(a.) The primary objective of tax planning is to reduce tax liability .
* tax liability
(b.) Excess of MAT paid over the normal tax liability is known as MAT credit. *MAT credit
(c.) In case of foreign companies, a surcharge at a rate of 5% of tax is charged if total income
exceeds 10 crores. *5%
(d). The speculation loss can be carried forward and set off up to the next 4 assessment years.
*4
(e.) No loss can be set off against salary incomes. *salary
(f.) Unabsorbed depreciation can be carried forward and set off for infinite years. *infinite
(g). In the Income-tax, only written down value (WDV) method of depreciation is allowed except
for power units. *written down value (WDV)
(h). The rate of deduction for a sum of money given to a company for scientific research is
100%. *100%
(i). STT stands for Securities Transaction Tax. *Securities Transaction Tax.
(j). ITR-1 is also known as Sahaj. * Sahaj
(k.) TAN stands for Tax Deduction and Collection Account Number. *Tax Deduction and
Collection Account Number
(l.) Avoidance of double taxation agreement results in relief of tax liability. *in relief
(A). What is tax management?
Tax management refers to the process of fulfilling tax obligations in a timely and efficient
manner, including filing returns, maintaining records, and paying taxes on time.
(b). What do you mean by previous year?
The previous year is the financial year in which income is earned by an assessee, which is
assessed for tax purposes in the following assessment year.
(c). What is Minimum Alternate Tax (MAT)?
MAT is a provision under the Income Tax Act where companies have to pay a minimum amount
of tax, even if they show zero or low income, based on their book profits.
(d). What is Speculative business?
A speculative business involves transactions where the purchase and sale of commodities or
stocks do not result in actual delivery, aiming to profit from price changes.
(e). What do you mean by set off of loss?
Set off of loss means adjusting losses incurred in one source of income against gains from
another source under the same or different head of income.
(f.) What is block of assets?
Block of assets refers to a group of assets of the same class for which the same rate of
depreciation is applicable under the Income Tax Act.
(g.) What is long-term capital gain or loss?
Long-term capital gain or loss arises from the sale of a capital asset held for more than 36/24/12
months, depending on the type of asset.
(h.) What is double taxation?
Double taxation occurs when the same income is taxed in two different countries or under two
different tax laws.
(i.) What is ITR-V?
ITR-V is the acknowledgment form generated after e-filing of income tax returns, which must be
signed and sent to the Income Tax Department for verification if not e-verified.
(j.) What is PAN?
PAN (Permanent Account Number) is a unique 10-character alphanumeric identifier issued by
the Income Tax Department to track financial transactions and tax payments.
PART-III
a. Differentiate between tax planning and tax evasion.
Tax planning is the legal method of reducing tax liability using benefits provided by the law, such
as deductions and exemptions. Tax evasion, on the other hand, is an illegal act of avoiding
taxes through false information, concealment of income, or fraudulent means.
(b.) Write a note on tax avoidance.
Tax avoidance involves using legal methods to minimize tax liability by exploiting loopholes in
tax laws. Though not illegal, it is discouraged by tax authorities as it defeats the intent of tax
legislation.
(c.) How do you determine the incidence of tax of a company?
The incidence of tax is determined based on the residential status of the company and the
source of income. A resident company is taxed on global income, while a non-resident is taxed
only on income received or accrued in India.
(d.) What are the provisions for set off and carry forward of loss from capital gain?
Short-term capital losses can be set off against both short- and long-term capital gains.
Long-term capital losses can be set off only against long-term gains. If not adjusted in the same
year, losses can be carried forward for 8 assessment years.
(e). Discuss the provisions for set off and carry forward of loss from casual incomes.
Losses from casual incomes like lottery, betting, or gambling cannot be set off against any other
income nor carried forward to subsequent years, as they are taxable under special provisions.
(f.) Explain the deductions in respect of scientific research u/s 35.
Section 35 provides deductions for expenditure on scientific research, both capital and revenue.
Companies can claim 100% deduction for approved in-house research and contributions to
approved research associations or universities.
(g.) Discuss the taxability of capital gain in case of buyback of shares.
In case of buyback of shares by a company (not listed on a recognized stock exchange), the
company is liable to pay tax on the distributed income under section 115QA, and such income is
exempt in the hands of shareholders.
(h.) What are the penalty provisions for delaying filing TDS/TCS Return?
A delay in filing TDS/TCS returns attracts a fee of Rs. 200 per day under section 234E until the
return is filed, subject to the total amount of TDS/TCS. Additional penalties may also apply
under section 271H.
(i.) What is the best judgement assessment?
Best judgement assessment is made by the Assessing Officer under section 144 when the
assessee fails to furnish returns or comply with notices. The officer estimates the income based
on available information and makes the assessment accordingly
Q4. What is tax planning? What are the features and objectives of tax planning?
A - >Tax Planning is the process of analyzing a financial situation or plan to ensure that all
elements work together to allow for the lowest tax liability. It involves making use of all available
exemptions, deductions, rebates, and reliefs to minimize tax payments legally.
Features of Tax Planning:
Legality: It must conform to the legal provisions of the Income Tax Act.
Futuristic Approach: It involves future planning and not retrospective arrangements.
Reduction of Tax Liability: Its main objective is to reduce tax burden within legal limits.
Productive Investment: Encourages taxpayers to invest in productive ventures.
Flexibility: Different tax planning options suit different individuals or businesses.
Objectives of Tax Planning:
Minimization of Tax Liability: To reduce the amount of tax payable.
Economic Stability: Helps in channeling resources to productive areas.
Growth of Economy: Promotes savings and investments, which in turn supports economic
development.
Avoidance of Legal Consequences: Ensures tax compliance and reduces legal risks.
Maximization of Returns: Optimizes the net income by minimizing tax impact.
Q5. Discuss the provisions for carry forward and set off of loss in case of amalgamation of
companies.
A-> Under the Income Tax Act, certain losses incurred by companies can be carried forward and
set off in future years. Section 72A deals with the carry forward and set-off of accumulated
losses and unabsorbed depreciation in case of amalgamation.
Provisions:
Eligible Companies: Industrial undertakings, banking companies, etc.
Conditions to be fulfilled:
Amalgamated company must hold 75% of the book value of fixed assets of the amalgamating
company for at least 5 years.
Continue the business of the amalgamating company for at least 5 years.
Fulfill prescribed conditions relating to the maintenance of levels of employees.
Approval by CBDT: The amalgamated company must obtain a certificate from a Chartered
Accountant and satisfy the Central Board of Direct Taxes (CBDT) that the conditions are fulfilled.
Time Limit: The losses can be carried forward for 8 years from the year of amalgamation.
Set Off: Only the unabsorbed loss and depreciation as per the books of the amalgamating
company are allowed to be set off.
Q6. Mr. Sharma Capital Gain Calculation (u/s 54)
A-> Cost of acquisition (indexed):
Purchased in FY 2001-02 for Rs. 40 Lakhs
CII for 2001-02 = 100, CII for 2021-22 = 317
Indexed cost = (40,00,000 × 317) / 100 = Rs. 1,26,80,000
Sale consideration: Rs. 2 Crores
Capital Gain: 2,00,00,000 - 1,26,80,000 = Rs. 73,20,000
Investment in new houses: 2 × 36 Lakhs = Rs. 72 Lakhs
Exemption under Sec 54: Rs. 72 Lakhs
Taxable Capital Gain = Rs. 73,20,000 - Rs. 72,00,000 = Rs. 1,20,000
Q7. What do you mean by ‘Double Taxation Relief’? Discuss the provisions related to bilateral
relief and unilateral relief.
(A) -> Double Taxation Relief refers to the provisions under which a taxpayer is relieved from
paying tax on the same income twice – once in the country of origin and again in the country of
residence.
Types:
Unilateral Relief (Section 91):
•Available when India does not have a Double Taxation Avoidance Agreement (DTAA) with
another country.
•Relief is given by Indian government to its residents for taxes paid abroad.
Relief is lower of:
•Indian rate of tax
•Rate of tax in the foreign country
Bilateral Relief (Section 90):
•Provided when India has signed a DTAA with another country.
Relief may be:
•Exemption method: Income is taxed in only one country.
•Credit method: Income is taxed in both countries but the resident country allows credit for tax
paid abroad.
Objective:
•To avoid double taxation
•Promote international trade and investment
•Encourage global mobility of labor and capital