Question 1

What is the residential status of Mr. Raj for the previous year 2024-25?

Accepted Answer

**Answer: (A)** Mr. Raj's residential status for P.Y. 2024-25 is determined under **Section 6 of the Income Tax Act, 1961**. **Days in India during P.Y. 2024-25:** From 1.11.2024 to 31.03.2025: November (30) + December (31) + January (31) + February (28) + March (31) = **151 days** **Testing Resident Status (Section 6(1)):** 1. Under Section 6(1)(a) — 182 days or more: NO (151 < 182) 2. Under Section 6(1)(b) — 60 days or more AND 365 days or more in 4 preceding years: - 60 days in P.Y. 2024-25: YES (151 > 60) - Days in 4 preceding years (2020-21 to 2023-24): 190 (2021-22) + 145 (2022-23) + 155 (2023-24) + 0 (2020-21 not mentioned) = **490 days > 365**: YES - **Therefore, Mr. Raj is RESIDENT under Section 6(1)(b)** **Testing Ordinarily Resident Status (Section 6(6)):** A resident is ordinarily resident if resident in that year AND for at least 2 of the 10 immediately preceding years. **Years of Residence (P.Y. 2014-15 to 2023-24):** - P.Y. 2021-22: 190 days > 182 days = **RESIDENT** - P.Y. 2022-23: 145 days (< 182). For 60+365 rule: 145 > 60 but preceding 4 years have only 190 (from 2021-22) < 365 = **NOT RESIDENT** - P.Y. 2023-24: 155 days (< 182). For 60+365 rule: 155 > 60 but preceding 4 years (2019-20 to 2022-23) have 190 + 145 = 335 days < 365 = **NOT RESIDENT** - Earlier years: No data provided Mr. Raj was resident for only **1 of the 10 preceding years** (2021-22), not the required minimum of 2 years. **Conclusion:** Mr. Raj is **Resident but Not Ordinar…

Question 2

What is the due date for filing the final return in the State of Assam?

Accepted Answer

**Answer: (B)**

When a GST registration is cancelled, Rule 19 of the CGST Rules, 2017, read with Section 29 of the CGST Act, 2017, requires the person to file a final return. The final return must be filed **within 3 months from the date of cancellation** as specified in the cancellation order.

In this case, although the cancellation order was passed on 2nd February 2025, the order explicitly specifies that the **cancellation is effective from 31st January 2025**. The effective date is the relevant date for calculating the due date for the final return, not the date of the order itself.

Therefore, the due date for filing the final return in Assam is **within 3 months from 31st January 2025**, which corresponds to option (B). The applicant date (5th January) and discontinuation date (15th December) are not the triggering dates for the final return deadline.

Question 3

What is the amount of capital gains chargeable to tax in the hands of Mr. Raj on sale of debentures for the P.Y. 2024-25?

Accepted Answer

**Answer: (C)**

Both sales of debentures qualify as **Long-Term Capital Gains (LTCG)** because the holding period exceeds 12 months. Debentures purchased in August 2020 and sold in April 2024 (19 months) and August 2024 (48 months) are both held for more than 12 months, hence LTCG treatment applies under Section 2(29A) of the Income Tax Act 1961.

For LTCG on debentures, the cost of acquisition is indexed using the Cost Inflation Index (CII) as per Section 48 of the Income Tax Act 1961.

**April 2024 Sale (2,500 debentures @ ₹175 each):**
Sale Proceeds = 2,500 × ₹175 = ₹4,37,500
Cost of Acquisition = 2,500 × ₹150 = ₹3,75,000
Indexed Cost = ₹3,75,000 × (363/301) = ₹4,52,238
Capital Loss = ₹4,37,500 − ₹4,52,238 = **(₹14,738) ≈ (₹14,750)**

**August 2024 Sale (7,500 debentures @ ₹155 each):**
Sale Proceeds = 7,500 × ₹155 = ₹11,62,500
Cost of Acquisition = 7,500 × ₹150 = ₹11,25,000
Indexed Cost = ₹11,25,000 × (363/301) = ₹13,56,717
Capital Loss = ₹11,62,500 − ₹13,56,717 = **(₹1,94,217)**

**Total LTCG = (₹14,750) + (₹1,94,217) = (₹2,08,967) ≈ (₹2,09,000)**

Note: The indexed cost is computed using the formula: Cost × (CII of year of sale / CII of year of acquisition). Since purchased in August 2020 (FY 2020-21, CII = 301) and sold in FY 2024-25 (CII = 363), the indexation factor is 363/301 = 1.206.

Question 4

Which of the following statements is correct in relation to the re-availment of the input tax credit that had been reversed earlier, upon payment of disputed amount by the company to Rudraksh Enterprises?

Accepted Answer

**Answer: (D)**

When input tax credit is reversed under Rule 37(1) of the CGST Rules, 2017 due to non-payment of the invoice, the credit can be re-availed upon subsequent payment of tax on the supply. In the given case, the company had reversed ITC on a supply from Rudraksh Enterprises (invoice: September of previous FY) due to non-payment. Upon settlement of the dispute and payment of ₹5,00,000 plus tax in December 2024, the re-availment becomes permissible.

While Rule 37(4) prescribes a general time limit for re-availment (two years from date of supply or by end of the financial year in which supply was received, whichever is earlier), this restriction does not apply to the specific case of re-availment following payment of a previously reversed credit due to non-payment. Rule 37(3) explicitly permits re-availment "after payment of the tax payable on the supply" without imposing an absolute temporal restriction once such payment is made.

The rationale is that the payment itself is the qualifying event that legitimizes the credit. Since the company has now paid the disputed amount along with applicable tax to the supplier, the ITC can be re-availed in the returns for the period in which payment is made (December 2024 or subsequent returns), without being constrained by the original time limits applicable to the supply period. Therefore, there is no time bar on re-availment once the payment condition is satisfied.

Question 5

What will be the gross total income of Mr. Raj for the A.Y. 2025-26?

Accepted Answer

**Answer: (B)**

Mr. Raj's residential status for A.Y. 2025-26 (P.Y. 2024-25) is determined under Section 6(1)(c) of the Income Tax Act, 1961. As a non-resident Indian citizen who came to India on 1.11.2024 with the intention of establishing permanent residence, he becomes **resident from 1.11.2024 onwards**. Therefore, he is NRI till 31.10.2024 and resident from 1.11.2024 to 31.3.2025.

**Income Classification:** As an NRI till 31.10.2024, only Indian-source income is taxable. From 1.11.2024 (resident period), worldwide income is taxable. However, the Canadian business profits till 31.10.2024 are foreign-source income earned during NRI period, hence **not taxable**.

**Taxable Income Components:**

1. **Indian Business Profits:** ₹5,00,000 (commenced from 1.11.2024, Indian-source, taxable).

2. **Capital Gains on Debentures:** Debentures were purchased in August 2020 @ ₹150 each. Both sales occurred during NRI period (April and August 2024), but since they are securities of an Indian company, the gains are Indian-source income taxable even when NRI. Holding period exceeds 12 months, so LTCG treatment applies. Without indexation (debentures not eligible for cost inflation adjustment under the given parameters): April 2024 sale gain = ₹4,37,500 − ₹3,75,000 = ₹62,500; August 2024 sale gain = ₹11,62,500 − ₹11,25,000 = ₹37,500. **Total LTCG = ₹1,00,000**.

3. **Interest on Debentures:** Interest accrues semi-annually on 30th June and 31st December on the face value of debentures …

Question 6

The amount of tax to be deducted at source under GST law by Governmental Agency of Gujarat is __________.

Accepted Answer

**Answer: (D) IGST - ₹50,000**

The transaction involves supply of **accommodation services** by Sambhav Ltd. in its hotel in **Rajasthan** to the **Governmental Agency of Gujarat** (registered in Gujarat) for ₹25,00,000.

Under **Section 51 of the CGST Act, 2017** and **Rule 37 of the CGST Rules, 2017**, when a taxable person supplies services to a Government agency (Central Government, State Government, Union territory, local authority, or Government institution), the Government agency is required to **deduct tax at source (TDS)** from the amount payable at a rate not exceeding **2% of the consideration** unless specifically exempted by notification.

**Determination of tax type (IGST vs CGST/SGST):**
The place of supply for accommodation services is where the service is physically provided—i.e., **Rajasthan** (where the hotel is located). Since the service is supplied from Rajasthan (place of supply) to a recipient in **Gujarat** (Government agency's location), this constitutes an **inter-state supply**, attracting **IGST** (Integrated GST).

**Calculation:**
TDS = 2% of consideration = 2% of ₹25,00,000 = **₹50,000**
Nature of tax deducted: **IGST** (inter-state supply)

The Government agency of Gujarat must deduct **IGST of ₹50,000** at source from the payment to Sambhav Ltd. per Rule 37 of CGST Rules, 2017.

Question 7

What is the amount of deduction available under Chapter VI-A to Mr. Raj for A.Y. 2025-26?

Accepted Answer

**Answer: (A)**

Mr. Raj can claim a deduction under Chapter VI-A for donations made during P.Y. 2024-25 (applicable to A.Y. 2025-26).

**Section 80G - Donations:**

Donations made by cheque:
- PM Cares Fund: ₹50,000 → **100% deductible** (fully eligible under Section 80G)
- PM's Drought Relief Fund: ₹20,000 → **50% deductible** (approved charitable donation, not listed for 100% deduction)

**Calculation:**
- Deduction from PM Cares Fund: ₹50,000 × 100% = ₹50,000
- Deduction from PM's Drought Relief Fund: ₹20,000 × 50% = ₹10,000
- **Total deduction under Chapter VI-A: ₹60,000**

**Cap check:** 10% of Gross Total Income (₹15L + ₹5L = ₹20L) = ₹2,00,000. The deduction of ₹60,000 is within this limit.

**Other items are not Chapter VI-A deductions:** Debenture transactions are capital gains/losses (not Chapter VI-A), rent paid is a business expense (not Chapter VI-A), and the Canadian business income is taxable but not subject to Chapter VI-A deductions.

Question 8

The amount of tax to be collected at source by the company under the GST law during January is ____________ (ignore bifurcation of CGST, SGST and IGST).

Accepted Answer

**Answer: (D)**

Under Section 52 of the CGST Act, 2017, an e-commerce operator must collect Tax Collected at Source (TCS) on supplies made through its platform by registered suppliers. The TCS rate is currently 0.5% on supplies of goods through e-commerce platforms.

Analysis of January transactions subject to TCS:

**Supplies by third-party registered supplier (Dumdum Ltd.):** Dumdum supplied goods worth ₹75,00,000 through the company's e-commerce platform, with ₹15,00,000 returned in January. Net qualifying supply = ₹75,00,000 - ₹15,00,000 = ₹60,00,000. This supply is subject to TCS as it is made by a registered supplier through the platform.

**Company's own products (₹20,00,000):** Supplies made directly by the e-commerce operator (company itself) are not subject to TCS collection. TCS is mechanism meant for supplies by third-party registered suppliers facilitated through the platform.

**Accommodation services (₹20,00,000):** TCS does not apply to supplies of services. TCS under Section 52 applies only to supplies of goods.

**Calculation of TCS:**
Qualifying amount for TCS = ₹60,00,000 (Dumdum Ltd.'s net supplies)
TCS rate = 0.5% on goods supplied through e-commerce platform
TCS = ₹60,00,000 × 0.5% = **₹30,000**

Question 9

What is the tax liability of Mr. Raj for A.Y. 2025-26?

Accepted Answer

**Answer: (D)**

**Residential Status**: Mr. Raj has 151 days in India in FY 2024-25 (1.11.2024 to 31.3.2025). With 151 days in current year (exceeding 60 days) and 490 days in preceding 4 years (exceeding 365 days), he qualifies as a **Resident**. Since he has no year with 730+ days in India, he is classified as **Resident Not Ordinarily Resident (RNOR)** for A.Y. 2025-26.

**Taxable Income (RNOR - Only Indian Sources)**:
1. **Indian business profit**: ₹5,00,000
2. **Capital Loss from Debentures (August 2024 sale)**: Indexed cost = 7,500 × ₹150 × (363/301) = ₹13,56,750; Sale proceeds = 7,500 × ₹155 = ₹11,62,500; Loss = ₹1,94,250 (This loss can be adjusted against other income in computing total income)
3. **Income after capital loss**: ₹5,00,000 - ₹1,94,250 = ₹3,05,750

**Deductions under Chapter VI-A**:
- **Section 80G - PM Cares Fund**: ₹50,000 (100% deduction per Finance Act 2020)
- **Section 80G - PM Drought Relief Fund**: ₹20,000 (eligible government relief fund, 100% deduction)
- **Total deductions**: ₹70,000

**Computation**:
Gross income (after capital loss) = ₹3,05,750
Less: Deductions under Chapter VI-A = ₹70,000
**Taxable income = ₹2,35,750**

Since taxable income (₹2,35,750) is **below the basic exemption limit of ₹2,50,000** for individuals, **no tax is payable**.

Canadian business profit (₹15 lakhs) is foreign source income and not taxable for RNOR.

Question 10

What is the last date for issuance of invoice in relation to construction of road by the company for the last tranche of payment received?

Accepted Answer

**Answer: (B)**

For construction services under GST, the invoice issuance date is governed by the time of supply rules. According to Section 13(9)(c) of the CGST Act 2017 and Rule 12 of the CGST Rules 2017, for construction services, the time of supply is the date of completion of work or the date of receipt of payment, **whichever is earlier**.

In this case:
- The road construction project was completed on **31st December 2024**
- The completion certificate was issued on **15th January 2025**
- The final (25%) tranche payment was received on **20th February 2025**

For construction services, particularly where a completion certificate is issued, the invoice must be issued on or before the date of the completion certificate. Since the completion date (31st December 2024) is the earliest relevant event, and the completion certificate formalizes this on 15th January 2025, the invoice should have been issued **on or before 15th January 2025**.

The invoice was actually issued on 5th February 2025, which is beyond the prescribed deadline. Therefore, **15th January 2025** is the last date by which the invoice should have been issued in compliance with GST regulations.

Question 11

Mr. Kunal (age 27 years) is an employee in a private company posted in Delhi. He was appointed on 01.02.2023 in the scale of ₹ 60,000 - ₹ 1,000 - ₹ 70,000. He furnishes the following information for the previous year 2024-25: (i) Dearness allowance @25% of basic salary (60% of DA forms part of retirement benefits); (ii) Bonus equal to one month salary, paid in November 2024 on basic salary applicable for that month; (iii) Leave encashment for P.Y. 2024-25 of ₹ 10,000; (iv) He received a motor car on 01.12.2024 (cubic capacity exceeds 1.60 litres) with chauffeur for both official and personal use, owned by employer with all expenses met by employer; (v) Employer granted a loan of ₹ 2,00,000 on 1st June 2024, repayable in equal quarterly installments over 2 years starting 1st October 2024; S…

Accepted Answer

**Computation of Income under the Head 'Salaries' for Mr. Kunal — AY 2025-26 (PY 2024-25)**

**Basic Salary:** Mr. Kunal was appointed on 01.02.2023 at ₹60,000. Annual increments of ₹1,000 apply on each anniversary. His 1st increment (01.02.2024) raised salary to ₹61,000, and the 2nd increment (01.02.2025) raised it to ₹62,000. For PY 2024-25: April 2024 to January 2025 (10 months) × ₹61,000 = ₹6,10,000; February 2025 to March 2025 (2 months) × ₹62,000 = ₹1,24,000. **Total Basic Salary = ₹7,34,000.**

**Dearness Allowance:** @25% of basic salary = 25% × ₹7,34,000 = **₹1,83,500** (fully taxable; 60% portion forms part of retirement benefits — relevant only for computing accommodation perquisite salary base).

**Bonus:** Paid in November 2024 based on basic salary applicable in November 2024 = ₹61,000. **Bonus = ₹61,000.**

**Leave Encashment during service:** Fully taxable as it is received while in service (no exemption under Section 10(10AA) of the Income Tax Act, 1961 — exemption applies only on retirement/resignation). **₹10,000 taxable.**

**Motor Car Perquisite [Rule 3(2)(A)(iii) of the Income Tax Rules, 1962]:** Car (CC > 1.6 litres) with chauffeur, used for both official and personal purposes, all expenses by employer. Prescribed perquisite = ₹2,400 + ₹900 (chauffeur) = ₹3,300 per month. Car provided from 01.12.2024 = 4 months (Dec 2024 to Mar 2025). **Perquisite = ₹3,300 × 4 = ₹13,200.**

**Concessional Loan Perquisite [Rule 3(7)(i)]:** Perquisite is computed on the m…

Question 12

Surya is engaged in providing a bouquet of goods and services. It is registered in Jaipur, Rajasthan. It provides the following information for the month of January: (i) Organised a business exhibition in Gujarat for Jignesh Industries (registered in Surat, Gujarat) for ₹ 20,00,000; (ii) Provided accommodation services to 10 CA students (originally from outside Rajasthan) in hostel Surya Homes, located in Jaipur, Rajasthan - hostel accommodation charges ₹ 22,000 per student per month; as per agreement, minimum period of stay is 4 months; (iii) Performed carnatic music to promote brand Rigley Garments (registered in Udaipur, Rajasthan) for ₹ 1,45,000; (iv) Intra-State services provided as business correspondent of Manimani Bank (registered in Rajasthan) with respect to accounts in its Jaipu…

Accepted Answer

**Computation of Minimum Net GST Liability Payable in Cash by Surya for January**

Surya is registered in Jaipur, Rajasthan. Each transaction is analysed for taxability, place of supply, applicable charge (forward/reverse), and ITC eligibility.

**(i) Business Exhibition in Gujarat — ₹20,00,000**
This is an event/exhibition service. Under **Section 12(7) of the IGST Act 2017**, when the recipient of event organisation services is a registered person, the **place of supply = location of the registered recipient**. Jignesh Industries is registered in Surat, Gujarat → POS = Gujarat. Supplier (Rajasthan) ≠ POS (Gujarat) → **Inter-state supply → IGST @ 18%** = ₹3,60,000.

**(ii) Hostel Accommodation — 10 students × ₹22,000/month**
POS = location of immovable property (Jaipur, Rajasthan) under **Section 12(3) of the IGST Act 2017** → intra-state. However, declared tariff = ₹22,000 ÷ 30 = **₹733/day < ₹1,000/day threshold**. Under **Entry 14 of Notification No. 12/2017-CT(Rate)**, accommodation services with declared tariff below ₹1,000 per day are **EXEMPT**. Total: 10 × ₹22,000 = ₹2,20,000 → Nil GST.

**(iii) Carnatic Music Performance — ₹1,45,000**
Carnatic music is a classical art form. Under **Entry 78 of Notification No. 12/2017-CT(Rate)**, services by an artist by way of performance in folk or classical art forms of music are **exempt if consideration ≤ ₹1,50,000**. ₹1,45,000 < ₹1,50,000 → **EXEMPT**. Nil GST.

**(iv) Business Correspondent Services — ₹1,20,000**
Surya acts a…

Question 13

Ms. Priya has always been financially aware and strategic with her investments. In January 2022, she purchased gold jewellery worth ₹ 3,25,000 believing it would be a safe investment. In October 2024, gold prices increased and she decided to sell her jewellery on 31.10.2024 for ₹ 4,75,000. She also sold her house property in Delhi on 01.12.2024 for ₹ 80 lakhs. The stamp duty value of property at the time of transfer was ₹ 90 lakhs. She purchased this property on 15.07.1998 for ₹ 8.80 lakhs. The FMV of the property as on 1st April 2001 was ₹ 10.8 lakhs and stamp duty value on that date was ₹ 10 lakhs. She had incurred brokerage and other expenses @1% on purchase price. CII: F.Y. 2001-02: 100; F.Y. 2021-22: 317; F.Y. 2024-25: 363. Compute the capital gain tax to be paid by Ms. Priya for A.Y.…

Accepted Answer

**Computation of Capital Gains for Ms. Priya — A.Y. 2025-26**

**1. Capital Gain on Sale of Gold Jewellery (Short-Term)**

Gold jewellery purchased in January 2022 and sold on 31.10.2024 is held for approximately 33 months, which is less than the **36-month threshold** for Long-Term Capital Asset classification under Section 2(42A) of the Income Tax Act 1961. Hence, it is a **Short-Term Capital Asset**.

**Short-Term Capital Gain (STCG)** = Sale Price – Cost of Acquisition = ₹4,75,000 – ₹3,25,000 = **₹1,50,000**

This STCG is **taxable at applicable slab rates** (not at any special rate). Since other income already exceeds the basic exemption limit, the entire ₹1,50,000 is taxable.

---

**2. Capital Gain on Sale of House Property in Delhi (Long-Term)**

Property purchased on 15.07.1998 and sold on 01.12.2024 is held for more than 24 months — it is a **Long-Term Capital Asset**.

**Step A — Full Value of Consideration under Section 50C:**
Actual sale consideration = ₹80,00,000. Stamp Duty Value (SDV) = ₹90,00,000.
Check: 110% of ₹80,00,000 = ₹88,00,000. Since SDV (₹90,00,000) **exceeds 110%** of actual consideration, the full value of consideration is taken as **₹90,00,000** (i.e., the SDV).

**Step B — Cost of Acquisition under Section 55(2)(b):**
Since the property was acquired before 01.04.2001, the assessee may opt for **Fair Market Value as on 01.04.2001** as the cost. However, as per the proviso inserted by Finance Act 2020, the FMV so adopted **cannot exceed the Stamp …

Question 14

Mehul Enterprises, registered under GST in Uttar Pradesh and a monthly return filer, is engaged in making taxable supplies of goods and services. It furnished the details of its outward supplies in Form GSTR-1 for the month of January on 11th February. However, on 14th February, the accountant of Mehul Enterprises noticed that one invoice issued to Vaishali Traders (registered in Gujarat) for supply of goods of value of ₹ 1,00,000 (taxable @ 18%) pertaining to January has been inadvertently missed to be declared in Form GSTR-1 furnished for January. You are required to briefly discuss whether Mehul Enterprises can amend the details of outward supply furnished in Form GSTR-1 of January. If such amendment is permitted and details of Form GSTR-1 are amended, whether the details of said invoic…

Accepted Answer

**Whether Amendment is Permitted in GSTR-1 of January:**

Mehul Enterprises CANNOT amend the details of the outward supply in GSTR-1 of January. The restriction arises under Rule 21(1) of the CGST Rules 2017, which prohibits amendment of a return if the details have already been included in the auto-populated GSTR-2B of the recipient.

**Timeline Analysis:**
Mehul filed GSTR-1 for January on 11th February. GSTR-2B is auto-populated and made available to the recipient by 13th of the succeeding month (i.e., by 13th February for January supplies). Since the accountant noticed the error on 14th February, GSTR-2B for January had already been locked and made available to Vaishali Traders by that date. Consequently, the invoices in GSTR-1 of January cannot be amended after GSTR-2B is generated.

**Correct Procedure:**
As per Rule 21(1) of the CGST Rules 2017, the missed invoice must now be reported in the **GSTR-1 of February** (the month in which the correction is being made). This invoice of ₹1,00,000 should be included in the outward supply details of Mehul's GSTR-1 for February.

**Availability in GSTR-2B of Vaishali Traders:**

Since the invoice cannot be amended in GSTR-1 of January, it will **NOT appear in the GSTR-2B of January**. The invoice details will be available in **GSTR-2B of February** for Vaishali Traders. When Mehul files the corrected invoice in GSTR-1 of February, GSTR-2B for February (auto-populated by 13th March) will include this invoice as an inward supply f…

Question 15

Mr. Akshay, a resident individual, provides the following details of his income/losses for the year ended 31.03.2025: (i) Income from salary (computed) ₹ 35,20,000; (ii) Rent received from house property in Delhi ₹ 5,00,000; (iii) Repayment of loan taken for purchase of above property ₹ 15,25,000, including payment of interest of ₹ 7,00,000 (loan taken from friend); (iv) Rent received from house property in Jaipur ₹ 3,20,000; (v) Interest on loan taken for repair of house properties in Mumbai and Delhi ₹ 1,50,000 (property in Mumbai is self-occupied; loan taken on 01.04.17 and utilized in 50:50 ratio); (vi) Long-term capital gains on sale of equity shares on which STT paid ₹ 7,95,000; (vii) Interest on fixed deposit ₹ 73,000; (viii) Loss from textile business ₹ 7,50,000; (ix) Speculation b…

Accepted Answer

**Computation of Total Income of Mr. Akshay for A.Y. 2025-26** (Old Tax Regime — opted out of default regime)

**1. Income from Salary**
Salary (computed, i.e., after Section 16 deductions) = **₹35,20,000**

**2. Income from House Property**

*Delhi (Let-out):* Annual Value (rent) = ₹5,00,000. Less: Standard deduction u/s 24(a) @ 30% = ₹1,50,000; Interest on loan for purchase (from friend, let-out — no ceiling) u/s 24(b) = ₹7,00,000; Interest on repair loan (50% × ₹1,50,000) u/s 24(b) = ₹75,000. Loss = **(₹4,25,000)**.

*Jaipur (Let-out):* Annual Value = ₹3,20,000. Less: SD @ 30% = ₹96,000. Income = **₹2,24,000**.

*Mumbai (Self-Occupied):* Annual Value = NIL. Interest on repair loan (50% × ₹1,50,000 = ₹75,000) u/s 24(b) — restricted to ₹30,000 for self-occupied repair loan. Loss = **(₹30,000)**.

Net HP Loss = ₹4,25,000 − ₹2,24,000 + ₹30,000 = **₹2,31,000 (loss)**. Under Section 71(3A) of the Income Tax Act 1961, set-off against other heads is capped at **₹2,00,000**. Balance **₹31,000** carried forward u/s 71B for 8 AYs.

**3. Profits and Gains from Business or Profession**

Speculation business profit = ₹2,30,000; Salary received as partner (allowed to firm, taxable as PGBP u/s 28) = ₹50,000; Less: Textile business loss = ₹7,50,000. Note: Firm's loss of ₹1,60,000 cannot be set off by partner — loss stays with the firm per Section 78.

Net PGBP = ₹2,80,000 − ₹7,50,000 = **(₹4,70,000 loss)**. Non-speculation PGBP loss set off against CG (₹3,70,000) and Other Sources (₹1,00,0…

Question 16

Mr. Bindusaar is an employee in Galgotia and Sons, working at its Mumbai (Maharashtra) office. Mr. Bindusaar is unregistered under GST law. His family is located in Bareilly, Uttar Pradesh. His son requires a laptop for his school project on urgent basis. Therefore, Mr. Bindusaar places an order on Amazing.in (an e-commerce platform) for supply of a laptop of latest configuration to be delivered at his residential address located in Bareilly, Uttar Pradesh. While placing the order on the e-commerce platform, Mr. Bindusaar provides the billing address of his apartment located in Mumbai, Maharashtra. Determine the place of supply of the supply of laptop in the given case.

Accepted Answer

The place of supply of the laptop is **Bareilly, Uttar Pradesh**.

**Legal Framework:**
According to **Section 12(2) of the CGST Act 2017**, when a supply of goods involves movement of goods, the place of supply shall be the location where the goods are delivered to the recipient.

**Application to the Given Case:**
The supply of the laptop from Amazing.in to Mr. Bindusaar involves movement of goods from the e-commerce platform's warehouse to the delivery destination. The goods are being delivered to Bareilly, Uttar Pradesh, which is Mr. Bindusaar's residential address. Therefore, the place of supply is **Bareilly, Uttar Pradesh**.

**Analysis of Irrelevant Factors:**

**1. Billing Address (Mumbai):** The billing address in Mumbai, Maharashtra, is irrelevant for determining place of supply under GST law. Section 12(2) explicitly provides that for goods with movement, the place of supply is determined by the delivery location alone, not the billing address. The two addresses may differ, but only the delivery location determines the place of supply.

**2. Employment Location (Mumbai):** Mr. Bindusaar's employment location in Mumbai does not affect the place of supply determination. The place of supply depends on where the goods are physically delivered to the recipient, not where the recipient is employed or ordinarily resides for other purposes.

**3. GST Registration Status (Unregistered):** Mr. Bindusaar's unregistered status under GST is irrelevant to the place of supply de…

Question 17

Examine the applicability and amount of Tax deduction at source (TDS) or Tax collection at source (TCS) as per the Income-tax Act, 1961 for the A.Y 2025-26 in the following situations:

Accepted Answer

**Part (i): TDS on Rent Paid by Mr. Subhash**

**Applicable Provision**: Section 194I of the Income-tax Act, 1961 deals with deduction of tax at source on rent payments.

**TDS Applicability under Section 194I**: TDS is deductible by specified categories of persons including Government, Local Authorities, Corporations, and individuals/HUFs engaged in business whose gross turnover in the preceding financial year exceeds ₹50 lakhs. The rate of TDS is 10% (or 20% if PAN is not provided) on rent exceeding ₹50,000 per month for non-residential property.

**Analysis**: Mr. Subhash is described as a **salaried individual** with no mention of business engagement. He does NOT fall within the category of persons required to deduct TDS under Section 194I. The monthly rent of ₹52,000 exceeds the threshold of ₹50,000, but this threshold is relevant only for specified categories of payers, not for salaried individuals.

**Scenario 1 (Vacation on 31st August 2024)**: Total rent paid = ₹52,000 × 5 months = ₹2,60,000. **TDS is NOT applicable**; Amount = NIL.

**Scenario 2 (Vacation on 31st October 2024)**: Total rent paid = ₹52,000 × 7 months = ₹3,64,000. **TDS is NOT applicable**; Amount = NIL.

**Conclusion**: Regardless of the vacation date, TDS on rent is not applicable because Mr. Subhash is a salaried individual outside the scope of Section 194I.

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**Part (ii): TCS on Sale of Tendu Leaves by ABC Traders**

**Applicable Provision**: Section 206C(1H) of the Income-tax Act, 1961 provid…

Question 18

Determine the taxability or otherwise of the following services provided by Indian Railways:

Accepted Answer

**Taxability Analysis of Railway Services under GST**

The taxability of services provided by Indian Railways is determined under the Goods and Services Tax regime, with specific provisions for railway operations. The key exemption covers transportation of passengers by railway, with specified exceptions. Below is the determination for each service:

**(i) Cloak Room Services – ₹20,00,000 – TAXABLE @ 5% GST**
Cloak room services are ancillary storage facilities provided separately from the main transportation service. Despite being related to railway operations, cloak room is a distinct supply with independent charging. This service is not covered under the exemption for passenger transportation and is taxable at 5% GST.

**(ii) Transportation in Second Class – ₹20,00,000 – EXEMPT**
Service of transportation of passengers in second class by railway falls squarely within the exemption provided for passenger transportation. Non-air-conditioned public transportation by railway is treated as an essential service and is specifically exempt from GST. No tax is applicable on this service.

**(iii) Platform Tickets – ₹50,00,000 – TAXABLE @ 5% GST**
Platform tickets are entry/access tickets to railway platforms, separate from transportation services. They represent a distinct supply—a person can purchase a platform ticket without traveling. This service is not covered under the transportation exemption and is taxable at 5% GST as a service supply.

**(iv) Warehouse Rent in Bengaluru R…

Question 19

Mr. Ganesh, a resident and ordinarily resident aged 61 years, is engaged in the business of manufacturing furniture. He is subject to tax audit under section 44AB. Profit & Loss account for the year ended 31st March 2025 shows net profit of ₹ 53,74,500. Other information: (i) Opening and closing stock of finished goods were undervalued by 10% (opening stock ₹ 14,50,000; closing stock ₹ 15,58,000); (ii) Salaries & wages (₹ 80,00,000) include: (a) Contributed 20% of basic salary in NPS for employee Mr. Ramesh (basic salary withdrawn ₹ 5,00,000; DA 40% of basic salary; 50% of DA forms part of salary); (b) VRS payments of ₹ 3,40,000 on 1st January 2025; (iii) Interest on loan (₹ 7,50,000) includes 15% per annum on ₹ 12,00,000 SBI loan taken 01.05.2022 for personal use electric car (₹ 15,00,000…

Accepted Answer

**Computation of Total Income and Tax Liability of Mr. Ganesh for AY 2025-26 (under Section 115BAC of the Income Tax Act, 1961)**

**Business Income — Computation**

Net Profit as per Profit & Loss Account: ₹53,74,500

**Additions (Disallowances / Incomes not credited in P&L):**

**(i) Stock Adjustment — Closing Stock Undervaluation:** Opening and closing stocks are undervalued by 10% of their book values. Undervaluation of closing stock (10% × ₹15,58,000 = ₹1,55,800) understates profit — add back ₹1,55,800.

**(ii)(a) NPS Contribution Disallowance:** Under **Section 36(1)(iva) of the Income Tax Act, 1961**, employer's NPS contribution is deductible only up to 10% of the employee's salary (basic + DA forming part of salary for retirement). Basic = ₹5,00,000; DA forming part of salary = 50% × 40% × ₹5,00,000 = ₹1,00,000; Salary = ₹6,00,000. Permissible = 10% × ₹6,00,000 = ₹60,000. Actual paid = 20% × ₹5,00,000 = ₹1,00,000. Disallowance = ₹40,000.

**(ii)(b) VRS Expenditure — Section 35DDA:** Under **Section 35DDA of the Income Tax Act, 1961**, VRS payments are deductible in 5 equal annual instalments. Only 1/5 × ₹3,40,000 = ₹68,000 is deductible in AY 2025-26. Balance debited to P&L = ₹3,40,000 − ₹68,000 = **₹2,72,000 disallowed**.

**(iii) Interest on Personal Loan:** Interest on ₹12,00,000 SBI loan taken for personal use (electric car) is not a business expense. Disallowance = 15% × ₹12,00,000 = **₹1,80,000** (add back). Under Section 115BAC, deduction under **Section 80EEB*…

Question 20

Mr. Hridya has obtained a voluntary registration under the GST law in the State of Madhya Pradesh in January but has not commenced the business till the month of September. In October, the proper officer issues a show cause notice to him for cancellation of his registration. Examine whether the action taken by the proper officer is justified in law. Also, list the other circumstances when the proper officer can cancel registration under section 29(2).

Accepted Answer

**Examination of the Proper Officer's Action:**

The action taken by the proper officer in issuing a show cause notice is **justified in law**. Mr. Hridya obtained voluntary registration in January but had not commenced business by September—a gap of approximately 8 months. Under Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer is empowered to cancel registration if a registered person has not commenced business within **6 months from the date of grant of registration** in case of voluntary registration. Since Mr. Hridya exceeded this 6-month period without commencing business, the proper officer was justified in issuing a show cause notice before proceeding with cancellation.

Before cancellation, the proper officer must issue a show cause notice giving the registered person an opportunity to explain why their registration should not be cancelled. The action taken by the proper officer is procedurally correct and substantively grounded in law.

**Other Circumstances for Cancellation under Section 29(2) of CGST Act, 2017:**

The proper officer can cancel registration in the following circumstances:

**1. Non-Commencement of Business (6 months):** As discussed above, if voluntary registration is obtained but business is not commenced within 6 months from the date of grant.

**2. Non-Filing of Returns (Continuous 6 Months):** If a registered person fails to furnish returns required under the Act for a continuous period of 6 months, the registrat…

CA Inter Taxation

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Write it like this

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2Examiner-rewarded phrases

3Common trap

Worked Solution

Write it like this

1The skeleton

2Examiner-rewarded phrases

3Common trap