Question

B C D I L M N O P Q R G H COMPREHENSIVE PROBLEM Bulletin Book income before Tax 1,000,000 Calculate Taxable income Calculate Taxes Payable Calculate tax expense Book income includes Proceeds of life insurance Book Expense includes Lobbying Expense Book Expense includes Fines Book Depreciation Tax Depreciation Book loss on sale of XYZ Corp stock Book expense on establishment of contingent liability Bad expense er to reserve Accounts receivables written off Book loss on sale of equipment Tax gain on sale of equipment all 1245 recapture Tax Expense 100.000 50.000 75 000 200.000 250.000 -25,000 No other capital gains/losses 75,000 75,000 50.000 -175.000 25,000 Net Income Per Books Excess capital losses Income subject to tax not on books Book / tax difference sale of equip Expenses on books not deductible Lobbying Contingent liability Expense Increase bad debt reserve Income on books not subject to tak Life insurance proceeds

Please calculate tacabke income, taxes payable, and tax expense

Answer 1

Particulars Amount

Income under the head Business or Profession :

1. Income before Tax as per Books 1,000,000

2. Add: Losses relating to other Heads

Loss on sale of Equipment (175,000)

Loss on sale of XYZ Corp Stock (25,000)

Total (200,000) (200,000)

3. Net Income related to BGPB 800,000

4. Add: Expenses accounted for in the books of accounts

but not deductible as per Income Tax Act

Lobbying Expenses 50,000

Expenses for Fines 75,000

Expense related to contingent Liability Adj 75,000

Bad debts transfer to reserve 75,000

Book Depreciation 200,000

Total 575,000 375,000

5. Less: Income included in the books but not

taxable as per IT Act

Proceeds from Life Insurance Corp.

(exempt under Sec.10(10D) (100,000)

6. Less: Tax Depreciation (250,000)

7. Net Income from PGBP   825,000

8. income Under the head Capital gains:

Loss on Sale of XYZ Corp Stock (25,000)

Tax gain on sale of Equipment 25,000

Total 0 0

9. Total taxable Income 825,000

10. Taxes Payable @ 40%+Cess@4% 343,000

Gross Tax Payable (825,000*40%) 330,000

Add: cess @ 4% (330,000*4%) 13,200

Net Tax Liability 343,000

11. Tax Expense 332,800

Current tax 343,000

Deferred Tax (10,200)

Working notes:

1.Calculation of deferred Tax expense

Adjustable Taxable income as per Books

Net taxable Income as per IT Act 825,000

Add: Depreciation diff(250,000-200,000) 50,000

Less: Bad DebtsTransferred to reserve 75,000

Total Adjustable Income 800,000

Tax Liability as per Books 332,800

(800,000@40%+cess@4%)

Deferred tax Asset

Tax liability as per IT Act 343,000

tax Liability as per Books 332,800

Deferred Tax Asset 10,200