BUSINESS TAXATION

ASSESSMENT OF COMPANIES

PROBLEMS OF ASSESSMENT OF COMPANIES

1. The book profit of the company is Rs 300000. Compute its tax liability keeping in view the
provisions of MAT U/S 115JB.

2. The total income under the IT act of 1961 is Rs 450000. The book profit of the company in the
PY 2016-17 in view with U/s 115JB of the IT Act is Rs 1500000. Is the company liable to MAT?

If Yes how much to be paid by the company.

3. The total income of the company is Rs 5780000outoff which long term capital gain is Rs
33000 and income from business is Rs 545000. The book profit of the company is Rs 1000000.
Compute its tax liability.

4. ABC Co Ltd is a domestic company. The following incomes are furnished by the company.

Income from export business 12500000

Dividend from foreign company 100000
Dividend from domestic company 150000
Long term capital gain 200000
Short term capital gain 125000
Income from listed securities 75000
Income from POSB 100000
Book profit U/s 115JB 9000000
The company donated 100000 towards Prime Minister Flood

5. Nirmala Roy traders Ltd closes its accounts on 31/3 Every Year for the year 2016-17. The
following details are given.

Income from royalty from foreign company 200000

Income from units of UTI 10000
Dividend from a co-operative societies 50000
Dividend from a domestic company 30000
Dividend from a foreign company 150000
Rent from HP 50000
Municipal tax paid on HP 5000
Long term capital gain 100000
Short term capital loss 40000
Income from business (computed) 300000
The business was started in backward state in 2004-05. Donation to PM relief fund Rs 100000.
Compute Taxable income for the AY 2017-18

6. Following is the P/L of RP Ltd an Indian Company for the PY 2016-17

Particulars Amount Particulars Amount

Raw materials 1500000 Sales 6000000
Wages and salaries 2500000
Advertisement expenses 250000
Insurance 35000
Audit fees 80000
Depreciation 70000
Provision fro taxation 50000
Provision fro contingent liabilities 45000
Transfer to General reveres 100000
Proposed dividend 200000
Office expanses 300000
Loss on subsidiary co 200000
Legal charges 75000
Repairs to machinery 55000
Balance C/d 540000
6000000 6000000
Additional Information

1. The above profit and Loss A/c has been prepared as per Companies Act 19566
2. Brought forward loss and depreciation
Particulars As per books of accounts As per IT
Brought forward losses 200000 250000
Unabsorbed depreciation 100000 200000
Calculate taxable total income and tax liability as per normal provisions of IT Act. Book Profit
and tax liability as per MAT provisions and Ultimate Tax liability

7. The following is the Profit and Loss A/c of LM Ltd an Indian company for the year ending
31/3/17. Calculate the final tax liability

Particulars Amount Particulars Amount

To purchases 1200000 By sales 5000000
To factory expanses 1200000 By dividend from foreign 500000
To deprecation 200000 company
To general expanses 100000
\to Income Tax 200000
To Net profit 2600000
5500000 5500000
Additional depreciation

1. Depreciation allowable as per IT Act Rs 150000

2. The company has various allowable depreciable assets. During the year a block of P/M
was revalued to a higher figure. Such revaluation resulted in excess depreciation of 20000

8. My Ambition Ltd is engaged in the business of developing and exporting computer software.
The following is the profit and loss A/c for the ended 31/3/2018

Particulars Amount Particulars Amount

To expenses on floppies 1250000 By export sales 6000000
To salaries 2500000 By sales in India 1600000
To administrative expenses 200000 By LTCG 300000
To marketing expenses 300000
O depreciation on computers 1500000
To repairs 20000
To provision for IT 480000
To proposed dividend 300000
To provision for contingent liabilities 100000
To Net profit 2195000
7900000 7900000
Additional Information

1. Depreciation is as per IT Act

2. Brought forward Losses/Expenses
Particulars As per books of accounts As per IT
Brought forward losses 450000 600000
Unabsorbed depreciation ---- 150000
3. LTCG represents gain on sale of listed shares of other companies.
Calculate the tax liability of the company.

9. An Indian Co carries on business in Motor Transportation. Its profit and Loss A/c for the PY
2016-17 shows a Net Profit of Rs 561300. Find out total income ad tax liability of the company
after taking into consideration the following particulars.

Profit and Loss A/c debited with the following expenses

 Rs 450000 as depreciation
 Rs 56250 as bad debts reserve
 Rs 15000 spent to obtain new license and company was able to get it.
 The engine of very old bus was replaced by a new one by spending Rs 75000

The Profit and Loss account was credited with the following Incomes

 Agricultural receipts Rs 75000

 Rs 12000 as interest from an Indian company on debentures
 Capital gain on sale of motor car Rs 25000 (short term)
 As per the rates applicable in the current year the amount of depreciation comes to
300000
 The book of company U/s 115JB Rs 2400000

10. KML Ltd is a domestic co in which public are substantially interested. It show the net profit
of Rs 7400000 for the PY 2016-17 after providing for taxation Rs 350000 but before providing
for depreciation the following are the other particulars.

 Depreciation Rs 470000
 Brought forward loss Rs 340000
 Net profit included the following
Dividend from DBM Ltd, Kolkata Rs 60000
STCG on sale of Units Rs 87000
LTCG on sale of jewelry Rs 68000
 The following items have been debited to Profit and loss A/c
Expenses on maintenance Rs 32000
Penalty of excise loss Rs 12000
Donation to accrued institution to be utilized for promoting family planning Rs 21000
The amount of dividend distributed by the company during 2016-17, Rs 1280000
Compute the total income and tax payable by the company under normal provisions for
the AY 2017-18
11. The following is the P&L A/c of Dhamaka Ltd for the year ended 31/3/17

Particulars Amount Particulars Amount

Materials consumed 18250000 Sale in India 3500000
Direct wages 750000 Export profit 450000
Salaries 400000 Amount withdrawn from 150000
Office expenses 50000 contingencies Reserves
Depreciation 175000 Profit on sale of P/M of 50000
Directors remuneration 200000 business
Audit fee 45000
Provision for IT 40000
Loss on subsidiary company 200000
Custom penalty 62000
Proposed dividend 350000
Net profit 53000
4150000 4150000
Additional Information

1. Depreciation allowable under IT Act Rs 250000

2. The contingency reserve was created during last year by debiting to P/L A/c
3. Export profits have been calculated separately.
4.
Particulars As per books of accounts As per IT
Brought forward losses 200000 250000
Unabsorbed depreciation 50000 80000
Calculate total income under normal provisions of IT Act and book profit under MAT and tax
liability.

12. BPG Ltd is a domestic company which shows a net profit of Rs 1315000 for the ending
31/3/17. This includes the following debit profit and loss A/c.

1. 350000 has been distributed as dividend among the shareholders during the PY 2016-17
2. Interest amounting Rs10000 paid on loan taken for the payment of company liability for
excise duty.
3. Interest amounting Rs 34000 paid on the loan taken to pay income tax.
4. Company director’s wife accompanied a trip to England a sum of Rs 24000 was spent by
the company towards her foreign trip expenses which are debited to P/L A/c
5. Company incurred Rs 145000 on maintenance of holiday home
6. Company incurred expenditure of Rs 90000 as follows:
Advertisement in newspaper amount paid in cash Rs 22000
Advertisement in sovenier of political parties Rs 20000
7. Rs 18000 paid as legal expenses in respect of proceeding
8. Penalty of Rs 36000 for importing
9. The total income included
LTCG on the sale of Investment Rs 120000
STCG Rs 105000
10. The company was maintaining a stud for race horses and there was stake money Rs
200000 and the expenditure on maintenance of horses amounting Rs 370000. These
amount have been included in P/L A/c
11. Depreciation for the year amounted to Rs 125600 which has not been debited.