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CORPORATE TAX

PLANNING
AND
MANAGEMENT

Module-1
Assessment of
Corporate

Dr R Soundararajan
.
Corporate Taxation and Management

Objectives and Outcomes

OBJECTIVES
To impart students with
knowledge on tax, types of
tax and their modalities.
To give insight on the taxes
influencing a corporate
entity - both direct and
indirect.
To orient the students on
the procedures and
formalities to be adhered,
with regard to tax matters.

OUTCOMES

The meaning of taxes, types of tax


and the differences between them. The
taxonomy of taxation in India.

Computation of income tax liability of


a corporate entity and the strategies
for legally reducing tax burden.

The various indirect taxes levied by


Union Government on corporate
entities, the extent of liability and
procedural formalities in respect of
each of the taxes..

Corporate Taxation and Management

Syllabus
MODULE 3:
Excise Duty

Module 4:
Customs Duty
Part-2
Indirect
Taxation

MODULE
6:
Central
Sales Tax

MODULE 1:
Assessment
of Corporate
Assesses

MODULE 5:
Service Tax

MODULE 2:
Tax Planning
and
Management

Corporate Taxation and Management

Part-1
Direct
Taxation

MODULE 1: Assessment of
Corporate Assesses
.Types

of Companies, Residential Status


and Incidence of Tax
for companies,
Computation of taxable income and tax
liability according to Income Tax Provisions,
Book Profits, Minimum Alternate Tax under
section 115JB, Tax Credit under MAT,
Dividend Distribution Tax u/s 115-0.
Corporate Taxation and Management

Class- 1
.

Definitions

Corporate Taxation and Management

BE A Filter , Not a sponge

ng
i
k

as
B y n s.
s? tio
i
t h es
A Filter screens ,
do Qu
u ht
o
rejects, takes in
y ig
r
o
d
e
what it wants and w th
o
H
what is useful

Tax, Duty, Cess


E

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m
xa

Define Tax: [2]


is a compulsory contribution , from the person, to the
government, to defray the expenses incurred in the common
interest of all without reference to special benefits conferred

Define Duty:[2]
is the compulsory payment, but no proportionate return, not
related to revenue. Example: excise duty, customs duty

Define Cess:[2]
is the compulsory payment, but no proportionate return, used
only for the purpose for which it is collected. Example: Education
cess
Corporate Taxation and Management

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Compare Tax, Duty and Cess[8].

Particula
rs
Nature
of
payment
Utilizati
on of
amount
Based
on
Example

Tax

Duty

Cess

compulsory

compulsory

General
purpose
of
government
Revenue

General
Special
purpose of
purpose
government
Production
Revenue

IT,

compulsor
y

Corporate Taxation
and Management
Wealth
Excise
duty, Education

What are all the sources of IT or the pillars of support


of IT Act [8]?
1.

Income Tax Act 1961:


It specifies the provisions of taxable Income, Tax Liability,
Procedure for assessment, appeals, penalties and prosecutions

2.

IT rules 1962

3.

Finance Act

4.

Case Laws

5.

Circulars and Notification


E
Corporate Taxation and Management

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ss

What are the objectives of


Direct Tax?[8]
1.

Raising revenue

2.

Economic development

3.

Reduction of unemployment

4.

Reduction of regional imbalance

5.

Capital accumulation

6.

Better distribution of income and wealth

7.

Reduce the effect of depression and


Corporate Taxation and Management

inflation atione
i n yp
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T
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x
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a
ss

What are the cannons Of Direct


Tax[8]?

Cannons- refer to the principles or rules laid down by Economists and


statement for guiding taxing authority
1.
2.
3.
4.
5.
6.
7.
8.

Proportional to the ability to ability to pay.. Equity


Cost of collecting taxes minimum Economy
Pay tax conveniently.. Convenience
Certain about taxes.. Certainty
Must not affect productivity and distribution
Productivity
Slight changes in the rates of tax must lead to more increase in the
amount of tax Elasticity
ay
s
s
E
Tax structure broad Diversity
i on
t
a e
n
i
p
Rules and procedure simple.. Simplicity
am Ty
Corporate Taxation and Management

Ex

What are the powers of CBDT?


1.

The powers to make rules

2.

Issue Instructions , orders , directions, to all


officers and persons employed to execute the act

3.

Power to relax mandatory provisions

4.

Power to admit belated refund applications

5.

Power to decide jurisdiction

6.

Power to disclose information


E
Corporate Taxation and Management

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Assignment Questions:

1.

Define Tax [2]

2.

What are the objectives of taxation? [ 8]

3.

What are the cannons of taxation[8]

4.

Briefly compare the concept of Tax, Duty and


Cess[8]

5.

Distinguish between Direct and Indirect Tax


[8]

6.

Briefly explain the taxes levied by Central nm


si g
Government. [13]
s
A
Corporate Taxation and Management

t1
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e

Questions asked in Interviews


Assignment

1.

What are the sources of Income Tax?

2.

Hint: Income Tax Act 1961, Income Tax Rules 1962,


Finance Bill, Government Notifications, Circular and
clarification of CBDT, Judicial decisions.

3.

Income Tax is Progressive whereas Indirect Tax is


regressive Explain.
m
n
g
si
s
A
Corporate Taxation and Management

t2
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e

Class- 2
.

Some more Concepts

Corporate Taxation and Management

Objectives

Learning Objectives:
Understand

certain basic concepts and


definitions such as
Assesse,
Assessment,
Person,
Previous year, Assessment Year,
Tax Planning, Avoidance and Evasion
Corporate Taxation and Management

Who is assesse as per IT act 1961?[2]


io How do you define the assesse in default?
t
in a
[2]
am

Ex
n
Assesse (S2 (7)): A person liable to pay tax. A person against
whom any proceedings under this act has been taken. A person who
is representative assesse (example guardian). Assesse in default
under any provision of this act

Deemed Assesse:

Assesse in Default: If the person on whom notice is served and

A person may not be liable not only for his own


income but also on the income of other persons. For instance guardian of
minor, agent of NRI. The person responsible for assessment of income of
such persons is called deemed assesse.
he has not paid within 30 days he is considered to be Assesse in default.
Corporate Taxation and Management

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Differentiate Person and PIO[2]

Person (S2(31)) defined as

An individual or

A Hindu Undivided Family or

Company or

Firm( including LLP) or

Association of Person (AOP) or

Local authority or

Every artificial juridical person not falling in the above categories

Person

of Indian origin

A person is said to be of Indian origin if he/ she or his/ her parents or grandparents
were born in un- divided India
Corporate Taxation and Management

io
t
in a

m
a
Ex
n

Define HUF AOP and Individual[2]

Hindu Un-divided family: it consists of all persons


lineally descended from a common
ancestor and includes
their wives and unmarried daughters.

AOP and Body of Individuals: Association of persons


implies a voluntary getting together for a definite purpose
whereas a body of individuals would be just a body without
an intention to get-together.
The members of body of individuals can be individuals only
whereas the members of an association of persons can be
individual or non-individuals (i.e. artificial persons).
Corporate Taxation and Management

m
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How the company is defined in IT


act 1961[8][2]

Company: Section 2(17) defines the term company


to mean:
(i)
(ii)

Any

Indian company, or

Anybody corporate incorporated by or under the laws of a country


outside India i.e. a

foreign company, or

(iii) Any institution, association or body assessed as a company on or


before AY 1970-71
(iv) Any institution, association or body, whether incorporated or not and whether
Indian or non-Indian, which is declared by general or special order of the
Board [CBDT]
Corporate Taxation and Management

Companies classified into 5 Types


Widely
Held CompanyS2[18]
Foreign

1.

Indian Company S2[26]

2.

Domestic Company S
2[22A]

3.

Foreign Company S
2[23A]

4.

Widely held Company S


2[18]

Domestic
Company
Indian
Company
Closely
Held
1.
Company in which
public is
Company[
2(23A)
S2[26]S2[22A]substantially
interested
Companies
1.
Incorporated
under
Indian
1.
Not
Domestic
or Indian
Indian
2.
Owned
byCompany
Government
or
RBI in
Earlier
A Companies
company
in
which
which
at least Act
40% or
shares
are held
company
2. companies
Any other Act
company
3.
S 25 Company
public
is not
[Non Indian
Company]
2.
Established
4. Or
Company
declaredby
by central,
CBDT to be
the
income
liable to be
substantially
so
State
Act
taxed
in India
5.
Nidhi company
or mutual benefit
interested

Closely Held Company

6.

5.

3.

Company registered under


society U/S 620A
any law in force in J&K
Listed Companies

Corporate Taxation and Management

Can you explain the Meaning of Business , Profession,


Vocation? Is hobby same as vocation? [6]
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Business
1. Any trade ,
commerce, or
manufacture
2. Any adventure in the
nature of trade ,
commerce, or
manufacture
Profession
An occupation ,
requiring pure
intellectual and manual
skill gathered through
past training or
qualification

Can you
explain
Business
and
profession
and
Vocation? Is
hobby same
as Vocation?

Corporate Taxation and Management

Vocation
Natural ability of a
person to undertake
some particular work.
Must have earning
feature.

Hobby is different from


vocation. Income earned
from hobby [ not by the
way of profession] shall
be taxable income from
other sources.

EW
I
RV
E
T
IN am
Ex

&

What are the draw


Backs of Closely
held companies?
Carry forward Loss U/S79

Deemed Dividend S 2[22]e


US2[22]e any loan or advance given
by closely held company to a large
shareholder [more than 10% voting
rights] or to a concern in which such
shareholder has substantial
interest[entitled to 20% income of
such concern ] shall be considered as

deemed dividend

1.

Carry
Do
not forward
apply in Loss
case of
Death of U/S79
shareholder

Un
of a
Gift absorbed
to relativeslosses
by shareholder
closely
held company can be
3.
Amalgamation /Demerger of
carry
forward only if 51% of
foreign company subject to 51%
voting
power are
same as
of shareholders
continues
to be
thethe
last
day
of
previous
year
shareholder of amalgamated
2.

company
Corporate Taxation and Management

Determine
the
income
status
of
the
IZ
U
Q
following:
[8]
A.An Individual
A.

Dr Muniraju a lecturer in BU

B.

Bharatidasan University

C.

Ganesh director in BHEL

D.

BHEL

E.

Mr Kasim Sole proprietor

F.

Bangalore Municipal Corporation

G.

LIC of India

H.

Malleswaran Ladies Association

I.

Co-Operative Society

J.

Laxman & Sons [partner ship firm]

K.

A Joint family of Ram, his wife, children and


parents

L.

Ram and Laxman , who are the legal heirs


of satyanarayana

M.

Union Bank of India

B.Artificial Juridical person


C.Individual
D.Company
E.Individual
F.Local Authority
G.Company
H.Association of Person
I.Association of Person
J.Firm
K.HUF
L.HUF
M.Company

Corporate Taxation and Management

io
t
in a

Explain Assessment Year and


Previous Year [2]

m
a
Ex
n Assessment year (S2(9))- It is the period of 12

months- 1st April to 31st March in which the income of


previous year is assessed

Previous Year 2(34) read with S 3. Immediately


preceding the assessment year. All assesse has to follow
uniform previous year 1st April to 31st March. Hence
called uniform previous year

Corporate Taxation and Management

Class- 3
TYPES OF TAXES

Corporate Taxation and Management

We Resolve
That

Tax Slabs for Individual

Corporate Taxation and Management

Capital Gains Tax:

Capital Gain tax as name suggests it is tax on gain in capital. If you


sale property, shares, bonds & PRECIOUS MATERIAL etc. and earn
profit on it within predefined time frame you are supposed to pay
capital gain tax. The capital gain is the difference between the
money received from selling the asset and the price paid for it.

Capital gain tax is categorized into short-term gains and long-term


gains. The Long-term Capital Gains Tax is charged if the capital
assets are kept for more than certain period 1 year in case of share
and 3 years in case of property. Short-term Capital Gains Tax is
applicable if these assets are held for less than the above-mentioned
period.
Corporate Taxation and Management

Perquisite Tax

Perquisite Tax:-

Earlier to Perquisite Tax we had tax called FBT (Fringe Benefit


Tax) which was abolished in 2009, this tax is on benefit given
by employer to employee. E.g If your company provides you
non-monetary benefits like car with driver, club membership,
ESOP etc. All this benefit is taxable under perquisite Tax.

In case of ESOP The employee will have to pay tax on the


difference between the Fair MARKETValue (FMV) of the
shares on the date of exercise and the price paid by him/her.
Corporate Taxation and Management

Corporate Tax

Corporate Taxes are


annual taxes payable
on the income of a
corporate operating in
India. For the purpose
of taxation companies
in India are broadly
classified into domestic
companies and foreign
companies.

Corporate Taxation and Management

Sales Tax :

Sales tax charged on the sales of movable goods. Sale tax on Inter
State sale is charged by Union Government, while sales tax on intraState sale (sale within State) (now termed as VAT) is charged by State
Government.

Sales can be broadly classified in three categories. (a) Inter-State Sale


(b) Sale during import/export (c) Intra-State (i.e. within the State) sale.
State Government can impose sales tax only on sale within the State.

CST is payable on inter-State sales is @ 2%, if C form is obtained. Even


if CST is charged by Union Government, the revenue goes to State
Government. State from which movement of goods commences gets
revenue. CST Act is administered by State Government
Corporate Taxation and Management

Service Tax:

Most of the paid services you take you have to pay service tax
on those services. This tax is called service tax. Over the past
few years, service tax been expanded to cover new services.

Few of the major service which comes under vicinity of service


tax are telephone, tour operator, architect, interior decorator,
advertising, beauty parlor, health center, banking and
FINANCIAL service, event management, maintenance service,
consultancy service

Current rate of interest on service tax is 14%. This tax is


passed on to us by service provider.
Corporate Taxation and Management

Value Added Tax:

The Sales Tax is the most important source of revenue of the


state governments; every state has their respective Sales Tax
Act. The tax rates are also different for respective states.

Tax imposed by Central government on sale of goods is called


as Sales tax same is called as Value added tax by state
government. VAT is additional to the price of goods and passed
on to us as buyer (end user). Around 220+ Items are covered
with VAT.VAT rates vary based on nature of item and state.

Government

is planning to merge service tax and


sales tax in form of Goods service tax (GST).
Corporate Taxation and Management

Customs and Excise Duty

CustomDuty:duty & Octroi (On Goods):Excise


An
excise
orisexcise
is a type
of tax charged
Custom
Duty
a typeduty
of indirect
tax charged
on goods
on
goodsinto
produced
within
the
country.
imported
India. One
has to
pay
this dutyThis
, on is
goods
opposite
to custom
which
is charged
on This
that are imported
fromduty
a foreign
country
into India.
bringing
goods
from
outside
of
country.
Another
duty is often payable at the port of entry (like the
name of this tax is CENVAT (Central Value Added
airport). This duty rate varies based on nature of items.
Tax).
Octroi
taxproducer
applicable/ on
goods entering
to
If
you is
are
manufacturer
of in
goods
or
municipality
or any
other jurisdiction
for use,
you
hire labor
to manufacture
goods
you are
consumption
sale. In
simple terms one can call it as
liable
to payor
excise
duty.
Entry Tax.
Corporate Taxation and Management

Anti Dumping Duty:

Dumping is said to occur when the goods are


exported by a country to another country at a
price lower than its normal value. This is an
unfair TRADE practice which can have a
distortive effect on international trade. In order
to rectify this situation Central Govt. imposes an
anti dumping duty not exceeding the margin of
dumping in relation to such goods.
Corporate Taxation and Management

Other Taxes
Professional Tax
Stamp Duty, Registration Fees,
If you are earning professional you need to pay

Toll
Tax:

Entertainment
Tax:Transfer
Education
Cess
,Tax:Surcharge:Dividend
distribution
Tax:professional Municipal
tax. Professional tax
is
imposed
by
Tax:
Gift
Tax: At
respective
Municipal
Corporations.
in
some
of
places
you
need
to
pay
tax
inMost
order
to the
use
If
you decide
to
purchase
property
than
in
addition
to of
cost
paid
to seller.
Education
cess
is
deducted
and
for
Education
of States
poor
Tax
is also applicable onused
Entertainment;
this
tax

You
Dividend
distribution
taxis
thetaximposed
by theIndian
must
consider
additional
cost
to
transfer
that
property
on
your
name.
India
charge
this
tax.
infrastructure
(road,
bridge
etc.)
build
from
your
money
given
to
If
you receive
giftAll
fromsomeone
is clubbed
your
income
people
in INDIA.
taxes in Indiaitare
subject with
to an
education

Municipal
Corporation
in every city
imposed
is
imposed
by
state
government
on
every
government
asto
Tax.
tax
istax
called
as
toll
tax.
This
tax
and
That
cost
include
registration
fees,
stamp
duty
and
transfer
tax.
This
is ais
you
need
pay
tax
on
it.
This
tax
isworking
called
as
gift
tax.
cess,
which
is
3%
ofThis
the
total
payable.
The
education
cess
Governmenton
companies
according
to
thedividendpaid
to
This
tax
is
paid
by
every
employee
in
Private
tax
in
terms
of
property
tax.
Owner
of
every
FINANCIAL
transaction
that
isfor
related
to
required
for
preparing
legal
document
of
property.
amount
is
very
small
amount
but,
to
be
paid
maintenance
mainly
applicable
on if
Income
tax, excise
duty
and
service
tax.
organizations.
The
tax
is
deducted
by
the
Employer
This
tax
is
applicable
gift
amount
or
value
is
more
than
50000
companys
investors.
Dividend
amount
toThis
investor
is major
tax
free.
At
entertainment
such
as
movie
tickets,
and
good
up
keeping.
work
property
has
to
pay
this
tax.
tax
rate
In
simple
sense
this
tax
is
imposed
on
the
handing
over
of
the
title
of
every
remitted
to that
the added
Municipal
Corporation
Rs/in amonth
year.
Surcharge
is anand
extra
tax or fees
to your
existing tax
commercial
shows
exhibition,
broadcasting
property
ownership
by
one
person
totaxes
another.
It incorporates
a legal
So
present
dividend
distribution
tax
is
15%.
and
it
is
mandatory
like
income
tax.
in
total
you
pay
20
different
in
direct
or
indirect
way.
calculation.
This
tax
is
applied
on
tax
amount.
varies
in
every
city
transaction
fee & stamp
duty.
This amount
varies
from property
to
service,
DTH
service
and
cable
service.
The rate on which this tax is applicable is not same in all
property based on cost.
states.
Corporate Taxation and Management

Capital Gain

Securities Transaction Tax:Example: A lot of people do not declare their profit and avoid paying
Similarly
if you purchase
property
after
two share)
year if and
you
If
you
purchase
share
at
say
1000
Rs/(per
capital gain tax, as government can only tax those profits, which
find
price
in which
you INVESTED
has
afterthat
two property
months by
this
price
increased
Rs/-(per
have
been
declared
people.
To
fight with to
this1200
situation
increased
you to
decide
to(Securities
sale
it you
need
pay
Government
has
introduced
Transaction
Tax ) of
share) youand
decide
saleSTT
this
STOCK
and
earntoprofit
short
term
capital
gain
tax.
which
is
applicable
on
every
at to
STOCK
200 Rs/- per share. If youtransaction
do so youdone
have
pay Short
Thatitmeans
if you buy as
or sell
equity
shares,
derivative
exchange.
For
property
is
considered
long
term
capital
gainon
if
term
CGT
(capital
gain
tax)
@
10%
+Education
cess
instruments, equity oriented Mutual Funds this tax is applicable.
you
hold
property
for
3 years
orgain.
above..
profit
as
it
is
short
term
capital
If you
same
This tax is added to the price of security during
thehold
transaction
sharehence
for 1 you
year
or above
is considered
as amount
long term
itself,
cannot
avoid it
(save)
it. As this tax
is
very
low gain
people
do you
not notice
much.
capital
and
needitnot
to pay capital gain tax.it
is considered as tax free.
Corporate Taxation and Management

Class- 4

Part 2
MODULE 1:
Assessment of Corporate Assesses
Corporate Taxation and Management

Computation
of
taxable
income and tax liability
according to Income Tax
Provisions, Book Profits,
Corporate Taxation and Management

What is the meaning of control and


management?

Corporate Taxation and Management

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Tax Incidence for companies


The incidence under income tax depends upon the
residential status of the company. A company
I.e. income
or liable
Non resident
to tax in India
May be Resident
Residential Status S[6(3)]

Control and
management of the
affairs of the
company

Indian Company

A company other than


Indian Company

Wholly In India

Resident

Resident

Wholly Outside India

Resident

Non- Resident

Partly in India and Partly


outside India

Resident

Non- Resident

Corporate Taxation and Management

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Tax Incidence for


companies
Incidence of Tax
Incidence of Tax S5
Resident in India

Non-Resident in India

Indian Income

Taxable in India.

Taxable in India

Foreign Income

Taxable in India

Non-taxable in India

Corporate Taxation and Management

in
m
a

Any of the
following 3 is
Indian Income

Ex
n

Indian Income

io
t
a
During the PY

Income received or
deemed to be
received

Income accrue or
deemed to accrue
during PY

In India

In India

In India

Outside India

Outside India

In India

Foreign Income
During the PY

Income received or
deemed to be
received

Income accrue or
deemed to accrue
during PY

Outside India

Outside India

Arising means coming into


existence

Accrue means to arise or


spring as a natural growth or

Income deemed to accrue or arise in


India S9
All income accrue or arising
A.or
Dividend paid by an Indian
directly or indirectly through
company outside India
from
1.Any business connection inB. Interest Payable by
Government or Resident / Non
India
resident for money borrowed
2.Any property or assets in
for business carried in India
India
C. Royalty payable , Fees for
3.Any source of income in India
technical services by
4.Transfer of capital assets
Government or resident for
situated in India
any business
Corporate Taxation and Management

AL
C
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A
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E

Income calculations on accrual

Samsung a South Korean company, a non resident under the


income tax act 1961, had the following receipts of royalty in the
year 2006. Indicate whether they will be taxable in India. Give
reasons.
1.Rs.

50,000 from Government of 'India under an "agreement


approved by Governments of South Korea and India.

2.Rs:

1, 00,000 from' Calcutta Co. Ltd., a resident Indian


company, for of technical know- how for use in a business in
India.

3.Rs.

75,000 from Bombay Co., a resident Indian Organization,


for import of drawings for use in its business in Singapore
and Malaysia.

4.Rs.

50,000

from

Keshoram, a non-resident

under

Indian

tax

Is it Indian or Foreign Income?


Rs. 50,000 from Government of 'India
under an "agreement approved by
Governments of South Korea and India.
Rs: 1, 00,000 from' Calcutta Co. Ltd., a
resident Indian company, for of technical knowhow for use in a business in India.
Rs. 75,000 from Bombay Co., a resident
Indian Organization, for import of drawings for
use in its business in Singapore and
Malay
Rs. 50,000 from Keshoram, a non-resident
under Indian tax law for a formula for a
business in India;
Rs. 40,000 from X, an Indian Non-resident,
for use of drawings and for a business in the
UK.

I
I
F
I
F

Nature of Income

Royalty from Government


Technical Know-how fees
paid

Rs
Amount
taxable
50000
100000

Fees paid by Bombay Co.


paid
for use in its business in
Singapore
Technical Know-how fees
paid

Not
taxable

from Mr. Keshavram

Amount paid by X non


resident for use of
drawing

05:02:19 AM

50000

Not
taxable

Reason

Royalty deemed to accrue in


India
Technical Know how paid by
resident
is deemed to accrue or arise in
India
Technical Know how
paid outside India

know how fees paid by a NonResident


for using the same in business
in India
deemed to accrue in India
Paid by non resident for using
drawings out side India not
accrue in India

tax compliance and management

50

Class- 5

Part 2
MODULE 1:
Assessment of Firms
Corporate Taxation and Management

Knowing How to study


1.
2.
3.
4.

5.

Small Study Groups did


better than study single

Study Skills

Anything that
Progress tracked by
competes
with your study
quizzes
and test
Pay attention to what
For
attention is
instructor
stress your
in class
Saying it aloud or writing
sucking
outline help to grass
better
Away
your
power
to
learn
Group and remember

1. Pay attention in class


2. Take good notes
3. Keep a organized note book for each
subject
4. Ask questions
5. Review, Review and Review
6. Plan a definite time and place for
study each day
7. Study for a while and take break
8. Dont cram for hours the night before
test
9. Study regularly a lit bit every day

Firm Partner and Partnership


Firm
: S 2[23]
Limited
Liability
Partnership
:
Partnership
: Partner

Partnership

Meaning As assigned
Firm
shall
have
An association of two
Meaning assigned
or more
persons
in Indian
Partner
Ship
the
LLP meaning
is a body CorporateAct
under
Act 2008 as per act and
1932 LLP
and shall
There should be an include:
agreement
assigned
to
it
in
include LLP
LLP has a separate legal entity
the
Indian to carry
on some business or profession
Agreement
Minor
Perpetual succession
admitted
Actto be carried
Partnership
The
business
on Act
by
all or by any one of
to the benefits
of the
Not covered by Indian Partnership
1932
partnership
1932 and
shallon behalf
acting
ofof
all Incorporation
and for the Document
benefit of with
all the
them
Incorporated by registration
include
as
registraraofLLP
the
in which
office of the
Agreement
tostate
share
profit the
andregistered
loss of business
orLLP is
defined
situated in the
profession
act 2008
LLP
Liability
of partner is limited
Corporate Taxation and Management

Firm /LLP fulfills conditions of S184


Treatment if S 184 is not fulfilled S185
Submitted Partnership deed
Shall be assessed in the same manner
Duly signed by partners
It is the joint and as well
as the
Except
Submitted along with first
several
liability
of
all
partners
1.
Not allowed to deduct remuneration as
return
allowed u/s 40 b
theinPY
orsharing
in case of death of
during
Any change
profit
2. Full amount of interest on capital paid
ratio then
revised return
a partner
then by legal
to partners is disallowed
Firm should not have been
3. The
amount of remuneration and
Representative
to
pay
the
amount
assessed to tax U/S 144 best
interest shall not be added in the
judgement
assessment
of tax and
any interest/ individual
penalty
income of partners

Pay Tax
same manner as per S184
under all provisions of4. the
act
Corporate Taxation and Management

Book Profit
The profit calculated after taking into
account all provisions provided in sections
28 to 44D
1.

Find out the profit as per P/L Account

2.

[-]Deduct all other incomes credited to P/L


A/c but to be treated under other heads of
accounts

3.

Add all payments or remuneration like


salary, commission etc. given to partners if
already debited to P/L account

4.

Add interest on capital given to all partners


in excess of 12%
Corporate Taxation and Management

Examination

Limits on payment of remuneration


to Working Partners Ex

Book

Profit
Rs 30,000
-30,000
Rs
Remuneration
to Partner
Partner Rs
Rs 1,80,000
1,80,000
Remuneration to
Book
Book Profit
Profit

am

in
a

tio
n

Rs
Rs -30,000
30,000
Rs
Rs-1,50,000
1,50,000
Rs[-1.80,000]
[-1.20,000]
Rs

Disallowed
Disallowed
Book
Book Loss
Loss
Dis
Dis allowed
allowed ::
Remuneration
Remunerationto
toPartner
Partner

Rs1,80,000
1,80,000oror
Rs
90%
is is
higher
90% of
of 30000
30000or
orstatutory
statutoryLimit
LimitRs
Rs1,50,000
1,50,000whichever
whichever
higher
Corporate Taxation and Management

Book profit means


A.
B.
C.

The net profit as shown in P/L


Account for PY
Computed as per S 28- 44
After adding back the full amount
of remuneration given to
partners as referred in the limit
Corporate Taxation and Management

Computation of Total Income of Firm /LLP

Income computed head wise. No


Salary Income
Can not have self occupied house.
Income from let out house computed
under head house property

Sec

Description

80G

Donations

80GG
A

Contributions to certain fund

80
GGC

Donation to Politics
Infra projects

Profit and gain

80IA

Capital Gain but with no exemption


u/s 54,54B and 54F

80IAB Setting up Special Eco Zones


80IB

New Industrial Undertaking

Income from other sources

80IC

Backward area

Carry forward and set off losses done


in the same manner

80ID

Setting up hotel or convention


center

80IE

Undertaking in North East

80JJA

Bio Waste

Corporate Taxation and Management

Long Term
capital gain
20%

Short Term
capital gain on
securities
covered under
STT 15%

Flat Tax rate of


30% with no
exemption limit

Education Cess
3%
Lotteries
gambling
Crossword
puzzles, @30%
Corporate Taxation and Management

Surcharge
@10% if exceed
Rs 1 crore

Class- 6

Part 2
MODULE 1:
Assessment of Firms
Corporate Taxation and Management

Start Your Notes on


Notes to be
Think
a new
page in
brief and
about the
Rewrite the
should be the
matter.
central
section
class
notes
as
outcome of

Jot
What are
down
soon as
understanding
your
possible
after
the Note down key
reactions?
pointsMeaningful facts class
Any
keyemphasized by
Notes taken
Significant
details examples?
from various
points instructor
Any

5-R
Concept

Record
HOW
To
Take
Notes
Reasons for
doubts
Reduce
position
1
3 Recite
Reflect
5 Review
books should
contain source

Business Income and expenditure


1.

Illegal income for the purpose of income tax there


is no difference between illegal Vs legal incomeboth taxable.

2.

Illegal Expenditure disallowed

3.

Expenditure incurred in respect of exempted income


S14A no deduction shall be allowed in respect of
any expenditure incurred in relation to income which
does not form part of total income.

4.

Income from ultra virus activity beyond object


clause shall be taxable.

Corporate Taxation and Management

Proprietor salary,
Business Income and expenditure
interest to proprietor
5.

Notional expenditure not allowed.-

6.

Notional profit is not taxable

7.

Anticipated loss not allowed-.

8.

Revenue expenditure is allowed


and not capital expenditure unless
specifically mentioned

9.

Profit prior to incorporation shall be


taxable as usual

10. Income

from all business and


profession to be taken

11. Business

must be carried on the PY

Corporate Taxation and Management

Proprietor withdraws
goods costing Rs 100000for personal use at agreed
value of 1,40,000.The
Market Value is 1,50,000.
The profit of Rs 40000 is
notional income hence not
taxable

Hence provision or
reserves shall not be
allowed as expenditure

Incomes Taxable Under the Head Profits and Gains of


Business or Profession

Profession carried on by
assesse
Expenses to be allowed from
deduction from gross receipt
provided incurred in the PY
General rule the expenses
incurred for earning that income
is allowed as deduction
Corporate Taxation and Management

Expenses allowed
7. Contribution to PF [43B]
1.
2.

Rent rate, Taxes, land Repairs,


Insurance
Repairs Insurance of Plant,
machinery and furniture

3.

Depreciation

4.

Scientific Research

5.

Bad debts

6.

Any amount paid by way of


bonus , commission for services
rendered by employees[43B]

8. Contribution to approved
Gratuity Fund
9. Animals used for business other
than stock in trade
10.Any bonafide Revenue
expenditure for business 100%
allowed in the year incurred and
Capital Expenditure in 5
years[ 1/5 in each PY]
11.Security transaction Tax if
income from taxable securities
computed under the head
Income

Corporate Taxation and Management

Disallowances of unpaid
statutory and other
liabilities [43B]

Any sum payable


by way of tax,
duty , cess under
any law

No deduction
is allowed in
respect of
Deductions are
interest ,
allowed only on
Any sum payable Bonus ,
royalty or fees
payment basis for
by way Leave
for technical
commission
the following
encashment
to employees Services or
even though the
other sums
Books of
payable to any

Any
sum
payable
Any sum payable by
accounts
person outside
Interest
on
loan
way
of
contribution
maintained on
India or in
to
PF
or
Welfare
of
or
advances
to
Mercantile
India to a Non
employees
Banks
or
FI
system
resident on
The expenditure should not be capital in Nature, Not personal, incurred
which TDS is
in the PY, Incurred for the business, and expended wholly for the
not deducted
business and specifically not disallowed
Corporate Taxation and Management

Interest and remuneration to


Partners of PFAS[ Partnership firm
assessed as such]

On the first Rs 3,00,000 of


booked profit

Rs 1,50,000 or 90% of
book profit whichever is
more

On the balance

60% Corporate
of book
profit
Taxation
and Management

Book profit will include:


All provisions of 30 to 44DA
Interest paid to partners to
the extend allowed[S40b]
Brought forward
unabsorbed depreciation

Book profit will not


include:
Other heads like house
property, capital gains,
Other Income
Salary to partner
Brought forward losses
from gross total income
Interest to partners
Must be authorized in the
deed
Pertained to the PY
Rate of interest max 12%

Class- 7,8,9
Part 2
MODULE 1:
Computation of taxable income and tax
liability according to Income Tax
Provisions
Corporate Taxation and Management

Rememberi
ng

Registrati
on
Rehearsal
Recall

New
facts

Retentio
n
NoRehearsal

Short Term
Memory

Long Term
Memory

Ref:Kevin Paul ;Study Smarter not harder ; Jaico Publishing House


pp57 Fig 1 Short term Memory Transfer

Forgettin
g

Remember

Ref:Kevin Paul ;Study


Smarter not harder ;
Jaico Publishing House

Computational Format
Particulars
Net profit as per accounting P/L
Add Expenditure dis allowed but debited to accounting P/L
Capital Expenditure
Personal Expenditure
Advertisement with political Party
Any Provision / Reserve
Add income taxable under the head but not credited to accounting P/L
Sales proceeds of assets for deduction has been claimed u/s 35 AD
less income taxable but credited to P/L
Dividend U/S 10[34]
Income from units of UTI U/S 10[35]
less income taxable but credited to P/L
Rent from house property
Interest on income tax refund
Less expenditure allowed but not debited to P/L
Asset purchased for specified business35 AD
Adjustment to stock
Add closing under valued / opening over valued
Less closing over valued / opening under valued
Profit and gain from business
Corporate Taxation and Management

Amount

Amount
xxxxx

xxxx
xxxx
xxxx
xxxx

xxxx
xxxx
xxxx
xxxx

xxxx
xxxx

xxxx

xxxx
xxxx

xxxxx

xxxxx

xxxxx

xxxxx
xxxxxx

Computation of taxable Income


tax liability is higher of
ANS Vijay,Tharun Raj and Divya Mittal; Only this much Module-3 KW Publishers Limited New
Delhi
Tax Liability under normal provisions
Tax Liability Calculated @ rate of 15% on book profit
Step1: Compute the taxable income
Compute Book Profit as per S 115 JB
under Normal provisions
Calculate Minimum alternate Tax as Follows
Step2: Compute Tax payable
Tax 30% in case of Domestic
XXX
company and 40% in case of
foreign Company
Add Surcharge if net income XXX
exceeds Rs 1 crore @ 5% and
2% incase of foreign
company
Add Education Cess [2+1] %
XXX

MAT @ 18.5 % on book profit

XXX

Add Surcharge if net income exceeds


Rs 1 crore @ 5% and 2% incase of
foreign company

XXX

Add Education Cess [2+1] %

XXX

Minimum Alternate Tax payable

XXX

Less Tax Rebate or tax credit


S 86,90,90A and 91

XXX

Net Tax payable

XXX Corporate Taxation and Management

Calculate the firms income under the


profit and gain for the assessment year
2014-15 from information given below:

Net P/L after debiting


P & L after the
following
Salary A
Salary B
Commission to A

Rs !,20,00
0
1,60,0
00

1,60,0
00

Salary B

1,40,0
00

1,40,0
00

Commission to A

1,20,0
00

1,20,0
00
30,000

The payment to A and B who are working


Toas
B partners made as per15.000
the agreement
filed with return for AY 2014-15

In admissible Expenses
Salary A

Interest On Capital @15%


To A

Rs
1,20,00
0

Net P/L after debiting


P & L after the
following

Also compute the individual income of


A&B under the head P&G

Interest Excess of
12%[45000x3/100]

9,000

4,29,000

Book Profit

5,49,00
0
Remuneration Allowed as per

Less Remuneration
40[b]
Allowed
Salary + Commission
Taxable Business Profits
90% book
profit{549000x.9=}

4,20,000

4,94,
000

4,20,0
4,20,000
00
1,29,000
Lower

1.

A,B.C are partners in a firm share P/L in the proportion 3:2:1

2.

Profit as per the P/L Account for year ended March 2014 is Rs
1,17,360 after debiting inter-alia the following amounts:
Rs

Salary paid to C
Rent paid to A
for the portion
owned
Interest @10%
A
B
C
Commission on
sale to B

4,000
9,000

1000
2000
3000
1000

Rs

Expense on
current repairs
agreement does
not contain
provision

1000

Donation
5,000
Net Profit
10,4000
Includes interest
on government
security
Corporate Taxation and Management

The deed
was
submitted
along with
return and
provides
salary to C
Rs 4000
and
interest
@10% for
capital to

Firms Profit
Profit from other sources : Interest on
Income
Government Security
In admissible
Expenses
Gross
Total Income
Salary
C
Less
Deduction
under 80 G Donation Rs 50% of
5000
Commission
Total
Income to
of Bthe firm
Expenses on Repairs
Tax @ 30% of 1,21,860
Donation
Education Cess @3% of 36558
Tax Payable rounded to nearest 0 rupees
Less income not taxable under this head

Rs
Rs
Rs 1,13,960
Rs
1,17,3
10,400
60
1,24,360
4,00 2,500
0
1,00
01,21,8
60
1,00
36,5 0
58
5,00 11,00
0
1,09 0 37,65
7
1,28,3
5
60
37,66
10,40
00

Individual Income of Partners


I.

Share of Income from this firm will not be included in the


individual income of partners as it is exempted u/s 10[2A]

II.

Salary and commission received by A & B will be taxable income


under Profit & Gain .

III.

Remuneration taxable in the hands of partners under the head


Profit and Gain

Partner A

Rs

Salary

1,60,0
00

Commission

1,20,0
00

Interest
@12%[30,000x12/15

24,000

Partner A
Salary
Interest
@12%[30,000x12/1
5

Rs
1,40,00
0
24,000

Profit and Loss Account of a partnership firm


for the year Ended march 2013 is as follows.

Particulars
Cost of goods
Sold
Remuneration to
partners
Interest to
partners @20%
pa
Municipal Taxes
of house
property
Other expenses
Net profit

Amount Particulars
10,00,00 Sales
0
1,45,000 Rent to house
property
40,000 Dividend

Amount
15,00,000
60,000
1,70,000

25,000

2,40,000
2,80,000
17,30,00
0

17,30,000

Other information
a. Out of other
expenses Rs 18,400
is not deductible
under S 36,37[1]
and 43 B
th January
b. On 15th
2013, the firm pays
an outstanding sales
tax liability of Rs
54,700 for the
previous year 200809 and not debited

l
o
S

t
u

n
io

Profit and Gains of business or


profession
Profit
Add Expenditure disallowed but
debited in P&L
Remuneration to Partner
Interest to partner excess of 12%
[40000*8/20]
Municipal Tax of house property
Other expenditure dis-allowed

Less Expenditure allowed but not


debited in P&L
Outstanding Sales Tax paid
Less income taxable under other
head- Rent of house property
Less income not taxable but credited
in P&L- Dividend Exempted [ 10(34)]
Book profit
Remuneration paid to partner
Minimum of

Amount

Amount

2,80,000

1,45,000
16,000

25,000
18,400

2,04,400
4,84,400

54,700
60,000

1,70,000

-284700

1,99,700

Company
Dr R Soundararajan

Corporate Taxation and Management

Mention any four exempted


income[2]

Agricultural Income

Share of income from HUF

Share of income of a partner from the firm

Refund from RPF

What is S10 of IT Act[2]


Long list of Income exempt totally
from tax and not included in GTI
05:02:22 AM

tax compliance and management

79

What is agricultural income? [2]


What are the basic operations to be carried out to
call as Agricultural Income[6]

Now income earned from carrying nursery operations


is also considered as agricultural income and hence exempt from income tax

Conditions on
agriculture income

Certain Income as
Agricultural Income

Certain
income
which is
not
treated
as
Agricult
ural
Income;

(a) Income from poultry farming.


(b) Income from bee hiving.
(c) Income from sale of spontaneously
grown trees.
(d) Income from dairy farming.
(e) Purchase of standing crop.
(f) Dividend paid by a company out of
its agriculture income.
(g) Income of salt produced by flooding
the land with sea water.
(h) Royalty income from mines.
(i)Income from butter and cheese
making.
(j)Receipts from TV serial shooting in
farm house is not agriculture income.

Mr Amal purchased a land on which trees


grew wild during the PY and sold timber for
Rs 10000 [2]

To treat it agricultural income


it is necessary that some
operation have been applied.
Hence shall not be considered
as agricultural income.
Taxable under income from
other sources

Practicals [8]

Mr Tony has rubber, tea


and coffee. He derives
income from them. He
has also nursery where he
grows plants and sell. He
furnishes the following
particulars.
Manufacture Rubber
Rs 50000

Manufacture coffee grown


and cured Rs 3,50,000
Manufacture Tea Rs
7,00,000
Sale of plants from
Nursery Rs 1,00,000

Particulars

Agricultural

Business

Rubber as per
Rule 7A
65% Agriculture

3,25,000

35% Business

1,75,000

Coffee as Per
rule 7B
75% agriculture

2,62,500

25% Business

87,500

Teas as per Rule


8
60% agriculture

4,20,000

40% business
Sale of plants
from nursery
Total

2,80,000
1,00,000
11,07,500

5.42,500

From the following compute the income from P&GB

Particulars
Amount
Particulars Amount

Opening stock
400000
Sales
16200000
Purchases
5200000 Closing stock
480000
Income from
Salaries
800000 House property
80000
Rent & Rates and
Indian company
taxes
120000
Dividend
9000
Legal Charges
40000

Misc Expenses
20000

provision for bad


debts
30000

Provision for gratuity


20000

provision for Itax


40000

salary to Mrs Ronie


36000

Depreciation
40000

Net Profit
10023000

Amoun
Particulars
t
Amount
16200 1,00,23,0
Net profitsales
as per P&L 000 00
Add
48000 1668000
Provision
for bad
0
0
Add Closing
stockdebts 30,000
Provision for gratuity
20,000
52000
Provision
I Tax
40,000
00
Less
expendituresfor
as per
IT Act
Dep as per account
40,000
80000 1,30,000
Less

0
Opening
stock
12000Dep Purchases
as per I Tax
60,000
0
Dividend
-9,000
40000
Salaries
Income
from House
16769
167690
20000Rent & Rates and taxes
property
80,000 -1,49,000
000
00
40000

Legal Charges

Additional Information Depreciation allowwed as per IT Act Rs


20000
Misc Expenses
60000
100,04
36000 6676000
salary to Mrs Ronie
,000

100040
Indirect method

Corporate Taxation and Management

00

Some clarity on S 30 and 31


1.

Current repairs are allowed. Capital


repairs not allowed

2.

Building should be used for business by


assesse

3.

Notional rent any rent paid to proprietor


is not allowed but rent paid to partner
allowed

4.

Taxes and insurance- allowed in respect


of land revenue, municipal tax and
insurance of premises

5.

Repairs and insurance of plant and


machinery and furniture s31- allowedMust be used for business and used in PY

6.

Only current repairs are allowed.

1.

Current repairs are


incurred irrespective of
amount for maintain
and preserve the asset
and which does not result
in fresh or new advantage

2.

Expenditure on repairs of
rental premises and
plumbing work shall not
be allowed under S 30

Corporate Taxation and Management

From the following compute the income from P&GB


Particulars
Amount
Particulars
Amount
Opening stock
Purchases
Salaries
Telephone
Electricity
Repair
Municipal taxes for
office

2,00,00
1620000
0
0
Sales
31,00,0
00
480000
Closing stock
5,00,00 Income from House
0
80000
property
1,00,00
0 Indian company Dividend
9000
60,000

80,000

20,000
1,50,00
0
Car expenses
Provision for bad debts 30,000
40,000
Dep on car
Securities transaction
Tax
Agricultural expenditure
Net profit

10,000
50,000
124,70,
000
167,69,
000

167,69,0
00

Additional Information- Repairs include replacement of petrol engine with diesel


Corporate Taxation and Management
engine for Rs 20000

Net profit as per P&L


Add
+Agricultural expenditure
+Provisions for bad debt
+Dep on car [ 40% of 40,000]
+Car Expenses [ 40% of
1,50,000]
+Electricity[40% of 60,000]
+Telephone [1,00000 x 50%]

1,24,70,
000

50,000
30,000
16,000
60,000
24,000
50,000

Less

-Income from house property S 22 2,00,000


-Dividend from Foreign Company -10,000
-Opening stock under
values[ 2,00,000 x 20/80]
-Closing stock over
values[ 5,00,000x 25/125]
Profit and gain from business

-50,000
1,00,000
1,23,40,
000

Condition for depreciation

Conditions for Claiming Depreciation

1. Asset must be owned by the assesse.

2. Used for business or profession

3. Used during the relevant previous year

4. Such asset should be eligible for


depreciation
Corporate Taxation and Management

Computation of Depreciation
(Block of Assets Method)

Additional Depreciation

It is allowed in addition to normal depreciation. It is given only to


manufacturers on Plant and Machinery, excluding the following 5 items:

a. Road vehicles b. Aircraft/ships

c. Office appliances

e. Assets on which 100% depreciation is eligible

d. Second hand machines

The rate of additional depreciation

20% of the cost

If put to use for less than 180 days, then 10% of the
Corporate Taxation and Management

cost

From the following figures you are required to ascertain the depreciation
admissible

Particulars

Machine
ry

Building

Opening WDV

Rs
5,00,000

Rs 20,00,000

Additions during the


year

Rs
6,00,000

NIL

Sale during the year

Rs
12,00,000

Rs 4,00,000

15%

10%

Rate of depreciation

Particulars Building

Amount

Opening WDV

Rs
20,00,000

Add Additions

------------

Less Money receivable on sale

-Rs
4,00,000

Closing WDV
Depreciation @10%

Rs
16,00,000

Particulars Machinery
Opening WDV

Rs
5,00,000

Add Additions

Rs
6,00,000

Less Money receivable on sale

-Rs
12,00,000

Closing WDV

Rs1,00,00
0

-Rs Taxation and Management


Corporate

1,60,000

Amount

From the following profit & Loss Account of Ronie for the year ended 31-3- 2013, Compute
his gross total income for the assessment year 2013-14.
Particulars
Opening Stock
Purchases
Salaries
Rent, Rates and Taxes
Legal Charges
Miscellaneous Expenditure
Provision for bad debts
Provision for gratuity
Provision for income tax
Salary to Mrs Ronie
Depreciation
Net Profit

Amount
4,00,000
1,30,00,000
8,00,000

Particulars
Sales
Closing stock
Income from
Property

Amount
1,40,00,000
4,80,000
House
80,000

1,20,000 Dividend from Indian


company
40,000
20,000
30,000
20,000
40,000
36,000
40,000
23,000
1,45,69,000

9,000

1,45,69,000

Additional Information:
Purchase include Rs 1,00,000 paid in cash to cultivator for purchase of an agriculture
produce
Purchase also include Rs 1,00,000 paid by way of compensation to supplier as the
assesse was not able to take the delivery of goods due to lack of storage space and
finance.
Opening stock was overvalued by 25% and closing stock was undervalued by 25%
Salary includes Rs 15000 paid as the customary bonus on the occasion of Diwali over
and above the bonus payable under payment of bonus Act 1956.
Rent Rate and taxes include Rs 10,000 on account of disputed ST demand, Rs 3000 on
account of municipal taxes, for property let out. It also includes Rs 5000 as Customs duty
penalty.

.An amount of Rs 20,000 from a customer was written off from the provision for bad
debts.

An employee retired on 28-3-13. Gratuity payable to him was Rs 20,000. A provision was
created for the same this year and was paid on 2-4-13.

a.

Mrs Ronie is a law graduate and actively working in the assessees firm.

Particulars
Profits and Gains of business or Profession
Add Expenditure disallowed but debited in P/L
Disputed Sales Tax
Municipal Tax
Customs Penalty
Provision for bad debts
Provision for Income Tax

Less Expenditure allowed but not debited in P/L A/c Bad Debts
Less Income not taxable but credited
Dividend received from companies
Less Income taxable under other heads but credited to P/L account- income from house
property

Adjustment of stock
Add under valuation of Closing Stock
Add Over Valuation of opening Stock

Income from Housing Property


Gross Annual Value [ Actual Rent Received]
Less Municipal Tax
Net Annual Value
Less standard Deduction Under S 24[a],30% of NAV
Income from other sources
Dividend [Exempt U/s 10(34)]

Amount

10,000
3,000
5,000
30,000
40,000

20,000
9,000

23,000

88,000
1,11,000

80,000

1,09,000

1,60,000

2,000

80,000

80,000
3,000
77,000
23,100

2,40,000
2,42,000

53,900

Nil

Following are the particulars of


Income of Mrs Seetha for the year
2007-08
Particulars

Rs

Dividend received from Indian


company

8,950

Lottery Rs 68,500 and tax deducted


at source Rs 31,500

68,50
0

Winning from card games

20,00
0

Particulars

Rs

Dividend received from


Indian company exempt
10[34]

--------

Interest received on
government securities
Less collection charges @2%

10,00
0
200

Winning from card games

20,000

Lottery Rs 68,500 and tax


deducted at source Rs
31,500[ 68,500 + 31,500]

1,00,00
0

Interest received on government


securities

10,00
0

Family pension

48,00
0

Family pension

48,00
0

Interest paid on amount borrowed


for purchasing shares

3,000

Less 1/3 of 48,000 or Rs


15000 whichever is less .

15,00
0

Collection charges for government


securities @ 2%
Purchased lottery tickets for Rs 100

9,800

Income from other sources

33,000

1,72,80
0

From the following income of Mr lingaraj for


the year ended 31-03-08 compute the income
from other sources

Rs

Director fee

10,000
3,000

Income from undisclosed


source

12,000

Winnings from lotteries[ net]

27,760

Royalty from book


Income from lectures delivered

Director fee
Interest on bank

Particulars
Interest on bank

Particulars

8000
5,000

Winnings from lotteries[ net]


Gross = Rs 27,760 x
100/69.1=40,174

40,174

Royalty from book = 8000


Less typing charges= 1000
Income from lectures delivered
Interest on loan given to relative

Interest on tax free


debenture[net]

3592

Dividend from cooperative


society

8000

Interest on tax free


debenture[net]
100/100-R = 3592/ 100-10.30=
3592/89.70
Dividend from cooperative society

500

3,000
12,000

7000

HE PAID RS 20 FOR COLLECTING DIVIDEND


Interest
from
central
AND RS 1000
FOR
TYPING MANUSCRIPT2,200
OF
Government
securities
THE BOOK

10,000

Income from undisclosed source

Interest on loan given to


relative

Interest from Post office SB a/c

Rs

Interest from Post office SB a/c


Exempted

7000
5,000
7000
4,004

8000
-----

Class- 10
1o
Part 2
MODULE 1: Book Profits

Corporate Taxation and Management

20% of
what
you
READ
Only

30% of
what
you
HEAR
only

40% of
what you
SEE only

50% of
what
you SAY
Only

60%
What
you DO
only

90%
Of what You
learn with
many
sensory
learning
activities
READ
HEAR
SEE
SAY
DO

Ref:Kevin Paul ;Study Smarter not harder ; Jaico Publishing House pp57 Fig 3 Remembering Graph

Remember

Class- 11
Part 2
MODULE 1:
Minimum Alternate Tax under section 115JB,
Tax Credit under MAT, Dividend Distribution
Tax u/s 115-0.
Corporate Taxation and Management

Particulars

Amount Rs Amount Rs

Alternate Minimum Tax

As per the provisions of Act

34 lacs

Total Income of the LLP as assessed by AO


Particulars Rate of tax including
Amount cess
Particulars

30.9 %

Amoun
t of
Total Income
as per IT Act
XXXXX
In order
to preserve
tax
base vis profit linked deductions, provisions
Tax Liability
10,50,600
as assessed by AO
Total
Income
of LLP
asintroduced
per
40
levy
of
A
lternate
M
inimum
T
ax
{
AMT}
have
been
w.e.f
AY
As
per
new
provisions
U/s
115
J
being
18.5%
on
adjusted
income
Add Deductions claimed
XXXXX Books of accounts
lakhs
2012-13
under Chapter
VI A of LLP as assessed by AO
Total Income
34 lacs
Total Income
per
Applicable
to all Corporate
assesse
. Earlierofit LLP
was as
applicable
to only 30
Add Deductions
claimed
XXXXX
Add Deductions U/s 80IB Return
Claimed
18 lacs
Lakhs
under S LLP
10 AA if any
Add
Deductions U/sXXXXX
10 AATotal
claimed
15
lacs
Income
LLP
as
per
IT
Act are not 34
Adjusted
total Income
Exceptions:
HUF AOP, BOI or Artificial or Judicial persons [AJP]
as
assessed
by
AOnot exceed
Lakhs
Total
Income
67As
lacs
liable toAdjusted
AMT if their
adjusted
total
income
does
Rs 20 Lacs
Particulars
As Claimed
allowed
by
Tax
Tax Payable:
rate 18.5%
+ education
cess i.e.by assesse19.055%
AO
Higher
of
Tax payable
Alternate
Minimum
67 lacs
* 19.055%
under
normal
provisions
of IT Act
Deductions
u/s
80
IB Tax[
Rs 18 12,76,685
lacs
Rs12,76,685
16 lacs
Tax
Liability
being higher
of
Deductions
under
10AA
Or 18.5%
of adjusted
total income

10,50,600

Rs 15 lacs

Corporate Taxation and Management

Rs12,76,685
13 lacs

Rao Ltd a domestic ltd company provides the following P & L Account for 1. Additional Information:
computation of tax liability for AY 2015-16
Purchase includes a bill of
Amount
Amount
Rs 60000 paid in cash.

Rs

Rs

2. Gen Expenses include Rs


Purchase
1875000
Sales
7525000
15000 as interest on loan
Direct wages
845000
Closing Stock
110000
taken from schedule bank.
Freight
12500

The interest not paid.


Gross profit
4902500

As per As per
Salaries
850000
Gross Profit
4902500
IT Act Books
General expenses 435000
Dividends

of a/c
Sales Expenses
215000

Director
B/F Loss
2.80,0 1,40,0
Remuneration
822000

00
00
Income Tax
180000

Un
1,70,0 50,000
Penalty Excise
10000

absorbed
00
Proposed Dividend 320000

Depreciati
Provisions for
on
losses of
subsidiary
Company
200000

Net Profit
1888000

4920000

4920000
Corporate Taxation and Management

Calculation
as per
Calculation
MATAct
Net Profit as per P&L

Net Profit as per P&L


AddAdd
Disallowed
itemsitems
already
Disallowed
debited
in P&L
already
debited
in P&L
Purchase by Cash Rs 60000 @
Income
100% Tax
Gen
Expensesfor
O/sLosses
Interest
Provisions

Proposed
Dividend
Income
Tax
Penalty Exempt]
Less Dividend[
Less Un absorbed
Proposed Dividend
depreciation[1,40,000]
or
losses[50,000] whichever
less
Provisions
for Losses

less Income taxable under


Taxable
differentIncome
head

18,88,0 Particulars
18,88,0
Particulars

00

00

1,80,000
60,000

Taxable
TaxableIncome
Income

Tax@
@30%
18.5%
Tax

15,000
2,00,000
1,80,00
AddSurcharge
Surcharge
3,20,000 25,88,0 Add
00
0
Add
AddCess
Cess2%
2%Education
EducationCess
Cess
10,000
Add
17,500
AddSHE
SHETax
Tax1%
1%
3,20,00
Total
TotalTax
Tax
0

25,20,5
2,00,00 7,85,00
50000
00
0
0
Tax as per IT Act
Tax as Per MAT
26,73,0

00
Higher of
25,20,5
00

26,

6,81,500

Amount
Amount
Rs
Rs
22,05,5
25,20,5
00
00
6,61,65
4,66,29
03
NIL
NIL
13,233
9,326
6,617
4.663
6,81,50
4,80,28
02

= 6,81,500
= 4,80,282

these

References
1.

ANS Vijay,Tharun Raj and Divya Mittal; Only this much Module-3 KW
Publishers Limited New Delhi

2.

Singhania, Vinod, and Singhania, Kapil, "Direct Taxes - Law and practice",
Taxmann.

3.

Ahuja, Girish and Gupta, Ravi, "Direct Taxes - Law and Practice", Bharat
Publications.

4.

Manoharan, T. N and Hari, G.R., "Direct Tax Laws", Snow White Publications.

5.

Sodhani, Vineet, "Indirect Taxes", Taxmann Publications.

6.

Hiregange, Jain and Nayak, "Student's Handbook on Indirect Taxes", Puliani


and Puliani.

7.

VP Gaur,Rajeev Puri,Joy Dhingra , Business Taxation II Kalyani Publishers


Ludhiyana
Corporate Taxation and Management

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