CWA ICWA Question Papers Final Group III
Indirect and Direct Tax Management December 2008
This Paper has 44 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 questions from the rest.
Wherever required, the candidates may take suitable assumptions and state
them clearly in the answer.
Working notes should form part of the answer.
1. (a) Provide brief answers to the following:
(i) Hema Polymers Pvt. Ltd. has paid excise duty of Rs. 45 lakhs during the year ended 31.03.2008. During the current year, duty payments are expected to be Rs. 70 lakhs. Should the company make only e–payment of duty during the current year i.e financial year 2008–09? 2 (0)
(ii) Can the valuation of goods manufactured and cleared as free samples be done on the basis of MRP for excise purposes? If not, how should they be valued? 2 (0)
(iii) Vasudha spinners Ltd. suppliers yarn to a job worker for dyeing. The cost of yarn is Rs. 2,000. Dyeing charges are Rs. 300/–. After receipt of dyed yarn from job worker, the finished product is sold at Rs. 2,500/– excluding VAT. The rate of duty is 14%. Find out the assessable value and duty payable. 2 (0)
(iv) Vivitha Telecom Ltd. imported an equipment, which reached Indian territorial waters on 20.02.2008. The rate of customs duty on imports was 10% then. The equipment was cleared from bonded warehouse on 28.03.2008. The customs duty on the said date is 12%. What is the rate of customs duty payable? 3 (0)
(v) On 18.06.2008, Vasudevan discovers a mistake in the service–tax return pertaining to the half–year ended 31st March, 2008 filed on 23.04.2008. Can he rectify the mistake? 2 (0)
(vi) Hema Transformers Ltd., has imported 12000 units of raw material under Advance Authorization. 11000 units of the same were consumed to manufacture 14000 units of finished products. 13200 units of finished goods were exported to meet the export obligation. Can the 1000 units of raw materials and 800 units of finished goods remaining after export, be disposed off? 2 (0)
(vii) Janak has sold a plot of land situated within the limits of Salem Corporation on 16.01.2008. The resultant long–term capital gain is Rs. 120 lakhs. On 30.03.2008, he invests Rs. 60 lakhs, and on 02.04.2008 he invests further sum of Rs. 60 lakhs in Rural Electricity Corporation Bonds, approved under section 54EC. What is the amount of exemption he can claim u/s. 54EC of the Income–tax Act, 1961 for the assessment year 2008–09? 2 (0)
(viii) Nathan Aviation Pvt. Ltd. wishes to challenge the order dated 10.03.2008 of the Assessing Officer directing them to undergo special audit u/s. 142(2A) on the ground that no opportunity was given to them. Advise. 2 (0)
(ix) Mr. X has transferred a godown to Mr. Y with the condition that the said asset will revert to him after the demise of Mr. Y. Is the value of godown includible in the net wealth of Mr. X? 2 (0)
(b) Fill up the blanks:
(i) The time limit for completion of Income–tax assessment of shipping business of non–residents is ________ months from the end of the ________ in which the return is furnished. 2 (0)
(ii) Where a person has made an application to the Settlement Commission which has been allowed to be proceeded with, he ________ (will/will not) be allowed to make another application subsequently under the Wealth–tax Act. 1 (0)
(iii) For delay in payment of service tax, interest is chargeable at ________ %, for the period for which payment is delayed. 1 (0)
(iv) Application for CST registration should be furnished within ________ days from the date when the dealer ________. ½+½ (0)
(v) Fringe benefits provided for ________ by an employer to his/its employees during the previous year is the basis of charge for liability of FBT. 1 (0)
(vi) An assessee aggrieved by the order passed by Commissioner (Appeals) u/s. 250 of Income–tax Act can submit the appeal before Income–tax Appellate Tribunal within ________ days of the relevant date. 1 (0)
(vii) If Central Excise duty is short paid or not paid or erroneously refunded, show cause notice can be issued under section 11A(1) of Central Excise Act within ________ from relevant date. 1 (0)
(viii) “Exclusive economic zone” extends to ________ nautical miles from the base line under the Customs Act. 1 (0)
(ix) SSI unit availing concession on the basis of annual turnover has to file return on quarterly basis within ________ days from the close of quarter in Form ER–3. 1 (0)
(x) Where subsequent to the provisional assessment, higher amount of customs duty is found payable in final assessment, interest on differential amount will be payable at the rate of prescribed under section ________ of the Customs Act. 1 (0)
2. (a) Durga Steel is denied the benefit of a notification under which excise duty exemption is granted to steel rod manufactures (subject to monetary limit), if no Cenvat Credit of duty paid on inputs is taken. Durga Steel erroneously took Cenvat Credit on inputs first, but prior to utilization, reversed the same. Is the action of Department justified? Can penalty be levied? 4 (0)
(b) For certain taxable services rendered by Prem, VAT as well as service tax is leviable. The following bill was raised by Prem on Vignesh (service receiver) on 20.03.2008:
Amount of bill
On 31.03.2008, Prem receives a sum of Rs. 30,000 in full settlement. What is the service tax payable? You are informed that Vignesh has incurred hotel bills of Rs. 3,708/– on behalf of Prem. Clearly indicate the provision considered in arriving at the service tax payable.
(c) The audited accounts of Vivitha Biochemicals Ltd. for the year ended 31.03.2008 were approved by shareholders in the general meeting of the company. The company has been consistently charging depreciation at the rates laid down in the Income–tax Rules, 1962, for the past several years. While calculating the MAT liability under section 115JB of the Income–tax Act, 1961, the Assessing Officer wants to add back a sum of Rs. 33 lacs on the ground that the company has charged depreciation at the rates prescribed under the Income–tax Act, 1961 and not as per the Companies Act, 1956. The company seeks your advice for rebutting the aforesaid view. Advise the company suitably. 4 (0)
3. (a) Enumerate the cases where Cenvat Credit will have to be reversed. 6 (0)
(b) From the taxation point of view, explain the importance to be given for “tax sparing” provision in a foreign collaboration agreement. 3 (0)
(c) Is the material imported under Duty Free Import Authorization (DFIA) transferable? Is value addition required in respect of DFIA? Is Cenvat Credit available in respect of the inputs? 3 (0)
(d) At the last minute, Pankaj, an Indian resident, cancels his journey from Singapore to Chennai. However, his baggage is allowed to be sent to Chennai without him accompanying it. Is general free allowance under the Customs Act available in respect of this baggage at Chennai? 2 (0)
4. (a) Subsequent to the demise of Mrs. X, her sons constituted a firm and ran the same business. Can the firm claim set off of unabsorbed business loss of late Mrs. X? 3 (0)
(b) Kimanshu Inc. of Tokyo operates through an agency at Chennai. ERP implementation support services are provided to Chennai unit. Is the Chennai agency liable to pay service tax? 4 (0)
(c) Prem Granites Ltd. appealed against excess levy of customs duty on a machinery imported and used for captive use, after paying the disputed amount under protest. Through appeal was decided in its favour, the Department refuses to grant refund on the ground that doctrine of unjust enrichment applies. Is the Department correct? Will your answer be different if the assessee reverses Cenvat Credit taken on input and agitates the matter? 4 (0)
(d) Briefly discuss about provisions applicable to EOU for availing credit of excise duty paid on inputs and service tax paid on input services. 3 (0)
5. (a) What are the terms of turnover which are required to be included while calculating the excise duty exemption limits for SSI units? 5 (0)
(b) Examine the liability of principal and agent under the Customs Act, 1962. 4 (0)
(c) The accounts of a firm are subject to tax audit under section 44AB of the Income–tax Act, 1961. Mr. X, is a working partner of the firm; he is however not entitled to receive any remuneration as per the partnership deed. He files his return of income for the assessment year 2008–09 on September 30, 2008. The Assessing Officer charges interest u/s. 234A for delay in filing of return. Is the Assessing Officer justified? 3 (0)
(d) Where there is a Double Taxation Avoidance Agreement (DTAA) with a country, in respect of taxability of a transaction, can a taxpayer choose to be governed by the normal provisions of the Income–tax Act, 1961? Can the Department insist that the provisions of the DTAA should necessarily be applied? 2 (0)
6. (a) A SSI manufacturer may like to pay full duty even when he is eligible for SSI exemption.
(i) Can he do so?
(ii) Why he would like to pay full duty?
(iii) What is the duty payable? 1+2+1 (0)
(b) Discuss under what circumstances revised returns of income can be filed. 2 (0)
(c) When and what types of business assets held in trust for any public charitable/religious nature are exempt from levy of Wealth tax? 4 (0)
(d) Can an exporter replace free of cost and without any authorisation, spares related to a product exported earlier and found to be defective, within the warranty period? Can the entire product exported earlier be replaced? Can it be so done after the warranty period also? 4 (0)
7. (a) Hema Pipes Ltd. a manufacturer of PVC pipes, removed goods from its factory from 01.06.2007 onwards after payment of excise duty under protest. Raghu Pipes, a sole trader and a customer of Hema Pipes Ltd. had purchased goods on 15.06.2007; in the sale bill issued to Raghu Pipes excise duty was charged. Hema Pipes Ltd., have appealed against the levy of excise duty on 25.06.2007 on 1st June, 2007. Hema Pipes Ltd. informs Raghu Pipes about the factum of their having filed appeal. On the same day, Raghu Pipes seek you advice relating to filing of refund claim and want to know whether the same can be filed after 3 months, by which time the appeal of Hema Pipes Ltd., will be decided. Advise Raghu Pipes as to the period of limitation and documents to be adduced in proof relating to the refund claim. 4 (0)
(b) During the year ended 31.03.2007, M/s. Bose Bio–medicals (partnership firm) submitted its return on 30.11.2007 declaring a business loss of Rs. 1.2 lacs besides unabsorbed depreciation of Rs. 2 lacs. During the year ended 31.03.2008, it ran two new industrial undertakings whose profits are eligible for deduction u/s. 80–IB. Old business was shut down. The results for the year ended 31.03.2008 are:
Results of industrial undertaking X ––– Profit Rs. 8 lacs.
Results of industrial undertaking Y ––– Loss Rs. 3 lacs.
Compute the total income of the firm for the assessment year 2008–09.
(c) Briefly list the distinctions between ‘Zero rate sale’ and ‘exempt sale’ as per White Paper on VAT laws in India. 5 (0)
8. (a) Where from bulk packing, repacking of small packets is done for being marketed, is there “manufacture” as per Central Excise Act? Can it be said that there is deemed manufacture, where in respect of ready to market imported packs, affixing a sticker containing importer’s details, MRP, etc. is done? 3 (0)
(b) Mr. Datey, a Cost Accountant rendered taxable service to Vishwa Cements Ltd. In this regard the company sent 200 cement bags free of cost, for the house construction of Mr. Datey. Explain how the value of the taxable service will be determined in this case. Will your answer be different if the service had been rendered free of charge? 5 (0)
(c) Discuss whether there is any liability to deduct tax at source, in the following situations, in the hands of Miss. Beauty, under the provision of the Income–tax Act, 1961.
(i) Payments made to job workers X, Y and Z in her business
Date X (Rs.) Y (Rs.) Z (Rs.)
12.06.2007 19000 18000 21000
14.09.2007 17000 19000 18000
23.03.2008 19000 12000 14000
There is no written contract. Each payment is for separate job.
(ii) Payment made to a contractor for construction of her residence.
(purely for self–occupation) –––– Rs. 18 lacs.
(iii) Payment made to Mr. Cutie, a non–resident lawyer in U.K. for
services rendered in London –––– Rs. 60,000 lacs.
You are informed that Miss Beauty’s turnover during the year ended 31.03.2007 was Rs. 42