CWA ICWA Exam Papers Inter Group I
Applied Direct Taxes December 2008
This Paper has 45 answerable questions with 0 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 from the rest.
1. (a) Choose the correct answer: 1×6
(i) The following assesse is charged to income-tax in the assessment year following the previous year:
(1) A non-resident business firm which shipped goods on 1.5.08 at Visakhapatnam Port in Andhra Pradesh;
(2) An employee left India to USA on 1.8.08 with no intention of returning;
(3) ABC firm which discontinued its business on 1.9.2008;
(4) An employee- assessee of a University who worked during 1.4.07 to 30.03.08.
(ii) The following is exempt income:
(1) Travel concession to employee;
(2) Remuneration received for valuation of answer scripts;
(3) Encashment of leave salary whilst in service;
(4) Perquisites in India.
(iii) The following is not “plant” under section 43(3) of Income–tax Act,1961;
(3) Road in the factory building;
(4) Electrical fittings.
(iv) The following is not a venture capital undertaking for the purposes of section 10(23F), if engaged in business of;
(1) Generation of power;
(3) Providing infrastructural facility;
(4) Dairy farming whose shares are not listed in a recognised stock exchange.
(v) In valuation of immovable property in Bangalore, the specified area means__________of the aggregate area, for wealth–tax purposes.
(1) 60 per cent;
(2) 65 per cent;
(3) 70 per cent;
(4) 75 per cent.
(vi) The following is not an “asset” as envisaged by section 2(ea) of the Wealth–tax Act;
(2) Urban land;
(3) Jeep used in business of manufacture of medicines;
(4) Motor boats of fishing business.
(b) Fill up the blanks:
(i) Under the Wealth-tax Act, “assessment year” means the period of__________commencing on 1st day of April every year, falling immediately after the _________. 2 (0)
(ii) The term “net wealth” is defined in section _________of the wealth–tax Act 1 (0)
(iii) Assets held by a minor married daughter __________(will/will not) be clubbed in the hands of the individual. 1 (0)
(iv) Where a charitable trust is created on 01.04.2007, the application for registration u/s. 12A of the Income-tax Act. 1961 should be submitted within________from________ 1 (0)
(v) Under section 44BBB (i) of the Income-tax Act, 1961, the presumptive income is taken as_________½% of ½ the eligible receipts in the hands of eligible assesse. 1 (0)
(vi) The amount of contribution made in excess of Rs._________in respect of each employee to approved superannuation fund for employees, is taken as the value of fringe benefit u/s. 115WC(1) of the Income-tax Act, 1961. 1 (0)
(vii) Electronic furnishing of income-tax return in approved computer readable media can be furnished under sub-section_________of section 139 of the Income-tax Act, 1961. 1 (0)
(viii) From out of his agricultural income. X has paid interest of Rs. 10,000 on education loan taken from nationalized bank last year. Deduction available under section 80E of the Income-tax Act, 1961 is Rs.____________. 1 (0)
(c) Provide very brief answers to the following;
(i) What is the tax incidence of contribution made by an employer to the pension scheme of Central Government? 2 (0)
(ii) What is the cost of acquisition of sweat equity shares in the hands of the employee? 2 (0)
(iii) In a house belonging to Janak, his cousin is living without paying any rent, Janak says that since his relative is residing there without paying any rent, there is no rental income chargeable to income–tax. Is he correct? 2 (0)
(iv) What is the binding nature of the arm’s length price determined by the Transfer Pricing Officer upon a reference made to him by the Assessing Officer? 2 (0)
(v) Is it correct to state that every member of AOP is an “assesse” for the purposes of wealth–tax? 2 (0)
2. (a) Answer the following questions briefly:
(i) Gratuity of Rs. 1,20,000 is received in August, 2007 by Mr. M, a legal heir of Mr. R aged 45 years who died on June 28, 2007. Is it taxable? 2 (0)
(ii) ABC Company derived income from two separate industrial units during the year ending March 31, 2008, eligible for deduction under section 80-IB. The profit of one unit was Rs. 4,50,000 while the other unit suffered a loss of Rs. 2,50,000. What is the deduction available under section 80-IB of the Income-tax Act, 1961? 2 (0)
(iii) RR Ltd., engaged in manufacture of paper, has taken a building on lease, sub–leased aportion of it along with furniture and fixtures from 1.4.2006. It received rent Rs. 1,20,000 and non–refundable deposit of Rs. 10,000 for the financial year 2007–08. It also received an amount of Rs. 70,000 as arrears of rent. What are the heads of income under which the various receipts will be taxed, If found exigible to tax? 2 2 (0)
(iv) Mr. Suman’s assessed tax for the assessment year 2008–09 is Rs. 12,000. Tax on it was Rs. 14,420. The advance tax instalments paid were Rs. 4,000 on 18.10.2007, Rs. 4,000 on 20.01.2008 and Rs. 4,000 on 10.03.2008. Are the payment of advance tax instalments paid proper? If not, is any interest chargeable under the Income–tax Act, 1961? 2 (0)
(v) Vasudha plastics Ltd., engaged in manufacture of PVC pipes, purchased a machinery on 25.09.2007 for Rs. 2,00,000 and put it to use after two weeks. There is no other asset in the block. What is the WDV of the block as on 31.03.2008? 3 (0)
(vi) What are “International transactions” in the context of transfer pricing provisions? 4 (0)
3. (a) Thilagam has given donation of Rs. 30,000 in cash and cement bags worth Rs. 20,000 to an approved charitable institution. What is the deduction under section 80G of the Income-tax Act, 1961 available to the assesse whose gross total income is Rs. 6,00,000? 3 (0)
(b) Are the profits arising from sales of agricultural lands situated In a village 10 kms. From Vishakhapatnam Corporation limits and another situated in city limits of Vishakhapatnam liable to Income-tax? 2 (0)
(c) A, B and C are three partners of a firm; the firm provides the following information:
(i) Total income of the firm is (-)Rs. 1,40,000, output of which unabsorbed depreciation is Rs. 50,000. The return of income of the firm was filed in time.
(ii) On March 31. 2007, C retires from the firm and the other partners continue the same business;
(iii) The firm’s income for the assessment year 2008–09 before adjusting the aforesaid loss and depreciation is Rs. 1,08,000;
(iv) A,B and C share Profit and Loss in ration of 1:1:2. Compute firm’s total income for the assessment year 2008–09, assuming that salary and interest are not paid to any partner.
(d) Briefly discuss the powers of Commission (Appeals) in disposing of an appeal filed before him under section 251 of the Income–tax Act ,1961. 5 (0)
4. (a) The income and related particulars of Mr. Coorg, aged 56, for the year ended 31.03.2008 are given below:
(i) Salary Rs. 24,000 per month;
(ii) He was provided with a rent–free accommodation in Hyderabad for which rent of Rs. 6,000 per month was paid by his employer;
(iii) His wife was sick and treatment was taken from a private hospital, for which an amount of Rs. 32,000 paid towards medical expenses by his employer in December,2007;
(iv) An allowance of Rs. 13,200 was paid by his employer towards his son’s education;
(v) The employer paid DA 10,000 per month (considered for retirement benefits), professional tax of Rs. 2,400 and income–tax liability of Rs. 15,000.
(vi) He encashed earned leave to his credit to the tune of Rs. 10,000;
(vii) Loss from speculative business Rs. 20,000;
(viii) Loss from sale of shares in ABC Pvt. Ltd. Held for ten months Rs. 8,000;
(ix) Profit on sale of long–term capital assets Rs. 10,000.
Compute the total Income and Tax liability of Mr. Coorg for the assessment year 2008–09.
(b) Briefly sketch the responsibilities and liability of a person liable to collect tax at source under the income–tax act, 1961. 5 (0)
5. (a) Kamalesh was working as a crew member on an Indian ship plying in foreign waters. During the year ended 31.03.2008, the ship did not touch the Indian coast, except for 180 days. State the residential status for the assessment and taxability of his salary. 2 (0)
(b) Amalesh owns a house property which is let–out for Rs. 6,500 per month. The fair rent of the property is Rs. 90,000. Municipal taxes paid during the year for each half year is Rs. 3,200. The tenant has spent Rs. 10,000 towards repairs of the property during the year. Compute the income from house property for the assessment year 2008–09. 2 (0)
(c) Under what circumstances, will urban land be not considered as an “asset” for wealth tax purposes? 2 (0)
(d) State the time limit under Wealth–tax Act, 1957 for completion of
(i) Regular assessment under section 16; and
(ii) Assessment or reassessment under section 17. 2 (0)
(e) Is a representative assesse exempt from liability to pay advance income–tax? 2 (0)
(f) State any ten circumstance when payment exceeding Rs. 20,000 relating to an expenditure, made otherwise than by a crossed cheque or by a crossed demand draft. Will not be disallowed under section 40A(3) of the Income-tax Act, 1961. 5 (0)
6. (a) State briefly the requisites of a charge income-tax of capital gains under section 45(1) of the Income-tax Act, 1961. 3 (0)
(b) Vatsan has the following incomes for the financial year 2007–08;
Short–term capital gains
Long–term capital gains (–) 40,000
He deposits Rs.10,000 in public provident fund account. You are required to find out his tax liability for the assessment year 2008–09.
(c) Vasudevan purchased a motor car in December, 2007, Which was used by him for business purposes during rest of the year. However, the relevant transfer in the records of the Regional Transport Office was made only in April, 2008. Can the assesse claim depreciation on motor car for the assessment year 2008-09? 2 (0)
(d) What are the types of income of a political party exempt from income-tax under section 13A if the Income-tax Act, 1961? Are conditions required to be fulfilled in this regard? 3 (0)
(e) Who is an “employer” for the purposes of levy of fringe benefit–tax? Who are the persons excluded in this regard? 3 (0)
7. (a) Ramesh furnishes the following particulars fore compilation of his wealth-tax return pertaining to the assessment year 2008–09;
(i) Flat purchased under instalment payment scheme in 1994 for Rs. 8,50,000 used for self occupation and market value as on 31st March,2008 15,00,000
(ii) Gift of jewellery made to wife from time to time amounting to Rs. 5,00,000 and market value as on 31st March,2008 9,00,000
(iii) Cash in hand 1,25,000
(iv) Bank Balance with HDFC Bank 2,50,000
(v) Urban land transferred to minor handicapped child, market value as on 31st March,2008 5,00,000
(vi) 2 motor cars (one is held as stock-in-trade in business and other used for personal purposes) 6,00,000
(vii) Loan against flat being instalment remaining unpaid 70,000
(viii) Wealth-tax liability outstanding 10,000
Compute the net wealth of Ramesh indicating reasons for the treatment under the provisions of the Wealth-tax Act, 1957 and the wealth–tax payable.
(b) How will you treat unrealized rent allowed as a deduction in the past and realized in a subsequent year when the assesse is no more the owner of the property. 3 (0)
(c) Mr. Daga is a trader, Particulars of his income and those of the members of his family are given below. (These incomes relate to the year ended 31st March,2008):
(i) Income from Mr. Daga’s business 90,000
(ii) Salary derived from an educational institution by Mrs. Daga; she is the principal of the institution 50,000
(iii) Interest on company deposits derived by Master Deep Daga (Minor son). These deposits were made in the name of Deep Daga by his father’s father about 6 years ago 12,000
(iv) Receipts from sale of paintings and drawings made by minor Dipali Daga (Minor Daughter of Mr. and Mrs. Daga and a noted child artiste) 60,000
(v) Income by way of lottery earning by Master Dipendar Daga (Minor son of Mr. and Mrs. Daga) 26,000
Discuss whether the above will form part of the total income of any individual, duty considering applicability of clubbing provisions in each case, and also compute the total income of Mr. Daga.