[Direct Tax - I Solved Question Papers 2015, Dibrugarh University Solved Question Papers, B.Com 5th Semester]
DIRECT TAX LAW I – NEW SYLLABUS QUESTION PAPERS
2015 (November)
COMMERCE (Speciality)
Course: 504 (Direct Tax – I)
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
1.
A resident in India cannot become
a resident in any other country for the same assessment year. False
2. An income under the head ‘Capital
Gains’ to a trade union is taxable. True
3. If rent is paid for a house
situated in New Delhi, the house rent allowance shall be exempted to the
maximum extent of 40% of salary. False, 50%
4. The circulars issued by the CBDT
are binding on the income-tax authorities. True
(b) Choose the correct answers to the
following:
1x4=4
1.
Income which accrues or arises
outside India and also received outside India is taxable in case of
a. Resident only.
b. Not ordinarily resident.
c. Both ordinarily resident and not
ordinarily resident.
2.
Rent received from agricultural
land is
a. Fully exempted. Because it is an
agricultural income
b. Partially exempted.
c. Not exempted.
3.
Leave travel concession is a
tax-free perquisite.
a. For one journey per year.
b. For one journey in a block of 4
years.
c. For two journeys in a block of 4 years.
4.
An assessee has borrowed money for
purchase of a house, and interest is payable outside India. Such interest shall
a. Be allowed as deduction.
b. Not be allowed as deduction.
c. Be allowed as deduction, if the tax is
deducted at source.
2.
Write short notes on any four of the following: 4x4=16
a) Assessee.
Ans: Assessee [Section 2 (7)]: To mean a
person by whom any tax or any other sum of money payable under the Act and
include:
i)
Every
person in respect of whom any proceeding has been initiated under the act for
the assessment of his income or the income of any other person.
ii)
A
person who is deemed to be assessee under any provision of the Act.
iii)
A
person who is deemed to be an assessee in default in any of the provision of
the Act.
Persons Liable
to Pay Income Tax :
A. Following
persons are liable to pay income-tax if their taxable income’ in a year exceeds
the basic exemption limit for the year:
1. Individuals
(including non-residents),
2. Hindu
Undivided Families (HUFs)
3. Association
of Persons (AOPs)/Bodies of Individuals (BOIs) (where the individual shares of
the members are known)
4. Artificial
juridical persons, such as, deities of temples
5. Societies
and charitable/religious trusts
B. Following
persons are liable to pay income-tax irrespective of their income :
1. All
partnership firms (including limited liability partnership firms)
2. Co-operative
societies
3. Companies
4. Local
authorities
5. AOP/BOI
where shares of the members are indeterminate or unknown.
b) Person.
Ans: Person [Section 2(31)]: Person
includes seven types of persons namely:
a.
An
individual;
b.
An
Hindu undivided family (HUF);
c.
A
company;
d.
A
firm;
e.
An
association of persons (AOP) or a body of individuals (BOI);
f.
A
local authority;
g.
Every
artificial juridical person not falling within any of the preceding sub
clauses.
The 2 basic differences between AOP and BOI
are:
a) In BOI there are only individuals but in
AOP there can be any type of persons.
b) BOI is creation of law whereas AOP can be
created by different persons coming together for doing some income producing
activity on the voluntary basis.
An Association of person or body of
individuals or a local authority or an artificial juridical person shall be
deemed to be a person, whether or not such person was formed or established or
incorporated with object of deriving income, profits and gains.
c) Concept of Tax.
Ans: Meaning and Definition of Tax
A tax is a fee charged (levied) by a
government on a product, income or
activity. If tax is levied directly on person or corporate income, it is called direct tax. If tax is levied on the
price of a good or service, it is called indirect tax. The purpose of taxation is to finance government expenditure.
According to Hugh Dalton, “A tax is a
compulsory contribution imposed by a
public authority, irrespective of the exact amount of service rendered to the tax payer in return
and not imposed as penalty for any legal offences.” In general, tax is a levy or other type of a financial charge or fee
imposed by state or central
governments on legal entities or individuals. Local authorities like local governments, like panchayats or
municipal corporations also have right to impose taxes.
In India, Income tax was introduced for the
first time in 1860, by Sir James Wilson in order to meet the losses sustained
by the Government on account of the Military Mutiny of 1857. Thereafter;
several amendments were made in it from time to time. In 1886, a separate
Income tax act was passed. This act remained in force up to, with various
amendments from time to time. In 1918, a new income tax was passed and again it
was replaced by another new act which was passed in 1922.This Act remained in
force up to the assessment year 1961-62 with numerous amendments. The Income
Tax Act of 1922 had become very complicated on account of innumerable
amendments. The Government of India therefore referred it to the law commission
in1956 with a view to simplify and prevent the evasion of tax. The law
commission submitted its report-in September 1958, but in the meantime the
Government of India had appointed the Direct Taxes Administration Enquiry
Committee submitted its report in 1956.In consultation with the Ministry of Law
finally the Income Tax Act, 1961 was passed.
d) Charge of Income-Tax.
Ans: Section 4
is the charging section for the Income tax Act, 1961 (the Act). It provides for
the charge and collection/ payment of Income Tax India. The important
Provisions of this section are:
Ø Where any Central Act enacts for any Assessment
Year that income-tax shall be charged at any rate or rates,
Ø Income-tax at that rate or rates
(including additional tax) shall be charged for that year in accordance with
and subject to all the provisions of the Act.
Ø In respect of the Total Income of the
Previous Year of every Person
Ø However, if by virtue of any provision
of the Act, Income Tax India is to be charged in respect of the income of a
period other than the previous year, then it shall be charged accordingly.
Ø The Income-tax chargeable as above
shall be deducted at source or paid in advance, if so required under any
provision of the Act.
e) Return of Tax.
Ans: The tax form or forms used to file income taxes with the Internal
Revenue Service (IRS). Tax returns often are set up in a worksheet format,
where the income figures used to calculate the tax liability are written into
the documents themselves. Tax returns must be filed every year for an
individual or business that received income during the year, whether through
regular income (wages), interest, dividends, capital gains, or other profits. A return of excess
taxes paid during a given tax year; this is more accurately known as a
"tax refund".
f) Gross Total Income.
Ans: Section
14: As per section 14, all income, for purposes of income-tax, will be
classified under the following heads of income.
(i)
Salaries,
(ii)
Income from House Property,
(iii)
Profits and gains of business or profession
(iv) Capital gains
(v)
Income from other sources
Aggregate of incomes computed under the above 5
heads, after applying clubbing provisions and making adjustments of set off and
carry forward of losses, is known, as gross total income (GTI) [Sec. 80B]
3. (a) Explain in brief various incomes
which are exempted u/s 10 of the Income-tax Act, 1961. 14
Ans: Income Exempted from tax under Sec. 10:
1. Agricultural Income: Income
from agriculture is exempt. However, if the net agricultural income exceeds
Rs.5,000, it is taken into account for determining the rates of income-tax on
incomes liable to tax. [Sec.10 (1)]
2. Receipt from Hindu Undivided Family: Any sum
received by an individual as a member of Hindu Undivided Family where such sum
has been paid out of the income of the family or in the case of any impartible
estate, where such sum has been paid out of the income of the estate belonging
to the family, irrespective of whether tax is payable or not by the HUF on its
total income. However, certain receipts from HUF are liable to be clubbed in
the hands of an individual member u/s 64(2). [Sec.10 (2)]
3. Partner’s Share in the Firm’s Income: In the
case of a person being a partner of a firm which is separately assessed as
such, partner’s share in the total income of the firm is exempt. Share of a
partner of the firm shall be computed by dividing the total income of the firm
in the profit sharing ratio mentioned in the Partnership Deed. [Sec.10 (2A)]
4. Value of Leave Travel Concession: Value of
any leave travel concession or assistance received by or due from the employer
to employee (including noncitizens) and his family (spouse, children and
dependent- father, mother, brother, sister dependent on him) in connection with
his proceeding on leave or after retirement or termination of his service to
any part of India. [Sec.10(5)]
5. Leave Encashment : Any
payment received by a Central/State Govt. employee, as cash equivalent of leave
salary in respect of period of earned leave at his credit at the time of his
retirement whether o superannuation or otherwise. However, in case of other
employees the exemption is available subject to specified limits. For details
see ‘Receipts Exempt from Income Tax’ in the chapter ‘Salary’. [Sec.10(10AA)]
6. Compensation to Employee: Any
compensation received by a workman under Industrial Disputes Act or under any
other Act or rules, order or notification issued there under or under any
standing order or under any award, contract of service or otherwise at the time
of his retrenchment is exempt to the extent such compensation is in accordance
with Section 25F (b) of Industrial Disputes Act, subject to a maximum of
Rs.5,00,000.
7. Payment from Provident Fund: Any
payment (including interest) from a provident fund under Provident Fund Act,
1925 or Public Provident Fund Scheme, 1968. [Sec.10(11)]
8. Payment from Sukanya Samriddhi Account: Any
payment from an account under the Sukanya Samriddhi Account Rules, 2014
[Sec.10(11A)]
9. Accumulated Balance of Recognised Provident
Fund: Any accumulated balance due and becoming payable to an employee from
a recognised provident fund, on fulfillment of any of the following conditions:
(i) If he has rendered a continuous
services of five years or more; or
(ii) If his service, though not as stated
in (i) above, has been terminated due to his ill-health or by the contraction
or discontinuation of his employer’s business or any other cause beyond his
control; or
(iii) If on cessation of his employment, his
accumulated balance is transferred to recognised provident fund maintained by
his new employer;
10. House Rent Allowance: Any
special allowance granted to an assessee by the employer to meet expenditure
incurred on payment of rent for residential accommodation subject to prescribed
limits and conditions. [Sec.10(13A)]
11. Allowances of MPS and MLAs:
(a) Any daily allowance received by Members of
Parliament or any State Legislature.
(b) Any allowance received by any Member of
Parliament under the Members of Parliament (Constituency Allowance) Rules,
1986.
(c) Any constituency allowance received by any
member of any State Legislature under any Act or rules made by it. [Sec.10(17)]
12. Income of a Professional Association set up for
the control, supervision, regulation or encouragement of the professions of
law, medicine, accountancy, engineering, architecture or other notified
profession (i.e. Company Secretary, Chemistry, Materials Management and Town
Planning), subject to specified conditions. [Sec.10(23A)]
13. Income of a New Agency [i.e.
Press Trust of India Ltd.] set up in India, which applies its income or
accumulates it for application solely for collection and distribution of news and does
not distribute its income in any manner to its members. [Sec.10(22B)]
14. Income of a Minor Child liable
to be included in income of his parent u/s 64(1A) is a exempt up to a maximum of
Rs.1,500 per minor child. [Sec.10(32)]
15. Any Capital gain arising to an
individual /HUF on compulsory acquisition of an agricultural and in
urban areas (i.e. situated within the jurisdiction of a municipality or a cantonment
board having population of 10,000 or more or within specified distance from the
local limits of such municipality/board), provided the compensation/consideration is
received on or after 1.4.2004 and the land was being used for agricultural purposes
by the HUF/individual or his parent(s), during the period of two years
immediately before acquisition. [Sec.10(37)]
Or
(b) Write an explanatory note on ‘Tax
Holiday’ for newly established units in SEZ. 14
Ans:
Out of Syllabus
4. (a) From the following information, compute
the taxable income for the assessment year 2014 – 15 under the head ‘Salaries’
of Shri Krishna who is working at Guwahati: 14
|
(i) Basis salary – Rs. 20,000 p.m.
(ii) Dearness allowance – Rs. 6,000 p.m.
(iii) He gets house rent allowance @ 3,000
p.m. He pays a rent of Rs. 4,000 p.m.
(iv) The employer provided him the facility
of a gardener and a cook, each of whom is being paid a salary of Rs. 600 p.m.
(v) He is provided with a motor car of 1.8
ltr. capacity engine with a driver which was used partly for official purpose
and partly for private.
(vi) Employer’s contribution to a recognized
provident fund is @ 15% of salary and interest credited to this fund @ 13%
amounted to Rs. 13,000.
(vii) Medical expenses paid by employer is
Rs. 20,000 for medical treatment in a private hospital.
(viii) He took an advance salary for two
months.
(ix) A lunch allowance @ Rs. 100 per day was
given for 300 days during the previous year.
(x) He paid professional tax of Rs. 3,500
per annum.
|
Computation
of salary of Mr. X for the Assessment Year (2018-2019)
|
Particulars |
Amount |
Amount |
|
a) Basic Salary b)
Dearness Allowance c)
Lunch Allowance (300*100) d)
Advance salary e)
House Rent Allowance Less:
Exempted upto minimum of the following three points: a)
Actual HRA b)
40% of Salaries (Salaries = 2,40,000) c)
Rent paid in excess of 10% of salaries (48,000-24,000) f)
Employer’s Contribution to RPF Less:
Exempted upto 12% of salary
[2,40,000*12%] g)
Interest on RPF Less:
Exempted upto 9.5% (13,000*9.5/13) h)
Salary of gardener (600*12) i)
Salary of cook (600*12) j)
Value of car (2,400*12) Add:
Driver’s salary (900*12) k)
Reimbursement of medical expenses Less:
Exempted |
36,000 36,000 96,000 24,000 36,000 28,800 13,000 9,500 28,800 10,800 20,000 15,000 |
2,40,000 72,000 30,000 40,000 12,000 7,200 3,500 7,200 7,200 39,600 5,000 |
|
Gross Salary Less: Deduction U/S 16 |
|
4,63,700 3,500 |
|
Income from Salary |
|
4,60,200 |
Or
(b) Name the different kinds of provident fund, of which a salaried
person may be a member, and state the income-tax provisions regarding each.
7+7=14
Ans: A Provident fund is a compulsory
retirement saving schemes for the government as well as non-government
employees in which contribution is made both by the employer and the employees.
It is a saving tool for the employees. This scheme is managed by under the
Employee’s Provident Funds and Miscellaneous Provision Act, 1952. Under this
scheme, employee has to pay a certain percentage from his salary and an equal
amount is contributed by the employer. The employee gets a lump sum amount with
interest at the time of his retirement.
Types of Provident Fund
At present there are 4 types of provident
funds:
a) Statutory
Provident Fund (SPF): This
Fund is mainly meant for Government/University/Educational Institutes
(affiliated to university) employees.
b) Recognized
Provident Fund (RPF): This
scheme is applicable to an organization which employs 20 or more employees. An
organization can also voluntarily opt for this scheme. All RPF schemes must be
approved by The Commissioner of Income Tax. Here the company can either opt for
government approved scheme or the employer and employees can together start a
PF scheme by forming a Trust. The Trust so created shall invest funds in
specified manner. The income of the trust shall also be exempt from income
taxes.
c) Unrecognized
Provident Fund (URPF): Such
schemes are those that are started by employer and employees in an
establishment, but are not approved by The Commissioner of Income Tax. Since
they are not recognized, URPF schemes have a different tax treatment as
compared to RPFs.
d) Public
Provident Fund (PPF): This
is a scheme under Public Provident Fund Act 1968. In this scheme even
self-employed persons can make a contribution. The minimum contribution is
Rs.500 per annum and the maximum contribution is Rs.1, 00,000 per annum. The
contribution made along with interest earned is repayable after 15 years,
unless extended.
Taxability
of Provident Funds
|
Particulars
|
SPF
|
RPF
|
URPF
|
PPF
|
|
1. Employee's/ assessee's contribution
|
Deduction u/s 80C is available from gross total income subject
to the limit specified therein
|
Deduction u/s 80C is available from gross total income subject
to the limit specified therein
|
No deduction u/s 80C is available
|
Deduction u/s 80C is available from gross total income subject
to the limit specified therein
|
|
2.Employer's contribution
|
Fully exempt from tax
|
Exempt up to 12% of salary. Amount in excess of 12% is included
in gross salary.
|
Not exempt but also not taxable every year. For taxability see
point 4 below
|
Not applicable as there is only assessee's own contribution
|
|
3. Interest on Provident Fund
|
Fully exempt from tax
|
Exempt u/s 10 up to 9.5% p.a. Interest credited in excess of
9.5% p.a. is included in gross salary
|
Not exempt but also not taxable every year. For taxability see
point 4 below
|
Fully exempt
|
|
4.Repayment of lump sum amount on retirement
/ resignation /termination
|
Fully exempt u/s 10(11)
|
Exempt if the employee has rendered minimum 5 years of
continuous service
|
Accumulated employee's contribution is not taxable Accumulated
employer's contribution + interest on employer's contribution (till date) is
taxable as profit in lieu of salary. Interest on employees contribution (till
date) is taxable as income from other sources
|
Fully exempt. u/s 10(11)
|
Transferred Balance of Provident Fund: The
balance of unrecognised fund which is transferred to recognised fund is called
transferred balance.
Points to remember:
Ø The fund will be treated as RPF from
the date fund was instituted
Ø The employer’s contribution to URPF
shall qualify for exemption upto 12% of salary and excess shall be taxable.
Ø Interest upto 9.5% is exempted, excess
taxable
Ø Salary means: basic + DP + DA (Which
enters) + Commission on turnover
5. (a) Define annual value. How is it determined? What deductions are
allowed from annual value in computing taxable income from house
property?
4+4+6=14
Ans: Ans: Annual Value (Section 23)
The Annual Value
of a house property is the inherent capacity of the property to earn income
and it has been defined as the amount for which the property may
reasonably be expected to be let out from year to year. It is not necessary
that the property should actually be let out. It is also not necessary that the
reasonable return from property should be equal to the actual rent realized
when the property is, in fact, let out.
Computation of
annual value: Computation
of Annual Value for the determination of Income from House property requires
three steps.
Ø STEP 1 Determine the Gross Annual Value(GAV)
Ø STEP 2 Determine the value of Municipal taxes
Ø STEP 3 Compute the Net Annual Value
STEP 1- Determine
the Gross Annual Value (GAV):
Calculation
of GAV based on the following factors:
1) Fair Rental Value (FRV): The amount of rent which a similar property (similar
to the house property the GAV of which is to be determined) in the same
locality would fetch.
2) Municipal Rental Value (MRV): The value of the house property under consideration
as determined by the Municipal authorities for the purpose of levying Municipal
taxes.
3) Standard Rental Value (SRV): The maximum amount of rent which a person can
recover from his tenant, legally, as determined by the Rent Control Act.
4) Expected Rental Value (ERV): The Fair rent or Municipal value, whichever is
higher, subject to the Standard rent.
5) Unrealised rent:
The amount of rent which is not capable of being realised. The amount of Unrealised rent shall not be included in
the actual amount of rent receivable from the house property if all the
following for conditions are satisfied:
a)
Tenancy is in good-faith.
b)
The defaulting tenant has vacated or steps must have been taken to vacate such
tenant.
c)
The defaulting tenant doesn't continue to occupy any other property of the assessee.
d)
Assessee has taken all the reasonable steps to proceed against the defaulting
tenant legally or he must satisfy the assessing officer that if such steps are
taken, it will be of no use.
6) Actual rent receivable (ARR): The amount of rent which is equal to the difference
between the Rent receivable and the unrealised rent.
7) Unoccupied property: The House property which cannot be occupied by its owner by reason of
his employment, business or profession being in some other place and he resides
at that place in a property not owned by him.
It
should be noted that the procedure for determination of Gross Annual Value is
not same in all the cases. It varies according to the given situation. Various
situations and the respective procedures for computation of GAV are given
below:
1) Property is let out throughout the
previous year (Section 23(1) (a)/ (b)):
GAV = ERV or ARR, whichever is higher.
2) Let out property is vacant for a part
of the year (Section 23(1) (c)):
If the ARR < ERV only because the property
was vacant for a part of the year, GAV = ERV. If the ARR < ERV for any other reason, GAV = ERV.
If the ARR > ERV even though it was vacant
for a part of the year, GAV = ARR. In all
the cases, ARR is computed for the let out period only and the ERV is for whole
year as usual.
3) Self-occupied or Unoccupied property (Section 23(2)): GAV
= Nil
4) Let out for a part of the year and
self-occupied for a part of the year (Section
23(3)): GAV = Higher of ERV
(calculated for the whole year) and ARR (calculated for let out period only)
5) Deemed to be let out property (Section 23(4)): This case arises when the assessee has more than two Self-occupied
properties in a previous year. In such case, only two of such properties is
treated as self-occupied and the remaining shall be treated as Deemed to be let
out properties. Here, GAV = ERV.
6) A portion of the property is let out
and the remaining portion is self-occupied: GAV is calculated separately for self-occupied part and the let out
part. The values of FR, MV, SR and Municipal taxes are apportioned on the given
basis.
Thus,
there is a scope for charging tax on Notional rent too. This happens when the
GAV determined according to the above steps is the ERV.
Now
that the Gross Annual Value of the house property is determined, the next step
is to determine the value of Municipal taxes paid that is deductible from the
Gross Annual Value.
STEP 2 -
Determine the value of Municipal taxes:
The
municipal tax or the property tax paid is allowed as deduction from the Gross
Annual Value if the following two conditions are satisfied.
(a) The
property is let out during the whole or any part of the previous year,
(b) The
Municipal taxes must be borne by the landlord. If the Municipal taxes or any
part thereof are borne by the tenant, it will not be allowed.
(c) The
Municipal taxes must be paid during the year. Where the municipal taxes become
due but have not been actually paid, it will not be allowed.
STEP 3 - Compute
the Net Annual Value:
Gross
Annual Value ++++++
Less:
Municipal Taxes ++++++
Net
Annual Value ++++++
Deductions allowable under section 24 of the
income tax act
Following two
deductions will be allowable from the net annual value to arrive at the taxable
income under the head ‘income from house property’:-
(a) Statutory
deduction: 30 per cent of the net annual value will be allowed as a deduction
towards repairs and collection of rent for the property, irrespective of the
actual expenditure incurred.
(b) Interest
on borrowed capital: The interest on borrowed capital will be allowable as a
deduction on an accrual basis if the money has been borrowed to buy or
construct the house. It is immaterial whether the interest has actually been
paid during the year or not. If money is borrowed for some other purpose,
interest payable thereon cannot be claimed as deduction.
Limit of deduction
u/s 24(b)
A. In case
of Let out/ deemed to be let out house property: Interest
on Money borrowed is allowed as deduction without any limit. Here interest on
money borrowed = interest of P/Y + 1/5 of Pre-construction
period (PCP) interest. PCP
started from the date of borrowing and ended on 31st mar immediately
preceding (Before) the year of
completion.
B. In Case
of Self Occupied House Property: Max. Rs.
2,00,000 is allowed as deduction if the following conditions are satisfied:
Ø Loan taken after 1 – 4 – 99
Ø For construction/purchase (Capital expenditure) of house
Ø Construction completed within 5 years
from the end of financial year in which
loan is borrowed.
Ø Loan certificate is obtained
For all other cases maximum allowed deduction
is Rs. 30000
Or
(b) Sri Ram has two house
properties situated in Kolkata. House 1 is self-occupied from the first 6
months, i.e., from 01-04-2013 to 30-09-2013 and w.e.f. 01-10-2013 it is let out
for Rs. 25,000 per month. House II is let out w.e.f 01-04-2013 at a rent of Rs.
20,000 p.m. and w.e.f 01-10-2013 it was self-occupied as Sri Ram shifted his
residence from House I to House II. The other details of the above two house
properties are as follows:
|
House – II (Rs.)
|
House – II (Rs.)
|
|
|
Municipal
tax paid
Insurance
premium paid
Interest
on money borrowed for purchase of house property
|
35,000
5,000
45,000
|
30,000
6,000
50,000
|
Compute
the income from house property of Sri Ram for the assessment year 2014 –
15. 14
Ans: Computation of Income from house property of Mr. Ram for the assessment year 2014-15 (Previous Year 2013-14)
|
Particulars |
House
– A |
House
– B |
|
1. Expected Rental Value 2. Actual Rent received or
receivable (6 MONTHS) 3. Gross Annual Value (higher of 1
OR 2) 7. Less: Municipal taxes paid |
3,00,000 1,50,000 3,00,000 35,000 |
2,40,000 1,20,000 2,40,000 30,000 |
|
8. Net Annual value (6-7) Less: Deduction under section. 24 (a) Standard Deduction @ 30% (b) Interest on money borrowed |
2,65,000 79,500 45,000 |
2,10,000 63,000 50,000 |
|
Income/ (Loss from house property) |
1,40,500 |
97,000 |
Note:
1.
In the given question both the properties are partly let out and partly self
occupied. No benefit is allowed for partly letout and partly self occupied
house property.
2.
In this question ERV is the 12 months rent of the house which both house
property can generate.
6. (a) Write short notes on the
following:
5+5+4=14
1.
Central Board of Direct Taxes.
2.
Commissioner of Income Tax.
3.
Deputy Commissioner of Income Tax.
Ans: 1. Central Board of Direct Taxes: The
Central Board of Direct Taxes (CBDT) is the highest executive authority. It is
subject to the overall control of the Central Government. It is authorized to
discharge all those functions prescribed in the Act and those which are
entrusted to it by the Central Government. The Central Board of Direct
Taxes consists of a Chairman and following six Members:
a) Chairman
b) Member
(Income-tax)
c) Member
(Legislation & Computerisation)
d) Member
(Personnel & Vigilance)
e) Member
(Investigation)
f) Member
(Revenue)
g) Member
(Audit & Judicial)
Powers of the Board:
Powers of
Central Board of Direct Taxes:
Income tax department are totally operated under
the control of central board of direct taxes (CBDT). It performs the function
of administration, supervision and control of entire income-tax structure in
our country. The Income tax Act provides the following specific power to the
CBDT:
(a)
It can declare any association whether
incorporated or not and whether Indian or Non-Indian, as company.
(b)
The CBDT has the powers to determine the
jurisdiction of various authorities mentioned in this Act.
(c)
The CBDT after considering territorial area,
person or classes of person, incomes or classes of incomes, may issue
directions to exercise the powers by any or all of these authorities.
(d)
The CBDT by general or specific order may
authorise director or director general to perform the functions of any of the
income tax authorities.
2.
Commissioner of Income Tax: The Central Government may appoint such persons
as it thinks fit to be the Commissioners of Income-tax. The jurisdiction of
Commissioners is to be determined by the Central Board of Direct Taxes keeping
in view the area, person, income or cases. The Board may, be general or
specific order and subject to such conditions, restrictions or limitations,
authorize any commissioner to perform such functions of any other income tax
authority as may be assigned to him in such order.
Powers:
a)
Under the directions of the Board, a
Commissioner may exercise the powers of an Assessing Officer.
b)
A Commissioner has the power to transfer any
case from one or more Assessing Officers subordinate to him to any other
Assessing Officer or Officers also subordinate to him. He can do so only after
giving the assessee an opportunity of being heard and after recording the
reasons for doing so.
c)
The Commissioner has been empowered to grant
approval for an order issued by the Assessing Officer asking a non-company
assessee to get its accounts audited from a Chartered Accountant.
d)
The prior approval of the Commissioner is
required for reopening of an assessment beyond the time limit of 4 years.
e)
The Commissioner has the power to revise an
order passed by Assessing Officer, if in his opinion it is erroneous or
prejudicial to the interests of the revenue. He can do so only after giving the
assessee an opportunity of being heard.
ASSESSING OFFICER (DEPUTY COMMISSIONER / ASSISTANT
COMMISSIONER / INCOME-TAX OFFICER ) AND THEIR POWERS
"Assessing Officer" means the
Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy
Director or the Income-tax Officer who is vested with the relevant jurisdiction
by virtue of directions or orders issued under sub-section (1) or sub-section
(2) of section 120 or any other provision of this Act, and the Joint
Commissioner or Joint Director who is directed under clause (b) of sub-section
(4) of that section to exercise or perform all or any of the powers and
functions conferred on, or assigned to, an Assessing Officer under this Act;
Importance of
Assessing Officer: The
Assessing Officer is the most important authority in the organisation structure
of Income-tax department. He is the primary authority to initiate assessment
proceedings and make assessment. He is the only authority to collect tax. The
jurisdiction of income-tax authorities shall be determined by the Central Board
of Direct taxes after considering the Territorial area, Persons or classes of
persons, Incomes or classes of incomes and Cases or classes of cases. The
Assessing Officer shall perform his functions in respect of such area or such
classes of persons or incomes as the above mentioned authorities may instruct.
The Assessing Officer shall have jurisdiction within the area assigned to him
and in respect of any person who is carrying of business or profession in his
area.
If two or more persons are
appointed as Assessing Officers in same area, each one will perform such
functions as are directed by the Commissioner. If there is dispute regarding
the jurisdiction of an Assessing Officer, it will be decided by the Director /
Chief Commissioner or Commissioner of Income-tax.
Or
(b) What are the authorities provided
by the Income-tax Act for the administration of tax? Discuss briefly the powers
of an Income-tax officer.
4+10=14
Ans: Income Tax Authorities
Section 116 of the Income Tax Act, 1961
provides for the administrative and judicial authorities for administration of
this Act. The Direct Tax Laws Act, 1987 has brought far-reaching changes in the
organizational structure. The implementation of the Act lies in the hands of
these authorities. The change in designation of certain authorities and
creation of certain new posts in the structure are the main features of
amendments made by The Direct Tax Laws Act, 1987. These authorities have been
grouped into three main wings:
(i) Administrative [Income Tax Authorities] [Sec.
116]
(a) the
Central Board of Direct Taxes constituted under the Central Boards of Revenue Act,
1963 (54 of 1963),
(b) Directors-General
of Income-tax or Chief Commissioners of Income-tax,
(c) Directors
of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax
(Appeals),
(d) Additional
Directors of Income-tax or Additional Commissioners of Income-tax or Additional
Commissioners of Income-tax (Appeals),
(e) Joint
Directors of Income-tax or Joint Commissioners of Income-tax.
(f)
Deputy Directors of Income-tax or Deputy
Commissioners of Income-tax or Deputy Commissioners of Income-tax (Appeals),
(g)
Assistant Directors of Income-tax or Assistant
Commissioners of Income-tax,
(h)
Income-tax Officers,
(i)
Tax Recovery Officers,
(j)
Inspectors of Income-tax.
(a) Commissioner of
Income tax (Appeals)
(b) Appellate
Tribunal
(c) High Court
(d) Supreme court
(iii) Assessing Officer [Sec. 2(7A)]
"Assessing Officer" means
the Assistant Commissioner or Deputy Commissioner or Assistant Director or
Deputy Director or the Income-tax Officer who is vested with the relevant
jurisdiction by virtue of directions or orders issued under sub-section (1) or
sub-section (2) of section 120 or any other provision of this Act, and the
Joint Commissioner or Joint Director who is directed under clause (b) of
sub-section (4) of that section to exercise or perform all or any of the powers
and functions conferred on, or assigned to, an Assessing Officer under this
Act;
ASSESSING OFFICER (DEPUTY
COMMISSIONER / ASSISTANT COMMISSIONER / INCOME-TAX OFFICER ) AND THEIR POWERS
"Assessing Officer" means the
Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy
Director or the Income-tax Officer who is vested with the relevant jurisdiction
by virtue of directions or orders issued under sub-section (1) or sub-section
(2) of section 120 or any other provision of this Act, and the Joint
Commissioner or Joint Director who is directed under clause (b) of sub-section
(4) of that section to exercise or perform all or any of the powers and
functions conferred on, or assigned to, an Assessing Officer under this Act;
Importance of
Assessing Officer: The
Assessing Officer is the most important authority in the organisation structure
of Income-tax department. He is the primary authority to initiate assessment
proceedings and make assessment. He is the only authority to collect tax. The
jurisdiction of income-tax authorities shall be determined by the Central Board
of Direct taxes after considering the Territorial area, Persons or classes of
persons, Incomes or classes of incomes and Cases or classes of cases. The
Assessing Officer shall perform his functions in respect of such area or such
classes of persons or incomes as the above mentioned authorities may instruct.
The Assessing Officer shall have jurisdiction within the area assigned to him
and in respect of any person who is carrying of business or profession in his
area.
If two or more persons are
appointed as Assessing Officers in same area, each one will perform such
functions as are directed by the Commissioner. If there is dispute regarding
the jurisdiction of an Assessing Officer, it will be decided by the Director / Chief
Commissioner or Commissioner of Income-tax.
Powers of assessing officers and others as named above: The
Assessing Office shall exercise the following powers:
1.
Powers of
Civil Court. These authorities shall have the same powers, as are vested in
a court under the Code of Civil Procedure 1908, when trying a suit in respect
of the following matters:
1)
Discovery and Inspection;
2)
Enforcing the attendance of any person including
any officer of a banking company and examining him under oath;
3)
Compelling a person to produce books of accounts
and other documents; and
4)
Issuing commissions.
2.
Powers of
Search and Seizure of assets and books of accounts. These authorities shall
have the power of searching any building, place vessel, vehicle or aircraft and
seize books of accounts, other documents, money, bullion, jewellery or other
valuable articles or things. Identification marks shall be put on the seized
assets. The assets so seized shall be retained by the Assessing Officer in his
authority to recover the existing and estimated tax liability of the assessee.
The books of accounts or the other documents seized shall not be retained by
the authorities for a period exceeding 180 days from the date of seizure.
3.
Power of
Assessment. As Assessing Officer or any other authority acting as Assessing
Officer shall have following powers while performing his functions:
1)
Power regarding self-assessment.
2)
Power of making regular assessment and Best
judgement assessment.
3)
Power to reopen an assessment.
4)
Power to reopen an assessment in case income has
escaped assessment.
5)
Power to treat a person as an agent.
6)
Power to assess a person leaving India and
trying to alienate his assets.
4.
Power to
call for information. These authorities has the power to:
(a) can call any firm to
provide him with a return of the addresses and names of partners of the firm
and their shares;
(b) can ask any Hindu
Undivided Family to provide him with return of the addresses and names of
members of the family and the manager;
(c) can ask any person who
is a trustee, guardian or an agent to deliver him with return of the names of
persons for or of whom he is an agent, trustee or guardian and their addresses;
(d) can ask an
assessee to furnish a statement of names and addresses of all the persons to
whom he has paid in any previous year rent, interest, commission, royalty or
brokerage etc. amounting to more than Rs. 1,000 or such higher amount as may be
prescribed together with particulars of all such payments.
5.
Power of Survey. An Income-tax authority may enter any place where business
or profession is carried on, if such place is within the limits of the area
assigned to him or is occupied by any person is respect of whom the Assessing
Officer exercises jurisdiction. The
objectives of conducting Income Tax surveys are:
• To discover new
assessees;
• To collect useful
information for the purpose of assessment;
• To verify that the
assessee who claims not to maintain any books of accounts is in-fact
maintaining the books;
• To check whether the
books are maintained, reflect the correct state of affairs.
6.
Power to Inspect Registers of Companies: The above-mentioned authority, may
inspect, if necessary, take copies or causes copies to be taken of any register
of members, debenture holders, mortgagees of company or of any entry in such
register.
7. Collection of
Information: For
the purpose of collection of information which may be useful for any purpose,
the Income tax authority can enter any building or place within the limits of
the area assigned to such authority, or any place or building occupied by any
person in respect of whom he exercises jurisdiction.
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