Tuesday, May 16, 2017

Dibrugarh University Question Papers - Direct Tax Law II (May' 2016)

Course: 601
(Direct Tax - II)
Full Marks: 80
Pass Marks: 32
Time: 3 hours

The figures in the margin indicate full marks for the questions
1. (a) Write True or False:                             1x4=4
                                 i.            Interest on capital or loan received by a partner from a firm is taxable under the head ‘income from other sources’.
                               ii.            Conversion of personal effect into stock-in-trade shall be subjected to capital gain.
                              iii.            Winning from lotteries, cross-word puzzles, horse races and other races, card games, etc., are casual income and hence exempt.
                             iv.            Loss under the head ‘income from house property’ can be carried forward even if the return is not furnished before the due date prescribed u/s 139 (1).

(b) Fill in the blanks:                                    1x4=4
                                 i.            Salary, bonus, commission or remuneration due to or received by a working partner from the firm is taxable under the head ____.
                               ii.            Conversion of debentures into shares shall not be regarded as ____ for capital gain purpose.
                              iii.            If no system of accounting is followed, interest on securities is taxable on ____ basis.
                             iv.            Loss under the head ‘house property income’ can be carried forward for ____.

2. Write short notes on any four of the following:                             4x4=16
a)      Inadmissible deduction u/s 40.
b)      Capital asset.
c)       Carry forward of business losses.
d)      Allowable deductions from ‘income from other sources’.
e)      Tax planning in case of employee’s remuneration.

3. (a) Write down briefly the basic principles for arriving at Business income.                       11
    (b) Mr. B, a businessman, submits the following Profit and Loss Account for the year ending 31.32015:
Travelling expenses
Rent & taxes
Interest on capital
Administrative charges
Income Tax
Net Profit
Gross Profit
Interest on company deposits
Discount received



The following additional information is furnished:
a)      Salaries include a payment of Rs. 24,000 to Mrs. B, who is acting as supervisor of the quality control department. She does not have any other income during this year. Till February, 2014 she was employed in R Ltd., in a similar post for 10 years and was drawing a monthly salary of Rs. 1,500.

b)      Mr. B had gone on a foreign tour in connection with business. The journey was for 15 days in which he spent 3 days on visiting tourist spots. Total expenses incurred, which were within RBI norms as well, in respect of this foreign tour was Rs. 75,000.

c)       Administrative charges include expenses in respect of donation of Rs. 1,000 to the trade association for the purposes of advertisement in souvenir published by it.

d)      Depreciation allowance as per Income Tax Rules, 1962 is Rs. 45,000.

e)      Mr. B raised a loan from LIC of India on the security of his life insurance policy and used the same for the payment of expenses relating to repairs of machinery. Interest of Rs. 2,500 in respect of this loan was paid out of his drawings.
    From the above particulars, compute the total income under the head Business/Profession of Mr. B for the assessment year, 2015-16.                                    11

4. (a) What is Transfer of Capital Asset? Discuss the procedure for computation of capital gains.     4+8=12
    (b) Mr. A transfer the following capital assets:

House Property
Date of acquisition
Date of transfer
Sale consideration (in Rs.)
Cost of Acquisition (in Rs.)
Cost of improvement incurred in 2012-13 (in Rs.)
Expenditure on transfer (in Rs.)




Determine the amount of capital gain chargeable to tax for the assessment year, 2015-16 considering CII of 1984-85, 2012-13 and 2014-15 at 125, 852 and 1024 respectively.                              12
5. (a) Explain the assets exempted from Tax under the Wealth-tax Act.                                 11
    (b) Explain briefly the deemed assets under the Wealth-tax Act.                           11

6. (a) (i) For the previous year ending March, 31, 2015, Mr. C (59 years) submits the following information:
                                 i.            Income from house property – Rs. 2,50,000.
                               ii.            Loss from Business (non-speculative) – Rs.(-) 1,00,000.
                              iii.            Bank fixed deposit interest – Rs. 50,000.
                             iv.            Deposit in public provident fund account – Rs. 1,25,000
                               v.            Payment of life insurance premium on own life – Rs. 35,000
                             vi.            Mediclaim insurance premium on the life of C’s father – Rs. 30,000.
    Determine the amount of net income and tax liability of Mr. C.                                                              8
            (ii) Write briefly the provisions of carry forward and set off of loss from house property under the Income-tax Act.
    (b) (i) Loss under a head of income can be set off against income under any other head of income in the same assessment year. Is there any exception to this rule?                                     7
            (ii) Show the order in which current and brought forward losses are to be set off.                                                 4
7. (a) Distinguish between tax avoidance and tax evasion. What are the objectives of tax planning?                         4+7

    (b) Explain the methods commonly used by tax payers to minimize tax liability.                    11


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