CWA ICWA Inter Stage I : Business Taxation - December 2005

CWA ICWA Inter - Stage I • Business Taxation • December 2005

This Paper has 40 answerable questions with 0 answered.

I–8(BTN) Revised Syllabus
Time Allowed : 3 Hours	Full Marks : 100

The figures in the margin on the right side indicate full marks.
Section I (50 marks)
Answer Question No. 1 which is compulsory and any two from the rest from this section.
Marks

The figures in the margin on the right side indicate full marks.

Section I (50 marks)

Answer Question No. 1 which is compulsory and any two from the rest from this section.

Marks

(a)

All answers should be on the basis of provisions relating to assessment year 2005–2006

1x5=5

(i)

State the limit for payment of dividend distribution tax u/s. 115–O(2).

(0)

(ii)

What is last date for serving of notice for hearing for regular assessment u/s. 143(2)?

(0)

(iii)

What is the rate and period for allowing amortization of expenditure in case of amalgamation?

(0)

(iv)

Name the postal investment scheme where investment is eligible for tax rebate u/s. 88, but interest qualifies for deduction only within limits of section 80L.

(0)

(v)

Name any two intangible assets on which depreciation is allowable under Income–tax Act, 1961.

(0)

(b)

Fill in the blanks:

1x3=3

(i)

Death–cum–retairement gratuity received by an employee of Central Government is ___________ (wholly exempt/exempt up to Rs. 3,50,000/exempt up to 5,00,000).

(0)

(ii)

If loan granted by employer to employee does not exceed Rs. __________ (10,000, 20,000, 50,000, 1,00,000), it is not treated as perquisite to employee for purpose of income tax.

(0)

(iii)

A person owns 4 heavy goods vehicles. His estimates annual income u/s. 44AE is Rs. ________ (1,68,000, 1,51,200, 1,92,000, 2,40,000).

(0)

(c)

Answer in brief:

2x3=6

(i)

An assessee raised an invoice of Rs. 50,000 in AY 2004–05 and had taken it into account as his income. Since it was not recoverable, he has filed suit in civil court. however, he wants to write it off as bad debt in AY 2005–06 and claim as deduction as bad debt. Can he do so?

(0)

(ii)

Your client is a doctor. When is he required to compulsorily maitained bokks of account?

(0)

(iii)

Explain the provisions under the Income-tax Act, 1961 in respect of valuation of closing stock of raw materials when assessee has vailed Cenvat in respect of his inputs.

(0)

(a)

A public company had unabsorbed depreciation of Rs. 18,000 and business loss of Rs. 40,000 as on 01.04.2004. During the financial year 2004–05, the company made profit from business of Rs. 60,000 (before depreciation). Depreciation for the financial year 2004–05 was Rs. 38,000. The company received during the year income from other sources of Rs. 52,000, which includes dividend of Rs. 10,000 received from its investment in other companies. Calculate net income liable to tax for assessment year 2005–06 and tax payable, if any. Also show the amount of unabsorbed depreciation and unabsorbed business loss, if any, that can be carried forward.

(0)

(b)

Mr. Jai prakash has house property in Chennai, which he has given on rent during FY 2004–05. Municipal valuation of the property is Rs. 1,94,000. Its fair rent as determined on the basis of similar property in similar area is Rs. 2,34,000. Standard rent as determined under provisions of rent Control Act is Rs. 1,60,000. Actual rent received during the year is Rs. 1,40,000. Jai prakash has paid municipal taxes of Rs. 12,000. He incurred expenditure of Rs. 10,000 on repaires of building. Insurance premium paid was Rs. 2,000. He had borrowed from housing finance and interest payable was Rs. 84,000. Find the income from house property.

(0)

(c)

Name any three transactions where tax collection at source is required to be made and the rate at which tax collection is to be done.

(0)

What would be your advice regarding admissibility of the following items of expenditure in computing the business income:

(a)

A donation of Rs. 1 lakh made to a University for starting a laboratory for Scientific Research (i) relating to the assessee’s business (ii) not relating to the assessee’s business.

(0)

(b)

Travelling expenses include a sum Rs. 1,50,000 incurred by a Director in travelling abroad for negotiating purchase of Plant & Machinery.

(0)

(c)

Amount payble to Government on account of shortfall in export target.

(0)

(d)

Interest of Rs.20,000 changed by bank on on account of overdraft taken for payment of income tax.

(0)

(e)

Payment of interest of Rs. 40,000 on monies borrowed from bank for payment of dividend to shareholders.

(0)

(f)

Rs. 1,20,000 paid for shifting of business premises from the original site to the present place which is more advantageously located.

(0)

(g)

Retrenchment compensation of Rs. 4 lakhs paid to the workmen on the closure of one of the units.

(0)

(a)

M/s. Alpha Beta Co. Ltd. has the following assets and liabilities as on 31^st March, 2005. Compute the Net Wealth as on 31.3.2005 (stating whether each item is taxable or not).

		Rs.
(i)	Land in urban area (Construction not allowed as per Municipal bye laws)	36,00,000
(ii)	Land in rural area	38,00,000
(iii)	Land in urban area (bought 12 years ago, but construction of factory yet to start)	50,60,000
(iv)	Residential Quarters for workers	34,80,000
(v)	Residential Quarters for officers–six units (2 of them are occupied by officers drawing monthly salary of Rs. 46,700 each)	48,00,000
(vi)	Guest House and land appurtenant thereto	10,00,000
(vii)	Air craft	2,80,00,000
(viii)	Motor cars for use of officers	20,50,000
(ix)	Loan from LIC for acquiring aircraft	90,00,000
(x)	Residential house provided to a whole–time director (salary Rs. 7,20,000 p.a., the director owns 25% equity)	27,00,000

(0)

(b)

State whether tax audit u/s. 44AB is applicable in the following cases:

(i)

Gross turnover from manufacturing business Rs. 20 lakhs and gross turnover from retail trade business of Rs.30 lakhs where the assessee opts to be assessed u/s. 44AF.

(0)

(ii)

Professional receipts Rs.15 lakhs and gross sales in business Rs.20 lakhs.

(0)

Section II (50 marks)
Answer Question No. 5 which is compulsory and any two from the rest from this section.

Section II (50 marks)

Answer Question No. 5 which is compulsory and any two from the rest from this section.

(a)

Answer the following:

1x6=6

(i)

Fill in the blanks—An EOU unit is required to execute a _____________bond.

(0)

(ii)

An EOU unit can obtain indigenous material without payment of duty on submission of __________certificate.

(0)

(iii)

State true or false— petrol is declared goods under CST Act.

(0)

(iv)

State true or false — State Government can waive condition of submission of C Form by issue of a notification under CST Act.

(0)

(v)

A registered dealer has procured some goods from depot of a manufacturer. Is the registered dealer ’first stage dealer’ or ’second dealer’?

(0)

(vi)

Fill in the blank —A service provider is providing both taxable and exempt services and he is unable to bifurcate the common input services used for providing exempt output services. In such case, his Cenvat credit of input services is restricted to ________________(10%, 20%, 33%, 40%) of service tax payble on his output taxable services.

(0)

(b)

Selling price of a product is Rs. 10,000. It is inclusive of out ward freight of Rs. 250, packing charges of Rs. 200, CST @ 4%, excise duty @ 16% and education cess @ 2%. Find the Assessable Value.

(0)

(c)

(i)

State the basic two requirements that should be satisfied for treating something as “goods” for the purpose of levy of Excise Duty.

(0)

(ii)

XYZ situated in Kolkata placed order for a certain product with the manufacturer ABC in Mumbai. The product manufactured to the buyer’s specification by ABC is transferred by ABC to its branch in Kolkata. The Excise authorities refused to treat the transfer from Mumbai to Kolkata branch as "Branch Transfer" and treated it as "Sale". Are they justified in doing so?

(0)

(a)

Explain provisions in Cenvat Credit Rules in respect of ’Inputservice distributor’

5x3=15

(0)

(b)

From Central sales tax point of view, distinguish between goods returned by buyer and goods rejected by buyer.

(0)

(c)

State purpose and use of ’Yellow Bill of Entry’.

(0)

A large manufacturing unit underlook following job work:

(a)	Machining of raw materials supplied by the buyer. The material was sent under Cenvat challan. Job work charges were Rs.30,000. Cost of raw materials was Rs. 3,50,000. These were returned after job work.
(b)	Processing of input sent by a buyer under his own (buyer’s) challan. Processing charges were Rs. 10,000 and cost on input was Rs. 2,00,000.
(c)	Repaires of a component. Original cost of component was Rs. 25,000 and repairs charges were Rs. 3,000. The component was sent by customer under cover of his letter.
In all these cases, raw material was sent by customer. Excise duty payble is 16% plus education cess of 2%. You are required to (a) Find total duty payble, (b) Procedure to be followed by manufacturer for despatch in each case after carrying out job work.

(0)

write about notes on:

(a)

Aggregate sale price under CST Act, 1956.

(0)

(b)

Unaccompanied Baggage under Customs Act, 1962.

(0)

(c)

House mark and Brand name under the Central Excise Act, 1944.

(0)

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