INCOME TAX LAW AND PRACTICE - COMPREHENSIVE PYQ ANALYSIS

📊 OVERALL PYQ ANALYSIS

Based on the uploaded question papers for B.Com (P) Semester III and V, I'll provide a complete analysis with detailed solutions.

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📋 SYLLABUS MAPPING & TOPIC CLASSIFICATION

UNIT-WISE DISTRIBUTION

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📈 TOPIC-WISE FREQUENCY TABLE

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🔄 REPEATED QUESTIONS TABLE

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📊 DIFFICULTY ANALYSIS

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PREDICTION FOR NEXT EXAMINATION

Based on PYQ trends (Note: Predictions are not guaranteed):

Most Likely Topics:

1. ✅ Residential Status with case studies (100% probability)

2. ✅ Salary computation with perquisites (100% probability)

3. ✅ House Property with multiple houses (90% probability)

4. ✅ Capital Gains with indexation & exemptions (90% probability)

5. ✅ PGBP with disallowances (80% probability)

6. ✅ Deductions under Chapter VI-A (80C, 80D) (85% probability)

Expected Question Pattern:

• Semester III: 6 questions, attempt 4, 55 marks total

• Semester V: All questions compulsory, 90 marks total

• Mix of theory (30%) and numerical (70%)

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DETAILED SOLUTIONS

Let me now provide detailed solutions for each question. I'll organize them by semester and year.

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SEMESTER III - DETAILED SOLUTIONS

QUESTION 1: DEPRECIATION COMPUTATION

[AY 2021-22 | 55 Marks Paper | Difficulty: Moderate]

Question:

The written down value of the block of Machinery and Plant (Rate of depreciation: 15%) consisting of three plants A, B and C, on 1 April 2020 was Rs. 20,00,000. Machine D was acquired as well as put to use on 7 July 2020 for Rs. 3,00,000 and Machine E was acquired as well as put to use on 9 December 2020 for Rs. 4,00,000. Machine B and C were sold for Rs. 5,00,000 (expenses on sale: Rs. 50,000). Compute:

• a) The written down value of the block on 31 March 2021

• b) The depreciation under section 32 for the assessment year 2021-22

• c) The additional depreciation under section 32 for the assessment year 2021-22

• d) The written down value of the block on 1 April 2021

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SOLUTION:

Given Information:

• Opening WDV (1.4.2020): Rs. 20,00,000

• Rate of Depreciation: 15%

• Machine D (Old): Rs. 3,00,000 (acquired 7.7.2020 - used for <180 days)

• Machine E (New): Rs. 4,00,000 (acquired 9.12.2020 - used for <180 days)

• Sale of B & C: Rs. 5,00,000

• Sale Expenses: Rs. 50,000

• Net Sale Consideration: Rs. 4,50,000

Step-by-Step Calculation:

Step 1: Calculate Total Block Value

Step 2: Calculate Normal Depreciation

Since additions were put to use for less than 180 days, depreciation @ 7.5% (50% of 15%) will be allowed on additions.

Depreciation Calculation:

Step 3: Calculate Additional Depreciation

Additional depreciation @ 20% is available on NEW machinery (Section 32(1)(iia)):

• Only Machine E qualifies (being NEW)

• Machine D is OLD, so no additional depreciation

• Rate: 20% (since used for <180 days, only 50% allowed = 10%)

Additional Depreciation:

= Rs. 4,00,000 × 10%

= Rs. 40,000

Step 4: Calculate Final WDV

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Final Answers:

✅ a) WDV on 31 March 2021: Rs. 18,57,500

✅ b) Normal Depreciation u/s 32: Rs. 3,52,500

✅ c) Additional Depreciation u/s 32: Rs. 40,000

✅ d) WDV on 1 April 2021: Rs. 18,57,500

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Important Points to Remember:

• ⚠️ When asset is used for less than 180 days, only 50% depreciation is allowed

• ️ Additional depreciation is available ONLY on new machinery

• ⚠️ Sale expenses are deducted from sale proceeds

• ⚠️ Manufacturing businesses get additional depreciation

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QUESTION 2: CAPITAL GAINS COMPUTATION

[AY 2021-22 | 55 Marks Paper | Difficulty: Difficult]

Question:

Mrs. X, a resident, sells the following capital assets on 31 December 2020:

Additional Information:

• Land inherited from father (died 2010-11). Father acquired on 1.1.2000 for Rs. 50,000. FMV on 1.4.2001 was Rs. 2,00,000

• Mrs. X spent Rs. 90,000 in 2013-14 on boundary wall

• Gold purchased on 22.3.2019 for Rs. 48,60,000

• Listed debentures purchased on 17.6.2018 for Rs. 7,92,000

• On 31.3.2021, purchased residential house for Rs. 46,00,000 from land sale proceeds

• Taxable income under House Property: Rs. 6,00,000

• PPF deposit: Rs. 80,000 on 7.2.2021

• Opted for section 115BAC

CII Data:

• 2001-02: 100

• 2010-11: 167

• 2013-14: 220

• 2018-19: 280

• 2020-21: 301

Compute Total Income for AY 2021-22

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SOLUTION:

Working Note 1: Capital Gain on Land

Since land was inherited, cost of acquisition will be:

• Cost to previous owner OR

• FMV as on 1.4.2001 (whichever is higher)

Indexed Cost of Acquisition:

= Cost × (CII of transfer year / CII of acquisition year or 2001-02)

= 2,00,000 × (301 / 100)

= Rs. 6,02,000

Indexed Cost of Improvement (Boundary wall):

= 90,000 × (301 / 220)

= 90,000 × 1.368

= Rs. 1,23,120

Capital Gain Calculation:

Exemption u/s 54F:

Since residential house purchased from sale proceeds:

• Amount invested: Rs. 46,00,000

• Net sale consideration: Rs. 47,52,000

• Exemption = LTCG × (Investment / Net Sale Consideration)

• Exemption = 40,26,880 × (46,00,000 / 47,52,000)

• Exemption = Rs. 38,98,000

Taxable LTCG on Land:

= 40,26,880 - 38,98,000

= Rs. 1,28,880

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Working Note 2: Capital Gain on Gold

Gold is held from 22.3.2019 to 31.12.2020 = Less than 3 years

Therefore, it's SHORT-TERM Capital Asset

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Working Note 3: Capital Gain on Listed Debentures

Purchased: 17.6.2018

Sold: 31.12.2020

Holding period: More than 1 year but less than 3 years

For listed debentures, if held for more than 12 months = LONG-TERM

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Computation of Total Income (Under Section 115BAC)

• Most exemptions/deductions are NOT available

• However, section 54F exemption is available

• Standard deduction not available

• Chapter VI-A deductions NOT available

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Final Answer:

Total Income for AY 2021-22 = Rs. 8,09,440

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Key Points:

• ✅ Inherited assets: Cost is FMV as on 1.4.2001 or actual cost, whichever is higher

• ✅ Indexation benefit available for long-term assets

• ✅ Section 54F exemption available even under 115BAC

• ✅ Gold held for less than 36 months = Short-term

• ✅ Listed debentures held for more than 12 months = Long-term

• ✅ Chapter VI-A deductions (80C, 80D, etc.) NOT available under 115BAC

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QUESTION 3: SALARY INCOME COMPUTATION

[AY 2021-22 | 55 Marks Paper | Difficulty: Moderate]

Question:

X, a regular employee of A Ltd., gets the following emoluments during PY 2020-21:

a) Basic salary: Rs. 6,000 p.m. (increased to Rs. 7,000 from 1.1.2021)

b) Dearness Allowance: Rs. 4,000 p.m. (72% forms part of salary for retirement benefits)

c) Education Allowance: Rs. 550 p.m. per child for 4 children

d) Medical Allowance: Rs. 400 p.m.

e) Transport Allowance: Rs. 1,950 p.m. (Rs. 1,700 for office-residence journey, Rs. 250 for personal needs)

f) HRA: Rs. 4,500 p.m. up to 30.11.2020 (rent paid at Ghaziabad: Rs. 5,500 p.m.)

From 1.12.2020: Furnished flat provided in Delhi

• Rent paid by employer: Rs. 7,500 p.m.

• Furniture rent (4 months): Rs. 500

• Rent recovered from X: Rs. 900 p.m.

Additional Info:

• STCG u/s 111A: Rs. 3,80,000

• From 1.1.2021, joined part-time employment with B Ltd. (Basic: Rs. 2,000 p.m.)

• Has NOT opted for section 115BAC

Compute Taxable Income for AY 2021-22

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SOLUTION:

Step 1: Calculate Basic Salary

Step 2: Calculate Dearness Allowance

DA = Rs. 4,000 × 12 months = Rs. 48,000

For retirement benefits: 72% of DA = 48,000 × 72% = Rs. 34,560

This portion will be considered for HRA, Gratuity, etc.

Step 3: Education Allowance

Exempt: Rs. 100 p.m. per child for maximum 2 children

= 100 × 2 × 12 = Rs. 2,400

Taxable:

Total received = 550 × 4 × 12 = Rs. 26,400

Taxable = 26,400 - 2,400 = Rs. 24,000

Step 4: Medical Allowance

Fully taxable = Rs. 4,800 (400 × 12)

Step 5: Transport Allowance

Exempt: Rs. 1,600 p.m. for transport (old rule applicable for AY 2021-22)

= 1,600 × 12 = Rs. 19,200

Taxable:

Total = 1,950 × 12 = 23,400

Taxable = 23,400 - 19,200 = Rs. 4,200

Step 6: HRA Calculation (Apr-Nov 2020)

Period: 8 months

HRA received = 4,500 × 8 = Rs. 36,000

Exempt HRA (Least of following):

a) Actual HRA received = Rs. 36,000

b) Rent paid minus 10% of salary:

• Rent paid = 5,500 × 8 = 44,000

• 10% of salary = 10% × [(6,000×8) + (4,000×72%×8)]

= 10% × [48,000 + 23,040] = 10% × 71,040 = 7,104

• Excess rent = 44,000 - 7,104 = Rs. 36,896

c) 40% of salary (Ghaziabad is not metro):

= 40% × 71,040 = Rs. 28,416

Least is Rs. 28,416 (Exempt)

Taxable HRA = 36,000 - 28,416 = Rs. 7,584

Step 7: Rent-Free Accommodation (Dec 2020-Mar 2021)

Period: 4 months

Valuation of Unfurnished Accommodation:

Since employer pays rent, and salary < Rs. 25 lakhs:

Value = Lower of:

a) Actual rent paid by employer, or

b) 15% of salary

Salary for this purpose:

• Basic: 7,000 × 4 = 28,000

• DA (72% portion): 4,000 × 72% × 4 = 11,520

• Total = Rs. 39,520

a) Actual rent = 7,500 × 4 = 30,000

b) 15% of salary = 15% × 39,520 = 5,928

Lower is Rs. 5,928

Add: Furniture

= Rent of furniture = Rs. 500

Total value of RFA = 5,928 + 500 = Rs. 6,428

Less: Rent recovered = 900 × 4 = 3,600

Taxable RFA = 6,428 - 3,600 = Rs. 2,828

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Computation of Income from Salary

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Total Income Computation

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Final Answer:

Taxable Income for AY 2021-22 = Rs. 5,02,412

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QUESTION 4: SET-OFF & CARRY FORWARD OF LOSSES

[AY 2021-22 | Theory | 6 Marks | Difficulty: Easy]

Question:

Explain the provisions of set-off or carry forward and set-off of losses of income under the head House Property and income under the head Capital Gains. Also explain clubbing provisions when Mr. X is employed in B Ltd. where his wife holds 30% share capital and his remuneration is not as per his qualification.

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SOLUTION:

PART A: SET-OFF OF LOSSES

11. Loss from House Property [Section 71B]

Intra-head Set-off (Same Head):

• Loss from one house property can be adjusted against income from another house property

• No restrictions

Inter-head Set-off (Different Heads):

• Loss from house property can be set off against any other head of income

• Maximum limit: Rs. 2,00,000 per year (from AY 2018-19 onwards)

• Excess loss beyond Rs. 2 lakhs CANNOT be set off with other heads

Carry Forward:

• Unadjusted loss can be carried forward for 8 assessment years

• Can be set off ONLY against income from house property

• Must file return within due date to carry forward

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22. Loss from Capital Gains [Section 71, 74]

A. Short-term Capital Loss (STCL):

• Can be set off against:

  • Short-term capital gains (STCG),