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Business taxation 2 Marks Imp Question With Answers For Sep-Oct Exam 2020
1 . What Is custom Duty?
Custom duty means a tax which is levied by the government on import of goods into india and export out of India. It is a central tax and mainly imposed on imported goods.
2.What are the types of customs Duty?
• Basic customs duty (BCD)
• Additional countervailing duty (CVD)
• Special Additional Duty (SAD)
• Protective duties
• Safeguard duty etc
3.What Is anti-dumping Duty?
A penalty imposed on suspiciously low-priced imports, to increase their price in the importing country and so protect local industry from unfair competition
4.What is CST?
Central Sales Tax or CST is imposed on sale or purchase of goods occurring the the course of inter-state trade or commerce.
5.When CST is applicable?
CST applicable only when there is sale or purchase. For a sale or purchase to have occurred under CST regulations, the re must be transfer of document of title to the goods during the movement of goods from one stat e to another.
6.What is FOB?
FOB means Freight On Board or Free On Board. If terms of delivery of a transact ion is on FOB means, the cost of movement of goods on board of Airlines or on board of ship is borne by the seller. Rest of all expenses to arrive the goods at buyer’s premise has to be met by the buyer.
7.What is CIF Value?
Cost, Insurance and Freight (CIF) means the seller pays costs, freight and insurance against the buyer’s risk of loss or damage in transit to destination.
8.Goods and services not covered under GST.
• Alcohol for human consumption
• Petroleum Products
• Services by an employee to the employer in relat ion to his
• Court/ Tribunal Services i.e passing judgement.
• Duties performed by:
• The Members of Parliament, State Legislature, Panchayats, Municipalities and other local authorities.
• Any person who holds a post under Constitution.
• Chairperson/ Member/Director in a body established by the government or a local body and who is not an employee of the same.
9.Definition of ‘Partner’
As per S.2(23)(ii) of Income Tax Act, 1961, unless the context otherwise requires, the term “partner” shall have the meaning assigned to it in the Indian Partnership Act, 1932, and shall include-
a) any person who, being a minor, has been admitted to the benefits of partnership; and
b) a partner of a limited liability partn ership as defined in the Limited Liability Partnership Act, 2008.
10.Definition of Partnership
As per S.2(23)(iii) of Income Tax Act, 1961, unless the context otherwise requires,the term “partnership” shall have the meaning assigned to it in the Indian Partnership Act, 1932, and shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008
11.Who Is Working Partner
Working partner means an individual who is actively engaged in t he affairs of business firm where he is a partner and he is not a sleeping partner who merely enjoys the prof its of business of profession. Any remuneration paid to working partner is allowed as expense as per section 40(b) of income tax act.
Remuneration To partners under section 40(b)
As per Section 40(b) of income tax act any interest, salary, bonus, commission or remuneration paid to partners by the partnership firm are allowed to be deducted as an expenses subject to such conditions mentioned in the income t ax act. Remuneration means any payment made towards services rendered.
Conditions for payment of remuneration to partners
► Remuneration ion shall be allowed as deduction only if it is paid to working Partner.
► Remuneration must be written /authorized and should be quantified in partnership deed.
► Remuneration must be related to t he period after the partnership deed.
► Interest paid to partner should not exceed 12%.
► I t s h ou l d not exceed limits specified in section 40(b).
Limits of Remuneration
Limit on the amount of remuneration payable to partners is specified in section 40(b) of income tax act. Remuneration is not allowed as deduction if total amount does not exceed following limits
a. On first 3 lakhs of book profit or loss Rs 150,000 or 90% of book profits (whichever is higher)
b. On the balance book profit 60% of book profit
12.What Is Book Profit?
Book profit means the net profit as shown in the profit and loss account which is computed according to the manner laid down in the chapter IV-D as increased by amount of remuneration paid to partners which is allowed as deduction in the profit and loss account.
Book profit is calculatedin the following way:
- Net prof it as per profit and loss accou nt
- Add remunerat ion if already debited
- Deduct interest if it is not deducted
- Make adjustments for expenses as per section 28 to 44D.
13.What Is Partnership Deed?
A Partnership Deed is a writt en agreement among the partners specifying rules and regulations and is signed by all the partners and stamped as per the Stamp Act with an aim to prevent possible disputes & disagreements among the partners at a future date.
As per S.2(36A) of Income Tax Act, 1961, unless the context otherwise requires, the term “public sector company” means any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 [* Now section 2(45) of the Companies Act, 2013).
Definition of ‘Domestic Company’ - Incom e Tax
15.What is Domestic Company?
As per S.2(22A) of t he Income Tax Act, 1961, unless the context otherwise requires, the term “domestic company” means an Indian company, or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income.
16.What Is limited liability partnership?
A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limit ed liabilities. It therefore exhibits elements of partnerships and corporations.111 In an LLP, each partner is not responsible or liable for another partner’s misconduct or negligence
17.What Is Block of Assets?
Block of assets means group of assets falling within a class of assets for which same rate of depreciation is prescribed.
18.What is Depreciation?
Depreciation is the reduction in the value of assets due to wear and tear. It is a method of allocation of cost of the asset over its useful life.
19.What is Additional depreciation?
The newly substituted section 32 (1)(iia) provides for additional depreciation in the case of any new machinery and plant, other than ships and aircraft . Such machinery and plant have to be acquired and installed after 31.03.2005 by the assessee engaged in the-
• business of manufacture; or
• production of any article or a thing or
• in the business of generation or generation and distribution of power (inserted vide Finance Act, 2013 with effect from 01.04.2013)
20.What is MAT?
MAT stands for Minimum Alternate Tax, described as a direct t ax that has to be paid by the companies that are enjoying tax benefits or tax exemptions, instead of having huge profits, under various schemes framed under Income Tax Act.
Now after the insertion of MAT they have to pay a particul ar amount of tax termed as MAT, so they come under the tax net under section 115JB.
21.What Is Tax Credit under MAT?
The amount of credit to be given shall be the difference between tax paid for any assessment year u/s 115J A (1) or u/s 115J B (as the case may be) and the amount of tax payable by the assessee on its total income.
In other words
Amount of tax credit= MAT - Tax payable on total income computed as per normal provisions of Income Tax Act.
22.What are zero tax companies?
The companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies are popularly known as Zero tax companies.
23.What is widely held company?
A company in which the public are substantially interested is known as widely held company.
MAT - Minimum Alternate Tax
AMT - Alternate Minimum Tax
CBDT -Central Board of Direct Taxes
PFAS - Partnership Firm Assessed As Such.
AOP - Associations of Persons.
CBEC - Central Board of Excise and Customs.
Asst. Professor GCW Kolar