CWA/ICWA Inter :: Business Taxation: December 2003

*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 carrying 18 marks, which is compulsory and 2 other questions from Section I.
		Marks

Optima Pharma Ltd., presents the following information to you pertaining to the year ended 31st March, 2003:

(a) A machinery costing Rs. 50,000 was purchased for which a single payment was made in cash;

(b)
Having regard to the vast purchase of a particular chemical by the company, the supplier of the chemical presents a car worth Rs. 2,50,000, which is used for business purposes by the company;

(c)
Expenditure towards acquisition of technical know-how paid to a foreign company in lump sum Rs. 6 lacs;

(d)
The company has paid income-tax of Rs. 60,000 being the tax in respect of non-monetary perquisites of an employee;

(e)
The company wanted to start a new plant for manufacture of a new product. X Ltd., paid to the company Rs. 10 lacs in order to start the same and compete with it;

(f)
The company has paid Rs. 20 lacs to four employees at the time of their voluntary retirement, in accordance with the approved scheme of voluntary retirement;

(g)
The company had borrowed Rs. 15 lacs for acquiring a machinery. Interest paid Rs. 90,000. The machinery was not put to use during the year;

(h)
Payment of Rs. 40,000 was made to a Don for ensuring that the employees will not indulge in strike;

(i)
The company had incurred expenditure of Rs. 34,000 in respect of exempt income. This forms part of administrative expenses.

You are requested to briefly state with reasons as to how the above are to be dealt with in computing the total income of the company for the assessment year 2003-04. The total income need not be computed.

2x9

X Ltd. is a manufacturing company. On April 1, 2002, it owns Plant A and Plant B (depreciation rate: 25 per cent; depreciated value of block being Rs. 2,40,000). Plant C (depreciation rate 25 per cent) is purchased by the company on June 10, 2002 for Rs. 60,000. It is put to use on the same day. Find out the tax consequences in the following different situations:

(a) Plant B is destroyed by fire on January 25, 2003. Rs. 10,000, being the compensation, is paid by the insurance company on February 10, 2003; Rs. 10,000, being the compensation, is paid by the insurance company on February 10, 2003;

(b)
If the insurance compensation in situation (1) is Rs. 3,70,000;

(c)
Plant A, B and C are destroyed by fire on January 25, 2003. Compensation paid by insurance company on February 10, 2003 is Rs. 20,000;

(d) If the insurance compensation in situation (3) is Rs. 4 lacs.

Please turn over

( 2 )

I-8(BTN)
Revised syllabus

Marks

The following information partaining to M/s Mukherjee & Co., a partnership firm engaged in business consisting of three partners with equal profit sharing ratio, relating to the year ended 31.03.2003 are available:

To Interest to partners:
L
M
N
To Remuneration to partners: Rs.

30,000
45,000
54,000
By Gross profit
By Profit on sale of residential house
By Income from speculation business
By Rental receipts Rs.
380,000
50,000
40,000
84,000

L
M
N 60,000
84,000
96,000

To Other expenses
(including depreciation)
To Net Profit
95,000
90,000

554,000 554,000

(a)

L is a partner representing the HUF of which he is the karta. L and N are working partners.

(b)

Interest has been provided to M and N at 18% simple interest and to L at 12%. Interest accrue uniformly throughout the year.

(c)

In the earlier assessment year for which the return was filed in time, there is unabsorbed depreciation of Rs. 34,500 and carried forward business loss of Rs. 70,000. These items have not been considered earlier.

(d)

The firm derived agricultural income of Rs. 1,20,000 from lands at Kolkata.

(e)

The residential house purchased in May, 2000 for Rs. 4,00,000 was sold in July, 2002 for Rs. 4,50,000.

Compute the total income of the partnership firm assessed as such, for the assessment year 2003-04 . Brief computation will suffice.

Please turn over

( 3 )

I-8(BTN)
Revised syllabus

Marks

X Ltd. is a company engaged in the manufacture and export of garments. It also purchased and exported garments. It has no local sale. It furnishes the following figures for the year April 1, 2002 to March 31, 2003. Determine the deduction admissible under section 80 HHC.

Total turnover
Freight and insurance incurred beyond
customs station
Export turnover in garments purchased (included
in total turnover)
Purchase price of garments
Total expenses
Total profits of business inclusive of profit of
Rs. 10 lakh of a branch situated outside India

(Amount in Rs. lakh)
602

2

200
150
225

130

Section II (50 marks)

Answer Question No. 5 carrying 18 marks which is compulsory.
Two other questions each carrying 16 marks are to be answered
out of the remaining three questions from Section II.

(a)

What is a stock transfer/branch transfer? Is it considered as a sale under Central Sales Tax Act, 1956?

(b)

What are goods under Customs Act, 1962?

(c)

What are the inputs eligible and inputs not eligible for Cenvat in Central Excise?

In the context of valueation of goods for determining the price paid or payable in the course of arriving at the assessable value under the Customs Act, discuss about the inclusion of the following items:

(a)

Cost of durable and reusable containers used for transportation:

(b)

Technical know-how drawings supplied by importer:

(c)

Air freight charges incurred for importing items urgently required, which are normally imported by sea.

(d)

Cost of insurance not readily ascertainable.

Please turn over

( 4 )

I-8(BTN)
Revised syllabus

Marks

(a)

Discuss about the eligibility of Cenvat credit in each of the following situations:

(i)	1000 kgs of raw materials were purchased on which duty paid was Rs. 16,000. Whilst in the production yard, they were destroyed by accidental fire:

(ii)	100o kgs of raw materials on which duty paid was Rs. 10,000 was used in manufacture of a final product for which the duty payable is Rs. 8,000;

(iii)

The original invoice for 1000 units of inputs purchased were missing; however 'Duplicate for transport' copy of invoice is available, which shows that duty of Rs. 10,000 had been paid on inputs.

(b)

(i)	Discuss the importance of noting of bill of entry vis-a-vis rate of customs duty applicable for import of goods, under the Customs Act;

(ii)	An Indian resident visiting Germany brought following goods while returning to India (a) his personal effects like cloth etc, valued at Rs. 25,000; (b) one litre of liquor of Rs. 1,600; (c) new camera of Rs. 24,800. What is the customs duty payable?

Write short notes on:

(a)	Drawback rates;
(b)	Valuation in case of job work under Central Excise Act, 1944;
(c)	Exclusions from sale price under Central Sales Tax Act, 1956.

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