ASSIGNMENT

DRIVE FALL 2013

PROGRAM BBA SEMESTER V
BBA 504 TAXATION MANAGEMENT

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Q.No1 Distinguish between revenue expenditure and capital expenditure. Explain the distinction
between capital losses and revenue losses.
Answer:
Differences between revenue expenditure and capital expenditure:
Capital Expenses vs. Revenue Expenses
To distinguish revenue expenditure from capital expenditure, the following tests can be applied:
(i) Nature of the assets: The amount incurred to purchase or gain fixed assets or due to the installation of
fixed assets is called capital expenditure. While When a person incurs expenses due to purchasing of
goods for resale as well as other costs in connection with the purchase, it is termed as revenue expense.
(ii) Nature of liability: A payment made by an individual to clear a capital liability is capital expenditure.
While Any expense incurred to clear a revenue liability is revenue expenditure.
For e.g., the amount paid to a contractor for cancelling a contract to construct a factory building will be
called capital expenditure.

(iii) Nature of transaction: If an expense is incurred to obtain a source of income it is capital

expenditure, e.g., purchase of patents to produce picture tubes of TV sets.
While Any expense incurred to earn an income is revenue expenditure, e.g., salary to staff, advertisement
expenses etc.
(iv) Nature of payment in the hands of payer: If any expenditure is incurred by an assessee as a capital
expenditure, it will remain a capital expenditure even if the amount may be revenue receipt in the hands
of receiver, e.g., purchase of motor car by a businessman is capital expenditure in his hands although it is
revenue receipt in the hands of the car dealer.
Capital Losses vs. Revenue Losses
A distinction has to be made between revenue losses and capital losses of the business because under the
provisions of this Act, capital losses can be set off against the income from capital gain only, whereas the
revenue losses are business losses and as such can be set off against any other income of the assessee. On
the basis of court judgment, following decisions have become distinguishing points between the two:
(i) Loss due to sale of assets: Where there is loss on selling capital assets, it is a capital loss whereas any
loss incurred during the sale of stock-in trade is a revenue loss.
(ii) Loss due to embezzlement: Where there is embezzlement by an employee and this causes loss to the
business, it is revenue loss.
(iii) Loss due to withdrawal of money from bank: Once the amount is deposited in a bank and then it is
withdrawn by an employee and is misappropriated, it is a capital loss.
(iv) Loss due to liquidation of company: Amount deposited by a person with manufacturing industry to
get its agency and loss due to company being liquidated is a capital loss.
(v) Loss due to theft by an employee: Losses occurring due to theft or embezzlement or
misappropriation by an employee is revenue loss.

2a. Suppose Mohan is a salaried employee. His annual income is `4, 25,000. His home loan interest
payment is `80,000 and his home loan principal repayment is `60,000. He has made an investment of
`50,000 in NSC.
Calculate Mohans tax liability.
Answer:
In Mohans case, he has taken advantage of two options under the
80C deduction available to him, namely principal repayment of `60,000 on
his home loan and an investment of `50,000 in NSC. However, these total
up to `110,000, and he can only take a deduction up to the statutory limit of
`100,000.
1,80,0015,00,000

10

5,00,0018,00,000

20

8,00,001 and above

30

His income= 425000

Deductions under 80c= 100000
Loan= 80000
Taxable income= 245000
Tax= (245000-180000)= 65000*10%
=6500

b. Discuss the tax assessment slabs for FY 2012-13 and FY 2011-12.

Answer:
Income Tax Rates/Slabs for Assessment Year 201213 (FY 201112)
Income Tax Rates/Slabs Rate (%)

Up to 1,80,000

nil

Up to 1,90,000 (for women)

Up to 2,50,000 (senior citizens)
1,80,0015,00,000

10%

5,00,0018,00,000

20%

8,00,001 and above

30%

Income tax rates/slabs for assessment year 2011-12 (FY 2010-11)

Income Tax Rates/Slabs Rate (%)
Up to 1,60,000

NIL

Up to 1,90,000 (for women)

Up to 2,40,000 (for resident individual of 65 years or above)
1,60,001 5,00,000

10%

5,00,001 8,00,000

20%

8,00,001 upwards

30%

3 Discuss the objectives of 2013-14 fiscal policy

Answer:
The fiscal policy of 2013-14 has been calibrated with two fold objectivesto aid economy in growth
revival; and to bring down the deficit from 2012-13 level so as to leave space for private sector credit as
the investment cycle picks up. Having undertaken mid-year course correction to contain government
spending within sustainable limits during the current financial year, Budget 2013-14 provides
for a measured increase in plan expenditure by 6.6 per cent over the budgeted estimates of last year. A
growth of 10.8 per cent has been provided for non-plan expenditure in budget estimate (BE) 2013-14 over
revised estimate (RE) 2012-13 keeping in view the requirements for defence, subsidies, interest
payments, finance commission grants and increase in salaries and pension payments etc. This would
result in overall expenditure increase of 16.3 per cent in BE 2013-14 over RE 2012-13. As percentage of

GDP, total expenditure is estimated to remain at same level in BE 2013-14 as in RE 2012-13 at 14.3 per
cent. Apart from containing growth in expenditure, the reduction in fiscal deficit is planned to be achieved
in conjunction with targeted revenue augmentation both through tax and non-tax revenues. Tax to GDP
ratio estimated at 10.7 per cent of GDP in BE 2012-13 is estimated to fall to 10.4 per cent of GDP in RE
2012-13, due to slowdown in economic growth. Tax to GDP ratio is estimated to increase to 10.9 per cent
in BE 2013-14, with the growth of 19.1 per cent over RE 2012-13. Substantial growth of 32.8 per cent has
been provided for non-tax revenue in BE 2013-14 as compared to RE 2012-13. However, this has to be
seen against the fact that RE 2012-13 was substantially lower than BE 2012-13 due to shortfall from 2G
spectrum sales. Compared to BE 2012-13, an increase of 4.6 per cent has been provided, which is as per
the trend for non-tax receipts over last several years.

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