MBA - III Semester

Sub: Corporate Tax Planning

Paper Code: MS-223(New Course)

Time: three Hours Max. Marks: 60
Attempt any five questions. Each question carries equal marks. Ques. 1 Explain the following with suitable examples: (i) Difference between tax planning and tax management, (ii) Previous year according to Sec. 2(7) of Income tax Act,, (iii) Agricultural Income, (iv) Residential status of a company. (4*3) Ques. 2(a) Explain the provisions of TDS for any five Incomes. (b) Explain the difference between tax avoidance and tax evasion. (6+6) Ques. 3 (a) X (28 years) is resident and ordinarily resident in India. His income is Rs 8,96,000 from a business in India and Rs 1,92,000 from a business in a foreign country with whom India has an ADT agreement. According to the ADT agreement, income is taxable in the country in which it is earned and not in the other country. However, in the other country such income can be included for computation of tax rate. According to the tax laws of the foreign country, business income of Rs 1,92,000 is taxable at 23%. During the previous year, X has deposited Rs 42,000 in his PPF account (out of which Rs 10,000 is deposited out of foreign income). He has also received an interest of Rs 32,000 on government securities. (b) Briefly explain the rules regarding filing of return and assessment of Income. (8+4) Ques. 4. The projected profit and loss accounts of ABC ltd. and XYZ Ltd (under the same management) for the year 2010-1011 are given below: ABC Ltd. and XYZ Ltd. (Rs. 000) Particulars ABC XYZ Particulars ABC XYZ Cost of goods sold 4500 6100 Sales 6500 8600 Dep.(15.3% on 1000) 153 Profit on sale of a plot 120 Dep.(13.91% on Rs.1430) 199 of land (long term capital Other expenses 200 gain u/s 48) Net Profit 1647 2421 Total 6500 8720 Total 6500 8720 ABC Ltd. has set up an industrial undertaking in a notified industrial park and qualified for 100% deduction u/s 80-IA. Written down value of plant and machinery for income tax purpose for ABC Ltd. is Rs. 12,50,000 and XYZ Ltd. is Rs. 18,76,670.

Compute total tax liability of both the firms and advice some tax planning to reduce the over all tax liability. (12) Ques. 5(a) Briefly explain the rules of advance tax payment by companies. (b) ABC Ltd. is a manufacturing company. On April, 2010, it owns Plant A and Plant B(rate of depreciation 15%, depreciated value of block Rs. 2,40,000). Plant C (rate of depreciation 20%) is purchased on June10, 2010 for Rs. 60,000 and put to use immediately. Fond out the tax consequences in the following situations:(i) Plant B is destroyed by fire on Jan. 25, 2011. Insurance Company paid the compensation of Rs. 10,000 on Feb. 10, 2011. (ii) If Insurance Company paid the compensation of Rs. 3,70,000 on Feb. 10, 2011. (iii) Plant A, B and C are destroyed by fire on Jan. 25, 2011. Insurance Company paid the compensation of Rs. 20,000 on Feb. 10, 2011. (iv) If Insurance Company paid the compensation of Rs. 4,00,000 on Feb. 10, 2011. (6+6) Ques. 6 X is offered employment in A ltd. Total cost to company (CTC) will be Rs 18,00,000.if the entire amount is received by cheque without any planning , his taxable income will be Rs 18,00,000 and tax liability will be Rs 4,03,760. The effective rate of tax comes to 22.43% (i.e. 4,03,760 / 18,00,000). If Mr. X is paid Rs 18,00,000 by way of salary , allowances and perquisites as followsRs Basic salary 6,00,000 Education allowance for children 2,400 Transport allowance 9,600 Helper allowance 36,000 Uniform allowance 24,000 Research allowance 30,000 Rent free house 6,00,000 Car with driver for official and private purposes but cannot be used for 2,22,000 commuting between office and residence (car: Rs 1,50,000 plus driver : Rs 72,000) Reimbursement of medical expenditure 15,000 Mediclaim insurance premium 28,000 Leave travel concession (twice in a block of 4 years : projected expenditure of one year is given) 34,000 Telephone 60,000 Gift-in-kind 40,000 Free lunch in office (Rs 90 per lunch for 300 working days) 27,000 Employers contribution towards PF (12% of 6,00,000) 72,000s Cost to company (CTC) 18,00,000 Calculate the tax liability of the employee and compare the effective rate of tax with the earlier situation. (12) Ques. 7 Write short notes on the following; (i) Avoidance of Double taxation benefits, (ii) Advance Rulings,

(iii)

Any ten Penalties under Income tax Act, 1961.

(4*3)

Ques. 8: X own a block of assets consisting of plants A and B, depreciation rate 15 percent .On April 1 2010, depreciated value of the block is Rs 10,40,000 . On July 7, 2010, the block of assets is transferred by X to Y for Rs 30,70,000. Find out the tax consequences under the following situations1) X is amalgamating company and Y, being an Indian company, is the amalgamated company and the block of assets is transferred by X to Y in a scheme of amalgamation. Y does not own any other asset. 2) Suppose in (1) (supra), Y is a foreign company. 3) Suppose in (1), Y owns a block of assets (consisting of plant C & D, depreciation rate 15 %) on April 1 2010. Depreciated value of the block of asset being Rs 6,40,000. Y purchases plant E, an office appliance (rate of depreciation 15 % ) on March 10 2010 for Rs 2,90,000. It is put to use on the same day. 4) X is a partnership firm. It is converted into Y Company. The conversion satisfies the conditions of section 47 (xiii).Y does not own any other asset. 5) X is a firm. The business of X is taken over by Y, a partner in the firm. On April 1, 2010, Y owns plants C & D (depreciation rate 15 %, depreciated value of the block is Rs 60,78,000 ). Y purchases plant E, an office appliance on December 5, 2010, (depreciation rate 15 %, actual cost Rs 36,000). It is put to use on the same day. On March 13, 2011 Y sells plant C for Rs. 26,40,000. (12)