CWA/ICWA Final :: Strategic Tax Management: December 2004

*F-16(STM)* *Revised Syllabus*
Time Allowed : 3 Hours		Full Marks : 100
The figures in the margin on the right side indicate full marks
Answer Question No. 1 which is compulsory and any five from the rest .
Total six questions are to be answered.
Marks

Answer any ten of the following, giving brief reasons not exceeding 3 or 4 sentences:

2x10=20

(a)

State True or False:

(i)	Wealth Tax paid by a company is a deductible expense.
(ii)	Motor car manufatured outside India is used in India as a taxi on hire for tourists. Depreciation allowable on it is 40% of WDV.

(b)

Fill in the blanks —

(i)	Income accrued outside India and is also received there. It is taxable in the case of ___________.
(ii)	For Assesment Yeat 2003-2004, the Income exemption limit for an individual is Rs. ___________.

(c)

State whether there is manufacture in the following process fo rthe purpose of Central Excise—

(i)	Adding water, perfume and colour to liquid soap.
(ii)	Pineapple fruit is canned, removing teh inedible portion, slicing edible portion and adding sugar to preserve it.

(d)

State Correct or Wrong —

(i)	Trees when served from earth are 'goods' under the Central Sales Tax.
(ii)	A person who manufacture gold ornaments with the gold supplied by the customer is not a dealer under CST Act.

(e)

Choose the correct answer —
Dediction under Sec 80 HHB is available to

(i)	A company
(ii)	A non-corporate assessee
(iii)	An Indidan company
(iv)	An Indian company or a resident non - corporate assessee.

(f)

Which of the following is not chargeable to tax under the head 'Income from other sources'

(i)	Prize on crossword puzzles.
(ii)	Profit on sale of goodwill.
(iii)	Interest from Bank.

(g)

Some inputs were brought on which duty paid was Rs.8,000. These were used in hte manufature of final product. Discuss eligibility of CENVAT Credit if

(i)	Final product is exempt from duty.
(ii)	Final product is dutiable but duty on it is only Rs.3000.

(h)

An Indian resident comes back to India after cisiting Germany. He brings on return

(i)	Personal effects valued at Rs. 20,000.
(ii)	1 litre of loquor of value Rs. 1,500.

(i)

S Mills Ltd., Salem, Tamil Nadu has its own depot at Ichalkaranji in Maharashtra. Yarn ois dispatched to that depot and then it is sold from there. Is there any liability to CST? State reason for your answer.

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F-16(STM)
Revised syllabus

Marks

(j)

An assessee commences business on (a) 1st Sept.. 2002, (b) 1st Dec.. 2002, (c) 1st Fec.. 2003. In each case what will be his assessment year and what will br treated as the previous year for the concerned Assessment Year?

(k)

Mr. Kesavan, a government officer living in Agra, has been procied with furnished rent free quarters. His salary is Rs. 20,000 per month. The rent of unfurnished house per government rules is Rs. 1,000 pm, but its fair rent value is Rs. 7,500 pm. He is provided with furniture costing Rd. 70,000. Find out value of rent free furnished house as a perquisite for I. T. pruposes.

(a)
(b)

Distinguish between Tax planning and Tax Management.
Discuss tax considerations with reference to specific management decision regarding 'Make' or 'Buy'.

8+8=16

State with reasons the treatment of the following for wealth tax purposes:

(a)

(i)	Urban land in which construction is not permitted.
(ii)	Urban land bought 12 years ago for construction of factory but construction yet to start.

(b)

In the case of an individual, interest in the coparcenary property of the HUF of which he is a member.

(c)

The assessee gifted cash of Rs. 2 lacks on 10.4.02 to his wife. She bought jewellary using the cash. The market value of such jewellary as on 31.3. 04 is Rs.3 lacs.

(d)

(i)	Guest house located beyond 30kms from municipal limits of Patna.
(ii)	Building used for running own business.

(e)

(i)	Residntial quarters allotted to workers in a company.
(ii)	Residential quarters allotted to officers drawing Rs. 40,000 pm.

(f)

The assessee obtained a loan of Rs.4lacs by mortaging his house. The loan was utilized for purchase of shares. As on 31.3. 2004 outstanding loan was Rs.2 lacs.

(g)

Urban land transferred without consideration to minor handicaped child valued as on 31.3.04 at Rs. 6,00,000.

(h)

The assessee transferred assets worth Rs. 10 lacs to his son's wife for Rs. 3 lacs.

(a)

A machinery costing Rs. 2 lacs acquired four years back ans used in the assesse's factory was destroyed by fire on 21.3.2003. As per the reinstatement clause with the insurance company, the latter replaced on 12.5.2003 the destroyed nachine by a new one whose current cost is Rs. 3 lacs. Discuss tha implications of the samw in the context of capital gains and impact on the WDV of the concerned block of asset under the Income Tax Act, 1961, stating clearly the assessment years involved.

(b)

Continuing the above problem, assuming that there is some capital gains, can the same be avoided if the assessee is willing to invest his surplus funds in eligible investment under Section 54EC? The company is advised that since the resultant capital gain is short-term gain under Section 50 the same is not possible. State your views.

(c)

A Ltd. is engaged in the activity of conversion of gray into embroidered dyedcloth. In the course of the various activities it gets the sizing done by S and dyeing by D. The cost of gray cloth is Rs.40 per metre. S charges Rs. 5 per meter for sizing and D charges Rs.20 per meter. The finished product is sold by A Ltd. for Rs. 75 per meter. In the context of C.E.Act, 1944, is there any manufacture involved? Who will be regarded as the manufacture in this situation?

(d)

Mr.Bhattacharjee purchased some raw materials from X Ltd., a SSI unit. Teh duty paid was at a concessional rate (70% of normal rate of 20%). The assessable value was Rs. 20,000. Due to technical reasons, he had to sell the goods for Rs. 19,000. What is the duty payable?

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F-16(STM)
Revised syllabus

Marks

Kumar Sparkplugs Ltd., has unit C which is not functioning satisfactorily. The details of its fixed assets are:

(a)

Tax liability of Mr.X, an individual, for the Financial Year 2003-2004 (Assessment year 2004-2005) is computed as Rs. 1,00,000. Mr.X has paid advance tax as follows —

(i)	10th September,2003 — Rs.20,000, (ii) 21st December, 2003— Rs. 30,000, (iii) 11th March, 2004 — Rs. 35,000
	Mr.X intends to file his income tax return with balance tax and interest payable. There was no TDS from any of his income.
	Compute the tax and interest payable if (i) Balance tax and interest os paid on 21st July, 2004 and return is filed on same date, (ii) Balance tax and interest is paid on 4 th January, 2005 and he files return on same date, (iii) Balance tax and interest is paid on 21st July, 2004, but he forgets to file return and return is latter filed on 4th January, 2005.

(b)

ABC Co. Ltd., wanted a stainless steel tank for their manufacturing process. Since the tank was huge size, they decided to fabricate the same in their factory to save problems of transportation. The contract of fabrication was given to XYZ Co. Ltd., who are experts in specialized steel tank designing, manufacture and welding. The tank was fabricated at site as designed by ABC Co. Ltd. The tavk was affixed to ground with bolts but could be removed without dismantling. No excise duty was paid on the tank. Excise department wants to issue show cause notice damanding duty.
Whether duty is payable? If duty is found to be payable, whether demand notice should be issued to ABC Co.Ltd. or XYZ Co. Ltd?

(a)

Central Sales Tax Act provides that in respect of certain aspects, provisions of General Sales Tax Law of each state will apply to persons liable under CST Act.

(b)

A demand of duty was raised on an assessee for previous five years, alleging suppression of facts with intention to evade duty. Assessee stated that there was no reason for him to avoid payment of duty as the buyer was in a position to avail Cenvat credit. There was no loss to him, even of he had paid higher duty. Hence, charge of suppression of facts with intention to evade duty is not sustainable. Is his stand sustainable?

(c)

A manufacturee purchased a machinery falling under chapter heading 84 from supplier 'X Co.'. The invoice eas for Es. 23,200 comprising of price of goods as Rs. 20,000 and Rs. 3,200 as excise duty. Pass journal entry in accounts book to record the purchase transaction. Explain how the balance will appear in Balance Sheet.

(a)

A manufacturer in Gujarat has a depot in Bangalore. His factory gate price os Rs. 9,000. Transport charges from Gujarat to Bangalore are Rs. 500 per piece. The manufacturer's Karnataks depot price os Rs. 10,000 exclisive of excise duty and Karnataka Sales Tax. Karnataka Sales Tax on the goods is 10%. As per Karnataka Sales Tax Law, sales tax is payable on selling price plus excise duty . The manufacturer is planning to make direct sale to Bangalore buyers from his Gujarat factory, instead of selling from depot. Bangalore dealers want that their present cum-duty invoice price (excluding Karnataka Sales Tax) should remain unaffected ecen if they will have to pay Karnartaka Sales Tax. The Bangalore dealers are registered under CST Act and are in a position to issue C Form for their purchases. The manufacturer has agerrd to the request of dealers.
You are required to calculate the assessable value and excise duty and CST payable if goods are sold directly from Gujarat, assuming that dealers' request is accepted. The product os levisable to excise duty @16%. If the product is sold in Gujarat State, the sales tax rate is 8%.

(b)

State provisions in respect of 'burden of proof' in respect of goods covered under section 123 of Customs Act.

__________

CWA/ICWA Final :: Strategic Tax Management : December 2004