Bos 050121 Interp 4

INTERMEDIATE COURSE
PAPER : 4
Taxation
BOOKLET ON MCQS &

CASE SCENARIOS
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
© The Institute of Chartered Accountants of India

This booklet has been prepared by the faculty of the Board of Studies. The
objective of the booklet is to provide teaching material to the students to enable
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Preface
In certain core papers at the Intermediate and Final levels, the question
paper has a dedicated section for 30 marks for objective type questions in
the form of MCQs, comprising of both independent MCQs and case scenario
based MCQs. These MCQs for 30 marks would be compulsory and there
would be no internal or external choice available in respect of such questions.
Each MCQ would have four options out of which you have to choose the one
correct option.
The Board of Studies, in its endeavour to assist students in their learning

process, has come out with a MCQ booklet in the above core papers. This
booklet on Intermediate (New) Paper 4: Taxation is divided into two sections
– Section A: Income-tax Law and Section B: Indirect Taxes.
Case-scenario based MCQs are all application-oriented and arise from the
facts of the case. In Intermediate (New) Paper 4: Taxation, you need to
apply the relevant provisions of income-tax law/Goods and Services Tax
(GST) law to the facts of the case to choose the correct option. The
independent MCQs may be application-oriented or knowledge-based. Since
Intermediate (New) Paper 4: Taxation is largely application-oriented, the
independent MCQs in this subject would be mostly application-oriented.
Section A: Income-tax Law includes 130 independent MCQs and 30 case

scenarios. The independent MCQs and case scenario based MCQs in
Section A: Income-tax Law have to be answered on the basis of the
provisions of income-tax law, as amended by the Finance Act, 2021 and the
significant notifications, circulars and other legislative amendments made
upto 31.10.2021. The relevant assessment year on the basis of which MCQs
have to be answered is A.Y. 2022-23.
Section B: Indirect Taxes includes 85 independent MCQs and 18 case
scenarios. The independent MCQs and case scenario based MCQs in Section
B: Indirect Taxes have to be answered on the basis of the provisions of the
CGST Act, 2017 and the IGST Act, 2017 as amended by the Finance Act,
2021, which have become effective up to 31.10.2021, including significant
circulars and notifications issued up to 31.10.2021.
iii

This booklet relating to Paper 4: Taxation is relevant for May 2022 and
November 2022 examinations. Please note that before working out the MCQs
of Section A: Income-tax Law in this booklet, you have to be thorough with
the provisions and concepts of income-tax law discussed in the June, 2021
edition of the Study Material, which is based on the provisions of income-tax
law as amended by the Finance Act, 2021 and circulars, notifications and
other legislative amendments made upto 15.6.2021. Similarly, before working
out the MCQs of Section B: Indirect Taxes, you need to be thorough with the
provisions and concepts of GST law discussed in the August 2021 edition of
the Study Material, which is based on the provisions of the CGST Act, 2017
and the IGST Act, 2017 as amended by the relevant Finance Acts, which have
become effective till 30.04.2021, and significant notifications and circulars
issued upto 30.04.2021. In addition, you have to read the Statutory Update
for May 2022 examination web-hosted at the BoS Knowledge Portal,
containing the significant notifications, circulars and other legislative
amendments upto 31.10.2021 in income-tax law and GST.
Students appearing in November 2022 examinations need to go through the
Statutory Update for November 2022 examinations, containing the
notifications, circulars and other legislative amendments in income-tax law
and GST made upto 30.04.2022, which will be web-hosted at the BoS
Knowledge Portal.
After attaining conceptual clarity by reading the Study Material and Statutory
Update, you are expected to apply the concepts learnt in answering the MCQs
given in this booklet. You have to read the case scenario and MCQs, identify
the provisions of tax law involved, apply the provisions correctly in addressing
the issue raised/making the computation required in the MCQ, and finally,
choose the correct answer. This process of learning concepts and provisions
of tax laws and solving MCQs based thereon will help you attain conceptual
clarity and hone your application and analytical skills so that you are able to
approach the examination with confidence and a positive attitude.
W ishing you happy reading!
iv

SECTION A:
INCOME TAX LAW

MULTIPLE CHOICE QUESTIONS
1. The tax liability of Mr. Saral, a resident, who attained the age of 60
years on 01.04.2022 and does not opt for the provisions of section
115BAC for the P.Y. 2021-22, on the total income of ` 5,60,000,
comprising of salary income and interest on fixed deposits would be -
(a) ` 9,880
(b) ` 22,880
(c) ` 25,480
(d) Nil
2. The tax liability of Nirlep Co-operative Society (does not opt to pay tax
under section 115BAD) on the total income of ` 90,000 for
P.Y. 2021-22 is -
(a) ` 24,000
(b) ` 28,080
(c) Nil
(d) ` 24,960
3. What is the amount of marginal relief available to Sadvichar Ltd., a
domestic company, on the total income of ` 10,03,50,000 for P.Y.
2021-22 (comprising only of business income) whose turnover in P.Y.
2019-20 is ` 450 crore, paying tax as per regular provisions of
Income-tax Act? Assume that the company does not exercise option
under section 115BAA.
(a) ` 9,98,000
(b) ` 12,67,600
(c) ` 3,50,000
(d) ` 13,32,304

2 INCOME TAX LAW
4. The tax payable by Dharma LLP on total income of ` 1,01,00,000 for

P.Y. 2021-22 is -
(a) ` 35,29,340
(b) ` 32,24,000
(c) ` 33,21,500
(d) ` 31,51,200
5. Mr. Raman, aged 64 years, was not able to provide satisfactory
explanation to the Assessing Officer for the investments of ` 7 lakhs
not recorded in the books of accounts. What shall be the tax payable
by him on the value of such investments considered to be deemed
income as per section 69?
(a) ` 2,18,400
(b) ` 55,000
(c) ` 5,46,000
(d) ` 54,600
6. If Anirudh, a citizen of India, has stayed in India in the P.Y. 2021-22 for
181 days, and he is non-resident in 9 out of 10 years immediately
preceding the current previous year and he has stayed in India for 365
days in all in the 4 years immediately preceding the current previous year
and 420 days in all in the 7 years immediately preceding the current
previous year, his residential status for the A.Y. 2022-23 would be -
(a) Resident and ordinarily resident
(b) Resident but not ordinarily resident
(c) Non-resident
(d) Deemed resident but not ordinarily resident
7. Mr. Mahesh is found to be the owner of two gold chains of 50 gms
each (value of which is ` 1,45,000 each) during the financial year
ending 31.3.2022 which are not recorded in his books of account and
he could not offer satisfactory explanation for the amount spent on
acquiring these gold chains. As per section 115BBE, Mr. Mahesh would
be liable to pay tax of –
(a) ` 1,80,960

MCQs & CASE SCENARIOS 3
(b) ` 2,26,200
(c) ` 90,480
(d) ` 1,23,958
8. Mr. Ajay is a recently qualified doctor. He joined a reputed hospital in
Delhi on 01.01.2022. He earned total income of ` 3,40,000 till
31.03.2022. His employer advised him to claim rebate u/s 87A while
filing return of income for A.Y. 2022-23. He approached his father, a
tax professional, to enquire regarding what is rebate u/s 87A of the
Act. What would have his father told him?
(i) An individual who is resident in India and whose total income
does not exceed ` 5,00,000 is entitled to claim rebate under
section 87A.
(ii) An individual who is resident in India and whose total income
does not exceed ` 3,50,000 is entitled to claim rebate under
section 87A.
(iii) Maximum rebate allowable under section 87A is ` 5,000.
(iv) Rebate under section 87A is available in the form of exemption
from total income.
(v) Maximum rebate allowable under section 87A is ` 12,500.
(vi) Rebate under section 87A is available in the form of deduction
from basic tax liability.
Choose the correct option from the following:
(a) (ii), (iii), (vi)
(b) (i), (v), (vi)
(c) (ii), (iii), (iv)
(d) (i), (iv), (v)
9. Raman, a citizen of India, was employed in Hindustan Lever Ltd. He
resigned on 27.09.2021. He received a salary of ` 40,000 p.m. from
1.4.2021 to 27.9.2021 from Hindustan Lever Ltd. Thereafter he left for
Dubai for the first time on 1.10.2021 and got salary of rupee
equivalent of ` 80,000 p.m. from 1.10.2021 to 31.3.2022 in Dubai. His

4 INCOME TAX LAW
salary for October to December 2021 was credited in his Dubai bank
account and the salary for January to March 2022 was credited in his
Mumbai account directly. He is liable to tax in respect of -
(a) income received in India from Hindustan Lever Ltd.
(b) income received in India and in Dubai.
(c) income received in India from Hindustan Lever Ltd. and income
directly credited in India.
(d) income received in Dubai.
10. Mr. Suhaan (aged 35 years), a non-resident, earned dividend income
of ` 12,50,000 from an Indian company which was declared on
30.09.2021 and credited directly to his bank account on 05.10.2021 in
France and ` 15,000 as interest in saving A/c from State Bank of India
for the previous year 2021-22. Assuming that he has no other income,
what will be amount of income chargeable to tax in his hands in India
for A.Y. 2022-23?
(a) ` 2,55,000
(b) ` 12,65,000
(c) ` 12,50,000
(d) ` 12,55,000
11. Aashish earns the following income during the P.Y. 2021-22:
• Interest on U.K. Development Bonds (1/4th being received in
India): ` 4,00,000
• Capital gain on sale of a building located in India but received
in Holland: ` 6,00,000
If Aashish is a resident but not ordinarily resident in India, then what
will be amount of income chargeable to tax in India for A.Y. 2022-23?
(a) ` 7,00,000
(b) ` 10,00,000
(c) ` 6,00,000
(d) ` 1,00,000

12. Mr. Sumit is an Indian citizen and a member of the crew of an America
bound Indian ship engaged in carriage of freight in international traffic
departing from Chennai on 25th April, 2021. From the following details
for the P.Y. 2021-22, what would be the residential status of
Mr. Sumit for A.Y. 2022-23, assuming that his stay in India in the last
4 previous years preceding P.Y. 2021-22 is 365 days and last seven
previous years preceding P.Y. 2021-22 is 730 days?
• Date entered in the Continuous Discharge Certificate in respect
of joining the ship by Mr. Sumit: 25th April, 2021
• Date entered in the Continuous Discharge Certificate in respect
of signing off the ship by Mr. Sumit: 24th October, 2021
Mr. Sumit has been filing his income tax return in India as a resident
for the preceding 2 previous years.
(b) Resident but not-ordinarily resident
(c) Non-resident
(d) Deemed resident but not-ordinarily resident
13. Mr. Square, an Indian citizen, currently resides in Dubai. He came to
India on a visit and his total stay in India during the F.Y. 2021-22 was
135 days. He is not liable to pay any tax in Dubai. Following is his
details of stay in India in the preceding previous years:
Financial Year Days of Stay in India
2020-21 100
2019-20 125
2018-19 106
2017-18 83
2016-17 78
2015-16 37
2014-15 40
What shall be his residential status for the P.Y. 2021-22 if his total
income (other than income from foreign sources) is ` 10 lakhs?
(a) Resident but not ordinary resident

6 INCOME TAX LAW
(b) Resident and ordinary resident

(c) Non-resident
14. Dividend income from Australian company received in Australia in the
year 2020, brought to India during the P.Y. 2021-22 is taxable in the
A.Y.2022-23 in the case of –
(a) resident and ordinarily resident only
(b) both resident and ordinarily resident and resident but not
ordinarily resident
(c) non-resident
(d) None of the above
15. Mr. Ramesh, a citizen of India, is employed in the Indian embassy in
Australia. He is a non-resident for A.Y. 2022-23. He received salary
and allowances in Australia from the Government of India for the year
ended 31.03.2022 for services rendered by him in Australia. In
addition, he was allowed perquisites by the Government. Which of the
following statements are correct?
(a) Salary, allowances and perquisites received outside India are
not taxable in the hands of Mr. Ramesh, since he is non-
resident.
(b) Salary, allowances and perquisites received outside India by
Mr. Ramesh are taxable in India since they are deemed to
accrue or arise in India.
(c) Salary received by Mr. Ramesh is taxable in India but
allowances and perquisites are exempt.
(d) Salary received by Mr. Ramesh is exempt in India but
allowances and perquisites are taxable.
16. Mr. Nishant, a resident but not ordinarily resident for the previous year
2020-21 and resident and ordinarily resident for the previous year
2021-22, has received rent from property in Canada amounting to
` 1,00,000 during the P.Y. 2020-21 in a bank in Canada. During the

financial year 2021-22, he remitted this amount to India through

approved banking channels. Is such rent taxable in India, and if so,
how much and in which year?
(a) Yes; ` 70,000 was taxable in India during the previous year
2020-21.
(b) Yes; ` 1,00,000 was taxable in India during the previous year
2020-21.
(c) Yes; ` 70,000 was taxable in India during the previous year
2021-22.
(d) No; such rent is not taxable in India either during the previous
year 2020-21 or during the previous year 2021-22.
17. Who among the following will qualify as non-resident for the previous
year 2021-22?
- Mr. Joey, an Italian designer, came on visit to India to explore
Indian handloom on 03.09.2021 and left on 15.12.2021. For
past four years, he visited India for fashion shows and stayed
in India for 100 days each year.
- Mr. Sanjay born and settled in Canada, visits India each year
for three months to meet his parents and grandparents, born in
India in 1946, living in Mumbai. His Indian income is
` 15,20,000.
- Mr. Chang, a Korean scientist, left India to his home country for
fixed employment there. He stayed in India for study and
research in medicines from 01.01.2017 till 01.07.2021.
Choose the correct answer:
(a) Mr. Joey and Mr. Chang
(b) Mr. Sanjay
(c) Mr. Sanjay and Mr. Chang
(d) Mr. Chang

8 INCOME TAX LAW
18. Which of the following income would be exempt in the hands of a

Sikkimese Individual?
(a) only income from any source in the State of Sikkim
(b) only income by way of dividend
(c) only income from interest on securities
(d) All the above
19. Which of the following statements is/are true in respect of taxability of
agricultural income under the Income-tax Act, 1961?
(i) Any income derived from saplings or seedlings grown in a
nursery is agricultural income exempt from tax u/s 10(1).
(ii) 60% of dividend received from shares held in a tea company is
agricultural income exempt from tax u/s 10(1).
(iii) While computing income tax liability of an assessee aged 50
years, agricultural income is required to be added to total
income only if net agricultural income for the P.Y. exceeds
` 5,000 and the total income (including net agricultural income)
exceeds ` 2,50,000.
(iv) While computing income tax liability of an assessee aged 50
years, agricultural income is required to be added to total
income only if net agricultural income for the P.Y. exceeds
` 5,000 and the total income (excluding net agricultural
income) exceeds ` 2,50,000.
(a) (i) and (iii)
(b) (ii) and (iii)
(c) (i) and (iv)
(d) (i), (ii) and (iv)
20. XYZ Ltd. has two units, one unit at Special Economic Zone (SEZ) and
other unit at Domestic Tariff Area (DTA). The unit in SEZ was set up
and started manufacturing from 12.3.2013 and unit in DTA from

15.6.2016. Total turnover of XYZ Ltd. and Unit in DTA is ` 8,50,00,000

and ` 3,25,00,000, respectively. Export sales of unit in SEZ and DTA is
` 2,50,00,000 and ` 1,25,00,000, respectively and net profit of Unit in
SEZ and DTA is ` 80,00,000 and ` 45,00,000, respectively. XYZ Ltd.
would be eligible for deduction under section 10AA for P.Y. 2021-22
for-
(a) ` 38,09,524
(b) ` 19,04,762
(c) ` 23,52,941
(d) ` 11,76,471
21. Income derived from farm building situated in the immediate vicinity
of an agricultural land (not assessed to land revenue) would be
treated as agricultural income if such land is situated in –
(a) an area at a distance of 3 kms from the local limits of a
municipality and has a population of 80,000 as per last census
(b) an area within 1.5 kms from the local limits of a municipality
and has a population of 12,000 as per last census
(c) an area within 2 kms from the local limits of a municipality and
has a population of 11,00,000 as per last census
(d) an area within 8 kms from the local limits of a municipality and
has a population of 10,50,000 as per last census
22. Anirudh stays in New Delhi. His basic salary is ` 10,000 p.m., D.A.
(60% of which forms part of pay) is ` 6,000 p.m., HRA is ` 5,000 p.m.
and he is entitled to a commission of 1% on the turnover achieved by
him. Anirudh pays a rent of ` 5,500 p.m. The turnover achieved by
him during the current year is ` 12 lakhs. The amount of HRA exempt
under section 10(13A) is –
(a) ` 48,480
(b) ` 45,600

10 INCOME TAX LAW
(c) ` 49,680
(d) ` 46,800
23. Mr. Dutta received voluntary retirement compensation of ` 7,00,000

after 30 years 4 months of service. He still has 6 years of service left.
At the time of voluntary retirement, he was drawing basic salary
` 20,000 p.m.; Dearness allowance (which forms part of pay) ` 5,000
p.m. Compute his taxable voluntary retirement compensation,
assuming that he does not claim any relief under section 89 -
(a) ` 7,00,000
(b) ` 5,00,000
(c) ` 2,00,000
(d) Nil
24. Anand is provided with furniture to the value of ` 70,000 along with
house from February, 2021. The actual hire charges paid by his
employer for hire of furniture is ` 5,000 p.a. The value of furniture to
be included along with value of unfurnished house for A.Y.2022-23 is-
(a) ` 5,000
(b) ` 7,000
(c) ` 10,500
(d) ` 14,000
25. Mr. Kashyap received basic salary of ` 20,000 p.m. from his employer.
He also received children education allowance of ` 3,000 for three
children and transport allowance of ` 1,800 p.m. Assume he is not
opting to pay tax under section 115BAC. The amount of salary
chargeable to tax for P.Y. 2021-22 is -
(a) ` 2,62,600
(b) ` 2,12,600

(c) ` 2,11,600
(d) ` 2,12,200
26. Mr. Jagat is an employee in accounts department of Bharat Ltd., a

cellular company operating in the regions of eastern India. It is
engaged in manufacturing of cellular devices. During F.Y. 2021-22,
following transactions were undertaken by Mr. Jagat:
(i) He attended a seminar on “Perquisite Valuation”. Seminar fees
of ` 12,500 was paid by Bharat Ltd.
(ii) Tuition fees of Mr. Himanshu (son of Mr. Jagat) paid to private
coaching classes (not having any tie-up with Bharat Ltd.) was
reimbursed by Bharat Ltd. Amount of fees was ` 25,000.
(iii) Ms. Sapna (daughter of Mr. Jagat) studies in DPS Public School
(owned and maintained by Bharat Ltd.). Tuition fees paid for
Ms. Sapna was ` 750 per month by Mr. Jagat. Cost of education
in similar institution is ` 5,250 per month.
What shall be the amount which is chargeable to tax under the head
“Salaries” in hands of Mr. Jagat for A.Y. 2022-23?
(a) ` 25,000
(b) ` 37,500
(c) ` 66,500
(d) ` 79,000
27. Vidya received ` 90,000 in May, 2021 towards recovery of unrealised
rent, which was deducted from actual rent during the P.Y. 2019-20 for
determining annual value. Legal expense incurred in relation to
unrealized rent is ` 20,000. The amount taxable under section 25A for
A.Y. 2022-23 would be -
(a) ` 70,000
(b) ` 63,000
(c) ` 90,000
(d) ` 49,000

12 INCOME TAX LAW
28. Ganesh and Rajesh are co-owners of a self-occupied property. They

own 50% share each. The interest paid by each co-owner during the
previous year 2021-2 on loan (taken for acquisition of property during
the year 2004) is ` 2,05,000. The amount of allowable deduction in
respect of each co-owner is –
(a) ` 2,05,000
(b) ` 1,02,500
(c) ` 2,00,000
(d) ` 1,00,000
29. Mr. Raghav has three houses for self-occupation. What would be the tax
treatment for A.Y.2022-23 in respect of income from house property?
(a) One house, at the option of Mr. Raghav, would be treated as self-
occupied. The other two houses would be deemed to be let out.
(b) Two houses, at the option of Mr. Raghav, would be treated as
self-occupied. The other house would be deemed to be let out.
(c) One house, at the option of Assessing Officer, would be treated
as self-occupied. The other two houses would be deemed to be
let out.
(d) Two houses, at the option of Assessing Officer, would be
treated as self-occupied. The other house would be deemed to
be let out.
30. An electricity company charging depreciation on straight line method
on each asset separately, sells one of its machinery in April, 2021 at
` 1,20,000. The WDV of the machinery at the beginning of the year
i.e., on 1st April, 2021 is ` 1,35,000. No new machinery was purchased
during the year. The shortfall of ` 15,000 is treated as -
(a) Terminal depreciation
(b) Short-term capital loss
(c) Normal depreciation
(d) Any of the above, at the option of the assessee

31. Mr. X acquires an asset in the year 2015-16 for the use for scientific
research for ` 2,75,000. He claimed deduction under section 35(1)(iv)
in the previous year 2015-16. The asset was brought into use for the
business of Mr. X in the P.Y.2021-22, after the research was
completed. The actual cost of the asset to be included in the block of
assets is -
(a) Nil
(b) Market value of the asset on the date of transfer to business
(c) ` 2,75,000 less notional depreciation under section 32 upto the
date of transfer.
(d) Actual cost of the asset i.e., ` 2,75,000
32. Mr. X, a retailer, acquired furniture on 10th May 2021 for ` 10,000 in
cash and on 15th May 2021, for ` 15,000 and ` 20,000 by a bearer
cheque and account payee cheque, respectively. Depreciation
allowable for A.Y. 2022-23 would be –
(a) ` 2,000
(b) ` 3,000
(c) ` 3,500
(d) ` 4,500
33. The W.D.V. of a block (Plant and Machinery, rate of depreciation 15%)
as on 1.4.2021 is ` 3,20,000. A second hand machinery costing
` 50,000 was acquired on 1.9.2021 through account payee cheque but
put to use on 1.11.2021. During January 2022, part of this block was
sold for ` 2,00,000. The depreciation for A.Y.2022-23 would be -
(a) ` 21,750
(b) ` 25,500
(c) ` 21,125
(d) ` 12,750

14 INCOME TAX LAW
34. M/s ABC, an eligible assessee, following mercantile system of

accounting, carrying on eligible business under section 44AD provides
the following details:
♦ Total turnover for the financial year 2021-22 is ` 130 lakh
♦ Out of the above:
- ` 25 lakh received by A/c payee cheque during the
financial year 2021-22;
- ` 50 lakh received by cash during the financial year
2021-22;
- ` 25 lakh received by A/c payee bank draft before the
due date of filing of return;
- ` 30 lakh not received till due date of filing of return.
What shall be the amount of deemed profits of M/s ABC under section
44AD(1) for A.Y. 2022-23?
(a) ` 10.4 lakh
(b) ` 7.0 lakh
(c) ` 5.5 lakh
(d) ` 9.4 lakh
35. Mr. Shahid, a wholesale supplier of dyes, provides you with the details
of the following cash payments made throughout the year –
• 12.06.2021: loan repayment of ` 27,000 taken for business
purpose from his friend Kunal. The repayment also includes
interest of ` 5,000.
• 19.08.2021: Portable dye machinery purchased for ` 15,000.
The payment was made in cash in three weekly instalments.
• 26.01.2022: Payment of ` 10,000 made to electrician due to
unforeseen electric circuit at shop.
• 28.02.2022: Purchases made from unregistered dealer for
` 13,500.

What will be disallowance under 40A(3), if any, if Mr. Shahid opts to

declare his income as per the provisions of section 44AD?
(a) ` 18,500
(b) ` 28,500
(c) ` 13,500
(d) Nil
36. For an assessee, who is a salaried employee who invests in equity
shares, what is the benefit available in respect of securities transaction
tax paid by him on sale and acquisition of 100 listed shares of X Ltd.
which has been held by him for 14 months before sale?
(a) Rebate under section 88E is allowable in respect of securities
transaction tax paid
(b) Securities transaction tax paid is treated as expenses of
transfer and deducted from sale consideration.
(c) Capital gains without deducting STT paid is taxable at a
concessional rate of 10% on such capital gains exceeding
` 1 lakh
(d) Capital gains without deducting STT paid is taxable at
concessional rate of 15%.
37. Under section 54EC, capital gains on transfer of land or building or
both are exempted if invested in the bonds issued by NHAI & RECL or
other notified bond -
(a) within a period of 6 months after the date of such transfer
(b) within a period of 6 months from the end of the relevant
previous year
(c) within a period of 6 months from the end of the previous year
or the due date for filing the return of income under section
139(1), whichever is earlier
(d) At any time before the end of the relevant previous year.

16 INCOME TAX LAW
38. Mr. A (aged 45 years) sold an agricultural land for ` 52 lakhs on

04.10.2021 acquired at a cost of ` 49.25 lakhs on 13.09.2020 situated
at 7 kms from the jurisdiction of municipality having population of
4,00,000 and also sold another agricultural land for ` 53 lakhs on
12.12.2021 acquired at a cost of ` 46 lakhs on 15.02.2020 situated at
1.5 kms from the jurisdiction of municipality having population of
12,000. What would be the amount of capital gain chargeable to tax in
the hands of Mr. A for the assessment year 2022-23? Cost inflation
index for F.Y. 2019-20:289; 2020-21: 301; 2021-22: 317.
(a) Short-term capital gain of ` 9.75 lakhs
(b) Short-term capital gain of ` 7 lakhs
(c) Long-term capital gain of ` 2,54,325
(d) Long-term capital gain of ` 2,67,531
39. Mr. Kashyap has acquired a building from his friend on 10.10.2021 for
` 15,00,000. The stamp duty value of the building on the date of
purchase is ` 16,20,000. Income chargeable to tax in the hands of
Mr. Kashyap is
(a) ` 70,000
(b) ` 50,000
(c) Nil
(d) ` 1, 20,000
40. Mr. X, aged 61 years, earned dividend of ` 12,00,000 from ABC Ltd. in
P.Y. 2021-22. Interest on loan taken for the purpose of investment in
ABC Ltd., is ` 3,00,000. Income included in the hands of Mr. X for
P.Y. 2021-22 would be -
(a) ` 12,00,000
(b) ` 9,60,000
(c) ` 9,00,000
(d) ` 2,00,000

41. Mr. Mayank has received a sum of ` 75,000 on 24.10.2021 from his
friend on the occasion of his marriage anniversary. What would be the
taxability of the said sum in the hands of Mr. Mayank?
(a) Entire ` 75,000 is chargeable to tax
(b) Entire ` 75,000 is exempt from tax
(c) Only ` 25,000 is chargeable to tax

(d) Only 50% i.e., ` 37,500 is chargeable to tax
42. If the converted property is subsequently partitioned among the
members of the family, the income derived from such converted
property as is received by the spouse of the transferor will be taxable -
(a) as the income of the karta of the HUF
(b) as the income of the spouse of the transferor
(c) as the income of the HUF.
(d) as the income of the transferor-member
43. Mr. Aarav gifted a house property valued at ` 50 lakhs to his wife,
Geetha, who in turn has gifted the same to her daughter-in-law
Deepa. The house was let out at ` 25,000 per month throughout the
P.Y.2021-22. Compute income from house property for A.Y.2022-23.
In whose hands is the income from house property chargeable to tax?
(a) ` 3,00,000 in the hands of Mr. Aarav
(b) ` 2,10,000 in the hands of Mr. Aarav
(c) ` 2,10,000 in the hands of Geetha
(d) ` 2,10,000 in the hands of Deepa
44. Ram owns 500, 15% debentures of Reliance Industries Ltd. of ` 500
each. Annual interest of ` 37,500 was declared on these debentures
for P.Y. 2021-22. He transfers interest income to his friend Shyam,
without transferring the ownership of these debentures. While filing
return of income for A.Y. 2022-23, Shyam showed ` 37,500 as his

18 INCOME TAX LAW
income from debentures. As tax advisor of Shyam, do you agree with

the tax treatment done by Shyam in his return of income?
(a) Yes, since interest income was transferred to Shyam therefore,

after transfer it becomes his income.
(b) No, since Ram has not transferred debentures to Shyam, interest
income on the debentures is not taxable income of Shyam.
(c) Yes, if debentures are not transferred, interest income on
debentures can be declared by anyone, Ram or Shyam, as
taxable income depending upon their discretion.
(d) No, since Shyam should have shown the income as interest
income received from Mr. Ram and not as interest income
earned on debentures.
45. Mrs. Shivani, wife of Mr. Anurag, is a partner in a firm. Her capital
contribution is ` 5 lakhs to the firm as on 1.4.2021 which includes
` 3.5 lakhs contributed out of gift received from Anurag. The firm paid
interest on capital of ` 50,000 and share of profit of ` 60,000 during
the F.Y.2021-22. The entire interest has been allowed as deduction in
the hands of the firm. Which of the following statements is correct?
(a) Share of profit is exempt but interest on capital is taxable in the
hands of Mrs. Shivani.
(b) Share of profit is exempt but interest of ` 39,286 is includible in
the income of Mr. Anurag and interest of ` 10,714 is includible
in the income of Mrs. Shivani.
(c) Share of profit is exempt but interest of ` 35,000 is includible in
the income of Mr. Anurag and interest of ` 15,000 is includible
in the income of Mrs. Shivani.
(d) Share of profit to the extent of ` 42,000 and interest on capital to
the extent of ` 35,000 is includible in the hands of Mr. Anurag.

46. Mr. Arvind gifted a house property to his wife, Ms. Meena and a flat to
his daughter-in law, Ms. Seetha. Both the properties were let out.
Which of the following statements is correct?
(a) Income from both properties is to be included in the hands of
Mr. Arvind by virtue of section 64.
(b) Income from property gifted to wife alone is to be included in
Mr. Arvind’s hands by virtue of section 64.
(c) Mr. Arvind is the deemed owner of house property gifted to
Ms. Meena and Ms. Seetha.
(d) Mr. Arvind is the deemed owner of property gifted to
Ms. Meena. Income from property gifted to Ms. Seetha would
be included in his hands by virtue of section 64.
47. On 20.10.2021, Pihu (minor child) gets a gift of ` 20,00,000 from her
father’s friend. On the same day, the amount is deposited as fixed
deposit in Pihu’s bank account. On the said deposit, interest of
` 13,000 was earned during the P.Y. 2021-22. In whose hands the
income of Pihu shall be taxable? Also, compute the amount of income
that shall be taxable.
(a) Income of ` 20,11,500 shall be taxable in the hands of Pihu’s
father.
(b) Income of ` 20,13,000 shall be taxable in the hands of Pihu’s
father.
(c) Income of ` 20,11,500 shall be taxable in the hands of Pihu’s
father or mother, whose income before this clubbing is higher.
(d) Income of ` 20,13,000 shall be taxable in the hands of Pihu’s
father or mother, whose income before this clubbing is higher.
48. Mr. A incurred short-term capital loss of ` 10,000 on sale of shares
through the National Stock Exchange. Such loss -
(a) can be set-off only against short-term capital gains
(b) can be set-off against both short-term capital gains and long-
term capital gains.

20 INCOME TAX LAW
(c) can be set-off against any head of income.

(d) not allowed to be set-off.
49. According to section 80, no loss which has not been determined in
pursuance of a return filed in accordance with the provisions of section
139(3), shall be carried forward. The exceptions to this are -
(a) Loss from specified business under section 73A
(b) Loss under the head “Capital Gains” and unabsorbed
depreciation carried forward under section 32(2)
(c) Loss from house property and unabsorbed depreciation carried
forward under section 32(2)
(d) Loss from speculation business under section 73
50. Brought forward loss from house property of ` 3,10,000 of A.Y. 2021-
22 is allowed to be set-off against income from house property of A.Y.
2022-23 of ` 5,00,000 to the extent of –
(a) ` 2,00,000
(b) ` 3,10,000
(c) ` 2,50,000
(d) ` 1,00,000
51. Mr. Rohan incurred loss of ` 3 lakh in the P.Y. 2021-22 in retail trade
business. Against which of the following income during the same year,
can he set-off such loss?
(a) profit of ` 1 lakh from wholesale cloth business
(b) long-term capital gains of ` 1.50 lakhs on sale of land
(c) speculative business income of ` 40,000
(d) All of the above
52. Virat runs a business of manufacturing of shoes since the P.Y. 2019-
20. During the P.Y. 2019-20 and P.Y. 2020-21, Virat had incurred
business losses. For P.Y. 2021-22, he earned business profit
(computed) of ` 3 lakhs. Considering he may/may not have sufficient

business income to set off his earlier losses, which of the following
order of set off shall be considered:
(He does not have income from any other source)
(a) First adjustment for loss of P.Y. 2019-20, then loss for P.Y.
2020-21 and then unabsorbed depreciation, if any.
(b) First adjustment for loss of P.Y. 2020-21, then loss for P.Y.
2019-20 and then unabsorbed depreciation, if any.
(c) First adjustment for unabsorbed depreciation, then loss of P.Y.
2020-21 and then loss for P.Y. 2019-20, if any.
(d) First adjustment for unabsorbed depreciation, then loss of P.Y.
2019-20 and then loss for P.Y. 2020-21, if any.
53. Mr. Ravi incurred loss of ` 4 lakh in the P.Y.2021-22 in leather
business. Against which of the following incomes earned during the
same year, can he set-off such loss?
(i) Profit of ` 1 lakh from apparel business
(ii) Long-term capital gains of ` 2 lakhs on sale of jewellery
(iii) Salary income of ` 1 lakh
(a) First from (ii) and thereafter from (i); the remaining loss has to
be carried forward.
(b) First from (i) and thereafter from (ii) and (iii)
(c) First from (i) and thereafter from (iii); the remaining loss has to
be carried forward
(d) First from (i) and thereafter from (ii); the remaining loss has to
be carried forward
54. During the A.Y.2021-22, Mr. A has a loss of ` 8 lakhs under the head
“Income from house property” which could not be set off against any
other head of income as per the provisions of section 71. The due date
for filing return of income u/s 139(1) in case of Mr. A has already
expired and Mr. A forgot to file his return of income within the said
due date. However, Mr. A filed his belated return of income for

22 INCOME TAX LAW
A.Y.2021-22. Now, while filing return of income for A.Y.2022-23, Mr. A

wishes to set off the said loss against income from house property for
the P.Y. 2021-22. Determine whether Mr. A can claim the said set off.
(a) No, Mr. A cannot claim set off of loss of ` 8 lakhs during A.Y.
2022-23 as he failed to file his return of income u/s 139(1) for
A.Y. 2021-22.
(b) Yes, Mr. A can claim set off of loss of ` 2 lakhs, out of ` 8
lakhs, from his income from house property during A.Y. 2022-
23, if any, and the balance has to be carried forward to
A.Y.2023-24.
(c) Yes, Mr. A can claim set off of loss of ` 2 lakhs, out of ` 8
lakhs, from his income from any head during A.Y. 2022-23 and
the balance has to be carried forward to A.Y.2023-24.
(d) Yes, Mr. A can claim set off of loss of ` 8 lakhs during A.Y.
2022-23 from his income from house property, if any, and the
balance has to be carried forward to A.Y.2023-24.
55. The details of income/loss of Mr. Kumar for A.Y. 2022-23 are as follows:
Particulars Amt. (in ` )
Income from Salary (computed) 5,20,000
Loss from self-occupied house property 95,000
Loss from let-out house property 2,25,000
Loss from specified business u/s 35AD 2,80,000
Loss from medical business 1,20,000
Long term capital gain 1,60,000
Income from other sources 80,000
What shall be the gross total income of Mr. Kumar for A.Y. 2022-23?
(a) ` 4,40,000
(b) ` 3,20,000
(c) ` 1,60,000
(d) ` 4,80,000
56. Mr. Srivastav, aged 72 years, paid medical insurance premium of
` 52,000 by cheque and ` 4,000 by cash during May, 2021 under a

Medical Insurance Scheme of the General Insurance Corporation. The

above sum was paid for insurance of his own health. He would be
entitled to a deduction under section 80D of a sum of -
(a) ` 30,000
(b) ` 50,000
(c) ` 52,000
(d) ` 56,000
57. Mr. Ramesh pays a rent of ` 5,000 per month. His total income is
` 2,80,000 (i.e., Gross Total Income as reduced by deductions under
Chapter VI-A except section 80GG). He is also in receipt of HRA. He
would be eligible for a deduction under section 80GG of an amount of-
(a) ` 60,000
(b) ` 32,000
(c) ` 70,000
(d) Nil
58. An individual has paid life insurance premium of ` 25,000 during the
previous year for a policy of ` 1,00,000 taken on 1.4.2018. He shall -
(a) not be allowed deduction u/s 80C
(b) be allowed deduction of ` 20,000 u/s 80C
(c) be allowed deduction of ` 25,000 u/s 80C
(d) be allowed deduction of ` 10,000 u/s 80C
59. In respect of loan of ` 40 lakhs sanctioned by SBI in April, 2021 for
purchase of residential house intended for self-occupation, compute
the interest deduction allowable under the provisions of the Act for
A.Y.2022-23, assuming that the disbursement was made on 1st June,
2021, the rate of interest is 8% p.a. and the loan sanctioned was 80%
of the stamp duty value of the property.
(a) ` 2,00,000 u/s 24 and ` 1,20,000 u/s 80EEA
(b) ` 1,50,000 u/s 80EEA and ` 1,70,000 u/s 24

24 INCOME TAX LAW
(c) ` 2,00,000 u/s 24 and ` 50,000 u/s 80EEA
(d) ` 2,00,000 u/s 24
60. The maximum amount which can be donated in cash for claiming
deduction under section 80G for the P.Y. 2021-22 is –
(a) ` 5,000
(b) ` 10,000
(c) ` 1,000
(d) ` 2,000
61. Rajan, a resident Indian, has incurred ` 15,000 for medical treatment
of his dependent brother, who is a person with severe disability and
has deposited ` 20,000 with LIC for his maintenance. For A.Y.2022-23,
Rajan would be eligible for deduction under section 80DD of an
amount equal to –
(a) ` 15,000
(b) ` 35,000
(c) ` 75,000
(d) ` 1,25,000
62. Mr. Shiva made a donation of ` 50,000 to PM Cares Fund and ` 20,000
to Rajiv Gandhi Foundation by cheque. He made a cash donation of
` 10,000 to a public charitable trust registered under section 80G. The
deduction allowable to him under section 80G for A.Y.2022-23 is –
(a) ` 80,000
(b) ` 70,000
(c) ` 60,000
(d) ` 35,000
63. Mr. Ritvik has purchased his first house in Gwalior for self-occupation
on 5.4.2020 for ` 45 lakhs (stamp duty value being the same) with
bank loan sanctioned on 30.3.2020 and disbursed on 3.4.2020. He

paid interest of ` 3.8 lakhs during the P.Y.2021-22. What is the tax
treatment of interest paid by him?
(a) Interest of ` 2 lakhs allowable u/s 24
(b) Interest of ` 2 lakhs allowable u/s 24 and ` 1.8 lakhs allowable
u/s 80EEA
(c) Interest of ` 2 lakhs allowable u/s 24 and ` 1.5 lakhs allowable
u/s 80EEA
(d) Interest of ` 1.5 lakhs allowable u/s 24 and ` 1.5 lakhs
allowable u/s 80EEA
64. Mr. Anuj is a businessman whose total income (after allowing
deduction under Chapter VI-A except under section 80GG) for A.Y.
2022-23 is ` 5,95,000. He does not own any house property and is
staying in a rented accommodation in Patna for a monthly rent of
` 9,000. Deduction under section 80GG for A.Y. 2022-23 is –
(a) ` 48,500
(b) ` 1,48,750
(c) ` 60,000
(d) ` 1,08,000
65. If Mr. Y’s total income for A.Y. 2022-23 is ` 52 Lakhs, surcharge is
payable at the rate of –
(a) 15%
(b) 12%
(c) 10%
(d) 2%
66. Unexhausted basic exemption limit of a resident individual can be
adjusted against –
(a) only LTCG taxable @20% u/s 112
(b) only STCG taxable @15% u/s 111A

26 INCOME TAX LAW
(c) both (a) and (b)

(d) casual income taxable @30% u/s 115BB
67. Unexhausted basic exemption limit of a non-resident individual can be
adjusted against –
(a) only LTCG taxable @20% u/s 112
(b) only STCG taxable @15% u/s 111A
(c) both (a) and (b)
(d) neither (a) nor (b)
68. During the P.Y.2021-22, Mr. Ranjit has short-term capital gains of ` 95
lakhs taxable under section 111A, long-term capital gains of ` 110
lakhs taxable under section 112A and business income of ` 90 lakhs.
Which of the following statements is correct?
(a) Surcharge @25% is leviable on income-tax computed on total
income of ` 2.95 crore, since total income exceeds ` 2 crore.
(b) Surcharge @15% is leviable on income-tax computed on total
income of ` 2.95 crore.
(c) Surcharge @15% is leviable in respect of income-tax computed
on capital gains of ` 2.05 crore; in respect of business income,
surcharge is leviable @25% on income-tax, since total income
exceeds ` 2 crore.
(d) Surcharge @15% is leviable in respect of income-tax computed
on capital gains of ` 2.05 crore; surcharge @10% is leviable on
income-tax computed on business income, since the same
exceeds ` 50 lakhs but is less than ` 1 crore.
69. Which of the following statements is not true with respect to A.Y.
2022-23?
(a) No exemption under section 80TTA would be available to
resident senior citizens
(b) Share of profit will not be exempt in the hands of partner, if
firm claims exemption of income under section 10AA

(c) Long term capital gains of ` 90,000 on STT paid listed equity
shares would not be subject to income-tax under section 112A
(d) Exemption under section 10(32) on income of minor child is
allowed for more than two children also
70. Gross total income of Arpita for P.Y. 2021-22 is ` 6,00,000. She had
taken a loan of ` 7,20,000 in the financial year 2018-19 from a bank
for her husband who is pursuing MBA course from IIM, Kolkata. On
02.04.2021, she paid the first installment of loan of ` 45,000 and
interest of ` 65,000. Compute her total income for A.Y. 2022-23.
(a) ` 6,00,000
(b) ` 5,35,000
(c) ` 4,90,000
(d) ` 5,55,000
71. Mr. Uttam presents you the following data related to his tax liability for
A.Y. 2022-23:
Particulars ` in lakhs
Tax Liability as per regular provisions of Income-tax
Act, 1961 15
Tax Liability as per section 115JC 12
AMT credit brought forward from A.Y. 2021-22 5
What shall be the tax liability of Mr. Uttam for A.Y. 2022-23?
(a) ` 12 lakhs
(b) ` 15 lakhs
(c) ` 10 lakhs
(d) ` 7 lakhs
72. Mr. Nekinsaan, aged 43 years, provides the following income details
for P.Y. 2021-22 as follows:
Capital Gains under section 112A 120

28 INCOME TAX LAW
Capital Gains under section 111A 110

Other Income 520
What shall be the tax liability of Mr. Nekinsaan as per regular
provisions of the Income-tax Act, 1961 for A.Y. 2022-23?
(a) ` 260.06 lakhs
(b) ` 253.68 lakhs
(c) ` 256.52 lakhs
(d) ` 253.56 lakhs
73. Continuing Q. 72, what shall be tax liability of Mr. Nekinsaan as per
regular provisions of the Income-tax Act, 1961 for A.Y. 2022-23, if the
Other Income is ` 480 lakhs?
(a) ` 218.20 lakhs
(b) ` 221.03 lakhs
(c) ` 218.73 lakhs
(d) ` 242.25 lakhs
74. Mr. Bandu, aged 37 years, provides the following details for P.Y. 2021-
22 as follows:
Textile business income 22
Speculative business loss (4)
Textile business loss b/f from P.Y. 2019-20 (5)
Business income of spouse included in the income of
Mr. Bandu as per section 64(1)(iv) 2
Deductions available under Chapter VI-A 3
TDS 1
TCS 0.5
Advance tax paid 1.3

What shall be the net tax payable/(refundable) as per regular

provisions of the Income-tax Act, 1961 for A.Y. 2022-23 for
Mr. Bandu?
(a) ` 24,200
(b) (` 1,00,600)
(c) ` 2,11,400
(d) ` 12,500
75. Mr. Raj, aged 32 years, presents you the following data for A.Y. 2022-23:
Gross receipts from business conducted entirely
through banking channels (opted for section 44AD) 70
Capital gains under section 112A 5
Capital gains under section 111A 3
Winnings from horse races 1
What would be the tax liability as per the regular provisions of the
Income-tax Act, 1961 of Mr. Raj for the A.Y.2022-23?
(a) ` 1,28,440
(b) ` 1,05,560
(c) ` 1,38,840
(d) ` 1,45,080
76. Mr. A, whose total sales is ` 201 lakhs, declares profit of ` 10 lakhs for
the F.Y. 2021-22. He is liable to pay advance tax -
(a) in one instalment
(b) in two instalments
(c) in three instalments
(d) in four instalments
77. Mr. Raj (a non-resident and aged 65 years) is a retired person, earning
rental income of ` 40,000 per month from a property located in Delhi.

30 INCOME TAX LAW
He is residing in Canada. Apart from rental income, he does not have

any other source of income. Is he liable to pay advance tax in India?
(a) Yes, he is liable to pay advance tax in India as he is a non-
resident and his tax liability in India exceeds ` 10,000.
(b) No, he is not liable to pay advance tax in India as his tax
liability in India is less than ` 10,000.
(c) No, he is not liable to pay advance tax in India as he has no
income chargeable under the head “Profits and gains of
business or profession” and he is of the age of 65 years.
(d) Both (b) and (c)
78. Mr. X, a resident, is due to receive ` 4.50 lakhs on 31.3.2022, towards
maturity proceeds of LIC policy taken on 1.4.2019, for which the sum
assured is ` 4 lakhs and the annual premium is ` 1,25,000. Mr. Z, a
resident, is due to receive ` 95,000 on 1.10.2021 towards maturity
proceeds of LIC policy taken on 1.10.2013 for which the sum assured
is ` 90,000 and the annual premium is ` 10,000.
(a) Tax is required to be deducted on income comprised in maturity
proceeds payable to Mr. X and Mr. Z
(b) Tax is required to be deducted on income comprised in maturity
proceeds payable to Mr. X
(c) Tax is required to be deducted on income comprised in maturity
proceeds payable to Mr. Z
(d) No tax is required to be deducted on income comprised in
maturity proceeds payable to either Mr. X or Mr. Z
79. An amount of ` 40,000 was paid to Mr. X on 1.7.2021 towards fees for
professional services without deduction of tax at source. Subsequently,
another payment of ` 50,000 was due to Mr. X on 28.02.2022, from
which tax @10% (amounting to ` 9,000) on the entire amount of
` 90,000 was deducted and the net amount was paid on the same day
to Mr. X. However, this tax of ` 9,000 was deposited only on
22.6.2022. The interest chargeable under section 201(1A) would be:
(a) ` 320

(b) ` 860
(c) ` 1,620
(d) ` 540
80. The benefit of payment of advance tax in one installment on or before
15th March is available to assessees computing profits on presumptive
basis –
(a) only under section 44AD
(b) under section 44AD and 44ADA
(c) under section 44AD and 44AE
(d) under section 44AD, 44ADA and 44AE
81. Mr. Ramesh, Mr. Mahesh and Mr. Suresh, jointly owned a flat in
Mathura, which was let out to Dr. Rajesh from 01.04.2021. The annual
rent paid by Dr. Rajesh for the flat was ` 5,40,000, credited equally to
each of their account. Mr. Rajesh approached his tax consultant to
seek clarity in relation to deduction of tax on payment of the rent. He
informed his consultant that he occupied such flat for his personal
accommodation and his receipts from his profession during the
previous year 2020-21 was ` 58 lakhs. As tax consultant, choose the
correct answer –
(a) No tax at source is required to be deducted since the rental
payments are towards flat occupied for personal purpose
(b) Tax is required to be deducted at source since the rent
payment exceeds ` 2,40,000 and Dr. Rajesh is an individual
having gross receipts from profession exceeding ` 50 lakh in
the preceding financial year.
(c) No tax is required to be deducted at source since the rent
credited to each co-owner is less than ` 2,40,000
(d) No tax is required to be deducted at source since Dr. Rajesh’s
gross receipts during the preceding financial year were less
than ` 1 crore

32 INCOME TAX LAW
82. Mr. Nihar maintains a savings A/c and a current A/c in Mera Bank Ltd.
The details of withdrawals on various dates during the previous year
2021-22 are as follows:
Date of Cash Saving Account Current Account
withdrawal
05.04.2021 15,00,000 -
10.05.2021 - 22,00,000
25.06.2021 20,00,000 -
17.07.2021 - 5,00,000
28.10.2021 35,00,000 -
10.11.2021 - 38,00,000
12.12.2021 25,00,000 -
Mr. Nihar regularly files his return of income. Is Mera Bank Limited
required to deduct tax at source on the withdrawals made by Mr. Nihar
during the previous year 2021-22? If yes, what would the amount of
tax deducted at source?
(a) TDS of ` 3,20,000 is required to be deducted
(b) No, TDS is not required to be deducted as the cash withdrawal does
not exceed ` 1 crore neither in saving account nor in current account
(c) TDS of ` 3,00,000 is required to be deducted.
(d) TDS of ` 1,20,000 is required to be deducted.
83. Mr. Jha, an employee of FX Ltd, attained 60 years of age on
15.05.2021. He is resident in India during F.Y. 2021-22 and earned
salary income of ` 5 lakhs (computed). During the year, he earned ` 7
lakhs from winning of lotteries. What shall be his advance tax liability
for A.Y. 2022-23 if all tax deductible at source has been duly deducted
and remitted to the credit of Central Government on time? Assume he
does not opt to pay tax under section 115BAC.
(a) ` 2,20,000 + Cess ` 8,800 = ` 2,28,800, being the tax payable
on total income of ` 12 lakhs
(b) ` 2,10,000 + Cess ` 8,400 = ` 2,18,400, being the tax payable
on lottery income of ` 7 lakhs

(c) ` 10,000 + Cess ` 8,800 = ` 18,800, being the net tax payable
on salary income, since tax would have been deducted at
source from lottery income.
(d) Nil
84. Mr. P is a professional who is responsible for paying a sum of
` 2,00,000 as rent for use of building to Mr. Harshit, a resident, for the
month of February, 2022. The gross receipts of Mr. P are as under:
From 01.04.2020 to 31.03.2021: ` 55,00,000
From 01.04.2021 to 28.02.2022: ` 45,00,000
Whether Mr. P is responsible for deducting any tax at source from the
rent of ` 2,00,000 payable to Mr. Harshit?
(a) Tax at source is required to be deducted u/s 194-I at the rate
of 10%.
(b) Tax at source is required to be deducted u/s 194-IB at the rate
of 5%.
(c) Tax at source is required to be deducted u/s 194-IB at the rate
of 10%.
(d) No tax is required to be deducted at source.
85. Mr. A has two bank accounts maintained with ICICI Bank and HDFC
Bank. From 01.04.2021 till 31.03.2022, Mr. A withdrew the following
amounts as cash from both the said accounts;
HDFC Bank: ` 50 Lakh
ICICI Bank: ` 120 Lakh
What shall be the amount of tax to be deducted at source u/s 194N by
HDFC Bank and ICICI Bank, respectively, while making payment in
cash to Mr. A assuming Mr. A has filed his return of income for P.Y.
2018-19, P.Y. 2019-20 and P.Y. 2020-21 respectively?
(a) ` 1,00,000 and ` 2,40,000
(b) Nil and ` 40,000

34 INCOME TAX LAW
(c) ` 60,000 and ` 1,00,000

(d) ` 50,000 and ` 1,20,000
86. Mr. Ram acquired a house property at Chennai from Mr. Satyam, a
resident, for a consideration of ` 85 lakhs, on 23.8.2021. On the same
day, Mr. Ram made two separate transactions, thereby acquiring an
urban plot in Gwalior from Mr. Vipun, a resident, for a sum of ` 50
lakhs and rural agricultural land from Mr. Danish, a resident, for a
consideration of ` 75 lakhs. Which of the following statements are
correct assuming that in the consideration amounts as aforementioned
all the charges incidental to transfer of the immovable property are
included?
(a) No tax deduction at source is required in respect of any of the
three payments.
(b) TDS@1% is attracted on all the three payments.
(c) TDS@1% on ` 85 lakhs and ` 50 lakhs are attracted. No TDS
on payment of ` 75 lakhs for acquisition of rural agricultural
land.
(d) TDS@1% on ` 85 lakhs is attracted. No TDS on payments of
` 50 lakhs and ` 75 lakhs.
87. Which of the following details/evidences are required to be furnished

by an employee to his/her employer in respect of deduction of interest
under the head "Income from house property", when the employer is
estimating the total income of the employee for the purpose of tax
deduction at source u/s 192?
(i) Amount of Interest payable or paid
(ii) Rate of interest payable or paid
(iii) Name of the lender
(iv) Address of the lender
(v) PAN or Aadhaar number as the case may be, of the lender

(vi) TAN of the lender

(a) (i), (iii), (v)
(b) (i), (iii), (iv), (v)
(c) (ii), (iv), (v), (vi)
(d) (i), (ii)
88. Mr. X paid fees for professional services of ` 40,000 to Mr. Y, who is
engaged only in the business of operation of call centre, on 15.7.2021.
Tax is to be deducted by Mr. X at the rate of –
(a) 0.75%
(b) 1%
(c) 1.5%
(d) 2%
89. An interior decorator has opted for presumptive taxation scheme under
section 44ADA for A.Y. 2022-23. -
(a) He is liable to pay advance tax on or before 15.3.2022
(b) He is not liable to advance tax
(c) He is liable to pay advance tax in three instalments i.e., on or
before 15.9.2021, 15.12.2021 and 15.3.2022
(d) He is liable to pay advance tax in four instalments i.e., on or
before 15.6.2021, 15.9.2021, 15.12.2021 and 15.3.2022
90. A firm pays salary and interest on capital to its resident partners. The
salary and interest paid fall within the limits specified in section 40(b).
Which of the following statements is true?
(a) Tax has to be deducted u/s 192 on salary and u/s 194A on
interest
(b) Tax has to be deducted u/s 192 on salary but no tax needs to
be deducted on interest

36 INCOME TAX LAW
(c) No tax has to be deducted on salary but tax has to be deducted

u/s 194A on interest
(d) No tax has to be deducted at source on either salary or interest
91. Mr. X, a resident Indian, wins ` 10,000 in a lottery. Which of the
statement is true?
(a) Tax is deductible u/s 194B@30%
(b) Tax is deductible u/s 194B@30.9%
(c) No tax is deductible at source
92. In which of the following transactions, quoting of PAN is mandatory by
the person entering into the said transaction?
I Opening a Basic savings bank deposit account with a bank
II Applying to a bank for issue of a credit card.
III Payment of ` 40,000 to mutual fund for purchase of its units
IV Cash deposit with a post office of ` 1,00,000 during a day.
V A fixed deposit of ` 30,000 with a NBFC registered with RBI

aggregating the total deposits to ` 3,50,000 for the F.Y upto to
the date of this deposit made.
VI Sale of shares of an unlisted company for an amount of

` 60,000
(a) II, IV
(b) II, III, IV
(c) I, II, III, V, VI
(d) II, IV, VI

93. An individual client has consulted you on the matter of PAN. He is
carrying on the business of sale & purchase of electronic appliances.
His turnover is ` 3,00,000 and the profit is ` 75,000 for the

P.Y. 2021-22. He has asked you to provide him threshold of turnover,

if any, exceeding which he has to apply for PAN.
(a) More than ` 2,00,000
(b) More than ` 2,50,000
(c) More than ` 3,00,000
(d) More than ` 5,00,000
94. Mr. Z, a salaried individual, has a total income of ` 8 lakhs for
A.Y. 2022-23. He furnishes his return of income for A.Y. 2022-23 on
28th August, 2022. He is liable to pay fee of –
(a) upto ` 1,000 under section 234F
(b) ` 5,000 under section 234F
(c) ` 10,000 under section 234F
(d) Not liable to pay any fee

95. Arun’s gross total income of P.Y. 2021-22 is ` 2,45,000. He deposits
` 45,000 in PPF. He pays electricity bills aggregating to ` 1.20 lakhs in
the P.Y.2021-22. Which of the statements is correct?
(a) Arun is not required to file his return of income u/s 139(1) for
P.Y. 2021-22, since his total income before giving effect to
deduction under section 80C does not exceed the basic
exemption limit.
(b) Arun is not required to file his return of income u/s 139(1) for
P.Y. 2021-22, since his electricity bills do not exceed ` 2,00,000
for the P.Y.2021-22.
(c) Arun is not required to file his return of income u/s 139(1) for
P.Y. 2021-22, since neither his total income before giving effect
to deduction under section 80C exceeds the basic exemption
limit nor his electricity bills exceed ` 2 lakh for the
P.Y. 2021-22.
(d) Arun is required to file his return of income u/s 139(1) for P.Y.
2021-22, since his electricity bills exceed ` 1 lakh for the
P.Y.2021-22.

38 INCOME TAX LAW
96. Which of the following returns can be revised under section 139(5)?
(i) A return of income filed u/s 139(1)
(ii) A belated return of income filed u/s 139(4)
(iii) A return of loss filed u/s 139(3)
(a) Only (i)
(b) Only (i) and (ii)
(c) Only (i) and (iii)
(d) (i), (ii) and (iii)
97. Iskon Inc., a foreign company and non-resident in India for
A.Y. 2022-23, engaged in the business of trading of tube-lights outside
India. The principal officer of the company has approached you to
enlighten him regarding the provisions of the Income-tax Act, 1961
pertaining to the person who is required to verify the return of income
in case of Iskon Inc. Advise him as to which of the following
statements are correct, assuming that the company has a managing
director-
I The return of income in case of Iskon Inc. can be verified by
the managing director.
II The return of income in case of Iskon Inc. can be verified by
any director, irrespective of the availability or otherwise of the
managing director.
III The return of income in case of Iskon Inc. may be verified by a
person who holds a valid power of attorney from such company
to do so, irrespective of the availability or otherwise of the
managing director.
(a) I or II or III
(b) Only I
(c) I or III
(d) Only III

98. Mr. Pawan is engaged in the business of roasting and grinding coffee
beans. During F.Y. 2021-22, his total income is ` 4.5 lakhs. Mr. Pawan
filed his return of income for A.Y. 2022-23 on 3rd December, 2022.
What shall be the fee payable for default in furnishing in return of
income for A.Y. 2022-23?
(a) ` 5,000
(b) Not exceeding ` 1,000
(c) ` 10,000
(d) No fees payable as total income is below ` 5,00,000
99. Which of the following benefits are not allowable to Ms. Sakshi, a non-
resident, while computing her total income and tax liability for A.Y.
2022-23 under the Income-tax Act, 1961?
(a) Deduction of 30% of gross annual value while computing her
income from house property in Bangalore
(b) Tax rebate of ` 9,500 from tax payable on her total income of
` 4,40,000
(c) Deduction for donation made by her to Prime Minister’s
National Relief Fund
(d) Deduction for interest earned by her on NRO savings account
permitted to be maintained by RBI.
100. Mr. Dinesh, a resident in India, has gross total income of ` 2,30,000
comprising of interest on saving A/c and rental income during the
previous year 2021-22. He incurred expenditure of ` 2,00,000 for his
son for a study tour to Europe. Whether he is required to file return of
income for the assessment year 2022-23? If yes, what is the due date?
(a) Yes, 31st July of A.Y
(b) Yes, 30th September of A.Y
(c) Yes, 31st October of A.Y
(d) No, he is not required to file return of income

40 INCOME TAX LAW
101. Mr. Tejas, an Indian Citizen, left India permanently with his wife and
two children, for extending his retail trade business of toys in Canada
in the year 2016. From Canada, he is managing his retail business of
toys in India. For the purpose of his Indian business, he visits India
every year from 1st September to 31st January. His business income is
` 23.50 lakhs and ` 18 lakhs from retail trade business in Canada and
in India, respectively for the F.Y. 2021-22. He has no other income
during the P.Y. 2021-22. Determine his residential status and income
taxable in his hands for the A.Y. 2022-23.
(a) Resident and ordinarily resident in India and income of ` 18
lakhs and ` 23.50 lakhs would be taxable.
(b) Non-Resident and ` 18 lakhs from Indian retail trade business
would only be taxable.
(c) Resident but not ordinarily Resident and ` 18 lakhs from Indian
retail trade business would only be taxable.
(d) Deemed resident and ` 18 lakhs from Indian retail trade
business would only be taxable.
102. Dr. Sargun maintained two bank A/cs, one current A/c with Canara
Bank for her profession and a saving bank A/c with State Bank of
India. The following are the details of her withdrawals from these A/cs
during the previous year 2021-22:
Date of Canara Bank State Bank of India
withdrawals
25.04.2021 25,00,000
27.04.2021 15,50,000
31.08.2021 29,00,000
01.09.2021 14,20,000
05.09.2021 14,00,000
07.10.2021 18,21,000
11.12.2021 26,23,000
12.02.2022 7,56,000
25.03.2022 16,13,000

She furnished her return of income for the A.Y. 2021-22 and
A.Y. 2020-21 on or before the time limit prescribed u/s 139(1).
However, for the A.Y. 2019-20 and A.Y. 2018-19, she has furnished
her return of income belatedly.
Is any tax deductible at source u/s 194N on the withdrawals made by
Dr. Sargun from Canara Bank and SBI Bank? If yes, at what rate and
what amount?
(a) TDS is deductible at source on ` 1,00,20,000 @ 5% by Canara
Bank and tax is deductible at source @2% on ` 25,63,000 by
SBI.
(b) TDS is deductible at source on ` 20,20,000 @ 5% by Canara
Bank and no tax is deductible by SBI.
(c) TDS is deductible at source on ` 20,20,000 @ 2% by Canara
Bank and no tax is deductible by SBI.
(d) TDS is deductible at source on ` 1,00,20,000 @ 5% by Canara
Bank and tax is deductible at source @5% on ` 25,63,000 by
SBI.
103. Ms. Rimjhim (aged 32 years), an interior decorator, has professional
receipts of ` 25,60,000 for the previous year 2021-22. She also earned
` 1,25,000 as dividend and ` 4,65,000 as interest income on fixed
deposits. She incurred expenses of ` 13,00,000 for her profession and
` 30,000 as interest on loan for making investment in shares on which
she received dividend. What would be her total income for the
A.Y. 2022-23, assuming that she wishes to make maximum tax savings
without getting her books of account audited?
(a) ` 18,45,000
(b) ` 18,70,000
(c) ` 18,40,000
(d) ` 18,25,000

42 INCOME TAX LAW
104. Mr. Arpan (aged 35 years) submits the following particulars for the
purpose of computing his total income:
Particulars `
Income from salary (computed) 4,00,000
Loss from let-out house property (-) 2,20,000
Brought forward loss from let-out house property for (-)2,30,000
the A.Y. 2021-22
Business loss (-)1,00,000
Bank interest (FD) received 80,000
Compute the total income of Mr. Arpan for the A.Y.2022-23 and the
amount of loss that can be carried forward for the subsequent
assessment year?
(a) Total income ` 2,00,000 and loss from house property of
` 2,50,000 and business loss of ` 20,000 to be carried forward
to subsequent assessment year.
(b) Total income ` 1,60,000 and loss from house property of
` 2,30,000 to be carried forward to subsequent assessment
year.
(c) Total income ` 1,80,000 and loss from house property of
` 2,30,000 and business loss of ` 20,000 to be carried forward
to subsequent assessment year.
(d) Total income is Nil and loss from house property of ` 70,000 to
be carried forward to subsequent assessment year.
105. Mr. Vikas transferred 600 unlisted shares of XYZ (P) Ltd. to ABC (P)
Ltd. on 15.12.2021 for ` 3,50,000 when the market price was
` 5,15,000. The indexed cost of acquisition of shares for Mr. Vikas was
computed at ` 4,25,000.
Determine the income chargeable to tax in the hands of Mr. Vikas and
ABC (P) Ltd. in respect of the above transaction.
(a) ` 90,000 chargeable to tax in the hands of Mr. Vikas as long-
term capital gains and nothing is taxable in the hands of ABC
(P) Ltd.

(b) ` 75,000 chargeable to tax in the hands of Mr. Vikas as long-

term capital gains and nothing is taxable in the hands of ABC
(P) Ltd.
(c) ` 90,000 chargeable to tax in the hands of Mr. Vikas as long-
term capital gains and ` 1,65,000 is taxable under the head
“Income from other sources” in the hands of ABC (P) Ltd.
(d) ` 75,000 chargeable to tax in the hands of Mr. Vikas as long-
term capital gains and ` 1,65,000 is taxable under the head
“Income from other sources” in the hands of ABC (P) Ltd.
106. Mr. T, an Indian Citizen and resident of India, earned dividend income
of ` 4,500 from an Indian company, which was declared on 1.10.2021
and paid in cash to Mr. T. What are the tax implications with respect
to the dividend in the hands of Mr. T and Indian Company?
(a) Such dividend is taxable in the hands of Mr. T and Indian
company is required to deduct tax at source @7.5%.
(b) Such dividend is taxable in the hands of Mr. T and Indian
company is required to deduct tax at source @10%.
(c) Such dividend is taxable in the hands of Mr. T. However, Indian
company is not required to deduct tax at source since it does
not exceed ` 5,000.
(d) Such dividend is exempt in the hands of Mr. T. Hence, Indian
company is not required to deduct tax at source.
107. Mr. X is a working partner and Mr. Y is a non-working partner of XYZ
partnership firm. XYZ Partnership firm subjected to tax audit under
section 44AB for the P.Y. 2021-22. What is the due date for filing
return of income for Mr. X and Mr. Y for the A.Y. 2022-23?
(a) 31st July, 2022 for both Mr. X and Mr. Y
(b) 31st October, 2022 for both Mr. X and Mr. Y
(c) 31st July, 2022 for Mr. X and 31st October, 2022 for Mr. Y
(d) 31st July, 2022 for Mr. Y and 31st October, 2022 for Mr. X
108. Mr. Arpit, an employee of MNO Ltd. has contributed ` 1,61,280
towards NPS and similar amount is contributed by his employer. His
basic salary is ` 80,000 p.m. and dearness allowance is 40% of basic

44 INCOME TAX LAW
salary which forms part of retirement benefits. He also paid

` 55,000 towards LIC premium for himself and his wife and medical
insurance premium of ` 35,000 by crossed cheque for his mother,
being a senior citizen during the previous year 2021-22. How much
deduction is available under Chapter VI-A while computing total
income of Mr. Arpit for the A.Y. 2022-23?
(a) ` 3,46,280
(b) ` 3,69,400
(c) ` 3,19,400
(d) ` 3,96,280
109. A building was acquired on 1.4.1995 for ` 20,00,000 and sold for
` 80,00,000 on 01.06.2021. The stamp duty value on the date of
transfer was ` 85,00,000. The fair market value of the building on
1.4.2001 was ` 25,00,000. Its stamp duty value on the same date was
` 22,00,000. Determine the capital gains on sale of such building for
the A.Y. 2022-23?
Cost Inflation Index for F.Y. 2001-02: 100; F.Y. 2021-22: 317
(a) ` 10,26,000
(b) ` 15,26,000
(c) ` 5,75,000
(d) ` 75,000
110. Mr. Vikas received a gold ring worth ` 60,000 on the occasion of his
daughter’s wedding from his best friend Mr. Vishnu. Mr. Vishnu also
gifted a gold chain to Kavya, daughter of Mr. Vikas, worth ` 80,000 on
the said occasion. Would such gifts be taxable in the hands of
Mr. Vikas and Ms. Kavya?
(a) Yes, the gift of gold ring and gold chain is taxable in the hands
of Mr. Vikas and Ms. Kavya, respectively
(b) Such gifts are not taxable in the hands of Mr. Vikas nor in the
hands of Ms. Kavya
(c) Value of gold ring is taxable in the hands of Mr. Vikas but value
of gold chain is not taxable in the hands of Ms. Kavya
(d) Value of gold chain is taxable in the hands of Ms. Kavya but
value of gold ring is not taxable in the hands of Mr. Vikas

111. TPR & Co., a partnership firm selling its product X through the digital
facility provided by MKY Limited (an E-commerce operator). MKY Limited
has credited in its books of account, the account of TPR & Co. on 31st
January, 2022 by sum of ` 4,80,000 for the sale of product X made
during the month of January 2022. Out of ` 4,80,000, it made payment
for ` 4,00,300 on 3rd February, 2022. Further, Mr. Pawan, who purchased
the product X through the facility provided by MKY Limited, has made the
payment of sum of ` 40,000 directly to TPR & Co. on 15th January, 2022.
Which statement is correct regarding requirement of deduction of tax at
source by MKY Limited?
(a) No tax is required to be deducted at source.
(b) MKY Limited is required to deduct tax at source ` 4,800 under
section 194C.
(c) MKY Limited is required to deduct tax at source ` 3,900 under
section 194-O.
(d) MKY Limited is required to deduct tax at source ` 5,200 under
section 194-O.
112. Mr. Harry, an Indian citizen, is a marketing consultant who provides
consultancy to various countries around the globe. Due to his
profession, he is required to travel across various countries throughout
the year. His marketing project does not last for more than 40 days
and therefore his stay in any country including India usually never
exceeds 40 days during a year. His income is ` 80 lakhs across the
globe which is not liable to tax in any country. During the P.Y. 2021-
22, an Indian company provides him a marketing project in India. His
stay in India for the project is expected to be only 25 days and his
income from that project would be ` 30 lakhs. Being a highly qualified
professional, he consults you about the tax regime on his income and
his residential status in India.
(a) He shall be treated as resident but not ordinarily resident and
shall be liable to pay tax on ` 30 lakhs.
(b) He shall be treated as resident and ordinarily resident and shall
be liable to pay tax on ` 80 lakhs.

46 INCOME TAX LAW
(c) He shall be treated as non-resident and shall not be liable to

any tax.
(d) He shall be treated as resident but not ordinarily resident and
shall be liable to pay tax on his entire income of ` 80 lakhs
earned across the globe.
113. Mr. Vyas, aged 80, is a retired government employee. On 1St April
2021, he received the maturity amount of his LIC policy amounting to
` 3,50,000. This policy was taken by Mr. Vyas on 1st April 2014 on
which the sum assured was ` 3,00,000 and the annual premium was
` 40,000. His other income comprised of pension amounting to
` 85,000. Mr. Vyas furnishes a declaration in Form 15H for non-
deduction of tax at source to the insurance company stating that his
net tax liability for the year is NIL.
Choose the correct statement from below:
(a) The declaration made by Mr. Vyas is wrong and the insurance
company has to deduct tax of ` 3,500 under section 194DA.
(b) The claim by Vyas is right and insurance company is not
required to deduct tax at source.
(c) The insurance company has to deduct tax under section 194DA
since declaration in Form 15H cannot be made for tax
deduction under section 194DA.
(d) The declaration made by Mr. Vyas is wrong and the insurance
company has to deduct tax of ` 1,000 under section 194DA.
114. During the A.Y. 2022-23, Mr. Kabir has a loss of ` 6 lakhs under the
head “Income from house property”, loss of ` 5 lakhs from business of
profession and income of ` 3 lakhs from long term capital gains. He
filed his return of income for the A.Y. 2022-23 on 31.12.2022.
Determine the total income of Mr. Kabir for A.Y. 2022-23 and the
amount of loss which can be carried forward in a manner most
beneficial to him?
(a) Total income Nil; loss of ` 4,00,000 from house property and
loss of ` 4,00,000 from business or profession.

(b) Total income ` 1,00,000; loss of ` 4,00,000 from house

property.
(c) Total income Nil; No loss is allowed to be carried forward.
(d) Total income Nil; loss of ` 6,00,000 from house property.
115. Pankaj gifted an amount of ` 3,00,000 to his wife, Pinky and
` 2,00,000 to his daughter, Rinky aged 20 years, on 1st April 2018.
Both Pinky and Rinky invested the amounts on the same date in
Government of India 11% Taxable Bonds. The interest accrues yearly
and is reinvested in the same bonds. Determine what will be the
amount taxable in hands on Pinky for A.Y. 2022-23?
(a) ` 4,473
(b) ` 12,132
(c) ` 33,000
(d) Nil
116. Mr. Mango, an Indian citizen, lives in New York, USA since the last 10
years. He has a penthouse in Mumbai, given on rent @2,00,000 per
month. During the year 2021-22, he came to India for 152 days in
aggregate. His total stay in India in the immediately preceding 4
previous years is 366 days.
You are, being the tax consultant of Mr. Mango, advise him about his
residential status for the A.Y. 2022-23.
(a) Non Resident
(b) Resident but not ordinary resident
(c) Resident and ordinary resident
(d) Deemed resident
117. Mr. C, aged 35 years, is a working partner in M/s BCD, a partnership
firm, with equal profit sharing ratio. During the P.Y. 2021-22, the firm
has paid remuneration to Mr. B, Mr. C and Mr. D, being the working
partners of the firm, of ` 2,00,000 each. The firm has paid interest on
capital of ` 1,20,000 in toto to all the three partners and the same is

48 INCOME TAX LAW
within the prescribed limit of 12%. The firm had a loss of ` 1,12,000
after debiting remuneration and interest on capital.
Note – Remuneration and interest on capital is authorized by the
partnership deed
You, being the CA of Mr. C, are in the process of computing his total
income. What would be his taxable remuneration from the firm?
(a) ` 2,00,000
(b) ` 1,51,600
(c) ` 1,27,600
(d) ` 1,50,000
118. Lister Internationals Inc., a non resident, engaged in business of selling
“Good Z” appoints Mr. Risky as an agent in India for selling such product.
Mr. Risky works as an agent for several other persons also including non
residents aiding them in selling their products. The appointment of
Mr. Risky will -
(a) lead to business connection in India as he is not independent
agent
(b) lead to business connection in India as he is an independent
agent
(c) not lead to business connection in India as he is not
independent agent
(d) not lead to business connection in India as he is an
independent agent
119. Mr. Krishna, a resident Indian aged 61 years, maintains a saving
account with a co-operative land development bank and he earns
` 20,000 as interest on saving account for the Financial Year
2021-22. Mr. Krishna also maintains a fixed deposit and recurring
deposit account with Mani Finance (A Non-Banking Finance Company)
and earns ` 25,000 and ` 10,000 as interest on fixed deposit and
recurring deposit, respectively. What would be the deduction allowable
to Mr. Krishna under Chapter VI-A if he does not opt for the section
115BAC for the A.Y. 2022-23?
(a) ` 55,000

(b) ` 10,000
(c) ` 20,000
(d) ` 50,000
120. Mr. Alex is a resident but not ordinarily resident in India for P.Y. 2021-22.
He is doing job in M/s Kothari Chemicals as Accountant & earns ` 25,000
per month. He had no other income in India but having a vacant land in
Canada which he had got from his father after his demise. He had no
income from Canada also. Mr. Alex come to you for consulting whether
he is required to file his return of income for A.Y. 2022-23?
(a) Alex is not required to file his return of income as his total
income does not exceed the basic exemption limit
(b) Alex is required to file his return of income as he is beneficiary
of the assets located outside India
(c) Alex is not required to file his return of income as his total
income does not exceed the basic exemption limit and he is
resident but not ordinarily resident during the P.Y. 2021-22
(d) Alex is required to file his return of income as his total income
exceeds the basic exemption limit
121. Mr. Ashutosh, aged 65 years and a resident in India, has a total income
of ` 3,20,00,000, comprising long term capital gain taxable under section
112 of ` 57,00,000, long term capital gain taxable under section 112A of
` 65,00,000 and other income of ` 1,98,00,000. What would be his tax
liability for A.Y. 2022-23. Assume that Mr. Ashutosh has not opted for the
provisions of section 115BAC.
(a) ` 90,05,880
(b) ` 97,25,690
(c) ` 97,34,400
(d) ` 97,22,440
122. Mr. Kumar, aged 62 years resident and ordinarily resident, is a retired
employee with a monthly pension of ` 22,000. He has no other source of
income. He has a house property in Bhatinda and his only son is living in

50 INCOME TAX LAW
London and has a house over there. He met with an accident and died
and thereby leaving the house at London in the name of his father,
Mr. Kumar. Mr. Kumar seeks your advice, as to whether he is required to
file his income-tax return u/s 139?
(a) Yes, he is mandatorily required to file his income-tax return as
he is a resident and ordinarily resident in India and has asset
located outside India
(b) No, he is not required to file return of income as his income is
below basic exemption limit
(c) Yes, he is required to file his return of income as his income
exceeds the basic exemption limit
(d) No, he is not required to file his return of income as he is a
senior citizen and retired employee
123. While deciding liability of an individual to deduct tax on payment of
fees for professional services, which of the following is immaterial –
(a) Amount paid to professional
(b) Turnover of financial year immediately preceding financial year
in which payment made
(c) Turnover of financial year in which payment is made
(d) Amount of fees for professional services
124. Mr. Ashutosh purchased his first dream home in Bangalore on
16.8.2021. He applied for home loan of ` 40 lakhs from IDFC bank on
15.7.2021, the same was sanctioned by bank on 20.7.2021. The stamp
duty value of the said house was ` 44 lakhs. The interest due on the
said home loan is ` 3,75,000 for the financial year 2021-22. Due to
liquidity issues, Mr. Ashutosh could only pay ` 3,26,000. Compute the
total interest deduction Mr. Ashutosh can claim for the A.Y. 2022-23,
assuming Mr. Ashutosh doesn’t opt for the tax rates under the new
scheme.
(a) ` 3,26,000
(b) ` 2,00,000

(c) ` 3,75,000
(d) ` 3,50,000
125. Mr. Vishal started a proprietary business on 01.04.2020 with a capital
of ` 5,00,000. He incurred a loss of ` 1,00,000 during the year
2020-21. To overcome the financial position, his wife Mrs. Kamini, a
Chartered Accountant, gave a gift of ` 4,00,000 on 01.04.2021, which
was immediately invested in the business by Mr. Vishal. He earned a
profit of ` 2,00,000 during the year 2021-22. What is the amount to be
clubbed in the hands of Mrs. Kamini for the Assessment Year 2022-23?
(a) ` 88,888
(b) ` 1,00,000
(c) ` 2,00,000
(d) Nil
126. Miss Nisha (68 years) is a resident individual. For the Assessment Year
2022-23, she has following income:
Long-term capital gain on transfer of equity shares ` 1,80,000
(Securities Transaction Tax has been paid on acquisition
and transfer of the said shares)
Other income ` 2,75,000
Calculate the tax liability of Miss Nisha for Assessment Year 2022-23.
(a) Nil
(b) ` 5,670
(c) ` 5,720
(d) ` 8,320
127. K is a working partner in a firm on behalf of his HUF and the HUF has
contributed ` 3,00,000 as its capital contribution. Apart from this, K
has given a loan of ` 50,000 to the firm in his individual capacity. The
firm pays interest as per market rate of 15% per annum on capital as
well as loan. Compute the amount of interest that shall be allowed to

52 INCOME TAX LAW
the firm while calculating its business income assuming that the
interest is authorized by the partnership deed.
(a) ` 42,000
(b) ` 51,000
(c) ` 52,500
(d) ` 43,500
128. Mr. Prakash is employed with XYZ Ltd. from 05.11.2017. He resigned
on 31.03.2022 and wants to withdraw the accumulated balance of
employer’s contribution in his EPF Account i.e., ` 55,000. The tax
deducted on such withdrawal would be -
(a) ` 500 u/s 192
(b) ` 5,500 u/s 192
(c) ` 4,125 u/s 192A
(d) ` 5,500 u/s 192A
129. Determine residential status of Sundaram (HUF) which carries out its
transactions in Malaysia. Its affairs are partly controlled from India.
The Karta of HUF, Mr. Sundaram who is from Chennai visits India on
01.06.2020 and leaves to Malaysia on 10.02.2021. He has not visited
India for the past 11 years.
(a) Non-resident
(c) Deemed resident
(d) Resident and ordinarily resident
130. Ms. Shalini received interest on enhanced compensation of ` 5,00,000.
Out of this interest, ` 1,50,000 relates to the previous year 2019-20,
` 1,90,000 relates to previous year 2020-21 and ` 1,60,000 relates to
previous year 2021-22. She paid ` 1 lakh to her advocate for his
efforts in the matter. What amount would be taxable in P.Y. 2021-22
and taxable, if any, under which head of income.
(a) ` 2,50,000 under the head “income from other sources”

(b) ` 4,00,000 under the head “income from other sources”

(c) ` 1,60,000 under the head “income from other sources”
(d) ` 1,60,000 under the head “Capital gains”
Answer Keys
Question Answer
No.
1 (b) ` 22,880
2 (d) ` 24,960
3 (b) ` 12,67,600
4 (b) ` 32,24,000
5 (c) ` 5,46,000
6 (b) Resident but not ordinarily resident
7 (b) ` 2,26,200
8 (b) (i), (v), (vi)
9 (b) income received in India and in Dubai.
10 (d) ` 12,55,000
11 (a) ` 7,00,000
12 (a) Resident and ordinarily resident
13 (c) Non-resident
14 (d) None of the above
15 (c) Salary received by Mr. Ramesh is taxable in India
but allowances and perquisites are exempt
16 (d) No; such rent is not taxable in India either during
the previous year 2020-21 or during the previous
year 2021-22
17 (b) Mr. Sanjay
18 (d) All the above
19 (c) (i) and (iv)

54 INCOME TAX LAW
20 (b) ` 19,04,762
21 (a) an area at a distance of 3 kms from the local
limits of a municipality and has a population of
80,000 as per last census
22 (a) ` 48,480
23 (c) ` 2,00,000
24 (a) ` 5,000
25 (b) ` 2,12,600
26 (d) ` 79,000
27 (b) ` 63,000
28 (c) ` 2,00,000
29 (b) Two houses, at the option of Mr. Raghav, would
be treated as self-occupied. The other house
would be deemed to be let out
30 (a) Terminal depreciation
31 (a) Nil
32 (b) ` 3,000
33 (a) ` 21,750
34 (d) ` 9.4 lakh
35 (d) Nil
36 (c) Capital gains without deducting STT paid is
taxable at a concessional rate of 10% on such
capital gains exceeding ` 1 lakh
37 (a) within a period of 6 months after the date of such
transfer
38 (b) Short-term capital gain of ` 7 lakhs
39 (c) Nil
40 (b) ` 9,60,000
41 (a) Entire ` 75,000 is chargeable to tax

42 (d) as the income of the transferor-member

43 (b) ` 2,10,000 in the hands of Mr. Aarav
44 (b) No, since Ram has not transferred debentures to
Shyam, interest income on the debentures is not
taxable income of Shyam.
45 (c) Share of profit is exempt but interest of ` 35,000
is includible in the income of Mr. Anurag and
interest of ` 15,000 is includible in the income of
Mrs. Shivani.
46 (d) Mr. Arvind is the deemed owner of property gifted
to Ms. Meena. Income from property gifted to Ms.
Seetha would be included in his hands by virtue
of section 64.
47 (c) Income of ` 20,11,500 shall be taxable in the
hands of Pihu’s father or mother, whose income
before this clubbing is higher.
48 (b) can be set-off against both short-term capital
gains and long-term capital gains.
49 (c) Loss from house property and unabsorbed
depreciation carried forward under section 32(2)
50 (b) ` 3,10,000
51 (d) All of the above
52 (a) First adjustment for loss of P.Y. 2019-20, then
loss for P.Y. 2020-21 and then unabsorbed
depreciation, if any.
53 (d) First from (i) and thereafter from (ii); the
remaining loss has to be carried forward
54 (d) Yes, Mr. A can claim set off of loss of ` 8 lakhs
during A.Y. 2022-23 from his income from house
property, if any, and the balance has to be carried
forward to A.Y.2023-24.
55 (a) ` 4,40,000

56 INCOME TAX LAW
56 (b) ` 50,000
57 (d) Nil
58 (d) be allowed deduction of ` 10,000 u/s 80C
59 (d) ` 2,00,000 u/s 24
60 (d) ` 2,000
61 (d) ` 1,25,000
62 (c) ` 60,000
63 (c) Interest of ` 2 lakhs allowable u/s 24 and ` 1.5
lakhs allowable u/s 80EEA
64 (a) ` 48,500
65 (c) 10%
66 (c) both (a) and (b)
67 (d) neither (a) nor (b)
68 (b) Surcharge @15% is leviable on income-tax
computed on total income of ` 2.95 crore.
69 (b) Share of profit will not be exempt in the hands of
partner, if firm claims exemption of income under
section 10AA
70 (b) ` 5,35,000
71 (a) ` 12 lakhs
72 (d) ` 253.56 lakhs
73 (c) ` 218.73 lakhs
74 (a) ` 24,200
75 (a) ` 1,28,440
76 (d) in four instalments
77 (b) No, he is not liable to pay advance tax in India
as his tax liability in India is less than ` 10,000.

78 (b) Tax is required to be deducted on income

comprised in maturity proceeds payable to
Mr. X
79 (b) ` 860
80 (b) under section 44AD and 44ADA
81 (c) No tax is required to be deducted at source
since the rent credited to each co-owner is less
than ` 2,40,000
82 (d) TDS of ` 1,20,000 is required to be deducted.
83 (d) Nil
84 (d) No tax is required to be deducted at source.
85 (b) Nil and ` 40,000
86 (c) TDS@1% on ` 85 lakhs and ` 50 lakhs are
attracted. No TDS on payment of ` 75 lakhs for
acquisition of rural agricultural land.
87 (b) (i), (iii), (iv), (v)
88 (d) 2%
89 (a) He is liable to pay advance tax on or before
15.3.2022
90 (d) No tax has to be deducted at source on either
salary or interest
91 (c) No tax is deductible at source
92 (a) II, IV
93 (d) More than ` 5,00,000
94 (b) ` 5,000 under section 234F
95 (d) Arun is required to file his return of income u/s
139(1) for P.Y. 2021-22, since his electricity
bills exceed ` 1 lakh for the P.Y.2021-22.
96 (d) (i), (ii) and (iii)
97 (c) I or III

58 INCOME TAX LAW
98 (b) Not exceeding ` 1,000

99 (b) Tax rebate of ` 9,500 from tax payable on her
total income of ` 4,40,000
100 (d) No, he is not required to file return of income
101 (c) Resident but not ordinarily Resident and ` 18
lakhs from Indian retail trade business would only
be taxable.
102 (c) TDS is deductible at source on ` 20,20,000 @ 2%
by Canara Bank and no tax is deductible by SBI.
103 (a) ` 18,45,000
104 (a) Total income ` 2,00,000 and loss from house
property of ` 2,50,000 and business loss of
` 20,000 to be carried forward to subsequent
assessment year.
105 (c) ` 90,000 chargeable to tax in the hands of Mr.
Vikas as long-term capital gains and ` 1,65,000 is
taxable under the head “Income from other
sources” in the hands of ABC (P) Ltd.
106 (b) Such dividend is taxable in the hands of Mr. T and
Indian company is required to deduct tax at
source @10%
107 (b) 31st October, 2022 for both Mr. X and Mr. Y
108 (b) ` 3,69,400
109 (a) ` 10,26,000
110 (c) Value of gold ring is taxable in the hands of
Mr. Vikas but value of gold chain is not taxable in
the hands of Ms. Kavya
111 (d) MKY Limited is required to deduct tax at source
` 5,200 under section 194-O.
112 (a) He shall be treated as resident but not
ordinarily resident and shall be liable to pay tax
on ` 30 lakhs.

113 (b) The claim by Vyas is right and insurance

company is not required to deduct tax at source
114 (d) Total income Nil; loss of ` 6,00,000 from house
property.
115 (b) ` 12,132
116 (b) Resident but not ordinary resident
117 (c) ` 1,27,600
118 (d) not lead to business connection in India as he is
an independent agent
119 (c) ` 20,000
120 (c) Alex is not required to file his return of income as
his total income does not exceed the basic
exemption limit and he is resident but not
ordinarily resident during the P.Y. 2021-22
121 (d) ` 97,22,440
122 (a) Yes, he is mandatorily required to file his income-
tax return as he is a resident and ordinarily
resident in India and has asset located outside
India
123 (c) Turnover of financial year in which payment is
made
124 (d) ` 3,50,000
125 (b) ` 1,00,000
126 (c) ` 5,720
127 (d) ` 43,500
128 (d) ` 5,500 u/s 192A
129 (b) Resident but not ordinarily resident
130 (a) ` 2,50,000 under the head “income from other
sources”

60 INCOME TAX LAW
CASE SCENARIOS
1 Mr. Shashikant, aged 45 years, is an Indian citizen and a member of

the crew of a Singapore bound Indian ship engaged in carriage of
passengers in international traffic departing from Chennai port on 29th
May, 2021.
Particulars Date
Date entered into the Continuous Discharge 29th May,
Certificate in respect of joining the ship by Mr. 2021
Shashikant
Date entered into the Continuous Discharge 19th
Certificate in respect of signing off the ship by Mr. December,
Shashikant 2021
He stayed in India in the last 4 previous years preceding the P.Y.
2021-22 for 400 days and for a period of 750 days in the last 7
previous years preceding to P.Y. 2021-22. He received salary of
` 7,20,000 in his NRE account maintained with State Bank of India,
Chennai Branch.
He also furnished details of other income earned by him during the
previous year 2021-22:
S.no Particulars Amount
(` )
1. Dividend declared in the month of April, 2021 by 1,00,000
X limited, a Singapore company. The same was
received by him in Singapore
2. Agriculture income from land in Pakistan received 2,50,000
in India
3. Rent received from house property in Chennai 3,60,000
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
1.1 What is Mr. Shashikant’s residential status for the P.Y 2021-22?

(c) Non-resident
(d) Deemed resident
1.2 What would be the total income of Mr. Shashikant for A.Y.2022-23
assume that he does not opt to pay tax under section 115BAC?
(a) ` 7,10,000
(b) ` 11,72,000
(c) ` 5,02,000
(d) ` 6,02,000
1.3. Assume for the purpose of answering this question that
Mr. Shashikant has transferred his house property in Chennai to
his minor married daughter on 1st April, 2021 and his wife is a
housewife and does not have any income. The minor married
daughter receives the rent from house property. In such case,
his total income would be -
(a) ` 5,00,500
(b) ` 6,00,500
(c) ` 5,02,000
(d) ` 6,02,000
1.4. Mr. Shashikant would like to minimize his tax liability and
consulted you to compute the amount of same for the
P.Y. 2021-22. Accordingly, his tax liability (rounded off) would be -
(a) ` 13,420
(b) ` 13,210
(c) ` 23,610
(d) ` 34,840
Answer Keys
Question Answer
No.
1.1 (c) Non-resident

62 INCOME TAX LAW
1.2 (c) ` 5,02,000

1.3 (a) ` 5,00,500
1.4 (b) ` 13,210
2. Mr. Suraj (aged 48 years) furnishes the following particulars for the
previous year 2021-22 in respect of an industrial undertaking
established in "Special Economic Zone" in March 2015. It began
manufacturing in April 2015.
Particulars (` )
Total sales 85,00,000
Export sales [proceeds received in India] 45,00,000
Domestic sales 40,00,000
Profit from the above undertaking 20,00,000
Export Sales of F.Y. of 2021-22 include freight and insurance of ` 5
lacs for delivery of goods outside India.
He received rent of ` 25,000 per month for a commercial property let
out to Mr. Sudhir, a salaried individual. He earned interest on savings
bank A/c of ` 12,500 and interest on Post Office savings A/c of
` 5,500 during the P.Y. 2021-22.
2.1 Compute the amount of export turnover and total turnover for
purpose of computing deduction under section 10AA for
A.Y. 2022-23.
(a) ` 45,00,000 and ` 85,00,000, respectively
(b) ` 40,00,000 and ` 80,00,000, respectively
(c) ` 45,00,000 and ` 80,00,000, respectively
(d) ` 40,00,000 and ` 85,00,000, respectively
2.2 Compute the amount of deduction available under section 10AA
to Mr. Suraj under section 10AA for A.Y. 2022-23.
(a) ` 10,00,000
(b) ` 4,70,577

(c) ` 5,62,500
(d) ` 5,00,000
2.3. Assume for the purpose of this question only that Mr. Suraj
established SEZ Unit and began manufacturing in April, 2018.
Compute the amount of deduction available under section 10AA
for A.Y. 2022-23.
(a) ` 10,00,000
(b) ` 9,41,154
(c) ` 11,25,000
(d) ` 5,00,000
2.4 Compute the total income of Mr. Suraj for the previous year
2021-22, assuming that he does not opt to pay tax under
section 115BAC.
(a) ` 12,14,500
(b) ` 17,18,000
(c) ` 17,14,500
(d) ` 17,28,000
Answer Keys
Question Answer
No.
2.1 (b) ` 40,00,000 and ` 80,00,000, respectively
2.2 (d) ` 5,00,000
2.3 (a) ` 10,00,000
2.4 (c) ` 17,14,500
3. Mr. Kishan is engaged in the following activities on agricultural land
situated in India, total area of land is 5 acres.
Activity A: He grows saplings or seedlings in a nursery spreading
over on one acre land, the sale proceeds of which is ` 5,00,000. Cost
of plantation is ` 1,40,000. Basic operations are not performed for
growing saplings or seedlings.

64 INCOME TAX LAW
Activity B: He grows cotton on 3 acres land. 40% of cotton produce

is sold for ` 4,00,000, the cost of cultivation of which is ` 2,25,000.
The cost of cultivation of balance 60% cotton is ` 3,37,500 and the
market value of the same is ` 6,00,000, which is used for the purpose
of manufacturing yarn. After incurring manufacturing expenses of
` 1,00,000, yarn is sold for ` 8,50,000
Activity C: Land measuring 1 acres is let out to Mr. Ramesh on
monthly rental of ` 15,000 which is used by Mr. Ramesh as follows:
- 50% of land is used for agricultural purpose
- 50% of land is used for non-agricultural purpose.
3.1 What amount of income arising from activity A would constitute
agricultural income in the hands of Mr. Kishan?
(a) ` 5,00,000
(b) Nil
(c) ` 3,60,000
(d) ` 1,40,000
3.2. What amount of income from activity B with respect to sale of
cotton would constitute agricultural income or/and business
income in the hands of Mr. Kishan?
(a) ` 1,75,000 as agricultural income
(b) ` 1,75,000 as business income
(c) ` 1,75,000 as agricultural income and ` 2,62,500 as
business income
(d) ` 4,00,000 as agricultural income
3.3. What amount of the income from activity B with respect to sale
of yarn constitute agricultural income or/and business income
in the hands of Mr. Kishan?
(a) ` 1,50,000 as agricultural income

(b) ` 2,62,500 as agricultural income and ` 1,50,000 as

business income
(c) ` 3,37,500 as agricultural income and ` 1,50,000 as
business income
(d) ` 4,12,500 as business income
3.4. What amount of income arising from activity C constitute
agricultural income or otherwise in the hands of Mr. Kishan?
(a) Whole amount of ` 1,80,000 would be agricultural
income
(b) Whole amount of ` 1,80,000 would be business income.
(c) ` 90,000 would be agricultural income and ` 63,000 is
chargeable to tax as income from house property
(d) ` 90,000 would be agricultural income and ` 90,000 is
chargeable to tax under the head “Income from Other
Sources”
3.5. Compute the gross total income of Mr. Kishan for the
P.Y. 2021-22, assuming he has no other source of income.
(a) ` 2,40,000
(b) ` 3,30,000
(c) ` 5,02,500
(d) ` 2,13,000
Answer Keys
Question Answer
No.
3.1 (c) ` 3,60,000
3.2 (a) ` 1,75,000 as agricultural income
3.3 (b) ` 2,62,500 as agricultural income and ` 1,50,000
as business income
3.4 (d) ` 90,000 would be agricultural income and
` 90,000 is chargeable to tax under the head
“Income from Other Sources”
3.5 (a) ` 2,40,000

66 INCOME TAX LAW
4. Mr. Rajesh Sharma, aged 54 years, an Indian citizen, is working as

Assistant Manager in ABC India Ltd. He is getting basic salary of
` 58,000 per month. He used to travel frequently out of India for his
office work. He left India from Delhi Airport on 5th October, 2021 and
returned to India on 2nd April, 2022.
For previous year 2021-22, following information are relevant;
(a) Dearness Allowance - 10% of Basic Pay (considered for
retirement purposes)
(b) Bonus - ` 98,000
(c) Medical allowance paid during P.Y. 2021-22 amounting to
` 60,000
(d) He was also reimbursed medical bill of his mother amounting to
` 15,000.
(e) He was also transferred a laptop by company for ` 15,000 on
31st December, 2021. The laptop was acquired by company on
1st October, 2018 for ` 1,00,000. Company was charging
depreciation at 31.666% assuming useful life of laptop as 3
years.
(f) He was also reimbursed salary of house servant of ` 4,000 per
month.
(g) Professional Tax paid by employer amounting to ` 2,400.
(h) 400 equity shares allotted by ABC India Ltd. at the rate of
` 250 per share against fair market value of share of ` 350 on
the date of exercise of option.
(i) Short-term capital gain on sale of shares of listed company on
which STT is paid amounting to ` 94,000.
(j) Mr. Rajesh does not opt for the provisions of section 115BAC.
4.1 What is Mr. Rajesh Sharma’s residential status for the
A.Y. 2022-23?
(a) Resident but can’t determine resident and ordinarily
resident or resident but not ordinarily resident from the
given information

(b) Non-Resident
(c) Resident but not ordinarily resident
(d) Resident and ordinarily resident
4.2 What are his taxable perquisites for A.Y. 2022-23?
(a) ` 55,000
(b) ` 90,400
(c) ` 1,05,400
(d) ` 1,03,000
4.3 What is the income chargeable under the head “Salaries” in the
hands of Mr. Rajesh Sharma for A.Y. 2022-23?
(a) ` 9,76,600
(b) ` 9,86,600
(c) ` 9,71,600
(d) ` 9,61,600
4.4 The total tax liability of Mr. Rajesh Sharma for A.Y. 2022-23 is:
(a) ` 1,26,800
(b) ` 1,40,710
(c) ` 1,12,130
(d) ` 1,39,960
4.5 Assume for the purpose of this question only, that Mr. Rajesh
was found owner of ` 5 lakh worth jewellery acquired in
F.Y. 2021-22, of which he could not provide any satisfactory
explanation about source of income. What would be the tax
liability (without considering surcharge and Health and
education cess, if any) of Mr. Rajesh Sharma towards such
unexplained expenditure:
(a) ` 1,00,000
(b) ` 1,50,000

68 INCOME TAX LAW
(c) ` 3,00,000
(d) ` 3,90,000
Answer Keys
Question Answer
No.
4.1 (a) Resident but can’t determine resident and
ordinarily resident or resident but not ordinarily
resident from the given information
4.2 (c) ` 1,05,400
4.3 (a) ` 9,76,600
4.4 (a) ` 1,26,800
4.5 (c) ` 3,00,000
5. Mr. Hardik (age 45 years) is appointed as senior executive officer in

Sky India Limited, Mumbai on 01.02.2021 in the scale of ` 35,000-
3500-65,000. He is paid dearness allowance @ 40% of salary forming
part of retirement benefits.
He is given rent free unfurnished accommodation on 01.5.2021 which
he occupied only from 01.10.2021. The company pays lease rent of
` 5,000 p.m.
He has been provided a car of above 1.6 liters capacity which is used
by him for private purposes only. The actual cost of the car is
` 8,00,000. The monthly expenditure of car is ` 5,000, which is fully
met by the employer. Car is owned by his employer.
He pays lumpsum premium of ` 1,20,000 towards health insurance for
self and his wife (age 43 years) for 48 months on 01.10.2021 by
account payee cheque. He also contributes ` 1,50,000 towards PPF.
Mr. Hardik is interested to opt for concessional tax regime available
under section 115BAC.
5.1 What would be the value of rent-free accommodation
chargeable to tax in the hands of Mr. Hardik?
(a) ` 44,835

(b) ` 44,100
(c) ` 45,570
(d) ` 30,000
5.2 What amount of health insurance premium paid during the
previous year 2021-22 by Mr. Hardik can be claimed as
deduction while computing total income, if he does not opt to
pay tax under section 115BAC?
(a) ` 30,000
(b) ` 15,000
(c) ` 24,000
(d) ` 25,000
5.3 What would be perquisite value of car chargeable to tax in the
hands of Mr. Hardik?
(a) ` 28,800
(b) ` 21,600
(c) ` 60,000
(d) ` 1,40,000
5.4 Would you advise to Mr. Hardik to opt to pay tax under section
115BAC?
(a) Yes, Mr. Hardik can opt for section 115BAC, since in
such case his tax liability would be ` 22,760, being lower
than the tax liability under normal provisions of the Act
(b) Yes, Mr. Hardik can opt for concessional tax regime,
since in such case his tax liability would be ` 17,560
being lower than the tax liability under normal
provisions of the Act.
(c) No, Mr. Hardik should not opt, since as per normal
provisions of the Act, his tax liability would be
` 32,510, being lower than the tax liability under section
115BAC

70 INCOME TAX LAW
(d) No, Mr. Hardik should not opt, since as per normal
` 22,110, being lower than the tax liability under section
115BAC
Answer Keys
Question Answer
No.
5.1 (d) ` 30,000
5.2 (c) ` 24,000
5.3 (d) ` 1,40,000
5.4 (d) No, Mr. Hardik should not opt, since as per normal
` 22,110, being lower than the tax liability under
section 115BAC
6. Ananya Gupta, a citizen of India, lives with her family in New York
since the year 2000. She visited India from 21st March, 2021 to 28th
September, 2021 to take care of her ailing mother. In the last four
years, she has been visiting India for 100 days every year to be with
her mother. She owns an apartment at New York, which is used as her
residence. The expected rent of the house is $ 32,000 p.a. The value
of one USD ($) may be taken as ` 75. Municipal taxes paid in New
York in January, 2022 are $ 2,000.
She took ownership and possession of her house in New Delhi on 25th
March, 2021, for self-occupation, while she is in India. The municipal
valuation is ` 4,20,000 p.a. and the fair rent is ` 4,50,000 p.a. She
paid property tax of ` 22,000 to Delhi Municipal Corporation on 21st
March, 2022. She had taken a loan of ` 16 lakhs @ 10% p.a. from
IDBI Bank on 1st April, 2017 for constructing this house and the
construction got completed on 20th March, 2021. No amount has been
paid towards principal repayment so far. The house is vacant for the
rest of the year i.e., from October 2021 to March 2022.
She had a house property in Mumbai, which was sold on 28th March,
2021. In respect of this house, she received arrears of rent of

` 3,00,000 on 4th February, 2022. This amount has not been charged
to tax earlier.
She does not have any income under any other source in India during
previous year in 2021-22.
Ananya Gupta does not want to opt for the new tax regime under
section 115BAC for A.Y. 2022-23.
6.1. What would be the residential status of Ananya Gupta for A.Y.
2022-23?
(c) Deemed resident but not ordinarily resident in India
(d) Non-resident
6.2. Ms. Ananya Gupta can claim benefit of “Nil” Annual Value under
section 23(2) in respect of -
(a) Her Delhi house
(b) Her New York house, since it is more beneficial; her
Delhi house will be deemed to be let out and expected
rent would be the annual value.
(c) Her Delhi house alone; her New York house will be
deemed to be let out and expected rent would be the
annual value.
(d) Both her Delhi house and New York house, since benefit
of Nil Annual value u/s 23(2) is available in respect of
two house properties.
6.3. What is the income chargeable under the head “Income from
house property” of Ananya Gupta for A.Y. 2022-23?
(a) ` 15,65,000
(b) ` 3,09,600

72 INCOME TAX LAW
(c) ` 1,00,000
(d) ` 10,000
6.4. Assuming that, for the purpose of this question alone, Ananya
Gupta has let out her flat in New York during the six months
(April to September) when she is in India, for a sum of $ 6,000
p.m. Such rent was received in a bank account in New York and
then remitted to India through approved banking channels.
What would be the income from house property chargeable to
tax in her hands in India for A.Y. 2022-23?
(a) ` 10,000
(b) ` 17,85,000
(c) ` 17,95,000
(d) ` 18,85,000
Answer Keys
Question Answer
No.
6.1 (d) Non-resident
6.2 (a) Her Delhi house
6.3 (d) ` 10,000
6.4 (a) ` 10,000
7. Ram Builders & Developers is the sole-proprietorship concern of

Mr. Ram. The main business of the concern is construction,
development and sale of residential and commercial units. Ram
Builders & Developers developed a project named Luxuria Heaven,
which has both residential and commercial units with its own funds. It
obtained certificate of completion for the said project with effect from
31/03/2021. Ram sold majority of its residential units and commercial
units in the F.Y.2021-22. However, around 30 residential units and 15
commercial units were held by him as stock in trade as on 31.3.2022.
During this period, there was a slump in the real estate sector. In
order to earn some income from these units, Ram incidentally let out

some of the units held as stock-in-trade. The details of units

constructed, sold and held as stock-in-trade are given hereunder:
Particulars Total Units Units Units held Units let Units Actual rent
constructed sold as stock- out vacant per unit
in-trade during during per month
as on P.Y.2021 the [in respect
31.3.2022 -22 out whole of of let out
[(2) – of (4) P.Y.2021 units
(3)] -22 mentioned
[(4) – in (5)]
(5)]
(1) (2) (3) (4) (5) (6) (7)
Residential 100 70 30 10 20 10,000 pm.

Units
Commercial 40 25 15 5 10 18,000 pm.
Units
140 95 45 15 30
Out of the residential units sold, 5 residential units were sold to his
friend, Mr. Gaurav, who is also a real estate developer, on 15.2.2022,
for ` 20 lakhs each. The stamp duty value on the date of sale was
` 23 lakhs each. However, the agreement of sale was entered into on
1.11.2021, on which the date the stamp duty value was ` 22 lakhs.
Mr. Ram received ` 1 lakh by way of account payee bank draft on
1.11.2021 from Mr. Gaurav.
7.1. While computing the total income of Mr. Ram, the income from
residential and commercial units let out during the P.Y.2021-22
will be taxed under head:
(a) Income from house property
(b) Profits and gains of business or profession

74 INCOME TAX LAW
(c) Income from let out residential units will be taxed under
the head “Income from house property” and income
from let out commercial units will be taxed under the
head “Profits and gains of business or profession”
(d) Income from other source
7.2. What would be the tax treatment of vacant residential and
commercial units held as stock in trade as on 31.3.2022?
(a) The vacant residential units would be deemed to be let
out and expected rent would be deemed as the annual
value chargeable to tax under the head “Income from
house property” for A.Y. 2022-23.
(b) The vacant units, both residential and commercial, would
be deemed to be let out and expected rent would be
deemed as the annual value chargeable to tax under the
head “Income from house property” for A.Y. 2022-23.
(c) The annual value of both vacant residential and
commercial units would be Nil for A.Y.2022-23. Hence,
no income is chargeable for such units under the head
“Income from house property” for A.Y. 2022-23.
(d) Vacant units held as stock-in-trade can never be deemed
as let out at any point of time
7.3. What would be the full value of consideration in respect of sale
of units to Mr. Gaurav for the purpose of computing profits and
gains from transfer of units?
(a) ` 1,00,00,000
(b) ` 1,15,00,000
(c) ` 1,10,00,000
(d) ` 99,00,000
7.4. Assume that ` 1 lakh was paid in cash by Mr. Gaurav to
Mr. Ram on 1.11.2021 instead of by way of account payee bank
draft, what would be the income chargeable under section
56(2)(x) in the hands of Mr. Gaurav?
(a) ` 15 lakh

(b) ` 10 lakh
(c) Nil, since the stamp duty value is within the permissible
deviation limit
(d) Nil, since section 56(2)(x) is not applicable in this case
Answer Keys
Question Answer
No.
7.1 (a) Income from house property
7.2 (c) The annual value of both vacant residential and
commercial units would be Nil for A.Y.2022-23.
Hence, no income is chargeable for such units
under the head “Income from house property” for
A.Y. 2022-23.
7.3 (a) ` 1,00,00,000
7.4 (d) Nil, since section 56(2)(x) is not applicable in this
case
8. For the assessment year 2022-23, Mr. Sonu submits the following
information:
Particulars Building at Building at
Chennai (`) Kochi (`)
Municipal valuation 35,000 80,000
Standard Rent 36,000 70,000
Fair Rent 31,000 82,000
Rent received 38,000 68,000
Municipal taxes paid by tenant 3,000 4,000
Mr. Ramu for building at Chennai and
paid by Mr. Sonu for Building at Kochi.
Repairs paid by tenant Mr. Ramu for 500 18,000
Chennai building and Mr. Sonu paid
for Kochi building
Land revenue paid 2,000 16,000
Insurance premium paid 500 2,000

76 INCOME TAX LAW
Interest on loan borrowed for 200 400

payment of municipal tax of house
property
Nature of occupation Let out for Let out for
residence business
Date of completion of construction 1.4.1996 1.7.2008
Mr. Sonu is constructing one more building in Mumbai during the

previous year 2021-22. Mr. Raju, a film director, took on rent the
building under construction in Mumbai at ` 5,000 per month for his
film shooting. The construction of the said building would be
completed by April 2022. Mr. Sonu is a real estate developer and
letting out properties is not the business of Mr. Sonu.
8.1. Which of the building’s income is chargeable to tax under the
head “Income from house property” in the hands of Mr. Sonu?
(a) Building at Chennai only
(b) Building at Kochi only
(c) Both buildings at Chennai and Kochi
(d) All the three buildings at Chennai, Kochi and Mumbai
8.2. Which of the following payments/expenditure is allowable as
deduction while computing income under the head “Income
from house property” incurred in respect of the building at
Chennai and Kochi?
(a) Municipal taxes paid by Mr. Sonu and Mr. Ramu
(b) Municipal tax, land revenue, insurance premium, interest on
loan borrowed for payment of Municipal tax paid by Mr. Sonu
(c) Only municipal tax paid by Mr. Sonu
(d) Both Municipal tax and repairs paid by Mr. Sonu
8.3. Under which head of income, the amount received from
Mr. Raju would be chargeable to tax?
(a) Income from house property

(b) Profits and gains from business or profession

(c) Income from other sources
(d) Income from house property or Income from other
sources, at the option of Mr. Sonu
8.4. What is the amount chargeable to tax under the head “Income
from house property” in the hands of Mr. Sonu for the
P.Y. 2021-22?
(a) ` 72,800
(b) ` 81,200
(c) ` 1,14,800
(d) ` 70,700
Answer Keys
Question Answer
No.
8.1 (c) Both buildings at Chennai and Kochi
8.2 (c) Only municipal tax paid by Mr. Sonu
8.3 (c) Income from other sources
8.4 (a) ` 72,800
9. Mr. Ganesha (a salaried person) has three houses. One in Thane

(Maharashtra), second in Jaipur (Rajasthan) and third in Ratlam
(Madhya Pradesh). Details of the flats/houses are as follows:
- Thane flat: 3 BHK flat purchased in April, 2003 for ` 90 lakhs.
Afterwards, interior work done in 2006 of ` 15 lakhs.
Mr. Ganesha took loan of ` 65 lakhs for purchase of this flat in
2001 and settled full loan in 2019.
- Jaipur house: Purchased in July, 2019 of ` 62 lakhs and
interior work done in September, 2020 of ` 15 lakhs. Loan
taken for purchase of this house of ` 15 lakhs in June, 2019. As
per interest certificate, he paid ` 12,00,500 and ` 43,500

78 INCOME TAX LAW
towards principal and interest, respectively, during the P.Y.

2021-22.
- Ratlam House: Purchased in December 2020 for ` 70 lakhs
(stamp duty value of ` 65 lakhs). For acquiring this house, he
took loan of ` 40 lakhs from Canara Bank. Loan was sanctioned
on 1.8.2020. He pays EMI of ` 38,100 per month. As per
interest certificate, for the previous year 2021-22, he paid
` 60,900 and ` 3,96,300 towards principal and interest,
respectively.
Particulars Thane Jaipur House Ratlam
House (Apr-21 to Dec- House
21)
Municipal Taxes paid 18,574 8,090 6,909
Municipal value (per month) 30,500 6,800 7,200
Fair Rent (per month) 33,000 7,000 7,500
Standard Rent (per month) 32,000 8,000 7,300
Other details are as follows:
- He has sold Jaipur house on 1st January, 2022 for ` 90 lakhs
and invested ` 15 lakh in RECL bonds issued by the Central
Government on 10th August 2022.
- Mr. Ganesha is working in WinDoor Exports Pvt Ltd, Mumbai
and self-occupied Thane flat. He earned salary of ` 22,50,350
for the previous year 2021-22.
- He has no other income from any source for the P.Y. 2021-22.
- He has given Ratlam house on rent for F.Y. 2021-22 to
Mr. Pratap on a monthly rent of ` 8,500.
- He has given Jaipur house on rent for the period of April, 2021
to June, 2021 to Mrs. Madhura Mahto on monthly rent of
` 7,100 and vacant for remaining period from July, 2021 to
December, 2021.
Mr. Ganesha would not like to opt concessional tax rates available
under section 115BAC.

Cost inflation index (CII) for the Financial Year (F.Y.) 2019-20 is 289;
2020-21: 301; F.Y. 2021-22: 317.
9.1. What would be Net Annual Value of each house for the
previous year 2021-22?
(a) Thane – Nil; Jaipur – ` 13,210; Ratlam – ` 95,091
(b) Thane – Nil; Jaipur – ` 54,910; Ratlam – ` 95,091
(c) Thane – Nil; Jaipur – ` 21,300; Ratlam – ` 1,02,000
(d) Thane – Nil; Jaipur – ` 13,210; Ratlam – ` 80,691
9.2. What would be income/loss under the head “Income from
house property” in the hands of Mr. Ganesha?
(a) Loss of ` 1,67,689
(b) Loss of ` 2,86,236
(c) Loss of ` 3,20,489
(d) Loss of ` 3,63,989
9.3. How much amount will be carried forward as loss from house
property for the subsequent assessment year 2023-24?
(a) ` 3,63,989
(b) ` 1,63,989
(c) ` 2,00,000
(d) ` 1,50,000
9.4. What would the amount of capital gains chargeable to tax in
the hands of Mr. Ganesha during the previous year 2021-22?
(a) Short-term capital gains of ` 13,00,000
(b) Long-term capital gains of ` 21,99,308

80 INCOME TAX LAW
(c) Long-term capital gain of ` 6,19,574

(d) Long-term capital gain of Nil, since he is eligible for
deduction u/s 54EC in respect of amount invested in
RECL bonds issued by Central Government
9.5. What would be the gross total income of Mr. Ganesha for the
A.Y. 2022-23?
(a) ` 26,69,920
(b) ` 24,69,920
(c) ` 26,19,920
(d) ` 41,99,660
Answer Keys
Question Answer
No.
9.1 (a) Thane – Nil; Jaipur – ` 13,210; Ratlam – ` 95,091
9.2 (d) Loss of ` 3,63,989
9.3 (b) ` 1,63,989
9.4 (c) Long-term capital gain of ` 6,19,574
9.5 (c) ` 26,19,920
10. “LUX Enterprise” a proprietorship firm of Mr. Lucifer Mornigstar, a

resident individual, in Maharashtra engaged in business of printing and
publishing. The following details pertain to the assets of the business:
Particulars Date of Date of Amount
purchase put to use
Office building 30.09.2021 30.12.2021 1,85,00,000
superstructure constructed
on leased land
BMW M4 convertible car 23.08.2019 25.08.2019 94,80,000
Machineries used in printing 25.09.2021 15.10.2021 9,12,500
and publishing process

Notes:
(1) Car is also used for personal purposes; disallowance for
personal use may be taken at 20%.
(2) Written down value of Plant & Machinery (Depreciable @15%)
as on 1.4.2021 is ` 1,45,00,000.
appropriate answer to the following questions, assuming all the
aforementioned assets are purchased through account payee cheque:
10.1. What would be the amount of depreciation allowable on plant
and machinery (@15%) for the previous year 2021-22?
(a) ` 24,25,938
(b) ` 23,34,688
(c) ` 24,94,375
(d) ` 24,03,125
10.2. What would be the WDV of plant and machinery
(Depreciable@15%) as on 1.4.2022?
(a) ` 1,29,86,562
(b) ` 1,29,18,125
(c) ` 1,30,77,812
(d) ` 1,30,09,375
10.3. What would the WDV of Office building superstructure
constructed on leased land as on 1.4.2022?
(a) ` 1,85,00,000
(b) ` 1,66,50,000
(c) ` 1,75,75,000
(d) ` 1,57,25,000

82 INCOME TAX LAW
10.4. What would be the amount of depreciation allowable on BMW

M4 convertible car for the previous year 2021-22?
(a) ` 22,75,200
(b) ` 11,37,600
(c) ` 8,80,957
(d) ` 13,14,156
Answer Keys
Question Answer
No.
10.1 (b) ` 23,34,688
10.2 (c) ` 1,30,77,812
10.3 (c) ` 1,75,75,000
10.4 (d) ` 13,14,156
11. Mr. X has set up a manufacturing unit in Chittor, Andhra Pradesh on

1st April 2020.
During the previous year 2020-21 and 2021-22, Mr. X has purchased
following assets:
Date of put to use Asset Amount (`)
7 Jun 2020 Plant & machinery “X” 14,75,340
25 Jul 2020 Office Furniture 7,65,400
14 Jan 2021 Plant & machinery “Y” 5,00,000
15 May 2021 Plant & machinery “Z” 8,00,000
He has paid professional fees of ` 35,000 each to Mr. A, Mr. B and
Mr. C, respectively on 10th September 2021 credited in the books on
the same day, to discuss some legal matter related to business.
The net profit computed in accordance with “Chapter IV-D -
Computation of business income” of the Income-tax Act, 1961 for the
previous year 2020-21 is ` 1.2 crore.
Mr. X has 2,000 equity shares of MNO Pvt. Ltd. On 21 October 2021,
MNO Pvt. Ltd has bought back 50% shares from its shareholders

amounting to ` 13,50,000 which were issued for ` 5,70,000 which

include ` 1,15,000 towards premium.
11.1 What would be the amount of depreciation in respect of Plant &
Machinery “Y” allowable as deduction while computing income
under the head “Profit & Gains from business or profession” for
the previous year 2021-22?
(a) ` 61,875
(b) ` 1,11,875
(c) ` 69,375
(d) ` 63,750
11.2. What shall be the total amount of depreciation for the previous
year 2021-22 allowable as deduction while computing profits
and gains from business or profession?
(a) ` 3,77,481
(b) ` 3,71,856
(c) ` 5,54,607
(d) ` 6,04,607
11.3. Mr. X wanted to know from you, whether tax is required to be
deducted on professional fees paid to Mr. A, Mr. B and Mr. C
respectively. If tax has to be deducted, then what would be the
rate and amount of tax to be deducted at source?
(a) Yes, TDS amounting to ` 7,875 @7.5% on ` 1,05,000 is
to be deducted
(b) Yes, TDS amounting to ` 1,575 @1.5% on ` 1,05,000 is
to be deducted

84 INCOME TAX LAW
(c) No, tax is to be deducted, since amount does not exceed

the threshold limit
(d) Yes, TDS amounting to ` 10,500 @10% on ` 1,05,000 is
to be deducted
11.4. What shall be the amount of tax payable by MNO Private
Limited on buy-back of its shares?
(a) ` 2,08,500
(b) ` 1,81,710
(c) ` 3,14,496
(d) ` 1,62,240
Answer Keys
Question Answer
No.
11.1 (b) ` 1,11,875
11.2 (d) ` 6,04,607
11.3 (d) Yes, TDS amounting to ` 10,500 @10% on
` 1,05,000 is to be deducted
11.4 (b) ` 1,81,710
12. ABC & Co. is a partnership firm engaged in the business of sale of
footwear. The partnership firm consist of three partners – A, B & C. A
& B are working partners and C is a sleeping partner. The firm is liable
to tax audit under section 44AB of the Act. It has a book profit of
` 11,50,000.
Following payments were made to partners as authorised by the
partnership deed:
• Remuneration to A & B - ` 32,000 p. m. to each partner
• Remuneration to C - ` 10,000 p. m.
• Interest on capital @ 19.5% to A & B - ` 18,500 p. a. to each
partner
• Interest on capital @ 17% to C - ` 10,540 p. a.

The firm has following brought forward losses of past years:

A.Y. Business loss Unabsorbed Long-term
depreciation capital loss
2019-20 26,000 17,600 5,300
2020-21 78,000 29,860 -
2021-22 1,05,670 54,180 13,470
12.1 What amount of interest is allowable as deduction in the hands
of firm while computing profits and gains from business or
profession?
(a) ` 29,040
(b) ` 22,770
(c) ` 47,540
(d) ` 30,210
12.2. What amount of remuneration not allowable as deduction in the
hands of firm while computing profits and gains from business
or profession?
(a) ` 1,20,000
(b) Nil
(c) ` 1,08,000
(d) ` 78,000
12.3. What is the due date of filing of return of income for Mr. A and
Mr. C for the A.Y. 2022-23?
(a) 31st July 2022 for Mr. C and 30th September 2022 for
Mr. A
(b) 31st July 2022 for Mr. C and 31st October 2022 for Mr. A
(c) 31st October 2022 for both Mr. A and Mr. C
(d) 31st October 2022 for Mr. C and 31st July 2022 for Mr. A

86 INCOME TAX LAW
12.4. What would be the income under the head “Profits and gains
from business or profession” in the hands of ABC & Co. for the
A.Y. 2022-23?
(a) ` 70,690
(b) ` 1,72,330
(c) ` 51,920
(d) ` 1,53,560
Answer Keys
Question Answer
No.
12.1 (d) ` 30,210
12.2 (a) ` 1,20,000
12.3 (c) 31st October 2022 for both Mr. A and Mr. C
12.4 (b) ` 1,72,330
13. Mr. Sarthak (aged 37 years) a share broker, sold a building to his
friend Anay, who is a dealer in automobile spare parts, for ` 120 lakh
on 10.11.2021, when the stamp duty value was ` 150 lakh. The
agreement was, however, entered into on 1.9.2021 when the stamp
duty value was ` 140 lakh. Mr. Sarthak had received a down payment
of ` 15 lakh by a crossed cheque from Anay on the date of agreement.
Mr. Sarthak purchased the building for ` 95 lakh on 10.5.2018.
Further, Mr. Sarthak also sold an agricultural land (situated in a village
which has a population of 5,800) for ` 60 lakhs to Mr. Vivek on
01.03.2022, which he acquired on 15.06.2015 for ` 45 lakhs. Stamp
duty value of agricultural land as on 1.3.2022 is ` 65 lakhs.
CII for F.Y. 2015-16; 254; F.Y. 2018-19: 280; F.Y. 2021-22: 317.
13.1. Is there any requirement to deduct tax at source on
consideration paid or payable for transfer of building and
agricultural land?
(a) Yes; Mr. Anay and Mr. Vivek both required to deduct tax
at source under section 194-IA

(b) Yes; Mr. Anay is required to deduct tax at source under

section 194-IA.
(c) Yes; Mr. Vivek is required to deduct tax at source under
section 194-IA.
(d) Yes; Mr. Sarthak is required to deduct tax at source
under section 194-IA.
13.2. What amount of capital gains are chargeable to tax in the
hands of Mr. Sarthak in respect of transfer of building?
(a) Long-term capital gains of ` 42,44,643
(b) Long-term capital gains of ` 32,44,643
(c) Long-term capital gains of ` 12,44,643
(d) Short-term capital gains of ` 55,00,000
13.3. Assuming that Mr. Sarthak has other income exceeding basic
exemption limit, the tax payable (excluding surcharge and
health and education cess) on transfer of building and
agricultural land, would be -
(a) ` 6,48,930
(b) ` 2,48,930
(c) ` 8,48,930
(d) ` 16,50,000
13.4. What amount of income is chargeable to tax in the hands of
Mr. Anay in respect of transfer of building?
(a) ` 20 lakh
(b) ` 30 lakhs
(c) ` 15 lakhs
(d) Nil

88 INCOME TAX LAW
Answer Keys
Question Answer
No.
13.1 (b) Yes; Mr. Anay is required to deduct tax at source
under section 194-IA.
13.2 (a) Long-term capital gains of ` 42,44,643
13.4 (c) ` 8,48,930
13.4 (b) ` 30 lakhs
14. Mr. Narendra Sharma, aged 54 years, an Indian citizen, carrying on

retail business in Dubai. He frequently visits India for business
purpose. Details of his visits in India are as follows:
1) Came to India on 03.12.2016 and left India on 26.04.2017
2) Again came to India on 09.09.2019 and left India on 10.01.2020
3) Again came to India on 27.12.2020 and left India on 20.02.2021
Afterwards he decided to shift permanently in India and closed his
business in Dubai. So, he came to India on 27.11.2021 and joined
Indian Company “Cosmos Heritage India Limited” at registered office
in Mumbai from 01.12.2021. From December 2021, he has taken a flat
on rent for ` 60,000 per month from Mr. Sarthak, an Indian resident,
and Mr. Sarthak has provided his PAN No. to Mr. Narendra Sharma.
Following details of his salary income earned in India:
- Basic Salary – ` 2,75,675 per month
- COLA (Cost of Living Allowance) (forms part of retirement
benefits) – ` 1,20,200 per month
- HRA – ` 1,37,838 per month
- Other Allowances – ` 1,56,000 per month
For the period from April 2021 to November 2021, his business income
arising in Dubai is ` 26,00,000 and his turnover for the P.Y. 2020-21 is
` 95,00,000. He is not liable to pay any tax in Dubai. Such business is
controlled from Dubai.

He is active in equity share trading after coming to India. Following

are the details of his portfolio:
S. Sale/ Company Date of Qty Price per Brokerage
No Purchase Purchase/ Share (`)
Sale
1. Purchase First Smile Ltd 10.12.2021 250 203 1.5%
2 Purchase Rainbow Ltd 10.12.2021 50 503 1.5%
3. Purchase Mega Service 12.12.2021 150 82 1.5%
Ltd
4. Sale First Smile Ltd 18.12.2021 100 325 1.8%
5. Purchase Mega Service 15.12.2021 110 110 1.5%
Ltd
6. Sale Mega Service 26.12.2021 150 100 1.8%
Ltd
7. Purchase Rainbow Ltd 28.12.2021 200 385 1.5%
8. Purchase Rainbow Ltd 03.01.2022 100 465 1.5%
9. Sale First Smile Ltd 23.03.2022 200 150 1.8%
10. Sale Mega Service 26.03.2022 110 110 1.8%
Ltd
Following additional details is also given by Mr. Narendra:
- First Smile Limited issued bonus shares 1:1 on 01.02.2022 and
credited the shares in his account on 10.02.2022.
- Rainbow Limited declared an interim dividend of 200% on
28.02.2022 (face value of each share is ` 10). The record date
was 31.1.2022.
He does not opt to pay tax as per section 115BAC.
14.1. What is the residential status of Mr. Narendra for the previous
year 2021-22?
(a) Resident
(b) Resident and ordinary resident
(c) Non-resident
(d) Deemed resident

90 INCOME TAX LAW
14.2. Which of the following statements is correct, in respect of

dividend paid by Rainbow Ltd. to Mr. Naredra?
(a) Dividend received from Rainbow Ltd is exempt in the
hands of Mr. Narendra. Hence, no tax is required to be
deducted at source.
(b) Dividend received from Rainbow Ltd is taxable in the
hands of Mr. Narendra but, since the dividend is less
than ` 10,000, no tax is required to be deducted at
source.
(c) Dividend received from Rainbow Ltd is taxable in the
hands of Mr. Narendra. Tax of ` 525 is required to be
deducted at source.
(d) Dividend received from Rainbow Ltd is taxable in the
hands of Mr. Narendra. Tax of ` 700 is required to be
deducted at source.
14.3. What shall be the TDS liability of Mr. Narendra for rent paid to
Mr. Sarthak?
(a) There is no TDS liability of Mr. Narendra, since he is a
salaried individual.
(b) Mr. Narendra is liable to deduct TDS u/s 194-I of
` 6,000 for each month.
(c) Mr. Narendra is liable to deduct TDS u/s 194-IB of
` 3,000 for each month
(d) Mr. Narendra is liable to deduct TDS u/s 194-IB of
` 12,000 in the month of March 2022.
14.4. What would be income chargeable to tax under the head
“Income from Salaries” in the hands of Mr. Narendra for the
A.Y. 2022-23:
(a) ` 26,27,202
(b) ` 26,77,202

(c) ` 27,08,852
(d) ` 26,58,852
14.5. What is the amount of short-term capital gain chargeable to tax in
the hands of Mr. Narendra on sale of shares for the P.Y. 2021-22:
(a) ` 21,860
(b) ` 13,556
(c) ` 8,018
(d) ` 11,710
Answer Keys
Question Answer
No.
14.1 (d) Deemed resident
14.2 (d) Dividend received from Rainbow Ltd is taxable in
the hands of Mr. Narendra. Tax of ` 700 is required
to be deducted at source.
14.3 (d) Mr. Narendra is liable to deduct TDS u/s 194-IB of
` 12,000 in the month of March 2022
14.4 (a) ` 26,27,202
14.5 (d) ` 11,710
15. Mr. Akshaya Biyani celebrated his 26th birthday on 15th May 2021 and
arranged a grand party at Radisson Blu hotel. On this occasion, he
invited his friends, blood relatives and distant relatives to attend the
party. The ceremony was very grand, the feast was also very
spectacular. All the arrangements and decorations were absolutely
wonderful. At the end of party, Mr. Akshaya was awarded by gifts and
flower’s bouquet as infra:
Gifts received Type of Gift Remarks
from
Mother One 22K Gold She purchased on the same day
Chain for ` 37,822
Father One 22K Gold He purchased on the same day
Bracelet for ` 56,075

92 INCOME TAX LAW
Wife 4 Gold Rings She purchased these rings on

15.5.2020 for ` 35,500 each. Fair
market value on 15th May 2021 is
` 37,429 each.
Sister Painting This painting is made by her. Fair
market value is ` 45,000.
Cousin brother One Gold chain He purchased it on the same day
(Father’s for ` 18,200.
brother’s son)
Closest cousins I-20 Car Value of ` 4,10,000
(mother’s
sister’s
sons/daughters)
Friends and Cash ` 1,51,000
other distant
relatives
Mr. Akshaya desires to set up a new manufacturing unit with his friend
in partnership on 1.12.2021. For making investment in the firm, he
sold following jewellery which he has received on his 26th birthday
celebration as gifts:
- Mother’s gifted Gold Chain for ` 42,150
- Father’s gifted Gold Bracelet for ` 60,180
- Cousin brother’s gifted Gold Chain for ` 20,600
His wife gave him ` 1 lakh as a gift so that he could invest sufficient
money in the unit.
On 1st December 2021, he invested ` 6,00,000 (including the amount
received on sale of above gifts and amount received from his wife) and
his friend invested ` 4,00,000 in the firm.
On 1st February 2022, his wife again gave him ` 1 lakh as a gift to
invest such money in the firm and apart from that he invested
` 50,000 more from his individual savings. On this day, his friend also
invested ` 1,00,000 in the firm.

Since the firm is a manufacturing unit and at initial stage, the firm
requires sufficient fund so Mr. Akshaya sold his wife’s gifted Gold
Rings for ` 40,250 each as on 31st March 2022 and he deployed the
funds as partner’s capital in the firm on 01st April, 2022.
15.1. What is the amount of capital gain taxable in the hand of
Mr. Akshaya for P.Y. 2021-22?
(a) Short term capital gains ` 10,833
(b) Short term capital gains ` 29,833
(c) Short term capital gains ` 22,117
(d) No, capital gains is taxable in his hands, since he
received the capital assets as gift.
15.2. What is the gift amount not considered as income under section
56(2)(x) for P.Y. 2021-22?
(a) ` 8,98,613
(b) ` 3,06,813
(c) ` 9,16,813
(d) ` 7,16,813
15.3. What is the gift amount taxable in the hands of Mr. Akshaya for
P.Y. 2021-22?
(a) ` 1,51,000
(b) ` 1,69,200
(c) ` 5,79,200
(d) ` 5,61,000
15.4. Is any amount taxable in the hands of Akshaya’s wife in respect
of sale of jewellery by Mr. Akshaya, if yes, what shall be the
taxable amount in her hands for P.Y. 2021-22?
(a) No

94 INCOME TAX LAW
(b) Yes; ` 15,284

(c) Yes; ` 19,000
(d) Yes; ` 11,284
Answer Keys
Question Answer
No.
15.1 (a) Short term capital gains ` 10,833
15.2 (c) ` 9,16,813
15.3 (a) ` 1,51,000
15.4 (c) Yes; ` 19,000
16. Mr. Rajesh gifted ` 15 lakhs to his wife, Raavi, on her birthday on 23rd
February, 2021. Raavi lent ` 6,00,000 out of the gifted amount to
Karuna on 1st April, 2021 for six months on which she received
interest of ` 30,000. The said sum of ` 30,000 was invested in shares
of a listed company on 18th October, 2021, which were sold for
` 66,000 on 25th March, 2022. Securities transactions tax was paid on
purchase and sale of such shares. The balance amount of gift was
invested on 1st April 2021, as capital by Raavi in her new business.
She suffered loss of ` 22,000 in the business in Financial Year 2021-
22. Raavi is working with a Private company as sales executive at a
salary of ` 62,000 p.m. She paid ` 3,500 p.m towards tuition fees for
her daughter Riya studying in St. Thomas School, Mumbai.
Rajesh is working with an MNC on a monthly salary of ` 64,000. He
has gifted ` 1,25,000 to Riya on her 13th Birthday. This amount is
deposited as 2 years term deposits with SBI bank in her name. On
which interest of ` 11,500 is earned during the previous year 2021-22.
Both Mr. Rajesh and Mrs. Raavi opt to pay tax under section 115BAC.

16.1. In whose hands, the interest income received from Karuna and
interest on fixed deposits in the name of Riya would be
included?
(a) both interest income to be included in the hands of
Mr. Rajesh
(b) both interest income to be included in the hands of
Mrs. Raavi
(c) interest income from Karuna to be included in the hands
of Mrs. Raavi and interest on two years term deposits to
be included in the hands of Mr. Rajesh.
(d) interest income from Karuna to be included in the hands
of Mr. Rajesh and interest on two years term deposits to
be included in the hands of Mrs. Raavi.
16.2. In whose hand’s loss from business and capital gains would be
included in Assessment Year 2022-23? Assume that capital
invested in the business was entirely out of the funds gifted by
her husband.
(a) Both loss from business and capital gains would be
included in the hands of Mr. Rajesh
(b) Both loss from business and capital gains would be
included in the hands of Mrs. Raavi
(c) Loss from business included in the hands of Mr. Rajesh
and capital gains included in the hands of Mrs. Raavi
(d) Loss from business included in the hands of Mrs. Raavi
and capital gains included in the hands of Mr. Rajesh
16.3. What would be the total income of Mrs. Raavi for the previous
year 2021-22?
(a) ` 6,88,000
(b) ` 7,80,000

96 INCOME TAX LAW
(c) ` 7,91,500
(d) ` 7,90,000
16.4. What would be total income of Mr. Rajesh for the previous year
2021-22?
(a) ` 7,76,000
(b) ` 8,09,500
(b) ` 8,08,000
(c) ` 7,98,000
Answer Keys
Question Answer
No.
16.1 (d) interest income from Karuna to be included in the
hands of Mr. Rajesh and interest on two years term
deposits to be included in the hands of Mrs. Raavi.
16.2 (c) Loss from business included in the hands of
Mr. Rajesh and capital gains included in the hands
of Mrs. Raavi
16.3 (c) ` 7,91,500
16.4 (a) ` 7,76,000
17. Miss Hetal transferred to his husband, Mr. Hemant, a residential

property worth ` 45 lakhs located in Nagpur without any consideration.
The expected rent of such property is ` 5 lakhs. Municipal tax of
` 5,000 paid by Miss Hetal for this property during the previous year
2021-22. Miss Hetal has three residential properties in Mumbai. The
expected rent from the 3 properties situated in Mumbai is ` 10 lakhs,
` 11 lakhs and ` 12 lakhs respectively. She purchased the properties
out of her own funds. Municipal taxes due are ` 15,000, ` 20,000 and
` 25,000. The same have, however, not been paid this year in respect
of the three properties. The expected rent is lesser than the standard
rent in case of all the aforementioned properties. Miss Hetal does not
have any income from any other source.

Miss Hetal’s father, aged 58 years had capital gains of ` 5 crores from
sale of house property. He reinvested the proceeds from sale in
another residential house of ` 4.98 crores and the remaining sale
proceeds were deposited in his savings bank account. He has paid
` 1,50,000 towards LIC premium. He has no other source of income.
Miss Hetal’s grandfather is aged 81 years and has interest income on
fixed deposits of ` 6 lakhs. He has no other income for the P.Y. 2021-
22. He has to fly to USA for his treatment of cancer on 31st July, 2022
and his return of income is not filed before his flying to USA.
17.1. What is the amount of income liable to be taxed in the hands of
Miss Hetal under the head “Income from House Property” for
A.Y.2022-23?
(a) ` 7,00,000
(b) ` 10,46,500
(c) ` 10,50,000
(d) ` 13,76,500
17.2. What would be tax liability of Miss Hetal for the assessment
year 2022-23? Compute in a manner so that her tax liability is
minimum.
(a) ` 66,300
(b) ` 88,400
(c) ` 87,670
(d) ` 1,31,510
17.3. Is Hetal’s father required to furnish his return of income in
India for the A.Y.2022-23?
(a) No, he is not required, since his income does not exceed
basic exemption limit

98 INCOME TAX LAW
(b) Yes, he is required to furnish return of income on or

before 31st July,2022
(c) Yes, he is required to furnish return of income on or
before 30th September, 2022
(d) Yes, he is required to furnish return of income on or
before 31st October, 2022
17.4. Is Miss Hetal’s grandfather required to pay advance tax during
the previous year 2021-22?
(a) No, he is not required to pay advance tax, since he is a
senior citizen
(b) Yes, he is required to pay advance tax, since his tax
liability exceeds ` 10,000
(c) No, he is not required to pay advance tax, since he is a
senior citizen and he is not having any income under the
head “Profits and gains from business or profession”
(d) Yes, he is required to pay advance tax, since his total
income exceeds basic exemption limit of ` 5,00,000
Answer Keys
Question Answer
No.
17.1 (b) ` 10,46,500
17.2 (c) ` 87,670
17.3 (b) Yes, he is required to furnish return of income on
or before 31st July,2022
17.4 (c) No, he is not required to pay advance tax, since he
is a senior citizen and he is not having any income
under the head “Profits and gains from business or
profession”
18. Ms. Chanchal, aged 45, provides the following data of her gross
receipts for the financial year 2020-21 and 2021-22. She is engaged in
agency business along with providing services as tarot card reader.
She is generally engaged in cash payments and cash receipts.

F.Y. Receipts from Receipts from Total Gross

business (`) profession (`) Receipts
(`)
2020-21 1,05,00,000 47,00,000 1,52,00,000
2021-22 98,00,000 49,00,000 1,47,00,000
She paid an amount of ` 12,00,000 to a contractor for polishing her
old furniture in her self-occupied residential house property on
12.04.2021. Further on 05.06.2021, she has taken services from
renowned interior designer for the same residential house property for
which she paid ` 2,50,000.
On 28.05.2021, she sold one commercial property for ` 50,00,000. The
stamp duty value on the date of registration is ` 58,00,000. The value
adopted for stamp duty was ` 54,00,000 on the date of agreement
(part payment by account payee cheque was received on the date of
agreement). It was purchased for ` 40,00,000 on 28.06.2019. (Cost
Inflation Index for F.Y. 2021-22: 317, F.Y. 2019-20: 289).
The brought forward long-term capital loss from unlisted shares of F.Y.
2020-21 is ` 5,50,000.
During the year, Ms. Chanchal incurred a loss of ` 70,00,000 while
trading in the agricultural commodity derivatives (no CTT paid).
Ms. Chanchal does not want to opt for the new tax regime available
under section 115BAC for A.Y. 2022-23.
appropriate answer to the following questions: -
18.1. Is Ms. Chanchal liable to tax audit under the Income-tax Act,
1961 for the P.Y. 2021-22?
(a) Yes, as the total gross receipts exceeds ` 1,00,00,000
(b) No, as the gross receipts from business or profession
are below the specified threshold limits.

100 INCOME TAX LAW
(c) Yes, as the gross receipts from business exceeds

` 50,00,000
(d) Yes, as the gross receipts from profession exceeds
` 25,00,000
18.2. With respect to payment made to contractor and to the interior
designer during the P.Y. 2021-22, Ms. Chanchal consulted
various persons and they have the following views -
(i) She is required to deduct tax at source under section
194C and 194J, since her turnover from business for the
previous year 2020-21 exceeds ` 1,00,00,000
(ii) She is required to deduct tax at source under section
194M on both the payments
(iii) She is not required to deduct tax at source neither
under section 194C nor under section 194J, since such
amounts are paid for personal purposes
(iv) She is not required to deduct tax at source under
section 194M, since payment to each individual does not
exceed ` 50,00,000
Which views are correct?
(a) (iii) and (iv) views are correct
(b) (i) view is correct
(c) (ii) view is correct
(d) (i) and (iv) views are correct
18.3. What is the amount and nature of Capital gain chargeable to
tax in the hands of Ms. Chanchal?
(a) ` 14,00,000 and Short-term capital gain.
(b) ` 10,00,000 and Short-term capital gain.
(c) ` 11,00,000 and Long-term capital gain.
(d) ` 7,00,000 and Long-term capital gain.

18.4. What is the amount of losses which can be carried forward to

A.Y. 2023-24, assuming that business income is ` 45,00,000
and income from profession is ` 25,00,000 for the
P.Y. 2021-22?
(a) ` 5,50,000 under section 74
(b) ` 70,00,000 under section 73
(c) No loss is required to be carried forward, since brought
forward loss and current year loss are set-off against
current year’s income
(d) ` 5,50,000 under section 74 and ` 70,00,000 under
section 73
Answer Keys
Question Answer
No.
18.1 (b) No, as the gross receipts from business or
profession are below the specified threshold limits.
18.2 (a) (iii) and (iv) views are correct
18.3 (b) ` 10,00,000 and Short-term capital gain.
18.4 (a) ` 5,50,000 under section 74
19. Mr. Abhishek Seth, aged 42 years, is working as a CEO of Soil Limited.
He provides you the following information for preparation and filing of
his income-tax return for the year ended 31st March 2022:
• Salary, allowances and perquisites from Soil Limited -
` 1,35,00,000
• Dividend from ABC Ltd. which was declared in February, 2021
and received in April, 2021 - ` 4,55,000
• Dividend from PRQ Ltd. declared and received in July, 2021 -
` 5,90,000 (Gross)
• Interest income on saving bank account in SBI – ` 24,530
• Long term capital gains on transfer of residential house in
Mumbai on 15th December, 2021 - ` 1,73,540

102 INCOME TAX LAW
• Short term capital gain on transfer of listed equity shares (STT

paid both at the time of transfer and acquisition) of Ind Ltd. -
` 73,00,000
He also furnished the following details of investment/ payments made
by him during the P.Y. 2021-22:
(a) Three-year post office time deposit - ` 25,000
(b) Contribution to PPF - ` 35,000
(c) Tuition fees of three children in Bharti Sr. Sec. School in Delhi -
` 20,000 per annum per children
(d) Subscription to NHAI redeemable bonds after 5 years on 16th
March, 2022 - ` 2,00,000.
Further, his son Mr. Dhaval, aged 15 years, has also earned the
following income:
(a) Income from a quiz competition - ` 25,000
(b) Interest on bank fixed deposit - ` 9,500
Assuming that the tax has been deducted on time, wherever
applicable. Mr. Abhishek does not want to opt for the provision of
section 115BAC.
appropriate answer to the following questions:-
19.1. What is the quantum of income of Mr. Dhaval which is to be
clubbed with the income of Mr. Abhishek, if any, assuming that
income of Mr. Abhishek is greater than the income of his spouse?
(a) ` 34,500
(b) ` 8,000
(c) ` 33,000
(d) ` 9,500
19.2. What is the gross total income of Mr. Abhishek for A.Y. 2022-23?
(a) ` 2,13,72,530

(b) ` 2,14,22,530
(c) ` 2,13,64,530
(d) ` 2,15,46,070
19.3. What is the amount of deduction allowable under section 80C
to Mr. Abhishek?
(a) ` 1,00,000
(b) ` 1,20,000
(c) ` 95,000
(d) ` 75,000
19.4. What shall be the tax liability of Mr. Abhishek for A.Y. 2022-23?
(a) ` 62,67,350
(b) ` 61,04,100
(c) ` 59,60,050
(d) ` 61,45,610
Answer Keys
Question Answer
No.
19.1 (b) ` 8,000
19.2 (a) ` 2,13,72,530
19.3 (d) ` 75,000
19.4 (b) ` 61,04,100
20. M/s Abhinav & sons, a sole proprietorship is engaged in the business
of manufacturing pharmaceutical products and it had started its
business on 20th June 2017. Tax head of M/s Abhinav & sons
furnishes you the following particulars for the year ended 31 March
2022:
• Income under the head PGBP - ` 5,75,22,750
• Interest on fixed deposits (Gross) - ` 12,50,000 [The same was
received on 30th April, 2021 after deduction of tax at source]

104 INCOME TAX LAW
• Donation to PM Cares Fund - ` 2,50,000

• Turnover during the previous year 2021-22 - ` 15,50,00,000
M/s Abhinav & sons does not want to opt for the provisions of section
115BAC. It has employed total 150 employees during the P.Y. 2020-21
with an annual increment of 10% in their monthly emoluments. Details
of the same are as under:
Date of No. of Employee Monthly Participate
joining employees category emoluments in
per recognised
employee provident
(`) fund
1.5.2020 50 Regular 26,500 Yes
1.6.2020 65 Casual 23,000 No
1.7.2020 35 Regular 22,500 Yes
It has employed further 50 employees during the P.Y. 2021-22. Details
of the same are as under:
Date of No. of Employee Monthly Participate
joining employees category emoluments in
per recognised
employee provident
fund
1.4.2021 20 Regular 21,000 Yes
1.8.2022 30 Regular 26,000 Yes
Emoluments to all the employees are being paid by way of account

payee cheque only. No employees have left the job during P.Y. 2020-
21 as well as during P.Y. 2021-22.
20.1. What is the due date of filing of return of income of M/s
Abhinav & sons for A.Y. 2022-23?
(a) 31st July, 2022
(b) 30th November, 2022

(c) 30th September, 2022

(d) 31st October, 2022
20.2. What shall be the amount of deduction available to M/s Abhinav
& sons under section 80JJAA for A.Y. 2022-23?
(a) ` 36,38,250
(b) ` 15,12,000
(c) ` 46,30,500
(d) ` 33,84,000
20.3. What would be the total income of M/s Abhinav & sons for the
A.Y. 2022-23?
(a) ` 5,70,10,750
(b) ` 5,48,84,500
(c) ` 5,57,60,750
(d) ` 5,52,64,250
20.4. What would be the tax payable of M/s Abhinav & sons for the
A.Y. 2022-23?
(a) ` 2,47,47,810
(b) ` 1,94,68,310
(c) ` 2,31,92,680
(d) ` 2,30,67,680
Answer Keys
Question Answer
No.
20.1 (d) 31st October, 2022
20.2 (a) ` 36,38,250
20.3 (b) ` 5,48,84,500
20.4 (d) ` 2,30,67,680

106 INCOME TAX LAW
21. Mr. X wanted to file his return of income for the previous year 2021-
22. He required assistance for which he has approached you. He has
shared the following details relevant to the P.Y. 2021-22.
Mr. X owned a house property in Mumbai and the same was rented out
for ` 70,000 p.m. He claims that this was the only income which he
earned during the P.Y. 2021-22. However, when you had sought for his
bank statement, you observed the following information additionally.
There is a credit for ` 23,975 towards income-tax refund which
includes ` 5,775 towards interest on income-tax refund. On 15th
August, 2021, the bank statement showed a credit of ` 55,000 which
he claimed to have received as a gift from his grandchildren on his 60th
birthday. On further assessment you were able to understand that
Mr. X and his wife had travelled to Australia during the P.Y. 2021-22 to
spend some time with their daughter, who is staying in Australia, since
her marriage. On scrutiny of their passport and relevant documents
you conclude that they had left India on 27th September, 2021 and
retuned on 30th March, 2022. During the 4 years preceding previous
year 2021-22, both had stayed in India for 320 days. Prior to that,
they had been staying only in India.
21.1. What is the residential status of Mr. X for the P.Y. 2021-22?
(c) Non-resident
21.2. Mr. X requests you to compute his tax liability for the A.Y.
2022-23 in a manner such that his tax liability is minimum.
Accordingly, his tax liability would be
(a) ` 22,750
(b) ` 29,910

(c) ` 32,510
(d) ` 20,150
21.3. In continuation to question 21.2, what would be tax liability of
Mr. X for the A.Y. 2022-23, if he had paid ` 1,00,000 towards
life insurance premium for self?
(a) ` 20,150
(b) ` 29,910
(c) ` 10,400
(d) Nil
21.4. Mr. X had given the house property at Mumbai on rent to Mr. Y,
a salaried employee. Is there any requirement to deduct tax at
source on such rent by Mr. Y, if yes, what would be the amount
of TDS to be deducted?
(a) No, there is no requirement to deduct tax at source,
since Mr. Y is a salaried employee
(b) Yes, Mr. Y is required to deduct tax at source of ` 42,000
(c) Yes, Mr. Y is required to deduct tax at source of ` 31,500
(d) No, there is no requirement to deduct tax at source,
since Mr. X is a non-resident
21.5. Which of the following statements is correct with respect to
advance tax liability of Mr. X for P.Y. 2021-22?
(a) Advance tax liability shall not arise to Mr. X since he is a
non-resident
(b) Advance tax liability shall not arise, since Mr. X is a
resident senior citizen and he has no income chargeable
under the head “Profits and gains of business or
profession
(c) Advance tax liability shall arise, since he is a non-resident
(d) Advance tax liability shall arise, since his tax liability is
not less than ` 10,000

108 INCOME TAX LAW
Answer Keys
Question Answer
No.
21.1 (a) Resident and ordinarily resident
21.2 (a) ` 22,750
21.3 (d) Nil
21.4 (b) Yes, Mr. Y is required to deduct tax at source of

` 42,000
21.5 (b) Advance tax liability shall not arise, since Mr. X is
a resident senior citizen and he has no income
chargeable under the head “Profits and gains of
business or profession
22. Mr. Zukaro, aged 42 years, a Singapore citizen, visits India for
business purpose on a regular basis. He was in India for the first time
in the year 2017-18 for 270 days, in the year 2018-19 for 190 days, in
the year 2019-20 for 145 days and in the year 2020-21 for 155 days.
In the current financial year 2021-22, he along with his family had
come to India on 10th August, 2021 for a pleasure trip. His family
returned to Singapore on 31st August, 2021, however he stayed back
to complete some business commitments and then returned to
Singapore on 17th November, 2021.
Mr. Zukaro owns a manufacturing unit in Singapore. He basically comes
to India for procurement of raw material. He has appointed Mr. Manish,
as a dependent agent in Mumbai, who procures raw material from India
and then exports it to Singapore to his manufacturing unit and then sells
the finished product there. An income of ` 8,75,000 was received in
Singapore out of this activity in the P.Y. 2021-22. He had purchased a
residential property for ` 17,50,000 in Indore in April 2018. On getting an
attractive deal in November, 2021, he sold the property for ` 26,25,000.
He also paid brokerage @2% on sales consideration.
Mr. Zukaro had also purchased an agricultural land in India and leased
it out to a tenant. The tenant shares a portion of his agricultural

income with Mr. Zukaro as a consideration for rent of land every year.
The share in the income from the land for the previous year 2021-22
was ` 6,50,000.
Cost inflation index (CII) for the Financial Year (F.Y.) 2018-19 is 280;
F.Y. 2021-22: 317
22.1. What is the Residential Status of Mr. Zukaro for the assessment
year 2022-23?
(c) Non-resident
22.2. Assume for the purpose of answering this question only, that
Mr. Zukaro is a non-resident in India for the P.Y. 2021-22, would
income of ` 8,75,000 earned though activity of procuring raw
material for manufacturing unit in Singapore be taxable in India?
(a) Yes, since it is deemed to accrue or arise in India
through a business connection in India
(b) No, as it is confined to purchase of goods in India for
further export and hence not an income deemed to
accrue or arise in India
(c) Yes, as business is controlled from India
(d) No, as income is received outside India
22.3. Would income arising from transfer of residential property in
Indore is chargeable to tax in India in the hands of Mr. Zukaro?
If yes, compute the amount of capital gains chargeable to tax.
(a) Yes, long term capital gain of ` 5,91,250 is chargeable
to tax, since income is deemed to accrue or arise in
India and hence taxable in his hands though he is non-
resident in India

110 INCOME TAX LAW
(b) Yes, long term capital gain of ` 6,43,750 is chargeable

to tax, since he is resident in India
(c) Yes, long term capital gain of ` 5,91,250 is chargeable
to tax, since he is resident in India
(d) Yes, long term capital gain of ` 6,43,750 is chargeable
to tax, since income is deemed to accrue or arise in
India and hence taxable in his hands though he is non-
resident in India
22.4. Would income earned from agricultural land given on lease is
taxable in the hands of Mr. Zukaro?
(a) No, such income is exempt, since it is agricultural income
(b) Yes, such income is taxable as income from house
property, since land is given on lease
(c) Yes, such income is taxable as income from other
sources, since land is given on lease
(d) Yes, such income is taxable since he is non-resident
even though it is an agricultural income.
22.5. What is the tax liability of Mr. Zukaro for A.Y. 2022-23
assuming he does not opt to pay tax under section 115BAC?
(a) ` 2,13,980
(b) ` 4,03,780
(c) ` 2,95,750
(d) ` 3,07,580
Answer Keys
Question Answer
No.
22.1 (a) Resident and ordinarily resident
22.2 (b) No, as it is confined to purchase of goods in India
for further export and hence not an income
deemed to accrue or arise in India

22.3 (c) Yes, long term capital gain of ` 5,91,250 is

chargeable to tax, since he is resident in India
22.4 (a) No, such income is exempt, since it is agricultural
income
22.5 (d) ` 3,07,580
23. Mr. Rajan, aged 62 years, an Indian citizen, resides in Delhi. His wife
Sheetal and daughter Riya also reside with him. Riya, aged 16 years, is
studying in 12th Standard in DAV school at New Delhi. Mr. Rajan left
for employment to the United States of America on 15th September,
2021 but his family did not accompany him. He returned to India on
25th March 2022. Mr. Rajan had gone outside India for the first time in
his life. During April, 2021 to September, 2021, he was working with a
multinational company in Delhi. He earned salary of ` 14,00,000 from
his job in India. He paid Tuition Fee of ` 1,80,000 for Riya’s education
in DAV school.
Apart from that, Mr. Rajan also earned professional income of
` 60,00,000 (Gross Receipts – ` 90 lakhs) from India. During the year,
he also earned interest from his Indian savings bank account to the
tune of ` 12,000 and interest from fixed deposits with nationalized
banks of ` 45,000. Mr. Rajan also earned a salary income equivalent to
` 6,00,000 from USA for his job, on which no tax is paid or payable in
USA, which was deposited in his bank account in USA and later on
remitted to India. Mr. Rajan decides not to opt to pay tax under
section 115BAC.
23.1 What is the residential status of Mr. Rajan for the previous year
2021-22?
(a) Resident and ordinarily in India
(b) Resident but not ordinarily resident in India
(c) Non-resident in India
(d) Deemed resident but not ordinarily resident in India

112 INCOME TAX LAW
23.2 What would be the income chargeable to tax under the head
“Salaries” in the hands of Mr. Rajan in India for F.Y. 2021-22?
(a) ` 20,00,000
(b) ` 19,50,000
(c) ` 13,50,000
(d) ` 19,60,000
23.3 How much deduction is available under Chapter VI-A from the
Gross Total Income of Mr. Rajan?
(a) ` 2,30,000
(b) ` 1,95,000
(c) ` 1,60,000
(d) ` 2,00,000
23.4 What shall be the tax liability of Mr. Rajan for the
A.Y. 2022-23?
(a) ` 22,69,810
(b) ` 22,58,940
(c) ` 22,56,080
(d) ` 22,72,670
23.5 What would be the due date for filing income-tax return of
Mr. Rajan for the P.Y. 2021-22?
(a) 31 st July, 2022
(b) 31st October, 2022
(c) 30th November, 2022
(d) 31st March, 2023
Answer Keys
Question Answer
No.
23.1 (d) Deemed resident but not ordinarily resident in
India

23.2 (c) ` 13,50,000

23.3 (d) ` 2,00,000
23.4 (c) ` 22,56,080
23.5 (b) 31st October, 2022
24. Mr. A (aged 52 years), is a CEO of XYZ Enterprise Limited. During the
previous year 2021-22, he earned salary of ` 1,65,00,000 and long-
term capital gain on sale of listed equity shares (STT paid) amounting
to ` 1,06,500. He earned interest of ` 4,82,778 on saving bank
account.
Further, he has provided the following other information for filing his
return of income:
He does not receive house rent allowance from his employer. Mr. A
took a loan from State Bank of India on 27th October 2019 for
repairing his house (self-occupied) at Delhi and paid interest on such
borrowings of ` 80,000 and ` 1,50,000 towards principal amount
during the previous year 2021-22.
Mr. A has made the following payments towards medical insurance
premium for health policies taken for his family members:
Medical premium for his brother: ` 13,500 (by cheque)
Medical premium for his parents: ` 17,670 (by cheque)
Medical premium for self and his wife: ` 21,000 (by cheque).
He also incurred ` 6,400 towards preventive health check-up of his
wife in cash. He deposited ` 1,00,000 towards PPF. He also deposited
` 50,000 and ` 2,50,000 towards Tier I and Tier II NPS A/c,
respectively.
He has paid ` 5,30,000 as advance tax. His employer has deducted tax
at source of ` 51,89,000. He is of the opinion that the balance amount
of tax, if any, he will pay on 27th July 2022 (i.e. before the due date
for filing of return of income).
Mr. A does not want to opt for section 115BAC.

114 INCOME TAX LAW
24.1. What would be the amount of deduction available to Mr. A
under Chapter VI-A for the assessment year 2022-23?
(a) ` 2,04,070
(b) ` 2,42,670
(c) ` 2,52,670
(d) ` 2,02,670
24.2. Assume that, for the purpose of answering this question alone,
that Mr. A pays rent of ` 65,000 per month for his rented house
at Mumbai to Mr. C, a resident individual, is Mr. A liable to
deduct TDS on such rent. If so, what would be the rate and
amount of TDS?
(a) Yes, Mr. A is liable to deduct TDS @ 3.75% amounting to
` 2,438 every month i.e., at the time of payment of such
rent
(b) Yes, Mr. A is liable to deduct TDS @5% amounting to
` 3,250 every month i.e., at the time of payment of such
rent
(c) Yes, Mr. A is liable to deduct TDS @5% amounting to
` 39,000 in the month of March 2022
(d) No, Mr. A is not liable to deduct TDS, since he is a
salaried person
24.3. What would be the amount of net tax payable for the
assessment year 2022-23 in the hands of Mr. A?
(a) ` 78,230
(b) ` 60,290
(c) ` 49,530
(d) ` 67,470

24.4. What would be the amount of interest chargeable under section

234B on account of short payment of advance tax?
(a) ` 1,980
(b) Nil
(c) ` 3,130
(d) ` 2,410
Answer Keys
Question Answer
No.
24.1 (d) ` 2,02,670
24.2 (c) Yes, Mr. A is liable to deduct TDS @5% amounting
to ` 39,000 in the month of March 2022
24.3 (c) ` 49,530
24.4 (b) Nil
25. Mr. Sarthak, aged 38 years, working in Nobita Pvt. Limited as Senior
Manager- Finance. His yearly pay slip for the financial year 2021-22 is
as follows:
Earnings ` Deduction `
Basic Pay 6,34,068 Employee’s 1,14,132
contribution to
Provident Fund
Dearness 1,26,814 Profession tax 2,400
allowance
HRA 3,17,040 Income-tax 2,32,830
Transport 19,200 Net Pay 13,03,848
Allowance
Personal 5,09,088
Allowance
Children Education 12,000
Allowance for two
children
Medical Allowance 15,000
Bonus 20,000 ________
Total Earnings 16,53,210 16,53,210

116 INCOME TAX LAW
(i) His employer also contributes equivalent amount of contribution

towards provident fund.
(ii) Dearness allowance forms part of retirement benefits.
(iii) He has intimated to his company that he would opt for 115BAC
for the A.Y. 2022-23. Consequently, he has not submitted any
investment proof to company.
(iv) He has paid ` 55,212 towards mediclaim premium for his
parents (aged above 65 years) by account payee cheque.
(v) He has purchased a house of ` 38,00,000 during the year 2014
and taken a loan of ` 28,00,000 from HDFC to purchase this
house. He is paying EMI of ` 22,835. Possession of house
received on 01/04/2021. He himself is occupying this house.
Total principal and interest paid for full year is ` 55,037 and
` 2,18,983, respectively, as per interest certificate received
from bank for F.Y. 2021-22.
(vi) He has 3 children, studying in Sandalwood International School.
The following are the components of school fees paid for the
Academic Session 2021-22:
School Fees
Component Child 1 Child 2 Child 3 Total
Tuition fees 30,000 37,000 40,000 1,07,000
Admission fees 20,000 - - 20,000
Books, stationery 8,000 12,000 15,000 35,000
and uniform
Infrastructure Fund 25,000 30,000 35,000 90,000
Commute cost 8,000 8,000 8,000 24,000
Activity Fees 6,000 7,000 8,000 21,000
Total Fees 97,000 94,000 1,06,000 2,97,000
(vii) He has invested ` 5000 in HDFC ULIP and taken a LIC policy for
his wife for ` 10,000.
(viii) He has invested ` 12,500 and ` 25,000 towards NPS Tier I A/c
and Tier II A/c, respectively.
(ix) He has also donated ` 50,000 in PM CARES fund.

(x) He has invested ` 40,000 in listed equity shares of Shaktimaan

Power Solution Limited on 01/03/2021 at ` 200 per share and
sells 100 shares at ` 350 per share on 01/11/2021. STT is paid
both at the time of sale and purchase of these shares.
25.1. What would be the amount of income chargeable to tax under
the head “Salaries” in the hands of Mr. Sarthak for the A.Y.
2022-23?
(a) ` 16,53,210
(b) ` 16,21,236
(c) ` 16,76,036
(d) ` 16,71,236
25.2. Whether the tax deducted at source by Nobita Pvt Ltd. on the
salary paid to Mr. Sarthak based on the intimation submitted by
him, is correct?
(a) Yes, the amount of ` 2,32,830 deducted as tax at source
is correct.
(b) No, the correct amount of tax to be deducted at source
is ` 2,49,920.
(c) No, the correct amount of tax to be deducted at source
is ` 2,42,800.
(d) No, the correct amount of tax to be deducted at source
is ` 2,41,300.
25.3. What would be the total income (without rounding off) of
Mr. Sarthak for the A.Y. 2022-23, assume that he does not opt
for section 115BAC?
(a) ` 11,73,736
(b) ` 11,76,699
(c) ` 11,61,699
(d) ` 11,58,736

118 INCOME TAX LAW
25.4. What would be tax liability of Mr. Sarthak for the A.Y. 2022-23,
if he does not opt for section 115BAC?
(a) ` 1,66,530
(b) ` 1,68,870
(c) ` 1,71,210
(d) ` 1,67,450
25.5. Assuming for the purpose of answering this question only that
no contribution is made by Mr. Sarthak and his employer
towards provident fund, what amount of deduction is available
to Mr. Sarthak under Chapter VI-A for the previous year
2022-23, if he does not opt for section 115BAC?
(a) ` 2,62,500
(b) ` 2,59,537
(c) ` 2,50,000
(d) ` 2,04,500
Answer Keys
Question Answer
No.
25.1 (c) ` 16,76,036
25.2 (b) No, the correct amount of tax to be deducted at
source is ` 2,49,920.
25.3 (a) ` 11,73,736
25.4 (b) ` 1,68,870
25.5 (b) ` 2,59,537
26. Mr. Animesh, an Indian citizen, aged 61 years, has set-up his business
in Canada and is residing in Canada since 2009. He owns a house
property in Canada, half of which is used by him for his residence and
half is given on rent (converted into INR is ` 12,00,000 p.a.).
He purchased a flat in Delhi on 13.10.2019 for ` 42,00,000. The stamp
duty value of the flat was ` 35,00,000. He has taken a loan from
Canara Bank in India of ` 34,00,000 for purchase of this flat. The

interest on such loan for the F.Y. 2021-22 was ` 3,14,000 and principal
repayment was ` 80,000. Mr. Animesh has given this flat on monthly
rent of ` 32,500 since April, 2021. The annual property tax of Delhi flat
is ` 40,000 which is paid by Mr. Animesh, whenever he comes to India
to meet his parents. Mr. Animesh visited India for 124 days during the
previous year 2021-22. Before that he visited India in total for 366
days during the period 1.4.2017 to 31.3.2021.
He had a house in Ranchi which was sold in May 2018. In respect of
this house, he received arrears of rent of ` 2,96,000 in February 2022
(not taxed earlier).
He also derived some other incomes during the F.Y. 2021-22 which are
as follows:
(i) Profit from business in Canada ` 2,75,000
(ii) Interest on bonds of a Canadian Co. ` 6,20,000 out of which
50% was received in India.
(iii) Income from Apple Orchid in Nepal given on contract and the
yearly contract fee of ` 5,00,000 for F.Y. 2021-22, was received
by Animesh in Nepal.
Mr. Animesh has sold 10,000 listed shares @ ` 480 per share of A Ltd.,
an Indian company, on 15.9.2021, which he acquired on 05-04-2017
@` 100 per share. STT was paid both at the time of acquisition as well
as at the time of transfer of such shares.
On 31-01-2018, the shares of A Ltd. were traded on a recognized stock
exchange as under:
Highest price - ` 300 per share
Average price - ` 290 per share
Lowest price - ` 280 per share
26.1. What would be the residential status of Mr. Animesh for the
A.Y. 2022-23?
(a) Resident and ordinarily resident in India

120 INCOME TAX LAW
(b) Resident but not ordinarily resident in India

(c) Non-resident
(d) Deemed resident
26.2. What would be amount of income taxable under the head
“Income from house property” in the hands of Mr. Animesh for
the A.Y. 2022-23?
(a) ` 2,52,200
(b) ` 1,38,200
(c) ` 9,78,200
(d) ` 10,92,200
26.3. What amount of capital gain would arise in the hands of
Mr. Animesh on transfer of shares of A Ltd?
(a) ` 18,00,000
(b) ` 19,00,000
(c) ` 20,00,000
(d) ` 38,00,000
26.4. What would be total income of Mr. Animesh for the
A.Y. 2022-23, if he does not opt to pay tax u/s 115BAC?
(a) ` 22,82,200
(b) ` 22,68,200
(c) ` 22,48,200
(d) ` 21,68,200
26.5. What would be the tax liability (computed in the manner so as
to minimise his tax liability) of Mr. Animesh for the
A.Y. 2022-23?
(a) ` 1,82,950
(b) ` 1,87,110
(c) ` 1,80,350
(d) ` 1,84,510

Answer Keys
Question Answer
No.
26.1 (b) Resident but not ordinarily resident in India
26.2 (b) ` 1,38,200
26.3 (a) ` 18,00,000
26.4 (d) ` 21,68,200
26.5 (c) ` 1,80,350
27. Mr. Kashyap, a manufacturer, has disclosed a net profit of ` 40 lakhs
for the year ended 31st March, 2022. He claimed depreciation of
` 12,20,000 in his books of account. Expenditure in profit and loss
account includes interest payable to Mr. Raj, a resident, without
deduction of tax at source ` 1,50,000. Such tax was, however,
deducted on 15.4.2022 and remitted on 17.5.2022.
Mr. Kashyap is engaged in in-house scientific research and
development. He incurred expenditure of ` 1,50,000 on purchase of
research equipments and ` 1,00,000 as remuneration paid to
scientists. The said sums are also debited in the profit and loss
account.
Mr. Kashyap purchased a new plant and machinery for ` 45,00,000 on
2nd August, 2021 and put the same to use on 1st November, 2021. For
this purpose, he borrowed ` 25,00,000 on 1st August, 2021 and paid
interest@10% p.a. which is debited in profit and loss account. Mr.
Kashyap also purchased a motor car for ` 8,00,000 on 2nd October,
2019, which was put to use on the same date. Written down value of
block of plant and machinery (15%) as on 1st April, 2021 is
` 95,00,000. Turnover for the P.Y. 2020-21 and P.Y. 2021-22 is ` 2.5
crores and ` 3 crores, respectively.
Based on the above information, choose the most appropriate
answer to the following Multiple Choice Questions -
27.1. What would be the depreciation allowable u/s 32 in respect of
block of plant and machinery (15%) and motor car for
A.Y.2022-23? Assume that motor car is the only asset in the
block.
(a) ` 22,23,438 and ` 1,17,600, respectively

122 INCOME TAX LAW
(b) ` 17,67,188 and ` 86,700, respectively

(c) ` 22,12,500 and ` 86,700, respectively
(d) ` 22,23,438 and ` 2,40,000, respectively
27.2. What is the amount of disallowance, if any, attracted for non-
deduction of tax at source on interest payable to Mr. Raj during
the P.Y.2021-22?
(a) Nil, since the tax was deducted and deposited on or
before the due date of filing of return of income
(b) ` 30,000
(c) ` 45,000
(d) ` 1,50,000
27.3. What would be the income under the head “Profits and gains of
business and profession” of Mr. Kashyap for A.Y.2022-23 under
the normal provisions of the Act?
(a) ` 29,86,462
(b) ` 29,23,962
(c) ` 28,01,562
(d) ` 34,11,112
27.4. What would be the income chargeable under the head “Profits
and gains of business and profession” of Mr. Kashyap for
A.Y.2022-23, if he opts for section 115BAC?
(a) ` 29,65,800
(b) ` 32,15,800
(c) ` 34,42,712
(d) ` 36,92,712
27.5. What would be the tax liability of Mr. Kashyap for A.Y. 2022-23
in a manner most beneficial to him?
(a) ` 7,30,330

(b) ` 7,36,780
(c) ` 7,17,280
(d) ` 6,79,090
Answer Keys
Question Answer
No.
27.1 (a) ` 22,23,438 and ` 1,17,600, respectively
27.2 (c) ` 45,000
27.3 (a) ` 29,86,462
27.4 (c) ` 34,42,712
27.5 (b) ` 7,36,780
28. Mr. Akash had bought a residential house worth ` 2.5 crores at South
Extension, Delhi in 2019 and let out the house on rent to Mr. Riyaz.
The property was funded through loan from PNB. The interest due for
F.Y.2021-22 to PNB is ` 25 lakhs, out of which he paid only ` 20 lakhs
during the year. Mr. Akash then took a loan of ` 1.5 crores from SBI
on 1.7.2021 for construction of first floor in that house for self-
occupation. The construction is in progress as on 31.3.2022. Mr. Akash
started repaying EMIs due to SBI. During the P.Y. 2021-22, he repaid
principal amount of ` 25 lakhs and ` 5 lakhs to PNB and SBI,
respectively. He also paid interest of ` 8 lakhs to SBI out of ` 10 lakhs,
being interest due for the period from 1.7.2021 to 31.3.2022.
Mr. Akash owns another house in Haryana. He transferred that house
to his minor daughter Miss Sia on her birthday as her birthday gift.
Miss Sia gave the said house to the local Panchayat from September,
2021 at a rent of ` 5,000 per month. Mrs. Akash’s total income for
A.Y.2022-23 is higher than that of Mr. Akash. This is the first year
when Miss Sia has any source of income.
Mr. Akash bought electric vehicle worth ` 50 lakhs on loan from BSM
Bank which it sanctioned on 1.4.2021. BSM Bank charged interest of
` 7 lakhs on electric vehicle for the P.Y.2021-22. Mr. Akash has also
taken loan from ABC Bank for his daughter’s higher education. He paid
` 50,000 as interest to ABC Bank. He also paid mediclaim of ` 20,000
to New India Assurance Scheme for insuring his health via cheque.

124 INCOME TAX LAW
Mrs. Akash owns a shop of 200 square feet area in Gurgaon. She
rented it to Mr. Vishal from October, 2021 at ` 60,000 per month, who
gave her an interest-free deposit of ` 1,50,000.
From the information given above, choose the most appropriate
answer to the following questions -
28.1. What is the amount of interest allowable as deduction u/s 24(b)
to Mr. Akash for A.Y.2022-23?
(a) ` 2 lakhs
(b) ` 25 lakhs
(c) ` 28 lakhs
(d) ` 35 lakhs
28.2. What is the amount of deduction permissible to Mr. Akash
under Chapter VI-A of Income-tax Act, 1961 for A.Y. 2022-23?
(a) ` 1,70,000
(b) ` 2,20,000
(c) ` 3,70,000
(d) ` 9,20,000
28.3. Is notional interest on interest free deposit received in respect
of shop let out on rent chargeable to income-tax? If so, under
which head of income would the same be taxable?
(a) No, it is not chargeable to tax
(b) Yes, it is chargeable to tax as profits and gains from
business, since a commercial property has been let out.
(c) Yes, it is chargeable to tax as “Income from Other
Sources”, being the residuary head of income.
(d) Yes, it is chargeable to tax as “Income from house
property”, since section 22 does not distinguish between
a residential house property and commercial house
property.

28.4. In whose hands would Sia’s rental income from house property
at Haryana be taxable and how much income would be taxable?
(a) In Sia’s hands; ` 24,500
(b) In Mr. Akash’s hands; ` 24,500
(c) In Mrs. Akash’s hands; ` 23,000
(d) It would change every year depending on the parent
whose income is higher in that year.
Answer Keys
Question Answer
No.
28.1 (b) ` 25 lakhs
28.2 (c) ` 3,70,000
28.3 (a) No, it is not chargeable to tax
28.4 (b) In Mr. Akash’s hands; ` 24,500
29. Mr. Alishaan is engaged in the business of clothes trading since 2015
and Mrs. Alishaan is a house wife. Their minor daughter’s marriage is
fixed in October, 2021. Mr. Alishaan planned destination wedding in
Udaipur for his minor daughter. For the wedding, he withdrew
` 40,00,000 cash in the month of August, 2021 and ` 65,00,000 cash
in the month of September, 2021 from Aapka Paisa Bank.
He booked 30 rooms for 5 days for the accommodation of his relatives
in Raho Hotel and paid ` 40,000 in cash as advance and balance by
account payee cheque. He took the catering services of Daana
Caterers, a sole proprietor, for the wedding for which he paid
` 10,20,000 on 15.9.2021. On her wedding, he gifted his daughter a
house property, purchased from RK Builders on 10.9.2021 by account
payee cheque for ` 15,00,000. The stamp duty value of the property
on 10.9.2021 is ` 16,00,000 and on the date of transfer to minor
daughter is ` 20,00,000.
Mr. Alishaan paid ` 45,000 in cash and balance in cheque to travel
agent for the return ticket of some of his relatives to US. He regularly
files his return of income on time but he failed to file his return of
income of P.Y. 2019-20. His daughter let out the house property
received from him at a monthly rent of ` 40,000 from 01.11.2021.

126 INCOME TAX LAW
Based on the above information, choose the most appropriate option

of the following Multiple Choice Questions (MCQs):-
29.1 The amount of tax to be deducted by Aapka Paisa Bank on cash
withdrawals by Mr. Alishaan is -
(a) ` 10,000
(b) ` 25,000
(c) ` 1,85,000
(d) ` 4,25,000
29.2. The amount of tax to be deducted by Mr. Alishaan on payment
made to Daana Caterers is -
(a) ` 1,200
(b) ` 900
(c) ` 150
(d) Nil
29.3. For which of the following transactions, Mr. Alishaan is required
to quote his PAN?
(a) Purchase of immovable property from RK Builders
(b) Payment to Raho Hotel
(c) Payment to Travel agent
(d) All of the above
29.4 What shall be the amount taxable and in whose hands with
respect to purchase of immovable property by Mr. Alishaan from
RK Builders and gift of the same to his daughter?
(a) ` 1,00,000 in the hands of Mr. Alishaan, ` 1,00,000 in

the hands of RK builders and ` 20,00,000 in the hands
of minor daughter
(b) Nothing is taxable in the hands of Mr. Alishaan, RK
Builders and minor daughter
(c) ` 1,00,000 in the hands of Mr. Alishaan, ` 1,00,000 in
the hands of RK builders and nothing is taxable in the
hands of minor daughter

(d) Nothing is taxable in the hands of Mr. Alishaan and RK

Builders but ` 20,00,000 is taxable in the hands of minor
daughter
29.5. What shall be the amount taxable under “Income from House
property” with respect to let out of house property by daughter
of Mr. Alishaan and in whose hands it will taxable?
(a) ` 1,40,000 taxable in the hands of daughter of
Mr. Alishaan
(b) ` 1,40,000 taxable in the hands of husband of daughter
of Mr. Alishaan
(c) ` 1,38,500 taxable in the hands of Mr. Alishaan
(d) ` 1,40,000 taxable in the hands of Mr. Alishaan
Answer Keys
Question Answer
No.
29.1 (a) ` 10,000
29.2 (d) Nil
29.3 (a) Purchase of immovable property from RK Builders
29.4 (b) Nothing is taxable in the hands of Mr. Alishaan,
RK Builders and minor daughter
29.5 (c) ` 1,38,500 taxable in the hands of Mr. Alishaan
30. Mr. Ram, an Indian resident, purchased a residential house property at
Gwalior on 28.05.1999 for ` 28.5 lakhs. The fair market value and the
stamp duty value of such house property as on 1.4.2001 was ` 33.5
lakhs and ` 32.4 lakhs, respectively. On 05.02.2012, Mr. Ram entered
into an agreement with Mr. Byomkesh for sale of such property for
` 74 lakhs and received an amount of ` 3.9 lakhs as advance.
However, as Mr. Byomkesh did not pay the balance amount, Mr. Ram
forfeited the advance.
On 15.04.2021, Mr. Ram sold the house property for ` 2.10 crores,
when the stamp duty value of the property was ` 2.33 crores. Further,
he purchased two residential house properties at Delhi and Mumbai for
` 54 lakhs each on 28.08.2021.
On 28.02.2022, Mr. Ram signed agreement to sale the house property
at Mumbai to his nephew, Mr. Vaibhav, for ` 58 lakhs, from whom

128 INCOME TAX LAW
` 19,000 was received in cash on 15.01.2022 as advance for signing

the agreement to sale. Sale deed was registered on 30.03.2022 on
receipt of the balance amount through account payee cheque from
Mr. Vaibhav. The stamp duty value of house property at Mumbai on
28.02.2022 and 30.03.2022 was ` 61 lakhs and ` 64 lakhs,
respectively.
Cost inflation index –
P.Y. 2021-22: 317; P.Y. 2011-12: 184; P.Y. 2001-02: 100
Based on the above information, choose the most appropriate option
of the following Multiple Choice Questions (MCQs):-
30.1 What shall be the indexed cost of acquisition of residential house
property at Gwalior for computation of capital gains in the hands
of Mr. Ram?
(a) ` 1,06,19,500
(b) ` 1,02,70,800
(c) ` 90,34,500
(d) ` 93,83,200
30.2. The amount of capital gains taxable for A.Y. 2022-23 in the
hands of Mr. Ram for sale of residential house property at
Gwalior is -
(a) ` 34,65,500
(b) ` 88,65,500
(c) ` 31,16,800
(d) ` 18,80,500
30.3. The amount of capital gains taxable for A.Y. 2022-23 in the
hands of Mr. Ram for sale of residential house property at
Mumbai is -
(a) ` 7 lakhs
(b) ` 10 lakhs
(c) ` 61 lakhs
(d) ` 64 lakhs

30.4. The amount taxable under section 56(2)(x) in the hands of

Mr. Vaibhav, if any, is -
(a) ` 3 lakhs
(b) Nil
(c) ` 6 lakhs
(d) ` 5.50 lakhs
30.5. What shall be the total TDS available with Mr. Ram with respect
to sale of two house properties during P.Y. 2021-22 assuming
the tax was fully deducted by both the buyers at the time of
payment?
(a) ` 2,01,000
(b) ` 2,53,500
(c) ` 2,68,000
(d) ` 2,81,000
Answer Keys
Question Answer
No.
30.1 (c) ` 90,34,500
30.2 (a) ` 34,65,500
30.3 (d) ` 64 lakhs
30.4 (c) ` 6 lakhs
30.5 (c) ` 2,68,000

SECTION B:
INDIRECT TAXES

MULTIPLE CHOICE QUESTIONS
1. X & Co., a supplier registered under GST in Meghalaya, wants to opt

for composition levy. The aggregate turnover limit for composition levy
is-
(a) ` 50 lakh
(b) ` 75 lakh
(c) ` 1.5 crore
(d) none of the above
2. The person making inter-State supplies from Madhya Pradesh which is
not notified handicraft goods or predominantly hand-made notified
products, is compulsorily required to get registered under GST,
(a) if his aggregate turnover exceeds ` 20 lakh in a financial year
(b) if his aggregate turnover exceeds ` 10 lakh in a financial year
(c) irrespective of the amount of aggregate turnover in a financial
year
(d) in case of making inter-State supply of taxable goods,
irrespective of the amount of aggregate turnover in a financial
year
3. Which of the following supply of services are exempt under GST?
(i) testing of agricultural produce
(ii) supply of farm labour
(iii) warehousing of agricultural produce
(a) (i)
(b) (i) and (ii)
(c) (ii) and (iii)

132 INDIRECT TAXES
4. Mr. Narayan Goel has booked a room on rent in Sunshine Hotel for the
purpose of lodging on 10 th August. GST is not payable by Mr. Narayan
Goel in case value of supply for accommodation is
(a) ` 800 per day
(b) ` 6,000 per day
(c) ` 11,000 per day
(d) ` 1,500 per day
5. Input tax credit is not available in respect of .
(i) services on which tax has been paid under composition levy
(ii) goods given as free samples
(iii) goods used for personal consumption
(a) (i)
(b) (i) and (ii)
(c) (ii) and (iii)
6. Subhas & Co., a registered person, supplies taxable goods to
unregistered persons. It need not issue tax invoice, if the value of
supply of goods to such persons is and the recipient does not
require such invoice.
(a) ` 1,200
(b) ` 600
(c) ` 150
(d) ` 200
7. Various taxes have been subsumed in GST to make one nation one tax
one market for consumers. Out of the following, determine which
taxes have been subsumed in GST.
(i) Basic customs duty levied under Customs Act, 1962
(ii) Taxes on lotteries

(iii) Environment tax

(a) (ii)
(b) (ii) and (iii)
(c) (iii)
8. Services by way of transportation of by rail from Chennai to
Gujarat is exempt from GST.
(i) pulses
(ii) military equipments
(iii) electric equipments
(iv) jaggery
(a) (i) & (ii)
(b) (i) & (iii)
(c) (ii) & (iv)
(d) (i), (ii), (iii) & (iv)
9. Services by way of warehousing of is exempt from GST.
(i) tea
(ii) jaggery
(iii) betel leaves
(iv) processed cashew nuts
(a) (i) & (iv)
(b) (i), (ii), (iii) & (iv)
(c) (iv)
10. GST is not payable by recipient of services in the following cases:-
(i) Services provided by way of sponsorship to ABC Ltd. located in
India.

134 INDIRECT TAXES
(ii) Services supplied by a director (registered under GST) of

Galaxy Ltd. to Mr. Krishna
(iii) Services by Department of Posts by way of speed post to MNO
Ltd. located in India.
(iv) Services supplied by a recovering agent to SNSP Bank located
in India.
(a) (i) & (iii)
(b) (i) & (iv)
(c) (ii) & (iii)
(d) (ii) & (iv)
11. Mr. X, a casual taxable person, is not involved in making taxable
supplies of notified handicraft goods or predominantly hand-made
notified products. Which of the following statements is true for Mr. X -
a casual taxable person?
(a) Mr. X is not required to take registration under GST under any
circumstances.
(b) Mr. X is required to get registration under GST if the aggregate
turnover in a financial year exceeds ` 20 lakh.
(c) Mr. X is required to get registration under GST if the aggregate
turnover in a financial year exceeds ` 40 lakh.
(d) Mr. X has to compulsorily get registered under GST irrespective
of the threshold limit.
12. The registration certificate granted to non-resident taxable person is
valid for _____days from the effective date of registration or period
specified in registration application, whichever is earlier.
(a) 30
(b) 60
(c) 90
(d) 120

13. Which of the following activities shall be treated neither as supply of

goods nor supply of services?
(i) Permanent transfer of business assets where input tax credit
has been availed on such assets
(ii) Temporary transfer of intellectual property right
(iii) Transportation of the deceased
(iv) Services by an employee to the employer in the course of
employment
(a) (i) & (iii)
(b) (ii) & (iv)
(c) (i) & (ii)
(d) (iii) & (iv)
14 Balance in electronic credit ledger can be utilized against payment of
________________.
(a) output tax
(b) interest
(c) penalty
(d) late fees
15. How the aggregate turnover is calculated for determining threshold
limit of registration?
(a) Aggregate value of all taxable supplies (excluding the value of
inward supplies on which tax is payable by a person on reverse
charge basis and inter-State supplies), exempt supplies and
export of goods/services.
(b) Aggregate value of all taxable supplies (excluding the value of
charge basis), exempt supplies, export of goods/services and
inter-State supplies of a person computed for each State
separately.

136 INDIRECT TAXES
(c) Aggregate value of all taxable intra-State supplies, export of

goods/services and exempt supplies of a person having same
PAN computed for each State separately.
(d) Aggregate value of all taxable supplies (excluding the value of
charge basis), exempt supplies, export of goods/services and
inter-State supplies of a person having same PAN computed on
all India basis and excluding taxes if any charged under CGST
Act, SGST Act and IGST Act.
16. Within how many days a person should apply for registration under
GST, apart from provisions of voluntary registration?
(a) Within 60 days from the date he becomes liable for registration.
(b) Within 30 days from the date he becomes liable for registration.
(c) No time limit
(d) Within 90 days from the date he becomes liable for registration.
17. Kalim & Associates made an application for cancellation of GST
registration in the month of March due to closure of its business. Its
application for cancellation of GST registration was approved w.e.f. 4th
September by the proper officer by passing an order for the same on
14th September. In the given case, Kalim & Associates is:
(a) required to file Final Return on or before 4th December
(b) not required to file Final Return
(c) required to file Final Return on or before 30 th September
(d) required to file Final Return on or before 14 th December
18. Xylo & Co. has three branches, in Jalandhar, Amritsar and Ludhiana, in
the State of Punjab. Amritsar and Ludhiana branches are engaged in
supply of garments and Jalandhar branch engaged in supply of shoes.
Which of the following options is/are legally available for registration
to Xylo & Co.?

(i) Xylo & Co. can obtain single registration for Punjab state
declaring any one of the branches as principal place of business
and other two branches as additional place of business.
(ii) Xylo & Co. can obtain separate GST registration for each of the
three branches - Amristar, Jalandhar and Ludhiana.
(iii) Xylo & Co. can obtain one GST registration for shoe business
(Jalandhar branch) and another GST registration which is
common for garments business (Amritsar and Ludhiana).
(a) ii
(b) Either i, ii or iii
(c) Either i or ii
(d) Either ii or iii
19. What is the validity of the registration certificate granted under GST
for a normal tax payer?
(a) One year
(b) Two years
(c) Valid till it is cancelled
(d) Five years.
20. Within how many days an application for revocation of cancellation of
registration can be made provided no extension to said time-limit has
been granted?
(a) Within 7 days from the date of service of the cancellation order.
(b) Within 15 days from the date of the cancellation order.
(c) Within 45 days from the date of the cancellation order.
(d) Within 30 days from the date of service of the cancellation
order.
21. Can a registered person under composition scheme collect GST on his
outward supplies from recipients?
(a) Yes, in all cases

138 INDIRECT TAXES
(b) Yes, only on such goods as may be notified by the Central

Government
(c) Yes, only on such services as may be notified by the Central
Government
(d) No
22. In case of Goods Transport Agency (GTA) services, tax is to be paid
under forward charge if:
(a) GST is payable @ 12%
(b) GST is payable @ 5% and a factory registered under the
Factories Act, 1948 is the recipient of GTA service.
(c) An unregistered individual end consumer is the recipient of GTA
service.
(d) A registered casual taxable person is the recipient of GTA
service.
23. Which of the following services are not exempt from GST?
(a) Yoga camp conducted by a charitable trust registered under
section 12AB (erstwhile under section 12AA) of the Income-tax
Act, 1961.
(b) Services provided by business correspondent with respect to
Savings Bank Accounts in the rural branch of a bank
(c) Services provided by cord blood bank for preservation of stem
cells.
(d) Service provided by commentator to a recognized sports body
24. Which of the following activities is a supply of services?
(i) Transfer of right in goods/ undivided share in goods without
transfer of title in goods
(ii) Transfer of title in goods
(iii) Transfer of title in goods under an agreement which stipulates
that property shall pass at a future date upon payment of full
consideration as agreed.

(a) (i)
(b) (iii)
(c) (i) and (iii)
25. Rama Ltd. has provided following information for the month of
September:
Intra-State taxable outward supply ` 8,00,000
Inter-State exempt outward supply ` 5,00,000
Turnover of exported goods ` 10,00,000
Payment made for availing GTA services* ` 80,000
* GTA not paying tax @ 12%
Calculate the aggregate turnover of Rama Ltd.
(a) ` 8,00,000
(b) ` 23,80,000
(c) ` 23,00,000
(d) ` 18,00,000
26. ‘P’ Ltd. has its registered office, under the Companies Act, 2013, in the
State of Maharashtra from where it ordinarily carries on its business of
taxable goods. It also has a warehouse in the State of Telangana for
storing said goods. What will be the place of business of ‘P’ Ltd.
under the GST law?
(a) Telangana
(b) Maharashtra
(c) Both (a) and (b)
(d) Neither (a) nor (b)
27. An exempt supply includes-
(i) Supply of goods or services or both which attracts Nil rate of
tax

140 INDIRECT TAXES
(ii) Non-taxable supply

(iii) Supply of goods or services or both which are wholly exempt
from tax under section 11 of the CGST Act or under section 6 of
IGST Act
(a) (i)
(b) (i) and (ii)
(c) (ii) and (iii)
28. Which of the following services are exempt from GST?
(a) Services by an artist by way of a performance in classical art
forms of painting/sculpture making etc. with consideration
thereof not exceeding ` 1.5 lakh.
(b) Services by an artist by way of a performance in modern art
forms of music/ dance/ theatre with consideration thereof not
exceeding ` 1.5 lakh.
(c) Services by an artist by way of a performance in folk or classical
art forms of music/ dance/theatre with consideration thereof
exceeding ` 1.5 lakh.
(d) Services by an artist by way of a performance in folk or classical
art forms of music/ dance / theatre with consideration thereof
not exceeding ` 1.5 lakh.
29. Services by way of admission to ______________ is not exempt from
GST.
(a) Museum
(b) National park
(c) Tiger reserve
(d) Recognised sporting event where the admission ticket costs
` 600 per person.
30. Discount given after the supply has been effected is deducted from the
value of taxable supply, if –

(i) such discount is given as per the agreement entered into at/or
before the time of such supply
(ii) such discount is linked to the relevant invoices
(iii) proportionate input tax credit is reversed by the recipient of
supply
(a) (i)
(b) (i) and (ii)
(c) (ii) and (iii)
31. In which of the following situations, recipient needs to add the input
tax credit availed by him to his output tax liability?
(a) If payment for supplies along with tax payable thereon under
forward charge is not made to the supplier within 45 days from
the date of invoice
(b) If payment for supplies along with tax payable thereon under
forward charge is not made to the supplier within 90 days from
the date of invoice
(c) If payment for supplies along with tax payable thereon under
forward charge is not made to the supplier within 180 days
from the date of invoice
(d) If payment for supplies along with tax payable thereon under
forward charge is not made to the supplier within 1 year from
the date of invoice
32. Which of the following statements are correct?
(i) Revocation of cancellation of registration under SGST/UTGST
Act shall be deemed to be a revocation of cancellation of
registration under CGST Act.
(ii) Cancellation of registration under SGST/UTGST Act shall be
deemed to be a cancellation of registration under CGST Act.

142 INDIRECT TAXES
(iii) Revocation of cancellation of registration under SGST/UTGST

Act shall not be deemed to be a revocation of cancellation of
registration under CGST Act.
(iv) Cancellation of registration under SGST/UTGST Act shall not be
deemed to be a cancellation of registration under CGST Act.
(a) (i) and (ii)
(b) (i) and (iv)
(c) (ii) and (iii)
(d) (iii) and (iv)
33. If the goods are received in lots/instalment, _________________
(a) 50% ITC can be taken on receipt of 1st lot and balance 50% on
receipt of last lot.
(b) ITC can be availed upon receipt of last lot.
(c) 100% ITC can be taken on receipt of 1st lot.
(d) Proportionate ITC can be availed on receipt of each
lot/instalment.
34. For banking companies using inputs and input services partly for
taxable supplies and partly for exempt supplies, which of the following
statement is true?
(a) ITC shall be compulsorily restricted to credit attributable to
taxable supplies including zero rated supplies
(b) 50% of eligible ITC on inputs, capital goods, and input services
shall be mandatorily taken in a month and the rest shall lapse.
(c) Banking company can choose to exercise either option (a) or
option (b)
(d) ITC shall be compulsorily restricted to credit attributable to
taxable supplies excluding zero rated supplies.
35. A supplier takes deduction of depreciation on the GST component of
the cost of capital goods as per Income- tax Act, 1961. The supplier
can-

(a) avail only 50% of the said tax component as ITC

(b) not avail ITC on the said tax component
(c) avail 100% ITC of the said tax component
(d) avail only 25% of the said tax component as ITC
36. Warehousing services of is exempt from GST.
(i) Rice
(ii) Minor forest produce
(iii) Jaggery
(iv) Coffee
(a) i, ii, iii and iv
(b) i and iii
(c) ii, iii and iv
(d) iii
37. Which of the following services received, in the course or furtherance
of business, without consideration amount to supply?
(i) Import of services by a person in India from his son well-settled
in USA
(ii) Import of services by a person in India from his brother well-
settled in Germany
(iii) Import of services by a person in India from his brother (wholly
dependent on such person in India) in France
(iv) Import of services by a person in India from his daughter
(wholly dependent on such person in India) in Russia
(a) i, iii and iv
(b) ii, iii and iv
(c) ii and iii
(d) i and ii

144 INDIRECT TAXES
38. Which of the following persons engaged in making intra-state supplies

from Uttar Pradesh, as prescribed below, is not eligible for composition
levy under sub-sections (1) and (2) of the CGST Act, 2017 even
though their aggregate turnover does not exceed ` 1.5 crore in
preceding FY?
(a) A person supplying restaurant services
(b) A person supplying restaurant services and earning bank
interest
(c) A person trading in ice cream
(d) A person supplying service of repairing of electronic items
39. The time of supply of service in case of reverse charge mechanism is:
(a) Date on which payment entered in the books of account of the
recipient
(b) Date immediately following 60 days from the date of issue of
invoice
(c) Date on which the payment is debited in the bank account of
recipient
(d) Earlier of (a), (b) and (c)
40. Which of the following services does not fall under reverse charge
provisions as contained under section 9(3) of the CGST Act?
(a) Services supplied by arbitral tribunal to business entity located
in Ladakh
(b) Sponsorship services provided to a partnership firm located in
Jammu & Kashmir
(c) Sponsorship services provided to a body corporate located in
Kerala
(d) Service of renting of motor vehicle for passengers provided to a
recipient other than body corporate.
41. Which of the following services are exempt from GST?
(a) Admission to a circus where entry ticket costs ` 550 per person
(b) Interest charged on outstanding credit card balances

(c) Services by an organiser to any person in respect of a business

exhibition held in India
(d) Services by a foreign diplomatic mission located in India
42. ITC of motor vehicles used for making is allowed.
(i) Transportation of goods
(ii) Taxable supplies of transportation of passengers
(iii) Taxable supplies of imparting training on driving
(a) (i)
(b) (i) and (ii)
(c) (ii) and (iii)
43. Which of the following persons is required to obtain compulsory
registration?
(a) Persons exclusively engaged in making intra-State supplies, tax
on which is to be paid by the recipient on reverse charge basis
under section 9(3) of the CGST Act, 2017.
(b) Persons making inter-State supplies from other than special
category states of taxable services up to
` 20,00,000
(c) Persons making supplies of services from other than special
category states through an ECO required to collect TCS (other
than supplies specified under section 9(5) of the CGST Act)
with aggregate turnover up to ` 20,00,000
(d) Persons who make taxable supply of goods or services or both
on behalf of other taxable persons whether as an agent or
otherwise.
44. A non-resident taxable person is required to apply for registration:
(a) within 30 days from the date on which he becomes liable to
registration

146 INDIRECT TAXES
(b) within 60 days from the date on which he becomes liable to

registration
(c) at least 5 days prior to the commencement of business
(d) within 180 days from the date on which he becomes liable to
registration
45. Registration certificate granted to casual taxable person or non-
resident taxable person will be valid for:
(a) Period specified in the registration application
(b) 90 days from the effective date of registration
(c) Earlier of (a) or (b)
(d) Later of (a) or (b)
46. In case of taxable supply of services by a non-banking financial
company (NBFC) to, other than a distinct person, invoice shall be
issued within a period of from the date of supply of service.
(a) 30 days
(b) 45 days
(c) 60 days
(d) 90 days
47. Where the goods being sent or taken on approval for sale or return
are removed before the supply takes place, the invoice shall be issued:
(a) before/at the time of supply
(b) 6 months from the date of removal
(c) Earlier of (a) or (b)
(d) Later of (a) or (b)
48. Invoice shall be prepared in ___________ in case of taxable supply of
goods and in _____________ in case of taxable supply of services.
(a) Triplicate, Duplicate
(b) Duplicate, Triplicate

(c) Duplicate, Duplicate

(d) Triplicate, Triplicate
49. Which of the following shall be discharged first, while discharging
liability of a taxable person?
(a) All dues related to previous tax period
(b) All dues related to current tax period
(c) Demand raised under section 73 and 74
(d) No such condition is mandatory.
50. The due date of filing Final Return is .
(a) 20th of the next month
(b) 18th of the month succeeding the quarter
(c) within 3 months of the date of cancellation or date of order of
cancellation, whichever is later
(d) 31st December of next financial year
51. Which of the following statements is true under GST law?
(a) Grand-parents are never considered as related persons to their
grand-son/grand-daughter
(b) Grand-parents are always considered as related persons to their
(c) Grand-parents are considered as related persons to their grand-
son/grand-daughter only if they are wholly dependent on their
(d) Grand-parents are considered as related persons to their grand-
son/grand-daughter only if they are not dependent on their
52. Alcoholic liquor for human consumption is subjected to
(a) State excise duty
(b) Central Sales Tax/Value Added Tax

148 INDIRECT TAXES

(d) GST
53. Mr. A has a tax invoice [date of issue: 20-1-2021] of services received
by him. Its input tax credit is lost, if ITC is not availed on or before–
(a) 20-1-2022
(b) 31-12-2021
(c) 20-1-2023
(d) due date of filing return under Section 39 for September, 2021
or date of filing of annual return for 2020-21, whichever is
earlier.
54. Input tax credit shall not be available in respect of:
(i) Goods used for personal consumption
(ii) Membership of a club provided by the employer to its
employees as per company’s internal policy.
(iii) Travel benefits extended to employees on vacation such as
leave or home travel concession as per company’s internal
policy.
(a) (i)
(b) (i) and (ii)
(c) (ii) and (iii)
55. Which of the following is not considered as ‘goods’ under the CGST
Act, 2017?
(i) Ten-paisa coin having sale value of ` 100.
(ii) Shares of unlisted company
(iii) Lottery tickets
(a) (i)
(b) (ii)

(c) (ii) and (iii)

56. Mr Ram, a jeweller registered under GST in Mumbai, wants to sell his
jewellery in a Trade Expo held in Delhi. Which of the following
statements is false in his case?
(a) He needs to get registration in Delhi as casual taxable person.
(b) He needs to pay advance tax on estimated tax liability.
(c) He needs to mandatorily have a place of business in Delhi.
(d) He needs to file GSTR-1/ IFF and GSTR-3B for Delhi GSTIN for
the month or quarter, as the case may be, when he gets
registered in Delhi.
57. Which of the following is treated as exempt supply under the CGST
Act, 2017?
(i) Sale of liquor
(ii) Supply of health care services by a hospital
(iii) Transmission of electricity by an electricity transmission utility
(a) (i)
(b) (ii)
(c) (ii) and (iii)
58. Which of the following is a recognised system of medicine for the
purpose of exemption for health care services?
(i) Allopathy
(ii) Unani
(iii) Siddha
(a) (i)
(b) (ii)

150 INDIRECT TAXES
(c) (ii) and (iii)

59. Which of the following services is exempt under health care services
provided by clinical establishments?
(a) Chemist shop in the hospital selling medicines to public at large.
(b) Food supplied by canteen run by the Hospital to in-patients as
per diet prescribed by the hospital’s dietician.
(c) Food supplied to the visitors or attendants of the patients in the
hospital by canteen run by the Hospital.
(d) Advertisement services provided by the hospital to a
pharmaceutical company for their asthma pump by displaying it
prominently in the hospital building
60. In case of supply of goods for ` 5,00,000, following information is
provided-
Advance received on 1st April
Invoice issued on 15th April
Goods removed on 25 th April
What is the time of supply of goods, where tax is payable under
forward charge?
(a) 1st April
(b) 15th April
(c) 25th April
(d) 30th April
61. Sham Ltd., located in Mumbai, is receiving legal services from a lawyer
Mr. Gyan, registered under GST. The aggregate turnover of Sham Ltd.
in the preceding financial year is ` 42 lakh. The information regarding
date of payment, invoice etc. is as follows-
Invoice issued by Mr. Gyan on 15th April
Payment debited in the bank account of Sham Ltd. on 5th May

Date of payment entered in books of accounts of Sham Ltd.: 1st May

What is time of supply of services?
(a) 1st May
(b) 5th May
(c) 15th June
(d) 15th April
62. Which of the following is not eligible for opting composition scheme
under sub-sections (1) and (2) of section 10 of the CGST Act, 2017?
(a) M/s ABC, a firm selling garments solely in Ahmedabad, having
aggregate turnover of ` 78 lakh in the preceding F.Y.
(b) A start up company exclusively operating a restaurant in Delhi,
having aggregate turnover of ` 98 lakh in the preceding F.Y.
(c) A courier service company operating solely in Mumbai having
(d) A trader selling grocery items solely in Orissa having an
63. Assuming that all the activities given below are undertaken for a
consideration, state which of the following is not a supply of service ?
(a) Renting of commercial office complex
(b) An employee agreeing to not work for the competitor
organization after leaving the current employment
(c) Repairing of mobile phone
(d) Provision of services by an employee to the employer in the
course of employment
64. During the month of May, Z Ltd. sold goods to Y Ltd. for ` 2,55,000
and charged GST @ 18%. However, owing to some defect in the
goods, Y Ltd. returned some of the goods by issuing debit note of
` 40,000 in the same month. Z Ltd. records the return of goods by
issuing a credit note of ` 40,000 plus GST in the same month. In this
situation, GST liability of Z Ltd. for the month of May will be-

152 INDIRECT TAXES
(a) ` 45,900
(b) ` 38,700
(c) ` 53,100
(d) ` 40,000
65. C & Co., a registered supplier in Delhi, opted for composition levy
under sub-sections (1) and (2) of section 10 of the CGST Act, 2017. It
sold goods in the fourth quarter of a financial year for ` 15,00,000
(exclusive of GST). The applicable GST rate on these goods is 12%.
C & Co. purchased goods from Ramesh & Co., registered in Delhi, for
` 9,55,000 on which Ramesh & Co. had charged CGST of ` 57,300 and
SGST of ` 57,300. C & Co. had also purchased goods from E & Co.,
registered in Haryana, for ` 2,46,000 on which E & Co. had charged
IGST of ` 29,520. GST liability of C & Co. for the fourth quarter of the
financial year is-
(a) CGST ` 7,500 & SGST ` 7,500
(b) CGST ` 3,180 & SGST ` 32,700
(c) CGST ` 32,700 & SGST ` 3,180
(d) CGST Nil and SGST Nil
66. Mr. Raghu avails services of Mr. Raja, a Chartered Accountant, as
under-
(i) Audit of financial accounts of Mr. Raghu ` 55,000
(ii) Tax audit and annual accounts filing of Mr. Raghu ` 10,000
(iii) Income-tax return filing of Mr. Raghu ’s wife
(salaried-return) ` 5,000
All the above amounts are exclusive of taxes and the applicable rate of
GST on these services is 18%.
The accountant of Mr. Raghu has booked the entire expenses of
` 70,000 plus GST in the books of account. Mr. Raghu is eligible to
take input tax credit of -
(a) ` 13,500

(b) ` 11,700
(c) ` 9,900
(d) ` 1,800
67. TT Pvt. Ltd., registered in Rajasthan, furnished following information
for the month of June:
(i) Inter-State sale of goods for ` 1,25,000 to JJ Enterprises
registered in Haryana
(ii) Inter-State purchases of goods from XYZ company, registered
in Punjab, for ` 40,000
(iii) Intra-State purchases of goods from RR Traders, registered in
Rajasthan, for ` 65,000
The applicable rate of GST is 18%. There is no opening balance of
ITC. All the above amounts are exclusive of taxes. GST liability
payable in cash is-
(a) CGST ` 1,800 & SGST ` 1,800
(b) SGST ` 3,600
(c) IGST ` 3,600
(d) CGST ` 3,600
68. Pradeep Traders, registered in Haryana, sold goods inter-State for
` 2,05,000 to Balram Pvt. Ltd. registered in Uttar Pradesh (GST is
leviable @ 5% on said goods). As per the terms of sales contract,
Pradeep Traders has to deliver the goods at the factory of Balram Pvt.
Ltd. For this purpose, Pradeep Traders has charged freight of ` 2,400
from Balram Pvt. Ltd. GST is leviable @ 12% on freight. What would
be the output GST liability in this case assuming that the amounts
given herein are exclusive of GST?
(a) IGST-` 37,332
(b) IGST-` 10,370
(c) CGST-` 18,666 and SGST-` 18,666
(d) CGST-` 5,185 and SGST-` 5,185

154 INDIRECT TAXES
69. Prem & Sons had taken GST registration on 1 st January, but failed to
furnish GST returns for the next 6 months. Owing to this, the proper
officer cancelled its registration on 25 th July and served the order for
cancellation of registration on 31 st July. Now, Prem & Sons wants to
revoke the cancellation of registration. Upto which date an application
for revocation of cancellation of registration can be filed assuming no
extension to said time-limit has been granted?
(a) 30th August
(b) 31st August
(c) 25th August
(d) 29th October
70. XX, registered in Delhi, purchased books from PC Traders, registered
in Uttar Pradesh. Books are exempt from GST. XX arranged the
transport of these books from a goods transport agency (GTA) which
charged a freight of ` 9,000 for the same. GST is payable @ 5% on
such GTA services. Which of the following statement is correct in the
given context:
(a) GST of ` 450 is payable by XX on revere charge basis.
(b) Supply of goods and supply of GTA service is a composite
supply wherein supply of goods is the principal supply and since
principal supply is an exempt supply, no tax is payable on
freight.
(c) Since exempt goods are being transported, service provided by
GTA for transporting the same is also exempt.
(d) GST of ` 450 is payable by the GTA.
71. Sahil, a resident of Delhi, is having a residential property in Vasant
Vihar, Delhi which has been given on rent to a family for ` 50 lakh per
annum for use as a residence. Determine whether Sahil is liable to pay
GST on such rent.
(a) Yes, as services by way of renting is taxable supply under GST.
(b) No, service by way of renting of residential property is exempt.

(c) No, service by way of renting of residential property does not

constitute supply.
(d) Sahil, being individual, is not liable to pay GST.
72. Goods as per section 2(52) of the CGST Act, 2017 includes:
(i) Actionable claims
(ii) Growing crops attached to the land agreed to be severed
before supply.
(iii) Money
(iv) Securities
(a) (i) and (iii)
(b) (iii) and (iv)
(c) (i) and (ii)
(d) (ii) and (iii)
73. Mr. Z of Himachal Pradesh starts a new business and makes following
supplies in the first month-
(i) Intra-State supply of taxable goods amounting to ` 17 lakh
(ii) Supply of exempted goods amounting to ` 1 lakh
(iii) Inter-State supply of taxable goods amounting to ` 1 lakh
Whether he is required to obtain registration, if the aforesaid goods are
not handicraft goods or predominantly hand-made products, as notified?
(a) Mr. Z is liable to obtain registration as the threshold limit of
` 10 lakh is crossed.
(b) Mr. Z is not liable to obtain registration as he makes exempted
supplies.
(c) Mr. Z is liable to obtain registration as he makes the inter-State
supply of goods.
(d) Mr. Z is not liable to obtain registration as the threshold limit of
` 20 lakh is not crossed.

156 INDIRECT TAXES
74. Determine which of the following independent cases will be deemed as

supply even if made without consideration in terms of Schedule I of
the CGST Act, 2017?
(i) AB & Associates transfers stock of goods from its Mumbai
branch to Kolkata depot for sale of such goods at the depot.
(ii) Mr. Raghuveer, a dealer of air-conditioners permanently
transfers the motor vehicle free of cost. ITC on said motor
vehicle was blocked and therefore, was not availed.
(iii) Mrs. Riddhi, an employee of Sun Ltd., received gift from her
employer on the occasion of Diwali worth ` 21,000.
(a) (i)
(b) (ii)
(c) (iii)
(d) Both (i) and (ii)
75. PZY Ltd. is engaged in manufacturing of motor car. The company paid
following amount of GST to its suppliers against the invoices raised to
it. Compute the amount of ineligible input tax credit under GST law: -
S.No. Particulars GST Paid
(`)
1. General insurance taken on cars 1,00,00,000
manufactured by PZY Ltd.
2. Buses purchased for transportation of 25,00,000
employees (Seating capacity 23)
3. Life and health insurance for employees 6,00,000
under statutory obligation
4. Outdoor catering in Diwali Mela organized for 3,50,000
employees
(a) ` 9,50,000
(b) ` 3,50,000
(c) ` 1,31,00,000
(d) ` 28,50,000

76. Which of the following statements is/are incorrect under GST law: -
(i) If the supplier has erroneously declared a value which is more
than the actual value of goods or services provided, then he
can issue credit note for the same.
(ii) If the supplier declared some special discount which is offered
after the supply is over, then he cannot issue credit note under
GST law for the discount offer.
(iii) If quantity received by the recipient is more than what has
been declared in the tax invoice, then supplier can issue debit
note for the same.
(iv) There is no time limit to declare the details of debit note in the
return.
(a) (i),(ii) and (iv)
(b) (i) and (iv)
(c) (iv)
(d) (i) and (iii)
77. Ms. Pearl is a classical singer. She wants to organize a classical singing
function, so she booked an auditorium on 10 th August for a total
amount of ` 20,000. She paid ` 5,000 as advance on that day. The
classical singing function was organized on 10 th October. The
auditorium owner issued invoice to Ms. Pearl on 25 th November
amounting to ` 20,000. Pearl made balance payment of ` 15,000 on
30th November. Determine the time of supply in this case.
(a) Time of supply is 25 th November for ` 20,000.
(b) Time of supply is 25 th November for ` 5,000 & 30 th November
for ` 15,000.
(c) Time of supply is 10 th August for ` 5,000 & 10 th October for
` 15,000.
(d) Time of supply is 10 th October for ` 20,000.
78. ABC Ltd. generated e-way bill on 12 th February at 14.00 hrs. It used
over-dimensional cargo for a distance of 100 km. When the validity

158 INDIRECT TAXES
period of the e-way bill will expire, if there is no extension of the

same?
(a) Midnight of 13 th-14th February
(b) Midnight of 17 th-18th February
(c) At 14.00 hrs. of 13 th February
(d) At 14.00 hrs. of 14 th February
79. An exempt supply includes-
(i) Supply of goods or services or both which attracts Nil rate of
tax
(ii) Non-taxable supply
(iii) Supply of goods or services or both which are wholly exempt
from tax under section 11 of the CGST Act or under section 6 of
IGST Act
(a) (i)
(b) (i) and (ii)
(c) (ii) and (iii)
80. Ram, an individual, based in Gujarat, is in employment and earning
` 10 lakh as salary. He is also providing consultancy services to
different organizations on growth and expansion of business. His
turnover from the supply of such services is ` 12 lakh. Determine
whether Ram is liable for taking registration as per provisions of the
Act?
(a) Yes, as his aggregate turnover is more than ` 20 lakh.
(b) No, as his aggregate turnover is less than ` 40 lakh.
(c) No, as services in the course of employment does not
constitute supply and therefore, aggregate turnover is less than
` 20 lakh.
(d) Yes, since he is engaged in taxable supply of services.

81. Harish Trading Company situated in Haryana, is a dealer of seeds

(exempt by exemption notification) & chemical fertilizers (taxable). He
is about to cross the threshold limit of registration under GST and
wants to opt for Composition Scheme under section 10(1) and 10(2) of
the CGST Act. His entire supply is made exclusively within the State of
Haryana. You being his Chartered Accountant, advise whether he can
do so or not?
(a) Yes, since aggregate turnover is less than ` 1.5 crore.
(b) No, a person effecting supply exempted by way of exemption
notification cannot opt for composition scheme under section
10(1) and 10(2) of the CGST Act.
(c) No, a trader cannot opt for composition scheme.
(d) No, a supplier of chemical fertilizer cannot opt for composition
scheme.
82. Ash & Co, registered in Delhi, is a manufacturer of hardware items. He
has purchased a machine on 01.06.2020 for ` 59,000 ( ` 50,000 +
` 9000 GST@ 18 %). GST of ` 9000 has been claimed by him as ITC.
Now, on 01.01.2022, he sold his machinery to an unrelated party,
Aggawal & Sons of Rajasthan for ` 47,200 (40,000 plus ` 7,200 GST @
18%). Determine how much tax Ash & Co. is liable to pay?
(a) ` 7,200
(b) ` 5,850
(c) ` 9,000
(d) ` 3,150
83. P.K. Traders, engaged in manufacturing of taxable as well as exempt
goods, purchased a machinery worth ` 17,70,000 (` 15,00,000 plus
` 2,70,000 GST). It capitalized full amount including taxes in the books
of accounts and claimed depreciation on it as per provisions of the
Income Tax Act, 1961. Compute the amount of ITC that can be
claimed by P.K. Traders?
(a) ` 2,70,000
(b) Zero

160 INDIRECT TAXES
(c) In proportion of taxable and exempt supply

(d) By decreasing percentage points as prescribed
84. Mr. Rahim wants to start a new business of trading of footwear in
Meghalaya. In order to expand his business he will also make such
supplies through e-commerce operator who will collect tax at source.
In this respect, he has approached you to seek an advice on GST
registration. Determine when he is required to get registered under
GST?
(a) Required to get registered when the turnover reaches the
threshold limit of ` 40 lakh.
(b) Required to get registered mandatorily irrespective of the
turnover limit as he will be making supplies through
e-commerce platform.
(c) Required to get registered when the turnover reaches the
(d) Required to get registered when the turnover reaches the
85. While conducting the GST audit of Vishwas Bank, it was discovered that
bank has not charged GST on certain supplies made by it. In this respect,
determine which of the following supplies made by Bank is taxable?
(a) Discounting of bills receivable
(b) Interest charged on loans
(c) Interest charged on credit card services
(d) Sale of foreign currency amongst banks
Answer Keys
Question Answer
No.
1 (b) ` 75 lakh
2 (d) in case of making inter-State supply of taxable
goods, irrespective of the amount of aggregate
turnover in a financial year

3 (d) (i), (ii) and (iii)

4 (a) ` 800
6 (c) ` 150
7 (a) (ii)
8 (a) (i) & (ii)
10 (c) (ii) & (iii)
11 (d) Mr. X has to compulsorily get registered under
GST irrespective of the threshold limit.
12 (c) 90
13 (d) (iii) & (iv)
14 (a) output tax
15 (d) Aggregate value of all taxable supplies (excluding
the value of inward supplies on which tax is
payable by a person on reverse charge basis),
exempt supplies, export of goods/services and
inter-State supplies of a person having same PAN
computed on all India basis and excluding taxes if
any charged under CGST Act, SGST Act and IGST
Act.
16 (b) Within 30 days from the date he becomes liable for
registration.
17 (d) required to file Final Return on or before 14 th
December
18 (c) Either (i) or (ii)
19 (c) Valid till it is cancelled
20 (d) Within 30 days from the date of service of the
cancellation order.
21 (d) No
22 (a) GST is payable @ 12%
23 (d) Service provided by commentator to a recognized
sports body
24 (a) (i)

162 INDIRECT TAXES
25 (c) ` 23,00,000/-
26 (c) Both (a) and (b)
27 (d) (i), (ii) and (iii)
28 (d) Services by an artist by way of a performance in
folk or classical art forms of music/ dance /
theatre with consideration thereof not exceeding
` 1.5 lakh.
29 (d) Recognised sporting event where the admission
ticket costs ` 600 per person.
30 (d) (i), (ii) and (iii)
31 (c) If payment for supplies along with tax payable
thereon under forward charge is not made to the
supplier within 180 days from the date of invoice
32 (a) (i) and (ii)
33 (b) ITC can be availed upon receipt of last lot.
34 (c) Banking company can choose to exercise either
option (a) or option (b)
35 (b) not avail ITC on the said tax component
36 (a) i, ii, iii and iv
37 (a) i, iii and iv
38 (d) A person supplying service of repairing of
electronic items
39 (d) Earlier of (a), (b) and (c)
40 (d) Service of renting of motor vehicle for passengers
provided to a recipient other than body corporate.
41 (d) Services by a foreign diplomatic mission located in
India
42 (d) (i), (ii) and (iii)
43 (d) Persons who make taxable supply of goods or
services or both on behalf of other taxable persons
whether as an agent or otherwise.
44 (c) at least 5 days prior to the commencement of
business
45 (c) Earlier of (a) or (b)

46 (b) 45 days
47 (c) Earlier of (a) or (b)
48 (a) Triplicate, Duplicate
49 (a) All dues related to previous tax period
50 (c) within 3 months of the date of cancellation or date
of order of cancellation, whichever is later
51 (c) Grand-parents are considered as related persons to
their grand-son/grand-daughter only if they are
wholly dependent on their grand-son/grand-
daughter
52 (c) Both (a) and (b)
53 (d) Due date of filing return for September, 2021 or
date of filing of annual return for 2020-21,
whichever is earlier.
54 (d) (i), (ii) and (iii)
55 (b) (ii)
56 (c) He needs to mandatorily have a place of business
in Delhi.
57 (d) (i), (ii) and (iii)
58 (d) (i), (ii) and (iii)
59 (b) Food supplied by canteen run by the Hospital to in-
patients as per diet prescribed by the hospital’s
dietician
60 (b) 15th April
61 (a) 1st May
62 (c) A courier service company operating solely in
Mumbai having aggregate turnover of ` 90 lakh in
the preceding F.Y.
63 (d) Provision of services by an employee to the
employer in the course of employment
64 (b) ` 38,700
65 (a) CGST ` 7,500 & SGST ` 7,500
66 (b) ` 11,700
67 (c) IGST ` 3,600

164 INDIRECT TAXES
68 (b) IGST-` 10,370

69 (a) 30th August
70 (a) GST of ` 450 is payable by XX on revere charge
basis.
71 (b) No, service by way of renting of residential
property is exempt.
72 (c) (i) and (ii)
73 (c) Mr. Z is liable to obtain registration as he makes
the inter-State supply of goods.
74 (a) (i)
75 (b) ` 3,50,000
76 (c) (iv)
77 (c) Time of supply is 10th August for ` 5,000 & 10th
October for ` 15,000.
78 (b) Midnight of 17 th-18th February
79 (d) (i), (ii) and (iii)
80 (c) No, as services in the course of employment
does not constitute supply and therefore,
aggregate turnover is less than ` 20 lakh.
81 (a) Yes, since aggregate turnover is less than ` 1.5
crore.
82 (a) ` 7,200
83 (b) Zero
84 (b) Required to get registered mandatorily irrespective
of the turnover limit as he will be making supplies
through e-commerce platform.
85 (c) Interest charged on credit card services

CASE SCENARIOS
1. Mr. Pasupathi, registered taxpayer under GST, is engaged in trading of

various types of consumer goods. His turnover in se preceding
financial year was below the threshold limit liable for registration.
During the month of April in the current year, he availed the following
services-
(a) GTA services from XYZ Transports (GST was charged @ 5%) –
` 35,000
(b) Renting of Godown premises from Local Municipality– ` 40,000
(c) Legal service availed from a Firm of Advocates – ` 50,000
He sold a car used for his personal purposes for ` 1,00,000. He
disposed off his old computers for ` 60,000 on which no ITC was
claimed. He also gave away his stock of old consumer goods
amounting to ` 75,000 (on which he had claimed ITC) to an
Orphanage Home.
He received goods on 1st May that are liable to tax under reverse
charge. Invoice was issued on 5th May and payment for the same was
made on 6th June entered in the books of accounts on same day and
debited in the bank account on 7 th June.
He paid repair expenses for truck used for transportation of goods of
his business. GST component involved thereon was ` 13,000. He
arranged for catering for his workers on Labour Day function and paid
bill in which GST component was ` 15,000. He received first lot of
certain goods having GST component of ` 25,000.
All the amounts given above are exclusive of taxes, wherever
applicable. All the supplies referred above are intra-State unless
specified otherwise. Conditions necessary for claiming ITC have been
fulfilled subject to the information given above.
Based on the information given above, choose the most appropriate
answer for the following questions:-

166 INDIRECT TAXES
1.1 Determine the value of services taxable under reverse charge

mechanism?
(a) ` 35,000
(b) ` 75,000
(c) ` 85,000
(d) ` 1,25,000
1.2 In respect of sale of personal car and disposal of computer and
stock of goods, total value of supply will be ___________
(a) ` 60,000
(b) ` 75,000
(c) ` 1,35,000
(d) ` 2,35,000
1.3 Time of Supply of goods received by Mr. Pasupathi is
_____________
(a) 1st May
(b) 5th May
(c) 5th June
(d) 6th June
1.4 Compute the amount of input tax credit (except ITC on services
taxable under reverse charge mechanism) that can be claimed
by Mr. Pasupathi?
(a) ` 28,000
(b) ` 38,000
(c) ` 40,000
(d) ` 13,000

Answers Key
Question Answer
No.
1.1 (b) ` 75,000
1.2 (a) ` 60,000
1.3 (a) 1st May
1.4 (d) ` 13,000
2. M/s. Vittal & Co., a registered supplier under GST, is dealing in supply
of taxable goods in the State of Karnataka.
The firm had opted for Composition Scheme from April month of last
financial year. It’s turnover crossed ` 1.50 Crores on 9 th May of current
financial year and had opted for withdrawal of composition scheme on
the said date.
Vittal & Co. removed goods on 10 th June for delivery to Suri & Co. on
‘Sale or Return Basis’. Suri & Co. accepted the goods vide its
confirmation mail dated 15 th December.
The firm has paid GST for various items during the month of August. It
comprised of the following-
(a) GST paid on input services intended to be used for personal
purposes – ` 12,000
(b) GST paid on purchase of Motor Vehicle for business use (being
a two-wheeler having engine capacity of 25CC) – ` 9,000
(c) GST paid on purchase of computer – ` 19,000
(GST portion was included as part of cost to claim depreciation
under Income-tax Act, 1961)
During May, Vittal and Co. had reversed ITC of ` 10,000 for not
making payment to Vendors within the time prescribed under CGST
Act, 2017. This pending payment was cleared in the month of August.
Out of purchases made and ITC availed during earlier months, the
following information is made available as on September:

168 INDIRECT TAXES
Supplier Name Payment is due for Related ITC

(Number of days) Component
XYZ 165 ` 13,000
ABC 199 ` 15,000
PQR 99 ` 20,000
Vittal & Co received accounting services from Raghu & Co., an
associated enterprise, located in Sri Lanka. Raghu & Co. issued invoice
for the service on 1 st September, which was entered by Vittal & Co. in
its book on 10 th October. But payment was made on 30 th September.
All the supply referred above is intra-State unless specified otherwise.
Conditions applicable for availment of ITC are fulfilled subject to the
information given above.
Based on the information provided above, choose the most appropriate
answer for the following questions-
2.1 Vittal & Co. needs to furnish a statement containing details of
stock of inputs/ inputs held in semi-finished / finished goods on
the withdrawal of composition scheme by ______
(a) 9th May
(b) 23rd May
(c) 8th June
(d) 7th July
2.2 In respect of the goods sent on sale or return basis, Vittal &
Co. shall issue the invoice by ________
(a) 10th June
(b) 10th September
(c) 10th December
(d) 15th December
2.3 Determine the amount of eligible input tax credit that can be
availed by Vittal & Co for the month of August?
(a) Nil

(b) ` 19,000
(c) ` 22,000
(d) ` 50,000
2.4 Compute the amount of ITC to be reversed for the month of
September? Ignore interest liability, if any.
(a) Nil
(b) ` 28,000
(c) ` 15,000
(d) ` 13,000
2.5 Time of supply in respect of service imported by Vittal & Co
from its Associated Enterprise is ___________
(a) 1st September
(b) 30th September
(c) 1st October
(d) 10th October
Answer Key
Question Answer
No.
2.1 (c) 8th June
2.2 (c) 10th December
2.3 (b) ` 19,000
2.4 (c) ` 15,000
2.5 (b) 30th September
3. M/s. Triambak & Co., a LLP registered dealer under GST is engaged in
various types of business activities.
It provided GTA services to Government Department, registered under
GST for providing various services for which GST is payable @ 5%.
The firm provided services of Direct Selling Agency (DSA Services) to
NBFC located in Mumbai.

170 INDIRECT TAXES
The firm also provided gift to each of its employees valuing ` 50,000
once in a financial year.
M/s Triambak & Co let out its warehouse to Mr. Grushnesh, who in
turn let out to an Agriculturist for warehousing of agricultural produce.
The firm also undertakes milling of paddy into rice for various
agriculturists (not under the Public Distribution Scheme).
The firm paid GST with respect to an order served by the GST
authority demanding to pay GST on two counts-
(a) Demand to pay GST of ` 45,000 for suppression of sales figures
in monthly returns
(b) Demand to pay GST ` 55,000 for fraudulently obtaining refund
of GST.
Further, in a particular month, the GST liability of the firm was
` 20,000 IGST; ` 10,000 CGST; ` 10,000 SGST. The following credits
were available in the said month-
IGST: ` 8,000
CGST: ` 12,000
SGST: ` 5,000
applicable. All the supply referred above is intra-State unless specified
otherwise. Conditions for availing ITC are fulfilled subject to the
3.1 Choose the correct statement(s).
(i) For GTA services, Government is liable to pay GST under
reverse charge
(ii) For DSA services, NBFC is liable to pay GST under
reverse charge
(iii) For GTA services, Triambak & Co is liable to pay GST
under forward charge

(iv) For DSA services, Triambak & Co is liable to pay GST

under forward charge
(a) i & ii
(b) iii & iv
(c) i & iv
(d) ii & iv
3.2 Gift of ` 50,000 in value provided by Triambak & Co to each of
its employee will be
(a) Supply of goods
(b) Supply of services
(c) Both supply of goods and services
(d) Neither supply of goods nor supply of services
3.3 Which of the following statement is correct:-
(i) Letting out of warehouse to Grushnesh is exempt
(ii) Milling of paddy into rice is exempt
(iii) Letting out of warehouse to Grushnesh is not exempt
(iv) Milling of paddy into rice is not exempt
(a) i & ii
(b) iii & iv
(c) i & iv
(d) ii & iii
3.4 M/s Triambak & Co is eligible to claim input tax credit of
_________
(a) ` 45,000
(b) ` 55,000
(c) ` 1,00,000
(d) Nil

172 INDIRECT TAXES
3.5 Compute the GST liability of the firm to be paid in cash, if rule
86B is not applicable?
(a) IGST: ` 10,000; CGST: Nil, SGST: ` 5000
(b) IGST: ` 12,000; CGST: Nil; SGST: ` 5000
(c) IGST: Nil; CGST: ` 10,000, SGST: ` 5000
(d) IGST: 5,000; CGST: Nil , SGST: 10,000
Answer Key
Question Answer
No.
3.1 (c) i & iv
3.2 (d) Neither Supply of goods nor supply of Services
3.3 (b) iii & iv
3.4 (d) Nil
3.5 (a) IGST: ` 10,000; CGST: Nil, SGST: ` 5000
4. Ms. Chanchala, is a doctor, registered person under GST, having in-

patient facility in her hospital.
She availed interior decoration services from her spouse without any
consideration being paid. She also availed IT related services from her
sister-in-law without any consideration. Both services were for the
purpose of her profession.
Ms. Chanchala provided treatment of various diseases in her hospital
and apart from that she also provided the following services in her
hospital-
(a) Plastic surgery to enhance the beauty of the face
(b) Ambulance service for transportation of patients
(c) Renting of space to run medical store in hospital premises
She is also a consultant in other hospitals and received ` 40,00,000 as
consultancy fee from the other hospitals.

Further, she also provides canteen facility and received ` 55,000 from
in-patients, ` 35,000 from patients who are not admitted and ` 25,000
from visitors for the same facility.
She filed GSTR-3B for the month of June with some errors. She filed
the Annual return for the said financial year on 31 st October of the
next year, whereas due date for the said Annual return is
31st December of the next year.
Proper Officer of the department cancelled the registration certificate
of Ms. Chanchala suo-motu on 31 st July. Order of cancellation was
served on 5 th August. However, she applied for revocation of the same
and got her registration restored back.
specified otherwise.
4.1 Which of the following is a correct statement as per the
provisions of CGST Act, 2017?
(i) Service availed from her Spouse is a deemed supply
(ii) Service availed from her Sister-in-Law is a deemed
supply
(iii) Service availed from her Spouse is not a deemed supply
(iv) Service availed from her Sister-in-Law is not a deemed
supply
(a) (i) and (iv)
(b) (iii) and (iv)
(c) (ii) and (iii)
(d) (i) and (ii)

174 INDIRECT TAXES
4.2 Compute the taxable value of supply of canteen service

provided by Ms. Chanchala?
(a) ` 25,000
(b) ` 35,000
(c) ` 60,000
(d) ` 80,000
4.3 By which date Ms. Chanchala should have applied for
revocation of cancellation of registration certificate, in case no
extension is granted?
(a) 5th August
(b) 20th August
(c) 30th August
(d) 4th September
4.4 Maximum time permissible for rectification of error committed
in monthly return of June is ________
(a) 20th July
(b) 20th October of the next year
(c) 31st October of the next year
(d) 31st December of the next year
4.5 Determine which of the following services provided by Ms.
Chanchala and her hospital is exempt from GST?
(i) Plastic surgery to enhance the beauty of the face
(ii) Ambulance service for transportation of patients
(iii) Renting of space to run medical store in hospital
premises
(iv) Consultancy service by Ms. Chanchala in other hospitals
(a) (i), (ii) & (iv)
(b) (i), (ii)

(c) (ii) & (iv)

(d) (i) & (iii)
Answer Key
Question Answer
No.
4.1 (a) (i) and (iv)
4.2 (c) ` 60,000
4.3 (d) 4th September
4.4 (b) 20th October of the next year
4.5 (c) (ii) & (iv)
5. M/s. Visali & Co, a Partnership firm, is engaged in manufacturing of

equipments in the State of Kerala.
The firm became liable for registration on 10 th July. It applied for
registration on 10 th August and was granted registration certificate by
14th August.
The firm received sponsorship services from “Leisure Treat Bay Private
limited’’ for conducting a business expo. It received a consignment
from M/s. Safe Logistics, a GTA, which charged 6% each CGST and
SGST for its services. It also received security services from Prompt
Security Agency Pvt. Ltd.
The firm had opted for composition levy and its turnover for the
quarter ending September was ` 14 lakh, out of which taxable supply
amounted to ` 10 lakh and exempt supply amounted to ` 4 lakh.
The firm made a supply of equipments to an unrelated limited
company in the month of October having market value of ` 12 lakh,
wholesale value of ` 13 lakh and maximum retail price was ` 14 lakh.
However, the transaction was made at ` 11 lakh.
The firm belatedly paid the tax amounting to ` 40,000 for the quarter
ending December on 09 th February of the succeeding year.

176 INDIRECT TAXES

5.1 The effective date of registration of M/s. Visali & Co is ______
(a) 10th July
(b) 9th August
(c) 10th August
(d) 14th August
5.2 Amongst the services availed by M/s. Visali & Co, which of the
following services are taxable under reverse charge
mechanism?
(i) Sponsorship services received from Leisure Treat Bay
Pvt. Ltd. Co.
(ii) GTA Services received from Safe Logistics
(iii) Security Services received from Prompt Security Agency
Pvt. Ltd.
(a) i
(b) i & ii
(c) i & iii
(d) ii & iii
5.3 Determine the value of supply of equipments under section
15(1) of CGST Act, 2017 made by M/s. Visali & Co. in the
month of October?
(a) ` 14 lakh
(b) ` 13 lakh
(c) ` 12 lakh
(d) ` 11 lakh

5.4 Compute the tax payable by the firm for the quarter ending
September under CGST and SGST?
(a) ` 5,000 each
(b) ` 7,000 each
(c) ` 10,000 each
(d) ` 35,000 each
5.5 Compute the interest payable by the firm for the belated
payment of tax?
(a) ` 395
(b) ` 434
(c) ` 414
(d) ` 552
Answer Key
Question Answer
No.
(d) 14 August
th
5.1
5.2 (a) i
5.3 (d) ` 11 lakh
5.4 (b) ` 7,000 each
5.5 (b) ` 434
6. Mr Mandeep, a registered dealer, is engaged in the business of

supplying construction material in the State of Assam. He availed
architect services for his business from his friend in London free of
cost. He also availed designing services from his brother in London for
` 5 lakh for his personal purposes.
He availed services, from an entity in India, which are liable to tax
under reverse charge for which date of invoice was 1 st September,
payment date as per his books of account and as per his bank account
was 15th November and 18 th November respectively.

178 INDIRECT TAXES
His turnover for the current financial year is as follows-

Taxable supply of goods – ` 55 lakh
Exempt supply of goods – ` 16 lakh
Inward supply liable to tax under reverse charge – ` 8 Lakh
He intends to start providing services, other than restaurant services,
also from the next financial year and also to avail composition scheme
under section 10(1) of the CGST Act, 2017. He also wishes to make
supplies to the Government.
6.1 In respect of services imported by Mr. Mandeep, which of the
following is a correct statement?
i. Architect services for his business from his friend in
London free of cost is considered as a supply
ii. Designing services from his brother in London for ` 5
Lakh for his personal purposes is considered as a supply.
iii. Architect services for his business from his friend in
London free of cost is not considered as a supply
iv. Designing services from his brother in London for ` 5
Lakh for his personal purposes is not considered as a
supply.
(a) i & ii
(b) i & iv
(c) ii & iii
(d) iii & iv

6.2 Determine the time of supply of services, received by

Mr. Mandeep and taxable under reverse charge?
(a) 1st September
(b) 1st November
(c) 15th November
(d) 18th November
6.3 Compute the aggregate turnover of Mr. Mandeep for the given
financial year?
(a) ` 63 lakh
(b) ` 79 lakh
(c) ` 71 lakh
(d) ` 55 lakh
6.4 Mr Mandeep will be eligible for composition scheme under
section 10(1) of the CGST Act, 2017, in the next financial year,
but he can supply services only upto ______
(a) ` 5.00 lakh
(b) ` 6.3 lakh
(c) ` 7.90 lakh
(d) ` 7.10 lakh
Answer Key
Question Answer
No.
6.1 (c) ii & iii
6.2 (b) 1st November
6.3 (c) ` 71 lakh
6.4 (d) ` 7.10 lakh
7. Ms. Riya is a multi-faceted business personality. She is registered

under GST from April, this year.

180 INDIRECT TAXES
She supplied a package consisting of stapler, calculator and charger at

a single price of ` 300. Rate of GST for stapler, calculator and charger
is 5%, 12% and 18% respectively.
She wants to opt for composition levy.
She received following payments during the month of May:
- earned ` 160,000 by performing a western music in a cultural
event at a Resort
- earned ` 50,000 by providing services by way of renting of
residential dwelling for use as a boutique.
- received ` 70,000 by way of rent for letting of agro machinery
Ms. Riya made a supply during June, details of which are as follows-
- Basic price of the product before TCS under Income Tax Act,
1961– ` 45,000
- Tax collected at source under Income-tax Act, 1961 – ` 2,500
- She received a subsidy of ` 3,500 from Green Foundation Pvt.
Ltd for usage of green energy and the subsidy was linked to
saving energy
Ms. Riya provides the following information regarding receipt of inward
supply during July-
- received invoice for goods having GST component of ` 30,000.
Goods were to be delivered in 5 lots, out of which three lots
were received in the current month.
- purchased a car having GST component of ` 1,50,000 for the
usage in a driving school owned by her for imparting training
- availed health insurance service for her employees on her own
voluntarily and paid GST of ` 7,000 thereon
specified otherwise. Conditions necessary for claiming input tax credit
(ITC) have been fulfilled subject to the information given above.


7.1 What would be the nature of supply and the applicable rate of
GST for the supply of package made by Ms. Riya (when not
registered under composition scheme):-
(a) composite Supply & applicable rate 12%
(b) mixed Supply & applicable rate 18%
(c) composite Supply & applicable rate 18%
(d) mixed Supply & applicable rate 12%
(d) ii, iii & iv
7.2 Out of payments received by Ms. Riya in month of May, exempt
Supply amounts to_____
(a) ` 50,000
(b) ` 70,000
(c) ` 1,20,000
(d) ` 1,60,000
7.3 Compute the value of supply under section 15 of CGST Act,
2017 made by Ms Riya?
(a) ` 45,000
(b) ` 47,500
(c) ` 48,500
(d) ` 51,000
7.4 Compute the amount of input tax credit that can be claimed by
Ms. Riya?
(a) ` 30,000
(b) ` 37,000
(c) ` 1,50,000
(d) ` 1,57,000

182 INDIRECT TAXES
Answer Key
Question Answer
No.
7.1 (b) mixed Supply & applicable rate 18%
7.2 (b) ` 70,000
7.3 (a) ` 45,000
7.4 (c) ` 1,50,000
8. M/s. Shanky Consultants, a partnership firm, registered in Delhi, as a

regular tax payer, renders following services during the year:
(i) Security services: ` 2,00,00,000 to registered business entities.
(ii) Manpower services (Accountants): ` 5,00,000
(iii) Auditing services: ` 1,00,00,000
Other Information:
(i) Shanky Consultants also paid sponsorship fees of ` 70,000 at
seminar organized by a private NGO (a partnership firm) in
Delhi.
(ii) Shanky Consultant pays rent amounting to ` 6,00,000 for a
building owned by Municipal Corporation of Delhi.
(iii) Assume all services are taxable at 18% and all transactions to
be intra-State supplies.
Based on the above information, answer the following questions:
8.1. What is the aggregate turnover of Shanky Consultants?

(a) ` 3,05,00,000
(b) ` 3,05,70,000
(c) ` 1,05,00,000
(d) ` 1,05,70,000

8.2. GST liability paid under reverse charge by Shanky Consultants

is?
(a) CGST: ` 60,300, SGST: ` 60,300
(b) CGST: ` 6,300, SGST: ` 6,300
(c) CGST: ` 54,000, SGST: ` 54,000
8.3. State which of the following statement is true in respect of
security services provided by Shanky Consultants to registered
business entities:
(a) Shanky Consultants shall issue GST compliant tax
invoice.
(b) Shanky Consultants shall issue bill of supply stating “Tax
to be paid by service recipient under reverse charge”.
(c) Shanky Consultants can issue any document in lieu of
tax invoice.
(d) Shanky Consultants shall issue receipt voucher every
time, it receives payment.
Answer Key
Question Answer
No.
8.1 (a) ` 3,05,00,000
8.2 (a) CGST: ` 60,300, SGST: ` 60,300
8.3 (a) Shanky Consultants shall issue GST compliant tax
invoice.
9. PTL Pvt. Ltd. is a retail store of merchandise located in 25 States in

the country. For the purpose of clearance of stock of merchandise and
to attract consumers, PTL Pvt. Ltd. launched scheme of “Buy One Get
One Free” for the same type of merchandise, for instance, one shirt to
be given free with purchase of one shirt. For saving cost, PTL Pvt. Ltd.
directly purchases merchandise from the manufacturers.

184 INDIRECT TAXES
In the month of May, in order to save employee cost, PTL Pvt. Ltd.
purchased a tempo traveller worth ` 12,00,000 with seating capacity
of 25 persons (including driver) for transportation of its employees.
Further, for ensuring the well-being of its employees, PTL Pvt. Ltd.
voluntarily obtained the health insurance cover of ` 2,00,000 for each
employee in the same month. The premium of ` 1,500 per employee
has been paid by the company for 100 employees.
In the month of July, Mr. Raghav, a customer of the company, filed a
law suit in the Court, against the company for not supplying goods of
the value of ` 1,00,000. PTL Pvt. Ltd. engaged Mr. Ram, an advocate,
to represent it in Court for an agreed consideration of
` 25,000. As per the terms of the contract, Mr. Ram issued an invoice
on 5th July. However, consideration was not paid till February next
year.
All the amounts given above are excluding taxes and all transactions
are intra-State transactions. Rates of tax are CGST - 9% and SGST –
9%. However, for tempo traveller, the rates of taxes are CGST - 14%
and SGST – 14%.
In relation to the above, answer the following questions:
9.1 With respect to “Buy One, Get One free” offer, which of the
following statements is true:
(a) It will not be considered as supply at all since no
consideration is involved in one of the items.
(b) Supply of item for which consideration is charged is a
supply under section 7 of the CGST Act, 2017 while
supply of the other item supplied free of cost is not a
supply.
(c) These are two individual supplies where a single price is
charged for the entire supply. Since a single price is
charged, the same will always be taxed as a mixed
supply.
(d) These are two individual supplies where a single price is
charged for the entire supply. Their taxability will

depend upon as to whether the supply is a composite

supply or a mixed supply.
9.2 Eligible input tax credit for the month of May (i) on the
purchase of tempo traveller and (ii) on health insurance
premium paid (assuming that all other conditions, for availing
input tax credit have been complied with) is:
(a) (i) CGST - Nil, SGST - Nil and (ii) CGST - Nil, SGST - Nil
(b) (i) CGST - ` 1,68,000, SGST - ` 1,68,000 and (ii) CGST -
Nil, SGST - Nil
(c) (i) CGST - Nil, SGST - Nil and (ii) CGST - ` 18,000, SGST
- ` 18,000
(d) (i) CGST - ` 1,68,000, SGST - ` 1,68,000 and (ii) CGST -
` 18,000, SGST - ` 18,000
9.3 Which of the following statements is true in respect of the
services of advocate availed by the company?
(a) CGST-` 2,250 and SGST- ` 2,250 on advocate services
are payable by PTL Pvt Ltd. ITC availed thereon is to be
added to its output tax liability with interest as
consideration along with tax is not paid within 180 days
of the issuance of invoice.
(b) CGST-` 2,250 and SGST- ` 2,250 on advocate services
are payable by Mr. Ram. ITC availed thereon is to be
added to output tax liability of PTL Pvt Ltd. with interest
as consideration along with tax is not paid within 180
days of the issuance of invoice.
(c) CGST-` 2,250 and SGST- ` 2,250 on advocate services
are payable by PTL Pvt. Ltd. The condition of payment
of consideration along with tax within 180 days of the
issuance of invoice does not apply in the given case.
(d) CGST-` 2,250 and SGST- ` 2,250 on advocate services
are payable by Mr. Ram. The condition of payment of

186 INDIRECT TAXES
consideration along with tax within 180 days of the

issuance of invoice does not apply in the given case.
Answer Key
Question Answer
No.
9.1 (d) These are two individual supplies where a single
price is charged for the entire supply. Their
taxability will depend upon as to whether the
supply is a composite supply or a mixed supply.
9.2 (b) (i) CGST - ` 1,68,000, SGST - ` 1,68,000 and (ii)
CGST - Nil, SGST - Nil
9.3 (c) CGST-` 2,250 and SGST- ` 2,250 on advocate
services are payable by PTL Pvt. Ltd. The
condition of payment of consideration along with
tax within 180 days of the issuance of invoice
does not apply in the given case.
10. Mr. Kumar started interior designing practice from the month of
January. His turnover up to the month of March was ` 12,50,000. On
30th June, his turnover exceeded ` 20,00,000 & reached to
` 20,05,000. Mr. Kumar applied for GST registration (as regular
taxpayer) on 15 th July and registration was granted to him on 25 th
July.
On 16th July, he entered into a contract for designing the flat of Mr.
Shyam. The service was completed on 22 nd July and Mr. Kumar issued
invoice on the same day for ` 6,00,000. On 5 th July, Mr. Kumar
purchased capital goods amounting to ` 4,50,000 and from 25 th July to
31st July, he availed input services amounting to ` 1,75,000 in relation
to an output service to be provided in the month of August.
On 1st August, Mr. Kumar got another contract for interior designing
from Mr. Ram, which he accepted on 2 nd August. The service was
completed on 6 th August and invoice was issued on 7 th August for
` 5,00,000. Payment was received on 29 th August.

All values are excluding taxes, unless specifically mentioned. Mr.

Kumar makes only intra-State outward supplies and all purchases are
also intra-State. Rates of tax are CGST - 9% and SGST – 9%.
In relation to the above, answer the following questions:
10.1 The effective date of registration for Mr. Kumar is-
(a) 30th June
(b) 15th July
(c) 25th July
(d) 16th July
10.2 Mr. Kumar can issue a revised tax invoice till-
(a) 23rd October
(b) 8th September
(c) 25th September
(d) 25th August
10.3 Eligible input tax credit available with Mr. Kumar for the month
of July is-
(a) CGST ` 40,500 & SGST ` 40,500
(b) CGST ` 15,750 & SGST ` 15,750
(c) CGST ` 56,250 & SGST ` 56,250
(d) CGST ` 36,000 & SGST ` 36,000
10.4 The time of supply of services provided by Mr. Kumar to
Mr. Ram is-
(a) 7th August
(b) 1st August
(c) 29th August
(d) 6th August
10.5 If instead of opting for regular scheme, Mr. Kumar opts to pay
tax under section 10(2A) of the CGST Act, 2017, the tax liability

188 INDIRECT TAXES
pertaining to July month, out of the total tax liability for the
September quarter, will be-
(a) CGST Nil and SGST Nil
(b) CGST ` 54,000 & SGST ` 54,000
(c) CGST ` 18,000 & SGST ` 18,000
(d) CGST ` 78,150 & SGST ` 78,150
Answer Key
Question Answer
No.
10.1 (a) 30th June
10.2 (d) 25th August

10.3 (c) CGST ` 56,250 & SGST ` 56,250
10.4 (a) 7th August
10.5 (c) CGST ` 18,000 & SGST ` 18,000
11. Ms. Neha is engaged in supply of services. She is registered under GST
and has opted to pay tax under composition scheme for service
provider under section 10(2A) of the CGST Act. The turnover for the
quarter ending June was ` 12,00,000.
During July, she crossed the aggregate turnover of ` 50 lakh and
opted out of composition scheme. She also started trading of goods in
July.
She supplied an order to Breathe Well LLP on ex factory basis, the
details of which are as follows-
i. Basic price of the product – ` 53,000
ii. Outward freight – ` 12,000
iii. Packing Charges – ` 5,000
iv. Discount given on receiving payment – ` 2,000
(not included in invoice and there was
not any agreement for the same)

For supplies, provided to Breathe Well LLP, she received half of the
amount in advance on 22 nd July. The goods were dispatched from her
factory on 25 th July and delivered on 28 th July. She raised the invoice
on 30th July and the balance payment was also received on the same
date.
Ms. Neha received 25 invoices from various suppliers involving GST of
` 1,50,000 for the month of July. While filing GSTR-3B for the said
month on 20 th August, she found that only 20 invoices involving GST
of ` 1,00,000 were uploaded by the suppliers.
Ms. Neha supplied goods to the following persons-
Sl. No. Recipient Value of Supply
1 Mr. Pawan - an unregistered person ` 150
2 Mr. Umesh, a registered person ` 110
3 Rains Trust, an unregistered entity ` 250
None of the above persons requires a tax invoice.

specified otherwise. Conditions applicable for availment of ITC are
fulfilled subject to the information given above.
From the information provided above, choose the most appropriate
11.1 Compute the tax liability for the quarter ending June under
CGST and SGST?
(a) ` 30,000 each
(b) ` 12,000 each
(c) ` 6,000 each
(d) ` 36,000 each
11.2 Compute the value of Supply made by Ms. Neha to Breathe
Wall LLP?
(a) ` 56,000

190 INDIRECT TAXES
(b) ` 58,000
(c) ` 68,000
(d) ` 75,000
11.3 Determine the amount of ITC that can be claimed by Ms. Neha
for the month of July?
(a) ` 1,00,000
(b) ` 1,10,000
(c) ` 1,05,000
(d) ` 1,50,000
11.4 Determine the time of supply made to Breathe Wall LLP?
(a) 22nd July
(b) 25th July
(c) 28th July
(d) 30th July
11.5 Ms. Neha need not issue tax invoice to which of the following
persons but required to issue a consolidated tax invoice?
(a) Mr. Pawan
(b) Mr. Pawan and Umesh
(c) Mr. Pawan and Rains Trust
(d) Need not issue invoice to all the three persons
Answer Key
Question Answer
No.
11.1 (d) ` 36,000 each
11.2 (b) ` 58,000
11.3 (c) ` 1,05,000
11.4 (b) 25th July
11.5 (a) Mr Pawan

12. Poorva Logistics is a Goods Transport Agency registered under GST.

It provided GTA services (taxable @ 5%) to the following persons-
(a) Kunal Traders, an unregistered Partnership firm
(b) Mr. Amar, who is not registered under GST
(c) Small Traders co-operative society registered under Societies
Registration Act
In a particular consignment, Poorva Logistics transported the
following-
(a) Defence Equipments
(b) Railway Equipments
(c) Organic Manure
Poorva Logistics opted to charge GST @ 12% from April, next year. It
provided GTA Services to Bama Steels Pvt. Ltd. on 1 st April and issued
an invoice dated 5 th May. Payment was received on 6 th May.
It provided both inter-State and intra-State service to various
registered as well as unregistered persons.
12.1 Which of the following persons are liable to pay GST on reverse
charge in respect of the GTA services (taxable @ 5%) provided
by Poorva Logistics
(i) Kunal Traders
(ii) Mr. Amar
(iii) Small Traders Co-operative society
(a) i & ii
(b) ii & iii
(c) i & iii
(d) i, ii & iii

192 INDIRECT TAXES
12.2 Out of items transported by Poorva Logistics, which of the

following is/ are exempt from GST?
i. Defence Equipments
ii. Railway Equipments
iii. Organic Manure
(a) i
(b) i & ii
(c) i & iii
(d) i , ii & iii
12.3 What will be the time of supply in respect of the services
provided by Poorva Logistics to Bama Steels Pvt. Ltd.?
(a) 6th May
(b) 5th May
(c) 30th May
(d) 1st April
12.4 Which of the following statements is correct in respect of
services provided by Poorva Logistics to Bama Steels Pvt. Ltd.
(a) Bama Steels Pvt. Ltd. is liable to pay GST
(b) Poorva Logistics is liable to pay GST
(c) Service provided by Poorva Logistics to Bama Steels Pvt.
Ltd. is exempt under GST
(d) Bama Steels Pvt. Ltd. is liable to pay 50% GST and
remaining 50% will be paid by Poorva Logistics
Answer Key
Question Answer
No.
12.1 (c) i & iii
12.2 (c) i & iii

12.3 (d) 1st April

12.4 (b) Poorva Logistics is liable to pay GST
13. Vedanshi & Co., a partnership firm, is engaged in retail trade since 1 st
April. The firm became liable for registration on 1 st October. However,
it applied for registration on 10 th October. It had inputs held in stock,
semi finished and finished goods. The firm was granted certificate of
registration on 5 th November.
Vedanshi & Co. needs to transport one consignment to the transporter
and then to the consignee. The distance, within the same state,
between godown of the firm and the transporter is 20 kms and from
the place of transporter to consignee is 99 kms, respectively.
In the month of November, the firm received 80 invoices for various
inward supplies on which total GST paid was ` 8 lakh. However, only
60 invoices involving GST of ` 7.70 lakh was uploaded in GSTR-1 by
the respective suppliers.
Also, while filing return for the month of November, the firm generated
E-Challan on 5 th December for making payment of GST through RTGS
of their bank.
All the supplies referred above are intra-State unless specified
otherwise. Conditions applicable for availment of ITC are fulfilled
subject to the information given above.
From the information provided above, choose the most appropriate
13.1 Determine the effective date of registration of Vedanshi & Co.?
(a) 1st April
(b) 1st October
(c) 10th October
(d) 5th November
13.2 Vedanshi & Co. is eligible to claim ITC in respect of inputs held
in stock as on-
(a) 30th September

194 INDIRECT TAXES
(b) 1st October

(c) 10th October
(d) Not eligible to claim ITC
13.3 Which of the following statements is true in respect of
furnishing of details of conveyance in Part B of e way bill?
(a) Part B need not be filed in respect of transport of
consignment from Godown of Vedanshi & Co. to
transporter location.
(b) Part B need not be filed in respect of transport of
consignment from transporter location to consignee’s
location.
(c) Information in Part-B is neither required in transport of
transporter location nor from transporter location to
consignee’s location.
(d) Information in Part-B is mandatory in in transport of
transporter location and from transporter location to
consignee’s location.
13.4 Compute the amount of ITC that can be claimed by Vedanshi &
Co for the month of November?
(a) ` 7,50,000
(b) ` 8,00,000
(c) ` 8,25,000
(d) ` 6,75,000
13.5 Determine the validity of E-Challan generated by Vedanshi &
Co. for payment of taxes for the month of November?
(a) 5th December
(b) 15th December
(c) 20th December
(d) 31st December

Answer Key
Question Answer
No.
13.1 (b) 1st October
13.2 (a) 30th September
13.3 (a) Part B need not be filed in respect of transport of
consignment from Godown to transporter location.
13.4 (b) ` 8,00,000
(c) 20 December
th
13.5
14. Safe Bank Ltd., a small finance bank, was incorporated in April this
year. The bank got registered under GST immediately on its
incorporation as a banking company.
Safe Bank Ltd. received software support service free of cost from its
Head office (HO) located in United Kingdom for business purpose in
April. Safe Bank Ltd. provided one high end laptop worth ` 50,000 to
its new Managing Director (MD) as a gift for discharge of his duties.
Initially the bank opened 125 branches across India covering various
States. In order to secure business, the bank appointed ‘Quick Loan
Providers LLP,’ a direct selling agent, on PAN India basis. The bank
was in need of services of recovery agents for various retail and
personal loans granted by its branches. For this purpose, the bank
appointed ‘Fast Recovery Services Pvt. Ltd.’, a recovery agent, on PAN
India basis.
Safe Bank Ltd. provided the following details for the month of May, in
respect of one of its branch-
Sl.no Nature of receipt Amount in `

i. Interest received on Term Loan 10,75,000
ii. Interest received on credit card transactions 6,20,000
iii. Interest received on Fixed Deposit held with 25,00,000
SBI, Mumbai
iv. Commission received on Letter of Credit issued 3,00,000

196 INDIRECT TAXES
v. Documentation charges collected from 1,25,000

borrowers
vi. Sale of foreign exchange to Bank of Rajasthan, 15,60,000
an authorized dealer
All the amounts given above are exclusive of taxes wherever
applicable. All the supplies referred above are intra-state unless
14.1 Which of the following statements is correct under GST law?
(i) Receipt of software support service by Safe Bank Ltd.
from HO is supply.
(ii) Issue of laptop to new MD as gift is supply.
(iii) Receipt of software support service by Safe Bank Ltd.
from HO is not a supply.
(iv) Issue of laptop to new MD as gift is not a supply.
(a) (i) & (ii)
(b) (i) & (iv)
(c) (ii) & (iii)
(d) (iii) & (iv)
14.2 In respect of services availed by Safe Bank Ltd., the bank shall
pay tax under reverse charge for which of the following
services?
(a) Service availed from ‘Quick Loan Providers LLP’
(b) Service availed from ‘Fast Recovery Services Pvt. Ltd.’
(d) None of the services availed attracts RCM

14.3 Compute the value of exempt supply provided by the branch of

Safe Bank Ltd. for the month of May?
(a) ` 15,00,000
(b) ` 41,95,000
(c) ` 51,35,000
(d) ` 66,95,000
14.4 Compute the value of taxable supply made by the branch of
Safe Bank Ltd. for the month of May?
(a) ` 10,45,000
(b) ` 21,20,000
(c) ` 36,80,000
(d) ` 61,80,000
Answer Key
Question Answer
No.
14.1 (b) (i) & (iv)
14.2 (b) Service availed from ‘Fast recovery services Pvt
Ltd’
14.3 (c) ` 51,35,000
14.4 (a) ` 10,45,000
15. KBC Insurance Ltd., is an insurance company providing life and non-
life products across India. The company is carrying on its business for
the past three years with the approval of IRDA.
KBC Insurance Ltd. secure its business through various insurance
agents spread across India. Those agents include individuals, firm, LLP
and private limited company also. However, all of them are licensed
under Insurance Act.
The company availed services of renting of motor vehicles for its
employees in PAN India through ‘RR Travels Private Limited’, where
cost of fuel is included in the consideration charged. The service

198 INDIRECT TAXES
provider charged 5% GST and informed the company that it is

claiming ITC only in respect of the same line of business.
KBC Insurance Ltd. provided the following details of insurance
business for the month of May-
Sl. Nature of receipt Amount in `
no
i. Premium received on Pradhan Mantri Jan Dhan 5,00,000
Yojana
ii. Premium received on Aam Aadmi Bima Yojana 3,00,000
iii. Premium received on Life micro-insurance 4,00,000
product having a sum assured of ` 2.50 lakh
iv. Premium received on reinsurance of Group 1,00,000
Personal Accident Policy for Self-Employed
Women
v. Premium received on Fire and Special perils 7,00,000
policy of various business units
vi. Premium received on Money-back policies 12,00,000
issued
KBC Insurance Ltd. received a proposal for Pandemic Insurance for

IPL matches from the franchisees. Sum assured for said insurance was
` 250 Crores with a premium of ` 50 lakh. The company issued the
said policy on 1st July. Invoice for the same was issued on 5th
August. Premium was received on 14th August.
KBC Insurance Ltd. received the following supplies in the month of
May and the details of GST paid on such supplies are as follows-
i GST paid on purchase of car for use of Managing Director –
` 5,00,000
ii GST paid on bus (seating capacity for 14 persons) purchased by
the company for transportation of its employees from their
residence to office and back – ` 3,00,000
iii GST of ` 80,000 was paid on general insurance taken from
Amity Insurance Ltd. for motor vehicles for transportation of
persons with seating capacity ≤ 13 persons (including the

driver) which were used in transportation of staff of the

company.
All the amounts given above are exclusive of taxes wherever
specified otherwise. Aggregate turnover of the company is not less
than ` 10 crores for the past three years. Conditions necessary for
availment of ITC are fulfilled subject to the information given.
15.1 Determine the services on which the company is liable to pay
tax under reverse charge?
(a) Service availed from insurance agents
(b) Service availed from RR Travels Private Limited
(c) None of the services availed attracts RCM
(d) Both (a) & (b)
15.2 Compute the total value of exempt supply provided by. KBC
Insurance Ltd. for the month of May?
(a) ` 9,00,000
(b) ` 13,00,000
(c) ` 20,00,000
(d) ` 32,00,000
15.3 Compute the total value of taxable supply made by KBC
Insurance Ltd. for the month of May?
(a) ` 4,00,000
(b) ` 12,00,000
(c) ` 23,00,000
(d) ` 32,00,000

200 INDIRECT TAXES
15.4 Determine the amount of ITC that can be claimed by KBC

Insurance Ltd?
(a) ` 80,000
(b) ` 3,00,000
(c) ` 3,80,000
(d) ` 8,80,000
15.5 Determine the time of supply of service provided to IPL
franchisees?
(a) 1st July
(b) 16th August
(c) 05th August
(d) 14th August
Answer Key
Question Answer
No.
15.1 (a) Service availed from Insurance Agents
15.2 (a) ` 9,00,000
15.3 (c) ` 23,00,000
15.4 (c) ` 3,80,000
15.5 (c) 5th August
16. M/s Aditi & Co, a partnership firm registered under GST, is undertaking
various Government projects.
The firm has let out on hire the following vehicles-
i. A motor vehicle to carry more than 15 passengers to a State
Government Electricity Department
ii. An electric operated vehicle to carry more than 12 passengers
to Local Municipal Corporation
iii. An electric operated vehicle to carry upto 12 passengers to
State Transport Undertaking

The firm provided the following additional information for the month of
October:
i. Works contract services were availed for construction of
immovable property being plant and machinery, where value of
GST component was ` 1,10,000.
ii. GST amounting to ` 70,000 was paid on account of demand of
the Department due to fraud in payment of tax.
iii. Goods valuing ` 10,00,000, (GST on the same - ` 1,00,000)
were received 180 days ago (invoice also issued on the date of
receipt of supply) for which payment has been made till date to
an extent of ` 4,00,000 towards value, ` 40,000 towards tax.
The firm issued invoices pertaining to two independent outward
supplies, where in one invoice value of supply was understated by
` 75,000 and in another invoice, value was overstated by ` 45,000
The firm received certain supply of goods amounting to ` 8,40,000
from registered persons on which tax was payable under reverse
charge basis.
applicable. All transactions referred to above are intra-State. All the
conditions for availing ITC have been fulfilled subject to the
16.1. In respect of vehicles let out on hire by the firm, services that
are exempt from GST are
(i) Letting on hire a motor vehicle to State Electricity
Department
(ii) Letting on hire an electric operated vehicle to Local
Municipality
(iii) Letting on hire an electric operated vehicle to State
Transport Undertaking
(a) (i)

202 INDIRECT TAXES
(b) (ii)
(c) (i) and (iii)
(d) (ii) and (iii)
16.2. Determine the amount of eligible ITC to be claimed by the firm
for the month of October.
(a) ` 70,000
(b) ` 1,10,000
(c) ` 1,80,000
(d) Nil
16.3. Determine the amount of ITC to be added to the output tax
liability. (Ignore interest)
(a) ` 40,000
(b) ` 60,000
(c) ` 1,00,000
(d) Nil
16.4. Which of the following is correct in respect of document to be
issued by the firm for understatement and overstatement of
invoice value?
(i) Debit note is to be issued for ` 75,000.
(ii) Credit note is to be issued for ` 75,000.
(iii) Debit note is to be issued for ` 45,000.
(iv) Credit note is to be issued for ` 45,000.
(a) i & iii
(b) ii & iii
(c) i & iv
(d) ii & iv

16.5. Which of the following statements is correct in respect of

supply of goods amounting to ` 8,40,000 received by the firm
which are taxable under reverse charge?
(i) Firm shall issue a payment voucher at the time of
making payment to supplier.
(ii) Firm shall issue invoice for supply of goods.
(iii) Firm shall issue receipt voucher at the time of making
payment to supplier.
(iv) Firm is not required to issue any document in respect of
such supply.
(a) i
(b) i & ii
(c) ii & iii
(d) iv
Answers Key
Question Answer
No.
16.1 (b) (ii)
16.2 (b) ` 1,10,000
16.3 (b) ` 60,000
16.4 (c) i & iv
16.5 (a) i
17. MM Charitable Trust is registered under section 12AB of the Income-

tax Act, 1961.
The trust conducted a three day residential yoga camp among people
on the occasion of international yoga day for the advancement of yoga
and charged ` 7,500 per person inclusive of stay and food.

204 INDIRECT TAXES
The trust also conducted programmes for the advancement of

education of persons aged above 65 years in metro cities. A nominal
fee was charged for the same.
The trust received following donations during the month of
September:-
i. Mr. Sunil Sharma, proprietor of Solid Steels donated a RO water
plant to the trust costing ` 75,000 and displayed his firm name
in the RO system installed at the premises of the trust as
“Donated by Mr. Sunil, owner of Solid Steels -trusted by all’.
ii. Mr. Prasanna, a lawyer donated chairs to the trust costing
` 25,000 and ‘Love all’ is printed on all chairs donated by him
to the trust.
The following are the details of GST payment made by the firm-
i. GST of ` 1,75,000 was paid for the purchase of motor vehicle
for transportation of needy persons (Seating capacity including
driver is 13).
ii. GST of ` 2,45,000 was paid for works contract services availed
from Super Builders for construction of Trust’s office building.
MM Charitable Trust also owns and manages a gurudwara. It rented
the community hall located in the precincts of the gurudwara for a rent
of ` 8,500 per day for a marriage function. It also rented the
commercial shop located in the precincts of the gurudwara for a rent
of ` 10,000 per month per shop.
You can assume that the Trust is registered under GST and all the
transactions are intra-State only. Conditions for availing ITC are
fulfilled subject to the above- mentioned information.
answer for the following questions -
17.1 Which of the following activities conducted by trust is exempt
from GST?
(a) Advancement of Yoga
(b) Advancement of education


(d) Neither of the activities
17.2 Determine the value of taxable supply in respect of donations
received by the Trust?
(a) ` 25,000
(b) ` 75,000
(c) ` 1,00,000
(d) Nil
17.3 Compute the amount of input tax credit that can be claimed by
the Trust?
(a) ` 1,75,000
(b) ` 2,45,000
(c) ` 4,20,000
(d) Nil
17.4 Which of the following statements is/are correct under GST law
in respect of gurudwara managed by MM Charitable Trust?
(a) Renting of community hall is taxable while renting of
commercial shop is exempt.
(b) Renting of community hall is exempt while renting of
commercial shop is taxable.
(c) Both renting of community hall and renting of
commercial shop are taxable.
(d) Both renting of community hall and renting of
commercial shop are exempt.
Answers Key
Question Answer
No.
17.1 (a) Advancement of Yoga

206 INDIRECT TAXES
17.2 (b) ` 75,000

17.3 (d) Nil
17.4 (b) Renting of community hall is exempt while renting of
commercial shop is taxable.
18. Mr. Dhev is engaged in supply of tiles and marbles in the State of
Telangana. He is not registered under GST. He commenced his
business from July month.
He availed godown construction services for business from his brother-
in-law who was dependent on him. He also availed professional
consultancy services for the purpose of business from his son who was
a Chartered Accountant and his son was not dependent on him. Mr.
Dhev did not pay anything for both the services as both of them were
his relative / family member respectively.
On the basis of advice of his son, Mr. Dhev made the supply of tiles
within his State only. He reached a turnover of ` 7 lakh as on 31st
October. However, he planned to expand his business to other States
since he received decent orders from other States also.
During the month of December, he received a consignment of tiles
from Rajasthan through Prompt Carriers, a goods transport agency
based in the State of Rajasthan. Goods were dispatched by the
supplier on ‘to-pay’ basis for freight. Freight charges were ` 50,000
and the said GTA pays GST @ 12%. Mr. Dhev paid the invoice amount
in the month of December itself. This was an inter-State transaction.
During the month of January, Mr. Dhev made his first inter-State
supply to Tamil Nādu on 4th January. His turnover before making such
supply was ` 15 lakh.
Value of such inter-state supply was ` 4,50,000, exclusive of taxes.
Payment for the said inter-State supply was received on 28 th February.
Invoice was raised by Mr. Dhev on 25 th January.
All the figures given above are exclusive of taxes wherever applicable.

18.1 In respect of services availed by Mr. Dhev, which of the

following is a correct statement?
(a) Godown construction service availed from his brother-in-
law free of cost is considered as a deemed supply
(b) Professional service availed from his son free of cost is
considered as a deemed supply
(c) Neither of the services is a deemed supply
(d) Both services are deemed supply
18.2 Upto which limit of aggregate turnover Mr Dhev can continue to
supply goods without registration within his state, if he does
not procure any goods/services on which tax is payable under
reverse charge mechanism?
(a) ` 20 lakh
(b) ` 40 lakh
(c) ` 10 lakh
(d) ` 150 lakh
18.3 What is the tax liability for the freight charges?
(a) ` 6000 of IGST under reverse charge
(b) ` 6000 of IGST under forward charge
(c) `3000 each under CGST and SGST under reverse charge
(d) Nil as it is exempt
18.4 Which of the following statement is correct with respect to
liability of Mr. Dhev to register under GST?
(a) Mr. Dhev is liable to register in the month of December
for receipt of GTA services.
(b) Mr. Dhev is liable to register in the month of January for
effecting inter-State outward supply of goods.
(c) Mr. Dhev is liable to register only when his turnover
exceeds the threshold limit irrespective of whether he is

208 INDIRECT TAXES
in receiving any GTA services or is effecting inter-State

outward supply.
(d) Mr. Dhev is not required to register as it is his first year
of business.
18.5 What is the time of supply of goods made by Mr Dhev during
January?
(a) 4th January
(b) 25th January
(c) 3rd February
(d) 28th February
Answers Key
Question Answer
No.
18.1 (b) Professional service availed from his son free of
cost is considered as a deemed supply
18.2 (a) ` 20 lakh
18.3 (d) Nil as it is exempt
18.4 (b) Mr. Dhev is liable to register in the month of January
for effecting inter-State outward supply of goods.
18.5 (a) 4th January

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(b) ` 2,10,000 in the hands of Mr. Aarav

(c) ` 2,10,000 in the hands of Geetha

(d) ` 2,10,000 in the hands of Deepa

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Medical Insurance Scheme of the General Insurance Corporation. The