(a) X, an employee of a firm, furnished the following particulars of his income for the year ended March 31, 2021 :

₹

Basic Salary 2,88,000
Dearness Allowance 57,600
Own contribution to recognized Provident Fund 40,320
Employer's contribution to th

Question

(a) X, an employee of a firm, furnished the following particulars of his income for the year ended March 31, 2021 :

₹

Basic Salary 2,88,000
Dearness Allowance 57,600
Own contribution to recognized Provident Fund 40,320
Employer's contribution to the above fund 40,320
Interest on balance in recognized Provident Fund 28,000
Bonus 24,000

Additional Information :

(i) X was provided with a small car for which the employer paid all the running and maintenance costs. The car was used for official as well as personal purposes.

(ii) He was also provided with rent-free accommodation at Kolkata for which the employer paid a rent of ₹ 2,500 pm. He was allowed to use one refrigerator and an air-conditioner costing ₹ 16,000 and ₹ 24,000 respectively, while their written-down values as on 01.04.2020 were ₹ 9,000 and ₹ 14,000 respectively.

(iii) Life insurance premium of ₹ 24,000 was paid by his employer on an Insurance Policy for ₹ 4,80,000 on the life of X.

Compute the taxable salary of X for the Assessment Year 2021 – 22. (20 marks)

(b) Explain the term 'Revenue' as per AS-9. State the items not included in the term 'Revenue'. When should revenue from sale of goods be recognized ? (15 marks)

(c) Explain the concept and features of Responsibility Accounting. Discuss the steps involved in implementing such an Accounting System. (15 marks)

UPSC Answer Check · Accepted Answer

Begin with precise computation for part (a) allocating ~40% time given its 20 marks weightage, showing all working notes for perquisites valuation under Rule 3. For part (b), define revenue per AS-9 with exclusions and recognition criteria (~30% time, 15 marks). For part (c), explain responsibility accounting concept, features and implementation steps with diagrammatic representation (~30% time, 15 marks). Conclude with brief synthesis on how accurate salary computation links to revenue recognition and accountability.
- Part (a): Correct computation of taxable salary with proper treatment of basic salary, DA, bonus, RPF contributions (employer's contribution taxable only to extent exceeding 12% of salary), interest on RPF (exempt up to 9.5%), car perquisite at ₹1,800 pm for small car, rent-free accommodation valuation at 15% of salary for Kolkata (metro), furniture perquisite at 10% of WDV, and LIC premium treated as perquisite u/s 17(2)(v)
- Part (a): Accurate working notes showing salary for accommodation valuation = Basic + DA (forming part of retirement benefits) + Bonus = ₹3,69,600; accommodation value = 15% of ₹3,69,600 = ₹55,440; furniture = 10% of (₹9,000+₹14,000) = ₹2,300
- Part (b): Definition of revenue per AS-9 as gross inflow of cash, receivables or other consideration arising in course of ordinary activities from sale of goods, rendering services, and use by others of enterprise resources yielding interest, royalties and dividends
- Part (b): Exclusions from revenue—realized/unrealized gains (AS-9 para 7), holding gains on biological assets, unrealized holding gains on investments, and specific exclusions like contributions from shareholders, capital receipts, and borrowings
- Part (b): Revenue recognition criteria for sale of goods—transfer of significant risks and rewards, no continuing managerial involvement, reliable measurement of revenue and costs, probable economic benefits, and specific timing per AS-9 paras 10-12
- Part (c): Concept of responsibility accounting as system of accounting recognizing various responsibility centers (cost, revenue, profit, investment) and decentralization of decision-making with performance measurement
- Part (c): Implementation steps—identification of responsibility centers, establishment of standards/budgets, preparation of responsibility reports, performance evaluation and feedback, and corrective action with management by exception

Dimension	Weight	Max marks	Excellent	Average	Poor
Demand-directive understanding	20%	10	For (a) interprets 'compute' as requiring systematic tabular presentation with clear working notes; for (b) addresses all three directive components (definition, exclusions, recognition timing) with equal weight; for (c) covers both 'explain concept/features' and 'discuss steps' without conflation	Addresses all parts but treats (a) as mechanical calculation without explanatory notes, (b) misses one component (typically exclusions), or (c) lists steps without explaining features	Misinterprets directives—treats (a) as theory question, (b) as revenue recognition under Ind AS 115 instead of AS-9, or (c) confuses responsibility accounting with standard costing
Content depth & accuracy	20%	10	(a) Applies correct valuation rules per Income-tax Act 1961 and Rule 3—car at ₹21,600, accommodation at ₹55,440, furniture at ₹2,300, LIC premium ₹24,000 as perquisite; (b) Cites AS-9 paragraphs precisely; (c) Distinguishes four responsibility centers with authority-responsibility linkage	Minor computational errors in (a) such as wrong accommodation percentage (10% instead of 15% for metro) or missing furniture perquisite; (b) generic AS-9 description without paragraph references; (c) lists steps without center types	Fundamental errors—treats entire employer RPF contribution as exempt, uses gross cost for furniture, omits AS-9 exclusions entirely, or describes financial accounting instead of responsibility accounting
Structure & flow	20%	10	Part (a) presents computation in standard format: salary components → perquisites u/s 17(2) → gross salary → deductions u/s 16 → net taxable salary with annexed working notes; parts (b) and (c) use structured headings matching directive verbs; seamless progression across all three parts	Readable structure but (a) lacks separate working notes causing clutter, (b) mixes definition with exclusions without sub-headings, or (c) presents steps as paragraph without numbering	Disorganized—random calculation order in (a), stream-of-consciousness in (b) and (c), or attempts all parts simultaneously without clear demarcation
Examples / case-law / data	20%	10	For (a) references specific notification/rule numbers (Rule 3(2), 3(1)(c)); for (b) illustrates revenue recognition with hypothetical sale transaction showing risk-reward transfer point; for (c) cites Indian corporate example like Tata Steel's divisional structure or BHEL's profit centers	Uses question's own data effectively in (a) but no external illustration; (b) and (c) purely theoretical without applied examples	No use of provided data in calculations, irrelevant examples (foreign GAAP for AS-9), or completely omits illustrative content despite 15 marks for theory parts
Conclusion & analytical edge	20%	10	Synthesizes across parts: notes how accurate perquisite valuation (a) ensures proper tax base for revenue generation, while responsibility accounting (c) enables performance measurement that AS-9 revenue recognition (b) validates; suggests integrated tax-accounting-control framework for salary administration	Brief part-wise conclusions without cross-linkage; restates main findings without analytical integration	Abrupt ending with no conclusion, or irrelevant conclusion on unrelated tax topic; treats three parts as completely isolated questions

(a) X, an employee of a firm, furnished the following particulars of his income for the year ended March 31, 2021 : ₹ Basic…

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