INCOME TAX LAW & PRACTICE II

21UCC11

T.RAJASEKAR

Head Of The Department

Department of Commerce CA

AVS COLLEGE OF ARTS & SCIENCE (AUTONOMOUS)

SALEM-636106

Unit – 2

Q.NO. 1 Mr. D holds 2,000 preference shares of ₹ 100 each in a

company. Company had reserves worth ₹ 50,00,000. Out of these reserves it
issued bones shares in the ratio of 1 : 4 Market Value of these shares amounts
to ₹ 116/- per share. How will they be treated in the hands of Mr. D ?

[ Hints : u/s 2(22)(b) to be treated as deemed dividend - ₹ 58,000; Bonus

shares issued to preference shareholders shall be treated as dividend ]

Q.NO. 2 Mr. R held the following investments :

a) ₹ 90,000 10% (Tax free) Debentures of a Listed Company. ( Rate

of T.D.S. 10% )
b) ₹ 1,00,000 12% Panjab Govt. Loan

Compute his income from interest on securities for the year ending 31-3-2024
if interest accrues on 1st January.

[ Hints : Taxable interest (a) ₹ 9,000 × 100/90 = 10,000 + (b) ₹ 12,000 Total
Interest ₹ 22,000 ]

Q.NO. 3 Calculate income from other sources from the information

given below : ₹₹₹

I. Winnings from lottery

1,00,000
II. Amount received from race winnings
35,000

Gifts Received during the previous year 2023-24

I. Received ₹ 20,000 as gift from his friend.

II. Received ₹ 1,00,000 as gift from his elder brother.
III. Received ₹ 1,40,000 as gift from his marriage.
IV. Received ₹ 80,000 as gift from his NRI friend on 1-1-2024.
V. Another gift of ₹ 18,000 received from his friend.
[ Hints : Taxable income from other sources ₹ 2,68,000 ; gifts at (ii) and (iii)
are exempted ]

Q.NO. 4 Compute income from other sources from particulars given

below : ₹₹₹

1. Interest on deposits with a company

10,000
2. University remuneration for working as examiner
6,000
3. Royalty for writing books
60,000
He claims to have spent ₹ 20,000 on writing these books
4. Dividend declared by R. Co. on 1-3-2024 but paid on 1-5-2024
6,000
5. Interim dividend paid on 1-5-2023
3,000
6. Stake money on race horses
1,50,000
Horses are maintained by him and expenses on
Maintenance of these horses are
2,40,000
7. Family pension received
36,000

[ Hints : General Incomes u/s 56 (1) ₹ 80,000 Specific incomes u/s 56 (2)
9,000 Exp. On horses to be c/f ₹ 90,000 Income from other sources ₹
89,000 ]

Q.NO.5 Compute income from other sources of Mr. Krishna Murthy

who held the following investments during the previous year 2023-24 :

i. ₹ 11,000, 10% Central Government, Securities.

ii. ₹ 36,000, 10% Tax – free commercial securities of a closely held
company.
iii. ₹ 6,300, received as interest on Tax free public limited company
securities ( listed ).
iv. ₹ 7,200, received interest on Karnataka government securities.
v. ₹ 4,000, received as interest on debentures of Deepak Fertilizers
( listed ).
vi. ₹ 30,000, 13.5% securities of a paper mill co. limited ( listed ).
vii. ₹ 35,000, 11% securities of a paper mill co. ( listed ).
viii. ₹ 10,000, 15% Jaipur Municipal Corporation bonds.
 ix. Dividend from Carona Ltd. ₹ 4,000
x. During the year he also got a prize in Karnataka State Lottery. The
net amount received by him was ₹ 35,000. Interest on all securities
is payable on 1st January every year. Bank charges ₹ 200 as
collection charges.

[ Hints : ( i ) Income from other sources ₹ 86,500 ] ( ii ) No TDS on Interest

on debentures by Deepak Fertilizers Ltd as the amount of interest does not
exceed ₹ 5,000.

Q.NO. 6 Sri Mukunda furnishes the following particulars of the

Incomes for the previous year 2023-24. Compute his total income :
₹₹₹

i. Dividend Equity ( gross ) [ Indian company ]

600
ii. Different on preference shares [ Indian company ]
3,200
iii. Income from letting on hire of building and machinery - composit
lease 17,000
iv. Interest on bank deposits
2,500
v. Director’s sitting fees
1,200
vi. Ground Rent
600
vii. Income from undisclosed sources ( unexplained expenditure )
10,000
viii. Income from lotteries ( gross )
10,000

The following deductions are claimed by him :

a) Collection charges of dividend ₹ 20

b) Allahabad appreciation on buildings and machinery ₹ 4,000
c) Fire insurance on building and machinery ₹ 100.

[ Hints : income from other sources ₹ 41,000 ; Dividend on equity/preference

shares is taxable ; income from undisclosed sources is taxable at a flat rate of
60 % ]

Q.NO. 7. Following are the incomes of Sri Amar for the financial
year 2023-24. Compute his taxable income under the head “Other Sources” if
he is Resident, NOR, or Non – Resident :

₹₹₹
 a) Interest on Saving Bank deposit A/c with Union Bank, Delhi
1,000
b) Income from agriculture in Africa invested in Pakistan
40,000
c) Dividends received in USA from an American company
Part of which ₹ 4,000 remitted to India
12,000
d) Family pension received in Kenya for services rendered in India.
54,000

[ Hints : income from other sources if Resident ₹ 92,000 ; if NOR or NR ₹

40,000 ; south of pension yes standard deduction of 1/3rd of pension or ₹
15,000, whichever is less is to be allowed ]

Q.NO. 8 Mr. X. who maintains books of accounts on merchantile

basis borrowed ₹ 20,000 at 18% p.a. on 1-9-2023 and invested it in 12%
securities of the Central Govt. purchased at ₹ 100/- with due date of interest
on 1st January every year. On 1-8-2023 he borrowed ₹ 30,000 @ 15% p.a. for
investing it in 14% listed debentures of C Ltd. With date of payment of
interest being 15th May every year. Interest on borrowings for the period
ending 31-3-2024 is, however, paid by X on 15-4-2024. He pays 2%
commission to his bank on amount of interest realised. Compute his income
chargeable under the head ‘ Income from Other Sources ’.

[ Hints : Interest on Central Govt. Securities ₹ 2,400 ; interest on debentures

of C Ltd. NIL , deduction of interest ₹ 2,100 + Rs. 3,000 and Collection
charges ₹ 48. Loss under the head, Other Sources ₹ 2,748 to be set off from
income under any other head ]

Q.NO. 9 From the following information compute the income from

other sources for the assessment year 2024-25 :
₹₹₹

i. Card games loss

12,000
ii. From the activity of owning and maintaining horses for race
purposes
a) Loss at Bombay
40,000
b) Profit at Bangalore
20,000
iii. Dividend ( gross ) from Indian Companies
6,000
iv. Betting in horse races
4,000
[ Hints : Dividend from Indian Company is taxable ; Card games loss can’t be
set off ; loss of ₹ 20,000 from maintenance of horses to be C/F ;
Income from other sources ₹ 10,000 ]

Q.NO.10 From the following particulars for the Year ended 31st March,
2024, compute the income under the head “ Income from Other Sources ” :

₹₹₹
Equity Dividends [ Indian Company ]
25,200
Dividends [ preference ]
12,000
Collection charges in respect of Dividend
1% of dividend
Rent from letting out of a building along with plant and machinery
Depreciation on buildings
4,000
Insurance on buildings
1,600
Office expenses relating to buildings
1,600
Repairs, rates etc..
1,600

[ Hints : Income ₹ 58,400 ; Dividend is Taxable ; Collection charges in respect

of dividend are not allowed as deduction ]

Q.NO.11 From the particulars of income of Sri. Madan Mohan,

compute his ( i ) Professional Income and ( ii ) Income U/H other source for the
Assessment year 2024-25 :

i. He owns an Agricultural land in Bangladesh from which he earned on

income of ₹ 6,500.
ii. He owns a plot of land in Dharwad which is let out for ₹ 1,200 p.m. for
trading purposes.
iii. He has a building near agricultural land in a village in India. It is let out
for ₹ 900 p.m. and used for storing agricultural equipments and for
supervision of agricultural work.
iv. He received ₹ 12,500 during the year consultation fee as a company
secretary.
v. He has a quarry in Ankola. He has let it on a royalty of 50 paise per
ton of stone raised. During the year 14,600 tons of stone was raised.
He spent ₹ 450 to earn royalty.
vi. He has let machinery and furniture at ₹ 3,000 p.m. He spent ₹ 1,000
on the repair of these assets. Depreciation allowed on these assets is
₹ 6,000.
vii. He lives in a rented house paying a rent of ₹ 2,000 p.m. He has sublet
40% of this house at a rent of ₹ 1,500 p.m. He has paid ₹ 1,000 as
 municipal tax on the house and spent ₹ 500 on the repairs of the
whole house.
viii. He has received an amount of ₹ 70,000 as lottery price on 1st Nov.2023
ix. He barrowed ₹ 30,000 on 1-6-2023 from a bank at 15% p.a. interest.
He invested the money in the purchase of equity shares of Public
Limited Company. During the year he has not received any dividend
from the company.

[ Hints : ( i ) Income from other sources ₹ 1,64,550 ; ( ii ) Professional Income

₹ 12,500 ; Consultation income has been treated as Professional Income ;
Dividend from Company is taxable but here dividend has been neither declared
by co. nor received by the shareholder during that previous year, so no
dividend Income. Interest paid on loan is not allowed as deduction ]