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

(a) Computation of Taxable Salary of X for Assessment Year 2021 – 22

Assumptions: X opts for the normal (old) regime, because under s.115BAC as it stood for AY 2021-22 the standard deduction was not allowed, and DA forms part of salary for retirement benefits.

1. Gross Salary:

• Basic Salary: ₹ 2,88,000
• Dearness Allowance: ₹ 57,600
• Bonus: ₹ 24,000
• Total Gross Salary: ₹ 3,69,600

2. Perquisites:

• Small Car: Since the car is used for both official and personal purposes and the employer bears all running and maintenance costs, the value is fixed at ₹ 1,800 per month.
• Value = ₹ 1,800 × 12 = ₹ 21,600
• Rent-Free Accommodation (Kolkata): Kolkata is a metropolitan city. The perquisite is the lower of:
• (a) 15% of Salary (Basic + DA + Bonus) = 15% of ₹ 3,69,600 = ₹ 55,440
• (b) Actual Rent Paid = ₹ 2,500 × 12 = ₹ 30,000
• Value = ₹ 30,000
• Furniture: The value is 10% p.a. of the original cost of the furniture owned by the employer (Rule 3(1)).
• Cost of Refrigerator: ₹ 16,000
• Cost of Air-conditioner: ₹ 24,000
• Total Cost: ₹ 40,000
• Value = 10% of ₹ 40,000 = ₹ 4,000
• Life Insurance Premium: The premium of ₹ 24,000 paid by the employer on a policy of ₹ 4,80,000 on X's life is a taxable perquisite under Section 17(2)(v) of the Income Tax Act (X may claim deduction for it under Section 80C).

3. Provident Fund (PF):

• Employer’s Contribution: Taxable only if it exceeds 12% of the employee’s Basic + DA.
• 12% of (₹ 2,88,000 + ₹ 57,600) = 12% of ₹ 3,45,600 = ₹ 41,472.
• Since the actual contribution (₹ 40,320) is less than ₹ 41,472, it is fully exempt.
• Interest on PF: The interest of ₹ 28,000 credited to the recognised PF is exempt as it is taken to be credited at a rate not exceeding 9.5% p.a. (only interest above 9.5% is taxable).
• Taxable Interest = Nil

4. Statement of Taxable Salary (AY 2021-22):

• Basic Salary + DA + Bonus: ₹ 3,69,600
• Perquisite, car: ₹ 21,600
• Perquisite, rent-free accommodation: ₹ 30,000
• Perquisite, furniture: ₹ 4,000
• Perquisite, life insurance premium: ₹ 24,000
• Employer PF contribution and PF interest: exempt (Nil)
• Gross Salary: ₹ 4,49,200
• Less: Standard Deduction u/s 16(ia): ₹ 50,000
• Taxable Salary: ₹ 3,99,200

Own contribution of ₹ 40,320 and the LIC premium of ₹ 24,000 do not reduce salary income, they qualify under s.80C (overall limit ₹ 1,50,000) while computing total income. These figures follow the Income-tax Act, 1961, which governs AY 2021-22. The Income-tax Act, 2025 applies from 1.4.2026 and does not alter this computation.

(b) Revenue as per AS-9

Definition of Revenue: Under AS-9, Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, the rendering of services, and the use by others of enterprise resources yielding interest, royalties and dividends. It is measured by the charges made to customers for goods supplied and services rendered. In an agency relationship, revenue is only the commission, not the gross amount collected.

Items Not Included in Revenue (AS-9):

1. Realised gains from disposal of, and unrealised gains from holding, non-current assets, such as appreciation in the value of fixed assets.
2. Unrealised holding gains from changes in the market prices of current assets.
3. Realised or unrealised gains from translation of foreign currency accounts.
4. Realised gains from discharge of an obligation at less than its carrying amount, and unrealised gains from restatement of the carrying amount of an obligation.
5. Amounts collected on behalf of third parties, such as GST or other indirect taxes, and the gross collections of an agent.
6. Items outside the scope of AS-9: revenue from construction contracts (AS-7), hire-purchase and lease agreements (AS-19), government grants (AS-12) and revenue of insurance companies from insurance contracts.

Recognition of Revenue from Sale of Goods (paras 10 and 11): Performance is regarded as achieved, and revenue is recognised, when both conditions are met:

1. The seller has transferred to the buyer the property in the goods for a price, or all significant risks and rewards of ownership have been transferred, and the seller retains no effective control of the goods to a degree usually associated with ownership.
2. No significant uncertainty exists regarding the amount of consideration that will be derived from the sale.

In addition, at the time of performance it must not be unreasonable to expect ultimate collection. If such uncertainty exists, recognition is postponed until it is reasonably certain that collection will be made.

(c) Responsibility Accounting

Concept and Features: Responsibility Accounting is a management accounting system that organizes an enterprise into distinct "responsibility centers." It is based on the principle that performance should be evaluated based on factors that a manager can actually control. The primary features include:

1. Decentralization: It supports a decentralized structure where authority is delegated to lower levels of management.
2. Responsibility Centers: The organization is divided into Cost Centers, Revenue Centers, Profit Centers, and Investment Centers.
3. Controllability: Only "controllable costs" are charged to a manager. Uncontrollable costs (like allocated overheads) are excluded from performance evaluation.
4. Performance Evaluation: It provides a framework for comparing actual performance against predetermined budgets to identify variances.

Steps in Implementation:

1. Organizational Mapping: The first step is to define the organizational structure and identify the specific responsibility centers (e.g., a production department as a cost center).
2. Identification of Controllable Items: For each center, the manager must identify which revenues, costs, or investments they have the authority to influence.
3. Budgeting: Standard budgets or performance targets must be set for each center. These budgets serve as the "benchmarks" for evaluation.
4. Data Collection and Reporting: Actual financial data must be collected and reported periodically (monthly or quarterly) for each center.
5. Variance Analysis: The actual results are compared with the budgeted figures. Significant variances are investigated to determine if they were due to managerial efficiency or external factors.
6. Feedback and Action: The results are used to provide feedback to managers, facilitating corrective actions and informing future decision-making.