Mock Test Paper - Series I: March, 2024

Date of Paper: 9 March, 2024

Time of Paper: 2 P.M. to 5 P.M.

INTERMEDIATE COURSE: GROUP - I

PAPER – 3: TAXATION
Time Allowed – 3 Hours Maximum Marks – 100
SECTION – A: INCOME TAX LAW (50 MARKS)
Working Notes should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of a note.
However, in answers to Questions in Division A, working notes are not
required.
The relevant assessment year is A.Y.2024-25.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are
compulsory.
1. Mr. Kamal, aged 45 years, commenced operations of the business of a new
three-star hotel in Delhi on 1.4.2023. He incurred capital expenditure of ` 50
lakhs on land in March, 2023 exclusively for the above business, and
capitalized the same in his books of account as on 1 st April, 2023. Further,
during the P.Y. 2023-24, he incurred capital expenditure of ` 2 crores (out of
which ` 50 lakhs was for acquisition of land and ` 1.50 crore was for
acquisition of building) exclusively for the above business. The payments in
respect of the above expenditure were made by account payee cheque. The
profits from the business of running this hotel (before claiming deduction
under section 35AD) for the A.Y.2024-25 is ` 85 lakhs.
He has employed 220 new employees during the P.Y.2023-24, the details of
whom are as follows –
No. of Date of Regular/ Total monthly
employees employment Casual emoluments per
employee (`)
(i) 40 1.6.2023 Regular 24,000
(ii) 80 1.7.2023 Regular 24,500
(iii) 50 1.7.2023 Casual 25,500
(iv) 30 1.9.2023 Regular 25,000
(v) 20 1.12.2023 Casual 24,000

1
 All regular employees participate in recognized provident fund and their
emoluments are paid by account payee cheque. His gross revenue from the
hotel is ` 11 crores. Mr. Kamal has opted out of the default tax regime under
section 115BAC.
Mr. Kamal also has another existing business of running a four-star hotel in
Ahmedabad, which commenced operations twenty years back, the profits
from which are ` 140 lakhs for the A.Y.2024-25
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) Assuming that Mr. Kamal has fulfilled all the conditions specified for
claim of deduction under section 35AD and has not claimed any
deduction under Chapter VI-A under the heading “C. – Deductions in
respect of certain incomes”, what would be the quantum of deduction
under section 35AD, which he is eligible to claim as deduction for
A.Y.2024-25?
(a) ` 250 lakhs
(b) ` 200 lakhs
(c) ` 100 lakhs
(d) ` 150 lakhs
(ii) What would be the income chargeable/loss under the head “Profits and
gains of business or profession” for the A.Y.2024-25 in the hands of
Mr. Kamal?
(a) ` 75 lakhs
(b) ` 140 lakhs
(c) ` 25 lakhs
(d) (` 10 lakhs)
(iii) Would Mr. Kamal be eligible for deduction under section 80JJAA in the
A.Y.2024-25? If so, what is the quantum of deduction?
(a) No, he would not be eligible for deduction u/s 80JJAA
(b) Yes; ` 75,00,000
(c) Yes; ` 81,72,000
(d) Yes; ` 99,72,000 (3 x 2 = 6 Marks)
2. Mr. Arvind, an Indian citizen, wants to file his return of income for the
previous year 2023-24. He required assistance for which he has approached
you. He has shared the following details relevant to the P.Y. 2023-24.
Mr. Arvind owned a house property in Bangalore and the same was rented
out for ` 65,000 p.m. to Mr. Arjun, a salaried employee. He claims that this
was the only income which he earned during the P.Y. 2023-24. However,
when you had sought for his bank statement, you observed the following
information additionally.
2
 There is a credit for ` 23,975 towards income-tax refund which includes
` 5,775 towards interest on income-tax refund. On 15th August, 2023, the
bank statement showed a credit of ` 55,000 which he claimed to have
received as a gift from his grandchildren on his 60th birthday. On further
assessment you were able to understand that Mr. Arvind and his wife had
travelled to Mauritius during the P.Y. 2023-24 to spend some time with their
son, who is staying in Mauritius. On scrutiny of their passport and relevant
documents you conclude that they had left India on 27th September, 2023
and retuned on 31st March, 2024. During the 4 years preceding previous
year 2023-24, both had stayed in India for 320 days. Prior to that, they had
been staying only in India.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) What is the residential status of Mr. Arvind for the P.Y. 2023-24?
(a) Resident and ordinarily resident
(b) Resident but not ordinarily resident
(c) Non-resident
(d) Deemed resident but not ordinarily resident
(ii) Is there any requirement to deduct tax at source under section 194-IB
on such rent by Mr. Arjun? If yes, what would be the amount of TDS to
be deducted?
(a) No, there is no requirement to deduct tax at source under section
194-IB, since Mr. Arjun is a salaried employee
(b) Yes, Mr. Arjun is required to deduct tax at source of ` 39,000
under section 194-IB
(c) Yes, Mr. Arjun is required to deduct tax at source of ` 78,000
under section 194-IB
(d) No, there is no requirement to deduct tax at source under section
194-IB, since Mr. Arvind is a non-resident
(iii) Which of the following statements is correct with respect to advance
tax liability of Mr. Arvind for P.Y. 2023-24?
(a) Advance tax liability shall not arise to Mr. Arvind since he is a
non-resident
(b) Advance tax liability shall not arise, since Mr. Arvind is a resident
senior citizen and he has no income chargeable under the head
“Profits and gains of business or profession
(c) Advance tax liability shall arise, since he is a non-resident
(d) Advance tax liability shall arise, since his tax liability is not less
than ` 10,000 (3 x 2 = 6 Marks)
3. Roshini Ltd. has two units, one unit at Special Economic Zone (SEZ) and
other unit at Domestic Tariff Area (DTA). The unit in SEZ was set up and
3
 started manufacturing from 12.5.2014 and unit in DTA from 15.6.2017. Total
turnover of Roshini Ltd. and Unit in DTA is ` 12,50,00,000 and 4,50,00,000,
respectively. Export sales of units in SEZ and DTA is ` 3,50,00,000 and
` 2,25,00,000, respectively and net profit of Unit in SEZ and DTA is
` 95,00,000 and ` 80,00,000, respectively. Out of the export sales of
` 3,50,00,000, ` 2,00,00,000 have been received in convertible foreign
exchange by 30.9.2024. Roshini Ltd. would be eligible for deduction under
section 10AA for -
(a) ` 20,78,125
(b) ` 41,56,250
(c) ` 11,87,500
(d) ` 23,75,000 (2 Marks)
4. What would be the tax liability of Ms. Savita, a resident, who attained the
age of 60 years on 01.04.2024 on the total income of ` 7,25,000, comprising
of salary income and interest on fixed deposits under default tax regime
under section 115BAC?
(a) ` 28,600
(b) ` 26,000
(c) ` 3,600
(d) ` 2,600 (1 Mark)

Division B – Descriptive Questions

Question No. 1 is compulsory
Attempt any two questions from the remaining three questions
1. Mr. Amit, having business of manufacturing of furniture, gives the following
Trading and Profit & Loss Account for the year ended 31.03.2024:
Trading and Profit & Loss Account
Particulars ` Particulars `
Opening Stock 5,62,500 Sales 2,33,25,000
Purchases 1,88,62,500 Closing Stock 6,75,000
Freight & Cartage 1,89,000
Gross profit 43,86,000
2,40,00,000 2,40,00,000
Bonus to staff 71,250 Gross profit 43,86,000
Rent of premises 80,250 Income-tax refund 30,000
Advertisement 7,500 Warehousing 22,50,000
charges

4
 Bad Debts 1,12,500
Interest on loans 2,51,250
Depreciation 1,07,250
Goods and Services tax 1,62,525
demand paid
Salary 5,50,000
Miscellaneous 2,38,475
expenses
Net profit 50,85,000
66,66,000 66,66,000

Following are the further information relating to the financial year 2023-24:
(i) Income-tax refund includes amount of ` 4,570 of interest allowed
thereon.
(ii) Salary include ` 30,000 paid to his brother which is unreasonable to
the extent of ` 5,000.
(iii) Advertisement expenses include an amount of ` 2,500 paid for
advertisement published in the souvenir issued by a political party. The
payment is made by way of an account payee cheque.
(iv) Miscellaneous expenses include an amount of ` 1,00,000 paid to
Political Party by cheque.
(v) Goods and Services Tax demand paid includes an amount of ` 5,300
charged as penalty for delayed filing of returns and ` 12,750 towards
interest for delay in deposit of tax.
(vi) Mr. Amiit had purchased a warehouse building of ` 20 lakhs in rural
area for the purpose of storage of agricultural produce. This was made
available for use from 15.07.2023 and the income from this activity is
credited in the Profit and Loss account under the head “Warehousing
charges”.
(vii) Depreciation under the Income-tax Act, 1961 works out at ` 65,000
excluding depreciation on warehouse building.
(viii) Interest on loans includes an amount of ` 80,000 paid to Mr. Mohit, a
resident, on which tax was not deducted.
Compute the total income and tax liability of Mr. Amit for the A.Y. 2024-25 in
a most beneficial manner. (15 Marks)
2. (a) Mr. Akash, an Indian citizen aged 45 years, worked in XYZ Ltd. in
Delhi. He got a job offer from ABC Inc., California on 01.06.2022. He
left India for the first time on 31.07.2022 and joined ABC Inc. on
08.08.2022. During the P.Y. 2023-24, Mr. Akash visited India from
25.05.2023 to 22.09.2023. He has received the following income for the
previous year 2023-24:
5
 Particulars `
Salary from ABC Inc., California received in California 7,00,000
(Computed)
Dividend from Indian companies 5,00,000
Agricultural income from land situated in Nepal, received 4,00,000
in Nepal
Rent received/receivable from house property in Delhi 5,50,000
Profits from a profession in California, which was set up in 6,00,000
India, received there

Determine the residential status of Mr. Akash and compute his total
income for the A.Y. 2024-25. (6 Marks)
(b) Examine and compute the liability for deduction of tax at source, if any,
in the cases stated hereunder, for the financial year ended 31 st March,
2024.
(i) State Bank of India pays ` 70,000 per month and ` 60,000 per
month as rent to the Central Government and Mr. Kunal,
respectively for building in which its branches are situated.
(ii) Payment of ` 2,50,000 to Mr. Deepak a transporter who owns 8
goods carriages throughout the previous year. He does not
furnish his PAN. (4 Marks)

3. (a) Mr. Sahil, a resident individual, aged 40 years, is an assistant manager

of Fox Ltd. He is getting a salary of ` 55,000 per month. During the
previous year 2023-24, he received the following amounts from his
employer.
(i) Dearness allowance (10% of basic pay which forms part of salary
for retirement benefits).
(ii) Bonus of ` 60,000.
(iii) Fixed Medical allowance of ` 50,000 for meeting medical
expenditure.
(iv) He was also reimbursed the medical bill of his mother dependent
on him amounting to ` 6,500.
(v) Mr. Sahil was provided;
• a laptop both for official and personal use. Laptop was
acquired by the company on 1 st June, 2021 at ` 35,000.
• a domestic servant at a monthly salary of ` 8,000 which was
reimbursed by his employer.
(vi) Fox Ltd. allotted 700 equity shares in the month of October 2023
@ ` 170 per share against the fair market value of ` 280 per
share on the date of exercise of option by Mr. Sahil. The fair
6
 market value was computed in accordance with the method
prescribed under the Act.
(vii) Professional tax ` 2,200 (out of which ` 1,400 was paid by the
employer).
Compute the Income under the head “Salaries” of Mr. Sahil for the
assessment year 2024-25 if he is paying tax under default tax regime
under section 115BAC. (5 Marks)
(b) Mr. Kushal is a resident but not ordinarily resident in India during the
Assessment Year 2024-25. He furnishes the following information
regarding his income/expenditure pertaining to his house properties for
the previous year 2023-24:
• He owns two houses, one in New York and the other in
Ahmedabad.
• The house in New York is let out there at a rent of $ 5,000 p.m.
The entire rent is received in India. He paid Property tax of
$ 1,250 and Sewerage Tax $ 750 there. ($ 1 = INR 81)
• The house in Ahmedabad is self-occupied. He had taken a loan of
` 30,00,000 to construct the house on 1 st September, 2018
@10%. The construction was completed on 31 st May, 2020 and
he occupied the house on 1 st June, 2020.
The entire loan is outstanding as on 31 st March, 2024. Property tax
paid in respect of the second house is ` 2,800.
Compute the income chargeable under the head "Income from House
property" in the hands of Mr. Kushal for the Assessment Year 2024-25
if he has opted out of the default tax regime under section 115BAC.
(5 Marks)
4. (a) Mr. Vishal, aged 33 years, submits the information of following
transaction/income during the P.Y. 2023-24
(i) Mr. Vishal had a house in Delhi. During financial year 2022-23, he
had transferred the said house to Ms. Deepika, daughter of his
brother without any consideration. House would go back to Mr.
Vishal after the life time of Ms. Deepika. The transfer was made
with a condition that 10% of rental income from such house shall
be paid to Mrs. Vishal. Rent received by Ms. Deepika during the
previous year 2023-24 from such house property is ` 5,50,000.
(ii) Mr. Vishal holds preference shares in M/s A Pvt. Ltd. He
instructed the company to pay dividends to Ms. Chandni, daughter
of his servant. The transfer is irrevocable for the lifetime of
Chandni. Dividend received by Ms. Chandni during the previous
year 2023-24 is ` 4,50,000.
(iii) Mr. Vishal has a short term capital loss of ` 16,000 from sale of
property and long term capital gain of ` 15,000 from sale of
property.
7
 (iv) Other income/loss of Mr. Vishal includes
- Interest from saving bank account of ` 1,75,000
- Cash gift of ` 75,000 received from daughter of his sister on
his birthday.
- Income from betting of ` 25,000
- Income from card games of ` 46,000
- Loss on maintenance of race horses of ` 14,600
Compute the total income of Mr. Vishal for the Assessment Year
2024-25 if he has opted out of the default tax regime and the losses to
be carried forward. (6 Marks)
(b) Enumerate the cases where a return of loss has to be filed on or before
the due date specified u/s 139(1) for carry forward of the losses. Also
enumerate the cases where losses can be carried forward even though
the return of loss has not been filed on or before the due date.
(4 Marks)
OR
(b) Mr. Vishnu has undertaken certain transactions during the F.Y.2023-
24, which are listed below. You are required to identify the transactions
in respect of which quoting of PAN is mandatory in the related
documents –
S. No. Transaction
1. Sale of scooter for ` 70,000
2. Payment of life insurance premium of ` 67,000 to
insurance company
3. Purchase of plot for ` 9 lakhs while the stamp duty of the
same is ` 11 lakhs
4. Applied to PNB for issue of credit card.
(4 Marks)

8
`
 `

`
`

`
`

`
 `

`
`

` `
 `

` `

`
`