Seat No.

: ________

Enrolment No.______________

GUJARAT TECHNOLOGICAL UNIVERSITY

M.B.A -IIInd SEMESTEREXAMINATION MAY/JUNE- 2012

Subject code: 2830010 Subject Name: Financial Planning (FP) Time: 02:30 pm 05:30 pm

Date: 29/05/2012 Total Marks: 70

Instructions:
1. Attempt all questions. 2. Make suitable assumptions wherever necessary. 3. Figures to the right indicate full marks. Q.1 (a) Give the advantages of career planning and which are called sources of 07 career information sources? (b) Explain advantages and disadvantages of life insurance, health insurance, 07 and property insurance. (a) What is a meaning of consumer credit? is consumer credit important for an 07 individuals economy? also give advantage and disadvantages of credit. (b) Explain the advantages and disadvantage of real estate investments. 07 OR (b) Why investor purchase the mutual funds? How can the following help you 07 to evaluate ( decide to buy or sell ) mutual funds 1. internet 2. news paper 3. professional advisory service 4. annual reports 5. financial publications (a) Explain the meaning of financial planning and also elaborate the financial planning process giving an example. (b) Explain the types of financial institutions in detail. OR (a) Suppose you are an advisor in the investment firm, which factor would be taken by you for the choice of investments. (b) Evaluate private source of health insurance and health care. (a) Explain the financial and legal aspects of employment. (b) Elaborate the various payment methods.
OR

Q.2

Q.3

07 07 07 07 07 07

Q.3

Q.4

Q.4

(a) Which are the various reasons for purchasing the corporate bonds and 07 explain in brief register bond, bearer bond, and zero coupon bond. (b) What is a meaning of life insurance? explain the important provision in 07 life insurance contract. (a) Explain the meaning of time value of money. Give objective of time value of money. (b) Explain briefly the various saving plan. OR (a) Describe, how the stocks are bought and sold? Would you ever trade stocks online? (b) Briefly explain the property and motor vehicle insurance and how it is useful in life? is there any malpractice done by the people in the insurance sector?
**********

Q.5

07 07 07 07

Q.5

Seat No.: ________

Enrolment No.______________

GUJARAT TECHNOLOGICAL UNIVERSITY

M.B.A -IIInd SEMESTEREXAMINATION MAY/JUNE- 2012

Subject code: 830201 Date: 31/05/2012 Subject Name: Corporate Taxation & Financial Planning (CT&FP) Time: 02:30 pm 05:30 pm Total Marks: 70

Instructions:
1. Attempt all questions. 2. Make suitable assumptions wherever necessary. 3. Figures to the right indicate full marks. Q.1 (a) XYZ Ltd. An Indian company furnishes following 07 particulars for the Assessment Year 2010-2011 compute Total Income. Net Profit as per P&L A/c:- Rs.4, 00,000 Additional Information 1. Income Tax debited to P&L A/c Rs.6, 000, out of it Rs.1, 200 is excessive. 2. During the previous year 2009-2010, the following payments are made not debited to P&L A/c. Rs.7, 000 paid on 5th May-2009 on A/c of outstanding custom duty of the previous year 2008-2009. Rs.5, 000 paid on 3rd January-2010 on A/c. of outstanding Sales Tax of the previous year 2008-2009. 3. Copyright of Rs.30, 000 debited to P&L A/c. was acquired and put to use on 10th March-2010. 4. Opening stock & Closing stock was respectively Rs.3, 60, 000 & Rs.4, 50, 000 as per books, it was found that it has been consistently valued 10% below cost. 5. Goods of Rs.50, 000 purchased by bearer cheque from Y Ltd. debited as purchase in P&L A/c. 6. Contribution to a national laboratory for carrying out approved scientific research qualified for weighted deduction U/s.35 (2AA) Rs.1, 06, 000 debited to P&L A/c. 7. During the previous year 2009-2010 company pays Rs.10, 00,000 not debited to P&L A/c. as compensation to employees on voluntary retirement under VRS scheme.

Page 1 of 6

(b) Find out the Total Income in the cases of X & Y for the 07 assessment year 2010-2011 both are resident retail traders at Ahmedabad. X Y Sales Turnover 40, 00,000 60, 00,000 Less: Expense Cost of Goods Sold 35, 00,000 50, 00,000 Depreciation 20,000 30,000 Other Expenses 3, 80,000 8, 20,000 Business Income 1, 00,000 1, 50,000 Other Income 2, 20,000 2, 30,000 PPF Contribution 40,000 50,000 LIC 60,000 Q.2 (a) As on 31-3-2009 the regular workers employed by an 07 industrial undertaking were 120. During the previous year following workers were employed Causal workman on 5-4-09 10 Workman employed 20 through contract labor from 10-5-09 Workman employed by company 15 w.e.f 1-5-09 5 w.e.f 1-6-09 15 w.e.f 15-7-09 5 w.e.f 15-10-09 Compute the deduction under section 80JJAA if the salary of each new workman is Rs.2000P.M. (b) Explain Tax planning, Tax avoidance and Tax evasion with 07 one example of each. OR (b) State meaning of Amalgamation under the Income Tax 07 Act and conditions for a merger to qualify as Amalgamation for the purpose of Income Tax Act. (a) What is regarded as income under The Income Tax 07 Act(any seven points)

Q.3

Page 2 of 6

Q.3

(b) Find out Gross Total Income of X for assessment year 07 2010-2011 if he is Resident & ordinary resident Resident & not ordinary resident Non resident Rs. Interest on USA 60, 000 development bonds(two fifth is received in India) Income from Agriculture 1, 00,000 in Australia(Activity is controlled in Australia) Income from business in 50, 000 Uganda(controlled from Delhi) Pension from a former 30, 000 employer in India received in Bangladesh Profit on sale of building in 1, 00,000 India but received in Sri Lanka Gift in foreign currency 80, 000 from a friend received in India on 20th January-2010 OR (a) State any 7 incomes which do not form part of Total 07 Income (Tax free incomes). (b) A company wants to appoint marketing manager Mr. X 07 aged 40 years , it has two options 1. Monthly Salary Rs.30, 000 2. (i) Monthly Salary Rs.15,000 (ii) Employers contribution to RPF Rs.1, 800 P.M. (iii) Education allowance for 2 children Rs.200 P.M. (iv) Academic research allowance Rs.2, 000 P.M. (50% use for conducting research) (v) Uniform allowance Rs.3000 P.M.(utilize for purchasing & maintaining uniform for official use) (vi) Rent free house in Delhi company pays rent at Rs.5, 000 P.M. (vii) Medical reimbursement Rs.12, 000 P.A. (viii) Telephone at residence of employee Rs.9000 P.A. (ix) Bonus Rs.15, 000 P.A. Compute tax liability under both option for Assessment Year 2010-2011 and state which option will be beneficial to X.

Page 3 of 6

Q.4

(a) A & B are minor sons of Mr. X and Mrs. X. Business 07 income of Mr. X is Rs.3, 50,000 and Mrs. X Rs.5, 00,000. Income of A & B from stage acting is Rs.60, 000 and Rs.70, 000 respectively besides interest on company deposits of A & B (deposit was made out of Income from acting) is Rs.30, 000 and Rs.1, 000 respectively. A & B have received following birthday gifts, on 20th May-2009 gift received by B from his grand father Rs.80,000 and on 14th September-2009 gift received by A Rs.60, 000 from X friend and Rs.35, 000 from a relative. Find out the income of Mr. X, Mrs. X, A and B for Assessment Year 20102011. (b) X purchases a property on 1st April-1976 for Rs.1, 00,000. 07 He enters into an agreement of the property to A on 1st November-1983 and receives Rs.10, 000 in advance. A could not however keep his promise & advance of Rs.10, 000 given by him is forfeited by X. Later on he gifts the property to his friend Y on 15th May-1985. The following expenses are incurred by X & Y for renewal of the property. Cost Rs. Addition of two Rooms by X during 25, 000 1978-1979 Addition of first floor by X during 40, 000 1983-1984 Addition of second floor by Y during 1, 15,000 1990-1991 Fair Market Value of the property on 1st April-1981 is Rs1, 20,000. Y enters into agreement of sale the property for Rs.8, 50,000 to B on 1st April-1993 after receiving an advance of Rs.50, 000. B could not pay the balance within and Y forfeits the advance. Y ultimately finds a buyer C to whom the property is transferred for Rs.10, 75,000 on 1stDecember-2009. Compute the capital gain chargeable to tax in the hands of Y for Assessment Year 2010-2011. Previous Year Cost Inflation Index 1981-82 100 1983-84 116 1985-86 133 1990-91 182 2009-10 632

OR

Page 4 of 6

Q.4

Q.4

(a) X a business man of Delhi furnishes the following 07 information for the Assessment Year 2010-2011. Rs. Income from house 2, 50,000 property(computed) Business Profit (before 2, 40,000 claiming following deduction) Current Year depreciation 1,10,000 allowance Unabsorbed depreciation allowance of previous years 15, 000 5, 000 2003-2004 1993-1994 Unabsorbed Business losses of the previous years 10, 000 2003-2004 6, 000 1993-1994 Current Scientific research 1, 05,000 expenditure Determine his total income for Assessment 2010-2011 (b) Mr. X aged 45 years has Gross Total Income of Rs.4, 07 00,000. Compute his total income and tax payable by him for Assessment year 2010-2011 considering below payments, investments or deposits. 1. LIC premium on life of his married daughter Rs.6,000(Sum assured Rs.20, 000) 2. LIC premium on his own life Rs.2, 700(sum assured Rs.60, 000) due on 31st march-2010 but paid on 4th April-2010. 3. LIC premium on life of dependent sister Rs.9, 000 (sum assured Rs.1, 00,000) 4. LIC premium on life of his Major son Rs.3, 100(sum assured Rs.20, 000) 5. Medical Insurance premium of own & spouse Rs.12, 000. 6. Tuition fee of his son Rs.15,000 7. Repayment of housing loan installment to LIC Rs.10, 000. (a) State the amendments brought in by the Finance Act 2010 07 for Assessment year 2011-2012 with respect to below provisions 1. Limit of turnover or gross receipts for the purpose of audit of accounts.[Sec.44AB] 2. Limit of turnover for the purpose of presumptive taxation. [Sec.44AD] 3. Normal rates of income tax in case of individual being a resident in India who is of the age 65 years or more at any time during previous year.

Q.5

Page 5 of 6

Q.5

(b) A company wants to raise capital of Rs.20, 00,000 for a 07 project where earning before interest and tax shall be 30% of the capital employed. The company can raise debt fund at 11% P.A. Suggest which of the following three alternatives should it opt for A. Rs.20, 00,000 to be raised by equity capital. B. Rs.15, 00,000 by equity and Rs.5, 00,000 by loans. C. Rs.5, 00,000 by equity and Rs.15,00,000 by loans Assume the company shall distribute the entire amount of profit as dividend. Assume effective Tax rate for company at 30.90% and effective dividend Tax rate 16.995% OR (a) Discuss the implications of Direct Tax code on various 07 Indian Sectors in brief. (b) Decide which one is a better alternative lease or buy in 07 following situation Tax rate 30.90% Cost of capital 14% Depreciation Rate(Income Tax) 15% Lease Cost Rs.34, 000 P.A for 5 Years(per Rs.1, 00,000) Present Value of Rs1 discounted at 14% is as follow Year 1 2 3 4 5 0.877 0.769 0.675 0.592 0.519 Assume cost of asset Rs.1, 00,000 with salvage value of Rs.1, 000 and there is no capital gain Income Tax liability.
*************

Page 6 of 6

Seat No.: __________

Enrolment No._____________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA Semester III Examination Dec. - 2011 Subject code: 2830010 Subject Name: Financial Planning Time: 10.30 am 01.30 pm
Instructions: 1. Attempt all questions. 2. Make suitable assumptions wherever necessary. 3. Figures to the right indicate full marks. Q.1 (a) What are the main components of personal financial planning? (b) What are the factors that are used to evaluate different savings Plans? 07 07

Date: 10/12/2011 Total Marks: 70

Q.2

(a) How is CIBIL aiding in improving credit in India? 07 (b) Discuss the various saving plans available in our country? 07 OR (b) Discuss the various credit options available in the formal sector of our 07 country? (a) What are the features of a typical Home Insurance policy? Why do we need Home Insurance for Lifes situations? (b) What are the various risks covered under a Motor Vehicle Insurance? OR (a) Explain the difference between Traditional and Market related Policies of Life Insurance market. (b) Why do you think Health Insurance is essential? Discuss the features of Health Insurance policy? (a) Why is learning about investments important for your financial success? (b) Discuss the Advantages and Disadvantages of investing in Mutual Funds.
OR

Q.3

07 07 07 07

Q.3

Q.4

07 07 07 07 07 07

Q.4

(a) What are the factors affecting the choice of investment (b) Describe the role of SEBI in regulating the stock market. (a) State the guidelines for setting financial goals? (b) Write Short Notes on the following: Rule of 78s Term Assurance OR (a) What are the various investment avenues available for tax deduction under Section 80C (b) Write Short Notes on the following: Whole life assurance Section 45 in Insurance Act 1938
*************

Q.5

Q.5

07 07

Seat No.: __________

Enrolment No._____________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA Semester III Examination Dec. - 2011 Subject code: 830201 Date: 13/12/2011 Subject Name: Corporate Taxation & Financial Planning Time: 10.30 am 01.30 pm Total Marks: 70
Instructions: 1. Attempt all questions. 2. Make suitable assumptions wherever necessary. 3. Figures to the right indicate full marks. Q.1 (a) Define the terms: (1) Assessment Year & Previous Year (2) Person (3) Gross 07 Total Income (4) Industrial Company (5) Agricultural Income (6) Surcharge (7) Foreign Income (b) X, a foreign national, furnishes the following particulars of his income relevant 07 for the previous year 2010-11: Profit on sale of plant at London (one-half received in India) Rs. 1,46,000 Profit on sale of plant at Delhi (one-half received in London) Rs. 1,02,000 Salary from an Indian company received in London (one-half paid for rendering services in India) Rs .60,000 Interest on U. K. Development Bonds (entire amount received in London) Rs.40,000 Income from property in London received there Rs. 30,000 Income from agriculture in London received there Rs. 25,000 Dividend received in London on May 6, 2010 from a company registered in India but mainly operating in U. K. Rs. 17,000 Profit from a business in Delhi managed from India Rs. 49,000 Rental income from a property in Nepal Rs. 12,000 Gift in foreign currency received on September 20, 2010 from a friend (onethird of which is received in India and remaining amount received outside India Rs. 3,70,000 Determine gross total income of X for the A.Y. 2011-12 if he is a) Non-resident and b)Resident and ordinarily resident

Q.2

(a) How the tax liability of a company will be calculated under Normal Provision 07 and under Minimum Alternate Tax show with imaginary figure? (b) X and Y form a partnership firm on April 1, 2010 (profit sharing ratio 2:3) by 07 investing Rs. 10,00,000 and Rs. 15,00,000 respectively. The investment has been financed from the following sources: X (Rs.) Y (Rs.) Gift from Mrs. X 6,60,000 ---Gift from Mrs. Y ---8,00,000 Past savings from X and Y 3,40,000 7,00,000 For the year ending March 31, 2011, share of profit from the firm is as follows: X (Rs.) Y (Rs.) Interest on capital @ 12% 1,20,000 1,80,000 Salary as working partner 24,000 24,000 Share of Profit 1,08,000 1,62,000 Find out the income chargeable to tax in the hands of X and Mrs. X.

OR (b) X, an employee of PQR Ltd., draws Rs. 2,00,000 as basic pay, Rs. 15,000 as 07 dearness allowance (not being part of salary) and Rs.20,000 as bonus. Besides the company provides a rent-free unfurnished house in Goa. The house is not owned by the company. Determine the taxable value of the perquisite for the A.Y. 2011-12 if lease rent of the house is : a) Rs.20,000 p.a. b) Rs.48,000 p.a. c) Rs.26,000 p.a. Q.3 (a) Discuss the provisions of Income Tax Act for computation of Cost of Acquisition of Original and Bonus Shares as the part of sale considerations. (b) X submits the following particulars of income/loss for the A.Y. 2011-12: Profits of Business I carried on in India Rs. 2,42,000 Loss of Business II carried on in India Rs. (1,26,000) Profits of Business III carried on in Germany (though income is earned and received in Germany, business is controlled from Bombay) Rs. 2,17,000 Loss of Business IV carried on in Germany (though income is earned and received in Germany, business is partly controlled from Germany and partly from Canada) Rs. (1,56,000) Unabsorbed depreciation of the A.Y. 2002-03: Business I Rs. (1,07,000) Business III Rs. (1,08,000) Business IV Rs. (2,15,000) Income from property situated in India Rs. 1,18,000 Income from property situated in Germany Rs. 1,20,000 Determine the net income of X for the A.Y. 2011-12 on the assumption that he is (i) resident and ordinarily resident in India (ii) resident but not ordinarily resident in India OR (a) Discuss in detail Sections 80IC and 80ID as the tax incentives under the Income Tax Act for selection of Location of New Business. (b) Mr. X is an entrepreneur. He provides you the following alternatives to select the best form of organization in regards with the best tax planning. Particulars Alt.-A Alt.-B Alt.-C No. of partners 3 4 8 Profit sharing ratio Equal Equal Equal Capital in equal proportion 10,00,000 15,00,000 80,00,000 Profit P.Y.- 2010-11 6,00.000 12,00,000 60,00,000 Other income of each partner 60,000 50,000 60,000 LIC Prem. of each partner 80,000 50,000 90,000 Salary p.m. of each partner 10,500 14,625 32,437.50 Mr. X has two option either partnership firm as per above mentioned alternatives or proprietary firm. Suggest which form of organization is better for him. 07 07

Q.3

07 07

Q.4

(a) Discuss provisions of Section 80JJAA-Deduction in respect of employment of 07 new workmen. (b) X (age : 32 years), posted at Bombay, receives a salary of Rs. 36,000 per month 07 during 2010-11 from A Ltd. His employer contributes Rs. 53,000 towards provident fund. His other allowances are: special allowance Rs. 2,28,000 and medical allowance: Rs. 22,200 and 0.5 per cent commission on sales achieved by him. During the year, turnover achieved by X is Rs. 9,60,000. Employer provides a Maruti-800 car with a chauffer for his private and official purposes w.e.f. April 1, 2010. The amount of interest credited to provident fund on May 10, 2010 @ 11% p.a. comes to Rs. 25,660.
2

Income of X from other sources is Rs. 7,54,000. Payments/ Contributions: Insurance premium paid on own life (sum assured : Rs. 22,500) Rs. 6,500 Insurance premium paid on the life of Mrs. X (sum assured : Rs. 1,00,000) Rs. 4,000 Insurance premium paid on the life of major son (sum assured : Rs. 20,000) Rs. 3,100 Contribution towards PPF Rs. 1,000 Contribution towards employees provident fund Rs. 50,000 Contribution made for participating in ULIP Rs. 2,000 Repayment of loan taken from LIC for purchase of a house (whose construction is completed on March 10, 1987 and used by him for his residence) Rs. 22,000 Tuition fee of Xs son Rs. 12,500 Investments in units of a notified Mutual Fund for financing infrastructure facility Rs. 2,000 Determine the amount of tax liability on the assumption that provident fund is (i) Statutory (ii) Recognised (iii) Unrecognised.
OR

Q.4

What do you mean by Tax Planning? Distinguish: Tax Avoidance and Tax 07 Evasion. (b) X, not being covered by the payment of Gratuity Act, 1972, retires on January 07 6, 2011 from PQR and receives Rs. 1,24,000 as gratuity after service of 29 years and 11 months. His average monthly salary during March 1, 2010 to December 31, 2010 is Rs. 8,500. Determine the amount of: a) taxable gratuity b) gratuity exempted from tax for the A. Y. 2011-12. (a) 07 07

(a) Discuss with comparison the tax benefits for various forms of organization: Firm, LLP and Company with reference to new business. XYZ Ltd. is contemplating an expansion programme. It has to make a (b) choice between debt issue and equity issue for its expansion programme. Its current position is as under: Rs.(in Crore) 10% Debt 80 Equity share capital(Rs. 10 per share) 200 Reserves and Surplus 120 Total capitalization 400 Sales 1,200 Less: Total Cost 1,076 EBIT 124 Less: Interest 8 EBT 116 Less: Tax @ 33.2175% 38.53 EAT 74.47 The expansion programme is estimated to cost Rs. 200 crore. If this is financed through debt, the new rate of debt will be 10% and the P/E Ratio will be 6 times. If the expansion programme is financed through equity, new shares can be sold getting Rs. 25 per share and the P/E Ratio will be 7 times. The expansion will generate additional sales of Rs. 600 crore with return of 10% on sales before interest and tax. Suggest which form of financing should it choose? OR Explain meaning of Dividend as per Section 2(22)(a) to 2(22)(e). What is tax Q.5 (a) treatment for them? (b) Enlist Any Five permissible deductions u/s 80C to 80U. Explain Any Two of them. Q.5
**********

07 07
3

Seat No.: _____

Enrolment No.______

GUJARAT TECHNOLOGICAL UNIVERSITY

M.B.A. Sem. III - Examination June- 2011

Subject code :( 830201) Subject Name: Corporate Taxation & Financial Planning
Date:09/06/2011 Time: 02.30 pm 05.30 pm Total Marks: 70

Instructions:
1. Attempt all questions. 2. Make suitable assumptions wherever necessary. 3. Figures to the right indicate full marks. Q.1 ABC Ltd., an Indian company, submits the following particulars relevant for 14 the assessment year 2010: Particulars Salary to Staff Income tax Expenses on issue of shares for setting up a new show room at Delhi Expenses on raising a long term loan for setting up a new show room at Mumbai Interest on public deposits Capital expenditure for promotion of family planning among employees Legal expenses for filing income tax appeals before Delhi High Court Reserve for losses Reserve for payment of fines and penalty Reserve for bad and doubtful debts Maintenance expenses for car Bad debts written off Depreciation to be written off: Plant and machinery Car Office expenses Rent & repairs Sundry expenses Net profit Total Rs. Particulars 5,24,000 Gross profit 20,000 40,000 60,000 Rs. 23,52,000

20,000 8,000

11,000

16,000 6,000 400 12,000 3,600

42,000 6,000 8,000 28,000 2,43,000 13,04,000 23,52,000

23,52,000

Other information: 1. Car is partly used for official purposes and partly for personal purposes of manager. In the past 50 percent of car expenditure is disallowed. 2. Sundry expenses include payment of an advertisement bill to a person who has substantial interest in company. The payment is excessive to the extent of Rs. 9,800. 3. Office expenses include an expenditure of Rs. 4,000 which is paid in cash. 4. Sundry expenses include an expenditure of Rs. 40,100 which is paid by a bearer cheque. 5. Depreciation on machinery as per income tax provisions is Rs. 18,000 6. On March 10, 2010, the company pays Rs. 1, 80,000 to National Laboratory for carrying an approved scientific research programme in natural science. The payment is not recorded in the above P & L Account. 7. Sundry expenses included royalty payment of Rs. 50,000 to a resident on which tax is deducted at source on March 31, 2010 and paid to the government on September 5, 2010 (i.e. after the time limit given under section 200(1). Determine the taxable income and tax liability of the company for the assessment year 2010-11. Q.2 (a) Distinguish between : (Any Two) (i) Tax avoidance and Tax evasion (ii) Tax planning and Tax management (iii) Real ownership and Beneficial ownership (b) X furnishes the following particulars of his income earned during the previous year relevant to the assessment year 2010-11 Rs. 1. Income on German Development Bonds 72,000 (one-sixth is received in India) 2. Income from agriculture in Pakistan, received 6,82,000 there but later on Rs. 1,72,000 as remitted to to India 3. Interest from property in USA received outside 6,80,000 India (Rs. 1,84,000 is used in Canada for meeting the education expenses of Xs son is in Canada and Rs. 4,96,000 is later on remitted to India ) 4. Income earned from business in Iran which 8,10,000 controlled from New Delhi (Rs. 1,40,000 is received in India) 5. Dividend paid by an Indian company on May 10, 3,91,600 2009 but received out side India 6. Pasted untaxed profit of 2006-07 brought to 4,20,000 India in May,2009 7. Profit from the business in New Delhi and 1,84,000 managed from out side India (60 % of profit is received out side India) 8. Profits on sale of building in India but received 37,48,000 in Nepal 9. Pension from a formal employer in India 4,30,000 received in Iran 07

07

10. Gift in foreign currency from a friend received 1,60,000 in India on September 6, 2009 Find out the gross total income of X if he is (i) Resident and ordinarily resident in India (ii) Resident but not ordinarily resident in India (iii) Non- resident in India For the assessment year 2010-11 OR (b) X joined a company at Ajmer (population 24 lakh) on June 1,2009 and was 07 paid the following emoluments and allowed perquisites as under: Emoluments : Basic pay Rs. 25,000 per month Dearness allowance Rs. 10,000 per month Bonus Rs. 50,000 per month Perquisites: i. Furnished accommodation owned by the employer and provided free of cost. ii. Value of furniture therein Rs. 3,00,000 iii. Motor car owned by company (with engine cubic capacity less than 1.6 litres) along with chauffeur for official and personal use. iv. Sweeper salary paid by company Rs. 1,500 per month. v. Watchman salary paid by company vi. Rs. 1,500 per month. vii. Educational facility for two children provided free of cost. The school owned and maintained by the company. viii. Interest free loan of Rs. 5.00,000 given on October 1, 2009 for purchase of a house repayable within five years. No repayment was made during the year (SBI landing rate is 9.75%). ix. Interest free loan of Rs.50, 000 for purchase of computer to be used for education purpose given on January 1, 2010. No repayment was made during the year (SBI landing rate is 11.75%) x. Corporate membership of a club. The initial fee of Rs. 1, 00,000 was paid by the company. X paid the bills for his use of club facilities. You are required to compute the income of X under the head salaries in respect of assessment year 2010-11.

Q.3

(a) Mr. Jay furnish the following details for the year ending March 31, 2010 , 07 assumed that figures given below are computed and arrived after considering eligible deductions. Particulars Salary Income Income(loss) from House property House 1 House 2 (Self-occupied) House 3 Profit or Gain from Business or Profession Pharmaceutical business Electronic business Speculation business Rs. 4,50,000 1,40,000 (7,05,000) 1,15,000 5,00,000 (7,50,000) 3,60,000
3

Capital Gains Long - term capital gain 3,00,000 Short - term capital gain 1,90,000 Long - term capital loss (3,25,000) Income from other sources Loss on owning and maintaining race horses (1,50,000) Interest on securities 2,90,000 Compute total taxable income of Jay. (b) Explain the concept of Double Taxation Avoidance Agreement (DTAA). OR Q.3

07

(a) ABC Ltd. is in process of expansion of programme. It has to make choice 07 between debt issue and equity issue for its expansion programme. Its current position is as under. Particulars Equity share capital ( Rs. 10 per share) 10 % loan Reserve & Surplus Total Capital Employed Total sales Less: Total costs Less: Interest (10 % on 200) Profit Before Tax Less: Tax @ 33. 2175 % Profit After Tax Rs. In Crore 500 200 300 1,000 3,000 2,690 310 20 290 96.;33 193.67

The expansion programme is estimated to cost Rs. 500 crore. If this is financed through debt, the new rate of debt will be 10 percent and the priceearning ratio will be 6 times. If the expansion programme is financed through equity shares, new shares can be sold @ Rs. 25 per share and priceearning ratio will be 7 times. The expansion will generate additional sales of Rs. 1500 crore with return of 10 % on sales before interest and taxes. If company wants to follow maximizing the market value of its shares, which form of financing, should it choose? (b) Explain advantages of Limited Liability Partnership (LLP) as compared to 07 company form of organization Q.4 XYZ Ltd. is considering the purchase of a new machine costing Rs. 1, 14 20,000 with an expected life of 5 years with salvage value of Rs. 6,000, in replacement of an old machine purchased 3 years ago for Rs. 30,000 with expected life of 8 years. The present market value of this old machine is Rs. 70,000. Because of the purchase of new machinery, the annual profits before depreciation are expected to increase by Rs. 24,000. The relevant depreciation rate for the machine is 15 percent on written down value basis
4

and the tax rate is 33.2175 percent. Assume the after tax cost of capital (discounting rate) to be 14 percent. Advice the company suitably.
OR

Q.4

(a)

R Ltd., is engaged in the business of carriage of goods. On April 1, 2009 it 07 owns 10 trucks (6 out of which are heavy goods vehicle). On May, 16, 2009, one of the heavy goods vehicles is sold by R. Ltd. to purchase a light goods vehicle on May 25, 2009, which is put to use only from August, 1 2009. Find out the net income of R Ltd. for the assessment year 2010-11 taking in to consideration the following data: Particulars Freight collected Less: Operating expenses Depreciation as per section 32 Other office expenses Net Profit Other Business Income Rs. 7,75,000 5,25,000 1,40,000 65,000 45,000 55,000 07 07

(b) Explain Methods of Accounting under income-tax Act 1961. Q.5 (a) XY & Co., a partnership firm, transfers a piece of land situated in Thane district on August 17, 2009 for Rs.50 lakh. The land purchased on March 6, 1980 for Rs. 1 lakh got registered on April 3, 1983 on payment of stamp duty of Rs. 20,000.Expenses on land development and construction of boundary wall incurred in August 1983 where of Rs. 1, 50,000. The charges for transfer of land paid to the broker where 2.5% of the sale consideration. Fair market value of the land as on April 1, 1981 was Rs. 1, 50,000.The firm invested Rs. 30 lakh on December 1, 2009 in the bonds issued by a National Highways Authority of India redeemable after a period of 48 months. Compute the amount of capital gain chargeable to tax and amount of exemption U/S 54EC for the assessment year 2010-11. Cost Inflation Index for 1981-82 and for 2009-10 is 100 and 632 respectively. (b) Explain implications of Direct Tax Code on Steel Sector. OR (a) Write provisions relating to deduction of tax at source from Salary. (b) X Ltd., is engaged in business of growing and manufacturing tea in India. During previous year 2008-09, it deposits Rs. 100 lakh in the special account and claim the same as deduction under section 33AB (i.e. 40 % of the business profit: Rs. 250 lakh). During 2009-10, the company withdraws Rs. 35 lakh from the special account which is utilized as follows : a. Rs. 25 lakh on December 31, 2009 for the purpose of scheme framed by the Tea Board ; and b. Rs. 4 lakh for the other purpose on January 27, 2010. c. 6 lakh is not utilized up to March 31, 2010. Find out the amount chargeable to tax for the assessment year 2010-11.

07 07 07

Q.5

*************

Seat No.: _____

Enrolment No.______

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA Sem-III Regular Examination January 2011

Subject code: 830201 Subject Name: Corporate Tax & Financial Planning (CT & FP) Date : 12/01/2011 Time: 10:30am-1.00pm
Total Marks: 70

Instructions:
1. Attempt all questions. 2. Make suitable assumptions wherever necessary. 3. Figures to the right indicate full marks. Q.1 (a) Discuss the relationship between residential status of tax payers and incidence of tax (b) Mrs.Madhu is offered an employment by PVR Ltd. at a basic salary of Rs.1,25,000 per month. Other allowance offered by the company includes: Dearness allowance: 15 percent of the basic pay (not forming part of salary for calculating retirement benefits) Bonus Pay: 2 Months basic salary Project allowance: 5 percent of basic pay The company gives her an option either to take a rent free unfurnished accommodation at Indore for which the company would bear the rent of Rs.45,000 per month or to accept a house rent allowance of Rs.45,000 per month and she can find out her own accommodation. She wants to invest Rs.60,000 in Public Provident Fund and Rs.35,000/- in Reliance Tax Saver (ELSS) fund. As a Tax Consultant, determine which one is a better option for Mrs.Madhu. 07 07

Q.2

(a) The following is the profit and loss account for the year ending 2009-10 of Mr.Kabra who is a businessman. Particulars Amt Sundry Charges 35,650 Insurance 3,500 Salary 1,12,000 Donation to Political Party 1,560 Income Tax 2,400 Depreciation 1,00,000 Advertisement 25656 Office Expenses 42,500 Advanced Tax 17,000 Net Profit 3,44,894 6,85,160 Particulars Amt Gross Profit 4,81,660 Commission 1,05,500 Interest on Debenture(22,500) 25,000 Short Term Gain 73,000

07

6,85,160

1. Depreciation as per income tax rule is only Rs.75,000 2. Bad debts of a business which was discontinued in earlier years has been recovered during the year Rs.15000 3. The advertisement expenses include Rs.5000 which is paid for printing of Souvenir. 4. Salary includes Rs.50,000 paid to his son who is rendering part time services in his business 5. Sundry charges includes Rs.22,000 paid by bearer cheque Compute the tax liability of Mr.Kabra if he invests Rs.50,000 in Public Provident Fund and Rs.50,000 in ELSS mutual Funds Schemes? (b) What are the provision for computing income on estimated basis under section 07 44 AE and 44 AF? Explain with suitable numerical examples. OR (b) Discuss how undisclosed income and investments are taxed 07 Q.3 (a) From the following information regarding certain transactions of Shrikant,, calculate
taxable amount of Capital Gain. 1. Jewelry purchased on 10-3-75 for Rs.109, 000 was sold on 2-5-2009 for Rs.12, 04,810/-. The fair market value of the Jewellary on 1-4-1981 was Rs.1,10,000/2. He had to pay brokerage of Rs.2000/- on Purchase and Rs.4810/- on sales of the said Jewellary. 3. On 1-11-2009 he purchased Bonds of NHAI of Rs.1,92,160/- which are repayable after 3 years. 4. Cost Inflation Index of 1981-82 was 100 and that of 2009-10 632.

07

Q.3

(b) Discuss the provisions of clubbing of income under the Income Tax Act, 1961 OR (a) IVRC Ltd. Sells the following assets: Agriculture Bonus House Land Share Property Date of Sale 31/01/2010 7/11/2009 25/3/2010 Date of Acquisition Sales Consideration Purchase Consideration 9/5/1993 9,00,000 70,000 4/4/1983 4,50,000 Nil 6/6/1982 6,50,000 1,00,000

07 07

The agriculture land is situated in an urban area and used for agriculture purpose since 1993. IVRC Ltd. invests in the following assets as on dated 2/4/2010 1. Rs.4,00,000 in the Bonds (Redeemable on June 5,2013) of National Highway Authority 2. Rs.5,00,000 in the Bonds( Redeemable on May 10,2015) of Rural Electrification Corporation 3. Rs.80,000 in Agriculture Land

Year Cost Inflation Index 2009-10:632, 1993-94:244, 1992-93:223, 1983-84:116, 1982-83:109, 198182:100 Find out the Capital Gain chargeable to tax. (b) Explain with examples set off and carry forward of losses and its exceptions Q.4 07

(a) JK Ltd obtains a telecom license on 22/04/2009 for a period of 10 years which 07 ends on 31/03/2019 and paid Rs.27,00,000 as licence fee. Find out the amount of deduction under section 35 ABB under following situations: 1. If the entire amount is paid on April 1,2010. 2. If the entire amount is paid in three instalments on April 30, 2009, April 30, 2010 and April 30, 2011. (b) Tax Planning is crucial while deciding upon the nature of business. Explain 07 with numerical examples.
OR

Q.4

(a) Discuss various tax incentives available while selecting a business location. (b) Differentiate between Tax Avoidance and Tax Evasion

07 07

Q.5

(a) Supernova Ltd. is planning for an expansion of its business. It has to make a 07 choice between debt issue and equity issue for the expansion of business. The current position of the company is as follows: 10% Debenture Equity Share Capital(Rs.100 Per Share) Reserve and Surpuls Total Capital Sales Turnover 8,00,000 20,00,000 12,00,000 40,00,000 12,00,000

Less: Total Cost 10,00,000 EBIT 2,00,000 Less: Interest @ 10% 80,000 EBT 1,20,000 Less: Tax @ 33.2175% 39,861 EAT 80,139 The expansion of business will cost Rs.20, 00,000. If this is financed through the issue of 10% Debenture then the price- earnings ratio will be 5 times and if financed through the new issue of equity shares then the price earnings ratio will be 6 times. The expansion will generate additional sales of Rs.60, 00,000 with a return of 10% on sales before interest and tax. If the company wants to maximize the market value of the shares, then which alternative should be adopted by the Supernova Ltd.? 07 (b) Evaluate the impact of budget 2010 with reference to an individual and 07 corporate point of view. OR

Q.5

(a) Ivory Ltd. wants to raise capital of Rs.20,00,000 for a project where earning 07 before tax is 30% of the capital employed. The company can raise debenture @ 12% p.a. suggest which of the three alternatives should be adopted by the company: 1. Rs.20,00,000 to be raised by equity shares 2. Rs.15,00,000 by equity and 5,00,000 by debentures of 12 Percentage 3. Rs.5,00,000 by equity and Rs.15,00,000 by debentures of 12 Percentage Assume that the corporate tax rate is 30%, education cess is 2 percent and secondary and higher secondary education cess is 1 percent. (b) Discuss tax planning aspects of Make or Buy decision
*************

07