Skip to content

CS Executive · Tax Laws and Practice · Deductions

Kaveri Ltd. has an eligible undertaking whose profits as recorded are Rs 40 lakh, after it transferred goods to its non-eligible unit at Rs 30 lakh. The market value of those goods on the transfer date was Rs 36 lakh. No other adjustment arises, and the transaction is not a specified domestic transaction. What profit of the undertaking is used for computing the Part C deduction?

The eligible profit is Rs 46 lakh. The goods are deemed transferred at market value of Rs 36 lakh rather than Rs 30 lakh, adding Rs 6 lakh to the undertaking's recorded profit of Rs 40 lakh.

  1. ARs 46 lakhCorrect
  2. BRs 40 lakh
  3. CRs 34 lakh
  4. DRs 36 lakh

Explanation

Under Section 122(6), where the transfer consideration differs from market value, profits are computed as if the transfer was at market value. Sale at Rs 36 lakh instead of Rs 30 lakh raises the undertaking's revenue by Rs 6 lakh, so profit is 40 + 6 = Rs 46 lakh. Rs 34 lakh wrongly subtracts the difference.

Did you get it right without looking?

One question tells you little. A timed set on Deductions shows your real accuracy, how long you take and where you lose marks.

Practise DeductionsFree diagnostic mock

More Deductions questions