If I were the Examiner...

Perhaps, in all of us lies a closet valedictorian. However, in a very few of us, lies the closet examiner. I have my taxation exam on the 17th. Tax happens to be my interest area. So if I had the chance to draft the tax question paper, it would look something like this:

Attempt any 5 questions. 

All questions carry equal marks.

1. Shantaram belongs to a religious order called Ram Matha. Shantaram has renounced the world. According to the tenets of his religion, he cannot own and acquire any property and everything he has (or had) belongs to the religious institution (i.e.: Ram Matha) to which he is attached. Ram Matha has an educational institute where Shantaram teaches Sanskrit. The educational institute receives funding from the Government. The Government disburses Shantaram's salary to the educational institution. According to the tenets of his religion, Shantaram cannot own and acquire any property and hence the salary is never disbursed to Shantaram and it remains with the educational institution (which in turn is owned by a religious institute - Ram Matha).
   
   
   By applying the concept of application and diversion of income, determine if the income is taxable in the hands of Shantaram.
   
   
   
   
2. In the foothills of the Himalayas grows a wonderful and savoury mushroom called Guchi. The mushrooms cannot be farmed and grow sporadically in forests, meadows and orchards. They grow best during the monsoons and it takes months before enough can be collected for the market. The mushrooms are sold at an exorbitant price of Rs 15,000 per kilogram. Shroomchand is in the business of collecting and distributing Guchi. He employs several persons who go into the forest and collect the produce. It several weeks for the workers to collect sufficient produce. A lot of time and effort is put in.
   
   
   Determine if the income earned by Shroomchand qualifies as agricultural income under the Income Tax Act, 1961.
   
   
   
   
3. "Our courts must send a clear signal that India is not a banana republic where foreign companies can be invited to loot our resources and even avoid paying taxes on their windfall gains from the sale of those resources."
   -Prashant Bhushan
   
   
   "The courts merely interpret the law and if a transaction is not liable to Indian income tax, one must graciously accept the result."
   

   -Arvind Datar

   
   Analyse the correctness of the above statements with respect to the Supreme Court's decision in Vodafone International Holdings v. Union of India (2012) 6 SCC 613.
   
   
   
   
4. (a) Pinty works with a mobile-application based taxi service business called Ubla. Pinty is a driver and owns her own car. Pinty receives cab requests through Ubla's mobile-application, which works through a Global Positioning System (GPS). As a driver, Pinty can decide when she wants to work and when she does not want to work. However, when she decides to work, she cannot refuse a cab request that is sent to her. During any day, certain hours are dedicated as peak hours. If a driver, completes 3 rides/cab requests during the peak hour then the driver receives Rs 3000/- as incentive from Ubla. This is called the Peak Hour incentive. Further, the driver receives 5% of the revenue generated by such driver through all her cab rides/requests. This is called the Revenue Incentive. 
   
   
   Are these incentives (Peak Hour and Revenue) taxable for Pinty under the Head of Salaries under the Income Tax Act, 1961?
   
   
   (b) Haweli Kumar is a wealthy man and owns several properties. His wife Padma and son Bhanu also own several residential properties. Haweli Kumar dies. In his will, he bequeaths his mansion to Padma for her life and after her death to Bhanu i.e.: he creates a life interest in favour of his wife Padma. The terms of the will provided that Padma had a right to stay in the mansion but she could rent or lease or sell it. She only had a right to stay in it. After, Haweli Kumar's death, Padma did not reside in the bequeathed mansion and it remained empty till her death. 
   
   
   Is the income from the bequeathed mansion taxable? If yes, in whose hands is it taxable?
   
   
   
   
5. To curb the air pollution in Delhi, the Delhi Government (with the consent of the Lt. Governor) instituted a policy of carbon credits for industries situated in Delhi. According to the policy, each industry was allocated a specific quota of air pollution emissions. An industry could not discharge air pollutants beyond that quota. However, if the industry discharged less than the allocated emissions, then it would earn 'Carbon Credits'. Such an industry would be free to sell these 'Carbon Credits' to industries that had crossed their quota. The idea of the policy was to control the overall emissions. 
   
   
   M/s MC Mehta purchased certain carbon credits from M/s Shriram. M/s MC Mehta showed the purchase of Carbon Credits as revenue expenditure. The ITO treated the same as capital expenditure. Decide.
   
   
   
   
6. Mr. Satyavan was pursuing LL.B. from Faculty of Law, University of Salwa. During his LL.B., he was working as a part-time editor with Yama Law Publications. The Publication used to publish books on law. Satyavan used to receive a stipend/salary in return for his part-time services. Ms. Savitri was the sole-proprietor of  Yama Law Publications. During his stint at Yama Law Publications, Satyavan and Savitri fell in love and got married after Satyavan's second year of LL.B. After their marriage, Satyavan continued to work at Yama Law Publications and drew the same amount of salary/stipend. After his graduation, Satyavan joined Yama Law Publications as a full-time editor. He now drew a higher salary.
   
   
   The ITO has sought to club the salary/stipend received by Satyavan with the income earned by his wife Savitri. Determine if the same is possible for the following three time periods:
   
   
   (a) When Satyavan was in his first year of LL.B.
   (b) When Satyavan was in his third year of LL.B.
   (c) After Satyavan's graduation
   
   
   
   
7. "The power conferred upon the ITO by Sections 147 and 148 is not an unbridled one. It is hedged in with several safeguards conceived in the interest of eliminating room for abuse of this power by the AOs." Discuss.
   
   
   
   
8. Explain any two:

• N. Bagavathy Ammal v. CIT [JT 2003 (1) SC 363]

• Whatever is a proper outgoing by way of expenditure must be debited irrespective of whether there is receipt of income or not.
  
  
• Bad and doubtful debts as deduction under the Head of Profits/Gains from Business and Profession.