CA PE II Question Papers Group II
Income Tax and Central Sales Tax Nov 2008
This Paper has 30 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.
The Suggested Answers for Paper – 5: Income–tax and Central Sales Tax are based on the provisions applicable for A.Y.2008–09, which is the assessment year relevant for November 2008 examination.
Answer all Questions
1. (a) Mr. Mahesh, a production manager working in ABC Ltd., New Delhi, receives the following emoluments during the previous year 2007–08:
D.A. (not forming part of salary)
Commission on extra production 1,75,000
Special allowance 8,000
Education Allowance (including allowance for hostel expenditure) for two sons who are engineering students at Mumbai – Rs.16,000.
(i) His employer has provided rent free house to him in New Delhi.
(ii) Electricity bills paid by ABC Ltd. for him during the previous year are of Rs.11,500.
(iii) On 2.1.2008, his employer company has given him a CD player for domestic use and a laptop for office and personal use. Ownership of both the assets have not been transferred. The cost of CD player is Rs.20,000 and that of laptop is Rs.40,000.
(iv) His investments during the previous year are:
(2) Notified mutual fund
PPF Rs. 25,000
(v) He has paid tuition fees of his sons on 17.12.2007 of Rs.60,000.
(vi) He has deposited Rs.10,000 in Five Year Time Deposit Scheme in Post Office on 25.3.2008.
(vii) His agricultural income during the year is Rs.45,000.
(viii) He has received gift of Rs.25,000 from his grandfather on 10.6.2007.
(ix) He has gifted his car to his wife on 15.5.2007. She has earned income of Rs.30,000 from hiring the same during the previous year.
Compute the total income and tax payable of Mr. Mahesh for the A.Y. 2008–09.
(b) Singhania & Co. own six machines, put in use for business in March, 2007. The depreciation on these machines is charged @ 15%. The written down value of these machines at the end of the previous year relevant to assessment year 2007–08 was Rs.8,50,000. A new plant was bought for Rs.8,50,000 on 30th November, 2007.
Three of the old machines were sold on 10th June, 2007 for Rs.11,00,000.
You are required to:
(i) determine the claim of depreciation for Assessment Year 2008–09.
(ii) compute the capital gains liable to tax for Assessment Year 2008–09.
(iii) If Singhania & Co. had sold the three machines in June, 2007 for Rs.21,00,000, will there be any difference in your above workings? Explain.
2. (First Alternative)
Paulomi has transferred 1,000 shares of Hetal Ltd., (which she acquired at a cost of Rs.10,000 in the financial year 2001–02) to Dhaval, her brother, at a consideration of Rs.2,12,934 on 15.5.2007 privately.
During the financial year 2007–08, she has paid through e–banking Rs.15,000 towardsmedical premium, Rs.50,000 towards L.I.P. and Rs.25,000 towards PPF.
Assuming she has no other source of income, compute her total income and tax payable for the Assessment Year 2008–09.
Cost Inflation Index:
F.Y.2001 – 02
F.Y.2007 – 08 –
(a) (Second Alternative)
Explain the provisions regarding exemption of compensation received on account of disaster under section 10(10BC) of the Income–tax Act, 1961.
(b) Check the taxability of the following gifts received by Mrs. Rashmi during the previous year 2007–08 and compute the taxable income from gifts for Assessment Year 2008–09:
(i) On the occasion of her marriage on 14.8.07, she has received Rs.90,000 as gift out of which Rs.70,000 are from relatives and balance from friends.
(ii) On 12.9.07, she has received gift of Rs.18,000 from cousin of her mother.
(iii) A cell phone of Rs.21,000 is gifted by her employer on 15.8.2007.
(iv) She gets a gift of Rs.25,000 from the elder brother of her husband’s grandfather on 25.10.2007.
(v) She has received a gift of Rs.2,000 from her friend on 14.4.2007.
3. (a) State with proper reasons whether the following statements are True/False with regard to the provisions of the Income–tax Act, 1961: 2×5=10
(i) A return cannot be filed after the expiry of due date. (0)
(ii) During the financial year 2007–08, Mr. Amit paid interest on loan availed by him for his son’s higher education. His son is already employed in a firm. Mr. Amit will get the deduction under section 80E. (0)
(iii) The mediclaim premium paid to GIC by Mr. Lomesh for his employees, by a draft, on 27.12.07 is a deductible expenditure under section 36. (0)
(iv) Mr. Priyank is a partner, but not a working partner, in a firm, whose turnover for the previous year 2007–08 is Rs.75 lacs. The due date of filing the return of income by Mr. Priyank is 31st July, 2008, if he is getting only interest on capital from the firm. (0)
(v) Income from growing and manufacturing tea in India is treated as agricultural income wholly. (0)
(b) Fill in the blanks by choosing the correct answer from the brackets: 1×5=5
(i) Mr. Sameer has purchased a flat for Rs.4,75,000 on 1.6.2007. He …………(should/should not) put his PAN on all relevant documents. (0)
(ii) Form No. 16 ………….(is/is not) to be enclosed with the income–tax return by a salaried assessee while filing the same for Assessment Year 2008–09. (0)
(iii) Fringe benefit tax ………….(is an/is not an) allowable item of business expenditure. (0)
(iv) If the assessee lets out his house to his employer company, which in return, allots the same to him as rent free accommodation, the assessee ………… (is/is not) entitled to the benefit of section 23(2)(a) regarding annual value to be taken as nil being self–occupied house property. (0)
(v) A compensation of Rs.4 lacs received by Mr. Jaimin from Indian Institute of Technology …………(is/is not) exempt under section 10(10C). (0)
4. Write short notes on any three of the following: 6×3=18
(i) Shipping business in case of non–resident. (0)
(ii) Various Income–tax Authorities and their powers regarding discovery, production and evidence, etc. under section 131 of Income–tax Act, 1961. (0)
(iii) The circumstances where the provisions of section 40A(3), regarding cash payments in excess of Rs.20,000, does not apply. (0)
(iv) Special provision for computation of capital gains in the case of slump sale under section 50B of Income–tax Act, 1961. (0)
5. (a) State with proper reasons whether the following statements are True/False with regard to the provisions of the Central Sales–tax Act, 1956 : 5×2=10
(i) Works contract does not include a contract of alteration of a building. (0)
(ii) The damageed goods of the insured are taken possession by the insurance company. The insurance company is a dealer if such goods are sold by it later on. (0)
(iii) Rajkumar of Rajkot of Gujarat comes to Jaipur of Rajasthan and purchases goods and brings them with him to Rajkot of Gujarat. The sale is an inter–State sale. (0)
(iv) During the course of penultimate sale, the declaration is to be signed by the dealer selling the goods. (0)
(v) The burden of proving that the transfer of goods is otherwise than by way of sale shall be on the sales–tax authority. (0)
(b) Fill in the blanks with reference to the provisions of the Central Sales–tax Act, 1956 : 1×5=5
(i) Amrapali, a dealer in West Bengal, has sold goods to Shruti in Gujarat for which the sales–tax rate in West Bengal is 2% and the rate in Gujarat is 3%. The CST leviable is________. (0)
(ii) The copy of every order passed by the Appellate Authority shall be sent to________and ________. (0)
(iii) Government subsidy________form part of sale price. (0)
(iv) A newspaper publisher sold the unsold copies of the paper as waste. This sale is ________to Central Sales–tax. (0)
(v) Pravin effected his first inter–State sale on 25.3.08 and applied for registration on 15.4.08. The effective date of registration will be________. (0)
6. Mr. Aarav, a first stage dealer in pharmaceutical plant and boiler in the State of Gujarat, furnishes the under mentioned information:
(i) Total inter–State sales during financial year 2007–08 (CST not shown separately) 2,31,25,000
(ii) Trade commission for which credit notes have to be issued separately 5,78,125
(iii) Freight and transportation charges (of this Rs.1,50,000 is on inclusive basis) 4,50,000
(iv) Insurance premium paid prior to delivery of goods 70,000
(v) Installation and commissioning charges levied separately in invoices 75,000
Determine the turnover and CST payable assuming the rate of tax at 3%.