| 1. | 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 manufactured outside India is used in India as a taxi on hire for tourists. Depreciation allowable on it is 40% of WDV. |
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| | (b) | Fill in the blanks — | (i) | Income accrued outside India and is also received there. It is taxable in the case of ___________. | | (ii) | For Assessment Year 2003–2004, the Income exemption limit for an individual is Rs. ___________. |
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| | (c) | State whether there is manufacture in the following process for the 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. |
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| | (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. |
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| | (e) | Choose the correct answer —
Deduction under Sec 80 HHB is available to | (i) | A company | | (ii) | A non-corporate assessee | | (iii) | An Indian company | | (iv) | An Indian company or a resident non - corporate assessee. |
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| | (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. |
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| | (g) | Some inputs were brought on which duty paid was Rs.8,000. These were used in the manufacture of final product. Discuss eligibility of CENVAT Credit if | (i) | Final product is exempt from duty. | | (ii) | Final product is dutiable but duty payable on it is only Rs.3000. |
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| | (h) | An Indian resident comes back to India after visiting Germany. He brings on return | (i) | Personal effects valued at Rs. 20,000. | | (ii) | 1 litre of liquor of value Rs. 1,500. |
What is the customs duty payable? | | (0) |
| | (i) | S Mills Ltd., Salem, Tamil Nadu has its own depot at Ichalkaranji in Maharashtra. Yarn is dispatched to that depot and then it is sold from there. Is there any liability to CST? State reason for your answer. | | (0) |
| | (j) | An assessee commences business on (a) 1st Sept.. 2002, (b) 1st Dec.. 2002, (c) 1st Feb.. 2003. In each case what will be his assessment year and what period will be treated as the previous year for the concerned Assessment Year? | | (0) |
| | (k) | Mr. Kesavan, a government officer living in Agra, has been provied 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 Rs. 70,000. Find out value of rent free furnished house as a perquisite for I. T. purposes. | | (0) |
| 2. | (a) | Distinguish between Tax planning and Tax Management. | 8+8=16 | (0) |
| | (b) | Discuss tax considerations with reference to specific management decision regarding 'Make' or 'Buy'. | | (0) |
| 3. | State with reasons the treatment of the following for wealth tax purposes: | 2x8=16 | |
| | (a) | (i) | Urban land in which construction is not permitted. | | (0) |
| | | (ii) | Urban land bought 12 years ago for construction of factory but construction yet to start. | | (0) |
| | (b) | In the case of an individual, interest in the coparcenary property of the HUF of which he is a member. | | (0) |
| | (c) | The assessee gifted cash of Rs. 2 lacks on 10.4.02 to his wife. She bought jewellery using the cash. The market value of such jewellery as on 31.3. 04 is Rs.3 lacs. | | (0) |
| | (d) | (i) | Guest house located beyond 30kms from municipal limits of Patna. | | (0) |
| | | (ii) | Building used for running own business. | | (0) |
| | (e) | (i) | Residntial quarters allotted to workers in a company. | | (0) |
| | | (ii) | Residential quarters allotted to officers drawing Rs. 40,000 pm. | | (0) |
| | (f) | The assessee obtained a loan of Rs.4lacs by mortgaging his house. The loan was utilized for purchase of shares. As on 31.3. 2004 outstanding loan was Rs.2 lacs. | | (0) |
| | (g) | Urban land transferred without consideration to minor handicapped child valued as on 31.3.04 at Rs. 6,00,000. | | (0) |
| | (h) | The assessee transferred assets worth Rs. 10 lacs to his son's wife for Rs. 3 lacs. | | (0) |
| 4. | (a) | A machinery costing Rs. 2 lacs acquired four years back ans used in the assessee'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 machine by a new one whose current cost is Rs. 3 lacs. Discuss the implications of the same 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. | 5+4
+5+2=16 | (0) |
| | (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. | | (0) |
| | (c) | A Ltd. is engaged in the activity of conversion of gray cloth 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? | | (0) |
| | (d) | Mr. Bhattacharjee purchased some raw materials from X Ltd., a SSI unit. The 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? | | (0) |
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| 5. | Kumar Sparkplugs Ltd., has unit C which is not functioning satisfactorily. The details of its fixed assets are: | Asset | Date of acquisition | Book value
(Rs. in lacs) | (a)
(b)
(c)
(d) | Land
Goodwill
(raised in books on 31.3.2004)
Machinery
Plant | 10.2.2002
—
5.4.1998
12.4.2002 | 30
10
40
20 |
The WDV as per the Income–tax Act, 1961 is Rs. 25 lacs in case of machinery and Rs. 15 lacs in case of plant. The liabilities on this unit on 31st March, 2004 are Rs. 35 lacs. There are two options (as on 31.3.2004): | (i) | Slump sale of M/s X & Co. for a consideration of Rs. 85 lacs. | | (ii) | Individual sale of assets for the following consideration:
(a) Land Rs. 48 lacs, (b) Goodwill Rs. 20 lacs.
(c) Machinery Rs. 32 lacs, (d) Plant Rs. 17 lacs. |
Which option is to be chosen and why? The other units are deriving taxable income and there are no carried forward losses or depreciation for the company as a whole. Unit C was started on 1.1.1998. | 16 | (0) |
| 6. | (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 is 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. |
| 10+6 | (0) |
| | (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 stainless steel tank designing, manufacture and welding. The tank was fabricated at site as designed by XYZ Co. Ltd Stainless steel sheets required for manufacture of tank were supplied by ABC Co. Ltd. The tank 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 demanding 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? | | (0) |
| 7. | (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. What are those aspects where provisions of local tax laws apply to persons liable under CST Act. | 6+4+6=16 | (0) |
| | (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 if he had paid higher duty. Hence, charge of suppression of facts with intention to evade duty is not sustainable. Is his stand sustainable? | | (0) |
| | (c) | A manufacturer purchased a machinery falling under chapter heading 84 from supplier 'X Co.'. The invoice was for Rs. 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. | | (0) |
| 8. | (a) | A manufacturer in Gujarat has a depot in Bangalore. His factory gate price is Rs. 9,000. Transport charges from Gujarat to Bangalore are Rs. 500 per piece. The manufacturer’s Karnataka depot price is Rs. 10,000 exclusive 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 even if goods are sold from Gujarat. The reason they are giving is that if goods are directly sold to them from Gujarat. they will have to pay Karnataka 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 agreed 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 is leviable to excise duty @16%. If the product is sold in Gujarat State, the sales tax rate is 8%. | 12+4=16 | (0) |
| | (b) | State provisions in respect of 'burden of proof' in respect of goods covered under section 123 of Customs Act. | | (0) |
