Taxmann's Direct & Indirect Taxation (DITX | DT & IDT) | CRACKER

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Chapter-wise Marks Distribution Year Chapter

Name of the Chapter

2017

2018

2019

J

J

J

D

D

D

2021

2022

D

D

2023 J

D

Average

Section A: Direct Taxation Overview of Income Tax

1

3

4

1

2

Residential Status

8

2

9

9

6

4

3

2

3.06

11

9

10

1

7.31

3

Incomes Which Do Not Form Part of Total Income

5

8

6

6

8

5

17

9

7.85

4

Income From Salary

7

8

12

9

5

Income from House Property

9

6

9

6

21

11

10

11

12

9

10.94

6

9

8

13

8

9

8.63

6

Profits and Gains of Business/Profession

16

18

16

10

14

33

25

19

13

20

18.19

7

Income from Capital Gains

15

12

17

8

15

4

17

13

12

11

13.31

8

Income from Other Sources

8

5

8

8

8

3

3

4

3

5.80

2

4

6

2

5

6

7

5.38

8

5

6

2

3

2

8

2

4.93

16

1

8

17

25

27

12.15

3

21

8

9

13

9

9.00

3

9

Clubbing of Income

10

Set off and Carried forward of Losses

11

Taxation of Individual & HUF (Including AMT)

7

12

Deductions, Rebate, Relief

6

13

Advance Tax

6

5

14

TDS & TCS

5

18

6

7

8

2

7 16

I-5

10

5.13

11 7

13

7

8

9

8

8.44

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1

I-6

CHAPTER-WISE MARKS DISTRIBUTION

Year

2017

2018

2019

2021

2022

J

J

J

D

D

D

7

16

8

5

5

6

Chapter

Name of the Chapter

D

D

15

Filing of Return & PAN

16

Self-Assessment & Intimation

1

Introduction to GST

2

Concept of Supply

3

Exemption under GST

4

Composition Scheme

5

Time of Supply

6

Valuation under GST

7

Input Tax Credit

19

5

15

8

Registration under GST

17

12

20

5

10

5

5 5

5

5

2023

Average

J

D

10

11

7.82

5

5.11

15

4.5

7

0.7

5

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Section B: Indirect Taxation

9

Tax Invoice

10

E-Way Bill

11

GST Returns

12

Basics of Custom Duties

13

Types of Duties

14

Valuation of Duties

15

Computation of Assessment Values and Duties

15

15

0 0.2

2

0 4

7

1.1

14

8

6.1

1

5

1

2.5

1

0.1

4

2

1.2

5

1

0.6

10

7

2.3

10 6 9

4

2.8

15 10

8

1.8

Note: The Old Syllabus was applicable till Dec., 2022 attempt. From June, 2023 attempt the New Syllabus is applicable and weightage is given accordingly.

J : June, D : December

Previous Exam Trend Analysis (Syllabus 2022) Question No. Year

Question

Subpart

Chapter Name

Marks

Category

June 2023

1

a(i)

Basic Concepts, Basis of Charge and Capital & Revenue Receipts

1

Theory

Residential Status and Scope of Total Income

1

Theory

Clubbing of Income

1

Theory

a(iv)

Profits and Gains of Business or Profession including Tax Audit

1

Theory

a(v)

Income from Salaries

1

Theory

a(vi)

Income from Other Sources

1

Theory

b(i)

Taxation of Individual (including AMT but excluding Non-resident) & HUF

1

Theory

b(ii)

Profits and Gains of Business or Profession including Tax Audit

1

Theory

b(iii)

Set off and Carry Forward of Losses

1

Theory

b(iv)

Income which do not form part of Total Income

1

Theory

c(i)

Residential Status and Scope of Total Income

1

Theory

c(ii)

Income from House Property

1

Theory

c(iii)

Profits and Gains of Business or Profession including Tax Audit

1

Theory

c(iv)

Deductions, Rebate and Relief

1

Theory

I-7

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a(ii) a(iii)

I-8

PREVIOUS EXAM TREND ANALYSIS (SYLLABUS 2022)

Question No. Year

Question

Subpart

Chapter Name

Marks

Category

2

a

Residential Status and Scope of Total Income

4

Practical

b

Income from House Property

8

Practical

3 4

5

1

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Dec. 2023

2

3

4 5

a

Income from Salaries

8

Practical

b

Deductions, Rebate and Relief

4

Practical

a(i)

Agricultural Income

6

Practical

a(ii)

Filing of Return

2

Theory

b

TDS & TCS

4

Theory

a

Taxation of Individual & HUF (including AMT)

6

Practical

b

Profits and Gains of Business or Profession including Tax Audit

6

Practical

i

Profits and Gains of Business or Profession including Tax Audit

2

Practical

ii

Income from Other Sources

2

Practical

iii

TDS & TCS

2

Theory

iv

Deductions, Rebate and Relief

2

Theory

v

Deductions, Rebate and Relief

2

Practical

vi

Agricultural Income

2

Theory

vii

Profits and Gains of Business or Profession including Tax Audit

2

Theory

a

Residential Status and Scope of Total Income

7

Practical

b

Income from Salaries

7

Practical

a

Income From House Property

7

Practical

b

Profits and Gains of Business or Profession including Tax Audit

7

Practical

a

Income from Capital Gains

7

Practical

b

Income from Other Sources

7

Practical

a

Set Off & Carry Forward of Losses

7

Practical

b

Taxation of Individual & HUF (including AMT)

7

Practical

Chapter-wise Comparison with Study Material Chapter No.

Chapter Head (As per Taxmann Cracker)

ICMAI Study Material Module

Section A: Direct Taxation 1

Introduction to Income Tax

2

Residential Status

3

Incomes which Do Not Form Part of Total Income

4

Income from Head Salaries

5

Income from House Property

6

Profit and Gains of Business or Profession

7

Income from Capital Gains

8

Income from other Sources

9

Clubbing of Income

10

Set off and carry forward of Losses

11

Deductions, Rebate, Relief

12

Taxation of Individual & HUF (Including AMT)

13

Tax Deducted at Source and Tax Collected at source

14

Return of Income and PAN

15

Self-Assessment & intimation

Module 1

Module 3

Section B: Indirect Taxation 1

Introduction to GST

2

Concept of Supply

3

Exemption under GST

4

Composition Scheme

Module 4 & 5

I-9

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Module 2

I-10

CHAPTER-WISE COMPARISON WITH STUDY MATERIAL

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Chapter No.

Chapter Head (As per Taxmann Cracker)

5

Time of Supply

6

Valuation under GST

7

Input Tax Credit

8

Registration under GST

9

Tax Invoice

10

E-Way Bill

11

GST Returns

12

Types of Customs Duties

13

Valuation of Duties

14

Computation of Assessment Values and Duties

ICMAI Study Material Module

Module 6

Contents PAGE

Chapter-wise Marks Distribution

I-5

Previous Exam Trend Analysis (Syllabus 2022)

I-7

Chapter-wise Comparison with Study Material

I-9

DIRECT TAXATION (DT) Chapter 1 1.5

u OVERVIEW OF INCOME TAX

Chapter 2 2.3

u RESIDENTIAL STATUS

Chapter 3 u INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

3.1

Chapter 4 4.3

u INCOME FROM SALARY

Chapter 5 5.3

u INCOME FROM HOUSE PROPERTY

Chapter 6 u INCOME FROM PROFITS AND GAINS OF BUSINESS AND PROFESSION

6.3

Chapter 7 7.3

u INCOME FROM CAPITAL GAINS

I-11

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SECTION A

I-12

CONTENTS PAGE

Chapter 8 u INCOME FROM OTHER SOURCES

8.3

Chapter 9 9.1

u CLUBBING OF INCOME

Chapter 10 SET-OFF & CARRY FORWARD OF LOSSES

10.1

Chapter 11 u DEDUCTIONS, REBATE & RELIEF

11.1

Chapter 12 12.1

u ADVANCE TAX

Chapter 13 13.1

TDS & TCS

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Chapter 14 u FILING OF RETURN OF INCOME

14.1

Chapter 15 u SELF-ASSESSMENT & INTIMATION

15.1

SECTION B INDIRECT TAXATION (IDT) Chapter 1 u INTRODUCTION TO GST

1.3

Chapter 2 u CONCEPT OF SUPPLY

2.1

Chapter 3 u EXEMPTIONS FROM GST

3.1

Chapter 4 u COMPOSITION SCHEME

4.1

Chapter 5 u TIME OF SUPPLY

5.1

CONTENTS

I-13 PAGE

Chapter 6 u VALUATION UNDER GST

6.1

Chapter 7 u INPUT TAX CREDIT

7.1

Chapter 8 u REGISTRATION UNDER GST

8.1

Chapter 9 u TAX INVOICE

9.1

Chapter 10 u E-WAY BILL

10.1

Chapter 11 u RETURNS

11.1

Chapter 12 12.1

Chapter 13 u VALUATION UNDER CUSTOM

13.1

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u TYPES OF CUSTOM DUTIES

6 CHAPTER

INCOME FROM PROFITS AND GAINS OF BUSINESS AND PROFESSION

SECTIONS SUMMARY Sections

Particulars Income chargeable under PGBP

28(i)

General Clause-Profits and Gains from Business and Profession

2(13)

Meaning of Business

2(36)

Meaning of Profession

28(ii)

Management Compensation

28(iiia)/ (iiib)/ (iiic)

Export Incentives

28(iv)

Any benefit, facilities, or perquisites in Business or Profession

28(v)

Interest/salary/bonus/commission received by partner from Firm/LLP

28(va)

Non Compete Fee

28(vi)

Keyman Insurance Policy

28(via)

Stock converted into asset Amount received as insurance compensation/receipt for destroyed/sale of Specified Business Asset Recovery of Expenses/Losses during relevant previous years which were claimed as deduction in earlier year Remission/Cessation on outstanding liabilities during relevant previous years which were claimed as deduction in earlier year.

41(2)

Balancing Charge on sale of SLM assets.

41(3)

Recovery of Bad Debts Research Asset sold without use in normal business

30

Revenue expenses incurred on Building to be use/used in business by Assessee (owner/tenant)

31

Revenue expenses incurred on Plant and machinery to be use/used in business by Assessee (owner/tenant)

32

Depreciation

32(1)(iia)

Additional Depreciation

38(2)

Assessing Officer (A.O.) Power to determine ratio for usage of Asset

6.3

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28

6.4

SECTION A : DIRECT TAXATION

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Sections

Particulars

43(6)

Computation of WDV

43(1)

Actual Cost of Asset

35

Donation to approved Research Institution

35(2AB)

In-House Research Expenditure

35AD

Specified Business/VIP Business

35CCA

Donation to national fund

35CCC

Expenses on Agricultural Extension Project

35CCD

Expenses on Training Program under Notified Skill Development Program

35D

Preliminary expense

35DD

Expenses incurred on amalgamation and demerger

35DDA

VRS Compensation paid to Employee

37(1)

General Deduction

37(2B)

Expenses incurred in any type of publication of Political Party

38(2)

All expenses incurred on asset in proportion to personal use determined

by A.O.

40(a)

TDS Default not deducted or deducted but not deposited

40A(2)

Excess of Market Value on revenue expense incurred on good/services received from specified person

40A(3)

Cash Payment made for revenue expenditure greater than ` 10,000 to a single person for a single bill

40A(3A)

Cash received in respect outstanding revenue expense, previously claimed > 10,000

40A(7)

Employer’s contribution to Unapproved gratuity fund.

40A(9)

Employer’s contribution to NPS in excess of 10% of Salary.

44AA

Maintenance of Books of Accounts

44AB

Tax Audit

A QUICK REVIEW Topic Name Meaning of Business and Profession

Summary Business [2(13)] Business includes any trade, commerce or manufacture; or any adventure or concern in the nature of trade, commerce or manufacture.

Profession [2(36)] Profession includes vocation. Profession requires purely intellectual skill or manual skill on the basis of some special learning and qualification gathered through past training or experience e.g. chartered accountant, doctor, lawyer etc.

CH. 6 : INCOME FROM PROFITS & GAINS OF BUSINESS & PROFESSION

Topic Name Incomes chargeable as PGBP

6.5

Summary Sec. 28 enlists the incomes, which are taxable under the head ‘Profits & gains of business or profession’: 1. Any income from business or profession including income from speculative transaction shall be taxable under this head.

2. Any compensation/other payment due to or received (i) Any person managing the affairs of an Indian company/company in India or in relation of his business for termination or modification of terms and conditions his appointment. (ii) Vesting in government, or government controlled/owned corporation 3. Income derived by a trade, professional or similar association from rendering specific services to its members shall be taxable under this head.

4. An export incentive in form of – (i) Profit on sale of import license or duty entitlement pass book. [Sec. 28(iiia)/(iiid)/(iiie)]

(iii) Duty draw back (received/receivable) for export e.g. duty drawback, etc. [Sec. 28(iiic)] 5. The value of any benefit or perquisite, whether convertible into money or not, arising from business or profession shall be taxable under this head.

6. Any interest salary, bonus, commission or remuneration received by a partner from the firm or LLP shall be taxable as business income in the hands of the partner to the extent allowed in hands of firm u/s 40(b).

7. Any sum, whether received or receivable in cash or in kind, under an agreement for (i) not carrying out any activity in relation to any business or profession; or (ii) not sharing any know-how, patent, copyright, trade mark, license, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provisions for services.

8. Any sum received under a Keyman Insurance Policy including bonus on such policy. As per sec. 10(10D) Keyman insurance policy is a life insurance policy taken by a person on the life of another person who is or was (i) an employee of the first mentioned person; or (ii) in any manner whatsoever connected with the business of the first mentioned person.

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(ii) Cash assistance received/receivable by an exporter under a scheme of the Government of India [Sec. 28(iiib)]

6.6 Topic Name

SECTION A : DIRECT TAXATION

Summary and includes such policy which has been assigned to a person, at any time during the term of the policy, with or without any consideration.

9. The fair market value of inventory as on the date on which it is converted into, or treated as, a capital asset.

Income not taxable under

10. Any sum received or receivable (in cash or kind) on account of any capital asset (other than land or good will or financial instrument) being demolished, destroyed, discarded or transferred, if the whole of the expenditure on such capital asset has been allowed as a deduction u/s 35AD. Following incomes are though in the nature of profits and gains of business or profession, shall not be taxable under this head: 1. Rent from house property is taxable u/s 22 under ‘Income from house property’ even though – (a) the assessee is engaged in the business of letting out properties on rent; or (b) such property is held as stock in trade.

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2. Dividend on shares is taxable u/s 562)(i) under the head ‘Income from other sources’ even though the assessee deals in shares and such shares are held as stock in trade. The provision is not applicable in case of interest on securities held as stock in trade.

3. Winning from lotteries, races etc. are taxable under the head ‘Income from other sources’ even if such income is derived through regular business activity. However dealing in lottery tickets and incidental winning on sold tickets will be taxable as PGBP. 4. Exempted income by virtue of sec. 10, 11 or 13A.

Expenditures allowed as deduction

5. Sum taxable under the head ‘Capital gains’ for the purpose of sec.

28 (va) shall not be taxable under this head. E.g. profit on sale of route permit.

1. Capital expenditures are not allowed as deduction, unless & until expressly allowed whereas revenue expenditures are allowed as deduction until & unless expressly disallowed under the Income tax Act. 2. Any expenditure of a non-assessable business is not allowed as deduction. E.g. Agricultural income u/s 10(1).

3. Expenditure must have been incurred by the assessee for its business.

4. Subject to certain exceptions, no deductions are allowed for anticipated losses. E.g. provision for bad & doubtful debts.

Specific Deductions

5. No one can earn income from himself/herself. E.g. Rent, salary to sole proprieter from his own firm.

As per sec. 29, income under this head will be computed considering the provisions of sec. 30 to 43DB, which decides the admissibility of expenditures for computing income under this head.

CH. 6 : INCOME FROM PROFITS & GAINS OF BUSINESS & PROFESSION

Topic Name

6.7

Summary 1. U/s 30- Rent, rates, taxes, repairs & insurance for premises used for the purpose of business or profession shall be allowed under this section. Points to be noted in this regard: (a) The building is to be used for the purpose of business or profession. (b) Rent paid by firm to its partner for using his premises is an allowed expenditure. (c) Only current repairs are allowed as deduction. Capital repairs are not disallowed. (d) Rates & taxes (for e.g. land revenue, municipal tax, etc.) are deductible on cash basis [Sec. 30 read with sec. 43B] 2. U/s 31- Repairs & insurance of plant, machinery & furniture are allowed as deduction. Points to be noted in this regard: (a) The asset must be used for the purpose of business or profession. (b) Only current repairs are allowed as deduction.

3. U/s 32- Depreciation on tangible assets like building, machinery, plant, furniture and intangible assets like know how, copyright, trade mark, patent, license, franchise, or any other business or commercial right of the similar nature acquired on or after 1/4/1998.

However, it does not include goodwill.

Conditions(a) Asset must be owned by the assessee. In case of hire purchase, the buyer can claim depreciation even though he does not get legal title of the asset till he pays the last instalment.

Lessee of a property is entitled to depreciation in respect of capital expenditure incurred on property. Possessor of an immovable property u/s 53A of Transfer of Property Act can claim depreciation. (b) Asset must be used for the purpose of business or profession during the previous year. As per sec. 38, if an asset is partly used for business or profession and partly used for personal purpose, then proportionate depreciation (as determined by the Assessing Officer) shall be allowed.

4. U/s 32(1)(iia)- Additional depreciation is applicable on all assessee engaged in the business of manufacture or production of any article or thing or in the business of generation, transmission or distribution of power.

5. An undertaking engaged in the business of generation or generation and distribution of power may charge depreciation (in respect of asset acquired after 31/3/1997) at its choice under:

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(c) Only repairs & insurance of machinery, plant & furniture is covered under this section. Rent paid for use of such assets is deductible u/s 37(1).

6.8 Topic Name

SECTION A : DIRECT TAXATION

Summary u

Written-down value method as followed by all other assessee (usual); or

u

Straight-line method at the prescribed rate in ‘Appendix IA’ of the Income Tax Rules on actual cost of asset (not the block value of asset)

However, such option shall be exercised before the due date of furnishing return of income. Further, it may be noted that once the option is exercised, it shall be applicable for all subsequent assessment year 6. U/s 35- Scientific research means any activity for the extension of knowledge in the fields of natural or applied science including agriculture, animal husbandry or fisheries [Sec. 43(4)] Such research can be categorized either as –

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(a) In-House research- Research done by the assessee himself (in connection with his business) (b) Research through outside institutions- Any sum paid to outside agencies, engaged in scientific research, to be used for scientific research.

7. U/s 35CCA, Where an assessee incurs any expenditure by way of payment of any sum— (a) to an association or institution, which has as its object the undertaking of any program of rural development, to be used for carrying out any program of rural development approved by the prescribed authority and the assessee furnishes a certificate from such association or institution. (b) to an association or institution, which has as its object the training of persons for implementing programs of rural development and the assessee furnishes a certificate from such association or institution; or, (c) the National fund for rural development; or, (d) to the National Urban Poverty Eradication Fund set up and notified by the Central Government in this behalf, the assessee shall, be allowed a deduction of the amount of such expenditure incurred during the previous year.

8. U/s 35CCC, Where an assessee incurs any expenditure on notified agricultural extension project, such expenditure is fully allowed.

9. U/s 35CCD, Where an assessee incurs any expenditure on notified agricultural extension project, such expenditure is fully allowed.

10. U/s 35 D & Rule 6AB, Preliminary Expenses are expenses incurred before starting an establishment for business, or extending a running business, or starting up a new unit.

They are considered as capital expenditure and allowed as deduction during 5 years equally to an Indian company or any other resident as per Income-tax Act.

CH. 6 : INCOME FROM PROFITS & GAINS OF BUSINESS & PROFESSION

Topic Name

6.9

Summary List of Preliminary Expenses Allowed as deduction by Income Tax Act, 1961 All Assessee (including company)

Additional Expenses for Company

Preparation of project report;

Drafting Expenses of MOA & AOA

Preparation of feasibility report; Printing Expenses of MOA & AOA Conducting market survey or Fees for registering company any other survey necessary for the business; Engineering services related to Expenses incurred for issue the business. shares & debentures Legal charges for drafting any agreement

12. U/s 35DD, Expenses on Amalgamation or Demerger- If an Indian Company incurred any expenditure on scheme of Amalgamation or Demerger with other company (can be foreign as well as Indian), then such expenditure shall be allowed for 5 years equally divided.

13. Donation U/s 35, to Approved Research Association is fully allowed as deduction.

14. Donation U/s 35CCA, by business entity to National funds for Rural development or Urban poverty eradication is fully allowed as deduction.

15. U/s 32AD, Additional Investment Allowance- Whenever a manufacturer, establishes a new factory in notified backward area of 4 states of Andhra Pradesh, Bihar, West Bengal and Telangana, during 2015-20, then 15% of such actual Cost is Deductible.

Note: There is a lock-in period of 5 year 16. U/s 36(1) (a) Stock Insurance (any mode of payment) (b) Employee’s Health Insurance (any bank mode) (c) Bonus and Commission to employee (d) Interest on Loan (taken for Business/Profession) (e) Discount on zero Coupon Bond

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11. U/s 35DDA, Amortization of expenditure incurred under VRS allowed to all assessee who have incurred any expenditure, by way of compensation to employees in connection with their voluntary retirement. 1/5th of expenditure so paid for a period of 5 years commencing from the year in which such expenditure was paid.

6.10 Topic Name

SECTION A : DIRECT TAXATION

Summary (f) Employer’s Contribution to RPF, SAF, (Approved), NPS, Gratuity Fund (Approved) (g) Employee’s Contribution to PF, SAF, NPS, or other staff welfare fund. (h) Expense of acquisition of animal used in Business/Profession (i) Bad Debts u/s 36(1)(vii) (j) Expenses on family planning promotion

Disallowed Expenses

(k) Securities Transaction Tax, Commodity Transaction Tax Following Expenses are not allowed while computing PGBP Income.

1. U/s 40(a) TDS Default, not deducted or deducted but not deposited on: (a) Interest, royalty, fees for technical services payable to a non-resident or outside India [Sec. 40(a)(i)]. (b) Any sum payable to a resident on which TDS provision is applicable [Sec. 40(a)(ia)]

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(c) Income tax, Interest under Income tax. (d) Penalty levied by under any law by Government/Local Authority. (e) Any obligation of employee met by employer is disallowed for employer but exempted u/s 10 (10CC) for employee.

2. U/s 38(2), Proportionate amount of expenses incurred for personal purpose in respect to asset used in Business/Profession as well as personal.

3. U/s 40A(2), Revenue expense paid to specified person (relative), in excess of Market Value of Goods or Services received are disallowed.

4. U/s 40A(3), Cash Payment made for revenue expenditure greater than ` 10,000 to a single person for a single bill, in a single day is fully disallowed as deduction. Otherwise than, any payment made through a/c payee cheque or draft, ECS, Prescribed banking mode (Rule 6ABBA) including debit/credit card, net/mobile banking are a allowed even on exceeding ` 10,000.

5. U/s 40A(3A), If cash received, “in respect any outstanding revenue expense which was previously claimed as expenditure in earlier years”, greater than 10,000 then it will be treated as income.

6. U/s 40A(7), Employer’s contribution to Unapproved gratuity fund.

7. U/s 40A(9), Employer’s contribution to NPS in excess of 10% of Salary. In this case, only excess amount is disallowed.

CH. 6 : INCOME FROM PROFITS & GAINS OF BUSINESS & PROFESSION

6.11

PAST EXAMINATION QUESTIONS OBJECTIVE QUESTIONS Q.6 Salary, bonus, commission or remuneration due to or received by a working partner from the firm is taxable under the head (a) PGBP of partner (b) Salary of partner (c) Other Sources of partner (d) None of these Q.7 When employer contributes to approved superannuation fund it is chargeable to tax as perquisite when the contribution exceeds (Repeated in Salary because superannuation fund is occurring in both chapters without much explanation) (a) ` 1,50,000 (b) ` 1,00,000 (c) ` 50,000 (d) ` 20,000 Q.8 Match the following (1) Securities Transaction Tax

i. Deductible as business expenditure

(2) Additional depreciation for plant used for more than 180 days

ii. Section 44AD

(3) Depreciation on iii. 20% computers (4) Compensation received for vacating business place

iv. 40%

(5) Presumptive Tax

v. Capital Receipt

TAXMANN®

Q.1 When a company paid ` 5 lakhs to Indian Institute of Technology to carry on research in a field unrelated to the activity of the company, the amount eligible for deduction paid by way of donation would be. (a) ` 5,00,000 (100%) (b) ` 6,25,000 (125%) (c) ` 7,50,000 (150%) (d) ` 7,50,000 (150%) Q.2 The rate of depreciation for a block of assets consisting of buildings used as factory is (a) 2.5% (b) 5% (c) 10% (d) None of the above Q.3 Expenditure incurred by a businessman for ready to use software is entitled to benefit of (a) 15% as depreciation (b) 30% as depreciation (c) 60% as depreciation (d) 100% as revenue expenditure Q.4 The threshold exemption limit for Equalization levy is (a) ` 5 lakh (b) ` 3 lakh (c) ` 2 lakh (d) ` 1 lakh Q.5 Preliminary expenditure are allowed deduction in 10 equal instalments. (a) True (b) False

6.12

SECTION A : DIRECT TAXATION

Q.9 When a director of a company received 30 lakhs by way of noncompete fee, it is taxable under the head: (a) Salary of director (b) PGBP of director (c) Other Sources of director (d) None of these Q.10 In the hands of a manufacturer, factory building newly constructed is not eligible for additional depreciation. (a) True (suggested answer)

TAXMANN®

(b) False Q.11 When tax is not deducted at source on annual rent of ` 2 lakhs paid to landlord by a company, the amount liable for disallowance under section 40(a) (ia) is (a) Nil (b) ` 2,00,000

(c) Upto 3 (d) None of the above Q.15 When the gross receipts from profession exceed ` ________ lakhs, it is liable for audit under section 44AB and the provisions of section 44ADA will not apply (a) 50 (b) 25 (c) 100 (d) 20 Q.16 An expenditure, for which cash payment is made for a sum exceeding ` ________ on a single day is disallowed. (a) ` 20,000 (b) ` 1,00,000 (c) ` 10,000 (d) ` 50,000

Q.12 Cost of self-generated goodwill of business is deemed to be Nil.

Q.17 Where a part of the block of asset is sold for a price less than the opening W.D.V. plus cost of assets, if any, acquired during the year, the balance amount shall be treated as:

(a) True

(a) Terminal/balancing depreciation

(b) False

(b) None of the given options

Q.13 Additional depreciation on factory building for ` 30 lakhs, acquired by a manufacturer on 1st Dec. 2017 is

(c) W.D.V. for the purpose of charging current year deprecation

(c) ` 20,000 (d) ` 60,000

(d) short-term capital loss

(c) 40%

Q.18 Cash gift of ` 1,00,000 received from uncle’s son by a resident individual is taxable as income from other sources.

(d) Nil

(a) True

Q.14 Unabsorbed depreciation can be carried forward for ________ year

(b) False

(a) 25% (b) 30%

(a) Any number of (b) Upto 5

Q.19 Maintenance of specified books of accounts compulsory if gross receipts in all three preceding PY exceeds in case of persons carrying

6.13

CH. 6 : INCOME FROM PROFITS & GAINS OF BUSINESS & PROFESSION

Act 1961 has to be restricted to ___________ of the cost of the Project.

(a) ` 2,00,000

(a) 5%

(b) ` 20,000

(b) 15%

(c) ` 60,000

(c) 20%

(d) ` 1,50,000

(d) None of the above.

Q.20 Harish is proprietor of Harish & Co. who acquired a know-how for ` 12 Lakh on 15th July 2022. It was used for manufacture of a new product with effect from 1st January 2023. How much is the quantum of depreciation allowable on know-how for the assessment year 2024-25?

Q.23 Dr. Rao is a famous physician in Chennai. His gross receipt from profession was ` 48,40,000 for the previous year 2022-23. He wants to admit income under the applicable presumptive provision of Income-tax Act, 1961. How much must be admitted a income on presumptive basis?

(a) ` 4,80,000

(a) 24,20,000

(b) ` 3,00,000

(b) 7,26,000

(c) ` 2,40,000

(c) 2,90,400

(d) ` 1,50,000

(d) 3,87,200

Q.21 A surgeon (doctor) has aggregate annual receipt of ` 48 lakhs (` 20 lakhs through cash and rest through bank) for the year ended 31-03-2023. His presumptive income under section 44ADA is `

Q.24 Interest on capital of or loan from partner of a firm is allowed as deduction u/s 40(b) of the Income-tax Act, 1961 to the firm to the extent of:

[Dec. 2023]

(a) 18% p.a. or at the rate mentioned in partnership deed whichever is less.

(a) 20 Lakh (b) 24 Lakh

(b) 12% p.a. even if it is not mentioned in the partnership deed.

(c) 15 Lakh

(c) 12% p.a. or at the rate mentioned in partnership deed whichever is less.

(d) 28 Lakh Q.22 Preliminary expenses that can be amortized under the Income-tax

(d) 9% p.a. or at the rate mentioned in partnership deed whichever is less.

[Dec. 2023]

Answers 1.

(a)

2.

(c)

3.

8.

1-(i), 2-(iii), 3-(iv), 4-(v), 5-(ii)

9.

(b) 10. (b) 11. (b) 12. (a) 13. (d) 14. (a)

15.

(a)

16.

(c)

17.

(c)

22.

(a)

23. (b) 24.

(c)

(d)

4.

(d)

5.

(b)

6.

(a)

7.

(a)

18. (a) 19. (d) 20. (d) 21. (b)

TAXMANN®

on the profession of technical consultancy.

6.14

SECTION A : DIRECT TAXATION

PRACTICAL QUESTIONS Q.1 An assessee owns a light commercial vehicle for 8 months and 3 days, a medium goods vehicle for 11 months and another medium goods vehicle for 12 months during the previous year. Compute his profits from the three trucks in terms of Section 44 AE. [June 2013 (2 Marks) (Modified)] Ans.: A taxpayer who own not more than 10 goods carriage and is engaged in the business of plying, hiring and leasing of goods carriage, his income would be deemed to be ` 7,500 per good carriage per month. So, profit and gain of the assessee u/s 44AE would be: (7,500 × 9) + (7,500 × 11) + (7,500 × 12) = ` 2,40, 000.

Q.2 Sarath Ltd., engaged in manufacturing activity, acquired new plant for ` 30 crores in August 2023 which was put to use from 15-09-2023 Compute depreciation, additional depreciation under section 32(1)(iia) and investment allowance under section 32AC of the Income-tax Act, 1961 for the plant. Quantify the written down value of asset as it would be on 31-03-2024 [June 2015 (4 Marks) (Modified)] TAXMANN®

Ans.: Particulars Normal depreciation at 15% on ` 30 crores Additional depreciation at 20% on ` 30 crores Closing WDV = `30 crores – Depreciation – Additional depreciation [i.e. ` 30 crores – A – B] = ` (30 crores – 4.50 crores – 6 crores) Investment allowance under section 32AC at 15% on ` 30 crores

Amt. (` In lakhs) 450 600 1950 450

Note: Investment allowance under section 32AC will not reduce the block value of assets.

Q.3 Vivitha Pipes Ltd., set up a new unit for extension of its manufacturing activity. It incurred ` 45 lakhs towards preliminary expenses. The cost of the project is ` 600 lakhs and the amount of capital employed is ` 700 lakhs. Determine the amount eligible for amortization under section 35D and the period of amortization.

Ans.: Amortization of preliminary expenses Preliminary expenses are eligible for amortization in 5 equal annual installments.

In the case of company, 5% of the cost of the project or the capital employed shall be considered for computing the amount eligible for amortization.

5% of the cost of the project = ` 600 lakhs × 5% = ` 30 lakhs 5% of the capital employed = ` 700 lakhs × 5% = ` 35 lakhs Actual preliminary expenditure incurred = ` 45 lakhs. The assessee hence is eligible to amortise ` 35 lakhs under section 35D. Amount eligible for amortization for 5 years = ` 7 lakhs for each year.

CH. 6 : INCOME FROM PROFITS & GAINS OF BUSINESS & PROFESSION

6.15

Q.4 Mr. Ghosh established an undertaking in a notified backward area in the State of West Bengal. He invested ` 150 lakhs in June, 2023 towards acquisition of plant and machinery and was engaged in manufacturing activity. The regular rate of depreciation on such machineries is 15%.

Advise the maximum amount of deduction that Mr. Ghosh could avail by way of depreciation, additional depreciation and deduction under section 32AD of the Income-tax Act, 1961. State the closing WDV of the plant and machinery after such claim.

[June 2016 (4 Marks) (Modified)] Ans.: Computation of eligible depreciation u/s 32 Particulars Amt. (` In Lakhs) Value of plant and Machinery purchased in June 2023 (it is assumed 150 that P&M is used throughout the year) Normal Depreciation u/s 32(1) @ 15% (22.5) Additional Depreciation u/s 32(1) (ii a) [assuming that factory was (30) not set up during 2015 - 20] Closing WDV of Plant & Machinery as on 31-03-2024 97.5

Q.5 Express Shipping Inc., a foreign company operating its ships in Indian ports during the previous year 2023-24 had collected the revenue as follows: u Freight (including ` 40 lakhs collected in US dollar for the cargo booked for Pradeep Port from UK) - ` 200 lakhs u Demurrages - ` 40 lakhs u Handling charges - ` 20 lakhs The expenses of operating its fleet during the year for the Indian ports were ` 110 lakhs which includes an expense of ` 0.40 lakhs paid in cash to an agency.

Compute income of the company under the head ‘Profits and Gains from business or profession’ for Assessment Year 2024-25.

[Dec. 2016 (5 Marks) (Modified)] Ans.: Computation of Income from Business of Express Shipping Inc. Particulars Freight Demurrages ` 260 Lakhs Deemed Income 7.5 % of ` 260 lakhs ` 19.50 Lakhs

Amt. (` In Lakhs) ` 200 ` 40

TAXMANN®

Besides depreciation and additional depreciation, the assessee can claim 15% deduction under section 32AD for the investment in new plant and machinery in setting up an undertaking in notified backward area in the State of West Bengal. Therefore, he can claim 15% of the actual cost of plant and machinery being ` 22.50 lakhs. This is not deductible while computing the WDV. However, this amount will not go to reduce the written down value of the assets.

6.16

SECTION A : DIRECT TAXATION

Particulars Handling charges

Amt. (` In Lakhs) ` 20 260 ` 19.50 Lakhs

Total Deemed income 7.5% of ` 260 lakhs

Expenses are not allowed u/s 44 B Q.6 Gopi Industries furnishes you the following details: Particulars Machinery Computers Furniture WDV as on 01-04-2023 20,00,000 6,00,000 2,00,000 Purchased during the year and used for 4,00,000 1,00,000 40,000 more than 180 days Purchased and used w.e.f. 01-01-2024 1,00,000 2,00,000 20,000 Sold a group of assets on 01-03-2024 2,00,000 1,00,000 50,000

Compute depreciation allowable for the assessment year 2024-25. lgnore additional depreciation.

[June 2017 (6 Marks) (Modified)]

TAXMANN®

Ans.: Computation of Depreciation Allowable u/s 32(1) to Gopi Industries for A.Y. 2024-25 Particulars WDV u/s 43(6)

Asset (%age of Depreciation) (`) Machinery (15%)

Computers (40%)

Furniture (10%)

WDV as on 01-04-2023

20,00,000

6,00,000

2,00,000

Add: Purchased during the year and used for more than 180 days

4,00,000

1,00,000

40,000

Total [A]

24,00,000

7,00,000

2,40,000

Less: Sold during the year on 01-03-2024

(2,00,000)

(1,00,000)

(50,000)

Total [B]

22,00,000

6,00,000

1,90,000

Add: Purchased and used w.e.f. 01-01-2024

1,00,000

2,00,000

20,000

WDV as on 31-03-2024 before Depreciation [C]

23,00,000

8,00,000

2,10,000

(1) Depreciation on full rate for assets used for more than 180 days [B]

3,30,000

2,40,000

19,000

(2) Depreciation on ½ rate for assets purchased and used w.e.f. 01-01-2024

7,500

40,000

1,000

Total Depreciation for A.Y. 2024-25 [D]

3,37,500

2,80,000

20,000

WDV as on 31-03-2024 [C-D]

19,62,500

5,20,000

1,90,000

Direct & Indirect Taxation

(DITX | DT & IDT) | CRACKER AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE

: : : : : : :

PRIYANKA SAXENA TAXMANN FEBRUARY 2024 2024 EDITION 9789357786461 400 PAPERBACK

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This book is prepared exclusively for the Intermediate Level of Cost Accountancy Examination requirement. It covers the past exam questions & point-wise answers as per the new syllabus of ICMAI. The Present Publication is the 2024 Edition for the CMA Intermediate | New Syllabus | June 2024 Exams. This book is authored by CA CS CMA (Dr.) Priyanka Saxena, with the following noteworthy features: 

Strictly as per the New Syllabus of ICMAI



Coverage of the book concludes: 

All Past Exam Questions, including 

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Module-wise Solved Paper – Dec. 2023 (Suggested Answers)

Objective Questions 

MCQs

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Blanks

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True/False

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Short Sums

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Descriptive Questions

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Practical Problems

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[Introduction to Each Chapter] is included in the book covering the following: 

Definitions

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Concepts

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Formulas

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