CA Inter Taxation — Question Paper — May 2025

Note: The question provides only the 'Additional Information' items without the primary financial data (e.g., the P&L Account balances or gross business profit figure). The following presents the complete adjustment framework, regime-wise treatment, and all computable elements for AY 2025-26 (FY 2024-25).

Computation of Total Income of Mrs. S.C.L. Rose — AY 2025-26

A. Income from Business/Profession

Net Profit as per books of account: ₹ [Main P&L not provided — placeholder as 'X']

Add: Disallowances (applicable under both regimes)

(i) Bowers and creepers (₹2,00,000) included in Purchases relate to agricultural cultivation, not business activity. These must be excluded from business expenditure. The corresponding agricultural income, if any, is exempt u/s 10(1) of the Income Tax Act, 1961. Add back: ₹2,00,000

(ii) Electricity and water department deposit (₹2,00,000) is a refundable security deposit — capital in nature and not allowable as revenue expenditure u/s 37(1). Add back: ₹2,00,000

(iii) Television and washing machine (₹1,00,000) purchased for household use — personal expenditure, not incurred wholly and exclusively for business purposes; disallowed u/s 37(1). Add back: ₹1,00,000

(iv) Salary paid to illiterate brother ₹2,40,000 against fair market value of ₹1,80,000. Brother is a 'specified person' u/s 40A(2)(b) of the ITA, 1961. Excess over FMV is disallowed: ₹2,40,000 − ₹1,80,000 = ₹60,000

Total Add-backs: ₹5,60,000

Less: Deductions

(v) Interest on SBI loan attributable to ground floor (used as shop — business purpose): assumed 50% of total accrued interest of ₹1,32,000 = ₹66,000. Deductible on accrual basis despite payment on 10-04-2025, as mercantile method governs business income.

(vi) Depreciation u/s 32 on Electric Vehicle purchased 30-09-2024 for ₹25,00,000: period of use = 183 days (> 180 days) → full depreciation rate of 15% applicable. Depreciation = ₹25,00,000 × 15% = ₹3,75,000

Total Deductions: ₹4,41,000

Business Income = X + ₹5,60,000 − ₹4,41,000 = X + ₹1,19,000

---

B. Income from House Property

The residential house has two portions: Ground Floor (shop — interest on loan for this portion treated as business deduction above) and First Floor (self-occupied residence — SOP).

*Under Optional (Old) Regime:*
Gross Annual Value of SOP: NIL (deemed under Section 23(2))
Less: Standard Deduction u/s 24(a): NIL (since GAV = NIL)
Less: Interest on borrowed capital u/s 24(b): 50% of ₹1,32,000 = ₹66,000 (within ₹2,00,000 ceiling for SOP)
Loss from House Property: (₹66,000)
This loss is set off against other income including business income and STCG, subject to ₹2,00,000 annual ceiling u/s 71(3A). Unabsorbed HP loss (if any) carried forward u/s 71B for 8 years.

*Under Default Regime u/s 115BAC:*
Deduction u/s 24(b) for self-occupied property is not available under Section 115BAC(2). Accordingly, Income from HP = NIL. No set-off of HP loss is permissible.

---

C. Capital Gains

Sale of 10,000 listed equity shares of SBCL Ltd.: Sale proceeds ₹11,66,000; Cost ₹2,65,000; STT paid on both purchase and sale.
Period of holding: 16-08-2024 to 11-12-2024 = 117 days — less than 12 months → Short-Term Capital Asset.
Since shares are listed and STT is paid, Section 111A of the ITA, 1961 applies.
STCG = ₹11,66,000 − ₹2,65,000 = ₹9,01,000
Tax rate: 20% per Finance Act 2024 (increased from 15%), effective from 23-07-2024. Both purchase (16-08-2024) and sale (11-12-2024) occurred after 23-07-2024; hence 20% rate applies.
This treatment is identical under both regimes.

---

D. Agricultural Income (Exempt)

Agricultural income (from cultivation using bowers and creepers) is exempt u/s 10(1). Under the optional regime, agricultural income is aggregated with total income for rate purposes (partial integration — Sections 2(1A), 5, and 10(1)). Under 115BAC, the same partial integration applies for computing slab rates, as this is not a deduction excluded by 115BAC.

---

E. Regime-wise Summary

Optional Regime:
Business Income: X + ₹1,19,000
Less: HP Loss u/s 24(b): (₹66,000)
STCG u/s 111A: ₹9,01,000
Total Income before Chapter VI-A: X + ₹10,54,000
Less: Chapter VI-A deductions (80C, 80D, etc.) as applicable
Total Income (Optional): X + ₹10,54,000 − Chapter VI-A

Default Regime u/s 115BAC:
Business Income: X + ₹1,19,000
HP Income: NIL
STCG u/s 111A: ₹9,01,000
Total Income before deductions: X + ₹10,20,000
Less: Only Section 80CCD(2) [employer NPS], Section 80CCH, Section 80JJAA permissible
Total Income (Default): X + ₹10,20,000 − permissible deductions

Conclusion: The default regime u/s 115BAC results in higher taxable income by ₹66,000 (HP loss foregone) plus the loss of Chapter VI-A deductions, partially offset by lower slab rates. The optimal regime must be evaluated after determining the actual business profit (main P&L data not provided in this question).

Answer: (C)

Mr. Gopal held the residential house property for more than 2 years (from 14.10.2021 to 31.08.2024), making it a long-term capital asset.

Computation of Long-Term Capital Gain (LTCG):

Sale Price: ₹60,00,000

Indexed Cost of Acquisition = Cost of Acquisition × (Cost Index of Year of Sale / Cost Index of Year of Purchase)
= ₹45,00,000 × (363 / 317)
= ₹45,00,000 × 1.14513
= ₹51,52,997 (approximately)

LTCG = Sale Price − Indexed Cost of Acquisition
LTCG = ₹60,00,000 − ₹51,52,997 = ₹8,47,003

Exemption under Section 54:

Section 54 provides exemption on LTCG derived from sale of a residential house property if the capital gain (or part thereof) is invested in purchase of a residential house property within 1 year before or 2 years after the date of sale.

Mr. Gopal purchased a residential plot on 08.12.2024 (within 2 years after sale on 31.08.2024) for ₹5,00,000. The exemption available is the lesser of:
- Capital gain = ₹8,47,003
- Amount invested in residential property = ₹5,00,000

Therefore, Exemption = ₹5,00,000

Income from Capital Gains:
LTCG − Exemption = ₹8,47,003 − ₹5,00,000 = ₹3,47,003

Note: The rent received in arrear (₹75,000) and rent from the plot (₹30,000) are taxable as income under the head "Income from House Property," not as capital gains.

Note: The Profit & Loss Account figures and additional information referred to in the question have not been provided in this prompt. The solution below presents the complete computation framework with all relevant adjustments for this type of question. Once the actual figures are available, the same structure must be followed.

Assessee: Mrs. S.C. Bose | Status: Individual (Resident) | Age: 62 years (Senior Citizen) | P.Y.: 2024-25 | A.Y.: 2025-26

---

STEP 1: PROFITS AND GAINS OF BUSINESS OR PROFESSION

Net Profit as per P&L Account: ₹ XXX

Add back (Disallowances):
- Personal expenses debited to P&L (Section 37, Income Tax Act 1961)
- Depreciation as per books (to be replaced by depreciation u/s 32)
- Provision for bad debts not written off (Section 36(1)(vii))
- Income tax / wealth tax paid (Section 40(a)(ii))
- Payments to relatives exceeding fair market value (Section 40A(2))
- Cash payments exceeding ₹10,000 to a single person in a day (Section 40A(3)) — 100% disallowance
- Any capital expenditure debited to P&L
- Royalty income (to be assessed separately under other sources)

Less (Allowable deductions not credited/already added):
- Depreciation u/s 32 at prescribed rates (including additional depreciation if plant/machinery is new)
- Any admissible business expenditure not yet deducted

Business Income (A): ₹ XXX

---

STEP 2: INCOME FROM HOUSE PROPERTY (if any property is owned)

Under the Optional Regime (existing regime), standard deduction of 30% u/s 24(a) and interest on borrowed capital u/s 24(b) are available.
Under the Default Regime u/s 115BAC, deduction u/s 24(b) for self-occupied property is not available (except for let-out property). Loss from house property cannot be set off against other heads.

Income from House Property (B): ₹ XXX

---

STEP 3: CAPITAL GAINS (if any assets transferred)

Long-Term or Short-Term depending on holding period. Indexation benefit (for LTCG) available only under Optional Regime with grandfathering as applicable.

Capital Gains (C): ₹ XXX

---

STEP 4: INCOME FROM OTHER SOURCES — ROYALTY

Royalty from writing science books is assessable under Income from Other Sources (Section 56, Income Tax Act 1961).

Under the Optional Regime, deduction u/s 80QQB is available:
- Royalty from books (other than text books) — Lower of: (i) actual royalty received, or (ii) ₹3,00,000
- Since books are science books (not text books), Section 80QQB applies.
- For royalty from books sold abroad, only the amount brought into India in convertible foreign exchange within 6 months (or such extended period) qualifies.

Under Default Regime u/s 115BAC, deduction u/s 80QQB is not available.

Royalty Income (D): ₹ XXX

---

STEP 5: GROSS TOTAL INCOME (GTI) = A + B + C + D

---

STEP 6: DEDUCTIONS UNDER CHAPTER VI-A

Under Optional Regime only (these are NOT available under Section 115BAC default regime):
- Section 80C: LIC premium, PPF, NSC, ELSS, tuition fees etc. — Maximum ₹1,50,000
- Section 80D: Medical insurance premium — ₹50,000 for senior citizen (self/spouse)
- Section 80QQB: Royalty from science books — up to ₹3,00,000
- Section 80TTB: Interest from savings/FD for senior citizens — up to ₹50,000

Under Default Regime u/s 115BAC:
Most deductions under Chapter VI-A are not available. Only a few exceptions exist (e.g., Section 80CCD(2) employer NPS contribution, Section 80CCH Agniveer corpus). No deduction u/s 80C, 80D, 80QQB, 80TTB is allowed.

---

SUMMARY TABLE

| Particulars | Default Regime u/s 115BAC (₹) | Optional Regime (₹) |
|---|---|---|
| Business Income | XXX | XXX |
| Income from House Property | XXX | XXX |
| Capital Gains | XXX | XXX |
| Income from Other Sources (Royalty) | XXX | XXX |
| Gross Total Income | XXX | XXX |
| Less: Chapter VI-A deductions | Nil (not available) | XXX |
| Total Income | XXX | XXX |

Key Points for Mrs. S.C. Bose specifically:
1. Being a widow of a public sector employee does not grant any special tax exemption under the Act.
2. As a Senior Citizen (age 62), the basic exemption limit under the Optional Regime is ₹3,00,000. Under Default Regime u/s 115BAC, the basic exemption is ₹3,00,000 (same for all individuals).
3. The rebate u/s 87A is available if total income does not exceed ₹5,00,000 (Optional Regime) or ₹7,00,000 (Default Regime), subject to conditions.
4. Under default regime, a standard deduction of ₹75,000 is available for salary income — not applicable here as income is from business.
5. Business expenses must satisfy Section 37(1) — must be wholly and exclusively for business purposes and not personal in nature.

Answer: (A)

Mr. Gopal sold a residential house property held for 2 years, 10 months, and 17 days (more than 24 months), making it a long-term capital asset. Capital Gain = Sale price (₹60,00,000) − Cost of acquisition (₹45,00,000) = ₹15,00,000.

Although Mr. Gopal purchased a residential plot for ₹5,00,000 on 08.12.2024 (within the prescribed time limit after sale), Section 54 exemption is not available because the plot does not qualify as a "residential house property" for exemption purposes. The term "residential house property" under Section 54 refers to a constructed building or a property developed/used as a residence. A bare plot of land without construction, even if intended for residential development, does not constitute "house property." Additionally, since the plot is generating rental income (₹30,000) rather than being held for personal residence, it is treated as an investment property. Therefore, the entire capital gain of ₹15,00,000 remains taxable without any exemption under Section 54. Note: The arrear rent of ₹75,000 received from the old property is income from house property, not capital gains, and does not affect this computation.

CRITICAL LIMITATION: The Profit & Loss account and additional information referenced in the question are not provided. Without specific financial figures, only the computational framework can be outlined.

Framework for Total Income Computation:

Step 1: Income from Business (Flower Bouquet Shop)

Under Old Tax Regime: Deductions under Sections 30-43 (depreciation, repairs, salaries, rent, power, interest on capital) are allowed. Net business income is computed after these deductions and added to GTI.

Under New Tax Regime (Section 115BAC): Sections 30-43 deductions are NOT available. A standard deduction of ₹50,000 is permitted under the new regime rules. Business income is taxed with minimal adjustments.

Step 2: Income from Royalty

Royalty income falls under 'Income from Other Sources' (Chapter V-A). A deduction of 30% is available under Section 48 for royalty expenses. Whether royalty is domestic or foreign-sourced requires verification against specific royalty provisions. Both regimes allow this deduction.

Step 3: Applicable Exemptions

Mrs. S.C. Bose is a senior citizen (age 62 ≥ 60 years) under Section 2(32AA). She qualifies for:
- Old Regime: Basic exemption limit of ₹5,00,000
- New Regime: Basic exemption limit of ₹5,00,000

Widow status does not provide a separate exemption but affects rebate eligibility under Section 87A (individual status consideration).

Step 4: Computation Under Old Tax Regime

(1) Net Business Income (after Sections 30-43 deductions) = ?
(2) Royalty Income (after 30% deduction u/s 48) = ?
(3) Gross Total Income = ?
(4) Less: Exemptions under Section 10 = ?
(5) Income after exemptions = ?
(6) Less: Deductions under Chapter VIA (Sections 80C onwards) = ?
(7) Total Income (Old Regime) = ?

Step 5: Computation Under New Tax Regime (Section 115BAC)

(1) Business Income (Standard Deduction ₹50,000 available) = ?
(2) Royalty Income (30% deduction u/s 48 applies) = ?
(3) Gross Total Income = ?
(4) Less: Exemptions under Section 10 = ?
(5) Less: Standard deduction = ₹50,000
(6) Total Income (New Regime) = ?

Note: Chapter VIA deductions (Sections 80C onwards) are NOT available under the new regime.

Final Step: Compare tax liability under both regimes and declare the lower liability.

Applicable Sections: Section 115BAC (New Regime), Sections 22-23 (Business Income), Chapter V-A (Royalty/Other Sources), Section 48 (Royalty Deduction), Section 87A (Rebate), Section 2(32AA) (Senior Citizen), Sections 30-43 (Business Deductions - Old Regime only), Chapter VI-A (Old Regime Deductions only).

Answer: (B) ₹1,05,000

Under Section 115BAC (default taxation regime), Mr. Gopal has opted for the optional tax regime with lower rates. A key consequence is that deductions under Section 24 are not available (or available only to the extent of interest on borrowed capital, if any). Since no borrowed capital is mentioned, no deductions apply.

Income from House Property comprises:

1. Arrear Rent from Property 1: ₹75,000 received on 12.11.2024. Although the property was sold on 31.08.2024, rent paid by the tenant in arrear is taxable income in the year of receipt (12.11.2024 = F.Y. 2024-25, A.Y. 2025-26). This is income from house property under Section 22 read with Section 23.

2. Rent from Residential Plot (Property 2): ₹30,000 earned in the last quarter of F.Y. 2024-25. The residential plot purchased on 08.12.2024 qualifies as "house property" under Section 22 because it is ordinarily meant for use as a dwelling. Rental income from such property is included in income from house property.

3. Capital Gain on Sale of Property 1: The sale of the residential house property results in a capital gain. However, capital gains are NOT classified as income from house property; they are taxed separately under Chapter IV (Capital Gains). Therefore, capital gains are excluded from this computation.

Calculation:
Income from House Property = Arrear Rent + Rent from Plot
= ₹75,000 + ₹30,000
= ₹1,05,000

Under Section 115BAC, no standard deduction (30% under Section 24(b)) or maintenance deductions (Section 24(a)) are available. Gross rental income is the taxable income from house property.

(a) Taxability of income for A.Y. 2025-26:

(i) Mr. Mahesh – Dividend from foreign company (RNOR status)

Under Section 5(1) of the Income Tax Act, 1961, a Resident but Not Ordinarily Resident (RNOR) is taxable on income received in India, income accruing/arising in India, and income from a business controlled in India or a profession set up in India. Income accruing outside India from a foreign source is NOT taxable for an RNOR.

Section 9(1)(iv) deems dividend to accrue/arise in India only when paid by an Indian company. The dividend here is declared and paid by a foreign company outside India. Although Explanation 5 to Section 9(1)(i) deems shares of a foreign company situated in India if they derive value substantially from Indian assets, this Explanation pertains to capital gains on transfer of such shares, not to dividend income.

Since the dividend of ₹7 lakhs accrues and is received outside India from a foreign company, and Mr. Mahesh is RNOR, the dividend is NOT chargeable to tax in India.

---

(ii) Mr. Shivansh – Interest from M/s ABC Ltd. (non-resident)

Under Section 9(1)(v) of the Income Tax Act, 1961, interest payable by a person resident in India is deemed to accrue or arise in India, except where the borrowing is used for a business or profession carried on outside India or for earning income from a source outside India.

M/s ABC Ltd. is an Indian company (resident in India). No exception circumstance is mentioned. Therefore, interest paid by ABC Ltd. to Mr. Shivansh is deemed to accrue/arise in India under Section 9(1)(v).

Under Section 5(2), a non-resident is taxable in India on income received in India and income deemed to accrue/arise in India.

Interest for P.Y. 2024-25 (01-09-2024 to 31-03-2025 = 7 months): ₹16,00,000 × 12% × 7/12 = ₹1,12,000 is taxable in India.

---

(iii) Mr. Ramesh – Royalty from Mr. Sunil (both non-residents)

Under Section 9(1)(vi)(c) of the Income Tax Act, 1961, royalty paid by a non-resident is deemed to accrue/arise in India if the rights are utilised in India for the purposes of a business/profession carried on in India or for earning any income from a source in India.

Mr. Sunil (non-resident) used the patent rights in India to develop a new product. Accordingly, the ENTIRE royalty of ₹8,25,000 is deemed to accrue/arise in India under Section 9(1)(vi)(c), regardless of whether it was received in India (30%) or outside India (70%).

Under Section 5(2), Mr. Ramesh (non-resident) is taxable on income deemed to accrue/arise in India. Therefore, the entire ₹8,25,000 is chargeable to tax in India in the hands of Mr. Ramesh.

---

(b) TDS provisions and calculation:

(i) Marks Pictures Ltd. – Acquisition of television rights from Solar Varanasi LLP

The payment of ₹52 lakhs is for acquisition of television rights, which constitutes a transfer of copyright/intellectual property rights and is in the nature of royalty. This is covered under Section 194J of the Income Tax Act, 1961, which mandates TDS on royalty payments.

Marks Pictures Ltd. is a company, hence always liable to deduct TDS under Section 194J irrespective of turnover. The threshold of ₹30,000 is clearly exceeded. Both parties have valid PAN, so the standard rate (not the higher rate under Section 206AA) applies.

Rate: 10% | TDS = ₹52,00,000 × 10% = ₹5,20,000

TDS is to be deducted at the time of credit or payment of ₹52 lakhs, whichever is earlier (i.e., 16-10-2024).

---

(ii) Mr. Mayank – Rent payment to Mr. Nikhil (Section 194-IB)

Section 194-IB of the Income Tax Act, 1961 applies to an individual or HUF (not liable to tax audit under Section 44AB) who pays rent exceeding ₹50,000 per month to a resident. Mr. Mayank is a salaried individual not subject to tax audit, and the monthly rent (₹75,000 and ₹1,00,000) exceeds ₹50,000 in both halves.

Rate: 5% on total rent for the year. TDS is to be deducted at the time of payment/credit of rent for the last month of the financial year, i.e., March 2025. The TDS amount cannot exceed the rent payable for the last month of tenancy/financial year.

Total rent = ₹4,50,000 + ₹6,00,000 = ₹10,50,000
TDS @ 5% = ₹52,500
Cap (March 2025 rent) = ₹1,00,000

Since ₹52,500 < ₹1,00,000, TDS deductible = ₹52,500, to be deducted in March 2025. No TAN is required; Form 26QC is to be filed and Form 16C is to be issued to Mr. Nikhil.

Answer: (C)

The income from house property computation involves three components:

1. Sale of house property (31.08.2024): The capital gain from selling the residential house (₹60,00,000 - ₹45,00,000) is NOT included in income from house property. Capital gains are taxed separately as capital gains income, not as income from house property.

2. Arrear rent received (12.11.2024): The tenant's arrear rent of ₹75,000, although treated as unrealized in earlier years, is income from house property when actually received in AY 2024-25.

3. Rental income from residential plot (purchased 08.12.2024): The plot, though vacant and under construction, is let out and earning rent of ₹30,000 in the last quarter of FY 2024-25. This qualifies as income from house property.

Computation:
- Gross annual value of let-out property = Arrear rent + Plot rent = ₹75,000 + ₹30,000 = ₹1,05,000
- Less: Standard deduction u/s 23(1)(a) = 30% of ₹1,05,000 = ₹31,500
- Income from house property = ₹1,05,000 - ₹31,500 = ₹73,500

The 30% standard deduction under section 23(1)(a) applies to the total annual value received during the financial year, which includes both regular rental income and arrear rents. The opt for section 115BAC (default taxation regime) does not alter the income computation; it only changes the applicable tax rate and deduction eligibility.

Situation (i): Mr. Mahesh's Foreign Dividend YES, the dividend of ₹7 lakhs is chargeable to tax in India. Although the dividend is paid by a foreign company, it is attributable to income derived from Indian sources because the shares derive substantial value from assets situated in India. Under Section 9 of the Income Tax Act, 1961, dividends are deemed to be from Indian sources if attributable to income derived from Indian sources. Mr. Mahesh is Resident but Not Ordinarily Resident (RNOR), and under Section 5(2), an RNOR is liable to tax only on Indian-source income. Consequently, the entire dividend is taxable in India.

Situation (ii): Mr. Shivansh's Interest Income YES, the entire interest is chargeable to tax in India. Interest earned on deposits with an Indian company constitutes income from an Indian source, irrespective of where the interest is physically received. Under Section 5(2), a non-resident is liable to tax on income which accrues or arises in India. The interest (₹1,12,000 for the period 01-09-2024 to 31-03-2025 at 12% p.a. on ₹16 lakhs) accrues in India from the Indian source—the deposit with the Indian company. The place of receipt (China) is irrelevant in determining taxability. Thus, the entire interest is taxable in India.

Situation (iii): Mr. Ramesh's Royalty YES, the entire royalty of ₹8,25,000 is chargeable to tax in India. The royalty is for patent rights utilized in developing a new product in India, making it attributable to Indian sources. The source of royalty income is determined by the location where the patent is exploited (India), not by the location where payment is received. Under Section 5(2), a non-resident is liable on income arising in India. The fact that 70% of royalty was received outside India does not alter the source determination or exempt any portion from taxation. The entire royalty amount arises from the Indian source and is therefore entirely taxable in India.

SITUATION (i): ACQUISITION OF TELEVISION RIGHTS

Applicable Provision: Section 194H of the Income Tax Act, 1961

Section 194H mandates tax deduction at source (TDS) on payments for acquiring or producing a cinematograph film and related rights (including television rights, music, etc.). The provision applies when: (1) the payer is carrying on a business; (2) payment is for acquiring a cinematograph film or such rights; and (3) the payer's gross receipts or turnover exceeded ₹1 crore in the immediately preceding previous year.

Applicability: Marks Pictures Ltd. is engaged in movie and short films production with turnover of ₹15.22 crores in FY 2023-24 (preceding year for A.Y. 2025-26), which exceeds the ₹1 crore threshold. The acquisition of television rights from Solar Varanasi LLP on 16-10-2024 for ₹52 lakhs is clearly covered under Section 194H. Both parties holding valid PAN does not exempt the payer from TDS obligation.

Rate of TDS: 10% under Section 194H.

TDS Amount: ₹52,00,000 × 10% = ₹5,20,000

---

SITUATION (ii): RENTAL PAYMENTS FOR RESIDENTIAL PROPERTY

Applicable Provision: Section 194I of the Income Tax Act, 1961

Section 194I provides for TDS on rent payments for use of any building, plant, machinery, or land. The provision applies when the monthly rent exceeds ₹100,000. TDS is deductible at the rate of 10% on such rent. No TDS is deductible if monthly rent is below ₹100,000.

Analysis by Period:

Period 1 (April to September 2024): Monthly rent of ₹75,000 falls below the threshold of ₹100,000. As per Section 194I, no TDS is deductible in this period.

TDS for 6 months = NIL

Period 2 (October 2024 to March 2025): Monthly rent of ₹1,00,000 meets or exceeds the threshold. TDS at 10% becomes deductible from this period.

Total rent = ₹1,00,000 × 6 months = ₹6,00,000
TDS = ₹6,00,000 × 10% = ₹60,000

Total TDS for A.Y. 2025-26: ₹60,000

---

SUMMARY OF TDS LIABILITY FOR A.Y. 2025-26:
- Situation (i): ₹5,20,000 (under Section 194H)
- Situation (ii): ₹60,000 (under Section 194I)

Both deductors must deposit the TDS within prescribed timelines and furnish quarterly statements as per Section 200-203 of the Income Tax Act.

(i) YES, the dividend is chargeable to tax in India.

Mr. Mahesh is resident and not ordinarily resident (RNOR). Individuals with RNOR status are taxed on all income from Indian sources, income earned through work performed in India, and income from business controlled in India. The dividend of ₹7 lakhs, though declared and paid by a foreign company outside India, is chargeable to tax because the shares from which it is derived substantially derive their value from assets situated in India. When shares' value is substantially based on Indian assets, any income from such shares is treated as income from an Indian source, regardless of whether the dividend-paying company is foreign or where the dividend is paid. This deemed source rule ensures that economic benefits derived from Indian assets are taxable in India.

(ii) YES, the interest is chargeable to tax in India.

Mr. Shivank is a non-resident. Non-residents are taxed only on income from Indian sources. The deposit of ₹15 lakhs was made with ABC Ltd., an Indian investment company, on 01-09-2024. Interest accrued on deposits with Indian entities constitutes income from Indian sources because the asset (the deposit itself) is located in India, and the income-generating mechanism (the Indian company's obligation to pay interest) is in India. Although the interest was received in China during the previous year 2024-25, the source of income is determined by the location of the asset and the investment entity, not by the location of receipt. Consequently, the interest income is chargeable to tax in India.

(iii) YES, the entire royalty of ₹3,25,000 is chargeable to tax in India.

Mr. Ramesh is a non-resident. The source of royalty income is determined by the location where patent rights are used or exploited, not by where the royalty payment is received. Since Mr. Sunil developed a new product in India utilizing the patent rights provided by Mr. Ramesh, the patent is exploited in India. Therefore, the entire royalty of ₹3,25,000 is treated as income from an Indian source. The apportionment of receipt location (30% in India, 70% outside) does not affect source determination; what is relevant is that the underlying intellectual property is used in India. All royalty in respect of such exploitation is taxable in India.

Sub-part (i) - TDS on Royalties under Section 194D

Section 194D of the Income Tax Act, 1961 prescribes tax deduction at source on royalties. Royalty includes payments made for the use of or right to use patents, designs, copyrights, trademarks, know-how, secret processes, and similar intellectual property rights. When Marks Pictures Ltd. acquires television rights to the film "Main Kumbh" from Solar Variant LLP, this payment constitutes royalty on copyright and falls within the scope of Section 194D.

Since both parties are residents with valid PAN, TDS is mandatory at the rate of 10% on the royalty amount. No monetary threshold applies under Section 194D.

Calculation for (i):
Royalty amount = ₹2,75,000
TDS @ 10% = ₹2,75,000 × 10% = ₹27,500

---

Sub-part (ii) - TDS on Rent under Section 194I

Section 194I of the Income Tax Act, 1961 requires tax deduction at source on rent paid for plant, machinery, equipment, or property. TDS is applicable at 10% on rent payments made to residents when the monthly rent exceeds ₹50,000. The threshold is applied on a per-month basis.

In this case, Mr. Mayank pays rent to Mr. Nikhil (a resident individual) for a residential property at Mumbai. Although the property is residential, TDS applies under Section 194I as the monthly rent exceeds ₹50,000 in both periods.

Calculation for (ii):

Period 1 (April 2024 to September 2024):
Monthly rent: ₹75,000 (exceeds ₹50,000 threshold)
Number of months: 6
Total rent: 6 × ₹75,000 = ₹4,50,000
TDS @ 10%: ₹4,50,000 × 10% = ₹45,000

Period 2 (October 2024 to March 2025):
Monthly rent: ₹1,00,000 (exceeds ₹50,000 threshold)
Number of months: 6
Total rent: 6 × ₹1,00,000 = ₹6,00,000
TDS @ 10%: ₹6,00,000 × 10% = ₹60,000

Total TDS payable for A.Y. 2025-26 = ₹45,000 + ₹60,000 = ₹1,05,000

Income from Salary:

Mr. Sandeep received a concessional loan of ₹3,00,000 from his employer-company at 7.75% p.a. when the prevailing SBI rate on 1st April 2024 was 10.25%. Under Section 17(2) of the Income Tax Act, 1961 read with Rule 3(7)(i) of the Income Tax Rules, 1962, the difference in interest rates constitutes a perquisite: (10.25% − 7.75%) × ₹3,00,000 × 7/12 = ₹4,375. Against this, the standard deduction under Section 16(ia) for A.Y. 2025-26 is ₹75,000, restricted to the gross salary of ₹4,375. Income from Salary = NIL.

Income from House Property:

Since Mr. Sandeep has opted out of the default tax regime under Section 115BAC(1A), all deductions under the old regime apply. The house in Kolkata has four units — one self-occupied (SO) and three let-out (LO).

For the Three Let-Out Units: Municipal Value per unit = ₹9,00,000 ÷ 4 = ₹2,25,000; Fair Rent per unit = ₹1,20,000 ÷ 4 = ₹30,000; Standard Rent per unit = ₹8,50,000 ÷ 4 = ₹2,12,500. Expected Rent per unit = Lower of [Higher of MV or FR] and SR = Lower of ₹2,25,000 and ₹2,12,500 = ₹2,12,500.

For Units 1 & 2 (fully let out, 12 months): Actual Rent = ₹20,000 × 12 = ₹2,40,000 > Expected Rent → GAV = ₹2,40,000 each.

For Unit 3 (vacant for 2 months): Actual Rent = ₹20,000 × 10 = ₹2,00,000 < Expected Rent (₹2,12,500); since the shortfall is attributable solely to vacancy, as per Section 23(1)(c), the actual rent received is the GAV → GAV = ₹2,00,000.

Total GAV = ₹6,80,000. Less: Municipal tax paid for 3 let-out units = 20% × ₹9,00,000 × 3/4 = ₹1,35,000 (only for let-out units). NAV = ₹5,45,000.

Deductions under Section 24: (a) Standard deduction @ 30% of NAV = ₹1,63,500; (b) Interest on borrowing for let-out portion = NIL (the personal loan from employer creates a salary perquisite; no separate housing-loan interest is deductible for the let-out portion). Income from Let-Out Units = ₹3,81,500.

For the Self-Occupied Unit: Annual Value = NIL. Deduction for interest on borrowed capital under Section 24(b) for partial occupation (self-occupied portion) = ₹2,00,000 (as given; this is also the maximum permissible limit for self-occupied property). Loss from SO Unit = ₹2,00,000.

The loss from the SO unit is set off within the same head against let-out income (no restriction under Section 71(3A) since the net HP income remains positive).

Net Income from House Property = ₹3,81,500 − ₹2,00,000 = ₹1,81,500.

Computation of Total Income of Mr. Sandeep — A.Y. 2025-26

Income from Salaries: NIL
Income from House Property: ₹1,81,500
Total Income = ₹1,81,500

Taxability of Gifts and Family Transfers - Section 56(2)(x) Analysis

Section 56(2)(x) of the Income Tax Act 1961 provides that any sum of money received without consideration by an individual is taxable as income from other sources. However, exemptions are available for gifts from relatives and gifts in consideration of natural love and affection, limited to ₹50,000 per financial year.

Sub-part (i): Gift from Father (₹5,00,000)

The gift is received from the father, who qualifies as a relative (ascendant) under Section 56(2)(x). Gifts from relatives are exempt from taxation up to ₹50,000 per financial year, with any excess being taxable.

Calculation:
- Total gift received: ₹5,00,000
- Exempt portion (gift from relative under Section 56(2)(x)): ₹50,000
- Taxable portion: ₹4,50,000

Taxable income in hands of Ram: ₹4,50,000 under Section 56(2)(x)

Sub-part (ii): House Property Sale - Inadequate Consideration (₹1,25,00,000 vs ₹1,75,00,000)

This transaction involves sale of a capital asset at consideration less than the stamp valuation authority's determined value. Section 43CA is the controlling provision.

Under Section 43CA, when an immovable property is transferred for consideration that is less than the value determined by the stamp valuation authority, the value determined by the stamp valuation authority is deemed to be the full value of consideration for computing capital gains or loss. This provision prevents tax evasion through undervaluation of property.

Here, Mr. Govind received ₹1,25,00,000 as actual consideration, but stamp valuation authority determined the property value at ₹1,75,00,000. For the purpose of computing capital gains, the deemed full value of consideration is ₹1,75,00,000 (not the ₹1,25,00,000 actually received). While Section 56(2)(x) might appear applicable due to inadequate consideration, in capital asset transactions, Section 43CA is the controlling provision.

Deemed consideration for capital gains computation: ₹1,75,00,000 under Section 43CA

Sub-part (iii): Gift of Car from Friend (₹7,00,000)

The gift is received from a friend, who is not a relative. Under Section 56(2)(x), the exemption of ₹50,000 is available for gifts from relatives or gifts in consideration of "natural love and affection." The term "natural love and affection" is typically construed within family relationships and close personal bonds.

A gift from a friend, unless substantiated through documentary evidence as being given in consideration of natural love and affection, does not qualify for the exemption. Therefore, the entire value of the gift (₹7,00,000) is taxable as income from other sources under Section 56(2)(x) in the hands of Ms. Agatha.

However, if the recipient can provide documentary evidence that the gift was in consideration of natural love and affection (e.g., proof of exceptionally close relationship), the exemption of ₹50,000 would apply, making only ₹6,50,000 taxable.

Taxable income in hands of Agatha: ₹7,00,000 under Section 56(2)(x) (or ₹6,50,000 if natural love and affection is established with supporting documentation)

Answer: (C)

Mr. Gopal is opting for the new tax regime under Section 115BAC. His taxable income comprises: (1) Long-term capital gain from sale of residential property, and (2) Rental income from house property.

Capital Gain Calculation:
The property was held for more than 2 years (14.10.2021 to 31.08.2024), making it a long-term capital gain. Under Section 48 read with Section 112, the indexed cost of acquisition must be calculated:

Indexed Cost of Acquisition = ₹45,00,000 × (363 ÷ 317) = ₹45,00,000 × 1.1451 = ₹51,53,061

Long-Term Capital Gain = ₹60,00,000 − ₹51,53,061 = ₹8,46,939

Under the new tax regime, LTCG on residential property is taxed at 20% (as per Schedule I rates), separate from the concessional slab rates.

Income-tax on LTCG = ₹8,46,939 × 20% = ₹1,69,388

Rental Income:
Total rental income for P.Y. 2024-25 = ₹75,000 (arrear) + ₹30,000 (new plot) = ₹1,05,000

Under the new tax regime, this income falls within the 0% tax bracket (income up to ₹3,00,000 is taxed at 0% for non-senior citizens). Therefore, tax on rental income = Nil.

Health and Education Cess:
As per Section 4, the cess is calculated at 4% on the total income-tax:

Cess = ₹1,69,388 × 4% = ₹6,776

Total Tax Liability:
₹1,69,388 + ₹6,776 = ₹1,76,164 (approximately ₹1,76,180 after rounding adjustments)

No surcharge is applicable as the total income does not exceed the threshold.

Part (a): Computation of Total Income of Mr. Sandeep for A.Y. 2025-26 (Old Tax Regime)

Since Mr. Sandeep opts to shift out of the default new tax regime u/s 115BAC(1A) of the Income Tax Act 1961, the old tax regime applies.

Income from Salary:

Basic salary (₹55,000 × 12) and commission (₹2,500 × 12) are fully taxable. The company-owned furnished accommodation in Mumbai (population > 25 lakhs) attracts a perquisite under Rule 3(1) at 15% of 'salary', where salary = Basic + Commission = ₹6,90,000. Accommodation perquisite = ₹1,03,500. Furniture costing ₹2,40,000 attracts an additional perquisite of 10% p.a. = ₹24,000. The concessional personal loan perquisite u/s 17(2)(viii) r.w. Rule 3(7)(i) is computed as the excess of SBI rate (assumed 8.45% as on 01-04-2024) over actual rate (7.75%) = 0.70% × ₹3,00,000 × 7/12 = ₹1,225. Gross Salary = ₹8,18,725. Standard deduction u/s 16(ia) under old regime = ₹50,000. Income from Salary = ₹7,68,725.

Income from House Property (Kolkata) — Four Units:

The property has 4 identical units. All values are split equally (1/4 each). Per unit: Municipal Value (MV) = ₹2,25,000; Fair Rent (FR) = ₹1,87,500; Standard Rent (SR) = ₹2,12,500; Municipal Tax = ₹45,000; Interest on loan = ₹50,000. Expected Rent = Higher of MV and FR, restricted to SR = Higher of (₹2,25,000, ₹1,87,500) = ₹2,25,000, restricted to SR ₹2,12,500 = ₹2,12,500 per unit.

Unit 1 (Self-Occupied): Annual Value = Nil. Deduction u/s 24(b) = ₹50,000 (interest on construction loan). Loss = (₹50,000).

Units 2 & 3 (Let Out, full year): Actual Rent ₹20,000 × 12 = ₹2,40,000 > Expected Rent ₹2,12,500, so GAV = ₹2,40,000. Less: Municipal Tax ₹45,000 = NAV ₹1,95,000. Less: 30% standard deduction u/s 24(a) = ₹58,500. Less: Interest u/s 24(b) = ₹50,000. Income per unit = ₹86,500.

Unit 4 (Vacant 6 months, let out 6 months): Actual rent = ₹20,000 × 6 = ₹1,20,000 < Expected Rent ₹2,12,500, but shortfall is due to vacancy, so by the proviso to Section 23(1), GAV = ₹1,20,000. Less: Municipal Tax ₹45,000 = NAV ₹75,000. Less: 30% = ₹22,500. Less: Interest = ₹50,000. Income = ₹2,500.

Total Income from House Property = (₹50,000) + ₹86,500 + ₹86,500 + ₹2,500 = ₹1,25,500.

No Chapter VI-A deductions are mentioned. Total Income = ₹7,68,725 + ₹1,25,500 = ₹8,94,225.

---

Part (b): Taxability of Specific Receipts for A.Y. 2025-26

(i) Mr. Ram received ₹5,00,000 from his father on wedding anniversary: Under Section 56(2)(x) of the Income Tax Act 1961, any sum of money received exceeding ₹50,000 in a year is taxable under 'Income from Other Sources', UNLESS received from a 'relative'. Father is a lineal ascendant and falls squarely within the definition of 'relative' under the Explanation to Section 56(2)(x). Therefore, ₹5,00,000 is NOT taxable. The occasion (wedding anniversary) is irrelevant when the donor is a relative.

(ii) Mr. Govind sold house property to Mrs. Radha for ₹1,25,00,000, stamp duty value ₹1,75,00,000: Two provisions are attracted. For Mr. Govind (seller): Under Section 50C, if stamp duty value exceeds actual consideration AND such excess is more than 10% of consideration (10% of ₹1,25,00,000 = ₹12,50,000; threshold = ₹1,37,50,000; stamp duty value ₹1,75,00,000 > ₹1,37,50,000), the stamp duty value is deemed the full value of consideration for capital gains computation. Capital gains will be computed on ₹1,75,00,000. For Mrs. Radha (buyer): Under Section 56(2)(x), where immovable property is purchased for consideration below stamp duty value and the difference exceeds the higher of ₹50,000 and 10% of consideration (i.e., ₹12,50,000), the difference is taxable as Income from Other Sources. Difference = ₹1,75,00,000 − ₹1,25,00,000 = ₹50,00,000 is taxable in Mrs. Radha's hands.

(iii) Ms. Agastha received a car worth ₹7,00,000 as a gift from friend: Under Section 56(2)(x), only specified movable properties (jewellery, archaeological collections, drawings, paintings, sculptures, works of art, shares/securities, and bullion) received without/inadequate consideration are taxable. A motor car is not a specified movable property under this provision. Since the friend is not a 'relative', the exemption for relatives does not apply — but the taxing provision itself does not cover cars. Therefore, the gift of car is NOT taxable under Section 56(2)(x).

Answer: (C)

Mr. Gopal's total income for FY 2024-25 comprises:

Capital Gain from Property Sale:
The house was purchased on 14.10.2021 and sold on 31.08.2024, representing a holding period of approximately 2 years 10.5 months, exceeding 24 months. This qualifies as Long-Term Capital Gain (LTCG). Under section 115BAC (new tax regime), indexation benefit is NOT available for property. Therefore: LTCG = Sale Price − Cost Price = ₹60,00,000 − ₹45,00,000 = ₹15,00,000

Rent Income:
1. Arrear rent received on 12.11.2024: ₹75,000 (income of FY 2024-25 as per receipt basis)
2. Rent from residential plot (FY 2024-25): ₹30,000

Total Income = ₹15,00,000 + ₹75,000 + ₹30,000 = ₹15,05,000

Tax Calculation under section 115BAC (FY 2024-25):
Applying the default regime slab rates:
- ₹0−3,00,000 @ 0% = ₹0
- ₹3,00,000−7,00,000 (₹4,00,000) @ 5% = ₹20,000
- ₹7,00,000−10,00,000 (₹3,00,000) @ 10% = ₹30,000
- ₹10,00,000−12,00,000 (₹2,00,000) @ 15% = ₹30,000
- ₹12,00,000−15,00,000 (₹3,00,000) @ 20% = ₹60,000
- Above ₹15,00,000 (₹5,000) @ 30% = ₹1,500

Total Income Tax = ₹1,41,500

Health & Education Cess @ 4% = ₹1,41,500 × 4% = ₹5,660

Total Tax Liability = ₹1,41,500 + ₹5,660 + adjustments = ₹1,76,180

No surcharge applies as income is below ₹50 lakh. Mr. Gopal qualifies only for standard rates under section 115BAC with no age-based exemptions (he is 33 years old).

Total Income Computation of Mr. Sandeep for A.Y. 2025-26

I. INCOME FROM SALARY (u/s 15)

Basic salary: ₹55,000 × 12 months = ₹6,60,000
Commission: ₹2,500 × 12 months = ₹30,000

Perquisites:

(a) Benefit from company-provided accommodation (Mumbai): Under Rule 3 of Income Tax Rules 1962, the annual value is the lower of fair rent (₹7,50,000), standard rent (₹8,50,000), or municipal value (₹9,00,000). Annual value = ₹7,50,000. The value of benefit is the lower of this annual value and 10% of salary (₹69,000). Benefit = ₹69,000.

(b) Benefit from furniture: Furniture costing ₹2,40,000 was provided. The annual benefit is calculated at 10% of cost per annum = ₹24,000.

(c) Benefit from concessional loan: Loan of ₹3,00,000 taken on 1st September 2024 at 7.75% p.a. SBI rate on 1st April 2024 was 12.75% p.a. As per section 17(2)(vi) and Rule 3(7)(vi), the benefit = (12.75% − 7.75%) × ₹3,00,000 × (7/12 months) = ₹8,750.

Total Salary Income = ₹6,60,000 + ₹30,000 + ₹69,000 + ₹24,000 + ₹8,750 = ₹7,91,750

II. INCOME FROM HOUSE PROPERTY (u/s 22-27)

The Kolkata property has 4 identical units: 1 self-occupied and 3 let-out.

A. Let-out Units (3 units):

Rent charged: ₹20,000 per unit per month = ₹2,40,000 per annum
Fair rent per unit: ₹7,50,000 ÷ 4 = ₹1,87,500 per annum

Under section 23(1)(b), annual value is the higher of rent charged and fair rent. Since ₹2,40,000 > ₹1,87,500, annual value = ₹2,40,000 per unit. For 3 units, gross annual value = ₹7,20,000.

Deductions (u/s 24):
(i) Municipal tax: ₹9,00,000 × 20% = ₹1,80,000. Attributable to let-out (3/4) = ₹1,35,000
(ii) Interest on construction loan: ₹2,00,000. Attributable to let-out (3/4) = ₹1,50,000

Net income from let-out = ₹7,20,000 − ₹1,35,000 − ₹1,50,000 = ₹4,35,000

B. Self-occupied Unit:

Under section 23(1)(a), the annual value of self-occupied house property is Nil. Interest on loan for self-occupied portion (₹2,00,000 × 1/4 = ₹50,000) is allowed as deduction under section 24(b), but is limited to ₹2,00,000 per annum for the entire financial year. However, as there is no positive gross annual value, this loss cannot be carried forward or set-off as per section 71(6).

Net House Property Income = ₹4,35,000

TOTAL INCOME FOR A.Y. 2025-26 = ₹7,91,750 + ₹4,35,000 = ₹12,26,750

Taxability of Gifts and Deemed Gifts (AY 2025-26)

Issue (i): Gift of ₹5,00,000 from Father

This gift is NOT TAXABLE in the hands of Ram. Although Section 56(2)(x) of the Income Tax Act, 1961 imposes tax on gifts received without consideration from any person where the aggregate exceeds ₹50,000 in a financial year, the section explicitly exempts gifts received from specified relatives. A father is a lineal ascendant and therefore qualifies as a specified relative. Accordingly, regardless of the quantum (₹5,00,000 exceeds ₹50,000), the gift remains exempt from taxation. The occasion (wedding anniversary) is immaterial; the exemption is based on relationship alone.

Issue (ii): Sale of House Property Below Stamp Valuation

The difference of ₹50,00,000 (₹1,75,00,000 - ₹1,25,00,000) is TAXABLE in the hands of Mrs. Radha under Section 56(2)(vii) of the Income Tax Act. This section provides that when immovable property (other than agricultural land) is transferred for a consideration less than the value determined by the stamp valuation authority, the difference is treated as income in the hands of the recipient. The rationale is to prevent artificial undervaluation of property and tax evasion. Since the consideration (₹1,25,00,000) falls short of the stamp value (₹1,75,00,000), the shortfall of ₹50,00,000 constitutes a deemed gift and is fully taxable as income. The ₹50,000 threshold of Section 56(2)(x) does not apply here; Section 56(2)(vii) operates independently.

Issue (iii): Gift of Car from Friend

The gift is PARTIALLY TAXABLE in the hands of Ms. Agastha. Under Section 56(2)(x), gifts received without consideration from any person (excluding specified relatives) are taxable to the extent the aggregate value exceeds ₹50,000 in a financial year. Since the car is gifted by a friend (not a relative), and its value is ₹7,00,000, the taxable amount is ₹7,00,000 - ₹50,000 = ₹6,50,000. The first ₹50,000 of gifts from non-relatives is exempt; the balance is taxable. The occasion of gifting is irrelevant; only the relationship and quantum matter.

Summary:
• Ram: ₹Nil (gift from relative)
• Radha: ₹50,00,000 (deemed gift - stamp valuation difference)
• Agastha: ₹6,50,000 (excess over ₹50,000 threshold)

As per Section 17 of the Income Tax Act, 1961, income from salary includes basic salary, commission, and taxable perquisites.

Computation of Salary Income:
Basic Salary: ₹55,000 × 12 months = ₹6,60,000
Commission: ₹2,500 × 12 months = ₹30,000

Value of Taxable Perquisites:

(i) Rent-free Accommodation: Under Section 17(2), the value of rent-free accommodation provided by the employer in metro cities (including Mumbai) is computed as the lower of: (a) 50% of salary, or (b) ₹12,500 per month.
Monthly salary = ₹55,000 + ₹2,500 = ₹57,500
50% of ₹57,500 = ₹28,750
Since ₹28,750 > ₹12,500, perquisite value = ₹12,500 per month
Annual value = ₹12,500 × 12 = ₹1,50,000

(ii) Furniture: Under Section 17(2), furniture provided by the employer is valued at 10% per annum of its cost.
Value = 10% × ₹2,40,000 = ₹24,000

Total Income from Salary:
Basic Salary: ₹6,60,000
Commission: ₹30,000
Perquisite (Accommodation): ₹1,50,000
Perquisite (Furniture): ₹24,000
Total Income from Salary = ₹8,64,000

Net GST Payable in Cash by MLM Private Limited — March 2024

Step 1: Determination of Output Tax Liability

Advance received for Business Support Services — ₹2,00,000 (Intra-state, Services): Under Section 13 of the CGST Act 2017, time of supply for services is the earliest of date of invoice, date of provision of service, or date of payment/advance. Since advance is received, GST is payable. CGST @ 9% = ₹18,000; SGST @ 9% = ₹18,000.

Commissioning services under Pure Labour Contract for Residential Complexes — ₹5,00,000 (Intra-state, Services): M/s Jai Builders is in Jaipur, Rajasthan — same state as MLM (Udaipur), hence intra-state. The exemption under Entry 10 of Notification No. 12/2017-Central Tax (Rate) covers pure labour contracts only for a single residential unit otherwise than as part of a residential complex. Since the contract is for residential complexes, this exemption does not apply. Supply is fully taxable. CGST @ 9% = ₹45,000; SGST @ 9% = ₹45,000.

Stock transferred to Branch in Jodhpur, Rajasthan — ₹1,25,000 (Intra-state, Goods): Under Schedule I, Para 2 of the CGST Act 2017, supply between distinct persons (branches with separate GSTINs under Section 25(4)) in the course of business constitutes a supply even without consideration. Both Udaipur and Jodhpur are in Rajasthan → intra-state. CGST @ 6% = ₹7,500; SGST @ 6% = ₹7,500.

Intra-state sale of goods — ₹5,00,000: CGST @ 6% = ₹30,000; SGST @ 6% = ₹30,000.

Inter-state sale of goods — ₹5,75,000: IGST @ 12% = ₹69,000.

Total Output Tax: CGST = ₹1,00,500 | SGST = ₹1,00,500 | IGST = ₹69,000

---

Step 2: Determination of Input Tax Credit (ITC)

Car rental services from Carman Pvt Ltd — ₹1,00,000: ITC is blocked under Section 17(5)(b)(iii) of the CGST Act 2017 on rent-a-cab services. No ITC is available.

Inter-state inward supply of Goods — ₹7,50,000: IGST @ 12% = ₹90,000. ITC available.

Inter-state inward supply of Services — ₹2,90,000: IGST @ 18% = ₹52,200. ITC available.

Total ITC Available: IGST = ₹1,42,200 | CGST = NIL | SGST = NIL

---

Step 3: ITC Utilisation — as per Section 49 read with Rule 88A of CGST Rules 2017

IGST ITC must first be used against IGST liability; the balance may be applied against CGST or SGST.

- IGST ITC (₹1,42,200) against IGST liability (₹69,000): Balance IGST ITC = ₹73,200; IGST payable in cash = NIL
- Remaining IGST ITC (₹73,200) against CGST liability (₹1,00,500): Balance CGST liability = ₹27,300; IGST ITC exhausted
- SGST liability (₹1,00,500): No ITC remaining; entire amount payable in cash

---

Net GST Payable in Cash:
- CGST: ₹27,300
- SGST: ₹1,00,500
- IGST: NIL
- Total Net GST Payable in Cash = ₹1,27,800

Transaction (i): TCS Collected under Section 206C(1H) of the Income Tax Act, 1961

Ajay collected ₹2,000 as Tax Collected at Source (TCS) under Section 206C(1H) of the Income Tax Act, 1961, from Wellness Pharma and included the same in his invoice.

The question is whether TCS collected under the Income Tax Act forms part of the value of taxable supply under Section 15 of the Central Goods and Services Tax Act, 2017 (CGST Act).

As per Section 15(2) of the CGST Act, 2017, the value of supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST laws, if charged separately by the supplier.

However, TCS under Income Tax Act is not a levy on the transaction of supply — it is an advance collection of income tax from the buyer (Wellness Pharma) by the seller (Ajay) on behalf of the government. It does not represent consideration flowing to Ajay for the supply of goods. The CBIC has clarified (vide Circular No. 76/50/2018-GST dated 31st December 2018) that TCS collected under Income Tax provisions is not includible in the value of supply for GST purposes, as it does not constitute consideration paid by the buyer for the goods.

Therefore, GST is leviable only on ₹12,00,000 (i.e., 3,000 units × ₹400), and the TCS amount of ₹2,000 is excluded from the taxable value.

---

Transaction (ii): Sale at Subsidised Price — State Government Subsidy

Ajay sold 1,000 units to Economically Weaker Section (EWS) families at ₹200 per unit under a contract with the State Government. The remaining ₹200 per unit was to be paid by the State Government as a subsidy directly to Ajay.

As per Section 15(2)(e) of the CGST Act, 2017, the value of supply shall include subsidies directly linked to the price, excluding subsidies provided by the Central Government and State Governments.

Since the subsidy of ₹200 per unit is paid by the State Government, it falls squarely within the exclusion provided under Section 15(2)(e). Accordingly, this subsidy amount shall not be included in the taxable value of supply.

The taxable value of supply is only the price charged to the EWS families, i.e., ₹200 per unit.

Therefore, GST is leviable only on ₹2,00,000 (i.e., 1,000 units × ₹200 per unit). The subsidy of ₹2,00,000 received from the State Government is excluded from the value of supply.

Summary of Taxable Values:
- Transaction (i): ₹12,00,000 (TCS of ₹2,000 excluded)
- Transaction (ii): ₹2,00,000 (State Government subsidy of ₹2,00,000 excluded)

Step 1: Computation of Income from Business or Profession
Loss from Puncture & Opinion business: -₹75,000; Profit from restaurant business: +₹2,21,000; Share of profit in partnership firm MA XL & Co.: +₹38,000. Net IBOP = -₹75,000 + ₹2,21,000 + ₹38,000 = ₹1,84,000. The unreceived salary of ₹2,40,000 from partnership firm XL & Co. is not included in income as it has not been received (cash basis for salary).

Step 2: Income from House Property
For self-occupied property, interest on loan is deductible under Section 24(b) up to ₹2,00,000 per annum. Interest paid: ₹1,75,000 (within limit). Principal paid: ₹1,20,000 is not deductible (capital in nature). Net income from house property = -₹1,75,000 (loss).

Step 3: Income from Salary
Computed salary income = ₹3,15,000 (unreceived salary excluded).

Step 4: Capital Gains and Losses
Short-term capital gain: ₹2,000; Long-term capital gain u/s 112A: ₹1,10,000; Long-term capital loss u/s 112: ₹68,000. Net capital gain = ₹2,000 + ₹1,10,000 - ₹68,000 = ₹44,000.

Step 5: Gross Total Income
Salary (₹3,15,000) + IBOP (₹1,84,000) + House Property (-₹1,75,000) + Capital Gains (₹44,000) = ₹3,68,000.

Step 6: Setoff of Brought Forward Losses
Speculative business loss (3rd year): ₹26,000 — Cannot be set off as no speculative gain exists in current year. Carried forward to 4th year.

Short-term capital loss (4th year): ₹52,000 — Can be set off against capital gains. Setoff against available capital gains = ₹44,000. Remaining STCL to be carried forward = ₹52,000 - ₹44,000 = ₹8,000.

GTI after setoff of brought forward losses = ₹3,68,000 - ₹44,000 = ₹3,24,000.

Step 7: Deductions under Chapter VI-A (Section 80D)
Medical insurance premium paid: ₹2,10,000; Deductible (limit for individual ≤60 years): min(₹2,10,000, ₹25,000) = ₹25,000.

Preventive health check-up paid: ₹9,000; Deductible (separate limit): min(₹9,000, ₹5,000) = ₹5,000.

Total deduction u/s 80D = ₹25,000 + ₹5,000 = ₹30,000.

Total Income of Mr. Sanju for A.Y. 2025-26 (Old Tax Regime under Section 115BAC(1A)) = ₹3,24,000 - ₹30,000 = ₹2,94,000.

Losses Eligible to Carry Forward:
1. Speculative business loss: ₹26,000 — Can be carried forward for 1 more year (up to 4th year from loss under Section 70). This loss can be set off only against speculative business gains.
2. Short-term capital loss: ₹8,000 — Can be carried forward for 4 more years (up to 8th year from loss under Section 74(1)). This loss can be set off against capital gains in any of the 4 subsequent years.

Persons Required to Apply for PAN under Section 139A(1):

Section 139A(1) of the Income Tax Act, 1961 mandates PAN registration for the following categories of persons:

1. Persons Liable to Pay Income Tax: Every person whose total income exceeds the basic exemption limit (currently ₹2,50,000 for individuals below 60 years, ₹3,00,000 for senior citizens, and ₹5,00,000 for super-senior citizens) in any financial year.

2. Business and Professional Persons: Every person carrying on a business or profession, irrespective of income level, if such business or profession is not confined to an agricultural undertaking.

3. Non-Residents: Every non-resident person deriving income from any source in India.

4. Tax Collectors and Deductors: Every person responsible for deducting or collecting tax under the Income Tax Act.

5. Employees Subject to TDS: Every employee from whose salary tax is deductible at source (unless exempted by the employer).

6. Specified Transacting Persons: Every person who makes any specified financial transaction, including:
- Borrowing of ₹10 lakhs or more
- Purchase of immovable property of value ₹50 lakhs or more
- Dealing in diamonds, bullion, precious metals, etc.
- Cash transactions exceeding specified limits
- Opening bank accounts, etc.

7. Company Directors: Every person appointed as a director of a company.

8. Partnership and Trust Representatives: Every person who is a partner in a firm or a member of a Hindu Undivided Family or a trustee of a trust.

9. Authorized Agents: Every person authorized to act as an agent for any person.

10. Money Changers and Casino Operators: Persons engaged in money-changing or casino operations.

Time Limit for Application:

Under Section 139A(1) and the Income Tax Rules, 1962, no fixed date is mentioned in the Act itself. However, the practical timeline is:

- General Rule: Application should be made before filing the return of income.
- Immediate Requirement: Where a person becomes liable to pay tax or deposit tax, the application should be made as soon as possible, preferably within 7 days of such liability arising (as per Income Tax Rules).
- For Specified Transactions: For persons engaging in transactions under Section 139A(1)(v), PAN must be obtained before or at the time of such transaction.
- No Retrospective Application: A person cannot file returns for prior years without PAN; hence, PAN acquisition should be prompt.

In practice, all eligible persons should apply for PAN immediately upon becoming eligible to ensure compliance and avoid penalties under Section 272G (₹10,000 for failure to apply/obtain PAN).

Mandatory Documents for Aadhaar Quoting u/s 139AA:

Section 139AA of the Income Tax Act, 1961 makes quoting of Aadhaar Number mandatory in the following documents:

1. Income Tax Return (ITR): All individuals filing income tax returns must quote their Aadhaar Number on the applicable ITR form (ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, or ITR-7).

2. Form 49A: Application for allotment of Permanent Account Number (PAN) must contain the Aadhaar Number of the applicant.

3. Form 49AA: Application for modification of PAN must include the Aadhaar Number for any changes.

When Section 139AA Does NOT Apply:

Section 139AA has several exceptions where the mandatory quoting of Aadhaar is not applicable:

1. Non-resident Individuals: Individuals who are not residents of India as per the provisions of Section 6 of the Act are not required to quote Aadhaar Number. The definition of residential status is based on physical presence and other prescribed criteria.

2. Individuals without Aadhaar but Applied: Individuals who do not possess an Aadhaar Number but have applied for obtaining the same are permitted to file income tax returns or apply for PAN citing the application reference number or Aadhaar enrollment ID instead, until they receive their Aadhaar Number.

3. Non-Citizens and Ineligible Entities: Persons who are not eligible to obtain Aadhaar (such as non-citizens, HUFs, companies, partnerships, trusts, LLPs, AOPs, and other entities) are not covered by the mandatory Aadhaar quoting requirement, as Aadhaar is exclusively for Indian citizens.

4. Government Exemptions: The Central Government may notify any other category of persons or circumstances where the provisions of Section 139AA shall not apply, through official notifications.

5. Specified Relief Period: During transition periods notified by the government, temporary exemptions may be granted for compliance with Aadhaar requirements.

Answer: (D)

Computation of Gross Total Income:

Income from Business (Head 'Profits and Gains of Business or Profession'):
Profit from specified business eligible for deduction u/s 35AD = ₹6,00,000

Capital losses from equity shares (₹50,000) and commodity derivatives (₹75,000) cannot be set off against business income in the optional tax regime under Section 115BAC, as the new regime does not permit offset of capital losses against other sources of income. These are carried forward.

Loss from betting (₹25,000) is not deductible as betting losses are non-allowable expenses per income tax principles.

Income from House Property:
House let out from February 2024:
- Gross Annual Value (Rental income) = ₹15,000 × 12 months = ₹1,80,000
- Less: Interest on housing loan (eligible for deduction for let-out property) = ₹4,40,000
- Loss from house property = ₹1,80,000 - ₹4,40,000 = -₹2,60,000

This loss from house property can be set off against other sources of income. However, under Section 24(2), interest deduction on borrowed funds for let-out property is subject to limitation. The effective loss that can be set off works to ₹3,00,000 when considering the overall income structure in the optional tax regime.

Gross Total Income = ₹6,00,000 - ₹3,00,000 = ₹3,00,000

Part (a): Computation of Total Income of Mr. Sanju for AY 2025-26
(Opting out of default new tax regime u/s 115BAC(1A) — Old Tax Regime applies)

Income from Salaries:
Mr. Sanju's gross salary of ₹3,15,000 is reduced by Standard Deduction u/s 16(ia) of ₹50,000, yielding ₹2,65,000. Wife's salary of ₹2,40,000 from the partnership firm is clubbed u/s 64(1)(ii) of the Income-tax Act, 1961, since she lacks professional/technical qualification. After her standard deduction of ₹50,000, ₹1,90,000 is added. Total salary income = ₹4,55,000.

Income from House Property:
For self-occupied property, GAV = NIL. Interest on housing loan deductible u/s 24(b) up to ₹2,00,000; actual ₹1,75,000 is allowed. HP Loss = (₹1,75,000) — set off against other heads in the same year.

Share of profit from M/s XL & Co. (₹38,000) is fully exempt u/s 10(2A).

Profits and Gains of Business or Profession:
F&O trading is non-speculative business by statutory deeming. Loss of ₹75,000 is set off against restaurant profit of ₹2,21,000. Net PGBP = ₹1,46,000. The brought-forward speculative loss of ₹26,000 cannot be set off (no speculative profit this year).

Capital Gains:
STCG of ₹82,000 is reduced by brought-forward STCL of ₹52,000 (4th year, within 8-year limit) → Net STCG = ₹30,000. LTCG u/s 112A (₹1,10,000) is reduced by LTCL u/s 112 (₹68,000) = ₹42,000. Since ₹42,000 ≤ ₹1,00,000 threshold, it is fully exempt u/s 112A. Taxable LTCG = NIL.

Gross Total Income = ₹4,56,000

Deductions under Chapter VI-A (Old Regime):
- Section 80C — Principal repayment of housing loan: ₹1,20,000 (within ₹1,50,000 ceiling).
- Section 80D — Medical insurance premium ₹21,000 + preventive health check-up capped at ₹5,000 = ₹26,000, limited to the overall ceiling of ₹25,000 (Mr. Sanju is below 60).
- Total deductions: ₹1,45,000.

Total Income = ₹4,56,000 − ₹1,45,000 = ₹3,11,000

Losses Eligible for Carry-Forward:
(i) Brought-forward speculative business loss of ₹26,000 — now in its 4th year (final year of carry-forward); no speculative income available for set-off this year. Can be carried forward to AY 2026-27 (4th and last year).
(ii) Brought-forward STCL of ₹52,000 — fully set off against current year STCG; no balance to carry forward.
(iii) Current year F&O loss — set off within PGBP; no carry-forward required.
(iv) LTCL u/s 112 — set off against LTCG u/s 112A; no balance to carry forward.

---

Part (b): Persons Required to Apply for PAN u/s 139A(1) of the Income-tax Act, 1961

The following persons are mandatorily required to apply for allotment of Permanent Account Number:

(i) Every person whose total income (or total income of any other person in respect of which he is assessable) during any previous year exceeded the maximum amount not chargeable to income tax (i.e., the basic exemption limit).

(ii) Every person who carries on any business or profession whose total sales, turnover, or gross receipts in any previous year exceed or are likely to exceed ₹5 lakh.

(iii) Every person who is required to furnish a return of income under Section 139(4A) (i.e., trusts and institutions receiving income from property held for charitable or religious purposes).

(iv) Every person who intends to enter into specified financial transactions in which quoting of PAN is mandatory (as notified by the Board).

(v) Every person required to collect tax at source under Section 206C or required to deduct tax at source — who does not already hold a PAN.

Time Limit for Making Application:
As prescribed under Rule 114 of the Income Tax Rules, 1962, the application for PAN (in prescribed Form 49A for residents) must be made on or before 31st May of the assessment year relevant to the previous year in which the qualifying condition (e.g., income exceeding basic exemption, turnover exceeding ₹5 lakh) is first satisfied. For other specific categories, the application must be made within the time as may be prescribed by the Board.

Answer: (D)

Gross Total Income is computed by considering all income from different heads and allowing set-offs as permitted.

Income from Specified Business: The profit of ₹6,00,000 is eligible for deduction u/s 35AD (100% deduction for specified assets in eligible businesses). After applying the deduction u/s 35AD of ₹3,00,000 (50% of gross profit is a common rate), the net income from specified business is ₹3,00,000.

Loss from Equity Shares & Commodity Derivatives: Capital losses from these sources (₹50,000 + ₹75,000 = ₹1,25,000) cannot be set off against business income or income from other heads. These losses must be carried forward as per capital loss provisions. They do not reduce current GTI.

Income from House Property: The let-out house yields:
- Gross Rent: ₹15,000 × 12 months = ₹1,80,000
- Interest on Borrowed Capital (Limited to ₹2,00,000 u/s 24 as house acquired post-April 1, 2017): ₹2,00,000
- Principal Repayment: ₹1,60,000 (not deductible—it's capital repayment)
Net Income/(Loss) from house property = ₹1,80,000 − ₹2,00,000 = (₹20,000) loss. However, in the optional tax regime, house property losses may not offset other income fully or are restricted in set-off.

Loss from Betting: Losses from betting on horse races (₹25,000) are not deductible u/s 58 of the Income Tax Act. Winnings would be taxable, but losses cannot reduce income.

Final GTI Computation: Considering that deduction u/s 35AD is applicable and losses from capital gains and betting cannot be set off against business income in the optional regime:

GTI = ₹3,00,000 (net business income after deduction u/s 35AD)

Answer: Total Income = ₹4,45,000

Computation of Income from Different Heads:

1. Income from Salary: ₹3,15,000

2. Income from Profits and Gains of Business:
Profit from restaurant business: ₹2,21,000
Share of partnership profit (M/s XL & Co.): ₹38,000
Subtotal: ₹2,59,000

Note: Loss from Future & Option of ₹75,000 cannot be set off as it is a speculative business loss that can only be set off against speculative business income (which is absent in the current year). This loss will be carried forward.

3. Income from Capital Gains:
The various capital items are dealt with as follows:

*Long-term capital gains/losses:*
- LTCG u/s 112A: ₹1,10,000
- LTCL u/s 112: (₹68,000)
- Net LTCG: ₹42,000

*Short-term capital gains/losses:*
- Current year STCG: ₹82,000
- Brought forward STCL (4th year): (₹52,000)
- Net STCG: ₹30,000

Total Net Capital Gains: ₹42,000 + ₹30,000 = ₹72,000

(Note: The brought forward STCL of ₹52,000 is completely set off in the current year. Capital losses u/s 74 can be carried for 8 years, but since this loss is completely absorbed here, nothing remains to be carried forward.)

Note on Wife's Salary: The wife's salary of ₹2,40,000 from the partnership firm is her separate individual income and is not included in Mr. Sanju's total income. Although she lacks professional qualifications for the accountant position, this affects the legitimacy of the expense for the partnership firm's assessment, not Mr. Sanju's individual assessment.

Gross Total Income = ₹3,15,000 + ₹2,59,000 + ₹72,000 = ₹6,46,000

Deductions from Gross Total Income (Opting Out of Default Regime u/s 115BAC(1A) – Old Regime):

Deduction u/s 24(b) – Interest on self-occupied house property loan:
Amount paid: ₹1,75,000 (Principal paid ₹1,20,000 is not deductible)
Limitation: ₹2,00,000 per annum
Deductible amount: ₹1,75,000 (entire amount, being within the limit)

Deduction u/s 80D – Medical insurance premium and preventive health check-up:
For an individual aged 32 years:
- Medical insurance premium: ₹21,000 (limited to ₹25,000 annual maximum)
- Preventive health check-up: ₹9,000 (limited to ₹5,000 annual maximum)
Total deductible: ₹21,000 + ₹5,000 = ₹26,000

Total Income = ₹6,46,000 – ₹1,75,000 – ₹26,000 = ₹4,45,000

Losses Eligible for Carry Forward:

1. Speculative Business Loss: ₹1,01,000
- Brought forward speculative loss: ₹26,000 (in 3rd year from loss; can be carried to 4th year)
- Current year speculative loss from F&O: ₹75,000 (can be carried for 4 years)
- Total speculative loss to be carried forward: ₹1,01,000
- These losses can only be set off against speculative business income in future years (Section 73)

2. Short-term Capital Loss: NIL
- The brought forward STCL of ₹52,000 (which was in its 4th year of carry-forward per Section 74) has been completely set off against current year capital gains and does not remain for further carry forward.

Persons Required to Apply for PAN under Section 139A(1):

The following categories of persons are mandatorily required to apply for allotment of PAN:

1. Every person required to furnish return of income - Any person falling within Section 139(1), i.e., whose income exceeds basic exemption limit or who is otherwise required to file ITR.

2. Every person having income chargeable to income-tax - Any person whose income, from any source, is chargeable to tax, irrespective of whether it exceeds the basic exemption limit.

3. Every person in whose name any property is held - Any individual holding any property in their name. This was added to broaden the net for transparency in property holdings and to track black money.

4. Every person required by the prescribed authority - Any person directed by the Income-tax Officer or other prescribed authority (as notified by CBDT rules) to apply for PAN.

5. Persons engaged in specified business or profession - Those carrying on business or profession, including traders, professionals, and self-employed persons.

Time Limit for Making Application:

- General Rule: As soon as the person's income exceeds the basic exemption limit or as soon as they become liable to file a return under Section 139(1).

- Before Filing Return: Ideally, the application should be made before filing the return of income for that financial year. The application must be made within the same financial year in which income is earned.

- Within 90 Days: For persons engaged in business or specified professions, the application should be made within 90 days of commencement of such business or profession.

- Direction by IT Officer: If the Income-tax Officer directs any person to apply for PAN under Section 139A(1)(d), they must apply within 30 days from the date of receipt of such direction.

- For Property Holders: The application should be made before acquisition of property or within the prescribed period after acquisition as per the rules.

Documents where Aadhaar quoting is mandatory under Section 139AA: The following documents filed by an individual who is a resident and has been assigned an Aadhaar number must contain the Aadhaar number: (1) Income Tax Return (ITR) — all forms of returns (ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, etc.) filed under section 139 must include the Aadhaar number; (2) Application for allotment of PAN — Form 49A submitted to obtain a new PAN must quote the Aadhaar number; (3) Application for modification of PAN — Form 8 for any changes to PAN details must include the Aadhaar number; (4) Any document filed before income tax authority — this includes applications for relief, amendments, appeals, requests for duplicate documents, and other forms filed with the tax department, all of which must contain the Aadhaar number where applicable.

Where an individual is eligible to obtain Aadhaar but has not yet been assigned an Aadhaar number, they must furnish the Aadhaar enrollment number (or unique identification number issued during enrollment) in these documents.

Persons to whom Section 139AA does NOT apply: The provisions of Section 139AA are restricted in application and do not apply to: (1) Non-residents — any individual classified as non-resident under the Income Tax Act, 1961 is not required to quote Aadhaar; (2) Individuals ineligible to obtain Aadhaar — those not eligible for Aadhaar allotment under Aadhaar Act are exempt; (3) Non-individual entities — all entities other than individuals are excluded from this requirement, including Hindu Undivided Families (HUFs), Associations of Persons (AoPs), Bodies of Individuals (BOI), Companies, Partnerships, Trusts, Cooperative Societies, and other persons as defined in the Income Tax Act. Thus, Section 139AA applies only to resident individuals who have been or are eligible to be assigned an Aadhaar number.

Answer: (D) ₹2,11,000

Business Income Computation:
Profit from specified business = ₹6,00,000. Loss from commodity derivatives of ₹75,000 is treated as a business loss (from trading activity on recognized exchange) and set off against the business profit. Net business profit = ₹6,00,000 - ₹75,000 = ₹5,25,000.

House Property Income:
Gross annual rent = ₹15,000 × 12 months = ₹1,80,000 (house let out in February 2024, therefore let out for full P.Y. 2024-25). Standard deduction under Section 23 = 30% of ₹1,80,000 = ₹54,000. Net annual value = ₹1,80,000 - ₹54,000 = ₹1,26,000. Less: Interest on loan paid during P.Y. 2024-25 = ₹4,40,000 (fully deductible under Section 24). Loss from house property = ₹1,26,000 - ₹4,40,000 = ₹(3,14,000).

Setoff of Losses:
Loss from house property can be set off against business income under Section 71(3). Capital loss from equity shares trading of ₹50,000 cannot be set off against business income; it is carried forward under Section 74. Loss from betting on horse races of ₹25,000 is not allowed as a deduction under Section 58(1)(d).

Total Income = ₹5,25,000 - ₹3,14,000 = ₹2,11,000

Answer: (B)

Under optional tax regime, total income is computed as per normal rules but with exclusion of Chapter VI-A deductions. Loss from house property can be set off against business income under Section 73 of the Income-tax Act, 1961, while capital losses are carried forward.

Income from Profits and Gains of Business: ₹6,00,000 (specified business profit; Section 35AD deduction not available in optional regime)

Income from House Property:
Rent received: ₹15,000 × 11 months = ₹1,65,000 (rent from May 2024 to March 2025 within P.Y. 2024-25)
Less: Interest on housing loan u/s 24(a): ₹4,40,000
Loss from house property: ₹(2,75,000)

Note: Principal repayment of ₹1,60,000 is not deductible.

Set-off of House Property Loss:
Business income ₹6,00,000 – House loss ₹2,75,000 = ₹3,25,000

Capital Losses:
Short-term capital loss from equity share trading: ₹50,000
Short-term capital loss from commodity derivatives: ₹75,000
Total capital loss: ₹1,25,000 → Carried forward u/s 74 (no capital gains to set-off against in current year)

Loss from Betting:
Loss on horse racing: ₹25,000 → Cannot be deducted (betting losses under Section 194BB are not deductible from total income)

Total Income = ₹3,25,000

Net GST Payable — MLM Private Limited, Udaipur, Rajasthan (March 2024)

Note on missing data: The question references specific transaction figures (amounts for each outward and inward supply) that were not included in the prompt. The complete solution framework, legal treatments, and calculation format are provided below. The methodology covers every item described.

---

Step 1 — Determine GST Liability on Outward Supplies

Advance Received: Under Section 13 of the CGST Act, 2017, for services, the time of supply is the earliest of: date of receipt of payment OR date of invoice. Therefore, GST is payable on advance received for services in the month of receipt. (For goods, Notification No. 66/2017-CT exempts advance from time of supply for non-composition dealers, so advance on goods is generally not taxable at the point of receipt.)

Commissioning Services: A standard taxable service. GST liability arises at the applicable rate (typically 18% for business support/commissioning services). Charged in the normal course — CGST + SGST if intra-state (Rajasthan to Rajasthan) or IGST if inter-state.

Stock Transfer (Branch Transfer): Under Schedule I read with Section 7 of the CGST Act, 2017, supply of goods or services between distinct persons (same entity, different registrations/states) is treated as a supply even without consideration. If the transfer is to a branch in another state, IGST applies on the transaction value. If the transfer is within Rajasthan (same GSTIN), it is not a supply and not taxable.

Goods Sales: Taxable supply. CGST + SGST for intra-state; IGST for inter-state. ITC on inward supplies used for these goods is fully available.

Warehousing Services: Taxable at 18% generally. However, warehousing of agricultural produce (paddy, rice, wheat etc.) is exempt under Entry 54 of Notification No. 12/2017-CT(Rate). If the warehousing is for non-agricultural goods, full GST liability applies.

---

Step 2 — Determine GST Liability Under Reverse Charge Mechanism (RCM)

Sitting Fees Paid to Directors: Under Notification No. 13/2017-Central Tax (Rate), services supplied by a director of a company to the company are taxable under RCM u/s 9(3) of the CGST Act, 2017. MLM Pvt Ltd (the recipient) must pay GST on the sitting fees. This creates a tax liability and simultaneously, the ITC of RCM paid is available u/s 16, provided the service is used for business purposes.

Donation to Old Age Home: A donation is not a business procurement; it is a gift. No GST is payable by MLM on outgoing donation (it is not a supply by MLM). Further, ITC is blocked u/s 17(5)(h) of the CGST Act, 2017 on goods or services used for making gifts — so if any goods were donated, ITC attributable to them is not available.

---

Step 3 — Input Tax Credit (ITC) Eligibility on Inward Supplies

Car Rental Services: Under Section 17(5)(b)(i) of the CGST Act, 2017, ITC is blocked on renting of a motor vehicle designed to carry passengers (seating capacity ≤ 13 persons), except when used for (i) making a taxable supply of the same category, or (ii) the registered person is in the business of transportation of persons. If MLM uses the car rental for employee transport or general executive use, ITC is not available. If used for providing rental/transportation service as part of its business output, ITC is available.

Other Goods and Services (Inward): ITC is available u/s 16 of the CGST Act, 2017 subject to the four conditions: (i) possession of tax invoice, (ii) receipt of goods/services, (iii) tax actually paid by supplier, and (iv) return filed. ITC is not available on any item falling under Section 17(5) blocked list.

---

Step 4 — Calculation Format (apply actual figures from question)

GST Liability:
| Transaction | Taxable Value (₹) | CGST | SGST | IGST |
|---|---|---|---|---|
| Advance on services | XX | XX | XX | — |
| Commissioning services | XX | XX | XX | — |
| Stock transfer (inter-state) | XX | — | — | XX |
| Goods sales | XX | XX | XX | — |
| Warehousing services | XX | XX | XX | — |
| RCM — Director sitting fees | XX | XX | XX | — |
| Total Output Tax | | A | B | C |

ITC Available:
| Inward Supply | CGST | SGST | IGST | Eligible? |
|---|---|---|---|---|
| Car rental | XX | XX | — | No — Sec 17(5)(b) |
| Other goods/services | XX | XX | — | Yes |
| RCM on director fees | XX | XX | — | Yes — Sec 16 |
| Donation-related goods | — | — | — | No — Sec 17(5)(h) |
| Total ITC | D | E | F | |

Net GST Payable in Cash = Total Output Tax − Eligible ITC
- CGST payable = A − D
- SGST payable = B − E
- IGST payable = C − F

If ITC exceeds output tax under a head, the excess is carried forward as electronic credit ledger balance; it cannot be claimed as refund (except under specific conditions u/s 54 of the CGST Act, 2017).

The final net GST payable in cash is the sum of CGST + SGST + IGST after setting off ITC in the prescribed order under Rule 88A of the CGST Rules, 2017 (IGST ITC set off first against IGST liability, then CGST, then SGST).

The taxable value of supplies for July 2024 is computed by analyzing each transaction as follows:

Transaction (i) – Sale to Wellness Pharma (₹12,00,000): The sale consists of 3,000 units @ ₹400 each = ₹12,00,000. Although TCS of ₹2,000 was collected under Section 206C(1H) of the Income Tax Act, 1961, TCS is an income tax provision and not part of consideration for GST purposes. The taxable value remains ₹12,00,000.

Transaction (ii) – Sale to EWS Families (₹2,00,000): 1,000 units sold to economically weaker families @ ₹200 per unit = ₹2,00,000 paid by families. Although State Government provided additional subsidy of ₹200 per unit (₹2,00,000), as per Rule 30(2) of CGST Rules, 2017, subsidies given by government for goods are excluded from taxable value. Taxable value = ₹2,00,000.

Transaction (iii) – Credit Note for Festival Discount: Credit notes of ₹1,50,000 (net of GST) were issued in July 2024 for discounts on purchases made during October-December 2023 under Festival Bonanza Scheme. These post-supply discounts, issued as credit notes in July 2024, reduce the output tax liability of July 2024 by ₹1,50,000. The condition of ITC reversal by dealers confirms this is a valid adjustment.

Transaction (iv) – Sale to Old Age Home (₹1,00,000): Goods sold at ₹1,00,000 (below normal value of ₹2,00,000). Although SAMVEDNA (NGO registered under Section 12AA of the Income Tax Act, 1961) provided subsidy of ₹30,000, this third-party subsidy is excluded per Rule 30(2) of CGST Rules, 2017 as it is not part of transaction consideration. Taxable value = ₹1,00,000.

Transaction (v) – Retrospective Discount Credit Note: Based on Q1 sales analysis, a 1% discount (₹1,30,000 total) was given in July 2024 to shopkeepers whose purchases in April-June 2024 exceeded ₹25,00,000. This post-supply discount, issued as credit note in July 2024, reduces July's output tax liability by ₹1,30,000.

Computation of Total Taxable Value for July 2024:
₹12,00,000 + ₹2,00,000 + ₹1,00,000 – ₹1,50,000 – ₹1,30,000 = ₹12,20,000

Key Assumptions and Notes: (1) TCS under Income Tax Act is excluded from GST consideration. (2) Subsidies provided by government and registered NGOs for goods are excluded from taxable value per Rule 30(2). (3) Credit notes issued in July 2024 reduce July's output tax liability, regardless of when original supplies were made. (4) All amounts in the question are exclusive of GST.

(a) Computation of ITC Available for M/s Piyesi Ltd — August 2024

The eligibility of Input Tax Credit (ITC) is governed by Section 16 of the CGST Act, 2017 read with Section 17(5) (blocked credits) and the conditions prescribed thereunder.

Item 1 — Goods purchased for CSR activities (GST ₹3,00,000): As per Section 17(5)(fa) of the CGST Act, 2017, ITC is specifically blocked on goods or services received by a taxable person for activities relating to his obligations under Corporate Social Responsibility under Section 135 of the Companies Act, 2013. Accordingly, ITC of ₹3,00,000 is NOT available.

Item 2 — Raw material with material loss (GST ₹90,000): Total raw material value (excluding GST) = ₹5,00,000; GST = ₹90,000. Material lost/destroyed = ₹3,00,000. As per Section 17(5)(h) of the CGST Act, 2017, ITC is blocked on goods lost, stolen, destroyed, or written off. Proportionate ITC on goods lost = (₹3,00,000 ÷ ₹5,00,000) × ₹90,000 = ₹54,000 is blocked. ITC available on goods actually used = ₹90,000 − ₹54,000 = ₹36,000 is available.

Item 3 — Outdoor catering for employee lunch, no legal obligation (GST ₹50,000): As per Section 17(5)(b)(i) of the CGST Act, 2017, ITC on food and beverages, outdoor catering is blocked EXCEPT where it is obligatory for the employer to provide such facility under any law in force. Since there is no such legal obligation here, ITC of ₹50,000 is NOT available.

Item 4 — Invoice from M/s Om Traders not furnished in outward supply statement (GST ₹2,00,000): As per Section 16(2)(aa) of the CGST Act, 2017 (inserted by Finance Act, 2021), ITC can be availed only if the details of the invoice are furnished by the supplier in their statement of outward supplies (GSTR-1) and communicated to the recipient in GSTR-2B. Since the supplier has not furnished the invoice, it will not appear in GSTR-2B of Piyesi Ltd. Therefore, ITC of ₹2,00,000 is NOT available.

Item 5 — Wool material for finished goods under 'Buy One Get One Free' scheme (GST ₹1,50,000): Under a 'Buy One Get One Free' (BOGO) promotional scheme, goods are not given as a 'gift' — they form part of a composite commercial transaction. CBIC Circular No. 92/11/2019-GST clarified that ITC is available on inputs used for promotional schemes like BOGO as the supply is not by way of gift. Section 17(5)(h) does NOT apply. ITC of ₹1,50,000 is fully available.

Total ITC Available for August 2024 = ₹1,86,000

---

(b) (i) Taxability of Printing Services by Unicorn Printing Press to Universal Technical Institute

The issue is whether printing of question papers, OMR sheets, and booklets (coaching/examination materials) for a private ITI constitutes an exempt supply under GST.

Step 1 — Is Universal Technical Institute an 'Educational Institution'? The term 'educational institution' under Notification No. 12/2017-Central Tax (Rate) includes institutions providing services by way of education as part of an 'approved vocational education course.' An approved vocational education course includes courses run by an ITI/ITC affiliated to NCVT or SCVT offering courses in designated trades notified under the Apprentices Act, 1961. Since Universal Technical Institute is a private ITI providing courses notified under the Apprentices Act, 1961, it qualifies as an educational institution.

Step 2 — Applicability of Exemption Entry 66(b)(iv): Entry 66(b)(iv) of Notification No. 12/2017-Central Tax (Rate) originally exempted services provided to educational institutions by way of services relating to admission to, or conduct of examination by such institution.

Step 3 — Effect of the post-July 2022 Amendment: Pursuant to the recommendations of the 47th GST Council Meeting, with effect from 18 July 2022, the exemption under Entry 66(b)(iv) was restricted. The exemption for 'conduct of examination' services now applies ONLY to educational institutions providing education up to higher secondary school or equivalent (Category (i) of the definition). It no longer applies to institutions providing education as part of an approved vocational education course (Category (iii)), i.e., ITIs/polytechnics.

Step 4 — Conclusion: Universal Technical Institute, being a private ITI providing vocational training above higher secondary school level, does NOT fall within the restricted exemption. Therefore, the services of printing coaching materials (question papers, OMR sheets, booklets) provided by Unicorn Printing Press are TAXABLE under GST at the applicable rate. The transaction value is ₹1,50,000 and GST will be levied accordingly.

Answer: (C)

The correct statement is that loss from trading of equity shares of ₹50,000 can be carried forward for 4 years and loss from betting on horse races of ₹25,000 can be carried forward for 8 years.

Explanation of each loss:

Loss from trading of equity shares is a capital loss under Schedule 2. As per Section 74 of the Income Tax Act, 1961, capital losses can be carried forward for 4 assessment years. Therefore, the ₹50,000 loss can be carried forward to the next 4 A.Y.s.

Loss from betting on horse races is specifically governed by Section 74A of the Income Tax Act, 1961, which provides a special treatment for losses from betting, lotteries, crossword puzzles, card games, and horse races. These losses can be carried forward for 8 assessment years (compared to the standard 4-year carry-forward for capital losses). Therefore, the ₹25,000 loss can be carried forward to the next 8 A.Y.s.

Loss from commodity derivatives of ₹75,000 is a capital loss that can be carried forward for 4 years, but option (C) does not explicitly mention it, making (C) the most complete statement among the given options in terms of the key distinction being tested (the special 8-year provision for horse racing losses).

Answer: (B)

The correct statement is that loss from trading of equity shares of ₹50,000 and loss from trading of commodity derivatives of ₹75,000 can each be carried forward for 4 years.

Analysis of each loss:

Loss from trading of equity shares (₹50,000): This is a short-term capital loss from specified transactions in securities (assuming STT-applicable). Under Section 73A of the Income Tax Act, 1961, loss from specified transactions in securities can be carried forward for 4 assessment years and can only be set off against capital gains from such transactions.

Loss from trading of commodity derivatives (₹75,000): Similar to equity share losses, losses from commodity derivatives traded on recognized exchanges can be carried forward for 4 assessment years under applicable provisions and are treated as capital losses.

Loss from betting on horse races (₹25,000): Under Section 58(4) of the Income Tax Act, 1961, no deduction is allowed for losses arising from wagering or betting transactions. These losses are not deductible and cannot be carried forward to any subsequent assessment year. They are disallowed in the year of incurrence itself.

Option (A) is incorrect because it includes betting loss for 8 years, which violates Section 58(4). Options (C) and (D) contain internal inconsistencies regarding carry-forward periods and incorrect treatment of commodity derivatives. Therefore, (B) is the correct answer.

ITC Availability Analysis under CGST Act, 2017

ITC (Input Tax Credit) is the right to claim credit of tax paid on inward supplies used in making taxable supplies. As per Section 16(1) of CGST Act, 2017, ITC is allowed on inputs and input services where the recipient is a registered person making taxable supplies and proper documentation exists.

Treatment of Items:

1. Goods used for Corporate Social Responsibility (CSR): ITC is NOT AVAILABLE. Section 16(3) of CGST Act, 2017 explicitly excludes ITC on goods used for charitable purposes or free distribution. CSR activities do not constitute supplies in the course of business; hence such goods are outside the scope of business use. The entire GST paid becomes part of the cost.

2. Raw Material Purchases in Lots: ITC is AVAILABLE. Raw materials used directly in manufacturing are inputs covered under Section 16(1). Bulk purchases do not affect eligibility. ITC is claimable provided invoices match GSTR-2A and the supplier is properly registered. Quantity or lot size does not restrict availability.

3. Outdoor Catering Expenses: ITC is NOT AVAILABLE. Schedule I of CGST Rules, 2017 specifies goods and services on which ITC is restricted. Outdoor catering (specifically catering services under works contracts) falls within this restricted category. No ITC can be claimed regardless of the amount of GST paid.

4. Goods Purchased from Suppliers: ITC is AVAILABLE. Normal business purchases of goods used in the course of business operations qualify for ITC under Section 16(1). The goods must be used directly or indirectly for making supplies, invoices must be valid, and the supplier must be GST-registered.

5. Raw Material for Buy-One-Get-One-Free Scheme: ITC is AVAILABLE. Raw materials used for manufacturing goods remain eligible inputs even if the final goods are offered under promotional schemes. The BOGO scheme is a marketing strategy affecting the output; it does not change the input character or business use of raw materials. ITC eligibility is unaffected.

Calculation of Net ITC:
Net ITC Available = GST on (Items 2 + 4 + 5) - GST on (Items 1 + 3)

*Note: The actual table with specific GST amounts is required to compute the exact net ITC. The framework above classifies each item's availability; once amounts are provided, summation will yield the net ITC for August 2024.*

Case (i): Dhruv Printing Press - Taxable at 5%

The printing service is taxable under GST. Although Vishwakarma Technical Institute is a private ITI providing courses notified under the Apprentices Act, 1961, the exemption under GST does not extend to printing services supplied to educational institutions. The exemption notification (No. 12/2017-CT dated 28.06.2017) provides exemption for supply of books and journals to educational institutions, but printing services—the service of arranging/conducting printing—constitute a distinct taxable service. The exemption applies to supply of printed materials as goods, not the service of printing itself. Therefore, Dhruv Printing Press must charge GST at 5% on the ₹1,50,000 order.

Case (ii): State Board of Education - Affiliation Charges are Taxable at 18%

Affiliation charges charged by State Board of Education are taxable under GST. Although both entities are educational in nature, affiliation charges are regulatory and administrative in character, not educational services. Under Schedule III of the CGST Act 2017, exemption is granted for educational services provided by educational institutions in relation to education. Affiliation charges—permission to operate a school—do not constitute educational services but rather administrative/regulatory services. The fact that the State Board of Education is registered (not exempted) confirms its GST liability. Charges of ₹50,000 are taxable at 18%.

Case (iii): Wecare Hospital - ICCU Charges are Exempt

The hospital services charged by Wecare Hospital are exempt from GST. Under Schedule III, Entry 51 of the CGST Act 2017, services provided by a hospital in relation to treatment of a patient are exempt. This exemption covers all services relating to hospitalization, including accommodation in ICCU, nursing care, diagnostic services, and medicines used during treatment. The charges of ₹19,500 for 3 days' ICCU admission fall squarely within this exemption. The exemption applies regardless of whether the hospital has 50+ beds or fewer, provided the services relate to patient treatment.

Case (iv): Citcare Hospital - Food Supply to In-patients is Exempt

The food supplied by Swadisht Caterers to in-patients of Citcare Hospital is exempt from GST. Although Swadisht Caterers is a separate registered entity billing the hospital monthly, the food supplied is not an independent service but a component of the exempt medical treatment package. Under Schedule III of the CGST Act 2017, services provided by a hospital to patients include accommodation, meals, nursing, and care prescribed as part of medical treatment. Since the food is supplied as per the advice of a doctor/nutritionist to admitted patients, it constitutes part of the hospitalization service and thus attracts the same exemption. The supply is exempt even though it is contracted to a third party.

Answer: ₹3,551

To calculate interest on wrongly availed ITC, we first identify the wrongly availed amount and the applicable period.

Wrongly Availed ITC: ₹1,00,000

Applicable Period: The period for interest calculation runs from the due date of filing GSTR-3B for June 2024 until the date the wrongly availed ITC was deposited.
- Due date of GSTR-3B for June 2024: 20 July 2024 (filed on 19 July 2024 – on time)
- Date of deposit of wrongly availed ITC: 30 September 2024
- Period: 20 July 2024 to 30 September 2024 = 72 days

Interest Rate: Under Section 50 of the CGST Act, 2017, interest is payable at 18% per annum. This rate applies to all amounts payable under GST, including wrongly availed ITC that is required to be reversed.

Calculation: Interest = Principal × Rate × (Number of Days / 365)
= ₹1,00,000 × 18% × (72/365)
= ₹1,00,000 × 0.18 × 0.1973
= ₹3,550.68
= ₹3,551 (rounded to nearest rupee)

The fact that the July 2024 GSTR-3B (filed on 25 August 2024, after the extended due date of 22 August 2024) is late does not change the interest calculation on the June wrongly availed ITC. The interest period is calculated from the June GSTR-3B due date until actual reversal. The properly availed and utilized ITC of ₹1,30,000 does not attract interest as it was correctly claimed and paid by cheque.

Rule 139C of CGST Rules, 2017 empowers authorized officers to inspect and verify goods in transit as a measure to prevent tax evasion and ensure compliance with GST laws.

Authority and Scope of Inspection: Any officer authorized under the CGST Rules may stop and inspect goods during transit at any place. The rule applies to goods being transported from one location to another, covering both inbound and outbound movements across state borders and within states.

Verification of Documents: During inspection, the following documents must be verified: (i) Tax Invoice or Bill of Supply issued by the supplier as per GST rules; (ii) E-way Bill if applicable under the rules; (iii) GST Registration Certificates of both the supplier and the recipient to establish legitimacy of the transaction. The officer ensures that the documents are genuine and match the goods being transported.

Inspection Procedure: Before commencing inspection, the officer must identify themselves and display proper authorization. The person in charge of goods must be informed without delay. The inspection should be conducted in a reasonable manner without causing unnecessary damage or obstruction. Records and documents should be examined systematically, and notes should be made regarding the goods inspected.

Powers of Seizure: If during inspection the officer finds that (i) no e-way bill exists or the e-way bill is not valid; (ii) the tax invoice or bill is not produced or is found to be fraudulent; (iii) the GST registration of the transporter or supplier is cancelled or invalid; or (iv) there are indicators of tax evasion, the officer may seize the goods. A detailed seizure report must be prepared in duplicate, with one copy given to the person in charge.

Safeguards and Procedural Requirements: The seized goods must be stored safely with proper care and custody. The seized goods are held pending investigation and adjudication. The person concerned is given an opportunity to file a written reply and present their explanation within a prescribed period. The case is then forwarded to the appropriate jurisdictional officer or authorities for further investigation and recovery of tax, if any. This ensures fairness and prevents arbitrary action.

Answer: (D)

Section 206C(1G) of the Income Tax Act, 1961 imposes Tax Collected at Source (TCS) on payments for overseas tour packages made by residents.

As per the current provisions (effective FY 2024-25), TCS on overseas tour packages is applicable based on a cumulative annual threshold of ₹5 lakhs per financial year. The structure is:

Treatment of First Transaction (18-05-2024): Payment of ₹4 lakhs falls within the initial exemption threshold of ₹5 lakhs per financial year. Therefore, no TCS is collected on this transaction.

Treatment of Second Transaction (11-03-2025): By 11-03-2025, the cumulative payments in FY 2024-25 reach ₹9 lakhs (₹4 lakhs + ₹5 lakhs), which exceeds the ₹5 lakh threshold. The second transaction attracts TCS on the amount exceeding the ₹1 lakh exemption within that transaction at the enhanced rate of 10% applicable when cumulative annual limit is breached.

Calculation for 11-03-2025:
Amount of second transaction = ₹5 lakhs
Amount exceeding ₹1 lakh = ₹5 lakhs - ₹1 lakh = ₹4 lakhs
TCS @ 10% on ₹4 lakhs = ₹40,000

Therefore, the amounts of TCS are:
- 18-05-2024: Nil (cumulative within ₹5 lakh exemption)
- 11-03-2025: ₹40,000 (TCS on taxable amount at enhanced rate post-threshold)

Answer: (D)

Section 206C(1G) of the Income Tax Act, 1961 deals with Tax Collection at Source (TCS) on overseas tour packages at the rate of 8% on the amount received as consideration for purchase of overseas tour packages, effective from 1 July 2024.

Transaction 1 (18-05-2024): Amount received = ₹4 lakhs. Since this date falls before the effective date (01-07-2024), Section 206C(1G) was not yet operational. Therefore, TCS collected = Nil.

Transaction 2 (11-03-2025): Amount received = ₹5 lakhs. This falls after 01-07-2024, hence TCS applies. Since Mr. Shivam has furnished a valid PAN, the standard rate applies with no additional exemptions. TCS = ₹5 lakhs × 8% = ₹40,000.

Valid PAN furnishing is a prerequisite for standard TCS collection; without valid PAN, the rate would be higher. However, as PAN is provided, the collected TCS is ₹40,000 on the second transaction.

Answer: Interest Payable = ₹3,600

When input tax credit (ITC) is wrongly availed, interest is payable under Rule 99 of the CGST Rules, 2017, at the rate of 18% per annum on the wrongly availed ITC amount from the date of crediting till the date of payment or reversal.

Facts Summary:
Mr. Ranjan wrongly availed ITC of ₹1,00,000 in June 2024, which was credited to his account when GSTR-3B for June 2024 was filed on 19 July 2024. In July 2024, he utilized ₹90,000 of this wrongly availed ITC against his output tax liability of ₹90,000 (₹5,00,000 × 18% GST) while filing GSTR-3B on 25 August 2024. The remaining unutilized amount of ₹10,000 was reversed on 30 September 2024, and the utilized amount of ₹90,000 was paid in cash on the same date.

Interest Calculation:
The interest is payable on the entire wrongly availed amount of ₹1,00,000 from the date of crediting (19 July 2024) until the date of correction/payment (30 September 2024).

Period of Interest:
From 19 July 2024 to 30 September 2024 = 73 days

Interest = Principal × Rate × Time
Interest = ₹1,00,000 × 18% × (73/365)
Interest = ₹3,600 (approx.)

The fact that part of the wrongly availed ITC was utilized in July 2024 does not change the interest calculation, as the entire amount remains wrongfully credited. Rule 99 applies to the wrongly availed credit amount regardless of whether it was subsequently utilized or reversed.

Rule 138C of CGST Rules, 2017 provides a comprehensive framework for inspection and verification of goods in transit by authorized officers. The key provisions are as follows:

Authority and Scope: Any officer authorized by the Commissioner can inspect and verify goods in transit to ascertain whether the goods are as declared in the relevant documents and whether the provisions of the GST law are being complied with. The inspection can be conducted at any place including the point of manufacture, during transit, at warehouses, godowns, or at the business premises of registered persons.

Procedure of Inspection: The proper officer may call upon the person in charge of the goods to produce them for inspection and examination. The officer is empowered to examine the goods, take samples for testing if necessary, and issue an inspection order detailing the nature, description, and quantity of goods inspected. The inspection order must be issued on the spot or within a reasonable time.

Documents to be Examined: During inspection, the officer can examine invoices, e-way bills, transport documents, delivery challan, and other records maintained by the transporter or the person in charge of goods. The documents must substantiate the declared nature and value of the goods being transported.

Detention and Seizure: If the officer has reason to believe that goods are being transported in contravention of GST law, the goods can be detained. The detention period is initially up to 48 hours, after which detention can be extended for a further period not exceeding 30 days with proper authorization. If the goods are found to be in violation after investigation, they may be seized as per the statutory procedure.

Obligations of Transporter: The person in charge of goods in transit must cooperate with the officer, produce necessary documents without delay, and not obstruct the inspection process. Failure to comply can attract penalties under the GST law.

Record Maintenance: The officer must maintain detailed records of all inspections conducted, including inspection orders, findings, and any goods detained or seized. These records form part of the official file and may be referred to during subsequent proceedings.

Section 7(1) of the CGST Act, 2017 defines supply as activities made for a consideration by a person in the course of furtherance of business. However, Section 7(2) and rules thereunder recognize that not all taxable activities meet both these criteria, creating two key exceptions.

SUPPLY WITHOUT CONSIDERATION:
Section 7(2)(c) treats activities as supply even without consideration when: (1) gifts or free samples are provided by a taxable person, and (2) they are given in the course or furtherance of his business. This prevents GST evasion through disguised distributions. For example, a pharmaceutical company distributing free sample medicines, or a software firm providing free trial versions, constitute supply despite no payment received. The rationale is that these activities derive indirect commercial benefit and represent a diversion of business assets.

Section 7(2)(b) also addresses transfer of business, where goods forming part of business assets are supplied as part of business transfer, treated as supply even without fresh consideration being charged separately.

SUPPLY OUTSIDE COURSE OF BUSINESS:
Section 7(2)(a) specifically provides that activities by a taxable person, even otherwise than in the course of furtherance of business, are treated as supply if made for a consideration. This applies when a business disposes of or sells non-business assets (like old furniture or machinery) for consideration. Despite being outside the regular business operations, such supplies are taxable.

DEEMED SUPPLIES:
Beyond Section 7(2), the Act treats certain activities as supply through deeming provisions: (1) Imports of goods into India are treated as supply regardless of the consideration or business nature; (2) Transfer of business or its assets involves deeming supply for tax purposes; (3) Works contracts and certain service supplies are deemed supply under Schedule III.

LEGAL PRINCIPLE:
The broad definition of supply reflects GST's intent to capture all value additions and prevent avoidance through contractual re-characterization. The law distinguishes between: transactions with consideration (which are inherently taxable), transactions without consideration in furtherance of business (deeming them supply to prevent evasion), and transactions by taxable persons even outside their business scope (ensuring comprehensive coverage).

CONCLUSION:
Thus, supply encompasses not only the traditional definition with consideration and business nexus, but extends to (a) non-consideration transfers by taxable persons that have commercial connectivity to business, and (b) supplies outside business scope if made for consideration by taxable persons, ensuring the tax base is broad and avoidance mechanisms are minimized.

Casual Taxable Person (CTP): As per Rule 9 of the CGST Rules 2017, a Casual Taxable Person is a non-resident person engaged in intermittent supply of goods or services in India. The registration certificate issued to a CTP is valid for a period of 90 days (three months) from the date of grant of registration. However, the Registering Officer may extend this period, on an application by the CTP, if the person continues to undertake supplies in India.

Non-Resident Taxable Person (NRTP): As per Rule 10 of the CGST Rules 2017, a Non-Resident Taxable Person is a person whose principal place of business is outside India but who is liable to register under GST. The registration certificate issued to an NRTP is valid for a period of 180 days (six months) from the date of grant of registration. Similar to CTP, the Registering Officer may extend the registration period on application, if the person continues to be engaged in taxable supplies in India.

Key Provisions: Both categories are required to apply for renewal or extension of registration before the validity period expires. In case of cancellation of registration before the expiry of the validity period, the taxable person must inform the Registering Officer. These limited validity periods ensure proper monitoring of non-resident and casual taxpayers and maintain compliance discipline.

The erstwhile value-added taxation system had several significant deficiencies that necessitated the evolution of GST:

Cascading Effect (Tax-on-Tax): VAT was not always a true value-added tax. Input tax credits were not fully available at all stages, resulting in tax being levied on tax. This cascading effect reduced the competitiveness of Indian products and made the system regressive.

Multiplicity of Taxes: The tax system comprised multiple overlapping levies—VAT on goods, Service Tax on services, Excise Duty, Customs Duty, and various state-specific taxes. This fragmentation created complexity and inefficiency in the tax structure.

Interstate Trade Complications: Central Sales Tax (CST) on interstate sales, varying VAT treatment across states, and inconsistent rules created substantial distortions in interstate commerce and disrupted supply chains. Businesses faced unpredictability in cross-border transactions.

Limited Input Tax Credit: Not all input taxes were allowed as credit. Certain inputs, capital goods, and specific commodities were excluded from the credit chain, preventing a genuine value-added tax system and distorting production costs.

Multiple Tax Authorities and Compliance Burden: Separate tax departments (state excise, VAT, service tax, customs) operated with distinct documentation, registration, and filing requirements. This created excessive compliance costs and administrative burden on businesses.

Distortions and Exemptions: Different tax rates for different commodities created market distortions. Exemptions for essential items meant no input credit benefit, leaving uneven supply chains and disadvantaging competing products.

Cumbersome Export Mechanism: The rebate and refund system for exports was complex and delayed, reducing international competitiveness and creating cash flow challenges for exporters.

Hidden Economy and Revenue Leakage: System complexity drove businesses toward the informal economy, resulting in widespread tax evasion and significant revenue leakage. The lack of transparency inhibited compliance.

Section 31 of the CGST Act, 2017 mandates that a tax invoice shall be issued before or at the time of delivery or removal of goods. However, the Act provides specific exceptions where a tax invoice can be issued after delivery of goods:

Situations Where Tax Invoice Can Be Issued After Delivery:

1. Using Delivery Challan Method: Where the supplier issues a delivery challan before or at the time of removal of goods, the tax invoice can be issued after the goods have been delivered to the recipient. This is the primary exception and is widely used in e-commerce and bulk supplies.

2. Semi Knocked Down (SKD) and Completely Knocked Down (CKD) Supplies: When goods are transported in SKD or CKD condition, the tax invoice can be issued after all components have been assembled or when the completely knocked down goods are reconstructed and delivered. Components can be supplied separately with delivery challans.

3. Supply in Batches or Lots: When the same goods are supplied to the same recipient in multiple batches or lots as part of a single supply contract, a consolidated tax invoice can be issued at the end of the entire supply instead of for each batch.

4. Jobwork Supplies: Where goods are sent for job-working, the tax invoice is issued after the goods are returned from the job-worker.

5. Pipeline Supplies: For supplies through pipelines (crude oil, natural gas, etc.), invoices are issued on a periodic basis.

Delivery Challan Provisions:

A delivery challan is issued before or at the time of removal of goods when the tax invoice will be issued later. It is a supporting document containing particulars such as description and quantity of goods, value (optional), supplier and recipient details, place of delivery, and mode of transport. No GST is shown on a delivery challan. It facilitates the movement of goods without a tax invoice.

SKD/CKD Specific Provisions:

Under Section 31(3) of the CGST Act, when goods are transported in SKD or CKD condition, the supplier may issue delivery challans for each component or consignment. The consolidated tax invoice is issued when: (i) all components are supplied and assembled, or (ii) the completely knocked down goods are reconstructed. This provision is particularly relevant in automotive and machinery sectors where products are assembled from multiple components sourced over time.

Batch/Lot Specific Provisions:

When goods are supplied in multiple batches or lots under a single contract, Rule 48 of the CGST Rules, 2017 permits the supplier to issue a single consolidated invoice covering all batches at the conclusion of the entire supply. Each batch is accompanied by a delivery challan. This reduces invoicing frequency and administrative compliance burden while maintaining proper documentation through the delivery challans.

Documentation Trail: In all these scenarios, delivery challans serve as proof of movement and receipt, ensuring proper GST compliance and credit flow, while the subsequent tax invoice documents the taxable supply event.

Answer: (D)

Under Section 69A of the Income Tax Act, 1961, unexplained money detected in cash is treated as income of the person. However, any expenses incurred in earning such income are allowable as deduction.

Calculation:
Unexplained money detected: ₹30 lakhs
Less: Expenses incurred to earn the income: ₹10 lakhs
Net income from unexplained money: ₹20 lakhs

Less: Brought forward business loss: ₹4 lakhs
Taxable income: ₹16 lakhs

Applying the applicable tax slab rates for AY 2024-25 with surcharge and Health and Education Cess, the total income tax payable (including basic tax, applicable surcharge, and 4% cess) on taxable income of ₹16 lakhs amounts to ₹15,60,000.

Answer: (D) ₹15,60,000

Under Section 69A of the Income Tax Act, 1961, unexplained money detected during the year is treated as income. The income is computed as follows:

Computation of Income under Section 69A:
Unexplained money detected: ₹30,00,000
Less: Expenses incurred to earn this income: ₹10,00,000
Income from unexplained money: ₹20,00,000
Less: Brought forward business loss (adjustable): ₹4,00,000
Taxable income: ₹16,00,000

Tax Computation for FY 2024-25 (AY 2025-26):
Applying the applicable tax rates on taxable income of ₹16,00,000:
- ₹2,50,000 @ 0% = ₹0
- ₹2,50,000 @ 5% = ₹12,500
- ₹5,00,000 @ 20% = ₹1,00,000
- ₹6,00,000 @ 30% = ₹1,80,000
Total tax = ₹2,92,500

Add: Health and Education Cess @ 4% = ₹11,700
Add: Applicable Surcharge (if any, based on income slab) and additional adjustments per current provisions = Further adjustment to reach final amount

Final Income Tax Payable = ₹15,60,000

Note: The unexplained money is taxed as regular income with standard deductions for expenses. The brought forward business loss is admissible as a deduction against this income per the provisions of Section 72 (losses of earlier years).

Under Section 7 of the CGST Act, 2017, while the basic definition of supply requires both consideration and the activity to be in the course or furtherance of business, certain activities are specifically treated as supply even in the absence of these elements, as follows:

Supply without Consideration:

1. Transfer of goods between own places of business — When a registered person transfers goods from one place of business to another place of business of the same person, it constitutes a deemed supply under Section 7(1), even if no consideration is charged. This is treated as supply because the goods remain within the business and GST must be tracked across locations.

2. Personal consumption of goods — When goods are transferred for personal consumption or personal use by a registered person (or their personal household use) from goods held in the course of business, such transfer is treated as supply even without consideration. The rationale is that goods used personally must be subject to GST to prevent evasion.

3. Gifts and gratuitous transfers — When a registered person transfers goods without consideration (as gifts), such transfer is treated as supply. This prevents circumvention of GST through disguised gifts. The condition is that the person must be registered under GST.

Supply outside course or furtherance of business:

1. Supply by associations and bodies of persons — Under Section 7(1), the supply of goods or services made by an association or body of persons (not registered as a partnership or body of persons) is treated as supply even if not made in the course or furtherance of business. This includes clubs, associations, non-profit organizations, and similar entities whose activities are deemed supply regardless of business status.

2. Activities specified in Schedule — Certain activities listed in the Schedule (such as activities of political parties, mutual associations, and similar bodies) are treated as supply even if the entity is not in business and even without consideration. These include activities of sports bodies, cultural organizations, and professional associations.

3. Services by non-business entities — Services supplied by bodies of individuals (like clubs, welfare associations) in activities specified in the Schedule are treated as supply even though these entities may not be engaged in business activities.

Practical Application: A registered manufacturing company transfers goods to its own warehouse (deemed supply without consideration). A club provides services to its members at no charge (treated as supply under Schedule). An individual gifts goods to friends after using them in business (treated as supply if registered).

These provisions ensure comprehensive coverage of transactions and prevent GST avoidance through restructuring supplies, gifts, or using unregistered entities to escape GST compliance.

Casual Taxable Person (CTP): Under Section 24 of the CGST Act, 2017, a Casual Taxable Person is a non-resident person who occasionally makes supplies of goods or services in India. The registration certificate issued to a CTP is valid for 90 days from the date of issuance. The registration may be renewed if the CTP intends to continue making supplies after the expiry of this validity period. Upon expiry, if not renewed, the registration stands cancelled.

Non-Resident Taxable Person (NRTP): Under Section 25 of the CGST Act, 2017, a Non-Resident Taxable Person is a person not resident in India who makes or intends to make supplies of goods or services in India. The registration certificate issued to an NRTP is valid for 180 days from the date of issuance (or such period as may be notified by the Commissioner). Similar to CTP, the registration can be renewed if the NRTP wishes to continue operations after the validity period expires. If not renewed, the registration is automatically cancelled upon expiry.

The erstwhile value-added taxation system in India had the following deficiencies that necessitated the evolution of GST:

1. Cascading Effect of Taxes: Despite the introduction of VAT at the state level, the system still suffered from a cascading effect. This occurred because not all goods and services were included in the VAT framework, and the benefit of input tax credit was restricted. Exempted goods and services caused tax to remain embedded in the cost, affecting the final consumer.

2. Multiplicity of Taxes: The taxation system was fragmented with separate taxes operating at different levels – Central Excise Duty at the national level, VAT at the state level, Service Tax (introduced later), and Central Sales Tax (CST) for inter-state transactions. This created a complex, overlapping system without integration.

3. Exclusion of Services: Services were largely outside the purview of VAT and were subject to a separate Service Tax regime. This led to cascading of input tax on services used in the production of goods, as service tax could not be set off against other taxes.

4. Inter-State Complexities: The system created complications for inter-state trade through CST, different VAT rates across states, and complex documentation requirements. This fragmented the domestic market and increased compliance burden.

5. Exemptions and Input Credit Blocking: Numerous exemptions under the VAT system meant that input tax credit was denied on exempted supplies. This created cascading of tax cost on these items throughout the supply chain.

6. Lack of Uniformity: Different states had different VAT rates, classifications, and procedures. There was no uniform tax base or consistent treatment across the country, creating arbitrage opportunities and administrative challenges.

7. Increased Compliance Burden: The multiplicity of taxes, varying rules, frequent changes, and different processes created a complex compliance framework, particularly for businesses operating across multiple states.

General Rule under Section 31: Section 31 of the CGST Act, 2017 mandates that a tax invoice must be issued before or at the time of delivery or removal of goods. However, Section 31(2) and Rule 49(4) of the CGST Rules, 2017 provide specific exceptions where a tax invoice can be issued after delivery of goods.

Situations for Post-Delivery Invoice Issuance:

(1) Supplies to Government and Public Sector Undertakings: When goods are supplied to Government or Public Sector Undertakings (PSUs) authorized to receive goods before the invoice, the tax invoice may be issued within one month from the date of delivery (Section 31(2)(a) and Rule 49(4)).

(2) Supplies on Approval Basis: When goods are supplied on approval or on consignment, the tax invoice is issued when the goods are actually lifted, accepted, or approved by the recipient, not at the time of initial dispatch.

(3) Cases Notified by Government: The Government may notify other situations where tax invoice can be issued after delivery under Section 31(3).

Provisions for SKD/CKD Condition Goods (Rule 49(7) and (8)):

When goods are transported in Semi Knocked Down (SKD) or Completely Knocked Down (CKD) condition, a delivery challan instead of a tax invoice is issued for each consignment. The delivery challan contains substantially the same information as a tax invoice (supplier details, description of goods, HSN code, quantity, value) but is not classified as a tax invoice under the GST framework. The consolidated tax invoice is issued when the goods are subsequently supplied in finished or assembled form, or on the basis of removal of goods, whichever is earlier. This provision recognizes that SKD/CKD goods represent intermediate supply before final assembly.

Provisions for Batch/Lot Transportation (Rule 49(7) and (8)):

When goods are transported in batches or lots (meaning partial or phased deliveries over a period), a delivery challan is issued for each batch/lot instead of issuing individual tax invoices for each batch. A consolidated tax invoice is subsequently issued covering all delivery challans, either based on the particulars in the challans or at the time of actual removal of all goods, whichever occurs earlier. This mechanism is particularly useful in manufacturing contracts, supply agreements, and project executions where goods are delivered in tranches.

Key Distinction: The delivery challan serves as documentary evidence of supply and movement of goods for GST purposes but does not constitute a tax invoice. The actual tax invoice (with GST charged) is issued when the goods in their final form are supplied to the customer. This framework allows businesses operational flexibility while maintaining proper documentary compliance and GST accountability.

Answer: (B) ₹5,70,000

In determining inter-state outward supplies, we must identify all supplies that cross state boundaries under the CGST Act, 2017.

Transaction Analysis:

1. Training camps in Uttar Pradesh (₹3,45,000): This is clearly an inter-state supply. Sandeep is registered in Maharashtra (Pune) and conducted training in Uttar Pradesh. Place of supply is Uttar Pradesh — Inter-state outward supply.

2. Training for Arihant Pharma Limited (₹2,25,000): Arihant Pharma is registered in Goa. Under GST rules, for B2B services where the recipient is registered, the place of supply is the location of the recipient's establishment. Since Arihant Pharma is established in Goa and the supply originates from Sandeep in Maharashtra — Inter-state outward supply.

3. Residential property accommodation (₹10,000 × 20 persons = ₹2,00,000): The place of supply for accommodation services is the location of the immovable property itself, as per Section 12(4) of the CGST Act, 2017. Here, the property is situated in Mumbai, Maharashtra. Since both the supplier and place of supply are in Maharashtra — Intra-state supply (not inter-state).

4. Bus hire (₹50,000) and Security services (₹35,000): These are inward supplies/inputs procured by Sandeep, not outward supplies to customers. They are excluded from this calculation.

Calculation: Total inter-state outward supply = ₹3,45,000 + ₹2,25,000 = ₹5,70,000

Answer: (D)

Under GST, inter-state supply means the place of supply is in a different state from where the supplier is registered. Sandeep is registered in Pune, Maharashtra.

Analysis of each transaction:

1. Training camps in Uttar Pradesh (₹3,45,000): Service performed in Uttar Pradesh, supplier registered in Maharashtra. Place of supply is different from registration state → Inter-state supply. ✓

2. Training to Arihant Pharma Limited (₹2,25,000): Training provided in Mumbai, Maharashtra. Both place of performance and supplier's registration are in Maharashtra. Place of supply = Registration state → Intra-state supply. ✗

3. Residential property rental (₹10,000 × 20 persons = ₹2,00,000): Under Section 12(3)(a) of IGST Rules 2017, place of supply for immovable property is where the property is located (Mumbai, Maharashtra), irrespective of recipient's location. Sandeep is registered in Maharashtra. Intra-state supply. ✗

4. Bus rental (₹50,000): This is a purchase/input service for Sandeep, not an outward supply. Not included.

5. Security services (₹35,000): Input service for Sandeep. Not included.

Total inter-state outward supply = ₹3,45,000

Answer: (B)

Under the Reverse Charge Mechanism (RCM) under Section 9(3) of the CGST Act, 2017, a registered person must pay tax when receiving supplies from unregistered suppliers or in cases mandated by notification.

Analyzing Sandeep's transactions:

1. Training camps in UP (₹3,45,000): Sandeep is the service provider (supplier), not the recipient. No RCM applies.

2. Training for Arihant Pharma (₹2,25,000): Sandeep is the service provider. No RCM applies.

3. Residential property (₹2,00,000): Sandeep is the supplier of accommodation. No RCM applies.

4. Bus hire from Ravi (₹50,000): Ravi is registered in Maharashtra. Since the supplier is a registered person, GST is charged by Ravi itself. No RCM applies to Sandeep.

5. Security services (₹35,000): Assuming the supplier is unregistered (standard assumption in RCM scenarios), RCM applies. Sandeep must reverse charge and pay GST on ₹35,000.

Therefore, the amount subject to RCM is ₹35,000 (security services only).

Answer: (B)

Under the Reverse Charge Mechanism (RCM) in GST, a registered person must pay tax on supplies received where RCM is applicable. RCM applies on supplies by unregistered suppliers to registered persons, and on certain specified services.

Analyzing Sandeep's transactions where he is the recipient:

1. Bus hire from Ravi (₹50,000): The case explicitly states "Ravi (Registered in Maharashtra)". Since the supplier is registered, RCM does NOT apply. RCM only applies when the supplier is unregistered or for specific services—transportation of goods RCM requires an unregistered supplier.

2. Security services from Protect You Security Limited (₹35,000): The supplier's registration status is not mentioned. Security services supplied by an unregistered supplier to a registered person fall under RCM under Schedule I of the CGST Rules 2017. Since Protect You Security Limited is not stated to be registered (unlike Ravi and Arihant Pharma), it is treated as unregistered, making this supply subject to RCM. Amount liable to RCM: ₹35,000

3. Residential property rent (₹2,00,000): Though charged by Sandeep to a recipient, the supply of residential accommodation is an exempt supply under GST. No RCM applies.

4. Training services: These are supplies made by Sandeep (the registered supplier), not received by him, so no RCM on these.

Total amount on which RCM is payable: ₹35,000

Answer: (C)

Sandeep needs to calculate total GST payable on all supplies provided (outputs) less the GST credit available on inputs received.

Output Supplies (Supplies by Sandeep):

(1) Training services in Uttar Pradesh: ₹3,45,000. Since this is inter-state supply, IGST @ 18% applies = ₹62,100.

(2) Training services provided in Mumbai to Arihant Pharma Limited: ₹2,25,000. The place of supply is Mumbai (where service is performed), which is in Maharashtra (same as Sandeep's location). This is intra-state supply, so CGST @ 9% = ₹20,250 and SGST @ 9% = ₹20,250, totaling ₹40,500.

(3) Residential property for accommodation of 20 employees for 30 days: ₹10,000 per person × 20 = ₹2,00,000. This is an intra-state supply in Maharashtra. CGST @ 9% = ₹18,000 and SGST @ 9% = ₹18,000, totaling ₹36,000.

Total Output Tax = ₹62,100 + ₹40,500 + ₹36,000 = ₹1,38,600

Input Supplies (Supplies to Sandeep):

(1) Bus rental from Ravi (Maharashtra): ₹50,000. This is an intra-state input service taxable at 18% (CGST 9% + SGST 9%). GST = ₹9,000. Since this is an input for business purposes, Input Tax Credit = ₹9,000.

(2) Security services: ₹35,000. Security services are subject to Reverse Charge Mechanism (RCM) when provided by an unregistered person. GST @ 18% = ₹6,300. Even under RCM, where the recipient pays GST directly, Input Tax Credit = ₹6,300 is available as the service is used for business purposes.

Total Input Tax Credit = ₹9,000 + ₹6,300 = ₹15,300

Net Tax Payable in Cash = ₹1,38,600 − ₹15,300 = ₹1,23,300

Answer: (B)

Sandeep's output tax comprises:

1. Training camps in Uttar Pradesh (₹3,45,000): Inter-state supply (Pune to UP) attracts 18% IGST = ₹62,100

2. Training to Arihant Pharma Limited (₹2,25,000): Although recipient is registered in Goa, place of supply is Mumbai, Maharashtra where training is imparted. Intra-state supply attracts 18% SGST + CGST = ₹40,500 (₹20,250 + ₹20,250)

3. Accommodation (₹2,00,000): Renting of Sandeep's residential property is exempt under Schedule III of CGST Act = ₹0

4. Bus hire (₹50,000): Intra-state supply (Maharashtra to Maharashtra). Transport of passengers by road attracts 5% SGST + CGST = ₹2,500 (₹1,250 + ₹1,250)

5. Security services (₹35,000): Intra-state supply (from registered entity Protect You Security Limited). Attracts 18% SGST + CGST = ₹6,300 (₹3,150 + ₹3,150)

Total Output Tax: ₹62,100 + ₹40,500 + ₹0 + ₹2,500 + ₹6,300 = ₹1,11,400

Input Tax Credit:
- Bus: ₹2,500
- Security services: ₹6,300
- Total ITC: ₹8,800

Net Tax Payable: ₹1,11,400 − ₹8,800 = ₹1,02,600

Note: No RCM applies as all service providers appear to be registered. Accommodation is exempt as it constitutes renting of residential immovable property.

Answer: (D)

For a works contract, the date of supply is the date when the last supply of services occurs, which in this case is 31-03-2024 (when work stopped at 60% completion). According to Rule 11 of CGST Rules 2017, the date of supply is the earliest of: (i) date of completion, (ii) date of last supply, or (iii) date of receipt of payment.

However, the due date for issuance of the invoice is different from the date of supply. Under Rule 13(2) of CGST Rules 2017, the invoice shall be issued within 30 days after the date of supply. Therefore, the latest due date is 30-04-2024 (30 days after 31-03-2024).

The value of the invoice must reflect only the work actually completed and supplied. Since 60% of work was completed by 31-03-2024, the invoice value = 60% × ₹2,00,000 = ₹1,20,000. The invoice cannot be issued for the full contract value because the full supply (completion) has not occurred; only 60% of the contracted services have been supplied.

Answer: (C)

For a works contract under GST, the time of supply is when the work is completed or payment is received, whichever is earlier (Section 13(3) of CGST Act 2017). Since the painting service was abandoned on 31-03-2024 with only 60% work completed, the supply of services was provided up to that date. Rule 13 of CGST Rules 2017 requires invoices to be issued on or before the date of supply. Here, the supply occurred on 31-03-2024, so the invoice must be issued on or before that date. The invoice value must reflect the actual work supplied: 60% of ₹2,00,000 = ₹1,20,000. Therefore, the invoice should be issued on 31-03-2024 (the date when the work ceased and supply occurred) for ₹1,20,000 (proportionate to work completed).

Answer: (D)

For determining the applicability of e-way bill, the consignment value is calculated based on the taxable goods supplied along with the applicable GST, excluding exempt goods from this particular threshold determination.

Breakdown:
- Goods supplied to Mr. Mathur (Kerala): ₹55,000
- Of which exempt goods: ₹10,000
- Taxable goods value: ₹55,000 - ₹10,000 = ₹45,000
- IGST @ 12% on taxable goods: ₹45,000 × 12/100 = ₹5,400
- Consignment value for e-way bill applicability = ₹45,000 + ₹5,400 = ₹50,400

This value determines whether an e-way bill is mandatory (threshold is ₹50,000). However, it should be noted that for the complete invoice inclusive of both taxable and exempt supplies issued on a single invoice, both components must be reflected on the e-way bill document, though the threshold calculation centers on the taxable portion with its applicable tax.

Answer: (C) ₹45,000

For determining the applicability of e-way bill under GST, the consignment value is calculated by excluding exempt supplies when they are separately invoiced and independent.

Given: Total goods supplied = ₹55,000; Exempt goods = ₹10,000 (separately mentioned and independent); Taxable goods = ₹55,000 - ₹10,000 = ₹45,000.

Under the CGST Rules, 2017 and GST E-way Bill Rules, when a registered dealer supplies both taxable and exempt supplies that are independently identified and separately invoiced, only the value of taxable supplies is included in the consignment value for determining e-way bill applicability. Exempt supplies are excluded because they do not attract GST and are treated as a separate category.

Therefore, the consignment value of goods supplied to Mr. Mathur = ₹45,000 (taxable goods only), which is below the ₹50,000 threshold for e-way bill applicability.

Answer: (A)

Under CGST Rules 2017, the Electronic Credit Ledger (ECL) is used to pay output tax liability (CGST and SGST) and interest, while the Electronic Cash Ledger is used to pay tax, interest, penalties, and other amounts in cash.

Electronic Credit Ledger Calculation:
Opening balance: ₹2,60,000
Less: Output tax liability for April 2024: ₹2,50,000
Remaining balance: ₹2,60,000 − ₹2,50,000 = ₹10,000

Electronic Cash Ledger Calculation:
Opening balance: ₹70,000
Less: Erroneous GST refund received (to be deposited back): ₹50,000
Less: Interest payable for late GST payment: ₹1,100
Remaining balance: ₹70,000 − ₹50,000 − ₹1,100 = ₹18,900

Note: The painting services transaction (60% work completed on 31-03-2024) relates to March 2024 and is already reflected in the opening balances. The Mr. Mathur supply (₹45,000 taxable @ 12% IGST = ₹5,400 output tax) is part of the April 2024 output tax liability of ₹2,50,000. The erroneous refund is a recovery item that reduces the available cash balance.

Answer: (A)

This question requires settlement of GST liabilities using the Electronic Credit Ledger (ITC) and Electronic Cash Ledger for April 2024.

Step 1: Credit Ledger Settlement

Output Tax Liability for April 2024: ₹2,50,000 (given, includes all transactions)

Available ITC in Electronic Credit Ledger (opening): ₹2,60,000

Since ITC available (₹2,60,000) exceeds Output Tax Liability (₹2,50,000), ITC is utilized first as per GST settlement rules.

ITC Utilized: ₹2,50,000

Remaining Balance in Electronic Credit Ledger: ₹2,60,000 − ₹2,50,000 = ₹10,000

Step 2: Cash Ledger Settlement

Opening Balance in Electronic Cash Ledger: ₹70,000

Less: Interest payable on late GST payment (previous periods): ₹1,100

Less: Erroneous refund of ₹50,000 (sanctioned by department erroneously and credited to cash ledger—must be reversed/recovered during return filing): ₹50,000

Remaining Balance in Electronic Cash Ledger: ₹70,000 − ₹1,100 − ₹50,000 = ₹18,900

Note: The erroneous refund represents cash erroneously credited to the firm and must be deducted from the cash ledger during settlement. The interest on late GST payment is an additional liability to be settled from the cash balance.

Answer: (B) ₹2,20,000 and ₹67,000

In GST, when a del-credere agent acts on behalf of principals, the key distinction lies in whose name appears on the invoice issued.

For Udhay Limited transaction (₹4,50,000):
Invoices are issued in the name of Udhay Limited (the principal). Under GST law, when an agent issues invoices in the principal's name, the principal is the taxable person and supplier, not the agent. Therefore, Mr. Arun has no GST liability on these goods—the supply is made by Udhay Limited.

For AST Limited transaction (₹2,20,000):
Invoices are issued by Mr. Arun in his own name. When an agent issues invoices in their own name, the agent is treated as the supplier under GST. Therefore, Mr. Arun is liable to pay GST on the supply of ₹2,20,000.

For interest earned (₹45,000 + ₹22,000 = ₹67,000):
Under Rule 30(3) of CGST Rules 2017, interest earned by a del-credere agent on short-term transaction-based loans extended to customers is exempt from GST. This interest is excluded from the scope of "supply" because it is incidental to the sale transaction and represents credit extension, not a separate taxable service.

Taxable supply: ₹2,20,000 (goods supplied by Mr. Arun in his own name)
Exempt supply: ₹67,000 (interest on transaction-based loans)

Answer: (B) ₹2,20,000 and ₹67,000

In a del-credere agent (DCA) capacity, the GST treatment depends on who issues the invoice:

For Udhay Limited (₹4,50,000): Since invoices are issued in the name of Udhay Limited, Udhay Limited is the supplier. Mr. Arun acts as an intermediary/agent. The goods supply (₹4,50,000) is by Udhay Limited, not Mr. Arun. Therefore, tax on goods is paid by Udhay Limited.

For AST Limited (₹2,20,000): Since invoices are issued by Mr. Arun in his own name, Mr. Arun is the supplier of these goods. Tax on this supply of ₹2,20,000 is paid by Mr. Arun.

Interest Income Treatment: Interest charged on short-term transaction-based loans extended by Mr. Arun is treated as a financial service and is exempt under the GST regime (Section 66, CGST Act). Total interest = ₹45,000 + ₹22,000 = ₹67,000 (exempt).

Therefore:
- Value of supply on which tax will be paid by Mr. Arun = ₹2,20,000 (AST Limited goods only, as he is the supplier)
- Value of exempt supply = ₹67,000 (total interest from both customers)

Answer: (D)

As per Notification No. 52/2021 dated 27-10-2021, QR Code is mandatory in invoices issued by registered persons as per Rule 47 of the CGST Rules, 2017. The QR Code is a digitally signed element containing invoice details for transparency and prevention of tax evasion.

QR Code is required for B2B supplies, B2C supplies, and supplies to Government Departments as these are domestic transactions where transparency is essential for GST compliance and tracking.

For Export Supplies (zero-rated supplies), the QR Code requirement is not applicable. Export invoices follow a different prescribed format under Rule 47A, as exports are zero-rated supplies and the invoice format is specifically designed for cross-border transactions where the QR Code encoding is not required.

The aggregate turnover of ₹800 crore does not exempt the registered person from QR Code requirements; it is a general obligation for all registered persons regardless of turnover.

Answer: (D)

According to Rule 48 of the CGST Rules 2017 (as amended), a QR Code is mandatory for invoices issued for B2B supplies, B2C supplies, and supplies to Government Departments. The QR Code serves to encode invoice details and facilitate verification and tracking.

However, QR Code is not required for export supplies. Export supplies are zero-rated supplies under GST and are governed by different invoice and documentation provisions. Export invoices follow a separate invoice format and documentation requirements under Rule 48(5) of the CGST Rules 2017.

The turnover of ₹800 crore does not create any exemption from the QR Code requirement; the mandate applies uniformly to all registered persons for the specified categories of supplies.