CA PE II Question Papers Group II
Income Tax and Central Sales Tax November 2007
This Paper has 34 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
Workings notes should form part of the answer. Wherever required, suitable assumptions may be made by the candidate.
1. (a) Rosy and May are sisters, born and brought up at Mumbai. Rosy got married in 1969 and settled at Canada since 1969. Mary got married and settled at Mumbai. Both of them are below 60 years. The following are the details of their income for the previous year ended 31.03.2007.
S. No. Particulars Rosy
4 Pention received from State
Pension received from Canadian
Long–term capital gain on sale
land at Mumbai
Short term capital gain on sale of
shares of Indian listed companies in
respect of which STT was paid.
9 LIC premium paid
Premium paid to Canadian Life
Insurance Corporation at Canada
Mediclaim policy premium paid
Tax saving bond purchased in
Rent received in respect of house
property at Mumbai —
Compute the taxable income of Mrs. Rosy and Mrs. Mary for the Assessment Year 2007–2008 and Tax thereon.
(i) Mr. Khanna, an employee of IOL, New Delhi, a Private Sector Company, received the following for the financial year 2006–07:
3 Basic pay
House rent allowance
Special allowance 1,20,000
Mr. Khanna was residing at New Delhi and was paying a rent of Rs. 10,000 a month.
Compute eligible exemption under Section 10(13A) of Income – tax Act, 1961, in respect of House Rent Allowance received.
(ii) If Mr. Khanna opts for rent free accommodation whereby IOL would be paying a rent of Rs. 10,000 per month, to the landlord and recovers a sum of Rs. 2,500 per month from Mr. Khanna which was in excess of his entitlement, what will be the perquisite value in respect of such rent free accommodation?
(iii) Which of the above would be beneficial to Mr. Khanna i.e., House Rent Allowance or rent free accommodation.
(c) Mr. Nigamanth, an employee furnishes the following particulars for the previous year ending 31.03.2007:
(a) Salary income as computed (after all deductions) for the year 6,60,000
(b) Arrears of salary received during the year
(not included in the above) relating to
Financial Year 2004–2005 25,000
(c) Assessed income of Financial Year 2004–2005 1,20,000
You are requested to compute relief under Section 89 of the Income–tax Act, 1961, in terms of tax payable.
The rates of Income–tax for the Assessment Year 2005–06 are:
Tax Rate (%)
On first Rs. 50,000
On 50,000 — 60,000
On 60,000 — 1,50,000
Education cess —
2% (of tax payable)
2. (First Alternative)
(a) Explain the provisions of Income – tax Act, 1961, with regard to clubbing income of spouse under Section 64. 6 (0)
(b) Elaborate the procedure for revision by the Commissioner of Income–tax of orders erroneous and prejudicial to Revenue under Section 263 of the Income–tax Act, 1961. 6 (0)
2. (Second Alternative)
(a) Explain the provisions of carry forward and set off of business losses under Section 72 of the Income–tax Act, 1961. 6 (0)
(b) Write briefly about the provisions regarding deductions from Gross Total Income in respect of medical treatment of dependent disabled under Section 80DD of the Income–tax Act, 1961 and in respect of medical treatment of assessee himself/dependent under Section 80DDB of the Income–tax Act, 1961 6 (0)
3. (a) Fill in the blanks with reference to the provisions of Income–tax Act, 1961: 5×1=5
(i) Business loss is _______ (eligible/not eligible) for set off against income from salaries. (0)
(ii) The time limit for revision of order under Section 154 is _______ years from the end of the Financial Year in which the order was passed. (0)
(iii) In the case of a person being a partner of a firm which is separately assessed as such, his share of total income of the firm is _______ (exempt/not exempt). (0)
(iv) Time limit for issue of notice under Section 143(2) is _______ months from the end of the month in which the return was filed by the Assessee. (0)
(v) Accounting standard notified under Section 145 is applicable for those following _______ system of Accounting. (0)
(b) State whether True/False with proper reasons of the following statements with regard to provisions of Income–tax Act, 1961. 5×2=10
(i) Mr. Dey, a non–resident, residing in US since 1960, came back to India on 1.4.2005 for permanent settlement. What will be his residential status for Assessment Years 2007–08 and 2008–09? (0)
(ii) Arrears of rent received shall be charged to Income–tax as income of the previous year in which rent was received irrespective of whether the Assessee is the owner of property in that year or not. (0)
(iii) The deduction on account of depreciation shall be made compulsorily, whether or not the assessee claimed the deduction or not. (0)
(iv) Mr. Roy received a sum of Rs. 20.00 lakhs on 31.3.07 from Life Insurance Corporation of India in respect of a policy, where the sum assured was Rs. 15.00 lakhs, taken on 1.10.2003 and for which a one time premium of Rs. 10.00 lakhs was paid. Mr. Roy claims that the amount is totally exempt under Section 10(10D)(c) of the Income–tax Act, 1961. (0)
(v) “A” receives Rs. 2.00 lakhs from his friends on the occasion of his marriage on 22.2.07 and Rs. 1.00 lakh from the brother of his father–in–law on 31.3.07. A’s income includable under “other sources” for the previous year 2006–07 would be Rs. 3.00 lakhs. (0)
4. Write short notes on any three of the following with reference to the provisions ofIncome–tax Act, 1961: 3×6=18
(a) Amortisation of expenditure incurred under voluntary retirement scheme. (0)
(b) Provisions of presumptive taxation for computing profits and gains of Civil Construction under Section 44AD of the Income–tax Act, 1961. (0)
(c) Restrictions on deductions allowable to the Partnership Firm in respect of salary and interest to its partners under Section 40(b) of the Income–tax Act, 1961. (0)
(d) Provisions of self–assessment under Section 140A of the Income–tax Act, 1961. (0)
5. (a) State with brief reasons whether the following statements are true or false as per the provisions of Central Sales tax Act 1956: 5×2=10
(i) Works contracts are not liable for Central Sales–tax. (0)
(ii) A branch outside the State is also a dealer. (0)
(iii) A dealer must obtain registration only if the turnover exceeds the limit prescribed in Sales–tax law of the ‘Appropriate State’. (0)
(iv) If the person furnishing surety dies, the dealer must inform the occurrence within 90 days. (0)
(v) Insurance charges incurred prior to delivery of goods to the buyer would form part of the turnover. (0)
(b) Fill in the blanks in the light of the provisions of Central Sales–tax Act: 5×1=5
(i) A & Co. of Mumbai sold goods to B & Co. is not a registered dealer under the CST Act. A & Co. ………. (can/cannot) collect tax from B & Co. for the inter–state sale. (0)
(ii) Government gives subsidy to compensate the cost of production which is more than controlled sale price. The subsidy so received ………. (would/would not) form part of turnover. (0)
(iii) Javed of Lucknow purchased goods from Bedi of Kanpur and paid State sales tax @ 8%. Later Javed sold those goods to Jain of Mumbai, Javed ……….. (can/cannot) claim refund of tax paid on within the State purchase as he has done inter–state sale of those goods subsequently. (0)
(iv) Raj of Mysore sold paddy to Ram of Delhi. Ram converted paddy into rice and exported later. The sale by Raj to Ram is ………. (sale in the course of export/an inter–state sale). (0)
(v) World & Co. despatched goods to its agent Best Ltd. The onus of proving it as transfer to agent is on ……….. (principal/agent/sales tax authority). (0)
6. Explain any two of the following with reference to the provisions of the Central Sales–tax Act: 5×2=10
(a) State any five forms/declarations used by dealers for availing concessional rate of tax/exemption from tax. (0)
(b) When a sale is said to take place in the course of inter–state trade or commerce? (0)
(c) Hari a Registered Dealer (with Head Office at Mumbai) furnishes the following information:
(i) Inter–state sale of goods (of this Rs. 8,10,000
is the value of goods transferred to branch at
Chennai and covered by Form “F”) 38,00,000
- Dharmada collected
- Weightment dues charged separately from buyers
- Cash discount shown in invoice and allowed according
- to prevailing trade practice
- Indemnity charges (recovered from Buyers to cover
- transit loss at their request) 4,450
Calculate the turnover and CST payable if all sales are made to Registered Dealers @ 4%.