All India Bar Examination (AIBE) 2-II Previous Year Question Papers with Answers

Practice Mode:
93.

Company A pays a salary to B in advance for nine months (from January, 2010 to September 2010) in December, 2009. As a result, Company A is unable to pay a salary to C from December, 2009 to March, 2010 and paid the salary for these four months in April,2010. In which assessment years will the salary of B (from January, 2010 to September, 2010) and C (from December, 2009 to March, 2010) be taxable?


Principle :

Salaries are chargeable to tax at time when they are due or when they are received, whichever is earlier.

A: B's salary from January, 2010 to September, 2010 will be chargeable in the Assessment Year 2010-11. C's salary from December, 2009 to March, 2010 will be chargeable in the Assessment Year 2011-12.
B: B's salary from January, 2010 to March, 2010 will be chargeable in the Assessment Year 2010-11 and B's salary from April, 2010 to September, 2010 will be chargeable in the Assessment Year 2011-12. C's salary from December, 2009 to March, 2010 will be chargeable in the Assessment Year 2011-12.
C: B's salary from January, 2010 to September, 2010 will be chargeable in the Assessment Year 2011-12. C's salary from December, 2009 to March, 2010 will be chargeable in the Assessment Year 2010-11
D: B's salary from January, 2010 to March, 2010 and C,s salary from December, 2009 to March 2010 will be chargeable in the Assessment Year 2010-1. B,s salary from April 2010 to September, 2010 will be chargeable in the Assessment Year 2011-12.
E: Both B's salary from January 2010 to September, 2010 and C,s salary from December, 2009 to March 2010 will be chargeable in the Assessment Year 2010-11.

The answer is: E

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Explanation

The correct option is indeed E:

E: Both B's salary from January 2010 to September 2010 and C's salary from December 2009 to March 2010 will be chargeable in the Assessment Year 2010-11.

Here's the explanation:

B's salary from January 2010 to September 2010: As mentioned, it was paid in advance in December 2009. According to the principle, salaries are taxable when they are due or when they are received, whichever is earlier. Since it was received in December 2009, it is taxable in the Assessment Year 2010-11.

C's salary from December 2009 to March 2010: Although it was paid in April 2010, it was actually due for the months of December 2009 to March 2010. So, it is taxable in the Assessment Year 2010-11 as well.

So, both B's and C's salaries are taxable in the Assessment Year 2010-11, which aligns with option E.