B.

Com (P) Semester III

Duration: 3 Hours
Max marks: 55

Course/ Mode Semester Paper Name and

Code
B.Com (p) III Income Tax Law
&Practice
52414304

1. A financial year has a double role to play: it is a previous year as well as an assessment year.
Explain. Define Previous year as per section 3 of Income Tax Act, 1961. Enumerate the cases
when income of previous year is not taxable in the immediately following assessment year.
What will be the relevant previous year to the AY 2020-21, if the new business is established
on 28.03.2018? What will be the answer if the new business is set up on 28.03.2019?
2. Mr. Satish Kapoor (55 years, a resident individual) is working as a Chief Manager (Materials
Department) with M/s Kiteflying in Nasik, Maharashtra. He furnishes the following
information for the Previous Year 2019-20. Compute his taxable income for the Assessment
Year 2020-21.

S. No. Particulars Amount (Rs.)

(i) Basic Salary 2,00,000 p.m.
(ii) Dearness Allowance (40% forms part of all retirement 10% of basic salary
benefits)
(iii) Fees 80,000
(iv) House Rent Allowance (Rent paid 50,000 p.m. upto 72,000 p.m.
November, 2019. From 01.12.2019, he shifts to his own
accommodation in Nasik, Maharashtra.)
(v) Employer company provides two watchmen 4,000 p.m. per watchman
(vi) Reimbursement of Medical expenses for treatment of Mr. 45,000
Satish and his wife in Kailash Private Hospital.
(vii) Employer contributed towards Recognised provident fund. 15% of Salary
Mr. Satish also makes a matching contribution.
(viii) Leave Travel Concession availed (Actual expenditure: Air 46,000
fare Rs. 56,000)
(ix) Innova Car (engine capacity = 2494 c.c. owned by 9,500 p.m.
Employer company, expenses met by employer, used for
partly official and partly personal purposes. Expenditure
recovered from Mr. Satish is Rs. 25,000)
(x) Gift of Phillips Airfryer on his birthday by employer in 25,000
November
(xi) Credit card provided by employer company used only for 36,000
official purposes.
(xii) Dividend received from Tata Corporation, an Indian 6,00,000
Company
(xiii) Interest on Savings account (in his own name) with Post 26,500
 office

During the Previous Year 2019 – 20, he has made the following investments, deposits or payments:
 Life insurance premium (policy taken in 2017) on the life of his independent daughter (Sum
assured: Rs. 2,00,000): Rs. 10,000
 Life insurance premium (policy taken in 2018) on his father’s life (father is a senior citizen) (Sum
assured: Rs. 1,40,000): Rs. 15,000
 Mediclaim insurance premium for parents in law (both senior citizens): Rs. 60,000
 Donation to political party in bearer cheque: Rs. 10,000

3. Mr. Pawan (a resident Individual, age 68 years) owns three houses which are used by him for
his residential purposes. From the following information, suggest which house should be
opted as self-occupied and accordingly determine the taxable income of Mr. Pawan for AY
2020-21.
Houses A B C

Municipal value 3,80,000 5,00,000 6,50,000

Fair Rent 3,88,000 5,00,000 6,30,000
Standard Rent 4,00,000 5,00,000 6,00,000
Municipal taxes paid by him 10% 10% 10%
Repairs and Insurance premium 16,000 35,000 80,000
Interest on Date of borrowing 20.08.2017 10.02.1999 15.10.2015
Borrowed
capital. Current year’s 85,000 1,00,000 1,36,000
Capital was interest
borrowed for Pre construction 28,000 10,000 78,000
construction period interest
of the instalment for year
properties. 2019-20 (20% of the
Construction total PCP interest)
was
completed
within
stipulated
time.
He receives a Tagore Painting on his birthday from a family friend. Fair market value of the
painting is Rs. 5,90,000. No other gift is received during the PY 2019-20.
Donation made through account payee cheque to Prime Minister National Relief fund: Rs. 25,000
Interest on loan for higher education of his daughter: Rs. 25,000.

4. Explain the concept of Block of Assets. Also, explain the provisions applicable to set off and
carry forward and set off of unabsorbed depreciation and non-speculative business losses.

5. Mr. Rahul Sharma purchased a flat (residential house property) in Ghaziabad, India on
01.07.2002 for Rs. 12,00,000. During June 2010, he gifted the property to his nephew Mr.
Ratan Grover. However, Ratan passes away in August 2016 and the property is transferred
through his will in the name of his son Mr. Sanchit Grover. Mr. Sanchit incurred Rs. 2,20,000
during October 2016 and Rs. 1,80,000 during December 2017 on the improvement of this
 property. He sells the property to Mr. Abhishek on 12.10.2019 for a consideration of Rs.
85,00,000 (Stamp Duty Value is Rs 90,00,000). He paid commission Rs. 20,000 to the agent
for arranging this deal.
He utilised the net sale proceeds as follows:
(i) Purchased Rural Electrification Corporation bonds worth Rs. 18,00,000 on 22.12.2019
(ii) Purchased a residential house property in NOIDA for Rs. 15,00,000 on 05.01.2020.
(iii) Subscribed units of Notified Mutual funds (Equity Linked Savings Scheme) worth Rs.
1,95,000 on 11.02.2020.
Compute the taxable income and tax liability of Mr. Sanchit (age 47 Years, resident individual)
for AY 2020-21.
PY Cost Inflation Index
2001-02 100
2002-03 105
2009-10 148
2010-11 167
2016-17 264
2017-18 272
2018-19 280
2019-20 289

6. Explain the provisions applicable to gifts in different circumstances u/s 56(2). Also, explain
the deductions available u/s 80C and 80D.
 B.com (P) 3rd Sem 2020
Income Tax Law and practice (OC)
Paper code: 52414304
Time: 3 hours
Mark: 55

Q1. “The income tax act gives absolute exemptions in respect of certain income, while some income is
included in the total income for determining the rate only”.In the light of above statement, state ten
incomes (along with their sections) which are exempt from tax.

Q2.Anamika, aged 59 years, is employed with XYZ Ltd. Her remuneration includes:

(i) Basic salary: Rs.80, 000 p.m.

(ii) Dearness allowance: 10% of basic salary (forming part of retirement benefits)
(iii) House rent allowance: Rs.24,000 p.m. (rent paid Rs.20,000 p.m. in Delhi)
(iv) City compensatory allowance: Rs.375 p.m.
(v) Family allowance: Rs.225 p.m.
(vi) Tiffin allowance: Rs.100 p.m.
(vii) Servant allowance: Rs.1050 p.m.
(viii) Over time allowance: Rs.500p.m.
(ix) Motor car facility for official and private use. The car, 1200 cc, (cost Rs.7, 00,000), is
owned by employer, Running and maintenance cost of Rs.1, 10,000 p.a. is also incurred
by employer. Anamika pays Rs.600 p.m. to the employer for use of this facility.
(x) Employer’s contribution to National pension scheme (NPS): 10% of salary. Anamika also
contributes an equal amount.
(xi) The only other income of Anamika is interest on fixed deposit (net of TDS): Rs.73,800.

She paid/deposited: (a) tuition fee of Rs.30, 000 for 2 children (b) Rs.40, 000 in Sukanya Samridh scheme
(III) Rs. 10,000 in Kishanvikashpatra (iv)paid med claim premium Rs.10, 000 each for herself, husband &
her brother in law.
Compute Anamika’s tax liability for the assessment year 2020-21.

Q3. Ms. For the assessment year 2020-21, X (age 65 years) submit the following information:

Particulars HOUSE :1 (Rs) HOUSE:2 (Rs.)

Fair rent 7,00,000 6,40,000
Municipal valuation 7,20,000 7,00,000
Standard rent 6,00,000 10,00,000
Annual rent 12,00,000 8,40,000
Unrealized rent of the previous 20,000 1,60,000
year 2019-20
Unrealized rent of the previous - 6,00,000
year 2018-19
Vacancy period (months) 2 4
Municipal tax paid 80,000 10%
Loss on account of vacancy 2,00,000 2,80,000
Repairs 15,000 14,000
Fire insurance 25,000 25,000
Land revenue 55,000 85,000
Ground rent 56,000 28,000
Interest on capital borrowed by 2,80,000 -
mortgaging house-1 but funds
used for construction of house -
2
Nature of occupation Let out for business Let out for residence
Determine the taxable income and tax liability of X for the assessment year 2020-21 assuming that X
paid Rs.1, 40,000 as life insurance premium on the life of his wife for Rs. 20, 00,000 policy is taken on 11-
8-2011 and invested Rs.20,000 in Indira Vikas patra& Rs.50, 000 in PPF account in his own name.

Q4. “There are certain expenses those can be claimed as deduction, under the head profits from
business and profession, even if paid after end of previous year”. Explain. Also discuss the treatment of
expenditure on scientific research under section 35?

Q5. Explain the term capital gains under the income tax act. Distinguish between short term and long
term capital gains. Also explain the provision of section 54 & 54 B of the income tax act 1961?

Q6. Explain the provisions of income tax act regarding, the set off and carry forward and set off of losses
under different heads of income.