SCANNER: APPLIED DIRECT TAXATION (Dec 2008 to June 2011)
UNIT - 1: OVERVIEW OF DIRECT TAX LAWS
Objective -Type Question:
Q1. The following assessee is charged to income-tax in the assessment year following the previous year: [Re: Q1. (a)(i), Dec ’08 / Paper-7] 1
(1) A non-resident business firm which shipped goods on 1.5.08 at Visakhapatnam Port in Andhra Pradesh;
(2) An employee left India to USA on 1.8.08 with no intention of returning;
(3) ABC firm which discontinued its business on 1.9.2008;
(4) An employee-assessee of a University who worked during 1.4.07 to 30.03.08.
Ans: (4) An employee-assessee of a University who worked during 1.4.07 to 30.03.08.
Explanation: Special case where income is chargeable to tax in the same year.
Normally tax is levied after completion of a Financial year. However, there are special cases under which income is chargeable to tax in the same year. Following are some of the examples.
Shipping business of a Non resident: where a ship is belonging or chartered by an NRI carrying Passengers, Livestock or goods, then ships is allowed to leave the port only if the tax due thereon has been paid or satisfactory arrangement have been made for the payment thereof.
Person leaving India with no intention of returning
AOP or BOI or artificial or juridical person formed for a particular purpose.
Person likely to transfer the property to avoid the tax
Discontinued business or profession
Q2. The following is capital receipt: [Ref: Q1. (c)(ii), June ’09 / Paper-7] 1
(1) Dividend from investments;
(2) Bonus shares;
(3) Sale of technological know-how;
(4) Compensation received for compulsory evacuation of place of business.
Ans. (d) Compensation received for compulsory evacuation of place of business.
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Q3. Fill up the blanks:
(i) A Foreign company means a company which is not a domestic company. [Ref: Q1. (a)(iii), Dec. ’09 / Paper-7] 1
(ii) Capital Expenses is a non-recurring expenditure whereas a revenue expense is normally a recurring one. [Ref: Q1. (a)(v), Dec. ’09 / Paper-7] 1
Descriptive & Practical Questions:
Q1. Kamalesh was working as a crew member on an Indian ship plying in foreign waters. During the year ended 31.03.2008, the ship did not touch the Indian coast, except for 180 days. State the residential status for the assessment and taxability of his salary. [Ref: Q5. (a), Dec ’08 / Paper-7] 2
Ans: Kamalesh total stay during previous year = 180 days
Since, kamalesh total stay is less than 182 days as condition of 60 days is not applied because he leaves India for employment as a crew member, therefore he is said to be Non Resident in India.
Salary of kamalesh is taxable in India because the source of India is India.
Q2. Briefly explain marginal relief allowable while computing tax payable by certain assessee. [Ref: Q4. (b), June ’10 / Paper-7] 3
Ans: Marginal relief is a concept of relaxation provided by the income tax department to the tax payers like domestic companies and foreign companies whose income exceeds Rs. 1 crore. Relief shall be provided by where tax payable together with surcharge exceeds the income earned by the companies in excess of Rs.1 crore. Such relief is known as Marginal Relief. The additional amount of income tax payable with surcharge in excess of income over Rs.1 crore should not be more than the amount in excess of Rs.1 crore.
Rate of surcharges:
Domestic companies 5% (for the year 2012-13)
Foreign companies 2% (for the year2012-13)
MARGINAL RELIEF (2012-13):
Tax on total income including surcharge
Less: (Total income – Rs.1 crore) + (Tax on Rs.1 crore excluding surcharge)
Tax Payable (after discount on income tax):
Tax on total income including surcharge
Less: marginal relief as computed above.
Q3. State the Elements/Sources of Income Tax Law. [Ref: Q8. (b), June ’10 / Paper-7] 3
a) Income Tax Ordinance (as amended upto date)
b) Rules framed by the CBDT
c) Notifications, Circulars and Orders
d) Income Tax Case Law
e) Finance Acts or Ordinances
Q4. X got an employment in Singapore during the previous year 2008-09. He left for Singapore on August 9, 2008. He is an Indian Citizen. Determine the residential status for the Assessment Year 2009-10. [Ref: Q6. (d), Dec. ’09 / Paper-7] 2
Ans: Mr X total stay during previous year is:
From 1 – 4 – 2008 to 9 – 8 – 2008 = April (30) + may (31) + June (30) + July (31) + ague (9) = 131 days
Since his total stays is more than 60 days during previous year and total of 365 days during four preceding previous year (as he left India on aug 9,08), he is said to be resident in India.
Again, since he left India on aug 9, 2008 for Singapore, he also satisfied two additional conditions.
Therefore, Mr X is said to be resident and ordinarily resident in India.
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