DT SERIES 1

CA FINAL (May 2025)

GROUP II – PAPER 4

DIRECT TAX LAWS AND INTERNATIONAL TAXATION

Time Allowed: - 3 Hours Maximum Marks: 100 Marks

This question paper comprises two parts, Div A and Div B. Div A comprises MCQ
& Div B comprises questions which require descriptive answers. All questions
relate to A.Y. 2025-26 unless stated otherwise in the question.

Division A – Multiple Choice Questions (2 marks each)

Case Scenario I
An investment fund (Investment Fund I) incorporated in India in the form of a LLP has
35 unit holders each holding 2 units.
The particulars of income of Investment Fund I for the P.Y.2024-25 is as follows:
(i) Business income - ₹ 14 lakh;
(ii) Long-term capital gains - ₹ 21 lakhs; and
(iii) Income from other sources - ₹ 7 lakhs.
Another investment fund (Investment Fund II) incorporated in India in the form of a
company has 50 unit holders each holding 4 units. All unit holders have held the units
for a period of more than a year.
The particulars of income of Investment Fund II for the P.Y.2024-25 is as follows:
(i) Business loss – (₹ 10 lakh);
(ii) Long-term capital losses - (₹ 20 lakhs); and
(iii) Income from other sources - ₹ 6 lakhs.

From the information given above, choose the most appropriate answer to the following
questions -
1. With respect to income of Investment Fund I for the P.Y.2024-25 -
(a) ₹ 42 lakhs is taxable in the hands of the investment fund
(b) ₹ 1,20,000 is taxable in the hands of each unit holder
(c) ₹ 21 lakh is taxable in the hands of the investment fund;
₹ 60,000 is taxable in the hands of each unit holder
(d) ₹ 14 lakh is taxable in the hands of the investment fund;
₹ 80,000 is taxable in the hands of each unit holder

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2. What is the applicable rate of tax on the component(s) of income of Investment

Fund I for the P.Y.2024-25 in the hands of Investment Fund I?
(a) The entire income of ₹ 42 lakhs is taxable@30% (plus cess@4%)
(b) N.A., since Investment Fund I enjoys pass through status for all its
income components
(c) Long-term capital gains is taxable@20% (plus cess@4%) and
other income@30% (plus cess@4%)
(d) Business income of ₹ 14 lakhs is taxable@30% (plus cess@4%)

3. With respect to income of Investment Fund II for the P.Y.2024-25-

(a) Income of ₹ 6 lakhs from other sources is taxable in the hands of the
investment fund and losses of ₹ 30 lakh can be carried forward by the
investment fund
(b) Losses of ₹ 24 lakh, arrived at after set-off of business loss against
income from other sources, can be carried forward by the investment
fund
(c) Business loss of ₹ 4 lakh can be carried forward by the investment fund;
capital loss of ₹ 40,000 can be carried forward by each unit holder
(d) Business loss of ₹ 10 lakh can be carried forward by the investment fund;
Income of ₹ 12,000 from other sources is taxable in the hands of each
unit holder and long-term capital loss of ₹ 40,000 can be carried forward
by each unit holder

4. If, in the P.Y.2025-26, Investment Fund II has business income of ₹ 15 lakh and
long-term capital gains of ₹ 25 lakhs, then, its total income for A.Y.2025-26
would be -
(a) ₹ 5 lakh
(b) ₹ 10 lakh
(c) ₹ 11 lakh
(d) ₹ 36 lakh
(2 x 4 = 8 Marks)

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Case Scenario II
The following are the details relating to four resident entities, AB & Co., LM &
Co., PQ & Co. and XY & Co. for the P.Y.2024-25 –

Particulars AB & Co. LM & Co. PQ & Co. XY & Co.

(Firm) (Firm) (LLP) (Firm)

(1) Nature of Retail trading Business of Wholesale Interior

business/ profession plying, trading decoration
hiring or
leasing
goods
carriages
(2) System of Mercantile Cash Mercantile Cash
accounting
(3) Turnover/ ₹ 200 lakhs ₹101 lakhs ₹100 lakhs ₹ 50 lakhs
Gross receipts
(4) Amount received by ₹ 150 lakhs ₹80 lakhs ₹ 70 lakhs ₹ 45 lakhs
way of RTGS/
NEFT in the P.Y.2024-
25
[included in
(3) above]

(5) Amount ₹ 30 lakhs ₹21 lakhs ₹ 10 lakhs ₹ 5 lakhs

received by way of
cash in the P.Y.2024-
25 [included in
(3) above]

(6) Amount received by ₹ 20 lakhs - ₹ 20 lakhs -

way of RTGS/ NEFT
between 1.4.2025 &
31.7.2025

(7) Working partners’ ₹ 5 lakhs ₹1.50lakhs ₹ 3 lakhs ₹ 5 lakhs

salary

(8) Interest on ₹ 1 lakh ₹ 0.50 lakh - ₹ 2 lakhs

capital@12%
paid to
partners

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(9) Profit as per books of ₹ 5.60 lakhs ₹4.10lakhs ₹4.50lakhs ₹ 20 lakhs

account maintained as
per section44AA
[after
deducting working
partners’ salary and
interest on capital]
(10) No. of vehicles owned - 10 (See - -
Note 2
below for
details)

Additional information:

1. It may be assumed that partners’ salary and interest are authorised by the
partnership deed, relates to a period after the partnership deed and is within
the permissible limits laid down under section 40(b).

2. The details of vehicles owned by M/s. LM & Co. are as follows –

Gross Vehicle Weight Number Date of purchase Date when first
(in kgs) put to use

(1) 8,000 3 28.5.2024 1.6.2024

(2) 9,000 2 31.7.2024 1.8.2024
(3) 10,000 1 17.8.2024 20.8.2024
(4) 11,000 1 30.9.2024 1.10.2024
(5) 12,000 1 11.11.2024 13.11.2024
(6) 13,000 2 31.12.2024 1.1.2025

5. Which of the four entities are eligible to declare income on Presumptive basis
under the Income-tax Act, 1961 for PY 2024-25?
(a) Only AB & Co and LM & Co.
(b) Only AB & Co and XY & Co.
(c) AB & Co, PQ & Co and XY & Co.
(d) AB & Co, LM & Co and XY & Co.

6. What is the business income to be declared by AB & Co. and PQ & Co. for PY 2024-
25, assuming that the entities wish to make maximum tax savings without getting
their books of account audited?
(a) ₹ 12.60 lakhs and ₹ 4.50 lakhs, respectively

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(b) ₹ 6.60 lakhs and ₹ 3.20 lakhs, respectively

(c) ₹ 5.60 lakhs and ₹ 4.50 lakhs, respectively
(d) ₹ 13 lakhs and ₹ 6.60 lakhs, respectively

7. What is the business income to be declared by LM & Co. for PY 2024-25, assuming
that the firm wishes to make maximum tax savings without getting its books of
account audited?
(a) ₹ 4,48,000
(b) ₹ 6,36,500
(c) ₹ 4,36,500
(d) ₹ 4,10,000

8. What is the income to be declared by XY & Co. under the head “Profits and gains of
business or profession” for PY 2024-25, assuming that the firm wishes to make
maximum tax savings, without getting its books of account audited?
(a) ₹ 18 lakhs
(b) ₹ 20 lakhs
(c) ₹ 25 lakhs
(d) ₹ 22.50 lakhs

9. Would your answer to questions 3.3 and 3.4 change, if the firms decide to get their
books of accounts audited?
(a) No, there would be no change in the answer to either questions 3.3 and 3.4
(b) Yes, there would be change in the answer to both question 3.3 and 3.4
(c) There would be a change in the answer to question 3.3 but not in the answer to
question 3.4
(d) There would be a change in the answer to question 3.4 but not in the answer to
question 3.3

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Case Scenario III

X Pvt. Ltd. (“X”) is an Indian company. Y Inc (“Y”) is a private company incorporated in
the USA and its income is not chargeable to tax in India. Both are promoted by Mr.
Ayush who holds 30% equity share capital and voting power in both X and Y. The
balance sheet of X as on 31st March, 2022 is as follows:

Liabilities Amount (₹ Assets Amount (₹

million) million)
Paid up capital 250 Fixed Assets 700
Loans: 800 Investments 300

From Y From 620 Cash and bank 200

others 180 balance

Current liabilities
150
Total 1,200 Total 1,200

Additional information:
(i) The loan was advanced by Y to X on 1st July, 2021 in rupee terms and carries
6.5% p.a. rate of interest. For borrowers with similar risk profile who are not
associated enterprises of Y, Y advances loan at 4% p.a. interest rate.
(ii) X has maintained such information and document in respect of the international
transaction as has been prescribed under section 92D but has not reported the
transaction as an international transaction. X does not make any adjustment to
its total income on account of application of provisions of Chapter X of the
Income-tax Act, 1961 in its return of income.

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From the information given above, choose the most appropriate answer to the
following questions –
10. Are X and Y associated enterprises? If so, why?
(i) Yes, X and Y are associated enterprises because Mr. Ayush holds voting
power of 30% in both the companies.
(ii) Yes, X and Y are associated enterprises as not less than 75% of X’s total
loans have been availed from Y.
(iii) Yes, X and Y are associated enterprises since the loan advanced by Y to
X is not less than 51% of the book value of X’s total assets.
(iv) No, X and Y are not associated enterprises The most appropriate answer
is -
(a) Only (i)
(b) (i) and (ii)
(c) (i) and (iii)
(d) Only (iv)

11. What is the amount of primary adjustment required to be made to the total
income of X for A.Y.2022-23?
(a) ₹ 1,16,25,000
(b) ₹ 58,12,500
(c) ₹ 1,55,00,000
(d) ₹ 77,50,000

12. If X has accepted the primary adjustment made by the Assessing Officer on
31.3.2023, what should X do if it does not want to treat the excess money as
deemed advance and include interest on the same in its total income?
(i) The excess money which is available to Y, has to be repatriated to India
within 90 days from the due date of filing of return.
(ii) The excess money which is available to Y, has to be repatriated to India
within 90 days from the date of order of the Assessing Officer.
(iii) X has to pay additional income-tax @20.9664% on the excess money.
(iv) Interest has to be paid upto the date of payment of additional income-
tax.

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The most appropriate answer is -

(a) (i) or (iii)
(b) (ii) or (iii)
(c) (i) or [(iii) and (iv)]
(d) (ii) or [(iii) and (iv)]

13. If X has accepted the primary adjustment made by the Assessing

Officer on 31.3.2023 and the excess money has not been repatriated into India
upto 31.3.2024, what would be the consequence if X has not opted to pay
additional income-tax? Assume that SBI one-year marginal cost of lending rate
is 10% on 1.4.2023 and 11% on 1.4.2024.
(a) Interest of ₹ 16,56,563 has to be added to its total income for
P.Y.2023-24
(b) Interest of ₹ 11,60,509 has to be added to its total income for P.Y.2023-
24
(c) Interest of ₹ 15,40,313 has to be added to its total income for P.Y.2023-
24
(d) Interest of ₹ 20,53,750 has to be added to its total income for
P.Y.2023-24

14. Which factor is relevant in determining whether penalty under section 270A of
the Income-tax Act, 1961 will be leviable in respect of the primary adjustment
to X’s total income?
(a) Since X has maintained information and documents as prescribed under
section 92D, that by itself is sufficient for holding that X has not under-
reported its income
(b) If the Assessing Officer/Transfer Pricing Officer makes adjustment to
X’s total income on account of an international transaction not being in
accordance with arm’s length price, that by itself is sufficient to hold
that X has under-reported its income; consequently, penalty u/s 270A is
leviable
(c) Since X has not reported the transaction as an international transaction,
X will be considered to have under-reported its income and penalty will be
50% of the amount of tax payable on the under-reported income
(d) Since X has not reported the transaction as an international transaction,
X will be considered to have misreported its income and penalty will be
200% of the amount of tax payable on the misreported income

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15. In the scenario given above, what would be the situation on account of
application of transfer pricing provisions if X, the Indian company would have
been the lender and Y, the US company, the borrower?
Rate of interest on loan by X to Y = 6.5% p.a.
For borrowers with similar risk profile who are not associated enterprises of X,
X advances loan at 4% p.a. interest rate.

(a) Identical adjustment would be made to the income of Y instead of X

(b) No adjustment would be required in the hands of X or Y
(c) Identical adjustment would made to the income Y as well as X
(d) Adjustment would still be made to the income of X and no adjustment
would be made to the income of Y
(2 x 6 =12 Marks)

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PART-II DESCRIPTIVE QUESTIONS

Question No. 1 is compulsory. Candidates are required to answer any four
questions from the remaining five questions

Question 1
M/s Bhagirathi Ltd. a manufacturing company, having an annual turnover of ₹ 7,000
lakhs, shows a net profit of ₹ 850 lakhs after debit/ credit of following amounts to its
statement of profit and loss account for the year ended 31st March 2025:
i) Depreciation as per Companies Act ₹ 65 lakhs
ii) Employer’s contribution to EPF of ₹18 lakhs together with similar amount of
Employee’s contribution for the month of March, 2025 was remitted on 20th
May, 2025. The due date for the remittance to the credit of employer’s EPF
account being 15th April, 2025)
iii) GST paid includes an amount of ₹ 10,500 charged as penalty for delayed filling
of returns and ₹15,400 towards interest for delay in deposit of tax
iv) An amount of ₹10 lakhs were incurred on notified skill development project
u/sec 35CCD
v) Loss of ₹ 20 lakhs, on destruction of an old machinery by fire in the factory and
₹ 5 lakhs received as scrap value on this machinery. The insurance company did
not admit the claim of the company on the charge of gross negligence
vi) Dividend ₹ 15 lakhs from a foreign company in which the company holds 32% of
the equity share capital of the company, (expenditure on earning dividend
income ₹ 50,000)
vii) profit of ₹ 15 lakhs on the sale of a building to X LTD. a domestic company, the
entire shares of which are held by the assessee company. The building was
acquired by Bhagirathi LTD on 1st December, 2023.

Additional information:
(1) Normal depreciation computed as per Income Tax Rules is ₹ 92 lakhs.
(2) During the previous year 2023-24 the company has purchased a new plant and
machinery worth ₹ 20 lakhs on 10th January, 2024. Balance of additional
depreciation on this machine is not included in the depreciation computed for
the previous year 2024-25.
(3) The company had created in the account of a sub- contractor, an amount of
₹7 lakhs on 31st March, 2024 towards repairs of factory building. The tax
deducted on such payment was remitted on 31st December, 2024.
(4) On 15th May, 2025 M/S Bhagirathi Ltd, declared and distributed dividend of ₹
20 lakhs.

Compute the total income and tax payable by M/S Bhagirathi Ltd. for the PY 2024-25
clearly stating the reasons for treatment of each item. Assume that the company has
opted for section 115BAA (14 Marks)

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Question 2A
Deepak, aged 45 (an Indian citizen) has settled in California, USA since 2015. Prior to
that, he has always been in India. He had acquired a residential property in California
on 25-06-2009 for USD 20,000. He kept bank deposit of USD 10,000 in a bank
account in New York since 15-04-2010.
Notice under Black Money (Undisclosed Foreign Income and Assets) and Imposition of
Tax Act, 2015 was issued on 20-10-2024. The fair market value of residential property
as on 01- 04-2024 was USD 25,000; on 01-04-2025 USD 32,000 and 20-10-2024 USD
30,000. The bank deposit with accrued interest thereon was USD 12,500 on 01-04-
2024; USD 12,800 on 01-04-2025 and USD 12,700 on 20-10-2024.
Note: USD = United States Dollar
The exchange rate of Indian currency per 1 USD as per the reference rate of the RBI
on the various dates are:
01-04-2024 = ₹ 71
20-10-2024 = ₹ 72
01-04-2025 = ₹ 73
Compute the value of undisclosed foreign asset chargeable to tax in the hands of
Deepak as per Black Money (Undisclosed Foreign Income and Assets) and Imposition of
Tax Act, 2015. (4 Marks)

Question 2B
Terabyte Inc. of France and R Ltd. of India are associated enterprises. R Ltd. imports
6,000 compressors for Air Conditioners from Terabyte Inc. at ₹ 6,700 per unit and
these are sold to Refresh Cooling Solutions Ltd at a price of ₹ 10,000 per unit. R Ltd.
had also imported similar products from Gold Inc. Poland and sold outside at a Gross
Profit of 20% on Sales. Terabyte Inc. offered a quantity discount of ₹ 1,000 per unit.
Gold Inc. could offer only ₹
500 per unit as Quantity Discount. The freight and customs duty paid for imports from
Gold Inc. Poland had cost R Ltd. ₹ 1,200 per piece. In respect of purchase from
Terabyte Inc., R Ltd. had to pay ₹ 200 only as freight charges.
On the basis of aforesaid information, you are requested to choose correct options for
the following:
1. What will be considered as arm’s length price per unit?
2. State the amount of addition required to be made in the computation of R Ltd.?
(4 Marks)

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Question 2C
M/s. ABC LLP filed its return of income for PY 2024-25, declaring total income of ₹18
lakhs, on 2nd October, 2025. On processing of return, the total income determined
under section 143(1)(a) was ₹22 lakhs, after disallowing claim for deduction under
section 10AA on account of late furnishing of return of income. Thereafter, on
scrutiny, the Assessing Officer made some additions under section40(a)(ia) and section
43 Band passed an assessment order under section 143(3) assessing total income of₹35
lakhs. Later on, the Assessing Officer noticed that certain income had escaped
assessment and issued notice for reassessment under section 148.The total income
reassessed under section 147 was ₹ 42 lakhs.
Considering that none of the additions or disallowances made in the assessment or re-
assessment as above qualifies under section 270A(6), compute the amount of penalty
to be levied under section 270A of the Income-tax Act, 1961 at the time of
assessment under section 143(3) and at the time of reassessment under section 147
(Assume under- reporting of income is not on account of misreporting). (6 Marks)

Question 3A
Following is the profit and loss account of Z Ltd. for the year ended on 31-3-2025

Particulars Amount Particulars Amount

To Raw material consumed 20,00,000 By Sale
To Rent 5,00,000 Export 50,00,000
To Salary & Wages 10,00,000 Domestic 30,00,000
To Depreciation 5,00,000 By Closing Stock 10,00,000
To Provision for contingencies 75,000
To Wealth Tax of earlier year 50,000
To Loss of subsidiary co. 50,000
To Custom Duty 40,000
To Proposed dividend 1,00,000
To Provision for Income tax 1,05,000
To Net Profit 45,80,000
90,00,000 90,00,000
Additional Information
1. Interest on bank loan relating to year 2021-22 has been paid during the
previous year ₹ 1,00,000.
2. Whole of Custom duty is unpaid.
3. Company is entitled to get deduction u/s 80G ₹ 1,00,000
4. For the purpose of Income tax, depreciation is ₹ 4,00,000.
5. Turnover of the company during the previous year was ₹ 65 crores and it is life
time highest turnover achieved by the company.
6. In past few years, company had suffered losses, following balances are still
unabsorbed:

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As per Income tax Act As per books of Accounts

Depreciation -- ₹ 3,50,000
Losses ₹ 42,50,000 ₹ 4,00,000

Compute tax liability of the company. (8 Marks)

Question 3B
Mani foundations, a charitable trust registered u/s 12AB of the Income-tax Act, 1961,
run schools for primary and secondary education. The following particulars pertaining
to the previous year 2024-25 are furnished to you by the trust:

Particulars ₹(in lakhs)

i. Gross receipts from students towards tuition fees, 600
development fees, laboratory fees etc.
ii. Voluntary contributions received from public (including 25
anonymous donation ₹5 lakhs)
iii. Government grants 8
iv Donation given towards corpus to a trust registered u/s 2
10(23C)(iv)
v. Amount applied for the purpose of schools 390
vi. Included in (v) above, a sum of 5 lakhs, being the amount
applied for the benefit of the founder of the trust.
vii. The trust set apart ₹55 lakhs for acquiring a building to
expand its schools. But the amount was paid in December
2025 when the sale deed was registered in its name. Trust
exercised option given u/s 11(2) for accumulation for specific
purpose.
viii. Excess of expenditure over income in previous year 2023-24 25
Compute the total income of the trust for the PY 2024-25 in order to avail maximum
benefits within the four corners of law. (6 Marks)

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Question 4A
The following data is furnished by Mr. Sumedh, a non-resident and a person of Indian
Origin, for the financial year ended 31-3-2025:
A: Long-term capital gains arising on transfer of foreign ₹ 6,50,000
exchange asset on 31.7.2024 (computed)
Expenditure wholly and exclusively incurred in connection ₹ 80,000
with such transfer (not considered above)
Interest on deposits held with private limited companies ₹ 5,90,000
Interest on Government Securities ₹ 95,000
Interest on deposits with pubic limited companies ₹ 2,60,000
B: Savings and Investments
Investment in notified savings certificates referred to in ₹ 2,00,000
section 10(4B) on 30.3.2025
Investment in shares of Indian public limited companies on ₹ 3,00,000
31.12.2025
C: Tax deducted at source ₹ 1,83,000
Compute balance tax payable / refund due for the PY 2024-25 in accordance with
special provisions applicable to non-residents (6 Marks)

Question 4B
Examine the applicability of provisions relating to deduction/collection of tax at source
in the following cases for the financial year ended 31st March, 2025 as per provisions
contained in the Income-tax Act, 1961:
(I) Delta Ltd., an Indian company, which was incorporated on 1.4.2024 purchases coal
from Phi Ltd., another Indian company, for ₹75 lakhs during the P.Y.2024-25, to
manufacture steel. Delta Ltd. furnishes a declaration that such coal is used to
manufacture steel and not for trading. What are the TCS/TDS implications on such
transaction, if Delta Ltd.'s turnover was ₹12 crores in the P.Y.2024-25; and Phi Ltd.'s
annual turnover ranges between ₹16 crores and ₹18 crores in the last few years?

Would your answer change if Delta Ltd. was incorporated on 1.4.2023 and its turnover
in the P.Y.2023-24 is ₹10 crores?

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(II) Sigma Ltd., a car manufacturer, sold the following cars to the car dealers, Epsilon
Ltd. and
Omega Ltd., in the P.Y.2024-25-
Dealer Particulars of cars sold Value
Epsilon Ltd. 10 cars of the value ₹12 ₹120 lakhs
lakhs each
Omega Ltd 8 cars of the value of ₹ 10 ₹80 lakhs
lakhs each
The turnover in the P.Y.2023-24 of Sigma Ltd. is ₹12 crores, Epsilon Ltd. is ₹14 crores
and Omega Ltd. is ₹9 crores. (4 Marks)

Question 4C
Mr. Goswami submitted his return on 25th July, 2025 for PY 2024-25. The following
particulars are furnished by him for the PY 2024-25:
₹
Tax payable on assessed income 1,03,950
Tax deducted at source 36,450
Advance taxes paid as under:
15th June, 2024 Nil
15th September, 2024 18,500
15th December, 2024 16,125
15th March, 2025 25,250
You are required to examine and compute the interest, if any, payable by the assessee
at the time of filing return of income. (4 Marks)

Question 5A
X, Y. and HUF of Z (represented by Z) are partners with equal shares in profits and
losses of a firm, M/s Popular Cine Vision, which is engaged in the production of TV
serials and telefilms. In the previous year 2023-24, one partner 'A' retired, but his
dues have been settled in the previous year 2024-25.

The earlier partnership deed did not authorise payment of remuneration or interest to
partners. The partnership deed was revised by the partners on 1st June, 2024 to
authorise payment of remuneration of 1 lac per month to each working partner and
simple interest at 15% per annum on partners' capital. X, Y and Z are actively
associated with the affairs of the firm.

The Profit & Loss Account of the firm for the year ended 31st March, 2025 shows a
net profit of 10 lacs after debiting/crediting the following:
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(a) Interest amounting to ₹5 lacs each was paid to partners on the balances
standing to their capital accounts from 1st June, 2024 to 31st March, 2025.
(b) Remuneration to the partners including partner in representative capacity ₹30
lacs.
(c) Interest amounting to ₹2 lacs paid to Z on loan provided by him in his individual
capacity at 16% interest.
(d) Royalty of ₹5 lacs paid to partner X, who is a professional script writer, for use
of his scripts as per agreement between the firm and X. The same is authorized
by partnership deed.
(e) Two separate payments of ₹18,000 and ₹15,000 made in cash on 1st February,
2025 to Altaf, a hairdresser, against his bill for services rendered in January,
2025 and two payments of₹19,000 and ₹10,000 made in cash on 1st February
and 2nd February, 2025, respectively, to Priyam, an assistant cameraman,
against her bill for services provided in January, 2025.
(f) Amount of₹ 25 lacs provided in the books on 31st March 2025 as liability for
remuneration to Shreya, a film artist and a non-resident. Tax deducted at
source u/s 195 from the amount so credited was paid on 3rd June, 2025.
(g) Amount of₹6 lacs provided as gratuity for the year on the basis of actuarial
valuation. Gratuity actually paid to one retired employee during the year is ₹1.50
lacs.
(h) Interest of ₹1.20 lacs received on income-tax refund u/s 244(1A) in respect of
P.Y. 2021-22.
Compute the total income of the firm for the PY 2024-25 stating the reasons for
treatment of each item. (6 Marks)

Question 5B
Mr. Ritesh, a resident individual, aged 42 years, received the following sums during the
previous year 2024-25:

Income from a business in India ₹ 4,85,000

Royalty from Country N ₹ 7,80,000 (Rate of Tax in Country N 10%, Tax deducted ₹
78,000)

Interest from Country Y US $ 9,500 (interest became due on 01.04.2024) Tax

deducted (on 21.02.2025) : US $ 950 (Rate of Tax 10%)
Agriculture income in Country M: ₹ 1,09,000

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Additional Information:
(i) As per the DTAA between India and Country N, the royalty will only be taxable
in the Source State.
(ii) As per the DTAA between India and Country Y, interest can be taxed in both
the states and tax credit will be available in respect of tax payable in resident
state.
(iii) Agriculture income is exempt in country M. India does not have a DTAA with
Country M.

Telegraphic transfer buying rate on different dates of US $:

Date Rate (₹)
31.03.2024 75
31.01.2025 78
21.02.2025 79
31.03.2025 80
01.01.2025 80

You are required to calculate the total income and tax payable by Mr. Ritesh assuming
that he did not opt to be governed by provisions of Section 115BAC.
(4 Marks)

Question 5C
Compute the income-tax payable by Mr. Raj, aged 32 years, who has the following
income for the P.Y.2024-25

(i) Business loss (₹3,18,000)

(ii) Interest on fixed deposits with HDFC Bank ₹18,000
(iii) Consideration received on transfer of VDA ₹4,20,000
(iv) Cost of acquisition of VDA transferred ₹20,000 (4 Marks)

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Question 6A
PQR Limited has two units - one engaged in manufacture of computer hardware and the
other involved in developing software. As a restructuring drive, the company has
decided to sell its software unit as a going concern by way of slump sale for ₹ 385 lakhs
to a new company called S Limited, in which it holds 74% equity shares.

The balance sheet of PQR limited as on 31st March 2025, being the date on which
software unit has been transferred, is given hereunder –

Balance Sheet as on 31.3.2025

Liabilities ₹ (in lakhs) Assets ₹ (in lakhs)

Paid up Share Capital 300 Fixed Assets

Hardware unit 170
Software unit 200

General Reserve 150 Debtors

Hardware unit 140
Software unit 110

Share Premium 50 Inventories

Hardware unit 95
Software unit 35

Revaluation Reserve 120

Current Liabilities (Ascertained

liabilities)
Hardware unit 40
Software unit 90

750 750

Following additional information are furnished by the management:

The Software unit is in existence since May, 2015.

Fixed assets of Software unit includes land which was purchased at ₹ 40 lakhs in the
year 2016 and revalued at ₹ 60 lakhs as on March 31, 2025. The stamp duty value on
31.3.2025 is ₹ 55 lakhs.

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Fixed assets of Software unit mirrored at ₹ 140 lakhs (₹ 200 lakhs minus land value ₹
60 lakhs) is written down value of depreciable assets (Furniture and Plant & machinery)
as per books of account. However, the written down value of these assets under section
43(6) of the Income-tax Act, 1961 is ₹ 90 lakhs.

a. Ascertain the tax liability, which would arise from slump sale to PQR Limited,
assuming it does not opt for section 115BAA.

b.What would be your advice as a tax-consultant to make the restructuring plan of the
company more tax-savvy, without changing the amount of sale consideration? (6 Marks)

Question 6B
An assessee, who is aggrieved by all or any of the following orders, is desirous to know
the available remedial recourse and the time limit against each order under the
Income-tax Act, 1961:
i. passed under section 143(3) by the Assessing Officer.
ii. passed under section 263 by the Commissioner of Income-tax
iii. passed under section 272A by the Director General.
iv. passed under section 254 by the ITAT. (4 Marks)

Question 6C
Mr. Vijay furnished his return of income for A.Y.2023-24 declaring total income of ₹
28,00,000. He received an assessment order under section 143(3) on 26.11.2024
enhancing the total income for the A.Y.2023-24 by ₹ 5,00,000. He is aggrieved by the
said order and is desirous of knowing whether he can file an application before the
Dispute Resolution Committee (DRC). He informs you that no order of detention has
been made and no prosecution proceedings have been initiated or instituted against him
under any law for the time being in force. However, penalty under section 271D has
been levied on him for failure to comply with the provisions of section 269SS.
Can Mr. Vijay file an application before the DRC?
(i) If yes, what is the time limit for making an application to DRC against such
order under the Income-tax Act, 1961. He is also keen to know, whether, in
case he is aggrieved by the order passed by the DRC, can he file appeal
against such order of DRC?

(ii) Would your answer be different, if assessment order is based on information

received under a DTAA with Country X? (4 Marks)

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