CONTENTS

DIRECT TAX (PART I)

LESSON 1
DIRECT TAXES – AT A GLANCE

Taxes - An Introduction 2
Characteristics of Taxes 4
Canons of Taxes 5
Objectives of Taxation 6
Direct Vs Indirect Taxes 8
Background of Taxation System in India 11
Tax Structure in India 12
Administration 13
Vital Statistics and Layout 14
SELF TEST QUESTIONS 16

LESSON 2
BASIC CONCEPT OF INCOME TAX

Introduction 20
An Overview of Finance Bill 20
Heads of Income [Section 14] 22
Important Concepts 22
Assessee [Section 2(7)] 24
Assessment Year [Section 2(9)] 25
Previous Year [Section 3] 26
India [Section 2(25A)] 26
Maximum Marginal Rate and Average Rate of Tax 26
Income [Section 2(24)] 27
Capital and Revenue Receipts 30
Charge of Income Tax [Section 4] 33
Residential Status [Section 6] 34
Test of Residency for Individuals 34

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Tests of Residence for Hindu Undivided Families 40
Test of Residence for Companies 42
Test of Residence for Firm and AOP 47
Meaning and Scope of Total Income [Section 5] 48
Income deemed to accrue or arise in India [Section 9] 51
Computation of Taxable Income and Tax Liability of an Assessee 60
Tax Rates For FY 2019-20 i.e. AY 2020-21 61
Case Laws 65
LESSON ROUND UP 65
SELF TEST QUESTIONS 67

LESSON 3
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

Background 72
Incomes which do not Form Part of Total Income 72
Summary Chart 99
LESSON ROUND UP 100
SELF TEST QUESTIONS 100

LESSON 4
COMPUTATION OF INCOME UNDER VARIOUS HEADS
PART I – INCOME UNDER THE HEAD “SALARIES”

Introduction 107
Basis of Charge 108
Salary [Section 17(1)] 109
Allowances 109
Retirement Benefits 113
Profits in lieu of Salary 116
Provident Funds - Treatment of Contributions to and Money Received From the Provident Fund 123
Deductions from Salary 126
Computation of Salary 126
Case Law 132
LESSON ROUND UP 133
SELF-TEST QUESTIONS 134

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 LESSON 4
PART II – INCOME UNDER THE HEAD HOUSE PROPERTY

Basis of Charge [Section 22] 138

Determination of Annual Value 138
Deductions from Net Annual Value (Section 24) 146
Deemed Ownership 150
House Property Incomes – Exempted From Tax 150
Case Law 155
LESSON ROUND UP 156
SELF-TEST QUESTIONS 157

LESSON 4
PART III – PROFIT AND GAINS FROM BUSINESS / PROFESSION

Business’ or ‘Profession’ 162

Income Chargeable To Tax under the Head Business or Profession (Section 28) 162
Speculation Business 163
Computation of Profits of Business or Profession 168
Computation of Income under the Head “Profits and Gains from Business or Profession” 168
Admissible Deductions 169
Expenses Disallowed (Section 40) 193
Expenses Restricted 196
Deemed Profits 201
Special Provision In Case of Income of Public Financial Institutions, Etc. (Section 43D) 203
Special Provisions Related To Insurance Business (Section 44) 203
Compulsory Maintenance of Books of Account (Section 44AA) 204
Compulsory Audit of Books of Account (Section 44AB) 204
Special Provision for Computing Profits and Gains of Business on Presumptive Basis (Section 44AD) 205
Presumptive Taxation for Professionals [Section 44ADA] 206
Special Provisions for Computing Profits and Gains of Business of Plying, Hiring or Leasing 206
Goods Carriages [Section 44AE]
Questions and Answers 207
Annexure 212
Case Law 219
LESSON ROUND UP 222
SELF TEST QUESTIONS 223
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 LESSON 4
PART IV – INCOME FROM CAPITAL GAINS

Capital Gains 226

Capital Asset [Section 2(14)] 227
Short-Term & Long-Term Assets 228
Transfer [Section 2(47)] 230
Mode of Computation 236
Ascertainment of Cost in specified circumstances [Section 49] 240
Advance Money Received [Section 51] 248
Exemption of Capital Gains 249
Tax Rates 256
Case Law 260
LESSON ROUND UP 262
SELF TEST QUESTIONS 262

LESSON 4
PART V – INCOME FROM OTHER SOURCES

Basis of Charge of Income from Other Sources [Section-56] 266

Casual Income [Section 56(2)(Ib)] 270
Income from Family Pension 271
Taxation of Dividends 271
Deductions Allowable In Computing Income from Other Sources 274
Amounts Not Deductible [Section 58] 275
Deemed Income [Section 59] 275
Case Law 277
LESSON ROUND UP 278
SELF TEST QUESTIONS 278

LESSON 5
CLUBBING PROVISIONS AND SET OFF AND / OR CARRY FORWARD OF LOSSES

Clubbing of Income 282

Transfer of Income [Section 60] 282
Revocable Transfer of Assets [Section 61] 283

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Income of Spouse 284
Income From Assets Transferred To Son’s Wife [Section 64(1)(vi)] 286
Transfer For Immediate Or Deferred Benefit Of Son’s Wife [Section 64(1)(viii)] 286
Income to Spouse Through A Third Person [Section 64(1)(vii)] 287
Clubbing of Income of Minor Child [Section 64(1A)] 287
Income from the Converted Property [Section 64(2)] 287
Recovery of Tax 290
Set-Off and Carry-Forward of Losses 292
Carry-Forward of Losses 295
Carry Forward and Set-Off Of Accumulated Business Loss and Unabsorbed Depreciation in 298
Certain Cases of Amalgamation or Demerger Etc. [Section 72A]
Carry Forward and Set Off Of Accumulated Loss and Unabsorbed Depreciation Allowance in 301
Scheme of Amalgamation of Banking Company in Certain Cases [Section 72AA]
Treatment of Carry-Forward of Losses of Certain Assessees 301
Submission of Return for Loss [Section 80] 302
Summary of provisions regarding carry forward and set-off of losses 303
LESSON ROUND UP 304
SELF TEST QUESTIONS 306

LESSON 6
DEDUCTIONS FROM GROSS TOTAL INCOME, REBATE AND RELIEF

Introduction 310
Deductions 313
Illustration 338
Relief and Rebate 348
Case Law 352
LESSON ROUND UP 352
SELF TEST QUESTIONS 354

LESSON 7
COMPUTATION OF TOTAL INCOME AND TAX LIABILITY OF VARIOUS ENTITIES

Introduction 358
Taxation of Individuals 359
Taxation of Hindu Undivided Families 366

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Computation of Income of HUF 369
Taxation of Firms 374
Alternate Minimum Tax (AMT) [Section 115JC] 379
Taxation of Association of Persons /Body of Individuals 390
Taxation of Co-Operative Societies 393
Tax Exemptions to Political Parties (Section 13A) 400
Electoral Trust 401
Tax Exemptions for Charitable Trusts and Institutions 401
LESSON ROUND UP 411
SELF TEST QUESTIONS 412

LESSON 8
CLASSIFICATION AND TAX INCIDENCE ON COMPANIES

Background & Types of Companies 416

Tax Incidence under Income Tax Act, 1961 419
Minimum Alternate Tax (MAT) 421
Mat Credit [Section 115JAA] 432
Dividend Distribution Tax [Section 115-O] 437
Carbon Credit [Section 115BG] 440
Buy-Back of Shares 440
Conversion of an Indian Branch of a Foreign Company into an Indian Subsidiary Company 442
Tax on Income Distributed by Specified Company or Mutual Fund 443
Equalization Levy 444
Taxation Aspects Related To Conversion of Company into an LLP 446
Tax Liability of Companies in the Event of Liquidation 448
Taxation of Share Premium 449
Taxation Aspects of Amalgamations, Mergers and Demergers 451
LESSON ROUND UP 453
SELF TEST QUESTIONS 454

LESSON 9
PROCEDURAL COMPLIANCE

Permanent Account Number [Section 139A] 458

Tax Deduction Account Number (TAN) 461

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Tax Deducted At Source (TDS) 463
Tax Collection At Source (TCS) [Section 206C] 482
Time limit for the payment of TDS to the Government 483
TDS Forms 485
TDS Chart FY 2019-20 “AY 2020-21” 486
Minimum Threshold Limit Upton Which TDS not Applicable 493
Advance Payment of Tax 495
Self-Assessment Tax (SAT) 500
Returns 501
Signing of Return [Section 140] 507
Fee and Interest 508
Collection and Recovery of Tax 511
Refunds (Section 237 to Section 245) 512
Case Laws 515
LESSON ROUND UP 516
SELF TEST QUESTIONS 517

LESSON 10
ASSESSMENT, APPEALS & REVISION

Income-Tax Authorities (Appointment, Jurisdiction and Powers) [Section 116] 520

The Central Board of Direct Taxes (CBDT) 521
Commissioner of Income-Tax (Appeals) 527
Assessment 529
Appeal 539
Introduction 539
Appeals Orders before Commissioner (Appeals) 540
Procedure for Filing of Appeal [Section 249(1)] 541
Period of Limitation to Prefer an Appeal [Section 249(2)] 541
Payment of Tax before Filing Appeal [Section 249(4)] 542
Procedure in Appeal [Section 250] 543
Powers of the Commissioner (Appeals) [Section 251] 543
Revisions 544
Revision by the Commissioner of Income Tax [Sections 263 And 264] 544
Revision of orders prejudicial to the interest of Revenue [Section 263] 544

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Revision of order in the interest of Assessee [Section 264] 547
Circumstances in Which No Revision can be Made [Section 264(4)] 548
Appellate Tribunal [Section 252] 549
Appealable Orders [Section 253(1) AND (2)] 549
Procedure For Filing Appeal [Section 253(3), (4)&(6)] 550
Order of Appellate Tribunal [SECTION 254] 551
Procedure of Appellate Tribunal [SECTION 255] 553
Appeal to High Court 553
Appeal to the Supreme Court [Section 261] 554
Offences and Penalties 556
Offences and Prosecution 565
LESSON ROUND UP 567
SELF TEST QUESTIONS 569

LESSON 11
CONCEPT OF INDIRECT TAXES AT A GLANCE

Background 572
Constitutional Powers of Taxation 572
Constitution Amendment Act, 2016 573
Goods and Services Tax Council 576
Compensation to States for deficit in Tax collections 579
Power to Remove Difficulties 579
Indirect Taxes in India – An Overview 580
Pre GST Tax Structure & Deficiencies 582
Administration of Indirect Taxation in India 584
Administrative Mechanism at the Central Level 585
Existing Tax Structure 585
LESSON ROUND UP 591
SELF TEST QUESTIONS 591

LESSON 12
BASICS OF GOODS AND SERVICES TAX

Basic Concepts and Overview Of Goods and Services Tax 594

GST MODEL 594
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Constitutional Framework of Goods & Services Tax 595
Taxable Event 597
Concept of Supply 597
Levy & Collection of Tax 602
Composition Scheme 602
Liability to pay GST 609
Exemptions Under Goods & Services Tax 609
LESSON ROUND UP 612
SELF TEST QUESTIONS 612

LESSON 13
CONCEPT OF TIME, VALUE AND PLACE OF TAXABLE SUPPLY

Concept of Supply 614

Place of Supply 616
Time of Supply 621
Value of Taxable Supply [Section 15 of CGST Act, 2017] 628
Valuation Rules : Chapter IV, CGST Rules, 2017 630
LESSON ROUND UP 636
SELF TEST QUESTIONS 636

LESSON 14
INPUT TAX CREDIT AND COMPUTATION OF GST LIABILITY

Input Tax Credit 640

Goods Sent To Job Worker 652
Input Service Distributor 655
LESSON ROUND UP 661
SELF TEST QUESTION 662

LESSON 15
PROCEDURAL COMPLIANCE UNDER GST

Registration 664
Tax Invoices, Debit & Credit Notes 683
Rules for Tax Invoices, Debit & Credit Notes 687

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Accounts and Records 695
Electronic Way Bills 697
Returns 698
Payments 701
Payment Rules [Chapter IX] 704
Refunds 708
Audit 712
LESSON ROUND UP 714
SELF TEST QUESTIONS 715

LESSON 16
BASIC OVERVIEW ON IGST, UTGST AND GST COMPENSATION TO STATES ACT

Introduction to IGST 718

Integrated Goods & Services Tax Act, 2017 718
Introduction to Union Territory Goods & Services Tax Act, 2017 723
Applicability of the UTGST ACT, 2017 723
Administration & Powers of Officers [Section 4, 5 & 6] 725
Levy and Collection of UTGST [Section 7] 725
Exemption From GST [Section 8] 726
Payment of Tax [Section 9] 726
Input Tax Credit on Input Stocks [Section 18] 728
Input Tax Credit: Taxable as well as Exempted Goods 728
Switch Over from Composition Levy 729
Advance Ruling [Section 14 of UTGST Act, 2017] 729
Constitution of Authority for Advance Ruling [Section 15] 730
Constitution of Appellate Authority For Advance Ruling [Section 16] 730
Miscellaneous 730
Power to Make Rules [Section 22] 731
General Power To Make Regulations [Section 23] 731
Laying of Rules, Regulations and Notifications [Section 24] 732
Power to Issue Instructions or Directions [Section 25] 732
Removal of Difficulties [Section 26] 732
The Goods and Services Tax (Compensation to States) Act, 2017 732
Salient Features Of GST (Compensation To States) Act, 2017 732

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Projected Growth Rate [Section 3] 734
Base Year [Section 4] 734
Base Year Revenue [Section 5] 735
Projected Revenue for any year [Section 6] 736
GST Compensation [Section 7] 736
Compensation Cess [Section 8] 737
Payments Return and Refund [Section 9] 738
Crediting Proceeds of Cess To Fund [Section 10] 738
Other Provisions Relating to Cess [Section 11] 739
Power to Make Rules [Section 12] 739
LESSON ROUND UP 741
SELF TEST QUESTIONS 741

LESSON 17
OVERVIEW OF CUSTOMS LAW

Overview of Customs Law 744

Levy & Collection of Customs Duties 746
Types of Customs Duties 746
Classification & Valuation of Import And Export Goods 749
Exemptions 758
Officers of Customs Law 758
Administration of Customs Law 758
Import & Export Procedures under Customs Law 760
Transportation & Warehousing 761
Duty Drawback 764
Demand & Recovery 766
Confiscation of Goods & Conveyances 766
Refund 768
Miscellaneous 769
LESSON ROUND UP 771
SELF-TEST QUESTIONS 772

TEST PAPER
Model Test Papers 774

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