CWA ICWA Question Papers Final Group III
Indirect and Direct Tax Management June 2009
This Paper has 43 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) Fill up the blanks: 1×9
(i) The provisions of section 35D of the Income–tax Act, 1961 relating to amortization of preliminary expenses apply to _______ sectors (all/selected/only fertilizer and biotechnology). (0)
(ii) In the case of dealer in commodities, commodities transaction tax _______ (will/ will not) be allowed as business expenditure. (0)
(iii) In the case of a company, where it holds cash balance of Rs. 70,000 as per books of accounts, the amount to be considered as “asset” for the purposes of the Wealth–tax Act, 1957 is _______. (0)
(iv) Where a service provider renders taxable as well as exempt service and some input services are used partially for the taxable services, one of the options available to the service provider is that he pays an amount equal to _______% value of exempted services. (0)
(v) Simple labeling or relabeling without any repacking _______ (is/is not) “deemed manufacture” for central excise purposes. (0)
(vi) The term “excisable goods” for central excise purposes _______ (will/ will not) include articles capable of being sold. (0)
(vii) The customs duty payable on project imports is _______ –%. (0)
(viii) The maximum amount of penalty leviable under section 117 of the Customs Act, 1962 is Rs. _______. (0)
(ix) In the bill raised on the client, the service provider _______ (is/is not) bound to show the service tax separately. (0)
(b) State with reasons, whether the following statements are true or false (mere conclusion will not deserve any credit): 2×8
(i) Income derived from sale of seedling in a nursery is exempt from income–tax, only where the basic operation in the land are done by the assessee. (0)
(ii) Under the Income–tax Act, 1961 depreciation is allowable to an assessee in respect of an asset of which he is only the fractional owner. (0)
(iii) Service tax on GTA will have to be paid by cash/cheque/e–payment only, and not through Cenvat Credit. (0)
(iv) The Central Government is authorized to issue notification specifying that excise duty in respect of certain notified products is leviable on the basis of production capacity of the factory. (0)
(v) No anti–dumping duty is payable by EOUs under the Customs Act, 1962, even where the goods imported are used for manufacture of goods sold in India. (0)
(vi) As per section 8(2) of the Central Sales Tax Act, 1956 in respect of inter–State of goods not falling under section 8(1), the CST rate applicable is the State Sales tax (or VAT)rate. (0)
(vii) Abatement of 30% is allowed from the gross amount charged in case of services provided in relation to chit, by whatever named called. (0)
(viii) There is no scheme for furnishing a service tax return through Service Tax Return Preparers. (0)
2. Vasudha & Co., is a partnership firm dealing in commodities and consists of two partnersV and H. The summarized details of its Profit and Loss Account for the year ended 31.03.2009 are given below:
To Rent to Mr. R.
To Commodities transaction tax
To General Expenses
To Interest on capitals:
To Remuneration (as per partnership deed):
To Net Profit 3,00,000
3,30,000 By Gross Profit B/d
By Income–Tax refund
To Interest on Bank deposits 12,20,000
The results pertaining to he earlier years which still remain unabsorbed, are as under:
Particulars Assessment year
Return filed on
Unabsorbed business loss
Unabsorbed depreciation 19.07.2007
Rs. 50,000 31.12.2008
You are required to compute the total income of the firm for the assessment year 2009–10, considering the following factors also:
(a) TDS from rent to Mr. R was remitted on the following dates:
For rent up to and including the month of January, 2009
(Rent Rs. 25,000 per month for 10 months)
For the month of February, 2009
For the month of March, 2009
(b) Deposits were made with the bank to comply with Government regulation pertaining to the assessee’s commodities trade, and the interest accrued thereon has been credited to the P & L Account.
(c) Interest paid to partners is at 15% per annum.
(d) Income–tax refund includes interest of Rs. 1,800 received from the Income–tax Department for delayed refund.
3. (a) M/s. Abanti Associates is a registered dealer engaged in the manufacturing of steel in the State of Maharastra. During the year 2008–09 the firm has procured raw materials of Rs. 25,50,320 (VAT @ 4%) and purchased plant and machinery of Rs. 20,00,000 (VAT @ 4%) and Rs. 5,00,000 (CST @ 2%) for use in the manufacturing of steel. Sales of steel materials made during the year is Rs. 40,00,000/- (VAT @ 4%) and inter–State sale is Rs. 5,29,000 (@2% CST). Besides above, branch transfer of Rs. 3,20,000 was made to Kolkata. Calculate the following as per White Paper on VAT Law in India:
(iv) Output tax;
Input tax credit to be availed during the year
Balance tax payable; and
Input tax credit, if any, to be carried forward.
(b) Is a single declaration from the Form C sufficient to cover all the transactions between two dealers in a financial year under the Central Sales Tax Act, 1956? 2 (0)
(c) Can PQR Ltd., providing taxable services from different locations and billing the clients from each location, opt for a centralized service tax registration? Explain. 2 (0)
(d) State briefly the provisions relating to rate of exchange applicable for customs valuation. 5 (0)
4. (a) M/s. Akshaya Processors Ltd. supplies raw material to a job worker B Ltd. After completing the job work, the finished products of 5,000 packets are returned to M/s. Akshaya Processors Ltd., putting the retail price as Rs. 20 in each packet. The product in the packet is covered under MRP provisions and 40% abatement is available on it. Determine the asessable value under Central Excise law from the following detals:
Cost of raw material supplied
Payment made to job workers including profit
Transportation charges for sending the raw material to B Ltd.
Transportation charges for returning the finished products factory Rs.
Who is liable to pay excise duty in the above situation
(b) Briefly explain: 1+2
(i) What is the date of removal of excisable goods in case of captive consumption? (0)
(ii) Is it required to issue invoice for removal of goods even for captive consumption? If so, Why? (0)
(c) XYZ Ltd. has availed Cenvat Credit as soon as goods enter the factory premises during 2007–08. The same has been written off fully in the books of accounts during the year 2008–09 due to obsolescence: 2+1
(i) What would be the impact of such write off of inputs? (0)
(ii) What will happen if goods are subsequently used in the manufacturing of goods? (0)
(d) Discuss briefly about Cenvat Credit on exempted final products/output services. 4 (0)
5. (a) M/s. Khusub, a SSI unit, can avail full benefit of exemption from payment of duty up to turnover of Rs. 150 lakhs and exercised the option to get the benefit of exemption for the year 2008–09 on 15th August, 2008. You are required to answer the following:
(i) To get the exemption benefit, the turnover of what will be taken?
(ii) What will happen if M/s. Khusub has more than one factory?
(iii) M/s. Khusub cleared goods of Rs. 90 lakhs up to 15th August, 2008. On 16th August, 2008, they cleared goods and issued invoice of Rs. 100 lakhs. Can they claim exemption of balance amount Rs. 60 lakh as a part of invoice?
(b) How is the value of goods supplied by the buyer treated in customs valuation for customs duty? 4 (0)
(c) XYZ Ltd. supplied tools, dies and moulds costing Rs. 2,00,000 to M/s. Hooks Ltd., China for issue in the manufactures of goods imported. The tools, dies and moulds etc. are expected to produce 10,000 units of goods. First shipment is made for 5,000 units. How will the same be treated while arriving at transaction value for arriving at value for imposition of duty? 2 (0)
(d) Mr. Nirvan Ltd. has imported 10,000 units of materials through Kolkata Port. The ship arrived on 15th January 2009. After completion of customs formalities, goods were cleared for home consumption. It is found that;
(i) 500 units are pilfered when they are in custody of port authorities;
(ii) 200 units are found deteriorated in such a condition that the goods are abandoned and rights relinquished. Explain with provisions, how the above attract customs duty.
6. (a) Discuss in brief about the options available to an exporter to procure goods from indigenous source against advance release order or back to back inland letter of credit. 5 (0)
(b) Can the valuation of goods manufactured and cleared as free samples be done in the basis of MRP for excise purpose? If not, how should they be valued? 4 (0)
(c) The accounts of a firm are subject to tax audit under section 44AB of the Income–tax Act, 1961. Mr. Suba, a working partner of the firm, is entitled to receive a fixed remuneration of Rs. 20,000 per month. He files his return of income for the assessment year 2009–10 on 30th September, 2009. The Assessing Officer charges interest under section 234A for delay in filing of return. Is the Assessing Officer justified? 3 (0)
(d) The Assessing Officer has issued a reassessment notice on Janak, seeking to bring to tax certain items of net wealth which have escaped assessment earlier. Janak wishes to know the reasons for issue of notice. Is he entitled to the same and if yes, at what stage? 3 (0)
7. (a) Write a brief note on Import/Export Authorisation. 7 (0)
(b) Under the Foreign Trade Policy of India, state the restriction on exports relating to: 2+2
(i) Export of warranty spares, and (0)
(ii) SCOMET items. (0)
(c) Thilagam Turbines Ltd. manufactured a steam turbine for Mr. Prem, who supplied special steel purchased by him from wholesale market (Cost Rs. 10,00,000 plus Central Excise Rs. 1,33,000). The normal price of such material is Rs. 12,00,000 plus Central Excise Rs. 1,48,320. Mr. Prem is eligible to claim Cenvat Credit Janak Turbines Ltd. incurred manufacturing cost of Rs. 23,00,000. What is the assessable value of the turbine? Briefly touch upon the issues involved. 4 (0)
8. (a) What type of goods are eligible for purchase at concessional rate in inter–State sales? Should any document be submitted in this regard? 4 (0)
(b) What are the various bonds which are required to be executed for Central Excise purposes? State briefly the purpose of each bond. 6 (0)
(c) M/s. Niran & Associates, a firm of Cost Accountants, raised an invoice for Rs. 39,326 (Rs. 35,000 – service tax of Rs. 4,326) on 12th February, 2008. The client paid lump sum of Rs. 36,000 on dated 2nd April, 2008 in full and final settlement:
(i) How much service tax M/s. Niran & Associates have to pay and what is the due date for payment of service tax?
(ii) What will be the liability if the client refuses to pay service tax and pays only Rs. 35,000?