Course: Taxation - Direct and Indirect

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NMIMS Global Access

School for Continuing Education (NGA-SCE)

Course: Taxation - Direct and Indirect

Internal Assignment Applicable for December 2015 Examination

Q1: Mr. Ammar was out of India only for 60 days in the previous year for the first time. He wants to know about what will be his residential status for the previous year. You are a Tax advisor, so explain to him the concept of Residential Status for an Individual. Also describe the conditions for Residential Status.

Answer: In order to understand the residential status of Mr. Ammar, one must first understand about ‘what are the conditions to be satisfied to be a resident?’, and after that, ‘whether one is an ordinarily resident or a non - ordinarily resident?’

Citizenship and the residential status are two very different concepts. One must not confuse them together. An individual can be a Citizen of India but still may not be called a resident in India where as on the other hand an Individual might be a foreign national, a citizen of any other country except India, and still be called as resident in India.

Q2: Do you agree with the statement that “Income from other sources is a residuary head of income”? Kindly explain the same with the help of appropriate examples.

Answer: The following are the various heads of Income as per the Income Tax:

1. Salary income;

2. Income from House Properties;

3. Capital Gains;

4. Income from carrying out any Business or Profession;

5. Income from other sources.

From an overview, any income not forming part of any of the heads from 1 - 4 which is otherwise chargeable to tax, shall fall under the head Income from other sources and be taxed accordingly.

Thus, one can say that income from other sources is

Q3: The W.D.V. of the block of assets as on 1.4.2013 was 5 lacs. Rate of Depreciation @15%. An asset of the same block was acquired on 11.5.13 for 3 lacs. There was a fire on 18.9.2013 and the assets were destroyed by fire. The assessee received a sum of 12 lacs from the insurance Company.

Compute the Capital Gain assuming:

(a) All the assets were destroyed by fire

(b) Part of the block was destroyed by fire

Would your answer differ if the assessee received a sum of 7 lacs from insurance company assuming:

(a) All the assets were destroyed by fire

(b) Part of the block was destroyed by fire.

Answer:

If Compensation received Rs. 12,00,000

Block of Assets u/s 2(11)

	Particulars	All assets Destroyed	Part of Block Destroyed
1.4.2013	W.D.A. of the Block Add:- Cost of New asset pur. Relating to the Block Less: Compensation received Short Term Capital Gains	5,00,000 3,00,000 8,00,000 12,00,000	5,00,000 3,00,000 8,00,000 12,00,000
		4,00,000	4,00,000
		U/S 50 (2)	U/S 50 (1)

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