Code

1.

Questions
Briefly
explain
the
major
considerations in capital structure
planning.

2.

What are the types of taxes?

Differentiate between tax avoidance
and tax evasion.

3.

List any 10 incomes which are

exempt from tax.

4.

Explain the provisions related to

valuation
of
rent
free
or
concessional
accommodation
provided to employees as per IT Act.

5.

Explain the provisions of section

54D of IT Act.

FW15 MF0012

Answers
1. Two types of risks are financial risk and business risk: in the
context of capital structure planning, financial risk is more
relevant.
2. Cost of capital: It is obvious that a business should be at least
capable of earning enough revenue to meet its cost of capital
and finance its growth.
3. Control: Along with cost and risk factors, the control aspect is
also an important consideration in planning the capital
structure.
4. Trading on equity: A company may raise funds either by issue
of shares or by borrowing.
5. Tax consideration: While dividend on shares is declared and
paid out of profit after tax, interest paid on borrowed capital is
allowed as deductions for computing taxable income.
6. Government monetary and fiscal policy: The annual review by
RBI, gives shape to the monetary and fiscal policies.
The different types of taxes are:
1. Direct taxes
2. Indirect taxes.
The difference between tax avoidance and tax evasion are:
a. Tax avoidance aims at reducing tax by exploiting loopholes in
tax law but tax evasion is escaping tax liability by illegal
concealment of income.
b. Tax avoidance skillfully examines legal lacunae that can help
reduce tax whereas tax evasion involves blatant use of unfair
practices. There is no skill here.
c. Tax avoidance is lawful in application but mala fide in intent
whereas tax evasion is unlawful.
d. Tax avoidance is planning before the actual liability for tax
comes into existence but tax evasion involves non-payment of
tax after the liability of tax has arisen.
The following are some of the types of income that are exempt
from tax:
1. Agricultural income
2. Any income by way of dividends received from domestic
companies.
3. Income of newly established undertakings in new trade zones
4. Income of a charitable or religious trust
5. Income of political parties
6. Income from units of mutual funds
7. Casual income subject to certain limits
8. Scholarships
9. Government and other approved awards
10. Allowances paid to MP and MLA
1. Accommodation provided by the government to its
employees:
a. Unfurnished accommodation
b. Furnished accommodation (5 M)
2. Accommodation provided by any other employer:
a. Unfurnished accommodation
b. Furnished accommodation (5 M)
1. The assessee is engaged in an industrial undertakings
2. The land or building or any right is part of the industrial
undertakings
3. The asset is compulsorily acquired under any law
4. The assessee has used the land or building or any right for
the purposes of the business of industrial undertaking in the two
years immediately preceding the date on which the transfer took
place
5. The assessee has, within a period of three years, after such

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6.

Explain the provisions applicable to

service
tax
registration
and
procedure for registration.

FW15 MF0012

transfer purchased another land or building or any right in any

other land or building or constructed any other building for the
purposes of shifting or re-establishing the industrial undertaking or
setting up another industrial undertaking
6. The capital gain arising from the transfer of such land or
building purchased or constructed within the period of three
years. When the amount of the capital gain exceeds the cost of
acquisition or construction, only the excess will be chargeable to
tax
Registration under service tax rules:
1. The taxable turnover of the service provider during the
previous year exceeds the prescribed amount
2. The service tax provider is acting as an input service
distributor irrespective of the turnover
3. The service receiver is liable to pay service tax being recipient
of service under reverse charge ( 4 M)
Procedure for registration:
Step 1: Apply for registration in Form ST-1 to the Superintendent
of Central Excise
Step 2: Submit the required documents like PAN, Affidavit,
Resident Proof, Partnership Deed in case of a firm, Memorandum
and Articles of Association in case of a company
Step 3: The Superintendent of Central Excise will grant a
certificate of registration in Form ST- 2 within 7 days
In case of providing multiple services, only one application is
enough and it has to be mentioned in Form ST 1 (6 M)

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