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Questions On PGBP

The document contains a series of questions related to the computation of profits and gains from business or profession under the Income-tax Act, 1961. It includes scenarios involving depreciation calculations, tax implications for non-deduction at source, allowable expenses, and specific cases of income and expenditure for individuals and companies. Each question requires detailed analysis and application of tax laws to determine the correct financial outcomes for the respective cases.

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52 views2 pages

Questions On PGBP

The document contains a series of questions related to the computation of profits and gains from business or profession under the Income-tax Act, 1961. It includes scenarios involving depreciation calculations, tax implications for non-deduction at source, allowable expenses, and specific cases of income and expenditure for individuals and companies. Each question requires detailed analysis and application of tax laws to determine the correct financial outcomes for the respective cases.

Uploaded by

audiosoundd
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Questions on Profits/ Gains on Business/ Profession

Q1. Mr. Raj, a proprietor started a business of manufacture of tyres and tubes for motor vehicles on
1.1.2021. The manufacturing unit was set up on 1.5.2021. He commenced his manufacturing
operations on 1.6.2021. The total cost of the plant and machinery installed in the unit is Rs. 120
crore. The said plant and machinery included second hand plant and machinery bought for Rs 20
crore and new plant and machinery for scientific research relating to the business of the assessee
acquired at a cost of Rs. 15 crore.

Compute the amount of depreciation allowable under section 32 of the Income-tax Act, 1961 in
respect of the AY 2022-23. Assume that all the assets were purchased by way of account payee
cheque.

Q2. Alpha Ltd. credited the following amounts to the account of resident payees in the month of
March 22 without deduction of tax at source. What would be the consequence of non-deduction
of tax at source by Aplha Ltd. on these amounts during the FY 2021-22.
Particulars Amount (Rs.)
Salary to its employees 12,00,000
Directors remuneration 28,000

Q3. Krishna, an Individual, carries on business of purchase and sale of agricultural commodities like
paddy, wheat, etc. He borrowed loans from AP State Financial Corporation and Indian Bank and
has not paid the following interest:

(i) AP State Financial Corporation Rs. 15,00,000


(ii) Indian Bank Rs. 30,00,000
Rs. 45,00,000

Both the banks converted the above interest payable by Krishna into loan repayable in 60
instalments in FY 2021-22. Krishna paid 5 instalments to Bank (i) and 3 instalments to Bank (ii).

Krishna claimed the entire interest of Rs. 45,00,000 as an expenditure while computing the
income from business. Examine whether his claim is valid and if not what is the amount if interest
allowable

Q4. Examine with reasons, the allowability of the following expenses under the Income-tax Act 1961
while computing income from business/ profession for AY 2022-23

(i) Provision made on the basis of actuarial valuation for payment of gratuity Rs. 5,00,000.
However, no payment on account of gratuity was made before the due date of filing of
return of income
(ii) Purchase of oil seeds of Rs. 50,000 in cash from a farmer on a banking day
(iii) Tax on non-monetary perquisite provided to an employee Rs. 20,000
(iv) Payment o Rs. 50,000 using credit card for fire insurance
(v) Salary payment of Rs. 4,00,000 to Mr. X outside India by a Company without deduction of
tax assuming Mr. X has not paid tax on such salary
(vi) Payment made in cash Rs. 30,000 to a transporter in a day for carriage of goods

Q5. Following is the trading & Profit & Loss account for the year ended 31.03.2022 of Mr. Ajay

Particulars Rs. Particulars Rs.


To Opening Stock 90,000 By sales 1,12,11,500
To Purchases 1,10,04,000 By Closing Stock 1,86,100
To Gross Profit 3,03,600
1,13,97,600 1,13,97,600
To Salary 60,000 By Gross Profit 3,03,600
To rent & rates 36,000 By Income from UTI 2,400
To Interest on loan 15,000
To Depreciation 1,05,000
To Printing & stationery 23,200
To Postage & telegram 1,640
To loss on sale of shares 8,100
(Short term)
To other general expenses 7,060
To Net Profit 50,000
3,06,000 3,06,000

Additional information:

(i) It was found that some stocks were omitted to be included in both the opening & closing
stock, the values of which were:

Opening Stock Rs 9,000


Closing Stock Rs. 18,000

(ii) Salary includes Rs. 10,000 paid to brother, which is unreasonable to the extent of Rs.
2,000
(iii) The whole amount of printing & stationery was paid in cash by way of one time payment
to Mr. Ramesh
(iv) The depreciation provided in the profit & loss account Rs. 1,05,000 was based on the
following information:
The written down value (WDV) of plant & machinery is Rs. 4,20,000as on 01.04.2021. New
pant & machinery falling under the same block of depreciation was bought on 01.07.2021
for Rs. 70,000. Two old plants were sold on 01.10.2021 for Rs. 50,000

(v) Rents & rates includes GST of Rs. 3,400 paid on 07.04.2022
(vi) Other general expenses include Rs. 2,000 paid as donation to a Public Charitable Trust

Compute the Income of Mr. Ajay under the head Profits/ Gains from Business / Profession.

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