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Commerce & Accountancy 2025 Paper I 50 marks Explain

Paper I — Q3

(a) Explain in brief the deductions that are expressly allowed in computing the income from business under the Income-tax Act…

(a) Explain in brief the deductions that are expressly allowed in computing the income from business under the Income-tax Act, 1961. 15 (b) Harish sold jewellery on 15th June, 2023 for ₹ 10,10,000 (cost of jewellery to Harish on 25th May, 2002 was ₹ 94,500 and brokerage paid on the sale of jewellery was ₹ 10,000). On 15th December, 2023, he purchased a residential house for ₹ 5,00,000. On 15th June, 2023, he did not own any residential house. The cost inflation index for 2002-03 was 105 and for 2023-24, it was 348. Compute the amount of capital gains chargeable to tax for the Assessment Year 2024-25. (i) Assuming that Harish sells the new residential house before 15th December, 2026, what will be the taxable capital gains and for which year? (ii) Assuming that Harish purchases any other residential house before 15th June, 2025 or constructs any other residential house before 15th June, 2026, what will be the taxable capital gains and for which year? 9+3+3=15 (c) Sky Ltd. invited application for issuing 200000 Equity Shares of ₹ 10 each at a premium of ₹ 2 per share, payable as follows: ₹ 6 per share (including premium) on application and allotment Balance on the first and final call Applications for 600000 Equity Shares were received. Applications for 300000 shares were rejected and money refunded. Shares were allotted on pro rata basis to the remaining applicants. The first and final call was made and all the amount was received except on 2000 shares, which were forfeited and reissued at ₹ 7 per share. Pass necessary Journal Entries in the books of Sky Ltd. 20

हिंदी में प्रश्न पढ़ें

(a) आयकर अधिनियम, 1961 के अंतर्गत व्यवसाय से आय की गणना में स्पष्ट रूप से स्वीकृत कटौतियों को संक्षेप में समझाइए। 15 (b) हरीश 15 जून, 2023 को ₹ 10,10,000 में आभूषण बेच देता है (हरीश के लिए इन आभूषणों की लागत 25 मई, 2002 को ₹ 94,500 थी तथा उसने इनके विक्रय पर ₹ 10,000 दलाली के चुकाए)। 15 दिसंबर, 2023 को उसने ₹ 5,00,000 का एक रिहायशी मकान खरीदा। 15 जून, 2023 को उसके पास कोई रिहायशी मकान नहीं था। वर्ष 2002-03 में लागत स्फीति सूचकांक 105 था तथा वर्ष 2023-24 में यह 348 था। कर निर्धारण वर्ष 2024-25 के लिए करयोग्य पूंजी लाभ ज्ञात कीजिए। (i) यदि मान लिया जाए कि हरीश नया रिहायशी मकान 15 दिसंबर, 2026 से पहले बेच देता है, तो बताइए कि करयोग्य पूँजी लाभ क्या होगा और किस वर्ष का होगा। (ii) यदि मान लिया जाए कि हरीश एक अन्य रिहायशी मकान 15 जून, 2025 से पूर्व क्रय कर ले अथवा 15 जून, 2026 से पूर्व एक अन्य रिहायशी मकान बनवा ले, तो बताइए कि करयोग्य पूँजी लाभ क्या होगा और किस वर्ष का होगा। 9+3+3=15 (c) स्काई लिमिटेड ने ₹ 2 प्रति शेयर के प्रीमियम पर ₹ 10 प्रति शेयर के 200000 इक्विटी शेयर जारी करने के लिए आवेदन आमंत्रित किए, जिनका भुगतान इस प्रकार किया जाना था: आवेदन एवं आवंटन पर ₹ 6 प्रति शेयर (प्रीमियम सहित) शेष राशि प्रथम एवं अंतिम याचना (कॉल) पर 600000 इक्विटी शेयरों के लिए आवेदन प्राप्त हुए। 300000 शेयरों के लिए आवेदन अस्वीकार कर दिए गए एवं रुपये वापस कर दिए गए। शेष आवेदकों को अनुपातिक आधार पर शेयर आवंटित किए गए। पहली और अंतिम कॉल की गयी और 2000 शेयरों को छोड़कर सभी राशि प्राप्त हुई, जिन्हें जब्त कर लिया गया और ₹ 7 प्रति शेयर पर फिर से जारी किया गया। स्काई लिमिटेड की पुस्तकों में आवश्यक जर्नल प्रविष्टियाँ कीजिए। 20

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Directive word: Explain

This question asks you to explain. The directive word signals the depth of analysis expected, the structure of your answer, and the weight of evidence you must bring.

See our UPSC directive words guide for a full breakdown of how to respond to each command word.

How this answer will be evaluated

Approach

The directive 'explain' requires clear exposition with reasoning for part (a), while parts (b) and (c) demand computational precision. Allocate approximately 30% time to part (a) covering Section 30-36 deductions, 30% to part (b) with indexed cost calculations and exemption reversals under Sections 54F and 54, and 40% to part (c) for detailed journal entries including pro-rata allotment, forfeiture and reissue mechanics. Structure with clear headings for each sub-part, show all workings for computations, and conclude with tax liability summary for (b) and balance sheet impact for (c).

Key points expected

  • Part (a): Express deductions under Sections 30-36 including rent, repairs, insurance, depreciation (Section 32), scientific research (Section 35), and pre-commencement expenses (Section 35D) with brief description of each
  • Part (b): Computation of indexed cost of acquisition (₹94,500 × 348/105 = ₹3,13,200), brokerage adjustment, LTCG before exemption (₹10,10,000 - ₹10,000 - ₹3,13,200 = ₹6,86,800), and Section 54F exemption proportion (₹5,00,000/₹10,00,000 × ₹6,86,800 = ₹3,43,400)
  • Part (b)(i): Reversal of Section 54F exemption if new house sold before 3 years (15.12.2026), taxable LTCG of ₹3,43,400 in AY 2027-28 with cost of new house reduced by exempted amount
  • Part (b)(ii): Reversal under Section 54F(3) if another residential house purchased/constructed before specified dates, entire exemption of ₹3,43,400 becomes taxable in AY 2025-26 or AY 2026-27 respectively
  • Part (c): Journal entries for application money received (₹36,00,000), refund to rejected applicants (₹18,00,000), pro-rata allotment to 300,000 shares (2:3 ratio), allotment money adjustment, first call, forfeiture of 2,000 shares, and reissue at ₹7 with ₹4,000 transferred to capital reserve

Evaluation rubric

DimensionWeightMax marksExcellentAveragePoor
Demand-directive understanding15%7.5Correctly interprets 'explain' for (a) as requiring elaboration with legal basis, treats (b) as computational with proper identification of assessment years for reversals, and (c) as requiring full double-entry bookkeeping with narrations; distinguishes between Section 54 and 54F applicabilityMixes up directives—either over-explains calculations or under-explains provisions; confuses reversal timelines or assessment years; provides ledger accounts instead of journal entries for (c)Misinterprets directives entirely—lists deductions without explanation, shows only final answers without workings, or writes descriptive answer for computational parts
Content depth & accuracy30%15For (a): covers 8-10 specific deductions with correct section numbers; for (b): accurate CII application, correct exemption calculation under Section 54F, precise reversal triggers and assessment year identification; for (c): mathematically correct pro-rata (300:200), accurate forfeiture accounting with capital reserve computationCovers 5-6 deductions with some section errors; minor CII calculation errors or incorrect exemption proportion; pro-rata calculation errors or wrong forfeiture treatment (treating ₹7 as premium instead of face value adjustment)Fundamental errors—wrong base year for indexing, applies Section 54 instead of 54F, ignores brokerage, or completely wrong journal entries (wrong amounts, missing premium account, incorrect forfeiture)
Structure & flow20%10Clear three-part separation with sub-headings; for (a) logical grouping (rent/repairs, depreciation, specific incentives); for (b) step-wise computation format with separate working notes; for (c) chronological journal entries with clear narrations and proper columnar presentationSome organization present but deductions listed randomly; calculations jumbled without clear sequence; journal entries without proper grouping or missing narrationsUnstructured stream of information; no separation between parts; illegible or confused presentation making evaluation difficult
Examples / case-law / data20%10Cites relevant judicial pronouncements for deductions (e.g., CIT v. Madras Refineries for repairs, Scientific Research Association cases); references CBDT notifications for depreciation rates; mentions specific ITR forms or Rule 8D where applicable; uses actual CII figures correctlyMentions section numbers correctly but no case laws; uses correct CII data but no additional statutory references; generic references to Income-tax Rules without specificityNo section references, invented CII numbers, or irrelevant case laws; confuses Companies Act 2013 with 1956 provisions for share forfeiture
Conclusion & analytical edge15%7.5For (a): brief note on deductions NOT allowed (Section 37) to show comprehensive understanding; for (b): summary table of tax liability under three scenarios with comparative analysis; for (c): note on balance sheet impact and disclosure requirements as per Schedule III; identifies planning opportunity in 54F timingSimple restatement of answers without synthesis; no comparative analysis across scenarios; missing final tax liability statementNo conclusion; abrupt ending; or irrelevant commentary on tax evasion instead of focused conclusion

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