(b) An Engineer from Mysore (India) went to U.S.A.

on job visa and sent Rupees

10,00,000 to his father in Mysore for the purpose of performing his sister's marriage
expenses. Whether this amount is taxable income to the father under income tax in
India. Decide
Answer:

Relevant Legal Provisions

1. Section 56(1) – Income from Other Sources

All incomes which are not chargeable under any other head are taxable under this section
unless specifically exempted.

2. Section 56(2)(x) – Taxability of Gifts

As per Section 56(2)(x), where any person receives, without consideration, any sum of
money exceeding ₹50,000, the whole of such sum is taxable under the head Income from
Other Sources.

However, this provision does not apply if the sum of money is received from a “relative”.

3. Meaning of “Relative” – Explanation to Section 56(2)(x)

For an individual, “relative” includes:

 Spouse
 Brother or sister
 Brother or sister of spouse
 Brother or sister of either of the parents
 Any lineal ascendant or descendant
 Any lineal ascendant or descendant of the spouse

👉 Son is a lineal descendant of the father, hence qualifies as a relative.

4. Residential Status of Son – Not Relevant

 The son is working in the USA and may be a Non-Resident (NR).

 Section 56(2)(x) does not differentiate between resident and non-resident
relatives.
 Therefore, even a gift from an NRI relative is fully exempt.
5. Purpose of Remittance

 The money was sent for sister’s marriage expenses.

 Purpose of gift is irrelevant for taxability under Section 56(2)(x).
 What matters is relationship and absence of consideration.

6. Capital Receipt vs Income

 A gift received from a relative is a capital receipt.

 Capital receipts are not taxable unless specifically brought to tax.
 Section 56(2)(x) specifically exempts gifts from relatives.

Conclusion (Decision)
✔ The amount of ₹10,00,000 received by the father is NOT taxable under the Income-tax
Act, 1961.

Reason:

 It is a gift
 Received from a relative (son)
 Covered by exemption under Section 56(2)(x)
 Hence, not chargeable to tax in the hands of the father

Final Answer (Exam-Oriented):

The sum of ₹10,00,000 received by the father from his son working in the USA is not
taxable, as the son is a relative within the meaning of Explanation to Section 56(2)(x) of the
Income-tax Act, 1961. Gifts received from relatives are fully exempt, irrespective of the
amount, residential status of the donor, or purpose of receipt.
(c) 'X' Ltd. a foreign company, pays to 'Y' a non resident employee for the services
rendered in India in a foreign country. Discuss the tax liability of the person 'Y' in
India for this payment.

Whether salary paid by X Ltd. (a foreign company) to Y (a non-resident employee) for

services rendered in India, but paid outside India, is taxable in India.

Relevant Provisions of the Income-tax Act, 1961

1. Section 5(2) – Scope of Total Income of a Non-Resident

In the case of a non-resident, total income includes income which is:

 Received or deemed to be received in India, or

 Accrues or arises or is deemed to accrue or arise in India

👉 Thus, even if income is received outside India, it can still be taxable in India if it accrues
or arises in India.

2. Section 9(1)(ii) – Income Deemed to Accrue or Arise in India (Salary)

As per Section 9(1)(ii):

Income chargeable under the head “Salaries” shall be deemed to accrue or arise in India if it
is earned in India.

Explanation to Section 9(1)(ii):

Salary is deemed to be earned in India if services are rendered in India.

👉 Place of rendering services is the deciding factor, not:

 Place of payment
 Residential status of employer
 Nationality of employee

4. Taxability in India

 Salary accrues in India under Section 9(1)(ii)

 Hence taxable in India under Section 5(2)
 Place of payment outside India is irrelevant
5. Exception – Short Stay (Not Applicable Here)

Section 9(1)(ii) provides an exception where:

 Stay in India does not exceed 90 days, and

 Employer is non-resident, and
 Salary is not borne by a PE in India

Since the question does not mention short stay or exception, it is assumed not applicable.

Conclusion (Decision)
✔ Salary paid to Y is taxable in India, even though:

 Employer is a foreign company, and

 Payment is made outside India

Reason:

 Services are rendered in India

 Salary is deemed to accrue or arise in India under Section 9(1)(ii)

Final Exam-Oriented Answer

The salary paid by X Ltd., a foreign company, to Y, a non-resident employee, is taxable in
India, as the services are rendered in India. As per Section 9(1)(ii) of the Income-tax Act,
1961, salary income is deemed to accrue or arise in India if it is earned in India, i.e., if
services are rendered in India. The place of payment and residential status of the employer
are irrelevant. Therefore, the payment is chargeable to tax in India in the hands of Y.
 1. (b) A T.V. Channel pays 20 lakh on 15th July 2022 as prize money to the
winner of "BIGBOSS" competition. Explain the taxability of this prize
money.

Taxability of Prize Money from BIGBOSS (₹20 lakh)

Income is chargeable under the Head INCOME FROM OTHER SOURCES

Any income not chargeable under any other 4 Heads of income will be chargeable
under income from other sources.

Even TDS is applicable to this question @30%

Relevant Provision

Section 115BB of the Income-tax Act, 1961

Explanation (Simple)

 Prize money from TV game shows / reality shows like BIGBOSS is treated as
income from winnings.
 Such winnings are taxable at a flat special rate, irrespective of the total income of
the winner.

Tax Rate under Section 115BB

 30% flat tax

 Plus Health & Education Cess @ 4%
 No basic exemption limit available
 No deduction allowed under:
o Chapter VI-A (80C, 80D, etc.)
o No set-off of losses

TDS Provision

As per Section 194B:

 TDS is deducted @ 30% if winnings exceed ₹10,000

 Hence, TDS will be deducted by the TV Channel before payment.
Conclusion (Exam Answer)

The prize money of ₹20 lakh received from winning the BIGBOSS competition is taxable
under Section 115BB as winnings from a game show at a flat rate of 30% plus cess. No
deduction or exemption is allowed. The TV channel is required to deduct TDS under
Section 194B before making the payment.
 1. (b) Mr. 'A' transfered a house property to his elder sister 'S' on January
20th 2021, on the condition that the house property will revert back to
Mr. 'A' after the death of 'S'. Monthly rental income from the house
property is 50,000/-. Is this income taxable in the hands of 'A' or 'S'?

Relevant Provision

Section 61 – Revocable Transfer of Assets

Explanation (Simple)

 A transfer is said to be revocable if:

o The asset can revert back to the transferor, or
o The transferor has a right to re-assume control over the asset.
 In this case:
o Mr. A transferred the house property to S
o With a condition that it will revert back to A after the death of S

👉 This is a revocable transfer, because the property is intended to come back to Mr. A.

Exception : if transfer is revoked after the death of beneficiary or transferee then the above
provision is not applicable.

Tax Effect (Section 61)

 Any income arising from a revocable transfer is taxable in the hands of the
transferor.
 Therefore, rental income from the house property will be clubbed with Mr. A’s
income.

Conclusion

✅ Rental income of ₹50,000 per month is taxable in the hands of Mr. A, not in the hands
of S.
c) Mr. 'X' received 45,000/-income from letting-out his tractor to use in
agricultural operation. Is this amount taxable ?

Relevant Provision

Section 2(1A) – Agricultural Income

Agricultural income includes:

 Income derived from land by agricultural operations, and

 Income attributable to agriculture.

Application to the Case

 Tractor is a movable asset, not land.

 Income is earned by letting out machinery, not by cultivation of land.
 Even though the tractor is used for agricultural purposes, the income is not derived
from land.

Legal Position (ICAI View)

 Income from hire or lease of agricultural machinery (tractor, harvesters, etc.) is not
agricultural income.
 Agricultural income must have a direct nexus with land, which is absent here.

Taxability

 ₹45,000 is NOT agricultural income

 It is taxable under the head Income from Other Sources (or Business Income, if
done systematically)

Conclusion (Simple Answer)

❌ Not agricultural income

✅ Taxable under the Income-tax Act, 1961
Ms. Laasya, a non-resident, residing in Australia since 1995. Came back to
India on 19-02-2019 for permanent settlement in India. Explain residential
status of Ms. Laasya for the assessment year 2021-2022.

Residential Status of Ms. Laasya for AY 2021–22

Facts Given

 Ms. Laasya is a non-resident and has been residing in Australia since 1995
 She came back to India on 19-02-2019 for permanent settlement
 Assessment Year: 2021–22
 Relevant Previous Year: 2020–21 (1-4-2020 to 31-3-2021)

Step 1: Residential Status – Resident or Non-Resident

During PY 2020–21, Ms. Laasya was in India for the entire year.

As per Section 6(1):

 A person is Resident if he/she stays in India for 182 days or more during the
previous year.

👉 Condition satisfied.

✅ Ms. Laasya is a Resident in India for AY 2021–22

Step 2: Whether Resident & Ordinarily Resident (ROR)

or Resident but Not Ordinarily Resident (RNOR)
As per Section 6(6), a resident individual is RNOR if any one of the following conditions is
satisfied:

1. He/she has been non-resident in India in 9 out of 10 preceding previous years, or

2. He/she has stayed in India for ≤ 729 days during the 7 preceding previous years

Application to Ms. Laasya

 She has been non-resident since 1995 → satisfies condition (1)

  She came to India only in Feb 2019, hence her stay in India during the last 7 years is
less than 729 days → condition (2) also satisfied

Final Conclusion
✅ Residential Status for AY 2021–22:

👉 Resident but Not Ordinarily Resident (RNOR)

 Mr. Vihan is getting income annually of Rs. 2 lakhs from dairy farming, butter and
ghee making and also poultry farming, which are established near by his agricultural
land. Whether this income is agricultural income. Is this sum income taxable ?
Explain

Relevant Provision
Section 2(1A) – Agricultural Income

Agricultural income means income derived from:

 Land used for agricultural purposes, and

 Agricultural operations on such land, including only ordinary processes to make
produce marketable.

Analysis of Each Activity

1. Dairy Farming

 Income from sale of milk is not derived from land

 It is derived from animals, not crops

❌ Not agricultural income

2. Butter and Ghee Making

 Conversion of milk into butter/ghee is a manufacturing activity

 It is not an ordinary agricultural process

❌ Not agricultural income

3. Poultry Farming

 Income arises from rearing of birds

 No agricultural operations on land involved

❌ Not agricultural income

Effect of Being Near Agricultural Land

 Mere location near agricultural land is irrelevant

 There must be direct nexus with land

Taxability
 Income of ₹2,00,000 is NOT agricultural income
 Hence, it is fully taxable under the Income-tax Act, 1961
 Taxable as Income from Business or Other Sources

Conclusion
❌ Not agricultural income

✅ Taxable income

One-line Exam Answer

Income from dairy farming, butter and ghee making, and poultry farming is not agricultural
income as it is not derived from land; hence ₹2,00,000 is taxable under the Income-tax Act,
1961.
 1. a) 'A' an employee received uniform allowance from the employer. Is it
taxable income?

Taxability of Uniform Allowance

Relevant Provision

Section 10(14) read with Rule 2BB of the Income-tax Act, 1961

Explanation (Simple)

 Uniform allowance is not fully exempt by default.

 Exemption is allowed only to the extent it is actually spent for:
o Purchase of uniform, and
o Maintenance (washing, stitching, etc.)
 Any unspent amount is taxable as salary.

Conclusion

 ✅ Exempt: Amount actually spent on uniform

 ❌ Taxable: Amount not spent

One-line Exam Answer

Uniform allowance received by an employee is exempt under Section 10(14) only to the
extent it is actually spent for purchase and maintenance of uniform; the balance, if any, is
taxable as salary income.
(b) 'X' is a senior advocate in the High Court of Karnataka. During December 2018, he
provides legal service to 'A' company (a firm of advocates) in Maharastra for a fee of
Rs. 1.5 lakhs. Turnover of 'A' company for preceding financial year is Rs. 18 lakhs.
Discuss whether the services are chargeable to GST. 'X'

Relevant Provisions under GST

1. Section 2(102) – Supply of Services
o Legal services are considered “services” under GST.
2. Notification No. 12/2017 – Services by Advocates
o Services by an individual advocate or firm of advocates are exempt from
GST if:
 Advocate provides services to an individual or business
 Turnover of service provider does not exceed ₹20 lakh in the
preceding financial year (for most states; ₹10 lakh in special category
states)
3. Section 9(1) – Levy of GST
o GST is levied at 18% on legal services if not exempt
4. Threshold Limit for Registration
o Turnover of X (service provider) is below ₹20 lakh → GST registration not
required

Facts Application

Particulars Value / Fact

Service Provider X, senior advocate

Client A Company (a firm of advocates)

Fee ₹1.5 lakh

Turnover of X in preceding year Not given, assume below ₹20 lakh

Turnover of A Company ₹18 lakh (irrelevant for exemption)

 X is a senior advocate (individual)

 Fee earned is ₹1.5 lakh (< threshold ₹20 lakh)
 Services are exempt under Notification 12/2017

Conclusion

 ✅ The legal services provided by X are exempt from GST

 ❌ No GST is payable on the fee of ₹1.5 lakh
 GST registration not required for X if total turnover < ₹20 lakh
One-line Exam Answer

Legal services provided by X, a senior advocate, are exempt from GST under Notification
12/2017, as the fee is below the threshold limit; hence no GST is payable.
(a) Mr. Ravish Kumar grows Jasmine flowers in his garden as a hobby. A flower
merchant purchases all such flowers grown is the garden for one year and pays Rs.
70,000/-. Is this sum income taxable ? Decide

Relevant Provision
Section 2(1A) – Agricultural Income

Agricultural income means income derived from land by:

 Agriculture, and
 Performance of basic agricultural operations such as cultivation, sowing, planting, etc.

Analysis
 Mr. Ravish Kumar grows jasmine flowers in his garden
 Growing flowers involves:
o Cultivation of land
o Human skill and effort
 Flowers are not of spontaneous growth
 Sale of flowers grown by cultivation is considered agriculture
 Income is derived from land used for agricultural purposes

Hobby Nature – Not Relevant

 Even if grown as a hobby, once there is:
o Cultivation of land, and
o Sale of agricultural produce
the income retains the character of agricultural income.

Taxability
 Income of ₹70,000 qualifies as agricultural income
 Agricultural income is exempt from tax under Section 10(1)

Conclusion
❌ Not taxable
✅ Exempt as agricultural income

One-line Exam Answer

Income of ₹70,000 from sale of jasmine flowers grown by cultivation in a garden is

agricultural income under Section 2(1A) and is exempt from tax under Section 10(1), even
though grown as a hobby.
a) Ramesh an Indian citizen an agriculturist. In the previous year he purchased an
agricultural land in Australia and received agricultural income. In the assessment year
concerned he was asked to pay tax on that income. Advice him suitably.

Relevant Provisions
1. Section 2(1A) – Definition of Agricultural Income

Agricultural income means income derived from land situated in India and used for
agricultural purposes.

👉 Location of land is crucial.

2. Section 10(1) – Exemption of Agricultural Income

 Only agricultural income as defined under Section 2(1A) is exempt.

 Hence, exemption applies only to agricultural income from land in India.

Application to the Case

 Ramesh purchased agricultural land in Australia
 Agricultural income is earned outside India
 Therefore, such income does not qualify as agricultural income under the Act

Taxability in India
 Agricultural income from foreign land is not exempt
 If Ramesh is Resident in India, such income is taxable in India
 Taxable under the head Income from Other Sources

(If Ramesh is Non-Resident, such foreign income will not be taxable in India)

Advice to Ramesh
 Since the land is situated outside India, the income is not agricultural income
under Indian tax law
 If he is a Resident, he must pay tax in India on such income
 He may claim relief under DTAA (if tax is also paid in Australia), under Section 90
Conclusion
❌ Not exempt agricultural income

✅ Taxable in India (if resident)

One-line Exam Answer

Agricultural income earned from land situated outside India does not fall within Section
2(1A) and hence is not exempt under Section 10(1); therefore, if Ramesh is resident in India,
such income is taxable in India.
a) 'A' Ltd. Company owns a plot of land. For construction of a single residential unit, a
works contract is given to B Ltd. for Rs. 4.5 crores. Labour and material will be
supplied by B Ltd. construction will be completed within 2 years, 20 percent cost of
agreed consideration is paid at the time of signing of contract. The balance of 80%
will be paid in installments depending upon completion of work. Whether this sum is
chargeable to GST ?

The short answer is yes, the sum is chargeable to GST. While there are certain exemptions
in the real estate sector, this specific arrangement between A Ltd. and B Ltd. hits a few
regulatory tripwires that make it a taxable service.

Here is the breakdown of why this contract attracts GST:

1. Classification as a "Works Contract"

Under the GST Act, a contract that involves both the supply of goods (materials) and services
(labour) for the construction of immovable property is defined as a Works Contract.

 According to Schedule II of the CGST Act, a works contract is treated specifically as

a supply of services.

2. The "Single Residential Unit" Misconception

There is a common point of confusion regarding the exemption for a "single residential unit."
Let's clear that up:

 Pure Labour Exemption: Exemption is available for the construction of a single

residential unit only if the contract is for pure labour.
 The "Material" Factor: Since B Ltd. is providing both labour and materials, it no
longer qualifies as a pure labour contract. Consequently, the exemption provided
under Notification No. 12/2017-Central Tax (Rate) does not apply here.

3. Nature of the Entity

The fact that the owner is A Ltd. (a company) rather than an individual building a personal
home further distances this from most "personal use" exemptions. In a commercial context,
construction services are almost always taxable.

4. Taxability of Advances

GST is not just due on the final handover; it follows the Time of Supply rules for services:

 The 20% Advance: GST must be paid on the 20% consideration at the time of
signing/receipt of payment.
 The 80% Balance: GST will be applicable on each installment as and when the
invoice is raised or payment is made (whichever is earlier) based on the completion
milestones.
 Exemption is applicable only if the work done is of pure labour.
Hence in the given ques work is done by supplying of material as well
as labour.
(b) Ramakrishnan of Chennai visited Mumbai and there decides to buy a Washing
Machine and a Air Conditioner for his house at Chennai. He visited a showroom of
Karthik in Mumbai. Karthik agreed to transport and deliver the Washing Machine and
Air conditioner to Ramakrishna at his house in Chennai for a sum of Rs. 48,000/-
including transportation charges. Decide what shall be the place of supply and kind of
GST.

Relevant GST Provisions

Section 10(1)(a) of IGST Act, 2017

Where supply involves movement of goods, the place of supply shall be:

The place where the movement of goods terminates for delivery to the recipient.

Application to the Case

 Supplier: Karthik (Mumbai, Maharashtra)
 Recipient: Ramakrishnan (Chennai, Tamil Nadu)
 Goods are transported by supplier
 Delivery is completed at Chennai

👉 Therefore, place of supply = Chennai (Tamil Nadu)

Type of GST
 Location of supplier: Maharashtra
 Place of supply: Tamil Nadu

Since supplier and place of supply are in different States:

✅ Inter-State Supply

✅ IGST is applicable

Conclusion
 Place of Supply: Chennai (Tamil Nadu)
 Kind of GST: IGST
One-line Exam Answer

As the goods are delivered to Chennai, the place of supply is Chennai under Section 10(1)(a)
of the IGST Act, and since the supplier is in Maharashtra, the supply is an inter-State supply
chargeable to IGST.
 1. (a) A person has sustained a loss of Rs. one lakh in his speculative
business. He wants to claim set-off of this loss from his income of Rs.
thirty thousand received under the head income from house property.
Will he be allowed to do so under the law? Decide with reasons.

Relevant Provisions
Section 73 – Losses in Speculation Business

 Loss from speculation business can be set off only against profits of another
speculation business.
 It cannot be set off against income under any other head.

Section 70 & 71 – Set-off Rules (General)

 General inter-head set-off is allowed except where specifically prohibited.

 Section 73 specifically restricts set-off of speculative losses.

Application to the Case

 Speculation loss = ₹1,00,000
 Income from house property = ₹30,000

Since income from house property is not speculation profit, set-off is not permitted.

Carry Forward
 As per Section 73(2), speculative loss:
o Can be carried forward for 4 assessment years
o Can be set off only against speculation profits of future years

Conclusion
❌ Set-off not allowed

✅ Loss can be carried forward

Final Decision (Exam Answer)

No, the speculative business loss of ₹1,00,000 cannot be set off against income from house
property of ₹30,000. As per Section 73 of the Income-tax Act, 1961, loss from speculation
business can be adjusted only against profits of another speculation business and not against
income under any other head. However, such loss can be carried forward for four assessment
years for set-off against future speculation profits.
b) A, while travelling in KSRTC bus, meets with an accident and is temporarily
disabled. KSRTC pays an amount of Rs. 10,000/- as compensation to him. State
whether the amount is revenue receipt or capital receipt.

Relevant Principle (Income-tax Law)

 Compensation for personal injury is generally treated as capital receipt.
 Such compensation is meant to restore the injured person, not to compensate for
loss of income.

Application to the Case

 A met with an accident while travelling
 Suffered temporary disability
 Compensation of ₹10,000 paid by KSRTC is for personal injury

Tax Treatment
 Compensation received for personal injury or disability is a capital receipt
 It is not taxable, unless specifically brought to tax (which it is not)

Conclusion
✅ Capital Receipt

❌ Not taxable

One-line Exam Answer

The compensation of ₹10,000 received from KSRTC for temporary disability due to an
accident is a capital receipt, as it is for personal injury, and hence not taxable.
 "A" a resident of India earned agricultural income from England. Is he liable to pay
tax on this income under the IT Act 1961?

Relevant Provisions
Section 2(1A) – Agricultural Income

Agricultural income means income derived from land situated in India and used for
agricultural purposes.

Section 10(1) – Exemption

Only agricultural income as defined in Section 2(1A) is exempt from tax.

Application to the Case

 Agricultural income is earned from land situated in England
 Hence, it does not fall within the definition of agricultural income under Indian
law
 Exemption under Section 10(1) is not available

Taxability in India
 Since “A” is a resident of India, his global income is taxable in India
 Therefore, agricultural income earned in England is taxable in India
 It will be taxed as Income from Other Sources
 Relief may be claimed under DTAA / Section 90, if tax is paid in England

Conclusion
✅ Yes, the income is taxable in India

One-line Exam Answer

Agricultural income earned from land situated outside India does not qualify as agricultural
income under Section 2(1A); hence, in the case of a resident, such income is taxable in India
under the Income-tax Act, 1961.
An assessee was an authorized dealer of Sony Electronic products which were sold
to different customers in Karnataka under the direct billing from Sony Ltd. in Delhi. Is
there a sale in the course of inter state trade or commerce ? Give reason.