CHAPTER – 1 BASIC CONCEPTS
Illustration 1-
Person when regarded as an ‘Assessee’ : A single letter of enquiry was issued by the income tax department to Mr. Shoumik of Pune. In this letter there was no specific mention of any provision of the Income-tax Act, 1961. Can Mr. Shoumik be treated as ‘assessee’ under the Income Tax Act, 1961? (Nov. 1998)
Solution 1:
A person is treated as an ‘assessee’ only when any proceeding is initiated in his respect under the Income Tax Act, 1961. In the given case, the letter was issued to Mr. Shoumik only for an enquiry an not for any assessment. Further, such an issuance of letter cannot be regarded as proceeding without any specific reference to the provisions of the Act. Therefore, Mr. Shoumik is not an ‘assessee’ under the Act.
Illustration 2:
Ascertainment of previous year : Ascertain the previous year in the following situations-
(a) Mr. X set up his new business on 27-08-2022.
(b) Mr. Y’s New source of income came into existence on 25-02-2023.
Solution 2:
(a) The previous year for Mr. X shall be 27-08-2022 to 31-03-2023.
(b) The previous year for Mr. Y shall be 25-02-2023 to 31-03-2023.
Illustration 3:
Marginal relief and tax liability – Individual assesse : Compute the tax liability of Mr. X resident individual 40 years of age wherein his total income is Rs. 51,00,000 assuming that there is no income is the nature which is chargeable to special rate of tax and he has not opted for the provisions of section 115 BAC of the Act.
Solution 3:
Tax on total income of Rs. 51,00,000 (including surcharge @ 10%) = Rs. 14,76,750 Tax on Rs. 50,00,000 = Rs. 13,12,500
Marginal Relief = 14,76,750 – (13,12,500 + 1,00,000) = Rs. 64,250
Tax liability = (Rs. 14,76,750 – Rs. 64,250) + 4% of Rs. 14,12,500 = Rs. 14,69,000
Illustration 4:
Marginal relief and tax liability – Individual assesse : Compute the tax liability of Mr. X a resident individual 40 years of age wherein his total income is Rs. 1,00,50,000 assuming that there is no income in the nature of is chargeable to special rate of tax and he has not opted for the provisions of Section 115 BAC of the Act.
Solution 4:
Tax on total income of Rs. 1,00,50,000 (including surcharge @ 15%) = Rs. 32,51,625 Tax on Rs. 1,00,00,000 (including surcharge @ 10%) = Rs. 30,93,750
Marginal Relief = Rs. 32,51,625 – (Rs. 30,93,750 + Rs. 50,000) = Rs. 1,07,875
Tax liability = (Rs. 32,51,625 – Rs. 1,07,875) + 4% of Rs. 31,43,750 = Rs. 32,69,500