The Hindu Business Line : A not-so-taxing paper

The question paper is in standard format with most questions being problems or situation analysis. Out of 93 marks on income-tax (with choice), 30 marks relate to theory and the balance are on logical reasoning and computation problems.

The first question relates to computation of total income with emphasis on salary income, income under the head ‘other sources’ and clubbing provisions.

Calculation of taxable educational allowance and medical allowance are to be answered based on Section 10(14). Perquisite valuation of rent-free accommodation, payment of electricity bill by employer and provision of CD player and laptop without transfer of ownership are to be decided for arriving at the solution.

The other part of the question is a straightforward one relating to computation of depreciation claim with addition in the first half of the year and disposal of the new acquisition in the second half year.

There is no ambiguity in the question and one of the questions on this sub-part relates to computation of short-term capital gain and the possibility of claiming any depreciation where the block value is nil.

Apparent error

The second question with choice relates to sale of shares privately, which is taxable under Section 112.

In the first paragraph, it is stated that the transferor is a male by the use of expression “to his brother” and in the last para it is stated that “she has no other source of income, compute her total income”.

Barring this apparent error, there is nothing to test the students, except making simple calculation of capital gain.

Except test relating to denial of deduction under chapter VI-A against long-term capital gain, it is a simple way to test for securing 12 marks.

As there is an apparent contradiction in the question as regards the gender of the taxpayer, students may compute the tax liability by taking the basic exemption limit at Rs 1.10 lakh or at Rs 1.45 lakh and both require evaluation.

The other alternative consists of testing the recent change of law relating to receipt of amount from Government by way of compensation on disaster under the Disaster Management Act, 2005. The other sub-part of the question relates to taxability of gifts in cash or in kind.

The third question, relating to true or false, has one seeking whether a return could be filed after the expiry of due date. It is too simple for the students to give a wrong answer. Similarly, is income from growing and manufacturing tea wholly agricultural income is a simple question.

The fourth question relating to shipping business in the case of non-resident in somewhat difficult to answer but it is compensated by three options, which are simple and straightforward.

The fifth and sixth questions on Central Sales Tax relating to true or false, fill in the blanks and a simple computation problem are gifts to students to secure high marks.

The entire question paper is easy to answer and does not pose any surprise or difficulty.

(The author is an Erode-based chartered accountant.)