CA INTER Super 30 Questions - (01-70)

CA INTER Super 30 Questions by CA Bhanwar Borana
CA INTER
Super 30 Question for Revisions
Question-1 [Topics- Residential Status, HP, IFOS and Tax Liability]

Miss Charlie, an American national, got married to Mr. Radhey of India in USA on 2.03.2021
and came to India for the first time on 16.03.2021. She left for USA on 19.9.2021. She
returned to India again on 27.03.2022. While in India, she had purchased a show room in
Mumbai on 30.04.2021, which was leased out to a company on a rent of ` 25,000 p.m. from
1.05.2021. She had taken loan from a bank for purchase of this show room on which bank
had charged interest of ` 97,500 upto 31.03.2022. She had received the following cash gifts
from her relatives and friends during 1.4.2021 to 31.3.2022:
- From parents of husband ` 51,000
- From married sister of husband ` 11,000
- From two very close friends of her husband (` 1,51,000 and ` 21,000) ` 1,72,000
(a) Determine her residential status and compute the total income chargeable to tax along
with the amount of tax liability on such income for the Assessment Year 2022-23.
(b) Would her residential status undergo any change, assuming that she is a person of
Indian origin and her total income from Indian sources is ` 18,00,000 and she is not
liable to tax in USA?
Answer
I. Under section 6(1), an individual is said to be resident in India in any previous year, if he/she
satisfies any one of the following conditions:
(i) He/she has been in India during the previous year for a total period of 182 days or more, or
(ii) He/she has been in India during the 4 years immediately preceding the previous year for a
total period of 365 days or more and has been in India for at least 60 days in the previous
year.
If an individual satisfies any one of the conditions mentioned above, he/she is a resident. If both
the above conditions are not satisfied, the individual is a non-resident.
Therefore, the residential status of Miss Charlie, an American National, for A.Y.2022-23 has to
be determined on the basis of her stay in India during the previous year relevant to A.Y. 2022-23
i.e., P.Y.2021-22 and in the preceding four assessment years.
Her stay in India during the previous year 2021-22 and in the preceding four years are as under:
P.Y. 2021-22
01.04.2021 to 19.09.2021 - 172 days
27.03.2022 to 31.03.2022 - 5 days
Total 177 days
Four preceding previous years
P.Y. 2020-21 [1.4.2020 to 31.3.2021] - 16 days
P.Y.2019-20 [1.4.2019 to 31.3.2020] - Nil
P.Y.2018-19 [1.4.2018 to 31.3.2019] - Nil
CA Bhanwar Borana 1
P.Y.2017-18 [1.4.2017 to 31.3.2018] - Nil
Total 16 days
The total stay of the assessee during the previous year in India was less than 182 days and during
the four years preceding this year was for 16 days. Therefore, due to non-fulfillment of any of the
two conditions for a resident, she would be treated as non-resident for the Assessment Year 2022-
23.
Computation of total income of Miss Charlie for the A.Y. 2022-23
Particulars ` `
Income from house property
Show room located in Mumbai remained on rent from 2,75,000

01.05.2021 to 31.03.2022 @ ` 25,000/- p.m.
Gross Annual Value [` 25,000 x 11] (See Note 1 below)
Less: Municipal taxes Nil
Net Annual Value (NAV) 2,75,000
Less: Deduction under section 24
30% of NAV 82,500
Interest on loan 97,500 1,80,000 95,000
Income from other sources
Cash gifts received from non-relatives is chargeable to tax as per

section 56(2)(x), if the aggregate value of such gifts exceeds `
50,000.
- `50,000 received from parents of husband would be exempt,

since parents of husband fall within the definition of Nil
‘relative’ and gifts from a relative are not chargeable to tax.
- `11,000 received from married sister of husband is exempt,

since sister-in-law falls within the definition of relative and Nil
gifts from a relative are not chargeable to tax.
- Gift received from two friends of husband ` 1,51,000 and `

21,000 aggregating to ` 1,72,000 is taxable under section
56(2)(x) since the aggregate of ` 1,72,000 exceeds ` 50,000.
(See Note 2 below) 1,72,000 1,72,000
Total income 2,67,000
2 CA Bhanwar Borana
Computation of tax liability by Miss Charlie for the A.Y. 2022-23
Particulars `
Tax on total income of ` 2,67,000 850

Add: Health and Education cess@4% 34
Total tax liability 884
Total tax liability (rounded off)
880
Notes:
1. Actual rent received has been taken as the gross annual value in the absence of other
information (i.e. Municipal value, fair rental value and standard rent) in the question.
2. If the aggregate value of taxable gifts received from non-relatives exceed ` 50,000 during the
year, the entire amount received (i.e. the aggregate value of taxable gifts received) is taxable.
Therefore, the entire amount of ` 1,72,000 is taxable under section 56(2)(x).
3. Since Miss Charlie is a non-resident for the A.Y. 2022-23, rebate under section 87A would
not be available to her, even though her total income does not exceed ` 5 lacs.
4. The tax liability of Miss Charlie would be the same even if she opts to pay tax as per section
115BAC, since she would be eligible for deduction under section 24(b), for interest on
housing loan in respect of let out property under regular provisions as well as under section
115BAC of the Income-tax Act, 1961.
II. Residential status of Miss Charlie in case she is a person of Indian origin and her total
income from Indian sources exceeds ` 18,00,000
If she is a person of Indian origin and her total income from Indian sources exceeds ` 15,00,000
(` 18,00,000, in her case), the condition of stay in India for a period exceeding 120 days during
the previous year and 365 days during the four immediately preceding previous years would be
applicable for being treated as a resident. Since her stay in India exceeds 120 days in the
P.Y.2021-22 but the period of her stay in India during the four immediately preceding previous
years is less than 365 days (only 16 days), her residential status as per section 6(1) would
continue to be same i.e., non-resident in India.
Further, since she is not a citizen of India, the provisions of section 6(1A) deeming an individual
to be a citizen of India would not get attracted in her case, even though she is a person of Indian
origin and her total income from Indian sources exceeds ` 15,00,000 and she is not liable to pay
tax in USA.
Therefore, her residential status would be non-resident in India for the previous year 2021-22.
Question-2 [Topics- Total Income + 115BAC]

Ms. Purvi, aged 55 years, is a Chartered Accountant in practice. She maintains her
accounts on cash basis. Her Income and Expenditure account for the year ended March 31,
2022 reads as follows:
Expenditure (`) Income (`) (`)
Salary to staff 15,50,000 Fees earned:
Stipend to articled 1,37,000 Audit 27,88,000
Assistants Taxation services 15,40,300
CA Bhanwar Borana 3
Expenditure (`) Income (`) (`)
Incentive to articled 13,000 Consultancy 12,70,000 55,98,300
Assistants Dividend on shares 10,524

of X Ltd., an Indian
company (Gross)
Office rent 12,24,000 Income from UTI 7,600

(Gross)
Printing and Stationery 12,22,000 Honorarium received 15,800

from various
institutions for
valuation of answer
papers
Meeting, seminar and 31,600 Rent received From 85,600

conference residential flat let out
Purchase of car (for 80,000

official use)
Repair, maintenance 4,000
and petrol of car
Travelling expenses 5,25,000
Municipal tax paid 3,000
in respect of house
property
Net Profit 9,28,224
57,17,824 57,17,824
Other Information:
(i) Allowable rate of depreciation on motor car is 15%.
(ii) Value of benefits received from clients during the course of profession is ` 10,500.
(iii) Incentives to articled assistants represent amount paid to two articled assistants for
passing IPCC Examination at first attempt.
(iv) Repairs and maintenance of car include ` 2,000 for the period from 1-10- 2021 to 30-
09-2022.
(v) Salary includes ` 30,000 to a computer specialist in cash for assisting Ms. Purvi in one
professional assignment.
(vi) The travelling expenses include expenditure incurred on foreign tour of ` 32,000 which
was within the RBI norms.
(vii) Medical Insurance Premium on the health of dependent brother and major son
dependent on her amounts to ` 5,000 and ` 10,000, respectively, paid in cash.
(viii) She invested an amount of ` 10,000 in National Saving Certificate.
4 CA Bhanwar Borana
(ix) She has paid ` 70,000 towards advance tax during the P.Y. 2021-22. Compute the total
income and tax payable of Ms. Purvi for the assessment year 2022-23.
Answer
Computation of total income and tax payable of Ms. Purvi for the A.Y. 2022-23 under the
regular provisions of the Act
Particulars ` `
Income from house property (See Working Note 1) 57,820
Profit and gains of business or profession (See Working Note 2) 9,20,200
Income from other sources (See Working Note 3) 33,924
Gross Total Income 10,11,944
Less: Deductions under Chapter VI-A (See Working Note 4) 10,000
Total Income 10,01,944
Total Income (rounded off) 10,01,940
Tax on total income
Upto ` 2,50,000 Nil
` 2,50,001 - ` 5,00,000 @5% 12,500
` 5,00,001 - ` 10,00,000 @20% 1,00,000
` 10,00,001 - `10,01,940 @ 30% 582 1,13,082
Add: Health and Education cess @ 4% 4,523
Total tax liability 1,17,605
Less: Advance tax paid 70,000
Less: Tax deducted at source on dividend income from an Indian 1,052

Company u/s 194
Tax deducted at source on income from UTI u/s 194K 760 1,812
Tax Payable 45,793
Tax Payable (rounded off) 45,790
CA Bhanwar Borana 5
Computation of tax payable in accordance with the provisions of section 115BAC
Particulars ` `

[Income under the “Income from house property”
“Profits and gains from business or profession” and “Income from

other sources” would remain the same even if Ms. Purvi opts for
special provisions under section 115BAC, since deduction claimed
by her under these heads is allowable even under section 115BAC]
Less: Deductions under Chapter VI-A [No deduction is allowable
under Chapter VI-A, by virtue of section 115BAC(2)] Nil
Total Income (rounded off) 10,11,940
Tax on total income
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000 @5% 12,500
` 5,00,000 - ` 7,50,000 @10% 25,000
` 7,50,000 - ` 10,00,000 @15% 37,500
` 10,00,000 – ` 10,11,940 @ 20% 2,388 77,388
Add: Health and Education cess @ 4% 3,096
Total tax liability 80,484
Less: Advance tax paid 70,000
Less: Tax deducted at source on dividend income from Indian 1,052

Companies u/s 194
Tax deducted at source on income from UTI u/s 194K 760 1,812
Tax Payable 8,672
Tax Payable (rounded off) 8,670
Since tax payable as per the provisions of section 115BAC is lower than the tax payable under the
regular provisions of the Income-tax Act, 1961, it would be beneficial for Ms. Purvi to opt for section
115BAC. She has to exercise this option on or before the due date of furnishing the return of income
i.e., 31st October 2022, in her case since she is liable to get her books of account audited. Further,
since she is having income from business or profession during the previous year 2021-22, if she opts
for section 115BAC for this previous year, the said provisions would apply for subsequent
assessment years as well.
6 CA Bhanwar Borana
Working Notes:
(1) Income from House Property
Particulars ` `
Gross Annual Value under section 23(1) 85,600
Less: Municipal taxes paid 3,000
Net Annual Value (NAV) 82,600
Less: Deduction u/s 24@30% of NAV 24,780 57,820
Note - Rent received has been taken as the Gross Annual Value in the absence of other information
relating to Municipal Value, Fair Rent and Standard Rent.
(2) Income under the head “Profits & Gains of Business or Profession”
Particulars ` `
Net profit as per Income and Expenditure account 9,28,224

Add: Expenses debited but not allowable
(i) Salary paid to computer specialist in cash disallowed under 30,000
section 40A(3), since such cash payment exceeds ` 10,000
(ii) Amount paid for purchase of car is not allowable under section 80,000
37(1) since it is a capital expenditure
(iii) Municipal Taxes paid in respect of residential flat let out
3,000 1,13,000
10,41,224
Add: Value of benefit received from clients during the course of 10,500
profession [taxable as business income under section 28(iv)]
10,51,724
Less: Income credited but not taxable under this head:

(i) Dividend on shares of X Ltd., an Indian company (taxable under 10,524
the head “Income from other sources")
(ii) Income from UTI (taxable under the head “Income from other 7,600
sources")
(iii) Honorarium for valuation of answer papers 15,800
(iv) Rent received from letting out of residential flat 85,600 1,19,524
9,32,200
Less: Depreciation on motor car @15% (See Note(i) below) 12,000
9,20,200
CA Bhanwar Borana 7
Notes:
(i) It has been assumed that the motor car was put to use for more than 180 days during the previous
year and hence, full depreciation @ 15% has been provided for under section 32(1)(ii).
Note: Alternatively, the question can be solved by assuming that motor car has been put to use
for less than 180 days and accordingly, only 50% of depreciation would be allowable as per the
second proviso below section 32(1)(ii).
(ii) Incentive to articled assistants for passing IPCC examination in their first attempt is deductible
under section 37(1).
(iii) Repairs and maintenance paid in advance for the period 1.4.2022 to 30.9.2022 i.e. for 6 months
amounting to ` 1,000 is allowable since Ms. Purvi is following the cash system of accounting.
(iv) ` 32,000 expended on foreign tour is allowable as deduction assuming that it was incurred in
connection with her professional work. Since it has already been debited to income and
expenditure account, no further adjustment is required.
(3) Income from other sources
Particulars `
Dividend on shares of X Ltd., an Indian company (taxable in the hands of 10,524

shareholders)
Income from UTI (taxable in the hands of unit holders) 7,600
Honorarium for valuation of answer papers 15,800
33,924
(4) Deduction under Chapter VI-A :
Particulars `
Deduction under section 80C (Investment in NSC) Deduction under section 80D 10,000
(See Notes (i) & (ii) below) Nil
Total deduction under Chapter VI-A
10,000
Notes:
(i) Premium paid to insure the health of brother is not eligible for deduction under section 80D,
even though he is a dependent, since brother is not included in the definition of “family” under
section 80D.
(ii) Premium paid to insure the health of major son is not eligible for deduction, even though he is a
dependent, since payment is made in cash.
8 CA Bhanwar Borana
Question-3 [Topics- Total Income (PGBP Direct Method)]
Mr. Rajiv, aged 50 years, a resident individual and practicing Chartered Accountant,
furnishes you the receipts and payments account for the financial year 2021-22.
Receipts and Payments Account
Receipts ` Payments `
Opening balance (1.4.2021) Cash 12,000 Staff salary, bonus and stipend to 21,50,000
on hand and at Bank articled clerks
Fee from professional services 59,38,000 Other administrative expenses 11,48,000

(Gross)
Rent 50,000 Office rent 30,000
Motor car loan from Canara Bank 2,50,000 Housing loan repaid to SBI 1,88,000
(@ 9% p.a.) (includes interest of ` 88,000)
Life insurance premium (10% of 24,000

sum assured)
Motor car (acquired in 4,25,000
Jan. 2022 by A/c payee cheque)
Medical insurance premium (for 18,000

self and wife)(paid by A/c Payee
cheque)
Books bought on 20,000
1.07.2021 (annual publications by

A/c payee cheque)
Computer acquired on 1.11.2021 30,000

by A/c payee cheque (for
professional use)
Domestic drawings 2,72,000
Public provident fund subscription 20,000
Motor car maintenance 10,000
Closing balance (31.3.2022) Cash 19,15,000

on hand and at Bank
62,50,000 62,50,000
Following further information is given to you:

(1) He occupies 50% of the building for own residence and let out the balance for
residential use at a monthly rent of ` 5,000. The building was constructed during the
year 1997-98, when the housing loan was taken.
(2) Motor car was put to use both for official and personal purpose. One-fifth of the motor
car use is for personal purpose. No car loan interest was paid during the year.
CA Bhanwar Borana 9
(3) The written down value of assets as on 1-4-2021 are given below:
Furniture & Fittings ` 60,000
Plant & Machinery ` 80,000
(Air-conditioners, Photocopiers, etc.)
Computers ` 50,000
Note: Mr. Rajiv follows regularly the cash system of accounting.
Compute the total income of Mr. Rajiv for the assessment year 2022-23 assuming that he
has not opted to pay tax under section 115BAC.
Answer
Computation of total income of Mr. Rajiv for the assessment year 2022-23
Particulars ` ` `
Self-occupied
Annual value Nil
Less: Deduction under section 24(b) Interest on

housing loan
50% of ` 88,000 = 44,000 but limited to 30,000
Loss from self occupied property (30,000)
Let out property
Annual value (Rent receivable has been 60,000

taken as the annual value in the absence of other
information)
Less: Deductions u/s 24

30% of Net Annual Value 18,000
Interest on housing loan (50% of ` 88,000) 44,000 62,000 (2,000)
Loss from house property (32,000)
Profits and gains of business or Profession
Fees from professional services 59,38,000
Less: Expenses allowable as deduction Staff salary, 21,50,000

bonus and stipend
Other administrative expenses 11,48,000
Office rent 30,000
Motor car maintenance (10,000 x 4/5) 8,000
10 CA Bhanwar Borana
Particulars ` ` `
Car loan interest – not allowable (since the same has Nil 33,36,000
not been paid and the assessee follows cash system of
accounting)
26,02,000
Motor car Depreciation ` 4,25,000 x 7.5% x 4/5 25,500
Books being annual publications@40% 8,000
Furniture and fittings@10% of ` 60,000 6,000
Plant and machinery@15% of ` 80,000 12,000
Computer@40% of ` 50,000 20,000
Computer (New) ` 30,000 @ 40% x 50% 6,000 77,500 25,24,500
Gross Total income 24,92,500
Less: Deductions under Chapter VI-A
Deduction under section 80C
Housing loan principal repayment 1,00,000
PPF subscription 20,000
Life insurance premium 24,000
Total amount of ` 1,44,000 is allowed as deduction 1,44,000
since it is within the limit of ` 1,50,000
Deduction under section 80D
Medical insurance premium paid ` 18,000 18,000 1,62,000
Question- 4 [Topics- Total Income + 115BAC]

From the following details, compute the total income and tax liability of Siddhant, aged 31
years, of Delhi both as per the regular provisions of the Income-tax Act, 1961 and as per
section 115BAC for the A.Y.2022-23. Advise Mr. Siddhant whether he would opt for section
115BAC:
Particulars `
Salary including dearness allowance 3,35,000
Bonus 11,000
Salary of servant provided by the employer 12,000
Rent paid by Siddhant for his accommodation 49,600
Bills paid by the employer for gas, electricity and water provided free of cost 11,000
at the above flat
CA Bhanwar Borana 11
Siddhant purchased a flat in a co-operative housing society in Delhi for ` 4,75,000 in April,
2015, which was financed by a loan from Life Insurance Corporation of India of `
1,60,000@15% interest, his own savings of ` 65,000 and a deposit from a nationalized bank
for ` 2,50,000 to whom this flat was given on lease for ten years. The rent payable by the
bank was ` 3,500 per month. The following particulars are relevant:
(a) Municipal taxes paid by Mr. Siddhant ` 4,300 (per annum)
(b) House Insurance ` 860
(c) He earned ` 2,700 in share speculation business and lost ` 4,200 in cotton speculation
business.
(d) In the year 2016-17, he had gifted ` 30,000 to his wife and ` 20,000 to his son who was
aged 11. The gifted amounts were advanced to Mr. Rajesh, who was paying
interest@19% per annum.
(e) Siddhant received a gift of ` 30,000 each from four friends.
(f) He contributed ` 50,000 to Public Provident Fund.
Answer
Computation of total income and tax liability of Siddhant for the A.Y. 2022-23
Particulars ` `
Salary Income
Bonus 11,000
Value of perquisites:
(i) Salary of servant 12,000
(ii) Free gas, electricity and water 11,000 23,000
3,69,000
Less: Standard deduction under section 16(ia) 50,000
3,19,000
Gross Annual Value (GAV) (Rent receivable is taken as GAV in the 42,000
absence of other information) (` 3,500 × 12)
Less: Deductions under section 24
(i) 30% of NAV ` 11,310
(ii) Interest on loan from LIC @15% of ` 1,60,000 [See ` 24,000 35,310 2,390
Note 2]
Particulars ` `
Income from speculative business

Income from share speculation business 2,700
Less: Loss of ` 4,200 from cotton speculation business set-off to the 2,700 Nil
extent of ` 2,700
Balance loss of ` 1,500 from cotton speculation business has to be
carried forward to the next year as it cannot be set off against any other
head of income.
Income from Other Sources
(i) Income on account of interest earned from advancing money gifted
to his minor son is includible in the hands of Siddhant as per 3,800
section 64(1A)
Less: Exempt under section 10(32)
1,500
2,300
(ii) Interest income earned from advancing money gifted to wife has to
be clubbed with the income of the assessee as per section 64(1) 5,700
(iii) Gift received from four friends (taxable under section 56(2)(x) as
the aggregate amount received during the year exceeds ` 50,000)
1,20,000 1,28,000
Less: Deduction under section 80C

Contribution to Public Provident Fund 50,000
Particulars `
Tax on total income of ` 3,99,390 [` 3,99,390 – ` 2,50,000 = ` 1,49,390@5%] 7,470
Less: Rebate u/s 87A, since total income does not exceed ` 5,00,000 7,470
Tax liability Nil
Computation of total income and tax liability of Siddhant in accordance with the provisions of
section 115BAC for the A.Y. 2022-23
Particulars ` `
Salary Income
Bonus 11,000
Value of perquisites:
Particulars ` `
(i) Salary of servant 12,000
(ii) Free gas, electricity and water 11,000 23,000
3,69,000
Less: Standard deduction under section 16(ia) [not allowable as per Nil
section 115BAC(2)]
3,69,000

Gross Annual Value (GAV) (Rent receivable is taken as GAV in the 42,000
absence of other information) (` 3,500 × 12)

Less: Deductions under section 24
(i) 30% of NAV ` 11,310
(ii) Interest on loan from LIC @15% of `1,60,000 35,310 2,390

[See Note 2] ` 24,000
Income from speculative business

Income from share speculation business 2,700
Less: Loss of ` 4,200 from cotton speculation business set-off to the 2,700 Nil
extent of ` 2,700
Balance loss of ` 1,500 from cotton speculation business has to be
carried forward to the next year as it cannot be set off against any other
head of income.
(i) Income on account of interest earned from advancing money gifted 3,800
to his minor son is includible in the hands of Siddhant as per section
64(1A) [Exemption under section 10(32) would not be available]
(ii) Interest income earned from advancing money gifted to wife has to
be clubbed with the income of the assessee as per section 64(1)
(iii) Gift received from four friends (taxable under section 56(2)(x) as 5,700
the aggregate amount received during the year exceeds ` 50,000)
Deduction under section 80C [No deduction under Chapter VI-A would 1,29,500
be allowed as per section 115BAC(2)]
5,00,890
Total Income
Nil
5,00,890
Particulars `
Tax on total income [5% of ` 2,50,000 + 10% of ` 890] 12,589

Add: Health and education cess @4% 504
Tax liability 13,093
Tax liability (rounded off) 13,090
Since Mr. Siddhant is not liable to pay any tax as per the regular provisions of the Income-tax Act,
1961, it would be beneficial for him to not opt for section 115BAC for A.Y.2022-23.
Notes:
(1) It is assumed that the entire loan of ` 1,60,000 is outstanding as on 31.3.2022;
(2) Since Siddhant’s own flat in a co-operative housing society, which he has rented out to a
nationalized bank, is also in Delhi, he is not eligible for deduction under section 80GG in respect
of rent paid by him for his accommodation in Delhi, since one of the conditions to be satisfied
for claiming deduction under section 80GG is that the assessee should not own any residential
accommodation in the same place.
(3) Alternatively, computation total income as per the special provisions of section 115BAC can
also be presented as follows:
Particulars ` `
Total Income as per regular provisions of the Income-tax Act 3,99,390
Add:(i) Standard deduction u/s 16(ia), as it would not be allowable under

the special provisions 50,000
(ii) Exemption under section 10(32), as it would not be available under the 1,500
special provisions
(iii) Deduction under section 80C, as no deduction under Chapter VI-A 50,000 1,01,500
would be allowed under the special provisions
Question-5 [Topics- Total Income (Scope of Total Income)]

Rosy and Mary are sisters, born and brought up at Mumbai. Rosy got married in 1982 and
settled at Canada since 1982. Mary got married and settled in Mumbai. Both of them are
below 60 years. The following are the details of their income for the previous year ended
31.3.2022:
S. No. Particulars Rosy Mary

` `
1. Pension received from State Government -- 60,000
2. Pension received from Canadian Government 20,000 --
3. Long-term capital gain on sale of land at Mumbai 1,00,000 1,00,000
S. No. Particulars Rosy Mary

` `
4. Short-term capital gain on sale of shares of 20,000 2,50,000
Indian listed companies in respect of which
STT was paid
5. LIC premium paid -- 10,000
6. Premium paid to Canadian Life Insurance Corporation at 40,000 --

Canada
7. Mediclaim policy premium paid by A/c Payee Cheque -- 25,000
8. Deposit in PPF -- 20,000
9. Rent received in respect of house property at Mumbai 60,000 30,000
Compute the taxable income and tax liability of Mrs. Rosy and Mrs. Mary for the
Assessment Year 2022-23 and tax thereon. Ignore the provisions of section 115BAC.
Answer
Computation of taxable income of Mrs. Rosy and Mrs. Mary for the A.Y.2022-23
S. Particulars Mrs. Rosy Mrs. Mary

No. (Non- (ROR)
resident)
` `
(I) Salaries
Pension received from State Govt. ` 60,000
Less: Standard deduction u/s 16(ia) ` 50,000 - 10,000
- -
Pension received from Canadian Government is not taxable in
the case of a non-resident since it is earned and received
outside India
- 10,000
(II) Income from house property

Rent received from house property at Mumbai (assumed to be 60,000 30,000
the annual value in the absence of other information i.e.
municipal value, fair rent and standard rent)
Less: Deduction under section 24(a)@30% 18,000 9,000
42,000 21,000
S. Particulars Mrs. Rosy Mrs. Mary

No. (Non- (ROR)
resident)
` `
(III) Capital gains

Long-term capital gain on sale of land at Mumbai 1,00,000 1,00,000
Short term capital gain on sale of shares of Indian listed 20,000 2,50,000
companies in respect of which STT was paid
1,20,000 3,50,000
(A) Gross Total Income [(I)+(II)+(III)] 1,62,000 3,81,000

Less: Deductions under Chapter VIA
1. Deduction under section 80C
1. LIC Premium paid - 10,000
2. Premium paid to Canadian Life Insurance Corporation 40,000 -
3. Deposit in PPF - 20,000
40,000 30,000
2. Deduction under section 80D – Mediclaim premium paid 25,000
40,000 55,000
(B) Total deduction under Chapter VI-A is restricted to income 40,000 31,000
other than capital gains taxable under sections 111A & 112
(C) Total income (A-B) 1,22,000 3,50,000
Tax liability of Mrs. Rosy for A.Y.2022-23
Tax on long-term capital gains @20% of ` 1,00,000 20,000
Tax on short-term capital gains @15% of ` 20,000 3,000
Tax on balance income of ` 2,000 Nil
23,000
Tax liability of Mrs. Mary for A.Y.2022-23
Tax on STCG @15% of ` 1,00,000 [i.e. ` 2,50,000 less ` 15,000
1,50,000, being the unexhausted basic exemption limit as per
proviso to section 111A] [See Notes 3 & 4 below]
Less: Rebate under section 87A would be lower of ` 12,500 or 12,500
tax liability, since total income does not exceed ` 5,00,000
2,500
Add: Health and Education cess@4% 920 100
Total tax liability 23,920 2,600
Notes:
(1) Long-term capital gains on sale of land is chargeable to tax@20% as per section 112.
(2) Short-term capital gains on transfer of equity shares in respect of which securities transaction tax
is paid is subject to tax@15% as per section 111A.
(3) In case of resident individuals, if the basic exemption limit is not fully exhausted against other
income, then, the long-term capital gains u/s 112/short-term capital gains u/s 111A will be
reduced by the unexhausted basic exemption limit and only the balance will be taxed at
20%/15%, respectively. However, this benefit is not available to non-residents. Therefore, while
Mrs. Mary can adjust unexhausted basic exemption limit against long-term capital gains taxable
under section 112 and short-term capital gains taxable under section 111A, Mrs. Rosy cannot do
so.
(4) Since long-term capital gains is taxable at the rate of 20% and short-term capital gains is taxable
at the rate of 15%, it is more beneficial for Mrs. Mary to first exhaust her basic exemption limit
of ` 2,50,000 against long-term capital gains of ` 100,000 and the balance limit of ` 1,50,000
(i.e., ` 2,50,000 – ` 1,50,000) against short-term capital gains.
(5) Rebate under section 87A would not be available to Mrs. Rosy even though her total income
does not exceed ` 5,00,000, since she is non-resident for the A.Y. 2022-23.
Question-6 [Topics- SEZ / 35AD / AMT / 115BAC]

Mr. X, an individual set up a unit in Special Economic Zone (SEZ) in the financial year 2017-
18 for production of washing machines. The unit fulfills all the conditions of section 10AA of
the Income-tax Act, 1961. During the financial year 2020-21, he has also set up a
warehousing facility in a district of Tamil Nadu for storage of agricultural produce. It fulfills all
the conditions of section 35AD. Capital expenditure in respect of warehouse amounted to `
75 lakhs (including cost of land ` 10 lakhs). The warehouse became operational with effect
from 1st April, 2021 and the expenditure of ` 75 lakhs was capitalized in the books on that
date. Relevant details for the financial year 2021-22 are as follows:
Particulars `
Profit of unit located in SEZ 40,00,000
Export sales of above unit 80,00,000
Domestic sales of above unit 20,00,000
Profit from operation of warehousing facility (before considering deduction 1,05,00,000

under Section 35AD)
Compute income-tax (including AMT under Section 115JC) liability of Mr. X for Assessment
Year 2022-23 both as per regular provisions of the Income-tax Act and as per section
115BAC for Assessment Year 2022-23. Advise Mr. X whether he should opt for section
115BAC.
Answer
Computation of total income and tax liability of Mr. X for A.Y.2022-23
(under the regular provisions of the Income-tax Act, 1961)
Particulars ` `
Profits and gains of business or profession
Profit from unit in SEZ 40,00,000
Less: Deduction u/s 10AA [See Note (1) below] 32,00,000
Business income of SEZ unit chargeable to tax 8,00,000
Profit from operation of warehousing facility 1,05,00,000
Less: Deduction u/s 35AD [See Note (2) below] 65,00,000
Business income of warehousing facility chargeable to tax 40,00,000
Computation of tax liability (under the normal/regular provisions)
Tax on ` 48,00,000 12,52,500
Add: Health and Education cess@4% 50,100
Computation of adjusted total income of Mr. X for levy of Alternate Minimum Tax
Particulars ` `
Total Income (computed above as per regular provisions 48,00,000
of income tax)
Add: Deduction under section 10AA 32,00,000
80,00,000
Add: Deduction under section 35AD 65,00,000
Less: Depreciation under section 32
On building @10% of ` 65 lakhs1 6,50,000 58,50,000
Adjusted Total Income 1,38,50,000
Alternate Minimum Tax@18.5% 25,62,250
Add: Surcharge@15% (since adjusted total income > ` 1 3,84,338
crore)
29,46,588
Add: Health and Education cess@4% 1,17,863
30,64,451
Tax liability u/s 115JC (rounded off) 30,64,450
1 Assuming the capital expenditure of ` 65 lakhs is incurred entirely on buildings.

Since the regular income-tax payable is less than the alternate minimum tax payable, the adjusted
total income shall be deemed to be the total income and tax is leviable @18.5% thereof plus
surcharge@15% and cess@4%. Therefore, tax liability as per section 115JC is ` 30,64,450.
Computation of total income and tax liability of Mr. X for A.Y.2022-23 (under the provisions of
section 115BAC of the Income-tax Act, 1961)
Particulars ` `
Total Income (as computed above as per regular provisions of 48,00,000

income tax)
Add: Deduction under section 10AA (not allowable) 32,00,000
80,00,000
Add: Deduction under section 35AD 65,00,000

Less: Depreciation under section 32
On building @10% of ` 65 lakhs2 (normal depreciation under 6,50,000 58,50,000
section 32 is allowable)
Total Income 1,38,50,000
Computation of tax liability as per section 115BAC
Tax on ` 1,38,50,000 38,92,500
Add: Surcharge@15%
5,83,875
44,76,375
Add: Health and Education cess@4% 1,79,055
Total tax liability
46,55,430
Notes:
(1) Deductions u/s 10AA and 35AD are not allowable as per section 115BAC(2). However, normal
depreciation u/s 32 is allowable.
(2) Individuals or HUFs exercising option u/s 115BAC are not liable to alternate minimum tax u/s
115JC.
Since the tax liability of Mr. X under section 115JC is lower than the tax liability as computed
u/s 115BAC, it would be beneficial for him not to opt for section 115BAC for A.Y. 2022-23.
Moreover, benefit of alternate minimum tax credit is also available to the extent of tax paid in
excess over regular tax.
AMT Credit to be carried forward under section 115JEE
Tax liability under section 115JC 30,64,450
Less: Tax liability under the regular provisions of the Income- tax Act, 1961 13,02,600
17,61,850
2 Assuming the capital expenditure of ` 65 lakhs is incurred entirely on buildings..

Notes:
(1) Deduction under section 10AA in respect of Unit in SEZ =
Export turnover of the Unit in SEZ
Profit of the Unit in SEZ ×
Total turnover of the Unit in SEZ
`80,00,000
`40,00,000 = ` 32,00,000
` 1,00,00,000
(2) Deduction@100% of the capital expenditure is available under section 35AD for A.Y.2022-23 in
respect of specified business of setting up and operating a warehousing facility for storage of
agricultural produce which commences operation on or after 01.04.2009.
Further, the expenditure incurred, wholly and exclusively, for the purposes of such specified
business, shall be allowed as deduction during the previous year in which he commences operations
of his specified business if the expenditure is incurred prior to the commencement of its operations
and the amount is capitalized in the books of account of the assessee on the date of commencement of
its operations.
Deduction under section 35AD would, however, not be available on expenditure incurred on
acquisition of land.
In this case, since the capital expenditure of ` 65 lakhs (i.e., ` 75 lakhs – ` 10 lakhs, being
expenditure on acquisition of land) has been incurred in the F.Y.2020-21 and capitalized in the books
of account on 1.4.2021, being the date when the warehouse became operational, ` 65,00,000, being
100% of ` 65 lakhs would qualify for deduction under section 35AD.
Question-7 [Topics- Setoff and Carryforward]

Mr. Prakash furnishes the following information for the financial year 2021-22.
Particulars `
Loss from speculation business-X 85,000
Profit from speculation business-Y 45,000
Interest on borrowings in respect of self-occupied house property 3,18,000
Income from let out house property 1,20,000
Presumptive Income from trading and manufacturing business under 1,00,000

section 44AD
Salary from XYZ (P) Ltd. 5,25,000
Interest on PPF deposit 65,000
Long term capital gain on sale of Vacant site 1,25,000
Short term capital loss on sale of Jewellery 65,000
Investment in tax saver deposit on 31-03-22 60,000
Brought forward loss of business of assessment year 2016-17 1,00,000
Donation to a charitable trust recognized under section 12AA and 60,000

approved under section 80G (payment made via credit card)
Compute total income of Mr. Prakash for the assessment year 2022-23 also show the loss,
eligible to be carried forward. Assume that he does not opt for section 115BAC.
Answer
Computation of total income of Mr. Prakash for A.Y.2022-23
Particulars ` `
Salary from XYZ (P) Ltd. 5,25,000
Less: Standard Deduction u/s 16(ia) 50,000
4,75,000
Less: Loss from house property of ` 20,000 [` 80,000 -` 60,000, 20,000 4,55,000
being the loss set-off against long-term capital gains]
Less: Loss from self-occupied house property to the extent of ` 2 2,00,000
lakhs, allowable as deduction u/s 24(b) in respect of interest on
borrowings
(80,000)
Less: Amount set-off against other heads of income (80,000)
Profits and gains from business or profession
Profit from speculation business Y 45,000
Less: Loss of ` 85,000 from speculation business X set-off against (45,000)

profit from speculation business Y to the extent of such profit
Presumptive Income from trading and manufacturing business 1,00,000 Nil
Less: Brought forward business loss of A.Y. 2016-17 set- off since (1,00,000) Nil
the period of eight assessment years has not expired
Capital Gains
Long term capital gain on sale of vacant site 1,25,000
Less: Short term capital loss on sale of jewellery 65,000
60,000
Less: Loss from house property to be set-off to the extent of LTCG 60,000 Nil
(It is more beneficial for Mr. Prakash to first set-off the loss from
house property against the long-term capital gains, since it is taxable
@20%)
Interest on PPF deposit 65,000
Less: Exempt 65,000 Nil
Particulars ` `
Less: Deduction under Chapter VI-A
Investment in tax saver deposit on 31.3.2022 60,000
Deduction under section 80G
Donation to recognized and approved charitable trust [Donation of `

60,000 to be first restricted to ` 39,500, being 10% of adjusted total
income of ` 3,95,000 (` 4,55,000 – ` 60,000). Thereafter, deduction
would be computed at 50% of ` 39,500.
19,750 79,750
Losses to be carried forward to A.Y.2023-24
Particulars `
Loss from speculation business X (` 85,000 - ` 45,000) 40,000

Loss from speculation business can be set-off only against profits of any other speculation
business. If loss cannot be so set-off, the same has to be carried forward to the subsequent
year for set off against income from speculation business, if any, in that year.
Question- 8 [Topics- Total Income]

Compute total income and tax liability thereon of Mr. Raghav for the A.Y. 2022-23 from the
following details:
Mr. Raghav (aged, 61 years) working in a private company from last 10 years. His salary
details for the financial year 2021-22 are:
(i) Basic Salary 1,70,000 p.m.
(ii) Dearness Allowance (forms part of retirement benefits) 80,000 p.m.
(iii) Commission 32,000 p.m.
(iv) Transport Allowance 5,000 p.m.
(v) Medical Reimbursement 40,000
Mr. Raghav resigned from the services on 30th November, 2021 after completing 10 years
and 5 months of service. He was paid gratuity of ` 25 lakhs on his retirement. He is not
covered under the Payment of Gratuity Act, 1972.
He started business of hiring of goods vehicle, purchased 4 small goods vehicle on 10th
December,2021 and 4 heavy vehicles having gross weight of 20 MTs each· on 1st January,
2022. He did not maintain books of accounts for the business of hiring of goods vehicle. Mr.
Shivpal, his very close friend gifted him ` 2 lakhs to purchase the vehicles.
He was holding 30% equity shares in TSP (P) Ltd., an Indian company. The paid up share
capital of company as on 31st March, 2021 was ` 20 lakh divided into 2 lakh shares of` 10
each which were issued at a premium of ` 30 each. Company allotted shares to
shareholders on 1st October, 2013.
He sold all these shares on 30th April, 2021 for ` 60 per share. Equity shares of TSP (P)
Ltd. are listed on National Stock Exchange and Mr. Raghav has paid STT both at the time of
acquisition and transfer of such shares. FMV on 31.1.2018 was ` 50 per share.
On 12.2.2022, interest of fixed deposits of ` 90,000 credited to his SBI Bank. On
30.4.2021,` 5,500 and on 30.12.2021, ` 8,500 credited to interest on saving bank A/c with
SBI Bank.
He deposited ` 1,10,000 in PPF A/c. He paid insurance premium of ` 20,000 on his life
policy during the financial year 2021-22. The policy was taken in April 2011 and sum
assured was ` 3,00,000. He also made payment of ` 25,000 towards L.I.C. pension fund
and premium of ` 40,000 towards mediclaim policy for self and ` 20,000 for his wife. All the
payment he made by A/c payee cheque.
There was no change in salary of Mr. Raghav from last two years. He does not opt to pay
tax as per section 115BAC.
Cost inflation Index is:
Financial Year Cost Inflation Index
2013-14 220
2021-22 317
Answer
Computation of Total Income of Mr. Raghav for the A.Y.2022-23
Particulars ` `
Salaries
Basic Salary = 1,70,000 x 8 13,60,000
Dearness Allowance = 80,000 x 8 6,40,000
Commission = 32,000 x 8 2,56,000
Transport Allowance = 5,000 x 8 40,000
Medical reimbursement [Fully taxable] 40,000
Gratuity – Amount received 25,00,000
Less: Least of the following exempt u/s 10(10)
(i) Actual Gratuity received ` 25,00,000
(ii) ½ month’s salary for every year of completed

service [ ½ x 2,50,000 (Basic salary plus DA)
+ x 10] = ` 12,50,000
(iii) Notified limit of ` 20,00,000
Least of the above is exempt 12,50,000 12,50,000
Particulars ` `
Gross Salary 35,86,000
Less: Standard deduction u/s 16(ia) [Actual salary or` 50,000, 50,000
whichever is less]
Net Salary 35,36,000
Income from business of hiring goods vehicle
Other than heavy goods vehicles = 4 x (` 7,500 p.m.) x (4 1,20,000

months)
Heavy goods vehicles = 4 x (20 MTs x ` 1,000 per MT) x (3 2,40,000

months)
Capital Gains 3,60,000
On transfer of 60,000 shares (2,00,000 x 30%)
Sales consideration [60,000 x ` 60 per share] 36,00,000
Less: Cost of acquisition, higher of – 30,00,000
- Actual cost [60,000 x ` 40 per share] 24,00,000
- Lower of
 FMV on 31.1.2018 [60,000 x50] 30,00,000
 Actual sales consideration [60,000 x 60] 36,00,000
Long-term capital gains u/s 112A (since shares are held 6,00,000
for a period of more than 12 months before transfer)
Gift from friend taxable u/s 56(2)(x) since the same exceeds ` 2,00,000
50,000. It is fully taxable
Interest on Saving A/c with SBI Bank 14,000
Interest on Fixed deposits with SBI Bank 1,00,000

[Since interest is credited after deduction of at source @ 10%,
as the amount of interest exceeds ` 50,000, amount included
in the total income need to be grossed up (` 90,000 x 100/90)]
3,14,000
Particulars ` `
Section 80C
Deposits in PPF A/c 1,10,000
Life Insurance premium [fully deductible, since, in respect of a
policy taken before 1.4.2012, the actual premium paid (`
20,000) or 20% of the sum assured (` 3,00,000 x 20%= `
20,000
60,000), whichever is lower, has to be deducted]
1,30,000
Section 80CCC
Payment to LIC Pension Fund 25,000
1,55,000
Restricted to ` 1,50,000, being the maximum allowable 1,50,000
deduction
Section 80D
Medical insurance premium for self and spouse ` 60,000, 50,000
allowable to the extent of ` 50,000, since Mr. Raghav is a
senior citizen
Section 80TTB
Deduction in respect of interest on fixed deposits and saving
bank allowable as deduction under section 80TTB, since Mr.
Raghav is a senior citizen, to the extent of` 50,000 50,000
Computation of tax liability of Mr. Raghav for A.Y. 2022-23
Particulars ` `
Tax on total income of ` 45,60,000
Tax on long-term capital gains of ` 6,00,000 arising from transfer 50,000
of listed shares @10% under section 112A after deducting ` 1
lakh.
Tax on other income of ` 39,60,000 [` 45,60,000 –` 6,00,000
capital gains]
Upto` 3,00,000 Nil
` 3,00,001 – ` 5,00,000 [i.e., ` 3,00,000@5%] 10,000
` 5,00,001 – ` 10,00,000 [i.e., ` 5,00,000@20%] 1,00,000
` 10,00,001 – ` 39,60,000 [i.e., ` 29,60,000@30%] 8,88,000 9,98,000
10,48,000
Tax liability 10,89,920
Question-9 [Topics- Total Income/10AA/AMT/115BAC]
Mr. Dheeraj, aged 48 years, a resident Indian has furnished the following particulars for the
year ended 31.03.2022:
(i) He occupies ground floor of his residential building and has let out first floor for
residential use at an annual rent of ` 3,34,000. He has paid municipal taxes of ` 30,000
for the current financial year. Both these floors are of equal size.
(ii) As per interest certificate from ICICI bank, he paid ` 1,80,000 as interest and ` 95,000
towards principal repayment of housing loan borrowed for the above residential building
in the year 2015.
(iii) He owns an industrial undertaking established in a SEZ and which had commenced
operation during the financial year 2019-20. Total turnover of the undertaking was ` 400
lakhs, which includes ` 120 lakhs from export turnover. This industrial undertaking
fulfills all the conditions of section 10AA of the Income-tax Act, 1961. Profit from this
industry is ` 45 lakhs.
(iv) He employed 20 new employees for the said industrial undertaking during the previous
year 2021-22. Out of 20 employees, 12 were employed on 1st May 2021 on monthly
emoluments of ` 18,000 and remaining were employed on 1st August 2021 on monthly
emoluments of ` 12,000. All these employees participate in recognised provident fund
and they are paid their emoluments directly to their bank accounts.
(v) He earned ` 30,000 and ` 45,000 as interest on saving bank deposits and fixed
deposits respectively.
(vi) He also sold his vacant land on 01.12.2021 for ` 13 lakhs. The stamp duty value of land
at the time of transfer was ` 14 lakhs. The FMV of the land as on 1st April, 2001 was `
4.8 lakhs and Stamp duty value on the said date was ` 4 lakhs. This land was acquired
by him on 15.9.1997 for ` 2.80 lakhs. He had incurred registration expenses of ` 12,000
at that time.
The cost of inflation index for the financial year 2021-22 and 2001-02 are 317 and 100
respectively.
(vii) He paid insurance premium of ` 49,000 towards life insurance policy of his son, who is
not dependent on him.
You are requested to compute his total income and tax liability of Mr. Dheeraj for the
Assessment Year 2022-23, in the manner so that he can make maximum tax savings.
Answer
Computation of total income of Mr. Dheeraj for A.Y. 2022-23
Particulars ` ` `
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received is taken as GAV, in 3,34,000

the absence of other information]
Less: Municipal taxes paid by him in the P.Y. 2021-22

pertaining to let out portion [`30,000/2] 15,000
Particulars ` ` `
Less: Deduction u/s 24
(a) 30% of ` 3,19,000 95,700
(b) Interest on housing loan [` 1,80,000/2] 90,000 1,85,700
1,33,300
Self-occupied portion [Ground Floor]
Annual Value Nil
[No deduction is allowable in respect of municipal

taxes paid]
Less: Interest on housing loan 90,000
(90,000)
Income from house property [` 1,33,300 –` 90,000] 43,300
II Profits and gains of business or profession
Income from SEZ unit 45,00,000
III Capital Gains
Long-term capital gains on sale of land (since held for

more than 24 months)
Full Value of Consideration [Actual consideration of ` 13,00,000

13 lakhs, since stamp duty value of ` 14 lakhs does not
exceed actual consideration bymore than 10%]
Less: Indexed Cost of acquisition [` 4,00,000 x 12,68,000 32,000

317/100]
Cost of acquisition
Higher of -
- Actual cost ` 2.80 lakhs + ` 0.12 lakhs =` 2.92 lakhs

and
- Fair Market Value (FMV) as on 1.4.2001 =` 4.8 lakhs

but cannot exceed stamp duty value of ` 4 lakhs.
IV Income from Other Sources
Interest on savings bank deposits 30,000
Interest on fixed deposits 45,000 75,000
Particulars ` ` `
Less: Deduction u/s 10AA 13,50,000

[Since the industrial undertaking is established in SEZ,
it is entitled to deduction u/s 10AA@100% of export
profits, since P.Y.2021-22 being the 3rd year of
operations]
[Profits of the SEZ x Export Turnover/Total Turnover]

x 100%
[` 45 lakhs x ` 120 lakhs/ ` 400 lakhs x 100%]
Repayment of principal amount of housing loan 95,000
Insurance premium paid on life insurance policy of son

allowable, even though not dependent on Mr. Dheeraj 49,000 1,44,000
Deduction under section 80JJAA 9,43,200
30% of the employee cost of the new employees

employed during the P.Y. 2021-22 allowable as
deduction [30%of` 31,44,000 [` 23,76,000 (12 x
18,000 x11) + ` 7,68,000 (8 x 12,000 x 8)]
Deduction under section 80TTA

Interest on savings bank account, restricted to ` 10,000
10,000
10,97,200
Computation of tax liability of Mr. Dheeraj for A.Y.2022-23 under the normal provisions of the
Act
Particulars ` `
Tax on LTCG of ` 32,000@20% 6,400
Tax on remaining total income of 21,71,100
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000[@5% of ` 2.50 lakh] 12,500
` 5,00,001 – ` 10,00,000[@20% of ` 5,00,000] 1,00,000
` 10,00,001 – ` 21,71,100[@30% of ` 11,71,100] 3,51,330 4,63,830
4,70,230
Particulars ` `
Add: Health and education cess@4% 18,809
Tax liability (rounded off) 4,89,040
Computation of tax liability of Mr. Dheeraj for A.Y.2022-23 under the special provisions of the
Act (Alternate Minimum Tax)
Particulars `
Computation of adjusted total income
Total income as per the normal provisions of the Act 22,03,100
Add: Deduction u/s 10AA 13,50,000
Deduction u/s 80JJAA 9,43,200
44,96,300
AMT@18.5% 8,31,815
Add: HEC@4% 33,273
AMT liability 8,65,088
AMT liability (rounded off) 8,65,090
Since the regular income tax payable is less than the AMT, the adjusted total income of` 44,96,300
would be deemed to be the total income and tax would be payable @18.5% plus HEC@4%. The total
tax liability would be ` 8,65,090. In this case, AMT credit of` 3,76,050 (` 8,65,090 – ` 4,89,040) can
be carried forward.
Mr. Dheeraj also can opt to pay tax as per the provisions of section 115BAC if tax liability thereunder
is lower. In such case, the AMT provisions would not apply on him. The computation of total income
and tax liability as per the provisions of section 115BAC would be as follows:
Computation of total income of Mr. Dheeraj as per section 115BAC for A.Y. 2022-23
Particulars ` `
Gross Total Income as per regular provisions of the Income-tax Act 46,50,300
Add: Interest on borrowing in respect of self-occupied house
property not allowable as deduction as per section 115BAC 90,000
Gross Total Income as per section 115BAC 47,40,300
Less: Deduction under section 80JJAA
30% of the employee cost of the new employees employed during
the P.Y. 2021-22 allowable as deduction [30% of ` 31,44,000 [` 9,43,200
23,76,000 (12 x18,000 x 11) + ` 7,68,000 (8 x 12,000 x 8)]
No deduction under section 10AA or under Chapter VI-A allowable
except u/s 80JJAA
9,43,200
Computation of tax liability as per section 115BAC
Particulars ` `
Tax on LTCG of ` 32,000@20% 6,400
Tax on remaining total income of ` 37,65,100
Upto` 2,50,000 Nil
` 2,50,001 – ` 5,00,000 [@5% of ` 2.50 lakhs] 12,500
` 5,00,001 – ` 7,50,000 [@10% of ` 2.50 lakhs] 25,000
` 7,50,001 – ` 10,00,000 [@15% of ` 2.5 lakhs] 37,500
` 10,00,001 – ` 12,50,000 [@20% of ` 2.5 lakhs] 50,000
` 12,50,001 – ` 15,00,000 [@25% of ` 2.5 lakhs] 62,500
` 15,00,001 – ` 37,65,100 [@30% of ` 22,65,100] 6,79,530 8,67,030
8,73,430
Since tax liability as per section 115BAC is higher than the tax liability of ` 8,65,090 being higher of
AMT liability and tax liability computed as per normal provisions of the Income- tax Act, 1961, it is
beneficial for Mr. Dheeraj not to exercise option under section 115BAC. In such case, his tax
liability, therefore, would be ` 8,65,090. Moreover, Mr. Dheeraj would also be eligible to claim carry
forward of AMT credit of ` 3,76,050.
Question- 10 [Topics- Total Income]

Mr. Rakesh, aged 45 years, a resident Indian has provided you the following information for
the previous year ended 31.03.2022
(i) He received royalty of ` 2,88,000 from abroad for a book authored by him in the nature
of artistic. The rate of royalty as 18% of value of books and expenditure made for
earning this royalty was ` 40,000. The amount remitted to India till 30th September,
2022 is ` 2,30,000.
(ii) He owns an industrial undertaking established in a SEZ and which had commenced
operation during the financial year 2019-20. Total turnover of the undertaking was ` 200
lakhs, which includes `140 lakhs from export turnover. This industrial undertaking fulfills
all the conditions of section 10AA of the Income-tax Act, 1961. Profit from this industry is
` 25 lakhs.
(iii) He also sold his vacant land on 10.11.2021 for `13 lakhs. The stamp duty value of land
at the time of transfer was ` 17 lakhs. The FMV of the land as on 1st April, 2001 was ` 5
lakhs. This land was acquired by him on 05.08.1995 for ` 1.75 lakhs. He had incurred
registration expenses of ` 20,000 at that time. The cost of inflation index for the year
2021-22 and 2001-02 are 317 and 100 respectively.
(iv) Received ` 40,000 as interest on saving bank deposits.
(v) He occupies ground floor of his residential building and has let out first floor for
residential use at an annual rent of ` 2,28,000. He has paid municipal taxes of ` 60,000
for the current financial year. Both floor are of equal size.
(vi) He paid insurance premium of ` 39,000 on life insurance policy of son, who is not
dependent on him and ` 48,000 on life insurance policy of his dependent father.
(vii) He paid tuition fees of ` 42,000 for his three children to a school. The fees being `
14,000 p.a. per child.
You are required to compute the total income and tax liability of Mr. Rakesh under normal
provisions as well as under section 115BAC for the A.Y. 2022-23. Ignore AMT provisions.
Answer
Computation of total income of Mr. Rakesh for A.Y. 2022-23
Particulars ` ` `
I Income from house property

Let out portion [First floor]
Gross Annual Value [Rent received is taken as GAV, in
the absence of other information]
Less: Municipal taxes paid by him in the P.Y. 2021-22 2,28,000
pertaining to let out portion [` 60,000/2]
30,000
Net Annual Value (NAV)
Less: Deduction u/s 24 (a) 1,98,000
30% of ` 1,98,000 59,400
1,38,600
Self-occupied portion [Ground Floor]

Annual Value Nil
[No deduction is allowable in respect of municipal 1,38,600
taxes paid]
II Profits and gains of business or profession

Income from SEZ unit 25,00,000
III Capital Gains

Long-term capital gains on sale of land (since held for
more than 24 months)
Full Value of Consideration [Higher of stamp duty 17,00,000
value of ` 17 lakhs and Actual consideration of ` 13
lakhs, since stamp duty value exceeds actual
consideration by more than 10%]
Particulars ` ` `
Less: Indexed Cost of acquisition [` 5,00,000 x 15,85,000 1,15,000

317/100]
Cost of acquisition
Higher of -
- Actual cost ` 1.75 lakhs + ` 0.20 lakhs = ` 1.95 lakhs
and
- Fair Market Value (FMV) as on 1.4.2001 = ` 5 lakhs
IV Income from Other Sources

Royalty from artistic book 2,88,000
Less: Expenses incurred for earning royalty 40,000
2,48,000
Interest on savings bank deposits 40,000
2,88,000

Less: Deduction u/s 10AA [Since the industrial 17,50,000
undertaking is established in SEZ, it is entitled to
deduction u/s 10AA @100% of export profits, since
P.Y.2021-22, being the 3rd year of operations]
[Profits of the SEZ x Export Turnover/Total Turnover]
x 100%[` 25 lakhs x ` 140 lakhs/ ` 200 lakhs x 100%]
Tuition fee paid for maximum of two children is 28,000
allowable (` 14,000 x 2)
Insurance premium paid on life insurance policy of son
39,000
allowable, even though not dependent on Mr. Rakesh
Insurance premium paid on life insurance policy of
father not allowable, even though father is dependent on
Mr. Rakesh -
Deduction under section 80QQB 67,000
Royalty [` 2,88,000 x 15/18 = ` 2,40,000, restricted to
amount brought into India in convertible foreign
exchange ` 2,30,000 minus ` 40,000 expenses already
allowed as deduction while computing royalty income] 1,90,000
Deduction under section 80TTA
Interest on savings bank account, restricted to` 10,000 10,000
2,67,000
10,24,600
Computation of tax liability of Mr. Rakesh for A.Y.2022-23 under the normalprovisions of the
Act
Particulars ` `
Tax on LTCG of ` 1,15,000@20% 23,000
Upto` 2,50,000 Nil
` 2,50,001 – ` 5,00,000[@5% of ` 2.50 lakh] 12,500
` 5,00,001 – ` 9,09,600[@20% of ` 4,09,600] 81,920 94,420
1,17,420
Computation of tax liability of Mr. Rakesh as per section 115BAC for A.Y.2022-23
Particulars `
Gross total Income as per regular provisions of the Act 30,41,600
Less: Deduction u/s 10AA/ Deduction under Chapter VI-A [No deduction under -
section 10AA or under Chapter VI-A is allowed]
Total Income as per section 115BAC 30,41,600
Tax on LTCG of ` 1,15,000@20% 23,000
Upto` 2,50,000 Nil
` 2,50,001 – ` 5,00,000[@5% of ` 2.50 lakh] 12,500
` 5,00,001 – ` 7,50,000[@10% of ` 2.50 lakh] 25,000
` 7,50,001 – ` 10,00,000[@15% of ` 2.50 lakh] 37,500
` 10,00,001 – ` 12,50,000[@20% of ` 2.50 lakh] 50,000
` 12,50,001 – ` 15,00,000[@25% of ` 2.50 lakh] 62,500
` 15,00,001 – ` 29,26,600[@30% of ` 14,26,600] 4,27,980 6,15,480
6,38,840
Particulars `
Since tax liability as per section 115BAC is higher than the tax liability under normal
provisions of the Act, it is beneficial for Mr. Rakesh not to exercise option under
section 115BAC.
Question- 11 [Topics- Misc Topic]

(a) Mr. Thomas, a citizen of Japan, comes to India for the first time during the P.Y. 2017-18.
During the financial years 2017-18, 2018-19, 2019-20 2020-21 and 2021-22, he was in
India for 50 days, 65 days, 95 days, 150 days and 75 days, respectively. Determine his
residential status for theA.Y. 2022-23. Examine the tax implications in the hands of Mr.
Thomas for the Assessment Year 2022-23 of the following transactions entered by him.
(1) Interest received from Mr. Michel, a non-resident outside India (The borrowed fund is
used by Mr. Michel for investing in Indian company's debt fund for earning interest).
(2) He is also engaged in the business of running news agency and earned income of `
5 lakhs from collection of news and views in India for transmission outside India.
(3) He entered into an agreement with ABC & Co., a partnership firm for transfer of
technical documents and design and for providing services relating thereto, to set up
a Steel manufacturing plant, in India. He charged ` 15 lakhs for these services from
ABC & Co.
(b) Mr. Naksh has undertaken certain transactions during the F.Y.2021-22, which are listed
below. You are required to identify the transactions in respect of which quoting of PAN is
mandatory in the related documents –
S.No. Transaction
1. Payment of life insurance premium of ` 40,000 in the F.Y.2021-22 by

account payee cheque to LIC for insuring life of self and spouse
2. Payment of ` 1,10,000 to RBI for acquiring its bonds
3. Applied for issue of credit card to SBI
4. Payment of ` 1,00,000 by account payee cheque to travel agent for travel to

Singapore for 3 days to visit
(c) Ms. Soha (aged 35 years), a resident individual, is a dealer of scooters. During the
previous year 2021-22, total turnover of her business was ` 110 lakhs (out of which ` 25
lakhs was received by way of account payee cheques and balance in cash). Ms. Soha
does not opt to pay tax as per the provisions of section 115BAC.
What would be your advice to Ms. Soha relating to the provisions of advance tax with its due
date along with the amount payable, assuming that she wishes to make maximum tax
savings.
Answer
(a) Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies
any one of the following conditions:
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the previous year for a total
period of 365 days or more and has been in India for at least 60 days in the previous year.
If an individual satisfies any one of the conditions mentioned above, he is a resident. If both the
above conditions are not satisfied, the individual is a non-resident.
During the previous year 2021-22, Mr. Thomas was in India for 75 days and during the 4 years
preceding the previous year 2021-22, he was in India for 360 days (i.e. 50+ 65+ 95+ 150 days).
The total stay of the Mr. Thomas during the previous year in India was less than 182 days and
during the four years preceding this year was for 360 days. Therefore, due to non-fulfillment of
any of the two conditions for a resident, he would be treated as non-resident for the Assessment
Year 2022-23.
(1) Not taxable, since interest payable by a non-resident to another non-resident would be
deemed to accrue or arise in India only if the borrowed fund is used for the purposes of
business or profession carried on by him in India. In this case, it is used for investing in
Indian company’s debt fund for earning interest and not for the purposes of business or
profession. Hence, it is not taxable in India.
(2) No income shall be deemed to accrue or arise to Mr. Thomas through or from activities
which are confined to the collection of news and views in India for transmission outside
India. Hence, ` 10 lakhs is not taxable in India in the hands of Mr. Thomas.
(3) ` 10 lakhs is deemed to accrue or arise in India to Mr. Thomas, a non-resident, since it
represents royalty/fees for technical services paid for services utilized in India, in this case,
for setting up a Steel manufacturing plant in India. Hence, the same would be taxable in India
in the hands of Mr. Thomas.
(b)
Transaction Is quoting of PAN mandatory in related

documents?
1. Payment of life insurance premium of ` No, since the amount paid does not exceed `
40,000 in the F.Y.2021-22 byaccount 50,000 in the F.Y.2021-22.
payee cheque to LIC for insuring life of
self and spouse
2. Payment of ` 1,10,000 to RBI for Yes, since the amount paid

acquiring its bonds exceeds ` 50,000
3. Applied to SBI for issue of credit card. Yes, quoting of PAN is mandatory on
making an application to a banking company
for issue of credit card.
4. Payment of ` 1,00,000 by account payee No, since the amount was paid by account
cheque to travel agent for travel to Dubai payee cheque, quoting of PAN is not
for 3 days to visit mandatory even though the payment exceeds
` 50,000
(c) Computation of advance tax of Ms. Soha under Presumptive Income scheme as per section
44AD
The total turnover of Ms. Soha, a dealer of scooter, is ` 110 lakhs. Since her total turnover from such
business is less than ` 200 lakhs and she does not wish to get his books of account audited, she can
opt for presumptive tax scheme under section 44AD.
Profits and gains from business computed under section 44AD:
Particulars `
6% of ` 25 lakhs, being turnover effected through account payee cheque 1,50,000
8% of ` 85 lakhs, being cash turnover 6,80,000
8,30,000
An eligible assessee opting for computation of profits and gains of business on presumptive basis
under section 44AD in respect of eligible business is required to pay advance tax of the whole
amount on or before 15th March of the financial year.
Computation of tax liability of Ms. Soha as per normal provisions of Income-taxAct, 1961
Particulars Amount in `
Tax on 8,30,000
Upto` 2,50,000 Nil
` 2,50,001 – ` 5,00,000@5% 12,500
` 5,00,001 – ` 8,30,000@20% 66,000 78,500
Tax liability 81,640
Accordingly, she is required to pay advance tax of ` 81,640 on or before 15th March of the financial
year. However, any amount by way of advance tax on or before 31st March of the financial year shall
also be treated as advance tax paid during the financial year ending on that day for all the purposes of
the Act.
Question- 12 [Topics- Salary and Setoff C/F]

(a) Mr. Kashyap, aged 38 years, is entitled to a salary of ` 40,000 per month. He is given an
option by his employer either to take house rent allowance or a rent free accommodation
which is owned by the company. The HRA amount payable was ` 8,000 per month. The
rent for the hired accommodation was ` 6,500 per month at New Delhi. Advice Mr.
Kashyap whether it would be beneficial for him to avail HRA or Rent Free
Accommodation. Give your advice on the basis of “Net Take Home Cash benefits”.
Assume Mr. Kashyap does not opt for the provisions of section 115BAC.
(b) Compute the total income of Mr. Veer for the assessment year 2022-23 under proper
heads from the following information furnished by him for the financial year 2021-22:
Particulars `
Income from let out house property (computed) 3,50,000
Interest paid on housing loan for self-occupied property 2,00,000
Income from Textile business 5,75,000
Brought forward business loss of Assessment Year 2018-19 1,05,000
Short-term capital loss 70,000
Brought forward long-term loss from Assessment Year 2020-21 90,000
Long-term capital gain on sale of house 75,000
Interest on enhanced compensation from Government for acquisition of 5,00,000

land in 2017
Dividend from ABC Ltd., Andhra Pradesh 15,000
Deposit made on 15.02.2022 in his Public Provident fund account 75,000
Loss from owning and maintaining race horse of Assessment Year 20,000
2021-22
Loss from Gambling 8,000
Also state the loss that can be carried forward to A.Y. 2023-24. Mr. Veer filed the return of
income for assessment year 2018-19 after the expiry of due date for filing the return.
Answer
(a) Computation of tax liability of Kashyap under both the options
Particulars Option I – Option II –

HRA (`) RFA(`)
Basic Salary (` 40,000 x 12 Months) 4,80,000 4,80,000
Perquisite value of rent-free accommodation (15% of ` 4,80,000) N.A. 72,000
House rent Allowance (` 8,000 x 12 Months) ` 96,000
Less: Exempt u/s 10(13A) – least of the following -
- 50% of Basic Salary ` 2,40,000
- Actual HRA received ` 96,000
- Rent paid less 10% of salary `30,000 ` 30,000 66,000
Gross Salary 5,46,000 5,52,000
Particulars Option I – Option II –

HRA (`) RFA(`)
Less: Standard deduction u/s 16(ia) 50,000 50,000
Net Salary 4,96,000 5,02,000
Less: Deduction under Chapter VI-A - -
Total Income 4,96,000 5,02,000
Tax on total income 12,300 12,900
Less: Rebate under section 87A - Lower of ` 12,500 or income-tax of ` 12,300 Nil
12,300, since total income does not exceed ` 5,00,000
Nil 12,900
Add: Health and Education cess@4% Nil 516
Total tax payable Nil 13,416
Tax Payable (Rounded off) Nil 13,420
Cash Flow Statement
Particulars Option I – Option II

HRA – RFA
Inflow: Salary 5,76,000 4,80,000
Less: Outflow: Rent paid (78,000) -
Tax on total income Nil (13,420)
Net Inflow 4,98,000 4,66,580
Since the net cash inflow under Option I (HRA) is higher than in Option II (RFA), it is beneficial for
Mr. Kashyap to avail Option I, i.e., House Rent Allowance
(b) Computation of total income of Mr. Veer for A.Y.2022-23.
Particulars ` `
Less: Set-off of loss from self-occupied house property by virtue of (2,00,000) 1,50,000
section 70(1) [Whole of interest i.e., ` 2,00,000 allowable as deduction,
since it is within the permissible limit applicable to self- occupied
property; The said amount represents loss from self- occupied property]
Income from textile business 5,75,000
Particulars ` `
[As per section 80, brought forward business loss of ` 1,05,000 of Nil 5,75,000
assessment year 2018-19 cannot be set-off, since return of income for
that year was filed after the expiry of due date specified under section
139(1)]
Capital Gains
Long-term capital gains on sale of house 75,000
Less: Short-term capital loss can be set-off against long-term capital

gains [section 70(2)] 70,000
5,000
Less: Brought forward long- term capital loss of ` 90,000 from A.Y. 5,000 Nil
2020-21, set-off to the extent of ` 5,000
Interest on enhanced compensation from Government 5,00,000
Less: Deduction @50% 2,50,000
2,50,000
Dividend from ABC Ltd. 15,000 2,65,000
Less: Deduction under section 80C – Deposit in PPF 75,000
Losses to be carried forward to A.Y.2023-24
Long-term capital loss of A.Y. 2020-21 (` 90,000 – ` 5,000) to be set-off 85,000

against long-term capital gains, if any, in that year
Loss from owning and maintaining racehorse of the A.Y. 2021-22 to be 20,000
set-off against income, if any, from owning and maintaining race horses
in that year.
Loss from gambling (it can neither be set-off against any income during
the previous year nor can it be carried forward for set-off against any
income in the subsequent assessment years).
Question- 13 [Topics- PGBP 44AD/ADA and Set-off C/F]

Mr. A furnishes you the following information for the year ended 31.03.2022:
(` )
(i) Income from plying of vehicles (computed as per books) 3,20,000

(He owned 5 light goods vehicle throughout the year)
(ii) Income from retail trade of garments 7,50,000
(Computed as per books) (Sales turnover ` 1,35,70,000)
Mr. A had declared income on presumptive basis under section 44AD for
the first time in A.Y. 2021-22. Assume 10% of the turnover during the
previous year 2021-22 was received in cash and balance through A/c
payee cheque and all the payments in respect of expenditure were also
made through A/c payee cheque or debit card.
(iii) He has brought forward depreciation relating to A.Y. 2020-21 1,00,000
Compute taxable income of Mr. A and his tax liability for the assessment year 2022- 23 with
reasons for your computation, assuming that he does not opt for section 115BAC.
Answer
Computation of total income and tax liability of Mr. A for the A.Y. 2022-23
Particulars `
Income from retail trade – as per books (See Note 1 below) 7,50,000
Income from plying of vehicles – as per books (See Note 2 below) 3,20,000
10,70,000
Less : Set off of b/f depreciation relating to A.Y. 2020-21 1,00,000
Tax liability 1,06,500
Add: Health and Education cess @4% 4,260
Note:
1. Income from retail trade: Presumptive business income under section 44AD is ` 8,41,340 i.e.,
8% of ` 13,57,000, being 10% of the turnover received in cash and 6% of ` 1,22,13,000, being
the amount of sales turnover received through A/c payee cheque. However, the income computed
as per books is ` 7,50,000 which is to be further reduced by the amount of unabsorbed
depreciation of ` 1,00,000. Since the income computed as per books is lower than the income
deemed under section 44AD, the assessee can adopt the income as per books.
However, if he does not opt for presumptive taxation under section 44AD, he has to get his books
of accounts audited under section 44AB, since his turnover exceeds ` 1 crore (the enhanced limit
of ` 10 crore would not available, since more than 5% of the turnover is received in cash). Also,
his case would be falling under section 44AD(4) and hence tax audit is mandatory. It may further
be noted that he cannot opt for section 44AD for next five A.Ys, if he does not opt for section
44AD this year.
2. Income from plying of light goods vehicles: Income calculated under section 44AE(1) would be
` 7,500 x 12 x 5 which is equal to ` 4,50,000. However, the income from plying of vehicles as
per books is ` 3,20,000, which is lower than the presumptive income of ` 4,50,000 calculated as
per section 44AE(1). Hence, the assessee can adopt the income as per books i.e. ` 3,20,000,
provided he maintains books of account as per section 44AA and gets his accounts audited and
furnishes an audit report as required under section 44AB.
It is to be further noted that in both the above cases, had presumptive income provisions been opted,
all deductions under sections 30 to 38, including depreciation would have been deemed to have been
given full effect to and no further deduction under those sections would be allowable.
If the assessee opted for income to be assessed on presumptive basis, his total income would be
as under:
Particulars `
Income from retail trade under section 44AD [` 13,57,000 @ 8% plus ` 8,41,340
1,22,13,000 @6%]
Income from plying of light goods vehicles under section 44AE [` 7,500 x 12 x 5] 4,50,000
12,91,340
Less: Set off of brought forward depreciation – not possible as
it is deemed that it has been allowed and set off Nil
Tax thereon 1,99,902
Add : Health and Education cess @4% 7,996
Total tax liability (rounded off) 2,07,900
Question- 14 [Topics - Set-off C/F]

Compute the gross total income of Mr. Farhan and show the items eligible for carry forward
and the assessment years upto which such losses can be carry forward from the following
information furnished by him for the year ended 31-03-2022:
Particulars Amount(`)
Loss from speculative business MNO 12,000
Income from speculative business BPO 25,000
Loss from specified business covered under section 35AD 45,000
Income from salary (computed) 4,18,000
Loss from house property 2,20,000
Income from trading business 2,80,000
Long-term capital gain from sale of urban land 2,05,000
Long-term capital loss on sale of equity shares (STT not paid) 85,000
Long-term capital loss on sale of listed equity shares in recognized stock 1,10,000
exchange (STT paid at the time of acquisition and sale of shares)
Short-term capital loss under section 111A 85,000
Following are the brought forward losses:
(1) Brought forward loss from speculative business MNO ` 18,000 relating to A.Y. 2018-19.
(2) Brought forward loss from trading business of ` 12,000 relating to A.Y. 2016-17
(3) Unabsorbed depreciation ` 1,00,000 relating to A.Y. 2021-22
Assume Mr. Farhan has furnished his return of income on or before the due date specified
under section 139(1) in all the above previous years.
Answer
Computation of Gross total income of Mr. Farhan for the A.Y.2022-23
Particulars ` `
Salaries
Income from Salary 4,18,000
Less: Loss from house property set-off against salary (2,00,000) 2,18,000
[As per section 71(3A), loss from house property to the extent of `
2,00,000 can be set-off against any other head of income.]
Income from trading business 2,80,000
Less: Brought forward loss from trading business of A.Y. 2016-17 can
be set off against current year income from trading business as per
section 72(1), since the eight-year time limit as specified under section
72(3), within which set-off is permitted, has not expired.
(12,000)
Less: Unabsorbed depreciation (1,00,000) 1,68,000
Income from speculative business BPO 25,000
Less: Loss from speculative business MNO set-off as per section 73(1) (12,000)
Loss from speculative business MNO brought forward from A.Y.
2018-19 as per section 73(2), can be set off to the extent of ` 13,000. (13,000) -
Balance loss will be lapsed, since four years his expired
Capital Gains
Long term capital gain on sale of urban land 2,05,000
Less: Long term capital loss on sale of shares (STT not paid) set- off (85,000)
as per section 71(3)
Less: Long-term capital loss on sale of listed equity shares on which

STT is paid can also be set-off as per section 71(3), since long-term
capital arising on sale of such shares is taxable under section 112A
(1,10,000)
Less: Short-term capital loss under section 111A as per section 71(2) (10,000) -
Items eligible for carried forward to A.Y.2023-24
Particulars `
Loss from house property 20,000

As per section 71B, balance loss not set-off can be carried forward to the next year
for set-off against income from house property of that year. It can be carried forward
for a maximum of eight assessment years i.e., upto A.Y. 2030-31, in this case.
Loss from specified business under section 35AD 45,000

Loss from specified business under section 35AD can be set-off only against profits
of any other specified business. If loss cannot be so set-off, the same has to be carried
forward to the subsequent year for set off against income from specified business, if
any, in that year. As per section 73A(2), such loss can be carried forward indefinitely
for set-off against profits of any specified business .
Short-term capital loss under section 111A 75,000

Short-term capital loss under section 111A can be set-off against long term or short
term capital gains. If it cannot be so set-off, it has to be carried forward to the next
year for set-off against capital gains, if any, in that year. It can be carried forward for
a maximum of eight assessment years, i.e., upto A.Y.2030-31, in this case, as
specified under section 74(1).
Question- 15 [Topics – Clubbing of Income]

Mr. Karan gifted a sum of ` 9 lakhs to his brother’s minor son on 1-5-2021. On the same
date, his brother gifted debentures worth ` 10 lakhs to Mrs. Karan. Son of Mr. Karan’s
brother invested the amount in fixed deposit with Canara Bank @ 9% p.a. interest and Mrs.
Karan received interest of ` 81,000 on these debentures during the previous year 2021-22.
Discuss the tax implications under the provisions of the Income- tax Act, 1961.
Answer
In the given case, Mr. Karan gifted a sum of ` 9 lakhs to his brother’s minor son on 1.5.2021 and
simultaneously, his brother gifted debentures worth ` 10 lakhs to Mr. Karan’s wife on the same date.
Mr. Karan’s brother’s minor son invested the gifted amount of ` 9 lakhs in fixed deposit with Canara
Bank.
These transfers are in the nature of cross transfers. Accordingly, the income from the assets
transferred would be assessed in the hands of the deemed transferor because the transfers are so
intimately connected to form part of a single transaction and each transfer constitutes consideration
for the other by being mutual or otherwise.
If two transactions are inter-connected and are part of the same transaction in such a way that it can
be said that the circuitous method was adopted as a device to evade tax, the implication of clubbing
provisions would be attracted.
As per section 64(1A), all income of a minor child is includible in the hands of the parent, whose
total income, before including minor’s income is higher. Accordingly, the interest income arising to
Mr. Karan’s brother’s son from fixed deposits would be included in the total income of Mr. Karan’s
brother, assuming that Mr. Karan’s brother’s total income is higher than his wife’s total income,
before including minor’s income. Mr. Karan’s brother can claim exemption of ` 1,500 under section
10(32).
Interest on debentures arising in the hands of Mrs. Karan would be taxable in the hands of Mr. Karan
as per section 64(1)(iv).
This is because both Mr. Karan and his brother are the indirect transferors of the income to their
spouse and minor son, respectively, with an intention to reduce their burden of taxation.
In the hands of Mr. Karan, interest received by his spouse on debentures of ` 9 lakhs alone would be
included and not the entire interest income on the debentures of `10 lakhs, since the cross transfer is
only to the extent of ` 9 lakhs.
Hence, only proportional interest (i.e., 9/10th of interest on debentures received)` 72,900 would be
includible in the hands of Mr. Karan.
The provisions of section 56(2)(x) are not attracted in respect of sum of money transferred or value of
debentures transferred, since in both the cases, the transfer is from a relative.
Question- 16 [Topics – Clubbing of Income]

Rayaan gifted ` 15 lakhs to his wife, Sargam on her birthday on, 23rd February, 2021.
Sargam lent ` 8,00,000 out of the gifted amount to Karuna on 1st April, 2021 for six months
on which she received interest of ` 80,000. The said sum of ` 80,000 was invested in
shares of a listed company on 5th October, 2021, which were sold for ` 96,000 on 28th
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 Sargam in her new
business. She suffered loss of ` 52,000 in the business in Financial Year 2021-22.
In whose hands the above income and loss shall be included in Assessment Year 2022-23,
assuming that capital invested in the business was entirely out of the funds gifted by her
husband. Support your answer with brief reasons.
Answer
In computing the total income of any individual, there shall be included all such income as arises
directly or indirectly, to the spouse of such individual from assets transferred directly or indirectly, to
the spouse by such individual otherwise than for adequate consideration or in connection with an
agreement to live apart.
Interest on loan: Accordingly, ` 80,000, being the amount of interest on loan received by Mrs.
Sargam, wife of Mr.Rayaan, would be includible in the total income of Mr. Rayaan, since such loan
was given out of the sum of money received by her as gift from her husband.
Loss from business: As per Explanation 2 to section 64, income includes loss. Thus, clubbing
provisions would be attracted even if there is loss and not income.
Thus, the entire loss of ` 52,000 from the business carried on by Mrs. Sargam would also be
includible in the total income of Mr. Rayaan, since as on 1st April 2021, the capital invested was
entirely out of the funds gifted by her husband.
Short-term capital gain: Income from the accretion of the transferred asset is not liable to be
included in the hands of the transferor and, therefore, short-term capital gain of ` 16,000 (` 96,000,
being the sale consideration less ` 80,000, being the cost ofacquisition) arising in the hands of Mrs.
Sargam from sale of shares acquired by investing the interest income of ` 80,000 earned by her (from
the loan given out of the sum gifted by her husband), would not be included in the hands of Mr.
Rayaan. Thus, such income is taxable in the hands of Mrs. Sargam.
Question- 17 [Topics – TDS/TCS]

Examine the TDS/TCS implications in the cases mentioned hereunder–
(i) On 1.6.2021, Mr. Ganesh made three nine months fixed deposits of ` 3 lakh each,
carrying interest@9% p.a. with Dwarka Branch, Janakpuri Branch and Rohini Branch
of XYZ Bank, a bank which has adopted CBS. The fixed deposits mature on
28.2.2022.
(ii) On 1.10.2021, Mr. Rajesh started a six months recurring deposit of ` 2,00,000 per
month@8% p.a. with PQR Bank. The recurring deposit matures on 31.3.2022
(iii) 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.
(iv) Mr. Y, a resident, is due to receive ` 3.95 lakhs on 31.3.2022 on LIC policy taken on
31.3.2012, for which the sum assured is ` 3.50 lakhs and the annual premium is `
30,100.
(v) Mr. Z, a resident, is due to receive ` 95,000 on 1.8.2021 towards maturity proceeds
of LIC policy taken on 1.8.2015 for which the sum assured is ` 90,000 and the
annual premium was ` 10,000.
(vi) Payment made to Smith, an Australian cricketer non-resident in India, by a
newspaper for contribution of articles ` 25,000.
(vii) Mr. X, a salaried individual, pays rent of ` 55,000 per month to Mr. Y from June,
2021 for immovable property. Is he required to deduct tax at source? If so, when is
he required to deduct tax? Also, compute the amount of tax to be deducted at
source.
Would your answer change if Mr. X vacated the premises on 31st December, 2021?
Also, what would be your answer if Mr. Y does not provide his PAN to Mr. X?
(viii) XYZ Ltd. makes a payment of ` 28,000 to Mr. Ganesh on 2.8.2021 towards fees for
professional services and another payment of ` 25,000 to him on the same date
towards fees for technical services. Discuss whether TDS provisions under section
194J are attracted.
(ix) Payment of ` 2,00,000 to Mr. R by S Ltd., a transporter who owns 8 goods carriages
throughout the previous year and furnishes a declaration to this effect alongwith his
PAN.
(x) ABC and Co. Ltd. paid ` 19,000 to one of its directors as sitting fees on 01-01-2022.
(xi) Fee paid on 1.12.2021 to Dr. Srivatsan by Sundar (HUF) ` 35,000 for surgery
performed on a member of the family.
(xii) ` 2,00,000 paid to Mr. A, a resident individual, on 22-02-2022 by the State of Uttar
Pradesh on compulsory acquisition of his urban land.
(xiii) Mr. Rohit transferred a residential house property to Mr. Arun for ` 45 lacs. The
stamp duty value of such property is ` 55 lacs.
(xiv) Rashi Limited is engaged by Jigar Limited for the sole purpose of business of
operation of call centre. On 18-03-2022, the total amount credited by Jigar Limited in
the ledger account of Rashi Limited is ` 70,000 regarding service charges of call
centre. The amount is paid through cheque on 28-03-2022 by Jigar Limited.
(xv) Ms. Mohit won a lucky draw prize of ` 21,000. The lucky draw was organized by M/s.
Maximus Retail Ltd. for its customer.
Answer
(i) XYZ Bank has to deduct tax at source@10% u/s 194A, since the aggregate interest on fixed
deposit with the three branches of the bank is ` 60,750 [3,00,000 × 3 × 9% × 9/12], which
exceeds the threshold limit of ` 40,000. Since XYZ Bank has adopted CBS, the aggregate interest
credited/paid by all branches has to be considered. Since the aggregate interest of ` 60,750
exceeds the threshold limit of ` 40,000, tax has to be deducted@10% u/s 194A.
(ii) No tax has to be deducted under section 194A by PQR Bank on the interest of ` 28,000 falling
due on recurring deposit on 31.3.2022 to Mr. Rajesh, since such interest does not exceed the
threshold limit of ` 40,000.
(iii) Since the annual premium exceeds 10% of sum assured in respect of a policy taken after
31.3.2012, the maturity proceeds of ` 4.50 lakhs due on 31.3.2022 are not exempt under section
10(10D) in the hands of Mr. X. Therefore, tax is required to be deducted@5% under section
194DA on the amount of income comprised therein i.e., on ` 75,000 (` 4,50,000, being maturity
proceeds - ` 3,75,000, being the aggregate amount of insurance premium paid).
(iv) Since the annual premium is less than 20% of sum assured in respect of a policy taken before
1.4.2012, the sum of ` 3.95 lakhs due to Mr. Y would be exempt under section 10(10D) in his
hands. Hence, no tax is required to be deducted at source under section 194DA on such sum
payable to Mr. Y.
(v) Even though the annual premium exceeds 10% of sum assured in respect of a policy taken after
31.3.2012, and consequently, the maturity proceeds of ` 95,000 due on 1.8.2021 would not be
exempt under section 10(10D) in the hands of Mr. Z, the tax deduction provisions under section
194DA are not attracted since the maturity proceeds are less than ` 1 lakh.
(vi) Under section 194E, the person responsible for payment of any amount to a non- resident
sportsman for contribution of articles relating to any game or sport in India in a newspaper shall
deduct tax @20%. Further, since Smith is a non-resident, health and education cess @4% on
TDS would also be added. Therefore, tax to be deducted = ` 25,000 x 20.8% = ` 5,200.
(vii) Since Mr. X pays rent exceeding ` 50,000 per month in the F.Y. 2021-22, he is liable to deduct
tax at source @5% of such rent for F.Y. 2021-22 under section 194-IB. Thus, ` 27,500 [` 55,000
x 5% x 10] has to be deducted from rent payable for March, 2022.
If Mr. X vacated the premises in December, 2021, then tax of ` 19,250 [` 55,000 x 5% x 7] has
to be deducted from rent payable for December, 2021.
In case Mr. Y does not provide his PAN to Mr. X, tax would be deductible@20%, instead of 5%.
In case 1 above, this would amount to ` 1,10,000 [` 55,000 x 20% x 10], but the same has to be
restricted to ` 55,000, being rent for March, 2022.
In case 2 above, this would amount to ` 77,000 [` 55,000 x 20% x 7], but the same has to be
restricted to ` 55,000, being rent for December, 2021.
(viii) TDS provisions under section 194J would not get attracted, since the limit of ` 30,000 is
applicable for fees for professional services and fees for technical services, separately. It is
assumed that there is no other payment to Mr. Ganesh towards fees for professional services and
fees for technical services during the P.Y.2021-22
(ix) No tax is required to be deducted at source under section 194C by M/s S Ltd. on payment to
transporter Mr. R, since he satisfies the following conditions:
-He owns ten or less goods carriages at any time during the previous year.
-He is engaged in the business of plying, hiring or leasing goods carriages;
-He has furnished a declaration to this effect along with his PAN.
(x) Section 194J provides for deduction of tax at source @10% from any sum paid by way of any
remuneration or fees or commission, by whatever name called, to a resident director, which is not
in the nature of salary on which tax is deductible under section 192. The threshold limit of `
30,000 upto which the provisions of tax deduction at source are not attracted in respect of every
other payment covered under section 194J is, however, not applicable in respect of sum paid to a
director.
Therefore, tax@10% has to be deducted at source under section 194J in respect of the sum of `
19,000 paid by ABC Ltd. to its director.
Therefore, the amount of tax to be deducted at source: = ` 19,000 x 10% = ` 1,900
(xi) As per the provisions of section 194J, a Hindu Undivided Family is required to deduct tax at
source on fees paid for professional services only if the total sales, gross receipts or turnover form
the business or profession exceed ` 1 crore in case of business or ` 50 lakhs in case of profession,
as the case may be, in the financial year preceding the current financial year and such payment
made for professional services is not exclusively for the personal purpose of any member of
Hindu Undivided Family.
Section 194M, provides for deduction of tax at source by a HUF (which is not required to deduct
tax at source under section 194J) in respect of fees for professional service if such sum or
aggregate of such sum exceeds ` 50 lakhs during the financial year.
In the given case, the fees for professional service to Dr. Srivatsan is paid on 1.12.2021 for a
personal purpose, therefore, section 194J is not attracted. Section 194M would have been
attracted, if the payment or aggregate of payments exceeded ` 50 lakhs in the P.Y.2021-22.
However, since the payment does not exceed ` 50 lakh in this case, there is no liability to deduct
tax at source under section 194M also.
(xii) As per section 194LA, any person responsible for payment to a resident, any sum in the nature of
compensation or consideration on account of compulsory acquisition under any law, of any
immovable property, is required to deduct tax at source, if such payment or the aggregate amount
of such payments to the resident during the financial year exceeds ` 2,50,000.
In the given case, there is no liability to deduct tax at source as the payment made to Mr. A does
not exceed ` 2,50,000.
(xiii) On payment of sale consideration for purchase of residential house property - Since the sale
consideration of house property is less than ` 50 lakhs, Mr. Arun is not required to deduct tax at
source u/s 194-IA, irrespective of the fact that the stamp duty value is more than the sale
consideration as well as the threshold limit of ` 50 lakhs.
(xiv) On payment of call centre service charges - Since Rashi Limited is engaged only in the business
of operation of call centre, Jigar Limited is required deduct tax at source@2% on the amount of `
70,000 u/s 194J on 18.3.2022 i.e., at the time of credit of call centre service charges to the
account of Rashi Limited, since the said date is earlier than the payment date i.e., 28.3.2022.
(xv) On payment of prize winnings of ` 21,000 -Tax is deductible @ 30% under section 194B by M/s.
Maximus Retail Ltd.., from the prize money of ` 21,000 payable to the customer, since the
winnings exceed ` 10,000.

Examine whether TDS provisions would be attracted in the following cases, and if so, under
which section. Also specify the rate of TDS applicable in each case. Assume that all
payments are made to residents.
Particulars of the payer Nature of payment Aggregate of
payments made in
the F.Y.2021-22
1 Mr. Ganesh, an individual Contract Payment for repair ` 5 lakhs
carrying on retail business of residential house
with turnover of ` 2.5 crores
Payment of commission to ` 80,000
in the P.Y.2020-21
Mr. Vallish for business
purposes
2. Mr. Rajesh, a wholesale Contract Payment for ` 20 lakhs in January,
trader whose turnover was reconstruction of residential 2022, ` 15 lakhs in
` 95 lakhs in P.Y. 2020-21. house (made during the Feb 2022 and ` 20
period January- March, 2022) lakhs in March 2022.
Particulars of the payer Nature of payment Aggregate of

payments made in
the F.Y.2021-22
3. Mr. Satish, a salaried Payment of brokerage for ` 51 lakhs

individual buying a residential house in
March, 2022
4. Mr. Dheeraj, a pensioner Contract payment made ` 48 lakhs

during October-November
2021 for reconstruction of
residential house
Answer
Particulars of Nature of Aggregate of Whether TDS provisions are

the payer payment payments in the attracted?
F.Y.2021- 22
1 Mr. Ganesh, an Contract Payment ` 5 lakhs No; TDS under section 194C is
individual for Repair of not attracted since The payment is
carrying on retail residential house for Personal purpose. TDS under
business with section 194M is not attracted as
turnover of ` 2.5 aggregate of contract payment to
crores in the the payee in the P.Y.2021-22 does
P.Y.2020-21 not exceed ` 50 lakh.
Payment of ` 80,000 Yes, u/s 194H, since the payment

commission to exceeds ` 15,000, and Mr.
Mr. Vallish for Ganesh’s turnover exceeds ` 1
business purposes crore in the P.Y.2020-21.
2. Mr. Rajesh, a Contract Payment ` 55 lakhs Yes, u/s 194M, since the
wholesale trader for reconstruction Aggregate of payments (i.e., ` 55
whose turnover of residential lakhs) exceed ` 50 lakhs. Since,
was ` 95 lakhs in house his turnover does not exceed 1
P.Y. 2020-21 crore in the P.Y.2020-21, TDS
provisions under section 194C are
not attracted in respect of
payments made in the P.Y.2021-
22.
3. Mr. Satish, a Payment of ` 51 lakhs Yes, u/s 194M, since the payment
salaried brokerage for of ` 51 lakhs made in March 2022
individual buying a exceeds the threshold of ` 50
residential house lakhs. Since Mr. Satish is a
salaried individual, the provisions
of section 194H are not applicable
in this case.
Particulars of Nature of Aggregate of Whether TDS provisions are

the payer payment payments in the attracted?
F.Y.2021- 22
4. Mr. Dheeraj, a Contract payment ` 48 lakhs TDS provisions under section

pensioner for reconstruction 194C are not attracted since Mr.
of residential Dheeraj is a pensioner.TDS
house provisions under section 194M
are also not Applicable in this
case, since the payment of ` 48
lakhs does not exceed the
threshold of ` 50 lakhs.

Mr. Subhash is a retailer of car spare parts. He started his business in May, 2020. His turnover for the P.Y.
2020-21 was ` 10.50 crores. He generally purchases goods from Car accessories & Co. only. Car accessories
& Co. manufacturers and sells spare parts directly to the customers as well as through an e-commerce
platform – CarParts.com. Car accessories & Co.’s turnover from the business for the P.Y. 2020-21 was ` 15
crores.
The relevant information of purchases made by Mr. Subhash in P.Y. 2021-22 is given hereunder:
Date of credit to Date of Payment to Value of spare GST @18% Total value of
account of Car Car accessories & Co. parts without spare parts/
accessories & Co. GST (`) payment
15.05.2021 02.06.2021 40,00,000 7,20,000 47,20,000
18.06.2021 30.06.2021 15,00,000 2,70,000 17,70,000
28.08.2021 17.08.2021 21,50,000 3,87,000 25,37,000
14.02.2022 28.02.2022 10,50,000 1,89,000 12,39,000
In addition to the above, Mr. Subhash also purchased spare parts of Car accessories & Co. for ` 12,00,000
inclusive of GST@18% through CarParts.com on 31.12.2021. The payment was made directly to Car
accessories & Co. on 15.1.2022. PAN is duly furnished by Mr. Subhash, Car accessories & Co. and
CarParts.com. The GST portion is indicated separately in the invoice of Car accessories & Co. but it is not
shown separately when the goods are purchased through CarParts.com.
Based on the above facts, choose the most appropriate answer to Q. No. i to v -
1. Is Mr. Subhash required to deduct tax at source in respect of the purchase transactions made directly with
Car accessories & Co. If yes, when and what is the amount of tax to be deducted?
(a) Yes; ` 2,150 on 17.08.2021 and ` 1,050 on 14.02.2022
(b) Yes; ` 2,537 on 17.08.2021 and ` 1,050 on 14.02.2022
(c) Yes; ` 500 on 18.06.2021, ` 2,150 on 17.08.2021 and ` 1,050 on 14.02.2022
(d) No, Mr. Subhash is not liable to deduct tax at source.
2. Is Car accessories & Co. required to collect tax at source in respect of the sale transactions with Mr.
Subhash. If yes, when and what is the amount of tax to be collected?
(a) Yes; ` 500 on 30.06.2021, ` 2,150 on 17.08.2022 and ` 1,050 on 28.02.2022
(b) Yes; ` 1,490 on 30.06.2021, ` 2,537 on 17.08.2021 and ` 1,239 on 28.02.2022
(c) Yes; ` 1,490 on 30.06.2021
(d) No, Car accessories & Co. is not liable to collect tax at source.
3. Assume that Mr. Subhash has started the retail business of car spare parts in May, 2021. In such case,
would the answer of MCQ i and ii be different? If yes, what would be the answer of MCQ i and ii?
(a) No, the answer of MCQ i and ii would be the same
(b) Yes, the answer of MCQ i would change to (d) but the answer of MCQ ii would be the same
(c) Yes, the answer of MCQ i would change to (d) and the answer of MCQ ii would change to (b)
(d) Yes, the answer of MCQ i would change to (d) and the answer of MCQ ii would change to (a)
4. Are the provisions of tax deduction/collection at source attracted in respect of the transactions with
CarParts.com? If yes, who has to deduct/collect at source and at what rate?
(a) Mr. Subhash is required to deduct tax at source on ` 12 lakhs @0.1%.
(b) Car accessories & Co. is required to collect tax at source on ` 12 lakhs @0.1%.
(c) CarParts.com is required to deduct tax at source on ` 12 lakhs @0.1%.
(d) CarParts.com is required to deduct tax at source on ` 12 lakhs @1%.
5. If Mr. Subhash has not furnished his PAN to Car accessories & Co. but has furnished his Aadhar number,
what would be the rate of TCS for the purpose of MCQ 2.
(a) 5%
(b) 1%
(c) 0.1%
(d) Car accessories & Co. is not liable to collect tax at source.
Answer
MCQ Most Reasons
No. Appropriate
Answer
1. (b) Section 194-Q applicable in this case on purchase made on or after 01/07/21.
Purchase made from 01/04/21 till 30/06/21 not liable for TDS but it will be
considered in the limit calculation of ` 50 Lakhs. TDS has to be deducted at the
time of payment or credit, whichever is earlier. As per CBDT if advance payment
made then TDS deducted on whole amount including GST.
TDS Amount
17/08/21 – ` 25,37,000 x 0.1% = ` 2537
14/04/22 – ` 10,50,000 x 0.1% = ` 1050
2. (c) Since last year T/O of seller is more then ` 10 Crores. As per section 206C(1H)
TCS collected @1% on consideration received in excess of ` 50 lakhs. As per
CBDT if section 194Q applicable then section 206C(1H) doesn’t apply. Since
section 194Q applicable from 01/07/21 so section 206C(1H) shall apply on
consideration received till 30/06/21. In this case since consideration received by
seller (including GST) is ` 64,90,000 so TCS applicable on ` 14,90,000 @ 0.1%.
3. (c) Since this is the first year of operation so last year T/O treated as NIL so buyer not
required to deduct TDS u/s 194Q but seller require to collect TCS on consideration
received during current year in excess of ` 50 Lakhs.
4. (d) As per section 194-O E-Commerce operator required to deduct TDS @1% on sale
value of goods to customer.
5. (c) Assessee can give aadhar instead of PAN.
Question- 20 [Topics – Return Filing]
(i) Mr. Sudarshan, due to inadvertent reasons, failed to file his Income-tax return for the
assessment year 2022-23 on or before the due date of filing such return of income.
(a) Can he file the above return after due date of filing return of income? If yes, which is the last
date for filing the above return?
(b) What are the consequences of non-filing the return within the due date under section
139(1)?
(ii) To whom the provisions of section 139AA relating to quoting of Aadhar Number do not apply?
(iii) Mrs. Hetal, an individual engaged in the business of Beauty Parlour, has got her books of
account for the financial year ended on 31st March, 2022 audited under section 44AB. Her total
income for the assessment year 2022-23 is ` 6,35,000. She wants to furnish her return of income
for assessment year 2022-23 through a tax return preparer. Can she do so?
Answer
(i) If any person fails to furnish a return within the time allowed to him under section 139(1), he may
furnish the belated return for any previous year at any time -
(a) 3 months prior to the end of the relevant assessment year; or
(b) before the completion of the assessment,
whichever is earlier.
The last date for filing return of income for A.Y.2022-23, therefore, is 31st December 2023. Thereafter,
Mr. Sudarshan cannot furnish a belated return after this date.
Consequences for non-filing return of Income within the due date under section 139(1)
Carry forward and set-off of certain losses: Business loss, speculation business loss, loss from
specified business under section 35AD, loss under the head “Capital Gains”; and loss from the activity of
owning and maintaining race horses, would not be allowed to be carried forward for set-off against
income of subsequent years, where a return of income is not furnished within the time allowed under
section 139(1).
Interest under section 234A: Interest under section 234A@1% per month or part of the month for the
period commencing from the date immediately following the due date under section 139(1) till the date
of furnishing of return of income is payable, where the return of income is furnished after the due date.
Fee under section 234F: Fee of ` 5,000 would be payable under section 234F, if the return of income is
not filed on or before the due date specified in section 139(1). However, such fee cannot exceed ` 1,000,
if the total income does not exceed` 5,00,000.
(ii) Persons to whom provisions of section 139AA relating to quoting of Aadhar Number does not
apply
The provisions of section 139AA relating to quoting of Aadhar Number would not apply to an individual
who does not possess the Aadhar number or Enrolment ID and is:
(i) residing in the States of Assam, Jammu & Kashmir and Meghalaya;
(ii) a non-resident as per Income-tax Act, 1961;
(iii) of the age of 80 years or more at any time during the previous year;
(iv) not a citizen of India
(iii) Section 139B provides a scheme for submission of return of income for any assessment year through a
Tax Return Preparer. However, it is not applicable to persons whose books of account are required to be
audited under section 44AB. Therefore, Mrs. Hetal cannot furnish her return of income for A.Y.2022-23
through a Tax Return Preparer.
Question- 21 [Topics – Residential Status and Scope of Total Income]
Determine the residential status and total income of Mr. Raghu for the assessment year
2022-23 from the information given below.
Mr. Raghu (age 62 years), an American citizen, is employed with a multinational company in
Gurugram. Mr. Raghu holds a senior level position as researcher in the company, since
2009. To share his knowledge and finding in research, company gave him an opportunity to
travel to other group companies outside India while continuing to be based at the Gurugram
office.
The details of his travel outside India for the financial year 2021-22 are as under:
Country Period of stay
USA 25 August, 2021 to 10 November, 2021
UK 20 November, 2021 to 23 December, 2021
Germany 10 January, 2022 to 24 March, 2022
During the last four years preceding the previous year 2021-22, he was present in India for
380 days. During the last seven previous years preceding the previous year 2021 -22, he
was present in India for 700 days. During the P.Y. 2021-22, he earned the following
incomes:
(1) Salary ` 15,80,000. The entire salary is paid by the Indian company in his Indian bank
account.
(2) Dividend amounting to ` 48,000 received from Treat Ltd., a Singapore based company,
which was transferred to his bank account in Singapore.
(3) Interest on fixed deposit with Punjab National Bank (Delhi) amounting to ` 10,500 was
credited to his saving account.
Answer
Determination of residential status
Mr. Raghu would be a resident in India in P.Y. 2021-22, if he satisfies any one of the following
conditions:
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the previous year for a total period
of 365 days or more and has been in India for at least 60 days in the previous year.
If he satisfies any one of the mentioned above, he is a resident. If both the above conditions are not
satisfied, he would be a non-resident.
During the P.Y. 2021-22 Mr. Raghu stayed in India for 179 days i.e., 365 days – 186 days [78 days +
34 days + 74 days] and 380 days i.e., more than 365 days during the 4 preceding previous years. He
satisfies the second basic condition for being a resident. Hence, he is a resident in India for
A.Y.2022-23.
A person would be “Not ordinarily Resident” in India in any previous year, if such person, inter alia:
(a) has been a non-resident in 9 out of 10 previous years preceding the relevant previous year; or
(b) has during the 7 previous years immediately preceding the relevant previous year been in India
for 729 days or less.
For the previous year 2021-22, Mr. Raghu would be “Resident but not ordinarily resident” since he
stayed for less than 729 days during the 7 previous years immediately preceding P.Y. 2021-22.
Computation of total income of Mr. Raghu for A.Y.2022-23
Particulars Amount (`)
(1) Salary from Indian company received in a bank account in 15,00,000

India
Less: Standard deduction u/s 16(ia) 50,000 14,50,000
(2) Dividend of ` 48,000 received from Singapore based company transferred to Nil
his bank account in Singapore is not taxable in the hands of the resident but
not ordinarily resident since the income has neither accrued or arisen in India
nor has it been received in India.
(3) Interest on fixed deposit with PNB credited to his savings bank account is 10,500
taxable in the hands of Mr. Raghu as Income from other sources, since it has
accrued and arisen in India and is also received in India.
Less: Deduction u/s 80TTB 10,500
Question- 22 [Topics – Salary]

From the following details, find out the salary chargeable to tax for the A.Y.2022-23
assuming he has not opted for the provisions of section 115BAC-
Mr. X is a regular employee of Rama & Co., in Gurgaon. He was appointed on 1.1.2021 in
the scale of ` 20,000 -` 1,000 - ` 30,000. He is paid 10% D.A. & Bonus equivalent to one
month pay based on salary of March every year. He contributes 15% of his pay and D.A.
towards his recognized provident fund and the company contributes the same amount. DA
forms part of pay for retirement benefits.
He is provided free housing facility which has been taken on rent by the company at
` 10,000 per month. He is also provided with following facilities:
(i) Facility of laptop costing ` 50,000.
(ii) Company reimbursed the medical treatment bill of his brother of ` 25,000, who is
dependent on him.
(iii) The monthly salary of ` 1,000 of a house keeper is reimbursed by the company.
(iv) A gift voucher of ` 10,000 on the occasion of his marriage anniversary.
(v) Conveyance allowance of ` 1,000 per month is given by the company towards actual
reimbursement of conveyance spent on official duty.
(vi) He is provided personal accident policy for which premium of ` 5,000 is paid by the
company.
(vii) He is getting telephone allowance @` 500 per month.
Answer
Computation of taxable salary of Mr. X for A.Y. 2022-23
Particulars `
Basic pay [(` 20,000×9) + (` 21,000×3)] = ` 1,80,000 + ` 63,000 2,43,000
Dearness allowance [10% of basic pay] 24,300
Bonus 21,000
Employer’s contribution to Recognized Provident Fund in excess
of 12% (15%-12% =3% of ` 2,67,300) [See Note 1 below] 8,019
Taxable allowances
Telephone allowance 6,000
Taxable perquisites
Rent-free accommodation [See Note 1 & 2 below] 44,145
Medical reimbursement 25,000
Reimbursement of salary of housekeeper 12,000
Gift voucher [See Note 5 below] 10,000
Less: Deduction under section 16(ia) – Standard deduction 50,000
Salary income chargeable to tax 3,43,464
Notes:
1. Since dearness allowance forms part of salary for retirement benefits, the perquisite value of rent-
free accommodation and employer’s contribution to recognized provident fund have been
accordingly worked out.
2. Where the accommodation is taken on lease or rent by the employer, the value of rent-free
accommodation provided to employee would be actual amount of lease rental paid or payable by
the employer or 15% of salary, whichever is lower.
For the purposes of valuation of rent free house, salary includes:
(i) Basic salary i.e., ` 2,43,000
(ii) Dearness allowance (assuming that it is included for calculating retirement benefits) i.e.
` 24,300
(iii) Bonus i.e., ` 21,000
(iv) Telephone allowance i.e., ` 6,000
Therefore, salary works out to
` 2,43,000 + ` 24,300 + ` 21,000 + ` 6,000 = ` 2,94,300.
15% of salary = ` 2,94,300 × 15/100 = ` 44,145
Value of rent-free house = Lower of rent paid by the employer (i.e.
` 1,20,000) or 15% of salary (i.e., ` 44,145).
Therefore, the perquisite value is ` 44,145.
3. Facility of use of laptop is not a taxable perquisite.
4. Conveyance allowance is exempt since it is based on actual reimbursement for official purposes.
5. The value of any gift or voucher or token in lieu of gift received by the employee or by member
of his household below ` 5,000 in aggregate during the previous year is exempt. In this case, the
gift voucher was received on the occasion of marriage anniversary and the sum exceeds the limit
of ` 5,000.
Therefore, the entire amount of ` 10,000 is liable to tax as perquisite.
Note - An alternate view possible is that only the sum in excess of ` 5,000 is taxable. In such a
case, the value of perquisite would be ` 5,000.
6. Premium of ` 5,000 paid by the company for personal accident policy is not liable to tax.
Question- 23 [Topics – Salary]

Mr. Samaksh is a Marketing Manager in Smile Ltd. From the following information, you are
required to compute his income chargeable under the head Salary for assessment year
2022-23.
(i) Basic salary is ` 70,000 per month.
(ii) Dearness allowance @ 40% of basic salary
(iii) He is provided health insurance scheme approved by IRDA for which ` 20,000 incurred
by Smile Ltd.
(iv) Received ` 10,000 as gift voucher on the occasion of his marriage anniversary from
Smile Ltd.
(v) Smile Ltd. allotted 800 sweat equity shares in August 2021. The shares were allotted at
` 450 per share and the fair market value on the date of exercising the option by Mr.
Samaksh was ` 700 per share.
(vi) He was provided with furniture during September 2017. The furniture is used at his
residence for personal purpose. The actual cost of the furniture was ` 1,10,000. On
31st March, 2022, the company offered the furniture to him at free of cost. No amount
was recovered from him towards the furniture till date.
(vii) Received ` 10,000 towards entertainment allowance.
(viii) Housing Loan@ 4.5% p.a. provided by Smile Ltd., amount outstanding as on
01.04.2021 is ` 15 Lakhs. ` 50,000 is paid by Mr. Samaksh every quarter towards
principal starting from June 2021. The lending rate of SBI for similar loan as on
01.04.2021 was 8%.
(ix) Facility of laptop costing ` 50,000
Answer
Computation of income under the head “Salaries” of Mr. Samaksh for the A.Y.2022-23
Particulars ` `
Basic Salary [`70,000 x 12 months] 8,40,000
Dearness allowance [40% of `8,40,000] 3,36,000
Entertainment allowance 10,000
Particulars ` `
Interest on housing loan given at concessional rate, would be 49,291

perquisite, since the amount of loan exceeds ` 20,000, For
computation, the lending rate of SBI on 1.4.2021 @8% has to be
considered. Thus, perquisite value would be determined @ 3.5% (8%
- 4.5%) [See Working Note]
Health insurance premium paid by the employer [tax free perquisite] Nil
Gift voucher on the occasion of his marriage anniversary [As per Rule 10,000
3(7)(iv), the value of any gift or voucher or token in lieu of gift
received by the employee or by member of his household exceeding `
5,000 in aggregate during the previous year is fully taxable] (See note
below)
Allotment of sweat equity shares
Fair market value of 800 sweat equity shares @ ` 700 each 5,60,000
Less: Amount recovered @ ` 450 each 3,60,000 2,00,000
Use of furniture by employee

10% p.a. of the actual cost of ` 1,10,000 11,000
Use of Laptop
Facility of use of laptop is not a taxable perquisite Nil
Transfer of asset to employee

Value of furniture transferred to Mr. Samaksh 1,10,000
Less: Normal wear and tear @10% for each completed year of usage
on SLM basis [1,10,000 x 10% x 4 years (from September 2017 to 44,000 66,000
September 2021)]
Less: Standard deduction u/s 16 [Actual salary or ` 50,000, whichever

is less] 50,000
Net Salary 14,72,291
Working Note:
Computation of perquisite value of loan given at concessional rate
For computation, the lending rate of SBI on 1.4.2021 @8% has to be considered. Thus, perquisite
value would be determined @ 3.5% (8% - 4.5%)
Month Maximum outstanding balance as on last date Perquisite value at
of month (`) 3.5% for the month (`)
April, 2021 15,00,000 4,375
May, 2021 15,00,000 4,375
June, 2021 14,50,000 4,229
Month Maximum outstanding balance as on last date Perquisite value at
of month (`) 3.5% for the month (`)
July, 2021 14,50,000 4,229
August, 2021 14,50,000 4,229
September, 2021 14,00,000 4,083
October, 2021 14,00,000 4,083
November, 2021 14,00,000 4,083
December, 2021 13,50,000 3,937.50
January, 2022 13,50,000 3,937.50
February, 2022 13,50,000 3,937.50
March, 2022 13,00,000 3,792
Total value of this perquisite 49,290.50
Note: An alternate view possible is that only the sum in excess of ` 5,000 is taxable. In such
a case, the value of perquisite would be ` 5,000 and gross salary and net salary would be `
15,17,291 and ` 14,67,291, respectively.
Question- 24 [Topics – Salary/Capital Gain/Clubbing]
(a) You are required to compute the income from salary of Mr. Raja from the following
particulars for the year ended 31-03-2022:
(i) He retired on 31-12-2021 at the age of 60, after putting in 25 years and 9 months of
service, from a private company at Delhi.
(ii) He was paid a salary of ` 25,000 p.m. and house rent allowance of `6,000 p.m. He
paid rent of ` 6,500 p.m., during his tenure of service.
(iii) On retirement, he was paid a gratuity of ` 3,50,000. He was covered by the payment
of Gratuity Act, 1972. He had not received any other gratuity at any point of time
earlier, other than this gratuity.
(iv) He had accumulated leave of 15 days per annum during the period of his service;
this was encashed by him at the time of his retirement. A sum of ` 3,15,000 was
received by him in this regard. Employer allowed 30 days leave per annum.
(v) He is receiving `5,000 as pension. On 1.2.2022, he commuted 60% of his pension
and received ` 3,00,000 as commuted pension.
(vi) The company presented him with a gift voucher of ` 5,000 on his retirement. His
colleagues also gifted him a mobile phone worth ` 50,000 from their own
contribution.
(b) Mr. Gyaanchand purchased 1200 shares of "A" limited at ` 130 per share on
26.02.1979. "A" limited issued him 600 bonus shares on 20.02.2002. The fair market
value of these shares at Mumbai Stock Exchange as on 1.04.2001 was ` 900 per share
and ` 2,000 per share as on 31.01.2018. On 07.07.2021 Mr. Gyaanchand sold all 1800
shares @ ` 2,400 per share at Mumbai Stock Exchange and securities transaction tax
was paid. Compute capital gain chargeable to tax in the hands of Mr. Gyaanchand for
the A.Y.2022-23.
(c) Aggarwal & Sons, HUF purchased a house property in the year 1950 for ` 50,000. On
31.10.2021, the HUF was totally partitioned and the aforesaid house property was given
to Mr. Subhash Aggarwal, a member of the family. Fair Market value of the house as on
31.10.2021 was ` 21,00,000. FMV of the house as on 1.4.2001 was ` 3,50,000. What
will be the tax implications in the hands of Mr. Subhash Aggarwal and the HUF?
Answer
(a) Computation of income under the head “Salaries” of Mr. Raja for the A.Y.2022-23
Particulars ` `
Basic Salary = ` 25,000 x 9 months 2,25,000
House Rent Allowance = ` 6,000 x 9 months 54,000
Less: Least of the following exempt under section 10(13A) 36,000 18,000
(i) House rent allowance actually received = ` 6,000 x 9 =` 54,000

(ii) Rent paid (-) 10% of salary for the relevant period [` 58,500 (i.e., `
6,500 x 9) (-) ` 22,500 (10% of salary i.e., 10% of` 2,25,000 (Basic
Salary)] = ` 36,000
(iii) 50% of salary for the relevant period [50% of ` 2,25,000 (Basic
salary)] ` 1,12,500
Gratuity
Less: Least of the following exempt under section 10(10)(ii) 3,50,000
3,50,000 Nil
(i) Actual Gratuity received ` 3,50,000
(ii) 15 days salary for every year of completed service [15/26 x` 25,000
x 26] = ` 3,75,000
(iii) Notified limit = ` 20,00,000
Leave encashment 3,15,000
Less: Least of the following exempt under section 10(10AA) 2,50,000 65,000
(i) ` 3,00,000
(ii) Leave salary actually received ` 3,15,000
(iii) ` 2,50,000, being 10 months’ salary x ` 25,000
(iv) Cash equivalent of leave standing at the credit of the employee based
on the average salary of last 10 months’ (max. 30 days per year of
service) for every year of actual service rendered for the employer
from whose service he has retired
375/30 x ` 25,000 = ` 3,12,500
[Leave Due = Leave allowed – Leave taken]
= 750 (30 days per year × 25 years) – 375 days (15 days x 25)
= 375 days]
Particulars ` `
Uncommuted Pension received [` 5,000 x 1) + (` 5,000 x 2 x 40%) 9,000
Commuted Pension received 3,00,000
Less: Exempt under section 10(10A)
1/3 x ` 3,00,000/60% x 100%) 1,66,667 1,33,333
Gift Voucher [As per Rule 3(7)(iv), the value of any gift or voucher or Exempt
token in lieu of gift received by the employee or by member of his
household not exceeding ` 5,000 in aggregate during the previous year is
exempt]
Mobile Phone received as gift from colleagues (Neither taxable under the Nil
head “Salaries” nor “Income from other sources”, since taxability
provisions under section 56(2)(x) are not attracted in respect of mobile
phone received from colleagues, as mobile phone is not included in the
definition of “property” thereunder)
Less: Standard deduction u/s 16 [Actual salary or ` 50,000, whichever is 50,000

less]
Net Salary 4,00,333
(b) Computation of capital gain of Mr. Gyaanchand for the A.Y.2022-23
Particulars ` `
Capital Gains
In respect of 600 shares (bonus shares)
Full value of consideration [600 shares x ` 2,400 per share] 14,40,000
Less: Cost of acquisition [600 shares x ` 2,000] 12,00,000 2,40,000
Higher of (i) and (ii), below
(i) Nil, being cost of acquisition
(ii) ` 2,000 per share, being the lower of
FMV as on 31.1.2018 - ` 2,000 per share
Sale consideration – ` 2,400 per share
In respect of 1,200 original shares
Full value of consideration [1,200 shares x ` 2,400] 28,80,000
Less: Cost of acquisition [1,200 shares x ` 2,000] 24,00,000 4,80,000
Higher of (i) and (ii), below
(i) ` 900, being original cost of acquisition (` 130) or FMV as on

1.4.2001 (` 900), at the option of the assessee
(ii) ` 2,000 per share, being the lower of
FMV as on 31.1.2018 - ` 2,000 per share
Sale consideration – ` 2,400 per share
Long term capital gain 7,20,000
(c) Tax implications in the hands of HUF

As per section 47, any distribution of capital assets on the total or partial partition of a HUF would
not be regarded as transfer for the purpose of capital gains tax.
In this case, Aggarwal & Sons, HUF transferred the asset to Mr. Subhash Aggarwal, a member of
HUF on total partition of the HUF. Hence, the transaction would not be regarded as transfer.
Tax implications in the hands of Mr. Subhash Aggarwal
If an immovable property is received by any person without consideration, the stamp duty value of
such property would be taxed as the income of the recipient under section 56(2)(x), if it exceeds
` 50,000. However, it would not be taxable as income if the transfer is by way of a transfer, inter alia,
on total or partial partition of a HUF.
In the give case, since Mr. Subhash Aggarwal received the house property on total partition of the
HUF, it would not be taxable in his hand.
Question- 25 [Topics – House Property]

Mr. Naveen and Mr. Vikas constructed their houses on a piece of land purchased by them at
Delhi. The built up area of each house was 1,800 sq. ft. ground floor and an equal area in
the first floor. Naveen started construction on 1-04-2019 and completed on 1-04-2021. Vikas
started the construction on 1-04-2019 and completed the construction on 30-09-2021.
Naveen occupied the entire house on 01-04-2021. Vikas occupied the ground floor on 01-
10-2021 and let out the first floor for a rent of `20,000 per month. However, the tenant
vacated the house on 31-12-2021 and Vikas occupied the entire house during the period
01-01-2022 to 31-03-2022.
Following are the other information
(i) Fair rental value of each unit - ` 1,00,000 per annum (ground floor /first floor)
(ii) Municipal value of each unit (ground floor / first floor) - ` 72,000 per annum
(iii) Municipal taxes paid by
Naveen – ` 8,000
Vikas – ` 8,000
(iv) Repair and maintenance charges paid by
Naveen – ` 28,000
Vikas – ` 30,000
Naveen has availed a housing loan of ` 15 lakhs @ 12% p.a. on 01-04-2019. Vikas has
availed a housing loan of ` 10 lakhs @ 10% p.a. on 01-07-2019. No repayment was made
by either of them till 31-03-2022. Compute income from house property for Naveen and
Vikas for the previous year 2021-22.
Answer
Computation of income from house property of Mr. Naveen for A.Y. 2022-23
Particulars ` `
Annual value is nil (since house is self occupied) Nil
Less: Deduction under section 24(b)
Interest paid on borrowed capital `15,00,000 @ 12% 1,80,000
Pre-construction interest `3,60,000/5 72,000
2,52,000
As per second proviso to section 24(b), interest deduction restricted to 2,00,000
Loss under the head “Income from house property” of Mr.Naveen (2,00,000)
Computation of income from house property of Mr. Vikas for A.Y. 2022-23
Particulars Ground floor First floor
Self occupied)
Gross annual value (See Note below) Nil 60,000
Less: Municipal taxes (for first floor) 4,000
Net annual value(A) Nil 56,000
(a) 30% of net annual value 16,800
(b) interest on borrowed capital
Current year interest
`10,00,000 x 10% = `1,00,000 50,000 50,000
Pre-construction interest
`10,00,000 x 10% x 21/12 = `1,75,000
`1,75,000 allowed in 5 equal installments
`1,75,000/5 = `35,000 per annum 17,500 17,500
Total deduction under section 24 67,500 84,300
Income from house property (A)-(B) (67,500) (28,300)
Loss under the head “Income from house property” of (95,800)
Mr.Vikas (both ground floor and first floor)
Note: Computation of Gross Annual Value (GAV) of first floor of Vikas’s house
If a single unit of property (in this case the first floor of Vikas’s house) is let out for some months and
self-occupied for the other months, then the Expected Rent of the property shall be taken into account
for determining the annual value. The Expected Rent shall be compared with the actual rent and
whichever is higher shall be adopted as the annual value. In this case, the actual rent shall be the rent
for the period for which the property was let out during the previous year.
The Expected Rent is the higher of fair rent and municipal value. This should be considered for 6
months since the construction of property was completed only on 30.9.2021.
Expected rent = `50,000 being higher of -
Fair rent = 1,00,000 x 6 /12 = `50,000 Municipal value = 72,000 x 6/12 = `36,000
Actual rent = `60,000 (`20,000 p.m. for 3 months from October to December, 2021)
Gross Annual Value = `60,000 (being higher of Expected Rent of `50,000 and actual rent of
`60,000).
Question- 26 [Topics – House Property]

Two brothers Arun and Bimal are co-owners of a house property with equal share. The
property was constructed during the financial year 1998-1999. The property consists of eight
identical units and is situated at Cochin.
During the financial year 2021-22, each co-owner occupied one unit for residence and the
balance of six units were let out at a rent of ` 12,000 per month per unit. The municipal
value of the house property is ` 9,00,000 and the municipal taxes are 20% of municipal
value, which were paid during the year. The other expenses were as follows:
`
(i) Repairs 40,000
(ii) Insurance premium (paid) 15,000
(iii) Interest payable on loan taken for construction of house 3,00,000 One of the let out units
remained vacant for four months during the year.
Arun could not occupy his unit for six months as he was transferred to Chennai. He does not
own any other house.
The other income of Mr. Arun and Mr. Bimal are ` 2,90,000 and ` 1,80,000, respectively, for
the financial year 2021-22.
Compute the income under the head ‘Income from House Property’ and the total income of
two brothers for the assessment year 2022-23.
Answer
Computation of total income for the A.Y. 2022-23
Particulars Arun (`) Bimal (`)

I. Self-occupied portion (25%)
Annual value Nil Nil
Less: Deduction under section 24(b)
Interest on loan taken for construction ` 37,500 (being 25% of ` 30,000 30,000
1.5 lakh) restricted to maximum of ` 30,000 for each co-owner
since the property was constructed before 1.04.1999. Hence, it is
assumed that loan was taken before 1.4.1999
Loss from self occupied property
(30,000) (30,000)
II. Let-out portion (75%) – See Working Note below
Income from house property 1,25,850 1,25,850
95,850 95,850
Other Income 2,90,000 1,80,000
Total Income 3,85,850 2,75,850
Working Note – Computation of Income from Let-Out Portion of House Property
Particulars ` `
Let-out portion (75%)
Gross Annual Value
(a) Municipal value (75% of ` 9 lakh) 6,75,000
(b) Actual rent [(` 12000 x 6 x 12) – (` 12,000 x 1 x 4)] = ` 8,64,000 8,16,000
- ` 48,000
- whichever is higher 8,16,000
Less: Municipal taxes 75% of ` 1,80,000 (20% of ` 9 lakh) 1,35,000

(a) 30% of NAV 2,04,300
(b) Interest on loan taken for the house [75% of ` 3 lakh] 2,25,000 4,29,300
Income from let-out portion of house property 2,51,700
Share of each co-owner (50%) 1,25,850
Question- 27 [Topics – PGBP Depreciation ]

Mr. Venus., engaged in manufacture of pesticides, furnishes the following particulars
relating to its manufacturing unit at Chennai, for the year ending 31-3-2022:
(` in lacs)
WDV of Plant and Machinery on 31.3.2021 30
Depreciation including additional depreciation for P.Y. 2020-21 4.75
New machinery purchased on 1-9-2021 10
New machinery purchased on 1-12-2021 8
Computer purchased on 3-1-2022 4
Additional information:
 All assets were purchased by A/c payee cheque.
 All assets were put to use immediately.
 New machinery purchased on 1-12-2021 and computer have been installed in the office.
 During the year ended 31-3-2021, a new machinery had been purchased on 31-10-
2020, for ` 10 lacs. Additional depreciation, besides normal depreciation, had been
claimed thereon.
 Depreciation rate for machinery may be taken as 15%.
Compute the depreciation available to the assessee as per the provisions of the Income-tax
Act, 1961 and the WDV of different blocks of assets as on 31-3-2022. Assume that he does
not opt for section 115BAC.
Answer
Computation of written down value of block of assets of Venus Ltd. as on 31.3.2022
Particulars Plant & Computer
Machinery (` in lacs)
(` in lacs)
Written down value (as on 31.3.2021) 30.00 Nil
Less: Depreciation including additional depreciation for P.Y. 4.75 -
2020-21
Opening balance as on 1.4.2021 25.25
Add: Actual cost of new assets acquired during the year
New machinery purchased on 1.9.2021 10.00 -
New machinery purchased on 1.12.2021 8.00 -
Computer purchased on 3.1.2022 - 4.00
43.25 4.00
Less: Assets sold/discarded/destroyed during the year Nil Nil
Written Down Value (as on 31.03.2022) 43.25 4.00
Computation of Depreciation for A.Y. 2022-23
Particulars Plant & Computer

Machinery (` in lacs)
(` in lacs)
I. Assets put to use for more than 180 days, eligible

for 100% depreciation calculated applying the
eligible rate of normal depreciation and additional
depreciation
Normal Depreciation
- WDV of plant and machinery (` 25.25 lacs x 3.79 -
15%)
- New Machinery purchased on 1.9.2021 (` 10 1.50 -

lacs x 15%)
(A) 5.29 -
Additional Depreciation
New Machinery purchased on 1.9.2021 (` 10 lakhs x -
2.00
20%)
Balance additional depreciation in respect of new
machinery purchased on 31.10.2020 and put to use
for less than 180 days in the P.Y. 2020-21 (` 10 lakhs 1.00
x 20% x 50%)
(B) 3.00
II. Assets put to use for less than 180 days, eligible
for 50% depreciation calculated applying the
eligible rate of normal depreciation and additional
depreciation, if any
Normal Depreciation
New machinery purchased on 1.12.2021 [` 8 lacs x
7.5% (i.e., 50% of 15%)]
0.60 -
Computer purchased on 3.1.2022 [` 4 lacs x 20%
(50% of 40%)]
- 0.80
(C) 0.60 0.80
Total Depreciation (A+B+C) 8.89 0.80
Notes:
(1) As per section 32(1)(iia), additional depreciation is allowable in the case of any new machinery
or plant acquired and installed after 31.3.2005, by an assessee engaged, inter alia, in the business
of manufacture or production of any article or thing, at the rate of 20% of the actual cost of such
machinery or plant.
However, additional depreciation shall not be allowed in respect of, inter alia,–
(i) any office appliances or road transport vehicles;
(ii) any machinery or plant installed in, inter alia, office premises.
In view of the above provisions, additional depreciation cannot be claimed in respect of -
(i) Machinery purchased on 1.12.2021, installed in office and
(ii) Computer purchased on 3.1.2022, installed in office.
(2) Balance additional depreciation@10% on new plant or machinery acquired and put to use for less
than 180 days in the year of acquisition which has not been allowed in that year, shall be allowed
in the immediately succeeding previous year.
Hence, in this case, the balance additional depreciation@10% (i.e., ` 1 lakhs, being 10% of ` 10
lakhs) in respect of new machinery which had been purchased during the previous year 2020-21 and
put to use for less than 180 days in that year can be claimed in P.Y. 2021-22 being immediately
succeeding previous year.
Question- 28 [Topics – Capital Gain ]

Mrs. Harshita purchased a land at a cost of ` 35 lakhs in the financial year 2003-04 and held
the same as her capital asset till 20th March, 2021.
She started her real estate business on 21st March, 2021 and converted the said land into
stock-in-trade of her business on the said date, when the fair market value of the land was `
210 lakhs.
She constructed 15 flats of equal size, quality and dimension. Cost of construction of each
flat is ` 10 lakhs. Construction was completed in February, 2022. She sold 10 flats at ` 30
lakhs per flat in March, 2022. The remaining 5 flats were held in stock as on 31st March,
2022.
She invested ` 50 lakhs in bonds issued by National Highways Authority of India on 31st
March, 2022 and another` 50 lakhs in bonds of Rural Electrification Corporation Ltd. in April,
2022.
Compute the amount of chargeable capital gain and business income in the hands of Mrs.
Harshita arising from the above transactions for Assessment Year 2022-23 indicating clearly
the reasons for treatment for each item.
[Cost Inflation Index: F.Y. 2003-04: 109; F.Y. 2020-21: 301].
Answer
Computation of capital gains and business income of Harshita for A.Y. 2022-23
Particulars `
Capital Gains
Fair market value of land on the date of conversion deemed as the full value of 2,10,00,000
consideration for the purposes of section 45(2)
Less:Indexed cost of acquisition[`35,00,000×301(2020-21)/109(2003-04)] 96,65,138
1,13,34,862
Proportionate capital gains arising during A.Y. 2022-23 [` 1,13,34,862 x 2/3] 75,56,575
Less: Exemption under section 54EC 50,00,000

Capital gains chargeable to tax for A.Y.2022-23
Business Income 25,56,575
Sale price of flats [10 × ` 30 lakhs]
Less: Cost of flats 3,00,00,000
Fair market value of land on the date of conversion [` 210 lacs × 2/3] 1,40,00,000
Cost of construction of flats [10 × ` 10 lakhs] 1,00,00,000
Business income chargeable to tax for A.Y.2022-23 60,00,000
Notes:
(1) The conversion of a capital asset into stock-in-trade is treated as a transfer under section 2(47). It
would be treated as a transfer in the year in which the capital asset is converted into stock-in-
trade (i.e., P.Y.2020-21, in this case).
(2) However, as per section 45(2), the capital gains arising from the transfer by way of conversion of
capital assets into stock-in-trade will be chargeable to tax only in the year in which the stock-in-
trade is sold.
(3) The indexation benefit for computing indexed cost of acquisition would, however, be available
only up to the year of conversion of capital asset into stock-in-trade (i.e., P.Y.2020-21) and not
up to the year of sale of stock-in- trade (i.e., P.Y.2021-22).
(4) For the purpose of computing capital gains in such cases, the fair market value of the capital asset
on the date on which it was converted into stock- in-trade shall be deemed to be the full value of
consideration received or accruing as a result of the transfer of the capital asset.
In this case, since only 2/3rd of the stock-in-trade (10 flats out of 15 flats) is sold in the
P.Y.2021-22, only proportionate capital gains (i.e., 2/3rd) would be chargeable to tax in the
A.Y.2022-23.
(5) On sale of such stock-in-trade, business income would arise. The business income chargeable to
tax would be the difference between the price at which the stock-in-trade is sold and the fair
market value on the date of conversion of the capital asset into stock-in-trade.
(6) In case of conversion of capital asset into stock-in-trade and subsequent sale of stock-in-trade, the
period of 6 months is to be reckoned from the date of sale of stock-in-trade for the purpose of
exemption under section 54EC [CBDT Circular No.791 dated 2.6.2000]. In this case, since the
investment in bonds of NHAI has been made within 6 months of sale of flats, the same qualifies
for exemption under section 54EC. With respect to long-term capital gains arising on land or
building or both in any financial year, the maximum deduction under section 54EC would be ` 50
lakhs, whether the investment in bonds of NHAI or RECL are made in the same financial year or
next financial year or partly in the same financial year and partly in the next financial year.
Therefore, even though investment of ` 50 lakhs has been made in bonds of NHAI during the
P.Y. 2021-22 and investment of ` 50 lakhs has been made in bonds of RECL during the P.Y.
2022-23, both within the stipulated six month period, the maximum deduction allowable for A.Y.
2022-23, in respect of long- term capital gain arising on sale of long-term capital asset(s) during
the P.Y. 2021-22, is only ` 50 lakhs.
Question- 29 [Topics – Capital Gain/IFOS ]

Mr. A, a dealer in shares, received the following without consideration during the P.Y.2021-
22 from his friend Mr. B, -
(1) Cash gift of ` 75,000 on his anniversary, 15th April, 2021.

(2) Bullion, the fair market value of which was ` 60,000, on his birthday, 19th June, 2021.
(3) A plot of land at Faridabad on 1st July, 2021, the stamp value of which is ` 5 lakh on
that date. Mr. B had purchased the land in April, 2010.
Mr. A purchased from his friend Mr. C, who is also a dealer in shares, 1000 shares of X Ltd.
@ ` 400 each on 19th June, 2021, the fair market value of which was ` 600 each on that
date. Mr. A sold these shares in the course of his business on 23rd June, 2021.
Further, on 1st November, 2021, Mr. A took possession of property (building) booked by him
two years back at ` 20 lakh. The stamp duty value of the property as on 1st November,
2021 was ` 32 lakh and on the date of booking was ` 23 lakh. He had paid ` 1 lakh by
account payee cheque as down payment on the date of booking.
On 1st March, 2022, he sold the plot of land at Faridabad for ` 7 lakh.
Compute the income of Mr. A chargeable under the head “Income from other sources” and
“Capital Gains” for A.Y.2022-23.
Answer
Computation of “Income from other sources” of Mr. A for the A.Y.2022-23
Particulars `
(1) Cash gift is taxable under section 56(2)(x), since it exceeds ` 50,000 75,000
(2) Since bullion is included in the definition of property, therefore, when 60,000
bullion is received without consideration, the same is taxable, since the
aggregate fair market value exceeds ` 50,000
(3) Stamp value of plot of land at Faridabad, received without consideration, 5,00,000
is taxable under section 56(2)(x)
(4) Difference of ` 2 lakh in the value of shares of X Ltd. purchased from Mr. -
C, a dealer in shares, is not taxable as it represents the stock-in-trade of
Mr. A.
Particulars `
Since Mr. A is a dealer in shares and it has been mentioned that the shares
were subsequently sold in the course of his business, such shares
represent the stock-in-trade of Mr. A.
(5) Difference between the stamp duty value of ` 23 lakh on the date of 3,00,000
booking and the actual consideration of ` 20 lakh paid is taxable under
section 56(2)(x) since the difference exceeds ` 1 lakh being, the higher of
` 50,000 and 10% of consideration.
Income from Other Sources 9,35,000
Computation of “Capital Gains” of Mr. A for the A.Y.2022-23
Particulars `
Sale Consideration 7,00,000
Less: Cost of acquisition [deemed to be the stamp value charged to tax under
section 56(2)(x) as per section 49(4)] 5,00,000
Short-term capital gains 2,00,000
Note – The resultant capital gains will be short-term capital gains since for calculating the period of
holding, the period of holding of previous owner is not to be considered.
Question- 30 [Topics – Capital Gain ]

Mr. A is a proprietor of Akash Enterprises having 2 units. He transferred on 1.4.2021 his
Unit 1 by way of slump sale for a total consideration of ` 25 lacs. The FMV-1 of the unit on
1.4.2021 is ` 30 lacs and FMV-2 is ` 28 lacs . Unit 1 was started in the year 2005-06. The
expenses incurred for this transfer were ` 28,000. His Balance Sheet as on 31.3.2021 is as
under:
Liabilities Total (`) Assets Unit 1(`) Unit 2 (`) Total (`)
Own Capital 15,00,000 Building 12,00,000 2,00,000 14,00,000
Revaluation Reserve 3,00,000 Machinery 3,00,000 1,00,000 4,00,000

(for building of unit 1)
Bank loan (70% for 2,00,000 Debtors 1,00,000 40,000 1,40,000

unit 1)
Trade creditors (25% Other

for unit 1) 1,50,000 assets 1,50,000 60,000 2,10,000
Total 21,50,000 Total 17,50,000 4,00,000 21,50,000
Other information:
(i) Revaluation reserve is created by revising upward the value of the building of Unit 1.
(ii) No individual value of any asset is considered in the transfer deed.
(iii) Other assets of Unit 1 include patents acquired on 1.7.2019 for ` 50,000 on which no
depreciation has been charged.
Compute the capital gain for the assessment year 2022-23.
Answer
Computation of capital gains on slump sale of Unit 1
Particulars `
Full value of consideration [Fair market value on 1.4.2021] 30,00,000
Less: Transfer Expenses 28,000
29,72,000
Less: Cost of Acquisition (Note 1) 12,50,625
Long-term capital gain 17,21,375
Notes:
1. Computation of net worth of Unit 1 of Akash Enterprises
Particulars ` `
Building (excluding ` 3 lakhs on account of revaluation) 9,00,000
Machinery 3,00,000
Debtors 1,00,000
Patents (See Note2 below) 28,125
Other assets (` 1,50,000 – ` 50,000) 1,00,000
Total assets 14,28,125
Less: Creditors (25% of ` 1,50,000) 37,500
Bank Loan (70% of ` 2,00,000) 1,40,000 1,77,500
Net worth 12,50,625
2. Written down value of patents as on 1.4.2021
Value of patents: `
Cost as on 1.7.2019 50,000
Less: Depreciation @ 25% for Financial Year 2019-20 12,500
Balance as on 1.4.2020 37,500
Less: Depreciation for Financial Year 2020-21 9,375
Balance as on 1.4.2021 28,125
For the purposes of computation of net worth, the written down value determined as per section 43(6)
has to be considered in the case of depreciable assets. The problem has been solved assuming that the
Balance Sheet values of ` 3 lakh and ` 9 lakh (` 12 lakh – ` 3 lakh) represent the written down value
of machinery and building, respectively, of Unit 1.
3. Since the Unit is held for more than 36 months, capital gain arising would be long term capital
gain. However, indexation benefit is not available in case of slump sale.

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CA INTER Super 30 Questions by CA Bhanwar Borana

Question-1 [Topics- Residential Status, HP, IFOS and Tax Liability]

Income from house property

Show room located in Mumbai remained on rent from 2,75,000

Gross Annual Value [` 25,000 x 11] (See Note 1 below)

Less: Municipal taxes Nil

Net Annual Value (NAV) 2,75,000

Less: Deduction under section 24

30% of NAV 82,500

Interest on loan 97,500 1,80,000 95,000

Income from other sources

Cash gifts received from non-relatives is chargeable to tax as per

- `50,000 received from parents of husband would be exempt,

- `11,000 received from married sister of husband is exempt,

- Gift received from two friends of husband ` 1,51,000 and `

Total income 2,67,000

Tax on total income of ` 2,67,000 850

Question-2 [Topics- Total Income + 115BAC]

Expenditure (`) Income (`) (`)

Salary to staff 15,50,000 Fees earned:

Stipend to articled 1,37,000 Audit 27,88,000

Assistants Taxation services 15,40,300

Expenditure (`) Income (`) (`)

Incentive to articled 13,000 Consultancy 12,70,000 55,98,300

Assistants Dividend on shares 10,524

Office rent 12,24,000 Income from UTI 7,600

Printing and Stationery 12,22,000 Honorarium received 15,800

Meeting, seminar and 31,600 Rent received From 85,600

Purchase of car (for 80,000

Repair, maintenance 4,000

and petrol of car

Travelling expenses 5,25,000

Municipal tax paid 3,000

Net Profit 9,28,224

Income from house property (See Working Note 1) 57,820

Profit and gains of business or profession (See Working Note 2) 9,20,200

Income from other sources (See Working Note 3) 33,924

Gross Total Income 10,11,944

Less: Deductions under Chapter VI-A (See Working Note 4) 10,000

Total Income 10,01,944

Total Income (rounded off) 10,01,940

Tax on total income

Upto ` 2,50,000 Nil

` 2,50,001 - ` 5,00,000 @5% 12,500

` 5,00,001 - ` 10,00,000 @20% 1,00,000

` 10,00,001 - `10,01,940 @ 30% 582 1,13,082

Add: Health and Education cess @ 4% 4,523

Total tax liability 1,17,605

Less: Advance tax paid 70,000

Less: Tax deducted at source on dividend income from an Indian 1,052

Tax Payable 45,793

Tax Payable (rounded off) 45,790

Gross Total Income 10,11,944

“Profits and gains from business or profession” and “Income from

Total Income 10,11,944

Total Income (rounded off) 10,11,940

Tax on total income

Upto ` 2,50,000 Nil

` 2,50,001 – ` 5,00,000 @5% 12,500