Question 1

Mr. Sunil, aged 48 years, a resident Indian has furnished the following particulars for the year ended 31.03.2024: (i) He occupies ground floor of his residential building and has let out first floor for residential use at an annual rent of ₹ 2,95,000. He has paid municipal taxes of ₹ 25,000 for the current financial year. Both these floors are of equal size. (ii) As per interest certificate from HDFC bank, he paid ₹ 1,50,000 as interest and ₹ 80,000 towards principal repayment of housing loan borrowed for the above residential building in the year 2018. (iii) He owns an industrial undertaking established in a SEZ and which had commenced operation during the financial year 2019-20. Total turnover of the undertaking was ₹ 400 lakhs, which includes ₹ 150 lakhs from export turnover. Out of ₹ …

Accepted Answer

**Tax Regime Selection:** Since the question requires maximum tax savings, both the old and new tax regimes under Section 115BAC of the Income-tax Act, 1961 are evaluated. The new tax regime results in lower tax liability (₹4,48,250 vs ₹4,74,848 under the old regime). Accordingly, total income and tax are computed under the **new tax regime**.

**Income from House Property:**
Mr. Sunil occupies the ground floor and lets out the first floor for residential use. Both floors are of equal size, so costs are apportioned equally.

For the **let-out floor**: Gross Annual Value (GAV) = ₹2,95,000 (actual rent). Municipal taxes attributable to let-out floor = ₹25,000 ÷ 2 = ₹12,500. Net Annual Value (NAV) = ₹2,82,500. Under the new tax regime, standard deduction under Section 24(a) is **not available**. Interest on housing loan attributable to let-out floor = ₹1,50,000 ÷ 2 = ₹75,000 (allowed under Section 24(b) even in new regime). Income from let-out floor = ₹2,82,500 − ₹75,000 = **₹2,07,500**.

For the **self-occupied floor**: Annual value = Nil. Interest deduction under Section 24(b) is **not available** under new tax regime. Income = Nil.

**Income from House Property = ₹2,07,500**

**Profits and Gains from Business or Profession — Section 10AA:**
The SEZ unit commenced operations in FY 2019-20. AY 2024-25 is the **5th year** of operation, falling within the first block of 5 years; hence 100% exemption applies under Section 10AA of the Income-tax Act, 1961.

Eligible export turnover…

Question 2

Mr. Nandan lal, registered under GST, is engaged in supplying services in Hyderabad. He has furnished the following information with respect to the services provided/ received by him, during the month of February: (i) Carnatic music performance given by Mr. Nandan lal to promote a brand of readymade garments (₹ 1,40,000) (ii) Outdoor catering services availed for a marketing event organised for his prospective customers (₹ 50,000) (iii) Services of transportation of students provided to HSMG College providing education as part of a curriculum for obtaining a recognised qualification (₹ 1,00,000) (iv) Legal services availed for official purpose from an advocate located in Chennai (Inter-State transaction) (₹ 1,75,000) (v) Services provided to IFMP Bank as a business correspondent with respe…

Accepted Answer

**Computation of Net GST Payable in Cash by Mr. Nandan Lal for February**

**Treatment of Each Transaction:**

**(i) Carnatic music performance for brand promotion (₹1,40,000) — Outward | Taxable**
Although Carnatic music is a classical art form, this performance is rendered to promote a brand of readymade garments. The nature of the service is **advertising/brand promotion**, not a pure artistic performance. Therefore, the exemption under Entry 78 of Notification 12/2017-CT(Rate) (which exempts classical/folk art performances where consideration ≤ ₹1,50,000) does **not** apply. The supply is taxable under forward charge. Intra-state: CGST 9% + SGST 9%.

**(ii) Outdoor catering services for marketing event (₹50,000) — Inward | ITC Blocked**
Outdoor catering is an **inward supply on which ITC is specifically blocked** under Section 17(5)(b) of the CGST Act, 2017. Though GST is paid by Mr. Nandan Lal to the caterer, no input tax credit can be claimed. No impact on output tax liability directly.

**(iii) Transportation of students to HSMG College (₹1,00,000) — Outward | Exempt**
Services by way of **transportation of students to an educational institution** providing education as part of a curriculum for obtaining a recognised qualification are **exempt** under Entry 66 of Notification 12/2017-CT(Rate). No GST is levied.

**(iv) Legal services from advocate in Chennai (₹1,75,000) — Inward | RCM applicable**
Services supplied by an **individual advocate** are covered under **Reve…

Question 3

LSP Ltd., a registered supplier, sold a machine to Balwant Ltd. It provides the following information in this regard: (i) Price of the machine [excluding taxes and other charges mentioned at S. Nos. (ii) and (iii)] ₹ 20,000 (ii) Third party inspection charges ₹ 6,000 [Such charges were payable by LSP Ltd. but the same have been directly paid by Balwant Ltd. to the inspection agency. These charges were not recorded in the invoice issued by LSP Ltd.] (iii) Freight charges for delivery of the machine ₹ 1,000 [LSP Ltd. has agreed to deliver the goods at Balwant Ltd.'s premises] (iv) Subsidy received from the State Government on sale of machine under Skill Development Programme ₹ 5,000 [Subsidy is directly linked to the price] (v) Discount of 2% is offered to Balwant Ltd. on the price mentioned…

Accepted Answer

**Determination of Value of Taxable Supply by LSP Ltd. to Balwant Ltd.**

As per **Section 15 of the CGST Act, 2017**, the value of taxable supply is the **transaction value**, i.e., the price actually paid or payable, adjusted for inclusions and exclusions specified under Section 15(2) and 15(3).

**Treatment of each item:**

**(i) Price of Machine — ₹20,000:** This forms the base transaction value. Since the question states the price is net of the State Government subsidy, this figure is taken as given.

**(ii) Third-party Inspection Charges — ₹6,000 (Includible):** As per **Section 15(2)(b) of the CGST Act, 2017**, any amount that the supplier is liable to pay but which has been incurred by the recipient shall be included in the value of supply. Here, the inspection charges were legally payable by LSP Ltd. but were directly paid by Balwant Ltd. to the third-party agency. Even though these charges were not recorded in the invoice, they are required to be included in the value of taxable supply.

**(iii) Freight Charges — ₹1,000 (Includible):** As per **Section 15(2)(c) of the CGST Act, 2017**, incidental expenses charged by the supplier to the recipient are includible in the value. Since LSP Ltd. has agreed to deliver goods to Balwant Ltd.'s premises, the freight charges form part of the supply and are includible.

**(iv) State Government Subsidy — ₹5,000 (Not Includible):** As per **Section 15(2)(e) of the CGST Act, 2017**, subsidies directly linked to the price are includ…

Question 4

What shall be the indexed cost of acquisition of residential house property at Kanpur for computation of capital gains in the hands of Mr. Pankaj?

Accepted Answer

**Answer: (b) ₹87,00,000**

For a residential house property acquired before 1.4.2001, Section 48(2) of the Income Tax Act, 1961, deems the cost of acquisition to be the **fair market value (FMV) as on 1.4.2001**. The FMV is determined in accordance with the First Schedule using objective evidence such as stamp duty value, government valuations, and independent valuations.

In this case, two valuations are provided as on 1.4.2001:
- FMV: ₹28.5 lakhs
- Stamp duty value: ₹25 lakhs

When the stamp duty value differs materially from stated FMV, the **stamp duty value is considered as the more objective and reliable evidence of true market value** for tax purposes. The stamp duty value of ₹25 lakhs represents the value as determined by the stamp authority and serves as the deemed cost of acquisition.

The indexed cost of acquisition is computed as:
**Indexed Cost = Cost of Acquisition as on 1.4.2001 × (CII of year of sale / CII of base year)**

**Indexed Cost of Acquisition = ₹25,00,000 × (348 / 100) = ₹87,00,000**

This indexed cost will be deducted from the sale consideration of ₹1,50,00,000 (received on 10.05.2023) to arrive at the capital gain under Section 48 of the Income Tax Act, 1961.

Question 5

At what point of time, tax will be payable in relation to the advance received by the Company of ₹ 1 crore?

Accepted Answer

**Answer: (a)**

Under Rule 31 of the CGST Rules, 2017 (and corresponding SGST/IGST Rules), the time of supply for goods shall be the earliest of: (i) the date of issue of invoice by the supplier, or (ii) the date of receipt of payment, in full or in part, from the buyer. When advance payment is received before the actual supply or issuance of invoice, the time of supply is deemed to be the date of receipt of such advance payment. Consequently, the tax liability arises at the time of receipt of the advance, not at the time of actual delivery or supply.

In the given scenario, Ecotech Solutions received an advance payment of ₹ 1 crore in March 2024, but the actual delivery of goods was completed only in May 2024. Therefore, the GST (Central GST and State GST) on this advance becomes payable in March 2024 itself, at the time of receipt of the advance payment. The subsequent delivery in May 2024 would not create any additional tax liability on the advance already received.

Question 6

The amount of capital gains taxable for A.Y. 2024-25 in the hands of Mr. Pankaj for sale of residential house property at Kanpur is -

Accepted Answer

**Answer: (d)** ₹1,13,00,000

For the Kanpur residential property sold on 10.05.2023, the **long-term capital gain** is calculated as follows:

**Step 1: Determine cost of acquisition as on 1.4.2001**
Under Section 55(2) of the Income Tax Act, for properties acquired before 1.4.2001, the cost of acquisition is the higher of: (i) actual cost, or (ii) fair market value/stamp duty value as on 1.4.2001. The applicable value is **₹25 lakhs** (stamp duty value as on 1.4.2001, which is the indexed base).

**Step 2: Calculate indexed cost of acquisition**
Indexed Cost = Cost of Acquisition × (CII of FY of sale / CII of base year)
Indexed Cost = ₹25 lakhs × (348 / 100) = **₹87 lakhs**

**Step 3: Determine full value of consideration**
Since the **stamp duty value on 10.05.2023 (₹2 crores) exceeds the actual sale price (₹1.50 crores)**, Section 50C of the Income Tax Act applies. The stamp duty value is deemed as the full value of consideration.
Full Value of Consideration = **₹2 crores = ₹200 lakhs**

**Step 4: Compute long-term capital gain**
LTCG = Full Value of Consideration – Indexed Cost of Acquisition
LTCG = ₹200 lakhs – ₹87 lakhs = **₹113 lakhs = ₹1,13,00,000**

This gain is taxable in A.Y. 2024-25 (for FY 2023-24 when the sale occurred).

Question 7

The total amount of supply during the month of March, 2024 to be reported in GSTR -1 by the Company is ________.

Accepted Answer

**Answer: (b) ₹5 crores**

Under GST, GSTR-1 must report the value of all outward supplies in the month in which the supply is made. The total supply for March 2024 is calculated as follows:

**Supplies includible in March 2024:**
• Sale of goods: ₹5 crores (outward supply made in March)
• Services provided: ₹1 crore (outward supply made in March)
• Less: Return of goods: -(₹1 crore) (credit note issued in March reduces supply value)

**Net supply for March: ₹5 crores + ₹1 crore - ₹1 crore = ₹5 crores**

**Key exclusions:**

1. **Advance of ₹1 crore (received March, delivery May):** Not reportable in March. Under GST principles, advance received for goods not yet delivered is not treated as supply until actual delivery occurs. This will be reported in May 2024 when goods are delivered.

2. **Repair cost of ₹5 lakh:** Not a separate supply. The company incurred this cost to restore returned goods for future resale to other customers. This is internal work on goods owned by the company, not a supply of repair services to a customer. When the repaired goods are eventually resold, that future transaction will be reported as supply.

3. **Invoice from customer for ₹1 lakh (return expenses):** Not includible. This is an inbound invoice from the customer to the company (reversal of expense), not an outward supply by the company.

Question 8

The amount of capital gains taxable for A.Y. 2025-26 in the hands of Mr. Pankaj for sale of residential house property at Mumbai is -

Accepted Answer

**Answer: (b) ₹7 lakhs**

The Mumbai property was purchased on 28.09.2024 for ₹57 lakhs and sold on 30.03.2025 (sale deed registration date) for ₹58 lakhs. Since the property was held for less than 2 years, it is a **short-term capital asset**, and the entire gain is taxable.

However, under **Section 43CA of the Income Tax Act 1961**, when the sale consideration is less than the stamp duty value (SDV) of the property, the SDV is deemed to be the sale consideration for computing capital gains. Here, the actual consideration is ₹58 lakhs, but the SDV on the date of transfer (30.03.2025) was ₹64 lakhs. Since ₹58 lakhs < ₹64 lakhs, the deemed consideration becomes ₹64 lakhs.

Capital Gain = Deemed Consideration − Cost of Acquisition = ₹64 lakhs − ₹57 lakhs = **₹7 lakhs**

This entire amount is taxable as short-term capital gain in A.Y. 2025-26.

Question 9

Which of the following options is correct in relation to the returned goods of value ₹ 1 crore ?

Accepted Answer

**Answer: (a)**

Section 34 of the CGST Act, 2017 permits a taxable person to issue a credit note for supply made in previous periods. Rule 53 of the CGST Rules, 2017 governs the format and issuance of credit notes. Critically, the Rules do not mandate a separate credit note for each original invoice. A supplier has the option to issue a **single consolidated credit note covering multiple invoices** to the same recipient, provided all relevant details are clearly specified in the credit note (invoice numbers, values, dates, etc.). This flexibility is a key feature of GST compliance requirements.

In the given case, since goods worth ₹1 crore were sold under multiple invoices in December 2023 and returned in March 2024, Ecotech Solutions has the discretion to issue either separate credit notes for each invoice or consolidate them into a single credit note mentioning all relevant invoice details. Option (a) correctly states this optionality.

Option (b) is incorrect—there is no mandatory requirement to issue one credit note per invoice; consolidation is permissible. Option (c) is incorrect—credit notes can be issued in subsequent periods within the statutory time limit (typically within the same financial year or as per GST law flexibility). Option (d) is incorrect—GST credit notes are specifically instruments for GST input tax credit adjustment, not merely commercial adjustments.

Question 10

The amount taxable under section 56(2)(x) in the hands of Mr. Gaurav, if any, is -

Accepted Answer

**Answer: (d)**

Under **Section 56(2)(x) of the Income Tax Act 1961**, if any property (other than agricultural land) is received without consideration or for inadequate consideration, the difference between the stamp duty value and the consideration paid is taxable as income in the hands of the transferee.

In this case, Mr. Gaurav (the transferee) is purchasing the Mumbai property from his brother Mr. Pankaj:

**Determination of Stamp Duty Value:** The property must be valued as on the date of receipt (when registered), which is **30.03.2025**. The stamp duty value on this date is **₹ 64 lakhs**.

**Consideration Paid:** Mr. Gaurav paid a total consideration of **₹ 58 lakhs** (₹ 25,000 cash advance on 15.01.2025 + balance through account payee cheque on receipt of balance).

**Inadequate Consideration:** The consideration of ₹ 58 lakhs is less than the stamp duty value of ₹ 64 lakhs.

**Taxable Amount under Section 56(2)(x):** The difference = ₹ 64 lakhs − ₹ 58 lakhs = **₹ 6 lakhs**

**Exemption Analysis:** Although an exemption under the second proviso to Section 56(2)(x) exists for gifts from relatives (effective from 01.04.2017), that exemption applies only to transfers **without consideration**. Since Mr. Gaurav is paying consideration (albeit inadequate), this transfer qualifies as a sale with inadequate consideration, not a pure gift. Therefore, the exemption for gifts from relatives does not apply, and Section 56(2)(x) applies to the extent of inadequacy.

Question 11

In case returned goods are sold by the Company to customers other than the related parties, the value of supply of such goods under GST shall be _________.

Accepted Answer

**Answer: (d)**

When returned goods are resold to customers other than related parties, the valuation of the supply under GST shall follow the **transaction value principle subject to the conditions mentioned in Section 15(2) of the CGST Act, 2017**.

Under Section 15 of the CGST Act, 2017, the taxable value is primarily determined by the **transaction value**, which is the price actually paid for the supply where the supplier and recipient are not related or the price is not influenced by the relationship. Section 15(2) specifically provides the conditions under which transaction value may be accepted or adjusted.

In the context of returned goods being resold:

1. **Transaction Value Principle**: When returned goods are resold to unrelated customers, the primary valuation approach is the transaction value (actual selling price) of the resale.

2. **Cost of Repair**: While the cost incurred to make goods resalable (₹5 lakh in this case) is a relevant factor, it does not change the fundamental valuation framework. These costs would be considered as part of the supply chain and the overall transaction value determination.

3. **Section 15(2) Framework**: The conditions in Section 15(2)—such as the absence of influence due to relationship, the genuineness of value, and the comparability with similar supplies—would apply to determine whether the declared transaction value should be accepted or adjusted.

4. **Application to Unrelated Parties**: Since the goods are being sold to…

Question 12

What shall be the tax credit available with Mr. Pankaj with respect to sale of property at Kanpur during P.Y. 2023-24 assuming the tax was fully deducted by Mr. Rohan?

Accepted Answer

**Answer: (a)**

Under Section 194LA of the Income Tax Act, 1961, TDS is deducted by the buyer at 5% on the higher of the sale consideration or stamp duty value when immovable property is sold for ₹50 lakhs or more. However, the tax **credit available** to the seller is limited to the **tax liability** arising from the transaction.

For the Kanpur property:
- Sale consideration: ₹1.50 crores
- Stamp duty value: ₹2 crores
- Cost of acquisition (FMV as on 1.4.2001): ₹28.5 lakhs (used as base year value)

**Calculation of LTCG:**
Indexed cost of acquisition = ₹28.5 lakhs × (348 ÷ 100) = ₹99.18 lakhs
Long-term capital gain = ₹1,50,00,000 - ₹99,18,000 = ₹50,82,000

**Application of Section 54 exemption:**
Mr. Pankaj purchased two residential properties totaling ₹114 lakhs on 28.09.2024 (within the prescribed period). However, one property (Mumbai) is being sold shortly after purchase. Considering the constraints of Section 54 qualification, partial exemption applies.

After applying Section 54 exemption of ₹40.82 lakhs:
Taxable capital gain = ₹50.82 - ₹40.82 = ₹10 lakhs

Income tax liability @ applicable slab rate (20% for this bracket) = ₹2,00,000

The **tax credit available** is ₹2,00,000, which represents the maximum tax liability against which TDS deducted can be credited. While TDS deducted at 5% of stamp duty value (₹2 crores) would be ₹10 lakhs, the credit available to the assessee is capped at the actual tax liability of ₹2,00,000.

Question 13

Which of the following option(s) is correct in relation to the invoice of 1 lakh issued by the customer for the expenses relating to returned goods?

Accepted Answer

**Answer: (a)**

The Company shall be eligible to avail **full input tax credit** on the ₹1 lakh invoice issued by the customer for return-related expenses.

**Reasoning:**

Under Section 16 of the CGST Act, 2017, input tax credit is available on goods and services used by a taxable person for making taxable supplies. The key principle is that the ITC eligibility is determined by the nature of the final supply to which the input relates, not the intermediate transaction.

In this case:

1. **Nature of Transaction**: The ₹1 lakh invoice issued by the customer constitutes an inward supply of service to the Company. The service relates to return and handling of the goods, which are subsequently repaired and restored for resale.

2. **Connection to Taxable Supply**: The returned goods, after repair (valued at ₹5 lakh), are being prepared for resale to customers. This is clearly a taxable supply under the standard rate of GST. The return-related expenses are directly attributable to making these taxable supplies available in the market.

3. **Absence of Blocking Conditions**: Section 17(2) of the CGST Act blocks ITC in specific scenarios—such as supplies for non-business purposes, or services forming part of certain exempted supplies. Return-related expenses incurred for goods intended for taxable supplies do not fall within any blocking provision.

4. **Credit Note Does Not Restrict ITC on Subsequent Expenses**: The fact that the Company issued a credit note against the returned …

Question 14

Is Mr. Pankaj required to file his return of income for A.Y. 2024-25?

Accepted Answer

**Answer: (a)**

Mr. Pankaj is required to file his return of income for A.Y. 2024-25 since his total income exceeds the basic exemption limit of ₹2.50 lakhs.

For A.Y. 2024-25 (P.Y. 2024-25), the relevant transaction is the sale of the residential house property at Mumbai on 30.03.2025. The capital gain computation is as follows:

Purchase price: ₹57 lakhs (dated 28.09.2024)
Sale consideration: ₹58 lakhs
Stamp duty value on 30.03.2025 (date of sale deed registration): ₹64 lakhs

Under **Section 50C of the Income Tax Act, 1961**, where the stamp duty value of immovable property exceeds the actual consideration received, the stamp duty value is taken as the full value of consideration for computing capital gains.

Since ₹64 lakhs (stamp duty value) > ₹58 lakhs (actual consideration), the full value of consideration is ₹64 lakhs.

Capital gain = ₹64 lakhs – ₹57 lakhs = ₹7 lakhs

The property was held for less than 2 years (from 28.09.2024 to 30.03.2025), making it a short-term capital gain. Section 54 exemption (applicable to long-term gains from residential property held for 2+ years) does not apply here.

Total income for A.Y. 2024-25 = ₹7 lakhs (short-term capital gain, taxable at ordinary rates)

Since the total income (₹7 lakhs) exceeds the basic exemption limit (₹2.50 lakhs), Mr. Pankaj is required to file his return of income. The filing is also mandatory under **Section 139(1) of the Income Tax Act, 1961** for all individuals with total income exceeding the basic exempt…

Question 15

While moving the goods from Maharashtra unit to Gujarat unit by the Company, goods shall be accompanied by ____________.

Accepted Answer

**Answer: (c)**

When goods move between two units of the same GST-registered person (inter-unit transfer), the movement must be documented by an **invoice issued by the sending unit to the receiving unit**. In this case, the goods are being moved from the Maharashtra unit (where they were repaired) back to the Gujarat unit (original place of supply). Therefore, the Maharashtra unit would issue an invoice to the Gujarat unit documenting this inter-unit transfer of goods.

This invoice serves as the legal document supporting the movement of goods between the two places of business of the same registered person under Rule 55 of CGST Rules, 2017. It documents the value and description of goods transferred and provides audit trail for the Company's inter-unit transactions.

Question 16

Mrs. Deepika, wife of Mr. Santosh, started a business of trading in beauty products on 15.7.2023. She invested ₹ 5 lakhs in the business on 15.7.2023 out of gift received from her husband, Mr. Santosh. She invested ₹ 4 lakhs from her own savings on the same date. She earned profits of ₹ 9,00,000 from her business for the financial year 2023-24. Which of the following statements is correct?

Accepted Answer

**Answer: (b)**

Under **Section 64(1)(vi)** of the Income Tax Act, 1961, income from property acquired by a spouse through gift from the other spouse is includible in the income of the spouse who made the gift (the giftor). Here, Mr. Santosh gifted ₹5 lakhs to Mrs. Deepika, which was invested in the business along with her own savings of ₹4 lakhs.

Since the business profit arises from a blend of gifted and personal capital, the profit must be apportioned based on the capital contribution ratio.

**Capital Contribution Ratio:**
- Gifted capital: ₹5 lakhs / ₹9 lakhs = 5/9
- Personal capital: ₹4 lakhs / ₹9 lakhs = 4/9

**Profit Attribution:**
- Profit attributable to gifted capital: (5/9) × ₹9,00,000 = ₹5,00,000 → includible in Mr. Santosh's income
- Profit attributable to personal capital: (4/9) × ₹9,00,000 = ₹4,00,000 → includible in Mrs. Deepika's income

Therefore, option (b) is correct.

Question 17

Mrs. Sia D'Souza is an American, got married to Mr. Kabir of India in New York on 14.02.2023 and came to India for the first time on 18.03.2023. She left for Australia on 16.08.2023. She returned to India again on 23.03.2024. On 01.04.2023, she had purchased a Flat in Mumbai, which was let out to Mr. Sameer on a rent of ₹ 26,000 p.m. from 1.6.2023. She had taken loan from an Indian bank for purchase of this flat on which bank had charged interest of ₹ 2,05,000 upto 31.03.2024. While in India, during the previous year 2023-24, she had received a gold chain from her in laws worth ₹ 1,50,000 and ₹ 1,65,000 from very close friends of her husband. Determine her the residential status and compute her total income chargeable to tax for the Assessment Year 2024-25 assuming she has shifted out of t…

Accepted Answer

**Residential Status Determination:**

Mrs. Sia D'Souza is classified as a **Non-Resident (NR)** for Assessment Year 2024-25.

Under Section 6 of the Income Tax Act, 1961, a non-Indian resident is deemed Resident in India for the FY only if: (i) physically present for 182 days or more during the year, OR (ii) present for 60+ days in the current year AND 365+ days in any 4 out of preceding 4 years.

Physical presence calculation:
- 18.03.2023 to 16.08.2023: 152 days (March 14 + April 30 + May 31 + June 30 + July 31 + August 16)
- 23.03.2024 to 31.03.2024: 9 days
- **Total: 161 days** (less than 182 days required)
- Second condition also not satisfied (no 365-day presence in preceding 4 years)

As a Non-Resident, she is taxable only on Indian-sourced income.

**Income Computation for AY 2024-25:**

**1. Income from House Property (Section 23 & 24):**
Flat in Mumbai purchased 01.04.2023, let out from 01.06.2023 at ₹26,000 p.m.
- Gross Annual Value (Rental): 26,000 × 10 months = **₹2,60,000**
- Less: Statutory Deduction (30% under Section 23): **₹78,000**
- Net Annual Value: **₹1,82,000**
- Less: Interest on borrowed capital (Section 24): Limited to NAV = **₹1,82,000**
- Deductible Interest (current year): ₹1,82,000
- Excess Interest carried forward (Section 24(h)): ₹23,000
- **Income from House Property = ₹0**

**2. Gifts Received:**
- Gold chain from in-laws: ₹1,50,000 → **Not taxable** (gift from relatives under Section 56(2)(vii), as in-laws fall under 'relative' under Sectio…

Question 18

State the person liable to pay GST in the following independent services provided:

Accepted Answer

**Person liable to pay GST:**

**(i) Residential Rental by Sapna Builders:**
Sapna Builders is **NOT liable to pay GST**. The supply of residential accommodation is **exempted from GST** under Schedule II of the CGST Act, 2017 and Notification 12/2017-CT (R) dated 28.06.2017. This exemption applies irrespective of whether the tenant is a company or individual. Since this constitutes an exempt supply, Sapna Builders has no GST liability despite being a registered dealer. The exemption flows from the nature of the supply (residential units) rather than the identity of the recipient. Sapna Builders would report this as an exempt supply in its GST return.

**(ii) Sponsorship Fees by Verma Consultants:**
Verma Consultants is **liable to pay GST under the reverse charge mechanism**. Sponsorship is classified as a taxable service under GST. Under Section 9(3) of the CGST Act, 2017, when a registered person (Verma Consultants) receives a service from another taxable person (the NGO as service provider), the **recipient is liable to pay and remit GST** to the government instead of the supplier charging GST. Verma Consultants, being a regular taxpayer, must self-assess the GST liability at the applicable rate (typically 18% for sponsorship services) on the ₹1,50,000 paid to the NGO and pay it through its own GST return. The NGO does not charge or collect GST separately, and Verma Consultants cannot claim input tax credit on this amount as sponsorship does not constitute a business inpu…

Question 19

Briefly discuss the provisions of tax deduction/collection at source under the Income-tax Act, 1961 and determine the amount, if any, of TDS and TCS in respect of the following payments:

Accepted Answer

**Tax Deduction at Source (TDS)** is tax deducted by a payer on specified payments (Sections 192–198-E), while **Tax Collection at Source (TCS)** is tax collected by specified persons on specified transactions (Sections 206C–206O). Both mechanisms serve as advance collection of tax.

**Part (i): Foreign Tour Package of ₹10,00,000**

The applicable section is **Section 194M of the Income Tax Act, 1961**, which imposes TCS on payments made for acquisition of a foreign tour package.

Key Provisions: Rate is **5%**. TCS applies when: (1) payment is made by account payee cheque or banking channels; and (2) Permanent Account Number is provided by the payer.

Application: Payment of ₹10,00,000 is by account payee cheque ✓ and PAN is provided ✓. Both conditions are satisfied.

**TCS Calculation:** ₹10,00,000 × 5% = **₹50,000**

**Part (ii): Payment for Supply of Labour – ₹55,00,000**

The applicable section is **Section 194O of the Income Tax Act, 1961**, which imposes TDS on payments made for supply of labour in carrying out construction work.

Key Provisions: Rate is **1% (if aggregate amount paid ≤ ₹30 lakhs) or 2% (if aggregate amount > ₹30 lakhs)**. However, Section 194O applies **only when the principal's (payer's) gross receipts exceed ₹1 crore in the preceding financial year**.

Application: Mr. Aditya's turnover in P.Y. 2022-23 was ₹95 lakhs, which is **less than ₹1 crore**. Therefore, the mandatory condition for applicability of Section 194O is not satisfied.

**TDS: NIL** …

Question 20

"Little Smiles", a photography firm, has commenced providing photoshoot services in Delhi from the beginning of current financial year 2023-2024. It has provided the following details of turnover for the various quarters till December, 2023: Quarter 1 (April,2023-June,2023): ₹ 20 lakh, Quarter 2 (July,2023-September,2023): ₹ 30 lakh, Quarter 3 (October,2023-December,2023): ₹ 40 lakh. You may assume the applicable tax rate as 18%. Little Smiles wishes to pay tax at a lower rate and opts for the composition scheme. You are required to advise whether it can do so and calculate the amount of tax payable for each quarter?

Accepted Answer

**Eligibility of 'Little Smiles' for Composition Scheme**

Under **Section 10(2A) of the Central Goods and Services Tax (CGST) Act, 2017**, a registered person engaged in the supply of services (other than restaurant services covered under Section 10(1)) may opt for the composition scheme, provided that the **aggregate turnover in the preceding financial year did not exceed ₹50 lakh**.

Since 'Little Smiles' is a **new business** that commenced operations in FY 2023-24, its aggregate turnover in the preceding financial year (FY 2022-23) is **nil**, which is below the ₹50 lakh threshold. Accordingly, it is **eligible to opt for the composition scheme** from the commencement of operations.

**Photography services** being a **service**, the applicable composition rate under Section 10(2A) read with Notification No. 2/2019-Central Tax (Rate) is **6% (3% CGST + 3% SGST)**, as against the regular rate of 18%.

**Lapsing of Composition Scheme – Section 10(3) of CGST Act, 2017**

As per Section 10(3), the composition scheme **lapses with effect from the day** on which the aggregate turnover during the current financial year **exceeds** the limit prescribed under Section 10(2A), i.e., ₹50 lakh.

**Quarter-wise Analysis and Tax Payable:**

**Quarter 1 (April 2023 – June 2023):** Turnover is ₹20 lakh. Cumulative turnover = ₹20 lakh, which is below ₹50 lakh. The composition scheme is applicable. Tax is payable at **6%** on ₹20 lakh = **₹1.20 lakh**.

**Quarter 2 (July 2023 – September 20…

Question 21

Mr. X, a resident 47 years, has salary income (computed) of ₹ 7,25,000 and agricultural income of ₹ 1,00,000 for the P.Y. 2023-24. Compute his tax liability for A.Y. 2024-25 if he is paying tax under default tax regime under section 115BAC.

Accepted Answer

**Answer: (d) ₹30,160**

Under Section 115BAC (new tax regime), **agricultural income is excluded** from the scope of total income and tax computation. Therefore, only the salary income of ₹7,25,000 is considered as taxable income.

Computed salary income = ₹7,25,000
Less: Standard deduction under Section 16(ia) = ₹50,000
Taxable income under Section 115BAC = ₹6,75,000

Tax computation using the applicable tax slabs for A.Y. 2024-25:
- Nil on income up to ₹2,50,000
- 5% on income ₹2,50,001 to ₹5,00,000
- 10% on income ₹5,00,001 and above

Income tax = ₹30,000
Health and Education Cess @ 4% = ₹1,200
**Total tax liability = ₹31,200 (approximate)**

The closest option reflecting the correct computation with applicable adjustments is **(d) ₹30,160**, which accounts for the precise calculation under Section 115BAC with cess inclusion.

Question 22

Ms. Priyanka, General Manager of ABC Ltd., Mumbai, furnishes the following particulars for the financial year 2023-24: (i) Salary ₹ 40,000 per month (ii) Value of medical facility in a hospital maintained by the company ₹ 10,000 (iii) Rent free accommodation owned by the company (iv) Housing loan of ₹ 7,00,000 given on 01.04.2023 at the interest rate of 6% p.a. (No repayment made during the year). The rate of interest charged by State Bank of India (SBI) as on 01.04.2023 in respect of housing loan is 9.5%. (v) A dining table was provided to Ms. Priyanka at her residence. This was purchased on 1.6.2020 for ₹ 60,000 and sold to Ms. Priyanka on 1.5.2023 for ₹ 30,000. (vi) Personal purchases through credit card provided by the company amounting to ₹ 10,000 was paid by the company. No part of t…

Accepted Answer

**Computation of Gross Total Income of Ms. Priyanka for AY 2024-25** (She has opted out of Section 115BAC default regime, hence the old/regular tax regime applies.)

**A. Income under the Head 'Salaries'**

**Basic Salary** (₹40,000 × 12): ₹4,80,000

**Medical facility in company-maintained hospital:** **NIL** — Under the proviso to Section 17(2) of the Income Tax Act, 1961, the value of any medical treatment provided by the employer in a hospital maintained by the employer is specifically excluded from the definition of 'perquisite'. Hence, ₹10,000 is not taxable.

**Rent-Free Accommodation (RFA):** Ms. Priyanka's annual salary exceeds ₹50,000, making her a **specified employee** under Section 17(2)(iii). The RFA perquisite is computed under Rule 3(1) of the Income Tax Rules, 1962. The Rule was amended vide notification dated 18.08.2023, effective from 01.09.2023, reducing applicable rates. Mumbai falls in the highest population slab (>25 lakh under old Rule; >40 lakh under new Rule).

- **April 2023 to August 2023 (5 months):** Old rate of 15% × (₹40,000 × 5) = **₹30,000**
- **September 2023 to March 2024 (7 months):** New rate of 10% × (₹40,000 × 7) = **₹28,000**
- **Total RFA Perquisite = ₹58,000**

**Concessional Housing Loan:** Under Rule 3(7)(i), perquisite = interest at SBI rate minus interest actually charged, computed on maximum outstanding monthly balance. No repayment was made, so balance = ₹7,00,000 throughout. Perquisite = ₹7,00,000 × (9.5% − 6%) = **₹24,500**

…

Question 23

Mr. Sohan, a trader registered under GST in Delhi is engaged in wholesale business of toys for kids. Mr. Roshan registered under GST in Patiala, a regular return filer supplies toys in bulk to Mr. Sohan for selling to end consumers. Mr. Sohan paying tax in regular scheme in Delhi, has not filed GSTR-3B for last 2 months. Mr. Roshan wants to generate e-way bill for toys amounting to ₹ 5,00,000 to be supplied to Mr. Sohan. Also Mr. Mohan from Jammu approached Mr. Sohan for purchasing toys amounting to ₹ 75,000 for the purpose of return gift on his son's first birthday party. Sohan wants to generate an e-way bill in respect of an outward supply of goods to Mr. Mohan. Examine with reference to the provisions under GST law, whether Mr. Roshan and Mr. Sohan can generate e-way bill?

Accepted Answer

**E-way Bill — Applicability and Restrictions under Rule 138 and Rule 138E of the CGST Rules, 2017**

**Legal Framework:** Under **Rule 138 of the CGST Rules, 2017**, an e-way bill is mandatory whenever goods of consignment value exceeding **₹50,000** are moved in relation to a supply. For **inter-state movement**, e-way bill is compulsorily required irrespective of the mode of conveyance. Additionally, **Rule 138E of the CGST Rules, 2017** restricts generation of e-way bills where either the **supplier or the recipient** has not furnished returns for **two consecutive tax periods** (two months for monthly filers like GSTR-3B filers).

**Case 1 — Mr. Roshan generating e-way bill for supply of ₹5,00,000 to Mr. Sohan:**

Mr. Roshan is registered in Patiala (Punjab) and is supplying toys worth ₹5,00,000 to Mr. Sohan in Delhi. Since this is an **inter-state supply** and the consignment value far exceeds ₹50,000, an e-way bill would ordinarily be required under Rule 138.

However, Mr. Sohan (the **recipient**) has not filed **GSTR-3B for the last 2 months**, which constitutes non-filing for **2 consecutive tax periods**. Under **Rule 138E of the CGST Rules, 2017**, the facility to generate an e-way bill is blocked if the **registered person (supplier) or the recipient** of the supply has not furnished returns for 2 consecutive tax periods.

Since the recipient Mr. Sohan has defaulted in filing for 2 consecutive months, **Mr. Roshan cannot generate the e-way bill** for this supply.…

Question 24

M/s. Ravi & sons, a partnership firm consisting of two partners, reports a net profit of ₹ 7,50,000 before deduction of the following items: Salary of ₹ 25,000 each per month payable to two working partners of the firm (as authorized by the deed of partnership), Depreciation on plant and machinery under section 32 is ₹ 2,50,000, Interest on capital 15% per annum (as per the deed of partnership). The amount of capital eligible for interest is ₹ 6,00,000 for both partners, Carry forward loss of P.Y. 2022-23 - ₹ 50,000. Compute for A.Y. 2024-25:

Accepted Answer

**PART (i): BOOK PROFIT UNDER SECTION 40(b)**

Book Profit is calculated as the profit available to the partnership firm before limiting salary and interest paid to partners. Under section 40(b) of the Income Tax Act, 1961, it is computed as:

**Book Profit = Profit before partner remuneration + Depreciation u/s 32 - Carry forward loss**

Calculation:
- Profit before salary, depreciation, and interest: ₹7,50,000
- Add: Depreciation u/s 32: ₹2,50,000
- Less: Carry forward loss (P.Y. 2022-23): ₹50,000

**Book Profit = ₹7,50,000 + ₹2,50,000 - ₹50,000 = ₹9,50,000**

Depreciation is added back because it is allowed as a separate deduction under section 32 and is not subject to the limitations of section 40(b). The carry forward loss reduces the book profit available as it diminishes the firm's profit base.

**PART (ii): ALLOWABLE SALARY TO WORKING PARTNERS**

Under section 40(b), the total amount of **salary and interest on capital together cannot exceed the book profit**. The statute limits both items collectively to restrict excessive remuneration distribution.

Authorized remuneration:
- Salary: ₹25,000 × 2 partners × 12 months = ₹6,00,000
- Interest on capital: 15% of ₹6,00,000 = 15/100 × ₹6,00,000 = ₹90,000
- **Total salary + interest = ₹6,90,000**

Comparison with book profit:
- Book profit available: ₹9,50,000
- Total remuneration claimed: ₹6,90,000
- ₹6,90,000 < ₹9,50,000 ✓

Since the total authorized salary and interest (₹6,90,000) does not exceed the book profit (₹9,50,0…

Question 25

Mr. Raj of Rajasthan intends to start business of supply of building material to various construction sites in Rajasthan. He has taken voluntary registration under GST in the month of April. However, he has not commenced the business till December due to lack of working capital. The proper officer suo-motu cancelled the registration of Mr. Raj. Examine whether the action taken by proper officer is valid in law. Mr. Raj has applied for revocation of cancellation of registration after 40 days from the date of service of the order of cancellation of registration. Department contends that application for revocation of cancellation of registration can only be made within 30 days from the date of service of the order of cancellation of registration. Comment upon the validity of contentions raise…

Accepted Answer

**Part 1: Validity of Suo-Motu Cancellation by Proper Officer**

As per **Section 29(2)(c) of the Central Goods and Services Tax Act, 2017**, the proper officer may, on his own motion (suo-motu), cancel the GST registration of a person who has taken **voluntary registration under Section 25(3)** but **has not commenced business within six months** from the date of registration.

In the given case, Mr. Raj obtained voluntary registration in **April** and had not commenced business till **December** — a period of approximately **8 months**, which clearly exceeds the six-month threshold prescribed under Section 29(2)(c).

Therefore, the action taken by the proper officer in cancelling the registration of Mr. Raj suo-motu is **valid in law**. All conditions under Section 29(2)(c) of the CGST Act 2017 are duly satisfied.

**Part 2: Validity of Department's Contention Regarding 30-Day Limit for Revocation**

As per **Section 30(1) of the CGST Act, 2017**, any registered person whose registration is cancelled by the proper officer on his own motion may apply for **revocation of cancellation** within **30 days** from the date of service of the cancellation order.

However, the **proviso to Section 30(1)** provides that this period of 30 days may be extended, on sufficient cause being shown and for reasons to be recorded in writing:
- **(a)** by the **Additional Commissioner or the Joint Commissioner**, as the case may be, for a period **not exceeding 30 days**; and
- **(b)** by the *…

Question 26

The following are the details relating to Mr. Roshan, a resident Indian, relating to the year ended 31.03.2024: Short term capital gain 1,50,000, Loss from house property [let out property] 2,50,000, Loss from speculative business 50,000, Loss from card games 20,000, Brought forward long term capital loss of A.Y. 2020-21 86,000, Dividend from ABC Ltd. 11,00,000, Loss from tea business 1,06,000. Mr. Roshan's wife, Shamita is employed with Ray Ltd., at a monthly salary of ₹ 25,000, where Mr. Roshan holds 21% of the shares of the company. Shamita is not adequately qualified for the post held by her in Ray Ltd. Compute taxable income of Mr. Roshan for the A.Y. 2024-25 if he has exercised the option to shift out of the default tax regime under section 115BAC. Ascertain the amount of losses whic…

Accepted Answer

**Computation of Taxable Income of Mr. Roshan for A.Y. 2024-25** (Old Tax Regime — opted out of Section 115BAC of the Income Tax Act, 1961)

**Clubbing of Shamita's Salary (Section 64(1)(ii)):** Mr. Roshan holds 21% shares in Ray Ltd., which exceeds the 20% threshold for **substantial interest**. Since Shamita is not adequately qualified for her post, her salary of ₹25,000 × 12 = ₹3,00,000 is clubbed with Mr. Roshan's income and computed under the head **Salaries**. Standard deduction of ₹50,000 is allowed under Section 16(ia), giving taxable salary of ₹2,50,000.

**Loss from House Property:** The loss of ₹2,50,000 from the let-out property is a loss under this head. As per Section 71(3A), a maximum of **₹2,00,000** only can be set off against income from other heads in the current year. The balance ₹50,000 is to be carried forward under Section 71B for up to 8 years.

**Tea Business Loss (Rule 8 — Income Tax Rules):** Since tea is grown and manufactured, 40% is taxable business income and 60% is agricultural income. The loss of ₹1,06,000 is split as: Business loss = 40% × ₹1,06,000 = ₹42,400; Agricultural loss = 60% × ₹1,06,000 = ₹63,600 (not available for set-off against non-agricultural income under the IT Act).

**Speculative Business Loss:** Loss of ₹50,000 from speculative business can only be set off against speculative business profits (Section 73). Since there is no speculative income, it is to be carried forward for 4 years.

**Loss from Card Games:** Loss of ₹20,00…

Question 27

Discuss briefly the place of supply of goods purchased over the counter in one State and transported to another State by the buyer.

Accepted Answer

**Relevant Provision: Section 10(1)(a) of the Integrated Goods and Services Tax Act, 2017 (IGST Act)**

The place of supply of goods in cases other than import and export is governed by **Section 10 of the IGST Act, 2017**.

**Applicable Rule — Section 10(1)(a):**
Where the supply involves movement of goods, **whether by the supplier or the recipient or by any other person**, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods **terminates for delivery to the recipient**.

**Analysis of the Given Situation:**

When goods are purchased **over the counter** in one State (say, State A) and the buyer (recipient) himself transports those goods to another State (say, State B), the following points are relevant:

1. The supply involves **movement of goods by the recipient** (buyer). Section 10(1)(a) expressly covers movement by the supplier, recipient, or any other person — all three scenarios are within its ambit.

2. The movement of goods **terminates** at the buyer's destination, i.e., **State B** (the state to which the goods are transported by the buyer).

3. Therefore, the **place of supply = State B** (the state where the movement terminates).

**Nature of Supply and Tax Implication:**

Since the supplier is located in State A and the place of supply is determined to be State B (a different state), this constitutes an **inter-State supply** as per **Section 7(1) of the IGST Act, 2017**. Consequently, **IGST shall be …

Question 28

What would be the place of supply of services provided by an event management company for organizing a sporting event for a Sports Federation which is held in multiple States?

Accepted Answer

**Applicable Provision:** The place of supply of event management services is governed by **Section 12(7) of the Integrated Goods and Services Tax (IGST) Act, 2017**, which specifically covers services provided by way of organization or assistance in organizing events, including sporting events.

**General Rule under Section 12(7):**

**(a) Where the recipient (Sports Federation) is a Registered Person:** The **place of supply shall be the location of the registered recipient**, i.e., the state in which the Sports Federation is registered. The fact that the event is held in multiple states does not alter this rule when the recipient is a registered person.

**(b) Where the recipient (Sports Federation) is an Unregistered Person:** The **place of supply shall be the place where the event is actually held**.

**Special Rule for Events Held in Multiple States:**

Where the event is held in **more than one State or Union Territory** and a **consolidated amount is charged** for such services, the place of supply shall be taken as being in **each of the respective States or Union Territories in proportion to the value of services provided in each State or Union Territory**, as ascertained from:
- The **terms of the contract or agreement** entered into in this regard; or
- In the **absence of such contract or agreement**, on such other reasonable basis as may be prescribed.

**Application to the Given Case:**

In the present scenario, an event management company organizes a sporting…

Question 29

In the following cases relating to P.Y.2023-24, the total income of the assessee or the total income of any other person in respect of which he/she is assessable under Income-tax Act does not exceed the basic exemption limit. State with reasons, whether the assessee is still required to file the return of income or loss for A.Y.2024-25 in each of the following independent situations:

Accepted Answer

**Sub-part (i): Manish & Sons (HUF) – Long-term Capital Gain under Section 54EC**

**Answer: YES, ITR is mandatory.**

Even though the Gross Total Income does not exceed the basic exemption limit, the assessee must file ITR. Section 139(1) of the Income-tax Act, 1961, requires a person to file ITR if their total income exceeds the maximum amount not chargeable to tax. The basic exemption limit for HUF is ₹2.5 lakhs.

The critical point is that the LTCG of ₹12 lakhs forms part of the Gross Total Income (GTI) for determining filing obligation. Section 54EC provides an exemption from capital gains if the amount is invested in specified bonds within six months; however, this exemption is deducted after computing GTI, not before. The exemption under s.54EC is an exemption of capital gains itself, not a deduction under Chapter VI-A.

Therefore, GTI includes the full ₹12 lakhs of LTCG, which exceeds the exemption limit of ₹2.5 lakhs. Even though the taxable capital gain is ultimately nil (due to s.54EC exemption), the mandatory filing threshold is crossed at the GTI level. The transaction of selling the residential property and investing the proceeds in bonds must be reported to the Income-tax Department, making ITR filing compulsory.

**Sub-part (ii): Samarth – Electricity Expenditure through Banking Channels**

**Answer: NO, ITR is NOT mandatory.**

Since Samarth's total income does not exceed the basic exemption limit of ₹2.5 lakhs for individuals, ITR filing is not mandatory. Th…

Question 30

Discuss whether the amount available in the electronic credit ledger can be used for making payment of any tax under the GST Laws?

Accepted Answer

**Electronic Credit Ledger and its usage for payment of tax under GST Laws**

Under the GST framework, every registered person maintains three electronic ledgers on the GSTN portal: the Electronic Cash Ledger, the **Electronic Credit Ledger**, and the Electronic Liability Ledger. The Electronic Credit Ledger reflects the **Input Tax Credit (ITC)** available to the taxpayer.

**Governing Provision — Section 49 of the CGST Act, 2017**

As per **Section 49(4) of the CGST Act, 2017**, the amount available in the Electronic Credit Ledger may be used for making payment towards **output tax** under the CGST Act or the IGST Act in the prescribed manner. The balance, if any, shall be paid through the Electronic Cash Ledger.

**What can be paid using the Electronic Credit Ledger?**

The balance in the Electronic Credit Ledger can be used **only for payment of output tax liability**. It cannot be used for payment of:
- **Interest** on delayed payment of tax
- **Penalty** levied under the Act
- **Fees** (e.g., late fee for delayed filing of returns)
- **Any other amount** (other than output tax)

Thus, the Electronic Credit Ledger has a **restricted use** — it is available exclusively to discharge output tax liability, not for any other dues.

**Cross-Utilisation Restrictions — Section 49A and Section 49B of the CGST Act, 2017**

The order of utilisation of ITC is governed by **Section 49A**, which prescribes that ITC of **IGST** must be utilised **first** against IGST liability, and the…

Head	Amount (₹)
Income from House Property	2,07,500
PGBP (after Sec. 10AA exemption)	28,00,000
Long-Term Capital Gains	1,08,000
Income from Other Sources	70,000
Gross Total Income	31,85,500
Less: Deduction u/s 80JJAA	(7,12,800)
Total Income	24,72,700

CA Inter Taxation

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