| Roll No………………… | |
| Total No. of Questions— 8] | [Total No. of Printed Pages—3 |
| Time Allowed : 3 Hours | Maximum Marks : 100 |
| PJ | |
| 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. | |
| Marks | |
| 1. | RST Ltd. is engaged in the manufacture and sale of drugs and pharmaceuticals. Its net profit for the year ending 31-3-2006 after debit/credit of the following items to the Profit and Loss Account was Rs.28,00,000. | ||
| (i) | Income-tax paid on non-monetary perquisites provided to the employees Rs.1,00,000. | ||
| (ii) | Legal fees incurred in defending title to factory premises Rs.2,00,000. | ||
| (iii) | Expenditure on scientific research (not in respect of cost of land or building) on in-house research and development facility approved by the prescribed authority Rs.10,00,000. | ||
| (iv) | Interest paid on arrears of sales tax Rs.1,00,000. | ||
| (v) | Cash payment of Rs.20,000 made on 10.10.2005 to a supplier towards purchase of raw material. | ||
| (vi) | Rent received from letting out vacant land Rs.1,00,000. | ||
| (vii) | Arrears of rent received in respect of a house property, which was let out in the earlier years and which was not charged to tax in any earlier year, Rs.2,00,000. The said property was sold during the year ending 31.3.2004. | ||
| The company had paid royalty in India to a foreign company amounting to Rs.3,00,000 on 1.5.2004, which was disallowed by the Assessing Officer for the assessment year 2005-06 since tax was not deducted thereon. The company deducted and paid tax at source on the said amount of royalty on 1.1.2006.
The company has brought forward loss from property relating to the assessment year 2004-05 amounting to Rs.40,000. Compute the total income of RST Ltd. for the assessment year 2006-07. Furnish explanations for the treatment of the various items given above. |
16 | ||
| 2. | (a) | What is a zero coupon bond? State briefly the treatment of zero coupon bonds in the hands of the issuer and the investor under the Income-tax Act, 1961. | 8 |
| (b) | A Hindu undivided family is carrying on the business of purchase and sale of food grains. The Karta of the family manages the business. Can the Hindu undivided family pay salary to the Karta and claim the payment made as a deduction from the profits of its business? If so, what are the conditions and limitations for such payment? | 8 | |
| 3. | (a) | ABC Club, a members’ club, registered as a society under Orissa State Societies Registration Act, derived surplus from the sale of refreshments, beverages, etc. and letting out rooms to its members. The club provided these facilities and amenities to its members as part of advantage attached to the membership. The club claims that the said surplus accuring to it is not income at all for the purpose of the Income-tax Act, 1961. Examine the validity of the claim made by the club. Would your answer be different, if the club was incorporated as a company or if some members alone took advantage of the facilities and amenities it provided? | 6 |
| PJ | P.T.O. |
( 2 )
| PJ | Marks |
| (b) | State whether the following persons have to mandatorily furnish their return of income for the assessment year 2006-07.
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4 | |||||
| 4. | (i) | S, an individual purchased a site on 21.4.2000 for Rs.2,00,000. He completed construction of a building thereon on 14.2.2003 at a cost of Rs.10,00,000. He sold the property consisting of site and building on 7.12.2005 for Rs.20,00,000. S seeks your opinion on the nature of capital gain arising to him from the sale of the property for the assessment year 2006-07. Computation of capital gain is not necessary. | 5 | ||||
| (ii) | J, a citizen of India, is employed in the Indian Embassy at Tokyo, Japan. He received salary and allowances at Tokyo from the Government of India during the year ending 31.3.2006 for services rendered by him in Tokyo. Besides, he was allowed perquisites by the Government. He is a non-resident for the assessment year 2006-07. Examine the taxability of salary, allowances and perquisites in the hands of J for the assessment year 2006-07. | 3 | |||||
| (iii) | Q, a non-resident, made an application to the Authority for Advance Rulings on 2.1.2006 in relation to a transaction proposed to be undertaken by him. On 31.3.2006, he decides to withdraw the said application. Can he withdraw the application on 31.3.2006? | 2 | |||||
| 5. | (a) | Can an order of assessment, which was in accordance with the law as it stood on the date when it was passed, be rectified by the Assessing Officer under section 154 of the Income-tax Act, 1961, on account of a subsequent amendment of the law with retrospective effect? | 4 | ||||
| (b) | An appeal was preferred by the assessee to the Commissioner (Appeals) against the order of assessment made by the Assessing Officer. The appeal was allowed by the Commissioner (Appeals). The assessee later found that he was entitled to a certain deduction, which was neither claimed by him nor allowed by the Assessing Officer in the course of assessment. The issue of deduction was not raised by the assessee in the appeal before the Commissioner (Appeals) and was not considered by the Commissioner (Appeals). Examine the power of the Commissioner to revise under section 264 the order of assessment in order to allow such deduction on an application by the assessee. | 4 | |||||
| (c) | M, an individual, had let out his building on a monthly rent of Rs.12,000. The tenant deducted tax under section 194-I from the rent paid to M, but did not remit such tax to the credit of the Central Government. M filed his return of income for the assessment year 2006-07 including therein the rental income from the said building and paid the balance tax on his total income after taking credit for tax deducted at source by the tenant. The Assessing Officer has called upon M to pay the tax to the extent of tax deducted at source. Is the Assessing Officer justified in doing so? | 4 | |||||
| 6. | (a) | Write a brief note on filing of memorandum of cross-objections before the Income-tax Appellate Tribunal. | 5 | ||||
| (b) | C, an individual, resident in India, paid medical insurance premium amounting to Rs.20,000 by cash during the year ending 31.3.2006 out of his income chargeable to tax in respect of the policy taken on the health of his dependent father in accordance with the scheme framed by the General Insurance Corporation of India and approved by the Central Government. Besides, he paid Rs.90,000 during the year ending 31.3.2006 for the medical treatment of his dependent mother, aged 69 years, in respect of a disease specified in Rule 11DD(1) of the Income-tax Rules, 1962. He received Rs.20,000 from the insurance company for the said medical treatment of his mother. C seeks your advice on the deductions, if any, available in respect of these two payments. | 6 | |||||
| (c) | An Assessing Officer entered a hotel run by a person, in respect of whom he exercises jurisdiction, at 8 p.m. for the purpose of collecting information, which may be useful for the purposes of the Act. The hotel is kept open for business every day between 9 a.m. and 9 p.m. The hotelier claims that the Assessing Officer could not enter the hotel after sunset. The Assessing Officer wants to take away with him the books of account kept at the hotel. Examine the validity of the claim made by the hotelier and the proposed action of the Assessing Officer with reference to the provisions of section 133B of the Incometax Act, 1961. | 4 |
| PJ | Contind... |
( 3 )
| PJ | Marks |
| 7. | (a) | What is an adventure in the nature of trade? State the factors which are relevant in deciding whether a transaction is an adventure in the nature of trade. | 7 | ||||||||||||||||||||||||
| (b) | The assessment of B, an individual, for the assessment year 2004-05 was made under section 143(3) of the Income-tax Act, 1961 on 18.3.2005. The assessment has become final and is not the subject-matter of an appeal or revision. The Assessing Officer issued a show cause notice for levy of penalty under section 271(1)(c) to B on 25.3.2005. B furnished a reply to the said notice on 30.3.2005. There was a change in incumbent and the Assessing Officer, who made the assessment and issued the show cause notice, was succeeded by another. The successor-Assessing Officer suo motu issued a notice under section 129 to B on 20.9.2005. B did not respond to the said notice. The successor- Assessing Officer passed an order on 4.10.2005 levying penalty under section 271(1)(c), Examine the validity of the order of penalty passed with reference to the aspect of limitation. | 8 | |||||||||||||||||||||||||
| 8. | D, an individual, has the following assets and liabilities as on 31.3.2006
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| The minor married daughter of D holds a plot of land at Indore valued at Rs.20 lakhs.
The amounts stated against the assets, except cash in hand, are the values determined as per section 7 of the Wealth-tax Act, 1957 read with Schedule III thereto. Compute the net wealth of D for the assessment year 2006-07. State the reasons for inclusion or exclusion of the various items |
10 | ||||||||||||||||||||||||||
| PJ |