CWA ICWA - Final Stage III : Strategic Tax Management - June 2010

CWA ICWA - Final Stage III • Strategic Tax Management • June 2010

This Paper has 33 answerable questions with 0 answered.

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 carrying 20 marks which is compulsory and any five from the rest.
Working notes should form part of the answer.
Marks

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

Answer Question NO. 1 carrying 20 marks which is compulsory and any five from the rest.

Working notes should form part of the answer.

Marks

(a)

Fill in the blanks in the following sentences by using appropriate words/phrases given in the brackets:

1x6

(i)

Affixing brand name, Labelling or re–Labelling and repacking from bulk pack to small pack of readymade garment ____________ (is/is not) manufacture under Central Excise Act.

(0)

(ii)

General Free Allowance (GFA) under Customs Act is ________________ (allowed/not allowed) on unaccompanied baggage.

(0)

(iii)

The time limit for completion of Income–tax assessment of shipping business of non–residents is _____________(six/nine/three) months from the end of the financial year in which the return is furnished.

(0)

(iv)

The time limit for revision of order under section 154 is ______________ (2/3/4) years from the financial year in which the order was passed.

(0)

(v)

The Income tax exemption limit for a senior citizen who is _____________ (60/65/70) years or more at any time during the previous year is Rs. ______________ (2,00,000/2,40,000/3,00,000) for A.Y.2010–11.

(0)

(vi)

An EOU unit is required to execute a _____________ bond (B–8, B–11, B–17, Annexure A) under Central Excise Act.

(0)

(b)

State with reasons, whether the following statements are True or False:

2x7

(i)

An assessee being aggrieved by the order of Assessing Officer can file a revision petition to the Commissioner within a period of two years.

(0)

(ii)

For the purposes of computing Minimum Alternate tax(MAT) under section 115JB(2) of the Income tax Act 1961, the book profit need not be increased, by inter–alia, the amount of deferred tax or provision for deferred tax debited to the Profit & Loss Account.

(0)

(iii)

Security demanded from dealer under Central Sales Tax Act, 1956 can be satisfied in the form of Surety Bond.

(0)

(iv)

In case of a partnership firm, payment of interest to a partner is allowed as deduction upto 12% compounded on monthly basis.

(0)

(v)

Depreciation @ 25% is allowable under section 32 in respect of intangible assets such as patents and copyrights.

(0)

(vi)

Deduction available in respect of investment in Public Provident Fund is on ‘EEE’ basis.

(0)

(vii)

Customs Duty is not paid by an importer and it was found that such non–payment was on account of fraud committed by him. In such case, there is no time limit for issue of Show Cause Notice demanding Customs Duty and Penalty.

(0)

(a)

State the factors to be considered in taking a Management Decision relating to "Make a Product" (part of component) or Buy it from Manufacturers for its existing unit.

(0)

(b)

ANKRIT LTD has two industrial undertakings – one engaged in production of chemical and the other engaged in production of paper. As a restructuring drive, the company has decided to sell its undertaking producing paper as a going concern by way of slump sale of Rs.1100 lakh to SHEETAL LTD on 31^st December, 2009. The balance sheet of ANKRIT LTD. as on 31.12.2009 is given hereunder.

(Amount in Rs. Lakhs)
Liabilities	Rs.	Assets	Rs.
Equity Share Capital (Paid up)	2040	Fixed Assets:
Reserves	744	Chemical Unit	360
		Paper Unit	660
Liabilities:		Other Assets:
Chemical Unit	180	Chemical Unit	1584
Paper Unit	108	Paper Unit	468
Total	3072	Total	3072

Using the further information given below, calculate the Capital Gain arising on slump sale of Paper Unit and tax liability for the Assessment year 2010–11.

(i)	Fixed assets of paper unit include land that was purchased at Rs.72 lakhs in the year 2004 and revalued at Rs.108 lakh as on 31.03.2009.
(ii)	Fixed assets of Paper Unit reflected at Rs.552 lakhs (Rs.660 lakh less Land value Rs.108 lakh) is written down value of depreciable assets as per books. However, the written down value of these assets under section 43(6) of the Income Tax Act is Rs.492 lakh.
(iii)	Other assets of Paper Unit shown at Rs.468 lakh represent book value of non depreciable assets.
(iv)	Paper Unit is in existence since July 2003.
(v)	Cost Inflation Index may be taken as 480 for the F.Y.2004–05 and 632 for 2009–10.

(0)

(a)

Examine the correctness of the statement that – All types of Land held by an assessee on the valuation date are treated as ‘Urban Land ‘� under the Wealth Tax 1957.

(0)

(b)

RONEX CONSTRUCTIONS LTD. furnishes the following particulars of its wealth for the valuation date as on 31^st March 2010.

(Amount in Rs.Lakhs)

Particulars		Rs.
1.	Land in Urban area (held as stock in trade since 1998)	162
2.	Motor cars (including one imported car worth Rs.36 lakh used for hiring)	76
3.	Agricultural Land (250 acre) acquired at Greater Noida Township on July 25, 2009 for construction of residential flats/commercial complex. However Greater Noida Authority has reserved 25 acre land as green belt.	500
4.	Residential flats of 1800 sq.ft. each provided to 3 employees (salary of one employee exceeded Rs.5 lakh per annum)	72
5.	Farm House of 5 acre at a remote village	18
6.	Cash in hand as per cash book	4
7.	The company has taken following loans: i. for purchase of Land at Urban area:60 ii. for purchase of Land at Greater Noida 240 iii. for construction of residential flats18	318
8.	Wealth Tax Liability for A.Y.2009–10	24

Required:
Compute the Net Wealth and the Wealth Tax Liability for the A.Y.2010–11.

(0)

(a)

Compare the different forms of organization from the point of view of Tax Planning and Tax Liability.

(0)

(b)

Discuss some important areas of Tax Planning.

(0)

(a)

State four instances of utilization of CENVAT Credit. Is the credit available when the final product is exempt from duty?

(0)

(b)

State the definition of ‘Sale Price’ under section 2(h) of CST Act.

(0)

(c)

Describe “Warehousing without Warehousing” under Customs Law.

(0)

(d)

Enumerate ‘Fast Track Clearance’ Scheme under Customs Law.

(0)

(a)

The accounts of ABC Co. Ltd. have been prepared in accordance with the provisions of Companies Act. The profit and loss account laid before the annual general meeting for the previous year ending 31.3.2010 shows a net profit of Rs.40 lakhs. The profit and loss account contains the following credits/debits:

Credits in profit and loss account:

(1)	Profit from a new industrial undertaking being research and development activity, qualifying for deduction under section 80–IB (Net)	Rs.14,00,000
(2)	Gross Receipts of a newly established 100% export oriented undertaking qualifying for deduction under section 10B.	Rs.20,00,000
(3)	Capital gains on transfer of factory building, being a depreciable asset, held for 5 years by ABC Co. Ltd.	Rs.5,00,000

Debits in profit and Loss account:

No.	Particulars	Rs.
(1)	Expenditure relating to the newly established 100% export oriented undertaking qualifying for deduction under section 10B	Rs.15,00,000
(2)	Current year’s depreciation.	Rs.7,50,000
(3)	Penalty for infraction of law	Rs.50,000
(4)	Provision of sales–Tax	Rs.2,25,000
(5)	Proposed dividend	Rs.1,75,000

Following additional information is available:–

(1)	Brought forward depreciation (relating to A.Y.2009–10) Rs.8,00,000.
(2)	Brought forward business loss (relating to A.Y.2009–10) RS.12,00,000.
(3)	Depreciation admissible under the Income–tax Act for the Financial Year 2009–10 is Rs.15,50,000.
(4)	There is no unabsorbed loss or unabsorbed depreciation brought forward from the previous year under the Income–tax Act 1961.
(5)	The company is carrying on scientific and industrial research and development and is eligible for deduction of 100% of its profits under section 80–IB in respect of that activity.
(6)	The entire capital gain has been invested in specified assets under section 54EC.
(7)	Sales tax provided in the accounts has been remitted before the due date. Compute the taxable income and the tax liability of ABC Co. Ltd. for the A.Y.2010–l1.

(0)

(b)

Write note on – transactions not regarded as transfer for purpose of Capital Gain.

(0)

(a)

A trader supplies raw material of Rs.1,150 to processor. Processor processes the raw material and supplies finished product to the trader. The processor charges Rs.450, which include Rs.350 as processing expenses and Rs.100 as his (processor’s)profit. Transport cost for sending the raw material to the factory of processor is Rs.50. Transport charges for returning the finished product to the trader from the premises of the processor is Rs.60. The finished product is sold by the trader at Rs.2,100 from his premises. He charges Vat separately in his invoice at applicable rates. The rate of duty is 16% plus education cess as applicable.
What is the A V, and what is total duty payable?

(0)

(b)

CIF value of imported goods is Rs.10,00,000. Basic Customs duty payable is 10%. If the goods were produced in India, excise duty payable would have been 8%. Education cess is 2% and Special Education cess is 1%. Spl. CVD is payable at appropriate rates. Find the Customs duty payable. What are the duty refunds/benefits available if the importer is (a) manufacturer (b) service provider (c) trader?

(0)

Write short notes on the following(any four):

4x4

(a)

Reverse Mortgage;

(0)

(b)

Powers of Central Sales Tax Appellate Authority under Section – 22.

(0)

(c)

Safeguard Duty;

(0)

(d)

Related Persons;

(0)

(e)

“Input Service” for purpose of Cenvat Credit as applicable to a manufacturer;

(0)

(f)

Mandatory penalty equal to amount of duty under the Central Excise Act, and circumstance in which such penalty shall be reduced.

(0)

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