The Applied Direct Taxation paper of Cost Accountancy Examination held on the 14th instant is interesting and comprehensive in coverage.
The objective type question consisting of multiple choice and ‘fill up the blanks’ included meaning of senior citizen, taxability of self-generated goodwill of profession, introduction of personal motor car into business, taxation of unrealised rent, perquisite value of transport allowance, research allowance and taxation of bad debt recovery.
The ‘fill up the blanks’ part contained interesting issues such as PPF contribution in the name of minor child vis a vis deduction under section 80C, enhanced limit of exemption for gratuity and taxation of provident fund contribution recovered out of salary by the employer.
Impact of residential status
A question on the computation of total income based on different residential statuses of taxpayers tested conceptual skills such as dividend of Korean company received by a non-resident outside India, income from nursery in Gujarat and rental income in Sri Lanka subsequently remitted through the banking channel to India. Yet another question on the residential status of a company was more than enough to test the candidates on residential status.
To test their understanding on exemptions, computing the income of a Sikkimese woman marrying a person twice, on different dates as per two different customs, poses a challenge to the conceptual skills of the candidates.
Computation of tax liability of a domestic company having total income of Rs 120 lakh, which included long-term capital gain of Rs 30 lakh, to determine applicability of surcharge completed the round-up of questions on fundamentals of income-tax.
Questions such as computation of salary income with employer’s contribution to notified pension scheme entitling deduction beyond the maximum limit of Rs 1 lakh under section 80 CCF is on the recent amendment. Due dates for furnishing the return by a non-working partner of LLP and computation of the tax liability of LLP reflect the modern trends of business and skill sets required.
Eligibility in the case of donation to the scientific research programme of a university by a person carrying on business vis a vis a salaried employee, tests the awareness of differential treatment prescribed in law. The question on computation of deduction under section 35D in respect of extension of existing business with relevant information and payment of salary to a managing director whose HUF has shareholding in the employer-company for deciding the taxability of salary, is too challenging for students of this level.
The question on carry forward and set off of losses including income from growing and manufacturing of coffee of current fiscal and eligibility for tax incentive for tax saver deposit in the name of spouse tests the candidates in full measure.
A sub-question on tax deduction under section 194-I comprising sub-lease of building with furniture and fittings seems practical. Computing the time and rate for tax deduction vis a vis remittance to the exchequer are too difficult for candidates.
The questions on wealth tax stating jewellery as stock in trade and unauthorised construction of a building are novel. Jewellery, normally liable for wealth tax, would be tax-free when it is held as stock in trade. An unauthorised construction is specifically excluded from the levy of wealth tax.
Other issues covered relate to co-parcenery interest in HUF and wealth tax on motor car. A sub-question on valuation of self-occupied property for wealth tax, however, is routine, meant to provide some relief to the students.
(The author is an Erode-based chartered accountant)