TRICKY POINTS FROM ICAI MCQS & CASE SCENARIOS

PART- I
MCQ TRICKY POINTS

Pt Particulars
1 Dep on Motor Cars → 15% (30% in case of Hire)
If Purchased betw 23/08/19 - 31/03/20 → 30% (45% in case of Hire)

2 As per Section 54 → if your capital Gain is upto 2 Cr, you can take
exemption of 2 residential houses.

3 194HIJACR → (1) All Assessee ≠ Individual or HUF

(2) Ind / HUF whose Last Year T/o > 1Cr → Business
G/R > 50L → Profession
Section 194M is applicable when Aggregate Amount Paid > 50L. The
Limit of 50L is checked Payee-Wise.

4 Appeal to ITAT can be filed against order of CIT imposing penalty u/s
270A for under-reporting of Income.

5 Maturity proceeds of LIP is exempt u/s IO(10D) if

→ policy is taken between 01/04/03 to 31/03/2012
→ premium paid ≤ 20% of sum assured in a year
after 01/04/2013
→ premium paid ≤ 10% of sum assured & 15% in case of Divyang people

6 On Buyback, Domestic Co is required to pay tax @ 23.296% [i.e. 20+12%+4%] on

Distributed Income, being Buyback Price (-) Issue Price (including Premium). If the
Buy back took place on /after 1/10/2024 it shall be taxable in the hands of
shareholders u/s 2(22)(f) AS DEEMED DIVIDEND.

7 Sec 133A Power of Survey Sec 133B Power to Collect Info

Visit any place where BOA is Kept Visit Business Premise only
Visit Business Premise-Business Hr Visit during Business Hrs only
Other Premise- Aft Sunrise Bef Sunset
Can Impound for 15days Can NOT impound BOA

9.1
Pt Particulars
8 Amount not received till due date is calculated at 8% for computation of Income
u/s 44AD

9 Sec 80IB / 80IA/ 80IAB / 80IAC etc

Recd from Govt = Eligible for Deduction Not Eligible as Deduction
• Transport Subsidy • Duty Drawback
• Interest Subsidy
• Power Subsidy

10 As per Section 9 - Income deemed to accrue or arise in India

Includes Does not Include

Salary Payable by GOI to Any allowance and Perquisites paid
Citizen of India for or allowed by Govt to Indian
rendering services Citizen for rendering services
outside India outside India is EXEMPT

11 Equalisation levy u/s 165 is only leviable when payment is made for purpose of
Business & profession.

12 TDS on rent u/s 194-IB is deductible only if rent > 50,000

13 Section 194E & 115BBA → Referee, Umpire & Commentator are

not covered.

14 Advance Ruling can be taken by both Resident & Non- Resident.

15 If deduction u/s IOAA, 35AD & VI-A [80IA - 80RRB] is given in question then
always check applicability of AMT

16 Chapter VI-A deductions are not allowed against LTCG, LTCG u/s 112A, STCG
u/s 111A & special rates of Income Tax

9.2
Pt Particulars
17 When Capital Asset converted to Stock in Trade
For Section 54EC → 6 months are counted from the date of sale of
Stock in Trade

18 Threshold Limit for 194J has to be checked separately for

• Fees for Professional Service - 30,000
• FTS - 30,000
• Royalty - 30,000
• Non-Compete Fees - 30,000
Fees to Independent/ Non-Executive Director → NO Threshold Limit

19 Exemption from Sec 194N available only to APMC Commission agent,

Not to any assessee who buys Agricultural produce for Raw Material

20 Transfer of Bonds / GDR by one NR → another NR o/s India

Sec 47(viia) → Not a Transfer

21 For Income linked Deductions → 80-IA, IB, IAC etc. , deduction under chapter VI-
A will be allowed on enhanced income due to disallowance
of 40(a)(ia), 40A(3) & 43B [Refer circular Study Material]

22 Section 194-I → TDS is not deductible on returnable security deposit.

23 For 44AE, No. of Months is counted from Date of Purchase, not from Date of
Put to Use

24 If Immovable property is received as gift, it is taxable under IFOS if →

SDV > 50,000 of such property.
If more than one property is received → this limit will be checked for every
property.

25 Sec 115 BBA is applicable Non- Resident & non-citizen of India

9.3
Pt Particulars
26 Repayment of Loan in Cash = 24,000 → Disallowed u/s 269T
Principal = 19,000 Amount Considered while
Interest = 5,000 Checking Limit
Amount of Penalty u/s 271E = 19,000
Penalty u/s 271E = 100% of such Loan/ Deposit / Advance Repayment

27 If 2 Tonnage Tax companies amalgamate, the scheme is available to the

Amalgamated Co for longest unexpired period
Ex: A Ltd (+) B Ltd = C Ltd
6 yrs 8 yrs 8 yrs

28 Section 44BBB → Turnkey projects → Only available to Foreign Co.

29 2 Disallowances
• Sec 40(a)(ia) → Appeal to CIT(Appeals)
• Unexplained Investments → Sec 264 NOT possible → Total Merger
→ Only Sec 154 possible → Partial Merger

30 Section 115BAB → Municipal Tax and Standard Deduction is not

allowed u/s 115BAB from Rental Income under the head “Income from
House Property”
Section 115BAA → Sec 24 & Sec 57 allowed
Section 115BAB → Sec 24 & Sec 57 NOT Allowed

31 Section 10(4D) - Specified Fund → Capital Gains on Transfer of Shares

of Indian Company → Taxable

32 Sec 44AB Sec 44AD/44ADA

For 10 cr Limit, For 3cr/75 Lakhs Limit
5% of Total Reciepts/Payments 5% of Turnover/Gross
is checked. Reciepts is checked
Reciepts can be more than T/O
(5% se upar Cash/Bearer Cheque/Crossed (5% se upar Cash/Bearer Cheque/Crossed

Cheque me nahi hona chaiye) Cheque me nahi hona chaiye)

9.4
 PART- II
CASE SCENARIO TRICKY POINTS

Pt Particulars
1 Section 78- Share of Unabsorbed loss of retired partner can't be carried forward.
But this does not apply to Unabsorbed Depreciation

2 Section 269SS 269ST 269T

↓ 20,000 ↓ 2,00,000 ↑ 20,000
Penalties ← Sec 271D Sec 271DA Sec 27E

3 Partner's remuneration, Salary, Interest u/s 40(b) is allowed as Deduction while

computing income u/s 44AE but it is not allowed in case of 44AD/ 44ADA.

4 When Date of sale & Date of agreement of capital Asset is different, then SDV on
the date of agreement is taken if, any payment is done on that date through a/c
payee cheque, ECS mode etc.

5 Section 80JJAA Applicable → IF employee for ≥ 240 days (≥ 150 days for
Apparel, Footwear and Leather)
Salary > 25,000 → NO Deduction
Salary ≤ 25, 000 → Deduction Milega

6 In PY 24-25, No New Company/Co-op Society can not opt for 115BAB/BAE.

As the last date was 31.3.24. So in any question, 115BAB/BAE will only be
applicable if it was opted before 31.3.24 in PY 23-24, otherwise No Relevance

7 If in 194O, Amount is directly received by E-comm Participants from

Customers, On that amount also, ECO will deduct TDS u/s 194O.

8 Order of Assessment Under Reporting is when

143(1) ↓
143(3) Income as per Sec 143(3) > Income as per 143(1)
147 Income as per Sec 147 > Income as per 143(3)

9.5
Pt Particulars
9 Penalty u/s 270A → 50% of Tax → Under Reporting
→ 200% of Tax Misreporting

10 URI→ Ind/HUF→ ROI not filed = Income Assessed (-) Basic Exemption Limit

11 No Eq levy of the NR providing the specified service has a PE in India &

specified service is effectively connected with such PE

12 Sec 206C(1H) is applicable on Reciept i.e. Amount incl. GST

13 194Q is applicable on Amt Excl. GST, But on whole Amt of Advance Payment

14 Section 194Q → If Both 194Q & 206C(1H) applies

Means Buyer and Seller Both have Last Year T/o > 10 Crores
Then 194Q will apply.

→ 206C(1H) applicable on 3,10,000

→ 194Q applicable on 10,00,000

→ 194Q applicable on 25,37,000

Advance Payment

15 Only 1/5th of Voluntary retirement scheme payment is allowed as

deduction in the current year

Failure to report → International Transaction

→ Deemed to be International Transaction
→ Specified domestic Transaction
Considered as Misreporting of Income and penalty of 200% shall apply

If co. is engaged in any other business activity other than manufacturing,

eg. trading of F&0, then it is not eligible for opting Section 115BAB(not
relevant anymore)

9.6
Pt Particulars
16 MAT is not applicable to Foreign Co in following cases

Foreign Co is a resident of Foreign Co is a resident a country

country with which India has a with which India does not have
DTAA & such Foreign Co does DTAA & Foreign Co is not required
not have any PE in India. to seek Registration under any law.

17 If Income Tax rate is 10% & DTAA rate is also 10% then
→ rate of DTAA will be taken as Income Tax Rate involves Cess also.

18 In case of NR, LTCG is Taxable @ 12.5% on/after 23/7/24. The benefit of 1st
and 2nd proviso not available

19 Income of foreign co. from

• Capital Gain on Securities or
• Interest, royalty or FTS
has to be deducted while computing book profit if tax rates on above income is
less than MAT Rate ie. 15%

20 In case of section 115BAA/ 115BAB/ 115BAC → Section 35(1)(i) & 35(1)(iv)

are allowed → But 35 (2AB) is not allowed

21 Municipal Taxes payment deduction u/s 24 is only allowed if it is paid by owner

of the property.

22 Section 80JJAA → Deduction allowed if salary paid is Upto 25000.

25000 ✓ 25001 ×
If salary of employees are paid in cash/Bearer/crossed cheque Ded u/s
80JJAA is not allowed.
Example: If salary is 15000 pm and paid in cash, then 2 disallowance
will be there
• Section 40A (3) → because more than 10,000 in cash
• Section 80JJAA Deduction will not be allowed.

9.7
Pt Particulars
23 When deduction US 10-AA is given, always check the year of operation.
1st 5 years = 100%
Next 5 years = 50%

24 Tonnage Tax Company Ko 20% of Book profit → reserve amount mein daalna
padta hai
• If there is shortfall of 5%, its 25% (1/4th) of 20 → Relevant shipping Income
× 25% is taxable

25 If more than 2 properties are given, those 2 properties are taken as SOP whose
GAV is more so as to save tax.

26 In 94B, local borrowing is not included in limit of 30% of EBITDA.

27 Under 206C(1G)
If Education Loan taken from Indian FI & remitted → TCS Rate = 0.5%
If Education Loan taken from Employer / Foreign Bank → Rate = 5%

28 NO PAN
Section 194Q Rate = 5%
206C(1H) Rate = 1%

29 For 269ST, Circular for NBFC & HFC

Every Instalment = Single Transaction
All Instalments → NOT to be aggregated for ceiling Limit
→ Which means we will check each Instalment for Ceiling Limit of Rs. 2L

30 Firm pays Interest to Partner

• Resident → TDS u/s 194A NOT applicable
• NR → TDS u/s 195 will be applicable

31 Amount Disallowed u/s 94B can be c/fwd for 8 Years, And it can be allowed
when there is unused limit of 30% of EBITDA in next 8 Years.

9.9
Pt Particulars

32. While Calculating Interest in Secondary Adj, SBI Rate of 1st April of Relevant PY
is Taken.
Which 1st April is considered?
→ If we're doing Sec. Adj of PY 24-25, so we will be doing it in AY 25-26, so
the relevant PY for calculating Interest would be PY 25-26 and SBI Rate will be
taken of 1.4.25

33. SFT Reporting to be done in following cases:

Cash Withdrawl > 50 lacs in FY from Current A/c
Payment of Credit Card from Savings A/c - 10 lacs or more

34 Interest on House Property is allowed as deduction only after construction is

Completed.

35 If AO goes for survey during Business Hours, But does not take prior permission
from CCIT or above, It would not be Valid.

For Collecting Info u/s 133B, prior

permission of Higher Auth. is not reqd

36 Immunity will not be granted by the AO if the Penalty Proceedings u/s 270A
have been initiated on account of Misreporting of Income

37 3 Amendments of Trust Came from PY 21-22, AY 22-23

→ Expenditure to be treated as applied only on Payment basis, not on accrual basis
→ Amt Applied out of Corpus not treated as Applied.
→ Loan Taken & spent to be treated as applied only on Repayment

9.10
All the Best!

When in Doubt, Just Say…

SAB KAR LUNGA MAI