Mumbai University Solved Question Papers
Taxation Laws
Previous Year Question Paper with Solution
LLB 3 years · Sem 4
May 2012 Examination
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LLB 3 years Sem 4 Taxation Laws May 2012 Question Paper with Solutions
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First published on munotes.in on 24 October 2026.
Published by munotes.in, Mumbai.
Model answers written and edited by the munotes.in editorial desk.
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The University does not publish an official answer key for this paper. The answers in this volume are model answers, written to show how a full-mark answer is built. They are a study aid, not an authority on what an examiner marked.
The question paper reproduced here is the paper as set by the University of Mumbai at the May 2012 examination.
The law in these answers is stated as at October 2026. The Income-tax Act, 2025 replaced the Act of 1961 from 1 April 2026; each answer gives the 1961 section the paper asks for, with the 2025 section beside it. No wealth-tax is charged for the assessment year 2016-17 or any later year (section 3(2) of the Wealth-tax Act, as amended in 2015). Since 1 July 2017 the Maharashtra VAT Act covers only liquor and a few petroleum products, and the Central Sales Tax Act six goods; other goods are taxed under the GST Acts of 2017. The central sales tax rate on sales against Form C has been 2 per cent since 1 June 2008, though section 8(1) still prints 3 per cent. The standard deduction from salary, withdrawn from 2005-06 to 2018-19, is now Rs 50,000, or Rs 75,000 under the new regime.
Contents
The questions below are the paper as the University of Mumbai set it at the May 2012 examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the May 2012 examination, reproduced as the University of Mumbai set them, in the order it set them. Nothing has been reworded, added or left out. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 100 · 25 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q.1
Q.1: Write short answer, not more than two sentences
20 Marks - 2 marks each
(a)What is capital receipt under the Income Tax Act?[2]
Answer
A capital receipt is a sum received in exchange for, or in place of, the source of income itself. That source may be the business structure, a capital asset or the right to earn. The Income-tax Act, 1961 does not define it. The courts draw the line case by case.
Signs of a capital receipt.
- It comes from parting with, or losing, a fixed asset or an asset of enduring value.
- It makes up for sterilising or delaying the profit-making apparatus, not for lost profits.
- It is usually a one-time receipt, outside the ordinary run of the business.
Why it matters. A capital receipt is not income, unless a provision of the Act brings it in. The main ones are capital gains (section 45), compensation under section 28(ii), gifts taxed under section 56(2)(x) and subsidies under section 2(24)(xviii).
The case. In Commissioner of Income Tax v. Saurashtra Cement Ltd., decided on 9 July 2010 (Civil Appeal No. 3702 of 2003), a cement maker bought a new plant. The supplier delivered late and paid Rs 8,50,000 as liquidated damages, worked out on the price of the late machinery. The Supreme Court held it a capital receipt. It was linked to acquiring the plant itself, and the delay had only postponed the profit-making apparatus.
Example. Compensation received for giving up a whole line of business is a capital receipt. A sale of goods in stock is not.
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