Simply Shiksha

CMA Final Direct Taxation

1. Choose the correct answer: [15*2 = 30]

(1) Mr. Rajesh and Mr. Brijesh, resident individuals, are due to receive Rs. 13 lakhs each on 1.4.2023 on
maturity of life insurance policy taken on 31.3.2012 and 1.4.2012, respectively, the sum assured of which is
Rs. 10 lakhs. They had paid an annual premium of Rs. 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 Rs. 1,00,000, being 10% of Rs. 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 Rs. 1,30,000, being 10% of Rs. 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 Rs. 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 Rs. 10,000

(2) Mr. Hari is an interior decorator declaring profits under 44ADA in the P.Y.2023-24 and the earlier previous
years. Mr. Hari has to pay brokerage of Rs. 10 lakhs to Mr. Lal, a broker, to buy a residential house, and Rs. 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?
(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.

(3) 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 account under section 133B

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CMA Final Direct Taxation
(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.

(4) Mr. Ram, born on 1.4.1963, has a gross total income of Rs. 2,90,000 for A.Y.2024-25 comprising of his
salary income. He does not claim any deduction under Chapter VI-A. He pays electricity bills of Rs. 10,000 per
month. He made a visit to Melbourne along with his wife for a month in February, 2024 for which he incurred
to and fro flight charges of Rs. 1.20 lakhs. The remaining expenditure for his visa, stay and sightseeing
amounting to Rs. 80,000 was met by his son residing in Melbourne. Is Mr. Ram required to file return of
income for A.Y.2024-25, 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 Rs. 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
Rs. 1 lakh

(5) X Ltd., a domestic company not opting for the provisions of section 115BAA, has a total income of Rs.
10,01,00,000 for A.Y.2024-25. The gross receipts of X Ltd. for P.Y.2021-22 is Rs. 260 crore. The tax liability of X
Ltd. for A.Y.2024-25 is –
(a) Rs. 2,68,50,000
(b) Rs. 2,79,24,000
(c) Rs. 2,91,49,120
(d) Rs. 3,34,88,000

(6) 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 March, 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
(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.

(7) Mr. Hari has income of Rs. 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.2024-25. The profit from such business
included in the business income is Rs. 35 lakhs. What is the tax payable (rounded off) by Mr. Hari for A.Y.2024-
25, assuming that he has no other income during the P.Y.2023-24, and credit for alternate minimum tax, if
any, to be carried forward?
(a) Rs. 3,35,400; AMT credit to be carried forward is Nil
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 Simply Shiksha
CMA Final Direct Taxation
(b) Rs. 10,00,480; AMT credit to be carried forward is Rs. 6,65,080
(c) Rs. 11,00,530; AMT credit to be carried forward is Rs. 7,65,130
(d) Rs. 11,50,550; AMT credit to be carried forward is Rs. 8,15,150

(8) During the P.Y.2023-24, Help Aid Charitable Trust registered under section 12AB received donations of Rs.
80 lakhs, out of which Rs. 10 lakhs were corpus donations which were deposited in post office savings bank
account and Rs. 20 lakhs were anonymous donations. The trust applied Rs. 40 lakhs towards its objects during
the P.Y.2023-24. The tax liability of the trust for A.Y.2024-25 is –
(a) Rs. 6,24,000
(b) Rs. 5,92,800
(c) Rs. 5,30,920
(d) Rs. 5,97,220

(9) A REIT derives rental income of Rs. 2 crore from real estate property directly owned by it and short-term
capital gains of Rs. 1 crore on sale of developmental properties. It also receives interest income of Rs. 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

(10) 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 Rs. 1.80 crores, rendered online
advertisement services to Mr. Rajesh, for which Mr. Rajesh made a payment of Rs. 2 lakhs in the F.Y.2023-24.
(i) The transaction is subject to equalisation levy since payment exceeding Rs. 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)

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 Simply Shiksha
CMA Final Direct Taxation
(11) In respect of DTAA, generally, India follows: [Please provide a brief justification]
(a) UN Model
(b) UK Model
(c) OECD Model
(d) US Model

(12) ABC & Co. Ltd. earned ₹ 15 lakhs by way of transfer of carbon credit. The tax liability in respect of carbon
credit is______? [Please provide a brief justification]
(a) ₹ 1,56,000
(b) ₹ 2,34,000
(c) ₹ 4,68,000
(d) Nil

(13) Venus Traders is engaged in turmeric trade with a turnover exceeding ₹ 1000 lakhs dispatched its goods
through Indian Railways. The amount of freight payable as on 31.03.2024 was ₹1,40,000. It wants to claim the
freight as expenditure. To satisfy such claim, it has to pay the freight to Indian Railways ________________.
[Please provide a brief justification]
(a) before due date specified in Section 139(1)
(b) before the end of the previous year
(c) before the end of the assessment year
(d) there is no time restriction

(14) Harivallabh Pvt. Ltd., has spent a sum of ₹ 10 lakhs towards meeting its corporate social responsibility
(CSR) under the Companies Act, 2013. The amount of deduction available while computing the business
income is ___________. [Please provide a brief justification]
(a) Nil
(b) ₹ 10 lakhs
(c) ₹ 15 lakhs
(d) ₹ 12.5 lakhs

(15) During the course of survey in the premises of Jagan & Co. on 10.01.2024, stocks of goods purchased for
₹ 10 lakhs were found to be not recorded in the books of account. The firm has brought forward loss of ₹ 5
lakhs and incurred business loss of ₹ 2 lakhs for the year ended 31.03.2024 without considering the
unaccounted stock. The tax liability of the firm including the said unaccounted purchase would be ___
(including surcharge and cess). [Please provide a brief justification]
(a) ₹ 7,80,000
(b) ₹ 3,12,000
(c) ₹ 93,600
(d) Nil

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 Simply Shiksha
CMA Final Direct Taxation
Section-B
Answer any five questions out of seven questions given. Each question carries 14 marks. [5 x 14 = 70]

2.

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 Simply Shiksha
CMA Final Direct Taxation
Ans.

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CMA Final Direct Taxation

3. (a) X Ltd. has several undertakings carrying on several businesses. During the year 2023-24, the company
sold one of its undertaking (as it was continuously generating loss since last 5 years) for a lump sum value of ₹
300 lacs without assigning value to individual asset and liabilities. Book value of sundry assets and liabilities of
the undertaking as on the date of sale is as under:

Brokerage on transfer paid @ 5%. Analyse the amount of capital gain in the hands of X Ltd. for the assessment
year 2023-24 in accordance with the related provisions of Law. [7]
Ans.

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CMA Final Direct Taxation

3. (b) Krishna Ltd. did not make a claim of ₹ 10 lacs in the return of income filed for A.Y. 2024-25 which was
disallowed in the previous assessment year u/s 43B. However, the said claim was also not considered by the
Assessing Officer during assessment proceedings on the ground that no revised return was filed. Suggest the
assessee in respect of making such claim before the appellate authority? [7]
Ans.

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CMA Final Direct Taxation
4. (a) Mr. Crown, a non-resident, gives you the following information for the year ended 31-3-2024:
Interest on Government securities (gross) ₹ 21,000
Dividend on shares of foreign companies received aboard ₹ 52,000
Interest from deposits in Indian companies (gross) ₹ 30,000
Income from horse races in India ₹ 20,000
He has donated a sum of ₹ 10,000 to Municipal Corporation of Delhi for promotion of family planning. He has
paid ₹ 2,000 by cheque to New India Assurance Co. for mediclaim for himself. He has also spent ₹ 16,000 on
medical treatment of his minor son who is physically handicapped.
Compute total income of Mr. Crown for the assessment year 2024-25 assuming he has opted out. [6]
Ans.

4. (b) How could you compute total undisclosed foreign income and asset under the Black Money
(Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015? [4]
Ans.

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CMA Final Direct Taxation

4. (c) Distinguish between Tax Planning and Tax Avoidance. [4]

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CMA Final Direct Taxation

5. (a)

[7]
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 Simply Shiksha
CMA Final Direct Taxation
Ans.

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CMA Final Direct Taxation

5. (b) North Star Consulting Ltd.’s total income during the previous year ended 31st March 2024 is
₹10,50,000. Tax deducted at source by different payers amounted to ₹24,450 and tax paid in foreign
country on a doubly taxed income amounted to ₹ 10,000 for which the company is entitled to relief u/sec.
90 as per the double tax avoidance agreement. During the year, the company paid advance tax as under:
Date of payment Advance tax paid (₹)
15.06.2023 40,000
12.09.2023 65,000
15.12.2023 1,00,000
15.03.2024 62,000
The company filed its return of income for the ay 2024-25 on 15th October 2024. Compute interest if any
payable by the company under sec. 234A,234B and 234C. Assume that transfer pricing provision is not
applicable. [7]
Ans.
Particulars Rs.
Total Income 10,50,000
Tax at 30% 3,15,000
HEC 4% 12,600
Total tax 3,27,600
Less: Relief (10,000)
Less: TDS (24,450)
Less: Advance Tax Paid (2,67,000)
26,150
Add: Interest
234A NIL
234B NIL
234C 1,516
Total tax Payable (Round off) 27,670

Working Note:
Interest u/s 234A: Return filed with in the due date of 31st October, Hence no interest payable.
Interest u/s 234B: Advance tax paid is more than 90% of tax payable hence no Interest.

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CMA Final Direct Taxation

6. (a)

[7]
Ans.

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CMA Final Direct Taxation

“Its not that we can teach books better than others, but we can surely teach a better way of learning”
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CMA Final Direct Taxation
6. (b)

[7]
Ans.

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 Simply Shiksha
CMA Final Direct Taxation

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 Simply Shiksha
CMA Final Direct Taxation
7. (a)

Ans.

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CMA Final Direct Taxation

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CMA Final Direct Taxation
7. (b)

Ans.

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CMA Final Direct Taxation
8. Justify the following situations on the basis of — Issue Involved, Relevant Provision of Law and Analysis &
Conclusion: [7 + 7]
(a)

Ans.

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CMA Final Direct Taxation
(b)

Ans.

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