Dr.M.Kamaraj, Associate of Professor in Commerce, TAC. Pondicherry.

Solutions for important exercises of Income –Tax –II. (Book-Author-V.P.Gaur.A/Y.2013-

14)

1. Ans. for Q.no.2. p.no. 2/456. Computation of Total Income for Assessment Year 2013-14

I .House Property Income Rs. Rs.

(i) Income From let-out House (computed) 6,000
(ii) Self-occupied house (Annual Value is taken as) _NIL
House property Income 6,000
II. Business Income
(i) Electric Goods Business Rs.
Profits from electric goods business 10,000
Add : Profit from agency business _3,000
13,000
Set-off B/F loss from Electric goods Business 6,000
Set-off B/F loss from Agency business _1,000 _7,000
6,000
Set-off B/F unabsorbed depreciation _1,000
5,000

(ii) Speculation Business

Speculation gain from Gold 2,000
Set-off B/F speculation loss from Silver -4,000
B/F Speculation loss from silver shall be
carried forward further _2,000
_NIL
Income under the head “Profits & Gains” 5,000

III. Capital Gains

(a) Long-term Capital Gain from land 7,000
Less Long-term Capital Loss _4,400
2,600

(b) Short term Capital Gain 2,000

Set-off Short-term Capital Loss B/F 3,000
Balance to the set off from LTCG _(-)1,000
Tabxable Capital Gain 1,600
G.T.I 12,600

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2.Ans. for Q.no.8. p.no. 2/459. Computation of Total Income For Mr. Moopnar for the P/Y 2012-13.
Profits and gains Rs. 80,000
Profit from business A
Loss from business B
of current year to be set of _20,000
60,000
Set off B/F unabsorbed depreciation of the A/Y 2009-10 _25,000
35,000
Set of B/F loss (A/Y 2006-07) _18,000

Capital Gains
Short term capital gain 50,000
Set off S.T. Capital loss A/Y 2011-12 _10,000
40,000
L.T Capital loss of 2012-13 Rs. 20,000
B/F off L.T. Capital loss of 2010-11 Rs. 4,000
Both to be C/F Rs. 24000
Other Sources
Interest on Securities 24,500
Income from owning and maintaining horses 15,000
Loss from owning and maintaining horses
A/Y 2008-2009 cannot be set off as period of
4 years is over NIL
Loss of Race horses A/Y 2009-10 to be set of (-) 18,000
Loss Still to be C/F _3,000 NIL
Income from lotteries 20,000
Income from card games 16,000
Loss from gambling ___NIL
(Cannot be set off) _36,000
__60,500
Gross Total Income 1,17,500

3.Ans. for Q.no.18.p.no.2/529. Computation of Total Income of Mr.A.

Particulars Rs. Rs. Rs.
Salary 1,44,000
Employer’s contribution to RPF 18,000
Less: 12% of salary being exempted 17,280 720

Interest on RPF Balance

(3000-3000 x 9.5/12) 625
Value of rent free house:
Salary Rs. 1,44,000: 15% of salary 21,600
Add: Actual rent of furniture 3,600 25,200 1,70,545
Salary Income
Other Sources:
Interest on units of Mutual Fund – Exempted Nil
Sitting fees 500
Card games 7,600
Bank Interest 27,000 35,100

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 2,05,645
Gross Total Income
Deductions u/s 80:
u/s 80 D ; Medi-claim (paid by cheque) 4,500
u/s 80 DD: Mentally retarded 50,000
u/s 80 C : Q.A for deduction: 100% 34,600 89,100
Own contribution to RPF 18,000
Life Insurance Premium 5,600
Pension Fund of LIC 11,000
Q.A 34,600

Total Income 1,16,545

4.Ans . for Q.no.32.p.no. 2/537. Computation of Business Income of Mr.Chenkoti.

Particulars Rs. Rs.
Net Profit as per P&L 66,175
Add. Disallowed expenses
Household expenses 10,500
Rates for property let 3,600
Donation 3,000
Fire Insurance Premium 4,800
Loss on shares 6,000
Interest on Capital 600
Income tax 9,900 38,400
1,04,575
Less: Allowable expenses Nil

Less: Incomes not taxable under this head:

Bank Interest 8,000
Rent 15,900
Interest on NSS 9,600 33,500
Business Profit. 71,075
Computation of Total Income.
House Property: 15,900
ARV 3,600
Less: Municipal Taxes. 12,300
NAV
Deductions u/s 24 3,600 8,610
Standard deduction 30% of NAV
Profits and Gains: as per above. 71,075
Capital Gains: Short Term Capital loss C/F Rs. 6,000 Nil
Other Sources:
Bank Interest 17,600
8,000
Interest on NSS,1992
9,600 97,285
Gross Total Income
Deduction u/s 80.
3,000
u/s 80 G QA Rs. 3,000 100%
Total Income 94,285
-----------

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 5.Ans. for Q.no.7.p.no.4/52. Computation of Business and Total Income of Sri. Rajaram.

Profits & Grains Rs.

Net Profit as per P & L A/c 25,200
Add : Disallowed expenses Rs.
Drawing 8,000
Insurance Premium on his life 1,000
Depreciation 4,500
Donation 500
Education Expenses 6,600
Provision for doubtful debts 1,500
Income Tax 2,000
private Expenses ___600 _24,700
49,900
Less : Expenses allowed by not debited
Depreciation _4,000
45,900
Less : Income credited but not taxable under this head
Interest on P.O.S.B. A/c 100
Life Insurance Maturity value 6,900
Interest on Bank Deposit _3,600 _10,600
Income under the head Profits & Gains 35,300
Other Sources :
Interest on Bank Deposit 3,600
Post Office Saving Bank Interest – Exempted __NIL __3,600
Gross Total Income 38,900
Deductions u/s 80:
80 C : Q.A. of Saving (Note 1) 1,000
80 G : Donations 50% of Q.A. __250 __1,250
Total Income _37,650
Note : 1. Q.A. for deduction u/s 80C : L I. Premium Rs. 1,000
2. Life Insurance Maturity value is fully exempted.

6.Ans.Q.no.8.p.no.4/72. Computation of Total Income of H.U.F(Karta-A)

Rs. Rs.
I. Income from House property
(a) Ancestral house : Self occupied NIL

(b) Let out house : Actual Rent Received 34,400

Less Municipal Taxes ___NIL
Net Annual Value 34,400
Standard Deduction : 30% of NAV _10,320
24,080
Income from house property
II. Income from Profits & Gains
(a) From Family Business 5,18,700

III. Income from other Sources

(a) Interest on Govt. Securities 9,000
(b) Interest from Bank Deposit _26,000

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 _35,000
Gross total Income 5,77,780
Deduction u/s 80 :
(i) u/s 80D : Medical Insurance Premium 2,000
(ii) u/s 80 C : Life Insurnace Premium 45,000
NSS 1992 _4,000 _49,000 _51,000
Total Income 5,26,780

Computation of Tax Liability

Tax 30,356
Add : Education cess @ 3% of Tax 910
--------
Tax Payable 31,266

7.Ans. Q.no.9. p.no.4/73. Computation of Business Income of H.U.F( Karta-Mr.Inamdar)

Rs. Rs.
Net Profit as per P & L A/c 65,000
Add : Disallowed expenses
Household expenses 17,000
Income Tax and Wealth Tax 10,700
Gifts and Presents 4,500
Charities 4,300
Loss on sale of Car (Personal) 3,200
Life Insurance Premium 7,300
Provision for Depreciation 11,000
Difference in trial Balance 200
Rent for residence of H.U.F _6,000
_64,000
1,29,000

Less : Allowable expenses

Depreciation ___9,000
1,20,000
Less Incomes not taxable under this head
Income Tax refund 3,000
Bad Debt recovered – disallowed earlier 3,000
Agricultural Income _7,000 __13,000

Taxable Business Profit 1,07,000

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 8.Ans.Q.no.11 p.no. 4/121. Computation of Firm’s Business Income (Partners-PQR)

Net Profit as per P & L A/c 90,000

Add : Expenses debited but not allowed
Salary to P 1,20,000
Salary to Q 60,000
Interest on Capital fully disallowed as not mentioned
in deed [Rs. 19,000 + Rs. 9,500 + Rs. 7,600] 36,100
Donation __4,000
2,20,100
Book Profit 3,10,100
Less : Remuneration u/s 40 (b)
(a) Actual remuneration paid to working partners as per
deed [Rs. 1,20,000 + Rs. 60,000] = Rs. 180,000
and An amount equal to (90% of first Rs.300000
= 270000+ 6060(60% of Balance ic. 310100-300000) = Rs,2,76,060 w.e.l. 1,80,000
---------
Firm’s Business Income 1,30,100

Computation of Firms’ Total Income Rs.

Income from house property 24,000
Profits & Gains 1,30,100
Other Sources : Interest on Govt. Securities Rs. 15,000
Interest on Bank Deposits Rs. 6,000
_21,000
Gross Total Income 1,75,100
Deduction u/s 80 G : Donation to National
Foundation for Communal harmony Rs. 4,000 @ 100% __4,000
Total Income 1,71,100

Computation of Firm’s Tax

Tax @ 30% of Total Income 51,330
Add : Education cess @ 3% of Tax _1,540
Tax Payable 52,870

Computation of Partner’s Income

Partner P : Salary 1,20,000
Interest 19,000
Profits & Gains [1,20,000 x 94,000/1,80,000] 62,667
----------- 2,01,667

Partner Q : Salary 60,000

Interest 9,500
Profits & Gains [60,000 x 94,000/1,80,000] 31,333
--------- 1,00,833
Partner R Interest. 7,600
*.No share from Business profit.

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 9. Ans.Q.no.16.p.no.4/123.Computation of Business Income of the Firm assessed as u/s 185
(Parners-Asim,John and Rahim)
Rs. Rs.
I. Income from House property
Profit as per P & L A/c 18,000
Add : Expenses charged but not allowed :
Interest on Capital
Asim 2,000
John 1,500
Rahim _1,000
4,500
Depreciation 2,500
Reserve for bad debts 500
Interest on loan from John 300
Commission to Rahim 1,000
Salary to Rahim _2,000
_10,800
28,800
Less : Income credited but to be treated under a separate head :
Income from other Sources : Interest on securities _3,000
25,800

Less : Allowable Business Expenses

Depreciation _2,400
Business Income of Firm 23,400

10.Ans for.Q.no.25.P.no.4/125. Computation of Business Income of the Firm assessed as u/s 185
Rs.
Profit as per given the Profit and Loss Account 28,530
Add : Items not allowed : Rs.
Charity 570
Bad debts reserve 1,430
Interest on Capital :
A 1,280
B __750

Salary to Partners :
A 1,800
B 1,200
3,000
Rent paid by the firm for partner’s residence 1,500
_8,530
37,060
Less : Allowable deduction :
Depreciation not charged earlier _3,340
Total Income 33,720

Firm’s Tax @ 30% of 33,720 = Rs. 10,116 + Education Cess @ 3% Rs. 303 Total Tax Rs. 10,419

Partner A’s Total Income

Income from other sources :
Interest on Govt. Securities 500
Income from House Property 600

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 Other Income 1,12,000
Gross Total Income 1,13,000
Deduction u/w 80 C to 80 U ___NIL
Total Income 1,13,000

Partner B’s Total Income

Income from other Sources :
Interest on Govt. Securities 2,100
Interest on Post Office Saving Bank (Exempted)
Other Income 86,000
Gross Total Income 88,100
Less : Deductions u/s 80 C to 80 U __NIL
Total Income 88,100

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11. Ans. for Q.no. 316. p.no. 4/123. Computation of tax liability of AOP. (Members - Mr. K. Mrs.
L and Mr. M.) (Assume that the total income of AOP was 2, 66,000.)

AOP shall pay text the rates applicable to an individual as total income of any of its members
without adding share from AOP as calculated below does not exceed the exempted limit.

Rs.

Tax on Rs. 2,66,000 1,600

Add : Education cess @ 3% of tax _480
Total Tax payable 5,080

Computation of total income and tax liability of members of AOP

MR.K Rs.
Income from House Property : ARV 45,000
Less Municipal Taxes __NIL
Annual Value 45,000
Standard Deduction 30% 13,500
H.P. Income 31,500
Income from other sources: Interest on deposits with HUDCO _26,000
Gross Total Income 57,500
Deduction u/s 80 C to 80 U : ___NIL
Total Income 57,500
Add : 1/3rd Share from AOP _72,000
1,29,500
Tax Liability : NIL
MRS.L Rs. Rs.
Income from other sources : Bank Interest _96,000
Gross Total Income 96,000
Deduction u/s 80 C to 80 U ___NIL
Total Income 96,000
Add : 1/3rd share from AOP _72,000
1,68,000
Tax liability : NIL

MR.M Rs.
Income from salary Pension from Govt. 50,000
Income from other sources : Interest accrued on NSC VIII issue 12,600
Interest on Govt. securities _5,000 _17,600
Gross Total Income 67,600
Deduction u/s 80 C : Interest accrued on NSC _12,600
Total Income 55,000
Add : 1/3rd Share from AOP _72,000
1,27,000
Tax liability : NIL

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 I. Important Illustrations of Income Tax-II

Chapter I. Carry forward and set off of losses.

1. P. No . 2/447. Illustration -4.
2. P.No. 2/448 .Illustration- 5.

Chapter .2 Deductions to be made.

3. P.No. 2/520 Illustration -9.

Chapter .3 Computation Tax liability.

4. P.No. 3/17. Illustration – 7.

Chapter .4. Assessment of Individual.

5. P.No. 4/33. Illustration-6.

Chapter.5 Assessment of HUF.

6. P.No. 4/67. Illustration.3

Chapter.6 Assessment of Firm.

7. P.No. 4/91. Illustration-6.
8. P.No. 4/107 Illustration. 12.

Chapter.7. Assessment of AOP.

9. P.No.4/134 Illustration.2.

II.Important theory Questions of Income Tax-II.

1. P.no.2/433 . Deemed Incomes.
2. P.no. 5/2 –Authority of Income Tax.
3. P.no. 5/9-Powers of CBDT.
4. P.no. 5/22 Forms of Returns.
5. P.no. 5/23. PAN
6. P.no. 5/33. Best judgment Assessment.
7. P.no. 5/44 Provision relating to Rectification of mistakes.
8. P.no. 5/49. Deduction of Tax at Sources.
9. P.no.5/69. Advance payment of Tax.
10. P.no.5/111. Provision relating to Penalties.
11. P.no.5/117-Provision relating to prosecutions.

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