CWA/ICWA Inter :: Business Taxation: June 2003

*I-8(BTN)* *Revised Syllabus*
Time Allowed : 3 Hours	Full Marks : 100
Section I (50 marks)
Answer Question No. 1 carrying 18 marks is compulsory.
2 other questions each carrying 16 marks are to be answered from Section I. Reasons must be stated for the answers.
		Marks

XYZ Lrd., which manufactures various products shows a net profit of Rs. 6,50,000 for the year ended 31st March; 2003; after debiting the following:

(a)
Fees paid to an architect for valuation of the office-building and factory building for contesting excessive municipal tax levied, Rs. 12,500.

(b) Compensation paid to a director on termination of service, Rs. 1,30,000.

(c)
Expenses paid to Management Consultant for preparation of budgeting formats, Rs. 34,000.

(d) Payment of Rs. 15,000 in advance for getting a new telephone connection under OYT Scheme.

(e) Expenditure incurred for repairing a property taken on lease for business, Rs. 4,000.

(f) Expenses incurred for registration of the trade mark of a product, Rs. 11,150.

(g)
Anticipated loss on forward contact for purchase of raw material as a result of a fall in market price, Rs. 1,20,780.

(h) Expenditure incurred initially on Installation of fluorescent tube lights, Rs. 800.

(i)
Cost of lunch given at a 5-star hotel where four representatives of suppliers were treated to lunch along with the purchase manager and secretary of the company, Rs. 3,800.

How would you deal with the above in computing total Income of the company?

2x9=18

Mr. X, a reputed vocal musician, is also a part time employee in a company. He furnishes the following particulars of his income and expenditure for the year ending 31st March, 2003.

(a)
Net salary received Rs. 30,000 after deduction of Income-tax, Rs. 6,000, contribution to recognised provident fund. Rs. 5,4000 and rent for quarters, Rs. 4,600 at 10% of salary only.

(b) Commission on Sales at 3% of Turnover, Rs. 8,00,000 as per appointment letter.

(c)
Salary paid to a servant, Rs. 1,200 per month, who was used for both domestic and professional purposes.

(d) Dictor's bill paid, Rs. 2,000 for treatment of throat so as to improve his voice.

(e)
His gross professional receipts amounted to Rs. 50,000 for the year including Rs. 6,000 earned for performances in the USA. He claims exemption on Rs. 6,000.

(f) Cost of two instruments, Rs. 1,000 (Rs. 500 each).

(g)
He resides his own house, the annual letting value of which as per municipal assessment is Rs. 2,400, and fair rent is Rs. 500 per month. The municipal tax is Rs. 650 and he spent Rs. 1,000 on repair, Rs. 53 on urban land tax and Rs. 40 on fire insurance.

(h)
A purse of Rs. 50,000 was presented to him at a function as a token of appreciation of the services rendered by him to the cause of music.

(i) Life insurance premium paid Rs. 40,000 on a policy of Rs. 5,00,000.

(j)
Agricultural income Rs. 6,000. His minor son earned Rs. 10,000 from agricultural lands gifted by X to him in 1999.

How should the above items be dealt with under the Income-tax Act, 1961? You need not compute his total income for the relevant assessment year.

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I-8(BTN)
Revised syllabus

Marks

The following particulars are available about Mr. T. for the previous year ended 31st March, 2003: /tr>

(a)
(b)
(c)

(d)
(e)
(f)
Profit of business A carried on in India
Loss of business B carried on in India
Profits of business C carried on in the U.K. and
controlled from India, the profit having been received in U.K.
Loss of business D carried on the U.K. the business being controlled from Mumbai.
Income from property in India
Income from properties in the U.K. 25% of which the receivable in India Rs.
80,000
(-) 30,000

52,000
(-) 46,000
32,000
1,92,000

(g) Royalty received in the U.K. for use of chemical formula in

(a) India
(b) U.K. 60,000
30,000
90,000
(h) Gain on sale of land in India 50,000

Determine the total income of Mr. T. for the assessment year 2003-2004, assuming that his status is -

(i) Resident and ordinarily resident in India;

(ii) Resident and not ordinarily resident in India;

(iii) Non-resident in India.

(a)

X, Y and Z are the three partners of a firm, sharing profit and losses as 2:3:5. It is constituted by a deed of partnership, but there has been a change in the profit-sharing ratio in the Financial Year 2002-2003 from the earlier year. The firm did not submit a certified copy of the new deed of partnership and it had been treated as an AOP.
The profit and loss account of the firm for the year ended on 31st March, 2003 shows the following:

Opening stock Sales purchases Other business receipts Other expenses Closing stock	Rs. 1,21,000 — 15,70,000 — 1,57,000 —	Rs. — 21,40,000 — 66,000 — 32,000
Remuneration to Partners X Y Z Interest to partners @ 24% per annum X Y Z Net profit	60,000 80,000 1,02,000 30,000 36,000 42,000 40,000
	22,38,000	22,38,000

Other Income of partners

Interest on Govt. securities
Interest on company deposits
Contribution to PPF

X
Rs.
34,000
15,500
10,000

Y
Rs.
7,000
10,000
20,000

Z
Rs.
42,000
20,000
16,000

Determine the tax of the partnership assessed as on AOP as also of X, Y and Z.

(b)

Mr. P, a citizen of India, has been residing in the U.S.A. but returns to India on 17.8.2002 for permanently residing in India. Discuss his Wealth Tax liability in the following cases:

(i)
He brought Rs. 15,00,000 (in Dollar) with him and purchased 2 cars at Rs. 8 lakh and Rs. 7 lakh, one for his business and second one for personal use respectively.

(ii)
He had sent Rs. 20 lakh on 3.5.2000 and purchased a residential house in Delhi on 17.5.2000.

(iii)
He had remitted Rs. 10 lakh to India on 1.9.2001 and purchased jewellery with the sum on 17.9.2002.

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I-8(BTN)
Revised syllabus

Marks

Section II (50 marks)

Answer Question No. 5 carrying 18 marks is compulsory.

2 other questions each carrying 16 marks are to be answered out of
the remaining three questions from Section II.

(a)

Define transaction value under the Central Exercise Act, 1944. What are its main requirements?

(b)

State whether the following items are includible in T.V. citing reasons, if any:

(i)	Regional discount;
(ii)	Commission;
(iii)	Surprise incentive scheme;
(iv)	Trader's margin.

1x4=4

(c)

How would you arrive at the T.V. for the purpose of levying excise duty from the following data?

Cum-duty selling price (exclusive of sales tax)
Rate of Excise Duty
Trade discount allowed
Freight Rs.
10,000
16%
1,200
750

(d)

How is turnover determined under the Central Sales Tax Act, 1956?

(a)

An importer in India Imported raw materials @ US $ 25,000 FOB. The goods were packed for which US$ 600 was charged extra. The goods were stuffed in Container, the price of which was US $ 250 and 800 respectively were paid. A commission of US $ 500 had to be paid to a broker for arranging the deal;

1 US $ = Rs. 42.38,
Custom Duty is 35%
Special Additional Duty (SAD) is 4%
Excise duty on similar goods in India is 16%.

Determine the duty payable.

(b)

Mr. and Mrs. K visited the USA and bought there a personal computer for US dollars equivalent to Rs. 31,000 while returning to India. They carried personal effects also valued at Rs. 46,000. What is the customs duty payable?

(c)

An Indian resident goes to Nepal on tour. He purchases a Colour TV for Rs. 18,000 and a hair-dryer for Rs. 2,000 (Indian Rs.) from a duty-free shop in Nepal and brings these to India. What is the duty payable, if he returns on
(i) The 3rd day of arrival in Nepal?
(ii) The 11th day of arrival in Nepal?

(a)

Examine whether the following amounts to manufacture under the Central Excise Act, 1944:

(i) Cutting or sizing;

(ii) Repairing reconditioning;

(iii) Remelting;

(iv) Mixing of metals.

1x4=4

(b)

Distinguish between CENVAT on capital goods and on inputs for production.

(c)

What are the documents and accounts required to be maintained for availing oneself of CENVAT credit?

write about notes on:

(a)	Penultimate sale for export under Central Sales Act, 1956.
(b)	Stores under the Customs Act, 1962,
(c)	Tariff value under Central Excise Act, 1944.

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