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    Solution TAX GM

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    Solution TAX GM

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    kuvira Lodha
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    Solution TAX GM (2)

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    16 views6 pages

    Solution TAX GM

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    kuvira Lodha

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    CA INTER NEW COURSE

    TAXATION

    Chapter-3 (Income Tax)

    Solution

    Case Study

    1. A
    2. A
    3. B
    4. D
    5. A

    (5 x 1 = 5 marks)

    MCQ’s

    1. (c)
    2. (d)

    (2 x 1 = 2 marks)

    A-1 Computation of total income of Mr. X for the A.Y. 2022-23

    (a) For the purpose of partial integration of taxes, Mr. X has satisfied both the conditions i.e.
    1. Net agricultural income exceeds Rs. 5,000 p.a., and
    2. Non-agricultural income exceeds the basic exemption limit of Rs. 2,50,000.

    His tax liability is computed in the following manner:

    GMTESTSERIES.COM®
    Particulars Rs. Rs.
    Income from salary 2,80,000
    Income from house property 2,50,000
    Net agricultural income [Rs. 4,80,000 – Rs. 1,70,000 3,10,000
    Less: Exempt under section 10(1) (3,10,000) -
    Gross Total Income 5,30,000
    Less: Deductions under Chapter VI-A -
    Total Income 5,30,000

    Step 1: Rs. 5,30,000 + Rs. 3,10,000 = Rs. 8,40,000

    Tax on Rs. 8,40,000 = Rs. 80,500

    (i.e., 5% of Rs. 2,50,000 plus 20% of Rs. 3,40,000)

    Step 2: Rs. 3,10,000 + Rs. 2,50,000 =Rs. 5,60,000

    Tax on Rs. 5,60,000 = Rs. 24,500

    (i.e. 5% of Rs. 2,50,000 plus 20% of Rs. 60,000)

    Step 3: Rs. 80,500 – Rs. 24,500 = Rs. 56,000

    Step 4 & 5: Total tax payable = Rs. 56,000

    = Rs. 56,000 + 4% of Rs. 56,000 = Rs. 58,240.

    (b) Computation of tax liability (age 70 years)

    For the purpose of partial integration of taxes, Mr. X has satisfied both the conditions i.e.

    1. Net agricultural income exceeds Rs. 5,000 p.a., and


    2. Non-agricultural income exceeds the basic exemption limit of Rs. 3,00,000.

    His tax liability is computed in the following manner:

    GMTESTSERIES.COM®
    Step 1: Rs. 5,30,000 +Rs. 3,10,000 = Rs. 8,40,000

    Tax on Rs. 8,40,000 = Rs. 78,000

    (i.e., 5% of Rs. 2,00,000 plus 20% of Rs. 3,40,000)

    Step 2: Rs. 3,10,000 + Rs. 3,00,000 = Rs. 6,10,000

    (i.e. 5% of Rs. 2,00,000 plus 20% of Rs. 1,10,000)

    Step 3: Rs. 78,000 – Rs. 32,000 = Rs. 46,000

    Step 4 & 5: Total tax payable = Rs. 46,000

    = Rs. 46,000

    = Rs. 46,000 + 4% of Rs. 46,000 = Rs. 47,840.

    (5 marks)

    A-2 Computation of deduction under section 10AA of the Income-tax Act, 1961

    As per section 10AA, in computing the total income of Rudra Ltd. from its unit located in a
    Special Economic Zone (SEZ), which begins to manufacture or produce articles or things or
    provide any services during the previous year relevant to the assessment year commencing on
    or after 01.04.2006 but before 01.04.2021, there shall be allowed a deduction of 100% of the
    profit and gains derived from export of such articles or things or from services for a period of
    five consecutive assessment years beginning with the assessment year relevant to the previous
    year in which the Unit begins to manufacture or produce such articles or things or provide
    services, as the case may be, and 50% of such profits for further five assessment years.

    Computation of eligible deduction under section 10AA [See Working Note below]:

    GMTESTSERIES.COM®
    (i) If Unit in SEZ was set up and began manufacturing from 22-02-2014: Since A.Y. 2022-23
    is the 8th assessment year from A.Y. 2015-16, relevant to the previous year 2014-15, in
    which the SEZ unit began manufacturing of articles or things, it shall be eligible for
    deduction of 50% of the profits derived from export of such articles or things, assuming
    all the other conditions specified in section 10AA are fulfilled.
    𝐸𝑥𝑝𝑜𝑟𝑡 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑜𝑓 𝑢𝑛𝑖𝑡 𝑖𝑛 𝑆𝐸𝑍 𝑥 50%
    = 𝑃𝑟𝑜𝑓𝑖𝑡𝑠 𝑜𝑓 𝑈𝑛𝑖𝑡 𝑖𝑛 𝑆𝐸𝑍 ×
    𝑇𝑜𝑡𝑎𝑙 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑜𝑓 𝑈𝑛𝑖𝑡 𝑖𝑛 𝑆𝐸𝑍
    300 𝑙𝑎𝑘ℎ𝑠
    = 60 𝑙𝑎𝑘ℎ𝑠 × × 50% = 𝑅𝑠. 22.50 𝑙𝑎𝑘ℎ𝑠
    400 𝑙𝑎𝑘ℎ𝑠

    (ii) If Unit in SEZ was set up and began manufacturing from 14-05-2018: Since A.Y. 2022-23
    is the 4th assessment year from A.Y. 2019-20, relevant to the previous year 2018-19, in
    which the SEZ unit began manufacturing of articles or things, it shall be eligible for
    deduction of 100% of the profits derived from export of such articles or things, assuming
    all the other conditions specified in section 10AA are fulfilled.
    𝐸𝑥𝑝𝑜𝑟𝑡 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑜𝑓 𝑢𝑛𝑖𝑡 𝑖𝑛 𝑆𝐸𝑍
    = 𝑃𝑟𝑜𝑓𝑖𝑡𝑠 𝑜𝑓 𝑈𝑛𝑖𝑡 𝑖𝑛 𝑆𝐸𝑍 × × 100%
    𝑇𝑜𝑡𝑎𝑙 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑜𝑓 𝑈𝑛𝑖𝑡 𝑖𝑛 𝑆𝐸𝑍
    300 𝑙𝑎𝑘ℎ𝑠
    = 60 𝑙𝑎𝑘ℎ𝑠 × × 100% = 𝑅𝑠. 45 𝑙𝑎𝑘ℎ𝑠
    400 𝑙𝑎𝑘ℎ𝑠
    = Profits of Unit in SEZ

    The unit set up in Domestic Tariff Area is not eligible for the benefit of deduction under section
    10AA in respect of its export profits, in both the situations.

    Working Note:

    Computation of total sales, export sales and net profit of unit in SEZ

    Particulars Rudra Ltd. (Rs.) Unit in SEZ (Rs.) Unit in DTA (Rs.)
    Total Sales 6,00,00,000 4,00,00,000 2,00,00,000
    Export Sales 4,60,00,000 3,00,00,000 1,60,00,000
    Net Profit 80,00,000 60,00,000 20,00,000
    (5 marks)

    GMTESTSERIES.COM®
    A-3 Computation of business and agricultural income of Ms. Vivitha for the A.Y. 2022-23

    Sr. Source of income Gross Business income Agricultural


    No. (Rs.) income
    % Rs. Rs.
    (i) Sale of centrifuged lates from rubber 3,00,000 35% 1,05,000 1,95,000
    plants grown in India
    (ii) Sale of coffee grown and cured in 1,00,000 25% 25,000 75,000
    India
    (iii) Sale of coffee grown, cured, roasted 2,50,000 100% 2,50,000 -
    and grounded outside India. (See
    Note 1 Below)
    (iv) Sale of tea grown and manufactured 4,00,000 40% 1,60,00 2,40,000
    in India
    (v) Saplings and seedlings grown in 80,000 Nil 80,000
    nursery in India (See Note 2 below)
    Total 5,40,000 5,90,000

    Notes:

    1. Where income is derived from sale of coffee grown, cured, roasted and grounded by the
    seller in India, 40% of such income is taken as business income and the balance as
    agricultural income and the balance as agricultural income. However, in this question, these
    operations are done in Colombo, Sri lanka. Hence, there is no question of such
    apportionment and the whole income is taxable as business income. Receipt of sale
    proceeds in India does not make this agricultural income. In the case of an assessee, being a
    resident and ordinarily resident, the income arising outside India is also chargeable to tax.
    2. Explanation 3 to section 2(1A) provides that the income derived from saplings or seedings
    grown in a nursery would be deemed to be agricultural income whether or not the basic
    operations were carried out on land. (4 marks)

    GMTESTSERIES.COM®
    A-4

    S. Taxable/Not Amount Reason


    No. Taxable liable to
    tax (Rs.)
    (i) Not Taxable - Share received by member out of the income of the
    HUF is exempt under section 10(2).
    (ii) Not Taxable - Pension received by Mr. Xavier, a former Central
    Government employee who is a ‘Param Vir Chakra’
    awardee, is exempt under section 10(18).
    (iii) Taxable 1,27,000 Agricultural income from a land in any foreign
    country is taxable in the case of a resident taxpayer
    as income under the head “Income from other
    sources”. Exemption under section 10(1) is not
    available in respect of such income.
    (iv) Taxable 72,000 Agricultural income is exempt from tax as per section
    10(1).Agricultural income means, inter alia, any rent
    or revenue derived from land which is situated in
    India and is used for agricultural purpose. In the
    present case, rent is being derived from letting out of
    agricultural land for a movie shoot, which is not an
    agricultural purpose. In effect, the land is not being
    put to use for agricultural purposes. Therefore, Rs.
    72,000, being rent received from letting out of
    agricultural land for movie shooting, is not exempt
    under section 10(1). The same is chargeable to tax
    under the head “Income from other sources”.
    (4 marks)

    GMTESTSERIES.COM®

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