CWA ICWA Question Papers Final Group III
Indirect and Direct Tax Management December 2011
This Paper has 41 answerable questions with 0 answered.
Time Allowed : 3 Hours Full Marks : 100
The figures in the margin on the right side indicate full marks.
Wherever required, the candidates may make suitable assumptions and
state them clearly in the answer.
Working notes should form part of the answer.
All sub-divisions of a question should be answered continusly.
Answer Question No. 1 which is compulsory and any five questions from the rest.
1. (a) Fill in the blanks: 1×5=5
(i) A certificate of CST registration issued by the concerned Authority shall be in Form ____. (0)
(ii) Under the CST Act, 1956, one declaration in Form C can cover all the transactions of purchase in one _____, irrespective of the total value of the transactions during the said period. (0)
(iii) A shipping bill or bill of entry filed through ICEGATE shall be digitally signed with digital signature issued by ______ . (0)
(iv) Duty drawback rate shall not exceed_______ percent of market price of export goods. (0)
(v) As per section 2 (ea) of the Wealth Tax Act, urban land is a land which is situated in any municipality, cantonment, town committee, etc., whose population exceeds ________ . (0)
(b) Provide brief answers (not exceeding three or four Sentences) for the following: 2×10=20
(i) State the type of goods and the situations in which packing, repacking, etc. constitutes deemed manufacture under the Central Excise Act, 1944. (0)
(ii) Briefly discuss about excise duty based on production capacity. (0)
(iii) Arc inputs used for other purposes, like repair, maintenance, and/or installation of capital goods, entitled for CENVAT credit? (0)
(iv) Under Customs Law, state the initial steps to be undertaken by a person for carrying out export of goods (any two). (0)
(v) In the context of anti–dumping duty, what is meant by “New Shipper Review”? (0)
(vi) When is e–filing of service tax return mandatory? (0)
(vii) Is it correct to say that all imports are free unless restricted or prohibited under the Foreign Trade Policy (FTP)? (0)
(viii) What is an oral trust and in whose hands will the income of such trust be assessed? (0)
(ix) During the assessment year 2010–11, an individual assessee had net agricultural loss of Rs. 34,000. During the assessment year 2011–12, he derived total income of Rs. 3,40,000 and. net agricultural income of Rs. 84,000. What is the quantum of agricultural income which will be considered for rate purposes for computing the tax payable? (Actual computation of tax is not required). (0)
(x) Mr. Subramani transferred jewellery worth Rs. 12 lacs to Ms. Geeta, his son’s fiancee on 21.1.2011.His son got married to Ms. Geeta on 12.3.2011. Can the value of the jewellery be clubbed in the hands of Mr. Subramani, for computing the net wealth as on 31.3.2011? (0)
2. (a) In the context of business auxiliary services in service tax, when is job work liable for service tax? State the exemptions/exclusions available in this regard. 4 (0)
(b) Name the goods which have been specifically excluded from the definition of ‘input’ under Cenvat Credit Rules. 2 (0)
(c) State two situations in which motor cars are not treated as asset under the Wealth Tax Act. 2 (0)
(d) The following details are available relating to Mr. Harivallabh, who always files the return of income within the time stipulated under section 139(1) of the Income Tax Act, 1961:
(Rs: in lacs)
(i) Assessment year 2010–11
Long–term capital loss
(ii) Assessment year 2011–12
Long–term capital gain
The LTCG during the assessment year 2011–12 is from sale of shares in a recognised stock exchange.
The Assessing Officer contends that brought forward LTCG loss of Rs. 3.2 lacs should be set off against above LTCG of Rs. 5.3 lacs for the current year and hence there is no LTCG loss of assessment year 2010–11 which can be further carried forward. Is the same justified?
(e) While ascertaining the assessable value for customs duty purposes, specify any two charges to be excluded under rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 2 (0)
3. (a) Does delayed payment of service tax attract any interest? If so, what is the rate of interest payable with effect from 1.4.2011? 2 (0)
(b) Anantha, the assessee sold certain goods to Govinda Co. Ltd. for Rs. 17,000 on 29.02.2011. The buyer is a related person as defined under section 4(3)(b) of the Central Excise Act, 1944. The buyer did not sell the goods but used it as intermediary product. The cost of production of the goods was Rs. 16,000. What should be the assessable value?
What should be the assessable value, if the goods were sold to an unrelated person for Rs. 20,000, who also used it as intermediary product?
You may assume that the price charged from the buyer is excluding excise duty and other taxes.
(c) Name any four Duty Credit Schemes which are being used as export promotional measure. 4 (0)
(d) In a revision petition filed by the assessee under section 264 of the Income-tax Act, 1961, the CIT accepted the plea of the assessee that the power subsidy was a capital receipt and allowed the relief prayed for by the assessee. The CIT considered the decisions then available on the issue involved and accepted the stand of the assessee. Later on, within a period of four years, the Supreme Court, in a case involving subsidy which was linked to production, held in favour of the Revenue. Based on this decision of the Apex Court, through rectification proceedings under section 154, the CIT seeks to rectify the earlier order passed by him under section 264. Is the rectification under section 154 permissible? 5 (0)
4. (a) Johar Engineering Industries are. selling a component for gross price of Rs. 80 per unit. The price includes packing charges of Rs. 2, loading charges within the factory of Rs. 1, excise duty @ 10%, education cess as applicable and State Vat @ 5%. Calculate excise duty and Vat payable per unit. 4 (0)
(b) New Era Manufacturing Co. Ltd. had placed an order for supply of textile manufacturing plant for Rs. 76 crores. The period of delivery agreed was 6 months. It was stipulated that in case of delay in supply of machinery beyond six months, the supplier would pay liquidated damages to New Era Manufacturing Co. Ltd. The supplier did not supply the machinery in time and as per the stipulated condition, he paid liquidated damages of Rs. 6.75 lakhs to New Era Manufacturing Co. Ltd. Advise New Era Manufacturing Co. Ltd. how the amount received should be treated for income tax purposes. You may take help of decided case law, if any. 3 (0)
(c) Is it true that where a person draws From his own stock–in–trade for personal use, the profit computed by considering the market value of such stock should be offered for income–tax? 2 (0)
(d) M/s. Pioneer Consulting Ltd., provided Consulting Engineering Services to a client at USA for value of Rs. 50 lakhs during the financial year 2010–11. No service tax was paid during the year. The company availed input services and procured inputs capital goods which were used in relation to providing such services. Total eligible input tax credit was Rs. 50,000/–. M/s. Pioneer Consulting Services Ltd. claimed rebate for such input lax complying to the procedures enumerated under service tax legislation/rules and notifications there-under. The jurisdictional Assessing Officer rejected the claim of rebate on the ground that the export of services are exported against which no rebate would be available. As a tax consultant, you are required to clarify,–
(i) Should Consulting Engineering Services provided by M/s. Pioneer Consulting Services Ltd. be treated as an exempted service?
(ii) What are the alternatives available to MIs. Pioneer Consulting Services Ltd. on payment of service tax and claim of refund of input tax credit?
(iii) Has M/s. Pioneer Consulting Services Ltd. rightly exported without payment of service tax?
5. (a) Mr. Prakash Kumar based at Mumbai, is a retailer, having turnover of Rs. 59,70,000/– for the financial year 2010–11. His income from the said business as per the books of account is computed at Rs. 4,96,000/–. He is having unabsorbed depreciation of Rs. 40,000/– related to the assessment year 2010–11 eligible for set off. Retail trade is the only source of income for Mr. Prakash Kumar. There is no depreciable asset in this year. He approaches you to advise him on the following queries for the assessment year 2011–12:
(i) Is Mr. Prakash Kumar eligible to opt for presumptive determination of his business income chargeable to tax?
(ii) If so, what will be his income from retail trade as per the applicable presumptive provision? Is it beneficial to him? Support your answer with reasoning.
(iii) Explain whether provisions of payment of advance tax are applicable to him, when he opts for the presumptive taxation and when he does not opt.
(iv) What is the due date for filing his return of income when he opts for the presumptive taxation and when he does not opt?
Please explain with reference to the provisions of the Income–tax Act, 1961. 7 (0)
(b) Briefly explain the provisions relating to provisional assessment of customs duty. 4 (0)
(c) What are the purposes for which Advance Authorisation can be issued? 2 (0)
(d) In respect of stock/branch transfers, can input tax credit be claimed under State VAT laws? 2 (0)
6. (a) Mr. Natarajan provides the following particulars and asks you to work out the net wealth as on 31.3.2011 to be declared by him in the wealth tax return:
Value of a Motor car Rs. 8,00,000
Value of a Motor cycle Rs. 50,000
A house of which ground floor is used by him for his business purposes and
first floor as self-occupied residence having value of Rs. 50,00,000
Jewellery worth Rs. 42 lacs purchased on 30.3.201 I by his wife out of funds given by him of Rs. 25 lacs and by his son of Rs. 17 lacs.
Shares of various companies worth Rs. 2,00,000 purchased by him in the name of his daughter–in–law.
(b) From the data given below relating to import of printing machinery, compute the assessable value for customs duty purposes:
FOB value of printing machinery
Expenses incurred by seller for improving the design, at buyer–importer’s request
Exchange rate 1 USD = Rs. 50
Basic duty may be taken as 30% (in USD)
(c) State the excise duty exemptions conferred to SSI units. 7 (0)
7. (a) Who are the persons not eligible for compounding of offence as per the provisions of the Central Excise Act, 1944? 4 (0)
(b) Mr. Nathan is a qualified Cost Accountant and has been rendering taxable services for the past several years. He furnishes the following details pertaining to the quarter ended 30th June, 2010:
(i) Services rendered to Reserve Bank of India ……………. 6,18,000
(ii) For preparation of accounting statements for
(iii) Advance received from LMN Ltd. for tax consultancy ……………. 3,09,000
(iv) Fees received for appearing before first
appellate authority in income tax
(v) Fees received from World Health Organization ……………. 6,00,000
The assessee ultimately did not render any service to LMN Ltd. and by mutual consent, Rs. 2 lacs was returned to LMN Ltd. on 10th March, 2011.
All the above figures are gross amounts of receipts and wherever required, service tax was billed separately and the same was also received separately from all the clients.
You are required to compute the value of taxable services rendered by Mr. Nathan for the above quarter (assume that service tax is chargeable on receipt basis).
(c) In the context of V A T law, explain the difference between exempt sale and zero rated sale. 4 (0)
8. (a) What is ‘Importer Exporter Code Number (IEC)? State the manner in which lEC has to be applied for In what export/import documents should the same be stated? 4 (0)
(b) Vivitha Logistics Ltd., engaged in the business of logistics support and infrastructural activities (started on 12.5.2008), has set up a cold chain facility during the current year. The particulars of investment relating to this cold chain facility business are as under:
(Rs. in lacs)
Non–compete fee paid to machinery manufacturer
Profit from cold chain facility (covered by section 35AD)
before depreciation 40
The assessee has earned profits of Rs. 150 lacs from the business of infrastructural activity (covered by section 35AD of the Income-tax Act, 1961), Rs. 40 lacs from the logistics support business and Rs. 2 lacs as income from other sources.
Determine the total income of the assessee and the loss, if any, to be carried forward, as per normal provisions. Notes Oil treatment of each item above, should from part of your answer. Logistics support business is not covered by section 35AD.
Where the return of income is being filed on 3rd December, 2011, will the right of carry forward of loss be affected?
(c) Achdha Castings Ltd. is manufacturing a product (which is captively consumed) to produce a final product, which is exempt from the payment of excise duty. The intermediary product is having a distinct market of its own. The company is of the view that since the final product is exempt, no duty liability arises on the intermediary product also. The Department objected to the view of the assessee.
Discuss, with reference to a decided case law, if any, whether the view of company is justified.