Multiple Choice Questions: Compiled by CA Bhanwar Borana

Compiled by CA Bhanwar Borana
Multiple Choice Questions

S. No. Explanations
1. As per Section 32, Depreciation rate for Motor Vehicles used in a business of running on hire is
30% (45% rate is applicable if acquired and put to use between 23.08.19 to 31.03.2020)
Depreciation rate for Other Motor Vehicles is 15% (30% rate is applicable if acquired and put to
use between 23.08.19 to 31.03.2020)
Therefore, depreciation on assets purchased on 01.11.2019 will be charged at special rates @

45% and 30% for Mr. Akash and Mr. Vikash respectively.
As per the proviso to sec 32(1), depreciation is restricted to 50% if asset is acquired and put to use for
less than 180 days.
Calculation of Depreciation allowable for FY 2019-20-
Particulars Mr. Akash Mr. Vikas

WDV as on 01.04.2019 ₹ 50,00,000.00 -
Add: Put to use for less than 180 days
₹ 5,00,000.00 ₹ 5,00,000.00
(01.11.2019)
Total ₹ 55,00,000.00 ₹ 5,00,000.00
Depreciation
Rs. -On Opening WDV @ 30% ₹ 15,00,000.00 ₹ -
Rs. -On asset put to use on 01.11.2019 at
₹ 1,12,500.00 ₹ 75,000.00
special rate for half year
WDV as on 01.04.2020
Rs. On normal asset ₹ 35,00,000.00 ₹ -
Rs.01.11.2019 asset ₹ 3,87,500.00 ₹ 4,25,000.00
Depreciation
Rs. On normal asset ₹ 10,50,000.00 ₹ -
Rs. On 01.11.2019 asset at special rate ₹ 1,74,375.00 ₹ 1,27,500.00
Total Depreciation allowable for FY 2019-20 ₹ 12,24,375.00 ₹ 1,27,500.00
2. Mr. Aarav is eligible for presumptive taxation as per Sec 44AD, since his turnover is upto 2Cr.
Presumptive PGBP income = Turnover/ Gross Receipt x 8% but if turnover or gross receipt is
received by account payee cheque/DD/ECS upto due date of return of return filing then PGBP
Income = Turnover/ Gross Receipts * 6%.
Mr. Vishal is engaged in legal profession and his Gross receipt is upto 50 lacs then he is eligible
for Presumptive basis for profession. PGBP income = Gross receipts * 50%.
1
Both Mr. Aarav and Mr. Vishal have not got the books of a/c audited and do not intend to do in
future so they can opt for presumptive taxation.
Mr. Aarav Income 12,40,000 i.e. [(6% of 1,80,00,000) +(8% of 20,00,000)]
Mr. Vishal Income 25,00,000 i.e. (50% of 50,00,000)
3. Sec 54 provides exemption on Capital gain on sale of Residential house property used by
individual/ HUF. if assessee purchase One House property in India within 1 year before or 2
years after the date of transfer or complete construction in India within 3 years after date of
transfer. then Capital gain is exempt to the extent purchase/ construction of new House
property.
W.E.F. from AY 2020-21, if LTCG is upto 2 Crores then assessee can acquire 2 Residential house
properties in prescribed time limits. (Added by FA 2019).
For claiming exemption u/s 54EC, Assessee has to invest in NHAI/RECL/PFCL/RFCL within 6
months from the date of transfer. assessee can claim maximum exemption of Rs. 50 lacs.
Particulars Mr. Vishal Mr. Guha

FVOC ₹ 3,00,00,000.00 ₹ 4,00,00,000.00
Indexed Cost of Acquisition ₹ 1,00,00,000.00 ₹ 1,75,00,000.00
Long term Capital Gain ₹ 2,00,00,000.00 ₹ 2,25,00,000.00
Less: Exemptions
U/s 54
Since capital gain is up to 2 crores,
benefit of both the properties will be ₹ 1,50,00,000.00
available
Since capital gain exceeds 2 crores,
benefit of only one the property will be ₹ 80,00,000.00
available
U/s 54EC (Max. 50 lakhs)

Bonds of NHAI ₹ 30,00,000.00 ₹ 30,00,000.00
Bonds of RECL ₹ 20,00,000.00 ₹ 20,00,000.00
Long term Capital Gain after exemption ₹ - ₹ 95,00,000.00
4. As per the section 194H, any person making payment of any income in respect of commission/
brokerage is required to deduct TDS. In case of Individual/ Hindu Undivided Family (HUF)
provisions of section 194H applies only if the total Turnover exceeds 1 crore in case of business
or gross receipts exceeds fifty lakhs in case of profession.
However, as per sec 194M Individual or HUF (other than covered u/s 194C,194H,194J) make a
payment to resident person for contract, commission, brokerage or fees for professional service
then TDS @5% required to be deducted if aggregate of sum paid/credited is more than
50,00,000.
2
TDS under Section 194C is not liable for deduction if the payment for contract is made for
personal purpose of individual / HUF.
In the given case, 194H is not applicable to Mr. Hari as his gross receipts does not exceed 50
lakhs (declaring profit u/s 44ADA). Further, 194C is also not applicable.
Further, since the payment made to Mr. Lal and Mr. Shyam individually does not exceed 50
lakhs, therefore no TDS is to be deducted u/s 194M.
5. As per sec 10(6)(vi) following conditions are required to be fulfilled to claim exemption -
(i) Foreign entity is not engaged in any trade or business in India.
(ii) His stay in India does not exceed the aggregate period of 90 days in such PY.
(iii) Such remuneration is not liable to deducted from the income of employer
chargeable under this act.
There is no such condition that Mr. X or employee should not be engaged in any trade or
business in India
6. As per seventh proviso of sec 139(1) (Added by FA 2019)
(i) has deposited an amount or aggregate of the amounts exceeding one crore rupees
in one or more current accounts maintained with a banking company or a co-operative
bank; or
(ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two
lakh rupees for himself or any other person for travel to a foreign country; or
(iii) has incurred expenditure of an amount or aggregate of the amounts exceeding
one lakh rupees towards consumption of electricity;
(iv) or fulfils any other condition as may be prescribed.
In this case, Total electricity expenditure is 1,20,000 (10,000 * 12)]
As per sec 139(1), for individual if GTI (before claiming exemption u/s 54, 54B, 54D, 54EC, 54F,
54G, 54GA, 54GB) > basic exemption, then return filing is compulsory. Mr Ram was born on
01.04.1961. On 31.03.2021, his age will be considered as 60 years based on CBDT Circular. So,
for Mr. Ram basic exemption limit is 3,00,000.
Hence, Mr Ram is required to file his return of income since he pays electricity bills of Rs. 10,000 per
month (Rs. 1.20 Lakhs per annum) which is more than threshold of Rs. 1 lakh.
7. As per Sec 253, any order of CIT/CCIT/DIT/DGIT can be appealed against ITAT. Appeal to ITAT
has to be filed within 60 Days from date of receipt of a copy of order sought to be appealed
against.
8. Ms. Aparna and Ms. Dimple both are Non-Resident as per section 6.
As per sec 47(viia), transfer of rupee denominated bond of Indian company by one NR to
another NR Outside India is not a transfer and hence, capital Gain not applicable in this case.
9. As per the section 194H, any person making payment of any income in respect of commission/
brokerage is required to deduct TDS. In case of Individual/Hindu Undivided Family (HUF) provisions of
section 194H applies only if the total Turnover exceeds 1 crore in case of business or gross receipts
exceeds fifty lakhs in case of profession.
However, as per sec 194M Individual or HUF (other than covered u/s 194C,194H,194J) make a
payment to resident person for contract, commission, brokerage or fees for professional service
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then TDS @5% required to be deducted if aggregate of sum paid/credited is more than
50,00,000.
So, Sanjay is not required to deduct TDS on brokerage amount under Section 194H since he is
a salaried Individual and not required to deduct tax under Section 194M since the brokerage
amount not exceeding the threshold limit.
TDS under Section 194C is not liable for deduction if the payment for contract is made for
personal purpose.
However, if payment exceeds 50,00,000, then TDS under Section 194M is required to be
deducted. Hence, Mr. Hari is required to deduct tax under Section 194M.
10. As per sec 194DA, TDS is required to be deducted on receipt of maturity proceeds of a life
insurance policy on income portion @5% if policy matured on or after 01.09.2019.
No TDS if amount exempted u/s 10(10D) and Amount less than Rs. 1,00,000.
TDS not required to be deducted in case of Mr Rajesh because it is exempted u/s 10(10D) as
Policy has been taken before 01.04.2012 and premium paid is not exceeding 20% of policy
value.
TDS required to be deducted in case of Mr Brijesh as policy has been taken on or after
01.04.2012 and premium paid is exceeding 10% of policy value.
TDS = 16,000 i.e., 5% of 3,20,000 [12,00,000 - 8,80,000 (1,10,000 * 8)]

Note - 8 years has been calculated as 01.04.2012 to 01.04.2020.
11. As per sec 44B and 44BBA, when Non-Resident is engaged in shipping Business and operation
of aircraft respectively, then presumptive income is 7.5% of specified sum for Shipping Business
and 5% of specified sum for operation of aircraft.
Specified sum means -
1. the amount paid or payable (whether in or out of India) to the assessee or to any
person on his behalf on account of the carriage of passengers, livestock, mail or goods
from any port in India; and
2. the amount received or deemed to be received in India by or on behalf of the assessee
on account of the carriage of passengers, livestock, mail or goods from any port
outside India.
Shipping Business Operation of aircraft
7.5% of (2000000 + 500000 + 700000) i.e., Rs. 5% of (1500000 + 400000 + 800000) i.e., Rs.
2,40,000 1,35,000
12. As per Section 92CE and Rule 10CB, If Primary adjustment made by AO and excess money or
part thereof not repatriated within 90 days from the date of order, then interest shall be
calculated and added as part of income.
Where the international transaction is denominated in foreign currency then interest at six-
month LIBOR as on 30th September of relevant PY+3% shall be added as part of income.
Hence, interest rate would be 13% = (10%+3%)
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As per section 92CE(2A) Assessee can pay additional Income tax @20.9664% instead of
secondary adjustment.
Excess money = 1,38,00,000
Interest = 1,38,00,000 x 13/100 x 273/365 = 13.418 Lakhs
Note – 273 days has been calculated from 02.07.2020 to 31.03.2021
13. Surcharge to individual, HUF, AOP, BOI and Artificial Judicial Person assessee will be 15% on tax
on Dividend Income & capital gains u/s 111A & 112A where total income including such capital
gains exceed Rs. 2 Cr.
Surcharge on tax on remaining total income will also be 15% in case total income of assessee
exceeds 2 Crores and not 5 crores due to 111A or 112A or Dividend Income.
14. As per Section 115UB, PGBP income of investment funds is taxable in hands of investment
funds.
As per amendment made by FA 2019, Losses other than PGBP of Investment Fund shall be
distributed to unit holders and unit holder can set off and carry forward such loss if unit holder
hold such units for 12 months or more. So, long term capital loss of Rs. 3 Crores shall be carrying
forward by unit holders.
15. Provisions of section 115QA were initially applicable only to unlisted companies. However, vide
the Finance (No. 2) Act, 2019, the provisions of section 115QA are amended and the same is
made applicable to the listed companies also.
As per Sec 115QA, rate of tax is 23.296% (Tax Rate applicable is 20% plus 12 % SC plus 4% HEC).
Amount received by shareholders is exempt u/s 10(34A).
16. Mr. Ganesh (Age 60 years 9 months) –
Tax as per Slab Rate:
• Upto 3 Lakhs – Tax Amount Nil
• From 3 – 5 Lakhs– Tax Amount (2 Lakhs x 5% = 10,000
• From 5 – 8 Lakhs– Tax Amount (3 Lakhs x 20% = 60,000)
• Total Tax = 70,000 + HEC @ 4% = 72,800
Penalty under Sec 270A = 50% of tax payable = 36,400
Mr. Rajesh – Since his age is 80 years completed on 31-03-2021 (as per CBDT Circular), he will
get the basic exemption of 5 Lakhs, and hence no tax is payable.
17. When Royalty or Fees for technical service received by Non-Resident or Foreign Company which
has –
PE in India – Section 44DA is applicable
No PE in India -Section 115A is applicable
Section 115A – 10% on Gross FTS = 200000 + Cess 4% = 2,08,000
Sec 44DA – Net Income = 20 Lakhs – 3 Lakhs (Expenditure wholly and exclusively connected
with fixed place of profession in India is allowed) = 17,00,000 taxable @ 30% + 4% Cess =
5,30,400
Expenditure wholly and exclusively not connected with fixed place of profession in India and
Amount paid by fixed place of profession to Head Office otherwise than towards
reimbursement of actual expenses is disallowed.
18. As per Section 94B, in case of the debt is issued by a lender which is not associated but an
associated enterprise either provides an implicit or explicit guarantee to such lender or deposits
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a corresponding and matching amount of funds with the lender, such debt shall be deemed to
have been issued by an associated enterprise.
Hence, C Ltd. and E Ltd. both are associated enterprises.
Lower of the following will be disallowed –

1. Total Interest – 30% of EBITDA
2. Interest paid to AE
Alternate View = Allowed interest is 30% of EBITDA

Here. As per both views, disallowed interest would be 5 Crores.
19. As per Section 10(4C), interest is exempted on RDB issued between 17/09/18 to 31/03/2019.
Hence, only N Ltd. Is required to deduct TDS in this case.
20. Range concept is applicable only when data sets entries are 6 or more.
If Actual transaction price is falling within 35th and 65th percentile, then actual transaction will
be considered as ALP.
In case, if it is not falling, then ALP will be determined by considering the median of the dataset.
21. An order of assessment passed by the Assessing Officer in pursuance of directions of Dispute
Resolution Panel cannot be appealed before CIT(A)
22. Below are the powers of an income-tax authority to collect information—
▪ The income-tax authority may enter the place of business only during the hours at which such
place is open for conduct of business
▪ The income-tax authority can on no account remove or cause to be removed from the building
or place he has entered any books of account or other documents.
23. REIT
Rental income received by unitholder from REIT and interest received by unitholder from
business trust (which was received from SPV) shall be taxable in hands of unitholder.
Therefore, taxable amount = 18 lakh x 10% share = 1.8 lakh.
Securitisation Trust
Section 115TCA - Any income accruing or arising to, or received by, a person, being an investor
of a securitisation trust, out of investments made in the securitisation trust, shall be chargeable
to income-tax in the same manner as if it were the income accruing or arising to, or received
by, such person, had the investments by the securitisation trust been made directly by him.
Therefore, taxable amount = 6 lakh x 7.5% share = 0.45 lakh.
Investment Fund
Section 115UB – All income received by unit holders from investment fund are taxable in hands
of unit holders (except PGBP).
Loss other than PGBP is allowed to be carried forward by Unit holder.
Therefore, taxable amount = 2 lakh x 5% share = 0.10 lakh. Share in capital loss = 12.50 lakh x
5% share = 0.625 lakh.
Total Income = 1.8+0.45+0.10+2.70-0.625 = 4.425 lakhs.

24. As per Section 115BBE, tax is chargeable at 60%. Further, surcharge of 25% and HEC of 4% will
be levied). Effective rate is 78%
Therefore, tax payable will be 2,40,000*78% = 1,87,200.
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25. As per section 208, Advance tax shall be payable during a financial year in every case where the
amount of such tax payable by the assessee during that year, as computed in accordance with
the provisions of this Chapter, is ten thousand rupees or more.
Exception - Resident senior citizen not having income under the head “PGBP”.
Here, Sarthak is a non-resident.
26. As per Section 115AD, short term capital gain will be chargeable at 15% (Gain referred to in
section 111A)
As per Section 115A, Interest referred under Section 194LD will be chargeable at 5%.
27. A person shall be qualified for appointment as a revenue Member-
(i) from the Indian Revenue Service, who is, or is qualified to be, a Member of the Board; or
(ii) from the Indian Customs and Central Excise Service, who is, or is qualified to be, a Member
of the Central Board of Excise and Customs,
Provided that where the Authority is dealing with an application seeking advance ruling in any
matter relating to this Act, the revenue Member of the Bench shall be such Member as referred
to in clause (i) above.
28. M/s TPS is eligible for presumptive taxation as per Sec 44AD, since his turnover is upto 2Cr.
Presumptive PGBP income = Turnover/ Gross Receipt x 8% but if turnover or gross receipt is
received by account payee cheque/DD/ECS upto due date of return of return filing then PGBP
Income = Turnover/ Gross Receipts x 6%.
M/s TPS have not got the books of a/c audited so they can opt for presumptive taxation.
Income 7,20,000 i.e. [(6% of 80,00,000) +(8% of 30,00,000)]
29. Section 115AC, Tax on income by way of interest on bonds of an Indian company issued in
accordance with such scheme as the Central Government may, by notification in the Official
Gazette, specify in this behalf is chargeable at 10% (plus HEC@4%)
30. As per sec 28 Charging section - Any profit or gain of any Business/ Profession chargeable under
PGBP. So, for X ltd letting out of properties is its main objective so total income of X ltd is taxable
under the head PGBP.
The same has also been given in Chennai Properties Case Law.
For Y ltd construction and sale of properties is its main Business. Y ltd let out some properties
which are held as stock in trade and earned rental income. Such Rental income from letting out
of properties is taxable under Income from House Property.
31. As per sec 35AD Assets on which deduction claimed u/s 35AD should be exclusively used for
specified business for minimum 8 years from the year of acquisition. If it is used for non-
specified business within 8 years then following shall be taxable under PGBP i.e., Amount of tax
claimed u/s 35AD earlier less depreciation that would have been allowable if sec 35AD not
there.
Actual cost of assets for computing depreciation would be Actual cost less depreciation claimed
as per Explanation 14 to Section 43(1).
Particulars Amount
Deduction claimed u/s 35AD 70,00,000
Less: Depreciation for PY 2019-20 (Depreciation for PY 20-21 has not 7,00,000
been taken since asset sold in PY 20-21)
PGBP Income 63,00,000
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Actual cost of building for computing depreciation for P.Y.2020-21

would be Rs. 63 lakhs.
32. As per CBDT Circular 39/2016, transport subsidy, interest subsidy and power subsidy received
from government are profit derived from the business of the industrial undertaking and hence,
eligible for deduction u/s 80-IB.
However as per Case Law of Otcher Pharma, Duty Drawback under Customs Act belong to the
category of ancillary profit hence deduction u/s 80-IB cannot be claimed in respect of such
receipt.
33. Section 10(23FC) - Interest & Dividend from SPV shall be fully exempt in hands of REIT
Section 10(23FCA) - any income of a business trust, being a real estate investment trust, by way
of renting or leasing or letting out any real estate asset owned directly by such business trust
will be exempt.
Any other income (except interest from SPV & Rental income from REIT) received by unit
Holders for Business Trust shall be exempt in hands of Unitholders u/s 10(23FD).
Dividend from SPV exempt in hands of Business Trust as well as Unit holders if SPV not opted
section 115BAA.
Capital Gain on disposal of capital assets is taxable in hands of Business Trust but exempted in
hands of unit holders as per sec 10(23FD)
Therefore,
Income REIT Unit holder
Rental Income Exempt Taxable
Interest Exempt Taxable
Dividend Exempt Exempt
Capital Gain Taxable Exempt
REIT will deduct TDS for rental income and Interest, since they are taxable in hands of unit
holder.
34. Particulars Amount
Donation other than corpus donation and anonymous donation (80-10-20) 50,00,000
Add – Part of anonymous donation i.e., higher of 5% of total donation 4,00,000
(80,00,000*5% = 4,00,000) or 1,00,000
Total 54,00,000
Less-15% 8,10,000
45,90,000
Less- Applied Income of Trust 40,00,000
Balance 5,90,000
Tax – 0-250000 = 0
250001-500000=12500
500001-590000=18000
On Anonymous donation as per Sec 115BBC
30% of 16,00,000 (20,00,000-4,00,000) = 4,80,000 5,10,500
Add HEC i.e., 4% of 510500 20,420
Total 5,30,920
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35. As per Section 271AAB, penalty @ 60% is levied since he does not furnish the return disclosing
the undisclosed income.
As per Sec.271AAB, where an assessee during a search admits the undisclosed income and
specify the manner in which such income was earned and pay tax & interest on such
undisclosed income and also furnish the return of income declaring undisclosed income u/s
139(1)/period specified u/s 153A notice then in such case penalty would be levied @ 30%. In
other cases, penalty would be 60%
36. As per Section 143(2), notice has to be served within 6 months from the end of the financial
year in which return was filled.
37. As per sec 44B, when Non-Residents is engaged in shipping Business then presumptive income
is 7.5% of specified sum for Shipping Business.
Specified sum mean amount paid or payable on account of carriage of goods at/from any
port/place in India and amount received or deemed to be received in India on account of
passengers at/from any port/place outside India.
Particulars Amount
Amount collected (85+5+2) 92,00,000
Amount received in India 50,00,000
Total 1,42,00,000
Deemed Income @7.5% 10,65,000
Tax rate for Foreign Company i.e., 40% +HEC (41.6% of 1065000) 4,43,040
38. As per sec 9(1)(iii) Salary received by Indian Citizen from Govt for service Rendered outside India
is taxable.
However, as per Sec 10(7) perquisite and allowance are exempt.
Based on combined reading of these sections, it can be concluded that Salary received by Mr.
Ganesh is taxable in India but allowances and perquisites are exempt.
39. Every person, being a resident and carrying on business or profession or a non-resident having
a permanent establishment in India shall deduct the equalisation levy on the amount paid or
payable to a non-resident in respect of the specified service at the rate of 6%, if the aggregate
amount of consideration for specified service in a previous year exceeds one lakh rupees.
Equalisation levy is not applicable where the payment for the specified service by the person
resident in India or the PE in India is not for the purpose of carrying out business or profession.
Hence, in this case equalisation levy not applicable because Mr. Rajesh does not use such
service for Business or profession purpose as he is salaried individual and does not have any
PGBP income
40. Tax on income from lottery will have to pay flat 30 per cent of the winning amount and there is
no basic exemption limit.
Particulars A B
Tax on lottery income @30% 270000 (30% of 900000) 240000 (30% of 800000)
HEC@4% 10,800 9,600
Total 2,80,800 2,49,600
Less: TDS 2,70,000 2,40,000
Net Tax Payable 10,800 9,600
Advance tax applicable for A because tax amount is more than 10,000.
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41. As per 194-IB, A salaried employee must deduct TDS on rent paid if the total rent payable for a
month is more than Rs. 50,000 per month.
Here rent is 50000 per month hence 194-IB not applicable.
42. The service rendered by a commentator in relation to sports activities has been notified by the
CBDT as a professional service for the purposes of section 194J.
So, if person is resident in India, then TDS will be deducted as per 194J, and if person is Non-
Resident, then TDS will be deducted as per provision of section 195.
43. Section 246A specifies the orders against which an appeal can be filed before the CIT (Appeals)
in respect of Assessment order passed under section 143(3).
A taxpayer can file an appeal to the ITAT in respect of following orders: -
Order passed by the Commissioner of Income-Tax (Appeals) under section 250, section 270A,
section 271, section 271A, 271J or section 272A.
44. Section 44BBA -
(1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an
assessee, being a non-resident, engaged in the business of operation of aircraft, a sum equal to
five per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to
be the profits and gains of such business chargeable to tax under the head “Profits and gains of
business or profession”.
(2) The amounts referred to in sub-section (1) shall be the following, namely: —
(a) the amount paid or payable (whether in or out of India) to the assessee or to any person on
his behalf on account of the carriage of passengers, livestock, mail or goods from any place in
India; and
(b) the amount received or deemed to be received in India by or on behalf of the assessee on
account of the carriage of passengers, livestock, mail or goods from any place outside India.
Particulars Amount in Crore

2 crores in India on account of carriage of passengers from Cochin. 2.00
1 crore in India on account of carriage of goods from Cochin. 1.00
3 crores in India on account of carriage of passengers from 3.00
Malaysia.
0.50 crore in Malaysia on account of carriage of passengers from 0.50
Cochin.
0.50 crore in Malaysia on account of carriage of goods from Cochin 0.50
Total 7
Tax as per 44BBA @5% 0.35
45. Section 245N(a)(iv) says “a determination or decision by the Authority whether an
arrangement, which is proposed to be undertaken by any person being a resident or a non-
resident, is an impermissible avoidance arrangement as referred to in Chapter X-A or not”
46. Section 80M - Where the gross total income of a domestic company in any previous year
includes any income by way of dividends from any other domestic company or a foreign
company or a business trust, there shall, in accordance with and subject to the provisions of
this section, be allowed in computing the total income of such domestic company, a deduction
of an amount equal to so much of the amount of income by way of dividends received from
such other domestic company or foreign company or business trust as does not exceed the
amount of dividend distributed by it on or before the due date.
Note – Due date means one month before due date of ROI u/s 139(1)
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47. AMT = 11,00,530 (5200000*18.50% + 10% surcharge + 4% HEC)

Normal Tax = 3,35,400 ((52 lakh – 35 lakh) @ slab rates)
AMT credit to be carried forward is Rs. 7,65,130 (1100530-335400)

48. As per the provisions of section 12AA(2), every order granting or refusing registration under section
12AA(1)(b), shall be passed by the registering authority before the expiry of six months from the end of
the month in which the application was received under section 12A(1)(a) or section 12A(1)(aa).
The Supreme Court, in CIT v. Society for Promotion of Education (2016) 382 ITR 6, held that once an
application under section 12AA was made and the same was not responded to within six months, the
trust would be deemed as registered with effect from the date following the expiry of the six month
period.
Applying the rationale of the above Supreme Court ruling in this case, the trust would be deemed as
registered with effect from 1.05.2020.
49. Deduction u/s 80C is not available against special rate income i.e. winnings from card games
Computation of Total Income

Particulars Amount
PGBP 1,45,000
Winnings 1,50,000
Interest on FD 40,000
Saving Interest 9,000
Total 3,44,000
Deduction-
80C (only for normal income) 1,45,000
80TTB 49,000
Total Income 1,50,000
50. Section 270A, penalty will be leviable @50% for under reporting of income.
Under reported income is Rs. 18 lakhs in the given case.
Tax is 3,66,600 (18 lakh @ slab rate)

Penalty = 1,83,300 (3,66,600*50%)
51. As per sec. 154(1), with a view to rectifying any mistake apparent from the record an income-
tax authority referred to in section 116 may, —
(a) amend any order passed by it under the provisions of this Act.
Here order is passed by assessing officer, so assessee can file an application for rectification
under 154.
Section 264 can not be used since the matter is subject matter of appeal (Total Merger)
52. as per sec 133A(2), an income-tax authority may enter any place of business or profession
referred to in sub-section (1) only during the hours at which such place is open for the conduct
of business or profession and, in the case of any other place, only after sunrise and before
sunset. Here AO has entered in business hours, so his action is correct.
An income-tax authority may impound books of accounts (Max 15 Working days)
11
Hence, action of impound of books is right.

53. Under specified circumstances, section 269SS restricts the person from taking or accepting
loan; deposit or any specified sum, if the amount is Rs.20,000 or more from any other person
other than the following mode –
An account payee cheque; or
An account payee bank draft; or
Electronic clearing system through a bank account; or
Any other electronic mode, as specified.
The penalty provision of section 271D applies in case the person contravenes provisions of
section 269SS of the Income Tax.
Here, amount is 12,000 which is deposit in cash and 7,500 which is deposited in bearer cheque,
so penalty will not be applicable.
54. As per Section 149, notice can be issued within 16 years from the end of the relevant
assessment year, in case income in relation to any asset outside India has escaped assessment.
In the given case, Asset located in Mizoram (India) will not be considered in 16 years period.
55. As per Section 44ADA, eligible assessee (Individual and Partnership Firm) can pay advance tax
in one instalment on or before 15th March of the financial year.
56. In case of in relation to a long-term capital asset, being an equity share in a company or a unit
of an equity-oriented fund or a unit of a business trust referred to in section 112A, acquired
before the 1st day of February, 2018, shall be higher of—
(i) the cost of acquisition of such asset; and
(ii) lower of—
(A) the fair market value of such asset; and
(B) the full value of consideration received or accruing as a result of the transfer of the capital
asset.
Accordingly, COA in case of Mr. Rajan = Rs. 2500 per share
COA in case of Mr. Ravi = Rs. 1900 per share
57. Settlement Commission with a view to rectifying any mistake apparent from the records, may
amend any order passed by it within a period of 6 months from the end of the month in which-
a) Order was passed
b) An application for rectification has been made by assessee or CIT/PCIT.
58. In Profit Split Method, arm’s length price shall be the arithmetical mean of all values which are
dataset. It may be assumed that the variation between the arm’s length price computed and
the transaction price is 15%.
59. As per Sec 194C, in a case of contract between parties, TDS will be deducted @ 2% where
payment made to other than individual & HUF. In case of Japan airlines Co Ltd v CIT (SC) it was
held that landing and parking charges payable by airlines in respect of aircrafts are not for the
use 'use of land' per se but the charges are in respect of number of facilities provided by the
Airport Authority of India. Thus, landing and parking charges payable by airlines would attract
TDS u/s 194C and not under 194-I
60. As per Sec. 194J, No TDS will be deducted where payment made for professional services and
technical services does not exceed Rs.30,000 respectively, such limit of Rs.30,000 is applicable
separately for professional fees & Technical fees.
12
61. This is the case of Diversion of Income. Hence, the income would be taxable in hands of Mr.
Hari as well as unregistered Trust.
62. Section 32(1)(iia) – Additional depreciation @20% is allowed in case of manufacturing business.
Therefore, normal depreciation @15% + additional depreciation@20% will be allowed to
assessee (excluding 2nd hand P&M)
Depreciation at half rate will be allowed for P&M put to use for less than 180 days.
63. U/s 32, Depreciation will be allowed @ 40% on Computers

In this case, 20% i.e., half rate on Rs.10 lakh since computers purchased and installed on 5 th
October 2020.
64. If any amount is paid or credited to resident & TDS has not been deducted or TDS has been
deducted but not paid to government upto due date of return filing, then 30% of such sum shall
be disallowed in current P.Y.
For TDS u/s 194-H, assessee required to deduct only if last year Turnover is more than one crore
in case of business or Gross Receipts is more than 50 lakhs in case of profession.
No disallowance on payment of salary because, for salary Income of Rs.300000, Mr. Hari will be
eligible for relief u/s 87A, hence no TDS will be required to be deducted.
Disallowance under section 40(a)(ia) @30% on commission amount would be attracted for not
deducting TDS.
65. Income from properties held by trust 10 lakhs

Voluntary contributions 15 lakhs
Gross Income 25 lakhs
Less: Standard deduction @15% 3.75
Less: Amount applied for charitable purpose 8.00
Less: Amount applied for repayment of loan for construction of 4.00
orphanage
Total Taxable Income 9.25
66. As per Sec.115A any interest received by a non-resident and foreign company from
infrastructure debt fund u/s 10(47) will be taxable @ 5% + 4% HEC.
As per section 94A, TDS will be deducted @ 30% + 4% HEC on transaction made with person
located in NJA &
67. As per section 47(viia) any transfer of bonds / GDR referred in sec.115AC made outside India by
Non-Resident to another Non-Resident shall not be treated as transfer & capital gain not
applied, but where such transaction made between Non-resident & Resident then capital gain
will be applicable.
Transfer is made by NR to resident LTCG is taxable @10% without indexation u/s 115AC.
68. Section 92BA - "specified domestic transaction" in case of an assessee means any of the
following transactions, not being an international transaction, namely:—
(iii) any transfer of goods or services referred to in sub-section (8) of section 80-IA;
13
Section 80-IA(8) - Where any goods or services held for the purposes of the eligible business
(power generation) are transferred to any other business carried on by the assessee, or where
any goods or services held for the purposes of any other business carried on by the assessee
are transferred to the eligible business and, in either case, the consideration, if any, for such
transfer as recorded in the accounts of the eligible business does not correspond to the market
value of such goods or services as on the date of the transfer, then, for the purposes of the
deduction under this section, the profits and gains of such eligible business shall be computed
as if the transfer, in either case, had been made at the market value of such goods or services
as on that date
69. In this case, SDV is more than 110% of the Consideration, Applying Sec 50C i.e., SDV of the
immovable property is taken as full value of consideration Rs. 50 lacs (2 Crores -1.5 Crores)
would be taxable in the hands of Mr. Anjan as business income (Since Anjan is a property
dealer), and Rs. 20 lacs (2 Crores - 1.8 Crores) would be taxable in the hands of Mr. Ashwin in
IFOS as per Sec 56(2)(X).
70. Interest from SPV & Dividend shall be fully exempt u/s 10(23FC)
Dividend taxable only when SPV paid taxes as per 115BAA.

Hence, exempt for both REIT and Unitholders.
71. As per Sec. 37, any expenditure incurred on advertisement souvenir of a political party
registered in India will not be allowed.
However, as per provisions of Sec. 80GGB, such expenditure incurred shall be allowed as
deduction from Gross total income to a company.
72. Profit after adjustments will be Rs. 30 lakhs so deduction available will be Rs. 30 lakhs only. i.e.
100% of the profits.
73. As per Sec.271AAB, where an assessee during a search admits the undisclosed income and
139(1)/period specified u/s 153A notice then in such case penalty would be levied @ 30%.
In other cases, penalty would be 60%

74. As per section 194-I, TDS is deductible since aggregate of amount of rent payable to a person
exceeds Rs.2,40,000 in a FY. TDS on rent of P&M will be deducted @ 2% and for L&B @ 10%
(refundable fixed deposit is not considered as part of rent)
In order to provide more funds at the disposal of the taxpayers for dealing with the economic
situation arising out of COVID-19 pandemic, the rate of TDS u/s 194-1 has been reduced from
2% to 1.5% (i.e. 3/4th of the specified rate), in respect of rent for plant, machinery or equipment
and 10% to7.5% (i.e., 3/4th of the specified rate) in respect of other rental payments for the
period from 14th May, 2020 to 31st March, 2021 [Section 197B].
75. TDS as per Section 194IA is to be deducted when amount of consideration is 50 Lakhs or more.
Further, No TDS is to be deducted in case of Rural agriculture land.
76. As per section 94A, TDS will be deducted @ 30% + 4% HEC on transaction made with person
located in NJA & as per Sec.115A any interest received by a non-resident and foreign company
14
from infrastructure debt fund u/s 10(47) will be taxable @ 5% + 4% HEC. No deduction of any
expenditure is available.
77. Failure to furnish Statement of financial transaction or reportable account within the time
prescribed u/s 285BA(2) attracts a penalty of a sum of Rs.500 for every day during which
failure continues till the notice period.
Failure to furnish Statement of financial transaction or reportable account within the time
prescribed u/s 285BA(5) i.e. time given in notice issued attracts a penalty of A sum of Rs.1,000
for every day during which failure continues.
Therefore, penalty is 153 (from1st June to 31st oct) x 500 + 15 (from 1st Nov to 15th Nov) x
1000 = 91500
31st May is the due date for filing Statement of Financial Transaction
78. As per sec 47, Gift is not treated as transfer. Hence, no Capital gain will arise in hands of Q and
R.
As per sec 56(2)(X), gift is taxable in hands of P. In case of immovable property (without
consideration) if SDV per property >50000, then entire SDV is taxable in hands of recipient.
Since SDV of property in Mumbai and UP exceed 50,000 hence their SDV will be taxable for P.
79. Section 80M - Where the gross total income of a domestic company in any previous year
includes any income by way of dividends from any other domestic company or a foreign
company or a business trust, there shall, in accordance with and subject to the provisions of
this section, be allowed in computing the total income of such domestic company, a deduction
of an amount equal to so much of the amount of income by way of dividends received from
such other domestic company or foreign company or business trust as does not exceed the
amount of dividend distributed by it on or before the due date.
Note – Due date means one month before due date of ROI u/s 139(1).
80. Provisions of section 115QA were initially applicable only to unlisted companies. However, vide
the Finance (No. 2) Act, 2019, the provisions of section 115QA are amended and the same is
made applicable to the listed companies also.
As per Sec 115QA, taxable value is Buyback amount - Issue price i.e. 6,00,000 (23,00,000-
17,00,000) and tax amount is 6,00,000 x 23.296% (Tax Rate applicable is 20% plus 12 %
Surcharge plus 4% HEC)
81. Interest income and rental income is exempted in hand of REIT as per section 10(23FC) and
10(23FCA) respectively but taxable in hands of unit holder and STCG is taxable in hands of REIT
but exempted in hands of unit holder as per section 10(23FD)
82. He is not entitled for deduction as it will be granted to him after construction as 1/5 under Sec
24
80EEA is not allowed as SDV is 45 Lakhs or more.
80C is not allowed as the property is under construction.
83. Under section 264, the Commissioner can revise the order pending before the Commissioner
(Appeals), if the revision pertains to a matter, other than the matter(s) covered in the appeal
before Commissioner (Appeals)
84. Section 11(7) - Where a trust or an institution has been granted registration under section
12AA and the said registration is in force for any previous year, then, nothing contained
in section 10 other than [clause (1), clause (23C) and clause (46)] thereof shall operate to
15
exclude any income derived from the property held under trust from the total income of the
person in receipt thereof for that previous year.
85. DDT is scrapped from FY 2020-21. Further, dividend income is taxable in hands of recipient at
slab rate.
86. Section 44AD is applicable for Resident Individual/HUF and Resident Firm (excluding LLP) if
Turnover or gross receipts of business is upto Rs.2 Crores.
Section 44ADA is applicable for resident professionals if gross receipt of Profession is upto Rs.50
lacs,
Section 44AE is applicable if assessee, being a person engaged in plying, leasing or hiring of
goods carriages does not own more than 10 vehicles at any time during the P.Y.
Hence, Case (i) and (iii)-Eligible for 44AD;

Case (iv)- Eligible for 44ADA;
Case (v)-Eligible for 44AE;
Case (ii) not eligible for 44ADA as receipts exceed Rs.50 Lakhs.
87. Particulars Amount
LTCG 5,00,000
STCG 2,00,000
Income from Lottery 1,00,000
Saving bank interest 30,000
Gross Total Income 8,30,000
Less: 80TTA 10,000
Less: 80C – PPF (to the extent of normal 20,000
income-interest)
Calculation of Tax
Lottery @ 30% 30,000
STCG @ 15% 30,000
LTCG (500000-250000*) @20% 50,000
1,10,000
Add – 4% 4,400
1,14,400
*Basic exemption
88. As per section 64(1)(iv), where assets transferred by an individual to his/her spouse are
invested by the transferee in the business, then proportionate income is to be included in total
income of transferor. Share of profit is exempted in hands of partners but interest income
300000/500000 * 60000 = 36000 will be clubbed in hands of Mr. Sunder and 200000/500000 *
60000 =24000 is taxable in hands of Mrs. Kavitha.
Clubbing shall be applicable only if gifted money is included in opening capital.
89. Marginal relief concept will apply -
Tax on 10 crores @25% plus 7% surcharge
Add: 100000
Add: 4% cess
Answer – 27924000
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90. 40% (foreign company)

Plus 5% surcharge (foreign company)
Plus 4% Health and education cess
91. Mr. Akhilesh is a Non-Resident and Indian Citizen and hence Section 194E will not be applicable.
In this case, TDS will be deducted under section 195 at normal tax slab rates. Such Income will
be taxable at slab rate.
92. Income 7 Lakhs – deduction 300000 (u/s 80QQB) = 4 Lakhs
Since NTI is below 5 Lakhs, Tax will be nil due to rebate u/s 87A
93. Section 194J is applicable to Mr. Ganesh because his last year T/o exceed 1cr (Turnover
threshold is checked and not tax audit for applicability of TDS deduction).
If tax is deducted then required to deposit 7th of next month for April to Feb and 30th April of
next F.Y. for March month
94. As per section 269T a person should not repay loan/deposit/advance in relation to immovable
property including interest in cash for an amount of 20000 or more.
On violation of Section 269T, penalty shall be levied @100% of such loan/ deposit/ advance
repayment (excluding interest) under Section 271E.
95. Sec 194E is applicable on NR sportsmen/Association/Entertainer & not on match referee.
Hence, section 195 is applicable in this case on payments made to Non-Resident.
96. As per sec 80D, medical claim insurance (20000+6000) + preventive health check-up (maximum
upto 5000) + medical expenditure for senior citizen 32000 is allowed under Chapter VIA
97. As per sec 43B conversion of unpaid interest into loan shall not be considered as payment of
interest so only actual payment of interest Rs. 100000 is allowed as deduction
98. As per Sec.271AAB, where an assessee during a search admits the undisclosed income and
139(1)/period specified u/s 153A notice then in such case penalty would be levied @ 30%.
In other cases, penalty would be 60%

99. As per section 10(6)(ii), in case of an individual who is not a citizen of India remuneration
received by him as an official of an embassy, high commission etc. of a foreign state or member
of the staff of any of that official is exempt from tax only if corresponding Indian official in that
foreign country enjoys a similar exemption.
In the given case, both of them are Indian citizens and hence no exemption shall be allowed.
100. As per Sec.94B, Interest expenses of similar nature (like guarantee, commission etc.) incurred
by an Indian company or a permanent establishment of a foreign company in India in respect
of any debt issued by a non-resident, being an associated enterprise shall be disallowed
interest, if interest is more than 30 % of EBITDA, while calculating income under the head PGBP
income.
Case Scenarios
17
S. No. Explanations
1. 1.1) As per section 40(b), Where an individual is a partner in a firm otherwise than in a
representative capacity, the provisions of section 40(b) shall not apply to any interest payable
by the firm to such individual on behalf of any other person. Such interest shall be allowed as
deduction in full even though the interest rate is more than 12% p.a. In normal cases, interest
@ 12% is allowed from the date of partnership deed.
Therefore, interest on HUF loan (Rs. 1,20,000) will be fully allowed and to partners, it will be
allowed at 12% for 3 months (from 01.01.2021)
Capital Amount = (540000-120000)/16*100*12 month/9 month = 35,00,000

Interest allowed = 35 lakh*12%*3/12 (Interest of Partners) + 120000 (Interest of HUF Loan)
= 225000
1.2) Remuneration is paid only to the working partner, therefore remuneration paid to
Madhav is not allowed.
Calculation of allowable remuneration-
Net profit 472000
Add: Interest as per Books 540000
Less: Interest allowed (as calculated 225000
above)
Add: Remuneration 888000
Less: Unabsorbed Depreciation 150000
Book Profit 1525000
Allowable remuneration
First 3 lakhs = 90% or 1.5 lakh
(whichever is higher) 1005000
Balance @60%
Or
Remuneration paid to working 696000

partners (Jay and Gopal)
Whichever is lower.
1.3) Section 78(1) - If there is retirement of partner or death of partner the firm shall not carry
forward share of retired /deceased partner in the losses of firm.
If Legal heir becomes partner after death of any partner, then firm can C/F and Set-off Losses.
Section 78 does not apply to unabsorbed dep so it can be c/f by firm even if partner dies or
retires.
Raj Share = 3 Lakhs x ¼ = 75,000 will not be allowed.
1.4) Calculation of total income

Net profit 472000
Add: Remuneration 888000
Add: Interest as per books 540000
18
Less: Interest allowable 225000

Less: Remuneration allowable 696000
Less: unabsorbed loss and dep 375000
Total 604000
1.5) As per Section 45(3), FVOC will be amount recorded in books of firm. However, in case
of immovable property if SDV is more than amount recorded then SDV shall be treated as
FVOC in the hands of Gopal. i.e. 20 lakhs.
Now, for firm, Purchase price would be the selling price for Gopal i.e 20 Lakhs.
SDV is more than 110% of actual consideration, hence SDV will be treated as FVOC.
Therefore, capital gain = 28 lakh – 20 lakh = 8 lakhs.
2. Section 269SS - No person shall take or accept from any other person, any loan or deposit or
any specified sum, otherwise than by an account payee cheque or account payee bank draft
or use of electronic clearing system through a bank account if the amount of such
loan/advance/deposit is more than 20,000 or the account balance exceeds 20,000 on the
date of accepting such loan/advance/deposit.
Penalty – Amount of loan/ deposit taken or accepted (section 271D)
Section 269T - No branch of a banking company or a co-operative bank and no other company
or co-operative society and no firm or other person shall repay any loan or deposit made with
it or any specified advance received by it otherwise than by an account payee cheque or
account payee bank draft drawn in the name of the person who has made the loan or deposit
or paid the specified advance, or by use of electronic clearing system through a bank account
if the amount of such loan/advance/deposit repaid is more than 20,000 or the account
balance (outstanding as on such date) exceeds 20,000 on the date of repayment of such
loan/advance/deposit.
Penalty – Amount of loan/deposit so repaid (section 271E)
Section 269ST - No person shall receive an amount of two lakh rupees or more—
(a) in aggregate from a person in a day; or
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion from a person,
otherwise than by an account payee cheque or an account payee bank draft or use of
electronic clearing system through a bank account.
Penalty – Sum equal to amount received (section 271DA)
2.1) Violation exist for Mr. A and Mr. B loan.

2.2) Cash payment and cross cheque payment is violation.
2.3) Contravention for Mr shyam since amount is 2 lakhs, no contravention in case of Mr.
Ankit since amount is 90,000 only.
2.4) Due date for filing return is 31.10.2021. Tax Audit due date is one month before the due
date of ROI as per Sec 139(1). Penalty leviable under Section 271B if assessee fails to get
accounts audited is 0.50% of Turnover or Gross Receipts (subject to max 1.5 lakh).
19
3. 3.1) As per section 44AD, eligible assessee for this section are resident firms (excluding
LLP)/individual/HUF having Turnover/Gross Receipts upto Rs.2 Cr. and not in the business of
section 44AE, agency, commission and brokerage.
Resident assessee is eligible for 44ADA if he is engaged in profession as referred in Sec 44AA
and Gross Receipt is upto Rs. 50 Lakhs
For the business of plying, hiring, leasing such goods carriage presumptive income will be
calculated as per Sec44AE.
44AE is applicable only if assessee owns Max 10 Vehicles.
Therefore, in the given case eligible firms for declaring income on presumptive basis are AB
& Co., LM & Co. and XY & Co.
3.2) As per section 44AD, income on presumptive basis is Turnover/Gross Receipts *6% (for
account payee cheque/DD/ECS received upto due date of ROI) and for remaining modes it is
Turnover/GR *8%.
Therefore, in the given cases income will be calculated as follows -:
AB & Co.
Presumptive Income = (150+20)*6% + 30*8% = Rs. 12,60,000
Working Partner’s Salary and Interest shall not be deductible while computing income as per
Sec 44AD
PQ & Co.
Since sec 44AD is not applicable therefore book profits of Rs.4,50,000
3.3) As per section 44AE, presumptive income (after deducting partners remuneration, salary,
interest, etc. as per 40(b)) in case of transporters is as follows –
Heavy Goods Vehicle (more than 12000 kgs) = Rs.1,000 per ton per vehicle for every month
or part thereof.
Other Vehicle = Rs.7500 per vehicle per month or part thereof.
Purchase Date (not put to use) is considered under Sec 44AE.

In the given case presumptive income for LM & Co. is as follows -:
= (11*3*7500 + 9*2*7500 + 8*1*7500 + 7*1*7500 + 5*1*7500 + 4*2*13*1000) – (1,50,000
+ 50,000)
= 6,36,500 – 2,00,000
=4,36,500.
3.4) As per section 44ADA, presumptive income in case of professional is (Gross

Receipt*50%). Therefore, income of XY & Co. for AY 21-22 would be = 50,00,000*50% =
Rs.25,00,000
3.5) Yes, since in both the cases, presumptive income is more than the income calculated as
per books of accounts. Hence, if assessee wishes to get their books of accounts audited, then
they can declare income as per books of accounts maintained.
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4. 4.1) Section 43CA - Where the consideration received due to transfer of asset (other than a
capital asset), being land or building or both, is less than stamp duty value in respect of such
transfer, the SDV shall, for the purposes of computing profits and gains from transfer of such
asset, be deemed to be the full value of the consideration. However, where the SDV does not
exceed 110% of consideration the sale consideration shall be treated as FVOC.
If the date of agreement and registration are not same, then assessee can take SDV on the
date of agreement if he has received consideration or part thereof upto date of agreement
in A/c payee cheque/DD, use of ECS, etc.
Since, SDV on date of agreement does not exceed 110% of 100 lakhs, therefore 100 lakhs will
be treated as FVOC.
Business Income (since Rajesh is a property dealer) = 100 lakh – 50 lakh = 50 lakhs
4.2) Where immovable property is acquired for inadequate consideration, if per immovable
property (SDV – Consideration) exceeds 50,000 AND SDV is more than 110% of consideration
then difference between SDV and consideration is taxable under IFOS – Section 56(2)(x)
In instant case, since SDV on date of agreement does not exceed 110% of 100 lakhs. Nothing
is chargeable in IFOS.
4.3) Provision similar to section 43CA exist for transfer of capital asset also (Section 50C).
In instant case, since down payment on date of agreement is received by crossed cheque,
SDV on date of agreement is not acceptable.
Further, SDV on date of transfer exceeds 110% of 50 lakh i.e. more than 55 lakhs, therefore,
70 lakh will be treated as FVOC.
Short Term Capital Gain = 70 – 32 = 38 lakhs.
No indexation benefit since period of holding does not exceed 24 months.
4.4) Where immovable property is acquired for inadequate consideration, if per immovable
property (SDV – Consideration) exceeds 50,000 AND SDV is more than 110% of consideration
then difference between SDV and consideration is taxable under IFOS – Section 56(2)(x)
In instant case, since SDV on date of transfer exceed 110% of 50 lakhs and difference (70 lakh-
50 lakh) is more than 50,000.
20 lakhs (70 lakh – 50 lakh) will be chargeable in IFOS.
4.5) Section 194IA – TDS @ 1% is deductible by payee on transfer of immovable property if

the consideration is 50 lakh or more.
Therefore, TDS is to be deducted by both Rajesh and Vallish.
5. Section 80JJAA – 1) Deduction of an amount equal to 30% of additional employee cost
incurred is allowed. 2) "additional employee" means an employee who has been employed
during the previous year but does not include—
(a) an employee whose total emoluments are more than 25000 per month; or
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(b) an employee for whom the entire contribution is paid by the Government under the
Employees' Pension Scheme notified in accordance with the provisions of the Employees'
Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952); or
(c) an employee employed for a period of less than 240 days during the previous year; or
However, for apparel, footwear or leather products business, period is 150 days
(d) an employee who does not participate in the recognised provident fund:
additional employees employed during the previous year:
Section 115BAB – Applicable only if company set up and registered on or after the 1st October
2019. Tax Rate – 17.16% (15% + 10% + 4%)
Section 115BAA – Tax rate 25.168% (22% + 10% + 4%)
5.1) B Ltd
As per section 115BAB, tax rate is 15% plus surcharge 10% plus HEC 4%.
Deduction u/s 80JJAA = (500 employees*24000* 5 months) *30% = 1.8 crore
Total Income = GTI less deduction u/s 80JJAA
= 2.8 crore – 1.8 crore = 1 crore
Tax = 1 crore*0.15*17.16% = 17,16,000.
5.2) A Ltd
As per section 115BAA, tax rate is 22% plus surcharge 10% plus HEC 4%.
Deduction u/s 80JJAA = (500 employees*24000* 12 months) * 30% = 4.32 crore
Total Income = GTI less deduction u/s 80JJAA
= 4.9 crore – 4.32 crore = 0.58 crore
Tax = 0.58 crore*25.168% = 14,59,740.
5.3) A Ltd
Total Income under special provisions = 0.58 crore
Since the company was set up in September 2019, it already had claimed benefit of additional
depreciation in PY 19-20 and therefore no additional claim is available to it.
Total Income = 0.58 crore
B Ltd
For B Ltd, 50% of additional depreciation will be allowed in PY 20-21 since P&M put to use for
less than 180 days in this PY
Total Income under special provisions = 1 crore
Less: Additional dep since P&M put to use for less than 180 days (4 crore * 20%*1/2) = 0.40
crore
Total Income = 1 crore - 0.40 crore = 0.60 Crore.
5.4) Since his turnover in PY 2018-19 is more than 400 crore, tax rate of 30% is applicable.
Since in this case return is filed therefore penalty will be 50% of tax on URI for under-reporting
of income u/s 270A, at the time of assessment it would be determined as follows -:
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Assessed Income – 16 Crore

Income u/s 143(3) – 20 Crore
URI = 20 Crore – 16 Crore = 4 Crore
Tax on Un-Reported Income = 4 crore * 30%* 1.12* 1.04 = 1.39766 crore
Penalty = 1.39776*50% = 0.69888 crore.
5.5) Since his turnover in PY 2018-19 is less than 400 crore, tax rate of 25% is applicable.
In the given case penalty on account of mis-reporting of income u/s 270A will be 200% of tax
on URI, at the time of reassessment it will be determined as follows -:
Assessed Income – 20 Crore
Income u/s 143(3) – 22 Crore
URI = 22 Crore – 20 Crore = 2 Crore
Tax on Un-Reported Income = 2 crore *25%* 1.12* 1.04 = 0.5824 crore
Penalty = 0.5824*200% =1.1648 crore.
6. 6.1) The business trust has to deduct tax at source under section 194LBA –
- @10%, on interest component of income distributed to resident unit holders; and
- @5% (plus cess), on interest component of income distributed to non-corporate Non-
resident unit holders and foreign companies.
Interest component of income distributed to unit holders is taxable in the hands of the unit
holders – @5%, in case of unit holders, being non-corporate non-residents or foreign
companies; and at normal rates of tax, in case of resident unit holders.
Note: TDS rates for residents are reduced by 25% due to COVID-19 from 14.05.2020 to
31.03.2021.
Therefore, tax is deductible at 7.5% for Mr. X (Resident) and 5.2% (including HEC) for Mr. Y
(Non-resident).
6.2) As per section 115UA(2), the business trust is liable to pay tax@15% under section 111A
in respect of short-term capital gains on sale of listed shares and MMR for sale of
developmental properties.
6.3) Section 10(23FC) - Interest & Dividend from SPV shall be fully exempt in hands of REIT.
Dividend taxable only when SPV paid taxes as per 115BAA.
Therefore, no tax payable by REIT or unit holder.
6.4) Since, tax is paid by SPV as per section 115BAA. Dividend will be taxable in hands of
unitholder.
Dividend exempt in hands of business trust due to its pass-through status.
6.5) Such interest is taxable at maximum marginal rate, in the hands of the Business trust, as
per section 115UA(2). However, there would be no tax liability in the hands of the unit holders
on the interest component of income distributed to them, by virtue of section 10(23FD).
Notes:
23
6.6) The distributed income or any part thereof, received by a unit holder from the REIT,
which is in the nature of income by way of renting or leasing or letting out any real estate
asset owned directly by such REIT is deemed income of the unit holder as per section
115UA(3).
The business trust has to deduct tax at source@10% under section 194LBA in case of
distribution to a resident unit holder and at rates in force in case of distribution to a non-
resident unit holder.
Note: TDS rates for residents are reduced by 25% due to COVID-19 from 14.05.2020 to
31.03.2021.
7. 7.1) M/s MNO Ltd. has under reported its income since twice (i) AO has issued order of
scrutiny assessment u/s 143(3) for return processed u/s 143(1)(a) where AO has determined
under reporting of income. (ii) Further, AO has reassessed income u/s 147 and found escaping
of income assessed u/s 143(3).
7.2) Mr. N has under reported its income since he has not furnished his return of income u/s
139(1), upon which AO has assessed income u/s section 144 which exceeds maximum
amount not chargeable to tax.
7.3) Since in this case return is filed therefore penalty will be 50% of tax on URI for under-
reporting of income u/s 270A, at the time of assessment it would be determined as follows -
:
Assessed Income – 65,00,000
Income u/s 143(1) – 50,00,000
URI = 65,00,000-50,00,000 = 15,00,000
Tax on Un-Reported Income = {(15,00,000 + 50,00,000) *30% -(50,00,000) *30%} * 104% =
4,68,000
Penalty = 4,68,000*50% = 2,34,000.
7.4) In the given case penalty on account of mis-reporting of income u/s 270A will be 200%
of tax on URI, at the time of reassessment it will be determined as follows -:
Reassessed income – 85,00,000
Income assessed in last order – 65,00,000
URI = 85,00,000-65,00,000 = 20,00,000
Tax on Un-Reported income = {(20,00,000+65,00,000) *30% - (65,00,000) * 30%} *104% =
6,24,000
Penalty = 6,24,000*200% = 12,48,000.
7.5) In the given case return has not been furnished by assessee, penalty on account of under-
reporting of income u/s270A by Mr. N will be 50% of tax on URI, the same will be assessed as
follows -:
Assessed Income – 15,00,000
URI = 15,00,000-2,50,000 = 12,50,000
Tax on URI = (2,50,000*5% + 5,00,000*20% + 5,00,000*30%) * 104%
= 2,73,000
Penalty = 2,73,000*50%
24
= 1,36,500.
8. As per Section 115UB, PGBP income of investment funds is taxable in hands of investment
funds.
Section 115UB – All income received by unit holders from investment fund are taxable in
hands of unit holders (except PGBP).
As per amendment made by FA 2019, Losses other than PGBP of Investment Fund shall be
distributed to unit holders and unit holder can set off and carry forward such loss if unit
holder hold such units for 12 months or more.
8.1) As per taxation on investment fund, PGBP income of Rs.14,00,000 will be taxable in the
hands of investment fund and remaining income of Rs.28,00,000 (Capital Gain-21,00,000 +
IFOS – 7,00,000) will be taxable in the hands of unit holder i.e. Rs.80,000 to each holder
(28,00,000/35).
8.2) As per taxation on investment fund, PGBP income of Rs, 14,00,000 will be taxable @30%
plus HEC 4% since it is LLP.
8.3) As per taxation on investment fund PGBP loss of Rs. 4,00,000 (PGBP loss 10,00,000 – IFOS
6,00,000) will be carried forward by Investment Fund II and since units have been hold by
holders for a period of atleast 12 months therefore capital loss of Rs.40,000 (20,00,000/50)
can be c/f by each unit holder.
8.4) As per taxation on investment fund PGBP income will be Rs. 11,00,000 for A.Y. 22-23 as
PBGP income for current year is Rs. 15,00,000 and carried forward loss of previous year is
Rs.4,00,000.
9. 9.1) As per sec 153(2), time limit for completion of assessment procedure by AO (if notice is
served on or after 01-04-2019) is 12 months from the end of P.Y. in which notice u/s 148 was
served. Therefore, in the given instances it is 31.3.21 for Mr. Ram (Notice u/s 148 served on
20.3.20) and 31.3.22 for Mr. Shyam (Notice u/s 148 served on 9.4.20).
9.2) As per sec 153(1), time limit for completion of assessment procedure by AO is 12 months
from the end of R.A.Y.
Section 153(4)-If reference is made to Transfer Pricing Officer under section 92CA, the period
available for completion of assessment or reassessment, as the case may be, shall be
extended by twelve months.
Therefore, in the given instances, it is 31.3.21 for Mr. Ram and 31.3.22 for Mr. Shyam.
9.3) As per sec 139(1), due date for return filling of Mr. Ram is 31st July of AY since his turnover
is less than 1 Cr. Hence not liable to audit u/s 44AB whereas due date for return filling of Mr.
Shyam is 30th Nov of AY as he is required to submit report u/s 92E. Therefore Mr. Shyam can
carry forward business losses of A.Y.2020-21 for set-off against his business income of
A.Y.2021-22 but Mr. Ram cannot do so as he has not filled his ROI within due date.
10. 10.1) Section 194-O: Where sale of goods or services of an e-commerce participant is
facilitated by an e-commerce operator, such e-commerce operator shall, at the time of credit
or at the time of payment thereof to such e-commerce participant by any mode, whichever
is earlier, deduct income-tax at the rate of 1% of the gross amount of such sales or services
or both.
25
Explanation—For the purposes of this sub-section, any payment made by a purchaser of

goods or recipient of services directly to an e-commerce participant for the sale of goods or
provision of services or both, facilitated by an e-commerce operator, shall be deemed to be
the amount credited or paid by the e-commerce operator to the e-commerce participant and
shall be included in the gross amount of such sale or services for the purpose of deduction of
income-tax under this sub-section
Further, as per Section 206AA, If the e-Commerce participant does not furnish his PAN or
Aadhaar, TDS must be deducted at the rate of 5%.
Above section is applicable w.e.f. 01.10.2020.
In instant case, 150000, 140000 and 20000 will be liable for TDS deduction at 5% rate.
310000*5/100 = 15500
10.2) As per Section 194J, TDS on professional services provided by Mr. B for office premises
of Mr. N are liable to TDS @10%, therefore Mr. N will deduct TDS of Mr. B on Rs.40,000 @10%
i.e. Rs.4,000.
Here, date is 05.05.2020 which is prior to 14.05.2020, hence rate of 10% has been taken.
10.3) As per Section 194M, TDS is not required to be deducted if professional services
received less than Rs. 50,00,000. Hence in given case Mr. N is not required to deduct TDS of
Mr. B u/s 194M as total services received are less than Rs. 50 Lacs.
10.4) As per sec 165 of FA 2016 equalization levy @6% is applicable if payment for specified
services is received/ receivable by NR from person resident in India carrying business or
profession, specified services includes online advertisement. In the given case, Mr. B has
received online advertisement services from Tumble LLC and Doodle Inc. Therefore,
equalization levy of Rs.6,600 on Tumble LLC and Rs. 6,300 on Doodle Inc. is required to be
deducted.
10.5) Since, assessee does not want to get accounts audited, hence 44ADA is applicable if
gross receipts is upto 50 Lacs.
Total Gross receipts = 49,10,000 (200000+150000+140000+20000+4000000+400000)
In given case, since PGBP shown is less than 50% and audit is not done. Assessee have to opt
section 44ADA.
PGBP = 4910000*50% = 24,55,000
Tax as per Slab rates = 5,70,960 (inclusive of HEC)
11. 11.1) As per sec 94B, excess interest paid by Indian Company to a NR being an associate
enterprise shall be disallowed, also such disallowed interest can be carried forward upto a
period of 8 AYs. Hence, in the given case allowed interest for computation of income of UI
ltd. for AY 2021-22 is as follows -:
Interest paid to AE – 30% of EBITDA
Here, EBITDA = PAT + Tax + Interest + Depreciation

EBITDA = 8 + 1.5 + 6 + 2.5 = 18 Cr.
Interest Allowed (Max which can be allowed) = 18*30/100 = 5.4Cr.
Interest paid to AE in AY 21-22 = Rs. 4.75 Cr. (50 crore * 9.5%)
26
Since, actual interest is less than max allowed interest, hence nothing will be disallowed.
Therefore, additional interest that can be further allowed (C/f from AY 20-21) = 5.4 – 4.75 =
0.65 Cr.
Local borrowings interest will be fully allowed.
Hence, Allowed interest expenditure for AY 21-22 = 4.75 + 1.25 + 0.65 = Rs. 6.65 Cr.
11.2) As per Section 92C, calculation of ALP by Resale Price Method (RPM) on import of turbo
equipment by UI Ltd from H Inc. is as follows - :
Resale price of Equipment sold to unrelated party = 40,00,00,000
(-) Normal GP margin @ 20% = (8,00,00,000)
Arm’s Length Price = 32,00,00,000
Purchase related expenses [inclusive of custom duty paid] = 34,50,00,000)
Increase in Income of UI Ltd. = 34,50,00,000 – 32,00,00,000 = Rs.2,50,00,000
11.3) As per section 92CE, if excess money of Rs. 2.5 crore is not repatriated in India then
following interest income will be added -:
= 2,50,00,000*(11.25%+3.25%) * 121/365days = Rs. 12,01,712.
No. of Days = 31 (Dec) + 31 (Jan) + 28 (Feb) + 31 (March) =121 days
Interest is calculated from the due date of filling of return in cases where primary adjustment
is made suo motu.
11.4) As per section 92CE (2A), additional Income Tax on amount to be repatriated will be
@18%, such tax will be increased by surcharge of 12% + 4% HEC. In the given case calculation
of additional tax to be paid will be -
Tax to be paid = 2,50,00,000*20.9664% = Rs. 52,41,600.
11.5) Excess money should be repatriated within 90 days from due (i.e 28-02-22) but in the
given case, the same has been repatriated on 15-03-22.
As per section 92CE (2A), if the assessee pays additional income tax, he will not be required
to make secondary adjustment or compute interest form the date of payment of such tax. In
the given case additional tax has been paid by UI ltd on 15.03.2022, hence interest income to
be added for AY 22-23 will be as follows -:
= 2,50,00,000 * (11.25%+3.255) * 105/365 = Rs. 10,42,808.
11.6) As per section 92A, UI Ltd holds more than 26% shares of K Inc and Y Ltd and K Inc has
prior agreement of sale for such transaction, hence H Inc, K Inc and Y ltd. are associate and
deemed associates of UI Ltd.
12. 12.1) As per section 194N, TDS @ 2% is applicable on cash withdrawals in excess of Rs. 1
Crore.
However, W.e.f. 01.07.2020 if the account holder has not filled his ROI for the 3 years
immediately preceding the PY then TDS @ 2% is applicable on withdrawals above Rs.
20,00,000 but upto Rs. 1Cr. and TDS @ 5% on withdrawals in excess of Rs. 1Cr. Therefore, in
the given case TDS u/s 194 for account holders will be as follows -:
Mr. A
27
Total cash withdraws = Rs.1,05,00,000

TDS on Rs.5,00,000 @ 2% = Rs.10,000
Mr. B
Withdrawal of Rs. 22 lakhs before 01.07.2020 will not be subject to TDS applicability.
However, it will be counted in the overall limit.
Total cash withdrawal = Rs.1,02,00,000
TDS on 2 lakh*5% = 0.10 lakh
TDS on balance withdrawal (100 lakh – 22 lakh) * 2% = 1.56 lakhs
Total = 1.66 lakhs
12.2) As per sec 36(1)(viia), Indian banks can provide provision for bad debts @8.5% of GTI
(before this deduction) + 10% of aggregate average advances made by rural branches. If
provision for bad debts is less than actual bad debts, then remaining bad debts allowed u/s
36(1)(vii). Therefore, in given case amount of provision will be -:
= 100,00,000*8.5% + 120,00,000*10% = Rs. 20,50,000
Total actual bad debts = Rs. 30,00,000
Therefore, deduction for bad debts u/s 36(1)(viia) = Rs.20,50,000
u/s 36(1)(vii) = 30,00,000-20,50,000
= Rs. 9,50,000
12.3) As per the provisions of IT Act, reportable accounts under SFT are of Mr. B & Mr. K as
Mr. B has withdrawals of more than Rs. 50 Lacs from his current account and Mr. K has paid
a bill of credit card in excess of Rs. 10 Lacs from account payee cheque.
12.4) As per section 271FA penalty for non-filling of SFT from the due date of 31st May of the
AY till the till the period of expiry of notice is Rs.500 per day and Rs.1000 on failure to furnish
the same after expiry of notice period.
In the given case penalty u/s 271FA would be -:
= (1/06/21-30/10/21)152 days *500 + (31/10/21-25/11/21) 26 days *1000
=Rs. 1,02,000.
12.5) In the given assets have been used by predecessor company for 332 days till 26/02/21,
therefore deduction u/s 32 & 35DDA will be as follows -:
=350000*331/365 + (30,00,000/5) *331/365
=8,61,507.
13. 13.1) Section 92A: Two enterprises shall be deemed to be associated enterprises if, at any
time during the previous year-
any person or enterprise holds, directly or indirectly, shares carrying not less than twenty-six
per cent of the voting power in each of such enterprises
or
a loan advanced by one enterprise to the other enterprise constitutes not less than fifty-one
per cent of the book value of the total assets of the other enterprise.
13.2) 620 million * 2.5% (6.5-4) * 9/12 months = 1,16,25,000.
28
13.3) If primary adjustment is made due to order of AO, then the excess money is required
to be brought back within 90 days from the date of order of AO.
Alternatively, additional income tax u/s 92CE(2A) can be paid and then the excess money will
not be required to be repatriated. However, interest will be charged upto date of payment of
additional income tax.
13.4) As per section 92CE, if excess money of Rs. 1,16,25,000 is not repatriated in India within
90 days from the date of order of AO, then following interest income will be added to PY 22-
23 -:
= 1,16,25,000*(10.00%+3.25%) = Rs. 15,40,313.
Interest is calculated from the date of order by AO in cases where primary adjustment is made
AO.
13.5) As per section 270A(9), failure to report any international transaction or any transaction
deemed to be an international transaction or any specified domestic transaction, to which
the provisions of Chapter X apply shall be treated as mis reporting of income and penalty
would be 200% of amount of the tax payable.
13.6) No adjustment would be required in hands of X and Y since this is an extra income to X
and income of Y is not chargeable to tax in India.
14. 14.1) Section 143: Where a return has been made under section 139, such return shall be
processed in the following manner, namely:
(a) the total income or loss shall be computed after making the following adjustments,
namely: (ii) an incorrect claim, if such incorrect claim is apparent from any information in the
return;
Since, it is a normal adjustment, this will not be treated as under reporting of income.
14.2) Since in this case return is filed therefore penalty will be 50% of tax on URI for under-
reporting of income u/s270A, at the time of assessment it would be determined as follows -:
Assessed Income – (10,50,000)
Income u/s 143(1) – (13,50,000)
URI = 13,50,000-10,50,000 = 3,00,000
Tax on Un-Reported Income = 300000*30%* 104% = 93,600
Penalty = 93,600*50% = 46,800.
14.3) In the given case penalty on account of mis-reporting of income u/s 270A will be 200%
of tax on URI, at the time of reassessment it will be determined as follows -:
Reassessed income – 2,00,000
Income assessed in last order – (10,50,000)
URI = 2,00,000-(-10,50,000) = 12,50,000
Tax on Un-Reported income = 12,50,000*30%*104% = 3,90,000
Penalty = 3,90,000*200% = 7,80,000.
14.4) Section 270AA: An assessee may make an application to the Assessing Officer to grant
immunity from imposition of penalty under section 270A and initiation of proceedings
under section 276C or section 276CC, if he fulfils the following conditions, namely:—
29
(a)- the tax and interest payable as per the order of assessment or reassessment under sub-
section (3) of section 143 or section 147, as the case may be, has been paid within the period
specified in such notice of demand; and
(b) no appeal against the order referred to in clause (a) has been filed.
14.5) Section 271AAD –

(1) Without prejudice to any other provisions of this Act, if during any proceeding under this
Act, it is found that in the books of account maintained by any person there is—
(i) a false entry; or
(ii) an omission of any entry which is relevant for computation of total income of such person,
to evade tax liability,
(2) Such person shall pay by way of penalty a sum equal to the aggregate amount of such
false or omitted entry.
Section 276C –
(1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or
interest chargeable or imposable, or under reports his income, under this Act, he shall,
without prejudice to any penalty that may be imposable on him under any other provision of
this Act, be punishable,—
(i) in a case where the amount sought to be evaded or tax on under-reported income exceeds
twenty-five hundred thousand rupees, with rigorous imprisonment for a term which shall not
be less than six months but which may extend to seven years and with fine;
(ii) in any other case, with rigorous imprisonment for a term which shall not be less than
three months but which may extend to two years and with fine.
15. 15.1) As per sec 94B, excess interest paid by Indian Company to a NR being an associate
enterprise shall be disallowed. Hence, in the given case disallowed interest is as follows -:
Interest paid to AE – 30% of EBITDA
Here, Interest Allowed = 6*30/100 = 1.8 Crore.

Interest paid to AE = Rs. 3 Cr. (50 crore*6%)
Therefore, interest disallowed = 3 crore -1.8 crore = 1.2 crore.
15.2) Section 115BAA: Notwithstanding anything contained in this Act but subject to the
provisions of this Chapter, other than those mentioned under section 115BA and section
115BAB, the income-tax payable in respect of the total income of a person, being a domestic
company, for any previous year relevant to the assessment year beginning on or after the 1st
day of April, 2020, shall, at the option of such person, be computed at the rate of 22%.
Section 115BBD provides tax rate of 15% for dividend received from foreign company where
Indian company holds 26% or more.
Here 115BAB is not eligible as assessee is engaged into trading in futures and options.
Company should not be engaged in any business other than business of manufacturing to
avail 115BAB.
30
15.3) Section 115BBF - Any income by way of royalty in respect of a patent developed and
registered in India, shall be taxable at 10%. No deduction in respect of any expenditure or
allowance shall be allowed to the eligible assessee under any provision of this Act.
"developed" means at least seventy-five per cent of the expenditure incurred in India by the
eligible assessee for any invention in respect of which patent is granted under the Patents
Act, 1970.
15.4) As per section 115BAA, the assessee can claim deduction u/s 80JJAA. No deduction u/s
32(1)(iia) will be allowed.
15.5) Since, notices are issued to non-existent company, they are void ab initio. Participation
of X would not validate the notices.
16. 16.1) Section 115JB is applicable to all companies.
As per Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of
this section shall not be applicable and shall be deemed never to have been applicable to an
assessee, being a foreign company, if the assessee is a resident of a country or a specified
territory with which India has an agreement referred to in sub-section (1) of section 90 or the
Central Government has adopted any agreement under sub-section (1) of section 90A and
the assessee does not have a permanent establishment in India in accordance with the
provisions of such agreement.
Since, in present case, DEF Inc. has permanent establishment, section 115JB is applicable.
16.2) As per Section 115A, it is taxable at 10% + HEC 4% while as per DTAA, tax rate is 10%
whichever is more beneficial would apply.
Note - Deduction of expenses not allowed.
16.3) Section 112(1)(c)(iii) - Long-term capital gains arising from the transfer of a capital asset,
being unlisted securities or shares of a company not being a company in which the public are
substantially interested, shall be calculated at the rate of ten per cent on the capital gains in
respect of such asset as computed without giving effect to the first and second proviso
to section 48 (indexation and foreign currency conversion).
16.4) Both capital gains on securities and fee for technical services have to be reduced while
computing book profit of DEF Inc. for levy of minimum alternate tax since they are taxable at
rate lower than rate in section 115JB.
17. 17.1) Section 44AB - Every person, carrying on business shall, if his total sales, turnover or
gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any
previous year shall get its books audited.
Provided that in the case of a person whose—
(a) aggregate of all amounts received including amount received for sales, turnover or gross
receipts during the previous year, in cash, does not exceed five per cent of the said amount;
and
(b) aggregate of all payments made including amount incurred for expenditure, in cash,
during the previous year does not exceed five per cent of the said payment,
31
this clause shall have effect as if for the words "one crore rupees", the words "five crore
rupees" had been substituted.
In given case, his receipts in cash does not exceed 5% (1.1 crore*5% = 5.5 lakh), amount
received in cash is also 5.5 lakh.
Total payments made = 65,84,500, payment in cash = 7,00,000. Payments allowed in cash =
3,29,225 (6584500*5%)
Since, the turnover exceeds 1 crore and cash payments exceeds 5% of total payment, Audit
as per Sec. 44AB is mandatory.
17.2) TDS is required in case of payments made to specialists under section 194J and payment
of salary u/s 192.
Therefore, disallowed amount under Section 40(a)(ia) -
= 16,50,000 ((35,00,000+20,00,000)*30%)
17.3) Calculation of depreciation:

Asset value = 3,50,000
Interest to be capitalized from 15th April to 14th oct = 34500*6/11.5 months = 18000
Total asset value = 350000+18000 = 368000.
Depreciation = 368000*40/100*1/2 = 73600.
17.4) Calculation of total income

Gross receipts 1,10,00,000
Less: Payments for Remuneration, 55,70,000
Salary and other Admin Expense
Add: Expense disallowed (due to TDS 16,50,000
non-deduction)
Less: Depreciation 73600
Less: Interest other than capitalised 16500
Note – Wages of 5,40,000 will be disallowed as per 40A(3), hence not deducted.
Advances are not expenses, hence not deducted.
17.5) Section 269ST - Any person should not receive an amount of 200000 or more except by
account payee cheque, DD or ECS in respect of a single transaction. Otherwise, penalty @
100% of such receipt shall be levied u/s 271DA.
18. 18.1) Depreciation rate for Motor Vehicles used in a business of running on hire is 30% (45%
if acquired and put to use between 23.08.19 to 31.03.2020)
Depreciation rate for Other Motor Vehicles is 15% (30% if acquired and put to use between
23.08.19 to 31.03.2020)
Interest capitalised = 30 lakh*10%*2/12 months = 0.50 lakh
Depreciation on P&M:
32
On Opening WDV = 95 lakhs*15% = 14.25 lakhs

New asset = (40 lakh + 0.50 Lakh)*15%*1/2 = 3.0375 lakh
Additional dep = (40 lakh + 0.50 Lakh)*20%*1/2 = 4.05
Total depreciation = 21.3375 lakhs
Depreciation on Motor Car:

Opening WDV = 700000*0.70 =490000
Dep during the year = 490000*0.30 = 1,47,000.
18.2) Section 40(a)(i), payment made to NR or foreign company without deduction of TDS
attracts 100% disallowance.
Note – It seems like a printing mistake by ICAI under point (ii) – hence make correction under
point (ii) as - Interest paid in dollars to X Inc., a foreign company, without deduction of tax at
source Rs. 1,50,000. Such tax was, however, deducted on 10.4.2021 and remitted on
7.5.2021.
18.3) As per section 115BAA, expenditure on in house scientific research and development
u/s 35(1)(i) and 35(1)(iv) is allowed.
18.4) Calculation of total income -

Net profit 3300000
Add: Dep as per companies act 1520000
Add: Interest paid 150000
Less: Depreciation as per Income tax 2280750
Less: Interest for 5 months (other 125000
than capitalised)
18.5) Calculation of total income if company opts 115BAA -

Net profit 3300000
Add: Dep as per companies act 1520000
Add: Interest paid 150000
Less: Depreciation as per Income tax 2280750
Add: Additional dep 405000
Less: Interest other than capitalised 125000
Add: Contribution to National Lab 500000
Total Income 3469250
19. 19.1) As per section 45(2), Conversion of capital asset into stock in trade is treated as transfer,
capital gain shall arise where an assessee converts capital asset in stock in trade. Capital gain
shall be taxable in the year in which such stock in trade is sold.
Calculation of capital gain for PY 20-21 -
33
FVOC (FMV on date of 300

Transfer)
Indexed cost of acquisition 105.4745
(50*289/137)
Capital Gain 194.5255
Capital Gain chargeable to 136.1679 Capital gain shall be taxable in the year in
tax (194.5255 * 14/20) which such stock in trade is sold
Less: exemption u/s 54EC 40 Max 50 lakh deduction allowed,
investment can be made within 6 months
from sale.
Capital gain taxable 96.1679
19.2) PGBP = Sale value – Cost of land – cost of construction

= (40 lakhs * 14 Flats – 300 lakhs *14 /20 – 15 lakhs * 14 Flats) = 140 lakhs.
19.3) Calculation of capital gain PY 21-22 -

Capital Gain 194.5255
Capital Gain chargeable to 58.3577

tax (194.5255 * 6/20)
Less: exemption u/s 54EC 10 Max 50 lakh deduction allowed,
investment can be made within 6 months
from sale.
Capital gain taxable 48.3577
PGBP = Sale value – Cost of land – cost of construction

= (40 lakhs * 6 Flats – 300 * 6/20 – 15 lakhs * 6 Flats) = 60 lakhs.
19.4) IFHP =
Annual Value = 60000*12 months = 720000
Less: standard deduction @30% = 216000
Taxable = 504000.
Since, municipal taxes by paid by tenant, it will not be deducted.
19.5) Section 194IB - Individual and HUF are required to deduct TDS @5% on rent paid for
immovable property if rent per month or part thereof exceeds 50,000.
This deduction is to be made at the time of credit of such rent for the last month of the
previous year or the last month of tenancy as the case may be.
20. 20.1) As per section 35AD, 100% deduction is allowed in respect of all capital expenses except
a) Land b) Goodwill c) Financial Instruments.
20.2) Loss of Specified business can be set off only against specified business income,
irrespective of whether the latter is eligible for deduction under section 35AD.
Loss under specified business = 80 – 175 = 95 lakh
Profit of other hotel = 130 lakh
34
Net = 130 – 95 = 35 lakhs
20.3) No change in answer since no deduction was taken for land.
20.4) Normal tax = 35 lakh *30%*1.04 = 10.92 lakhs
Calculation of AMT -
Profit = 35 lakh
Add: Deduction u/s 35AD = 175 lakhs
Less: Depreciation u/s 32 on 175 Lakhs @ 10% = 17.5 lakh
Adjusted total income = 192.50 lakhs
AMT = 192.50*18.5%*1.12*1.04 = 41.48144 lakhs
Tax payable = 41.48144 lakhs
20.5) Section 80JJAA – 1) Deduction of an amount equal to 30% of additional employee cost
incurred is allowed. 2) "additional employee" means an employee who has been employed
during the previous year but does not include—
(a) an employee whose total emoluments are more than 25,000 per month; or
(b) an employee for whom the entire contribution is paid by the Government under the
Employees' Pension Scheme notified in accordance with the provisions of the Employees'
Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952); or
(c) an employee employed for a period of less than 240 days during the previous year; or
However, for apparel, footwear or leather products business, period is 150 days
(d) an employee who does not participate in the recognised provident fund:
additional employees employed during the previous year:
40 1.10.2020 Regular 24000 182 Eligible

80 1.10.2020 Regular 24500 182 Eligible
50 1.11.2020 Regular 25500 151 Not eligible since salary exceed 25k
30 1.11.2020 Casual 25000 151 Eligible
Not eligible since employed for less
20 1.12.2020 Casual 24000 90 than 150 days
Calculation of Deduction -
Employees Months Salary Total Salary
40 6 24000 57.60 Lakhs
80 6 24500 117.6 Lakhs
30 5 25000 37.5 Lakhs
Total 212.7 Lakhs
Deduction
@ 30% 63.81 Lakhs
21. 21.1) Section 50B

Calculation of Deemed Cost
35
Depreciable Asset 615 WDV as per income tax is

considered
Other FA 90 Revaluation to be ignored
Other assets 585
1290
Liabilities 135
Net worth 1155
Calculation of Capital
Gain
Sale Value 1320
Net worth 1155
Short term Capital Gain 165 POH is less than 3 years
21.2) Tax rate applicable to the company is 25% since turnover in 18-19 was less than 400
crores.
Short term capital gain other than 111A will be taxable at normal tax rates.
Tax liability = 165 lakhs * 25% *1.07*1.04 = 45,90,300.
21.3)
Calculation of Capital Gain
Sale Value 3000
Net worth 1155
Long term Capital Gain 1845 POH is more than 3 years
Tax liability = 1845 lakhs * 20% *1.12*1.04 = 429.81 lakhs.
21.4) MAT Rate in case of IFSC is 9%.

400 lakh*9%*1.07*1.04 = 40,06,080.
21.5) No tax on distributed profits shall be chargeable in respect of the total income of a
company being a unit located in International Financial Services Centre, deriving income
solely in convertible foreign exchange, for any assessment year on any amount declared,
distributed or paid by such company, by way of dividends (whether interim or otherwise) on
or after the 1stday of April, 2017 out of its current income, either in the hands of the company
or the person receiving such dividend.
22. 22.1) Section 10AA - Since, it is the 6th year of operations, 50% of export profit will be exempt.
Deduction = 60 lakh * 120 lakh/160 lakhs * 50% = 22.50 lakhs
Section 35AD - 100% deduction is allowed in respect of all capital expenses except a) Land b)
Goodwill c) Financial Instruments.
Therefore, deduction = 65 lakhs.
22.2)
Profit of unit located in SEZ 60 lakhs
Less: Deduction u/s 10AA 22.50 lakhs
36
A 37.50 lakhs
Profit from warehouse 160 lakhs

Less: Deduction u/s 35AD 65 lakhs
B 95 lakhs
A+B 132.50 lakhs
Tax Liability 46.3008 lakhs

132.50*30%*1.12*1.04
22.3)
Taxable Income 132.50 Lakhs
Add: Deduction u/s 10AA 22.50 lakhs
Add: Deduction u/s 35AD 65 lakhs
220
Less: Dep u/s 32 (65 Lakhs*10%) 6.5 lakhs
Adjusted Total Income 213.5 lakhs
Tax Liability 46,00,670
213.50*18.50%*1.12*1.04
22.4) Tax as per normal provision was higher. Therefore, no AMT credit will be there.
22.5) As per section 44AD, income on presumptive basis is Turnover/Gross Receipts *6% (for
account payee cheque/DD/ECS received upto due date of ROI) and for remaining modes, it is
Turnover/GR *8%.
Therefore, in the given cases income will be calculated as follows -:
190 lakhs*6% + 10 lakhs*8% = 12.20 lakhs.
22.6) Section 44AB - Every person, carrying on business shall, if his total sales, turnover or
gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any
previous year shall get its books audited.
Since, income declared as per books is less than presumptive profit, hence, Audit is
mandatory.
23. 23.1) Section 115UG -
Tonnage shall be rounded off to nearest multiple of 100 tons. Therefore, Ship 1 rounded off
to 33800 tonnes and ship 2 to 25000 tonnes.
Particulars Ship 1 Ship 2
First 1,000 tons (1,000 x 70/100) 700 700
Next 9,000 tons (9,000 x 53/100) 4770 4770
Next 15,000 tons (15,000 x42/100) 6300 6300
Balance (8,800 x29/100) 2552 -
14322 11770
Ship 1 = 14322*212 days = 30,36,264
Ship 2 = 11770*347 days = 40,84,190
Total = 71,20,454
37
23.2) Section 115VK - (1) For the purposes of computing depreciation under clause (iv)
of section 115VL, the depreciation for the first previous year of the tonnage tax scheme
(hereafter in this section referred to as the first previous year) shall be computed on the
written down value of the qualifying ships as specified under sub-section (2).
(2) The written down value of the block of assets, being ships, as on the first day of the first
previous year, shall be divided in the ratio of written down value as per books of the qualifying
ships (hereafter in this section referred to as the qualifying assets) and the book written down
value of the non-qualifying ships (hereafter in this section referred to as the other assets).
In the instant case, WDV as per books of Qualifying ships is 850 lakhs (580+270)
WDV as per books of all ships is 1080 lakhs
Ratio = 850/1080 = 78.704%
Therefore, WDV of qualifying ships for tax purpose = 1200 lakhs * 78.704% = 944.44 Lakhs.
23.3) Section 115VT. (1) A tonnage tax company shall, subject to and in accordance with the
provisions of this section, be required to credit to a reserve account (hereafter in this section
referred to as the Tonnage Tax Reserve Account) an amount not less than 20% of the book
profit derived from the activities referred to in clauses (i) and (ii) of sub-section (1) of section
115V-I in each previous year to be utilised in the manner laid down in sub-section (3):
Provided that a tonnage tax company may transfer a sum in excess of twenty per cent of the
book profit and such excess sum transferred shall also be utilised in the manner laid down in
sub-section (3).
In our case, Book profits calculated as per the Explanation to section 115JB(2) [in so far as it
relates to income derived from core and incidental activity] are Rs. 100 lakhs.
Therefore, minimum reserve requirement is Rs. 20 lakhs (100 lakh*20%)
23.4) Section 115VT (5) - Notwithstanding anything contained in any other provision of this
Chapter, where the amount credited to the Tonnage Tax Reserve Account in accordance with
sub-section (1) is less than the minimum amount required to be credited under sub-section
(1), an amount which bears the same proportion to the total relevant shipping income, as the
shortfall in credit to the reserves bears to the minimum reserve required to be credited under
sub-section (1) shall not be taxable under the tonnage tax scheme and shall be taxable under
the other provisions of this Act.
Amount required to be credits is 20 lakhs
Amount credited is Rs. 15 lakhs
Shortfall = 5 lakh i.e. 25%.
Total Income from core and non-core activities = 70 lakh + 14 lakh = 84 lakhs
Amount that will be taxable under other provisions of the Act due to shortfall = 84 lakhs *
25% = 21 lakhs.
23.5) As per sec 44B, when Non-Residents is engaged in shipping Business then presumptive
income is 7.5% of specified sum for Shipping Business.
38
Specified sum mean amount paid or payable on account of carriage of goods at/from any
port/place in India and amount received or deemed to be received in India on account of
passengers at/from any port/place outside India.
Particulars Amount
Goods shipped at ports in India (200+150) 350
Goods shipped at ports outside India but consideration 180
received in India
Total 530
Deemed Income @7.5% 39.75
24. Section 165A of Finance Act 2016 - (1) On and from the 1st day of April, 2020, there shall be
charged an equalisation levy at the rate of two per cent. of the amount of consideration
received or receivable by an e-commerce operator from e-commerce supply or services
made or provided or facilitated by it—
(i) to a person resident in India; or
(ii) to a non-resident in the specified circumstances as referred to in sub-section (3); or
(iii) to a person who buys such goods or services or both using internet protocol address
located in India.
(2) The equalisation levy under sub-section (1) shall not be charged—
(i) where the e-commerce operator making or providing or facilitating e-commerce
supply or services has a permanent establishment in India and such e-commerce
supply or services is effectively connected with such permanent establishment;
(ii) where the equalisation levy is leviable under section 165; or
(iii) sales, turnover or gross receipts, as the case may be, of the e-commerce operator
from the e-commerce supply or services made or provided or facilitated as referred
to in sub-section (1) is less than two crore rupees during the previous year.
(3) For the purposes of this section, "specified circumstances" mean—
(i) sale of advertisement, which targets a customer, who is resident in India or a
customer who accesses the advertisement though internet protocol address
located in India; and
(ii) sale of data, collected from a person who is resident in India or from a person who
uses internet protocol address located in India.]
24.1) Therefore, Ujay International is required to charge equalisation levy of 2% since Mr.
Alex accessed the advertisement though internet protocol address located in India.
24.2) Section 166A of Finance Act 2016 – Equalisation levy collected in March is required to
be deposited till 31st March.
24.3) Considering section 165A of Finance Act, 2016 mentioned above, e commerce operator
having no PE in India providing services to person resident in India is liable for collecting
equalisation levy.
39
24.4) Considering the specified circumstances mentioned in section 165A of Finance Act,
2016, equalisation levy of 2000 is deductible and payable by Y tourism Ltd since the data
relates to Indian customers.
25. 25.1) As per section 6(1), a person is treated as resident in India if
He stays in India for 182 days or more in PY
Or
Stay in India for 60 days or more in PY and 365 days in Last 4 PY’s.
As per section 6(6), a person will be treated as ordinary resident if he satisfies both
conditions-
Resident for 2 PY or more in Last 10 PYs
And
Stay in India for 730 days or more in Last 7 PYs.
In the given case, his stay in India during PY is = 30+31+30+31+20+12+9+10+6 = 179 days.
He does not satisfy 1st condition. However, since he is staying in India since 2009. He will
satisfy the 2nd condition of section 6(1) and both the conditions of section 6(6).
Therefore, he is considered as resident and ordinary resident.
25.2) Since, entire salary is paid by Indian company and will therefore will be liable for TDS
deduction after reducing standard deduction of 50,000.
25.3) Cost of acquisition is-

Lower of Sale value or FMV as on 31.01.2018 (say A)
And higher of COA or A.
Therefore, in our case:

Sale value = Rs. 81,250 (325*250 shares)
FMV as on 31.01.2018 = Rs. 90,000 (360*250 shares)
Actual COA = Rs. 75,000 (150*500 shares)
Therefore, COA for computation of capital gains = Rs. 81,250.
25.4) IFHP
Rate
Particulars Amount (March) Amount Rs.
Rent 3300 GBP 93.07 307131
Less: 30% deduction 92139.3
Taxable 214991.7
TTBR on last day of PY is used to convert foreign currency amount for HP income.
No deduction in respect of interest is allowed for self-occupied property if assessee has opted
to pay tax as per section 115BAC.
25.5) As per section 148, a time period of 16 years from the end of relevant AY is available for
sending notice in case of income escaping assessment relate to foreign assets. Therefore,
time till 31st March 2038 is available.
40
26. 26.1) Section 115BBD, Dividend received by Indian company from Foreign company where it
holds 26% or more equity share capital shall be taxable @15 (plus surcharge if any and H&EC
@4%). Further, no deduction of any expense shall be allowed against such income.
Therefore, dividend from PQR Inc. taxable at 15% (without any deduction of expenses) and
rest at normal tax rate.
Dividend taxable at normal rates = 10,30,000

Interest u/s 57 (upto 20% of dividend received) = 1,76,000
Net Income = 8,54,000
26.2) From FY 20-21, DDT provisions are abolished, Dividend declared by Indian companies is
taxable in hands of shareholders. Further, Indian company shall deduct TDS as per section
194.
Furthermore, deduction u/s 80M for dividend received from domestic company, foreign
company or business trust will be allowed to Pawan Ltd. Amount of deduction would be lower
of Aggregate dividend income received (include deemed dividend) or dividend distributed to
shareholders upto due date, whichever is lower.
Due date means one month before due date of ROI u/s 139(1).
26.3) Section 57 - The income chargeable under the head "Income from other sources" shall
be computed after making the following deductions:
(i) in the case of dividends, or interest on securities, any reasonable sum paid by way of
commission or remuneration to a banker or any other person for the purpose of realising
such dividend or interest on behalf of the assessee;
Provided that such deduction shall not exceed twenty per cent of the dividend income, or
income in respect of such units, included in the total income for that year, without deduction
under this section.
Dividend = 320000 * 50% = 160000.
Therefore, taxable dividend = 160,000 – 32000 (lower of 80,000 or 20% of 160,000)
= 128,000.
26.4)
Particulars Amount Remarks
PGBP 5,40,000 6% of 90 lakhs (Section 44AD)
Dividend 1,28,000 net of expenses as per point 26.3 above.
House Property -2,00,000 Interest as per section 24(b)
FD Interest 50,000
5,18,000
Less: 80C 1,50,000 Repayment of principal
Interest on housing loan (since stamp
Less: 80EEA 50,000 duty value is upto 45 lakh)
3,18,000
26.5)
Particulars Amount
41
Deemed dividend u/s 2(22)(e) 200000

Dividend received 32000
232000
Less: deduction u/s 57 21000
211000
27. 27.1) Interest is allowed on due or paid basis. Therefore, full 40 lakhs will be allowed.
Interest on under-construction property is allowed when the construction gets complete.
Limit of 2 Lakhs is only applied in case of Self Occupied House Property.
27.2) 80C – 1,50,000 (repayment of principal to the extent of 1.5 lakh)

80EEB (Interest on Electric Vehicle loan) – 1,50,000
80E (Interest on education loan)– 50,000
80D (Medical premium)– 20,000
Total = 3,70,000
27.3) No such enabling provision in Income from house property, therefore not chargeable
to tax.
27.4) Section 163. (1) For the purposes of this Act, "agent", in relation to a non-resident,
includes any person in India—
(a) who is employed by or on behalf of the non-resident; or
(b) who has any business connection with the non-resident; or
(c) from or through whom the non-resident is in receipt of any income, whether directly or
indirectly; or
(d) who is the trustee of the non-resident;
and includes also any other person who, whether a resident or non-resident, has acquired
by means of a transfer, a capital asset in India.
Therefore, Mr. David can be treated as an Agent.
27.5) Section 64(1A) – Income of minor child is taxable in hands of parent whose income is
more before clubbing minor’s income.
28. Municipal taxes paid for let out/deemed let out properties are allowed as deduction. Further,
Assessee can at his option claim max. two properties as self -occupied property.
In given case, there are total 4 properties, 2 in India and 2 outside India.
London property is already let out, so assessee can choose the property having higher GAV
as self-occupied property to save tax, which in our case is Worli and Winchester property.
Therefore, Bandra property will be treated as deemed let out.
28.1) Allowable Municipal tax

London property = 1000 pound*Rs. 120 = 12000
Bandra Property = 10000
42
Total = 22000
28.2) Annual rent = Higher of Municipal value or fair rent subject to standard rent.
Calculation of Income from House Property
London Property = ((24000-100) *Rs. 120) – 30% Std Deduction = 2007600
Bandra Property = (720000-10000) – 30% Std Deduction = 497000
Total = 25,04,600.
28.3) Since, Winchester property is sold, Assessee can claim both the Indian properties as
self-occupied property.
Therefore, IFHP will only be for London property i.e. 20,07,600.
28.4) Calculation of Capital gain chargeable to tax:

Capital Gain – 2 crores
Less: Exemption u/s 54EC
NHAI bonds – 0.20 crore
RECL bonds – 0.30 crore
Less: Exemption u/s 54 (deduction allowed for 2 properties if capital gain is upto 2 crore)
Pune properties – 1 cr. (treated as single house)
Baroda – 0.40 crore
Chargeable capital gain = 0.10 crore
28.5) TDS deductible on sale of property u/s 194IA @1% of 3 Crores = 3 Lakhs
TDS deductible on brokerage u/s 194H @ 5% of 20000 = 1000
No TDS required on interest since it is upto 50,000 (Resident Senior citizen)
No TDS on rent required since it is less than 2,40,000.
29. 29.1) Section 80E, Deduction is allowed if loan is taken for education of self, spouse, children
and any other student from whom assessee is a legal guardian. (Brother is not covered)
Sec 206C(1G): TCS on remittance outside India or sale of Tour package (Added by FA 20
w.e.f. 01/10/20)
1) In case of authorised dealer, who receives an amount of more than 7,00,000 in PY
from a buyer who remitting such amount out of India under the Liberalised
Remittance Scheme (LRS) of the RBI then he required to collect TCS @ 5% in excess
of 7,00,000.
Note: If remitted amount is out of Educational Loan taken from Financial Institution,
then TCS rate shall be 0.5% instead of 5%.
2) In case of sale of an overseas tour program package (OTPP), seller receives any
amount from a buyer required to collect TCS @5%.
So, SBI is required to collect tax at source on the amount remitted to Mr. Ram @0.5% (plus cess) on
Rs. 28 lakhs, being the amount in excess of Rs. 7 lakhs.
43
29.2)
As per Section 206C(1G) - tax @5% will be collected on total amount remitted (6.9 lakh)
29.3) Section 206C(1), TCS @ 1% is collected on sale of scrap. 4% H&EC is applicable if buyer
is foreign company or NR.
29.4) Section 194C, TDS @1% (in case payee is Individual/HUF) is deducted for the amount of
contract*. (0.75% in given case due to reduction of rates due to COVID-19 from 14.05.2020
to 31.03.2021)
*In case of Job work, the TDS shall be deducted on the invoice value excluding the value of
material, if material value mentioned separately in Invoice.
30. 30.1) As per section 2(22)(e), any payment by a company in which the public are not
substantially interested by way of loan to a shareholder, who is the beneficial owner of shares
holding not less than 10% of voting power, is deemed as divided to the extent to which the
company possesses accumulated profits. Accordingly, in this case, Rs. 8 lakhs would be
deemed as dividend u/s 2(22)(e) and taxable in hands of Mr. Rajat.
30.2) As per Section 194N, TDS @2% is applicable only if payer paying sum or aggregate of
sum in cash in excess of one crore in PY from one or more accounts maintain by payee. TDS
applicable only on excess of amount over one crore.
In this case, withdrawal from ABC bank in excess of 1 crore will attract TDS.
Withdrawal from co-operative bank does not require TDS deduction since amount withdrawn
is less than 1 crore.
30.3) Section 194N provides that in case of a recipient who has not filed the returns of income
for all of the three assessment years relevant to the three previous years, for which the time
limit of file return of income under sub-section (1) of section 139 has expired, immediately
preceding the previous year in which the payment of the sum is made to him, the provision
of this section shall apply with the modification that—
(i) the sum shall be the amount or the aggregate of amounts, as the case may be, in cash
exceeding twenty lakh rupees during the previous year; and
(ii) the deduction shall be—
(a) an amount equal to two per cent of the sum where the amount or aggregate of amounts,
as the case may be, being paid in cash exceeds twenty lakh rupees during the previous year
but does not exceed one crore rupees; or
(b) an amount equal to five per cent of the sum where the amount or aggregate of amounts,
as the case may be, being paid in cash exceeds one crore rupees during the previous year:
30.4) & 30.5)

Amount
Particulars (lakhs) Remarks
PGBP 60 -
Other Source
Dividend 12 Dividends are taxable in hands of shareholders
44
Deemed dividend 8 Deemed dividend u/s 2(22)(e)

Taxable u/s 56(2)(x), since Value of gift exceeds
Gift 5 50k
Allowed on due basis, max 2 lakh in case of
House Property -2 self- occupied property
Total Income 83
Tax Liability
Tax as per Slab Rate 23.025
Add: surcharge at
10% 2.3025
25.3275
Add: 4% H&EC 1.0131
Gross liability 26.34060
45

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What are the different types of depreciation rates mentioned for motor vehicles?

What are the different types of depreciation rates mentioned for motor vehicles?

What are the eligibility criteria for presumptive taxation under section 44AD?

What are the eligibility criteria for presumptive taxation under section 44AD?

Compiled by CA Bhanwar Borana

Multiple Choice Questions

Therefore, depreciation on assets purchased on 01.11.2019 will be charged at special rates @

Calculation of Depreciation allowable for FY 2019-20-

Particulars Mr. Akash Mr. Vikas

Particulars Mr. Vishal Mr. Guha

U/s 54EC (Max. 50 lakhs)

Long term Capital Gain after exemption ₹ - ₹ 95,00,000.00

In this case, Total electricity expenditure is 1,20,000 (10,000 * 12)]

TDS = 16,000 i.e., 5% of 3,20,000 [12,00,000 - 8,80,000 (1,10,000 * 8)]

Lower of the following will be disallowed –

Alternate View = Allowed interest is 30% of EBITDA

Therefore, taxable amount = 18 lakh x 10% share = 1.8 lakh.

Total Income = 1.8+0.45+0.10+2.70-0.625 = 4.425 lakhs.

Actual cost of building for computing depreciation for P.Y.2020-21

Particulars Amount in Crore

47. AMT = 11,00,530 (5200000*18.50% + 10% surcharge + 4% HEC)

AMT credit to be carried forward is Rs. 7,65,130 (1100530-335400)

Computation of Total Income

Tax is 3,66,600 (18 lakh @ slab rate)

Hence, action of impound of books is right.

63. U/s 32, Depreciation will be allowed @ 40% on Computers

65. Income from properties held by trust 10 lakhs

Dividend taxable only when SPV paid taxes as per 115BAA.

In other cases, penalty would be 60%

Hence, Case (i) and (iii)-Eligible for 44AD;

90. 40% (foreign company)

In other cases, penalty would be 60%

Capital Amount = (540000-120000)/16*100*12 month/9 month = 35,00,000

Remuneration paid to working 696000

Raj Share = 3 Lakhs x ¼ = 75,000 will not be allowed.

1.4) Calculation of total income

Less: Interest allowable 225000

2.1) Violation exist for Mr. A and Mr. B loan.

Purchase Date (not put to use) is considered under Sec 44AE.

3.4) As per section 44ADA, presumptive income in case of professional is (Gross

4.5) Section 194IA – TDS @ 1% is deductible by payee on transfer of immovable property if

Tax = 1 crore*0.15*17.16% = 17,16,000.

Tax = 0.58 crore*25.168% = 14,59,740.

Assessed Income – 16 Crore

Explanation—For the purposes of this sub-section, any payment made by a purchaser of

Here, EBITDA = PAT + Tax + Interest + Depreciation

Purchase related expenses [inclusive of custom duty paid] = 34,50,00,000)

Increase in Income of UI Ltd. = 34,50,00,000 – 32,00,00,000 = Rs.2,50,00,000

Total cash withdraws = Rs.1,05,00,000

13.2) 620 million * 2.5% (6.5-4) * 9/12 months = 1,16,25,000.

14.5) Section 271AAD –

Here, Interest Allowed = 6*30/100 = 1.8 Crore.

17.3) Calculation of depreciation:

17.4) Calculation of total income

Total Income 69,89,900

Interest capitalised = 30 lakh*10%*2/12 months = 0.50 lakh

On Opening WDV = 95 lakhs*15% = 14.25 lakhs

Total depreciation = 21.3375 lakhs

Depreciation on Motor Car:

Capital Amount = (540000-120000)/1610012 month/9 month = 35,00,000

Tax = 1 crore0.1517.16% = 17,16,000.

Interest capitalised = 30 lakh10%2/12 months = 0.50 lakh

20.4) Normal tax = 35 lakh 30%1.04 = 10.92 lakhs

Tax liability = 1845 lakhs * 20% 1.121.04 = 429.81 lakhs.