Machhindra S. Murudkar.

Roll no. 520917620

Set 2

Marks 30

SUBJECT NAME: TAXATION MANAGEMENT

1. Mr. Alok is a practicing accountant. He also took 40

lectures in college at Rs. 100 per lecture. His receipt and
payment account is given below

Rs. Rs.
To bal b/d 9500 By office 2500
expenses 0
Audit fees 16000 Municipal taxes 600
0
Remuneration 4000 Personal 5000
lectures expenses
Examiner’s fees 1500 Membership 500
fees
Interest on 1550 LI Premium 3000
securities
Rent from LOP 3000 Scooter 4500
purchased 0
Royalty on book 6000 Scooter 6000
expenses
Balance c/d 185550
270650 270650

I. Office expenses include Rs. 1000 paid as typing charges for

preparing manuscript of his book.
II. ½ of the scooter expenses relate to personal use.
III. Scooter being P& M depreciation is allowed at per rate 15 %
IV. Interest of securities includes Rs. 774 being interest on tax
free government securities.

Answer:

Computation of total income of Mr. Alok is calculated below:

Receipt From Rs Rs
Profession
Add: (Fees +
Remuneration + Rent
from LOP + Royalty

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Machhindra S. Murudkar.
Roll no. 520917620

on book)
160000 + 4000 + 176050
1500 + 1550 + 3000
+ 6000
176050
Less: Admissible
Expenses
Office Expenses 25000
Personal Expenses +
(1/2 of scooter
expenses used as
personal expenses 8000
6000/2)
5000 + 3000
Scooter Purchased 45000
Scooter expenses –
personal usage
6000 – 3000 3000
Additional Office 1000
expenses
Scooter depreciation 6750
(15% of 45000)
88750
87300
Less: Deduction
under section 80c
Municipal Expenses 6000
Membership Fees 500
Premium 3000
9500
77800
Less: Incomes To
Be Treated
Separately
Interest On Govt. 974 974
Securities
76826

Therefore, Total Income of Mr. Alok is approximately Rs. 76,

826/-

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Machhindra S. Murudkar.
Roll no. 520917620

2. Enumerate at least 10 items which can be included under

the head ‘income from other sources’.

Answer:

Incomes chargeable under this head of income [Sec. 56(2)].

The following incomes shall be chargeable to income tax under the

head ‘Income Other Sources’:

Income from winnings from lotteries, crossword puzzles, races

including horse races, card games and other games of any short or
from gambling or betting of any form or nature whatsoever.

Any sum received by the assessee from his employees as

contributions to any provident fund or superannuating fund or any
fund set-up under Employees’ State Insurance Act, 1948 or any
other fund for the welfare of such employees, provided that it is not
chargeable under the head ‘ Profits and Gains of Business or
Profession’.

Income by way of interest on securities, if the income is not

chargeable to income tax under the head ‘Profits and Gains of
Business or Profession’.

Income from machinery, plant or furniture belonging to the

assessee and let on hire if the income is not chargeable to income
tax under the head ‘Profits and Gains of Business or Profession’.

Income of an assessee from letting on hire machinery, plant or

furniture belonging to him and also buildings, and the letting of the
buildings is inseparable from the letting of the said machinery, plant
or furniture, if it is not chargeable to income tax under the head
“profits and Gains of Business or Profession’. Income received under
a Keyman insurance policy including bonus on such policy if such
income is not chargeable to income tax under the head ‘Profit and
Gains of Business or Profession’ or under the head ‘Salaries’.

Dividend on Shares in Foreign Companies:

Any fees or commission received by an employee from a person

other than his employer.

• All interest including interest on securities.

• Income of a tenant from subletting.

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Machhindra S. Murudkar.
Roll no. 520917620

• Director’s fees. Rent of land not appurtenant to buildings.

Agricultural income from land situated outside India.
• Income from markets, ferries, fisheries etc.
• Income from leasehold properties.
• Remunerations for writing articles in Journals.
• Income from undisclosed sources (unexplained investments,
unexplained money, unexplained expenditure etc.).
• Interest on employees own contribution to URPF.
• Casual income.
• Salary of M.P, M.L.A., M.L.C.

Interest received on securities of co-operative society. Family

pension received by the widow and heirs of deceased employee
(Standard deduction permissible in respect of family pension is Rs.
15,000 or 1/3 of such pension whichever is less)

Director’s Commission for underwriting shares of a new company,

Insurance Commission not chargeable under the head ‘business or
profession’.

Any sum of money exceeding Rs. 25,000 (Rs. 50,000 on or after

01-04-2006) received without consideration by an individual or a
HUF from any person, the whole of such sum is taxable under this
head.

But it does not apply to any sum of money received:

(a) from a relative; or

(b)under a will or by way of inheritance; or
(c) on the occasion of the marriage of the individual; or
(d)in contemplation of death of the payer

For this purpose relative means:

i. spouse of the individual;

ii. brother or sister of the individual;
iii. brother or sister of the spouse of the individual;
iv. brother or sister of either of the parents of the individual;
v. any lineal ascendant or descendant of the individual; and
of the spouse also
vi. spouse of the person referred to in (i) to (v)

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Machhindra S. Murudkar.
Roll no. 520917620

3. How tax liability of a company is computed?

Answer:

The assessment of Companies to compute tax liability is done as

mentioned below:

Computation of Total Income of a company

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Machhindra S. Murudkar.
Roll no. 520917620

Computation of Tax Liability of a Company

Therefore tax liability of the company is (A) or (B)

whichever is more

Tax Rates Percenta

ge
STCG on equity/ units of Equity Oriented funds where STT is 10
applicable
15
For A Y 2008-09
20
For A Y 2009-10
30

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Machhindra S. Murudkar.
Roll no. 520917620

Tax on LTCG 30

Tax on casual Income 40

Tax on Any other income:

a) Domestic Company

b) Foreign company

Surcharge: at 10% for domestic companies and at 2.5% for

foreign company (if the income is likely to exceed Rs. 1
crore)

For the above ( Tax + surcharge) add: 3% Education

cess (always)

Special provisions for payment of tax by certain

companies or Minimum Alternative Tax (w.e.f. A.Y. 2001-
02)

Where in the case of company the income-tax payable on its

total income in respect of any previous year relevant to
assessment year is less than 10% (plus surcharge, if any +
Education cess) of its book profit, such book-profit shall be
deemed to be the total income and the tax payable on such total
income shall be the amount of income-tax @ 10% (plus
surcharge, if any + Education cess) of such book profit.

MAT (see 115 JB): under this tax payable by a company for any
A.Y. cannot be less than 10% of book profit

To compute tax as Provisions of MAT:

(A) Find out Normal Tax Liability (ignoring MAT)

(B) MAT

1. Find out Book Profit

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Machhindra S. Murudkar.
Roll no. 520917620

2. Find out MAT Tax at 10%

If (A) is more MAT is not applicable

If (B) is more MAT is applicable

Points to be kept in mind while computing the profit

The profit and loss account shall be prepared in accordance with

the provisions of Parts II and III of Schedule VI to the Companies
Act, 1956.

Other Provisions:

The company shall furnish a report of Chartered Accountant in

the prescribed form certifying that the book profit has been
computed in accordance with the provisions of this section. The
report shall be furnished along with the return of income.