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Past papers › Cost & Mgmt › November 2016

CA Inter Cost & Mgmt — Suggested Answers — November 2016

This page contains all 27 questions from the CA Inter Cost & Management Accounting Suggested Answers for the November 2016 attempt cycle, sourced from VSI Jaipur.

QcService Tax filing, late fees, revision of returns
0 marks hard
Case: Mr. Abhishek, a taxable service provider, filed his Service Tax return for the half year ended 30th September 2015 on 01-12-2015.
Mr. Abhishek, a taxable service provider, filed his Service Tax return for the half year ended 30th September 2015 on 01-12-2015. He seeks your advice on the following issues:
QcCENVAT Credit Rules 2004, place of removal
0 marks easy
Decide with reasons whether the following places can be treated as a 'Place of Removal' in terms of Rule 2(g) of CENVAT Credit Rules, 2004:
QdCustoms Act 1962, customs duty provisions
3 marks medium
Examine the validity of the following statements under the provisions of Customs Act, 1962:
Q1Income Computation, Deductions, Income Tax, Assessment Year
0 marks easy
Mr. Raghuveer, a resident individual aged 35 years, furnished the following information from his Profit and Loss Account for the year ended 31st March 2016: (i) The net profit was ₹ 6,50,000. (ii) The following incomes were credited in the Profit & Loss Account: (a) Interest on government securities ₹ 25,000 (b) Dividend from a foreign company ₹ 15,000 (c) Gold coins worth ₹ 55,000 received as gift from his father. (iii) Depreciation debited in the books of account was ₹ 85,000. Depreciation allowed as per Income-tax Act, 1961 was ₹ 96,000. (iv) Interest on loan amounting to ₹ 68,000 was paid in respect of capital borrowed for the purchase of the new asset which has not been put to use till 31st March 2016. (v) General expenses included: (a) An expenditure of ₹ 20,500 which was paid by a bearer cheque; (b) Compensation of ₹ 4,500 paid to an employee while terminating his services in business unit. (vi) He contributed the following amounts by cheque: (a) ₹ 45,000 to Sukarya Samithi Scheme in the name of his minor daughter Alpa. (b) ₹ 20,000 to the Swadhi Bharat Kosh set up by the Central Government. (c) ₹ 28,000 towards premium for health insurance and ₹ 2,500 on account of preventive health check-up for self and his wife. (d) ₹ 35,000 on account of medical expenses of his father aged 82 years (no insurance scheme had been availed on his health of his father). You are required to compute the total income of Mr. Raghuveer for the Assessment Year 2016-17.
Q2(a)Income Tax - property dealing business, capital gains, resid
8 marks very hard
Mr. Anand Prakash, a resident individual, aged 55 years, purchased 10 flats in the year 1993-94 for ₹12 lakhs and started a business of property dealing and converted all 10 flats into stock in trade of his business and recorded the same in his books being Fair market value on 1st April 2004. On 31st March 2016, he sold all 10 flats for ₹55 Lakh and purchased a residential house property for ₹50 Lakh. He has consumed 2 rooms in this residential house in June 2011 and has spent ₹8 Lakh. He sold the above residential house on 7th July 2016, for ₹70 Lakh. The valuation adopted by Stamp valuation authority for the payment of stamp duty was ₹75 Lakh. On the request of Mr. Anand Prakash, A.O. made a reference to the valuation officer. The Valuation Officer determined the value at ₹85 Lakh. Mr. Anand Prakash pledged 1% of the consideration. Compute the total income and total Tax liability of Mr. Anand Prakash for the Assessment year 2016-17.
Q2(b)Service Tax - value of taxable service, time of supply
5 marks medium
Purve Sainik Security Service Ltd. providing the security services, entered into a contract with Women Welfare Mandal, for exhibition of jewellery held between 22nd August 2015 to 26th August 2015. Contract period on 5th August 2015 and company received an advance of ₹5,00,000 by account payee cheque on signing date. On 22nd Aug 2015, the company received ₹6,00,000 by credit card and on 26th August 2015, ₹4,00,000 by pay order. Determine the value of taxable service and the service tax liability payable by Purve Sainik Security Service Ltd. Assuming the above company is not eligible for SSP exemption and service tax has been charged separately @ 14.5%.
Q3(b)Service Tax - banking services
6 marks medium
ET Bank Ltd. furnishes the following information relating to the services provided and the gross amount received. Compute the value of taxable services and service tax liability. Sale and purchase of forward contract: ₹25 lakhs Commission charged on debit collection services: ₹18 lakhs Margin earned on reverse repo transactions: ₹5 lakhs Administrative charges collected for extending home loans: ₹12 lakhs Assume: ET Bank Ltd. is not eligible for small service provider exemption. Service tax is not included in the above amounts and is to be charged separately @ 14.5%.
Q3(b)Service Tax - Renting of Properties
5 marks medium
Case: Mr. Dhingra rendered the following services by renting his properties located in Gujarat for various uses: (i) Land let out to Jumbo Circus ₹1,50,000; (ii) A building let out to Singhania classes for providing coaching to CA students ₹5,00,000; (iii) A vacant land used for horticulture ₹3,00,000; (iv) A building let out to EXIM Ltd. for use as a corporate office ₹8,00,000.
Determine the value of taxable services and service tax liability thereon @ 14.5%. Assume, Mr. Dhingra is not eligible for small service provider exemption and the above mentioned amounts are exclusive of service tax.
Q3(c)VAT - purchase, export, and lease transactions
4 marks medium
Nagarjuna Ltd. of Tamil Nadu provides the following information for the month of December 2015: Purchase of raw materials from the local market (excluding VAT @ 4%): ₹45,00,000 Raw materials purchased from the above raw materials were exported at a sale price of ₹2,50,000. Remaining goods were given on lease to M/s X of Karnataka at a deemed sale price of ₹35,00,000 (excluding VAT @ 12.50%). You may assume that exports are subject to Zero rate of tax and input tax credit of the raw material used in the manufacture of leased goods is available immediately. Compute the amount of net VAT payable/refund and input tax credit for the month of December 2015.
Q3(c)CST - Taxable Turnover and Tax Liability
3 marks medium
Total sales during the financial year 2015-16 were ₹25,00,000 inclusive of CST. The sales do not include the following: (i) Goods worth ₹50,000 provided as free samples to Mr. C of Ludhiana. (ii) Sale of goods amounting to ₹1,50,000 to Mr. Sam, a foreign tourist. (iii) Despatch of goods worth ₹2,00,000 to Mr. Saket's branch located in another State. (iv) Hypothecation of the goods worth ₹12,00,000 for a working capital loan from SBI amounting to ₹10,00,000. Compute the taxable turnover and the tax liability of M/B. Saket under CST Act, assuming that the VAT rate within the state is 4%.
Q3(d)Income Tax - Resident Status and GTI Computation
2 marks hard
Case: Mr. Rajesh, a citizen of India, serving in the Ministry of Finance in India and transferred to High Commission of Australia on 15th March 2015. He did not come to India during the financial year 2015-16. His income during the financial year 2015-16 is given here under: Salary from Govt. of India ₹7,20,000; Foreign Allowances from Govt. of India ₹6,00,000; Rent from a house situated at London, received in London ₹3,00,000; Interest accrued on National Saving Certificate during the year 2015-16 ₹45,000.
Compute The Gross Total Income of Mr. Rajesh for the Assessment year 2016-17.
Q3(d)(ii)Income Tax - Loan vs Dividend Classification
0 marks easy
Mr. Rakesh has 15% share holding in RSL (P) Ltd and also 50% share in Rakesh & Sons, a partnership firm. The accumulated profit of RSL(P) Ltd. is 20 Lakh. Rakesh & Sons had taken a loan of ₹2.5 Lakh, from RSL (P) Ltd. Explain, whether the above loan is treated as dividend, as per the provision of Income Tax Act, 1961.
Q4(a)Income-tax Act, 1961 - Taxability of receipts
6 marks medium
State with reasons whether the following receipts are taxable or not under the provisions of Income-tax Act, 1961 ? (1) Mr. Suri received a sum of ₹ 5,00,000 as compensation, from 'Yatra Foundation', towards the loss of property on account of Flood Disaster at Chennai during December 2015. (2) Mr. Suman received an advance of ₹ 3,00,000 on 06-06-2015 to transfer his residential house property. Since the transfer was not effected during the previous year due to failure in negotiations, he deducted the advance money forfeited from the cost of acquisition of the property. (3) Mr. Federer, a non-resident residing in Sweden, has received rent from Mr. Nadal, also a non-resident residing in France in respect of a property taken on lease at Mumbai. Since this income is received outside India from a non-resident, Federer claims that his income is not chargeable to Tax in India. (4) TDS is not applicable in respect of payment of ₹ 1,00,000 to Mr. Pandey a resident, being interest on recurring deposit with SBI.
Q4(b)CENVAT credit eligibility and computation
5 marks medium
Compute the CENVAT credit available to M/s. Shine Enterprises Ltd. in respect of the following services availed by it in the month of October 2015; duly mentioning why CENVAT credit is available ? Services: (a) Market Research Services - ₹ 2,00,000 Service Tax paid; (b) Service of General Insurance taken for motor vehicles which are not capital goods - ₹ 52,000 Service Tax paid; (c) Credit Rating Services - ₹ 1,09,000 Service Tax paid; (d) Health & Fitness Centre service for the personal use of the Managing Director of the Company - ₹ 72,000 Service Tax paid; (e) Repairs & Renovation services for office premises - ₹ 1,40,000 Service Tax paid
Q4(c)Central Excise Act, 1944 - Excisability and excise duty liab
3 marks medium
Examine the validity of the following statements under Central Excise Act, 1944 and under Central Excise Rules, 2002 : (i) Goods subjected to NIL rate duty are not excisable goods. (ii) XYZ Ltd., a manufacturer of Khandasari Molasses, claims that it is not liable to pay excise duty on the sugar imported in the manufacturing process on the balance (60%) paddy.
Q5(a)(i)Income-tax Act - Classification of income as agricultural or
6 marks medium
Mr. Kamal grows paddy and uses the same for the purpose of manufacturing of rice in his own Rice Mill. The cost of cultivation of 40% of paddy produce is ₹ 7,00,000, which is sold for ₹ 15,00,000, and the cost of cultivation of balance 60% of paddy is ₹ 12,00,000 and the market value of such paddy is ₹ 24,00,000. To manufacture rice, he incurred ₹ 2,00,000 in the manufacturing process on the balance (60%) paddy. The rice was sold for ₹ 30,00,000. Compute the Business income and Agriculture Income of Mr. Kamal.
Q6(a)Income Tax - Advance Tax on Capital Gain
2 marks easy
Discuss the provision under Income Tax Act for Payment of Advance Tax in case of Capital Gain.
Q6(b)(i)Income Tax Act - Verification Authority
2 marks easy
Specify the persons who are authorized to verify u/s 160, the income filed u/s 139 of the Income Tax Act, 1961 in case of a company.
Q6(b)(ii)Factory Employment - Worker Classification
4 marks medium
Mr. Satya is a manufacturer of goods in a factory located in Navi Mumbai. On 1st April 2015, there were 120 workmen engaged in the factory. Now, to increase in demand of his products, he employed 140 new-workmen during the previous year 2015-16 which included: (a) 15 casual workmen (b) 25 contract labourers (c) 40 workmen employed on 20th April, 2015 (d) 35 workmen employed on 1st May, 2015 (e) 25 workmen employed on 5th August, 2015
Q9(b)Customs Duty - Import Equipment
5 marks medium
Shanti Ltd. imported an equipment in the month of July 2015 whose assessable value was US$ 18,000. From the following additional information, compute the duty payable: (a) Date of Entry inward was 09-05-2015. Basic custom duty on that date was 20% and Exchange rate notified by Central Board of Excise & Customs was US$ 1 = Rs. 65. (b) Date of Bill of Entry was 13-05-2015. Basic custom duty on that date was 10% and Exchange rate notified by Central Board of Excise & Customs was US$ 1 = Rs. 64. (c) Additional Duty payable under section 3(1) of the Customs Tariff Act, 1975 was 12.5%. (d) Additional Duty payable under section 3(5) of the Customs Tariff Act, 1975 was 4%. (e) Education Cess was 2% and Secondary & Higher Education Cess was 1%. (ii) How much CENVAT credit can Shanti Ltd. avail?
Q9(ii)Income Tax Act - LTC Exemption
0 marks easy
Compute the amount of LTC Exemption in the following cases with reference to the provision under Income Tax Act, 1961: (a) Mr. Suresh went on a holiday on 09/09/2015 with his wife and 3 children – one daughter born on 02/02/2009 and twin sons born on 05/05/2011. The total cost of travel was ₹ 80,000. The ticket cost for Mr. Suresh and his wife was ₹ 50,000 and for all three children was ₹ 30,000. The employer reimbursed total ticket cost ₹ 80,000. (b) In another case if a person has 3 children born on 02/02/2009 and the daughter was born on 05/05/2011, what shall be the exemption?
Q10(c)Central Excise Duty - Car Sale
3 marks medium
Maruti Ltd., a manufacturer of Cars sold a car to S.K. Enterprises Ltd. at a price of ₹ 4,20,000 excluding taxes and duties. It also charged the following additional amounts for providing extra benefits: (i) Assembly of Music System - ₹ 15,000 (ii) Design and Engineering charges - ₹ 25,000 (iii) Outward Freight and handling charges from factory to depot - ₹ 2,500 (iv) Special Accessories to beautify the car - ₹ 18,000 Determine the total amount of Central Excise Duty payable as per Central Excise Act, 1944, with explanation and reason.
Q11Tax deduction under Section 80JAA
3 marks medium
Compute the Deduction under Section 80JAA, if available to Mr. Satya for Assessment year 2016-17, if wages are paid to each worker @ ₹ 3,000 per month. His profit from the manufacture of goods for Assessment year 2016-17 is ₹ 5.50 lakhs.
Q12(2)Return of income filing obligation for senior citizens
0 marks easy
Mr. Ajai, a super senior citizen, has reported a Gross Total Income ₹ 5,60,000 and the deductions eligible under Chapter VI-A amounting to ₹ 70,000 for the Assessment year 2015-16. Is he liable to file his return of income u/s 139(1) for the Assessment year 2016-17? If so Why?
Q12(iii)Computation of taxable income
0 marks easy
Mr. Baran provides you the following information and requests you to determine the taxable income for the financial year 2015-16. Estimated tax liability for the financial year 2015-16: ₹ 65,000. Tax deducted at source for this year: ₹ 5,000