Sample Questions -Income & Sales Tax

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Q1. Whether a show cause notice by the government is necessary for compulsory purchase under Section 269 of the Income-tax Act, 1961.

A. Yes, a show cause notice is compulsory in the case of a compulsory purchase by the government. The law requires to in our opportunity to be given to the concerned parties particularly the intending purchaser and the intending seller. Thus under Section 269 you would be intending purchaser and intending seller must be given the show cause notice against order for compulsory purchase.

Q2. In my Income Tax Return I claimed expenditure incurred of repairs and renovations of my business premises. The department disallowed my claim. Is the order of the department justified?

A. The provision of Section 30 (a) (ii) the Income-tax Act, 1961 require that for the amount to be allowed as a deduction the same must be spend for the purposes of carrying on current repairs . If the deduction sought by you comes with the definition of current repairs you will be entitled to claim deduction otherwise the department would be justified in disallowing the same.

Q3. I am a tenant in a premises and I incurred certain expenses for renovation of the premises . In the Income Tax Return I claimed deduction for the said expenses incurred as revenue expenditure. Is such deduction permissible ?

A. Yes, you will be entitled to the benefits of Section 37 of the Income tax Act, 1961 in case you have incurred expenses on the renovation of the tenanted premises. The tenant does not acquire any capital assets in doing the same because of the building does not belong to him and as such the expenditure can not be termed of a revenue nature. The expenditure has been incurred for the purposes of facilitating the assesses business operation or otherwise and the said amount should be allowable as Revenue Expenditure under Section 37 of the Income-tax Act.

Q4. Is there any judgement holding that the provisions of Section 127 (2) of the Income-tax Act, is not ultra vires the Constitution of India?

A. Yes one the judgement in this regard is Sameer Leasing Company Limited Vs. Chairman C.B.D.T. reported in 40(1990) DLT page 37.

Q5. Can the Income tax officer retain sealed books of accounts and other documents for more than a particular period. What is the legal position in this regard?

A. Under Section 132 (8) of the Income-Tax Act, the Income tax officer has the power to retain the books of accounts and other documents seized by him for a period of 180 days. In case an extension of the said period is required an order is to be passed by Commissioner of the Income tax and if no such order is passed the Income tax officer is bound to release the books of account and other documents to the party.

Q6. In the case of acquisition of a property under Section 269 of the Income-tax Act, if the said property is occupied by tenant, What is the right of the said tenant in said property?

A. After the acquisition of the property under Section 269 of the Income-tax Act the tenant has no right to stay in the property. The tenant has no right to continue in possession and there is no safe guard provided to tenant in this regard.

Q7. Incomes as salaries to the employees in 100% subsidiary unit supported by US company in India is Taxable or not? As the unit in India is registered with STPI and enjoys 100 EOU status, please clarify on this and if taxable what will be the Tax to be the Tax to be paid ?

A. Salaries to the employees of a 100% subsidiary unit supported by a US company, even if the unit enjoys 100% status are taxable. The taxable status of the employees is determined by their residential status as determined by Section 6 of the Indian Income Tax Act. Tax on Income by the employees would be paid as per prevalent rates of the relevant assessment year, attracting all the deductions and exemptions as allowed by the Act for any salaried employee.

Q8. I have already invested Rs.6000 in the tax saving schemes. Can I invest more? If yes, how much and in which schemes?

A If your are talking of Sec 88, you can further invest in shares, debentures or units of infrastructure sector to the extend of Rs.10000/- to claim maximum rebate.

Q9. I have a house on which I took HDFC loan 6 years back. I am currently claiming only Rs.10000 as the max deductible under Section 88 (20% deduction form IT). A friend told me that it is possible to claim the full Emi payment made under a special section that exists (from the total taxable salary) (probably section 24 or something). Could you please tell me if this is true?

A. Your current claim of Rs.10,000/- is correct. Though in the current Finance Bill 2000, it is proposed to be increased to Rs.20,000/-. However you can claim deduction for interest on borrowed capital u/s 24 under Income from House Property. Any expenditure claimed u/s 24 will not qualify for purposes of Sec 88.

Q10. Does the NRI have to pay property tax if they buy property in India? Can a person fill a NRI in a income tax form if he has been out of India for six months though he is Indian citizen?

A. If an NRI buy a property in India, the house Tax levied by Municipal Authorities is payable by them. An individual is treated as a Non Resident during the previous year if he does not satisfy the basic conditions laid down in section 6(1) of the Income Tax Act i.e. :- He should not satisfy any of the following conditions:- a) He is in India in the previous year for a period of 182 days or more or b) He is in India for a period of 60 days or more during the previous year and 365 days or more during the four years immediately preceding the previous year. You haven’t mentioned any thing about his stay in India in the previous year ( financial year) in number of days and in the years prior to the previous year ( financial year). we assume that he at least satisfies the condition (b) above and in this case he cannot be assessed as a Non Resident Indian.

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About the Author

- Vakilno1 is a group of Law Enthusiasts and Legal Experts in India with a passion to provide the latest info and articles on Indian Legal System

Displaying 6 Comments
Have Your Say
  1. Murali says:

    Can u highlight the service tax applicablility etc on flats construction and sales

  2. Heather says:

    “Sample Questions -Income & Sales Tax” was in fact a
    superb read and also I personally ended up being really happy to come across the blog post.
    Thanks a lot,Nichol

  3. S Das says:

    I get Form 16 from my employer. I have given Rs 1.5L to my Father for purchase of an old Car in my mothers name. Will the amount be delectable form my taxable Income for this year. How to show this please explain.

  4. nice and very informative site for income tax and other direct taxes

  5. sir plz help me if question require both the treatment like u/s 87A and u/s 91 why to solve the question

  6. Divya says:

    Hi

    i just came across a judgement of a state in India recently stating about tangible assests tax applicability. The judgment states either VAT OR SERVICE TAX has to be levied and not both. can someone provide me the citation of the same.

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