CWA ICWA Inter Stage I : Business Taxation - June 2005

CWA ICWA Inter - Stage I • Business Taxation • June 2005

This Paper has 41 answerable questions with 0 answered.

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

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

(All sub–divisions relate to the assessment year 2005–06)

(A)

Choose the correct answer:

1x9=9

(i)

Surcharge of 2.5% is payable in the case of companies, by

(a)	Domestic companies only;
(b)	Companies other than domestic companies;
(c)	All companies;
(d)	None of the above.

(0)

(ii)

Government’s contribution to the new pension scheme referred to in section 80CCD is

(a)	An exempt income;
(b)	Income chargeable to tax as "Salaries" in full;
(c)	50% thereof is income chargeable to tax as "Salaries";
(d)	Income chargeable to tax as "Income from other sources" in full.

(0)

(iii)

Long–term capital gains arising on compulsory acquisition of agricultural land held by a domestic company within specified urban limits is

(a)	Not exempt under section 10(37);
(b)	Exempt under section 10(37) in full;
(c)	50% of the receipt is exempt under section 10(37);
(d)	25% of the receipt is exempt under section 10(37).

(0)

(iv)

In case of companies deriving loss for any assessment year, filing of return of income within the due date laid down in section 139(1) is compulsory.

(a)	Only where the Department issues notice to the assessee–company;
(b)	For domestic companies only;
(c)	For foreign companies only;
(d)	For all companies.

(0)

(v)

The registration of a charitable trust can be cancelled under section 12AA of the Income–tax Act, 1961 by

(a)	Assessing Officer;
(b)	Commissioner of Income-tax;
(c)	Chief Commissioner of Income-tax;
(d)	Central Board of Direct Taxes.

(0)

(vi)

X Ltd. has failed to remit the tax deducted at source from annual rent of Rs. 6,60,000 paid to Mr. A for its office building. Said rent is

(a)	Fully allowable as a business expenditure;
(b)	Not allowable in view of section 40(a)(i);
(c)	Allowable to the extent of 50%;
(d)	None of the above.

(0)

(vii)

In case of an investor in shares, in respect of shares sold, securities transactions tax paid (at the time of purchase of the said shares earlier), is

(a)	To be added to the cost of acquisition;
(b)	To be deducted as an expenditure connected with transfer;
(c)	Not deducted at all while computing capital gains;
(d)	None of the above.

(0)

(viii)

In respect of listed shares held for 10 months sold on 12.8.2004, the rate of tax in respect of capital gains is

(a)	10%;
(b)	20%;
(c)	15%
(d)	Not determinable, as the capital gains will form part of the total income whose other components are not known.

(0)

(ix)

In case of a rural hospital built after 31.3.2004 fulfilling the required conditions laid down in section 80IB(11), the profits and gains derived from running the hospital are

(a)	Deductible in full;
(b)	Deductible to the extent of 50%;
(c)	Deductible to the extent of 75%;
(d)	Taxable in full.

(0)

(B)

Fill up the blanks:

1x5=5

(i)

For a self-occupied house property occupied on 1.7.2004, for which housing loan was availed, if the interest up to 31.3.2004 is Rs. 90,000 and there after the interest payable is Rs. 3,000 per month, the deduction available under section 24 in respect of interest for the year ended 31.3.2005 is Rs...........

(0)

(ii)

For a person suffering from severe physical disability, deduction available under section 80U is Rs.............

(0)

(iii)

The tax rebate available under section 88E to a Hindu Undivided Family resident in India is Rs...........

(0)

(iv)

In case of an existing industrial undertaking, to be eligible for additional depreciation, increase in installed capacity as compared to the installed capacity as on 31.3.2002 is ........... per cent.

(0)

(v)

The due date for filing return of net wealth by an individual who is a non–working partner is a firm whose accounts are audited under section 44AB of the Income–tax Act, 1961 is ...............

(0)

(C)

State true or false, referring to the relevant provisions of the Income–tax Act 1961:

2x3=6

(a)

business loss can be set off against salary income;

(0)

(b)

Mr. A has received gift of Rs. 1,50,000 on 12th December, 2004 from his close friend who is assessed to income-tax. The same is taxable at the hands of Mr. A;

(0)

(c)

Long–term capital gains arising from units of debt–oriented equity funds for which securities transactions tax has been paid in a recognized stock exchange is exempt.

(0)

(a)

From the following data you are required to compute the total income and tax thereon of X Ltd, in a manner most beneficial to the company, for the assessment year 2005–06;

	Rs.
Business loss Property income Income from other sources Short–term capital gain Long–term capital gain	50,00,000 45,00,000 1,00,000 3,00,000 10,00,000

(0)

(b)

X sells the following long–term capital assets on January 11, 2005:

	Residential house property Rs.	Gold Rs.	Silver Rs.	Diamonds Rs.
Sale consideration Indexed cost of acquisition Expenses on transfer	3,90,000 70,000 10,000	8,10,000 1,15,000 81,000	2,96,000 1,78,000 6,000	6,40,000 4,30,000 32,000

The due date of filling return of income for the assessment year 2005–06 is July 31, 2005. For claiming exemption under section 54 and 54EC, X has acquired or deposited the following:

Assets	Date of Purchase/Deposit	Amount
Land (for constructing a residential house) Deposit in Capital Gains Deposit Scheme (for constructing house) National Bank for Agriculture and Rural Development (redeemable on July 5, 2009) Bonds of National High ways Authority of India (redeemable on August 10,2014)	March 31. 2005 August 5, 2005 July 5, 2005 July 10, 2005	1,00,000 50,000 7,50,000 3,05,000

Find out the amount of capital gain chargeable to tax for the assessment year 2005–06.

(0)

X Ltd. is a company carrying on business in the construction and sale of residential flats. It furnishes the following data and requests you to compile wealth–tax return and determine the tax payable for assessment year 2005–06:

1. 2. 3. 4. 5.	Land in rural area (it is within 5 kilometers of Ajmer; construction is permissible; land was purchased in 1987) Land in urban area (construction not permitted as per municipal laws) Land in urban area (held as stock–in–trade since 1995, construction will be commenced during June, 2005) Motor cars (one of them is imported: Rs. 4,00,000; none of them is held as stock–in–trade) Jewellery	Market Value Rs. 92,78,000 23,00,000 49,50,000 11,30,000 18,00,000
6. 7. 8. 9. 10 11. 12. 13. 14.	Aircraft for use of directors and auditors Bank balance Cash in hand as per cash book Guest house and land appurtenant thereto situated in rural area Residential flats of identical size provided to 6 employees for their use near factory which is situated in rural area (salary of two of them exceeds Rs. 5,00,000) Residence provided to Managing Director (salary exceeds Rs. 5,00,000) Flats constructed and remaining unsold Residence provided to a whole–time director (gross annual salary Rs. 4,20,000, the director owns 25 per cent equity share capital) Three let out residential houses given on rent (value of each being Rs. 50 lakhs; one of them is let out for 9 months during 2004–05)	1,58,00,000 3,10,000 1,70,000 8,00,000 15,00,000 10,00,000 30,00,000 17,00,000

The company has taken a loan of Rs. 6,00,000, Rs. 7,00,000, Rs. 50,000 and Rs. 90,000 for acquiring property numbers 5, 6, 12 and 13, respectively.
Find out the wealth–tax liability of the company for the assessment year 2005–06.

(0)

(a)

Mr. X retires on 30.03.2005 from Z Ltd. which maintains recognized provident fund Rs. 9,00,000 (being accumulated balance of said fund of which Rs. 3,80,000 was employer's contribution, Rs. 53,000 as interest thereon. Rs. 4,10,000 as employee's contribution and Rs. 57,000 as interest thereon) is paid on the same day. Discuss the tax treatment of the above sums:
(i) If he had joined in 1990;
(ii) If he had joined in 2001.

(0)

(b)

S owns two plant A and B, the depreciation rate being 25%. WDV of the block as on 01.04.2002 is Rs. 2,36,000. He purchased plant C for Rs. 60,000 on 31.10.2002. He transferred plant C to F for Rs. 80,000 (FMV Rs. 28,000) on 30.06.2004. On 05.07.2004, F gives plant C on lease to S at a monthly lease rent of Rs. 2000. Find the actual cost of plant C for purpose of computing depreciation in the hands of F.

(0)

(c)

An assessee had raised invoice of Rs. 20,000 in AY 2002-03, He has not received the amount, but is very much hopeful of getting the amount. However, he has provided for that amount in ’provision of bad and doubtful debts’, as three years are over, Can he claim deduction as ’bad debt’?

(0)

Section II (50 marks)
Answer Question No. 5 which is compulsory and any two from the rest from this Section.

Section II (50 marks)

Answer Question No. 5 which is compulsory and any two from the rest from this Section.

Fill up the blanks (with the appropriate expression out of those put in brackets where applicable).

(i)

SSI units paying duty under notification No. 9/2003–CE have to pay excise duty on ______ (monthly/quarter/half yearly) basis. They have to file return within the prescribed time on ______ (monthly/quarterly/half yearly/ yearly) basis.

(0)

(ii)

A registered dealer has procured some goods from depot of a manufacturer. The registered dealer is ______ (‘first stage dealer’/‘second stage dealer’). Invoice of second stage dealer is ______ (required/not required) to be authenticated by Inspector of Central Excise.

(0)

(iii)

Advance licence is _______ (transferable/not transferable). Advance licence _______ (can be/cannot be) issued for deemed exports.

(0)

(iv)

Duty drawback on re–export is allowable if goods are re–exported within _______ years from date of import. _______ of customs duty which was paid while importing the goods is allowed as duty drawback u/s. 74 if Customs Act.

(0)

(v)

EOU units can sell part of their production in domestic market up to _______ % of their FOB value of exports in previous year, with permission from _______.

(0)

(vi)

W.e.f. 1.1.2004, assessees paying duty of rupees _______ or more per annum through PLA, should file Annual Financial Information Statement for the preceding financial year by _______ of succeeding year in Form ER–4.

(0)

(vii)

Where an assessee has opted for provisional assessment of central excise duty, if differential duty is found to be payable on finalization of assessment, the rate of interest chargeable under section 11AA or 11BB is __________%. The time limit for finalization of provisional assessment is __________. The said time limit for finalization or provisional assessment can be extended for a further period of _______.

(0)

(viii)

In case of transfer of business, the successor in business is _______ (liable/not liable) for the excise dues of the predecessor.

(0)

(ix)

CESTAT can grant a maximum of _______ adjournments.

(0)

(x)

Education cess is _______ (payable/not payable) on Safeguard duty levied under section 8B of the Customs Act.

(0)

(xi)

W.e.f. 10.9.2004, a manufacturer producing both exempt as well as non–exempt services, not maintaining separate accounts would pay excise duty at _______ %. Education cess is _______ (payable/not payable) on the same.

(0)

(a)

An SSI unit, which is a partnership firm, has achieved turnover of Rs. 90 lakhs in 2003–04. It is receiving good orders and its turnover may cross Rs. 100 lakhs in current year. It is planning to start another unit so that SSI Exemption can be availed for both the units. The firm approaches you for advice. Advise them the legal position with reference to clubbing provisions of the Central Excise Act.

(0)

(b)

Briefly explain the term "dealer" as per the Central Sales–tax Act, 1956.

(0)

(a)

Briefly explain the provision in respect of ’�burden of proof’ in respect of goods covered under section 123 of Customs Act, 1962. List at least four articles which are covered under these provisions.

2+4

(0)

(b)

FOB Cost of an article imported on 10.12.2004 is 3000 UK pounds. Insurance and transport costs are not available. On the date of filing of Bill of entry, RBI rate of USD was Rs. 43.37 and inter–Bank closing rate was Rs. 43.38 per USD and Rs. 69.38 per UK pound. Exchange rate as per Customs notification was Rs. 69–78 per UK pound. Assuming customs duty of 20% and excise duty payable on similar product in India as 16% , find the total duty payable.

(0)

(c)

Briefly discuss about inter–changeability of duties for Cenvat credit.

(0)

(a)

Gross inter–state sales of ZX Co. Ltd., Patna, Bihar, were Rs. 18,00,000 during 2004–05 (April 04–March 05). CST was not shown separately in invoices. Other information are as follows:

(i)	If product P is sold within State of Bihar, sales tax rate is 8%.
(ii)	Sales of Rs. 8 lakhs are inclusive of erection expenses of Rs. 1,00,000, excise duty of Rs. 76,000 and packing charges of Rs. 25,000. The sale price is also inclusive of trade discount of Rs. 24,000, which has been later given by issuing a Credit Note. Buyers of these goods have issued from ‘C’ for these purchases.
(iii)	Balance sales of Rs. 10 lakhs are inclusive of excise duty of Rs. 95,000 and outward freight of Rs. 30,000. The freight was charged separately in Invoice. Buyers of these goods have not issued any declaration under Central Sales Tax Act. Out of these sales, goods of Rs. 2 lakhs were returned by customers. The goods were dispatched in February 04 and returned in June 04, i.e. after end of the accounting year.

Find the turnover and CST payable.

(0)

(b)

What is meant by "Indian customs waters" under the Customs Act, 1962?

(0)

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