FALL-2015

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Master of Business Administration - MBA Semester 3
MF0012-Taxation Management-4 Credits
(Book ID: 1760)
Assignment (60 Marks)
Note: Answers for 10 marks questions should be approximately of 400
words. Each question is followed by evaluation scheme. Each Question
carries 10 marks 6 X 10=60.
Q1. Explain the objectives of tax planning. Discuss the factors to be
considered in tax planning.
Answer. Objectives of Tax Planning
a. Reduction of tax liability by utilizing the benefits available in the tax laws.
b. Informed and pragmatic financial decisions: A person adds the dimension of
tax incidence in his decision-making on financial matters, and this helps him
optimize his decisions.
c. Multi-dimensional investment decisions: In a democratic welfare state like
India the government requires substantial investment

Q2. Explain the categories in Capital assets.

Mr. C acquired a plot of land on 15th June, 1993 for 10,00,000 and
sold it on 5th January, 2010 for 41,00,000. The expenses of transfer
were 1,00,000.

Mr. C made the following investments on 4th February, 2010 from the
proceeds of the plot.
a) Bonds of Rural Electrification Corporation redeemable after a
period of three years, 12,00,000.
b) Deposits under Capital Gain Scheme for purchase of a residential
house 8,00,000 (he does not own any house).
Compute the capital gain chargeable to tax for the AY2010-11.
Answer. Categories of capital assets
For taxation purposes, the capital assets have been, divided into
(a) Short-term capital assets and
(b) Long-term capital assets.

Q3. Explain major considerations in capital structure planning. Write

about the dividend policy and factors affecting dividend decisions.
Answer. Major considerations in capital structure planning
1. Risk of two kinds, that is, financial risk and business risk: In the context of
capital structure planning, financial risk is more relevant. Financial risk is of two
types:
(a) Risk of cash illiquidity:
(b) Risk of variation in the earnings to equity shareholders in relation to
expectation:

Q4. X Ltd. has Unit C which is not functioning satisfactorily. The

following are the details of its fixed assets:

The written down value (WDV) is Rs. 25 lakh for the machinery, and
Rs.15 lakh for the plant. The liabilities on this Unit on 31st March,
2011 are Rs.35 lakh.

The following are two options as on 31st March, 2011:

Option 1: Slump sale to Y Ltd for a consideration of 85 lakh.
Option 2: Individual sale of assets as follows: Land Rs.48 lakh,
goodwill Rs.20 lakh, machinery Rs.32 lakh, Plant Rs.17 lakh.
The other units derive taxable income and there is no carry forward of
loss or depreciation for the company as a whole. Unit C was started
on 1st January, 2005. Which option would you choose, and why?
Answer.

Q5. Explain the Service Tax Law in India and concept of negative list.
Write about the exemptions and rebates in Service Tax Law.
Ans. Service Tax Law in India
Service tax was introduced in India in 1994 by Chapter V of the Finance Act,
1994. It was imposed on an initial set of three services in 1994 and the scope
of the service tax has since been expanded continuously by subsequent
Finance Acts.
There is no separate Service Tax Act, but all pronouncements relating to
service tax are in the annual Finance Acts. Service Tax Rules, 1994 were
enacted to begin with, and with notifications

Q6. What do you understand by customs duty? Explain the taxable

events for imported, warehoused and exported goods. List down the
types of duties in customs. An importer imports goods for subsequent
sale in India at $10,000 on assessable value basis. Relevant exchange
rate and rate of duty are as follows:
Calculate assessable value and customs duty.

Answer. Customs Duty

Customs duty is the duty imposed on goods imported into the country. In the
years before globalization it was difficult to import goods on account of stiff
duty rates and procedures, especially for less developed and.
Taxable event for imported goods The taxable event with respect to
imports is the day of crossing of the customs barrier and not the date
on which goods land in India or enter its territorial waters.
Taxable event for warehoused goods The taxable event in case of
warehoused goods is when goods are cleared from customs-bonded
warehouse by submitting sub-bill of entry.
Taxable event for exported goods Taxable event arises for exported
goods when the proper officer makes an order permitting clearance and
loading of the goods for exportation under

FALL-2015
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Rs.125 each.
Visit www.instamojo.com/subjects4u search for
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