INCOME TAX, VAT & SERVICE TAX
CA IPCC/PCC
PART-A
Question 1 is compulsory (5X4 = 20 marks)
Answer any five questions from remaining six questions (16 X 5 = 80 marks)
1. a. During the previous year 2010-11, X a foreign citizen, stayed in India for just 69 days. Determine his residential status and gross total income for the assessment year 2011-12 on the basis of the following information
(i) During 2007-08, X was present in India for 365 days.
(ii) During 2004-05 and 2003-04, X was in Japan for 359 and 348 days respectively and for the balance period in India.
The following are the particulars of Income of Ramesh for the previous year 2010-11:
Particulars Amount
1. Capital gain on sale of property at Delhi received in USA 1,80,000
2. Income from business in USA controlled from Delhi 2,20,000
3. Income from a business in Bangalore controlled from USA 3,80,000
4. Rent from property in USA received there but remitted to India
at later date 6,00,000
5. Interest from deposits with an Indian company received in USA 40,000
6. Profits for the year 2009-10 of a business in USA remitted to
India during the previous year 2010-11 (Not taxed earlier) 1,75,000
7. Gifts received from parents 4,45,000
8. Interest payable by Indian government for use of Royalty rights 1,00,000
b. Short notes on classification of services under sec 65A of Service tax act.
c. (i) The WDV of plant and machinery on 01.04.2010 of X Ltd engaged in manufacturing of PVC granules is Rs.1000 lakhs. The company purchased additional plant and machinery for Rs.800 lakhs on 18.04.2010 inclusive of second hand machinery imported from China for Rs.200 lakhs to increase its installed capacity of production from 1000 TPA to 1500 TPA. The production from new machine was taken w.e.f 01.12.2010. Compute the amount of allowable depreciation.
(ii) R is engaged in business of transportation of goods. On 01-04-2010 the WDV of his various assets are furnished below:
| Particulars | Rate of depreciation | Amount |
| A. Office building (2nos) B. Commercial vehicles(6 nos) C. Car (3 nos) | 10% 30% 15% | 9,20,000 30,50,000 2,10,000
|
During the year, he sold one of the commercial vehicles which was over 15 years old for Rs.60,000. It was replaced by another vehicle at the cost of Rs.9,00,000 on 01-11-2011. A new motor car was purchased on 16-10-2010 for Rs.3,50,000. on 15-03-2011 one of the existing motor car was disposed for Rs.55,000. Compute the allowable depreciation u/s 32.
d. Mr. Sathya is a registered dealer and gives the following Information. Compute the Net tax liability and total sales value under value added tax:
He sells his products to dealers in his state and in other states. The profit margin is15% of cost of production and VAT is 12.5% of sales.
(i) Intra state purchase of raw materials Rs.2, 50,000 (excluding VAT @ 4%)
(ii) Purchase of raw material from an unregistered dealer Rs. 80,000 (Including VAT @ 12.5%)
(iii) High seas purchase of raw materials is Rs.1, 85,000 (excluding customs duty@10% Rs.18, 500)
(iv) Purchase of raw materials from other states (excluding CST@ 2%) Rs.50, 000
(v) Transportation charges, wages and other manufacturing expenses excluding tax Rs.1, 45,000.
(vi) Interest paid on bank loan Rs.70, 000.
2. a. (i) Mr. Shamshad sells his house property, acquired in 1975 for Rs.2.5 lacs, for a consideration of Rs.80 lacs in April, 2010. Cost of improvement incurred for this property in June 1985 was Rs.1.5 lacs and in August 2000 was Rs.3 lacs. Expenses incurred for effecting sale is Rs.1.5 lacs. He acquired a new house property during September for a consideration of Rs.10 lacs. Compute the taxable capital gains by assuming that the fair market value as on 1.4.81 at Rs.10 lacs for assessment year 2011-12.
(ii) Short notes on registration procedures for Small service providers under service tax act.
b. (i) what records should be maintained by a registered dealer under VAT system.
(ii) Short notes on provisional payment of service tax.
c. Explain how VAT helps to avoid cascading effect of taxation with suitable example.
d. A partnership firm, consisting of three partners A, B and C was engaged in business of civil construction and received the following amounts as contract receipts:
Contract work for supply of labour Rs.30, 00,000
Value of materials supplied by Government Rs. 8, 00,000
Total value of contract Rs.38, 00,000
Each partner is entitled to draw Rs.2, 500 by way of salary as authorized by partnership deed. Interest of Rs.1, 00,000 was paid to partner C on capital of Rs.5, 00,000 contributed by him. The profit as per book of accounts, before deduction of salary to partners and Interest to partner C amounted to Rs.2, 50,000.
Compute the total income of the firm, applying the relevant provisions of the Act.
3. a. (i) Dushyanth was employed with XY Ltd on a basic salary of Rs.5000 per month. He is also entitled to dearness allowance @ 60% of basic salary, 50% included for retirement benefits. The company gives HRA of Rs.3000 per month which was increased to Rs.3500 per month w.e.f 01-02-2011. He also got an increment of Rs.500 in his basic salary w.e.f 01-02-2011. Rent paid by him during the previous year 2010-11 is as under:
April and May, 2010 – Nil, as he stayed with his parents
June to October, 2010 – Rs.3000 for an accommodation at Ghaziabad
November, 2010 to March,2011 – Rs.4000 per month for an accommodation in Delhi.
Compute the gross salary for assessment year 2011-12.
(ii) Seshadri, is the owner of a commercial property let out at Rs.30,000 pm. The municipal tax on the property is Rs.12,000 /Annum and 50% would be borne by the tenant. This tax was actually paid on 15.04.2011. He had borrowed a sum of Rs.10 lakhs from his cousin, resident in USA (in dollars) for construction of house property for which interest is payable @ 10%. He was also in receipt of arrears of rent of Rs.25,000 which was not taxed in earlier years. Determine the taxable income for assessment year 2011-12.
b. Compute VAT liability:
Mr. A, a manufacturer sells goods to Mr.B, a distributor for Rs.2,000 (excluding VAT). Mr. B sells goods to Mr.C, a wholesale dealer for Rs.2,400. The whole sale dealer sells the goods to a retailer for Rs.3,000, who sells to ultimate consumer for Rs.4,000. Compute tax liability, input credit availed and tax payable by the manufacturer, distributor, wholesale dealer and retailer under invoice method assuming VAT @ 12.5%.
4. a. Siddharth , is employed with Xansa Ltd and the details of his salary and allowances are as under:
| Particulars | Amount |
| Basic pay House rent allowance City compensatory allowance Reimbursement of medical expenses (Incl Rs.8,000 spent in a government hospital) | 50,000 p.m 12,000 p.m 300 p.m 24,000 p.m |
He is given a motor car of 1400 cc engine capacity and is entitled to use it both for office and private purposes. He is also given the facility of driver w.e.f 01-10-2010. He is also provided with facility of gardner and watchman by his employer for which employer pays Rs.500 p.m to each such employee. 500 shares of face value Rs.10 each given to him free of cost under ESOP. The market value of the shares is Rs.10,000.
He contributes 15% of his salary to recognized provident fund to which employer contributes a similar amount. Interest credited to RPF @12 % p.a is Rs.84,000. The company has taken a personal accident policy for which annual premium of Rs.1,500 is paid by the employer.
Compute the taxable salary of Mr.Siddharth for assessment year 2011-12.
b. Explain the concept of reverse mortgage and discuss whether it amounts to transfer.
c. (i) Explain the goods outside the purview of VAT
(ii) List out six purchases not eligible for input tax credit.
d. M/s. X private Ltd went into liquidation on 01.06.2010. The company was seized and possessed the following funds wrt distribution of assets to the shareholders:
(a) Share capital Rs.5, 00,000
(b) Reserves prior to 01.06.2010 Rs.3, 00,000
(c) Excess realization in the course of liquidation Rs.5, 00,000
Total Rs.13, 00,000
There are 5 shareholders, each of whom received Rs.2,60,000 from liquidation in full settlement. The shareholders desire to invest the resultant element of capital gains in Long-term specified assets as defined in sec 54EC. Discuss the relevant provision under the IT act and the tax liability of the shareholders.
5. a. (i) Explain the Scope of taxable service in following cases:
(i) Private tuition centres
(ii) Manpower recruitment agencies
(ii) Explain the transactions exempt from transfer
b. Mr.satish owns 3 residential house and the details of the same are furnished there under:
House I House II House III
Nature of property Let-out Self-occupied Self- occupied
Standard rent 1,30,000 96,000 75,000
Fair rent 2,20,000 2,10,000 2,25,000
Municipal valuation 2,15,000 2,18,000 2,40,000
Actual rent 27,500/pm --- ---
Municipal taxes paid 2,400 3,000 5,400
Repairs Nil 3,000 6,000
Ground rent 1,500 ---- 4,500
Loan borrowed 2,00,000 3,00,000 4,00,000
Date of loan 01-07-2005 01-04-2006 01-10-2007
Rate of Interest 10.5% 9.75% 10.25%
Date of commencement of constn 01-12-2005 01-07-2006 01-02-2008
Date of completion 01-10-2008 01-05-2009 01-01-2011
Computation of Income from house property for assessment year 2011-12.
6. M/s. ABC industries, is a partnership firm. The following particulars are for the previous year relevant to the assessment year 2011-12:
Profit and Loss account for the year ending March 31st' 2011
Rs Rs
Salary to staff 13,000 Gross profit 2,75,000
Salary to partners: Income tax refund 5,500
Jaswanth: 60,000 Interest on fixed deposit 4,500
Singh : 30,000 90,000 Bad debts recovered
Staff welfare expenditure 6,000 (previously not allowed as 750
General expenses 36,500 deduction)
Income from house property 1, 20,000
Bad debts 3,000
Fire insurance 4,000
Advertisement expenses 11,000
Interest on Partner's capital:
A: 10,000
B: 6,500 16,500
Interest on loan paid to Financial
Institution 4,250
Expenditure on acquisition
Of a Know-how on 1st march'11 2,800
Depreciation on other business assets 16,000
Provision for Income tax 3,000
Contribution to a political party 1,500
Payment to a scientific research
Institution for carrying out scientific
Research 6,250
Contribution to PF:
Employees: 12,000
Employers: 12,000 24,000
Net profit 1, 67,950
2, 85,750 2,85,750
Other information:
1. Salary to a staff includes salary paid to a relative which is unreasonable to the extent of Rs.3, 500.
2. General expenses include an amount of Rs.25, 000 paid in cash.
3. Interest on partner's capital is paid at 15%.
4. One of the partners Mr. Singh is a Non-working partner.
5. Interest on loan paid to financial institution is paid on 1st October'2011.
6. Contribution to PF (both employee and employer) made before filing return of income but after due date of the relevant act.
Compute the taxable business income of the firm for the assessment year 2011-12.
b. Explain the exemptions available to SEZ units under service tax.
7. a. X was employed with ABC Ltd and retired from the services on 01-01-2011 after rendering a service of 26 years and 8 months. At the time of retirement he received gratuity of Rs.3,30,000 and leave encashment was Rs.1,85,000. Employer offers 45 days leave for each completed year of service. Leave to the credit (as per employer terms) is: 15 months. His last drawn salary comprises of Basic: 24,500 and DA: 3,500 (60% forms part of retirement benefits). Salary before 6 months was Basic: 24,000 and DA stands at same amount. He received proceeds from RPF: Rs.3, 25,000. Compute the taxable salary for assessment year 2011-12.
b. Explain the appropriate due dates for remittance of service tax and procedures for the same.
1 comment:
THANKS SIR, ITS VERY HELPFUL SIR.
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