Model Question paper 1

RA Examination for A.A.O.s/S.O.s (Civil Branch)

Paper I Income Tax Theory
(Common paper for all Exams of RAE)
Time 2 Hours.
Total No. of questions: 100
Each question carries 1 mark
Maximum marks 100
Choose the correct answer
Q.1 Fringe Benefits tax was introduced with effect from
(a) 1 April 2003
(b) 1 April 2004
(c) 1 April 2006
(d) 1 April 2007
(c)
Q.2 Aggrieved by the orders of the assessing officer the assessee can take the
following action:
(a) Refuse to pay tax
(b) Go on appeal
(c) File complaint with the Chief Commissioner
(d) Request for assessment by a different assessing officer
(b)
Q.3 DTAA means:
(a) Double Taxation Avoidance Agreement
(b) Dual Tax Avoidance Agreement
(c) Double Tax Avoidance Agenda
(d) Definite Tax Assigned Agreement
(a)
Q.4 STT stands for:
(a) Service Transaction Tax
(b) Securities Transaction Tax
(c) Ship Terminal Tax
(d) Sure Transaction Tax
(b)
Q.5 BCTT talks about:
(a) Banking Cash Transaction Tax
(b) Brokers Commission Transaction Tax
(c) Bankers Commission Transaction Tax
(d) Benami Cash Transaction Tax
(a)

2.

265387917.doc

-2Under which section of Income Tax Act, 1961, undisclosed incomes given below are
dealt with?
Q.6 Unexplained cash credits:
(a) 69A
(b) 69D
(c) 68
(d) 69C
(e) 69
(c)
Q.7 Unexplained expenditure:
(a) 69A
(b) 69D
(c) 68
(d) 69C
(e) 69
(d)
Q.8 Unexplained money, Bullion, etc.:
(a) 69A
(b) 69D
(c) 68
(d) 69 C
(e) 69
(a)
Q.9 Amount borrowed on Hundi, etc.:
(a) 69A
(b) 69D
(c) 68
(d) 69 C
(e) 69
(b)
Q.10 Unexplained investments:
(a) 69A
(b) 69D
(c) 68
(d) 69C
(e) 69
(e)
State Yes/No in the following cases:
Q.11 Section 5 of the Income Tax Act prescribes 3 categories of assessees based on
residential status.
(No)
Q.12 Dividend paid by an Indian company outside India is not deemed to have
accrued or arisen in India for residents and ordinarily resident.
(No)
3.

265387917.doc

-3Q.13 While computing Taxable income the expenditure relating to income which
does not form part of Total income will be allowed as deduction.
(No)
Q.14 Tax rates are prescribed by Finance Act; However, Income Tax Act itself
prescribes specific rates for certain categories of income.
(Yes)
Q.15 Person includes Artificial juridical person; Hence income earned in the name
of deity is also chargeable to tax.
(Yes)
Choose the correct answer:
Q.16 Tax on Short Term Capital Gains on Listed securities (u/s 111A of the
Income Tax Act)
(a) 10 per cent
(b) 20 per cent
(c) 60 per cent
(d) 30 per cent
(a)
Q.17 Tax on Long Term Capital Gains (u/s 112)
(a) 10 per cent
(b) 20 per cent
(c) 60 per cent
(d) 30 per cent
(b)
Q.18 Winnings from Lotteries (u/s 112)
(a) 10 per cent
(b) 20 per cent
(c) 60 per cent
(d) 30 per cent
(d)
Q.19 Income from open ended schemes of UTI or mutual funds (u/s 115 BBB of
the Income Tax Act)
(a) 10 per cent
(b) 20 per cent
(c) 60 per cent
(d) 30 per cent
(a)
Q.20 Deduction available for donations to Prime Ministers Drought Relief Fund is:
(a) 100 per cent
(b) 50 per cent
(c) 60 per cent
(d) 30 per cent
(b)

4.

265387917.doc

-4Determine the residential status in the following cases:

Q.21 An individual, a person of Indian origin visited on 1 st October 2002 and left
India on 31st March 2003 and his total period of stay in India during the four
preceding previous years was 365 days. State his residential status in the
previous year 2002-03.
(a) Resident
(b) Non-resident
(a)
Q.22 A company registered outside India but the control and management is wholly
in India.
(a) Resident
(b) Non-resident
(a)
Q.23 An Indian Company but management is partly outside India.
(a) Resident
(b) Non-resident
(a)
Q.24 Subsidy received by a company from Tea Board is exempt under section
10(30) of the Income Tax Act:
(a) Yes
(b) No
(a)
Q.25 Dearness allowance is exempt from tax
(a) Yes
(b) No.
(b)
If you agree with the following suggestions indicate Yes or else indicate No:
Q.26 In assessment year 2004-05 winnings from races including horse races are
exempted up to Rs.2,500.
(Yes)
Q.27 Income of a sports association is exempt under Section 10(23) of the Income
Tax Act for A.Y. 2003-04.
(No)
Q.28 Income of ASOSAI-Secretariat is exempt from A.Y. 2001-02 till 2007-08.
(No)
Q.29 Income of Employees State Insurance fund set up under Employees State
Insurance Act 1948 is exempt under section 10(25) of the Income Tax Act.
(No)
Q.30 Exemption available under section 10(37) of the Income Tax Act is available
for Companies also.
(No)

5.

265387917.doc

-5Find out the correct answer relevant to the Income Tax Act from the following:
Q.31 For rectification of mistakes apparent from records, the assessing officer can
rectify the assessment under section:
(a) 154
(b) 148
(c) 251
(d) 263
(a)
Q.32 Rectification of mistakes where there is a change of opinion is not possible
under section:
(a) 154
(b) 148
(c) 251
(d) 263
(a)
Q.33 Income that escaped assessment can be brought to tax by issuing notice under
section:
(a) 154
(b) 148
(c) 251
(d) 263
(b)
Q.34 Assessing Officers orders prejudicial to revenue can be cancelled by the
Commissioner of Income under section:
(a) 154
(b) 148
(c) 251
(d) 263
(d)
Q.35. In a summary assessment the assessing officer cannot make any change on
the income returned but can issue a notice under section:
(a) 154
(b) 148
(c) 143(2)
(d) 263
(c)
The following Amendments were introduced to the Income Tax Act 1961 by various
Finance Acts, select the correct date.
Q.36 Procedure for Block Assessment was withdrawn with effect from:
(a) 1 June 2003
(b) 1 April 2006
(c) 1 June 2006
(d) 1 October 2007
(a)
6.

265387917.doc

-6Q.37 Securities Transaction Tax was brought into force from:

(a) 1 June 2004
(b) 1 April 2006
(c) 1 April 2007
(d) 1 October 2004
(d)
Q.38 Additional Depreciation is applicable to assessees engaged in the business of
Manufacture or production of any article or thing; and for Plant or Machinery
under Section 32(1)(iia) acquired after:
(a) 31.03.2005
(b) 01.04.2004
(c) 01.09.2006
(d) 31.03.2006
(a)
Q.39 Any sum paid on account of FBT shall not be allowed as a deduction under
Section 40(a)(ic) with effect from:
(a) 1 April 2006
(b) 1 April 2007
(c) 1 October 2004
(d) 1 April 2005
(a)
Q.40 Banking Cash Transaction Tax was introduced from:
(a) 1 April 2005
(b) 1 May 2005
(c) 1 June 2005
(d) 1 September 2005
(c)
Q.41 Profits and gains of any business of banking (including providing credit
facilities) carried on by a co-operative society with its members forms part
of income for the purpose of taxation by:
(a) Finance Act, 2004
(b) Finance Act, 2005
(c) Finance Act, 2006
(d) Finance Act, 2007
(d)
Q.42 Definition of Tax Credit Certificate has been introduced in the Income Tax
Act by:
(a) Finance Act, 1964
(b) Finance Act, 1965
(c) Finance Act, 1966
(d) Finance Act, 1967
(b)

7.

265387917.doc

-7Q.43 Income by way of long-term capital gain of a company is to be considered for

computing book profit under section 115 JB, Vide:
(a) Finance Act, 2004
(b) Finance Act, 2005
(c) Finance Act, 2006
(d) Finance Act, 2007
(c)
Q.44 Assessing Officers have been permitted to re-open the assessment in the
cases, where expenditure against exempt income has been claimed as
deduction for any assessment year beginning on or after 1 April 2001, with
retrospective effect from 11 May 2001, Vide:
(a) Finance Act, 2002
(b) Finance Act, 2005
(c) Finance Act, 2006
(d) Finance Act, 2007
(?)
Q.45 Scheme of submission of returns through Tax Return Preparers has been
introduced by:
(a) Finance Act, 2004
(b) Finance Act, 2005
(c) Finance Act, 2006
(d) Finance Act, 2007
(c)
If you agree with the following statements according to the Income Tax Act, 1961,
indicate Yes, or else indicate No.
Q.46 While computing Salaries Standard deduction under section 16(i) was
admissible for A.Y. 2006-07 also.
(No)
Q.47 Exemption under Section 10A is not allowable to an assessee who does not
furnish the return of income on or before due date under section 139(1) from
A.Y. 2006-07.
(Yes)
Q.48 For A.Y. 2005-06 deduction under Section 80C read with 80CCE is allowed
upto Rs.1 lakh along with deductions under Section 80CCC and 80CCD.
(No)
Q.49 Losses in speculative business will be allowed for carry over for a period of
four years only with effect from A.Y. 2006-07.
(Yes)
Q.50 Deduction under section 80L was available for A.Y. 2006-07 also.
(No)
Under the Income Tax Act, certain due dates have been prescribed for filing returns
from different types of cases. Identify the correct date of filing the returns in relevant
cases.

8.

265387917.doc

-8Q.51 Return for Securities Transaction Tax:

(a) 31st July
(b) 31st October
(c) 30th June
(d) 30th April
(c)
Q.52 Return of Income/wealth for the relevant previous year for assessees whose
accounts are not subject to audit under IT Act or any other law.
(a) 31st July
(b) 31st October
(c) 30th June
(d) 30th April
(a)
Q.53 Annual Return of Income under Proviso to Section 139(1).
(a) 31st July
(b) 31st October
(c) 30th June
(d) 30th April
(?)
Q.54 Filing of return of FBT by companies and any persons subject to Audit
(a) 31st July
(b) 31st October
(c) 30th June
(d) 30th April
(b)
Q.55 Half-yearly return on TCS during October 1 st to 31st March under Section
206C.
(a) 31st July
(b) 31st October
(c) 30th June
(d) 30th April
(?)
Match the correct Sections from the Income Tax Act under which the following items
are deducted while computing Profits and gains of Business or Profession:
Q.56 Amortisation of preliminary expenses
[35D]
Q.57 Compensation on voluntary retirement
[35DDA]
Q.58 Provision for Bad debts
[36(viia)]
Q.59 Amalgamation/demerger expenses
[35DD]
Q.60 Deduction for eligible projects
[35AC]
9.

265387917.doc

-9In the following cases quote the relevant section/rule in the Income Tax Act/Income
Tax Rules for determining the income of Non-Residents from the options given
below:
Q.61 Shipping business:
(a) 44BBB
(b) 44C
(c) 44B
(d) 44BBA
(e) 44D
(c)
Q.62 Operation of aircraft:
(a) 44BBB
(b) 44C
(c) 44B
(d) 44BBA
(e) 44D
(d)
Q.63 Foreign Companies engaged in civil construction business in connection with
power projects approved by Central Government:
(a) 44BBB
(b) 44C
(c) 44B
(d) 44BBA
(e) 44D
(a)
Q.64 Royalty of Technical fees derived by a foreign company from Government or
Indian concern:
(a) 44BBB
(b) 44C
(c) 44B
(d) 44BBA
(e) 44D
(e)
Q.65 Head office expenditure:
(a) 44BBB
(b) 44C
(c) 44B
(d) 44BBA
(e) 44D
(b)
Mention different types of Assessments prescribed in the Income Tax Act by matching
correct reference to the Section prescribing such Assessments from the following:
Q.66 Summary Assessment:
[143(1)]
10.
- 10 -

265387917.doc

Q.67 Scrutiny Assessment:

[143(3)]
Q.68 Best judgement assessment:
[144]
Q.69 Income escaping assessment:
[147]
Q.70 Block assessments:
[158BC/158BD]
Under which section of the Income Tax Act, an assessee is liable to pay interest to
revenue? Choose the correct answer from the following options:
Q.71 If the return of income is furnished after due date or not furnished, interest is
to be paid on the amount of tax as determined on regular assessment or under
section 143(1) as reduced by the advance tax and tax deducted at source or
collected at source.
(a) 234A
(b) 234B
(c) 234C
(d) 201(1A)
(a)
Q.72 An assessee who is liable to pay advance tax, has failed to pay such tax or he
has paid advance tax but the amount of advance tax paid by him is less than
90 per cent of assessed tax, he is liable to pay the interest from April 1 of the
assessment year to the date of determination of total income on regular
assessment or under section 143(1).
(a) 234A
(b) 234B
(c) 201(1A)
(d) 234D
(b)
Q.73 If an assessee has not paid advance tax or under estimated instalments of
advance tax, interest is to be paid for short fall for the advance tax paid.
(a) 234A
(b) 234B
(c) 234C
(d) 234D
(c)
Q.74 With effect from 1.6.2003, interest is to be charged on the refund granted
under section 143(1) but no refund is due on regular assessment or the
amount so refunded exceeds the amount refundable on regular assessment.
(a) 201(1A)
(b) 234B
(c) 234C
(d) 234D
(d)
11.
- 11 -

265387917.doc

Q.75 If a person responsible for deducting tax at source does not deduct tax at
source under section 192 to 195 or after deducting tax fails to pay the same
as required by the Act, he is liable to pay interest at the prescribed rates on
the amount of such tax from the date on which such tax deductible to the date
on which the tax is actually paid.
(a) 201(1A)
(b) 220(2)
(c) 234C
(d) 234D
(a)
Q.76 Who can claim refund where due to death, incapacity, insolvency, liquidation
or any other cause, a person is unable to claim or receive the refund due to
him?
(a) Legal representative
(b) Relative
(c) Nominated person
(d) None
(a)
Q.77 What is the time for claiming the refund?
(a) one year from the end of the assessment year
(b) six months from the end of the assessment year
(c) two years from he end of the assessment year
(d) no limit
(a)
Q.78 What is he CITs power to condone the delay in case of belated claim of
refund?
(a) Up to Rs.10,000
(b) Up to Rs.1,00,000
(c) Up to Rs.2,00,000
(d) No limit
(?)
Q.79 Can a refund be withheld by the assessing officer?
(a) Yes, with the previous approval of CIT or CCIT
(b) No, powers of withheld of refund have been withdrawn
(c) Discretionary power of assessing officer
(d) Yes, with the approval of DCIT
(b)
Q.80 Under what circumstances assessee is not entitled to interest on refunds?
(a) If proceedings resulting in refund are delayed for reasons attributable to
the assessee wholly or in part, the period of the delay so attributable to
him shall be excluded from the period for which interest is payable
(b) No interest is payable if the interest of refund is less than ten per cent of
the tax as determined
(c) In both the above conditions, assessee is not entitled to interest on
refund
(d) In both the above circumstances assessee is entitled to interest on
refunds
(c)
12.
- 12 -

265387917.doc

Q.81 The Supreme Court had held in the case of Maddi Venkataraman and
Company Private Limited vs. CIT(229 ITR 534) that any expenses incurred
in transactions carried out in violation of provisions of statute in force was
not allowable. In view of the above decision which of the following
transactions can be allowed as deduction from the computation of income.
(a) The expenses towards interest and penalties on sales tax
(b) The statutory penalty levied by the RBI on account of non-maintenance
of cash reserve ratio
(c) The expenses on damage bills raised by the forest department on
account of penalty for illicit felling of trees
(d) The interest is payable for delay in filing the return and failure to pay
advance tax
(?)
Q.82 Any expenditure not being of capital nature laid out wholly or exclusively for
the purpose of business is allowable as deduction in computation of the
income chargeable to tax under the head Profits and Gains of Business or
Profession. In view of this provision which of the following can be treated as
capital expenditure of the assessee company.
(a) The interest paid on borrowed capital for expansion of capital base
(b) The interest paid on capital work in progress
(c) The share issue expenses of the company
(d) In all the three cases
(?)
Q.83 The Supreme Court had held in the case of Sawhney Steel and Press Works
Ltd. vs. CIT (228 ITR 253) that if some subsidy is given to the assessee for
assisting him in carrying out the business operations, such subsidy must be
treated as assistance for the purpose of the trade and hence classified as
revenue receipts. In view of the judicial ruling can which of the following
can be considered as revenue receipts?
(a) Grant-in-aid from Government
(b) Waiving of electrical liability
(c) Subsidy received
(d) In all the three cases it was treated as revenue receipts
(?)
Q.84 The Supreme Court had held in the case of Ballimal Navalkishore and another
vs. CIT (224 ITR 414) that expenditure incurred for preserving or maintaining
an existing asset is current repairs and where the expenditure incurred brings
into existence a new asset or where the cost of replaced part constitutes
substantial value of the old machinery, the expenditure incurred would
constitute capital expenditure. In view of this judicial ruling which of the
following can be considered as capital expenditure.
(a) The expenditure incurred on installation of lift, tubewells, renovation of
buildings, etc.
(b) Heavy expenditure incurred on account of repairs and maintenance
(c) Expenditure towards body renovation in respect of Transport Company
(d) It may be treated as capital expenditure in all the cases
(d)
...13.
- 13 -

265387917.doc

Q.85 The Supreme Court had held in the case of CIT vs. HICO Products (P) Ltd.
(247 ITR 797) that where a deduction for scientific expenditure has been
allowed in respect of capital asset for the same or any other previous year no
depreciation shall be allowed on that capital asset for the same or any other
previous year. In view of this judicial pronouncement which of the following
the assessees can claim deduction u/s 35 of the Income Tax Act, 1961 on
account of capital expenditure in scientific research and claim of depreciation
on these assets is correct?
(a) The deduction allowed u/s 35 is in order but depreciation should not
have been given on this capital asset
(b) The depreciation should have been allowed but deduction u/s 35 should
not have been given
(c) The deduction u/s 35 should have been given and simultaneously
depreciation should also have been allowed
(d) None of the above
(?)
Q.86 This is a data communication system which allows servers and PCs to
communicate with each other within a limited area:
(a) LAN
(b) WAN
(c) Operational Software
(d) Switches
(a)
Q.87 The users of LAN are connected to RCC and NCC through this:
(a) WAN
(b) Nodal offices
(c) UPS
(d) PAN
(a)
Q.88 The main objective of this software is to identify each employee of the
department by a uniquely generated employee number:
(a) MMS
(b) PAN
(c) Assessee database
(d) GIR
(b)
Q.89 This provides for an off-line reference system on judgements, rulings case
laws, Circulars, Instructions, notifications, etc.
(a) Judicial reference System
(b) Assessment Information System
(c) Assessee Information System
(d) Management Information System
(a)

14.
- 14

265387917.doc

Q.90 This is an active networking equipment to which various computers and

server are connected and it acts as switched media for communication
between them.
(a) Switches
(b) ISDN
(c) Leased lines
(d) MMS
(b)
Q.91. This is a dial up connection supporting speeds up to 128 Kbps. It supports
data, voice and slow scan video and is reliable.
(a) ISDN
(b) Dial up
(c) WAN
(d) UPS
(a)
Q.92 Movement Control Register is maintained by:
(a) RKU
(b) AO
(c) Receipt Counter
(d) Dial up
(?)
Q.93 Collection Unit dealing with all matters relating to collection of demands of
the range and grant of stay/instalments works under:
(a) CIT
(b) TRO
(c) CCIT
(d) TDS word
(b)
Q.94 Under the Income Tax Rules, the authority to operate Personal Deposit
Account is:
(a) CCIT
(b) CIT
(c) ITO
(d) Assessing Officer
(?)
Q.95 The accounting procedure is done by:
(a) ZAO
(b) CTU
(c) ZAO & CTU
(d) TRO
(?)
Q.96 Sub-section (3) under Section 200 was inserted by the Finance Act, 2004 and
effective from_________.
(a) 1 April 2005
(b) 1 June 2005
(c) 1 April 2006
(d) 1 June 2006
(?)
15.
- 15 -

265387917.doc

Match correct percentage of three items given in table under Sub-section (1C) of
Section 206C of the Income Tax Act where Tax Collection at Source is to be effected
and also choose the correct date from which these are effective.
Q.97 Parking lot:
(a) 1 per cent
(b) 2 per cent
(c) 3 per cent
(d) 4 per cent
(b)
Q.98 Toll plaza
(a) 1 per cent
(b) 2 per cent
(c) 3 per cent
(d) 4 per cent
(b)
Q.99 Mining and quarrying:
(a) 1 per cent
(b) 2 per cent
(c) 3 per cent
(d) 4 per cent
(b)
Q.100 Effective date:
(a) 1 April 2005
(b) 1 June 2005
(c) 1 April 2006
(d) 1 October 2004
(?)

265387917.doc