Mukund Industries Ltd. (MIL), is a big corporate house, with presence in several industries and businesses, subsidiaries and sister concerns. As the Company Secretary, you are also a key person in the Group's taxation ma

CS Professional · Direct Tax Law & Practice · PYQS · June 2019
Mukund Industries Ltd. (MIL), is a big corporate house, with presence in several industries and businesses, subsidiaries and sister concerns. As the Company Secretary, you are also a key person in the Group's taxation matters, including international taxation. MIL holds a think tank meeting in the month of April, 2019 to arrive at a preliminary idea of its income-tax liability for the previous year 2018-19. Abhinav Pvt. Ltd.'s activities: Abhinav Pvt. Ltd. (APL) is one of the group companies, having a small presence in the overseas market also. It has agricultural lands in country L with which India does not have a DTAA. The global turnover of APL during this year was ₹210 crores. During the last 7 years, the company has been showing an increase of around 6% in its turnover, as compared to the earlier year. During the PY 2018-19, APL derived business income of ₹140 lakh from its Indian operations, but made a loss of ₹10 lakh from its core business operations in country L. From its agricultural operations in country L, APL made net surplus of ₹22 lakh. In country L, the income earned from other sources was ₹8 lakh. In country L, tax paid is ₹5.4 lakh. Agricultural income is taxed there and business loss can be set off against any other income in the same year. Results of Vaamana & Co.: MIL is a partner in a firm Vaamana & Co. On behalf of MIL, Mr. Vishnu, its director, is a working partner in the said firm. The Taxation Manager furnishes gist of the firm's workings, which are furnished infra. The partnership firm, has earned net profit of ₹79 lakhs, before remuneration to working partners. Only depreciation pertaining to current year has been considered in this. The partnership deed provides for remuneration of ₹40 lakhs to the working partners, and this amount has also been actually paid by the firm. The income from other sources earned by the firm during the PY 2018-19 is ₹76 lakhs. The firm has brought forward business loss of ₹7 lakhs (eligible for set off) and unabsorbed depreciation of ₹6 lakhs, both pertaining to the AY 2018-19. Workings of industrial undertaking owned by RPL: Rajalakshmi Textiles Pvt. Ltd. (RPL) is a subsidiary of MIL. Two industrial undertakings are owned by RPL, units P and Q. Both units are eligible for claiming deduction u/s 80-IA. During the PY 2018-19, unit P made a profit of ₹70 lakhs, while unit Q made a loss of ₹15 lakhs. Gross total income of RPL is ₹590 lakhs. Ascertain the tax payable by APL for the assessment year 2019-20. Show the complete workings.

Answer & Explanation:

The turnover of Abhinav Pvt. Ltd. 'APL' was less than ₹250 crores during the previous year 2016-17. Hence, the tax rates applicable is @ 25%. Computation of Total Income and Tax Payable of APL for the AY 2019-20 Particulars Amount (in Lakhs) Business Income Profits made from its Indian Operation 140 Less: Business loss from its core operation in Country L (10) 130 Income from Other Sources in country L 8 Agriculture Income in Country L 22 Total Income 160 Tax @ 25% 40 Surcharge @7% 2.80 Total Tax including surcharge 42.80 Add: Cess @4% 1.712 Total Tax including surcharge and cess 44.512 Less: Double Taxation Relief (Note 1) (5.40) Net Tax Payable 39.112 Working Note: 1 Calculation of Double Taxation Relief Particulars Amount (in Lakhs) Business loss from its core operation in Country L (10) Income from Other Sources in country L 8 Agriculture Income in Country L 22 Total Income in Country L 20 Tax Paid in Country L 5.40 A) Average Rate of Tax in Country L [(5.4/20)*100] 27% B) Average Rate of Tax in India [(44.512/160)*100] 27.82% Rate to be applied for double taxation relief i.e. A or B whichever is lower i.e. 27% or 27.82% whichever is less 27% Double Taxed Income 20 Double Taxation Relief (20*27%) 5.4

Topics: International Taxation, Income from Business & Profession, Income from Other Sources

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