Question 4 (a) Mr. Suraj, (39 years), his wife Megha (35 years) and minor son Dev (12 years), provide the following details of their income/losses ...

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Question 4 (a) Mr. Suraj, (39 years), his wife Megha (35 years) and minor son Dev (12 years), provide the following details of their income/losses for the previous year 2023-24: Mr. Suraj (i) Salary received as a partner from a partnership firm - 6,15,000 He is a working partner in the firm and the salary is as per the limits prescribed under section 40(b). (ii) Income (loss) from house property: Brought forward loss from House -A (let out) - 96,000 Current year loss from House B (let out) - 2,30,000 (iii) Interest received on enhanced compensation - 2,00,000 It relates to transfer of a piece of land in the financial year 2018-19. Out of the above 35,000 relates to previous year 2023-24 and the balance relate to preceding previous year. (iv) Gift from grandfather's younger sister by cheque - 1,25,000 (v) Dividend on listed equity shares of domestic companies (Gross) - 50,000 (vi) On 1stDecember 2023, Mr. Suraj received 75 lakhs as maturity proceeds from his life insurance policy which was taken on 1stMay 2012. He paid 6,00,000 as annual premium and the sum assured was 65 lakhs. Mrs. Megha (i) Current year loss from business. (She carried on this business with funds which Mr. Suraj gifted to her) - 8,10,000. (ii) Mrs. Megha purchased a house property from her "Stridhan" and gifted the same to her minor son, Dev on 1stApril, 2023 out of love and affection. The FMV of the house on the date of transfer was 51 lakhs. Master Dev Rent received from house property received from Mrs. Megha - 35,000 p.m. Compute total income of Mr. Suraj, Mrs. Megha and Dev for the assessment year 2024-25 assuming Mr. Suraj has decided to pay tax under default tax regime provided under section 115BAC, whereas Mrs. Megha and Dev have opted out of the default tax regime. Briefly explain the reasons for the treatment of each item. (6 Marks) (b) Answer the following: (i) Vegetable Ltd. filed its return of income for the A.Y. 2023-24, on 15thDecember 2023. On 2nd January 2024, the accountant of Vegetable Ltd. realised that he had forgotten to claim a genuine business expenditure amounting to 15 lakhs. He wants to file revised return to claim such expenditure as the assessment is not yet completed. Whether the action of the accountant of Vegetable Ltd. is valid? (ii) Mahendra, a resident individual aged 45 years earned a salary income of 2 crores during the F.Y. 2023-24. He also earned dividend from unlisted TAXATION shares amounting to 4 lakhs. He wants to file his return of income for the A.Y. 2024-25 through a Tax Return Preparer. Can he do so? (4 Marks) OR (b) Rani, an Indian resident aged 34 years did not file her return of income for the A.Y. 2021-22, 2022-23 and 2023-24. She gives the following information regarding each of the A.Y.- A.Y. 2021-22 (i) Tax payable on the total income of Rani - 14,50,000 (ii) TDS deducted - 5,00,000 A.Y. 2022-23 (i) Tax payable on the total income of Rani - 5,60,000 (ii) TDS deducted - 10,00,000 A.Y. 2023-24 (i) Tax payable on the total income of Rani - 6,30,000 (ii) TDS deducted - 2,00,000 (iii) Interest payable under section 234A, 234B and 234C - 90,000 (calculated till 31st May 2024) (iv) Self-assessment tax paid - 1,00,000 She approaches you to file updated return under section 139(8A) on 16.5.2024. You are required to prepare a suggestion to be given to her in this respect. Your suggestion should include the financial aspect also (like payment of tax) briefly outlining the relevant provisions of the Income-tax Act. (4 Marks)

Accepted Answer

Answer Solution: (a) Computation of total income of Mr. Suraj, Mrs. Megha and minor son Dev for A.Y. 2024-25 Particulars Mr. Suraj [Under default tax regime] Mrs. Megha [Under normal provisions] Dev [Under normal provisions] Income from house property Annual Value [As per section 27, Mrs. Megha is the deemed owner of the house property transferred to minor son, Dev without consideration though such property is acquired from her “Stridhan”] [ 35,000 x12] 4,20,000 Less: Deduction @30% of NAV 1,26,000 2,94,000 Brought forward loss from House A [Not allowed to be set-off against income from other heads] - Current year loss of Mr. Suraj from House – B [Not allowed to be set-off against income from other heads since Mr. Suraj is paying tax under default tax regime] - TAXATION Profits and gains from business or profession Salary from partnership firm 6,15,000 Less: As per section 70, set off of current year loss from business of 8,10,000 to the extent of [Current year loss from business of his wife is allowed to be set off in the hands of Mr. Suraj since funds for business is gifted by him] 6,15,000 Income from Other Sources - Interest on enhanced compensation [Taxable in the year it is received] 2,00,000 Less: Deduction @50% 1,00,000 1,00,000 Gift from grandfather’s sister [Taxable under section 56(2)(x), since grandfather’s sister is not a relative and the amount of gift exceeds 50,000] 1,25,000 Dividend on shares (gross) 50,000 Maturity proceeds from LIC [Exempt under section 10(10D) since the annual premium payable does not exceed 10% of sum assured] - 2,75,000 Less: Set off of remaining business loss of 1,95,000 1,95,000 80,000 Gift of house property from Mrs. Megha to Dev [Exempt since the gift is from a relative i.e., from his mother] Nil Taxable Income 80,000 2,94,000 - (b) First Alternative (i) The due date of filing return of income of Vegetable Ltd for the A.Y.2023-24 is 31st October, 2023 since it is a company. However, it filed its return of income on 15.12.2023, which is a belated return. If any omission is discovered even in a belated return, the same can also be revised up to 31.12.2023 being the date 3 months prior to the end of the relevant assessment year i.e. 31.03.2024 or completion of assessment, whichever is earlier. However, it cannot file a revised return on 02.01.2024 since it is beyond 31.12.2023. Hence, the action of accountant of Vegetable Ltd is not valid. (ii) Since Mr. Mahendra is a resident individual, not being a company or a person whose accounts are required to be audited under section 44AB for the P.Y. 2023-24, and therefore he can file his return of income for A.Y. 2024-25 through a Tax Return Preparer. (b) Second Alternative An updated return can be furnished for the previous year relevant to the assessment year at any time within 24 months from the end of the relevant assessment year. TAXATION Accordingly, the following are the suggestions to Rani with respect to updated return on 16.5.2024 for A.Y. 2021-22, A.Y. 2022-23 and A.Y. 2023-24: A.Y. 2021-22: Since the period of 24 months from the end of A.Y. 2021-22 expired on 31.3.2024 updated return cannot be furnished on 16.5.2024 for A.Y. 2021-22. A.Y. 2022-23: For A.Y. 2022-23, updated return can be furnished up to 31.3.2025. Thus, updated return can be furnished on 16.5.2024. Since updated return would be furnished after the expiry of 12 months but before 24 months from the end of 31.3.2023, additional income tax would be payable @50% of aggregate of tax (after taking into consideration tax deducted at source) and interest payable. Accordingly, Rani is required to pay additional income-tax in addition to the tax payable of 5,60,000, interest and late fee of 5,000. Alternate answer: The main solution has been worked out in line with the provisions of section 140B taking tax payable as the net figure of tax after adjusting TDS. However, since the term “tax payable” used in the ITR form for updated return is before the adjustment of TDS, TCS, Advance tax, interest payable etc., it is possible to take a view that the amount of tax payable of 5,60,000 is before adjusting TDS of 10,00,000. In such case, since the refund of 4,40,000 would arise, updated return cannot be furnished for A.Y. 2022-23. A.Y. 2023-24: - For A.Y. 2023-24, updated return can be furnished up to 31.3.2026. Thus, updated return can be furnished on 16.5.2024 Since updated return would be furnished before the expiry of 12 months from the end of 31.3.2024, additional income tax would be payable @25% of aggregate of tax (after taking into consideration tax deducted at source and self-assessment tax paid) and interest payable. Accordingly, Rani is required to pay additional income-tax of 1,80,000 i.e., 25% of 7,20,000 ( 6,30,000 + 90,000) in addition to tax payable of 6,30,000, interest payable of 90,000 and late fees of 5,000. Alternate answer: The main solution has been worked out in line with the provisions of section 140B taking tax payable as the net figure of tax after adjusting TDS and self-assessment tax paid. However, since the term “tax payable” used in the ITR form for updated return is before the adjustment of TDS, TCS, Advance tax, interest payable etc., it is possible to take a view that the amount of tax payable of 6,30,000 is before adjusting TDS of 2,00,000 and self-assessment tax paid of 1,00,000. In such case, Rani is required to pay additional income-tax of 1,05,000 i.e., 25% of 4,20,000 [ 3,30,000 ( 6,30,000 – 2,00,000 – 1,00,000) + 90,000] in addition to tax payable of 3,30,000, interest payable of 90,000 and late fees of 5,000. TAXATION 31 SUGGESTED ANSWER SECTION B: GOODS AND SERVICES TAX 1. For Part-II, Section B comprises of questions from 5-8. In Section B, answer

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