Going through the Classification and Tax Incidence on Companies – CS Executive Tax Laws MCQ Questions with Answers you can quickly revise the concepts.
Classification and Tax Incidence on Companies – Tax Laws CS Executive MCQs
Question 1.
Which of the following is a company, under Income Tax Act
(a) Indian Company
(b) Domestic and Foreign Company
(c) Widely held and Closely held Company
(d) All of the above
Answer:
(d) All of the above
Question 2.
Section 2(26) of the Income-tax Act, 1961 defines the expression “Indian Company” as company formed and registered under the Companies Act, 2013. It includes:
(a) a company formed and registered under any law relating to companies formerly in force in any part of India (other than the State of Jammu and Kashmir, and the Union Territories)
(b) in the case of State of Jammu & Kashmir, any company formed and registered under any law for the time being in force in that State
(c) in the case of any of the Union Territories of Dadra and Nagar Haveli, Goa, Daman and Diu and Pondicherry, a company formed and registered under any law for the time being in force in that Union Territory
(d) All of the above
Answer:
(d) All of the above
Question 3.
Income Tax Act, 1961 distinguished a closely held company from widely held company significantly from the view point of: …………….
(a) tax levied at different rates
(b) section 2(22)(e) where certain payments made to shareholders are treated as deemed dividend
(c) allowed to carry forward its business losses only if the conditions specified in section 79 are satisfied
(d) Both (b) and (c)
Answer:
(d) Both (b) and (c)
Question 4.
As per the provisions of Income Tax Act, which one of the following statement is correct
(a) Statutory corporations as well as Government Companies are automatically treated as Indian Companies
(b) Statutory corporations are not Indian Companies
(c) GovernmentCompany may be lndian Company or Foreign Company
(d) Statutory Corporations are treated as Indian Companies subject to ful-fillment of certain conditions
Answer:
(a) Statutory corporations as well as Government Companies are automatically treated as Indian Companies
Question 5.
In relation to Infrastructural Capital company under section 2(26A) of Income Tax Act, the project for construction of hospital is included if it is with at least beds for patients
(a) 50
(b) 100
(c) 150
(d) 500
Answer:
(b) 100
As per section 2(26A), “Infrastructural capital company” is a company which makes investments by wav of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business referred to in Section 80-IA(4) or Section 80-IAB(l) or an undertaking developing and building a housing project referred to in Section 80-IB( 10) or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one-hundred beds for patients.
Question 6.
As per Section 2(26A), “Infrastructural capital company” means a company which makes investments by way of acquiring shares or providing long-term finance to ……………..
(a) any enterprise or undertaking wholly engaged in the business referred to in Section 80-IA(4) or Section 80-IAB( 1)
(b) an undertaking developing and building a housing project referred to in Section 80-IB(10)
(c) a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one-hundred beds for patients.
(d) All of the above
Answer:
(d) All of the above
Question 7.
Providing long-term finance to a project for constructing a hotel of not less than category as classified by the Central Government is considered in the scope of Infrastructure Capital Company.
(a) 2 Star
(b) 3 Star
(c) 4 Star
(d) 5 Star
Answer:
(b) 3 Star
As per section 2(26A), “Infrastructural capital company” is a company which makes investments by wav of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business referred to in Section 80-IA(4) or Section 80-IAB(l) or an undertaking developing and building a housing project referred to in Section 80-IB( 10) or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one-hundred beds for patients.
Question 8.
Under Income-tax Act, 1961
(a) All Indian companies are domestic companies while all domestic companies need not necessarily be Indian companies
(b) All domestic companies are Indian companies while all Indian companies need not necessarily be domestic companies
(c) No Indian Company is a domestic company
(d) No domestic company is Indian company
Answer:
(a) All Indian companies are domestic companies while all domestic companies need not necessarily be Indian companies
Question 9.
Domestic Company means
I An Indian Company II Any other company
III The company which makes the pre-scribed arrangements for the declaration and payment of dividends in India on which tax is deductible under Section 194.
(a) I & III
(b) II & III
(c) I & II
(d) I, II & III
Answer:
(d) I, II & III
Question 10.
Under Rule 27 of Income tax Rules, the prescribed arrangements include
(a) the share register of the company concerned, for all its shareholders, shall be regularly maintained at its principal place of business within India in respect of any assessment year from a date not later than the first day of April of such year
(b) the general meeting for passing the accounts of the previous year relevant to the assessment year declaring any dividends in respect thereof shall be held only at a place within India
(c) the dividends declared, if any, shall be payable only within India to all shareholders
(d) All of the above
Answer:
(d) All of the above
As per section 2(22A), a non-Indian company would be considered as a domestic company if it makes the prescribed arrangements for the declaration and payment of dividends in India on which tax is deductible under Section 194. The prescribed arrangements have been explained under Rule 27.
Question 11.
If a non-Indian company has made the prescribed arrangements for declaration and payments of dividends within India, such a non-Indian company must be treated as
(a) Domestic Company
(b) Foreign Company
(c) Indian Company
(d) Any of the above
Answer:
(a) Domestic Company
Question 12.
All Non-Indian Companies are
(a) Not necessarily Foreign Companies
(b) Necessarily to be Foreign Companies
(c) Can never be Foreign Companies
(d) Can never be Domestic Companies
Answer:
(a) Not necessarily Foreign Companies
Question 13.
Section 2(18) of the Income-tax Act, defines the expression “company in which the public are substantially interested”. In this context, which one of the following company cannot be said to be one in which public are substantially interested
(a) A company owned by Govt./RBI or A company having no share capital declared by CBDT
(b) Section 8 company or Nidhi/Mutual Benefit Society
(c) A company having no share capital declared by CBDT
(d) Private Limited Company
Answer:
(d) Private Limited Company
Question 14.
A company is said to be one in which public are substantially interested if it is a company owned by the Government or the Reserve Bank of India or in which of the shares, whether singly or taken together, are held by the Government or the Reserve Bank of India or a corporation owned by the Reserve Bank of India;
(a) Not less than 40 percent
(b) Less than 40 percent
(c) Up to 40 percent
(d) More than 40 percent
Answer:
(a) Not less than 40 percent
Under section 2(18) of the Income-tax Act, A company is said to be one in which public are substantially interested, if it is owned by the Government or the Reserve Bank of India or in which not less than 40 per cent of the shares, whether singly or taken together, arc held by the Government or the Reserve Bank of India or a corporation owned by the Reserve Bank of India.
Question 15.
In case of company owned by co-operative society, it will be deemed as if public are substantially interested if shares carrying not less than of the voting power have been allotted unconditionally to or acquired unconditionally by, and are throughout the relevant previous year beneficially held by, one or more co-operative societies; or
(a) 50 percent
(b) 50 percent
(c) 50 percent
(d) 60 percent
Answer:
(c) 50 percent
Question 16.
For the purpose of section 2(18), a listed company is a company, which is not a private company as defined in Companies Act, and equity shares of the company were, as on the of the previous year, listed in a recognised stock exchange in India.
(a) Last day, relevant
(b) Last day, preceding
(c) During the year, relevant
(d) During the year, preceding
Answer:
(a) Last day, relevant
Question 17.
Industrial Company means an Indian company where business consists mainly in the
(a) Construction of ships
(b) Manufacture or processing of goods
(c) Mining or in the generation or distribution of electricity or any other form of power
(d) All of the above
Answer:
(d) All of the above
Question 18.
The shares of ABC Private Limited are held as follows:
| A corporation owned by RBI | 11% |
| Central Govt. | 18% |
| R.B.I. | 14% |
| Mr. Kishore | 18% |
| Mr. Mohit | 37% |
Which of the following statement is true
(a) As shares held by CG along with RBI and Corporation owned by RBI is more than 40%, ABC Pvt. Ltd. is a Govt. Participating company.
(b) As shares held by CG is less than 40%, ABC Pvt. Ltd. is a NOT a Govt. Participating company.
(c) As shares held by RBI is less than 40%, ABC Pvt. Ltd. is a NOT a Govt. Participating company.
(d) Since it is the case of a Private company, no question arises about Government Participation
Answer:
(a) As shares held by CG along with RBI and Corporation owned by RBI is more than 40%, ABC Pvt. Ltd. is a Govt. Participating company.
Shares held by Govt., RBI and Corporation owned by RBI = 18%+14%+11% = 43%. As shares held by CG along with RBI arc more than 40%, therefore, ABC Pvt. Ltd. is a Govt. Participating company. Hence, it is a company in which Public is substantially interested ie. widely held.
Question 19.
86% equity shares of ‘Turbulent Private Limited’ were held by the public and its affairs during the relevant previous year were controlled by seven persons. None of the criteria mentioned in section 2(18) are met. The ‘Turbulent Private Limited’ is a ……………..
(a) Widely held company
(b) Closely held company
(c) Government Participating company
(d) Deemed public company
Answer:
(b) Closely held company
As none of the criteria mentioned in Section 2(18) are met in case of Turbulent Pvt. Ltd. (such as Govt. Participating, Section 8 Company or Nidhi etc.), therefore, it is a closely held company.
Question 20.
A Company in which the public is not substantially interested is known as ……….
(a) A closely held company
(b) A widely held company
(c) A Private company
(d) Nidhi company
Answer:
(a) A closely held company
Question 21.
Section 2(22)(e), which deems certain payments as dividend, is applicable only to the shareholders of ……….
(a) A Private company
(b) A widely held company
(c) A closely held company
(d) Nidhi company
Answer:
(c) A closely held company
Question 22
……….. is allowed to carry forward its business losses only if the conditions specified in Section 79 are satisfied.
(a) A Private company
(b) A widely held company
(c) Nidhi company
(d) A closely held company
Answer:
(d) A closely held company
Question 23.
The incidence of Income tax depends upon the residential status of a company in India
(a) During the relevant previous year
(b) During the preceding year
(c) During the previous four years
(d) At the option of AO
Answer:
(a) During the relevant previous year
Question 24.
A company may be …………
(a) Resident (ordinarily or not-ordinarily)
(b) Non-resident only
(c) Resident or non-resident
(d) Resident and non-resident
Answer:
(c) Resident or non-resident
Question 25.
According to Section 6(3) of the Act, a company is said to be resident in India (resident company) in any previous year, if:
(a) It is an Indian company
(b) Its place of effective management, in that year, is in India
(c) Any of (a) or (b)
(d) Both (a) & (b)
Answer:
(c) Any of (a) or (b)
Question 26.
From Assessment Year : foreign company is resident in India if its Place of Effective Management(POEM) during the previous year is in India.
(a) 2015-16
(b) 2016-17
(c) 2017-18
(d) 2018-19
Answer:
(c) 2017-18
Question 27.
According to Section 5(1) of the Act, the total income of any previous year of a resident company would consist of:
(a) income received or deemed to be received in India during the previous year by or on behalf of such company
(b) income which accrues or arises or is deemed to accrue or arise to it in India during the previous year
(c) income which accrues or arises to it outside India during the previous year.
(d) All of the above
Answer:
(d) All of the above
Question 28.
Income DEEMED TO accrue or arise outside India is ……….. in the hands of residents.
(a) Not includible
(b) Includible
(c) Always includible
(d) None of the above
Answer:
(a) Not includible
As per third clause of section 5(1) of the Act, the total income of any previous year of a resident company would include the income which accrues or arises to it outside India during the previous year. Thus, in this clause only income accruing or arising outside India is included. Income deemed to accrue or arise outside India is not includible in the hands of residents.
Question 29.
Under Section 5(2) of the Income Tax Act, the total income of any previous year of non-resident company would consist of …………
(a) Income received or deemed to be received in India in the previous year by or on behalf of such company
(b) Income which accrues or arises or is deemed to accrue or arise to it in India during the previous year
(c) Both (a) & (b)
(d) Either (a) or (b)
Answer:
(c) Both (a) & (b)
Question 30.
The corporate taxation rate for Domestic company is …………….
(a) 30% irrespective of turnover
(b) 25% if turnover is less than or equal to ₹ 250 Crore, otherwise 30%
(c) 25% if turnover is less than ₹ 250 Crore, otherwise 30%
(d) Flat @ 35%
Answer:
(b) 25% if turnover is less than or equal to ₹ 250 Crore, otherwise 30%
Question 31.
The rate of tax applicable for an Indian Company is 25% in the Assessment year 2020-21 if the turnover of the company for the Previous year 2017-18 is less than:
(a) 200 crores
(b) 250 crores
(c) 300 Crores
(d) 400 Crores
Answer:
(d) 400 Crores
Question 32.
The corporate taxation rate for Foreign company is …………….
(a) 40% irrespective of turnover
(b) 25% if turnover is less than or equal to ₹ 250 Crore, otherwise 30%
(c) 25% if turnover is less than ₹ 250 Crore, otherwise 30%
(d) Flat @ 35%
Answer:
(a) 40% irrespective of turnover
Question 33.
In the case of Domestic Company, the surcharge is ………………
(a) 7% if Taxable Income is more than ₹ 1 Crore & 12% if Taxable Income is more than ₹ 10 Crore
(b) 2% if Taxable Income is more than ₹ 1 Crore & 5% if Taxable Income is more than ₹ 10 Crore
(c) 5% if Taxable Income is more than ₹ 1 Crore & 10% if Taxable Income is more than ₹ 10 Crore
(d) 10% if Taxable Income is more than ₹ 1 Crore & 12% if Taxable Income is more than ₹ 10 Crore
Answer:
(a) 7% if Taxable Income is more than ₹ 1 Crore & 12% if Taxable Income is more than ₹ 10 Crore
Question 34.
In the case of Foreign Company, the surcharge is …………….
(a) 7% if Taxable Income is more than ₹ 1 Crore & 12% if Taxable Income is more than ₹ 10 Crore
(b) 2% if Taxable Income is more than ₹ 1 Crore & 5% if Taxable Income is more than ₹ 10 Crore
(c) 5% if Taxable Income is more than ₹ 1 Crore & 10% if Taxable Income is more than ₹ 10 Crore
(d) 10% if Taxable Income is more than ₹ 1 Crore & 12% if Taxable Income is more than ₹ 10 Crore
Answer:
(b) 2% if Taxable Income is more than ₹ 1 Crore & 5% if Taxable Income is more than ₹ 10 Crore
Question 35.
In case of a company having a total income exceeding ………. marginal relief would be provided to ensure that the additional income-tax payable including surcharge, on the excess of income over ……. is limited to the amount by which the income is more than
(a) ₹ 1 crore, ₹ 1 crore
(b) ₹ 10 crore, ₹ 10 crore
(c) ₹ 1 crore, ₹ 10 crore
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)
Question 36.
The total taxable income of a domestic company is ₹ 1,02,00,000. What will be the marginal relief if the turnover of the company is ₹ 256 Crore
(a) ₹ 50,000
(b) ₹ 74,200
(c) ₹ 2,00,000
(d) ₹ 2,74,200
Answer:
(b) ₹ 74,200
Calculation of Marginal Relief (Total Income more than ₹ 1 Cr.)
Question 37.
The total taxable income of a domestic company is ₹ 10,10,00,000. What will be the marginal relief if the turnover of the company is more than ₹ 250 Crore
(a) ₹ 3,03,00,000
(b) ₹ 18,36,000
(c) ₹ 9,25,000
(d) ₹ 8,36,000
Answer:
(d) ₹ 8,36,000
Question 38.
The income of Domestic company is ₹ 10 Crore. What will be the surcharge
(a) 5%
(b) 1%
(c) 12%
(d) Nil
Answer:
(b) 1%
In case of Domestic Company, the surcharge is 7%, if the total income is more than ₹ 1 Crore and 12% if the income is more than ₹ 10 Crore. Therefore, if the income is exact ₹ 10 Crore, then the applicable surcharge is 7%.
Question 39.
Section 115J which was a special provision applicable to a company if its total income as computed under the Income Tax Act was less than thirty percent of its book profit was introduced with effect from …….. but was discontinued with effect from…………………
(a) 1.4.1988, 1.4.1991
(b) 1.4.1988, 1.4.1990
(c) 1.4.1990, 1.4.1998
(d) 1.4.1988, 1.4.2000
Answer:
(a) 1.4.1988, 1.4.1991
Question 40.
At present, the Minimum Alternate Tax provisions are given in section ………… of Income-tax Act, 1961.
(a) 115J
(b) 115A
(c) 115JA
(d) 115JB
Answer:
(d) 115JB
Question 41.
MAT provisions under section 115JB are applicable to …………..
(a) Public Company
(b) Private Company
(c) Domestic Company
(d) All corporate entities
Answer:
(d) All corporate entities
Question 42.
Provisions of Minimum Alternative Tax (MAT) are applicable to the companies which are:
(i) Indian companies
(ii) Foreign companies
(iii) LLP
(a) (i)&(iii)
(b) (i)&(ii)
(c) All the three
(d) None of the above
Answer:
(b) (i)&(ii)
Question 43.
As per Section 115JB, all companies having book profits under the Companies Act shall have to pay a minimum alternate
(a) 15.0
(b) 18.5%
(c) 30%
(d) 25%
Answer:
(b) 18.5%
Question 44.
According to section 115JB, if the in¬come tax payable by a company on its total income as computed under the Income Tax Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012, is less than 18.5% of such book profit plus surcharge plus education cess then such book profit shall be treated as total income of the company and the tax payable for the rele¬vant previous year shall be deemed to be
18.5% of such book profit. This
provision will override provision
of the Income Tax Act.
(a) Absolute, Any other
(b) Non-absolute, Any other
(c) Conditional, No other
(d) Subjective, No other
Answer:
(b) Non-absolute, Any other
Question 45.
As per section 115JB(7) w.e.f.AY 2017 – 18, in case of the assessee is a unit located in an International Financial Services Centre and derives its income solely inconvertible foreign exchange, MAT rate is ………..
(a) 9% of book profits
(b) 18.5% of book profits
(c) 25% of book profits
(d) 30% of book profits
Answer:
(a) 9% of book profits
Question 46.
Where the Income-tax payable is ………. of Book Profit, such book profit will be deemed to be total Income and Income Tax will be payable @ ……… on such Book Profit.
(a) More than 18.5%, 18.5%
(b) More than 18.5%, 9%
(c) less than 18.5%, 18.5%
(d) less than 18.5%, 9%
Answer:
(c) less than 18.5%, 18.5%
Question 47.
The provisions of MAT are applicable to:
(a) Public and Private Company
(b) Indian company
(c) Foreign Company
(d) All of the above
Answer:
(d) All of the above
Question 48.
The provisions of MAT shall not apply to :
(a) Any income arising to a company from life insurance business.
(b) Any shipping income arising to a company liable to tonnage taxation.
(c) A foreign company resident of a country with which India has an Double Taxation Avoidance Agreement (DTAA) and such company does not have a permanent establishment in India
(d) All of the above
Answer:
(d) All of the above
Question 49.
The provisions of MAT under Section 115JB (1) shall not affect the determination of the amount of ………. in relation to the relevant previous year to be carried forward to the subsequent year or years. In other words, these are allowed to be carried forward in usual manner.
(a) unabsorbed depreciation under Section 32(2)
(b) business loss u/s 72(1), speculation loss u/s 73
(c) capital loss u/s 74 and loss u/s 74A
(d) All of the above
Answer:
(d) All of the above
Question 50.
Every company to which section 115 JB applies, shall furnish a report in the prescribed form from ……….. , certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under Section 139(1) or along with the return of income furnished in response to a notice Section 142(l)(i).
(a) a Chartered Accountant
(b) a Company Secretary
(c) a Cost Accountant
(d) The CEO of the company
Answer:
(a) a Chartered Accountant
Question 51.
As per section 115JB(7) inserted vide Finance Act, 2016, where the assessee is a unit located in an International Financial Services Centre and derives its income solely in convertible foreign exchange, the rate of MAT shall be …………..instead of …………
(a) 9%, 18.5% of Taxable Profits
(b) 9%, 18.5% of Book Profits
(c) 18.5%, 9% of Taxable Profits
(d) 18.5%, 9% of Book Profits
Answer:
(b) 9%, 18.5% of Book Profits
Question 52.
Number of years for which credit of MAT excess paid u/s 115JB can be carried forward is –
(a) 10 Assessment years
(b) 8 Assessment years
(c) 15 Assessment years
(d) 9 Assessment years
Answer:
(c) 15 Assessment years
Question 53.
MAT credit in respect of excess taxes paid u/s 115JB can be carried forward for –
(a) 7 Assessment years
(b) 10 Financial years
(c) 15 Assessment years
(d) 7 Financial years
Answer:
(c) 15 Assessment years
Question 54.
In which of the following case(s), the Assessing officer has power to rework or rewrite the profit and loss account:
(a) Where the profit and loss account submitted is not as per Companies Act
(b) Where accounting policies or ac-counting standards or rate of depreciation adopted are different from those adopted for the profit and loss prepared for the AGM
(c) Both (a) & (b)
(d) None of the above
Answer:
(c) Both (a) & (b)
Question 55.
As decided in the case ‘Apollo Tyres Ltd. v. CIT’, the Supreme Court has decided that:
(a) The AO does not have the power to question correctness of P&L A/c prepared by assessee and certified by the statutory auditors of the company
(b) The Assessing officer has the power to examine correctness of net profit shown in profit and loss Account
(c) The AO as the jurisdiction to go behind the net profits shown in the P&L A/c
(d) None of the above.
Answer:
(a) The AO does not have the power to question correctness of P&L A/c prepared by assessee and certified by the statutory auditors of the company
Question 56.
Tax credit in respect of MAT paid as per Section 115JB will be allowed only in the previous year in which the tax payable on the total income at the normal rate is-
(a) More than the tax payable under section 115JB
(b) Less than the tax payable under section 115JB
(c) Equal to the tax payable under section 115JB
(d) All of the above
Answer:
(a) More than the tax payable under section 115JB
Question 57.
MAT Credit to be set off in an Assessment Year is …………………
(a) Regular Income tax – Minimum alternate tax
(b) Regular Income tax + Minimum alternate tax
(c) Minimum alternate tax – Regular Income tax
(d) Not allowed
Answer:
(a) Regular Income tax – Minimum alternate tax
Question 58.
Provisions of Section 115 JB are applicable in case of
(a) Domestic companies only
(b) Foreign companies only
(c) All companies
(d) Closely held companies
Answer:
(c) All companies
Question 59.
Credit of MAT in respect of tax excess paid under Section 115 JB will be available and it can be carried forward for
assessment years.
(a) 8
(b) 10
(c) 15
(d) 20
Answer:
(c) 15
Question 60.
The amount of MAT credit shall not be allowed to be carried forward to the subsequent year to the extent such credit relates to the difference between the amount of allowed against MAT.
(a) Foreign tax credit
(b) Foreign tax paid
(c) Double Taxation Relief
(d) None of the above
Answer:
(a) Foreign tax credit
Question 61.
MAT Credit for taxes paid as per Section 115 JB in earlier years is available in the Assessment year in which Tax payable on the total income computed under the normal provisions of this Act is tax payable u/s 115JB for that Assessment year.
(a) Less than
(b) More than
(c) Equal to
(d) Up to
Answer:
(b) More than
Question 62.
In case of conversion of a company into LLP, MAT Credit available in the hands of company
(a) Shall not be allowed to LLP
(b) Shall be allowed to LLP
(c) Shall not be allowed to company
(d) Shall be allowed to company
Answer:
(a) Shall not be allowed to LLP
Question 63.
For computing the Book Profit under section 115JB. Which of the following is not added back to the profits
(a) Income-tax
(b) Provision for Tax
(c) Dividend Distribution Tax u/s 115-0
(d) Securities Transaction Tax
Answer:
(d) Securities Transaction Tax
Question 64.
While calculating Book Profits under section 115JB of Income-tax Act, 1961, which of the following is not to be added
(a) The amount of dividend up to ₹ 10 lakh
(b) Interest on Income tax including surcharge and cess
(c) The amounts carried to any reserves
(d) The amount by way of provision for losses of subsidiary companies
Answer:
(b) Interest on Income tax including surcharge and cess
Question 65.
While calculating book profits under section 115JB of Income-tax Act, 1961 which of the following is not to be deducted
(a) The amount withdrawn from any reserve or provision if any such amount is credited to the Profit & Loss Account
(b) The amount of income by way of royalty in respect of patent charge able to tax under section 115BBF
(c) Long term capital gain referred under section 10(38) of the Act
(d) Brought forward loss/unabsorbed depreciation whichever is less
Answer:
(c) Long term capital gain referred under section 10(38) of the Act
Question 66.
Net Profit as per Profit and Loss A/c: ₹ 15,00,000 Book Profit: ₹ 13,25,000 What will be the MAT liability with Cess
(a) ₹ 2,45,125
(b) ₹ 2,54,930
(c) ₹ 9,805
(d) None of the above
Answer:
(b) ₹ 2,54,930
Calculation of MAT Liability (Under section 115JB)
Question 67.
The normal tax liability is ₹ 5,00,000 The liability under MAT is ₹ 8,00,000. The tax payable and MAT Credit c/f will be respectively
(a) ₹ 8,00,000 & ₹ 3,00,000
(b) ₹ 5,00,000 & ₹ 3,00,000
(c) ₹ 8,00,000 & Nil
(d) ₹ 5,00,000 & Nil
Answer:
(a) ₹ 8,00,000 & ₹ 3,00,000
Calculation of MAT Credit
Question 68.
MAT credit can be carried forward for a period of following number of assessment years:
(a) 15
(b) 8
(c) 10
(d) No time limit
Answer:
(a) 15
Question 69.
Provisions of Minimum Alternate Tax (MAT) are applicable to the companies which are :
(i) Indian companies
(ii) Foreign companies in certain situations
(iii) LLP
(a) (i) and (iii)
(b) (i) and (ii)
(c) All the three
(d) None of the above
Answer:
(b) (i) and (ii)
Question 70.
M Ltd. has Minimum Alternative Tax (MAT) credit of ₹ 5,20,000 of the assessment year 2018-19. It can carry forward this MAT credit upto ……… assessment years immediately succeeding the assessment year 2018-19.
(a) 5
(b) 10
(c) 15
(d) 20
Answer:
(c) 15
Question 71.
The Dividend Distribution Tax is applicable on
(a) Domestic Company only
(b) Foreign company only
(c) Both (a) & (b)
(d) None of the above
Answer:
(a) Domestic Company only
Question 72.
Dividend distribution tax by a domes¬tic company under section 115-0 shall be paid within ……. days of declaration
of dividend.
(a) 30 days
(b) 15
(c) 10
(d) 14
Answer:
(d) 14
Question 73.
When an Indian company holds 30% of the nominal value of equity capital of a foreign company, the amount of dividend received from the foreign company in the hands of Indian company is :
(a) Exempt from Tax
(b) Taxable @15%
(c) Taxable @ 10%
(d) Taxable @ 30%
Answer:
(b) Taxable @15%
Question 74.
In order to be entitled to concessional rate of tax for dividend received from a foreign company, the Indian company should have the following minimum shareholding in such foreign company …..
(a) 10%
(b) 25%
(c) 26%
(d) 51%
Answer:
(c) 26%
Question 75.
A limited company declared ₹ 20 lakh as dividend on its paid-up capital of ₹ 100 lakh. The dividend distribution tax payable by it would be-………
(a) ₹ 3 lakh
(b) ₹ 3.351233 lakh
(c) ₹ 4.0715294 lakh
(d) 16.1547808 lakh
Answer:
(c) ₹ 4.0715294 lakh
Question 76.
Total income of XYZ Limited includes the income of dividend of ₹ 10 lakh paid by a U.K. based foreign company in which XYZ Limited holds 30% of the equity share capital. ₹ 50,000 has been spent for earning such dividend. The dividend income so received by the company from the U.K. based foreign company and the tax rate shall be :
(a) Not taxable being exempt u/s 10(34)
(b) Taxable @ 15% of ₹ 10 lakh
(c) Taxable @ 15% of ₹ 9.5 lakh
(d) Taxable @ 10% of ₹ 9.5 lakh
Answer:
(b) Taxable @ 15% of ₹ 10 lakh
Question 77.
Section 115-0 is related with
(a) DDT
(b) MAT
(c) AMT
(d) Equalization Levy
Answer:
(a) DDT
Question 78.
According to Section 115-0(1A), subject to certain conditions, where a company receives dividend from its ………. company in a financial year and in the same financial year such ………….company also declares dividend, then dividend tax shall be levied on dividend declared by ……..company after reducing dividend received from ………. company.
(a) Subsidiary, Subsidiary, Subsidiary, Holding, Subsidiary
(b) Holding, Subsidiary, Holding, Holding, Subsidiary
(c) Holding, Subsidiary, Subsidiary, Holding, Subsidiary
(d) Holding, Subsidiary, Subsidiary, Holding, Holding
Answer:
(b) Holding, Subsidiary, Holding, Holding, Subsidiary
Question 79.
As per Section 115-0(3), the Dividend tax is to be paid within from the date of declaration or distribution or payment of dividend, whichever is earlier.
(a) 7 days
(b) 14 days
(c) 18 days
(d) 21 days
Answer:
(b) 14 days
Question 80.
Dividend distribution tax u/s 115-0 shall be deposited within days from the date of declaration/distribution/payment of dividend, whichever is earlier.
(a) 7 days
(b) 10 days
(c) 14 days
(d) 20 days
Answer:
(c) 14 days
Question 81.
A domestic company distributed a dividend of ₹ 30,00,000 to its shareholders. Out of this dividend ₹ 4,00,000 paid to a person on behalf of the New Pension System Trust and ₹ 1,00,000 paid to another corporate shareholder. The company also received a dividend of ₹ 2,00,000 from its subsidiary which paid dividend distribution tax under Section 115-0. In this case, the amount of dividend subject to dividend distribution tax for the domestic company will be -………….
(a) ₹ 24,00,000
(b) ₹ 27,00,000
(c) ₹ 28,00,000
(d) ₹ 30,00,000
Answer:
(a) ₹ 24,00,000
Question 82.
Dividend distribution tax u/s 115-0 is payable by – …………..
(a) Domestic companies only
(b) Foreign companies only
(c) Both domestic and foreign companies
(d) None of the above
Answer:
(a) Domestic companies only
Question 83.
An Indian company having 30% voting power in a foreign company received dividend of ₹ 10 lakh form the foreign company. The dividend so received by the Indian company is- …………
(a) Exempt
(b) Taxable @15%
(c) Taxable at the regular rates
(d) Taxable @ 20%
Answer:
(b) Taxable @15%
Question 84.
Radha Ltd. received dividend of ₹ 100 lakhs from King (P) Ltd. of Singapore in December 2018. The company declared interim dividend of ₹ 200 lakhs in January 2019. The dividend distribution tax payable by Radha Ltd. would be ……….
(a) on ₹ 200 lakhs
(b) on₹ 100 lakhs
(c) Nil since dividend declared is more than dividend received
(d) None of the above
Answer:
(a) on ₹ 200 lakhs
Question 85.
As per section 115BBD, Dividend Income of an Indian company out of dividend declared, distributed or paid by a Specified foreign company is taxable @ 15%. In this context, the “Specified Foreign Company” means a foreign company in which the Indian company holds ……….. in nominal value of the equity share capital of company.
(a) 26% or more
(b) Up to 25%
(c) 20% or more
(d) 15% or more
Answer:
(a) 26% or more
Question 86.
As per section 166, Equalization Levy is deductible if the aggregate amount of consideration for a specified service in a previous year exceeds
(a) ₹ 50,000
(b) ₹ 75,000
(c) ₹ 1,00,000
(d) ₹ 2,50,000
Answer:
(c) ₹ 1,00,000
Question 87.
The Equalization Levy deducted during any calendar month shall be paid by every assessee to the credit of the Central Government by the ………….
(a) 5th of following month
(b) 7th of following month
(c) 10th of following month
(d) 11th of following month
Answer:
(b) 7th of following month
Question 88.
As per section 170, Every assessee who fails to deposit to the credit of the Central Government, the applicable Equalization Levy, within 7th of the month following the month in which it was deducted, the assessee shall be liable to pay Interest
(a) @ 1% of such levy for every month/ part of the month of delay
(b) @ 2% of such levy for every month/ part of the month of delay
(c) @ 1 % of such levy for every completed month ignoring any part of the month of delay
(d) @ 0.5% of such levy for every completed month ignoring any part of the month of delay
Answer:
(a) @ 1% of such levy for every month/ part of the month of delay
Question 89.
As per section 172 of Income Tax Act, if the assessee fails to furnish the statement of Equalization Levy within 30th June of the following FY, or within 30 days of the notice served by the A.O., a penalty of is leviable on the assessee
(a) ₹ 50 perday
(b) ₹ 100 perday
(c) ₹ 250 perday
(d) ₹ 10,000
Answer:
(b) ₹ 100 perday
Question 90.
As per section 115BG, where total income of the assessees includes any income from the transfer of carbon credit then such income shall be taxable at concessional rate of ……plus CESS on the amount of such income.
(a) 5%, Gross
(b) 10%, Gross
(c) 5%, Net
(d) 10%, Net
Answer:
(b) 10%, Gross
Question 91.
When the income is taxed @ 10%, as per section 115BG, relating to Carbon Credit, then …………
(a) No expenditure or allowance in respect of such income shall be allowed.
(b) Actual expenditure or allowance in respect of such income shall be allowed.
(c) The 50% of expenditure or allowance in respect of such income shall be allowed.
(d) The expenditure or allowance in repect of such income shall be allowed to the extent of such income
Answer:
(a) No expenditure or allowance in respect of such income shall be allowed.
Question 92.
The section 115BG relating to Carbon Credit has been introduced vide Finance Act., w.e.f. Assessment Year
(a) 2016,2016-2017
(b) 2016,2017-2018
(c) 2017,2017-2018
(d) 2017,2018-2019
Answer:
(d) 2017,2018-2019
Question 93.
In the hands of the shareholders (irrespective of residential status), since exemption under Section 10(34A) is available only in cases where BBT is paid by the company.
(a) a buyback triggers capital gain tax
(b) a buyback triggers tax under other sources
(c) a buyback always triggers long term capital tax
(d) a buyback does not trigger tax
Answer:
(a) a buyback triggers capital gain tax
Question 94.
The buyback of listed shares held for over a year, qualifies as and the same is tax exempt under Section …… of the Act if shares are bought back before March 31,2017.
(a) Short-term capital gain, 10(38)
(b) long-term capital gain, 10(38)
(c) Short-term capital gain, 10(37)
(d) long-term capital gain, 10(37)
Answer:
(b) long-term capital gain, 10(38)
Question 95.
It will be worthwhile to note that a investor possessing a valid Tax Residency Certificate can avail the beneficial provisions of the relevant Double Tax Avoidance Agreement entered into by the Indian Government with its tax residence country.
(a) non-resident
(b) resident
(c) Not ordinarily resident
(d) Ordinarily resident
Answer:
(a) non-resident
Question 96.
In the case of Money Market Mutual Fund (MMMF), the tax rate under section 115(2) is
(a) 15% if the distribution is to Individual/ HUF and 20% if the distribution is to any other person
(b) 2 5 % if the distribution is to Individual / HUF and 30% if the distribution is to any other person .
(c) 15% if the distribution is to Individual/ HUF and 30% if the distribution is to any other person
(d) No tax is payable
Answer:
(b) 2 5 % if the distribution is to Individual / HUF and 30% if the distribution is to any other person .
Question 97.
In the case of Fund other than MMMF/Liquid Fund, the tax rate under section 115(2) is
(a) 15% if the distribution is to Individual/ HUF and 20% if the distribution is to any other person
(b) 2 5% if the distribution is to Individual / HUF and 30% if the distribution is to any other person
(c) 15% if the distribution is to Individual/ HUF and 30% if the distribution is to any other person
(d) No tax is payable
Answer:
(b) 2 5% if the distribution is to Individual / HUF and 30% if the distribution is to any other person
Question 98.
As per section 115R(3), the person responsible for making the payment of incomes distributed by the Mutual Fund would be responsible to ensure that the applicable income tax on such distribution is deposited to the credit of the Central Government within of such distribution/payment.
(a) 14 days
(b) 15 days
(c) 20 days
(d) 21 days
Answer:
(a) 14 days
Question 99.
In case of any transfer of a capital asset or intangible asset by a private company or unlisted public company to a limited liability partnership, it:
(a) Shall not be regarded as “transfer” and no capital gain shall arise
(b) Shall not be regarded as “transfer” but capital gain shall arise
(c) Shall be regarded as “transfer” and capital gain shall arise
(d) Shall be regarded as “transfer” and but no capital gain shall arise
Answer:
(a) Shall not be regarded as “transfer” and no capital gain shall arise
Question 100.
In case of any transfer of a share or shares held in the company by a shareholder as a result of conversion of the company into a limited liability partnership in accordance with the provisions of section 56 or section 57of the Limited Liability Partnership Act, 2008:
(a) Shall not be regarded as “transfer” and no capital gain shall arise
(b) Shall not be regarded as “transfer” but capital gain shall arise
(c) Shall be regarded as “transfer” and capital gain shall arise
(d) Shall be regarded as “transfer” and but no capital gain shall arise
Answer:
(a) Shall not be regarded as “transfer” and no capital gain shall arise
Question 101.
In case of conversion of company into LLP, no capital gain tax arises. In order to avail this exemption, the aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than at any time during the period of ………….. from the date of conversion.
(a) 40 percent, 4 years
(b) 50 percent, 5 years
(c) 40 percent, 5 years
(d) 50 percent, 4 years
Answer:
(b) 50 percent, 5 years
Question 102.
As per section 178, If the A.O. fails to notify the tax liability within the time period, then the demand of made by the A.O. after the expiry of this statutory period, falls outside the scope of preferential payment within the meaning of Sec. 530 of the Act and hence, such tax liability then assumes the same preference, i.e. ranks paripassu with the claims of ordinary creditors.
(a) 3 months
(b) 4 months
(c) 30 days
(d) 45 days
Answer:
(a) 3 months
Question 103.
Which of the following statement is incorrect as regards section 220
(a) A Company in Liquidation cannot be deemed to be an assessee in default on the same footing as any other assessee for the purposes of Sec. 200 of the Income-tax Act.
(b) Since, the Company is under the control of a Liquidator, who acts as such, in accordance to the Companies Act, he cannot be equated to be a defaulter.
(c) The company in liquidation attracts the liability to pay the interest u/s 220 or penalty u/s 221
(d) All the statements are incorrect
Answer:
(c) The company in liquidation attracts the liability to pay the interest u/s 220 or penalty u/s 221
Question 104.
Section 179 of the Income-tax Act fastens the directors of a private company with a personal liability in the event of non-recovery of its tax dues. This liability is
(a) Joint
(b) Several
(c) Joint and several
(d) None of the above
Answer:
(c) Joint and several
Question 105.
In case of issue of shares at premium by listed companies, share premium is ……………….
(a) Not considered as income.
(b) Considered as income under the head capital gains
(c) Considered as income under the head Income from other sources
(d) Considered as income under the head PGBP
Answer:
(a) Not considered as income.
Question 106.
In case of issue of shares at premium by unlisted companies, the share premium can be considered as income in case the price charged at the time of issue of share is more than and is also higher than …………………..
(a) fair market value, face value
(b) face value, fair market value
(c) fair market value, fair market value
(d) face value, face value
Answer:
(b) face value, fair market value
Question 107.
Section 35DD provides that where an assessee being an Indian company incurs any expenditure, wholly and exclusively for the purposes of amalgamation or demerger of an undertaking, the assessee shall be allowed a deduction of an amount equal to of such expenditure for each of the successive previous years beginning with the PY in which such amalgamation/ demerger takes place.
(a) one-third, three
(b) one-fourth, four
(c) one-fifth, five
(d) One-tenth, ten
Answer:
(d) One-tenth, ten
Question 108.
In case of an amalgamation, if the amalgamating company transfers to the amalgamated company, which is an Indian company, any asset representing capital expenditure on scientific research, provision of section 35 would apply to the company as they would have applied to company if the latter had not transferred the asset.
(a) Amalgamated, Amalgamating
(b) Amalgamating, Amalgamated
(c) Amalgamated, Amalgamated
(d) Amalgamating, Amalgamating
Answer:
(a) Amalgamated, Amalgamating
Question 109.
According to section 2(1B), “amalgamation, in relation to companies means, the merger of one or more companies with another company or the merger of two or more companies to form one company” provided all conditions except the following are satisfied:
(a) All assets to be transferred from amalgamating company to the amalgamated company
(b) All liabilities including contingent liabilities to be transferred from amalgamating company to amalgamated company
(c) Shareholders holding at least 3 /4th in value of shares of the amalgamating company should become shareholders of the amalgamated company
(d) Shareholders holding at least 9/10th in value of shares of the amalgamating company should become shareholders of the amalgamated company
Answer:
(d) Shareholders holding at least 9/10th in value of shares of the amalgamating company should become shareholders of the amalgamated company
Question 110.
Which of the following is not a requirement for amalgamation of two companies
(a) All the assets are transferred from amalgamating company to amalgamated company
(b) More than 50% of the directors of the amalgamating company become directors of the amalgamated company
(c) All liabilities including contingent liabilities are transferred from amalgamating company to amalgamated company
(d) Shareholders having 3/4th in value of shares of the amalgamating company become shareholders of the amalgamated company
Answer:
(b) More than 50% of the directors of the amalgamating company become directors of the amalgamated company
Question 111.
An employee director of a company was paid ₹ 5 lakh as a lump sum consideration for resigning from the directorship by XYZ Ltd. The amount so paid shall be treated in the accounts of the company as
(a) Deferred Revenue expenses
(b) Revenue expenses
(c) Capital expenses
(d) Gift to employee director
Answer:
(b) Revenue expenses
Question 112.
The base for determination of notional income arising from the operation of a ship, in case of Indian Shipping Company under sections 115Vtoll5V2Cof the Income-tax Act, 1961 is taken :
(a) Aggregate turnover/receipt/sales of the ship
(b) Tonnage of the ship
(c) @ 8% of turnover/receipts/sales of the ship
(d) Gross profit rate of preceding year
Answer:
(b) Tonnage of the ship
Question 113.
Which out of the following criteria determines the Place of Effective Management (POEM) in order to treat a foreign company as resident in India (resident company) during the previous year as per guidelines issued by CBDT and the provisions contained under the Income-tax Act, 1961
(a) General Meeting held in India
(b) Research and Development work is done in India
(c) Board Meetings are held in India
(d) None of the above
Answer:
(c) Board Meetings are held in India
Question 114.
John Miller & Co. of UK is maintaining and operating a branch in India for sale of its garment products. The adjusted total income of the branch for the year prior to charge of H.O. expenses of ₹ 20 lakh is of ₹ 100 lakh. Indian branch intends to know the maximum amount of H.O. expenses as Allowable during the year under the Act. Specify the amount:
(a) ₹ 20 lakh
(b) Nil as HO is non-resident
(c) ₹ 5 lakh
(d) 8% of adjusted total income
Answer:
(c) ₹ 5 lakh
H.O. expenses allowable will be actual (₹ 20,00,000) or 5% of the adjusted income (i.e. 5% of ₹100 Lakhs), whichever is less.
Question 115.
ABC Limited has paid amount of royalty of ₹ 30 lakh in September, 2017 to John Miller Company of USA in pursuance of an agreement approved by the Central Government in the previous year
2015-16. The royalty so received by the foreign company shall be subject to tax in A. Y.2018-19 and the amount of tax payable by the foreign company shall be :
(a) ₹ 9.27 lakh
(b) ₹ 4.635 lakh
(c) ₹ 3 lakh
(d) None of the above
Answer:
(d) None of the above
Tax = (30,00,000 × 10%) + 4% HEC
Question 116.
ABC Pvt. Ltd. has a business loss of ₹ 10 lakh. There is unexplained share application money to the tune of ₹ 25 lakh. The total income of the company will be :
(a) ₹ 15 lakh
(b) ₹ 35 lakh
(c) ₹ 25 lakh
(d) None of the above
Answer:
(c) ₹ 25 lakh
No losses can be adjusted against unexplained money.