MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO LAW – PLANT AND MACHINERY
Which act governs the taxation and depreciation of plant and machinery in India?
a) Income Tax Act, 1961
b) Goods and Services Tax Act, 2017
c) Companies Act, 2013
d) Central Excise Act, 1944
Answer: a) Income Tax Act, 1961
What is the maximum rate of depreciation allowed on plant and machinery as per the Income Tax Act?
a) 10%
b) 15%
c) 20%
d) 25%
Answer: c) 20%
Which of the following assets are generally categorized as plant and machinery for taxation purposes?
a) Land and buildings
b) Furniture and fixtures
c) Vehicles used for personal purposes
d) Plant equipment used in manufacturing processes
Answer: d) Plant equipment used in manufacturing processes
Under the Income Tax Act, what is the method used for calculating depreciation on plant and machinery?
a) Straight-line method
b) Reducing balance method
c) Sum-of-the-years-digits method
d) Units of production method
Answer: b) Reducing balance method
In India, which authority is responsible for determining the useful life of plant and machinery for depreciation calculation?
a) Ministry of Finance
b) Reserve Bank of India
c) Institute of Chartered Accountants of India
d) Central Board of Direct Taxes
Answer: d) Central Board of Direct Taxes
Which section of the Income Tax Act deals with provisions related to depreciation on plant and machinery?
a) Section 40A
b) Section 32
c) Section 80C
d) Section 43B
Answer: b) Section 32
In case of sale or disposal of plant and machinery, how is the resulting gain or loss treated for taxation purposes?
a) It is treated as revenue income
b) It is not taxable
c) It is treated as capital gains
d) It is treated as dividend income
Answer: c) It is treated as capital gains
Which of the following factors is NOT considered while determining the depreciation of plant and machinery?
a) Cost of acquisition
b) Salvage value
c) Expected demand for the product
d) Useful life
Answer: c) Expected demand for the product
What is the minimum threshold value for plant and machinery to be eligible for claiming depreciation under the Income Tax Act?
a) Rs.5,000
b) Rs.10,000
c) Rs.1,000
d) Rs.50,000
Answer: d) Rs.50,000
Which of the following is a benefit of claiming depreciation on plant and machinery?
a) Decreased taxation
b) Increased insurance costs
c) Higher maintenance expenses
d) Reduced production efficiency
Answer: a) Decreased taxation
Which of the following assets is NOT considered as plant and machinery for depreciation purposes under the Income Tax Act?
a) Computers
b) Factory building
c) Office equipment
d) Electrical fittings
Answer: b) Factory building
In India, the concept of “block of assets” is used for the purpose of:
a) Calculating capital gains
b) Determining eligible deductions
c) Computing depreciation
d) Assessing wealth tax
Answer: c) Computing depreciation
As per the Income Tax Act, what is the depreciation rate applicable to computers and computer software?
a) 10%
b) 15%
c) 40%
d) 60%
Answer: c) 40%
Which of the following depreciation rates is applicable to plant and machinery acquired and installed after 1st April 2017?
a) 15%
b) 20%
c) 25%
d) 30%
Answer: b) 20%
Under the Income Tax Act, what is the treatment of depreciation on leased plant and machinery?
a) Not eligible for depreciation
b) Only lessor can claim depreciation
c) Lessor and lessee can claim depreciation
d) Lessee can claim depreciation
Answer: d) Lessee can claim depreciation
Which authority in India is responsible for prescribing accounting standards related to plant and machinery?
a) Institute of Chartered Accountants of India (ICAI)
b) Ministry of Corporate Affairs
c) Securities and Exchange Board of India (SEBI)
d) Reserve Bank of India (RBI)
Answer: a) Institute of Chartered Accountants of India (ICAI)
What is the term used to refer to the value below which an asset is not subject to depreciation under the Income Tax Act?
a) Threshold value
b) Base value
c) Cut-off value
d) Floor value
Answer: a) Threshold value
Which method of depreciation calculation assumes that the asset depreciates by the same amount each year?
a) Straight-line method
b) Reducing balance method
c) Units of production method
d) Sum-of-the-years-digits method
Answer: a) Straight-line method
Which section of the Income Tax Act deals with the concept of “block of assets”?
a) Section 32
b) Section 80C
c) Section 43B
d) Section 80IA
Answer: a) Section 32
Which of the following is NOT considered while determining the useful life of plant and machinery?
a) Technological obsolescence
b) Economic viability
c) Maintenance cost
d) Legal requirements
Answer: d) Legal requirements
Which of the following statements regarding the treatment of repairs and maintenance expenses for plant and machinery under the Income Tax Act is correct?
a) Repairs and maintenance expenses are fully deductible in the year they are incurred.
b) Repairs and maintenance expenses are capitalized and added to the cost of the asset.
c) Repairs and maintenance expenses are not allowed as deductions for taxation purposes.
d) Repairs and maintenance expenses are treated as revenue expenditures and are deductible over the useful life of the asset.
Answer: d) Repairs and maintenance expenses are treated as revenue expenditures and are deductible over the useful life of the asset.
In India, which authority is responsible for determining the method of valuation of plant and machinery for taxation purposes?
a) Ministry of Finance
b) Central Board of Indirect Taxes and Customs (CBIC)
c) Central Board of Direct Taxes (CBDT)
d) Securities and Exchange Board of India (SEBI)
Answer: c) Central Board of Direct Taxes (CBDT)
Which of the following is NOT a method of depreciation calculation recognized under the Income Tax Act for plant and machinery?
a) Reducing balance method
b) Double declining balance method
c) Units of production method
d) Sum-of-the-years-digits method
Answer: b) Double declining balance method
What is the depreciation rate applicable to plant and machinery used for generation and distribution of power under the Income Tax Act?
a) 10%
b) 15%
c) 25%
d) 40%
Answer: c) 25%
Under which section of the Income Tax Act is the provision for Investment Allowance for plant and machinery introduced?
a) Section 32AD
b) Section 80IA
c) Section 43B
d) Section 40A
Answer: a) Section 32AD
Which of the following assets is eligible for Investment Allowance under the Income Tax Act?
a) Second-hand plant and machinery
b) Plant and machinery used for mining activities
c) Plant and machinery used for agricultural activities
d) Plant and machinery used for commercial purposes
Answer: b) Plant and machinery used for mining activities
What is the maximum investment limit to avail Investment Allowance under Section 32AD of the Income Tax Act?
a) Rs.50 crores
b) Rs.100 crores
c) Rs.200 crores
d) Rs.500 crores
Answer: c) Rs.200 crores
Which of the following is TRUE regarding the treatment of plant and machinery leased out by a taxpayer under the Income Tax Act?
a) The lessor can claim depreciation while the lessee cannot.
b) Both lessor and lessee can claim depreciation.
c) Neither lessor nor lessee can claim depreciation.
d) The lessee can claim depreciation while the lessor cannot.
Answer: d) The lessee can claim depreciation while the lessor cannot.
Which method of depreciation calculation is based on the actual usage of the asset?
a) Straight-line method
b) Reducing balance method
c) Units of production method
d) Sum-of-the-years-digits method
Answer: c) Units of production method
Which section of the Income Tax Act allows a deduction for the cost of acquisition of plant and machinery in certain specified areas?
a) Section 32AB
b) Section 35AD
c) Section 43CA
d) Section 80-IA
Answer: b) Section 35AD
What is the treatment of depreciation on leased plant and machinery under the Income Tax Act?
a) Lessor and lessee both can claim depreciation
b) Only lessor can claim depreciation
c) Neither lessor nor lessee can claim depreciation
d) Only lessee can claim depreciation
Answer: d) Only lessee can claim depreciation
Which section of the Income Tax Act deals with the provisions related to depreciation of intangible assets?
a) Section 32
b) Section 35AD
c) Section 32AB
d) Section 32AC
Answer: c) Section 32AB
What is the concept of “balancing charge” in relation to plant and machinery under the Income Tax Act?
a) It is a charge levied on the purchase of new machinery
b) It is a charge levied when an asset is sold for more than its written-down value
c) It is a charge levied for maintenance of machinery
d) It is a charge levied for depreciation of machinery
Answer: b) It is a charge levied when an asset is sold for more than its written-down value
Which of the following assets is NOT eligible for depreciation under the Income Tax Act?
a) Air conditioning units
b) Industrial boilers
c) Land
d) Office furniture
Answer: c) Land
What is the maximum depreciation rate allowed for the assessment year 2023-24 on tangible assets other than building acquired and installed after 31st March 2017 but before 1st April 2020?
a) 25%
b) 30%
c) 35%
d) 40%
Answer: a) 25%
Which method of depreciation calculation assumes that the asset depreciates at a constant percentage of its carrying amount each year?
a) Straight-line method
b) Reducing balance method
c) Units of production method
d) Sum-of-the-years-digits method
Answer: b) Reducing balance method
Under which section of the Income Tax Act, the cost of newly acquired plant and machinery is allowed as a deduction in the year of acquisition?
a) Section 32AD
b) Section 35AD
c) Section 32AC
d) Section 32AB
Answer: a) Section 32AD
What is the term used to describe the difference between the actual sale price of an asset and its written-down value?
a) Capital gain
b) Capital loss
c) Depreciation expense
d) Amortization
Answer: a) Capital gain
Which of the following assets is NOT considered as plant and machinery for depreciation purposes under the Income Tax Act?
a) Computers
b) Office building
c) Vehicles
d) Plant equipment
Answer: b) Office building
What is the maximum depreciation rate allowed for computers and computer software under the Income Tax Act?
a) 10%
b) 20%
c) 40%
d) 50%
Answer: c) 40%
Which section of the Income Tax Act deals with the treatment of depreciation on assets used for scientific research?
a) Section 32AC
b) Section 35AD
c) Section 32AB
d) Section 35ABB
Answer: d) Section 35ABB
What is the maximum depreciation rate allowed for plant and machinery used in a hotel business under the Income Tax Act?
a) 10%
b) 15%
c) 25%
d) 40%
Answer: c) 25%
Under the Income Tax Act, what is the depreciation rate applicable to plant and machinery used in the business of generation and distribution of power?
a) 15%
b) 25%
c) 40%
d) 60%
Answer: b) 25%
Which method of depreciation calculation allows a higher depreciation charge in the earlier years of an asset’s life?
a) Straight-line method
b) Reducing balance method
c) Units of production method
d) Sum-of-the-years-digits method
Answer: b) Reducing balance method
In India, who determines the rate of depreciation on plant and machinery for the purpose of insurance?
a) Central Board of Direct Taxes (CBDT)
b) Insurance Regulatory and Development Authority of India (IRDAI)
c) Ministry of Finance
d) Reserve Bank of India (RBI)
Answer: b) Insurance Regulatory and Development Authority of India (IRDAI)
Which section of the Income Tax Act deals with the conditions for allowing a deduction for expenditure on scientific research?
a) Section 32AB
b) Section 35AD
c) Section 35ABB
d) Section 80-IA
Answer: b) Section 35AD
What is the term used to describe the reduction in the value of an asset due to wear and tear, obsolescence, or any other cause?
a) Appreciation
b) Amortization
c) Depreciation
d) Erosion
Answer: c) Depreciation
Under the Income Tax Act, which method of depreciation calculation is used for ships?
a) Straight-line method
b) Reducing balance method
c) Sum-of-the-years-digits method
d) Units of production method
Answer: d) Units of production method
Which section of the Income Tax Act deals with the provisions related to depreciation on intangible assets like patents and copyrights?
a) Section 32
b) Section 35AD
c) Section 32AB
d) Section 32AC
Answer: d) Section 32AC
What is the depreciation rate applicable to plant and machinery used in the business of laying and operating a cross-country natural gas or crude oil pipeline network under the Income Tax Act?
a) 20%
b) 25%
c) 40%
d) 60%
Answer: c) 40%
