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1 Question 1: For AY , assessment under section 143(3) is completed on and notice of demand is served for ` 20 Lakhs on Nothing is paid by assessee after taking stay of demand u/s 220(6) and appeal is filed by him to CIT(A). CIT(A) passes an order under section 250 in the favour of assessee and tax demand becomes nil. Assessing Officer files an appeal to ITAT, HC and then SC. Order of SC is passed on , against the assessee. Suppose assessee wants to pay tax demand ` 20 lakhs on calculate interest under section 220. As per amendment by Finance Act, 2014 assessee shall pay interest from the date of original demand was created. [( Days (time allowed to pay tax given by Notice of demand)] to Question 2: Suppose in previous question assessee paid the original demand of ` 20 lakhs on and subsequently, refund of ` 20 lakhs is granted as per order of CIT(A) under section 250 on Period for calculating interest = to = 56 Months Question 3: Income from property held under trust is ` 16 lakh. The voluntary contributions received by a trust is ` 25 lakh, which includes anonymous donations of ` 9 lakh and corpus donations of ` 6 lakh. The trust has applied ` 12 lakh to purchase a building on for meeting its objective. Compute the tax liability of the trust for A.Y Particulars Amount (`) Income from Property 16,00,000 Voluntary contribution with specific direction (corpus) ` 6,00,000 Exempt Voluntary contribution without specific direction (excluding Anonymous donations) 10,00,000 Total Income from property held for charitable purposes 26,00,000 Less: 15% accumulation without any conditions (3,90,000) Less: Income applied for charitable purposes (12,00,000) Taxable Income 10,10,000 Add: Anonymous donation 9,00,000 Total taxable income 19,10,000 Computation of tax liabilities On anonymous 30% of 7,75,000 (9,00,000 1,25,000) 2,32,500 On other slab rate (19,10,000 7,75,000) 1,65,500 Basic Tax 3,98,000

2 Add: Education 3% 11,940 Net Tax Liab. 4,09,940 Notes: 1. Depreciation on building is not allowable since the cost of it has been claimed as application of income. 2. Anonymous donation which is chargeable to tax at normal rate (in excess of ` 1,25,000) is not eligible for accumulation. Question 4 Compute the admissible deduction under section 32AC for AY and AY under following cases: - Manufacturing company Investments in new plants installed in factory (` in crores) PY PY X Ltd Y Ltd Z Ltd P Ltd Q Ltd (` in crores) Manufacturing company Under section 32AC PY PY Question 5: X Ltd. (1) Nil 16.5 Y Ltd. - Nil Nil Z Ltd. (1A) Nil 4.5 P Ltd. (1A) Nil 6 Q Ltd. (1) Ram Ltd. made the following payments in the month of January 2015 to residents without deduction of tax at source. Payment of salary to its employee 20,00,000 Payments to contractor for repairs of building 10,00,000 Director s sitting fees in board meeting 5,000 What would be the tax consequence for A.Y , assuming that the resident payees in all the cases mentioned above, have not paid the tax, if any, which was required to be deducted by Ram Ltd.?

3 Non-deduction of tax at source on any payment on which tax is deductible as per the provisions of Chapter XVII-B would attract disallowance under section 40(a)(ia). Therefore, non-deduction of tax at source on salary payment on which tax is deductible under section 192, amount paid to contractor for repairs of building u/s 194C and directors fess on which tax is deductible under section 194J, would attract of sum paid under section 40(a)(ia). Hence Amount disallowed under section 40(a)(ia) would be ` 9,01,500. Question 6: A business trust receives income of ` 1 crore, comprising of ` 80 lakh interest from SPV and ` 20 lakh, dividend from SPV. It distributes ` 90 lakh to its unit-holders. What are the tax implications? The proportion of interest and dividend income in the hands of each unit holder would be in the ratio of 8:2. For example, in the case of a unit holder to whom income of ` 5 lakh is distributed, ` 4 lakh would constitute interest income and ` 1 lakh dividend income. Tax has to be deducted by the business trust on interest component of income distributed to unit holders, since the business trust enjoys a pass-through status in respect of such income and the same is taxable in the hands of the unit holder. However, dividend income is exempt both in the hands of the business trust and in the hands of the unit holder, since the SPV would have paid dividend distribution tax under section 115-O on the same.

4 Question 7: A REIT gives particulars of its income for PY : Rental income Interest from SPV Dividend from SPV LTCG on sale of Land Other income Total 5 crores 3 crores 2 crores 1 crore 4 crore 15 crores The REIT has distributed ` 6 crores to the unit holders. Mr. Ram who is a unitholder receives his shares `60 lacs. Discuss the tax consequences. TAX CONSEQUENCE IN THE HAND OF REIT Rental income of ` 5 crores and other income of ` 15 crores It is treated as normal income of business trust and same is 33.99% 1. Interest received from SPV It is exempt in the hands of business trust (REIT) under section 10(23FC) However, the REIT has to deduct 10% for Resident unit holder 5% for nonresident unit-holder on interest component of income distributed. 2. Dividend from SPV It is exempt from tax under section 10(34), since the same is subject to CDT under section 115-O in the hand of SPV. 3. LTCG on sale of land REIT is liable to pay 20% under section 112 on LTCG.

5 TAX CONSEQUENCE IN THE HAND OF unit holder (RAM) 1. Rental income 5 15 X 60 = ` 20 Lacs: It is exempt from tax under section 10(23FD) 2. Interest income 3 15 X 60 = ` 12 Lacs: It is taxable under the head IFOS 3. Dividend income 2 15 X 60 = ` 8 Lacs: It is exempt from tax under section 10(23FD) 4. LTCG 1 15 X 60 = ` 4 Lacs: It is exempt from tax under section 10(23FD) 5. Others 4 15 Question 8: X 60 = ` 16 Lacs: It is exempt from tax under section 10(23FD) Mr.Girija, carrying on the business of operating a warehousing facility for storage of sugar, has a total income of ` 60 lakh. In computing the total income, he had claimed deduction under section 35AD to the tune of ` 50 lakh on investment in building (on ) and 6 lakhs on plant for operating the warehousing facility for storage of sugar. Compute his tax liability for A.Y Tax liabilities as per normal provisions of this Act, By applying slab rate of tax on TTI of `60 Lakhs 16,25,000 Add: Education 3% 48,750 Net Tax Liab. 16,73,750

6 Adjusted total income Computation of Alternate minimum tax under section 115JC Total Taxable Income 60,00,000 Add : Deduction under section 35AD 56,00,000 Less: Depreciation under section 32 on building (10% of 50 Lakhs) (5,00,000) 15% on Plants of 6 Lakhs (90,000) Adjusted Total Income 1,10,10, % 20,36,850 Add: 10% since Adjusted total income exceeds 100 lakhs 2,03,685 22,40,535 Add: Education cess and 3% 67,216 Tax as per AMT 23,07,751 Final tax liabilities ` 23,07,50 Question 9: P Ltd., a domestic company, has distributed on , dividend of ` 300 lakh to its shareholders. On , P Ltd. has received dividend of ` 50 lakh from its domestic subsidiary company G Ltd., on which G Ltd. has paid dividend distribution tax under section 115-O., and dividend of ` 20 lakhs from X Ltd. a foreign company in which P Ltd. has 26% equity shares. Compute the additional income-tax payable by P Ltd. under section 115-O. Dividend declared by P Ltd. During the PY Less: Dividend received from subsidiary company Net Distributed profits 300 Lakhs (50 lakhs) 250 Lakhs CDT Payable X ` 51,18,667

7 Question 10: Examine the applicability of the provisions for tax deduction at source under section 194DA in the above cases - (i) Mr.X, a resident, is due to receive ` 4.50 lakhs on , towards maturity proceeds of LIC policy taken on , for which the sum assured is ` 4 lakhs and the annual premium is ` 1,25,000. (ii) Mr.Y, a resident, is due to receive ` 2.20 lakhs on on LIC policy taken on , for which the sum assured is ` 2 lakhs and the annual premium is ` 35,000. (iii) Mr.Z, a resident, is due to receive ` 95,000 on towards maturity proceeds of LIC policy taken on for which the sum assured is ` 90,000 and the annual premium was ` 19,000. Answer (i) Since the annual premium exceeds 10% of sum assured in respect of a policy taken on , the maturity proceeds of ` 4.50 lakhs are not exempt under section 10(10D) in the hands of Mr.X. Therefore, tax is required to be under section 194DA on the maturity proceeds of ` 4.50 lakhs payable to Mr.X. (ii) Since the annual premium is less than 20% of sum assured in respect of a policy taken before , the sum of ` 2.20 lakhs due to Mr.Y would be exempt under section 10(10D) in his hands. Hence, no tax is required to be deducted at source under section 194DA on such sum payable to Mr.Y. (iii) Even though the annual premium exceeds 20% of sum assured in respect of a policy taken before , and consequently, the maturity proceeds of ` 95,000 would not be exempt under section 10(10D) in the hands of Mr.Z, the tax deduction provisions under section 194DA are not attracted since the maturity proceeds are less than ` 1 lakh. Question 11: Ram bharose charitable trust, whose main object is relief of the poor, filed an application for registration on 1st April, 2014 and got registration under section 12AA on 1 st September, The trust is in existence since May, The trust claimed the benefits of sections 11 and 12 in respect of income from property held under trust for A.Y to A.Y Discuss the correctness of the claim of the trust, if assessment proceedings for A.Y and A.Y are pending before the Assessing Officer on 1st September, 2014.

8 Section 12A(2) provides that the provisions of section 11 and 12 shall apply in relation to the income of a trust from the assessment year immediately following the financial year in which the application for registration is made. Accordingly, the exemption provisions would apply from A.Y since the charitable trust made an application for registration in April, However, the first proviso to section 12A(2) provides that in case where a trust or institution has been granted registration under section 12AA, the benefit of sections 11 and 12 shall be available in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration, provided the objects and activities of the trust remain the same for such preceding year. In this case, since the assessment proceedings for A.Y and A.Y are pending before the Assessing Officer on the date of registration of the trust, the claim of Ram Bharose charitable trust is correct and the benefit of exemption under sections 11 and 12 would be available in respect of those years, provided the objects and activities of the trust were the same during those years. Question 12: In the Indian context, Advance Pricing Agreements entered into for determining arm s length price in relation to an international transaction is valid only for a period, not exceeding 5 years, prospective to the date of agreement and cannot be applied in respect of prior period transactions Discuss the correctness or otherwise of this statement. The statement is not correct. Under section 92CC, the CBDT may, with the approval of the Central Government, enter into an advance pricing agreement with any person for determining the Arm s Length Price or specifying the manner in which the arm s length price is to be determined in relation to an international transaction to be entered into by that person.

9 The agreement entered into is valid for a period, not exceeding five previous years, as may be mentioned in the agreement. Once the agreement is entered into, the arm s length price of the international transaction, which is subject matter of the advance pricing agreement, would be determined in accordance with such an advance pricing agreement, except where there is a change in law or facts having a bearing on the agreement so entered. In order to reduce current pending as well as future litigation in respect of the transfer pricing matters, sub-section (9A) has been inserted in section 92CC by the Finance (No.2) Act, 2014 to provide roll back mechanism in the advance pricing agreement scheme. The roll back provisions refer to the applicability of the methodology of determination of arm s length in relation to the international transactions which have already been entered into in a period prior to the period covered under an advance pricing agreement. Accordingly, the advance pricing agreement may, subject to such prescribed conditions, procedure and manner, provide for determining the arm s length price or for specifying the manner in which arm s length price is to be determined in relation to an international transaction entered into by a person during any period not exceeding four previous years preceding the first of the previous years for which the advance pricing agreement applies in respect of the international transaction. Question 13: R Ltd., an Indian company, has entered into an agreement for sale of its product to B Ltd., an unrelated party, on B Ltd. had entered into an agreement on 15/01/2015 (for sale of same product) with L Ltd., a non-resident entity, which is associated enterprises foreign company in relation to R Ltd. Would the transaction between R Ltd. and B Ltd. be deemed as an international transaction entered into between two associated enterprises, if B Ltd. is a resident company for the P.Y ? Section 92B(2) extends the scope of the definition of international transaction given in section 92B(1) by deeming a transaction entered into with a person other than an associated enterprise as a transaction with an associated enterprise, if the following conditions are satisfied: there exists a prior agreement in relation to the relevant transaction between the other person and the associated enterprise or,

10 where the terms of the relevant transaction are determined in substance between such other person and the associated enterprise; and either the enterprise or the associated enterprise or both of them are non-residents. In this case, the agreement between the R Ltd. and unrelated party, B Ltd. for sale of its product was entered into on Prior to that date (i.e., on ), B Ltd. has entered into an agreement, for sale of same product, with L Ltd., a non-resident entity and associated enterprise of R Ltd. In such a case, a transaction entered into between the enterprise and the other person shall be deemed to be an international transaction entered into between two associated enterprises, whether or not such other person is a non-resident. Question 14: The scope of definition of case in respect of which an assessee can make an application to the Settlement Commission has been expanded Discuss the correctness or otherwise of this statement, in the context of the definition as amended by the Finance (No.2) Act, The statement is correct. Prior to 1st October, 2014, section 245A(b) defining case in respect of which an assessee may make an application to the Settlement Commission, specifically excluded from its scope (1) a proceeding for assessment or reassessment under section 147; (2) a proceeding for making fresh assessment in pursuance of an order under section 254 by the Appellate Tribunal or an order of revision under section 263 or section 264 by Commissioner, setting aside or cancelling an assessment. This exclusion has now been removed by the Finance (No.2) Act, 2014 with effect from 1st October, Therefore, the proceedings mentioned in (1) and (2) above would now fall within the definition of case in respect of which an assessee can make an application to the Settlement Commission under section 245C.