GLS UNIVERSITY FACULTY OF COMMERCE SEM-6 TAXATION-2 UNIT 1-PROFITS AND GAINS OF BUSINESS AND PROFESSION

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1 GLS UNIVERSITY FACULTY OF COMMERCE SEM-6 TAXATION-2 UNIT 1-PROFITS AND GAINS OF BUSINESS AND PROFESSION Q-1 CHOOSE THE CORRECT ALTERNATIVE (1) Which expenditure is allowed as deduction from the head Profits and Gains of Business and Profession? (a) Income Tax (b) Wealth Tax (c) Staff Salary (d) All of These (2) includes any agreement or understanding or action in concert whether or not it is formal or in writing or whether or not it is intended to be enforceable by legal proceedings? (a) Contract (b) Agreement (c) Service (d) Profession (3) Which of the following are included in business? (a) Trade (b) Commerce (c) Manufacture (d) All of above (4) Assessee is having stock existing in business. Valuation of stock will be at : (a) Cost price (b) Market price (c) Cost or Market price, whichever is less (d) Cost or Market price, whichever is more (5) Method of accounting to be followed for computing income chargeable under the head PGBP shall be: (a) Cash system (c) Either (a) or (b) (b) Mercantile system (d) None of the above (6) Which expenditure incurred for a building used for the business or profession shall not be allowed as deduction? (a) Rent,rates and taxes (c) Reparing of building (b) Insurance of building (d) Capital expenditure (7) Group of assets falling within a class of assets comprising of tangible & intangible assets is known as: (a) Group of assets (c) Set of assets (b) Block of assets (d) None of above (8) The Profit and Loss Account of a firm showed Rs.5,000 as income in the form of recovery of bad debts. The insolvent debtors account was already written off by Rs.10,000 of

2 bad debts in earlier previous years. The assessing Officer had not allowed Rs. 8,000 of bad debts in this regard. What will be correct taxable amount of bad debts recovery? (a) Rs.10,000 (b) Rs.4,000 (c) Rs.3,000 (d) Nil (9) Which expenditure is allowed as deduction from the head Profits and Gains of Business and Profession? (a) Medical Expenses of Owner (c) Sales Tax (b) Life Insurance Premium (d) All of These (10)Which is a disallowable expenditure? (a) Telephone Expenses (b) (c) Drawings (b) Office expenses (d) Printing & Stationary Q-2 DO AS DIRECTED. (1) Bonus paid to a partner is not an allowable expense of a firm.(true/false) (2) Loss due to the embezzlement in the business is admissible as a business loss. (True/False) (3) Personal expenses of assessee are allowed as deduction from business income only to the extent of availability of profit. (True/False) (4) Salary paid to an engineer for installation of new plant and machinery is an allowable business expenses. (True/False) (5) For computation of business income, the assessee has to follow Accounting standard notified by Central Government. (True/False) (6) The rate of depreciation charged on Furniture and Fittings including electric fittings is 10%. (7) The rate of depreciation charged on Oceangoing ship is 20%. (8) The rate of depreciation charged on Computer software is 60% (9)The rate of depreciation charged on Temporary building structure is 100%. (10) The charging section of income under the head profits and gains of business and profession is section 28. Q-3 SOLVE THE FOLLOWING (1) The Profit and Loss Account of a firm showed Rs.5,000 as income in the form of recovery of bad debts. The insolvent debtors account was already written off by Rs.10,000 of bad debts in earlier previous years. The assessing Officer had not allowed Rs. 8,000 of bad debts in this regard. What will be correct taxable amount of bad debts recovery? Ans: Rs. 3,000 (2) The book value of Plant and machinery on was Rs.90,000. A machine having a book value of Rs. 22,500 was sold on for Rs.25,000 and on and on1-1-

3 2017,new machines of Rs.20,000 and Rs.40,000 were purchased. The rate of depreciation is 15%.What would be the admissible depreciation for A.Y ? Ans: Rs.15,750 (3)The loss from the cloth business for financial year ,before debiting admissible depreciation of Rs.10,000,amounted to Rs.15,000. Taxable profit of the stationary business for the same period was Rs.60,000.Besides,that there was loss of Rs.20,000 from hard ware business during the financial year What will be taxable income of Business and Profession for A.Y ? Ans: Rs.15,000 (4)As per profits and loss account of a firm there was Net Loss of Rs.40,000.If Proprietors salary was Rs.24,000,Rent paid of Personal house was Rs.9,000 and interest received investment wasrs.8,000, What will be taxable income of business and profession? Ans: Rs.15,000 (Loss) (5)The Net Profit as per profit and loss of account is Rs.1,00,000.If penalty paid under income tax act is Rs.2,400,Donation is Rs.1,000 and Dividend received is Rs. 2,000,What will be taxable income of business and profession? Ans: Rs.1,01,400 UNIT 2 CAPITAL GAINS & INCOME FROM OTHER SOURCES Q1. CHOOSE THE CORRECT ALTERNATIVE. CAPITAL GAINS 1. What are the conditions to be satisfied for charging an income to tax under the head capital gains? (a) There must be a capital asset (b) Capital asset must be transferred (c) There arises profit/loss on such transfer (d) All of these 2. The following asset is not regarded as a capital asset u/s 2(14)- (a) Urban land (b) Securities & shares (c) Jewellery (d) Personal motor 3. The following asset is not regarded as a capital asset u/s 2(14)- (a) Archaeological collections (b) Securities & shares (c) Jewellery (d) Rural Agricultural land 4. Which of the following assets is a long term capital asset if held for more than 12 months but less than 36 months? (a) Shares of listed company (b) Shares of unlisted company (c) Urban land (d) Rural land 5. If an asset is purchased before for Rs.40,000; and the fair market value of the asset on is Rs.55,000, then the cost available for indexation will be

4 (a) Rs. 40,000 (b) Rs.50,000 (c) Rs.55,000 (d) Rs.15, Capital gain on sale of residential house property is exempted u/s54 if it is : (a) Long term capital gain (c) Any of the two (b) short term capital gain (d) None of these 7. For claiming the benefit of exemption u/s 54 new residential house property must be purchased within next year/s of transfer of capital asset. (a) 1 (b) 2 (c) 3 (d) 4 8. For claiming the benefit of exemption u/s 5EC NHAI/RECL bonds must be purchased within months of transfer of capital asset. (a) 4 (b) 5 (c) 6 (d) 7 INCOME FROM OTHER SOURCES 9. Family Pension will be subject to standard deduction of lower of the 2 amounts- (a) Rs.15,000 or 1/3 rd of the Pension (c) 20% of the Pension (b) Rs.15,000 or 1/4 th of the Pension (d) None of these 10. Agricultural income from an agricultural land situated outside India will be subject to tax under: (a) Capital Gains (c) Income from Other Sources (b) Business or Profession (d) Income from house property Q2. DO AS DIRECTED: CAPITAL GAINS 1. When the period of holding by the assessee in respect of a capital asset is more than 36months it is called long term capital asset 2. If the capital asset sold, are listed shares, then it would become long term capital asset if it is sold only after 12 months. 3. When sale proceeds of a residential house are invested in Residential house, an assessee can claim exemption u/s When sale proceeds of a residential house are invested in NHAI/RECL bonds, an assessee can claim exemption u/s 54EC. 5. Mr. M purchased a personal I-phone 8 Mobile phone in April 2016 for Rs.56,000. He sold the same on for Rs.60,000. His taxable capital gains would be NIL

5 6. Mr. M purchased a Rural Agricultural land in April 2016 for Rs.56,000. He sold the same on for Rs.60,000. His taxable capital gains would be NIL 7. If an assessee sells listed shares within 12 months of purchase he would be subject to 15% 8. The maximum tax benefit of exemption u/s 54EC on investment in NHAI bonds can be to the extent of Rs. 50, 00,000 INCOME FROM OTHER SOURCES 9. Salary paid to a Member of Parliament is taxable under the head Income from Other Sources. 10. Winnings from lottery will be taxable under Income from Other Sources. Q3. ANSWER THE FOLLOWING: CAPITAL GAINS 1. Mr. M purchased a Rural land in April 2016 for Rs.56,000. He sold the same on for Rs.60,000. Calculate the taxable capital gains Ans: Rs.4, Mr. X sells listed shares which are subject to Securities Transaction tax, worth Rs.75,000 which he had purchased before 13 months for Rs.70,000. Calculate his taxable amount under capital gains. Ans : NIL 3. Mr. X sells listed shares which are subject to Securities Transaction tax, worth Rs.75,000 which he had purchased before 11 months for Rs.70,000. Calculate his taxable amount under capital gains. Ans Rs.5,000 INCOME FROM OTHER SOURCES 4. Interest received is Rs.9000 on which TDS rate is 10%, Compute the gross amount of interest to be included in the statement of taxable Income from other sources Ans: Rs.10, Winnings from lottery received is Rs.70,000, which is after TDS deduction of 30%. Compute the gross amount taxable under the head Income from other sources. Ans: Rs.1,00,000 UNIT 3 DEDUCTION AND RELIEF Q-1 CHOOSE THE CORRECT ALTERNATIVE (1)Deduction available u/s 80D Medical insurance premium (Mediclaim) for senior citizen is: (a) Rs.20,000p.a. (b) Rs. 30,000p.a. (c) Rs.25,000p.a. (d) Rs.15,000p.a. (2)Deduction available u/s 80D Medical insurance premium (Mediclaim) in normal case is:

6 (a) Rs.20,000p.a. (b) Rs. 30,000p.a. (c) Rs.25,000p.a. (d) Rs.15,000p.a. (3)Deduction available u/s 80DD Medical Treatment of Handicapped Dependent in normal case is: (a) Rs.50,000 (b) Rs. 75,000 (c) Rs.1,00,000 (d) Rs.1,25,000 (4) Deduction available u/s 80DD Medical Treatment of Handicapped Dependent in case of severe disability is: (a) Rs.50,000 (b) Rs. 75,000 (c) Rs.1,00,000 (d) Rs.1,25,000 (5) Deduction available u/s 80DDB Medical Treatment of assessee or Dependent relative for special disease, the lower amount between Actual expenditure and in normal case: (a) Rs.40,000 (b) Rs. 50,000 (c) Rs.60,000 (d) Rs.70,000 (6) Deduction available u/s 80DDB Medical Treatment of assessee or Dependent relative for special disease, the lower amount between Actual expenditure and for senior citizen: (a) Rs.40,000 (b) Rs. 50,000 (c) Rs.60,000 (d) Rs.70,000 (7) Deduction available u/s 80 U in case of persons suffering from physical or mental disability in normal case is : (a) Rs.40,000 (b) Rs. 50,000 (c) Rs.75,000 (d) Rs.1,25,000 (8) Deduction available u/s 80 U in case of persons suffering from physical or mental disability in case of severe disability is : (a) Rs.40,000 (b) Rs. 50,000 (c) Rs.75,000 (d) Rs.1,25,000 (9) Which of the following section is available as deduction for donation made by an assessee? (a)section 80C (b) Section 80 DD (c) Section 80 G (d) Section 80U (10) The donation given to Rajiv Gandhi Foundation is qualifies for of actual donation? (a)50% (b) 75% (c) 100% (d) 200% Q-2 DO AS DIRECTED. (1) Deduction for donation to Prime Minister Draught Relief Fund is 100% without any overall limit.(true/false) (2) Deduction for donation to Indira Gandhi Memorial Trust is without any overall limit.(true /False)

7 (3) Deduction for donation to Jawaharlal Nehru Memorial Fund is without any overall limit.(true/ False) (4) Deduction for donation for promotion of family planning is without any overall limit.(true/ False) (5) Deduction for donation to Swachh Bharat Kosh is without any overall limit.(true/ False) (6) Deduction for donation to Clean Ganga Fund (amount donated by resident only) is without any overall limit.(true/ False) (7) The maximum amount allowed as a deduction u/s 80 C is Rs.1,50,000. (8) Employee s and employer s contribution each up to 10% of salary is allowed as deduction u/s 80CCD from his gross total income. (True/ False) (9) Rs.75,000 is available as a deduction to a blind assessee. (True/ False) (10)Deduction u/s 80QQB is of royalty income earned (by an author of book on literature,art or science) or Rs.3,00,000,whichever is less. (True/ False) Q-3 SOLVE THE FOLLOWING. (1)The total gross income of Mr. Shivam for the financial year is Rs.6,58,000. This income includesrs.3,44,000 of royaltyon patent registeredafter He has donated Rs40,000 to Tirupati Balaji Trust (approved).what will be his Taxable income for A.Y ? Ans: Rs.3,40,100 (2) The total gross income of Mr. Kishan is Rs.3,02,000,which includesrs.15,000 of interest on bank term deposits andrs.24,000of taxable business profits. During the financial year ,he has given donation of Rs.35,000to an approved charitable institution and has purchased P.O.N.S.C.(IX series) of Rs.12,000. What will be the correct amount of deduction for donation u/s 80G? Ans: Rs.14,500 (3) Mr.Ganesh has computed his total gross income of Rs.3,35,000 for the A.Y , which includes a long term capital gain of Rs.6,000 in respect of sale of land. He has won a lottery prize of Rs.50,000 in May,2016,which has not been taken in to account while computing the total gross income of Rs.3,35,000.What will be his total taxable income(rectified) for A.Y ? Ans. Rs.3,85,000 (4) The total gross income of Mr.Kunchit for the accounting year was Rs.3,85,000 (including Rs.20,000 0f bank interest on term deposit and Rs.12,000 as interest on Govt. security).during the previous year, donation to Jawaharlal Nehru Memorial fund and

8 Swachh Bharat Kosh amounted to Rs. 20,000 and Rs.10,000 respectively. What would be his total taxable income for A.Y ? Ans. Rs. 3,65,000 (5) The total gross income of Mr. Ram for accounting year was Rs.2,00,000. During the year,donation to the Prime Minister s National Relief Fund was Rs.11,000, Donation to the Government of India for promotion of family planning was Rs.13,000 and donation to Gujarat University (an Approved Institution ) was Rs.6,000. What will be total taxable income? Ans: Rs. 1,70,000 UNIT 4 : GST Q1. CHOOSE THE CORRECT ALTERNATIVE: 1. Input means- (a) Any goods excluding capital goods (b) Any goods including capital goods (c) Capital Goods only (d) Capital goods used for furtherance of business 2. Input tax credit can be taken by (a) Registered dealer not opting composition scheme (b) Registered dealer opting composition scheme (c) Unregistered dealers (d) None of these 3. Details of outward supplies shall include- (a) Invoice (b) Credit and debit notes (c) Revised invoice issued in relation to outward supplies (d) All of these 4. Refunds will not be allowed in cases of (a) Exports made on payment of tax (b) Exports made without payment of tax (c) Inverted duty structures where tax on inputs are higher than tax on outputs (d) All of the above 5. A registered person claiming refund of balance in electronic cash ledger may make such a claim in

9 (a) Application for the refund (b) Annual Return (c) Returns filed at the end of tax period (d) None of these 6. Refunds would be allowed on provisional basis in case of refund claims on account of zero rated supplies of goods and / or services made by registered persons. At what percentage would such provisional refunds be granted? (a) 80% (b) 65% (c) 50% (d) 90% 7. The sanction of refund can be adjusted against the payments which he is liable to pay but remains unpaid under the earlier law- (a) Tax (b) Penalty (c) Interest & other amounts (d) All 8. The date by which the GSTN will auto populate the statement of inward supplies based details of outward supply at the end of the recipient of the supplies? (a) On 11 th of the next month (c) On 17 th of the next month (b) On 15 th of the next month (d) On 20 th of the next month 9. The Appellate Authority can condone the delay in filing an appeal, on sufficient cause being shown, up to (a) 1 month (b) 1 year (c) 3 months (d) 60 days 10. The details of inward supplies of goods or services shall be submitted by- (a) 10 th of the succeeding month (c) 15 th of the succeeding month (b) 18 th of the succeeding month (d) 20 th of the succeeding month Q2. DO AS DIRECTED: 1. Is it mandatory to capitalize the value of capital goods in the books of accounts? (YES/NO ) 2. Where the goods against an invoice are received in lots, the registered person shall be entitled to take the credit upon receipt of the Last Lot 3. Whether credit on capital goods can be taken immediately on receipt of the goods? (YES/ NO) 4. Every registered person shall furnish details of outward supply by 10 th of the next month 5. The return for outward supplies shall be furnished in GSTR-1

10 6. The applicant is not required to furnish documentary evidence if the amount of refund is less than Rs. 2,00, In GST, the eligible refund amount, otherwise ineligible due to some prescribed reasons are credited to Consumer Welfare Fund. 8. Refund shall not be paid to the applicant if the amount of refund is less than Rs.1, Interest on refund amount is required to be paid after expiry of 60 days from the date of receipt of application. 10. The rate of interest to be payable in case of delay in sanctioning the refund claimed, will be not exceeding 6%. Q3. ANSWER THE FOLLOWING: 1. What is the maximum time limit to claim the Input tax credit? Ans: The maximum time limit to claim Input tax credit is date of filing annual return or Due date of September month which is following the financial year, whichever is earlier. 2. What is the permissible time period for addition or deletion or editing or modifications of the entries related to one s statement of outward supply in the same month based on details of inward supplies? Ans: The permissible time period for addition or deletion or editing or modifications of the entries related to one s statement of outward supply in the same month based on details of inward supplies between 15 th to 17 th of the next month. 3. What is the time period for applying for refund? Ans: The time period for applying for refund will be before expiry of 2 years from the relevant date. 4. What is the time limit within which the aggrieved party as well as the department can file appeal to the Appellate Authority against the order of the adjudicating authority is- Ans: The aggrieved party can file an appeal within 3 months from the date of communication of the order where as the Department can file an appeal within 6 months from the date of communication of the order. 5. What amount shall be deposited before filing an appeal to be entertained? Ans: The appeal filed shall not be entertained and recovery proceedings stayed unless the amount deposited before filing an appeal is equal to the admitted tax and 10% of the disputed tax.