 These summary notes are a result of hours of hard work poured in by me.

 I believe you will find it useful for your preparation.

 These notes are fully updated and are relevant for CA Intermediate
students preparing for May 2021 examinations.
 We have also provided 2-3 solved questions in summary notes so that you
need not refer to any other books. So it is a combination of Theory +
Practical problems.
 If you do not have much time to study bulky materials then I strongly
recommend you to use these notes.
 I have tried my best to make it concise and error free. However, if you find
any error then please do mail me at [email protected] with the
subject line “error in notes” or drop me the message on facebook.
 You can connect me through following
Click here to add me in facebook. https://www.facebook.com/jignesh.thakkar.7
Click here to like my facebook page. https://www.facebook.com/incometaxguru/
Click here to join my Telegram Channel https://t.me/incometaxgurucajigneshthakkar

You can refer your friends to join our CA Final MAY & NOV 2022 face to face / online coaching.
CA INTERMEDIATE – INCOME TAX [May 2021] Compiled by Prof. CA. Jignesh Thakkar

MISCELLANEOUS TOPICS
Cases where income of previous year is assessed in the same year: Income earned during any previous year is
assessed or charged to tax in the immediately succeeding assessment year. However, in the below mentioned
circumstances, income is taxed in the same year in which it is earned, and hence the previous year and the
assessment year in these circumstances will be the same. These provisions are to safeguard the revenue as regards
the collection of taxes, even if the assesses are not traceable later on or recovery of taxes is not possible later on.
Following are the cases in which income of previous year is assessed in the same year:
(1) Non-resident Shipping Business [Section 172]
a) The assessee (the person liable to pay tax) should be a non-resident.
b) He should own a ship or ship is chartered by him.
c) The ship carries passengers, live-stock, mail or goods, shipped at a port in India.
d) Deemed income is 7.5% of carriage amount received/receivable (including demurrage / handling charges) -
(Section 44B).
e) Rate of tax shall be the tax rate applicable to foreign companies.
f) Before the departure of ship from Indian port, the return of the full amount paid / payable to the owner on
account of fare and freight (including demurrage charge or handling charge or any other amount of similar
nature) should be filed by the master of ship. Then only the collector of customs shall grant the port clearance.
g) If AO is satisfied that it will be difficult to submit ROI before departure and satisfactory arrangement is made
for payment of tax, then he may allow submission of ROI within 30 days of departure.
h) However, the non-resident may claim before the expiry of the assessment year that a normal assessment
should be made of his income and in such a case, the tax paid u/s 172 will be adjusted against the tax due on
normal assessment.
(2) Assessment of persons leaving India [Section 174]: When it appears to the Assessing Officer that any
individual may leave India during the current assessment year or shortly after its expiry, with no present intention
of returning to India, the total income of such individuals, up to the probable date of his departure from India shall
be chargeable to tax in the same year.
th st
For example, if a person is leaving India on 15 of September, 2020, then the income for the period 1 of April,
th
2020 to 15 of September, 2020 will be chargeable to tax in the financial year 2020 - 21 it-self. The AO may
estimate the income of such individual for such period or any part thereof, where it cannot be readily determined
in the manner provided in the Act.
(3) Associations / Bodies formed for short duration [Section 174A]:
a) There is an association of persons or a body of Individuals or an artificial juridical person, formed or
established or incorporated for a particular event or purpose.
b) It appears to the Assessing Officer that the above-mentioned association, body, etc. is likely to be dissolved in
the year in which such association of persons or body of individuals or artificial juridical person was formed or
established or incorporated or immediately after such year.
c) The total income of such association or body or juridical person for the period from the expiry of the previous
year for that assessment year upto the date of its dissolution shall be chargeable to tax in that assessment
year.
(4) Assessment of Person trying to alienate his assets with a view to avoid tax [Section 175]: If it appears to
the Assessing Officer during any current assessment year, that any person is likely to charge, sell, transfer,
dispose of or otherwise part with any of his assets with a view to avoiding any payment of his tax liability, then the
total income of such person for the period from the expiry of the previous year till the date when the assessing
officer commences proceedings, shall be chargeable to tax in the same assessment year.
(5) Discontinued Business [Section 176]: Where any business or profession is discontinued in any assessment
year, the income of the period from expiry of the previous year for that assessment year up to the date of such
discontinuance may, at the discretion of the assessing officer, be charged to tax in that assessment year. For
th
example, if a business is discontinued on 16 of July, 2020, then the income for the period 1.4.2020 to 16.7.2020
may be assessed in the previous year 2020-21 itself. Further, any sum received after the discontinuance is
chargeable to tax in the hands of recipient.

Chapter 15. Miscellaneous Topics 144

CA INTERMEDIATE – INCOME TAX [May 2021] Compiled by Prof. CA. Jignesh Thakkar
Diversion of Income by overriding title vs Application of Income
Particulars Diversion of Income by over-riding title Application of income
Essentials a) Income is diverted at source. a) Income accrues to the assessee.
b) There is an over-riding charge or title for such b) Income reaches the assessee.
diversion. c) Income is applied to discharge an
c) The charge or the obligation is on the source obligation.
of income and not on the receiver.
Examples a) Right of maintenance of dependents or of a) Payment of housing loan
coparceners on partition of HUF installment from salary.
b) Right under statutory provision b) Donations.
c) A charge created by a decree of a court of c) Contribution to provident fund.
law.
Provisions illustrated – A and B prepare an article for publication in Pragati Publications, a weekly magazine, on the
understanding that remuneration will be shared equally. The article is published in August 23, 2020 issue. On
September 7, 2020, A receives the entire remuneration of ` 2,00,000 (as per practice of the magazine, the
remuneration is paid to the first author), a half of which is later on paid by A to B. The payment of ` 1,00,000 (being
50% of ` 2,00,000) by A to B is diversion of income by overriding title. The taxable income of A will be ` 1,00,000
(payment of ` 1,00,000 to B will not be treated as income of A as it is diverted by an overriding title.) Any expenditure
or investment by A out of his income of ` 1,00,000 will be an “application of income”.
Income from Undisclosed Sources
1) Unexplained Cash Credit [Section 68]: Where any sum is found credited in the books of an assessee
maintained for any previous year and the assessee offers no explanation about the nature and source thereof, or,
the explanation offered is not satisfactory, the sum so credited may be charged as income of the assessee for that
previous year.
Note: Further, any explanation offered by a closely held company in respect of any sum credited as share
application money, share capital, share premium or such amount, by whatever name called, in the accounts of
such company shall be deemed to be not satisfactory unless the person, being a resident, in whose name such
credit is recorded in the books of such company also explains, to the satisfaction of the Assessing Officer, the
source of sum so credited as share application money, share capital, etc. in his hands. Otherwise, the explanation
offered by the assessee company shall be deemed as not satisfactory, consequent to which the sum shall be
treated as income of the company. However, this deeming provision would not apply if the person in whose name
such sum is recorded in the books of the closely held company is a Venture Capital Fund (VCF) or a Venture
Capital Company (VCC) registered with SEBI.
2) Unexplained Investments [Section 69]: Where in the financial year relevant to an assessment year, the
assessee has made investments which are not recorded in the books of account, if any, maintained by him, and
the assessee offers no explanation or unsatisfactory explanation, the value of the investments may be deemed to
be the income of the assessee for such financial year.
3) Unexplained Money, Bullion, Jewellery, etc. [Section 69A]: Where in any financial year, the assessee is found
to be the owner of any money, bullion, jewellery, or other valuable articles, which are not recorded in the books of
account, if any, maintained by the assessee and the assessee offers no explanation or unsatisfactory explanation
the money and value of assets so found may be deemed to be the income of the assessee for such financial year.
Ownership is important and mere possession is not enough.
4) Investments not fully disclosed [Section 69B]: Where in any financial year, the assessee has made
investments or is found to be the owner of any bullion, jewellery or other valuable article and the assessing officer
finds that the amount expended for making such investments exceeds the amount recorded in the books and the
assessee offers no explanation or unsatisfactory explanation, the excess amount may be deemed to be the
income of the assessee for such financial year.
5) Unexplained Expenditure [Section 69C]: Where in any financial year, the assessee has incurred any
expenditure and offers no explanation about the source of such expenditure, or the explanation offered is not
satisfactory, then the expenditure to the extent it is not satisfactorily explained may be deemed to be the income of
the assessee for such financial year. Such unexplained expenditure which is deemed to be the income of the
assessee shall not be allowed as a deduction under any head of income.

Chapter 15. Miscellaneous Topics 145

CA INTERMEDIATE – INCOME TAX [May 2021] Compiled by Prof. CA. Jignesh Thakkar
6) Amount borrowed or repaid on hundi [Section 69D]: Where any amount is borrowed on a hundi or any amount
due thereon is repaid other than through an account payee cheque drawn on a bank, the amount so borrowed or
repaid shall be deemed to be the income of the person borrowing or repaying for the previous year in which the
amount was borrowed or repaid, as the case may be.
However, where any amount borrowed on a hundi has been deemed to be the income of any person, he will not
be again liable to be assessed in respect of such amount on repayment of such amount. The amount repaid shall
include interest paid on the amount borrowed.

Taxability of Income from Undisclosed Sources [Section 115BBE]

1) Tax rate = 60% + 25% compulsory surcharge + 4% Health & education cess: In order to control laundering of
unaccounted money by availing the benefit of basic exemption limit, the unexplained money, investment,
expenditure, etc. deemed as income under section 68 or section 69 or section 69A or section 69B or section 69C
or section 69D would be taxed at the rate of 60% The enhanced rate of 60% shall apply to both:
i) Income from unexplained sources but disclosed by the assessee by reflecting it in the return furnished u/s
139.
ii) Income from such unexplained sources and also undisclosed but found by the Assessing Officer. The
surcharge as applicable otherwise, if the total income exceeds the specified amount, is not applicable on the
tax calculated in accordance with the provisions of section 115BBE. Instead, surcharge of 25% shall apply on
the amount of such tax. The surcharge of 25% is applicable irrespective of the amount of income from
unexplained sources and also irrespective of the amount of total income.
2) No deduction for exemption & No basic exemption limit: No basic exemption or allowance or expenditure
shall be allowed to the assessee under any provision of the Income-tax Act, 1961 in computing such deemed
income.
3) No set-off of losses: Further, no set off of any loss shall be allowable against income brought to tax under
sections 68 or section 69 or section 69A or section 69B or section 69C or section 69D.

CHAPTER XII-BA (SECTION 115JC TO 115JF)

ALTERNATE MINIMUM TAX (AMT)
1) Section 115JC(1): Income Tax payable by every person other than a Company shall be the higher of the
following two:
(i) Regular Income Tax payable on regular income as per Income Tax Act provisions (+) Surcharge (only if the
NTI > ` 50 lakhs or 100 Lakhs) (+) Health and Education Cess @ 4%
OR
(ii) 18.5% of Adjusted Total Income (+) Surcharge (only if the ATI > ` 50 lakhs or 100 Lakhs) (+) Health and
Education Cess @ 4% (called as ‘Alternate Minimum Tax – AMT’)
Important points to be noted:
(a) Adjusted Total Income – Section 115JC(2): ‘Adjusted Total Income’ means the total income (as per Income
Tax Act), before giving effect to this chapter, increased by the following three:
Particulars `
Total income as per Income tax Act xxx
Add Back:
1) Deductions claimed under Chapter VIA under the heading ‘C’- ‘Deductions in xxx
respect of certain Incomes’, other than deduction u/s 80P (i.e. deduction u/s 80-IA /
80-IAB / 80-IB / 80-IC / 80-ID / 80-IE / 80JJA / 80QQB / 80RRB) (but not Section
80TTA & 80TTB)
2) Deductions claimed under Section 10AA(SEZ) xxx
3) Deductions claimed under Section 35AD. xxx
xxx
Less:
4) Depreciation allowable u/s 32, as if no deduction was allowed u/s 35AD in respect of
the asset on which deduction u/s 35AD is claimed. (xxx)
Adjusted Total Income xxx

Chapter 15. Miscellaneous Topics 146

CA INTERMEDIATE – INCOME TAX [May 2021] Compiled by Prof. CA. Jignesh Thakkar
(b) CA report in Form No. 29C to be furnished one month prior to the due date for furnishing ROI u/s
139(1) – Section 115JC(3): Every person to whom section 115JC applies, shall be required to obtain a report
of a Chartered Accountant (in a prescribed form i.e. Form No. 29C) certifying the correct computation of
Adjusted Total Income and Alternate Minimum Tax and furnish such report before the specified date referred
to in section 44AB. Specified date means date one month prior to the due date for furnishing the return of
income under sub-section (1) of section 139 (W.e.f AY 2021-22)
(c) AMT @ 9% for unit in IFSC – Section 115JC(4) (w.e.f AY 2019-20): If the assessee referred to in section
115JC(1) is a unit located in an International Financial Service Centre (IFSC) and is deriving income solely in
convertible foreign exchange, then the rate of AMT shall be 9% instead of 18.5%.
2) AMT credit allowed to be C/f for 15 years & set-off allowed against excess of Regular tax over AMT –
Section 115JD: Excess of AMT paid over and above the Regular Tax payable shall be allowed as a Credit, which
can be carried forward for the next (w.e.f AY 2018-19) 15 consecutive years from the end of the year in which
such credit arose and can be set-off against excess of Regular Tax payable over and above AMT in those 15
successive years.
Important points to be noted:
(a) If AMT credit is not availed off in the next 15 consecutive years, then it shall lapse.
(b) No interest will be allowed to the assessee on the amount of such credit.
(c) If the amount of Regular Income Tax payable or the amount of AMT undergoes any changes, due to an order
of any assessment / reassessment or order of any higher authority in an appeal or otherwise, then the amount
of AMT Credit shall also undergo changes accordingly.
(d) AMT Credit can be set-off only in the year in which the Regular Tax payable exceeds the AMT and can be
set-off only to the extent of the amount of excess of Regular Income Tax over and above the amount of AMT.
3) All other provisions of the Act shall apply in the normal manner – Section 115JE: Except as otherwise
provided, all the provisions of the Income Tax Act shall be applicable to a person to whom section 115JC applies,
apart from this chapter. (Simply, applicability of this chapter on AMT, shall not affect the applicability of the other
provisions of the Income Tax Act) [Same as Section 115JB(5) of MAT Chapter]
4) Section 115JEE:
(i) Applicability of AMT provisions – Section 115JEE(1): The provisions of this chapter shall apply only to a
person who has claimed deduction under chapter VI-A, under the heading – ‘C’ i.e., ‘Deduction in respect of
certain incomes’ (other than u/s 80P) (but not Section 80TTA & 80TTB) or deduction u/s 10AA (SEZ) or
deduction u/s 35AD.
(ii) AMT provisions do not apply if Adjusted total Income ≤ 20 lakhs – Section 115JEE(2): The provisions
of this chapter, shall not apply to an Individual / HUF / AOP / BOI / Artificial Juridical Person, whose
Adjusted Total Income, does not exceed ` 20 Lakhs.
(iii) Credit of AMT is allowed as per Section 115JD – Section 115JEE(3): Notwithstanding anything
contained in Section 115JEE(1) or 115JEE(2), the credit of tax paid u/s 115JC shall be allowed in
accordance with the provisions of Section 115JD.
5) Section 115JF: Definitions: Following three terminologies used in this chapter have been defined in this section,
as follows:
a) “Accountant”: shall have the meaning as given in Explanation to Section 288.
b) “Alternate Minimum Tax (AMT)”: means the amount of tax computed on ‘Adjusted Total Income’ at the rate
of 18.5%.
c) “Regular Income Tax”: means the income tax payable for the previous year on total income in accordance
with the provisions of this Act other than the provisions of this Chapter.

Chapter 15. Miscellaneous Topics 147

CA INTERMEDIATE – INCOME TAX [May 2021] Compiled by Prof. CA. Jignesh Thakkar
AMT provisions at a Glance
1) CHAPTER – XII-BA
2) Section 115JC / JD / JE / JEE / JF
3) Applicable to all persons other than Companies
4) Tax payable = Higher of the following two:
(i) Regular Tax payable as per regular provisions of the Income Tax Act (+) SC (only if NTI exceeds ` 100
Lakhs) (+) HEC @ 4%. (OR)
(ii) 18.5 % of ‘Adjusted Total Income (ATI)’ (+) SC (only if ATI exceeds ` 100 Lakhs) (+) HEC @ 4%
5) CA Report in Form No. 29C
6) AMT credit = AMT – Regular tax payable.
7) AMT Credit available for 15 consecutive years – Section 115JD
8) AMT credit can be set-off against excess of Regular tax payable over AMT in subsequent years.
9) Starting point of Adjusted Total Income (ATI) calculation is NTI as per Income Tax Act provisions.

Practical question on AMT

Q.1. PQR, LLP, limited liability partnership set-up a unit in Special Economic Zone (SEZ) in the financial year 2016-17
for production of washing machines. The unit fulfills all the conditions of Section 10AA of the Income Tax Act, 1961.
During the Financial Year 2019-20, it has also set up a warehousing facility in a district of Tamil Nadu for storage of
agricultural produce. It fulfills all the conditions of section 35AD. Capital expenditure in respect of warehouse
amounted to 75 Lakhs (including cost of land ` 10 lakhs). The warehouse became operational with effect from 1 April,
2020 and the expenditure of ` 75 lakhs was capitalised in the books on that date. Relevant details for the financial
year 2020-21 are as follows:
Particulars `
Profit of unit located in SEZ 40,00,000
Export sales of the above unit 80,00,000
Domestic sales of above unit 20,00,000
Profit from operation of warehousing facility (before considering deduction) 1,05,00,000
Compute income tax (including AMT u/s 115JC) payable by PQR, LLP for A.Y. 2021-22.
Ans.1.
[A] Computation of total income and tax liability of POR, LLP for A.Y. 2021-22 as per Normal provisions
Particulars ` `
Profits and gains of business or profession
From Unit in SEZ 40,00,000
Less: Deduction under Section 10AA [See Note (1) below] (32,00,000)
Business income of SEZ unit chargeable to tax 8,00,000
Profit from operation of warehousing facility 1,05,00,000
Less: Deduction under Section 35AD [See Note (2) below] (65,00,000)
Business income of warehousing facility chargeable to tax 40,00,000 40,00,000
Total Income 48,00,000
Computation of tax liability (under the normal / regular provisions)
Tax @ 30% on 48,00,000 14,40,000
Add: Health and Education cess @ 4% 57,600
Total tax liability 14,97,600
[B] Computation of adjusted total income of PQR, LLP for levy of Alternate Minimum Tax
Particulars ` `
Total Income (as computed above) 48,00,000
Deduction under Section 10AA 32.00,000
80,00,000
Add: Deduction under Section 35AD 65,00,000
Depreciation under section 32 on building @ 10% of 65 Lakhs. (6,50,000) 58,50,000
Adjusted Total income 1,38,50,000

Chapter 15. Miscellaneous Topics 148

CA INTERMEDIATE – INCOME TAX [May 2021] Compiled by Prof. CA. Jignesh Thakkar
Alternate Minimum Tax @ 18.5% 25,62,250
Surcharge @ 12% (since Adjusted Total Income > 1 crore) 3,07,470
28,69,720
Add: Health and Education Cess @ 4% 1,14,789
Tax liability 29,84,509
Tax liability under Section 115JC (rounded off) 29,84,510
Since, the Regular Income Tax payable is less than the alternate minimum tax payable, the adjusted total income
shall be deemed to be the total income, and the tax is leviable @ 18.5% thereof plus Surcharge @ 12% and Health
and Education Cess @ 4%. Therefore, the tax liability is ` 29,84,510.
Particulars `
Tax liability under Section 115JC 29,84,510
Less: Tax liability under the regular provisions of the Income Tax Act, 1961. (14,97,600)
AMT Credit to be carried forward under Section 115JEE 14,86,910
Notes:
(1) Deduction under section 10AA in respect of unit in SEZ is computed as follows:
Export turnover of SEZ unit 80,00,000
Profit of SEZ unit x 40,00,000 x = ` 32,00,000
Total turnover of SEZ unit 1,00,00,000
(2) Weighted deduction @ 150% of the capital expenditure is no more available under section 35AD from A.Y. 2018-
19 and onwards in respect of specified business of setting-up and operating a warehousing facility for storage of
agricultural produce which commences operation on or after 1.4.2012.
Further, the expenditure incurred, wholly and exclusively, for the purposes of such specified business shall be
allowed as deduction during the previous year in which it commences operations of the specified business, if the
expenditure is incurred prior to the commencement of its operations and the amount is capitalised in the books of
account of the assessee on the date of commencement of its operations.
Deduction under section 35AD would, however, not be available on expenditure incurred on acquisition of
land. In this case, since the capital expenditure of 65 lakhs [i.e. 75 lakhs (-) 10 lakhs, being expenditure on acquisition
of land] has been incurred in the F.Y. 2019-20 and capitalized in the books of account on 1.4.2020, being the date
when the warehouse became operational, 65 lakhs would qualify for deduction under section 35AD. (It is assumed
that the Capital Expenditure of 65 Lakhs is incurred for acquiring only Building/s).

Chapter 15. Miscellaneous Topics 149