Legal Aspect of Business

END Term Paper, 2010
Business Taxation
Set 1

1.
A company bought a new car for Rs. 12 lakhs and gifted it the same day, November 22, 2010, to a cricketer for his match winning performance in a one day game. What is the taxable income of the cricketer arising from the gift?

Answer: A gift from a non-relative is potentially covered under Section 56. The Section applies to only certain kinds of movable property given as a gift. A car is not included in the list. Thus, there will be no incidence of income tax for the cricketer from the transaction.

Taxable income of the cricketer arising from the gift: Nil

2.
Pine Investment Private Limited is in the business of making investments in the equity shares of foreign companies. The income of the company is only from dividends. The company received 40 lakhs during 2009-10 in dividends on its shares held in foreign companies. The expenditure made by the company in renting office space, salary and travel was Rs. 25 lakhs. The only capital asset the company had was a desktop computer bought in June 2009 for Rs. 1 lakh. What is the taxable income (after permissible deductions) of the company for the previous year, 2009-10?

Answer: The income from dividend is specifically listed, without qualifications, under the head of income from other sources. Thus, even if the business of the assessee is to earn dividend, it would be taken under the head of other sources and not business income. The head of income from other sources allows expenditure for earning the income. Under the head, capital expenditures, however, are not allowed.

Thus, the taxable income = Rs. 40 lakh – Rs. 25 lakhs =   Rs. 15 lakh.

3.
Dev Pratap is a management consultant, operating from rented premises. He bought a building from Sigma Computers Limited for Rs. 20 lakhs on November 20, 2010 for running his business from. The stamp duty value of the property was Rs. 22 lakhs. What is the taxable income of Dev Pratap arising from the... [continues]

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