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Assignment II

XYZ Pvt. Ltd. is a mid-sized manufacturing company in India seeking to reduce its tax liability through various methods, including legal tax-saving instruments and potentially unethical practices like under-reporting revenue. The company faces discrepancies during a tax audit, including unexplained cash credits and unaccounted investments. Key issues to address include identifying the nature of tax strategies employed, determining the company's residential status, calculating deemed income, and assessing allowable business expense deductions.

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63 views1 page

Assignment II

XYZ Pvt. Ltd. is a mid-sized manufacturing company in India seeking to reduce its tax liability through various methods, including legal tax-saving instruments and potentially unethical practices like under-reporting revenue. The company faces discrepancies during a tax audit, including unexplained cash credits and unaccounted investments. Key issues to address include identifying the nature of tax strategies employed, determining the company's residential status, calculating deemed income, and assessing allowable business expense deductions.

Uploaded by

k26176853
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Assignment II

BBA VI Sem
Corporate Tax Planning (BBA 608)
Case Study
Company Background
XYZ Pvt. Ltd. is a mid-sized manufacturing company based in India. The company operates in
multiple countries and has its head office in Mumbai. It is engaged in the production of
automobile parts and has an annual turnover of ₹50 crores.

Scenario & Issues:


1) XYZ Pvt. Ltd. wants to reduce its tax liability legally. The company’s finance manager
suggests the following approaches:

• Investing in government-approved tax-saving instruments under Section 80C.


• Shifting profits to a subsidiary in Singapore where corporate tax rates are lower.
• Under-reporting revenue from one of its plants to reduce taxable income.

2) XYZ Pvt. Ltd. has the following operational details:

• Head office in India and incorporated in India.


• Earns ₹10 crores from international operations.
• Board meetings are held in Dubai, but strategic decisions are made in Mumbai.
3) During an audit by tax authorities, the following discrepancies were found:

• Unexplained cash credits of ₹5,00,000.


• Unaccounted investments of ₹8,00,000 in a new factory.
• Valuable assets worth ₹3,00,000 not disclosed in books.
4) XYZ Pvt. Ltd. incurs the following expenses:

• ₹5,00,000 paid as bonus to employees (Section 36).


• ₹50,00,000 loan taken for business expansion at 10% interest.
• ₹8,00,000 spent on advertising (Section 37(1)).
• Employees' Provident Fund contribution of ₹12,00,000, deposited after the due date.
Questions:
1. Identify whether XYZ Pvt. Ltd. is engaging in tax planning, tax avoidance, or tax evasion
in the given scenarios.
2. Determine the residential status of XYZ Pvt. Ltd. and its tax liability on global income.
3. Calculate the deemed income and the final taxable income after considering
unexplained cash credits, investments, and assets.
4. Compute the allowable deductions for business expenses and assess whether the
company is eligible to claim all deductions.

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