Paper-1

Corporate Tax Planning and Management

Section - A

Answer any five questions from the following each carries 5 marks: 5X5=25

1. Why VAT is not found successful in India? Explain the need for VAT.

2. ABC Ltd is engaged in providing taxable services. Calculate the service tax payable by
the assessee for the month of February 2014 from the information given below:

Particulars Amount (Rs)

Supply of farm labour for agricultural purposes 2,00,000
Cost Of free services rendered 40,000
Advance received from clients in February 2014 for which no service 6,00,000
has been rendered till date
Invoice issued for the services rendered in February 2014 against 8,00,000
which no amount is received till date`
Amount received for the service rendered in October 2013 (invoice 5,00,000
for the same was issued in October 2013)

The above amounts are exclusive of service tax. ABC Ltd is not eligible for small service
provider Exemption in the finance year 2013-14.

3. A manufacturer of machinery sold a special machine. Following details are provided in

relation to amounts charged:

Amount (Rs)

Price of machinery excluding taxes and duties 6,00,000

Installation charges
(Machinery is fixed to earth in customers premises) 21,000
Packing charges 9,000
Extra charges for designing the machine 20,000
Outward freight beyond place of removal 12,000

Other information furnished is:

a) Cash discount @ 2% on price of machinery was allowed as the customer paid the bill
amount before dispatch.
b) State VAT rate 5%
c) Central excise duty rate 12% and education cesses as applicable.
 Calculate excise duty payable on the special machine.

4. Explain the various modes of assessment under service tax,

5. From the following calculate taxable turnover and payable of a dealer under CST ACT.

Amount (Rs)
a. Gross turnover 15,00,000
b. Exports to USA 6,00,000
c. Freight (shown separately) 80,000
d. Cash discounts 20,000
e. Installation charges (shown separately) 50,000
f. Goods return within six months 20,000
g. CST is 2% include in GTO
h. Trade discounts 1,00,000

6. Mr. Tarun .An Indian citizen, returned to India on 12.3.2013, after travelling to loss
Angeles, USA for 7 Months. He brought with him the following: (i) Used shirts and
cloth-30,000 (ii) New cloth and fancy jewellery -40,000 (iii) 2kgs of gold bearing
manufactures or refiners serial number and weight expressed in metric units, valued at
3,000 per gms. The tariff value notified by CBE & C or calculating duty on gold is US $
530 per 10gms. The exchange rate notified by CBEC is USD = 54.25 (iv) one laptop
computer worth -50,000. What is the customs duty payable by him?

7. Differentiate between tax planning & Tax Evasion?

Section- B

Answer any three questions from the following each carries 10 marks: 3X10=30

8. What are the purposes of providing for exemptions? State the procedure for availing
exemption under excise laws.
9. The gross total income of Ramesh Ltd. Was computed as under for the previous year
2013-14:-
Paper mills income 2, 80,000
Mini cement plant profit 60,000
Profit of new industrial unit situated at Meghalaya

(Backward industrial state) this unit was established in 2007 85,000

Export business profit 2, 45,000

Profit from poultry farming, commenced in October, 2012 1, 00,000
Long-term capital gain 70,000
Income from royalty:
 a) Income from Prabhakar Ltd.(Indian company) for supply
Of technical know-how 80,000
b) Stoneson Ltd. (foreign company) for supply of technical
Know-how 90,000
Profit of hotel established in backward area in June-1994 70,000
Profit of small-scale industry established in rural area on 1 June 2002 50,000
Loss of steel plant 90,000
Dividend from non domestic company 75,000

Compute companys total income and gross tax liability. Company donated by cheques
40,000 to P.Ms. National relief funds and 90,000 to M.P.Govt for family planning.

10. A imports by air from USA a gear cutting machine complete with accessories and spares. Its
HSN classification is 84.6140 and values US $ F.O.B 20,000- other relevant data/ information:-

a) At the request of imports ,US $ 1,000 have been incurred for improving the design ,etc.
of machine, but is not reflected in the invoice ,but will be paid by the party ,

b) Fright US $ 6,000.

c) Goods are insured but premium is not shown/ available in invoice

d) Commission to be paid local agent in India 4,500.

e) Freight and insurance from airport to factory is 4,500.

f) Exchange rate is US $ 1= 45.

g) Duties of customs: Basics-10% Education cess on duty - 2% SAH cess at 1% special

CVD under section 3(5) of customs tariff Act is applicable.

Compute: 1) Assessable value.

2) Customs Duty Payable

11. a) From the following information determine whether the assessee should purchase an assets
or take on lease:

1) Cost of assets 1, 00,000

2) Rate of depreciation 15 %

3) Rate of interest 10%

4) Repayment of loan by the assessee 20,000 P.A

5) Rate of tax 30.9%

6) Residual Value- 20,000 after five years.

7) Profit of the assessee 1, 00,000 before depreciation, interest and tax/before lease rent and
tax.

8) Lease rent 30,000 P.A

b) Company A is proposed to be merged with company B the following are the particulars of the
former company:

1) Unabsorbed depreciation 50 Lakhs

2) Unabsorbed business loss 30 Lakhs

3) Unexpired period for deduction under section 80IB 3 years

Consider which of the benefits can be availed by company BI:

a. The merger is not amalgamation u/s 2(1B):

b. The merger is amalgamation u/s 2(1B) but not satisfy condition of sec .72 A;
c. The merger satisfies condition of sec.2 (1B) as well as sec.72A.

Section- C

CASE STUDY (Compulsory) 15X1=15

12. The Profit & Loss A/c of X Ltd, a domestic company, for the year ending 31st March, 2014 is
given below:

Profit & Loss Account

Exp. related to goods 10,00,000 Sales of goods manufactured by the 16,00,000

manufactured Company
Exp. related to sale of other 8,25,000 Sales of other goods 14,50,000
goods
Proposed Dividend 8,00,000 Long-term Capital gain 5,60,000
Provision for un ascertained 40,000 Amount withdrawn from general 30,000
liabilities reserve
General reserve 60,000
Income tax paid 35,000
Wealth tax paid 40,000
Net profit 8,40,000
36,40,000 36,46,000
Other relevant information is as follow:
 1) An outstanding liability related to sales tax for 2012-13 paid during 2013-14 40,000
which were not charged to above P. & L. Account.

2) Brought forward loss as per books of accounts is 60,000 while the brought forward
depreciation as per books of accounts is 80,000

3) Brought forwards unabsorbed depreciation is 4, 60,000

4) Brought forwards loss under the head capital gain 3, 50,000

Compute the tax liability of X Ltd for the assessment year 2014-15.

*****

Paper -2

Corporate Tax Planning and Management

Section - A

Answer any five questions from the following each carries 5 marks: 5X5=25
1. Raj & Co. furnish the following expenditure incurred by them and want you to find the
assessable value for the purpose of paying excise duty on captive consumption.
Determine the cost of production In terms of rule 8 of the Central Excise Valuation
(Determination of Price of Excisable Goods) Rules, 2000 and as per CAS- 4 (cost
accounting standard) (i) Direct material cost per unit inclusive of excise duty at 10% - Rs
1,320 (ii) Direct wages Rs 250 (iii) other direct expenses Rs 100 (iv) Indirect material
Rs 75 (v) Factory Overheads Rs 200 (vi) Administrative overhead (25% relating to
production capacity) Rs 100 (vii) Selling & distribution expenses Rs 150 (viii) Quality
Control Rs 25 (ix) Sale of scrap realized Rs 20 (x) Actual profit margin 15%.

2. Write Short note on:-

a) Tax Planning through Modvat
b) Tax planning through exemption notification

3. From the following details, compute the turnover & central sales-tax payable by a dealer:

Particulars Amount (Rs.)

Total inter-State sales (including GST) 25,00,000

a) Trade commission for which credit notes have to be issued 70,000

separately

b) Installation charges charged separately 20,000

c) Excise duty 3,00,000

d) Freight, insurance & transport charges recovered separately in 80,000

the invoice

e) Goods returned by dealers within six months of sale, but after 40,000
the end of the financial year

Buyers have issued C forms for all purchases. Sales tax rate within State is 5%.

4. MH Ltd. Is engaged in providing taxable services. Calculate the service tax payable by the
assessee for the month of March 2014 from the information given below:

Particulars Amount (Rs.)

1) Total invoices issued during March 2014 for services 20,00,000

rendered during March 2014 (No amount is received as on
 31.03.2014)

2) Invoices issued during March 2014 includes services 2,00,000

rendered in Jammu & Kashmir

3) Advance received for services to be rendered in the month of 9,00,000

June 2014 for which invoices are not issued as on 31.03.2014

4) Services rendered to Associated Enterprises for which no 75,000

invoice is issued but accounting entry is made in the books of
accounts in March 2014

The above accounts are inclusive of service tax & cess @ 12.36% wherever applicable.
MH Ltd. is not eligible for small Service Providers exemption in financial year 2013-14.

5. What are the methods adopted for computation of VAT? Explain.

6. X Company Ltd., an Indian Company, furnished the following particulars of its income
for the previous year ended 31st March, 2014. Compute its total income for the
assessment year 2014-15:

Rs.

a) Business income 4,20,000

b) Dividend from: A Domestic company 20,000

A Foreign Company 15,000

c) Capital Gains : Short term 25,000

Long term 70,000

Additional information:

A) General expenses charged include Rs 5,000 revenue expenditure & Rs 20,000 capital
expenditure for family planning programme amongst employees.

B) Donation to B. R. Ambedkar University, Agra Rs 30,000 by cheque; Ved Mata

Gayatri Trust, Shanti Kunj, Haridwar (an approved trust u/s 80G) Rs 70,000 by
cheque and Rajiv Gandhi Foundation Rs 5,000 in cash were debited to P. & L. A/c.

7. An Indian resident goes to Nepal on tour. He purchases color TV of Rs 18,000, a laptop

computer of Rs 79,000 & hair dryer of Rs 2,000 in a duty free shop in Nepal & brings the
same to India. What is the duty payable (a) If he returns on 3 rd day by air (b) If he returns
 on 3rd day by land route (c) If he returns on 11th day by air (d) If he returns on 11th day by
land route.

Section- B

Answer any three questions from the following each carries 10 marks: 3X10=30

8. From the following information determine whether the assessee (X ltd.) should purchase
the machine by installment or hire it.

a) Cost five installments of Rs 2, 00,000 each payable in the beginning of each year.

b) Hire charges Rs 1, 50,000 p.a. for eight years payable in the beginning of each year.

c) Residual value Rs 50,000 after eighth year.

d) Rate of depreciation 15%.

e) Cost of capital 10%.

f) Rate of tax 30%.

g) Present value @ 10%.

Years 1 2 3 4 5 6 7 8

PV 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467

Factor
@ 10%

h) Loss on sale of machine set-off against short term capital gains.

9. Briefly explain the implication management decision in the following areas.

a) Product make buy or lease.

b) Repair or replace

c) Capital structure own or barrowed capital

 10. The following is the P & L A/c of the Deccan Sugar Mills Ltd., an Indian Company in
which the public are substantially interested, for the year ended 31st march, 2014:

Particulars Rs. Particulars Rs.

To manufacturing exps 8,85,295 By sales A/c (Net) 17,61,300

To Excise Duty 1,07,500 By Rent from Agricultural 950

Lands

To salaries & wages 1,20,495 By Revenue from Fisheries 3,700

To Establishment charges 50,150 By Sale proceeds of Cane 6,07,055

To General charges 13,750 By Transfer Fees 300

To Directors Fees 1,750 By Profit on sale of motor 1,230

To Interest on debentures 25,000

To MDs Remuneration 41,000

To Depreciation 69,000

To Cultivation Exps 4,57,500

To Taxation Reserve 25,000

To Net Profit 5,78,095

23,74,535 23,74,535

Compute the total income of the company & net tax liability for the Assessment Year 2014-15
after taking the following information into consideration:

a) Sales included cost of cane Rs 6, 12,000 on account of cane produced & consumed in the
factory, the average market price of such cane being Rs 6, 75,000.

b) The Motor sold during the year Rs 3,230 was purchased in the past for Rs 17,000, the
depreciation claimed in respect thereof in past assessment being Rs 15,000.

c) General charges include (a) Rs 750 legal expenses incurred in defending a suit regarding
the Companies title to certain agricultural lands, and (b) Rs 9,000 paid to a Director for a
trip to Hawaii to study modern methods of confectionery manufacture.

d) Depreciation in respect of all assets has been agreed at Rs 50,000.

e) The company has paid advance tax Rs 1,20,000

11. (a) How and when can a manufacturer enjoy exemption from payment of excise duty?

(b) State the circumstances under which refund of excise duty can be claimed under the
excise Act.

Section C

CASE STUDY (Compulsory) 15X1=15

1. An importer has imported a machine from UK at FOB cost of 10000 UK Pounds. Other
details are as follows:

a) Freight from UK to Indian port was 700 pounds.

b) Insurance was paid to insurer in India: Rs 6000

c) Design and development charges of 2000 UK pounds were paid to a consultancy firm
in UK.

d) The importer also spent an amount of Rs 50000 in India for development work
connected with the machinery.

e) Rs 10000 were spent in transporting the machinery from Indian port to the factory of
importer.

f) Rate of exchange as announced by RBI was: Rs 88.82 = One UK pound.

g) Rate of exchange as announced by CBE & C (Board) by notification under section

14(3)(a)(i): Rs 88.70 = One UK Pound.

h) Rate at which bank recovered the amount from importer: Rs 88.35 = One UK Pound.

i) Foreign exporters have an Agent in India. Commission is payable to the agent in

Indian Rs @ 5% of FOB price.

Customs duty payable was 10%. If similar goods were produced in India, excise duty
payable as per tariff is 14%. There is an excise exemption notification which exempts the
duty as is in excess of 10%. Education cess is as applicable. Special CVD is payable at
applicable rates. Find customs duty payable. How much CENVAT can be availed by
importer, if he is a manufacturer?
 ******

TAX PLANNNING:-

1) Write Short note on:-

a)Tax Planning through Modvat
b)Tax planning through exemption notification

2) How do you Classify the tax planning under central excises Act, Customs act and CST?
and differentiate among them.

EXCISE DUTY:-

1) What are the methods adopted for computation of VAT?

2) How and when can a manufacturer enjoy exemption from payment of excise duty ?
3) State the circumstances under which refund of excise duty can be claimed under the
excise Act.
 4) State the penalty levied under the central excisess act 1944.

Service Tax:-

1) Explain the services in respect of which service tax is payable.

*****************

1) Discuss the sailent features of Company ACT 2013?

3) Briefly Explain the implication management decision in the following areas.

a) Product make buy or lease .

b) Repair or replace

c) Capital structure own or barrowed capital

4) What are the salient features of company Act 2013? Explain the various kinds of companies
under Company Act 2013?

G) From the following information determine whether the assessee should purchase an assets or
take on lease:

1) Cost of assets 1,00,000

2) Rate of depreciation 15 %

3)Rate of interest 10%

4) Repayment of loan by the assessee 20,000 P.A

5)Rate of tax 30,9%

6) Residual Value- 20,000 after five years.

7) Profit of the assessee 1, 00,000 before depreciation, interest and tax/before lease rent and
tax.

8) Lease rent 30,000 P.A

H) Company A is proposed to be merged with company B.the following are the particulars of
the former company:

1) unabsorbed depreciation 50 Lakhs

2) Unabsorbed business loss 30 Lakhs

3) Unexpired period for deduction under section 80IB 3
years

Consider which of the benefits can be availed by company BI:

a. The merger is not amalgamation u/s 2(1B):

b. The merger is amalgamation u/s 2(1B) but not satisfy condition of sec .72 A;
c. The merger satisfies condition of sec.2 (1B) as well as sec.72A.

i) Examine the nature of sale in the following cases under the CST Act,1956:

(i) A dealer of Delhi supplies goods to buyer of Calcutta from its factory in Haryana.

(ii) A dealer of Mumbai supplies goods to buyer in Mumbai from its factory in Madras.

(iii) A dealer of Madras goes to Delhi, makes purchases of goods there and comes back to
Madras with the goods.
(iv) An Indian dealer after receipt of order from foreign countries purchases goods in
Indian for the purposes of export