Wednesday, 29 June 2016

MF0012 - TAXATION MANAGEMENT

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ASSIGNMENT

DRIVE
WINTER 2015
PROGRAM
MBADS – (SEM 3/SEM 5) / MBAN2 / MBAFLEX – (SEM 3) /
PGDFMN – (SEM 1)
SUBJECT CODE & NAME
MF0012 - TAXATION MANAGEMENT
SEMESTER
3
BK ID
B1760
CREDITS
4
MARKS
60


Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

QUESTION. 1.  Mr. X (38 year) is employed by A Ltd. as marketing manager in Pune. The following information is furnished by Mr. X for the previous year ending 31st March 2015.
Basic salary Rs. 12,00,000 p.a., DA Rs. 40,000 p.a. (36 % of DA is considered for gratuity and Pension, but not for Provident fund). Club allowance Rs. 5,000 p.m., Furnishing allowance Rs. 2,000 p.m. and HRA Rs. 40,000 p.m. Conveyance allowance is Rs. 2,000 p.m. which can be used both for office and private purposes.
Up to August 31, 2014, he resides with his parents and does not pay any rent. From September 1, 2015 he has been allotted a company accommodation at Pune (population 23 lakhs) in lieu of house rent allowance.
Club allowance has been discontinued from January 1, 2015. And Mr. X has been provided by the company club facility for private (20 %) and office use (80%). Expenditure by the company uptil 31st March 2015 was Rs. 20,500.
On 20 Nov. 2014, Mr X has taken an interest free loan from the company (SBI lending rate for Similar loan being 18.5 % p.a.). Mr. X and his employer contribute @ 10 % of his salary to P.F. Interest Credited by the company in Provident Fund on June 1, 2014 @ 9.7 % is Rs. 2,11,200.
Assuming that income of Mr. X from Other Sources Rs. (-30,000), find out the net income and liability of Mr. X for the Assessment Year 2015-16.
Based on above Compute the taxable income and tax liability (before deducting TDS) of Ms. X for the A.Y. 2015-16 Rs. 2,600 (being Income-tax refund and Rs. 200 being Interest thereon)

Answer: Calculation of tax liability of Mr. X
Basic salary                                                                                         1200000
DA                                                                                                               40000
Club allowance (5000*9 months)                                                   45000
Furnishing allowance (2000*12 months)                                     24000
HRA (40000*5 months)                                                    200000
HRA                                                                                                         280000
(least of: 40000*7 months = 280000
                 1200000*0.40*7/12=280000)
Conveyance


QUESTION. 2 a) How is advance money received against cost of acquisition adjusted?

b) State giving reasons, whether the following assets are Short term or Long term:
i) X purchases a house on 10th March 2012 and transfers on 6th June 2014.
ii) Y purchases unquoted shares in an Indian company on 10th March 2012 and transfers on 6th June 2012.
iii) Z acquires units of mutual fund on 7th July 2013 and transfers those on 10th July 2014.
iv) A purchases diamonds on 12 September 2011 and gifts the same to his friend B on 31st

December 2014 and B transfers the asset on 20 October 2014.

Answer: a) Adjustment of advance money received against cost of acquisition (Section 51)
It is possible for an assessee to receive some advance in regard to the transfer of capital asset. Due to breakdown of negotiations the assessee may have retained the advance. In calculating capital gains the above advance retained by the assessee must be used to reduce the cost of acquisition.





QUESTION. 3 Ms. A purchases a house property on 1st January 1976 for Rs. 95,000. She enters into an Agreement for sale of the same property to Mr. X on 1st November 1983 and receives Rs. 10,000 as advance. Following the demise of Mr. X immediately thereafter, the money was forfeited by Ms. A. Later Ms. A gifts her property to her friend Ms. B on 15th May 1985. The following expenses are incurred by Ms. A and Ms. B for improvement of the property:
Particulars                                                                                                                          Cost (Rs.)
Additions of two rooms by Ms. A during 1978-79                                              25,000
Addition of first floor by Ms. A during 1983-84                                   40,000
Addition of second floor by Ms. B during 1990-91                                             1,15,000
Ms. B enters into an agreement for sell the property for RS. 8,50,000 to Mr. P on 1st April 1993after receiving an advance of Rs. 50,000. Mr. P could not pay the balance amount within the stipulated time of two months and Ms. B forfeits the amount of advance.

Ms. B finally transfers the property to Ms. C for Rs. 14,75,000 on 1st December 2014. Given the Fair Market Value of the property on 1st April 1981 being Rs. 1,15,000; Cost Inflation Index for 1981-82 : Rs. 100; for 1983-84 : Rs.116; for 1985-86 : Rs. 133; for 1990-91 : Rs. 182; for 1993-94 : Rs. 244 and 2014-15: Rs.1,024 compute the Capital gains in the hands of Ms. B  for the Assessment Year 2015-16.
Compute the Capital gains in the hands of Ms. B for the Assessment Year 2015-16.

Answer: Calculation of the capital gain of Ms. B for the A.Y 2015-16
Sale Proceeds                                                                                                                    14,75,000
Less: Indexed cost of acquisition                                                                                     70,356
                                               



QUESTION. 4 i) Ms. Brinda, a U.S. citizen visits India on 1st January 2014 to study and conduct research on Indian folk culture. She has been regularly visiting India for 100 days in the past five consecutive years to carry the research. Advise the residential status of Ms. Brinda under extant rules referring to section 6 of the Income-tax Act 1961.
ii) What are the provisions of Advance tax under section 2(1)?

Answer: i) Residential status: On the parameter of residence in India, there are three categories: resident, non-resident, and not ordinarily resident. The definition depends upon physical presence of the person in case of individuals, and upon control and management in case of companies and HUFs.

For example, if an individual is in India during the year for 182 days or more he or she is deemed to be a resident.

Alternatively, if he or she has spent



QUESTION. 5 Explain the need of Service tax in India. What are the different approaches to Service tax in India?

Answer: Service tax is a tax levied by Central Government of India on services provided or to be provided excluding services covered under negative list and considering the Place of Provision of Services Rules, 2012 and collected as per Point of Taxation Rules, 2011 from the person liable to pay service tax. Person liable to pay service



QUESTION. 6 Mr. X (aged 59 years) furnishes the following Profit and Loss account for the year ended 31st March, 2015. Compute the Gross Total Income of Mr. X under respective heads, his Net Taxable Income and Tax liability in the assessment year 2015-16.
Particulars
Rs.
Particulars
Rs.
General Expenses
13,400
Gross profit
3,15,500
Bad debts
22,000
Commission
8,600
Advance tax
2,000
Brokerage
37,000
Insurance
600
Miscellaneous Income
2,500
Salary to Staff
26,000
Bad Debt Recovery
11,000
Salary to Mr. X
51,000
Interest on Debenture
(Net interest Rs.22,500 + TDS Rs. 2,500)
25,000
Interest on Cash Credit
4,000
Interest on Fixed Deposits
(Net interest Rs. 11,700 + TDS Rs. 1,300)
13,000
Interest on loan to Mrs. X
42,000


Interest on Capital of Mr. X
23,000


Depreciation
48,000


Advertisement
7,000


Contribution to Employees’ Provident Fund
13,000


Net Profit
1,60,600


Total
4,12,600
Total
4,12,600
Supplementary information:
Permissible depreciation as per CBDT circular is Rs. 37,300 which includes depreciation of permanent glow sign board.
i. Advertisement expenditure includes Rs. 3,000, being cost of permanent glow sign board affixed outside the office premises.
ii. Commission accrued but not received Rs. 4,500 is not credited to P & L Account.
iii. Mr. X pays premium of Rs. 6,000 on his own life.
iv. General expenses includes:
a) Rs. 500 spent for arranging a party for Mr. X’s son who arrives from Canada.
b) Rs. 1,000 for contribution to a political party.
v. Loan availed from Mrs. X was for payment of arrear tax.
A Mr. X (aged 59 years) furnishes the above Profit and Loss account for the year ended 31st March, 2015.
Compute the Gross Total Income of Mr. X under respective heads, his Net Taxable Income and Tax liability in the assessment year 2015-16.

Answer: Computation of Gross Total Income of Mr. X under respective heads, his Net Taxable Income and Tax liability in the assessment year 2015-16
Net profit as per profit and loss account

160000
Add: Inadmissible expenses


Expenses for arranging a party for Mr. X’s son
500

Contribution to a political party
1000

Advance tax
2000

Salary to Mr. X
51000

Interest on Capital of Mr. X
23000



Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
help.mbaassignments@gmail.com
or
call us at : 08263069601


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