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FALL 2017

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. Write notes on :

a) Tax Treatment of Income.

Answer: Income Tax Treatment: The character of the income you receive is the same as it would be to the decedent if they were still alive. If the income would have been a capital gain to the decedent, it will also be a capital gain to the final recipient. The income must be reported by the person or entity who acquired, from the decedent, the right to receive the income, and must be reported on their tax return.


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b) Capital Expenses vs. Revenue Expenses.

Answer: A capital expenditure is an amount spent to acquire or improve a long-term asset such as equipment or buildings. Usually the cost is recorded in an account classified as Property, Plant and Equipment. The cost (except for the cost of land) will then be charged to depreciation expense over the useful life of the asset.

Revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense. Even significant repairs that do not extend the life of the asset or do not improve the asset (the repairs merely return the asset back to its previous condition) are

c) Fringe Benefit Tax.

Answer: The fringe benefits tax (FBT) was the tax applied to most, although not all, fringe benefits in India. A new tax was imposed on employers by India's Finance Act 2005 from the financial year commencing April 1, 2005. The fringe benefit tax was temporarily suspended in the 2009 Union budget of India by the then Finance Minister Pranab Mukherjee.

The following items were covered:

Question. 2. A) Raj was born in Karachi on January 2,1947. He has been staying in USA since 1986.He comes to India on a visit of 200 days on October 10,2014. Determine the residential status of Mr Raj for the assessment year 2015-16.

Answer: There are normally two primary classifications – Resident & Non- Resident.

Again, Resident is divided into two sub-categories (secondary classification) – Ordinarily & Not-ordinarily Resident.

PRIMARY CONDITION: An Individual is said to be Resident in India, if he satisfies at least one of the basic condition:

B) Discuss the advantages of VAT over Sales tax.

Answer: A sales tax is charged as I understand when something is sold at retail. So if I am selling to another company for non retail no tax is charged.

Both of these taxes are subject to evasion, through perhaps offers for cash jobs or the 15% discount for cash (Or whatever the rate is in that country). However since a GST is tax which allows for deductions you have an incentive to keep receipts and documents so you can claim a deduction from your bill.

Question. 3. “Section 48 of the Income-tax Act, 1961 discusses the methods of computation of short term and long term capital gains”. Enumerate with examples.

Answer: When you buy and sell assets, the profit that you earn is called a Capital Gain. You are liable to pay a tax on profits earned, called Capital Gains Tax. There are two types of capital gains tax that apply on the sale of an asset, depending on the duration of time you’ve held the asset before selling it.

Short and Long term capital gains are

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