
	Trending ▼ ICSE CBSE 10th ISC CBSE 12th CTET GATE UGC NET Vestibulares ResFinder

CA IPCC : Sample / Mock Test Paper (with Model Answers) - TAXATION Sep 2014

21 pages, 23 questions, 0 questions with responses, 0 total responses,

CA IPCC
Tilak Vidyalaya Higher Secondary School (TVHSS), Kallidaikurichi

+Fave Message

Profile Timeline Uploads Q & A

Home > ca_ipcc > F Also featured on: taxation2021

Instantly get Model Answers to questions on this ResPaper. Try now!
NEW ResPaper Exclusive!

Formatting page ...

Test Series: September, 2014 MOCK TEST PAPER 1 INTERMEDIATE (IPC): GROUP I PAPER 4: TAXATION Time Allowed 3 Hours 1. (a) Maximum Marks 100 Compute the taxable income and tax liability of Mrs. Sudha Sharma for the A.Y. 2014-15 from the following detail: (i) Smt. Sudha Sharma was born on 01.07.1950. She is a Deputy Manager in a Company in Mumbai. She is getting a monthly salary and D.A. of Rs.45,000 and Rs. 12,000 respectively. 50% of DA forms part of pay. She also gets a House Rent Allowance of Rs. 6,000 per month. She is a member of Recognised P.F. wherein she contributes 15% of her salary of Rs. 51,000 p.m. (45,000 + 6,000, being 50% of DA). Her employer also contributes an equal amount. (ii) She is living in the house of her minor son in Mumbai. (iii) During the previous year 2013-14, her minor son has earned an income of Rs. 30,000 (computed) as rent from a House Property, which had been transferred to him by Smt. Sudha Sharma without consideration a few years back. (iv) During the previous year 2013-14, she sold Government of India Capital Indexed Bonds for Rs. 1,50,000 on 30.09.2013, which she purchased on 01.07.2001 for Rs. 80,000 (Cost inflation index F.Y. 2001-2002: 426 and for the F.Y. 2013-14: 939). (v) Her employer gave her an interest free loan of Rs. 1,50,000 on 01.10.2013 to one of her son s wife for the purchase of an Alto Maruti Car. Nothing has been repaid to the company towards the loan. The lending rate on SBI for a similar loan is 8% p.a as on 01.04.2013. (vi) During the previous year 2013-14 she paid Rs. 15,000 by cheque to GIC towards Medical Insurance Premium of her dependent mother. (10 Marks) (b) Star Professionals Ltd. is engaged in providing services which became taxable with effect from August 01, 2013. Compute the service tax payable by Star Professionals Ltd. on the following amounts (inclusive of service tax wherever applicable) received in the month of March, 2014:Particulars Amount (Rs.) Services performed in July, 2013 (Amount received from the client is full and final) 5,00,000 The Institute of Chartered Accountants of India Services by way of renting of residential dwelling for use as residence 1,75,000 Free services rendered to the friends (Value of similar services is Rs. 60,000) Services rendered to its associated enterprise in UK for which no invoice has been issued Other receipts 2. (a) 5,00,000 7,00,000 (10 Marks) Mr. Mahesh purchased a house property on 14th April, 1979 for Rs. 1,05,000. He entered into an agreement with Mr. Sonu for the sale of house on 15th September, 1982 and received an advance of Rs. 25,000. However, since Mr. Sonu did not remit the balance amount, Mr. Mahesh forfeited the advance. Later on, he gifted the house property to his friend Mr. Suresh on 15th June, 1986. Following renovations were carried out by Mr. Mahesh and Mr. Suresh to the house property: Rs. By Mr. Mahesh during F.Y. 1979-80 10,000 By Mr. Mahesh during F.Y. 1983-84 50,000 By Mr. Suresh during F.Y. 1993-94 1,90,000 The fair market value of the property as on 1.4.1981 is Rs. 1,50,000. Mr. Suresh entered into an agreement with Mr. Pintu for sale of the house on 1st June, 1995 and received an advance of Rs. 80,000. The said amount was forfeited by Mr. Suresh, since Mr. Pintu could not fulfil the terms of the agreement. Finally, the house was sold by Mr. Suresh to Mr. Rajeev on 2nd January, 2014 for a consideration of Rs. 12,00,000. Compute the capital gains chargeable to tax in the hands of Mr. Suresh for the assessment year 2014-15. Cost inflation indices are as under: Financial Year 1981-82 1983-84 1986-87 1993-94 2013-14 Cost inflation index 100 116 140 244 939 (8 Marks) The Institute of Chartered Accountants of India (b) Determine net VAT liability of Mr. Mehta for the month of January, 2014 using invoice method of computation from the following data: Purchase price of goods acquired from local market (including VAT) Rs. 52 lakhs VAT rate on input 4% Transportation, insurance, warehousing and handling cost incurred by X Rs. 30,000 Goods sold at a profit margin (% of cost of production) 15% VAT rate on sales 12.50% (4 Marks) (c) Mr. Sumit Arora is a service tax assessee. His service tax liability for the quarter April - June was Rs. 35,000. However, on account of a clerical error, he paid Rs. 3,50,000 as service tax for the said quarter. Now Mr. Sumit Arora wants to adjust the excess payment of Rs. 3,15,000 against his service tax liability for the succeeding quarter. Can he do so? What is the condition to be satisfied for it? (4 Marks) 3. (a) Mr. Bhimsen is engaged in composite business of growing and curing (further processing) coffee in Munnar, Kerala. The whole of coffee grown in his plantation is cured. Relevant information pertaining to the year ended 31.3.2014 are given below: Particulars WDV of car as on 1.4.2013 WDV of machinery as on 1.4.2013 (15% rate) Expenses incurred for growing coffee Expenditure for curing coffee Sale value of cured coffee Rs. 4,50,000 17,50,000 4,20,000 3,10,000 29,00,000 Besides being used for agricultural operations, the car is also used for personal use; disallowance for personal use may be taken at 25%. The expenses incurred for car running and maintenance are Rs. 60,000. The machines were used in coffee curing business operations. Compute the income arising from the above activities for the assessment year 2014-15. Show the WDV of the assets as on 31.3.2014. (8 Marks) (b) Mr. X is an air travel agent, who discharges his service tax liability at special rates provided under the Service Tax Rules, 1994. Compute his service tax liability for the quarter October December, 2013 with the help of following particulars furnished by him: The Institute of Chartered Accountants of India Particulars Basic fare as per rule 6(7) of Service Tax Rules, 1994 (Rs.) Other charges and fee (Rs.) Taxes (Rs.) Total Domestic Bookings 1,00,900 8,420 3,960 1,13,280 International Bookings 3,16,880 22,110 13,890 3,52,880 Mr. X wants to pay service tax at the general rate of 12% in respect of bookings done by him during the quarter January March, 2014. Can he do so? Explain. (8 Marks) 4. (a) Gayatri holding 32% of equity shares in a company, took a loan of Rs. 6,00,000 from the same company. On the date of granting the loan, the company had accumulated profit of Rs. 4,50,000. The company is engaged in some manufacturing activity. (i) Is the amount of loan taxable as deemed dividend in the hands of Gayatri, if the company is a company in which the public are substantially interested? (ii) What would be your answer, if the lending company is a private limited company (i.e. a company in which the public are not substantially interested)? (4 Marks) (b) M/s. Cool and Calm, a sole proprietary concern, was converted into a company on 21.8.2013. Before the conversion, the sole proprietary concern had a Block of Plant and Machinery (Rate of depreciation 15%), whose WDV as on 1.4.2013 was Rs. 5,00,000. On 1st April itself, a new plant of the same block was purchased for Rs. 1,50,000. After the conversion, the company has purchased the same type of Plant on 30.12.2013 for Rs. 1,80,000. Compute the depreciation that would be allocated between the sole proprietary concern and the successor company. (4 Marks) (c) Golden Export House exported some goods to Newyork. Compute the export duty payable by it from the following information available: (i) Assessable value Rs. 60,00,000. (ii) Shipping bill presented electronically on 18.02.2014. (iii) Proper officer passed order permitting clearance and loading of goods for export on 10.03.2014. (iv) Rate of export duty are as under: The Institute of Chartered Accountants of India Rate of export duty On 18.02.2014 10% On 10.03.2014 8% (4 Marks) (d) Compute the CENVAT credit available in respect of the following services billed to Shri Brijmohan Services Ltd. in the month of February, 2014:S.No. Services billed Service tax paid* [Rs. ] (i) Accounting and auditing services (ii) Legal services (iii) Security services 4,00,000 40,000 (iv) Hiring of motor vehicles (Such motor vehicles are not eligible as capital goods for the purposes of claiming CENVAT credit) *including EC and SHEC 5. 12,00,000 2,00,000 (4 Marks) (a) Mr. Dhruv and his wife Mrs. Diya furnish the following information: Sl. No. (i) (ii) Particulars Rs. Salary income (computed) of Mrs. Diya 4,60,000 Income of minor son B who suffers from disability 1,08,000 specified in Section 80U (iii) Income of minor daughter C' from singing 86,000 (iv) Income from profession of Mr. Dhruv 7,50,000 (v) Cash gift received by 'C' on 2.10.2013 from friend of Mrs. 48,000 Diya on winning of singing competition (vi) Income of minor married daughter A from company 30,000 deposit Compute the total income of Mr. Dhruv and Mrs. Diya for the Assessment Year 2014-15. (5 Marks) (b) Cheeku is in possession of agricultural land situated within urban limits, which is used for agricultural purposes during the preceeding 3 years by his father. On 1.5.2013, this land is compulsorily acquired by the Central Government of India on a compensation fixed and paid by it for Rs. 25 lakhs. Advise Cheeku as to the tax consequences, assuming that the entire amount is invested in purchase of shares. (3 Marks) The Institute of Chartered Accountants of India (c) Rahman Services Ltd. started providing services with effect from 01.04.2013. It rendered services to ABC Ltd. on 16.10.2013 for which payment was received on 21.10.2013. With effect from 02.11.2013, the said services became taxable. On 13.11.2013, Rahman Services Ltd. raised the invoice on ABC Ltd. You are required to examine whether service tax is payable on the said services. Will your answer be different if Rahman Services Ltd. raised the invoice on ABC Ltd. on 16.11.2013? (5 Marks) (d) A manufacturer cleared some goods by charging excise duty. The invoice provided the following details: Rs. Price 20,000 Excise duty @ 10.30% 2,060 Total 22,060 However, he came to know later that actual rate of excise duty is 12.36%. How much differential duty is payable by him, if he is not able to recover any extra amount from the customer? (3 Marks) 6. (a) Mr. Ram Bharose, a resident individual aged 64, is a partner in Musical Ears & Co., a partnership firm. He also runs a wholesale business in medical products. The following details are made available for the year ended 31.3.2014: Sl. No. (i) Particulars Rs. (iii) (iv) 45,000 Motor car expenses (ii) Interest on capital received from Musicals Ears & Co., at 18% Interest from bank on fixed deposit (Net of TDS Rs. 2,500) Income-tax refund received relating to assessment year 2012-13 including interest of Rs. 2,450 Net profit from wholesale business Amounts debited include the following: Depreciation as per books 55,000 Municipal taxes for the shop (For two half years; payment for one half year made on 12.4.2014 and for the other on 20.11.2014) Salary to manager by way of a single cash payment The Institute of Chartered Accountants of India Rs. 1,80,000 22,500 36,500 7,20,000 8,500 32,000 (v) The WDV of the assets (as on 1.4.2013) used in above wholesale business is as under: Computers - (vi) 2,10,000 3,80,000 Motor car (20% used for personal use) LIP paid for major son 75,000 PPF of his wife 85,000 Interest on loan taken for higher education of daughter 55,000 Compute the total income of the assessee for the assessment year 2014-15. The computation should show the proper heads of income. Also compute the WDV of the different blocks of assets as on 31.3.2014. (8 Marks) (b) Shubh Ltd. exported some goods to Riddhi Inc. of USA. It received US $ 8,000 as consideration for the same and sold the foreign currency @ Rs. 62 per US dollar. Compute the value of taxable service under rule 2B of the Service Tax (Determination of Value) Rules, 2006 in the following cases:(i) RBI reference rate for US dollar at that time is Rs. 63 per US dollar. (ii) RBI reference rate for US dollars is not available. What would be the value of taxable service if US $ 8,000 are converted into UK 4,000. RBI reference rate at that time for US $ is Rs. 64 per US dollar and for UK is Rs. 102 per UK Pound. (8 Marks) 7. (a) Will a charitable trust be forfeited of tax exemption granted to it, if it holds shares in Public Sector Company? Will a charitable trust having business receipt and income of Rs. 20,00,000 and Rs. 2,00,000, respectively, be denied the tax exemption? (4 Marks) (b) Miss Vinita paid a sum of 8,500 USD to Mr. Shekhar, a management consultant practising in Macau, specializing in project financing. The payment was made in Macau. Mr. Shekhar is a non-resident. The consultancy is related to a project in India with possible Korean collaboration. Is this payment chargeable to tax in India in the hands of Mr. Shekhar, since the services were used in India? (4 Marks) (c) Examine whether following amount to inter-State sales:(i) P of Chandigarh sends goods by air to his branch office at Australia. Subsequently, he transfers the documents of title of such goods to a buyer at Scotland after said goods have crossed the customs frontiers of India. (ii) A London based entrepreneur enters into a contract of sale of goods with (4 Marks) Manoj of Rajasthan and sends the goods to India. The Institute of Chartered Accountants of India (d) Y is a consulting engineer. He has obtained service tax registration on May 4, 2013. Y has entered into a contract with Z for provision of consulting services on May 5, 2013. Y provides the services on May 15, 2013 but Z has communicated that he will be able to pay the consideration only after three months owing to his poor financial condition. Y has not issued any invoice or bill for the said service as he is not sure of the requirements of an invoice issued by a registered service tax provider. You are required to guide Y with regard to content and time of issuance of an invoice.(4 Marks) The Institute of Chartered Accountants of India Test Series: September, 2014 MOCK TEST I INTERMEDIATE (IPC) GROUP I PAPER 4: TAXATION SUGGESTED ANSWERS/HINTS 1. (a) Computation of taxable income and tax liability of Smt. Sudha Sharma for A.Y. 2014-15 Particulars Rs. Income from salary Basic salary (Rs.45,000 12) Dearness Allowance (Rs.12000 12) House Rent allowance (fully taxable) Employer s contribution to recognized provident fund in excess of 12% is taxable as salary income 12% of salary is Rs.73,440. Employer s contribution is 15% of salary, which is Rs.91,800 Excess contribution is (Rs.91,800 Rs.73,440) Perquisite in respect of interest free loan (Rs.1,50,000 x 8% x ) Net Salary Income from house property (See Note below) Long term Capital Gain: Sale consideration of GOI capital indexed bonds Less: Indexed cost of acquisition (Rs.80,000 x 939/426) Long-term capital loss (to be carried forward) Gross Total Income Deduction under section 80C in respect of recognized provident fund contribution Deduction under section 80D Mediclaim Total Income Tax Payable on Rs.7,03,560 Add : Education cess and Secondary and higher education cess @ 3% Total tax payable Total tax payable (rounded off) Rs. 5,40,000 1,44,000 72,000 18,360 6,000 7,80,360 30,000 1,50,000 1,76,338 26,338 91,800 15,000 8,10,360 1,06,800 7,03,560 65,712 1,971 67,683 67,680 Note: As per section 27, any property transferred to the minor child without adequate consideration would be deemed to be the property of the assessee. The Institute of Chartered Accountants of India Therefore, the income from house property of Rs.30,000 (computed) is to be assessed in the hands of Smt. Sudha Sharma. (b) Computation of service tax payable by Star Professionals Ltd.:Particulars Services performed in July, 2013 i.e., before such service became taxable (Note-1) Amount (Rs. ) 5,00,000 Services by way of renting of residential dwelling for use as residence (Note-2) Nil Value of free services rendered to the friends (Note-3) Nil Services rendered to its associated enterprise in UK (Note-4) 5,00,000 Other receipts 7,00,000 Total 17,00,000 Less: Exemption available to small service providers (Note-5) Value of taxable services 10,00,000 7,00,000 Service tax payable = 7,00,000 12.36 112.36 77,002 Notes:1. As per rule 5 of the Point of Taxation Rules, 2011, where a service is taxed for the first time, no tax is payable if the invoice has been issued and the payment also has been received against such invoice before such service became taxable. Therefore, in this case since the payment has been received after the service became taxable; the same will be leviable to service tax. 2. Services by way of renting of residential dwelling for use as residence are included in the negative list of services. Hence, they are not subject to service tax. 3. Service is an activity carried out inter alia for a consideration. Therefore, since no consideration is involved in case of free services, service tax is not payable thereon. 4. Services rendered to associated enterprises are taxable even if an invoice has not been issued. Point of taxation is the date of making the payment [Rule 7 of the Point of Taxation Rules]. 5. Since, services provided by Star Professional Ltd. became taxable on August 01, 2013, aggregate value of taxable services rendered in preceding financial year 2012-13 is Nil. Hence, Star Professional Ltd. is eligible for small service provider s exemption. The Institute of Chartered Accountants of India 2. (a) Computation of taxable capital gains of Mr. Suresh for the A.Y. 2014-15 Particulars Sale consideration Less: Indexed cost of acquisition (Note 1) Less: Indexed cost of improvement (Note 2) Long term capital loss Note 1 Indexed cost of acquisition is determined as under: Cost to the previous owner i.e. Mr. Mahesh is Rs.1,05,000 Fair Market Value on 1st April, 1981 is Rs.1,50,000 Cost to the previous owner or FMV on 1st April, 1981, whichever is more, is to be taken as cost of acquisition of Mr. Suresh Less: Advance money forfeited by Mr. Suresh (as per section 51) (Note : Advance forfeited by Mr. Mahesh, the previous owner, should, however, not be deducted) Cost of acquisition Rs. 12,00,000 4,69,500 7,30,500 11,35,930 (4,05,430) Rs.1,50,000 Rs.80,000 Rs. 70,000 Indexed cost of acquisition (Rs.70,000 939/140) Rs. 4,69,500 140 is the CII for F.Y. 1986-87, being the first year in which property is held by Mr. Suresh and 939 is the CII for F.Y. 2013-14, being the year in which the property is sold. Alternative view: In the case of CIT v. Manjula J. Shah 16 Taxmann 42 (Bom.), the Bombay High Court held that the indexed cost of acquisition in case of gifted asset can be computed with reference to the year in which the previous owner first held the asset. As per this view, the indexation cost of acquisition of house would be Rs. 6,57,300, taking CII of 100 for the F.Y. 1980-81 since F.M.V. as on 1st April, 1981 is taken as cost of acquisition of Mr. Suresh. Note 2 Indexed cost of Improvement is determined as under: Expenditure incurred before 1st April, 1981 should not be NIL considered Expenditure incurred on or after 1st April, 1981 - During 1983-84: Indexed cost of Improvement Rs.4,04,741 [Rs.50,000 939/116] - During 1993-94: Indexed cost of Improvement Rs.7,31,189 [Rs.1,90,000 939/244] The Institute of Chartered Accountants of India Total indexed cost of improvement Rs.11,35,930 (b) Computation of Net VAT liability Particulars Purchase price of goods acquired from local market excluding VAT (input tax credit does not form part of cost of production) 100 Rs. 52,00,000 104 Transportation, insurance etc. Cost of production Profit @ 15% on cost of production Total Sales Output VAT payable @ 12.5% Less: Input tax credit [VAT paid on goods acquired from local market is eligible for input tax credit] Net VAT payable Rs. 50,00,000 30,000 50,30,000 7,54,500 57,84,500 7,23,062.50 2,00,000 5,23,062.50 (c) Where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month/quarter, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month/quarter. Such adjustment is subject to the condition that the excess amount paid is on account of reasons not involving interpretation of law, taxability, valuation or applicability of any exemption notification. Since Mr. Sumit Arora has paid the excess amount on account of a clerical error, he can adjust the excess payment of Rs. 3,15,000 against his service tax liability for the succeeding quarter. 3. (a) Where an assessee is engaged in the composite business of growing and curing of coffee, the income will be segregated between agricultural income and business income, as per Rule 7B of the Income-tax Rules, 1962. As per the above Rule, income derived from sale of coffee grown and cured by the seller in India shall be computed as if it were income derived from business, and 25% of such income shall be deemed to be income liable to tax. The balance 75% will be treated as agricultural income. Particulars Rs. Rs. Rs. Sale value of cured coffee 29,00,000 Less: Expenses for growing coffee 4,20,000 Car expenses (75% of Rs. 60,000) 45,000 Depreciation on car (75% of 15% of 50,625 Rs. 4,50,000) The Institute of Chartered Accountants of India Total costs of agricultural operations 5,15,625 Expenditure for coffee curing 3,10,000 operations Add: Depreciation on machinery (15% of 17,50,000) (See Computation 2,62,500 below) Total cost of the curing operations 5,72,500 Total cost of composite operations Total profits from composite activities 10,88,125 18,11,875 Amount regarded as business income (25% of above) Amount treated as agricultural income (75% of above) 4,52,969 13,58,906 Computation of written down value of depreciable assets as on 31.3.2014 Particulars Rs. Rs. Rs. Car: Opening value as on 1.4.2013 4,50,000 Depreciation thereon @ 15% 67,500 Less: Disallowance @ 25% for personal use 16,875 Depreciation actually allowed 50,625 Closing value as on 31.3.2014 3,99,375 Machinery: Opening value as on 1.4.2013 17,50,000 Less: Depreciation @ 15% 2,62,500 Closing value as on 31.3.2014 14,87,500 Explanation 7 to section 43(6) provides that in cases of composite income , for the purpose of computing written down value of assets acquired before the previous year, the total amount of depreciation shall be computed as if the entire composite income of the assessee (and not just 25%) is chargeable under the head Profits and gains of business or profession . The depreciation so computed shall be deemed to have been actually allowed to the assessee. (b) Computation of service tax liability of Mr. X for the quarter OctoberDecember, 2013 Particulars Basic fare in case of domestic bookings Service tax @ 0.6% [A] Refer Note 1 Basic fare in case of international bookings The Institute of Chartered Accountants of India Rs. 1,00,900 605.40 3,16,880 Service tax @ 1.2% [B] Refer Note 1 Total service tax payable [A] + [B] (rounded off) Add: Education cess @ 2% Add: Secondary and higher education cess Total service tax payable inclusive of education cesses (rounded off) 3,802.56 4,408 88.16 44.08 4,540 Notes: 1. Rule 6(7) of Service Tax Rules, 1994 provides an option to an air travel agent to pay service tax at special rates of 0.6% and 1.2% of basic fare in case of domestic and international bookings for air travel respectively. 2. Since the given basic fare is in terms of rule 6(7) of service Tax rules, 1994, service tax has been computed as a percentage of such basic fare and other charges, fee and taxes have been ignored. The option once exercised, applies uniformly in respect of all the bookings for air travel made by the air travel agent and cannot be changed during a financial year under any circumstances. Therefore, Mr. X cannot pay service tax @ 12% for the quarter January March, 2014 and will have to discharge his service tax liability for the said quarter by paying service tax at the special rates mentioned above. However, he can change the option and pay service tax @ 12% from financial year 2014-15. 4. (a) Any payment by a company, other than a company in which the public are substantially interested, of any sum by way of advance or loan to an equity shareholder, being a person who is the beneficial owner of shares holding not less than 10% of the voting power, is deemed as dividend under section 2(22)(e), to the extent the company possesses accumulated profits. (i) The provisions of section 2(22)(e), however, will not apply where the loan is given by a company in which public are substantially interested. In such a case, the loan would not be taxable as deemed dividend in the hands of Gayatri. (ii) However, if the loan is taken from a private company (i.e. a company in which the public are not substantially interested), which is a manufacturing company and not a company where lending of money is a substantial part of the business of the company, then, the provisions of section 2(22)(e) would be attracted, since Gayatri holds more than 10% of the equity shares in the company. The amount chargeable as deemed dividend cannot, however, exceed the accumulated profits held by the company on the date of giving the loan. Therefore, the amount taxable as deemed dividend in the hands of Gayatri The Institute of Chartered Accountants of India would be limited to the accumulated profit i.e., Rs.4,50,000 and not the amount of loan which is Rs.6,00,000. (b) Computation of depreciation in the case of transfer of business: Depreciation is to be calculated as if there is no succession WDV as on 1st April Add : Additions made before succession Less : Sale consideration of the asset sold Depreciation @ 15% (Rs.) 5,00,000 1,50,000 6,50,000 Nil 6,50,000 97,500 Allocation of depreciation between sole proprietary concern and the successor company: The depreciation of Rs. 97,500 is to be allocated in the ratio of number of days the assets were used by the sole proprietary concern and the company. Ex sole proprietary concern 1st April to 20th August = 142 days Rs. 97,500 x 142 / 365 = Rs. 37,932 Successor company Rs. 97,500 - Rs. 37,932 = Rs. 59,568 (i.e. Rs. 97,500 x 223 /365) The depreciation of Rs. 13,500 [50% of 15% on Rs. 1,80,000] in respect of asset purchased by the successor company on 1st January is fully allowable in the hands of the successor company. Note: Since it has not been specified that the company is a manufacturing company or a company engaged in the generation or generation and distribution of power, additional depreciation has not been provided for. (c) Computation of export duty Particulars Assessable value of the export goods Export duty @ 8% [Refer Note below] Amount (Rs.) 60,00,000 4,80,000 Note: In case of goods entered for export, the rate of duty shall be the rate in force on the date on which the proper officer makes an order permitting clearance and loading of the goods for exportation. (d) Computation of CENVAT credit available with Shri Brijmohan Services Ltd.: Particulars The Institute of Chartered Accountants of India Amount [Rs.] Accounting and auditing services [Note 1] Legal services [Note 1] Security services [Note 1] Hiring of motor vehicles [Note 2] Total CENVAT credit available 12,00,000 4,00,000 40,000 Nil 16,40,000 Notes: 1. As per the definition of the input services under, there is a specific inclusion with regard to the following services:(a) Accounting and auditing services (b) Legal services (c) Security services Hence, the CENVAT credit of the service tax paid on the aforesaid services is available. 2. 5. The definition of input services specifically excludes the services of hiring of the motor vehicles, which are not eligible as capital goods. (a) Computation of Total Income of Mr. Dhruv and Mrs. Diya for the A.Y. 2014-15 Particulars Mr. Dhruv Mrs. Diya (Rs.) (Rs.) Salaries 4,60,000 Profits and gains of business or 7,50,000 profession Income from other sources: Income by way of interest from 30,000 company deposit earned by minor married daughter A [See Note (d)] Less : Exemption under section 10(32) 1,500 28,500 Total Income 7,78,500 4,60,000 Notes: (a) The income of a minor child suffering from any disability of the nature specified in section 80U shall not be included in the hands of the parents. Hence, Rs.1,08,000, being the income of minor son B who suffers from disability specified under section 80U, shall not be included in the hands of either of his parents. (b) The income derived by the minor from manual work or from any activity involving exercise of his skill, talent or specialised knowledge or experience will not be included in the income of his parent. Hence, in the given case, The Institute of Chartered Accountants of India Rs.86,000 being the income of the minor daughter C shall not be clubbed in the hands of the parents. (c) Under section 56(2)(vii), cash gifts received from any person/persons exceeding Rs. 50,000 during the year in aggregate is taxable. Since the cash gift in this case does not exceed Rs. 50,000, the same is not taxable. (d) The clubbing provisions are attracted even in respect of income of minor married daughter. The income of the minor will be included in the income of that parent whose total income is greater. Hence, income of minor married daughter A from company deposit shall be clubbed in the hands of the Mr. Dhruv and exemption under section 10(32) of Rs. 1,500 per child shall be allowed in respect of such income. (b) Section 10(37) exempts the capital gains arising to an individual or a Hindu Undivided Family from transfer of agricultural land by way of compulsory acquisition, or a transfer, the consideration for which is determined or approved by the RBI or the Central Government. Such exemption is available where the compensation or the enhanced compensation or consideration, as the case may be, is received on or after 1st April, 2004 and the land has been used for agricultural purposes during the preceding two years by such individual or a parent of his or by such Hindu undivided family. Since all the above conditions are fulfilled in this case, Cheeku is entitled to exemption under section 10(37) of the entire capital gains arising on sale of agricultural land. (c) As per rule 5 of the Point of Taxation Rules, where a service is taxed for the first time, no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued:(a) within 14 days of the date when the service is taxed for the first time or (b) before such service became taxable. In the given case, since the payment has been received before service became taxable and Rahman Services Ltd. has issued the invoice on 13.11.2013 i.e. within 14 days of the service becoming taxable, no service tax is payable on the said transaction. However, if the invoice is raised on 16.11.2013, i.e. after 14 days of the service becoming taxable, service tax will be payable on the said transaction. (d) Since the manufacturer charged only Rs. 22,060 and he is not able to recover any extra amount from customer, this amount is required to be treated as price cum duty. Hence, differential duty payable by him will be computed as under: The Institute of Chartered Accountants of India Particulars Rs. Price-cum-duty 22,060 Excise duty @ 12.36% [Rs. 22,060 x 12.36/112.36) 2,426.68 Excise duty (rounded off) 2,427 Differential excise duty to be paid [Rs. 2,427 Rs. 2,060 (duty already paid)] 6. 367 (a) Computation of total income of Mr. Ram Bharose for the A.Y.2014-15 Particulars Profits and gains of business or profession Income from wholesale business Net profit as per books Add: Depreciation as per books Disallowance of municipal taxes paid for the second half-year under section 43B, since the same was paid after the due date of filing of return (Rs.8,500/2) - Disallowance under section 40A(3) in respect of salary paid in cash since the same exceeds Rs.20,000 - 20% of car expenses for personal use Rs. 45,000 7,20,000 4,250 32,000 11,000 Less: Depreciation allowable (Note 1) Income from firm Interest on capital from partnership firm (Note 2) Income from other sources Interest on bank fixed deposit (Gross) Interest on income-tax refund Gross total income Less: Deduction under Chapter VIA (Note 3) Total Income Rs. 92,250 8,12,250 1,71,600 6,40,650 1,20,000 7,60,650 25,000 2,450 27,450 7,88,100 1,55,000 6,33,100 Notes: (1) Depreciation allowable under the Income-tax Rules, 1962 Opening The Institute of Chartered Accountants of India Rate Depreciation Closing WDV Block 1 Computers 2,10,000 60% Block 2 Motor Car 3,80,000 15% Less: 20% disallowance for personal use 57,000 11,400 WDV 1,26,000 84,000 45,600 3,34,400 1,71,600 (2) Only to the extent the interest is allowed as deduction in the hands of the firm, the same is includible as business income in the hands of the partner. Maximum interest allowable as deduction in the hands of the firm is 12% p.a. It is assumed that the partnership deed provides for the same and hence is allowable to this extent in the hands of the firm. Therefore, interest @12% p.a. amounting to Rs.1,20,000 would be treated as the business income of Mr. Ram Bharose. (3) Deduction under Chapter VI-A Particulars Under section 80C LIP for major son PPF paid in wife s name Deduction under 80CCE, restricted to Add: Deduction under section 80E Total deduction (b) Rs. 75,000 85,000 1,60,000 Rs. 1,00,000 55,000 1,55,000 (i) For a currency, when exchanged from, or to, Indian Rupees (INR), the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency at that time, multiplied by the total units of currency. Hence, in the given case, value of taxable service would be as follows:(RBI reference rate for $ Selling rate for $) Total units of US $ =Rs. (63-62) 8,000 =Rs. 8,000 (ii) If the RBI reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or received, by the person changing the money. Hence, in the given case, value of taxable service would be as follows:1% of Rs. (62 8,000) =Rs. 4,960 The Institute of Chartered Accountants of India In case neither of the currencies exchanged is Indian Rupee: The value shall be equal to 1% of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by RBI. Hence, in the given case, value of taxable service would be 1% of the lower of the following:(a) US dollar converted into Indian rupees = $ 8,000 Rs. 64 = Rs. 5,12,000 (b) UK pound converted into Indian rupees = 4,000 Rs. 102 = Rs. 4,08,000 Value of taxable service 7. (a) (i) = 1% of Rs. 4,08,000 = Rs. 4,080 Since investment or deposit in a public sector company is one of the permitted modes of investment mentioned in section 11(5), the exemption granted to a charitable trust under section 11 will not be forfeited if it holds shares in a public sector company. (ii) As per section 11(4), property held under trust includes a business undertaking so held. If the object of the trust is relief of the poor, education, medical relief etc. (other than advancement of any other object of general public utility) and the trust has a business undertaking, then, the income from such business would also be exempt from tax provided the following conditions, as mentioned in section 11(4A) are satisfied : (a) such business is incidental to the attainment of the objects of the trust; and (b) separate books of accounts are maintained by such trust in respect of such business. Even if the main object of the charitable trust is advancement of any other object of general public utility , tax exemption will not be denied in this case since the aggregate receipts from business have not exceeded Rs.25 lakhs in the year. (b) A non-resident is chargeable to tax in respect of income received outside India only if such income accrues or arises or is deemed to accrue or arise to him in India. The income deemed to accrue or arise in India under section 9 comprises, inter alia, income by way of fees for technical services, which includes any consideration for rendering of any managerial, technical or consultancy services. Therefore, payment to a management consultant relating to project financing is covered within the scope of fees for technical services . The Explanation below section 9(2) clarifies that income by way of, inter alia, fees for technical services, from services utilized in India would be deemed to accrue or arise in India in case of a non-resident and be included in his total income, whether The Institute of Chartered Accountants of India or not such services were rendered in India or whether or not the non-resident has a residence or place of business or business connection in India. In the instant case, since the services were utilized in India, the payment received by Mr. Shekhar, a non-resident, in Macau is chargeable to tax in his hands in India, as it is deemed to accrue or arise in India. (c) (i) Since in the given case, sale is effected by transfer of documents of title to the goods after the goods have crossed the customs frontiers of India, it is not an inter-State sale, but a sale in the course of export. (ii) Since in this case, the sale has occasioned the import of the goods into the territory of India, it is not an inter-State sale, but a sale in the course of import. (d) In terms of Rule 4A of Service Tax Rules, 1994, Y has to issue an invoice or a bill, or a challan signed by him or a person authorized by him in respect of taxable service provided by him. The invoice, bill or challan should contain the following details and be serially numbered: (i) Name, address and the registration number of Y; (ii) Name and address of Z (person receiving taxable service); (iii) Description of taxable service provided or agreed to be provided; (iv) Value of taxable service provided or agreed to be provided and (v) Service tax payable thereon. Such an invoice has to be issued within 30 days from the date of completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier. Since X will receive the payment for the services only after three months, he should issue the invoice latest by June 15, 2013 i.e., within 30 days from May 15, 2013 (date of completion of such taxable service). The Institute of Chartered Accountants of India

Formatting page ...

Tags : CA IPCC, sample / model / mock / past / previous / old / online test papers, Group I, Group II, accounting technician course, atc, accounts, accounting, business laws, ethics, communiation, cost accounts, cost accounting, financial management, fm, tax, taxation, advanced accounting, audit, auditing, assurance, itsm, it & sm, information technology, strategic management, Integrated Professional Competence Course, may, november, 2015, 2014, 2013, 2012, 2011, 2010, 2009.

ca_ipcc chat

Horizontal lines at:
Guest Horizontal lines at:
AutoRM Data:
Box geometries: