Corporate Tax Assign Derick

Assignment A

Amity CampusUttar PradeshIndia 201303ASSIGNMENTS

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INSTRUCTIONS

a) Students are required to submit all three assignment sets.

ASSIGNMENTDETAILSMARKS

Assignment AFive Subjective Questions10

Assignment BThree Subjective Questions + Case Study10

Assignment CObjective or one line Questions10

b) Total weightage given to these assignments is 30%. OR 30 Marks

c) All assignments are to be completed as typed in word/pdf.

d) All questions are required to be attempted.

e) All the three assignments are to be completed by due dates and need to be submitted for evaluation by Amity University.

f) The students have to attached a scan signature in the form.

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( ) Tick mark in front of the assignments submitted

Assignment AAssignment BAssignment C

Corporate Tax Planning

Assignment A

(10 Marks )

Q.1 Distinguish between tax avoidance and tax evasion? (2 Marks )

Tax avoidance is structuring ones income in such a manner that one can legally avoid taxes. The simplest and less controversial example of tax avoidance is when an individual invests in tax saving mutual funds, insurance products and bank deposits. Unfortunately many tax avoidance strategies though legal are controversial in nature. Tax evasion as the term implies refers to the phenomenon of evading tax. For example some entities collect revenue in cash and do not record the same. The logic behind not disclosing the true income is to avoid paying taxes on the non- recorded income. This example is a clear example of tax evasion and is an illegal act. The table below shows the distinction between tax avoidance and tax evasion.

TAX AVOIDANCETAX EVASION

Where the payment of tax is avoided though by complying with the provisions of law but defeating the intension of the law is known as tax Avoidance.Where the payment of tax is avoided through illegal means or fraud is termed as tax evasion.

Tax Avoidance is undertaken by taking advantage of loop holes in lawTax evasion is undertaken by employing unfair means

Tax avoidance is tax hedging within the framework of the law.All methods by which tax liability is illegally avoided are termed as tax evasion.

Tax avoidance is intentional tax planning before the actual tax liability arises.Tax evasion is blatant fraud and is done after the tax liability has arisen.

Tax avoidance has legal sanction. Tax evasion is unlawful and an assessee guilty of tax evasion may be punished under the relevant laws.

Q.2 What do you understand by control and Management of a company? (2 Marks)

Control and management refers to head and brain which directs the affairs of policy, finance, disposal of profits and vital things concerning the management of a company. Control and management is what determines the residential status of the company. The place of incorporation of the company may not be the place where control lies. Control is not necessarily situated in the country in which the company is registered. A company may be resident in more than one country- Under the tax laws a company may have more than one residence. The mere fact that a company is also resident in a foreign country would not necessarily displace its residence in India.

Central control and management lies where meetings of board of directors are held- Usually control and management of a companys affairs is situated at the place where meetings of board of directors are held. Moreover, control and management referred to in section 6 is central control and management and not the carrying on of day to day business of servants, employees or agents. Place of doing business may be different from place of control of business. The whole of business may be done outside India and yet the control and management of that business may be wholly within India. In order to determine the residence of a company, the real test to be applied is where the controlling and directing power function is, or where its head and brain is.

Control is different from shareholding control. In the case of a subsidiary company managed by its local board of directors, it is difficult to establish that control and management of its affairs vests at the place where the parent company resides. A non-Indian companys de facto control must be in India for residential India-In order to hold that a non-Indian company is resident in India during any previous year, it must be established that such companys de facto is in India. Although central management and control has sometimes been stated in the form of head, seat and directing power the question depends on the facts of the management and not on the physical situation of the thing that is managed. A company is managed by the board of directors and if the meetings of the board of directors are held within India, it may be said that the control and management is situated here. Partial control from outside India -control and management does not mean carrying day to day business. Even a partial control outside India is sufficient to hold a foreign company as a non-resident.

Q.3 What is VAT? (2 Marks)

VAT is a system of indirect taxation, which has been introduced in lieu of sales tax. It is the tax paid by the producers, manufacturers, retailers or any other dealer who add value to the goods and that is ultimately passed on to the consumer. VAT has been introduced in India to ensure a fair and uniform system of taxation. It is an efficient, transparent, revenue-neutral, globally acceptable and easy to administer taxation system. It benefits the common man (consumer), businessman and the Government.

VAT enhances competitiveness by removing the cascading effect of taxes on goods and makes the levy of tax simple and self-regulatory, ensuring flexibility to generate large revenues. The cascading effect is brought about by the existing structure of taxation where inputs are taxed before a commodity is produced and the output is taxed after it is produced. This causes an unfair double-taxation. However, in VAT, a set-off is given for input tax (tax paid on purchases). This results in the overall tax burden being rationalized and a fall in prices of goods.

VAT makes the tax structure simple, hassle-free and export-oriented. The integration of VAT with Tally helps in the smooth functioning of the business and eliminates the complications that might otherwise arise in VAT.

Looking at the above illustration the following advantages of VAT become apparent: It widens the tax base and promotes equity: One can see that VAT is a multiple point taxation mechanism replacing the single point Sales Tax Law. The tax is not just collected at the shopkeepers end. It is collected from every person that forms the chain from the raw material supplier to the person making the final sale. It eliminates cascading impact of double taxation and promotes economic efficiency: Every person making a sale gets the credit of the tax that he has already paid to the government (indirectly, through the invoice price) on the corresponding purchases made by him. Other Advantages of VAT include the following:

It is primarily a self-policing, self-assessment system with more trust put on dealers.

It provides the potential for a stronger manufacturing base and more competitive export pricing.

It is invoice based and as a result it offers a better financial system with less scope for error.

It has an improved control mechanism resulting in better compliance.

Q.4 What is the concept of avoidance of double taxation? (2 Marks)

According to Vogelt (1986) double taxation occurs when two or more states impose taxes on the same taxpayer for the same subject matter. Most commonly, double taxation arises because countries tax not only domestic assets and transactions but also assets and transactions in other countries which benefit resident taxpayers, resulting in the overlap of the countries' tax claims. Bilateral double tax treaties address and reduce the extent of this double taxation. The efficacy of the treaty approach, however, depends on common and workable interpretations of the treaty terms.

The double taxation problem arises if a taxpayer is resident in one country but has a source of income situated in another country. This presents a situation at hand where his income is taxed in both countries. To avoid paying tax on same income twice, one can use the provisions of the Double Taxation Avoidance Agreement (DTAA), a tax treaty countries such as India have signed with many other countries. In this question I will consider India as the country of residence.

Every person who is a lawful resident of India is liable to pay taxes in India on his or her global income. However, non-residents have to pay tax only on the income earned in India or from a source or activity carried out in India. Section 6 of the Income Tax Act, (1961) defines a resident of India as a person who has been in India for a period of 182 days or more in the financial year or who has been in India for 60 days or more in a financial year and 365 days or more in the 4 years before that financial year. Non-Residents definition under the Act is tied to number of days of an individuals stay in India during a particular financial year. A person is Non-Resident if his or her stay in India does not exceed 181 days in a financial year (1st April to 31st March of next year). To avoid Double taxation a mandate called the Double Tax Avoidance Agreement (DTAA) is entered between two countries, India and another foreign state. The purpose is to promote and foster economic trade and investments between two countries. The treaty can apply to two or more countries and can therefore be termed to be either unilateral or bi-lateral. The mechanism of double tax avoidance can be effected in either of the following two ways: Exemption Method: Resident country exempts income earned in a foreign country. Tax Credit Method: Resident country grants credits for the tax paid in another country. The actual exemption granted will differ from country to country. Tax on interest on NRO deposits with or without DTAA benefit for country is 30% without DTAA benefit but 15% with DTAA benefit. The following is a brief description of the various methods for availing Tax Benefits under DTAA: Exemption method: Under this method, income is taxed in only one of the two countries. As per the terms of the treaty with countries like Greece, Libya and United Arab Republic, income from dividend, Interest, royalty and fees for technical services are applicable. So for a citizen of these three countries, any income accruing in the form of dividend, interest, royalty or fees for technical services arising in India, will be solely taxable in India and if for a resident if such income is arising in any of these three countries then the income will solely be taxed in these three countries and it will not be taxed in India. Deduction method: Tax paid in the country of source is deducted from the global income and then on residual amount income tax is paid, as per this method. Credit method: The country of residence includes income from the country of source (India) in the total taxable income of the tax payer and tax on the basis of such taxpayers total income (including income from country where income was earned) is then computed. A deduction is then allowed from its own taxes for taxes paid in country where income was earned.Q.5 What is Gross Total Income? (2 Marks)

The term Gross Total Income (GTI) has been defined in sub-section 45 of section 2 of Indian Income Tax Act, 1961 as "total income" means the total amount of income referred to in section 5, computed in the manner laid down in this act. Section 5 determines the scope of total income for a resident or a non-resident assessee. It follows that for a resident assessee, the total income includes all income that accrue, arise, earned or received in India (except those income which accrues or arises outside India). Gross Total Income, as per the Income Tax Act Income is Chargeable to tax underfive heads, those being:

1) Salaries

2) Income from House Property

3) Profits and Gains from Business or Profession

4) Capital Gains.

5) Income from Other Sources

The aggregate income under these heads is termed as Gross Total Income. It is always calculated before providing exemptions under Chapter VIA, i.e., deductions from Section 80CCC to 80U.Here is given a brief presentation ofComputation of Total Income:

Particulars1) Income from SalariesBasic Salary xx

Taxable Allowances xx

Taxable Value of Perquisites xx Gross Salary xx

Less: Entertainment Allowance xx

Professional Tax xx xx

2) Income from House PropertyGross Annual Value

xx

Less: Municipal Taxes paid

x Annual Value

xx

Less: Deduction u/s 24 xx xx

3) Profits and Gains of Business or Profession Net Profit as per P/L A/c xxx

Add: Amount shown as expenses but not allowed xx xxx Less: Expenses allowed but not claimed. xx

xxx

Add: Incomes not shown in the P/L A/c but taxable xx xxx

Less: Incomes shown in the P/L A/c but not taxable xx xxx4) Capital GainsSale Consideration xxx

Less: Expenses on transfer xxNet Sale Consideration xxx

Less: Cost of acquisition/improve. xx Capital Gains xxx

Less: Exemptions (if any) xxxxx

5)Income from other sources

xx Gross Total Income

xxx Less: Deduction u/s 80CCC to 80U

xx Total Income xxxAssignment B

(10 Marks)

Q.1 How the incidence of tax depends upon Residential Status of an

assessee?

(3 Marks)

According to Robin (2011) tax incidence of an assessee depends on his residential status. For instance, whether an income, accrued to a person outside India, is taxable in India depends upon the residential status of the person in India.Similarly, whether an income earned by a foreign national in India or outside India is taxable in India depends on the residential status of the individual, rather than on his citizenship. Therefore, the determination of the residential status of a person is very significant in order to find out his tax liability.

Residential status of an assessee is important in determining the scope of income on which income tax has to be paid in India. Broadly, an assessee may be resident or non-resident in India in a given previous year.

Under Section 6(1) of the Income Tax Act of 1961, an individual is said to be resident in India in any previous year if he satisfies any one of the following basic conditions: He is in India in the previous year for a period of at least 182 days or, He is in India for a period of at least 60 days during the relevant previous year and at least 365 days during the four years preceding that previous year.

A Hindu Undivided Family (HUF) is said to be resident in India if control and management of its affairs is wholly or partly situated in India during the relevant previous year. A resident individual or HUF assessee may further be classified into (i) resident and ordinarily resident (ROR) and (ii) resident but not ordinarily resident (RNOR). A resident individual or HUF is treated as ROR in India in a given previous year, if he satisfies the following additional conditions:- He has been resident in India in at least 9 out of 10 previous years preceding the relevant previous year; and He has been in India for a period of at least 730 days during 7 years proceeding, the relevant previous year.

In case of an assessee, other than an individual and HUF, the residential status depends upon the place from which its affairs are controlled and managed. As per Section 6(2), a partnership firm or an association of persons are said to be resident in India if control and management of their affairs are wholly or partly situated within India during the relevant previous year. They are, however, treated as non-resident if control and management of their affairs are situated wholly outside India. As per Section 6(3), an Indian company is always resident in India. A foreign Company is resident in India only if, during the previous year, control and management of its affairs is situated wholly in India. Where part or whole of control and management of the affairs of a foreign company is situated outside India, it shall be treated as a non-resident company. As per Section 6(4), every other person is resident in India if control and management of his affairs is, wholly or partly, situated within India during the relevant previous year. On the other hand, every other person is non-resident in India if control and management of its affairs is wholly situated outside India.

Under FEMA the residential status of an individual is determined by the purpose for which he goes abroad. Section 2(v) provides that a person residing in India for more than 182 days during the course of the preceding financial year is a person resident in India. Further, it says that in case any person comes to or stays in India for or ontaking up employment or for carrying on business or vocation or for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period will be regarded as resident in India for such financial year. Similarly if any person goes out of India or stays outside India for fulfilling or achieving any of the aforesaidpurposes as would indicate his intention to stay outside India for an uncertain period will be regarded as non-resident in India. Further, it provides thatany person or body corporate registered or incorporated in India and an office, branch or agency in India owned or controlled by a person resident outside India or by a person resident in India will also be regarded as person resident in India.

Schedule XIII of the Companies Act, 1961 deals with conditions to be satisfied for the appointment of a managing or whole-time director or a manager (referred to as managerial person) of the Company without the approval of the Central Government. Explanation to Clause (e) of Part I of the Schedule provides that a resident in India includes a person who has been staying in India for a continuous period of not less than twelve months immediately preceding the date of his appointment as a managerial person and who has come to stay in India for taking up employment in India or for carrying on a business or vocation in India.

As per Section 5 of the Income Tax Act 1961, incidence of tax on a taxpayer depends on his residential status and also on the place and time of accrual or receipt of income. In order to understand the relationship between residential status and tax liability, one must understand the meaning of Indian income and Foreign income. An Indian income is one which satisfies any of the following conditions: If income is received (or deemed to be received) in India during the previous year and at the same time it accrues (or arises or is deemed to accrue or arise) in India during the previous year, or If income is received (or deemed to be received) in India during the previous year but it accrues (or arises) outside India during the previous year, or If income is received outside India during the previous year but it accrues (or arises or is deemed to accrue or arise) in India during the previous year.

Similarly, foreign income is one which satisfies both the following conditions: Income is not received (or not deemed to be received) in India; and Income does not accrue or arise (or does not deemed to accrue or arise) in India.

Indian income is always taxable in India irrespective of the residential status of the taxpayer. Foreign income of an individual and HUF from a business controlled or profession setup in India will be taxable in the hands of resident and ordinarily resident and resident but not ordinarily resident but not in the hands of a non-resident. However, Foreign income from a business controlled or profession setup outside India will be taxable only in the hands of resident and ordinarily resident and not in the hands of a resident but not ordinarily resident or a non-resident person. Foreign income of any other taxpayer (Company, Firm, AOP and BOI) will be taxable if the taxpayer is resident in India and will not be taxable in case the taxpayer is non-resident in India.

Q.2 How the tax planning with reference to new business is to be done?

(3 Marks )

Tax planning can be defined as an arrangement of ones financial and business affairs by taking legitimately in full benefit of all deductions, exemptions, allowances and rebates so that tax liability reduces to minimum. When a person decides to start a business there are a number of factors to be considered which may include location, nature and size of business, form of business, capital structure and setting up and commencement of business. Tax benefits on the basis of location, nature and size include the following:

Agricultural income: income (sec: 10(1))up to tax exemption

Newly established unit in SEZ (sec:10AA) 100% tax exemption for the first 10years and thereafter 50% for the next 5 years

Infrastructure : Development: Undertaking (sec: 80IA) Undertaking engaged in development: of SEZ(sec: 80IAB) Certain undertakings in certain special category sates (sec: 80IC) Hotels and convention centers in specified areas (sec: 80 ID) Undertakings in North Eastern states (sec: 801E) Assesses engaged in the collection and processing of bio-degradable waste.(sec: 80JJA)The different forms of business include Individual / Sole Proprietorship, Hindu Undivided Family (HUF), Firm and Company. An individual/ Sole Proprietorship can pay tax on taxable income (TI) at prescribed slab rate. He is not entitled to get deduction in respect of remuneration, interest on capital while computing income from his business. General Deductions to individuals Sec: 80C - contribution to life insurance premium, PPF, NSC, housing loan.

Sec: 80CCC contribution to Pension Fund.

Sec: 80D Health Insurance.

Sec: 80DD medical treatment for handicapped.

Sec: 80DDB expense on medical treatment of specified deceases.

HUF pays tax same as like an individual. The family can pay reasonable remuneration to karta and other family members allowed to deducting in computing business income. Interest on capital is not allowable for deduction. Deduction entitled from its Gross Total Income u/s 80C, 80D, 80DD, 80DDB, 80TTA.

Firm pay tax at the rate of 30.9%. Firm has no initial exemptions and entire income is taxable. The share of income of a firm in the hand of partner is fully exempted u/s 10(2A)Deductions to Firm Interest on capital or loan given a rate mentioned in partnership deed, but not exceeding 12%.

Remuneration to working partners as mentioned in Deed. But limits up to prescribed u/s 40(b)

A domestic company is liable to pay tax at the rate of 30%.Deduction to company Whole amount of interest paid to the loan taken for business purposes.

Remuneration paid to MD, Directors and other staffs.

Amount of dividend on its share capital is not deductible.

Since tax planning is the arrangement of ones financial and business affairs by taking legitimately in full the benefit of all deductions, exemptions, allowances and rebates so that tax liability reduces to minimum, it would be helpful to do the following: Where deduction from Gross TI is allowed for prescribed number of years it is better to commence the business from the beginning of the year.

For availing deductions u/s 80IA and 80IAB, the conditions laid down for the deduction must be complied.

The tax rate of HUF and Individual is the same so each case requires careful analysis.

Keeping in view exemption. There are no exemptions in the case of a firm, so to reduce the incidence of tax it is better to dissolve and start individual business.

The firm should pay interest and remuneration to partners to the extent u/s 40(b) to reduce the incidence of tax.

Take care of Minimum Alternative Tax (MAT)

Q.3 Telco Ltd., a company incorporated and managed in South Africa and engaged in telecommunication services, is going to invest in

China. Its Chinese operations will be both manufacturing and providing services. Telco intends to penetrate the Chinese market for telecommunication and according to some market research carried out before, the operations will be highly profitable within a couple of years.

How to structure Telco's investment in a tax effective manner?

(4 Marks )

Foreign investment enterprises in the Peoples Republic of China (PRC) usually take the form of equity joint ventures (EJVs), cooperative joint ventures (CJVs) or wholly foreign-owned enterprises (collectively, FIEs). According to Article 4 of the EJV Law, foreign investor(s) shall hold at least 25% of the registered capital of such a joint venture. If a foreign investment enterprise does not satisfy the 25% requirement and thus is not eligible for FIE status, it cannot enjoy the special tax holidays and incentives to which FIEs are entitled. If FIEs are tax residents under the PRC Tax Law they will be subject to tax on world-wide income. If FE's are non-tax residents then they will be subject to income tax on income derived from sources inside China only. Non-residents are not entitled to the benefit of avoiding double tax on income, as provided under the fax treaty entered into between the PRC and other countries.

Telco Ltd, the company incorporated and managed in South Africa and engaged in telecommunication services will need to structure its investment in China as follows:

Be EJVs or CJVs or indeed a wholly foreign-owned enterprise (FIE) holding at least 25% of the registered capital. Be a tax resident of the PRC. These will make the dividend paid by the Chinese subsidiary become exempted from withholding tax. If Telco Ltd will not be a tax resident of the PRC then a 10% withholding tax on dividends will be payable because Non-Residents are not entitled to the benefit of avoiding double tax on income, as provided under the fax treaty entered into between the PRC and other countries. So to reduce the incidences of double taxation on dividends Telco Ltd will be better off a tax resident of the PRC. A further reduction of the tax incidences in China would be achieved if Telco would invest in the Special Economic Zones (SEZ) or in the Free Trade Zone (FTZ) where the maximum corporate tax is 15%.

Upon receipt of the dividends by the parent in South Africa, additional South African corporate tax (about 28%) may be due. To reduce the incidence of tax on dividends for Telco Ltd, channeling of the dividends to a group holding company in Seychelles for example and subsequently to the South African investor would be an interesting solution.

This could be achieved by structuring the investment through a Seychelles group holding company established as a Special License Company (CSL) under the Seychelles law. The dividends received by this company are only subject to 1.5% tax in the Seychelles.

Due to special provision in the treaty between the Seychelles and South Africa, no further tax is payable in South Africa upon redistribution of the dividends to the parent company. Therefore, the maximum tax burden would be limited to 1.5%.

Assignment C

( 10 Marks )

Each question given below carry equal marks of 0.25

(i.e 0.25*40 = 10 Marks)

Q.1A domestic company is always a company in which the public are substantially interested -

(a) True (b) False

(c) None of the above

(d) True in some cases.Q.2 A private limited company can never be a company in which

the public are substantially interested

(a) True

(b) False

(c) True in some cases

(d) None of the above

Q.3 A company registered in the UK and makes arrangement for

payment of dividend in India is not a domestic company

(a) True

(b) False



Q.4 A company is said to be resident of a particular company if

(a)Control and management of the affairs of a company is

situated wholly in that particular country.

(b)Control and management of the affairs of a company is

situated outside that particular country.

(c) Control and management of the affairs of a company is

situated partly in that particular country and partly

outside that particular country.

(d) All of the above

Q.5 X Ltd. a foreign company manages its affairs partly from

India and partly outside India. X Ltd. is said to be

(a) Resident in India

(b) Non-Resident in India.

(c) Resident and Ordinary Resident in India,

(d) Resident but not ordinary Resident in India.

Q.6 A company owning the following hotels can claim deduction

under section 80-ID

(a)A 5 star hotel in X ( a place ).

(b)A 4 star hotel in Y ( a place ).

(c)A 3 star hotel in Z ( a place ).

(d)All of the above.

Q.7 A company is qualified to claim deduction under section 80-IB.

By mistake the deduction was not claimed in the return in the

return of income. However, the company claims the before the

Assessing Officer at the time of assessment under section 143(3)

(a)Deduction will be allowed by the assessing officer.

(b)Deduction will not be allowed by the assessing officer. (c)Deduction will be allowed by the assessing officer, if the

Commissioner of Income-tax permits.

(d)Deduction will be allowed by the assessing officer, if the

it is permitted by the Chief Commissioner.

Q.8 A Government company cannot claim any deduction under

section 10A, 10AA and 10B

(a)True

(b)False

(c)None of the above

(d)True in some cases.

Q.9A limited liability partnership owns an infrastructure facility. It can claim deduction under section 80-IA

(a)True

(b)False

(c)True in some cases

(d)None of the above

Q.10 Only a company(not a limited liability partnership) can claim deduction under section 10A, 10AA, and 10B

(a)True

(b)False



Q.11 Deduction under section 80JJJA is available in the following cases

(a)Indian Company

(b)Foreign Company

(c)Limited Liability Partnership.

(d)All of the above

Q.12Tonnage tax scheme is applicable in the following cases

(a)Foreign Shipping Company,

(b)Indian Shipping Company,

(c)Limited liability partnership in shipping industry.

(d)All of the above

Q.13A company will pay dividend tax if

(a)Bonus shares are allotted to equity shareholder.

(b)Bonus shares are allotted to preference shareholders,

(c)Shares are allotted to debenture holders free of cost.

(d)Shares are allotted to employees as ESOP shares free of

cost.

Q.14 Corporate taxation does not play any significance role in determining the choice between different sources of finance

(a)True

(b)False

Q.15 A Company want to purchase a plant (cost: Rs. 80 crore).It can out rightly purchase it. Alternatively, it can take the plant on lease. The following factors are taken into consideration to find out which one is better

(a) Corporate tax rate;

(b) Corporate rate and depreciation rate;

(c) Corporate tax rate, depreciation rate, lease rent, cost of

capital and useful life of plant;

(d) None of the above.

Q.16 If corporate tax rate is reduced the tax saving on account of depreciation will increase -

(a) True

(b) False



Q.17 If rate of depreciation is reduced the tax saving on account of

depreciation will increase -

(a) True

(b) False



Q.18 If borrowed funds are used for purchase of a plant and tax rates are reduced, the tax saving will increase -

(a) True

(b) False



Q.19 Depreciation is not available in the case of machine acquired under higher purchase

(a) True

(b) False



Q.20 X Limited is considering a proposal to manufacture a component itself or purchase from market. No fresh investment in plant and machinery will be required if it decides to manufacture the component within its factory. Total Variable Cost of manufacturing is $ 74 per unit of component. Net fixed cost of use of plant and machinery comes to $ 20 per unit of component. The component is available in market at $ 79 per unit of component. It is better to purchase the component from market-

(a) True

(b) False



Q.21 Y Limited has an option to purchase a machine out of own funds or alternatively a bank can finance it. At the current rate of corporate tax, the tax saving in the later option is higher. If the corporate tax rate is reduced, the second option will become less attractive-

(a) True

(b) False



Q.22In case of demerger, accumulated loss and unabsorbed

depreciation of the demerged company will be-

(a)Carried forward in the hands of demerged companies.

(b)Carried forward and set off in hands of resulting companies.

(c) Set off in the hands of demerged companies.

(d) None of these.

Q.23 Amalgamation and demerger are considered as-

(a) Same terms always.

(b) Distinct terms always

(c) Same terms in certain cases.

(d) Distinct terms in certain cases.

Q.24 Net wealth is calculated as-

(a) Assets chargeable to wealth tax less the exempted assets

(b) Assets chargeable to wealth tax less debt owned

(c) Assets less debt owned

(d) Assets less exempted assets

Q.25 Wealth tax is chargeable

(a) @ 2% of the net wealth exceeding Rs. 30 Lakhs

(b) @ 1% of the net wealth exceeding Rs. 30 lakhs

(c) @ 1% of the entire net wealth provided it exceeds Rs. 30,00,000.(b) @ 2% of the entire net wealth provided it exceeds Rs. 30,00,000.Q.26 Wealth tax is payable if the net wealth of the assesee

(a) Exceeds Rs. 250,000

(b) Is Rs. 30,00,000 or more

(c) Exceeds Rs. 30,00,000


Q.27 A firm is

(a) Not liable to wealth tax

(b) Liable to wealth tax

(c) Not liable to wealth tax but partners share in the value of the assests of the firm shall be included in the net wealth of the partner

(d) All of the above

Q.28 Asset held by a minor child is included in the net wealth of the

(a)Father

(b)Mother

(c)Father or mother whose net wealth before clubbing is greater. (d)Father or mother whose net wealth before clubbing is lesser.

Q.29 An assessee is one who pays the wealth tax, an assesse belongs to which of the following category?

(a) A company

(b) HUF

(c) A dead persons legal representative, the executor or administrator

(d)All of the above

Q.30 A house is not treated as an asset if

(a) it is meant exclusively for residential purposes

(b) house held as stock-in-trade

(c) house used for own business or profession

(d) all of the above

Q.31 VAT WAS FIRST INTRODUCED AS A TAX IN THE YEAR:-

(A) 1919

(B) 1921

(C ) 1948

(D) 1954

Q.32 VAT WAS FIRST INTRODUCED BY THE:-

(A) FRANCE

(B) GERMANY

(C ) USA

(D) UK

Q.33 WHICH IS MOST COMMON VARIANT OF VAT USED WORLD WIDE:-

(A) GROSS PROFIT VARIANT

(B) CONSUMPTION VARIANT

(C ) GROSS PRODUCT VARIANT

(D) GROSS INCOME VARIANT

Q.34 TIN MEANS:-

(A) TAX INFORMATION NUMBER

(B) TAX INDIA NUMBER

(C ) TAX IDENTIFICATION NUMBER

(D) TAX INTRODUCTION NUMBER

Q. 35 VAT INTRODUCTION WILL CERTAINLY:-

(A) MAKE THE REVENUE COLLECTION WORST.

(B) MAKE THE REVENUE COLLECTION BETTER.

(C ) THE REVENUE COLLECTION ARE THE SAME.

(D) REVENUE VOLUME HAS NOTHING TO DO WITH

INTRODUCTION OF VAT

Q.36 THE ACCOUNTING UNDER THE VAT WILL BE:-

(A) REGULAR AND CHEAP.

(B) REGULAR AND EXPENSIVE

(C) IRREGULAR AND CHEAP.

(D) IRREGULAR AND EXPENSIVE

Q.37 TO CLAIM THE INPUT CREDIT OF TAX PAID WHAT IS MOST IMPORTANT DOCUMENT:-

(A) PERMISSION OF THE SALES TAX AUTHORITY.

(B) PROPER VAT INVOICE

(C ) CASH BOOK

(D) LEDGER

Q.38 WHICH IS MOST COMMON VARIANT OF VAT USED WORLD WIDE:-

(A) GROSS PROFIT VARIANT

(B) CONSUMPTION VARIANT

(C ) GROSS PRODUCT VARIANT

(D) GROSS INCOME VARIANT

Q.39 DUE TO INTRODUCTION OF VAT:-

(A) TAX EVASION IS RESTRICTED.

(B) TAX EVASION IS INCREASED.

(C ) VAT HAS NOTHING TO DO WITH EVASION OF TAX.

(D) TAX EVASION HAS BECOME EASY.

Q.40 THE ACCOUNTING UNDER THE VAT WILL BE:-

(A) REGULAR AND CHEAP.

(B) REGULAR AND EXPENSIVE

(C) IRREGULAR AND CHEAP.

(D) IRREGULAR AND EXPENSIVE

Corporate Tax Assign Derick

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