CA Inter Taxation — Question Paper — May 2024

As per CBDT Notification No. 17/2022 dated 21.04.2022, which inserted Rule 12AB in the Income Tax Rules, 1962, the following persons (other than companies and firms) are compulsorily required to file return of income under Section 139(1), regardless of whether their income exceeds the basic exemption limit:

1. Directors of Companies: Every individual who is a director of any company during the financial year must file a return of income, irrespective of the quantum of income earned.

2. Managing Partners of Firms: Every individual who is a managing partner of a firm (other than a Limited Liability Partnership) must file a return of income.

3. Persons with Specified Business/Professional Income: Individuals carrying on business or profession and required to maintain books of accounts or records must file returns, even if income falls below the exemption limit.

4. Persons with Rental Income: Individuals having income from property/rent exceeding ₹50,000 in the financial year must file a return.

5. Non-Residents Earning Income in India: Any individual who is a non-resident and has earned income from sources in India during the financial year must file a return, as per Section 139(1).

6. Persons with Specified Financial Transactions: Individuals meeting specified thresholds regarding bank deposits, foreign remittances, investments, or securities above prescribed limits are required to file returns.

7. Persons with Foreign Assets: Individuals holding foreign assets, foreign bank accounts, or having received substantial foreign remittances must file returns as per specified criteria.

8. Specified Persons under Section 139(1): Any other category of individuals notified by the CBDT from time to time, including those liable under Special Economic Zone provisions or other statutory requirements.

The primary objective of Rule 12AB is to ensure financial transparency, track individuals with significant economic activities, and ensure compliance across diverse income categories, irrespective of whether their total income exceeds the basic exemption limit.

Assumption: Evershine Pvt. Ltd. is registered in Rajasthan (confirmed by Transactions 4 and 5 attracting CGST + SGST, indicating intra-state supply from Rajasthan-based suppliers). Transactions 1 and 2 are inter-state (from UP and Karnataka respectively), attracting IGST @ 18%.

Note: The question provides only inward supply data and opening ITC balances. No outward supply (output tax liability) figures are stated; hence the net cash payable is computed as: Output Tax − Total Available ITC. The computation below establishes total eligible ITC.

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Transaction 1 — Raw Material from PQR Ltd., Kanpur (UP)
Inter-state supply → IGST @ 18%. Goods worth ₹1,00,000 not received during the month. Per Section 16(2)(b) of the CGST Act 2017, ITC is available only when goods are actually received. Eligible ITC = IGST on ₹19,00,000 = ₹3,42,000.

Transaction 2 — Machinery from MNO Pvt. Ltd., Bengaluru (Karnataka)
Inter-state supply → IGST = ₹2,00,000 × 18% = ₹36,000. However, the company has claimed depreciation on the full value including GST under the Income Tax Act 1961. Per Section 16(3) of the CGST Act 2017, where a registered person has claimed depreciation on the tax component of cost of capital goods, ITC on such tax component shall not be allowed. Eligible ITC = NIL.

Transaction 3 — Stock from GST Dealer, Ajmer (Rajasthan)
Intra-state supply (both parties in Rajasthan) → CGST @ 14% + SGST @ 14%. Stock is purchased for business (transport/trading) purposes — eligible for ITC. CGST = ₹15,00,000 × 14% = ₹2,10,000; SGST = ₹2,10,000.

Transaction 4 — Car (7-seater) from Mihir Automobiles, Ajmer (Rajasthan)
Intra-state supply → CGST @ 14% + SGST @ 14%. CGST = ₹1,40,000; SGST = ₹1,40,000. Per Section 17(5)(a) of the CGST Act 2017, ITC is blocked on motor vehicles for transportation of persons with seating capacity ≤ 13 persons, unless used for further supply of such vehicles, transportation of passengers as a business, or imparting driving training. Since the car is for general official purpose, ITC = NIL.

Transaction 5 — Goods for Additional Factory Floor from DEF Buildwell, Jaipur (Rajasthan)
Intra-state supply → CGST @ 9% + SGST @ 9%. CGST = ₹45,000; SGST = ₹45,000. Per Section 17(5)(d) of the CGST Act 2017, ITC is blocked on goods or services received for construction of immovable property (other than plant and machinery) on own account. A factory floor constitutes immovable property. ITC = NIL.

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Statement of Total Eligible ITC Available for September 2023:

| Particulars | IGST (₹) | CGST (₹) | SGST (₹) |
|---|---|---|---|
| Opening Balance | 5,000 | 20,000 | 50,000 |
| Tr.1 – RM from PQR Ltd. (UP) | 3,42,000 | — | — |
| Tr.2 – Machinery, MNO (Karnataka) | NIL | — | — |
| Tr.3 – Stock, Ajmer (Raj.) | — | 2,10,000 | 2,10,000 |
| Tr.4 – Car, Mihir Auto (Raj.) | — | NIL | NIL |
| Tr.5 – Factory floor goods, Jaipur | — | NIL | NIL |
| Total ITC Available | 3,47,000 | 2,30,000 | 2,60,000 |

Total eligible ITC = ₹3,47,000 + ₹2,30,000 + ₹2,60,000 = ₹8,37,000

The net minimum GST payable in cash = Output Tax Liability − ₹8,37,000 (zero if ITC ≥ output tax). Since no output tax liability figures are given in the question, ₹8,37,000 represents the maximum ITC available to minimise cash outflow.

Answer: ₹24,40,000 (or ₹24.4 lakhs)

Step 1: Cost of Acquisition for Inherited Property
Under Section 49(1)(ii), for property inherited, the cost of acquisition is the FMV on the date of inheritance. Since the property can be traced as held on 01.04.2001 with FMV ₹13 lakhs, this amount is taken as the base cost for indexation purposes per Section 55(2).

Step 2: Computation of Indexed Cost of Acquisition
The property comprises two components:

(a) Original property:
- Base cost (FMV on 01.04.2001) = ₹13 lakhs (Index = 100)
- Sale year index (FY 2022-23) = 220
- Indexed cost = ₹13 lakhs × (220/100) = ₹28.6 lakhs

(b) Improvements made in 2013-14:
- Cost of improvement = ₹10 lakhs (Index for 2013-14 = 220)
- Indexed cost = ₹10 lakhs × (220/220) = ₹10 lakhs

Total Indexed Cost of Acquisition = ₹28.6 lakhs + ₹10 lakhs = ₹38.6 lakhs

Step 3: Capital Gain Computation
Sale consideration (10.03.2023) = ₹75 lakhs
Less: Indexed cost of acquisition = ₹38.6 lakhs
Capital Gain (before exemption) = ₹36.4 lakhs

Step 4: Character of Gain
The property was inherited in December 2009 and sold in March 2023, constituting a holding period exceeding 2 years. Thus, this is a long-term capital gain for a residential house.

Step 5: Exemption under Section 54
The assessee qualifies for exemption under Section 54 (exemption from LTCG on transfer of residential property) as:
- Does not own any other residential house (condition satisfied)
- New residential house purchased on 29.12.2023 (within 2 years after sale)
- Cost of new house = ₹12 lakhs
- Exemption available = Lesser of capital gain (₹36.4 lakhs) or cost of new house (₹12 lakhs) = ₹12 lakhs

Step 6: Taxable Capital Gain
Capital gain = ₹36.4 lakhs
Less: Exemption under Section 54 = ₹12 lakhs
Taxable Capital Gain = ₹24.4 lakhs (or ₹24,40,000)

Filing Requirements Analysis for Assessment Year 2024-25 (Previous Year 2023-24)

Basic Exemption Limits (PY 2023-24):
- Individuals below 60 years: ₹2,50,000
- Senior Citizens (60 to below 80 years): ₹3,00,000
- Super Senior Citizens (80 years and above): ₹5,00,000

Persons required to file under Section 139(1):
- Whose total income exceeds the basic exemption limit, OR
- Who have paid advance tax or TDS during the PY, OR
- Whose gross receipts from business/profession exceed ₹25,00,000, OR
- Who have claimed refund in the previous year

(i) Mr. Aneesh (Age 31, Taxable Income ₹2,90,000):

Required to file. Mr. Aneesh's taxable income of ₹2,90,000 exceeds his basic exemption limit of ₹2,50,000 (applicable to individuals below 60 years). Under Section 139(1), every person whose income exceeds the basic exemption limit is mandatorily required to file a return of income. The fact that he has opted for the default tax regime under Section 115 BAC(1) does not exempt him from the filing requirement; this provision only determines the tax rate applicable (flat 20% without exemptions), but does not affect the filing obligation. Therefore, filing is mandatory.

(ii) Smt. Patel (Age 65, TDS Credit ₹55,000):

Required to file. Even though Smt. Patel's income is not explicitly stated, the presence of TDS credit of ₹55,000 indicates that income tax has been deducted at source during the previous year. Under Section 139(1), a person who has paid TDS is required to file a return of income to claim the TDS credit and, if applicable, secure a refund of excess tax paid. As a Senior Citizen, her basic exemption limit is ₹3,00,000. Although her income may fall below this limit, the presence of TDS makes filing mandatory. Section 192 and related TDS provisions necessitate filing to report the income and claim the TDS credit.

(iii) Mr. Ajit (Age 45, Gross Receipts ₹12,00,000, Profit ₹2,25,000):

Not required to file. Mr. Ajit's total income from profession is ₹2,25,000, which is below his basic exemption limit of ₹2,50,000 (applicable to individuals below 60 years). Additionally, his gross receipts of ₹12,00,000 are well below the ₹25,00,000 threshold beyond which filing becomes mandatory based on gross receipts from business or profession. Since neither condition for mandatory filing is satisfied, Mr. Ajit is not required to file a return. However, he may optionally file to carry forward losses, if any, or to establish his credit history.

Computation of Taxable Value of Supply for January 2024

Mr. Ravindra is a registered person providing multiple supplies. The taxable value on which GST is payable is determined as follows:

Supply 1: Chief Selector Remuneration (₹5,00,000)
While this service relates to sports, it is provided TO a recognized sports body by an individual in an administrative/management role, not by a sports person providing athletic services. The exemption for sports services under Notification 12/2017-Central Tax applies to services provided BY sports bodies or BY sports persons for sporting activities. Services provided TO the sports body for administration are TAXABLE. Taxable Value: ₹5,00,000

Supply 2: Pure Labour Contract for Construction (₹1,80,000)
Construction services, including pure labour contracts for construction of independent residential units, are TAXABLE supplies under GST (charged at 5% for residential construction). The taxable value includes the labour cost. Taxable Value: ₹1,80,000

Supply 3: Warehouse Rental for Sugarcane (₹75,000)
Although immovable property rent is typically exempt under Section 12 of the IGST Act, 2017, the supply here is specifically described as 'warehousing of sugarcane,' which constitutes a warehousing and storage service, not mere immovable property rent. Storage and warehousing services are TAXABLE supplies (charged at 5%). Taxable Value: ₹75,000

Supply 4: Services to Municipal Corporation for Slum Improvement (₹6,50,000)
Services provided TO a government entity (Municipal Corporation) are TAXABLE supplies. The exemption under Section 12 of IGST Act applies to services provided BY government/local authorities, not services supplied TO them. Although the purpose is public interest, there is no blanket exemption for supplies TO government entities. Taxable Value: ₹6,50,000

Supply 5: Western Music Dance Performance (₹1,25,000)
Entertainment services, including live dance performances, are TAXABLE supplies under GST. There is no exemption notification for performance/entertainment services. Taxable Value: ₹1,25,000

Total Taxable Value = ₹5,00,000 + ₹1,80,000 + ₹75,000 + ₹6,50,000 + ₹1,25,000 = ₹15,30,000

Computation of Deduction u/s 35 for Assessment Year 2024-25:

Item (i) - Revenue Expenditure on Scientific Research (₹2,00,000): Fully deductible under Section 35(1)(i) of the Income Tax Act, 1961. Revenue expenditure incurred on scientific research is allowed as a complete deduction in the year incurred.

Item (ii) - Capital Expenditure on Scientific Research (₹3,00,000): Deductible in equal annual instalments over 5 years under Section 35(1)(ii). First year deduction = ₹3,00,000 ÷ 5 = ₹60,000.

Item (iii) - Contribution to Notified Approved Research Association (₹1,25,000): Fully deductible under Section 35(1)(ii). Contributions to notified approved research associations are allowed as deduction in the year paid.

Item (iv) - Amount Paid to H Limited (₹2,50,000): Fully deductible under Section 35(1)(iii). Payments to Indian companies having scientific research as their main object and approved by the prescribed authority are deductible in full.

Item (v) - Expenditure on Purchase of Land (₹50,000): Not deductible. Land is a capital asset and does not qualify as scientific research expenditure under Section 35. Only capital assets used in scientific research operations (such as equipment and machinery) are covered, not land acquisition.

Item (vi) - Arrears of Salary before Commencement of Business (Not stated in amount): Not deductible. Expenditure incurred before commencement of business, including salary arrears from F.Y. 2022-23, is not allowable as deduction. The condition that it is "certified by the prescribed authority" does not overcome the fundamental principle that pre-business expenditure is not deductible. Certification only ensures authenticity, not allowability of pre-business expenses.

Total Deduction u/s 35 = ₹2,00,000 + ₹60,000 + ₹1,25,000 + ₹2,50,000 = ₹6,35,000

Computation of Total Income of Mr. Sahil for AY 2024-25

Mr. Sahil is a Senior Citizen (aged 60 years), resident Indian, manufacturer at Chennai. Old Tax Regime assumed (question tests deductions under 80C, 80EE, 80G).

I. Income from Business/Profession

Net Profit per P&L is adjusted as follows:

SGST Penalty ₹1,70,000 — Added back. Under Section 37(1) of the Income Tax Act, 1961, penalties for statutory violations are not deductible business expenditure.

Excess commission to brother ₹10,000 — Added back. Under Section 40A(2)(b), payments to specified relatives (brother qualifies) exceeding fair market value are disallowed. Amount paid ₹46,000; market rate ₹36,000; disallowance = ₹10,000.

Cash Credit Interest ₹13,000 (26.12.2023) — No adjustment. Interest paid to a scheduled bank on cash credit is allowable on actual payment basis under Section 43B(d). Paid within FY 2023-24; deduction sustained.

Staff Salary ₹48,000 — No adjustment. Monthly salary ₹4,000 = ₹48,000 p.a. is well below the basic exemption limit; no TDS default under Section 192 and no disallowance under Section 40(a)(ia). Allowable as a business expense.

Bank Term Loan Interest ₹2,00,000 — Deducted additionally. This amount was paid on 31.03.2024 but NOT debited in the P&L. Under Section 43B(d), interest on loans from scheduled banks is deductible on actual payment basis. Since ₹2,00,000 was paid within FY 2023-24, it is allowable. The balance paid October 2024 is deductible only in FY 2024-25.

Donation to PM National Relief Fund ₹10,000 — Added back from business expenses. It is not incurred for the purpose of business under Section 37. It qualifies for 100% deduction under Section 80G(2)(iiihf) and is claimed there.

Loss on Sale of Shares ₹1,20,000 — Added back. Mr. Sahil is a manufacturer; shares are capital assets, not stock-in-trade. This loss is a Short-Term Capital Loss (STCL) — must be removed from business head and shown under Capital Gains.

Profit on Shares ₹70,500 (derived: P&L credit total ₹22,48,500 − Gross Profit ₹21,78,000) — Deducted from business income. Shares held 2 years with STT paid = Long-Term Capital Gain under Section 112A; not taxable as business income.

Income from Business/Profession = ₹13,93,500

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II. Income from House Property

Residential property, assumed self-occupied. Annual Value = Nil (self-occupied under Section 23(2)). Less: Interest on housing loan under Section 24(b) — maximum deduction for self-occupied property = ₹2,00,000 (loan post-01.04.1999, for acquisition). The actual interest is ₹2,60,000 but capped at ₹2,00,000 under Section 24(b).

Income from House Property = (₹2,00,000) [Loss]

This loss is set off against business income under Section 71 (inter-head set-off), subject to the cap of ₹2,00,000 per year from AY 2018-19 onwards. Full ₹2,00,000 is set off here.

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III. Capital Gains

LTCG (Section 112A): ₹70,500 — Shares held 2 years, STT paid = listed equity LTCG. Under Section 112A, LTCG up to ₹1,00,000 is exempt. ₹70,500 < ₹1,00,000 → fully exempt.

STCL: ₹1,20,000 — Shares sold within 6 months. Set off under Section 70(3): STCL of ₹1,20,000 set off against LTCG of ₹70,500 = Balance STCL ₹49,500 carried forward for 8 assessment years under Section 74.

Income from Capital Gains = NIL

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IV. Gross Total Income

Business Income ₹13,93,500 less HP Loss ₹2,00,000 = ₹11,93,500

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V. Deductions under Chapter VI-A

Section 80C — Housing loan principal repaid ₹50,000 (residential property, eligible u/s 80C). Deduction = ₹50,000.

Section 80G — Donation to PM National Relief Fund ₹10,000 qualifies for 100% deduction without qualifying limit under Section 80G(2)(iiihf). Deduction = ₹10,000.

Section 80EE — Additional deduction on home loan interest. Conditions satisfied: loan from Canara Bank (scheduled bank) ✓; sanction date 31.03.2017 (within 01.04.2016–31.03.2017) ✓; loan ₹25 lakhs ≤ ₹35 lakhs ✓; house value ₹43 lakhs ≤ ₹50 lakhs ✓. Interest not claimed under Section 24(b) = ₹2,60,000 − ₹2,00,000 = ₹60,000; Section 80EE cap = ₹50,000. Deduction = ₹50,000. (Balance ₹10,000 not deductible.)

Total Deductions = ₹1,10,000

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Total Income = ₹11,93,500 − ₹1,10,000 = ₹10,83,500

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Tax Computation (Senior Citizen 60–80 years, Old Regime, AY 2024-25)

On ₹10,83,500 (no special rate income since Capital Gains = NIL):
- ₹0–₹3,00,000: Nil
- ₹3,00,001–₹5,00,000 @ 5%: ₹10,000
- ₹5,00,001–₹10,00,000 @ 20%: ₹1,00,000
- ₹10,00,001–₹10,83,500 @ 30%: ₹25,050

Tax before cess: ₹1,35,050
Add: Health & Education Cess @ 4%: ₹5,402

Total Tax Payable = ₹1,40,452

Note: No rebate u/s 87A (income > ₹5,00,000 under old regime). No surcharge (income < ₹50 lakhs). STCL of ₹49,500 carried forward for 8 years.

Computation of Total Income of Mr. Sahil (Resident, Age 40) for Assessment Year 2024-25

Head I — Profits and Gains of Business or Profession (Section 28 of the Income Tax Act, 1961)

The starting point is the Net Profit as per P&L Account: ₹13,56,000.

Certain amounts debited to the P&L must be added back as they are inadmissible under the Act:

(a) SGST Penalty ₹7,000 — Disallowed under Section 37(1). Penalties imposed by statutory authorities are penal in nature and are not expenditure incurred wholly and exclusively for business purposes; they are not deductible.

(b) Depreciation as per Books ₹2,00,000 — Book depreciation is disallowed and replaced by depreciation computed under Section 32 of the Income Tax Act.

(c) Loss on Sale of Shares ₹20,000 — Mr. Sahil is a manufacturer; shares held by him are investments, not stock-in-trade. This loss is in the nature of a Short-Term Capital Loss (STCL) and cannot be deducted as a business expense.

Total additions: ₹2,27,000. Adjusted figure: ₹15,83,000.

Certain amounts credited to the P&L are not chargeable under the head PGBP; they are deducted and taxed under their respective heads:

(a) Dividends from domestic companies ₹15,000 → Income from Other Sources (Section 56(2)(i))
(b) Winning items ₹10,500 → Income from Other Sources (Section 115BB)
(c) Lottery income (net of TDS, as appearing in P&L) ₹10,500 → Income from Other Sources (Section 115BB); gross amount is ₹15,000
(d) Profit on sale of shares ₹45,000 → Capital Gains

Total deductions: ₹81,000. Adjusted figure: ₹15,02,000.

Less: Depreciation allowable under Section 32 (assumed equal to book depreciation, as no separate information on Written Down Value or applicable rates is provided): ₹2,00,000.

Note: GST paid ₹1,10,000 is allowed as a deduction since it has been actually paid (Section 43B compliance assumed). Interest on bank machinery term loan ₹60,000 is allowable under Section 36(1)(iii) as interest on capital borrowed for business. All other expenses — administrative charges, general expenses, and miscellaneous expenses — are presumed to be incurred wholly and exclusively for business and are thus allowable under Section 37(1).

Income from Business (PGBP) = ₹13,02,000

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Head II — Capital Gains

Shares held by a manufacturer are investments. The profit and loss on their sale are capital gains/losses.

Short-Term Capital Gain (profit on sale of shares): ₹45,000
Less: Short-Term Capital Loss (loss on sale of shares, disallowed from PGBP above): ₹20,000

Set-off is permissible under Section 70 (loss from one source under a head set off against gain from another source under the same head).

Net Short-Term Capital Gain = ₹25,000

(Note: Nature of shares — listed/unlisted — is not specified; STCG is accordingly taxed at normal slab rates. If confirmed as listed equity with STT paid, Section 111A would apply at 15%.)

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Head III — Income from Other Sources (Section 56)

Dividends from domestic companies: ₹15,000 (taxable at normal rates post Finance Act 2020)
Winning items (taxable at flat 30% u/s 115BB; no deduction or basic exemption benefit available): ₹10,500
Lottery income — gross amount ₹15,000 (taxable at flat 30% u/s 115BB; TDS of ₹4,500 deducted u/s 194B; net as per P&L = ₹10,500; grossed up: ₹10,500 × 100/70 = ₹15,000)

Total Income from Other Sources = ₹40,500

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Gross Total Income

PGBP: ₹13,02,000
Capital Gains: ₹25,000
Income from Other Sources: ₹40,500
Gross Total Income = ₹13,67,500

Less: Deductions under Chapter VI-A (Sections 80C to 80U): Nil (no information provided)

Total Income = ₹13,67,500

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Computation of Tax Liability (Old Tax Regime, AY 2024-25)

Income taxable at special rates u/s 115BB (Winning items ₹10,500 + Lottery ₹15,000) = ₹25,500; Tax = 30% × ₹25,500 = ₹7,650 (no basic exemption benefit available against this income).

Income taxable at normal slab rates = ₹13,67,500 − ₹25,500 = ₹13,42,000 (includes STCG and dividends since no special rate confirmed).

Tax on ₹13,42,000:
Nil up to ₹2,50,000; 5% on next ₹2,50,000 = ₹12,500; 20% on next ₹5,00,000 = ₹1,00,000; 30% on ₹3,42,000 = ₹1,02,600; Total = ₹2,15,100

Total Tax = ₹2,15,100 + ₹7,650 = ₹2,22,750
Add: Health & Education Cess @ 4% = ₹8,910
Gross Tax = ₹2,31,660
Less: TDS on lottery u/s 194B = ₹4,500

Net Tax Payable = ₹2,27,160

Under Section 32 of the Income Tax Act, 1961, depreciation is allowable on Written Down Value (WDV) basis. The depreciation must be calculated separately for assets based on their holding period during the financial year.

Depreciation Calculation for A.Y. 2024-25 (F.Y. 2023-24):

The total additions of ₹4,00,000 must be classified as:
- Additions used for more than 180 days: ₹2,00,000
- Additions used for 180 days or less: ₹2,00,000 (₹4,00,000 - ₹2,00,000)

Depreciation on assets used for more than 180 days is calculated at full rate on Opening WDV plus such additions:
(₹12,00,000 + ₹2,00,000) × 15% = ₹2,10,000

Depreciation on assets used for 180 days or less is calculated at half the rate:
₹2,00,000 × 15% × 0.5 = ₹15,000

Total Depreciation Allowable: ₹2,25,000
Closing WDV: ₹12,00,000 + ₹4,00,000 - ₹2,25,000 = ₹13,75,000

Tax Liability Implication:

Since Mr. Sahil has exercised the option to shift out of the default new tax regime under Section 115BAC(1A) and chosen the old tax regime, he is entitled to claim depreciation of ₹2,25,000 as a deduction from his gross total income. This is a critical distinction because under the new tax regime, depreciation is NOT allowed as a deduction. The depreciation deduction reduces his taxable income by ₹2,25,000, thereby reducing his overall tax liability. The tax benefit achieved equals ₹2,25,000 multiplied by his applicable tax slab rate. This makes the choice to opt for the old regime particularly beneficial for Mr. Sahil, who has significant depreciation available.

Note: The Manufacturing, Trading and Profit & Loss Account figures and 'further information' referenced in the question were not provided with this query. The solution below presents the complete framework, adjustments, and tax computation methodology that must be applied to the given data. Once figures are substituted, this framework yields the final answer.

Regime Selection: Mr. Sahil has opted out of the default new tax regime under Section 115BAC(1A) of the Income Tax Act, 1961 (inserted w.e.f. AY 2023-24). Opting out means he is taxed under the old (regular) regime, allowing all eligible deductions under Chapter VI-A, depreciation u/s 32, set-off of losses, etc.

Step 1 — Computation of Business Income (Manufacturing)

Net Profit as per P&L Account: ₹ XXX

Add back (Disallowances/Inadmissible Expenses):
- Personal expenses debited to P&L [Section 37(1)]
- Income tax, wealth tax paid [Section 40(a)(ii)]
- TDS not deducted / not deposited on due date of return [Section 40(a)(ia)] — 30% of such expenditure disallowed
- Salary/interest to partners [Section 40(b)] — if partnership; not applicable here as proprietorship
- Cash payments exceeding ₹10,000 in a single day to a single person [Section 40A(3)] — 100% disallowed
- Payments to relatives exceeding fair market value [Section 40A(2)]
- Provision for doubtful debts, contingent liabilities [not deductible under Section 36/37]
- Section 43B items (PF, ESI, GST, interest on loans from banks/FIs, leave encashment) — deductible only on actual payment basis, not on accrual; amounts unpaid before due date of return are added back
- Depreciation as per books (added back; replaced by Income Tax depreciation)

Less (Credits/Admissible deductions not credited):
- Depreciation under Section 32 of the Income Tax Act, 1961 at prescribed rates (SLM for power units; WDV for others)
- Additional Depreciation u/s 32(1)(iia): 20% on new plant & machinery used for manufacture, for first year (10% if used < 180 days)
- Any Section 43B items actually paid before due date of return (deductible)
- Any exempt income included in P&L (e.g., interest on PPF)

Income from Business (Manufacturing): ₹ A

Step 2 — Presumptive Income u/s 44AD (if Trading business turnover ≤ ₹2 crores / ₹3 crores)

Section 44AD of the Income Tax Act, 1961 applies to an eligible assessee (resident individual/HUF/firm, not a company or LLP) carrying on eligible business (any business except those u/s 44AE, 44AF, 44B, 44BB, etc.) with turnover up to ₹2 crore (₹3 crore if ≥ 95% receipts are through banking channels in the preceding year).

If Mr. Sahil's trading turnover qualifies, presumptive income = 8% of gross turnover (or 6% for amounts received through digital/banking channels). No further deductions (depreciation, salary, etc.) are allowable once 44AD is opted.

Income from Trading Business (Presumptive): ₹ B

Step 3 — Total Income

Business Income (Manufacturing): ₹ A
Presumptive Income (Trading u/s 44AD): ₹ B
Less: Chapter VI-A Deductions (available under old regime):
- Section 80C (LIC, PPF, ELSS, etc.) — max ₹1,50,000
- Section 80D (health insurance premium) — max ₹25,000 for self/family
- Other applicable deductions as per given information

Total Income: ₹ T (rounded to nearest ₹10)

Step 4 — Tax Computation (Old Regime, AY 2024-25, Age 40 years — below 60)

Up to ₹2,50,000: Nil
₹2,50,001 to ₹5,00,000: 5% = ₹12,500
₹5,00,001 to ₹10,00,000: 20% = ₹1,00,000
Above ₹10,00,000: 30%

Rebate u/s 87A: ₹12,500 if Total Income ≤ ₹5,00,000 (not available if income > ₹5 lakh).
Surcharge: 10% if total income > ₹50 lakh; 15% if > ₹1 crore; 25% if > ₹2 crore; 37% if > ₹5 crore (marginal relief applicable).
Health and Education Cess: 4% on income tax + surcharge.

Total Tax Liability = Income Tax + Surcharge + Health & Education Cess

Please provide the P&L figures and further information to obtain the exact numerical answer.

Computation of Total Income of Mr. Tilak for Assessment Year 2024-25:

1. If Resident and Ordinarily Resident (RAR):

A RAR is taxable on worldwide income—income from all sources whether situated in India or outside India, irrespective of whether it is earned in India or remitted to India. The taxing jurisdiction is unrestricted.

Applying to Mr. Tilak:
- Malaysian service remuneration: ₹50,000 (foreign source, but taxable as RAR has worldwide income liability)
- English business profits: ₹3,00,000 (entire amount taxable; remittance to India is irrelevant)
- Singapore profits brought to India: ₹1,00,000 (entire amount taxable despite being past untaxed income)

Total Income = ₹4,50,000

2. If Resident but Not Ordinarily Resident (RNOR):

A RNOR is taxable on (a) all income from Indian sources, and (b) foreign income only to the extent remitted to India. The remittance rule restricts taxability of foreign income to amounts actually received in India or accruing in India.

Applying to Mr. Tilak:
- Malaysian service remuneration: ₹50,000 (immediately remitted to India—hence fully taxable as the remittance condition is satisfied)
- English business profits: Only ₹25,000 is taxable (the total profits are ₹3,00,000, but only ₹25,000 is received/remitted into India; the balance ₹2,75,000 remains outside India and is not taxable as no remittance occurred in the relevant year)
- Singapore profits brought to India: ₹1,00,000 (brought to India—hence remitted, making it fully taxable)

Total Income = ₹1,75,000

Key Distinction: The difference of ₹2,75,000 (English business profits not remitted) is not taxable for RNOR because it was neither earned in India nor remitted to India. For RAR, the location and remittance of income are irrelevant; all worldwide income is taxable.

Part (1): Resident and Ordinarily Resident (ROR)

As an ROR individual, Mr. Tilak is taxed on his worldwide income. All income from any source, irrespective of where earned or received, is taxable.

Income Analysis for ROR:

(a) Remuneration from Malaysia: Taxable ₹50,000 (worldwide income includes foreign earned income)

(b) Business profit from England controlled from Bombay: Taxable ₹3,00,000 (entire income is taxable; place of control is India making it Indian business income)

(c) Past untaxed profits brought from Singapore: Taxable ₹1,00,000 (brought to India during the year)

(d) Capital gain on Indian land: Taxable ₹2,00,000 (income from Indian source; place of receipt immaterial)

(e) Agricultural income from Nepal: Not taxable ₹0 (under Section 9(3) of Income Tax Act 1961, agricultural income from outside India is excluded)

(f) Principal repayment on home loan: Not deductible ₹0 (Section 24 allows interest only, not principal; this is capital expenditure)

(g) Interest on SBI savings account: Taxable ₹12,000 (Indian source income)

Total Income if ROR = ₹6,62,000

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Part (2): Resident but Not Ordinarily Resident (RNOR)

As an RNOR individual under Rule 8 of Income Tax Rules 1962, Mr. Tilak is taxed on:
- Income accrued or arising in India
- Income earned outside India but received in India during the year
- Amounts brought to India

Income Analysis for RNOR:

(a) Remuneration from Malaysia: Taxable ₹50,000 (foreign income but received/remitted to India during the year)

(b) Business profit from England: Taxable ₹25,000 only (income earned outside India; only the amount received in India is taxable; remaining ₹2,75,000 earned and retained outside India is not taxable)

(c) Past untaxed profits brought from Singapore: Taxable ₹1,00,000 (amount brought to India during the year)

(d) Capital gain on Indian land: Taxable ₹2,00,000 (source is India; capital gains on Indian assets are always taxable regardless of place of receipt)

(e) Agricultural income from Nepal: Not taxable ₹0 (foreign agricultural income excluded under Section 9(3))

(f) Principal repayment on home loan: Not deductible ₹0 (capital expenditure; no deduction allowed)

(g) Interest on SBI savings account: Taxable ₹12,000 (Indian source income)

Total Income if RNOR = ₹4,87,000

Part (i): TDS on Rent - Section 194-I

TDS IS APPLICABLE under Section 194-I at 10% on the monthly rent of ₹75,000.

Section 194-I provides for TDS deduction on rent paid for any building or residential property when the monthly rent exceeds ₹50,000. Here, the monthly rent of ₹75,000 (excluding GST, which is levied separately and not included in the rent for TDS threshold) clearly exceeds the ₹50,000 threshold. Therefore, TDS is attracted.

The applicable rate is 10% because the recipient (Mr. Ram) is an individual, has furnished his PAN, and is presumed to be an Indian resident. Although Mr. Ram has furnished PAN and filed his return of income regularly before the due date, these facts do not exempt the deductor from TDS obligation. TDS is a statutory deduction mandatory on the payer (ABC Limited) and cannot be waived based on the payee's PAN status or return filing compliance. The deductor must deduct ₹7,500 TDS per month (10% of ₹75,000) and deposit the same with the government.

Part (ii): TCS on Sale of Motor Vehicles - Section 206C(1F)

TCS is applicable under Section 206C(1F) on sale of motor vehicles. The applicability and rate depend on the sale consideration in each transaction:

First Car (₹4,00,000 on 01.05.2023): TCS IS NOT APPLICABLE because the sale consideration of ₹4,00,000 does not exceed the threshold of ₹10,00,000. Section 206C(1F) prescribes that TCS at 1% is applicable only when the sale consideration in a single transaction exceeds ₹10,00,000. Since this car falls below the threshold, no TCS is collected.

Second Car (₹12,00,000 on 25.12.2023): TCS IS APPLICABLE at 1% because the sale consideration of ₹12,00,000 exceeds the ₹10,00,000 threshold. Since Mrs. Anju has furnished her PAN and filed her return of income regularly before the due date, TCS is collected at the concessional rate of 1% (not 5%). The TCS liability is ₹12,000 (1% of ₹12,00,000). The furnishing of PAN and compliance with return filing requirements reduces the rate from 5% to 1%, but TCS remains applicable and is not waivable—it is a statutory collection obligation on the seller (XYZ Pvt. Ltd).

Sub-part (i): TDS on Rent

TDS is applicable on the rent paid by ABC Limited to Mr. Ravi under Section 194I of the Income Tax Act, 1961. The monthly rent of ₹75,000 (excluding GST) exceeds the threshold of ₹50,000 prescribed under Section 194I. Since the rent of building exceeds ₹50,000 per month, TDS at the rate of 10% must be deducted by the payer (ABC Limited). The furnishing of PAN and regular filing of returns by Mr. Ravi do not exempt him from TDS; these are conditions that may qualify him for certain reliefs but do not absolve the payer from the statutory obligation to deduct TDS. ABC Limited must deduct TDS of ₹7,500 per month (₹75,000 × 10%) and remit it to the government before the due date. Note that GST is levied separately and is not included in the rent amount for TDS calculation purposes.

Sub-part (ii): TCS on Sale of Motor Vehicles

TCS is NOT applicable on the sale of cars by XYZ Pvt. Ltd to Mrs. Anju under Section 206C(1G) of the Income Tax Act, 1961. The threshold for TCS on sale of motor vehicles is ₹10 lakhs per transaction. The first car is sold for ₹4,00,000 and the second car for ₹1,20,000—both amounts are individually below the ₹10 lakhs threshold. Section 206C(1G) applies only when the value of a single motor vehicle exceeds ₹10 lakhs. Since each car falls below this limit, TCS is not triggered. The furnishing of PAN and regular filing of returns by Mrs. Anju, while important for compliance, are not relevant in this case as TCS itself is not applicable. The buyer may purchase the vehicles without TCS collection.

Answer: ₹14,291

For advances given to shareholders in closely held companies (where the public are not substantially interested), the amount constitutes a perquisite equal to the interest foregone at the prescribed rate. The prescribed rate of interest for FY 2023-24 is 8% per annum.

Computation:
Perquisite = Advance × Prescribed Rate × Period (in years)

Period from 10.5.2023 to 31.3.2024:
- May 10–31: 21 days
- June–December 2023: 214 days
- January–March 2024: 91 days (2024 is a leap year)
- Total: 326 days (or 0.8932 years)

Perquisite = ₹2,00,000 × 8% × (326/365)
Perquisite = ₹2,00,000 × 0.08 × 0.8932
Perquisite = ₹14,291.20 ≈ ₹14,291

Head of Income: Income from Other Sources (Section 56 of the Income Tax Act, 1961)

Note: The accumulated profit figure of ₹1,00,000 does not affect the perquisite calculation under the current framework. The perquisite is determined solely by the interest at the prescribed rate on the advance for the period it remained outstanding.

Answer: ₹1,00,000 under the head 'Income from other sources'

When a shareholder of a closely held company receives any advance (or loan, or other payment not being a loan repayable within specified period), the amount is deemed to be dividend under Section 2(22)(e) of the Income Tax Act, 1961. A closely held company is defined as a private company in which the public are not substantially interested.

The amount of deemed dividend is calculated as the excess of the advance received over the accumulated profit available at the time of giving the advance:

Deemed Dividend = Amount advanced – Accumulated profit

In this case, the company's accumulated profit of ₹1,00,000 represents earnings available for distribution. Since the advance of ₹2,00,000 exceeds this accumulated profit, the excess constitutes deemed dividend.

The shareholder's percentage holding (22%) does not affect the computation—the full amount of excess is treated as deemed dividend.

Income to be included in Mr. Ravi's hands:
- Amount: ₹1,00,000
- Head of Income: Income from other sources (as per Section 17(1)(a) of the Income Tax Act, 1961, which specifically mentions that dividends are taxable under this head)
- Assessment Year: 2024-25 (since the advance was received on 10.5.2023, falling in FY 2023-24)

This deemed dividend income must be included in Mr. Ravi's total income for AY 2024-25 as it constitutes income from other sources.

Mr. Ravi is a shareholder with 22% shareholding in a closely held company. The advance of ₹2,00,000 received on 10.5.2023 falls under Section 2(22)(e) of the Income Tax Act 1961, which treats amounts obtained as advances or loans from closely held companies as income if they exceed 20% of the company's book profit. The company's agreement profit (book profit) at the time was ₹1,00,000. The threshold amount (20% of book profit) = ₹20,000. Since the advance of ₹2,00,000 exceeds this threshold of ₹20,000, the excess amount becomes chargeable as income. Amount to be included as income = ₹2,00,000 - ₹20,000 = ₹1,80,000. This income falls under the head Other Sources as per Section 56 of the Income Tax Act. The amount will be included in Mr. Ravi's total income for assessment year 2024-25, corresponding to the financial year 2023-24 in which the advance was received on 10.5.2023.

Deduction allowable under Section 35 of the Income Tax Act, 1961 for A.Y. 2024-25

Mr. Rao is not under the default tax regime u/s 115BAC, so all deductions under Section 35 are available in full.

Item-wise analysis:

(i) Revenue expenditure on scientific research — ₹1,00,000: Fully deductible @ 100% under Section 35(1)(i). Deduction = ₹1,00,000.

(ii) Capital expenditure on scientific research — ₹3,00,000: Deductible @ 100% under Section 35(1)(iv) read with Section 35(2). Note: This applies only to assets other than land. Deduction = ₹3,00,000.

(iii) Contribution to notified approved research association — ₹1,50,000: Deductible @ 100% under Section 35(1)(ii). (Weighted deduction of 150% was reduced to 100% with effect from A.Y. 2021-22 by Finance Act 2020.) Deduction = ₹1,50,000.

(iv) Amount paid to H Limited (approved Indian company, main object = scientific research) — ₹2,50,000: Deductible @ 100% under Section 35(1)(iia). Deduction = ₹2,50,000.

(v) Purchase of Land for scientific research — ₹2,50,000: NIL deduction. Under Section 35(2)(1A), expenditure on the acquisition of land does not qualify for deduction under Section 35, even if it is for the purpose of scientific research.

(vi) Pre-commencement revenue expenditure on salary of research staff — ₹2,00,000: Deductible @ 100% under the proviso to Section 35(1)(i). Revenue expenditure on scientific research incurred within 3 years immediately preceding the commencement of business, certified by the prescribed authority, is allowed as a deduction in the year of commencement. Since the expenditure was incurred in F.Y. 2022-23 and is certified, it is fully allowable in A.Y. 2024-25. Deduction = ₹2,00,000.

Total deduction allowable under Section 35 for A.Y. 2024-25 = ₹10,00,000.

Answer: ₹5,40,000

Analysis of each item under Section 35(1):

(i) Revenue expenditure on scientific research (₹1,00,000): Revenue expenditure on scientific research is deductible in full under Section 35(1)(i). Deduction: ₹1,00,000

(ii) Capital expenditure for scientific research (₹3,00,000): Capital expenditure on scientific research is deductible by spreading equally over 5 years commencing from the year of incurrence under Section 35(1)(ii). Annual deduction = ₹3,00,000 ÷ 5 = ₹60,000 for A.Y. 2024-25

(iii) Contribution to notified approved research association (₹1,50,000): Contributions to research associations approved under Section 35(1)(iii) are deductible in full. Deduction: ₹1,50,000

(iv) Amount paid to approved company for scientific research (₹2,30,000): Payments to an approved company having scientific research as its main object are deductible in full under Section 35(1)(iv), provided the company is approved by the notified authority. Deduction: ₹2,30,000

(v) Expenditure on purchase of land (₹2,50,000): Land is expressly excluded from the definition of capital expenditure for scientific research under Section 35(1)(ii). The Supreme Court has held that land cannot be considered capital asset for SR purposes. Deduction: ₹Nil

(vi) Revenue expenditure before commencement of business (₹2,00,000): This is revenue expenditure incurred before commencement of business. Section 35(1)(i) applies only to revenue expenditure incurred during the conduct of business or profession. Section 35(2AA) provides relief for capital expenditure before commencement (spread over 5 years from commencement), but no corresponding provision exists for revenue expenditure before commencement. Although certified by prescribed authority, this does not overcome the fundamental requirement that the business must be operational for the deduction to apply. Deduction: ₹Nil

Part (i) - Rent Payment by ABC Limited

The applicable provision is Section 194-IA of the Income Tax Act, 1961. This section requires Tax Deduction at Source (TDS) on rent of immovable property (other than plant/machinery) at the rate of 5% if the monthly rent exceeds ₹50,000. Goods and Services Tax (GST) is excluded from the TDS calculation as it is a separate tax unrelated to income.

Facts of the case: Monthly rent = ₹75,000 (GST excluded), Total annual rent for FY 2023-24 = ₹75,000 × 12 months = ₹9,00,000. The monthly rent of ₹75,000 exceeds the threshold of ₹50,000.

However, Section 194-IA contains an important exception: TDS is NOT required if the recipient has furnished a valid Permanent Account Number (PAN). In this case, Mr. Ram has furnished his PAN and has also filed his income tax return regularly before the due date, confirming his status as a PAN holder.

Conclusion: NO TDS is required on the rent paid by ABC Limited to Mr. Ram, as the PAN exemption applies.

Part (ii) - Purchase of Cars by Mrs. Anju

The applicable provision is Section 194O of the Income Tax Act, 1961. This section mandates Tax Collection at Source (TCS) on the sale of motor vehicles at the rate of 1% when the sale price of a single vehicle exceeds ₹10,00,000.

Analysis of each purchase:

Car 1 (Cost ₹4,00,000, purchased 01.05.2023): The sale price does not exceed ₹10,00,000. Section 194O does not apply as the threshold condition is not met. NO TCS is required.

Car 2 (Cost ₹12,00,000, purchased 25.12.2023): The sale price of ₹12,00,000 exceeds ₹10,00,000. Ordinarily, TCS at 1% would be applicable. However, Section 194O provides an exception: TCS is NOT applicable if the buyer has furnished a valid PAN. Since Mrs. Anju files income tax return regularly before the due date, she is clearly a PAN holder. Therefore, NO TCS is required even though the vehicle cost exceeds ₹10,00,000.

Overall Conclusion: Neither TDS nor TCS is applicable in either situation due to the PAN exemptions provided in the respective sections.

Net Sale Consideration: The house was sold for ₹75 lakhs on 10.05.2023. After deducting transfer expenses of ₹50,000, the net sale consideration is ₹74,50,000.

Cost of Acquisition (Indexed): For inherited property originally acquired by the father before 01.04.2001, the cost of acquisition is the Fair Market Value on 01.04.2001, which is ₹13 lakhs. This is indexed from 01.04.2001 (CII 100) to the year of sale 2023-24 (CII 348): ₹13,00,000 × (348/100) = ₹45,24,000.

Cost of Improvements (Indexed): Further construction in FY 2013-14 costing ₹10 lakhs is indexed from FY 2013-14 (CII 220) to FY 2023-24 (CII 348): ₹10,00,000 × (348/220) = ₹15,81,818.

Total Indexed Cost of Acquisition and Improvement: ₹45,24,000 + ₹15,81,818 = ₹61,05,818.

Capital Gain: ₹74,50,000 - ₹61,05,818 = ₹13,44,182.

Application of Section 54 Exemption: The individual has purchased a new residential house for ₹12,00,000 on 20.12.2023. This is within 1 year of the sale (10.05.2023) and he does not own any other residential house, satisfying all conditions of Section 54. Under Section 54, the capital gain is exempted to the extent of the lower of (a) the capital gain realized or (b) the amount invested in the new residential house. Therefore, exemption = min(₹13,44,182, ₹12,00,000) = ₹12,00,000.

Taxable Capital Gain = ₹13,44,182 - ₹12,00,000 = ₹1,44,182 (or ₹1.44 lakhs rounded)

Answer: Taxable Long-Term Capital Gain = ₹1,44,182 (₹1.44 lakhs)

Mr. Surinder inherited a residential house in December 2009. Since the property was originally acquired by his father before 01.04.2001 and inherited after 01.04.2001, under Section 55(2)(a), the Fair Market Value on 01.04.2001 (₹13 lakhs) is deemed as the Cost of Acquisition instead of the date-of-inheritance FMV.

Computation of Indexed Cost of Acquisition:
The FMV on 01.04.2001 (₹13 lakhs) is indexed from 2001-02 to 2023-24 using the Cost Inflation Index. Improvements made in 2013-14 (₹10 lakhs) are indexed separately from 2013-14 to 2023-24. Using standard CII values: 2001-02 (100), 2013-14 (220), and 2023-24 (348), the base cost becomes ₹45,24,000 and improvements become ₹15,81,818, totaling ₹61,05,818.

Computation of Long-Term Capital Gain:
Sale price is ₹75 lakhs. Transfer expenditure of ₹50,000 is deducted to arrive at net sale price of ₹74,50,000. LTCG = ₹74,50,000 − ₹61,05,818 = ₹13,44,182.

Application of Section 54 Exemption:
Under Section 54, since Mr. Surinder purchased another residential house for ₹12 lakhs on 29.12.2023 (within 2 years of sale) and does not own any other residential house, the entire cost of the new house (₹12 lakhs) qualifies for exemption, being less than the LTCG.

Taxable Capital Gain = ₹13,44,182 − ₹12,00,000 = ₹1,44,182

Answer: Total Income of Mr. Joshi for AY 2024-25: ₹1,50,000

Computation of Total Income:

Head 1 - Income from House Property:
Current year income: ₹2,00,000. Less: Brought forward loss from AY 2021-22 of ₹2,50,000 (adjusted to the extent of current income): ₹2,00,000. Net house property income: ₹0. Unabsorbed loss: ₹50,000 (cannot be carried forward under Section 115BAC(1A) as losses cannot be carried forward in the new regime).

Head 2 - Profits and Gains of Business or Profession:
Income from proprietary business: ₹3,00,000. Less: Loss from owning and maintenance of race horses: ₹50,000 (treated as business loss, can be set-off against other business income). Net: ₹2,50,000. Less: Brought forward unabsorbed depreciation from AY 2014-15: ₹1,00,000 (depreciation continues to be set-off even in new regime, but cannot be carried forward if unabsorbed). Net business income: ₹1,50,000. Note: Brought forward business loss from AY 2013-14 (₹50,000) has lapsed as it exceeds the 8-year carry forward period (AY 2013-14 can only be carried forward till AY 2021-22).

Loss from Speculation Business: ₹40,000
Speculation loss can be set-off only against speculation income (Section 71B). Since there is no speculation business income, this loss cannot be adjusted in the current year. Under Section 115BAC(1A), it cannot be carried forward to the next year.

Head 3 - Capital Gains:
Short-term capital gain (land): ₹75,000. Less: Short-term capital loss (listed shares with STT): ₹75,000. Net: ₹0. Brought forward long-term capital loss from AY 2018-19: ₹90,000 (cannot be set-off as no long-term capital gain in current year).

Interest on Bank FD (₹40,000):
Received by son aged 21 years. This income is not clubbed with Mr. Joshi as the son is a major. Not included in Mr. Joshi's total income.

Total Income = ₹0 + ₹1,50,000 + ₹0 = ₹1,50,000

Items Eligible for Carry Forward:

Under Section 115BAC(1A) (default tax regime), most losses cannot be carried forward. Specifically: (i) Business losses cannot be carried forward; (ii) House property losses cannot be carried forward; (iii) Unabsorbed depreciation cannot be carried forward; (iv) Speculation losses cannot be carried forward.

Only long-term capital loss under Section 73 can be carried forward even under the new regime.

Eligible for Carry Forward:
1. Long-term capital loss from AY 2018-19: ₹90,000 – Can be carried forward indefinitely and adjusted against future long-term capital gains.

Not Eligible for Carry Forward (under new regime):
1. House property loss (unabsorbed): ₹50,000 – Cannot be carried forward under new regime
2. Speculation business loss (current year): ₹40,000 – Cannot be carried forward under new regime
3. Unabsorbed depreciation: Already set-off; nil remaining
4. Business loss from AY 2013-14: ₹50,000 – Lapsed (beyond 8-year period); cannot be carried forward

Note: This question references a Profit & Loss Account 'given above' that is not reproduced here. The solution presents all adjustments with computed figures. The business profit (Net Profit as per P&L) is denoted as 'NP'. All adjustments shown below must be applied to that figure.

Regime Note: Mr. Sahil has opted OUT of the default new tax regime under Section 115BAC(1A) of the Income Tax Act, 1961, i.e., he is assessed under the old tax regime. All Chapter VI-A deductions and exemptions are therefore available.

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COMPUTATION OF INCOME FROM BUSINESS OR PROFESSION (AY 2024-25)

Net Profit as per P&L Account: ₹NP

Add back (Inadmissible/Non-business items):
(i) Excess commission paid to member [Section 40A(2)] — commission paid ₹46,000 vs. reasonable rate ₹36,000: +₹10,000
(ii) Contribution to PM's Relief Fund (not a business expense; allowable under Section 80G): +₹10,000
(iii) Loss on Sale of Shares (not a business item; to be reclassified under Capital Gains): +₹XX (as per P&L)
(iv) Book depreciation (to be replaced by tax depreciation): +₹XX (as per P&L)

Less (Allowable deductions not recorded/non-business receipts):
(i) Salary not recorded in books (₹4,000 × 12 months; actually paid, hence deductible u/s 37): −₹48,000
(ii) Profit on Sale of Shares (LTCG; to be reclassified under Capital Gains): −₹XX (as per P&L)
(iii) Depreciation allowable under Section 32 of the Income Tax Act, 1961: −₹2,25,000

Items requiring no further adjustment:
- Cash payment of ₹31,000 to Transport Carrier: No disallowance. Exception under Rule 6DD(i) of the Income Tax Rules, 1962 applies — cash payments to transport operators up to ₹35,000 are excluded from Section 40A(3) disallowance. Since ₹31,000 < ₹35,000 limit: NIL disallowance.
- Bank Term Loan Interest: Section 43B(d) mandates deduction only on actual payment basis. Amount actually paid up to 31.03.2024 = ₹2,00,000 is fully allowable. Unpaid balance (paid October 2024) is deductible in AY 2025-26. If P&L includes unpaid interest, add back that portion.

Income from Business or Profession = NP ± adjustments above

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INCOME FROM HOUSE PROPERTY

Property: Self-occupied residential house.
Gross Annual Value: Nil (self-occupied; deemed Annual Value = Nil)
Less: Municipal Taxes paid: Nil
Net Annual Value: Nil
Less: Standard Deduction u/s 24(a): Nil (as NAV = Nil)
Less: Interest on Housing Loan [Section 24(b)] — Canara Bank (scheduled bank), interest paid ₹2,00,000; maximum deduction for self-occupied = ₹2,00,000: (₹2,00,000)
Loss from House Property: (₹2,00,000)

Note: Housing Loan Principal repayment ₹50,000 is not deductible under house property; it is eligible under Section 80C.

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CAPITAL GAINS

Short-Term Capital Loss [Section 111A]: Sale of listed shares within 6 months (≤ 12 months = short-term capital asset). Assuming STT was paid: STCL taxable at special rate under Section 111A. Amount = ₹(as per P&L). This loss can be set off only against Short-Term or Long-Term Capital Gains.

Long-Term Capital Gain [Section 112A]: Shares held for 2 years (> 12 months = long-term capital asset), STT paid on sale. LTCG taxable at 10% on gains exceeding ₹1,00,000 under Section 112A. Cost of acquisition as per Section 55(2)(ac) (grandfathering for pre-Jan 31, 2018 acquisitions, if applicable). Amount = ₹(as per P&L).

STCL (111A) is set off against LTCG (112A) to arrive at net capital gains.

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GROSS TOTAL INCOME = Business Income + HP Loss + Net Capital Gains

(HP Loss of ₹2,00,000 is set off against Business Income, as per inter-head set-off rules)

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DEDUCTIONS UNDER CHAPTER VI-A (Old Regime)

Section 80C: Principal repayment of Housing Loan from Canara Bank on residential self-occupied property: ₹50,000 (subject to overall limit of ₹1,50,000).

Section 80EE: Additional deduction on interest on housing loan for first-time buyers. Conditions satisfied: loan from financial institution (Canara Bank ✓), property value ₹45 Lakhs ≤ ₹50 Lakhs ✓, loan amount ₹25 Lakhs ≤ ₹35 Lakhs ✓, loan sanctioned 31.03.2017 (within 01.04.2016–31.03.2017 ✓). Maximum deduction: ₹50,000. This is an additional deduction over and above Section 24(b).

Section 80G: Contribution to PM's National Relief Fund — 100% deduction without any qualifying limit: ₹10,000.

Total Chapter VI-A Deductions = ₹1,10,000

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TOTAL INCOME = GTI − ₹1,10,000

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TAX LIABILITY (Old Regime — Individual, age assumed below 60)

On normal income (Business + HP) at slab rates:
- Up to ₹2,50,000: Nil
- ₹2,50,001 – ₹5,00,000: 5%
- ₹5,00,001 – ₹10,00,000: 20%
- Above ₹10,00,000: 30%

On STCG u/s 111A: @ 15% (flat rate, no basic exemption benefit)
On LTCG u/s 112A exceeding ₹1,00,000: @ 10% (flat rate, no basic exemption benefit)

Less: Rebate u/s 87A: ₹12,500 if total income ≤ ₹5,00,000
Add: Health and Education Cess: 4% on income tax

Net Tax Liability = Tax on normal income + Tax on STCG + Tax on LTCG − Rebate u/s 87A + 4% Cess

Answer: Total Income for AY 2024-25 is ₹2,25,000

COMPUTATION OF TOTAL INCOME FOR AY 2024-25

Under the old tax regime (opting out of Section 115BAC(1A)), the income is computed as follows:

1. INCOME FROM HOUSE PROPERTY
Current year income: ₹2,00,000
Less: Brought forward loss from AY 2021-22: ₹2,50,000
Set-off limited to income available: ₹2,00,000
Net income from house property: ₹0
Balance loss to carry forward: ₹50,000

2. INCOME FROM BUSINESS AND PROFESSION
Income from Proprietary Business: ₹3,00,000
Less: Brought forward loss (AY 2013-14): ₹50,000
Less: Brought forward unabsorbed depreciation (AY 2014-15): ₹1,00,000
Net income from proprietary business: ₹1,50,000

Speculation Business Loss ₹40,000 and Race Horse Loss ₹50,000: Cannot be set-off against income from proprietary business. These shall be carried forward separately under Section 73 and Section 58 respectively.

3. INCOME FROM CAPITAL GAINS
Short-term capital gain (land): ₹2,00,000
Less: Short-term capital loss (equity shares, STT paid): ₹75,000
Net capital gains: ₹1,25,000

Long-term capital loss of ₹90,000 brought forward from AY 2018-19: Cannot be carried forward as the return of income was filed on 31.01.2019 after the due date. Section 79 of the Income Tax Act 1961 explicitly bars carry-forward of capital losses if the return is furnished after the due date.

4. OTHER INCOME
Interest on bank fixed deposit ₹50,000 received by son (aged 21): Not assessable to Mr. Joshi. Since the son is a major, he is independently assessable on his own income. The gifted money becomes his asset, and interest earned thereon is his income, not subject to Section 64 or Section 94.

INTER-HEAD SET-OFF
The brought forward house property loss of ₹50,000 (remaining after setting off current year income) can be set-off against income from other heads under Section 71(3)(b).
Set-off against business income: ₹50,000
Business income after inter-head set-off: ₹1,50,000 – ₹50,000 = ₹1,00,000

TOTAL INCOME FOR AY 2024-25:
House Property: ₹0
Business and Profession: ₹1,00,000
Capital Gains: ₹1,25,000
Total Income: ₹2,25,000

ITEMS ELIGIBLE FOR CARRY-FORWARD TO AY 2025-26:

1. Loss from Speculation Business: ₹40,000 – Can be carried forward for 4 years under Section 73 and set-off against speculation business income only.

2. Loss from Owning and Maintenance of Race Horses: ₹50,000 – Can be carried forward for 4 years under Section 58 and can only be set-off against income from the same source (race horses) in subsequent years.

Note: The choice under Section 115BAC(1A) to opt out of the default tax regime and remain in the old regime is implemented here, allowing computation under the normal provisions of the Income Tax Act without restrictions of the new regime.

Computation of Total Income and Taxable Capital Gain for AY 2024-25:

A. Capital Gains Computation:

Short-term Capital Gain (STCG):
Sale of Land: ₹2,00,000
Less: STCL on equity shares (listed on recognized stock exchange, STT paid): ₹(75,000)
Net STCG: ₹1,25,000

Long-term Capital Gain (LTCG):
Long-term Speculation Business: ₹40,000

Brought Forward LTCL (AY 2018-19): ₹60,000
NOT available. Per Section 80(a), capital losses can be carried forward only if the return is filed within the prescribed time. The return for AY 2018-19 was filed on 31.10.2019, which is after the due date of 31.07.2019. Hence, this loss is forfeited.

Taxable Capital Gain: ₹1,25,000 + ₹40,000 = ₹1,65,000

B. Computation of Total Income:

1. Income from House Property:
Computed Income: ₹2,00,000
Less: Brought Forward Loss (AY 2023-24): ₹(2,00,000)
Net Income/(Loss): ₹0
Excess Loss to Carry Forward: ₹50,000

2. Income from Proprietary Business:
Business Income: ₹3,00,000
Less: Unabsorbed Depreciation (AY 2014-15): ₹(1,00,000)
Net Income: ₹2,00,000

3. Capital Gains (as computed above): ₹1,65,000

4. Interest on Bank FD: ₹Nil
The interest of ₹50,000 was received by his son (aged 21 years) out of money gifted in 2022. Since the son is a major, Section 64 does not apply, and this income is taxable in the son's hands, not in Mr. Joshi's hands.

5. Loss from Race Horses: ₹Nil
Loss of ₹50,000 from owning and maintaining race horses cannot be set off against other sources of income per the specific restrictions in the Income Tax Act. This loss can only be carried forward for set-off against future income from the same activity.

Brought Forward Business Loss (AY 2013-14): ₹50,000
NOT available. Business losses can be carried forward for 8 years. From AY 2013-14 to AY 2024-25 is 11 years, which exceeds the carry-forward period. This loss has expired.

TOTAL INCOME: ₹0 + ₹2,00,000 + ₹1,65,000 = ₹3,65,000

C. Items Eligible for Carry Forward to AY 2025-26:

1. House Property Loss: ₹50,000 (can be carried forward for 8 years; can be set off only against house property income)
2. Loss from Race Horses: ₹50,000 (can be carried forward for 8 years; can be set off only against race horse activity income)

Note: The option to shift out of the default new tax regime under Section 115BAC(1A) does not alter the computation of total income. It affects the deductions available and applicable tax rates, not the income computation itself.

Answer to (i) – YES, return filing is required. Mr. Aneesh is 31 years old, placing him in the category with a basic exemption limit of ₹2,50,000 for assessment year 2024-25. His total income of ₹2,90,000 exceeds this limit. Under Section 139(1) of the Income Tax Act, 1961, any person whose total income exceeds the basic exemption limit is mandatorily required to file a return of income. The option to adopt the default tax regime (new tax regime) u/s 115BAC(1A) does not exempt him from this filing obligation.

Answer to (ii) – YES, return filing is required. The presence of TDS credit of ₹55,000 indicates that tax has been deducted at source from Smt. Patel's income during the previous year. Section 139(1) of the Income Tax Act, 1961 mandates filing of return when TDS has been deducted, regardless of whether total income exceeds the basic exemption limit. Smt. Patel, being aged 65 years, falls in the 60-80 age bracket with a basic exemption limit of ₹3,00,000. The TDS credit must be claimed and reconciled in her return for proper accounting of taxes paid.

Answer to (iii) – NO, return filing is not required. The critical factor for determining return filing requirement is total income, not gross receipts. Mr. Ajit's total income (profit from profession) is ₹2,25,000, which is below the basic exemption limit of ₹2,50,000 applicable to individuals below 60 years for assessment year 2024-25. Additionally, there is no indication of TDS being deducted from his income. Under Section 139(1) of the Income Tax Act, 1961, filing is not mandatory when total income is below the exemption limit and no TDS is deducted. The gross receipts of ₹12,00,000 are immaterial for determining the basic filing requirement, though such turnover may trigger other statutory obligations like maintaining books of accounts under Section 44AA.

For assessment year 2024-25, filing of return is mandatory under Section 139(1) of the Income Tax Act, 1961 only if total income exceeds the applicable basic exemption limit. The exemption limits for financial year 2023-24 are: individuals below 60 years – ₹2,50,000; individuals 60 but below 80 years – ₹3,00,000; and individuals 80 years and above – ₹5,00,000.

Mr. Amesh (Age 31): NOT REQUIRED to file. His total income of ₹2,00,000 is below the exemption limit of ₹2,50,000 applicable to individuals below 60 years. Although he opted for the new tax regime u/s 115 BAC(1A), the basic exemption limit remains ₹2,50,000 under both old and new regimes. The filing obligation is determined by the exemption limit, not the regime chosen. Since his income does not exceed the exemption limit and no TDS or advance tax has been mentioned, filing is not mandatory.

Smt. Patel (Age 65): NOT REQUIRED to file if her total income is below ₹3,00,000 (the exemption limit for individuals aged 60-80 years). The mere fact that TDS of ₹55,000 has been deducted does not make filing mandatory. However, she CAN file voluntarily under Section 139(2) to claim refund of the TDS deducted. Such voluntary filing is optional but advisable when TDS exceeds the tax liability.

Mr. Ajit (Age 45): NOT REQUIRED to file. His total income of ₹2,25,000 from the profession is below the exemption limit of ₹2,50,000. The filing requirement under Section 139(1) is based on total income, not gross receipts. Although his gross receipts of ₹12,00,000 are substantial, this has no bearing on the mandatory filing requirement. Filing becomes mandatory only when total income exceeds the applicable exemption limit.

Rule 12AB (inserted by CBDT Notification No. 37/2022 dated 21.04.2022) prescribes the following categories of persons other than companies and firms who must compulsorily file return of income under Section 139(1), irrespective of their total income:

1. Cash Deposits in Saving Accounts: Persons who have deposited more than ₹1 crore in one or more saving accounts during the financial year.

2. Cash Expenditure for Goods: Persons who have incurred cash expenditure exceeding ₹2 lakhs for purchase of goods in a single transaction (excluding food items, fuel, and prescribed services) or aggregate cash expenditure exceeding ₹10 lakhs for purchase of goods and services during the financial year.

3. Foreign Travel: Persons who have incurred cash expenditure exceeding ₹1 lakh for foreign travel.

4. Outward Remittance: Persons who have made outward remittance exceeding ₹1 crore outside India during the financial year.

5. Motor Vehicles: Persons who own one or more motor vehicles (excluding two-wheeled vehicles).

6. Immovable Property: Persons who own immovable property other than agricultural land (value exceeds prescribed threshold).

7. Electricity Consumption: Persons whose electricity consumption exceeds 10,000 kWh during the financial year.

8. Cash Gifts from Unrelated Persons: Persons who have received or enjoyed cash gifts exceeding ₹1 lakh from unrelated persons during the financial year.

9. Foreign Credit Card: Persons who have used foreign credit cards for transactions aggregating more than ₹1 lakh during the financial year.

10. Monetary Transactions with Bank: Persons who have made monetary transactions with any bank exceeding ₹10 lakhs during the financial year.

11. Business or Profession: Persons carrying on business or profession who have received gross receipts of ₹2.5 lakhs or more in a single transaction or in aggregate during the financial year.

12. Cash from Moneylenders/Financial Institutions: Persons who have received any amount in cash from a moneylender or financial institution exceeding ₹1 lakh during the financial year.

These categories ensure that persons with significant financial dealings or asset ownership file returns for transparency and tracking purposes under the Income Tax Act, 1961.

Rule 12AB was inserted by CBDT vide Notification No. 37/2022 dated 21.04.2022 to expand the scope of persons required to file return of income under Section 139(1) of the Income Tax Act, 1961. It applies to persons other than companies or firms who are not ordinarily required to file ITR under Section 139(1) but must file if they meet specified criteria relating to income or financial transactions.

Persons compulsorily required to file return of income under Rule 12AB:

1. Persons with specific income sources:
Any person having income chargeable to tax, loss in business or profession, income or loss from capital gains, or income from house property—even if total income is below the taxable limit.

2. Persons with high-value financial transactions:
- Borrowed more than ₹1 crore during the financial year
- Deposited more than ₹1 crore without satisfactory source explanation
- Single purchase of goods/articles exceeding ₹2 lakhs
- Foreign travel expenditure of ₹1 lakh or more
- Electricity consumption bill exceeding ₹2 lakhs per month or during the year
- Expenditure of ₹10 lakhs or more for buying/constructing a house
- Remittance abroad aggregating ₹10 lakhs or more
- Donation of ₹50,000 or more to any person or entity

3. Persons with significant asset holdings:
- Purchase of motor vehicle costing ₹10 lakhs or more
- Aggregate value of investments, deposits, and jewellery holdings of ₹30 lakhs or more
- Immovable property (other than self-occupied residence) valued at ₹50 lakhs or more

4. Persons with unexplained economic activity:
Any person having borrowed money not fully explained by known sources of income or whose books of accounts or documents show financial transactions not matching returned income.

Rationale: Rule 12AB addresses a significant compliance gap by requiring broader filing of returns even when income is below taxable limits but economic activities indicate substantial financial engagement. This enhances tax compliance, improves data collection, and prevents income leakage through non-disclosure of transactions.

PART A: COMPUTATION OF VALUE OF OUTWARD SUPPLIES AND GST LIABILITY

(1) Supply to Validdi Enterprises, Udaipur, Rajasthan (Intra-State)
As per Section 15(2)(c) of the CGST Act, 2017, any amount charged by the supplier for anything done in relation to the supply at the time of or before delivery of goods is includible in the value of supply. Freight charges of ₹95,000 (for delivery at buyer's premises) are therefore includible.
Value of supply = ₹18,00,000 + ₹95,000 = ₹18,95,000
CGST @ 9% = ₹1,70,550 | SGST @ 9% = ₹1,70,550

(2) Supply to Calc. Exim, Prayagraj, Uttar Pradesh (Inter-State)
As per Section 15(2)(a) of the CGST Act, 2017, taxes, duties, cesses, fees and charges levied under any law other than GST laws, if charged separately, are includible in value of supply. Municipal taxes of ₹60,000 levied in relation to this supply are includible.
Value of supply = ₹35,00,000 + ₹60,000 = ₹35,60,000
IGST @ 18% = ₹6,40,800

(3) Supply of Services to Sunshine Ltd., Jodhpur, Rajasthan (Intra-State)
As per Section 15(3)(a) of the CGST Act, 2017, discount given before or at the time of supply, recorded in the invoice, is deductible from value of supply.
Value of supply = ₹6,00,000 − ₹30,000 = ₹5,70,000
CGST @ 9% = ₹51,300 | SGST @ 9% = ₹51,300

(4) Bill-to-Ship-to Transaction: Supply to Ragini Enterprise, Mumbai, Maharashtra (Inter-State)
This is a bill-to-ship-to scenario. As per Section 10(1)(b) of the IGST Act, 2017, where goods are delivered by the supplier to a recipient on the direction of a third person, the place of supply shall be the principal place of business of such third person (Ragini Enterprise, Maharashtra). Since the supplier is in Rajasthan and place of supply is Maharashtra, IGST applies.
Value of supply = ₹2,00,000
IGST @ 18% = ₹36,000

Total Outward GST Liability:
CGST = ₹1,70,550 + ₹51,300 = ₹2,21,850
SGST = ₹1,70,550 + ₹51,300 = ₹2,21,850
IGST = ₹6,40,800 + ₹36,000 = ₹6,76,800

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PART B: COMPUTATION OF ELIGIBLE INPUT TAX CREDIT (ITC)

(1) Raw Materials from PQR Ltd., Kanpur, UP (Inter-State): As per Section 16(2)(b) of the CGST Act, 2017, ITC can be availed only on receipt of goods. Goods worth ₹1,00,000 not received during the month are ineligible. Eligible value = ₹19,00,000. IGST @ 18% = ₹3,42,000 — ELIGIBLE.

(2) Machinery from MRO Pvt. Ltd., Bengaluru (Inter-State): As per Section 16(3) of the CGST Act, 2017, if depreciation is claimed on the GST component of capital goods under the Income Tax Act, 1961, ITC on that portion is not admissible. Since depreciation was claimed on the full value including GST, the entire ITC of IGST ₹36,000 is NOT ELIGIBLE.

(3) Truck from Ajmer, Rajasthan (Intra-State): Motor vehicles used for transportation of goods are not covered under blocked credits under Section 17(5)(a) of the CGST Act, 2017. ITC is fully available. CGST @ 14% = ₹2,10,000 | SGST @ 14% = ₹2,10,000 — ELIGIBLE.

(4) Car (7-seater) from Mihir Automobiles, Ajmer (Intra-State): As per Section 17(5)(a) of the CGST Act, 2017, ITC is blocked on motor vehicles for transportation of persons with approved seating capacity of ≤ 13 persons (including driver), unless used for further supply, passenger transportation, or driving training. Use for director's official purpose is not an exception. CGST ₹1,40,000 and SGST ₹1,40,000 are NOT ELIGIBLE.

(5) Goods for construction of additional floor from DEF Buildsvd, Jaipur (Intra-State): As per Section 17(5)(d) of the CGST Act, 2017, ITC on goods received for construction of immovable property on own account (other than plant and machinery) is blocked, even if used in furtherance of business. CGST ₹45,000 and SGST ₹45,000 are NOT ELIGIBLE.

Total Eligible ITC for September 2023:
CGST: ₹2,10,000 | SGST: ₹2,10,000 | IGST: ₹3,42,000

Adding Opening ITC Balance: CGST ₹20,000 + SGST ₹50,000 + IGST ₹75,000

Total Available ITC: CGST ₹2,30,000 | SGST ₹2,60,000 | IGST ₹4,17,000

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PART C: NET GST PAYABLE IN CASH

As per Section 49A of the CGST Act, 2017, IGST credit must be utilized first before using CGST or SGST credit. Utilization order:

IGST ITC (₹4,17,000) against IGST liability (₹6,76,800) → Balance IGST = ₹2,59,800
CGST ITC (₹2,30,000) against CGST liability (₹2,21,850) → CGST NIL; Surplus CGST ITC = ₹8,150
SGST ITC (₹2,60,000) against SGST liability (₹2,21,850) → SGST NIL; Surplus SGST ITC = ₹38,150
Surplus CGST ITC (₹8,150) against remaining IGST → Balance IGST = ₹2,51,650
Surplus SGST ITC (₹38,150) against remaining IGST → Balance IGST = ₹2,13,500

Net GST payable in cash: CGST — NIL | SGST — NIL | IGST — ₹2,13,500

Computation of Net GST Payable in Cash by Evershine Pvt. Ltd. for September 2023

Step 1 — Taxable Value of Outward Supplies

All supplies are assumed intra-state (CGST + SGST), as Evershine is registered in Jaipur, Rajasthan and no inter-state indication is given.

(1) Goods to Vaidehi Enterprises: Contract price ₹18,00,000 + freight ₹50,000 = ₹18,50,000. Freight charged by the supplier is includible in the value of supply under Section 15(2)(b) of the CGST Act, 2017.

(2) Goods to Calc. Exim: Contract price ₹35,00,000 + municipal taxes ₹60,000 = ₹35,60,000. Taxes levied under any other law and charged by the supplier to the recipient are included under Section 15(2)(a) of the CGST Act, 2017.

(3) Services to Sunshine Ltd.: ₹6,00,000 − discount ₹30,000 = ₹5,70,000. A discount shown on the face of the invoice is deductible under Section 15(3)(a) of the CGST Act, 2017.

(4) Goods delivered to Jeevan Solutions at direction of Raghu Enterprise: This is a bill-to-ship-to arrangement. The supply is treated as made by Evershine to Raghu Enterprise (the directing party); Jeevan Solutions is merely the recipient of physical delivery. Taxable value = ₹2,00,000.

Total Output Tax Liability:
All four supplies attract CGST @9% + SGST @9% (intra-state).
Total Taxable Value = ₹18,50,000 + ₹35,60,000 + ₹5,70,000 + ₹2,00,000 = ₹61,80,000
CGST @9% = ₹5,56,200 | SGST @9% = ₹5,56,200

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Step 2 — Eligible Input Tax Credit (ITC)

(1) Raw material ₹20,00,000 (₹1,00,000 not received): ITC is available only on goods actually received per Section 16(2)(b) of the CGST Act, 2017. Eligible base = ₹19,00,000. CGST ITC = ₹1,71,000; SGST ITC = ₹1,71,000.

(2) Machinery ₹2,00,000 (depreciation claimed): Under Section 16(3) of the CGST Act, 2017, if depreciation is claimed on the GST component, ITC is not available. ITC = NIL.

(3) Truck ₹15,00,000: A truck is used for transportation of goods, not persons. The restriction under Section 17(5)(a) of the CGST Act, 2017 applies to motor vehicles for transportation of persons (approved seating capacity ≤13 persons). ITC on trucks is fully available. CGST ITC = ₹1,35,000; SGST ITC = ₹1,35,000.

(4) Car ₹10,00,000: A car is a motor vehicle for transportation of persons (≤13 seats). ITC is blocked under Section 17(5)(a) of the CGST Act, 2017. ITC = NIL.

(5) Goods for factory construction ₹5,00,000: ITC is blocked under Section 17(5)(c) and (d) of the CGST Act, 2017 for goods used in construction of an immovable property (other than plant and machinery). ITC = NIL.

Total ITC Available:
Current period: CGST ₹3,06,000 + SGST ₹3,06,000
Add: Opening balances: CGST ₹20,000 + SGST ₹50,000 + IGST ₹75,000
Net ITC: CGST ₹3,26,000 | SGST ₹3,56,000 | IGST ₹75,000

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Step 3 — ITC Utilization (Order per Section 49 of CGST Act, 2017)

Since there is no IGST output liability, the IGST ITC of ₹75,000 is applied against CGST liability first (to minimise cash outflow, as CGST residual is higher).

CGST: ₹5,56,200 − ₹3,26,000 (CGST ITC) − ₹75,000 (IGST ITC) = ₹1,55,200
SGST: ₹5,56,200 − ₹3,56,000 (SGST ITC) = ₹2,00,200
IGST: NIL

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Net GST Payable in Cash: CGST ₹1,55,200 + SGST ₹2,00,200 = ₹3,55,400

Analysis of Each Transaction:

1. Remuneration for Chief Selector (₹5,00,000): While services provided by a recognized sports body are exempt under Schedule III of the CGST Act 2017, this transaction involves remuneration paid to an individual for services rendered to the sports body. The exemption applies to services provided by the sports body to the public, not services received by the sports body. Therefore, ₹5,00,000 is taxable.

2. Pure Labour Contract for Residential Construction (₹1,80,000): Section 13(8) of the CGST Act 2017 provides exemption for "supply of construction service in relation to construction of an independent residential unit." Pure labour contracts for construction of residential units fall within this exemption. Therefore, ₹1,80,000 is exempt.

3. Warehouse Rental for Sugarcane Storage (₹75,000): Warehousing services for storage of agricultural produce are exempt under Schedule III of the CGST Act 2017. Since sugarcane is an agricultural product and the warehouse is being rented for its storage, this supply qualifies for exemption. Therefore, ₹75,000 is exempt.

4. Services to Municipal Corporation (₹6,50,000): Services provided by Government or local authorities are exempt under Schedule III. However, this transaction involves services supplied to the Municipal Corporation. Services rendered to government/local authority entities for slum improvement do not have a specific exemption under GST. Therefore, ₹6,50,000 is taxable.

5. Western Music Dance Performance (₹1,25,000): Services by performing artists by way of dancing, singing, playing musical instruments, or similar performances are exempt under Schedule III of the CGST Act 2017. This cultural performance service qualifies for exemption. Therefore, ₹1,25,000 is exempt.

Computation of Taxable Value:
Remuneration to Chief Selector: ₹5,00,000
Services to Municipal Corporation: ₹6,50,000
Total Taxable Value = ₹11,50,000

This taxable value would attract GST at applicable rates (5%, 12%, or 18% depending on the classification of services for transactions 1 and 4).

Determination of Value of Taxable Supply and Nature of GST for Evershine Pvt. Ltd. for September 2023

Evershine Pvt. Ltd. is registered in Jaipur, Rajasthan. The value and nature of each outward supply is determined under Section 15 of the CGST Act, 2017 and Section 7/8 of the IGST Act, 2017.

(a) Transaction 1 — Supply of goods to Vaidhi Enterprises (Udaipur, Rajasthan): ₹18,50,000 | Intra-state | CGST + SGST

Both supplier (Jaipur) and recipient (Udaipur) are in Rajasthan, making this an intra-state supply chargeable to CGST + SGST.

As per Section 15(2)(c) of the CGST Act, 2017, incidental expenses including freight, packing, and any other charges incurred by the supplier in respect of the supply up to delivery shall be included in the value of supply. Evershine agreed to deliver goods at Vaidhi's premises and received ₹50,000 as freight charges. Hence, ₹50,000 forms part of the transaction value.

Taxable Value = ₹18,00,000 + ₹50,000 = ₹18,50,000

(b) Transaction 2 — Supply of goods to Calc. Exam. (Prayagraj, UP): ₹35,60,000 | Inter-state | IGST

Supplier is in Rajasthan and recipient is in Uttar Pradesh — this is an inter-state supply chargeable to IGST under Section 5 of the IGST Act, 2017.

As per Section 15(2)(a) of the CGST Act, 2017, any taxes, duties, cesses, fees and charges levied under any law other than GST law, if charged separately by the supplier, shall be included in the value of supply. Municipal taxes of ₹60,000 levied in relation to this supply were charged separately — they must be included.

Taxable Value = ₹35,00,000 + ₹60,000 = ₹35,60,000

(c) Transaction 3 — Supply of services to Sunshine Ltd. (Jodhpur, Rajasthan): ₹5,70,000 | Intra-state | CGST + SGST

Both supplier (Jaipur) and recipient (Jodhpur) are in Rajasthan — intra-state supply chargeable to CGST + SGST.

As per Section 15(3)(a) of the CGST Act, 2017, a discount given before or at the time of supply shall be excluded from the value of supply, provided it is duly recorded in the invoice. The discount of ₹30,000 was given at the time of supply and is recorded in the invoice — it qualifies for deduction.

Taxable Value = ₹6,00,000 − ₹30,000 = ₹5,70,000

(d) Transaction 4 — Bill-to Ship-to: Raghu Enterprise (Mumbai, Maharashtra) / Unregistered Supplier Solutions (Bikaner, Rajasthan): ₹2,00,000 | Inter-state | IGST

This is a classic bill-to ship-to scenario. Evershine (Jaipur) supplied goods to Raghu Enterprise (Mumbai) but physically delivered them to Unregistered Supplier Solutions (Bikaner) on Raghu's direction.

As per Section 10(1)(b) of the IGST Act, 2017, where goods are delivered by the supplier to a recipient on the direction of a third person, the place of supply shall be the principal place of business of such third person (i.e., Raghu Enterprise). Accordingly, the place of supply = Mumbai, Maharashtra.

Since the supplier (Rajasthan) and place of supply (Maharashtra) are in different states, this is an inter-state supply — IGST applies.

Taxable Value = ₹2,00,000

Summary Table:

| # | Recipient | Taxable Value (₹) | Nature | Tax Applicable |
|---|-----------|-------------------|--------|----------------|
| 1 | Vaidhi Enterprises (Udaipur, RJ) | 18,50,000 | Intra-state | CGST + SGST |
| 2 | Calc. Exam. (Prayagraj, UP) | 35,60,000 | Inter-state | IGST |
| 3 | Sunshine Ltd. (Jodhpur, RJ) | 5,70,000 | Intra-state | CGST + SGST |
| 4 | Raghu Enterprise (Mumbai, MH) | 2,00,000 | Inter-state | IGST |

Case 1: Mr. Joy's Courier from Kolkata to Mumbai — The supply involves movement of goods from Kolkata, West Bengal to Mumbai, Maharashtra. Since the goods are in movement, Rule 4(2) of the CGST Rules 2017 applies, which provides that 'where goods are to be moved or are moved from one location to another, the place of supply shall be the location to which the goods are to be sent or supplied.' The goods are being delivered to the recipient (Joy's sister) in Mumbai. Place of Supply: Maharashtra.

Case 2: Mr. Nitin's Two-Way Journey Ticket — This involves supply of passenger transport services. Rule 7(3) of the CGST Rules 2017 specifically provides that 'the place of supply of services by way of passenger transport shall be the location from which such passenger transport is to commence, as indicated in the ticket issued at the time of supply.' The ticket is for a round trip commencing from Prayagraj, Uttar Pradesh to Jaipur, Rajasthan. Although the ticket includes a return journey, the place of supply is determined by the location from which the outbound journey commences. Place of Supply: Uttar Pradesh.

Case 3: Rinkum's Machinery Purchase for Installation — The supply involves machinery being sent from Jaipur, Rajasthan to Handivar, Uttarakhand for installation at Rinkum Pvt. Ltd.'s factory. Since the goods are in movement from one state to another, Rule 4(2) of the CGST Rules 2017 applies. The goods are being supplied to the location of Handivar, Uttarakhand where they are to be installed. The place of supply is the location to which the goods are sent, not the location of the recipient's registered office (Lucknow). Place of Supply: Uttarakhand.

Answer: Eligible ITC = ₹24,000; Net Minimum GST to be paid in cash = ₹7,000

When a business opts for voluntary registration under Section 18(1) of the CGST Act 2017, Input Tax Credit (ITC) is available on opening stock of inputs held on the date preceding registration, subject to the following conditions: (1) inputs must have been procured within 180 days prior to registration; (2) inputs must be held in their original form and not consumed in manufacturing before registration; and (3) valid invoices with tax details must be available.

Analysis of Eligible ITC:

Capital goods procured on 5th February 2024: These capital goods are held as fixed assets in their original form. Procured 19 days before registration (24 Feb 2024), within the 180-day window. CGST @ 6% = ₹12,000; SGST @ 6% = ₹12,000. Eligible ITC = ₹24,000.

Inputs in finished goods stock procured 13th February 2023: These inputs were procured on 13 Feb 2023, which is approximately 376 days before registration on 24 Feb 2024. This falls outside the 180-day eligibility period prescribed under Section 18(1) of CGST Act 2017. NOT ELIGIBLE.

Inputs in semi-finished goods procured 10th October 2023: Although procured within 180 days (137 days before registration), these inputs have been consumed/incorporated into semi-finished goods through manufacturing. Opening stock ITC applies to inputs held in their original form, not inputs already used in production. NOT ELIGIBLE.

Input in finished goods procured 1st February 2024: Although within 180 days, the input has been incorporated into finished goods. Since the input is not in its original form, it does not qualify for opening stock ITC under the prescribed conditions. NOT ELIGIBLE.

Input in finished goods procured 8th February 2024: Same reasoning—this input has been consumed in manufacturing finished goods and is not in its original form. NOT ELIGIBLE.

Computation of Net Minimum GST:
Output Tax Liability (CGST) for February 2024 = ₹31,000
Less: Eligible ITC = ₹24,000
Net Minimum GST to be paid in cash = ₹7,000

Eligible ITC Available and Net GST Payable for February 2024:

Vishnu Limited's voluntary registration was granted on 24th February 2024. Under Section 18(1) of the CGST Act 2017, a registered person is entitled to claim input tax credit on goods held in stock on the date of registration, subject to prescribed conditions.

ITC Eligibility Assessment:

*Item 1 - Capital Goods (5th Feb 2024):*
Procured before registration date. CGST @ 6% = ₹2,00,000 × 6% = ₹12,000; SGST @ 6% = ₹12,000. ITC eligible: ₹24,000

*Item 2 - Inputs in Finished Goods (13th Feb 2023):*
IGST @ 18% = ₹3,00,000 × 18% = ₹54,000. Since Vishnu Limited is not engaged in inter-State outward taxable supplies, IGST cannot be claimed as ITC (IGST is applicable only where inter-State supplies are made or received). ITC eligible: ₹0

*Item 3 - Inputs in Semi-Finished Goods (10th Oct 2023):*
CGST @ 6% = ₹2,50,000 × 6% = ₹15,000; SGST @ 6% = ₹15,000. Procured before registration and within 24-month ITC eligibility period. ITC eligible: ₹30,000

*Item 4 - Inputs in Semi-Finished Goods (1st Feb 2024):*
CGST @ 7.5% = ₹1,50,000 × 7.5% = ₹11,250; SGST @ 7.5% = ₹11,250. Procured before registration. ITC eligible: ₹22,500

*Item 5 - Inputs in Finished Goods (8th Feb 2024):*
IGST @ 18% = ₹60,000 × 18% = ₹10,800. Not claimable (same reason as Item 2). ITC eligible: ₹0

Total Eligible ITC:
CGST ITC: ₹12,000 + ₹15,000 + ₹11,250 = ₹38,250
SGST ITC: ₹12,000 + ₹15,000 + ₹11,250 = ₹38,250
Total: ₹76,500

Net GST Payable in Cash:
CGST Liability: ₹31,000 - CGST ITC ₹38,250 = (-₹7,250) Refund
SGST Liability: ₹31,000 - SGST ITC ₹38,250 = (-₹7,250) Refund

Net Amount to be Paid in Cash: ₹0 (Refund of ₹14,500 is due)

Case 1: Baggage through Courier Service

The service involves transportation of goods (baggage) via a courier agency. Under Section 12(3)(b) of the CGST Act, 2017, for transportation of goods, the place of supply is the location where the goods are picked up by the service provider. Since Mohan Courier Agency, the transportation service provider, is located in Kolkata and the baggage is sent/picked up from Kolkata, West Bengal, the place of supply is Kolkata, West Bengal. The fact that goods are delivered to Mumbai is irrelevant for determining place of supply in courier/transportation services.

Case 2: Two-way Air Journey Ticket

The service is transportation of persons by air. Under Section 12(3)(c)(ii) of the CGST Act, 2017, the place of supply for air transportation is where the journey of the passenger commences. Nitin's journey commences from Prayagraj on 11th September, 2024 (the starting point of the outbound flight). Even though the ticket covers a round-trip with intermediate stops in Jaipur and return journey, the place of supply is determined by where the passenger's journey begins. The place of supply is Prayagraj, Uttar Pradesh. The subsequent legs of the journey (Jaipur to Prayagraj) are part of the same contractual supply and do not change the principal place of supply determination.

Case 3: Machinery Purchased for Installation

The supply involves tangible goods (manufacturing machinery). Under Section 12(3)(a) of the CGST Act, 2017, for supply of goods, the general rule is that the place of supply is where goods are delivered to the recipient. However, when goods are supplied for erection or installation, the place of supply is the location where the goods are actually installed or erected, not where they are dispatched from or delivered to. Since the machinery is purchased by Raman Pvt. Ltd. (Lucknow) but is intended for installation in its factory located in Uttarakhand, the place of supply is Uttarakhand. The purchaser's location is irrelevant when goods are meant for installation at a different location.

Case (1): Courier Service from Kolkata to Mumbai

The place of supply is Kolkata, West Bengal. The courier service involves the transport of goods from the shipper (Mr. Joy) in Kolkata to the recipient in Mumbai. According to Rule 12(5) of the CGST Rules 2017, for services of transport of goods, the place of supply is the location where the goods are actually located at the time when the transport begins. Since the goods are located in Kolkata when handed over to Mohan Courier Agency, the place of supply is Kolkata, West Bengal.

Case (2): Passenger Air Transport (Outbound and Return Journey)

For the outbound journey (Prayagraj to Jaipur on 11 September), the place of supply is Prayagraj, Uttar Pradesh. For the return journey (Jaipur to Prayagraj, departing 15 September and arriving 16 September), the place of supply is Jaipur, Rajasthan. As per Rule 12(4) of the CGST Rules 2017, for services of passenger transport, the place of supply is determined by the location from which the passenger is actually transported. Each journey leg is treated separately—the place of supply is the location from which that particular journey commences. Therefore, Prayagraj is the place of supply for the outbound leg, and Jaipur is the place of supply for the return leg.

Case (3): Supply of Manufacturing Machine with Installation

The place of supply is Haridwar, Uttarakhand. Although the supplier (Manav Steel Industries) is located in Jaipur and the buyer (Rimjhim Pvt. Ltd) is located in Lucknow, the supply involves installation work at a third location. As per Rule 12(6) of the CGST Rules 2017, for services of work on goods, the place of supply is the location where such work is actually performed. Since the manufacturing machine is to be installed at the factory in Haridwar, the place of supply is determined to be Haridwar, Uttarakhand, where the installation service is executed.

Shortfall Identification and Analysis: M/S Avida Limited identified a shortfall of ₹16,000 in tax payment for January 2024 after filing the GSTR 3B by due date (February 29, 2024). The shortfall was subsequently paid during February 2024 return filing on March 20, 2024.

Interest Calculation: As per Rule 69(4) of the CGST Rules 2017, when a shortfall is not paid by the original due date but is paid with the subsequent month's return, interest is levied at 18% per annum (as specified in Section 50 of the CGST Act 2017). Interest accrues from the original due date (February 29, 2024) to the date of payment (March 20, 2024), which is 20 days.

Interest = ₹16,000 × 18% × (20 ÷ 365) = ₹158 (rounded)

Penalty Calculation: Under Rule 73 of the CGST Rules 2017, a penalty equal to 25% of the interest is levied for failure to pay tax on time.

Penalty = 25% × ₹158 = ₹40 (rounded)

Total GST Liability: The total amount required to be paid for the shortfall is: Shortfall (₹16,000) + Interest (₹158) + Penalty (₹40) = ₹16,198

Payment Analysis: The company paid ₹16,000 through cash ledger (₹12,000) and credit ledger (₹4,000). The use of credit ledger for payment is permissible. However, the company falls short by ₹198, comprising interest (₹158) and penalty (₹40), which must be paid to fully settle the shortfall liability.

Part (i): Interest on Delayed Payment (GSTR 3B filed on time)

Interest is payable under Section 50 of the CGST Act 2017 on any amount of tax which is not paid on or before the due date. The calculation is governed by Rule 88B of the CGST Rules 2017, which prescribes interest at 18% per annum from the date on which tax was due till the date of actual payment.

The tax shortfall of ₹16,000 was due to be paid by February 20, 2024 (the due date for GSTR 3B for January 2024). However, it was actually paid on March 20, 2024, creating a delay of 29 days.

Interest Payable = ₹229

Part (ii): Effect of Late Filing of GSTR 3B on March 20, 2024

If GSTR 3B for January 2024 had been filed belatedly on March 20, 2024 with all other conditions remaining the same:

1. Interest on delayed tax payment remains the same: ₹229 — The interest is calculated from the statutory due date (February 20, 2024) to the actual date of payment (March 20, 2024), irrespective of when the GSTR 3B is filed. Since the tax payment date is unchanged in this scenario, the interest of ₹229 continues to apply.

2. Additional Liability for Late Filing: In addition to the interest, a late fee would become payable for the delayed filing of GSTR 3B. Under the CGST Rules 2017, the filing of GSTR 3B after the prescribed due date attracts additional consequences. The taxpayer would be liable to pay both:
- Interest on delayed payment of tax: ₹229
- Late fee/penalty for delayed filing of GSTR 3B (as prescribed under applicable rules or notifications)

Thus, the total liability in Part (ii) would be higher than Part (i) by the amount of the late fee applicable for delayed filing.

Who is Liable to Collect TCS: An Electronic Commerce Operator (ECO), not being a Government entity, making supplies of goods or services or both through electronic commerce is liable to collect TCS under Section 52 of the CGST Act, 2017. TCS applies when the supplier is not registered under GST and the supply is facilitated through the ECO's platform. TCS is collected at 1% of the value of taxable supplies (or as notified by the Commissioner).

Registration Requirements: ECOs liable to collect TCS must obtain compulsory registration under GST. Registration is mandatory for all ECOs facilitating supplies, even if the ECO itself makes no taxable supplies. The registration should be obtained with the State GST authority where the ECO is located. A separate registration may be required for each State where the ECO operates. The registration certificate should indicate the ECO's liability to collect TCS. Registration cannot be refused if the prescribed conditions are satisfied.

Filing of Returns (Rule 12 CGST Rules, 2017): ECOs shall file monthly returns in the prescribed format (typically GSTR-8 or as specified). The return must be filed by the 10th of the succeeding month or within the extended period as notified. The return should contain details of all supplies facilitated through the platform, including value of each supply, particulars of suppliers (registered and unregistered), tax collected during the month, and tax remitted to Government. All returns must be filed electronically on the GST portal, and ECOs must maintain detailed records of all supplies facilitated and TCS collected.

Deposit of TCS to Government: The TCS collected must be deposited to the Government within prescribed timelines. Payment must be made by the 10th of the succeeding month (TCS collected in March must be paid by 10th April) through authorized banks or the official payment gateway. The TCS collected is distributed between the Central Government (IGST portion) and respective State Government (SGST portion) and credited to the appropriate GST ledger accounts. Payment proof must be retained for audit and compliance purposes. Failure to deposit TCS on time attracts interest at 18% per annum and applicable penalties. TCS collected should not be adjusted against the ECO's own GST liability unless expressly permitted. Suppliers can claim credit of TCS collected against their GST liability as per Section 52 provisions.

Section 15(3) of the CGST Act 2017 provides for the deduction of post-supply discounts from the value of supply through the mechanism of credit notes. The following conditions must be satisfied for availing this deduction:

Timing of Issue: The credit note reducing the consideration must be issued AFTER the supply of goods or services has been made. However, it may be issued either before or after the payment of tax. The key is that the supply itself must be completed first.

Clear Identification and Quantifiability: The discount amount must be clearly identifiable and quantifiable. The discount cannot be vague or conditional in nature. It must be capable of being ascertained with certainty and must be separately stated in the credit note.

Nexus to Specific Supply: The discount must be directly and unmistakably linked to the original supply. It should relate to a particular transaction and not be a generalized allowance.

Issued by the Supplier: The credit note must be issued by the supplier of goods or services. It cannot be issued by any intermediary, agent, or third party. The supplier must have the authority to grant the discount.

Communication to Recipient: The credit note must be issued and communicated to the recipient/buyer. The recipient must be informed of the discount being granted. Merely issuing an internal note is insufficient.

No Pre-Supply Condition: The discount must not be a condition precedent to the supply. If the discount was agreed upon before or as part of the original contract, it would constitute a reduction in the price of supply and not a post-supply discount.

Documentary Evidence: There must be documentary evidence supporting the issuance of the credit note. The credit note should comply with the format and requirements prescribed under Rule 28 of the CGST Rules 2017.

Determination as per Sub-section (2): The reduction in value of supply shall be determined in accordance with Section 15(2), which prescribes the method for computing the adjusted value when a credit note is issued.

Consideration is defined under Section 2(31) of the CGST Act, 2017, as the price paid or payable for a supply of goods or services, including any contribution, gift, donation, transfer, or other settlement whether in kind or in cash.

However, the definition of consideration explicitly excludes voluntary contributions to a charitable institution registered under Section 12AB or 12A of the Income Tax Act, 1961. This exclusion is crucial for understanding donations to charitable institutions.

Analysis of Donations Without Quid Pro Quo:

When a charitable institution receives a donation from an individual donor without any quid pro quo (return benefit or obligation), the donation does not constitute consideration for GST purposes. This is because:

(1) Absence of Supply: A donation without quid pro quo involves no reciprocal supply of goods or services. The donor receives nothing in return—no goods are delivered, no services are rendered. Since GST is a tax on supplies, and no supply exists where there is only a unilateral transfer of money, GST does not apply.

(2) Statutory Exclusion: The explicit carve-out in Section 2(31) exempts voluntary contributions to registered charitable institutions from being treated as consideration. This is a legislative recognition that donations are distinct from commercial transactions involving consideration.

(3) Nature of Charitable Donations: Donations to charitable institutions are made with donative intent—motivated by philanthropy, social responsibility, or religious duty—not as a payment for goods or services. The absence of quid pro quo is the defining feature that distinguishes donations from commercial considerations.

(4) Registration Requirement: The exclusion applies only if the charitable institution is registered under Section 12A or 12AB of the Income Tax Act, 1961. Such registration ensures that the institution is genuinely charitable in nature.

Conclusion:

Donations received by charitable institutions from individual donors without quid pro quo do not constitute consideration under Section 2(31) of the CGST Act, 2017. Therefore, such donations are outside the scope of GST, and no input tax credit or output GST liability arises on them. This treatment is appropriate because consideration fundamentally requires a supply-recipient relationship, which is absent in voluntary, gratuitous donations.

Section 15(3) of the CGST Act 2017 provides that the value of supply may be reduced by the amount of post-supply discounts if specific conditions are satisfied. Post-supply discounts are those granted after the supply of goods or services has been made.

The conditions to be satisfied for availing deduction of post-supply discounts are:

1. Communication in Writing: The discount must be communicated to the recipient in writing. This requirement ensures proper documentation and transparency in the transaction. Oral or informal communication is not sufficient. The written communication should clearly specify the amount of discount and the reason thereof.

2. Acceptance by Recipient in Writing: The recipient must accept the discount in writing. A unilateral communication by the supplier is insufficient. There must be mutual acknowledgment and acceptance by both parties, which should be documented in writing. This creates a binding agreement between the supplier and the recipient.

3. Support by Debit Note or Credit Note: The discount must be supported by a debit note or credit note, as the case may be, issued in accordance with the GST law and rules. A debit note is issued by the supplier to reduce the original invoice amount, while a credit note is issued when the recipient claims a reduction. These notes must comply with Rule 34 of the CGST Rules 2017, which prescribes the format, contents, and timing requirements.

4. Restriction on Input Tax Credit: The discount should not relate to supplies for which the recipient is not entitled to claim input tax credit. This is a negative condition; the discount can be availed only on taxable supplies where the recipient has the right to claim ITC. If the original supply did not qualify for ITC, the discount on that supply cannot reduce the value of supply for GST purposes.

5. Timing Requirement: Although termed a "post-supply" discount, it should be communicated and accepted before payment is finalized. The discount must be substantiated within the prescribed time limits for issuing credit/debit notes.

These conditions ensure that post-supply discounts are transparent, documented, and do not facilitate wrongful ITC claims. Failure to satisfy any condition results in the discount not being allowed as a deduction from the value of supply.

Examination of Consideration for Donations Without Quid Pro Quo

Definition of Consideration under Section 2(31):

Section 2(31) of the CGST Act, 2017 defines "consideration" as "the payment made or to be made, whether in money or otherwise, for a supply of goods or services or both." The pivotal word is "for"—indicating that consideration must be exchanged in return for a supply. This definition establishes that consideration is not merely a payment, but a payment linked to the provision of goods or services.

Concept of Quid Pro Quo:

Quid pro quo means "something for something." It represents the reciprocal nature of a taxable transaction. For a transaction to constitute a supply under Section 7 of the CGST Act, 2017, there must be consideration flowing from the recipient. Conversely, if there is no quid pro quo, there is no reciprocal obligation, and hence no supply.

Existence of Consideration in Donations Without Quid Pro Quo:

When individual donors make donations to charitable institutions without quid pro quo, the following examination is critical:

1. Nature of Donation: A donation is a voluntary, gratuitous transfer of funds or goods. The donor gives without expecting any return—neither goods, services, nor identifiable benefits.

2. Absence of Supply: The charitable institution does not "supply" anything to the donor in exchange. While the institution may utilize donations for charitable purposes (education, healthcare, relief), such utilization is not a supply "for" the individual donor. There is no contractual obligation on the institution to deliver anything to the donor.

3. No Quid Pro Quo Exists: The donor receives no tangible or intangible benefit. Even if the charitable institution benefits from the donation and expands its services, this benefit does not accrue to the donor.

Critical Finding:

No consideration exists for donations received by charitable institutions from individual donors when there is an absolute absence of quid pro quo. This is because consideration, as defined in Section 2(31), requires a payment "for" a supply. Without supply and without quid pro quo, the essential element of consideration is absent.

Distinction - When Consideration May Exist:

Consideration may be deemed to exist if the charitable institution provides even nominal benefits, such as: naming rights, acknowledgment certificates, membership in an exclusive donor group, or access to events. In such cases, a quid pro quo is established, consideration exists, and GST treatment may apply.

Conclusion:

The existence of consideration is fundamentally dependent on the presence of quid pro quo. Pure donations without any return expectation involve no consideration as contemplated under Section 2(31) of the CGST Act, 2017. Such donations are not taxable supplies, and consequently, no GST is applicable. This principle is crucial in understanding the preferential treatment accorded to charitable institutions under the GST framework.

Reverse Charge Applicability: Reverse charge under Section 9(3) of CGST Act 2017 applies when a registered person (recipient) receives supplies from an unregistered person. Section 9(3) states that for supplies notified by the Government, the time of supply is when the recipient obtains possession or services are provided, and reverse charge mechanism makes the recipient liable to pay GST instead of the supplier.

Scenario 1 - Advocate Sameer (Registered Supplier): Since Advocate Sameer is a registered person, reverse charge does NOT apply to this supply. Sameer, being registered, is liable to issue a tax invoice as per Rule 52 of CGST Rules 2017 and pay GST directly to the Government. Mohan Enterprise will claim GST input credit on the invoice issued by Sameer. No document needs to be issued by recipient in this case.

Scenario 2 - Shekhar (Unregistered Supplier): Since Shekhar is an unregistered person providing labour services, reverse charge APPLIES. As per Section 9(3) and Section 31(2) of CGST Act 2017 and Rule 53 of CGST Rules 2017, Mohan Enterprise (the recipient and registered person) becomes liable to pay GST and must issue a document (invoice) in place of the supplier's invoice.

Provisions for Invoice Issued by Recipient: When reverse charge applies, Rule 53 mandates that the recipient shall issue an invoice containing all particulars specified in Rule 52, including: (i) Unique invoice number and date; (ii) Supplier's (Shekhar's) name, address and GSTIN status (if any); (iii) Recipient's (Mohan Enterprise's) name, address and GSTIN; (iv) Description of services (labour), SAC code, quantity and rate; (v) Applicable tax rates and amounts (CGST and SGST); (vi) Clear notation that invoice is issued by recipient under reverse charge; (vii) Recipient's digital signature or authorized representative's signature.

Key Distinction: The invoice issued by recipient for Shekhar's services will differ from Sameer's tax invoice in that it must explicitly state it is issued under reverse charge, and Mohan Enterprise becomes the taxpayer for that supply. The invoice should be issued within prescribed time and uploaded in GSTR-1 filing by the recipient.

Conclusion: Mohan Enterprise must issue an invoice by recipient only for services from Shekhar (unregistered), as reverse charge applies; whereas for services from Advocate Sameer (registered), Sameer issues the normal tax invoice and reverse charge provisions do not apply.

The taxable value of supply on which GST is to be paid by Mr. Ravindra for January 2024 is ₹8,50,000.

Transaction-wise Analysis:

(1) Remuneration as Chief Selector (₹2,00,000) – TAXABLE

The remuneration received for services as chief selector is a supply of services. Although provided in relation to a recognized sports body, the supply is made BY Mr. Ravindra TO the sports body, not by the sports body itself. Schedule III, Para 4(d) exempts only "services provided by, or on behalf of, a recognized sports body and supplied by that body". The phrase "supplied by that body" indicates the exemption applies to services originating from the sports body itself. Since this supply originates from an external service provider (Mr. Ravindra) to the sports body, it does not qualify for exemption and is TAXABLE.

(2) Pure Labour Contract for Residential Construction (₹1,80,000) – EXEMPT

Construction services provided as a pure labour contract for an independent residential unit qualify for exemption under Schedule III, Para 1(v) of the CGST Act 2017. Construction services on new residential units are exempt supplies. Accordingly, this transaction is exempt from GST.

(3) Warehouse Rental (₹75,000) – EXEMPT

Renting out a warehouse for warehousing of sugarcane constitutes a supply of immovable property through rental. Under Section 5(f) of the CGST Act 2017, "renting of immovable property" is an exempt supply. Hence, this rental income is exempt from GST.

(4) Services to Municipal Corporation (₹6,50,000) – TAXABLE

Services provided to the Municipal Corporation of Bhopal for slum improvement and upgradation constitute a taxable supply. While Schedule III, Para 5 exempts services PROVIDED BY Government entities, services supplied TO Government entities do not automatically qualify for exemption unless specifically notified. Slum improvement services, though provided to a Government entity, are not covered under any specific exemption provision and therefore remain TAXABLE.

(5) Western Music Dance Performance (₹1,25,000) – EXEMPT

Entertainment services comprising a western music dance performance qualify for exemption under Schedule III, Para 4(c) of the CGST Act 2017, which exempts "entertainment services provided by an individual artist". Performance services by an individual artist are exempt supplies. Accordingly, this transaction is exempt from GST.

Computation:

Taxable supplies = Transaction (1) + Transaction (4) = ₹2,00,000 + ₹6,50,000 = ₹8,50,000

Applicable Provision: Under Section 18(1)(b) of the CGST Act, 2017, a person opting for voluntary registration under Section 25(3) is entitled to ITC on inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration. The registration was granted on 24th February 2024, so the relevant stock date is 23rd February 2024.

Rule 40 of the CGST Rules, 2017 governs the manner of claiming such ITC:
- For inputs: Only those received within one year before 23rd February 2024 (i.e., on or after 23rd February 2023) are eligible.
- For capital goods: ITC is reduced by 5% per quarter or part thereof from the date of invoice.

Analysis of Each Item:

Item 1 – Capital Goods (₹2,00,000; CGST+SGST @6% each; intra-state): Total tax = ₹24,000. Period from invoice (5 Feb 2024) to entitlement date (23 Feb 2024) = part of 1 quarter → reduction = 5%. Eligible ITC = ₹24,000 × 95% = ₹22,800 (CGST ₹11,400 + SGST ₹11,400).

Item 2 – Inputs in Finished Goods (₹3,00,000; IGST @18%; inter-state): Procured on 13 Feb 2023 — this is more than one year before 23 Feb 2024 (one-year threshold = 23 Feb 2023). Not eligible. ITC = NIL.

Item 3 – Inputs in Semi-Finished Goods (₹2,50,000; inter-state; rate stated as CGST+SGST @6% each): Since this is an inter-state supply, IGST @12% applies (equivalent of 6%+6%). Received on 10 Oct 2023 — within one year. Eligible ITC = ₹2,50,000 × 12% = ₹30,000 (IGST).

Item 4 – Inputs in Semi-Finished Goods (₹1,50,000; CGST+SGST @7.5% each; intra-state): Procured 1 Feb 2024 — within one year. Eligible ITC = ₹11,250 CGST + ₹11,250 SGST = ₹22,500.

Item 5 – Inputs in Finished Goods (₹60,000; IGST @18%; inter-state): Procured 8 Feb 2024 — within one year. Eligible ITC = ₹60,000 × 18% = ₹10,800 (IGST).

Total Eligible ITC = ₹86,100 (CGST ₹22,650 + SGST ₹22,650 + IGST ₹40,800).

Net GST Payable in Cash (Section 49 of CGST Act, 2017):

IGST ITC (₹40,800) is set off against CGST liability first (₹31,000), then remaining ₹9,800 against SGST liability. SGST balance = ₹31,000 − ₹9,800 = ₹21,200. SGST ITC (₹22,650) is then used against remaining SGST (₹21,200), fully covering it. CGST ITC (₹22,650) cannot be used against SGST and is carried forward.

Net minimum GST payable in cash for February 2024 = NIL. ITC carried forward: CGST ₹22,650 and SGST ₹1,450.

Part (a): Interest under Section 50 of CGST Act 2017

Section 50 of the CGST Act 2017 provides that interest shall be payable on any amount of tax that remains unpaid beyond the due date. Rule 88 of CGST Rules 2017 prescribes the methodology for calculating such interest. The rate of interest is 18% per annum.

The question references a shortfall amount from a preceding part, but the specific amount is not provided in this extract. Interest is calculated using the formula:

Interest = (Amount of tax × 18% × Number of days) / 365 (or 366 for leap year)

Part (a(i)): Effect of non-filing of GSTR-3B for January 2024 (filed on March 20, 2024)

For GSTR-3B of January 2024, the due date for filing is 20th February 2024. If the return is filed on 20th March 2024, the number of days of delay is calculated as follows:

From 20 February 2024 to 20 March 2024 = 29 days (Since 2024 is a leap year, February has 29 days; the delay extends from 20 Feb to 20 Mar, which is exactly 29 days).

Assuming the shortfall amount is ₹X (not specified), the interest payable would be:
Interest = (X × 18 × 29) / 366 = X × 0.01426

The final amount should be rounded off to the nearest rupee as specified. The payment should be made from the electronic cash ledger or credit ledger as both carry sufficient balance per the assumption.

Part (b): Tax Collected at Source (TCS) under Section 52 of CGST Act 2017

Who is Liable to Collect TCS:
Registered persons supplying goods or services are liable to collect TCS when supply is made to an un-registered person and the value of supply exceeds the threshold limit specified. TCS is collected at the rate of 1% of the value of taxable supplies.

Registration Requirements:
TCS collectors must be registered under GST. A separate GSTIN is not required for TCS purposes, but the collection must be tracked and reported under the existing registration. TCS can only be collected by those who are registered and have the requisite authority.

Filing of Returns:
TCS collected must be reported in GSTR-1 (Return of outward supplies) by the supplier indicating TCS collected. The recipient of supplies on which TCS is collected can claim the same as input tax credit in GSTR-2A (ITC from suppliers) within the specified period. The supplier must report TCS in GSTR-3B to reconcile their liability after ITC claims.

Deposit of TCS to Government:
TCS collected must be deposited to the Government account within the prescribed period, generally by the 5th of the following month. Failure to deposit TCS punctually attracts interest at 18% per annum under Section 50 and applicable penalties. TCS can be paid using the electronic cash ledger or through cash payment in Form CMP-08 or bank account debit.

Invoices must clearly segregate TCS collected from the tax component. Documentary evidence of TCS collection and deposit forms part of compliance requirements.

Invoice Provisions Relating to Issue of Invoice by Recipient:

Under Rule 31 of the CGST Rules 2017, the supplier is ordinarily responsible for issuing a tax invoice. However, when services are received from an unregistered supplier and reverse charge applies, the recipient is required to maintain documentary evidence of the transaction. The recipient (Mohan Enterprise) must keep evidence such as work orders, payment receipts, service agreements, and proof of payment. If prescribed by notification, the recipient may be required to issue a document evidencing the transaction for recording purposes in GST records.

For services received from a registered supplier (Advocate Sameer), the supplier issues the tax invoice as per Rule 31(1), and normal invoice provisions apply.

Reverse Charge Liability Analysis:

Services from Advocate Sameer (Registered Person): Reverse charge does NOT apply. Since Advocate Sameer is a registered person, the normal tax liability under Section 9(1) applies to the supplier. Advocate Sameer must issue a tax invoice showing GST, and Mohan Enterprise can claim input tax credit (ITC) on the same. Neither Section 9(3) nor 9(4) applies in this case.

Services from Shekhar (Unregistered Person): Reverse charge APPLIES under Section 9(3) of the CGST Act 2017. Section 9(3) provides that the recipient of supplies of goods or services from an unregistered supplier shall pay the tax on reverse charge basis. The liability to pay tax shifts from the supplier to the recipient (Mohan Enterprise). Mohan Enterprise must self-assess, pay the applicable CGST and SGST to the Government, and maintain proper documentary evidence. The unregistered supplier (Shekhar) is not required to register or issue a tax invoice. Section 9(4) deals with "specified services" (notified by Government) but labour services in this context are generally covered under the broad reverse charge mechanism of Section 9(3) itself, not as a specified service attracting reverse charge from registered suppliers.

Conclusion: Mohan Enterprise is liable under Section 9(3) only for the labour services received from Shekhar. No reverse charge applies for services from Advocate Sameer.

Reverse Charge is a tax mechanism where the recipient (not supplier) is liable to pay GST. When Mohan Enterprise receives services under reverse charge, specific invoice provisions apply.

For Services by Advocate Rambey (Section 9(1)):

Advocate Rambey is a registered person providing legal services. Services supplied by an Advocate to a registered person are covered under Section 9(1) of CGST Act 2017, which prescribes reverse charge. Mohan Enterprise becomes liable to pay GST instead of the Advocate.

For Services by Shethar (Section 9(4)):

Shethar is an unregistered person providing labour services. Under Section 9(4) of CGST Act 2017, when unregistered persons supply services to registered persons (except continuing supplies like rent), reverse charge applies. Mohan Enterprise becomes liable to pay tax.

Invoice Provisions for Recipient (Mohan Enterprise):

1. Supplier's Non-Obligation: The supplier (whether registered like Advocate Rambey or unregistered like Shethar) is NOT required to issue a tax invoice under reverse charge. The supplier may issue a bill of supply or receipt instead.

2. Recipient's Obligation - Issue of Invoice: This is the key provision - Mohan Enterprise (the recipient) is required to issue an invoice even though it is the buyer. This is unique to reverse charge transactions. As per Rule 53 of CGST Rules 2017, the recipient must issue an invoice because the recipient is the person liable to pay tax.

3. Mandatory Particulars in Invoice: The invoice issued by Mohan Enterprise must contain all details as per Rule 49 of CGST Rules 2017:

- Sequential invoice number and date
- Name, address, and GSTIN of both Mohan Enterprise and service provider
- HSN/SAC code (Services Accounting Code) for services received
- Detailed description of services (e.g., "Legal services for property dispute" or "Labour services for construction")
- Place of supply (State where services are received)
- Taxable value and amount of CGST and SGST separately
- Total invoice value
- Clear mention that reverse charge applies
- Signature/seal of an authorized person of Mohan Enterprise

4. Timing of Invoice Issue: The invoice must be issued by the 5th day of the month following the month in which services were received, ensuring timely documentation.

5. Supporting Documentation: Mohan Enterprise must maintain:

- Original bill/receipt from the service provider as proof of service receipt
- Copy of the reverse charge invoice issued by Mohan Enterprise
- Both documents must be cross-referenced and reconciled

6. Input Tax Credit (ITC) Claim: The GST paid by Mohan Enterprise under reverse charge is eligible for ITC if Mohan Enterprise is engaged in taxable supplies. ITC can be claimed in the month when the reverse charge invoice is issued, provided the invoice clearly indicates reverse charge.

7. GSTR-2 Reporting: Services received under reverse charge must be reported in GSTR-2A (inward supply details). Mohan Enterprise should verify and include these in its monthly GST return filings to claim appropriate input credit.

8. Distinction by Section:

- Section 9(1) (Advocate Rambey): Recipient must issue invoice even though supplier is registered; the supplier simply doesn't issue a tax invoice.
- Section 9(4) (Shethar): Recipient must issue invoice despite supplier being unregistered; this ensures GST compliance and documentation.

Critical Point: The invoice issued by Mohan Enterprise is not merely optional documentation but a mandatory requirement to claim ITC, maintain proper GST compliance, and substantiate the reverse charge payment. Without this invoice, ITC cannot be claimed and penalties may be imposed.