DU SOL Question Paper 2018 B.Com (Hons.) Tax Planning and Management

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B.Com. (Hons.) i III' G

ELECTIVE GROUP EF _ TAX PLANNING
AND MANAGEMENT

Paper Code : C-3'\4

PaPer XXIX : CorPorate Tax Planning

Time: 3 Hours Mqximum Marks : 75

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a,
613

1. (a) "Tax Planr.ing is not the same es Tax Avoidance and
Tax Eva"ion." Discuss. (5)

(b) Define tl,e following :

(i) A Company in which the public are substantially
interested

(ii) A Domestic Company ( 10)

OR

(a) As a tax consultant advise your client as to how to
minimize his tax liability from a new unit in Special
Economrc Zone under section 104A. (7)

(b) Hory ccn tax liabiiity be minimized in respect of
developing and building housing projects under section
8OIB. (8)

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613 3

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2. The net profit of XYZ Ltd. as per profii & loss account for
the year ended 3L03.2014 amounted to R.s. 40,00,000 after
debiting/crediting the following items :

Items debited to Profit anci. Loss Account

(i) Pro.rision for income-lax -- Rs. 2,00,000

(ii) Provision for diminution in the value
of investment - Rs. 1,50,000

(iii) Wealth-tax paid - Rs. 2,00,000

(iv) Securities transaction tax Paid - Rs. 50,000

(v) Transfer to General Reserve - Rs. 75,000

(vi) Depreciation (including depreciation
of Rs. 1,50,000 on revaluation) Rs. 3,00,000

P.T.O.

613 4

Items credited to Profit and Loss Account

(D Amount credited to P&L A/c lrom
Speclrrl Iieserve - Rs' 5,00,000

(ii) Amouut credited to P&L A/c from
Revalt''ation Reserve Rs' 2'00'000

as per
Brought forward losses and unabsorbed depreciation
books of thc company are as follows :

Previous Yeer Brought Forward Unabsorbed

Loss DePreciation

1
I . 2010-1 2,00,000 5,00',000

3'00',000
2.2011-12
3. 2}l2-r3 10,00'000 2,00'000

You are required to compute the tax liability of
the company
(15)
for the A.i". 2014-15'

OR

(a) As a tax consultant you are requested to advise
an

assessee as to how to minimize tax in respect
of
area as per
operating and maintaining hospirai in a rural
(5)
Section 80IB.

613 r
Profit" be computed for
(b) Explain horv would "Book
Alternate Tax as per section
computation of Minimum ( 10)
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613 6

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X and Y u'ant to start a new business. They have the
option of iorrriing a partnership firm or a company. As a
tax consultant suggest as to which option they should chose,
keeping in rie',v the fcllowing inforrnation :

(i) The eipected profits of the bus;.less are Rs. 20,00,000.

613 7

(ii) If they form partnership firm, they would contribute
Rs. 15,00,000 each and take lLoh interest and salary
of Rs. 4,00,000 p.a. each while sharing profits and
losses equally.

(iii) If they form company, they would contribute Rs' 10,00,000
each as capital and Rs. 5,00,000 each as loan @ l5oh'
They would also get salary of Rs' 4,00,000 p'a' each
and distribute profits as dividend equally' Do a1l
calculation according to the provisions relating to
(1 5)
Assessment Year 2015-16.

OR

..Deemed Dividend,, under section
Explain the concept of
2(22) of the Income Tax Act 1961 . What tax considerations
will have to be kept in mind while deciding about the dividend
(1 s)
policy of the company.

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P.T.O.

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4, Mr. X wants to acquire a rnachine for Rs. 1,00,000.
The expected life of the rnachine is 5 years after which it
will be discarded, having nil residual value. He has two
options

(i) Borrow Rs. 1,00,000 from bank to purchase the
machine and repay the loan in 5 equal instalments of
Rs. 20,000 each with interest @ 12% per annum.

613 9

(ii) Obtain the asset on lease, for the annual lease rent of
Rs. 27,500 for 5 years with lease management fee of
Rs. 1500 to be paid in the first year'

Assuming the rate of tax to be 33.99% and depreciation
rate to be \5o/o, suggest whether the assessee should acquire
the asset with borrowed funds or take the asset on lease
while taking the discounting rate to be 10%'

The present value factors are:

Years. 2 J

PV Factor. .909 .826 .7 51 .683 .621
Assutne that lease rentals, lease management fees, loan as
well interest amounts are payable at the year end' (15)

OR

(a) Explain the provisions of section 45(1A) with regard to
taxabilityofthereceiptofinsurancecompensationin
case of damage or destruction of a capital asset'
(7)

(b) Mr. X, 40 years, resident Indian, earned a sum of
Rs. 20,00,000 during the previous year 2013-14 from a
business in a country with which India does not have a

P.T.O.

6r3 10

double tax avoidance treaty. Tax of Rs. 40,000 was
levied on such income in the source country. He earned
Rs. 30,00,000 during 2013-1,4 from business in India.
He has deposited Rs. 2,00,000 in PPF during the year.
Compute his income tax liability for the assessment year
20t4-r5. (8)

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613 11

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5. (a) State the different methods of computation of arm's
length price under section 92C ? Which can be the most
appropriate method of determination of arms' length
price ? (7)

(b) Define advance ruling as per section 245N(a). When
can the application for advance ruling be rejected by
the authority for advance ruling. (8)

P.T.O.

613 t2

OR

(a) Mr. X started a unit in 2009. The Balance Sheet of the
unit as on March 31, 2014 is as uncler

Capitai 6,50,000 Land (purchased on
June 1,2009) 5,00,000
Revaluation Reserve 3,00,000 Building(WDV) 2,50,000
Biils Payable 75,000 Plant & Machinery
(wDV) 1,50,000
Creditors 1,25,000 BillsReceivables 25,000
Stock 1,25,000
Debtors 1,00,000
Total 11,50,000 Total 1i,50,000

Other Information ;

(i) Land was revalued in 2013 and the amount was
crediteC io Revaluat:on Reserve Account.

(ii) Mr. X sold the unit on May 1,2014 for lump sum
consideration of Rs. 10.00.000.

Compute the capital gains in slump sale. (g)

(b) Explain the tax implications of the transfer of assets
between holding and subsidiary company. (7)

613 13

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P.T.O.

613 l4

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