FINAL PAPER 7: DIRECT TAX LAWS & INTERNATIONAL TAXATION

MULTIPLE CHOICE QUESTIONS FOR MAY 2023 AND NOVEMBER 2023 EXAMINATION
1. Mr. Rajesh and Mr. Brijesh, resident individuals, are due to receive ` 13 lakhs each on 1.4.2022 on
maturity of life insurance policy taken on 31.3.2012 and 1.4.2012, respectively, the sum assured of
which is ` 10 lakhs. They had paid an annual premium of ` 1.10 lakhs each. Are provisions of tax
deduction at source attracted on maturity proceeds received by Mr. Rajesh and Mr. Brijesh?
(a) Yes; Tax is deductible at source on maturity proceeds receivable by both Mr. Rajesh and
Mr. Brijesh, since the annual premium is more than ` 1,00,000, being 10% of ` 10 lakhs
(b) No; Tax is not deductible at source on maturity proceeds receivable by either Mr. Rajesh or
Mr. Brijesh, since the annual premium is less than ` 1,30,000, being 10% of ` 13 lakhs
(c) No tax is deductible at source on maturity proceeds receivable by Mr. Rajesh. Tax is deductible at
source on maturity proceeds received by Mr. Brijesh and the tax deductible at source is ` 13,000
(d) No tax is deductible at source on maturity proceeds receivable by Mr. Rajesh. Tax is deductible at
source on maturity proceeds received by Mr. Brijesh and the tax deductible at source is ` 10,000
2. ABC Ltd. took on sub-lease a building from Ms. Jhanvi with effect from 1.7.2022 on a rent of ` 20,000
per month. It also took on hire machinery from Ms. Jhanvi with effect from 1.10.20 22 on hire charges of
` 15,000 per month. ABC Ltd. entered into two separate agreements with Ms. Jhanvi for sub -lease of
building and hiring of machinery. Which of the following statements is correct with reference to ABC
Ltd.'s liability to deduct tax at source, assuming that one-month's rent was received as security deposit,
which is refundable at the end of the lease period?
(a) No tax needs to be deducted at source since rent for building does not exceed ` 2,40,000 p.a. and
rent for machinery also does not exceed ` 2,40,000 p.a. Security deposit refundable at the end of
the lease term is not rent for the purpose of TDS
(b) Tax has to be deducted@10% on ` 2,00,000 and @2% on ` 1,05,000 (i.e., rent including security
deposit)
(c) Tax has to be deducted@10% on ` 1,80,000 and @2% on ` 90,000 (i.e., rent excluding security
deposit)
(d) Tax has to be deducted@10% on ` 2,00,000 (i.e., rent including security deposit). However, no
tax is to be deducted on rent of ` 1,05,000 (i.e., rent including security deposit) for machinery,
since the same does not exceed ` 1,80,000
3. Mr. Vallish, employed as Manager with ABC Ltd., pays rent of ` 50,000 per month to his landlord. Which
of the following statements is correct?
(a) Mr. Vallish is liable to deduct tax@10% u/s 194-I, since his annual rent exceeds ` 2,40,000
(b) Mr. Vallish is liable to deduct tax@5% u/s 194-IB every month, since he pays rent of ` 50,000 per
month
(c) Mr. Vallish is liable to deduct tax@5% u/s 194-IB on the annual rent in the month of March, since
he pays rent of ` 50,000 per month
(d) Mr. Vallish is not liable to deduct tax at source
4. Mr. Hari is an interior decorator declaring profits under 44ADA in the P.Y.2022-23 and the earlier
previous years. Mr. Hari has to pay brokerage of ` 10 lakhs to Mr. Lal, a broker, to buy a residential
house, and ` 50 lakhs to Mr. Shyam, a contractor for reconstruction of the residential house. Are TDS
provisions attracted in the hands of Mr. Hari in respect of the above transactions?

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 (a) No; TDS provisions are not attracted in the hands of Mr. Hari in respect of payments to Mr. Lal and
Mr. Shyam
(b) Yes; Mr. Hari has to deduct tax from payment to Mr. Lal and Mr. Shyam
(c) Mr. Hari does not have to deduct tax on payment to Mr. Lal but has to deduct tax from payment to
Mr. Shyam
(d) Mr. Hari does not have to deduct tax on payment to Mr. Shyam but has to deduct tax from payment
to Mr. Lal
5. Mr. Sanjay, a salaried individual, pays brokerage of ` 40 lakhs to Mr. Harish, a broker, on 5.1.2023 to
buy a residential house. His father, Mr. Hari, a retired pensioner, makes contract payments of ` 15
lakhs, ` 25 lakhs and ` 12 lakhs on 28.9.2022, 3.11.2022 and 15.2.2023 to Mr. Rajeev, a contractor,
for reconstruction of residential house. With respect to the above payments made by Mr. Sanjay and
Mr. Hari, which of the following statements is correct?
(a) Neither Mr. Sanjay nor Mr. Hari is required to deduct tax at source, since they are not subject to
tax audit, on account of being a salaried individual and pensioner, respectively
(b) Both Mr. Sanjay and Mr. Hari are required to deduct tax at source under the provisions of t he
Income-tax Act, even though they are not subject to tax audit
(c) Mr. Sanjay is required to deduct tax at source but Mr. Hari is not required to deduct tax at source
(d) Mr. Hari is required to deduct tax at source but Mr. Sanjay is not required to dedu ct tax at source
6. Kunal & Co LLP engaged in manufacturing business withdrew from its bank account ` 125 lakhs by
cash (each individual withdrawal does not exceed ` 2 lakhs) in the P.Y.2022-23. The purpose of
withdrawal from bank was for buying agricultural produce, being raw material required for manufacture
for finished products by it. Kunal & Co LLP always files its return of income before the due date. Are
TDS provisions applicable on such withdrawals? If yes, what is the amount of tax to be deducted?
(a) No; TDS provisions are not attracted
(b) Yes; Tax of ` 50,000 is required to be deducted
(c) Yes; Tax of ` 1,25,000 is required to be deducted
(d) Yes; Tax of ` 2,10,000 is required to be deducted
7. The following are details of cash withdrawals from Canara Bank by Mr. Ravish during the P.Y. 2022-23:
- ` 16 lakhs on 27.05.2022
- ` 55 lakhs on 07.09.2022
- ` 28 Lakhs on 12.02.2023
Mr. Ravish has not filed his return of income for A.Y. 2020-21, A.Y. 2021-22 and A.Y. 2022-23. What is
the amount of tax required to be deducted at source by Canara Bank on such withdrawals during the
P.Y. 2022-23?
(a) ` 1,58,000
(b) ` 1,98,000
(c) ` 3,95,000
(d) Nil

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8. Mr. Ganesh is running a steel factory. The total turnover of the factory during the F.Y. 2021-22 amounted
to ` 2.5 crores. The estimated turnover for F.Y. 2022-23 is likely to exceed ` 3 crore. On 10-04-2022,
he availed consultancy services from a Delhi based chartered accountant. The consultancy fees
amounted to ` 1,84,000. Should Mr. Ganesh deduct tax from consultancy fees of ` 1,84,000? If yes,
then what shall be the amount of tax to be deducted and by when should the same be deposited with
Government?
(a) Yes; ` 18,400 to be deposited by 07.05.2022
(b) Yes; ` 18,400 to be deposited by 07.07.2022
(c) Yes; ` 15,400 to be deposited by 07.05.2022
(d) He is not liable to deduct tax in respect of professional fees paid
9. Mr. Harsh has to pay ` 3 lakhs on 3.3.2023 to “Plan your trip”, a travel agency, for a holiday package
in Singapore and Malaysia for himself and his wife. He obtained a loan of ` 10 lakhs for higher education
of his son studying in Columbia University, New York, on 20.3.2023 from SBI, and remitted, under LRS
of RBI, the said sum through the same bank, SBI, which is also an authorised dealer. Is tax required to
be collected at source from Mr. Harsh by travel agency and the bank? If so, how much?
(a) No tax is required to be collected by the travel agency since the payment for overseas tour
programme package is less than ` 7 lakhs; tax has to be collected by SBI@5% of
` 3 lakhs, being the amount in excess of ` 7 lakhs
(b) No tax is required to be collected by the travel agency since the payment for overseas tour
programme package is less than ` 7 lakhs; tax has to be collected by [email protected]% of ` 3 lakhs,
being the amount in excess of ` 7 lakhs
(c) Tax has to be collected by the travel agency@5% on ` 3 lakhs; and by SBI@5% of ` 3 lakhs, being
the amount in excess of ` 7 lakhs
(d) Tax has to be collected by the travel agency@5% on ` 3 lakhs; and by [email protected]% of ` 3 lakhs,
being the amount in excess of ` 7 lakhs
10. Mr. Mahesh engaged in the business of trading of car accessories. His turnover for F.Y. 2021 -22 and
F.Y. 2022-23 was ` 11.5 crore and ` 9.75 crore, respectively. XYZ Ltd. placed order for purchase of car
accessories for ` 90 lakhs on 01.06.2022. Mr. Mahesh delivered the order within 15 days of receipt of
order and received the payment within 7 days from the date of delivery. Is Mr. Mahesh required to collect
tax at source on the consideration received by him from XYZ Ltd., if the turnover of XYZ Ltd. during the
F.Y.2021-22 and F.Y.2022-23 was 15 crores and ` 17 crores, respectively? If yes, what is the amount
of tax which he is required to collect at source? You may assume that XYZ Ltd. complies with all its TDS
obligations.
(a) No, since XYZ Ltd. is liable to deduct tax under section 194Q.
(b) No, since Mahesh’s turnover of F.Y.2022-23 does not exceed ` 10 crore.
(c) Yes, since Mahesh’s turnover of F.Y.2021-22 exceeds ` 10 crore; Amount of TCS = ` 4,000
(d) Yes, since Mahesh’s turnover of F.Y.2021-22 exceeds ` 10 crore; Amount of TCS ` 9,000
11. In the course of search operations under section 132 in April, 2022, Mr. Hari makes a declaration under
section 132(4) on the earning of income in respect of P.Y.2021-22 not disclosed in the books of account.
Mr. Hari explains the manner in which income was derived and pays the tax, together with interest in
respect of such income. However, he does not disclose such income in his return of income filed on
31.7.2022. Is penalty leviable in this case, and if so, what is the quantum of penalty?

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 (a) No penalty is leviable since Mr. Hari has made a declaration under section 132(4)
(b) Yes; penalty@10% is leviable
(c) Yes; penalty@30% is leviable
(d) Yes; penalty@60% is leviable
12. A search u/s 132 was carried out in the case of Mr. M on 20.7.2022. During the course of search, the
assessee admitted the additional income of ` 50 crore as additional sales for the financial year 2021-
22. While filing his return of income in response to notice u/s 148, M did not declare the said income.
What is the amount of penalty to be payable by M in respect of the said undisclosed income?
(a) ` 5 crore
(b) ` 10 crore
(c) ` 15 crore
(d) ` 30 crore
13. In the course of search operations under section 132 in the month of May, 2022, Mr. Aakash makes a
declaration under section 132(4) on the earning of income not disclosed in respect of P.Y. 2021 -22. He
also explains the manner in which he has derived such income and he pays the tax together with interest
on such income and declares such income in the return of income filed by him in the month of July,
2022. Is penalty leviable in this case? If so, how much?
(a) No penalty is attracted since Mr. Aakash has voluntarily made a declaration under section 132(4)
(b) Yes; Penalty@10% of undisclosed income would be attracted even if Mr. Aakash has voluntarily
made a declaration under section 132(4)
(c) Yes; Penalty@30% of undisclosed income would be attracted even if Mr. Aakash has voluntarily
made a declaration under section 132(4)
(d) Yes; Penalty@60% of undisclosed income would be attracted even if Mr. Aakash has voluntarily
made a declaration under section 132(4)
14. Which of the following statements are correct in relation to the power of an income-tax authority to collect
information which may be useful for the purposes of the Income-tax Act, 1961?
(i) The income-tax authority can enter the place of business of the assessee only after sunr ise and
before sunset.
(ii) The income-tax authority may enter the place of business only during the hours at which such place is open
for conduct of business.
(iii) The income-tax authority may impound and retain in his custody, for a period not exceeding 15
days, books of account or other documents inspected by him. If he wishes to retain for a period
exceeding 15 days, he has to take the prior approval of Principal Chief Commissioner or Chief
Commissioner.
(iv) The income-tax authority can on no account remove or cause to be removed from the building or
place he has entered any books of account or other documents.
The correct answer is -
(a) (i) and (iii)
(b) (i) and (iv)
(c) (ii) and (iii)

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 (d) (ii) and (iv)
15. The Assessing Officer within his jurisdiction surveyed a popular Cyber Café at 1 a.m. in night for the
purpose of collecting information which may be useful for the purposes of the Income -tax Act, 1961. The
Cyber Café is kept open for business every day between 2 p.m. and 2 a.m. He impounded and retained
in his custody, books of account and other documents inspected by him, after recording his reasons for
doing so, for 12 days. Which of the following statements is correct?
(a) The Assessing Officer’s action in entering the cybercafé at 1 a.m. and impounding books of account
and documents inspected by him is in order
(b) The Assessing Officer’s action in entering the cyber café at 1 a.m. is not in order, since he can
enter the cyber café only after sunrise but before sunset
(c) The Assessing Officer’s action in entering the cyber café at 1 a.m. and in impounding books of
account and documents inspected by him are not in order, since he can enter the cyber café only
after sunrise but before sunset and he does not have the power to impound books of acc ount under
section 133B
(d) The Assessing Officer’s action in entering the cyber café at 1 a.m. is in order but impounding
books of account and documents inspected by him is not in order, since he does not have the
power to impound books of account under section 133B
16. Mr. Ram, born on 1.4.1963, has a gross total income of ` 2,90,000 for A.Y.2023-24 comprising of his
salary income. He does not claim any deduction under Chapter VI-A. He pays electricity bills of ` 10,000
per month. He made a visit to Melbourne along with his wife for a month in February, 2023 for which he
incurred to and fro flight charges of ` 1.20 lakhs. The remaining expenditure for his visa, stay and
sightseeing amounting to ` 80,000 was met by his son residing in Melbourne. Is Mr. Ram required to
file return of income for A.Y.2023-24, and if so, why?
(a) No, Ram is not required to file his return of income
(b) Yes, Ram is required to file his return of income, since his gross total income/total income exceeds
the basic exemption limit
(c) Yes, Ram is required to file his return of income since he pays electricity bills of ` 10,000 per
month, which exceeds the prescribed annual threshold
(d) Yes, Ram is required to file his return of income since he has incurred foreign travel expenditure
exceeding ` 1 lakh
17. A Ltd. filed its return of income for A.Y.2023-24 on 30 th September, 2023. The return is selected for
regular assessment under section 143(3). The time limit for service of notice u/s 143(2) in this case is -
(a) 30.06.2024
(b) 30.9.2024
(c) 31.12.2024
(d) 31.03.2025
18. Which of the following cannot be adjusted in computation of total income while processing the return of
income for A.Y. 2023-24 under section 143(1)?
(a) any arithmetical error in the return
(b) an incorrect claim apparent from any information in the return

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 (c) disallowance of expenditure indicated in the audit report but not taken into account in computing
total income in the return.
(d) addition of income appearing in Form 26AS which has not been included in computing total income
in the return.
19. Mr. Rajesh is aggrieved by an order passed by the Commissioner of Income-tax imposing penalty under
section 270A for under-reporting of income. What is the appellate remedy available to him under the
Income-tax Act, 1961 and the specified time limit within which he has to file an appeal?
(a) He can file an appeal to Commissioner (Appeals) u/s 246A within 30 days from the date on which
the order is communicated to him
(b) He can file an appeal to Commissioner (Appeals) u/s 246A within 60 days from the date o n which
the order is communicated to him
(c) He can file an appeal to Appellate Tribunal u/s 253 within 30 days from the date on which the order
is communicated to him
(d) He can file an appeal to Appellate Tribunal u/s 253 within 60 days from the date on which he order
is communicated to him
20. Which of the following orders is not appealable before Commissioner (Appeals)?
(a) An order of penalty under section 271B for failure to get accounts audited
(b) An order made under section 163 treating the assessee as an agent of a non-resident
(c) An order of assessment passed by the Assessing Officer in pursuance of directions of Dispute
Resolution Panel
(d) An order made under section 201 deeming a person to be an assessee-in-default for non-deduction
of tax at source
21. Mr. X is aggrieved by an order passed under section 143(3) by the Assessing Officer. Mr. Y is aggrieved
by an order passed under section 272A by the Director General. What is the remedy available to Mr. X
and Mr. Y and the time limit within which they should exercise the remedy?
(a) Both Mr. X and Mr. Y have to file an appeal before Commissioner (Appeals) u/s 246A within 30
days of the date on which the order sought to be appealed against is communicated to them
(b) Both Mr. X and Mr. Y have to file an appeal before the Appellate Tribunal u/s 253 within 60 days
of the date on which the order sought to be appealed against is communicated to them
(c) Mr. X has to file an appeal u/s 246A before Commissioner (Appeals) within 30 days of the date of
service of the notice of demand relating to the assessment. Mr. Y has to file an appeal u/s 253
before the Appellate Tribunal within 60 days of the date on which the order sought to be appealed
against is communicated to him
(d) Mr. Y has to file an appeal before Commissioner (Appeals) u/s 246A within 60 days of the date on
which the order sought to be appealed against is communicated to him. Mr. X has to file an appeal
u/s 253 before the Appellate Tribunal within 30 days of the date of service of the no tice of demand
relating to the assessment.
22. The assessment of M/s. Epsilon Associates for A.Y.2022-23 was made u/s 143(3) on 28 th December,
2023. The Assessing Officer added ` 3 lakh being 30% of ` 10 lakh, for non-deduction of tax at source
and ` 4 lakh on account of unexplained investments. The assessee contested the addition on account
of unexplained investments in appeal before Commissioner (Appeals). The appeal was decided against
the assessee in June, 2024. What is remedy available to the assessee in respect of disallowance under

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 section 40(a)?
(a) The assessee can file an application for revision to the Commissioner under section 264
(b) The assessee can file an application for rectification under section 154, if it is a mistake apparent
from the record
(c) The assessee can opt for either (a) or (b)
(d) The assessee can neither opt for remedy stated in (a) nor for remedy stated in (b)
23. Mr. Mahesh is found to be the owner of two gold chains of 50 gms each (value of which is ` 1,45,000
each) during the financial year ending 31.3.2023 which are not recorded in his books of account and he
could not offer satisfactory explanation for the amount spent on acquiring these gold chains. As per
section 115BBE, Mr. Mahesh would be liable to pay tax of –
(a) ` 1,80,960
(b) ` 2,26,200
(c) ` 90,480
(d) ` 1,23,958
24. Mr. Ganesh and Mr. Rajesh, resident Indians born on 1.7.1962 and 1.4.1943, respectively, have not
furnished their returns of income for the P.Y.2022-23. However, the total income assessed in respect of
such year under section 144 is ` 8 lakhs and ` 5 lakhs, respectively. Is penalty leviable under section
270A, and if so, what is the quantum of penalty?
(a) No penalty is leviable under section 270A in the hands of either Mr. Ganesh or Mr. Rajesh
(b) Yes; ` 36,400 and ` 5,200, respectively
(c) Yes; ` 37,700 and ` 6,500, respectively
(d) Penalty of ` 36,400 leviable in the hands of Mr. Ganesh; No penalty leviable in the hands of Mr.
Rajesh
25. Dinesh, a resident individual of age of 47 years, has not furnished his return of income for the A.Y. 2023-
24. However, his total income for such year as assessed u/s 144 is ` 18 lakhs. Is penalty under section
270A attracted and if so, what is the quantum of penalty?
(a) No; penalty under section 270A is not attracted since he has not filed his return of income, hence,
this is not a case of underreporting or misreporting of income.
(b) Yes; penalty is ` 3,66,600
(c) Yes; penalty is ` 1,83,300
(d) Yes; penalty is ` 1,44,300
26. Mr. X made a fixed deposit of ` 12,000 with a non-banking finance company (NBFC) on 1.4.2022 in
cash. Thereafter, he made another fixed deposit of ` 7,500 with the same NBFC on 1.8.2022 by bearer
cheque. On 31.3.2023, he made yet another fixed deposit of ` 8,000 with the same NBFC by an account
payee cheque. Which of the following statements is correct?
(a) Penalty under section 271D is attracted at the time of acceptance of first deposit on 1.4.202 2
(b) Penalty under section 271D is attracted at the time of acceptance of second deposit on 1.8.2022
(c) Penalty under section 271D is attracted at the time of acceptance of third deposit on 31.3.202 3
(d) Penalty under section 271D is not attracted

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27. XYZ Ltd. has failed to report an international transaction entered into by it with PQR Inc., which is a
specified foreign company in relation to XYZ Ltd. What would be the penalty leviable in this case?
(a) 2% of the value of the international transaction
(b) 50% of tax payable on under-reported income
(c) 200% of tax payable on under-reported income
(d) Both (a) and (c)
28. Mr. Vyomesh, a non-resident individual aged 61 years, has not furnished his return of income for
A.Y.2023-24. However, the total income assessed in respect of such year under section 144 is ` 13
lakh. Determine the quantum of penalty leviable under section 270A (Ignore the provisions of section
115BAC).
(a) ` 1,04,000, being 50% of tax payable on total income of ` 13 lakh
(b) ` 1,05,300, being 50% of tax payable on total income of ` 13 lakh
(c) ` 66,300, being 50% of tax payable on under-reported income of ` 10.50 lakhs (i.e., ` 13 lakhs -
basic exemption limit of ` 2.50 lakhs)
(d) ` 58,500, being 50% of tax payable on under-reported income of ` 10 lakhs (i.e., ` 13 lakhs - basic
exemption limit of ` 3 lakhs)
29. X Ltd., a domestic company not opting for the provisions of section 115BAA, has a total income of
` 10,01,00,000 for A.Y.2023-24. The gross receipts of X Ltd. for P.Y.2020-21 is ` 260 crore. The tax
liability of X Ltd. for A.Y.2023-24 is -
(a) ` 2,68,50,000
(b) ` 2,79,24,000
(c) ` 2,91,49,120
(d) ` 3,34,88,000
30. XYZ Ltd., a domestic company not opting for the provisions of section 115BAA, has a total income of
` 10,02,00,000 for A.Y.2023-24. The gross receipts of XYZ Ltd. for P.Y.2020-21 is ` 410 crore. The tax
liability of X Ltd. for A.Y.2023-24 is -
(a) ` 3,23,00,000
(b) ` 3,35,92,000
(c) ` 3,36,67,200
(d) ` 3,50,13,890
31. A Ltd., an Indian company, bought back its listed shares from its shareholders and B (P) Ltd., an Indian
company, bought back its unlisted shares from its shareholders in the month of Marc h, 2023. What are
the tax consequences of such buyback in the hands of A Ltd., B (P) Ltd. and the shareholders?
(a) Additional [email protected]% of the distributed income is leviable in the hands of A Ltd. and B
(P) Ltd.; income arising to shareholders is exempt.
(b) Income arising to shareholders from buyback is taxable in their individual hands; No distribution
tax is leviable in the hands of A Ltd. and B (P) Ltd.
(c) Additional [email protected]% of the distributed income is leviable in the hands of A Ltd.; income
arising to shareholders of B (P) Ltd. is taxable in their individual hands

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 (d) Additional [email protected]% of the distributed income is leviable in the hands of B (P) Ltd.;
income arising to shareholders of A Ltd. is taxable in their individual hands.
32. Gamma Ltd. has distributed on 30.6.2023, dividend of ` 130 lakhs to its shareholders. During the
F.Y.2022-23, Gamma Ltd. has received dividend of ` 108 lakhs (Net of TDS) from domestic companies
and ` 30 lakhs (gross) from a foreign company in which it has 5% shareholding. What is the deduction,
if any, available to Gamma Ltd. in respect of such dividend?
(a) ` 138 lakhs
(b) ` 120 lakhs
(c) ` 130 lakhs
(d) ` 150 lakhs
33. Lima Ltd., a domestic company, purchases its own listed shares on 13th August, 2022. The
consideration for buyback amounted to ` 23 lakh, which was paid on the same day. The amount received
by the company two years back for issue of such shares determined in the manner specified in Rule
40BB was ` 17 lakh. The additional income-tax payable by Lima Ltd. is –
(a) ` 1,02,960
(b) ` 1,04,832
(c) ` 1,39,776
(d) ` 1,37,280
34. Two tonnage tax companies X Ltd. and Y Ltd. are amalgamated to form a new tonnage company Z Ltd.,
a qualifying company and the option for tonnage tax scheme of X Ltd. has an unexpired period of 8
years and Y Ltd. has an unexpired period of 6 years. For what period the special provisions of Chapter
XII-G relating taxation of income shipping companies would apply to the new company Z Ltd.?
(a) 8 years
(b) 6 years
(c) 7 years
(d) 10 years
35. Mr. Hari has income of ` 52 lakhs under the head “Profits and gains of business or profession”. One of
his businesses is eligible for deduction@100% of profits u/s 80-IA for A.Y.2023-24. The profit from such
business included in the business income is ` 35 lakhs. What is the tax payable (rounded off) by
Mr. Hari for A.Y.2023-24, assuming that he has no other income during the P.Y.2022-23, and credit for
alternate minimum tax, if any, to be carried forward?
(a) ` 3,35,400; AMT credit to be carried forward is Nil
(b) ` 10,00,480; AMT credit to be carried forward is ` 6,65,080
(c) ` 11,00,530; AMT credit to be carried forward is ` 7,65,130
(d) ` 11,50,550; AMT credit to be carried forward is ` 8,15,150
36. In the P.Y.2022-23, Mr. Ganguly, a resident individual aged 60 years, earned income from profession
(computed) ` 1,45,000, winnings from card games ` 1,50,000 (gross). He also has interest of ` 40,000
on fixed deposit with banks and ` 9,000 on savings account with bank. He deposited ` 1,50,000 in PPF.
What is the total income of Mr. Ganguly for P.Y.2022-23, assuming that he does not opt for section
115BAC?

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 (a) ` 1,45,000
(b) ` 1,50,000
(c) ` 1,85,000
(d) ` 1,90,000
37. During the P.Y.2022-23, HelpAid Charitable Trust registered under section 12AB received donations of
` 80 lakhs, out of which ` 10 lakhs were corpus donations which were deposited in post office savings
bank account and ` 20 lakhs were anonymous donations. The trust applied ` 40 lakhs towards its
objects during the P.Y.2022-23. The tax liability of the trust for A.Y.2023-24 is -
(a) ` 6,24,000
(b) ` 5,92,800
(c) ` 5,30,920
(d) ` 5,97,220
38. For the previous year ended 31.3.2023, a public charitable trust, registered under section 12AB, derived
income of ` 10 lakhs from properties held under trust and ` 15 lakhs, being voluntary contributions from
public, out of which ` 8 lakhs was applied for charitable purposes and ` 4 lakhs towards repayment of
loan taken for construction of orphanage. The amount of ` 4 lakhs was not claimed as application in
any earlier previous year. The total income of the trust for A.Y.2023 -24 is –
(a) ` 13 lakhs
(b) ` 9.25 lakhs
(c) ` 13.25 lakhs
(d) ` 17 lakhs
39. Kamala charitable trust, registered u/s 12AB, having its main object as medical relief, earned income of
` 2 lakhs as interest on bonds issued by local authority and agricultural income of ` 4 lakhs during the
P.Y.2022-23. Which of the following statements is correct?
(a) The trust has to apply such income for charitable purposes as per the provisions of section 11 to
claim exemption in respect of such income
(b) The trust can claim exemption u/s 10(1) and 10(15) in respect of its agricultural income and income
from bonds of local authority, respectively, without applying such income for charitable purposes.
(c) The trust can claim exemption u/s 10(15) in respect of its interest income from bonds of local
authority, without applying such income for charitable purposes. However, it cannot claim
exemption u/s 10(1) in respect of agricultural income without applying such income for charitable
purposes.
(d) The trust can claim exemption u/s 10(1) in respect of its agricultural income. However, exemption
u/s 10(15) in respect of its interest income from bonds of local authority is not available if it is
claiming the benefit of section 11 and 12.
40. During the P.Y.2022-23, Sarvasewa, a charitable trust, made voluntary contributions, not being corpus
donations, to –
(i) another charitable trust registered u/s 12AB out of its current year income derived from property
held under trust

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 (ii) an educational institution referred to in section 10(23C)(vi) out of its current year income derived
from property held under trust
(iii) another charitable trust registered u/s 12AB out of the accumulated income of the trust
Which of the above voluntary contributions are permitted as application of income for charitable
purposes for A.Y.2023-24 under the provisions of the Income-tax Act, 1961?
(a) None of the above
(b) Only (i) above
(c) (i) and (ii) above
(d) (i) and (iii) above
41. What would be your answer to Q.40 above, had the voluntary contributions to the said trust/institution
been in the form of corpus donations?
(a) None of the above
(b) Only (i) above
(c) (i) and (ii) above
(d) (i) and (iii) above
42. A REIT has distributed ` 2 crore to its unitholders, which comprises of -
(i) Rental income from real estate property directly held by it ` 80 lakhs
(ii) Interest income from special purpose vehicle ` 50 lakhs
(iii) Dividend income from special purpose vehicle ` 40 lakhs
(iv) Capital gains on disposal of assets ` 30 lakhs
In this case, the special purpose vehicle is an Indian company, A Ltd., in which REIT holds 100% of
shares. A Ltd. does not exercise option to pay tax u/s 115BAA. Which of the following statements
relating to taxability of the above income are correct?
(1) All the above income are taxable in the hands of REIT. The said income are exempt i n the hands
of unit holders.
(2) Only income referred to in (i) and (ii) are taxable in the hands of REIT. Income referred to in (iii)
and (iv) are taxable in the hands of unit holders.
(3) Only income referred to in (i) and (ii) are taxable in the hands of REIT. Income referred to in (iv) is
taxable in the hands of unit holders. Income referred to in (iii) is exempt both in the hands of REIT
and unitholders.
(4) Only income referred to in (iv) is taxable in the hands of REIT. Income referred to in (i) and (ii) is
taxable in the hands of unit holders. Income referred to in (iii) is exempt both in the hands of REIT
and unitholders
(5) Tax is deductible by REIT from income referred to in (i) and (ii).
(6) Tax is deductible by REIT from income referred to in (iii) and (iv).
(7) Tax is deductible by REIT only from income referred to in (iv).
(8) No tax is deductible by REIT since the entire income is taxable in its hands.
The correct option is –

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 (a) (1) and (8) above
(b) (2) and (6) above
(c) (3) and (7) above
(d) (4) and (5) above
43. Dividend received by a real estate investment trust (REIT) from special purpose vehicle (SPV) and
distributed to its unit holders is –
(a) exempt in the hands of both the REIT and the unit holders unconditionally
(b) exempt in the hands of the REIT only if the SPV is a specified domestic company; taxable in the
hands of unit holders only if SPV does not exercise option under section 115BAA
(c) exempt in the hands of the REIT; exempt in the hands of unit holders only if SPV does not exercise
option under section 115BAA
(d) taxable in the hands of the REIT; exempt unconditionally in the hands of unitholders
44. A REIT derives rental income of ` 2 crore from real estate property directly owned by it and short-term
capital gains of ` 1 crore on sale of developmental properties. It also receives interest income of ` 3
crore from Gamma Ltd., an Indian company, in which it holds controlling interest. The REIT holds 90%
of the shareholding of Gamma Ltd. Which of the following statements is correct?
(a) All the above income are taxable in the hands of REIT
(b) REIT enjoys pass through status in respect of the above income and hence, such income are
taxable in the hands of the unit holders
(c) REIT enjoys pass through status in respect of interest income from Gamma Ltd. and hence, such
income is taxable in the hands of the unit holders. Rental income and short -term capital gains are
taxable in the hands of the REIT
(d) REIT enjoys pass through status in respect of interest income from Gamma Ltd. and rental income
from directly owned real estate property and hence, such income are taxable in the hands of the
unit holders. Short-term capital gains is taxable in the hands of the REIT
45. A real estate investment trust (REIT) receives dividend of ` 8 lakh in February, 2023 from A Ltd., a
special purpose vehicle, in which the REIT holds 80% of shareholding. The REIT distributes the dividend
to its unit holders in March, 2023. Mr. X is a resident Indian holding 5% units and Mr. Y is a non-resident
holding 10% units. What would be the tax consequence in the hands of the REIT and its unit -holders
Mr. X and Mr. Y?
(i) REIT enjoys pass-through status in respect of dividend received from A Ltd., only if A Ltd. does
not opt for section 115BAA
(ii) REIT enjoys pass-through status in respect of dividend received from A Ltd., only if A Ltd. opts for
section 115BAA
(iii) REIT enjoys pass-through status in respect of dividend received from A Ltd., irrespective of
whether A Ltd. opts for section 115BAA
(iv) In cases where dividend is taxable in the hands of REIT, the same would be subject to tax at
maximum marginal rate
(v) Dividend is exempt in the hands of Mr. X and Mr. Y, only if A Ltd. opts for section 115BAA
(vi) Dividend is exempt in the hands of Mr. X and Mr. Y, only if A Ltd. does not opt for section 115BAA

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 (vii) Dividend is exempt in the hands of Mr. X and Mr. Y, irrespective of whether A Ltd. opts for section
115BAA.
(viii) Tax is deductible by REIT on dividend distributed to Mr. X and Mr. Y, only if A Ltd. does not opt for
section 115BAA
(ix) Tax is deductible by REIT on dividend distributed to Mr. X and Mr. Y, only in case A Ltd. opts for
section 115BAA
(x) Tax is deductible by REIT on dividend distributed to Mr. X and Mr. Y, whether or not A Ltd. opts for
section 115BAA
Which of the above statements are correct?
(a) (i), (iv) and (vii)
(b) (iii), (v) and (x)
(c) (iii), (vi) and (ix)
(d) (ii), (v) and (viii)
46. Mr. B has been holding 10% units in Real Estate Investment Trust, 7.5% units in Securitisation Trust
and 5% units in Investment Fund for more than 15 months. The following incomes were earned by the
Trust/Fund during the P.Y. 2022-23:

Particulars Investment Real Estate Securitisation

Fund (`) Investment Trust Trust (`)
(`)
Rental Income from directly held real - 10,00,000 -
estate property
Interest income from Special Purpose - 8,00,000 -
Vehicle
Profit from Business 5,00,000 - 6,00,000
Other Income (not in the nature of 2,00,000 1,00,000 -
dividend)
Long-term capital loss (12,50,000) - -

What would be the total income of Mr. B for P.Y. 2022-23, assuming that apart from share in above
income, Mr. B had only long-term capital gains of ` 2,70,000?
(a) ` 4,42,500
(b) ` 4,67,500
(c) ` 4,52,500
(d) ` 5,05,000
47. ABC & Co. and PQR & Co. are two non-resident entities based in Country A and Country P, respectively.
Both the entities own and operate an electronic facility through which they effect online sale of organic
products manufactured by them. The details of their receipts from such sale during the P.Y.2022 -23
are–
Particulars ABC & Co., PQR & Co.,
Country A Country P

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 (a) Receipts from sale of organic products to persons ` 138 lakhs ` 126 lakhs
resident in India
(b) Receipts from sale of organic products to persons ` 285 lakhs ` 377 lakhs
resident in other parts of the world
Out of the sum mentioned in (b), the receipts from ` 63 lakhs ` 73 lakhs
persons using internet protocol address located in
India

Is equalisation levy attracted in the hands of ABC & Co. and PQR & Co., assuming that both the entities
do not have a permanent establishment in India?
(a) Equalisation levy is attracted in the hands of both ABC & Co. and PQR & Co.
(b) No equalisation levy is attracted in the hands of either ABC & Co. and PQR & Co.
(c) Equalisation levy is attracted in the hands of ABC & Co. but not PQR & Co.
(d) Equalisation levy is attracted in the hands of PQR & Co. but not ABC & Co.
48. Mr. Rajesh, a resident Indian, is an employee of M/s. ABC Ltd., Bangalore. In addition to the salary
income from M/s. ABC Ltd., he also earns interest from fixed deposits. M/s. PQR Inc., a foreign company
not having permanent establishment in India, whose gross receipts are equivalent to ` 1.80 crores,
rendered online advertisement services to Mr. Rajesh, for which Mr. Rajesh made a payment of ` 2
lakhs in the F.Y.2022-23.
(i) The transaction is subject to equalisation levy since payment exceeding ` 1 lakh has been made
for online advertisement services.
(ii) The transaction is subject to equalisation levy since payment is made by a resident to a non-
resident not having permanent establishment in India.
(iii) Equalisation levy has to be deducted and paid by Mr. Rajesh.
(iv) Equalisation levy has to be paid by M/s. ABC Ltd.
(v) The transaction is not subject to equalization levy.
Which of the statements is correct?
(a) (i), (ii) and (iii)
(b) (i), (ii) and (iv)
(c) (i) and (iv)
(d) Only (v)
49. A Ltd. is a Singapore Company (whose POEM is in Singapore) which owns and operates an electronic
platform for provision of services. B Ltd. is a Malaysian company (whose POEM is in Malaysia) which
provides online advertisement services. The gross receipts from such services to persons resident in
India may be taken as ` 3 crores in the F.Y.2022-23 both for A Ltd and B Ltd. A Ltd. does not have a
branch in India whereas B Ltd. has a branch in India at Mumbai and the online advertisement services
are effectively connected to that branch. If Mr. X, a citizen and resident of India, has availed services
from A Ltd. and B Ltd. in September, 2022 for purposes of business in India, and the amount payable
to A Ltd. and B Ltd. is ` 1 lakh and ` 12 lakhs, respectively, would equalisation levy be attracted in
respect of the same?
(a) Equalisation levy would be attracted in both cases, albeit at different rates

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 (b) Equalisation levy@2% would be attracted in the hands of A Ltd. in respect of consideration received
from Mr. X.
(c) Equalisation levy@6% would be attracted in respect of the transaction between Mr. X and B Ltd.
However, no equalisation levy would be attracted in respect of transaction between Mr. X and A
Ltd., since the consideration does not exceed ` 1 lakh.
(d) No equalisation levy would be attracted in both cases.
50. Mr. X, a foreign national and citizen of USA, working with M Inc., a US based company, came to I ndia
during the P.Y. 2022-23 for rendering services on behalf of the employer. He wishes to claim his salary
income earned during his stay in India as exempt. Which of the following is not a condition to be fulfilled
to claim such remuneration as exempt income under the Income-tax Act, 1961?
(a) M Inc. should not be engaged in any trade or business in India
(b) Mr. X should not be engaged in any trade or business in India
(c) Mr. X’s stay in India should not exceed 90 days in aggregate during the P.Y. 2022-23
(d) Remuneration received by Mr. X should not liable to be deducted from M Inc.'s income chargeable
to tax under the Income-tax Act, 1961

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 ANSWERS
1. (d) No tax is deductible at source on maturity proceeds receivable by Mr. Rajesh. Tax is deductible at
source on maturity proceeds received by Mr. Brijesh and the tax deductible at source is ` 10,000.
2. (c) Tax has to be deducted@10% on ` 1,80,000 and @2% on ` 90,000 (i.e., rent excluding security
deposit)
3. (d) Mr. Vallish is not liable to deduct tax at source
4. (a) No; TDS provisions are not attracted in the hands of Mr. Hari in respect of payments to
Mr. Lal and Mr. Shyam
5. (d) Mr. Hari is required to deduct tax at source but Mr. Sanjay is not required to deduct tax at source.
6. (b) Yes; Tax of ` 50,000 is required to be deducted
7. (a) ` 1,58,000
8. (a) Yes; ` 18,400 to be deposited by 07.05.2022
9. (d) Tax has to be collected by the travel agency@5% on ` 3 lakhs; and by [email protected]% of ` 3 lakhs,
being the amount in excess of ` 7 lakhs
10. (a) No, since XYZ Ltd. is liable to deduct tax under section 194Q.
11. (d) Yes; penalty@60% is leviable
12. (d) ` 30 crore
13. (c) Yes; Penalty@30% of undisclosed income would be attracted even if Mr. Aakash has voluntarily
made a declaration under section 132(4).
14. (d) (ii) and (iv)
15. (a) The Assessing Officer’s action in entering the cybercafé at 1 a.m. and impounding books of account
and documents inspected by him is in order.
16. (c) Yes, Ram is required to file his return of income since he pays electricity bills of ` 10,000 per
month, which exceeds the prescribed annual threshold.
17. (a) 30.6.2024
18. (d) addition of income appearing in Form 26AS which has not been included in computing total income
in the return.
19. (d) He can file an appeal to Appellate Tribunal u/s 253 within 60 days from the date on which the order
is communicated to him.
20. (c) An order of assessment passed by the Assessing Officer in pursuance of directio ns of Dispute
Resolution Panel.
21. (c) Mr. X has to file an appeal u/s 246A before Commissioner (Appeals) within 30 days of the date of
service of the notice of demand relating to the assessment. Mr. Y has to file an appeal u/s 253
before the Appellate Tribunal within 60 days of the date on which the order sought to be appealed
against is communicated to him.
22. (b) The assessee can file an application for rectification under section 154, if it is a mistake apparent
from the record.
23. (b) ` 2,26,200
24. (d) Penalty of ` 36,400 leviable in the hands of Mr. Ganesh; No penalty leviable in the hands of Mr. Rajesh
25. (c) Yes; penalty is ` 1,83,300
26. (d) Penalty under section 271D is not attracted
27. (d) Both (a) and (c)

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28. (b) ` 1,05,300, being 50% of tax payable on total income of ` 13 lakh
29. (b) ` 2,79,24,000
30. (b) ` 3,35,92,000
31. (a) Additional [email protected]% of the distributed income is leviable in the hands of A Ltd. and B
(P) Ltd.; income arising to shareholders is exempt
32. (c) ` 130 lakhs
33. (c) ` 1,39,776
34. (a) 8 years
35. (c) ` 11,00,530; AMT credit to be carried forward is ` 7,65,130
36. (b) ` 1,50,000
37. (c) ` 5,30,920
38. (b) ` 9.25 lakhs
39. (d) The trust can claim exemption u/s 10(1) in respect of its agricultural income. However, it cannot
claim exemption u/s 10(15) in respect of its interest income from bonds of local authority without
applying such income for charitable purposes.
40. (c) (i) and (ii) above
41. (a) None of the above
42. (d) (4) and (5) above
43. (c) exempt in the hands of the REIT; exempt in the hands of unit holders only if SPV does not exercise
option under section 115BAA
44. (d) REIT enjoys pass through status in respect of interest income from Gamma Ltd. and rental income
from directly owned real estate property and hence, such income are taxable in the hands of the
unit holders. Short-term capital gains is taxable in the hands of the REIT
45. (c) (iii), (vi) and (ix)
46. (a) ` 4,42,500
47. (c) Equalisation levy is attracted in the hands of ABC & Co. but not PQR & Co.
48. (d) Only (v)
49. (b) Equalisation levy@2% would be attracted in the hands of A Ltd. in respect of consideration received
from Mr. X
50. (b) Mr. X should not be engaged in any trade or business in India

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