|Total No. of Questions—8]||[Total No. of Printed Pages—8|
|Time Allowed : 3 Hours||Maximum Marks : 100|
|Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.|
|Answer all Questions.|
|1.|| The net profits of XYZ Ltd. for the year ended 31st March, 2005, after debiting/crediting the following items, were Rs. 9 lakhs : |
The company had the following claims brought forward from the prior years :
|2.||(a)||Can penalty under Section 271(1)(c) of the Income–tax Act for concealment of income or particulars thereof be imposed on “intangible” additions to income made by the Assessing officer. |
Can these additions be utilised by the assessees to explain investments made in the subsequent years?
Is there any time limit for initiation of penalty proceedings in such cases? Discuss.
|(b)||State the cases where the benefit of indexation of costs is not available for determination of capital gains.||5||(0)|
|(c)||A charitable trust, whose income can be exempt under Section 11 of the Income–tax Act, was formed on 1st March, 2004. For the accounting year ended 31st March, 2005, it earned an income of Rs. 60,000. |
It filed with the Commissioner of Income–tax its application for registration on 30th March, 2005 explaining that for good and sufficient reasons, it was prevented from filing the application by the due date. State:
|(i)||by which date the application for registration should have been filed;||(0)|
|(ii)||whether such an application could have been filed before the formation of the trust;||(0)|
|(iii)||In the absence of an order of registration from the Commissioner, can the trust be deemed to be registered;||(0)|
|(iv)||The steps to be taken by the trust to secure exemption from Income–tax;||(0)|
|(v)||whether a certificate of registration once granted can be cancelled and if so, the conditions therefore.||(0)|
|3.||(a)|| Tarun Shipping Co, Ltd., having its registered office in Mumbai, plies two ocean-going vessels which it owns. The registered tonnage of two vessels are 47,549 tonnes and 800 kgs and 25,759 tonnes and 400 kgs respectively. The first vessel, in the accounting year 2004-05, the first vessel was operated for 360 days and the second for 199 days. The accounts of the company reveal the following results : |
Compute the tax payable by the company for the assessment year 2005-06, taking note of the new provisions of the law relating to taxation of income of shipping companies. Also indicate the specified conditions for the applicability of the new procedure.
|(b)||M, an individual, was carrying on a business as sole proprietor. On his death his legal heirs decide to continue the same business by forming a firm. |
At the time of death, M had a determined business loss of Rs. 2 lakhs, under the provisions of the Income–tax Act, to be carried forward.
Does the firm, consisting of all the legal heirs of M, get a right to have this loss adjusted against its current income? Discuss.
|(c)||X Ltd., is a company engaged in the business of growing, manufacturing and selling of Tea. |
For the accounting year ended 31st March, 2005, its composite business profits, before an adjustment under Section 33AB of the Income–tax Act, were Rs. 60 lakhs. In the year, it deposited Rs. 25 lakhs with NABARD.
The company has a business loss of Rs. 10 lakhs brought forward from the previous year.
The company withdrew in February, 2005 Rs. 20 lakhs from the deposit account to buy a non–depreciable asset for Rs. 18 lakhs and could not use the balance before the end of the accounting year. The withdrawal and the purchase were under a scheme appeared by the Tea Board.
The non–depreciable asset was sold in November, 2005 for Rs. 29 lakhs.
Indicate clearly the tax consequences of the above transactions and the total income for the relevant years.
|4.||(a)|| T and Q are individuals, who constitute an Association of persons, sharing profit and losses in the ratio of 2 : 1, For the accounting year ended 31st March, 2005, the Profit and Loss account of the business was as under: |
|(b)|| M, an individual, is 70 years of age. He is a sitting member of the State Assembly of Karnataka and for the financial year 2004-05 received the following amounts from the Assembly Secretariat : |
He owns a house in Delhi which has been let out at Rs. 5,000 p.m. He received rent for 10 months only, the house having remained vacant for two months. Municipal taxes of Rs. 1,200 were paid by the tenant. Interest of Rs. 14,000 was paid by M on amount borrowed by him to buy the house.
|5.||(a)||State whether the provisions of Section 41(1) of the Act can be applied to a case, where refund of excise duty has been obtained by the assessee on the basis of a decision of the CEGAT and where the matter has been taken up in further appeal to the Court by the Central Excise Department.||4||(0)|
|(b)||Does the Settlement Commission have the power to reduce or waive interest levied under Sections 234A, 234B and 234C of the Income–tax Act? Discuss.||6||(0)|
|(c)||In the course of search operations under Section 132, a tax payer makes a declaration under Section 132(4) on the earning of income not disclosed. Can that state save the tax payer from a levy of penalty under Section 271(1)(C)?||4||(0)|
|6.||(a)||State whether the information regarding possession of unexplained assets and income received from the Central Bureau of Investigation, a Government agency, can constitute “information” for action under Section 132 of the Act. Discuss.||5||(0)|
|(b)||In the course of an assessment proceeding, the assessing officer enhanced the value of the closing stock and added the difference to the total income. |
In the assessment year subsequent to this, the assessee wants the assessing officer to enhance, by the same amount, the value of the opening stock of that year.
Discuss the validity of the claim
|(c)||A foreign company, ST, has entered into an agreement with an Indian Company KN for supply of know-how and the agreement is within the Industrial Policy conditions laid down by the Central Government. In the year 2004-05, Rs. 50 lakhs is paid, under the agreement, to ST by KN. |
ST claims to have spent Rs. 14 lakhs as expenses in India to be recognised as a deduction.
In the following situations, what will be your decision on the tax liability of the parties :
|7.||(a)|| New Era Construction Ltd. furnishes the following particulars of its wealth for the valuation date of 31st March, 2005. Compute its net wealth and the wealth tax payable by it for the Assessment year 2005-06; |