I PCC Tax Exam Analysis and Solution for Practical questions

Please Find the summary of mark awarded for Income tax , Service tax and VAT segment

Question	sub question	Topic	Mark	nature
1	(a)	capital Gain	5	Practical
	(b)	Chapter VI A deduction	5	Practical
	( c )	Service Tax	5	Practical
	(d)	VAT	5	Practical
2	(a) (i)	Business connection	4	Theory
	(a) (ii)	Business & Profession	4	Practical
	(b)	Service Tax	4	Practical
	( c )	VAT	4	Theory
3	(a)	Business and profession	8	Practical
	(b) (i)	Service Tax	2	Theory
	(b) (ii)	VAT	2	Theory
	(c )	VAT	4	Theory
4	(a)	set off & carry forward	8	Practical
	(b)	Service Tax	4	Theory
	(c )	VAT	4	Theory
5	(a)	capital Gain	8	Practical
	(b)	Service Tax	4	Theory
	( c )	VAT	4	Theory
6	(a)	Business & Profession	8	Practical
	(b)	Service Tax	4	Practical
	( c )	VAT	4	Theory
7	(a) (1)	Assessment procedure	4	Theory
	(a) (2)	Income from other source	4	Theory
	(a) (3)	TDS with Business& profession	4	Theory
	(b)	Service Tax	4	Theory
		VAT	4	Theory

Each question was a combination of Income tax, Service tax and VAT. This pattern shows consistently. This indicates, if you have not worked any of these three segment, you cannot able to solve the questions well. Service tax practical questions were comparatively easy. Theory part from VAT dominated well. The paper is not tough, but those who have not given good importance to all these three may feel some difficulties in this paper. If this papers seems to be tough to you, it indicate that you are not done a balanced study.

Please find attached here with the Solutions for income tax problems for your May 11 exam. Effort have been taken to reduce the error, however, it is not an error free. Your suggestion is always welcome.

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Corrected Answer from Capital gain 

Computation of Capital Gain
Particular	Amount
Full Value of consideration	12,00,000
Less Expense in connection with transfer	Nil
Net consideration	12,00,000
Less Indexed cost of Acquisition
45000/140*711 ( Working note 3)	228536
Less Indexed cost of improvement
Improvement expense incurred by Rakesh
50000/140*711	253929
Improvement expense incurred By A
190000/244*711	5,53,648
Long term capital Gain
Less exemption	NIL
Taxable capital Gain	163,887

Working notes

Where the property acquired on or before 1981, then following workings are warranted

Working note	Computation of cost of acquisition
a)	Cost of acquisition	105000
b)	Fair Market value as on 1/4/4981	150000
	a) or b) whichever is higher Shall be	150000

                                              Cost of acquisition

Working note 2

 Section 51

If any of the capital asset was subject matter of negotiation and advance received in respect thereof , transfer of the asset was not taken place, then, such advance need to be deducted from any of the below component for the purpose of computing capital gain

·       Cost of acquisition

·       FMV

·       WDV

Depends upon the nature of capital asset.

Calculation of Total advance received for sale of property

a)	Advance received by Rakesh	25000
b)	Advance received by  Mr A	80000
	Total advance received	105000
This will be deducted from FMV
Working note 3
	Calculation of adjusted Cost of acquisition
	Cost of acquisition as per WN (1) above	150000
	Total advance received   WN  (2) Above	105000
	Adjusted Cost of acquisition	45000
Working note 4

Cost of improvement incurred on or after 1^st April 1981 is eligible for deduction .Cost of improvement expense incurred by Mr. Rakesh for the year 1979-80 will not eligible for deduction.

Indexation will be given for the year of  Gift of property to Mr A. year of Gift was 1986-87 and the index point during that year is 140 point.

This is a correction