Question 1

Mrs. Shruti is an Indian citizen, currently in employment with an overseas company located in UAE. During the previous year 2021-22, she comes to India for 157 days. She is in India for 200 days, 100 days, 76 days and 45 days in the financial years 2017-18, 2018-19, 2019-20 and 2020-21 respectively. Her annual income for the previous year 2021-22 is as follows: Income from salary earned and received in UAE: ₹ 2,00,000; Income earned and received from a house property situated in UAE: ₹ 5,00,000; Income deemed to be accrued and arise in India: ₹ 5,00,000; Income from retail business (accrued and received outside India, controlled from India): ₹ 10,00,000; Income accrued and arise in India: ₹ 3,00,000; Life insurance premium paid by cheque in India: ₹ 1,50,000. Determine the residential stat…

Accepted Answer

**Residential Status Analysis for AY 2022-23 (FY 2021-22)**

**Step 1: Determine Residential Status**

Under **Section 6 of the Income Tax Act, 1961**, an Indian citizen is classified as Resident if:
(a) In the FY, the person is in India for 182 days or more, OR
(b) In the FY, the person is in India for 60 days or more AND in the 4 preceding FYs, the person was in India for 365 days or more in aggregate.

For FY 2021-22:
- Days in India: 157 days (< 182, so condition (a) not met)
- Condition (b) check: 157 days (≥ 60) ✓
  Sum of preceding 4 FYs: 200 + 100 + 76 + 45 = 421 days (≥ 365) ✓

**Mrs. Shruti is RESIDENT for AY 2022-23.**

**Step 2: Determine Ordinarily Resident Status**

Under **Section 6(6)**, a Resident is Ordinarily Resident if:
(a) Was resident in 9 or more of the 10 preceding FYs, OR
(b) Was in India for 9 months (270 days) or more in aggregate during the 7 preceding FYs.

For condition (b): 7 preceding FYs are FY 2014-15 to FY 2020-21. Available data (FY 2017-18 to 2020-21) totals 421 days. Even with zero days in the 3 years without data, aggregate exceeds 270 days.

**Mrs. Shruti is Resident AND Ordinarily Resident (ROR) for AY 2022-23.**

**Step 3: Determine Taxable Income**

For ROR, all income from worldwide sources is taxable. Categorizing the income:
- Salary earned and received in UAE: ₹2,00,000 → **Taxable**
- House property income from UAE property: ₹5,00,000 → **Taxable**
- Income deemed to accrue and arise in India: ₹5,00,000 → **Taxable**
- Retail b…

Question 2

The assessee is found to be the owner of the gold (market value of which is ₹ 50,00,000) during the financial year ending 31-03-2022 but he recorded to have spent ₹ 10,00,000 in acquiring the same. Explain how the assessing officer will deal with the issue.

Accepted Answer

The Assessing Officer will invoke **Section 69 of the Income Tax Act, 1961** — Unexplained Money, Bullion, Jewellery, etc. — to address the disparity between the recorded expenditure of ₹10,00,000 and the market value of ₹50,00,000.

**Procedure by AO:**
The AO will call upon the assessee to satisfactorily account for the gold and provide evidence of: (a) the source of the ₹10,00,000 spent (whether from salary, business income, savings, loans, gifts, etc.); (b) documentary proof of purchase (bills, invoices, bank statements); and (c) the legitimacy of the acquisition.

**Burden of Proof:**
Under Section 69, the burden lies on the assessee to demonstrate satisfactory evidence. Failure to do so will result in the unexplained portion being treated as income.

**Two Possible Outcomes:**

**Case 1 — If Source of ₹10,00,000 is Explained:** If the assessee proves that ₹10,00,000 was spent from legitimate sources, it becomes the cost base. The difference of ₹40,00,000 (₹50,00,000 market value minus ₹10,00,000 cost) represents unrealized appreciation or capital gain on the asset. This gain will NOT be treated as unexplained income under Section 69. Instead, when the gold is eventually sold, the capital gain will be taxed as either long-term or short-term capital gains depending on the holding period. No issue arises under Section 69.

**Case 2 — If Source Cannot Be Explained:** If the assessee cannot satisfactorily prove the source of the ₹10,00,000, the unexplained amount of ₹40,00,0…

Question 3

You are required to compute the total income and tax payable by Mrs. Nisha for the assessment year 2022-23. (Ignore the provisions of Section 115BAC). Give brief note wherever necessary.

Facts: (xii) She deposited a sum of ₹50,000 with life insurance Corporation of India every year for the maintenance of her mother aged 70 years. (xiii) She purchased a residential house during the previous year and paid stamp duty and registration fee ₹1,55,000 to get registered the property in her name.

Accepted Answer

**Note:** The solution addresses facts (xii) and (xiii) only. Complete computation of total income and tax payable requires details of all income sources (salary, business, capital gains, etc.).

**Fact (xii) - Life Insurance Premium (₹50,000):** Mrs. Nisha's annual life insurance premium of ₹50,000 deposited with the Life Insurance Corporation of India for the maintenance of her mother (aged 70 years) is **deductible under Section 80C of the Income Tax Act 1961**. The premium qualifies for deduction because the insured person is the assessee's parent, satisfying the eligibility criteria under Section 80C. The amount of ₹50,000 is within the overall limit of ₹1,50,000 under Section 80C. This deduction reduces the taxable income.

**Deduction Allowed: ₹50,000**

**Fact (xiii) - Stamp Duty and Registration Fees (₹1,55,000):** The stamp duty and registration fees of ₹1,55,000 paid for registration of the residential property are **capital expenditures** incurred to acquire the property. Under **Section 37 of the Income Tax Act 1961**, deductions are restricted to expenses incurred in earning income, and capital expenditures are explicitly excluded. These costs do **not qualify as a deduction** in the year of purchase. Instead, they form an integral part of the **cost of acquisition of the property** and will increase the cost base for capital gains calculation when the property is sold in the future.

**No Deduction in AY 2022-23: ₹0**

**Overall Impact:** The net impact on tota…

Question 4

Discuss the liability of tax deduction at source under the Income Tax Act, 1961 in respect of the following cases with reference to A.Y. 2022-23.

Accepted Answer

**Case (i): E-Commerce Platform Transaction**

The liability to deduct tax at source falls on **AB Ltd. (the e-commerce operator)** under **Section 194O of the Income Tax Act, 1961**. This section applies to payments made through e-commerce operators when aggregate consideration exceeds ₹50,000 in a financial year from a single buyer to a single seller.

**Facts Analysis:**
- Amount credited by AB Ltd on 28th February, 2022: ₹4,00,000 (through platform)
- Direct payment by Mr. Rai to XY on 21st February, 2022: ₹60,000 (outside platform)

**TDS Liability under Section 194O:**
Section 194O applies ONLY to payments channeled through the e-commerce operator. Aggregation is computed per buyer-per seller basis in a financial year.
- Qualifying amount (through platform): ₹4,00,000 (exceeds ₹50,000 threshold)
- TDS rate: 1%
- **TDS deductible: ₹4,00,000 × 1% = ₹4,000**

The direct payment of ₹60,000 lies outside Section 194O since it is not routed through the platform. AB Ltd has no TDS obligation on this amount.

**Case (ii): Sale of Natural Gas**

**No TDS is applicable** in this transaction.

**Rationale:** ABC Ltd is the seller. Sellers have no statutory TDS liability when selling goods, including natural gas. Similarly, the buyer (Ms Deep Co.) has no TDS obligation when purchasing goods. The segregation of freight charges (₹1,70,000) on the invoice serves **GST purposes only**—to separately identify the supply value and service components for tax computation. While freight is a …

Question 5

Mr. Sarthak is a member of HUF. It consists of himself, his wife Jahi and his major son Arjun and his minor daughter Aditi. Mr. Sarthak transferred his house property acquired through his personal income to the HUF without any consideration. On 01-10-2021, HUF is partitioned and such property being divided equally. Net annual value of the property for the Previous Year 2021-22 is ₹ 1,00,000. Determine the tax implications.

Accepted Answer

**Section 64(2) of the Income Tax Act, 1961** governs this situation. When an individual transfers his self-acquired property to the HUF of which he is a member, without adequate consideration, the income from such property is clubbed with the individual's (Mr. Sarthak's) income. This clubbing continues even after partition — the income from the share allotted to the **spouse** (Jahi) on partition is also clubbed with Mr. Sarthak.

**Pre-Partition Period (01-04-2021 to 30-09-2021 — 6 months):**
The property is with HUF. Under Section 64(2), the entire income from the house property is clubbed with Mr. Sarthak's individual income.
NAV for 6 months = ₹50,000. Less: Standard Deduction u/s 24(a) @ 30% = ₹15,000. **Income from House Property = ₹35,000** — clubbed with Mr. Sarthak.

**Post-Partition Period (01-10-2021 to 31-03-2022 — 6 months):**
Property is divided equally among 4 members. Each member's NAV for 6 months = ₹12,500.
Each member's income = ₹12,500 − 30% of ₹12,500 = ₹12,500 − ₹3,750 = **₹8,750**.

- **Mr. Sarthak's share (1/4):** ₹8,750 — taxable in his own hands.
- **Mrs. Jahi's share (1/4):** ₹8,750 — **clubbed with Mr. Sarthak u/s 64(2)** (spouse's share from converted property).
- **Arjun's share (1/4):** ₹8,750 — **taxable in Arjun's hands** (major son; no clubbing provision applies).
- **Aditi's share (1/4):** ₹8,750 — **clubbed with the parent having higher total income u/s 64(1A)** (income of minor child).

**Summary — Income taxable in Mr. Sarthak's hands:**…

Question 6

Mr. Harsh furnishes the following details for the year ended on 31-03-2022. Compute the total income and allow the item eligible for carry forward of Mr. Harsh for the assessment year 2022-23.

| Particulars | ₹ |
|---|---|
| Salary received from partnership firm (the same was allowed to the firm) | 8,50,000 |
| Loss on sale of shares listed in stock exchange held for 18 months and STT paid on the sale and acquisition | 6,00,000 |
| Long-term capital gain on sale of land | 5,00,000 |
| Brought forward business loss of assessment year 2014-15 | 6,00,000 |
| Loss of the specified business covered in Section 35AD | 3,50,000 |
| Loss from house property | 2,50,000 |
| Income from betting (gross) | 50,000 |
| Loss from card games | 25,000 |

Accepted Answer

**Computation of Total Income for Assessment Year 2022-23**

**Income from Salaries**: ₹8,50,000 (salary from partnership firm).

**Income from House Property**: Loss of ₹2,50,000. Per Section 71 of the Income Tax Act, 1961, loss from house property cannot be set off against any other income in the same year; it is carried forward.

**Profits and Gains of Business or Profession**: No current year business income. However, brought forward business loss from AY 2014-15 of ₹6,00,000 is available (within 8-year carry-forward period under Section 72). Current year loss under Section 35AD of ₹3,50,000 cannot be set off as it is limited to business profits of the specified business (Section 35AD), and no such profits exist.

**Capital Gains**: LTCG loss on equity shares (₹6,00,000) netted against LTCG gain on land (₹5,00,000) = net capital loss of ₹1,00,000. This cannot increase the loss and is carried forward indefinitely per Section 73.

**Income from Other Sources**: Betting income ₹50,000. Loss from card games ₹25,000 cannot be set off per Section 59 (loss from games of chance cannot be offset against any other income).

**Gross Total Income**: ₹8,50,000 + ₹50,000 = ₹9,00,000.

**Loss Set Off**: Only brought forward business loss of ₹6,00,000 can be set off against GTI, as house property loss and Section 35AD loss have restricted set-off provisions, capital loss cannot increase loss, and card games loss is statutorily restricted.

**Total Income = ₹9,00,000 − ₹6,00,000 = ₹3,00,0…

Question 7

Mr. Lalit, a dealer in shares and securities, has entered into following transactions during the previous year 2021-22: (i) Received a motor car of ₹ 5,00,000 as gift from his friend Sunil on the occasion of his marriage anniversary. (ii) Cash gift of ₹ 21,000 each from his four friends. (iii) Land at Jaipur on 1st July, 2021 as a gift from his friend Kabra, the stamp duty value of the land is ₹ 6 lakhs as on the date. The land was acquired by Mr. Kabra in the previous year 2001-2002 for ₹ 2 lakhs.

Accepted Answer

**Taxability of Gifts received by Mr. Lalit during PY 2021-22**

The relevant provision is **Section 56(2)(x) of the Income Tax Act, 1961**, which taxes gifts received by any person (other than specified relatives) under the head **"Income from Other Sources"**.

**(i) Motor Car of ₹5,00,000 received as gift on Marriage Anniversary:**

Section 56(2)(x) covers receipt of money, immovable property, or **specified movable properties** (jewellery, archaeological collections, drawings, paintings, sculptures, any work of art, shares and securities, and bullion) without or for inadequate consideration. A **motor car is NOT a specified movable property** in the above list. Therefore, the gift of a motor car worth ₹5,00,000 is **not taxable** under Section 56(2)(x), irrespective of the occasion. Note: The exemption under the proviso to Section 56(2)(x) applies to gifts received "on the occasion of the marriage of the individual" — marriage anniversary does not qualify — but this point is moot since motor car is outside the scope of the section entirely.

**Motor car: NIL taxable.**

**(ii) Cash Gifts of ₹21,000 each from four friends:**

Under **Section 56(2)(x)(a)**, if the aggregate of money received from persons other than relatives (as defined in the Explanation to Section 56) exceeds ₹50,000 in a year, the **entire aggregate amount** is chargeable to tax. Friends do not fall within the definition of "relative." The aggregate cash received = 4 × ₹21,000 = **₹84,000**, which exceed…

Question 8

From the following particulars furnished by Mr. Suresh aged 53 years, a resident Indian for the previous year ended March 31, 2022, you are requested to compute his total income and the probable loss for the Assessment Year 2022-23. (Assuming he do not opt for the Section 115BAC): (i) He sold his vacant land on 09.12.2021 for ₹ 15 lakhs. The Stamp Duty Value (SDV) of land at the time of transfer was ₹ 19 lakhs. The fair market value of the land as on 1st April 2001 was ₹ 6 lakhs (SDV is ₹ 5,00,000). This land was acquired by him on 05.08.1996 for ₹ 3.40 lakhs. He had incurred registration expenses of ₹ 15,000 at that time. The cost of inflation index for the year 2021-22 and 2001-02 are 317 and 100 respectively. (ii) He owns an industrial undertaking established in a Special Economic Zone …

Accepted Answer

**Computation of Total Income of Mr. Suresh for AY 2022-23 (PY 2021-22)**

**A. Income from Business (SEZ Undertaking — Section 10AA of the Income-tax Act, 1961)**

The industrial undertaking commenced operations in FY 2019-20, so AY 2022-23 is the **3rd year** — eligible for **100% deduction** on export profits under Section 10AA.

Profit from SEZ undertaking: ₹30,00,000
Section 10AA Deduction = Profit × (Export Turnover / Total Turnover) = ₹30,00,000 × (₹120/₹300) = **₹12,00,000**

Taxable Business Income = ₹30,00,000 − ₹12,00,000 = **₹18,00,000**

**B. Capital Gains (Long-Term) — Sale of Vacant Land**

The land was acquired on 05.08.1996 (before 01.04.2001). Under **Section 55(2)(b)** of the Income-tax Act, 1961, the assessee may opt for FMV as on 01.04.2001 as cost, but such FMV shall **not exceed the Stamp Duty Value (SDV) as on 01.04.2001**, as per the amendment effective from AY 2021-22.

FMV as on 01.04.2001: ₹6,00,000; SDV as on 01.04.2001: ₹5,00,000 → Cost taken = ₹5,00,000.

**Indexed Cost of Acquisition** = ₹5,00,000 × (317 ÷ 100) = ₹15,85,000

Under **Section 50C**, since the SDV (₹19,00,000) exceeds 110% of the actual consideration (110% × ₹15,00,000 = ₹16,50,000), the SDV is deemed as the **Full Value of Consideration** = ₹19,00,000.

Long-Term Capital Gain = ₹19,00,000 − ₹15,85,000 = **₹3,15,000**
(Taxable @ 20% with indexation under Section 112)

**C. Income from Other Sources**

- Crossword puzzle winnings (Section 115BB — taxable @ 30%): ₹10,000
- Interest …

Question 9

Mr. Lalit purchased from his friend Mr. Abhishek, who is also a dealer in shares, 1000 shares of ABC Ltd. @ ₹ 400 each on 19th June, 2021 the fair market value of which was ₹ 600 each on that date. Mr. Lalit sold these shares in the course of his business on 23rd June, 2021. Further, on 1st November, 2021, Mr. Lalit took possession of his residential house booked by him two years back at ₹ 30 lakh. The stamp duty value of the property as on 1st November, 2021 was ₹ 32 lakh and on the date of booking was ₹ 24 lakh. He had paid ₹ 1 lakh by account payee cheque as down payment on the date of booking. He received a shop (building) of the fair market value of ₹ 1,50,000 and cash ₹ 50,000 in distribution from the ABC (P) ltd at the time of liquidation process of the company in proportion of his …

Accepted Answer

**Computation of Income under 'Income from Other Sources' and 'Capital Gains' for Mr. Lalit — A.Y. 2022-23 (P.Y. 2021-22)**

**INCOME FROM OTHER SOURCES**

**1. Purchase of Shares of ABC Ltd. below Fair Market Value [Section 56(2)(x) of the Income Tax Act, 1961]:**
Mr. Lalit purchased 1,000 shares of ABC Ltd. @ ₹400 each from Mr. Abhishek (a friend, not a relative). The **fair market value** on the date of purchase was ₹600 per share. Since the shares are a 'property' as defined under Section 56(2)(x), and the aggregate FMV (₹6,00,000) exceeds the consideration paid (₹4,00,000) by ₹2,00,000, which is more than ₹50,000, the difference of **₹2,00,000** is chargeable as Income from Other Sources. No exception under the proviso applies since Mr. Abhishek is not a relative. The fact that Mr. Abhishek is a dealer in shares does not alter the applicability of Section 56(2)(x) to the recipient. Since Mr. Lalit sold these shares in the course of his business, they are **stock-in-trade** — no capital gains arise from their sale; business income is not asked here.

**2. Residential House Taken on Possession [Section 56(2)(x)]:**
Mr. Lalit booked the house two years back at ₹30 lakh, paying ₹1 lakh by account payee cheque at the time of booking. Under the **proviso to Section 56(2)(x)**, where an agreement for immovable property is entered into before the date of registration/possession and part payment is made by account payee cheque on or before the date of agreement, the **stamp duty …

Question 10

Calculate the amount of net minimum GST payable in Cash by Zeon Ltd. for the month of September, 2021.

Accepted Answer

**Minimum GST Payable: ₹0** (with excess ITC of ₹2,40,000 available for carry-forward)

**Analysis:**

Bus Purchase Transaction (September 2021):
Cost of bus: ₹12,00,000. Bus capacity of 25 workers exceeds the 12-passenger threshold, making it eligible for ITC under Section 17(5) of CGST Act, 2017. The bus is purchased from a registered dealer in Talamgarh, Jharkhand. Assuming Zeon Ltd. is also in Jharkhand (intra-state purchase), the applicable GST is 5% CGST + 5% SGST.

GST on Bus:
- CGST: ₹12,00,000 × 5% = ₹60,000
- SGST: ₹12,00,000 × 5% = ₹60,000

Total Available Input Tax Credit:
- CGST: ₹20,000 (opening balance) + ₹60,000 (bus) = ₹80,000
- SGST: ₹5,000 (opening balance) + ₹60,000 (bus) = ₹65,000
- IGST: ₹95,000 (opening balance)
- **Total ITC: ₹2,40,000**

Output GST for September 2021:
No output supplies are specified in the case scenario, therefore output GST is ₹0.

Net GST Liability:
Net GST Payable = Output GST − Available ITC = ₹0 − ₹2,40,000 = **−₹2,40,000** (Credit)

Since the net liability is negative, indicating excess ITC, the minimum GST payable in cash is **₹0**. The excess ITC of ₹2,40,000 is carried forward to future months or claimed as refund as per GST rules.

Question 11

Determine the value of taxable supply made by XYZ Pvt. Ltd. under GST law.

Accepted Answer

The value of taxable supply made by XYZ Pvt. Ltd. to ABC Pvt. Ltd. is **₹55,500**.

Under Section 15 of the CGST Act, 2017, the value of supply is determined by adding the transaction value to specified inclusions and deducting permitted exclusions.

**Determination of Taxable Supply Value:**

**List price of ₹50,000** forms the base transaction value and is included in full. **Municipal tax of ₹6,000** is added because taxes levied by local authorities (other than GST) constitute part of the consideration and must be included in the value of supply per Section 15(1). **Packing charges of ₹2,500** are separately incurred and must be added, as Section 15 specifically includes insurance, packing, handling, and freight charges in the valuation.

The **subsidy of ₹3,000 directly linked to price is deducted** from the value. Section 15(3) read with Rule 30 of the CGST Rules, 2017, explicitly excludes subsidies directly or indirectly linked to price that reduces the effective price. Since the question states it is directly linked to price, this deduction is mandatory.

The **2% turnover discount cannot be deducted** even though offered, because it was not known at the time of supply. Section 15 permits discount deduction only when it is offered, agreed, and settled at the time of supply or when parties have agreed before or at supply. A discount determined after supply based on performance review does not qualify.

The **₹2,000 paid by ABC Pvt. Ltd. to the vendor** is excluded beca…

CA Inter Cost & Mgmt

Drill 5 questions from this paper — instant grading

Worked Solution

Write it like this

1The skeleton

2Examiner-rewarded phrases

3Common trap