OTF MASTER’S INSTITUTE OF COMMERCE OTF

M O C K T E S T - I (TAX)(2010-11)
-----BY PARDEEP KUMAR
Office: S.C.O. 361(Level-2), Sector 44-D,Chd. Mobile No. 98140-98739
Time allowed: 3 hours Max. Marks : 80
Section- A
Students are required to attempt four questions from this part. (4 x 5)
Question No. 1. What is Agricultural Income?
Answer:- Refer Page No. 5 of our notes
Question No. 2. What do you mean by transfer?
Answer:- Refer page nos. 40 & 41 of our notes
Question No. 3. What do you understand by self-assessment?
Answer:- Refer page nos. 84 of our notes
Question No. 4. X purchases 1,000 shares in Y Ltd in August 16, 1996 for Rs. 8,000. On May
17, 1998, he gets 500 bonus shares in Y Ltd. On October 20, 2008 he acquires 1,500 right
shares at the rate of Rs. 11 per share. He sells 3,000 shares in Y Ltd. on February 12, 2010 at
the rate of Rs. 110 per share (brokerage on sale : 1%). He owns one residential house property.
He purchases a residential house on June 29, 2010 for Rs. 2,90,000. Ascertain the amount of
capital gains chargeable to tax for the assessment year 2010-11.
CII 1996-97= 305 : 1998-99 = 351 : 2008-09 = 582 : 2009-10 =682
Answer:- Refer page no. 470 of Singhania Notes
Question No. 5 Sh. Ram Mohan an employee-completed 27 years and 8 months of service with
M/s Jaipur Iron steel Ltd. and at the time of retirement on 1-1-2010, he received Rs. 3,30,000
as gratuity. His monthly salary on the date of retirement was Rs. 19,500. Find out the amount
of taxable gratuity if gratuity act applies.
Answer:- Employee is covered under Payment of Gratuity Act, 1972
Limits:-
1) Actual Gratuity Received = Rs. 3,30,000
2) Rs. 3,50,000
3) 15/26 x 19,500 x 28 = 3,15,000
Least is exempted from tax i.e. 3,15,000
Taxable = 330000 – 315000 = 15000
Question No.6. Mr. Singh holds following securities on 1st April, 2009:
Rs. 10,000 6.5% Central Govt. loan (interest due on July 10)
Rs. 40,000 8% Debentures (not listed) of PQR Ltd.
(Interest due on May 15 and Nov. 15)
Rs. 10,000 9% National Relief Bonds
Mr. X received Rs. 4,000 as Interest on UP Govt. Loan (Non-Listed), Rs. 8,000 Interest on Bihar
Govt. Loan and Rs. 16,000 on Debentures of a Company (Non-Listed)
Income From Other Sources
Particulars Taxable Amount
Interest on Central Govt. loan (10,000 X 6.5%) 650
Interest on 8% Debentures (40,000 X 8%) 3,200
Interest on 9% National Relief Bonds Exempted
Interest on UP Govt. Loan 4,000
Interest on Bihar Govt. Loan 8,000
Interest on Debentures of a Company (16,000 X 100/100-20) 20,000
= Income from other Sources = 35,850
 Section –B
This part consists of four questions and students are required to attempt two questions from
this section. (2 x 15)
Question No.7. What do you understand by Residential Status? How it is determined. Discuss
incidence of tax also?
Answer :- Refer page nos. 2,3 & 4 of our notes
Question no. 8. What do you understand by set-off and carry forward of losses? Explain in detail.
Answer :- Refer page nos. 59, 60 & 61 of our notes
Question No. 9. Mr. Yash Chopra has 3 house properties situated at Mumbai.
Property A is let out for the Business. Property B is let out for Residential Purposes. Property C has four
identical units: Unit P – Let out for residential purposes throughout the previous year, Unit Q – Used for
own Business, Unit R – Used for own residence, Unit S – Let out for residential purposes: but w.e.f 1-1-
2010 was also used for own residence. The particulars of the property A and B are as under:
Property A Property B
Municipal Value 50,000 60,000
Actual Rent 5,000 p.m. 6,000 p.m.
Fair Rent 70,000 75,000
Standard Rent 54,000 84,000
Date of completion of construction 1-3-03 1-3-98
Municipal Taxes paid 10,000 20,000
Repairs 5,000 **
Collection Charges 4,800 4,800
Insurance premium paid 2,000 2,000
Interest on money borrowed for construction 30,000 11,000
Mr. Chopra borrowed a sum of Rs. 2,50,000 @ 12% p.a. on 1-1-2001 for construction of House A. The Entire loan is
still outstanding though interest is being paid every year. The particulars of property C are as under:-
Unit—P Unit—Q Unit—R Unit—S
Rent 3,000 p.m. 3,000 p.m. *** ***
Repairs 5,000 10,000 *** ***
Collection Charges 3,000 *** *** 2,400
Insurance premium of the house property Rs. 3,000. The municipal value & Municipal tax of the whole
property was Rs. 1,60,000 and Rs. 20,000 respectively. Interest on money borrowed for purchase of house
40,000. Lease rent of land of house property Rs. 5,000.
Income From House Property
Particulars Property -A Property-B Property -C
Unit- P
Unit- R Unit- S
Gross Annual Value 60,000 75,000 40,000Nil 40,000
Less:- municipal 10,000 20,000 5,000Nil 5,000
taxes paid by the
owner
Net Annual value 50,000 55,000 35,000 Nil 35,000
Less:- Deductions
U/s 24
Standard Deduction 15,000 16,500 10,500 Nil 10,500
Interest on loan 30,000 11,000 10,000 10,000
taken for constructn
repair or renovation
of house Property
= Income From H.P. 5,000 27,500 14,500 (10,000) 14,500
Unit-R is not taxable under this head but will be taxable under head “income from
business and profession.
Question No. 10:- DR. J.L.Gupta is renowned Medical Practitioner. The Following is the
receipts and payments A/c for the financial year 2009-10.
 Receipts Amount Payments Amount
To Balance b/f 44,000 Rent of Clinic
Consultation Fees 2008-09 24,800
2008-09 5,000 2009-10 1,200
2009-10 1,35,000 Water and electricity 2,000
Visiting fees 30,000 Purchase of professional
Loan from Bank 1,25,000 books 40,000
Sale of Medicines 60,000 Household expenses 47,800
Gifts and Presents 5,000 Collection Charges for
Royalties from journals 6,000 dividend income 100
Dividend 10,000 Motor car purchased 1,30,000
Interest on Govt. Surgical equipment
Securities 7,000 purchased 24,800
Income tax 10,000
Salary to staff 15,000
Life insurance premium 15,000
Gift to son 5,000
Interest on loan 11,000
Car expenses 15,000
Purchase of medicines 40,000
Balance c/d 45,300

1,28,000 1,28,000
Compute his income from profession for the assessment year 2009-10 after taking into account
the following information when he maintains his books on (i) Cash Basis (ii) Accrual Basis:-
a) Books worth Rs. 25,000 were purchased on 15-5-2009 and the balance on 5-02-2010.
b) Car was purchased on 1-1-2010 and the surgical equipment on 4-9-2009.
c) It is estimated that 1/3 of the use of car is for his personal use.
d) Gifts and presents include Rs. 2,000 from patients in appreciation of his medical service.
e) Opening and closing stock of medicines amounted to Rs. 10,000 and Rs. 6,000.
f) Visiting fees outstanding Rs. 20,000
g) Salary to staff outstanding Rs. 7,000 and prepaid Rs. 2,000.
Particulars Due Basis Cash Basis
Details Amount Details Amount
Professional Reciepts:-
Consultation Fees 1,35,000 1,40,000
Visiting Fees 30,000 30,000
+ outstanding 20,000 50,000 Nil
Sale of Medicines 60,000 60,000
Gifts and presents 2,000 2,000
Royalties from journals 6,000 6,000
Less:- Professional Expenses 2,53,000 2,38,000
Rent of clinic 1,200 26,000
Water and electricity 2,000 2,000
Dep. On Books 19,500 19,500
Dep. On Motor Car 6,500 6,500
Dep. On Surgical Equipments 3,720 3,720
Salary to Staff (15000+7000-2000) 20,000 15,000
Car Expenses (15000 x2/3) 10,000 10,000
Medicines Consumed (Purchased) 44,000 1,06,920 40,000 1,22,720
= Professional Gain 1,46,080 1,15,280
 Section-C
This part consists of four questions and students are required to attempt two questions from
this section. (2 x 15)
Question No 11. How would you determine the amount of deduction in respect of Certain
Donations? Discuss in detail with the help of illustration.
Answer:- Refer page nos. 63 & 64 of our notes
Question No 12. What is the procedure for assessment? Explain in detail.
Answer:- Refer page nos. 84 to 89 of our notes
Question No.13. X (28 years) and Y (26 years) are two partners of XY Co. (a firm of chartered
accountants). On March 31, 2009, there is no provision for payment of salary and interest to
partners. On April 1, 2009, the deed of partnership has been amended to provide salary and
interest as follows:
X Y
Salary Rs. 20,833 p.m. Rs. 25,000 p.m.
Interest 24 per cent p.a. 24 per cent p.a.
The income and expenditure account of XY Co. for the year ending March 31, 2010 is as
follows:
Office expenses 2,10,000 Receipt from clients 10,10,000
Salary to employees 70,000 Interest recovered from X and
Income tax 42,000 Y on drawings 3,000
Salary to X 2,50,000
Salary to Y 3,00,000
Interest on capital to X@ 24% 16,000
p.a. 19,000
Interest on capital to Y @ 24%
p.a. Net profit (shared by X and
Y 1,06,000
equally as per the terms of
partnership deed)

Other information:
1. Out of office expenses, Rs. 18,800 is not deductible by virtue of sections 30 to 37. 2. During
the previous year 2009-10, the firm sells a capital asset for Rs. 7,10,000 (indexed cost of
acquisition being Rs. 1,45,865).
3. Personal income and investments of partners are as follows:
Incomes X (in Rs.) Y (in Rs.)
Interest from Government securities 4,70,000 4,23,000
Bank interest 6,00,000 1,02,000
Deposit in public provident fund 70,000 45,000
Mediclaim insurance premium 12,000 11,000
Find out the net income and tax liability of the firm and partners for the assessment year
2010-11 on the assumptions that-
a. conditions of sections 184 and 40(b) are satisfied; and
b. conditions of section 184 and/or section 40(b) are not satisfied.
Answer:- Refer page no. 715 of Singhania book notes
Question No. 14. Compute the Net ealth of M for the assessment year 2010-11 on the basis of
following information.
a) Urban land gifted by father-in-law 4,00,000
b) Residential house let out for 220 days 7,00,000
c) Motor car for personal use 3,20,000
d) Jewelry held by minor-married daughter 3,70,000
e) Jewelry held by minor- handicapped son 4,10,000
f) Shares in some companies 2,70,000
g) Bank balance 50,000
h) Cash in hand 70,000
i) Urban land gifted by wife without any consideration 2,90,000
j) Residential house Self occupied 9,00,000
k) Motor car for use of Minor child 4,00,000
l) Helicopter for personal use 9,75,000
m) Farm house 26 KMS away from city 2,00,000
n) Household appliances 5,20,000
Computation of Net Wealth
Assets Treatment Amount
Urban land Assets u/s 2(ea) 4,00,000
Residential House Assets u/s 2(ea) 7,00,000
Motor Car Assets u/s 2(ea) 3,20,000
jewellery Not an Assets u/s 2(ea) Nil
jewellery Not an Assets u/s 2(ea) Nil
Shares Not an Assets u/s 2(ea) Nil
Bank balance Not an Assets u/s 2(ea) Nil
Cash in hand Assets u/s 2(ea) 20,000
Urban Lanad Not an Assets u/s 2(ea) Nil
Residential House Exempted u/s 5 Nil
Motor Car Deemed Assets u/s 4 4,00,000
Helicopter Assets u/s 2(ea) 9,75,000
Farm House Assets u/s 2(ea) 2,00,000
House hold Appliances Not an Assets u/s 2(ea) Nil
Gross Wealth = 30,15,000
Less:- Liabilities on Assets Nil
Net Wealth 30,15,000
Less :- Basic Exemption 30,00,000
Taxable Wealth = 15,000

Wealth Tax payable = 15,000 x 1% = 150

OTF MASTER’S INSTITUTE OF COMMERCE (EVENING) OTF

 M O C K T E S T - I (TAX)(2010-11)
-----BY PARDEEP KUMAR
Office: S.C.O. 361(Level-2), Sector 44-D,Chd. Mobile No. 98140-98739
Time allowed: 3 hours Max. Marks : 80
Section- A
Students are required to attempt four questions from this part. (4 x 5)
Question No.1. Explain the Term ‘Assessee’?
Question No.2. Discuss the treatment of expenditure on scientific research incurred by an
assessee while computing his income from business and profession?
Question No.3. Explain Deemed Incomes?
Question No.4. During the previous year 2009-10, X sells the following assets:
Date of sale Sale Date of Purchase Cost of
proceeds Acquisition
Rural agricultural land June15,2009 2,00,000 March 1, 1982 20,000
Urban agricultural land Nov 1, 2009 6,00,000 May 10, 1983 30,000
Shares (not listed) Jan 15, 2010 7,40,000 January 10, 2009 1,25,000
Debentures(listed) Jan 12, 2010 40,000 January 10,2008 20,000
X purchases the following assets:
Date of purchase Assets Amount
July 10, 2009 Agricultural land 2,00,000
August 7, 2009 Rural Electrification corporation 20,000
November 70, 2009 Agricultural land 4,00,000
November 75, 2009 Residential house 90,000
July 74, 2070 Bonds of National Highways Auth. 1,40,000
of India (date of redemption July 20, 2017)
Compute Capital Gain income for the assessment year 2010-11.
Question No.5:From the following data furnished By R determine the value of house property
built on leasehold land(99 years) as at the valuation date 31-03-2010.
Annual Value as per municipal records 70,000
Rent Received from tenant 54,000
Municipal Tax borne by tenant 5,000
Repairs on property paid by tenant 4,000
Refundable deposit collected from tenant as security deposit which does
not carry any interest 1,00,000
The difference between the unbuild area and specified area is 9.5%
Question No.6. X holds the following securities on April 1, 2009
Rs. 1,48,000 10% securities of the Tamil Nadu Government and Rs. 40,000 5% less- tax non-
listed debentures of ABC Ltd.Interest in both the cases is payable on December 11 every year.
On August 1, 2009, X borrows Rs. 20,000 at 7% p.a. and invests it in purchasing Rs. 20,000,
7.5% tax free securities of the Central Government (due date of interest March 15 every year;
interest due on 15 March 2010 is received on April 2, 2010). Interest on borrowings for the
period ending March 31, 2010 is however paid by X on April 15, 2010. Determine his income
under the following situations:-
(a) X maintains books of account on Cash Basis
(b) X maintains books of accounts on Mercantile system

Section –B
This part consists of four questions and students are required to attempt two questions from
this section. (2 x 15)

Question No.7. What do you understand by Agricultural Income? Explain its tax treatment &
Importance?
Question no. 8. State the Circumstances in which the income of one person is treated as
income of other person.
Question No. 9. X has the following properties:
1. Flat in Bombay purchased on June 1,2009 which is let out on a monthly rent of Rs. 20,000.
The building in which the flat is located was completed on May 1, 2009. The flat was let out
from August 1, 2009.
2. Flat in Delhi constructed in 2007 which is self-occupied.
3. Godown in Calcutta constructed in 2006 which is let out on a monthly rent of Rs. 70,000 (it
remains vacant for 1/2 month). The expenses actually incurred during the year against rental
income are :
Bombay Delhi Calcutta
Rs. Rs. Rs.
Municipal taxes paid during the previous year ending
March 31, 2010(*for10 months ending 31-3-2010) 50,000* 24,000 1,80,000
Building co-operative maintenance charges 10,000 9,000 ###
Electricity charges ### 12,000 48,000
Fire insurance premium ### ### 6,480
Collection charges 7,500 ### 54,000
Repairs 200 19,000 1,10,000
The following further information is given:
1. The flat in Delhi, if let out, would fetch a monthly rent of Rs. 60,000. However, standard rent
of the house according to the Delhi Rent Control Act is Rs. 40,000 per month.
2. Other data regarding flat in Bombay and godown in Calcutta is as follows-
Bombay flat Calcutta
Rs. Rs.
Municipal valuation (annual) (MV) 2,16,000 7,00,000
Fair rent (annual) (FR) 2,20,000 7,50,000
Standard rent (annual) (SR) 2,25,000 7,40,000
Unrealised rent 2,000 40,000
Compute X’s house property income for the year ending March 31, 2010.
Question No.10:- X a resident individual, furnishes the following particulars for the Previous
Year relevant for the assessment year relevant for the assessment year 2010-11:-
Profit and loss account for the year ending March 31, 2003
Salary to staff 13,000 Gross profit 4,49,700
Staff welfare fund 6,000 Sundry receipts 4,400
General expenses 6,500 Short term cap. Gains 3,000
Bad debts 3,000
Advance tax 400
Fire insurance 4,000
Advertisement expenses 11,000
Int. on X’s cap. And loan 3,600
Expenditure on acquisition of a
Copyright incurred on March
1,2010(it is put to use on the same
Day) 2,800
Lump sum consideration for
Acquiring know-how incurred
On March 10, 2010(it is put to use
On April 1, 2010) 12,000
Depreciation 6,000
Provision for Income tax 2,000
Contribution to a political party 1,000
Net profit 3,85,800
 4,57,100 4,57,100
Other Information:-
1. Salary to staff includes salary paid to a relative, which is unreasonable to the extent of Rs.
3,400.
2. Advertisement expenses include Rs. 8,000 being cost of 8 diaries presented to the
customers.
3. Depreciation on other assets according to income tax provision come to Rs. 9,600
4. Provision for income tax is excessive to the tune of Rs. 600
5. During the year 2009-10, X purchased National Saving Certificates VIII issue of Rs. 10,000
6. General expenses include an expenditure of Rs. 1,780 for arranging a long-term loan.
7. During the Previous Year 2009-10 the following payments are made:
a) Rs. 7,000 paid on May 5, 2009 on account of outstanding customs duty of the Previous
Year 2008-09 and
b) Rs. 5,000 paid on December 10, 2009 on account of outstanding sales tax of the
Previous Year 2008-09.
8. During the previous year 2009-10, X also makes a capital expenditure of Rs. 25,000 for the
purpose of carrying scientific research related to his business. This expenditure is however
is not debited to P & L a/c.
9. X made a payment of Rs. 20,000 to National laboratory not recorded.
Find out the Business Income.

Section-C
This part consists of four questions and students are required to attempt two questions from
this section. (2 x 15)
Question No 11. What are the various authorities for the administration of Income tax law?
Discuss their powers.
Question No.12: Explain the provisions relating to Advance Payment of Tax?

Question No.13. The following particulars are furnished by X (26 years), a resident assessee, for the
year ending on March 31,2010 :
Net basic salary after deduction of tax at source and of contribution to recognised
provident fund 1,80,000
Tax deducted at source from salary 1,000
Own contribution to recognised provident fund 4,000
Employer's contribution to provident fund 27,900
Interest credited to provident fund @ 11 per cent 5,000
Leave travel concession for self and wife for proceeding on leave to Srinagar (amount
exempt: Rs. 10,000, being actual expenditure on fare) 12,000
Contribution by employer to an approved gratuity fund 1,000
House rent allowance (house is at Madras and rent actually paid amounts to Rs. 20,400) 14,800
Interest on debentures from ABC Co. (net) (paid on November 12, 2009) 25,200
Tax deducted at source from interest on debentures 2,800
Interest on capitol borrowed for the purpose of investment in debentures of ABC Co. 19,800
Winnings from lotteries (net of tax deducted at source) paid to X on March 11, 2010 2,59,000
Tax deducted at source 1,11,000
Expenses on collection of lottery prize and on purchase of lottery tickets on which he could
not bag any prize 4,500
Winnings from horse races (net to tax deducted at source) paid to X on January 11, 2010 89,250
Tax deducted at source 38,250
Expenses on collection of race winnings 600
Life insurance premium:
--- On own life (sum assured: Rs. 2,80,000) 58,000
--- On wife's life (sum assured: Rs. 50,000) 7,600
--- On minor child's life (sum assured: Rs. 12,000) 800
Tuition fees of X's son 16,000
Tuition fees of X's daughter 10,000
Compute the total income and tax liability of X for the assessment year 2010-11.
Question No. 14. The following information is given for the Assessment Year 2010-11.
a) Residential House 40,00,000
b) A Farm House – 15 Km away from local limits 10,00,000
c) Motor car 6,00,000
d) Jewellery 14,00,000
e) Aircraft for personal use 1,50,00,000
f) Urban land (construction not permitted) 10,00,000
g) Cash in hand (recorded) 1,50,000
h) Unrecorded Cash 1,25,000
i) Shops given on rent 20,00,000
j) Gold Deposit Bonds 10,00,000
k) Loan taken to purchase the aircraft 50,00,000
l) 6 Residential Houses given to employees 15,00,000
(Salary of 2 employees exceeds Rs. 5 lacs)
Compute the net wealth & tax liability in following situations
Situation 1:- where assessee is An Individual
Situation 2:- Where Assessee is a H.U.F
Situation 3:- Where Assessee is a Company