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Wednesday, November 06, 2019

Direct Tax - I Solved Papers: Nov' 2018


2018
 (November)
COMMERCE (Speciality)
Course: 504 (Direct Tax - I)
The figures in the margin indicate full marks for the questions
(NEW COURSE)
Full Marks: 80
Pass Marks: 24
Time: 3 hours
1. (a) Write True or False:                                                     1x4=4

1)         The total income of individual leaving India up to the date of his departure shall be chargeable to tax in that assessment year.         True
2)         Scholarship received by students must be financed by the government.          False
3)         Any income received by any person for or on behalf of the New Pension System Trust (established on February 27, 2008) will not be chargeable to tax.                 True
4)         Interest on borrowed capital is allowable as deduction if capital is borrowed for the purpose of purchase, construction, repair, renewal, etc.                        True
(b) Choose the correct answer of the following:               1x4=4
1)         The contribution made by the Central Government in the previous year, to the account of an employee under a pension scheme referred to in
a)      Section 80C.
b)      Section 80CCC.
c)      Section 80CCD
2)         Where an assessee uses his property for carrying on any business or profession, no income is chargeable to tax under the head
a)      Income from Salaries.
b)     Income from House Property.
c)      Income from Other Sources.
3)         The Appellate Tribunal, constituted by the Central Government, functions under the Ministry of Law, consists of which of the following two classes of members?
a)      Judicial and accountant.
b)      Commissioners and accountant.
c)      Inspector of income tax and accountant.
4)         Statutory Provident Fund is set up under the provisions of the
a)      Provident Fund Act, 1952
b)     Provident Fund Act, 1925
c)      Income-tax Act, 1961
2. Write short notes on any four of the following:                        4x4=16
a)      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.
b)     Entertainment Allowance.
Ans: Entertainment allowance is fully taxable for non-government employees. But in case of government employee’s a deduction is allowed u/s 16(ii) at the least of the following:
(a)    Statutory limit: 5000
(b)   1/5th of basic salary
(c)    Actual entertainment allowance
c)      Approved Superannuation Fund.
Ans: The tax treatment as regards the contribution to and payment from the fund is as under:
Ø  Employee's contribution: Deduction is available under section 80C from gross total income.
Ø  Employer's contribution: Contribution by the employer to the approved superannuation fund is exempt upto Rs. 1, 00,000 per year per employee. If the contribution exceeds Rs. 1, 00,000 the balance shall be taxable in the hands of the employee.
Ø  Interest on accumulated balance: It is exempt from tax.
Any payment from an approved superannuation fund is exempt from tax if it is made on the following situations:
a)      on the death of a beneficiary to an employee
b)      in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming in capacitated prior to such retirement
c)       By way of refund of contribution on the death of beneficiary

d)     Unrealized Rent.
Ans: For the purpose of determining the Annual value, the actual rent shall not include the rent which cannot be realized by the owner. However, the following conditions need to be satisfied for this:
(a) The tenancy is bona fide;
(b) The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property.
(c) The defaulting tenant is not in occupation of any other property of the assessee;
(d) The assessee has taken all reasonable steps for the recovery of the unpaid rent or satisfied the assessing Officer that legal proceedings would be useless.
(e) Unrealised rent of earlier years is not deductible.
Treatment of unrealized rent recovered
Where any rent cannot be realized, and subsequently if such amount is realized, such an amount will be deemed to be the income from house property of that year in which it is received. However, in the cases where unrealized rent is subsequently realized, it is not necessary that the assessee continues to be the owner of the property in the year of receipt also. 
e)      Commissioner of Income Tax.
Ans: PRINCIPAL DIRECTOR GENERAL/DIRECTOR GENERAL/PRINCIPAL CHIEF COMMISSIONER/CHIEF COMMISSIONER OF INCOME-TAX AND THEIR POWERS
The Central Government may appoint such persons as it thinks fit to be the Director General/Chief Commissioner of Income-tax. The jurisdiction of these authorities shall be determined by the C.B.D.T. keeping in view the area, persons, incomes or cases. The C.B.D.T. may be general or special order and subject to such conditions, restrictions or limitations, authorize any Principal Director General/Director or Chief Commissioner to perform such functions of any other income-tax authority as may be assigned to him in such order.
Powers of these income tax authorities
a)         The Principal Director General/Director General or Principal Chief Commissioner/ Chief Commissioner may be empowered to authorize a Deputy Commissioner to exercise the powers of an Assessing Officer in respect of a person, case, income or an area.
b)         These authorities may be empowered by the Board to appoint income-tax authorities below the rank of an Assistant Commissioner.
c)          These authorities may, after giving the assessee a reasonable opportunity of being heard in the matter, and after recording his reasons, transfer the case from one Assessing Officer subordinate to him.
d)         The Director General or Director or any other officer so authorised, may exercise the powers of Assessing Officer, in case he has reason to suspect that any income has been concealed or is likely to be concealed by an assessee coming within his jurisdiction.
e)         Such directors can issue instructions to the Assessing Officers and such instructions are issued for their guidance and are binding on them.
f)          Taxation Laws has given the power to the Director to make any inquiry or investigation in case of such type of assessee who falls within his jurisdiction and in whose case he has reason to suspect that any income has been concealed or is likely to be concealed. This section also confers on the Director such powers which are vested in a court under the Code of Civil Procedure, 1908.
g)         The Director shall be competent to make any inquiry under this Act and for this purpose shall have all the powers that an Assessing Officer has under this Act in relation to the making of inquiries.

3. (a) “Appeal against the order of the Assessing Office lies with the Commissioner (Appeals).” Do you agree? Write an explanatory note in support of the above statement. 14
Ans: Meaning of Appeal
In general parlance, ‘appeal’ means ‘making a request’ and in legal parlance, it means ‘apply to a higher court for a reversal of the decision of a lower court’. In India, the taxpayer computes the tax payable on his total income and pays to the government. If the Income Tax department (the government) disagrees with the tax computed by the taxpayer, they can levy an additional tax. Under Income Tax Act, the liability is determined at the level of Assessing Officer (it can be Income Tax Officer (ITO) or Assistant/Deputy Commissioner of Income Tax). A tax payer aggrieved by various actions of Assessing Officer (say higher tax demand) can appeal before Commissioner of Income Tax (Appeals). Further appeal can be preferred before the Income Tax Appellate Tribunal. On substantial question of law, further appeal can be filed before the High Court and even to the Supreme Court.
Appeal to the commissioner of taxes:
Aggrieved tax payer can file appeal before the Commissioner (Appeals) having, jurisdiction over the tax payer. Appeal can be filed when a taxpayer is adversely affected by the Orders passed by Tax authorities. Every appeal to the Commissioner (Appeals) is to be filed in Form No. 35, signed by the taxpayer/director or his authorized representative. Appeal Fees to be paid depending upon total income determined by the Assessing Officer, subject to a maximum of Rs.1000.
Appeal is to be filed within 30 days of the date of service of notice of demand relating to assessment or penalty order or the date of service of order sought to be appealed against, as the case may be. The commissioner may admit an appeal after the expiry of 30 days, if he is satisfied that there was sufficient cause of not presenting the appeal within the period of 30 days.
On receipt of Form no. 35, Commissioner of Income-tax (Appeals) fixes date and place for hearing the appeal by issuing notice to the tax payer and the Assessing Officer, against whose order appeal is preferred. Commissioner of income tax is required to give opportunity of hearing to the assessee and to the assessing officer. The following shall have the right to be heard at the hearing of the appeal:
a)      The appellant either in person or by an authorised representative;
b)      Assessing Officer, either in person or by a representative.
Powers of commissioner
1)         The Commissioner shall have the power to adjourn the hearing of the appeal from time to time.
2)         The Commissioner, may before disposing off any appeal, make such further inquiries as they think fit or may direct the Assessing Officer to make further enquiry and report the result of the same.
3)         The Commissioner may, at the hearing of an appeal, allow the appellant to go into any ground of appeal, not specified in the grounds of appeal, the Commissioner (Appeals) is satisfied that omission of that ground from the form of appeal was not willful or unreasonable.
4)         The order of the Commissioner disposing of the appeal shall be in writing and shall state the points for determination, decision thereon and the reason for the decision.
5)         Limitation of period to decide the appeal by Commissioner (Appeals), the Commissioner (Appeals) may decide upon the appeal (where it is possible) within a period of One year from the end of financial year in which appeal is made.
6)         On the disposal of the appeal, the orders passed by them shall be passed on the assessee as well as to the Commissioner.
After the hearing is concluded, Commissioner (Appeals) passes order in writing and disposes the appeal. In disposing the appeal, the Commissioner (Appeals) as the case may be, has following powers:
1)         To confirm, reduce, enhance or annual the assessment;
2)         To confirm, cancel, enhance or reduce the penalty imposed; and
3)         In other cases to pass such orders in the appeal as he thinks fit.
The Commissioner (Appeals), as the case may be, will not pass any order enhancing the tax liability or a penalty or reducing the amount of refund without giving a reasonable opportunity to the appellant of being heard. He may pass orders on matters which may not have been referred to him.
Or
(b) Mention any fourteen such incomes that are absolutely exempt from income tax under Section 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)]
4. (a) Shri Uttom, is an employee of an Guwahati-based company. He provides the following particulars of his salary income:            14
1)         Basic salary – Rs. 50,000 per month.
2)         Dearness allowance – Rs. 12,500 per month (40 per cent of which is include for the purpose of determining retirement benefit).
3)         Bonus – Rs. 25,000.
4)         Transport allowance – Rs. 7,600 p.m. (out of which Rs. 1,600 is used for the journey between office and residence, remaining amount is not spent).
5)         He contributes 15% of basic salary towards RPF and the company also makes a matching contribution.
6)         Interest credited to RPF @ 12% is Rs. 30,000.
7)         Reimbursement of medical bills Rs. 60,000 out of this Rs. 20,000 is in respect of medical bill of his wife and she got her medical treatment from government hospital.
8)         Leave encashment Rs. 30,000. It relates to encashment of current year’s leave.
9)         He has been provided with a rent free house hired by employer at Rs. 15,000 p.m.
10)     He paid Rs. 3,000 as professional tax.
Compute Shri Uttom income under the head Income from Salaries for the Assessment year, 2018 – 19.     
Computation of salary of Shri Uttom for the Assessment Year (2018-2019)
Particulars
Amount
Amount
a) Basic Salary (50,000*12)
b) Dearness Allowance
c) Bonus
d) Transport Allowance (Now fully taxable)
f) Employer’s Contribution to RPF (6,00,000+60,000=6,60,000*15%)
Less: Exempted  upto 12% of salary [6,60,000*12%]
f) Interest on RPF
Less: Exempted upto 9.5% (30,000*9.5/12)
g) Leave encashed during service (Fully taxable)
h) Reimbursement of medical expenses
Government Hospital (Exempted)
Other Hospital (Fully taxable)




99,000
79,200
30,000
23,750
6,00,000
1,50,000
25,000
91,200

19,800

6,250
30,000

Exempt
40,000
Gross Salary
Less: Deduction U/S 16
(ia) Standard Deduction
(iii) Professional tax paid

9,62,250

40,000
2,500
Income from Salary

9,19,750
           
Or
(b) What do you mean by the term ‘perquisites’ under the head salary? What are the classifications of perquisites? Explain briefly the perquisites which are not taxable.                                 3+2+9=14
Ans: Perquisites (Sec. 17[2]): The term perquisite is defined to signify some benefit in addition to the amount that may be legally due by way of contract of services rendered. Section 17(2) gives an inclusive definition of perquisites. As per the Terms of Section 17(2), Perquisites Includes:
(i) The value of rent-free accommodation provided (used or not) to the assessee by his employer;
(ii) The value of any concession in the matter of rent respecting any accommodation provided (used or not) to the assessee by his employer;
(iii) The value of any benefit or amenity granted or provided (used or not) free of cost or at concessional rate in any of the following cases (specified employee):
(a) By a company to an employee, who is a director thereof;
(b) By a company to an employee being a person who has a substantial interest in the company;
‘Substantial Interest’ : In relation to a company, means a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than 20% of the voting power.
(c) by any employer (including a company) to an employee to whom the provision of clause (a) and (b) do not apply and whose income under the head of Salaries (whether due from, or paid or allowed by, one or more employer), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds Rs. 50,000.
(iv) Any sum actually paid by the employer in respect of any obligation on behalf of the employee;
(v) any sum payable (not necessarily paid) by the employer to effect an assurance on the life of the employee or to effect a contract for an annuity;
(vi) the value of any other fringe benefit or amenity as may be prescribed.
The perquisites can be divided into three categories:
1.       Perquisites which are taxable for all employees
2.       Perquisites which are fully exempted
3.       Perquisites which are taxable for specified employees only
2. Perquisites which are fully exempted:
Ø  Medical facility in employer’s hospital, clinic, dispensary (or) nursing home to the members of employee’s family (spouse, children, dependent parents, dependent brother and sister).
Ø  Medical facility in a government hospital paid or reimbursed by the employer.
Ø  Any medical expenses paid (or) reimbursed by the employer to the employee for treatment in a hospital for notified diseases.
Ø  Mediclaim insurance premium paid (or) reimbursed by the employer to the employees in respect of med claim insurance policy on his own life or life of members of his family.
Ø  Refreshment provided by employee to all during office hours.
Ø  Recreation facilities provided by employer to employees.
Ø  Amount spent on training of employees. Cost of refresher course attended by employee, met by employer including expenditure of higher education or training India or abroad.
Ø  Goods manufactured and sold by employer to his employees at concessional rates.
Ø  Free telephones including mobile phone provided by the employer for personal or official purpose or official purpose etc.
Ø  Free education facility provided to the children of employee in an institution owned/maintained by employer provided fair value of education does not exceed Rs 1000.
Ø  Interest-fee/concessional loan of an amount not exceeding or loan taken for medical treatment of member of the family of employee.
Ø  Computer/laptop given to an employee for official/personal use.
Ø  Transfer of movable assents (other than computer, car or electronic items) to employee after using them for 10 years or more.
5. (a) Mr. Swadhin owns resident house properties. Following are the particulars of two house properties owned by him:

House – I
House – II
Municipal valuation (in Rs.)
Fair rent (in Rs.)
Standard rent (in Rs.)
Actual rent received (in Rs.)
Self-occupied
Let out

Municipal taxes:
Due (in Rs.)
Paid (in Rs.)
Interest on borrowed money (in Rs.)
1,00,000
88,000
90,000
9,000 p.m.
01.04.2017 to 30.11.2017
01.12.2017 to 31.03.2018

6,000
3,000

10,000
92,000
96,000
1,08,000
10,000 p.m.
01.12.2017 to 31.03.2018
01.04.2017 to 30.11.2017

8,000
NIL

42,000
Loan taken to construct House – II is still outstanding. Loan was taken in 1998. Find out the income from house properties of Swadhin for the Assessment Year, 2018-19. 14
Ans: Computation of Income from house property of Mr. Swadhin for the assessment year 2018-19
Particulars
House – A
House – B
1. Municipal Rental Value
2. Fair Rental Value
3. Standard Rental Value
4. Expected Rental Value (MRV or FRV whichever is higher but limited upto SRV)
5. Actual Rent received or receivable (Annual rent less unrealised rent)
6. Gross Annual Value (higher of 5 or 6)[in case of vacancy only point 5 is considered)
7. Less: Municipal taxes paid
1,00,000
88,000
90,000
90,000
36,000
90,000
3,000
92,000
96,000
1,08,000
96,000
90,000
96,000
Nil
8. Net Annual value (6-7)
Less: Deduction under section. 24
(a) Standard Deduction @ 30%
(b) Interest on money borrowed
87,000

26,100
10,000
96,000

28,800
42,000
Income/ (Loss from house property)
50,900
25,200
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.
Or
(b) Explain how to compute income from self-occupied house property. Write a note on special provisions with regard to unrealized rent when it is realized subsequently.            10+4=14
Ans: Treatment of unrealized rent
For the purpose of determining the Annual value, the actual rent shall not include the rent which cannot be realized by the owner. However, the following conditions need to be satisfied for this:
(a) The tenancy is bona fide;
(b) The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property.
(c) The defaulting tenant is not in occupation of any other property of the assessee;
(d) The assessee has taken all reasonable steps for the recovery of the unpaid rent or satisfied the assessing Officer that legal proceedings would be useless.
(e) Unrealised rent of earlier years is not deductible.
Treatment of unrealized rent recovered
Where any rent cannot be realized, and subsequently if such amount is realized, such an amount will be deemed to be the income from house property of that year in which it is received. However, in the cases where unrealized rent is subsequently realized, it is not necessary that the assessee continues to be the owner of the property in the year of receipt also.
6. (a) Write a note on Central Board of Direct Taxes. Explain the powers of Assessing Officers.          4+10=14
Ans: Central Board of Direct Taxes and their powers
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 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.
Or
(b) What do you mean by ‘right to appeal’? What are the procedures in appeal? Explain in detail.  4+10=14
Ans: Meaning of Appeal
In general parlance, ‘appeal’ means ‘making a request’ and in legal parlance, it means ‘apply to a higher court for a reversal of the decision of a lower court’. In India, the taxpayer computes the tax payable on his total income and pays to the government. If the Income Tax department (the government) disagrees with the tax computed by the taxpayer, they can levy an additional tax. Under Income Tax Act, the liability is determined at the level of Assessing Officer (it can be Income Tax Officer (ITO) or Assistant/Deputy Commissioner of Income Tax). A tax payer aggrieved by various actions of Assessing Officer (say higher tax demand) can appeal before Commissioner of Income Tax (Appeals). Further appeal can be preferred before the Income Tax Appellate Tribunal. On substantial question of law, further appeal can be filed before the High Court and even to the Supreme Court.
Statutory right of appeal
Every law that provides for some form of adjudication also usually provides for appeal in one form or the other against orders passed by the lower authorities. This is based on the concept of equity and recognition that every authority is fallible. The mechanism of appeal provides safeguard against erroneous, unjust or invalid orders. The appeal proceedings ordinarily embrace all proceedings whereby an appellate authority is called upon to review, revise, affirm, reverse or modify the decisions of the lower or subordinate authority.
Under the scheme of the Income Tax Act, appeal can be preferred only against orders specified under the relevant act. It is pertinent to note that the right to appeal is conferred by the statute and that right to appeal cannot be assumed to be an inherent right. Therefore appeal against non-appealable orders can be dismissed as not maintainable. Being a privilege and not a right, every person seeking to file an appeal must take care to make sure that he fulfils every condition, procedure and restrictions provided under the law in order that his appeal be considered by the appropriate authority.
Though right of appeal is not inherent but a statutory right, it is a substantive right. Thus once the law provides for an appeal, a person who complies with the prescribed conditions gets a vested right to have the appeal dealt with under the law. Therefore the appellate authorities while construing right of appeal opt for liberal interpretation. It is for this reason that the courts have held appeal against levy of interest valid under the board category of denial of liability to be assessed. Similarly appeal against non-granting of interest on refund is also held to be valid.
Who can file an appeal?
Only a person aggrieved by an order would have a right to file an appeal. An assessee can said to be aggrieved when he is required to bear tax, legal burden or is denied some benefit to which he claims to be entitled. If an assessee who has been allowed an additional deduction or allowance such as depreciation or has been permitted a set off of loss which was not claimed can file an appeal.
Any partner of a firm or any member of AOP can file appeal against adverse order in case of firm or AOP as aggrieved persons. In case of adverse order passed in the matter of deceased person, his legal heirs can file appeal. In case of HUF, Karta can file appeal. The representative assessee as defined u/s 160 is eligible to file an appeal. Similarly a beneficiary though assessment is made on representative assessee is also eligible to file an appeal.
Pre-requisites for appeal
No appeal shall be admitted unless at the time of filing of the appeal:
a)         Where a return has been filed by the assessee, the assessee has paid the tax due on the income returned by him; or
b)         Where the return has not been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him.
Provided that, on an application made by the appellant in this behalf, the Deputy Commissioner (Appeals) may, for reason to be recorded in writing, exempt him from the operation of these provisions.
Procedure for filing an appeal
1. First Appeal before Commissioner (Appeals): Aggrieved tax payer can file appeal before the Commissioner (Appeals) having, jurisdiction over the tax payer. Appeal can be filed when a taxpayer is adversely affected by the Orders passed by Tax authorities. Every appeal to the Commissioner (Appeals) is to be filed in Form No. 35, signed by the taxpayer/director or his authorized representative and must be filed within 30 days. Appeal Fees to be paid depending upon total income determined by the Assessing Officer, subject to a maximum of Rs.1000.
2. Appeal before Income Tax Appellate Tribunal (ITAT): Appeal against an order of Commissioner (Appeals) lies with the Income Tax Appellate Tribunal (ITAT). The tribunal shall be constituted by the central government and shall consist of as many judicial and accountant members as it thinks fit. Both tax payer and the Assessing Officer can file appeal before ITAT.
3. Appeal before High Court: Appeal against Appellate Tribunal’s order lies with the High Court, where the High Court is satisfied that the case involves a substantial question of law. Appeal to the High Court against Appellate Tribunal’s order can be filed by the tax payer or the Chief Commissioner/Commissioner within 120 days of receipt of the order and in the form of memorandum of appeal, precisely stating the substantial question of law involved. Appeal filed before High Court is heard by bench of not less than two Judges and decision is by majority
4. Appeal before Supreme Court: Appeal against High Court’s order in respect of Appellate Tribunal’s order lies with the Supreme Court in those cases, which are certified to be fit for appeal to the Supreme Court. Special leave can also be granted by the Supreme Court under Art. 136 of the constitution of India against the order of the High Court.
(OLD COURSE)
Full Marks: 80
Pass Marks: 32
Time: 3 hours
1. (a) Write True or False:                                                                                                      1x4=4
1)         A company shall be ‘non-resident’ if its place of effective management is situated wholly or partially outside India during the relevant accounting year.   False, 100% outside India
2)         Statutory Provident Fund is set up under the provision of the Provident Fund Act, 1952.         False, 1925
3)         Any income derived by the SAARC fund for regional project is exempt from tax.                    True
4)         Income is taxable under the head Income from House Property only if the assessee is not the owner of a house property.                    False
(b) Choose the correct answer of the following:                                                                             1x4=4
1)         One can deposit in Public Provident Fund subject to
a)      Minimum Rs. 500 and maximum Rs. 1,50,000 per annum.
b)      Minimum Rs. 600 and maximum Rs. 2,00,000 per annum.
c)      Minimum Rs. 700 and maximum Rs. 2,50,000 per annum.
2)         Example of an Association of Persons (AoP) is
a)      A village Panchayat.
b)      Mark fed.
c)      Reliance Industries Limited.
3)         Pankaj is entitled to hostel allowance @ Rs. 500 p.m. per child for 3 children. It will be exempted to the extent of
a)      Rs. 7,200.
b)      Rs. 12,000.
c)      Rs. 16,400.
4)         Underground allowance granted to an employee who is working in uncongenial, unnatural climate in underground mines is exempted to the limit of
a)      Rs. 1,000 per month.
b)     Rs. 800 per month.
c)      Rs. 600 per month.
2. Write short notes on any four of the following:                                                                 4x4=16
a)         Income.
b)         Annuity.
c)         Deemed Income.
d)         Recognized Provident Fund.
e)         Municipal Rental Value.
f)          Income-tax Act, 1961.
3. (a) Explain in detail any twelve incomes which are exempted under Section 10 of the Income-tax Act, 1961.  12
Or
(b) “Income received in India is taxable in all cases irrespective of residential status of the assessee.” Explain the statement in detail.                                        12
4. (a) “Income-tax concession is given to newly established units in special economic zone.” Explain this statement.     11
Or
(b) Write brief notes on the following:                                                           + =11
1)         Income which are not included in the total income.
2)         Tax holiday for industrial units in trade zones.
5. (a) From the following information compute the taxable income from salary of Shri Kamal Deka for the Assessment Year, 2018 – 19: 11
1)        Basic salary – Rs. 3,60,000 p.a. 
2)        Dearness allowance – Rs. 36,000 (25% enters for retirement benefit)
3)        Education allowance for two children at Rs. 350 per month per child and hostel allowance for two children at Rs. 450 per month per child.
4)        Commission received on turnover – Rs. 50,000.
5)        Special allowance Rs. 3,000 per month.
6)        Entertainment allowance @ Rs. 10,000 per annum.
7)        He is provided with a rent-free house hired by employer at Rs. 10,000 per month.
8)        He is provided with a car of 1.8 litre capacity (with driver) for both official and personal purposes.
9)        He receives Rs. 20,000 as leave travel concession but has not travels anywhere.
10)    Professional tax paid by him – Rs. 250 per month.
Compute the taxable income from salary of Shri Kamal Deka for the Assessment Year, 2018-19.
Or
(b) In order to encourage savings for the social security of employees, government has set up various kinds of provident funds.  In the light of the above statement, explain the following:                                   + =11
1)         Recognized Provident Fund.
2)         Unrecognized Provident Fund.
6. (a) Mohan is a manager (finance) in Reliance Ltd., Mumbai and gets Rs. 34,000 per month as salary. He owns two houses one of which is let out to the employer-company which in turn provided the same to Mohan as rent-free accommodation. Determine the net income of Mohan for the Assessment Year, 2018-19 taking into account the following information relating property income:                                                11

House – I
House – II
Fair rent (FR) (in Rs.)
Annual rent (in Rs.)
Municipal valuation (MV) (in Rs.)
Standard rent
Municipal taxes paid (in Rs.)
Repairs (in Rs.)
Insurance (in Rs.)
Land revenue (in Rs.)
Ground rent (in Rs.)
Interest on capital borrowed by mortgaging House – I
(funds are used for construction of House – II) (in Rs.)
Unrealized rent of the previous year, 2003 – 04 (in Rs.)
Unrealized rent of 2017-18 (in Rs.)
Nature of occupation
Date of completion of construction
60,000
63,000
61,000
NA
14,000
3,500
3,000
7,500
4,000

18,000
-
-
Let out to Reliance Ltd.
March 1999
1,82,000
1,84,000
1,85,000
NA
40,000
7,700
33,000
24,000
7,800

-
1,60,000
55,000
Let out to  Rohan for Business
April 2001
Or
(b) Explain the procedure of computation of gross annual value in the case of self-occupied house property.      11
7. (a) What is the role of commissioner of income tax? Explain the powers which are entrusted to him by Central Board of Direct Taxes.                                                            11
Or
(b) Write notes on the following:                                                                + =11
1)         Central Board of Direct Taxes.
2)         Commissioner of Income Tax.

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