Problem 1

X ltd is engaged in the business of manufacturing, plastic bottle. Its profit and loss account show a net
profit of Rs 60 Lakh for the year ending March 31, 2016 after debiting/crediting the following items.
1. Rs 5 lakh, being expenses incurred on the travelling of the wife of managing director, who
accompanied him on tour to Beijing on invitation of trade & commerce chamber, China.
2. Rs 10,000 and Rs 15,000 paid in cash on Oct 15, 2015 by two separate vouchers to a
contractor who carried out certain repair work in the office premises.
3. One-time license fee of Rs 10 Lakh paid to a foreign company for obtaining franchise on July
1, 2015.
4. Rs 5 lakh paid to S ltd towards feasibility study conducted for examining proposals for
technological advancement relating to existing business, where the project was abandoned
without creating a new asset.
5. Dividend of Rs 3,50,000 received from a foreign company in which X ltd holds a 28% in
nominal value of equity share capital of the company. Rs 25,000 spent on earning this
income.
6. Depreciation on Tangible Fixed Asset Rs 1,50,000
7. Rs 5,00,000 & Rs 1,50,000 being amount waived by a bank out of a principal & arrear
interest, respectively in one-time settlement. The Loan was obtained for meeting working
capital requirements two years back.
8. Provision for gratuity based on actuarial valuation is Rs 5,00,000. Actual gratuity paid Rs
1,50,000 was debited to provision for gratuity account.
9. The operating & closing stock of the year were Rs 18,00,000 & Rs 18,72,000 respectively &
were undervalued by 10% on Cost.

Additional Information:

 Provision for audit fee of Rs 1 Lakh was maid in the books of the year ending Mar 31
2015, without deducting tax at source. Such fees were paid to the auditors in Sept 2015,
after deducting tax under section 1941 and the tax so deducted was deposited on Oct 7,
2015.
 During the year, company purchased the 5000 shares of RK private Ltd. at Rs 20 per
share. The fair market value of such share on the date of transaction was Rs 40 per share.
 Depreciation on tangible fixed assets as per Income tax rules: Rs 1.75 Lakh.
 A debt of Rs 8 lakh was claimed as a bad debt in the previous year 2014-15. But the
assessing officer allowed only Rs 4 lakh as bad debt in the previous year 2015-16. Rs 3
lakh was recovered ultimately in respect of the debt. The effect of recovery of the bad
debt was not given in the books of account.

Compute the total income & tax payable by X Ltd, giving the reasons for treatment of each item, for
the assessment year 2016-17. Ignore MAT provisions.