Page 19 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes Income earned by an individual during the previous year 2010-11 is taxable in the immediately
following assessment year 2011-12 at the rates applicable for the assessment year 2011-12.
Similarly, income earned during the previous year 2011-12 by a company will be taxable in the
assessment year 2012-13 at the rates applicable for the assessment year 2012-13.

Task A Chartered Accountant sets up his practice on 1st July, 2012. Determine the previ-
ous year for the assessment year 2013-14.

(8) Gross Total Income: ‘Gross Total Income’ may be defined as the aggregate of income
computed in accordance with the provisions of this act before making any deduction under
Chapter-VI A of Income Tax Act, 1961.
(9) Total Income: Any assessee has to pay income tax on different types of income derived
on the basis of residential status. As per section 45 of Income Tax Act, 1961 ‘Total Income’
means, income shown in Section 5 of Income Tax Act, 1961:
(a) Salary Income,
(b) Income from House property,
(c) Income from Business and Profession,
(d) Capital gains, and
(e) Income from other sources.

These five are also called as ‘Heads of Income’. The income is determined under different sections.
But some of the incomes which are exempted are not included in Total Income.

Self Assessment

State whether the following statements are true or false:
10. AOP denotes the status of persons like executors or trustees who merely receive the income
jointly.

11. Accumulated profits include all profits of the company up to the date of liquidation whether

capitalised or not.
12. Previous Year is the financial year immediately proceeding the assessment year.

1.5 Agricultural Income

Agricultural income is defined in section 2(1A) to mean, inter alia, income derived from land

which is situated in India and is used for agricultural purposes. Also the income from a farm
house, except the income from non-agricultural activity, is agricultural income. Such agricultural
income is exempt from tax under section 10(1). From the assessment year 2009-10, any income
derived from saplings or seedlings grown in a nursery is agricultural income.
Agriculture income does not include fisheries and mines. Also on an agricultural land, the income

from poultry farming, dairy farming and aquaculture are not agricultural income. According to
Section 10 (1) of Income Tax Act, 1961, ‘Agricultural Income’ is exempted from tax. However,
income from agricultural sources will be included in ‘total income’, to determine tax-liability. It is
to remember that ‘Agricultural-Income’ comes under purview of respective state governments.

Section 2 (1) states that the following conditions are to be satisfied to that ‘income’ as ‘agricul-
tural income’:
1. Income should be received from land.

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