ANNOUNCEMENT NO.

AMENDMENTS
FOR

MAY -2013 EXAMINATION DAYS: 11-03- 2013 TO 16-03-2013

(THERE MAY BE FIVE OR SIX CLASSES)

TIMINGS: 7:00 A.M. TO 11:00 A.M.

VENUE:

METRO MALL KASHMERE GATE

FEE : `3000/(IT INCLUDES COST OF THE NEW BOOKS FOR MAY -2013 EXAMINATION)

THE STUDENTS WILLING TO TAKE AMENDMENT CLASSES SHOULD REGISTER AT OUR CENTRE.
Kashmere Gate Parsvnath Mall, Hall No. 14 (Near FAST TRAX /HDFC ATM/BEST FOODS/STAR BANQUET) Kasmere Gate Metro Station, Delhi

Laxmi Nagar 1/48, Lalita Park, Laxmi Nagar Metro Station (Opposite Metro Pillar No. 21), Vikas Marg, Laxmi Nagar, Delhi 110092 Pitam Pura Metro Station Office No. ED-1A, Near Aggarwal Sweets, Madhuban Chowk,

Pitam Pura Metro Station (Opposite Metro Pillar No. 370-371), Delhi 110034 ANNOUNCEMENT NO.2

FULL SYLLABUS TEST SHALL BE HELD

ON

07TH OCT 2012

1. METRO

MALL KASHMERE

GATE
7:00 A.M. TO 10:00 A.M.

2. METRO

MALL KASHMERE

GATE
5:00 P.M. TO 8:00 P.M.
THE STUDENTS WHO WANT TO APPEAR IN THE TEST SHOULD OBTAIN ENTRY SLIP FROM OUR OFFICE PLEASE BRING TWO PHOTOS

Kashmere Gate Parsvnath Mall, Hall No. 14 (Near FAST TRAX /HDFC ATM/BEST FOODS/STAR BANQUET) Kasmere Gate Metro Station, Delhi

Laxmi Nagar 1/48, Lalita Park, Laxmi Nagar Metro Station (Opposite Metro Pillar No. 21), Vikas Marg, Laxmi Nagar, Delhi 110092 Pitam Pura Metro Station Office No. ED-1A, Near Aggarwal Sweets, Madhuban Chowk, Pitam Pura Metro Station (Opposite Metro Pillar No. 370-371), Delhi 110034

9811429230 / 9212011367
ANNOUNCEMENT NO.3

SOLUTION
TO THE TEST HELD IN AGGARWAL CITY MALL ON 26TH AUGUST 2012

IPCC
Total No. of Question 7] Printed Pages 27 Time Allowed 3 Hours Maximum Marks 100 [Total No. of

Answers to questions are to be given only in English except in the case of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued. Question No.1 is compulsory Attempt any five questions from the remaining six questions. Wherever required, suitable assumptions may be made by the candidate. Working notes should form part of the answer.

1(a).

The following are details of purchases, sales, etc. effected by Kapil & Co., a registered dealer, for the year ended 31.03.2012: Particulars Amount (`) Purchase of raw materials within State, 1000 units, inclusive of VAT levy at 6% 7,42,000

Marks 4

Inter-State purchase of raw materials, inclusive of CST at 2% Import of raw materials, inclusive of basic customs duty plus education cess of `38,050 Capital goods purchased on 01.05.2011, inclusive of VAT levy at 10% (input credit to be spread over 2 financial years) Other manufacturing expenses Sale of taxable goods within State, inclusive of VAT levy at 4% Sale of goods within State, exempt from levy of VAT (Goods were manufactured from the Inter-State purchase of raw materials)

3,06,000 5,35,000 5,50,000 2,00,000 10,40,000 2,00,000

Closing stock as on 31.03.2012 was 100 units of raw materials purchased within the State Input credit is allowed only on raw material used in manufacture of the taxable goods. Compute the VAT liability of the dealer for the year ended 31.03.2012.

Solution 1(a): Computation of VAT liability of Kapil & Co. for the year ended 31.03.2012:Particulars Amount (`) Input tax credit: Intra-State purchases of 1000 42,000 Inter-State purchases of raw materials -Import of raw materials -Purchase of 25,000 Other manufacturing expenses -Total input 67,000 Capital units of raw materials

7,42,000 6 106

Goods

5,50,000 10 110 2

tax

credit

available

Output VAT payable: Sale of taxable goods within State [(10,40,000 x 4)/104] 40,000

Sale of exempted goods within State -VAT credit to be carried forward (40,000 67,000) (27000) Notes:1. VAT paid on purchase of capital goods is eligible for input tax credit. However, the same has to be spread over a period of two years. 2. VAT system allows credit in respect of purchases made during a period to be set-off against the taxable sales during that period, irrespective of when the supplies/inputs purchased are utilized/sold. Therefore, input tax credit in respect of closing stock of raw materials need not be reduced from total input tax credit available.

Note: The statement in the question, Input credit is allowed only on raw materials used in manufacture of the taxable goods, implies that the same is not allowable in respect of sale of goods within the State which are exempt from levy of VAT. 1(b). The broad break-up of tax and allied details of Mrs. Rinku, born Marks on 31st March, 1952 are as under: 4 ` Long-term capital gains on sale of house 2,00,000 Short-term capital gains on sale of shares in B Ltd. (STT paid) 30,000 Prize winning from a T.V. show 20,000 Business income 2,40,000 Net agricultural income 4,40,000 Deduction allowed under section 80C to 80U 60,000 Compute the tax payable by Mrs. Rinku for the assessment year 2012-13. Solution. Computation of Gross Total Income Business Income 2,40,000 Long term capital gain on sale of house 2,00,000 Short-term capital gains on sale of shares in B Ltd. (STT paid) 30,000 Casual Income (Prize winning from a T.V. show) 20,000 Gross Total Income 4,90,000

Less: Deduction u/s 80C to 80U 60,000 Total Income 4,30,000 Computation of tax payable by Mrs. Rinku for the A.Y. 2012-13 Particulars ` (i) Tax on long-term capital gain of `1,30,000 (2,00,000 70,000) @ 20% 26,000 (ii) Tax on short term capital gain of `30,000 @ 15% 4,500 (iii) Tax on winnings of `20,000 from a T.V. show @ 30% 6,000 (iv) Tax on balance income of `1,80,000 Nil Deficiency of `70,000 has been allowed from LTCG Amount of tax before EC 36,500 Add: Education cess @ 2% 730 Add: SHEC @ 1% 365 Tax payable by Mrs. Rinku 37,595 Rounded off u/s 288B 37,600 (i) Mrs. Rinku has completed 60 years of age on 31st March, 2012 i.e. she has completed the age of 60 years on the last day of the previous year. Therefore, she is entitled to the higher basic exemption limit of `2,50,000. (ii) Partial integration is not applicable because her non-agricultural income is not exceeding the exemption limit of `2,50,000. 1(c). A firm made the following payments of advance tax during the financial year 2011-12: Marks 5 ` Upto September 15, 2011 8,25,000 Upto December 15, 2011 16,64,000 Upto March 15, 2012 26,23,000 The income returned by the firm is `88,00,000 under the head profits and gains of business or

profession and `9,50,000 by way of long term capital gains on sale of a property effected on December 1, 2011. What is the interest payable by the assessee under section 234B and section 234C for assessment year 2012-13? Assume that the return of income was filed on 30.09.2012 i.e. the due date and tax was fully paid on self assessment. Solution1(c): Computation of Tax Liability ` Business income 88,00,000 Long term capital gains 9,50,000 Total Income 97,50,000 Tax on `88,00,000 @ 30% 26,40,000 Tax on `9,50,000 @ 20% 1,90,000 Add: Education cess @ 2% 56,600 Add: SHEC @ 1% 28,300 Tax Liability 29,14,900 (Tax liability excluding capital gains `88,00,000 x 30% + EC@ 3% 27,19,200) Interest under section 234C Since capital gains arises on 1st December 2011, installment for 15th September shall be checked without including tax on capital gain and shall be as given below: Amount payable as advance tax ` 8,15,760 Amount actually paid by way of advance tax ` 8,25,000 Shortfall ` Nil Interest ` Nil

Upto September 15, 2011 (27,19,200 x 30%)

Installments for 15th December and 15th March shall be including tax on capital gains and is as given below: Amount payable as advance tax ` 17,48,940 29,14,900 Amount actually paid by way of advance tax ` 16,64,000 26,23,000 Shortfall ` 84,940 (84,900 x 1% x 3 month) 2,91,900 (2,91,900 x 1% x 1month) Interest ` 2,547 2,919

Upto December 15, 2011 (29,14,900 x 60%) Upto March 15, 2012 (29,14,900 x 100%)

Interest Payable under section 234C

`5,466 Interest under section 234B 2,91,900 x 1% x 6 `17,514 1(d). Punjabi Banquets is engaged in providing mandap keeper services. For the month of January, 2012, it provided the following information: S. No. Particulars Amount ` (1) Banquet hall let out for marriage function: Marks 5

The gross amount charged for banquet hall including catering charges (Catering charges have been separately indicated in the invoice). 6,00,000 (2) Amount received for rooms let out for stay of guests attending the marriage. 40,000 (3) Amount collected for letting out the hall for All India Dance Competition. No food was supplied along with it. 5,00,000 (4) Mandap for shooting of marriage sequence of a Daily Soap Opera 2,40,000 Compute the amount of service tax, education cess and secondary and higher education cess payable by Punjabi Banquets for the month of January, 2012. Additional Informations: (1) Point of taxation in all the aforesaid case is January, 2012. (2) All the amounts stated above are exclusive of service tax. (3) Punjabi Banquet is not eligible for small service providers exemption under notification. No.6/2005 ST dated 01-03-2005 for the financial year 2011-12. Solution 1(d):

` Computation of Service Tax Payable by Punjabi Banquets Total Value Charged 6,00,000 Less: Abatement N.N. 01/2006 (40% of gross amount charged) 2,40,000 Taxable value 3,60,000 Amount received for rooms let out for stay of guests 40,000 Amount collected for letting out the hall for All India Dance Competition 5,00,000 (No food was supplied along with it.) Mandap for shooting of marriage sequence of a Daily Soap Opera Nil (Since shooting cannot be considered to be a function hence it is not taxable as Mandap Keeper Service) Value of Taxable Services 9,00,000 Service Tax @ 10.3% on `9,00,000 92,700 1(e). When does e-payment of service tax become mandatory? Marks 2

Solution 1(e): The assessee who has paid service tax of `10,00,000/- or above including the amount paid by utilization of CENVAT credit in the preceding financial year has to compulsorily deposit the service tax liable to be paid by him electronically, through internet banking. 2(a). (i) Brett Lee, an Australian cricket player visits India for 100 days in every financial year. Marks This has been his practice for the past 10 financial years. Find out his residential 4 status for the assessment year 2012-2013. (ii) State with reason, whether the statement is True or False: Mr. X, Karta of HUF, claims that the HUF is non-resident as the business of HUF is transacted from UK and all the policy decisions are taken there. Solution 2(a)(i): An individual is said to be resident in India in any previous year, if he complies with at least one of the following conditions:(a) He is in India in that year for a period amounting in all to 182 days or more, or (b) He is in India in that year for a period amounting in all to 60 days or more and also for 365 days or more during four years preceding the relevant previous year. Since, Brett Lee has complied with the second condition hence he is resident. Further more, An individual shall be considered to be not ordinarily resident in India in case his stay in India is 729 days or less during preceding seven years.

Since stay of Brett Lee during preceding seven years is 700 days. Hence, he is NOR. Solution 2(a)(ii): True, A HUF is considered to be a non-resident where the control and management of its affairs are situated wholly outside India. In the given case, since all the policy decisions of HUF are taken from UK, the HUF is a non-resident. 2(b). Mr. X is engaged in rendering taxable services and gross receipt during the year is `80,00,000 and it includes `3,00,000 for services rendered to Embassies, `2,00,000 for services rendered to RBI and `1,60,000 for services rendered to Government. He is carrying on the profession in his own building (market rent `4,00,000 p.a.) and expenses incurred / paid for the building are as given below: Municipal Tax Repairs Depreciation Ground rent Land revenue ` 40,000 ` 60,000 `1,00,000 ` 20,000 ` 10,000 Marks 4

Expenses incurred in rendering services are `20,00,000. He is eligible for SSP exemption. Interest paid under section 75 is `30,000. Service tax has been charged in addition to above amounts wherever it was applicable. Compute income tax liability for assessment year 2012-13 and service tax liability for financial year 2011-12. Solution 2(b): ` Computation of income under the head Business/Profession Income from rendering services 80,00,000.00 Less: Expenses 20,00,000.00 Less: Interest under section 75 30,000.00 Less: Municipal tax 40,000.00 Less: Repairs 60,000.00 Less: Depreciation 1,00,000.00 Less: Ground rent 20,000.00 Less: Land revenue 10,000.00 Income under the head Business/Profession

57,40,000.00 Computation of Tax Liability Tax on `57,40,000 at slab rate 15,74,000.00 Add: Education cess @ 2% 31,480.00 Add: SHEC @1% 15,740.00 Tax Liability 16,21,220.00 Computation of Service Tax Liability Gross Receipts 80,00,000.00 Less: SSP exemption 10,00,000.00 Less: Services rendered to Embassies 3,00,000.00 Taxable services 67,00,000.00 Service Tax @ 10.3% 6,90,100.00 2(c). Mr. X is a Registered in Central Excise, Central Sales Tax and Delhi VAT and he has purchased raw material for `12,00,000 in Delhi and paid excise duty @ 10% plus education cess and secondary and higher education cess @ 3% and Delhi VAT @ 4%. (i) 1/6th of raw material is stock transferred to some other state. (ii) 1/6th of raw material is used in manufacturing of final product which is exempt from VAT and processing charges and profit is `1,00,000. (iii) 1/6th of raw material is used in manufacturing of final product which is exempt from excise duty but VAT is payable and processing charges and profit is `1,00,000. (iv) 1/6th of raw material is used in manufacturing of final product which is exported from India. (v) 1/6th of raw material is used in manufacturing of final product which is sold in some other state and CST @ 2% and processing charges and profit is `1,00,000. (vi) 1/6th of raw material is used in manufacturing of final product which is sold in the same state. Processing charges and profit is `1,00,000. Output excise duty rate is 10% plus EC / output Delhi VAT @ 12.5%. Compute Output Excise Duty / VAT / Tax Credit / Net Excise duty /VAT. Solution 2(c): Marks 4

` Raw material 12,00,000 Excise duty @ 10% 1,20,000 EC @ 2% 2,400 SHEC@ 1% 1,200 Total 13,23,600 Delhi VAT @ 4% 52,944 13,76,544 (i) Since 1/6th of the stock has been transferred to some other state, VAT credit allowed for such stock transfer shall be 2% (4% - 2%). Tax paid (52,944 x 1/6) 8,824 VAT credit (4% - 2%) 4,412 (In case of stock transfer VAT credit is allowed after retaining 2%) (ii) Raw material 2,00,000 VAT (`52,944 x 1/6) 8,824 Processing charges 1,00,000 Assessable value 3,08,824 Excise duty @ 10% 30,882 EC @ 2% 618 SHEC@ 1% 309 Total 3,40,633 VAT Nil (Since output VAT is exempt, hence VAT credit for input VAT is not allowed and it will be added in the cost) (iii) Raw material 2,00,000 Excise duty @ 10% 20,000

EC @ 2% 400 SHEC@ 1% 200 Processing charges 1,00,000 Total 3,20,600 Delhi VAT @ 12.5% 40,075 3,60,675 (Since output excise duty is exempt, Cenvat credit for input excise duty is not allowed and it will be added in the cost) (iv) No tax is payable in case of export but Tax credit will be allowed. (v) Raw material 2,00,000 Processing charges 1,00,000 Assessable value 3,00,000 Excise duty @ 10% 30,000 EC @ 2% 600 SHEC@ 1% 300 Total 3,30,900 Central sales tax @ 2% 6618 3 , 3 7 , 5 1 8 (vi) Raw material 2,00,000 Processing charges 1,00,000 Assessable value 3,00,000

Excise duty @ 10% 30,000 EC @ 2% 600 SHEC @ 1% 300 Total 3,30,900 Delhi VAT @ 12.5% 41,363 3,72,263 Particulars OUTPUT TAX 1/6th raw material (Stock transfer) 1/6th Final Product (Exempt from VAT) 30,882 618 309 1/6th Final Product (Exempt from excise duty) 1/6th Final product Exported 1/6th Final product sold in some other 30,000 600 300 State 1/6th Final product sold in same State 30,000 600 300 Total 90,882 1,818 909 Less: INPUT TAX CREDIT 1/6th raw material (Stock transfer) 20,000 400 200 1/6th Final Product (Exempt from VAT) 20,000 400 200 1/6th Final Product (Exempt from excise duty) 1/6th Final product Exported 20,000 400 200 th 1/6 Final product sold in some other 20,000 400 200 State 1/6th Final product sold in same State 20,000 400 200 Total 1,00,000 2,000 1,000 Tax payable VAT / CENVAT Credit Balance 9,118 182 91 Cenvat credit for excise duty and service tax shall be refundable only in case of exports, otherwise its carry forward is allowed. 2(d). (i) Is e-filing of service tax return permitted? (ii) In case of import of services, is a recipient of such services in India liable to pay service tax? (iii) Who is liable to pay service tax in relation to services provided by a goods transport agency? Solution 2(d): (i) Excise Duty ` EC @ 2% ` SHEC @ 1% ` DVAT ` 40,075 41,363 81,438 4,412 8,824 8,824 8,824 8,824 39,708 41,730 CST `

6,61

6,61

6,61

Marks 1+1+2

With effect from 01.10.2011, e-filing of service tax returns has been made mandatory for all the assesses (Notification No. 43/2011 dated: 25.08.2011). The assessee can e-file the return through software ACES i.e. AUTOMATION OF CENTRAL EXCISE AND SERVICE TAX. (ii) Clause (iii) of rule 2(1)(d) of the Service Tax Rules, 1994 provides that in relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India, the person liable to pay service tax is the recipient of such service. Thus, in case of import of services, recipient of such services in India shall be liable to pay service tax. (iii) In relation to taxable service provided by a goods transport agency, where the consignor or consignee of goods is(a) any factory registered under or governed by the Factories Act, 1948, (b) any company formed or registered under the Companies Act, 1956, (c) any corporation established by or under any law, (d) any society registered under Societies Registration Act, 1860 or under any law corresponding to that Act in force in any part of India, (e) any co-operative society established by or under any law, (f) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 or the rules made thereunder, or (g) any body corporate established, or a partnership firm registered, by or under any law. the person liable for paying service tax is any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage. 3(a). Mr. Vaibhav owns five houses at Cochin. Compute the gross annual value of each house from the information given below : House-I House-II House-III House-IV House V Municipal value 1,20,000 2,40,000 1,10,000 90,000 75,000 Fair rent 1,50,000 2,40,000 1,14,000 84,000 80,000 Standard rent Marks 4

1,08,000 N.A. 1,44,000 N.A. 78,000 Actual rent received/ receivable 1,80,000 2,10,000 1,20,000 1,08,000 72,000

Solution 3(a): House I ` Computation of Gross Annual Value (a) Fair Rent 1,50,000 (b) Municipal Valuation 1,20,000 (c) Higher of (a) or (b) 1,50,000 (d) Standard 1,08,000 (e) Expected Rent {Lower 1,08,000 (f) Rent 1,80,000 (g) Higher of (e) or (f) shall be GAV 1,80,000 House II ` Computation of Gross Annual Value (a) Fair Rent 2,40,000 (b) Municipal Valuation 2,40,000 (c) Higher of (a) or (b) 2,40,000 (d) Standard N.A (e) Expected Rent {Lower 2,40,000 (f) Rent 2,10,000 (g) Higher of (e) or (f) shall be GAV 2,40,000 House III

Rent of (c) or (d)}

Received/Receivable

Rent of (c) or (d)}

Received/Receivable

` Computation of Gross Annual Value (a) Fair Rent 1,14,000 (b) Municipal Valuation 1,10,000 (c) Higher of (a) or (b) 1,14,000 (d) Standard 1,44,000 (e) Expected Rent {Lower 1,14,000 (f) Rent 1,20,000 (g) Higher of (e) or (f) shall be GAV 1,20,000 House IV ` Computation of Gross Annual Value (a) Fair Rent 84,000 (b) Municipal Valuation 90,000 (c) Higher of (a) or (b) 90,000 (d) Standard N.A (e) Expected Rent {Lower 90,000 (f) Rent 1,08,000 (g) Higher of (e) or (f) shall be GAV 1,08,000 House V ` Computation of Gross Annual Value (a) Fair Rent 80,000 (b) Municipal Valuation 75,000 (c) Higher of (a) or (b) 80,000 (d) Standard 78,000 (e) Expected Rent {Lower 78,000 (f) Rent 72,000 (g) Higher of (e) or (f) shall be GAV 78,000 3(b).

Rent of (c) or (d)}

Received/Receivable

Rent of (c) or (d)}

Received/Receivable

Rent of (c) or (d)}

Received/Receivable

State the liability of service tax in respect of the following services: (i) Services provided for personal use or use by the family members of a foreign diplomatic agent in a foreign diplomatic mission.

Marks 3

(ii) A company located in the State of Jammu & Kashmir rendered service in Delhi. Is the service provided by the company liable for service tax? (iii) Service rendered to a friend free of cost. Solution 3(b): Answer (i): Exemption to services provided for personal use or for use of Family Members of Diplomatic Agents or Career Consular Officers posted in Foreign Diplomatic Mission / Consular Post in India as per Notification No. 34/2007 dated 23.05.2007 Answer (ii): Yes, when the company located in the State of Jammu & Kashmir had rendered services outside the State, the service tax would be attracted as the location where service is provided is relevant. Answer (iii): Service tax is not payable on free service. Service tax is payable only when there is consideration. No service tax is payable when value of service is 'zero' as the charging sectionsection 66 provides that service tax is chargeable on the value of taxable service. 3(c). Mr. Janak bought 200 listed shares on 19.04.2010 @ `2,000 per share. He gifted these shares to his wife Mrs. Janki on 21.03.2011. On 01.04.2011, bonus shares were allotted in the ratio of 1:1. All these shares were sold by Mrs. Janki as under: Date of sale Manner of sale No. of shares Net sales value (`) 10.04.2011 Private sale, to her friend Mrs. Hema (Market value on this date was `2,10,000) 100 original shares 1,70,000 21.05.2011 Sold in recognized stock exchange, STT paid 100 original shares 2,20,000 21.07.2011 Private sale to an outsider All bonus shares 2,50,000 Marks 5

Briefly state the income-tax consequences in respect of the sale of the shares by Mrs. Janki, showing clearly the person in whose hands the same is chargeable, the quantum and the head of income in respect of the above transactions. Detailed computation of total income is NOT required. Net sales value represents the amount credited after all taxes, levies, brokerage, etc., and the same may be adopted for computing the capital gains.

Solution 3(c): Where an asset has been transferred by an individual to his spouse otherwise than for adequate consideration, the income arising from the sale of the said asset by the spouse will be clubbed in the hands of the individual. Where there is any accretion to the asset transferred, income arising to the transferee from such accretion will not be clubbed. Hence, the profit from sale of bonus shares allotted to Mrs. Janki will be chargeable to tax in the hands of Mrs. Janki. Therefore, the capital gains arising from the sale of the original shares has to be included in the hands of Mr. Janak, and the capital gains arising from the sale of bonus shares would be taxable in the hands of Mrs. Janki. Income/loss to be clubbed in the hands of Mr. Janak (i) 100 Original shares sold on 10.04.2011 Sale consideration Less: Cost of acquisition of 100 shares (` 2,000 x 100) Short term capital loss to be included in the hands of Mr. Janak 100 Original shares sold on 21.05.2011 100 shares sold on 21.05.2011 in a recognized stock exchange, STT paid. Long-term capital gains on sale of such shares is exempt under section 10(38)

1,70,000.00 2,00,000.00 (30,000.00)

(ii)

Nil

Income taxable in the hands of Mrs. Janki on sale of 200 bonus shares Bonus shares Sale consideration Less: Cost of acquisition of bonus shares Short-term capital gains Taxability in the hands of Mrs. Hema under the head Income from other sources Mrs. Hema has received shares from her friend, Mrs. Janki, for inadequate consideration. Even though shares fall within the definition of property under section 56, the provisions of section 56 would not be attracted in the hands of Mrs. Hema, since the difference between the fair market value of shares and actual sale consideration does not exceed `50,000. 3(d). Test the veracity of the following assertions with reference to the statutory provisions relating to value added tax. Do not assign any reason for them. (a) Input credit under VAT is not available in respect of Central Sales Tax paid on

` 2,50,000 Nil 2,50,000

Marks 4

purchases. (b) VAT is leviable at the last stage of sale. (c) Input credit is available in respect of import duty paid on goods imported from a country outside India. (d) Input credit is available only if the purchaser has obtained proper tax invoice. (e) No declaration form is prescribed under VAT system. (f) Taxpayers Identification Number is a 11 digit alpha numeric number. (g) Set off of input tax credit on capital goods is available only to manufactures and not to traders. (h) White paper on State level VAT provides a framework for drafting various State VAT legislations. Solution 3(d): (h) True (i) False (j) False (k) True (l) True (m) False (n) False (o) True 4(a). Mr. X is a Dealer Registered in Delhi Value Added Tax Act, 2004 and also under Central Sales Tax Act, 1956 and he has submitted the informations as given below: (i) Purchased Goods A from Delhi for `2,00,000 and paid VAT @ 4% and sold the goods in Delhi at a profit of 50% on purchase price and charged VAT @ 4%. (ii) Purchased goods B from U.P. for `4,00,000 and paid central sales tax @ 2% and sold goods in Delhi at a profit of 50% on purchase price and charged VAT @ 12.5%. (iii) Purchased goods C from Delhi for `8,00,000 and paid VAT @ 12.5% and sold the goods at a profit of 50% on purchase price to a registered dealer in Orissa and charged Central Sales Tax @ 2% (iv) Purchased goods D for `10,00,000 in Delhi and paid VAT @ 12.5% and sold the goods at a profit of 50% on purchase price to an unregistered dealer in Punjab and charged Central Sales Tax @ 12.5%. (v) Purchased goods E from Madhya Pradesh for `6,00,000 and paid Central Sales Tax @ 1% and sold goods at a profit of 50% on purchase price in Maharashtra and charged central sales tax @ 1%. (vi) Purchased goods F from Delhi `14,00,000 and paid VAT @ 1% and the goods were sold Marks 8

at a profit of 50% on purchase price to an unregistered dealer in Maharashtra and charged central sales tax @ 1%. (vii) Purchased goods G for `12,00,000 in Delhi and paid VAT @ 12.5% and goods were stock transferred to some other state. (viii) Purchased goods H for `16,00,000 in Delhi and paid VAT @ 4% and goods were exported at a profit of 50% on purchase price and no tax was charged (because as per section 6 Central Sales Tax Act, 1956, CST can not be charged in case of export sale.) (ix) Purchased goods I for `18,00,000 in Delhi and paid VAT @ 12.5% and sold the goods at a profit of 50% on purchase price to a manufacturer in SEZ and no VAT was charged. Show the tax treatment for VAT,CST and also compute his income tax liability for the assessment year 2012-13. Solution 4(a): ` (i) Purchased Goods A from Delhi 2,00,000 Add: VAT @ 4% 8,000 Purchase Price 2,08,000 Cost 2,00,000 Add: Profit {2,08,000 8,000(as VAT credit is available)} x 50% 1,00,000 Sale Price before VAT 3,00,000 Input tax credit 8,000 Goods sold in Delhi 3,00,000 Add: VAT @ 4% 12,000 Sale Price 3,12,000 (ii) Purchased goods B from U.P. 4,00,000 Add: Central sales tax @ 2% 8,000 Purchase Price 4,08,000 Add: Profit (4,08,000 x 50%) 2,04,000 Sale Price before VAT

6,12,000 Input tax credit Nil Goods sold in Delhi 6,12,000 Add: VAT @ 12.5% 76,500 Sale Price 6,88,500 (iii) Purchased goods C from Delhi 8,00,000 Add: VAT @ 12.5% 1,00,000 Purchase Price 9,00,000 Cost 8,00,000 Add: Profit {9,00,000 1,00,000(as VAT credit is available)} x 50% 4,00,000 Sale Price before CST 12,00,000 Input tax credit 1,00,000 Goods sold in Orissa 12,00,000 Add: Central sales tax @ 2% 24,000 Sale Price 12,24,000 (iv) Purchased goods D from Delhi 10,00,000 Add: VAT @ 12.5% 1,25,000 Purchase Price 11,25,000 Cost 10,00,000 Add: Profit {11,25,000 1,25,000(as VAT credit is available)} x 50% 5,00,000 Sale Price before CST 15,00,000 Input tax credit 1,25,000 Goods sold in Punjab to unregistered dealer 15,00,000 Add: Central sales tax @ 12.5%

1,87,500 Sale Price 16,87,500 (v) Purchased goods E from Madhya Pradesh 6,00,000 Add: Central sales tax @ 1% 6,000 Purchase Price 6,06,000 Add: Profit (6,06,000 x 50%) 3,03,000 Sale Price 9,09,000 Input tax credit Nil Goods sold in Maharashtra 9,09,000 Add: Central sales tax @ 1% 9,090 Sale Price 9,18,090 (vi) Purchased goods F from Delhi 14,00,000 Add: VAT @ 1% 14,000 Purchase Price 14,14,000 Cost 14,00,000 Add: Profit {14,14,000-14,000(as VAT credit is available)} x 50% 7,00,000 Sale Price 21,00,000 Input tax credit 14,000 Goods sold in Maharashtra to unregistered dealer 21,00,000 Add: Central sales tax @ 1% 21,000 Sale Price 21,21,000 (vii) Purchased goods G from Delhi 12,00,000 Add: VAT @ 12.5%

1,50,000 Purchase Price 13,50,000 Goods Stock transferred 12,00,000 VAT credit allowed in stock transfer (12,00,000 x 10.5%) 1,26,000 (in case of stock transfer, VAT credit shall be allowed after retaining 2%) (viii) Purchased goods H from Delhi 16,00,000 Add: VAT @ 4% 64,000 Purchase Price 16,64,000 Cost 16,00,000 Add: Profit {16,64,000 64,000(as VAT credit is available)} x 50% 8,00,000 Sale Price 24,00,000 Input tax credit 64,000 Goods exported 24,00,000 (ix) Purchased goods I from Delhi 18,00,000 Add: VAT @ 12.5% 2,25,000 Purchase Price 20,25,000 Cost 18,00,000 Add: Profit {20,25,000-2,25,000(as VAT credit is available)} x 50% 9,00,000 Sale Price 27,00,000 Input tax credit 2,25,000 Goods sold to manufacturer in SEZ 27,00,000 VAT A/C Particulars OUTPUT TAX Goods A Goods B Goods C ` VAT 12,000 76,500 --` CST ----24,000

Goods D Goods E Goods F Goods G (Stock transfer) Goods H (Export) Goods I (Sale to SEZ) LESS: INPUT TAX CREDIT Goods A Goods B Goods C Goods D Goods E Goods F Goods G Goods H Goods I 8,000 Not allowed 1,00,000 1,25,000 Not allowed 14,000 1,26,000 64,000 2,25,000 6,62,000

------Not applicable Nil Nil 88,500

1,87,500 9,090 21,000 ------2,41,590

After adjusting output VAT of `88,500 and CST of `2,41,590, there will be unutilised VAT credit of `3,31,910 and it can be set off from other output tax or it can be carried forward or refund can be claimed but procedure differs from State to State. At the year end it should be shown on the assets side of the balance sheet under the head CURRENT ASSETS, LOAN AND ADVANCES. Computation of Income Tax Liability Particulars Purchases Goods A Goods B Goods C Goods D Goods E Goods F Goods H Goods I Net profit Income under the head Business/Profession 39,07,000.00 Gross Total Income 39,07,000.00 Less: Deduction u/s 80C to 80U Nil Total Income 39,07,000.00 Tax on `39,07,000 at slab rate 10,24,100.00 Add: Education cess @ 2% 20,482.00 Add: SHEC @ 1% Amount ` 2,00,000 4,08,000 8,00,000 10,00,000 6,06,000 14,00,000 16,00,000 18,00,000 39,07,000 1,17,21,000 Particulars Sales Goods A Goods B Goods C Goods D Goods E Goods F Goods H Goods I

Amount ` 3,00,000 6,12,000 12,00,000 15,00,000 9,09,000 21,00,000 24,00,000 27,00,000

1,17,21,000

10,241.00 Tax Liability 10,54,823.00 Rounded off u/s 288B 10,54,820.00 Income shall be computed exclusive of VAT & CST because any VAT & CST collected shall be paid to the Government and it will not be considered to be income. Similarly VAT paid by the dealer is collected from the customer hence it will not be considered to be expense. Further, the stock transfer of goods G is having a neutral effect and thus ignored for calculation of business/profession income. 4(b). Mr. Rakesh and Mr. Anish are brothers and they earned the following incomes during the financial year 2011-12. Mr. Rakesh settled in U.K. in the year 1975 and Mr. Anish settled in Surat. Compute the total income for the Assessment Year 2012-13. Sr. No. Particulars Mr. Rakesh Mr. Anish 1. Interest on U.K. development bonds, 50% of interest received in India 25,000 20,000 2. Dividend from British Company received in London 8,000 10,000 3. Profit from a business in Mumbai, but managed directly from London 10,000 12,000 4. Profit on sale of shares of an Indian company received in India 50,000 80,000 5. Income from a business in Delhi 20,000 20,000 Marks 5

6. Fees for technical services rendered in India, but received in London 1,00,000 7. Interest on SB deposit in SBI, Bangalore 5,000 15,000 8. Agricultural income from a land situated in Rajasthan 25,000 25,000 9. Income under the head House Property at Bangalore 50,400 33,600 Solution 4(b): Computation of total income of Mr. Rakesh and Mr. Anish for the A.Y. 2012-13 Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. Particulars Interest on U.K. Development Bonds Dividend from British Company received in London Profit from a business in Mumbai but managed directly from London Profit on sale of shares of an Indian company received in India Income from a business in Delhi Fees for technical services rendered in India but received in London Interest on SB Deposit in SBI Bangalore Agricultural income from a land in Rajasthan [(Exempt u/s.10(1)] Income under the head House property at Bangalore Gross Total income Total Income Mr. Rakesh Non-Resident 12,500 10,000 50,000 20,000 1,00,000 5,000 50,400 2,47,900 2,47,900

Mr. Anish ROR 20,000

10,000

12,000

80,000

20,000

15,000

33,600

1,90,600 1,90,600

4(c).

State the due dates for filing of service tax returns. Will the delayed filing of service tax return result in payment of any late fee? If so, how much?

Marks 3

Solution 4(c): The service tax return (in Form ST-3) should be filed on half yearly basis by the 25 th of the month following the particular half-year. The due dates on this basis are as under: Half year 1 April to 30th September 1st October to 31st March
st

Due date 25th October 25th April

In case the due date of filing of return falls on a public holiday, the assessee can file the return on the immediately succeeding working day. Yes, late fee will be levied for delay in furnishing of the service tax return. The prescribed late fee is given hereunder: Particulars Period of delay 15 days from the date prescribed for submission of the return Beyond 15 days but not later than 30 days from the date prescribed for submission of the return. Beyond 30 days from the date prescribed for submission of the return Late fee ` 500 1,000 An amount of ` 1,000 plus ` 100 for every day from the 31st day till the date of furnishing the said return Marks 3

(a) (b) (c)

However, the total late fee for delayed submission should not exceed ` 20,000. 5(a). Mr. X has submitted information given below. i) ii) iii) iv) v) Income from owning and maintaining of race horse ` 2,00,000. Income from owning and maintaining of race camels ` 1,00,000. He had winning of ` 1,60,000 from horse race on 01.12.2011 and winning from camel race `1,80,000 on 07.12.2011. He purchased lottery tickets of `10,000 on 01.02.2012 and had winning of `2,00,000 on 12.02.2012. He has received Royalty of book of literary nature @ 50% of print price of ` 600 and total copies sold are 2,000 Compute tax liability for the A.Y 2012-13. Solution 5(a): Computation of Total Income for the A.Y 2012-13 `

Income under head Other Source Income from owning and maintaining race horse 2,00,000 Income from Royalty 6,00,000 Income from winning horse race (casual income) 1,60,000 Income from winning camel race (casual income) 1,80,000 Income from lottery income (casual income) 2,00,000 Income under head Other Sources 13,40,000 Income under head Business/Profession Income from owning and maintaining race camel 1,00,000 Gross Total Income 14,40,000 Less: Deduction u/s 80QQB (WN 1) 1,80,000 Total Income 12,60,000 Computation of Tax Liability Tax on ` 7,20,000 at slab rate 76,000 Tax on casual income i.e. ` 5,40,000 @ 30% 1,62,000 Tax before education cess 2,38,000 Add: Education cess @ 3% 7,140 Tax Liability 2,45,140 Working Note: 1. Maximum deduction allowed u/s 80QQB 15% of print price i.e. ` 600 x 15% x 2,000= `1,80,000. 5(b). R. Ltd of Mumbai made a total purchases of input and capital goods of `60,00,000 during the month of February ,2012. The following further information is available. (i) (ii) (iii) Goods worth `15,00,000 were purchased from Assam on which C.S.T 2% was paid. The purchases made in February, 2012 include goods purchased from unregistered dealers amounting to `18,50,000. It purchased capital goods (not eligible for input credit) worth `6,50,000 and those eligible for input credit for `9,00,000. Marks 5

(iv)

Sales made in Mumbai during the month of February, 2012 is `10,00,000 on which VAT at 12.5% is payable.

Assuming that all purchases given are exclusive of tax and VAT 4% is paid on them calculate: (a) the amount of purchases eligible for input credit. (b) the amount of input credit available for the month of February, 2012. (c) the VAT payable for the month of February, 2012. The input VAT credit on eligible capital goods is available in 36 equal monthly instalments. Solution 5(b): ` (a) Computation of Amount of Eligible Purchases for Input Tax Credit Total Purchases 60,00,000 Less: Ineligible Purchases Purchase From Assam 15,00,000 Purchase From Unregistered Dealer 18,50,000 Capital goods not eligible 6,50,000 40,00,000 Eligible Purchases for Input Tax Credit 20,00,000 (b) Computation of Input Tax Credit for the month of February 2012 Capital Goods ( 9,00,000 x 4%/36) 1,000 Inputs (11,00,000 x 4%) 44,000 Input Tax Credit 45,000 (c) Computation of VAT Payable for the month of February 2012 Output Tax ( 10,00,000 x 12.5%) 1,25,000 Less: Input Tax Credit 45,000 VAT 80,000 Note: 1. Total purchases are `60,00,000 but details are given only for `49,00,000, hence remaining `11,00,000 are presumed to be raw material eligible for tax credit. 5(c). (i) What records should be maintained under VAT system by a registered dealer? Marks 3+2 Payable

(ii) Lee traders a registered dealer having stock of goods cost `30,000 purchased from outside the State, wishes to opt for the Composition Scheme. Advise the dealer whether it is possible? State the conditions to be satisfied by a dealer before opting for composition scheme. Solution 5(c)(i): The following records should be maintained under VAT system: 1. Purchase records, showing details of purchases on which tax has been paid, purchases made without payment of tax, purchases made from an exempted unit (Military Canteen) and purchases made from outside State. 2. Sales records, showing separately sales made at different tax rates, zero-rated taxable sales and tax-free sales. 3. VAT account - A monthly account specifying total output tax, total input tax and net tax payable or the excess tax credit due for carry forward. 4. Details of input tax calculations where the dealer is making both taxable and tax free sales. 5. Stock records showing stock receipts and deliveries and manufacturing records. 6. Stock records showing separately the particulars of goods stored in cold storage, warehouse, godown or any other place taken on hire. 7. Order records and delivery challan, wherever applicable. 8. Annual accounts including trading, profit and loss accounts and the balance sheet. 9. Bank records, including statements, cheque book counter foils and pay-in-slips. 10. Cash book, daybook and ledger. Solution 5(c)(ii): No it is not possible for dealer to opt for composition scheme because If any dealer is procuring goods from outside the State or is selling or supplying goods to any place outside the State at any time during the year. There are the following conditions to be satisfied by a dealer before opting for composition scheme: Composition Scheme is not allowed in the following cases: (i) If any dealer is procuring goods from outside the State or is selling or supplying goods to any place outside the State at any time during the year. (ii) If he is registered under Central Sales Tax Act. 5(d). Write a note on Rule 7 of Point of Taxation Rules 2011 Marks 3

Solution 5(d):

Service tax to be paid on actual receipt basis in certain cases Rule 7 As per rule 7 of point of taxation in the following cases, service tax shall be paid on actual receipt basis. 1. Individuals or proprietary firms or partnership firms providing taxable services referred below: (i) Consulting Engineer (ii) Practising Chartered Accountant (iii) Scientist or a Technocrat (iv) Legal Consultancy Services (v) Practising Company Secretary (vi) Practising Cost Accountant (vii) Interior Decorator (viii) Architect 2. In case of Reverse Charge, but payment should be made within a period of 6 months of the date of invoice otherwise point of taxation shall be determined in the normal manner. 6(a). Check the taxability of the following gifts received by Mrs. Rashmi during the previous year 2011-12 and compute the taxable income from gifts for Assessment Year 2012-13: (i) On the occasion of her marriage on 14.08.11, she has received `90,000 as gift out of which `70,000 are from relatives and balance from friends. (ii) On 12.09.2011, she has received gift of `18,000 from cousin of her mother. (iii) A cell phone of `21,000 is gifted by her employer on 15.08.2011. (iv) She gets a gift of `25,000 from the elder brother of her husband's grandfather on 25.10.2011. (v) She has received a gift of `2,000 from her friend on 14.04.2011. Solution 6(a): Computation of taxable income of Mrs. Rashmi from gifts for A.Y.2012-13 Particulars Taxable amount Reason for taxability or ` otherwise of each gift (p) Relatives and friends Nil Gifts received on the occasion of marriage are not taxable. (q) Cousin of Mrs. Rashmis mother mother is is taxable. (r) Elder brother of husbands grandfather grandfather is taxable. 25,000 Brother of husbands not a relative. Hence, the gift is 18,000 Cousin of Mrs. Rashmis not a relative. Hence, the gift Marks 4

(s) Friend taxable. Aggregate value of gifts

2,000 45,000

Gift from friend is

Since the aggregate value of gifts received by Mrs. Rashmi during the previous year 2011-12 does not exceed `50,000, the same is not chargeable to tax under section 56 of the Income-Tax Act, 1961. Gift received from the employer in kind upto `5,000 is exempt from income tax but excess over it is taxable hence in this case taxable amount of gift shall be `16,000 (21,000 5,000) 6(b). (i) Explain the role of chartered Accountants in proper compliance of VAT. (Any 4 points). (ii) Briefly explain the benefits of the system of cross-checking under VAT as per White Paper. Marks 2+2

Solution 6(b)(i): Under the VAT system, trust has been reposed on tax payers, as there will be no regular assessment of all VAT returns, but only a few VAT returns will be taken up for scrutiny assessment. In other cases, the return filed by the trader will be accepted. It will not be also seen whether proper records have been maintained by the trader. As a consequence, a check on compliance becomes essential. Chartered Accountants can ensure tax compliance by:(i) helping the client in systematic record keeping; (ii) helping the client in interpretation of the provisions of VAT law, and (iii) performing audit of VAT accounts. (iv) reporting the under-assessment, if any, made by the dealer requiring additional payment or (v) reporting any excess payment of tax warranting refund to the tax payers. Solution 6(b)(ii): In the VAT system more emphasis has been laid on self-assessment. Hence, a system of crosschecking is essential. Dealers may be asked to submit the list of sales or purchases above a certain monetary value or to give the dealer-wise list from whom or to whom the goods have been purchased/sold for values exceeding a prescribed monetary ceiling. A cross-checking computerized system is being worked out on the basis of coordination between the tax authorities of the State Government and the authorities of Central Excise and Income-tax to compare constantly the tax returns and set-off documents of VAT system of the States and those of Central Excise and Income-tax. This comprehensive cross-checking system will help reduce tax evasion and also lead to significant growth of tax revenue. At the same time, by protecting the interests of tax-complying dealers against the unfair practices of tax-evaders, the system will also bring in more equal competition in the sphere of trade and industry. 6(c). Test the veracity of the following assertions with reference to the statutory provisions relating to service tax. Do not assign any reason for them. (a) Services provided by consulting engineers in computer hardware engineering and Marks 4

computer software engineering are includible in their taxable services. (b) Services provided to any person by a mandap keeper for the use of the precincts of a religious place as a mandap are exempt from service tax. (c) Service provided by public funded research institutions like CSIR, IIT under scientific or technical consultancy service is exempt from service tax. (d) Service tax shall be leviable on fee collected by public authority while performing statutory functions. (e) Service tax is administered by Central Board of Direct Taxes (CBDT). (f) Small scale service provider who is claiming exemption of `10 lakh shall have to apply for registration where the gross value of taxable services exceeds `9 lakhs. (g) The amount of service tax shall be rounded off in the multiple of ten. (h) Service tax for the month of March or quarter ending March should be deposited by 5th April Solution 6(c): (t) True (u) True (v) False (w) False (x) False (y) True (z) False (aa)False 6(d). ABC Ltd., a domestic company has total income of `500,00,000 and company has distributed dividend of `65,00,000 and one of the shareholder Mr. X has received dividend of `5,00,000. Compute tax liability and additional tax liability of the company and also that of the shareholder. (ii) Presume that ABC Ltd. is a foreign company. Solution 6(d)(i): Tax liability and additional tax liability of the company shall be as given below: ` Profit before tax 500,00,000.00 Income tax on `500,00,000 @ 30 % 150,00,000.00 Surcharge @ 5% 7,50,000.00 Education cess @ 2% 3,15,000.00 SHEC @ 1,57,500.00 Marks 4

1%

Income tax liability 162,22,500.00 Dividend 65,00,000.00 Additional income tax @ 15% of `65 lakhs 9,75,000.00 Add: Surcharge @ 5% 48,750.00 Add: Education cess @ 2% 20,475.00 Add: SHEC @ 1% 10,237.50 Additional income tax 10,54,462.50 Rounded off u/s 288B 10,54,460.00 Tax liability of the shareholder shall be nil. Solution 6(d)(ii): Tax liability and additional tax liability of the company shall be as given below: ` Profit before tax 500,00,000.00 Income tax on `500,00,000 @ 40% 200,00,000.00 Surcharge @ 2% 4,00,000.00 Education cess @ 2% 4,08,000.00 SHEC @ 1% 2,04,000.00 Income tax liability 210,12,000.00 Additional income tax of the foreign company is nil. Tax liability of the shareholder shall be as given below: Dividend from foreign company 5,00,000.00 Tax on `5,00,000 at slab rate 32,000.00 Add: Education cess @ 2% 640.00 Add: SHEC @ 1% 320.00 Tax Liability 32,960.00 7(a). Explain the following definition as per Income tax Act: (i). Assessee Marks 2 x 2 =4

(ii). Assessment Year and Previous Year 7(b). From the following particulars of Income furnished by Mr. Anirudh pertaining to the year ended 31.03.2012, compute the total income for the assessment year 2012-13, if he is: (i) Resident and ordinary resident; (ii) Resident but not ordinary resident; (iii) Non-resident: Particulars (a) Profit on sale of shares in Indian Company received in German (b) Dividend from a Japanese Company received in Japan (c) income from business in London deposited in a bank in London, later on remitted to India through approved banking channels (d) Dividend from RP Ltd., an Indian Company (e) Agricultural income from land in Gujarat 7(c). 75,000 6,000 25,000 Marks 3 Marks 4 Amount (`) 15,000 10,000 Marks 5

Mr. X has agricultural income `10,00,000 and income from business `12,00,000 and casual income `5,00,000 and he has completed the age of 80 years on 31.03.2012. Compute his tax liability Assessment Year 2012-13. Nathan Aviation Ltd. is running two industrial undertakings, one in a SEZ (Unit S) and another in a normal area (Unit N). The brief summarized details for the year ended 31.03.2012 are as under: (` in lacs) S N Domestic turnover 10 100 Export turnover 120 Nil Gross profit 20 10 Less: Expenses and depreciation 7 6 Profits derived from the unit 13 4 The brought forward business loss pertaining to Unit N is `2 lacs. Briefly compute the business income of the assessee.

7(d).

Solution 7(a): (i). Assessee Section 2(7) Assessee means a person by whom any tax or any other sum of money is payable under Income tax Act, and includes (a) every person in respect of whom any proceeding under Income tax Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person.

(b) every person who is deemed to be an assessee under any provision of Income tax Act. (c) every person who is deemed to be an assessee in default under any provision of Income tax Act. (ii). Assessment Year Section 2(9) Assessment year means the period of twelve months commencing on the 1 st day of April every year. Previous Year Section 2(34) Previous year means the previous year as defined in section 3. Previous year means the financial year immediately preceding the assessment year. Solution 7(b): Computation of total income of Mr. Anirudh for the A.Y. 2012-13 Particulars 1) Profit on sale of shares of an Indian company, received in Germany 2) Dividend from a Japanese company, received in Japan. 3) Income from business in London deposited in a bank in London 4) Dividend from RP Ltd., an Indian Company [See Note (i) below] 5) Agricultural income from land in Gujarat [See Note (ii) below] TOTAL INCOME Notes (i) Dividend from Indian company is exempt under section 10(34) (ii) Agricultural income is exempt under section 10(1). Solution 7(c): Computation of Total Income ` Income under the head Business/Profession 12,00,000 Income under the head Other Sources (Casual income) 5,00,000 Gross Total Income 17,00,000 Less: Deduction u/s 80C to 80U Nil Total Income 17,00,000 Agricultural income 10,00,000 Resident & ordinarily resident 15,000 10,000 75,000 1,00,000 Resident but not ordinarily resident 15,000 15,000

NonResiden

15,000 -

15,000

Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 22,00,000/- at slab rates 4,80,000 Step 2. Tax on (`5,00,000 + agricultural income) at slab rates 2,70,000 Step 3. Deduct Tax at Step 2 from Tax at Step 1 2,10,000 Tax on casual income `5,00,000 @ 30% 1,50,000 Tax before education cess 3,60,000 Add: Education cess @ 2% 7,200 Add: SHEC @ 1% 3,600 Tax Liability 3,70,800 Solution 7(d): Computation of business income of Nathan Aviation Ltd. Particulars Total profit dervied from Units S & N (`13 lacs + `4 lacs) Less: Exemption under section 10AA [See Working Note below] Less: Brought forward business loss Working Note Computation of exemption under section 10AA in respect of Unit S located in a SEZ

` in lacs

17

12 5 2 3

` in lacs Domestic turnover of Unit S Export turnover of Unit S Total turnover of Unit S Profit derived from Unit S Exemption under section 10AA Profit of Unit S x Export turnover of Unit S = 13 120 Total turnover of Unit S 130

10 120

130

13

12

Note 100% of the profit derived from export of articles or things or from services is eligible for deduction under section 10AA, assuming that F.Y. 2011-12 falls within the first five year period commencing from the year of manufacture or production of articles or things or provision of services by the Unit in SEZ.