CWA/ICWA Inter :: Business Taxation: December 2004

A person purchased motor car in December, 2003, which was used for business purposes during the year. However, the relevant transfer in records of RTO (Regional Transport Office) was made only in April, 2004. Can the assessee claim depreciation on motor car for the assessment year 2004-05?

Expand abbreviations—ITAT, CCIT, MAT, CBDT.

What are the types of income of a political party exempt from income-tax under section 13A?

An assessee had acquired a machinery from foreign country for USD 10,000. The liability was provided in books @ 1 USD = Rs. 49.25 and payment of 50% of value of asset was made at that rate. Balance 50% was payable next year, when dollar depreciated. The payment of balance 50% was made to foreign supplier when exchange rate was 1 USD = Rs. 46.25. How will the change in value be treated for income-tax purposes and in what year? The machinery is being regularly put to use.

Professional tax of Rs. 2,500 payable by employee was paid by employer on his behalf. How will the transaction be treated for income-tax purposes?

State any four expenditure which are allowable for amortization as 'preliminary expenses' under section 35D.

Name any four expenses which are deductible only on payment basis under section 43B.

X Ltd., a manufacturing company, retains you to assist in preparing the income-tax return for assessment year 2004-05. The company earns a net profit of Rs. 6,00,000, in the financial year 2003-04. You are required to assist the company to compute its gross total income after taking note of the following:

• Rs. 35,000 received on termination of a contract entered into in the ordinary course of business.


• Rs. 25,000 realised as penalty from a supplier of raw material whose supply fell short of the agreed quantity contracted to be supplied by him.


• Rs. 50,000 being dividends received from a foreign company on shares allotted in pursuance of a collaboration agreement.

• Payment of interest for late filing of return of income for the assessment year 2003-04; Rs. 5,000.


• Payment of interest on money borrowed from bank for purchase of land for construction of a building for own administrative office: Rs. 55,000. Of this, interest up to the date on which the asset was put to use is Rs. 23,000.


• Payment of interest on overdraft with bank utilized for payment of dividends Rs. 40,000.

• Expenditure incurred on replacement of worn out asbestos sheets of the factory shed with new sheets: Rs. 30,000.


• Repairs to compound wall collapsed due to heavy rain: Rs. 25,000.

• Expenditure of capital nature incurred for the purpose of promoting family planning amongst its employees: Rs. 75,000.


• Contribution to Government for construction of health center adjacent to the company's factory where its employees are allowed to have treatment along with the members of public: Rs. 35,000.


• Salary of foreign technicians retained on contract basis to study and suggest improved method of production: Rs.. 80,000.

• Entertainment expenses: Rs. 10,000.


• Cost of statue of the founder-chairman erected within the factory premises: Rs. 15,000.


• Salary of foreign technicians retained on contract basis to study and suggest improved method of production: Rs.. 80,000.

The company decided to close one of its divisions and accordingly retrenched employees working in that division by paying the retrechment compensation and notice pay of Rs. 90,000 (separately debited to profit and loss account).

You are requested to briefly state with reasons how the above are to be dealt with in computing gross total income of company for the assessment year 2004-05. Total income need not be computed. Ignore MAT Provisions.

During the financial year 2003-04, Mr. X sells the following assets held as investments:

Income of X from other sources is Rs. 7,86,000. He deposits Rs. 50,000 in public provident fund. Find out the total income and tax liability for the assessment year 2004-05.
Cost inflation indices are:

Briefly discuss about deductibility of expenditure incurred in respect of income exempt under the Income-tax Act, 1961.

Write short note on residential status vis-a-vis inclusion of foreign assets and debts as per section 6 of the Wealth-tax Act, 1957.

A foreign company has executed technical collaboration agreement on 30th July, 2003 with an Indian company. The agreement is permissible as per industrial policy of Government of India. State tax treatment for assessment year 2004-05, if—

(i)	The foreign company has no permanent establishment in India.
(ii)	The foreign company has permanent establishment in India and the technical know how fee paid is connected with the permanent establishment of foreign company in India.

An importer has imported a machine from UK at FOB cost of 10,000 UK Pounds, Other details are as follows:

(i)	Freight from UK to Indian port was 700 pounds.
(ii)	Insurance was paid to insurer in India: Rs. 6,000.
(iii)	Design and development charge of 2,000 UK pounds were paid to a consultancy firm in UK.
(iv)	The importer also spent an amount of Rs. 50,000 in India for development work connected with the machinery.
(v)	Rs. 10,000 were spent in transporting the machinery from India port to the factory of importer.
(vi)	Rate of exchange as announced by RBI was: Rs. 68.82 = one UK pound.
(vii)	Rate of exchange as announced by CBE & C (Board) by notification under section 14(3)(a)(i); Rs. 68.70 = one UK pound.
(viii)	Rate at which bank recovered the amount from importer: Rs. 68.35 = one UK pound.
(ix)	Foreign exporters have an agent in India. Commission is payable to the agent in India Rupees @ 5% of FOB price.
Customs duty payable was 25%. If similar goods were produced in India, excise duty payable as per tariff is 24%. There is an excise exemption notification which exempts the duty as is in excess of 16%. Find customs duty payable if (a) Improper is manufacturer using the goods himself, (b) Importer is a trader who has imported goods for subsequent sale in India.

A small scale manufacturer having a SSI Unit has achieved turnover of Rs. 1.52 crores during the year ended 31.3.2004. Normal duty payable on the product is 16%. Find the total excise duty payable by the manufacturer during the year:

(i)	If the unit has availed CENVAT Credit;
(ii)	If the unit has not availed CENVAT Credit.
(The turnover mentioned above is without taxes and duties).

Explain the penal provisions relating to vexatious search, seizures, etc, by Central Excise officers.

M/s. Snow White Ltd., Mumbai sells iron rods to M/s. Hyderabad Ltd. in Vijayawada, (both of them are registered dealers), for a value of Rs. 10,00,000 inclusive of CST @ 4%. The local sales tax on iron rods is Mumbai is 3%. Ascertain the CST payable.
If Hyderabad Ltd. were unable ton submit From 'C' being an unregistered dealer, what will be the CST liability, if the local tax rate is 12%? Note—Iron rods are not declared goods.

Inter-State sales of Deepak Brothers, Bhopal, MP of product X was Rs. 6 lakhs during the year ended 31st March, 2004. The same is inclusive of sales tax charged in invoices at appropriate rates. The goods were liable to tax @ 4% if sold within State of MP. Out of the goods sold, goods of Rs. 50,000 were returned. These were sold by Deepak Brothers in February, 2004 and returned by buyer in May 2004 as they were excess of his requirements, Some goods of Rs. 30,000 dispatched December, 2003 were rejected by a buyer and sent back in November 2004. Find the taxable turnover and CST if C form was received from all buyers.

What is the compounded levy scheme under Central Excise Act, 1944? Explain giving instances where it is applicable.