CWA ICWA Inter - Stage I : Business Taxation - June 2010

CWA ICWA Inter - Stage I • Business Taxation • June 2010

This Paper has 39 answerable questions with 4 answered.

1—8(BTN) Revised Syllabus
Time Allowed : 3 Hours	Full Marks : 100

The figures in the margin on the right side indicate full marks.
Wherever required, suitable assumptions may be made by the candidate and stated clearly in the answer.
All questions relate to the assessment year 2010—11 unless stated otherwise in the question.
SECTION A
Answer Question No. 1 which is COMPULSORY and any two from the rest in this section.
Marks

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

Wherever required, suitable assumptions may be made by the candidate
and stated clearly in the answer.

All questions relate to the assessment year 2010—11 unless stated otherwise in the question.

SECTION A

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

Marks

(a)

Fill up the blanks:

1x6

(i)

Fixed medical allowance is ___________(taxable/not taxable) without any monetary limit.

(1)

(ii)

When voluntary retirement compensation is received, it is eligible for exemption ____________(either/both)under section 10(10C) ________(or/and)relief under section 89.

(0)

(iii)

Interest earned on public provident fund account is ___________(taxable/exempt).

(1)

(iv)

In the case of an assessee engaged in business with turnover of Rs.50 lakhs, interest expenditure incurred from 01.04.2009 to 28.02.2010 is deductible if the tax deducted at source thereon is remitted before _______________.

(0)

(v)

The liability to pay advance tax during the financial year arises when the tax payable is Rs.____________ or more.

(1)

(vi)

The deduction under section 80U in the case of person with severe disability is increased to Rs.____________ .

(1)

(b)

State with reason, whether the following statements are true or false (answers not containing reasons will not receive any credit):

2x4

(i)

In a case where the property is owned by more than one person, the income from such property is chargeable to tax in the hands of association of persons.

(0)

(ii)

In the case of partnership firm, a minimum of Rs.1,50,000 is deductible towards remuneration to working partners if the partnership deed authorizes such payment, whether or not the firm has earned any profit during the year.

(0)

(iii)

Where the return of income is not furnished by the assessee on or before the due date, compound interest is payable under section 243B @ 1% per month or part of the month.

(0)

(iv)

An AOP wherein the shares of the members are not determinate, is chargeable to wealth tax.

(0)

(a)

Dr. Vatsan (aged 67 years) paid a sum of Rs.10,000 per month towards rent in respect of his residential accommodation. His gross total income (computed) for the year ended 31.03.2010 amounts to Rs.8,50,000 and it includes long term capital gain from sale of vacant site of Rs.2,00,000 (computed). He deposited Rs.50,000 in tax saver deposit of Indian Bank. Compute his total income and tax liability for the assessment year 2010–11 after allowing eligible deduction for the rent paid.

(0)

(b)

Explain the tax treatment of Limited Liability Partnership under different provision of the Income–tax Act, 1961.

(0)

(c)

Rajput, engaged in the business of plying goods carriages, owned 8 heavy goods vehicles as on 31.03.2010. He had acquired 3 goods vehicles other than heavy goods vehicle in April 2009 and sold 2 heavy goods vehicles in October 2009. His income as per books as per books of account (computed) is Rs.3,00,000. Is he eligible to claim the benefit of presumptive income determination prescribed in section 44AE of the Income–tax Act, 1961?

(0)

(a)

The finalized accounts of X Ltd., a public limited company, for the year ending March 31, 2010 reveals the following aspects:

(i)	The debit for sales tax payment of Rs.8 lakhs relates to a demand issued by the sales tax department in respect of which a stay has been obtained from the High Court on a petition under article 226 of the Constitution disputing the liability.
(ii)	An amount of $ 12,000 due to the company account of the agency commission from a foreign company had not been taken into account as income for the year ending March 31, 2008 as the payment of the amount has been withheld by the foreign company on the ground that X Ltd. is liable for damages for breach of certain conditions in relation to the terms of agency agreement.
(iii)	The company has made a payment of Rs.10 lakhs to a local mafia leader for effectively quelling labour unrest and possible labour strike; if the strike had taken place, the company would have lost around Rs.1 crore and so the company feels that this payment was justified.
(iv)	The company had incurred expenditure of Rs.50 lakhs for issue of fully convertible debentures, the conversion to take place after six months.

For preparing its return of income for the assessment year 2010–11, the company desires to know from you how the items mentioned above are to be treated so as to get the maximum tax advantage.

(0)

(b)

The depreciated value of a block of assets consisting of Plant A and Plant B (rate of depreciation 30%) owned by Vasudha & Co., a trading company, is Rs.1,17,000 on April 2009 (Plant A:Rs.1,00,000+Plant B:Rs.17,000). The following information are available:

Assets	Rate of Depreciation(%)	Date of purchase	Date when first put to use	Actual cost Rs.
Plant C Plant D Plant E Plant F Plant G	30 30 30 30 30	10th March 2009 1^st March 2009 6th May 2009 15th May 2009 6th March 2010	10th April 2009 3rd Dec.2009 6th May 2009 2nd January 2010 6th April 2010	20,000 30,000 40,000 60,000 80,000

Plant A is sold on August 16, 2009 for Rs.97,000. Determine the depreciation for the previous year 2009–10 (AY 2010–11) and the closing WDV as on 31.03.2010. Will your answer be different if Plant A is sold for Rs.3,00,000? Detailed note on treatment of each item is required.

(0)

(a)

Write short notes on any two of the following:

4x2

(i)

Marginal relief to companies;

(0)

(ii)

Transactions where quoting of PAN is mandatory (any eight instances);

(0)

(iii)

Undisclosed sources of income and previous year therefor.

(0)

(b)

The following information pertaining to Mr. Ram for the year ended 31.03.2010 are made available to you:

	Rs.
Basic salary Rs.15,000 per month
Dearness allowance (not eligible for retirement benefits) Rs.12,000 per month Bonus	40,000
House rent allowance received Rs.10,000 per month
Rent paid for house at Chennai Rs.8,000 per month
Employer has contributed to recognized provident fund (RPF) at 17% of basic pay
Own contribution to RPF	60,000
Loss suffered in textile business	3,00,000
Income from speculation business	1,00,000

Compute the total income of Mr. Ram for the assessment year 2010–11 and advise the date by which the return of income is to be filed for having the benefits of carry forward of loss, if any.

(0)

SECTION B
Answer Question No. 5 which is COMPULSORY and any two from the rest in this section.

SECTION B

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

(a)

Fill up the blanks:

1x6

(i)

The two tests to be satisfied for making the manufactured goods excisable are _________ and _______ .

(0)

(ii)

Scrap generated from sources other than raw material is __________ (excisable/not excisable).

(0)

(iii)

Shares and debentures are __________ (liable/not liable) under the CST Act, 1956.

(0)

(iv)

While calculating value of Rupees 4 crores for exemption limit to small scale industry, value of goods exported to Nepal are to be __________ (included/not included).

(0)

(v)

A dealer has made inter–State sale of goods to a buyer who has exported the goods. The dealer is not liable to pay Central Sales Tax if the buyer issues ________ From (C/D/H/M).

(0)

(vi)

An Indian resident who went abroad brought a laptop computer of Rs.86,000 while returning from Germany. The customs duty payable is __________ (10.3%/24.72%/36.05%/None of the above).

(0)

(b)

State with reasons, whether the following statements are true or false (answers not containing reasons will not receive any credit):

2x4

(i)

Branded Jewellery is presently exempt from excise duty.

(0)

(ii)

A bank making inter–State sale of pledged goods is a dealer under the CST Act, 1956.

(0)

(iii)

Special audit under section 14A of the Central Excise Act, 1956 cannot be done by a Chartered Accountant.

(0)

(iv)

For the purposes of the Customs Act, 1962, in the case of goods cleared from the vessel which has landed in Indian waters and stored in the bonded warehouse, the taxable event occurs the moment the goods have reached the Indian territorial waters.

(0)

(a)

Write short notes on any two of the following:

2x6

(i)

Process amounting to manufacture, as per excise law;

(0)

(ii)

Refund of special CVD of customs;

(0)

(iii)

Stock transfer/Branch Transfer under the CST Act, 1956.

(0)

(b)

ABC Ltd. manufactures two products A and B. The product A is specified under section 4A of the Central Excise Act, 1944. The deduction (abatement) permissible under section 4A is 40%. The MRP of the product is Rs.40 per unit. The sale price takes into account 16% BED and education cess @ 3%. Sale price also includes CST @ 2%. The company has cleared 3,00,000 units of this product.
The company had cleared 2,00,000 pieces of product B which is sold at Rs.50 per piece inclusive of excise duty @ 16% (plus cess @ 3%) and CST @ 2%.
Calculate the excise duty liability of the company.

(0)

(a)

M/s. Ginat Lifts Ltd. wish to know whether there is any provision under the Customs Act, 1962 for claiming refund of import duty paid, where the imported goods are found to be defective or not in accordance with agreed specifications. Advise them briefly.

(0)

(b)

Ram & Co., a registered dealer with head office at Kolkata, furnishes to you the following information:

	Rs.
Inter–State sale of goods (it includes Rs.10,00,000 being the value of goods Transferred to Chennai Branch covered by Form F) Dharmada collected Weightment dues charged separately from buyers Cash discount shown in invoice as per trade practice Indemnity charges (recovered from buyers to cover transit loss based on their request)	49,20,000 25,000 2,15,000 60,000 53,000

Calculate the turnover and CST payable, on the assumption that all the sales were made to registered dealers.

(0)

(c)

A company manufacturing a dutiable product in the factory at Cochin, was making sales through its depot in Mumbai. The sale price at Mumbai depot at Rs.30,000 per piece inclusive of transport charges from Cochin to Mumbai of Rs.3,000. The depot price includes excise duty @ 16% plus cess @ 3% but excludes Maharashtra VAT. Annually 2,000 pieces are sold by the depot. The company decides to make direct sale from Cochin to its customers which would attract CST at 2% to be borne by the company. The company wants to close down the depot at Mumbai bringing cost saving of Rs.5,00,000 per annum. The sale price will continue to be as earlier. Evaluate the implications of the decision.

(0)

(a)

What do you understand about the term ‘Anti–dumping Duty’ under the Customs law?

(0)

(b)

What is the difference between a sale for export and sale in the course of export under the CST Act, 1956?

(0)

(c)

Mr. A is manufacturing goods with other’s brand name. Mr. A has manufactured goods of Rs.90,00,000 in the FY 2009–10. Out of this, Rs.70,00,000 are taxable final products and Rs.20,00,000 are example final products.
Excise duty paid on his inputs (excluding education cess and SAH education cess) is Rs.10,00,000. Rate of basic excise duty on final products is 14%. [Ignore education cess and SAH education cess.]
Discuss the options available to Mr. A for availment of Cenvat credit, if he is not able to bifurcate inputs between those used for exempt goods and taxable final products. Calculate Cenvat credit available to him under different options and explain which option is beneficial to him.

(0)

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