DU SOL M.Com Question Paper 2nd Year 2018 Sem 4 Corporate Tax Structure And Planning

[This question paper contains 7 printed pages]
Your Roll No.
Sl. No. of Q. Paper 4098 c
Unique Paper Code MN-432
Name of the Course M.Com.
Name of the Paper Corporate Tax
Structure and Planning
Semester rv (Nc)
Time : 3 Hours Maximum Mq.rks : 7OO
Instructions for Candidates :
(a) Write your Roll No. on the top immediately
on receipt of this question paper.
(b) Attempt all questions.
(c) All questions carry equal marks.
1. Y Ltd., a closely held Indian company, is
engaged in the business of manufacture of
chemical good. Value of Plant and Machinery
owned by company is 55 Lakh. the following
informations for the financial year 20IS-16 are
given: 20
P.T.O.

Sale proceeds of goods 2223900
(domestic sale)
Sale proceeds of goods (export sale) 576 100
Amount withdrawn from 200000
general reserve
Amount withdrawn from 1s0000
revaluation reserve
Total 3150000
Less : Expenses
Depreciation (normal) 6 16000
Depreciation (Extra depreciation 270000
on account of revaluation)
Salary and wages 2 1 0000
Wealth Tax 10000
Income tax 350000
Outstanding custom 17500
duty (not paid as yet)
Proposed dividend 60000
Consultation fees 2 1000
paid to a tax expert
Other expenses 139000
Net profit 1456500
2

For tax purposes the company wants to claim
the following :
Deduction under section 8O-IB (30 percent of
Rs. 1456500)
Depreciation under section 32 (Rs. 536000)

The company also wants For tax For Accounting

to set off following losses purposes purposes

and unabsorbed
depreciation
Brought forward loss of 1480000 400000

assessment year 20 14- 1 5

Unabsorbed depreciation Nil 70000

Compute the net income and tax liability of Y
Ltd. for the assessment yeat 2016-17 assuming
that Y Ltd. has a (deemed) long term capital
gain of Rs. 60000 under proviso (i) to section
54D(21 which is not credited in Profit & Loss
account. 20
OR
Discuss the adjustments to be made in the net
profit of the P&L a/c for computing 'Book Profit'
under the provision of MAT (u/s 1 15 JB), along
with the provisions of Tax Credit (115 JAA).
20

P.T.O.

2. X Ltd., an Indian company, engaged in the
business of manufacture of transformers and
switchgears, negotiates for the purchase or
taking on hire a machine from a concern in U.K.
If it acquires the machine, then the total cost
will be Rs. 60,00,000 payabte in 5 annual
(interest free) instalments of Rs. l2,OO,OOO
each, payable at the beginning of the year.
If X Ltd. takes the machine on hire, it has to
pay an annual rent of Rs. 8,OO,OOO per annum
payable at the beginning of the year. Company
proposes to use the machine for 10 years.
Which option should company choose and why ?
The Following assumptions have been made :
(a) The company is widely held company and tax rate
is 33.99c/ol
(b) Rate of Depreciation on machinery ts l5o/o (WDV)
no additional depreciation applicable.
(c) Cost of capital is assumed as l0 percent for present
value factors. 20
OR
(a) Explain the provision of section 91 of
income tax act, 196I relating to avoidance
of double taxation of foreign income of a
resident.

4

of a firm
(b) Discuss the rules of conversion
availing of
into company with a view to
exemption from capitai
tax' Also state ln
can
what circumstances such exemptions
lOx2=2O
be withdrawn'
the proposal
-it'l^kh
3. An Indian compa"{ 9o:":dering
fot- 1 Pt?j:t: Yi::"
of raisins o;'
307" of the capital
earning U"foJ" tax shall be raise this entire
employed' The company can
amount titt'ei ;; t;; of equitv share ol bJ
Uorro*l,tgfromaUant<@14%perannuTot foliowing three
by mix of uo'it', *fti"ft J for
lttt
aiternatives should it oPt'
:

raised through
(a) Entire Rs'50 lakh to be
equitY share caPitai'
shares and
(b) 40 1+1 from issue of equity ioan'
remalnrng from I4o/o Bank
and rest
(c) 10 lakh from issue of equity shares
Rs.4O lakh from l4o/o Bank loan'
Assume the company shall
distribute the
and
entire ^*otttt oi ptotit* as dividend
is 30'9%
appticablt totpo'^te tax rate
on capital
What trill be you answer if return
instead of 30%
employed l"flt" tax is 10%
other trringJ the same ? Compare and
'L*Lning
comment onboth the situations'
20

P.T.O.

OR
Discuss the provisions governing the tax
liability for dividend u/ s 2(221 and the tax
treatment of bonus shares in the hands of
shareholders and the company. 20

4. (a) X and Y are two shareholders of Z Ltd. a
closely held company. X holds 55 percent
share capital of ZLtd. On January 30, 2016,
X soid all his shares to A. Now Z Ltd. wants
to set off brought forward loss of Rs. 100000
and unabsorbed depreciation of Rs.30O0OO
of the previous year 2014-15 against the
income of the immediate previous year
2015-16 i.e Rs.9O0OOO. Compute the
taxable income of Z Ltd. for the assesment
year 2016-17.
Do you change your answer, if it would have
been given that A is the relative of X, other
facts remains the same in the given problem
? State applicable provisions of section 79
in this case.
(b) Distinguish among Tax planning, Tax
evasion and Tax management.
IOx2=2O

6

OR
Discuss the conditions and consequences ot'
availing deduction in respect of expenditure on
specified business u/s 35 AD. 20

5. Write Explanatory notes on any two of the
following ; 1Ox2=2O
(a) Industriai companY.
(b) Demerger.
(c) Transfer pricing. -

7 300