CWA/ICWA Inter :: Business Taxation: June 2006

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
1.

All answers should be on basis of provision relating to Income Tax assessment year 2006-07.
(A) Choose the correct answer:
(i)

An individual is said to be resident in India in a previous year (in which the February month has 29 days) if he is in India in that year for a period or periods amounting in all to _______ days or more.
[(a)182(b)183(c)60(d)150]

(ii)

A partnership firm's profit as per the profit and loss account is Rs. 10,00,000. Its total income determined according to the provisions of the Income-tax Act, 1961 is Rs. 9,00,000. A partner who has 20% share in the firm can claim exemption of amount of Rs. _______ under section 10(2A).
[(a)2,00,000,(b)1,80,000,(c) 20,000,(d)None of the above]

(iii)

The income of any university or other educational institution existing solely for educational purposes and not for purposes of profit is exempt under clause (iiiad) of section 10(23C) if the aggregate annual receipts of such university or educational institution do not exceed Rs. _______
[(a)Rs. 100 crores,(b)Rs. 1 crore, (c)Rs. 10 crores,(d)Rs. 10 lakhs]

(iv)

Capital gains arising to an individual/HUF is exempt from tax under section 10(37) if the land was being used for agricultural purposes by such HUF or individual or parent of his during a period of _______ or more immediately preceding the date of transfer.
[(a) 2 years,(b)36 months,(c)12 months,(d)6 months,]

(v)

Expenditure incurred by an employer on medical treatment and stay abroad of the employee shall not be taxed in the case of _______.
[(a)

An employee whose gross total income before including the said expenditure does not exceed Rs. 2 lakhs,

(b)

An employee whose income under the head "Salaries" exclusive of all monetary perquisites does not exceed Rs. 2 lakhs,

(c)

An employee whose income under the head "Salaries" exclusive of all non-monetary perquisites does not exceed Rs. 2 lakhs,

(d)

All employees irrespective of their amount of gross total income/the amount of income under the head "Salaries"]

 1x5
(B)

Fill in the blanks:
(i)

According to section 44AB, every person, carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceeds Rs. _______ in any previous year, inter alia, get his accounts of such previous year audited by a Chartered Accountant.

 1
(ii)

Additional depreciation of 20% of the actual cost of any new machinery or plant which has been acquired or installed after 31.3.2005 is available to an assessee engaged in the business of _______

 1
(iii)

According to section 40A(3), where the assessee incurs any expenditure in respect of which payment is made in a sum exceeding Rs. _______ otherwise than by a crossed cheque or crossed bank draft. _______ per cent of such expenditure shall not be allowed as a deduction.

 ½+½

 
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( 2 )

I—8(BTN)
Revised syllabus
Marks
(C) State true or false, with reasons:
(i)

For computation of capital gains, full value of consideration arising from the transfer of a capital asset, being land or buildings or both, shall be the value adopted by the "stamp valuation authority" for payment of stamp duty or the consideration accruing or received from the transfer, whichever is less.

(ii)

Section 73 does not permit carry forward of losses from speculation business for more than four assessment years immediately succeeding the assessment year for which the loss was first computed.

(iii)

Every assessee carrying on a business or prefession is entitled to deduction under section 80JJAA equal to 30% of additional wages paid to new regular workmen employed by the assessee.

 2x3
2. (a)

From the following data, compute the book profit of ABC Ltd. under section 115JB of the Income-tax Act, 1961 for the assessment year 2006-07:

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ParticularsAmount
(Rs.)
Net profit as per Profit and Loss Account (before tax)
Profit on sale of listed securities (these listed securities are
long-term capital assets) included in Net Profit as above.
Depreciation charged in accounts
Proposed dividend (including dividend distribution tax thereon)
Transfer to general reserve
Provision for taxation — current tax
Provision for taxation — differed tax (liability)
Provision for taxation — fringe benefit tax		 50,00,000

5,00,00
10,00,000
5,00,000
10,00,000
14,00,000
6,00,000
1,00,000

Of the depreciation charged in accounts, Rs. 6,00,000 is the depreciation on plant and machinery which was revalued upwards on 1.4.2005. The increase on revaluation was credited to revaluation reserve. Had there been no revaluation, depreciation charged on plant and machinery (as per books) would have been Rs. 4,50,000.
(b)

The Assessing Officer processes the return filed under section 143(1)(a) and refunds the amount claimed as refund with interest at the rate of 0.5% per month on the amount of refund. Subsequently, a notice is issued under section 143(2) and it is found that in the scrutiny proceedings that the refund was wrongly granted. The Assessing Officer issues a demand for the wrongly allowed refund amount and interest at the rate of 0.5% p.a. thereon. What will be the consequences?

 3
(c)

Briefly explain the salient features of the presumptive provisions (of section 44AD) for computing income from business of civil construction.

 7

 
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( 3 )

I—8(BTN)
Revised syllabus
Marks
3. (a)

Explain in brief whether the following expenses incurred by a company during the financial year 2005-06 attract Fringe Benefit Tax? Answer any four.
(i)

Non-transferable food vouchers/meal vouchers usable at eating joints/eating outlets provided to employees.

(ii)Expenses on food and beverages for the permanent employees in a temporary training centre.
(iii)Reimbursement of out-of-pocket expenses to auditors of the company.
(iv)Payment of employer's ESI (Employees' State Insurance) contributions.
(v)Repairs, running and maintenance expenses and depreciation on delivery vans.
(vi)Expenditure on holding of press conference.

 2x4
(b) Explain the scheme of filing returns by salaried employees through employer. 5
(c)

Write a short note about clubbing of income of minor child under section 64(1A) of the Income-tax Act, 1961

 5
4. (a)

X Ltd. is a manufacturing company, The Profit and Loss Account of X Ltd. for the year ending March 31, 2006 is given below:

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Sales Tax
Other Expenses
Net Profit		 50,000
14,15,000
5,45,000		 Sales 20,10,000
Total20,10,000 20,10,000

Other Information:
(1)

Out of sales tax of Rs. 50,000 only Rs. 47,000 is paid. The payment is made as follows:
(i)Rs. 40,000 on September 2, 2005;
(ii)Rs. 4,000 on October 5, 2006; and
(iii)Rs. 3,000 on November 1, 2006.
(2)

Return of income is submitted on November 10, 2006 and evidence of sales tax payment as stated in (ii) and 1(iii) above is submitted along with the return of income.

(3)

During the previous year 2005-06, the following payments are made in respect of expenses pertaining to earlier years:
(i)

Bonus to employees pertaining to the previous year 2003-04 paid on April 30, 2005: Rs. 15,000;

(ii)

Customs duty pertaining to the previous year 2003-04 paid on December 1, 2005; Rs. 25,000;

(iii)

Electricity bill payable to BSES pertaining to previous year 2003-04 paid on May 3, 2005: Rs. 35,000;

(iv)

Excise duty pertaining to the previous year 2004-05 paid on May 20, 2005: Rs. 40,000; and

(v)

Leave salary payable to employees pertaining to the previous year 2004-05 paid on December 2, 2005: Rs. 45,000

These payments do not pertain to the previous year 2005-06. Consequently, these are not recorded in the Profit & Loss Account.

Find out the consequences on the net income of X Ltd. for the assessment year 2006-07, assuming that there are no other adjustments.
(b) Briefly explain whether trading in derivatives is regarded as speculative transaction. 8

 
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( 4 )

I—8(BTN)
Revised syllabus
Marks
Section — II
(50 marks)
Answer Question No. 5 which is compulsory and any two from the rest
from this Section
5. (a) Answer any eight from the following:
(i)

If customs duty is evaded by suppression of facts or fraud or wilful misstatement, there is mandatory penalty equal to ______. [value of goods, duty and interest payable, twice the duty and interest payable, customs duty payable]

(ii)

Imported goods can be kept in customs bonded warehouse without payment of interest for a period of ______ days. [30, 60, 90, 180]

(iii)

Value of software loaded on computer at the time of clearance from factory, is required to be ______ [excluded/included] for purpose of valuation of computer, under section 4 of Central Excise Act.

(iv)

A company has factory in Surat and HO in Mumbai. It pays audit fees from Mumbai, for auditing its annual accounts. The Auditor charged service tax in his Invoice. Can the company avail Cenvat credit of that service tax?

(v)

State correct or wrong:
Countervailing duty (CVD) is payable on assessable value plus basic customs duty plus anti-dumping duty.

(vi)

A manufacturer purchased certain inputs from 'X'. The assessable value is Rs. 10,000 and excise duty Rs. 1,632 (including education cess) [Total Invoice Rs. 11,632]. The manufacturer paid only Rs. 10,200 to 'X' in full settlement of his Bill. How much Cenvat credit can be availed by the manufacturer?

(vii)

An assessee cleared some goods on payment of excise duty, considering value as Rs. 20,000. Later, he found that actual value was Rs. 24,000. Which document he should prepare to pay the differential duty so that buyer can avail Cenvat credit?

(viii)

Excise Departmental appeal against order passed by Commissioner (Appeals) can be field when it is authorised by ________.
[Committee of two Commissioners/Committee of two Chief Commissioners/Chief Commissioner/Board i.e. CBE & C]

 1x8
(b)

An assessee cleared his manufactured final products during January 2006. The duty payable for the month on his final products was as follows: Basic duty — Rs. 48,000; NCCD — Rs. 2,000; Education cess — As applicable. During the month, he received various inputs on which total duty paid by suppliers of inputs was as follows; Basic duty — Rs. 40,000 plus applicable education cess; Special Excise Duty — Rs. 4,000 plus applicable education cess. Service tax paid on input services was as follows: Service tax — Rs. 8,000. Education cess — Rs. 160. How much duty the assessee will be required to pay through account current for the month of January 2006?

 6
6. (a)

Turnover of an SSI unit during financial year 2005-06 was as follows: (i) Clearance under his own brand name—Rs. 110 lakhs, (ii) Clearances of goods bearing other's brand name, on full payment of duty—Rs. 180 lakhs, (iii) Waste and scrap—Rs. 10 lakhs, (iv) Goods which were exempt from duty—Rs. 225 lakhs, (v) Job work done under notification No. 217/86-CE—Job charges—Rs. 30 lakhs, Cost of material on which job work done—Rs. 120 lakhs, (vi) Exports—Rs. 90 lakhs. Can he avail SSI exemption during 2006-07?

 7
(b)

Explain meaning of 'benches' of Customs, Excise and Service Tax Appellate Tribunal (CESTAT). Distinguish between Principal and Zonal Bench and Single Member Bench and Full Bench.

 5
(c)

Mr. and Mrs. Bapat visited Germany as tourist and bought a personal computer for Rs. 52,000 and laptop computer of Rs. 78,000 while returning to India, besides their personal effects valued at Rs. 1,33,000. What is the customs duty payable, if duty on baggage is 35% plus education cess of 2%.

 6
7. (a)

Customs Valuation Rules provide that if valuation is not possible on the basis of transaction value of identical goods, valuation can be done on basis of transaction value of 'similar goods'. What are the distinctions and similarities between 'identical goods' and 'similar goods'?

 6
(b)

State giving brief reasons, whether sales tax can be levied on following transactions: (i) Sale of newspapers, (ii) Giving utensils on rental basis, (iii) Supply, erection, testing and commissioning of water supply line.

 6
(c)

A manufacturer sold the goods @ Rs. 300 per piece without charging excise duty, as he was under impression that his product was exempt from duty. Later, it was found that the product was dutiable @ 16%. Excise Department claimed that since goods were removed without duty, assessable value should be Rs. 300 and duty @ 16% plus education cess of 2% is payable on assessable value of Rs. 300. Assessee contended that price of Rs. 300 should be taken as cum-duty price and actual duty payable should be calculated by back calculations. Who is correct? Explain and determine the correct duty payable per price.

 6
8. (a)

Discuss provisions relating to 'deemed manufacture' in respect of goods covered under MRP provisions of valuation.

 6
(b) Discuss the circumstances when an Advance Ruling will be void under Central Excise Act, 1944. 6
(c) Write a short note on Provisional Assessment under Customs Act, 1962. 6

__________

 

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