Examine the applicability of tax deducted/ collected at source as per the provisions of the Income-tax Act, 1961 and calculate the amount of TDS/TCS…
CA Intermediate · Taxation · PYQS · May 2026
Examine the applicability of tax deducted/ collected at source as per the provisions of the Income-tax Act, 1961 and calculate the amount of TDS/TCS for A.Y. 2026-27 in the following independent situations: (i) M/s. Stylo Enterprises, an Indian partnership firm deals in branded handbags and wristwatches. It opened a showroom at a luxury mall in Delhi in April 2025. Mr. X, a resident bollywood star, purchased a handbag of "GICCI" brand worth - 12,00,000 from M/s. Stylo Enterprises for his wife as anniversary gift on 10/01/2026. He also purchased a wrist watch of RAWO brand worth - 9,22,000 on 15/01/2026 for his son as his birthday gift. (ii) M/s Robo Ltd., an Indian company, made a payment of 3,00,000 to Mrs. Sandhya, a resident individual, on 12/04/2025, for the supply of new year diaries manufactured as per the specifications of M/s Robo Ltd. However, no material was supplied by M/s Robo Ltd. to Mrs. Sandhya for the production of such diaries.
Suggested Answer and Working Notes:
(i) M/s Stylo Enterprises, being a seller, is required to collect tax at source @1% at the time of receipt of 12,00,000, the consideration for sale of handbag, a notified good, since its value of such goods exceed 10lakhs. However, since the value of wristwatch does not exceed 10lakhs, no tax would be collected by M/s Stylo Enterprises on sales consideration of wrist watch. Accordingly, the amount of TCS would be - 12,000 (1% of 12,00,000). (ii) Since no material was supplied by M/s Robo Ltd. to Mrs. Sandhya for production of new year diaries, the same would not fall within the scope of work. Accordingly, there is no liability to deduct tax at source in respect of payment of 3,00,000 to Mrs. Sandhya, since the contract is a contract for 'sale'.
Topics: Paper 3A: Income Tax Laws
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