Taxation - Income TaxQuestion 5640 of 146
All Questions

2023. The market value is ` 45,100. Determine the residential status of Mr. Madan and his HUF and compute gross total income of Mr. Madan for the assessment year 2024-25 assuming he opted out of the default tax regime. The value of one USD ($) may be taken as ` 70. (4 Marks)

Options

A(ia) though Mr. Amit has filed his return of income considering the professional fees from M/s PQR & Co. and paid taxes on the same. In such a case, M/s PQR & Co. would not be deemed as assessee in default by virtue of the first proviso to section 201(1) and the amount disallowed i.e., 27,150 would be allowed as deduction in A.Y. 2025-26. For non-deduction of tax at source, interest @1% would be leviable under section 201(1A)(i) for every month or part of the month on the amount of tax from the date on which such tax was deductible to the date such tax was paid by the payee i.e., 2.5.2024. Interest @1% on ` 3,050 (10% of ` 30,500) from June 2023 to May 2024 = ` 366 and on ` 6,000 (10% of ` 60,000) from January, 2024 to May 2024 = ` 300 is payable by M/s PQR & Co. (ii) M/s. Fastest Ltd. is not required to collect tax at source u/s 206C(1F) on sale of cars of ` 150 lakhs to M/s. Race LLP, since such sale is to a distributor and sale price of each car does not exceed ` 10 lakhs. M/s. Race LLP is also not required to deduct tax at source u/s 194Q, since its turnover, being a buyer in the P.Y. 2022-23 does not exceed ` 10 crores. However, M/s Fastest Ltd. is required to collect tax at source u/s 206C(1H) @0.1% on the sale consideration exceeding ` 50 lakhs i.e. on 1 since firm is required to get its books of accounts audited TAXATION ` 100 lakhs since turnover of M/s Fastest Ltd. exceeds ` 10 crores and TCS u/s 206C(1F) and TDS u/s 194Q is not applicable.
B(i) M/s PQR & Co. is required to deduct tax at source under section 194J @10% on the professional fees paid to Mr. Amit of ` 30,500 and ` 60,000 on 1st June 2023 and 30th January 2024, respectively, assuming M/s PQR & Co. turnover/gross receipts exceeds the prescribed threshold limit1. However, M/s PQR & Co. has not deducted the tax at source during the P.Y. 2023-24, disallowance of ` 27,150, being 30% of ` 90,500 would be attracted u/s 40
C
D
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option A — (ia) though Mr. Amit has filed his return of income considering the professional fees from M/s PQR & Co. and paid taxes on the same. In such a case, M/s PQR & Co. would not be deemed as assessee in default by virtue of the first proviso to section 201(1) and the amount disallowed i.e., 27,150 would be allowed as deduction in A.Y. 2025-26. For non-deduction of tax at source, interest @1% would be leviable under section 201(1A)(i) for every month or part of the month on the amount of tax from the date on which such tax was deductible to the date such tax was paid by the payee i.e., 2.5.2024. Interest @1% on ` 3,050 (10% of ` 30,500) from June 2023 to May 2024 = ` 366 and on ` 6,000 (10% of ` 60,000) from January, 2024 to May 2024 = ` 300 is payable by M/s PQR & Co. (ii) M/s. Fastest Ltd. is not required to collect tax at source u/s 206C(1F) on sale of cars of ` 150 lakhs to M/s. Race LLP, since such sale is to a distributor and sale price of each car does not exceed ` 10 lakhs. M/s. Race LLP is also not required to deduct tax at source u/s 194Q, since its turnover, being a buyer in the P.Y. 2022-23 does not exceed ` 10 crores. However, M/s Fastest Ltd. is required to collect tax at source u/s 206C(1H) @0.1% on the sale consideration exceeding ` 50 lakhs i.e. on 1 since firm is required to get its books of accounts audited TAXATION ` 100 lakhs since turnover of M/s Fastest Ltd. exceeds ` 10 crores and TCS u/s 206C(1F) and TDS u/s 194Q is not applicable.

All Options:

  • A(ia) though Mr. Amit has filed his return of income considering the professional fees from M/s PQR & Co. and paid taxes on the same. In such a case, M/s PQR & Co. would not be deemed as assessee in default by virtue of the first proviso to section 201(1) and the amount disallowed i.e., 27,150 would be allowed as deduction in A.Y. 2025-26. For non-deduction of tax at source, interest @1% would be leviable under section 201(1A)(i) for every month or part of the month on the amount of tax from the date on which such tax was deductible to the date such tax was paid by the payee i.e., 2.5.2024. Interest @1% on ` 3,050 (10% of ` 30,500) from June 2023 to May 2024 = ` 366 and on ` 6,000 (10% of ` 60,000) from January, 2024 to May 2024 = ` 300 is payable by M/s PQR & Co. (ii) M/s. Fastest Ltd. is not required to collect tax at source u/s 206C(1F) on sale of cars of ` 150 lakhs to M/s. Race LLP, since such sale is to a distributor and sale price of each car does not exceed ` 10 lakhs. M/s. Race LLP is also not required to deduct tax at source u/s 194Q, since its turnover, being a buyer in the P.Y. 2022-23 does not exceed ` 10 crores. However, M/s Fastest Ltd. is required to collect tax at source u/s 206C(1H) @0.1% on the sale consideration exceeding ` 50 lakhs i.e. on 1 since firm is required to get its books of accounts audited TAXATION ` 100 lakhs since turnover of M/s Fastest Ltd. exceeds ` 10 crores and TCS u/s 206C(1F) and TDS u/s 194Q is not applicable. ✓
  • B(i) M/s PQR & Co. is required to deduct tax at source under section 194J @10% on the professional fees paid to Mr. Amit of ` 30,500 and ` 60,000 on 1st June 2023 and 30th January 2024, respectively, assuming M/s PQR & Co. turnover/gross receipts exceeds the prescribed threshold limit1. However, M/s PQR & Co. has not deducted the tax at source during the P.Y. 2023-24, disallowance of ` 27,150, being 30% of ` 90,500 would be attracted u/s 40
  • C
  • D

Ad

Detailed Solution & Explanation

Correct Answer: Option **A** Explanation: ### **Part A: Residential Status and Income of Mr. Madan & HUF (Question 2(a))**

**1. Residential Status of Mr. Madan:**
Mr. Madan is an Indian citizen who left India on 1st September 2023 for employment in the USA. Under Explanation 1(a) to Section 6(1) of the Income-tax Act, 1961, the 60-day stay requirement is replaced by 182 days. His stay in India during P.Y. 2023-24 is:
- April 2023 to August 2023 = 153 days (30 + 31 + 30 + 31 + 31)
- September 2023 = 1 day (departure date)
- January 2024 = 15 days (visit for project training)
- **Total stay = 169 days**
Since his stay in India is less than 182 days, Mr. Madan is a **Non-Resident** in India for P.Y. 2023-24.

**2. Residential Status of HUF:**
Since the Karta, Mr. Madan, manages the HUF partly from India during his stay, the control and management is situated partly in India. Therefore, the HUF is a resident. Further, Mr. Madan has never gone out of India prior to P.Y. 2021-22, which means he satisfies the conditions of being resident in 2 out of 10 preceding years and staying in India for ≥730\displaystyle \ge 730 days in the 7 preceding years. Thus, the HUF is **Resident and Ordinarily Resident (ROR)**.

**3. Gross Total Income of Mr. Madan (A.Y. 2024-25):**
- **Income under the head "Salaries":**
- Salary earned in India (for 5 months and 15 days): ₹ 65,500 ×5\displaystyle \times 5 + ₹ 65,500 ×15/31\displaystyle \times 15/31 = ₹ 3,59,194
- Salary earned in USA ($2,500 per month): Non-taxable in India as he is non-resident and services were rendered in USA.
- Gross Salary = ₹ 3,59,194
- Less: Standard Deduction = ₹ 50,000
- **Net Salary = ₹ 3,09,194**
- **Income from Other Sources:**
- Difference between Stamp Duty Value (₹ 23,00,000) and Purchase Price (₹ 18,00,000) of Mumbai property u/s 56(2)(x) = ₹ 5,00,000 (taxable since difference exceeds ₹ 1,80,000, which is higher of ₹ 50,000 and 10% of consideration).
- Sculpture received as gift = Nil (since market value ₹ 45,100 is less than ₹ 50,000).
- **Total Income from Other Sources = ₹ 5,00,000**
- **Gross Total Income = ₹ 3,09,194 + ₹ 5,00,000 = ₹ 8,09,914**

### **Part B: TDS and TCS Implications (Question 2(b))**

**1. Tax Obligations of M/s PQR & Co. (Proprietor Mr. Yogesh) u/s 194J:**
- M/s PQR & Co. is required to deduct TDS @ 10% under Section 194J on professional fees of ₹ 30,500 and ₹ 60,000 paid/credited to Mr. Amit since the aggregate fees exceed ₹ 30,000.
- As no tax was deducted, 30% of ₹ 90,500 (i.e., ₹ 27,150) is disallowed under Section 40(a)(ia).
- Since the payee (Mr. Amit) paid taxes on this income and filed his return on 02.05.2024, M/s PQR & Co. is not deemed to be an "assessee in default" (first proviso to Section 201(1)). The disallowed expenditure of ₹ 27,150 will be allowed as a deduction in A.Y. 2025-26.
- M/s PQR & Co. remains liable for interest @ 1% per month or part thereof under Section 201(1A)(i) from the date tax was deductible to the date of payment by the payee (02.05.2024). Interest calculation:
- On ₹ 3,050 (June 2023 to May 2024 = 12 months) @ 1% p.m. = ₹ 366.
- On ₹ 6,000 (January 2024 to May 2024 = 5 months) @ 1% p.m. = ₹ 300.
- Total interest payable = ₹ 666.

**2. TCS implications on M/s Fastest Ltd. and M/s. Race LLP:**
- M/s Fastest Ltd. is not required to collect TCS u/s 206C(1F) since the sale is to a distributor and the price of each individual car (₹ 7.5 lakhs) does not exceed ₹ 10 lakhs.
- M/s. Race LLP is not required to deduct TDS u/s 194Q because its turnover in P.Y. 2022-23 (₹ 8 crores) did not exceed the ₹ 10 crores threshold.
- However, M/s Fastest Ltd. is required to collect TCS @ 0.1% u/s 206C(1H) on receipts exceeding ₹ 50 lakhs (i.e. on ₹ 100 lakhs, which is ₹ 150 lakhs - ₹ 50 lakhs) since its turnover exceeds ₹ 10 crores.

Hence, **Option A** is the correct answer.

More Questions from Taxation - Income Tax

On solving the inequalities 5x+y≤100\displaystyle 5x + y \le 100, x+y≤60\displaystyle x + y \le 60, x≥0\displaystyle x \ge 0, y≥0\displaystyle y \ge 0, we get the following solution:

An employer recruits experienced (x)\displaystyle (x) and fresh workmen (y)\displaystyle (y) for his under the condition that he cannot employ more than 11\displaystyle 11 people x\displaystyle x and y\displaystyle y can be related by the inequality.

The solution set of the equations x+2>0\displaystyle x + 2 > 0 and 2x−6>0\displaystyle 2x - 6 > 0 is

On solving the inequalities; we get 6x+y≥18\displaystyle 6x + y \ge 18, x+4y≥12\displaystyle x + 4y \ge 12, 2x+y≥10\displaystyle 2x + y \ge 10

Solve for x\displaystyle x of the inequalities 2≤3x−25≤4\displaystyle 2 \le \frac{3x - 2}{5} \le 4 where x∈N\displaystyle x \in N

The common region in the graph of the inequalities x+y≤4\displaystyle x + y \le 4, x−y≤4\displaystyle x - y \le 4, x≥2\displaystyle x \ge 2 is

Ready to Master Taxation - Income Tax?

Practice all 146 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free