INCOME TAX

MOCK TEST Questions &

Answers

BY VG SIR

BE HONEST WITH YOURSLEF

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 3.338 INCOME TAX LAW

To Loss on sale of 8,100

shares (Short-term)
To Other general 7,060
expenses
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 and Closing Stock, the values of which were:

Opening stock ` 9,000

Closing stock ` 18,000

(ii) Salary includes ` 10,000 paid to his brother, which is unreasonable to

the extent of ` 2,000.
(iii) The whole amount of printing and stationery was paid in cash by way of
one-time payment to Mr. Ramesh.
(iv) The depreciation provided in the Profit and Loss Account ` 1,05,000 was
based on the following information:
The opening balance of plant and machinery (i.e., the written down value
as on 31.3.2023 minus depreciation for P.Y. 2022-23) is ` 4,20,000. A new
plant falling under the same block of depreciation was bought on
01.7.2023 for ` 70,000. Two old plants were sold on 1.10.2023 for ` 50,000.
(v) Rent and rates includes GST liability of ` 3,400 paid on 7.4.2024.

(vi) Other general expenses include ` 2,000 paid as donation to a Public

Charitable Trust.
You are required to compute the profits and gains of Mr. Sivam under
presumptive taxation u/s 44AD and profits and gains as per the regular
provisions of the Act assuming he has exercised the option of shifting out of
the default tax regime provided under section 115BAC(1A). Assume that the
whole of the amount of turnover received by account payee cheque or use of
electronic clearing system through bank account during the previous year.

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 3.350 INCOME TAX LAW

(vi) Allowable as deduction: The limit for attracting disallowance under

section 40A(3) for payment otherwise than by way of account payee

ANSWERS
cheque or account payee bank draft or use of ECS through a bank
account or through such other prescribed electronic mode is ` 35,000
in case of payment made for plying, hiring or leasing goods carriage.
Therefore, in the present case, disallowance under section 40A(3) is
not attracted for payment of ` 30,000 made in cash to a transporter
for carriage of goods.

6. (a) True: In order to escape the disallowance specified in section 40A(3),

payment in respect of the business expenditure ought to have been

OF MOCK
made through an account payee cheque. Payment through a crossed
cheque will attract disallowance under section 40A(3).
(b) (i) True: It is mandatory to write off the amount due from a debtor
as not receivable in the books of account, in order to claim the
same as bad debt under section 36(1)(vii). However, where the
debt has been taken into account in computing the income of
the assessee on the basis of ICDSs notified under section 145(2),

TEST
without recording the same in the accounts, then, such debt
shall be allowed in the previous year in which such debt
becomes irrecoverable and it shall be deemed that such debt or
part thereof has been written off as irrecoverable in the accounts
for the said purpose.
(ii) True: Section 40(a)(i) provides that failure to deduct tax at
source from, inter alia, rent or royalty payable to a non-resident,
in accordance with the provisions of Chapter XVII-B, will result in
disallowance of such expenditure, where the non-resident payee
has not paid the tax due on such income.

①
7. Computation of business income of Mr. Sivam for the A.Y. 2024-25

Particulars ` `
Net Profit as per profit and loss account 50,000
Add: Inadmissible expenses/ losses
Under valuation of closing stock 18,000
Salary paid to brother – unreasonable 2,000
[Section 40A(2)]
Printing and stationery - whole amount of 23,200

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 PROFITS & GAINS OF BUSINESS OR PROFESSION 3.351

printing & stationery paid in cash would be

disallowed, since such amount exceeds
` 10,000 [Section 40A(3)]
Depreciation (considered separately) 1,05,000
Short term capital loss on shares 8,100
Donation to public charitable trust 2,000 1,58,300
2,08,300
Less: Items to be deducted:
Under valuation of opening stock 9,000

Income from UTI [Chargeable under the 2,400 11,400

head “Income from Other Sources]
Business income before depreciation 1,96,900
Less: Depreciation (See Note 1) 66,000
1,30,900
Computation of business income as per section 44AD:
As per section 44AD, where the amount of turnover is received, inter alia, by
way of account payee cheque or use of electronic clearing system through
bank account or through such other prescribed electronic modes, the
presumptive business income would be 6% of turnover, i.e., ` 1,12,11,500 x
6 /100 = ` 6,72,690
Notes:
1. Calculation of depreciation

Particulars `
Opening balance of plant & machinery as on 1.4.2023 4,20,000
(i.e. WDV as on 31.3.2023 (-) depreciation for P.Y. 2022-23)
Add: Cost of new plant & machinery 70,000
4,90,000
Less: Sale proceeds of assets sold 50,000
WDV of the block of plant & machinery as on 31.3.2024 4,40,000
Depreciation@15% 66,000
No additional depreciation is allowable as the assessee is
not engaged in manufacture or production of any article.

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 3.352 INCOME TAX LAW

2. Since GST liability has been paid before the due date of filing return of
income under section 139(1), the same is deductible.

8. Section 44AE would apply in the case of Mr. Sukhvinder since he is engaged
in the business of plying goods carriages and owns not more than ten
goods carriages at any time during the previous year.

Section 44AE provides for computation of business income of such assesses

on a presumptive basis. The income shall be deemed to be ` 1,000 per ton
of gross vehicle weight or unladen weight, as the case may be, per month or
part of the month for each heavy goods vehicle and ` 7,500 per month or
part of month for each goods carriage other than heavy goods vehicle,
owned by the assessee in the previous year or such higher sum as declared
by the assessee in his return of income.
Mr. Sukhvinder’s business income calculated applying the provisions of
section 44AE is ` 13,72,500 (See Notes 1 & 2 below) and his total income
would be ` 14,42,500.
However, as per section 44AE(7), Mr. Sukhvinder may claim lower profits
and gains if he keeps and maintains proper books of account as per section
44AA and gets the same audited and furnishes a report of such audit as
required under section 44AB. If he does so, then his income for tax purposes
from goods carriages would be ` 4,45,000 instead of ` 13,72,500 and his
total income would be ` 5,15,000.
Notes:
1. Computation of total income of Mr. Sukhvinder for A.Y. 2024-25

Particulars Presumptive Where books

income are maintained
` `
Income from business of plying
goods carriages [See Note 2 13,72,500 4,45,000
Below]
Other business and non-business 70,000 70,000
income
Total Income 14,42,500 5,15,000

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②
EP-TL&P Computation of Total Income and Tax Liability of various Entities

Profits and Gains of Business & Profession 4,22,000

(II) Income from other sources Interest on debenture 40,000

Gross Total Income (I + II) 4,62,000

Less: Deduction U/S 80C – 80U

(i) Premium on life insurance policy (u/s 80C) (Note 1) (5,000)

(ii) Health insurance Premium (u/s 80 D) (5,000)

Total Taxable Income 4,52,000

Note
1. Under section 80C deduction of life insurance premium cannot exceed 10% of the sum assured.
2. Under Section 36(1)(iii) Interest paid on borrowed capital is allowed as a deduction. Interest on own
capital is not deductible. Similarly, interest on money borrowed to pay income tax in not allowed as
a deduction.
Option 2: Assessee is paying tax as per Section 115BAC

Particulars Amount (Rs.) Amount (Rs.)

(I) Income from Business

Net profit for the year 4,00,000

Add: Expenses not allowed under Income tax act but debited to P & L A/c

Interest on capital (Note 2) 12,000

Depreciation as per books of A/c 34,000

Advance tax 25,000

General Expenses 5,000

Salary to Vinay 20,000

Interest on loan (Note 2) 8,000 1,04,000

Less: Income not related to business and profession but Credited to

P& L A/c

Interest on debentures 40,000

Deductible expenses not debited to P&L Account

Depreciation as per Income tax Act (Working Note) 42,000 (82,000)

Profits and Gains of Business & Profession 4,22,000

(II) Income from other sources Interest on debenture 40,000

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 a 9.64 INCOME TAX LAW

(2) Since Siddhant’s own flat in a co-operative housing society, which he

=
has rented out to a nationalized bank, is also in Delhi, he is not
eligible for deduction under section 80GG in respect of rent paid by
him for his accommodation in Delhi, since one of the conditions to be
satisfied for claiming deduction under section 80GG is that the
assessee should not own any residential accommodation in the same
place.
12. Computation of Total Income of Mr. Ramdin for the A.Y.2024-25
under normal provisions of the Act

Particulars ` `
Income from Salaries
Basic Salary (` 15,000 x 12) 1,80,000
Dearness Allowance (` 12,000 x12) 1,44,000
Commission on Turnover (0.5% of ` 50 lacs) 25,000
Bonus 50,000
Gratuity (See Note 1) 30,000
Employer’s contribution to recognized provident fund
Actual contribution [20% of ` 1,80,000] 36,000
Less: Exempt (See Note 2) 33,240 2,760
Interest credited in recognized provident fund 15,000
account @15% p.a.
Less: Exempt upto 9.5% p.a. 9,500 5,500
Gift of gold ring worth ` 10,000 on 25th wedding
anniversary by employer (See Note 3) 10,000
Perquisite value of music system given for
personal use (being 10% of actual cost) i.e. 10% 8,500
of ` 85,000
4,55,760
Less: Standard deduction under section 16(ia) 50,000
4,05,760
Profits and Gains of Business or Profession
Lease of 2 light goods vehicles on contract basis
against fixed charges of ` 6,500 p.m. In this case, 1,80,000

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 INCOME TAX LIABILITY – COMPUTATION a
9.65
AND OPTIMISATION
a

presumptive tax provisions of section 44AE will

apply i.e. ` 7,500 p.m. for each of the two light
goods vehicle (` 7,500 x 2 x 12). He cannot claim
lower profits and gains since he has not
maintained books of account.
Income from Other Sources
Interest on bank FDRs 5,860
Interest on debentures (` 6786 x 100/90) 7,540 13,400
Gross total Income 5,99,160
Less: Deductions under Chapter VI-A
14B Section 80C
Premium on life insurance policy 15,370
Investment in NSC 30,000
FDR of SBI for 5 years 50,000
Employee’s contribution to recognized provident 30,000 1,25,370
fund
Section 80D – Mediclaim Insurance 22,500
Section 80G (See Note 4) 10,600
Total Income 4,40,690
Tax on total income
Income-tax [5% of ` 1,90,690 (i.e., ` 4,40,690 – 9,535
` 2,50,000)
Less: Rebate u/s 87A, since total income does not
exceed ` 5,00,000 9,535
Tax liability Nil
Less: Tax deducted at source (` 7,540 – ` 6,786) 754
Net tax refundable 754
Tax refundable (rounded off) 750

Notes:

1. Gratuity received during service is fully taxable.

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 a 9.66 INCOME TAX LAW

2. Employer’s contribution in the recognized provident fund is exempt

up to 12% of the salary i.e. 12% of (Basic Salary + DA for retirement
benefits + Commission based on turnover)
= 12% of (` 1,80,000+ (50% of ` 1,44,000)+ ` 25,000)

= 12% of 2,77,000 = ` 33,240

3. An alternate view possible is that only the sum in excess of ` 5,000 is
taxable in view of the language of Circular No.15/2001 dated
12.12.2001 that such gifts upto` 5,000 in the aggregate per annum
would be exempt, beyond which it would be taxed as a perquisite. As
per this view, the value of perquisite would be ` 5,000. In such a case
the Income from Salaries would be ` 4,00,760.
4. Deduction under section 80G is computed as under:

Particulars `
Donation to PM National Relief Fund (100%) 5,100
Donation to institution approved under section 80G (50%
of ` 11,000) (amount contributed ` 11,000 or 10% of
Adjusted Total Income i.e. ` 45,129, whichever is lower) 5,500
Total deduction 10,600

Adjusted Total Income = Gross Total Income − Deductions under

section 80C and 80D = ` 5,99,160 − ` 1,47,870 = ` 4,51,290.
13. Computation of total income of Mr. X for A.Y.2024-25

Particulars ` `

Income from Salaries

Basic salary (` 25,000 x 9 months) 2,25,000
House rent allowance:
Actual amount received (` 6,000 x 9 months) 54,000
Less : Exemption under section 10(13A)(Note 1) 36,000 18,000
Gratuity:
Actual amount received 3,50,000
Less: Exemption under section 10(10)(ii) (Note 2) 3,50,000 -

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Deductions LESSON 10

He earned a long-term capital gain of Rs. 15,000 on sale of gold during the year.
Solution:

A. Computation of Total Income Rs. Rs.

Income from Basic Salary 3,00,000

Less : Deduction under section 16(ia) – Standard Deduction (50,000)

2,50,000

Income from house property

Rent Received 48,000

Less : Statutory Deduction @ 30% (14,400) 33,600

Capital Gains

Long-term capital gains 15,000

Income from other sources

Dividend from co-operative society 1,000

Interest on saving bank deposits 18,000

Interest on government Securities 1,000

Winning from Lotteries 5,000 25,000

Gross Total Income 3,23,600

Less : Deduction under section 80C to 80U

(i) Under section 80C Rs. (10,000 + 30,000) (40000)

(ii) Under section 80TTA (10,000)

(iii) Under section 80U (75,000) (1,25,000)

Total Income 1,98,600

B. Computation of Tax on Total Income

Tax on winning from lotteries (30% of Rs.5,000) 1,500

Tax on long-term capital gains (20% of Rs.15,000) 3,000

Balance of Total Income Rs. 1,78,600 Nil

Tax payable, bring total income below Rs. 2,50,000 Nil

Note: The solution has been made assuming the assessee has not opted to pay tax under section 115BAC
of the Income Tax Act, 1961.

393
 6.108 INCOME TAX LAW

Medical insurance premium paid ` 52,000 for

parents, being senior citizens, restricted to 50,000 75,000
Eligible deduction under Chapter VI-A 2,25,000

⑤
6. Computation of deduction u/s 10AA of the Income-tax Act, 1961
As per section 10AA, in computing the total income of Mr. Rudra from his
unit located in a Special Economic Zone (SEZ), which begins to manufacture
or produce articles or things or provide any services during the previous year
relevant to the assessment year commencing on or after 01.04.2006 but
before 01.04.2021, there shall be allowed a deduction of 100% of the profit
and gains derived from export of such articles or things or from services for
a period of five consecutive assessment years beginning with the assessment
year relevant to the previous year in which the Unit begins to manufacture or
produce such articles or things or provide services, as the case may be, and
50% of such profits for further five assessment years.
Since Mr. Rudra has exercised the option of shifting out of the default tax
regime provided under section 115BAC(1A), he would be eligible for
deduction u/s 10AA.
The deduction u/s 10AA would be available only if Mr. Rudra furnishes report
of chartered accountant before the date specified in section 44AB and files
return of income on or before due date u/s 139(1).
Computation of eligible deduction under section 10AA:
(i) If Unit in SEZ was set up and began manufacturing from
22-05-2015:
Since A.Y. 2024-25 is the 9th assessment year from A.Y. 2016-17,
relevant to the previous year 2015-16, in which the SEZ unit began
manufacturing of articles or things, it shall be eligible for deduction of
50% of the profits derived from export of such articles or things,
assuming all the other conditions specified in section 10AA are fulfilled.
= Profits of Unit in x Export turnover of Unit in x 50%
SEZ SEZ
Total turnover of Unit in SEZ

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 DEDUCTIONS FROM GROSS TOTAL INCOME 6.109

= 60 lakhs X 300 lakhs x 50% = ` 22.50 lakhs

400 lakhs

Export turnover of Unit in SEZ is the export sales in SEZ received in

convertible foreign exchange by 30.9.2024 which is ` 3,00,00,000.

(ii) If Unit in SEZ was set up and began manufacturing from

14-05-2019:

Since A.Y. 2024-25 is the 5th assessment year from A.Y. 2020-21,
relevant to the previous year 2019-20, in which the SEZ unit began
manufacturing of articles or things, it shall be eligible for deduction of
100% of the profits derived from export of such articles or things,
assuming all the other conditions specified in section 10AA are fulfilled.
= Profits of Export turnover of Unit in SEZ
x x 100%
Unit in SEZ Total turnover of Unit in SEZ
= 60 lakhs 300 Lakhs
x x 100% = ` 45 lakhs
400 Lakhs
The unit set up in Domestic Tariff Area is not eligible for the benefit of
deduction u/s 10AA in respect of its export profits, in both the situations.
Working Note:
Computation of total sales, export sales and net profit of unit in SEZ

Particulars Rudra Ltd. (`) Unit in DTA (`) Unit in SEZ (`)
Total Sales 6,00,00,000 2,00,00,000 4,00,00,000
Export Sales 4,60,00,000 1,60,00,000 3,00,00,000
Net Profit 80,00,000 20,00,000 60,00,000

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&
 3.178 INCOME TAX LAW

ANSWERS
1. Computation of income from house property of Mr. Raman for A.Y. 2024-25

Particulars ` `
Gross Annual Value (See Note 1 below) 1,80,000
Less: Municipal taxes – paid by the tenant, hence not Nil
deductible
Net Annual Value (NAV) 1,80,000
Less: Deductions under section 24
(i) 30% of NAV 54,000
(ii) Interest on housing loan (See Note 2 below)
- Interest on loan taken from bank 25,000
- Interest on fresh loan to repay old loan for 5,000 84,000
this property
Income from house property 96,000
50% share taxable in the hands of Mr. Raman
(See Note 3 below) 48,000
Notes:
1. Computation of Gross Annual Value (GAV)
GAV is the higher of Expected rent and actual rent received. Expected
rent is the higher of municipal value and fair rent, but restricted to
standard rent.

Particulars ` ` ` `
(a) Municipal value 1,60,000
(b) Fair rent 1,50,000
(c) Higher of (a) and (b) 1,60,000
(d) Standard rent 1,70,000
(e) Expected rent [lower of 1,60,000
(c) and (d)]
(f) Actual rent [` 15,000 x 12] 1,80,000
(g) Gross Annual Value 1,80,000
[higher of (e) and (f)]

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 INCOME FROM HOUSE PROPERTY 3.179

2. Interest on housing loan is allowable as a deduction under section 24

on accrual basis. Further, interest on fresh loan taken to repay old loan
is also allowable as deduction. However, interest on unpaid interest is
not allowable as deduction under section 24.
3. Section 26 provides that where a house property is owned by two or
more persons whose shares are definite and ascertainable, the share
of each such person in the income of house property, as computed in
accordance with sections 22 to 25, shall be included in his respective
total income. Therefore, 50% of the total income from the house
property is taxable in the hands of Mr. Raman since he is an equal
owner of the property.
2. Computation of Income from house property for A.Y. 2024-25
Particulars

X
` `
(A) Rented unit (50% of total area – See Note
below)
Step I - Computation of Expected Rent
Municipal valuation (` 1,90,000 x ½) 95,000
Fair rent (` 1,85,000 x ½) 92,500
Standard rent (` 1,62,000 x ½) 81,000
Expected Rent is higher of municipal valuation 81,000
and fair rent, but restricted to standard rent
Step II - Actual Rent
Rent received/receivable for the let out period 80,000
(` 8,000 x 10)
Step III – Computation of Gross Annual Value
The actual rent of ` 80,000 is lower than ER of 80,000
` 81,000 owing to vacancy, since, had the
property not been vacant the actual rent would
have been ` 96,000 (` 80,000 + ` 16,000, being
notional rent for two months. Therefore, actual
rent is the GAV.
Gross Annual Value 80,000
Less: Municipal taxes (5% of ` 95,000) 4,750
Net Annual value 75,250

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⑲
 3.132 INCOME TAX LAW

(ii) Leave salary actually received ` 3,15,000

(iii) ` 2,50,000, being 10 months’ salary x
` 25,000
(iv) Cash equivalent of leave standing at the
credit of the employee based on the
average salary of last 10 months’ (max. 30
days per year of service) for every year of
actual service rendered for the employer
from whose service he has retired
375/30 x ` 25,000 = ` 3,12,500
[Leave Due = Leave allowed – Leave taken]
= 750 (30 days per year × 25 years) – 375
days (15 days x 25)
= 375 days]
Uncommuted Pension received [` 5,000 x 1) + 9,000
(` 5,000 x 2 x 40%)
Commuted Pension received 3,00,000
Less: Exempt under section 10(10A)
1/3 x ` 3,00,000/60% x 100%) 1,66,667 1,33,333
Gift Voucher [As per Rule 3(7)(iv), the value of Nil
any gift or voucher or token in lieu of gift
received by the employee or by member of his
household not exceeding ` 5,000 in aggregate
during the previous year is exempt]
Mobile Phone received as gift from colleagues Nil
(Neither taxable under the head “Salaries” nor
“Income from other sources”, since taxability
provisions under section 56(2)(x) are not
attracted in respect of mobile phone received
from colleagues, as mobile phone is not
included in the definition of “property”
thereunder)
Gross Salary 4,86,333

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a 5.36 INCOME TAX LAW

Income from speculative business B 5,000

Less: Loss of ` 25,000 from speculative business A
set-off as per section 73(1) to the extent of ` 5,000 5,000 Nil
Balance loss of ` 20,000 from speculative business A
to be carried forward to A.Y.2025-26 as per section
73(2)
Loss of ` 20,000 from specified business covered
under section 35AD to be carried forward for set-
off against income from specified business as per
section 73A.
Capital Gains
Long term capital gain on sale of urban land 2,00,000
Less: Long term capital loss on sale of shares (STT
not paid) set-off as per section 74(1)]
75,000
Less: Long-term capital loss on sale of listed shares
on which STT is paid can also be set-off as per
section 74(1), since long-term capital arising on sale
of such shares is taxable under section 112A 1,02,000 23,000
Total Income 1,63,000

Items eligible for carried forward to A.Y.2025-26

Particulars `
Loss from House property 50,000
As per section 71(3A), loss from house property can be set-off
against any other head of income to the extent of ` 2,00,000
since Mr. Aditya is exercising the option of shifting out of the
default tax regime provided under section 115BAC(1A).
As per section 71B, balance loss not set-off can be carried
forward to the next year for set-off against income from house
property of that year. It can be carried forward for a maximum of
eight assessment years i.e., upto A.Y.2032-33, in this case.
Loss from speculative business A 20,000
Loss from speculative business can be set-off only against profits
from any other speculation business. As per section 73(2), balance
loss not set-off can be carried forward to the next year for set-off
AGGREGATION OF INCOME, SET-OFF AND CARRY
5.37 a
FORWARD OF LOSSES
against speculative business income of that year. Such loss can be
carried forward for a maximum of four assessment years i.e., upto
A.Y.2028-29, in this case, as specified under section 73(4).
Loss from specified business 20,000
Loss from specified business under section 35AD can be set-off
only against profits of any other specified business. If loss cannot
be so set-off, the same has to be carried forward to the
subsequent year for set off against income from specified
business, if any, in that year. As per section 73A(2), such loss can
be carried forward indefinitely for set-off against profits of any
specified business.
Mr. Aditya is entitled to deduction u/s 35AD, since he has
exercised the option of shifting out of the default tax regime
provided under section 115BAC(1A). He can, accordingly, carry
forward loss from such business indefinitely for set off against
profits of any other specified business.
Loss from the activity of owning and maintaining race horses 2,000
Losses from the activity of owning and maintaining race horses
(current year or brought forward) can be set-off only against
income from the activity of owning and maintaining race horses.
If it cannot be so set-off, it has to be carried forward to the next
year for set-off against income from the activity of owning and
maintaining race horses, if any, in that year. It can be carried
forward for a maximum of four assessment years, i.e., upto
A.Y.2026-27, in this case, as specified under section 74A(3).

6. Computation of Gross Total Income of Mr. Garg for the A.Y. 2024-25

X
Particulars ` `

(i) Income from salary 15,000

(ii) Profits and gains of business or profession 66,000
Less: Unabsorbed depreciation brought forward from
A.Y.2023-24 (Unabsorbed depreciation can be
set-off against any head of income other than
“salary”) 11,000 55,000
(iii) Capital gains
Long-term capital gain on sale of land 10,800
 a 9.44 INCOME TAX LAW

Tax@15% of ` 65,00,000 9,75,000

Tax on other income of ` 3,30,00,000
` 3,00,000 – ` 6,00,000 @5% 15,000
` 6,00,000 – ` 9,00,000 @10% 30,000
` 9,00,000 – ` 12,00,000 @15% 45,000
` 12,00,000 – ` 15,00,000 @20% 60,000
` 15,00,000 – ` 3,30,00,000 @30% 94,50,000 96,00,000
1,16,75,000
Add: Surcharge @15% on ` 20,75,000 3,11,250
@25% on ` 96,00,000 24,00,000 27,11,250
1,43,86,250
Add: Health and education cess @4% 5,75,450
Tax Liability 1,49,61,700

Computation of tax liability of Mr. Agarwal for the A.Y.2024-25

under normal provisions of the Act

Particulars `
Tax on total income of ` 4,50,00,000
Tax@20% of ` 55,00,000 11,00,000
Tax@15% of ` 65,00,000 9,75,000
Tax on other income of ` 3,30,00,000
` 2,50,000 – ` 5,00,000 @5% 12,500
` 5,00,000 – ` 10,00,000 @20% 1,00,000
` 10,00,000 – ` 3,30,00,000 @30% 96,00,000 97,12,500
1,17,87,500
Add: Surcharge @15% on ` 20,75,000 3,11,250
@25% on ` 97,12,500 24,28,125 27,39,375
1,45,26,875
Add: Health and education cess @4% 5,81,075
Tax Liability 1,51,07,950

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 PROFITS & GAINS OF BUSINESS OR PROFESSION 3.341

10. Mr. Tenzingh is engaged in composite business of growing and curing (further

·
processing) coffee in Coorg, Karnataka. The whole of coffee grown in his
plantation is cured. Relevant information pertaining to the year ended 31.3.2024
are given below:

Particulars `
Opening balance of car (only asset in the block) as on 1.4.2023 3,00,000
(i.e. WDV as on 31.3.2023 (-) depreciation for P.Y. 2022-23)
Opening balance of machinery as on 1.4.2023 (i.e., WDV as on 15,00,000
31.3.2023 (-) depreciation for P.Y. 2022-23)
Expenses incurred for growing coffee 3,10,000
Expenditure for curing coffee 3,00,000
Sale value of cured coffee 22,00,000

Besides being used for agricultural operations, the car is also used for
personal use; disallowance for personal use may be taken at 20%. The
expenses incurred for car running and maintenance are ` 50,000. The
machines were used in coffee curing business operations.
Compute the income arising from the above activities for the A.Y. 2024-25.

ANSWERS
1. Computation of written down value of block of assets of
Venus Ltd. as on 31.3.2024

Particulars Plant & Computer

Machinery
(` in lacs) (` in lacs)
Written down value (as on 31.3.2023) 30.00 Nil
Less: Depreciation including additional 4.75 -
depreciation for P.Y. 2022-23
Opening balance as on 1.4.2023 25.25
Add: Actual cost of new assets acquired
during the year
New machinery purchased on 1.9.2023 10.00 -
New machinery purchased on 1.12.2023 8.00 -

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 3.342 INCOME TAX LAW

Computer purchased on 3.1.2024 - 4.00

43.25 4.00
Less: Assets sold/discarded/destroyed Nil Nil
during the year
Written Down Value (as on 31.03.2024) 43.25 4.00

(i) If Mr. Venus exercises the option of shifting out of the default tax
regime provided under section 115BAC(1A)
In this case, since his income would be computed under the optional tax
regime as per the normal provisions of the Act, he would be entitled for normal
depreciation and additional depreciation, subject to fulfilment of conditions.
Computation of depreciation for A.Y. 2024-25

Plant & Computer

Particulars Machinery
(` in lacs) (` in lacs)
I. Assets put to use for more than 180
days, eligible for 100% depreciation
calculated applying the eligible rate
of normal depreciation and
additional depreciation
Normal Depreciation
- WDV of plant and machinery 3.79 -
(` 25.25 lacs x 15%)
- New Machinery purchased on 1.50 -
1.9.2023 (` 10 lacs x 15%)
(A) 5.29 -
Additional Depreciation
New Machinery purchased on 2.00 -
1.9.2023 (` 10 lakhs x 20%)
Balance additional depreciation in
respect of new machinery purchased
on 31.10.2022 and put to use for less 1.00
than 180 days in the P.Y. 2022-23
(` 10 lakhs x 20% x 50%)
(B) 3.00

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 PROFITS & GAINS OF BUSINESS OR PROFESSION 3.343

II. Assets put to use for less than 180

days, eligible for 50% depreciation
calculated applying the eligible rate
of normal depreciation and
additional depreciation, if any
Normal Depreciation
New machinery purchased on 0.60 -
1.12.2023 [` 8 lacs x 7.5% (i.e., 50% of
15%)]
Computer purchased on 3.1.2023
[` 4 lacs x 20% (50% of 40%)] - 0.80
(C) 0.60 0.80
Total Depreciation (A+B+C) 8.89 0.80

Notes:
(1) As per section 32(1)(iia), additional depreciation is allowable in the
case of any new machinery or plant acquired and installed after
31.3.2005, by an assessee engaged, inter alia, in the business of
manufacture or production of any article or thing, at the rate of 20%
of the actual cost of such machinery or plant.

However, additional depreciation shall not be allowed in respect of,

inter alia,–
(i) any office appliances or road transport vehicles;
(ii) any machinery or plant installed in, inter alia, office premises.
In view of the above provisions, additional depreciation cannot be
claimed in respect of -
(i) Machinery purchased on 1.12.2023, installed in office and
(ii) Computer purchased on 3.1.2024, installed in office.
(2) Balance additional depreciation@10% on new plant or machinery
acquired and put to use for less than 180 days in the year of
acquisition which has not been allowed in that year, shall be allowed
in the immediately succeeding previous year.
Hence, in this case, the balance additional depreciation@10% (i.e., ` 1
lakhs, being 10% of ` 10 lakhs) in respect of new machinery which had

© The Institute of Chartered Accountants of India

 3.344 INCOME TAX LAW

been purchased during the previous year 2022-23 and put to use for
less than 180 days in that year can be claimed in P.Y. 2023-24 being
immediately succeeding previous year.
(i) If Mr. Venus pays tax under default tax regime under section 115BAC
In this case, under the default tax regime as per section 115BAC, he would
be entitled only for normal depreciation but not additional depreciation.
Computation of depreciation for A.Y. 2024-25

Plant & Computer

Particulars Machinery (` in lacs)
(` in lacs)
I. Assets put to use for more than 180
days, eligible for 100% depreciation
calculated applying the eligible rate of
normal depreciation
Normal Depreciation
- WDV of plant and machinery 3.79 -
(` 25.25 lacs x 15%)
- New Machinery purchased on 1.50 -
1.9.2023 (` 10 lacs x 15%)
(A) 5.29 -
II. Assets put to use for less than 180 days,
eligible for 50% depreciation calculated
applying the eligible rate of normal
depreciation
Normal Depreciation
New machinery purchased on 1.12.2023 0.60 -
[` 8 lacs x 7.5% (i.e., 50% of 15%)]
Computer purchased on 3.1.2023 [` 4 lacs
x 20% (50% of 40%)] - 0.80
(C) 0.60 0.80
Total Depreciation (A+B+C) 5.89 0.80

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