CA PE II Question Papers Group II
Income Tax and Central Sales Tax May 2004
This Paper has 25 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) Dr. Krishna furnishes you the following information:
Income and Expenditure Account for the year ended 31st March, 2004
To Medicines consumed
To Staff salary
To Hospital consumables
To Rent paid
To Administrative expenses
To Net Income 2,42,000
2,46,000 By Free receipts
By Dividend from Indian
(i) Rent paid includes rent for his residential accommodation of Rs. 30,000 (paid by cheque)
(ii) Hospital equipments (eligible for depreciation @ 25%)
01.04.2003 Opening WDV Rs. 5,00,000
07.12.2003 Acquired (Cost) Rs. 2,00,000
(iii) Medicines consumed include medicines (cost) Rs. 10,000 used for Dr. Krishna’s family.
(iv) Rent received – relates to a property situated at Mysore (Gross Annual Value). The municipal tax of Rs. 2,000 paid in December, 2003 has been included in the “administrative expenses”.
(v) He received Rs. 5,000 per month as salary from Full Cure Hospital. This has not been included in the “fee receipts” credited to income and expenditure account.
(vi) He sold a vacant site in July, 2003 for Rs. 5,00,000. It was inherited by him from his father in January, 1998. The site was acquired by his father in December, 1990 for Rs. 1,50,000.
(b) Ramesh retired as General Manager of XYZ Co. Ltd, on 30.11.2003 after rendering service for 20 years and 10 months. He received Rs. 3,00,000 as gratuity from the employer. (He is not covered by Gratuity Act, 1972)
His salary particulars are given below:
(Eligible for retirement benefits)
Transport allowance Rs. 10,000 per month upto 30.06.2003
Rs. 12,000 per month from 01.07.2003
50% of basic pay
Rs. 1,500 per month
He resides in his own house. Interest on monies borrowed for the self-occupied house is Rs. 24,000 for the year ended 31.03.2004.
From a fixed deposit with a bank he earned interest income of Rs. 18,000 for the year ended 31.03.2004.
Compute taxable income of Ramesh for the year ended 31.03.2004.
2. (First Alternative)
(i) State the conditions for claiming exemption in the case of a infra – structural company. 6 (0)
(ii) When a charitable trust can avail benefits under Sec. 11 & 12 of the Income Tax Act, 1961? 6 (0)
(iii) State the provisions relating to the deduction in respect of repayment of loan taken for higher education. 5 (0)
2. (Second Alternative)
(i) What are the consequences of demerger as to the accumulated loss and unabsorbed depreciation? 6 (0)
(ii) State the provisions relating to expenditure by way of payment to institutions carrying rural development programmes. 6 (0)
(iii) What are the requisites for filing a revised return. 5 (0)
3. (a) Mr. A furnishes you the following information for the year ended 31.03.2004.
(i) Income from plying of vehicles (computed as per books)
(He owned 5 heavy goods vehicle throughout the year) 2,10,400
(ii) Income from retail trade of garments
(computed as per books) (Sales turnover Rs. 21,70,000) 75,000
(iii) He has brought forward depreciation relating to assessment year 2003-04 1,00,000
(iv) He deposited Rs. 1,00,000 into his PPF account on 6.01.2004
Compute taxable income of Mr. A and his tax liability for the assessment year 2004–05 with reasons for your computation.
(b) Bala sold his vacant site on 21.09.2003 for Rs. 7,00,000. It was acquired by him on 01.10.1994 for Rs. 1,50,000
The State stamp valuation authority fixed the value of the site at the time of transfer @ Rs. 13,00,000.
Compute capital gains in the hands of Bala and your reasons for computation.
Cost inflation index : (1994-95 = 259 and 2003-04 = 463) 6 (0)
(c) Determine the value of perquisite in the following cases with brief reasons for your answer:
(i) Motor car (cubic capacity of engine below 1.60 litres) owned by employer and provided to employee since 1.04.2003. It is partly used for official and personal purposes by the employee. Expenditure fully met by the employer Rs. 25,600. (Car is self — driven by the employee)
(ii) 100 shares allotted to an employee under ESOP scheme on 1.09.2003 by a limited company (the share allotment scheme is in accordance with the guidelines issued by the Central Government). Market value of each share on the date of allotment is Rs. 70.
4. Write short notes on any three of the following: 3×6=18
(i) Amortization of expenditure under voluntary retirement scheme. (0)
(ii) Carry forward and set off of losses by closely held companies. (0)
(iii) Rectification of mistake apparent from record. (0)
(iv) Revision by Commissioner of Income Tax U/S 263 of the Act. (0)
5. (a) Discuss the term ‘sale’ under CST Act. 3 (0)
(b) When a Government can be treated as a dealer? 3 (0)
(c) When a certificate of registration can be cancelled? 3 (0)
(d) Mr. X reported sales turnover of Rs. 36,20,000. This includes the following:
(i) Excise duty Rs. 3,00,000 and
(ii) Deposit for returnable containers and packages Rs. 5,00,000.
Sales tax was not included separately in the sales invoice. Compute tax liability under the CST Act, assuming the rate of tax @ 4%. 3 (0)
(e) Mr. Y of Mumbai purchased declared goods from Nagpur by paying sales tax at 3%. Subsequently, the commodity is sold to a dealer at Chennai. The dealer Y while collects and remits tax on the Interstate sale, wants refund of tax paid on sale within State (i.e. purchase from Nagpur). Is he correct? 3 (0)
6. Discuss the following, with brief reasons, whether they are True/False under CST Act. 5×2=10
(a) Appeal against an order passed by the registration authority must be filed within 90 days of the service of order to the Central Sales Tax Appellate Authority. (0)
(b) Excise duty would form part of sale price and turnover. (0)
(c) Where the dealer beings a proprietor dies – the certificate of registration will be cancelled. (0)
(d) ‘Place of business’ does not include place of business of the agent. (0)
(e) A dealer who does not get himself registered is liable for penalty. (0)