Mid Term Examination, February 2016
B.A.LL.B. (HONS.)
SEMESTER VIII X
CLS-CORPORATE TAX (HONS.-I)
Max. Marks: 20 Max. Time: 1:30 Hrs.
Note: Answer any TWO questions out of three. All questions carry equal marks.
1. Mark Twain said that 'even the most settled things in this world may get unsettled later'. Slump Sale has also brought such slight twist in the tale of business and muddled the tax scenario. Do you agree with the statement? Explain the concept of Slump Sale and also focus on the situation prevailing Pre and Post-insertion of Section 50-B of Income Tax Act, 1961. (Marks 10)
2. One Direction Pvt. Ltd, a widely-held company, submits the following particulars for the previous year ending on March 31, 2015. Determine its tax liability for assessment year 2015-2016.
Profit from Manufacturing Activity in India
Rs.8,60,000
Royalty from the Bangladesh Government for use of its patent
Rs.2,50,000
Charitable Donation
Rs.50,000
Short-Term Capital Loss
Rs.50,000
Long -Term gains on sale
Rs.30,000
Carry Forward Loss under Profit and Gains of Business and Profession
Rs.1,00,000
Cash Assistance received from Indian Government against exports
Rs.3,00,000
Long Term Loss on sale of building in Previous Year 2013-2014
Rs.30,000
Section of the Income Tax Act, 1961 provides the test of Residence Status of Company in India but soon that test shall change. What is that change? Do you support that amendment in the given section which will be enforced from 1st April 2016? Give Reasons.
On the basis of new test, discuss that whether a Foreign Company "Logan Ltd" incorporated in USA with majority business in USA and Ireland; who arranges every year Board of Director meeting in 5 different countries- USA, UK, JAPAN, ITALY, and INDIA; will be taxed in India or not? (Marks 5×2=10)
3. Deadpool Ltd. is a Nidhi Company, whose shareholding has recently changed. Till April 2015 Ms. Duckling was holding 55% shares but now Mr. Harry is having majority shares that is 53% share and Ms. Duckling is left with 47% share. This change is neither due to gift nor due to death of any shareholder. Now company has to compute its tax liability for the previous year 2015-2016; so while calculating the same, company wants to set off some losses of Rupees 4 lakhs which were incurred on February 2015. Will they be allowed to do so? Give reasons with the help of legal provisions.
Section 115 JB of the Income Tax Act, 1961 in its Explanation 1 states "For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section as increased by— the amount of income-tax paid or payable, and the provision therefore; or…………………………………………………………………..if any amount referred to in clauses is debited to the profit and loss account "
What do you understand by this- increase of amount of income tax paid or payable in book profit with respect to Minimum Alternate Tax? What does this term "income tax" include? Explain in detail with the help required provisions. (Marks 5×2=10)