| 1. | Reproduce the correct answer in the following cases. Give reasons for your answer in 3–4 sentences: | 20 | |
| | (a) | In the case of company assessee, preliminary expenses are allowable as deduction subject to — (i) 5 per cent of cost of project; (ii) 5 per cent of capital employed; (iii) 10 per cent of capital employed; or (iv) 5 per cent of cost of project or 5 per cent of capital employed, whichever is higher. | | (0) |
| | (b) | Amortisation of telecom licence fees shall be allowed as deduction in — (i) 10 equal installments; (ii) equal installments over the period starting from the year in which such payment has been made and ending in the year in which licence comes to an end; (iii) 6 equal installments; or (iv) 14 equal installments. | | (0) |
| | (c) | Deduction under section 80 HHBA in respect of housing projects is available on projects funded by the — (i) Reserve Bank of India; (ii) ICICI; (iii) HDFC; (iv) World Bank; or (v) IMF. | | (0) |
| | (d) | Under the new rules of valuation of perquisite the taxable value of the perquisites in respect of rent free unfurnished house (which is owned by the employer) to a non-Government employee depends upon — (i) "salary" of employee; (ii) size of the house; (iii) fair rent of the house; (iv) all the above. | | (0) |
| | (e) | The gross salary of X is Rs. 1,55,000. The deduction on account of entertainment allowance and professional tax is Rs. 4,200 and Rs. 1,900 respectively. The standard deduction in this case is — (i) Rs. 20,000; (ii) Rs. 30,000; (iii) Nil; or (iv) noe of the above. | | (0) |
| | (f) | X retires from A Ltd. on October 10, 2001. For the purpose of computing taxable leave salary, average salary of 10 months shall be from — (i) December 1, 2000 to September 30, 2001; (ii) January 1, 2001 to October 31, 2001; (iii) December 10, 2000 to October 10, 2001; or (iv) none of the above. | | (0) |
| | (g) | X the owner of a house property in Delhi, has started legal proceeding against his defaulting tenant for getting the property vacated. In this process, he incurs Rs. 40,000 as legal charges. Can the same be allowed as deduction from income under the head "Income from house property" — (i) Yes; (ii) No; or (iii) Depends upon facts and circumstances of the case. | | (0) |
| | (h) | X Ltd. owns two house properties, one in Delhi and the other in Bombay. The Delhi house property is let out for residence and the Bombay house property is used for the purpose of carrying on business. On February 11, 2002. The Bombay house property is sold. Can exemption be claimed under — (i) Section 54 by purchasing a house property within the prescribed time limit; (ii) Section 54 by purchasing a house property and section 54EC by purchasing bonds within the prescribed time limit; (iii) Section 54F by purchasing a flat within the prescribed time limit; (iv) Section 54 by purchasing a commercial house property and section 54EC by purchasing bonds, within the prescribed time limit; or (v) none of the above? | | (0) |
| | (i) | Sales tax payable on product 'A' if sold within State of Punjab is 2 per cent. If the product is sold in inter. State sale, what will be the Central Sales Tax payable if (a) Buyer furnishes C form; (b) Buyer does not furnish any form; (c) Buyer furnishes H form; (d) Buyer furnishes D form.? | | (0) |
| | (j) | An exemption notification under Customs Act was issued on January 2, 2003, published in official Gazette on January 3, and was made available for sale on January 4. State the date when the notification will be effective. | | (0) |
| 2. | If you are asked to design the remuneration package for an employee state the tax planning measures you will consider to minimize the tax liability of the employee and at the same time no disallowances are faced by the employer. | 16 | (0) |
| 3. | (a) | Nav Udyog Ltd., a manufacturing company, is also doing purchase and sale of shares of other companies. It made a profit of Rs. 30 lakhs in the manufacturing business and suffered a loss of Rs. 20 lakhs in share business during the previous year 2001—02. | (i) | Can Nav Udyog Ltd. set off loss of Rs. 20 lakhs from the profit of manufacturing business? |
| (ii) | If Nav Udyog Ltd. is an investment company instead of a manufacturing company will your answer be different? |
| (iii) | If the name of the manufacturing entity is Gupta Mehta & Co. will your answer be different? |
| 3+2+3 | (0) |
| | (b) | ABC Ltd. had borrowed money for purchase of a machinery. The interest paid on the borrowed money was being allowed as a deduction in the earlier years. The Assessing Officer (AO) however found a note in the account stating that no depreciation had been charged to the profit and loss account on unused machinery. The AO viewing that, since the machinery was not in use, the interest on borrowing could not be allowed as business expenditure, reopened the past assessment and disallowed the interest, is the action of AO justified? | 4 | (0) |
| | (c) | A company paid full consideration for the building acquired for its administrative office and occupied the same as possession was given. The registration could not take place before the end of the previous year for some reason or other. The Assessing officer disallowed the claim for depreciation on the ground that the building has not been registered in favour of the company and hence it is not the legal owner. Is the action of AO justified? | 4 | (0) |
| 4. | (a) | What are the assets that are included as 'deemed wealth' in computation of Net Wealth? | 8 | (0) |
| | (b) | State how the following would be treated in computation of Net Wealth under the Wealth Tax Act for the Assessment Year 2002–03. | 2x4 | |
| | | (i) | Urban land transferred by the assessee to minor handicapped child. Cost price in 1998 Rs. 3 lakhs valued on March 31, 2002 at Rs. 5 lakhs. | | (0) |
| | | (ii) | Residential property in Kolkata (let out for residence from 1st September 2001). — Market value Rs. 2.5 lakhs. | | (0) |
| | | (iii) | Yacht purchased in April 2001 by a person of Indian Origin who was working in Bahrain from 1985 and returned to India in May 2001 when he remitted the money into India. The Yacht was purchased out of money remitted to India from Bahrain — Rs. 2,00,000. | | (0) |
| | | (iv) | Jewellery received by an assessee from her father at the time of her marriage in 1956 valued on 31.3.2002 at Rs. 1,50,000). | | (0) |
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| 5. | (a) | What is "transfer pricing" under income Tax? Why the provisions were introduced in Income Tax in respect of transfer pricing? What are the methods provided in Income Tax Act to determine price, where provisions of transfer pricing are applicable? | 8 | (0) |
| | (b) | A Ltd., an Indian company, sells computer monitor to its 100 per cent subsidiary X Ltd. in United States @ $ 50 per piece. A Ltd. also sells its computer monitor to another company Y Ltd. in United States @ $ 80 per piece. Total income of A Ltd. for the assessment year 2003–04 is Rs. 12,00,000 which includes sales made for 100 computer monitors @ $ 50 to X Ltd. Compute the arm's length price and taxable income of A Ltd. The rate of one dollar may be assumed to be equivalent to Rs. 49 for the sake of simplicity. | 8 | (0) |
| 6. | (a) | A small scale industry is not eligible for exemption from duty if it manufactures goods bearing brand name of other person. Discuss the provisions in respect of (i) Original Equipment (OE) parts manufactured by SSI with 'BHEL' mark for use by BHEL (Bharat Heavy Electricals in their equipment); (ii) Soap manufactured bearing brand name of 'Hotel Tajmahal' to be kept in hotel rooms for use by occupants; (iii) Foreign brand name; (iv) Goods manufactured in rural area. | 10 | (0) |
| | (b) | What are the offences in Central Excise for which penalty can be imposed under rule 25 (1) of Central Exercise Rules? What is the maximum penalty that can be imposed under this rule? | 6 | (0) |
| 7. | (a) | What are the essential requirements of 'penultimate sale of export' under Central Sales Tax Law'? Can packing material he purchased without payment of CST for packing goods to be exported? | 10 | (0) |
| | (b) | Prepare a note for the Managing Director of your company pinpointing method of calculation of the perquisite value in case of transfer of movable assets like computer and lap–top to employees. | 6 | (0) |
| 8. | (a) | A consignment is imported by air. CIF price is 2,000 Euro. Air freight is 550 Euro and Insurance cost is Euro 50. Exchange rate announced by CBE & C as pet Customs notification is 1 Euro = 47.10. Basic Customs duty payable is 30%. Excise duty on similar goods produced in India is 16%. Special Additional Duty (SAD) is payable at normal rates. Find the value for customs purposes and total customs duty payable. | 10 | (0) |
| | (b) | State briefly the provisions of EPCG scheme. | 6 | (0) |
