Solapur University Question Paper
M.Com. (Part – I) (Semester – II) Examination, 2014
TAXATION (Paper – II) (Gr. C) (New)
Day and Date : Monday, 21-4-2014 Max. Marks : 50
Time : 11.00 a.m. to 1.00 p.m.
Instructions : All questions carry equal marks.
All questions are compulsory.
Figures in the bracket indicate marks.
1. Select the correct answer from alternatives. (10)
1) Interest on capital or loan received by a partner from the firm in which he is
partner shall be
A) Fully exempt
B) Fully taxable
C) Taxable to the extent the deduction is allowed to the firm
D) Taxable to the extent of 12% p.a.
2) If there is change in the constitution of the firm due to retirement, death, etc.
of the partner then the brought forward loss of the firm shall
A) Be allowed to set off in the hands of reconstituted firm
B) Be allowed to be set off in the hands of reconstituted firm to the extent of
brought forward loss minus share of the brought forward loss of partner
who has retired or died
C) Not be allowed to be carry-forward and set off
3) If a firm is not evidenced by an instrument or if the partners shares are not
determinate or if the partnership deed is not submitted along with the return
of income then such firm shall be
A) Assessed as firm but shall not be entitled to deduction on account of any
interest or remuneration to partners
B) Assessed as individual
C) Assessed in the hands of its partners by including the share of profits in
their income
D) Assessed as AOP
4) In case of AOP/BOI, any salary, bonus, commission or remuneration paid by
AOP/BOI to its member shall
A) Be allowed as deduction to the AOP/BOI while computing its income
B) Be allowed as deduction to the AOP/BOI while computing its income subject
to the limit prescribed u/s 40(b)
C) Not be allowed as deduction
5) Where the AOP/BOI has paid tax on its income at the maximum marginal
rate or at a higher rate, the share of the profit which a member gets from the
AOP/BOI
A) Shall be included in the total income of a member
B) Shall be included in the total income of a member but a rebate of income
tax at the average rate will be allowed as per Section 86 read with
Section 110
C) Shall not be included in the total income of the member
6) The circulars issued by the Board are
A) binding on assessee as well as Income Tax Authorities
B) binding on Income Tax Authority
C) neither binding on Income Tax Authorities nor on the assessee
7) Where a person is carrying on business or profession in more places than
one, the jurisdiction of such person shall be with
A) each assessing officer in whose jurisdiction such person carry on such
business
B) that assessing officer in whose jurisdiction the principle place of business
or professional in situated
8) Tax on dividend is payable by the domestic company at the rate of
A) 12.5%
B) 12.5% plus surcharge @ 5% plus education cess @2% plus SHEC @1%
C) 15% plus surcharge @ 5% plus education cess @ 2% plus SHEC @ 1%
9) A foreign company is chargeable to income tax
A) @35%
B) @40% + surcharge@2% + education cess of 2%
C) @40% + surcharge@2% + education cess of 2% + SHEC@1%
D) @40% + surcharge@2% if its total income exceeds Rs. 1 crore + education
cess of 2% + SHEC
10) The appeal against the order of commissioner (appeal) can be filed by
A) an assessee only
B) an assessing officer only subject to approval of CIT
C) either by assessee or by the assessing officer subject to approval of CIT
2. Write short notes on any two from the following : (10)
1) Book profit u/s 115JB of the Income Tax Act, 1961
2) Deductions available for cooperative societies
3) Scheme of taxation of partnership firms
4) Assessment of AOP
3. A) Solapur Super Bazar Consumer Co-operative Society furnishes the following
particulars of its income in respect of financial year 2012-13. You are required
to work out the taxable income of the Co-operative society : (5)
Income from business 2,50,000
Interest received on credit facility extended to member societies 50,000
Interest on deposits with banks 10,000
Dividend on investments :
Investments in shares of other co-operative societies 4,000
Other investments 4,000
Income from letting of godown for storage of commodities 20,000
Give reasons for your answer.
B) The total income of a co-operative society (other than consumers co-operative
society) for financial year ending 31-3-2013 (assessment year 2013-14) under
various heads is as under : (5)
Rs.
Banking business 10,000
Income from cottage industry 15,000
Marketing of agricultural produce grown by members 15,000
Income from purchase/sale of agriculture implements to members 12,000
Profit and gains of business 75,000
Interest and dividend from other co-operative society 12,000
Collective disposal of labour 11,000
Income from house property 50,000
2,00,000
Compute taxable income of the co-operative society.
4. A) M/s R, S, G and Sons is a partnership concern engaged exclusively in the
business of manufacture and export of goods. Compute the total income for
the previous year ended on 31-3-2013 on the basis of the following information. (10)
i) Net profit as per profit and loss account Rs. 23,75,860 after debiting
depreciation of Rs. 27,315.
ii) Salary paid to :
a) R, Rs. 36,000
b) G, Rs. 24,000
c) Mrs. S. Rs. 60,000. Mrs. S is an Export Manager of the firm. She is
matriculate with no previous experience
d) Shri W, chartered accountant, who is the son of Shri R was paid salary
of Rs. 1,20,000 p.a. Considering the fact that Shri W is only 26 years
old and has 2 years experience, a person with similar qualification
could be available for Rs. 75,000 p.a.
iii) The firm paid rent of Rs. 75,000 for a godown to Mrs. G. The normal
commercial rent for similar premises is Rs. 50,000.
iv) The firm had entered into an export order for supply of garments worth
Rs. 2,00,000 to U.A.E. However, due to non-availability of shipping facilities
due to strike at Bombay Port, the consignment was delayed resulting in
non-acceptance by the foreign buyer. The firm paid damages of Rs. 80,000
to the foreign buyer as per terms of agreement.
v) The firm had a marketing manager who has appointed for a period of
10 years in 2000 on a monthly salary of Rs. 5,000. During the previous
year it came to the knowledge of the firm that he was in collusion with a
competitor to jeopardize the firm’s foreign business though no definite
proof could be available. The firm terminated his services by paying him
lump sum amount of Rs. 2,40,000 during the relevant previous year.
vi) The firm paid a sum of Rs. 40,000 to Shri M who was the son of an
important official before whom certain criminal proceedings against the
firm were pending. The payment resulted in dropping of those proceedings.
However, Shri M did not pass any receipt for this payment to him.
vii) The firm had purchased shares of MSM Ltd., worth Rs. 3,60,000 by taking
an overdraft of an identical amount from Bank of India at 15% rate of
interest. During the relevant previous year no dividend was declared by
the said company.
viii) The firm had claimed depreciation on the following items :
a) Machinery and plant W. D. V. Rs. 68,480.
b) Motor cars (one was exclusively used by partners for personal use
with W. D. V. Rs. 17,300) W. D. V. Rs. 40,300.
c) Furniture and fixtures W. D. V. Rs. 25,900.
d) R and G are non-working partners.
OR
B) The total income of a firm JSN in which Jain, Shukla and Neema the partners
share profits and losses in the ratio 1 : 2 : 3 was as per P and L A/c
Rs. 40,000 for the previous year 2012-13. In computing the total income of
Rs. 40,000 the following have been debited to the P and L accounts. Salaries
of Rs. 1,80,000 and 1,20,000 to Jain and Shukla respectively. (10)
Interest on capital calculated @ 12%. Interest paid Rs. 7,500, Rs. 45,000 and
Rs. 37,500 to Jain, Shukla and Neema respectively. Bonus to Neema
Rs. 90,000.
Commission of Rs. 30,000; Rs. 75,000 and Rs. 1,05,000 to Jain, Shukla and
Neema respectively. Neema had borrowed capital for his investment in the
firm and had paid interest of Rs. 37,500 separately to the lender.
Compute the total income of the firm and taxable income of the three partners
in the firm. All the partners are working partners.
5. A) Vedant Prints Ltd. is a public company engaged in the business of printing
and publication of books. Its profit and loss account for the year ended
31-3-2013 disclosed a net profit of Rs. 8,00,000. Particulars noted from the
company’s accounts and obtained on enquiry from the company are given
below : (10)
i) The head office of the company is situated in a building taken on lease.
During the year, the company incurred an expenditure of Rs. 1,00,000 on
extension of and improvements to this building. The sum of Rs. 1,00,000
was debited by the company to its P and L A/c.
ii) In the past, the company used to value its closing stock at cost. This year
the closing stock was valued at 10% below cost at Rs. 90,000. The
company has resolved that it will henceforth adopt this method of valuation,
consistently from year to year.
iii) A motor car purchased by the company in the past for Rs. 25,000 was
sold to an employee of the company for Rs. 16,000 which was also the
written down value of the car at the beginning of the year. The market
value of the car on the date of sale was Rs. 24,000.
iv) Credits to the P and L A/c included dividend of Rs. 80,000 received from
an Indian company.
v) Debits to the P and L A/c included the following :
a) Rs. 10,000 regarding expenditure incurred for printing invitation cards
and hiring and transport charges of furniture and shamiana in connection
with the inauguration of a new branch opened for expanding the business.
b) Rs. 20,000 paid as penalty to Government for the company’s failure to
perform the job of printing and supply of text books within the stipulated
time. Company had to pay penalty for 4 months delay @ Rs. 5,000 per
month as per agreement with the Government.
c) Rs. 5,000 being interest paid to bank on monies borrowed to pay
income-tax Rs. 4,000 and wealth-tax Rs. 1,000.
d) Rs. 12,000 paid for shifting of business premises from the original site
to the present site which is more advantageously located.
Compute the total income of the company for the assessment year 2013-14.
Give reasons for additions made or deductions allowed in respect of the
various items.
OR
B) Bhagyalaxmi Trades (P) Ltd. gives you a draft of its profit and loss account
for the year ended 31-3-2013 showing a net profit of Rs. 9 lakhs. The following
further information is also given : (10)
a) The company had imported machinery at a cost of Rs. 50 lakhs in
2011-12. Depreciation on the original cost at 10 per cent on the straight
line basis is provided in the accounts (Rs. 5 lakhs). The company obtained
from the foreign supplier Rs. 50,000 in 2011-12 by way of compensation
for the defective machinery supplied. This has been credited to a reserve
account. Provision for depreciation on other assets in the books are on
the same basis as provided in the Income-tax Act.
b) The enforcement directorate had detected that the company had over
invoiced imports of raw materials to the extent of Rs. 90,000. This sum
had been spent by the managing director during his business visit to the
foreign country for personal purposes.
c) Professional charges included :
i) Rs. 2,000 being legal expenses incurred in connection with criminal
proceedings launched by the Income Tax Department against the
Managing Director for fabrication of accounts in the case of a firm in
which he is a partner.
ii) Rs. 7,500 paid to solicitors for attending income-tax appeals for 3 years
before Income-tax Appellate Tribunal.
SLR-NN – 45 -6-
d) Advertisement expenses included (incurred in January, 2013) :
i) Advertisement in Malaysia for exploring the possibilities of export to
that country Rs. 9,000.
ii) Payment to an advertising agent Rs. 4,000 in cash. The payment is
supported by proper voucher.
e) Interest payment included the following :
i) Rs. 1 lakh paid to depositors all of whom were shareholders of the
company, on fixed deposits and Rs. 2 lakhs to a bank on overdraft
account.
ii) Rs. 3,000 paid by way of interest to a non-resident and Rs. 10,000 paid
as interest on fixed deposits from a relative of the Managing Director
without deduction of tax at source.
iii) Rs. 5,000 paid to bank on loan taken for meeting income-tax liabilities.
f) As per the payment of Bonus Act, the bonus liability worked out to
Rs. 3 lakhs. However, following past practice, the company paid
Rs. 4 lakhs, which worked out to 20 per cent of salaries of staff.
g) The profit and loss account shows a credit of Rs. 5,000 for dividend on
1-6-2012 from a company engaged in the manufacture of cement. Dividend
distributed by Bhagyalaxmi Prints (P) Ltd. for the financial year 2012-13
on 1-10-2013 is Rs. 1,50,000
Compute the total income of the company for the purpose of making provision
for taxation for the above year. You need not compute the tax. Please indicate,
in brief, the reasons for any adjustments that you make in support of your
computation.
_____________________
M.Com. (Part – I) (Semester – II) Examination, 2014
TAXATION (Paper – II) (Gr. C) (New)
Day and Date : Monday, 21-4-2014 Max. Marks : 50
Time : 11.00 a.m. to 1.00 p.m.
Instructions : All questions carry equal marks.
All questions are compulsory.
Figures in the bracket indicate marks.
1. Select the correct answer from alternatives. (10)
1) Interest on capital or loan received by a partner from the firm in which he is
partner shall be
A) Fully exempt
B) Fully taxable
C) Taxable to the extent the deduction is allowed to the firm
D) Taxable to the extent of 12% p.a.
2) If there is change in the constitution of the firm due to retirement, death, etc.
of the partner then the brought forward loss of the firm shall
A) Be allowed to set off in the hands of reconstituted firm
B) Be allowed to be set off in the hands of reconstituted firm to the extent of
brought forward loss minus share of the brought forward loss of partner
who has retired or died
C) Not be allowed to be carry-forward and set off
3) If a firm is not evidenced by an instrument or if the partners shares are not
determinate or if the partnership deed is not submitted along with the return
of income then such firm shall be
A) Assessed as firm but shall not be entitled to deduction on account of any
interest or remuneration to partners
B) Assessed as individual
C) Assessed in the hands of its partners by including the share of profits in
their income
D) Assessed as AOP
4) In case of AOP/BOI, any salary, bonus, commission or remuneration paid by
AOP/BOI to its member shall
A) Be allowed as deduction to the AOP/BOI while computing its income
B) Be allowed as deduction to the AOP/BOI while computing its income subject
to the limit prescribed u/s 40(b)
C) Not be allowed as deduction
5) Where the AOP/BOI has paid tax on its income at the maximum marginal
rate or at a higher rate, the share of the profit which a member gets from the
AOP/BOI
A) Shall be included in the total income of a member
B) Shall be included in the total income of a member but a rebate of income
tax at the average rate will be allowed as per Section 86 read with
Section 110
C) Shall not be included in the total income of the member
6) The circulars issued by the Board are
A) binding on assessee as well as Income Tax Authorities
B) binding on Income Tax Authority
C) neither binding on Income Tax Authorities nor on the assessee
7) Where a person is carrying on business or profession in more places than
one, the jurisdiction of such person shall be with
A) each assessing officer in whose jurisdiction such person carry on such
business
B) that assessing officer in whose jurisdiction the principle place of business
or professional in situated
8) Tax on dividend is payable by the domestic company at the rate of
A) 12.5%
B) 12.5% plus surcharge @ 5% plus education cess @2% plus SHEC @1%
C) 15% plus surcharge @ 5% plus education cess @ 2% plus SHEC @ 1%
9) A foreign company is chargeable to income tax
A) @35%
B) @40% + surcharge@2% + education cess of 2%
C) @40% + surcharge@2% + education cess of 2% + SHEC@1%
D) @40% + surcharge@2% if its total income exceeds Rs. 1 crore + education
cess of 2% + SHEC
10) The appeal against the order of commissioner (appeal) can be filed by
A) an assessee only
B) an assessing officer only subject to approval of CIT
C) either by assessee or by the assessing officer subject to approval of CIT
2. Write short notes on any two from the following : (10)
1) Book profit u/s 115JB of the Income Tax Act, 1961
2) Deductions available for cooperative societies
3) Scheme of taxation of partnership firms
4) Assessment of AOP
3. A) Solapur Super Bazar Consumer Co-operative Society furnishes the following
particulars of its income in respect of financial year 2012-13. You are required
to work out the taxable income of the Co-operative society : (5)
Income from business 2,50,000
Interest received on credit facility extended to member societies 50,000
Interest on deposits with banks 10,000
Dividend on investments :
Investments in shares of other co-operative societies 4,000
Other investments 4,000
Income from letting of godown for storage of commodities 20,000
Give reasons for your answer.
B) The total income of a co-operative society (other than consumers co-operative
society) for financial year ending 31-3-2013 (assessment year 2013-14) under
various heads is as under : (5)
Rs.
Banking business 10,000
Income from cottage industry 15,000
Marketing of agricultural produce grown by members 15,000
Income from purchase/sale of agriculture implements to members 12,000
Profit and gains of business 75,000
Interest and dividend from other co-operative society 12,000
Collective disposal of labour 11,000
Income from house property 50,000
2,00,000
Compute taxable income of the co-operative society.
4. A) M/s R, S, G and Sons is a partnership concern engaged exclusively in the
business of manufacture and export of goods. Compute the total income for
the previous year ended on 31-3-2013 on the basis of the following information. (10)
i) Net profit as per profit and loss account Rs. 23,75,860 after debiting
depreciation of Rs. 27,315.
ii) Salary paid to :
a) R, Rs. 36,000
b) G, Rs. 24,000
c) Mrs. S. Rs. 60,000. Mrs. S is an Export Manager of the firm. She is
matriculate with no previous experience
d) Shri W, chartered accountant, who is the son of Shri R was paid salary
of Rs. 1,20,000 p.a. Considering the fact that Shri W is only 26 years
old and has 2 years experience, a person with similar qualification
could be available for Rs. 75,000 p.a.
iii) The firm paid rent of Rs. 75,000 for a godown to Mrs. G. The normal
commercial rent for similar premises is Rs. 50,000.
iv) The firm had entered into an export order for supply of garments worth
Rs. 2,00,000 to U.A.E. However, due to non-availability of shipping facilities
due to strike at Bombay Port, the consignment was delayed resulting in
non-acceptance by the foreign buyer. The firm paid damages of Rs. 80,000
to the foreign buyer as per terms of agreement.
v) The firm had a marketing manager who has appointed for a period of
10 years in 2000 on a monthly salary of Rs. 5,000. During the previous
year it came to the knowledge of the firm that he was in collusion with a
competitor to jeopardize the firm’s foreign business though no definite
proof could be available. The firm terminated his services by paying him
lump sum amount of Rs. 2,40,000 during the relevant previous year.
vi) The firm paid a sum of Rs. 40,000 to Shri M who was the son of an
important official before whom certain criminal proceedings against the
firm were pending. The payment resulted in dropping of those proceedings.
However, Shri M did not pass any receipt for this payment to him.
vii) The firm had purchased shares of MSM Ltd., worth Rs. 3,60,000 by taking
an overdraft of an identical amount from Bank of India at 15% rate of
interest. During the relevant previous year no dividend was declared by
the said company.
viii) The firm had claimed depreciation on the following items :
a) Machinery and plant W. D. V. Rs. 68,480.
b) Motor cars (one was exclusively used by partners for personal use
with W. D. V. Rs. 17,300) W. D. V. Rs. 40,300.
c) Furniture and fixtures W. D. V. Rs. 25,900.
d) R and G are non-working partners.
OR
B) The total income of a firm JSN in which Jain, Shukla and Neema the partners
share profits and losses in the ratio 1 : 2 : 3 was as per P and L A/c
Rs. 40,000 for the previous year 2012-13. In computing the total income of
Rs. 40,000 the following have been debited to the P and L accounts. Salaries
of Rs. 1,80,000 and 1,20,000 to Jain and Shukla respectively. (10)
Interest on capital calculated @ 12%. Interest paid Rs. 7,500, Rs. 45,000 and
Rs. 37,500 to Jain, Shukla and Neema respectively. Bonus to Neema
Rs. 90,000.
Commission of Rs. 30,000; Rs. 75,000 and Rs. 1,05,000 to Jain, Shukla and
Neema respectively. Neema had borrowed capital for his investment in the
firm and had paid interest of Rs. 37,500 separately to the lender.
Compute the total income of the firm and taxable income of the three partners
in the firm. All the partners are working partners.
5. A) Vedant Prints Ltd. is a public company engaged in the business of printing
and publication of books. Its profit and loss account for the year ended
31-3-2013 disclosed a net profit of Rs. 8,00,000. Particulars noted from the
company’s accounts and obtained on enquiry from the company are given
below : (10)
i) The head office of the company is situated in a building taken on lease.
During the year, the company incurred an expenditure of Rs. 1,00,000 on
extension of and improvements to this building. The sum of Rs. 1,00,000
was debited by the company to its P and L A/c.
ii) In the past, the company used to value its closing stock at cost. This year
the closing stock was valued at 10% below cost at Rs. 90,000. The
company has resolved that it will henceforth adopt this method of valuation,
consistently from year to year.
iii) A motor car purchased by the company in the past for Rs. 25,000 was
sold to an employee of the company for Rs. 16,000 which was also the
written down value of the car at the beginning of the year. The market
value of the car on the date of sale was Rs. 24,000.
iv) Credits to the P and L A/c included dividend of Rs. 80,000 received from
an Indian company.
v) Debits to the P and L A/c included the following :
a) Rs. 10,000 regarding expenditure incurred for printing invitation cards
and hiring and transport charges of furniture and shamiana in connection
with the inauguration of a new branch opened for expanding the business.
b) Rs. 20,000 paid as penalty to Government for the company’s failure to
perform the job of printing and supply of text books within the stipulated
time. Company had to pay penalty for 4 months delay @ Rs. 5,000 per
month as per agreement with the Government.
c) Rs. 5,000 being interest paid to bank on monies borrowed to pay
income-tax Rs. 4,000 and wealth-tax Rs. 1,000.
d) Rs. 12,000 paid for shifting of business premises from the original site
to the present site which is more advantageously located.
Compute the total income of the company for the assessment year 2013-14.
Give reasons for additions made or deductions allowed in respect of the
various items.
OR
B) Bhagyalaxmi Trades (P) Ltd. gives you a draft of its profit and loss account
for the year ended 31-3-2013 showing a net profit of Rs. 9 lakhs. The following
further information is also given : (10)
a) The company had imported machinery at a cost of Rs. 50 lakhs in
2011-12. Depreciation on the original cost at 10 per cent on the straight
line basis is provided in the accounts (Rs. 5 lakhs). The company obtained
from the foreign supplier Rs. 50,000 in 2011-12 by way of compensation
for the defective machinery supplied. This has been credited to a reserve
account. Provision for depreciation on other assets in the books are on
the same basis as provided in the Income-tax Act.
b) The enforcement directorate had detected that the company had over
invoiced imports of raw materials to the extent of Rs. 90,000. This sum
had been spent by the managing director during his business visit to the
foreign country for personal purposes.
c) Professional charges included :
i) Rs. 2,000 being legal expenses incurred in connection with criminal
proceedings launched by the Income Tax Department against the
Managing Director for fabrication of accounts in the case of a firm in
which he is a partner.
ii) Rs. 7,500 paid to solicitors for attending income-tax appeals for 3 years
before Income-tax Appellate Tribunal.
SLR-NN – 45 -6-
d) Advertisement expenses included (incurred in January, 2013) :
i) Advertisement in Malaysia for exploring the possibilities of export to
that country Rs. 9,000.
ii) Payment to an advertising agent Rs. 4,000 in cash. The payment is
supported by proper voucher.
e) Interest payment included the following :
i) Rs. 1 lakh paid to depositors all of whom were shareholders of the
company, on fixed deposits and Rs. 2 lakhs to a bank on overdraft
account.
ii) Rs. 3,000 paid by way of interest to a non-resident and Rs. 10,000 paid
as interest on fixed deposits from a relative of the Managing Director
without deduction of tax at source.
iii) Rs. 5,000 paid to bank on loan taken for meeting income-tax liabilities.
f) As per the payment of Bonus Act, the bonus liability worked out to
Rs. 3 lakhs. However, following past practice, the company paid
Rs. 4 lakhs, which worked out to 20 per cent of salaries of staff.
g) The profit and loss account shows a credit of Rs. 5,000 for dividend on
1-6-2012 from a company engaged in the manufacture of cement. Dividend
distributed by Bhagyalaxmi Prints (P) Ltd. for the financial year 2012-13
on 1-10-2013 is Rs. 1,50,000
Compute the total income of the company for the purpose of making provision
for taxation for the above year. You need not compute the tax. Please indicate,
in brief, the reasons for any adjustments that you make in support of your
computation.
_____________________
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