Result Oriented SSC & Bank Exam Preparation Tips: April 2013

UNIT V :

Income-tax Law and Tax Planning

Basic concepts, Residential status and tax incidence, exempted incomes, computation of taxable income under various heads.
Computation of taxable income of individuals and firms.
Deduction of tax, filing of returns, different types of assessment; Defaults and penalties.
Tax Planning : Concept, significance and problems of tax planning, Tax evasion and tax avoidance, methods of tax planning.
Tax considerations in specific business decisions, viz., make or buy; own or lease, retain or replace; export or domestic sales; shut-down or closure; expand or contract; invest or disinvest.
Computer Application in Income taxand Tax planning

1. The most important source of capital formation in India has been?

a. Household savings

b. Public sector savings

c. Government revenue surpluses

d. Corporate savings

Ans. a

2.In India, the Public Sector is most dominant in?

a. transport

b. steel production

c. commercial banking

d. organised term lending financial institutions.

Ans. c

3.Goa’s economy is mainly based on ?

a. tourism

b. export of ores

c. agriculture

d. None of these

Ans. b

4.India’s wage policy is based on ?

a. Cost Of Living

b. Standard of living

c. productivity

d. None of these

Ans. a

5.One of the problems in calculating the national income in India correctly is?

a. under – employment

b. inflation

c. non -monetised consumption

d. low savings

Ans. c

6.The main source of India’s national income is?

a. Industry

b. Agriculture

c. Forestry

d. None of these

Ans. b

7.The largest revenue in India is obtained from?

a. Sales Tax

b. Direct Taxes

c. Answer: Excise Duties

d. None of these

Ans. c

8. Government imposes taxes to ?

a. check the accumulation of wealth among the rich

b. Run the machinery of state

c. uplift weaker sections

d. None of these

Ans. b

9.The income tax in India is

a. indirect and progressive

b. direct and proportional

c. direct and progressive

d. indirect and proportional

Ans. c

10.Which of the following is not a direct tax?

a. Wealth Tax

b. Income Tax

c. Estate Duty

d. Answer: Sales Tax

Ans. d

11. Consider the following statements:

Regional neural banks in India

1. are required to assist the wreaker's sections' are to help the small and marginal farmers only

2. Have free access to liberal financial assistance from NABARD

3. have free access to liberal financial assistance from NABARD

4. have a limited area of operation

Of these statements

a. 1, 3 and 4 are correct

b. 2 alone is correct

c. 2 and 3 are correct

d. 1 and 4 are correct

Ans.

12. Which of the following pairs are correctly matched?

1. Treasury Bills RBI

2. Interest Rate Discount and finance House of India

3. Call money a rate Commercial banks

4. Prudential norms RIB

Select the correct answer using the codes given below:

Codes:

a. 1, 2, 3 and 4

b. 2 and 4

c. 1, 2 and 3

d. 1, 3 and 4

Ans.

13. It is generally believed that a rise in the tax rate would normally lead to a rise in the revenue. But there is also a view the reduced rates on income tax would lead to a significant rise in income tax revenue. This later view has been attributed to

a. Arthur Laffer

b. Robert Lucas

c. Heerbert Simon

d. J B Say

Ans.

14.After allowing for states share of taxation which one of the following tax revenues brings in the largest amount of revenue to the Central Government?

a. Corporation tax

b. Income tax

c. custom duties

d. Union excise duties

Ans.

15. Match List I with List II and select the correct answer using the codes given below the lists:

List-I List-II

Service tax Central government

Stamp duty State government

Property tax both

Sales tax none

A B C D

a. 1 2 2 3

b. 1 2 3 2

c. 1 1 2 3

d. 3 1 1 2

Ans.

16.Short-term measure focused under the new economy policy is

a. correcting the disequilibrium in foreign exchange market

b. reforms in financial and capital market

c. Trade and industrial reforms

d. Technological up-gradation of production facilities in different fields

Ans.

17. The tenth finance Commission has recommended that the states share of total income tax collection may be kept at

a.75%

b.77.5%

c.80%

d.85%

Ans.

18. As per the recommendations of the finance Commission, besides income tax, the net proceeds of which of the following tax (ex) is/are to be shared between the Centre and the states?

1.Additional duties of excise

2.Wealth tax on agricultural properties

3.Union Excise Duties

Select the correct answer using the codes given below:

Codes:

a. 1, 2 and 3

b. 3 alone

c. 1 and 2

d. 2 and 3

Ans.

19. Which statement below expresses the lifeblood theory?

a) The assessed taxes must be enforced by the government.

b) The underlying basis of taxation is government necessity, for without taxation, a government can neither exist nor endure;

c) Taxation is an arbitrary method of exaction by those who are in the seat of power;

d) The power of taxation is an inherent power of the sovereign to impose burdens upon subjects and objects within its jurisdiction for the purpose of raising revenues.

Ans.

20. Which statement is WRONG?

a) The power of taxation may be exercised by the government, its political subdivisions, and public utilities;

b' Generally, there is no limit on the amount of tax that may be imposed;

c) The money contributed as tax becomes part of the public funds;

d) The power of tax is subject to certain constitutional limitations.

Ans.

21. A taxpayer who invests in New York City Sewer bonds, rather than corporate bonds that pay a higher rate of interest, is engaging in tax planning that uses the

A. Entity variable

B. Time period variable

C. Jurisdiction variable

D. Character variable

Ans.

22. An investor who is a non-resident for U.S. tax purposes who buys stock of a U. S. company is engaging in tax planning that uses the

A. Entity variable

B. Time period variable

C. Jurisdiction variable

D. Character variable

Ans.

23. Reporting rent from a building that you own on your daughter’s tax return could be challenged by the IRS under the

A. Substance over form doctrine

B. Step transaction doctrine

C. Business purpose doctrine

D. Assignment of income doctrine

(24) Income earned and received outside India but later on remitted to India, is

taxable in the case of ––

(a) All the assessees

(b) Resident and ordinarily resident in India

(d) None of the above.

(25) Which one of the following is not an ‘asset’ under section 2(ea) of the Wealthtax Act, 1957 ––

(a) Motor car

(b) Boat and aircraft

(d) Balance in bank account

(26) Short-term capital loss can be set-off from ––

(a) Short-term capital gains

(b) Long-term capital gains

(d) Any income of the previous year.

(27) Which of the following income is not exempt under section 10 ––

(a) Share in total income of firm

(b) Income from agriculture in Lahore

(d) Income from mutual funds.

(28) Which of the following income is taxable under the head ‘income from salary’ ––

(a) Salary received by a partner from firm

(b) Salary received by a Member of Parliament

(d) None of the above.

(29) Rate of depreciation chargeable on fully temporary wooden structure for the

assessment year 2011-12 is ––

(a) 5%

(b) 10%

(d) None of the above

30) Which of the following income is not exempt under section 10 ––

(a) Share in total income of firm

(b) Income from agriculture in Lahore

(d) Income from mutual funds.

31) Which of the following income is taxable under the head ‘income from salary’ ––

(a) Salary received by a partner from firm

(b) Salary received by a Member of Parliament

(d) None of the above.

32) Rate of depreciation chargeable on fully temporary wooden structure for the

assessment year 2011-12 is ––

(a) 5%

(b) 10%

(d) None of the above

33. A marginal tax rate equals:

A. tax paid divided by the appropriate measure of affluence.

B. the tax liability resulting from true application of the tax statutes divided by the statutory base.

C. the tax rate required, at the margin, to balance the budget.

D. the amount by which a taxpayer's tax would increase from an additional dollar of the tax base.

34. A taxpayer may legally avoid paying federal income tax by

A. receiving income in kind, not in cash.

B. working for a non-profit organization.

C. collecting income only from non-labor sources (stock dividends, bank interest, etc.)

D. None of the above answers.

35. A state's basic individual income tax applies at a flat rate of 3.4 percent. Can the distribution be progressive, at least in part?

A. Yes, because the state might allow counties to apply surtaxes to all income.

B. Yes, at the low end of the income range, because of the personal exemption.

C. Yes, because the state might apply a millionaire's surcharge.

D. No, do not be silly-the rate is flat.

36. Which of the following is NOT an advantage of income taxation?

A. Income taxation remains constant when the economy contracts.

B. Income taxes yield substantial amount of revenue.

C. Income taxation entails low collection costs.

D. Income is a reasonable measure of individual capacity to bear the cost of government.

37. Estimated taxes are:

A. an approximation of tax liability for the elderly and blind using the short form.

B. withholding taxes for the self-employed and for non-wage or salary income.

C. an approximation of taxes if you apply for a filing extension beyond April 15.

D. the minimum deduction or tax if one does not itemize.

38. Which of the following accurately reflects the current philosophy and approach of the federal individual income tax?

A. The tax code avoids the use of tax preferences to encourage specific kinds of private expenditure.

B. The code attempts to impose a strictly proportional rate structure.

C. The code taxes capital gains when realized.

D. The code encourages savings by taxing only on what people take out of the economy.

39. Which of the following is true?

A. Taxable Income = Adjusted Gross Income - (Personal Deductions + Personal Exemptions).

B. Taxable Income = Adjusted Gross Income - (Personal Deductions + Personal Exemptions + Credits).

C. Taxable Income = Adjusted Gross Income + (Personal Deductions + Personal Exemption + Medical Expenses).

D. Taxable Income = Adjusted Gross Income + Credits.

40. Which of the following is NOT accurate about personal exemptions in the federal individual income tax? The exemptions:

A. are indexed for inflation.allow

B. allow for differences in the size of the taxpaying unit.

C. give varying amounts of tax relief to taxpayers.

D. are calibrated to the cost of food and clothing for an individual.

41. The federal government may levy an individual income tax without the need to apportion among states because:

A. the U.S. Supreme Court has ruled that the individual income tax is not a direct tax.

B. individual income taxes are subject only to the requirement that they be uniform across the states.

C. the sixteenth amendment allows such taxes without apportionment.

D. None of the above.

42. For federal income tax purposes which of the following expenses can be personal deductions (on schedule A) to the extent that it exceeds a certain percentage of adjusted gross income?

A. Medical and dental expenses.

B. State and local taxes.

C. Mortgage interest and points.

D. Gifts to charity.

43. Payroll taxes (such as FICA) are characterized by all of the following EXCEPT:

A. The tax is levied on a narrow tax base.

B. Tax rates increase with increases in the tax base.

C. The tax is levied on the first dollar earned.

D. Tax proceeds are earmarked for specific purposes.

44. The federal government taxes consumption mainly through:

A. a retail sales tax.

B. value-added tax.

C. selective excise taxes.

D. None of the above answers.

45. Which of the following might logically be reasons used in support of a value added tax for the federal government?

A. Improve separation of revenue sources across the levels of government (federal, state, and local).

B. Provide an increased economic incentive for private savings.

C. Increase the responsiveness of the federal tax base to changes in the natural economic activity.

D. Improve progressivity of the federal revenue system.

46. A common criticism of retail sales and excise taxes is:

A. they are progressive with respect to income.

B. they are general taxes with no allowed exemptions.

C. they are regressive with respect to income.

D. they tend to be shifted backward.

48. The following statements about VAT are true except:

A. VAT is a means for taxing general consumption.

B. VAT is a single stage tax.

C. VAT covers broader services than RST.

D. VAT ultimately excludes businesses from taxation.

49. What is one difficulty associated with specific (as opposed to ad valorem) excise taxes?

A. They discriminate against property owners.

B. They do not reflect price, and therefore do not capture the impact of inflation.

C. They do not reflect price, and therefore do not discourage consumption.

D. They discriminate against people who buy in large quantities.

50. Which of these problems is NOT associated with selective excise taxes?

A. Collection costs are high per tax dollar received.

B. They discriminate by taste.

C. It is often difficult to define what is covered by the tax.

D. None of the above.

51. Multistage sales taxes levied at a fixed rate on the gross receipts of transactions at each stage of production are called:

A. excise taxes.

B. turnover taxes.

C. value-added taxes.

D. general consumption taxes.

52. At both the federal and state level, the greatest amount of revenue is generated from which of the following selective sales taxes?

A. Alcohol

B. Tobacco

C. Motor Fuels

D. Public Utilities

53. "Over-the-counter relief" is characteristic of:

A. the manner in which states try to reduce sales tax regressivity.

B. the way the federal government distributes Medicare to states.

C. the mechanism assessors use to value property for tax purposes.

D. the argument that federal debt does not burden the economy.

54. Fractional assessment refers to:

A. the practice states use to divide formula funding among cities.

B. the balance of corporate profits across state jurisdictions.

C. assessing properties at less than market value for tax purposes.

D. None of the above.

55. If a city is taxing property at the maximum rate allowed and then the assessed valuation of property in the city increases, which of the following can be expected to happen if the state does not allow an increase in the property tax levy?

A. property tax rate increase.

B. the property tax levy increases.

C. coefficients of dispersion increase.

D. property tax rates decrease.

56. In a traditional mass cyclical assessment system, which of the following occurs?

A. the value for a property parcel is adjusted each time the parcel is sold.

B. the value of all properties in the assessment jurisdiction will be realigned annually, according to estimated changes in the value of types of properties.

C. all properties in a jurisdiction are assessed in a single year and assessments do not change until the next reassessment year some years ahead.

D. tax rates are frozen when property values change.

57. A circuit breaker generally returns excess property tax paid through:

A. cash payments from local govdernments.

B. personal deductions on the state income tax.

C. a state income tax credit.

D. vouchers for payment of state sales taxes.

58. City X reassesses a portion of the property within its borders every year, on a rotating basis. This method of updating the assessment roll is referred to as:

A. annual assessment

B. proportional assessment

C. segmental assessment

D. periodic assessment

59. Which of the following approaches would an assessor most likely use if she or he were trying to determine the value of a large manufacturing plant?

A. sales comparison

B. income

C. cost

D. value in use

60. Which of the following does NOT constitute a property tax reflef measure?

A. circuit breakers

B. deferrals

C. exemptions

D. all of the above constitute property tax relief measures

61. The most appropriate method of assessing rental property is:

A. Market-Data Approach

B. Income Approach

C. Cost Approach

D. Summation Approach

62. Circuit breakers may be generally preferable to exemptions as a means of property tax relief because:

A. they place costs directly on local governments.

B. they require annual reauthorization and thus allow greater control.

C. they are targeted.

D. they link property and sales taxes.

63. A statewide property tax freeze:

A. would allow property tax revenue to grow as rapidly as the growth in assessed value.

B. would require that all local jurisdictions in the state have the same property tax rate.

C. would cause property tax rates to rise when assessed value increases.

D. would limit local expenditure growth to that financed by non-property tax revenue.

64. Which of the following is an advantage that property taxes have compared to income and sales taxes.

A. Property taxes are the least regressive.

B. Property taxes bring in the largest amount of revenue.

C. Property taxes have lower administrative cost.

D. None of the above.

65. A measure of the overall uniformity of property tax assessment system is:

A. assessment sales ratio

B. circuit breaker

C. coefficient of dispersion.

D. the effective tax rate.

66. Which of the following is correct?

A. Tax evasion includes the application of legal loopholes to reduce tax liability.

B. Tax avoidance includes failure to pay tax on unreported income from legal sources.

C. The Internal Revenue Service estimates that more income tax is lost from evasion involving illegal activities than from unreported legal activities.

D. Tax avoidance is legal.

67. For a taxpayer passive tax, the total collection costs of the tax:

A. Tax evasion includes the application of legal loopholes to reduce tax liability.

B. Tax avoidance includes failure to pay tax on unreported income from legal sources.

C. The Internal Revenue Service estimates that more income tax is lost from evasion involving illegal activities than from unreported legal activities.

D. Tax avoidance is legal.

68. Voluntary compliance with a tax law means that:

A. taxpayers pay whatever amount they voluntarily choose to pay.

B. taxpayers pay the amount they are billed by the government

C. taxpayers pay the tax they owe without direct enforcement action against them.

D. None of the above.

69. A fiscal impact statement:

A. is a multiple regression estimate of revenue produced by an existing tax for the next budget year.

B. estimates the revenue increase or decrease produced by a tax structure change.

C. determines the revenue loss from special provisions of the existing tax structure.

D. is based on diversions from the "normal structure" of the tax.

70. When preparing a baseline revenue forecast for the budget process, the analyst:

A. includes the effect of proposed tax legislation on collections.

B. never estimates increases larger than experience in the most recently completed fiscal year.

C. ultimately prepares time series estimates.

D. None of the above.

71. If the present tax structure is the normal tax baseline, then the level of tax expenditures:

A. equals zero.

B. is larger than under the reference tax law baseline.

C. cannot be estimated.

D. rises as the economy expands.

72. An insured municipal bond bears a lower cost to the borrower than does an equivalent uninsured bond because:

A. interest from the insured bond is exempt from federal income tax.

B. the insurer pledges its resources to payment of debt service, if necessary.

C. only highest rated (AAA) bonds can obtain insurance.

D. term structures of interest rates vary.

73. Revenue bonds generally require higher interest rates than full faith and credit bonds because:

A. revenue bonds are subject to more severe political checks and legislative review than full faith and credit bonds.

B. revenue bonds pledge only revenue from the project financed for service of debt while full faith and credit bonds pledge tax revenues as well.

C. revenue bonds are not permitted to be "called" (repaid) prior to their maturity.

D. revenue bonds have higher face value than do full faith and credit bonds.

74. The carrying value of a long-term note payable:

A. Is computed as the future value of all remaining future payments, using the market rate of interest.
B. Is the face value of the long-term note less the total of all future interest payments.
C. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance.
D. Is computed as the present value of all remaining interest payments, discounted using the note's rate of interest.
E. Decreases each time period the discount on the note is amortized.

75. If a company applies overhead to production with a predetermined rate, a credit balance in the Factory Overhead account at the end of the period means that:

A. The bookkeeper has made an error because the debits don't equal the credits.
B. The balance will be carried forward to the next period as an overhead cost.
C. Actual overhead was less than the overhead amount charged to production.
D. The overhead was underapplied for the period.
E. Actual overhead was greater than the overhead amount charged to production

76. When preparing the cash budget, all the following should be considered except:

A. Cash receipts from customers.
B. Cash payments for merchandise.
C. Depreciation expense.
D. Cash payments for income taxes.
E. Cash payments for capital expenditures.

77. A flexible budget is prepared:

A. Before the operating period only.
B. After the operating period only.
C. During the operating period only.
D. At any time in the planning period.
E. A flexible budget should never be prepared

78. Consider the following type of income:

1. Personal income.

2. Private income

3. Disposable income

4. National income

The correct sequence in descending order of their magnitude is

a. 4, 2, 1, 3

b. 4, 2, 3, 1

c. 2, 4, 3, 1

d. 2, 4, 1, 3

Ans. b

79. Match List-I with List-II and select the correct answer using the code given below the Lists :

List-I List-II

(Basis of Classification) (Types of Audit)

A. Time 1. Complete Audit

B. Subject matter 2.Public Audit

C. Extent or coverage 3. Periodical Audit

D. Organization structure 4. Government Audit

5. Cost Audit

Codes

A B C D

(a) 3 4 1 5

(b) 1 5 2 3

(d) 1 4 2 5

Ans.

80)What does the total auding situation comprise?

(a) Inherent risk, process risk and control risk

(b) Appropriate evidence and oral evidence

(d) Sufficient evidence and appropriate evidence

Ans.

81. Match List- I (Audit Test) with List-II (Situation) and select the correct answer using the code given below:

list-I list-II

(A) Depth testing 1. Examination in depth by the auditor of the accounting function or department at an interval planned by auditor

(B)Vouching audit 2. Used in situations where evidence of a single error gives hint to the auditor of a serious lapse which may require

(C)Discover Sampling 3. Applied in situations where auditor has absent or unreliable adn as a result, it would be necessary to check all the documentary evidences.

(d)Rotational test 4. Involves tracing through the entire system all the aspects of a transaction which the auditor wishes to check.

Codes

A B C D

(a)1 3 4 2

(b)4 2 3 1

(d)4 3 2 1

Ans.

82) The following is capital receipt:

(a) Dividend from investment;

(b) Bonus shares;

(d) Compensation received for compulsory evacuation of place of business.

Ans. (d)

(83) Following is not a capital receipt:

(a) Dividend on investment;

(b) Bonus shares;

(d) Compensation received for vacating business place.

Ans. (a

(84) An individual is said to be resident in India in a previous year (in which the February month has 29 days) if he is in India in that year for a period or periods amounting in all to 182 days or more,

(a) 182,

(b) 183,

(d) 150

Ans. a.

(85) The assessee is charged to income-tax in the assessment year following the previous year:

(a) A non-resident business firm which shipped goods on 1.5.210 at Visakhapatnam Port in Andhra Pradesh

(b) An employee left India to USA on 1.8.2010 with no intention of returning

(d)An employee-assessee of a University who worked during 1.4.09 to 30.03.2010

Ans. (d)

(86) Income received in India in previous year is taxable in the hands of:

(a) Resident;

(b) Not-resident;

(d) All above.

Ans. (d)

(87) Expenditure incurred by an employer on medical treatment and stay abroad of the employee shall not be taxed in the case of ___________.

(a) an employee whose gross total income before including the said expenditure does not exceed Rs. 2 lakhs.

(b) an employee whose income under the head "Salaries" exclusive of all monetary perquisites does not exceed Rs. 2 lakhs,

(c) an employee whose income under the head "Salaries" exclusive of all non-monetary perquisites does not exceed Rs. 2 lakhs,

(d) all employees irrespective of their amount of gross total income/the amount of income under the head "Salaries".

Ans. (a)

(88)The following is exempt income :—

(a) Travel concession to employee

(b) Remuneration received for valuation of answer scripts

(d) Perquisites in India

Ans. (a)

(89) The following is not taxable as income under the head "Salaries":-

(a) Commission received by a full-time director;

(b) Remuneration received by a partner;

(d) Free accommodation given to an employee.

Ans. (b).

90. If an assessee earns rent from a sub-tenant in respect to tenanted property let out as a residence, the said rent is:

(a) Exempt under Section 10.

(b) Taxable under the head income from house property.

(d) Taxable as income from other sources, unless the assessee is in the busi¬ness of subletting properties on a regular basis.

Ans. (d)

(91)X Ltd. has failed to remit the tax deducted at source from annual rent of Rs. 6,60,000 paid to Mr. A for its office building. Said rent is —

(a)fully allowable as a business expenditure;

(b)not allowable in view of Section 40(a)(i);

(c)allowable to the extent of 50%;

(d)none of the above.

Ans. (b)

(92) A partnership firm's profit as per the profit and loss account is Rs. 10,00,000. Its total income determined according to the provisions of the Income- tax Act, 1961 is Rs. 9,00,000. A partner who has 20% share in the firm can claim exemption of amount of Rs.__________under Section 10(2A).

(a) 2,00,000,

(b)1,80,000,

d) None of the above

Ans. (a) 2,00,000

(93) Expenditure incurred in carrying out illegal business is—

(a) Not allowed as deduction in any case.

(b) Allowable as deduction, if gross total income is less than Rs. 5 lakhs.

(d) Allowable as deduction, if income from illegal business is offered to tax.

Ans. (d)

(94) if any expenditure is incurred by an Indian company wholly and ex¬clusively for purpose of amalgamation or demerger, the said expenditure is —

(a) not allowable as a deduction as a deduction in computing "Profits and gains from business or profession"

(b) Fully deductible as revenue expenditure in the year in which it is incurred.

(c) allowable as a deduction, spread over eight successive previous years begin¬ning if the previous year in which the amalgamation or demerger taken place.

(d) allowable as a deduction, spread over five successive years beginning with the previous year in which the amalgamation or demerger taken place.

Ans. (d)

(95)If any expenditure is incurred by an Indian company wholly and exclu¬sively for the purpose of amalgamation or demerger, the said expenditure is —

(a) Not allowable as a deduction in computing profits and gains of business or profession.

(b) Fully deductible as revenue expenditure in the year in which it is incurred.

(d) Allowed as a deduction spread over five successive previous year beginning with the previous year in which the amalgamation or demerger takes place.

Ans. (d)

(96) Deduction for bad debts is allowed to an assessee carrying on business —

(a) In the year in which the debt is written off as bad.

(b) In the year in which the debt first arose.

(d) In the year in which the debt becomes irrecoverable by operation of law.

Ans. (a)

(97) Under Section 41(4) of the Income-tax Act, 1961, where a bad debt allowed as a deduction under Section 36(1)(vii) in an earlier year is subsequently recovered —

(a) It is taxable to the extent of 50% of recovery, in the year of receipt, as busi¬ness income.

(b) It is taxable as business income in the year of recovery.

(d)It is taxable as income from other sources in the year of receipt.

Ans. (b

(98) Payment of interest to partners of partnership firm assessed as firm is allowable as deduction under Section 40(b) of the Income Tax Act, 1961.

(a) If the rate of interest does not exceed 8% p.a.

(b) If the interest is paid on the minimum balance of capital account between 10th and the end of every month.

(d) If it is authorized by and in accordance with the partnership deed, pertains to a period after the deed and does not exceed 12 percent simple interest per annum.

Ans. (d

(99) The following is not 'plant' u/s 43(3) of the Income-Tax Act, 1961 —

(a) Books

(b) Know-how

(d) Electrical fittings

Ans. (c)

(100) Mr. L Singh used it in his business. This is the only asset in the block. 20% of the usage is for personal purposes. The WDV of the block as on 31.3.2011 is —

(a) Rs. 2,70,000;

(b) Rs. 2,55,000;

(d) None of the above.

Ans. (d)

101. A. Long-term capital gains arising on compulsory acquisition of agricul¬tural land held by a domestic company within specified urban limits is —

(a) not exempt under Section 10(37);

(b) exempt under Section 10(37) in full;

(d) 25% of the receipt is exempt under Section 10(37).

Ans. (a)

102. In case of an investor in shares, in respect of shares sold, securities transactions tax paid (at the time of purchase of the said shares earlier), is —

(a) to be added to the cost of acquisition;

(b) to be deducted as an expenditure connected with transfer;

(d) none of the above.

Ans. (c)

103. In respect of listed shares held for 10 months sold on 12.8.2010, the rate of tax in respect of capital gains is —

(a) 10%;

(b) 20%;

(d) not determinable, as the capital gains will form part of the total income whose other components are not known.

Ans. (c)

104. Capital gains arising to an individual/HUF is exempt from tax under section 10(37) if the land was being used for agriculture purposes by such HUF or individual or parent of his during a period of or more immediately preceding the date of transfer.

(a) 2 years

(b) 36 months,

,(c) 12 months,

(d) 6 months

Ans. (a)

105. Long term capital gain arising to an assessee on the sale of a capital asset is exempt under Section 54EC of the Income-tax Act, 1961 —

(a) To the extent of investment in specified bonds up to a limit of X 100 lakhs.

(b) To the extent of 50% of investment in certain bonds up to a limit of Rs. 50 lakhs.

(d) Proportionate to the extent of investment of net sale proceeds in specified

bonds, not exceeding Rs. 50 lakhs.

Ans. (c)

106. (A)Gift received from one or more unrelated person(s) during the previous year shall form part of an individual's income, if the aggregate of gifts exceeds —

(a) Rs. 50,000

(b) Rs. 1,00,000

(d) Rs. 1,65,000

Ans. (a)

107. Cash gift received under Section 56(2)(vii) from non relatives are not taxable upto —

(a) Rs. 1,00,000;

(b) 175,000;

(d) Rs. 25,000

Ans. (c)

108. Mr. X gifts Rs.60,000 to the HUF of which he is member; said amount will be treated as income of —

(a) Mr. X;

(b) The HUF;

(d) None of the above.

Ans. (b)

109. Government's contribution to the new pension scheme referred to in Section 80CCD is -

(a) an exempt income;

(b) income chargeable to tax as "Salaries" in full;

(d) Income chargeable to tax as "Income from other sources" in full.

Ans. (b

110. In case of a hospital built in specified area after 31.3.2008 fulfilling the required conditions laid down in Section 80IB-(11C), the profits and gains derived from running the hospital are

(a) deductible in full;

(b) deductible to the extent of 50%;

(d) taxable in full.

Ans. (a)

111. Multiple Choice Questions

A. The registration of a charitable trust can be cancelled under Section 12AA of the Income-tax Act, 1961 by —'

(a) Assessing Office;

(b) Commissioner of Income-tax;

(d) Central Board of Direct Taxes.

Ans. (b

112. The income of any university or other educational institution existing solely for educational purposes and not for the purposes of profit is exempt under clause (iiiad) of Section 10(23C) if the aggregate annual receipts'of such univer¬sity or educational institution do not exceed Rs.

(a) Rs.100crores,(c) Rs. 10crores,

(b) Rs.1 crore,(d) Rs. 10 lakhs

Ans. (b)

113. Any income chargeable under the based "Salaries" is exempt from tax under Section 10(6)(viii), if it is received by any non resident individual as remuneration for services rendered in connection with his employment in a for-eign ship where his total stay in India does not exceed a period days in that previous year.

(a) 90

(b) 182

(d) 120

Ans. (a

114. The following is not a venture capital undertaking for the pur¬poses of Sec.10(23F), if engaged in business of-

(a) Generation of power

(b) Telecommunications

(d) Dairy farming whose shares are not listed in a recognized stock exchange

Ans. (d)

115 In case of companies deriving loss for any assessment year, filling of return of income within the due date laid down in Section 139(1) is compulsory

(a) only where the Department issues notice to the assessee-company;

(b) for domestic companies only;

(d) for all companies.

Ans. (d)

116. Where assessment has not been completed, belated income-tax return for assessment year 2011-12 can be filed upto

(a) 31-03-2013

(b) 31-12-2012

(d) 31-12-2013

Ans. (a)

117. The due date for filing return of net wealth of an individual, who is a part¬ner in a firm, whose turnover for the year ended 31-03-2011 exceeds Rs. 60 lacs, is

(a) 30th June, 2011

(b) 31st July, 2011

(d) None of the above

Ans. (d)

118. Where the karta is not available, the return of wealth of a HUF can be signed by:

(a) Any adult member of the family;

(b) Any adult coparcener of the family:

(d) None of the above.

Ans. (a)

119. Following Form Number is to be used for filing the return of income by an individual having business income:

(a) Form No. 1;

(b) Form No. 2;

(d) Form No. 4A.

Ans. (c

120. . Surcharge of 2.5% is payable in the case of companies, by

(a) domestic companies only;

(b) companies other than domestic companies;

(d) None of the above.

Ans. (d).

121. Which one of the following is an "asset" as per Section 2(ea) of the Wealth-tax Act?

(a) Any residential property forming part of stock-in-trade

(b) Any residential house that has been let out for a minimum period of 180 days during the previous year

(d) House occupied for the purpose of assessee's business.

Ans. (b)

122. Under the Wealth Tax Act, 1957 the time limit for completion of regu¬lar assessment is months from the end of relevant assessment year.

(a) 21

(b) 12

(d) None of the above.

Ans. (a) 21

123. In valuation of immovable property in Bangalore, the specified area means of the aggregate area, for wealth-tax purpose.

(a) 60%

(b) 65%

(d) 75%

Ans. (b)

124.The following is not an asset as envisaged by Sec.2(ea) of the Wealth-tax Act.

(a) Bullion

(b) Urban Land

(d) Motor boats of fishing business

Ans. (d

125. In an agreement where the subject matter is essentially different from what the parties thought it to be, the agreement is:

a) Void

b) Voidable

c) Valid

d) Illegal

Answer (a)

45. Suman who is 17 years old entered into a contract for 50 Lakhs he could not honour the contract and ended up breaching the same. Which one of the following statements is correct as regards the above situation?

a) Action can be taken against suman for breach of contract

b) No action can be taken against suman for breach of contract

c) Taking action against suman depends on terms of contract.

d) Specific performance can be insisted through judicial proceedings

Answer (b)

46. To constitute a partnership, the agreement must be in:

a) In writing

b) In Oral

c) Either in written or in Oral

d) Neither in writing Nor in Oral

Answer (c)

47. A person who wants to inspect the register of firms maintained by registrar is required to pay the fee as prescribed by law

a) True

b) False

c) Partly True

d) None of these

Answer (a)

48. Impossibility arising subsequently to formation of a contract is

a) Pre-contractual contract

b) Supervening impossibility

c) Initial Impossibility

d) None of these

Answer (b)

126. A person who is not a party to a partnership agreement and conducts (or) represents himself as a partner in a firm is called

a) Sub partner

b) Sleeping Partner

c) Partner by estoppels

d) A share holder

Answer (c)

127. In a contract of sale, under the sale of goods act 1930, physical delivery of goods is not an essential element.

a) False

b) Partly True

c) True

d) None

Answer (c)

128. _____ is one sided contract in which only one party has to perform his part of promise

a) Unilateral contract

b) Illegal

c) Bilateral

d) enforceable

Answer. a

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