CWA ICWA Inter Stage I : Business Taxation - June 2004

CWA ICWA Inter - Stage I • Business Taxation • June 2004

This Paper has 32 answerable questions with 0 answered.

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. and
2 other questions from Section I.
Marks

Section I (50 marks)

Answer Question No. 1 carrying 18 marks is compulsory. and

2 other questions from Section I.

Marks

Answer the following, giving brief reasons/comments not exceeding 3 to 4 sentences:

(a)

Answer true or false and state relevant section:

2+2

(i)

Benefit of carry forward and set off of accumulated losses and unabsorbed depreciation is not available in case of amalgamation of a company owning hotel, with another company.

(0)

(ii)

If a person is resident and ordinarily resident of India, his income earned outside India is taxable in the country in which he earned that income.

(0)

(b)

Fill in the blanks:

Accumulated losses of amalgamating company shall be allowed to be set off or carried forward by amalgamated company, if the amalgamated company holds continuously for a minimum period of _________ years from date of amalgamation at least three-fourths of _________ of the amalgamating company.

(0)

(c)

Name any four States where tax holiday for new industrial undertaking is available under section 80–IC of the Income–tax Act, 1961, from AY 2004–05.

(0)

(d)

An author of a work of literary, artistic or scientific nature is entitled to deduction up to certain amount from his income. State the amount and section number under which he is entitled to deduction.

(0)

(e)

Fill in the blanks:
Interest on capital borrowed for acquisition or construction of property is deductible subject to limit of Rs. _______ per year, if capital is borrowed on or after _______. This is allowable if acquisition or construction is completed within ______ years from _______.

(0)

(f)

Fill in the blanks:
For the assessment year 2004–05, tax on distributed profits (dividend distribution tax) is payable at _______ % plus surcharge of _______, if domestic company distributes dividend on or after ______.

(0)

(g)

A person residing in Ahmedabad has salary of Rs. 30,000 per month. He is in receipt of house rent allowance of Rs. 6,000. The actual rent paid by him is Rs. 7,000 per month. Calculate the amount of HRA exempt from income–tax.

(0)

(h)

State whether following perquisites received by employee during previous year 2003–04 are taxable:

(i)	Gift of wrist watch costing Rs. 4,000;
(ii)	Free meal costing Rs. 80 per meal;
(iii)	School fees of Rs. 4,000 of family members of employee paid by employer directly to school;
(iv)	Reimbursement of medical expenses of Rs. 22,000 during the year.

(0)

X owns a big house (erection completed on September 14, 1999) which is partly self–occupied and partly let–out. Unit 1 (50% of the floor area) is let out for commercial purposes on a monthly rent of Rs. 6,000 (rent of 2 months could not be realized). Unit 2 (25% of the floor area) is used by X for the purpose of his profession, while unit 3 (the remaining 25%) is utilized for the purpose of his residence.
Other particulars of house are as follows:

Municipal valuation: Rs. 80,000
Standard rent under the Delhi Rent Control Act: Rs. 1,40,000
Municipal tax: Rs. 10,812 (levied during the year), Rs. 10,000
(actually paid during the year 2003–04, Rs. 812 is, however paid on April 30, 2004)
Repairs: Rs. 8,000
Ground rent: Rs. 16,800
Annual charge created by will by father in favour of Mrs. X: Rs. 14,000
Assurance premium: Rs. 12,000.

Income of X from profession is Rs. 62,000 (without debiting house rent and other incidental expenditure).
Cost of construction of the house: Rs. 8,00,000; rate of depreciation: 10%.

X has a substantial interest in ABC Ltd., a closely–held company. For financing the construction of the house property he had borrowed Rs. 2,00,000 @ 6% from ABC Ltd. The amount of loan was treated as dividend under section 2(22)(e) in the assessment of X for the assessment year 1999–2000. However, as per contract with the company, he is liable to pay interest on January 1 every year.
Determine the total income of X for the assessment year 2004–05, on the assumption that he maintains books of accounts on the basis of mercantile system.

(0)

X sells shares in a private sector company on July 10, 2003 for Rs. 8,05,000 (cost of acquisition of June 15, 1984: Rs. 60,000, expenses on sale: Rs. 5,000). On July 10, 2003, he owns one residential house property. To get the benefit of exemption under section 54F, X deposits on July 30, 2004 Rs. 6,00,000 in Capital Gains Deposit Account Scheme. By withdrawing from the Deposit Account, he purchases a residential house property at Delhi on July 6, 2005 for Rs. 4,80,0000. Ascertain—

(a)	The amount of capital gain chargeable to tax for the assessment year 2004–05;
(b)	Tax treatment of the unutilized amount;
(c)	When he can withdraw the unutilized amount; and
(d)	What X has to do to ensure that exemption under section 54F is never taken back
Cost Inflation Index: FY 2003–04 is 463, FY 1984–85 is 125.

(0)

(a)

X furnishes the following particulars for the compilation of his wealth–tax return for assessment year 2004–05:

1.

2.

3.

Gifts of jewellery made to wife from time to time aggregating Rs. 60,000
(market value on valuation date)
Flat purchased under installment payment scheme in 1972 for
Rs. 7,50,000, used for purposes of his residence and market value as
on March 31, 2004 (installments remaining unpaid Rs. 50,000)
Urban land transferred to minor handicapped child value on March 31, 2004.

Rs. 2,00,000

Rs. 10,00,000
Rs. 5,00,000

Explain how you will deal these items. Make suitable assumptions, if required.

(0)

(b)

Under what circumstances can the Assessing Officer make a reference to the Valuation Officer for the purpose of making an assessment under the Wealth–tax Act?

(0)

(c)

Explain the tax treatment of arrears of rent received under the Income–tax Act, 1961.

(0)

Section II (50 marks)
Answer Question No. 5 carrying 18 marks is compulsory and 2 other question from Section II.

Section II (50 marks)

Answer Question No. 5 carrying 18 marks is compulsory and
2 other question from Section II.

5.	Answer the following, giving brief reasons/ comments not exceeding 3 to 4 sentences:
	(a)	Explain the following abbreviations–EPCGS, NCCD, CCCE, DFRC.		2	(0)
	(b)	A book often contains a CD. If a software is purchased, a manual is given along with CD. The CD contains the software. Thus, in both cases, there is a book and CD. What test will be applied while classifying these products?		2	(0)
	(c)	State true or false:
		(i)	Trade discount is permissible as deduction from assessable value only if it is given before removal from factory. Discount given later is not allowable as deduction.	1	(0)
		(ii)	In case of CIF contract, the assessee will be entitled to deduction of outward insurance and freight while calculating assessable value.	1	(0)
		(iii)	Charges for training the buyer in use of the machinery supplied are includible in assessable value.	1	(0)
	(d)	(i)	An assessee has discontinued his manufacturing activities. He has applied for cancellation of excise registration. Explain the circumstance in which the Excise Superintendent can refuse cancellation of registration.	2	(0)
		(ii)	If assessee is required to pay differential duty subsequent to removal from his factory, which document he should prepare?	1	(0)
	(e)	Fill in the blanks: If duty is not at paid fully on due date, assessee is liable to pay the outstanding amount along with interest on unpaid amount @ _______% per month on outstanding amount, or Rs. ________ per day, whichever is ________ (higher/lower), till payment of duty.		2	(0)
	(f)	State purpose of B–2 and B–4 bond.		2	(0)
	(g)	State whether following are eligible as inputs for Cenvat— (i) Safety appliances used by workmen; (ii) Light Diesel Oil (LDO) used in manufacture; (iii) Dies; (iv) Parts used to manufacture capital goods within the factory.		2	(0)
	(h)	An assessee had procured some inputs in May 2002 for Rs. 20 lakhs. Duty paid on the inputs was Rs. 3,20,000 (@ 16%). He was unable to use the inputs in view of change in market conditions. He sold the inputs in March 2004 for Rs. 16,00,000. How much ’duty’ or ’amount’ is payable while clearing the inputs?		2	(0)
6.	(a)	An assessee has factory in Kolkata. As a sales policy, he has fixed uniform price of Rs. 2,000 per piece (excluding taxes) for sale anywhere in India. Freight is not shown separately in his invoice. During the FY 2003–04, he made following sales:"(i) Sale at factory gate in Kolkata–1,200 pieces" no transport charges; (ii) Sale to buyers in Gujarat—600 pieces–actual transport charges incurred–Rs. 28,000; (iii) Sale to buyers in Bihar–400 pieces–actual transport charges incurred Rs. 18,000; (iv) Sale to buyers in Kerala–1,000 pieces–actual transport charges–Rs. 54,800. Find the assessable value per piece.		8	(0)
	(b)	What is the purpose of ’safeguard duty’? What are the restrictions of WTO in respect of safeguard duty? Can it be imposed on provisional basis?		8	(0)
7.	(a)	Mr. A, a person holding Indian passport, brings 1 kg gold out of which Rs. 3,60,000 are in form of biscuits and balance of Rs. 40,000 in form of gold jewelery which he was using abroad (valued at international rates). What is the duty payable if (i) the person returning after 3 months stay; (ii) the person is returning after 9 months stay abroad and the gold belongs to him; (iii) the person is returning after 8 months stay abroad and the gold belongs to his friend, who has given it only for carrying to India. (iv) He is returning after 18 months stay abroad (ignore difference due to minor impurities in jewelery).		8	(0)
	(b)	Define “Indian Customs Waters”. What is its significance in terms of Customs Act, 1962?		8	(0)
8.	Write short notes on:
	(a)	Document of title of goods.		5	(0)
	(b)	Customs value as per section 14(1) of the Customs Act, 1962.		6	(0)
	(c)	Manufacturer under the Central Excise Act, 1944.		5	(0)

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