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DRIVE SPRING 2016
PROGRAM MBA
SEMESTER III
SSUBJECT CODE & NAME
MF 0012
TAXATION MANAGEMENT
1 Mr. X (38 year) is employed by A Ltd. as marketing manager in Pune. The following
information is furnished by Mr. X for the previous year ending 31st March 2015.
Basic salary Rs. 12,00,000 p.a., DA Rs. 40,000 p.a. (36 % of DA is considered for gratuity
and Pension, but not for Provident fund). Club allowance Rs. 5,000 p.m., Furnishing
allowance Rs. 2,000 p.m. and HRA Rs. 40,000 p.m. Conveyance allowance is Rs. 2,000
p.m. which can be used both for office and private purposes.
Up to August 31, 2014, he resides with his parents and does not pay any rent. From
September 1, 2015 he has been allotted a company accommodation at Pune (population
23 lakhs) in lieu of house rent allowance.
Club allowance has been discontinued from January 1, 2015. And Mr. X has been
provided by the company club facility for private (20 %) and office use (80%).
Expenditure by the company uptil 31st March 2015 was Rs. 20,500.
On 20 Nov. 2014, Mr X has taken an interest free loan from the company (SBI lending
rate for Similar loan being 18.5 % p.a.). Mr. X and his employer contribute @ 10 % of his
salary to P.F. Interest Credited by the company in Provident Fund on June 1, 2014 @ 9.7
% is Rs. 2,11,200.
Assuming that income of Mr. X from Other Sources Rs. (-30,000), find out the net
income and liability of Mr. X for the Assessment Year 2015-16.
Based on above Compute the taxable income and tax liability (before deducting TDS) of Ms. X for the
A.Y. 2015-16 Rs. 2,600 (being Income-tax refund and Rs. 200 being Interest thereon)
Q2 a) How is advance money received against cost of acquisition adjusted?
b) State giving reasons, whether the following assets are Short term or Long term:
i) X purchases a house on 10th March 2012 and transfers on 6th June 2014.
ii) Y purchases unquoted shares in an Indian company on 10th March 2012 and transfers
on 6th June 2012.
iii) Z acquires units of mutual fund on 7th July 2013 and transfers those on 10th July
2014.
iv) A purchases diamonds on 12 September 2011 and gifts the same to his friend B on 31st
December 2014 and B transfers the asset on 20 October 2014.

2. Q3 Ms. A purchases a house property on 1st January 1976 for Rs. 95,000. She enters into
an Agreement for sale of the same property to Mr. X on 1st November 1983 and receives
Rs. 10,000 as advance. Following the demise of Mr. X immediately thereafter, the money
was forfeited by Ms. A. Later Ms. A gifts her property to her friend Ms. B on 15th May
1985. The following expenses are incurred by Ms. A and Ms. B for improvement of the
property:
Particulars Cost (Rs.)
Additions of two rooms by Ms. A during 1978-79 25,000
Addition of first floor by Ms. A during 1983-84 40,000
Addition of second floor by Ms. B during 1990-91 1,15,000
Ms. B enters into an agreement for sell the property for RS. 8,50,000 to Mr. P on 1st
April 1993after receiving an advance of Rs. 50,000. Mr. P could not pay the balance
amount within the stipulated time of two months and Ms. B forfeits the amount of
advance.
Ms. B finally transfers the property to Ms. C for Rs. 14,75,000 on 1st December 2014.
Given the Fair Market Value of the property on 1st April 1981 being Rs. 1,15,000; Cost
Inflation Index for 1981-82 : Rs. 100; for 1983-84 : Rs.116; for 1985-86 : Rs. 133; for 1990-
91 : Rs. 182; for 1993-94 : Rs. 244 and 2014-15: Rs.1,024 compute the Capital gains in the
hands of Ms. B for the Assessment Year 2015-16.
Compute the Capital gains in the hands of Ms. B for the Assessment Year 2015-16.
Q4 i) Ms. Brinda, a U.S. citizen visits India on 1st January 2014 to study and conduct
research on Indian folk culture. She has been regularly visiting India for 100 days in the
past five consecutive years to carry the research. Advise the residential status of Ms.
Brinda under extant rules referring to section 6 of the Income-tax Act 1961.
ii) What are the provisions of Advance tax under section 2(1)?
Q5 Explain the need of Service tax in India. What are the different approaches to Service
tax in India?
Q6 Mr. X (aged 59 years) furnishes the following Profit and Loss account for the year
ended 31st March, 2015. Compute the Gross Total Income of Mr. X under respective
heads, his Net Taxable Income and Tax liability in the assessment year 2015-16.
Particulars Rs. Particulars Rs.
General Expenses 13,400 Gross profit 3,15,500
Bad debts 22,000 Commission 8,600
Advance tax 2,000 Brokerage 37,000
Insurance 600 Miscellaneous Income 2,500
Salary to Staff 26,000 Bad Debt Recovery 11,000

3. Salary to Mr. X 51,000 Interest on Debenture
(Net interest Rs.22,500 + TDS Rs.
2,500)
25,000
Interest on Cash
Credit
4,000 Interest on Fixed Deposits
(Net interest Rs. 11,700 + TDS Rs.
1,300)
13,000
Interest on loan to
Mrs. X
42,000
Interest on Capital
of Mr. X
23,000
Depreciation 48,000
Advertisement 7,000
Contribution to
Employees’
Provident Fund
13,000
Net Profit 1,60,600
Total 4,12,600 Total 4,12,600
Supplementary information:
Permissible depreciation as per CBDT circular is Rs. 37,300 which includes depreciation
of permanent glow sign board.
i. Advertisement expenditure includes Rs. 3,000, being cost of permanent glow sign
board affixed outside the office premises.
ii. Commission accrued but not received Rs. 4,500 is not credited to P & L Account.
iii. Mr. X pays premium of Rs. 6,000 on his own life.
iv. General expenses includes:
a) Rs. 500 spent for arranging a party for Mr. X’s son who arrives from Canada.
b) Rs. 1,000 for contribution to a political party.
v. Loan availed from Mrs. X was for payment of arrear tax.
A Mr. X (aged 59 years) furnishes the above Profit and Loss account for the year ended
31st March, 2015.
Compute the Gross Total Income of Mr. X under respective heads, his Net Taxable
Income and Tax liability in the assessment year 2015-16.
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