Salary

1. Determine the taxability of following perquisites

(1) Electricity bills of employee met by employer
(2) Employer gives free gas, water to employee
(3) Employee allowed to use motor car of Employer
(4) Housing loan (15 years) provided to employee @ 4% Interest
(5) Employees credit card payment met by employer

2. Mr. Anu was absorbed by Exim Ltd on 01.11.2007 on or monthly salary of Rs. 15,000.
On 01.10.2007 he is paid Rs. 40,000 as lump sum upon terms that he shall not join for
employment elsewhere. determine gross salary.

3. R retire after rendering service for 20 years. He receives Rs.3, 80,000 gratuity upon
retirement. His last drawn salary is RS. 4000 P.M. While average salary is Rs.3,800 PM.
Determine exemption for gratuity is he was a
(i) Govt. Employee
(ii) Employee covered under payment of gratuity Act
(iii) Non Govt. Employee not covered under payment of gratuity Act.

4. X a govt. employee gives following particulars of salary determine taxable salary.

Basic- 6000 PM, DA-2000 PM, Entertainment Allowance 700 PM, Employment Tax paid
–1000 .

5. D a govt. employee receives Rs.15,000 as entertainment allowance from employer out

of which he spends RS.4000 for official purpose Rs. 6000 for personal purpose. Balance
is not spent at all. Determine taxable entertainment allowance if basic salary is RS
100000.

6.Mr.K retire from Govt Service on 31.12.2007. He was drawing a salary of Rs. 6000 PM
and DA Rs.1500 PM , on retirement he is paid gratuity Rs.1,50,000. He is also entitled
for a pension of Rs. 2000 PM, Compute taxable salary.

7.Mr.A retire from employment. He was drawing pay as under-Basic: Rs.2500 PM – DA

in terms of employment Rs. 1500 PM. He receives Rs. 1,25,000 as gratuity. He had
served for 20 years and 7 months. Determine his income from salary assuming he
retires on 31.12.2007.

8.Suppose in Q (7) if he served for 20 years and 5 months what will be your answer.

9.Suppose in Q (7) if he is not covered under payment of gratuity Act what will be your
answer. Average salary PM may be taken as Rs.3600.

10. (a) on 31.12.2007 X retire from Govt service. He is entitled to a pension of Rs.4500
PM. On 28.02.08, 2/3rd of pension is surrendered and he receives lump sum amount of Rs.
1,80,000. Compute taxable pension.
(b) What will be your answer if he is a non-Govt. Employee not in receipt of gratuity

11. (a) X a Govt employee receives Rs.80,000 as encashment of leave to his credit at
the time of his retirement. His last drawn salary is RS.3000 PM. While average salary
is Rs2,800 PM. He has rendered service of 20 years and 9 months. He has taken
11months leave while in service. Determine exemption for leave salary.
(b) What will be your answer if X is a non-Govt. employee.

12.X is an employee of EM Ltd. He retires on 31.08.2007 after rendering service for

20 years. As per the terms of employer he is eligible for 1 ½ months leave for every
completed year of service. Leave to his credit is accordingly 14 months which is
encashed for Rs. 2,80,000. Average salary may be taken as Rs. 20,000 PM.

13.Mr.Albert retires from service after rendering service for 20 years and is paid Rs.
6,00,000 as compensation under VRS. His last drawn salary detail is as under.
Basic-12000 PM, - DA (not in terms of employment)-4000 PM
Determine taxable VRS compensation

14.(a). Raj resides at Banglore is drawing following salary. Basic-14,000 pm. Da-
6000 pm, Commission (as a percentage of Turnover achieved by him) 4%. Turnover
achieved is Rs.20 lacs, HRA-2000 p m (Rent paid by him Rs.4,500 pm). Determine
taxable salary.
(b). What will be your answer if he resides at Delhi.

15.John who resides at Nagpur gets monthly emoluments from two employers. ---X
Ltd from April-July 2007 and -- of Y Ltd from August 2007 to March 2008.

XLTD YLTD
Basic Salary pm 2200 2800
DA 600 900
HRA 1000 1400
Commission as a % of
Turnover pa NIL 3000

Rent paid by him during the year is 1800 p.m. Calculate taxable HRA.

16.Rohan is in receipt of following allowances. Determine the

taxable amount of allowance:

1. Helper allowance Rs.300 pm. Rohan has an helper for 7

months to whom he paid Rs.180 p.m.
2. Conveyance allowance Rs.1800 p.m. Total monthly expenses
amount to Rs.1400 of which 50% is for office use.
3. Education allowance Rs.150 p.m. each for his 3 children.
4. Entertainment allowance Rs.1000 pm.
5. Uniform allowance Rs, 800 pm. Actual amount spent Rs.300pm
 6. Hostel expenditure allowance Rs.400 pm for each of his 3
children.

17.Mr.Albert residing at Nagpur receives following; Basic Salary Rs.10,000 pm

DA in Terms of Employment Rs.4000 pm
Entertainment Allowance Rs.1000 pm
HRA 1200 pm (Rent paid pm Rs.3000)
Transport Allowance Rs.2000 pm
Education and Hostel Expenditure allowance Rs.500 pm for each of his
three children. Determine taxable salary.

18.Following expenses incurred for Medical treatment of Mr.A was reimbursed by

employer. Treatment was done in USA.
(I). Medical Treatment Rs.1,20,000 (permitted by RBI 100000)
(ii). Stay Expenses Rs.75,000 (Permitted by RBI 40000)
(iii). Travelling Expenses Rs.1,00,000
Determine taxable Medical parquisite if salary income before including
any perk in connected with Medical perk is
(a). Rs.1,20,000
(b). Rs. 1,55,000
Mr. A do not have income chargeble under any other head.

19. (a). Determine taxable salary from following

(1). Basic salary-4500 pm (2) DA (50% in terms of employment)-
3000 pm (3) Bonus-Rs.20,000 (4) special allowance-1000 pm
Conveyance Allowance-Rs.2000 pm. Rent free accomodation at
Jaipur.
. (b). What will be your answer if accomodation is hired by the
employer and rent paid by employer is Rs.20,000 p.a.
. ( c). What will be your answer if rent paid by employer is
Rs.50,000 p.a (instead of Rs.20,000 p.a.)

20. Calculate the value of furnished accomodation

Basic 5000 pm DA 2000 pm Bonus 2 months Basic
Special allowance 500 pm. Rent-free accomodation at Delhi.
Value of furniture provided at employes residence:
(a). Own furniture of employer WDV 10000 (original cost 40000)
(b). Furniture hired by employer monthly hire charges Rs.1000. No amount is
recovered from employee.
21. In the above question what will be your answer if Rs.12000 is
recovered towards rent from employee.
22. What will be your answer if Rs.48000 is recovered towards rent of accomodation
from employee
23. Determine the taxability of following perquisites.
(i). Free education facility for two children. Reasonable cost of education in
the area is Rs.1500 p.m. per child.
 (ii). If in the above case Rs.750 p.m. per child is recovered what will be the
perk.
(iii). Motor Car purchased on 01.07.2004 for Rs.2,50,000 sold to employee on
17.06.2007 for Rs.1,10,000.
(iv). What will be the answer if above asset sold is furniture.
(v). What will be the answer if above asset sold is Computer
(vi). Employee is allowed to use one Video Camera belonging to employer
(Cost of which is Rs.90000).
(vii). Employee is provided at his house with one computer owned by
employer (original cost of Rs.30,000)
24. Determine salary income of Mr.N.
(1). Basic 20000 p.m.employers contribution to RPF 3500 pm. HRA 2000 pm
(Rent paid Rs.4500 p.m.) Conveyance Allowance Rs.1000 pm. Credit Card expenses
Rs.15000 met by employer. He is provided with free service of gardener and watchman.
Salary for each one of them is Rs.1000 p.m. Interest credited to RPF @ 13% is 13000
p.a. Medical bills reimbursed by employer is 18000 p.a. He also availed leave travel
concession of Rs.10,000. He was allowed to use one invertor costing Rs.10,000 and
Laptop costing Rs.50000 which was owned by employer.

25. From the following calculate taxable salary of Mr.A who is given two
options.
Option 1 Option 2
Basic Salary (pa) 66000 66000
HRA (pa)(rent paid RS12,000) 18000 NIL
Rent free accommodation NIL YES
Conveyance Allowance (pa) -- 18000
Free Transport Facility YES NIL
Free Gas,Water,Electricity
(Cost 6000 pa) YES NO
Above bills in the name of
Employee but paid by
employer) NO YES
Free education facility for
Two children (Cost per
Child to employer is
Rs.9000 pa) YES NO
Education allowance per child
Per month for two
Children) 200 p.m.
Advice him as to which option is beneficial.
INCOME FROM HOUSE PROPERTY

1. Determine GAV in following cases.

(a). Fair Rent-60,000, Municipal Valuation-65,000, Standard Rent-48,000,
Rent received-4500 p.m.

(b). Fair Rent-68,000, Municipal Valuation-60,000, Standard Rent-70,000,

Rent Received-5,500 p.m.
(c ). Fair Rent-70,000, Municipal Valuation-72,000, Actual Rent-6,500
p.m. But property vacant for 2 months.

(d). Fair Rent-75,000, Standard Rent-70,000, Actual Rent-5,500 pm But

property vacant for 4 months.

(e). Fair Rent-75,000, Municipal Valuation-60,000, Actual Rent-7,600

p.m. But 2 months rent is unrealized (Rules 4 condition satisfied)

(f). Fair rent-60,000, Municipal Valuation-55,000, Actual Rent-

6,000 p.m. But 3 months rent unrealized (Rule 4 condition satisfied)

(g). Suppose in (F) rule 4 condition is not satisfied. What will be the
answer

2. Determine Income from House Property

Fair rent- 60,000, Municipal Valuation- 56,000, Actual Rent- 6000 PM. property vacant
for 1 month. Municipal taxes (a) paid-4000
(b) Payable-2000
Repairs-4000, Insurance premium paid-2000. Interest on loan Rs.14,000

3. Mr. X owns two houses, which he uses for residential purpose. He give following
particulars
House 1 House 2
Fair Rent 50,000 45,000
Municipal value 48,000 50,000
Standard Rent 45,000 40,000
Municipal Tax 10% 8%
Repairs 2,000 1,000
Interest on loan 50,0000 10,000
(loan taken on 31.03.1999)

4. (a) Mr.X has a property whose fair rent is 2,00,000/- monthly rent is 25,000 PM. But
he could not realize 3 months rent (Rule 4 satisfied). What is the concession
available ?.
What will be the position if the rent is subsequently realized.
(b) Will there be any difference in your answer if actual monthly rent is 20,000 PM
(instead of Rs.25,000 PM)
( c ) Also advice whether if any legal expenses is incurred for recovery of rent will it be
admissible.
5. Determine pre construction interest from following. date of loan-01.05.2004.
Amount of loan – Ten lakhs @ 12% interest.
Date of completion of construction – 27.02.2008 . No repayment of loan made. Also
determine deduction for interest on Housing loan for previous year 2007-08 if
the House is self occupied

6. Determine Income from House Property:

Fair Rent – 40,000, Municipal valuation-42,000 Actual Rent-Rs. 4000 PM from
June 2007to December 2007. After that it is self occupied. For the month of
April and May 2007 the property is vacant. Interest on capital borrowed for
repairs is RS. 35,000. Municipal tax paid by Tenant is Rs. 2000. Tenant has also
done repairs of RS. 4000

7. Determine Income from House Property:

Fair Rent-45,000, Actual Rent-Rs.4000 PM (one month rent is unrealized . Rule 4 not
satisfied) . Municipal tax paid –Rs.2000. Interest on loan- 20,000. During the year he
received arrears of rent relating to Financial Year 2001-02 RS. 10,000 which was not
taxed earlier. He also received unrealized rent Rs.15,000 relating to FY 2002-03 (Total
unrealized rent of that year was Rs.20,000 but assessing officer allowed deduction for
only Rs.10,000). Legal expenses incurred for the same is Rs.2000.
INCOME FROM BUSINESS OR PROFESSION

1. From the following calculate depreciation eligible for the previous year . Rate
of depreciation is 15%

Block A – WDV on 01.04.2007(2 Assets) 1,00,000

Addition 11.08.2007 (1 Asset) 60,000
Addition 01.02.2008 (1 Asset) 40,000

Sale of Asset (3 Assets) on 01.01.2008 for Rs. 80,000

2. From the following determine depreciation for previous year. Rate of

depreciation is 30%.

Assets of Block
WDV on 01.04.2007
Motor Taxi-A 1,00,000
Motor Taxi-B 60,000

Additions
Motor Taxi – C on 01.07.2007 70,000
Motor Taxi - D on 01.01.2008 80,000
On 01.02.2008 Motor Taxi A is sold for 60,000

3. What will be your answer if Motor Taxi A & B were both sold for
Rs.1,00,000.

4. What will be your answer if asset sold was Motor Taxi C for Rs.80,000

5. What will be your answer if asset sold were Motor Taxi A, B & C for total
Rs.2,00,000

6. What will be your answer if asset sold was Motor Taxi D for Rs.1,00,000

7. What will be your answer if asset sold was Motor Taxi D for Rs.60,000
8. A power sector company was eligible for straight-line method of charging
depreciation. Original cost of asset was Rs.12 lakhs. Value after depreciation
was Rs.8 lakhs. Determine the treatment if the asset is sold for
a). Rs.5 Lakhs
b). Rs.10 Lakhs
c). Rs.13 Lakhs

9. Mr. Z was having a sole proprietary concern on 01.04.2007 the WDV of asset was
Rs.2,00,000. On 31.08.2007 the concern was converted into company. After that
conversion the company purchased a new asset on 01.01.2008 for Rs.1,60,000.
The rate of depreciation may be taken as 15%. Determine the eligibility of
depreciation for 2007-2008.

10. Mr. A owns a house property purchased by him on 01.01.2003 for

Rs.12,00,000. This was used for own residence on 01.06.2007 this was
brought into use for locating business. What will be the eligible depreciation
for financial year 2007-2008. Rate of depreciation may be taken as 10%.
11. A Motor car was purchases by Mr.Zen on 01.06.2003 for Rs.3 lakhs, which was used
for Private purpose. On 01.01.2008 this was introduced as asset into his proprietory
business. Determine eligible depreciation for FY 2007-08. Assuming rate of
depreciation a 15%.

12. A company engaged in manufacture of articles gives following data

about its assets

WDV on 01.04.2007 - 200 Lakhs

Additions on 01.07.2007 - 100 Lakhs
Additions on 31.12.2007 - 120 Lakhs (including second
hand asset purchased for Rs.20 lakhs)
The asset is eligible for 15% depreciation. Calculate the eligible depreciation
for 2007-08.
13. A Pharmaceutical company incurs following expenses-
for scientific research.

(i). Revenue Expenses - 20 Lakhs

(ii). Purchase of Land - 5 Lakhs
(iii). Purchase of Machinery - 10 Lakhs
determine deduction u/s 35
14. A company had acquired a capital asset for Rs.2 lakhs and claimed
weighted deduction for same u/s.35. The asset was subsequently sold for
Rs.3.50 lakhs. Determine tax treatment on the sale.

15. Network Ltd acquired in 2004-2005 license to operate telecom

Network for 10 years by paying Rs.100 lakhs license fees. Examine the
deduction available for 2007-08.
a). What will your answer if part of the license is sold on
 01.10.2007 for Rs.40 lakhs
b). What will be your answer if full license is sold on 10.10.2007
for Rs.40 Lakhs.
c). What will be your answer if part/full license is sold on
01.10.2007 for Rs.80 lakhs
d). What will be your answer if part/full license is sold on
01.10.2007 for Rs,110 lakhs
16. Compute deduction admissible under section 35 D for M/s.Excel Ltd
from following data :
a). Cost of Project Rs.600 Lakhs
b). Capital Employment Rs.680 Lakhs
c). Preliminary Expenses Rs.35 Lakhs
What will be your answer if M/s.Excel is a partnership Firm.

17. Determine the consequences of following transactions.

1. Provisions for gratuity in books of accounts Rs.1,50,000
2. Purchases paid by cash Rs.1,00,000
3. Income Tax paid debited in Profit and Loss Account Rs.1,00,000
4. Sales Tax Rs.20,000 provided in books of accounts
5. Electricity Charges Rs.30,000 paid in Cash.
6. A sum of Rs.1,40,000 was paid for acquiring knowhow on 01.11.2007

18. A partnership is dissolved on 31.03.2008. On that date it held stock,

cost of which is Rs.3,00,000 (market value is Rs. 4 lakhs) partners
value the stock at Rs.3,00,000. is it correct.

19. Net profit of the Partnership Firm is Rs.2,00,000. This is after debiting
eligible expenses and following allowances to partners.

1. Interest on Capital @ 15% 1,50,000

2. Remuneration to Partners 3,00,000
Determine Book Profit and eligible remuneration.

20. Mr.Ajay is a professional. His gross receipt from profession is as under

2003-2004 - 1,00,000
2004-2005 - 1,40,000
2005-2006 - 1,75,000
2006-2007 - 1,60,000
2007-2008 - 1,56,000
is he required to maintain books of accounts. if so what are the books?

21. Mr.Z furnishes following particulars . Determine Business Income

1. Retail trade in Garments: (Turnover Rs.26,00,000)

Profit as per Books: Rs.60,000
2. Income from plying of 6 medium vehicle
 (Computed as per Books) : Rs.2,20,000
3. Unabsorbed depreciation: Rs.1,00,000
Will your answer be different if no books of accounts are maintained?

22. Mr. X Furnishes following Information

PROFIT AND LOSS ACCOUNT 31.03.2008
To Office Expenses 39,000 By Gross Profit 3,06,000
“ Salary 24,000 “ Sy. Reciepts 48,000
“ Depreciation 15,000
“ Travelling Expenses 9,000
“ Loss of cash on theft by
Employee 6,000
“ Transfer to reserves 4,000
“ Festival Gifts 10,000
“ Interest & Legal Expenses 47,000
“ P.F 10,000
“ Sy. Expenses 20,000
“ Deposit under OYT
Scheme for Telephone 20,000
“ N/P 1,50,000
------------
--------------- Total 3,44,000 Total
3,44,000
======= ======
1) Office expenses include Rs.21,000/- being single payment in cash
2) Salary include fees RS.8000/- paid to Non resident. No tax is deducted
3) Depreciation is charged at rate fixed by X. But he gives following information about
assets.
i) FIXTURE WDV 01.04.07 10,000
ii) PLANT WDV 01.04.07 20,000 addition 01.08.07-
30,000, addition 07.11.07- 20,000
iii) Type writer with WDV Rs. 500 is sold for Rs.300. Not
considered in depreciation already charged
iv) Motor car WDV 01.04.07 1,00,000. 1/4th use of car is
for X ‘s personal purpose
4) Travel Expenses include hotel expenses of employee, 2000 meant for official Tour
5) Interest and legal expenses include;
a) Bank interest Rs.21,000 paid in cash
b) Legal expenses paid in cash Rs. 26,000 to a relative which is
unreasonable to the extent of RS. 8000
6) Sundry Expenses include following family promotion expenses incurred for employee.
a) Revenue nature Rs. 5000
b) capital Expenditure Rs. 10000
7) PF include PF (Employer share) payable Rs.2000. as on 31.03.2008 which is paid as
under
a) 01.07.2008 – 500
 b) 06.09.2008 – 1500
Determine income from business. Due date of filing return is 31.07.2008.

23. Mr.A is a manufacturer. He give following profit and loss account for the year ended
on 31.03.2008 (Rs. In lakhs)
To Cost of Production 140 By Sales 240
“ G/P 100
---- ----
240 240
=== ===
To Salaries 40 By G/p 100
“ Contribution scientific
Research 8 ” Dividend 10
“ Purchases of Know-how 20 ” Rent Received 2
“ Sales Tax 2 ” Net Loss 11
“ Interest on term loan 14
“ Repairs 2
“ Preliminary Expenses
Incurred 10
“ Depreciation 10
“ Provision for Gratuity 10
“ Income Tax 5
“ Banking cash transaction
Tax paid 2
----- -------
123 123
=== =====

Additional Information
1. while determining cost of production, closing stock was under valued by RS. 10 lakhs.
2. Know how purchased on 1.08.2007 was put to use on 01.12.2007
3. Salary include Rs. 50,000 paid to Mrs.A. She does not render any service in business.
4. Cost of production include goods worth Rs. 2,00,000 lakhs purchased by paying cash.
5. Sales tax Rs.2 lakhs include Rs. 50,000 sales tax in dispute provided
6. Interest on term loan Rs. 14 lakhs include Rs. 10 lakhs interest payable which is met as
under.
1. Rs. 4 lakhs paid on 01.06.2008
2. Rs. 2 lakhs paid on 01.11.2008
3. Rs. 4 lakhs was converted by bank into term loan
on 11.06.2008
7. Details assets on which depreciation is charged is given below.
Plant & Machinery : WDV on 01.04.2007 – 40 lakhs
Addition to plant on 01.06.2007 – 20 lakhs
Addition to plant on 30.11.2007- 10 lakhs

24. Mr.Ajay is a lawyer. He gives his receipts and payments account as on 31.03.2008.
Receipts Payments

To Balance c/d 10,000 By Rent paid 30,000

“ Professional Receipts 7,20,000 “ Salary 3,60,000
“ Interest Received 20,000 “ Telephone Expenses 18,000
“ Stationery 6,000
“ Stipend 24,000
“ Municipal Taxes 12,000
“ Bank Charges 1,000
“ Deposit into Bank 2,00,000
“ Income Tax paid 2,000
“ Repairs 40,000
“ Travelling Expenses 42,000
“ Journal & Subscription 6,000
“ Balance c/d 9,000
----------- -------------
7,50,000 7,50,000

======= =======
(i) Salary include salary paid to Mrs. Ajay who is a senior Advocate Rs. 48,000.
(2) Stipend is paid to Advocate Trainees in the office
(3) Travelling Expenses include Rs. 30,000 being single payment in cash
(4) Municipal Tax include Rs. 3,000 paid towards tax of own residence
(5) Ajay owns a car . WDV on 01.04.2007 is RS. 1,80,000 25% of car is used for personal
purpose.
(6) Repairs include car repairs & running expenses RS. 30,000.
(7).Ravi a client of Mr. Ajay gave him Rs. 10,000 in appreciation of service. This is not
included in professional charges.
(8) Telephone expenses include mobile bills of his son who is studying for LLB Rs. 3000.

CAPITAL GAINS
1. Determine Capital gains on Sale of land
Cost of Acquisition – Rs. 1,00,000 on 17.02.2001
Expenses on acquisition - RS. 10, 000
Improvement to land on 27.04.2003- 2,00,000
Sale of land on 11.11.2007 for Rs. 9,20, 000
Brokerage on sale – RS. 20,000

2. “A” purchases a land on 01.06.1978 for Rs. 50, 000. FMV of land on 01.04.1981 is
RS. 1,00, 000. This land is gifted to his son “X” on 01.09.2000. Subsequently X sells the
land on 31.11.2007. Determine who will be taxable for capital gains. Also determine
taxable capital gains.
3. Mr. “Z” purchases a land on 01.07.1998 for Rs. 2,00, 000 on 10.08.2002. he started
real estate business and introduced this land into business. Fair market value as on the
date of conversion into stock in trade was Rs. 3,20,000. Subsequently the land is sold for
RS. 5 lakhs after incurring development expenses of Rs. 50, 000. Determine taxable
capital gains.

4. Mr. “X” purchase convertible debentures on 01.04.1998 for Rs. 6,00,000 on 01.10.2004 the
same is converted into shares. FMV as on the date of conversion was RS.7,20,000. Subsequently
the entire shares were sold on 11.11.2007 for Rs. 8,50,000. Determine Capital gains.

5. Govt. compulsorily acquired a plot of land owned by Mr. X on 10.04.2004 compensation was
fixed at Rs. 4,00, 000 and was paid on 17.01.2008. Mr. X had purchased this property on
01.07.2000 Rs. 1,20,000. Determine taxable capital gains. Also determine the year in which it
will be taxable.

6. Zakeer purchased a plot of land on 01.07.1990 for Rs.1,00,000. This was compulsorily
acquired by govt. on 01.06.2004. compensation was fixed at Rs.400,000 and paid in 01.05.2007.
Not satisfied with the amount zakeer filed a suit and additional compensation of Rs. 200,000 was
paid on 02.04.2008. He also incurred Rs. 10,000 towards expenses on filing suit for enhanced
compensation. Determine taxability of compensation.

7. Agricultural land owned by Mr.X was compulsorily acquired by Govt. on 01.10.2004. X had
acquired this land on 01.08.2000 for Rs. 1,00,000. Compensation RS 4,00,000 was received on
31-12-2007. what is the taxable compensation?. What will be your answer if agricultural land is
located out side specified area.

8. Mr. A acquired 2000 shares listed in recognized stock exchange on 01.04.2000 for Rs.200000.
The above shares were fully sold on 01.10.2007 through NSE. Security transaction tax deducted
is Rs. 1800. Determine the taxability of capital gains. What will be the tax treatment if date of
acquisition was 01.04.2007 instead of 01.04.2000.
9. Mr. Arun acquires listed Government security for Rs. 1,50,000 on 31.03.2000. This was sold on
01.01.2008 for Rs. 4,10,000. Expenses on transfer is Rs. 10,000. Determine taxable capital gain.

10. Mr. Mehta was admitted as partner on 01.04.2007. He contribute land purchased by him in
June 1997 for Rs. 1,50,000 as his capital. Fair market value as on april 2006 is Rs. 4,00,000
while value as recorded in the books of accounts was Rs. 4,50,000. Determine taxability of
capital gain.
What will be your answer is subsequently firm was dissolved on 31.01.2008 and the land was
transferred to another partner Mr.shan. Whose capital balance as on 31.01.2008 was Rs. 500,
000. While FMV of land same date was Rs. 6, 00, 000.

11. Mr. A purchases a plot of land for Rs. 14 lakhs on 01.05.1999. Expenditure on purchase was
Rs. 1 lakhs. The plot of land was sold for Rs. 20 lakhs on 01.05.2007. Mr. A purchases a
residential flat on 01.04.2007 for Rs. 10 lakhs. Determine taxable capital gains.

12. Mr. A purchases a house on 01.04.1998 for Rs. 2,00,000. He incurrs Rs.1,00,000 for
improvement of house on 31.08.2003. He sells the house on 01.09.2007 for Rs. 12,00,000.
Brokerage on transfer is Rs. 50,000. He purchases a residential house for Rs.6 lakhs on
31.03.2007. Determine taxable capital gains.
13. Mr. Siva inherits an agricultural land on 01.07.1999. This was acquired by his father on
01.08.1977 for Rs. 20,000. FMV as on 01.04.1981 is Rs. 200,000. Mr. Siva sells this land on
31.05.2007 for Rs.12,00,000. Determine taxable capital gain. What is the time limit available if
any for claiming exemption. What are the exemption available?. If capital gain is invested in
rural agricultural land can he enjoy exemption?. How is unutilized amount to be
invested?.

14. Mr. Amar sold a vacant land on 31.05.2007 for Rs. 7,00,000. But the govt. has fixed
Rs.7,50,000 as value for stamp duty purpose. No dispute is raised by Amar against this
value. Amar had originally purchased this land on 01.01.1997 for Rs. 2,00,000.
Determine taxable capital gain.

15. Mr. Athil acquires a flat on 01.08.2000for Rs 200,000. He enter into an agreement
to sell the flat on 01.06.2004 to Mr. Akshay for Rs. 4 lakhs and receives 20% as advance
money. But the sale did not materialize and the advance was forfeited . Ultimately the
land was sold on 28.08.2076 to Mr.Vishal for Rs.6,00,000. Determine taxable capital
gain.

16. Mr. A is the holder of 1000 convertible debentures acquired by him on 01.04.2000
for Rs.10 per debentures. on 31.07.2007 the company gave an option to redeem the
debentures for 60 per debentures or to convert the debentures into equal number shares
of Rs. 50 each. What will be the tax implication if.
(a) Debentures are redeemed @ Rs. 60/- each
(b) Debentures are converted into shares

17. P is a share holder of ABC Ltd. Where he holds 2000 shares of Rs. 10 each. The
company makes a rights issue where in Mr. P is eligible for 2000 shares @ Rs. 22 each
while public issue rate is 66 per share. Mr. P renounces his right in favour of Mr. X . For
which he receive a consideration of Rs. 20 per share. Determine the taxability of right of
renunciation . Also determine cost of acquisition per share to Mr. X.

18. Mr. Diwan had jewellery purchased by him on 01.07.1991 for Rs. 2,00,000. This was
sold on 18.09.2007 for Rs. 10,20,000. Expenses on sale was Rs. 20,000. He purchased a
house on 24.02.2008 for Rs. 7,00,000. Determine taxable capital gain. Also state the
condition to be satisfied for claiming exemption. will your answer be different if as on the
date of transfer he was having one house.

19. Mr. Risha owns a residential building purchased by him on 12.10.1995. The cost of
acquisition was 4 lakhs. Cost of registration was Rs. 50,000.
on 13.07.2007 the building was sold for a consideration of Rs. 18,50,000. Expenses on
transfer being Rs.25,000. A new flat is purchased by him on 10.06.2007 for Rs.12Lakhs
Determine taxable capital gain.

20. Mr. X has earned a long term capital gain of Rs. 2,00,000 on transfer of residential
house. He is not interested to invest in residential house and claim exemption u/s. 54. He
seeks on alteration investment. Advice regarding other exemption option available and
time limits assuming date of transfer of residential house was 31.07.2007 while date of
receipt of consideration is 01.10.2007.

21. Mr. Albert a non- resident Indian, acquired in January 2002 shares in Indian
company for a consideration of Rs. 5 lakhs by remitting equal amount of US Dollars . In
December 2007 the entire shares is sold for Rs. 21 lakhs . Expenses on transfer was Rs. 1
lakhs. Determine taxable capital gains. You are given telegraphic transfer rates of SBI;
Particulars Buying Rates /USD Selling Rate/USD

January 2002 Rs. 24.00 26.00

December 2007 Rs. 39.00 41.00
22. K industries has 8 machines eligible for depreciation @ 15%. The WDV on
01.04.2007 is Rs. 12 lakhs. During November 2006 a new machine was purchased for Rs.
3 lakhs. on 01.01.2008 entire machine were sold for Rs.16 lakhs. Determine Capital
gains
(a) What will be your answer if entire machine sold for Rs. 10 lakhs
(b) What will be your answer if 6 machines sold for Rs. 16 lakhs
(c ) What will be your answer if date of sale was October 2007 and 8 machines were sold
for Rs. 12.50 lakhs.

23. Ajay has purchased 10,000 equity shares in K & Co. Ltd @ Rs. 5 per share on
24.04.1987. The company goes on liquidation on 01.07.2007 on which date total paid up
equity share capital was Rs.5,00,000. While assets of the company was Rs. 20,00,000
investment in debentures and cash in hand Rs 5,00,000. Company also have
accumulated profit of Rs. 20,00,000. Determine the taxability of capital gain if;
(a) Entire debenture investment of company is realized by liquidator for Rs. 25,00,000.
(b) The assets of the company is distributed among the shareholder in proportion of
shareholding.

24. The Balance sheet of X Ltd as on 31.10.2007 is as under On which date

slump sale of company was made for Rs3250 Lacs.
Rs. In lakhs
Liabilities Assets
Paid up Capital 2000 Fixed Asset 3000
Reserves 500 Other assets 1000
Liabilities 1500
------ -------
Total 40000 Total 4000
===== ====

(1) Fixed assets include value of land Rs. 500 lakhs (original cost was Rs. 400 lakhs
but was revalued at Rs.500 lakhs)
(2) Other fixed assets Rs. 2500 lakhs is the depreciated value of assets as per books.
But for income tax purpose the depreciated value is Rs. 2200 lakhs.
(3) Other assets Rs.1000 lakhs are at its book value.
(4) Determine Capital Gains.
INCOME FROM OTHER SOURCES

1.Mr. X receives on his birthday following gifts

(1) citizen watch costing Rs. 6,000 from his friend
(2) His six friends contributed Rs. 50, 000 each in cash to purchase a car which was
gifted to him
(3) Cash gift Rs.1,00,000 from his friend Z who gave the gift through Mr. X’s relative.
Mr. X’s father also gifted another Rs. 30,000 to him on that day
(4) Mrs. X gave a gift of Rs. 20,000 in cash

2. Mr.X who was a Jawan in Indian Army was killed in military operation. His wife was
entitled to a family pension of RS. 5000 PM. Advice whether she is eligible for any
exemption.

3. Mrs. Z is the legal heir of Mr. Z. She receives a monthly family pension of Rs. 7500.
Determine taxable pension. Under which head will it be taxable.
4. Mr. Giji had taken a loan of Rs. 1,00,000 which was in turn invested in bonds. Annual
income received on bond is Rs. 30,000 which interest due on loan is Rs.30,000 while
interest due on loan is Rs. 24,000. is he eligible to claim deduction in respect of interest
on loan. Advice .

5. Timco Ltd is a closely held company. From the following examine the tax implication
of transactions.
(1) Rs. 1,00, 000 given as advance to Mrs. Tom wife of a share holder having 20%
shareholding in company.
(2) Rs.20, 000 loan to Mr.Sarangi holding 7% share in company
(3) Rs.50,000 as trade deposit to R & Co. a partnership firm for supply of plant &
machinery . Mr. R partner of R & Co. is having 20% shareholding in Co.

CLUBBING OF INCOME
1. Mrs. Didi started a business with a capital of Rs. 2,00,000 on 01.04.2005. on
10.04.2006 she received Rs.1,00,000 as cash gift from her husband which was invested
by her in the business on the same day . She gives following figures of profit for the
years.
2006-07 – 1,20,000
2007-08– 2,10,000
Determine the profit to be clubbed in the hands of Didi’s husband for FY.

2. Mr. Varun is holding 25% shares in Varun Ltd. His wife Mrs. Varun is employed as
marketing officer of the company. She receives Rs.7000 PM salary and also received Rs.
20,000 as commission for her performance . Advice whether clubbing provision arise
assuming Mrs. Varun is MBA in marketing.

3. Mr. Z gives following particulars of income.

1) Income arising to elder son’s wife out of investment transferred by Mr. Z without
consideration on her birth day- Rs. 20,000
2)Income arising to younger son’s wife who in 17 years old out of investment transferred
by Mr.Z without consideration –Rs. 10,000
3)Mr.Z had gifted Rs.1,00,000 to his wife. This along with accumulated own savings
Rs.50,000 was invested in bank. Total interest earned is Rs.15,000.
4)Minor daughter earns Rs. 1,00,000 from acting in telefilms.
5)Minor son is handicapped. His investment earns interest Rs.10,000.

4. Mr. X is a business man. His income from business is Rs. 90,000. Mrs. X is a tutor in
school. She draws monthly salary of Rs.5000. Determine in whose hands following
incomes will be clubbed.
(1) Income from minor son D;
Business Income – (Loss) 4000
Commission received – 2000
Bank interest on fund invested in his name by grand father- 4000
(2) Income of Minor Son E;
Lottery winnings- 40,000
Receipt from sale of own paintings - 20,000
(3) Income of minor daughter F
Income from dance performance – 1,00, 000
Above income was invested in bank and she earns interest Rs.6000 agricultural
income 40,000. Determine the total income

5. Following is the income of Mr.Kartha and his family members.

Mr. Kartha : Business loss – 10,000 Mrs.Kartha salary – 30,000 interest income – 25,000
Mrs.Kartha earns : divident from shares transferred to her by Mr.Kartha. Total divident
on shares transferred is 10,000, In addition company also issued her bonus share.
Divident on bonus shares is Rs.5,000. Arjun minor son of Kartha’s earns Rs.1,00,000 as
income from acting in film. This amount is invested in agricultural land and income from
agricultural is 10,000. Mr. Kartha is also having another minor child Pooja who was
born to Mr.Kartha and his former wife who died 10 years ago. This child is living with
Kartha’s family and earns Rs.20,000 as investment income.
Advice regarding provisions for clubbing of income.

Set off and carry forward of loss

1. Mr.Abraham furnishing following information. Determine the eligibility for set off
of loss.
Loss from business (Textiles) ;
Current Year 40,000
Business Loss b /d from Assessment Year 2005-2006 20,000
Unabsorbed Depreciation 1,00,000
Profit from speculation business 50,000
Chemical business discontinued on 24.03.2005
B/d Loss (2004-2005) 30,000
Unabsorbed depreciation (2004-2005) 15,000
Bad Debts written off during 2004-2005 recovered during
Current year: 50,000
Long Term Capital Loss 40,000
Short Term Capitan Gain 20,000
Loss from House property 20,000
Winnings from Lottery 1,00,000

2. Dependar gives his following particulars of income

1. Salary income - 1,20,000
2. Income from House Property - (30,000)
3.Business income of minor son clubbed u/s.64 (1A) – (45,000)
4. Interest income - 36000
5. Winnings from Card Games - 10,000
Determine gross total income
3) Raghav furnish following data. Determine gross total income
Income from house property
House 1 - 42,000
House 2 - (36,000)
Income from business
Textile - 25,000
Automobile;- Current Year Loss – 13,000
B/fd Unabsorbed depreciation – 20,000
Loss from dealing in Derivatives - 10,000
Short Term Capital Loss - 20,000
Long Term Capital Gain (listed shares STT deducted) 1,00,000
Long Term Capital Gain (Jewellery) 17,000
4) Reghuver furnishes following data. Determine gross total income
Income from Salary - 90,000
Income from House Property
House 1 (self occupied) - Interest on Housing Loan Rs.1.80 Lakhs
House 2 (Let out) – Income computed Rs.90,000
Income from Business
Business A - Profit 40,000
B - Loss 55,000
Long Term Capital Loss (Jewellery) - 45,000
Long Term Capital Gain (Land) - 26,000
Short Term Capital Gain - 25,000
Interest on Investments - 24,000
5) Determine the eligibility of set off of loss and loss to be carried forward
B/Fd Business loss of Assessment Year 1998-1999 - 1,00,000
B/Fd Unabsorbed depreciation Assessment Year 1998-1999 - 1,20,000
Current year Business Profit - textiles - 1,60,000
Current Year Business Loss - grocery - 86,000
Income from House Property (Loss) - 20,000
Long Term Capital Gains - 1,00,000
Short Term Capital Loss - 1,10,000
 Family Pension received
6. Determine Gross total Income
Income from House Property
Short Term Capital Gains
Long Term Capital Gains
Income from Other sources
7. Determine Gross total Income
Gift in Cash received from Friend
Business Loss Current Year
Long Term Capital Gains
Short Term Capital Loss
Winnings from Lottery
B/Fd loss of Lottery
Unabsorbed depreciation b/fd
- 90,000
- (10,000)
- 1,05,000
- (60,000)
- 10,000
- 1,00,000
- 30,000
- 25,000
- 10,000
- 60,000
- 20,000
- 1,20,000

Deductions from Gross Total Income

1. Anand is a retired Govt.Employee. He gives following information

1. Pension 7500 pm
2. Interest income 60,000
He pays Rs.11,000 as Medical Insurance Premium on health of himself and
his wife. He lives in a rented house and pays monthly rent of Rs.3000

Determine taxable income assuming he is 70 year of age.

2. Dr.Rajan gives following particulars. Determine his Net Income

Income from Profession 2,40,000
Long Term Capital Gains 1,20,000
Short Term Capital Gains 40,000
Medical Insurance Premium paid by Cheque2000
By Cash 4000
He lives in rented house and pays Rs.48000 as annual Rent.

3. From the following determine eligible item for deduction under chapter VI A
i. LIC Premium paid for : Self 20,000
Spouse 10,000
Major Son 5,000
Minor Son 4,000
Father 2,500
ii. Expenses on Medical Treatment of Brother who is
suffering from Cancer. Brother does not have own
livelihood 45,000
iii. Medical Treatment and Maintenance of
Dependent handicapped Sister
36,000
iv.Repayment of loan taken for full time
 post graduate course : Principle repaid 26,000
Interest repaid 38,000
v. Contribution to approved superannuation Fund 14,000
vi. Contribution to 5 year post office savings deposit 10,000
vii. Contribution to Unrecognized PF
viii. Contribution to PPF
ix. Contribution to Pension Scheme of LIC - 12,000
ii. Individual Assessee suffering from Severe
disability earning income of - 72,000

4) Determine deduction eligible u/s.80 G in following cases. Gross total income in all
cases may be taken as Rs.1,20,000 including LTCG of Rs.10,000. In all cases
deduction of Rs.10,000 is eligible u/s.80 CCC.
CASE A CASE B CASE C
Prime Minister National Relief
Fund 10,000 6,000 12,000
National Defence Fund 5,000 -- 7,000
Contribution to Govt for
Promoting family planning -- -- 8,000
Contribution to approved
Charitable Trust 6,000 6,000 6,000
Contribution for approved
Temple renovation 2,000 4,000 --
5)Mr.X suffers from disability. He is drawing a salary of Rs.10,000 pm. He also
receives interest Rs.20,000. He contribute Rs.10,000 to PPF and Rs.12,000 to LIC
Pension plan. Determine Gross Total Income.
6)Mr.Sandhu furnishes data. Determine his taxable income.
Income from salary 1,20,000
Income from House Property (25,000)
Long Term Capital Gains 1,40,000
Contribution to PPF 20,000
Contribution to LIC Premium Plan 12,000
Expenditure on Medical Treatment of
Handicapped Brother 36,000
Medical Insurance Premium paid 10,000
LIC premium Paid 30,000
7)Mr.Sharma gives following particulars. calculate taxable inome
Income from Business 2,00,000
Winnings from Lottery 50,000
Long Term Capital Gain 60,000
Short Term Capital (Jewellery) 10,000
Short Term Capital Gain u/s.111 A 20,000
He makes following payments/contribution
i). LIC Premium paid Rs.25,000 (sum assured is Rs.1,00,00)
ii). Housing Loan Principle Repaid 45,000
iii). Donation to following Funds
 (a). PM National Relief Fund - 10,000
(b). Contribution to Charitable Trust- 20,000
(iv). Tuition Fees paid for
(a). Full Time Education of Elder son – 18,000
(b). Part Time Computer
Education of Younger son - 16,000
(v). Investment in NSC 30,000
(vi). ICICI Prudential Premium Fund
Contribution 12,000
(vii). Mediclaim Premium paid by Cheque 6,000
by Cash 4,000
8)Mr.Atul furnishes following data. Determine his taxable income

Income from Salary 2,40,000

Business Loss computed 60,000
House Property loss computed 20,000
Long Term Capital Gain 65,000
He deposits Rs.20,000 with LIC for maintenance of his dependent brother with
severe disability. He contribute Rs.14,000 to approved heritage trust. He pays
LIC premium Rs.5,000 and premium u/s.80 CCC Rs.12,000.

Rebate and Relief’s

1. Mr.Saran earns Rs.2,10,000 as income from securities business. Securities
transactions tax deducted is Rs.2,500. Determine rebate u/s.88 E. Will your answer be
different of saran held the securities as an investor and they were sold within 9 months
from the date of purchase.
2. Atul gives following data. Determine Rebate u/s.88 E
1. Income from securities business Rs.1,60,000
2. Loss from House property Rs. 45,000
3. STT deducted 1,600
3. Rajan gives following data. Determine Rebate u/s.88 E
1. Loss from securities Business
(Non-speculative) 1,50,000
2. Income from House Property 2,70,000
3. STT deducted 2,000
4. Mrs.Sania gives following data. Determine rebate u/s.88 E
1. Income from securities Business:
Non speculative (Profit) 1,00,000
Speculative (Loss) 20,000
2. STT deducted on above
Non-speculative 1,500
Speculative 300
3. Income from House Property 45,000
4. LIC Premium Paid 10,000
 5. Premium paid u/s. 80 D 3,000

5. Raj Kumar is a Trader in securities. He furnishes following particulars of

Income. Determine Rebate u/s.88 E
1. Income from Shares Business 1,80,000 (STT deducted 1800)
2. Income from share LTCG 60,000 (STT deducted-600)
3. Income from House Property (Loss) 30,000
4. Agricultural Income 1,00,000
5. Contribution to National Defense Fund 5000
6. Mr.Parameswar receives Rs.50,000 as arrears of salary during the year 2006-
2007. His salary for the year before arrears was Rs.2,40,000. he gives following
particulars regarding the year to which arrears is related to.

Financial Year Assessment Year Salary Offered Arrears now

For Tax Received

1999-2000 2000-2001 60,000 10000

2000-2001 2001-2002 64,000 16,000

2001-2002 2002-2003 76,000 24,000

Compute relief for Assessment Year 2007-2008
Note: Rates of tax for Assessment Year 2000-2001, 2001-2002, 2002-2003 :
Up to 50000 NIL 50001 to 60,000 – 10% 60001 to 150000 – 20%
Surcharge Assessment year 2000-2001 – 10% (if taxable income exceeds 60000)
2001-2002 – 12% ( - Do - )
2002-2003 - 2% ( - Do - )
Exemptions
1. Mr.Gautham takes an LIC Policy of Rs.10 Lakhs.Annual premium payable is
Rs.2.25 lakhs. Determine the treatment of amount received upon maturity of policy.
2. Mr.Jovan is a Member of Parliament. He receives following allowances.

(i). Daily allowance received Rs.30,000 for the year

(ii).Allowance received under MP’s constituency allowance
Rules-2500 pm
(iii). Other allowance received 12000 p.m.
Determine the exemption available. Also ascertain the taxability of income under which
head ?
3. A Municipal Corporation derives following income determine the taxability of the
same.
(i). Income from House Property 20,000
(ii). Capital Gain 30,000
 (iii). Interest Income 25,000
(iv). Income from Business
a). Supply of Water and Electricity
in own Jurisdiction - 40,000
b). Supply of Water and Electricity
in other areas - 35,000
c). Supply of Commodities in other
areas - 10,000

4. Determine exemption u/s.10B

(Turnover in Lakhs) CASE A CASE B
Total Turnover 100 150
Export Turnover 70 120
Profit of Business 30 50

Note: i). Export Turnover of A includes Turnover of Rs.10 Lakhs out of onsite
installation of computer software.
ii). In case B out of total export Turnover Rs.15 lakhs could not be realised
within six months, RBI had extended the time limit to nine months but still 10 lakhs could
not be realized.
5. An education Trust claiming exemption u/s.11 furnishes following data. (RS in
crores)
Gross Fees - 4.00
Expenses incurred - 1.20
Depreciation - 0.80
-----
Surplus - 2.00
===
Trust follows Mercantile System. Out of the total fees due Rs.20 lakhs could not be
collected during the year. Trust makes following arrangement for claiming examples.
1). Fund accumulated as invested in specified securities - 50 Lakhs
2). Construction of New Science Block - 30 Lakhs
Determine Taxable Income:
1. Will your answer be different if cost of construction of Science Block is
Rs.1.20 Crores.

6) A Trust registered u/s.11 derives income net of expenses Rs.20 Lakhs and also corpus
Donation Rs.5 Lakhs. It invest entire corpus donation in bank and does not spend at all.
It accumulates Rs.12 Lakhs out of the surplus for specified purpose. Of the total income
Rs.1,00,000 is receivable as on 31.03.2008. It spends Rs.3 lakhs for charitable purpose.
Determine taxable income.
7)A land acquired by the Trust for Rs.8 lakhs is sold for Rs.23.50 Lakhs. Expenses on
transfer is Rs.50,000. Determine the taxability of transaction if new asset is purchased
for
a). Rs.24 Lakhs
b). Rs.18 Lakhs
c). What will be your answer if instead of acquiring new asset the above
amount is invested in Bank F.D.
8. Bharatiya Sugam Party is a registered political party. It gives following data of
receipts.
1). Income from House Property 1,00,000
2). Invest income 50,000
3). Voluntary contribution (less than Rs.20,000 per person) 4,00,000
4). Voluntary contribution (per person more than
Rs.20,000) 6,00,000
Out of the voluntary contribution in excess of Rs.20,000 name
and address of two persons who contributed Rs.50,000 each is unknown.
Determine taxability of above receipts.

9. Mr.Anil receives following income.

(i). Cash prize of Rs.1 lakhs under the Scheme of state award for films
instituted by Central Government.
(ii). Share of Profit as partner from M/s.AB & Co - 50,000
(iii). Share of profit from HUF in which he is a Member - 20,000
Determine taxability of income