CA FINAL Class Test Paper MAY/NOV-22 Exams

Topics : Basics, Capital Gain & IFOS

1. A Ltd. is an Indian company which has invested in shares of other Indian and
foreign companies. During the P.Y.2021-22, A Ltd. received dividend from these
companies as follows:
% of Date of Date of Amount Interest
holding declaration distribution of expenditure
of A of dividend of dividend dividend on loan
Ltd. by the by the [Gross] (`) borrowed
company company for
investment
in shares (`)
B Ltd., an Indian 10% 20.6.2021 3.7.2021 2,00,000 45,000
company
C Inc, a foreign 22% 17.9.2021 12.10.2021 4,00,000 90,000
company
D Inc., a foreign 30% 13.11.2021 28.11.2021 6,00,000 1,30,000
company
E Ltd., an Indian 15% 14.1.2022 2.2.2022 3,20,000 70,000
company
A Ltd. declared and distributed dividend of ` 6 lakhs for the F.Y.2020-21 in June,
2021 and dividend of ` 7 lakhs for the F.Y.2021-22 in July, 2022.
Mr. Aakash have invested in shares of A Ltd. He is born in India. Mr. Aakash is
an Indian citizen who lives in Hyderabad. He is employed with a leading textile
manufacturing unit at a salary of ` 1 lakh per month.

The details of investment in shares of A Ltd. by Mr. Aakash given below –

Month of declaration & Amt of dividend Interest expenditure
distribution of dividend [Gross] on loan borrowed for
(`) investment in shares
(`)
June, 2021 60,000 15,000
July, 2022 70,000 15,000

(i) What is the amount of dividend income includible in the gross total income of
A Ltd. for A.Y.2022-23 under the provisions of the Income-tax Act, 1961?
(a) ` 11,85,000
(b) ` 12,16,000
(c) ` 13,15,000
(d) ` 13,36,000 [2 Marks]

(ii) What is the deduction allowable under section 80M to A Ltd. for A.Y.2022-23?
(a) ` 6,00,000
 (b) ` 7,00,000
(c) ` 9,20,000
(d) ` 13,00,000 [2 Marks]

(iii) What is the tax liability (rounded off) of Mr. Aakash for A.Y.2022-23 under the
provisions of the Income-tax Act, 1961. Assume Akash not opted provision of
section 115BAC. (ignore TDS)?
(a) ` 1,32,600
(b) ` 1,44,040
(c) ` 1,78,780
(d) ` 1,29,580 [2 Marks]

2. Mr. Vishal and Mr. Guha sold their residential house property in Pune for ` 3
crore and ` 4 crore, respectively, in January, 2022. The house property was
purchased by them 25 months back. The indexed cost of acquisition is ` 1 crore
and ` 1.75 crore, respectively. Mr. Vishal purchased two residential flats, one in
Delhi and one in Agra for ` 70 lakhs and ` 80 lakhs, respectively, in April, 2022.
On the same date, Mr. Guha also purchased two residential flats, one in Mumbai
and the other in Pune, for ` 80 lakhs and ` 75 lakhs, respectively. Both of them
invested ` 30 lakhs in bonds of NHAI in March, 2022 and ` 30 lakhs in bonds
of RECL in April, 2022. What is the income taxable under the head “Capital
Gains” for A.Y.2022-23 in the hands of Mr. Vishal and Mr. Guha?
a. ` 70 lakhs and ` 95 lakhs, respectively
b. ` 60 lakhs and ` 85 lakhs, respectively
c. Nil and ` 95 lakhs, respectively
d. Nil and ` 20 lakhs, respectively [2 Marks]

3. During the P.Y.2021-22, Mr. Aakash has ` 80 lakhs of short-term capital gains
taxable u/s 111A, ` 70 lakhs of long-term capital gains taxable u/s 112A and
business income of ` 90 lakhs. Which of the following statements is correct?
a. Surcharge@25% is leviable on income-tax computed on total income of `
2.40 crore, since the total income exceeds ` 2 crore
b. Surcharge@15% is leviable on income-tax computed on total income of `
2.40 crore
c. Surcharge@15% is leviable in respect of income-tax computed on capital
gains of ` 1.50 crore, since such income exceeds ` 1 crore but is less than
` 2 crore; in respect of business income of ` 90 lakhs, surcharge is
leviable@25% on income-tax, since the total income exceeds ` 2 crore
d. Surcharge@15% is leviable in respect of income-tax computed on capital
gains of ` 1.50 crore, since such income exceeds ` 1 crore but is less than
` 2 crore; in respect of business income of ` 90 lakhs, surcharge is
 leviable@10% on income-tax, since such income exceeds ` 50 lakhs but
is less than ` 1 crore [2 Marks]
4. A Ltd., an Indian company, bought back its listed shares from its shareholders
and B (P) Ltd., an Indian company, bought back its unlisted shares from its
shareholders in the month of March, 2022. What are the tax consequences of
such buyback in the hands of A Ltd., B (P) Ltd. and the shareholders?
a. Additional [email protected]% of the distributed income is leviable in
the hands of A Ltd. and B (P) Ltd.; income arising to shareholders is
exempt
b. Income arising to shareholders from buyback is taxable in their individual
hands; No distribution tax is leviable in the hands of A Ltd. and B (P) Ltd.
c. Additional [email protected]% of the distributed income is leviable in
the hands of A Ltd.; income arising to shareholders of B (P) Ltd. is taxable
in their individual hands
d. Additional [email protected]% of the distributed income is leviable in
the hands of B (P) Ltd.; income arising to shareholders of A Ltd. is taxable
in their individual hands [2 Marks]

5. Mr. Rajan purchased 300 shares in Vaigai Ltd. on 12.1.2017 at a cost of ` 2,500
per share. The Fair Market Value (FMV) of the share as on 31.1.2018 is ` 1,800.
Mr. Rajan sold all the shares of Vaigai Ltd. on 15.7.2021 for ` 3,200. Mr. Rajan’s
brother Mr. Ravi purchased 600 shares in Tapti Ltd. on 25.1.2017 at a cost of `
1,900 per share. The FMV of the share as on 31.1.2018 is ` 2,400. Mr. Ravi sold
all the shares of Tapti Ltd. on 31.1.2022 for ` 1,700 per share. What is the
chargeable capital gains on sale of shares of Vaigai Ltd. and Tapti Ltd. in the
hands of Mr. Rajan and Mr. Ravi, respectively, for A.Y.2022-23, assuming that
STT was paid at the time of acquisition and sale?
a. Long-term capital gains of Mr. Rajan ` 2,10,000; Long-term capital loss
of Mr. Ravi ` 4,20,000
b. Long-term capital gains of Mr. Rajan ` 4,20,000; Long-term capital loss
of Mr. Ravi ` 4,20,000
c. Long-term capital gains of Mr. Rajan ` 4,20,000; Long-term capital loss
of Mr. Ravi ` 1,20,000
d. Long-term capital gains of Mr. Rajan ` 2,10,000; Long-term capital loss
of Mr. Ravi ` 1,20,000 [2 Marks]

6. Mr. Anjan, a property dealer, sold a flat in Mumbai, the stamp duty of which is
` 2 crores for ` 1.80 crores to his friend Mr. Ashwin, a college lecturer. Mr. Anjan
had purchased the flat one year back for ` 1.50 crores and the stamp duty value
on that date was also ` 1.50 crores. What are the tax implications of such sale?
a. ` 50 lakhs would be taxable as short-term capital gains in the hands of
Mr. Anjan. There would be no tax implication in the hands of Mr. Ashwin
 b. ` 50 lakhs would be taxable as business income in the hands of Mr. Anjan.
There would be no tax implication in the hands of Mr. Ashwin
c. ` 50 lakhs would be taxable as business income in the hands of Mr. Anjan
and ` 20 lakhs would be taxable as income from other sources in the
hands of Mr. Ashwin
d. ` 50 lakhs would be taxable as short-term capital gains in the hands of
Mr. Anjan and ` 20 lakhs would be taxable as income from other sources
in the hands of Mr. Ashwin [2 Marks]

7. Mr. Roy owned a residential house in Noida. It was acquired on 09.09.2010 for `
30,00,000. He sold it for ` 1,57,00,000 on 07.01.2019.
Mr. Roy utilized the sale proceeds of the above property to acquire a residential
house in Panchkula for ` 2,05,00,000 on 20.07.2019. The said house property
was sold on 31.10.2021 and he purchased another residential house at delhi for
` 2,57,00,000 on 02.03.22. The property at Panchkula was sold for ` 3,25,00,000.
Calculate capital gains chargeable to tax for the assessment year 2019-20 and
2022-23. All working should form part of your answer. [6 Marks]

8. Mr. Arjun bought a vacant land for ` 80 lakhs in March 2007. Registration and
other expenses were 10% of the cost of land. He constructed a residential building
on the said land for ` 100 lakhs during the financial year 2008-09.

He entered into an agreement for sale of the above said residential house with
Mr. Jerry (not a relative) on 9th April 2021 and received ` 20 lakhs as advance in
cash on that date. The stamp duty value on that date was ` 740 lakhs. The actual
sale consideration was, however, fixed at ` 700 lakhs.

The sale deed was executed and registered on 10-6-2021 for the agreed
consideration. However, the State stamp valuation authority had revised the
values, hence, the value of property for stamp duty purposes was ` 770 lakhs.
Mr. Arjun paid 1% as brokerage on sale consideration received.
Subsequent to sale, Mr. Arjun made following investments:
(i) Acquired a residential house at Mumbai for ` 110 lakhs.
(ii) Acquired a residential house at London for ` 150 lakhs.
(iii) Subscribed to NHAI bond: ` 45 lakhs on 29-8-2021 and ` 50 lakhs on 12-
10-2021.
Compute the income chargeable under the head “Capital Gains” for A.Y. 2022-
23. The choice of exemption must be in the manner most beneficial to the
assessee. [6 Marks]

9. Mr. ‘X’ furnishes the following data for the previous year ending 31.3.2022:
(a) Unlisted Equity Shares of AB Ltd., 10,000 in number were sold on 31.5.2021,
at ` 500 for each share.
(b) The above shares of 10,000 were acquired by ‘X’ in the following manner:
(i) Received as gift from his father on 1.6.2000 (5,000 shares) the fair market
value on 1.4.2001 ` 200 per share.
(ii) Bonus shares received from AB Ltd. on 21.7.2009 (2,000 shares).
(iii) Purchased on 1.2.2012 at the price of ` 350 per share (3,000 shares).
(c) Purchased one residential house at ` 25 lakhs, on 1.5.2022 from the sale
proceeds of shares.
 (d) ‘X’ is already owning a residential house, even before the purchase of above
house.
You are required to compute the taxable capital gain. He has no other source of
income chargeable to tax. [6 Marks]

10. Mr. Mithun purchased 100 equity shares of M/s Goodmoney Co. Ltd. on 01-04-
2005 at rate of ` 1,000 per share in public issue of the company by paying
securities transaction tax.
Company allotted bonus shares in the ratio of 1:1 on 01.12.2017. He has also
received dividend of ` 10 per share on 01.05.2018.
He has sold all the shares on 01.10.2021 at the rate of ` 4,000 per share through
a recognized stock exchange and paid brokerage of 1% and securities transaction
tax of 0.02% to celebrate his 75th birthday.
Compute his total income and tax liability for Assessment Year 2022-23,
assuming that he is having no income other than given above. Fair market value
of shares of M/s Goodmoney Co. Ltd. on 31.1.2018 is ` 2,000. [6 Marks]

Solutions
1. (i) : D
(ii) : D
(iii) : C

2. C
3. B
4. A
5. D
6. C

7. Computation of capital gains chargeable to tax for PY 18-19 AY 19-20

Particulars `
Full value of consideration received on sale of residential 1,57,00,000
house in Noida
Less: Indexed cost of acquisition [` 30,00,000 x 280/167] 50,29,940
Long-term capital gain 1,06,70,060
Less: Exemption under section 54
Purchase of new residential house property at Panchkula
for ` 2,05,00,000 on 20.7.2019 i.e., within two years from
the date of transfer of residential house in Noida;
exemption restricted to long term capital gain, since cost of 1,06,70,060
new house exceeds long-term capital gain
Taxable long term capital gain
Nil

Computation of capital gains chargeable to tax for PY 21-22 AY 22-23

Particulars `
 Full value of consideration received on sale of residential 3,25,00,000
house at Panchkula

Less: Indexed cost of acquisition [As per section 54, if the

new residential house purchased (i.e., on 20.7.2019, in this
case) is transferred within 3 years of its purchase (i.e., on
31.10.2021, in this case), and the cost of acquisition of the
new house (i.e., ` 2,05,00,000) is higher than the long-term
capital gain (i.e., `1,06,70,060,) then, the cost of acquisition
of such new residential house shall be reduced by long term
capital gain exempted earlier, while computing capital gains
1,07,82,322
on sale of the new residential house]
[` 98,29,940 (`2,05,00,000 – `1,06,70,060) x 317/289]
Long-term capital gain [Since the residential house is held
for more than 24 months] 2,17,17,678

Less: Exemption under section 54

Purchase of new residential house property in Delhi for
` 2,57,00,000 on 2.3.2022 i.e., within two years from
31.10.2021, being the date of transfer of residential house
at Panchkula; exemption restricted to long term capital
gain, since cost of new house exceeds long-term capital 2,17,17,678
gains
Taxable long term capital gain Nil

8. Computation of income chargeable under the head “Capital Gains” for

PY 21-22 AY 22-23
Particulars ` `
(in lakhs) (in lakhs)
Capital Gains on sale of residential building
Actual sale consideration ` 700 lakhs
Value adopted by Stamp Valuation Authority `
770 lakhs
SDV is upto 110% of Considerations so Sale
Consideration is treated as FVOC
Full Value of Consideration 700.00
Less: Brokerage@1% of sale consideration (1% of 7.00
` 700 lakhs)
Net Consideration 693.00
Less: Indexed cost of acquisition
- Cost of vacant land, ` 80 lakhs, plus
registration and other expenses i.e., ` 8
lakhs, being 10% of cost of land [` 88 228.66
lakhs × 317/122]
- Construction cost of residential building (` 231.39
100 lakhs x 317/137) 460.05
Long-term capital gains before exemption 232.95
 Less: Exemption under section 54 110.00
The capital gain arising on transfer of a long-term
residential property shall not be chargeable to tax
to the extent such capital gain is invested in the
purchase of one residential house property in
India one year before or two years after the date of
transfer of original asset.
Therefore, in the present case, the exemption
would be available only in respect of the
residential house acquired at Mumbai and not in
respect of the residential house in London

Less: Exemption under section 54EC

50.00
Amount deposited in capital gains bonds of
NHAI within six months from the date of
transfer (i.e., on or before 09.12.2021) would
qualify for exemption, to the maximum extent of
` 50 lakhs.
Therefore, in the present case, exemption can
be availed only to the extent of ` 50 lakh out of `
95 lakhs, even if the both the investments are
made on or before 09.12.2021 (i.e., within six
months from the date of transfer).

Long term capital gains chargeable to tax

72.95
Note: Since the residential house property was held by Mr. Arjun for more
than 24 months immediately preceding the date of its transfer, the resultant
gain is a long-term capital gain.

9. Mr. X PY 21-22 AY 22-23

Computation of Capital Gain
Particulars Amount
Full Value of Consideration (10,000 x 500) 50,00,000
Less: Transfer Expenses Nil
Net Consideration 50,00,000
Less: Index Cost of Acquisition
a) Gifted Shares (5000 x 200) (31,70,000)
10,00,000 x 317/100
b) Bonus Shares Nil
c) Purchased on 01/02/12 (3000 x 350) (18,08,967)
10,50,000 x 317/184
Gross LTCG 21,033
Less: Exemption u/s 54F
LTCG x Cost of New asset/ Net Consideration (10,516.5)
21,033 x 25,00,000 / 50,00,000
 Net LTCG 10,516.5
i.e. 10,520

10. Mr Mithun PY 21-22 AY 22-23

Computation of Capital Gain
Particular 100 Org. 100 Bonus
Shares shares
(01/04/05) (01/12/17)
Full Value of Consideration (4000 per share) 4,00,000 4,00,000
Less: Transfer Expenses (Brokerage 1%) 4,000 4,000
Net Consideration 3,96,000 3,96,000
Less: Cost of Acquisition as per section 55 (wn- (2,00,000) (2,00,000)
1)
LTCG u/s 112A 1,96,000 1,96,000

WN:1 Cost of Acquisition

100 Org Shares 100 Bonus
Step-1 Actual Cost 1,00,000 Nil
Step-2 (i) FMV as on 31.01.18. 2,00,000
(ii) FVOC 4,00,000 2,00,000 2,00,000
Lower of (i) & (ii)
COA Higher of Step-1 and Step-2 2,00,000 2,00,000

Calculation of Tax Liability `

LTCG 112A 3,92,000
Less: Basic exemption (3,00,000) (senior citizen)
Balance LTCG 112A 92,000

As per section 112A, LTCG taxable @10% in excess of ` 1,00,000. In the

present question LTCG is upto ` 1,00,000 so nothing is taxable.

Note : 2
As per seventh proviso to section 48, STT not allowed under the head capital
gain.