MTP Intermediate Syl2016 June 2019 Paper 7 Set 2 PDF

MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 Paper 7- Direct Taxation DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2...

MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 Paper 7- Direct Taxation DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 Paper-7: - Direct Taxation Full Marks: 100 Time allowed:3 hours All question relate to income –tax assessment Year 2018-19 and the provisions stated relate to the Income-Tax Act,1961,unless otherwise stated in the question. Answer Question No.1, which is compulsory and any five question Question Nos.2 to 8. 1. (a) Choose the most Appropriate alternative for the following (Option to be given only in capital letters A,B,C or D ; entire answer need Not be reproduced); 1 X 10 =10 (i)An individual, being foreign national, came to India first time during the previous year 2018- 19 on 01-01-2019 for 200 days, his residential status for the previous year 2018-19 is. (a) Non-resident (b) Resident but not ordinarily resident in India (c) Resident and ordinarily resident in India (d) Resident in India (ii) Which of the following is an agriculture income? (a) Dividend paid by a company out of its agriculture income. (b) Share of Profit of a Partner from a firm engaged in an agriculture operation (c) Income from supply of water by a assessee from a tank in its agriculture land (d) Interest received by a money lender in the form of agricultural produce. (iii)Which of the following is not taxable under head ‘Salaries’? (a) Remuneration paid to the lecturer of a college for setting a question paper by a university. (b) Salary received by a member of the Parliament (c) Commission received by an employee director of a company (d) Both (a) and (b) above (iv) If a domestic servant is engaged by the employer and salary is paid by him, the perquisite is (a) Taxable in the hands of all employee (b) Not taxable in the hands of both specified and non-specified employers. (c) Taxable in the hands of specified employees only (d) Taxable to the extent of ` 120 per person in the hands of all employees. (v)A house property located outside India is: (a) Taxable in hands of all assessee (b) Taxable in hands of non resident assesse (c) Taxable in hands of resident and ordinarily resident assessee (d) Exempted from tax in India DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 2  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 (vi) Which of the following is not allowed as a deduction for computation of business Income? (a) Loss incurred due to theft in factory after working hours (b) Anticipated future losse (c) Loss caused by white ants (d) Loss due to accidental fire in stock-in-trade (vii) Deduction u/s 35AD is available in respect of expenditure on specified business, one of them is: (a) Setting up and operating a cold chain facility (b) Setting up and operating a power plant (c) Setting up and operating an industrial unit (d) All of the above (viii)U/s 54, capital gain will be allowed as exemption if the house property under transfer is held for (a) Less than 12 months preceding the date of transfer (b) More than 12 months preceding the date of transfer (c) Less than 36 months preceding the date of transfer (d) More than 24 months preceding the date of transfer (ix)Cost of acquisition of self-generated asset is nil, the exception is: (a) Goodwill (b) Route permit (c) Bonus shares acquired before 01-04-2001 (d) Loom hours (x)Unabsorbed depreciation can be carried forward for (a) Any number of years (b) 8 years (c) 4 years (d) 7 years (b) Match The following(Sufficient to give the corresponding item in column 3 for column 1; reproducing columns 2 and 4 are not required): 1 X5=5 1 2 3 4 (i) Sec. 288B (A) Determination of Residential Status (ii) Sec. 6 (B) Capital Gain (ii) Sec. 10 (C) Depreciation (iv) Sec. 45 (D) Rounding off of tax (v) Sec. 32 (E) Exempted Income DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 3  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 Answer: (i)D (ii)A (iii)E (iv)B (v)C (c) State whether the following statements are True or False : 1 X5=5 (i) Cash gift of ` 1,00,000 from uncle’s son is not taxable. (ii) Reasonable expected rent can not exceed standard rent. (iii) The income of minor child will always be included in the income of his/her parents. (iv) No tax is required to be deducted from winning from race-horse, if such winning does not exceed `10,000 (v) Telephone provided to an employee at his residence is a tax-free perquisite. Answer: (i)False (ii)True (iii)False (iv)True (v)True (d)Fill in the blanks: 1 X5=5 (i) A person owns 4 goods vehicles other than heavy vehicles. His estimated annual income u/s 44AE is ` ______ (ii) Advance tax is payable in _______ instalments by a non-corporate assessee. (iii) Total tax payable on a lottery income of ` 3,00,000 as per section 115BB is _____________ (iv) The monetary ceiling limit for exemption for gratuity received under the Payment of Gratuity Act, 1972 is __________ (v) Exemption u/s. 10(32) in respect of income of minor child included in the hands of assesses under Section 64(1A) is restricted to ` _____per child. Answer: (i) `3,60,000 (ii)4 (iii)`90,00(plus applicable surcharge (iv)`20,00,000 (v) `1,500 and health and education cess) 2(a) Ram provides following details of income, calculate the income which is liable to be taxed in India for the A.Y.2019-20 assuming that – a) He is an ordinarily resident b) He is not an ordinarily resident c) He is a non-resident. Particulars Amount Salary received in India from a former employer of UK 1,40,000 Income from tea business in Nepal being controlled from India 10,000 Interest on company deposit in Canada (1/3rd received in India) 30,000 Profit from a business in Mumbai controlled from UK 1,00,000 Profit for the year 2002-03 from a business in Tokyo remitted to India 2,00,000 Income from a property in India but received in USA 45,000 Income from a property in London but received in Delhi 1,50,000 Income from a property in London but received in Canada 2,50,000 Income from a business in Jambia but controlled from Turkey 10,000 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 4  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 2(b) X Ltd. has two house properties both of which are vacant. Municipal value of 1st house property is ` 1,00,000 and that of 2nd is ` 80,000. It has computed income from house property as under: Particulars Details(`) Amount(`) HP1: Self occupied [Sec. 23(2)(a)] Net Annual Value (NAV) Nil Less: Interest on loan u/s 24(b) Nil Income from HP1 Nil HP2: Deemed to be let out [Sec. 23(4)] Gross Annual Value (GAV) 80,000 Less: Municipal tax Nil Net Annual Value (NAV) 80,000 Less: Standard deduction u/s 24(a) @ 30% of 24,000 56,000 NAV Income from house property 56,000 Do you agree with the computation of income from house property of the assessee Answer:2(a) Calculation of income liable to be taxed in India of Ram for the A.Y.2019-20 Resident Resident but Non- & not ordinarily resident Particulars Ordinarily resident resident Salary received in India from a former employer of UK 1,40,000 1,40,000 1,40,000 Income from tea business in Nepal being controlled from 10,000 10,000 Nil India Interest on company deposit in Canada - - 1/3rd received in India 10,000 10,000 10,000 - 2/3rd received outside India 20,000 Nil Nil Profit from a business in Mumbai controlled from UK 1,00,000 1,00,000 1,00,000 Past Profit from a business in Tokyo remitted to India Nil Nil Nil Income from a property in India but received in USA 45,000 45,000 45,000 Income from a property in London but received in Delhi 1,50,000 1,50,000 1,50,000 Income from a property in London but received in 2,50,000 Nil Nil Canada Income from a business in Jambia but controlled from 10,000 Nil Nil Turkey Income liable to tax in India 7,35,000 4,55,000 4,45,000 2(b) In the above computation, X Ltd. has claimed benefit of self-occupation, whereas, such benefit can be claimed only by an individual or HUF. A company form of assessee cannot claim such DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 5  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 benefit. Hence, income under the head Income from house property will be as under: Computation of income from house property of X Ltd. for the A.Y. 2018-19 Particulars Details Amount HP1: Deemed to be let out [Sec. 23(4)] Gross Annual Value (GAV) 1,00,000 Less: Municipal tax Nil Net Annual Value (NAV) 1,00,000 Less: Standard Deduction u/s 24(a) @ 30% of 30,000 70,000 NAV HP2: Deemed to be let out [Sec. 23(4)] Gross Annual Value (GAV) 80,000 Less: Municipal tax Nil Net Annual Value (NAV) 80,000 Less: Standard Deduction u/s 24(a) @ 30% of 24,000 56,000 NAV Income from house property 1,26,000 3(a) Mr. Mugal joined Star Ltd. on 1/4/2018. Details regarding his salary are as follows: Particulars Amount Basic 5,000 p.m. Dearness Allowance 2,000 p.m. (50% considered for retirement benefit) Education Allowance 1,000 p.m. (he has 1 son and 3 daughters) Hostel Allowance 2,000 p.m. (none of the children is sent to hostel) Medical Allowance 1,000 p.m. (total medical expenditure incurred ` 3,000) Transport Allowance 1,800 p.m. (being used for office to residence & vice versa) Servant Allowance 1,000 p.m. City compensatory Allowance 2,000 p.m. Entertainment Allowance 1,000 p.m. Assistants Allowance 3,000 p.m. (paid to assistant ` 2,000 p.m.) Professional Development 2,000 p.m. (actual expenses for the purpose ` 8,000 p.m.) Allowance Bonus 24,000 p.a. Commission 9,000 p.a. Fees 5,000 p.a. Compute his gross taxable salary for the assessment year 2019-20. (b)Y ,an individual has a net agricultural income of an assessee is RS 90,86,0000 and non agricularal income is Rs 13,65,000.Y contributes 1,40,000 towards PPF. Compute his taxable liablility for the assessment year 2019-20. DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 6  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 Answer 3(a) Computation of gross taxable salary of Mr. Mugal for the A.Y.2019-20 Particulars Details Amount Amount Basic Salary 60,000 Bonus 24,000 Commission 9,000 Fees 5,000 Allowances Dearness Allowance 24,000 Education Allowance 12,000 Less: Exemption (` 100 * 2 * 12) 2,400 9,600 Hostel Allowance 24,000 Less: Exemption (` 300 * 2 * 12) 7,200 16,800 Medical Allowance 12,000 Transport Allowance 21,600 Less: Exemption Nil 21,600 Servant Allowance 12,000 City Compensatory allowance 24,000 Entertainment Allowance 12,000 Assistance Allowance 36,000 Less: Exemption (Being actual expenditure) 24,000 12,000 Professional development allowance 24,000 Less: Exemption (Actual expenditure max. of amount 24,000 Nil 1,44,000 received) Gross Taxable Salary 2,42,000 3(b) Computation of Mr.Y for the A.Y 2019-20 (`) Gross total Income 13,65,000 Less: Deduction under section 80 C 1,40,000 Total income (i.e non-agricultural income) 12,25,000 Computation of tax 1.Income Tax on agricultural income: Rs 90,86,000 + non-agricultural income Rs 29,05,800 12,25,000 2.Income Tax on agricultural income 90,86,000 +exempted slab of income 26,13,300 2,50,000 3.Income tax Computed at(1) minus Income Tax computed at (2) 2,92,500 4.Less : Rebate under section 87A Nil 5.Balance 2.92,500 6.Surcharge (applicable only if non-agricultural income exceeds 50 lakh Nil 7.Tax and Surcharge 2,92,500 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 7  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 8.Health and Education cees {4 % of (7)] 11,700 9.Tax Liability 3,04,200 4(a) Sunil has a house property acquired on 7/07/1995 for ` 3,00,000. He incurred improvement expenditure on such property ` 70,000 on 16/08/2000 and ` 50,000 on 17/07/2010. Market value of such property as on 1/04/2001 is ` 4,50,000. On 16/08/2013, such property is compulsorily acquired by the Government and compensation decided at ` 11,50,000. 20% of the compensation received on 31/03/2019 and balance on 2/04/2019. On further appeal, on 16/08/2019 enhanced compensation is declared by the Government ` 2,00,000. Expenditure incurred to get enhanced compensation is ` 11,000. Such compensation received on 18/08/2020. Compute income under the head Capital Gains of Sunil for the assessment year 2019-20, 2020-21 and 2021-22.. (b)Mr. Bhola has furnished you the following data – Income from house property ( ` 1,30,000) Salaries (Net) ` 80,000 Income from other sources (` 90,000) Income from lotteries ` 3,50,000 Mr. Bhola is seeking your advice relating to set off and carry-forward. Answer:4(a) Computation of capital gains of Sunil for the A.Y. 2019-20 Particulars Working Amount(`) Amount(`) Sale consideration 11,50,0001 Less: Expenses on transfer Nil Net sale consideration 11,50,000 Less: i) Indexed cost of acquisition ` 4,50,0002 * 2204/100 9,90,000 ii) Indexed cost of improvement3 ` 50,000 * 2204/167 65,868 10,55,868 Long Term Capital Gain 94,132 1. The initial compensation (i.e. ` 11,50,000) decided by the Government shall be treated as sale consideration. 2. Cost of acquisition is the original cost of acquisition (i.e. ` 3,00,000) or Fair market value as on 1/04/2001 (i.e. ` 4,50,000) whichever is higher. 3. Cost of improvement incurred before 1/04/2001 is to be completely ignored. 4. Though the property was compulsorily acquired by the Government in the P.Y 2013-14 but the compensation was received in the P.Y.2018-19, therefore the amount shall be taxable in the P.Y. 2018-19, however indexation benefit shall be available till the previous year 2013-14. Computation of capital gains of Mr. Sunil for the A.Y. 2020-21: As the assessee has not received enhanced compensation during the P.Y.2019-20, hence nothing is taxable in the A.Y. 2020-21. Computation of capital gains of Mr. Sunil for the A.Y. 2021-22 Particulars Working Amount(`) Amount(`) Sale Consideration Enhanced compensation 2,00,000 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 8  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 Less: Expenses on transfer 11,000 Net Sale Consideration 1,89,000 Less: i) Indexed cost of acquisition Nil ii) Indexed cost of improvement Nil Nil Long Term Capital Gain 1,89,000 In case of enhanced compensation, the cost of acquisition shall be taken as nil and the nature of capital gain shall be same as that of initial compensation. (b) Statement showing application of sec. 71 Particulars Amount(`) Salaries 80,000 Income from house property (1,30,000) Income from other sources Winning from lotteries 3,50,000 Other income (90,000) Gross total income 3,50,000 Conclusion Casual income shall be fully taxable as no loss can be set off against such 3,50,000 income. Losses to be carried forward a) Loss under the head “Income from house property” (1,30,000) b) Loss under the head “Income from other sources”, as such loss cannot be Nil carried forward. Income under the head ‘Salaries’ is first adjusted with the loss under the head ‘Income from other sources’ as the same cannot be carried forward. Though loss under the head ‘Income from other sources’ is ` 90,000 and such loss could be adjusted with income under the head ‘Salaries’ only to the extent of ` 80,000 still the remaining loss of ` 10,000 cannot be carried forward. 5(a) Uttar and Dakshin, partners of PP Traders, furnishes the following details – Profit and loss account for the year ended 31-3-2019 Particulars Amount Particulars Amount Bonus paid to employee 50,000 Gross Profit 10,00,000 Interest on loan taken from bank 45,000 Interest on drawings Other Expenses 40,000 Uttar 2,000 Salary to partners Dakshin 3,000 Uttar 2,44,000 Dakshin 4,88,000 Interest on capital @ 15% Uttar 4,500 Dakshin 6,000 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 9  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 Depreciation 40,000 Net profit 87,500 10,05,000 10,05,000 Additional information 1. Depreciation for the year allowed u/s 32 is ` 30,000. 2. During the last year, firm has incurred loss of ` 8,50,000 (which includes unabsorbed depreciation of ` 50,000). 3. Interest on loan taken from bank is yet to be paid. Compute total income of firm. (b) Compute total income of Sri Bajaj of Delhi from the following data: Particulars Amount(`) Profits & gains of business or profession 80,000 Income from house property (let-out and situated at Kolkata) 40,000 Income from other sources 10,000 Rent paid for office 8,000 Rent paid for residential house 40,000 Answer:5(a) Working 1 Computation of remuneration allowed to the partners Particulars Details(`) Amount(`) Profits and gains of business or profession Net profit as per Profit & loss account 87,500 Add: Expenditure disallowed but debited in P/L A/c Salary to partners 7,32,000 Interest on capital (in excess of 12%) [(` 4,500 + ` 6,000)/15 * 3] 2,100 Depreciation 40,000 Interest on loan taken from bank is disallowed u/s 43B 45,000 8,19,100 9,06,600 Less: Expenditure allowed but not debited in P/L A/c Depreciation 30,000 8,76,600 Less: Unabsorbed Depreciation (allowed to the extent that the remaining book profit is not less than brought forward business losses) 50,000 Book profit 8,26,600 Remuneration paid to the partners (being minimum of the following) - Actual remuneration 7,32,000 - Maximum remuneration u/s 40(b) [` 3,00,000 * 90% + ` 5,26,600 * 60%] 5,85,960 5,85,960 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 10  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 Computation of total income of PP Traders for A.Y. 2019-20 Particulars Amount(`) Book Profit before adjusting unabsorbed depreciation 8,76,600 Less: Salary to partner (as computed above) 5,85,960 2,90,640 Less: Brought forward business loss 2,90,640 Total Income Nil Remaining brought forward loss ` 5,09,360 & unabsorbed depreciation ` 50,000 shall be carried forward. (b)Calculation of total income of Sri Bajaj for the A.Y. 2019-20 Particulars Amount(`) Profits & gains of business or profession 80,000 Income from house property 40,000 Income from other sources 10,000 Gross Total Income 1,30,000 Less: Deduction u/s 80GG# 27,000 Total Income 1,03,000 # Computation of deduction u/s 80GG Particulars Working Amount(`) Amount(`) Least of the following shall be deductible: 1. ` 5,000 per month ` 5,000 * 12 60,000 2. 25% of Adjusted Gross total income 25% of `1,30,000# 32,500 3. Excess of rent paid over 10% of Adj. ` 40,000 - (10% of ` 27,000 27,000 GTI 1,30,000#) # Adjusted GTI = Gross total income – Long term capital gain – Short term capital gain covered u/s 111A - All deduction under 80’s other than section 80GG – Income u/s 115A, etc. = ` 1,30,000 Note: Rent paid for office is irrelevant for the purpose of Sec. 80GG. 6(a) Ms. Suparna Roy (Age 46 yrs), a resident individual of India, finished the following details of her income during the Previous year 2018 –19. Compute her Total Income and tax payable for the Assessment year 2019 –20. Gross salary ` 5,01,000 (Professional Tax paid ` 2,000). Income from Business owned by her ` 2,00,000 and Allowable expenses ` 1,20,000. Received family pension ` 10,000 p.m. w.e.f. 1.04.2018. Long term Capital gain on sale of building ` 80,000. She received her share of income from Hindu Undivided Family (HUF) as member ` 40,000. She deposited to PPF ` 80,000 during the year DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 11  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2. Donation to National Defence Fund ` 25,000. Repayment of house building loan taken from HDFC Bank (purchased during 2018 –19) ` 2,50,000 (of which ` 50,000 is for principal repayment). Paid premium on Mediclaim Insurance Policy on own health by cheque ` 16,000. 6(b) Write short note on “Co-ownership” Answer:6(a) Computation of total income of Ms. Suparna Roy for the A.Y. 2018-19 Particulars Amount Amount Amount ` ` ` Salaries Gross Salary 5,01,000 Less: Professional Tax 2,000 4,99,000 Income from House Property Net annual value of self-occupied property Nil Less: Deduction u/s 24(b) (Interest on loan) 2,00,000 (2,00,000) Profits & Gains of Business or Profession Income from business 2,00,000 Less: Allowable Expenses 1,20,000 80,000 Capital Gains Long term capital gain 80,000 Income from other sources Family Pension 1,20,000 Less: Std. Deduction [Lower of 1/3rd of pension or `15,000] 15,000 1,05,000 Gross Total Income 5,64,000 Less: Deductions - u/s 80C PPF 80,000 Repayment of housing loan 50,000 1,30,000 - u/s 80D (mediclaim) 16,000 - u/s 80G [Donation to National Relief Fund] 25,000 1,71,000 Total Income 3,93,000 Computation of Tax liability of Ms. Suparna Roy for the A.Y. 2018-19 Particulars Rate On Details Amount ` ` Long Term Capital Gain ` 80,000 20% 16,000 Other Income(Note) Upto ` 2,50,000 - - From ` 2,50,001 to ` 3,13,000 5% 63,000 3,150 3,150 Tax Liability 19,150 Less: Rebate u/s 87A - 19,150 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 12  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 Add: Education cess & SHEC 3% of ` 19,150 574 Final tax liability 19,724 Rounded off u/s 288B 19,720 (b) Co-ownership [Sec. 26] If two or more persons own a house property jointly, then they are known as co-owners. If individual share of each co-owner is definite and ascertainable then the share of each such person shall be taxable as his income from house property. Tax treatment 1. Share of each co-owner in the income from the property as computed in accordance with sec. 22 to 25 shall be included in his total income. 2. Where the house property is owned by co-owners and is occupied by each of the co- owner then all of them can claim benefit u/s 23(2)(a) and interest on loan shall be allowed to all the co-owners to the extent of `30,000/`2,00,000 as the case may be. Note: Provision of Sec. 26 is mandatory and not optional. 7(a) Shri Anil follows cash basis of accounting and has furnished the Receipts & Payment A/c of previous year 2018-19 for computing his income: Particulars Receipts Payments Interest on listed debenture of A Ltd. 16,200 Letting of building & machinery @ ` 15,000 p.m. under a composite 1,50,000 lease Collection charges 1,000 Repairs 5,000 Capital repairs 16,000 Interest paid outside India without deducting tax on loan taken for 8,000 construction of building Gift from father 6,000 Ground rent received (related to financial year 2017-18) 600 The following additional information are also provided - Allowable depreciation on Building and Machinery - ` 4,000 Fire Insurance on Building and Machinery (not paid) - ` 1,000 7(b)Write short note on Revised Return. DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 13  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 Answer:7(a) Computation of income from other sources of Anil for A.Y.2019-20 Particulars Details (`) Details (`) Amount Amount(`) (`) Interest on debenture of A Ltd. `16,200 / 90% 18,000 Interest received on letting of assets 1,50,000 Less: Expenses paid Collection charges 1,000 Repair 5,000 Capital repairs3 Nil Depreciation 4,000 10,000 1,40,000 Gift from father [As received from Nil relative] Ground rent received 600 Income from other source 1,58,600 Notes 1. Since assessee follows cash basis of accounting, hence, income shall be chargeable and expenditure shall be allowed on cash basis. 2. Debenture income required to be grossed up. 3. Capital repairs are not allowed. 4. Interest paid outside India without deducting tax at source shall not be deductible expenditure. (b) REVISED RETURN [SEC. 139(5)] If an assessee discovers any omission or wrong statement (bonafide in nature) in the return filed, he can revise his return u/s 139(5). Time limit: Assessee may file the revised return – before the end of the relevant assessment year; or before completion of regular assessment, - whichever is earlier. Notes a) Replacement of original return: Once a revised return is filed, it replaces the earlier return. This signifies that the revised return should be complete in itself and not merely an accessory to the original return. b) Revision of revised return: A revised return can again be revised i.e. a second revised return can be filed u/s 139(5) for correcting any omission or wrong statement made in the first revised return within specified time. c) Revision of belated return: A belated return u/s 139(4) can be revised. d) Revision of loss return: A loss return can be revised e) Return filed pursuant to notice u/s 142(1) cannot be revise 8.Write short notes on any three of the following: 5 X 3=15 (a) TDS u/s 194H (b) Rectification u/s 154 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 14  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 (c) Who is required to follow Income Computation and Disclosure Standards (ICDS) (d) INTIMATION [SEC. 143(1) Answer:8(a) Who is responsible to deduct tax: Following persons are responsible to deduct tax at source on commission or brokerage (other than commission on insurance) to a resident person – Any person, other than individual or HUF; & Individual or HUF, whose books of account are required to be audited u/s 44AB (due to turnover or gross receipt criteria) during the financial year immediately preceding the financial year in which such commission is credited or paid. Note: 1.No tax shall be deducted if the aggregate amounts of commission or brokerage credited or paid during the financial year to the payee does not exceed ` 15,000. 2. No deduction shall be made on any commission or brokerage payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call office franchisees. When tax shall be deducted: At the time of payment or crediting the payee, whichever is earlier. Rate of TDS: 5% Exemption or relaxation from the provision When the recipient applies to the Assessing Officer in Form No. 13 and gets a certificate authorising the payer to deduct tax at lower rate or deduct no tax [Refer sec.197] When commission is retained by an agent Where commission or brokerage is retained by the consignee/agent while remitting the sale consideration, the consignor/principal will have to deposit the tax deductible on the amount of such retained commission - [Circular No.619] Other Points: Commission or brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities (b) Rectification u/s 154 An income-tax authority, is empowered (suo moto or on application by assessee) to – a) rectify any mistake apparent in an order passed by him; or b) amend any intimation issued u/s 143(1) or deemed intimation c) amend any intimation issued u/s 200A(1). Taxpoint: Such order of rectification must be passed in writing. Time limit for Rectification [Sec. 154(7)] Within 4 years from the end of the financial year in which the order sought to be amended was passed.However, in respect of an application made by the assessee or deductor or collector, the authority shall, within a period of 6 months from the end of the month in which the application is received by it, pass an order – DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 15  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 a. making the amendment; or b. refusing to allow the claim. Opportunity of being heard [Sec. 154(3)]: If such rectification order is prejudicial to the assessee or deductor or collector, an opportunity of being heard must be given to the assessee, before passing such order. Note Where any such amendment has the effect of reducing the assessment or otherwise reducing the liability of the assessee or the deductor or collector, the Assessing Officer shall make any refund which may be due to such assessee or the deductor or collector. Where any such amendment has the effect of enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee or the deductor or collector, the Assessing Officer shall serve on the assessee or the deductor or collector, as the case may be a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued u/s 15 (c) The ICDS are required to be followed: by all assessee (other than an individual or a Hindu undivided family who is not required to get his accounts of the previous year audited u/s 44AB) who follows the mercantile system of accounting, for the purposes of computation of income chargeable to income-tax under the head “Profits and gains of business or profession” or “Income from other sources”. Tax point The standards are not for the purpose of maintenance of books of account. The standards are for computation of income under aforesaid heads of income only In case of conflict between the provision of the Income-tax Act and ICDS, the provision of the Act shall prevail to that extent. (d) Where a return has been made u/s 139 or in response to a notice u/s 142(1), such return shall be processed in the following manner, namely:— a.the total income or loss shall be computed after making the following adjustment: i. any arithmetical error in the return; ii. an incorrect claim, if such incorrect claim is apparent from any information in the return; iii. disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished after the due date; iv. disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; v. disallowance of deduction claimed u/s 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or 80-IE, if the return is furnished after the due date; b.the tax, interest and fee, if any, shall be computed on the total income computed above; c.the sum payable by (or the amount of refund due to), the assessee shall be determined after adjustment of the tax, interest and fee, if any, by any TDS, TCS, advance tax paid, any relief, tax paid on self-assessment and any amount paid otherwise by way of tax, interest or fee; DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 16  MTP_Intermediate_Syl2016_June,2019_Paper 7_Set 2 d.an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee; and e.the amount of refund due to the assessee in pursuance of the determination shall be granted to the assessee. f.An intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax or interest or fee is payable by, or no refund is due to, him. Time limit for intimation: No intimation shall be sent after the expiry of 1 year from the end of the financial year in which the return is made. The period of limitation will run from the date of filing of latest revised return. DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 17