CWA ICWA Inter Stage I : Business Taxation - June 2008

CWA ICWA Inter - Stage I • Business Taxation • June 2008

This Paper has 35 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
All questions relate to the assessment year 2008-09 Working notes should form part of the answer.
Section — I
Answer Question No. 1 which is compulsory and any two from the rest in this Section.
Marks

(a)

Choose the correct answer:

1x6

(i)

If an assessee earns rent from a sub–tenant in respect of tenanted property let out as a residence, the said rent is:

(1)	Exempt under section 10.
(2)	Taxable under the head income from house property.
(3)	Taxable as business income, as the letting out is a commercial activity.
(4)	Taxable as income from other sources, unless the assessee is in the business of subletting properties on a regular basis.

(0)

(ii)

Deduction for bad debts is allowed to an assessee carrying on business,

(1)	In the year in which the debt is written off as bad.
(2)	In the year in which the debt first arose.
(3)	In the year in which a provisions was made in respect of the bad debt.
(4)	In the year in which the debt becomes irrecoverable by operation of law.

(0)

(iii)

Under section 41(4) of the Income–tax Act, 1961, where a bad debt allowed as a deduction under section 36(i)(vii) in an earlier year is subsequently recovered,

(1)	It is taxable to the extent of 50% of recovery in the year of receipt, as business income.
(2)	It is taxable as business income in the year of recovery.
(3)	It is added back to the income of the year when it was written off and taxed as business income.
(4)	It is taxable as income from other sources in the year of receipt.

(0)

(iv)

Long–term capital gain arising to an assessee on the sale of a capital asset is exempt under section 54EC of the Income–tax Act, 1961.

(1)	To the extent of investment in specified bonds upto a limit of Rs. 100 lakhs.
(2)	To the extent of 50% of investment in certain bonds upto a limit of Rs. 50 lakhs.
(3)	To the extent of investment of capital gain in specified bonds not exceeding Rs. 50 lakhs.
(4)	Proportionate to the extent of investment of net sale proceeds in specified bonds, not exceeding Rs. 50 lakhs.

(0)

(v)

Payment of interest to partners of partnership firm assessed as firm is allowable as deduction under section 40(b) of the Income–tax Act, 1961,

(1)	If the rate of interest does not exceed 8% p.a.
(2)	If the interest is paid on the minimum balance of capital account between 10th and the end of every month.
(3)	If it is calculated on quarterly balance.
(4)	If it is authorized by and in accordance with the partnership deep, pertains to a period after the deed and does not exceed 12 per cent simple interest per annum.

(0)

(vi)

Under the Wealth–tax Act, 1957 the time limit for completion of regular assessment is _______ months from the end of relevant assessment year

(1)	21
(2)	12
(3)	24
(4)	None of the above.

(0)

(b)

State with reasons, whether the following statements are True or False (any four):

2x4

(i)

Gift of a diamond necklace worth Rs. 2,00,000 received from a friend by an individual assessee is not taxable as income from other sources.

(0)

(ii)

Vivitha, a Cost Accountant, is employed in Hema Plastics Ltd. The company pays the annual Cost Accountant membership fee. The fee so paid by the company is not to be treated as a perquisite in the hands of Vivitha.

(0)

(iii)

No disallowance under section 40A(3) of the Income–tax Act, 1961 arises where an assessee makes a cash payment exceeding Rs. 20,000 towards purchase of a capital asset.

(0)

(iv)

The term "individual", as defined in the Wealth–tax Act, 1957 means only a single human being.

(0)

(v)

Under the Wealth–tax Act, 1957 a person who is once treated as a citizen of India, continues to be treated as a citizen of India for ever.

(0)

Mr. Vasidevan retired on June 30, 2007. He submits the following information:
Basic salary (since January 2007): Rs. 20,000 per month.
Dearness allowance: Rs. 6,000 per month (One–third of which is part of salary for retirement benefits)
Employer’s contribution towards provident fund: Rs. 3,000 per month
(Vasudevan makes a matching contribution)
Interest credited to PF at the rate of 15% on April 30, 2007: Rs. 7,500.
Pension after retirement: Rs. 10,000 per month
Payment of provident fund received at the time of retirement: Rs. 7,60,000
as per details below:

Employer's contribution
Interest thereon
Vasudevan’s contribution
Interest thereon

:
:
:
:

Rs. 3,30,000
Rs. 44,000
Rs. 3,40,000
Rs. 46,000

Salary and pension become due on the last day of each month.
Vasudevan deposited the entire provident fund payment with a company (rate of interest 9 per cent per annum).
Find out the total income of Vasudevan for the assessment year 2008–2009 on the assumption that the provident fund is
(a) Statutory provident fund.
(b) Recognized provident fund, and
(c) Unrecognized provident fund.

(0)

From the following particulars, compute the net wealth of 'A' as on 31.3.2008 and the wealth tax payable showing the retirement of each item separately.

		Rs.
(i)	Self–occupied residential house	3,00,000
(ii)	Let out residential house (let out for more than 300 days)	5,00.000
(iii)	Cars	3,50,000
(iv)	Gold ornaments of wife: (A) Given by her father at the time of marriage (B) Gifted by the assessee	4,00,000 3,00,000
(v)	Gold ornaments purchased for daughter's marriage on 14.4.2008 in advance	12,00,000
(vi)	Cash in hand	70,350
(vii)	Cash at Bank	8,000
(viii)	Eqiotu shares in Indian companies	2,00,000
(ix)	Fixed Deposit with bank	1,00,000
(x)	Balance with PPF	5,00,000
(xi)	Loan taken for car purchase still outstanding	50,000
(xii)	Loan taken on the security of house for the purchase of (A) Equity shares (B) Gold ornaments	50,000 2,50,000
(xiii)	Loan taken on the security of gold for investment in rural land (value of land as on 31.03.2008 is Rs. 70,000)	1,00,000
(xiv)	Income–tax liability	10,000

(0)

Write short notes on any three of the following:

6x3

(a)

Deduction under section 80–IA of the Income–tax Act, 1961 to an undertaking engaged in the business of laying and operating cross–country natural gas distribution network.

(0)

(b)

Loss returns under section 80 of the Income–tax Act 1961.

(0)

(c)

Assets as defined in section 2(ea) of the Wealth–tax Act, 1957.

(0)

(d)

Penalties leviable under sections 18 and 18A of the Wealth–tax Act, 1957.

(0)

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

5.	(a)	Fill up the blanks:		1x6
		(i)	Ownership of raw materials is _________ (relevant/not relevant) for excise duty liability.		(0)
		(ii)	Goods were removed by the manufacturer without payment of excise duty on the premise that the goods are exempt. Later it transpires that such goods are excisable at 15% (all inclusive). The manufacturer has invoiced at Rs. 11,500/-. The assessable value is Rs. _________		(0)
		(iii)	Customs duty is levied under section _________ of the Customs Act.		(0)
		(iv)	Foreign visitors are permitted to bring articles upto Rs. _________ for making gifts, without payment of duty.		(0)
		(v)	Stock transfer to branch is not treated as inter–State sales when Form _________ is submitted.		(0)
		(vi)	Application for registration under the Central Sales–tax Act, 1956 should be filed within ________ days.		(0)
	(b)	State with reasons, whether True or False:		2x6
		(i)	Waste and scrap are always treated as excisable goods.		(0)
		(ii)	In exceptional circumstances, goods can be cleared from factory without payment of excise duty and stored in any other premises.		(0)
		(iii)	Since the Government wants to encourage exports, there is export (customs) duty on very few items.		(0)
		(iv)	There is no "fast tract clearance" for any importer towards clearance of imported goods.		(0)
		(v)	Importers can sotre imported goods without payment of duty in public warehouse or private warehouse.		(0)
		(vi)	Security demanded from dealer under the Central Sales–tax Act, 1956 can be satisfied in the form of Surety Bond.		(0)
6.	(a)	Customs value (Assessable Value) of imported goods in Rs. 2,00,000. Basic customs duty payable is 10% If the goods were produced in India, excise duty payable would have been 14%. Education Cess is 2% and Special Education Cess is 1%. Special CVD is payable at appropriate rates. Find the customs duty payable. What are the duty refunds/Cenvat credits available if the importer is (i) manufacturer, (ii) service provider, (iii) trader?		10	(0)
	(b)	How is the value determined for excise duty purposes when sales are made to or through a related person?		6	(0)
7.	(a)	Briefly explain the provisions under the Customs Act relating to import through courier.		13	(0)
	(b)	Who can file refund claims under the Customs Act?		3	(0)
8.	(a)	Is it correct to say that every dealer, who in the course of inter–State trade or commerce sells the goods, shall be liable to pay Central sales tax? Explain in detail who are all ‘dealers’.		11	(0)
	(b)	What are the Central sales tax rates applicable for inter–State sale of declared goods?		5	(0)

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