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CA Final · Direct Tax Laws & International Taxation · Incomes which do not form part of Total Income

Kaveri Estates sells coffee that it has grown, cured, roasted and ground in India, mixing in chicory. Income from these sales, computed as if from business, is ₹40,00,000. It also sells separately coffee that it has grown and cured only, with computed business income of ₹20,00,000. Under Rule 271 of the Income-tax Rules, 2026, what total amount is deemed to be income liable to tax from both activities, before any replanting allowance?

The total is ₹21,00,000. Under Rule 271, roasted and ground coffee attracts 40%, giving ₹16,00,000, while coffee that is grown and cured only attracts 25%, giving ₹5,00,000. Adding the two amounts gives ₹21,00,000.

  1. A₹21,00,000Correct
  2. B₹16,00,000
  3. C₹24,00,000
  4. D₹26,00,000

Explanation

Roasted and ground coffee (Sl. No. 3) is taxed at 40%: 40% of ₹40,00,000 is ₹16,00,000. Coffee grown and cured only (Sl. No. 2) is taxed at 25%: 25% of ₹20,00,000 is ₹5,00,000. The total is ₹21,00,000. Applying 40% to both would give ₹24,00,000, which is wrong.

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