CA BHANWAR BORANA

TEST Paper CA FINAL MAY/NOV-23

Topics: Capital Gain and IFOS
Total Marks : 38

Que. 1 2 Marks
Mr. Vishal and Mr. Guha sold their residential house property in Pune for ₹ 3 crore and ₹ 4 crore,
respectively, in January, 2023. The house property was purchased by them 25 months back. The
indexed cost of acquisition is ₹ 1 crore and ₹ 1.75 crore, respectively. Mr. Vishal purchased two
residential flats, one in Delhi and one in Agra for ₹ 70 lakhs and ₹ 80 lakhs, respectively, in April, 2023.
On the same date, Mr. Guha also purchased two residential flats, one in Mumbai and the other in
Pune, for ₹ 80 lakhs and ₹ 75 lakhs, respectively. Both of them invested ₹ 30 lakhs in bonds of NHAI
in March, 2023 and ₹ 30 lakhs in bonds of RECL in April, 2023. What is the income taxable under the
head “Capital Gains” for A.Y.2023-24 in the hands of Mr. Vishal and Mr. Guha?
(a) ₹ 70 lakhs and ₹ 95 lakhs, respectively (b) ₹ 60 lakhs and ₹ 85 lakhs, respectively
(c) Nil and ₹ 95 lakhs, respectively (d) Nil and ₹ 20 lakhs, respectively

Que. 2 (2 marks x 4 questions) 8 Marks

Mr. Hari, a property dealer, sold a building in the course of his business to his friend Mr. Rajesh, who
is a dealer in automobile spare parts, for ₹ 100 lakh on 1.1.2023, when the stamp duty value was ₹
120 lakh. The agreement was, however, entered into on 1.9.2022 when the stamp duty value was ₹
110 lakh. Mr. Hari had received a down payment of ₹ 15 lakh by NEFT from Mr. Rajesh on the date
of agreement. Mr. Hari has purchased the building for ₹ 50 lakh on 12.7.2021.
Mr. Hari’s brother, Mr. Ravi, a retail trader, sold a residential house to Mr. Vallish, a wholesale trader
for ₹ 50 lakh on 1.2.2023, when the stamp duty value was ₹ 70 lakh. The agreement was, however,
entered into on 1.8.2022 when the stamp duty value was ₹ 55 lakh. Mr. Ravi had received a down
payment of ₹ 5 lakh by a crossed cheque from Mr. Vallish on the date of agreement. Mr. Ravi has
purchased the building for ₹ 32 lakh on 17.8.2021.
From the information given above, choose the most appropriate answer to the following questions
–
(i) What is the amount of income chargeable to tax in the hands of Mr. Hari in respect of the
transaction of sale of building to Mr. Rajesh and under which head is it taxable?
₹ 70 lakh is taxable as his business ₹ 60 lakh is taxable as his business
(a) (b)
income income
₹ 50 lakh is taxable as his business ₹ 50 lakh is taxable as short-term
(c) (d)
income capital gains
(ii) Is any amount taxable in the hands of Mr. Rajesh in respect of the above transaction? If so,
what is the amount and under which head is it taxable?
(a) No amount is taxable in the hands of Mr. Rajesh
(b) ₹ 20 lakh is taxable under the head “Income from Other Sources”
(c) ₹ 10 lakh is taxable under the head “Income from Other Sources”
(d) ₹ 10 lakh is taxable as his business income
(iii) What is the amount of income chargeable to tax in the hands of Mr. Ravi in respect of the
transaction of sale of residential house to Mr. Vallish and under which head is it taxable?
₹ 18 lakh is taxable as short-term ₹ 23 lakh is taxable as short-term
(a) (b)
capital gains capital gains
₹ 38 lakh is taxable as short-term ₹ 18 lakh is taxable as his business
(c) (d)
capital gains income

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(iv) Is any amount taxable in the hands of Mr. Vallish in respect of the above transaction? If so,
what is the amount and under which head is it taxable?
(a) No amount is taxable in the hands of Mr. Vallish
(b) ₹ 20 lakh is taxable under the head “Income from Other Sources”
(c) ₹ 10 lakh is taxable under the head “Income from Other Sources”
(d) ₹ 10 lakh is taxable as his business income
Que. 3 2 Marks
Mr. Rajan purchased 300 shares in Vaigai Ltd. on 12.1.2017 at a cost of ₹ 2,500 per share. The Fair
Market Value (FMV) of the share as on 31.1.2018 is ₹ 1,800. Mr. Rajan sold all the shares of Vaigai
Ltd. on 15.7.2022 for ₹ 3,200. Mr. Rajan’s brother Mr. Ravi purchased 600 shares in Tapti Ltd. on
25.1.2017 at a cost of ₹ 1,900 per share. The FMV of the share as on 31.1.2018 is ₹ 2,400. Mr. Ravi
sold all the shares of Tapti Ltd. on 31.1.2023 for ₹ 1,700 per share. What is the chargeable capital
gains on sale of shares of Vaigai Ltd. and Tapti Ltd. in the hands of Mr. Rajan and Mr. Ravi,
respectively, for A.Y.2023-24, assuming that STT was paid at the time of acquisition and sale?
(a) Long-term capital gains of Mr. Rajan ₹ 2,10,000; Long-term capital loss of Mr. Ravi ₹ 4,20,000
(b) Long-term capital gains of Mr. Rajan ₹ 4,20,000; Long-term capital loss of Mr. Ravi ₹ 4,20,000
(c) Long-term capital gains of Mr. Rajan ₹ 4,20,000; Long-term capital loss of Mr. Ravi ₹ 1,20,000
(d) Long-term capital gains of Mr. Rajan ₹ 2,10,000; Long-term capital loss of Mr. Ravi ₹ 1,20,000
Que. 4 2 Marks
P is a salaried employee. On 1.6.2022, he gets a gift of house property situated in Mumbai (stamp
duty value ₹ 80,00,000) from Q. On 2.8.2022, P gets a gift of house property in a small town near
Pune (stamp duty value ₹ 50,000) from R. On 3.9.2022, P also gets a gift of house property in a small
town near Kanpur in Uttar Pradesh from R, the stamp duty value of which is ₹ 1,00,000. What will be
the tax implications in the hands of P, Q and R, assuming that they are not related to each other?
(a) ₹ 81,00,000 shall be chargeable to tax in the hands of P as income from other sources and
capital gains shall arise in the hands of Q and R respectively on account of transfer of capital
asset in Mumbai and Kanpur, respectively
(b) ₹ 80,00,000 shall be chargeable to tax in the hands of P as income from other sources and
capital gains shall arise in the hands of Q on account of transfer of capital asset in Mumbai
(c) ₹ 81,00,000 shall be chargeable to tax in the hands of P as income from other sources and no
capital gains shall arise in the hands of Q and R respectively as gift does not constitute
“transfer”
(d) ₹ 81,50,000 shall be chargeable to tax in the hands of P as income from other sources and no
capital gains shall arise in the hands of Q and R respectively as gift does not constitute
“transfer”

Que. 5 (2 marks x 4 questions) 8 Marks

High Tech Ltd., a real estate development company, entered into an agreement with Mr. Sakshar, a
resident individual on 25.6.2020 as per which Mr. Sakshar agrees to transfer a plot of land measuring
12 acres in New Delhi to High Tech Ltd. Mr. Sakshar purchased such land on 14.7.2018 for ₹
80,50,000.
High Tech Ltd. has planned to develop a high-rise society of 250 flats on such land. In consideration,
High Tech Ltd. paid a part consideration of ₹ 1 crore to Mr. Sakshar on the date of agreement and
would provide 3 flats in the society to him as final settlement.
The certificate of completion of society was issued by the authority as on 10.8.2022. On such date,
stamp duty value of each flat in the society was ₹ 2,51,00,000. Subsequently on 31.8.2022, Mr.
Sakshar sold 2 flats in the society to Mr. Kevin for a consideration of ₹ 2,70,00,000 each while the
stamp duty value of each flat on such date was ₹ 2,98,00,000. During the P.Y. 2022-23, Mr. Kevin has
earned Gross salary income of ₹ 30,50,000.

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Out of the proceeds received on sale of land, Mr. Sakshar has purchased a house on 08.09.2022 for
a consideration of ₹ 47,00,000 and occupied for own residence. Mr. Sakshar has taken a loan of ₹
35,00,000 (80% of stamp duty value) from SBI for purchase of such house which was sanctioned and
disbursed at the interest rate of 12% p.a. on 01.07.2022. He does not own any other residential
house on the date of sanction of loan. Mr. Kevin and Mr. Sakshar do not opt for section 115BAC.
Cost Inflation Index: 2022-23: 331; 2020-21: 301; 2018-19: 380

(i) What would be the capital gain in the hands of Mr. Sakshar in respect of the agreement
entered into with High Tech Ltd. and in which year it would be taxable?
(a) ₹ 7,59,18,199 in P.Y. 2022-23 (b) ₹ 7,20,46,875 in P.Y. 2022-23
(c) ₹ 7,72,50,000 in P.Y. 2022-23 (d) ₹ 7,67,46,875 in P.Y. 2020-21

(ii) Determine the capital gain/loss in the hands of Mr. Sakshar in respect of sale of 2 flats to
Mr. Kevin during the P.Y. 2022-23.
(a) (₹ 28,66,666) (b) ₹ 38,00,000
(c) ₹ 94,00,000 (d) ₹ 27,33,334

(iii) What would be the total income of Mr. Kevin for the P.Y. 2022-23?
(a) ₹ 30,50,000 (b) ₹ 86,50,000
(c) ₹ 86,00,000 (d) ₹ 30,00,000

(iv) What would be the total income (rounded off) of Mr. Sakshar for the P.Y. 2022-23?
(a) ₹ 7,46,30,210 (b) ₹ 7,95,53,330
(c) ₹ 8,50,03,200 (d) ₹ 7,35,65,210

Que. 6 2 Marks
During the P.Y.2022-23, Mr. Aakash has ₹ 80 lakhs of short-term capital gains taxable u/s 111A, ₹
70 lakhs of long-term capital gains taxable u/s 112A and business income of ₹ 90 lakhs. Which of
the following statements is correct?
(a) Surcharge @ 25% is leviable on income-tax computed on total income of ₹ 2.40 crore, since
the total income exceeds ₹ 2 crore
(b) Surcharge @ 15% is leviable on income-tax computed on total income of ₹ 2.40 crore
(c) Surcharge @ 15% is leviable in respect of income-tax computed on capital gains of ₹ 1.50
crore, since such income exceeds ₹ 1 crore but is less than ₹ 2 crore; in respect of business
income of ₹ 90 lakhs, surcharge is leviable @ 25% on income-tax, since the total income
exceeds ₹ 2 crore
(d) Surcharge @ 15% is leviable in respect of income-tax computed on capital gains of ₹ 1.50
crore, since such income exceeds ₹ 1 crore but is less than ₹ 2 crore; in respect of business
income of ₹ 90 lakhs, surcharge is leviable @ 10% on income-tax, since such income exceeds ₹
50 lakhs but is less than ₹ 1 crore

Que. 7 (2 Marks x 3 Que) 6 Marks

Delta Limited has three Units – Alpha, Beta and Gamma. It transferred its Unit Gamma to Epsilon
Limited by way of slump sale on 1st April, 2022. The Balance Sheet of Delta Limited as on that date
is given below:
Liabilities ₹ in lakhs Assets ₹ in lakhs
Paid up capital 2,550 Fixed Assets:
Reserves and Surplus 930 Unit Alpha 225
Liabilities: Unit Beta 225
Unit Alpha 60 Unit Gamma 825

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Unit Beta 165 Other Assets:

Unit Gamma 135 Unit Alpha 780
Unit Beta 1,200
Unit Gamma 585
Total 3,840 Total 3,840
Additional information:
(i) Lump sum consideration on transfer of Unit Gamma is ₹ 1,320 lakhs.
(ii) Fixed assets of Unit Gamma include land which was purchased at ₹ 90 lakhs in March, 2021 and
revalued at ₹ 135 lakhs as on March 31, 2022. The stamp duty value of land on that date was ₹ 130
lakhs.
(iii) Other fixed assets represent plant and machinery and furniture, which are reflected at ₹ 690 lakhs (i.e.,
₹ 825 lakhs less value of land) which represents written down value of those assets as per books. The
written down value of these assets u/s 43(6) of the Income-tax Act, 1961 is ₹ 615 lakhs.
(iv) Other assets do not include jewellery, artistic work, shares and securities.
(v) Liabilities represent ascertained liabilities and does not include provision for taxation or proposed
dividend.
(vi) Unit Gamma was set up by Delta Limited in March, 2021.
(vii) Assume that the turnover of Delta Ltd. for F.Y. 2020-21 is ₹ 1295 lakhs and Delta Ltd. has not opted for
section 115BAA.
From the information given above, choose the most appropriate answer to the following questions
-
(i) For computing capital gains on slump sale of Unit Gamma, what would be the deemed cost
of acquisition and improvement for the purposes of section 48 and 49 and the resultant
capital gains?
₹ 1275 lakhs and ₹ 45 lakhs, ₹ 1230 lakhs and ₹ 40 lakhs,
(a) (b)
respectively respectively
₹ 1155 lakhs and ₹ 115 lakhs, ₹ 1155 lakhs and ₹ 165 lakhs,
(c) (d)
respectively respectively
(ii) What is the tax liability on capital gain arising on slump sale of Unit Gamma?
(a) ₹ 55,08,360 (b) ₹ 45,90,300
(c) ₹ 57,65,760 (d) ₹ 48,04,800
(iii) If Unit Gamma was set up on March, 2010 instead of March, 2021, and the sale
consideration is ₹ 3000 lakhs instead of ₹ 1320 lakhs, what would be the capital gains arising
to Delta Ltd. on slump sale and the resultant tax liability?
The CII of F.Y.2009-10 is 148 and F.Y.2022-23 is 331. Assume that there is no change in any
other information given in the case scenario.
₹ 650.98 lakhs and ₹ 135.40 lakhs, ₹ 650.98 lakhs and ₹ 181.10 lakhs,
(a) (b)
respectively respectively
₹ 1845 lakhs and ₹ 429.81 lakhs, ₹ 1845 lakhs and ₹ 410.62 lakhs,
(c) (d)
respectively respectively

Que. 8 8 Marks
Mr. Manoj (aged 45 years) is a resident Indian who has the following life insurance policies, some
of which are ULIPs. The details of such policies are given hereunder:

Particulars A B C (ULIP) D (ULIP) E (ULIP) F (ULIP)

Date of issue 1.4.2015 1.4.2016 1.2.2021 1.1.2021 1.3.2021 1.4.2021

Annual premium ₹ 50,000 ₹ 40,000 ₹ 1,00,000 ₹ 3,00,000 ₹ 1,40,000 ₹ 2,50,000

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Date when premium 1st April 1st April 1st Feb 1st Jan 1st March 1st April
falls due every year

Date of maturity 31.3.2023 31.3.2023 31.1.2030 31.12.2029 28.2.2030 31.3.2030

Consideration received ₹ 7,00,000 ₹ 4,00,000 ₹ 11,00,000 ₹ 32,00,000 ₹ 17,00,000 ₹ 28,00,000

on maturity (including
bonus)

Sum assured ₹ 6,00,000 ₹ 3,50,000 ₹ 10,00,000 ₹ 30,00,000 ₹ 15,00,000 ₹ 25,00,000

During the P.Y.2022-23, Mr. Manoj has earned dividend income of ₹ 12 lakh from shares of Indian
companies and long-term capital gains (computed) of ₹ 5 lakhs on sale of land. He deposited ₹ 1,00,000
in public provident fund. Mr. Manoj does not opt for section 115BAC.

(i) Which are the life insurance policies (excluding ULIPs) in respect of which Mr. Manoj would
be eligible for exemption under section 10(10D) in respect of maturity proceeds and what is
the quantum of deduction which would be available under section 80C in respect of premium
paid on such policies for A.Y.2022-23? Assume that Mr. Manoj does not have any ULIPs only
for the purpose of answering this MCQ.
(a) A and B; ₹ 90,000 (b) A and B; ₹ 85,000
(c) Only A; ₹ 50,000 (d) Only A; ₹ 85,000

(ii) Which are the ULIPs in respect of which Mr. Manoj would be eligible for exemption u/s
10(10D) in respect of maturity proceeds? Choose the option most beneficial to Mr. Manoj.
(a) Only C and E (b) Only F
(c) Only C, D and E (d) Only D and F

(iii) Considering the option chosen in MCQ 2 above, what would be the capital gains computed
u/s 45(1B) in the hands of Mr. Manoj for A.Y.2031-32? Assume that, for the purpose of this
MCQ, no consideration was received prior to the maturity date in case of any ULIP.
(a) ₹ 11,40,000 (b) ₹ 10,50,000
(c) ₹ 5,50,000 (d) ₹ 6,40,000

(iv) What is Mr. Manoj’s tax liability for A.Y.2023-24?

(a) ₹ 2,21,000 (b) ₹ 2,36,600
(c) ₹ 2,58,440 (d) ₹ 2,74,040

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