This Paper has 24 answerable questions with 0 answered.
|Total No. of Questions — 7]||[Total No. of Printed Pages — 11|
|Time Allowed : 3 Hours||Maximum Marks : 100|
| Answers to questions are to be given only in English except in the case of candidates who |
have opted for Hindi Medium. If a candidate has not opted for Hindi medium, his/her answers
in Hindi will not be valued.
|Working notes should form part of the answer.|
|Question No. 1 is compulsory.|
|Answer any five Questions from the remaining six questions.|
|1.||(a)||Jyoti Education Centre, a charitable institution registered under section 12AA of the Income–tax Act runs schools for primary and secondary education. The following particulars pertaining to the previous year 2010–11 are furnished to you by the institution: |
|(b)||A. Limited engaged in manufacturing activity has the following immovable properties as on 31st March, 2011. State, with reasons,whether the assets are chargeable to wealth tax as on the valuation date 31st March, 2011. |
|(c)||Madhav, a child artist acting in laughter shows accumulated a wealth of Rs. 25 lakh over a short span of time. The same was put into securities by his mother, who is also the guardian. The securities were sold in 2010–11 resulting in capital gain of Rs. 10 lakh, which was invested in a plot of land in urban area. The Assessing Officer proposes to include the value of the land in computation of net wealth of the mother under section 4(1) on the valuation date. Is the proposition of the Assessing Officer justified in law?||3||(0)|
|(d)||"The rules laid down in Schedule III to the Wealth–tax Act are not binding on the Valuation Officer." Examine the correctness of the statement.||3||(0)|
|2.||XYZ Private Limited is engaged in manufacturing and selling ceramic tiles. The net profit of the company as per its Profit & Loss Account for the year ended 31stMarch, 2011 is Rs. 150 lakh after debiting or crediting the following items: |
|3.||(a)||A partnership firm consisting of three partners X, Y, and Z is engaged in the business of manufacturing and selling toys. |
Turnover of the business for the year ended 31st March, 2011 amounts to Rs. 55 lakh.
Bad debts written off in the books are Rs. 75,000.
Interest at 12% is provided to partner, Z on his capital of Rs. 6 lakh as authorized by the partnership deed.
The firm had business loss of Rs. 50,000 and unabsorbed depreciation of Rs. 1,50,000 carried forward from Assessment Year 2010–11. The firm did not pay tax under presumptive tax system in assessment year 2010–11. The firm opts for presumptive taxation under section 44AD for Assessment Year 2011–12.
|(b)||Mr. X transferred his residential house to Y for Rs. 10 lakh on 1st April, 2010. The value of the said house as per Stamp Valuation Authority was Rs. 16 lakh. Mr. Y is a childhood friend of Mr. X. |
Mr. X gifted a plot of land (purchased by him on 1st August, 2007) to Mr. Y on, 1st July, 2010. The value as per Stamp Valuation Authority is Rs. 8 lakh. Mr. Y sold the land on 1st March, 2011 at Rs. 14 lakh.
Cost Inflation Index– 2007–08: 551; 2010–11: 771.
Compute the income of Mr. Y chargeable under the heads "Capital Gains" and "Income from other sources" for Assessment Year 2011–12.
|(c)||JJ Limited, a company incorporated in Australia has entered into an agreement with KK Limited, an Indian company for rendering technical services to the latter for setting up a fertilizer plant in Orissa. As per the agreement JJ Limited rendered both off–shore services and on–shore services to KK Limited at fee of Rs. 1 crore and Rs. 1.5 crore respectively. JJ Limited is of the view that it is not liable to tax in India in respect of fee of Rs. 1 crore as it is for rendering services outside India. Discuss the correctness of the view of JJ Limited.||4||(0)|
|4.||Attempt any four questions out of the following questions:||4x4=16|
|(a)||Rajesh regularly files his return of income electronically. While he was trying to upload his return of income for assessment year 2010–11 on 31stJuly, 2010, last date for filing the same, he found it extremely difficult to do the same due to network problems and ultimately he became successful in making e–filing of , his return only at 1 A.M. on 1st August, 2010. The return contained a claim for carry forward of business loss of Rs. 11akh. This circumstance was recorded in a letter delivered to the office of the Deputy Commissioner of Income Tax on 1st August, 2010 during normal office hours. Rajesh made a request to the CBDT for condonation of delay in filing the return of income. |
Discuss whether the CBDT has the power to condone the delay in filing the return of income and permit carry forward of loss in the given circumstance.
|(b)||PQR Limited has written off certain debts as bad debts in the books of account and claimed deduction under section 36(1)(vii) in the return of income filed for Assessment Year 2011–12. The Assessing Officer made disallowance for deduction of bad debts on the ground that the debts have not been established to have become irrecoverable and bad in the previous year 2010–11. |
Examine the correctness of the action of the Assessing Officer.
|(c)||MNO Limited is engaged in manufacturing activities. It received liquidated damages of Rs. 10 lakh from supplier of machinery due to delay in supply of machinery. State, with reasons whether or not the income by way of liquidated damages is assessable as income from business.||(0)|
|(d)||ABC JET Limited, an airline company pays landing and parking charges to the Airports Authority of India. Discuss whether the company is required to deduct tax at source from such payment.||(0)|
|(e)||ABC Limited has claimed exemption on the income from long–term capital gains under section 54EC by investing in bonds of National Highway Authority of India within the prescribed time. In the computation of "book profit" under section 115JB, the company claimed exclusion of long–term capital gains because of exemption available on it by virtue of section 54EC. The Assessing Officer reckoned the book profit including long–term capital gains for the purpose of levy of minimum alternate tax payable under section 1I5JB. |
Is the action of the Assessing Officer justified in law?
|5.||(a)||Explain the term "Bilateral Relief" in the context of Double Taxation Avoidance Agreement.||4||(0)|
|(b)||Ajay, a non–resident Indian has the following sources of income in India during the previous year 2010–11: |
Compute tax payable by Ajay for Assessment Year 2011–12, if he opts for the provisions of Chapter XII–A of the Income–tax Act.
|(c)||State the consequences that would follow if the Assessing Officer makes adjustment to arm’s length price in international transactions of the assessee resulting in increase in taxable income. What are the remedies available to the assessee to dispute such adjustment?||6||(0)|
|6.||(a)||The Assessing Officer within his jurisdiction surveyed a popular Cyber Cafe at 12’0 clock in night for the purpose of collecting information which may be useful for the purposes of the Income–tax Act. The Cyber Cafe is kept open for business every day between 2 P.M. and 2 A.M. The owner of the Cyber Cafe claims that the Assessing Officer could not enter the cafe in late night. The Assessing Officer wanted to take away with him the books of account kept at the Cyber Cafe. Examine the validity of the claim made by the owner and the proposed action of the Assessing Officer.||4||(0)|
|(b)||The Assessing Officer issued a notice under section 142(1) on the assessee on 24th December, 2010 calling upon him to file return of income for Assessment Year 2010–11. In response to the said notice the assessee furnished a return of loss and claimed carry forward of business loss and unabsorbed depreciation. State whether the assessee would be entitled to carry forward as claimed in the return.||4||(0)|
|(c)||The regular assessment of MNO Ltd. for the Assessment Year 2009–10 was completed under section 143(3) on 13th March, 2011. There was an audit objection by the Revenue Audit team that interest on loan should be disallowed partly as there was diversion of borrowed fund to sister concern without charge of interest. |
Based on the above facts:
|(d)||Discuss the correctness or otherwise of the following statements with reference to the provisions of the Income–tax Act: |
|7.||(a)||Ms. Madhvi, a resident individual and self–employed industrial designer, furnished the following particulars for the year ended 31–03.2011 : |
|(b)||A sum of Rs. 60,000 was paid to Mr. Dastur, an advocate on 1st July, 2010 towards fees for his professional services without deducting tax at source. Later on, a further sum of Rs. 70,000' was due to him on 27th February, 2011 from which tax of Rs. 13,000 was deducted at source. The tax so deducted was deposited on 25thJune, 2011. Compute interest payable by the deductor under section 201(1A).||5||(0)|
|(c)||Explain whether there is conflict between accounting standards and provisions of the Income–tax Act in respect of the following:||3x2=6|
|(i)||Effect of fluctuation in foreign currency rates where a capital asset is imported by a company.||(0)|
|(ii)||Permanent fall in value of long–term investments held by a company.||(0)|