CWA ICWA Question Papers Final Group III
Indirect and Direct Tax Management June 2010
This Paper has 43 answerable questions with 2 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.
1. (a) Fill up the blanks: 1×15=15
(i) The rate of Minimum Alternate Tax under section 115JB of the Income–tax Act, 1961 has been raised to _______ %. (0)
(ii) A unit is entitled to SSI concessions under excise provisions if its turnover in the earlier year does not exceed Rupees ________. (0)
(iii) Parts used during warranty period for repairs or replacement _________ (are/are not) excisable. (0)
(iv) CVD _________ (is/is not) payable on anti–dumping duty. (1)
(v) Customs value of excisable goods is determined , inter alia, under section _________ of the Customs Act, 1962. (0)
(vi) Section 18 of the Customs Act, 1962 provides for __________ of duty. (1)
(vii) All items other than those which are restricted/prohibited can be imported __________ (freely/subject to nominal import duty of 10% on assessable value). (0)
(viii) Where advance authorization has been obtained, export obligation should be fulfilled within ___________ from the date of __________. (0)
(ix) Forms received from branches for stock transfers should be submitted to CST authorities on _________ basis. (0)
(x) Under the Central Sales Tax Act, 1956, sale price means the amount payable to dealer as consideration for sale of goods and _________ (includes/does not include) CST whether shown separately or not. (0)
(xi) Expenditure relating to exempt income are not deductible as per section ___________ of the Income–tax Act, 1961. (0)
(xii) Marginal relief under the Income–tax Act, 1961 is available to ___________ (individuals, firms and companies, companies). (0)
(xiii) Wealth tax is levied on the value of __________ held by the assessee as on the ___________. (0)
(xiv) An AOP is ___________ to wealth tax (assessable/not assessable/assessable under certain situations). (0)
(xv) In service tax matters, an eligible appeal should be filed within ________ from the date of receipt of order appealed against. (0)
(b) State with reasons, whether the following statements are True or False (mere conclusion will not deserve any credit; for a “True” conclusion, the question should not be merely repeated, but reasoning should be given). 2×5=10
(i) Where an assessee following mercantile system of accounting receives interest on enhanced compensation for lands compulsorily acquired, he has to admit as Income the interest relatable to the current year only, (0)
(ii) Import manifest is required to be submitted at the customs station within twelve hours of arrival of aircraft or vessel. (0)
(iii) An individual is required to furnish return of income only where the total income exceeds the maximum amount not chargeable to tax. (0)
(iv) Mrs. Y’s mother–in–law gave a diamond necklace worth Rs. 6 lacs at the time ofmarriage of Mrs. Y on 12.4.2009. Later on, she forcibly took away the necklace on 12.9.2009. The value of diamond necklace is not includible in the net wealth of Mrs. Y as on 31.3.2010. (0)
(v) Where taxable services are provided by a person not residing in India and are utilized in India, the agent of the non–resident residing on India is liable to collect and pay the service tax on behalf of the non–resident. (0)
2. (a) Is it correct to say that mandatory levy of penalty under section 11AC of the Central Excise Act, 1944 is not applicable to every case of non–payment or short–payment of duty? 5 (0)
(b) LMN Aluminum Ltd. is engage in manufacture of aluminum sheets and allied products. The assessee noticed some difference at the time of physical verification of stock, as compared to book records, due to several reasons like rain seepage, weighment differences, accounting method employed, etc. The assessee applied under Rule 21 of the Central Excise Rules, 2002, seeking remission of duty. This claim is resisted by the Department on the ground that the reasons for the differences were neither due to natural causes, nor due to unavoidable accident. The assessee’s request was hence turned down, though there was clear evidence to the effect that the assessee has suffered loss of stock.
Is the action of the Department justified? Advise the assessee suitable. 6 (0)
(c) Who are the persons not eligible for compounding of offence as per the provisions of the Central Excise Act, 1944? 4 (0)
3. (a) VSK Motors manufactures Light Motor Vehicles (LMV). The practice followed is that the chassis of the LCV is sent to Nathan Ltd. for building the body as per design and specifications furnished. The LCV chassis is not sold but is transferred after payment of excise duty on stock transfer basis. Nathan Ltd. avails CENVAT credit on the excise duty on chassis; after completing the body building, Nathan Ltd. discharges the duty on the assessable value comprising the value of chassis and the job charges. After receipt of the body–built LMV from Nathan Ltd., VSK Motors sells the same at a higher price.
You are required to examine whether the practice followed is correct in terms of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
(b) What is the quantum of CENVAT credit that can be availed in respect of inputs and capital goods cleared on or after 07.09.2009 from an EOU or by a unit in electronic hardware technology part or in a software technology park? 5 (0)
(c) State the cases under which the Central Government is empowered under Rule 12CC of the Central Excise Rules, 2002 to withdraw facilities or impose restrictions on a manufacturer, first stage or second stage dealer, or an exporter. 6 (0)
4. (a) State the cases where the import duty shall be refunded to the person who has paid such duty, as laid down in section 26A of the Customs Act, 1962. 5 (0)
Mr. Bhar imported goods on
Bill of entry presented on
Assessable value (in Euro)
Goods were removed to warehouse. Order permitting
the deposit of goods in bonded warehouse issued on …
Mr. Bhar neither obtained permission of time for the warehousing period, nor cleared the goods within the permitted warehousing period of 18.4.2010. Only after a notice was issued under section 72 demanding duty and other charges, Mr. Bhar removed the goods from the warehouse, on 15th May, 2010.
Assuming that no additional duty or SAD is payable, on the basis of following information, compute the amount of duty payable by Mr. Bhar while removing the goods.
15.1.2010 18.4.2010 15.5.2010
Rate of exchange (1 Euro=) 65 66 67
Basic customs duty 12% 15% 18%
(c) M/s. Nigamanth Cables are engaged in the business of providing cable TV and high speed internet services in Salem, Tamil Nadu. For their business requirements, they imported Optic Fibre Cables (OFC) and classified them under Heading 85.44 of the Customs Tariff. This was not accepted by the Revenue and according to them, the goods should be classified under Heading 90.01. The assessee’s stand was accepted by Commissioner of Customs (Appeals). The matter was carried in appeal before CESTAT against the said order, which has yet not been decided.
Meanwhile, the customs authorities (DRI officers) had seized the consignment of OFC imported and permitted Nigamanth Cables to clear the goods on payment of duty assessed under Heading 90.01 and forced Nigamanth Cables to pay the differential duty between Headings 85.44 and 90.01 by threat and coercion.
You are required to consider the validity of the aforesaid action of the customs authorities in the light of judicial pronouncements.
5. (a) M/s. DPC & Co., a consulting engineering firm, has provided consulting engineering services to NFD Ltd. in connection with construction of power plant during the financial year 2009–10, for a value of Rs. 50 lacs, excluding service tax. While providing the services, DPC & Co. appointed Mr. X, sub–consultant, to provide services to the extent of Rs. 11 lacs, inclusive of all expenses and taxes, if any. A show cause notice has been served on Mr. X, requiring them to pay services of Rs. 11 lacs rendered by it to DPC & Co., who have utilised the same in providing the services to NFD Ltd. Mr. X is of the opinion that he is not liable to service tax since DPC & Co. have paid the service tax on the entire contract of Rs. 50 lacs. In the light of these facts, state
(i) Whether the ground taken by Mr. X for non–payment of service tax is correct.
(ii) If the answer is in the negative, what is the service tax payable, assuming that Mr. X has crossed threshold limit.
(iii) How payment of service tax by Mr. X is beneficial to DPC & Co.
(b) With reference to business auxiliary services, examine whether service tax liability is attracted in following cases:
(i) Manufacture of an excisable goods on behalf of the client, which is exempt from duty.
(ii) Business auxiliary service provided by a service provider to any other person (service receiver) during the course of manufacture or processing of alcoholic beverages by the service provider, for or on behalf of the service receiver.
(c) Compute the net VAT liability of Janak from the under–mentioned information:
Raw material purchased from foreign market (including duty paid on imports @ 20%)
Raw material purchased from local market (including VAT charged on the material @ 1%)
Raw material purchased from another State (excluding CST)
Storage, transportation cost and insurance
Other manufacturing expenses incurred 47,000
Janak sold the goods to Prem adding margin of profit @ 10% on the selling price. VAT rate on sale of such goods is 10%.
6. (a) What are the reasons for setting up of Export Promotion Councils? Write a brief note on their responsibilities and types of Councils in India in the context of foreign trade policy. Should an exporter compulsorily register himself as a member of such Export Promotion Council? 5 (0)
(b) Briefly explain the different types of Drawback rates. 7 (0)
(c) While importing goods under Duty Free Import Authorisation (DFIA), should any customs duty be paid? Is the DFIA transferable? 3 (0)
7. (a) Discuss whether the following expenses are permissible deductions while computing the business income of M/s. Hemalatha & Co., a partnership firm engaged in fertilizer business: 2×3
(i) Interest to partners A, B and C (to each) Rs. 6,00,000 calculated at 15% simple interest, as provided for in the partnership deed. C is a non–resident. The firm has not deducted tax at source from these interest payments. (0)
(ii) Salaries paid to resident employees Rs. 4,20,000, of this, in respect of a salary payment of Rs. 3,20,000, the required TDS was remitted only on 2.10.2010. (0)
(iii) On a building taken on lease, the firm has incurred expenditure on wooden partitions and laying of floor tiles to the tune of Rs. 3,60,000. (0)
(b) N.T.Dhoni, a resident Indian, received a sum of Rs. 5,00,000 for playing cricket match in a nation with which India does not have a DTAA. In that nation, withholding tax (TDS) of Rs. 1,00,000 was made. In India, he has received match fees of Rs. 15,000 for playing cricket matches. Assuming that he has paid life insurance premium of Rs. 1,50,000 and mediclaim premium of Rs. 20,000, compute his tax liability for the assessment year 2010–11. 6 (0)
(c) Can the Income–tax Appellate Tribunal pass a rectification order after four years, under section 254 of the Income–tax Act, 1961? 3 (0)
8. (a) In a search conducted in the premises of Mr. Raghav on 20th November, 2009, assets worth Rs. 40 lacs were found. The explanation of Mr. Raghav was that such assets had been acquired out of the income of the previous year relevant to the assessment year 2009–10. However in the return of Income filed for the assessment year on 15th October, 2009, there was no disclosure of the aforesaid income. According to the assessee, he is not liable for concealment penalty under section 271(1)(c) of the Income–tax Act, 1961? Is his claim tenable in law? 4 (0)
(b) The assessee Mr. Jaydev, wrote off the amount due to him from Dhruv for the goods supplied four years back in the course of business. His claim for deduction of bad debts is resisted by the Revenue on the ground that the assessee has to still show that the impugned debt had turned bad and that mere writing off of the bad debt is not sufficient. Is the said contention correct? 6 (0)
(c) Mr. L., against whom penalty proceedings had been initiated under section 17(1)(c) of the Wealth–tax Act, 1956, died. Penalty had however not been levied. After his death, can the proceedings be continued against the legal representative of deceased Mr. L? 5 (0)