Mr. Madan, a citizen of India and the Karta of an HUF, is employed in M/s. PCS Pvt. Ltd. He is drawing monthly salary of 65,500 in India. On June 1,…

CA Intermediate · Taxation · PYQS · September 2024
Mr. Madan, a citizen of India and the Karta of an HUF, is employed in M/s. PCS Pvt. Ltd. He is drawing monthly salary of 65,500 in India. On June 1, 2023 he purchased one residential house property in Mumbai for 18,00,000 in his individual capacity. The market value of the property is 32,00,000 and value for the purpose of charging stamp duty is 23,00,000. On August 31 st , 2023 he was transferred to the branch office of M/s. PCS Pvt. Ltd. in U.S.A. and he left India on September 1 st , 2023. The overseas branch paid him a salary of $2,500 per month in USA. He managed business of HUF from USA when he was not in India. He had also gone out of India for 99 days and 201 days in previous years 2022-23 and 2021-22, respectively. He had never gone out of India prior to that. Mr. Rajeev, one of his friends, gifted him a sculpture in India on August 10, 2023. The market value is 45,100. Determine the residential status of Mr. Madan and his HUF and compute gross total income of Mr. Madan for the assessment year 2024-25 assuming he opted out of the default tax regime. The value of one USD ($) may be taken as 70.

Suggested Answer and Working Notes:

Residential Status of Mr. Madan Mr. Madan, an Indian citizen who left India on 1 st September 2023 for the purpose of employment to USA, would be non-resident in India, since he stayed in India for 169 days (30+31+30+31+31+1+15) only during the P.Y. 2023-24 which is less than 182 days. Residential Status of HUF Since Mr. Madan is managing the HUF for part of the year from India, control and management of its affairs is situated partly in India. Hence, the HUF would be resident in India for the P.Y. 2023-24. A HUF is said to be “Resident and ordinarily resident” in India during the previous year 2023-24, if Karta (Mr. Madan, in this case) satisfies both the following conditions: He is a resident in at least 2 out of 10 previous years preceding the relevant previous year; andHis stay in India in the last 7 years preceding the relevant previous year is 730 days or more. Mr. Madan has satisfied both the above conditions as he had never gone out of India except for 99 days and 201 days in the P.Y. 2022-23 and P.Y. 2021-22, respectively, the HUF would be ROR in India. Computation of Gross Total Income of Mr. Madan for the A.Y. 2024-25 Income under the head “Salaries” Amount in ₹ Salary earned in India: [₹ 65,500 x 5 +65,500 ×15/31] 3,59,194 Salary paid in USA: [Not taxable as Mr. Madan is a non-resident and such income does not accrue or arise or received in India] Nil Less: Standard Deduction 50,000 3,09,194 Income from other sources Difference between the consideration of 18lakhs and stamp duty value of 23lakhs of the residential property acquired [Taxable, since the difference of 5lakhs exceed - 1,80,000, being the higher of 10% of the consideration and - 50,000] 5,00,000 Sculpture received as gift from Rajeev, his friend in India [Not taxable as the value does not exceed - 50,000] Nil Gross Total Income 8,09,914

Topics: Paper 3A: Income Tax Laws

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