TAXATION OF VARIOUS ENTITIES

94(7)
DIVIDEND STRIPPING
Any person buys or acquires any SECURITIES or UNITS within a period of 3 MONTHS PRIOR TO THE RECORD DATE ;
such person sells/trf the above :
SECURITIES
within 3 Months after such date
UNITS
within 9 Months after such date
the dividend or income on such sec/unit is exempted;
then any loss, arising to him on account of such purchase and sale of Sec/Units ,
Record date means date of entitlement of recei
to the extent not exceeding the income on such sec/units,
dividend or income.
shall be ignored for the purpose of computing his income chargeable to tax.
Sec includes stocks and shares
94(8)
BONUS STRIPPING
The Provision :
> applies to all units whether bought or acquired
> covers both open ended and close ended equity funds
> is applicable even in case units are held as SIT
> is applicable only in respect of units and not shares
> doesnt apply if all the additional units are sold before the original units are sold.
Any person buys or acquires any units within a period of 3 MONTHS prior to the resord date ;
such person is allotted additional units w/o any pay on the basis of holdibg of such units on such date i.e Bonus Units ;
such person sells the original units within a period of 9 Months after such date, while continuing to hold the bonus units;
then the loss ,if any, arising to him shall be ignored and
n/w/s/a/c in any other provision of this act, the amount of loss so ignored
shall be deemed to be the cost of purchase of such Bonus units as are held on the date of such sale or transfer.
TAXATION OF INCOME ON UNITS
10(35)
115R
10(35)
MF dividend income is exempt in the hands of the unit holders.
115 R
Tax on Distributed income to U/h
Type of Funds
EOF
MMMF/LF
O/t above

Person to whom income distributed

Any person
Indl/HUF
Any other person
Indl/HUF
Any other person
Non corporate non resident or a Foreign Co.

Infra debt Fund

TAXATION OF ZCB
ZCB : 2(48) : means a bond issued by any infra cap co. or infra cap fund or public sector co or schedule bank on/after 01.06.2005 ,in respect of whic
no pay or benefit is receivable before maturity and which the CG notifies in the OG.
Tax Treatment :
INVESTOR
ISSUER
On maturity it amounts to trf u/s 2(47)(iva)
36(1)(iiia) : Discount is deductible on Pro Rata basis over th
If held for more than 12m ,LTCG @ 10% w/o indexation
the ZCB
(Indexation not available in case on Bonds )
No TDS is required u/s 194A by the payer co.
Pro rata Disc =

Discount / Period of life (in months) * No. of calender months in PY in which disc is to be allowed.

NEW PENSION SCHEME

80CCD
10(44)
197A(1E)
115-O(1A) Complete Pass Through
10(44)
The income received by the NPS Trust is exempted.
All pur and sale of equity and derivatives by the NPS Trust is exempted f
115-O(1A) Dividend paid to a NPS Trust is not liable to DDT
197A(1E)
NPS Trust shall receive all income w/o deduction of tax.
80CCD
Deduction from GTI to an indl
in case of Emloyee ,10% of his Salary in PY; and
in any other case, 10% of his GTI
Amount received from NPST shall be taxable in the hands of the recipient unless such amt is used for purchasing an annuity plan in the
same PY.
NOTE: BENEFIT UNDER 80CCD HAS BEEN EXTENDED TO PRIVATE SECTOR EMPLOYEES W/O CONDITION REGARDING DATE OF JOINING
BEING 01.01.2004. [ FINANCE ACT, 2014 ]
TAX ON DIVIDEND RECEIVED FROM SPECIFIED FOREIGN COMPANIES
115BBD
NORMAL TAX ON DIVIDEND 30%
115BBD PROVIDE FOR CONCESSIONAL TAX @ 15%
Benefit available only to the Indian Companies.
Indian co must hold >=26 % of nominal value of Equity Share cap of the FC
Note : FA 2014 has been extended the concessional rate of
Dividend doesnt include 2(22)(e) .
gross dividend w/o limiting it to a particular AY.
No other expenditure shall be claimed by the indian co
only on or after 01.04.2012
TAXATION OF POLITICAL PARTIES
13A
EXEMPTED INCOME
> HP
> OS
> CG
> Any income by way of Voluntary Contribution
Conditions
> keeps and maintain such BOA as are required to enable the AO to deduce income therefrom ;
> for each vol cont in excess of 20000/- the name,address and other details of donor are kept ;
> the accounts are audited by an accountant.
Provided further that if the treasurer of such political party or any other person authosrised by the PP in this behalf fails to submit a report u/s
29C(3) of the Representation of the people act,1951, for a FY, no exemption u/s 13A shall be available for that PP for such FY.
TAXATION OF ELECTORAL TRUSTS
13B
It is not a charitable or religious trust hence not alowed the ded u/s 11-13
Any Voluntary contribution shall not be included in the TI if :
> such ET distributes to any eligible political party, during the said PY, 95% of the aggregate donations received by it during the said PY alongwith
surplus, if any, b/f from any earlier py; and
> such ET functionsin accordance with the rules made by CG ( rule 17CA by n/f 8/2013 dated 31.01.2013 )
A person contributing to an ET gets dedcution u/s 80GGB/GGC.
The exemption is available only for VC and other incomes shall be taxable normally.
TAXATION OF CO OPERATIVE SOCIETIES :
1. WHERE 100% DEDUCTION IS ALLOWED :
2. O/T 1 ABOVE :

For Certain categories of incomes

For incomes o/t above
1.If the co op soc is a consumers' co op soc
2.In any other case

100000/50000/-

1. WHERE 100% DEDUCTION IS ALLOWED :

a. Profits attributable to cetain specified activities :
1. carrying the buz of banking or providing credit facilities to mem.
2. A Cottage Industry
[wef AY 07-08 ,no exemption to co op banks o/t a Primary Agri Soc
3. The Marketing of Agri produce grown by its members
or a Primary Coop Agri and Rural Bank. However ded shall be avail
4. The Collective Disposal of the Labour of its members
to soc in the buz of providing credit facilities to members. ]
5.The processing w/o the aid of power, of agri produce of its members.
6.The purchase of agri implements,seeds,livestock or other articles
7. Fishing or allied act i.e catching,curing,processing,preserving,storing
intended for agri for the purpose of supplying them to members
of fish or pur of equip for supplying them to members.
b. Profits of certain primary co op society engaged in supplying milk, oilseeds, fruits, or vegetables raised or grown by its members to :
1 A Federal co op soc being a society engaged in the buz of supplyin above things ; or
2 the government or a local authority ; or
3 a govt co or a statutory corp engaged in above act to the public
c Income from investment with other co op society [ by way of interest, dividend ]
d Income of letting of Godowns or warehouses for storage, processing or facilitating the marketing of commodities.

HINDU UNDIVIDED FAMILY

> HUF = FATHER+SONS+DAUGHTERS
> Wife is a coparcenar in her fathers' property .However, the karta can give his share to his wife.
> Partition has to be Total. Partial partition is not recognised in the Income tax and Wealth Tax.
> Any gift of HUF property to any co parcenar or non coparcenar is Void Ab Initio.
> Remuneration paid by HUF to karta or any member : deductible only if
> paid under a valid and bonafide agreement
> in the interest of and expedient for the buz of the family; and
> reasonable and not excessive
> Prtition of HUF u/s 171 ,takes place on the date on which the properties are actually physically divided. There must be physical division of proper
TAXATION OF FILM PRODUCERS AND FILM DISTRIBUTORS
COST OF PRODUCTION
CAPITAL
Expenditure for preparation of positive prints of the film
Advertisement exp after it is certified by the censor board
PRODUCER
Qtm of Deduction
DISTRIBUTOR
Situation
Film Released
Situation
before 31.12after 31.12
Sells all rights of exhibition in the PY
COP
COP
Sells all rights of exhibition in the PY
>himself exhibits in all or some areas ;
COP or
>himself exhibits on commercial basis in all
>sells the exh rights in respect of some area
Amt of
or some areas
>himself exhibits in certain areas and sell
exhibition > sells the rights of exhibition in some areas
COP
the rights in respect of some or all other
and sale > exhibits on comm basis in some areas and
areas
of rights sell in respect of other
WIL

Revenue
Revenue
Qtm of Deduction
Film Released
before 31.12
COA

COA

TAXATION OF DIVIDENDS
DEEMED DIVIDENDS
2(22)(a) to (e)
2(22)(a)
Distribution of Assets
Dividend includes any distr of assets by a co to its shareholders to the extent the co.possesses acc.profits whether Capitalised or not.
The MV of assets on the date of distr shall be taken for computing dividend.
Sec 47 is not attracted and hence no CG to co.However the COA in hands of s/h is that was in the hands of co.
The deemed div is exempt for s/h.Company shall pay DDT u/s 115-O.
Bonus shares doesnt amt to release of assets coz assets side remains intact.
2(22)(b)
Distribution of Debentures etc.
> any distribution to its s/h by a co, of debentures/deb stock/deposit certificates in any form, whether with or w/o interest; AND
> any dist. To its PREFERNCE s/h, of shares by way of Bonus ;
to the extent to which the co possesses acc.profits, whether cap or not.
The deemed div is exempt for s/h.Company shall pay DDT u/s 115-O.
As per sec 55 the COA in the hands of the s/h shall be NIL.
2(22)(c )
Distribution of assets on Liquidation
any distribution made to the s/h on its liq to the extent to which such dist is attributable to the acc profits of the co.immediately before its liquida
whether cap or not. (see sec 46(1) and (2) later )
The deemed div is exempt for s/h.Company shall pay DDT u/s 115-O.
The FMV on the date of distribution shall be taken for getting deemed dividend.
2(22)(d)
Distribution on Reduction of Share Capital deemed as dividend
any dist.to its s/h by a co on reduction of its capital to the extent to which the co possesses profits, whether cap or not.
The FMV on the date of distribution shall be taken for getting deemed dividend.
Sec 46
CG on distribution of assets by companies in liquidation
46(1)
such transfer shall not be regarded as a trf by the co and hence no CG arises.
46(2)
where a s/h receives any money or asset on Liquidation from the co. then he shall be chargeable to tax under the head CG and the sale
consideration for the purposes of sec 48 shall be as under :
Money received
xx
Add: MV of asset received on Liq
xx
Add: Amt assessed as Div u/s 2(22)(c )
xx
SC for shares in Liq co
xx
55
Sale of asset received on Liquidation
COA of asset shall be the MV on the date of Distribution.
46A
CG on Buy Back of shares or other specified sec.
where a s/h or holder of other spec sec
receives any consideration from any company for purchase of its own shares or specified sec held by such s/h or holder of spec sec, the
subject to the provisions of sec 48 ,
the difference b/w the cost of acq and the FVC received by the s/h ,
shall be deemed to be the CG arising,
in the year in which such sharesor spec sec were purchased by the co.
115-O(1A) If any Holding company receives dividend from its subsy
on which the subsy has paid DDT payable then the amt of div declared,distributed or paid by HC

115-O(1)

115-O(1B)
NEW by
FA,2014

notes:

by way of dividends whether interim or final

shall be reduced by the amt of dividend, if any,
received from the SC during the FY
provided that the same amt of dividend shall not be taken into acc for reduction more than once.
n/w/s/a/c in any provision of this act and subject to the prov of this section,
in addirtion to the income tax chargeable in respect of the TI of domestic company for any AY,
any amt declared, distributed or paid by such company by way of dividends,
whether out of current or accumulated profits shall be charged to additional income tax at 15%.
The net distributed profits i.e dividend referred to in sec 115-O(1) as reduced by amt reffered to in sec 115-O(1A)
shall be grossed up for the purpose of calculating additional tax payable to make the net distributed profit as above to be the amount
remaining after such addl tax being calculated so that the effective rate of tax remains same.
e.g Div by HC
230 received from SC
60 tax 15%
115-O(1)
230
less: 115-O(1A)
60
170 You may gross up at 16.995 as well.
Incresed for grossing up
170/85*15
30 its just an example
200
DDT 15%
30
similar amendment in sec 115R is made.
Surcharge and ec
3.99
33.99
>subsy here means only in which >50% nominal value is held and not other types of subsy e.g controllin composition of BOD or JV etc.
>Benefit u/s 115-O(1A) is on year to year basis i.e it cant be carried forwarded.
>Deemed div u/s 2(22)(a) to (d) is taken for the benefit u/s 115-O(1A).
>271C penalty if tax not paid equivalent to amt of tax payable.
>276B imprisonment >=3m which may extend to 7 y.

2(22)(e)

LOANS AND ADVANCES BY CLOSELY HELD COMPANIES DEEMED AS DIVIDEND

Any payment by a company not being a company in which public are substantially interested,
of any sum by way of loan or advance to
a.
a shareholder being the beneficial owner of shares
Deemed as dividend in the
holding >=10% of VP
hands of the s/h
or
b.
to any concern in which
Deemed dividend
such a s/h is a member or partner
in the hands of
and in which he has Substantial Interest
the concern
or
c.
to any person
Deemed dividend
on behalf of or for benefit of
in the hands of
such a s/h
the s/h
to the extent to which the co possesses acc profits
notes :
Accumulated profits include all amt as profit upto tha date on which L & A given
2(22)(a) to (d)
Acc profits, whether capitalised or not
2(22)(e)
Acc profits

SI= >=20% of the V

at any time du
Concern = HUF/F/C

Beneficial owner/10%
partner = on the dat
which Loan/Advance

The fact that L & A is repaid doesnt make any difference in the aplicaility of this section.
It is attracted even if the company charges market rate of intt on L/A given to the s/h.
The co is required to deduct TDS from the amt given as L/A.
Attracted even if advance given to s/h holding >=10 VP for expense or for buying asset and the amt is subsequently spent by s/h.
2(22)(e)
in case L/A made by a closely held co
taxable in the hands of the s/h
2(22)(a) to (d)
pay/dist made by all co.
taxable in the hands of the company.
For the purposes of sec 2(22), Accumulated Profits means the Commercial profits and not the assessable profits. It means the accounting profits.
Share Premium
No
General Reseve
Yes
DRR
Yes
CR outta profit on sale of assets
Reval Reserve
No
P/L Cr.
Yes
Div Eualisation Res.
Yes
Shipping Reserve
Depreciation Reserve
No
Resere outta Agri inc
Yes
Workmen Comp.res.
Yes
Sinking Fund
CR out of Govt Subsy
No
CRR
Yes
Excess Provisions
Yes
Reserve for Contingency
A Widely held Company : i.e a company in which public are substantially interested.
1. A co owned by the Govt (CG or SG but not Foreign) or the RBI or in which not less than 40% of the shares are held by the govt.or RBI or corpor
owned by that bank.
2. A company registered u/s 25 of the Co.act 1956 (Sec 8 of 2013)
3. The co which has no share capital which is declared by the Board for the specified Ays to be such a co in which public are substantially intereste
4. A co declared u/s 620A of co act 1956 to be a Nidhi or Mutual benefit society (406 of 2013 )
5. A co whose equity shares carrying at least 50% of VP have been alloted unconditionally to or acquired unconditionally by and were beneficially
held throughout the relevant py by one or more co operative societies.
6. A co which is not a Pvt co and fullfils any of the following conditions :
- its equity shares should have, as on the last day of PY, been listed in a RSE in india ; or
- its ES carrying at least 50% VP (40% in case of industrial co.) should have been uncond.allotted to or acquired by and should have been benefi
held throughout the RPY by : a. Govt ; b. Statutory Corporation ; c. a co in which public are subs intt ; d. any wholly owned susby of c.

Dividend shall not include :

Any advance or loan made to a s/h or concern by a co in the ordinary course of its buz where the money lending is Substantial Part of the buz of co.
Any div paid by a co which is set off by the co againstthe whole or any part of the loan which has been deemed u/s 2(22)(e).
Any pay by a co on purchase of its own shares.
Any distribution of shares pursuant to a Demerger by the Resulting co to the s/h of the demerged co (whether or not there is a reduction of cap in
the demerged co. )

PRINCIPLE OF MUTUALITY
The first principle of mutuality is that no person can trade with himself or make income out of himself.
A mutual concern arises when a group of persons associate together with a common object and contribute monies together with a common object
and divide the surplus amongst themselves.However profit is not an objective.
All the contributors to the common fund are entitled to participate to the surplus and all the participants to the surplus must be the contributor
to the common fund.
It is not necessary for the mutual concern to distribute the surplus immediately.The participation in the surplus may be by way of reduction in
future contributions or division of surplus on dissolution.
The fact that mutual concern is incorporated as a company does not make any difference because incorporation does not destroy the identity of
the contributors and participators.
The income of a mutual concern is exempt from tax as far as it is derived from activities of mutual nature.The income so far as it is confined to own

members is also exempt.'

When taxable ?
Only in case of Trade/Professional Association
Nature of income tax
the income derived from specific services performed for its members is taxable
income received from non members.
any section
44A

44A

>Applicable only to that T/P association the income of which is not distributed to its members.
> In case general receipts from members i.e contribution, entrance fee etc., general exp shall be allowed as deduction and difference :
Deficiency
or
will be allowed as deduction in getting PGBP
if balance, then from other heads
before this, effect shall be given to ded under this act and b/f losses
Max ded = 50% of TI before giving deduction of such deficiency
e.g trade association
General receipts
2L
Specific receipts
Gen exp
4.5L
Exp on above
Deficiency
2.5L
Surplus exempt

General receipts
Gen exp
Deficiency

TI before deficiency

PGBP
O/S

Max deficiency set off

2L
4.5L
2.5L
0.8
3

50%

Taxable

3.8
1.9

Balance deficieny 2.5-1.9 = .6 shall have no effect and

shall not be c/fd
ALTERNATE MINIMUM TAX
Ch-XII-BA
115JC
115JD
115JE
IN AMT Book Pofits have no relevance unlike MAT. Further, AMT is calculated by making
Applicability
All assessees except companies,
who has claimed deduction under any section (except 80P)
included in chapter VI-A under the heading C-Deduction in respect of income
and under section 10AA
ADJUSTED TI
TI as computed under the normal provisions of the act
xx
Add- Deduction ch VI-A [80-IA to 80RRB] o/t 80P
xx
Add-Deduction under Sec 10AA
xx
Add-Ded u/s 35AD as reduced by dep u/s 32 as if no ded

surplus
Exempt from tax

3L
1.6L
1.4L

Specific receipts
Exp on above
b/f dep
PGBP
Def.

bank Intt
b/f Dep

3L
0.60L

3L
1.6L
1.4L
0.6
0.8
0.8
-

Income from O/S

def
TI

3
1.1
1.9

115JEE
some adjustments in Taxable Incomes.
When ?
The regular income tax payable by a person for
is less than the AMT payable for such year, then
the Adjusted TI shall be deemed to be tha TI an
the person has to pay tax @19.055% (18.5+3%
Not Applicable
When the ATI of any
INDL/HUF/AOP/BOI (incorporated or not)/AJP
as referred u/s 2(31)(vii)

was allowed for asset which is subject to 35AD

xx
80C to 80GGC and 80U & TTA are not allowed to be added back as these
are deduction in respect to certain payments.

does not exceed Rs. 20L

CA report
Report from a CA certifying the computation of ATI and AMT
to be furnished before the due date of ROI.

Tax Credit for AMT

if AMT > Regular IT the excess shall be available as AMT credit
that shall be allowed to c/f for next 10 AY
credit is allowed in the year when RIT > AMT
credit restricted to the difference b/w RTI-AMT
Amendments by FA 2014 w.r.t AMT
115JC has been amended to bring the Deduction claimed by an assessee u/s 35AD w.r.t Specified Business , in the ambit of AMT.
Accordingly it has been provided that the TI shall be incresed by deduction u/s 35AD as reduced by depreciation u/s 32 as if no deduction was
claimed u/s 35AD w.rt the concerned asset.
Sec 115JEE has been amended to avoid the hardship faced by assessee in a case when he has not claimed ded under ch VI-A/35AD/10AA and his ATI
doesnt exceed Rs 20L in a PY when he has a c/f AMT credit.
The amendment provides that in such a case the assessee shall be entitled to b/f the AMT credti.
Taxation of Firms :
184
Assessment as a Firm
185 Assessment when sec 184 not complied with
187
Change in the constituion of the firm
188A Joint and Several liability of partners for tax payable by the
189
Firm Dissolved or Buz Discontinued
40(b) Pay of Salary, bonus ,commission etc to partners
184
A firm shall be assessed as a firm for the purposes of this act if :
A certified copy of the instrument should a
1 the partnership is evidenced by an instrument ,and
the ROI of PY in respect of which assessment a
2 the individual shares of the partners are specified in the instrument.
is first sought.
If there is any change in the constitution of the firm then the revised
The certification is made in written by all the p
instrument is certified and attached to ROI of PY concerned.
not being a minor.
> If the firm dose not comply with the provisions of sec 184 or there is any failure on the part of the firm as mentioned in sec 144, then :
> The interest and remuneration paid to the partners shall be fully disallowed in the hands of the firm i.e taxed in the hands of the firm ;
> Interest and Remuneratio shall not be taxed in the hands of the partners u/s 28(v).
187

> Where at the time of making assessment u/s 143/144/147/153,

As far as Tax liability is concerned, sec 188A
it is found that a change has occurred in the constitution of the firm,
for the same even in case of reconstition of firm
the assessment shall be made on the latest reconstituted firm.
What do you mean by change ?
> one or more partners retire or new admitted provided one or more before change, remain in the reconstituted firm ; or
> where all the partners continue with a change in the respective shares or in the shares of some of them.
e.g: ABC , A retired, D admitted now its DBC
Its a change
DBC, B gone ,E came now its DEC
Its a change
ABC, B died and deed is silent : not a change its dissolution time
ABC, B died and deed provides that buz shall be continued : its achange.

188

Succession of One Firm by Another Firm

Where a firm is succeeded by another firm ,and the case is not one covered by sec 187, separate assessment shall be made on both :

Predecessor
Successor
188A

189

Firm

Joint & Several Liabilities of the partners for tax payable by firm :
Every person ,who was during the PY ,
a partner of a firm and the legal representative of a deceased partner,
shall be jointly and severally liable along with the firm,
for the amount of Tax,Penalty or other sum payable by the Firm,
for the AY to which such PY is relevant.

Firm Dissolved or Business Discontinued

The AO shall make an assessment as if no such diss/discont happened and the act shall apply accordingly.
Every person who was at the time of such diss/discont. A partner of the firm and the legal heir of the deceased partner, shall be jointly
severally liable for tax ,penalty and other sum payable by the firm.
Where such diss/disct takes place after assessment proceedings have commenced, then the proceeding may be continued against pers
referred above from the stage at which the proceedings stood at the time of such discontinuance or dissolution.

Income
LTCG
STCG
Remuneration & Intt
Remuneration & Intt
40(b)
40(b)(i)
40(b)(ii)

40(b)(iii)
40(b)(iv)
40(b)(v)

Upto the date of succession

After the date of Succession

Tax 30%
112 or 10(38)
111A
Allowed if within 40(b)
Taxed in excess of 40(b)

Partners

Share of income
Remuneration & Intt
Remuneration & Intt

Exempt u/s 10(2A)

Taxed u/s 28(v) if within 40(b)
in excess of 40(b)

Losses of the firm shall be c/f by the firm only.

Interst and Remuneration paid to partners by a firm are not deductible unless All the following conditions are satisfied :
Remuneration is only paid to a working partner.
The payment of Remuneration to a working partner and payment of interest to any partner should be authorised by and should be in
accordance with the terms of Partnership Deed.
Cir.739 says that the remuneration shall be addmissible only if the partnership deed eithr specifies the amt of remuneration payable to
each working partner or lays down the manner of quantifying such remuneration.
The payment of Remuneration and Interest should relate to a period falling after the date of partnership deed. That means the PD cnt
provide for retrospective payment thereof.
The payment of interest to a partner should not exceed the amount calculated at the rate of 12% simple interest.(excess taxed in partn
The payment of Remuneration should not exceed the following(excess shall be disallowed and taxed in the hands of partners )
On the first Book Profit or In case of Loss
150000/- or 90%*BP, WIH
On the balance BP
60%*BP
Book Profit :
P/L as per PGBP
xx
Not considered:
Add- Remuneration to partners if debited
xx
B/F Losses u/s 72
Add- Interest in excess of limit (i.e above 12%)paid
xx
Chapter VI-A
Less: Depreciation u/s 32 [CY and b/f, if any ]
xx
Add:Other disallowance in computing PGBP
xx
Book Profit
xx

Notes :

If a firm pays interest to partner and the partner pays intt to firm on his drawings then the both shall not be netted off but intt paid by
firm is allowed as limit provided and received is taxable as business income.
Only 12% is allowed and PD has to specify on which cap Fixed or current or on any loan
Explanation 1 to sec 40(b) :
Where an indl is a partner in a representative capacity, then
1 Interest paid by the firm to such individual o/w than as partner in a representative capacity, shall not be tak
into account for the purposes of sec 40(b)
2 Interest paid by the firm to such indl as a partner in representative capacity and interest paid by the firm to
person so represented shall be taken into account .
e.g
X is a partner on behalf of his HUF.He gave loan to firm from his personal assets and also the firm pays intt to him on the capital of HUF
> 40(b)
not applicable on intt paid to X on loan given by him form personal assets
shall be applicable in case of intt on capital of HUF being the person so represented by X.
Explanation 2 to sec 40(b) :
Where an individual is a partner in a firm o/w than as partner in a representative capacity, interest paid by the
firm to such indl shall not be taken into account for the purposes of sec 40(b), if such intt is received by him o
behalf or for the benefit of any other person.
e.g
Mr X is a partner in indl capacity.He is also Karta of HUF.Firm pays intt 1000 to X on loan given by HUF to the firm.Also intt 1500 paid b
firm to X on his capital.
> 40(b)
Not aaplicable for 1000 being intt paid by firm to a partner o/w than in a representative capacity, on or for the benefit of
other person i.e HUF.Such exp is allowed u/s 36(1)(iii) to the firm.
78(1)
C/F and S/O of losses in case of change in the constitution of firm
It provides that where a change in the constitution of firm takes place on account of retirement of partner or death of the partner then, the firm
shall not carry forward and set off the following b/f losses :
a. Share of the retired/deceased partner in the b/f losses in the firm
xx
b. Less - Share of the retired /deceased partner in the current year profit
xx
b/f loss not to be c/f by the firm
a-b

TAXATION OF LLPs
> The Income of the LLP shall be taxed at 30.9% .LTCG and STCG shall be taxed u/s 112 and 111A.
> The Remuneration and interest paid to partners shall be allowed as per sec 40(b).
> The share of profit received by the partners shall be exempt u/s 10(2A).
> The remuneration and interest received by partners shall be taxed u/s 28.
> There will be no implication under the Income Tax Act if a PF is converted into a LLP.
> CG shall be exempt in case a co is converted into a LLP .
> The ROI of the LLP shall be signed by the Designated Partner and in case DP not there, by any partner .
> Sec 167C says that the liability of all the partners shall be jointly and severelly wrt tax payable [FA ,2013 amended that tax due shall include int
penalty and any other sum due under the act] unless proved that the non recovery cannot be attributable to any gross neglect,misfeasance, or
breach of duty on his part in relation to the affairs of the LLP .
> Sec 44AD is not applicabe to LLPs.

TAXATION OF AOP/BOI
Sec 40(ba) is specific to AOP/BOI which EXPRESSELY DISALLOWS THE SALARY,INTEREST,BONUS,COMMISSION OR REMUNERATION PAID TO
ANY MEMBER THEREOF FOR COMPUTING PGBP INCOME.
The income is computed as per the normal provisions of IT and in case of business sec 28 to 44D are applicable having regard to the prov of sec 40(

P-T-R

> Rent paid to members for use of members' premises, is allowed sub to sec 40A(2).
> Explanation 1 :
Where interest is paid by it to any member and the member also pays interest ,then the net interest shall be t
e.g AOP/BOI ---- > Member A interest 12000
Member A --- > AOP/BOI intt 7000
Disallowed u/s 40(ba)
12000 - 7000 = 5000
e.g AOP/BOI ---- > Member A interest 10000
Member A --- > AOP/BOI intt 12000
Income of AOP/BOI
10000 - 12000 = 2000
> Explanation 2 :
Where an Indl is member on behalf or for the benefit of any other person, then the Intt paid by aop/boi to such
indl or by such indl to aop/boi o/w than as a member in representative capacity, shall not be taken into account for the purpose of disal
eg X is member on behalf of his HUF. AOP pays intt to HUF 10k on capital and 12k on loan given by HUF. Also it pays intt 5k to X on loan
given by X from his self property.
40(ba)
10+12 = 22k
36(1)(iii)
5000

> Explanation 3 :
Where an indl is member in his personal cap then any intt to him on behalf or for the benefit of any other pers
shalll not be considered for 40(ba) [reverse of expl 2 ]
Tax Rates on AOP/BOI : Sec 167B
Basis
Condidtions
Taxation at
Share of Members
1. None of the members have TI (excluding Share in AOP/BOI)
Normal rates applicable to an Individual
are known &
exceeding exemption Limit; AND
Determinate
2. None of the member is taxed at rate higher than MMR

Share of Members
are unknown or
InDeterminate

1. One or more members have TI (excl) exceeding exemption Limit;

AND
2. None of the member is taxed at rate higher than MMR

Tax the entire income of the AOP/BOI is to be ta

such MMR

1. One or more member are assessable at MMR

1. Higher's tax at = Such Higher Rate

2. Balance Income Tax at = MMR

1. None of the member is taxed at rate higher than MMR

Tax the entire income of the AOP/BOI is to be ta

MMR

1. One or more member are assessable at MMR

Tax the entire income of the AOP/BOI is to be ta

Higher Rate.

> MMR = 30.9%

> Loss of AOP/BOI shall be c/f by itself only.
> the share of member in aop/boi shall be deemed to unknown or indeterminate if such shares are indeterminate or unknown at the time of
formation of AOP/BOI ar at any time thereafter
Rebate u/s 86
To members
AOP/BOI charged at
Rebate
Will share in AOP income included in TI of Member
Normal Rates
Yes.At average tax rate. YES
Normal Rates but tax payable is
NIL
NO.
YES

MMR or Higher rate

NO.

NO

67A : Manner of Computing Members' share in the Income of AOP

P/L a/c
xx
Add: 40(ba) disallowances
xx
Taxable TI of AOP
xx
Income Allocated to Members
Taxable TI of AOP
Less : Salaries/Intt paid to members
Allocable to members in Profit Ratio

Members Income
Share in AOP
Add : Salary/Intt
Other income, if any
Total Income

xx
xx
xx
xx

xx
xx
xx

TAXATION OF COMPANIES
The liability of a co depends on the following :
Whether its a Domestic co ?
Whether Dividends declared and distributed by it ?
Whether Closely Held ?
Companies are taxed at Flat Rates of 30/40/50 %
Exception : Income deriving PGBP from Insurance Business 12.5% and other income normal rate.Also such co are not sub to MAT
For Non Resident taxation refer the chapter- Taxation of NRs
Deductions Available for certain Expenses :
Tax incentives on certain incomes
35/35ABB/35AC/35AD/35D/35DD/35E/36(1)(ix)
80-IA/IB/IC/JJA/JJAA
178 Tax Liability of companies in Liquidation
> Every person who is appointed as a Liquidator of a co , shall give a notice, within 30d of his appointment, to the concerned AO.
> The AO ,after making necessary inquiry ,shall within 3m of such notice received, notify to the L, the amount which would be sufficient to provide
for the amt payable by the co.
> The L shall not part with the Assets/Prop of co unless he has set aside the amt of tax so notified by AO, unless permitted by Chief Comm
> The L can part the assets for the purposes of :
> payment of tax payable by the co ;or
> for making payment of government dues ;or
> for meeting the cost of WU of the co.
> If the L doesnt comply with any of the above, he shall be personally liable

179 Liability of Directors of a Private Company

> In case of non recovery, any person who was a D of a Pvt co , shall be jointly and severally liable for the tax, interest or any sum payable by the c
unless he proves that the non reovery was not on part of his neglect, misfeasance etc.
> This shall apply irrespective of whether the co is liquidating or not.
MINIMUM ALTERNATE TAX
115JB(1)
Charging Section
Tax payable by a company shall be higher of :
Tax on TI as per the normal provisions of IT act ; or

Marginal relief : Tax on income >1cr together with SC shall not exceed t
by which the income is >1cr

18.5% of Book Profits

Available in both cases
115JB(2)
Preparation of P/L
Computation of BP
Amount debited to P/L account ; As INCREASED BY :
1 AMOUNT OF INCOME TAX PAID OR PAYABLE, AND THE PROVISION THEREOF ;
To be Added
Not to be Added
> Income Tax
> Wealth Tax
> CDT u/s 115-O
> STT
> Interest under Income Tax Act
> Intt under Wealth Tax Act and other Acts
> Surcharge and EC
> Penalties
2 AMOUNTS CARRIED TO ANY RESERVES, BY WHATEVER NAME CALLED
> Transfer to reserves as per any statute is to be added back
> Excess provisions are reserves and to be added back
3 PROVISIONS MADE TO MEET UNCERTAIN LIABILITIES :
To be Added
Not to be Added
> Provision for Leave Encashment/Warranty
> Provision for Leave Encashment/Warranty
on adhoc basis
on scientific basis
> Provision for gratuity on adhoc basis
> Provision for gratuity on basis of Actuary
> Provisions for Losses, Contingencies
> Bad Debts Written off
4 THE AMOUNT BY WAY OF PROVISION FOR LOSSES OF SUBSIDIARY COMPANIES
Even the actual loss debited to P/L shall be added back.
5 THE AMOUNT OF DIVIDENDS PAID OR PROPOSED
6 THE AMOUNT OR EXP RELATED TO ANY INCOME TO WHICH SEC 10 [ O/T 10(38) ] OR 11 OR 12 APPLY
That means gain u/s 10(38) is subject to MAT
7 THE AMOUNT OF DEPRCIATION (ENTIRE DEP INCLUDING DEP ON REVALUED ASSETS )
8 AMOUNT OF DEFERRED TAX AND PROVISION THEREOF
9 THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET,
> Provision for Bad and Doubtful debts is to be added back as its amt set aside for diminution in asset viz. Debtors
> Provision for diminution in value of any Investment or Asset as per AS 13/28
10 THE AMOUNT STANDING IN REVALUATION RESERVE RELATING TO REVALUED ASSET ON THE RETIREMENT OR DISPOSAL
As REDUCED BY :
1 THE AMOUNT WITHDRAWN FROM ANY RESRVE OR PROVISION IF ANY SUCH AMOUNT IS CREDITED TO THE P/L ACCOUNT
However, any amt withdrawn from any reserve or provision, credited to P/L account ,shall be reduced only if the same was created by

debiting the P/L account.

2 THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISION OF SEC 10 (O/T 10(38) OR 11 OR 12 APPLY, IF ANY SUCH AMT IS
CREDITED TO P/L A/C.
3 THE AMT OF DEP DEBITED TO P/L A/C EXCEPT DEP ON REVALUATION
4 THE AMT WDRN FROM RR AND CREDITED TO P/L, TO THE EXTENT IT DOES NOT EXCEED THE AMOUNT OF DEPRECIATION ON ACC
OF REVALUATION OF ASSET REFERRED TO IN 3 ABOVE
5 THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION, WIL, AS PER BOA.
> Loss shall not include depreciation
> if the amt of b/f loss or unabs dep is NIL, then nothin to be dedusted here

6 THE AMOUNT OF PROFIT OF SICK IND CO COMMENCING FROM THE AY IN WHICH IT BECAME SICK AND ENDING WITH THE AY
IN DURING WHICH THE ENTIRE N/W OF SUCH CO BECOMES EQUAL TO OR THE ACCUMULATED LOSSES.
7 THE AMOUNT OF DEFERRED TAX, IF ANY , CREDITED TO P/L.
115JB(3)

C/F of Losses and Depreciation

Nothing contained in section 115JB shall affect the determination of the amt in relation to the relevant PY to be c/f to the susequent yr
under the prov of sec 32/72/73/74A

115JB(4)

Furnishing of report
To the effect that computation of B/P is as per prov, certified by a CA

115JB(5)

Applicability of other prov of the Act

Save as o/w provided, all the prov of act are applicable here as well.

115JAA

MAT CREDIT
TO BE UTILISED FOR 10AY IN THE FOLLOWING CASE
TAX ON REGULAR INCOME IS > MAT = DIFFERENCE CAN BE SET OFF

TAXATION OF SECURITISATION TRUST

Income of a ST is exempted
10(23DA)
Income distributed by the ST
Subject to additional IT as follows :
115TA
Person in whose case the income is exempt under the IT act 1961
Ind/HUF
Other Investors
115TB
Interst in case the tax has not been paid within 14d from the date of distribution or payment of inco
from the date immediately after the time 14d expires till the day of payment of tax

NIL
25%
30%
1% pm/part th

115TC

The co and the person responsible for pay of dist inc. to deemed to assessee in default in case fails to
pay tax within specified time limit

Income from ST in the hands of Investors

exempted u/s 10(35A)

ntitlement of receiving the

Units= of MFs or UTI.

on/after 01.06.13
NIL
25%
30%
25%
30%
5%

in respect of which

Rata basis over the life of

rust is exempted frm STT.

duction of tax.

annuity plan in the

ncessional rate of tax 15% on

it a report u/s

said PY alongwith

of its members.
preserving,storing or mkt

division of property

of Deduction
Film Released
after 31.12
COA
COA
or
the amt
realised
WIL

before its liquida

ad CG and the sales

er of spec sec, then ,

to be the amount

5R is made.

of BOD or JV etc.

SI= >=20% of the VP/Income

at any time during PY
Concern = HUF/F/C/AOP/BOI

eneficial owner/10% VP/Mem

rtner = on the date on
hich Loan/Advance is given.

spent by s/h.

ounting profits.
n sale of assets

.or RBI or corpor

tantially interested.

were beneficially

have been benefic.

usby of c.

rt of the buz of co.

duction of cap in

a common object

he contributor
reduction in
the identity of

is confined to own

Yes
Yes
Yes
Yes

n and difference :

ble by a person for pY

for such year, then
med to be tha TI and
9.055% (18.5+3% )

on of ATI and AMT,

duction was

D/10AA and his ATI

ax payable by the firm

strument should accompany

hich assessment as a firm

ritten by all the partner,

f the firm ;

oncerned, sec 188A provides

reconstition of firm.

e made on both :

er, shall be jointly &

nued against person

f within 40(b)

and should be in

eration payable to

means the PD cnt

cess taxed in partner)

partners )

ff but intt paid by

y, shall not be taken

paid by the firm to the

the capital of HUF

nterest paid by the

received by him on

o intt 1500 paid by

for the benefit of

then, the firm

e shall include interest

misfeasance, or

he prov of sec 40(ba)

interest shall be treated

by aop/boi to such
he purpose of disall.
ntt 5k to X on loan

t of any other person

ation at
n Individual

AOP/BOI is to be taxed at

AOP/BOI is to be taxed at

AOP/BOI is to be taxed at

he time of

fficient to provide

ef Comm

m payable by the co.

shall not exceed the amt

e was created by

N ON ACC

the susequent yr

NIL
28.33%
33.99%