CA PE II Exam Papers Group II
Income Tax and Central Sales Tax May 2003
This Paper has 24 answerable questions with 0 answered.
Total No. of Questions— 6]
Time Allowed : 3 Hours
Maximum Marks : 100
Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.
Questions of both the Sections have been given together without the Sections being mentioned in the question–paper. Candidates are advised to attempt all the required questions in the same answer–book.
Attempt all questions
1. (a) Mr. Vignesh, Finance Manager of KLM Ltd, Mumbai, furnishes the following particulars for the financial 2002-03:
(i) Salary Rs. 46,000 per month
(ii) Value of medical facility in a hospital maintained by the company Rs. 7,000
(iii) Rent Free accommodation owned by the company
(iv) Housing Loan of Rs. 6,00,000 at the interest rate of 5% p.a. (No repayment made during the year)
(v) Gifts made by the company on the occasion of Wedding anniversary of Mr. Vignesh Rs. 4,750
(vi) A Wooden table and 4 chairs were provided to Mr. Vignesh at his residence (dining table). This was purchased on 1.5.99 for Rs. 60,000 and sold to Mr. Vignesh on 1.8.2002 for Rs. 30,000
(vii) Personal Purchases through Credit Card provided by the Company amounting to Rs. 10,000 was paid by the Company. No part of the amount was recovered from Mr. Vignesh
(viii) An ambassador can which was purchased by the Company on 16.7.99 for Rs. 2,50,000 was sold to the assessee on 14.7.02 for Rs. 80,000.
Other Income Received by the Assessee during the previous year 2002–03:
(a) Interest on Fixed Deposits with a Company. Rs. 5,000
(b) Income from specified Mutual Fund Rs. 3,000
(c) Interest on Bank Deposits of minor married daughter. Rs. 3,000
(d) Income from UTI received by his handicapped Rs. 1,200
(e) Contribution to LIC towards premium U/S 80CCC. Rs. 10,000
(f) Deposit in PPF Account made during the year 2002-03. Rs. 75,000
(g) Bonds of ICICI (Tax Savings) eligible for Tax rebate. Rs. 25,000
Compute the taxable Income of Mr. Vignesh and the tax thereon for the Assessment year 2003-04.
(b) Compute the deduction U/S 80HHC from the following particulars given by a individual Trader for the Assessment year 2003-04:
Export Sales (Received in convertible Foreign Exchange Rs. 45,00,000 in India)
Total Sales Rs. 70,00,000
Direct Cost of Goods exported Rs. 30,00,000
Allocated Indirect Costs relating to Export Rs. 8,00,000
Export Incentives. Rs. 5,00,000
(c) M/s QQ & Co., a sole proprietory concern, was converted into a Company on 31.8.2002. Before the conversion, the sole proprietory concern had a Block of Plant and Machinery (Rate of Depreciation 25%), whose WDV as on 1.4.2002 was Rs. 3,00,000. On 1st April, itself a new Plant of the same Block was
Purchased for Rs. 1,20,000. After the conversion, the Company has purchased the same type of Plant on 1.1.2003 for Rs. 1,60,000
Compute the depreciation that would be allocated between the sole proprietory concern and the successor Company. 4 (0)
(d) Discuss the following issues relating to Income from House property:
(i) Income earned by Residents from House Properties situated in foreign countries.
(ii) Properties which are used for Agricultural purposes.
2. (First Alternative)
(a) Compute the Tax liability of Mr. Madhavan for the Assessment year 2003-04 from the following particulars:
(i) Net House Property Income as computed under the
head Income from House property
(ii) Income from business before adjusting the following Rs. 90,000
(a) Carried forward business Loss Rs. 70,000
(b) Current Depreciation Rs. 30,000
(c) Carried forward unabsorb Depreciation Rs. 1,40,000
(iii) Short-term Capital Gains—Jewellery Rs. 1,60,000
(iv) Long–term Capital Loss—Shares Rs. 40,000
(v) Long-term Capital Gain—Debentures Rs. 2,00,000
(vi) Dividend on shares held as stock in trade Rs. 10,000
(vii) Dividend from a company carrying on Agricultural operation Rs. 12,000
(viii) Income from growing and manufacturing Coffee (Cured and Roasted) Rs. 1,00,000
During the Previous year 2002–03, the assessee has donated Rs. 35,000 to an approved Local Authority for the promotion of Family Planning and purchased NSC VIII issue for Rs. 1,00,000 12 (0)
(b) Discuss the treatment of unrealised Rent and its recovery in subsequent years. 3 (0)
2. (Second Alternative)
(a) Mr. Sivan, a retail trader of Cochin gives the following Trading and Profit and Loss Account for the year ended 31st March 2003:
Trading and Profit and Loss Account for the year ended 31.03.2003
To Opening Stock 90,000 By Sales 12,11,500
Purchases 10,04,000 Income from UTI 2,400
Gross Profits 3,06,000 Other Business receipts 6,100
Closing Stock 1,80,000
To Salary 60,000 Gross Profit B/d 3,06,000
Rent and Rates 36,000
Interest on loan 15,000
Printing and Stationery 23,200
Postage and Telegram 1,640
Loss on Sale of Shares (short-term) 8,100
Other General Expense 7,060
Net Profit 50,000
(i) It was found, some stocks were omitted to be included in both the Opening and Closing stock; the values of which were
Opening stock Rs. 9,000
Closing stock Rs. 18,000
(ii) Salary includes Rs. 10,000 paid to his brother, which is unreasonable to the extent of Rs. 2,000.
(iii) The whole amount of Printing and Stationery was paid in cash.
(iv) The Depreciation provided in the Profit and Loss Account Rs. 1,05,000 was based on the following information:
The written down value of Plant and Machinery is Rs. 4,20,000. A new Plant falling under the same Block of depreciation of 25% was bought on 1.7.2002 for Rs. 70,000. Two old plants were sold on 1.10.2002 for Rs. 50,000.
(v) Rent and Rates includes Sales Tax liability of Rs. 3,400 paid on 7.4.03.
(vi) Other Business receipts include Rs. 2,200 received as refund of Sales Tax relating to 2001-02.
(vii) Other General Expenses include Rs. 2,000 paid as Donation to a Public Charitable Trust.
You are required to advise Mr. Sivam whether he can offer his business income U/S 44AF i.e. Presumptive taxation.
(b) Mr. X and Mr. Y are working for M/s Gama Ltd. As per Salary fixation norms, the following perquisites were offered:
(i) For Mr. X, who engaged a domestic servant for Rs. 500 per month, his employer reimbursed the entire salary paid to the domestic servant i.e. Rs. 500 per month
(ii) For Mr. Y, he was provided with a domestic servant @ Rs. 500 per month as part of remuneration package.
You are required to comment on the taxability of the above in the hands of Mr. X and Mr. Y, who are not specified employees 3 (0)
3. Discuss the following with regard to: 3×6=18
(a) Deductions in respect of Donations for Scientific Research and Development U/S 80GGA of the Income Tax Act, 1961. (0)
(b) Summary Assessment U/S 143(1) of the Income Tax Act, 1961. (0)
(c) Deductions allowable U/S 57 of the Income Tax Act, 1961, in respect of Income from other sources. (0)
4. Write short notes on any three of the following: 3×5=15
(a) Clubbing of Income of Minor children in the hands of Parent. (0)
(b) Deduction based on actual payment under Sec. 43B of the Income Tax Act, 1961. (0)
(c) Exemption in respect of encashment of Leave salary. (0)
(d) Computation of Capital Gains in the case of ‘Slump Sale’ U/S 50B of the Income Tax 1961. (0)
5. (a) Discuss briefly about Central Sales Tax Appellate Authority U/S 19 of the CST Act. 7 (0)
(b) (i) 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 Central Sales Tax @ 4%. The Local Sales Tax on iron rods in Mumbai is 3%.
Ascertain the Central Sales Tax payable. 2 (0)
(ii) If Hyderabad Ltd. were unable to submit form ‘C’, being a unregistered dealer, what will be the Central Sales Tax liability, if the Local Sales Tax rate is 12%? 2 (0)
(c) Discuss briefly about the liability of a company in liquidation under Central Sales Tax Act. 4 (0)
6. State with reasons, whether the following is True or False under the CST Act: 5×2=10
(a) Electricity supplied will not come within the meaning of ‘Goods’ under CST Act. (0)
(b) The supply of Aviation Spirit by a petroleum dealer from his depots at an Airport in India to an Aircraft proceeding abroad is an export out of India eligible for exemption under CST. (0)
(c) In respect of Declared Goods, Central Sales Tax can exceed 4% for Sales to Government. (0)
(d) Weighment charges charged separately from buyers will not form part of Sale price. (0)
(e) To avail concession in CST, in respect of Sales to Registered dealers, ‘Form D’ is to be furnished by the dealer. (0)