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Roll No...............................
Total No. of Questions-8] [Total No. of Printed Pages-7
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Time Allowed-3 Hours Maximum Marks-100
WIN
Answers to questions are to be given only in English except in the case of candidates
who have opted for Hindi medium. If a candidate who has not opted for Hindi
medium, his answers in Hindi will not be valued.
Answer all questions.
Marks
1. The Trading Profit and Loss account -of Pingu Trading Pvt. Ltd. having business 18
of Agricultural produce, consumer items and other products for the year ended
31.03.2010 is as under: .
(Amount In Rupee )
Trading Account
Opening Stock 3,75,000.00 Sales 1,55,50,000.00
Purchases 1,25,75,000.00 Closing Stock 4,50,000.00
Freight & Cartage 1,26,000.00
Gross Profit 29,24,000.00
1,60,00,000.00 1,60,00;000.00
Profit & Loss Account
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Rs. Rs.
Bonus to Staff 47,500.00 Gross Profit 29,24,000.00
Rent of Premises 53,500.00 tncome-tax Refund 20,000.00
Advertisement 5,000.00 Warehousing
Bad Debts, 75,000.00 Charges 15,00,000,00
Interest on Loans 1,63,500.00
Depreciation 75,500.00
Sales-tax Demand paid 1,08,350.00
Miscellaneous Exp. 5,25,650.00
Net Profit of the year 33,90,000.00
<14,44,000.00 44,44,000.00.
WIN P.T.O.
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On'scru,tiny of records the following further information and details were extracted!
gathered:
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(i) There was a survey ills 133A on the business premises on 31.3.2010 in which
it was revealed that the value of closing stocks of 31.3.2009 was Rs. 8,75,000
and a sale of Rs. 75,000 made on 13.3.2010 was not recorded in the books. The
value of closing stocks after considering these facts and on the basis of inventory
prepared by the department as on 31.3.2010worked out at Rs. 12,50,000,
which was accepted to be correct and not disputed.
(ii) Income-tax refund includes amount of Rs. 4,570 of interest allowed thereon.
(iii) Bonus to Staff includes an amount of Rs. 7,500 paid in the month of Dec. '09,
which was provided in the books on 31.03.2009.
(iv) Rent of premises includes an amount of Rs. 5,500 incurred on repairs.
The assessee was under no obligation to incur such expenses' as per rent
agreement.
(v) Advertisement expenses include an amount ofRs. 2,500 paid for advertisement
published in the souvenir issued by a political party.
(vi) Miscellaneous expenses include:
(a) amount of Rs. 15,000 paid towards penalty for non-fulfilment of delivery
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conditions of a contract of sale for the reasons beyond' control,
(b) amount of Rs. 1,00,000 spent on a notified scheme meant for the uplift
of the residents of Mid Himalayan Region,
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(c) amount of Rs. 1,00,000 paid to the wife of a dire~tor, who is working as
junior lawyer for taking an opinion on a disputed matter. The senior
advocate of Supreme Court had charged only Rs. 25,000 for the same
opinion,
(d) amount of Rs. 1,00,000 paid to an Electoral Trust.
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(vii) .Sales-tax demand paid includes ,an amount of Rs. 5,300 charged as penalty
for delayed filing of returns and Rs. 12,750 towards interest for delays in
deposi t of tax. ..
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(viii) The company had made an investment of Rs. 25 lacs on the construction of
a warehouse in rural area for the purpose of storage of agricultural produce.
This was made available for use from 15.09.2009 an.d the income from this
activity is credited in the Profit and Loss account under the head ofWarehousing
charges.
(ix) Depreciation under the Income-tax Act works out at Rs. 65,000.
(x) Interest on loans include an amount of Rs. 20,000 on which tax at source was
not deducted.
. Compute the income chargeable to tax for assessment year 2010-2011 of Pingu
Trading Pvt. Ltd. Support your answer with working notes.
2. (a) The Assessing Officer has served a notice proposing to levy penalty under 4
Section 271(1)(c) of the Income-tax Act, 1961, as the variation of income
ass~ssed to income returned and also the tax effect was more than thirty
percent. The addition arose consequent to the disallowance of claim' of assessee
relating to certain exemption. The assessee wants to reply to the effect that
there was no mens rea or conscious act of concealment on his part and that
the claim made was bonafide, the levy of penalty under Sec~ion 271(1)(c) is
not valid. You are requested to help the assessee in this regard in drafting
a suitable reply.
(b) Premises of Ganesh was subjected to a search under Section 132 of the Act. 4
The search was authorized and the warrant was ,signed by the Joint
Commissioner of Income-tax having jurisdiction over the assessee. The assessee
challenged the va1idity of search, since Section 132(1) does not empower Joint
Commissioner to authorize a search under the Act. Decide the correctness of
the contention raised by the assessee.
WIN P.T.O.
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(c) LL Limited paid leave travel facility to its employees and considered exemption
under Section 10(5), based on the self-declaration furnished by the employees.
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The Assessing Officer held that the company as employer ought to have verified
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the genuineness of the claim of exemption by verifying the details of actual
expenditure incurred for availing leave travel facility by the employees.
Accordingly, the AO treated the assessee company as assessee in default.
Decide the correctness of action.
3. (a) Vikram aged 70 years resident in India received a dividend of Rs. 2,00,000
from s4ares held in a company situated in Malaysia. The other incomes of the
assessee in India was Rs. 12,00,000. The company in Malaysia deducted tax
at source and no further tax is payable in respect of the dividend income in
Malaysia. The AD wants to tax the dividend income of Vikram in India since
he is a resident in India. Decide the issue.
(b) The proceedings before the Income-tax Authorities either can be attended by 4
the assessee in person or through an authorized representative. Who can be
treated as an authorized representative of the assessee?
(c) A Company Ltd. issued 11% Debentures and raised Rs. 600 lakhs. The debentures 3
are redeemable after 6 years at a premium of 110%. The company wants to
provide Rs. 10 lakhs for meeting the premium on rede~ption of debentures
and claimed the same as revenue expenditure. Is it a permissible deduction?
Cd) Balaram & Co. engaged in real estate business acquired an old building 4
for Rs. 75 lakhs from Mr. X. The firm demolished'the building and sold
scrap materials for Rs. 5 lakhs. The purchase consideration could not be
paid immediately and therefore it settled to pay in installments to Mr. X with
interest @ 6% and the amount of interest was "Rs. 4,50,000. The AD treated
the income from sale of scrap materials as business income, but whereas the
claim of interest on delayed payment of purchase. consideration claimed as
revenue expenditure was disallpwed. Decide the correctness of the action of
assesseevis a vis the AO.
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4. (a) Discuss whether adjustment is required in th~ context of transfer pricing 4
provisions where the transfer price adopted for an international transaction
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concluded on 1st November, 2009 is Rs. 50 lacs whilst the Arm's Length Price
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determined using appropriate method are Rs. 48 lacs and Rs. 56 lacs.
(b) Gurudev Engineers Pvt. Ltd., is running an industrial undertaking whose 4
profits are eligible for deduction under Section 80IA of the Income-tax Act,
1961. During the year ended 31.03.2010, the undertaking was engaged in
eligible business referred to in Section 80IA(4), which however, consisted
solely of executing works contract awarded by the State Government. Is the
assessee eligible to claim deduction under Section 801A(4) in respect of Profits
derived from this undertaking?
(c) On 15.11.2009, Ram gave power of attorney and possession to Rahim in respect 4
of a vacant land (held as stock in trade) aquired 10 years ago. The sale deed
was executed in April, 2010. In which assessment year, the capital gain is
chargeable to tax?
5. (a) In .July 2009, Mr. Pervez employed as Marketing Manager in a Pharma company, 4
received a Maruti car as gift from a distributor of the company. The value of
the gifted car is estimated at Rs. 2,60,000. Is the value of car taxable as
income? If so, under what head it is taxable?
If the gift of car was received in December, 2009, what is the tax implication?
(b) ABC (P) Ltd. made a provision of Rs. 30 lakhs for doubtful debts by' debit to 4
Profit and Loss Account. The Assessing Officer while computing 'Book-profit'
under S~ction 115JB wants to add back the provision. Is the Assessing Officer
justified in making such addition for computing Book-profit?
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(c) During the year ended 31.3.2010, Geojit Marine Products Ltd: has made 4
payment in cash to the tune of Rs. 60,000 on a single day to local fishermen,
who regularly supply to them lobsters and crabs. Will such cash payments be
hit by the provisions of Section 40A(3) of the Income-tax Act, 1961 ? Will your
answer be different, if such cash payments are made to a hawker who supplies
lobsters and crabs?
;.(a) Examine critically in the context of provisions of the Act "can the A.a. issue 4
notice u/s 148 to reopen the same assessment order on the same grounds for.
which the CIThad issued notice u/s 263 of the Act" ?
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(b) The land of Ganesh was aequired by NHAI in the year 2006 and since then 6
the litigation was going on for enhancement of compensation. The issue was
resolved on 11.09.09 and the court ordered finally to make payment to Ganesh
of the enhanced compensation and the following amounts for interest on such
enhanced compensation:
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Financial Year Amount (Rs.)
2006-2007 1,15,000
2007 -2008 2,25,500
2008-2009 3,75,000
2009-2010 2,14,500
Explain the provisions of the Act and also work out the amount of interest
and the assessment year in which the same shall be taxed.
7. (a) Can reference be made to the Valuation Officer under Section 55A of the 4
Income-tax Act, 1961 where the Assessing Officer is of the view that in the
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context of computation of capital gains, the value of the asset as on 1.4.1981
adopted by the assessee, is more than the fair market value? If reference
under Section 55A is not permissible, is the Assessing Officer bound to accept
the value as returned by the assessee?
(b) Can the provisions of Section 14A of the Income-tax Act, 1961 be applied for 4
disallowing expenditure relating to income for which deduction is available
under Chapter VIA, or the section can be invoked only in respect of expenditure
relating to income exempt under the provisions of Sections 10 ?
(c) Bharathi Cements Ltd., the assessee, purchases jute bags from Raj Kumar & 4.
Co. The latter has to supply the jute bags with the logo and address of the
assessee, printed on it. From 01.09.2009 to 20.03.2010, the value ofjute bages
supplied is .Rs. 8,,00,000, for which the invoice has been raised on 20.03.2010.
While effecting the payment for the same, is the assessee bound to deduct tax
at source, assuming that the value of the printing component involved is
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Rs. 60,000. You are informed that the assessee has not sold any material to
Raj Kumr & Co. and that the latter has to manufacture the jute bags in its
plant using raw materials purchased by it from outsiders.
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8. (a) Examine the correctness of the following statements as per provisions contained .
in Wealth-tax Act, 1957 :
(i) The building and land appurtenant thereto held on valuation date always 4
do not form part of net wealth.
(ii) Every officer of the company shall be treated as principal officer in respect 2
of proceedings under W.T. Act.
(b) Dee (P) Ltd. has a farm house situated at 30 kilometers from the local limits 2
of Jaipur Municipal Corporation. It also has a guest house at a distance of
40 kilometers from the local limits of Bangalore Municipal Corporation. Decide
whether farm house and guest house are chargeable to Wealth tax.
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(c) Mr. Parikh pledged his jewellery with a financier and borrowed Rs. 50 lakhs.
He acquired shares in limited companies out of the borrowed amount.
The value-of Assets as on 31.03.2010 are given below:
1.
Market value of jewellery pledged with the
financier Rs. 80,00,000
2. The market price of shares on the valuation date Rs. 28,00,000
The loan outstanding on the valuation date was Rs. 48 lakhs. Compute the
Net Wealth of Mr. Parikh as on 31.03.2010.