TAXATION ( Direct and Indirect)

2007 Duration : 3 Hours Max. Marks: 100

Instructions: There are Two Sections of the paper Section I for Direct Tax and Section II for Indirect Tax. Answers to the two sections should be written separately Attempt all questions. Figures at the right indicate marks for the respective question. Section I Q.1. Mr.Sukumar Sharma has been working as General Manager Finance at Shakti Insulted Wires Ltd. at Mumbai Office for last five years, drawing following emoluments at present: i) Basic Salary of Rs.12500/- per month ii) Dearness allowance Rs.2500/- per month iii) House rent allowance Rs.4000/- per month he was promoted as Director (Finance) with effect from 1.10.2006 with following terms of emoluments: iv) Revised basic Salary Rs.22500/-per month v) Dearness allowance however remained unchanged vi) House rent allowance was increased by Rs.1000/vii) He was also entitled to following benefits: a) Servant allowance of Rs.500/-per month b) Free Residential telephones up to Rs.1000/-per month c) Chauffer driven car for office use Chauffers salary of Rs.3500/- to be paid by the company. (As per the records, the company spent Rs.36000/- towards petrol and maintenance of the car given to Mr. Sharma) d) He was also entitled to eat at Executive Canteen maintained by the company and company spent Rs.6000/- on account of Mr. Sharmas canteen bill. viii) Up till now both Mr.Sharma and the company were contributing @ 12% of basic salary towards recognized provident fund. With effect from 1.10.2006, both Mr. Sharma as well as the company would be contributing towards P/F @ 12.5% of basic pay. ix) Mr. Sharma had taken a rented house and he was paying rent@ Rs.4000/- per month. x) Apart form contribution forwards P/F, Mr. Sharma has made following investments during the year: a) LIC Premium Rs.12000/b) Eligible schemes of Mutual Funds: Rs.36000/c) NSC Rs.25000/d) PPF Rs.42000/Calculate Taxable salary as well as tax liability under income tax act 1961 for the assessment year 2007-08. (20 Marks) Q.2. Abbott Pharmaceuticals Pvt. Ltd. Furnishes following P&L account for the financial year ending 31.3.2007: Particulars Rs Particulars Rs To Salaries 6,10,500 By Gross profit 31,45,650 To General 35000 By Proceeds from 27,650 Expenses Units of UTI To Depreciation on 1,50,000 By Dividend from 32,500

SLM basis

investments made in shares of listed companies 25,000 5,00,000 72,000

To Insurance To Research & Devl. Expenses To Contribution to Employees recognized P/F To Advertisement To Provision for Bad and Doubtful debts To Provision for Bonus To Provision for tax To Net Profit Total

1,05,000 75,000

1,50,000 1,50,000 13,33,300 32,05,800

32,05,800

Additional Information : i) General Expenses include Rs.13000/- paid to wife of managing director for organizing a party at the residence of Managing Director in honour of her personal friend. ii) The companys assets include following assets with opening balances shown below: with applicable rate of depreciation Building (10%) Furniture (10%) Plant & Machinery (15%) Rs.15Lakhs Rs.5Lakhs Rs.25Laksh iii) During the year company sold off plant and machinery of Rs.7.5Lakhs and purchase Machinery worth 12lakhs in the month of May 2006 and started utising immediately. iv) Value of Research and development expenses are debited on actual basis. v) Out of the Provident Fund contribution, the amount of Rs.3600/- has remained to be deposited with appropriate authority vi) Actual Bonus paid during the year amounted to Rs.1,32500/Calculate Taxable Income under the Head Profits and Gains from Business and Profession. (20 Marks) Q.3. Mr. Swaroopchand Jain acquired 2000 shares of a company listed at National Stock Exchange for Rs.5lakhs during the year 1991-92 In the year 1997-98, company allotted him bonus shares in the ratio of 1:1 the company made second bonus issue during March 2006 when he received 1 bonus share for every 2 shares held by him. The entire shares held in the company were sold by him on 8th August,2006 @ Rs.1100 per share on which securities transaction tax was paid. Determine the taxable capital gain indicating the nature for capital gain. You may use following indexation factors if required: Financial year Cost Inflation Index Financial Year Cost Inflation Index 1991-92 1992-93 1993-94 1994-95 199 223 244 259 1999-2000 2000-01 2001-02 2002-03 389 406 426 447

1995-96 1996-97 1997-98 1998-99

281 305 331 351

2003-04 2004 -05 2005-06 2006-07

463 480 497 519 (10 Marks)

Q.4. Mr. Ranjan Semn constructed a house property for which he borrowed a loan of Rs.2lakhs at 12% annum on 1.10.99. The construction of the house was completed by end of January 2001. the house property has been let out for Rs.6000/- per month form September 2001. during the previous year 2006-2007 Municipal taxes paid amounted to Rs.7500/- Mr. Sen incurred expenses of Rs.12500/- towards repairs, Rs.1500/-towards insurance and Rs.100/- per month towards collection charges. Current year interest on the loan is outstanding. Compute income from house property of Mr.Ranjan Sen for the assessment year 2007-08 (7 Marks) Q.5 (a) Mr. Jackie Chan, a foreign national, leaves India after 10 years of stay in India on 15.6.2005 to settle down in China. For doing business. During 2006-07, he visits India on 21-2007 and leaves India on the last day of March 2007. determine the residential status of Mr. Jackie Chan for the Assessment year 2007-08 (3 Marks) Q.5 (b) Write Short Notes (Any Two): (5 Marks) i) Income deemed to accrue and arise in India ii) Deductibility of expenses on Research and Development u/s 35 iii) Amortisation of Preliminery expenses iv) Taxability of Income of Non Resident

SECTION II INDIRECT TAXATION Q.6. (a) What do you mean by Input Service distributor and what is the manner of distribution of credit by input service distribution? (5 Marks) (b) Explain how will the various types of packing charges be dealt under CETA 1944 (5 Marks) Q.7. (a) Briefly explain how the services of Mandap Keeper will be taxable under Service Tax Law along with relevant definition. (5 Marks) (b) Are export services taxable? Explain specific inclusions under Consulting Engineers (3 Marks) (2 Marks)

Q.8. M/S/ Agarwal Industries imported by air for USA, certain goods at CIF value of $6500. air freight US $ 1400 and insurance charges of US$100 were also paid. Bill of Entry was presented on 28.02.2006. but the Entry inwards was granted on 10.03.06. Other relevant information is as under: As on 28.2.06 As on 10.3.06 Rate of Exchange: By CBEC US $ 1 = Rs.46.80 Rs.46.60 BY RBI US $ 1 = Rs.46.70 Rs.46.50 Rate of Customs Duty

BCD Additional Customs Duty

25% 16%

20% 16%

The same goods are exempt from excise duty in India, if manufactured without the aid of power. Compute the Assessable Value and Duty payable. ( 10 Marks)

TAXATION 2007 Duration : 2 .15 Minutes Max. Marks: 100

INSTRUCTIONS : There are two Sections of the paper Section I for Direct Tax and Section II for Indirect Tax. Answers to the two sections should be written separately. Attempt all questions. Figures at the right indicate marks for the respective question.

Section I Q.1. During Campus placements at the Institute, Shri Sarvamitra Sen MMS student and Ms. Sanghamitra Sinha PGDBM student have received an offer letter from Sanata Software Ltd, Bangalore the relevant extract of which is given below: 15 I) for fist three months, the candidate will be on induction training and will receive consolidated training allowance @ Rs.15000/- per month. II) from the fourth month they will draw regular salary as under: a) Basic pay Rs.10000/= pm b) Dearness Allowance : Rs.3500/ = pm c) HRA : Rs.2500/- pm. (it is reported that these candidate will be able to find accommodation on rental basis at the rent of Rs.3000 per month) d) Travelling allowance (from house to office) Rs.1000/-pm e) Medical allowance : Rs.2000/-pm f) Telephones and mobile bills allowance : Rs.2000/-pm g) Lunch Coupons @ Rs.50 per working day ( Taken on 300 days working in a year.) III) the candidate will be entitled to Provident Fund. LTC / leave and leave encashment benefits as per the companies rules. The company has a recognized provident fund scheme

IV) The actual appointment will start from the date of joining. V) The candidate have to report after completing their final examinations. VI) Ms. Sangha mitra Sinha decided to join the company w.ef. 1st April,2007 and taking into account the final university examination dated, Sarvamitra Sen has decided to join the company as on 1st June, 2007. VII) Both these students approach you t ascertain their tax liability and also inform you that apart from whatever P/F deductions from the salary, they will invest following amounts a) LIC Premium Rs.6000 per annum b) PPF Rs.20000/- p.a. c) Tax SAVER Schemes of Mutual Fund Rs.24000/- p.a. Assuming that the existing Tax Provisions are not altered, please advice both Mr.Sarvamitra Sen and Ms.Sanghamitra Sinha their respective tax liability Q.2. Mr. Jagdish Mathur voluntarily retired from Hind Chenicals Pvt. Ltd. On 31.10.2006 as per the scheme approved under Sec. 10 (10C) of the Income Tax Act,1961. he furnishes the following detail of the amounts he received from the company: i) Salary Rs.5000/- p.m. ii) D.A. forming part of basic pay Rs.1000/- pm. iii) Compensation received under VRS: Rs.2,00,000/iv) Pension Rs.3000/- per month v) Commuted Pension (70% pension commuted): Rs.42000/- on 31.1.2007 vi) Gratuity : Rs.120000/-(Not covered under payment of gratuity Act) vii)Leave Salary paid to him on retirement : Rs.30000/Mr. Mathur has completed 20 years and 8 months of service and but for voluntary retirement he would have retired after 40 months. During this service he also availed total leave of 25 months. Last increment was drawn by him in 2005. Calculate taxable salary of Mr. Mathur for A.Y.2007-2008 (06) Q.3.a) Discuss the significance of residential status for taxability of his income bringing out clearly the conditions of residential status. (04) b) Mrs. Norma Fernandes, Swiss national, furnishes information about during previous years relevant to A.Y.1996-97 to 2007-08 as follows 1996-97 30days 2000-01 75days 2004-05 1197-98 60days 2001-02 45days 2005-06 1998-99 60days 2002-03 70days 2006-07 1999-00 155days 2003-04 180days 2007-08 her stay in India (04) 35days 115days 35days 65days

Q.4. a) Discuss the conditions and amount of deduction enjoyed by the units under Special Economic Zones under Section 10AA of Income Tax Act 1961 (03) b) Discuss under what circumstances Charitable Trust can enjoy full tax exemption for its income under Income Tax Act 1961. (03) SECTION II Q.5. a) when will the assessable value be the transaction value? (05)

B) Marketability is a litmus test to be fulfilled before any goods can be subjected to levy of excise duty. Discuss (05) c) M/S UTA Mfg. Co. manufactures welding electrodes which are put first in polythene bags and then packed in card box cartons. They sell electrodes are also packed in wooden boxes when sold to their customers located at outstations. Is the departments justified to include the cost of wooden boxes in the Assessable value of the welding electrodes? Discuss. (05)

TAXATION Marks : 100 Duration :3 Hours Instructions : Attempt All Questions. The marks for this paper will be scaled down to 60 % , the balance 40 % marks are reserved for internal assessment on the basis of the project on Union Budget, Taxation News Analysis and class participation. Q.1. A reputed corporate entity participated in final placement for the students of the Institute in the placement season in Nov. 2008. Ms. Smita Shah , PG student and Mr.Anupam Mishra , MMS student received the offer letters with following terms and conditions. PG students were allowed to join in Feb.2009 and MMS students were allowed to join with effect from 1st May,2009. Details of offer letter are as under : 1. Training allowance of Rs.20000/- per month for first six months. 2. Thereafter , these students were to be placed in normal grade as under : Basic Salary RS. 15000/- per month. Dearness Allowance Rs.7500/- per month ( Forming part of retirement benefits in terms of employment.) City Living Allowance Rs.2000/- per month. House Rent Allowance Rs.2500/- per month Transport allowance of Rs.800/- per month. Reimbursement of Mobile bills Rs.1000/- per month and Medical reimbursement of Rs.15000/-per annum. The company also has a scheme of recognized provident fund scheme to which company contributes 12% of basic salary as employers contribution in addition to employees contribution. Both Miss Shah and Mr. Mishra invested in tax saving mutual funds schemes Rs. 20000/- each. Additionally, LIC policy with premium of Rs.1000/= per month was taken by Miss Smita Shah immediately on joining the organization in the month of Feb.2009.While Smita stayed with her parents, Anupam Mishra was staying as a paying guest and produced annual rent receipt of Rs.24000/-. Similarly, Miss Smita could not produce any medical bills for reimbursement while Mr. Anupam Mishra produced medical bills pertaining to sickness of his parents for Rs.12000/- which company reimbursed. However, mobile telephone bills of both the employees were fully reimbursed according to the companys policy.

You are required to calculate taxable salary as well as tax liability for both Miss Smita Shah and Mr. Anupam Mishra for A.Y.2010-11. (25) Q.2. From the following particulars furnished by Shri Yashesh Mehta for the year ended 31.3.2010, you are requested to compute his taxable income and the tax liability: (15) i) Mr. Yashesh Mehta retired on 31.12.2009 at the age of 58, after putting in 25 years and 9 months service at a private limited company. ii) He was paid a salary of Rs.25000/- per month and house rent allowance of Rs.6000/- p.m. He paid actual rent of Rs.6500/- per month. iii)On retirement, he was paid a gratuity of Rs.3,50,000/- .He was not covered by Payment of Gratuity Act. His average salary in this regard may be taken as Rs.24500/iv) He had accumulated leave of 15 days per annum during the period of his service which was encashed by him at the time of retirement. He received Rs.3,15,000/- as leave encashment. His average salary may be taken as Rs.24500/v) He invested Rs.22500/- in recognized Provident Fund Scheme, Rs.40000/- in PPF and Rs. 37500/- in Term Deposit of five years in a scheduled bank. Q3.Dr. Smt Nirmala Mehta, a resident individual aged 60 years is running a clinic . She furnishes her Income and Expenditure Account for the year ending 31.3.2010 as under : ( 20) Expenditure Amount Rs. Income Amount Rs. To medicine consumed To staff salary To clinic consumables To Rent paid To administrative exp. TO amt paid to scientific Research Assn To Net Profit Total 5,38,400 3,80,000 1,10,000 90,000 2,55,000 1,50,000 4,38,570 19,61,970 By consultation charges Income Tax Refund Dividend from UTI Winning from Game show o TV ( Net of Tax) By Rent 18,85,850 5,450 10,500 33,170 27,000

19,61,970

Additional Information : I) Rent paid includes Rs.30000/- paid by cheque toward rent for her residential house. II) Clinic Equipments are : Entitled to depreciation @15% 1.4.2009 Opening W.DV. : 5,00,000/7.12.2009 Acquired ( Cost) 2,00,000/iii) Rent received relates to a property situated at Surat . Municipal tax of Rs.2000/- paid in Dec.2009 has been included in administrative expenses. From the above details under the head profits and gains from business and profession. Q.4. Shri Ramchandra Sathe owns one residential house in Mumbai. The house is having two units of equal size. First unit is self occupied and unit is rented for Rs.8000/- per month. The rented unit was vacant for two months during the year. The particulars of the house for the previous year 2009-10 are as under:

Standard Rent : Rs. 162,000 p.a. Municipal Valuation : Rs. 1,90,000 p.a. Fair Rent : Rs.185,000 p.a. Municipal Tax 15% of Municipal Valuation Light and Water Charges : Rs. 500/- per month Interest on Borrowed capital : Rs.1500/- per month Insurance Charges : Rs.3000/- p.a. Repairs : Rs. 12000/- p.a. Compute Income from house property for Ramchandra Sathe for A.Y.2010-11. (15) Q.5. Mr. Green Hunt, an American citizen is appointed by a multi national company having a branch in India in Dec.2005. He had never been to India before. He arrived in Mumbai on 15th April 2006 and joined New Delhi office on 20th April,2006. The company provided him a leased residence. His wife and children join him in October,2006. On 10th Jan.2007, he is transferred on deputation basis to Hongkong office as Regional Chief . He leaves New Delhi on the night of 10th Feb and arrives in Hongkong on 11th Feb.2007. However his family stays in Delhi and occupies the house provided by the company. He comes back to India on 15th June 2008on two months leave ad returns leaves India on 4th August along with his family. At the end of deputation period , Mr. Green Hunt is posted back to India and joins New Delhi Office on 30TH Jan.2010 and continues to work in India. Determine Residential status of Mr. Green Hunt for all the previous years beginning from the date he arrived in India. ( 5) Q.6 M/s Pertech Computers Ltd rendered services to his client for an agreed amount of R.7,50,000/- The company received an advance of Rs.1,50,000/- on 30th July,2009 and balance amount was received on 25th September,2009. However the company paid the service tax to Govt on 25th October,2009. Calculate the amount of invoice value , value of service tax, due date of service tax and interest payment payable if any on account of delay of paying service tax. (5) Q.7. Write short Notes ( Any Three) ( 15) i) Taxability of Income on the basis of residential status. ii) Tax deductibility for investment in Telecom licenses. iii) Provisions for deductibility of investment in Research and Development. iv) Conditions for allowing income tax exemptions for charitable Trust. v) Enhanced Depreciation

INDIRECT TAX

2008 Duration : 2 Hours Max. Marks:50

All questions are compulsory. Marks are indicated against each question.
Q.1. State whether following statements are correct or incorrect with reasons:18 Marks a) No input credit if final product/ output service exempt from duty/ service tax. b) Processing food/ fruits is not manufacture. c) CENVAT credit rules do not require one to one correlation. d) Scrap can be goods. e) CVD can be levied only when goods imported are re exported f) A contractor is supplying labour in the premises of manufacturer. Is the contractor/ manufacturer for purpose of duty liable under Central Excise. g) Goods sold to related partied , is valued at 110% of production. h) Identical goods means imported from different countries. i) Marketability is not a relevant test for determining goods. Q.2. Write short notes on any two of the following: a) Manufacture b) Conditions for levy of excise under CETA c) Taxable event under Customs Act. Q.3. How business auxillary service is taxable under Service Tax? 6 Marks

3 Marks

Q.4. An assessee sells certain goods to a buyer who is a related person for net price of Rs.1,400 the buyer does not sell the goods but uses it himself as intermediate product. The cost of production of goods is Rs.1,000. what is the assessable value? What will be the assessable value if goods are sold to unrelated person at a price of Rs.1,400? 6 Marks. Q.5. The cum duty price of a product is Rs.1,500 per piece. Sales tax price is 4%. What is Assessable value and what is total duty payable? 6 Marks. Q.6. An actual users imports (date of import 15/2/2007) the following goods from England for S.S.Vishal : 11 Marks. Value FOB 1000 500 1 = Rs.80 150 25

1) Second hand numerically controlled lathe machine 2) A.C. Motors Other relevant data : Freight Insurance Rate of duty : BCD

12.5%

Additional duty of customs Special duty of customs Education Cess

16% 4% 2%

It is found that the Lathe Machine is undervalued, it is proposed to load the FOB value of the Lathe Machine by 25% Compute: 1) Assessable value 2) Total Customs duty payable.