considered provided the whole or part of the consideration is paid by way
of account payee cheque/bank draft or by way of ECS through bank
account on or before the date of agreement. In this case, since advance
of ` 20 lakh is paid by cash, stamp duty value of ` 740 lakhs on the date
of agreement cannot be adopted as the full value of consideration. Stamp
duty value on the date of registration would be the full value of
consideration]
Less: Brokerage@1% of sale consideration (1% of ` 700 lakhs) 7.00
Net Sale consideration 763.00
Less: Indexed cost of acquisition
Cost of vacant land, ` 80 lakhs, plus registration and other expenses
i.e., ` 8 lakhs, being 10% of cost of land [` 88 lakhs × 289/113] 225.06
Construction cost of residential building

(` 100 lakhs x 289/122) 236.89 461.95
Long-term capital gains before exemption 301.05
The capital gain arising on transfer of a long-term residential property
shall not be chargeable to tax to the extent such capital gain is invested in
the purchase of one residential house property in India one year before or
two years after the date of transfer of original asset. 110.00
Therefore, in the present case, the exemption would be available only in

respect of the residential house acquired at Mumbai and not in respect of
the residential house in London
Less: Exemption under section 54EC
Amount deposited in capital gains bonds of NHAI within six months from
the date of transfer (i.e., on or before 09.12.2019) would qualify for
exemption, to the maximum extent of ` 50 lakhs.
Therefore, in the present case, exemption can be availed only to the 50.00
extent of ` 50 lakh out of ` 95 lakhs, even if the both the investments are
made on or before 09.12.2019 (i.e., within six months from the date of
transfer).
Long term capital gains chargeable to tax 141.05
Note: Since the residential house property was held by Mr. Arjun for more than 24 months immediately preceding
the date of its transfer, the resultant gain is a long-term capital gain.
7. From the following transactions relating to Mrs. Sonu, determine the amount chargeable to tax in her
hands for the A.Y. 2020-21. Your answer should be supported by reasons:
(i) Received cash gifts on the occasion of her marriage on 19-11-2019 of ` 2,10,000. It includes gift of `
55,000 received from non-relatives.
(ii) On 1-1-2020, being her birthday, she received a gift of ` 45,000 by means of cheque from her father's
maternal uncle.
(iii) On 12-2-2020, she acquired a vacant site from her friend for ` 1,12,000. The State stamp valuation
authority fixed the value of site at ` 1,92,000 for stamp duty purpose.
(iv) She bought 50 equity shares of a private company from another friend for ` 75,000. The fair market
value of such shares on the date of purchase was ` 1,33,000.

Solution:
Computation of amount chargeable to tax in hands of Mrs. Sonu for A.Y. 2020-21
Particulars `
(i) Cash gift of ` 2,10,000 received on the occasion of her marriage is not taxable, since Nil
gifts received by an individual on the occasion of marriage is excluded from tax under
section 56(2)(x), even if the same are from non-relatives
(ii) Even though father’s maternal uncle does not fall within the definition of Nil
“relative” under section 56(2)(x), gift of ` 45,000 received from him by cheque is
not chargeable to tax since the aggregate sum of money received by Mrs. Sonu
without consideration from non-relatives (other than on the occasion of marriage)
during the previous year 2019-20 does not exceed ` 50,000.
(iii) Purchase of vacant site for inadequate consideration on 12.2.2020 would attract the 80,000
provisions of Section 56(2)(x). Where any immovable property is received for a
consideration which is less than the stamp duty value of the property by an amount
exceeding ` 50,000 or 5% of sales price, the difference between the stamp duty
value and consideration is chargeable to tax in the hands of Individual.
Therefore, in the given case ` 80,000(` 1,92,000 - ` 1,12,000) is taxable in the hands
of Mrs. Sonu.
(iv) Since shares are included in the definition of “property” and difference between 58,000
the purchase value and fair market value of shares is ` 58,000 (` 1,33,000 - ` 75,000)
i.e. it exceeds ` 50,000, the difference would be taxable under section 56(2)(x).
Amount chargeable to tax 1,38,000
8. Compute the income to be included in the hands of Mr. Sharma for the Assessment year 2020-21 with
reasons from the following information:
A proprietary business was started by Mrs. Sharma in the year 2017. As on 1.4.2018 her capital in
business was ` 5,00,000. Her husband gifted ` 3,00,000 on 2.4.2018, which Mrs. Sharma invested in her
business on the same date. Mrs. Sharma earned profits from her proprietory business for the financial
year 2018-19, ` 2,00,000 and financial year 2019-20 ` 4,20,000.
Solution:
Section 64(1)(iv) provides for the clubbing of income in the hands of the individual, if the income earned is from
the assets transferred directly or indirectly to the spouse of the individual, otherwise than for adequate
consideration or in connection with an agreement to live apart. In this case, Mrs. Sharma received a gift of `
3,00,000 from her husband which she invested in her business. In a case where gift from spouse has been
invested in business, as per Explanation 3 to section 64(1), the income or loss from such business for any
previous year has to be apportioned between the spouses on the basis of the ratio of their capital employed as on
1st April of the relevant previous year. Accordingly, the income to be included in the hands of Mr. Sharma for
A.Y.2020-21 has to be computed as under:

Mrs. Capital
Particulars Sharma’s Contribution Total
Capital Out of gift
Contribution from
husband
` ` `
Capital as on 1.4.2018 5,00,000 -- 5,00,000
Investment on 02.04.2018 out of
gift received from her husband 3,00,000 3,00,000
5,00,000 3,00,000 8,00,000
Profit for F.Y. 2018-19 to be
apportioned on the basis of
capital employed on the first day 2,00,000 2,00,000
of the P.Y. i.e., on 1.4.2018
Capital employed as on 7,00,000 3,00,000 10,00,000
1.4.2019
Profit for F.Y. 2019-20 to be
apportioned on the basis of
capital employed as on 1.4.2019
(i.e., 7:3) 2,94,000 1,26,000 4,20,000
Therefore, the income to be included in the hands of Mr. Sharma for A.Y.2020-21 is ` 1,26,000.
9. The following are the details relating to Mr. Gupta, a resident Indian, relating to the year ended 31.3.2020:
Particulars `
Income from salaries 2,20,000
Loss from cloth business 2,40,000
Income from speculation business 30,000
Loss from specified business covered by section 35AD 45,000
Long-term capital gains from sale of urban land 2,50,000
Loss from card games 40,000
Income from betting (Gross) 35,000
Life Insurance Premium paid (Sum assured ` 5,00,000) 25,000
Compute his total income for A.Y. 2020-21 and show the items eligible for carry forward.

Solution:
Computation of total income of Mr. Gupta for the A.Y. 2020-21
Particulars ` `
Salaries
Less: Loss from house property [See Note (i)] 2,00,000 20,000
Less: Loss from cloth business set off [See Note (iv)] 30,000 Nil
Capital gains
Less: Loss from cloth business set off [See Note (iv)] 2,10,000 40,000
Income from other sources

Income from betting 35,000
Gross Total Income 95,000

Less: Deduction under section 80C (life insurance 20,000
premium paid) [See Note (vi)]
Total income 75,000
Losses to be carried forward:
1. Loss from house property (` 2,50,000 - ` 2,00,000) 50,000
2. Loss from cloth business (` 2,40,000 - ` 30,000 - ` 2,10,000) Nil
3. Loss from specified business covered by section 35AD 45,000
Notes:
(i) As per section 71(3A), loss from house property can be set-off against income under any other head to the
extent of ` 2,00,000 only. As per section 71B, balance loss not set-off can be carried forward to the next year
for set-off against income from house property of that year.
(ii) Loss from specified business covered by section 35AD can be set-off only against profits and gains of any
other specified business. Therefore, such loss cannot be set off against any other income. The unabsorbed
loss has to be carried forward for set-off against profits and gains of any specified business in the following
year(s).
(iii) Since inter-source set-off of losses is permissible as per section 70(1), loss from cloth business to the extent of
` 30,000 can be set-off against income from speculation business. The remaining business loss cannot be set
off against salary income due to restriction contained in section 71(2A). However, the remaining business loss
of ` 2,10,000 (` 2,40,000 – ` 30,000) can be set-off against long-term capital gains of ` 2,50,000 from sale of
urban land. Consequently, the taxable long-term capital gains would be ` 40,000.
(iv) Loss from card games can neither be set off against any other income, nor can it be carried forward.
(v) For providing deduction under Chapter VI-A, gross total income has to be reduced by the amount of long-term
capital gains and casual income. Therefore, the deduction under section 80C in respect of life insurance
premium paid has to be restricted to ` 20,000 [i.e., Gross Total Income of ` 95,000 – ` 40,000 (LTCG) – `
35,000 (Casual income)].
(vi) Income from betting is chargeable to tax at a flat rate of 30% under Section 115BB and no expenditure or
allowance can be allowed as deduction from such income, nor can any loss be set-off against such income.

10. For the A.Y. 2020-21, the Gross Total Income of Mr. Raja, a resident in India, was ` 8,60,000 which includes
long-term capital gain of ` 2,50,000 and Short-term capital gain of ` 50,000. The Gross Total Income also
includes interest income of ` 55,000 from savings bank deposits with banks. Mr. Raja has invested in PPF
` 1,40,000 and also paid a medical insurance premium ` 55,000 for self. Mr. Raja also contributed ` 50,000
to Public Charitable Trust eligible for deduction under section 80G by way of an account payee cheque.
Compute the total income and tax thereon of Mr. Raja, who is 65 years old as on 31.3.2020.
Solution:
Computation of total income and tax payable by Mr. Raja for the A.Y. 2020-21
Particulars ` `
Gross total income including long term capital gain 8,60,000
Less: Deductions under Chapter VI-A:
Under section 80C in respect of PPF deposit 1,40,000
Under section 80D (it is assumed that premium of ` 55,000 is paid by 50,000
otherwise than by cash. The deduction would be restricted to ` 50,000, since
Mr. Raja is a resident senior citizen)
Under section 80G (See Notes 1 & 2 below) 18,500
Under section 80TTB (See Note 3 below) 50,000
2,58,500
Total income (including long term capital gains) 6,01,500
Tax on total income (including long-term capital gains of ` 2,50,000)
LTCG ` 2,50,000 x 20%
50,000
Balance total income ` 3,51,500: Tax @5% on ` 51,500
2,575
(` 3,51,500 – ` 3,00,000, being the basic exemption limit for senior citizen)
Tax before cess 52,575
Add: H& EC@4% 2,103
Total tax liability 54,678

Total tax liability (rounded off) 54,680
Notes:
1. Computation of deduction under section 80G:
Particulars `
Gross total income (excluding long term capital gains) 6,10,000
Less: Deduction under section 80C, 80D & 80TTB 2,40,000
3,70,000
10% of the above 37,000
Contribution made to Public Charitable Trust 50,000
Lower of the two eligible for deduction under section 80G 37,000
Deduction under section 80G – 50% of ` 37,000 18,500
2. Deduction under section 80G is allowed only if amount is paid by any mode other than cash, in case of amount
exceeding ` 2,000. Therefore, the contribution made to public charitable trust is eligible for deduction since it is
made by way of an account payee cheque
3. Deduction of upto `50,000 under section 80TTB is allowed, inter alia, to a Senior Citizen (Resident individual) if
gross total income includes interest income from deposits in a saving account with bank. Since Gross Total
Income of Mr. Raja includes interest income of ` 55,000 on savings bank deposit, he is eligible for deduction of
` 50,000 under section 80TTB.

11. Mr. Yusuf Khan, a resident individual aged 55, furnishes the following information pertaining to the year
ended 31.3.2020:
(i) He is a working partner in ABC & Co. He has received the following amounts from the firm:
Interest on capital at 15% : ` 3,00,000
Salary as working partner (at 1% of firm's sales) (allowed fully to the firm): ` 90,000
(ii) He is engaged in a business of manufacturing. The Profit and Loss account pertaining to this
proprietary business (summarised form) is as under:
Particulars ` Particulars `
To Salaries 1,20,000 By Gross profit 12,50,000
To Bonus 48,000 By Interest on Bank FD 45,000
To Car expenses 50,000 (Net of TDS)
To Machinery repairs 2,34,000 By Agricultural income 60,000
To Advance tax 70,000 By Pension from LIC
To Depreciation on: Jeevan Dhara 24,000
- Car 3,00,000
- Machinery 1,25,000
To Net profit 4,32,000
13,79,000 13,79,000
Details of assets:
Particulars `
Opening WDV of assets are as under:
Car 3,00,000
Machinery (Used during the year for 179 days) 6,50,000
Additions to machinery:
Purchased on 23.9.2019 by cash in single payment 2,00,000
Purchased on 12.11.2019 by account payee cheque 3,00,000
Second hand machinery purchased on 12.4.2019 by bearer cheque 1,25,000
in single payment
(All assets added during the year were put to use immediately after purchase) One-fifth of the car
expenses are towards estimated personal use of the assessee. Salary includes ` 15,000 paid by way of
a single cash payment to manager.
(iii) In February, 2019, he had sold a house at Chennai. Arrears of rent relating to this house amounting to `
75,000 was received in March, 2020.
(iv) Details of his Savings and Investments are as under:
Particulars `
Life insurance premium for policy in the name of his major son
employed in a multinational company, at a salary of ` 10 lakhs p.a. 30,000
(Sum assured ` 2,00,000) (Policy taken on 1.07.2013)
Contribution to PPF 70,000
Medical Insurance premium for his father aged 79, who is not dependent on him 52,000
You are required to compute the total income of Mr. Yusuf Khan for the assessment year 2020-21.

Solution:
Computation of total income of Mr. Yusuf Khan for the A.Y. 2020-21
Particulars ` `
Income from house property
Arrears of rent received in respect of the Chennai house taxable
under Section 25A [Note 1] 75,000
Less: Deduction @ 30% 22,500 52,500

(a) Own business [Note 3] 6,37,000
(b) Income from partnership firm [Note 2]
Interest on capital 2,40,000
[As per section 28(v), chargeable in the hands of the partner
only to the extent allowable as deduction in the firm’s hand
i.e. @12%]
[Salary of working partner (Since the same has been fully

allowed as deduction in the hands of the firm) 90,000 3,30,000

(a) LIC Jeevan Dhara pension 24,000
(b) Interest from bank FD (gross) 50,000 74,000

Less: Deductions under Chapter VIA
Section 80C
Life insurance premium for policy in the name of major son
qualifies for deduction even though he is not dependent on the
assessee. However, the same has to be restricted to 10% of
sum assured i.e. 10% of ` 2,00,000. 20,000
Contribution to PPF 70,000 90,000
Section 80D
Mediclaim premium for father, a senior citizen 52,000
(qualifies for deduction, even though the father is not dependent

on the assessee, subject to a maximum of ` 50,000) 50,000 1,40,000
Notes:
(1) As per section 25A, any arrears of rent received will be chargeable to tax, after deducting a sum equal to 30%
of such arrears, as income from house property in the year of receipt, whether or not the assessee is the
owner of the house property.
(2) The income by way of interest on capital and salary of Mr. Yusuf Khan from the firm, ABC & Co., in which he is
a working partner, to the extent allowed as deduction in the hands of the firm under section 40(b), has to be
included in the business income of the partner as per section 28(v). Accordingly, ` 3,30,000 [i.e., ` 90,000
(salary) + ` 2,40,000 (interest@12%)] should be included in his business income.

(3) Computation of income from own business
Particulars ` `
Less: Items credited to profit and loss account not treated as
business income
Interest on bank FD (Net of TDS) 45,000

Agricultural income 60,000
Pension from LIC Jeevan Dhara 24,000 1,29,000
Add: Items debited to profit and loss account to be 3,03,000

disallowed/considered separately
Advance tax 70,000

Depreciation:
- Car 3,00,000
- Machinery 1,25,000
Car expenses disallowed for personal use 10,000
(` 50,000 x 1/5)
Salary to manager disallowed under section 40A(3) since it is
paid in cash and the same exceeds ` 10,000 15,000
5,20,000
8,23,000
Less: Depreciation (See Working Note below) 1,86,000
Income from business 6,37,000
Working Note:
Computation of depreciation allowable under the income-tax Act, 1961
Particulars ` `
On Car:
Depreciation @15% on 3,00,000 45,000
Less: 1/5th for personal use 9,000 36,000
Depreciation on Car allowable as deduction
On Machinery:
Opening WDV 6,50,000
Additions during the year (used for more than 180 days)
- New Machinery purchased on 23.9.19 2,00,000
- Second hand machinery purchased on 12.4.19 1,25,000
Additions during the year (used for less than180 days) 3,00,000
Normal Depreciation
Depreciation @15% on ` 6,50,000 97,500
[As per second proviso to Section 43(1), the expenditure for acquisition
of asset, in respect of which payment to a person in a day exceeds
` 10,000 has to be ignored for computing actual cost, if such payment is
made otherwise than by way of A/c payee cheque/ bank draft or ECS.
Accordingly, depreciation on second hand machinery purchased on
12.4.2019 and on new machinery purchased on 23.9.2019 is not
allowable since the payment is made otherwise than by A/c payee
cheque/A/c payee draft/ ECS to a person in a day]
Depreciation @ 7.5% on ` 3,00,000 22,500
Total normal depreciation on machinery (A) 1,20,000

Where an asset acquired during the year is put to use for less
than 180 days, 50% of the rate of depreciation is allowable. This
restriction does not apply to assets acquired in an earlier year.
Additional depreciation (B)

New machinery 30,000
Used for less than 180 days = 10% of ` 3,00,000
Total permissible depreciation on machinery (A) + (B) 1,50,000
Depreciation allowable under section 32 1,86,000
12. Mr. Sachal, a resident individual aged 54, furnishes his income & other details for the P.Y. 2019-20:
(i) Income of ` 8,10,000 from wholesale cloth business, whose accounts are audited u/s 44AB.
(ii) Income from other sources ` 2,70,000.
(iii) Tax deducted at source ` 25,000.
(iv) Advance tax paid ` 1,03,000 during the P.Y. 2019-20.
Return of income filed on 11-12-2020. Calculate the interest payable under section 234B of the Income-tax
Act, 1961. Assume that the return of income would be processed on the same day of filing of return. What
are the consequences for delay in furnishing return of income under the Income-tax Act, 1961? Examine,
making the required computations in this case.
Solution:
Computation of interest payable under section 234B by Mr. Sachal
Particulars `
Tax on total income of ` 10,80,000 [Business income of ` 8,10,000 + 1,36,500
Income from other sources of ` 2,70,000]
Add: Education cess and SHEC@4% 5,460
Tax on total income 1,41,960
Assessed Tax 1,16,960
90% of assessed tax 1,05,264
Advance tax paid 1,03,000
Interest under section 234B is leviable since advance tax of ` 1,03,000 paid is less than ` 1,05,264, being 90% of
assessed tax
Number of months from 1st April, 2020 to 11th December, 2020,

Being the date of processing of return 9
Interest under section 234B@1% per month or part of a month for 9 months
on ` 14,000 [i.e., difference between assessed tax of ` 1,16,960 and
advance tax of ` 1,03,000 paid, being ` 13,960 which is rounded off to
` 14,000 under Rule 119A of Income-tax Rules, 1962] 1,260
Consequences for delay in filing return of income on or before the due date
Interest under section 234A and fee under section 234F would be attracted for filing return of income beyond the
due date specified under section 139(1).

Interest under section 234A
Since Mr. Sachal’s accounts are audited under section 44AB, the due date for filing of return for A.Y. 2019-20, in
his case, is 30.09.2019. Mr. Sachal has filed his return on 11.12.2019 i.e., interest under section 234A will be
payable for 3 months (from 1.10.2019 to 11.12.2019) @ 1% per month or part of month on the amount of tax
payable on the total income, as reduced by TDS and advance tax paid i.e., ` 13,960 rounded off to ` 14,000 under
Rule 119A of Income-tax Rules, 1962
Interest u/s 234A = ` 14,000 x 1% x 3 = ` 420
Fee for late filing of return under section 234F
Since Mr. Sachal has furnished his return of income after the due date but before 31.12.2019 and his total income
exceeds ` 5 lakhs, a fee of ` 5,000 will be payable by him.
13. Ms. Geetha submits her return of income on 29-09-2020 for A.Y 2020-21 consisting of income under the
head “Salaries”, “Income from house property” and bank interest. On 01-02-2021, she realized that she
had not claimed deduction under section 80D in respect of medical insurance premium of ` 15,000 paid
for her mother. She wants to revise her return of income. Can she do so? Examine.
Would your answer be different if she discovered this omission on 02-04-2021?
Solution:
Since Ms. Geetha has income only under the heads “Salaries”, “Income from house property” and “Income from
other sources”, she does not fall under the category of a person whose accounts are required to be audited under
the Income-tax Act, 1961. Therefore, the due date of filing return for A.Y. 2020-21 under section 139(1), in her
case, is 31st July, 2020. Since Ms. Geetha had submitted her return only on 29.9.2020, the said return is a
belated return under section 139(4).
As per section 139(5), a return furnished under section 139(1) or a belated return u/s 139(4) can be revised, if she
discovers any omission or wrong statement therein. Thus, a belated return under section 139(4) can also be
revised. Therefore, Ms. Geetha can revise the return of income filed by her under section 139(4) in February 2021,
to claim deduction under section 80D, since the time limit for filing a revised return is upto the end of the relevant
assessment year, which is 31.03.2021.
However, she cannot revise return had she discovered this omission only on 02-04-2021, since it is beyond
31.03.2021, being the end of A.Y. 2020-21.


(APPLICABLE FOR 2020 EXAM - ASSESSMENT YEAR 2020-21)
1. Mr. Sarthak (age 37 years) a share broker, sold a building to his friend Anay, who is a dealer in
automobile spare parts, for ` 120 lakh on 10.11.2019, when the stamp duty value was ` 150 lakh. The
agreement was, however, entered into on 1.9.2019 when the stamp duty value was ` 140 lakh. Mr.
Sarthak had received a down payment of ` 15 lakh by a crossed cheque from Anay on the date of
agreement. Mr. Sarthak purchased the building for ` 95 lakh on 10.5.2017. Further, Mr. Sarthak also sold
an agricultural land (situated in a village which has a population of 5,800) for ` 60 lakhs to Mr. Vivek on
01.03.2020, which he acquired on 15.06.2014 for ` 45 lakhs. Stamp duty value of agricultural land as on
1.3.2020 is ` 75 lakhs
CII for F.Y. 2014-15; 240; F.Y. 2017-18: 272; F.Y. 2019-20: 289.
In the light of the above facts, you are required to answer the following:
(i) Is there any requirement to deduct tax at source on consideration paid or payable on transfer of
building and agricultural land?
(a) No; no tax is required to be deducted at source on transfer of any capital asset
(b) Yes; Mr. Anay is required to deduct tax at source under section 194-IA.
(c) Yes; Mr. Vivek is required to deduct tax at source under section 194-IA.
(d) Yes; Mr. Sarthak is required to deduct tax at source under section 194-IA.
(ii) In respect of transfer of building, capital gains chargeable to tax in the hands of Mr. Sarthak would
be -
(a) long-term capital gains of ` 49,06,250
(b) long-term capital gains of ` 39,06,250
(c) short-term capital gains of ` 45,00,000
(d) short-term capital gains of ` 55,00,000
(iii) Assuming that Mr. Sarthak has other income exceeding basic exemption limit, the tax payable
(excluding surcharge and health and education cess) on transfer of building and agricultural land,
would be -
(a) ` 7,81,250
(b) ` 13,97,500
(c) ` 9,81,250
(d) ` 10,97,500
(iv) In respect of purchase of building from Mr. Sarthak, income chargeable to tax in the hands of Mr.
Anay would be –
(a) ` 20 lakh
(b) ` 30 lakhs
(c) ` 15 lakhs
(d) Nil
2. Mr. Hardik (age 45 years) is appointed as senior executive officer in Sky India Limited, Mumbai on
01.02.2019 in the scale of ` 35,000-3500-65,000. He is paid dearness allowance @40% of salary forming
part of retirement benefits. He is given rent free unfurnished accommodation on 01.5.2019 which he
occupied only from 01.10.2019. The company pays lease rent of ` 5,000 p.m.
He has been provided a car of 2000 cc capacity which is used by him for private purposes only. The actual
cost of the car is ` 8,00,000. The monthly expenditure of car is ` 5,000, which is fully met by the employer.
He pays lumpsum premium of ` 1,50,000 towards health insurance for self and his wife for 48 months on
01.10.2019 by account payee cheque. He also contributes ` 1,50,000 towards PPF.
In the light of above facts, you are required to answer the following:
(i) Value of rent-free accommodation chargeable to tax in the hands of Mr. Hardik, would be -
(a) ` 44,835
(b) ` 44,100
(c) ` 45,570
(d) ` 30,000
(ii) Mr. Hardik would be eligible for deduction in respect of health insurance premium paid during the
previous year 2019-20, for –
(a) ` 30,000
(b) ` 18,750

(c) ` 25,000
(d) ` 37,500
(iii) Perquisite value of car chargeable to tax in the hands of Mr. Hardik would be –
(a) ` 28,800
(b) ` 21,600
(c) ` 60,000
(d) ` 1,40,000
3. Mr. Raghav has three houses for self-occupation. What would be the tax treatment for A.Y. 2020-21 in
respect of income from house property?
(a) One house, at the option of Mr. Raghav, would be treated as self-occupied. The other two houses would be
deemed to be let out.
(b) Two houses, at the option of Mr. Raghav, would be treated as self -occupied. The other house would be
deemed to be let out.
(c) One house, at the option of Assessing Officer, would be treated as self-occupied. The other two houses
would be deemed to be let out.
(d) Two houses, at the option of Assessing Officer, would be treated as self -occupied. The other house would
be deemed to be let out.
4. Arun’s gross total income of P.Y. 2019-20 is ` 2,45,000. He deposits ` 45,000 in PPF. He pays electricity
bills aggregating to ` 1.20 lakhs in the P.Y. 2019-20. Which of the statements is correct?
(a) Arun is not required to file his return of income u/s 139(1) for P.Y. 2019-20, since his total income before
giving effect to deduction under section 80C does not exceed the basic exemption limit.
(b) Arun is not required to file his return of income u/s 139(1) for P.Y. 2019 -20, since his electricity bills do not
exceed ` 2,00,000 for the P.Y. 2019-20.
(c) Arun is not required to file his return of income u/s 139(1) for P.Y. 2019 -20, since neither his total income
before giving effect to deduction under section 80C exceeds the basic exemption limit nor his electricity bills
exceed ` 2 lakh for the P.Y. 2019-20.
(d) Arun is required to file his return of income u/s 139(1) for P.Y. 2019 -20, since his electricity bills exceed
` 1 lakh for the P.Y. 2019-20.
5. Mr. Ritvik has purchased his first house in Gwalior for self-occupation on 5.4.2019 for ` 45 lakhs (stamp
duty value being the same) with bank loan sanctioned on 30.3.2019 and disbursed on 3.4.2019. He paid
interest of ` 3.8 lakhs during the P.Y. 2019-20. What is the tax treatment of interest paid by him?
(a) Interest of ` 2 lakhs allowable u/s 24
(b) Interest of ` 2 lakhs allowable u/s 24 and ` 1.8 lakhs allowable u/s 80EEA
(c) Interest of ` 2 lakhs allowable u/s 24 and ` 1.5 lakhs allowable u/s 80EEA
(d) Interest of ` 1.5 lakhs allowable u/s 24 and ` 1.5 lakhs allowable u/s 80EEA
6. During the P.Y. 2019-20, Mr. Ranjit has short-term capital gains of `95 lakhs taxable under section 111A,
long-term capital gains of ` 110 lakhs taxable under section 112A and business income of ` 90 lakhs.
Which of the following statements is correct?
(a) Surcharge@25% is leviable on income-tax computed on total income of ` 2.95 crore, since total income
exceeds ` 2 crore.
(b) Surcharge@15% is leviable on income-tax computed on total income of ` 2.95 crore.
(c) Surcharge@15% is leviable in respect of income-tax computed on capital gains of ` 2.05 crore; in respect of
business income, surcharge is leviable@25% on income- tax, since total income exceeds ` 2 crore.
(d) Surcharge@15% is leviable in respect of income-tax computed on capital gains of ` 2.05 crore;
surcharge@10% is leviable on income-tax computed on business income, since the same exceeds ` 50 lakhs
but is less than ` 1 crore.
Answer Key:
MCQ Sub- part Most Appropriate MCQ Most Appropriate

No. Answer No. Answer
(i) (b) 3. (b)
(ii) (a) 4. (d)
1.
(iii) (c) 5. (a)
(iv) (b) 6. (b)
(i) (d)
2. (ii) (c)
(iii) (d)
7. Mr. Shridhar (age 45 years), a citizen of India, serving in the Ministry of Finance in India, was transferred
to Indian Embassy in Australia on 15 th March 2019. His income during the financial year 2019-20 is given
hereunder:
Particulars `
Rent from a house situated at Australia, received in Australia. Thereafter, remitted to 5,25,000
Indian bank account.
Interest on Post office savings bank account in India 4,500
Foreign Allowances from Government of India 8,00,000
Mr. Shridhar did not come to India during the financial year 2019-20. Compute his Gross Total Income for
the Assessment year 2020-21.
Answer:
Mr. Shridhar is a non-resident for the A.Y. 2020-21, since he was not present in India at any time during the
previous year 2019-20 [Section 6(1)].
As per section 5(2), a non-resident is chargeable to tax in India only in respect of following incomes:
(ii) Income accruing or arising or income deemed to accrue or arise in India.
Computation of Gross Total Income of Mr. Shridhar for A.Y. 2020-21

Particulars `
Salaries
(Income chargeable under the head ‘Salaries’ payable by the Government to a citizen of India
for services rendered outside India is deemed to accrue or arise in India under section 9(1)(iii).
Hence, such income is taxable in the hands of Mr. Shridhar, a citizen of India, even though he
is a non- resident and rendering services outside India)
Foreign Allowance from Government of India Nil
[Any allowances or perquisites paid or allowed as such outside India by the Government to a
citizen of India for rendering service outside India is exempt under section 10(7)].

Less: Standard Deduction under section 16(ia) of ` 50,000, being lower of gross salary or `
50,000 50,000
8,75,000
Income from House Property
Rent from a house situated at Australia, received in Australia Nil
(Income from property situated outside India would not be taxable in India in the hands of a
non-resident, since it neither accrues or arises in India nor is it deemed to accrue or arise in
India nor is it received in India)

Interest on Post office savings bank account – exempt upto ` 3,500 1,000
Note – Interest on Post office saving bank account of ` 1,000 would be allowed as deduction under section
80TTA.
8. Important - Mr. Ramesh furnishes the following particulars for the previous year 2019-20 in respect of
an industrial undertaking established in "Special Economic Zone" in March 2014. It began
manufacturing in April 2014.
Particulars `
Total sales 85,00,000
Export sales [proceeds received in India] 45,00,000
Domestic sales 40,00,000
Profit from the above undertaking 20,00,000
Export Sales of F.Y. of 2019-20 include freight and insurance of ` 5 lacs for delivery of goods outside
India. Compute the amount of deduction available to Mr. Ramesh under section 10AA for A.Y. 2020-21.
Computation of income from house property of Mrs. Daya for the A.Y. 2020-21
Answer:
Computation of deduction under section 10AA for A.Y. 2020-21
Since A.Y. 2020-21 is the 6th assessment year from A.Y. 2015-16, relevant to the previous year 2014-15, in which
the SEZ unit began manufacturing of articles or things, it shall be eligible for deduction of 50% of the profits
derived from export of such articles or things, assuming all the other conditions specified in section 10AA are
fulfilled.
= Profits of Unit in SEZ x Export turnover of Unit in SEZ x 50%
Total turnover of Unit in SEZ
= 20,00,000 x 40,00,000 x 50%

80,00,000
= ` 5,00,000
Working Note:
`
Export Turnover
Sale proceeds received in India 45,00,000
Less: Freight and insurance for delivery of goods outside India to be excluded from export
turnover 5,00,000
40,00,000
Total turnover 85,00,000
Less: Freight and insurance not includible [Since freight and insurance has been excluded from
export turnover, the same has to be excluded from total turnover also]. 5,00,000
80,00,000
9. Mrs. Daya, a resident of India, owns a house property at Panipat in Haryana. The Municipal value of the
property is ` 8,50,000, Fair Rent of the property is ` 7,30,000 and Standard Rent is ` 8,20,000 per annum.
The property was let out for ` 85,000 per month for the period April 2019 to December 2019.
Thereafter, the tenant vacated the property and Mrs. Daya used the house for self- occupation. Rent for
the months of November and December 2019 could not be realized from the tenant. Mrs. Daya has not
instituted any legal proceedings for recovery of the unpaid rent. She paid municipal taxes @ 12% during
the year and paid interest of ` 50,000 during the year for amount borrowed towards repairs of the house
property.
You are required to compute her income from house property for the A.Y. 2020-21.
Answer:
Computation of income from house property of Mrs. Daya for the A.Y.2020-21
Amount in `
Computation of Gross Annual Value
Expected Rent for the whole year = Higher of Municipal Value of ` 8,50,000 8,20,000
and Fair Rent of ` 7,30,000, but restricted to Standard Rent of ` 8,20,000
Actual rent receivable for the let-out period = ` 85,000 x 9 7,65,000

[Unrealised rent is not deductible from actual rent in this case since Mrs.
Daya has not instituted any legal proceedings for recovery of unpaid rent.
Hence, one of the conditions laid out in Rule 4 has not been fulfilled]
GAV is the higher of Expected Rent for the whole year and Actual rent 8,20,000
received/receivable for the let-out period
Gross Annual Value (GAV) 8,20,000

Less: Municipal taxes (paid by the owner during the previous year) = 12% of ` 1,02,000
8,50,000
Deductions under section 24
(a) 30% of NAV = 30% of ` 7,18,000 2,15,400
(b) Interest on amount borrowed for repairs (Fully allowable as deduction,
since it pertains to let- out property 50,000 2,65,400
Income from house property 4,52,600

10. VERY IMPORTANT (BASED ON AMENDMENT): Dr. Arjun runs a clinic in Delhi. As per new rule in the
city, private cars can be plied in the city only on alternate days. He has purchased a car on 25-09-2019,
for the purpose of his medical profession, as per following details:
Cost of car (excluding GST) 15,00,000

Add: Delhi GST at 14% 2,10,000
Add: Central GST at 14% 2,10,000
Total price of car 19,20,000
He put his car to use from 25.9.2019 itself. He estimates the usage of the car for personal purposes will be
25%. He is advised by his friends that since the car has run only on alternate days, half the depreciation,
which is otherwise allowable, will be actually allowed. He has started using the car immediately after
purchase.
Determine the depreciation allowable on car for the A.Y. 2020-21, if this is the only asset in the block. If
this car would also be used in the subsequent Assessment Year 2021-22 on the same terms and
conditions above, what will be the depreciation allowable? Assume that there is no change in the legal
position under the Income-tax Act, 1961.
Answer:
Computation of depreciation allowance
Particulars `
Since the car was put to use for more than 180 days in the P.Y. 2019-20, full depreciation@30%
(higher rate of depreciation is allowable on the actual cost, since car is purchased during the
period 23.8.2019 to 31.3.2020] of ` 19,20,000, which is the total price (inclusive of GST)
would be allowable.
However, the depreciation actually allowed would be restricted to 75%, since 25% of usage is
estimated for personal use, on which depreciation is not allowable
Depreciation for P.Y.2019-20 = 30% x ` 19,20,000 x 75% = 4,32,000
Written Down Value as on 1.4.2020 = ` 19,20,000 – ` 4,32,000 = ` 14,88,000

Depreciation for P.Y. 2020-21 = 30% x ` 14,88,000 x 75% = 3,34,800
Note - As per Section 17(5) of the CGST Act, 2017, input tax credit would not be available in respect of motor
vehicles for transportation of persons having approved seating capacity of not more than thirteen persons
(including the driver), except when they are used for making the taxable supplies, namely, further supply of such
motor vehicles; or transportation of passengers; or imparting training on driving such motor vehicles.
Since Dr. Arjun used the car for his professional purpose and not for any purpose stated in exception cases,
input tax credit would not be available and hence, both CGST & SGST would form part of actual cost of car.
11. Rayaan gifted ` 15 lakhs to his wife, Sargam on her birthday on, 23rd February, 2019. Sargam lent `
8,00,000 out of the gifted amount to Karuna on 1 st April, 2019 for six months on which she received
interest of ` 80,000. The said sum of ` 80,000 was invested in shares of a listed company on 5th
October, 2019, which were sold for ` 96,000 on 28th March, 2020. Securities transactions tax was paid
on purchase and sale of such shares. The balance amount of gift was invested on 1 st April 2019, as
capital by Sargam in her new business. She suffered loss of ` 52,000 in the business in Financial Year
2019-20.
In whose hands the above income and loss shall be included in Assessment Year 2020-21, assuming
that capital invested in the business was entirely out of the funds gifted by her husband. Support your
answer with brief reasons.
Answer:
In computing the total income of any individual, there shall be included all such income as arises directly or
indirectly, to the spouse of such individual from assets transferred directly or indirectly, to the spouse by such
individual otherwise than for adequate consideration or in connection with an agreement to live apart.
Interest on loan: Accordingly, ` 80,000, being the amount of interest on loan received by Mrs. Sargam, wife of
Mr. Rayaan, would be includible in the total income of Mr. Rayaan, since such loan was given out of the sum of
money received by her as gift from her husband.

Loss from business: As per Explanation 2 to section 64, income includes loss. Thus, clubbing provisions would
be attracted even if there is loss and not income.
Thus, the entire loss of ` 52,000 from the business carried on by Mrs. Sargam would also be includible in the total
income of Mr. Rayaan, since as on 1st April 2019, the capital invested was entirely out of the funds gifted by her
husband.
Short-term capital gain: Income from the accretion of the transferred asset is not liable to be included in the
hands of the transferor and, therefore, short-term capital gain of ` 16,000 (` 96,000, being the sale
consideration less ` 80,000, being the cost of acquisition) arising in the hands of Mrs. Sargam from sale of
shares acquired by investing the interest income of ` 80,000 earned by her (from the loan given out of the sum
gifted by her husband), would not be included in the hands of Mr. Rayaan. Thus, such income is taxable in the
hands of Mrs. Sargam.
12. IMPORTANT: Compute total income of Mr. Mathur for the assessment year 2020 -21 from the following
information furnished by him for the financial year 2019-20.
Particulars `
Salary income (computed) 4,70,000
Loss from self-occupied house property 2,00,000
Loss from let out house property 60,000
Loss from speculation business-X 80,000
Profit from speculation business-Y 40,000
Income from trading and manufacturing business @ 8% 3,50,000
Interest on PPF deposit 95,000
Long term capital gain on sale of Vacant site (Computed) 2,10,000
Short term capital loss on sale of Jewellery 1,50,000
Investment in tax saver deposit on 31-03-2020 60,000
Brought forward loss of business of assessment year 2014-15 5,50,000
Donation to a charitable trust recognized under section 12AA and approved under section 1,10,000
80G paid by cheque
Enhanced compensation received from government for compulsory acquisition of land 3,00,000
(held for a period of 5 years) in the year 2006
Answer:
Computation of total income of Mr. Mathur for A.Y.2020-21
Particulars ` `
Salaries 4,70,000
Profits and gains from business or profession
Profit from speculation business Y 40,000
Less: Loss of ` 80,000 from speculation business X set-off against profit
from speculation business Y to the extent of such profit (40,000)
Loss of ` 40,000 from speculation business X to be carried forward to A.Y.

2021-22 for set-off against profits from speculation business.
Income from trading and manufacturing business @8% 3,50,000
Less: Brought forward business loss of A.Y. 2014-15 set- off since a (3,50,000)
period of eight assessment years has not expired.
Balance loss of ` 2,00,000 to be carried forward to A.Y. 2021-22 Nil
Capital Gains
Enhanced compensation received from government for compulsory 3,00,000
acquisition [Taxable in P.Y. 2019-20 since enhanced compensation is
taxable on receipt basis]
Long term capital gain on sale of vacant site 2,10,000
Less: Short term capital loss on sale of jewellery (1,50,000)
3,60,000
Less: Loss from house property can be set-off to the extent of ` 2,00,000
as per section 71(3A) [since long-term capital gains would be chargeable
to tax @20%, it would be beneficial to set-off the loss from house property
against LTCG]. Balance HP loss of ` 60,000 to be carried forward to A.Y.
2021-22. (2,00,000) 1,60,000

Interest on PPF deposit 95,000
Less: Exempt under section 10(11) (95,000) Nil
Less: Deduction under Chapter VI-A
Deduction under section 80C
Investment in tax saver deposit on 31.3.2020 60,000
Deduction under section 80G
Donation to recognized and approved charitable trust [Donation of `
1,10,000 to be first restricted to ` 41,000, being 10% of adjusted total
income of ` 4,10,000 i.e., [` 6,30,000 – ` 1,60,000 – ` 60,000]. Thereafter,
deduction would be computed at 50% of ` 41,000. 20,500 80,500
13. VERY IMPORTANT: Mr. Manohar, a resident individual, age 53 years provides consultancy services in
st
the field of Taxation. His Income and Expenditure account for the year ended 31 March, 2020 is as
follows:
Income and Expenditure account for the year ending 31st March, 2020
Expenditure Amount (``) Income Amount (`
`)
To Salary 4,00,000 By Consulting fees 58,00,000
To Motor car expenses 88,000 By Share of Profit from HUF 55,000
To Depreciation 87,500 By Interest on saving bank deposits 25,000
To Medical expenses 70,000 By Interest on income tax refund 26,000
To Purchase of computer 90,000
To Bonus 25,000
To General expenses 1,05,000
To Office & administrative 1,15,000
To Excess of income over
Expenditure 49,25,500
59,06,000 59,06,000
The following other information relates to the financial year 2019-20:

(1) Salary includes a payment of ` 22,000 per month to his sister-in-law who is in-charge of the
marketing department. However, in comparison to similar business, the reasonable salary of a
marketing supervisor is ` 18,000 per month.
(2) Written down value of the assets as on 1 st April, 2019 are as follows:
Motor Car (25% used for personal use) ` 3,50,000
Furniture and Fittings `80,000
(3) Medical expenses includes:
Family planning expenditure ` 15,000 incurred for the employees which was revenue in nature.
Medical expenses for his father ` 55,000. (Father's age is 65 years and he is not covered under
any medical insurance policy). ` 2,500 incurred in cash and remaining by credit card.
(4) The computer was purchased on 5th June, 2019 on credit. The total invoice was paid in the
following manner:
` 18,000 paid in cash as down payment on the date of purchase.
Remaining amount was paid through account payee cheque on 10 th August, 2019.
(5) Bonus was paid on 30th September, 2020.
(6) General expenses include commission payment of ` 42,000 to Mr. Mahesh for the promotion of
business on 17th September, 2019 without deduction of tax at source.
(7) He also received gold coins from a family friend on the occasion of marriage anniversary on 15 th
November, 2019. The market value of the coins on the said date was ` 85,000.
(8) The consultancy fees for the previous year 2018-19 was ` 52,50,300.
Compute the total income and the tax liability of Mr. Manohar for the assessment year 2020-21.
Answer:
Computation of Total Income of Mr. Manohar for the A.Y.2020-21
Particulars ` `
Profit and gains from business or profession
Net income as per Income and Expenditure Account 49,25,500
Add: Expenses debited but not allowable

Excess salary of ` 4,000 per month to sister-in-law [not disallowed since -
sister-in-law does not fall within the definition of ‘relative’ under section
2(41)]
Motor car expenses attributable to personal use not allowable (` 88,000 x 22,000
25%)
87,500
Depreciation as per books of account
Medical expenses of ` 15,000 for family planning expenditure for the 15,000
employees [disallowed, since such expenditure is allowable to company
assessee only]
Medical expenditure of ` 55,000 incurred for his father, not allowable,

since it is personal in nature] 55,000
Purchase of computer (not allowable since it is capital in nature) 90,000
Bonus (allowed since it is paid on the due date of filing of return of -

income i.e., on 30.9.2020)
[For the P.Y.2019-20, the gross receipts i.e., fees of Mr. Manohar
from consultancy services is ` 58 lakhs (exceeding ` 50 lakhs), he
has to get his books of account audited under section 44AB, in
which case, his due date for filing return of income would be
30.9.2020]
Commission paid without deduction of tax at source 12,600

[Mr. Manohar would be liable to deduct tax at source under section 194-H
on commission paid during the P.Y. 2019- 20, since his gross receipts
from profession during the P.Y. 2018-19 exceeded the monetary limit 2,82,100
specified in section 44AB i.e., ` 50 lakhs. Thus, 30% disallowance would
be attracted since he has not deducted tax at source on the commission]
52,07,600
Less: Income credited but not taxable or taxable under any other head
Share of profit from HUF (Exempt) 55,000
Interest on saving bank deposit 25,000
Interest on income-tax refund 26,000 1,06,000
51,01,600
Less: Depreciation allowable under the Income-tax Act, 1961 76,175
[See Working Note]
Profit and gains from business or profession 50,25,425
Interest on saving bank deposits 25,000
Interest on income-tax refund 26,000
Value of gold coins received from a family friend on the occasion of
marriage anniversary (taxable under section 56(2)(x), as the fair market
value of such coins exceeds ` 50,000) 85,000 1,36,000

Section 80D 50,000
Medical expenses for father (Deduction allowable to the extent of ` 50,000
since father, aged 65 years, is a senior citizen and is not covered under any
medical insurance policy)
Total Income (Rounded off) 51,11,430
Computation of tax liability of Mr. Manohar for A.Y. 2020-21

Tax on total income of ` 51,11,430
Up-to ` 2,50,000 Nil
` 2,50,001 – `5,00,000 @5% 12,500
` 5,00,001 – `10,00,000 @20% 1,00,000
Above ` 10,00,001 i.e.,41,11,430 @30% 12,33,429 13,45,929
Add: Surcharge @10% [Since his total income exceed
` 50,00,000] 1,34,593
14,80,522
Less: Marginal Relief (compute MR as per format discussed in the class):
Excess tax payable [14,80,522 - 13,12,500, being the amount of tax payable on total 1,68,022
income of ` 50 lakhs]
Amount of income in excess of ` 50,00,000 1,11,430 56,592
Tax before cess 14,23,930
Add: Health & Education cess@4% 56,957
Tax liabily 14,80,887
Tax liability (rounded off) 14,80,890
Working note:
Computation of depreciation allowable as per Income-tax Act, 1961
Particulars `
On Motor Car
` 3,50,000 x 15% x 75% 39,375
On Furniture and fittings
` 80,000 x 10% 8,000
On Computer
` 72,000 x 40% [Actual cost of the computer is ` 72,000 (i.e., ` 90,000 – 28,800
` 18,000). ` 18,000 paid otherwise than by way of account payee cheque/bank draft or use of
ECS is not includible in actual cost.
76,175
14. The following details are provided by Mr. Divakar, an individual, for the assessment year 2020-21.
Amount (` `)
Total estimated tax payable 4,40,000
TDS (deductible but not deducted) 55,000
Determine the advance tax payable with their due dates for the assessment year 2020-21.
Answer:
Computation of Advance Tax Payable for the A.Y 2020-21
Particulars `
Tax Payable 4,40,000
TDS (deductible but not deducted), cannot be reduced for computing advance tax liability Nil
Net Tax Payable 4,40,000
Due dates for payment of advance tax

Due date of installment Amount payable
On or before 15th June, 2019 ` 66,000

[15% of ` 4,40,000]

On or before 15th September, 2019 ` 1,32,000
[`1,98,000 (45% of `4,40,000) less `66,000,
(amount paid in earlier installment)]
On or before 15th December, 2019 ` 132,000
[` 3,30,000 (75% of ` 4,40,000) Less
` 1,98,000 (amount paid in earlier installment or installments)]
On or before 15th March, 2020 ` 1,10,000,
[` 4,40,000 (whole amount of advance tax liability less ` 3,30,000
(amount paid in earlier installment or installments)]
15. Mr. Sudarshan, due to inadvertent reasons, failed to file his Income-tax return for the assessment year
2020-21 on or before the due date of filing such return of income.
(i) Can he file the above return after due date of filing return of income? If yes, which is the last date for
filing the above return?
(ii) What are the consequences of non-filing the return within the due date under section 139(1)?
Answer:
If any person fails to furnish a return within the time allowed to him under section 139(1), he may furnish
the belated return for any previous year at any time -
(iii) before the end of the relevant assessment year; or
(iv) before the completion of the assessment, whichever is earlier.
The last date for filing return of income for A.Y.2020-21, therefore, is 31st March 2021. Thereafter, Mr. Sudarshan
cannot furnish a belated return after this date.
Consequences for non-filing return of Income within the due date under section 139(1)
Carry forward and set-off of certain losses: Business loss, speculation business loss, loss from specified
business under section 35AD, loss under the head “Capital Gains”; and loss from the activity of owning and
maintaining race horses, would not be allowed to be carried forward for set-off against income of subsequent
years, where a return of income is not furnished within the time allowed under section 139(1).
Interest under section 234A: Interest under section 234A@1% per month or part of the month for the period
commencing from the date immediately following the due date under section 139(1) till the date of furnishing of
return of income is payable, where the return of income is furnished after the due date.
Fee under section 234F: Fee of ` 5,000 would be payable under section 234F, if the return of income is not
st
filed on or before the due date specified in section 139(1) but filed on or before 31 December of the
assessment year and ` 10,000 would be the fee payable under section 234F where the return is furnished after
31st December of the assessment year. However, such fee cannot exceed ` 1,000, if the total income does
not exceed ` 5,00,000.


1. Mr. Ajay is found to be the owner of two gold chains of 50 gms each (market value of which is ` 1,45,000
each) during the financial year ending 31.3.2020 but he could offer satisfactory explanation for ` 50,000
spent on acquiring these gold chains. As per Section 115BBE, Mr. Ajay would be liable to pay tax of –
(a) ` 1,87,200
(b) ` 2,26,200
(c) ` 1,49,760
(d) ` 1,80,960
2. IMP: Mr. Suhaan (aged 35 years), a non-resident earned dividend income of ` 12,50,000 from an Indian
Company which is credited directly to its bank account in France and ` 15,000 as interest in Saving A/c
from State Bank of India during the previous year 2019-20. Assuming that he has no other income, what
will be amount of income chargeable to tax in his hands in India for A.Y. 2020-21?
(a) ` 2,55,000
(b) ` 2,65,000
(c) ` 15,000
(d) ` 5,000
3. XYZ Ltd. has two units, one unit at Special Economic Zone (SEZ) and other unit at Domestic Tariff Area
(DTA). The unit in SEZ was set up and started manufacturing from 12.3.2013 and unit in DTA from
15.6.2016. Total turnover of XYZ Ltd. and Unit in DTA is ` 8,50,00,000 and 3,25,00,000, respectively. Export
sales of unit in SEZ and DTA is ` 2,50,00,000 and ` 1,25,00,000, respectively and net profit of Unit in SEZ
and DTA is ` 80,00,000 and ` 45,00,000, respectively. XYZ Ltd. would be eligible for deduction under
section 10AA for -
(a) ` 38,09,524
(b) ` 19,04,762
(c) ` 23,52,941
(d) ` 11,76,471
4. Mr. Jagat is an employee in accounts department of Bharat Ltd., a cellular company operating in the
regions of eastern India. It is engaged in manufacturing of cellular devices. During F.Y. 2019-20, following
transactions were undertaken by Mr. Jagat:
(i) He attended a seminar on “Perquisite Valuation”. Seminar fees of ` 12,500 was paid by Bharat Ltd.
(ii) Tuition fees of Mr. Himanshu (son of Mr. Jagat) was reimbursed by Bharat Ltd. Amount of fees is `
25,000.
(iii) Ms. Sapna (daughter of Mr. Jagat) studies in DPS Public School (owned and maintained by Bharat
Ltd.). Tuition fees paid for Ms. Sapna was ` 750 per month. Cost of education in similar institution is `
5,250 per month.
Compute the amount which is chargeable to tax as perquisites under the head “Salaries” in hands of Mr.
Jagat for A.Y. 2020-21.
(a) ` 25,000
(b) ` 37,500
(c) ` 66,500
(d) ` 79,000
5. IMP: Mr. Jha, an employee of FX Ltd, attained 60 years of age on 15.05.2019. He is resident in India during F.Y.
2019-20 and earned salary income of ` 5 lacs (computed). During the year, he earned ` 7 lacs from winning of
lotteries. Compute his advance tax liability for A.Y. 2020-21:
(a) ` 2,20,000 + Cess ` 8,800 = ` 2,28,800, being the tax payable on total income of ` 12 lacs
(b) ` 2,10,000 + Cess ` 8,400 = ` 2,18,400, being the tax payable on lottery income of ` 7 lacs
(c) ` 10,000 + Cess ` 400 = ` 20,400, being the tax payable on salary income, since tax would have been
deducted at source from lottery income.
(d) Nil

6. APM Ltd. is a pioneer company in textile industry. At the end of F.Y. 2019-20, it decided to distribute
deposit certificates (without interest) to its shareholders (preference as well as equity shareholders). Total
value of accumulated profits of APM Ltd. was ` 25 lakhs. Mr. A is an equity shareholder of APM Ltd.
holding 10% of share capital. During F.Y. 2019-20, Mr. A received deposit certificates (without interest)
valuing ` 5,00,000 from APM Ltd. Comment upon taxability of receipt of deposit certificates in the hands
of Mr. A.
(a) Deposit Receipts (without interest) are taxable to the extent of ` 2,50,000 under Income from other sources.
(b) Deposit Receipts (without interest) are fully taxable under Income from other sources.
(c) Deposit Receipts (without interest) are exempt since DDT is payable by the company.
(d) Deposit Receipts (without interest) are fully taxable and shall be included in Gross total income. But such
receipt shall be allowed as deduction under Chapter-VI A.
7. Mr. Hari is 65 years old residing in Agra. During F.Y. 2013-14, he purchased a house property in Kamla
Nagar for ` 25 lacs. This house property was self-occupied by him till F.Y. 2015-16. In F.Y. 2016-17, he
shifted to Delhi and the house property in Kamla Nagar was let out to Mr. Kishore. His income from house
property was ` 5 lacs per annum (computed).
During F.Y. 2019-20, Mr. Hari earned long-term capital gain of ` 2.50 lacs, casual income of ` 10 lacs,
agricultural income of ` 3 lacs and profits from business of ` 4 lacs. During the same year, he transferred
house property situated in Kamla Nagar to Mrs. Neelam (his son’s wife) without any consideration.
Subsequently, income from house property was received by Mrs. Neelam for F.Y. 2019-20. Compute gross
total income of Mr. Hari for A.Y. 2020-21:
(a) ` 16.50 lacs
(b) ` 21.50 lacs
(c) ` 19.50 lacs
(d) ` 24.50 lacs
8. The details of income/loss of Mr. Kumar for A.Y. 2020-21 are as follows:
Particulars Amt. (in `)

Income from Salary (Computed) 5,20,000
Loss from self-occupied house property 95,000
Loss from let-out house property 2,25,000
Loss from specified business u/s 35AD 2,80,000
Loss from medical business 1,20,000
Long term capital gain 1,60,000
Income from other sources 80,000
Compute gross total income of Mr. Kumar for A.Y. 2020-21:

(a) ` 4,40,000
(b) ` 3,20,000
(c) ` 1,60,000
(d) ` 4,80,000
9. Mr. Pawan is engaged in the business of roasting and grinding coffee beans. During F.Y. 2019-20, his total
income is ` 4.5 lacs. Mr. Pawan filed its return of income for A.Y. 2020-21 on 3rd March, 2021. Compute fee
payable for default in furnishing in return of income for A.Y. 2020-21:
(a) ` 5,000
(b) Not exceeding ` 1,000
(c) ` 10,000
(d) No fees payable as total income is below ` 5,00,000

10. Mr. Rana is a resident of India residing in Meerut. During F.Y. 2010-11 he purchased an agricultural land
situated in Bahadurpur for ` 10 lacs. This land is situated in an area which has aerial distance of 3 km
from the local limits of Municipality of Bahadurpur. Total population of this area is 80,000 as per the last
preceding census. During F.Y. 2019 -20, Mr. Rana sold this land to Mr. Jeet for ` 25 lacs on 29.1.2020. Mr.
Rana invested ` 5 lakhs in bonds of NHAI on 31.7.2020. Cost inflation index for F.Y. 2010-11 and F.Y. 2019-
20 is 167 and 289 respectively.
Compute the amount of capital gain taxable in the hands of Mr. Rana for A.Y. 2020-21:
(a) ` 3,23,353
(b) ` 8,23,353
(c) ` 10,00,000
(d) None of the above
SUGGESTED ANSWERS
1 2 3 4 5
(a) (d) (b) (d) (d)
6 7 8 9 10
(c) (b) (a) (b) (d)
11. Mr. Sunil Patni, aged 45 years, furnishes the following details of his total income for the A.Y. 2020-21:
Income from Salaries (computed) 26,56,000

Income from House Property (computed) 16,90,000
Interest income from FDRs 7,34,000
He has not claimed any deduction under Chapter VI-A. You are required to compute tax liability of Mr.
Sunil Patni as per the provisions of Income Tax Act, 1961.
Answer:
Computation of tax liability of Mr. Sunil Patni for the A.Y. 2020-21
Particulars ` `
Income from Salaries (computed) 26,56,000
Income from house property (computed) 16,90,000
Interest income from FDR’s 7,34,000
Tax Liability
(A) Tax payable including surcharge on total income of ` 50,80,000
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000 @ 5% 12,500
` 5,00,001 – ` 10,00,000 @ 20% 1,00,000
` 10,00,001 – ` 50,80,000 @30% 12,24,000
13,36,500
Add: Surcharge @ 10%, since total income exceeds 1,33,650 14,70,150

` 50 lakhs but does not exceed ` 1 crore.
(B)Tax Payable on total income of ` 50 lakhs (`
` 12,500 plus ` 1,00,000
plus ` 12,00,000, being 30% of ` 40,00,000) 13,12,500
(C) Excess tax payable (A)-(B) 1,57,650
(D) Marginal Relief (`

` 1,57,650 – ` 80,000, being the amount of income in 77,650
excess of ` 50,00,000)
Tax payable (A)-(D) [ ` 14,70,150 – ` 77,650] 13,92,500
Add: Health & Education cess@4% 55,700
Tax Liability 14,48,200

12. Mr. Rajesh Sharma (aged 62 years), an Indian citizen, travelled frequently out of India for his business trip
as well as for his outings. He left India from Delhi airport on 29th May 2019 as stamped in the passport
and returned on 27th April 2020. He has been in India for less than 365 days during the 4 years
immediately preceding the previous year. Determine his residential status and his total income for the
assessment year 2020-21 from the following information:
1. Short term capital gain on the sale of shares of Tilt India Ltd., a listed Indian company, amounting to
` 58,000. The sale proceeds were credited to his bank account in Singapore.
2. Dividend amounting to ` 48,000 received from Treat Ltd., a Singapore based company, which was
transferred to his bank account in Singapore. He had borrowed money from Mr. Abhay, a non-resident
Indian, for the above-mentioned investment on 2nd April, 2019. Interest on the borrowed money for
the previous year 2019-20 amounted to ` 5,800.
3. Interest on fixed deposit with Punjab National Bank, Delhi amounting to ` 9,500 was credited to his
saving bank account.
Answer:
1. Determination of residential status
An individual is said to be resident in India in any previous year, if he satisfies any one of the following conditions:
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the previous year for a total period of 365 days
or more and has been in India for at least 60 days in the previous year.
If the individual satisfies any one of the conditions mentioned above, he is a resident. If both the above conditions
are not satisfied, the individual is a non-resident.
Mr. Rajesh Sharma, an Indian citizen, has not satisfied either of the basic conditions for being a resident, since he
was in India for only 59 days during the previous year 2019-20. Hence, he is non-resident in India for A.Y. 2020-
21.
Computation of total income of Mr. Rajesh Sharma for A.Y. 2020-21
Particulars Amount (`
`)
(1) Short-term capital gain on sale of shares of an Indian listed company is 58,000
chargeable to tax in the hands of Mr. Rajesh Sharma, since it has accrued and
arisen in India even through the sale proceeds were credited to bank account in
Singapore.
(2) Dividend of ` 48,000 received from Singapore based company transferred to his
bank account in Singapore is not taxable in the hands of the non-resident since Nil
the income has neither accrued or arisen in India nor has it been received in
India.
Since dividend is not taxable in India, interest paid for investment is not
allowable as deduction.
(3) Interest on fixed deposit with Punjab National Bank, Delhi credited to his savings 9,500
bank account is taxable in the hands of Mr. Rajesh Sharma as Income from
other sources, since it has accrued and arisen in India and is also received in
India. He would not be eligible for deduction under Section 80TTB, since he
is a non-resident. However, he can claim deduction under section 80TTA.
Gross Total Income 67,500
13. Examine with brief reasons, whether the following are chargeable to income-tax and the amount liable to
tax with reference to the provisions of the Income-tax Act, 1961:
1. Allowance of ` 18,000 p.m. received by an employee, Mr. Uttam Prakash, working in a transport
system granted to meet his personal expenditure while on duty. He is not in receipt of any daily
allowance from his employer.
2. During the previous year 2019-20, Mrs. Aadhya, a resident in India, received a sum of ` 9,63,000 as
dividend from Indian companies and ` 4,34,000 as dividend from units of equity oriented mutual fund.

Answer:
Chargeability Amount Reason
liable to
tax (`
`)
(i) Partly 96,000 Any allowance granted to an employee working in a transport
taxable system to meet his personal expenditure during his duty is exempt
provided he is not in receipt of any daily allowance. The
exemption is 70% of such allowance (i.e., ` 12,600 per month
being, 70% of ` 18,000, in the present case) or ` 10,000 per
month, whichever is less. Hence, ` 1,20,000 (i.e., ` 10,000 x 12)
is exempt. Balance ` 96,000 (` 2,16,000 – ` 1,20,000) is taxable
in the hands of Mr. Uttam Prakash.
(ii) Not Taxable - As per section 10(34), dividend received up to ` 10 lakhs from
Indian companies on which dividend distribution tax is paid by the
company, is exempt in the hands of shareholder.
As per section 10(35), income received from units of mutual fund

is exempt.
Hence, ` 9,63,000, being the dividend from Indian companies and

` 4,34,000, being the dividend from units of equity oriented mutual
fund is not taxable in the hands of Mrs. Aadhya.
14. Ms. Suhaani, a resident individual, aged 33 years, is an assistant manager of Daily Needs Ltd. She is
getting a salary of ` 48,000 per month. During the previous year 2019-20, she received the following
amounts from her employer.
(i) Dearness allowance (10% of basic pay which forms part of salary for retirement benefits).
(ii) Bonus for the previous year 2018-19 amounting to ` 52,000 was received on 30th November, 2019.
(iii) Fixed Medical allowance of ` 48,000 for meeting medical expenditure.
(iv) She was also reimbursed the medical bill of her father dependent on her amounting to ` 4,900.
(v) Ms. Suhaani was provided;
a laptop both for official and personal use. Laptop was acquired by the company on 1st June, 2017
at ` 35,000.
a domestic servant at a monthly salary of ` 5,000 which was reimbursed by her employer.
(vi) Daily Needs Ltd. allotted 700 equity shares in the month of October 2019 @ ` 170 per share against the
fair market value of ` 280 per share on the date of exercise of option by Ms. Suhaani. The fair market
value was computed in accordance with the method prescribed under the Act.
(vii) Professional tax ` 2,200 (out of which ` 1,400 was paid by the employer).
Compute the Income under the head “Salaries” of Ms. Suhaani for the assessment year 2020-21.
Answer:
Computation of Income under the head “Salaries” in the hands of Ms. Suhaani for the A.Y. 2020-21
Particulars `
Basic Salary [` 48,000 x 12] 5,76,000
Dearness allowance [10% of basic salary] 57,600
Bonus [Taxable in the P.Y. 2019-20, since it is taxable on receipt basis] 52,000
Fixed Medical Allowance [Taxable] 48,000
Reimbursement of Medical expenditure incurred for her father [Fully taxable from A.Y. 4,900
2020-21, even though father is included in the meaning of “family” on account of

standard deduction being introduced in lieu of reimbursement of medical expenditure].
Facility of laptop [Facility of laptop is an exempt perquisite, whether used for official or
personal purpose or both] Nil
Reimbursement of salary of domestic servant [` 5,000 x12] [Fully taxable, since 60,000
perquisite includes any sum paid by the employer in respect of any obligation which
would have been payable by the employee]
Value of equity shares allotted [700equity shares x ` 110 (` 280, being the fair market 77,000
value – ` 170, being the amount recovered)]
Professional tax paid by the employer [Perquisite includes any sum paid by the
employer in respect of any obligation which would have been payable by the 1,400
employee]

Less: Deduction under section 16
Professional tax paid 2,200
Standard Deduction (Lower of ` 50,000 or amount of salary) 50,000
Taxable Salary 8,24,700
15. Mr. Vihaan is a resident but not ordinarily resident in India during the Assessment Year 2020-21. He
furnishes the following information regarding his income/expenditure pertaining to his house properties
for the previous year 2019-20:
He owns two houses, one in Singapore and the other in Pune.
The house in Singapore is let out there at a rent of SGD 4,000 p.m. The entire rent is received in India.
He paid Property tax of SGD 1250 and Sewerage Tax SGD750 there. (1SGD=INR 51)
The house in Pune is self-occupied. He had taken a loan of ` 25,00,000 to construct the house on 1st
June, 2015 @12%. The construction was completed on 31st May, 2017 and he occupied the house on
1st June, 2017.
The entire loan is outstanding as on 31st March, 2020. Property tax paid in respect of the second house is
` 2,800.
Compute the income chargeable under the head "Income from House property" in the hands of Mr. Vihaan
for the Assessment Year 2020-21.
Answer:
Computation of income from house property of Mr. Vihaan for A.Y. 2020-21
Particulars ` `
1. Income from let-out property in Singapore [See Note 1below]
Gross Annual Value (SGD 4,000 p.m. x 12 months x ` 51) 24,48,000
Less: Municipal taxes paid during the year
[SGD2,000 (SGD 1,250 + SGD 750) x ` 51] 1,02,000

(a) 30% of NAV 7,03,800
(b) Interest on housing loan -
7,03,800
16,42,200

2. Income from self-occupied property in Pune
Annual Value [Nil, since the property is self-occupied] NIL
[No deduction is allowable in respect of municipal taxes paid in respect
of self-occupied property]
Less: Deduction in respect of interest on housing loan 2,00,000
[See Note 2 below] (2,00,000)
Income from house property [` 16,42,200 – ` 2,00,000] 14,42,200
Notes:
1. Since Mr. Vihaan is a resident but not ordinarily resident in India for A.Y. 2020 -21, income which is, inter alia,
received in India shall be taxable in India, even if such income has accrued or arisen outside India by virtue of
the provisions of section 5(1). Accordingly, rent received from house property in Singapore would be taxable
in India since such income is received by him in India.
2. Interest on housing loan for construction of self-occupied property allowable as deduction under
section 24
Interest for the current year (` 25,00,000 x 12%) ` 3,00,000
For the period 01.06.2015 to 31.03.2017 (` 25,00,000 x 12% x 22/12) = ` 5,50,000
` 5,50,000 allowed in 5 equal installments (` 5,50,000/5) ` 1,10,000
` 4,10,000
In case of self-occupied property, interest deduction to be restricted to ` 2,00,000
16. IMPORTANT: Mr. Chirag, set up a manufacturing unit of Baking Soda in notified backward area of the
State of Andhra Pradesh on 18th May, 2019. The following machineries (falling under 15% block)
purchased by him during the previous year 2019-20.
Amount
` lakhs)
(`
(i) Machinery X, Machinery Y and Machinery Z from Sahaj Limited on credit 58
th th st
(installed and usage started on 18 July, 2019, 25 July 2019 and 1
th
August 2019, respectively). Payment is made on 15 April 2020 to Sahaj
Limited by net banking.
th
(ii) Machinery L from Swayam Limited (installed on 8 August, 2019). The 35
Invoice was paid through a cash payment on the same day.
th
(iii) Machinery M (a second-hand machine) from Sunshine Limited on 18 15
December, 2019 (The payment for the purchase invoice was made
th
through NEFT on 5 January, 2020)
Compute the depreciation allowance under section 32 of the Income-tax Act, 1961 for the assessment
year 2020-21.
Answer:
Computation of depreciation under section 32 for A.Y. 2020-21
Particulars ` `
Machinery X, Machinery Y and Machinery Z acquired from Sahaj Ltd. 58,00,000
(Since payment is made to Sahaj Ltd by way of use of ECS and the
machineries were put to use for more than 180 days during the previous
year, depreciation is allowable@15%)
Machinery L acquired from Swayam Ltd. in cash and NIL

installed on 8.8.2019 [Since payment of ` 35 lakhs is made otherwise than
by account payee cheque/bank draft or use of ECS, the said amount will
not be included in actual cost and hence, depreciation not allowable]

Second hand Machinery M from Sunshine Ltd on 18.12.2019 assuming it

is installed and put to use in P.Y. 2019-20. [Since payment is made to 15,00,000
Sunshine Ltd by way of use of ECS]
Actual Cost 73,00,000
Depreciation for P.Y. 2019-20
Depreciation@15% on Machineries X, Y and Z on ` 58 lakhs 8,70,000
Depreciation@7.5% (50% of 15%) on ` 15 lakhs for Machinery M since it
is put to use for less than 180 days 1,12,500
9,82,500
Additional Depreciation@35% on ` 58 lakhs, since the machinery is
acquired and installed for a manufacturing unit set up in a notified 20,30,000
backward area in the state of Andhra Pradesh
Additional depreciation is not allowable on second hand machinery -
Depreciation under section 32 for A.Y. 2020-21 30,12,500
17. Mrs. Yuvika bought a vacant land for ` 80 lakhs in May 2004. Registration and other expenses were 10% of
the cost of land. She constructed a residential building on the said land for ` 100 lakhs during the
financial year 2006-07.
She entered into an agreement for sale of the above said residential house with Mr. Johar (not a relative)
in April 2015. The sale consideration was fixed at ` 700 lakhs and on 23- 4-2015, Mrs. Yuvika received ` 20
lakhs as advance in cash by executing an agreement. However, due to failure on part of Mr. Johar, the
said negotiation could not materialise and hence, the said amount of advance was forfeited by Mrs.
Yuvika.
Mrs. Yuvika, again entered into an agreement on 01.08.2019 for sale of this house at ` 810 lakhs. She
received ` 80 lakhs as advance by cash payment. The stamp duty value on the date of agreement was `
835 lakhs. The sale deed was executed and registered on 14-1-2020 for the agreed consideration.
However, the State stamp valuation authority had revised the values, hence, the value of property for
stamp duty purposes was ` 870 lakhs. Mrs. Yuvika paid 1% as brokerage on sale consideration received.
Subsequent to sale, Mrs. Yuvika made following investments:

(i) Acquired a residential house at Delhi for ` 130 lakhs on 31.5.2020.
(ii) Acquired a residential house at UK for ` 290 lakhs on 23.3.2020.
(iii) Subscribed to NHAI capital gains bond (approved under section 54EC) for ` 47 lakhs on 29-3-2020 and
for ` 50 lakhs on 12-5-2020.
Compute the income chargeable under the head 'Capital Gains'. The choice of exemption must be in the
manner most beneficial to the assessee.
Cost Inflation Index: F.Y. 2004-05 – 113; F.Y. 2006-07 – 122; F.Y. 2019-20 - 289.
Answer:
Particulars ` `
(in lakhs) (in lakhs)
Capital Gains on sale of residential building
Value adopted by Stamp Valuation Authority ` 870 lakhs 870.00
Gross Sale consideration

[Where the actual sale consideration declared by the assessee on the date is
less than the value adopted by the Stamp Valuation Authority for the purpose
of charging stamp duty, and such stamp duty value exceeds 105% of the
actual sale consideration then, the value adopted by the Stamp Valuation
Authority shall be taken to be the full value of consideration as per section
50C.
However, where the date of agreement is different from the date of registration,
stamp duty value on the date of agreement can be considered provided the
whole or part of the consideration is received by way of account payee
cheque/bank draft or by way of ECS through bank account on or before the date
of agreement.
In this case, since advance of ` 80 lakh is received by cash, stamp duty value
on the date of agreement cannot be adopted as the full value of consideration.
Stamp duty value on the date of registration would be considered for
determining the full value of consideration, since such value exceeds 105% of
` 810 lakhs]
Less: Brokerage@1% of sale consideration (1% of ` 810 lakhs) 8.10
Net Sale consideration
861.90
Less: Indexed cost of acquisition
Cost of vacant land, ` 80 lakhs, plus registration and other expenses i.e., `
8 lakhs, being 10% of cost of land [` 88 lakhs × 289/113] 225.06
Construction cost of residential building (` 100 lakhs x 289/122) 236.89 461.95
Long-term capital gains before exemption 399.95

The capital gain arising on transfer of a long-term residential property shall not
be chargeable to tax to the extent such capital gain is invested in the purchase
of one residential house property in India one year before or two years after the
130.00
date of transfer of original asset. Therefore, in the present case, the exemption
would be available only in respect of the residential house acquired at Delhi and
not in respect of the residential house in UK
Less: Exemption under section 54EC

Amount deposited in capital gains bonds of NHAI within six months after the
date of transfer (i.e., on or before 13.7.2020), of long-term capital asset, being
land or building or both, would qualify for exemption, to the 50.00
maximum extent of ` 50 lakhs, whether such investment is made in the current
financial year or subsequent financial year.
Therefore, in the present case, exemption can be availed only to the extent of `
50 lakh out of ` 97 lakhs, even if the both the investments are made on or
before 13.7.2020 (i.e., within six months after the date of transfer).
Long term capital gains chargeable to tax 219.95
Note:
Advance of ` 20 lakhs received from Mr. Johar, would have been chargeable to tax under the head “Income from
other sources”, in the A.Y. 2016-17, as per section 56(2)(ix), since the same was forfeited on or after 01.4.2014 as
a result of failure of negotiation. Hence, the same should not be deducted while computing indexed cost of
acquisition.

18. Mr. Raghav is a chartered accountant and his income from profession for the year 2019-20 is ` 15,00,000.
He provides you with the following information for the year 2019-20.
Particulars `
Income of minor son Rahul from company deposit 1,75,000
Income of minor daughter Riya (professional dancer) from her dance performances 20,00,000
Interest from Canara bank received by Riyaon fixed deposit made in 2015 out of 20,000
income earned from her dance performances
Gift received by Riya from friends of Mr. Raghav on winning National award 45,000
Loss from house property (computed) 2,50,000
Short term capital loss 6,00,000
Long term capital gain under section 112 4,00,000
Short term capital loss under section 111A 10,00,000
Mr. Raghav income before considering clubbing provisions is higher than that of his wife.
Compute the Total Income of Mr. Raghav for Assessment Year 2020-21 and the losses to be carried
forward assuming that he files his income tax returns every year before due date.
Answer:
Computation of Total Income of Mr. Raghav for A.Y. 2020-21
Particulars ` ` `
Profits and gains from business and profession
Income from chartered accountancy profession 15,00,000
Less: Loss from house property (can be set-off to the extent of ` 2,00,000 13,00,000
2,00,000, as per section 71(3A).
Capital gains
Long term capital gain under Section 112 4,00,000
Less: Short term capital loss set off against long-term capital
gain as per section 74 (4,00,000) Nil

Income of minor son Rahul
Income from company deposit includible in the hands of Mr. 1,75,000
Raghav as per section 64(1A)
Less: Exemption in respect of income of minor child u/s 10(32) 1,500
1,73,500
Income of minor daughter Riya
Income of ` 20,00,000 of minor daughter Riya (professional Nil
dancer) not includible in the
hands of parent, since such income is earned on account of
her special skills
Interest received on deposit with Canara Bank made out of
amount earned on account of her special talent is includible
as per section 64(1A), since interest income arises out of 20,000
deposit made and not on account of her special skills
Gift of ` 45,000 received by her from friends of Mr. Raghav is
not taxable under section 56(2)(x), since the aggregate amount Nil
from non-relatives does not exceed ` 50,000
1,500 8,500 1,92,000
Less: Exemption in respect of income of minor child u/s 10(32)

Losses to be carried forward to A.Y. 2021-22
Particulars `
Loss from house property [` 2.50,000 – ` 2,00,000] 50,000
Short term capital loss under section 111A 10,00,000
Short term capital loss (other than above) [` 6,00,000 – ` 4,00,000] 2,00,000
Note – Short-term capital loss under section 111A can also be set-off against long-term capital gains under
section 112. In such a case, the losses to be carried forward to A.Y. 2021-22 would be as under –
Particulars `
Loss from house property [` 2,50,000 – ` 2,00,000] 50,000
Short term capital loss under section 111A [` 10,00,000 – ` 4,00,000] 6,00,000
Short term capital loss (other than above) 6,00,000
19. Mr. Arihant, a resident individual aged 40 years, has Gross Total Income of ` 7,50,000 comprising of
income from Salary and income from house property for the assessment year 2020-21. He provides the
following information:
Paid ` 70,000 towards premium for life insurance policy of his handicapped son (section 80U disability).
Sum assured ` 4,00,000; and date of issue of policy 1-8-2018.
Deposited ` 90,000 in tax saver deposit in the name of his major son in Punjab National Bank of India.
Paid ` 78,000 towards medical insurance for the term of 3 years as a lumpsum payment for himself and
his spouse. Also, incurred ` 54,000 on medical expenditure of his father, a resident aged 68 years. No
medical insurance policy is taken in the name of his father. His father earned ` 4,50,000 interest from fixed
deposit. Contributed ` 25,000 to The Clean Ganga Fund, set up by the Central Government.
Compute the Total Income and deduction under Chapter VI-A for the Assessment year 2020-21.
Answer:
Computation of Total Income of Mr. Arihant for A.Y. 2020-21
Particulars ` ` `
Under section 80C
Life insurance premium of ` 70,000
(restricted to ` 60,000 i.e., 15% of ` 4,00,000, being the sum
60,000
assured, since the policy has been taken on or after
01.04.2013, in respect of his handicapped son suffering
from disability u/s 80U)
Tax saver deposit of ` 90,000 in the name of his major son

does not qualify for deduction under section 80C, since such
deposit has to be made in the name of the assessee himself
to qualify for deduction u/s 80C
Nil 60,000
Under section 80D
Medical insurance premium for self and his wife, pertaining to
the previous year 2019-20 is ` 26,000, being 1/3rd of ` 25,000
78,000, the lumpsum premium, since the policy would be in
force for three previous years. The said deduction would be
restricted to
Deduction in respect of medical expenditure of ` 54,000 for
his father, being a senior citizen would be allowable, since no 50,000
insurance policy is taken in his name, to the extent of 75,000

Under section 80G
Contribution by a resident towards the Clean Ganga Fund,
25,000
set up by the Central Government would be eligible for 100% 1,60,000
deduction without any qualifying limit.
20. Mr. Chandra Prakash, a resident individual aged 54, is planning to pay self-assessment tax and furnish his
return of income on 15.12.2020. He furnishes the following details of his income, the amount of tax
deducted at source and advance tax paid for the previous year 2019-20 as under:
(i) Retail Toy business, whose turnover is ` 185 lakhs [received ` 90 lakhs by Account payee cheque, `
50 lakhs through ECS and balance in cash]. He opts for presumptive taxation scheme under section
44AD.
(ii) Income from other sources ` 3,05,000.
(iii) Tax deducted at source ` 55,000.
(iv) Advance tax paid ` 1,45,000 on 14-3-2020.
Calculate the interest payable under section 234B of the income-tax Act, 1961.
Answer:
Computation of interest payable under section 234B by Mr. Chandra Prakash
Particulars `
Tax on total income of ` 15,05,000 [Business income of ` 12,00,000 2,64,000

(See Note below) + Income from other sources of ` 3,05,000]
Add: Health and Education cess @4% 10,560
Tax on total income 2,74,560
Assessed Tax 2,19,560
90% of assessed tax 1,97,604
Advance tax paid on 14-3-2020 1,45,000
Interest under section 234B is leviable since advance tax of ` 1,45,000 paid is less
than ` 1,97,604, being 90% of assessed tax
st
Number of months from 1 April, 2020 to 15th December, 2020, being the date of 9
payment of self-assessment tax
Interest under section 234B@1% per month or part of a month for 9 months on `
74,600 [i.e., difference between assessed tax of ` 2,19,560 and advance tax of `
1,45,000 paid being ` 74,560 which is rounded off to ` 74,600] 6,714
Interest under section 234B rounded off
6,710
Note: The presumptive income computed under section 44AD would be ` 12 lakhs,
being 8% of ` 45 lakhs and 6% of ` 140 lakhs.
21. Examine with reference to the relevant provisions of Income-tax Act, 1961 whether the following
losses/deductions can be carried forward/claimed by Mr. Sharma. These losses/deductions are in respect
of the financial year 2019-20.
(i) Loss from the business carried on by him as a proprietor: ` 9,80,000 (computed)
(ii) Unabsorbed Depreciation: ` 3,25,000 (computed)
(iii) Loss from House property: ` 50,000 (computed)
The due date for filing the return for Mr. Sharma was 31st July, 2020 under section 139(1). However, he
filed the return on 25.9.2020.

Answer:
Mr. Sharma has furnished his return of income for A.Y. 2020-21 on 25.9.2020, i.e., after 31st July 2020, being the
due date specified under section 139(1). Hence, the return is a belated return under section 139(4).
As per section 80 read with section 139(3), specified losses, which have not been determined in pursuance of a
return of loss filed within the time specified in section 139(1), cannot be carried forward to the subsequent year for
set-off against income of that year. The specified losses include, inter alia, business loss but does not include loss
from house property and unabsorbed depreciation.
Accordingly, business loss of ` 9,80,000 of Mr. Sharma for A.Y. 2020-21, not determined in pursuance of a return
of loss, filed within the time specified in section 139(1), cannot be carried forward to A.Y.2021-22.
However, the loss of ` 50,000 from house property and unabsorbed depreciation of ` 3,25,000 pertaining to A.Y.
2020-21, can be carried forward to A.Y.2021-22 for set-off, even though Mr. Sharma has filed the return of loss for
A.Y. 2020-21 belatedly.

Class Notes


1. Mr. Sumit is an Indian citizen and a member of the crew of an America bound Indian ship engaged in
th
carriage of freight in international traffic departing from Kochi on 25 April, 2019. From the following
details for the P.Y. 2019-20, determine the residential status of Mr. Sumit for A.Y. 2020-21, assuming
that his stay in India in the last 4 previous years preceding P.Y. 2019-20 is 365 days and last seven
previous years preceding P.Y. 2019-20 is 730 days:
Date entered in the Continuous Discharge Certificate in respect of joining the ship by Mr. Sumit: 25th
April, 2019
Date entered in the Continuous Discharge Certificate in respect of signing off the ship by Mr. Sumit:
24th October, 2019
Mr. Sumit has been filing his income tax return in India as a Resident for previous 2 years.
What is his residential status for A.Y. 2020-21:

(a) Resident and ordinarily resident
(b) Resident but not-ordinarily resident
(c) Non-resident
(d) Non-resident till 24.10.2019 and resident till 31.03.2020
2. Aashish earns the following income during the P.Y. 2019-20:

Interest on U.K. Development Bonds (1/4th being received in India): ` 4,00,000
Capital gain on sale of a building in India but received in Holland: ` 6,00,000
If Aashish is a resident but not ordinarily resident in India, then what will be amount of income
chargeable to tax in India for A.Y. 2020-21?
(a) ` 7,00,000
(b) ` 10,00,000
(c) ` 6,00,000
(d) ` 1,00,000
3. Mr. Anay (aged 25) has agricultural income of ` 2,10,000 and business income of ` 2,35,000. Which of
the following statement is correct?
(a) Agricultural income always has to be aggregated with business income for rate purposes
(b) No aggregation is required since business income which constitutes his total income, is less than basic
exemption limit
(c) No aggregation is required since agricultural income is less than basic exemption limit
(d) Agricultural income is exempt under section 10(1) but the same has to be aggregated with business
income, since it exceeds ` 5,000
4. Miss Riya has started working in a reputed company. This is her first job. She earned total income of `
8 Lakhs in P.Y. 2019-20. While filing her return of income she had a doubt with respect to deduction of
transport allowance. Her father advised her that she cannot claim deduction of transport allowance
while her friend told that maximum deduction of ` 1600 p.m. in respect of the said allowance can be
claimed. According to you, what is the correct treatment for the same?
(a) Transport allowance upto a maximum ` 1600 per month can be claimed.
(b) Transport allowance upto a maximum ` 800 per month can be claimed.
(c) No separate deduction for transport allowance is allowed. However, a standard deduction of ` 50,000 is
allowed to salaried assessees.
(d) Deduction of transport allowance is allowed without any monetary limit.

5. In respect of loss from house property, which of the following statements are correct?
(a) While computing income from any house property, the maximum interest deduction allowable under
section 24 is ` 2 lakhs
(b) Loss from house property relating to a particular year can be set-off against income under any other head
during that year only to the extent of ` 2 lakhs
(c) The loss in excess of ` 2 lakh, which is not set-off during the year, can be carried forward for set-off
against any head of income in the succeeding year(s)
(d) All the above
6. M/s ABC, an eligible assessee, following mercantile system of accounting, carrying on eligible
business under Section 44AD provides the following details:
Total turnover for the financial year 2019-20 is ` 130 lakh
Out of the above:
(i) ` 25 lakh received by A/c payee cheque during the financial year 2019-20;
(ii) ` 50 lakh received by cash during the financial year 2019-20;
(iii) ` 25 lakh received by A/c payee bank draft before the due date of filing of return;
(iv) ` 30 lakh not received till due date of filing of return.
Compute the amount of deemed profits of M/s ABC under section 44AD(1) for A.Y. 2020-21.
(a) ` 10.4 lakh
(b) ` 7.0 lakh
(c) ` 5.5 lakh
(d) ` 9.4 lakh
7. Ram owns 500, 15% debentures of Reliance Industries Ltd. of ` 500 each. Annual interest of ` 37,500
was declared on these debentures for P.Y. 2019-20. He transfers interest income to his friend Shyam,
without transferring the owner ship of these debentures. While filing return of income for A.Y. 2020-21,
Shyam showed ` 37,500 as his income from debentures. As tax advisor of Shyam, do you agree with
the tax treatment done by Shyam in his return of income?
(a) Yes, since interest income was transferred to Shyam therefore, after transfer it becomes his income.
(b) No, since Ram has not transferred debentures to Shyam, interest income on the debentures is not taxable
income of Shyam.
(c) Yes, if debentures are not transferred, interest income on debentures can be declared by anyone, Ram or
Shyam, as taxable income depending upon their discretion.
(d) No, since Shyam should have shown the income as interest income received from Mr. Ram and not as
interest income earned on debentures.
8. Mr. Rajan incurred loss of ` 5.3 lakh in the P.Y. 2019-20 in toy business. Against which of the following
income earned during the same year, can he set-off such loss?
(a) profit of ` 2 lakh from wholesale cloth business
(b) speculative business income of ` 80,000
(c) long-term capital gains of ` 1.20 lakhs on sale of land
(d) All of the above

9. Mr. Ajay is a recently qualified doctor. He joined a reputed hospital in Delhi on 01.01.2020. He earned
total income of ` 3,40,000 till 31.03.2020. His employer advised him to claim rebate u/s 87A while filing
return of income for A.Y. 2020-21. He approached his father to enquire regarding what is rebate u/s
87A of the Act. His father told him:
(i) An individual who is resident in India and whose total income does not exceed ` 5,00,000 is entitled
to claim rebate under section 87A.
(ii) An individual who is resident in India and whose total income does not exceed ` 3,50,000 is entitled
to claim rebate under section 87A.
(iii) Maximum rebate allowable under section 87A is ` 5,000.
(iv) Rebate under section 87A is available in the form of exemption from total income.
(v) Maximum rebate allowable under section 87A is ` 12,500.
(vi) Rebate under section 87A is available in the form of deduction from tax liability.
As a tax expert, do you agree with the explanation given by Mr. Ajay’s father? Choose the correct
option from the following:
(a) (ii), (iii), (vi)
(b) (i), (v), (vi)
(c) (ii), (iii), (iv)
(d) (i), (iv), (v)
10. Mr. P is a professional who is responsible for paying a sum of ` 2,70,000 as rent for use of building to
Mr. Harshit for the month of February, 2020. The gross receipts of Mr. P areas under:
From 01.04.2018 to 31.03.2019: ` 55,00,000

From 01.04.2019 to 28.02.2020: ` 45,00,000
Find out whether Mr. P is responsible for deducting any tax at source from the rent of ` 2,70,000
payable to Mr. Harshit.
(a) Tax at source is required to be deducted u/s 194-I at the rate of 10%.
(b) Tax at source is required to be deducted u/s 194-IB at the rate of 5%.
(c) Tax at source is required to be deducted u/s 194-IB at the rate of 10%.
(d) No tax is required to be deducted at source.
Solution:
1. (a)
2. (a)
3. (b)
4. (c)
5. (b)
6. (d)
7. (b)
8. (d)
9. (b)
10. (a)

11. Mr. Rana, a resident and ordinarily resident aged 42 years, manufactures rubber from the latex
processed from rubber plants grown in Kerala. Thereafter, he sold the rubber for ` 47 lakhs. The cost
of growing rubber plants was ` 25 lakhs and the cost of manufacturing rubber was ` 7 lakhs. He has no
other income during the previous year 2019-20. Compute his tax liability for the Assessment Year
2020-21.
Answer:
In cases where the assessee himself grows rubber plants and manufactures rubber processed from latex
obtained from rubber plants in India, then, as per Rule 7A, 35% of profit on sale of rubber is taxable as
business income under the head “Profits and gains from business or profession”, and the balance 65% is
agricultural income, which is exempt from tax.
Profits from manufacture and sale of rubber processed from latex = ` 47 lakhs – ` 25 lakhs – ` 7 lakhs = ` 15
lakhs
Agricultural Income = 65% of ` 15 lakhs = ` 9.75 lakhs Business Income = 35% of ` 15 lakhs = ` 5.25 lakhs.
The tax liability of Mr. Rana has to be computed applying the concept of partial integration, since his total
income comprises of both agricultural income and non- agricultural income and his agricultural income
exceeds ` 5,000 p.a and his non- agricultural income exceeds the basic exemption limit i.e., ` 2,50,000
(applicable, in his case).
Accordingly, his tax liability would be computed in the following manner:
Computation of tax liability of Mr. Rana for the A.Y. 2020-21
Particulars `
Tax on total income of ` 15,00,000, being agricultural income and non-agricultural income 2,62,500
Less: Tax on agricultural income and basic exemption limit i.e.,

` 12,25,000 [` 9,75,000 plus ` 2,50,000] 1,80,000
82,500
Add: Health and Education cess@4% 3,300
Total Tax liability 85,800
12. Mr. Jai Prakash commenced the business of operating goods vehicles on 1.4.2019. He purchased the
following vehicles during the P.Y. 2019-20. Compute his income under section 44AE for A.Y. 2020-21.
Gross Vehicle Weight (in kilograms) Number Date of purchase

(1) 8,500 3 11.05.2019
(2) 9,500 1 16.03.2020
(3) 10,000 1 21.09.2019
(4) 11,500 2 12.01.2020
(5) 15,000 1 21.07.2019
(6) 15,000 2 23.01.2020
Would your answer change if the goods vehicles purchased in January, 2020 were put to use only in
July, 2020?
Answer:
Since Mr. Jai Prakash does not own more than 10 vehicles at any time during the previous year 2019-20, he
is eligible to opt for presumptive taxation scheme under section 44AE. ` 1,000 per ton of gross vehicle weight
or unladen weight per month or part of the month for each heavy goods vehicle and ` 7,500 per month or part
of month for each goods carriage other than heavy goods vehicle, owned by him would be deemed as his
profits and gains from such goods carriage.
Heavy goods vehicle means any goods carriage, the gross vehicle weight of which exceeds 12,000 kg.
(1) (2) (3) (4)
Number of Vehicles Date of No. of months for which No. of months × No. of
purchase vehicle is owned vehicles
[(1) ×(3)]
For Heavy goods vehicle
1 21.07.2019 9 9
2 23.01.2020 3 6
15
For goods vehicle other than heavy goods vehicle
3 11.5.2019 11 33
1 16.3.2020 1 1
1 21.9.2019 7 7
2 12.1.2020 3 6
47
The presumptive income of Mr. Jai Prakash under section 44AE for A.Y. 2020-21 would be ` 5,77,500,i.e., `
3,52,500 (47 × ` 7,500, being for other than heavy goods vehicle) + ` 2,25,000 (15 x ` 1,000 x 15 ton, being
for heavy goods vehicle).
The answer would remain the same even if the two vehicles purchased in January, 2020 were put to use only
in July, 2020, since the presumptive income has to be calculated per month or part of the month for which the
vehicle is owned by Mr. Jai Prakash.
13. Mr. Pratap, a proprietor has transferred his unit ` to Mr. Raj by way of Slump Sale on December 7,
2019. The summarised Balance Sheet of Mr. Pratap as on that date is given below:
Liabilities Amount Assets Amount

` In lacs)
(` ` In lacs)
(`
Own Capital 1,850 Fixed Assets:
Accumulated P & L balance 870 Unit PT 250
Liabilities: Unit QL 170
Unit PT 190 Unit RS 950
Unit QL 260 Other Assets:
Unit RS 340 Unit PT 790
Unit QL 860
Unit RS 490
Total 3,510 Total 3,510
Other information:
(i) Slump sale consideration on transfer of Unit RS was ` 1540 lacs.
(ii) Fixed Assets of Unit RS includes land which was purchased at ` 90 lacs in the year 2008 and was
revalued at ` 180 lacs.
(iii) Other fixed assets are reflected at ` 770 lacs, (i.e., ` 950 lacs less value of land) which represents
written down value of those assets as per books. The written down value of these assets is ` 630
lacs as per Income-tax Act, 1961.
(iv) Unit RS was set up by Mr. Pratap in December, 2006.
Compute the Capital Gains arising in the hands of Mr. Pratap from slump sale of Unit ` for Assessment
year 2020-21.
Note: Cost Inflation Indices for the financial year 2006-07 and financial year 2019-20 are 122 and 289,
respectively.

Answer:
Computation of capital gain on slump sale of Unit RS for A.Y. 2020-21
Particulars `
Full value of consideration 15,40,00,000
Less: Deemed cost of acquisition (Net worth is deemed to be the cost of acquisition)
[Refer Working Note below] 8,70,00,000
Long-term capital gain [Since the Unit is held for more than 36 months] 6,70,00,000
RS
Working Note: Net worth of Unit-RS
Particulars `
Cost of Land (Revaluation not to be considered) 90,00,000
WDV of other depreciable fixed assets as per the Income-tax Act, 1961 6,30,00,000
Other Assets (book value) 4,90,00,000
12,10,00,000
Less: Liabilities 3,40,00,000
Net worth 8,70,00,000
Notes:
(1) In case of slump sale, net worth of the undertaking transferred shall be deemed to be the cost of
acquisition and cost of improvement as per section 50B.
(2) “Net worth” of the undertaking shall be the aggregate value of total assets of the undertaking or division as
reduced by the value of liabilities of such undertaking or division as appearing in the books of accounts.
However, any change in the value of assets on account of revaluation shall not be considered for this
purpose.
(3) For calculating aggregate value of total assets of the undertaking or division in case of slump sale in case
of depreciable assets, the written down value of block of assets determined in accordance with the
provisions contained in section 43(6) of Income-tax Act, 1961 is to be considered and for all other assets,
book value is to be considered.
(4) Since Unit RS is held by the assessee for more than 36 months, the capital gain arising from slump sale is
a long-term capital gain.
(5) Indexation benefit is not available in case of slump sale
14. IMPORTANT - Mr. Suraj sold a house to his friend Mr. Ganesh on 18th September, 2019 for a
consideration of ` 42,00,000. On the date of registration stamp duty value of the said property is `
45,00,000. However, on the date of agreement stamp duty value of the said property was ` 44,00,000.
Mr. Ganesh had paid 10% of the value of the property by way of A/c payee cheque at the time of
agreement. Assume value of land is 70% of the total value of the property.
What are the tax implications in the hands of Mr. Suraj and Mr. Ganesh for the assessment year 2020-
21? Mr. Suraj had purchased the land on 19th February, 2013 for ` 9,20,000 and completed the
th
construction of house on 18 January, 2018 for ` 15,50,000.
Cost Inflation Index: F.Y. 2012-13 – 200; F.Y. 2016-17 – 264; F.Y. 2019-20 - 289.
Answer:
In the hands of the seller, Mr. Suraj
As per section 50C, where the consideration received or accruing as a result of transfer of land or building or
both, is less than the value adopted or assessed or assessable by the stamp valuation authority, the value
adopted or assessed or assessable by the stamp valuation authority shall be deemed to be the full value of
consideration received or accruing as a result of transfer.
However, where the date of registration and date of agreement are not the same and part or whole of the
consideration is received by way of A/c payee cheque or A/c payee bank draft or by use of ECS on or before
the date of agreement, then stamp duty value on the date of agreement may be taken to be the full value of
consideration.
Further, where the stamp duty value on the date of agreement or registration, as the case may be, does not
exceed 105% of the amount of consideration received or receivable then the consideration so received would
be deemed to be the full value of the consideration.
In the present case, since Mr. Suraj has received 10% of the consideration by way of A/c payee cheque on the
date of agreement, the stamp duty value of ` 44,00,000 on the date of agreement would be taken for the
purpose of computing full value of consideration.
Further, since the stamp duty of land and building of ` 44,00,000 does not exceed ` 44,10,000 i.e., 105% of `
42,00,000, the consideration received i.e., ` 42,00,000 in respect of land and building would be deemed to be
the full value of consideration.
In the given problem, land has been held for a period exceeding 24 months and building for a period less than
24 months immediately preceding the date of transfer. So land is a long-term capital asset, while building
is a short-term capital asset.
Accordingly, capital gains would be determined in the following manner:

Particulars `
Long term capital gain on sale of land
Consideration received or accruing as a result of transfer of land [70% of 29,40,000
` 42,00,000]
Less: Indexed cost of acquisition ` 9,20,000 x 289/200 13,29,400
Long-term capital gain (A) 16,10,600
Short-term capital loss on sale of building
Consideration received or accruing from transfer of building [30% of 12,60,000
` 42,00,000]
Less: Cost of acquisition 15,50,000
Short term capital loss (B) (2,90,000)
As per section 70(2), short-term capital loss can be set-off against long-term capital gains. Therefore, the net
taxable long-term capital gains would be ` 13,62,000 (i.e., ` 16,52,000 – ` 2,90,000). The same would be
taxable @ 20% under section 112, after adjusting un-exhausted basic exemption limit, if any, against such
long term capital gain.
In the hands of the buyer Mr. Ganesh

As per Section 56(2)(x), where any person receives from a non-relative, any immovable property for a
consideration which is less than the stamp duty value on the date of agreement or date of registration as the
case may be, and the difference between actual consideration and stamp duty value so considered is than the
higher of ` 50,000 or 5% of the consideration so received, then the difference between such value and actual
consideration of such property is chargeable to tax as income from other sources.
Where the date of registration and date of agreement are not the same and part or whole of the consideration
is paid by way of A/c payee cheque or A/c payee bank draft or by use of ECS on or before the date of
agreement, then stamp duty value on the date of agreement may be taken for the purpose of determining
income taxable under the head “Income from other sources”.
Since in the present case, Mr. Ganesh has paid 10% of the consideration by way of A/c payee cheque, the
stamp duty value on the date of agreement has to be taken. Further, since the difference of ` 2,00,000 is not
more than ` 2,10,000 being higher of ` 50,000 and ` 2,10,000 (5% of ` 42,00,000), no income would be
chargeable to tax as income from other sources in the hands of Mr. Ganesh.
15. On 10th April, 2019, Mr. Mayur made a gift of ` 4,45,000 to his handicapped son, Master Tanmay aged
10 years. He deposited such amount in a fixed deposit account in a Nationalised bank. The bank
credited a sum of ` 42,500 as interest on fixed deposit on 31st March, 2020.
Mayur's father gifted 10,000 unlisted equity shares of an Indian company to Master Tejas, another son
of Mr. Mayur (Date of birth 19th June, 2011) in September 2011 which were purchased by him on 18th
December, 2004 for ` 95,000. Tejas received a dividend of ` 10,000 on these shares in October 2019. He
sold these shares on 1st December, 2019 for ` 4,80,000 and deposited ` 3,10,000 in a company at 14%
interest per annum.
Cost Inflation Index
Financial Year Cost Inflation Index
2004-05 113
2011-12 184
2019-20 289
Mr. Mayur has a taxable income of ` 4,50,000 from his profession during the financial year 2019-20.
Compute his Gross Total Income for the A.Y. 2020-21.
Answer:
Computation of Gross Total Income of Mr. Mayur for the A.Y. 2020-21
Particulars ` ` `
Income from profession 4,50,000
Income of minor son Tejas
Capital gains
Full value of consideration 4,80,000
Less: Indexed Cost of Acquisition [` 95,000 x 289/184] 1,49,212 3,30,788
Dividend of ` 10,000 on equity shares [Exempt u/s 10(34)] -
Interest on company deposit [` 3,10,000 x 14% x 4/12] 14,467 14,467
3,45,255
Less: Exemption u/s 10(32) in respect of income of minor child 1,500 3,43,755
Notes:
1. As per Section 64(1A), in computing the total income of an individual, all such income accruing or arising
to a minor child shall be included. However, income of a minor child suffering from disability specified
under section 80U would not be included in the income of the parent but would be taxable in the hands of
the minor child. Therefore, in this case, interest income of ` 42,500 arising to handicapped son, Master
Tanmay, would not be clubbed with the income of Mr. Mayur.
2. Income of the other minor child, Master Tejas, is includible in the hands of Mr. Mayur, assuming that Mr.
Mayur’s income is higher than that of his wife.
3. In the above solution, the indexed cost of acquisition has been computed by taking into consideration the
first year in which Master Tejas held the asset, i.e., F.Y. 2011-12, as per the definition given in clause (iii)
of Explanation below section 48.
However, as per the view expressed by Bombay High Court in CIT v. Manjula J. Shah, in case the cost of
acquisition of the capital asset in the hands of the assessee is taken to be cost of such asset in the hands
of the previous owner, the indexation benefit would be available from the year in which the capital asset is
acquired by the previous owner. If this view is considered, the indexed cost of acquisition would have to be
calculated by considering the Cost Inflation Index of F.Y. 2004-05. In that case, ICOA will be 2,42,965.
16. Compute the gross total income of Mr. Avinash and show the items eligible for carry forward and the
assessment years upto which such losses can be carry forward from the following information
furnished by him for the year ended 31-03-2020:
Particulars `)
Amount (`
Loss from speculative business MNO 12,000
Income from speculative business BPO 25,000
Income from salary (computed) 4,18,000
Income from trading business 2,80,000
Income from owning and maintaining race horses 8,000

Long-term capital loss on sale of equity shares (STT not paid) 85,000
Long-term capital loss on sale of listed equity shares in recognized stock exchange 1,10,000
(STT paid at the time of acquisition and sale of shares)
Following are the brought forward losses:

(a) Losses from owning and maintaining of race horses pertaining to A.Y. 2018-19 ` 12,000.
(b) Brought forward loss from speculative business MNO 18,000 relating to A.Y. 2017-18.
(c) Brought forward loss from trading business of ` 12,000 relating to A.Y. 2016-17.
Assume Mr. Avinash has furnished his return of income on or before the due date specified under
section 139(1) in all the above previous years.
Answer:
Computation of Gross total income of Mr. Avinash for the A.Y. 2020-21
Particulars ` `
Salaries
Less: Loss from house property set-off against salary (1,90,000) 2,28,000
[As per section 71(3A), loss from house property to the extent of ` 2,00,000 can
be set-off against any other head of income. In case of Mr. Avinash, it is more
beneficial to set-off the loss from house property against long-term capital gains,
since LTCG would be taxable @ 20%. Accordingly, loss to the extent of ` 10,000 is
set-off against LTCG (shown below) and ` 1,90,000 set-off against income under
the head “Salaries”]

Income from trading business 2,80,000
Less: Brought forward loss from trading business of A.Y. 2016-17 can be set off
against current year income from trading business as per section 72(1), since the
eight-year time limit as specified under section 72(3), within which set- off is
permitted, has not expired. (12,000) 2,68,000
Income from speculative business BPO 25,000

Less: Loss from speculative business MNO set-off as per section 73(1) (12,000)
Loss from speculative business MNO brought forward from A.Y. 2017-18 as per
section 73(2), can be set off to the extent of (13,000) -
Capital Gains
Less: Long term capital loss on sale of shares (STT not paid) set-off as per
section74(1) (85,000)
Less: Long-term capital loss on sale of listed equity shares on which STT is paid
can also be set-off as per section 74(1), since long-term capital arising on sale of
such shares is taxable under section112A (1,10,000)
Less: Loss from house property (10,000) -
Income from owning and maintaining race horses 8,000
Less: Set-off of brought forward losses from owning and maintaining race horses as
per section 74A(3) (8,000) -

Items eligible for carried forward to A.Y. 2021-22
Particulars `
Loss from house property 20,000
As per section 71B, balance loss not set-off can be carried forward to the next year for
set-off against income from house property of that year. It can be carried forward for a
maximum of eight assessment years i.e., upto A.Y. 2028-29, in this case.
Loss from speculative business MNO 5,000

speculation business. As per section 73(2), balance loss not set-off can be carried
forward to the next year for set-off against speculative business income of that
year. Such loss can be carried forward for a maximum of four assessment years i.e.,
upto A.Y. 2021-22, in this case, as specified under section73(4).
Loss from specified business under section 35AD 45,000

Loss from specified business under section 35AD can be set-off only against profits of any
other specified business. If loss can not be so set- off, the same has to be carried forward
to the subsequent year for set off against income from specified business, if any, in that
year. As per section 73A(2), such loss can be carried forward indefinitely for set-off
against profits of any specified business.
Loss from the activity of owningand maintaining race horses 4,000

Losses from the activity of owning and maintaining race horses (current year or brought
forward) can be set-off only against income from the activity of owning and maintaining
race horses. If it cannot be so set-off, it has to be carried forward to the next year for
set-off against income from the activity of owning and maintaining race horses, if any, in
that year. It can be carried forward for a maximum of four assessment years, i.e., upto
A.Y. 2022-23, in this case, as specified under section 74A(3).
17. Mr. Darshan aged 61 years, working with G Ltd., submits the following particulars of investments and
payments made by him during the previous year 2019-20:
Deposit of ` 1,50,000 in public provident fund
Payment of life insurance premium of ` 62,000 on the policy taken on 01.4.2017 to insure his life
(Sum assured – ` 3,00,000).
Deposit of ` 55,000 in a five year term deposit with bank.
Contributed ` 1,95,000, being 15% of his salary (basic salary plus dearness allowance, which forms
part of retirement benefits) to the NPS of the Central Government. A matching contribution was
made by G Ltd.
On 1.4.2019, mediclaim premium of ` 1,08,000 and ` 80,000 paid as lumpsum to insure his and his
wife (aged 58 years) health, respectively for four years medical insurance and incurred ` 46,000
towards medical expenditure of his father, aged 90 years, not dependent on him. No insurance
policy taken for his father.
He spent ` 6,000 for the preventive health-check up of his wife.
He has incurred an expenditure of ` 90,000 for the medical treatment of his mother, being a person
with severe disability.
His income comprises of income from salary of ` 18,50,000 and interest on fixed deposits of ` 75,000.
Compute the deduction available to Mr. Darshan under Chapter VI-A for A.Y.2020-21.
Would your answer be different, if Mr. Darshan contributed ` 1,30,000 (being, 10% of his salary)
towards NPS of the Central Government?

Answer:
(i) Deduction available to Mr. Darshan under Chapter VI-A for A.Y. 2020-21
Section Particulars ` `
80C Deposit in public provident fund 1,50,000
Life insurance premium paid ` 62,000 (deduction restricted to ` 30,000
30,000, being 10%of ` 3,00,000, which is the sum assured, since the
policy was taken on or after 01.04.2012)
Five year term deposit with bank 55,000
2,35,000
Restricted to 1,50,000
80CCD(1) Contribution to NPS of the Central Government,
` 1,45,000 [` 1,95,000 – ` 50,000,being
deduction under section 80CCD(1B)], restricted to 10% of salary
[` 1,95,000 x 10/15] [See Note 1] 1,30,000
2,80,000
80CCE Aggregate deduction under section 80C and 80CCD(1), ` 2,80,000, but
restricted to 1,50,000
80CCD(1B) ` 50,000 would be eligible for deduction in respect of contribution to NPS of 50,000
the Central Government
80CCD(2) Employer contribution to NPS, restricted to 10% of salary 1,30,000
[See Note 2]
80D (i) (a) Medical insurance premium for self and his wife, deduction 47,000
would be equal to ` 47,000 (` 27,000 +
th
` 20,000), being 1/4 of lumpsum premium, since policies
would be in force for four previous years.
(b) Preventive health check up ` 6,000 for wife restricted to
` 3,000 (` 50,000 - ` 47,000, since maximum allowable deduction
is ` 50,000 in case assessee or one of the family member is 3,000
senior citizen)
50,000
(ii) Medical Expenditure for his father would be fully allowed as deduction,
since no insurance policy is taken on his name
46,000
Total of (i) and (ii) 96,000
80DD Deduction of ` 1,25,000 in respect of expenditure on medical treatment of
his mother, being a person with severe disability would be allowed 1,25,000
irrespective of the fact that amount of expenditure incurred is ` 90,000
80TTB Interest on fixed deposits with bank of ` 75,000, deduction restricted to 50,000
Deduction under Chapter VI-A 6,01,000
Notes:
1. The deduction under section 80CCD(1B) would not be subject to overall limit of ` 1.50 lakh under section
80CCE. Therefore, it is more beneficial for Mr. Darshan to claim deduction under section 80CCD(1B) first
in respect of contribution to NPS. Thereafter, the remaining amount of ` 1,45,000 can be claimed as
deduction under section 80CCD(1), subject to a maximum limit of 10% of salary i.e. ` 1,30,000.
2. The entire employer’s contribution to notified pension scheme has to be first included under the head
“Salaries” while computing gross total income and thereafter, deduction under section 80CCD(2) would be
allowed, subject to a maximum of 10% of salary. Deduction under section 80CCD(2) is also not subject to
the overall limit of ` 1,50,000 under section 80CCE
(ii) If the contribution towards NPS is ` 1,30,000, here again, it is beneficial for Mr. Darshan to first claim
deduction of ` 50,000 under section 80CCD(1B) and the balance of ` 80,000 can be claimed under section
80CCD(1), since the deduction available under section 80CCD(1B) is over and above the aggregate limit of `
1,50,000 under section 80CCE. In any case, the aggregate deduction of ` 2,30,000 [i.e., ` 1,50,000 under
section 80C and ` 80,000 under section 80CCD(1)] cannot exceed the overall limit of ` 1,50,000 under section
80CCE. The total deduction under Chapter VIA would remain the same i.e., ` 6,01,000.
18. IMPORTANT: Mr. Krishan, aged 58 years, a resident individual and practicing Chartered/Cost
Accountant, furnishes you the receipts and payments account for the financial year 2019-20.
Receipts ` Payments `
Opening Balance (01-04- 80,000 Staff salary, bonus and stipend to articled 17,50,000
2019) Cash & Bank clerks
Other general and administrative expenses 22,00,000
Fee from professional 49,60,000 Office rent 1,48,000
services
Motor car loan from ICICI 5,00,000 Life Insurance Premium 49,000
@12% interest per annum (Sum Assured ` 5,00,000]
Sale receipts of 5,800 listed 5,95,000 Motor car (Acquired in January 2020 by 9,50,000
equity shares (sold on 31st way of online payment)
January 2020)
Books bought by way of A/c payee cheque
80,000
in the month of May, June and September
2019 (annual publications)
Computer acquired on 1-11-2019 for 52,000

professional use
(payment made by A/c payee cheque)
Domestic drawings
6,23,000
Motor car maintenance
72,000
Public Provident Fund subscription
1,50,000
Closing balances (31-03-2020) Cash & Bank
61,000
61,35,000 61,35,000
Other information:
(i) Listed equity shares on which STT was paid were acquired in August 2017 for ` 1,21,800. The fair
market value of such shares as on 31st January 2018 and on 1st April 2019 was ` 75 per share and
` 85 per share, respectively.
(ii) Motor car was put to use for both official and personal purposes. 1/5th of the motor car is for
personal purpose. No interest on car loan was paid during the previous year 2019-20.
(iii) Mr. Krishan purchased a flat in Gwalior for ` 35,00,000 in July 2012 cost of which was partly
financed by a loan from Punjab National Housing Finance Limited of ` 25,00,000, his own-savings `
1,00,000 and a deposit from Canara Bank for ` 9,00,000. The flat was given to Canara Bank on lease
for 10 years @ ` 35,000 per month. The following particulars are relevant:
(a) Municipal taxes paid by Mr. Krishan ` 8,200 per annum

(b) House insurance ` 11,000
As per interest certificate issued by Punjab National Housing Finance Limited for the financial year
2019-20, he paid ` 1,80,000 towards principal and ` 2,01,500 as interest.
(iv) He earned ` 1,20,000 in share speculation business and lost ` 1,80,000 in commodity speculation
business.
(v) Mr. Krishan received a gift of ` 21,000 each from four of his family friends.
(vi) He contributed ` 1,21,000 to Prime Minister's Drought Relief Fund by way of bank draft.
(vii) He donated to a registered political party ` 3,50,000 by way of cheque.
(viii) He follows cash system of accounting.
(ix) Cost Inflation Index : F.Y. 2016-17 – 264; F.Y. 2018-19 - 289
Compute the total income of Mr. Krishan and the tax payable for the Assessment year 2020-21.

ANSWER:
Computation of total income and tax liability of Mr. Krishan for A.Y. 2020-21
Particulars ` ` `
Gross annual value1 (` 35,000 x 12) 4,20,000
Less: Municipal taxes paid by Mr. Krishan 8,200
Net annual value 4,11,800
(a) 30% of Net Annual Value 1,23,540
(b) Interest on house borrowing (allowed in full in case of let
out property) 2,01,500 86,760

Income from profession
Fees from professional services 49,60,000
Less: Expenses allowable as deduction
Staff salary, bonus and stipend 17,50,000
Other general and administrative expenses 22,00,000
Office rent 1,48,000
Motor car maintenance (` 72,000 x4/5) 57,600
Car loan interest – not allowable, since Mr. Krishan follows
cash system of accounting and no interest is paid during the
previous year) - 41,55,600
8,04,400
Less: Depreciation u/s 32
Motor car ` 9,50,000 x 15% x 50% x 4/5, being put to use for less 57,000
than 180 days
Books being annual publications [` 80,000 x 40%] 32,000
Computer @40% of ` 52,000 x 50%, since the same is put to
use for less than 180 days 10,400 99,400
7,05,000
For the P.Y. 2019-20, the gross receipts of Mr. Krishan is
` 49,60,000. Since, it does not exceed ` 50,00,000, he is eligible
to opt for presumptive tax scheme under section 44ADA
In such case, his professional income would be ` 24,80,000,

being 50% of ` 49,60,000
It is more beneficial for Mr. Krishan to declare profit of `

7,05,000 as per books of accounts which is lower than the
profits computed on presumptive basis under section 44ADA.
However, for declaring lower profits, he has to maintain books
of account under section 44AA and get the same audited under
section 44AB
Income from share speculation business 1,20,000

Less: Loss from commodity speculation business set off against
income from share speculation business. Balance loss of
` 60,000 from commodity speculation business to be carried
forward to A.Y. 2021-22 1,20,000 Nil 7,05,000
Capital Gains
Long-term capital gains on sale of 5800 listed shares
Sale consideration 5,95,000
Less: Cost of acquisition is higher of 4,35,000 1,60,000
Cost of acquisition 1,21,800
Lower of ` 4,35,000 (` 75 x 5800), being fair market 4,35,000
value as on 31.1.2018 and ` 5,95,000, being full value of
consideration on transfer

Cash Gift of ` 84,000 i.e., ` 21,000 x 4, received from his four
friends is taxable u/s 56(2)(x), since aggregate amount of cash gifts
exceeds ` 50,000 84,000

Section 80C
Life insurance premium 49,000
Repayment of housing loan 1,80,000
PPF subscription 1,50,000
3,79,000
Restricted to ` 1,50,000 1,50,000
Section 80G
Contribution to Prime Minister’s Drought Relief 60,500
Fund (50% of ` 1,21,000) by way of bank draft
Section 80GGC
Donation to registered political party made by way of cheque 3,50,000 5,60,500
Tax liability
Tax @ 10% under section 112A on long-term capital gains 6,000
exceeding ` 1,00,000 i.e., ` 60,000
Tax @5% on ` 65,260 [` 3,15,260 (total income excluding LTCG

u/s 112A) - ` 2,50,000, being basic exemption limit] 3,263
9,263
Add: Health and Education cess@4% 371
Tax liability 9,634
Tax liability (rounded off) 9,630
19. Important: Mr. Narayan is engaged in the retail business of groceries. During the previous year 2019-20
his turnover was ` 1.65 crores. Out of this, receipt of ` 1.30 crore represents online transactions and `
35 lakhs cash transactions. He opted for paying tax as per presumptive taxation scheme laid down in
section 44AD. He has no other income during the previous year.
Is he liable to pay advance tax and if so, what is the minimum amount of advance tax to be paid and
the due date for payment of such advance tax?
Answer:
Computation of advance tax liability in the hands of Mr. Narayan opting for presumptive taxation
scheme under section 44AD
Particulars `
The advance tax liability is computed as follows –
Business Income
8% of ` 35,00,000 2,80,000
6% of ` 1,30,00,000 7,80,000 10,60,000

In respect of the amount of turnover received by account payee cheque/bank
draft or use of ECS through a bank account, the assessee can declare 6%
(instead of 8%) of such turnover as presumptive
income under section 44AD.
Since Mr. Narayan does not have any other income during the previous year
2019-20, business income would be the total income.
Tax liability
Upto ` 2,50,000 Nil
` 2,50,001 to ` 5,00,000 @5% 12,500
` 5,00,001 to ` 10,00,000 @20% 1,00,000
Above ` 10,00,001 @30% 18,000 1,30,500
Add: Health and Education cess @ 4% 5,220
Total Tax Payable 1,35,720
th
Mr. Narayan is required pay ` 1,35,720 as minimum amount of advance tax by 15 March 2020.
20. Mr. Shivpal, a very senior citizen, has reported a Total Income ` 4,90,000 and the deductions eligible
under Chapter VI-A amounting to ` 1,70,000 for the previous year 2019-20. Is he liable to file his return
of income under section 139(1) for the Assessment year 2020-21? If so why?
Answer:
As per sixth proviso to section 139(1), every person, being an individual whose total income without giving
effect to the provisions of, interalia, Chapter VI-A exceeds the basic exemption limit, is compulsorily required
to furnish return of income on or before the due date.
Therefore, in the present case, Mr. Shivpal, a very senior citizen is required to file return of income, since his
total income of ` 6,60,000 before giving effect to the deduction of ` 1,70,000 under Chapter VI-A, exceeds the
basic exemption limit of ` 5,00,000 applicable in his case.

Class Notes


1. Mr. Aakash earns the following income during the previous year 2019-20. Compute his total income
for A.Y. 2020-21 if he is (i) resident and ordinarily resident; (ii) resident but not ordinarily resident; (iii)
non-resident.
Particulars (`
`)
1. Interest on Canada Development Bonds (only 50% of interest received in India) 40,000
2. Dividend from Malaysian company received in Malaysia 20,000
3. Short term capital gain on sale of shares of an Indian company received in 90,000
India
4. Interest on savings bank deposit in UCO Bank, Delhi 12,000
5. Income from Profession in Malaysia (set up in India), out of which ` 10,000 is 15,000
received in India
6. Agricultural income from a land situated in Gujarat 45,000
7. Rent received in London in respect of house property at London 60,000
Answer:
Computation of total income of Mr. Aakash for the A.Y. 2020-21
Particulars Resident Resident Non-
& but not Resident
ordinarily ordinarily
resident Resident
1. Interest on Canada Development Bond (See Note 1) 40,000 20,000 20,000
2. Dividend from Malaysian Company received in Malaysia (See 20,000 - -
Note 2)
3. Short term capital gain on sale of shares of an Indian company 90,000 90,000 90,000
received in India
4. Interest on savings bank deposit in UCO Bank, Delhi 12,000 12,000 12,000
5. Income from profession in Malaysia (set up in India) out of which
` 10,000 is received in India (See Note 1) 15,000 15,000 10,000
6. Agricultural income from a land in Gujarat (See Note 3) - - -
7. Income from house property at London (See Note 4) 42,000
Gross Total income 2,19,000 1,37,000 1,32,000
Less: Deduction under Chapter VI-A 10,000 10,000 10,000
Section 80TTA (See Note 5)
Total Income 2,09,000 1,27,000 1,22,000
Notes:
(1) As per section 5(1), global income is taxable in case of a resident. However, as per section 5(2), in case
of a non-resident, only the following incomes are chargeable to tax in India:
(ii) Income accruing or arising or deemed to accrue or arise in India.
Further, the income which accrues or arise outside India would be chargeable to tax in case of resident
but not ordinarily resident in India, only if such income is derived from a profession set up in India.
Accordingly, the entire interest from Canada Development Bonds and income from profession in
Malaysia would be chargeable to tax in the hands of Mr. Aakash, if he is a resident in India.
If he is resident but not ordinarily resident then also entire income from profession in Malaysia would be
chargeable to tax in his hands, since the profession was set up in India. Interest on Canada
Development Bonds would be taxable only to the extent received in India.
However, if he is non-resident then only that part of interest income and income from profession which is
received in India would be taxable in his hands.
(2) Dividend received in Malaysia from a Malaysian based company would be taxable in the hands of Mr.
Aakash, only if he is resident and ordinarily resident in India. If he is a resident but not ordinarily resident
or a non-resident, the same would not be taxable in his hands in India since it has neither accrued or
arisen in India nor is it received in India.
(3) Agricultural income from a land situated in India is exempt under section 10(1) in the case of both non-
residents and residents.
(4) Likewise, rental income from property in London would also be taxable only if he is resident in India. It
has been assumed that the rental income is the gross annual value of the property. Therefore, deduction
@30% under section 24, has been provided and the net income so computed is taken into account for
determining the gross total income of a resident and ordinarily resident.
SURAJ AGRAWAL TAX CLASS, LAXMINAGAR I 01147542530 I 8527230445 I

`
Rent received (assumed as gross annual value) 60,000
Less: Deduction under section 24 (30% of ` 60,000) 18,000
Income from house property 42,000
(5) In case of an individual, interest upto ` 10,000 from savings account with, inter alia, a bank is allowable
as deduction under section 80TTA, irrespective of the residential status.
2. IMPORTANT: Examine with brief reasons whether the following statements are true or false with
reference to the provisions of the Income-tax Act, 1961:
(a) Mr. Rahim received a sum of ` 18 lakh on 31.3.2020 from Life Insurance Corporation of India in
respect of a policy, the sum assured of which was ` 13 lakh, taken on 1.07.2007 and for which a
one time premium of ` 10 lakh was paid. The sum of ` 18 lakhs received by Mr. Rahim is fully
exempt under section 10(10D)(c).
(b) Pension of ` 2,20,000 received by Mr. Sinha, a ‘Param Vir Chakra’ awardee, who was formerly in
the service of the Central Government, is exempt .
(c) Compensation on account of disaster received from a local authority by an individual or his/her
legal heir is taxable.
(d) Mr. Q, a shareholder of a closely held company, holding 15% shares, received advances from that
company which is to be deemed as dividend from an Indian Company, hence exempted under
section 10(34).
Answer:
(a) False: As per section 10(10D)(c), any sum received under an insurance policy issued on or after 1.4.2003
but on or before 31.03.2012, in respect of which the premium payable for any year during the term of the
policy exceeds 20% of actual capital sum assured, shall not be exempt from tax. Since one-time
premium of ` 10 lakh paid by him is in excess of 20% of the sum assured (i.e. it exceeds ` 2.6 lakh, being
20% of ` 13 lakh), the amount of ` 18 lakh received from LIC is not exempt in the hands of Mr. Rahim.
Further, tax is deductible under section 194DA on such sum paid to Rahim, since the same is not
exempt under section 10(10D) and the amount exceeds ` 1 lakh.
(b) True: As per Section 10(18), pension received by Mr. Sinha, a former Central Government employee who
is a ‘Param Vir Chakra’ awardee, is exempt.
(c) False: As per Section 10(10BC), any amount received or receivable as compensation by an individual or
his/her legal heir on account of any disaster from the Central Government, State Government or a local
authority is exempt from tax.
However, the exemption is not available to the extent such individual or legal heir has already been
allowed a deduction under this Act on account of such loss or damage caused by such disaster.
(d) True: As per Section 10(34), Income by way of dividend referred to in section 115-O shall be exempt in the
hands of shareholders. Dividend distribution tax under section 115-O is now leviable on deemed dividend
under section 2(22)(e) and hence, such deemed dividend is exempt under Section 10(34), in the
hands of Mr. Q.
3. Mr. Narender, employed as Marketing Manager in Gama Ltd., furnishes you the following information
for the year ended 31.03.2020:
(i) Basic salary upto 31.10.2019 ` 50,000 p.m.
Basic salary from 01.11.2019 ` 60,000 p.m.
Note: Salary is due and paid on the last day of every month.
(ii) Dearness allowance @ 40% of basic salary (not forming part of salary for retirement benefits).
(iii) Bonus equal to one month salary. Paid in October 2019 on basic salary plus dearness allowance
applicable for that month.
(iv) Contribution of employee to recognized provident fund account of the employee@16% of basic
salary. Employer contributed an equivalent amount.
(v) Profession tax paid ` 3,000 of which ` 2,000 was paid by the employer.
(vi) Facility of laptop and computer was provided to Narender for both official and personal use.
Cost of laptop ` 45,000 and computer ` 35,000 were acquired by the company on 01.12.2019.
(vii) Motor car owned by the employer (cubic capacity of engine exceeds 1.60 litres) provided to the
employee from 01.11.2019 meant for both official and personal use. Repair and running
expenses of ` 45,000 from 01.11.2019 to 31.03.2020, were fully met by the employer. The motor
car was self-driven by the employee.

(viii) Leave travel concession given to employee, his wife and three children (one daughter aged 6 and
twin sons aged 4). Cost of air tickets (economy class) reimbursed by the employer ` 20,000 for
adults and ` 30,000 for three children. Narender is eligible for availing exemption this year to the
extent it is permissible in law.Mr. Narender made the following payments:
(i) Medical insurance premium paid in cash ` 4,000
(ii) Medical insurance premium paid by account payee crossed cheque ` 25,700
Compute the total income chargeable to tax in the hands of Mr. Narender and tax thereon for the
assessment year 2020-21.
Answer:
Computation of Total Income and tax liability of Mr. Narender for A.Y. 2020-21
Particulars `
Basic salary [(` 50,000 × 7) + (` 60,000 × 5)] 6,50,000
Dearness Allowance (40% of basic salary) 2,60,000
Bonus (` 50,000 + 40% of ` 50,000) (See Note 1) 70,000
Employers contribution to recognised provident fund in excess of
12% of salary = 4% of ` 6,50,000 26,000
Professional tax paid by employer (See Note 5) 2,000
Perquisite of Motor Car (` 2,400 for 5 months) (See Note 3) 12,000
Statutory Deduction 50,000
Professional tax (See Note 5) 3,000
Taxable salary/ Gross Total Income 9,67,000
Deduction under section 80C (own contribution to recognised provident fund) 1,04,000
Deduction under section 80D in respect of medical insurance premium paid
by cheque amounting to ` 25,700 but restricted to ` 25,000 (See Note-6) 25,000 1,29,000
Tax on total income [` 12,500 + (` 8,38,000 - ` 5,00,000) x 20%] 80,100
Add: Health & Education cess @ 4% 3,204
Tax Liability (rounded off) 83,300
Notes:
1. Since bonus was paid in the month of October, the basic salary of ` 50,000 for the month of October is
considered for its calculation.
2. As per Rule 3(7)(vii), facility of use of laptop and computer is an exempt perquisite, whether used for
official or personal purpose or both.
3. As per the provisions of Rule 3(2), in case a motor car (engine cubic capacity exceeding 1.60 litres)
owned by the employer is provided to the employee without chauffeur for personal as well as office use,
the value of perquisite shall be ` 2,400 per month. The car was provided to the employee from
01.11.2019, therefore the perquisite value has been calculated for 5 months.
4. Mr. Narender can avail exemption under section 10(5) on the entire amount of ` 50,000 reimbursed by the
employer towards Leave Travel Concession since the same was availed for himself, his wife and three
children and the journey was undertaken by economy class airfare. The restriction imposed for two
children is not applicable in case of multiple births which take place after the first child. It is assumed that
the Leave Travel Concession was availed for journey within India.
5. As per section 17(2)(iv), a “perquisite” includes any sum paid by the employer in respect of any obligation
which, but for such payment, would have been payable by the assessee. Therefore, professional tax of
` 2,000 paid by the employer is taxable as a perquisite in the hands of Mr. Narender. As per section
16(iii), a deduction from the salary is allowable on account of tax on employment i.e. professional tax paid
during the year.
Therefore, in the present case, the professional tax paid by the employer on behalf of the employee `
2,000 is first included in the salary and deduction of the entire professional tax of ` 3,000 is provided from
salary.
6. Medical insurance premium paid in cash of ` 4,000 is not allowable as deduction under section 80D.
Further, deduction for medical insurance premium paid through cheque is restricted to ` 25,000, which is
the maximum deduction allowable.

4. IMPORTANT: Mr. Praveen engaged in retail trade, reports a turnover of ` 1,98,50,000 for the financial
year 2019-20. His income from the said business as per books of account is ` 13,20,000 computed as
per the provisions of Chapter IV-D “Profits and gains from business or Profession” of the Income-tax
Act, 1961. Retail trade is the only source of income for Mr. Praveen. A.Y. 2019-20 was the first year for
which he declared his business income in accordance with the provisions of presumptive taxation
under section 44AD.
(i) Is Mr. Praveen also eligible to opt for presumptive determination of his income chargeable to tax
for the assessment year 2020-21?
(ii) If so, determine his income from retail trade as per the applicable presumptive provision
assuming that whole of the turnover represents cash receipts.
(iii) In case Mr. Praveen does not opt for presumptive taxation of income from retail trade, what are his
obligations under the Income-tax Act, 1961?
(iv) What is the due date for filing his return of income under both the options?
Solution
(i) Yes. Since his total turnover for the F.Y. 2019-20 is below ` 200 lakhs, he is eligible to opt for presumptive
taxation scheme under section 44AD in respect of his retail trade business.
(ii) His income from retail trade, applying the presumptive tax provisions under section 44AD, would be
` 15,88,000, being 8% of ` 1,98,50,000.
(iii) Mr. Praveen had declared profit for the previous year 2018-19 in accordance with the presumptive
provisions and if he does not opt for presumptive provisions for any of the five consecutive assessment
years i.e., A.Y.2020-21 to A.Y. 2024-25, he would not be eligible to claim the benefit of presumptive
taxation for five assessment years i.e., A.Y. 2021-22 to A.Y.2025-26 subsequent to the assessment year
relevant to the previous year in which the profit has not been declared in accordance the presumptive
provisions.
Consequently, Mr. Praveen is required to maintain the books of accounts and get them audited under
section 44AB, since his income exceeds the basic exemption limit.
In case he opts for the presumptive taxation scheme under section 44AD, the due date would be 31st
July, 2020.
(iv) In case he does not opt for presumptive taxation scheme, he is required to get his books of account
audited, in which case the due date for filing of return of income would be 30th September, 2020.
5. IMPORTANT: Mr. Mittal, aged 55 years, is the owner of a residential house which was purchased in
September, 2003 for ` 5,00,000. He sold the said house on 25th September, 2019 for ` 34,00,000.
Valuation as per stamp valuation authority of the said residential house was ` 43,00,000. He invested
` 5,00,000 in NHAI Bonds on 12th January, 2020. He purchased a residential house on 15th July, 2020
for ` 10,00,000. He gives other particulars as follows:
Interest on Bank Fixed Deposit ` 32,000
Investment in public provident fund ` 50,000
You are requested to calculate the taxable income for the assessment year 2020-21 and the tax
liability, if any.
Cost inflation index for F.Y. 2003-04 and 2019-20 are 109 and 289, respectively.
Answer:
Computation of total income of Mr. Mittal for the A.Y. 2020-21
Particulars ` `
Capital Gains:
Sale price of the residential house 34,00,000
Valuation as per Stamp Valuation authority 43,00,000
(Value to be taken is the higher of actual sale price or valuation adopted
for stamp duty purpose as per section 50C)
Therefore, Consideration for the purpose of Capital Gains 43,00,000
Less: Indexed Cost of Acquisition
` 5,00,000 x 289/109 13,25,688
29,74,312
Less: Exemption under section 54 ` 10,00,000 15,00,000
Exemption under section 54EC ` 5,00,000
Long-term capital gains 14,74,312
Income from other sources:
Interest on bank fixed deposits 32,000
Section 80C – Deposit in PPF (restricted to ` 32,000) [See Note (ii)] 32,000
14,74,310
Computation of Tax liability of Mr. Mittal for A.Y. 2020-21

Particulars `
Tax on ` 12,24,310 @ 20% [i.e. long term capital gain less basic exemption
limit (` 14,74,310 - ` 2,50,000)] [See Note (i)] 244,862
Add: Health & Education Cess@4% 9,794
Tax Payable 2,54,656
Tax Payable (Rounded off) 2,54,660
Notes:
(i) The basic exemption limit of ` 2,50,000 can be adjusted against long term capital gains.
(ii) Deduction under section 80C should be restricted to gross total income excluding long term capital gain.
6. IMPORTANT: Mr. Krishna, a dealer in shares, received the following without consideration during the
P.Y. 2019-20 from his friend Mr. Raju, -
(1) Cash gift of ` 70,000 on his anniversary, 15th April, 2019.
(2) Bullion, the fair market value of which was ` 51,000, on his birthday, 19th June, 2019.
(3) A plot of land at Ghaziabad on 1st July, 2019, the stamp value of which is ` 5 lakh on that date. Mr.
Raju had purchased the land in April, 2008.
Mr. Krishna purchased from his friend Mr. Pankaj, who is also a dealer in shares, 1000 shares of
ABC Ltd. @ ` 450 each on 25th June, 2019, the fair market value of which was ` 650 each on that
date. Mr. Krishna sold these shares in the course of his business on 30th June, 2019.
Further, on 21st November, 2019, Mr. Krishna took possession of property (building) booked by
him two years back at ` 20 lakh. The stamp duty value of the property as on 21st November, 2019
was ` 30 lakh and on the date of booking was ` 23 lakh. He had paid ` 1 lakh by account payee
cheque as down payment on the date of booking.
th
On 11 March, 2020, he sold the plot of land at Ghaziabad for ` 7 lakh. Compute the income of Mr.
Krishna chargeable under the head “Income from other sources” and “Capital Gains” for
A.Y.2020-21.
Answer:
Computation of “Income from other sources” of Mr. Krishna for the A.Y.2020-21
Particulars `
(1) Cash gift is taxable under section 56(2)(x), since it exceeds ` 50,000 70,000
(2) Since bullion is included in the definition of property, therefore, when bullion is
received without consideration, the same is taxable, since the aggregate fair 51,000
market value exceeds ` 50,000
(3) Stamp value of plot of land at Ghaziabad, received without consideration, is 5,00,000
taxable under section 56(2)(x)
(4) Difference of ` 2 lakh in the value of shares of ABC Ltd. purchased from Mr.
Pankaj, a dealer in shares, is not taxable as it represents the stock-in-trade of -
Mr. Krishna. Since Mr. Krishna is a dealer in shares and it has been mentioned
that the shares were subsequently sold in the course of his business, such
shares represent the stock-in-trade of Mr. Krishna.
(5) Difference between the stamp duty value of ` 23 lakh on the date of booking
and the actual consideration of ` 20 lakh paid is taxable under section 56(2)(x) 3,00,000
[See Note (i)].
Income from Other Sources 9,21,000

Computation of “Capital Gains” of Mr. Krishna for the A.Y. 2020-21
Particulars `
Sale Consideration 7,00,000
Less: Cost of acquisition [deemed to be the stamp value charged to tax under 5,00,000
section 56(2)(x) as per section 49(4)] [See Note (ii)]
Short-term capital gains 2,00,000
Notes:
(i) As per the first and second proviso to section 56(2)(x), the stamp duty value may be taken as on the
date of agreement instead of the date of registration, if the date of the agreement fixing the amount of
consideration for the transfer of the immovable property and the date of registration are not the same,
provided at least a part of the consideration has been paid by any mode other than cash on or before
the date of agreement.
Since Mr. Krishna had paid ` 1 lakh by account payee cheque, the difference between the stamp duty
value on the date of agreement and the consideration would be chargeable to tax under the head
“Income from other sources”.
(ii) The resultant capital gains on sale of plot of land at Ghaziabad will be short-term capital gains, since for
calculating the period of holding in a case covered under section 49(4), the period of holding of previous
owner is not to be considered.
7. [CROSS TRANSFER] - Mr. Kabir gifted a sum of ` 9 lakhs to his brother’s minor son on 20-5-2019. On
25-5-2019, his brother gifted debentures worth ` 10 lakhs to Mrs. Kabir. Son of Mr. Kabir’s brother
invested the amount in fixed deposit with Bank of India @ 9% p.a. interest and Mrs. Kabir received
interest of ` 81,000 on debentures received by her. Discuss the tax implications under the provisions
of the Income-tax Act, 1961.
Answer:
In the given case, Mr. Kabir gifted a sum of ` 9 lakhs to his brother’s minor son on 20.5.2019 and
simultaneously, his brother gifted debentures worth ` 10 lakhs to Mr. Kabir’s wife on 25.5.2019. Mr. Kabir’s
brother’s minor son invested the gifted amount of ` 9 lakhs in fixed deposit with Bank of India.
These transfers are in the nature of cross transfers. Accordingly, the income from the assets transferred
would be assessed in the hands of the deemed transferor because the transfers are so intimately
connected to form part of a single transaction and each transfer constitutes consideration for the
other by being mutual or otherwise.
If two transactions are inter-connected and are part of the same transaction in such a way that it can be said
that the circuitous method was adopted as a device to evade tax, the implication of clubbing provisions would
be attracted.
As per section 64(1A), all income of a minor child is includible in the hands of the parent, whose total income,
before including minor’s income is higher. Accordingly, the interest income arising to Mr. Kabir’s brother’s son
from fixed deposits would be included in the total income of Mr. Kabir’s brother, assuming that Mr. Kabir’s
brother’s total income is higher than his wife’s total income, before including minor’s income. Mr. Kabir’s
brother can claim exemption of ` 1,500 under Section 10(32).
Interest on debentures arising in the hands of Mrs. Kabir would be taxable in the hands of Mr. Kabir as per
section 64(1)(iv).
This is because both Mr. Kabir and his brother are the indirect transferors of the income to their spouse and
minor son, respectively, with an intention to reduce their burden of taxation. In the hands of Mr. Kabir,
interest received by his spouse on debentures of ` 9 lakhs alone would be included and not the entire
interest income on the debentures of ` 10 lakhs, since the cross transfer is only to the extent of ` 9
lakhs.
Hence, only proportional interest (i.e., 9/10th of interest on debentures received) ` 72,900 would be
includible in the hands of Mr. Kabir. The provisions of section 56(2)(x) are not attracted in respect of sum of
money transferred or value of debentures transferred, since in both the cases, the transfer is from a relative.

8. Compute the gross total income of Mr. Virat and show the items eligible for carry forward from the
following information furnished for the year ended 31-03-2020:
`)
Income from salary 2,50,000
Income from speculative business X 5,000
Loss from speculative business Y 25,000
Long-term capital loss on sale of shares (STT not paid) 75,000
Other brought forward losses:

(i) Losses from owning and maintaining of race horses pertaining to A.Y. 2019-20 ` 2,000.
(ii) Brought forward loss from trading business ` 5,000 relating to A.Y.2016-17.
Answer:
Computation of total income of Mr. Virat for the A.Y.2020-21
Particulars ` `
Salaries
Less: Loss from house property set-off against salary income
as per section 71(1) 1,50,000 1,00,000

Less: Brought forward loss from trading business of A.Y.
2016-17 can be set off against current year income from
trading business as per section 72(1), since the eight year
time limit as specified under section 72(3), within which set -off
is permitted, has not expired. 5,000 40,000
Income from speculative business X 5,000
Less: Loss from speculative business Y set-off as per section 73(1) 25,000
[Loss from speculative business Y to be carried forward to
A.Y. 2021-22 as per section 73(2)] 20,000
Loss from specified business covered under section 35AD to
be carried forward for set-off against income from specified
business as per section 73A. 20,000
Capital Gains
Less: Long term capital loss on sale of shares (STT not paid)
set-off as per section 74(1)] 75,000 1,25,000
Losses eligible for carried forward to A.Y. 2021-22
Particulars `
Loss from speculative business Y
speculation business. As per section 73(2), balance loss not set –off can be carried 20,000
forward to the next year for set-off against speculative business income of that year.
Such loss can be carried forward for a maximum of four assessment years i.e., upto
A.Y. 2024-25, in this case, as specified under section 73(4).
Loss from specified business

Loss from specified business under section 35AD can be set -off only against profits of
any other specified business. If loss cannot be so set-off, the same has to be carried 20,000
forward to the subsequent year for set off against income from specified business, if
any, in that year. As per section 73A(2), such loss can be carried forward indefinitely for
set-off against profits of any specified business.
Loss from the activity of owning and maintaining race horses

Losses from the activity of owning and maintaining race horses (current year or brought
forward) can be set-off only against income from the activity of owning and maintaining

race horses. If it cannot be so set -off, it has to be carried forward to the next year for 2,000
set -off against income from the activity of owning and maintaining race horses, if any,
in that year. It can be carried forward for a maximum of four assessment years, i.e.,
upto A.Y. 2023-24, in this case as specified under section 74A(3).
9. Mr. Shiva aged 65 years, has gross total income of ` 7,75,000 comprising of income from salary and
house property. He has made the following payments and investments:
(i) Premium paid to insure the life of her major daughter (policy taken on 1.4.2014) (Assured value `
1,80,000)– ` 20,000.
(ii) Medical Insurance premium paid by cheque for self – ` 12,000; Spouse – ` 14,000.
(iii) Donation to a public charitable institution registered under 80G ` 1,50,000 by way of cheque.
(iv) LIC Pension Fund – ` 60,000.
(v) Donation to National Children’s Fund - ` 25,000 by way of cheque
(vi) Donation to Jawaharlal Nehru Memorial Fund - ` 25,000 by way of cheque
(vii) Donation to approved institution for promotion of family planning - ` 40,000 by way of cheque
Compute the total income of Mr. Shiva for A.Y. 2020-21.
Answer:
Computation of Total Income of Mr. Shiva for A.Y. 2020-21
Particulars ` `
Less: Deduction under section 80C
Life insurance premium paid for insurance of major daughter (Maximum
10% of the assured value ` 1,80,000, as the policy is taken after 18,000
31.3.2012)
Deduction under section 80CCC

LIC pension fund 60,000
Deduction under section 80D

Medical Insurance premium in respect of self and spouse (Since Mr. Shiva 26,000
is a senior citizen, he is eligible for deduction of actual premium paid
subject to a maximum of ` 50,000)
Deduction under section 80G (See Working Note below) 91,050

1,95,050
Total income 5,79,950
Working Note:
Computation of deduction under section 80G
Particulars of donation Amount % of deduction Deduction
Donated u/s 80G
(`) (`)
(i) National Children’s Fund 25,000 100% 25,000
(ii) Jawaharlal Nehru Memorial Fund 25,000 50% 12,500
(iii) Approved institution for promotion of family 40,000 100%, subject to 40,000
planning qualifying limit
(iv) Public Charitable Institution (See Note 1,50,000 50% subject to 13,550
below qualifying limit
91,050
Note - Adjusted total income = Gross Total Income – Amount of deductions under section 80C to 80U except
section 80G i.e., ` 6,71,000 (` 7,75,000 – ` 18,000 – ` 60,000 – ` 26,000), in this case. ` 67,100, being 10%
of adjusted total income is the qualifying limit, in this case.
Firstly, donation of ` 40,000 to approved institution for family planning qualifying for 100% deduction subject
to qualifying limit, has to be adjusted against this amount. Thereafter, donation to public charitable trust
qualifying for 50% deduction, subject to qualifying limit is adjusted. Hence, the contribution of ` 1,50,000 to
public charitable trust is restricted to ` 27,100 (being, ` 67,100 - ` 40,000), 50% of which would be allowed as
deduction under section 80G. Therefore, the deduction under section 80G in respect of donation to public
charitable trust would be ` 13,550, which is 50% of ` 27,100.
10. IMPORTANT: Mr. Rajiv, a resident individual, engaged in a wholesale business of health products. He
is also a partner in XYZ & Co., a partnership firm. The following details are made available for the
year ended 31.3.2020:
Sl.No. Particulars ` `
(i) Interest on capital received from XYZ & Co., at 15% 1,50,000
(ii) Interest from bank on fixed deposit (Net of TDS ` 1,500) 13,500
(iii) Income-tax refund received relating to assessment year
2016-17 including interest of ` 2,300 34,500
(iv) Net profit from wholesale business 5,60,000

Amounts debited include the following:
Depreciation as per books 34,000
Motor car expenses 40,000
Municipal taxes for the shop 7,000
(For two half years; payment for one half year made on
12.7.2020 and for the other on 31.12.2020)
Salary to manager by way of a single cash payment 21,000

(v) The WDV of the assets (as on 1.4.2019) used in above
wholesale business is as under:
Computers 1,20,000
Motor car (20% used for personal use) 3,20,000
(vi) LIP paid for independent son 60,000
PPF of his wife 70,000
You are required to compute the total income of the Mr. Rajiv for the assessment year 2020-21 and the
closing WDV of each block of assets.
Answer:
Computation of total income of Mr. Rajiv for the A.Y. 2020-21
Particulars ` `
Income from wholesale business
Net profit as per books 5,60,000
Add: Depreciation as per books 34,000
Disallowance of municipal taxes paid for the second half -
year under Section 43B, since the same was paid after the
due date of filing of return (` 7,000/2) 3,500
Disallowance under section 40A(3) in respect of salary paid
in cash since the same exceeds ` 20,000 21,000
20% of car expenses for personal use 8,000 66,500
6,26,500
Less: Depreciation allowable (Note 1) 86,400
5,40,100
Income from firm

Interest on capital from partnership firm (Note 2) 1,20,000
6,60,100
Interest on bank fixed deposit (Gross) 15,000
Interest on income-tax refund 2,300 17,300
Gross total income 6,77,400
Less: Deduction under Chapter VIA (Note 3) 1,30,000
Notes:
(1) Depreciation allowable under the Income-tax Rules, 1962
Opening WDV Rate Depreciation Closing

WDV
Block 1 Computers 1,20,000 40% 48,000 72,000
Block 2 Motor Car 3,20,000 15% 48,000
Less: 20% disallowance for
personal use 9,600 38,400 2,81,600
86,400
(2) Only to the extent the interest is allowed as deduction in the hands of the firm, the same is includible as
business income in the hands of the partner. Maximum interest allowable as deduction in the hands of the
firm is 12% p.a. It is assumed that the partnership deed provides for the same and hence is allowable to this
extent in the hands of the firm. Therefore, interest @12% p.a. amounting to ` 1,20,000 would be treated as
the business income of Mr. Rajiv.
(3) Deduction under Chapter VI-A

Particulars ` `
Under section 80C
LIP for independent son 60,000
PPF paid in wife’s name 70,000
1,30,000
Since the maximum deduction under section 80C
and 80CCE is ` 1,50,000, the entire sum of
` 1,30,000 would be allowed as deduction 1,30,000
Total deduction 1,30,000
11. Examine the applicability of TDS provisions and amount of tax, if any, to be deducted in the following
cases:
(a) Payment of fee for technical services of ` 22,000 and royalty of ` 25,000 to Mr. Ram, who is having
PAN.
(b) Payment of ` 2,00,000 made to Mr. X for purchase of diaries made according to specifications of
M/s ABC Ltd. However, no material was supplied for such diaries to Mr. X by M/s ABC Ltd.
(c) Rent paid for plant and machinery ` 1,50,000 by a partnership firm having sales turnover of `
25,00,000 and net loss of ` 15,000.
Answer:
(a) As per section 194J, liability to deduct tax is attracted only in case the payment made as fees for technical
services and royalty, individually, exceeds ` 30,000 during the financial year. In the given case, since, the
individual payments for fee of technical services i.e. ` 22,000 and royalty ` 25,000 is less than ` 30,000
each, there is no liability to deduct tax at source. It is assumed that no other payment towards fees for
technical services and royalty were made during the year to Mr. Ram.
(b) According to Section 194C, the definition of “work” does not include the manufacturing or supply of
product according to the specification by customer in case the material is purchased from a person other
than the customer. Therefore, there is no liability to deduct tax at source in respect of payment of `
2,00,000 to Mr. X, since the contract is a contract for ‘sale’.
(c) As per section 194-I, tax is to be deducted @ 2% on payment of rent for plant and machinery, only if the
payment exceeds ` 2,40,000 during the financial year. Since rent of ` 1,50,000 paid by a partnership
firm does not exceed ` 2,40,000, tax is not deductible.
12. Who are the persons authorized to verify return of income in the case of following persons:
(i) Local authority
(ii) Firm, having no managing partner
(iii) Non-resident Company
(iv) Political party
Answer:
Return of income to be verified by whom
Person Return of income to be verified by
(i) Local authority The principal officer
(ii) Firm, having no managing partner Any partner of the firm, not being a minor
(iii) Non-resident Company A person who holds a valid power of attorney from
such company to do so
(iv) Political party Chief executive officer of such party


1. Mr. Suhaan furnished the following particulars of his income for the year ended 31.3.2020.
Particulars `
(a) Income earned from business in France which is controlled from 90,000
Mumbai (`
` 65,000 is received in India)
(b) Pension for services rendered in India but received in France 64,000
(c) Dividend received in France from Titanium Inc., a French company 25,000
(d) Rent from property in France deposited in a bank in France and later 85,000
on, remitted to India through approved banking channels
(e) Dividend from Sunset Ltd., an Indian company received in France 98,000
Compute his gross total income for the assessment year 2020-21, if he is:
(i) Resident and ordinarily resident;
(ii) Resident but not ordinarily resident;
(iii) Non-resident
Answer:
Computation of gross total income of Mr. Suhaan for the A.Y. 2020-21
Resident Resident Non-
& but not Resident
Particulars
ordinarily ordinarily
resident resident
` ` `
(a) Income earned from business in France 90,000 90,000 65,000

which is controlled from Mumbai, out of
which ` 65,000 is received in India
(b) Pension for services rendered in India but 14,000 14,000 14,000
received in France (64000-50000)
(c) Dividend received in France from a 25,000 - -
Titanium Inc., a French company
(d) Rent from property in France deposited in 59,500 - -
a bank in France (Deduction 30%)
(e) Dividend from Sunset Ltd., an Indian - - -
Company
Gross Total Income 1,88,500 1,04,000 79,000
Notes:
(a) As per Section 5(1), global income is taxable in case of a resident. However, as per Section 5(2), in
case of a non-resident, only the following incomes are chargeable to tax in India:
(ii) Income accruing or arising or deemed to accrue or arise in India.
Further, the income which accrues or arise outside India would be chargeable to tax in case of resident
but not ordinarily resident in India, only if such income is derived from a business controlled in India.
Accordingly, the entire income earned from business in France which is controlled from Mumbai would be
chargeable to tax in the hands of Mr. Suhaan if he is a resident in India or resident but not ordinarily
resident. However, if he is non-resident then only that part of income which is received in India would be
taxable in his hands.

(b) Pension for services rendered in India but received in France would be taxable in all cases, since it has
accrued or arisen in India.
(c) Dividend received in France from a French company would be taxable in the hands of Mr. Suhaan, only
if he is resident and ordinarily resident in India. If he is a resident but not ordinarily resident or a non-
resident, the same would not be taxable in his hands in India since it has neither accrued or arisen in
India nor is it received in India.
(d) Likewise, rental income from property in France would also be taxable only if he is resident in India. It
has been assumed that the rental income is the gross annual value of the property. Therefore, deduction
@30% under section 24, has been provided and the net income so computed is taken into account for
determining the gross total income of a resident and ordinarily resident.
`
Rent received (assumed as gross annual value) 85,000
Less: Deduction under section 24 (30% of ` 85,000) 25,500
(e) Dividend from Indian company is exempt under Section 10(34), whether the recipient is a resident,
resident but not-ordinarily resident or non-resident
2. State with brief reasons whether the following statements are true or false with reference to the
provisions of the Income-tax Act, 1961:
(a) IMP: Payment of ` 12 lakh from an approved superannuation fund made by T Ltd. by way of
transfer to the account of Mr. Swayam, an employee of T Ltd., under Atal Pension Yojana is
taxable in the hands of Mr. Swayam.
(b) Mr. Arpit, a member of a HUF, received ` 12,000 as his share from the income of the HUF. The
same is to be included in his chargeable income.
(c) During the previous year 2019-20, Ms. Arpita received in aggregate ` 12 lakhs as dividend from
Indian companies. The same is exempt in her hands under section 10(34).
(d) Exemption is available to a Sikkimese individual, only in respect of income from any source in
the State of Sikkim.
Answer:
(a) False: Any payment from an approved superannuation fund made by way of transfer to the account of
an employee under a notified pension scheme referred to in section 80CCD is exempt under section
10(13).
Since Atal Pension Yojana is a notified pension scheme under section 80CCD, the payment of ` 12
lakhs made by T Ltd. by way of transfer from an approved superannuation fund to Mr. Swayam’s
account under such scheme is exempt under section 10(13).
(b) False: Section 10(2) exempts any sum received by an individual as a member of a HUF where such
sum has been paid out of the income of the family. Therefore, ` 12,000 would not be included in Mr.
Arpit’s taxable income.
(c) False: As per section 115BBDA, dividend in excess of ` 10 lakhs would be chargeable to tax @10% in
the hands of, inter alia, an individual, resident in India. Section 10(34) exempts dividend distributed by
domestic companies in the hands of the recipient, since the same has been subject to dividend
distribution tax under section 115-O in the hands of the company. However, the amount of dividend
which is chargeable to tax under section 115BBDA would not be exempt under section 10(34).
Accordingly, dividend received upto ` 10 lakh would be exempt under section 10(34) in the hands of Ms.
Arpita. However, dividend in excess of ` 10 lakh i.e., ` 2 lakhs, would be taxable@10% in her hands.
(d) False: Exemption under section 10(26AAA) is available to a Sikkimese individual not only in respect of
income from any source in the state of Sikkim, but also in respect of income by way of dividend or
interest on securities.

3. Mrs. Shakshi is a Human Resources Manager of M/s. Trumph & Co. Pvt. Ltd., based at Mumbai. She is
61 years of age and receives the following salary and perquisites from the company during the year
ending 31.03.2020:
(i) Basic Salary ` 80,000 per month
(ii) Dearness Allowance ` 22,000 per month (forms part of pay for retirement benefits)
(iii) Bonus – 2 months basic pay.
(iv) Commission – 0.1% of the turnover of the company. The turnover for the F.Y. 2019-20 was `
12.00 crores.
(v) Contribution of the employer and employee to the recognized provident fund Account `
2,00,000 each.
(vi) Interest credited to Recognized Provident Fund Account at 9.5% - ` 80,000.
(vii) Rent free unfurnished accommodation provided by the company for which the company pays a
rent of ` 84,000 per annum.
(viii) Entertainment Allowance – ` 75,000.
(ix) Hostel allowance for three children – ` 3,200 each.
She makes the following payments and investments:

(i) Premium paid to insure the life of her major daughter – ` 18,000.
(ii) Medical Insurance premium for self – ` 12,000 ; Spouse – ` 14,000.
(iii) Donation to a public charitable institution registered under 80G ` 1,50,000 by way of cheque.
(iv) LIC Pension Fund – ` 60,000.
Determine the tax liability of Mrs. Sakshi for the Assessment Year 2020-21.
Answer:
Computation of Total Income and tax liability of Mrs. Shakshi for A.Y. 2020-21
Particulars ` `
Income from salary
Basic salary 9,60,000
Bonus 1,60,000
Commission (calculated as percentage of turnover) 1,20,000
Children’s hostel allowance 9,600
Less :Exemption (` 300 x 12 x 2) 7,200 2,400
Interest credited to recognized provident fund account -
(exempt)
Rent free unfurnished accommodation
(Refer Working Note 1) 84,000
Excess contribution to PF by employer
(Refer Working Note 2) 38,720
Gross salary 17,04,120
Less: Deduction u/s 16(ia) 50,000
Income from Salary / Gross Total Income 16,54,120
Less : Deduction under section 80C
Life insurance premium paid for insurance of major
daughter 18,000
Contribution to recognized provident fund 2,00,000
2,18,000
Deduction under section 80CCC in respect of LIC
pension fund 60,000
2,10,000
Deduction limited to ` 1,50,000 as per section 80CCE 1,50,000

Medical Insurance premium in respect of self and spouse 26,000
Deduction under section 80G
Donation to Public Charitable Trust ` 1,50,000 restricted to
50% of ` 1,48,812 (10% of adjusted total income) (Refer
Working Note 3) 74,406
Total Income (Rounded Off) 14,03,710
Tax on total income [10,000 + 1,00,000 + (14,03,710 -
10,00,000) x 30%] 2,31,113
Add : Health & Education cess @ 4% 9,245
Total tax liability 2,40,358
Tax Liability (rounded off) 2,40,360
Working Notes:
(1) Value of Rent Free Accommodation
Particulars Amount
Dearness Allowance 2,40,000
Bonus 1,60,000
Commission 1,20,000
Entertainment Allowance 35,000
Children’s Hostel Allowance 2,400
15% of Actual Rent 2,31,210
Actual Rent paid by company 84,000
The least of the above is chargeable perquisite
(2) Employer’s contribution to P.F. in excess of 12% of salary

Employer’s contribution 2,00,000
Less: 12% of basic salary, DA and Commission 1,61,280
12% of 13,44,000 38,720
(3) Deduction@50% is allowable on donation made to public charitable trust subject to qualifying limit, which
is 10% of adjusted total income i.e., ` 1,48,812 [i.e., Gross Total Income ` 16,64,120 (-) Deduction under
section 80C/80CCC ` 1,50,000 (-) Deduction under section 80D ` 26,000].
Therefore, ` 74,406, being 50% of ` 1,48,812 is allowable as deduction under Section 80G. In this case,
since donation is made otherwise than by way of cash, it qualifies for deduction under Section 80G.
4. In May, 2019, Mr. Aakarsh recovered rent of ` 17,000 from Ms. Gunjan, to whom he had let out his
house from June 2012 to August 2014. He could not realise two months rent of ` 24,000 from her and
to that extent his actual rent was reduced while computing income from house property for A.Y.
2015-16.
From September 2015 to November 2018, he had let out his property to Mr. Sahil. In October, 2017, he
had increased the rent from ` 13,000 to ` 15,000 per month and the same was a subject matter of
dispute. The house remained vacant for three months from December 2018 to February 2019. In April,
2019 the matter was finally settled and Mr. Aakarsh received ` 28,000 as arrears of rent for the period
October 2017 to November, 2018. However, in March 2019, Mr. Aakarsh had already sold this
residential house property to Mr. Sagar.
Mr. Aakarsh, contends that the amount recovered as unrealised rent and arrears of rent in the P.Y.
2019-20 would not be taxable in his hands in that year, since he had sold such house property in the
previous year 2018-19 itself. Is the contention of Mr. Aakarsh correct? If not, under what head would
such income be taxable and compute the income taxable under that head for A.Y. 2020-21?

Answer:
Since the unrealised rent was recovered in the P.Y. 2019-20, the same would be taxable in the A.Y. 2020-21
under Section 25A, irrespective of the fact that Mr. Aakarsh was not the owner of the house in that year.
Further, the arrears of rent was also received in the P.Y. 2019-20, and hence the same would also be taxable
in the A.Y. 2020-21 under Section 25A, even though Mr. Aakarsh was not the owner of the house in that
year.
Both unrealised rent and arrears of rent would be taxable under the head “Income from house property”. A
deduction of 30% of unrealised rent recovered and arrears of rent would be allowed while computing income
from house property of Mr. Aakarsh for A.Y.2020-21.
Computation of income from house property of Mr. Aakarsh for A.Y. 2020-21
Particulars `
(i) Unrealised rent recovered 17,000
(ii) Arrears of rent received 28,000
45,000
Less: Deduction@30% 13,500
5. State, with reasons, the allowability of the following expenses under the Income-tax Act, 1961, as
deduction, while computing income from business or profession for the Assessment Year 2020-21:
(i) On 14.5.2020, ABC Ltd. paid ` 45,000 to the Indian Railways for the use of railway assets
pertaining to previous year 2019-20.
(ii) MNO Ltd. paid ` 55,000 as tax on non-monetary perquisite provided to an employee.
(iii) ` 32,000 paid by S Ltd. in cash on 28.3.2020 to a transporter (owning 8 goods carriages
throughout the previous year) for carriage of goods, without deduction of tax at source.
(iv) P Ltd. paid ` 80,000 in cash for purchase of wheat from a farmer on a banking day.
Answer:
(i) Allowable as deduction: As per Section 43B, the allowability of deduction in respect of any sum
payable by an assessee to the Indian Railways for use of Railway Assets is subject to actual payment of
such sum on or before the due date of filing return of income under Section 139(1).
Thus, in the present case, ` 45,000 paid by ABC Ltd. to Indian Railways for use of railway assets would
be allowed as deduction while computing the business for the previous year 2019-20, since such
payment is made on or before the due date for filing return of income for the previous year 2019-20,
being the year in which such liability incurred.
(ii) Not allowable as deduction: Income-tax paid by the employer in respect of non-monetary perquisites
provided to its employees is exempt in the hands of the employee under Section 10(10CC). As per
Section 40(a)(v), such income-tax paid by the employer is not deductible while computing business
income.
Therefore, income-tax of ` 55,000 paid by the MNO Ltd. in respect of non-monetary perquisites provided
to an employee would not be allowed as deduction while computing its business income.
(iii) Allowable as deduction: The limit for attracting disallowance under Section 40A(3) for payment
otherwise than by way of account payee cheque or account payee bank draft is ` 35,000 in case of
payment made for plying, hiring or leasing goods carriage to a transporter.
Therefore, in the present case, no disallowance under Section 40A(3) would be attracted in the hands of
S Ltd. in respect of payment of ` 32,000 made in cash for carriage of goods to a transporter. Further,
disallowance under section 40(a)(ia) for non-deduction of tax at source would also not be attracted,
since the provisions for deduction of tax at source under Section 194C are not applicable, in case of a
transporter owning not more than 10 goods carriages at any time during the previous year.
(iv) Allowable as deduction: As per Rule 6DD, in case the payment is made for purchase of agricultural
produce directly to the cultivator, grower or producer of such agricultural produce, no disallowance under
section 40A(3) is attracted even if the cash payment for the expense exceeds ` 20,000.
Therefore, disallowance under section 40A(3) would not be attracted in this case, since cash payment for
purchase of wheat is made directly to the farmer.

6. During the previous year 2019-20, Mr. Gagan received ` 5,32,000 towards interest on enhanced
compensation from State Government in respect of compulsory acquisition of his land effected
during the financial year 2015-16.
The above amount of interest include interest relating to the following financial years:
F.Y. 2016-17: ` 1,58,000
F.Y. 2017-18 ` 1,78,000
F.Y. 2018-19 ` 1,96,000
He incurred ` 75,000 by way of legal expenses in the F.Y. 2019-20 to receive the interest on such
enhanced compensation.
Determine how much of interest on enhanced compensation would be chargeable to tax for the
assessment year 2020-20? Can he claim deduction in respect of legal expenses from the amount of
interest on enhanced compensation chargeable to tax?
Answer:
Section 145B provides that interest received by the assessee on enhanced compensation shall be deemed
to be the income of the assessee of the year in which it is received, irrespective of the method of accounting
followed by the assessee and irrespective of the financial year to which it relates.
Section 56(2)(viii) states that such income shall be taxable as ‘Income from other sources’.
50% of such income shall be allowed as deduction by virtue of section 57(iv) and no other deduction shall be
permissible from such Income.
Therefore, he cannot claim deduction in respect of legal expenses incurred to receive the interest on
enhanced compensation from such income.
Computation of interest on enhanced compensation taxable as “Income from other sources” for the
A.Y 2020-21:
Particulars `
Interest on enhanced compensation taxable under section 56(2)(viii) 5,32,000
Less: Deduction under section 57(iv) (50% x ` 5,32,000) 2,66,000
Taxable interest on enhanced compensation 2,66,000
7. Compute the GTI of Mr. Abhinav & and his wife Mrs. Suhaani from the following information:
Particulars `
(a) Salary income (computed) of Mrs. Suhaani 3,25,000
(b) Income from business of Mr. Abhinav 4,15,000
(c) Income of minor son Chetan from fixed deposit 25,000
Income of minor daughter Shreya from music concerts given
(d) byher 28,000
(e) Interest from bank received by Shreya on deposit made out of
income derived from music concerts 7,000
(f) Gift received by Shreya on 4.10.2018 from friend of Mrs. 5,500
Suhaani
Answer:
As per the provisions of Section 64(1A) of the Income-tax Act, 1961, all the income of a minor child has to be
clubbed in the hands of that parent whose total income (excluding the income of the minor) is greater. The
income of Mr. Abhinav is ` 4,15,000 and income of Mrs. Suhaani is ` 3,25,000. Since the income of Mr.
Abhinav is greater than that of Mrs. Suhaani, the income of the minor children have to be clubbed in the
hands of Mr. Abhinav. It is assumed that this is the first year when clubbing provisions are attracted.
Income derived by a minor child from any activity involving application of his/her skill, talent, specialised
knowledge and experience is not to be clubbed. Hence, the income of minor child Shreya from giving music
concerts will not be included in the hands of either parent.

However, interest from bank deposit has to be clubbed even when deposit is made out of income arising
from application of special talent.
The Gross Total Income of Mrs. Suhaani is ` 3,25,000. The gross total income of Mr. Abhinav giving effect to
the provisions of section 64(1A) is as follows:
Computation of gross total income of Mr. Abhinav for the A.Y. 2020-21
Particulars ` `
Income of minor son Chetan from fixed deposit 25,000
Less: Exemption under section 10(32) 1,500 23,500
Income of minor daughter Shreya
(i) From music concerts
[From special talent – not to be clubbed] -
(ii) Interest from bank 7,000
(iii) Gift of ` 5,500 received from a non-relative is not taxable
under section 56(2)(x) being less than the aggregate
limit of ` 50,000 Nil
7,000
Less : Exemption under section 10(32) 1,500 5,500
8. Compute the total income of Mr. Tarun, a resident Indian, aged 57 years, from the following details for
the year ended 31.3.2020. Also, show the items eligible for carry forward to the A.Y. 2021-22:
Particulars `
Loss from toys business of A.Y. 2019-20 2,45,000
Loss from specified business covered by Section 35AD 46,000
Loss from card games 23,000
Income from betting (Gross) 49,000
Deposit in PPF 1,00,000
Answer: Computation of total income of Mr. Tarun for the A.Y. 2020-21
Particulars ` `
Salaries
Less: Loss from house property 2,19,000 36,000
Less: Loss from toys business set off 28,000 Nil
Capital gains
Less: Loss from toys business set off 2,17,000 58,500

Income from betting 49,000
Less: Deduction under section 80C (deposit in PPF) 36,000
Losses to be carried forward to A.Y. 2021-22:

Particulars `
(1) Loss from toys business (` 2,45,000 – ` 28,000 - ` 2,17,000) Nil
(2) Loss from specified business covered by section 35AD 46,000
Notes:
(i) Loss from specified business covered by section 35AD can be set-off only against profits and gains of
any other specified business as per section 73A. Therefore, such loss cannot be set off against any
other income. The unabsorbed loss has to be carried forward for set-off against profits and gains of any
specified business in the following year, provided the return is filed on or before the due date under
section 139(1).
(ii) Loss from toys business cannot be set off against salary income. However, the balance business loss of
` 2,17,000 [` 2,45,000 – ` 28,000 set-off against income from speculation business as per section 70(1)]
can be set-off against long-term capital gains of ` 2,75,500 from sale of urban land as per section 71(2).
Consequently, the taxable long-term capital gains would be ` 58,500.
(iii) Loss from card games can neither be set off against any other income, nor can it be carried forward.
(iv) For providing deduction under Chapter VI-A, gross total income has to be reduced by the amount of
long-term capital gains and casual income. Therefore, the deduction under section 80C in respect of the
amount deposited in PPF has to be restricted to ` 36,000 [i.e., Gross Total Income of ` 1,43,500 – `
58,500 (LTCG) – ` 49,000 (Casual income)].
(v) Income from betting is chargeable at a flat rate of 30% under section 115BB and no expenditure or
allowance can be allowed as deduction from such income, nor can any loss be set-off against such
income.
9. State with proper reasons whether the following statements are True/False with regard to the
provisions of the Income-tax Act, 1961:
(i) Mrs. Leena, widow of Mr. Sahitya (who was an employee of M/s. ABC Ltd.), received ` 9 lakhs on
11.12.2019, being amount standing to the credit of Mr. Sahitya in his NPS Account, in respect of
which deduction has been allowed under Section 80CCD to Mr. Sahitya in the earlier previous
years. Such amount received by her as a nominee on closure of the account is deemed to be her
income for A.Y. 2020-21.
(ii) Mr. Gopal, a businessman, whose total income (before allowing deduction under section 80GG)
for A.Y. 2020-21 is ` 3,80,000, paid house rent at ` 8,000 p.m. in respect of residential
accommodation occupied by him at Chennai. He is eligible to claim flat deduction of ` 60,000
under section 80GG for A.Y.2020-21.
Answer:
(i) False: A proviso has been inserted in Section 80CCD(3) to provide that the amount received by the
nominee, on closure of NPS account on the death of the assessee, shall not be deemed to be the
income of the nominee.
Therefore, ` 9 lakhs, being the amount received by Mrs. Leena, widow of Mr. Sahitya as a
nominee on closure of NPS account on his death would not be deemed as income in her hands.
(ii) False, as per Section 80GG, least of the following is allowed as deduction:
(a) Actual rent paid less 10% of total income
96,000 minus 38,000 = ` 58,000
(b) 25% of total income 3,80,000 x 25% = ` 95,000
(c) Amount calculated at ` 5,000 p.m. = ` 60,000
Thus, Mr. Gopal is eligible to claim deduction of only ` 58,000 under section 80GG and not a flat
deduction of ` 60,000.

10. IMPORTANT: From the following information, you are required to compute the total income of Mr.
Dinesh (aged 52 years) for the assessment year 2020-21, based on provisions contained under
Section 44AE of the Income-tax Act, 1961.
Mr. Dinesh is solely engaged in the business of plying goods vehicles since financial year 2012-13.
He owned 5 non heavy goods vehicles (Gross Vehicle weight – 7000kg) as on 01.04.2019. He acquired
3 more non-heavy goods vehicles on 1.7.2019.
He did not opt for presumptive provision contained in section 44AE for the financial year 2018-19. His
books were audited under Section 44AB and the return of income was filed on 18.9.2019. He has
unabsorbed depreciation of ` 95,000 and business loss of ` 1,28,000 for the financial year 2018-19.
Following further information relating to P.Y. 2019-20 is also provided to you:

(i) He paid premium on life insurance policy of his married daughter ` 28,000. The policy was taken
on 1.07.2019 and the minimum sum assured is ` 2,50,000.
(ii) He repaid principal of ` 88,000 and interest of ` 22,000 to Indian Bank towards education loan of
his son, who completed MBA two years ago. He is employed after completion of his studies.
(iii) He deposited ` 55,000 in Tax Saver Deposit with Indian Bank in the name of married daughter.
(iv) He paid medical insurance premium of ` 51,500 for his mother, resident in India, aged 75 years
by cheque.
Answer:
Computation of total income of Mr. Dinesh for the A.Y. 2020-21
Particulars ` `
Income from business of plying goods vehicle (Refer 6,52,500
Note 1)
Less: Brought forward business loss of financial year
2018-19 (Refer Note 2 & 3) 1,28,000
Section 80C:-
Life insurance premium paid for insurance of 25,000
married daughter (Refer Note 5)
Section 80D:-
Medical insurance premium paid for insurance 50,000
of mother (Refer Note 6)
Section 80E:-
Interest paid towards education loan taken for studies
of his son (Refer Note 7) 22,000 97,000
Working Notes:
(1) Computation of income from business of plying goods vehicles under section 44AE
Particulars `
5 non heavy goods vehicle held throughout the year (` 7,500×5×12) 4,50,000
3 non-heavy goods vehicle – held for 9 months (` 7,500×3×9) 2,02,500
Income under section 44AE 6,52,500
(2) As per section 44AE, any deduction allowable under the provisions of sections 30 to 38 shall be deemed
to have been already allowed. Therefore, the unabsorbed depreciation of ` 95,000 shall not be allowed
as a deduction since it is covered by section 32.
(3) Brought forward business loss of ` 1,28,000 shall be allowed as deduction, by virtue of section 72, as it
is allowed to be carried forward for 8 assessment years following the assessment year to which it
relates, since the return for A.Y. 2019-20 was filed before the due date specified under section 139(1).

(4) Tax saver deposit in the name of married daughter does not qualify for deduction under section 80C.
(5) Premium paid for insurance on the life of any child of the individual, whether married or not, qualifies for
deduction under section 80C. In respect of policies issued on or after 1.04.2012, only premium paid to
the extent of 10% of “minimum capital sum assured” qualifies for deduction under section 80C.
Therefore, out of the life insurance premium of ` 28,000 paid for insurance policy of married daughter,
only ` 25,000 (being 10% of ` 2,50,000) is allowable as deduction under section 80C.
(6) Deduction is allowed under section 80D for payment made for medical insurance of parents. Medical
insurance premium paid for insuring the health of a person who is a senior citizen i.e. of age 60 years or
more, qualifies for deduction under section 80D, subject to a maximum of ` 50,000. Hence, deduction of
` 50,000 is provided to Mr. Dinesh, as his mother is a senior citizen and the premium is paid otherwise
than by way of cash.
(7) It is only the payment of interest on education loan which qualifies for deduction under section 80E.
Deduction under section 80E is allowed in respect of interest on loan taken for education of children of
the individual even if they are not dependent. Principal repayment of the education loan is not eligible for
deduction under section 80E
11. State the applicability of TDS provisions and amount of tax, if any, to be deducted in the following
cases:
(a) Mr. Karthik received ` 2,50,000 as rent from Trip Ltd. for hire of machinery.
(b) Dr. Sarthak performed a plastic surgery on Mr. Verma, Karta of Verma’s Family. The Verma HUF
paid ` 35,000 to Dr. Sarthak for such surgery.
(c) Mr. Abhinav received ` 29,000 as director’s sitting fees on 21-03-2020 from XYZ Ltd.
Answer:
(a) Since the rent paid for hire of machinery by Trip Ltd. to Mr. Kartik exceeds ` 1,80,000, the provisions of
section 194-I for deduction of tax at source are attracted.
The rate applicable for deduction of tax at source under section 194-I on rent paid for hire of plant and
machinery is 2%, assuming that Mr. Kartik has furnished his permanent account number to Trip Ltd.
Therefore, the amount of tax to be deducted at source: = ` 2,50,000 x 2% = ` 5,000.
Note: In case Mr. Kartik has not furnished his permanent account number to Trip Ltd., tax shall be
deducted @ 20% on ` 2,50,000, by virtue of provisions of Section 206AA.
(b) As per the provisions of Section 194J, a Hindu Undivided Family is required to deduct tax at source on
fees paid for professional services only if it is subject to tax audit under Section 44AB in the financial year
preceding the current financial year.
However, if such payment made for professional services is exclusively for the personal purpose of any
member of Hindu Undivided Family, then, the liability to deduct tax is not attracted.
Therefore, even if Verma (HUF) is liable to tax audit in the immediately preceding financial year, the
liability to deduct tax at source is not attracted in this case since, the fees for professional service to Dr.
Sarthak is paid for a personal purpose i.e. the surgery of a member of the family.
(c) Section 194J provides for deduction of tax at source @10% from any sum paid by way of any
remuneration or fees or commission, by whatever name called, to a director, which is not in the nature of
salary on which tax is deductible under section 192.
The threshold limit of ` 30,000 upto which the provisions of tax deduction at source are not attracted in
respect of every other payment covered under section 194J is, however, not applicable in respect of sum
paid to a director.
Therefore, in this case, tax@10% has to be deducted at source under section 194J in respect of the sum
of ` 29,000 paid by XYZ Ltd. to its director. Thus, tax of ` 2,900 has to be deducted at source.
12. Mr. Vardaan earned income under the head “Salaries”, “Income from House Property” and bank
interest during the previous year 2019-20. He furnished his return of income on 30.11.2020 for A.Y
2020-21. Later, on 1.3.2021, he realized that he had not claimed deduction under section 80C in
respect of the amount deposited by him in public provident fund (PPF). He now wants to revise his
return of income. Can he do so? Explain with reference to the provisions of the Income-tax Act, 1961.

Answer:
Since Mr. Vardaan has income only under the heads “Salaries”, “Income from house property” and “Income
from other sources”, he does not fall under the category of a person whose accounts are required to be
audited under the Income-tax Act, 1961 or any other law in force. Therefore, the due date of filing return for
A.Y.2020-21 under section 139(1), in his case, is 31st July, 2020. Since Mr. Vardaan had submitted his return
of income only on 30.11.2020, the said return is a belated return under section 139(4).
Section 139(5) now permits a return furnished under section 139(1) as well as a belated return furnished
under section 139(4) to be revised. Thus, a belated return under section 139(4) can also be revised. The time
limit for filing a revised return is end of the relevant assessment year.
In this case, the time limit would expire only on 31.3.2021. He has discovered the mistake in March 2021
itself. Therefore, Mr. Vardaan can revise the belated return of income filed by him to claim deduction under
section 80C, since the time limit has not elapsed.

Class Notes


Residential Status and Scope of total income

1. (a)
Mr. Alok is an Indian citizen and a member of the crew of a Singapore bound Indian ship engaged in
carriage of passengers in international traffic departing from Mumbai port on 6th June, 2019. From the
following details for the P.Y. 2019-20, determine the residential status of Mr. Alok for A.Y. 2020-21,
assuming that his stay in India in the last 4 previous years (preceding P.Y. 2019-20) is 400 days and
last seven previous years (preceding P.Y.2019-20) is 750 days:
Particulars Date
Date entered into the Continuous Discharge Certificate in
Respect of joining the ship by Mr. Alok 6th June, 2019
Date entered into the Continuous Discharge Certificate in
respect of signing off the ship by Mr. Alok 9th December, 2019
Answer:
As per Section 6, an individual is treated as resident if:
he has stayed for 182 days in India during the previous year or
he has stayed for 60 days in the current previous year and 365 days in total during the four preceding
previous years.
However, where an Indian citizen leaves India as a member of crew of an Indian ship or for the purpose of
employment outside India, he will be resident only if he stayed for 182 days during the previous year.
Explanation 2 has been inserted in Section 6(1) to provide that in the case of an Individual, being a citizen of
India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India
shall, in respect of such voyage, be determined in the prescribed manner and subject to the prescribed
conditions.
Accordingly, the CBDT has prescribed the manner of determination of period of stay. For the purposes of
section 6(1), in case of an individual, being a citizen of India and a member of the crew of a ship, the period or
periods of stay in India shall, in respect of an eligible voyage, not include the period –
beginning on the date entered into the Continuous Discharge Certificate in respect of joining the ship by
the said individual for the eligible voyage and
ending on the date entered into the Continuous Discharge Certificate in respect of signing off by that
individual from the ship in respect of such voyage.
Eligible voyage refers to a voyage undertaken by a ship engaged in the carriage of passengers or freight in
international traffic where –
(i) for the voyage having originated from any port in India, has as its destination any port outside India; and
(ii) for the voyage having originated from any port outside India, has as its destination any port in India.
In this case, the voyage is undertaken by an Indian ship engaged in the carriage of passengers in
international traffic, originating from a port in India (i.e., the Mumbai port) and having its destination at a port
outside India (i.e., the Singapore port).
Hence, the voyage is an eligible voyage for the purposes of section 6(1). Therefore, the period beginning from
6thJune, 2019 and ending on 9th December, 2019, being the dates entered into the Continuous Discharge
Certificate in respect of joining the ship and signing off from the ship by Mr. Alok, an Indian citizen who is a
member of the crew of the ship, has to be excluded for computing the period of his stay in India.
Accordingly, 187 days [25+31+31+30+31+30+9] have to be excluded from the period of his stay in India.
Consequently, Mr. Alok’s period of stay in India during the P.Y. 2019-20 would be 179 days [i.e., 366 days –
187 days]. Since his period of stay in India during the P.Y.2019-20 is less than 182 days, he is a non-resident
for A.Y.2020-21.
Note - Since the residential status of Mr. Alok is “non-resident” for A.Y. 2020-21 consequent to his number of
days of stay in P.Y. 2019-20 being less than 182 days, his period of stay in the earlier previous years become
irrelevant.
SURAJ AGRAWAL TAX CLASS, LAXMINAGAR I 01147542530 I 85272 30445 I

(b)
Mr. Shravan, a citizen of India and an employee of Central Government, left India for the first time on
11.02.2019 due to his transfer to Australia for an assignment. He did not visit India any time during the
previous year 2019-20. From the following particulars of his income for the Financial Year 2019-20,
compute his gross total income for A.Y. 2020-21:
S.No. Particulars `
(i) Salary 6,50,000
(ii) Foreign Allowance (paid by the Government for rendering services in Australia) 4,55,000
(iii) Interest on fixed deposit from bank in India 1,10,000
(iv) Income from agriculture in Malaysia 3,50,000
(v) Income from house property in Malaysia 2,25,000
Answer:
As per Section 6(1), Mr. Shravan is a non-resident for the A.Y. 2020-21, since he was not present in India at any
time during the previous year 2019-20. As per Section 5(2), a non-resident is chargeable to tax in India only in
respect of following incomes:
(ii) Income accruing or arising or which is deemed to accrue or arise in India.
In view of the above provisions, income from agriculture in Malaysia and income from house property in
Malaysia would not be chargeable to tax in the hands of Mr. Shravan, assuming that the same were received
in Malaysia.
Income from ‘Salaries’ payable by the Government to a citizen of India for services rendered outside India is
deemed to accrue or arise in India as per section 9(1)(iii).
Hence, such income is taxable in the hands of Mr. Shravan, an Indian citizen, even though he is a non-
resident.
However, allowances or perquisites paid or allowed as such outside India by the Government to a citizen of
India for rendering service outside India is exempt under section 10(7). Hence, foreign allowance of `
4,55,000 is exempt under section 10(7).
Gross Total Income of Mr. Shravan for A.Y. 2020-21
Particulars `
Salaries (650,000 – 50000) 6,00,000
Income from other sources (Interest on fixed deposit in India) 1,10,000
Income which do not form part of total income

2. Discuss the taxability or otherwise of the following under the Income-tax Act, 1961:
(i) Agricultural income of ` 2, 00,000 earned by Ms. Dolly, a non-resident from land in Kanchipuram,
Tamil Nadu.
(ii) Amount of ` 5,00,000 withdrawn by Mr. Rajesh, a resident individual, from Public Provident Fund
as per relevant rules.
(iii) Mr. Abhi received ` 1,30,000 on 31.03.2020 towards maturity proceeds of life insurance policy
issued on 1.4.2012. The annual premium and capital sum assured are ` 23,000 and ` 1,20,000,
respectively.
(iv) Mr. Dinesh received ` 5,60,000 as partner share in the income of limited liability partnership.
(v) ` 3,50,000, received by Mr. Rohan from Central Government as compensation on account of
disaster.
Answer:
(i) Agriculture Income from land situated in India is exempt under Section 10(1), both in the case of residents
and non-residents. Therefore, agriculture income of ` 2,00,000 from land in Kanchipuram, Tamil Nadu
would be exempt in the hands of Ms. Dolly, a non-resident.
(ii) Amount withdrawn from Public Provident Fund is exempt under Section 10(11). Therefore, amount of
` 5,00,000 withdrawn by Mr. Rajesh from Public Provident Fund in accordance with rules would not be
chargeable to tax.
(iii) Section 10(10D)(d) exempts, any sum received under a life insurance policy, other than any sum received
under an insurance policy issued on or after 1.4.2012 in respect of which the premium payable for any of
the years during the term of the policy exceeds 10% of the capital sum assured.

Therefore, ` 1,30,000 received by Mr. Abhi towards maturity proceeds of the life insurance policy would
be chargeable to tax, since ` 23,000, being the amount of annual premium exceeds ` 12,000, being 10%
of capital sum assured i.e., ` 1,20,000.
(iv) Section 10(2A) provides that partner’s share in the total income of a firm is exempt in his hands. The term
“firm” includes a limited liability partnership and “partner” includes a partner of a limited liability
partnership.
Therefore, ` 5,60,000, being Dinesh’s share of profit in the limited liability partnership would not be
chargeable to tax in his hands.
(v) As per Section 10(10BC), any amount received or receivable as compensation by an individual or his/her
legal heir on account of any disaster from the Central Government, State Government or a local authority
is exempt from tax, except to the extent such individual or legal heir has already been allowed a deduction
under this Act on account of such loss or damage caused by such disaster.
Thus, ` 3,50,000, being the amount of compensation received from Central Government on account of
disaster would be exempt under section 10(10BC) in the hands of Mr. Rohan, assuming that the same
has not been allowed as deduction under any other provision of the Act.
Income from Salaries

3. State the taxability or otherwise of the following perquisites and compute the total value of taxable
perquisites, in the hands of Mr. Sarthak, employed with Assam Tea Limited as Chief Compliance
Officer, for the previous year 2019-20, assuming that his basic salary is ` 60,000 p.m.
(i) Mr. Sarthak paid ` 6,000 p.m. to his domestic servant, which is entirely reimbursed by his
employer.
(ii) Air-conditioner purchased 3 years back for ` 50,000 has been given to the servant of Mr. Sarthak
free of cost.
(iii) The estimated value of medical facility given to his family in a hospital maintained by the company
is ` 85,000.
(iv) Free education was provided to his two children Avani and Aarav in a school maintained and
owned by the company. The cost of such education for Avani is computed at ` 950 per month and
for Aarav at ` 1,250 per month. No amount was recovered by the company for such education
facility from Mr. Sarthak.
(v) Telephone provided at the residence of Mr. Sarthak and the bill aggregating to ` 27,000 paid by the
employer.
Answer:
Computation of value and taxability of perquisites provided by Assam Tea Limited to Mr. Sarthak
S. Particulars Value of
Taxable
No. perquisite
(i) Any sum paid by the employer in respect of any expenditure actually incurred by the 72,000
employee in respect of any obligation which but for such payment, would have been
payable by the assessee, would be chargeable to tax as perquisite [Section 17(2)(iv)].
Thus, in this case, since it becomes an obligation on Mr. Sarthak to pay salary to his
servant even if it is not reimbursed by his employer, ` 72,000 (` 6,000 x 12), being the
amount of salary of servant reimbursed by his employer would be
chargeable to tax in his hands.
(ii) The value of benefit to the employee arising from the transfer of any movable asset (air
conditioner, in this case) belonging to the employer directly or indirectly to the
employee or any member of the household shall be actual cost to the employer as 35,000
reduced by 10% of such cost for each completed year during which such asset was
put to use by the employer and as further reduced by the amount, if any paid or
recovered from the employee, being the consideration for such transfer. “Member of
household” shall include spouse, children and their spouses, parents, servants and
dependents.
Computation of value of perquisite

Particulars `
Original cost 50,000
Depreciation on SLM basis for 3 years @10% i.e.
` 50,000 x10% x 3 15,000
Perquisite value 35,000
Thus, ` 35,000, being the value of perquisite of transferred movable asset i.e., air-
conditioner to the servant of Mr. Sarthak would be chargeable to tax in his hands.
(iii) Medical facility to employee’s family in a hospital maintained by the employer is not a Nil
taxable perquisite. Regardless of the estimated value of benefit arising from such
facility to the employee, it is exempt from tax. Therefore, the value of perquisite is Nil.
(iv) Where the educational institution is owned by the employer, the value of perquisite in
respect of free education facility shall be determined with reference to the reasonable
cost of such education in a similar institution in or near the locality. However, there
would be no perquisite if the cost of such education per child does not exceed ` 1,000
per month.
15,000
Therefore, there would be no perquisite in respect of cost of free education provided to
his child Avani, since the cost does not exceed ` 1,000 per month.
However, the cost of free education provided to his child Aarav would be taxable, since
the cost exceeds ` 1,000 per month. The taxable perquisite value would be ` 15,000 (`
1,250 × 12).
Note – An alternate view possible is that only the sum in excess of ` 1,000 per month
is taxable. In such a case, the value of perquisite would be ` 3,000.
(v) Telephone provided at the residence of the employee and payment of bill by the Nil
employer is a tax free perquisite.
Total Value of Perquisite 1,22,000

4. Mrs. Lalita, a resident individual, owns a house in San Diego, U.S.A and a two storey house in
Lucknow. Compute her income from house property from the following details for the previous year
2019-20:
House at San Diego
Rent @ $ 3,500 per month.
Municipal taxes paid $ 2,100
The value of one dollar is to be taken as ` 65.
House at Lucknow:
Ground floor is used for her residence
First floor is let out at a monthly rent of ` 13,500.
Standard rent for each floor is ` 15,000 per month
Fair rent for each floor is ` 12,500 per month.
Municipal taxes paid ` 8,000.
Repayment of housing loan of ` 85,000 including interest of ` 40,000.
Answer:
Computation of Income from House Property of Mrs. Lalita for the A.Y. 2020-21
Particulars ` `
House property in San Diego
GAV– Rent received ($ 3,500 p.m. x ` 65 per USD x 12 months) 27,30,000
Less: Municipal taxes paid ($ 2,100 x ` 65 per USD) 1,36,500
- 30% of NAV 7,78,050 18,15,450
House property in Lucknow (Let-out portion – First Floor) 1,50,000

Expected rent (lower of standard rent and fair rent) 1,62,000
Standard Rent (` 15,000 x 12) ` 1,80,000 1,62,000
Fair rent (` 12,500 x 12 ) ` 1,50,000 4,000
Actual rent received (13,500 × 12) 1,58,000
Gross Annual Value (higher of Expected rent and actual rent)
Less: Municipal taxes paid (50% of ` 8,000)

Net Annual Value (NAV)
30% of NAV ` 47,400
Interest on housing loan (50% of ` 40,000) ` 20,000 67,400 90,600
Income from House property in Lucknow

(Self-occupied portion - Ground Floor)
Annual Value
Less: Deduction under section 24 Nil
Interest on housing loan (50% of ` 40,000) 20,000 (-) 20,000
Income from house property 18,86,050

5. (a)
Mr. Varun is engaged in the business of manufacturing of spare parts. From the following details,
compute the depreciation allowable as per the provisions of the Income-tax Act, 1961 for the
assessment year 2020-21:
(`
` in lacs)
(i) Opening WDV of block (15% rate) 49
(ii) New machinery purchased on 18-11-2019 18
(iii) Machinery imported from California on 21-5-2019 12
This machine had been used only in California earlier and the assessee is the first user in India.
(iv) New computer installed in manufacturing unit on 15-7-2019 6
Answer:
Computation of depreciation under section 32 for A.Y. 2020-21
Particulars ` `
Normal Depreciation
Depreciation@15% on ` 61,00,000, being machinery 9,15,000
(put to use for more than 180 days) [Opening WDV of ` 49,00,000 +
Purchase cost of imported machinery of ` 12,00,000]
Depreciation @7.5% on ` 18,00,000, being new machinery put to use

for less than 180 days 1,35,000
10,50,000
Depreciation@ 40% on computers purchased ` 6,00,000 2,40,000 12,90,000
Additional Depreciation (Refer Note below)

Additional Depreciation@10% of ` 18,00,000 [being actual cost of new 1,80,000
machinery purchased on 18-11-2019]
Additional Depreciation@20% on new computer installed in 1,20,000 3,00,000
manufacturing unit [20% of ` 6,00,000]
Total Depreciation 17,10,000
Note:-
The benefit of additional depreciation is available to new plant and machinery acquired and installed in
manufacturing undertakings. Accordingly, additional depreciation is allowable in the case of any new
machinery or plant acquired and installed by an assessee engaged, inter alia, in the business of
manufacturing of spare parts, at the rate of 20% of the actual cost of such machinery or plant.
Therefore, new computer installed in manufacturing unit is eligible for additional depreciation@20%.
Since the new machinery was purchased only on 18.11.2019, it was put to use for less than 180 days during
the previous year, and hence, only 10% (i.e., 50% of 20%) is allowable as additional depreciation in the A.Y.
2020-21. The balance additional depreciation would be allowed in the next year.
However, additional depreciation shall not be allowed in respect of, inter alia, any machinery or plant which,
before its installation by the assessee, was used either within or outside India by any other person. Therefore,
additional depreciation is not allowable in respect of imported machinery, since it was used in California,
before its installation by Mr. Varun

(b)
Discuss the deductibility or otherwise of the following expenditure incurred by Purnit Agro Industries,
while computing its business income for the year ended 31-03-2020:
(i) Revenue expenditure of ` 5,65,000 on scientific research related to its business.
(ii) Land & Building acquired for scientific research (cost of land is ` 9,50,000) in September 2019 for
` 22,00,000.
(iii) Contribution to the account of employees as per pension scheme referred to in Section 80CCD
amounted to ` 45,00,000. Amount above 10% of the salary of employees is ` 6,80,000.
(iv) Tax on non-monetary perquisites provided to the employees, borne by the employer ` 5,50,000.
Answer:
(i) The entire revenue expenditure of ` 5,65,000 on scientific research related to the business of the
company qualifies for deduction under section 35(1)(i).
(ii) As per section 35(1)(iv) read with section 35(2), if any capital expenditure (other than expenditure on
acquisition of land) is incurred on scientific research related to the business carried on by the assessee,
the whole of such capital expenditure is allowable as deduction in the previous year in which it is incurred.
Therefore, ` 12,50,000 (i.e. ` 22,00,000 – ` 9,50,000, being the cost of land) is allowable as deduction for
the A.Y. 2020-21. It is assumed that the scientific research is related to the business of Purnit Agro
Industries.
(iii) The employer’s contribution to the account of an employee under a pension scheme referred to in section
80CCD, upto 10% of salary of the employee in the previous year, is allowable as deduction under section
36(1)(iva) while computing business income. Disallowance under section 40A(9) would be attracted only
in respect of the amount in excess of 10% of salary. Accordingly, ` 38,20,000 would be allowed as
deduction under section 36(1)(iva) and ` 6,80,000 would be disallowed as per section 40A(9).
(iv) The tax of ` 5,50,000 borne by the employer on non-monetary perquisites provided to the employees is
disallowed under section 40(a)(v).
Capital Gains
6. Mr. Sutanu is a proprietor of Purple Enterprises, which has two units, X and Y. The Balance Sheet as
on 31.3.2019 is as under:
Liabilities Unit X (`
`) Unit Y (`
`) Assets Unit X (`
`) Unit Y (`
`)
Own Capital 25,72,500 10,27,500 Building 22,00,000 11,00,000
Revaluation Reserve 5,00,000 - Machinery 5,00,000 6,00,000
Bank loan 4,40,000 8,60,000 Debtors 3,25,000 2,40,000
Trade creditors 1,37,500 4,12,500 Other assets 6,25,000 3,60,000
Total 36,50,000 23,00,000 Total 36,50,000 23,00,000
He transferred on 1.4.2019 his Unit X by way of slump sale for a total consideration of ` 50 lacs. Unit X
was started in the year 2006-07. The expenses incurred for this transfer were ` 68,000.
Other information:
(i) Revaluation reserve is created by revising upward the value of the building of Unit X.
(ii) No individual value of any asset is considered in the transfer deed.
(iii) Other assets of Unit X include patents acquired on 13.5.2017 for ` 2,50,000 on which no
depreciation has been charged.
Cost Inflation Index: F.Y. 2005-06: 117, F.Y. 2019-20: 289
Compute the capital gain for the assessment year 2020-21.
Answer:
Computation of capital gains on slump sale of Unit X
Particulars `
Sale value 50,00,000
Less: Expenses on sale 68,000
Net sale consideration 49,32,000
Less: Net worth (See Note 1 below) 24,63,125
Long-term capital gain 24,68,875

Notes:
1. Computation of net worth of Unit X of Purple Enterprises
Particulars ` `
Building (excluding ` 5 lakhs on account of revaluation) 17,00,000
Machinery 5,00,000
Debtors 3,25,000
Patents (See Note 2 below) 1,40,625
Other assets (` 6,25,000 – ` 2,50,000) 3,75,000
Total assets 30,40,625
Less: Creditors 1,37,500
Bank Loan 4,40,000 5,77,500
Net worth 24,63,125
2. Written down value of patents as on 1.4.2019
Value of patents: `
Cost as on 13.5.2017 2,50,000
Less: Depreciation @ 25% for Financial Year 2017-18 62,500
WDV as on 1.4.2018 1,87,500
Less: Depreciation for Financial Year 2018-19 46,875
WDV as on 1.4.2019 1,40,625
For the purposes of computation of net worth, the written down value determined as per Section 43(6) has
to be considered in the case of depreciable assets. The problem has been solved assuming that the
Balance Sheet values of ` 5 lakh and ` 17 lakh (` 22 lakh – ` 5 lakh) represent the written down value of
machinery and building, respectively, of Unit X determined as per Section 43(6).
3. Since the Unit is held for more than 36 months, capital gain arising would be long term capital gain.
However, indexation benefit is not available in case of slump sale.

7. Mrs. Rupali, has furnished the following information pertaining to the year ended 31.3.2020:
(i) She bought 100 equity shares of a listed company from a friend for ` 80,000. The value of shares
in the stock exchange on the date of purchase was ` 1,55,000.
(ii) On her 25th wedding anniversary, she received cash gift of ` 1,01,000 from her friend Ms. Anjali.
(iii) On the above occasion, she also received a platinum ring worth ` 2,50,000 from her brother living
in Singapore.
(iv) She got cash gifts in aggregate of ` 25,000 from her four friends on the occasion of her daughter's
wedding on 11.11.2019.
(v) She also received ` 49,000 as gift by way of cheque from her maternal uncle, on her daughter’s
wedding.
Determine the amount chargeable to tax in the hands of Mr. Rupali under the head “Income from
other Sources” for the A.Y. 2020-21.
Answer:
Computation of amount chargeable to tax under the head “Income from other sources” in the hands
of Mrs. Rupali for A.Y. 2020-21
Particulars `
(i) Since shares are included in the definition of “property” and difference between the 75,000
purchase value and fair market value of shares exceeds ` 50,000 i.e., ` 75,000
(` 1,55,000 – ` 80,000), the difference would be chargeable to tax under section
56(2)(x)
(ii) Any sum of money received by an individual on the occasion of the marriage of the 1,01,000
individual is exempt. This provision is, however, not applicable to a cash gift received on
the occasion of wedding anniversary.
The gift of ` 1,01,000 received from a non-relative is, therefore, chargeable to tax under
section 56(2)(x) in the hands of Mrs. Rupali.
(iii) The provisions of section 56(2)(x) are not attracted in respect of any sum of money or Nil
property received from a relative.
Thus, the gift of platinum ring received from her brother is not taxable under section
56(2)(x), even though jewellery falls within the definition of “property”.
25,000

(iv) To be exempt from applicability of section 56(2)(x), the property should be received on
the occasion of the marriage of the individual, not that of the individual’s son or
daughter. Therefore, this exemption provision is not attracted in this case.
Any sum of money received without consideration by an individual is chargeable to tax
under section 56(2)(x), if the aggregate value exceeds ` 50,000 in a year. Since, the
aggregate value of cash gifts received by Mrs. Rupali exceeds ` 50,000 during the
previous year 2019-20, the cash gifts aggregating ` 25,000 received from her four
Nil
friends would be chargeable to tax in her hands.
(v) The provisions of section 56(2)(x) are not attracted in respect of any sum of money or
property received from a relative. Since maternal uncle is a relative, the amount of `
49,000 received by way of cheque from him would not be chargeable to tax in her
hands.
Amount chargeable to tax under the head “Income from other Sources” 2,01,000
Income of Other Persons included in assessee’s Total Income

8. The following are the details of the transactions pertaining to Mr. Sangram, Mrs. Sangeeta (wife) and
their two minor sons Master Aayu and Avi for the previous year 2019-20.
(a) Master Aayu earned ` 51,000 by investing ` 3,25,000 in a business. The said amount i.e.,
` 3,25,000, was received as a gift from his father Mr. Sangram.
(b) Mr. Sangram had a fixed deposit of ` 2,00,000 in Canara Bank. He instructed the bank to credit the
interest on the deposit @ 9% from 1-4-2019 to 31-3-2020 to the savings bank account of Mr.
Babloo, son of his brother, to help him in his education.
(c) Master Avi derived an income of ` 35,000 through an activity involving application of his skill and
talent.
(d) Mr. Sangram gifted a flat to Mrs. Sangeeta on April 1, 2019. During the previous year 2019-20, Mrs.
Sangeeta “Income from house property” (computed) was ` 5,12,000.
(e) Mr. Sangram holds 75% share in a partnership firm. Mrs. Sangeeta received a remuneration of `
32,500 from the firm for designing the webpage of the firm. Mrs. Sangeeta possesses no technical
or professional qualification.
During the year, Mr. Sangram got a monthly pension of ` 50,000. He had no other income. Mrs.
Sangeeta received salary of ` 12,000 per month from a part time job. Discuss the tax implications
of each transaction and compute the total income of Mr. Sangram, Mrs. Sangeeta and their minor
sons.
Answer:
Computation of total income of Mr. Sangram, Mrs. Sangeeta and their minor son for the A.Y. 2020-21
Particulars Mrs. Master
Mr. Sangram Sangeeta Avi
Salary income (of Mrs. Sangeeta) [1,44,000 - 50,000] 94,000

Pension income (of Mr. Sangram) (` 50,000×12-50,000) 5,50,000
Income from House Property [See Note (3) below) 5,12,000

Interest on Mr. Sangram’s fixed deposit
With Canara Bank (` 2,00,000 × 9%) 18,000
[See Note (1) below]
Remuneration received by Mrs. Sangeeta from a

partnership firm, in which Mr. Sangram has substantial
interest [See Note (2) below] 32,500 50,500
Income before including income of minor son under 11,12,500 94,000
section 64(1A)
Income of the Master Aayu from the investment made in 49,500
the business out of the amount gifted by Mr. Sangram
[SeeNote (4) below]
Income of the Master Avi through an activity involving
application of his skill and talent [See Note (5) below] 35,000
Total Income 11,62,000 94,000 35,000

Notes:
(1) As per section 60, in case there is a transfer of income without transfer of asset from which such income
is derived, such income shall be treated as income of the transferor. Therefore, the fixed deposit interest
of ` 18,000 transferred by Mr. Sangram to Mr. Babloo shall be included in the total income of Mr.
Sangram.
(2) As per section 64(1)(ii), in case the spouse of the individual receives any amount by way of income from
any concern in which the individual has substantial interest (i.e. holding shares carrying at least 20%
voting power or entitled to at least 20% of the profits of the concern), then, such income shall be included
in the total income of the individual. The only exception is in a case where the spouse possesses any
technical or professional qualifications and the income earned is solely attributable to the application of
her technical or professional knowledge and experience, in which case, the clubbing provisions would not
apply.
In this case, the remuneration of ` 32,500 received by Mrs. Sangeeta from the partnership firm has to be
included in the total income of Mr. Sangram, as his wife does not possess any technical or professional
qualification for earning such remuneration and Mr. Sangram has substantial interest in the partnership
firm as he holds 75% share in the firm.
(3) According to section 27(i), an individual who transfers any house property to his or her spouse otherwise
than for adequate consideration or in connection with an agreement to live apart, shall be deemed to be
the owner of the house property so transferred. Hence, Mr. Sangram shall be deemed to be the owner of
the flat gifted to Mrs. Sangeeta and hence, the income arising from the same shall be computed in the
hands of Mr. Sangram.
Note: The provisions of section 56(2)(x) would not be attracted in the hands of Mrs. Sangeeta, since she
has received immovable property without consideration from a relative i.e., her husband.
(4) As per section 64(1A), the income of the minor child is to be included in the total income of the parent
whose total income (excluding the income of minor child to be so clubbed) is greater. Further, as per
section 10(32), income of a minor child which is includible in the income of the parent shall be exempt to
the extent of ` 1,500 per child.
Therefore, the income of ` 51,000 received by Master Aayu from the investment made out of the sum
gifted by Mr. Sangram shall, after providing for exemption of ` 1,500 under section 10(32), be included in
the income of Mr. Sangram, since Mr. Sangram’s income of ` 11,22,500 (before including the income of
the minor child) is greater than Mrs. Sangeeta’s income of ` 1,04,000. Therefore, ` 49,500 (i.e.,` 51,000 –
` 1,500) shall be included in Mr. Sangram’s income. It is assumed that this is the first year in which
clubbing provisions are attracted.
Note – The provisions of section 56(2)(x) would not be attracted in the hands of the Master Aayu, since
he has received a sum of money exceeding ` 50,000 without consideration from a relative i.e., his father.
(5) In case the income earned by the minor child is on account of any activity involving application of any skill
or talent, then, such income of the minor child shall not be included in the income of the parent, but shall
be taxable in the hands of the minor child.
Therefore, the income of ` 35,000 derived by Master Avi through an activity involving application of his
skill and talent shall not be clubbed in the hands of the parent. Such income shall be taxable in the hands
of the minor son.

Set off and Carry Forward of Losses
9. Compute the Gross Total Income of Mr. Hariharan for the assessment year 2020-21 from the following
particulars:
Particulars Amount (` `)
Income from business before adjusting the following items: 3,45,000
(a) Business loss brought forward from assessment year 2017-18 65,000
(b) Current depreciation 32,500
(c) Unabsorbed depreciation of earlier year 1,95,000
Income from house property (Gross Annual Value) 5,23,000
Municipal taxes paid 28,000
Mr. Hariharan sold a plot at Kanpur on 30th October, 2019 for a

consideration of ` 9,32,000, which had been purchased by him on
25th November, 2017 at a cost of ` 7,18,000
Long-term capital gain on sale of debentures 88,000

Dividend on shares held as stock in trade 28,000
Dividend from a company carrying on agri business 25,000
During the previous year 2019-20, Mr. Hariharan has repaid ` 3,46,000 towards housing loan from a
scheduled bank. Out of ` 3,46,000, ` 2,16,000 was towards payment of interest and rest towards
principal payment.
Cost inflation indices: F.Y. 2012-13: 200 & F.Y.2019-20: 289.
Answer:
Computation of Gross total income of Mr. Hariharan for the A.Y 2020-21
Particulars ` `
I. Income from house property
Gross Annual Value 5,23,000
Less: Municipal taxes paid 28,000
(a) 30% of NAV 1,48,500
(b) Interest on housing loan (whole of the amount paid towards interest
allowed as deduction, since property is let-out) 2,16,000 1,30,500
II. Income from business

Less : Current year depreciation under section 32(1) 32,500
3,12,500
Less: Set-off of brought forward business loss of
A.Y. 2017-18 under section 65,000
2,47,500
1,07,000
Less: Unabsorbed depreciation set-off [See Note 2] 1,40,500
III. Capital gains

Long term capital gain on sale of debentures
88,000
Less: Unabsorbed depreciation set-off [See Note 2]
88,000
Short term capital gain on sale of land [See Note 1] Nil
2,14,000
2,14,000
IV. Income from other sources

Dividend on shares (whether held as stock-in-trade or from a
company carrying on agricultural operations)
– exempt under section 10(34) - Nil

Notes:
(1) Since land is held for a period of less than 24 months, the gain of ` 2,14,000 arising from sale of such
land is a short-term capital gain.
(2) Brought forward unabsorbed depreciation can be adjusted against any head of income except salaries.
However, it is more beneficial to set-off unabsorbed depreciation first against long-term capital gains,
since it is taxable at a higher rate of 20% (the other income of the assessee falling in the 5% slab rate).
Therefore, unabsorbed depreciation is first set-off against long-term capital gains to the extent of `
88,000. The remaining unabsorbed depreciation is adjusted against business income to the extent of `
1,07,000.
In the alternative, the balance of unabsorbed deprecation ` 1,07,000 may also be set-off against income
from house property or short-term capital gain, in which case, the net income from house property would
be ` 23,500 or short-term capital gain would be ` 1,07,000. The gross total income would, however,
remain unchanged.
Deductions from Gross Total Income

10. Compute the total income of Mr. Chankaya for the assessment year 2020-21 from the followings
details of payments/investments he made during the financial year 2019-20:
(i) Payment made towards mediclaim premium of `. 21,000 to insure his health and ` 24,000 to
insure the health of his father, aged 65 years, not dependent on him, by a mode other than cash.
(ii) He spent ` 5,000 for the preventive health-check up of his wife and ` 5,000 for the preventive
check up of his father.
(iii) He has incurred an expenditure of ` 80,000 for the medical treatment of his mother, being a
person with severe disability.
(iv) Deposit of ` 1,00,000 in public provident fund.
(v) Deposited ` 80,000 in tax saver deposit in the name of major son in a nationalized bank.
(vi) Contributed ` 1,50,000 to the National Pension System of the Central Government.
(vii) Paid ` 45,000 towards premium on life insurance policy of his married daughter
(Sum Assured ` 5,50,000). The policy was taken on 01.05.2012.
(viii) Contributed ` 12,000 to Prime Minister's National Relief Fund.
(ix) Donated ` 22,000 to a Government recognized institution for scientific research by a cheque.
His gross total income is ` 8,40,000 for the previous year 2019-20. Assume that the gross total income
of Mr. Chankaya comprises of only income under the head ‘Income from house property’ and interest
on bank fixed deposit.
Answer:
Computation of total income of Mr. Chankaya for the A.Y. 2020-21
Particulars `
Less: Deductions under Chapter VI-A (See Working Note below) 4,09,000
Working Note:
Computation of Deductions under Chapter VI-A
Particulars ` `
(i) Deduction under section 80C
Deposit in public provident fund 1,00,000
Deposit of ` 80,000 in tax saver deposit in the name of major son in _
a nationalized bank – Fixed deposit in the name of son does not
qualify for deduction under section 80C
Premium on life insurance policy of his married daughter – Full
amount is eligible for deduction under section 80C (since premium
paid does not exceed 10% of sum assured) 45,000
1,45,000
(ii) Deduction under section 80CCD(1)
Contribution to NPS of the Central Government, ` 1,00,000 [` 1,50,000 –
` 50,000, being deduction under section 80CCD(1B)], restricted to 20%
of Gross total Income 1,00,000
2,45,000
As per Section 80CCE, aggregate deduction under section 80C and
80CCD(1) cannot exceed 1,50,000

(iii) Deduction under section 80CCD(1B)
The deduction under section 80CCD(1B) would not be subject to overall 50,000
limit of ` 1.50 lakh under section 80CCE. Therefore, it is more beneficial
for Mr. Chankaya to claim deduction under section 80CCD(1B) first in
respect of contribution to NPS.
Thereafter, the remaining amount of ` 1,00,000 can be claimed as
deduction under section 80CCD(1), subject to a maximum limit of 20% of
Gross Total Income.
(iv) Deduction under section 80D
(i) (a) Medical insurance premium for self 21,000
(b) Preventive health check up ` 5,000 for wife restricted to `
4,000 (` 25,000 - ` 21,000, since maximum allowable 4,000
deduction is ` 25,000) 25,000
(ii) 24,000
(a) Health Insurance premium for his father
(b) Preventive health check up ` 5,000 restricted to ` 1,000 (` 5,000
- ` 4,000), since maximum allowable deduction in respect of
preventive health check up under section 80D is ` 5,000.
Whole of the amount of ` 25,000 allowed as deduction, since
maximum allowable deduction is ` 50,000, where the parent is a
senior citizen. 1,000
25,000
(v) Deduction under section 80DD
Deduction of ` 1,25,000 in respect of expenditure on medical treatment
of his mother, being a person with severe disability would be allowed
irrespective of the fact that amount of expenditure incurred is ` 80,000 1,25,000
(vi) Deduction under section 80G

Contribution of ` 12,000 to PM’s National Relief Fund, eligible for 100%
deduction 12,000
(vii) Deduction under section 80GGA
Payment of ` 22,000 to a Government recognized institution for
scientific research - Eligible for deduction under section 80GGA since
the payment is made by way of cheque 22,000
Total Deductions under Chapter VI-A 4,09,000
Note: In the alternative, preventive health check-up of ` 5,000 of his father can be claimed, in which case, no
deduction would be allowed in respect of the expenses on preventive health check-up of wife, since the
aggregate deduction for preventive health check-up cannot exceed ` 5,000. In such case also, the total
deduction under section 80D would be ` 50,000
Computation of Total Income of an individual

11. CA Suraj Agrawal (resident in India) aged 53 years is a practicing member. He maintains his accounts
on cash basis. His income and expenditure account for the year ended March 31, 2020 reads as
follows:
Expenditure ` Income `
Salary to staff 8,05,000 Fees earned:
Stipend to trainee 33,000 Audit 8,85,200
Incentive to trainee 10,000 Taxation services 6,28,800
Office rent 94,000 Consultancy 5,22,000
Printing and stationery 4,200 Dividend on shares of
Meeting, seminar and conference 28,400 Indian companies (gross) 10,155
Repairs, maintenance and petrol of car 26,600 Income from Unit Trust of India 8,400
Subscription and periodicals 25,000 Profit on sale of shares (STT paid) 25,200
Postage, telegram and fax 22,000 Honorarium received from various
Depreciation 31,500 institutions for valuation of
Travelling expenses 50,500 answer papers 26,300
Municipal tax paid in respect of house Rent received from residential flat
property 1,800 let out 1,04,000
Net profit 10,78,055
22,10,055 22,10,055

Other information:
(i) Depreciation debited to income and expenditure account is as per the rates of Income-tax Rules,
1962.
(ii) ` 2,050, interest paid on loan taken from LIC on the security of his Life Insurance Policy and
utilised for repair of computer, has been debited to the drawing account of Mr. Suraj.
(iii) Repairs and maintenance of car includes ` 1,900 for the period from 1.10.2019 to 30.09.2020.
(iv) Salary include ` 33,000 to a computer specialist in cash for assisting Mr. Suraj in one
professional assignment.
(v) Incentive to trainee represent amount paid to two trainee for passing Examination at first attempt.
(vi) Medical Insurance Premium on the health of self, wife, married daughter and dependent brother
of ` 15,000, 11,000, 12,000 & 8,000, respectively. He also incurred medical expenditure of ` 30,000
on health of father, 82 years old. He made all these payments in a mode other than cash except
medical premium of his wife.
(vii) The period of holding of shares is 6 months from the date of acquisition.
(viii) The travelling expenses includes expenditure incurred on foreign tour of ` 25,000 which was
within the RBI norms.
Compute the total income and tax liability of CA. Suraj Chawla for the Assessment year 2020-21.
Answer:
Computation of Total Income and tax liability of CA. Suraj Chawla for Assessment Year 2020-21
Particulars WorkingNote `
Income from House Property 1 71,540
Profit and gains of Business or Profession 2 9,36,750
Short-term capital gains 3 25,200
Income from other sources 4 26,300
Less: Deduction under Chapter VI-A 5 45,000
Tax on total income
Less: Short-term capital gains (See Note 9 below) 25,200
Normal Income 9,89,590
Tax on normal income 1,10,418
Tax on short-term capital gains @15% 3,780
1,14,198
Add: Health & Education cess @ 4% 4,568
Total tax liability 1,18,766
Total tax liability (rounded off) 1,18,770
Notes :
Notes Particulars ` `
(1) Income from House Property
Gross Annual Value 1,04,000
Less: Municipal taxes paid by owner 1,800
Less: Deduction under section 24 @ 30% of NAV 30,660 71,540
Rent received has been taken as the Gross Annual Value in the
absence of other information relating to Municipal Value, Fair Rent
and Standard Rent.
(2) Income under the head “Profits & Gains of Business or
Profession”
Net profit as per Profit & Loss Account 10,78,055
Add: Expenses debited to the Profit & Loss Account but not allowable
(i) Salary paid to computer specialist in cash disallowed under 33,000
section 40A(3), since such cash payment exceeds ` 10,000
(ii) Municipal Taxes paid in respect of residential flat let out 1,800 34,800
11,12,855
Less: Expenses allowable but not debited to profit and loss account 2,050
Interest paid on loan taken from LIC used for repair of computer 11,10,805

Less: Income credited to Profit & Loss Account but
not taxable under this head:
(i) Dividend on shares of Indian companies 10,155
(ii) Income from UTI 8,400
(iii) Profit on sale of shares 25,200
(iv) Honorarium for valuation of answer papers 26,300
(v) Rent received from letting out of residential flat 1,04,000 1,74,055
9,36,750
(3) Capital gains:
Short term capital gain on sale of shares 25,200
(4) Income from other sources:
Dividend on shares of Indian companies 10,155
Less: Exempt under section 10(34) 10,155 Nil
Income from UTI 8,400
Less: Exempt under section 10(35) 8,400 Nil
Honorarium for valuation of answer papers 26,300 26,300
(5) Deductions under Chapter VI-A :
Deduction under section 80D (Medical Insurance Premium)
Policy holder Amount of Amount

Premium eligible for
(`
`) deduction
(`
`)
Self 15,000 15,000
Wife (See note below) 11,000 Nil
Married daughter (See note below) 12,000 Nil
Dependent brother (See note below) 8,000 Nil
15,000 15,000
Deduction under section 80D (Medical Expenditure)
Medical expenditure incurred on the health of Father is allowed as 30,000
deduction to the maximum of ` 50,000, since he is a very senior
citizen.
It is assumed that father is resident in India and no payment has been
made to keep in force an insurance on his health.
Total deduction under Chapter VI-A 45,000

Note – Premium paid to insure the health of brother is not eligible for
deduction under section 80D, since brother is not included in the
definition of family. Premium paid to insure the health of wife is not
eligible for deduction since payment is made in cash. Premium paid to
insure the health of married daughter is not eligible for deduction as
she is not dependent on Mr. Suraj.
(6) ` 25,000 expended on foreign tour is allowable as deduction assuming that it was incurred in
connection with his professional work. Therefore, it requires no further treatment, since the same
has already been debited to Income & Expenditure A/c.
(7) Incentive to trainee passing examination in their first attempt is deductible under section 37(1).
(8) Repairs and maintenance paid in advance for the period 1.4.2020 to 30.9.2020 i.e. for 6 months
amounting to ` 950 will be allowed since Mr. Suraj is following the cash system of accounting.
(9) Since securities transaction tax has been paid on the shares and the period of holding of these
shares is less than 12 months, the profit arising there from is a short-term capital gain chargeable
to tax at 15% under section 111A.
(10) Since depreciation debited to income and expenditure account is as per the Income-tax Rules,
1962, no adjustment for the same has been made.

Provisions concerning Advance Tax and Tax Deducted at source
12. State in brief the applicability of tax deduction at source provisions, the rate and amount of tax
deduction in the following cases for the financial year 2019-20:
(a) Rent of ` 1,65,000 paid by a partnership firm having sales turnover of ` 25,00,000 and net loss of `
15,000 for use of plant and machinery.
(b) Payment of ` 59,000 made by an Indian newspaper agency on 21-09-2019 to Chris Gayle, a West
Indies cricket player non-resident in India, for contribution of articles in relation to the sport of
cricket.
(c) Winnings by way of jackpot in a horse race ` 1,80,000 paid to Mr. Ramesh, a resident.
(d) Two individual payments of ` 28,000 (on 1.6.2019) and ` 37,000 (on 21.9.2019) made towards
advertisement to X Ltd.
Answer:
(a) As per section 194-I, tax is to be deducted at source @ 2% on payment of rent for use of plant and
machinery, only if the payment exceeds ` 2,40,000 during the financial year.
Since rent of `. 1,65,000 paid by a partnership firm does not exceed ` 2,40,000, tax is not deductible.
(b) Section 194E provides that the person responsible for payment of any amount to a non-resident
sportsman for contribution of articles relating to any game or sport in India in a newspaper has to deduct
tax at source @ 20%. Further, since Chris Gayle, a cricket player of West Indies team is a non-resident,
cess @4% on TDS should also be added.
Therefore, tax to be deducted = ` 59,000 x 20.80% = ` 12,272.
(c) Under section 194BB, tax is to be deducted at source, if the income arising by way of winning a jackpot in
horse races exceeds ` 10,000. The rate of deduction of tax at source is 30%. Since, the winnings are
paid to a resident, cess has not been added to the tax rate of 30%.
Hence, tax to be deducted = ` 1,80,000 x 30% = ` 54,000.
(d) Advertising is included in the definition of “work” under section 194C. Under section 194C, the provisions
for tax deduction at source would not be attracted if the amount paid to a contractor does not exceed `
30,000 in a single payment or ` 100,000 in the aggregate during the financial year.
Therefore, provisions for deduction of tax at source under section 194C are not attracted in respect of
payment of ` 28,000 on 1.6.2019 to X Ltd. However, payment of ` 37,000 on 21.9.2019 to X Ltd. would
attract TDS @2%, since it exceeds ` 30,000.
Hence, tax to be deducted = ` 37,000 x 2% = ` 740
Provisions for filing of Return of Income

13. State whether filing of income-tax return is mandatory for the assessment year 2020-21 in respect of
the following cases:
(a) A Limited Liability Partnership (LLP) having business loss of ` 1,30,000.
Answer:
(a) As per third proviso to section 139(1), every company or firm shall furnish on or before the due date the
return in respect of its income or loss in every previous year. Since LLP is included in the definition of
“firm” under the Income-tax Act, 1961, it has to file its return mandatorily, even though it has incurred a
loss.

CLASS NOTES


1. State with reasons whether the following transactions attract income-tax in India in the hands of
recipients for A.Y. 2020-21:
(i) Post office savings bank interest of ` 15,000 received by a resident assessee, Mr. Pankaj.
(ii) Legal charges of ` 5,00,000 paid in Madras to a lawyer of Canada who visited India to represent a
case at the Madras High Court.
(iii) Royalty paid by Mr. Harish, a resident, to Mr. Rajesh, a non-resident, in respect of a business
carried on in France.
(iv) Salary paid by Central Government to Mr. Avi, a citizen of India ` 11,00,000 for the services
rendered in USA.
Answer:
Taxable/Not Amount Reason

Taxable liable to
tax (`)
(i) Partly 1,500 The interest on Post Office Savings Bank Account, would be exempt
Taxable under section 10(15)(i), only to the extent of ` 3,500 in case of an
individual account.
Hence, ` 11,500 will be taxable under the head Income from other
sources and will form part of Gross Total Income. ` 10,000, however,
would be allowed as deduction under section 80TTA from Gross
Total Income.
(ii) Taxable 5,00,000 In case of a non-resident, any income which accrues or arises in
India or which is deemed to accrue or arise in India or which is
received in India or is deemed to be received in India is taxable in
India.
Therefore, legal charges paid in India to a nonresident lawyer of

Canada, who visited India to represent a case at the Madras High
Court would be taxable in India.
(iii) Not Taxable _ Royalty paid by a resident to a non-resident in respect of a business

carried in France, would not be taxable in the hands of the non-
resident provided the same is not received in India. This has been
provided as an exception to deemed accrual mentioned in section
9(1)(vi)(b).
(iv) Taxable 10,50,000 As per section 9(1)(iii), salaries payable by the Government to a
citizen of India for service rendered outside India shall be deemed to
accrue or arise in India. Therefore, salary paid by Central
Government to Mr. Avi for services rendered in USA would be
deemed to accrue or arise in India, since he is a citizen of India.
Further, assessee is eligible for Deduction u/s 16(ia) to the extent of

` 50,000.

2. IMPORTANT: Mr. X, a sole proprietor, has one unit at Special Economic Zone (SEZ) and another unit
at Domestic Tariff Area (DTA). The following are the details of the sole proprietorship for the previous
year 2019-20.
Particulars Mr. X (`) Unit in DTA (`)

Total Sales 9,00,00,000 3,00,00,000
Export Sales 4,80,00,000 2,20,00,000
Net Profit 1,20,00,000 30,00,000
Calculate the eligible deduction under section 10AA of the Income-tax Act, 1961, for the Assessment
Year 2020-21, in the following situations:
(i) If both the units were set up and start manufacturing from 18-08-2013.
(ii) If both the units were set up and start manufacturing from 23-09-2017.
Answer:
Computation of deduction under section 10AA of the Income-tax Act, 1961
As per section 10AA, in computing the total income of Mr. X from its unit located in a Special Economic Zone
(SEZ), which begins to manufacture or produce articles or things or provide any services during the previous
year relevant to the assessment year commencing on or after 01.04.2006, there shall be allowed a deduction
of 100% of the profit and gains derived from export of such articles or things or from services for a period of
five consecutive assessment years beginning with the assessment year relevant to the previous year in which
the Unit begins to manufacture or produce such articles or things or provide services, as the case may be,
and 50% of such profits for further five assessment years subject to fulfillment of other conditions specified in
section 10AA.
Computation of eligible deduction under section 10AA [See Working Note below]:
(i) If Unit in SEZ was set up and began manufacturing from 18-08-2013:
Since A.Y. 2020-21 is the 7th assessment year from A.Y. 2014-15, relevant to the previous year 2013-
14, in which the SEZ unit began manufacturing of articles or things, it shall be eligible for deduction of
50% of the profits derived from export of such articles or things, assuming all the other conditions
specified in section 10AA are fulfilled.

= 90 lakhs x 260 lakhs x 50% = ` 19.50 lakhs

600 lakhs
(ii) If Unit in SEZ was set up and began manufacturing from 23-09-2017: Since A.Y. 2020-21 is the 3rd
assessment year from A.Y. 2018-19, relevant to the previous year 2017-18, in which the SEZ unit began
manufacturing of articles or things, it shall be eligible for deduction of 100% of the profits derived from
export of such articles or things, assuming all the other conditions specified in section 10AA are fulfilled.

= 90 lakhs x 260 lakhs x 100% = ` 39 lakhs

600 lakhs
The unit set up in Domestic Tariff Area is not eligible for the benefit of deduction under section 10AA in
respect of its export profits, in both the situations.
Working Note:
Computation of total sales, export sales and net profit of unit in SEZ
Particulars Mr. X (`) Unit in DTA (`) Unit in SEZ (`)
Total Sales 9,00,00,000 3,00,00,000 6,00,00,000
Export Sales 4,80,00,000 2,20,00,000 2,60,00,000
Net Profit 1,20,00,000 30,00,000 90,00,000

3. Mr. Shyam is a Finance Executive at Xerox Ltd. From the following particulars, compute his total
income for the Assessment Year 2020-21:
Basic salary ` 30,000 per month
Dearness allowance 30% of basic salary
Transport allowance (for commuting between place of residence and office) ` 1,800 per month
Motor car running and maintenance charges fully paid by employer ` 40,000
(The motor car is owned and driven by employee Shyam. The engine cubic
capacity is below 1.60 litres. The motor car is used for both official and personal
purpose by the employee)
Expenditure on accommodation in hotels while touring on official duties met
by the employer. ` 30,000
Lunch provided by the employer during office hours. Cost to the employer ` 12,000
Computer (cost ` 50,000) kept by the employer in the residence of Shyam
from 1.10.2019
Interest on saving bank account ` 12,000
Shyam made the following payments:

Tuition fees for 2 children studying post-graduation courses at Madras University ` 1,60,000
Medical insurance premium : Paid by cash ` 5,000
Paid by cheque ` 22,000
Expenditure on preventive health checkup (incurred in cash) ` 7,000
Answer:
Computation of taxable income of Mr. Shyam for the A.Y. 2020-21
Particulars (`) (`)
Income from salary
Basic salary (` 30,000 x 12) 3,60,000
Dearness allowance @ 30% 1,08,000
Transport allowance (` 1800 x 12) 21,600
Motor car maintenance borne by employer 18,400

[` 40,000 - ` 21,600 (i.e., ` 1,800 x 12)]
Expenditure on accommodation while on official duty not a perquisite Nil

and hence not chargeable to tax
Value of lunch provided during working hours (not chargeable to tax as Nil
per Rule 3(7)(iii)-free food provided by the employer during working
hours is not treated as perquisite provided that the value thereof does
not exceed fifty rupees per meal)
Nil
Computer provided in the residence of employee by the
employer – not chargeable to tax [Rule 3(7)(vii)]

Interest on saving bank account 12,000

Under section 80C
Tuition fees paid for two children ` 1,60,000
Under section 80D

Medical insurance premium otherwise than by way of cash would only 22,000
be allowed as deduction. Hence, only premium paid by cheque would be
deductible
Expenditure on Preventive health checkup restricted to ` 5,000 5,000
(payment made in cash would also qualify for deduction) 27,000

Restricted to overall limit of 25,000
Under section 80TTA 10,000

Interest on saving bank account ` 12,000, subject to a limit of ` 10,000

4. Discuss, on the basis of the provisions of Income-tax Act, 1961, the correctness or otherwise of the
following statements:
(i) Where new plant and machinery acquired during the P.Y. 2019-20 is put to use for less than 180
days in that year, additional depreciation allowable under section 32(1)(iia) for A.Y.2020-21 is
restricted to 10% (i.e., 50% of 20%). The balance additional depreciation cannot be claimed in
future.
(ii) A manufacturing company set up in Vaishali, a notified backward area in the State of Bihar,
acquires and installs new plant and machinery for ` 30 crores in the P.Y. 2019-20. For A.Y.2020-21,
it is not entitled to deduction under Section 32AD.
(iii) Interest paid in respect of capital borrowed for acquisition of an asset, for the period upto the date
on which the asset is first put to use must not be capitalized, if the acquisition of the asset is not
for extension of existing business or profession.
Answer:
(i) The statement is not correct.
As per the third proviso to Section 32(1)(ii), 50% of the additional depreciation on new plant and
machinery acquired and used for less than 180 days in the year of acquisition and installation which has
not been allowed as deduction in that previous year, shall be allowed in the immediately succeeding
previous year.
Hence, the balance additional depreciation of 10% (i.e. 50% of 20%) can be claimed in the
immediately succeeding previous year i.e., P.Y. 2020-21.
(ii) The statement is not correct.

If an undertaking is set up in any notified backward area in the states of Andhra Pradesh or Bihar or
Telangana or West Bengal by a company, it shall be eligible to claim deduction under Section 32AD, if it
fulfills the conditions specified in Section 32AD.
In the given case, a manufacturing company set up in Vaishali i.e., a notified backward area in the State
of Bihar, acquires and installs new plant and machinery for ` 30 crores in P.Y. 2019-20. Hence, it will be
entitled to deduction under Section 32AD (since the undertaking is set-up in a notified backward
area in the State of Bihar), assuming that it fulfills the other conditions specified thereunder.
(iii) The statement is not correct.

The proviso to Section 36(1)(iii) provides that interest paid on capital borrowed for acquisition of an asset
(whether capitalized in the books of account or not) for the period upto the date on which such asset was
first put to use shall not be allowed as deduction. This is irrespective of whether the acquisition of
asset was for extension of existing business or not.
Therefore, interest paid on capital borrowed for acquisition of an asset for the period upto the date
on which such asset was first put to use shall be capitalized even if the acquisition is not for the
extension of existing business or profession.
Capital Gains & Income from Other Sources

5. IMPORTANT: Mr. Sitesh sold a house to his friend Mr. Gautam on 21st December, 2019 for a
consideration of ` 30,00,000. The Sub-Registrar refused to register the document for the said value, as
according to him, stamp duty had to be paid on ` 52,00,000, which was the Government guideline
value. Mr. Sitesh preferred an appeal to the Revenue Divisional Officer, who fixed the value of the
house as ` 35,00,000 (` 25,00,000 for land and the balance for building portion). The differential stamp
duty was paid, accepting the said value determined. What are the tax implications in the hands of Mr.
Sitesh and Mr. Gautam for the assessment year 2020-21? Mr. Sitesh had purchased the land on 21st

March, 2013 for ` 6,19,000 and completed the construction of house on 2nd January, 2018 for `
12,50,000.
Cost inflation indices may be taken as 200 for the financial year 2012-13, 264 for the financial year
2016-17 and 289 for the financial year 2019-20.
Answer:
In the hands of the seller, Mr. Sitesh
As per section 50C(1), where the consideration received or accruing as a result of transfer of land or building
or both, is less than the value adopted or assessed or assessable by the stamp valuation authority, the value
adopted or assessed or assessable by the stamp valuation authority shall be deemed to be the full value of
consideration received or accruing as a result of transfer.
Where the assessee appeals against the stamp valuation and the value is reduced in appeal by the appellate
authority (Revenue Divisional Officer, in this case), such value will be regarded as the consideration received
or accruing as a result of transfer. In the given problem, land has been held for a period exceeding 24 months
and building for a period less than 24 months immediately preceding the date of transfer. So land is a long-
term capital asset, while building is a short-term capital asset.
Particulars `
Long term capital gain on sale of land
Consideration received or accruing as a result of transfer of land 25,00,000
Less: Indexed cost of acquisition ` 6,19,000 x 289/200 8,94,455
Long-term capital gain (A) 16,05,545
Short-term capital loss on sale of building

Consideration received or accruing from transfer of building 10,00,000
Less: Cost of acquisition 12,50,000
Short term capital loss (B) (2,50,000)
As per section 70, short-term capital loss can be set-off against long-term capital gains.
Therefore, the net taxable long-term capital gains would be ` 13,55,545 (i.e., ` 16,05,545 – ` 2,50,000). The
same would be taxable @ 20% under Section 112, after adjusting un-exhausted basic exemption limit, if any,
against such long term capital gain.
In the hands of the buyer Mr. Gautam

As per Section 56(2)(x), where an individual or HUF receives from a non-relative, any immovable property for
a consideration which is less than the stamp value (or the value reduced by the appellate authority, as in this
case) by an amount exceeding ` 50,000, then the difference between such value and actual consideration of
such property is chargeable to tax as income from other sources. Therefore, ` 5,00,000 (i.e. ` 35,00,000 - `
30,00,000) would be charged to tax as income from other sources under Section 56(2)(x) in the hands of Mr.
Gautam.
Income of Other Persons included in assessee’s Total Income

6. Mr. Chauhan commenced a proprietary business on 01.04.2018 with a capital of ` 10,00,000. He
incurred a loss of ` 4,00,000 during the year 2018-19. To help her husband tide over the loss, his wife
Mrs. Aparna, a Chartered Accountant, gave a gift of ` 4,00,000 on 01.04.2019, which was immediately
invested in the business by Mr. Chauhan. He earned a profit of ` 5,00,000 during the year 2019-20.
What is the amount to be clubbed in the hands of Mrs. Aparna for the Assessment Year 2020-21.
Would your answer be different, if Mrs. Aparna gave the said amount as loan?
Answer:
Section 64(1)(iv) of the Income-tax Act, 1961 provides for the clubbing of income in the hands of the
individual, if the income earned is from the assets (other than house property) transferred directly or indirectly
to the spouse of the individual, otherwise than for adequate consideration or in connection with an agreement
to live apart. In this case, Mr. Chauhan received a gift of ` 4,00,000 on 1.4.2019 from his wife Mrs. Aparna,
which he invested in his business immediately. The income to be clubbed in the hands of Mrs. Aparna for the
A.Y. 2020-21 is computed as under:

Particulars Mr. Chauhan’s capital Capital contribution Total (`)
contribution (`) out of gift from Mrs.
Aparna (`)
Capital as on 1.4.2019 6,00,000
(10,00,000 – 4,00,000) 4,00,000 10,00,000
Profit for P.Y. 2019-20 to be 3,00,000 2,00,000 5,00,000

apportioned on the basis of capital (5,00,000x3/5) (5,00,000x2/5)
employed on the first day of the
previous year i.e. as on 1.4.2019 (3:2)
Therefore, the income to be clubbed in the hands of Mrs. Aparna for the A.Y. 2020-21 is ` 2,00,000. In case
Mrs. Aparna gave the said amount of ` 4,00,000 as a bona fide loan, then, clubbing provisions would not be
attracted.
Set off and Carry Forward of Losses

7. Mr. Jain, a resident individual, furnishes the following particulars of his income and other details for
the previous year 2019-20.
`
a) Income from Salary (computed) 70,000
b) Loss from house property (Computed) 25,000
c) Business loss 40,000
d) Long term capital gain on sale of land 82,700
e) Loss on maintenance of race horses 21,000
f) Loss from gambling 12,100
The other details of unabsorbed depreciation and brought forward losses pertaining to Assessment
Year 2019-20 are as follows:
`
a) Unabsorbed depreciation 20,000
b) Loss from Speculative business 22,000
c) Short term capital loss 9,700
Compute the Gross total income of Mr. Jain for the Assessment Year 2020-21 and the amount of loss,
if any, that can be carried forward or not.
Answer:
Computation of Gross Total Income of Mr. Jain for the A.Y. 2020-21
Particulars (`) (`)
(i) Income from salary 70,000
Less: Loss from house property (set-off as per section 71) 25,000 45,000
(ii) Capital gains
Long term capital gain on sale of land 82,700
Less: Set-off of business loss as per section 71 40,000
42,700
Less: Set-off of brought forward short term capital loss
[Short-term capital loss can be set-off against both short- term
capital gains and long-term capital gains as per section 74(1)]
9,700
33,000
Less: Unabsorbed depreciation (can be set-off against any head of
income other than salaries) 20,000 13,000
Gross total income 58,000

Particulars (`)
(1) Loss from speculative business [to be carried forward as per section 73] 22,000
[Loss from a speculative business can be set off only against income from another
speculative business. Since there is no income from speculative business in the
current year, the entire loss of ` 22,000 brought forward from A.Y. 2019-20 has to be
carried forward to A.Y. 2021-22 for set-off against speculative business income of
that year. It may be noted that speculative business loss can be carried forward for a
maximum of four years as per Section 73(4), i.e., upto A.Y. 2023-24]
(2) Loss on maintenance of race horses [to be carried forward as per section 74A] 21,000
[As per Section 74A(3), the loss incurred in the activity of owning and maintaining
race horses in any assessment year cannot beset-off against income from any other
source other than the activity of owning and maintaining race horses. Such loss can
be carried forward for a maximum of four assessment years i.e., upto A.Y. 2024-25]
(3) Loss from gambling can neither be set-off nor be carried forward.
Notes:
(1) Section 71 permits set-off of losses incurred under one head against income earned under any other
head of income. Therefore, loss from house property has been set -off against salary income.
(2) However, there are certain exceptions contained in section 71 on inter -head set-off of losses. Business
loss and unabsorbed depreciation cannot be set -off against salary income as per Section 71(2A).
However, there is no bar in setting-off the business loss and unabsorbed depreciation against long term
capital gain. Hence, business loss and unabsorbed depreciation have been set off against long term
capital gain.
Deductions from Gross Total Income
8. IMPORTANT: Mr. Hariharan, working with Gamma Ltd., submits the following particulars of
investments and payments made by during the previous year 2019-20:
Deposit of ` 1,60,000 in public provident fund
Payment of life insurance premium of ` 25,000 on the policy taken on 31.3.2012 to insure his life
(Sum assured – ` 1,00,000).
Deposit of ` 50,000 in a five year term deposit with bank.
Contributed ` 2,10,000, being 15% of his salary, to the NPS of the Central Government. A matching
contribution was made by Gamma Ltd.
Paid mediclaim premium of ` 22,000 to insure his health and ` 26,000 to insure the health of his
father, aged 65 years, not dependent on him.
He spent ` 5,000 for the preventive health-check up of his wife and ` 5,000 for the preventive
check up of his father.
He has incurred an expenditure of ` 50,000 for the medical treatment of his mother, being a person
with severe disability.
(i) Compute the deduction available to Mr. Hariharan under Chapter VI -A for AY 2020-21.
(ii) Would your answer be different, if Mr. Hariharan contributed ` 1,40,000 (being 10% of his
salary) towards NPS of the Central Government ?
Answer:
(i) Deduction available to Mr. Hariharan under Chapter VI-A for A.Y. 2020-21
Section Particulars ` `
80C Deposit in public provident fund ` 1,60,000 1,50,000
(deduction restricted to ` 1,50,000)
Life insurance premium paid ` 25,000 (deduction 20,000

restricted to ` 20,000, being 20% of ` 1,00,000, which is
the sum assured, since the policy was taken before
01.04.2012)
Five year term deposit with bank 50,000

2,20,000

80CCD(1) Contribution to NPS of the Central Government, `
1,60,000 [` 2,10,000 – ` 50,000, being deduction under
section 80CCD(1B)], restricted to 10% of salary [` 1,40,000
2,10,000 x 10/15] [See Note 1]
Aggregate deduction under section 80C and 80CCD(1), `

80CCE 2,90,000, but restricted to 1,50,000
` 50,000 would be eligible for deduction in respect

80CCD(1B) of contribution to NPS of the Central Government 50,000
Employer contribution to NPS, restricted to 10% of salary

80CCD(2) [See Note 2] 1,40,000
80D (i)
(a) Medical insurance premium for self 22,000
(b) Preventive health check up ` 5,000 for wife
restricted to ` 3,000 (` 25,000 - ` 22,000, since
maximum allowable deduction is ` 25,000) 3,000
25,000
(ii)
(a) Health Insurance premium for his father 26,000
(b) Preventive health check up ` 5,000 restricted to `
2,000 (` 5,000 - ` 3,000), since maximum allowable
deduction in respect of preventive health check up
under section 80D is ` 5,000.
Whole of the amount of ` 28,000 allowed as

deduction, since maximum allowable deduction is ` 2,000
50,000, where the parent is a senior citizen. 28,000
80DD Deduction of ` 1,25,000 in respect of expenditure on

medical treatment of his mother, being a person with
severe disability would be allowed irrespective of the fact
that amount of expenditure incurred is ` 50,000 1,25,000
Deduction under Chapter VI-A 5,18,000
Notes:
(1) The deduction under section 80CCD(1B) would not be subject to overall limit of ` 1.50 lakh under
section 80CCE. Therefore, it is more beneficial for Mr. Hariharan to claim deduction under section
80CCD(1B) first in respect of contribution to NPS. Thereafter, the remaining amount of ` 1,60,000 can
be claimed as deduction under section 80CCD(1), subject to a maximum limit of 10% of salary i.e. `
1,40,000.
(2) The entire employer‘s contribution to notified pension scheme has to be first included under the head
‘Salaries’ while computing gross total income and thereafter, deduction under section 80CCD(2)
would be allowed, subject to a maximum of 10% of salary. Deduction under section 80CCD(2) is also
not subject to the overall limit of ` 1,50,000 under section 80CCE
(3) In the alternative, preventive health check-up of ` 4,000 of his father can be claimed, in which case,
expenses on preventive health check-up of wife can be claimed only to the extent of ` 1,000. In such
case also, the total deduction under section 80D would be ` 53,000 (` 23,000 + ` 30,000)
(ii) If the contribution towards NPS is ` 1,40,000, here again, it is beneficial for Mr. Hariharan to first claim
deduction of ` 50,000 under section 80CCD(1B) and the balance of ` 90,000 can be claimed under
section 80CCD(1), since the deduction available under section 80CCD(1B) is over and above the
aggregate limit of ` 1,50,000 under section 80CCE. In any case, the aggregate deduction of ` 2,40,000
[i.e., ` 1,50,000 under section 80C and ` 90,000 under section 80CCD(1)] cannot exceed the overall limit
of ` 1,50,000 under section 80CCE. The total deduction under Chapter VIA would remain the same i.e., `
5,18,000.

9. IMPORTANT: Dr. Ashish Puri is running a clinic. His Income and Expenditure account for the year
ending 31st March, 2020 is given below:
To Staff Salary 4,30,000 By Fees Receipts 12,63,600
To Consumables 10,750 By Dividend from Indian Companies 15,000
To Medicine consumed 3,69,800 By Winning from Lotteries (Net of 28,000
To Depreciation 91,000 TDS of ` 12,000)
To Administrative Expenses 1,51,000 By Income-tax refund 2,750
To Donation to Prime
Minister's National Relief Fund 5,000
To Excess of Income over
expenditure 2,51,800
Total 13,09,350 Total 13,09,350
(i) Depreciation in respect of all assets has been ascertained at ` 50,000 as per Income-tax Rules,
1962.
(ii) Medicines consumed include medicine of (cost) ` 25,000 used for his family.
(iii) Fees Receipts include ` 20,000 honorarium for valuing medical examination answer books.
(iv) He has also received ` 2,75,000 on account of Agricultural Income which had not been included
in the above Income and Expenditure Account.
(v) He has also received ` 62,000 on maturity of one LIC Policy, not included in the above Income
and Expenditure Account.
(vi) He received ` 8,000 per month as salary from a City Care Centre. This has not been included in
the 'Fees Receipts' credited to Income and Expenditure Account.
(vii) He has sold land in August, 2019 for ` 12,00,000 (valuation as per stamp valuation authority `
14,45,244). The land was acquired by him in May, 2005 for ` 4,00,000.
(viii) He has paid premium of ` 45,000 for another LIC Policy on his life which was taken on 1.04.2013
(sum assured ` 5,00,000).
(ix) He has paid ` 4,000 for purchase of lottery tickets, which has not been debited to Income and
Expenditure account.
(x) Donation to Prime Minister National Relief Fund has been made by way of an crossed cheque.
(xi) He deposited ` 1,50,000 in PPF.
From the above, compute the income and tax payable of Dr. Ashish Puri for the A.Y. 2020-21
Cost Inflation Index: F.Y. 2005-06 – 117; F.Y. 2018-19 – 289
Answer:
Computation of total income and tax liability of Dr. Ashish Puri for the A.Y. 2020-21
Particulars (`)
Income from salary (Working Note – 1) 46,000
Income from business (Working Note – 2) 2,57,050
Long-term capital gains (Working Note – 3) 4,57,210
Income from other sources (Working Note – 4) 60,000
Less: Deduction under Chapter VI-A (Working Note – 5) 1,55,000
Tax on total income (Working Note - 6) 95,595

Add: Health & Education Cess – 4% 3,824
Less: Tax deducted at source (TDS) 12,000
Tax payable 87,419
Rounded off 87,420
Working Notes:
1. Computation of salary income
Particulars `
Gross Salary (` 8,000x12) 96,000
Less: Deduction under section 16 50,000
Net Salary 46,000

2. Computation of income under the head “Profits and gains of business or profession”
Particulars ` `
Net Income as per Income and Expenditure Account 2,51,800
Add: Expenses disallowed:
Depreciation (` 91,000 – ` 50,000) 41,000
Cost of medicine for self-use 25,000
Donation to Prime Minister‘s National Relief Fund 5,000 71,000
3,22,800
Less: Dividend from Indian companies 15,000
Income-tax refund 2,750
Winning from Lotteries 28,000
Honorarium for valuing answer books 20,000 65,750
2,57,050
3. Computation of Capital Gains
Particulars ` `
Valuation as per Stamp Valuation Authority 14,45,244
(Value to be taken is the higher of actual sale consideration or valuation
adopted for stamp duty purposes as per section 50C)
Consideration for the purpose of capital gain 14,45,244

Less: Cost of acquisition = ` 4,00,000 x 289/117 9,88,034
Long term capital gain 4,57,210
4. Computation of income under the head “Income from other sources”

Particulars ` `
Dividend from Indian Companies [Exempt u/s 10(34)] -
Honorarium for valuing answer books 20,000
Winning from Lotteries (Net) 28,000
Add: TDS 12,000 40,000
Income from other sources 60,000
Note: As per section 58(4), no expense or deduction is allowable in respect of winnings from lotteries.
5. Computation of deduction under Chapter VI-A
Particulars (`)
U/s 80C Life Insurance Premium (whole amount is allowed as deduction since it is 45,000
within the limit of 10% of sum assured)
PPF 1,50,000
1,95,000
U/s 80G Donation to Prime Minister‘s National Relief Fund [See
Note below] 5,000
Total deduction under Chapter VI-A 1,55,000
Note –The donation made to the Prime Minister‘s National Relief Fund qualifies for 100% deduction under
section 80G.
6. Computation of tax on total income

Particulars (`)
Tax on agricultural income plus non-agricultural income 1,13,095
i.e. tax on ` 9,40,260 (being ` 2,75,000 + ` 6,65,260) [See Note below]
Less: Tax on agricultural income plus basic exemption limit
i.e. tax on ` 5,25,000, (being ` 2,75,000 + ` 2,50,000) 17,500
Tax on total income 95,595

Note: Tax on ` 6,65,260 plus agricultural income of ` 2,75,000 is computed hereunder:
Particulars (`)
Tax on long term capital gain 91,442
` 4,57,210 @ 20%
Tax on winnings from lotteries 12,000
` 40,000 @ 30%
Tax on balance income of ` 4,43,050 (` 9,40,260 – ` 4,57,210 – ` 40,000) 9,653
1,13,095
Note: Agricultural income is exempt from tax. It is considered for rate purpose only.
7. Any sum received under a life insurance policy is wholly exempt from tax under section 10(10D), subject
to satisfaction of conditions given thereunder. In this case, it is presumed that all the conditions are
satisfied.
Provisions concerning Advance Tax and Tax Deducted at Source

10. Examine the implications of tax deduction at source under section 194A in the cases mentioned
hereunder, based on the provisions of the Income-tax Act, 1961, as amended–
(i) On 1.10.2019, Mr. Mohit made a six-month fixed deposit of ` 12 lakh @ 8% p.a. with Theta Co-
operative Bank. The fixed deposit matures on 31.3.2020.
(ii) Mr. Harish made fixed deposits carrying interest @10% p.a. with the following branches of Omega
Bank, a bank which has adopted CBS.
Branch Amount (`) Date of deposit Date of Maturity

Adyar 60,000 01.06.2019 31.03.2020
Anna Nagar 80,000 01.07.2019 31.03.2020
Nungambakkam 75,000 01.08.2019 31.03.2020
(iii) On 1.4.2019, Ms. Meena started a 1 year recurring deposit of ` 20,000 per month@ 10% p.a. with
Gamma Bank. The recurring deposit matures on 31.3.2020.
Answer:
(i) Theta Co-operative Bank has to deduct tax at source@10% on the interest of ` 48,000 (8% × ` 12 lakh ×
½) under section 194A.
(ii) Since Omega Bank has adopted CBS, the aggregate interest credited/paid by all branches has to be
considered, and if the same exceeds ` 10,000, tax is deductible under Section 194A. Omega Bank has to
deduct tax at source @10% under Section 194A, since the aggregate interest on fixed deposit with the
three branches of the bank is ` 16,000, which exceeds the threshold limit of ` 10,000.
Branch Amount of Rate of Period in Amount of

deposit (`) Interest months Interest (`)
Adyar 60,000 10% 10 5,000
Anna Nagar 80,000 10% 9 6,000
Nungambakkam 75,000 10% 8 5,000
Total 16,000
(iii) Tax has to be deducted @ 10% under Section 194A by Gamma Bank on the interest of ` 13,000 (See
Working Note below) falling due on recurring deposit on 31.3.2020 to Ms. Meena, since –
(1) “recurring deposit” has been included in the definition of “time deposit”; and
(2) such interest exceeds the threshold limit of ` 10,000.
Working Note:
Computation of Interest
= ` 20,000 x 10% x [(12+11+10+9+8+7+6+5+4+3+2+1)/12]
= ` 2,000 x (78/12)
= ` 13,000

Provisions for Filing of Return of Income
11. Explain with brief reasons whether the return of income can be revised under section 139(5) of the
Income-tax Act, 1961 in the following cases:
(i) Belated return filed under section 139(4).
(ii) Return already revised once under section 139(5).
(iii) Return of loss filed under section 139(3).
Answer:
Any person who has furnished a return under section 139(1) or under section 139(4) can file a revised return
if he discovers any omission or any wrong statement in the return filed earlier.
Accordingly,
(i) A belated return filed under section 139(4) can now be revised.
(ii) A return revised earlier can be revised again as the first revised return replaces the original return.
Therefore, if the assessee discovers any omission or wrong statement in such a revised return, he can
furnish a second revised return within the prescribed time i.e. by the end of the relevant assessment year
or before the completion of assessment, whichever is earlier.
(iii) A return of loss filed under section 139(3) is deemed to be return filed under section 139(1), and
therefore, can be revised under section 139(5).


1. Miss Rosy, a Canadian national, got married to Mr. Ankur of India in Canada on 4.02.2019 and came to
India for the first time on 16.03.2019. She remained in India up till 15.9.2019 and left for Canada on
16.9.2019. She returned to India again on 22.03.2019. While in India, she had purchased a shop in
Pune on 25.04.2019, which was let-out to a company on a rent of ` 50,000 p.m. from 1.06.2019. She
had taken loan from a bank for purchase of this shop on which bank had charged interest of `
1,25,000 upto 31.03.2020. She had received the following gifts from her relatives and friends during
1.4.2019 to 15.9.2019:
From parents of husband ` 51,000
From married sister of husband ` 21,000
From two very close friends of her husband, ` 75,000 and ` 50,000.
Determine her residential status and compute the total income chargeable to tax along with the
amount of tax payable on such income for the Assessment Year 2020-21.
Answer:
Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies any
one of the following conditions:
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately proceeding the previous year for a total period of 365
days or more and has been in India for at least 60 days in the previous year.
If an individual satisfies any one of the conditions mentioned above, he is a resident. If both the above
conditions are not satisfied, the individual is a non-resident.
Therefore, the residential status of Miss Rosy, a Canadian, for A.Y.2020-21 has to be determined on the basis
of her stay in India during the previous year relevant to A.Y. 2020-21 i.e., P.Y.2019-20 and in the preceding
four assessment years.
Her stay in India during the previous year 2019-20 and in the preceding four years is as under:
P.Y.2019-20
01.04.2019 to 15.09.2019 - 168 days
22.03.2020 to 31.03.2020 - 10 days
Total 178 days
Four preceding previous years

P.Y.2018-19 [1.4.2018 to 31.3.2019] - 16 days
P.Y.2017-18 [1.4.2017 to 31.3.2018] - Nil
P.Y.2016-17 [1.4.2016 to 31.3.2017] - Nil
P.Y.2015-16 [1.4.2015 to 31.3.2016] - Nil
Total 16 days
The total stay of Ms. Rosy during the previous year in India was less than 182 days and during the four years
preceding this year was for 16 days. Therefore, due to nonfulfilment of either of the two conditions for a
resident, she would be treated as nonresident for the Assessment Year 2020-21.
In case of a non-resident, all income accruing or arising in India or deemed to accrue or arise in India or
received or deemed to be received in India during the previous year would be taxable.
Computation of total income of Miss Rosy for the A.Y. 2020-21

Particulars ` `
Shop in Pune remained on rent from 01.06.2019 to 31.03.2020 @ ` 50,000
p.m.
Gross Annual Value [` 50,000 x 10] (See Note 1 below) 5,00,000
Less: Municipal taxes Nil
Less: Deduction under section 24 `
(a) 30% of NAV 1,50,000
(b) Interest on loan 1,25,000 2,75,000 2,25,000
Gifts received from non-relatives is chargeable to tax as per section 56(2)(x),
if the aggregate value of such gifts exceed ` 50,000.
` 51,000 received from parents of husband would be exempt, since
parents of husband fall within the definition of “relative” and gifts from a Nil
relative are not chargeable to tax.
` 21,000 received from married sister of husband is exempt, since sister-
in-law falls within the definition of “relative” and gifts from a relative are Nil
not chargeable to tax.
Gift received from two friends of husband ` 75,000 and ` 50,000
aggregating to ` 1,25,000 is taxable under section 56(2)(x) since the
aggregate of ` 1,25,000 exceeds ` 50,000 (See Note 2 below). 1,25,000 1,25,000
Computation of tax payable by Miss Rosy for the A.Y. 2020-21

Particulars `
Tax on total income of ` 3,50,000 5,000
Add: Health & Education cess@4% 200
Total tax payable 5,200
Notes:
(1) Actual rent received has been taken as the gross annual value in the absence of other information (i.e.,
municipal value, fair rental value and standard rent) in the question.
(2) If the aggregate value of sum of money received without consideration from nonrelatives exceeds `
50,000 during the year, the entire amount received (i.e., the aggregate value of sum of money received) is
taxable. Therefore, the entire amount of ` 1,25,000 would be taxable under section 56(2)(x).
(3) Since Miss Rosy is a non-resident for the A.Y.2020-21, rebate under section 87A would not be available
to her, even though her total income is less than ` 5 lakhs.
2. State, with reasons in brief, whether the following statements are true or false with reference to the
provisions of the Income-tax Act, 1961: significant
(a) Mr. Arun, a member of a HUF, received ` 50,000 as his share from the income of the HUF. The
same is to be included in his total income.
(b) Agricultural income from a land situated in Malaysia would be taxable in the hands of Mr. Anand, a
resident in India.
(c) Mr. X is a ‘Maha Vir Chakra’ awardee who was in the service of the Central Government. Pension
of ` 3,50,000 received by him during the financial year 2019-20 is chargeable to tax in his hands.
Answer:
(i) False: Section 10(2) exempts any sum received by an individual as a member of a HUF, where such sum
has been paid out of the income of the family. Therefore, ` 50,000 should not be included in Mr. Arun’s
total income.
(ii) True: Agricultural income from a land situated in any foreign country is taxable in the case of a person
resident in India. Exemption under Section 10(1) is not available in respect of such income.
(iii) False: Pension received by an individual who has been in the service of the Central Government or State
Government and has been awarded ‘Maha Vir Chakra’ is exempt under Section 10(18).
3.
(a)
From the following details, find out the salary income chargeable to tax in the hands of Mr. Vansh for
the assessment year 2020-21: Mr. Vansh is a regular employee of X Ltd. in Delhi. He was appointed on
01-03-2019 in the scale of 27,000-3200-35,000. He is paid dearness allowance (which forms part of
salary for retirement benefits)@30% of basic pay and bonus equivalent to one and a half month's
basic pay as at the end of the year. He contributes 18% of his salary (basic pay plus dearness
allowance) towards recognized provident fund and the company contributes the same amount.
He is provided free housing facility which has been taken on rent by the company at ` 18,000 per
month. He is also provided with following facilities:
(i) The company reimbursed the medical treatment bill of ` 28,000 of his daughter, who is dependent
on him.
(ii) The monthly salary of ` 5,600 of a house keeper is reimbursed by the company.
(iii) He is getting telephone allowance of ` 1,200 per month.
(iv) A gift voucher of ` 4,900 was given on the occasion of his marriage anniversary.

(v) The company pays medical insurance premium to effect an insurance on the health of Mr. Vansh
` 10,500.
(vi) Motor car running and maintenance charges of ` 48,200 fully paid by employer. (The motor car is
owned and driven by Mr. Vansh. The engine cubic capacity is below 1.60 litres. The motor car is
used for both official and personal purpose by the employee.)
(vii) Value of free lunch provided during office hours is ` 1,000.
(viii) Facility of laptop and computer was provided to Mr. Vansh both for official and personal use. The
cost of laptop and computer acquired by the company on 01.12.2019, are ` 45,000 and ` 35,000,
respectively.
(ix) Professional tax paid ` 3,000, of which ` 2,000 was paid by the employer.
Answer: Computation of taxable salary of Mr. Vansh for A.Y. 2020-21

Particulars `
Basic pay [(`
` 27,000×11) + (`
` 30,200×1)] = ` 2,97,000 + ` 30,200 3,27,200
Dearness allowance [30% of basic pay] 98,160
Bonus [` 30,200 × 1.5] 45,300
Employer’s contribution to Recognized Provident Fund in excess of
12% (18% - 12% = 6% of ` 4,25,360) 25,522
Taxable allowances
Telephone allowance 14,400
Taxable perquisites
Rent-free accommodation (See Note 1 below) 72,759
Medical reimbursement 28,000
Reimbursement of salary of housekeeper [Rs5,600 × 12] 67,200
Gift voucher (See Note 3 below) Nil
Reimbursement of medical insurance premium (See Note 4 below) Nil
Motor car owned and driven by employee, running and maintenance charges borne
by the employer [` 48,200 - ` 21,600 (i.e., ` 1,800 × 12)] 26,600
Value of free lunch facility (See Note 5 below) Nil
Use of laptop and computer (See Note 6 below) Nil
Professional tax paid by employer 2,000
Less: Deduction under section 16(ia) 50,000
Deduction under section 16(iii) 3,000
- Professional tax (See Note 7 below)
Salary income chargeable to tax 6,54,141
Notes:
(1) Where the accommodation is taken on lease or rent by the employer, the value of rent-free
accommodation provided to employee would be the actual amount of lease rental paid or payable by the
employer or 15% of salary, whichever is lower.
For the purposes of valuation of rent free house, salary includes:

(i) Basic salary ` 3,27,200
(ii) Dearness allowance ` 98,160
(iii) Bonus ` 45,300
(iv) Telephone allowance ` 14,400
Total ` 4,85,060
15% of salary = ` 4,85,060 × 15/100 = ` 72,759

Value of rent-free house will be the lower of:
Actual amount of lease rental paid by employer [i.e., ` 2,16,000 (` 18,000 x 12)]; or
15% of salary (i.e., ` 72,759, being 15% of ` 4,85,060),
Therefore, the perquisite value is ` 72,759.
(2) Any sum paid by the employer in respect of any expenditure actually incurred by the employee on his
medical treatment or treatment of any member of his family is a taxable perquisite.
(3) If the value of any gift or voucher or token in lieu of gift received by the employee or by member of his
household is less than ` 5,000 in aggregate during the previous year, the perquisite value is Nil. In this
case, the gift voucher was received on the occasion of marriage anniversary and the sum is less than `
5,000. Therefore, the perquisite value of gift voucher is Nil.

(4) Medical insurance premium paid by the employer to effect an insurance on the health of the employee is
fully exempt.
(5) Free lunch provided by the employer during office hours is not a perquisite, assuming that the value does
not exceed ` 50 per meal.
(6) As per Rule 3(7)(vii), facility for use of laptop and computers is an exempt perquisite, whether used for
official or personal purpose or both.
(7) As per Section 17(2)(iv), a “perquisite” includes any sum paid by the employer in respect of any obligation
which, but for such payment, would have been payable by the assessee. Therefore, professional tax of `
2,000 paid by the employer is taxable as a perquisite in the hands of Mr. Vansh. As per section 16(iii), a
deduction from the salary is provided on account of tax on employment i.e., professional tax paid during
the year.
Therefore, in the present case, the professional tax paid by the employer on behalf of the employee `
2,000 is first included in salary and deduction of the entire professional tax of ` 3,000 is allowed from
salary.
(b)
Mr. Satvik is employed with MN Ltd. on a basic salary of ` 12,000 p.m. He is also entitled to dearness
allowance @ 100% of basic salary, 50% of which is included in salary as per terms of employment.
The company gives him house rent allowance of ` 6,600 p.m. which was increased to ` 7,200 p.m. with
effect from 1.01.2020. He also got an increment of ` 1,200 p.m. in his basic salary with effect from
1.02.2020. Rent paid by him during the previous year 2019-20 is as under:
April and May, 2019 Nil, as he stayed with his parents
June to October, 2019 ` 6,500 p.m. for an accommodation in Gurgaon
November, 2019 to March, 2020 ` 8,500 p.m. for an accommodation in Noida.
Compute his gross salary for assessment year 2020-21.
Answer:
Computation of gross salary of Mr. Satvik for A.Y. 2020-21
Particulars `
Basic salary [(` 12,000 × 10) + (` 13,200 × 2)] 1,46,400
Dearness Allowance (100% of basic salary) 1,46,400
House Rent Allowance (See Note below) 24,560
Note: Computation of Taxable House Rent Allowance (HRA)

Particulars April- June- Nov- Jan (`) Feb-
May (`) Oct (`) Dec (`) March (`)
Basic salary per month 12,000 12,000 12,000 12,000 13,200
Dearness allowance
(included in salary as per terms of 6,000 6,000 6,000 6,000 6,600
employment) (50% of basic salary)
Salary per month for the purpose of 18,000 18,000 18,000 18,000 19,800
computation of house rent allowance
Relevant period (in months) 2 5 2 1 2
Salary for the relevant period (Salary per 36,000 90,000 36,000 18,000 39,600
month × relevant period)
Rent paid for the relevant period Nil 32,500 17,000 8,500 17,000
(6,500×5) (8,500×2) (8,500×1) (8,500×2)
House rent allowance (HRA) received 13,200 33,000 13,200 7,200 14,400
during the relevant period (A) (6,600×2) (6,600×5) (6,600×2) (7,200×1) (7,200×2)
Least of the following is exempt [u/s

10(13A)]
1. Actual HRA received 13,200 33,000 13,200 7,200 14,400
2. Rent paid – 10% of salary N.A. 23,500 13,400 6,700 13,040
3. 40% of salary 14,400 36,000 14,400 7,200 15,840
(40% × (40% × (40% × (40% ×
` 90,000) ` 36,000) ` 18,000) ` 39,600)
Nil 23,500 13,200 6,700 13,040
Exempt HRA (B)
Taxable HRA (Actual HRA 13,200 9,500 Nil 500 1,360
– Exempt HRA) (A-B)
Taxable HRA (total) = ` 13,200 + ` 9,500 + Nil + ` 500 + ` 1,360 = ` 24,560
4. Ronak owns a house in Bangalore. During the previous year 2019-20, 2/3rd portion of the house was
self-occupied and 1/3rd portion was let out for residential purposes at a rent of ` 9,200 p.m. Municipal
value of the property is ` 3,30,000 p.a., fair rent is ` 3,00,000 p.a. and standard rent is ` 3,60,000. He
paid municipal taxes @10% of municipal value during the year. A loan of ` 38,00,000 was taken by him
during the year 2014 for acquiring the property. Interest on loan paid during the previous year 2019-20
was ` 3,90,000. Compute Ronak’s income from house property for the A.Y.2020-21.
Answer:
There are two units of the house. Unit I with 2/3rd area is used by Ronak for self-occupation throughout the
year and no benefit is derived from that unit, hence it will be treated as self-occupied and its annual value will
be Nil. Unit 2 with 1/3rd area is let-out throughout the previous year and its annual value has to be determined
as per section 23(1).
Computation of income from house property of Mr. Ronak for A.Y. 2020-21
Particulars ` `
Unit I (2/3rd area – self-occupied)
Annual Value
Less: Deduction under section 24(b) Nil
` 2,60,000 (2/3rd of ` 3,90,000) Restricted to 2,00,000
Income from Unit I (self-occupied) (2,00,000)
Unit II (1/3rd area – let out)

Computation of GAV
Step I – Compute Expected Rent (ER)
ER = Higher of Municipal Value (MV) and Fair Rent (FR), restricted to
Standard Rent (SR). However, in this case, SR of ` 1,20,000 (1/3rd of `
3,60,000) is more than the higher of MV of ` 1,10,000 (1/3rd of ` 3,30,000)
and FR of ` 1,00,000 (1/3rd of ` 3,00,000). Hence the higher of MV and FR is 1,10,000
the ER. In this case, it is the MV.
Step 2 – Compute actual rent received/ receivable 1,10,400

` 9,200×12 = ` 1,10,400
Step 3 – GAV is the higher of ER and actual rent received/receivable i.e., 1,10,400
higher of ` 1,10,000 and ` 1,10,400
Gross Annual Value (GAV) 1,10,400
Less: Municipal taxes paid by the owner during the previous year relating to
let-out portion 1/3rd of (10% of ` 3,30,000) = ` 33,000/3 = ` 11,000 11,000
Net Annual Value (NAV) 99,400
(a) 30% of NAV = 30% of ` 99,400 29,820
(b) Interest paid on borrowed capital (relating to let out portion) 1/3 rd
of ` 3,90,000 1,30,000 1,59,820
Income from Unit II (let-out) (60,420)
Loss under the head “Income from house property” = (` 2,00,000) + (` 60,420) = (2,60,420)

5. IMPORTANT: Mr. Prabhakar commenced operations of the businesses of setting up a warehousing
facility for storage of food grains, sugar and edible oil on 1.4.2019. He incurred capital expenditure of
` 70 lakh, ` 50 lakh and ` 40 lakh, respectively, on purchase of land and building during the period
November, 2018 to March, 2019 exclusively for the above businesses, and capitalized the same in its
books of account as on 1st April, 2019. The cost of land included in the above figures are ` 40 lakh, `
30 lakh and ` 20 lakh, respectively. Further, during the P.Y.2019-20, it incurred capital expenditure of `
15 lakh, ` 10 lakh & ` 8 lakh, respectively, for extension/reconstruction of the building purchased and
used exclusively for the above businesses.
The profits from the business of setting up a warehousing facility for storage of food grains, sugar
and edible oil (before claiming deduction under section 35AD and section 32) for the A.Y. 2020-21 are
` 15 lakhs, ` 13 lakhs and ` 29 lakhs, respectively Compute the income under the head “Profits and
gains of business or profession” for the A.Y.2020-21 and the loss to be carried forward, assuming that
Mr. Prabhakar has fulfilled all the conditions specified for claim of deduction under section 35AD and
has not claimed any deduction under Chapter VI-A under the heading “C. – Deductions in respect of
certain incomes”.
Answer:
Computation of profits and gains of business or profession for A.Y. 2020-21
Particulars ` (in lakhs)
Profit from business of setting up of warehouse for storage of edible oil (before providing 29.00
for depreciation under section 32)
Less: Depreciation under section 32
10% of ` 28 lakh, being (` 40 lakh – ` 20 lakh + ` 8 lakh) 2.80
Income chargeable under “Profits and gains from business or profession” 26.20
Computation of income/loss from specified business under section 35AD ` (in lakhs)
Particulars Food Sugar Total
Grains
(A) Profits from the specified business of setting up a 15.00 13.00 28.00
warehousing facility (before providing deduction under
section 35AD)
Less: Deduction under section 35AD
(B) Capital expenditure incurred prior to 1.4.2019 (i.e., prior to
commencement of business) and capitalized in the books of
account as on 1.4.2019 (excluding the expenditure incurred
on acquisition of land) = ` 30 lakh (` 70 lakh – ` 40 lakh) and 30.00 20.00 50.00
` 20 lakh (` 50 lakh – ` 30 lakh)
(C) Capital expenditure incurred during the P.Y. 2019-20 15.00 10.00 25.00
(D) Total capital expenditure (B + C) 45.00 30.00 75.00

(E) Deduction under section 35AD
100% of capital expenditure 45.00
Total deduction u/s 35AD for A.Y. 2020-21 30.00
45.00 30.00 75.00
(F) Loss from the specified business of setting up and operating
a warehousing facility (after providing for deduction under
section 35AD) to be carried forward as per section 73A (A-E)
(30.00) (17.00) (47.00)
Notes:
(1) Deduction of 100% of the capital expenditure is available under section 35AD in respect of specified
business of setting up and operating a warehousing facility for storage of sugar or agriculture produce.
(2) However, since setting up and operating a warehousing facility for storage of edible oils is not a specified
business, Mr. Prabhakar is not eligible for deduction under section 35AD in respect of capital expenditure
incurred in respect of such business.
(3) Mr. Prabhakar can, however, claim depreciation@10% under section 32 in respect of the capital
expenditure incurred on buildings. It is presumed that the buildings were put to use for more than 180
days during the P.Y. 2019-20.
(4) Loss from a specified business can be set-off only against profits from another specified business.
Therefore, the loss of ` 47.00 lakh from the specified businesses of setting up and operating a
warehousing facility for storage of food grains and sugar cannot be set-off against the profits of ` 26.20
lakh from the business of setting and operating a warehousing facility for storage of edible oils, since the

same is not a specified business. Such loss can, however, be carried forward indefinitely for set-off
against profits of the same or any other specified business.
6. IMPORTANT: Mr. Jaiprakash inherited a house in Aligarh under will of his father in October, 2003. The
house was purchased by his father in August, 1997 for ` 8,25,000. He invested an amount of `
10,50,000 in construction of one more floor in this house in July, 2005.
He decided to sell the property to Mr. Suresh for ` 65,00,000 and received an advance of ` 6,50,000 in
May 2009. Mr. Suresh was unable to pay the balance amount and hence, the entire advance was
forfeited by Mr. Jaiprakash.
Again Mr. Jaiprakash entered into an agreement to sell the property to Mr. Mahesh for ` 70,00,000 and
received advance money of ` 7,00,000 in June, 2019. But again the transfer did not materialise due to
which the advance money was again forfeited.
The house was finally sold by him in November, 2019 for ` 85,50,000 to Mr. Dinesh. The valuation
adopted by the registration authorities for charge of stamp duty was ` 95,25,000 which was not
contested by the buyer, but as per assessee’s request, the Assessing Officer made a reference to
Valuation Officer. The value determined by the Valuation officer was ` 98,00,000. Brokerage@1% of
sale consideration was paid by Mr. Jaiprakash to the agent. The fair market value of house as on
01.04.2001 was ` 8,30,000.
He invested ` 30,00,000 in 3 years bonds of NHAI in January 2020 and ` 35,00,000 in 3 years bonds of
RECL in April 2020, out of the net consideration arising on sale of residential house.
You are required to compute the gross total income of Mr. Jaiprakash for A.Y. 2020-21 with the help of
the given information and by taking CII for the F.Y. 2003-04 : 109, F.Y. 2005-06: 117, F.Y. 2009-10: 148
and for F.Y. 2019-20: 289.
Answer:
Computation of Gross Total Income of Mr. Jaiprakash for A.Y. 2020-21
Particulars ` `
Sale consideration as per section 50C (Note 1) 95,25,000
Less: Expenses incurred on transfer being brokerage @
1% of sale consideration of ` 85,50,000 85,500
94,39,500
Less: Indexed cost of acquisition (Note 2)
(` 1,80,000 × 289/109) 4,77,248
Indexed cost of improvement
(` 10,50,000 × 289/117) 25,93,590 30,70,838
63,68,662
Less: Deduction under section 54EC (Note 3) 50,00,000
Long term capital gains 13,68,662

- Advance received and forfeited on or after 01.04.2014 (Note 4) 7,00,000
Notes:
(1) As per section 50C, where the consideration received or accruing as a result of transfer of a capital asset,
being land or building or both, is less than the valuation by the stamp valuation authority, such value
adopted or assessed by the stamp valuation authority shall be deemed to be the full value of
consideration. Where a reference is made to the Valuation Officer, and the value ascertained by the
Valuation Officer exceeds the value adopted by the stamp valuation authority, the value adopted by the
stamp valuation authority shall be taken as the full value of consideration.
Sale consideration ` 85,50,000

Valuation made by registration authority for stamp duty ` 95,25,000
Valuation made by the Valuation Officer on a reference ` 98,00,000
Applying the provisions of section 50C in the present case, ` 95,25,000, being, the value adopted by the
registration authority for stamp duty, shall be taken as the full value of consideration for the purpose of
computing capital gains.

(2) Since the house was inherited by Mr. Jaiprakash under the will of his father and his father, the previous
owner, had purchased the house before 01.04.2001, Mr. Jaiprakash has the option to adopt cost incurred
by the previous owner or fair market value as on 01.04.2001 as cost of acquisition as per section
55(2)(b)(ii). In this case, it is more beneficial to him to adopt the FMV on 01.04.2001 as the cost of
acquisition of the house property.
However, indexation benefit will be given effect from the year in which Mr. Jaiprakash first held the asset
i.e., P.Y. 2003-04.
As per section 51, the advance money forfeited and retained before 01.04.2014, as a result of failure of
the negotiations, would be reduced from the cost of acquisition for determining the indexed cost of
acquisition for the purpose of computing capital gains.
Computation of indexed cost of acquisition

Particulars `
Cost of acquisition 8,30,000
Less: Advance taken in the previous year 2009-10 and forfeited 6,50,000
Cost for the purpose on indexation 1,80,000
Alternative view: In the case of CIT v. Manjula J. Shah 16 Taxmann 42 (Bom.), the Bombay High Court
held that the indexed cost of acquisition in case of gifted asset can be computed with reference to the
year in which the previous owner first held the asset.
Applying the rationale of the Bombay High Court ruling in this case, the indexed cost of acquisition of
house would be ` 5,20,200
(3) Exemption under section 54EC is available if the capital gains arising from transfer of long-term capital
assets are invested in long-term specified assets, namely, bonds of National Highways Authority of India
and Rural Electrification Corporation Ltd. within 6 months from the date of transfer.
As per second proviso to section 54EC(1), out of capital gains arising from transfer of one or more capital
assets in a financial year, the investment eligible for exemption cannot exceed ` 50 lakhs, whether such
investment is made in the same financial year or in the subsequent financial year or in both the years.
In this case, Mr. Jaiprakahsh has invested ` 30 lakhs in RECL bonds in the F.Y. 2019-20 and ` 35 lakhs
in NHAI bonds in the F.Y. 2020-21, both within six months from the date of transfer. However, he would
be eligible for exemption of only ` 50 lakhs under section 54EC for investment in such bonds.
(4) Advance of ` 7,00,000 taken by Mr. Jaipraksh in June, 2019, which was forfeited due to the transaction
not materializing, is taxable under section 56(2)(ix). Hence, such amount would not be reduced to
compute the indexed cost of acquisition while computing capital gains on sale of the property in
November, 2019.
7. State whether the following are chargeable to tax and the amount liable to tax in each case:
(i) A sum of ` 2,15,000 was received as gift from non-relatives by Mr. Ranu on the occasion of the
marriage of his son Sahil.
th
(ii) A wrist watch worth ` 52,000 is received by Sarthak from his friend on his 25 Birthday.
(iii) Ms. Runjhun received a cash gift of ` 51,000 from elder brother of her husband’s grandfather on
01.08.2019.
(iv) Interest on enhanced compensation of ` 1,75,000 received on 14-8-2019 for acquisition of urban
land, of which 60% relates to the earlier year.

Answer:
Chargeability of receipts under the head “Income from other sources”
S. Taxable/ Amount liable Reason
No. Not Taxable to tax (` )
(i) Taxable 2,15,000 The exemption from applicability of section 56(2)(x) would be available
if, inter alia, any sum of money is received without consideration from a
relative or is received on the occasion of marriage of the individual
himself. In this case, since the sum of money is received by Mr. Ranu
without consideration from a non-relative on the occasion of marriage of
his son, it would be taxable in his hands under section 56(2)(x), since
the same exceeds ` 50,000.
(ii) Not Nil Wrist watch is not included in the definition of “property” as per the
taxable Explanation to section 56(2)(x).
Hence, the value of the wrist watch worth ` 52,000 received without
consideration from his friend is not taxable in the hands of Sarthak.
(iii) Taxable 51,000 Brother of husband’s grandfather is not included in the definition of
“relative”. Hence, the amount of ` 51,000 received as cash gift would be
taxable in Ms. Runjhun’s hands.
(iv) Taxable 87,500 Interest received by the assessee on enhanced compensation shall be
deemed to be the income of the year in which it is received, irrespective
of the method of accounting followed by the assessee. Interest of `
1,75,000 on enhanced compensation is chargeable to tax in the year of
receipt i.e. P.Y.2019-20 under section 56(2)(viii) after providing
deduction of 50% under section 57(iv). Therefore, ` 87,500 is
chargeable to tax under the head “Income from other sources”.
8. Examine the correctness or otherwise of the claims made in the following cases:
(i) Aarav who is a physically handicapped minor (suffering from a disability of the nature specified in
section 80U), earns bank interest of ` 85,000 and ` 90,000 from making bags manually by himself.
Aarav’s father claims that such income shall not be included in his hands but shall be computed
in the hands of Aarav separately.
Answer:
Correct: The clubbing provisions of section 64(1A) are not applicable in a case where the minor child is
suffering from any disability of the nature specified in section 80U. The income of such minor child will not
be clubbed in the hands of either of the parents. Consequently, the bank interest of ` 85,000 and ` 90,000
for making bags has to be included in the total income assessed in the hands of Aarav.
(ii) Mrs. Parvati transferred her immovable property to her friend Mr. Harsh without consideration,
subject to a condition that out of the rental income from such property, a sum of ` 38,000 per
annum shall be credited to her daughter-in-law’s bank account.
Mrs. Parvati claims that the amount of ` 38,000 (utilized by her son’s wife) should not be included
in her total income as she no longer owned the property.
Answer:
Incorrect: The clubbing provisions under section 64(1)(viii) are attracted in case of transfer of any asset
by an individual, directly or indirectly, otherwise than for adequate consideration, to any person to the
extent to which the income from such asset is for the immediate or deferred benefit of son’s wife. Such
income shall be included in computing the total income of the transferor-individual.
Therefore, income of ` 38,000 arising to her daughter-in-law is chargeable to tax in the hands of
transferor i.e., Mrs. Parvati, in this case, since the property was transferred to Mr. Harsh without
consideration, with a condition that ` 38,000 should be transferred to her daughter-in-law every year.

9. IMPORTANT: Mr. Aaditya submits the following information for the financial year ending 31st March,
2020. He desires that you should:
(a) Compute his total income and
(b) Ascertain the amount of losses that can be carried forward.
Particulars `
(i) He has two houses :
(a) House No. I – Income after all statutory deductions 84,000
(b) House No. II – Current year loss (56,000)
(ii) He has four proprietary businesses :
(a) Textile Business : 60,000
(i) Discontinued from 31st October, 2019 – Current year loss 1,05,000
(ii) Brought forward business loss of A.Y.2016-17
(b) Chemical Business :
(i) Discontinued from 1st March, 2019 – hence no profit/loss Nil
(ii) Bad debts allowed in earlier years recovered during this year 38,000
(iii) Brought forward business loss of A.Y. 2018-19 55,000
(c) Leather Business : Profit for the current year 2,50,000
(d) Loss from specified business under section 35AD 80,000
(e) Share of profit in a firm in which he is partner since 2005 21,050
(iii) (a) Short-term capital gain 65,000
(b) Long-term capital loss 42,000
(iv) LIC premium paid 18,000
Answer:
Computation of total income of Mr. Aaditya for the A.Y. 2020-21
Particulars ` `
1. Income from house property
House No.1 84,000
House No.2 (-) 56,000 28,000
2. Profits and gains of business or profession
Profit from leather business 2,50,000
Bad debts recovered taxable under section 41(4) 38,000
2,88,000
Less: Current year loss of textile business (-) 60,000
2,28,000
Less: Brought forward business loss of textile business for A.Y.2016-17 1,05,000
set off against the business income of current year
Less: Brought forward business loss of chemical business for A.Y.2017-
18 set off against the business income of current year 55,000 68,000
3. Capital Gains
Short-term capital gain 65,000
Under section 80C – LIC premium paid 18,000
Statement of losses to be carried forward to A.Y. 2021-22

Particulars `
Loss from specified business 80,000
(to be carried forward as per section 73A)
Long term capital loss 42,000
(to be carried forward as per section 74)
Notes:
(1) Share of profit of ` 21,050 from a firm is exempt under section 10(2A).
(2) As per section 73A, loss of specified business can be carried forward indefinitely for set-off only against
profits of any specified business.
(3) Long-term capital loss cannot be set-off against short-term capital gains. Therefore, it has to be carried
forward to the next year to be set-off against long-term capital gains of that year.

10. For the Assessment year 2020-21, the gross total income of Mr. Shivpal, a resident in India, was `
9,35,600 which includes long-term capital gain under section 112 of ` 3,15,000 and short-term capital
gain under section 111A of ` 64,500. The gross total income also includes interest income of ` 13,500
from savings bank deposits with banks. Mr. Shivpal has invested in PPF ` 1,42,500 and also paid a
medical insurance premium ` 34,000 to insure his health. Mr. Shivpal also contributed ` 68,000 to
public charitable trust eligible for deduction under section 80G by way of an account payee cheque.
Compute the total income and tax thereon of Mr. Shivpal, who is 72 years old as on 31.3.2020.
Answer:
Computation of total income and tax payable by Mr. Shivpal for the A.Y. 2020-21
Particulars ` `
Gross total income including long term capital gain and short term capital gain
under section 111A 9,35,600
Less: Long term capital gain under section 112 3,15,000
Less: Short-term capital gain under section 111A 64,500
5,56,100
Less: Deductions under Chapter VI-A:
Under section 80C (PPF deposit) 1,42,500
Under section 80D (The deduction would be restricted to 34,000
` 50,000, since Mr. Shivpal is a senior citizen)
Under section 80G (See Notes 1 & 2 below) 18,305
Under section 80TTB (See Note 3 below) 13,500 2, 08,305
Total income (excluding STCG u/s 111A & LTCG) 3,47,795
Total income (including STCG u/s 111A & LTCG) 7,27,295
Total income (rounded off) 7,27,300
Tax on total income (including STCG u/s 111A & LTCG)

LTCG ` 3,15,000 x 20% 63,000
STCG under section 111A ` 64,500 x 15% 9,675
Balance total income ` 3,47,800 [` 3,47,800 – ` 3,00,000] x 5% 2,390
75,065
Add: Health & Education cess @4% 3,003
Total tax liability (rounded off) 78,070
Notes:
(1) Computation of deduction under section 80G:
Particulars `
Gross total income (excluding STCG u/s 111A & LTCG) 5,56,100
Less : Deduction under section 80C, 80D & 80TTA 1,90,000
Adjusted total income 3,66,100
10% of the above 36,610
Contribution made 68,000
Lower of the two 36,610
Deduction under section 80G – 50% of ` 36,610 18,305
(2) Deduction under section 80G is allowed only if amount is paid by any mode other than cash, in case of
amount exceeding ` 10,000. Therefore, the contribution made to public charitable trust is eligible for
deduction since it is made by way of an account payee cheque.
(3) Deduction of up to ` 50,000 under section 80TTB is allowed, inter alia, to an senior citizen assessee, if
gross total income includes interest income from deposits in a saving account with bank.

11. IMPORTANT: Mr. Yashwant carries on his own business. An analysis of his trading and profit & loss
for the year ended 31-3-2020 revealed the following information:
(1) The net profit was ` 13,47,000.
(2) The following incomes were credited in the profit and loss account :
(a) Income from UTI ` 28,000.
(b) Interest on debentures (Gross) ` 34,200.
(c) Winnings from races (net of TDS) ` 33,600.
(3) It was found that some stocks were omitted to be included in both the opening and closing
stocks, the value of which were:
Opening stock ` 10,500.
Closing stock ` 14,000.
(4) ` 1,25,000 was debited in the profit and loss account, being contribution to a University approved
and notified under section 35(1)(ii).
(5) Salary includes ` 27,000 paid to his brother which is unreasonable to the extent of ` 5,000.
(6) Advertisement expenses include 20 gift packets of dry fruits costing ` 1,250 per packet presented
to important customers.
(7) Total expenses on car was ` 95,000. The car was used both for business and personal purposes.
¾th is for business purposes.
(8) Miscellaneous expenses included `. 33,500 paid to Shiva & Co., a goods transport operator in
cash on 28-2-2020 for distribution of the company’s product to the warehouses.
(9) Depreciation debited in the books was ` 95,000. Depreciation allowed as per Income-tax Rules,
1962 was ` 82,000.
(10)Drawings ` 18,000.
(11)Investment in NSC ` 27,000.
Compute the total income of Mr. Yashwant for the assessment year 2020-21.
Answer:
Computation of total income of Mr. Yashwant for the A.Y. 2020-21
Particulars `
Profits and gains of business or profession (See Working Note 1 below) 12,47,700
Income from other sources (See Working Note 2 below) 82,200
Less: Deduction under section 80C (Investment in NSC) 27,000
Working Notes:
1. Computation of profits and gains of business or profession
Particulars ` `
Add: Expenses debited to profit and loss account but not allowable
as deduction
Salary paid to brother disallowed to the extent considered 5,000
unreasonable [Section 40A(2)]
Motor car expenses attributable to personal use not allowable 23,750
(` 95,000 × ¼)
Depreciation debited in the books of account 95,000
Drawings (not allowable since it is personal in nature) 18,000
[See Note (iv)]
Investment in NSC [See Note (iv)] 27,000 1,68,750
15,15,750
Add: Under statement of closing stock 14,000
15,29,750
Less: Under statement of opening stock 10,500
15,19,250
Less: Contribution to a University approved and notified under section
35(1)(ii) is eligible for weighted deduction@150%. Since only the
actual contribution (100%) has been debited to profit and loss
account, the additional 50% has to be deducted. 62,500
14,56,750
Less: Incomes credited to profit and loss account but not taxable as
business income
Income from UTI [Exempt under section 10(35)] 28,000

Interest on debentures (taxable under the head “Income from other
sources”) 34,200
Winnings from races (taxable under the head “Income from other
sources”) 33,600 95,800
13,60,950
Less: Depreciation allowable under the Income-tax Rules, 1962 82,000
12,78,950
Notes:
(i) Advertisement expenses of revenue nature, namely, gift of dry fruits to important customers, is incurred
wholly and exclusively for business purposes. Hence, the same is allowable as deduction under section
37.
(ii) Disallowance under section 40A(3) is not attracted in respect of cash payment of ` 33,500 to Shiva & Co.,
a goods transport operator, since, in case of payment made for plying, hiring or leasing goods carriages,
an increased limit of ` 35,000 is applicable [i.e., payment of upto ` 35,000 can be made in cash without
attracting disallowance under section 40A(3)]
(iii) In point no. 9 of the question, it has been given that depreciation as per Income-tax Rules, 1962 is `
82,000. It has been assumed that, in the said figure of ` 82,000, only the proportional depreciation (i.e.,
75% for business purposes) has been included in respect of motor car.
(iv) Since drawings and investment in NSC have been given as debited to profit and loss account, the same
have to be added back to arrive at the business income.
2. Computation of “Income from other sources”

Particulars `
Interest on debentures 34,200
Winnings from races (` 33,600 x 100/70) 48,000
82,200
12. Examine the applicability of the provisions for tax deduction at source in the following cases -
(i) On 12.02.2020, payment of ` 2,20,000 made to Mr. Arvind for purchase of diaries made according
to specifications of M/s Sutra Ltd. However, no material was supplied for such diaries to Mr.
Arvind by M/s Sutra Ltd.
(ii) Mr. Mohit sold his house property in Ranchi as well as rural agricultural land for a consideration of
` 68,00,000 and ` 27,00,000, respectively, to Mr. Rajesh on 01.12.2019.
(iii) Miss Sonia, a resident, is due to receive ` 2,30,000 on 1.5.2019 on maturity of her life insurance
policy taken 01.11.2011. The policy sum assured is ` 2,00,000 and the annual premium is ` 45,000.
(iv) Rent of ` 1,75,000 paid for hire of plant and machinery by a partnership firm.
(v) Compensation of ` 2,50,000 paid to Mr. Devesh for compulsory acquisition of his urban land by
the State Government.
Answer:
(i) According to section 194C, the definition of “work” does not include the manufacturing or supply of
product according to the specification by customer in case the material is purchased from a person other
than the customer.
Therefore, there is no liability to deduct tax at source in respect of payment of ` 2,20,000 to Mr. Arvind,
since the contract is a contract for ‘sale’.
(ii) As per Section 194-IA, any person, being a transferee, responsible for paying to a resident transferor any
sum by way of consideration for transfer of any immovable property (other than rural agricultural land) is
required to deduct tax at source@1% of such sum, if the consideration for transfer is ` 50 lakhs or more.
The deduction of tax at source has to be made at the time of credit of such sum to the account of the
transferor or at the time of payment of such sum, whichever is earlier.
Therefore, in this case, Mr. Rajesh, the purchaser, is required to deduct tax at source at 1% of ` 68 lakhs,
being the consideration for transfer of house property, since the sale consideration of house property
exceeds ` 50 lakhs. However, no tax is required to be deducted by him from the sale consideration
payable for transfer of rural agricultural land, since TDS provisions under section 194-IA are attracted in
respect of transfer of any immovable property, other than rural agricultural land.
(iii) Since the annual premium exceeds 20% of sum assured in respect of a policy taken on or before
1.4.2012, the maturity proceeds of ` 2,30,000 would not be exempt under section 10(10D) in the hands of

Miss Sonia, a resident individual. Therefore, tax is required to be deducted@1% under section 194DA on
the maturity proceeds of ` 2,30,000 payable to Miss Sonia, at the time of payment.
(iv) As per section 194-I, tax is to be deducted @ 2% on payment of rent for plant and machinery, if the
payment exceeds ` 2,40,000 during the financial year. Since rent of ` 1,75,000 paid by a partnership firm
does not exceed ` 2,40,000, no tax is deductible at source under section 194-I.
(v) As per Section 194LA, any person responsible for payment to a resident, any sum in the nature of
compensation or consideration on account of compulsory acquisition under any law, of any immovable
property, is responsible for deduction of tax at source if such payment or the aggregate amount of such
payments to the resident during the financial year exceeds ` 2,50,000.
In the given case, no liability to deduct tax at source is attracted as the payment made to Mr. Devesh for
compulsory acquisition of his urban land does not exceed ` 2,50,000.
13. State with reasons, whether the following statements are true or false, with regard to the provisions of
the Income-tax Act, 1961:
(i) Return of income of Limited Liability Partnership (LLP) can be verified by any partner.
Answer:
False: As per Section 140, the return of income of LLP should be verified by a designated partner. Any
other partner can verify the return of income of LLP only in the following cases:-
(a) where for any unavoidable reason such designated partner is not able to verify the return, or,
(b) where there is no designated partner.
(ii) An individual, who is not in India, can verify the return of income from outside India.
Answer:
True: As per Section 140, return of income can be verified by an individual even if he is absent from India.
Hence, an individual can himself verify the return of income from a place outside India. Alternatively, any
person holding a valid power of attorney and duly authorised by the individual can also verify the return of
income. However, such power of attorney should be attached along with the return of income.


1. Compute the tax liability of Mr. Dherya, aged 58 years, for the assessment year 2020-21, from the
following details:
`
Profits and gains from business or profession 73,00,000
Income from other sources (Interest on bank Fixed Deposits) 3,82,000
Amount deposited in Public Provident Fund (PPF) 1,30,000
Answer:
Computation of tax liability of Mr. Dherya for A.Y. 2020-21
`
Profits and gains from business or profession 73,00,000
Income from other sources (Interest on bank fixed deposit) 3,82,000
Gross total income 1,02,10,000
- Amount deposited in PPF allowed as deduction under section
80C (since it is within the overall limit of `1,50,000) 1,30,000
Total income 1,00,80,000
Tax liability
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000 @ 5% 12,500
` 5,00,001 – ` 10,00,000 @ 20% 1,00,000
` 10,00,001 – ` 1,00,80,000 @ 30% 27,24,000 28,36,500
Add: Surcharge @ 15%, since total income exceeds ` 1 crore 4,25,475
Tax after surcharge 32,61,975
Less: Marginal Relief (See Note below) 88,225
Tax before cess 31,73,750
Add: Higher & Education cess@ 4% 1,26,950
Tax liability 33,00,700
Note: Marginal relief in case of individuals is available where the total income exceeds ` 1 crore and
surcharge is payable @15% of income tax. In such case, the amount of income-tax payable on the total
income together with surcharge cannot exceed the amount of tax payable on ` 1 crore including surcharge
plus the income in excess of ` 1 crore.
Therefore, in this case, marginal relief would be ` 88,225 [excess of the tax payable on total income (including
surcharge) i.e., ` 32,61,975 minus ` 31,73,750 (being the amount of tax payable on income of ` 1 crore
including surcharge i.e., ` 30,93,750 plus ` 80,000, the total income in excess of ` 1 crore)].
2. Mr. Sachin settled in Australia in the year 1990, earned the following incomes during the financial
year 2019-20. Compute his total income for the assessment year 2020-21.
Sr. Particulars Amount

No. (`
`)
1. Fees for technical services rendered in India, but received in Australia 75,000
2. Interest on Savings Bank Deposit in Indian Bank 12,000
3. Interest on Australia Development Bonds (only 50% of
interest received in India) 55,000
4. Dividend from Indian company received in Australia 28,000
5. Profit from a business in Nagpur, but managed directly 95,000
from Australia
6. Short term capital gain on sale of shares of an Indian
company received in India 90,000
7. Agricultural income from a land situated in Punjab 55,000
8. Rent received in respect of house property at Bhopal 1,25,000

Answer:
Mr. Sachin, is a non-resident, as he settled in Australia since 1990. Accordingly, his total income would be
computed as follows:
Computation of total income of Mr. Sachin for the A.Y. 2020-21
S. No. Particulars Mr. Sachin
(Non-Resident)
(`)
1. Fees for technical services rendered in India, but received
in Australia (See Note 1) 75,000
2. Interest on Savings Bank Deposit in Indian Bank (See Note 1) 12,000
3. Interest on Australia Development Bonds (See Note 1) 27,500
4. Dividend from Indian Company received in Australia (See Note 2) -
5. Profit from a business in Nagpur but managed directly
from Australia (See Note 1) 95,000
6. Short term capital gain on sale of shares of an Indian
company received in India (See Note 1) 90,000
7. Agricultural income from a land in Punjab (See Note 3) -
8. Income from house property at Bhopal (See Note 4) 87,500
Gross Total income 3,87,000
Section 80TTA (See Note 5) 10,000
Notes:
(1) In case of a resident, his global income is taxable as per Section 5(1).
However, as per section 5(2), in case of a non-resident, only the following incomes are chargeable to tax:
(ii) Income which accrues or arises or is deemed to accrue or arise in India
Therefore, fees for technical services rendered in India would be taxable in hands of Mr. Sachin, even
though he is a non-resident.
The income referred to in Sl. No. 2, 5 and 6 are also taxable in his hands, since these incomes accrue or
arise or deemed to accrue or arise in India. Interest on Australia Development Bonds to the extent of 50%
would be taxable in India, since this portion is received in India.
(2) Dividend received from Indian company is exempt under Section 10(34), both in the case of residents and
non-residents. Hence, dividend received would not be includible in Mr. Sachin’s total income.
(3) Agricultural income from a land situated in India is exempt under Section 10(1).
(4) Income from house property:
Particulars `
Rent received
(Rent received has been assumed as Gross Annual Value in
the absence of information relating to fair rent, municipal value
and standard rent) 1,25,000
Less: Deduction under section 24 @ 30% 37,500
Net income from house property 87,500
The net income from house property in India would be taxable in his hands since the accrual and receipt
of the same are in India.
(5) In case of an individual, interest upto ` 10,000 from savings account with, inter alia, a bank is allowable as
deduction under section 80TTA.
3. State, with reference to the provisions of the Income-tax Act, 1961, whether the following are
chargeable to tax and if so, the amount liable to tax :
(i) Leave travel concession of ` 1,75,000 (being the total cost of tickets) received by Mr. Sahil,
employee of P Ltd. for his holiday (with spouse & one child) to Mumbai by Air India (executive
class). The flight fare for executive class is 2.5 times the fare for economy class.
(ii) Income-tax of ` 43,000 paid by employer on non-monetary perquisites provided to employees.
(iii) Sargam received ` 29,000 as his share of income from a partnership firm.
(iv) Mr. Tarun has derived an income of ` 80,000 derived from manufacturing, growing and curing
coffee in India during the financial year 2019-20.
(v) Mr. Bhuwan received ` 25 lacs as Gratuity from XYZ Ltd., on his retirement, after completing 25
years and 3 months of service. Last drawn salary is ` 180,000. He is covered by the Payment of
Gratuity Act, 1972.

Answer:
S. Taxable/ Amount Reason
No. Not Taxable/ liable to
Partly tax (`)
Taxable
(i) Partly taxable 1,05,000 Section 10(5), which provides exemption of
leave travel concession, exempts only an
amount not exceeding the air economy fare, if
the journey is performed by air. Since, the
amount reimbursed to Mr. Sahil is for travelling
in executive class, only the fare of economy
class, being ` 70,000 (` 1,75,000/2.5), would be
exempt under section 10(5) and the balance
would be taxable.
(ii) Not taxable Nil Income-tax paid by employer on behalf of

employee on non-monetary perquisites
provided to employees is exempt in the hands
of an employee under section 10(10CC).
(iii) Not taxable Nil Share of a partner in the total income of the
firm is exempt under section 10(2A) in the
hands of a partner.
(iv) Partly taxable 20,000 As per Rule 7B of the Income-tax Rules, 1962,
25% of the income from manufacturing,
growing and curing of coffee in India is taxable
as business income under the head “Profits
and gains from business or profession”, and
the balance 75%, being agricultural income, is
exempt.
(v) Partly taxable 5 lacs As per section 10(10), least of the following
amount would be exempt in the hands of Mr.
Bhuwan out of ` 25 lacs received as gratuity:
(i) ` 20 lacs (notified limit)
(ii) ` 25 lacs (gratuity actually received)
(iii) 25,96,154 [15/26 x `180,000 x 25]
Therefore, ` 20 lacs would be exempt and
balance of ` 5 lacs is taxable in the hands of
Mr. Bhuwan.
4. Mr. Mayur is a production manager of M/s Iron & Ore Co. Ltd. During the financial year 2019-20, he
gets the following emoluments from his employer:
Basic Salary
Up to 31.7.2019 ` 22,000 p.m.
From 01.8.2019 ` 26,000 p.m.
Transport allowance ` 2,600 p.m.
Contribution to recognised provident fund 15% of basic salary
Children education allowance ` 400 p.m. per child for two children
City compensatory allowance ` 500 p.m.
Hostel expenses allowance ` 420 p.m. per child for two children
Tiffin allowance (actual expenses ` 4,300) ` 6,000 p.a.
Tax on employment paid by the employer ` 3,200
Compute taxable salary of Mr. Mayur for the Assessment year 2020-21.
Answer:
Computation of taxable salary of Mr. Mayur for the Assessment Year 2020-21
Particulars ` `
Basic Salary (` 22,000 x 4) +(` 26,000 x 8) 2,96,000
Transport allowance ( ` 2,600 x 12) 31,200
Children education allowance (` 400 x 2 x 12) 9,600
Less: Exempt under section 10(14) ( ` 100 x 2 x 12) 2,400 7,200

City Compensatory Allowance (` 500 x 12) 6,000
Hostel Expenses Allowance (` 420 x 2 x 12) 10,080
Less: Exempt under section 10(14) ( ` 300 x 2 x 12) 7,200 2,880
Tiffin allowance (fully taxable) 6,000
Tax paid on employment [See Note Below] 3,200
Employer’s contribution to recognized provident fund in
excess of 12% of salary (i.e., 3% of ` 2,96,000) 8,880
Less : Deduction u/s 16(ia) – Statutory Deduction 50,000
Tax on employment under section 16(iii) 3,200 53,200
Taxable salary 3,08,160
Note: Professional tax paid by employer should be included in the salary of Mr. Mayur as a perquisite since it
is discharge of monetary obligation of the employee by the employer. Thereafter, deduction of professional
tax paid is allowed to the employee from his gross salary.
5. Mr. Vikul acquired a residential house in Delhi at a cost of ` 42,00,000 on 01.04.2019, in respect of
which he took a housing loan of ` 24,00,000 from Canara Bank @12% p.a on the same date. There has
been no principal repayment upto 31.03.2020.
The house is having two identical units. First unit (area 1200 sq. Ft) of the house is self occupied by
Mr. Vikul and another unit (area 400 sq.ft) is rented for ` 6,000 p.m. from 1st April, 2019. The rented
unit was vacant for four months during the year.
The particulars of the house for the previous year 2019-20 are as under:
Standard Rent ` 2,30,000 p.a.
Municipal Valuation ` 2,67,000 p.a.
Fair Rent ` 2,48,000 p.a.
Municipal tax paid by Mr. Vikul 12% of the Municipal Valuation
Light and water charges ` 8,000 p.a.
Insurance charges ` 7,500 p.a.
Painting expenses ` 50,000 p.a.
Compute income from house property of Mr. Vikul for the A.Y. 2020-21.
Answer:
Computation of Income from house property of Mr. Vikul for A.Y. 2020-21
Particulars ` `
(A) Rented unit (25% of total area)
Step I - Computation of Expected Rent
Municipal valuation (` 2,67,000 x ¼) 66,750
Fair rent (` 2,48,000 x ¼) 62,000
Standard rent (` 2,30,000 x ¼) 57,500
Expected Rent is higher of municipal valuation and
fair rent, but restricted to standard rent 57,500
Step II - Actual Rent

Rent receivable for the whole year (` 6,000 x 12) 72,000
Step III – Computation of Gross Annual Value

Actual rent received owing to vacancy
(` 72,000 – ` 24,000) 48,000
Since, owing to vacancy, the actual rent received
is lower than the Expected Rent, the actual rent
received is the Gross Annual value
Gross Annual Value (GAV) 48,000

Less: Municipal taxes [(12% of ` 66,750)] 8,010
Less : Deductions under section 24
(a) 30% of NAV 11,997
(b) Interest on borrowed capital
(` 2,88,000 x ¼), 72,000 83,997
Taxable income from let out portion (44,007)

(B) Self occupied unit (75% of total area)
Annual value Nil
Less : Deduction under section 24:
- Interest on borrowed capital (` 2,88,000 x
¾), ` 2,16,000 restricted to ` 2,00,000 2,00,000 (2,00,000)
Income from house property (2,44,007)
Notes:
1. No deduction will be allowed separately for light and water charges, insurance charges and painting
expenses.
2. Mr. Vikul is eligible for a maximum deduction of ` 2,00,000 under section 24 in respect of interest on
housing loan taken in respect of a self-occupied property, for which he is claiming benefit of “Nil” annual
value. Therefore, deduction in respect of the interest of ` 2,16,000 relating to self-occupied portion would
be restricted to ` 2,00,000, which would represent his loss from self-occupied portion.
6. State with reasons, the deductibility or otherwise of the following expenses/payments under the
Income-tax Act, 1961, while computing income under the head “Profits and gains of business or
profession” for the Assessment Year 2020-21:
(i) MNO Ltd. paid ` 2,50,000 as technical fees to a non-resident on which tax is deducted during the
previous year 2019-20 but deposited on 31.8.2020.
(ii) Bus & Train Pvt. Ltd. incurred ` 1,80,000 towards CSR Expenditure during the previous year 2019-
20.
(iii) XYZ Ltd. has not deducted tax at source on the amount of ` 7,50,000 paid as annual salary to Mr.
Raghav, an employee of the company during the previous year 2019-20. Mr. Raghav has not
furnished any declaration to his employer regarding any investment made by him or any other
income earned or loss incurred by him for the previous year 2019-20.
(iv) Rise & Co. has set up a warehousing facility for storage of sugar. It commenced operations on
01.04.2019. In July 2019, Rise & Co. incurred capital expenditure of ` 72 lakhs on purchase of
building. Would your answer be different, if the company has set up a warehousing facility of food
grain?
Answer:
(i) As per section 40(a)(i), interest, royalty, fee for technical services or other sum chargeable under the Act
which is payable to a non-resident is not allowable as deduction while computing business income if tax
on such payment has not been deducted during the previous year or after deduction, is not paid on or
before the due date specified for filing of return under section 139(1).
In the present case, MNO Ltd deducted tax at source on payment made to a non-resident in the previous
year 2019-20 and deposited such amount on 31.08.2020, before the due date under section 139(1) i.e.,
30th September 2020. Therefore, the disallowance under section 40(a)(i) would not be attracted, in this
case.
(ii) Under section 37(1) of the Income-tax Act, 1961, only expenditure, not covered under sections 30 to 36,
and incurred wholly and exclusively for the purposes of the business is allowed as a deduction while
computing business income. Explanation 2 to section 37 provides that any expenditure incurred by an
assessee on the activities relating to corporate social responsibility referred to in section 135 of the
Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and hence,
shall not be allowed as deduction under section 37.
Accordingly, the amount of ` 1,80,000 incurred by Bus & Train Pvt. Ltd. towards CSR expenditure
referred to in section 135 of the Companies Act, 2013 shall not be allowed as deduction under section
37.
However, the Explanatory Memorandum to the Finance (No.2) Bill, 2014 clarifies that CSR expenditure,
which is of the nature described in sections 30 to 36, shall be allowed as deduction under these sections
subject to fulfillment of conditions, if any, specified therein.
Therefore, if the CSR expenditure incurred by Bus & Train Pvt. Ltd. is of the nature described in sections
30 to 36, the same would be allowed as deduction under the respective section, subject to fulfilment of the
conditions prescribed thereunder.
(iii) Section 40(a)(ia) provides that 30% of any sum payable to a resident, on which tax is deductible at source
under Chapter XVII-B and such tax has not been deducted or after deduction has not been paid on or
before the due date specified in section 139(1) would be disallowed.

Section 192 of Chapter XVII-B provides that tax is required to be deducted on the payment made as
salaries. Tax is to be deducted on the estimated income at the average of income tax computed on the
basis of the rates in force for the financial year in which payment is made.
In this case, XYZ Ltd. has not deducted tax at source on the amount of ` 7,50,000 paid as salary to Mr.
Raghav. Therefore, ` 2,25,000 being 30% of ` 7,50,000 would be disallowed under section 40(a)(ia).
(iv) As per Section 35AD, investment linked deduction is available in respect of any of the specified
businesses defined thereunder. 100% of the capital expenditure is available in respect specified business
inter alia business of warehousing facility for storage of sugar. Therefore, in this case, Rise & Co. would
be eligible for deduction of ` 72,00,000 (100% of ` 72 lakhs), in the P.Y. 2019-20. No other deduction is
allowable in respect of the said sum under any other provision of the Income-tax Act, 1961.
No, the answer would not be different, if the company has set up a warehousing facility of food grain.
7. Mr. Satvik purchased a residential house in February, 2001 for ` 2,40,000. In addition, he also paid
stamp duty at the rate of 10% on stamp duty value of ` 2,50,000. Fair market value of property on
1.4.2001 is ` 2,60,000.
In January 2005, Mr. Satvik entered into an agreement with Mr. Naresh for sale of such property for `
4,20,000 and received an amount of ` 50,000 as an advance. However, the sale transaction did not
ultimately materialise and Mr. Satvik forfeited the advance.
In March, 2008, Mr. Satvik constructed the first floor by incurring a cost of ` 1,35,000. He entered into
an agreement for sale of the said house on 25th August, 2019 for ` 91,00,000 to Mr. Manik and
received ` 7,50,000 as advance. However, such advance was forfeited by Mr. Satvik on account of
failure on the part of Mr. Manik in making balance payment.
Finally, on 18th October 2019, Mr. Satvik sold the house to Mr. Munish for ` 65,00,000. Stamp duty was
paid by Munish at the rate of 12% on the stamp duty value of ` 67,00,000. Satvik has paid brokerage @
1% of sale consideration to the broker.
He invested ` 35,00,000 in NHAI Bonds on 29th February, 2020 and ` 25,00,000 in RECL bonds on 10th
April 2020.
Compute the capital gains chargeable to tax in the hands of Mr. Satvik for the AY 2020-21.
Financial Year Cost Inflation Index
2001-02= 100
2004-05 =113
2007-08 =129
2018-19 =289
Answer:
Computation of capital gains in the hands of Mr. Satvik for A.Y. 2020-21
Particulars ` `
Actual Sale Consideration 65,00,000
Valuation as per Stamp Valuation authority 67,00,000
(Value to be taken is the higher of actual sale consideration or
valuation adopted for stamp duty purpose as per section 50C)
Deemed Sale Consideration for the purpose of Capital Gains 67,00,000
Less: Expenses on transfer (Brokerage @1% of
` 65,00,000) 65,000
Net Sale Consideration 66,35,000
Less: Indexed cost of acquisition (See Note 1) 6,21,350
Indexed cost of improvement (See Note 2) 3,02,442 9,23,792
57,11,208
Less: Exemption under section 54EC in respect of
investment in NHAI Bonds (See Note 4) 50,00,000
Long-term Capital Gain 7,11,208

Notes:
(1) Computation of indexed cost of acquisition
Particulars `
Cost of acquisition, 2,65,000
being the higher of -
(i) fair market value as on April 1, 2001 i.e. ` 2,60,000
(ii) actual cost of acquisition i.e. ` 2,65,000 (`
` 2,40,000 +
` 25,000, being stamp duty @ 10% of ` 2,50,000)
Less: Advance taken and forfeited (See Note 3) 50,000
Cost for the purpose of indexation 2,15,000
Indexed cost of acquisition (` 2,15,000 x 289/100) 6,21,350
(2) Computation of indexed cost of improvement

Construction of first floor in March, 2008
(i.e., ` 1,35,000 x 289/129) ` 3,02,442
(3) Clause (ix) has been inserted in section 56(2) to bring to tax advance received and forfeited on or after
01.04.2014, in respect of a transaction of sale of a capital asset which failed to materialise. Consequently,
a proviso has been inserted in section 51 to provide that where any sum of money received as an
advance or otherwise in the course of negotiations for transfer of a capital asset has been included in the
total income of the assessee for any previous year, in accordance with section 56(2)(ix), such amount
shall not be deducted from the cost for which the asset was acquired or the written down value or the fair
market value, as the case may be, in computing the cost of acquisition.
Therefore, the advance of ` 7,50,000 received by Mr. Satvik on 25th August, 2019, which was forfeited
due to the transaction not materializing, is taxable under section 56(2)(ix) as “Income from other sources”
in the A.Y.2020-21. Hence, such amount would not be reduced to compute the indexed cost of acquisition
while computing capital gains on sale of the property in October, 2019.
However, the advance of ` 50,000 received and forfeited before 01.04.2014 has to be deducted from cost
of acquisition for determining indexed cost of acquisition, since the same was not subject to tax under
section 56(2)(ix).
(4) As per second proviso to section 54EC(1), out of capital gains arising from transfer of one or more
capital assets in a financial year, the investment eligible for exemption, cannot exceed ` 50 lakhs,
whether such investment is made in the same financial year or in the subsequent financial year or
in both the year. In this case, Mr. Satvik has invested ` 35 lakhs in NHAI bonds in the F.Y. 2019-20 and
` 25 lakhs in RECL bonds in the F.Y. 2020-21, both within six months from the date of transfer. However,
out of the total investment of ` 60 lakhs in eligible bonds, he would be eligible for exemption of only ` 50
lakhs under section 54EC.
8. On 12.12.2019, Mr. Gagan (a bank employee) received ` 8,50,000 towards interest on enhanced
compensation from State Government in respect of compulsory acquisition of his land effected
during the financial year 2016-17.
Out of this interest, ` 2,05,000 relates to the financial year 2016-17; ` 2,15,000 to the financial year
2017-18; and ` 2,30,000 to the financial year 2018-19. Only ` 2,00,000 relates to financial year 2019-20.
He incurred ` 75,000 by way of legal expenses to receive the interest on such enhanced
compensation.
How much of interest on enhanced compensation would be chargeable to tax for the assessment year
2020-21?
Answer:
Section 145A provides that interest received by the assessee on enhanced compensation shall be deemed to
be the income of the assessee of the year in which it is received, irrespective of the method of accounting
followed by the assessee and irrespective of the financial year to which it relates.
Section 56(2)(viii) states that such income shall be taxable as ‘Income from other sources’. 50% of such
income shall be allowed as deduction by virtue of section 57(iv) and no other deduction shall be permissible
from such Income.

Therefore, legal expenses incurred to receive the interest on enhanced compensation would not be allowed
as deduction from such income.
Computation of interest on enhanced compensation taxable as “Income from

other sources” for the A.Y 2020-21:
Particulars `
Interest on enhanced compensation taxable under section 56(2)(viii) 8,50,000
Less: Deduction under section 57(iv) (50% x ` 8,50,000) 4,25,000
Taxable interest on enhanced compensation 4,25,000
9. Discuss the tax implications under Section 56(2) in respect of each of the following transactions –
(i) Sharma’s son transferred shares of XYZ Ltd. to Sharma HUF without any consideration. The fair
market value of the shares is ` 3.25 lakh.
(ii) Sunnyvale (P) Ltd. purchased 10,500 equity shares of Solid (P) Ltd. at ` 95 per share. The fair
market value of the share on the date of transaction is ` 115.
(iii) Balaji (P) Ltd. issued 26,000 equity shares of ` 10 each at a premium of ` 7. The fair market value
of each share on the date of issue is ` 13.
Answer:
(i) Any property received without consideration by a HUF from its relative is not taxable under section
56(2)(x).
Since Sharma’s son is a member of Sharma HUF, he is a “relative” of the HUF. Therefore, if Sharma HUF
receives any property (shares, in this case) from its member, i.e., Sharma’s son, without consideration,
then, the fair market value of such shares will not be chargeable to tax in the hands of the HUF, since gift
received from a “relative” is excluded from the scope of section 56(2)(x).
(ii) The difference between the aggregate fair market value of shares of a closely held company and the
consideration paid for purchase of such shares is deemed as income in the hands of the purchasing
company under section 56(2)(x), if the difference exceeds ` 50,000.
Accordingly, in this case, the difference of ` 2,10,000 [i.e.,( ` 115 – ` 95) × 10,500] is taxable under
section 56(2)(x) in the hands of Sunnyvale (P) Ltd.
(iii) The provisions of Section 56(2)(viib) are attracted in this case since the shares of a closely held company
are issued at a premium (i.e., the issue price of ` 17 per share exceeds the face value of ` 10 per share)
and the issue price exceeds the fair market value of such shares.
The consideration received by the company in excess of the fair market value of the shares would be
taxable under section 56(2)(viib).
Therefore, ` 1,04,000 [i.e., (` 17 – ` 13) x 26,000 shares] shall be the income chargeable under section
56(2)(viib) in the hands of Balaji (P) Ltd.
10. The following are the particulars of income earned by Mr. Chandrapal and his family members:
Particulars `
(i) Income from Chandrapal' s profession 2,50,000
(ii) Mrs.
rs. Chandrapal' s salary as primary teacher (Computed) 1,06,000
(iii) Minor son Arav (interest on fixed deposits with a bank which
were gifted to him by his uncle) 12,000
(iv) Arav also has income by way winnings from lottery (gross) 2,20,000
(v) Minor daughter Pallavi’s earnings from sports 1,05,000
(vi) Cash gift received by minor married daughter Garima from
friend of Mrs.
rs. Chandrapal 55,000
(vii) Income of minor son Arvind, who suffers from disability
specified in section 80U. 1,20,000
Discuss the tax implications in the hands of Mr. Chandrapal and Mrs.
rs. Chandrapal.

Answer: Clubbing of income and other tax implications
As per the provisions of section 64(1A), in case the marriage of the parents subsist, the income of a minor
child shall be clubbed in the hands of the parent whose total income, excluding the income of the minor child
to be clubbed, is greater. In this problem, it has been assumed that the marriage of Mr. Chandrapal and Mrs.
Chandrapal subsists.
However, in case the income arises to the minor child on account of any manual work done by the child or as
a result of any activity involving application of skill, talent, specialized knowledge or experience of the child,
then, the same shall not be clubbed in the hands of the parent.
Further, the income of minor child suffering from disability of the nature specified under section 80U shall also
not be included in the hands of parents.
Tax implications
(i) Income of ` 2,50,000 from Mr. Chandrapal’s profession shall be taxable in the hands of Mr. Chandrapal
under the head “Profits and gains of business or profession”.
(ii) Salary of ` 1,06,000 received by Mrs. Chandrapal as a Primary teacher shall be taxable as “Salaries” in
the hands of Mrs. Chandrapal.
(iii) Income from fixed deposit of ` 12,000 arising to the minor son Arav, shall be clubbed in the hands of the
father, Mr. Chandrapal as “Income from other sources”, since Mr. Chandrapal’s income is greater than the
income of his wife before including the income of the minor child.
As per section 10(32), income of a minor child which is includible in the income of the parent shall be
exempt to the extent of ` 1,500 per child. The balance income would be clubbed in the hands of the
parent as “Income from other sources”. Therefore, ` 10,500 would be clubbed in the hands of Mr.
Chandrapal.
(iv) Income of ` 2,20,000 arising to minor son Arav from lottery shall be included in the hands of Mr.
Chandrapal as “Income from other sources”, since Mr. Chandrapal’s income is greater than the income of
his wife before including the income of minor child.
Note – Mr. Chandrapal can reduce the tax deducted at source from such lottery income while computing
his net tax liability.
(v) Income of ` 1,05,000 arising to the minor daughter Pallavi from sports shall not be included in the hands
of the parent, since such income has arisen to the minor daughter on account of an activity involving
application of her skill.
(vi) The clubbing provisions are attracted even in respect of income of minor married daughter. As per
Section 56(2)(x), cash gifts received from any person/persons exceeding ` 50,000 during the year in
aggregate is taxable. Since the cash gift in this case exceeds ` 50,000, the amount of ` 55,000 shall be
taxable under section 56(2)(x). This amount shall be clubbed in the hands of Mr. Chandrapal and
exemption under section 10(32) of ` 1,500 per child shall be allowed in his hands.
(vii) Income of minor son Arvind, who suffers from disability specified under section 80U, shall not be included
in the hands of either of his parents.
11. Mr. Alok furnishes the following details for year ended 31.03.2020:
Particulars `
Short term capital gain 1,65,000
Loss from speculative business 58,000
Long term capital loss on sale of shares (securities transaction tax not paid) 1,06,000
Income from business of textile (after allowing current year depreciation) 73,000
Income from activity of owning and maintaining race horses 21,000
Income from salary 1,38,000
Loss from house property 66,000

Following are the brought forward losses:
(i) Losses from activity of owning and maintaining race horses-pertaining to A.Y. 2017-18 ` 37,000.
(ii) Brought forward loss from business of textile ` 82,000 - Loss pertains to A.Y. 2012-13.
Compute gross total income of Mr. Alok for the Assessment Year 2020-21. Also state the losses which
are eligible for carry forward to the Assessment Year 2021-22.
Answer: Computation of Gross Total Income of Mr. Alok for A.Y. 2020-21
Particulars ` `
Salaries 1,38,000
Less: Current year loss from house property (66,000) 72,000
Profit and gains of business or profession
Income from textile business 73,000
Less: Loss from textile business brought forward from A.Y.
2012-13 82,000
Balance business loss of A.Y. 2012-13 (See Note 1) (9,000) NIL
Income from the activity of owning and maintaining race
Horses 21,000
Less: Loss from activity of owning and maintaining race
horses brought forward from A.Y. 2017-18 37,000
Loss to be carried forward to A.Y. 2021-22 (See Note 2) (16,000) NIL
Capital Gain
Short term capital gain 1,65,000
Less: Long term capital loss on sale of shares 1,06,000
Loss to be carried forward to A.Y. 2021-22 (See Note 3) (79,000) NIL
Particulars `
Current year loss from speculative business (See Note 4) 58,000
Current year long term capital loss on sale of shares (See Note 3) 79,000
Loss from activity of owning and maintaining of race horse pertaining to
A.Y.2017-18 (See Note 2) 16,000
Notes:
(1) As per Section 72(3), business loss can be carried forward for a maximum of eight assessment years
immediately succeeding the assessment year for which the loss was first computed. Since the eight year
period for carry forward of business loss of A.Y. 2012-13 expired with the A.Y. 2020-21, the
balance unabsorbed business loss of ` 9,000 cannot be carried forward to A.Y. 2021-22.
(2) As per section 74A(3), the loss incurred from the activity of owning and maintaining of race horses cannot
be set-off against income from any source other than the activity of owning and maintaining race horses.
Such loss can be carried forward for a maximum period of 4 assessment year Therefore, the unabsorbed
loss of ` 16,000 from the activity of owning and maintaining race horses pertaining to A.Y. 2017-18 can be
carried forward upto A.Y. 2021-22.
(3) Long-term capital loss on sale of such shares can be set-off against long-term capital gain on sale of land.
The balance loss of ` 79,000 cannot be set-off against short term capital gain or against any other head of
income. The same has to be carried forward for set-off against long-term capital gain of the subsequent
assessment year. Such long-term capital loss can be carried forward for a maximum of eight assessment
yea`
(4) Loss from speculation business cannot be set-off against any income other than profit and gains of
another speculation business. Such loss can, however, be carried forward for a maximum of four years as
per section 73(4) to be set-off against income from speculation business.

12. The gross total income of Mr. Mayank (New retail investor) for the Assessment Year 2021-22, was
` 8,00,000. He has made the following investment/payments during the year 2020-21-
Particulars `
1. L.I.C. premium paid (Policy value ` 2,00,000) (taken on 1.07.2012) 30,000
2. Contribution to Public Provident Fund (PPF) 110,000
3. Repayment of housing loan to Indian Bank 35,000
4. Payment made to LIC pension fund 28,000
5. Medical insurance premium for self, wife and dependent children. 32,000
6. Mediclaim premium for parents (aged over 80 years), who are
not dependent on Mayank 62,000
8. Donation to Congress Party by crossed cheque 30,000
Compute eligible deduction under Chapter VI-A for the Assessment Year 2020-21.
Answer:
Computation of eligible deduction under Chapter VI-A of Mr. Mayank for A.Y. 2020-21
Particulars ` `
Deduction under Section 80C
LIC premium paid ` 30,000 20,000
[Limited to 10% of policy value, since policy has been taken
on or after 1.04.2012 (10% x ` 2,00,000)]
Contribution to PPF 1,10,000
Repayment of housing loan to Indian Bank 35,000
1,65,000
Deduction allowed under section 80C, restricted to 1,50,000
Deduction under Section 80CCC

Payment to LIC Pension Fund 28,000
1,78,000
Deduction limited to ` 1,50,000 as per section 80CCE 1,50,000
Deduction under Section 80D
Payment of medical insurance premium ` 32,000 for self, wife
and dependent children. Deduction limited to ` 25,000. 25,000
Medical insurance premium paid for non-dependant parents
` 62,000 (limited to ` 50,000, being the limit applicable for
senior citizens) 50,000 75,000
Deduction under section 80GGC

Donation to National Congress party by crossed cheque 30,000 30,000
Eligible deduction under Chapter VI-A 2,55,500
13. Examine the applicability of the provisions for tax deduction at source in the following cases –
(i) The firm, M/s Duplicate, has two resident partners, Mr. Vikul and Mr. Rahul. During the previous
year, the firm paid ` 25,000 and ` 30,000 as interest on capital to Mr. Vikul and Mr. Rahul,
respectively.
(ii) Fee of ` 41,000 paid to Dr. Kunal Garg by Taneja (HUF) for surgery performed on Master Vatsal
Taneja, son of the Karta of HUF.
(iii) Mr. Dheeraj, a resident, is due to receive ` 5.50 lakhs on 31.5.2019, towards maturity proceeds of
LIC policy taken on 1.4.2012, for which the sum assured is ` 4.5 lakhs and the annual premium is `
55,000.
Answer:
(i) Section 194A requiring deduction of tax at source on any income by way of interest, other than interest on
securities, credited or paid to a resident, excludes from its scope, income credited or paid by a firm
to its resident partner.
Therefore, no tax is required to be deducted at source under Section 194A on interest on capital of `
25,000 and ` 30,000 paid by the firm, M/s Duplicate, to its resident partners Mr. Vikul and Mr. Rahul.

(ii) As per the provisions of Section 194J, a Hindu Undivided Family is required to deduct tax at source on
fees paid for professional services only if it is subject to tax audit under section 44AB in the financial year
preceding the current financial year.
However, if such payment made for professional services is exclusively for the personal purpose of
any member of Hindu Undivided Family, then, the liability to deduct tax is not attracted.
Therefore, in the given case, even if Taneja (HUF) is liable to tax audit in the immediately preceding
financial year, the liability to deduct tax at source under section 194J is not attracted in this case
since, the fees for professional service paid to Dr. Kunal Garg is for personal purpose i.e. for the
purposes of surgery on a member of the family.
(iii) Since the annual premium exceeds 10% of sum assured in respect of a policy taken on 1.4.2012, the
maturity proceeds of ` 5.50 lakhs are not exempt under section 10(10D) in the hands of Mr. Dheeraj, a
resident individual. Therefore, tax is required to be deducted@1% under section 194DA on the maturity
proceeds of ` 5.50 lakhs payable to Mr. Dheeraj. This Section is amended from 01/09/2019.
14. State with reasons, whether the following statements are true or false, with regard to the provisions
of the Income-tax Act, 1961:
(i) Where the Karta of a HUF is absent from India, the return of income can be verified by any male
member of the family.
Answer:
(i) False: Section 140(b) provides that where the Karta of a HUF is absent from India, the return of income
can be verified by any other adult member of the family; such member can be a male or female
member.


1. [DEDUCTION CHAPTER] - Determine the taxability of the following sums received by Mr. Tularam
from LIC on account of the life insurance policies taken by him -
S. Date of Person insured Actual Annual sums
No. Issue of capital insurance received as
Policy sum premium bonus during
Assured the previous
year 2019-20
1. 20.10.2010 Minor Son 5,00,000 75,000 60,000
2. 10.06.2012 Spouse 2,00,000 30,000 15,000
3. 11.04.2013 Handicapped daughter 8,00,000 1,00,000 18,000
(section 80U disability)
Answer:
Taxability of the sums received by way of bonus in the hands of Mr. Tularam from LIC shall be determined in
accordance with the provisions of section 10(10D) in the following manner:
S. Date of Person Insured Actual Annual Sums recived
No. issue of Capital Sum Insurance as bonus during
Policy Assured Premium the previous year
2019-20
1. 20.10.2010 Minor Son 5,00,000 75,000 60,000
Taxability:
Sum received is exempt under section 10(10D), as the policy is issued on or
before 31.3.2012 and the annual premium does not exceed 20% of the Actual
Capital Sum Assured.
2. 10.06.2012 Spouse 2,00,000 30,000 15,000
Taxability:
Sum received is taxable, as the policy is issued after 1.4.2012 and the annual premium exceeds
10% of the Actual Capital Sum Assured.
3. 11.04.2013 Handicapped 8,00,000 1,00,000 18,000

daughter
(section 80U
disability)
Taxability:
Sum received is exempt under section 10(10D), since the policy is issued after
1.4.2013 for insuring the life of the handicapped daughter, being a person with
section 80U disability, and the annual premium does not exceed 15% of the
Actual Capital Sum Assured.
2. IMPORTANT: [HOUSE PROPERTY] - Mr. Karan and Mr. Kunal constructed their houses on a piece of
land purchased by them at Kanpur. The built up area of each house was 1,250 sq.ft. ground floor and
an equal area in the first floor. Karan started construction on 1-04-2017 and completed on 1-04-2019.
Kunal started the construction on 1-07-2018 and completed the construction on 30-06-2019. Karan
occupied the entire house on 01-04-2019. Kunal occupied the ground floor on 01-07-2019 and let out
the first floor for a rent of ` 25,000 per month.
However, the tenant vacated the house on 30-11-2019 and Kunal occupied the entire house during the
period 01-12-2019 to 31-03-2020.
Following are the other information:

(i) Fair rental value of each unit (ground floor/first floor) ` 1,25,000 per annum
(ii) Municipal value of each unit (ground floor/first floor) ` 80,000 per annum
(iii) Municipal taxes paid by Karan – ` 10,000
Kunal – ` 10,000

(iv) Repair and maintenance charges paid by Karan – ` 35,000
Kunal– ` 32,000
Karan has availed a housing loan of ` 30 lakh @ 11% p.a. on 01-04-2018. Kunal has availed a housing
loan of ` 25 lakh @ 10% p.a. on 01-07-2018. No repayment was made by either of them till 31-03-2020.
Compute income from house property for Karan and Kunal for the A.Y. 2020-21.
Answer:
Computation of income from house property of Mr. Karan for A.Y. 2020-21
Particulars ` `
Annual Value is nil (since house is self occupied) Nil
Less : Deduction under section 24(b)
Interest paid on borrowed capital ` 30,00,000 @ 11% 3,30,000
Pre-construction interest ` 3,30,000 / 5 66,000
3,96,000
As per second proviso to section 24(b), interest deduction
Loss under the head “income from house property” of Mr. Karan (2,00,000)
Computation of income from house property of Mr. Kunal for A.Y. 2020-21
Particulars Ground First floor

floor (Self
occupied)
Gross Annual Value (See Note below) Nil 1,25,000

Less : Municipal taxes (for first floor) 5,000
Net Annual Value (A) Nil 1,20,000
Less : Deductions under section 24
(a) 30% of Net Annual Value 36,000
(b) Interest on borrowed capital
Current year interest
` 25,00,000 x 10% = ` 2,50,000 1,25,000 1,25,000
` 25,00,000 x 10% x 9/12 = ` 1,87,500
` 1,87,500 allowed in 5 equal installments
` 1,87,500 / 5 = ` 37,500 per annum 18,750 18,750
Total deduction under section 24 (B) 1,43,750 1,79,750
Income from house property (A)-(B) (1,43,750) (59,750)
Loss under the head “income from house property” of Mr.

Kunal (both ground floor and first floor) (2,03,500)
Note : Computation of Gross Annual Value (GAV) of first floor of Kunal’s house
If a single unit of property (in this case the first floor of Kunal’s house) is let out for some months and self-
occupied for the other months, then the annual letting value (ALV) of the property shall be taken into account
for determining the annual value. The ALV shall be compared with the actual rent and whichever is higher
shall be adopted as the annual value. In this case, the actual rent shall be the rent for the period for which the
property was let out during the previous year.
The Annual Letting Value (ALV) is the higher of fair rent and municipal value. This should be considered for 9
months since the construction of property was completed only on 30.6.2019.
Annual letting value = ` 93,750, being higher of -

Fair rent = 125,000 x 9 /12 = ` 93,750
Municipal value = 80,000 x 9/12 = ` 60,000
Actual rent = ` 1,25,000 (` 25,000 p.m. for 5 months from July to November, 2019)
Gross annual value = ` 1,25,000 (being higher of ALV of ` 93,750 and actual rent of ` 1,25,000)

3. VERY IMPORTANT: [CAPITAL GAIN] Ms. Gunjan purchased a land at a cost of ` 50 lakh in the
financial year 2010-11 and held the same as her capital asset till 31st August, 2015. She started her
real estate business on 1st September, 2015 and converted the said land into stock-in-trade of her
business on the said date, when the fair market value of the land was ` 320 lakh.
She constructed 8 flats of equal size, quality and dimension. Cost of construction of each flat is ` 36
lakh. Construction was completed in January, 2020. She sold 5 flats at ` 90 lakh per flat in February,
2020.
She invested ` 70 lakh in bonds issued by National Highways Authority of India on 31st March, 2020.
Compute the capital gains and business income arising from the above transactions in the hands of
Ms. Gunjan for Assessment Year 2020-21 indicating clearly the reasons for treatment for each item.
Cost Inflation Indices: F.Y. 2010-11: 167; F.Y. 2015-16: 254; F.Y. 2019-20: 289.
Answer:
Computation of capital gains and business income of Ms. Gunjan for A.Y. 2020-21
Particulars `
Capital Gains
Fair market value of land on the date of conversion deemed as the full
value of consideration for the purposes of section 45(2) 3,20,00,000
Less: Indexed cost of acquisition [` 50,00,000 × 254/167] 76,04,790
2,43,95,210
Proportionate capital gains arising during the A.Y. 2020-21
(2,43,95,210 x 5/8) 1,52,47,006
Less: Exemption under section 54EC (restricted to ` 50 lakh) 50,00,000
Capital gains chargeable to tax for A.Y. 2020-21 1,02,47,006
Business Income
Sale price of flats [5 × ` 90 lakh] 4,50,00,000
Less: Cost of flats
Fair market value of land on the date of conversion (3,20,00,000 x 5/8) 2,00,00,000
Cost of construction of flats [5 × ` 36 lakh] 1,80,00,000
70,00,000
Notes:
(1) The conversion of a capital asset into stock-in-trade is treated as a transfer under section 2(47). It would
be treated as a transfer in the year in which the capital asset is converted into stock-in-trade.
(2) However, as per section 45(2), the capital gains arising from the transfer by way of conversion of capital
assets into stock-in-trade will be chargeable to tax only in the year in which the stock-in-trade is sold.
(3) The indexation benefit for computing indexed cost of acquisition would be available only up to the year of
conversion of capital asset to stock-in-trade and not up to the year of sale of stock-in-trade.
(4) For the purpose of computing capital gains in such cases, the fair market value of the capital asset on the
date on which it was converted into stock-in-trade shall be deemed to be the full value of consideration
received or accruing as a result of the transfer of the capital asset.
In this case, since only 5/8th of stock-in trade (5 flats out of 8 flats) is sold in the P.Y. 2019-20 only
proportionate capital gains (i.e. 5/8th) would be chargeable to tax in the A.Y. 2020-21.
(5) On sale of such stock-in-trade (i.e., flats, in this case), business income would arise. The business income
chargeable to tax would be the price at which the flats are sold as reduced by the fair market value on the
date of conversion of the capital asset (i.e., land) into stock-in-trade and the cost of construction of flats.
(6) In case of conversion of capital asset into stock-in-trade and subsequent sale of stock-in-trade, the period
of 6 months, for the purpose of exemption under section 54EC, is to be reckoned from the date of sale of
stock-in-trade [CBDT Circular No.791 dated 2.6.2000]. In this case, since the investment in bonds of
NHAI has been made within 6 months of sale of flats, the same qualifies for exemption under section
54EC, subject to a maximum of ` 50 lakh.

4. [INCOME FROM OTHER SOURCES] - Discuss the Tax implications under Section 56(2) in respect of
each of the following transactions:
(i) Mr. Tejpal received a painting by M. F. Hussain worth ` 2 lakh from his nephew on his 10th
wedding anniversary.
(ii) Verma’s son transferred shares of D Ltd. to Verma HUF without any consideration. The fair market
value of the shares is ` 2.5 lakh.
(iii) Sunshine (P) Ltd. purchased 9,500 equity shares of Saturn (P) Ltd. at ` 86 per share. The fair
market value of the share on the date of transaction is ` 105.
(iv) Bijali (P) Ltd. issued 28,000 equity shares of ` 10 each at a premium of ` 8. The fair market value of
each share on the date of issue is ` 15.
(v) Mr. Sharan’s land was acquired by the Government in August 2014. He received interest of `
5,40,000 on enhanced compensation in January, 2020, out of which ` 1,20,000 related to the year
2015-16, ` 1,60,000 related to the year 2016-17, ` 2,00,000 related to the year 2017-18 and 60,000
related to the year 2018-19.
Answer:
Tax implications under Section 56(2)
(i) Since paintings are included in the definition of “property”, therefore, when paintings are received without
consideration, the same is taxable under section 56(2)(x), as the aggregate fair market value of paintings
exceed ` 50,000. Therefore, ` 2,00,000, being the value of painting gifted by his nephew, would be
taxable under section 56(2)(x) in the hands of Mr. Tejpal, since “nephew” is not included in the definition
of “relative” thereunder.
(ii) Any property received without consideration by a HUF from its relative is not taxable under section
56(2)(x).
Since Verma’s son is a member of Verma HUF, he is a “relative” of the HUF. Therefore, if Verma HUF
receives any property (shares, in this case) from its member, i.e., Verma’s son, without consideration,
then, the fair market value of such shares will not be chargeable to tax in the hands of the HUF, since gift
received from a “relative” is excluded from the scope of section 56(2)(x).
(iii) The difference between the aggregate fair market value of shares of a closely held company and the
consideration paid for purchase of such shares is deemed as income in the hands of the purchasing
company under section 56(2)(x), if the difference exceeds ` 50,000.
Accordingly, in this case, the difference of ` 1,80,500 [i.e.,( ` 105 – ` 86) × 9,500] is taxable under section
56(2)(x) in the hands of Sunshine (P) Ltd.
(iv) The provisions of section 56(2)(viib) are attracted in this case since the shares of a closely held company
are issued at a premium (i.e., the issue price of ` 18 per share exceeds the face value of ` 10 per share)
and the issue price exceeds the fair market value of such shares.
The consideration received by the company in excess of the fair market value of the shares would be
taxable under section 56(2)(viib).
Therefore, ` 84,000 {i.e., (` 18 – ` 15) x 28,000 shares} shall be the income chargeable under section
56(2)(viib) in the hands of Bijali (P) Ltd.
(v) Interest received on enhanced compensation shall be deemed to be the income of the previous year in
which it is received, irrespective of the method of accounting followed by the assessee. Therefore, in this
case, interest on enhanced compensation received by Mr. Sharan in January, 2020 shall be deemed to
be the income of P.Y. 2019-20, i.e., the year of receipt, irrespective of the method of accounting followed
by him.
Such interest is taxable under section 56(2)(viii):

(` 1,20,000 + ` 1,60,000 + ` 2,00,000+ ` 60,000) ` 5,40,000
Less: Deduction under section 57(iv)@50% of ` 5,40,000 ` 2,70,000
Taxable interest income ` 2,70,000

5. IMPORTANT - [PGBP+CG+IOS] - Mr. Suraj, a Sales Manager with Moon Ltd., sold a building to his
friend Mr. Rohan, who is engaged in the business of artificial jewellery, for ` 80 lakh on 01.01.2020,
when the stamp duty value was ` 220 lakh. The agreement was, however, entered into on 04.06.2019
when the stamp duty value was ` 150 lakh. Mr. Suraj had received a down payment of ` 30 lakh by
cheque from Mr. Rohan on the date of agreement. Discuss the tax implications in the hands of Mr.
Suraj and Mr. Rohan, assuming that Mr. Suraj had purchased the building for ` 61 lakh on 20th
October, 2018.
Would your answer be different if Mr. Suraj was a property dealer and he sold the building to Mr.
Rohan in the course of his business?
Answer:
(a) Tax implications on sale of a building representing a capital asset in the hands of Mr. Suraj, a
salaried employee
(i) Tax implications in the hands of Mr. Suraj for A.Y. 2020-21
The building represents a capital asset in the hands of Mr. Suraj, a salaried employee. On sale of the
building, the provisions of Section 50C are attracted and ` 89 lakh, being the difference between the
stamp duty value on the date of agreement (i.e., ` 150 lakh) and the purchase price (i.e., ` 61 lakh)
would be chargeable as short-term capital gains in the hands of Mr. Suraj. [Here SDV exceeds 105%
of sale price]
It may be noted that under section 50C, there is now an option to adopt the stamp duty value on the date
of agreement, even if the date of agreement is different from the date of registration and part of the
consideration has been received on or before the date of agreement otherwise than by way of cash.
(ii) Tax implications in the hands of Mr. Rohan for A.Y. 2020-21
The building purchased would be a capital asset in the hands of Mr. Rohan, who is engaged in the
business of artificial jewellery. The provisions of section 56(2)(x) would be attracted in the hands of Mr.
Rohan who has received immovable property, being a capital asset, for inadequate consideration.
For the purpose of Section 56(2)(x), Mr. Rohan can take the stamp duty value on the date of agreement
instead of the date of registration since he has paid part of the consideration by a mode other than cash
on the date of agreement.
Therefore, ` 70 lakh, being the difference between the stamp duty value of the property on the date of
agreement (i.e., ` 150 lakh) and the actual consideration (i.e., ` 80 lakh) would be taxable as per section
56(2)(x) under the head “Income from other sources” in the hands of Mr. Rohan.
(b) Tax implications if Mr. Suraj is a property dealer
(i) Tax implications in the hands of Mr. Suraj for A.Y. 2020-21
If Mr. Suraj is a property dealer who has sold the building in the course of his business, the provisions of
section 43CA would be attracted, since the building represents his stock-in-trade and he has transferred
the same for a consideration less than the stamp duty value.
For the purpose of Section 43CA, Mr. Suraj can take the stamp duty value on the date of agreement
instead of the date of registration since he has received part of the consideration by a mode other than
cash on the date of agreement.
Therefore, ` 89 lakh, being the difference between the stamp duty value on the date of agreement (i.e., `
150 lakh) and the purchase price (i.e., ` 61 lakh), would be chargeable as business income in the hands
of Mr. Suraj.
(ii) Tax implications in the hands of Mr. Rohan for A.Y. 2020-21
There would be no difference in the taxability in the hands of Mr. Rohan, whether Mr. Suraj is a property
dealer or a salaried employee. Therefore, the provisions of section 56(2)(x) would be attracted in the
hands of Mr. Rohan who has received immovable property, being a capital asset, for inadequate
consideration.
Consequently, ` 70 lakh, being the difference between the stamp duty value of the property on the date of
agreement (i.e., ` 150 lakh) and the actual consideration (i.e., ` 80 lakh) would be taxable as per section
56(2)(x) under the head “Income from other sources” in the hands of Mr. Rohan.

6. [TDS CHAPTER] - State, in brief, the applicability of tax deduction at source provisions, the rate and
amount of tax deduction in the following cases for the financial year 2019-20:
(i) Mr. Jagdish sold his house property in Delhi as well as rural agricultural land for a consideration
of ` 80 lakh and ` 25 lakh, respectively, to Mr. Siddharth on 31st August 2019.
(ii) Payment of royalty of ` 25,000 and fee for professional services of ` 28,000 to Mr. Varun.
(iii) Punjab National Bank pays ` 1,00,000 per month as rent to the Central Government for a building
in which one of its branches is situated.
(iv) Payment of ` 2,48,000 on 01.07.2019 to Mr. Karan for compulsory acquisition of his urban land by
the State Government.
Answer:
(i) Since the sale consideration of house property exceeds ` 50 lakh, Mr. Siddharth is required to deduct tax
at source under section 194-IA. The tax to be deducted under section 194IA would be ` 80,000, being 1%
of ` 80 lakh. TDS provisions under section 194-IA are not attracted in respect of transfer of rural
agricultural land.
(ii) As per Section 194J, liability to deduct tax is attracted only in case the payment made as fees for
professional services and royalty, individually, exceeds ` 30,000 during the financial year. In the given
case, since, the individual payment for fee of ` 28,000 for professional services and royalty of ` 25,000 is
less than ` 30,000 each, there is no liability to deduct tax at source. It is assumed that no other payment
towards fees for professional services and royalty were made during the year to Mr. Varun.
(iii) Section 194-I, which requires the deduction of tax at source on payment of rent exceeding ` 1,80,000 per
annum is applicable to all persons other than individuals and HUF’s, who are not subject to tax audit in
the immediately preceding financial year.
Therefore, the TDS provisions under section 194-I are applicable in respect of rental payments made by a
bank. However, under Section 196, payments made to Government are exempt from the
application of provisions of tax deduction at source.
Hence, Punjab National Bank is not required to deduct tax at source on payment of ` 1,00,000 per month
as rent to Central Government.
(i) As per Section 194LA, any person responsible for payment to a resident, any sum in the nature of
compensation or consideration on account of compulsory acquisition under any law, of any immovable
property, is responsible for deduction of tax at source if such payment or the aggregate amount of such
payments to the resident during the financial year exceeds ` 2,50,000.
In the given case, no liability to deduct tax at source is attracted as the payment made does not exceed
` 2,50,000.


1. Mr. Hansraj, an Indian citizen, is a Government employee serving in the Ministry of External Affairs.
He left India for the first time on 22.02.2019 due to his transfer to Indian Embassy in Germany. He did
not visit India any time during the previous year 2019-20. He has received the following income during
the Financial Year 2019-20:
Particulars `
(i) Salary for the year 7,00,000
(ii) Foreign Allowance 3,50,000
(iii) Income from house property in Nepal 2,50,000
(iv) Income from agriculture in Bhutan 2,00,000
(v) Interest on fixed deposit with State Bank of India 80,000
Compute his gross total income for Assessment Year 2020-21.
Solution:
Computation of Gross Total Income of Mr. Hansraj for A.Y. 2020-21
Particulars `
Salaries [See Note 2] 6,50,000
Foreign Allowance [See Note 3] Nil
Income from other sources (Interest on fixed deposit in India) 80,000
Notes:
(1) As per section 6(1), Mr. Hansraj is a non-resident for the F.Y. 2019-20, since he was not present in India at
any time during the previous year 2019-20. As per section 5(2), a non-resident is chargeable to tax in India
only in respect of following incomes:
(ii) Income accruing or arising or deemed to accrue or arise in India. In view of the above provisions, income
from agriculture in Bhutan and income from house property in Nepal would not be chargeable to tax in the
hands of Hansraj, assuming that the same were received in Bhutan and Nepal, respectively.
(2) Income from ‘Salaries’ payable by the Government to a citizen of India for services rendered outside India is
deemed to accrue or arise in India as per section 9(1)(iii).
Hence, such income is taxable in the hands of Mr. Hansraj, even though he is a non-resident. Further, he is
eligible for deduction of ` 50,000.
(3) Allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for
rendering service outside India are exempt under section 10(7). Hence, foreign allowance of ` 3,50,000 is
exempt under section 10(7).
2. Examine the following, with reference to the provisions of the Income-tax Act, 1961:
(i) Paras Ltd. had taken a Keyman Insurance policy on the life of its Chief Executive Officer, Mr.
Dayal. Subsequently, during the term of the policy, it assigned the policy to Mr. Dayal. The
proceeds of ` 25 lakhs on matured policy were received by Mr. Dayal on 31st January 2020. Mr.
Dayal claimed exemption under section 10(10D) in respect of the said sum of ` 25 lakhs. Is his
claim tenable in law?
(ii) Mr. Sumeet held 100 unlisted shares of A Ltd., a domestic company. On 31.08.2019, he received `
25,000 from A Ltd. for buy back of the unlisted shares held by him. Is the amount chargeable to
tax in the hands of Mr. Sumeet?

Solution:
(i) Under section 10(10D), any sum received under a life insurance policy is exempt, except, inter alia, any sum
received under a Keyman Insurance Policy.
The scope of the term “Keyman Insurance Policy” has been amplified to include a Keyman Insurance Policy
which has been assigned by the person who had taken the policy (Paras Ltd., in this case), to any employee
during its term. Such policies shall continue to be treated as Keyman Insurance Policy even after the
same is assigned to a keyman. Therefore, Mr. Dayal will not be entitled to exemption under section
10(10D), in respect of the proceeds of ` 25,00,000 received by him under Keyman Insurance Policy.
(ii) The buyback of unlisted shares would attract additional income-tax under Section 115QA in the hands of the
domestic company, i.e., A Ltd. in this case. Consequently, the income arising to Mr. Sumeet in respect of
such buyback of unlisted shares by A Ltd. would be exempt under section 10(34A).
3. Mr. Madhav is the Finance Head of Gamma Ltd. at Ahmedabad. From the following details, compute
his total income for the AY 2020-21:
Basic salary ` 22,500 per month

Dearness allowance 1/4th of basic salary
Transport allowance (for commuting between place of residence and office) ` 2,800 per month
Cost of laptop facility provided for both official and personal use ` 40,000
Conveyance allowance (out of the said amount ` 10,000 was incurred on ` 12,000
conveyance for his official duties)
Expenditure on accommodation in hotels while touring on official duties met by ` 45,000
the employer
Lunch provided by the employer during office hours. Cost to the employer ` 13,500
Gamma Ltd. had taken a house on lease for which it paid a rent of ` 3,500 p.m.
The said accommodation was provided to Mr. Madhav, who pays rent @ ` 1,000
p.m to the company. Gamma Ltd. also hired furniture @ ` 500 p.m and provided
the same to Mr. Madhav free of cost. In addition, the company provided a
television owned by it (Cost ` 20,000) to Mr. Madhav, free of cost.
Mr. Madhav made the following payments:

Medical insurance premium : Paid in cash ` 1,500
Paid by cheque ` 4,500
Contribution to Public Provident Fund (PPF) ` 1,00,000
Solution:
Computation of total income of Mr. Madhav for the A.Y. 2020-21
Particulars ` `
Basic salary (` 22,500 x 12) 2,70,000
Dearness allowance (1/4th of basic salary) 67,500
Transport allowance (` 2,800 x 12) 33,600
Facility for use of laptop [See Note 1] Nil
Conveyance Allowance [See Note 2] 2,000
Expenditure on accommodation while on official duty not a perquisite and
hence, not chargeable to tax Nil
Value of lunch provided during working hours [See Note 3] Nil
Value of concessional accommodation [See Note 4] 38,000
Income from Salary as well as Gross Total Income 3,61,100
Less : Deduction under Chapter VI-A
Under section 80C 1,00,000
Contribution to PPF
Under section 80D
Medical insurance premium paid by cheque 4,500
Premium paid in cash not eligible for deduction Nil 1,04,500

Notes:
(1) As per Rule 3(7)(vii), facility for use of laptop is not a taxable perquisite, even if it is used for personal
purposes.
(2) As per section 10(14), conveyance allowance granted to meet expenditure incurred on conveyance for
official duties of an employee is exempt. Hence, ` 10,000 would be exempt under section 10(14) in the
hands of Mr. Madhav and the balance of ` 2,000 would be taxable.
(3) As per Rule 3(7)(iii), free food provided by the employer during working hours will not be treated as
perquisite provided the value thereof does not exceed fifty rupees per meal. In this case, assuming
that the value per meal does not exceed ` 50, the cost to employer would not be chargeable to
tax.
(4) Perquisite Value of Furnished Accommodation provided at concessional rent:
Particulars ` `
Transport Allowance (the portion which is chargeable to tax) 33,600
Conveyance Allowance 2,000
“Salary” for the purpose of perquisite value of accommodation 3,05,600
15% of salary (A) 45,840
Rent paid by the company for the accommodation @ ` 3,500 p.m. (B) 42,000
Lower of (A) and (B) would be taken as the perquisite value of accommodation 42,000
i.e.
Less: Rent paid by Madhav (` 1,000 × 12) 12,000
30,000
Add: Value of furniture provided by employer:
Rent for furniture (` 500 × 12) 6,000
Television (` 20,000 × 10% p.a.) 2,000 8,000
Value of furnished accommodation given at concessional rent 38,000
Note - It is assumed that dearness allowance does not form part of retirement benefits and therefore,
the same has not been considered for computation of value of furnished accommodation.
4. Mrs. Dholakia owns a house property whose Municipal Value, Fair Rent and Standard Rent are `
1,02,000 p.a., ` 1,32,000 p.a. and 1,14,000 p.a., respectively. During the Financial Year 2019-20, one-
third of the portion of the house was let out for residential purpose at a monthly rent of ` 7,000. The
remaining two-third portion was self-occupied by her. Municipal tax @ 15% of municipal value was
paid by her during the year.
The construction of the house began in May, 2012 and was completed on 31-8-2015. Mrs. Dholakia
took a loan of ` 1,00,000 on 1-5-2012 for the construction of house. She paid interest on loan @ 12%
per annum and such interest was paid every month. Compute income from house property of Mrs.
Dholakia for the Assessment Year 2020-21.
Solution:
Computation of income from house property of Mrs. Dholakia for the A.Y. 2020-21
Particulars ` `
I. Self-occupied portion (Two third) Nil
Net Annual value
Less: Deduction under section 24(b)
Interest on loan (See Note below) (` 19,000 x 2/3) 12,667
Loss from self occupied property (12,667)
II. Let-out portion (One third)
Gross Annual Value
(a) Actual rent received (` 7,000 x 12) = ` 84,000
(b) Annual Letting Value (ALV)
[Higher of municipal valuation (i.e. ` 1,02,000) and fair rent (i.e. ` 1,32,000)
but restricted to standard rent (i.e. ` 1,14,000)] = ` 1,14,000 x 1/3 = `
38,000
Higher of (a) or (b) 84,000
Less: Municipal taxes (` 1,02,000 x 15% x 1/3) 5,100
Net Annual Value 78,900

(a) 30% of NAV 23,670
(b) Interest on loan (See Note below) (` 19,000 x 1/3) 6,333 48,897
Note: Interest on loan taken for construction of building

Interest for the year (1.4.2019 to 31.3.2020) = 12% of ` 1,00,000 = ` 12,000
Pre-construction period interest = 12% of ` 1,00,000 for 35 months (from 1.05.2012 to 31.3.2015) = ` 35,000
Pre-construction period interest to be allowed in 5 equal annual installments of ` 7,000 from the year of
completion of construction i.e. from F.Y. 2015-16 to F.Y. 2020-21.
Therefore, total interest deduction under section 24 = ` 12,000 + ` 7,000 = ` 19,000.
5. State with reasons, the deductibility or otherwise of the following expenses/payments under the
Income-tax Act, 1961, while computing income under the head “Profits and gains of business or
profession” for the Assessment Year 2020-21:
(i) Murugan paid ` 75,000 as commodity transaction tax in respect of sale of commodity derivatives
during the previous year 2019-20.
(ii) Clean (P) Ltd. incurred an amount of ` 2,50,000 on a notified project to enhance skill development
of its employees.
Solution:
(i) An amount equal to commodity transaction tax paid by the assessee shall be allowable as deduction, under
new section 36(1)(xvi), if the income arising from taxable commodities transactions is included in the income
computed under the head “Profits and gains of business or profession”.
In the given case, Murugan, is entitled to claim deduction in respect of commodity transaction tax of ` 75000
paid by him, on sale of commodity derivatives, if the income arising from taxable commodities
transactions is included in the income computed under the head “Profits and gains of business or
profession”.
(ii) Clean (P) Ltd. is entitled to a weighted deduction of a sum equal to 150% of the expenditure incurred by
it on notified skill development project, under section 35CCD. Therefore, it can claim ` 3,75,000 (i.e.,
150% of ` 2,50,000) as deduction under section 35CCD for the P.Y. 2019-20.
6. Shri. Laxman reports the following transactions to you:

(i) Received cash gifts on the occasion of his marriage on 15-6-2019 of ` 1,08,000. It includes gift of
` 28,000 received from non-relatives.
(ii) On 15-8-2019, being his birthday, he received a gift by means of cheque from his mother's
maternal aunt for an amount of ` 49,000.
(iii) On 25-12-2019 he acquired a vacant site from his friend for ` 1,50,000. The State stamp valuation
authority fixed the value of site at ` 2,25,000 for stamp duty purpose.
(iv) He bought 200 equity shares of a listed company from another friend for ` 75,000. The value of
shares in the stock exchange on the date of purchase was ` 1,75,000.
(v) A cell phone worth ` 21,000 is gifted by his friend on 16.8.2019
Determine the amount chargeable to tax in the hands of Shri Laxman for the Assessment Year 2020-21.
Your answer should be supported with reasons.
Solution:
Computation of amount chargeable to tax in hands of Shri. Laxman for A.Y. 2020-21
Particulars `
(i) Cash gift of ` 1,08,000 received on the occasion of his marriage is not taxable since gifts Nil
received by an individual on the occasion of marriage are excluded under section 56(2)(x),
even if the same are from non-relatives.
(ii) Even though mother’s maternal aunt does not fall within the definition of “relative” under Nil
section 56(2)(x), gift of ` 49,000 received from her by cheque is not chargeable to tax since the
aggregate sum of money received by Shri. Laxman without consideration from non-relatives
(other than on the occasion of marriage) during the previous year 2019-20 does not exceed `
50,000.

(iii) Purchase of land for inadequate consideration on 25.12.2019 would attract the provisions of 75,000
section 56(2)(x). Where any immovable property is received for a consideration which is less
than the stamp duty value of the property by an amount exceeding higher of ` 50,000 or 5% of
sales consideration, the difference between the stamp duty value and consideration is
chargeable to tax in the hands of the individual. Therefore, in the given case ` 75,000 is
taxable in the hands of Shri. Laxman
(iv) Since shares are included in the definition of “property” and difference between the purchase 100,000
price and fair market value of shares is ` 1,00,000 (` 1,75,000 - ` 75,000) i.e. it exceeds `
50,000, the difference would be taxable under section 56(2)(x).
(v) Cell phone is not included in the definition of “property” as per Explanation to section 56(2)(x). Nil
Hence, it is not taxable.
Amount chargeable to tax 1,75,000
7. Mr. Sunil sold his house property in Hyderabad as well as his rural agricultural land for a
consideration of ` 70 lakh and ` 20 lakh, respectively, to his friend Mr. Ravi on 1.10.2019. He has
purchased the house property and the land in the year 2018 for ` 45 lakh and ` 12 lakh, respectively.
The stamp duty value on the date of transfer, i.e.,1.10.2019, is ` 78 lakh and ` 22 lakh for the house
property and rural agricultural land, respectively. Determine the tax implications in the hands of Mr.
Sunil and Mr. Ravi and the TDS implications, if any, in the hands of Mr. Ravi, assuming that both Mr.
Sunil and Mr. Ravi are resident Indians.
Solution: Tax implications on sale of house property and rural agricultural land at a price lower than the
stamp duty value
(i) Tax implications in the hands of Mr. Sunil As per section 50C, the stamp duty value of house property (i.e.
` 78 lakh) would be deemed to be the full value of consideration arising on transfer of property. Therefore, `
33 lakh (i.e. ` 78 lakh – ` 45 lakh, being the purchase price) would be taxable as short-term capital gains in
the A.Y.2020-21. Since rural agricultural land is not a capital asset, the gains arising on sale of such land is
not taxable in the hands of Mr. Sunil.
(ii) Tax implications in the hands of Mr. Ravi In case immovable property is received for inadequate
consideration, the difference between the stamp value and actual consideration would be taxable under
section 56(2)(x), if such difference exceeds higher of ` 50,000 or 5% of sales consideration
Therefore, in this case ` 8 lakh (` 78 lakh – ` 70 lakh) would be taxable in the hands of Mr. Ravi under section
56(2)(x).
Since rural agricultural land is not a capital asset, the provisions of section 56(2)(x) are not attracted
in respect of receipt of rural agricultural land for inadequate consideration, since the definition of
“property” under section 56(2)(x) includes only the capital assets specified there under.
(iii) TDS implications in the hands of Mr. Ravi Since the sale consideration of house property exceeds ` 50
lakh, Mr. Ravi is required to deduct tax at source under section 194-IA. The tax to be deducted under section
194-IA would be ` 70,000, being 1% of ` 70 lakh.
TDS provisions under section 194-IA are not attracted in respect of transfer of rural agricultural land.
8. Mr. Avinash, entered into the following transactions during the previous year 2019-20:
(a) Mr. Avinash had a fixed deposit of ` 8,00,000 with State Bank of India. He instructed the bank to
credit the interest on the deposit @ 9% from 1-4-2019 to 31-3-2020 to the savings bank account
of Ms. Sheetal, his niece, to help her in her higher education.
(b) Mr. Avinash holds 51% share in a partnership firm. Mrs. Alka (wife of Mr. Avinash) received a
remuneration of ` 45,000 from the firm for writing its books of accounts. Mrs. Alka, being a
fashion designer, does not possess any qualification or training in the accountancy field.
(c) Mr. Avinash gifted a flat to Mrs. Alka on April 1, 2019. During the previous year 2019-20, she
received rent of ` 8,500 p.m. from letting out of the flat.
(d) Mr. Avinash gifted ` 4,00,000 to his minor son who invested the same in a business and he
derived income of ` 40,000 from the investment.
(e) Mr. Avinash’s minor daughter derived an income of ` 25,000 from participation in music shows.
During the year, Mr. Avinash got a monthly pension of ` 18,000. He had no other income. Mrs. Alka
received salary of ` 25,000 per month from a part time job as a fashion designer.
Discuss the tax implications of each transaction and compute the total income of Mr. Avinash and
Mrs. Alka.

Solution:
Computation of Total Income of Mr. Avinash and Mrs. Alka for the A.Y. 2020-21
Particulars Mr. Avinash (`) Mrs. Alka (`)
Salary income (of Mrs. Alka) - 3,00,000
Pension income (of Mr. Avinash) (` 18,000×12) -40,000 1,76,000
Income from House Property [See Note (3)] 71,400 -
Interest on Mr. Avinash’s fixed deposit with Bank of India (` 72,000
8,00,000×9%) [See Note (1)]
Remuneration received by Mrs. Alka from a partnership firm, in
which Mr. Avinash has substantial interest [See Note (2)] 45,000 1,17,000
Income before including income of minor child under 3,64,400 3,00,000

section 64(1A)
Income of the minor son from the investment made in the 38,500 -
business out of the amount gifted by Mr. Avinash
[See Note (4)]
Income of the minor daughter from music shows, being an - -
activity involving application of her skill and talent
[See Note (5)]
Total Income 4,02,900 3,00,000
Notes:
(1) As per Section 60, in case there is a transfer of income without transfer of asset from which such income is
derived, such income shall be treated as income of the transferor. Therefore, the fixed deposit interest of `
72,000 transferred by Mr. Avinash to Ms. Sheetal shall be included in the total income of Mr. Avinash.
(2) As per Section 64(1)(ii), in case the spouse of the individual receives any amount by way of income from any
concern in which the individual has substantial interest (i.e. holding shares carrying at least 20% voting power
or entitled to at least 20% of the profits of the concern), then, such income shall be included in the total
income of the individual. The only exception is in a case where the spouse possesses any technical or
professional qualifications and the income earned is solely attributable to the application of her technical or
professional knowledge and experience, in which case, the clubbing provisions would not apply.
In this case, the remuneration of ` 45,000 received by Mrs. Alka from the partnership firm, for writing its books
of account, has to be included in the total income of Mr. Avinash, as Mrs. Alka is a fashion designer and does
not possess any qualification or training in the accountancy filed for earning such remuneration and Mr.
Avinash has substantial interest in the partnership firm as he holds 51% share in the firm.
(3) According to Section 27(i), an individual who transfers any house property to his or her spouse otherwise than
for adequate consideration or in connection with an agreement to live apart, shall be deemed to be the owner
of the house property so transferred. Hence, Mr. Avinash shall be deemed to be the owner of the flat gifted to
Mrs. Alka and hence, the income arising from the same shall be computed in the hands of Mr. Avinash. Rent
received (i.e. ` 1,02,000) is taken as Gross Annual Value in the absence of other information. Deduction @
30% of Net Annual Value is allowed u/s 24. The net income from house property would be ` 71,400 (i.e. `
1,02,000- ` 30,600 being 30% of NAV).
Note: The provisions of section 56(2)(x) would not be attracted in the hands of Mrs. Alka, since she has
received immovable property without consideration from a relative i.e., her husband.
(4) As per section 64(1A), the income of the minor child is to be included in the total income of the parent whose
total income (excluding the income of minor child to be so clubbed) is greater. Further, as per section 10(32),
income of a minor child which is includible in the income of the parent shall be exempt to the extent of ` 1,500
per child.
Therefore, the income of ` 40,000 received by minor son from the investment made out of the sum gifted by
Mr. Avinash shall, after providing for exemption of ` 1,500 under section 10(32), be included in the income of
Mr. Avinash, since Mr. Avinash’s income of ` 3,64,400 (before including the income of the minor child) is
greater than Mrs. Alka’s income of ` 3,00,000. Therefore, ` 38,500 (i.e., ` 40,000 – ` 1,500) shall be included
in Mr. Avinash’s income. It is assumed that this is the first year in which clubbing provisions are attracted.
(5) In case the income earned by the minor child is on account of any activity involving application of any skill or
talent, then, such income of the minor child shall not be included in the income of the parent, but shall be
taxable in the hands of the minor child.
Therefore, the income of ` 25,000 derived by Mr. Avinash’s minor daughter from music shows, which involve
application of her skill and talent shall not be clubbed in the hands of either parent. Such income shall be
taxable in the hands of the minor daughter.
9.
Compute the eligible deduction under section 80C for A.Y. 2020-21 in respect of life insurance
premium paid by Mr. Himesh during the P.Y. 2019-20, the details of which are given hereunder –
Date of issue of Person insured Actual capital Insurance

policy Sum assured (` `) Premium paid
during 2019-20
(`
`)
(i) 1/6/2011 Mr. Himesh 3,00,000 75,000
(ii) 1/5/2013 Mrs. Himani, his wife 1,00,000 25,000
(iii) 1/7/2019 Ms. Shweta, his handicapped 2,00,000 60,000
daughter (section 80U disability)
(iv) 1/7/2019 Mr. Siddhartha, his son 1,00,000 25,000
Total Premium paid 1,85,000
Solution: (
Computation of eligible deduction under section 80C for A.Y. 2020-21
(in respect of life insurance premium paid by Mr. Himesh)
Date of Person Actual capital Insurance Restricted Deduction

issue of insured Sum assured Premium to % of u/s 80C for
policy paid during sum A.Y. 2020-
2019-20 assured) 21
(i) 1/6/2011 Mr. Himesh 3,00,000 75,000 20% 60,000
(ii) 1/5/2013 Mrs. Himani 1,00,000 25,000 10% 10,000
(iii) 1/7/2019 Handicapped daughter 2,00,000 60,000 15% 30,000
(iv) 1/7/2019 Son 1,00,000 25,000 10% 10,000
Total 1,10,000
deduction u/s 80C 1,10,000
Note:
In respect of policies issued Maximum deduction u/s 80C
(% of actual capital sum assured)
between 01-04-2003 and 31-03-2012 20%
between 01-04-2012 and 31-03-2013 10%
on or after 01-04-2013
Insurance on life of person with disability u/s 80U 15%
Others 10%
10. Mr. Rahul, aged 55 years, a resident individual and practicing Chartered/Cost Accountant, furnishes
you the receipts and payments account for the financial year 2019-20
Receipts and Payments Account
Receipts ` Payments `
Opening balance 1.4.2019 16,500 Staff salary, bonus and stipend to 1,77,000
Cash on hand and at bank Trainee
Fee from professional 8,51,500 Other administrative expenses 51,500
services Office rent 48,000
Rent 72,000 Housing loan repaid to SBI 1,00,000
Motor car loan from Vyasa 3,00,000 (includes interest of ` 65,000)
Bank (@ 11% p.a.) Life insurance premium 30,000
Motor car (acquired in Dec. 2019) 4,00,000
Medical insurance premium 15,000
(for self and wife)
Books purchased (annual 18,500
publications)
Laptop acquired on 1.12.2019 40,000
(for professional use)
Domestic drawings 2,82,000
Public provident fund subscription 45,000
Motor car maintenance 12,500
Closing balance (31.3.2020)
Cash on hand and at bank 20,500
12,40,000 12,40,000

Following further information is given to you:
(1) He occupies the first floor of the building for own residence and has let out ground floor for
residential use at a monthly rent of ` 6,000. Both the floors have the same area. The building was
constructed during the year 1997-98.
(2) Motor car was put to use both for official and personal purpose. One-fourth of the motor car use is for
personal purpose. No car loan interest was paid during the year.
(3) The written down value of assets as on 1-4-2019 are given below:
Furniture & Fittings ` 75,000
Plant & Machinery (Air-conditioners, Photocopiers, etc.) ` 90,000
Computers ` 60,000
Compute the total income of Mr. Rahul for the assessment year 2020-21, assuming that he follows
cash system of accounting regularly.
Solution:
Computation of total income of Mr. Rahul for the assessment year 2020-21
Particulars ` ` `
Self-occupied
Annual value Nil
Less: Deduction under section 24(b)
Interest on housing loan
50% of ` 65,000 = 32,500 but limited to 30,000
Loss from self occupied property (30,000)
Let out property

Annual value (Rent receivable has been taken as the annual 72,000
value in the absence of other information)
(a) 30% of Net Annual Value 21,600
(b) Interest on housing loan
(50% of ` 65,000) 32,500 54,100 17,900
Loss from house property (12,100)
Fees from professional services 8,51,500
Less: Expenses allowable as deduction
Staff salary, bonus and stipend 1,77,000
Other administrative expenses 51,500
Office rent 48,000
Motor car maintenance (12,500 x 3/4) 9,375
Car loan interest – not allowable (since the same has
not been paid and the assessee follows cash
system of accounting) Nil 2,85,875
5,65,625
Less: Depreciation
Furniture and fittings @ 10% of ` 75,000 7,500
Plant & Machinery
Opening W.D.V @ 15% of ` 90,000 13,500
Motor Car @30% (new rate as vehicle is purchased
between 23/082019 to 31/03/2020) - AMENDMENT 45,000
Motor Car @30% × ½ × 4,00,000 × ¾
Computer
Opening W.D.V @ 40% of ` 60,000 24,000
Add: Additions during the year
Laptop @ 40% of ` 40,000 for ½ year 8,000 32,000
Books being annual publications @ 40% 7,400 105,400 4,60,225

Gross Total income 4,48,125
Deduction under section 80C
Housing loan principal repayment 35,000
PPF subscription 45,000
Life insurance premium 30,000 1,10,000
Medical insurance premium paid ` 15,000 (fully
allowed since it is within the permissible limit) 15,000 1,25,000
3,23,130
11. State, in brief, the applicability of tax deduction at source provisions, the rate and amount of tax
deduction in the following cases for the financial year 2019-20:
(i) Mr. Jack sold his house property in Chennai for a consideration of ` 75 lakh to Mr. David on
31.01.2020.
(ii) ` 2,80,000 paid to Mr. Bansi on 05.07.2019 by State Government on compulsory acquisition of his
urban land.
(iii) Madona, a non-resident, received ` 40 lakh for her stage shows in India from Optimistic Ltd., an
event management company in India, on 26.12.2019.
(iv) A Ltd. paid retainership fees of ` 25,000 to its director, Mr. Ram Sharma, on 30.01.2020.
Solution:
(i) Since the sale consideration of house property exceeds ` 50 lakh, Mr. David is required to deduct tax at
source under section 194-IA at the time of credit of such sum to the account of Mr. Jack or at the time of
payment, whichever is earlier. Tax @ 1% of the sale consideration is required to be deducted by Mr. David
under section 194-IA.Tax deductible under section 194-IA = ` 75 lakh × 1% = ` 75,000
(ii) As per section 194LA, tax shall be deducted at source @ 10%, if the compensation/ consideration or
enhanced compensation/consideration on compulsory acquisition of immovable property (other than
agricultural land) during the year exceeds ` 2,50,000. Therefore, in this case, since there has been a
compulsory acquisition of urban land, tax has to be deducted at source under section 194LA.Tax deductible
under section 194LA = ` 2,80,000 × 10% = ` 28,000
(iii) Payments made to a non-resident entertainer, shall be subject to tax deduction @20% under the provisions of
section 194E plus health & education cess@4%.Tax deductible under section 194E = ` 40 lakh × 20.8% = `
8,32,000
(iv) As per section 194J, a company shall be liable to deduct tax at source @ 10% on any remuneration or fees or
commission paid to a director, on which the tax is not deductible under section 192. The limit of ` 30,000
under section 194J is not applicable on any remuneration or fees or commission payable to director of a
company. Tax deductible under section 194J = ` 25,000 x 10% = ` 2,500
12.
(i) During the P.Y. 2019-20, Mrs. Lal, a resident and ordinarily resident in India, aged 45 years, holds 18%
of equity shares in a company registered in London. She also owns a house in London. She contends
that since her total income computed as per the Income-tax Act, 1961, before allowing deduction
under Chapter VIA, is less than the basic exemption limit of `. 2.5 lakh, she is not required to file
return of income for A.Y. 2020-21. Discuss the correctness of her contention.
(ii) State with reasons whether you agree or disagree with the following statements:
(a) The return of income of a Limited Liability Partnership (LLP) can be signed by any partner.
Solution:
(i) The contention of Mrs. Lal is incorrect.
As per section 139(1), every person who is a resident, other than not-ordinarily resident in India, having –
(a) any asset (including financial interest in any entity) located outside India or
(b) signing authority in any account located outside India
is required to file a return of income in the prescribed form compulsorily on or before the due date of filing
the return of income.
Hence, the contention of Mrs. Lal is not correct, as she-

(i) holds financial interest in a company in London and
(ii) owns a house property in London.
Therefore, she has to compulsorily file her return of income for A.Y 2020-21 on or before the due date
of filing return of income.
(ii)
(a) Disagree: The return of income of LLP should be signed by a designated partner. Any other partner can
sign the Return of Income of LLP only in the following cases:-
(i) where for any unavoidable reason such designated partner is not able to sign and verify the return, or,
(ii) where there is no designated partner.

Class Notes


1. Mrs. Mitul, a resident individual, aged 63 years, is a qualified medical practitioner. She runs her own
clinic. Income & Expenditure A/c of Mrs. Mitul for the year ending March 31st 2020 is as under :
To Salary to Staff 1,20,000 By Consultation Fees 12,00,000
To Administrative Exp. 2,90,000 By Salary received from True Care 1,80,000
Hospitals (P) Ltd.
To Conveyance Expenses 24,000 By Rental Income from House Property 78,000
To Power & Fuel 24,000 By Dividend from Foreign 10,000
Companies
To Interest Loan on Housing 1,00,000
To Interest Loan for son on 26,000
Education
To Amount paid to scientific 25,000
research association approved
& Notified under section 35 8,59,000
To net profit
Total 14,68,000 Total 14,68,000
Explanatory Information:
(i) She is working part-time with True Care Hospitals (P) Ltd. Her salary details are as under:
Basic Pay ` 13,000 p.m.

Transport Allowance ` 2,000 p.m.
Total ` 15,000 p.m.
Further, during P.Y. 2019-20, her son had undergone a medical treatment in True Care Hospitals (P)
Ltd. free of cost. The hospital would have charged a sum of ` 60,000 for a similar treatment to
unrelated patients.
(ii) She owns a residential house. Ground floor of the house is self -occupied by her while first floor has
been rented out since 01/10/2019. The reconstruction of the house was started on 01-04-2019 and
was completed on 30-09-2019. The monthly rent is ` 10,000. The tenant also pays ` 3,000 p.m. as
power back-up charges. She took a housing loan of ` 12 lakhs on 01-04-2019. Interest on housing
loan for the period 01-04-2019 to 30-09-2019 was ` 60,000 and for the period 01-10-2019 to 31-03-
2019 was ` 40,000. During the year, she also paid municipal taxes for the F.Y. 2018-19 ` 5,000 and
for F.Y. 2019-20 ` 5,000.
(iii) Other information:
(a) Conveyance expenses include a sum of ` 12,000 incurred for conveyance from house to True
Care Hospitals (P) Ltd. and vice versa in relation to her employment.
(b) Power & fuel expenses include a sum of ` 6,000 incurred for generator fuel for providing power
back-up to the tenant.
(c) Administrative expenses include a sum of ` 10,000 paid as Municipal Taxes for her house.
(d) Clinic equipments' details are:
Opening W.D.V. of clinic equipments as on 01-04-2019 was ` 1,00,000 and fresh purchase made on
28-08-2019 is ` 25,000 which was paid in cash.
(e) She also paid tuition fee of ` 40,000 for her grand-daughter, which has been debited to her
Capital A/c.
(f) She availed a loan of ` 8,00,000 from bank for higher education of her son. She repaid principal
of ` 50,000 and interest of ` 26,000 during P.Y. 2019-20.
You are required to compute her total income and net tax liability for the Assessment Year
2020-21.

Answer
Computation of total income and tax liability of Mrs. Mitul for A.Y. 2020-21
Particulars ` ` `
I Income from Salaries:
Basic Pay (` 13,000 x 12) 1,56,000
Transport Allowance (` 2,000 x 12) [Fully taxable] 24,000
Cost of treatment for son in True Care Hospitals
(P) Ltd. [Exempt, since value of medical treatment provided to an
employee’s family member in any hospital maintained by the
employer is excluded from the definition of perquisite]1 Nil
Less: Standard deduction u/s 16 [Actual salary or
` 50,000, whichever is less] 50,000
1,30,000
II Income from House Property
Let out portion [First floor]2
Gross Annual Value [Rent received is taken as GAV = ` 10,000 60,000
p.m. x 6 months]
Less: Municipal taxes paid by her in the P.Y. 2019-
20 pertaining to let out portion [(` 5,000 +
` 5,000)/2], allowable since it is paid during the year, even if it 5,000
relates to earlier years
Less: Deduction u/s 24
(a) 30% of ` 55,000 16,500
(b) Interest on housing loan [(` 60,000 (+) `
50,000 66,500
40,000)/2]
(11,500)
Self-occupied portion [Ground Floor]
Annual Value Nil
Less: Deduction u/s 24
Interest on housing loan for reconstruction
` 50,000[(` 60,000 + ` 40,000)/2] restricted to 30,000 (30,000)
(41,500)
88,500
III Profits and gains of business or profession
Net profit as per Income and Expenditure account 8,59,000
Less: Items of income to be treated separately under the
respective head of income
(i) Salary received from True Care Hospitals (P) Ltd. 1,80,000
(ii) Rent from house property 78,000
(iii) Dividend from foreign companies 10,000 2,68,000
5,91,000
Less: Allowable expenditure
• Depreciation on Clinic equipments
On Opening WDV ` 1,00,000@15% 15,000
On additions during the year ` 25,000, no depreciation is Nil
allowable, since payment was made in cash and hence, it
will not form part of actual cost.
• Additional deduction of 50% for amount paid to scientific
research association (Since weighted deduction of 150% is
available in respect of such payment) 12,500

27,500
5,63,500
Add: Items of expenditure not allowable while computing
business income
(i) Interest on housing loan for reconstruction of residential 1,00,000
house
(ii) Interest on education loan for son 26,000
(i) Conveyance expenses in relation to her employment with 12,000
True Care Hospitals debited to Income and Expenditure A/c,
not allowed
(ii) Power and fuel expenses incurred for providing power back 6,000
up to tenant not deductible
(iii) Municipal tax paid relating to residential house included in
administrative expenses, not deductible 10,000 1,54,000 7,17,500
As per section 44ADA, Mrs. Mitul can opt to claim 50% of

gross receipts (`
` 6 lakhs, being 50% of ` 12 lakhs) or, as the
case may be, a sum higher than the aforesaid sum claimed
to have been earned by her. In this case, since Mrs. Mitul has
maintained books of account, she can claim the higher sum
actually earned ` 7,17,500 as her income from profession.
This solution has been worked out by considering the higher
sum actually earned by her i.e., ` 7,17,500 as her income
from profession.3

Power back up charges from tenant (` 3,000 p.m. x 6 months) 18,000
Less: Actual expenditure incurred for providing power back up 6,000 12,000
Dividend from foreign companies [not exempt u/s 10(34)] 10,000 22,000
Deduction under section 80C – Tuition fee paid for grand Nil
child is not allowable
Deduction under section 80E - Interest on loan taken for
higher education of her son is deductible [principal
repayment is not deductible] 26,000 26,000
Computation of tax liability of Mrs. Mitul for A.Y. 2020-21
Particulars ` `
Upto ` 3,00,000 Nil
` 3,00,001 – ` 5,00,000[@5% of ` 2 lakh] 10,000
` 5,00,000 – ` 8,02,000[@20% of ` 3,02,000] 60,400 70,400
Add: Health and education cess @4% 2,816
Tax liability (rounded off) 73,220
Note: Loss from house property can also be set-off against business income. In such a case, salary income
would be ` 1,30,000 and business income would be ` 6,76,000 (i.e., ` 7,17,500- ` 41,500). Gross total income,
total income and tax liability would remain the same.
Alternatively, if ` 6 lakhs, being 50% of ` 12 lakh, is considered as her professional income, her total
income and tax liability would be ` 6,84,500 and ` 48,780, respectively.

2. Mr. Jagdish, aged 61 years, has set-up his business in Thailand and is residing in Thailand since last 20
years. He owns a house property in Bangkok, half of which is used as his residence and half is given
on rent (such rent received, converted in INR is ` 6,00,000). The annual value of the house in Thailand is
` 50,00,000 i.e. converted value in INR.
He purchased a flat in Pune during F.Y. 2015-16, which has been given on monthly rent of ` 27,500 since
01.07.2018. The annual property tax of Pune flat is ` 40,000 which is paid by Mr. Jagdish whenever he
comes to India. Mr. Jagdish last visited India in July 2018. He has taken a loan from Union Bank of India
for purchase of the Pune flat amounting to ` 15,00,000. The interest on such loan for the F.Y. 2019-20
was ` 84,000. However, interest for March 2020 quarter has not yet been paid by Mr. Jagdish.
He had a house in Jaipur which was sold in May 2015. In respect of this house he received arrears of
rent of ` 96,000 in Feb. 2020 (not taxed earlier).
He also derived some other incomes during F.Y. 2019-20 which are as follows: Profit from business in
Thailand ` 2,75,000 Interest on bonds of a Japanese Co. ` 45,000 out of which 50% was received in India.
Income from Apple Orchid in Nepal given on contract and the yearly contract fee of ` 5,00,000, for F.Y.
2019-20 was deposited directly by the contractor in Kathmandu branch of Union Bank of India in Mr.
Jagdish's bank account maintained with Union Bank of India's Pune Branch.
Compute the total income of Mr. Jagdish for Assessment Year 2020-21 chargeable to income tax in
India.
Answer
Stay in India for a minimum period of 182 days in the relevant previous year or, in the alternative, 60 days in the
relevant previous year and 365 days in the four immediately preceding previous years is required to qualify as a
resident. In this case, since Mr. Jagdish has not visited India at any time during the P.Y. 2019 -20, he would be
a non- resident for that year.
Computation of Total Income of Mr. Jagdish, a non-resident, for the A.Y. 2020-21
Particulars ` `
(i) Income from house property
Income from house property at Bangkok NIL
[Income from house property at Bangkok neither
accrues or arises in India, nor is it deemed to accrue or arise in India; and it
is also not stated to be received in India.
Hence, it is not taxable in India, since he is a non-resident]
Income from house property in Pune (taxable in India since it accrues and
arises in India)
Gross Annual Value of Pune flat4 (` 27,500 x 12) 3,30,000
Less: Municipal taxes (Deduction is not allowable, since no amount has been
paid during the previous year 2019-20) Nil
Less: Deductions u/s 24
(a) 30% of NAV 99,000
(b) Interest due on housing loan (allowable even if not
paid) 84,000 1,83,000
1,47,000
Arrears of rent received in respect of Jaipur house 96,000
(taxable u/s 25A, even if he is not the owner of the house
property in the P.Y. 2019-20)
Less: Deduction@30% 28,800 67,200 2,14,200
(ii) Profits and gains of business or profession

Profit from business in Thailand (not taxable in the hands of a non-resident, Nil
since it neither accrues or arises in India nor is it deemed to accrue or arise in
India; and it is also not stated to be received in India)

(iii) Income from Other Sources
Interest on bonds of a Japanese company [Only 22,500
` 22,500, being 50% of ` 45,000 is taxable in India, since it is stated to be
received in India]
Income from Apple Orchid in Nepal [Contract fee directly credited to bank
account in India is taxable in India, since it is received in India] 5,00,000 5,22,500
Note: Contract fee for Apple Orchid has been stated to have been deposited directly by the contractor in the
Kathmandu branch of UBI in Mr. Jagdish’s bank account maintained with UBI’s Pune Branch. Since the
deposit is stated to have been made by the contractor directly in UBI’s Pune branch, the income is received in
India and hence, would be taxable in the hands of Mr. Jagdish. The above solution has been worked out
accordingly.
3. Examine & explain the TDS implications in the following cases along with reasons thereof, assuming
that the deductees are residents and having a PAN which they have duly furnished to the respective
deductors.
(i) Mr. Tandon received a sum of ` 1,75,000 as pre-mature withdrawal from Employees Provident Fund
Scheme before continuous service of 5 years on account of termination of employment due to ill-
health.
(ii) A sum of ` 42,000 has been credited as interest on recurring deposit by a banking company to the
account of Mr. Hasan (aged 63 years).
(iii) Ms. Kaul won a lucky draw prize of ` 21,000. The lucky draw was organized by M/s. Maximus Retail
Ltd. for its customer.
(iv) Finance Bank Ltd. sanctioned and disbursed a loan of ` 10 crores to Borrower Ltd. on 31-3-2020.
Borrower Ltd. paid a sum of ` 1,00,000 as service fee to Finance Bank Ltd. for processing the loan
application.
(v) Mr. Ashok, working in a private company, is on deputation for 3 months (from December, 2019 to
February, 2020) at Hyderabad where he pays a monthly house rent of ` 52,000 for those three
months, totalling to ` 1,56,000. Rent is paid by him on the first day of the relevant month.
Solution:
TDS implications
(i) On pre-mature withdrawal from EPF
No tax is deductible under section 192A even though the employee, Mr. Tandon, has not completed 5
years of continuous service, since termination of employment is on account of his ill-health. Hence, Rule 8
of Part A of the Fourth Schedule is applicable in this case.
(ii) On credit of interest on recurring deposit by a banking company

Since the interest on recurring deposit credited to the account of Mr. Hasan, a senior citizen, does not
exceed ` 50,000 in the P.Y. 2019-20, no tax is deductible at source under section 194A.
(iii) On payment of prize winnings of ` 21,000

Tax is deductible @ 30% under section 194B by M/s. Maximus Retail Ltd., from the prize money of ` 21,000
payable to the customer, since the winnings exceed `10,000.
(iv) On payment of service fee to bank

Even though service fee is included in the definition of “interest” as defined under section 2(28A), no tax is
deductible at source under section 194A, since the service fee are paid to a banking company, i.e., Finance
Bank Ltd.
(v) On payment of rent exceeding ` 50,000 by a salaried individual

Mr. Ashok, a salaried individual, is liable to deduct tax at source @5% under section 194-IB on ` 1,56,000
(being rent for 3 months from December 2019 to February 2020) from the rent of ` 52,000 payable on 1 st
February, 2020, since the monthly rent exceeds ` 50,000.

4. Mr. Prakash is in the business of operating goods vehicles. As on 1st April, 2019, he had the following
vehicles :
Vehicle Gross Vehicle Weight Date of Purchase Put to use during

(in Kgs.) F.Y. 2019-20
A 8500 2-4-2018 Yes
B 13000 15-5-2018 Yes
C 12000 4-8-2018 No (as under repairs)
During P.Y. 2019-20, he purchased the following vehicles :
Vehicle Gross Vehicle Weight Date of Purchase Date on which

(in Kgs.) put to use
D 11000 30-4-2019 10-5-2019
E 15000 15-5-2019 18-5-2019
Compute his income under section 44AE of the Income-tax Act, 1961 for A.Y. 2020-21.
Answer:
Since Mr. Prakash does not own more than 10 vehicles at any time during the previous year 2019-20, he is
eligible to opt for presumptive taxation scheme under section 44AE. As per section 44AE, ` 1,000 per ton of
gross vehicle weight or unladen weight, as the case may be, per month or part of the month for each heavy
goods vehicle and ` 7,500 per month or part of month for each goods carriage other than heavy goods vehicle,
owned by him would be deemed as his profits and gains from such goods carriage.
Heavy goods vehicle means any goods carriage, the gross vehicle weight of which exceeds 12,000 kg.
Calculation of presumptive income as per section 44AE
Type of carriage No. of months Rate per Ton Amount

the vehicle is ton per `
owned by month
Mr. Prakash
(1) (2) (3) (4) (5)
[(2) x (3) x
(4)]
Heavy goods vehicle
Vehicle B (13,000 kgs) held 12 1,000 13 (13,000/ 1,000) 1,56,000
throughout the year
Vehicle E (15,000 kgs) purchased 11 1,000 15 (15,000/ 1,000) 1,65,000
on 15.5.2019
Goods vehicles other than Rate per month
heavy goods vehicle
Vehicle A held 12 7,500 - 90,000
throughout the year
Vehicle C held 12 7,500 - 90,000
throughout the year
Vehicle D purchased on 30.4.2019 12 7,500 - 90,000
Total 5,91,000
The “put to use” date of the vehicle is not relevant for the purpose of computation of presumptive income under
section 44AE, since the presumptive income has to be calculated per month or part of the month for which the
vehicle is owned by Mr. Prakash.

5. IMPORTANT: Mr. Rajan provides you the following details with regard to sale of certain securities by
him during F.Y. 2019-20:
(i) Sold 10000 shares of A Ltd. on 05-04-2019 @ ` 650 per share
A Ltd. is a listed company. These shares were acquired by Mr. Rajan on 05-04-2016 @` ` 100 per
share. STT was paid both at the time of acquisition as well as at the time of transfer of such
shares which was affected through a recognized stock exchange.
On 31-01-2018, the shares of A Ltd. were traded on a recognized stock exchange as under :
Highest price - ` 300 per share Average price - ` 290 per share Lowest price - ` 280 per share
(ii) Sold 1000 units of B Mutual Fund on 20-04-2019 @` ` 50 per unit

B Mutual Fund is an equity oriented fund. These units were acquired by Mr. Rajan on 15-04-2017 @ `
10 per unit. STT was paid only at the time of transfer of such units. On 31-01-2018, the Net Asset
Value of the units of B Mutual Fund was ` 55 per unit.
(iii) Sold 100 shares of C Ltd. on 25-04-2019 @ ` 200 per share

C Ltd. is an un-listed company. These shares were issued by the company as bonus shares on 30-
09-1997. The Fair Market Value of these shares as on 01-04-2001 was ` 50 per share.
Cost Inflation Index for various financial years are as under :

2001-02 - 100
2016-17 - 264
2017-18 - 272
2019-20 - 289
Calculate the amount chargeable to tax under the head 'Capital Gains' and also calculate tax on
such gains for A.Y. 2020-21 assuming that the other incomes of Mr. Rajan exceeds the maximum
amount not chargeable to tax. (Ignore surcharge and cess).
Solution:
Computation of amount chargeable to tax under the head “Capital Gains” in the hands of Mr. Rajan
Particulars `
(i) Sale of 10,000 shares of A Ltd. on 5.4.2019 @ 650 per share
Sales consideration (10,000 x ` 650) 65,00,000
Less: Cost of acquisition Higher of: ` 30,00,000

Actual cost (10,000 x ` 100) 10,00,000
Lower of: 30,00,000
` 30,00,000 (` 300 x 10,000), being fair market value as on
31.1.2018 (Highest price of the shares traded on
31.01.2018); and
` 65,00,000, being full value of consideration on transfer
Long-term capital gain under section 112A [Since shares held for more than 12 months 35,00,000
and STT is paid both at the time of purchase and sale.
Benefit of indexation is, however, not available on LTCG taxable u/s 112A].
(ii) Sale of 1,000 units of B Mutual Fund on 20.4.2019 @ ` 50 per unit

Sale consideration (1,000 x ` 50) 50,000
Less: Cost of acquisition - Higher of - 50,000
Actual cost (1,000 x ` 10) 10,000
Lower of: 50,000
` 55,000 (` 55 x 1,000), FMV, being Net Asset Value as on 31.1.2018; and
` 50,000, being full value of consideration on transfer
Long-term capital gain under section 112A [Since shares are held for more than 12 months
and STT is paid at the time of sale]
Nil
(iii) Sale of 100 shares of C Ltd. on 25.4.2019 @ 200 per share
Sale consideration (100 x ` 200) 20,000
Less: Indexed Cost of acquisition [100 x ` 50 (being FMV on 1.4.2001) x 289/100] 14,450

Long-term capital gain under section 112 [Since shares are unlisted and held for more 5,550
than 24 months]
Computation of tax on such capital gains for A.Y. 2020-21

Particulars `
Tax under section 112A @ 10% on long-term capital gains of ` 34,00,000 3,40,000
[LTCG of ` 35,00,000 (-) ` 1,00,000] arising on sale of shares of A Ltd.
Tax under section 112 @ 20% on long-term capital gains of ` 5,550 arising on sale of unlisted 1,110
shares of C Ltd.
Total tax payable 3,41,110
6. MLX Investments (P) Ltd. was incorporated during P.Y. 2017-18 having a paid up capital of ` 10 lacs. In
order to increase its capital, the company further issues, 1,00,000 shares (having face value of ` 100
each) during the year at par as on 01-08-2019. The FMV of such share as on 01-08-2019 was ` 85.
(i) Determine the tax implications of the above transaction in the hands of company, assuming it is the
only transaction made during the year.
(ii) Will your answer change, if shares were issued at ` 105 each?
(iii) What will be your answer, if shares were issued at ` 105 and FMV of the share was ` 120 as on 01-
08-2019?
Solution:
The provisions of section 56(2)(viib) would be attracted, where consideration is received from a resident person
by a company, other than a company in which public are substantially interested, in excess of the face value of
shares i.e., where shares are issued at a premium.
In such a case, the difference between the consideration received and the fair market value would be
chargeable to tax under the head “Income from Other Sources”.
(i) In this case, since MLX Investments (P) Ltd., a closely held company issued 1,00,000 shares (having face
value of ` 100 each) at par i.e., ` 100 each, though issue price is greater than FMV, no amount would be
chargeable to tax as income from other sources.
(ii) In this case, since shares are issued at a premium, the amount by which the issue price of ` 105 each
exceeds the FMV of ` 85 each would be chargeable to tax under the head “Income from other sources”.
Hence, ` 20 lakh, being ` 20 (i.e., ` 105 - ` 85) x 1,00,000 shares, would be chargeable under section
56(2)(viib).
(iii) If shares are issued at ` 105 each and FMV of share is ` 120 each, no amount would be chargeable to tax
even though the shares were issued at a premium, since shares are issued at a price which is less than
the fair market value.
7. IMPORTANT - Mr. Mahadev, a noted bhajan singer of Rajasthan and his wife Mrs. Dariya furnish the
following information relating to the Assessment Year 2020-21.
`
1 Income of Mr. Mahadev - professional bhajan singer (computed) 5,65,000
2 Salary income of Mrs. Dariya (computed) 3,80,000
3 Loan received by Mrs. Dariya from Ramu & Jay (Pvt) Ltd. (Mrs. Dariya holds 35% 2,50,000
shares of the Co. The Co. has incurred losses since its inception 2 years back)
4 Income of their minor son Golu from winning singing reality show on T.V. 2,50,000
5 Cash gift received by Golu from friend of Mr. Mahadev on winning the show 21,000
6 Interest income received by minor married daughter Gudia from deposit with 40,000
Ramu & Jay Pvt Ltd.
Compute total taxable income of Mr. Mahadev & Mrs. Dariya for the Assessment Year 2020-21.

Answer:
Computation of Taxable income of Mr. Mahadev for A.Y. 2020-21
Particulars `
Professional income (bhajan singer) 5,65,000
Income of minor son – Golu
Income from winning singing reality show on T.V. Nil
Income derived by a minor child from any activity involving application of his/her skill,
talent, specialized knowledge and experience is not to be included in the hands of parent.
Hence, ` 2,50,000 earned by minor son Golu from reality show on TV would not be
included in the income of either parent.
Cash gift received by Golu from friend of Mr. Mahadev on winning the show The cash gift Nil
received by his minor son Golu (not on account of her skill) from his friends would not be
taxable, since its value does not exceed ` 50,000.
Income of minor married daughter – Gudia
Interest income on deposit with Ramu & Jay Pvt. Ltd. 40,000
Less: Exempt under section 10(32) 1,500
(Income of minor daughter would be included in the hands of Mr. Mahadev, since his income, 38,500
before including minor daughter’s income, is higher than his wife’s income).
Taxable Income 6,03,500
Computation of Taxable income of Mrs. Dariya for A.Y. 2020-21
Particulars `
Salary income (computed) 3,80,000
Loan received from Ramu & Jay (Pvt.) Ltd. Nil
[Such loan amount would not be considered as deemed dividend under section 2(22)(e), even
though Mrs. Dariya has substantial interest (holding 20% shares or more) in the Ramu & Jay
(Pvt.) Ltd., a closely held company, since the company does not have any accumulated profits
on account of losses incurred in last 2 years from inception]
Taxable Income 3,80,000
8. Following are the details of incomes/losses of Mr. Rishi for the F.Y. 2019-20:
(Figures in brackets represents losses) `

Taxable salary income (computed) 3,60,000
Taxable income from house property (computed)
from rented house property X 1,20,000
from rented house property Y (3,40,000)
Taxable profit from business (computed)
business P 2,30,000
business Q (12,000)
business R (speculative business) 15,000
business T (speculative business) (25,000)
Taxable Income from other sources :
from card games 16,000
from owning & maintenance of race horses (7,000)
interest on securities 5,000
You are required to determine the Gross total income of Mr. Rishi for Assessment Year 2020-21.

Solution:
Computation of gross total income of Mr. Rishi for the A.Y. 2020-21
Particulars ` `
Salary Income (computed) 3,60,000
Less: Set-off of loss from house property ` 2,20,000, restricted to 2,00,000 1,60,000
Income from House Property

Income from Property X 1,20,000
Less: Loss from Property Y [inter-source set-off is permitted under section 70(1)]
3,40,000
Less: Loss eligible for set-off against salary income as per section 71(3A),
Loss to be carried forward to A.Y. 2020-21 as per section 71B, for set-off against
income from house property, if any, in that year. (20,000)

Income from business P 2,30,000
Less: Loss from business Q (inter-source set-off is permitted) 12,000 2,18,000
Income from speculation business R 15,000

Less: Loss from speculation business T [can be set-off only against income from
speculation business as per section 73(1)] 25,000
Loss to be carried forward to A.Y. 2020-21 for set-off against speculative business (10,000)
income of that year by virtue of section 73(2).

Income from card games 16,000
Interest on securities 5,000
21,000
Loss from owning & maintaining race horses (7,000)

[Not allowed to be set-off against any other income under this head or under any
other head. Thus, such loss has to be carried forward to A.Y. 2021-22 for set-off
against income, if any, from owning and maintaining race horses in that year by
virtue of section 74A(3)]
Note: Loss from house property of ` 2 lakh can also be set-off against business income instead of salary
income. In such a case, salary income would be ` 3,60,000 and business income would be ` 18,000. Gross
total income would remain the same.
Any other permutation for set-off of house property (other than income from card games), including partial set-
off against one head and the remaining against another, is also possible.
9. What are the clarifications given by CBDT with respect to section 206C(1F) relating to following issues :
(i) Whether TCS on sale of motor vehicle is applicable only to luxury car?
(ii) Whether TCS is applicable on each sale or aggregate value of sale of motor vehicle, exceeding `
10 lakhs?
(iii) Whether TCS is applicable in case of an individual?
(iv) Whether TCS on sale of motor vehicle is at retail level also or only by manufacturer to distributor
or dealer?

Solution:
(i) No, as per section 206C(1F), the seller shall collect tax @ 1% from the purchaser on sale of any
motor vehicle of the value exceeding ` 10 lakhs.
(ii) Tax is to be collected at source @ 1% on sale consideration of a motor vehicle exceeding ` 10 lakhs.
It is applicable to each sale and not to aggregate value of sale made during the year.
(iii) The term “seller” includes inter alia, an individual who is liable to audit as per the provisions of
section 44AB during the financial year immediately preceding the financial year in which the motor
vehicle is sold. Thus, an individual shall be liable for collection of tax at source on sale of motor
vehicle by him.
(iv) TCS on sale of motor vehicle is applicable on all transactions of retail sales only. Accordingly, it will
not apply on sale of motor vehicles by manufacturers to dealers/distributors.
10. IMPORTANT: Elaborate the conditions, non-fulfilment of which would render a return of income filed by
an assessee not maintaining regular books of accounts, defective.
Solution:
Where regular books of account are not maintained by the assessee, the return should be accompanied
by -
(i) a statement indicating -
(1) the amount of turnover or gross receipts,
(2) gross profit,
(3) expenses; and
(4) net profit
of the business or profession;
(ii) the basis on which such amounts mentioned in (i) above have been computed,
(iii) the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of
the previous year.
Note: The above answer is based on the provisions of Section 139(9) of the Income-tax Act, 1961. However,
since returns are now required to be e-filed, many of the details need to be incorporated as part of the relevant
return form itself.

Class Notes


1. Ms. Kanchan, a resident individual aged 61 years, provides the following information for the
financial year 2019-20:
(i) She is partner in SAR & Associates and received the following amounts from the firm :
Share of profit from the firm ` 31,100

Interest on capital@ 15% p.a. ` 2,85,000
Rent for an office ` 1,44,000
Salary as working partner (fully allowed in the hands of the firm) ` 1,20,000
(ii) She worked as a sales manager in her friend's show-room for 2 months at a salary of `
30,000 per month.
(iii) She started her own boutique on 01-08-2019. The net profit as per Profit & Loss account for
the period of initial 8 months is ` 3,50,000. The following items are debited to Profit and Loss
account:
Advance Income-tax paid ` 90,000

Personal drawings ` 80,000
The following items are credited to Profit and Loss Account :

Interest on savings bank account with PNB ` 27,000
Interest on savings account with post office ` 11,000
Interest on Fixed Deposits with Canara Bank ` 25,000
(iv) She owned a house property which was sold in June, 2019 for ` 80 Lakh. This property was
purchased for ` 31.5 Lakh in January 2003. She received ` 90,000 by way of arrear rent in
respect of the said property in March, 2020.
(v) She made the following investments:

Life insurance premium on a policy in the name of her husband ` 87,000. (The policy was taken
on 01-07-2012 and the sum assured being ` 8,00,000).
Health insurance premium on a policy covering her mother aged 83. She is not dependant on
Ms. Kanchan. Premium paid by cheque ` 54,000.
Cost inflation indices for different years are as under :

Financial Year : 2002-03 2003-04 2019-20
Cost inflation index : 105 109 289
Compute the total income and the tax liability of Ms. Kanchan for the Assessment Year
2020-21.

Answer
Computation of Total Income of Ms. Kanchan for the A.Y. 2020-21
Particulars ` ` `
Salaries
Salary = ` 30,000 x 2 months 60,000
Less: Standard deduction u/s 16 [Actual salary or 50,000
` 50,000, whichever is less]
Net Salary 10,000
Annual value (rent of office has been taken as annual value, due to 1,44,000
absence of information relating to expected rent in the question)
Less: Deduction under section 24(a)
30% of Annual Value 43,200
1,00,800
Arrears of rent received chargeable to tax under section 25A (even if 90,000
Ms. Kanchan is no longer the owner of the property)
Less: Deduction@30% 27,000 63,000 1,63,800
Income received from the firm in which she is partner:
Share of profit from firm ` 31,100 [Exempt under section 10(2A)] -
Interest on capital [` 2,85,000 x 12%/15%] 2,28,000
[Since interest calculated@12% on capital is the maximum
permissible deduction in the hands of the firm computed u/s
40(b), only interest to such extent is taxable in the hands of the
partner2]
Salary as working partner (taxable in her hands, since the same
is fully allowed in the hands of the firm) 1,20,000 3,48,000
Income received from her proprietary boutique business:

Add:Expenses/Payments debited to profit and loss account but
not allowed
Advance income-tax paid disallowed under section 40(a)(ii) 90,000
Personal drawings (since personal expenses are not allowed
under section 37) 80,000
5,20,000
Less: Income chargeable under the head “Income from Other
Sources” but credited to profit and loss account
Interest on savings bank account with PNB 27,000
Interest on savings account with post office 11,000
Interest on FDs with Canara Bank 25,000 4,57,000 8,05,000
Capital Gains
Less: Indexed cost of acquisition [` 31,50,000 x 289/105]3 86,70,000
Long-term capital loss to be carried forward to A.Y. 2021-22 for (6,70,000)
set-off against long-term capital
gains, if any, arising in that year

Interest on savings bank account with PNB 27,000
Interest on savings account with post office 11,000
Less: Exempt under section 10(15) 3,500 7,500
Interest on fixed deposits with Canara Bank 25,000 59,500

Section 80C
Life Insurance premium in the name of her husband [` 87,000, 80,000
restricted to ` 80,000, being 10% of sum assured of ` 8 lakh, since
the same is in respect of a policy taken after 31.3.2012]
Section 80D
Health insurance premium for her mother ` 54,000, being a senior 50,000
citizen restricted to ` 50,000 (the same is allowable even though her
mother is not dependent on her)
50,000
Section 80TTB
Since Ms. Kanchan is a resident individual aged 61 years, interest on
savings deposits as well as fixed deposits would qualify for deduction.
However, the total of ` 59,500 would be subject to a maximum of
` 50,000 1,80,000
Computation of tax liability of Ms. Kanchan for A.Y. 2020-21

Particulars `
Upto ` 3,00,000 (Since Ms. Kanchan is a resident individual of the age of 61 years) Nil
` 3,00,001 – ` 5,00,000 [i.e., ` 2,00,000@5%] 10,000
` 5,00,001 – ` 8,68,300 [i.e., ` 3,68,300@20%] 73,660
83,660
Add: Health and Education cess@4% 3,346
Tax Liability 87,006
Tax Liability (rounded off) 87,010
Less: Advance income-tax paid 90,000
Tax refundable (2,990)
2. Miss Bansuri, a Chinese National, got married to Mr. Keshav of India in Beijing on 3rd February,
2019 and came to India for the first time on 14-02-2019. She left for China on 11-08-2019. She
returned to India again on 20-02-2020.
She received the following gifts from her relatives and friends during 01-04-2019 to 31-03-2020 in
India:
From parents of husband ` 71,000

From married sister of husband ` 21,000
From two very close friends of her husband, ` 1,41,000 and ` 1,21,000 ` 2,62,000
(a) Determine her residential status and compute the total income chargeable to tax along with
the amount of tax payable on such income for the Assessment Year 2020-21.
(b) Will your answer change if she had returned to India again on 20-01-2020 instead of 20-02-
2020?

Answer
Determination of residential status and computation of total income and tax liability of Miss
Bansuri (if she returned to India on 20.2.2020)
Particulars `
Under section 6(1), an individual is said to be resident in India in any previous year, if
he/she satisfies any one of the following conditions:
(i) He/she has been in India during the previous year for a total period of 182 days or
more, or
(ii) He/she has been in India during the 4 years immediately preceding the previous
year for a total period of 365 days or more and has been in India for at least 60
days in the previous year.
If an individual satisfies any one of the conditions mentioned above, he/she is a
resident. If both the above conditions are not satisfied, the individual is a non-resident.
Therefore, the residential status of Miss Bansuri, a Chinese National, for A.Y. 2020-21
has to be determined on the basis of her stay in India during the previous year relevant
to A.Y. 2020-21 i.e. P.Y.2019-20 and in the preceding four years.
Her stay in India during the previous year 2019-20 and in the preceding four years are
as under:
P.Y. 2019-20
01.04.2019 to 11.08.2019 - 133 days
20.02.2020 to 31.03.2020 - 40 days
Total 173 days
Four preceding previous years
P.Y. 2018-19 [14.2.2019 to 31.3.2019] - 46 days
P.Y. 2017-18 [1.4.2017 to 31.3.2018] - Nil
P.Y. 2016-17 [1.4.2016 to 31.3.2017] - Nil
P.Y. 2015-16 [1.4.2015 to 31.3.2016] - Nil
Total 46 days
The total stay of Miss Bansuri during the previous year in India was less than 182 days
and during the four years preceding this year was for 46 days.
Therefore, due to non-fulfillment of any of the two conditions for a resident, she would be
treated as non-resident for the Assessment Year 2020-21.
Accordingly, her total income and tax liability would be computed in the following
manner:
Computation of total income and tax liability of Miss Bansuri for the A.Y. 2020-21
Gifts received from non-relatives is chargeable to tax as per section 56(2)(x) if the
aggregate value of such gifts exceeds ` 50,000.
` 71,000 received from parents of husband would be exempt, since parents of Nil
husband fall within the definition of ‘relatives’ and gifts from a relative are not
chargeable to tax.
` 21,000 received from married sister-in-law is exempt, since sister of husband Nil
falls within the definition of relative and gifts from a relative are not chargeable to
tax.
Gift received from two friends of her husband ` 1,41,000 and ` 1,21,000
aggregating to ` 2,62,000 is taxable under section 56(2)(x) since the aggregate of `
2,62,000 exceeds ` 50,000. 2,62,000

Tax on total income of ` 2,62,000 [5% of ` 12,000 in excess of 600
` 2,50,000, being the basic exemption limit]
Add: Health and Education cess@4% 24
Total tax payable 624
Total tax payable (rounded off) 620

Determination of residential status and computation of total income and tax liability of Miss
Bansuri (if she returned to India on 20.1.2020)
Particulars `
Yes, the answer would change, if she had returned to India again on 20.1.2020 instead of
20.2.2020.
In such case, her stay in India during the previous year 2019-20 would be:
01.04.2019 to 11.08.2019 - 133 days

20.01.2020 to 31.03.2020 - 71 days
Total 204 days
Since she satisfies the condition of stay in India for more than 182 days during the previous
year 2019-20, she would become resident in India. She would be a resident but not ordinarily
resident in India for A.Y. 2020-21, since her stay in India in the preceding seven years is less
than 730 days (it is only 46 days).
Her total income would remain same i.e., ` 2,62,000 even in case she become resident but
not ordinarily resident, however, her tax liability would be determined in the following manner:
Tax liability:
Tax on total income of ` 2,62,000 [5% of ` 12,000 in excess of 600
` 2,50,000, being the basic exemption limit]
Less: Rebate under section 87A (since she is a resident individual and her total income does
not exceed ` 5,00,000, she would be eligible for a rebate of lower of ` 12,500 and tax payable
i.e., ` 600). 600
Total tax payable Nil
3. Mr. Swaraj has provided the following particulars for the year ended 31-03-2020:
(i) He retired on 31-12-2019 at the age of 58, after putting in 25 years and 9 months of service,
from a private company at Delhi.
(ii) He was paid a salary of ` 25,000 p.m. and house rent allowance of ` 6,000 p.m. He paid rent of
` 6,500 p.m., during his tenure of service.
(iii) On retirement, he was paid a gratuity of ` 3,50,000. He was covered by the payment of
Gratuity Act, 1972. He had not received any other gratuity at any point of time earlier, other
than this gratuity.
(iv) He had accumulated leave of 15 days per annum during the period of his service; this was
encashed by him at the time of his retirement. A sum of ` 3,15,000 was received by him in this
regard. Employer allowed 30 days leave per annum.
(v) The company presented him with a gift voucher of ` 5,000 on his retirement. His colleagues
also gifted him a mobile phone worth ` 50,000 from their own contribution.
You are requested to compute his income from salary for the assessment year 2020-21.

Answer
Computation of income under the head “Salaries” of Mr. Swaraj for the A.Y. 2020-21
Particulars ` `
Basic Salary = ` 25,000 x 9 months 2,25,000
House Rent Allowance = ` 6,000 x 9 months 54,000
Less: Least of the following exempt under section 10(13A) 36,000 18,000
(i) House rent allowance actually received = ` 6,000 x 9 = ` 54,000
(ii) Rent paid (-) 10% of salary for the relevant period [` 58,500 (i.e., `
6,500 x 9) (-) ` 22,500 (10% of salary i.e., 10% of ` 2,25,000 (Basic
Salary)] = `36,000
(iii) 50% of salary for the relevant period [50% of ` 2,25,000 (Basic salary)]
` 1,12,500
Gratuity 3,50,000
Less: Least of the following exempt under section 10(10)(ii) 3,50,000 Nil
(i) Actual Gratuity received ` 3,50,000
(ii) 15 days salary for every year of completed service [15/26 x ` 25,000 x
26] = `3,75,000
(iii) Notified limit = ` 20,00,000
Leave encashment 3,15,000

Less: Least of the following exempt under section 10(10AA) 2,50,000 65,000
(i) ` 3,00,000
(ii) Leave salary actually received `3,15,000
(iii) ` 2,50,000, being 10 months’ salary x ` 25,000
(iv) Cash equivalent of leave standing at the credit of the employee based
on the average salary of last 10 months’ (max. 30 days per year of
service) for every year of actual service rendered for the employer from
whose service he has retired 375/30 x ` 25,000 = `3,12,500
[Leave Due = Leave allowed – Leave taken]
= 750 (30 days per year × 25 years) – 375 days (15 days x 25)
= 375 days]
Gift Voucher [As per Rule 3(7)(iv), the value of any gift or voucher or token in lieu Exempt
of gift received by the employee or by member of his household not exceeding `
5,000 in aggregate during the previous year is exempt].
Mobile Phone received as gift from colleagues (Neither taxable under the head
“Salaries” nor “Income from other sources”, since taxability provisions under
section 56(2)(x) are not attracted in respect of mobile phone received from
colleagues, as mobile phone is not included in the definition of “property” Nil
thereunder)

Less: Standard deduction u/s 16 [Actual salary or ` 50,000, whichever is less]
50,000
Net Salary 2,58,000

4. IMPORTANT: M/s ABC and Co., a partnership firm, started its textile business on 01-04-2019.
During the previous year 2019-20, it appoints the following persons :
Date of No. of Designation Emoluments (in `
appointment Employees per person/ month)
01-04-2019 25 Accounting and office staff 22,000
01-05-2019 25 Technical staff 25,200
01-08-2019 100 Supervisors 28,000
01-09-2019 200 Helpers 22,000
Total 350
Determine the amount of deduction available, if any, for the assessment year 2020-21, if turnover
of ABC and Co. for the previous year 2019-20 is ` 4 crore and tax audit under section 44AB is
applicable and all the employees participates in the recognised provident fund.
What would be your answer if the business of M/s ABC and Co. was of manufacture of leather
products instead of textile?
(Assume that all the requirements under the relevant section, relating to the aforesaid deduction,
have been fulfilled.)
Answer
(i) Where ABC and Co. has started textile business on 1.4.2019
M/s. ABC and Co., a partnership firm, would be eligible for deduction u/s 80JJAA in respect of
additional employees employed by it during the P.Y. 2019-20, since it is subject to tax audit under
section 44AB.
However, only employees employed on 1.4.2019 will qualify as “additional employees” since
employees employed on 1.5.2019 and 1.8.2019 draw monthly emoluments exceeding ` 25,000.
Also, employees employed on 1.9.2019 have been employed for only 212 days (i.e., less than 240
days) in the P.Y.2019-20. Hence, they would not be included in the meaning of “additional
employees”.
Deduction u/s 80JJAA = 30% x ` 66,00,000, being additional employee cost in respect of employees
employed on 1.4.2019 (25 employees x ` 22,000 p.m. x 12 months) = ` 19,80,000
(ii) Where ABC and Co. has started manufacture of leather products on 1.4.2019
In this case the firm has started manufacture of leather products, new employees employed for 150
days in the year would qualify as “additional employees” for the purpose of section 80JJAA.
Therefore, employees employed on 1.9.2019 (for 212 days during the P.Y. 2019-20) would also
qualify as additional employees.
Additional Employee Cost `

Employees employed on 1.4.2019 (25 employees x ` 22,000 p.m. x 12 months) 66,00,000
Employees employed on 1.9.2019 (200 employees x ` 22,000 p.m. x 7 months) 3,08,00,000
3,74,00,000
Deduction u/s 80JJAA: 30% of ` 3,74,00,000 = `1,12,20,000
Note: The benefit of employment for minimum period of 150 days instead of 240 days during the year
to qualify as “additional employee” for the purpose of section 80JJAA is available in respect of
assessees engaged in apparel business, leather products and footwear products.
The question (first part) mentions that M/s. ABC and Co., partnership firm, started its textile
business. Accordingly, the above solution has been worked out by considering that the firm is
engaged only in the manufacture of raw fabric and not in the manufacture of finished apparel.
Hence, 200 employees employed on 1.9.2019 (i.e., for less than 240 days) would not qualify as
additional employees for the purpose of deduction under section 80JJAA.
Alternatively, if it is assumed that the firm manufactures the finished apparel, the employee cost of 200
employees employed on 1.9.2019 (i.e., for less than 240 days) has also to be included in the
additional employees cost for the purpose of deduction under section 80JJAA. In such a case, in both
scenarios I & II, i.e., whether ABC and Co. has started manufacture of apparel or manufacture of
leather products, the deduction under section 80JJAA would be ` 1,12,20,000.

5. Ms. Netra, a resident individual aged 32 years, furnishes you with the following information for
the year ended on 31-03-2020:
`)
Income from business of handloom trading 2,65,000
Long term capital gain on sale of jewellery 1,55,000
Long term capital loss on sale of shares listed in recognised stock exchange 1,25,000
(STT paid both at the time of sale and purchase of shares)
Ms. Netra also has a brought forward loss of ` 4,500 from handloom business related to
assessment year 2011-12 and a brought forward loss from house property amounting to `
2,20,000 related to the assessment year 2019-20.
You are required to compute the total income of Ms. Netra for the assessment year 2020-21 and
the amount of loss, if any, to be carried forward.
Solution:
Computation of total income of Ms. Netra for A.Y. 2020-21
Particulars `
Income from business of handloom trading 2,65,000
[By virtue of section 72(3), brought forward loss of ` 4,500 from handloom business for
A.Y. 2011-12 cannot be set-off against this income, since the eight year period
immediately succeeding the assessment year relevant to the previous year in which the
loss was incurred for carry forward and set-off of business loss has expired with A.Y.
2019-20]
Capital Gains
Long-term capital gains on sale of jewellery 1,55,000
Less: Long-term capital loss on sale of listed shares on which STT was
paid both at the time of purchase and sale 1,25,000 30,000
{Since long-term capital gains on sale of such shares is taxable under section 112A, the
long-term capital loss arising therefrom can be set-off against long-term capital gains on sale
of jewellery [Section 70(3)]}
Loss to be carried forward to A.Y. 2021-22
Loss from house property ` 2,20,000 related to A.Y. 2019-20
As per section 71B, brought forward loss of ` 2,20,000 from house property related to A.Y. 2,20,000
2019-20 has to be carried forward to A.Y. 2021-22, since there is no income chargeable
under this head in the A.Y. 2020-21. Such loss can be carried forward for a maximum of 8
assessment years for set-off only against income from house property.
th
6. Mr. Mani, a resident individual, sold a plot of land on 20 March, 2019. Long term capital gain on
such sale amounted to ` 5,00,000. Since he had no other income during the previous year 2019-
20, he did not pay any advance tax instalment.
You are required to calculate the amount of advance tax payable by Mr. Mani, if any.
Base your answer on the relevant provisions relating to the payment of advance tax on income
from capital gain and advise Mr. Mani suitably, so that the liability on late payment does not
arise.

Answer
Computation of advance tax payable by Mr. Mani
Particulars `
The total income of ` 5 lakh comprises only of long-term capital gains on sale of plot
on 20.3.2020.
Therefore, the basic exemption limit of ` 2,50,000 can be fully exhausted against long-
term capital gains, since Mr. Mani is a resident individual. The balance capital gains of
` 2,50,000 is taxable@20%.
Tax @20% on long-term capital gain of ` 2,50,000 (i.e., ` 5,00,000 less unexhausted 50,000
basic exemption limit of ` 2,50,000)
Add: Health and education cess@4% 2,000
Since Mr. Mani sold the plot of land on 20.3.2020, the long-term capital gain on
transfer of such land arises only after due date of fourth instalment, i.e., after
15.3.2020. Accordingly, he is required to pay whole of the tax of ` 52,000 on such
long-term capital gain on or before 31.3.2020.
Accordingly, if he pays ` 52,000 on or before 31.3.2020, interest under section 234C for
deferment of advance tax would not be attracted. Also, interest under section 234B for
default in payment of advance tax would not be attracted.
7. IMPORTANT: Examine the applicability of tax deduction at source provisions, the rate and
amount of tax deduction in the following cases for the financial year 2019-20:
(A) An insurance company paid ` 45,000 as insurance commission to its agent Mr. Abjijeet.
(B) Gupta and·Co. (firm), engaged in wholesale business, assigned a contract for construction of
its godown building to Mr. Ravi. The firm paid an aggregate of ` 10,00,000 to Mr. Ravi during
the year.
(C) Y and Co. engaged in real estate business, conducted a lucky dip and gave a Maruti Car
worth ` 5,00,000 to the prize winner.
(D) An advertisement company paid ` 5,00,000 to a cricketer, Mr. Peter from England, for working
in an advertisement film.
Answer
(A) Insurance Commission
The insurance company is required to deduct tax at source @5% under section 194D on ` 45,000,
being the amount of insurance commission payable to Mr. Abhijeet, since such amount exceeds the
threshold limit of ` 15,000.
Therefore, the amount of tax to be deducted at source:

= ` 45,000 x 5% = `2,250
(B) Contract for construction of godown building

Gupta and Co. (firm) is required deduct tax at source @1% under section 194C, on the amount of `
10,00,000 payable for contract for construction of godown building to an individual, Mr. Ravi, since
the aggregate amount of payment during the financial year 2018-19 exceeds ` 1,00,000.
Therefore, the amount of tax to be deducted at source:

= ` 10,00,000 x 1% = ` 10,000
(C) Winning of Maruti car in Lucky dip

Y and Co., before giving the Maruti Car to the prize winner, is required to ensure that tax of ` 1,50,000
(i.e., ` 5,00,000 x 30%) has been paid in respect of the winnings, since the winnings are wholly in
kind.
(D) Payment to non-resident sportsman

The advertisement company is required to deduct tax at source @ 20% plus health and education
cess@4% under section 194E, on the payment made to Mr. Peter from England, being a non-
resident sportsman for advertisement
Therefore, the amount of tax to be deducted at source = ` 5,00,000 x 20.8%

= ` 1,04,000

8. Explain with brief reasons, whether the return of income can be revised under section 139(5) of
the Income-tax Act, 1961 in the following cases:
(i) Defective or incomplete return filed under section 139(9).
(ii) Return already revised once under section 139(5).
(iii) Return of loss filed under section 139(3).
Answer
(i) Defective or incomplete return filed under section 139(9)
The defective return has to be rectified within the period of 15 days from the date of intimation
received from the Assessing Officer or such further extended period. Where a defective return is
rectified within 15 days or such further extended period, then, such return would be a valid return.
Thereafter, if the assessee discovers any omission or wrong statement in such a return, he can
furnish a revised return under section 139(5), within the prescribed time i.e. within the end of the
relevant assessment year or before the completion of assessment, whichever is earlier.
However, if the defect is not rectified within the said time, it would be an invalid return, in which case, it
cannot be revised.
(ii) Return already revised once under section 139(5)

A return revised earlier can be revised again as the first revised return replaces the original return.
Therefore, if the assessee discovers any omission or wrong statement in such a revised return, he can
furnish a second revised return within the prescribed time i.e. within the end of the relevant
assessment year or before the completion of assessment, whichever is earlier.
(iii) Return of loss filed under section 139(3)

A return of loss filed under section 139(3) is deemed to be return filed under section 139(1), and
therefore, can be revised under section 139(5).

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THANKS TO MY FAMILY &

STUDENTS FOR CONTINUOUS

Updated on 30.04.2020 (17th Edition – 1st Print)

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1 KUNAL AGGARWAL 623158 81 TAX CA INTER

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10 KISHAN KASHYAP `04181023519 69 OM & SM CMA INTER

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13 POONAM KHEMKA `04161003969 68 IDT CMA FINAL

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18 VARUN KHATTAR (AIR 30) `04141003976 66 IDT CMA FINAL

19 ADARSH KUMAR UPADHYAY `04152003297 65 DT CMA INTER

20 NISHITHA JAIN `04181030186 65 DT CMA INTER

22 RAHUL RANJAN SINGH `04162004494 65 IDT CMA INTER

23 MINAKSHI SINGH `04181031103 65 OM & SM CMA INTER

24 NEHA VASHISHT `04191056393 65 OM & SM CMA INTER

25 ANAMIKA DIXIT `04171006352 65 OM & SM CMA INTER

26 SUNNY `04191055669 64 DT CMA INTER

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37 DEEPAK KATHAYAT `04152002482 61 DT CMA INTER