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OTF MASTERS INSTITUTE OF COMMERCE OTF

M O C K T E S T - I (TAX)(2010-11)-----BY PARDEEP KUMAR

Office: S.C.O. 361(Level-2), Sector 44-D,Chd. Mobile No. 98140-98739Time allowed: 3 hours Max. Marks : 80

Section- AStudents are required to attempt four questions from this part. (4 x 5)Question No. 1. What is Agricultural Income?

Answer:- Refer Page No. 5 of our notesQuestion No. 2. What do you mean by transfer?

Answer:- Refer page nos. 40 & 41 of our notesQuestion No. 3. What do you understand by self-assessment?

Answer:- Refer page nos. 84 of our notesQuestion No. 4. X purchases 1,000 shares in Y Ltd in August 16, 1996 for Rs. 8,000. On May17, 1998, he gets 500 bonus shares in Y Ltd. On October 20, 2008 he acquires 1,500 rightshares at the rate of Rs. 11 per share. He sells 3,000 shares in Y Ltd. on February 12, 2010 atthe rate of Rs. 110 per share (brokerage on sale : 1%). He owns one residential house property.

He purchases a residential house on June 29, 2010 for Rs. 2,90,000. Ascertain the amount ofcapital gains chargeable to tax for the assessment year 2010-11.CII 1996-97= 305 : 1998-99 = 351 : 2008-09 = 582 : 2009-10 =682

Answer:- Refer page no. 470 of Singhania NotesQuestion No. 5 Sh. Ram Mohan an employee-completed 27 years and 8 months of service withM/s Jaipur Iron steel Ltd. and at the time of retirement on 1-1-2010, he received Rs. 3,30,000as gratuity. His monthly salary on the date of retirement was Rs. 19,500. Find out the amountof taxable gratuity if gratuity act applies.

Answer:- Employee is covered under Payment of Gratuity Act, 1972Limits:-

1) Actual Gratuity Received = Rs. 3,30,0002) Rs. 3,50,0003) 15/26 x 19,500 x 28 = 3,15,000

Least is exempted from tax i.e. 3,15,000Taxable = 330000 315000 = 15000

Question No.6. Mr. Singh holds following securities on 1st April, 2009:Rs. 10,000 6.5% Central Govt. loan (interest due on July 10)Rs. 40,000 8% Debentures (not listed) of PQR Ltd.

(Interest due on May 15 and Nov. 15)Rs. 10,000 9% National Relief BondsMr. X received Rs. 4,000 as Interest on UP Govt. Loan (Non-Listed), Rs. 8,000 Interest on BiharGovt. Loan and Rs. 16,000 on Debentures of a Company (Non-Listed)

Income From Other SourcesParticulars Taxable AmountInterest on Central Govt. loan (10,000 X 6.5%)Interest on 8% Debentures (40,000 X 8%)Interest on 9% National Relief BondsInterest on UP Govt. LoanInterest on Bihar Govt. LoanInterest on Debentures of a Company (16,000 X 100/100-20)= Income from other Sources

6503,200

Exempted4,0008,000

20,000

= 35,850


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Section BThis part consists of four questions and students are required to attempt two questions fromthis section. (2 x 15)Question No.7. What do you understand by Residential Status? How it is determined. Discussincidence of tax also?

Answer :- Refer page nos. 2,3 & 4 of our notes

Question no. 8. What do you understand by set-off and carry forward of losses? Explain in detail.Answer :- Refer page nos. 59, 60 & 61 of our notesQuestion No. 9.Mr. Yash Chopra has 3 house properties situated at Mumbai.Property A is let out for the Business. Property B is let out for Residential Purposes. Property C has fouridentical units: Unit P Let out for residential purposes throughout the previous year, Unit Q Used forown Business, Unit R Used for own residence, Unit S Let out for residential purposes: but w.e.f 1-1-2010 was also used for own residence. The particulars of the property A and B are as under:

Property A Property BMunicipal Value 50,000 60,000Actual Rent 5,000 p.m. 6,000 p.m.Fair Rent 70,000 75,000Standard Rent 54,000 84,000

Date of completion of construction 1-3-03 1-3-98Municipal Taxes paid 10,000 20,000Repairs 5,000 **Collection Charges 4,800 4,800Insurance premium paid 2,000 2,000Interest on money borrowed for construction 30,000 11,000Mr. Chopra borrowed a sum of Rs. 2,50,000 @ 12% p.a. on 1-1-2001 for construction of House A. The Entire loan isstill outstanding though interest is being paid every year. The particulars of property C are as under:-

UnitP UnitQ UnitR UnitSRent 3,000 p.m. 3,000 p.m. *** ***Repairs 5,000 10,000 *** ***Collection Charges 3,000 *** *** 2,400Insurance premium of the house property Rs. 3,000. The municipal value & Municipal tax of the whole

property was Rs. 1,60,000 and Rs. 20,000 respectively. Interest on money borrowed for purchase of house40,000. Lease rent of land of house property Rs. 5,000.

Income From House PropertyParticulars Property -A Property-B Property -C

Unit- P Unit- R Unit- SGross Annual Value 60,000 75,000 40,000 Nil 40,000Less:- municipaltaxes paid by theowner

10,000 20,000 5,000 Nil 5,000

Net Annual value 50,000 55,000 35,000 Nil 35,000Less:- DeductionsU/s 24

Standard Deduction 15,000 16,500 10,500 Nil 10,500Interest on loantaken for constructnrepair or renovationof house Property

30,000 11,000 10,000 10,000

= Income From H.P. 5,000 27,500 14,500 (10,000) 14,500Unit-R is not taxable under this head but will be taxable under head income frombusiness and profession.


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Question No. 10:- DR. J.L.Gupta is renowned Medical Practitioner. The Following is thereceipts and payments A/c for the financial year 2009-10.

Receipts Amount Payments AmountTo Balance b/fConsultation Fees

2008-09

2009-10Visiting feesLoan from BankSale of MedicinesGifts and PresentsRoyalties from journalsDividendInterest on Govt.Securities

44,000

5,000

1,35,00030,0001,25,000

60,0005,0006,000

10,000

7,000

1,28,000

Rent of Clinic2008-092009-10

Water and electricityPurchase of professionalbooksHousehold expensesCollection Charges fordividend incomeMotor car purchasedSurgical equipmentpurchasedIncome taxSalary to staffLife insurance premiumGift to son

Interest on loanCar expensesPurchase of medicinesBalance c/d

24,8001,200

2,000

40,00047,800

1001,30,000

24,80010,00015,00015,0005,000

11,00015,00040,00045,300

1,28,000

Compute his income from profession for the assessment year 2009-10 after taking into accountthe following information when he maintains his books on (i) Cash Basis (ii) Accrual Basis:-

a) Books worth Rs. 25,000 were purchased on 15-5-2009 and the balance on 5-02-2010.b) Car was purchased on 1-1-2010 and the surgical equipment on 4-9-2009.c) It is estimated that 1/3of the use of car is for his personal use.d) Gifts and presents include Rs. 2,000 from patients in appreciation of his medical service.e) Opening and closing stock of medicines amounted to Rs. 10,000 and Rs. 6,000.f)

Visiting fees outstanding Rs. 20,000g) Salary to staff outstanding Rs. 7,000 and prepaid Rs. 2,000.

Particulars Due Basis Cash BasisDetails Amount Details Amount

Professional Reciepts:-

Consultation Fees 1,35,000 1,40,000

Visiting Fees 30,000 30,000

+ outstanding 20,000 50,000 Nil

Sale of Medicines 60,000 60,000

Gifts and presents 2,000 2,000

Royalties from journals 6,000 6,000

Less:- Professional Expenses 2,53,000 2,38,000

Rent of clinic 1,200 26,000

Water and electricity 2,000 2,000

Dep. On Books 19,500 19,500

Dep. On Motor Car 6,500 6,500

Dep. On Surgical Equipments 3,720 3,720

Salary to Staff(15000+7000-2000) 20,000 15,000

Car Expenses (15000 x2/3) 10,000 10,000

Medicines Consumed (Purchased) 44,000 1,06,920 40,000 1,22,720

= Professional Gain 1,46,080 1,15,280


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Section-CThis part consists of four questions and students are required to attempt two questions fromthis section. (2 x 15)Question No 11. How would you determine the amount of deduction in respect of CertainDonations? Discuss in detail with the help of illustration.

Answer:- Refer page nos. 63 & 64 of our notes

Question No 12. What is the procedure for assessment? Explain in detail.Answer:- Refer page nos. 84 to 89 of our notesQuestion No.13. X (28 years) and Y (26 years) are two partners of XY Co. (a firm of charteredaccountants). On March 31, 2009, there is no provision for payment of salary and interest topartners. On April 1, 2009, the deed of partnership has been amended to provide salary andinterest as follows:

X YSalary Rs. 20,833 p.m. Rs. 25,000 p.m.Interest 24 per cent p.a. 24 per cent p.a.The income and expenditure account of XY Co. for the year ending March 31, 2010 is asfollows:Office expensesSalary to employeesIncome tax

Salary to XSalary to YInterest on capital to X@ 24%p.a.Interest on capital to Y @ 24%p.a. Net profit (shared by X andYequally as per the terms ofpartnership deed)

2,10,00070,00042,000

2,50,0003,00,000

16,00019,000

1,06,000

Receipt from clientsInterest recovered from X andY on drawings

10,10,000

3,000

Other information:

1. Out of office expenses, Rs. 18,800 is not deductible by virtue of sections 30 to 37. 2. During

the previous year 2009-10, the firm sells a capital asset for Rs. 7,10,000 (indexed cost of

acquisition being Rs. 1,45,865).

3. Personal income and investments of partners are as follows:Incomes X (in Rs.) Y (in Rs.)Interest from Government securitiesBank interestDeposit in public provident fundMediclaim insurance premium

4,70,0006,00,000

70,00012,000

4,23,0001,02,000

45,00011,000

Find out the net income and tax liability of the firm and partners for the assessment year2010-11 on the assumptions that-a. conditions of sections 184 and 40(b) are satisfied; andb. conditions of section 184 and/or section 40(b) are not satisfied.

Answer:- Refer page no. 715 of Singhania book notes


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Question No. 14. Compute the Net ealth of M for the assessment year 2010-11 on the basis offollowing information.a) Urban land gifted by father-in-law 4,00,000b) Residential house let out for 220 days 7,00,000c) Motor car for personal use 3,20,000d) Jewelry held by minor-married daughter 3,70,000

e) Jewelry held by minor- handicapped son 4,10,000f) Shares in some companies 2,70,000g) Bank balance 50,000h) Cash in hand 70,000i) Urban land gifted by wife without any consideration 2,90,000j) Residential house Self occupied 9,00,000k) Motor car for use of Minor child 4,00,000l) Helicopter for personal use 9,75,000m) Farm house 26 KMS away from city 2,00,000n) Household appliances 5,20,000

Computation of Net WealthAssets Treatment Amount

Urban land Assets u/s 2(ea) 4,00,000

Residential House Assets u/s 2(ea) 7,00,000Motor Car Assets u/s 2(ea) 3,20,000

jewellery Not an Assets u/s 2(ea) Nil

jewellery Not an Assets u/s 2(ea) Nil

Shares Not an Assets u/s 2(ea) NilBank balance Not an Assets u/s 2(ea) Nil

Cash in hand Assets u/s 2(ea) 20,000

Urban Lanad Not an Assets u/s 2(ea) Nil

Residential House Exempted u/s 5 Nil

Motor Car Deemed Assets u/s 4 4,00,000

Helicopter Assets u/s 2(ea) 9,75,000

Farm House Assets u/s 2(ea) 2,00,000House hold Appliances Not an Assets u/s 2(ea) Nil

Gross Wealth = 30,15,000Less:- Liabilities on Assets Nil

Net Wealth 30,15,000Less :- Basic Exemption 30,00,000

Taxable Wealth = 15,000

Wealth Tax payable = 15,000 x 1% = 150


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OTF MASTERS INSTITUTE OF COMMERCE (EVENING) OTF

M O C K T E S T - I (TAX)(2010-11)-----BY PARDEEP KUMAR

Office: S.C.O. 361(Level-2), Sector 44-D,Chd. Mobile No. 98140-98739Time allowed: 3 hours Max. Marks : 80

Section- AStudents are required to attempt four questions from this part. (4 x 5)Question No.1. Explain the Term Assessee?Question No.2. Discuss the treatment of expenditure on scientific research incurred by anassessee while computing his income from business and profession?Question No.3. Explain Deemed Incomes?Question No.4. During the previous year 2009-10, X sells the following assets:

Rural agricultural landUrban agricultural landShares (not listed)Debentures(listed)

Date of sale

June15,2009Nov 1, 2009Jan 15, 2010Jan 12, 2010

Saleproceeds2,00,0006,00,0007,40,00040,000

Date of Purchase

March 1, 1982May 10, 1983January 10, 2009January 10,2008

Cost ofAcquisition20,00030,0001,25,00020,000

X purchases the following assets:Date of purchase Assets AmountJuly 10, 2009 Agricultural land 2,00,000August 7, 2009 Rural Electrification corporation 20,000November 70, 2009 Agricultural land 4,00,000November 75, 2009 Residential house 90,000July 74, 2070 Bonds of National Highways Auth. 1,40,000

of India (date of redemption July 20, 2017)Compute Capital Gain income for the assessment year 2010-11.Question No.5:From the following data furnished By R determine the value of house propertybuilt on leasehold land(99 years) as at the valuation date 31-03-2010.Annual Value as per municipal records 70,000Rent Received from tenant 54,000Municipal Tax borne by tenant 5,000Repairs on property paid by tenant 4,000Refundable deposit collected from tenant as security deposit which doesnot carry any interest 1,00,000The difference between the unbuild area and specified area is 9.5%Question No.6. Xholds the following securities on April 1, 2009Rs. 1,48,000 10% securities of the Tamil Nadu Government and Rs. 40,000 5% less- tax non-listed debentures of ABC Ltd.Interest in both the cases is payable on December 11 every year.On August 1, 2009, X borrows Rs. 20,000 at 7% p.a. and invests it in purchasing Rs. 20,000,7.5% tax free securities of the Central Government (due date of interest March 15 every year;interest due on 15 March 2010 is received on April 2, 2010). Interest on borrowings for theperiod ending March 31, 2010 is however paid by X on April 15, 2010. Determine his incomeunder the following situations:-(a) X maintains books of account on Cash Basis(b) X maintains books of accounts on Mercantile system

Section BThis part consists of four questions and students are required to attempt two questions fromthis section. (2 x 15)


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Question No.7. What do you understand by Agricultural Income? Explain its tax treatment &Importance?Question no. 8. State the Circumstances in which the income of one person is treated asincome of other person.Question No. 9. X has the following properties:1. Flat in Bombay purchased on June 1,2009 which is let out on a monthly rent of Rs. 20,000.

The building in which the flat is located was completed on May 1, 2009. The flat was let outfrom August 1, 2009.2. Flat in Delhi constructed in 2007 which is self-occupied.3. Godown in Calcutta constructed in 2006 which is let out on a monthly rent of Rs. 70,000 (itremains vacant for 1/2 month). The expenses actually incurred during the year against rentalincome are :

Bombay Delhi CalcuttaRs. Rs. Rs.

Municipal taxes paid during the previous year endingMarch 31, 2010(*for10 months ending 31-3-2010) 50,000* 24,000 1,80,000Building co-operative maintenance charges 10,000 9,000 ###Electricity charges ### 12,000 48,000Fire insurance premium ### ### 6,480

Collection charges 7,500 ### 54,000Repairs 200 19,000 1,10,000The following further information is given:1. The flat in Delhi, if let out, would fetch a monthly rent of Rs. 60,000. However, standard rentof the house according to the Delhi Rent Control Act is Rs. 40,000 per month.2. Other data regarding flat in Bombay and godown in Calcutta is as follows-

Bombay flat CalcuttaRs. Rs.

Municipal valuation (annual) (MV) 2,16,000 7,00,000Fair rent (annual) (FR) 2,20,000 7,50,000Standard rent (annual) (SR) 2,25,000 7,40,000Unrealised rent 2,000 40,000Compute Xs house property income for the year ending March 31, 2010.

Question No.10:-X a resident individual, furnishes the following particulars for the PreviousYear relevant for the assessment year relevant for the assessment year 2010-11:-Profit and loss account for the year ending March 31, 2003

Salary to staff 13,000 Gross profit 4,49,700

Staff welfare fund 6,000 Sundry receipts 4,400General expenses 6,500 Short term cap. Gains 3,000Bad debts 3,000

Advance tax 400Fire insurance 4,000Advertisement expenses 11,000

Int. on Xs cap. And loan 3,600Expenditure on acquisition of a

Copyright incurred on March1,2010(it is put to use on the sameDay) 2,800

Lump sum consideration forAcquiring know-how incurredOn March 10, 2010(it is put to use

On April 1, 2010) 12,000Depreciation 6,000


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Provision for Income tax 2,000Contribution to a political party 1,000

Net profit 3,85,800

4,57,100 4,57,100Other Information:-1. Salary to staff includes salary paid to a relative, which is unreasonable to the extent of Rs.

3,400.2. Advertisement expenses include Rs. 8,000 being cost of 8 diaries presented to the

customers.3. Depreciation on other assets according to income tax provision come to Rs. 9,6004. Provision for income tax is excessive to the tune of Rs. 6005. During the year 2009-10, X purchased National Saving Certificates VIII issue of Rs. 10,0006. General expenses include an expenditure of Rs. 1,780 for arranging a long-term loan.7. During the Previous Year 2009-10 the following payments are made:

a) Rs. 7,000 paid on May 5, 2009 on account of outstanding customs duty of the PreviousYear 2008-09 and

b) Rs. 5,000 paid on December 10, 2009 on account of outstanding sales tax of thePrevious Year 2008-09.

8. During the previous year 2009-10, X also makes a capital expenditure of Rs. 25,000 for thepurpose of carrying scientific research related to his business. This expenditure is howeveris not debited to P & L a/c.

9. X made a payment of Rs. 20,000 to National laboratory not recorded.Find out the Business Income.

Section-CThis part consists of four questions and students are required to attempt two questions fromthis section. (2 x 15)Question No 11. What are the various authorities for the administration of Income tax law?Discuss their powers.Question No.12: Explain the provisions relating to Advance Payment of Tax?

Question No.13. The following particulars are furnished by X (26 years), a resident assessee, for theyear ending on March 31,2010 :Net basic salary after deduction of tax at source and of contribution to recognisedprovident fund 1,80,000Tax deducted at source from salary 1,000Own contribution to recognised provident fund 4,000Employer's contribution to provident fund 27,900Interest credited to provident fund @ 11 per cent 5,000Leave travel concession for self and wife for proceeding on leave to Srinagar (amountexempt: Rs. 10,000, being actual expenditure on fare) 12,000Contribution by employer to an approved gratuity fund 1,000House rent allowance (house is at Madras and rent actually paid amounts to Rs. 20,400) 14,800Interest on debentures from ABC Co. (net) (paid on November 12, 2009) 25,200Tax deducted at source from interest on debentures 2,800Interest on capitol borrowed for the purpose of investment in debentures of ABC Co. 19,800

Winnings from lotteries (net of tax deducted at source) paid to X on March 11, 2010 2,59,000Tax deducted at source 1,11,000Expenses on collection of lottery prize and on purchase of lottery tickets on which he couldnot bag any prize 4,500Winnings from horse races (net to tax deducted at source) paid to X on January 11, 2010 89,250Tax deducted at source 38,250Expenses on collection of race winnings 600Life insurance premium:--- On own life (sum assured: Rs. 2,80,000) 58,000--- On wife's life (sum assured: Rs. 50,000) 7,600


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--- On minor child's life (sum assured: Rs. 12,000) 800Tuition fees of X's son 16,000Tuition fees of X's daughter 10,000Compute the total income and tax liability of X for the assessment year 2010-11.

Question No. 14. The following information is given for the Assessment Year 2010-11.a) Residential House 40,00,000

b) A Farm House 15 Km away from local limits 10,00,000c) Motor car 6,00,000d) Jewellery 14,00,000e) Aircraft for personal use 1,50,00,000f) Urban land (construction not permitted) 10,00,000g) Cash in hand (recorded) 1,50,000h) Unrecorded Cash 1,25,000i) Shops given on rent 20,00,000j) Gold Deposit Bonds 10,00,000k) Loan taken to purchase the aircraft 50,00,000l) 6 Residential Houses given to employees 15,00,000

(Salary of 2 employees exceeds Rs. 5 lacs)Compute the net wealth & tax liability in following situations

Situation 1:- where assessee is An IndividualSituation 2:- Where Assessee is a H.U.FSituation 3:- Where Assessee is a Company

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