Clubbing Provisions and Set off AND/OR Carry Forward of Losses – CS Executive Tax Laws MCQ

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Clubbing Provisions and Set off AND/OR Carry Forward of Losses – Tax Laws CS Executive MCQs

Question 1.
The provisions of clubbing of income are contained in section …….. to under the Income-tax Act, 1961
(a) 60 – 65
(b) 60-64
(0 58-64
(d) 59-65
Answer:
(b) 60-64

Question 2.
Which of the following is the reason for including other person’s income in assessee’s total income
(a) To facilitate the government to collect more taxes.
(b) To prevent diversion of income from higher slab individuals to low slab income
(c) To prevent evasion of tax
(d) To keep a person away from tax liability
Answer:
(b) To prevent diversion of income from higher slab individuals to low slab income

Question 3.
Sushma transferred the rental income of ₹ 90,000 per month to Kajol but she did not transfer the property. As per the provision of section 60, the rental income will be taxed in the hands of
(a) Sushma
(b) Kajol
(c) Sushma or Kajol, whoever is having higher income before clubbing during the previous year.
(d) As per the discretion of Assessing Officer
Answer:
(a) Sushma
As per Section 60, where there is a transfer of an income by one person to another, without transferring the asset from which the income arises, such income shall be included in the total income of the transferor, in this case Sushma.

Question 4.
The income transferred, without transferring the asset, may be transferred under
(a) Settlement
(b) Trust
(c) Covenant
(d) Any of the above
Answer:
(d) Any of the above

Question 5.
If an asset is transferred under a “revocable transfer” income will be taxable in the hands of
(a) Transferor
(b) Transferee
(c) Transferor or Transferee, who so ever has higher income
(d) None of the above
Answer:
(a) Transferor
As per section 61, Income from an asset will be included in the total income of the transferor in case of revocable transfers.

Question 6.
If an asset is transferred under a trust but it is not revocable during the life time of the beneficiary, it will be
(a) Treated as revocable transfer
(b) Treated as irrevocable transfer
(c) Can be both
(d) None of the above
Answer:
(b) Treated as irrevocable transfer
Section 62(1) specifies that in the case of transfer by way of trust, and the transfer is not revocable during the lifetime of the beneficiary, the income will be not clubbed in the hands of transferor.

Question 7.
If the deed of transfer contains any provision to retransfer the asset or income, directly or indirectly, in whole or in part, it is considered as
(a) Revocable transfer
(b) Irrevocable transfer
(c) Can be both
(d) None of the above
Answer:
(a) Revocable transfer

Question 8.
Transfer of income is revocable in the following cases:
(a) Sale with a condition of re-purchase
(b) Power to change beneficiary or trustees
(c) Both (A) and (B)
(d) Neither (A) nor (B)
Answer:
(c) Both (A) and (B)

Question 9.
X transfers an asset to Y on 10.10.1960. It is revocable but only after 10.10.1966, this transfer will be treated as:
(a) Revocable therefore income taxable in the hands of X
(b) Irrevocable therefore income taxable in the hands of X
(c) Revocable therefore income taxable in the hands of Y
(d) Irrevocable therefore income taxable in the hands of Y
Answer:
(d) Irrevocable therefore income taxable in the hands of Y
As per section 62(1), if the asset is transferred before 1.4.1961, and not revocable for a period exceeding 6 years, section 61 is not applicable, therefore, no clubbing of Income in the hands of transferor.

Question 10.
X transfers a house property to A. But by a legal clause inserted in the agreement, if X survives A, he shall have the power to take back the asset. The income from this Asset will be taxable in the hands of till, if X re-acquires the asset
(a) X
(b) A
(c) Whose Income (whether it be X or A) is higher
(d) None of the above
Answer:
(b) A
Section 62(1) specifies that in the case of transfer which is not revocable during the life time of the transferee, the income will not be clubbed in the hands of transferor.

Question 11.
Suresh holds 22% shares in X Y Ltd. His wife is a software engineer. Now Mrs. Suresh is drawing a remuneration of 30,000 p.m. from X Y Ltd. The salary of wife of Mr. Suresh will be taxable in the hands of
(a) Suresh
(b) Wife of Suresh
(c) Whos oeuvre’s income is higher
(d) None of the above
Answer:
(b) Wife of Suresh
According to Sec. 64( 1)(ii) the remuneration of spouse from a concern in which the other spouse has substantial interest is clubbed but the section is not applicable if the income is attributable to the application of his/her technical or professional qualification. As Mrs. Suresh is a software engineer, salary will not be clubbed but taxable in the hands of Mrs. Suresh only.

Question 12.
Rohit is working as Company Secretary in Raj Chem Pvt. Ltd. on a salary of ₹ 20,000 p.m. He got married to Pooja who holds 25% shares of this Company. What will be the impact of salary paid to Rohit by the company in the hands of Pooja
(a) No amount to be clubbed
(b) Club 50% salary
(c) Club 100% salary
(d) 25% salary be clubbed
Answer:
(a) No amount to be clubbed

Question 13.
For the purpose of determining substantial interest u/s 64(i)(ii) it means:
(a) In case of company, if individual holds (individually or along with relatives) 20% or more equity shares at any time during the P.Y.
(b) If not a company, he has 20% or more share in profits
(c) Both (a) & (b)
(d) None of these
Answer:
(c) Both (a) & (b)

Question 14.
X and Mrs. X both have substantial interest in ABC Ltd. Their salary was clubbed in the hands of Mr. X in the year P.Y. 2019-20. In the P.Y. 2020-21, Mrs. X has higher income before clubbing u/s 64(1 )(iv), the salary will be clubbed in the hands of
(a) Mr. X
(b) Mrs. X
(c) At the option of the couple
(d) None of the above
Answer:
(a) Mr. X
If both husband and wife have substantial interest, then the remuneration of both shall be clubbed in the hands of that spouse, whose total income, before including such remuneration is greater. Where such income is once included in the hands of either spouse, any such income arising in any succeeding year shall not be included in the income of other spouse unless the assessing officer is satisfied, that it is necessary to do so.

Question 15.
Mr. A transferred to his wife, the property belonging to Mr. A without adequate consideration, the income from house property be
(a) Clubbed in the hands of Mr. A u/s 64(1)
(b) Treated as income of Mrs. A
(c) Taxable in the hands of Mr. A u/s 27 as Mr. A is deemed owner
(d) None of the above.
Answer:
(c) Taxable in the hands of Mr. A u/s 27 as Mr. A is deemed owner
In case of house property, section 27 is applicable and not 64.

Question 16.
Mr. A transferred to his wife the shares of a foreign company worth ₹ 1,00,000 without consideration. The Dividends of ₹ 30,000 were received which Mrs. A invested in fixed deposits. She received interest income of ₹ 300 from the deposits. The dividend income will be taxable in the
hands of and the interest income will be taxable in the hands of
(a) Mr. A , Mrs. A
(b) Mrs. A , Mr. A
(c) Mr. A , Mr. A
(d) Mrs. A , Mrs. A
Answer:
(a) Mr. A , Mrs. A
Income from clubbed income invested by the transferee is taxable in the hands of transferee only and is not clubbed.

Question 17.
Shyam transferred 2,000 shares of X Ltd. to Ms. Babita without any consideration. Later, Shyam and Ms. Babita got married to each other. The dividend income from the shares transferred would be –
(a) Taxable in the hands of Shyam both before and after marriage
(b) Taxable in the hands of Shyam before marriage but not after marriage
(c) Taxable in the hands of Shyam after marriage but not before marriage
(d) Never taxable in the hands of Shyam
Answer:
(d) Never taxable in the hands of Shyam
The relationship of husband and wife should subsist at the time of transfer of such asset as well as at the time of accrual of income. Here clubbing provision u/s 64(z)(z’v) is not applicable, as they got married later ie. after transferring the asset.

Question 18.
Rohit (a Chartered Accountant) is working as Account Officer in Raj (P) Ltd. on a salary of ₹ 20,000 p.m. He got married to Ms. Pooja who holds 25% shares of this company. What will be the impact of salary paid to Rohit by the company in the hands Ms. Pooja
(a) 100% salary to be clubbed
(b) 50% salary to be clubbed
(c) No amount be clubbed
(d) 25% salary be clubbed
Answer:
(c) No amount be clubbed
As Rohit is professionally qualified and already drawing the salary before marriage, no remuneration will be clubbed.

Question 19.
Mr. Shiva gifted a let-out building which fetches rental income of ₹ 10,500 per month to his son’s wife on 1.11.2019. The municipal tax on 6,000 on the property was paid on 10.1.2021. The total income from all other sources (computed) amounts to ₹ 2,60,000 except income from above said property. His total income chargeable to tax is:
(a) ₹ 3,11,450
(b) ₹ 3,44,000
(c) ₹ 3,80,000
(d) ₹ 3,33,500
Answer:
(b) ₹ 3,44,000
The Income from House Property will be clubbed in the hands of Mr. Shiva u/s 64(1 )(vz)
Clubbing Provisions and Set off ANDOR Carry Forward of Losses CS Executive Tax Laws MCQ 1
Clubbing Provisions and Set off ANDOR Carry Forward of Losses CS Executive Tax Laws MCQ 2
The provision of clause (z) of section 27 are invoked when transfer is to wife or minor child only, if transfer is to son’s wife, income will be clubbed u/s 64(1 )(vz).

Question 19A.
Ravi and Rajat are brothers. During the Financial year 2019-20 Ravi gifts a house to Rajat’s wife worth ₹ 40,00,000. After some time in the same financial year Rajat transfers shares in a foreign company worth ₹ 40,00,000 to the minor daughter of Ravi. The rental income of the house and the dividend received from foreign company shall be taxed in the hands of:
(a) Ravi and Minor daughter of Ravi respectively
(b) Ravi and Rajat respectively
(c) Rajat’s wife and Rajat respectively
(d) Rajat’s wife and Minor daughter of Ravi respectively
Answer:
(a) Ravi and Minor daughter of Ravi respectively

Question 19B.
Sunidhi and Suhani are sisters. Sunidhi gifted ₹ 15,000 to Suhani’s husband and Suhani gifted ₹ 20,000 to Sunidhi’s husband. They both put the money in a bank earning interest @ 10% p.a. Choose the correct option:
(a) ₹ 1500 (the income of Suhani’s husband) will be clubbed in Sunidhi’s income and ₹ 2000 (the income of Sunidhi’s husband) will be clubbed in Suhani’s income.
(b) Only the interest on the difference of t 5,000 ie. f. 500 will be clubbed in the hands of Sunidhi
(c) ₹ 1500 (the income of Suhani’s husband) will be clubbed in Suhani’s income and ₹ 2000 (the income of Sunidhi’s husband) will be clubbed in Sunidhi’s income.
(d) ₹ 1500 (the income of Suhani’s husband) will be clubbed in Suhani’s income and ₹ 1500 (the income of Sunidhi’s husband to the extent of interest on ₹ 15,000 only) will be clubbed in Sunidhi’s income.
Answer:
₹ 1500 (the income of Suhani’s husband) will be clubbed in Suhani’s income and ₹ 1500 (the income of Sunidhi’s husband to the extent of interest on ₹ 15,000 only) will be clubbed in Sunidhi’s income.

Question 20.
Baby Meena (age 12) a child artist acted in feature films and earned ₹ 3,50,000. The total income of her father is ₹ 5,20,000 and mother is ₹ 4,80,000. The minor’s income would be:
(a) Chargeable to tax in the hands of father
(b) Chargeable to tax in the hands of mother
(c) Chargeable to tax in her own hands
(d) Fully exempt from tax
Answer:
(c) Chargeable to tax in her own hands
Income of minor child is clubbed u/s 64(1A) But income is taxable in the hands of minor child only, if it arises an account of minor’s skills, talent or knowledge.

Question 21.
All income which arises or accrues to the minor child (not suffering from any disability as specified in section 80U) shall be clubbed with the income of parent whose total income excluding the income to be included of the minor not derived from any activity involving application of his skill, talent or specialized knowledge :
(a) in the hands of father only
(b) in the hands of mother only
(c) equally in the hands of both mother and father
(d) with the income of that parent whose total income is greater before clubbing of such income
Answer:
(d) with the income of that parent whose total income is greater before clubbing of such income
Minor’s income will be clubbed in the hands of that parent whose total income is higher if marriage subsists, otherwise is the hands of parent who maintains the minor child in the previous year.

Question 22.
Sona is 15 years of age. She has income of ₹ 1,75,000 from interest on deposits. Sona’s parents died in an air crash. She is now looked after by Mr. X, her maternal uncle and also her guardian. Sona’s income will be:
(a) Clubbed in the hands of Mr. X
(b) Exempt from tax
(c) Return will be filed by Mr. X on behalf of Sona
(d) Taxed when Sona will attain majority.
Answer:
(c) Return will be filed by Mr. X on behalf of Sona
If both the parents of minor child are not alive, then the minor’s income is not clubbed and the guardian of the minor shall file the return of such income on behalf of the minor.

Question 23.
Sunidhi had an income of ₹ 4,80,000 during the Previous year 2020-21. She celebrated her 18th Birthday on 1st February 2021. Choose the right option.
(a) Sunidhi will pay taxes on ₹ 4,80,000
(b) 10 months income will be clubbed in any parent’s income and 2 months income after attaining majority will be taxable in the hands of Sunidhi
(c) ₹ 4,80,000 will be clubbed.
(d) Exempt.
Answer:
(d) Exempt.
Where the minor child attains majority during the previous year, then, the income, till the date he remained minor, will be clubbed.

Question 24.
Ram has gifted an amount of ₹ 10,00,000 to his wife Sita without consideration (but not to live apart), which was invested by his wife in interest bearing security. She earned interest of ₹ 1,00,000. The interest of ₹ 1,00,000 was further invested by her in the business from which she earned a profit of ₹ 15,000. The income which is to be included out of this gifted amount in the hands of Ram is :
(a) ₹ 1,15,000
(b) ₹ 15,000
(c) ₹ 1,00,000
(d) Nil, because gift is to relative
Answer:
(c) ₹ 1,00,000
If a transferee earns income from investment made out of income which is clubbed in the hands of transferor, the income from new investment is not clubbed. It will taxable in the hands of transferee only.

Question 25.
Aiyer gifted 100 shares to his wife on 1st August, 2013. She received 200 bonus shares from the company in April 2017. All the shares were sold to a friend for ₹ 1,50,000 in May, 2019. The 1000 shares were originally acquired by Aiyer for ₹ 5,000. The Capital gain on sale of shares in the month of May, 2019 shall be chargeable to tax:
(a) Fully in the hands of Aiyer
(b) Fully in the hands of Mrs. Aiyer
(c) For 100 shares in the hands of Aiyer and balance 200 shares in the hands of Mrs. Aiyer.
(d) For 200 shares in the hands of Aiyer and balance 100 shares in the hands of Mrs. Aiyer.
Answer:
(c) For 100 shares in the hands of Aiyer and balance 200 shares in the hands of Mrs. Aiyer.

Question 26.
Kapoor gifted ₹ 10,00,000 to his wife Sunita Kapoor on 15th May, 2020. The amount of gift of ₹ 10,00,000 was invested by his wife in debentures of a company on 1st June, 2020 earning interest @ 12% p.a. The income of interest of from the debentures earned by Sunita Kapoor shall be with the income of Kapoor
in A.Y. 2021-22.
(a) ₹ 1,20,000, not clubbed
(b) ₹ 1,00,000, clubbed
(c) ₹ 1,00,000, not clubbed
(d) ₹ 1,20,000, clubbed
Answer:
(b) ₹ 1,00,000, clubbed
Assuming interest has accrued to Mrs. Sunita Kapoor for 10 months (She has not purchased debentures in secondary market but was a direct allottee.) Income will be clubbed.

Question 27.
Ram has gifted on 11th May, 2019 an amount of ₹ 10,00,000 to his wife Sita without consideration and also for not to live apart. The gifted amount was invested by his wife in interest bearing security on which she earned interest of ₹ 1,00,000 on 1st January, 2021. The amount of interest of ₹  1 ,00,000 was further invested by her in the business form which she earned a profit of ₹ 15,000 for the period ended on 31st March, 2021. Specify the income which is to be included in the hands of Ram in A.Y. 2021-22.
(a) ₹ 1,15,000
(b) ₹ 1,00,000
(c) ₹ 15,000
(d) Nil
Answer:
(b) ₹ 1,00,000

Question 28.
Where the marriage of the parents do not subsist, the income of the minor is taxable in the hands of that parent:
(a) Who has higher income during the previous year
(b) Who maintains the child during the previous year
(c) In the hands of minor only
(d) It is exempt in such cases
Answer:
(b) Who maintains the child during the previous year

Question 29.
Provisions of Clubbing of income of a minor child is applicable to a:
(a) Minor Step Child
(b) Minor married Daughter
(c) Minor Adopted Child
(d) All of the above
Answer:
(d) All of the above
As per section 2(15B), child in relation to an individual, includes a step child and an adopted child.

Question 30.
Mr. Sukant a member of an HUF converted his self-acquired property as the property of HUF. The Income from the property shall be taxable in the hands of:
(a) Mr. Sukant
(b) The HUF
(c) At the option of the HUF
(d) None of the above
Answer:
(a) Mr. Sukant
As per Section 64(2) – Income from self-acquired property converted to joint family property will continue to be included in the total income of the individual.

Question 31.
An HUF was partitioned and the member Mr. X who had transferred his self-acquired property and his wife got some share. The income will be taxable in the hands of :
(a) Mr. X
(b) HUF
(c) Mr. X will be liable to pay tax on his and his wife’s share.
(d) Mr. X will be liable to pay tax on his share alone.
Answer:
(c) Mr. X will be liable to pay tax on his and his wife’s share.
On subsequent partition, the individual will be taxable for his and his spouse’s share. If minor child receives some share, that income will also be clubbed in the hands of either parent whose income is higher.

Question 32.
Section 70 enables set off of losses under one source of income against another source under the same head, except:
(a) Long term Capital Losses
(b) Speculation Loss & Loss from Specified business
(c) Loss from the activity of owning and maintaining race horses.
(d) All of the above
Answer:
(d) All of the above

Question 33.
As per section 80, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of section 139(3), is allowed to be set off except:
(a) Loss from specified business
(b) Loss under the head Capital Gains
(c) Loss from House property
(d) Loss from speculation business.
Answer:
(c) Loss from House property

Question 34.
Which of the following losses available after inter source set-off, cannot be set-off from incomes in other heads in the same assessment year –
(a) Speculation losses
(b) Loss from specified business
(c) Loss under the head capital gains
(d) All of the above
Answer:
(d) All of the above

Question 35.
No loss can be set off against –
(a) Income from salaries
(b) Income from house property
(c) Income from capital gains
(d) Winnings from lotteries
Answer:
(d) Winnings from lotteries

Question 36.
Brought forward loss from house property can be set off:
(a) Against any other head of income to the extent of ₹ 2,00,000
(b) Against income from house property to the extent of ₹ 2,00,000
(c) Against any other head of income without any limit
(d) Against income from house property without any limit
Answer:
(d) Against income from house property without any limit

Question 37.
Loss from house property of the current year can be set off against Income from
(a) Any other house property without any limit
(b) Any other head of Income up to Maximum ₹ 2,00,000
(c) Both (a) & (b)
(d) None of the above
Answer:
(c) Both (a) & (b)

Question 38.
Mr. Shahu has loss from house property of ₹ 1,10,000 (computed) for the assessment year 2021-22. He can carry forward such loss for subsequent assessment years.
(a) 4
(b) Nil
(c) 8
(d) Indefinite
Answer:
(c) 8

Question 39.
Unabsorbed loss from house property can be carried forward for –
(a) 4 years
(b) 8 years
(c) Indefinite period
(d) Cannot be carried forward
Answer:
(b) 8 years

Question 40.
Speculation loss can be carried forward for ……… subsequent assessment years.
(a) 8
(b) Nil
(c) 4
(d) 6
Answer:
(c) 4

Question 41.
Loss from speculation business can be set off against –
(a) Income from salaries
(b) Income from house property
(c) Income from speculation business only
(d) Any head of income
Answer:
(c) Income from speculation business only

Question 42.
Mathur Storage (P) Ltd., engaged in chain cold storage, has brought forward business loss of ₹ 12 lakhs relating to assessment year 2020-21. During the previous Year 2020-21, its income from the said business is ₹ 9 lakhs. It also has profit from trade in food grains of ₹ 6 lakhs. The total income of the company for the assessment year 2021-22 is:
(a) 115 lakhs
(b) ₹ 6 lakhs
(c) X 9 lakhs
(d) ₹ 3 lakhs
Answer:
(b) ₹ 6 lakhs
The Business of cold storage is a specified business u/s 35AD the loss of which can be set off only against profits of specified business. Therefore in the P.Y the loss to the tune of ₹ 9 Lac out of brought forward loss of ₹ 12 lacs will be set off, the remaining profits of ₹ 6 lakhs during the P.Y are not from specified business therefore, no set off will be allowed against these profits. It will be fully taxable. Hence, Income of the Company for Assessment year 2021-22 is ₹ 6 lakhs.

Question 42A.
The Amalgamated company had brought forward losses of Amalgamating company to the extent of ₹ 23 lacs as on the date if amalgamation. It was able to set off loss to the tune of ₹ 12 lacs in the first year but in the second year it could not continue with the business of Amalgamating company and had to close that business. Choose the correct option:
(a) The remaining loss of 11 lacs will lapse.
(b) The remaining loss of 11 lacs will lapse and the set off of loss of ₹ 12 lacs allowed in the earlier year will be treated as the income of the amalgamated company.
(c) The amalgamated company will continue to set off the remaining brought forward loss in future.
(d) The amalgamating company will set off the remaining loss.
Answer:
(b) The remaining loss of 11 lacs will lapse and the set off of loss of ₹ 12 lacs allowed in the earlier year will be treated as the income of the amalgamated company.

Question 42B.
The Carry forward and set off of accumulated losses and unabsorbed depreciation in case of business reorganization of co-operative banks is covered under section:
(a) 12k
(b) 72 AA
(c) 72AB.
(d) 72B
Answer:
(c) 72AB.

Question 43.
If an individual, having a sales turnover of ₹ 60 lakh files his return of income for the AY 2021-22 after the due date showing unabsorbed business loss of ₹ 23,000 and unabsorbed depreciation of ₹ 45,000, he can carry forward to the subsequent assessment years
(a) Both unabsorbed business loss of ₹ 23,000 and unabsorbed depreciation of ₹ 45,000
(b) Only unabsorbed business loss of ₹ 23,000
(c) Only unabsorbed depreciation of ₹ 45,000
(d) Neither unabsorbed business loss of ₹ 23,000 nor unabsorbed depreciation of ₹ 45,000.
Answer:
(c) Only unabsorbed depreciation of ₹ 45,000
In order to carry forward business loss, the return of loss must be filed on or before due date of filing the return. The provision is not applicable for depreciation. Therefore, only unabsorbed’ depreciation of ₹ 45,000 can be carried forward to be set off in subsequent Assessment years.

Question 43A.
In case of demerger, the Carry forward and set off of accumulated losses and unabsorbed depreciation which is directly related to the undertaking transferred by demerged company to the resulting company is allowed to the :
(a) Demerged Company only
(b) Resulting Company only
(c) Both the companies in proportion to value of assets retained and trans-ferred.
(d) Not allowed
Answer:
(a) Demerged Company only

Question 43B.
In case of demerger, the carry forward and set off of accumulated losses and un-absorbed depreciation which is not directly related to the undertaking transferred by demerged company to the resulting company is allowed to the :
(a) Demerged Company only
(b) Resulting Company only
(c) Both the companies ie. demerged Co. and resulting Co. in proportion to value of assets retained and transferred.
(d) Not allowed
Answer:
(c) Both the companies ie. demerged Co. and resulting Co. in proportion to value of assets retained and transferred.

Question 43C.
The business of Anant & Co. was discontinued in the year 2017-18 due to heavy floods in the area that destroyed its machinery. The business sustained heavy losses. The assessee was able to revive the business in the Financial year 2020-21. It could not earn any profits from this business but his other businesses were profitable. Can he set off the losses of revived business For how many subsequent years can he carry forward unabsorbed loss
(a) He can set off loss against income from other business and carry forward unabsorbed loss up to A.Y. 2029-30, provided the business is now continued.
(b) He can set off loss against income from other business and carry forward unabsorbed loss up to A.Y. 2029-30, whether the business is continued or not.
(c) He can set off loss against income from other business and carry forward unabsorbed loss up to A.Y.2028- 29, provided the business is now continued.
(d) The loss cannot be set off against income of any other business but can be carried forward up to A.Y. 2029- 30.
Answer:
(a) He can set off loss against income from other business and carry forward unabsorbed loss up to A.Y. 2029-30, provided the business is now continued.

Question 43D.
A successor Cooperative bank can set off accumulated losses of predecessor Cooperative bank in a scheme of reorganization of co-operative banks provided the successor bank holds at least ………. of the Book value of fixed assets acquired for a continuous period of at least 5 years immediately succeeding the date of reor-ganization.
(a) 4/5th
(b) 3/4th
(c) 2/5th
(d) 1/2
Answer:
(b) 3/4th

Question 44.
The amount of depreciation not absorbed in the same year can be carried forward –
(a) For a period of 4 years
(b) For a period of 8 years
(c) For a period of 6 years
(d) Indefinitely
Answer:
(d) Indefinitely

Question 45.
Loss from the activity of owning and maintaining race horses could be set-off –
(a) Against income under any of the five heads of income
(b) Only against income under the head ‘income from other sources’
(c) Only against income under the head ‘profits and gains of business or profession’
(d) Only against income from same activity.
Answer:
(d) Only against income from same activity.

Question 46.
A Co. Ltd. has business loss and un-absorbed depreciation of ₹ 10 Crore. B Co. Ltd. is profit making Company. B Co. Ltd. wanted to acquire A Co. Ltd. with the benefit of set off of brought forward loss and unabsorbed depreciation. The legally permissible method is:
(a) Reverse merger
(b) Outright purchase
(c) Slump sale of A Co. Ltd.
(d) Converting A Co. Ltd. into subsidiary of B. Co. Ltd.
Answer:
(b) Outright purchase

Question 47.
Biren discontinued wholesale trade in medicines from 1st July, 2016. He recovered ₹ 1,50,000 in October 2020 being a bad debt which was written-off and allowed in assessment year 2017-2018. He has, eligible brought forward business loss of wholesale trade in medicines of ₹ 1,70,000. The consequence of bad debt recovery is that –
(a) It is chargeable to tax
(b) It is eligible for set-off against brought forward business loss
(c) The brought forward business loss is taxable now
(d) 50% of the amount recovered now is taxable
Answer:
(b) It is eligible for set-off against brought forward business loss

Question 48.
If a person is eligible to claim:
(1) Unabsorbed depreciation
(2) Current scientific research expenditure
(3) Current depreciation
(4) Brought forward business loss The order of priority to set-off would be –
(a) (4), (3), (2) & (1)
(b) (2), (3), (4) & (1)
(c) (3), (4), (1) & (2).
(d) (1), (2), (3) & (4)
Answer:
(b) (2), (3), (4) & (1)

Question 49.
A company has the following:
(i) Current scientific research expenditure;
(ii) Current depreciation;
(iii) Unabsorbed depreciation;
(iv) Brought forward business loss.
The order sequence of set off is:
(a) (i), (ii), (iii), (iv)
(b) (iv), (iii), (i), (ii)
(c) (i), (ii), (iv), (iii)
(d) (iv), (ii), (i), (iii)
Answer:
(c) (i), (ii), (iv), (iii)

Question 50.
To carry forward and set off losses, a loss return must be filed by the assessee within the stipulated time and get the loss determined by the Assessing Officer. However, this condition is not applicable to –
(a) Loss from house property
(b) Loss from speculation
(c) Loss from discontinued business
(d) Loss from capital assets
Answer:
(a) Loss from house property

Question 51.
Rohan engaged in multifarious activities reports the following:
(i) Loss from business ₹ 80,000;
(ii) Loss from house property ₹ 1,20,000;
(iii) Long term capital loss ₹ 70,000;
He filed his return beyond the ‘due date’ specified in Section 139(1).Which of the above losses cannot be carried forward to subsequent assessment year
(a) Loss from business
(b) Loss from house property
(c) Long term capital loss
(d) Both (a) & (c).
Answer:
(d) Both (a) & (c).

Question 52.
Mr. Hussey for the previous year has –
(i) Business loss of ₹ 1,30,000;
(ii) Income from salary ₹ 2,40,000; and
(iii) Speculation gain of f 1,10,000.
His total income for income tax assessment is:
(a) ₹ 3,50,000
(b) ₹ 2,20,000
(c) ₹ 2,40,000
(d) ₹ 1,10,000
Answer:
(c) ₹ 2,40,000
Business Loss cannot be set off against salary income but can be set off against speculation gain. Therefore, out of ₹ 1,30,000, business loss to the tune of ₹ 1,10,000 will be set off and ₹ 20,000 will be carried forward. The Income of M.R. Hussey for the P.Y. will be only his salary income of ₹ 2,40,000.

Question 53.
Mr. Siddharth is employed in a company. His income under various heads are –
(i) Salary, 5,60,000;
(ii) Loss from let out property, ₹ 65,000;
(iii) Loss from business, ₹ 1,10,000 and
(iv) Loss under the head “other sources” ₹ 30,000.
His total income after set-off of losses would be:
(a) ₹ 3,55,000
(b) ₹ 4,65,000
(c) ₹ 4,20,000
(d) ₹ 5,30,000
Answer:
(b) ₹ 4,65,000
Clubbing Provisions and Set off ANDOR Carry Forward of Losses CS Executive Tax Laws MCQ 3
Clubbing Provisions and Set off ANDOR Carry Forward of Losses CS Executive Tax Laws MCQ 4

Question 54.
Short term capital loss can be set-off as per provisions of Section 74 of the Income tax Act, 1961 from:
(a) Short term capital gain
(b) Short term capital gain & Long term capital gain
(c) Long term capital gain
(d) Short term capital gain & profits and gain from business.
Answer:
(b) Short term capital gain & Long term capital gain

Question 55.
Business loss can be set off from any other business income but cannot be set off from:
(a) Salary income
(b) House property income
(c) Long term capital gains
(d) Income from derivatives specified in section 43(5)
Answer:
(a) Salary income

Question 56.
The loss computed under the head “Income from house property” can be set-off by inter-head adjustment during the same year from :
(a) any other head of income upto maximum of ₹ 2,50,000
(b) any other head of income upto maximum of ₹ 3,00,000
(c) any other head of income upto maximum of ₹ 5,00,000
(d) any other head of income upto maximum of ₹ 2,00,000
Answer:
(d) any other head of income upto maximum of ₹ 2,00,000

Question 57.
The benefit of carry forward and set-off of losses under section 79 of Income-tax Act, 1961, by a closely held Indian company which is a subsidiary of a foreign company as a result of amalgamation or demerger, is subject to the condition that specified percentage of the shareholders of the amalgamating or demerged foreign company continue to be the shareholders of the amalgamated or the resulting foreign company which is :
(a) 51%
(b) 10%
(c) 26%
(d) 100%
Answer:
(a) 51%

Question 58.
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

Question 59.
Mr. Shyam, a resident of Chandigarh, provides the following information for the financial year 2020-21:

Particulars
Income from textile business 4,60,000
Income from speculation business 25,000
Loss from gambling 12,000
Loss on maintenance of race horse 15,000
Eligible current year depreciation of textile business not adjusted in the income given above. 5,000
Unabsorbed depreciation of As­sessment year 2020-21 brought forward 10,000
Speculation business loss of As­sessment year 2020-21 30,000

The Gross total Income of Mr. Shyam for the assessment year 2021-22 will be:
(a) ₹ 4,40,000
(b) ₹ 4,45,000
(c) ₹ 4,35,000
(d) ₹ 4,80,000
Answer:
(b) ₹ 4,45,000
Loss of Gambling cannot be carried forward.
Loss of maintenance of race horses cannot be adjusted against any other Income and has to be carried forward.
First, adjustment will be of current year depreciation of ₹ 5,000 from income of textile Business, and then bought forward depreciation of ₹ 10,000.
Speculation losses to the extent of ₹ 25,000 will be adjusted against current year speculation gains and the balance of ₹ 5,000 will be carried forward.
Clubbing Provisions and Set off ANDOR Carry Forward of Losses CS Executive Tax Laws MCQ 5

Question 60.
Mr. X provides the following details for the previous year ending 31.03.2020.

Particulars
(i) Salary from XYZ Ltd. (Computed) 5,60,000
(ii) Interest on FD with SBI for the Financial Year 2020-21 80,000
(iii) Determined long term capi­tal loss of AY 2019-20 96,000
(iv) Long term Capital gain 75,000
(v) Loss of minor son. Mr. X transferred his own house to his minor son without adequate consideration and minor son let it out and suffered loss. (90,000)
(vi) Loss of his wife’s business

She carried business with funds which Mr. X gifted to her.The taxable income of Mr. X for the AY 2021-22 will be:
(a) ₹ 5,60,000
(b) ₹ 4,70,000
(c) ₹ 4,50,000
(d) ₹ 4,20,000
Answer:
(b) ₹ 4,70,000
Clubbing Provisions and Set off ANDOR Carry Forward of Losses CS Executive Tax Laws MCQ 6
The loss of minor son and wife is allowed to be set off as Mr. X is deemed owner of house u/s 27 and wifes income attracts clubbing provisions. The wife’s loss of ₹ 120,000 and long term capital loss of ₹ 21,000 will be carried forward

Question 61.
Mr. X, a resident individual, furnishes the following particulars of his income and other details for the previous year 2020-21.

Particulars
1. Income from Salary 15,000
2. Income from Business 66,000
3. Long term capital gain on sale of Land 10,800
4. Loss on maintenance of Race Horses 15,000
5. Loss from Gambling 9,100

The other details of unabsorbed depreciation and brought forward losses pertaining to Assessment Year 2020-21 are as follows:

Particulars
1. Unabsorbed depreciation 11,000
2. Loss from Speculative business 22,000
3. Short term capital loss 9,800

The Gross total income of Mr. X for the Assessment Year 2021 -22 and the amount of loss, that can be carried forward is:
(a) Gross total income ₹ 71,000 and carry forward ₹ 37,000
(b) Gross total income ₹ 70,000 and carry forward ₹ 22,000
(c) Gross total income ₹ 71,000 and carry forward ₹ 15,000
(d) Gross total income ₹ 70,000 and carry forward ₹ nil
Answer:
(a) Gross total income ₹ 71,000 and carry forward ₹ 37,000
Clubbing Provisions and Set off ANDOR Carry Forward of Losses CS Executive Tax Laws MCQ 7