M.COM. (Semester II) (CBCS) Examination, 2017
TAXATION (Paper II)
Day Date: Friday, 21-04-2017 Max. Marks: 70
Time: 10.30 AM to 01.00 PM
N.B. All questions are compulsory.
Figures to the right indicate full marks.
Q.1 Select the correct answer from multiple options given. 14
A surcharge of on income tax is payable by:
Any company An Indian company 1
A domestic company
A domestic company provided its total income exceeds Rs. 1
crore but is less than 10 crores.
Tax on dividend is payable by
Any Indian company A Public Limited Company
A shareholder A Domestic Company
If the assessee is not satisfied with any order passed by the
Assessing officer, he can:
File appeal to commissioner of Income tax (Appeal)
Apply for revision to the CIT u/s 264
Either file appeal or apply for revision u/s 264
File appeal or apply for revision
Make application before CBDT
The order passed by the Commissioner of Income tax (Appeals)
should be communicated to:
Assessee
Commissioner of Income Tax who has jurisdicition over the
case
Both to the assessee and Commissioner of Income Tax
The assessee through Commissioner of Income Tax
In case of AOP/BOI, any salary, bonus, commission or
remuneration paid by AOP/BOI to its member shall:
Be allowed as deduction to the AOP/BOI while computing its
income
Not be allowed as deduction
Be allowed as deduction to the AOP/BOI while computing its
income subject to the limit prescribed u/s
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Where the total income of the AOP/BOI, whose none of the
members has income exceeding maximum exemption limit nor
any member is taxable at a rate higher than maximum marginal
rate, does not exceed Rs. 2,50,000:
Neither the AOP/BOI shall be liable to pay any tax nor shall the
share of profits of the member form AOP/BOI be included in
their respective total income.
Although the AOP/BOI shall not be liable to pay any tax but
the share of the profit of each member from AOP/BOI shall be
included in his total income
The AOP/BOI will be liable to tax at the maximum marginal
rate.
Income by way of interest or dividends derived by a cooperative
society other than a cooperative bank from its investments with
any other cooperative society is
Not liable for deduction u/s 80P
Eligible for deduction at 7.5% u/s
Eligible for deduction at 25% u/s
Eligible for deduction at 100% u/s
A cooperative society engaged in activities other than those
specified will be entitled for deduction u/s of:
Rs. 20,000 Rs. 50,000
Rs. 1,00,000 None of these
Return of income of assessment year 2015-16 is furnished on
16.8.2015. Intimation in respect of such assessment year must
be sent by:
31.03.2016
31.03.2017
31.03.2018
10) Income tax authority below the rank of Deputy Commissioner of
Income Tax:
Is appointed by the Central Board of Direct Taxes
May be appointed by the Board/Director General/Chief
Commissioner/ Director/ Commissioner if authorized by board
Is appointed only by the Central Government
11) The jurisdiction of the Assessing officer shall be in case of any
person:
Who is carrying on business or profession within the area
vested with him
Who is having place of residence with in that area
Who is carrying on business or profession or having place of
residence within that area
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12) Assessment made under section 143(1) is:
An intimation of assessment
Scrutiny assessment
Self assessment
Best judgment assessment
13) The Income Tax authority can conduct the survey:
Any time
Only during the hours at which the place of business or
profession is open for the conduct of such business or
profession
Between 10 A.M. and 6 P.M.
14) A foreign company is chargeable to income tax:
35%
40% surcharge education cess of
40% surcharge education cess of SHEC

40% surcharge ifs its total income exceeds Rs. 1
Crore but does not exceed Rs. 10 crore education cess of
SHEC 1%.
Q.2 Write short notes on any two from the following. 14
Provisions of Minimum Alternate Tax applicable to company
Deduction under section 80P for cooperative society
Powers of the Income Tax Officer
Procedure for rectification
Q.3 Sarvasakshi Consumer Co-operative Society furnishes the
following particulars of its income in respect of financial year
2014-15. You are required to work out the taxable income of the
co-operative society:
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Rs. Rs.
Income from business 1,25,000
Interest received on credit facility
extended to member societies 25,000
Interest on deposits with banks 5,000
Dividend on Investments:
Investments in shares of other
co-operative societies 2,000
Other investment 2,000
Income from letting of godown for
storage of commodities 10,000
Give reasons for you answer.
Explain in brief the provisions and procedure for filing of Appeals
under Income Tax Act, 1961.
07
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Q.4 Raghuvanshi Mills Pvt. Ltd. gives you a draft of its Profit and Loss
Account for the year ended 31.3.2015 showing a net profit of Rs. 9
lakhs. The following further information is also given.
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The company had imported machinery at a cost of Rs. 50
lakhs in 2013-14. Depreciation on the original cost at 10
percent on the straight line basis is provided in the accounts
(Rs. 5 Lakhs). The company obtained from the foreign
supplier Rs. 50,000 in 2013-14 by way of compensation for the
defective machinery supplied. This has been credited to a
reserve account. Provisions for depreciation on other assets in
the books are made on the same basis as provided in the
Income Tax Act.
ii) The Enforcement Directorate had detected that the company
had over invoiced imports of raw materials to the extent of Rs.
90,000. This sum had been spent by the Managing Director
during his business visit to the foreign country for personal
purpose.
iii) Professional charges included;
Rs. 2,000 being legal expenses incurred in connection
with criminal proceeding launched by the Income Tax
Department against the managing director for fabrication
of accounts in the case of a firm in which he is a partner.
ii) Rs. 7,500 paid to solicitors for attending income tax
appeals for 3 year before Income Tax Appellate
Tribunal.
iv) Advertisement expenses included (incurred in Jan, 2015)
Advertisement in Malaysia for exploring the possibilities
of export to that country Rs. 9,000.
ii) Payment to an advertising agent Rs. 4,000 in cash. The
payment is supported by proper voucher.
Interest payment included the following.
Rs. 1 lakh paid to depositors all of whom were
shareholders of the company on fixed deposits and Rs.
2 lakhs to a bank overdraft account.
ii) Rs. 3,000 paid by way of interest to a non-resident and
Rs. 10,000 paid as interest on fixed deposit from a
relative of the managing director without deduction of tax
at source.
iii) Rs. 5,000 paid to bank on loan taken for meeting income
tax liabilities.
vi) As per the payment of Bonus Act the bonus liability worked out
of Rs. 3 lakhs however, following past practice, the company
paid Rs. 4 lakhs, which worked out to 20 per cent of salaries of
staff.
vii)The Profit and Loss Account shows a credit of Rs. 5,000 for
dividend on 1.6.2014 from a company engaged in the
manufacture of cement. Dividend distributed by the
Raghivanshi Mills Pvt. Ltd. for the financial year 2014-15 on
1.10.2015 is Rs. 1,50,000.
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Compute the total income of the company for the purpose of making
provision for taxation for the above year. You need not compute the
tax. Please indicate in brief, the reasons for any adjustments that
you make in support of your computation.
OR
Q.4 Arihant Rock Cement Ltd., a domestic company in which public are
substantially interested, is engaged in the manufacture and sale of
cement. Its audited accounts for the year ended 31.3.2015 show a
net profit of Rs. 35,00,000. Examination of the accounts reveals that
the above profit was arrived at after taking into account the following
items of income and expenditure.
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Rs. Rs.
Dividend received from M Ltd. a domestic company
registered in April, 1980 and engaged exclusively in
the manufacture of paint. The assessee company
has declared dividend of Rs. 30,000. 50,000
ii) Expenditure incurred in connection with issue of
additional share capital in the year 20,000
iii) Interest of Rs. 3,50,000 debited to the Profit and Loss account is
made up as under:
Interest payable to debenture holders 30,000
Interest payable to XYZ Ltd. 40,000
Interest on fixed deposits received
from the members of the public 60,000
Interest to bank in respect of overdraft 2,20,000
3,50,000
iv) Penal interest paid to stat government for delay in
payment of cess 12,000
Expenditure on maintenance of guest house 35,000
vi) Legal charges include payment made to lawyer for
conducting the income tax proceedings before the
AO 8,000
vii)Depreciation debited to profit and loss account
(Depreciation allowable under the Income Tax Act
Rs. 7,45,000) 8,95,000
viii) Payment made to consultants for furnishing a
feasibility report regarding the setting up a new unit
in another state. 15,000
ix) Expenditure incurred on stamp duty etc. in
connection with issue of debentures in the year. 14,000
Donation to Prime Minister's National Relief Fund 25,000
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Compute the taxable income of the company for the assessment
year 2015-16 giving reason briefly for the various adjustments you
may wish to make to the net profit shown in the audited accounts.
Q.5 The profit and loss account of the AOP viz. M/s Tukaram and
Sakharam, sharing profit and losses in the ratio of 2:1 for the
previous year ending 31.3.2015 is as follows:
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Rs. Rs.
Cost of goods sold 63,67,500 Sales 76,14,000
Salary to Tukaram 2,70,000 Dividends 37,500
Salaly to Sakharam 1,80,000 Long-term capital
Salary to employees 4,05,000 gain 6,60,000
Interest to Tukaram 72,000
Interest to Sakharam 54,000
Other expenses 2,40,000
Sales tax outstanding 45,000
Net profit 6,78,000
83,11,500 83,11,500
Additional information is given below:
Other expenses include the following:
Entertainment expenses Rs. 50,000
Watches costing of Rs. 3,500 each given to 12 dealers who
exceeded the sales target fixed under sales promotion
scheme.
Employer's contribution to provident fund included in other
expenses, amounting to Rs. 16,000 was paid by cheque on
15.11.2015.
Rs. 50,000 paid in cash to an advertising agency.
Purchases included a sum of Rs. 1,00,000 being import made
from UK on which no tax at source was deducted.
Outstanding sales tax was paid on 3.9.2015
Other income of Tukaram and Sakharam being Rs. 4,11,000 and
Rs. 3,69,000 respectively.
You are required to compute total income and tax liability of AOP for
the assessment year 2015-16.
OR
The total income of an AOP for the previous year ending 31.3.2015 is
Rs. 9,00,000. It has 3 members i.e. Adams Plast Ltd. foreign
company) and two individuals Raghuveer and Ranveer. The share
of profit of the members from the AOP is not known. Compute the
tax payable by the AOP,
What will be your answer if all the members of AOP are individuals
and their shares are indeterminate?