Taxation - Income TaxQuestion 5590 of 146
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Question 2 (a) Mr. Paras has a proprietary business since P.Y. 2015-16. He has transferred this business on 01.04.2023 by way of a slump sale for a total consideration of ` 40 Lakh. The fair market value of his capital assets as on 01.04.2023 is ` 35 Lakh. He has incurred expenses for this deal of ` 1,50,000. His Balance Sheet as on 31.03.2023 is given below: Liabilities ` Assets ` Own Capital 20,00,000 Building 18,00,000 Bank Loan 5,00,000 Debtors 5,00,000 Unsecured Loans 2,50,000 Machinery 5,00,000 Creditors 4,10,000 Other assets 3,60,000 31,60,000 31,60,000 Other information : (1) Bank loan balance includes ` 2 lakh for personal purpose. (2) Machinery costing ` 50,000 has been allowed 100% as deduction u/s 35AD (3) Other assets include self-generated goodwill of ` 60,000. (4) Unsecured loans include ` 1 lakh for amount payable for the purchase of the ornaments of his wife. Compute the capital gain/loss for the A.Y. 2024-25. (b) Mr. Ganesh whose Professional Receipts for the year ended 31.03.2023 were ` 1.25 crores has made payment to Mr. Rajesh (a Chartered Accountant) during P.Y. 2023-24 who has multi faced activities. Examine whether TDS Provisions re applicable for following payments made by Mr. Ganesh to CA Rajesh : (i) Professional Fee for consultation - ` 32,450 on 15.06.2023 including GST paid @18%. (ii) Royalty Payment for Use of Computer Software by various clients of Mr. Rajesh - ` 2,50,000 on 03.03.2024. (iii) Fee for Technical services related to Business of Mr. Ganesh - ` 20,000 on 15.12.2023. (iv) Fees for teaching accountancy to his Son - ` 40,000 on 31.10.2023.

Options

A
B
C
D
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Correct Answer

✅ Option descriptive — Correct Option

All Options:

  • A
  • B
  • C
  • D

Detailed Solution & Explanation

### Part (a) Computation of Capital Gains on Slump Sale for A.Y. 2024-25 | Particulars | Calculation | Amount (₹) | | :--- | :--- | :--- | | Full value of consideration (Deemed u/s 50B) | Higher of:
1. FMV of capital assets (₹35,00,000\displaystyle ₹35,00,000)
2. FMV of monetary consideration received (₹40,00,000\displaystyle ₹40,00,000) | 40,00,000\displaystyle 40,00,000 | | Less: Expenses on transfer | | (1,50,000)\displaystyle (1,50,000) | | **Net Consideration** | | **38,50,000\displaystyle 38,50,000** | | Less: Net Worth of the undertaking (See Note below) | | (21,90,000)\displaystyle (21,90,000) | | **Long-term Capital Gain** | Slump sale of undertaking held for > 36 months (No indexation u/s 50B) | **16,60,000\displaystyle 16,60,000** | #### **Note: Computation of Net Worth** | Asset / Liability | Book Value (₹) | Remarks | | :--- | :--- | :--- | | Building | 18,00,000\displaystyle 18,00,000 | WDV as per Section 43(6)(c) (assumed book value represents WDV) | | Machinery | 4,50,000\displaystyle 4,50,000 | ₹5,00,000\displaystyle ₹5,00,000 book value less ₹50,000\displaystyle ₹50,000 allowed as 100% deduction u/s 35AD | | Debtors | 5,00,000\displaystyle 5,00,000 | Book Value | | Other Assets | 3,00,000\displaystyle 3,00,000 | ₹3,60,000\displaystyle ₹3,60,000 book value less self-generated goodwill of ₹60,000\displaystyle ₹60,000 (excluded u/s 50B) | | **Total Assets (A)** | **30,50,000\displaystyle 30,50,000** | | | Less: Bank Loan | (3,00,000)\displaystyle (3,00,000) | ₹5,00,000\displaystyle ₹5,00,000 total less personal loan of ₹2,00,000\displaystyle ₹2,00,000 | | Less: Unsecured Loan | (1,50,000)\displaystyle (1,50,000) | ₹2,50,000\displaystyle ₹2,50,000 total less wife's ornaments loan of ₹1,00,000\displaystyle ₹1,00,000 | | Less: Creditors | (4,10,000)\displaystyle (4,10,000) | Book Value | | **Total Liabilities (B)** | **8,60,000\displaystyle 8,60,000** | | | **Net Worth (A - B)** | **21,90,000\displaystyle 21,90,000** | | ### Part (b) Examination of TDS Provisions for Payments by Mr. Ganesh to CA Rajesh 1. **Professional Fee for Consultation (₹32,450\displaystyle ₹32,450 on 15.06.2023 including GST @ 18%):** - Under Section 194J, TDS is required to be deducted @ 10% on professional fees exceeding the threshold of ₹30,000\displaystyle ₹30,000 in a financial year. - The professional fee excluding GST is ₹32,450×100118=₹27,500\displaystyle ₹32,450 \times \frac{100}{118} = ₹27,500. - Since ₹27,500\displaystyle ₹27,500 does not exceed ₹30,000\displaystyle ₹30,000, no TDS is required to be deducted. 2. **Royalty Payment for Use of Computer Software (₹2,50,000\displaystyle ₹2,50,000 on 03.03.2024):** - Under Section 194J, individuals and HUFs are not required to deduct TDS on royalties if their turnover in the preceding year does not exceed the limits specified u/s 44AB(a)/(b) (i.e. ₹1 Crore\displaystyle ₹1 \text{ Crore} for business or ₹50 Lakhs\displaystyle ₹50 \text{ Lakhs} for profession). Since Mr. Ganesh's receipts in the preceding year were ₹1.25 Crores\displaystyle ₹1.25 \text{ Crores} (exceeding the limit), he is liable to deduct TDS. - However, for software royalties, if TDS is covered under Section 194J, the rate of TDS is 2% (royalty for sale/distribution of software) or 10%. - The payment of ₹2,50,000\displaystyle ₹2,50,000 exceeds the limit of ₹30,000\displaystyle ₹30,000. Hence, TDS @ 10% (or 2% if it is for use of software) is applicable. 3. **Fee for Technical Services (₹20,000\displaystyle ₹20,000 on 15.12.2023):** - Under Section 194J, TDS on fees for technical services is 2% subject to the threshold limit of ₹30,000\displaystyle ₹30,000 per financial year. - Since the payment of ₹20,000\displaystyle ₹20,000 is below ₹30,000\displaystyle ₹30,000, no TDS is required. 4. **Fees for Teaching Accountancy to his Son (₹40,000\displaystyle ₹40,000 on 31.10.2023):** - This payment is for personal purposes. Under Section 194J, individuals/HUFs are not required to deduct TDS on payments made for personal purposes. Hence, no TDS is required.

Key Concepts to Understand

Consideration

Something of value exchanged for a promise. 'Quid Pro Quo' (Something for something).

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