CA Final DT – Part I – Chapter 6 – Profits and Gains of Business or Profession MCQs – Set II

In case of succession of a firm/ sole proprietary concern by a company, the depreciation is-

In case of Hire purchase, depreciation is allowed to be claimed by-

Mr. Ajith incurs the following expenditure for acquisition of a plant and machinery for his factory.
1)      Rs. 1,50,000/- paid via net banking
2)      Rs. 20,000/- paid via BHIM
3)      Rs. 10,000/- paid via credit card
4)      Rs. 5,000/- paid via cash
5)      Rs. 25,000/- paid via cashWhich of the following would be the actual cost of asset as per Section 43(1)?

Where an assessee incurs any expenditure for acquisition of any asset or part thereof in respect of which, payment or aggregate of payments made to a person in a day, otherwise than by account payee cheque or account payee bank draft or electronic clearing system or through prescribed electronic mode exceeding Rs. ____________ would not form part of actual cost of asset

Actual cost of asset used for business after it ceases to be used for scientific research would be –

In a case where Inventory is converted into capital asset and used for business or profession, the actual cost of the asset of such asset would be-

Ms. Bharathi owns a plant and machinery and uses it for the purpose of her business. She has claimed depreciation in respect of such asset. This plant and machinery are transferred to Ms. Aarthi. Ms. Bharathi then acquires the same back from Aarthi on lease. What would be the cost of asset in the hands of Ms. Aarthi?

Mr. Shekar a non-resident brings a furniture to India from Germany for the purpose of using it in his business. What would be the actual cost of the furniture u/s 43(1) in the hands of Mr. Shekhar?

Tippu succeeds his father’s business due to retirement of his father.WDV of assets in the hands of Tippu would be-

Mr. X is engaged in the business of manufacture of tea, If the turnover is Rs. 20,00,000/-, depreciation Rs. 1,00,000/- and other expenses of Rs. 4,00,000/-, then income would be Rs. 15,00,000/- Business Income in this case would be –

Mr. X is engaged in the business of manufacture of tea, If the turnover is Rs. 20,00,000/-, depreciation Rs. 1,00,000/- and other expenses of Rs. 4,00,000/-, then income would be Rs. 15,00,000/-. Depreciation allowed in this case would be –

What is the order of set off of depreciation and losses as per income tax act 1961?

Unabsorbed depreciation can be set off against any head of income except:

Unabsorbed depreciation can be carried forward for –

Which of the following statement is correct?

When a building, plant & machinery, furniture is not exclusively used for business purposes, deduction on account of expenses on account of current repairs, insurance premium and depreciation is allowed-

Balancing charge is calculated as–

The concept of balancing charge is applicable to –

Mega Power Ltd purchased an asset on 15/07/2017. The actual cost of the asset is Rs. 100 lakhs. The company claimed depreciation at 5% on actual cost of asset. WDV of the asset as on 01/04/2021 is Rs. 80 lakhs. On 21/06/2021, the company sold the asset for Rs. 90 lakhs. Income taxable as balancing charge would be

Deduction under Section 33AB for assesses carrying on business of growing and manufacturing of tea, coffee or rubber is allowed –

In order to claim deduction u/s 33AB, assessee must have made deposits in prescribed deposit account-

Where any deduction u/s 33AB is allowed in respect of any amount deposited in special account or Deposit account has been allowed in any P.Y; then-

In which of the following circumstances, amount deposited in Special account/Deposit account u/s 33AB may be withdrawn?

In which of the following circumstances, the amount withdrawn from Special account/Deposit account u/s 33AB is not treated as taxable profits?

Asset acquired in accordance with the scheme or deposit u/s 33 AB should not be sold or transferred in any PY before the expiry of_______ years from the end of PY in which it was acquired.

The lock in period of 8 years for sale or transfer of asset acquired u/s 33AB would not apply in which of the following cases?

National Bank with respect to Section 33AB means

In case of Site restoration fund u/s 33ABA, deduction allowable to the assessee would be –

Which of the following is considered as Scientific research for the purpose of Section 35?Activities for extension of knowledge in fields of:

Which of the following expenditures incurred for Scientific research related to the business of an assessee is allowed as deduction u/s 35?

Which of the following expenditures incurred within 3 years immediately preceding commencement of business is allowed as deduction u/s 35?

Which of the following statements are correct?

Mr. Akshay incurred a capital expenditure on scientific research amounting to Rs. 4 lakhs in P.Y. 2020-21 and claimed deduction of the same u/s 35. Further he sold such asset for Rs. 6 lakhs in PY 2021-22. What would be the amount chargeable to tax in the year of sale?

Which of the following are the conditions to be satisfied to claim deduction u/s 35 when any amount is paid by an assessee to an approved company for scientific research?

Company engaged in business of bio technology shall not be eligible for deduction u/s 35 for which of the following expenditures?

Yakima Ltd. purchased computers for Rs.10 lakhs on 5th October, 2020, installed the same in its office and put the said computers to use on the same date. The depreciation allowable under Section 32 for A.Y.2021-22 is respect of the said computers is

Mr. Sanjay took a loan from SBI on 31.03.2014 of Rs. 10,00,000. During previous year 2021-22, interest actually paid on such loan was Rs. 1,00,000. However, the amount of interest unpaid on such loan from 01.04.2014 up to 31.03.2022 is Rs. 3,50,000. As Mr. Sanjay was making continuous defaults in payment of interest, a restructuring arrangement was entered into wherein the unpaid interest was converted into Funded Interest Term Loan (FITL) which is shown separately from the original loan and no interest is chargeable on FITL. This converted interest is to be paid 4 annual equal instalments from 01.04.2022. Mr. Sanjay is of the view that for A.Y. 2022-23, the following deductions shall be allowed to him while computing his business income:Interest of Rs 1,00,000 on original principal of Rs 10,00,000. Converted Interest of Rs. 3,50,000. Is Sanjay’s View correct?

Mr. Arun, engaged in the business of wholesale trade, has a turnover of Rs. 180 lakhs for P.Y.2020-21 and Rs. 250 lakhs for P.Y.2021-22. In the P.Y.2021-22, he paid salary of Rs. 2 lakhs to Mr. Vishnu, a resident, without deduction of tax at source and commission of Rs.70 lakhs to Mr. Raghu, a resident, without deduction of tax at source. The disallowance under section 40(a)(ia) while computing business income of A.Y.2022-23 would be

Ashutosh Ltd., an Indian company engaged in manufacture of steel utensils, has incurred expenditure on advertisement in a souvenir of a registered political party. Which of the following statements is correct?

M/s STP, a partnership firm, is engaged in the trading business of electrical appliances. Its turnover for the previous year 2021-22 is Rs.1,60,00,000. It follows mercantile system of accounting. It has received the amount of its turnover in the following manner:

Rs. 80,00,000 through Account payee cheques (Rs. 5,00,000 received on 30.4.2022)
Rs. 15,00,000 in Cash (whole amount received during the P.Y. 2021-22)Rs. 20,00,000 through Crossed cheques (whole amount received during the P.Y. 2021-22)
Rs. 30,00,000 through RTGS (Rs. 2,00,000 received on 15.5.2022)
Rs 15,00,000 was not received by the firm till the due date of filing return of income for the current previous year.

The Profits and Gains as per the Books of account maintained as per Section 44AA is Rs 8,90,000. What would be the total income of the firm for AY 2022-23, if it wishes to make maximum tax savings without getting its books of Accounts audited?

Which of the following Individuals would be entitled to opt for presumptive taxationscheme under the Income Tax Act, 1961, for A.Y 2021-22?
i. A retail trader having turnover of Rs. 2 crore during the previous year 2021-22.
ii. A practicing chartered accountant having gross receipts of Rs. 92 lakhs during the previous year 2021-22
iii. A wholesale trader having turnover of Rs. 1.96 crore during the previous year 2021-22
iv. A doctor having gross receipts of Rs. 50 lakhs during the previous year 2021-22
v. An individual owning 8 goods carriages as on 1.4.2021. He sold 2 goods carriages on 1.5.2021 and purchased 4 goods carriages on 1.7.2021

The Turnover of Ms. Aarathi, engaged in wholesale trading business, for the P.Y.2021-22 is Rs. 2 crore and the gross receipts of Ms. Vijaya , engaged in legal profession is Rs. 50 lakhs. Ms. Aarathi has been regularly following mercantile system of accounting and Ms. Vijaya regularly follows cash basis of accounting. Out of the turnover of Ms. Aarathi, she receives Rs. 1.20 crores through ECS through bank account during the P.Y.2021-22. She receives another Rs. 60 lakhs through ECS through bank account on or before 30.4.2022. Ms. Vijaya receives Rs. 30 lakhs by account payee bank draft and Rs. 20 lakhs by crossed cheque during the P.Y.2021-22.

What would be the income chargeable to tax under the head “Profits and Gains of Business and Profession”, if they want to minimize their tax liability? Both of them maintain books of account as per section 44AA. Income computed as per the regular provisions of Income-tax Act, 1961 is Rs. 11,50,000 and Rs. 24,75,000 in the hands of Aarathi and Vijaya, respectively. However, they have not got the books of account audited and do not intend to do so in future.

XY Ltd is a company having two units – Unit X carries on specified business of setting up and operating warehousing facility for storage of agricultural produce and Unit Y carries on non specified business of setting up and operating warehousing facility for storage of edible oil. Unit X commenced operations on 1.4.2021 and claimed deduction of Rs. 150 lakhs incurred in April, 2021 on purchase of two buildings for Rs. 90 lakhs and Rs. 60 lakhs (for operating warehousing facility for storage of agricultural produce) under section 35AD for A.Y.2022-23. However, in March, 2022, Unit X transferred its building costing Rs. 90 lakhs to Unit Y. What are the tax implications of such transfer in the hands of XY Ltd.?
i. Rs. 90 lakhs would be deemed as business income in the hands of XY Ltd. for A.Y.2022-23
ii. Rs. 81 lakhs would be deemed as business income in the hands of XY Ltd. for A.Y.2022-23
iii. Actual cost of building for computing depreciation for P.Y.2021-22 would be Rs. 90 lakhs
iv. Actual cost of building for computing depreciation for P.Y.2021-22 would be Rs. 81 lakhs.

Which of the above statements are correct?

S Ltd. is engaged in the business of letting out of properties. As per the memorandum of association of S Ltd., letting out of properties is its main objective. The total income of S Ltd. comprises only of rental income from the business of letting out of properties. T Ltd. is engaged in the construction and sale of properties, which is its main objective as per its memorandum of association. Incidentally, it let out some properties which are held as stock-in-trade and earns rental income there from. Which of the following statements are correct?

Mr. Dheeraj who is the tax consultant of Y Pvt. Ltd. is computing the income from business of the company for A.Y. 2022-23 for determining the tax liability. Y Pvt. Ltd. is not liable for tax audit u/s 44AB during the said year. While computing the business income under the normal provisions of the Income tax Act, 1961, Mr. Dheeraj has duly considered the provisions of the Income Computation and Disclosure Standards (“ICDS”) wherever applicable. However, Mr. Dheeraj is confused regarding the applicability of ICDS while computing book profits for determining the MAT liability of the company u/s 115JB. Advise Mr. Dheeraj regarding the same.

Benefit of presumptive taxation under the Income-tax Act, 1961 would not be available to Emmanuel, a non-resident, in A.Y. 2022-23, in respect of the related Indian income, if he is engaged in the business of-

Which of the following expenditure is not eligible for deduction u/s 35AD

Which of the following is not a specified business u/s 35AD?

Which of the following contributions to rural development are eligible for deduction u/s 35CCA?

Section 35D allows amortisation of preliminary expenses over a period of –

Deduction u/s 35 D is available to –

The maximum aggregate amount of qualifying expenses that can be amortised in case of resident non corporate assessee u/s 35D is-

P Ltd contributes 20% of basic salary to the account of each employee under pension scheme u/s 80CCD. DA is 30% of basic salary and it forms part of pay of the employees. What would be the amount of deduction allowable u/s 36(1)(iva), if the basic salary of employees aggregates to Rs. 10 lakhs; and also the disallowance u/s 40A(9)?

Deduction available on account of provision of bad and doubtful debts in case of NBFC’s is –

For the purpose of Section 44AE, heavy goods vehicle is any goods carriage, the gross vehicle weight of which exceeds