Sikkim Manipal University Subject: Taxation Management Subject code: MF0012 Book ID B1760 Question Paper Code: Time:

2 hours PART A 1 MARK QUESTIONS Answer all questions. Each question carries 1 mark 50 * 1= 50 Marks Max.Marks:140

1. Every year ________________ act is passed during the central budget & brings in significant changes in the relevant acts A. Income B. Sales C. Wealth D. Finance 2. Direct taxes are taxes on ________ A. Sales B. Income C. Wealth D. Finance 3. Execution of financial affairs to reduce tax impact by law is called________ A. Tax evasion B. Tax planning C. Tax Avoidance D. Taxable income 4. Government agreements are given effect through __________________ A. Notifications B. Circulars C. Acts D. Laws 5. The word tax payers refers to an ________________ A. Assesse B. Only Individual C. Firm D. Company

6. The Income tax law in India is administered through the _____________. A. Income tax Act 1961 B. Income tax Act 1962 C. Income tax Act 1963 D. Income tax Act 1964 7. Presentation of tax related numbers in the ___________ statement is important for the companies A. Income B. Legal C. Financial D. Purpose 8. The total of all deduction must be limited to the amount of the ________ of the assesse A. Salary B. Total Income C. Capital gains D. Return 9. The provision in chapter VI A are in the form of _________ from the total income A. Assessment B. Payment C. Returns D. Deductions 10. For any Previous Year the deductions can be sourced from the __________ act of the relevant year A. Finance B. Income Tax C. Statutory D. Returns 11. Exempted incomes are enumerated in the _____________ of the act A. Section 60 B. Section 38 C. Section 10 D. Section 2A 12. Knowing the ____________ status of a tax payer is important deciding factor to pay tax A. Residential B. Financial C. Property D. Income

13. An organisation receiving donation should obtain clearance from income tax under section _______ A. 80DD B. 80E C. 80G D. 80U 14. The pension received by an employee from his former employer is taxable under the head income from _________ A. Salary B. Capital & Gains C. Other sources D. Business and Profession 15. Employers contribution towards RPF is exempt from tax up to ____% of the salary A. 12 B. 15 C. 12.5 D. 13 16. Compensation by termination of employment comes under ________________ A. Salary B. Profits in lieu of salary C. Perquisites D. Tax free perquisites 17. Commuted pension for non-government employees can claim relief under section_____. A. 10 B. 17 C. 89 D. 17(2) 18. ___________ 1991 issued by the Central government is not a capital asset U/s 2(14) A. Gold bonds B. Securities C. Special bearer bonds D. Development loan bonds

19. Transfer of ___________________ land before 1st March, 1970 is not regarded as a transaction A. Rural agricultural land B. Urban agricultural land C. Industrial land D. None of the above 20. Section 80JJA allows deduction for profits from business on ___________ A. Infrastructural development B. Bio-degradable C. Hotels & Conventions centres D. Scientific research 21. _______________ means an individual who is actively engaged in conducting the affairs of the firm in which he is a partner. A. Coparcener B. Active partner C. Working partner D. Sleeping partner 22. While calculating the book profit deduct ___________ depreciation brought forward from earlier years A. Absorbed depreciation B. Diminishing depreciation C. Unabsorbed depreciation D. None of the above 23. Net worth of the undertaking being sold is taken as ________ for calculation. A. Full value consideration B. Cost C. Profit D. Asset 24. A surcharge of _____% is applicable for total income exceeding Rs. 1 crore in case of domestic companies. A. 12 B. 7.5 C. 2.5 D. 3

25. Intent of a merger or demerger should not be ______________ of tax A. Avoidance B. Incidence C. Liability D. Evasion 26. If the tax audit report is not filed before the due date of filing of return, penalty would be levied under ________________ A. Section 44BBB B. Section 27 (1B) C. Section 29A D. Section 35 27. Amount of Income tax determined to be payable in respect of the taxable income for a period is called A. Tax liability B. Deferred payment C. Current tax D. Permanent difference 28. A complication in Tax accounting is the concept of _________ of liability and asset in reporting A. Deferred tax B. Income tax C. Tax calculation D. Tax incidence 29. If a tax payer appeals against the order the amount appealed is disclosed as a A. Tax liability B. Taxable income C. Deferred liability D. Contingent liability 30. Valuation of jewellery shall be determined in accordance with the ______________ as estimated by the assesse A. Fair market value B. Net value C. Gross value D. Prevailing price

31. Gifts are treated as Income from ____________ under the income tax act A. Capital gains B. Business C. Profession D. Other sources 32. A residential property let out for a minimum period of ______ in the previous year is not an asset. A. 300 days B. 500 days C. 600 days D. 400 days 33. The interest in the _____________ property of the HUF is not included in the net wealth A. Family B. Coparcenary C. Parcenary D. Karta 34. Total income of ________ in excess of Rs.1,00,000 is liable to tax @15% A. Hospital B. Conventions centre C. NPO D. Public religious trust 35. Initial depreciation shall not be allowed if the asset is on the nature of an _________________ A. Block assets B. Leased equipment C. Office appliances D. Rails 36. Report of international transaction certified by a Chartered Accountant has to be lodged directly with the ___________________ A. Transfer pricing officer B. Commissioner Income tax office C. Assessing officer D. Tax recovery officer 37. _______ covers sales within the state A. Sales Tax B. VAT C. CST D. Customs

38. The basic concept of _________ credit is to avoid the cascading effect of duty A. VAT B. CENVAT C. CST D. Excise 39. The customary practices of gifts tax being collected by the government has come to be called as ___________ in the modern era A. Customs duty B. Excise duty C. Import duty D. Sales duty 40. According to condition 3 of CENVAT the final product must suffer _________ duty A. Customs B. Export C. Import D. Central Excise 41. Exemptions are provided by notifying in the ___________ for whole or part of the service tax A. Circulars B. Notices C. Finance act D. Official gazette 42. When service recipient is located outside India it is a ___________ transaction A. Export B. Import C. Foreign D. None of the above 43. _________ time is provided to amend the original order in case of rectification of mistakes in the assessment of service tax liability A. 5 years B. 2 years C. 3 years D. 4 years

44. The concept of ___________ is used to prevent multiple tax impact A. Self-assessment B. Input tax credits C. Tax free services D. VAT 45. Income of a Non-Resident from Global Depository Receipts purchased in foreign currency is taxable at the rate of ________ A. 10% B. 20% C. 30% D. None of the above 46. An undertaking that starts production in a _____ on or after 1st April, 2002 is allowed 100% profits deduction A. SEZ B. EOU C. VCU D. FTZ 47. Long term capital gains from the sale of units of an equity oriented fund is exempted under _____________ A. Section 10(83) B. Section 10(38) C. Section 10(39) D. Section 10(93) 48. Low regular & extra dividend policy is common among companies that experience ________________ earnings A. Seasonal shifting B. Cyclical shifting C. Trendy shifting D. Irregular shifting 49. The combination of different sources of fund used for the business is called _______________ A. Capital structure B. Capital gearing C. Capitalisation D. Capital funds

50. Typical share-holders who are long time investors & at the top tax brackets favour _______________ of profits A. Paying of dividend B. Retaining C. Ploughing back D. None of the above

Section-B Answer all questions. Each question carries 2 marks 25 * 2 = 50 Marks

51. Transactions in tax avoidance are structured with the purpose of ________ & _________ the tax A. Planning & Evading B. Calculating & Investing C. Planning & Limiting D. Reducing & Eliminating 52. Expenses incurred for __________ purpose & __________ by law is not allowed as deductions A. Offence & Prohibited B. Agriculture & Poultry C. Small scale industry & delayed D. None of the above 53. Bill becomes an act after the ________ has cleared it & the ___________ approves it. A. Apex body and Income Tax officer B. Parliament & Prime Minister C. Committee & Apex body D. Parliament & President 54. Income can be computed on ______ or _______ basis A. Rate or Liability B. Income or Expenses C. Cash or Accrual D. None of the above

55. The _________ & ________ should be presented along with the tax return after tax audit A. Profit & Loss a/c, Balance Sheet B. Financial, Statutory C. Income, Returns D. None of the above 56. When_________ has filed nil returns then ________ is the final proof of tax compliance. A. Assesse, ITR-1 B. Assesse, ITR-2 C. Assesse, ITR-V D. Assesse, ITR-8 57. Company gets entire amount of remuneration paid to employees as _______ while arriving at its taxable __________. A. Deductible, Business income B. Chargeable, Income C. Deductible, Sources D. Chargeable, Sources 58. ________ & _______ are collected when HRA crosses Rs180000 PA A. Rent receipt & PAN B. Rent receipt & Agreement C. Rent receipt and Sale deed D. None of the above 59. Indexed cost acquisition is the product of ____________ & ____________ A. Cost of improvement & inflation index of the first year B. Cost of improvement & inflation index of the year C. Cost of acquisition & inflation index of the year D. Cost of acquisition & inflation index of the first year

60. Section 54F exempts the long term capital asset if ___________ is invested in _____________. A. Sale consideration, block asset B. Net consideration, block asset C. Net consideration, residential house D. Sale consideration, financial asset

61. When the total income of an AOP exceeds Rs800000 its tax rates are ______ & ______ of the amount by which the Income tax exceeds. A. 10%, 18,000 B. 20%, 32,000 C. 30%, 92,000 D. 40%, 102,000 62. __________ & ____________ of losses for a firm is permitted for eight years A. Setoff & Carry forward B. Setoff & Deductions C. Setoff & Losses D. Carry forward & Losses 63. Section 80LA allows deduction of income of ___________ & ____________ centre. A. Biodegradble, Scientific research B. Infrastructure & Scientific research C. Certain States & New workmen D. Off shore banking & International financial services 64. Amortisation for five years begin in the year in which ___________ or __________ takes place A. Amalgamation, demerger B. Re-organisation, demerger C. Amalgamation, Re-organisation D. Demerger, capital expenditure 65. According to clause 8b of form 3CD the auditor should review the ____________ & ___________ A. Partnership deed & Directors report B. Residential status & Partnership deed C. Minutes of the meeting & Residential status D. Minutes of the meeting & Directors report 66. A Tax audit effectively curbs ____________ & ensures _____________ A. Tax liability & tax incidence B. Tax evasion & tax compliance C. Tax liability & tax incidence D. Tax evasion & tax liability

67. One house or part of the house exemption is allowed only to _________ &__________ assesse A. Capital gain & other source B. Individual & HUF C. Individual & capital gain D. Other source & HUF 68. The ________ with an agreement with the ________ can specify the manner in which the Arms-Length price is determined. A. CBDT, Tax payer B. CIT, Tax officer C. CBDT, Tax officer D. CIT, Tax payer 69. Gross rent can be calculated on basis of _________ received & not on __________ basis A. Actual rent, Presumptive B. Actual rent, taxable C. Tax, presumptive D. Gross rent, Interest

70. CENVAT credit can be availed on the input goods we ______ & use for __________ A. Sell & Trading B. Sell & Manufacturing C. Purchase & Manufacturing D. Purchase & Trading 71. Once a ________ has been allowed by the Central Government it can be ______________ if the proceeds are not received A. Exemption, Taxed B. Rebate, Disallowed C. Exemptions, Disallowed D. Rebate, Taxed 72. Renting of a place for ______ purposes or _______ services is a tax free services A. Charitable or education B. Veterinary or health care C. Religious or Religious D. Culture or Sports

73. Foreign companies receiving royalties from _____________ or an ______________are allowed a maximum deduction at 20% of its expenses A. MNC, Foreign government B. Indian company, Foreign government C. Indian company, Indian government D. MNC, Indian government 74. A firm selects an optimum capital structure when the firm has selected a combination of __________ & _________ A. Shares & Debentures B. Internal & External C. Equity & Debt D. Long term & Short term 75. When a business is acquired by another person through inheritance the new owner can claim _________ & ______________ of losses A. Set-off & Carry forward B. Sale & Replacement C. Business loss & Unabsorbed depreciation D. Unabsorbed depreciation & Business income Section-C Answer all the following questions. (Descriptive questions to be answered in not more than 200 words) 10Marks x 2 = 20Marks
Sl. No. 76 Questions Marks

77

Explain a) The different categories of assesses according to their 10 Marks) residential status? How is this status determined? (5 Marks) b) The Capital assets, its categories and basis of charges. (5 Marks) Snow White Ltd. Manufactures paper and in the course of such manufacture, wastepaper is produced (paper being the main product and dutiable goods). The Central Excise Tariff Act, 1985 (CE7) was amended w.e.f. 1-3-1995, so as to include waste paper. White Ltd. was issued a show cause notice by the Central Excise Officer, demanding duty of Rs.2 lakhs on waste paper produced during October, 1994 to February, 1995, but cleared during AprilMay, 1995. A reply is due to be filed immediately to the notice. As (10 Marks) Counsel of Snow White Ltd. you we required to advise the company about (i) The legality and validity of the proposed levy and collection of duty on waste paper for the period prior to 1-3-1995; and (ii) State (with the help of decided cases) the reasons for your advice/opinion.

D Ltd., carrying on business in manufacture, sale and export of tyres, tubes and accessories, has disclosed a net profit of Rs.21,00,000 in its P & L account for the period ended March 31, 2011. The company follows the mercantile system of accounting : (a) A sum of Rs.20,000 is debited to compensation account. The company had placed an order for machinery to manufacture tyre with a UK company. However, due to a sudden increase in the price of machinery by the vendor, the assessee, had to cancel the contract, in lieu of compensation The company claims the said amount as deduction on revenue account or, in the alternate, as loss under the head Capital gains as the payment was made towards extinguishment of right to acquire a capital asset. (b) Loss on export of accessories account shows a debit of Rs. 4 lakh. In this connection it is explained that two trucks belonging to the company carrying tyres accessories were intercepted at the international border and seized by customs authorities for illegal export. The goods were confiscated by the customs authorities and a fine of Rs.2 lakh was levied. The company claims the value of confiscated goods as a trading loss under section 28 and the payment of the fine of Rs.2 lakh which is debited to rates and taxes account as on expenditure in the course of business under section 37(1). (c) The company had set up a separate unit for manufacture of plastic tubes at Bangalore in 1995. The said unit suffered heavy losses. As a result the same was closed down and the plant and machinery were sold away. The company, however, claims unabsorbed depreciation amounting to Rs.8 lakh in its return of income. It is not debited to the profit and loss account. (d) During the previous year 1995-96, the assessee-company acquired 5,000 shares of E Ltd., an Indian company,as a result, the entire share capital of the said company is now held by the assessee-company. In May 2010, the assessee-company sold to E Ltd. plant and machinery for Rs.6,00,000. The actual cost is ascertained at Rs.4,00,000 and written down value at Rs.1,50,000. (e) In the years 2000-2001 and 2001-02, the Government of India arranged exports of tyres and tubes through the Federation of Tyre Dealers of which the company was a member. The exports which were made to For Eastern countries resulted in loss which was shared by all members including the company. The Federation thereafter took up the questions of reimbursement of losses with the Government, which after protracted discussion and correspondence agreed to grant a subsidy calculated at a certain percentage of exports. The assessee-company received its share of subsidy amounting to Rs.3 lakh in the previous year. The amount stands credited to the Capital reserve account and claimed as exempt 78 On the basis of the particulars furnished by the company and ascertained on inquiry Compute its total income for the assessment (10 Marks) year 2011- 12.
79 Ms. Hema, aged about 66 years is a Finance Manager of Udyog Pvt. Ltd. based at Mumbai. She is in continuous service since 1969 and received the following from the Company during the year ended 31.3.2011. (a) Basic Pay (50,000 12) = Rs.6,00,000 (b) D.A (20,000 12) = Rs.2,40,000 (c) Bonus 2 months Basic Pay (d) Commission 0.1% of Companys Turnover. Turnover for financial year 2010-2011 was Rs.15 Crores. (e) Contribution of the Employer and Employee to the PF Account Rs.3,00,000 each (10 Marks)

(f) Interest credited to P.F Account at 10% Rs.60,000 (g) Rent Free Unfurnished Accommodation provided by the Company (Company pays Rs. 70,000 p.a. rent) (h) Entertainment Allowance Rs. 30,000 (i) Childrens Education Allowance to meet the hostel expenditure of three children Rs. 5,000 each. Hema makes the following payments and Investments : (a) Premium paid to insure the life of her major son Rs.15,000 (b) Medical Insurance Premium for Self Rs. 15,000, Spouse Rs. 15,000 (Aged 70 yrs.) (c) Donation to Public Charitable Institution registered under Section 80G Rs. 2,00,000 (d) LIC Pension Fund Rs.12,000 (e) Long-term Infrastructure Bond Rs.25,000 Determine the tax liability for the Assessment Year 2011-12