Download GTU MBA 2019 Winter 3rd Sem 2830009 Corporate Taxation Question Paper

Download GTU (Gujarat Technological University) MBA 2019 Winter 3rd Sem 2830009 Corporate Taxation Previous Question Paper

Page 1 of 5


Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER III ? EXAMINATION ? WINTER 2019
Subject Code:2830009 Date:02/12/2019
Subject Name: Corporate Taxation
Time: 10.30AM TO 01.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.

Q. 1(a) Multiple Choice Questions 6
1. Extra tax which a company has to pay because of minimum alternate tax, can be
carried forward for

A. 5 years B. 7 Years
C. 10 years D. No Carry forward
2.
A person getting bonus shares will have to pay tax at the time of allotment of bonus
shares.
A. On the market value of bonus
shares
B. On the face value of bonus shares
C. On the value determined by the
board
D On Nothing
3.
An Indian company is said to be resident in India if -
A. Control and management of the
affairs of a company is situated
wholly in India
B. Control and management of the
affairs of a company is situated
outside India
C. Control and management of the
affairs of a company is situated
partly in India and partly outside
India
D. All of the above
4.
A company will pay dividend tax if-
A. Bonus shares are allotted to equity
shareholders
B. Bonus shares are allotted to
preference shareholders
C. Shares are allotted to debenture-
holders free of cost
D. Shares are allotted to employees as
ESOP shares free of cost
5.
Deduction under section 80JJAA is available in the following cases
A. Indian Company B. Foreign Company
C. Limited Liability Partnership D. All of the above
6.
Avoidance of double taxation agreement
A. Can increase tax liability B. Can reduce tax liability
C. Does not have any impact on tax
liability
D. Can impose tax liability in respect of
income which is otherwise exempt
under Income Tax Act
Q.1 (b) Define the following
a. Tax avoidance
b. Tax evasion
c. Non-resident
d. Double taxation relief
04
Q.1 (c) a. Explain any four differences of tax planning and tax management 04
FirstRanker.com - FirstRanker's Choice
Page 1 of 5


Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER III ? EXAMINATION ? WINTER 2019
Subject Code:2830009 Date:02/12/2019
Subject Name: Corporate Taxation
Time: 10.30AM TO 01.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.

Q. 1(a) Multiple Choice Questions 6
1. Extra tax which a company has to pay because of minimum alternate tax, can be
carried forward for

A. 5 years B. 7 Years
C. 10 years D. No Carry forward
2.
A person getting bonus shares will have to pay tax at the time of allotment of bonus
shares.
A. On the market value of bonus
shares
B. On the face value of bonus shares
C. On the value determined by the
board
D On Nothing
3.
An Indian company is said to be resident in India if -
A. Control and management of the
affairs of a company is situated
wholly in India
B. Control and management of the
affairs of a company is situated
outside India
C. Control and management of the
affairs of a company is situated
partly in India and partly outside
India
D. All of the above
4.
A company will pay dividend tax if-
A. Bonus shares are allotted to equity
shareholders
B. Bonus shares are allotted to
preference shareholders
C. Shares are allotted to debenture-
holders free of cost
D. Shares are allotted to employees as
ESOP shares free of cost
5.
Deduction under section 80JJAA is available in the following cases
A. Indian Company B. Foreign Company
C. Limited Liability Partnership D. All of the above
6.
Avoidance of double taxation agreement
A. Can increase tax liability B. Can reduce tax liability
C. Does not have any impact on tax
liability
D. Can impose tax liability in respect of
income which is otherwise exempt
under Income Tax Act
Q.1 (b) Define the following
a. Tax avoidance
b. Tax evasion
c. Non-resident
d. Double taxation relief
04
Q.1 (c) a. Explain any four differences of tax planning and tax management 04
Page 2 of 5

Q.2 (a) XYZ (P) Ltd. is a company which was started on April 1, 1999 and in
which there are only equity shares. The shares are held throughout by X,
Y and Z equally. The company has made losses/profits in the past as
under and the same have been accepted in the income-tax assessments.
Assessment
Year
Business Loss Unabsorbed
Depreciation
Total (`)
2006-07 NIL 30,00,000 30,00,000
2007-08 NIL 18,00,000 18,00,000
2008-09 9,50,000 8,70,000 18,20,000
Total 9,50,000 56,70,000 66,20,000
During the year previous year ended March 31,2009, X transferred his
shares to P and during the previous year ended March 31,2010, Y
transferred his shares to Q. during the previous year ended March
31,2009, the company made a profit of ` 12,00,000 (before debiting `
6,00,000 for depreciation) and during the previous year ended March
31,2010, the company made a profit of ` 80,00,000 (before debiting `
5,00,000 for depreciation). Compute the taxable income of the company
for the assessment year 2010-11. Workings should form part of your
answer.
07
(b) X & company, a firm is engaged in the business of Civil construction
(Turnover of 2018- 2019) being ` 37,80,000. It wants to claim the
following deduction.
Particulars
Amount (`)
Salary & interest to partners (as permitted by sec. 40(b) 60,000
Salary to employees 4,90,000
Depreciation 2,70,000
Cost of material used 25,90,000
Others Expenses 3,45,000
Total 37,55,000
Net Profit 25,000
Determine the net income of X & company for the current assessment
year. Assuming taxable income from other business is ` 1,90,000, long
term capital gain is ` 40,000 & the firm is eligible for deduction of `
5,000 under sec 80G.



07


OR
(b) List out different areas of Tax Planning and explain any two in detailed. 07
Q.3 (a)
X Purchases 1,100 equity shares in A ltd. on June 11, 1979 @ ` 30 per
share (brokerage: 1%) on May 23, 1984, he gets 550 bonus shares. Fair
market value of shares in A ltd. on April `, 1981 is ` 46. He sells 1,100
original shares on March 10,2010 @ ` 116 per share (brokerage: 1%).
Further on March 29,2010, he sells 550 bonus shares @ 131 per share
(brokerage: 2%). Find out the amount of capital gains on the assumption
that securities transaction tax is not applicable.
07
(b) X Ltd. manufactures electric pumping sets. The company has the option
to either make or buy from the market component Y used in manufacture
of the sets.
The following details are available.
07
FirstRanker.com - FirstRanker's Choice
Page 1 of 5


Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER III ? EXAMINATION ? WINTER 2019
Subject Code:2830009 Date:02/12/2019
Subject Name: Corporate Taxation
Time: 10.30AM TO 01.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.

Q. 1(a) Multiple Choice Questions 6
1. Extra tax which a company has to pay because of minimum alternate tax, can be
carried forward for

A. 5 years B. 7 Years
C. 10 years D. No Carry forward
2.
A person getting bonus shares will have to pay tax at the time of allotment of bonus
shares.
A. On the market value of bonus
shares
B. On the face value of bonus shares
C. On the value determined by the
board
D On Nothing
3.
An Indian company is said to be resident in India if -
A. Control and management of the
affairs of a company is situated
wholly in India
B. Control and management of the
affairs of a company is situated
outside India
C. Control and management of the
affairs of a company is situated
partly in India and partly outside
India
D. All of the above
4.
A company will pay dividend tax if-
A. Bonus shares are allotted to equity
shareholders
B. Bonus shares are allotted to
preference shareholders
C. Shares are allotted to debenture-
holders free of cost
D. Shares are allotted to employees as
ESOP shares free of cost
5.
Deduction under section 80JJAA is available in the following cases
A. Indian Company B. Foreign Company
C. Limited Liability Partnership D. All of the above
6.
Avoidance of double taxation agreement
A. Can increase tax liability B. Can reduce tax liability
C. Does not have any impact on tax
liability
D. Can impose tax liability in respect of
income which is otherwise exempt
under Income Tax Act
Q.1 (b) Define the following
a. Tax avoidance
b. Tax evasion
c. Non-resident
d. Double taxation relief
04
Q.1 (c) a. Explain any four differences of tax planning and tax management 04
Page 2 of 5

Q.2 (a) XYZ (P) Ltd. is a company which was started on April 1, 1999 and in
which there are only equity shares. The shares are held throughout by X,
Y and Z equally. The company has made losses/profits in the past as
under and the same have been accepted in the income-tax assessments.
Assessment
Year
Business Loss Unabsorbed
Depreciation
Total (`)
2006-07 NIL 30,00,000 30,00,000
2007-08 NIL 18,00,000 18,00,000
2008-09 9,50,000 8,70,000 18,20,000
Total 9,50,000 56,70,000 66,20,000
During the year previous year ended March 31,2009, X transferred his
shares to P and during the previous year ended March 31,2010, Y
transferred his shares to Q. during the previous year ended March
31,2009, the company made a profit of ` 12,00,000 (before debiting `
6,00,000 for depreciation) and during the previous year ended March
31,2010, the company made a profit of ` 80,00,000 (before debiting `
5,00,000 for depreciation). Compute the taxable income of the company
for the assessment year 2010-11. Workings should form part of your
answer.
07
(b) X & company, a firm is engaged in the business of Civil construction
(Turnover of 2018- 2019) being ` 37,80,000. It wants to claim the
following deduction.
Particulars
Amount (`)
Salary & interest to partners (as permitted by sec. 40(b) 60,000
Salary to employees 4,90,000
Depreciation 2,70,000
Cost of material used 25,90,000
Others Expenses 3,45,000
Total 37,55,000
Net Profit 25,000
Determine the net income of X & company for the current assessment
year. Assuming taxable income from other business is ` 1,90,000, long
term capital gain is ` 40,000 & the firm is eligible for deduction of `
5,000 under sec 80G.



07


OR
(b) List out different areas of Tax Planning and explain any two in detailed. 07
Q.3 (a)
X Purchases 1,100 equity shares in A ltd. on June 11, 1979 @ ` 30 per
share (brokerage: 1%) on May 23, 1984, he gets 550 bonus shares. Fair
market value of shares in A ltd. on April `, 1981 is ` 46. He sells 1,100
original shares on March 10,2010 @ ` 116 per share (brokerage: 1%).
Further on March 29,2010, he sells 550 bonus shares @ 131 per share
(brokerage: 2%). Find out the amount of capital gains on the assumption
that securities transaction tax is not applicable.
07
(b) X Ltd. manufactures electric pumping sets. The company has the option
to either make or buy from the market component Y used in manufacture
of the sets.
The following details are available.
07
Page 3 of 5

The component will be manufactured on new machine costing ` 1,00,000
with a life of 10 yea` Material required cost ` 2 per kg and wages ` 0.30
per hour. The salary of the foreman employed is ` 1,500 per month and
other variable overheads include ` 20,000 for manufacturing 25,000
components per year. material requirement is 25,000 kgs. And requires
50,000 labor hou` The component is available in the market at ` 4.30 per
piece.
Will it be profitable to make or to buy the component? Does it make any
difference if the component can be manufactured on an existing
machine?
OR
Q.3 XYZ Ltd. needs a component in an assembly operation. It is
contemplating the proposal to either make or buy the aforesaid
component.
1. If the company decides to make the product itself, then it would need
to buy a machine for ` 8,00,000 which would be used for 5 yea`
Manufacturing costs in each of the 5 years would be ` 12,00,000, `
14,00,000, ` 16,00,000, ` 20,00,000 and ` 25,00,000 respectively. The
relevant depreciation rate is 15%. The machine will be sold for `
1,00,000 at the beginning of the 6
th
year.
2. If the company decides to buy the component from a supplier the
component would cost ` 18 lakh, ` 20 lakh, ` 22 lakh, ` 28 lakh and `
34 lakh respectively in each of the five year.
The relevant discounting rate and tax rate are 14% and 33.2175 %
respectively. Additional depreciation is not available. Should XYZ Ltd.
make the component or buy from outside?
14
Q.4 (a) ONGC has agreements (approved by the Government) with the
following three foreign companies which provide services and facilities
to ONGC in connection with prospecting for (or extraction/production
of) mineral oils in India-
Particulars A INC B INC C INC
Date of Agreement June
10,1982
June
10,1992
June
10,2002
Amount paid by ONGC on
account services provided by
foreign companies (in `)
90 crores 90 crores 90 crores
Tax Liability borne by ONGC (in
`)
NIL 3.8007
crore
3.96828
crore
Find out the taxable income and tax liability of the foreign companies.
Discuss whether tax liability borne by ONGC would be perquisite
arising to B Inc. and C Inc. under section 28(iv) and would be taxable
separately in addition to income computed under section 44BB.
07
(b) X (28 years) is a musician deriving income from concerts performed
outside India of ` 9,50,000. Tax of ` 1,90,000 was deducted at source in
the country where the concerts were given and remaining ` 7,60,000 is
remitted to India. India does not have any agreement with that country
for avoidance of double taxation. If the Indian income of X is `
2,00,000, what is the relief due to him under section 91 for assessment
07
FirstRanker.com - FirstRanker's Choice
Page 1 of 5


Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER III ? EXAMINATION ? WINTER 2019
Subject Code:2830009 Date:02/12/2019
Subject Name: Corporate Taxation
Time: 10.30AM TO 01.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.

Q. 1(a) Multiple Choice Questions 6
1. Extra tax which a company has to pay because of minimum alternate tax, can be
carried forward for

A. 5 years B. 7 Years
C. 10 years D. No Carry forward
2.
A person getting bonus shares will have to pay tax at the time of allotment of bonus
shares.
A. On the market value of bonus
shares
B. On the face value of bonus shares
C. On the value determined by the
board
D On Nothing
3.
An Indian company is said to be resident in India if -
A. Control and management of the
affairs of a company is situated
wholly in India
B. Control and management of the
affairs of a company is situated
outside India
C. Control and management of the
affairs of a company is situated
partly in India and partly outside
India
D. All of the above
4.
A company will pay dividend tax if-
A. Bonus shares are allotted to equity
shareholders
B. Bonus shares are allotted to
preference shareholders
C. Shares are allotted to debenture-
holders free of cost
D. Shares are allotted to employees as
ESOP shares free of cost
5.
Deduction under section 80JJAA is available in the following cases
A. Indian Company B. Foreign Company
C. Limited Liability Partnership D. All of the above
6.
Avoidance of double taxation agreement
A. Can increase tax liability B. Can reduce tax liability
C. Does not have any impact on tax
liability
D. Can impose tax liability in respect of
income which is otherwise exempt
under Income Tax Act
Q.1 (b) Define the following
a. Tax avoidance
b. Tax evasion
c. Non-resident
d. Double taxation relief
04
Q.1 (c) a. Explain any four differences of tax planning and tax management 04
Page 2 of 5

Q.2 (a) XYZ (P) Ltd. is a company which was started on April 1, 1999 and in
which there are only equity shares. The shares are held throughout by X,
Y and Z equally. The company has made losses/profits in the past as
under and the same have been accepted in the income-tax assessments.
Assessment
Year
Business Loss Unabsorbed
Depreciation
Total (`)
2006-07 NIL 30,00,000 30,00,000
2007-08 NIL 18,00,000 18,00,000
2008-09 9,50,000 8,70,000 18,20,000
Total 9,50,000 56,70,000 66,20,000
During the year previous year ended March 31,2009, X transferred his
shares to P and during the previous year ended March 31,2010, Y
transferred his shares to Q. during the previous year ended March
31,2009, the company made a profit of ` 12,00,000 (before debiting `
6,00,000 for depreciation) and during the previous year ended March
31,2010, the company made a profit of ` 80,00,000 (before debiting `
5,00,000 for depreciation). Compute the taxable income of the company
for the assessment year 2010-11. Workings should form part of your
answer.
07
(b) X & company, a firm is engaged in the business of Civil construction
(Turnover of 2018- 2019) being ` 37,80,000. It wants to claim the
following deduction.
Particulars
Amount (`)
Salary & interest to partners (as permitted by sec. 40(b) 60,000
Salary to employees 4,90,000
Depreciation 2,70,000
Cost of material used 25,90,000
Others Expenses 3,45,000
Total 37,55,000
Net Profit 25,000
Determine the net income of X & company for the current assessment
year. Assuming taxable income from other business is ` 1,90,000, long
term capital gain is ` 40,000 & the firm is eligible for deduction of `
5,000 under sec 80G.



07


OR
(b) List out different areas of Tax Planning and explain any two in detailed. 07
Q.3 (a)
X Purchases 1,100 equity shares in A ltd. on June 11, 1979 @ ` 30 per
share (brokerage: 1%) on May 23, 1984, he gets 550 bonus shares. Fair
market value of shares in A ltd. on April `, 1981 is ` 46. He sells 1,100
original shares on March 10,2010 @ ` 116 per share (brokerage: 1%).
Further on March 29,2010, he sells 550 bonus shares @ 131 per share
(brokerage: 2%). Find out the amount of capital gains on the assumption
that securities transaction tax is not applicable.
07
(b) X Ltd. manufactures electric pumping sets. The company has the option
to either make or buy from the market component Y used in manufacture
of the sets.
The following details are available.
07
Page 3 of 5

The component will be manufactured on new machine costing ` 1,00,000
with a life of 10 yea` Material required cost ` 2 per kg and wages ` 0.30
per hour. The salary of the foreman employed is ` 1,500 per month and
other variable overheads include ` 20,000 for manufacturing 25,000
components per year. material requirement is 25,000 kgs. And requires
50,000 labor hou` The component is available in the market at ` 4.30 per
piece.
Will it be profitable to make or to buy the component? Does it make any
difference if the component can be manufactured on an existing
machine?
OR
Q.3 XYZ Ltd. needs a component in an assembly operation. It is
contemplating the proposal to either make or buy the aforesaid
component.
1. If the company decides to make the product itself, then it would need
to buy a machine for ` 8,00,000 which would be used for 5 yea`
Manufacturing costs in each of the 5 years would be ` 12,00,000, `
14,00,000, ` 16,00,000, ` 20,00,000 and ` 25,00,000 respectively. The
relevant depreciation rate is 15%. The machine will be sold for `
1,00,000 at the beginning of the 6
th
year.
2. If the company decides to buy the component from a supplier the
component would cost ` 18 lakh, ` 20 lakh, ` 22 lakh, ` 28 lakh and `
34 lakh respectively in each of the five year.
The relevant discounting rate and tax rate are 14% and 33.2175 %
respectively. Additional depreciation is not available. Should XYZ Ltd.
make the component or buy from outside?
14
Q.4 (a) ONGC has agreements (approved by the Government) with the
following three foreign companies which provide services and facilities
to ONGC in connection with prospecting for (or extraction/production
of) mineral oils in India-
Particulars A INC B INC C INC
Date of Agreement June
10,1982
June
10,1992
June
10,2002
Amount paid by ONGC on
account services provided by
foreign companies (in `)
90 crores 90 crores 90 crores
Tax Liability borne by ONGC (in
`)
NIL 3.8007
crore
3.96828
crore
Find out the taxable income and tax liability of the foreign companies.
Discuss whether tax liability borne by ONGC would be perquisite
arising to B Inc. and C Inc. under section 28(iv) and would be taxable
separately in addition to income computed under section 44BB.
07
(b) X (28 years) is a musician deriving income from concerts performed
outside India of ` 9,50,000. Tax of ` 1,90,000 was deducted at source in
the country where the concerts were given and remaining ` 7,60,000 is
remitted to India. India does not have any agreement with that country
for avoidance of double taxation. If the Indian income of X is `
2,00,000, what is the relief due to him under section 91 for assessment
07
Page 4 of 5

year 2010-11, assuming that X is ` 2,00,000, what is the relief due to
him under section 91 for assessment year 2010-11, if X has deposited `
22,000 in the public provident fund account.
OR
Q.4 (a) Discuss in brief arm?s length price computation method. 07
(b) Find out the net income in the cases of Guruji (32 years) and Ganesh
(28 years) (both are retail traders at Mahadev Peth) from the following data
for the assessment year 2010-11:
Particulars
Guruji (`) Ganesh (`)

Sales turnover 20,00,000 30,00,000
Less: Expenses
Cost of Goods sold
Depreciation
Other expenses
Business Income
Other Income
Public Provident Contribution

18,00,000
5,000
1,60,000
35,000
1,07,500
15,000

27,00,000
7,500
2,40,000
52,500
1,15,000
30,000

07
Q.5 Mr. Sartaj Singh is interested in starting a new business but is confused
whether a partnership firm is a better option or a private limited
company for taxation working. He approaches the tax consultant and
provides him with the following details:
If a partnership firm is started:
1. There are two partners Mr. Singh and Mr. Parulkar with an equal
share of profit.
2. They want to draw the maximum permissible amount as salary. Both
the partners will draw equal salary.
3. Income is from business (not from profession).
4. They are entitled to simple interest at the rate of 12% on the capital
contribution of ` 10,00,000. 5. They do not have any other income.
If a private limited company is incorporated:
1. Mr. Singh and Mr. Parulkar will be the two shareholders and directors
of the company.
2. They will draw salary. As there is no maximum ceilings under the
Income tax Act, they will draw salary @ 90% of profit up to ` 3,00,000
of profit and 60% of balance. It is assumed that provisions of section
40A(2) are not attracted.
Assume taxable income before deduction of salary and interest to
partners in case of firm and taxable income before payment of salary to
the directors is either i) ` 10,00,000 or ii) ` 20 ,00,000 As a tax consultant
you are required to analyze the tax incidence under each level of income
for firm and company and advise accordingly.
14



OR

FirstRanker.com - FirstRanker's Choice
Page 1 of 5


Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER III ? EXAMINATION ? WINTER 2019
Subject Code:2830009 Date:02/12/2019
Subject Name: Corporate Taxation
Time: 10.30AM TO 01.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.

Q. 1(a) Multiple Choice Questions 6
1. Extra tax which a company has to pay because of minimum alternate tax, can be
carried forward for

A. 5 years B. 7 Years
C. 10 years D. No Carry forward
2.
A person getting bonus shares will have to pay tax at the time of allotment of bonus
shares.
A. On the market value of bonus
shares
B. On the face value of bonus shares
C. On the value determined by the
board
D On Nothing
3.
An Indian company is said to be resident in India if -
A. Control and management of the
affairs of a company is situated
wholly in India
B. Control and management of the
affairs of a company is situated
outside India
C. Control and management of the
affairs of a company is situated
partly in India and partly outside
India
D. All of the above
4.
A company will pay dividend tax if-
A. Bonus shares are allotted to equity
shareholders
B. Bonus shares are allotted to
preference shareholders
C. Shares are allotted to debenture-
holders free of cost
D. Shares are allotted to employees as
ESOP shares free of cost
5.
Deduction under section 80JJAA is available in the following cases
A. Indian Company B. Foreign Company
C. Limited Liability Partnership D. All of the above
6.
Avoidance of double taxation agreement
A. Can increase tax liability B. Can reduce tax liability
C. Does not have any impact on tax
liability
D. Can impose tax liability in respect of
income which is otherwise exempt
under Income Tax Act
Q.1 (b) Define the following
a. Tax avoidance
b. Tax evasion
c. Non-resident
d. Double taxation relief
04
Q.1 (c) a. Explain any four differences of tax planning and tax management 04
Page 2 of 5

Q.2 (a) XYZ (P) Ltd. is a company which was started on April 1, 1999 and in
which there are only equity shares. The shares are held throughout by X,
Y and Z equally. The company has made losses/profits in the past as
under and the same have been accepted in the income-tax assessments.
Assessment
Year
Business Loss Unabsorbed
Depreciation
Total (`)
2006-07 NIL 30,00,000 30,00,000
2007-08 NIL 18,00,000 18,00,000
2008-09 9,50,000 8,70,000 18,20,000
Total 9,50,000 56,70,000 66,20,000
During the year previous year ended March 31,2009, X transferred his
shares to P and during the previous year ended March 31,2010, Y
transferred his shares to Q. during the previous year ended March
31,2009, the company made a profit of ` 12,00,000 (before debiting `
6,00,000 for depreciation) and during the previous year ended March
31,2010, the company made a profit of ` 80,00,000 (before debiting `
5,00,000 for depreciation). Compute the taxable income of the company
for the assessment year 2010-11. Workings should form part of your
answer.
07
(b) X & company, a firm is engaged in the business of Civil construction
(Turnover of 2018- 2019) being ` 37,80,000. It wants to claim the
following deduction.
Particulars
Amount (`)
Salary & interest to partners (as permitted by sec. 40(b) 60,000
Salary to employees 4,90,000
Depreciation 2,70,000
Cost of material used 25,90,000
Others Expenses 3,45,000
Total 37,55,000
Net Profit 25,000
Determine the net income of X & company for the current assessment
year. Assuming taxable income from other business is ` 1,90,000, long
term capital gain is ` 40,000 & the firm is eligible for deduction of `
5,000 under sec 80G.



07


OR
(b) List out different areas of Tax Planning and explain any two in detailed. 07
Q.3 (a)
X Purchases 1,100 equity shares in A ltd. on June 11, 1979 @ ` 30 per
share (brokerage: 1%) on May 23, 1984, he gets 550 bonus shares. Fair
market value of shares in A ltd. on April `, 1981 is ` 46. He sells 1,100
original shares on March 10,2010 @ ` 116 per share (brokerage: 1%).
Further on March 29,2010, he sells 550 bonus shares @ 131 per share
(brokerage: 2%). Find out the amount of capital gains on the assumption
that securities transaction tax is not applicable.
07
(b) X Ltd. manufactures electric pumping sets. The company has the option
to either make or buy from the market component Y used in manufacture
of the sets.
The following details are available.
07
Page 3 of 5

The component will be manufactured on new machine costing ` 1,00,000
with a life of 10 yea` Material required cost ` 2 per kg and wages ` 0.30
per hour. The salary of the foreman employed is ` 1,500 per month and
other variable overheads include ` 20,000 for manufacturing 25,000
components per year. material requirement is 25,000 kgs. And requires
50,000 labor hou` The component is available in the market at ` 4.30 per
piece.
Will it be profitable to make or to buy the component? Does it make any
difference if the component can be manufactured on an existing
machine?
OR
Q.3 XYZ Ltd. needs a component in an assembly operation. It is
contemplating the proposal to either make or buy the aforesaid
component.
1. If the company decides to make the product itself, then it would need
to buy a machine for ` 8,00,000 which would be used for 5 yea`
Manufacturing costs in each of the 5 years would be ` 12,00,000, `
14,00,000, ` 16,00,000, ` 20,00,000 and ` 25,00,000 respectively. The
relevant depreciation rate is 15%. The machine will be sold for `
1,00,000 at the beginning of the 6
th
year.
2. If the company decides to buy the component from a supplier the
component would cost ` 18 lakh, ` 20 lakh, ` 22 lakh, ` 28 lakh and `
34 lakh respectively in each of the five year.
The relevant discounting rate and tax rate are 14% and 33.2175 %
respectively. Additional depreciation is not available. Should XYZ Ltd.
make the component or buy from outside?
14
Q.4 (a) ONGC has agreements (approved by the Government) with the
following three foreign companies which provide services and facilities
to ONGC in connection with prospecting for (or extraction/production
of) mineral oils in India-
Particulars A INC B INC C INC
Date of Agreement June
10,1982
June
10,1992
June
10,2002
Amount paid by ONGC on
account services provided by
foreign companies (in `)
90 crores 90 crores 90 crores
Tax Liability borne by ONGC (in
`)
NIL 3.8007
crore
3.96828
crore
Find out the taxable income and tax liability of the foreign companies.
Discuss whether tax liability borne by ONGC would be perquisite
arising to B Inc. and C Inc. under section 28(iv) and would be taxable
separately in addition to income computed under section 44BB.
07
(b) X (28 years) is a musician deriving income from concerts performed
outside India of ` 9,50,000. Tax of ` 1,90,000 was deducted at source in
the country where the concerts were given and remaining ` 7,60,000 is
remitted to India. India does not have any agreement with that country
for avoidance of double taxation. If the Indian income of X is `
2,00,000, what is the relief due to him under section 91 for assessment
07
Page 4 of 5

year 2010-11, assuming that X is ` 2,00,000, what is the relief due to
him under section 91 for assessment year 2010-11, if X has deposited `
22,000 in the public provident fund account.
OR
Q.4 (a) Discuss in brief arm?s length price computation method. 07
(b) Find out the net income in the cases of Guruji (32 years) and Ganesh
(28 years) (both are retail traders at Mahadev Peth) from the following data
for the assessment year 2010-11:
Particulars
Guruji (`) Ganesh (`)

Sales turnover 20,00,000 30,00,000
Less: Expenses
Cost of Goods sold
Depreciation
Other expenses
Business Income
Other Income
Public Provident Contribution

18,00,000
5,000
1,60,000
35,000
1,07,500
15,000

27,00,000
7,500
2,40,000
52,500
1,15,000
30,000

07
Q.5 Mr. Sartaj Singh is interested in starting a new business but is confused
whether a partnership firm is a better option or a private limited
company for taxation working. He approaches the tax consultant and
provides him with the following details:
If a partnership firm is started:
1. There are two partners Mr. Singh and Mr. Parulkar with an equal
share of profit.
2. They want to draw the maximum permissible amount as salary. Both
the partners will draw equal salary.
3. Income is from business (not from profession).
4. They are entitled to simple interest at the rate of 12% on the capital
contribution of ` 10,00,000. 5. They do not have any other income.
If a private limited company is incorporated:
1. Mr. Singh and Mr. Parulkar will be the two shareholders and directors
of the company.
2. They will draw salary. As there is no maximum ceilings under the
Income tax Act, they will draw salary @ 90% of profit up to ` 3,00,000
of profit and 60% of balance. It is assumed that provisions of section
40A(2) are not attracted.
Assume taxable income before deduction of salary and interest to
partners in case of firm and taxable income before payment of salary to
the directors is either i) ` 10,00,000 or ii) ` 20 ,00,000 As a tax consultant
you are required to analyze the tax incidence under each level of income
for firm and company and advise accordingly.
14



OR

Page 5 of 5

Q.5 Trivedi Ltd. is contemplating an expansion program. It has to make a
choice between debt issue and equity issue for its expansion program. Its
current position is as under:
Particulars Amount
(` in crores)
10% Debt
Equity share capital(` 10 per Share)
Reserves and Surplus
Total capitalization
Sales
Less: Total Cost
EBIT
Less: Interest
EBT
Less: Tax @ 33.99%
EAT
80
200
120
400
1,200
1,076
124
8
116
39.43
76.77
The expansion program is estimated to cost ` 200 crore. If this is
financed through debt, the new rate of debt will be 10% and the P/E
Ratio will be 6 times. If the expansion program is financed through
equity, new shares can be sold getting ` 25 per share and the P/E Ratio
will be 7 times. The expansion will generate additional sales of ` 600
crore with return of 10% on sales before interest and tax. Suggest which
form of financing should it choose?
14

*************
FirstRanker.com - FirstRanker's Choice