CWA ICWA Question Papers Final Group III
Indirect and Direct Tax Management December 2011
This Paper has 28 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 make suitable assumptions and
state them clearly in the answer.
Working notes should form part of the answer.
1. (a) Fill in the blanks in the following sentences by using appropriate words/phrases given in the brackets: 2×8=16
(i) The basic exemption from income tax for women assessee resident in India below the age of 65 years is ___________(Rs.1,90,000, Rs.2,40,000, Rs.1,60,000). (0)
(ii) The basic rate of income tax for firms is___________(35%,30%,40%). (0)
(iii) The specified turnover limit for getting compulsory tax audit done of a business u/s 44AB of Income Tax Act,1961 is ___________(Rs.40 lakhs,Rs.50 lakhs,Rs.60 lakhs). (0)
(iv) The specified turnover limit for getting compulsory tax audit done for a profession u/s 44AB of Income Tax Act,1961 is __________(Rs.10 lakhs,Rs.15 lakhs,Rs.20.lakhs). (0)
(v) The provision of section 115JAA pertaining to credit in respect of minimmun alternative tax paid_____________(shall/shall not)apply to a limited liability partnership which has been converted from a private limited or unlimited public company under the Limited LiabilityPartnership Act,2008. (0)
(vi) Tax deducted at source by a person not being an office of a Government,from incomewhich is paid in the month of March, or credited in the month of March should be deposited by__________(7th April/30thApril/15th April). (0)
(vii) As per section35(C) (2A) of central Excise Act,the validity or stay granted by CESTAT for recovery of duty,interest and penalty is for_________(180/365) days. (0)
(viii) If it is found that customs duty is not levied,short or erroneously refunded,the Customs Officer u/s 28 of Customs ACt,can issue a show cause notice within __________(six/twelve)months demanding duty or interest. (0)
(b) State whether the following statements are true or false.If false give the correct statement.If true give the reason in brief: 3×3=9
(i) Person claiming refund of excise duty and interest paid on such duty should make application to AC/DC within six months of relevant date. (0)
(ii) Excise duty cannot be lived on immovable property. (0)
(iii) Process of mixing and granting amounts to manufacture. (0)
2. (a) M/s Engineers Ltd.is a works Contractor providing works contract services to M/s BKAY Ltd.and already crossed the threshold limit under service tax laws.The company quoted an amount of Rs.10 lakhs for a construction contract.it is agreed that if M/s.BKAY Ltd.supplied the steel and cement,the contract amount will be reduced on the agreed basis.M/s BKAY Ltd.supplied steel and cement of Rs.1 lakh for use in the construction activities as a result the contract amount reduced to Rs.9 lakhs.Further M/s Engineers Ltd.had supplied goods worth Rs.2 lakhs under a separate agreement which was also used while providing above works contract service.M/s Engineers Ltd.the service provider preferred to pay service tax under composition scheme.please find out:
(i) What is the gross amount chargeable to service Tax Law?
(ii) What is the service Tax payable under Composition scheme by Engineers Ltd.
(iii) Can M/s.Engineers Ltd. avail cenvat credit also?
(b) M/s.Ajay Security Services Ltd.,A company while signing a contract for providing taxable services on dated 15thJune,2010 has received Rs.1,00,000 by an account payee cheque as advance.On dated 14th November,2010 an amount of Rs.5,00,000 has been received through credit while providing the services and another Rs.5,00,000 by a pay order after completion of service on 18th March,2011.Above amount is inclusive of service tax as applicable and over and above threshold limit of exemption available under service tax law.
(i) What would be the total service tax liability for the financial year 2010—11?
(ii) What is the value of taxable service?
(iii) What would be the due date of payment of service tax electronically through internet banking?
What would be the amount of service tax payable on different due dates?
(iv) If the entire service tax is deposited on dated 14th April,2011 What would be the interest liability.
3. (a) An excisable product is covered under provision of the standards of Weights & Measures Act.1976 and falls in the category of specified goods subject to excise duty on the basis of retail price.From the particulars compute (rounded to nearest rupee):
(i) Assessable value.
(ii) Excise duty & Cess payable.
MRP printed on the package is Rs.10,640.The price is inclusive of excise duty @10% and eduction and secondary and higher eduction cess at the applicable rates as per Finance Act,2010 The product is eligible for an abatement of 38%. 5+4 (0)
(b) Briefly explain the following with reference to Central Excise Laws:
(i) Is it compulsory too pay tax trough PLA after forfeiture of facility of payment by installments?
(ii) Can an assessee claim refund of money deposited in PLA, when there is a provision of unjust enrichment?
(c) (i) An exemption notification under Central Excise Act was issued on 22nd December,2010.The same was published in Official Gazette on 2nd January,2011,From which date the notification is effective? 1 (0)
(ii) KSK Ltd. a manufacturer dispatched rubber products to Mr.X from factory at Pune after payment of duty.The goods were rejected by the buyer as found defective and sent back the manufacturer for rectification.Can Mr.X avail cenvat credit? 1 (0)
4. (a) Briefly explain the term ‘Export’ for the purpose of duty drawback under section 75 of the Customs Act,1962.
Is duty drawback available if the goods do not reach the destination? 5 (0)
(b) Computation of duty drawback iscuss whether any duty drawback is admissible under section 75 in the following cases and if yes,what is the quantum of such duty drawback?
FOB value of exported
goods(RS.) Rate or amount
of drawback Market price of
goods (Rs.) Value of imported
material used in
(2,000kgs.) 0.75% of FOB value
1% of FOB value
0.80% of FOB value
40% of FOB value
Rs.30 per kg
3.5 of FOB value
4% of FOB value 80,000
*In case (viii),the Central Government has specified a minimum value—addition to be achieved @40% of imported material in terms of FOB value.
5. (a) A,an unit in SEZ,received services as covered u/s 65(105) from various service provider in relation to the authorized operation in the SEZ.At the time of making payment,service provider ask it to pay the service tax,however,it argues that service tax is not liable on taxable services provided to it.Now, you are approached to confirm the contention of A with the following details:
Place Where such services consumed Amount (Net of tax)
(iii) With in the SEZ
Partially with in the SEZ and partially out of the SEZ
Wholly out of the SEZ RS.5,00,000
(b) A show cause notice demanding customs duty was issued in case of clearances made by a 100% Export Oriented Undertaking (EOU) to Domestic Traiff Area (DTA).Is the show cause notice defective in law? 2 (0)
(c) Detail the provisions for registration of dealers under section 7 of CST Act,relating to
(ii) Compulsory Registration
Voluntary Registration and indicate the benefits of certificate of registration.
6. (a) M/s.PIONEER INFRA& CO,a partnership firm consisting of three partners,X,Y and Z is engaged in the business of civil construction.The firm gets the following by way of contract receipts during previous year 2010–11 (Asst.Year 2011–12):
Contract work for supply of labour
Value of materials supplied by contractor
Total value of contract –
Each partner of the firm entitled to draw Rs.2,500 per month by way of salary as authorized by the terms of the partnership deed.An amount of Rs.1,00,000 interest is paid too partner Z on the capital contributed of Rs.5,00,000.profit as per books of accounts before deduction of salary to partners and interest to partner Z is Rs.2,50,000.Compute
(i) Total income of the firm applying provisions of sec.44AD of the income Tax Act,1961.
(ii) Total tax payable.
(b) Samir furnishes the following particulars for the compilation of his Wealth Tax Return for Assessment Year 2011–12:
(i) Gifts of jewellery made to wife from time to time aggregating Rs.80,000.Market value on valuation date Rs.3,00,000.
(ii) Flat purchased under installment payment scheme in 1979 for Rs.9,50,000.Used for purposes of his residence and market value as on 31.03.2011 (installment remaining unpaid Rs.80,000) Rs.10,00,000.
(iii) Urban land transferred to minor handicapped child valued on 30.03.2011 Rs.5,00,000.
Examine how you will deal with these items,make suitable assumptions required.
(c) Explain the treatment under sec.6 of wealth Tax Act in respect of value of assets and debts located outside India of (a) an individual or HUF not resident in India and(b) a company not resident in India. 3 (0)
7. The profit & Loss Account of Mr.A Basu for the previous year 2010—11 given below:
particulars Rs. particulars Rs.
Cost of goods sold
Rent of business premises,owned by the assessee
Repairs and renewals
Income Tax paid
Excise Duty paid
sales Tax payable
Municipal taxes payable for staff quarters
Provision for bad debts
Employers contribution to recognized fund
Net profit 16,00,000
Rent of staff quarters
Sale price of machinery block on 31.03.2011 34,70,000
(i) Salaries include:
(a) Rs.1,20,000 was paid outside India to an employee, “resident” in India but neither tax was deducted nor tax has been paid there on,
(b) Rs.90,000 was paid in India to an employee “resident” in India but neither tax deducted there from nor paid there on.
(ii) Excise Duty of Rs.50,000 for the assessment year 2010—11 was paid on 1st January.2011,but it was not included in the profit & loss A/c.
(iii) Sales Tax amounting Rs.1,30,000 was paid on 30th May,2011 and the balance was proposed to be paid on 1st August,2011,the due date of furnishing return of income is 31st,2011.
(iv) Repairs/renewals include remodeling and renovation of revenue nature costing Rs.80,000.The balance is capital expenditure.
(v) Legal expenses include:
(a) Lawyer fee of Rs.50,000paid by single bearer cheque to K,nephew of the proprietor.The Assessing Officer disallowed a Sum of Rs.10,000,being found in excess of the desired qualifications;
(b) Gift of Rs.1,20,000,made to wife,a tax—adviser,but disallowed by the A.O.
(vi) Employers contribution include:
(a) Rs.30,000 credited to their account on due date under provident Fund rules;
(b) Rs.20,000 not credited to their account and proposed to be credited in October,2011.
(vii) Commission receipts of Rs.2,00,000 have not been credited to the profit and loss account as their recovery seems to be doubtful.
(viii) WDV of machinery on 01.04.2010 was Rs..6,50,000.
(ix) WDV of business premises and staff quarters as on 01.04.2010:Rs.10,00,000 and Rs.30,00,000 respectively.
Depreciation @10% on business premises and @5% on staff quarters.
Compute taxable profits for the previous year 2010–11, A.Y. 2011–12.
8. (a) J.Inc of korea and CD Ltd.an Indian Company are associated enterprises.CD Ltd.manufactures Cell phones and sells them to J.K & F.Inc,a Company based at Nepal.During the Year CD Ltd.supplied 2,50,000 Cellular phones to J.Inc.Korea at a price of Rs.3,000 per unit to J.K. & F.Inc.at a price of Rs.5,800 per unit.The transactions of CD Ltd.with J.K & F.Inc.are comparable subject to the following considerations:
Sales to J.Inc are on FOB basis,sales to J.K & F.Inc are on CIF basis.The freight and insurance paid by J.Inc.for each to J.K. & F.Inc.are under free warranty for two years where as sales to J.Inc.are without any such warranty.The estimated cost of executing such warranty is Rs.500.Since J.Inc’s order was huge in volume,quantity discount of Rs.200 per unit was offered to it.compute the Arm’s Length Price and the subsequent amount of increase in the total income of CD Ltd.if any.
(b) State the methods of computing Arm’s Length Price under section 92C of the Income Tax Act,1961. 5 (0)