Dear Professional Seniors & Friends,
Here is the 2nd post of MCQ on concept based practical professional knowledge in a unique manner to be self answered by participants. The detailed answer of these MCQs shall be posted next day for the self assessment of the participants.
MCQ 1. What may be the maximum rate of income tax plus surcharge and cess for a person for AY 2019-20 under the Income Tax Act?
A) 35.88%
B) 34.32%
C) 78%
D) 84%
MCQ 2. A building is owned by a person and running his own businesses under four different name in the same building and charging rent only from his two businesses and pay GST on the rent charged. Is there any GST implication in his hand on the rent which he is actually not charging from his other two businesses?
A) Yes, on the same amount which he is charging from his other two businesses.
B) No, as he is not charging any rent from these two businesses.
C) Yes, on the Open Market Value of the rent relating to these businesses.
D) No, as he is charging the whole rent from the two businesses.
Answer MCQ Challenge #0002
Answer MCQ (1).
Normally tax rates for different entities are 25%, 30%,40% plus surcharge and cess. But when the Income is assessed u/s 68(Cash Credits), 69(Unexplained Investments), 69A(Unexplained money), 69B(Amount of investments not fully disclosed in books of accounts), 69C(Unexplained Expenditure) & 69D(Amount borrowed or repaid on hundi) then section 115BBE comes into force w.e.f 01.04.2013 which states 30% tax plus surcharge and cess without any deduction of expenses or allowance.
During demonetization, Section 115BBE was amended by the Taxation Laws (Second Amendment) Act, 2016 w.e.f. 01.04.2017 to raise the tax rate from 30% to 60%. Surcharge under this section is 25% of income tax and cess is 4% on tax and surcharge (as amended by Finance Act 2018). Penalty under section 271AAC shall also be payable at 10% of the tax payable if this income has not been included by the assessee in his return of Income.
Hence, Maximum tax rate under Section 115 BBE comes to 78% without deduction of any expenditure or allowance or set off of any losses. This section is really going to hit all of us in coming future and may have severe implications.
Correct answer is (C) i.e. 78% as question asked about tax, surcharge and cess NOT penalty.
Answer MCQ (2).
Section 7 of the CGST Act defines the word supply, if it is made for consideration. But Schedule I defines the activities to be treated as supply even made without consideration.
Entry no (b) of Schedule I states the transaction between related parties made without consideration to be deemed as supply.Valuation for such cases will be based on the valuation rules (Rule 28) of the CGST Act which states that the OMV will be taken as the value of supply.
Hence, In our case GST will be applicable on the OMV of the rent even when he is not charging any rent from 2 business. This is a case of hidden supply which may have wide implication under GST Law.
Correct answer is (C).
(Disclaimer: Please do not treat this as professional opinion, you can definitely have your own opinion.)
Regards – CA Sanjay Kumar Agrawal
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