Tax Answers

PAPER – 4 : TAXATION
SECTION A: INCOME TAX LAW

Part - II
Question No.1 is compulsory.
Candidates are also required to answer any two questions from the remaining three
questions.
Working notes should form part of the respective answers.
All questions relate to Assessment Year 2023-24, unless otherwise stated.
Question 1
Mr. Bhasin, a resident individual, aged 52 years, provides management consultancy services to
various corporate and non-corporate clients. His Income & Expenditure A/c for the year ended
31st March, 2023 is as under:
Expenditure Amount (`) Income Amount (`)
To Employees’ 15,00,000 By Gross Receipts from 60,60,000
Remuneration Profession (last year
` 75,00,000) (No
TDS was deducted
from any of the
receipts)
To Office & Administrative 5,00,000 By Interest on Savings 25,000
Expenses Bank Account
To Rates and Taxes 15,000 By Winnings from 99,500
Lottery (Net of cost of
lottery tickets of
` 500)
To Interest Expenses 80,000 By Rent Received 2,40,000
To Office Rent 2,40,000
To Insurance Premium 72,000
To Professional Fees 2,00,000
To Depreciation on 1,20,000
Computers
The Suggested Answers for Paper 4A: Income-tax Law are based on the provisions of Income-
tax Act as amended by the Finance Act, 2022 which are relevant for May, 2023 Examination.
The relevant assessment year is A.Y.2023-24.
© The Institute of Chartered Accountants of India

2 INTERMEDIATE EXAMINATION: MAY, 2023
To Excess of Income
over Expenditure 36,97,500
64,24,500 64,24,500
The following details relates to F.Y. 2022-23:
(i) Employees’ Remuneration includes a sum of ` 3,00,000 paid to his wife, Mrs. Beena who
is working as a manager in his office. She does not have any technical or professional
qualification or experience required for the job. The payment of salary was as per market
rates in comparison to similar work profile.
(ii) Mr. Bhasin owns a big house with 2 independent units. Unit - 1 (with 50% floor area) has
been let our for residential purposes at a monthly rent of ` 20,000 for the entire year.
Unit - 2 (with the balance 50% of the floor area) is used by Mr. Bhasin as his residence -
cum-office. Other particulars of the house are:
Municipal Valuation - ` 3,60,000 p.a.
Fair Rent - ` 4,20,000 p.a.
Standard Rent under Rent Control Act -` 4,00,000 p.a.
(iii) Rates and taxes include a sum of ` 10,000 paid as municipal taxes of the house.
(iv) Interest expenses represent interest on capital borrowed from a nationalised bank for the
construction of the house. The construction was completed in F.Y.2010-11. Neither the
loan nor the interest was paid till the due date of filing the return of income.
(v) Based on the actual rent received for Unit-1, Mr. Bhasin has debited ` 2,40,000 as notional
rent for Unit-2 which is used for his profession.
(vi) The expense on insurance premium of ` 72,000 represents lump-sum health insurance
premium paid by Mr. Bhasin for 3 years effective from 1 stJuly, 2022 to 30 thJune, 2025 for
himself, his spouse and two dependent children. The said insurance premium was paid
through account payee cheque.
(vii) The expenses on professional fees paid includes a sum of ` 1,00,000 paid to Mr. Raunak,
an Indian resident on which no tax was deducted at source.
(viii) There was only one block containing computers which came into existence only on
2nd April, 2022 when new laptops (for ` 1,60,000), printers and scanners (for ` 40,000)
were purchased. He charged depreciation @ 60% in the entire cost of ` 2,00,000 and
debited the amount to Income & Expenditure A/c.
(ix) Mr. Bhasin has also taken a loan of ` 5,00,000 from a nationalised bank for higher
education of his son. During F.Y.2022-23, he repaid principal of ` 75,000 along with
interest of ` 40,000. This amount is not reflected in Income and Expenditure Account.

PAPER – 4 : TAXATION 3
You are required to compute the total income under proper heads of income of Mr. Bhasin for
A.Y. 2023-24 under regular provisions of Income-tax Act 1961, assuming that he has not opted
to pay tax under section 115BAC. Also calculate the total tax payable by him. (14 Marks)
Answer
Computation of total income and tax payable by Mr. Bhasin for A.Y. 2023 -24
Particulars ` ` `
I Income from Salaries
Salary of Mrs. Beena [Remuneration paid by 3,00,000
Mr. Bhasin to his wife Mrs. Beena who is
employed as a manager in his office would be
included in his hands, since Mrs. Beena does
not have any technical or professional
qualification or experience required for the job]
Less: Standard deduction u/s 16(ia) 50,000 2,50,000
II Income from house property
Let out portion (Unit 1 – 50% area)
Gross Annual Value [Higher of expected rent of 2,40,000
` 2,00,000 and actual rent of ` 2,40,000
(` 20,000 x 12)]
[Expected rent is higher of municipal value of
` 1,80,000 (3,60,000 x 50%) and fair rent of
` 2,10,000 (` 4,20,000 x 50%), restricted to
standard rent of ` 2,00,000 (` 4,00,000 x 50%)]
Less: Municipal taxes paid for let out portion 5,000
(` 10,000 x 50%)
Net Annual Value (NAV) 2,35,000
Less: Deduction under section 24
(a) 30% of NAV 70,500
(b) Interest on capital borrowed for 40,000
construction of house relating to let out
portion (80,000 x 50%) (allowed on
accrual basis)
Income from let out portion 1,24,500
Self-occupied (Unit 2 – 25%)
[Since Unit 2 representing 50% of the floor area
is used for residence as well as business

purpose, it is assumed that it is equally used for

residence and business purpose]
Gross Annual Value Nil
Less: Municipal taxes [not allowed for self- Nil
occupied property]
Net Annual Value Nil
Less: Deduction under section 24(b)
Interest on loan for construction of house, 20,000
` 80,000 x 50% x 1/2 (allowable on accrual
basis)
Loss from self-occupied portion (20,000)
[Loss from self-occupied portion can be set off 1,04,500
against income from let out portion]
III Profits and gains from business and
profession
Excess of income over expenditure 36,97,500
Add: Expenses debited to Income &
Expenditure A/c but not allowable as
deduction
Remuneration paid to his wife Mrs. Beena [As -
per section 40A(2) remuneration paid to Mrs.
Beena is allowed, since it is as per market rates]
Municipal taxes attributable to let out and self- 7,500
occupied portions not allowable [` 10,000 x
75%]
Interest on capital borrowed for construction 60,000
of house attributable to let out and self-
occupied portion not allowable [` 80,000 x 75%]
Interest on capital borrowed from bank for 20,000
construction of house attributable to business
portion i.e., 25% of ` 80,000 [not allowable,
since it is not paid on or before due date of filing
return of income by virtue of section 43B]
Notional rent for Unit 2 used for business or 2,40,000
profession [not allowable under section 30, since
Mr. Bhasin himself is the owner of the property]
Insurance premium [Personal expenditure not 72,000
allowable]

Professional fees to Mr. Raunak without 30,000

deducting TDS [` 1,00,000 x 30%]
[Mr. Bhasin is required to deduct TDS on
professional fees payment to Mr. Raunak since
his gross receipts from profession exceeds ` 50
lakhs during the P.Y. 2021-22. 30% of the sum
paid to Mr. Raunak, resident without deducting
tax to be disallowed in P.Y. 2022-23]
Depreciation as per books 1,20,000 5,49,500
42,47,000
Less: Income credited to Income &
Expenditure A/c but not taxable as business
income
Interest on savings bank account [taxable under 25,000
the head “Income from other sources”]
Winnings from lottery [taxable under the head 99,500
“Income from other sources”]
Rent received [taxable under the head “Income
from house property”] 2,40,000 3,64,500
38,82,500
Less: Depreciation allowable [2,00,000 80,000
(` 1,60,000, being new laptops + ` 40,000,
being printers) x 40%, i.e., 64,000+16,000 as it
was put to use for more than 180 days in the
P.Y. 2022-23. Printers and scanners for
` 40,000 are eligible for higher depreciation of
40%]
38,02,500
IV Income from Other Sources
Interest on savings bank account 25,000
Winnings from Lottery [No expenditure or
allowance is allowed from lottery income] 1,00,0001
1,25,000
Gross Total Income 42,82,000
1 Assumed to be the gross amount (inclusive of TDS) in the absence of any information.

Less: Deduction under Chapter VI-A

Deduction under section 80D
Medical insurance premium [` 72,000 x 1/4, 18,000
being the previous years in which insurance
would be in force] [allowable for self, spouse and
dependent children]
Deduction under section 80E
Interest on loan taken from a nationalised bank 40,000
for higher education of son
Deduction under section 80TTA
Interest on saving bank account to the extent of 10,000 68,000
Total Income 42,14,000
Tax Payable
On lottery income [30% of ` 1,00,000] 30,000
On other income of ` 41,14,000
Upto ` 2,50,000 Nil
` 2,50,000 @5% [` 2,50,000 – ` 5,00,000] 12,500
` 5,00,000 @20% [` 5,00,000 – ` 10,00,000] 1,00,000
` 31,14,000 @30% [` 10,00,000 – ` 41,14,000] 9,34,200
10,46,700
10,76,700
Less: HEC@4% 43,068
Tax liability 11,19,768
Less: TDS on lottery winnings @30% u/s 194B 30,000
Tax payable 10,89,768
Tax payable (rounded off) 10,89,770
Question 2
(a) (i) Mr. Jai Chand (an Indian citizen) left India for employment in country X on 5 thJune,
2014. He regularly visited India and stayed for 60 days in every previous year since
then. However, in the financial year 2022-23, he did not come to India at all. He owns
a commercial building in Delhi which is let out. He has also set a retail store in India
which is controlled by his brother from India. He provides the following information to
you regarding his income for the financial year 2022-23:
Income from commercial building in Delhi - ` 12,00,000 (computed as per the
provisions of the Act).

Income from the retail store - ` 4,50,000 (computed as per the provisions of the Act)
Country X does not tax any individual on their income as there is no personal
income-tax regime there.
Determine the residential status of Mr. Jai Chand for the Assessment year 2023-24.
Will your answer change if he is a citizen of Country X? (3 Marks)
(ii) Mr. Prashant (aged 35 years) is an Australian citizen who is settled in Australia and
visits India for 125 days in every financial year since past 11 years. During the F.Y.
2022-23, he visited India for a total period of 200 days. The purpose of his visit was
to meet his family members who are settled in India and also for managing his family
members who are settled in India and also for managing his business in Sri Lanka
through his office in Chennai, India.
During the P.Y. 2022-23, he has the following incomes:
(A) Income from business in Australia controlled form Australia - ` 20,00,000
(B) Income from business in Sri Lanka controlled form Chennai - ` 16,00,000
(C) Short-term capital gains on sale of shares of an Indian company received in
Australia - ` 50,000. The shares were sold online from Australia.
(D) Income from agricultural land in Australia, received there and then brought to
India - ` 2,00,000
Find out the residential status of Mr. Prashant and compute his total income for
Assessment Year 2023-24. (4 Marks)
(b) Answer the following:
(i) Miss Tara, resident individual aged 32 years, is a social media influencer. She makes
videos reviewing various electronic items and posts those videos on social media. On
1st December 2022, XYZ Ltd., an Indian company manufacturer of electronic cars
gave her a brand new car having fair market value of ` 6 lakhs to promote on her
social media page. She used that car for 7 months for her personal purposes,
recorded a video reviewing the car and then returned the car to the company. You
are required to discuss the applicable provisions in the Income-tax Act regarding the
deduction of tax at source in respect of such transaction.
(ii) Ms. Aruna is a Chief Executive Officer of a multi-national company. She hires
Mr. Suresh for supply of her housing staff (like gardener, chefs and drivers etc.) and
makes the following payments to him:
` 25,00,000/- on 10th August, 2022 and ` 30,00,000 on 22 nd November, 2022.
Determine the amount of tax to be deducted/ collected at source, if any.

Would your answer be different, if Ms. Aruna is a business woman and her books are
not audited in immediately preceding financial year and payment to Mr. Suresh is for
business purposes.
(iii) By virtue of an agreement with Nationalized Bank, M/s ABC Pvt Ltd., a company
engaged in catering business received ` 60,000 p.m. towards supply of food, water,
snacks, etc. during office hours to the employees of the bank. Discuss the TDS
implication of this transaction/agreement. (7 Marks)
Answer
(a) (i) Determination of residential status of Mr. Jai Chand for A.Y. 2023-24
Since Mr. Jai Chand, an Indian citizen employed in Country X, did not come to India
at all during the P.Y. 2022-23, he would not be a resident for A.Y.2023-24 as per
section 6(1).
However, since he is an Indian citizen
- having total income (excluding income from foreign sources) of ` 16,50,000
[` 12,00,000, being income from commercial building in India + ` 4,50,000,
being Income from retail store in India], which exceeds the threshold of ` 15
lakhs during the previous year; and
- not liable to tax in Country X,
he would be deemed resident in India for the P.Y. 2022-23.
A deemed resident is always a resident but not ordinarily resident in India (RNOR).
Yes, in case Mr. Jai Chand is a citizen of Country X, he would be non-resident in India
for the P.Y. 2022-23, since the provisions of deemed resident are applicable only to
an Indian citizen.
(ii) Determination of Residential Status of Mr. Prashant 2
Mr. Prashant is an Australian citizen who comes on a visit to India for 125 days in
every financial year since the past 11 years. During the P.Y. 2022-23, he visited India
for 200 days. Since he stayed in India for 182 days or more during the P.Y. 2022-23,
he would be resident in India for the A.Y. 2023-24.
An individual is said to be “Resident and ordinarily resident [ROR]” in India in any
previous year, if he satisfies both the following conditions:
- He is a resident in at least 2 out of 10 previous years preceding the relevant
previous year; and
- His stay in India in the last 7 years preceding the relevant previous year is 730
days or more [Refer Note 1 below for alternate presentation]
2 In the absence of information, it is assumed that he is not a person of Indian Origin

First condition
Residential status for P.Y.2021-22 (A.Y.2022-23) – Resident, since he has stayed in
India for ≥ 60 days (125 days) in the said P.Y. and ≥ 365 days ( 500 days, being 125
days x 4) in the four immediately preceding PYs.
Residential status for P.Y.2020-21 (A.Y.2021-22) – Resident, since he has stayed in
India for ≥ 60 days (125 days) in the said P.Y. and ≥ 365 days ( 500 days, being 125
days x 4) in the four immediately preceding PYs.
Therefore, he satisfies the first condition of being resident in India in atleast 2 out of
10 previous years preceding the relevant P.Y. 3
Second condition
Stay in India in 7 immediately preceding PYs = 7 x 125 days = 875 days > 730 days
Since both the conditions are satisfied, he is Resident and Ordinarily Resident
(ROR).
In case of ROR, global income would be taxable in India. Accordingly, his total income
for A.Y. 2023-24 would as follows:
Computation of Total Income of Mr. Prashant for A.Y.2023-24
Particulars `
(i) Income from business in Australia 20,00,000
(ii) Income from business in Sri Lanka 16,00,000
(iii) Short-term capital gains on sale of shares of an Indian 50,000
company
(iv) Income from agricultural land in Australia [would not be
exempt, since it is not from an agricultural land in India] 2,00,000
Total income 38,50,000
Notes - (1) Alternative manner of determination of whether Mr. Prashant is ROR/
RNOR -
“An individual is said to be “Resident but not ordinarily resident [RNOR]” in India in
any previous year, if he satisfies any one of the following conditions:
- He is a non-resident in at least 9 out of 10 previous years preceding the
relevant previous year; or
- His stay in India in the last 7 years preceding the relevant previous year is 729
days or less.
3He is a resident in 8 out of 10 PYs immediately preceding P.Y.2022-23

Mr. Prashant does not satisfy either of the above conditions on account of being
resident in more than 1 year out of 10 years and stay in India for 875 days in the 7
years preceding the P.Y.2022-23. Hence, he is a Resident and Ordinarily Resident in
the P.Y.2022-23.
(2) In the absence of information relating to whether Mr. Prashant is a person of
Indian origin, the above solution has been worked out assuming that Mr. Prashant is
not a person of Indian origin.
However, alternate assumption that Mr. Prashant is a person of Indian origin is also
possible since the purpose of his visit was to meet his family members who are settled
in India. Accordingly, if it is assumed that he is a person of Indian origin, then, for
determining whether he is resident in P.Y.2020-21 and P.Y.2021-22, information
relating to his total income (excluding income from foreign sources) for the said P.Y.s
is required for ascertaining whether the condition of 120 days in the relevant P.Y. +
365 days in the 4 immediately preceding P.Ys would be attracted in his case. This
information is not given in the question. Accordingly, assumptions would have to be
made relating to the applicability of this condition.
It may be noted that the condition of 120 days in the P.Y. + 365 days in the four
immediately preceding PYs for a PIO whose total income (other than income from
foreign sources) exceed ` 15 lakhs for determination of residential status came into
effect only from A.Y.2021-22. Therefore, in the previous years prior to that, he would
be non-resident irrespective of his total income since the number of days of his stay
< 182 days each year.
In case if it is assumed that his total income (other than income from foreign sources)
for the P.Y.2020-21 and P.Y.2021-22 > ` 15 lakhs, he would be ROR since he would
be resident in 2 out of 10 years immediately preceding the current P.Y. and he stayed
for 730 days or more in 7 previous years immediately preceding current P.Y.. In such
case, his total income would be same as determined in the above solution.
In case if it assumed that he is a PIO whose total income (other than income from
foreign sources) for the P.Y.2020-21 and P.Y.2021-22 ≤ ` 15 lakhs, he would be
non-resident for P.Y.2020-21 and P.Y.2021-22, since his stay in India is for less than
182 days in those years. In such a case, for P.Y.2022-23, he would be RNOR, since
he would be non-resident in all the 10 years immediately preceding the current P.Y.
In such case, the computation of total income for A.Y.2023-24 would be as follows –
Computation of Total Income of Mr. Prashant for A.Y.2023-24
Particulars `
(i) Income from business in Australia controlled from Australia -
(not taxable in case of RNOR, since it accrues and arises
outside India)

(ii) Income from business in Sri Lanka (taxable since it is 16,00,000

controlled from India)
(iii) Short-term capital gains on sale of shares of an Indian 50,000
company (taxable, irrespective of residential status)
(iv) Income from agricultural land in Australia [would not be
taxable in case of RNOR since it accrues and arises outside
India] -
(b) (i) Under section 194R, the person who is responsible for providing to a resident, any
benefit or perquisite whether convertible into money or not, arising from business or
the exercise of a profession by such resident, has to first ensure deduction of
tax@10% of the value of such benefit or perquisite, if the same exceeds ` 20,000.
However, in case of benefit or perquisite being a product like car, mobile etc. if the
product is returned to the manufacturing company after using for the purpose of
rendering service, then it will not be treated as a benefit/perquisite for the purposes
of section 194R.
Accordingly, in the present case, since Miss Tara has returned the car to XYZ Ltd.,
TDS provisions under section 194R would not apply.
(ii) The provisions of section 194C would not apply in the hands of Ms. Aruna since the
amount paid to Mr. Suresh is for supply of her housing staff. Hence, it is used
exclusively for her personal purposes.
In this case, tax is required to be deducted at source from such amount under section
194M @5%, since the aggregate payment made to Mr. Suresh for the said contract
exceeds ` 50 lakhs during the P.Y.2022-23.
Accordingly, ` 2,75,000, being 5% of ` 55,00,000 [` 25,00,000 + ` 30,00,000], is
required to be deducted at source.
In case Ms. Aruna made payment to Mr. Suresh for business purposes and she is not
required to get her books of account audited [assuming her turnover from such
business does not exceed ` 1 crore in P.Y. 2021-22], she is not required to deduct
tax at source under section 194C. In such case also, she is required to deducted tax
at source of ` 2,75,000 under section 194M.
Note – In the question, it is mentioned that Ms. Aruna is a business woman and her
books are not audited in immediately preceding financial year. However, whether the
provisions of section 194C would be attracted are dependent on whether the turnover
of business carried on by her during the financial year immediately preceding the
financial year in which the sum credited or paid exceeds ` 1 crore. In the absence of
this information, it is possible that audit may not be required in her case due to the
following reasons-

- her turnover exceeds ` 1 crore but does not exceed ` 10 crores and receipts
and payments in cash does not exceed 5% of such receipts or payments,
respectively.
- her turnover exceeds ` 1 crore but does not exceed ` 2 crore and she is
declaring profits under the presumptive provisions of section 44AD.
Accordingly, following alternate answer is also possible based on the assumption that
turnover of Ms. Aruna’s business exceeds ` 1 crore.
Alternative answer - In case Ms. Aruna made payment to Mr. Suresh for business
purposes during the P.Y. 2021-22, she would be required to deduct tax at source
@1% under section 194C amounting to ` 55,000 (since payment is made to
Mr. Suresh, an individual) of ` 55,00,000.
(iii) According to section 194C, the definition of “work” include catering. In the present
case, nationalised bank is required to deduct tax source @2% on ` 7,20,000
[` 60,000 x 12] paid to ABC Pvt. Ltd. for providing catering services to the bank, since
amount of ` 60,000 paid every month exceeds the threshold of ` 30,000.
Therefore, nationalised bank is required to deduct tax at source of ` 1,200 per month
amounting to ` 14,400 for the year.
Question 3
(a) Mr. Bhagat, an individual aged 50 years, set up a unit in Special Economic Zone (SEZ) in
F.Y.2017-18 for the production of computers. The unit fulfils all the conditions of section
10AA of the Income-tax Act, 1961. During F.Y. 2021-22, he set up a hospital in a district
of Maharashtra with 110 beds for patients. It fulfils all the conditions of section 35AD.
Capital expenditure in respect of the said hospital amounted to ` 65 lakhs (comprising of
cost of land ` 15 lakhs and the balance was the cost of construction of building). The
hospital became operational with effect from 1 st April, 2022 and the expenditure of ` 65
lakhs was capitalized in the books of accounts on that date
Relevant details for F.Y. 2022-23 are as follows:
Particulars Amount
(` in lakhs)
Profit of unit located in SEZ 36
Export sales of SEZ unit 75
Domestic sales of SEZ unit 25
Profit form operation of hospital facility (before considering deduction 90
under Section 35AD)

Compute the income-tax (including AMT under section 115JC and AMT credit, if any, under
section 115JEE) payable by Mr. Bhagat for A.Y. 2023-24 under regular provisions of the
Income-tax Act i.e. ignoring the provisions of section 115BAC. Ignore marginal relief, if
any. (7 Marks)
(b) Mr. Rohan retired from M/s. QRST Ltd. a private sector company, on 31 st March, 2023 after
completing 28 years and 3 months of service. He received the following sums/gifts on his
retirement:
(i) Gratuity of ` 7,50,000. He was covered under the Payment of Gratuity Act, 1972.
(ii) Leave encashment of ` 3,25,000 for 210 days leave balance in his account. He was
credited with 30 days leave for each completed year of service.
(iii) Crockery set worth ` 4,500 from his employer at the farewell party which was
organised by the HR department a day before his retirement.
He drew a basic salary of ` 25,000 per month alongwith 50% of basic salary as dearness
allowance (not forming part of retirement benefits) for the period from 1 st April, 2022 to 31 st
March, 2023.
Further, during the year, his employer provided him a motor car of 1800 cc which was used
by him and his family solely for personal purposes. The cost of fuel and repairs were met
by Mr. Rohan himself. The car was purchased by the employer on 1 st April, 2021 at a cost
of ` 8,00,000. Salary of driver amounting to ` 10,000 per month was met by the employer
only. Upon retirement, he gave the car back to the employer.
You are required to compute the taxable salary of Mr. Rohan for A.Y.2023 -24 assuming
that he neither claims any relief under section 89 nor does he opt to pay tax under section
115BAC. (7 Marks)
Answer
(a) Computation of total income and tax payable of Mr. Bhagat for A.Y.2023 -24
(under the regular provisions of the Income-tax Act, 1961)
Particulars ` `
Profits and gains of business or profession
Profit from unit in SEZ 36,00,000
Profit from operation of hospital 90,00,000
Less: Deduction u/s 35AD 50,00,000
In this case, since the capital expenditure of ` 50
lakhs (i.e., ` 65 lakhs – ` 10 lakhs, being expenditure
on acquisition of land) has been incurred in the
F.Y.2021-22 and capitalized in the books of account
on 1.4.2022, being the date when the hospital

became operational, the said amount would be

eligible for deduction under section 35AD.
Business income from hospital chargeable to tax 40,00,000
Less: Deduction u/s 10AA 13,50,000
Export turnover of
SEZ unit
Profit of SEZ unit x -------------------------- x 50%
Total turnover of SEZ
unit
` 75,00,000
= ` 36,00,000 x --------------------- x 50%
` 1,00,00,000
= ` 27,00,000 x 50% = ` 13,50,000
Deduction would be 50% of eligible profits, since

P.Y.2022-23 is the 6 th year of operation
Computation of tax payable (under the regular provisions of the `
Act)
Tax on ` 62,50,000 [` 1,12,500 plus 30% of ` 52,50,000] 16,87,500
Add: Surcharge @10%, since total income exceeds ` 50 lakhs but
does not exceed ` 1 crore 1,68,750
18,56,250
Add: Health and Education cess@4% 74,250
Total tax payable 19,30,500
Computation of adjusted total income of Mr. Bhagat for levy of Alternate
Minimum Tax
`
Total Income (computed above as per regular provisions of 62,50,000
income tax)
Add: Deduction under section 10AA 13,50,000
76,00,000

Add: Deduction under section 35AD 50,00,000

Less: Depreciation under section 32
On building @10% of ` 50 lakhs 5,00,000 45,00,000
Adjusted Total Income 1,21,00,000
Alternate Minimum [email protected]% 22,38,500
Add: Surcharge@15% (since adjusted total income 3,35,775
> ` 1 crore but does not exceed ` 2 crores)
25,74,275
Add: Health and education cess@4% 1,02,971
26,77,246
Tax liability u/s 115JC (rounded off) 26,77,250
Since the regular income-tax payable is less than the
alternate minimum tax payable, the adjusted total
income shall be deemed to be the total income and
tax is leviable @18.5% thereof plus surcharge@15%
and cess@4%. Therefore, tax payable as per section
115JC is ` 26,77,250.
AMT Credit to be carried forward under section
115JEE
Tax liability under section 115JC 26,77,250
Less: Tax liability under the regular provisions of the 19,30,500
Income-tax Act, 1961
7,46,750
(b) Computation of taxable salary of Mr. Rohan for A.Y. 2023-24
Particulars `
Basic Salary ` 25,000 x 12 3,00,000
Dearness Allowance (50% of basic salary) 1,50,000
Gratuity [` 7,50,000 – ` 6,05,769] 1,44,231
Less: Exempt under section 10(10) - Least of the `
following:
(i) Notified limit 20,00,000
(ii) Actual gratuity received 7,50,000

(iii) 15/26 x last drawn salary x no. of 6,05,769

completed years of services or part in
excess of 6 months [15/26 x 37,500 4 x 28]
Leave encashment [` 3,25,000 – ` 1,75,000] 1,50,000
Less: Exempt under section 10(10AA) - Least of the
following:
(iv) Notified limit 3,00,000
(v) Actual leave salary received 3,25,000
(vi) 10 months x ` 25,000 2,50,000
(vii) Cash equivalent of leave to his credit 1,75,000
[` 25,000 x 210/30]
Crockery set [not a perquisite, since value of gift does -
not exceed ` 5,000]
Perquisite value of car [Driver’s salary met by employer 2,00,000
` 1,20,000 (i.e., ` 10,000 x 12) + ` 80,000 (10% of
` 8,00,000), being normal wear and tear on car]
Gross Salary 9,44,231
Less: Standard deduction u/s 16(ia) 50,000
Taxable Salary 8,94,231
Question 4
(a) Mr. Chaman who is 50 years old and his wife Mrs. Chaman who in 48 years old furnish the
following information (all the amount of incomes/gains/losses are computed as per the
provisions of Income-tax Act):
(i) Mr. Chaman's salary income - ` 11,00,000
(i) Mrs. Chaman's income from Kathak performances - ` 2,50,000. She is a professional
Kathak dancer and pursue dancing as her profession.
(iii) Mrs. Chaman earned long-term capital gains of ` 5,50,000 from sale of shares.
(iv) Mrs. Chaman gifted ` 2,00,000 to Mr. Chaman out of her Stridhan on 1.4.2023,
Mr. Chaman invested the entire amount in stock market but suffered a short -term
capital loss of ` 5,10,000
4 Since gratuity is received under the Payment of Gratuity Act, both basic salary and dearness allowance has
to be considered for computation of this limit, even though dearness allowance does not form part of retirement
benefits.

(v) Miss Naina, their minor daughter, earned ` 3,56,000 by performing in various quiz
competitions held online during the year 2022-23. She kept that amount in savings
bank account and earned interest of ` 15,000 during the year 2022-23.
(vi) Master Neelabh, their minor son earned ` 35,000 from fixed deposit which was made
out of the cash he received on his birthday from his friends and family. Neelabh
suffers from disability as mentioned under section 80U. The medical certificate shows
a disability of upto 75%.
Compute the total income in the hands of Mr. and Mrs. Chaman and their minor children
for the Assessment Year 2023-24. Ignore section 115BAC pertaining to alternative tax
regime. (6 Marks)
(b) Mr. Ray, a resident individual, aged 37 years gives the following information with respect
to various loans taken by him from scheduled banks for various purposes-
(i) A housing loan of ` 36,00,000/- taken on 15 th March, 2022 for the purchase of a house
to be used for self-residence at a cost of ` 47,00,000/-. The stamp duty value of the
house was ` 42,00,000/- at the time of purchase. Amount of re-payment of loan during
P.Y.2022-23 was:
(A) towards principal - ` 1,25,000/-
(B) towards interest - ` 3,65,000/-
This is the first and only residential house owned by Mr. Ray.
(ii) A vehicle loan of ` 16,00,000/- taken on 31 st October, 2021 for the purchase of electric
vehicle for personal use. Amount of re-payment of loan during P.Y.2022-23 was:
(A) towards principal - ` 75,000/-
(B) towards interest - ` 1,90,000/-
Besides these loans, he has also paid a sum of ` 15,000 to a political party as contribution.
The entire amount was paid in cash.
You are required to compute the amount of deduction(s) available to Mr. Ray under various
provisions of Income-tax Act for A.Y.2023-24 so that he gets the maximum benefits
assuming that he does not opt to pay tax under section 115BAC. (4 Marks)
(c) What is the time limit within which an updated return can be filed? Also enumerate the
circumstances in which updated return cannot be furnished.
OR
A person other than a company or a firm who is otherwise not required to furnish the return
of income, needs to furnish return of income provided they fulfil certain c onditions
prescribed. Enumerate. (4 Marks)

Answer
(a) Computation of total income of Mr. Chaman, Mrs. Chaman and their
minor children for the A.Y.2023-24
Particulars Mr. Mrs. Naina, Neelabh,
Chaman Chaman minor minor
daughter son
` ` ` `
Income under the head “Salaries”
Salaries (computed) 11,00,000
Profits and gains from business
or profession
Income from Kathak performances 2,50,000
Capital Gains
Long term capital gains from sale of 5,50,000
shares
Less: Set off of short-term capital 2,00,000
loss from long term capital gain
[Short term capital loss to the extent
of ` 2 lakhs would be included in the
income of Mrs. Chaman, since the
shares are purchased by
Mr. Chaman from the amount of ` 2
lakhs gifted by Mrs. Chaman out of
her Stridhan. Clubbing provisions
would be attracted even if it is a loss
and not income] [Refer Note 1 and
2 below]
The balance short-term capital loss
of ` 3,10,000 has to be carried
forward by Mr. Chaman, since it
cannot be set-off against salary
income.
3,50,000
Income [before considering 11,00,000 6,00,000
income of minor son and minor
daughter]
Income of Naina, minor daughter, 3,56,000
from performances in various quiz
competitions would not be included
in the hands of either parent, since

such income arises from her own 13,500

skills/talent.
However, interest of ` 15,000 on
saving bank account [after providing
for deduction of ` 1,500, being
exempt under section 10(32)] is to
be included in the hands of
Mr. Chaman, since his income is
higher than that of his wife
[` 15,000 -` 1,500]5
Income of Neelabh, minor son
suffering from disability u/s 80U,
from fixed deposits would not be
included in the income of parent but 35,000
would be taxable in his hands.
Gross Total Income 11,13,500 6,00,000 3,56,000 35,000
Less: Deductions under Chapter
VI-A
- Under section 80TTA 10,000
In respect of interest on saving
bank account to the extent of
- Under section 80U 35,000
Flat deduction of ` 75,000 to a
person with disability. However,
deduction would be restricted to
gross total income
Total Income 11,03,500 6,00,000 3,56,000 Nil
Note – (1) The question mentions that Mrs. Chaman gifted ` 2 lakh to Mr. Chaman out of
her Stridhan on 1.4.2023 and that Mr. Chaman invested the entire amount in stock market
but suffered a short-term capital loss of ` 5,10,000. It is not possible to invest ` 2 lakhs
and incur short-term capital loss of ` 5.10 lakhs. Accordingly, in the above solution, it has
been assumed that the remaining ` 3,10,000 is invested by Mr. Chaman and hence the
same would be a short-term capital loss to be carried forward by him.
Due to the use of the words “invested the entire amount in the stock market” in the question,
it is possible to take a view that the entire capital loss of ` 5,10,000 has to be set off against
long-term capital gains of ` 5,50,000 in the hands of Mrs. Chaman. In which case the total
income of Mrs. Chaman would be ` 2,90,000 instead of ` 6,00,000. Also, there would be
no short-term capital loss in the hands of Mr. Chaman.
5 Assumed that this is the first year of clubbing

Since the relevant assessment year for May 2023 examination is A.Y. 2023 -24,
accordingly, the relevant previous year is P.Y. 2022-23. The above solution has been
worked out considering the date of gift as 1.4.2022.
(2) Item (iv) mentions that the gift was made by Mrs. Chaman to Mr. Chaman on 1.4.2023,
which falls outside the P.Y. 2022-23. Since the date of gift has been mentioned as 1.4.2023
in the question, as per the plain reading, such short-term capital loss cannot be set-off
against long-term capital gains of ` 5,50,000. In such a case, the total income of
Mr. Chaman would be ` 8,00,000.
(b) Computation of amount of deductions available to Mr. Ray for A.Y. 2023-24
Amount (`)
(i) Deduction allowable while computing income under
the head “Income from house property”
Deduction under section 24(b) for interest on loan of 2,00,000
` 3,65,000 in respect of self-occupied property restricted to
(ii) Deduction under Chapter VI-A from Gross Total Income
Deduction under section 80C
For repayment of loan of ` 1,25,000 to bank 1,25,000
Deduction under section 80EEA
Since stamp duty value does not exceed ` 45 lakhs and
Mr. Ray does not own any residential house, he is eligible
for deduction of upto ` 1,50,000 in respect of such interest
on loan since loan is sanctioned between 1.4.2019 and
31.3.2022.
` 3,65,000 – ` 2,00,000 [claimed as deduction u/s 24(b)] =
` 1,65,000 restricted to ` 1,50,000, being the maximum
permissible deduction 1,50,000
Deduction under section 80EEB
Deduction for interest on loan for purchase of electric
vehicle of ` 1,90,000 restricted to ` 1,50,000, being the
maximum permissible deduction, since loan is sanctioned
between 1.4.2019 and 31.3.2023. 1,50,000
No deduction in respect of principal repayment of loan for
purchase of electric vehicle is allowable
Deduction under section 80GGC
Contribution of ` 15,000 to political party not allowable Nil
since the sum is paid in cash
Deduction under Chapter VI-A from Gross Total Income 4,25,000

(c) [First Alternative]

Any person may furnish an updated return of his income or the income of any other person
in respect of which he is assessable, for the previous year relevant to the assessment year
at any time within 24 months from the end of the relevant assessment year.
Circumstances in which updated return cannot be furnished
No updated return can be furnished by any person for the relevant assessment year, where
(a) an updated return has been furnished by him for the relevant assessment year
(b) any proceeding for assessment or reassessment or recomputation or revision of
income is pending or has been completed for the relevant assessment year in his
case;
(c) he is such person or belongs to such class of persons, as may be notified by the
CBDT.
(d) an updated return is a loss return
(e) the updated return has the effect of decreasing the total tax liability determined on
the basis of return furnished under section 139(1)/(4)/(5) / original or revised return
(f) the updated return results in refund or increases the refund due on the basis of return
furnished under section 139(1)/(4)/(5) / original or revised return.
Note – Any three of the above circumstances can be mentioned.
(c) [Second Alternative]
A person, other than a company or a firm, who is not required to furnish a return under
section 139(1), has to furnish their return of income on or before the due date if they fulfill
any of the following conditions -
(i) if his total sales, turnover or gross receipts, as the case may be, in the business
> ` 60 lakhs during the previous year; or
(ii) if his total gross receipts in profession > ` 10 lakhs during the previous year; or
(iii) if the aggregate of TDS and TCS during the previous year, in the case of the person,
is ` 25,000 or more; or
However, a resident individual who is of the age of 60 years or more, at any time
during the relevant previous year would be required to file return of income only, if
the aggregate of TDS and TCS during the previous year, in his case, is ` 50,000 or
more.
(iv) the deposit in one or more savings bank account of the person, in aggregate , is ` 50
lakhs or more during the previous year

SECTION B: INDIRECT TAXES
1. Section B comprises of questions from 5-8. In Section B, answer question no. 5 which is
compulsory and any two questions from question nos. 6-8.
2. Working notes should form part of the answer.
3. All questions in Section B should be answered on the basis of position of GST law as
amended by Finance Act, 2022 and the significant notifications/ circulars issued upto
31st October, 2022.
Question 5
Jino Enterprises, a partnership firm is a regular taxable person registered in Guwahati, Assam
and is engaged in supply of Air conditioners and its accessories as well as air conditioned
repairing services. Details of their various activities for the month of October 2022 are as follows:
(i) Intra State supply of Air conditioner to customers in Assam. Freight is separately charged
in invoices for delivery of goods at customer's doorstep.
`
Value of goods 4,00,000
Value of freight charges charged separately in above invoices. 1,00,000
(ii) Intra State supply of repairing services wherein apart from charging service charges, cost
of parts/ spares provided to customers is also charged and consideration for the same is
separately mentioned in the invoices.
`
Value of services component of invoices 3,00,000
Value of parts / spares component in invoices 50,000
(iii) In order to enhance their sales and to clear the stock of old models of air- conditioner, Jino
Enterprises made combo offers to customers wherein, if a customer purchases an
Air-conditioner along with a stabilizer, the same is offered at a combo price of ` 20,000 as
against the original price of ` 30,000 (Air-conditioner ` 22,000 & stabilizer ` 8,000) if these
are purchased separately. During October, 2022, Jino Enterprises had made inter-State
supply of 10 numbers of such combo products.
(iv) Purchased business class air tickets for intra State travel from Guwahati Airport, Assam to
Dibrugarh Airport, Assam for its executive employees relating to business of the concern.
Basic air fare was ` 40,000 and airlines charges GST @ 2.5% CGST, SGST each on basic
freight, in case the same is applicable.

Additional Information:
(a) All the figures mentioned above are exclusive of taxes.
(b) In respect of few of the invoices relating to F.Y. 2021-2022, involving ITC of CGST
` 20,000, SGST of ` 20,000, IGST ` 80,000 was not taken earlier. Jino Enterprises
now want to avail credit in respect of such invoices in the current month.
(c) The rates of GST applicable on various supplies are as follows:
Nature of Supply CGST SGST IGST
Air-Conditioner, Parts and accessories (Except 6% 6% 12%
Stabilizers)
Services 9% 9% 18%
Stabilizers 9% 9% 18%
Freight 6% 6% 12%
Calculate the amount of minimum CGST, SGST & IGST tax payable in cash by Jino Enterprises
for the month of October, 2022.
Note: Working Notes (legal provisions) should form part of your answer. (8 Marks)
Answer
Computation of minimum CGST, SGST and IGST payable in cash by Jino Enterprises for
the month of October, 2022
Particulars Value CGST (`) SGST (`) IGST
(`) (`)
Intra-State supply of air-conditioners 5,00,000 30,000 30,000
[Since goods are agreed to be delivered at [4,00,000 [5,00,000 [5,00,000
customer’s doorsteps, supply of air- + 1,00,000] × 6%] × 6%]
conditioners along with transportation thereof
is a composite supply which is treated as the
supply of the principal supply (viz. air-
conditioners). Accordingly, rate of principal
supply, i.e. air-conditioners will be charged.]
Intra-State supply of [Since parts/ spares 3,00,000 27,000 27,000
repairing services 1 and repair services are [3,00,000 [3,00,000
not naturally bundled, × 9%] × 9%]
Intra-State supply they are taxable 50,000 3,000 3,000
of parts / spares separately at the [50,000 [50,000
applicable rates.] × 6%] × 6%]
1
Based on the view taken in Circular No. 47/21/2018 GST dated 08.06.2018. However, it is also possible
to consider the supply of repairing services along with parts/spares as a composite supply .

Inter-State supply of 10 combos of air- 2,00,000 36,000

conditioners and stabilizers [20,000 [2,00,000
[Since supplies are not naturally bundled and × 10] × 18%]
a single price is being charged, it is a
mixed supply. It is treated as supply of that
particular supply which attracts highest tax
rate(i.e., stabilizers).]
Total output tax 60,000 60,000 36,000
Less: Input Tax Credit [Refer Working Note (36,000)
below] (22,000) (22,000) (IGST)
[IGST credit is first utilized for payment of (IGST) (IGST)
IGST liability. Remaining IGST credit has (21,000) (21,000)
been utilised for payment of CGST and SGST (CGST) (SGST)
in such proportion to keep the liability at its
minimum. After exhausting IGST credit,
CGST and SGST credits have been utilized.
CGST credit is utilized for payment of CGST
and SGST credit is utilised for the payment of
SGST. ITC of CGST cannot be utilized for
payment of SGST and vice versa.]
Minimum net GST payable in cash 17,000 17,000 Nil
Working Note: Computation of ITC available
Particulars CGST (`) SGST (`) IGST (`)
Purchase of business class air tickets for travel from 1,000 1,000
Assam [40,000 [40,000
[Not exempt, since air travel embarking from Assam × 2.5%] × 2.5%]
is not being undertaken in economy class. Further,
ITC is available since service is used in the
course/furtherance of business.]
Invoices relating to FY 2021-222 20,000 20,000 80,000
[ITC in respect of any invoice can be taken upto
30th November following the end of FY to which such
invoice relates or furnishing of the relevant annual
return, whichever is earlier.]
Total ITC available 21,000 21,000 80,000
2It has been most logically assumed that the annual return for the FY 2021-22 has not yet been furnished.

Question 6
(a) Mr. Jayesh, a registered supplier of Mumbai, received the following amounts in respect of
the various activities undertaken by him during the month of October, 2022.
S. No Particulars Amount (`)
(i) Commission received as a recovery agent from a Non-Banking 80,000
Finance Company (NBFC)
(ii) Actionable claim received from normal business debtors 10,50,000
(iii) Amount received from ABC Ltd. for performance of classical 1,74,500
dance in one program.
(iv) Business assets (old computers) given to a friend free of cost, No amount
the market value of all the computers was ` 51,000. Charged
No input tax credit has been availed on such computers when
used for business.
(v) Consideration received for one month rent from a registered 15,200
individual person for renting of residential dwelling for use as
residence.
Details of Input services:
S. No. Particulars Amount (`)
Paid to an unregistered Goods Transport agency for various 15,100
consignments of transportation of goods by road.
(Each individual consignment in a single carriage was of less
than ` 1,450.)
Notes:
(i) All the amount stated above in both the tables are exclusive of GST, wherever
applicable.
(ii) Aggregate turnover of Mr. Jayesh in previous year was ` 42,00,000.
You are required to compute Gross value of supplies, on which GST to be paid by
Mr. Jayesh for the month of October, 2022. (6 Marks)
(b) Mr. Shyam Das was admitted to Suraksha Hospital in Mumbai for 2 days in relation to
diagnosis of removal of stones from his kidney. For the said services, Surkasha hospital
charged following from Mr. Das:
(i) Room rent ` 7,000 per day for 2 days.
(ii) Operation theatre charges ` 5,000
(iii) Doctors Consultation Charges ` 8,000

(iv) Other services ` 4,000

In each of the above scenario explain whether Suraksha Hospital should levy GST or not
in line with the relevant provisions of the GST laws. (4 Marks)
Answer
(a) Computation of gross value of taxable supply on which GST is to be paid by
Mr. Jayesh
Particulars Amount (`)
Commission received as a recovery agent from Non-Banking Financial -
Company
[Tax is payable by NBFC under reverse charge.]
Actionable claim received from normal business debtors -
[No tax is payable as actionable claims other than lottery, betting and
gambling are covered under Schedule III, i.e. they are neither supply of
goods nor supply of services.]
Amount received from ABC Ltd. for performance of classical dance 1,74,500
[Taxable since consideration for classical dance performance exceeds
` 1,50,000.]
Business assets given free of cost -
[Not a supply as it is made without consideration and not covered in
Schedule I because ITC is not availed on the same.]
Rent from registered individual person -
[Tax is payable by the registered individual person under reverse
charge3]
Services from unregistered GTA 15,100
[Tax on services provided by unregistered GTA is payable under reverse
charge by Mr. Jayesh being a registered person.]
Gross value of taxable supply on which GST is to be paid by 1,89,600
Mr. Jayesh
(b) Health care services by a clinical establishment are exempt from GST.
However, services provided by a clinical establishment by way of providing room having
room charges exceeding ` 5,000 per day to a person receiving health care services are
not exempt.
In view of the same, only the room rent of ` 14,000 (` 7,000 per day × 2 days) is liable to
GST.
3 Based on the position of law as existing on 31.10.2022.

Other than room rent, all other nature of services provided by Suraksha Hospital are
exempt from GST.
Question 7
(a) Mr. Manik provides the following information regarding his tax & other liabilities under GST
law as per Electronic Liability Register:
Sr. No. Particulars Amount (`)
1. Tax due for the month of May 25,000
2. Interest due for the month of May 2,000
3. Penalty due for the month of May 3,000
4 Tax due for the month of June 35,000
5. Liability arising out of demand notice u/s 73 48,000
Mr. Manik wants to clear his liability of demand notice u/s 73 first.
Discuss the provision of order of discharge of GST liability u/s 49 (8) of the CGST Act &
advice to Mr. Manik. (5 Marks)
(b) (i) Mr. Sumit is a registered dealer in the state of Punjab. In the month of May, he decides
to apply for QRMP scheme. As he wants to switch to QRMP scheme, he had not filed
his returns for the months of May and June.
Please guide to Mr. Sumit regarding the following:
(A) Conditions and restrictions of QRMP scheme.
(B) Manner of exercising option of QRMP scheme. (3 Marks)
(ii) When goods are transferred by principal to job worker, there is no need to issue
e-way bill. Comment on the validity of the above statement with reference to GST
Laws. (2 Marks)
Answer
(a) The order of discharge of GST liability under section 49(8) of the CGST Act is as under:
(i) self-assessed tax, interest, penalty, fee or any other amount related to returns of the
previous tax periods.
(ii) self-assessed tax, interest, penalty, fee or any other amount related to returns of the
current tax period.
(iii) any other amount payable including demand determined under section 73 or section 74,
In view of the above provisions, Mr. Manik cannot clear his liability of demand notice
u/s 73 first.

The order of discharge of liability of Mr. Manik will be as under:

1. Tax, interest and penalty for the month of May, ` 30,000
2. Tax due for the month of June, ` 35,000
3. Liability arising out of demand notice u/s 73, ` 48,000
(b) (i) (A) Conditions and restrictions of QRMP scheme
Mr. Sumit has to fulfil the following conditions and restrictions for opting for
QRMP scheme:
• His aggregate annual turnover (PAN based) is up to ` 5 crore in the
preceding financial year.
• He has furnished the return for the preceding month, as due on the date of
exercising such option.
• He is not required to exercise the option every quarter.
(B) Manner of exercising option of QRMP scheme
Registered person – Mr. Sumit - intending to opt for QRMP scheme for any
quarter should indicate his preference for furnishing of return on a quarterly
basis from 1st day of the 2 nd month of the preceding quarter till the last day of
the 1st month of the quarter for which the option is being exercised.
(ii) The said statement is not valid.
When goods are transferred by principal to job worker, e-way bill is required to be
mandatorily issued:
• in case of intra-State transfer, if consignment value exceeds ` 50,000, and
• in case of inter-State transfer, irrespective of the value of the consignment.
Question 8
(a) (i) Who are not eligible to opt for composition scheme for goods under GST Laws?
(5 Marks)
(ii) GTA services provided to an unregistered person (including unregistered casual
taxable person) are exempt from GST by virtue of Entry 21 A of GST Laws. Discuss
the validity of above statement.
OR
List any 5 (Five) activities/transactions specified under Schedule III of the CGST Act, 2017
which shall be neither treated as supply of goods nor as supply of services. Detailed
explanations is not required. (5 Marks)

(b) “Rule 86A of the CGST Rules, 2017 provides that in certain specified circum stances,
Commissioner on the basis of reasonable belief may not allow debit of an amount
equivalent to such credit in electronic credit ledger.”
State the grounds (as guided by CBIC) on which the reasons for such belief must be based
on. (5 Marks)
Answer
(a) (i) The registered person who is not eligible for composition scheme for goods under
GST law are as under:
(i) Supplier engaged in making any supply of goods or services which are not
leviable to tax.
(ii) Supplier engaged in making any inter-State outward supplies of goods or
services.
(iii) Person supplying any goods or services through an electronic commerce
operator who is required to collect tax at source (under section 52).
(iv) Manufacturer of ice cream, panmasala, tobacco, aerated waters, fly ash bricks;
fly ash aggregate, fly ash blocks, bricks of fossil meals or similar siliceous
earths, building bricks, earthen or roofing tiles.
(v) Supplier who is either a casual taxable person or a non-resident taxable person
(vi) Supplier of services exceeding an amount which is higher of 10% of the turnover
in a State/U.T. in the preceding financial year or ` 5 lakh.
(ii) The said statement is invalid.
Services provided by a GTA to an unregistered person, including an unregistered
casual taxable person are exempt except when provided to a:
(a) factory
(b) society
(c) co-operative society
(d) body corporate
(e) partnership firm
(f) registered casual taxable person
(a) Alternative
Activities or transactions which shall be treated neither as a supply of goods nor a supply
of services are as under:-
(1) Services by an employee to the employer in the course of or in relation to his
employment.

(2) Services by any court or Tribunal established under any law for the time being in
force.
(3) Functions performed by the Members of Parliament, Members of State Legislature,
Members of Panchayats, Members of Municipalities and Members of other local
authorities.
(4) Duties performed by any person who holds any post in pursuance of the provisions
of the Constitution in that capacity.
(5) Duties performed by any person as a Chairperson or a Member or a Director in a
body established by the Central Government or a State Government or local authority
and who is not deemed as an employee before the commencement of this clause.
(6) Services of funeral, burial, crematorium or mortuary including transportation of the
deceased.
(7) Sale of land and, subject to paragraph 5(b) of Schedule II, sale of building . (i.e. in
case, where entire consideration for sale of building received after issuance of
completion certificate or after its first occupation, whichever is earlier).
(8) Actionable claims, other than lottery, betting and gambling.
(9) Supply of goods from a place in the non-taxable territory to another place in the
non-taxable territory without such goods entering into India (OR) Merchant Trading /
High-sea Sales
(10) Supply of warehoused goods to any person before clearance for home consumption.
(11) Supply of goods by the consignee to any other person, by endorsement of documents
of title to the goods, after the goods have been dispatched from the port of origin
located outside India but before clearance for home consumption.
(b) The reasons for such belief must be based on one or more of the following grounds:
(1) The credit is availed by the registered person on the invoices/debit note s issued by a
supplier, who is found to be non-existent or is found not to be conducting any business
from the place declared in registration.
(2) The credit is availed by the registered person on invoices/debit notes, without actually
receiving any goods and/or services.
(3) The credit is availed by the registered person on invoices/debit notes, the tax in
respect of which has not been paid to the Government.
(4) The registered person claiming the credit is found to be non-existent or is found not
to be conducting any business from the place declared in registration.
(5) The credit is availed by the registered person without having any invoice/debit note
or any other valid document for it.

SECTION A : INCOME TAX LAW
Part - II
questions.
Working notes should form part of the respective answers. All questions relate to assessment
year 2022-23, unless otherwise stated.
Question 1
Dr. Rohan, 82 years old resident surgeon, having his Nursing Home in Mumbai, gives the
following particulars for the year ended on 31.03.2022.
Receipts ` Payments `
Opening Balance b/d 1,25,000 Salary to Staff 3,50,000
Fees from visits to other 5,85,000 Taxes & Insurance 26,000
hospitals (net)
Fees for March, 2021 received in Entertainment Expenses 1,10,000
April, 2021
IPD 40,000 85,000 Purchase of Television 48,000
OPD 45,000
Dividend from shares (net) 18,900 Gift to daughter-in law 60,000
Fees received during the year 10,25,000 Interest on loan for repairs to 65,000
property
Gifts received from relatives of 45,000 Personal medical expenses 70,000
patients
Honorarium for painting services 22,500 Deposits in PPF A/c 55,000
in Jai Hind Art School (net)
Income-tax Refund (Including 12,100 Nursing Home expenses 3,75,000
interest ` 1,500)
Prof. fees paid for consulting 1,20,000
services
tax Act as amended by the Finance Act, 2021 which are relevant for November, 2022
Examination. The relevant assessment year is A.Y.2022-23.

2 INTERMEDIATE EXAMINATION: NOVEMBER, 2022
Purchase of furniture at 1,35,000

home
Personal Expenses 3,00,000
Balance c/f 2,04,500
19,18,500 19,18,500
Other Information:
(a) He keeps his books of accounts on cash basis and has not opted for the provisions of
section 44ADA.
(b) Salary includes ` 60,000 paid to his sister who is a qualified nurse paid in cash.
(c) Entertainment expenses include ` 25,000 for dinner to doctors in a five star hotel.
(d) Interest on loan for repairs to property includes ` 40,000 for his residential property.
(e) His daughter in law earned income of ` 10,000 from the amount received as gift.
(f) Fixed Assets values as on 01.04.2021 are as under :
Nursing Home Equipment's ` 2,20,000, Medical Books (incl. annual publications ` 10,000)
` 35,000, Laptop ` 40,000.
(g) Television purchased for nursing home purpose on 21.09.2021 is put to use on 03.10.2021.
(h) He has donated ` 10,000 towards PM CARES Fund on 15.08.2021.
You are required to
(i) Compute the total income and tax payable by him for AY 2022-23 as per the regular
provisions of the Income-tax Act, 1961. Assume that he has not opted for section 115BAC.
(ii) What will be his total income and tax payable, if he opts for the provisions of section
44ADA? Will it be more beneficial for him to adopt 44ADA? (14 Marks)
Answer
(i) Computation of total income and tax payable by Dr. Rohan for A.Y. 2022-23 as per
the regular provisions of the Act
Particulars ` ` `
I Income from house property
Annual value [Assuming residential property is Nil
self-occupied]
Less: Deduction under section 24(b)
Interest on loan for repairs to property, 30,000
` 40,000, restricted to

Loss from self-occupied property (30,000)

[can be set-off against Profits and gains of
business or profession or Income from other
sources]
II Profits and gains from business and
profession
Gross Receipts
Fees from visits to other hospitals 6,50,000
[5,85,000/90%]
Fees for March 2021 received in April 2021 85,000
[Fees for March 2021 is chargeable to tax
during P.Y. 2021-22, since Dr. Rohan is
following cash system of accounting] [40,000 +
45,000]
Fees received during the year 10,25,000
Gifts received from relatives of patients
[taxable as business income] 45,000 18,05,000
Less: Permissible deductions
Salary to staff [Salary paid to his sister who is 2,90,000
a qualified nurse in cash disallowed under
section 40A(3), since such cash payment
exceeds ` 10,000] [` 3,50,000 – ` 60,000]
Taxes and insurance 26,000
Entertainment expenses, including dinner to 1,10,000
doctors [Assuming that the entire sum was
incurred wholly and exclusively for business
purpose]
Interest on loan for repair to property [to the 25,000
extent relating to business] = ` 65,000 –
` 40,000, relating to residential property
Nursing home expenses 3,75,000
Professional fees paid for consulting services 1,20,000 9,46,000
8,59,000
Less: Depreciation under section 32
Nursing home equipment’s [2,20,000 x 15%] 33,000
Note – Nursing home equipment would be
eligible for depreciation @15%, being the

general rate for plant and machinery. The main

solution has, accordingly, been worked out
applying 15%. However, if such equipment are
in the nature of life saving medical equipment,
they would be eligible for higher depreciation
@40%. If 40% rate is applied, depreciation would
be ` 88,000
Medical books [35,000 x 40%] 14,000
Laptop [40,000 x 40%] 16,000
Television [48,000 x 15%, since the television 7,200 70,200
is put to use for 180 days during the P.Y.
2021-22]
Note - Television would be eligible for
depreciation @15%. However, television
connected to laptop or other medical
equipment and used by Doctor may be
classified as plant and machinery eligible for
depreciation @40%. If 40% rate is applied,
depreciation for TV would be ` 19,200.
Also, it is possible to take a view that Television 7,88,800
is furniture and fixtures qualifying for
depreciation@10%. If 10% rate is applied,
depreciation for TV would be ` 4,800.
III Income from Other Sources
Dividend from shares [18,900/90%] 21,000
Honorarium for painting services in Jai Hind Art 25,000
School [22,500/90%]
Honorarium (Alternative without TDS) -
` 22,500
Note – In the question, it is mentioned that
Dr. Rohan has received Honorarium for
painting services in Jai Hind Art School (Net) of
` 22,500. Since the threshold limit for
deducting tax at source under section 194J is
` 30,000, there is no requirement to deduct tax
at source on such income. Accordingly,
question can be answered without grossing up
the amount of honorarium of ` 22,500.
Interest on income-tax refund 1,500

Income earned from gift to daughter in law

[Income earned by daughter in law from asset
gifted without consideration to her by
Dr. Rohan is includible in the hands of
10,000 57,500
Dr. Rohan]
Deposits in PPF 55,000
Medical expenses to the extent of 50,000
` 50,000 since Dr. Rohan is a senior
citizen (assuming he has not taken any
medical insurance policy)
Deduction under section 80G
Donation towards PM CARES Fund 10,000 1,15,000
Tax Payable
Upto ` 5,00,000 [since Dr. Rohan is aged 80 Nil
years or above]
` 5,00,001 to ` 7,01,300 [` 2,01,300@20%] 40,260
40,260
Add: HEC@4% 1,610
Tax liability 41,870
Less: TDS on fees from visits to other hospitals 65,000
TDS on dividend from shares 2,100
TDS on honorarium for painting services 2,500 69,600
in Jai Hind art School
Tax Refundable 27,730
(ii) Computation of total income and tax payable by Dr. Rohan for A.Y. 2022-23 if he opts
for section 44ADA
Particulars ` `
I Income from house property
Loss from self occupied property (30,000)
II Income from business or profession
Income from profession [18,05,000 x 50%] [No 9,02,500
other expenditure or depreciation is allowed]

III Income from Other Sources 57,500

Less: Deduction under Chapter VI-A 1,15,000
Tax Payable
Upto ` 5,00,000 Nil
` 5,00,001 to ` 8,15,000 [3,15,000@20%] 63,000
63,000
Less: HEC@4% 2,520
Less: TDS 69,600
Tax Refundable 4,080
Since tax refundable in case Dr. Rohan opts for the provisions of section 44ADA
is lower than the regular provisions of the Act, it would be beneficial for him not to
opt for section 44ADA and get his books of account audited and declare income
under the regular provisions.
Question 2
(a) Mr. Sarthak, an individual and Indian citizen living abroad (Dubai), a tax haven, since year
2005 and never came to India for a single day since then, earned the following incomes
during previous year 2021-22:
Particulars Amount (in `)
(i) Income accrued and arisen in Dubai not taxable in Dubai 20,00,000
(being tax haven)
(ii) Income accrued and arisen in India 5,00,000
(iii) Income deemed to accrue and arise in India 8,00,000
(iv) Income arising in Dubai from a profession set up in India 10,00,000
I. Determine the residential status of Mr. Sarthak and taxable income for the previous
year 2021-22 (assuming no other income arise during the previous year).
II. What would be your answer if income arising in Dubai from a profession set up in
India is ` 2 lakhs instead of ` 10 lakhs?
III. What would be your answer, if Mr. Sarthak born in Dubai and his parents were born
in India? (6 Marks)

(b) Mr. B is a sales manager in PQR Ltd. During F.Y. 2021-22 he has received the following
towards his salary and allowances/perquisites;
(i) Basic pay ` 85,000 per month upto December 2021 and thereafter an increase of
` 2,000 per month.
(ii) Dearness allowance 40% of basic pay forming part of retirement benefits.
(iii) Bonus 1 month basic pay based on the salary drawn during January month every
year.
(iv) He contributes 14% of his basic pay & DA towards his recognized provident fund and
his employer company contributes the same amount.
(v) Travelling allowance of ` 5,000 per month towards on duty tours.
(vi) Research and training allowance ` 3,000 per month.
(vii) Children education allowance of ` 600 per month, per child for his 2 sons and 1
daughter.
(viii) Accommodation owned by PQR Ltd. was provided to him in Hyderabad for the whole
year and furniture of ` 2,00,000 was provided from 1 st October, 2021.
(ix) Reimbursement of medical expenses on his treatment in private hospital -` 15,000,
medical allowance ` 1,500 per month. Company has paid premium on medical policy
purchased on his health ` 12,500.
You are required to:
I. Compute the income chargeable to tax under the head "Income from Salary",
assuming that he does not opt for the provisions under section 115BAC.
II. What will be the income under the head “Salaries”, if he opts for the provisions under
section 115BAC? (8 Marks)
Answer
(a) I. Mr. Sarthak is an Indian citizen living in Dubai since 2005 who never came to India
for a single day since then, he would not be a resident in India for the P.Y. 2021 -22
on the basis of number of days of his stay in India as per section 6(1).
However, since he is an Indian citizen
− having total income (excluding income from foreign sources) of ` 23 lakhs,
which exceeds the threshold of ` 15 lakhs during the previous year; and
− not liable to tax in Dubai,
he would be deemed resident in India for the P.Y. 2021-22 by virtue of section 6(1A).

A deemed resident is always a resident but not ordinarily resident in India (RNOR).
Computation of Total Income for A.Y.2022-23
Particulars `
(i) Income accrued and arisen in Dubai (not taxable in case of an -
RNOR)
(ii) Income accrued and arisen in India (taxable) 5,00,000
(iii) Income deemed to accrue or arise in India (taxable) 8,00,000
(iv) Income arising in Dubai from a profession set up in India would
be taxable in case of RNOR 10,00,000
Total income 23,00,000
II. If income arising in Dubai from a profession set up in India is ` 2 lakhs instead of
` 10 lakhs, his total income (excluding income from foreign sources) would be only
` 15 lakhs. Since the same does not exceed the threshold limit of ` 15 lakhs, he
would not be deemed resident.
Accordingly, he would be non-resident in India for the P.Y. 2021-22 and hence, his
total income would be only ` 13 lakhs (aggregate of (ii) and (iii) above i.e., ` 5 lakhs
+ ` 8 lakhs).
III. If Mr. Sarthak is born in Dubai and his parents were born in India, he would not be an
Indian citizen, but he may qualify as person of Indian origin. In such case, the
provisions relating to deemed resident would not apply to him.
Accordingly, he would be non-resident in India during the P.Y. 2021-22 and his total
income would be `13 lakhs.
Note – In sub-part III., it is inferred that he is not a citizen of India since he is not
born in India. It is assumed that he has not applied for citizenship by fulfilling the
other specified eligibility conditions.
(b) I. Computation of income chargeable to tax under the head “Salaries” for
A.Y.2022-23, if Mr. B does not opt for the provisions of section 115BAC
Particulars ` `
Basic Pay [` 85,000 x 9 + ` 87,000 x 3] 10,26,000
Dearness Allowance [` 10,26,000 x 40%] 4,10,400
Bonus 87,000
Travelling allowance [Exempt, since provided towards -
duty tours1]
1 It is assumed that he has fully expended the amount

Research and training allowance [` 3,000 x 12] 36,000

Medical allowance [` 1500 x 12] 18,000
Children Education allowance [` 600 x 12 x 3] 21,600
Less: Exempt [`100 x 12 x 2] 2,400 19,200
Salary (for the purpose of valuation of Rent-free 15,96,600
accommodation)
Value of Rent-free accommodation [15% of 2,39,490
` 15,96,600]
Add: Value of furniture [` 2,00,000 × 10% p.a. for 6 10,000 2,49,490
months]
Reimbursement of medical expenses [taxable, since 15,000
amount is reimbursed for treatment in private hospital]
Health insurance premium paid by PQR Ltd. [Exempt] -
Employers’ contribution to RPF in excess of 12% of 28,728
salary = 2% of ` 14,36,400 (` 10,26,000 + ` 4,10,400)
Less: Deductions under section 16
Standard deduction 50,000
Income chargeable under the head “Salaries” 18,39,818
II. Computation of income chargeable to tax under the head “Salaries” for
A.Y.2022-23, if Mr. B opts for the provisions of section 115BAC
Add: Exemption in respect of children education 2400
allowance [Not allowable as per section 115BAC]
Add: Standard deduction [Not allowable as per section 50,000
115BAC]
18,92,218
Less: Value of rent-free accommodation (As per 2,49,490
regular provisions)
16,42,728
Add: Value of Rent-free accommodation [15% of
` 15,99,000 (` 15,96,600 (as calculated above) +
` 2,400)] 2,39,850
Add: Value of furniture [` 2,00,000 × 10% p.a. for 6 2,49,850
months] 10,000

Question 3
(a) Examine the applicability and the amount of TDS to be deducted in the following cases for
F.Y. 2021-22:
(i) S and Co. Ltd. paid ` 25,000 to one of its Directors as sitting fees on 02-02-2022.
(ii) ` 2,20,000 paid to Mr. Mohan, a resident individual, on 28-02-2022 by the State of
Haryana on compulsory acquisition of his urban land.
(iii) Mr. Purushotham, a resident Indian, dealing in hardware goods has a turnover of
` 12 crores in the previous year 2020-21. He purchased goods from Mr. Agarwal a
resident seller, regularly in the course of his business. The aggregate purchase made
during the previous year 2021-22 on various dates is ` 80 lakhs which are as under:
10-06-2021 ` 25,00,000
20-08-2021 ` 27,00,000
12-10-2021 ` 28,00,000
He credited Mr. Agarwal's account in the books of accounts on the same date and made
the payment on the 28-02-2022 ` 80 lakh. Mr. Agarwal's turnover for the financial year
2020-21 is ` 20 crores. (6 Marks)
(b) Compute the gross total income of Mr. Prakhar for A.Y. 2022-23 and the losses to be
carried forward, from the information given below:
(i) Income from House Property (computed) ` 3,60,000
(ii) Short term capital loss on shares of a company ` (-) 18,700
(iii) Long term capital gain on sale of agricultural land ` 6,000
(iv) Income from rubber business (plants grown by Mr. Prakhar) ` 80,000
(v) Loss from garment business b/f discontinued in F.Y. 2019-20 ` (-) 70,000
(vi) Loss from betting ` (-) 5,500
(vii) Income from lotteries (net) ` 5,460
(4 Marks)
(c) Mr. A employed with B Pvt. Ltd. residing in Chennai, filed his return of Income on 30 thJuly.
He has no other income other than salary. He however has failed to link his Aadhar with
PAN as on return filing date.
(i) What is the last date for linking Aadhar with PAN?
(ii) What is the consequence for him if he has linked the Aadhar with PAN on 31 st August
2022?

(iii) Are there any exceptions provided under section 139AA from quoting of Aadhar
number? (4 Marks)
Answer
(a) (i) Tax @10% has to be deducted by S and Co. Ltd. under section 194J on directors
sitting fees of ` 25,000. The threshold limit of ` 30,000 is not applicable in respect of
sum paid to a director.
The amount of tax to be deducted at source = ` 25,000 x 10% = ` 2,500
(ii) There is no liability to deduct tax at source under section 194LA, since the payment
to Mr. Mohan, a resident, by State of Haryana on compulsory acquisition of his urban
land does not exceed ` 2,50,000.
(iii) Since Mr. Purushotham’s turnover for F.Y.2020-21 exceeds ` 10 crores, and value
of goods purchased from Mr. Agarwal, a resident seller, exceeds ` 50 lakhs in the
P.Y.2021-22, he is liable to deduct [email protected]% on ` 30 lakhs (being the sum exceeding
` 50 lakhs), at the time of credit or payment, whichever is earlier.
On 10.6.21= Nil (No tax is to be deducted u/s 194Q on the purchases made on
10.6.2021 since the purchases made till that date has not exceeded the threshold of
` 50 lakhs and TDS provisions u/s 194Q was effective from 1.7.2021)
On 20.8.2021 = 0.1% of ` 2 lakhs (amount exceeding ` 50 lakhs) = ` 200
On 12.10.2021 = 0.1% of ` 28 lakhs = ` 2,800.
(b) Computation of gross total income of Mr. Prakhar for the A.Y.2022-23
Particulars ` `
Income from house property (computed) 3,60,000
Profits and gains from business and profession
Income from rubber business [35% of income from 28,000
manufacture of rubber is business income [80,000 x 35%]
and the balance 65% would be agricultural income
Less: Brought forward loss of ` 70,000 from garment 28,000 Nil
business set-off to the extent of ` 28,000, set-off is
permissible even if the business is discontinued
Capital Gains
Long-term capital gain on sale of agricultural land
(Exempt, assuming that the same is rural agricultural land)
-
Income from Other Sources
Income from lotteries (` 5,460 x 100/70) 7,800

[Note – Tax @30% has to be deducted on winnings from

lotteries u/s 194B only if the amount of payment exceeds
` 10,000. However, in the question, winnings from lotteries
is only ` 5,460 and the word “net” is given in the bracket.
Since, the word “net” is written in the bracket in question,
main solution is given based on the view that tax has been
deducted on income from lotteries @30% and accordingly,
the lottery income is grossed up. However, since no tax is
deductible u/s 194B where lottery income does not exceed
` 10,000, the question can be answered without grossing
up the lottery income of ` 5,460. In such a case, gross total
income would be ` 3,65,460]
Losses to be carried forward to A.Y.2023-24 `
Loss from garment business pertaining to P.Y. 2019-20 42,000
(` 70,000 – ` 28,000)
Short term capital loss on shares of a company of 18,700
A.Y. 2022-23
Loss of ` 5,500 from betting can neither be set-off nor be -
carried forward.
Note – In the question, long term capital gain on sale of agricultural land is given as
` 6,000. However, it is not mentioned as to whether the same is rural agricultural land or
urban agricultural land. The main solution given above is based on the assumption that it
is rural agricultural land. An alternate solution has been given below based on the
assumption that it is urban agricultural land -
ALTERNATE SOLUTION
Computation of gross total income of Mr. Prakhar for the A.Y.2022-23
Particulars ` `
Income from house property (computed) 3,60,000
Income from rubber business [35% of income from 28,000
manufacture of rubber is business income [80,000 x 35%] and
the balance 65% would be agricultural income
Less: Brought forward loss of ` 70,000 from garment 28,000 Nil
business set-off to the extent of ` 28,000, set-off is
permissible even if the business is discontinued

Capital Gains
Long-term capital gain on sale of agricultural land, assuming 6,000
that the same is urban agricultural land.
Less: Set-off of Short-term capital loss of ` 18,700 against 6,000
long-term capital gains to the extent of ` 6,000 by virtue of
section 74(1) Nil
Income from lotteries (` 5,460 x 100/70) 7,800
[Note – Tax @30% has to be deducted on winnings from
lotteries u/s 194B only if the amount of payment exceeds
` 10,000. However, in the question, winnings from lotteries is
only ` 5,460 and the word “net” is given in the bracket. Since,
the word “net” is written in the bracket in question, main
solution is given based on the view that tax has been
deducted on income from lotteries @30% and accordingly,
the lottery income is grossed up. However, since no tax is
deductible u/s 194B where lottery income does not exceed
` 10,000, the question can be answered without grossing up
the lottery income of ` 5,460. In such a case, gross total
income would be ` 3,65,460]
Losses to be carried forward to A.Y. 2023-24 `
Loss from garment business pertaining to P.Y. 2019-20 42,000
(` 70,000 – ` 28,000)
Short term capital loss on shares of a company of A.Y. 12,700
2022-23 (` 18,700 – ` 6,000)
Loss of ` 5,500 from betting can neither be set-off nor be -
carried forward.
(c) Every person who has been allotted PAN as on 1st July, 2017, and who is eligible to obtain
Aadhar Number, has to intimate his Aadhar Number to prescribed authority on or before
31st March, 2022.
Since, Mr. A fails to link his Aadhar number with PAN on or before 31.3.2022,
consequently, at the time of linking his Aadhaar number with PAN on 31.8.2022, he would
be liable to pay fee of ` 1,000 as per section 234H.
Yes, the following are the exceptions -
An individual who does not possess the Aadhar number or Enrolment ID and is:
(i) residing in Assam, Jammu & Kashmir and Meghalaya;

(ii) a non-resident as per Income-tax Act, 1961;

(iii) of the age of 80 years or more at any time during the previous year;
(iv) not a citizen of India
Question 4
(a) Examine whether the following are chargeable to tax and the amount liable to tax:
(i) Interest on enhanced compensation ` 3,00,000 received on 31.03.2022 from
Government of Tamil Nadu towards urban land acquired by it. 40% of enhanced
compensation interest pertains to previous year 2020-21.
(ii) Narayanan transferred 1000 shares of BS Ltd to AB Pvt. Ltd on 01-06-2021 for a
consideration of ` 2,00,000 when the fair market value of the same as on transaction
date was ` 3,00,000. The indexed cost of acquisition of shares for Narayanan was
` 2,75,000. The transfer was effected off market on which securities transaction tax
was not paid. BS Ltd is a closely held unlisted company.
(iii) Mr. A received ` 5,00,000 on 1 st March 2022 from Sree Pushpaka Charitable Trust
for meeting his medical expenses. The trust is registered under section 12AB of
Income-tax Act. (6 Marks)
(b) Ms. Priya, aged 61 years, has total income of ` 7,50,000, including income from
profession, for A.Y. 2022-23, and has paid advance tax of ` 10,000 on 13.12.2021. She
has filed her return of income on 15.06.2022.
Calculate the self-assessment tax payable and the interest thereon u/s 234A, 234B and
234C, if any, by Ms. Priya. (4 Marks)
(c) Mr. X a resident, aged 56 years, till recently was a successful businessman filing his return
of incomes regularly and promptly ever since he obtained PAN card. During the COVID -
Pandemic period his business suffered severely and he incurred huge losses. He was not
able to continue his business and finally on 1 st January, 2022 he decided to wind-up his
business which he also promptly intimated to the jurisdictional Assessing Officer about the
closure of his business.
The Assessing Officer sent him a notice to tax income of A.Y. 2022-23 during the
A.Y. 2021-22 itself. Does the Assessing Officer have the power to do so? Are there any
exceptions to the general rule “Income of the previous year is assessed in the assessment
year following the previous year”? (4 Marks)
OR
From the following transactions compute the total income of Mr. Raman and his wife Savita
for the Assessment year 2022-23.
(i) Mr. Raman had a fixed deposit of ` 5,00,000 in the bank. He instructed the bank to
credit the interest on deposit @6% from 01-04-2021 to 31-03-2022 to the savings
account of his brother’s son for his education.

(ii) Savita is a B.com graduate and working in the ABC Private Limited as an accountant
with a monthly salary of ` 25,000. Raman holds 30% equity shares of the ABC Private
Limited.
(iii) Raman started proprietary business on 01-04-2000 with a capital of ` 10,00,000. He
incurred a loss of ` 2,00,000 during the previous year 2020-21. To overcome the
financial position, Savita gifted a sum of ` 4,00,000 to him on 01-04-2021 which was
immediately invested in the business by Mr. Raman. He earned a profit of ` 3,00,000
during the previous year 2021-22
(iv) Sajan, younger son of Raman, aged 17 years won in a debate competition during the
annual competitions held at his school and received a cash award of ` 10,000 and
he also earned interest of ` 7,000 on balance maintained in his savings bank account.
(4 Marks)
Answer
(a) (i) Interest on enhanced compensation received on 31.03.22 from Government of Tamil
Nadu (including 40% of interest on enhanced compensation relating to P.Y. 2020 -21)
would be deemed to be the income of P.Y. 2021-22, being the year in which it is
received irrespective of the method of accounting followed by the assessee.
Interest of ` 3,00,000 on enhanced compensation is chargeable to tax during the P.Y.
2021-22 after providing deduction of 50% under section 57. Therefore, ` 1,50,000 is
chargeable to tax under the head “Income from other sources”.
(ii) In the hands of Mr. Narayanan
Since the consideration of ` 2,00,000 is less than ` 3,00,000, being the fair market
value of unquoted shares of BS Ltd., the fair market value of shares i.e., ` 3,00,000
would be deemed to be the full value of consideration.
Accordingly, ` 25,000 [` 3,00,000 – ` 2,75,000, being indexed cost of acquisition]
would be liable to tax as long term capital gains in the hands of Mr. Narayanan.
In the hands of AB Pvt. Ltd.
Shares received by AB Pvt. Ltd. from Mr. Narayanan for inadequate consideration is
chargeable to tax, since the difference exceeds ` 50,000. Accordingly, ` 1,00,000,
being the difference between aggregate Fair Market Value of the shares i.e.,
` 3,00,000 and consideration i.e., ` 2,00,000 would be chargeable to tax under the
head “Income from other sources”.
(iii) The sum of ` 5,00,000 received from Sree Pushpaka Charitable Trust, without
consideration, for meeting medical expenses would not be chargeable to tax in the
hands of Mr. A, since the same is received from a trust registered under section 12AB.

(b)
Self assessment tax payable [It is assumed Ms. Priya is not opting for section
115BAC] [See Note and Alternative thereto]
Tax on ` 7,50,000
Upto ` 3,00,000 Nil
` 3,00,001 – ` 5,00,000 @5% 10,000
` 5,00,001 – ` 7,50,000 @20% 50,000
60,000
Add: Health and education cess @4% 2,400
62,400
Less: Advance tax 10,000
Tax payable 52,400
Add: Interest under section 234A [Interest under section 234A would not be -
attracted, since Ms. Priya has furnished her return of income on 15.06.2022
which is before the due date of filing return of income]
Add: Interest under section 234B would be levied on ` 52,400 at 1% for 3 1,572
months i.e., From April to June. The interest under section 234B amount to
` 1,572
Add: Interest under section 234C 2,747
Date of Specified Amount due and Period Interest
Instalment % of unpaid (rounded off @ 1%
estimated to nearest ` 100,
tax ignoring fraction)
15th June 2021 15% 9,300 [15% of 3 months 279
` 62,400]
15th September 45% 28,000 [45% of 3 months 840
2021 ` 62,400]
15th December 75% 36,800 [(75% of 3 months 1104
2021 ` 62,400) –
` 10,000]
15th March 2022 100% 52,400 1 month 524
Total interest under section 234C 2,747
Self assessment tax payable and interest thereon 56,719

Self assessment tax payable and interest thereon (rounded off) 56,720

Note - The question does not mention that Ms. Priya has opted for section 115BAC, in
which case the total income given therein would be as per the regular provisions of the
Act. The main solution has been worked out accordingly as per the regular provisions of
the Act.
Since there is no mention of Chapter VI-A or other deductions claimed by her, it is possible
to assume that she has not claimed any such deduction, in which case, it would be
beneficial for her to opt for section 115BAC. Based on the assumption that she has opted
for section 115BAC and the total income given in the question reflects the computation
accordingly, the alternative answer would be as follows:
Self assessment tax payable [It is assumed Ms. Priya has opted for section 115BAC]
Tax on ` 7,50,000 `
Upto ` 2,50,000 [not eligible for higher basic exemption limit] Nil
` 2,50,001 – ` 5,00,000 @5% 12,500
` 5,00,001 – ` 7,50,000 @10% 25,000
37,500
39,000
Less: Advance tax 10,000
Tax payable 29,000
Add: Interest under section 234A [Interest under section 234A would not be -
attracted, since Ms. Priya has furnished her return of income on 15.06.2022
which is before the due date of filing return of income]
Add: Interest under section 234B would be levied on ` 29,000 at 1% for 3 870
months i.e., from April to June. The interest under section 234B amount to
` 870.
Add: Interest under section 234C 1,565
Date of Specified Amount due and Period Interest
Instalment % of unpaid (rounded off @ 1%
estimated to nearest
tax ` 100, ignoring
fraction)
15th June 2021 15% 5,800 [15% of 3 months 174
` 39,000]
15th September 45% 17,500 [45% of 3 months 525
2021 ` 39,000]
15th December 75% 19,200[(75% of 3 months 576
2021 ` 39,000) – `10,000]

15th March 2022 100% 29,000 1 month 290 ----------

Total interest under section 234C 1,565
Self assessment tax payable and interest thereon 31,435
Self assessment tax payable and interest thereon(rounded off) 31,440
Yes, he has the power to do so.
Since the business of Mr. X is discontinued on 1st January, 2022, the income of the
period from 1.4.2021 to 1.1.2022 may, at the discretion of the Assessing Officer, be
charged to tax in A.Y.2021-22 itself.
Following are the other exceptions to the general rule “Income of the previous year is
assessed in the assessment year following the previous year” i.e., the income of the
previous year is assessed in the previous year itself.
(i) Shipping business of non-resident
(ii) Persons leaving India with no present intention of returning
(iii) AOP/BOI/Artificial Juridical Person formed for a particular event or purpose and
likely to be dissolved
(iv) Persons likely to transfer property to avoid tax.
Computation of Total Income of Mr. Raman and Mrs. Savita for A.Y. 2022-23
Particulars Mr. Raman Mrs. Savita
Amount (`)
(i) Interest on fixed deposits [Income would be 30,000
included in the hands of Raman, since he has
transferred income to his brother’s son without
transfer of the asset, being fixed deposit]
[` 5,00,000 x 6%]
(ii) Salary income [` 3,00,000 (` 25,000 x 12) less 2,50,000
standard deduction of ` 50,000]
[Mrs. Savita’s salary would not be included in the
income of Raman, who has substantial interest in
the company, since she possesses the relevant
professional qualifications for working as an
accountant]
(iii) Savita gifted ` 4,00,000 to Mr. Raman, which 2,00,000 1,00,000
Mr. Raman has invested in the business. In such
case, proportionate income (i.e., 1/3 x
` 3,00,000) arising from such investment is to be

included in the total income of Savita.

Mr. Raman’s contribution in capital as on
1.4.2021 = ` 8,00,000 [` 10,00,000 – ` 2,00,000]
Mrs. Savita’s contribution on 1.4.2021 =
` 4,00,000
` 3,00,000, being the profit for P.Y.2021-22 to be
apportioned on the basis of capital employed on
the first day of the previous year i.e., as on
1.4.2021 (8:4 or 2:1)
Total income [before considering minor income 2,30,000 3,50,000
from interest on savings account]
(iv) Cash award won in a debate by Sajan, minor son,
would not be included in the hands of either -
parent, since such income arises from his own -
skills/talent.
However, interest of ` 7,000 on savings bank
account (after providing for deduction of ` 1,500)
is to be included in the hands of Mrs. Savita, since
her income is higher than that of her husband
[` 7,000 - `1,500] - 5,500
Gross Total Income 2,30,000 3,55,500
Less: Deduction under section 80TTA (Interest on
savings bank account) - 5,500
Total Income 2,30,000 3,50,000


compulsory and any two questions from question nos 6-8.
amended by the Finance Act, 2021 as well as significant notifications/ circulars issued upto
30th April, 2022.
Question 5
Ajay Limited, a registered dealer in Patna (Bihar), is engaged in various types of supplies. The
company provided the following details for the month of January 2022:
Sl. Particulars Amount in
No. `
(i) Outward supply of goods made during the month to various non- As given in
related persons: particulars
Particulars Market Transaction column
value Value (`)
a. in the State of Bihar (Intra- 3,00,000 4,00,000
State)
b. to other States (Inter-State) 2,00,000 1,00,000
(ii) Services provided to the State Government of Karnataka for 5,00,000
conducting a computer training programme for its employees. Total
expenditure incurred for the said programme was ` 90,000, of which
` 63,000 was borne by the State Govt. (Inter-State transaction)
(iii) Stock transfer without consideration to its branch at Gaya (Bihar). Nil
Branch has separate GSTN for convenience of accounting and
billing.
Value under section 15 - ` 20,000 (Intra -State)
(iv) Intra - State inward supply of various services for use in the course 6,50,000
or furtherance of business (30 invoices)
Additional Information:
(a) All the amounts given above are exclusive of taxes.
(b) During the course of arranging and filing documents, the accountant of Ajay Limited
observed that an invoice for ` 30,000 (excluding tax) dated 02.12.2021 was omitted to be
recorded in the books of accounts and no payment was made against the same till the end
of January 2022. This invoice was issued by Mr. Mukesh of Patna, from whom Ajay Limited
had taken cars on rental basis. Invoice included cost of fuel also. (Intra -State transaction).

(c) Rate of GST applicable on various supplies are as follows:

Nature of supply CGST SGST IGST
Car rental service 2.5% 2.5% 5%
All other inward and outward supplies 9% 9% 18%
(d) No opening balance of input tax credit exists in the beginning of the month.
(e) Out of the 30 invoices of inward supply received, 6 invoices with taxable value amounting
to ` 1,50,000 were e-invoices in which Invoice Reference Number (IRN) was not
mentioned. However, all the invoices were duly reflected in GSTR 2B for the month of
January 2022, since the suppliers had filed their GSTR-1.
(f) Subject to the information given above, conditions necessary for claiming ITC were
complied with.
You are required to calculate the amount of net GST liability payable in cash by Ajay Limited for
the month of January 2022. Brief notes for treatment given for each item should form part of
your answer. (8 Marks)
Answer
Computation of net GST payable in cash by Ajay Ltd. for the month of January 2022
Outward intra-State supply of goods made in 36,000 36,000
the State of Bihar [4,00,000 × [4,00,000 ×
[Value of supply is the transaction value of 9%] 9%]
the goods.]
Outward supply of goods made to other 18,000
States [1,00,000 ×
[Value of supply is the transaction value of 18%]
the goods.]
Inter-State services provided to State 90,000
Government of Karnataka for conducting a [5,00,000 ×
computer training programme 18%]
[Not exempt since the State Government has
borne less than 75% of total expenditure of
the training programme.]
Intra-State stock transfer to Gaya Branch 1,800 1,800
with separate registration [20,000 × [20,000 ×
[Supply of goods between distinct persons in 9%] 9%]
course or furtherance of business qualifies as
supply even if made without consideration.]

Total output tax 37,800 37800 1,08,000

Less: Input Tax Credit [Refer Working Note (37,800) (7,200)
below] (CGST) (CGST)
[CGST credit should be utilized for payment (37,800) (7,200)
of CGST and IGST in that order. Similarly,
(SGST) (SGST)
SGST credit should be utilized for payment of
SGST and IGST in that order. ITC of CGST
cannot be utilized for payment of SGST and
vice versa.]
Net GST payable in cash Nil Nil 93,600
Working Note:
Computation of ITC available
Intra-State inward supply of services 45,000 45,000 --
[` 6,50,000 – `1,50,000] [5,00,000 × [5,00,000 ×
[ITC cannot be claimed on the e-invoices without 9%] 9%]
IRN since an e-invoice without IRN is not treated
as valid document for claiming ITC.]
Cars taken on rental basis from Mr. Mukesh -- -- --
[Tax on renting of motor car services wherein
cost of fuel is included in consideration provided
by a non-body corporate to a body corporate and
invoice is issued charging CGST/SGST @ 2.5%
is payable under reverse charge.
Time of supply of such services is 1 st February
being earlier of date of payment, or date
immediately following 60 days since issue of
invoice by the supplier. Since the time of supply
of renting of motor car services in the given case
does not fall in January, tax liability on the same
does not arise in said month.
Further, ITC on renting of motor car services
received is blocked since the recipient - Ajay Ltd.
is not in the same line of business 1.]
Total ITC available 45,000 45,000 --
1
It has been most logically assumed that Ajay Ltd. is not engaged renting of cars business.

Question 6
(a) Charm Limited, registered under GST in the State of Jharkhand, manufactures cosmetic
products and appointed Mr. Handsome of Mumbai, who is registered under GST in the
State of Maharashtra, as their Del-credere agent (DCA) to sell their products. Being a DCA,
he agrees to raise invoices in his own name and also guarantees for the realization of
payments from customers to Charm Limited.
In order to realize the payments from customers on time, he extends short term transaction
based loans to them and charges interest for the same.
Mr. Handsome provides you the following details of transactions carried out during the
month of March 2022:
Sl. Particulars Amount
No. in (` )
Outward supply:
i. Goods sold by Mr. Handsome in his DCA capacity (intra -State 2,80,000
transaction)
ii. Interest earned from the above customers for short term credit 20,000
facility provided for timely payment of dues. (intra-State
transaction)
iii. Commission bill raised on Charm Limited (inter-State transaction) 30,000
in respect of DCA services provided.
Inward supply:
iv Inter-State supply of goods received from Charm Limited. Being a Nil
DCA, no consideration was paid.
Value under section 15 - ` 2,00,000
v. Received training in marketing and distribution from Charm Limited Nil
as per DCA agreement, free of cost.
Company charges ` 75,000 for such training when it provides the
same to others.
Applicable rate of tax on both inward and outward supplies is 9% each for CGST and SGST
and 18% for IGST. Amounts given above are exclusive of taxes wherever applicable.
Subject to the information given above, necessary conditions are complied with for
availment of input tax credit.
You are required to calculate the gross GST liability and eligible input tax credit for the
month of March 2022 of Mr. Handsome. Brief notes should form part of your answer for
treatment of items in Sl. No. (i) to (v). (6 Marks)

(b) Answer the following, after reading the below given two paragraphs:
(i) Briefly discuss the relevant provision
(ii) decide the correct conclusion and
(iii) determine the validity of the given advice (Correct/Incorrect)
(I) Raju is engaged in the manufacture of 'Fly ash Bricks' in the State of Kerala. He
started his activity in the month of April 2022 and deals only in intra-State. His tax
consultant advised him to register under composition levy under GST as Raju's
turnover is expected to be below ` 1 crore for the said financial year.
(II) Dharun provides service as a business facilitator to Zio Bank Limited by facilitating in
opening of bank accounts to villagers in its rural branches in Punjab and earned a
commission of ` 22 lakh in the month of April, 2022. So far he is not registered under
GST. Dharun's tax consultant advised him that he is liable for registration under GST
as his gross receipts exceeded ` 20 lakh. Dharun has no other receipt / business
activity other than the above. (4 Marks)
Answer
(a) Computation of gross GST liability of Mr. Handsome for the month of March 2022
Particulars CGST SGST IGST
(`) (`) (`)
Goods sold by Mr. Handsome in his 2,80,000 27,000 27,000
DCA capacity [3,00,000 [3,00,000
Add: Interest earned for short term 20,000 × 9%] × 9%]
credit facility provided to above
customers
[Interest included in the value of supply
of the goods sold since where DCA is
an agent under Schedule - I of the
CGST Act, short term credit facility
provided by DCA to the buyer is
subsumed in the supply of the goods by
the DCA to the buyer.]
Commission charged for DCA services 5,400
[Being taxable supply of services.] [30,000
× 18%]
Gross GST liability 27,000 27,000 5,400
Note: Since the invoice for goods sold is issued by the DCA – Mr. Handsome in his
own name, he would fall under the ambit of an agent under Schedule – I of the CGST
Act.

Computation of eligible ITC for the month of March 2022

Particulars CGST SGST IGST (`)
(`) (`)
Inward supply of goods from Charm Limited free 36,000
of cost [2,00,000
[Supply of goods by principal – Charm Limited to × 18%]
the agent – Mr. Handsome qualifies as supply
even though it is made without consideration.]
Training in marketing and distribution received -- -- --
from Charm Limited free of cost
[Since no consideration is charged for the
services provided, said services do not qualify as
supply. As no GST is paid on the same, ITC is not
available]
Total ITC available Nil Nil 36,000
(b) (I) A registered person whose aggregate turnover in the preceding financial year did not
exceed ` 1.5 crore in a State/UT may opt for composition scheme subject to fulfilment
of specified conditions.
One of these conditions is that he must not be engaged in the manufacture of notified
goods including fly ash bricks.
Therefore, in the given case, since Raju is engaged in manufacture of fly ash bricks,
he cannot opt for composition levy even though his aggregate turnover in the
preceding financial year is nil.
Thus, the advice given by his tax consultant is not correct.
(II) Services by a business facilitator to a banking company with respect to accounts in
its rural area branch is exempt from GST.
Since in the given case, Dharun is engaged exclusively in providing the exempt
services, it is not liable to obtain registration even though his aggregate turnover
exceeds ` 20 lakh.
Thus, the advice given by his tax consultant is not correct.
Question 7
(a) Nesamani started his business activities in the month of February 2022 in the State of
Orissa. He provided the following details:

Particulars Amount in `
(i) Outward supply of petrol (Intra State) 4,00,000
(ii) Transfer of exempt goods to his branch in Rajasthan (Inter- 2,00,000
State)
(iii) Outward supply of taxable goods by his branch in Uttar 5,00,000
Pradesh (Intra State)
(iv) Outward supply of services on which tax is payable under 6,00,000
RCM by the recipient of services (Intra-State)
(v) Inward supply of services on which tax is payable under RCM 2,00,000
(Intra- State)
From the information given above, compute the aggregate turnover of Nesamani and also
decide whether he is required to get registration under GST. Assume that the amounts
given above are exclusive of taxes. (5 Marks)
(b) (i) Pranesh has deposited a sum of ` 5,000 under the head of ‘Fee’ column of Cess and
`4,000 was lying unutilized under the head of ‘Penalty’ column of IGST. Both the
deposits were made wrongly instead of depositing under the head of Fee column
under SGST.
In the light of the provisions of section 49(10) & 49(11) of the CGST Act, 2017, briefly
explain the relevant provisions as how can Pranesh rectify these errors? (3 Marks)
(ii) M/s Sakura Enterprises made an inter-State supply of taxable goods valued at
` 47,500 and exempt goods valued at ` 2,000. Rate of IGST for taxable supply was
6%. Determine, with brief reasons, whether e-way bill generation is mandatory for the
above supply made by M/s Sakura Enterprises. (2 Marks)
Answer
(a)
Computation of aggregate turnover of Nesamani
Outward supply of petrol 4,00,000
[Supply of petrol being a non-taxable supply is an exempt supply.
Value of exempt supply is includible in aggregate turnover.]
Inter-State stock transfer of exempt goods 2,00,000
[Supply of taxable/exempt goods between distinct persons is
includible.]
Outward supply of taxable goods from Uttar Pradesh branch 5,00,000
[Value of outward supplies under same PAN are includible.]

Outward supply of services taxable under reverse charge 6,00,000

[Includible in aggregate turnover.]
Inward supply of services taxable under reverse charge --
[Excludible from the aggregate turnover.]
Aggregate turnover 17,00,000
For a supplier engaged in supply of goods and services from the States of Orissa and Uttar
Pradesh, the threshold limit of aggregate turnover to obtain registration is ` 20 lakh.
However, a person required to pay tax under reverse charge has to obtain registration
compulsorily irrespective of the quantum of turnover.
Since in the given case, Nesamani is required to pay tax under reverse charge, it is liable
to obtain registration compulsorily irrespective of his quantum of turnover.
(b) (i) A registered person is allowed to make intra-head or inter-head transfer of amount,
as available in electronic cash ledger, using specified form.
It can transfer any amount of tax, interest, penalty, fee or others, under one (major or
minor) head to another (major or minor) head, as available in the electronic cash
ledger.
Therefore, in the given case, amount of ` 5,000 available under minor head ‘fee’ of
major head ‘cess’ and ` 4,000 available under minor head ‘penalty’ of major head
‘IGST’ can be transferred to minor head ‘fee’ of major head ‘SGST’ using specified
form.
(ii) In the given case, consignment value of goods (including GST and excluding value
of exempt supply) is ` 50,350 (47,500 × 106%).
Since there is a movement of goods of consignment value exceeding ` 50,000, M/s
Sakura Enterprises is mandatorily required to issue e-way bill.
Question 8
(a) Rule 86B restricts the use of Input Tax Credit (ITC) available in the Electronic Credit Ledger
for discharging output tax liability. List down the exceptions to the rule 86B.
(5 Marks)
(b) List any three situations that warrant issue of credit note. Briefly explain the time line to
declare such credit note in the GST return.
OR
List the details of outward supplies which can be furnished using Invoice Furnishing Facility
(IFF). Also briefly list the cases where a registered person is debarred from furnish ing
details of outward supplies in GSTR-1/IFF. (5 Marks)

Answer
(a) Rule 86B of the CGST Rules, 2017 restricts the use of ITC available in the Electronic Credit
Ledger for discharging output tax liability by a registered person. Exceptions to rule 86B
are as follows:
(1) Where the said person/proprietor/karta/managing director/any of its two partners,
whole-time directors, members of Managing Committee of Associations or Board of
Trustees, as the case may be, have paid more than ` 1 lakh as income tax in each
of the last 2 financial years.
(2) Where the registered person has received a refund of more than ` 1 lakh in the
preceding FY on account of unutilised ITC in case of
(i) zero rated supplies made without payment of tax or
(ii) inverted duty structure.
(3) Where the registered person has discharged his liability towards output tax through
the electronic cash ledger for an amount which is in excess of 1% of the total output
tax liability, applied cumulatively, upto the said month in the current FY.
(4) Where the registered person is Government Department, Public Sector Undertaking,
Local authority or Statutory body. Said restriction may be removed by Commissioner/
authorised officer after required verifications and safeguards.
(b) Situations that warrant the issue of credit note are as follows:
• The supplier has erroneously declared a value which is more than the actual value of
the goods or services provided.
• The supplier has erroneously declared a higher tax rate than what is applicable for
the kind of the goods or services or both supplied.
• The quantity received by the recipient is less than what has been declared in the tax
invoice.
• The quality of the goods or services or both supplied is not to the satisfaction of the
recipient thereby necessitating a partial or total reimbursement on the invoice value.
The details of credit note are declared in the GST return for the month during which such
credit note has been issued but not later than:
(i) September following the end of the financial year in which such supply was made,
or
(ii) the date of furnishing of the relevant annual return,

whichever is earlier.
Alternative answer (b)
Details of outward supplies which can be furnished using IFF are as follows:
(a) invoice wise details of inter-State and intra-State supplies made to the registered
persons;
(b) debit and credit notes, if any, issued during the month for such invoices issued
previously.
Cases where a registered person is debarred from furnishing details of outward supplies
in GSTR-1/using IFF:
(i) A registered person is not allowed to furnish Form GSTR-1, if he has not furnished
the return in Form GSTR-3B for the preceding 2 months 2/ for the preceding 1 month 3.
(ii) A registered person, opting for QRMP (Quarterly Return Monthly Payment) scheme
is not allowed to furnish Form GSTR-1/using IFF, if he has not furnished the return in
Form GSTR-3B for preceding tax period.
2 Position of law till 31.12.2021

3 Position of law w.e.f. 01.01.2022

Part - II
questions.
All questions relate to assessment year 2022-23, unless otherwise stated.
Question 1
Mrs. Nisha, a resident individual aged 54 years, is carrying on business of manufacturing of
textile fabrics, as a proprietor. The turnover in the previous year 2020-21 was ` 250 lakhs and
in the current previous year 2021-22, it is ` 600 lakhs. The net profit as per the profit and loss
account as on 31-03-2022 is ` 5,61,000. She provides the following additional information those
were not considered while making the profit and loss account for the previous year 2021-22.
(i) Depreciation has not been debited to profit and loss account. The details of the plant &
machinery employed in the business are given as under:
Date PARTICULARS AMOUNT
01-04-2021 Opening written down value of machinery used for 4,75,000
manufacturing purpose
03-07-2021 New machinery purchased during the year, payment 7,25,000
made by an account pay cheque.
10-03-2022 Sold one of the old machine 75,000
She does not have any other fixed assets employed in the business.
(ii) Received subsidy of 20% on new machine purchased on 03-07-2021 during the previous
year under technology upgradation fund Scheme from the Central Government.
(iii) She paid a job charges for the value addition on the fabrics ` 90,000 without deduction of
tax to job worker by an account payee cheque.
(iv) Commission paid to one agent allowed as deduction in earlier assessment year amounting
` 50,000, has now been received back during previous year 2021-22, from the agent due
to settlement with commission agent.
(v) ` 25,000 paid to creditor for goods in cash.
tax Act as amended by the Finance Act, 2021 which are relevant for May, 2022 Examination.
The relevant assessment year is A.Y.2022-23.

(vi) Incurred loss of ` 1,17,500 from an eligible transaction carried out in respect of trading in
derivatives in a recognised stock exchange.
(vii) Interest received amounting ` 2,00,000, duly authorised by partnership deed of M/s Ramji
textiles @ 15% p.a. on the capital employed. She is sleeping partner in the Ramji textiles.
(viii) She Received ` 60,000 by pre-mature withdrawals from deposit including interest ` 5,000,
in post office time deposit, eligible for deduction under Section 80C.
(ix) She sold her gold bracelet (jewellery), used by her for personal purposes, on 01-05-2021
for ` 5,00,000, which was acquired for ` 40,000 on 01-03-2005. A diamond was embedded
onto bracelet on 01-05-2007 of ` 50,000. (cost inflation index 2004-05:113, 2007-08:129
and 2021-22:317)
(x) She received a gold coin (bullion) worth ` 55,000 (FMV) from her cousin (daughter of
uncle) during the previous year 2021-22.
(xi) She incurred long term loss from sale of share of the Indian company. (The STT is paid on
the sale and purchase of the shares) ` 75,000.
(xii) She deposited a sum of ` 50,000 with life insurance Corporation of India every year for
the maintenance of her mother aged 70 years depended upon him and suffering from
severe disability.
(xiii) She purchased the new residential house during the previous year and paid stamp duty
and registration fee ` 1,55,000 to get transfer the property in her name.
You are required to compute the total income and tax payable by Mrs. Nisha for the assessment
year 2022-23. (Ignore the provisions of Section 115BAC). Give brief note wherever necessary.
(14 Marks)
Answer
Computation of total income of Mrs. Nisha for A.Y. 2022-23

Particulars ` ` `
I. Income from business or profession
Net Profit as per profit and loss account 5,61,000
Add: Items not credited but taxable while
computing business income
- Commission from agent on settlement [Since 50,000
deduction was allowed in respect of commission
in earlier year and during the P.Y. 2021-22
Mrs. Nisha received back such amount due to
settlement, the same would be deemed as her
income]

- Interest on capital from partnership firm 1,60,000

[` 2,00,000/15% x 12%] [Since interest on
capital from M/s Ramji textiles is authorized by
partnership deed, interest@12% p.a. would be
allowed as deduction in the hands of firm under
section 40(b). Consequently, interest @ 12%
p.a. would be the business income of Mrs. Nisha
under section 28. For allowability of interest in
the hands of the firm, there is no requirement
that the partner should be a working partner]
2,10,000
7,71,000
Less: Items not debited but allowable while
- Job charges without deduction of tax 63,000
[` 90,000 – 30% of ` 90,000] [Mrs. Nisha’s
turnover for the P.Y. 2020-21 exceeds ` 1 crore,
hence, she is liable to deduct tax at source u/s
194C on Job charges of ` 90,000. Since
Mrs. Nisha has not deducted tax at source on
` 90,000, 30% would be disallowed under section
40(a)(ia). Remaining job charges paid would be
allowable as deduction while computing
business income
- Payment to creditor in cash [Payment to creditor -
in cash is not allowable as business expenditure,
since such amount exceeds ` 10,000 and paid
in cash by virtue of section 40A(3)]
63,000
7,08,000
Less: Depreciation as per Income-tax Rules
Opening WDV of machinery 4,75,000
Add: Purchase of machinery for
` 7,25,000 during the P.Y.
2021-22 by A/c payee cheque.
Subsidy of ` 1,45,000, being
20% of cost, received from
Central Government on new

machinery is to be reduced from

actual cost (` 7,25,000 –
` 1,45,000). 5,80,000
10,55,000
Less: Sale proceeds 75,000
WDV as on 31.3.2022 before
depreciation for P.Y. 2021-22 9,80,000
Depreciation @15% on ` 9,80,000 1,47,000
Additional Depreciation@20% on ` 5,80,000 1,16,000
(As new machinery is used in manufacturing business
and put to use for more than 180 days in the P.Y. 2,63,000
2021-22, depreciation and additional depreciation will
be allowed in full)
4,45,000
Less: Loss from eligible transaction carried out in 1,17,500
respect of trading in derivatives in a
recognized stock exchange is not a
speculative business and hence, the same is
allowed to be set off from textile business
income as per section 70.
3,27,500
II Capital Gains
Long term capital gain on sale of gold bracelet
since it is held for more than 36 months 5,00,000
Sales consideration
Less: Cost of acquisition (40,000 x 317/113) 1,12,212
Less: Cost of improvement (50,000 x 317/129) 1,22,868
Long- term capital gain on sale of gold bracelet 2,64,920
Note – In the additional information (xiii), it is
mentioned that Mrs. Nisha has purchased a new
residential house during the previous year. In such a
case, she would be eligible for exemption u/s 54F in
respect of amount invested in purchase of new
residential house from long term capital gain on sale
of gold bracelet. However, the cost of new residential
house is not provided in the question but only stamp

duty and registration fee is given which would also

be the part of cost of house. In such case exemption
u/s 54F would be ` 2,64,920 x 1,55,000/5,00,000 =
` 82,125. Accordingly, long term capital gain would
be ` 1,07,795 (instead of ` 1,89,920). In such a
case, Rebate u/s 87A would be ` 5,060 (instead of
` 12,500) and tax liability of Mrs. Nisha would be Nil
(instead of ` 9,340).
Less: Long term capital loss from sale of STT paid 75,000
shares of an Indian company allowed to be
set off from long term capital gain on sale of
gold bracelet as per section 70.
1,89,920
Fair market value of gold coin received from cousin 55,000
[Taxable u/s 56(2)(x), since cousin is not a relative
and the fair market value exceeds ` 50,000]
Pre-mature withdrawal from post office time deposit 60,000
[Amount including interest received on pre-mature
withdrawal from post office time deposit, in respect
1,15,000
of which deduction u/s 80C was claimed, would be
deemed to be the income of Mrs. Nisha]
Stamp duty and registration fee of ` 1,55,000 1,50,000
for the purpose of transfer of house property,
restricted to
Deduction under section 80DD
Sum deposited with LIC for the maintenance
of her dependent mother and suffering from 1,25,000
severe disability [Eligible for higher deduction
`1,25,000 in case of severe disability
irrespective of amount deposited with LIC] 2,75,000

Computation of tax liability of Mrs. Nisha for A.Y.2022-23

Particulars `
Tax on long-term capital gains @20% on ` 1,07,420 [` 1,89,920 – ` 82,500, 21,484
being unexhausted basic exemption limit (` 2,50,000 – `1,67,500)]
Tax on other income of ` 1,67,500 [` 3,57,420 – ` 1,89,920, being LTCG], being Nil
lower than the basic exemption limit
21,484
Less: Rebate u/s 87A [Tax payable or `12,500, whichever is less] 12,500
8,984
Add: Health and education cess@4% 359
Tax liability 9,343
Tax liability (rounded off) 9,340
Note - The last two lines in the first para of the question reads as follows–
“The net profit as per the profit and loss account as on 31.3.2022 is ` 5,61,000. She provides
the following additional information those were not considered while making the profit
and loss account for the previous year 2021-22”
Items (i) to (xiii) are listed thereunder.
On a plain reading of the above sentences, it appears that none of the expenditures/receipts in
(i) to (xiii) were considered while making the profit and loss account. The above solution has
been prepared accordingly.
Alternatively, it is possible to interpret the last sentence (bold underlined above) to mean that
as far as items (iii) and (v) are concerned, wherein disallowance of expenditure is attracted u/s
40(a)(ia) and 40A(3), respectively, such disallowances (and not the expenditure itself) were not
considered while making the profit and loss account of the previous year 2021-22. If so
interpreted, then, for item (iii), instead of reducing ` 63,000, ` 27,000 has to be added back.
Likewise for item (v), ` 25,000 has to be added back. In such a case, profits and gains from
business and profession, Gross Total Income, Total Income and Tax Payable would change
accordingly. An alternate solution based on this interpretation has been worked out as follows:
Alternate solution
Computation of total income of Mrs. Nisha for A.Y. 2022-23
Particulars ` ` `
Net Profit as per profit and loss account 5,61,000

Add: Items not credited but taxable while

- Commission from agent on settlement [Since 50,000
deduction was allowed in respect of
commission in earlier year and during the
P.Y. 2021-22 Mrs. Nisha received back such
amount due to settlement, the same would be
deemed as her income]
- Interest on capital from partnership firm 1,60,000
[` 2,00,000/15% x 12%] [Since interest on
capital from M/s Ramji textiles is authorized by
partnership deed, interest@12% p.a. would be
allowed as deduction in the hands of firm under
section 40(b). Consequently, interest @ 12%
p.a. would be the business income of
Mrs. Nisha under section 28. For allowability of
interest in the hands of the firm, there is no
requirement that the partner should be a
working partner]
2,10,000
7,71,000
Add: Disallowances not considered while
- Job charges without deduction of tax 27,000
[30% of ` 90,000] [Mrs. Nisha’s turnover for the
P.Y. 2020-21 exceeds ` 1 crore, hence, she is
liable to deduct tax at source u/s 194C on Job
charges of ` 90,000. Since Mrs. Nisha has not
deducted tax at source on ` 90,000, 30%
would be disallowed under section 40(a)(ia).
- Payment to creditor in cash [Payment to 25,000
creditor in cash is not allowable as business
expenditure, since such amount exceeds
` 10,000 and paid in cash as per section
40A(3)]
52,000
8,23,000

Less: Depreciation as per Income-tax Rules

Opening WDV of machinery 4,75,000
Add: Purchase of machinery for
` 7,25,000 during the
P.Y. 2021-22 by A/c payee
cheque. Subsidy of ` 1,45,000,
being 20% of cost, received
from Central Government on
new machinery is to be
reduced from actual cost
(` 7,25,000 – ` 1,45,000). 5,80,000
10,55,000
Less: Sale proceeds 75,000
WDV as on 31.3.2022 before
depreciation for P.Y. 2021-22 9,80,000
Depreciation @15% on ` 9,80,000 1,47,000
Additional Depreciation@20% on ` 5,80,000 1,16,000
(As new machinery is used in manufacturing 2,63,000
business and put to use for more than 180 days in
the P.Y.2021-22, depreciation and additional
depreciation will be allowed in full)
5,60,000
Less: Loss from eligible transaction carried out in 1,17,500
respect of trading in derivatives in a
recognized stock exchange is not a
speculative business and hence, the same
is allowed to be set off from textile business
income as per section 70.
4,42,500
II Capital Gains
Long term capital gain on sale of gold bracelet
since it is held for more than 36 months 5,00,000
Sales consideration
Less: Cost of acquisition (40,000 x 317/113) 1,12,212
Less: Cost of improvement (50,000 x 317/129) 1,22,868

Long- term capital gain on sale of gold bracelet 2,64,920

Note – In the additional information (xiii), it is
mentioned that Mrs. Nisha has purchased a new
residential house during the previous year. In such
a case, she would be eligible for exemption u/s 54F
in respect of amount invested in purchase of new
residential house from long term capital gain on
sale of gold bracelet. However, the cost of new
residential house is not provided in the question but
only stamp duty and registration fee is given which
would also be the part of cost of house. In such
case, exemption u/s 54F would be ` 2,64,920 x
1,55,000/5,00,000 = ` 82,125. Accordingly, long
term capital gain would be ` 1,07,795 (instead of
` 1,89,920). In such a case, Rebate u/s 87A would
remain as ` 12,500 and tax liability of Mrs. Nisha
would be ` 11,111, before rounding off (instead of
` 28,193).
Less: Long term capital loss from sale of STT paid 75,000
shares of an Indian company allowed to be
set off from long term capital gain on sale of
gold bracelet as per section 70
1,89,920
Fair market value of gold coin received from cousin 55,000
[Taxable u/s 56(2)(x), since cousin is not a relative
and the fair market value exceeds ` 50,000]
Pre-mature withdrawal from post office time 60,000
deposit [Amount including interest received on pre-
mature withdrawn from post office time deposit, in
1,15,000
respect of which deduction u/s 80C was claimed,
would be deemed to be the income of Mrs. Nisha
Stamp duty and registration fee of 1,50,000
` 1,55,000 for the purpose of transfer of
house property, restricted to

Deduction under section 80DD

Sum deposited with LIC for the maintenance
of her dependent mother and suffering from 1,25,000
severe disability [Eligible for higher
deduction `1,25,000 in case of severe
disability irrespective of amount deposited 2,75,000
with LIC]
Computation of tax payable by Mrs. Nisha for A.Y.2022-23

Particulars `
Tax on long-term capital gains @20% on `1,89,920 37,984
Tax on other income of ` 2,82,500 [` 4,72,420 – ` 1,89,920, being LTCG] 1,625
– 5% of ` 32,500 (` 2,82,500 – basic exemption limit ` 2,50,000)
39,609
Less: Rebate u/s 87A [Tax payable or ` 12,500, whichever is less] 12,500
27,109
Add: Health and education cess@4% 1,084
Tax Payable 28,193
Tax Payable (rounded off) 28,190
Question 2
(a) Discuss the liability of tax deduction at source under the Income-tax Act, 1961 in respect
of the following cases with reference to A.Y. 2022-23.
(i) XY a partnership firm is selling its product 'R' through the E-commerce Platform
provided by AB Ltd. (E-commerce Operator). AB Ltd., credited in its books of account,
the account of XY on 28th February, 2022 by sum of ` 4,90,000 for the sale of product
R, made during the month February, 2022.
Mr. Rai, who purchased product 'R' through the platform provided by AB Ltd. made
payment of ` 60,000 directly to XY on 21 st February, 2022.
(ii) ABC Ltd is a producer of natural gas. During the year it sold natural gas worth
` 26,50,000 to M/s Deep Co., a partnership firm. It also incurred ` 1,70,000 as freight
for the transportation of gas. It raised the invoice and clearly segregated the value of
gas as well as the transportation charges.
(iii) ABC LLP paid job charges to XYZ, a partnership firm for doing embroidery work on
the fabric supplied by the ABC LLP during the previous year 2021-22 as under:

BILL NO. DATE AMOUNT `
1 30-04-2021 27,000
57 30-06-2021 25,000
105 30-09-2021 28,000
151 30-12-2021 32,000
(6 Marks)
(b) Mr. Harsh furnishes the following details for the year ended on 31-03-2022:
PARTICULARS AMOUNT
(`)
Salary received from partnership firm (the same was allowed to the firm) 8,50,000
Loss on sale of shares listed in stock exchange held for 18 months and 6,00,000
the STT paid on the sale and acquisition
Long term capital gain on sale of land 5,00,000
Brought forward business loss of assessment year 2014-15 6,00,000
Loss of the specified business covered in Section 35AD 3,50,000
Loss from house property 2,50,000
Income from betting (gross) 50,000
Loss from card games 35,000
Compute the total income and show the item eligible for carry forward of Mr. Harsh for the
assessment year 2022-23. (4 Marks)
(c) Mr. Sarthak is a member of HUF. It consists of himself, his wife Juhi and his major son
Arjun and his minor daughter Aditi. Mr. Sarthak transferred his house property acquired
through his personal income to the HUF without any consideration.
On 01-10-2021, HUF is partitioned and such property being divided equally. Net annual
value of the property for the Previous Year 2021-22 is ` 1,00,000. Determine the tax
implications. (4 Marks)
Answer
(a) (i) AB Ltd, an e-commerce operator is required to deduct tax @1% under section 194-O
on ` 5,50,000 (i.e., ` 4,90,000 credited on 28.2.2022 plus deemed payment of
` 60,000 on 21.2.2022, being payment directly made by Mr. Rai to the e-commerce
participant XY), being the gross amount of sale of product ‘R’ of XY, an e-commerce
participant, since such sale is effected in February, 2022 is facilitated by AB Ltd.
through its e-commerce platform.
Hence, TDS u/s 194O = 1% on ` 5,50,000 = ` 5,500

(ii) Since ABC Ltd., being the producer of the natural gas, sells as well as transports the
gas to M/s. Deep Co., the purchaser, till the point of delivery, where the ownership of
gas is simultaneously transferred to M/s. Deep Co, the manner of raising the invoice
(whether the transportation charges are embedded in the cost of gas or shown
separately) does not alter the basic nature of such contract which remains essentially
a ‘contract for sale’ and not a ‘works contract’ as envisaged in section 194C.
Therefore, in such circumstances, the TDS provisions would not be attracted on
`1,70,000, being the component of gas transportation charges paid by M/s. Deep Co.
to ABC Ltd.
Alternate Answer:
The above solution is based on Circular No. 9/2012 dated 17.10.2012, wherein it has
been clarified that in case the Owner/Seller of the gas sells as well as transports the
gas to the purchaser till the point of delivery, where the ownership of gas to the
purchaser is simultaneously transferred, the manner of raising the sale bill, does not
alter the basic nature of such contract which remains essentially a 'contract for sale'
and not a 'works contract' as envisaged in section 194C of the Act.
Since, the question is silent on the timing of the transfer of ownership of the gas to
the purchaser, an assumption that the ownership of the gas to the purchaser is
transferred before its transportation is possible. In such a case, the transportation of
gas after transfer of ownership may be considered as a separate contract for
transportation of gas i.e. ‘works contract’ u/s 194C, and hence TDS @ 2% has to be
deducted by M/s. Deep Co. on ` 1,70,000/- i.e. ` 3,400/-.
(iii) In this case, the individual contract payments (through the bills dated 30.4.2021,
30.6.2021 and 30.9.2021) made by ABC LLP to XYZ does not exceed ` 30,000.
However, since the aggregate amount paid to XYZ during the P.Y. 2021-22 exceeds
` 1,00,000 (on account of the last payment of ` 32,000, due on 30.12.2021, taking
the total from ` 80,000 to ` 1,12,000), the TDS provisions under section 194C would
get attracted on the entire sum of ` 1,12,000.
Tax has to be deducted @ 2% (since payment is to a firm, XYZ) on the entire amount
of ` 1,12,000, from the last payment of ` 32,000 on 30.12.2021.
Hence, TDS u/s 194C = ` 2,240.
(b) Computation of total income of Mr. Harsh for the A.Y.2022-23
Particulars ` `
Salary received from partnership firm (would be fully taxable 8,50,000
in the hands of Mr. Harsh as business income, since the
same was allowed to the firm as deduction)

Less: Loss from house property ` 2,50,000 (can be set-off 2,00,000

against income from any other head only to the extent of
` 2 lakh)
6,50,000
Less: Set-off of brought forward business loss of A.Y. 6,00,000
2014-15 (since the eight year time period for set-off has not
expired)
50,000
Capital Gains
Long-term capital gain on sale of land 5,00,000
Less: Set-off of long-term capital losses (since held for 18
months i.e., more than 12 months) on sale of STT paid listed
shares [Such set-off is permissible since it is a loss from a
source of income taxable u/s 112A] 5,00,000 -
Income from betting (gross) 50,000
[No Loss can be set off against income from betting]
Loss of ` 35,000 from card games can neither be set-off nor -
be carried forward
Losses to be carried forward to A.Y. 2023-24 `
Loss from house property (` 2,50,000 – ` 2,00,000) 50,000
Loss from specified business covered u/s 35AD [Entire loss 3,50,000
is to be carried forward, since there is no income from any
specified business for A.Y.2022-23. Such loss has to be
carried forward for set-off against income from any specified
business in A.Y.2023-24]
Long-term capital loss on sale of listed shares (STT paid) 1,00,000
[` 6,00,000 – ` 5,00,000]
(c)
`
Since Mr. Sarthak, who is a member of the HUF, transfers the house 35,000
property acquired by him out of his personal income to the HUF without
any consideration, the income from such property would continue to be
included in his total income upto the date of partition. Accordingly,
income from such property for six months upto the date of partition i.e.,
30.9.2021 (6/12 x ` 70,000 [Net Annual Value of ` 1,00,000 less

deduction under section 24(a) @30%) would be included in the total

income of Mr. Sarthak.
Since the HUF was partitioned on 1.10.2021, the income derived from
such converted house property as is received by Mr. Sarthak’s spouse,
Juhi, on partition will be deemed to arise to Mr. Sarthak from house
property transferred indirectly by him to her and consequently, such
income would also be included in the total income of Mr. Sarthak.
Accordingly, Mr. Sarthak’s share (25%) and Juhi’s share (25%) would be
included in the total income of Mr. Sarthak.
Sarthak’s Share [25% of ` 35,000 (` 70,000 x 6/12)] 8,750
Juhi’s Share [25% of ` 35,000] included in the total income of Sarthak 8,750
Income from house property includible in the income of Mr. Sarthak 52,500
25% share of Sarthak’s minor daughter, Aditi, i.e., ` 8,750, being 25% of ` 35,000,
would be included in the total income of Mr. Sarthak or Juhi, whosoever’s total income,
before including Aditi’s income, is higher.
Such parent shall be entitled to an exemption of ` 1,500 under section 10(32).
25% share of Sarthak’s major son, Arjun, i.e., ` 8,750, being 25% of
` 35,000, would be included in Arjun’s total income.
Distribution of house property on partition of HUF is not a transfer for levy of capital
gains tax.
Question 3
(a) Mr. Lalit, a dealer in shares and securities, has entered into following transactions during
the previous year 2021-22:
(i) Received a motor car of ` 5,00,000 as gift from his friend Sunil on the occasion of his
marriage anniversary.
(ii) Cash gift of ` 21,000 each from his four friends.
(iii) Land at Jaipur on 1 st July,2021 as a gift from his friend Kabra, the stamp duty value
of the land is ` 6 lakhs as on the date. The land was acquired by Mr. Kabra in the
previous year 2001-02 for ` 2 lakhs.
Mr. Lalit purchased from his friend Mr. Abhishek, who is also a dealer in shares, 1000
shares of ABC Ltd. @400 each on 19 th June,2021 the fair market value of which was
` 600 each on that date. Mr. Lalit sold these shares in the course of his business on
23rd June,2021.
Further, on 1st November, 2021, Mr. Lalit took possession of his residential house booked
by him two years back at ` 20 lakh. The stamp duty value of the property as on
1st November, 2021 was ` 32 lakh and on the date of booking was ` 24 lakh. He had paid
` 1 lakh by account payee cheque as down payment on the date of booking.

He received a shop (building) of the fair market value ` 1,50,000 and cash ` 50,000 in
distribution from the ABC (P) Ltd at the time of liquidation process of the company in
proportion of his share capital. The balance in general reserve of the company attributable
to his share capital is ` 1,25,000.
On 1st March,2022, he sold the plot of land at Jaipur for ` 8 lakh.
The value of the cost inflation index is 100 and 317 for the previous year 2001-02 and
2021-22 respectively.
Compute the income of Mr. Lalit chargeable under the head "Income from other sources"
and "Capital Gains" for A.Y. 2022-23. (8 Marks)
(b) Mrs. Shruti is an Indian citizen, is currently in employment with an overseas company
located in UAE. During the previous year 2021-22, she comes to India for 157 days. She
is in India for 200 days, 100 days, 76 days and 45 days in the financial years 2017-18,
2018-19, 2019-20 and 2020-21, respectively. Her annual income for the previous year
2021-22 is as follows:
Particulars Amount (` )
Income from salary earned and received in UAE 2,00,000
Income earned and received from a house property situated in UAE 5,00,000
Income deemed to be accrued and arise in India 5,00,000
Income from retail business (accrued and received outside India, 10,00,000
controlled from India)
Income accrued and arise in India 3,00,000
Life insurance premium paid by cheque in India 1,50,000
Determine the residential status of Mrs. Shruti for the assessment year 2022-23. (Support
your Answer with computation) (4 Marks)
(c) The assessee is found to be the owner of the gold (market value of which is ` 50,00,000)
during the financial year ending 31-03-2022 but he recorded to have spent ` 10,00,000 in
acquiring the same. Explain how the Assessing Officer will deal with the issue. (2 Marks)
Answer
(a) Computation of “Income from Other Sources” of Mr. Lalit for the A.Y. 2022-23
Particulars `
(i) Motor car is not included in the definition of “property” for the -
purpose of section 56(2)(x), hence, value of the same is not
taxable, even though it is received without any consideration.
(ii) Cash gift is taxable under section 56(2)(x) 84,000
[since the aggregate of ` 84,000 (` 21,000 x 4) exceeds ` 50,000]

(iii) Stamp value of plot of land at Jaipur, received without 6,00,000

consideration, is taxable under section 56(2)(x), since the same
exceeds ` 50,000
(iv) Difference of ` 2 lakh [1000 shares x ` 200] in the value of shares -
of ABC Ltd. purchased from Mr. Abhishek, a dealer in shares, is
not taxable as it represents the stock-in-trade of Mr. Lalit (since he
is a dealer in shares) and not capital asset.1
(v) Difference between the stamp duty value of ` 24 lakh on the date 4,00,000
of booking (since advance was paid by account payee cheque on
that date) and the actual consideration of ` 20 lakh paid is taxable
under section 56(2)(x) since the difference exceeds ` 2,00,000,
being the higher of ` 50,000 and 10% of consideration
(vi) Distribution of assets by ABC (P) Ltd. on liquidation attributable to 1,25,000
the accumulated profits (general reserve) of the company is
taxable as dividend under section 2(22)(c).
Income taxable under the head “Income from other sources” 12,09,000
Computation of “Capital Gains” of Mr. Lalit for the A.Y.2022-23
Particulars `
Capital gains on sale of land at Jaipur
Sale Consideration 8,00,000
Less: Cost of acquisition [deemed to be the stamp value charged to tax
under section 56(2)(x)] 6,00,000
Short-term capital gains (since held for a period of not more than 24 2,00,000
months. Period of holding of previous owner, Mr. Kabra, not to be
considered)
Capital gains on distribution of assets on liquidation of ABC (P) Ltd.
Full value of consideration for capital gains on distribution of assets
on liquidation of ABC (P) Ltd.
FMV of assets distributed 1,50,000
Cash 50,000
2,00,000
Less: Deemed dividend under section 2(22)(c) 1,25,000
Full value of consideration for computing capital gains 75,000
1 Since Mr. Lalit is a dealer in shares and it has been mentioned that the shares were subsequently sold in the
course of his business, such shares represent the stock-in-trade of Mr. Lalit.

Note -
(i) As cost of acquisition of shares in ABC(P) Ltd. is not given in the question, capital
gains on distribution of assets on liquidation of ABC(P) Ltd. in the hands of Mr. Lalit
has not been computed.
(ii) As per section 56(1)(i), dividend income is chargeable under the head “Income from
Other Sources”. Hence, deemed dividend u/s 2(22)(c) would be taxable under the
head “Income from Other Sources” in the hands of Mr. Lalit, who is a dealer in shares 2.
(b) Mrs. Shruti is an Indian citizen in employment in UAE. She comes on a visit to India during
the P.Y.2021-22 for 157 days.
Her stay in India in the four immediately preceding previous years is as follows :
P.Y. No. of days
P.Y.2017-18 200
P.Y.2018-19 100
P.Y.2019-20 76
P.Y.2020-21 45
Total 421
Computation of Total Income of Mrs. Shruti (excluding income from foreign sources)
Particulars `
Income from salary earned and received in UAE (income from a foreign -
source, hence, to be excluded)
Income earned and received from a house property situated in UAE -
(income from a foreign source, hence, to be excluded)
Income deemed to accrue or arise in India 5,00,000
Income from retail business (to be included since the business is controlled 10,00,000
from India, even though such income accrues and is received outside India)
Income accrued and arising in India 3,00,000
18,00,000
Less: Deduction u/s 80C (LIC premium paid by cheque in India) – 1,50,000
Assuming other conditions are fulfilled
Total income (excluding income from foreign sources) 16,50,000
Mrs. Shruti, an Indian citizen visiting India in the P.Y.2021-22, would be a resident in India
for A.Y.2022-23, if she satisfies either of the following conditions -
2 Alternatively, as per the tutorials given on the website of the Income-tax department, if shares are held
for trading purposes, then the dividend income would be taxable under the head “Profits and gains of
business or profession”.

(i) She is in India for 182 days or more during the P.Y.2021-22 or
(ii) She is in India for a period of 120 days or more during the P.Y.2021-22 and her
stay in India in the four immediately preceding previous years is 365 days or
more.
[This condition will apply to her since she comes on a visit to India during the
previous year 2021-22 and her total income (excluding income from foreign
sources) is ` 16.50 lakhs, which exceeds the threshold of ` 15 lakhs]
This first condition is not satisfied since she is in India only for 157 days during the
P.Y.2021-22.
The second condition is satisfied, since she has stayed in India for 157 days during the
P.Y.2021-22 and 421 days in the four immediately preceding previous years. Since she
has become resident in India for A.Y.2022-23 by satisfying this condition, by default, she
would be treated as resident but not ordinarily resident.
Conclusion – Mrs. Shruti’s residential status for A.Y.2022-23 is resident but not ordinarily
resident.
Note – The provisions of section 6(1A) deeming an Indian citizen to be a resident but not
ordinarily resident, irrespective of the period of her stay in India in the relevant previous
year, if she is not liable to tax in any other country would not apply to Shruti, since she is
a resident as per the provisions of section 6(1).
(c) As per section 69B, if the assessee is found to be the owner of gold (market value of which
is ` 50 lakhs) during the financial year ending 31.3.2022 but he has recorded to have spent
only ` 10 lakhs in acquiring it, the Assessing Officer can add the difference of the market
value of such gold and ` 10 lakhs i.e., ` 40 lakhs as the income of the assessee for
A.Y.2022-23, if the assessee offers no satisfactory explanation thereof.
Such income would be chargeable to tax@78% (@60% plus surcharge @25% and cess
@4%).
Question 4
(a) From the following particulars furnished by Mr. Suresh, aged 53 years, a resident Indian
for the previous year ended March 31, 2022, you are requested to compute his total income
and tax payable for the Assessment Year 2022-23. (Assuming he does not opt for the
Section 115BAC):
(i) He sold his vacant land on 09.12.2021 for ` 15 lakhs. The Stamp Duty Value (SDV)
of land at the time of transfer was ` 19 lakhs. The fair market value of the land as on
1st April, 2001 was ` 6 lakhs (SDV is ` 5,00,000). This land was acquired by him on
05.08.1996 for ` 3.40 lakhs. He had incurred registration expenses of ` 15,000 at
that time. The cost of inflation index for the year 2021-22 and 2001-02 are 317 and
100, respectively.

(ii) He owns an industrial undertaking established in a Special Economic Zone (SEZ) and
which had commenced operation during the financial year 2019-20. Total turnover of
the undertaking was ` 300 lakhs, which includes ` 120 lakhs from export turnover.
This industrial undertaking fulfils all the conditions of Section 10AA of the Income-tax
Act, 1961. Profit from this industrial undertaking is ` 30 lakhs.
(iii) He has income of ` 10,000 from crossword puzzles and ` 15,000 gross interest from
bank fixed deposit.
(iv) Tuition fees of ` 36,000 for his three children to a school. The fees being ` 12,000
p.a. per child. (6 Marks)
(b) Mr. Kabra is engaged in the business of growing and curing (further processing) coffee in
the state of Karnataka. The whole of coffee grown in his plantation is cured. Relevant
information pertaining to the year ended 31-03-2022 are given hereunder:
PARTICULARS AMOUNT `
Opening balance of the car as on 01-04-2021 3,00,000
Opening balance of machinery as on 01-04-2021 15,00,000
Expenses incurred in growing coffee 3,10,000
Expenses of curing coffee 3,00,000
Sale value of cured coffee 22,00,000
The car is used for the agricultural operations and the machine was used for coffee curing
business operations. Compute the income arising from the above activities for the
assessment year 2022-23 and the written down value as on 01-04-2022 (WDV as on
31-03-2022 less depreciation for the P.Y. 2021-22). (4 Marks)
(c) Explain with brief reasons, whether the return of income can be revised under Section
139(5) of the Income-tax Act, 1961 in the following cases:
(i) Belated return filed under Section 139(4)
(ii) Return already revised twice under Section 139(5)
(iii) Return of loss filed under Section 139(3)
OR
Due to some inconsistent information provided in the return of income furnished under
Section 139(1), the Assessing Officer considers it defective under Section 139(9) of the
Income-tax Act, 1961.
(i) How, the Assessing Officer would deal with the issue?
(ii) What are the consequences if defect is not rectified within the time allowed?
(iii) Specify the remedies available if not rectified within time allowed by the Assessing
Officer? (4 Marks)

Answer
(a) Computation of Total Income and Tax Payable by Mr. Suresh for A.Y. 2022-23
Particulars Amount Amount
(` ) (`)
Profits and gains from business or profession
Profit from SEZ undertaking 30,00,000
Capital Gains
Long term capital gain on sale of vacant land [since land
held for a period of more than 24 months, it is long-term
capital asset]
As per section 50C, Full value of consideration would be 19,00,000
stamp duty value since it exceeds 110% of actual sale
consideration
Less: Indexed cost of acquisition [` 5,00,000 x 317/100] 15,85,000
Cost of acquisition, being higher of 3,15,000
- Actual cost (` 3,40,000 + ` 15,000) ` 3,55,000
- lower of FMV of ` 6,00,000 and stamp duty ` 5,00,000
value of ` 5,00,000 as on 1.4.2001
Income from other sources
Income from crossword puzzles 10,000
Interest on fixed deposit 15,000
25,000
Less: Deductions under Chapter VI-A
Under section 80C – Tuition fees of two children 24,000
Less: Deduction under section 10AA 12,00,000
(` 30,00,000 x 120 lakhs/300 lakhs) x 100 %, being 3rd year
of operation
Computation of Tax payable on total income under the
regular provisions of the Income-tax Act, 1961
Tax on LTCG @ 20% of ` 3,15,000 63,000
Tax on income from crossword puzzles @30% of ` 10,000 3,000
Tax on remaining amount of ` 17,91,000 [` 2,37,300 (30%
of ` 7,91,000) + ` 1,12,500] 3,49,800
4,15,800


Tax Payable under the regular provisions of the Act 4,32,432
Tax Payable under the regular provisions of the Act 4,32,430
(rounded off)
Computation of Adjusted Total Income and Alternate Minimum Tax (AMT) payable
Total Income computed under the regular provisions of the Act 21,16,000
Add: Deduction u/s 10AA 12,00,000
Adjusted Total Income 33,16,000
Since Adjusted Total Income exceeds ` 20 lakhs, the provisions
of Alternate Minimum Tax (AMT) are attracted in this case
AMT 6,37,998
AMT (rounded off) 6,38,000
Since the regular income-tax payable is less than the AMT payable, the adjusted total
income of ` 33,16,000 shall be deemed as the total income and tax is [email protected]%
thereof plus cess@4%. Therefore, his tax liability would be ` 6,38,000.
However, he would be entitled to AMT credit of ` 2,05,570 (` 6,38,000 – `4,32,430)
(b) Computation of Income from growing and curing coffee of Mr. Kabra for
A.Y. 2022-23
(` ) (`)
Income from growing and curing coffee
Sale value of cured coffee 22,00,000
Less: Expenses incurred in growing coffee 3,10,000
Depreciation on Car (15% of ` 3,00,000) 45,000
3,55,000
18,45,000
Less: Expenses of curing coffee 3,00,000
Depreciation on machinery (15% of ` 15,00,000) 2,25,000
5,25,000
13,20,000
Business Income [25% of ` 13,20,000] 3,30,000
Agricultural Income [75% of ` 13,20,000] 9,90,000

Computation of Written Down Value as on 1.4.2022

Opening balance of Car as on 1.4.2021 3,00,000
Less: Depreciation@15% on ` 3 lakh 45,000
WDV of car as on 1.4.2022 2,55,000
Opening balance of machinery as on 1.4.2021 15,00,000
Less: Depreciation@15% on ` 15 lakh 2,25,000
WDV of machinery as on 1.4.2022 12,75,000
(c) First Alternative
Any person who has furnished a return under section 139(1) or 139(4) can file a revised
return at any time
- before three months prior to the end of the relevant assessment year or
- before the completion of assessment,
whichever is earlier, if he discovers any omission or any wrong statement in the return filed
earlier. Accordingly,
(i) A belated return filed under section 139(4) can be revised.
(ii) A return revised earlier can be revised again as the first revised return replaces the
original return; and the second revised return replaces the earlier return filed.
(iii) A return of loss filed under section 139(3) is deemed to be return filed under section
139(1), and therefore, can be revised under section 139(5).
(c) Second Alternative
(i) Where the Assessing Officer considers that the return of income furnished by the
assessee is defective,
- he may intimate the defect to the assessee and
- give him an opportunity to rectify the defect within a period of 15 days from the
date of such intimation.
The Assessing Officer has the discretion to extend the time period beyond 15 days,
on an application made by the assessee.
(ii) If the defect is not rectified within the period of 15 days or such further extended
period, then, the return would be treated as an invalid return. The consequential effect
would be the same as if the assessee had failed to furnish the return.
(iii) The Assessing Officer has the power to condone the delay and treat the return as a
valid return, if the assessee has rectified the return after the expiry of 15 days or the
further extended period, but before the assessment is made.

compulsory and any two questions from question nos 6-8.
amended by the significant notifications/ circulars issued upto 31 st October, 2021.
Question 5
Zeon Ltd., a GST registered supplier located in Ranchi, Jharkhand, is engaged in the
manufacturing of washing machines & mixer grinders. It provides you the details of various
activities undertaken during the month of September, 2021 as follows:
Sl. Particulars Amount
No. (` )
(i) Outward supplies made during the month
a. Within Jharkhand ` 24,00,000
29,00,000
b. Outside Jharkhand ` 5,00,000
(ii) Purchase of raw materials from registered dealers within Jharkhand
which includes materials worth ` 2,00,000 purchased from
Mr. Krishna, a registered person who is paying tax under composition
scheme. 7,00,000
(iii) Bus purchased from a registered dealer in Tatanagar, Jharkhand. 12,00,000
Bus used to ferry its 25 workers to and from factory.
Assume the rates of GST applicable on various supplies as follows:
Nature of supply CGST SGST IGST
Composition supplies 0.5% 0.5% -
Bus 14% 14% 28%
Raw material 6% 6% 12%
Washing machines & mixer grinders 9% 9% 18%
Opening balances of input tax credit as on 01/09/2021 were as follows:
CGST (`) SGST (`) IGST (` )
20,000 5,000 95,000

Note:
(i) All the figures mentioned above are exclusive of taxes.
(ii) Both inward & outward supplies within the State of Jharkhand are to be considered
intra-State supplies and outside the State of Jharkhand are inter-State supplies.
(iii) Subject to information given above, all the other conditions necessary for availing ITC have
been fulfilled.
Calculate the amount of net minimum GST payable in cash by Zeon Ltd. for the month of
September, 2021.
Brief and suitable notes should form part of your answer. (8 Marks)
Answer
Computation of minimum net GST payable in cash by Zeon Ltd. for the month of
September 2021
Outward supplies made 2,16,000 2,16,000
within Jharkhand [24,00,000 × 9%] [24,00,000 × 9%]
Outward supplies made 90,000
outside Jharkhand [5,00,000 × 18%]
Total output tax 2,16,000 2,16,000 90,000
Less: Input Tax Credit - 5,000 (90,000)
[Refer Working Note below] (IGST) (IGST)
[IGST credit be first utilized 2,16,000
for payment of IGST
(CGST)
liability. Remaining IGST
credit has been utilized for 2,03,000
payment of SGST liability (SGST)
since the SGST liability is
to be kept at minimum.
After exhausting IGST
credit, CGST and SGST
credit to be utilized. CGST
credit to be utilized for
payment of CGST and
SGST credit to be utilized
for the payment of SGST.
ITC of CGST cannot be
utilized for payment of
SGST and vice versa.]

Minimum net GST Nil 8,000 Nil

payable in cash
ITC to be carried forward 2,000
next month
Working Note:
Computation of ITC available
Opening balance 20,000 5,000 95,000
Purchase of raw materials from 30,000 30,000
registered dealers within Jharkhand [5,00,000 × 6%] [5,00,000 × 6%]
[7,00,000 – 2,00,000]
[ITC on purchases of goods worth
` 2,00,000 on which tax has been
paid under composition scheme is
blocked. ITC on remaining
purchases worth ` 5,00,000 is
available, being supply of goods
used/intended to be used in the
course/furtherance of business.]
Bus purchased from dealer in 1,68,000 1,68,000
Jharkhand used to ferry 25 workers [12,00,000 × 14%] [12,00,000 × 14%]
to and from factory
[ITC on motor vehicles for
transportation of persons with
seating capacity > 13 persons
(including the driver) used for any
purpose is allowed.]
Total ITC available 2,18,000 2,03,000 95,000
Question 6
(a) XYZ Pvt. Ltd. provided the following particulars relating to goods sold by it to ABC Pvt.
Ltd.:
Particulars Amount
(` )
List price of the goods (exclusive of taxes and discount) 50,000
Tax levied by the Municipal Authority on the sale of such goods 6,000
Packing charges (not included in the list price above) 2,500

Subsidy received from a NGO, directly linked to price (included in the list 3,000
price above)
Paid to one of the vendors by ABC Pvt.in relation to the service provided 2,000
by the vendor to XYZ Pvt. Ltd. (not included in the list price above)
XYZ Pvt. Ltd. offers 2% turnover discount on the list price after reviewing the performance
of ABC Pvt. Ltd. The discount was not known at the time of supply.
ABC Pvt. Ltd. delayed the payment and paid ` 5,000 (including GST of 18%) as interest
to XYZ Pvt. Ltd.
Determine the value of taxable supply made by XYZ Pvt. Ltd. under GST law. (6 Marks)
(b) Examine whether the following activities would amount to "supply" under GST law?
(i) Glory Ltd. is engaged in manufacturing and selling of cosmetic products. Seva Trust,
a charitable organisation, approached Glory Ltd. to provide financial assistance for
its charitable activities. Glory Ltd. donated a sum of ` 2 lakh to Seva Trust with a
condition that Seva Trust will place a hoarding at the entrance of the trust premises
displaying picture of products sold by Glory Ltd. (2 Marks)
(ii) Mr. Swamy of Chennai is working as a manager with ABC Bank. He consulted
M/s. Jacobs and Company of London and took its advice for buying a residential
house in Mumbai and paid them consultancy fee of 200 UK Pound for this import of
service. (2 Marks)
Answer
(a) Computation of value of taxable supply made by XYZ Pvt. Ltd.
List price of the goods (exclusive of taxes and discounts) 50,000
Tax levied by Municipal Authority on the sale of such goods 6,000
[Taxes other than GST, if charged separately, are includible in
the value of supply.]
Packing charges 2,500
[Being incidental expenses, same are includible in the value of
supply.]
Subsidy received from NGO Nil
[Since subsidy is received from a non-Government body and
directly linked to the price, the same is includible in the value of
supply.]

Payment made by ABC Pvt. Ltd. in relation to service provided 2,000

by vendor to XYZ Pvt Ltd1.
[Amount that supplier is liable to pay, but incurred by the
recipient, is includible in the value of supply.]
Turnover discount -
[Since discount is not known at the time of supply, it is not
deductible from the value of supply.]
Interest for delayed payment (rounded off) 4,237
[Includible in the value of supply] [5,000 × 100/118]
Value of taxable supply 64,737
(b) (i) An activity qualifies as supply under GST only if it is for a consideration and is in
course/furtherance of business. Donations received by the charitable organizations
are treated as consideration only when there’s an obligation on part of the recipient
of the donation to do anything.
Since in the given case, the display of products sold by the donor – Glory Ltd. - in
charitable organization’s premises aims at advertising/promotion of its business, it is
supply for consideration in course/furtherance of business and thus, qualifies as
supply under GST law.
(ii) Supply includes importation of services, for a consideration whether or not in the
course/furtherance of business. Thus, in the given case, the import of services by
Mr. Swamy amounts to supply although it is not in course/furtherance of business.
Question 7
(a) M/s. Xing Trans of Kolkata is engaged in the trading of transmitters. On 20/05/2021,
M/s. Xing Trans has sent 500 units of transmitters for exhibition at Chennai on sale or
return basis. Out of the said 500 units, 300 units have been sold on 28/07/2021 at the
exhibition. Out of remaining 200 units, 150 units have been brought back to Kolkata on
25/11/2021 and balance 50 units have neither been sold nor brought back.
Explain the provisions under GST law relating to issue of invoices with exact dates on
which tax invoices need to be issued by M/s. Xing Trans. (4 Marks)
(b) "One consolidated e-way bill can be generated for multiple invoices". Comment on the
validity of the above statement with reference to GST law. (3 Marks)
(c) "All taxpayers are required to file GSTR-1 only after the end of the current tax period."
Comment on the validity of the above statement with reference to GST law. (3 Marks)
1It has been most logically assumed that service provided by the vendor to XYZ Pvt. Ltd. is in relation to
supply of goods by XYZ Pvt. Ltd. to ABC Pvt. Ltd.

Answer
(a) Where the goods being sent for sale or return are removed before the supply takes place,
the tax invoice shall be issued before or at the time of supply or 6 months from the date of
removal, whichever is earlier.
In the given case, 500 units of transmitters have been sent for exhibition on sale or return
basis out of which 300 units are sold before 6 months from the date of removal. Thus, tax
invoice for said 300 units needs to be issued before or at the time of supply of such goods,
i.e. upto 28/07/2021.
Remaining 200 (150+ 50) units have neither been sold nor brought back till the expiry of 6
months from the date of removal goods, i.e. 20/11/2021. Thus, tax invoice for said 200
units needs to be issued upto 20/11/2021.
(b) The statement is invalid.
Multiple invoices cannot be clubbed to generate one e-way bill. If multiple invoices are
issued by the supplier to recipient, for movement of such goods, multiple e-way bills have
to be generated.
Thus, for each invoice, one e-way bill has to be generated, irrespective of the fact whether
same or different consignors or consignees are involved.
However, after generating all these e-way bills, one consolidated e-way bill can be
prepared for transportation purpose, if goods are going in one vehicle.
(c) The statement is partially valid.
A taxpayer cannot file Form GSTR-1 before the end of the current tax period.
However, following are the exceptions to this rule:
a. Casual taxpayers, after the closure of their business
b. Cancellation of GSTIN of a normal taxpayer.
A taxpayer who has applied for cancellation of registration will be allowed to file Form
GSTR-1 after confirming receipt of the application.
Question 8
(a) "Under the GST law, taxes on taxable services supplied by the Central Government or the
State Government to a business entity in India are payable by recipient of services".
State the exceptions of the above statement. (5 Marks)
(b) Mr. B, a registered supplier of Uttar Pradesh, is doing the trading of taxable goods. He
approaches you to understand the manner of utilisation of available Input Tax Credit (ITC).
With reference to provisions of payment of tax, state the manner of uilisation of ITC under
GST law. (5 Marks)

OR
State any five circumstances under which the proper officer can cancel the registration on
his own under the CGST Act, 2017.
Answer
(a) Tax on following services supplied by the Central Government or State Government to a
business entity in India is payable by the supplier of services:
(1) services of renting of immovable property provided to an unregistered business entity.
(2) services by the Department of Posts by way of speed post, express parcel post, life
insurance, and agency services provided to a person other than Central Government,
State Government or Union territory or local authority.
(3) services in relation to an aircraft or a vessel, inside or outside the precincts of a port
or an airport.
(4) services of transport of goods or passengers.
(b) The manner of utlisation of ITC under GST law is as under:
1. IGST credit should first be utilized towards payment of IGST.
2. Remaining IGST credit, if any, can be utilized towards payment of CGST and
SGST/UTGST in any order and in any proportion.
3. Entire ITC of IGST should be fully utilized before utilizing the ITC of CGST or
SGST/UTGST.
4. Subsequently, ITC of CGST should be utilized for payment of CGST and IGST in that
order.
5. ITC of SGST /UTGST should be utilized for payment of SGST/UTGST and IGST in
that order.
6. ITC of SGST/UTGST should be utilized for payment of IGST, only after ITC of CGST
has been utilized fully.
7. ITC of SGST/UTGST cannot be utilized for payment of CGST and vice versa.
Answer to Alternative
(b) Circumstances under which the proper officer can cancel the registration on his own under
the CGST Act, 2017:
(i) A registered person has contravened any of the following prescribed provisions of the
GST law:
(a) he does not conduct any business from the declared place of business.
(b) he issues invoice/bill without supply of goods/services in violation of the
provisions of GST law.

(c) he violates the provisions of anti-profeetering.

(d) he violates the provisions relating to furnishing of bank details.
(e) he avails ITC in violation of the provisions of the GST law.
(f) furnishes the details of outward supplies in GSTR-1 for one or more tax periods
which is in excess of the outward supplies declared by him in his valid return for
the said tax periods.
(g) he violates the provision relating to restrictions on use of amount available in
electronic credit ledger
(ii) A person paying tax under composition levy has not furnished returns for
3 consecutive tax periods.
(iii) A registered person paying tax under regular scheme has not furnished returns for
continuous period of 6 months.
(iv) Voluntarily registered person has not commenced the business within 6 months from
the date of registration.
(v) Registration was obtained by means of fraud, wilful misstatement or suppression of
facts.

Candidates are also required to answer any two questions from the remaining questions.
Working notes shall form part of the respective answers.
All questions pertaining to income-tax relate to assessment year 2021-22, unless stated
otherwise in the question.
Question 1
Mr. Shivansh, a resident and ordinarily resident aged 61 years, is engaged in the business of
manufacturing of motor parts. He is subject to tax audit under section 44AB of Income-tax Act,
1961. He has provided following information:
Profit & Loss account for the year ended 31 st March, 2021
Particulars (` ) Particulars (` )
To Administrative expenses 4,30,000 By Gross Profit 58,30,000
To Salaries & wages 20,00,000 By Profit on sale of asset of 2,00,000
scientific research
To Interest on loans 7,50,000 By Winning from lottery (Net of 31,500
TDS @ 30%)
To Depreciation 6,17,000
To Professional fees 2,70,000
To Rent, rates & taxes 2,80,000
To Travelling & conveyance 1,40,000
To Net Profit 15,74,500
Total 60,61,500 Total 60,61,500
Explanatory information:
(i) Opening and closing stock of finished goods were undervalued by 10%. Opening stock of
` 4,50,000 and Closing stock of ` 5,58,000 was shown.
The Suggested Answers for Paper 4A: Income-tax Law are based on the provisions of
Income-tax Act as amended by the Finance Act, 2020 which are relevant for December, 2021
Examination. The relevant assessment year is A.Y.2021-22.

2 INTERMEDIATE (NEW) EXAMINATION: DECEMBER, 2021
(ii) Salaries & wages include following items:

(a) Contributed 20% of basic salary in National Pension Scheme referred in section
80CCD regarding salary paid to an employee Mr. Ganesh who has withdrawn basic
salary of ` 3,00,000 and Dearness allowance is 40% of basic salary. 50% of
Dearness allowance forms part of the salary.
(b) Some of the employees opted for retirement under the voluntary retirement sch eme;
a sum of ` 2,40,000 was paid to them on 1 st January, 2021.
(iii) Interest on loan includes interest paid @ 15% per annum on loan of ` 12,00,000 which
was taken from State Bank of India on 01.05.2020 for purchase of new electric car of
` 15,00,000. The car is used for personal purpose.
(iv) Depreciation allowable as per Income-tax Rules, 1962 is ` 4,50,000 but during the
calculation of such depreciation following addition was not considered:
Motor car purchased for ` 3,00,000 for supply of finished goods to dealers on
25-08-2020.
(v) An asset was purchased for ` 6,00,000 on 17-11-19 for conducting scientific research
and the deduction was claimed under section 35 of the Income-tax Act, 1961. This asset
was sold on 05-09-2020 for a consideration of ` 8,00,000.
Other information:
A plot of Industrial land which was used by Mr. Shivansh for business purpose for last 10
years was compulsorily acquired by Central Government on 07.05.2020. The compensation of
` 12,00,000 was received on 27.02.2021. Such property was purchased by him on 08.08.2005
for ` 2,00,000. He has purchased another plot of industrial land on 21.04.2021 for ` 6,00,000.
Government has also paid ` 54,000 as interest on such compensation on 28.03.2021.
Cost Inflation Indices: FY 2020-21: 301, FY 2005-06: 117
Compute the total income and tax liability of Mr. Shivansh for the assessment year 2021-22
assuming that he has not opted for the provisions of section 115BAC. Ignore Provisions
relating to AMT. (14 Marks)
Answer
Computation of total income of Mr. Shivansh for A.Y. 2021-22
Particulars ` ` `
Net Profit 15,74,500
Add: Items debited but not allowable/item not
credited but taxable while computing
business income
- Employer’s contribution to NPS in excess of

10% of salary - Employer’s contribution to

the extent of 10% of salary i.e., basic salary
plus dearness allowance forming part of
salary would be allowed as deduction. Thus,
excess contribution i.e., ` 24,000 [` 60,000,
being 20% of ` 3,00,000 less ` 36,000
being 10% of ` 3,60,000 (` 3,00,000 + 20%
of ` 3,00,000] has to be added back. 24,000
- VRS expenditure - 1/5th of expenditure on
voluntary retirement scheme is allowable
over a period of five years u/s 35DDA. Since
whole amount of expenditure is debited to
Profit and Loss A/c, 4/5th has to be added
back [` 2,40,000 x 4/5]. 1,92,000
- Interest on loan taken for purchase of electric
car used for personal purpose not allowable
as deduction while computing business
income as being expense of personal nature.
Thus, ` 1,65,000 [` 12,00,000 x 15% x
11/12] has to be added back, since the same
forms part of interest on loan debited to profit
and loss account. 1,65,000
- Sale proceeds of asset acquired for
conducting scientific research taxable as
business income under section 41(3) in the
year of sale to the extent of lower of
` 6,00,000 (being the deduction allowed u/s
35) and ` 8,00,000 being the excess of sale
proceeds and deduction allowed u/s 35 i.e.,
(` 8,00,000 + ` 6,00,000) over the capital 6,00,000
expenditure incurred of ` 6,00,000
- Undervaluation of stock [(` 5,58,000 -
` 4,50,000) x 10/90] 12,000
Note: Alternatively, undervaluation of closing
stock i.e., ` 62,000 can be added back and
under valuation of opening stock i.e.,
` 50,000 can be reduced from net profits.
- Depreciation as per books of A/c 6,17,000
16,10,000
31,84,500

Less: Depreciation as per Income-tax Rules 4,50,000

Depreciation on Motor car purchased for
supply of finished goods [` 3,00,000 x 45,000
15%] 4,95,000
26,89,500
Less: Items of income credited to profit and
loss account but not taxable or
taxable under any other head of
income
- Profit on sale of asset of scientific
2,00,000
research [Taxable under the head
“Capital Gains”]
- Winning from lottery [Taxable under the
head “Income from other sources”] 31,500
2,31,500
24,58,000
II. Capital Gain
Short-term capital gains
Sale of asset acquired for conducting
scientific research
Sales consideration 8,00,000
Less: Cost of acquisition 6,00,000
Short- term capital gain 2,00,000
Long-term capital gains
Compulsory acquisition of industrial plot by
the Central Government taxable as per section
45(5)
Compensation received 12,00,000
Less: Indexed cost of acquisition [` 2,00,000 x 5,14,530
301/117]
Long-term capital gain [since such plot is held for 6,85,470
more than 24 months]
Less: Exemption u/s 54D
- Acquisition of industrial plot within 3 6,00,000
years 85,470 2,85,470

III. Income from other sources

Winning from lottery [` 31,500 x 100/70] 45,000
Interest on enhanced compensation 54,000
Less: 50% of enhanced compensation 27,000
27,000 72,000
Deduction under section 80EEB
Interest on loan taken for purchase of
electric vehicle allowable as deduction to the 1,50,000
extent of
Computation of tax liability of Mr. Shivansh for A.Y.2021-22
Particulars ` `
Tax on long-term capital gains @20% of ` 85,470 17,094
Tax on winning from lottery @30% of ` 45,000 13,500
Tax on total income (excluding LTCG and winning from lottery) of
` 25,35,000
Upto ` 3,00,000 [since Mr. Shivansh, a senior citizen, he is Nil
eligible for higher exemption limit]
` 3,00,001 – ` 5,00,000[@5% of ` 2.00 lakh] 10,000
` 5,00,001 – `10,00,000[@20% of ` 5 lakh] 1,00,000
` 10,00,001- ` 25,35,000 [@30% of ` 15,35,000] 4,60,500
5,70,500
6,01,094
Add: Health and education cess@4% 24,044
Tax liability 6,25,138
Tax liability (rounded off) 6,25,140
Question 2
(a) Examine the tax implications of the following transactions for the assessment year
2021-22: (Give brief reason)
(i) Government of India has appointed Mr. Rahul as an ambassador in Japan. He
received salary of ` 7,50,000 and allowances of ` 2,40,000 during the previous year
2020-21 for rendering his services in Japan. He is an Indian citizen having status of
non-resident in India for the previous year 2020-21.

(ii) Ms. Juhi, a non-resident in India is engaged in operations which are confined to
purchase of goods in India for the purpose of export. She has earned ` 2,50,000
during the previous year 2020-21.
(iii) Mr. Naveen, a non-resident in India, has earned ` 3,00,000 as royalty for a patent
right made available to Mr. Rakesh who is also a non-resident. Mr. Rakesh has
utilized patent rights for development of a product in India and 50% royalty is
received in India and 50% outside India.
(iv) Mr. James, a NRI, borrowed ` 10,00,000 on 01.04.2020 from Mr. Akash who is also
a non-resident and invested such money in the shares of an Indian Company.
Mr. Akash has received interest @ 12% per annum. (7 Marks)
(b) Ms. Mishika has entered into an agreement with M/s CVM Build Limited on 25.04.2017 in
which she agrees to allow such Company to develop a shopping mall on land owned by
her in New Delhi. She purchased such land on 05.05.2009 for ` 15,00,000. In
consideration, M/s CVM Build Limited will provide 20% share in shopping mall to Mishika.
The certificate of completion of shopping mall was issued by authority as on 26.12.2020.
On such date, Stamp duty value of shopping mall was ` 4,14,00,000. Subsequently on
18.03.2021, she sold her 15% share in shopping mall to Mr. Ketav in consideration of
` 65,00,000.
She has also purchased a house on 09.05.2020 in consideration of ` 46,00,000 and
occupied for own residence. Punjab National Bank has sanctioned a loan of ` 35,50,000
(80% of stamp value) at the interest rate of 12% per annum on 01.05.2020 and
disbursement was made on 01.06.2020. She does not own any other residential house
on the date of sanction of loan. Principal amount of ` 1,30,000 was paid during the
financial year 2020-21.
Cost Inflation Indices: 2020-21: 301, 2009-10: 148
Compute total income of Ms. Mishika for the assessment year 2021-22 assuming that
she has not opted for the provisions under section 115BAC. (7 Marks)
Answer
(a) (i) As per section 9(1)(iii), salaries (including, inter alia, allowances) payable by the
Government to a citizen of India for services rendered outside India shall be
deemed to accrue or arise in India.
Thus, salary received from Government by Mr. Rahul, being a non-resident of
` 7,50,000 for rendering services in Japan would be taxable in his hands, after
allowing standard deduction of ` 50,000.
However, any allowance or perquisites paid or allowed outside India by the
Government to a citizen of India for rendering services outside India wi ll be fully
exempt u/s 10(7). Hence, ` 2,40,000, being the allowance would be exempt.

(ii) In the case of a non-resident, no income shall be deemed to accrue or arise in India
to him through or from operations which are confined to the purchase of goods in
India for the purpose of export.
Thus, income of ` 2,50,000 arising in the hands of Ms. Juhi would not be taxable in
her hands in India, since her operations are confined to purchase of goods in India
for the purpose of export.
(iii) Royalty payable by a non-resident would be deemed to accrue or arise in India in
the hands of the recipient only when such royalty is payable in respect of any right,
property or information used for the purposes of a business or profession carried on
by such non-resident in India or earning any income from any source in India.
In the present case, since Mr. Rakesh, a non-resident, paid the royalty of
` 3,00,000 for a patent right used for development of a product in India, the same
would be taxable in India in the hands of the recipient, Mr. Naveen, a non-resident,
irrespective of the fact that only 50% of the royalty is received in India.
(iv) Interest payable by a non-resident on the money borrowed for any purpose other
than a business or profession in India, would not be deemed to accrue or arise in
India.
In the present case, since Mr. James, a non-resident borrowed the money for
investment in shares of an Indian company, the interest on such borrowing of
` 1,20,000 (` 10,00,000 x 12%) payable to Mr. Akash, a non-resident would not be
deemed to accrue or arise to him in India. Hence, the same would not be taxable in
India in the hands of Mr. Akash.
(b) Computation of total income of Ms. Mishika for the A.Y.2021-22
(`) (`)
Income from house property [Self-occupied]
Net Annual Value Nil
Less: Interest on housing loan of ` 3,55,000
[` 35,50,000 x 12% x 10/12 months] restricted to
` 2,00,000/- 2,00,000
(2,00,000)
Less: Set-off of loss against long-term capital gains 2,00,000 Nil
Long-term capital gains on transfer of land under
specified agreement
Since Ms. Mishika transferred her share in the project
after issue of completion certificate, capital gains on
transfer of land handed over to developer under specified
agreement in the P.Y. 2017-18 would be taxable in the

previous year 2020-21, being the year in which certificate

of completion is issued as per section 45(5A).
Accordingly, capital gain arising in respect of land would
be-
Full value of consideration, being 20% share in shopping 82,80,000
mall [Stamp duty value on the date of issue of completion
certificate (` 4,14,00,000 x 20%)]
Less: Indexed of cost of acquisition [` 15,00,000 x
301/148] 30,50,676
Long-term capital gain 52,29,324
Less: Deduction under section 54F
Deduction in respect of amount invested for purchase of a
residential house acquired within one year prior to date of
transfer would be allowable proportionately, since amount
invested is less than the net consideration. Accordingly,
deduction would be ` 29,05,180 (` 52,29,324 x
`46,00,000 / ` 82,80,000) 29,05,180
Long-term capital gains 23,24,144
Less: Set-off of loss from house property [It is beneficial to
set-off loss from house property against long-term capital
gains, since in case of Ms. Mishika total income
comprises of LTCG taxable@20% and STCG taxable at
normal slab rates; and she can claim deduction of
` 2,80,000 under Chapter VI-A against STCG of
` 2,90,000. Moreover, the remaining STCG would also
not be taxable since it would be below the basic
exemption limit] 2,00,000
21,24,144
Short-term capital gains
Sale of 15% share in shopping mall [short-term capital
asset, since held for not more than 24 months]
Net Sales consideration 65,00,000
Less: Cost of acquisition, being the full value of
consideration taxable on transfer of land [` 4,14,00,000 x
15%] 62,10,000
Short-term capital gains 2,90,000
Less: Deductions under Chapter VI-A (allowable
against short-term capital gains of ` 2,90,000)

Deduction under section 80C – repayment of principal 1,30,000

amount of housing loan
Deduction under section 80EEA – Ms. Mishika would be
eligible for deduction of interest on housing loan
(` 3,55,000 - ` 2,00,000 = ` 1,55,000) to the extent of
` 1,50,000, since stamp duty value of the house does not
exceed ` 45,00,000 [being ` 44,37,500 (` 35,50,000 x
100/80)] and she does not own any other residential
house on the date of sanction of loan. 1,50,000 2,80,000
Total Income (rounded off) 21,34,140
Note -
As per section 45(5A), any capital gains arising from the transfer of a capital asset, being
land or building or both, under a specified agreement, is chargeable to income-tax as income
of the previous year in which the certificate of completion is issued by the competent
authority. In the above solution, the CII of F.Y.2020-21 has been considered on the basis of
parity, since, as per section 45(5A), it is the stamp duty value of the developed property
(shopping mall, in this case) on the date of issue of certificate of completion (26.12.2020),
which is deemed as the full value of consideration for transfer of land handed over to the
developer.
Alternate view -
The definition of transfer, inter alia, includes any arrangement or transaction where any rights
are handed over in execution of part performance of contract, even though the legal title has
not been transferred. Hence, in case of ‘specified agreement(s)’, ‘transfer’ takes place at the
time when the owner of the immovable property hands over the same to the developer i.e., in
F.Y.2017-18 in this case.
As per the plain reading of definition of ‘indexed cost of acquisition’, the CII of the year in
which the asset (land, in this case) is transferred has to be considered. Accordingly, as
per this interpretation, CII of F.Y. 2017-18 i.e., 272 can be considered for computing
indexed cost of acquisition. If the CII of F.Y.2017-18 is considered on the basis of this
line of reasoning, the figures of long-term capital gains and total income would
accordingly change. However, the CII of F.Y.2017-18 has not been given in the question
for the purpose of making such computation.
Question 3
(a) State in brief the applicability of provisions of tax deduction at source, the rate and
amount of tax deduction in the following cases for the financial year 2020 -21 under
Income-tax Act, 1961. Assume that all payments are made to residents:

(i) Mr. Mahesh has paid ` 6,00,000 on 15.10.2020 to M/s Fresh Cold Storage Pvt. Ltd.
for preservation of fruits and vegetables. He is engaged in the wholesale business
of fruits & vegetable in India having turnover of ` 3 Crores during the previous year
2019-20.
(ii) Mr. Ramu, a salaried individual, has paid rent of ` 60,000 per month to Mr. Shiv
Kumar from 1st July, 2020 to 31st March, 2021. Mr. Shiv Kumar has not furnished
his Permanent Account Number. (4 Marks)
(b) Examine the following transactions with reference to applicability of the provision of tax
collected at source and the rate and amount of the TCS for the Assessment year
2021-22.
(i) Mr. Kalpit bought an overseas tour programme package for Singapore for himself
and his family of ` 5 lakhs on 01-11-2020 from an agent who is engaged in
organising foreign tours in course of his business. He made the payment by an
account payee cheque and provided the permanent account number to the seller.
Assuming Kalpit is not liable to deduct tax at source under any other provisions of
the Act.
(ii) Mr. Anu doing business of textile as a proprietor. His turnover in the business is
` 11 crores in the previous year 2019-20. He received payment against sale of
textile goods from Mr. Ram of ` 75 lakhs against the sales made to him in the
previous year and preceding previous years. (Assuming all the sales are domestic
sales and Mr. Ram is neither liable to deduct tax on the purchase from Mr. Anu nor
he deducted any tax at source). (4 Marks)
(c) Mr. Ravi, a resident and ordinarily resident in India, owns a let out house property having
different flats in Kanpur which has municipal value of ` 27,00,000 and standard rent of
` 29,80,000. Market rent of similar property is ` 30,00,000. Annual rent was ` 40,00,000
which includes ` 10,00,000 pertaining to different amenities provided in the building.
One flat in the property (annual rent is ` 2,40,000) remains vacant for 4 months during
the previous year. He has incurred following expenses in respect of aforesaid p roperty:
Municipal taxes of ` 4,00,000 for the financial year 2020-21 (10% rebate is obtained for
payment before due date). Arrears of municipal tax of financial year 2019 -20 paid during
the year of ` 1,40,000 which includes interest on arrears of ` 25,000.
Lift maintenance expenses of ` 2,40,000 which includes a payment of ` 30,000 which is
made in cash.
Salary of ` 88,000 paid to staff for collecting house rent and other charges.
Compute the total income of Mr. Ravi for the assessment year 2021-22 assuming that
Mr. Ravi has not opted for the provisions under section 115BAC. (6 Marks)

Answer
(a) (i) The arrangement between Mr. Mahesh, the customer, and M/s. Fresh Cold Storage
Pvt. Ltd., the cold storage owner, is basically contractual in nature and main object
of the cold storage is to preserve perishable goods by mechanical process and
storage of such goods is only incidental. Hence, the provisions of section 194C will
be applicable to the amount of ` 6 lakh paid by Mr. Mahesh to the cold storage
company1.
Accordingly, tax has to be [email protected]%2 on ` 6 lakh.
TDS u/s 194C = 1.5% x ` 6 lakh = ` 9,000
(ii) Mr. Ramu, being a salaried individual, has to deduct tax at source @ 3.75%3 u/s
194-IB on the annual rent paid by him from the last month’s rent (rent of March,
2021), since the rent paid by him exceeds ` 50,000 p.m.
Since his landlord Mr. Shiv Kumar has not furnished his PAN to Mr. Ramu, tax has
to be deducted @ 20% instead of 3.75%. However, the same cannot exceed
` 60,000, being rent for March, 2021.
TDS u/s 194-IB = ` 5,40,000 (` 60,000 x 9) x 20% = ` 1,08,000, but restricted to
` 60,000, being rent for March, 2021.
(b) (i) Tax @ 5% is required to be collected u/s 206C by the seller of an overseas tour
programme package, from Mr. Kalpit, being the buyer of an overseas tour package,
even if payment is made by account payee cheque.
Accordingly, tax has to be collected@5% on ` 5 lakh.
TCS = 5% x ` 5 lakh = ` 25,000
(ii) Mr. Anu is required to collect tax @0.075%4 u/s 206C from Mr. Ram, since his
turnover in the P.Y.2019-20 exceeds `10 crores, and the sales receipts from
Mr. Ram in the P.Y.2020-21 exceeds ` 50 lakhs. Tax has to be collected by Mr. Anu
on ` 25 lakhs, being the amount exceeding ` 50 lakhs, at the time of receipt. Since
receipt is in the P.Y.2020-21, TCS provisions are attracted even though part of the
sales may relate to the preceding previous years.
TCS = 0.075% x ` 25 lakhs = ` 1,875
Note – It is assumed that sales receipts to the tune of at least ` 25 lakhs were
received on or after 1.10.2020, being the date when the provisions of section
206C(1H) became effective. Alternatively, it is also possible to assume that the
1 Circular No. 1/2008 dated 10.1.2008

2 Since the payment is on 15.10.2020, which falls in the period 14.5.2020 to 31.3.2021, the rate is 1.5% instead of 2%.
3 Since tax is deductible on 31.3.2021, which falls in the period 14.5.2020 to 31.3.2021, the rate is 3.75% instead of 5%.
4 Since tax is collectible on receipts between 1.10.2020 and 31.3.2021, the rate is 0.075% instead of 0.1%.

entire receipts of ` 75 lakhs was received before 1.10.2020. In such a case, the
provisions of section 206C(IH) would not be applicable and no tax would be
required to be collected.
(c) Computation of total income of Mr. Ravi for A.Y. 2021-22 under the regular
provisions of the Act
(`) (`)
Income from house property
Gross Annual Value
- Expected rent ` 29,80,000 [Higher of Municipal
Value of ` 27,00,000 p.a. and Fair Rent of
` 30,00,000 p.a., but restricted to Standard Rent of
` 29,80,000 p.a.]
- Actual rent ` 29,40,000 [` 30,00,000, being annual
rent for house property less rent of
` 60,000 (` 2,40,000 x 4/12 x 3/4) due to vacancy]
Gross Annual Value 29,40,000
In this case, the actual rent is lower than the expected rent
due to vacancy. Otherwise, the actual rent of
` 30,00,000 would have been higher than the expected
rent. In such a case, the actual rent would be the gross
annual value, even if it is lower than the expected rent.
Less: Municipal taxes actually paid during the year:
[` 4,00,000 – rebate of ` 40,000] = ` 3,60,000
[` 1,40,000 arrears – ` 25,000 interest] = ` 1,15,000 4,75,000
Net Annual Value 24,65,000
Less: Deduction from Net Annual Value
30% of Net Annual Value 7,39,500
17,25,500
Income from Other Sources/Profits and gains from
business or profession
Rent for amenities 10,00,000
Less: Loss due to vacancy
[` 2,40,000 x 4/12 x ¼] 20,000
9,80,000
Less: Expenditure in respect thereof
- Lift maintenance expenses 2,10,000
[excluding cash payment of ` 30,000
disallowed] = ` 2,40,000 – ` 30,000

- Salary to staff [` 88,000 x1/4, being

the proportion pertaining to
amenities] 22,000
2,32,000 7,48,000
Question 4
(a) Details of Income of Mr. R and his wife Mrs. R for the previous year 2020-21 are as
under:
(i) Mr. R transferred his self-occupied property without any consideration to the HUF of
which he is a member. During the previous year 2020-21 the HUF earned an
income of ` 50,000 from such property.
(ii) Mr. R transferred ` 4,00,000 to his wife Mrs. R on 01.04.2006 without any
consideration which was given as a loan by her to Mr. Girish. She earned
` 3,50,000 as interest during the earlier previous years which was also given as a
loan to Mr. Girish. During the previous year 2020-21, she earned interest @ 11%
per annum.
(iii) Mr. R and Mrs. R both hold equity shares of 27% and 25% respectively in AMG
Limited. They are also working as employees in such Company. During the financial
year 2020-21 they have withdrawn a salary of ` 3,20,000 and 2,70,000 respectively.
(iv) Mrs. R transferred 5,000 equity shares of RSB Ltd. on 17.09.2013 to Mr. R without
any consideration. The Company issued 3,000 bonus shares to Mr. R in 2016. On
04.03.2021, Mr. R sold entire share holdings and earned ` 5,20,000 as capital
gains.
Apart from above income, Mr. R has income from commission ` 4,00,000 and Mrs. R has
interest income of ` 3,30,000.
Compute Gross Total income of Mr. R and Mrs. R for the assessment year 2021-22.
(4 Marks)
(b) Mr. X, an employee of the Central Government is posted at New Delhi. He joined the
service on 1 st February, 2017. Details of his income for the previous year 2020-21, are
as follows:
(i) Basic salary : ` 3,80,000
(ii) Dearness allowance : ` 1,20,000 (40% forms part of pay for retirement benefits)
(iii) Both Mr. X and Government contribute 20% of basic salary to the pension scheme
referred to in section 80CCD.
(iv) Gift received by X’s minor son on his birthday from friend: ` 70,000. (No other gift is
received by him during the previous year 2020-21)

(v) During the year 2013-14, Mr. X gifted a sum of ` 6,00,000 to Mrs. X. She started a
business by introducing such amount as her capital. On 1st April, 2020, her total
investments in business was ` 10,00,000. During the previous year 2020-21, she
has loss from such business ` 1,30,000
(vi) Mr. X deposited ` 70,000 in Sukanya Samridhi account on 23.01.2021. He also
contributed ` 40,000 in an approved annuity plan of LIC to claim deduction u/s
80CCC.
(vii) He has taken an educational loan for his major son who is pursuing MBA course
from Gujarat University. He has paid ` 15,000 as interest on such loan which
includes ` 5,000 for the financial year 2019-20.
Determine the total income of Mr. X for the assessment year 2021-22. Ignore provisions
under section 115BAC. (6 Marks)
(c) Mr. Kailash, a resident and ordinarily resident in India, could not file his return of Income
for the assessment year 2021-22 before due date prescribed under section 139(1).
Advise Mr. Kailash as a tax consultant.
What are the consequences for non-filing of return of Income within the due date under
section 139(1)?
OR
Mr. Sitaram is engaged in the business of trading of cement having turnover of ` 10
crores during the financial year 2021-215. As a tax consultant advise him what are the
particulars to be furnished under section 139(6A) along with Return of Income?
(4 Marks)
Answer
(a) Computation of Gross Total Income of Mr. R and Mrs. R for A.Y. 2021-22
Particulars Mr. R Mrs. R
Amount (`)
I. Income from house property
Income from property transferred to HUF without
consideration
Since Mr. R has transferred his property to his HUF 50,000
without consideration, income of ` 50,0006 from such
property would be included in the total income of
Mr. R as per section 64(2).
5 To be read as 2020-21
6 Assumed as computed figure.

II. Capital Gains

Income from equity shares transferred by Mrs. R
to Mr. R without consideration
Capital gains arising to Mr. R from transfer of equity 3,25,000
shares of RSB Ltd. gifted to him by Mrs. R would be
included in the hands of Mrs. R [` 5,20,000 x
5,000/8,000]
Capital gains arising to Mr. R from transfer of bonus 1,95,000
shares issued by RSB Ltd. on the basis of holding of
the said equity shares would be included in the
income of Mr. R and not Mrs. R, since income derived
from accretion of the transferred asset cannot be
clubbed with the income of transferor of the original
asset i.e., Mrs. R [` 5,20,000 x 3,000/8,000]7
III. Income from Other Sources
Income from commission 4,00,000
Interest income 3,30,000
Interest income on ` 4 lakh transferred by Mr. R to
Mrs. R without consideration
Income of ` 44,000, i.e., 11% of `4,00,000, being the 44,000
amount transferred by Mr. R to Mrs. R without any
consideration and loaned by her to Mr. Girish, would
be included in the income of Mr. R
Income of ` 38,500 i.e., 11% of ` 3,50,000, being the 38,500
interest earned by Mrs. R out of amount gifted by Mr.
R and thereafter, given by her as loan to
Mr. Girish, would be included in the income of
Mrs. R, as income derived by Mrs. R from accretion of
the amount gifted by Mr. R (i.e., interest income)
cannot be included in the income of Mr. R.
Total income [before considering adjustment on 6,89,000 6,93,500
account of item (iii) i.e., salary income from a
company in which both Mr. R and Mrs. R have
substantial interest]
IV. Salary income from a company in which both Mr. R
and Mrs. R have substantial interest
7In the absence of any other information, the capital gains has been apportioned on the basis of number of
original shares to number of bonus shares.

Since both Mr. R and Mrs. R have substantial interest

in AMG Ltd. (on account of holding equity shares
carrying 20% or more of voting power) and both are in
receipt of income by way of salary from AMG Ltd.,
such salary income would be includible in the
hands of that spouse, whose total income, before
including such salary income, is higher.
Accordingly, the salary income of both Mr. R and Mrs.
R would be included in the hands of Mrs. R in this
case, since her total income, before including such
income, is higher than that of Mr. R.
Salary income of Mr. R = ` 3,20,000 – ` 50,000 2,70,000
(standard deduction)
Salary income of Mrs. R = ` 2,70,000 – ` 50,000 2,20,000
(standard deduction)
Gross Total Income 6,89,000 11,83,500
(b) Computation of Total Income of Mr. X for A.Y. 2021-22
` `
Salaries
Basic Salary 3,80,000
Dearness Allowance 1,20,000
Employer contribution to NPS = 20% of ` 3,80,000 76,000
5,76,000
Less: Standard deduction
[` 50,000 or ` 5,76,000, whichever is lower] 50,000
5,26,000
Where the amount gifted by Mr. X (` 6 lakh, in this case) is
invested by Mrs. X in a business as her capital,
proportionate share of profit or loss, as the case may be,
computed by taking into account the value of the investment
as on 1.4.2020 to the total investment in the business (` 10
lakh) would be included in the income of Mr. X [loss of
` 1,30,000 x 6/10] (78,000)
All income of the minor son would be included in the income 70,000
of the parent Mr. X, since his income is higher than the

income of Mrs. X (loss of ` 52,000, based on the

information given in the question). Accordingly, ` 70,000,
being amount of gift received by minor son during the
P.Y.2021-22, would be included in the income of Mr. X as
the amount of gift exceeds ` 50,000.
Less: Exemption in respect of income of minor child
included in Mr. X’s income 1,500
68,500
Less: Business loss of ` 78,000 set-off to the extent of 68,500
(Balance business loss of ` 9,500 to be carried forward
to the next year, since the same cannot be set-off against
salary income)
Nil
Less: Deductions under Chapter VI-A
Under section 80C – deposit in Sukanya Samridhi Account 70,000
Under section 80CCC – Contribution to LIC Annuity Plan 40,000
Under section 80CCD(1) – Employee contribution to NPS
(` 76,000 – ` 50,000 deduction claimed u/s 80CCD(1B)],
since it is lower than ` 42,800, being 10% of salary
(` 3,80,000 + ` 48,000) 26,000
Allowable in full, since less than `1,50,000, being the 1,36,000
maximum permissible deduction u/s 80C, 80CCC &
80CCD(1)
Under section 80CCD(1B) – Employee contribution to NPS 50,000
Under section 80CCD(2) – Employer contribution to NPS 59,920
restricted to 14% of basic salary + DA forming part of pay,
since employer is Central Government = 14% x (` 3,80,000
+ ` 48,000)
Under section 80E – Interest paid on loan taken for higher
education 15,000
2,60,920
Notes - The following assumptions have been made while solving the question –
(i) Loan is taken from a financial institution or approved charitable institution, and
hence, interest paid on such loan qualifies for deduction under section 80E.
(ii) The question mentions that gift of ` 6 lakhs is given by Mr. X to Mrs. X during the
P.Y.2013-14. However, the date of investment in business is not given. It has been

assumed that it was invested between 2.4.2019 to 1.4.2020 for solving the problem,
in the absence of other information in the question.
Consequences for non-filing return of income within the due date under section 139(1)
Interest under section 234A
Interest under section 234A@1% per month or part of the month for the period
commencing from the date immediately following the due date under section 139(1) till
the date of furnishing of return of income is payable, where the return of income is
furnished after the due date.
However, no interest u/s 234A shall be charged on self-assessment tax paid by the
assessee on or before the due date of filing of return.
Fee under section 234F
Late fee of
- ` 5,000 would be payable under section 234F, if the return of income is not filed
before the due date specified in section 139(1) and
- ` 10,000 would be the fee payable under section 234F where the return is furnished
after 31st December,2021.
However, such fee cannot exceed ` 1,000, if the total income does not exceed
` 5,00,000.
Carry forward and set-off of certain losses not permissible
Following losses would not be allowed to be carried forward, where a return of income is
not furnished within the time allowed under section 139(1):
- business loss, speculation business loss, loss from specified business,
- loss under the head “Capital Gains”; and
- loss from the activity of owning and maintaining race horses.
Since Mr. Sitaram’s turnover from business of trading of cement is ` 10 crores which
exceeds ` 1 crore, being the threshold limit for tax audit under section 44AB, he is
subjected to tax audit.
Accordingly, Mr. Sitaram, is required to furnish the following particulars along with his
return of income -
(i) the report of audit referred to in section 44AB.
(ii) the particulars of the location and style of the principal place where he carries on
the business or profession and all the branches thereof.


Question No. 5 is compulsory.
questions.
All questions should be answered on the basis of position of GST law as amen ded upto
30th April, 2021.
Working notes should form part of the answer.
Wherever necessary, suitable assumptions may be made by the candidates and disclosed by
way of note.
Question 5
ABC Ltd., a registered supplier in Surat, Gujarat has calculated output net GST liability after
adjusting ITC in the books for the month of February 2021:
CGST : ` 3,00,000
SGST : ` 2,50,000
IGST : ` 3,00,000
During the above month, the following additional information is provided by ABC Ltd.:
S. No. Particulars Amount
(excluding GST) `
1 The company had given on hire 5 trucks to one of the 3,75,000
transporters of Vadodara (a goods transport agency) for
transporting goods for 10 days. The hiring charges for the
trucks were ` 7,500 per truck per day
2 The company sold goods to X & Co. of Delhi on 6 th January 5,00,000
2021 with a condition that interest @ 2% per month will be
charged on invoice value if X & Co. failed to make payment
within 30 days of the delivery of the goods. Goods were
delivered and also the invoice was issued on 6 th January
2021. X & Co. paid the consideration for the goods on 20 th
February along with applicable interest.
3 The company sought legal consultancy services for it’s 1,50,000
business from A & Advocates, a partnership firm of
advocates situated at Bhuj, Gujarat.
4 The company ordered 3,000 packets of tools which are to 5,00,000
be delivered by the supplier of Delhi via 3 lots of 1,000
packets monthly. The supplier raised the invoice for full

quantity in February 2021 and the last lot would be

delivered in April 2021.
5 The company supplied 10,000 packets of tools to one of it’s
customer at ` 10/- per packet in Gujarat in January 2021.
Afterwards, the company re-values it at ` 9 per packet in
February 2021 and the company issued credit note to the
customer for ` 1 per packet.
The rate of GST is 9% CGST, 9% SGST and 18% IGST.

You are required to compute the actual net liability of GST to be paid in cash along with
working notes for the month of February 2021. (8 Marks)
Answer
Computation of net GST liability of ABC Ltd. to be paid in cash for February 2021
Particulars Value CGST SGST IGST
(`) (`) (`) (`)
Net output GST liability as given 3,00,000 2,50,000 3,00,000
Add: Trucks given on hire to GTA 3,75,000 -- -- --
[Services by way of giving a means of
transportation of goods on hire to a
goods transport agency are exempt.]
Add: Interest on delayed payment of 15 5,900 -- -- 900
days1 (6th February, 2021 to 20th [5,90,000 ×
February,2021) 2% × 15/30]
[Includible in value in terms of section 15
of the CGST Act, 2017.]
Total output tax liability 3,00,000 2,50,000 3,00,900
Less: ITC in respect of legal services 1,50,000 (13,500) (13,500)
paid as reverse charge is available 2 [1,50,000 [1,50,000
× 9%] × 9%]
Net output tax liability (A) 2,86,500 2,36,500 3,00,900
1 Interest on delayed payment collected is assumed to be inclusive of GST. Further, the invoice value has
been taken as inclusive of GST for computing said penal interest However, it is also possible to assume the
interest to be exclusive of GST and to compute the same by taking the values as exclusive of GST (i.e.
` 5,00,000).
2
The reversal provisions under rule 42 of the CGST Rules, 2017 have not been given effect to in the above
answer on account of specific exclusion of the same via Study guidelines applicable for November, 2021
examination.

Legal consultancy services received(B) 1,50,000 13,500 13,500

[Tax is payable under reverse charge on [1,50,000 [1,50,000
legal services received by a business × 9%] × 9%]
entity3 from a partnership firm of
advocates.
Further, tax payable under reverse
charge, being not an output tax, cannot
be set off against ITC and thus, will have
to be paid in cash.]
Total GST payable in cash [(A) + (B)] 3,00,000 2,50,000 3,00,900
Notes:
(1) ITC on goods received in lots is available on receipt of last lot. Hence, ITC on tools
received will not be available in February 2021.
(2) Since discount given by ABC Ltd. on the packets of tools was not known at the time of
supply, it shall not be excluded from its value of supply.
Question 6
(a) AB Ltd., a registered company of Chennai, Tamil Nadu has provided following services
for the month of October, 2021
Particulars Amount
(` )
Services of transportation of students, faculty and staff from home to 2,50,000
college and back to Commerce College, (a private college) providing
degree courses in BBA, MBA, B.Com., M.Com.
Online monthly magazine containing question bank and latest updates in 1,00,000
law to students of PQR Law College offering degree courses in LLB and
LLM
Housekeeping services to T Coaching Institute 50,000
Security services to N Higher Secondary School 3,25,000
Services of providing breakfast, lunch and dinner to students of ABC 5,80,000
Medical College offering degree courses recognized by law in medical field
All the above amounts are exclusive of GST.
Compute the taxable supplies of AB Ltd. for the month of October 2021 with necessary
explanations. (6 Marks)
3
It has been most logically assumed that the aggregate turnover of ABC Ltd. in the preceding FY was
above the threshold limit for registration under GST law.

(b) Q Ltd. is engaged exclusively in supply of taxable goods from the following states. The
particulars of intra-state supplies for the month of May 2021 are as follows:
State Turnover (`)
Madhya Pradesh 5,00,000
Gujarat 14,00,000
Tripura 12,00,000
(i) Q Ltd. seeks to know whether it is liable for registration under GST. Give your
explanation.
(ii) Will your answer be different if Q Ltd. supplies only petrol & diesel from Tripura
instead of any other taxable goods? (4 Marks)
Answer
(a) Computation of value of taxable supplies of AB Ltd.
Particulars Amount
(`)
Services of transportation of students, faculty and staff to Commerce 2,50,000
College
[Not exempt, since transportation services provided to an educational
institution are exempt only if such institution provides pre-school
education or education up to higher secondary school or equivalent.]
Online monthly magazine to students of PQR Law College
[Services of supply of online educational journals provided to an Nil
educational institution providing qualification recognized by law are
exempt.]
Housekeeping services to T Coaching Institute 50,000
[Not exempt]
Security services 4 to N Higher Secondary School Nil
[Security services provided to an educational institution providing
education up to higher secondary school are exempt.]
Services of providing breakfast, lunch and dinner to students of ABC 5,80,000
Medical College
[Not exempt, since catering services provided to an educational
institution are exempt only if such institution provides pre-school
It has been assumed that security services are performed in N Higher Secondary School.
4

education or education up to higher secondary school or equivalent.]

Value of taxable supplies 8,80,000
(b) Every person engaged in making a taxable supply is required to obtain registration if his
aggregate turnover exceeds ` 20 lakh in a financial year. An enhanced threshold limit
for registration of ` 40 lakh is available to persons engaged exclusively in intra-State
supply of goods in specified States. However, the applicable threshold limit for
registration gets reduced to ` 10 lakh in case a person is engaged in making supply from
a specified Special Category State provided such supply is a taxable supply.
(i) Since Q Ltd. is making supply of taxable goods 5from Tripura – a specified Special
Category State, the applicable threshold limit will get reduced to ` 10 lakh.
Thus, it is liable to be registered under GST as its aggregate turnover [` 31 lakh]
exceeds the said threshold limit.
(ii) In case Q Ltd. is making supply of non-taxable goods [petrol and diesel] from
Tripura, the applicable threshold limit will not be reduced to ` 10 lakh; enhanced
threshold limit of ` 40 lakh will be applicable.
Thus, it is not liable to be registered under GST as its aggregate turnover [` 31 lakh]
does not exceed the said threshold limit.
Question 7
(a) (i) An order is placed to T & Co;, Sholapur on 18 th August, 2021 for supply of fabrics to
make garments. Company delivered the fabrics on 4 th September, 2021 and after
completion of the order issued the invoice on 15 th September, 2021. The payment
against the same was received on 30 th September, 2021. Determine the time of
supply for the purpose of payment under CGST Act, 2017 with your explanations.
(ii) HM Industries Ltd. engaged the services of a transporter for road transport of a
consignment on 20th May, 2021. However, the consignment could not be sent
immediately on account of a strike in the factory, and instead was sent on 20th July
2021. Invoice was received from the transporter on 20 th June 2021 and payment
was made on 25 th August 2021.
What is the time of supply of the transporter’s service? (5 Marks)
(b) PQR Ltd., have filed their GSTR-3B return for the month of August, 2020 within the due
date i.e. 20.09.2020. It was noticed in October, 2020 that tax dues for the month of
August, 2020 have been short paid by ` 10,000. The shortfall of ` 10,000 was paid
through cash ledger and credit ledger amounting to ` 7,500 and ` 2,500 respectively
while filing GSTR-3B of October, 2020 which was filed on 20.11.2020.
5
It has been assumed that Q Ltd. is not engaged in making supplies of ice cream and other edible ice,
whether or not containing cocoa [2105 00 00], Pan masala [2106 90 20] and all goods of Chapter 24,
i.e. Tobacco and manufactured tobacco substitutes.

(i) Examine and compute the interest payable if any under the CGST Act, 2017.
(ii) What would be your answer if, GSTR-3B for the month of August 2020 had been
filed belatedly on 20.11.2020 as above.
Note: Ignore the effect of the leap year. Electronic cash ledger and credit ledger carried
sufficient balance for the above shortfall. (5 Marks)
Answer
(a) (i) The time of supply of goods (where movement of goods involve) (fabric) for the
purpose of payment of tax is the date of issue of invoice or the last date when the
invoice ought to have been issued.
Further, a registered person is required to issue a tax invoice before or at the time of
delivery of goods or making available thereof to the recipient.
Thus, in the given case, time of supply is 4th September, 2021.
(ii) Alternative 1: Assuming that services of transportation of goods by road
have been provided by a GTA which has not paid GST @ 12%; i.e. GST is
payable @ 5%.
Tax on supply of transportation of goods by road services provided by a Goods
Transport Agency (GTA) to a body corporate is payable under reverse charge by
such body corporate.
Time of supply of services taxable under reverse charge is earliest of:-
(a) date of making payment, or
(b) 61st day from the date of issue of invoice by supplier
Thus, in the given case, time of supply is earlier of
(a) 25th August
or
(b) 20th August 2021 (61st day from 20 th June)
Thus, in the given case, time of supply 20th August 2021
Alternative 2: Assuming that services of transportation of goods by road
have been provided by a GTA which has paid GST @ 12%. Thus, GST is
payable under forward charge.
The time of supply of services in case where the invoice is issued within 30 days of
provision of service is the earlier of date of invoice or date of receipt of payment.
Thus, in the given case, time of supply is 20th June, 2021.

(b) In case of delayed payment of tax,interest is payable @ 18% per annum from the date
following the due date of payment to the actual date of payment of tax.
However, interest is payable only on the short-paid tax which is paid through electronic
cash ledger if return under section 39 is furnished after the due date.
(i) In the given case, PQR Ltd. has furnished the return for August 2020 by the due
date. Hence, interest is payable on the entire amount of short payment of ` 10,000,
as under:
= ` 10,000×18%×61/365 = ` 300.82 or 301(rounded off)
(ii) If PQR Ltd. has furnished the return for August 2020 after the due date, interest is
payable only on the short payment which is paid through electronic cash ledger, i.e.
` 7,500, as under:
= ` 7,500×18%×61/365 = ` 225.62 or 226 (rounded off)
Question 8
(a) Mr. Q, a casual taxable person of Gujarat state is a trader of taxable notified handicraft
goods. It makes supplies to the states of Maharashtra, Rajasthan and Andhra Pradesh.
Turnover for October, 2021 is ` 18 Lakh.
(i) Explain the provisions of registration for casual taxable person under GST.
Examine whether Mr. Q is liable for registration or not?
(ii) What will be the answer if Mr. Q makes trading in taxable notified products instead
of taxable notified handicraft goods which involves 75% making on machine and
25% by hand? (5 Marks)
(b) Is Dynamic Quick Response (QR) Code applicable to suppliers who issue invoice to
unregistered persons? If no, list the suppliers to whom Dynamic QR Code is not
applicable. (5 Marks)
OR
(i) What is ‘e-invoicing’?
(ii) What is the threshold limit for mandatory issuance of E-invoice for all registered
businesses?
(iii) A consignor hands over his goods for transportation on Friday to the transporter.
However, assigned transporter starts the movement of goods from consigner’s
warehouse to its depot located at distance of 600 Km. on Monday.
When will the e-way bill be generated and for how many days it will be valid?
(5 Marks)

Answer
(a) (i) A casual taxable person is required to obtain compulsory registration under GST
irrespective of the quantum of its aggregate turnover.
However, a threshold limit of ` 20 lakh (` 10 lakh in case of specified Special
Category States) is available for registration to a casual taxable per son who:
(i) is making inter-State taxable supplies of notified handicraft goods and notified
hand-made goods,
(ii) is availing the benefit of exemption from registration available to inter-State
supply of above-mentioned goods upto the aggregate turnover of ` 20 lakh
(` 10 lakh in case of specified Special Category States), and
(iii) has obtained a PAN and
(iv) has generated an e-way bill.
In the given case, since Mr. Q is engaged in supplying notified handicraft goods and
its aggregate turnover 6 does not exceed ` 20 lakh, he will not be liable to
registration provided he fulfills other conditions specified herein.
(ii) In case Mr. Q is engaged in trading of notified products which are predominantly
made by machine, he will not be eligible for the exemption from registration under
aforesaid provisions and needs to take compulsory ( mandatory) registration.
(b) Dynamic QR code is applicable to invoices issued in respect of supplies made to
unregistered persons by a registered supplier provided its aggregate turnover in any
preceding financial year from 2017-18 onwards exceeds ` 500 crores.
However, it is not applicable to following suppliers issuing invoices to unregistered
persons:-
(i) Insurer or banking company or financial institution including NBFC
(ii) GTA supplying services in relation to transportation of goods by road in a goods
carriage
(iii) Supplier of passenger transportation service
(iv) Person supplying services by way of admission to exhibition of cinematograph films
in multiplex screens
(v) Supplier of online information and database access or retrieval (OIDAR) services
6It has been assumed that Mr. Q has started supply of goods in October 2021 itself.

Alternative
(b) (i) E-invoicing is reporting of business to business (B2B) invoices to GST system for
certain notified category of taxpayers.
(ii) The threshold limit for mandatory issuance of e-invoice for all registered businesses
is ` 50 crores.
(iii) E-way bill will be generated before commencement of movement of goods by
transporter on Monday.
The validity period of the e-way bill is one day from relevant date upto 200 km and
one additional day for every 200 km or part thereof thereafter.
Thus, validity period in the given case7, is 3 days
It has been assumed that goods transported are not over Dimensional cargo.
7

SECTION A : INCOME TAX
PART II
Candidates are also required to attempt any three questions from the rest.
otherwise in the questions.
Question 1
Mr. Arun is working as a Senior Manager in ABCD Bank, a listed commercial bank, in Delhi
since January 2005. He gives the following details of his income for the previous year 2020-21:
House rent allowance ` 15,000 p.m.
Basic Salary ` 20,000 p.m.
Dearness Allowance ` 5,000 p.m.
(50% forms part of retirement benefits)
Bank paid ` 5,000 p.a. as premium on personal accident insurance policy taken for Mr. Arun.
The bank also allotted 2000 sweat equity shares to Mr. Arun in May 2020 at the rate of
` 1,300 per share. The fair market value of the share was ` 1,500 on the date of exercise of
option by Mr. Arun. He sold all the shares for ` 2,100 on 31-3-21 on registered stock exchange.
Assume securities transaction tax has been paid.
He transferred ` 50,000 p.m. as rent, to the bank account of his mother, Mrs. Nirmal, who owned
the house (municipal valuation ` 2 lakh) in which he stayed at Delhi. He also owns a house
property at Kanpur, whose municipal valuation is ` 2,60,000 p.a. The fair rent is
` 2,20,000 p.a. and the standard rent fixed by the Rent Control Act is ` 2,40,000 p.a. The
property was let out for a rent of ` 22,000 p.m. throughout the previous year. He also paid
municipal taxes at the rate of 10% of the municipal valuation of the house at Kanpur during the
previous year.
He has a son Aditya, aged 12 years having PAN, who is earning interest of ` 50,000 p.a. on a
fixed deposit created by his late grandfather (Mr. Arun’s father) in his name. Gross interest
credited by the bank during the year amounted to ` 43,750.
The Suggested Answers for Paper 4A: Income-tax are based on the provisions of income-tax
law as amended by the Finance Act, 2020 which are relevant for July, 2021 Examination. The
relevant assessment year is A.Y.2021-22.

2 INTERMEDIATE (IPC) EXAMINATION: JULY, 2021
He received the following gifts from his friends and relatives during the P.Y. 2020-21:
(1) Gold chain from friend worth ` 70,000
(2) LED TV set from colleagues on completing 15 years in Bank amounting to ` 1,00,000
(3) ` 51,000 in cash from married sister of wife.
Compute Mr. Arun’s total income and the gross tax liability for the A.Y. 2021-22 in a manner
most beneficial to him. (14 Marks)
Answer
Computation of Total Income of Mr. Arun for the A.Y.2021-22 under the regular
Particulars ` ` `
Salaries
Basic Salary = ` 20,000 x 12 2,40,000
Dearness Allowance = ` 5,000 x 12 60,000
House Rent Allowance = ` 15,000 x 12 1,80,000
Less: Exempt u/s 10(13A) 1,35,000 45,000
Lowest of the three limits given below -
(i) Actual HRA = ` 1,80,000
(ii) 50% of Salary, since the property is
located in Delhi = 50% of ` 2,70,000
[` 2,40,000 + 50% of ` 60,000] =
` 1,35,000
(iii) Rent paid – 10% of salary = ` 6,00,000
(i.e., ` 50,000 x 12) - ` 27,000 (i.e., 10%
of ` 2,70,000) = ` 5,73,000
Perquisites
Premium on personal accident insurance policy -
[Exempt perquisite]
Sweat equity shares
FMV on the date of exercise of option = ` 1,500 30,00,000
x 2,000
Less: Price at which shares were allotted = 26,00,000 4,00,000
`1,300 x 2,000 =
Less: Standard deduction u/s 16(ia), actual salary or
` 50,000, whichever is lower 50,000
6,95,000

Income from house property [house at Kanpur]

Gross Annual Value [Higher of expected rent and 2,64,000
actual rent]
Expected Rent – Higher of fair rent (` 2,20,000) and 2,40,000
municipal valuation (` 2,60,000), but restricted to
standard rent (` 2,40,000)
Actual rent – ` 22,000 p.m. x 12 2,64,000
Less: Municipal taxes paid [10% of municipal value 26,000
of ` 2,60,000]
Net Annual Value (NAV) 2,38,000
Less: Deduction u/s 24(a) – 30% of NAV = 30% of
` 2,38,000 71,400
1,66,600
Capital Gains
Short-term capital gains on sale of sweat equity
shares, since they are held for a period not more
than 12 months
Actual sale consideration [` 2,100 x 2,000] 42,00,000
Less: Cost of acquisition [FMV of shares considered 30,00,000
for perquisite valuation (` 1,500 x 2000]
12,00,000
Interest on fixed deposit of minor son, includible in 43,750
his income assuming that his income is higher than
his spouse’s income
Less: Exemption u/s 10(32) in respect of minor
child’s income 1,500 42,250
Value of gold chain from friend, since the value
exceeds ` 50,000 70,000
Value of LED set is not taxable u/s 56(2)(x), since it -
is not included in the definition of “property”
thereunder
Sum of money received without consideration from -
sister-in-law is not taxable, since she falls within the
meaning of “relative”; and gift from relative is not
taxable
1,12,250
Less: Deduction under Chapter VI-A -

Computation of tax liability of Mr. Arun for the A.Y.2021-22 under the regular
Particulars `
Short term capital gains of ` 12 lakh taxable@15% u/s 111A 1,80,000
Tax on total income of ` 9,73,850
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000 [i.e., ` 2,50,000@5%] 12,500
` 5,00,001 – ` 9,73,850 [i.e., ` 4,73,850@20%] 94,770
1,07,270
2,87,270
Tax Liability 2,98,761
Tax Liability (rounded off) 2,98,760
Computation of Total Income of Mr. Arun for the A.Y.2021-22 under section 115BAC
Particulars ` `
Salaries computed under the regular provisions 6,95,000
Add: Exemption u/s 10(13A) not available u/s 115BAC 1,35,000
Standard deduction u/s 16 not allowable u/s 115BAC 50,000
8,80,000
Income from house property [same as computed under the 1,66,600
regular provisions, since the house property is let out]
Capital Gains [STCG on sale of sweat equity shares – same as 12,00,000
computed under the regular provisions]
Income from Other Sources computed under the regular 1,12,250
provisions
Add: Exemption u/s 10(32) in respect of minor child’s income not
allowable u/s 115BAC 1,500 1,13,750
Total Income computed as per section 115BAC 23,60,350
Computation of tax liability of Mr. Arun for the A.Y.2021-22 under section 115BAC
Particulars `
Short term capital gains of ` 12 lakh taxable@15% u/s 111A 1,80,000
Tax on total income of `11,60,350
Upto `2,50,000 Nil

` 2,50,001 – ` 5,00,000 [i.e., ` 2,50,000@5%] 12,500

` 5,00,001 – ` 7,50,000 [i.e., ` 2,50,000@10%] 25,000
` 7,50,001 – ` 10,00,000 [i.e., ` 2,50,000@15%] 37,500
`10,00,001 – ` 11,60,350 [i.e., ` 1,60,350@20%] 32,070
1,07,070
2,87,070
Tax Liability 2,98,553
Tax Liability (rounded off) 2,98,550
Since the tax liability under the special provisions of section 115BAC is
marginally lower, by ` 210, Mr. Arun can opt to compute his total income
and tax liability under the special provisions.
Note - The first sentence in page 3 of the question paper mentions that Aditya, aged 12 years,
is earning interest of ` 50,000 p.a. on fixed deposit created by his late grandfather in his name.
The following sentence mentions that the gross interest credited by the bank during the year
amounted to ` 43,750.
Since gross interest for the year has been specifically mentioned as ` 43,750, the above solution
is given considering this figure of interest. This answer can also be solved considering ` 50,000
as the figure of interest. In such case, the tax liability as per regular provision and as per section
115BAC shall be ` 3,00,060 and ` 2,99,850 respectively
Question 2
(a) Mr. Pratap earned following incomes during the F.Y. 2020-21. He settled in Singapore in
the year 1996.
(1) Interest on Singapore Development Bonds (only 50% of interest received in India)
` 35,000.
(2) Dividend from German Company received in Germany ` 28,000.
(3) Profits from a business in Kanpur, which is managed directly from Singapore
` 1,00,000.
(4) Short term capital gain on sale of shares of an Indian company received in India
` 60,000.
(5) Income from Business in Mumbai ` 80,000
(6) Fees for technical services rendered in India, but received in Singapore ` 1,00,000.
(7) Agricultural Income from land situated in Punjab ` 55,000
(8) Rent received from house property at Lucknow ` 1,00,000.
Compute his total income for the A.Y. 2021-22. (5 Marks)

(b) Compute the tax liability for the Assessment Year 2021-22, (in a manner most beneficial
to the assessee) of Mr. Satya, a resident individual aged 42 years, where his total income
is ` 4,90,000 and the income comprises of long term capital gains on sale of plot of
` 1,00,000 and short term capital gains on sale of listed equity shares (STT paid) of
` 2,90,000. Ignore the concessional provisions under section 115BAC. (2 Marks)
Answer
(a) Computation of total income of Mr. Pratap 2, a non-resident, for the A.Y. 2021-22
Particulars `
Interest on Singapore Development Bonds [50% of `3 5, 000 would be 17,500
taxable in India in the hands of a non-resident, since the same is received
in India. The remaining 50% would not be taxable in India, since it neither
accrues in India nor is received in India]
Dividend from German company received in Germany [Since the accrual -
and receipt of income are outside India, the same is not taxable in the
hands of a non-resident]
Profit from business in Kanpur, which is managed from Singapore [Such 1,00,000
income from a business in India is deemed to accrue or arise in India in
the hands of a non-resident]
Short-term capital gains on sale of shares of an Indian company received 60,000
in India [Since income arises from transfer of a capital asset situated in
India and the same is also received in India, it is taxable in the hands of a
non-resident]
Income from business in Mumbai [Such income from a business in India is 80,000
deemed to accrue or arise in India and is hence, taxable in the hands of a
non-resident]
Fees from technical services rendered in India, but received in Singapore 1,00,000
[Such income from services rendered in India is deemed to accrue or arise
in India and is hence, taxable in India]
Agricultural income from land situated in Punjab [Exempt u/s 10(1), both in -
the hands of resident and non-resident]
Rent from house property in Lucknow [Such income from 1,00,000
a property situated in India is deemed to accrue or arise
in India and hence, is taxable in India in the hands of a
non-resident]
Less: Deduction u/s 24(a)@30% 30,000
70,000
2Since the question mentions that Pratap is settled in Singapore in the year 1996, it is logical to assume that
he is a non-resident.

(b) Determination of tax liability of Mr. Satya, a resident, for A.Y.2021 -22
Particulars `
Long-term capital gains on sale of plot of land [Taxable@20% u/s 112] 1,00,000
Short-term capital gains on sale of listed equity shares (STT paid) 2,90,000
[Taxable@15% u/s 111A]
Other Income 1,00,000
Tax on total income
Long-term capital gains [` 1,00,000 – unexhausted basic exemption limit Nil
of ` 1,00,000]
Short-term capital gains @15% of ` 2,40,000 [i.e., `2,90,000 –
unexhausted basic exemption limit of ` 50,000] 36,000
36,000
Less: Rebate u/s 87A [Since total income does not exceed ` 5 lakh,
rebate of tax payable or ` 12,500, whichever is lower is allowable] 12,500
23,500
Add: Health and education cess@4% 940
Note – The basic exemption limit of ` 2,50,000 would be first exhausted against other
income of ` 1,00,000. Thereafter, since Mr. Satya is a resident, he would be eligible to
adjust the unexhausted basic exemption limit of ` 1,50,000 against both long-term capital
gains taxable u/s 112 and short-term capital gains taxable u/s 111A. It would be more
beneficial for Mr. Satya to adjust the unexhausted basic exemption limit of ` 1, 50,000 first
against long-term capital gains of ` 1 lakh taxable u/s 112, since the tax rate of 20%
u/s 112 is higher than the tax rate of 15% u/s 111A. Thereafter, he can adjust the balance
` 50, 000 against short-term capital gains chargeable to tax u/s 111A.
Question 3
(a) M/s. MN & Co., a partnership firm, is engaged in the business of plying and hiring goods
vehicles. It owns following vehicles as on 1st April, 2020 :
Gross vehicle weight (in kgs.) Number of vehicles
7000 2
9000 2
12000 3
15000 2

It purchased a vehicle weighing 15000 kg on 6 th June, 2020 which was put to use only on
10th July, 2020. Net profits of the firm [after claiming partners remuneration of ` 1,50,000 and
within the limits prescribed under section 40(b)] from the above business, as per books of
accounts amounted to ` 6,50,000. The firm has declared its income for the Assessment Year
2021-22 in accordance with the provisions of presumptive income under section 44AE.
(i) Compute the income of the firm if it opts for the provisions of section 44AE for the
Assessment Year 2021-22.
(ii) If the firm wants to claim its income as per books of accounts for the Assessment
Year 2021-22, what are its obligations under the Income-tax Act, 1961?
(iii) What is the due date for filing its return of income under both the options?
(5 Marks)
(b) During the previous year 2020-21, Mr. B's HUF comprising of Mr. B, Mrs. B, his minor son
and his major daughter, sold listed equity shares thrown by Mr. B, in the common stock of
the family. The said shares were equally divided among the members of the family and
subsequently sold, earning an aggregate LTCG of ` 3,00,000.
Compute the amount of income to be included in the hands of Mr. B. Mr. B is the sole
earning member in the family. What would your answer be if the said shares were inherited
by the HUF of Mr. B? (2 Marks)
Answer
(a) Computation of income of M/s. MN & Co., a partnership firm, for A.Y.2021-22
Particulars
(i) Since M/s. MN & Co., a partnership firm, does not own more than 10 vehicles
at any time during the P.Y. 2020-21, it is eligible to opt for presumptive taxation
scheme u/s 44AE.
Particulars `
Income computed u/s 44AE -
I Heavy goods vehicle (goods, carriage whose gross
vehicle weight exceeds 12,000 kg)
[15 tons’ x ` 1,000/ton x 2 vehicles x 12 months] + 3,60,000
[15 tons x `1,000/ton x 1 vehicle x 10 months – 1,50,000
months owned to be considered and not months
used].
II Other than heavy goods vehicle
[` 7,500 per month x 7 vehicles x 12 months] 6,30,000
11,40,000
Less: Partners’ remuneration [within limits prescribed u/s 1,50,000
40(b)]
9,90,000

(ii) If M/s. MN & Co. declares profits and gains in accordance with the provisions
of section 44AE, it is not required to maintain books of account u/s 44AA or
get them audited u/s 44AB.
However, if the firm wishes to claim its income of ` 6,50,000 as per books of
account, which is lower than the profits of ` 9,90,000 computed u/s 44AE, it
has to maintain books of account u/s 44AA and get its accounts audited u/s
44AB and furnish report of audit on or before 30 th September, 2021.
(iii) In case the firm opts for the presumptive taxation scheme under section 44AE,
the due date for filing of return would be 31 st July, 2021.
In case the firm does not opt for section 44AE, it is required to get its books
of account audited, in which case the due date for filing of return of income
would be 31st October, 2021.
(b) (i) Mr. B, who is a member of the HUF, throws his individual property (i.e., listed equity
shares) into the common stock of the family. It is presumed that the same is otherwise
than for adequate consideration. In such a case, the income from such property shall
continue to be included in the total income of Mr. B. Accordingly, the long-term capital
gains of ` 3 lakh arising on sale of shares is includible in the total income of Mr. B
and not Mr. B’s HUF.
(ii) If the said shares were inherited by B’s HUF, then the long-term capital gains of ` 3
lakh arising on sale of shares would be included in the total income of Mr. B’s HUF
and not Mr. B.
Note – The first sentence in the question states that during the P.Y.2020-21, Mr. B’s HUF
sold listed equity shares thrown by Mr. B in the common stock of the family. However, the
second sentence states that the said shares were equally divided among the members of
the family and subsequently sold. Two alternatives are possible on account of these two
sentences. The above answer is based on the facts as contained in the first sentence.
Considering the facts contained in the second sentence and assume that there has been
a partial partition, then, it may be possible to answer the question on the following lines -
ALTERNATIVE SOLUTION
(i) Where the converted property has been partitioned, either by way of total or partial
partition, the income derived from such converted property as is received by Mrs. B
(i.e., ` 75,000, being 1/4 th of ` 3 lakh) will be deemed to arise from assets transferred
indirectly by Mr. B to Mrs. B and consequently, included in the total income of Mr. B.
Further, minor son’s share of ` 75,000 less ` 1,500 deduction u/s 10(32) will also be
included in the total income of Mr. B as per section 64(1A), since the total i ncome of
Mr. B, being the sole earning member, would naturally be higher than that of Mrs. B.
Therefore, ` 2,23,500, being LTCG arising to self, spouse and minor son would be
included in the total income of Mr. B.

(ii) If the said shares were inherited by B’s HUF, equally divided amongst the members
and then sold, then, the share of long-term capital gains of ` 75,000 [less ` 1,500
deduction u/s 10(32)] arising to minor son alone would be included in the total income
of Mr. B by virtue of section 64(1A), in addition to B’s own share of ` 75,000.
Question 4
(a) Mr. Brajesh is a partner in a partnership firm named XYZ Associates. He provides the
details regarding his income and losses for the F.Y. 2020-21 and brought forward losses
as follows:
(i) Salary from XYZ & Associates ` 3,75,000 which was claimed by the firm in its return
and allowed as deduction.
(ii) Long term capital gain on sale of his house ` 2,50,000.
(iii) Long term capital loss on sale of shares listed in National Stock Exchange. STT has
been paid on the transactions of purchase and sales ` 1,50,000.
(iv) Business loss brought forward from A.Y. 2020-21 ` 6,25,000.
(v) Dividend received from listed equity shares of domestic companies ` 27,500.
(vi) Gift received from father's friend ` 51,000 in cash.
(vii) Loss from speculative business brought forward from Assessment Year 2018-19
` 2,50,000.
(viii) Life Insurance Premium paid (10% of the capital sum assured) ` 1,00,000.
Compute the total income of Mr. Brajesh for the Assessment Year 2021-22 and show the
items eligible for carry forward. (Ignore the provisions of section 11 5BAC) (5 Marks)
(b) (i) Mr. Mani holding 20% of the equity share capital in XY Ltd., a manufacturing company
in which public is substantially interested, took a loan of ` 4,50,000 from it on 10 th
May, 2020.The accumulated profits of the company on that date amounted to ` 4,00,000.
Examine the taxability of the above transaction in the hands of Mr. Mani.
(ii) ABC Ltd., a domestic company brought back its 1000 equity shares listed on a
recognized stock exchange. Examine the taxability of the above transaction in the
hands of the company and the shareholders. (2 Marks)
Answer
(a) Computation of total income of Mr. Brajesh for A.Y.2021-22
Particulars ` `
Salary from XYZ & Associates [Taxable as business income, 3,75,000
since firm has claimed and been allowed deduction in respect
of the remuneration in its return of income]

Less: Set-off of brought forward business loss of ` 6,25,000

of A.Y.2020-21 to the extent of ` 3,75,000 by virtue of section
72(1) 3,75,000 Nil
[Balance brought forward business loss of ` 2,50,000 (i.e.,
` 6,25,000 – ` 3,75,000) to be carry forward to A.Y.2022-23
for set-off against business income of that year]
Capital Gains
Long term capital gain on sale of house 2,50,000
Less: Long-term capital loss on sale of listed shares on which 1,50,000 1,00,000
STT is paid can also be set-off against long-term capital gain
on sale of house as per section 74(1), since long-term capital
arising on sale of such shares is taxable under section 112A.
Dividend from domestic companies 27,500
Gifts from father’s friend [Taxable under section 56(2)(x),
since received from a non-relative and it exceeds the
aggregate limit of ` 50,000] 51,000 78,500
Less: Deduction under section 80C
LIC premium paid of ` 1,00,000 restricted to ` 78,500,
being gross total income excluding long term capital
gains as Chapter VIA deductions are not allowable
against long-term capital gains 78,500
Losses eligible for carried forward to A.Y. 2022-23
Business loss of A.Y. 2020-21 [` 6,25,000 – ` 3,75,000] 2,50,000
Loss from Speculative business of A.Y. 2018-19 (since the same can 2,50,000
be set off only against profits of any other speculation business. As
there is no such profit in the current year, the loss has to be carried
forward to A.Y. 2022-23, since the four year time limit for carry forward
expires only in A.Y.2022-23)
(b) (i) Loan of ` 4,50,000 taken by Mr. Mani from XY Ltd., in which he holds 20% of the
equity share capital, would not be deemed as dividend u/s 2(22)(e) to the extent of
accumulated profits of ` 4,00,000, since XY Ltd. is a company in which public is
substantially interested.
Hence, no amount would be taxable as deemed dividend in the hands of Mr. Mani.

(ii) ABC Ltd., a domestic company, has to pay additional income-tax@20% (plus
surcharge @12% and cess@4%) on buyback of its 1000 listed equity shares.
The income arising to the shareholders in respect of such buyback of shares by ABC
Ltd. would be exempt under section 10(34A), since ABC Ltd. is liable to pay additional
income-tax on the buy back of shares.
Question 5
(a) Examine the applicability of TDS provisions, the rate and amount of tax deduction in the
following cases for the financial year 2020-21 :
(i) A payment of ` 1,00,000 made to Mr. Jack Smith, a New Zealand cricketer, non-
resident in India, on 20 th December 2020 by a sports magazine for contribution of an
sports article.
(ii) A payment of ` 3,20,000 made to Mrs. Vidyawati, an Indian resident, on 15 th January
2021, by a TV channel for winning from a crossword puzzle. (4 Marks)
(b) Briefly explain the provisions of section 139A of the Income-tax Act, 1961 with regard to
the persons who are required to apply for Permanent Account Number.
OR
Mr. X, a resident individual carrying on trading business has a turnover of ` 1.25 crores
during the previous year 2019-20. He made a payment of ` 50,000 to Mr. Y, a contractor
on 1st May, 2020 for some contract work without deducting tax at source.
What are the circumstances under which Mrs. X will not be deemed to be an assessee -in-
default u/s 201 for not deducting tax at source? (3 Marks)
Answer
(a) (i) Under section 194E, the person responsible for payment of any amount to non -
resident sports person for contribution of article relating to any game or sports in India
shall deduct tax @20% plus surcharge (if applicable) and health and education cess
@ 4%.
Tax to be deducted = ` 1,00,000 x 20.8% = ` 20,800
(ii) Under section 194B, every person responsible for paying to any person whether
resident or non-resident, any income by way of winning from crossword puzzle, is
required to deduct income-tax @30%, if the amount exceeds ` 10,000.
Tax to be deducted = ` 3,20,000 x 30% = ` 96,000
(b) [First Alternative]
Following persons, who have not been allotted a permanent account number (PAN), are
required to apply to the Assessing Officer under section 139A for the allotment of a PAN
within the prescribed time -

(i) Every person, if his total income or the total income of any other person in respect of
which he is assessable under the Act during any previous year exceeds the maximum
amount which is not chargeable to income-tax
(ii) Every person carrying on any business or profession whose total sales, turnover or
gross receipts are or is likely to exceed ` 5 lakhs in any previous year
(iii) Every person being a resident, other than an individual, which enters into a financial
transaction of an amount aggregating to ` 2,50,000 or more in a financial year
(iv) Every person who is a managing director, director, partner, trustee, author, founder,
karta, chief executive officer, principal officer or office bearer of any person referred
in (iii) above or any person competent to act on behalf of such person referred in (iii)
above
(b) [Second Alternative]
Mr. X is required to deduct tax at source @1% u/s 194C on payment of ` 50,000 to Mr. Y,
a contractor, for contract since Mr. X’s turnover from business exceeds ` 1 crore during
the P.Y. 2019-20 and the individual payment exceeds the specified threshold of ` 30,000.
In case of non-deduction of tax at source, Mr. X would be deemed to be an assesse -in-
default u/s 201.
However, Mr. X would not be deemed to be an assessee-in-default in respect of such tax
if Mr. Y –
(i) has furnished his return of income under section 139;
(ii) has taken into account such sum for computing income in such return of income; and
(iii) has paid the tax due on the income declared by him in such return of income, and
(iv) Mr. X furnishes a certificate to this effect from an accountant in the prescr ibed form.


Attempt any three questions from the rest.
“Working notes should form part of the respective answers.”
“Wherever necessary, suitable assumptions may be made by the candidates, and disclosed by
way of note.”
“All questions should be answered on the basis of the position of GST law as amended upto
31st October, 2020.”
Question 6
Kaira Air Ltd. located in Anand, Gujarat is engaged in manufacturing of Air Coolers and Air
Purifiers. They supply goods all over India and their aggregate turnover during F.Y. 2019-20
was ` 125 lakh. The details of various activities undertaken during the month of September
2020 are as follows:
S. No. Particulars Amount
(`)
(i) Outward supplies made during the month : 14,00,000
(a) Within Gujarat 11,00,000
(b) Outside Gujarat 3,00,000
(ii) On 5th September 2020, the company had issued 10 exchange
vouchers @ 1,000 each of which can be exchanged/redeemed
against purchase of Air cooler worth
` 10,000 each at any of the company's outlets in the State of
Gujarat. Out of the above, 7 vouchers were encashed during the
month of September 2020 & rest 3 were encashed during the month
of October 2020.
(iii) Purchase of material within Gujarat which includes material worth 8,00,000
` 3,00,000 purchased from M/s. Kalpana Industries registered as
a Composition dealer.
(iv) In respect of few invoices worth ` 1,00,000 raised during the month
of June 2020, the stipulated condition was to pay the dues within 1
month from the date of raising of invoices, otherwise interest @
24% was payable on supplies made against such invoices. The
buyers failed to pay the dues within the stipulated time and made
the payment together with interest of ` 11,200 during the month of
September 2020.
(v) Bought air tickets from Ahmedabad to Guwahati Airport, Assam for
its marketing executives. The total fare of the tickets was ` 60,000

out of which ` 55,000 is the basic fare. Applicable GST rate is 5%

on basic fare for air tickets.
(vi) Send 10 managers for 15 days training course organized by IIM 50,000
Ahmedabad, Gujarat on 5th September 2020. The IIM provides
Participation Certificates at the end of the course.
The Rates of GST applicable on various supplies are as follows :

Nature of Supply CGST SGST IGST
Goods 6% 6% 12%
Services other than item of S. No. (v) 9% 9% 18%
Composition Supplies 2.5% 2.5% -
Opening balances of input tax credit as on 1st September, 2020 were as follows:
CGST (`) SGST (`) IGST (` )
4,000 10,000 5,000
All the figures mentioned above other than S. No. (iv) are exclusive of taxes.
Both Inward & Outward supplies within the State of Gujarat are Intra State supplies and outside
Gujarat supplies are Inter State Supplies.
Calculate the amount of tax payable in cash by Kaira Air Ltd. for the month of September 2020.
Brief and suitable notes should form part of your answer. (8 Marks)
Answer
Computation of tax payable in cash by Kaira Air Ltd. for September 2020
Particulars Amount CGST SGST IGST

(`) (`) (`) (`)
I. Output tax
Outward supplies within Gujarat 11,00,000 66,000 66,000
@ 6%
Outward supplies outside Gujarat 3,00,000 36,000
@ 12%
Supply of 10 exchange vouchers 10,0001 600 600
@ 6%
1It is also possible to consider the value of exchange vouchers as ` 1,00,000 in terms of Rule 32(6) of the
CGST Rules, 2017.

[Since supply is identifiable at the

time of issue of the 10 vouchers, the
time of supply is the date of their
issue and are thus the same are
taxable in September itself
irrespective of the time of their
redemption.]
Interest for delayed payment2 10,000 1,200
[Includible in value and taxable [11,200 x 100/112]
when the same is received, i.e. in [Since inclusive of
September.] GST]
Total output tax liability (A) 66,600 66,600 37,200
II. Input tax credit
Opening balance 4,000 10,000 5,000
Purchase of material within Gujarat 5,00,000 30,000 30,000
[No credit on material purchased [` 8,00,000 –
from composition dealer as he ` 3,00,000]
cannot collect any tax from the @ 6%
recipient on supplies made by him.]
Air tickets from Ahmedabad to 55,000 - -
Guwahati
Training course organized by IIM, 50,000 4,500 4,500
Gujarat @ 9%
[Not exempt. Short duration
programmes offered by IIMs for
which participation certificate is
awarded are not ‘qualification
recognized by law’.]
Total ITC (B) 38,500 44,500 5,000
Net GST payable in cash =(A) - (B) 28,100 22,100 32,200
[IGST credit be first utilized for payment of IGST liability and
then for payment of CGST and SGST liability in any order and
in any proportion. After exhausting IGST credit, CGST and
SGST credit to be utilized. ITC of CGST cannot be utilized for
payment of SGST and vice versa.]
2
It has been assumed that interest for delayed payment has been collected in respect of inter-State sale.
However, interest on delayed payment can also be assumed in respect of intra-State sale.

Question 7
(a) SRI Petrol Pump is a licensed petrol pump of M/s. IOC Corporation and engaged in the
sale of (a) petrol (b) HSD & (c) Mobil.
During the month of October 2020, total sales of M/s. SRI Petrol Pump is as follows:
Item Sale Value (`)
Petrol 7,00,000
Diesel 15,00,000
Mobil 3,00,000
Details of Purchases of M/s. SRI Petrol Pump during October 2020 are as follows:
Item Purchase Value
Petrol 5,00,000
Diesel 16,00,000
Mobil 2,00,000
[All the figures above are exclusive of GST and rate of GST is 9% CGST and 9% SGST
on applicable items.]
Other Information :
(i) Every month M/s. IOC Corporation charges license fees from SRI Petrol Pump for
grant of license and the same is charged based on total quantity of sale of all the
products. During the month of October 2020, the amount of License fees charged by
IOC Corporation was ` 1,00,000 plus CGST & SGST @ 9% each.
(ii) Administrative Expenses incurred by SRI Petrol Pump was ` 50,000 on which CGST
& SGST @ 6% each were paid.
You are required to calculate the amount of taxable supply under GST, available input tax
credit and net liability of SRI Petrol Pump for the month of October 2020. Kindly provide
appropriate reason wherever necessary. (5 Marks)
(b) M/s. Chand is a manufacturer of Paper products having factory at Pune, Maharashtra. M /s.
Kela and M/s. Bela of Mumbai, Maharashtra are appointed as agents to sell the products
on behalf of M/s. Chand with the conditions that both of them guarantee the realization
of payment from buyers.
Both M/s. Kela and M/s. Bela provide short-term borrowing facilities to buyers for timely
payment of dues against supplies made to them and for this they charge interest from the
ultimate buyer. While M/s. Kela raises invoices in the name of M/s. Chand and M/s. Bela
raises invoices in its own name.

In light of provisions contained in Para 3 of Schedule I of CGST Act, kindly explain

treatment of interest charged by M/s. Kela and M/s. Bela in above mentioned cases.
(4 Marks)
Answer
(a) Computation of value of taxable supply and net GST liability of SRI Petrol Pump for
October, 2020
Particulars Amount
(`)
Supply of petrol Levy of GST on petrol and diesel has been -
Supply of diesel deferred and thus, being not leviable to tax, -
the supply of the same is exempt supply.
Supply of mobil @ 9% 3,00,000
Value of taxable supply 3,00,000
Tax liability CGST SGST
Total outward tax liability [` 3,00,000 x 9%] 27,000 27,000
Less: Input Tax Credit (Refer Working Note below) 19,440 19,440
Net GST liability payable in cash 7,560 7,560
Working Note
Computation of ITC available with SRI Petrol Pump
Particulars Amount CGST SGST

(`) (`) (`)
Inward supply of petrol Being exempt supply, no 5,00,000 - -
Inward supply of diesel GST is payable thereon 16,00,000 - -
and hence, no ITC.
Inward supply of mobil Being used in the course 2,00,000 18,000 18,000
License fees @ 9% or furtherance of 1,00,000 9,000 9,000
business, ITC is
Administrative expenses available 50,000 3,000 3,000
@ 6%
Less: Ineligible ITC attributable to exempt supply (10,560) (10,560)
[License fee and administrative expenses are used for
making both taxable supply of mobil and exempt
supply of petrol and diesel, hence ITC attributable to
exempt supply will be reversed as under:

Ineligible ITC = Common ITC x Exempt supply/

Aggregate turnover
Common ITC = ` 9,000 + ` 3,000 = ` 12,000
Exempt supply = ` 7,00,000 + ` 15,00,000 =
` 22,00,000
Aggregate turnover = ` 7,00,000 + ` 15,00,000 +
` 3,00,000 = ` 25,00,000
Ineligible ITC = 12,000 x 22,00,000/25,00,000 =
` 10,560
Eligible ITC 19,440 19,440
(b) M/s. Kela and M/s. Bela are del credere agents (DCA) of M/s. Chand as they guarantee
the payment to the supplier.
A DCA falls under the ambit of ‘agent’ under Para 3 of Schedule I of the CGST Act, 2017
if the invoice for supply of goods is issued by the DCA in its own name.
However, if the invoice for supply of goods is issued by the supplier to the customer, either
himself or through DCA, the DCA is not an ‘agent’ in terms of Para 3 of Schedule I. Thus,
while M/s. Bela is an agent of M/s. Chand in terms of Para 3 of Schedule I, M/s. Kela is
not.
Where the DCA is not an agent under Para 3 of Schedule I, the temporary short-term loan
being provided by DCA to the buyer is a supply of service by the DCA to the recipient on
principal-to-principal basis and is an independent supply. Said supply is specifically exempt
from tax. Thus, interest charged by M/s. Kela is an independent supply and is exempt from
tax.
Where the DCA is an agent under Para 3 of Schedule I, the temporary short -term credit
being provided by DCA to the buyer no longer retains its character of an independent
supply and is subsumed in the supply of the goods by the DCA to the recipient. The value
of the interest charged for such credit is included in the value of supply of goods by DCA
to the recipient. Thus, interest charged by M/s. Bela will be included in the value of goods
supplied by it.
Question 8
(a) MNI Ltd. provides following details for the month of March 2021:
(1) While filling GST return of March 2021 on 20-04-21(within the prescribed due date),
they came to know that one bill of January 2021 consisting tax amount of
` 50,000 was not considered while filling return for the month of January 2021 (Return
was filed on 20-02-2021, within the prescribed due date).
(2) MNI Ltd. has paid the above shortfall of ` 50,000 of January 2021, through GSTR-3B
for the month of March 2021 (payment through cash ledger was ` 30,000 and
payment through credit ledger was ` 20,000).

MNI Ltd. got a notice regarding interest payment u/s 50 of the CGST Act, 2017. MNI
Ltd. assumed that they paid self-assessed tax and both returns were also filed timely
so they were not liable for payment of interest. They seek your opinion regarding
whether,
(i) They are liable to pay interest u/s 50 of the CGST Act,.
(ii) If they had filed return of January 2021 on 20-04-21 (Self assessed tax also paid
on 20-04-2021 of ` 50,000 (payment through cash ledger was ` 30,000 and
payment through credit ledger was ` 20,000) then also they are liable to pay
interest u/s 50 of the CGST Act. (5 Marks)
(b) Answer the following individual independent cases with reference to the provisions of
registration under the CGST Act, 2017 and the rules made thereunder :
(i) Govardhan is an agriculturist engaged in supply of produce out of cultivation of land.
He utilizes services of Manu who is a commission agent as per the Agricultural
Produce Marketing Committee Act. Turnover of Manu is above the threshold limit
prescribed. Manu wants to know whether he is liable to get registered under GST Act
or not.
(ii) Anubhav is dealing in supply of taxable goods and services in the state of Gujarat.
His turnover from intra-State supply of taxable goods is ` 16 lakh and inter-state
supply of taxable services is ` 22 lakh. He is of the opinion that his aggregate turnover
is within the limit so he is not required to get registered. Advise him. (4 Marks)
Answer
(a) (i) As per section 50 of the CGST Act, 2017, in case of delayed payment of tax, interest @
18% p.a. is payable from the date following the due date of payment to the actual date of
payment of tax.
Further, the interest on tax payable in respect of supplies made during a tax period
and declared in the return for the said period furnished after the due date is payable
on the net tax liability paid through electronic cash ledger.
In the given case, MNI Ltd. has defaulted in making the payment of ` 50,000 in the
return of January 2021. Therefore, it will be liable to pay interest @ 18% p.a. from
21.02.2021 till the date of payment.
Further, since the return for the month of January, 2021 has been filed on the due
date, MNI Ltd. will be liable to pay interest on the gross tax liability i.e., ` 50,000 and
not on net tax liability paid in cash.
(ii) If MNI Ltd. had filed the return for the month of January, 2021 on 20.04.2021, i.e. after
the prescribed due date and the tax of ` 50,000 is also paid on 20.04.2021, interest
will be payable on net tax liability paid through electronic cash ledger i.e., ` 30,000.

(b) (i) A commission agent under APMC Act is not liable to be compulsorily registered since it
provides exempt services of sale/purchase of agricultural produce on behalf of an
agriculturist being a non-taxable person as he supplies produce out of cultivation of land.
Moreover, such commission agents are otherwise also exempt from registration
since any person engaged exclusively in the business of supplying exempt services
is not liable to registration.
Therefore, Manu is not liable to get registered under GST law.
(ii) A supplier who is supplying both goods and services is required to obtain registration
in the State (other than special category States) from where he makes a taxable
supply if his aggregate turnover exceeds specified threshold limit of ` 20 lakh in a
financial year.
In the given case, the aggregate turnover of goods and services supplied by Anubhav
(` 38 lakh) exceeds the threshold limit and thus, he is required to obtain registration.
Question 9
(a) Zen Pvt. Ltd. is a dealer in goods having registered office at Noida, Uttar Pradesh and
shops are located at Noida, Uttar Pradesh and Chennai, Tamil Nadu.
Details of various supplies both inward and outward undertaken by them during June 2020
quarter are given in the table below :
All the values given in the table are inclusive of GST (CGST/SGST/ UTGST/IGST),
wherever applicable.
Applicable IGST Rate is 5% and CGST & SGST @ 2.5% each, on inward & RCM supplies
as well.
S. No. Particulars Amount (`)
(i) Export of goods to China from Noida 20,00,000
(ii) Goods supplied to SEZ located at Delhi from Noida 15,00,000
(iii) Supply of goods directly to customer from location of job 2,00,000
worker at Lucknow (U.P.) after completion of job work. (Intra
state)
(iv) Sales from Chennai Shop (Inter State) 11,00,000
(v) Local sales at Noida (Intra State) 25,00,000
(vi) Services of transport availed from M/s. ABC Transport (Inter 3,00,000
State)
(vii) Commission paid to Mr. Nagar, Sales Executive which is not 50,000
part of the terms of employment. (Intra State)

Calculate the aggregate turnover of Zen Pvt. Ltd. for June 2020 quarter. Brief and suitable
notes should form part of your answer. (5 Marks)
(b) M/s. S Corporation has made default in furnishing returns. It has not filed returns from the
month of June 2020. The proper officer cancelled its registration with effect from
1st January 2021 by an order dated 1st January 2021. It applied for revocation of
cancellation of registration and the order for revocation of cancellation of registration was
passed on 1st March 2021. What are the provisions regarding filing returns before making
such an application of revocation of cancellation of registration for the given case?
(4 Marks)
Answer
(a) Computation of aggregate turnover of Zen Pvt. Ltd.
[Excluding GST]
(i) Exports3 of goods to China from Noida 20,00,000
[Includible in the aggregate turnover]
(ii) Goods supplied to SEZ located at Delhi from Noida4 15,00,000
(iii) Supply of goods directly to customer from location of 1,90,476
job worker – includible in the aggregate turnover of Zen (Rs 2,00,000 x 100/105)
Pvt. Ltd. (Rs 2,00,000 x 100/105)
(iv) Sales from Chennai shop (Inter-State) 10,47,619
[Includible in the aggregate turnover. Further, IGST be [` 11,00,000 × 100/105]
excluded from the same]
(v) Local sales at Noida (Intra-State) 23,80,952
[Includible in the aggregate turnover. Further, CGST [` 25,00,000 × 100/105]
and SGST be excluded from the same]
(vi) Services of transport [Inward supplies are not Nil
availed included in aggregate
(vii) Commission paid to sales turnover] Nil
executive
Total aggregate turnover 71,19,047
(b) Where the registration is cancelled suo-moto by the appropriate officer, the registrant
seeking revocation of the order, has to apply for the revocation of cancellation within 30
days from the date of service of the order of cancellation of registration.
3 It has been assumed that exports of goods have been made without payment of tax.
4
It has been assumed that supply of goods to SEZ have been made without payment of tax.

Further, he has to furnish all the returns due till the date of such cancellation before the
application for revocation can be filed.
Further, he should also pay any amount due as tax along with any amount payable towards
interest, penalty, and late fee in respect of the said returns.
Thus, in the given case, before making an application for revocation of cancellation of
registration, M/s S. Corporation should file all returns due for the period from June 2020 till
1st January 2021.
Question 10
(a) List down the activities/transactions specified under schedule III of the GST Act as non-
supplies or 'Negative List'. (4 Marks)
(b) (i) To whom mandatory E-invoicing is applicable? (1 Mark)
(ii) Which entities are exempt from mandatory requirement of E-invoicing? (2 Marks)
(iii) What are the advantages of E-Invoicing? (2 Marks)
OR
(i) Under what circumstances, a registered person is required to issue a "Bill of Supply"?
(1 Marks)
(ii) What are the documents required to be carried by a person-in-charge of a
conveyance? (2 Marks)
(iii) What are the circumstances under which "Debit Notes" needs to be issued by a
taxable person? (2 Marks)
Answer
(a) The activities/transactions specified under Schedule III of the CGST Act as non -supplies
or “Negative List” are as follows:––
1. Services by an employee to the employer in the course of or in relation to his
employment.
2. Services by any court or Tribunal established under any law for the time being in
force.
3. Functions performed by the Members of Parliament, Members of State Legislature,
Members of Panchayats, Members of Municipalities and Members of other local
authorities.
4. Duties performed by any person who holds any post in pursuance of the provisions
of the Constitution in that capacity.
5. Duties performed by any person as a Chairperson or a Member or a Director in a
body established by the Central Government or a State Government or local authority
and who is not deemed as an employee before the commencement of this clause.

6. Services of funeral, burial, crematorium or mortuary including transportation of the

deceased.
7. Sale of land and, subject to paragraph 5(b) of Schedule II, sale of building.
8. Actionable claims, other than lottery, betting and gambling.
(b) (i) Mandatory e-invoicing is applicable to all notified registered businesses (except specified
class of persons) with an aggregate turnover greater than ` 500 crore (based on PAN) in
any preceding financial year from 2017-18 onwards.
(ii) The following entities are exempt from mandatory requirement of e-invoicing:-
(a) Special Economic Zone units
(b) Insurer or banking company or financial institution including NBFC
(c) GTA supplying services in relation to transportation of goods by road in a goods
carriage
(d) Supplier of passenger transportation service
(e) Person supplying services by way of admission to exhibition of cinematograph
films in multiplex screens
(iii) The advantages of e-invoicing are as follows:-
(i) Auto-reporting of invoices into GST returns and auto-generation of e-way bill
(wherever required)
(ii) Reduction in transcription errors
(iii) Elimination of fake invoices
(iv) Reduction in tax evasion
(v) Reduction in disputes among transacting parties
(vi) Improvement in payment cycles
(vii) Reduction in processing costs
(vii) Eco-friendly as it eliminates paper
Alternative
(b) (i) A registered person is required to issue a “bill of supply” in the following two
circumstances:-
(a) In case of supplying exempted goods and/or services or
(b) In case of payment of tax under composition levy.
(ii) The documents required to be carried by a person-in-charge of a conveyance are as
under:-
(a) (i) the invoice

OR
(a) (i) QR code with embedded IRN may be produced electronically in case of e-
invoice
(Any one of the two may be mentioned)
or
(ii) bill of supply
or
(iii) delivery challan as the case may be and
(b) a copy of the e-way bill in physical form or
(c) e-way bill number in electronic form or
(d) e-way bill number mapped to a RFID embedded on to the conveyance [except
in case of rail or air or vessel]
(iii) The circumstances under which debit note needs to be issued by a taxable person
are:-
(a) The taxable value declared in the invoice is less than the actual value of the
supply;
(b) The tax charged in the invoice is less than the actual tax payable in respect of
the supply;
(c) The quantity received by the recipient is more than what has been decl ared in
the tax invoice and the customer choses to retain the same.

questions.
Working notes shall form part of the respective answers.
otherwise in the question.
Question 1
Mr. Krishna (aged 65 years), a furniture manufacturer, reported a profit of ` 5,64,44,700 for
the previous year 2019-20 after debiting/crediting the following items:
Debits:
1. ` 20,000 paid to a Gurudwara registered u/s 80G of the Income-tax Act, in cash where
no cheques are accepted.
2. ` 48,000 contributed to a university approved and notified u/s 35(1)(ii) to be used for
scientific research.
3. Interest paid ` 1,67,000 on loan taken for purchase of E-vehicle on 15-05-2019 from a
bank. The E-vehicle was purchased for the personal use of his wife.
4. His firm has purchased timber under a forest lease of ` 20,00,000 for the purpose of
business.
Credits:
1. Income of ` 4,00,000 from royalty on patent registered under the Patent Act received
from different resident clients. No TDS was needed to be deducted by any of the clients.
2. He received ` 3,00,000 from a debtor which was written off as bad in the year 2015-16.
Amount due from the debtor (which was written off as bad) was ` 5,00,000, out of which
tax officer had only allowed ` 3,00,000 as deduction in computing the total income for
assessment year 2016-17.
3. He sold some furniture to his brother for ` 7,00,000. The fair market value of such
furniture was ` 9,00,000.
The Suggested Answers for Paper 4A: Income-tax Law are based on the provisions of income-
tax law as amended by the Finance Act, 2019 and Finance (No.2) Act, 2019, which are
relevant for January, 2021. The relevant assessment year is A.Y.2020-21.

2 INTERMEDIATE (NEW) EXAMINATION: JANUARY, 2021
Other information :
1. Depreciation in books of accounts is computed by applying the rates prescribed under
the Income tax laws.
2. Mr. Krishna purchased a new car of ` 12,00,000 on 1st September, 2019 and the same
was put to use in the business on the same day. No depreciation for the same has been
taken on car in the books of account.
3. Mr. Krishna had sold a house on 30th March, 2017 and deposited the long term capital
gains of ` 25,00,000 in capital gain account scheme by the due date of filing return of
income for that year. On 1st March, 2020, he sold another house property in which he
resided for ` 1 crore. He earned a long term capital gain of ` 50,00,000 on sale of this
property. On 25th March, 2020, he withdrew money out of his capital gain account and
invested ` 1 crore on construction of one house.
4. Mr. Krishna also made the following payments during the previous year 2019-20
- Lump-sum premium of ` 30,000 paid on 30th March, 2020 for the medical policy
taken for self and spouse. The policy shall be effective for five years i.e. from
30th March, 2020 to 29th March, 2025.
- ` 8,000 paid in cash for preventive health check-up of self and spouse.
Compute the total income and tax payable by Mr. Krishna for the assessment year 2020-21.
(14 Marks)
Answer
Computation of total income of Mr. Krishna for A.Y. 2020-21
18BParticulars ` ` `
20B I Income from business or profession
Net profit as per profit and loss account 5,64,44,700
Add: Items of expenditure debited but not
allowable while computing business
income
1. Donation to Gurudwara in cash [not
allowable as deduction since it is not
incurred wholly and exclusively for
business purpose. Since the amount is
already debited, the same has to be added
back while computing business income] 20,000
2. Interest on loan taken for purchase of e-
vehicle [Interest on loan for purchase of e-
vehicle for personal purpose is not

allowed as deduction from business

income since the same is not incurred
wholly and exclusively for business
purpose. Since it is already debited, the
same has to be added back while
computing business income] 1,67,000
3. Sale of furniture to brother at less than
FMV [The provisions of section 40A(2) are
not applicable in case of sale transaction,
even if the same is to a related party.
Therefore, no adjustment is necessary in
respect of difference of ` 2 lakh] - 1,87,000
5,66,31,700
Less: Items of income credited but not
taxable or taxable under any other head of
income
4. Royalty on patent [Not taxable as business
income since Mr. Krishna is engaged in
manufacturing business. Since the amount
is already credited to profit and loss
account, the same has to be reduced while
computing business income] 4,00,000
5. Bad debt recovered [Actual bad debt is
` 2 lakhs i.e., ` 5 lakhs less ` 3 lakh,
being the amount of bad debt recovered.
Bad debt written off is ` 3 lakhs. Bad debt
recovered to the extent of ` 1 lakh being
excess of bad debt recovered over actual
bad debt would be deemed to be business
income. Since the entire ` 3 lakhs is
credited to the profit and loss account, ` 2
lakhs has to be reduced] 2,00,000 6,00,000
5,60,31,700
Less: Allowable expenditure
6. Contribution to a university approved and
notified u/s 35(1)(ii) for scientific research
[Eligible for deduction @150%. Since,
100% of the expenditure is already
debited to profit and loss account, balance
50% is allowed from business income] 24,000

7. Depreciation on car [` 12 lakh x 30%,

since car is purchased between 23.8.2019
and 31.3.2020 and put to use for more
than 180 days in the P.Y.2019-20] 3,60,000
5,56,47,700
II Capital Gain
Long term capital gain on sale of house 50,00,000
property
Less: Exemption under section 54 [Since
whole amount of long term capital gain is
invested in construction of house within -
the stipulated time limit.] 50,00,000
[Capital gain of ` 25 lakhs in capital gain
account scheme is not taxable in P.Y. 2019-20,
since the same is withdrawn and invested in
construction of house within the stipulated time
limit. The remaining amount of `75 lakhs
invested in construction of house is eligible for
exemption u/s 54, subject to a maximum of
`50 lakhs being long-term capital gain on sale
of house property during the P.Y.2019-20]
Royalty on patent [Taxable as “income from
other sources”, since he is engaged in
business of manufacturing furniture] 4,00,000
Gross Total Income 5,60,47,700
- Mediclaim premium for self and 5,000
spouse [In case of lump sum
premium for medical policy,
deduction is allowed for equally for
each relevant previous years.
[` 30,000/6 years, being relevant
previous years in which the
insurance is in force]
- Preventive health check up of self
and spouse [Preventive health check
up paid in cash allowed to the extent
of ` 5,000] 5,000 10,000

Deduction under section 80EEB 1,50,000

[Since the loan is sanctioned by Bank
during the P.Y. 2019-20, interest on loan
taken for purchase of e-vehicle is allowed
to the extent of ` 1,50,000]
Deduction under section 80G -
[Donation of ` 20,000 to Gurudwara not
allowable as deduction since amount
exceeding ` 2,000 paid in cash]
Deduction under section 80RRB
[Deduction in respect of royalty on patent
registered under the Patent Act subject to
a maximum of ` 3 lakh] 3,00,000 4,60,000
Total income 5,55,87,700
Computation of tax liability of Mr. Krishna for A.Y.2020-21
Particulars ` `
Tax on total income of ` 5,55,87,700

Upto ` 3,00,000 Nil
` 3,00,001 – ` 5,00,000 [@5% of ` 2 lakh] 10,000
` 5,00,001 – ` 10,00,000 [@20% of ` 5,00,000] 1,00,000
` 10,00,001- ` 5,55,87,700 [@30% of ` 5,54,87,700] 1,63,76,310 1,64,86,310
Add: Surcharge @ 37%, since total income exceeds
` 5,00,00,000 60,99,935
2,25,86,245
Add: Health and education cess@4% 9,03,450
Total tax liability 2,34,89,695
Less: TCS u/s 206C(1) @ 2.5% on ` 20 lakh i.e., timber 50,000
TCS u/s 206C(1F)@1% of ` 12 lakh i.e., sale of 12,000
motor car where consideration exceeds ` 10 lakh
TDS u/s 194-IA@1% of ` 1 crore i.e., sale of
immovable property where consideration is ` 50
lakh or more 1,00,000 1,62,000
Tax payable 2,33,27,695
Tax payable (rounded off) 2,33,27,700

Question 2
(a) Examine TDS/TCS implications in case of following transactions, briefly explaining
provisions involved assuming that all the payees are residents; state the rate and amount
to be deducted, in case TDS/TCS is required to be deducted/collected.
(i) On 1.5.2019, Mr. Brijesh made three fixed deposits of nine months each of ` 3 lakh
each, carrying interest @ 9% with Mumbai Branch, Delhi Branch and Chandigarh
Branch of CBZ Bank, a bank which had adopted CBS. These Fixed Deposits
mature on 31.01.2020.
(ii) Mr. Marwah, aged 80 years, holds 6½% Gold Bonds, 1977 of ` 2,00,000 and 7%
Gold Bonds 1980 of ` 3,00,000. He received yearly interest on these bonds on
28.02.2020.
(iii) M/s AG Pvt. Ltd. took a loan of ` 50,00,000 from Mr. Haridas. It credited interest of
` 79,000 payable to Mr. Haridas during the previous year 2019-20. M/s AG Pvt. Ltd.
is not liable for tax audit during previous years 2018-19 and 2019-20.
(iv) Mr. Prabhakar is due to receive ` 6 lakh on 31.3.2020 towards maturity proceeds of
LIC policy taken on 1.4.2016, for which the sum assured is ` 5 lakhs and the annual
premium is ` 1,40,000. (8 Marks)
(b) Mr. Xavier, an Indian resident individual, set up an unit in Special Economic Zone (SEZ)
in the financial year 2015-16 for production of Mobile Phones. The unit fulfills all the
conditions of section 10AA of the Income-tax Act, 1961.
During the financial year 2018-19, he has also set up a warehousing facility in a district of
Tamil Nadu for storage of agricultural produce. It fulfills all the conditions of section
35AD.
Capital expenditure in respect of warehouse amounted to ` 93 lakhs (including cost of
land ` 13 lakhs). The warehouse became operational with effect from 1st April, 2019 and
the expenditure of ` 63 lakhs was capitalized in the books on that date.
Further details relevant for the financial year 2019-20 are as follows :
Particulars `
Profit from operation of warehousing facility before claiming 1,10,00,000
deduction under section 35AD
Net Profit of SEZ (Mobile Phone) Unit 50,00,000
Export sales of SEZ (Mobile Phone) Unit 90,00,000
Domestic Sales of SEZ (Mobile Phone) Unit 60,00,000
Compute income tax (including AMT under 115JC) payable by Mr. Xavier for Assessment
Year 2020-21. (6 Marks)

Answer
(a) (i) CBZ Bank has to deduct tax at source @10% under section 194A, since the
aggregate interest on fixed deposit with the three branches of the bank is ` 60,750
[3,00,000 x 9% x 3 x 9/12], which exceeds the threshold limit of ` 40,000.
Since CBZ Bank has adopted core banking solution (CBS), the aggregate interest
credited/paid by all branches has to be considered.
Tax to be deducted at source = ` 60,750 x 10% = ` 6,0751
(ii) Tax @10% under section 193 is to be deducted on interest on 6½ Gold Bonds,
1977 and 7% Gold Bonds 1980, since the nominal value of the bonds held by Mr.
Marwah i.e., ` 5,00,000 exceed ` 10,000.
Interest on 6½ Gold Bonds, 1977 = ` 2,00,000 x 6.5% = ` 13,000
Interest on 7% Gold Bonds 1980 = ` 3,00,000 x 7% = ` 21,000
(iii) M/s AG Pvt. Ltd. has to deduct tax at source @10% under section 194A, since the
interest on loan payable is ` 79,000 which exceeds the threshold limit of ` 5,000.
M/s AG Pvt. Ltd., being a company, has to deduct tax at source irrespective of the
fact that it is not liable to tax audit during P.Y. 2018-19 and 2019-20.
(iv) Since the annual premium exceeds 10% of sum assured in respect of a policy taken
after 31.3.2012, the maturity proceeds of ` 6 lakhs due on 31.3.2020 are not
exempt under section 10(10D) in the hands of Mr. Prabhakar. Therefore, tax is
required to be deducted @5% under section 194DA on the amount of income
comprised therein i.e., on ` 40,000 [` 6,00,000, being maturity proceeds -
` 5,60,000, being the amount of insurance premium paid.
(b) Computation of total income and tax liability of Mr. Xavier for A.Y. 2020-21 (under
the regular provisions of the Act)
Particulars ` `
Less: Deduction under section 10AA 30,00,000
[50,00,000 x 90,00,000/1,50,00,000 x 100%, since it is
5th year of manufacturing]
1
Alternatively, in the absence of information about p.a., the amount of interest can also be worked out as ` 81,000
[3,00,000 x 9% x 3] and the tax to be deducted thereon would be ` 81,000 x 10% = ` 8,100.

Business income of SEZ unit chargeable to tax 20,00,000

Profit from operation of warehousing facility 1,10,00,000
Less: Deduction u/s 35AD [Deduction@100% in respect 80,00,000
of the expenditure incurred prior to the commencement
of its operations and capitalized in the books of account
on 1.4.2019. Deduction is not available on expenditure
incurred on acquisition of land] [` 93 lakhs – ` 13 lakhs]
Business income of warehousing facility chargeable to 30,00,000
tax
Computation of tax liability
Tax on ` 50,00,000 13,12,500
Total tax liability 13,65,000
Computation of adjusted total income and AMT of Mr. Xavier for A.Y. 2020-21
Particulars ` `
Total Income (as computed above) 50,00,000
80,00,000
Less: Depreciation u/s 32 [On building@10% of ` 80 8,00,000 72,00,000
lakhs2]
Add: Surcharge@15% (since adjusted total income > 4,21,800
` 1 crore)
32,33,800
Add: Health and Education cess@4% 1,29,352
Tax Liability (Rounded off) 33,63,150
2
Assuming the capital expenditure of ` 80 lakhs is incurred entirely on building

Since the regular income-tax payable is less than the alternate minimum tax payable,
the adjusted total income shall be deemed to be the total income and tax is leviable
@18.5% thereof plus surcharge@15% and cess@4%. Therefore, the tax liability is
` 33,63,150.
AMT Credit to be carried forward under section 115JEE
`
Less: Tax liability under the regular provisions of the Income-tax 13,65,000
Act, 1961
19,98,150
Note: In the third para of the question, there is a difference between the figure of capital
expenditure incurred in respect of warehouse i.e., ` 93 lakhs (including cost of land ` 13
lakhs) and the figure of capital expenditure capitalised in the books on 1.4.2019 i.e., ` 63
lakhs. It appears to be a typographical error, due to which the main solution has been
worked out considering ` 93 lakhs as the amount capitalised in the books on 1.4.2019.
However, alternative answers have been worked out below considering ` 63 lakhs (being
the figure as printed in the question paper) as the amount capitalised in the books on
1.4.2019. In Alternative 1, it has been assumed that the amount of `63 lakhs capitalised
on 1.4.2019 does not include cost of land. In Alternative 2, it has been assumed that the
amount of ` 63 lakhs capitalised on 1.4.2019 includes cost of land.
Alternative 1 (The amount of ` 63 lakhs capitalized on 1.4.2019 does not include
cost of land)
Computation of total income and tax liability of Mr. Xavier for A.Y. 2020-21 (under
Particulars ` `
[50,00,000 x 90,00,000/1,50,00,000 x 100%, since it is
5th year of manufacturing]
Profit from operation of warehousing facility3 1,10,00,000
3
Since the question mentions ` 1,10,00,000 as the profit from operation of warehousing facility before claiming
deduction u/s 35AD, it is assumed that said figure of profit is after providing depreciation u/s 32 on ` 17 lakhs, being the
amount of capital expenditure not capitalized as on 1.4.2019 less cost of land (i.e., ` 93 lakhs – ` 63 lakhs = ` 30 lakhs
– ` 13 lakhs (cost of land) = ` 17 lakhs)

Less: Deduction u/s 35AD [Deduction@100% in respect 63,00,000

of the expenditure incurred prior to the commencement
of its operations and capitalized in the books of account
on 1.4.2019. It is assumed that the capitalized
expenditure of ` 63 lakhs does not include cost of land]
tax
Tax on ` 67,00,000 18,22,500
Add: Surcharge @10% 1,82,250
20,04,750
Particulars ` `
97,00,000
Less: Depreciation u/s 32 [On building @10% of `63 6,30,000 56,70,000
lakhs4]
Add: Surcharge@15% (since adjusted total income > 4,26,518
` 1 crore)
32,69,968
Tax Liability (Rounded off) 34,00,770
Since the regular income-tax payable is less than the alternate minimum tax payable, the
adjusted total income shall be deemed to be the total income and tax is leviable @18.5%
thereof plus surcharge@15% and cess@4%. Therefore, the tax liability is ` 34,00,770.
4 Assuming the capital expenditure of ` 63 lakhs is incurred entirely on building


`
Less: Tax liability under the regular provisions of the Income-tax Act, 20,84,940
1961
13,15,830
Alternative 2 (The amount of `63 lakh capitalized includes cost of land)
Computation of total income and tax liability of Mr. Xavier for A.Y. 2020-21 (under
Particulars ` `
[50,00,000 x 90,00,000/1,50,00,000 x 100%, since it
is 5th year of manufacturing]
Profit from operation of warehousing facility 5 1,10,00,000
Less: Deduction u/s 35AD [Deduction@100% in 50,00,000
respect of the expenditure incurred prior to the
commencement of its operations, and capitalized in
the books of account on 1.4.2019. Deduction is not
available on expenditure incurred on acquisition of
land. It is assumed that the capitalized expenditure
includes ` 13 lakhs of land] [` 63 lakhs – ` 13 lakhs]
tax
Tax on ` 80,00,000 22,12,500
Add: Surcharge @10% 2,21,250
24,33,750
5
Since the question mentions ` 1,10,00,000 as the profit from operation of warehousing facility before claiming deduction
u/s 35AD, it is assumed that said figure of profit is after providing depreciation u/s 32 on ` 30 lakhs, being the amount of
capital expenditure not capitalized as on 1.4.2019 (` 93 lakhs – ` 63 lakhs).


Particulars ` `
1,10,00,000
Less: Depreciation u/s 32 [On building @10% of 5,00,000 45,00,000
` 50 lakhs6]
Add: Surcharge@15% (since adjusted total income 4,30,125
> ` 1 crore)
32,97,625
Since the regular income-tax payable is less than the alternate minimum tax payable, the
adjusted total income shall be deemed to be the total income and tax is leviable @18.5%
thereof plus surcharge@15% and cess@4%. Therefore, the tax liability is ` 34,29,530.
`
Less: Tax liability under the regular provisions of the Income-tax 25,31,100
Act, 1961
8,98,430
Question 3
(a) Rajesh was employed in Axis Ltd., Mumbai. He received a salary of ` 45,000 p.m. from
1.04.2019 to 20.09.2019. He resigned and left for Dubai for the first time on 28.09.2019
and got monthly salary of rupee equivalent of ` 90,000 from 1.10.2019 to 31.03.2020.
His salary for October to December was credited in his Mumbai bank account directly
and the salary for January to March 2020 was credited in his Dubai bank account.
6 Assuming the capital expenditure of ` 50 lakhs is incurred entirely on building

The cost of his air tickets to Dubai costing ` 1,50,000 was funded by her sister staying in
London. The cost of his initial stay at Dubai costing ` 40,000 was funded by one of his
friends staying in Delhi.
He further received interest of ` 10,500 on his fixed deposits and ` 7,500 on his
savings a/c with his Mumbai bank. He also paid LIC Premiums of ` 15,000 for self,
` 10,000 for spouse and ` 25,000 for dependent mother aged 71 years.
Compute taxable income of Mr. Rajesh for the Assessment Year 2020-21. (7 Marks)
(b) Mr. Hari aged 57 years is a resident of India. He provides you the following details of his
incomes pertaining to F.Y. 2019-20.
- Interest on Non-Resident (External) Account maintained with
State Bank of India as per RBI stipulations - ` 3,55,000
- Interest on savings bank account maintained
with State Bank of India - ` 8,000
- Interest on Fixed Deposits with Punjab National Bank - ` 40,000
He seeks your advice on his liability to file return of income as per Income-tax Act, 1961
for the Assessment Year 2020-21.
What will be your answer, if he has incurred ` 4 lakhs on travel expenses of his newly
married son and daughter in law's honeymoon in Canada? (4 Marks)
(c) Income deemed to accrue or arise in India to a non-resident by way of interest, royalty
and fee for technical services is to be taxed in India irrespective of territorial nexus.
Examine the correctness or otherwise of the given statement. (3 Marks)
Answer
(a) In case of an Indian citizens leaving India for employment during the relevant previous
year, the period of their stay during that previous year for being treated as a resident of
India must be 182 days or more.
During the previous year 2019-20, Mr. Rajesh, an Indian citizen, was in India for 181
days only (i.e., 30+31+30+31+31+28 days). Thereafter, he left India for employment
purposes.
Since he does not satisfy the minimum criteria of 182 days, he is a non-resident for the
A.Y. 2020-21.
A non-resident is chargeable to tax in respect of income received or deemed to be
received in India and income which accrues or arises or is deemed to accrue or arise to
him in India. Hence, salary for January to March 2020, which was credited in his Dubai
bank account for services rendered in Dubai, would not be taxable in the hands of
Mr. Rajesh.

Computation of taxable income of Mr. Rajesh for A.Y. 2020-21

Particulars Amount
(`)
Salary
Salary from 1.4.2019 to 20.9.2019 [45,000 x 5 + 45,000 x 2,55,000
20/30]
Salary from 1.10.2019 to 31.12.2019 [90,000 x 3] 2,70,000
Less: Standard deduction u/s 16(ia) 50,000
Net Salary 4,75,000

Interest on fixed deposits 10,500
Interest on Savings account 7,500 18,000
- Deduction under section 80C 25,000
LIC premium for self and spouse [LIC premium for mother is
not allowed for deduction]
- Deduction under section 80TTA 7,500
[Interest on savings account with Mumbai bank]
Working Notes –
1. Cost of his air tickets to Dubai costing ` 1,50,000 funded by his sister is not taxable
under section 56(2)(x) in the hands of Mr. Rajesh, since “sister” is a relative.
2. Cost of initial stay at Dubai costing ` 40,000 funded by his friend is also not
taxable under section 56(2)(x), since the amount does not exceed `50,000.
(b) An individual is required to furnish a return of income under section 139(1) if his total
income, before giving effect to the deductions under Chapter VI-A or exemption under
section 54/54B/54D/54EC or 54F, exceeds the maximum amount not chargeable to tax
i.e., ` 2,50,000.

Computation of total income of Mr. Hari for A.Y. 2020-21

Particulars `
Interest earned from Non-resident (External) Account ` 3,55,000 [Exempt
u/s 10(4)(ii), since he is maintaining the said account as per RBI NIL
stipulations]
Interest on savings bank account 8,000
Interest on fixed deposit with Punjab National Bank 40,000
Gross Total Income 48,000
Less: Deduction u/s 80TTA (Interest on saving bank account) 8,000
Total Income 40,000
Since the total income of Mr. Hari for A.Y.2020-21, before giving effect, inter alia, to the
deductions under Chapter VI-A, is less than the basic exemption limit of ` 2,50,000, he is
not required to file return of income for A.Y.2020-21.
However, if he has incurred expenditure exceeding ` 2 lakhs for himself or any other
person for travel to a foreign country, he would be required to file a return of income,
even if his total income does not exceed the basic exemption limit. Since he has in curred
expenditure of ` 4 lakhs on foreign travel of his newly married son and daughter in law in
the F.Y. 2019-20, he has to mandatorily file his return of income for A.Y. 2020-21 on or
before the due date under section 139(1).
(c) Income by way of interest, royalty or fees for technical services which is deemed to
accrue or arise in India by virtue of clauses (v), (vi) and (vii) of section 9(1) shall be
included in the total income of the non-resident, whether or not –
(i) the non-resident has a residence or place of business or business connection in
India; or
(ii) the non-resident has rendered services in India.
In effect, the income by way of fees for technical services, interest or royalty, from services
utilized in India would be deemed to accrue or arise in India in case of a non-resident and be
included in his total income, whether or not such services were rendered in India.
Therefore, the given statement that income deemed to accrue or arise in India to a non -
resident by way of interest, royalty and fees for technical services is to be taxed
irrespective of territorial nexus, is correct.
Question 4
(a) During the previous year 2019-20, following transactions took place in respect of
Mr. Raghav who is 56 years old.

(i) Mr. Raghav owns two house properties in Mumbai. The details in respect o f these
properties are as under -
House 1 House 2
Self-occupied Let-out
Rent received per month Not applicable ` 60,000
Municipal taxes paid ` 7,500 Nil
Interest on loan (taken for purchase of ` 3,50,000 ` 5,00,000
property)
Principal repayment of loan (taken from HDFC ` 2,00,000 ` 3,00,000
bank)
(ii) Mr. Raghav had a house in Delhi. During financial year 2010-11, he had transferred
the house to Ms. Vamika, daughter of his sister without any consideration. House
would go back to Mr. Raghav after the life time of Ms. Vamika. The transfer was
made with a condition that 10% of rental income from such house shall be paid to
Mrs. Raghav. Rent received by Ms. Vamika during the previous year 2019-20 from
such house property is ` 5,50,000.
(iii) Mr. Raghav receives following income from M/s M Pvt. Ltd. during P.Y. 2019-20:
 Interest on Debentures of ` 7,50,000; and
 Salary of ` 3,75,000. He does not possess the adequate professional
qualification commensurate with the salary received by him.
Shareholding of M/s M Pvt. Ltd. as on 31.3.2020 is as under -
Equity shares Preference shares
Mr. Raghav Nil Nil
Mrs. Raghav 2% 25%
Mr. Jai Kishan
(brother of Mrs. Raghav) 98% 75%
(iv) Mr. and Mrs. Raghav forms a partnership firm with equal share in profits.
Mr. Raghav transferred a fixed deposit of ` 1 crore to such firm. Firm had no income
or expense other than the interest of ` 9,00,000 received from such fixed deposit.
Firm distributed the entire surplus to Mr. and Mrs. Raghav at the end of the year.
(v) Mr. Raghav holds preference shares in M/s K Pvt. Ltd. He instructed the company
to pay dividends to Ms. Geetanshi, daughter of his servant. The transfer is
irrevocable for the life time of Geetanshi. Dividend received by Ms. Geetanshi
during the previous year 2019-20 is ` 13,00,000.
(vi) Other income of Mr. Raghav includes
- Interest from saving bank account of ` 2,00,000

- Cash gift of ` 75,000 received from daughter of his sister on his birthday.
Compute the total income of Mr. Raghav for the Assessment Year 2020-21. (8 Marks)
(b) Discuss the taxability of the following transactions giving reasons, in the light of relevant
provisions, for your conclusion.
Attempt any two out of the following three parts:
(i) Mr. Rajpal took a land on rent from Ms. Shilpa on monthly rent of ` 10,000. He sub-
lets the land to Mr. Manish for a monthly rent of ` 11,500. Manish uses the land for
grazing of cattle required for agricultural activities. Mr. Rajpal wants to claim
deduction of ` 10,000 (being rent paid by him to Ms. Shilpa) from the rental income
received by it from Mr. Manish.
(ii) Mr. Pratham, a non-resident in India, received a sum of ` 1,14,000 from
Mr. Rakesh, a resident and ordinarily resident in India. The amount was paid to
Pratham on account of transfer of right to use the manufacturing process developed
by Pratham. The manufacturing process was developed by Mr. Pratham in Singapore
and Mr. Rakesh uses such process for his business carried on by him in Dubai.
(iii) Mr. Netram grows paddy on land. He then employs mechanical operations on grain
to make it fit for sale in the market, like removing hay and chaff from the grain,
filtering the grain and finally packing the rice in gunny bags. He claims that entire
income earned by him from sale of rice is agricultural income not liable to inc ome-
tax since paddy as grown on land is not fit for sale in its original form.
(3 x 2 = 6 Marks)
Answer
(a) Computation of Total Income of Mr. Raghav for A.Y. 2020-21
(`) (`)
Salary Nil
[Since Mrs. Raghav along with her brother holds shares
carrying 100% voting power in M/s M Pvt. Ltd., they have a
substantial interest in the company. Since Mr. Raghav is
working in the same company without any professional
qualifications commensurate with his salary, the salary of
` 3,75,000 received by him would be included in the hands
of Mrs. Raghav.
Income from house property
House 1 [Self-occupied]
Net annual value -
Less: Interest on loan [upto `2,00,000] 2,00,000 (2,00,000)

House 2 [Let out]

Gross annual value7 [`60,000 x 12] 7,20,000
Less: Municipal taxes -
Net annual value 7,20,000
Less: Deductions from Net Annual Value
(a) 30% of Net Annual Value 2,16,000
(b) Interest on loan 5,00,000 4,000
House in Delhi [Since Mr. Raghav receives direct or
indirect benefit from income arising to his sister’s daughter,
Ms. Vamika, from the transfer of house to her without
consideration, such income is to be included in the total
income of Mr. Raghav as per proviso to section 62(1), even
though the transfer may not be revocable during lifetime of
Ms. Vamika’s]
Gross Annual Value8 5,50,000
Less: Municipal taxes -
Net Annual Value 5,50,000
Less: Deductions from Net Annual Value
(a) 30% of Net Annual Value 1,65,000
(b) Interest on loan - 3,85,000
1,89,000
Profits and gains from business or profession
Share of profit from firm [Exempt u/s 10(2A)] -
Exempt income cannot be clubbed
Dividend on preference shares exceeding ` 10,00,000 taxable 3,00,000
under section 115BBDA [Taxable in the hands of Mr. Raghav
as per section 60, since he transferred the income, i.e.,
dividend, without transferring the asset, i.e., preference shares]
Interest on debentures 7,50,000
Interest from saving bank account 2,00,000
Cash gift [Taxable, since sum of money exceeding
` 50,000 is received from his niece, who is not a relative
as per section 56(2)] 75,000 13,25,000
7 Rent receivable has been taken as the gross annual value in the absence of other information
8 Rent receivable has been taken as the gross annual value in the absence of other information


Deduction under section 80C [Principal repayment of 1,50,000
loan ` 5 lakh, restricted to ` 1,50,000]
Deduction under section 80TTA [Interest from
savings bank account] 10,000 1,60,000
(b) (i) The rent or revenue derived from land situated in India and used for agricultural
purposes would be agricultural income under section 2(1A)(a). Therefore, rent
received from sub-letting of the land used for grazing of cattle required for
agriculture activities is agricultural income. The rent can either be received by the
owner of the land or by the original tenant from the sub-tenant.
Accordingly, rent received by Mr. Rajpal from Mr. Manish for using land for grazing
of cattle required for agricultural activities is agricultural income exempt u/s 10(1).
As per section 14A, no deduction is allowable in respect of exempt income.
(ii) Consideration for transfer of right to use the manufacturing process falls within the
definition of royalty. Income by way royalty payable by Mr. Rakesh, a resident and
ordinarily resident, is not deemed to accrue or arise in India in the hands of Mr.
Pratham as per section 9(1)(vi)(b), since royalty is payable in respect of right used
for the purposes of a business carried on by Mr. Rakesh outside India i.e ., in Dubai.
(iii) The income from the process ordinarily employed to render the produce fit to be
taken to the market would be agricultural income under section 2(1A)(b)(ii). The
process of making the rice ready from paddy for the market may involve manua l
operations or mechanical operations, both of which constitute processes ordinarily
employed to make the product fit for the market.
Accordingly, the entire income earned by Mr. Netram from sale of rice is agricultural
income.

questions.
All questions should be answered on the basis of position of GST law as amended upto
30th April, 2020.
Working notes should form part of the answer.
Wherever necessary, suitable assumptions may be made by the candidates and disclosed by
way of note.
Question 5
Star Ltd., a registered supplier in Karnataka has provided the following details for supply of
one machine·:
Particulars Amount in
(` )
(1) List price of machine supplied [exclusive of items given below from 80,000
(2) to (4)]
(2) Tax levied by Local Authority on sale of such machine 6,000
(3) Discount of 2% on the list price of machine was provided (recorded
in the invoice of machine)
(4) Packing expenses for safe transportation charged separately in 4,000
the invoice
Star Ltd. received ` 5,000 as subsidy from a NGO on sale of each such machine, The Price
of ` 80,000 of the machine is after considering such subsidy.
During the month of February, 2020, Star Ltd. supplied three machines to Intra-State customers
and one machine to Inter-State customer.
Star Ltd. purchased inputs (intra-State) for ` 1,20,000 exclusive of GST for supplying the above
four machines during the month.
The Balance of ITC at the beginning of February, 2020 was:
CGST SGST IGST
` 18,000 ` 4,000 ` 26,000
Note:
(i) Rate of CGST, SGST and IGST to be 9%,9% and 18% respectively for both inward and
outward supplies.

(ii) All the amounts given above are exclusive of GST.

(iii) All the conditions necessary for availing the ITC have been fulfilled.
Compute the minimum net GST payable in cash by Star Ltd. for the month of February, 2020.
(8 Marks)
Answer
Computation of value of taxable supply
Particulars Amount
(`)
List price of the machine 80,000
Add: Tax levied by Local Authority on the sale of machine 6,000
[Tax other than GST, if charged separately, are includible in the value in terms
of section 15 of the CGST Act, 2017.]
Add: Packing expenses for safe transportation 4,000
[Includible in the value as per section 15 of the CGST Act, 2017.]
Add: Subsidy received from a NGO on sale of each machine 5,000
[Subsidy received from a non-Government body and which is directly linked to
the price, the same is included in the value in terms of section 15 of the CGST
Act, 2017.]
Total 95,000
Less: Discount @ 2% on ` 80,000 1,600
[Since discount is known at the time of supply and recorded in invoice, it
is deductible from the value in terms of section 15 of the CGST Act, 2017.]
Value of taxable supply 93,400
Computation of minimum net GST payable in cash by Star Ltd.
Sale of machine 25,218 25,218 16,812
[Intra-State sales = ` 93,400 × 3 machines = ` 2,80,200
2,80,200 2,80,200 93,400×1
Inter-State sales = ` 93,400 × 1 machine = ` 93,400]
×9%] ×9%] 8%]
Total output tax 25,218 25,218 16,812
Less: Set off of IGST against IGST and SGST (9,188) (16,812)
[IGST credit first be utilized towards payment of IGST,
remaining amount can be utilized towards CGST and SGST in
any order and in any proportion]

Less: Set off of CGST against CGST and SGST against SGST (25,218) (14,800)
[CGST credit cannot be utilized towards payment of SGST
and vice versa.]
Minimum net GST payable in cash Nil 1,230
Working Note:
Computation of total ITC available
Opening balance of ITC 18,000 4,000 26,000
Add: Inputs purchased during the month 10,800 10,800
[` 1,20,000 ×9%] [` 1,20,000 ×9%]
Total ITC available 28,800 14,800 26,000
Question 6
(a) Green Agro Services, a registered person provides the following information relating to its
activities during the month of February, 2020:
Gross Receipts from (` )
Services relating to rearing of sheeps 6,00,000
Services by way of artificial insemination of horses 4,00,000
Processing of sugarcane into jaggery 8,00,000
Milling of paddy into rice 7,50,000
Services by way of fumigation in a warehouse of agricultural produce 1,80,000
All the above receipts are exclusive of GST.
Compute the value of taxable supplies under GST laws for the month of February, 2020.
(6 Marks)
(b) Satya Sai Residents Welfare Association, a registered person under GST has 30 members
each paying ` 8,000 as maintenance charges per month for sourcing of goods and services
from third persons for common use of its members.
The Association purchased a water pump for ` 59,000 (inclusive of GST of ` 9,000) and
availed input services for ` 23,600 (inclusive of GST of ` 3,600) for common use of its
members during February 2020.
Compute the total GST payable, if any, by Satya Sai Residents Welfare Association, for
February 2020. (4 Marks)
GST rate is 18%. All transactions are intra-State.
There is no opening ITC and all conditions for ITC are fulfilled.

Answer
(a) Computation of value of taxable supplies
Particulars Amount
(`)
Services relating to rearing of sheeps Nil
[Exempt since services relating to rearing of all life forms of animals,
except horses, for food etc. are exempt.]
Services by way of artificial insemination of horses 4,00,000
[Not exempt since services of artificial insemination are exempt only of
livestock other than horses.]
Processing of sugarcane into jaggery 8,00,000
[Not exempt, since processes which alter the essential characteristics
of agricultural produce are not exempt and processing of sugarcane into
jaggery changes the essential characteristics of sugarcane.]
Milling of paddy into rice 7,50,000
[Not exempt, since this process, being carried out after cultivation is
over, is not an intermediate production process in relation to cultivation
of plants and it also changes the essential characteristics of paddy.]
Services by way of fumigation in a warehouse of agricultural produce Nil
[Specifically exempt from GST.]
Value of taxable supplies 19,50,000
(b) Computation of total GST payable by Satya Sai Residents Welfare Association
Particulars Value GST
(`) @ 18%
(`)
Maintenance charges received 2,40,000
[` 8,000 × 30 members]
[Services by RWA to its members for sourcing of goods or services
from a third person for the common use of its members in a
housing society are exempt provided the share of contribution
per month per member is upto ` 7,500. Otherwise, entire amount
is taxable.]
Total GST payable [It has been logically presumed that 43,200
maintenance charges are exclusive of GST.]

Note: Residents Welfare Association is entitled to take ITC of GST paid by them on capital goods,
goods and input services, used by it for making supplies to its members and use such ITC for
discharge of GST liability on such supplies where the amount charged for such supplies is more
than ` 7,500 per month per member. Thus, Satya Sai Residents Welfare Association can avail
ITC of GST paid on water pump purchased (` 9,000) and input services availed (` 3,600). Net GST
payable in that case will come out ` 30,600.
Question 7
(a) ABC Cinemas, a registered person engaged in making supply of services by way of
admission to exhibition of cinematograph films in multiplex screens was issuing
consolidated tax invoice for supplies at the close of each day in terms of section 31(3)(b)
of CGST Act, 2017 read with fourth proviso to rule 46 of CGST Rules, 2017.
During the month of October, 2019, the Department raised objection for this practice
and asked to issue separate tax invoices for each ticket.
Advise ABC Cinemas for the procedure to be followed in the light of recent notification.
(4 Marks)
(b) Agni Ltd. a registered supplier wishes to transport cargo by road between two cities
situated at a distance of 368 kilometres. Calculate the validity period of e-way bill under
rule 138(10) of CGST Rules, 2017 for transport of the said cargo, if it is over dimensional
cargo or otherwise. (3 Marks)
(c) The aggregate turnover of Mr. Prithvi, a registered person for the FY 2017-18 and
2018-19 were ` 140 lakh and ` 170 lakh respectively. He has not filed the annual return
(GSTR-9) under section 44(1) of CGST Act, 2017 before the due date.
Discuss the penal provisions, if any, for not filing the returns before the due date. (3 Marks)
Answer
(a) The procedure to be followed by ABC Cinemas, a registered person engaged in making
supply of services by way of admission to exhibition of cinematograph films in multiplex
screens, is as under:-
The option to issue consolidated tax invoice is not available to a supplier engaged in making
supply of services by way of admission to exhibition of cinematograph films in multiplex
screens. Thus, ABC Cinemas cannot issue consolidated tax invoice for supplies made
by it at the close of each day.
ABC Cinemas is required to issue an electronic ticket.
The said electronic ticket shall be deemed to be a tax invoice, even if such ticket does not
contain the details of the recipient of service but contains the other information as prescribed
to be mentioned.
(b) The validity period of e-way bill under rule 138(10) of the CGST Rules, 2017 for transport of
cargo by road between two cities situated at a distance of 368 km is as under:

(i) If it is over dimensional cargo: the validity period of the e-way bill is one day from
relevant date upto 20 km and one additional day for every 20 km or part thereof
thereafter.
Thus, validity period in given case:
= 1 day + 18 days
= 19 days
(ii) If it is a cargo other than over dimensional cargo: the validity period of the e-
way bill is one day from relevant date upto 100 km and one additional day for every
100 km or part thereof thereafter.
Thus, validity period in given case:
= 1 day + 3 days
= 4 days
(c) The penal provisions for not filing the annual return (GSTR-9) under section 44(1) of the
CGST Act, 2017 before the due date are as under:-
(a) ` 100 for every day during which such failure continues,
or
(b) 0.25% of the turnover of the registered person in the State/Union Territory
whichever is lower1.
Note:- It may be noted that filing of GSTR-9 has been made voluntary in respect of financial years
2017-18 and 2018-19 for the registered persons whose turnover is less than ` 2 crores and who
have not furnished the said annual return before due date. Here, the annual return is deemed to
be furnished on the due date if it has not been furnished before the due date.
Question 8
(a) Mr. Anurag, a famous Author is engaged in supply of services by the way of transfer or
permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1)
of section 13 of the Copyright Act, 1957 relating to original literary works to a publisher.
Explain in brief the conditions under which an Author can choose to pay tax under forward
charge. (5 Marks)
1
It has been most logically assumed that Mr. Prithvi has not filed the annual return till the due date for the
same. Further, it has also been assumed that he has not filed the annual returns for both the financial years,
FY 2017-18 and FY 2018-19.

(b) Under the provision of section 29(1) of CGST Act, 2017 read with rule 21A of CGST Rules,
2017 related to suspension of registration if the registered person has applied for
cancellation of registration, what is the period and manner of suspension of registrati on ?
(5 Marks)
OR
Explain the circumstances under which proper officer can cancel the registration on his
own of a registered person under CGST Act, 2017. (5 Marks)
Answer
(a) Mr. Anurag, an author, can choose to pay tax under forward charge provided he fulfills the
following conditions:-
(i) He has taken registration under the GST law.
(ii) He has filed a declaration, in the prescribed form,
that he exercises the option to pay tax on the said service under forward
charge and, to comply with all the provisions of the GST law as they apply to a
person liable for paying the tax in relation to the supply of any goods and/or services
and
that he shall not withdraw the said option within a period of 1 year from the date
of exercising such option.
(iii) He makes a declaration on the invoice issued by him in prescribed form to the
publisher.
(b) Where a registered person has applied for cancellation of registration, the registration shall
be deemed to be suspended from:
(a) the date of submission of the application or
(b) the date from which the cancellation is sought, whichever is later, pending the
completion of proceedings for cancellation of registration.
Such person shall not make any taxable supply during the period of suspension and shall
not be required to furnish any return.
The expression “shall not make any taxable supply” mean that the registered person shall
not issue a tax invoice and, accordingly, not charge tax on supplies made by him during
the suspension period.
Answer to Alternative
(b) The circumstances under which proper officer can cancel the registration on his own of a
registered person under the CGST Act, 2017 are as under:-
(i) A registered person has contravened any of the following prescribed provisions
of the GST law:

(a) he does not conduct any business from the declared place of business.
(b) he issues invoice/bill without supply of goods/services in violation of the
provisions of GST law.
(c) he violates the provisions of anti-profiteering.
(d) he violates the provisions relating to furnishing of bank details.
(ii) A person paying tax under composition levy has not furnished returns for 3
consecutive tax periods.
(iii) A registered person paying tax under regular scheme has not furnished returns for
continuous period of 6 months.
(iv) Voluntarily registered person has not commenced the business within 6 months from
the date of registration.
(v) Registration was obtained by means of fraud, wilful misstatement or suppression of
facts.
[Note: Any 5 points out of the above 8 points may be mentioned]

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PAPER – 4 : TAXATION

SECTION A: INCOME TAX LAW

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

purpose, it is assumed that it is equally used for

© The Institute of Chartered Accountants of India

Professional fees to Mr. Raunak without 30,000

© The Institute of Chartered Accountants of India

Less: Deduction under Chapter VI-A

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

2 In the absence of information, it is assumed that he is not a person of Indian Origin

© The Institute of Chartered Accountants of India

3He is a resident in 8 out of 10 PYs immediately preceding P.Y.2022-23

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(ii) Income from business in Sri Lanka (taxable since it is 16,00,000

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

became operational, the said amount would be

= ` 27,00,000 x 50% = ` 13,50,000

Deduction would be 50% of eligible profits, since

© The Institute of Chartered Accountants of India

Add: Deduction under section 35AD 50,00,000

© The Institute of Chartered Accountants of India

(iii) 15/26 x last drawn salary x no. of 6,05,769

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

such income arises from her own 13,500

5 Assumed that this is the first year of clubbing

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(c) [First Alternative]

© The Institute of Chartered Accountants of India

SECTION B: INDIRECT TAXES

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Inter-State supply of 10 combos of air- 2,00,000 36,000

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(iv) Other services ` 4,000

3 Based on the position of law as existing on 31.10.2022.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

The order of discharge of liability of Mr. Manik will be as under:

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Purchase of furniture at 1,35,000

© The Institute of Chartered Accountants of India

Loss from self-occupied property (30,000)

© The Institute of Chartered Accountants of India

general rate for plant and machinery. The main

© The Institute of Chartered Accountants of India

Income earned from gift to daughter in law