University of Delhi 2010-3rd Year B.Com (HONS) TAX PLANNING AND MANAGEMENT UNIVERSITY - Question Paper
TAX PLANNING AND MANAGEMENT PAPER
This question paper contains 24+4 printed pages]
Your Roll No.................................................
6083
B.Com. (Hons.)/m J
4
ELECTIVE GROUP EF-TAX PLANNING AND MANAGEMENTPaper XXIX (Corporate Tax Planning)
Time : 3 Hours Maximum Marks 75
WW : 3 ' Tjnfa : 75
(Write your Roll No. on the top immediately on receipt of this question paper) (JQ "5 ftvffta WH TR 3TPTI 3q5F*?TC> l)
Note . The maximum marks printed on the question paper are applicable for the candidates registered with the School of Open Learning. These marks will, however, be scaled down proportionately in respect of the students of regular colleges, at the time of posting of awards for compilation of result.
. ( 2 ) 6033
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Note . Answers may be written either in English or in Hindi; but the same medium should be used throughout the paper.
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Attempt A// questions.
A// questions carry equal marks
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1. The accounts of a public company have been prepared in accordance with provisions of Part II and III of
* Schedule VI of the Companies Act and its Profit & Loss Account laid before the Annual General Meeting for the previous year ending 31 March, 2009 shows a net profit of Rs 15 lakhs.
The following information relevant for the purpose of computing its assessable income has been extracted from a scrutiny of Profit & Loss Account :
Credits in the Profit & Loss Account *
(1) Profit from a new industrial
*
undertaking qualifying for deduction under Section 80IA
Rs. 17,00,000
(Net)
(2) Profits from a new industrial
undertaking qualifying for
deduction under Section 10A
Rs 10,00,000
(gross)
(3) Long-term capital gains
Rs 3,00,000
Debits in Profit & Loss Account
(1) Expenditure relating to industrial
undertaking qualifying for
(2) Depreciation relating to 2007-08
brought forward Rs 10,00,000
(3) Business loss relating to 2007-.08
brought forward Rs 12,00,000
(4) Current year's depreciation Rs. 10,00,000
(5) Penalty for infraction of law Rs 1,00,000
(6) Provision of sales tax Rs 3,00,000
(7) Dividend proposed Rs. 2,00,000
t
Depreciation admissible under the Income Tax Act and rules for the previous year is Rs 19,50,000 The capital gains has been invested in specified assets under Section 54EC. Sales tax provided in the accounts has been remitted before the due date. There is no loss or unabsorbed depreciation to be carried forward and adjusted as per income tax assessment.
You are required to compute the total tax liability of the company for the assessment year 2009-10. 16
( 5 ) 6033
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(3) cM 3fa < -yWcT eHM 3,00,000 WT
|
( 6 ) |
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sfrc wfar SUf | ||
|
(1) |
aflhitop <iHshi -oifim | |
|
fa ro ioa | ||
|
%*Tf |
7,00,000 | |
|
(2) |
2007-08 Tfacf | |
|
% |
3TFt eTRT FTT % |
.10,00,000 |
|
(3) |
2007-08 $ wffim | |
|
ifT f- 3TTt rTFir | |
12,00,000 | |
|
(4) |
SPT |
10,00,000 |
|
(5) |
4 fafa *m jpfar |
1,00,000 |
|
(6) |
3,00,000 | |
|
(7) |
srcdifad w*m |
2,00,000 |
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Or
() Define tax planning How is it different from tax avoidance and tax evasion ? 6
() Give reasons when
(i) A non-Indian company is permitted to acquire status of a domestic company.
(ii) A company is required to pay income tax
- more than that computed as per normal
provision of Income Tax Act
(iii) A closely held company is allowed to set off
I
and carry forward its business losses. 9
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(o) What are the tax incentives allowed to new industrial units set up in Special Economic Zones (SEZ) ? 6
(6) A and B want to start a business. They have two
J
options for selecting the form of organisation, j partnership firm or a private company, the
estimated profits of which, before the following
deductions, are expected at Rs. 7,44,000
(1) Remuneration Rs. 12,000 per month each
(2) Medical facility Rs. 20,000 per annum each
(3) Car facility from residence to office and back, estimated cost Rs 20,000 per annum each
(4) Rent free house valued at Rs. 30,000 each.
(5) Each will give loan to the business of Rs 2,00,000 @ 12% per annum.
(6) Contribution as capital Rs 2,00,000 each. On this, interest will be paid @ 12% per annum. However, the company cannot pay any interest on it
(7) The profits after tax will be distributed equally as profits or dividends
Suggest whether they should form a partnership
firm or a private company 9
< 10 ) 6033
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XYZ Ltd needs a component in an assembly operation It is contemplating a proposal to either make or buy the aforesaid component.
(1) If the company decides to make the component itself, it would need to buy a machine for Rs. 8 lakhs which would be used for 5 years. Manufacturing costs in each of the 5 years
would be Rs 12 lakhs, Rs 14 lakhs, Rs 16 lakhs, Rs 20 lakhs and Rs. 25 lakhs respectively The relevant depreciation rate is 15% The machine
*
will be sold for Rs. 1 lakh at the beginning of the sixth year.
(2) If the company decides to buy the component from the supplier, the component would cost Rs 18 lakhs, Rs 20 lakhs, Rs. 22 lakhs, Rs 28 lakhs and Rs 34 lakhs respectively in each of the five years
The relevant discounting rate and tax rate are 14 percent and 33 99 percent respectively Additional depreciation is not available Should XYZ Ltd make the component or buy it from outside 9 15 *
XYZ # far? VJ*
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3. (o) Write a note on receipt of insurance compensation
in case of damage or destruction of capital asset
u/s 45(1A). . * 5
i - P.T.O.
(6) X Ltd., a widely held company, engaged in manufacture of electrical switches is considering major expansion of its production facilities which is expected to improve its profitability from present 20% to 25% (before tax) The finance manager has given the following proposals
|
(Rs in lakhs) | |||||||||||||||||||||||||||||||||||||||||||||
|
() The rate of dividend on equity has not been
below 24% in the past (u) The tax rate faced by company is 33 99%
y
Your opinion with detailed reasons is sought on * the above * 10
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20 |
40 | |
|
N> |qfq*> vjf (20%) |
40 |
70 | ||
|
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40 | |||
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() X Ltd , a closely held company having accumulated losses of Rs 5 lakhs has advanced a loan of Rs 4 lakhs to a partnership firm on 20th August, 2008 Mr A, possesses 18% equity shares m X Ltd and has 25% share in the profits of partnership firm. Discuss the tax consequence
I
to this transaction on Mr A, X Ltd and the
4
partnership firm. ' 5
() Mrs. X is offered an employment by A Ltd at a basic salary of Rs 24,OOQ per month Other allowances according to the rules of the company are
Dearness allowance 18% of basic pay (not forming part of salary), bonus : one months basic pay, project allowance : 6% of basic pay
The company gives Mrs X an option either to take a rent free unfurnished accommodation at Bhopal for which the company will directly bear rent of Rs 15,000 per month or to accept a House Rent Allowance of Rs 15,000 per month and to find out own accommodation and pay Rs 15,000 as rent Which one of the two options should Mrs X opt for in order to minimise her tax bill 9 Will it make any difference to her choice if Dearness Allowance forms part of salary for long-term benefits 9 10
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(6) Explain briefly the amount of deduction allowed
to Non-Resident under Section 44C in respect of
head office expenditure
5
(c) X, a member of New Zealand cricket team, received a sum of Rs 5 lakh for participation m cncket matches in India He also received a
sum of Rs 1 lakh m India for endorsing a product on TV. He contributed articles in a newspaper in India for which he received Rs 10,000 During the tour of India, he attended horse racing in Mumbai and won a prize of Rs 10,000 Determine
/
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() Discuss briefly the scheme of Advance Ruling 7
() Professor X, citizen of India, earned the following remuneration dunng the previous year
Rs
*
Salary from Delhi University
(for 8 months) 4,00,000
Salary from a University in USA 4,00,000
.. He went to USA on leave without pay for 4 months dunng the previous year He returned to India on 1st April, 2009 and brought with him Rs 3 lakh m convertible foreign exchange The foreign university deducted tax at source of Rs 50,000 Compute
(1) Double taxation relief, and
(2) Tax payable for AY 2009-10 8
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5 (a) Define amalgamation u/s 2(1B) of Income Tax Act State the tax incentives available to amalgamated company in case of amalgamation under Income Tax Act 9
(6) X owns a block of assets (consisting of plants A and B, depreciation rate 15%) On 1st April, 2008, WDV of block of assets is Rs 10,40,000 On 7th July, 2008, block of assets is transferred to Y by X in a scheme of amalgamation for Rs. 30,70,000 Find out tax consequences in the following 2 cases
*
(1) X is an amalgamating company and Y is an Indian amalgamated company and the block of assets is transferred by X to Y in scheme of amalgamation Y does not own any other asset
(2) Y is a foreign company (assume in the aforesaid case) 6
( 25 ) 6033
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(c) Define demerger u/s 2(19AA) 5
0b) Discuss the tax implications of transfer of assets between holding and subsidiary companies What are the cases when profits and gams arising from such transfer will be charged to capital gams tax 9 5
(c) X started a unit m 2002, the Balance Sheet of which as on 31st March, 2009 is as follows
|
Amt. (Rs) |
Amt. (Rs ) | ||
|
Capital |
13,00,000 |
Land (purchased | |
|
Revaluation Reserve |
6,00,000 |
on 1-6-2004) |
10,00,000 |
|
Bills Payable |
1,50,000 |
Building (WDV) |
5,00,000 |
|
Creditors |
2,50,000 |
Plant and | |
|
Machinery | |||
|
(WDV) |
3,00,000 | ||
|
Bills Receivable |
50,000 | ||
|
Stock |
2,50,000 | ||
|
Debtors |
2,00,000 | ||
|
23,00,000 |
23,00,000 |
(1) Land was revalued in 2007 and the amount was credited to Revaluation Reserve A/c
(2) Sold the unit on 1st May, 2008 for lump sum consideration of Rs 20,00,000
Compute the capital gains m slump sale 5
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|
Or) X % 2002 3 3i w$> 2009 cTSF cFTT y<*>K % : | ||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||
|
3RT qxRI : |
(1) 2007 3 *jfa fen tit ?n 3
TTlTT fecf *FTT
ttct n i
(2) 1 i, 2008 TTgcT 20,00,000
T pid "sfa ITT 7RT I
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6033 , 28 4,000
|
Attachment: |
| Earning: Approval pending. |
