CWA ICWA Final - Group III : Indirect and Direct Tax Management - December 2010
This Paper has 49 answerable questions with 3 answered.
Time Allowed : 3 Hours Full Marks : 100
The figures in the margin on the right side indicate full marks.
Answer Question No. 1 which is compulsory and any five questions from the rest.
Wherever required, the candidates may make suitable assumptions and state
them clearly in the answer.
Working notes should form part of the answer.
1. (a) Fill in the blanks in the following sentences by using appropriate words/phrases given in the brackets: 1x15
(i) Depreciation on an asset purchased and kept as standby will be allowed in spite of the same not put to use as it has ___________(passive/active) use by the assessee during the year. (0)
(ii) Steamer agents can file application for entry outwards _________ (14/30) days in advance. (0)
(iii) The instructions/circulars issued of CBDT under section 119 of Income Tax Act are _______ (binding/ not binding) on the assessee. (0)
(iv) A service provider, whether registered or not, providing taxable services under brand name/trade name of others _______ (will/will not) be eligible for availing threshold limit of Rs.10 lakhs available to small service providers. (0)
(v) Where excise duty has been paid on provisional basis, refund claim should be filed within ______ (one year/two years) after duty has been adjusted in final assessment. (0)
(vi) A sale or purchase of goods is deemed to be in the course of import, inter alia, if such sale or purchase ________ the import of such goods (occasions/follows). (0)
(vii) Certificate of registration under Central Sales Tax Act is to be issued by the registration authority in the prescribed Form __ (B/G). (0)
(viii) An EOU is required to execute a bond in form ___ (B22/B17) for issue of a certificate on strength of which goods will be cleared from Customs without payment of duty. (0)
(ix) If raw material is supplied to a job worker on principal to principal basis the supplier is ______ (manufacturer/not manufacturer) under Central Excise Law. (0)
(x) For concealment of particulars of income or furnishing of inaccurate particulars of income, maximum penalty of ______ (100%/300%) of the tax sought to be evaded is imposed under section 271(1 )(c) of the Income Tax Act. (0)
(xi) Anti dumping and countervailing duties are imposed under the _____ Act (Customs/Central Sales Tax). (1)
(xii) The form for bill of entry for _____ (warehousing/home consumption) is printed on yellow paper. (1)
(xiii) The demand of duty can be raised within ______ (one/five) years, in case of fraud, collusion, willful misstatement and suppression of facts or contravention of any provision of Central Excise Act or Rules with intent to evade payment of duty made by a manufacturer. (0)
(xiv) An importer importing under an authorization or EPCG is required to execute ________ (a bond/a bond with guarantee), when he has export obligation. (0)
(xv) Transaction Value __________ (includes/does not include) receipts/recoveries or charges incurred or expenses provided for in connection with manufacturing, marketing, selling of excisable goods to be part of the price payable for goods sold. (0)
(b) Answer the following questions in brief: 2x5
(i) What is a Large Tax Payer Unit? (0)
(ii) What is the basic distinction between VAT & Sales Tax? (1)
(iii) Is mens rea essential for imposing penalty under Central Excise Act/Customs Act? (0)
(iv) Name three perquisites free from Income Tax in the hands of all employees. (0)
(v) State the meaning of arm’s length price. (0)
2. (a) A co–operative society formed for the purpose of construction of residential flats for its members acquired a large area of urban land for Rs. 4 crores. The society had memberships all members having equal share. The Assessing Officer proposed to tax urban land in hands of the society under wealth tax.
(i) Is the Assessing Officer correct?
(ii) Can the individual members of the society be assessed for their share in the value of urban land?
(b) Can wealth–tax payable by a company be treated as a charge on book profits computation of MAT? 3 (0)
(c) M/s. Ashok & Co. has acquired a plant and machinery of Rs.30.5 lakhs on dated 14th November, 2008, which was installed on dated 20th December, 2009 & put to commercial use since then. There is no other plant and machinery in the said block. While computing business income, they have claimed depreciation of Rs.4.575 lakhs @ 15% under section 32( 1) of Income Tax Act for the previous year 2009–10 even if the plant was used for less than 180 days. Is M/s. Ashok & Co. correct in their claim for the previous year 2009–10 (Asst. Year 2010–11)? 4 (0)
(d) TRAI EXPORTERS imported some goods in January 2010 and the goods were cleared from Paradeep Port for warehousing on 8th January, 2010 after assessment. Assessment was completed at the exchange rate $ 1 = Rs.47.50. The rate of duty on that date was 20% (no other additional duty is payable). The goods were warehoused at Cuttack and were cleared from Cuttack warehouse on 5th March, 2010 when rate of duty was 15% and exchange rate was $ 1 = 47.00. What is the rate of duty and exchange rate applicable on the date of removal of goods from Cuttack warehouse. 2+2 (0)
3. (a) Mrs. Nirupama, working as Deputy Director in Government of India received arrears of salary for last 3 years of Rs.5.5 lakhs due to pay revision. The Drawing Disbursing Officer responsible for payment of salary is attempting to deduct tax at source on entire arrear salary of Rs.5.5 lakhs along with current year salary. Please explain with provisions.
(i) Whether she is liable for deduction of tax on the entire amount during current year?
(ii) If so, what documents she is required to submit so that her claim of relief if any, will be admitted by the Drawing Disbursing Officer?
(b) A rectification petition under section 154 of the Income Tax Act, 1961 is proposed by your client on an assessment order which was passed on dt. 15th June, 2005. 3 (0)
(c) What will be the Central Sales Tax leviable to registered and unregistered dealer in following situations? Rate of CST applicable is 2%. 1x4
(i) If local VAT is 1% (0)
(ii) If VAT is 2% (0)
(iii) If VAT is 4% (0)
(iv) If VAT is 12.5% (0)
(d) M/s. Link Ltd. a service provider engaged in providing advertising agency services deposited Rs.2 lakhs as service tax for the month of April, 2009 on 5th May, 2009 with a designated bank by cheque. The cheque was cleared on 10th May, 2009. The department alleging that the service tax for the month of April, 2009 has not been deposited in due date for which interest @ 13% p.a. would be levied.
(i) Is the action of the department right on levy of interest? Give reasons in support of your answer.
(ii) Will the situation be different if the cheque deposited could not be realized due to insufficient funds.
4. (a) State briefly whether the following services are taxable services under the Service Tax:
(i) Services provided in the State of Rajasthan by a person having a place of business in Jammu and Kashmir.
(ii) Service provided from outside India and received in India by an individual otherwise than for the purpose of use in business or commerce.
(b) M/s. Y Consultants are engaged in the business of supply of manpower to M/s. Z Enterprises. They charge to the principal employer for the wages of their labour which amounts to Rs.1,50,000/- plus their service charges of Rs.30,000/-. What is the amount of service tax payable? 2 (0)
(i) Is e–filing of service tax return permitted?
(ii) Should service tax be paid even if not collected from the client or service receiver?
(d) M/s. Y rendered taxable service to a client. A bill for Rs.40,000/- was raised. No service tax was separately charged in the bill. What is the value of taxable service and the service tax payable? 3 (0)
5. (a) State the objectives of Central Sales Tax Act. 5 (0)
(b) State whether the following are goods under CST Act:
(ii) Lottery Tickets
(iii) Old newspapers
(c) State whether the following are includible in “Sale Price”:
(i) Excise Duty
(ii) Packing materials and Packing charges
(iii) Insurance charges
(iv) Weighment charges paid for goods
(d) A registered dealer of Bikaner (Rajasthan) sold goods worth Rs.4,36,000/- (including .tax @ 9%) to an unregistered dealer in Gujarat. Calculate the amount of Central Sale Tax payable, if the sales tax rate on such goods in Rajasthan is 9% and surcharge @ 15% is also payable on it. 4 (0)
6. (a) An assessee borrows money on mortgage of his property for his daughter's marriage and pays interest. Is such interest paid deductible from the property income? 2 (0)
(b) AB and Company, a partnership firm carrying on the business of civil construction in which A and B are the partners sharing profits/losses equally. Both are entitled to draw remuneration @ Rs.2,500/- p.m. as per partnership deed which is allowable under section 40(b). The following data is available for financial year 2009–10:
Gross work done
Payments with respect of work done and deposited in bank
WDV as on 01.04.2008 of machinery eligible for
Depreciation @ 15%
The firm has taken loan from the market @ 15% p.a.
Interest paid is Rs.35 lakhs
Calculate the amount of taxable business income of the firm.
(c) M/s. I.I. is a partnership firm consisting of partners A, B and C. C retires from the firm on 31.01.2010 on which date accounts are made up and the balance standing to his capital account is Rs.10,00,000/-. The firm is dissolved on 31.01.2010. The account of the retiring partner C is settled by transferring in his favour a flat purchased by the firm on 31.03.1990 for Rs. 5,16,000/-. Explain the tax implications in the hands of the firm and partner C.
Cost Inflation Index 1989-90
Date of distribution :
7. (a) Mr. Y a resident individual, submits the following particulars of his income and outgoings:
Inflows: Income as partner of M/s F. Industries
Salary received by cheque
Share in net profits of firm (retained in firm)
(i) Contribution towards pension plans of LIC for himself of Rs.10,000/-. The sum was paid by M/s F Industries and debited to his capital account. He has also taken the said policy in the name of his wife for the same amount for which payment was made by cheque (account payee).
(ii) Contribution towards medical insurance premia:
Name of Policy Holder Amount of Premium Mode of payment
5. Dependent Mother
Father who is retired
Govt. Officer receiving pension
Major Son unemployed
Wife dependent on Y
Self out of gifts received from
father in law by cheque 1500
1500 by cheque 2000 by cash
Y is also maintaining his brother who is suffering from disability. He was hospitalized and the total estimated expenditure was Rs.75,000/-. Y deposited Rs.15,000/- on March 31, 2010 in cash and the balance at the time of discharge from hospital in April, 2010.
Compute deductions available under chapter VI A for the Assessment year 2010–11.
(b) Ram Promoters and Developers Ltd., a widely held company own the following assets as on March 31, 2010:
(i) Land at Burdwan (West Bengal) purchased in 2002 on which a residential complex of 24 flats to be sold on ownership basis, is under construction for the last 18 months,
(ii) Two office flats at Noida purchased for resale in the year 2003.
(iii) Shares of a group of companies breakup value of which is Rs.19,00,000/-.
(iv) Cash at construction site Rs. 8,00,000/-.
(v) Residential flat in occupation of the company’s whole time Director drawing a Salary of Rs.4,50,000/- per annum.
Which of the above assets will be liable for Wealth Tax Give reasons in brief?
(c) Under what circumstances it is possible for any authority to waive or reduce interest under section 220(2)? 3 (0)
8. (a) What are the essential ingredients of interstate sale–Elucidate. 6 (0)
(b) State whether sale by VPP is liable to CST. 3 (0)
(c) What are the exceptions to sec. 3 of CST Act? 4 (0)
(d) Give four instances of Goods of special importance in Interstate Trade or Commerce u/s 14 of CST Act. 2 (0)