CA Intermediate

Income from Other Sources – CA Inter Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Income from Other Sources – CA Inter Taxation Study Material

Gift

Question 1.
From the following particulars of Pankaj for the previous year ended 31st March, 2021 compute the Income under the head “Income from other Sources”  [Nov. 2009, 6 Marks]

Particulars	Amount (₹)
Directors Fee from a Company	10000
Interest on bank Deposits	3000
Income from undisclosed source	12000
Winnings from Lotteries (Net)	33500
Royalty on a book written by him	9000
Lectures in Seminars	5000
Interest on loan given to a relative	7000
Interest on Debentures of a Company (listed in a Recognized Stock Exchange) Net of Taxes	3588
Interest on Post Office Savings Bank Account	500
Interest on Deposit Certificate issued under the Gold Monetization Scheme	9000
Interest on Government Securities	2200
Interest on Monthly Income Scheme of Post office	33000
He paid ₹ 1,000 for typing the manuscript of book written by him	1000

Answer:
Computation of Income from Other Sources for the Assessment Year 2021-22

Particulars	Amount (₹)
Directors Fee from a Company	10000
Interest on bank Deposits	3000
Income from undisclosed source	12000
Winnings from Lotteries Gross [33500 × 100/70] = 47857	47857
Royalty on a book written by him [9000 – 1000]	8000
Lectures in Seminars	5000
Interest on loan given to a relative	7000
Interest on Debentures of a Company (listed in a Recognized Stock Exchange) Net of Taxes received [3588 × 100/90]	3987
Interest on Post Office Savings Bank Account ₹ 500 Exempt u/s 10(15)	Exempt
Interest on Deposit Certificate issued under the Gold Monetization Scheme Exempt u/s 10(75)	Exempt
Interest on Government Securities	2200
Interest on Monthly Income Scheme of Post office	33000
Taxable Income under the head Income from Other Sources	132044

Question 2.
The following details have been furnished by Mrs. Hemali, pertaining to the year ended 31-3-2021 :

S.No.	Particulars
1	Cash gift of ₹ 51,000 received from her friend on the occasion of her “Shastiapthapoorthi”, a wedding function celebrated 60th years of age her husband completing 60 years of age. This was also her 25th wedding anniversary.
2	On the above occasion, a diamond necklace worth ₹ 2 lacs was presented by her sister living in Dubai.
3	When she celebrated her daughter’s wedding on 21-2-2020, her friend assigned in Mrs. Hemali favour a fixed deposit held by the said friend in a scheduled bank; the value of the fixed deposit and the accrued interest on the said date was ₹ 51000

Compute the income, if any, assessable as income from other sources. [May 2011, 4 Marks]
Answer:
Computation of Income from Other Sources for the Assessment Year 2021-22

Question 3.
Discuss the taxability or otherwise in the hands of the recipients, as per the provisions of the Income-tax Act, 1961.

Mr. Kumar gifted a car to his sister’s son (Sunil) for achieving good marks in CA Final exam. The fair market value of the car is ₹ 5,00,000. [May 2016, 2 Marks]
Answer:

Section	Explanation
56(2)	Car is not asset. Hence it is not taxable.

Question 4.
Mr. Rakesh has 15% shareholding in RSL Private Limited and has also 50% share in Rakesh & sons a partnership firm. The accumulated profit of RSL Private Limited is ₹ 20,00,000. Rakesh & sons has taken a loan of ₹ 25,00,000 from RSL Private Limited. Explain whether the above loan is treated as dividend as per the provisions of Income-tax Act 1961. [Nov. 2018, 4 Marks]
Answer:

S. No.	Reasons
1	RSL Private Limited is a company in which public are not substantially interested.
2	This company has Accumulated Profit of ₹ 20 Lakhs.
3	Rakesh’s shareholding in RSL (P) limited > 10%
4	Rakesh’s Share in the Partnership Firm > 20%
5	Hence all conditions given in the principles above are attracted.
Conclusion: Of the Loan of  ₹ 25 Lakh, ₹ 20 Lakh shall be treated as Deemed Dividend u/s 2(22)(e) in the hands of shareholder.

Note:
1. Corporate Dividend Tax is not leviable on Deemed Dividend u/s 2(22) (e) and it will be taxed in the hands of Shareholders.

Question 5.
State with reason whether the following receipt is taxable or not under the provision of Income-tax Act, 1961?

Mr. Suri received a sum of ₹ 5,00,000 as compensation from ‘Yatra Foundation’, towards the loss of property on account of “Flood Disaster” at Chennai during December 2020. [Nov. 2016, 2 Marks]
Answer:

Section	Provision	Case Answer
10(10BC)	any amount received or receivable as compensation by an individ­ual, on account of any loss or damage caused by disaster from the Central Government, State Government or a local authority is exempt from tax	Mr. Suri has received a compensa­tion of ₹ 5,00,000 from Yatra Foun­dation, and not the Central or State Government or local authority, no exemption will be available under Section 10 (10BC)

Question 6.
Discuss the taxability of the following receipts in the hands of Mr. Sanjay Kamboj under the Income-tax Act, 1961 for A.Y. 2021-22 :
(i) ₹ 51,000 received from his sister living in US on 1-6-2020.
(ii) Received a car from his friend on payment of ₹ 2,50,000, the FMV of which was ₹ 5,50,000.
Provisions of taxability or Non-taxability must be discussed. [May 2018, 3 Marks]
Answer:

Section	Provision	Case	Case Answer
56(2)	Gift received from any other person other than a Relative is taxable.	₹ 51,000 received from his sister living in US on 1-6-2020	In this case Gifts are from sister and hence NOT TAXABLE.
56(2)(vii)	Motor Car is not a Movable Property.	Received a car from his friend on pay­ment of ₹ 2,50,000, the FMV of which was ₹ 5,50,000	In this Case Received a Car from his friend on payment of ₹ 2,50,000 the FMV of which was ₹ 5,50,000. Hence NOT TAXABLE.

Question 7.
Examine with brief- reasons, whether the following are chargeable to income-tax and the amount liable to tax with reference to the provisions of the Income-tax Act, 1961:

During the previous year 2020-21, Mrs. Aishwarya, resident, received, a sum of ₹ 8,50,000 as dividend from Indian companies and ₹ 4,00,000 as dividend from Indian equity oriented mutual fund units. [Nov. 2018, 2 Marks]
Answer:
From Assessment Year 2021-22 the dividend is taxable in the hands of Recipient.

Question 8.
State with brief reasoning whether the following receipts are chargeable to Income Tax or exempt for the assessment year 2021-22. (Computation is not required.)

• Interest on enhanced compensation received ₹ 1,02,000 in 12.02.2021 for acquisition of urban land of which 40% relates to the earlier year.
• Rent received ₹ 55,000 for letting out agricultural land for a movie shooting. [Nov. 2013, Modified]

Answer:

S.No.	Section	Particulars	Taxability
1	56 and57	Interest on enhanced compensation received in 12.02.2021 for acquisition of urban land of which 40% relates to the earlier year.	Yes, ₹ 51,000
2	2(1 A)	Rent received for letting out agricultural land for a movie shooting.	Yes, ₹ 55,000

Question 9.
Mr Sajan is employed in a company with taxable salary income of ₹ 5,00,000. He received a Cash gift of ₹ 1,00,000 from Sunita Charitable Trust registered under section 12AA in the month of December for meeting his medical expenses. Is the cash gift received from the trust chargeable to tax in the hands of Mr Sajan. [May 2011, Modified]
Answer:
Computation of Gross Total Income of Mr. Sajan for the Assessment Year 2021-22

Particulars	Amount (₹)
Income from Salary	5,00,000
Cash gift from Sunita Charitable Trust is Exempt u/s 56	NIL
Gross Total Income	5,00,000

Question 10.
Shrimati Saraswati reports the following transactions:

1. Received cash gifts on the occasion of her marriage on 18.08.2020 of ₹ 1,10,000. It includes gift of ₹ 10,000 received from non-relative.
2. On 01.09.2020 being her birthday gift, she received a gift by means of cheque from her mother’s maternal uncle. The amount being ₹ 30,000.
3. On 01.01.2021 she acquired a vacant site from her friend for ₹ 1,10,000. The State Stamp Valuation Authority fix the value of site at ₹ 2,90,000 stamp duty purposes.
4. She bought 100 equity shares of a listed company from another friend for ₹ 70,000. The value of share in the stock exchange on the date of purchase was ₹ 1,20,000.

Determine the amount chargeable to tax in the hands of Shrimati Saraswati for the assessment year 2021-22. [Nov. 2012, Modified]
Answer:

Question 11.
Determine the taxability of the following sums received by Mr. Pradeep Kumar from LIC on account of life insurance policies taken by him. [RTP, Modified]

Answer:

Question 12.
On 10-10-2020, Mr. Govind (a bank employee) received ₹ 5,00,000 towards interest on enhanced compensation from State Government in respect of compulsory acquisition of his land effected during the financial year 2012-13. Out of this interest, ₹ 1,50,000 related to the financial year 2014-15, ₹ 1,65,000 to the financial year 2015-16; and ₹ 1,85,000 to the financial year 2016-17.

He incurred ₹ 50,000 by way of legal expenses to receive the interest on such enhanced compensation. How much of interest on enhanced com-pensation would be chargeable to tax for the assessment year 2021-22? [Nov. 2011, 4 Marks]
Answer:
Computation of Taxable Income from Other Sources
(Assessment Year 2021-22)

Particulars	Amount (₹)
Interest on enhanced compensation Section 56(2)(viii)	5,00,000
Less – Deduction at the rate of 50°o under section 57(iv)	2,50,000
Taxable interest on enhanced compensation	2,50,000

Notes:

1. The amount of interest on enhanced compensation is taxable under the head income from other sources in assessment year 2021-22.
2. As per section 57( iv) – 50% of such taxable interest is deductible and no other expenses are allowed.
3. As per section 145B which is inserted by Finance Act, 2018 and applicable with effect from assessment year 2017-18 onwards. Interest received by an assessee on compensation or on enhanced compensation [section 56(2)(viii)] is deemed to be income of the Year in which it is received and taxable under the head income from other sources.

Question 13.
MLX Investments (P) Ltd. was incorporated during P.Y. 2016-17 having a paid up capital of ₹ 10 lacs. In order to increase its capital, the company further issues, 1,00,000 shares (having face value of ₹ 100 each) during the year at par as on 01-08-2018. The FMV of such share as on 01-08-2018 was ₹ 85.

a. Determine the tax implications of the above transaction in the hands of company, assuming it is the only transaction made during the year.
b. Will your answer change, if shares were issued at ₹ 105 each?
c. What will be your answer, if shares were issued at ₹ 105 and FMV of the share was ₹ 120 as on 01-08-2018? [Nov. 2019, 4 Marks]
Answer:
The provisions of section 56(2)(viib) would be attracted, where consi-deration is received from a resident person by a company, other than a company in which public are substantially interested, in excess of the face value of shares i.e., where shares are issued at a premium. In such a case, the difference between the consideration received and the fair market value would be chargeable to tax under the head “Income j from Other Sources”.

(a) In this case, since MLX Investments (P.) Ltd., a closely held company issued 1,00,000 shares (having face value of ₹ 100 each) at par i e., ₹ 100 each, though issue price is greater than FMV, no amount would be chargeable to tax as income from other sources.

(b) In this case, since shares are issued at a premium, the amount by which the issue price of ₹ 105 each exceeds the FMV of ₹ 85 each would be chargeable to tax under the head “Income from other sources”. Hence, ₹ 20 lakh, being ₹ 20 (ie., ₹105 – ₹ 85) × 1,00,000 shares, would be chargeable under section 56(2)(viib).

(c) If shares are issued at ₹ 105 each and FMV of share is ₹ 120 each, no amount would be chargeable to tax even though the shares were issued at a premium, since shares are issued at a price which is less than the fair market value.

Income from House Property – CA Inter Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Income from House Property – CA Inter Taxation Study Material

Introduction

Question 1.
Explain the concept of Municipal Value, Fair Rent and Standard Rent.
Answer:
Municipal Value
It refers to the value that the Municipal Authorities deems as the value of the property for the purpose of assessment of property taxes.

Fair Rent
It is the rent fetched by a similar property, in same or similar locality, with same facilities.
Standard Rent

It is the maximum rent which a person can legally recover from his tenant under Rent Control Act.

Question 2.
Is it possible for the net annual value of a house property to be negative? What will be tax treatment if income under the head “Income from house property” is negative? [CMA June 2009, 4 Marks]
Answer:

Question 3.
Mr. X owns live houses at Cochin. Compute the Gross Annual Value of each house from the information given below: [May 2012, 5 Marks]

Answer:

Deductions Under Section 24

Question 4.
Mr. A owns a commercial building let out @ X 40,000 per month. During the financial year 2020-21, he wants to claim expenses made | towards insurance, water, etc. from the rent received. Comment in the light of section 24(a).
Answer:
The section 24(a) allows deduction to an extent of 30% of Net Annual Value (NAV) as a standard deduction from the house property used as a let out property or deemed let out property. In the given case, Mr. A is entitled to standard deduction but no other expenditure shall be allowed as deduction towards insurance, repair, ground rent, collection charges, water charges, etc.

Question 5.
Ms. Jyoti purchased a house property costing X 49 Lakhs on 1st May, 2020. The property is used exclusively for her residential purpose. For this purpose she obtained loan from DHFL of X 35 lakhs bearing interest @ 14% p.a. on 1st April, 2020. She does not own any other house.

State with brief reasons the deductions that can be claimed by Ms. Jyoti in respect of interest on loan for Assessment Year 2021-22. What would -5 be the change in your answer if the loan has been taken over for repairs. [Nov. 2017 Modified, 5 Marks]
Answer:
Interest paid on housing loan = 14% of ₹ 35,00,000 = ₹ 4,90,000
Status of house property = Self-occupied
(a) Loan taken for construction or acquisition: If the capital is borrowed on or after April 1,1999 for acquiring or constructing a property which i is self-occupied, the interest on such borrowed capital is deductible up to ₹ 2,00,000.

(b) Loan taken for reconstruction, repairs or renewal: In this case, the maximum amount of deduction on account of interest is ₹ 30,000.

Question 6.
Mrs. Vimala commenced construction of house meant for residential purpose on 01.11.2018. She raised a loan of ₹ 10 lakhs @ 11% per annum from a bank. Finding that there was over run in the cost of construction, she raised a further loan of ₹ 5 lakhs from her friend at 15% rate of interest per annum on 1.10.2020. The construction was completed by February, 2021.
Compute the amount of interest allowable exemption under section 24 of the income-tax Act, 1961 in the following cases:
(i) The house was meant for self-occupation from 01.03.2021
(ii) The house was to be let out from 01.03.2021.
Is there any deduction available u/s 80C towards principal repayment in respect of above loans? [CMA June 2011, 6 Marks]
Answer:
(i) When the house was meant for self-occupation:
Computation of the amount of interest allowable exemption under section 24

As per section 24(b), the amount eligible for deduction for interest on borrowed capital (of the current year and pre-construction period) is up to ₹ 2,00,000. The actual interest (₹ 1,78,667) is deductible as it is within limit.

(ii) When the house is let out w.e.f. 1-3-2021:
If capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the property, then no maximum limit has been prescribed, if the house is not self-occupied.
Therefore, the whole amount of ₹ 1,78,667 (calculated in first part) is deductible.

Question 7.
Sanjay commenced construction of a residential house intended exclusively for his residence, on 1-12-2019. He raised a loan of ₹ 8,00,000 @15% interest for the purpose of construction on 1-11 -2019. Finding that there was an over run in the cost of construction he raised a further loan of ₹ 9,00,000 at 14% p.a. on 1-9-2020. What is the interest allowable under section 24 in Assessment year 2021-22, assuming that the construction was completed on 31-3-2021? [May 2000 Modified, 5 Marks]
Answer:
Computation of the amount of interest allowable exemption under section 24

As per section 24(b), in case of self-occupied property, the amount eligible for deduction for interest on borrowed capital (of the current year and pre-construction period) is up to ₹ 2,00,000. Thus, the deduction under section 24 in respect of borrowed capital is ₹ 2,00,000.

Question 8.
Give a tabular presentation of computation of income under the head “Income from House Property”.
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Deduction For Unrealised Rent And Subsequent Recovery [Rule 4 And Section 25a]

Question 9.
Explain the treatment of unrealized rent and its recovery in subsequent years under the provisions of Income Tax Act, 1961 [May 2012, 4Marks]
Answer:

Question 10.
Mr. X owns a house property which is let out. During the previous year ending 31-3-2021, he receives the following:
(i) Arrears of Rent ₹ 30,000
(ii) Unrealized Rent ₹ 20,000 You are requested to
(a) State, how they should be dealt with as per the provisions of the Act.
(b) Compute the income chargeable under the head “Income from House Property”. ___ [May 2002, 4 Marks]
Answer:
(a) State, how they should be dealt with as per the provisions of the Act.
As per section 25A, the arrears of rent received are taxable in the year in which arrears have been received. However, deduction shall be allowed @ 30% of such arrears and only the balance amount is taxable. The taxability exists irrespective of the fact whether assessee remains the owner of the property in the year of receipt or not.

(b) Computation of Income from House Property
(Assessment Year 2021-22)

Let Out Property Throughout The Year [Without Vacancy]

Question 11.
[Elementary] Amalesh owns a house property which is let-out for ₹ 6,500 per month. The fair rent of the property is ? 90,000. Municipal taxes paid during the year for each half year is ₹ 3,200. The tenant has spent ₹ 10,000 towards repairs of the property during the year. Compute the income from house property for the assessment year 2021-22.
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:
1. The GAV of the house property is determined as under:
Step 1: Computation of Expected Rent
(a) Municipal Valuation : NA
(b) Fair Valuation : ₹ 90,000
(c) Higher of (a) and (b) : ₹ 90,000
(d) Standard Rent : NA
Expected Rent = Lower of (c) and (d) = ₹ 90,000

Step 2: Computation of Gross Annual value

1. Expected Rent (As per step 1) : ₹ 90,000
2. Actual Rent Received (6,500 × 12) : ₹ 78,000

1. Gross Annual Value: The expected rent is higher than the rent received. Thus, the expected rent i.e. ₹ 90,000 shall be GAV.
2. The Municipal Taxes paid during the year for each half year is ₹ 3,200 i.e. ₹ 6,400 annual.

Question 12.
Mr. Lai is the owner of a commercial property let out at ₹ 60,000 per month. The Corporation tax on the property is ₹ 30,000 annually, 60% of which is payable by the tenant. This tax was actually paid on 15.04.2021. He had borrowed a sum of ₹ 40 lakhs from his cousin, resident in Singapore (in dollars) for the construction of the property on which interest at 8% is payable. He has also received arrears of rent of ₹ 80,000 during the year, which was not charged to tax in the earlier years. What is the property income of Mr. Lai for the assessment year 2021-22?
Answer:
Computation of Income from House Property (Assessment Year 2021-22)

Working Notes:

1. Municipal taxes paid by tenant (60%) are not deductible. The balance 40%, although paid by assessee, is not deducted because it was paid in FY 2021-22 and not in 2020-21.
2. It is presumed that the tax has been deducted at source on the amount of interest payable outside India.
3. As per section 25A, the arrears of rent received are taxable in the year in which arrears have been received. However, deduction shall be allowed @ 30% of such arrears and only the balance amount is taxable.

Question 13.
Tarun, employed in a private company, commenced construction of a commercial complex in July, 2019. He borrowed ₹ 50 lakhs from a bank @ 9% per annum. Interest up to 31.03.2020 was₹ 2,20,000 and for j the period from 01.04.2020 to 31.12.2020 ₹ 2,30,000; ₹ 1,40,000 towards interest for the balance three months remained unpaid.

The construction of the building was completed on 31st December, 2020. The building was let out w.e.f. 01.01.2021 for a monthly rent ₹ 90,000. Municipal tax of ₹ 1,20,000 was paid by cash on 10.01.2021. He repaid ₹ 1,90,000 towards principal during the previous year 2020-21, of which he paid ₹ 1,20,000 up to 31.12.2020. The municipal value of the property is ₹ 9,00,000.

Compute the income from house property of Tarun for the assessment year 2021-22.
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Question 14.
Mr. Ganesh owns a commercial building whose construction got completed in June 2019. He took a loan of ₹ 15 lakhs from his friend on 1-8-2018 and had been paying interest calculated at 15% per annum. He is eligible for pre-construction interest as deduction as per the provisions of the Income Tax Act.

Mr. Ganesh has let out the commercial building at a monthly rent of ₹ 40,000 during the financial year 2020-21. He paid municipal tax of ₹ 18,000 each for the financial years 2019-20 and 2020-21 on 1-5-2020 and 5-4-2021 respectively.

Compute income under the head ‘House Property’ of Mr. Ganesh for the Assessment Year 2021-22. [May 2017, 4 Marks]
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:

1. Municipal taxes paid on 5-4-2021 are not considered because these are not paid in financial year 2019-20.
2. The interest for pre-construction period deductible in previous year is determined as under:

(a) Pre-construction period (PCP) : 1-8-2018 to 31-3-2019 i.e. 8 Months
(b) Loan amount : ₹ 15,00,000
(c) Rate of Interest : 15%
(d) Total Pre-construction Interest : 15,00,000 × 15% × 8/12 = ₹ 1,50,000
(e) PCP Interest deductible in current Pr. Yr. : ₹ 1,50,000 × l/5 = ₹ 30,000

Question 15.
Mr. Ashok owns two buildings which are let out during the financial year 2020-21. The relevant details are as under:

Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Note: Repayment of principal amount of housing loan to bank is deductible from Gross Total Income under section 80C.

Working Notes:
1. The GAV of both the houses are determined as under:

Self-Occupied Property Throughout The Year [One Self-Occupied House]

Question 16.
Mr. Chaturvedi, Delhi has 3 house properties in various parts of India. The details are given below:

Note: All the properties were acquired constructed after 01.04.2013.
You are required to compute the income of Mr. Chaturvedi chargeable under x the head Income form house property for the assessment year 2021-22.
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Total taxable Income from House Property = (2,00,000) + 1,12,000 + (38,000) = – 1,26,000

Working Notes:

1. The NAV of self-occupied property (Delhi) is always taken as nil.
2. The GAV of both the houses are determined as under:
   

Question 17.
Raja is the owner of a residential house property having two independent floors of equal size in Chennai. The ground floor of the property has been let out to a tenant at rent of ₹ 15,000 per month from 1st June, 2020. The first floor of the property is occupied by Raja for his residential purpose.
Other particulars relating to the property are as follows:

Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:

1. The NAV of self-occupied property is always taken as nil.
2. As per section 70, the loss from one house property can be set-off against income from another property.

Question 18.
Mr. Raphael constructed a shopping complex. He had taken a loan of 25 Lakhs for construction of the said property on 01-08-2018 from SBI @ 10% for 5 years. The construction was completed on 30-06-2019. Rental income received from shopping complex ₹ 30,000 per month being let out for the whole year. Municipal Taxes paid for shopping complex ₹ 8,000. Arrears of rent received from shopping complex ₹ 1,20,000.

Interest paid on loan taken from SBI for purchase of house for use as own residence for the period 2020-2 1 Is ₹ 3 lakhs.

You are required to compute Income from House property of Mr. Raphael for A.Y. 2021-22 as per Income Tax Act, 1961. [Nov. 2015, 8 Marks]
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:

1. The NAV of self-occupied property is always taken as nil.
2. The maximum allowable amount for interest on loan for construction on self-occupied is ₹ 2,00,000.
3. The interest for pre-construction period deductible in previous year is determined as under:
   (a) Pre-construction period (PCP) : 1-8-2018 to 31-3-2019 i.e. 8 Months
   (b) Loan amount : ₹ 25,00,000
   (c) Rate of Interest : 10%
   (d) Total Pre-construction Interest : 25,00,000 × 10% × 8/12 = ₹ 1,66,666.67
   (e) PCP Interest deductible in current Yr. : ₹ 1,66,666.67 × 1/5 = ₹ 33,333
4. As per section 25A, the arrears of rent received are taxable in the year in which arrears have been received. However, deduction shall be allowed @ 30% of such arrears and only the balance amount is taxable.
5. As per section 70, the loss from one house property can be set-off against income from another property.

Self-Occupied Property Throughout The Year [Two Self-Occupied Houses]

Question 19.
Mr. Nitin owns two houses, both of which are occupied by him for residential purpose. The details are given below:

Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

The total comes to (2,80,000), but in case of self-occupied, the total interest on borrowed capital is deductible up to ₹ 2,00,000 only. Hence, total taxable income from house property = – 2,00,000

Working Notes:
1. The NAV of self-occupied property is always taken as nil.

Question 20.
Nisha has two houses, both of which are self-occupied. The particulars of these are given below:

Compute Nisha’s income from the House Property for the Assessment Year 2021-22 and suggest which house should be opted by Nisha to be is assessed as self-occupied so that her Tax liability is minimum. [May 2014, 8 Marks]
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Total taxable income = – 30,000

Working Notes:

1. The NAV of self-occupied property is always taken as nil.
2. The maximum allowable amount for interest on loan for repair on self-occupied is ₹ 30,000

Question 21.
Mr. Kamal Hasan has two independent residential flats in an apartment, both of them being of identical size. First flat is self-occupied and the second flat is occupied by his daughter, from whom he does not receive any rent.
For each flat the relevant annual rent details are as under:

Compute income of Mr. Kamal Hasan under the head income from house property for assessment year 2021-22. [CMA June 2016, 8 Marks]
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

The total comes to (3,90,000), but in case of self-occupied, the total interest on borrowed capital is deductible up to ₹ 2,00,000 only. Hence, total taxable income from house property = – 2,00,000

Working Note:
1. The NAV of self-occupied property is always taken as nil.

Question 22.
Surbhi has two houses, both of which are self-occupied. You are required to compute Surbhi’s income form house property for the Assessment Year 2021-22.
The Particulars of these are given below:

Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Total taxable income = Nil + (30,000) = – 30,000

Working Notes:

1. The NAV of self-occupied property is always taken as nil.
2. The maximum deduction allowable on loan taken for repairs is ₹ 30,000.

Let Out Property Throughout The Year [Kept Vacant For Part of the Year]

Question 23.
Mr. Nitin completed construction of a residential house on 01.04.2020. Interest paid on loans borrowed for the purpose of construction during the 30 months prior to completion was ₹ 60,000.
The house was let-out on a monthly rent of ₹ 18,000.

He had also received arrears of rent of ₹ 36,000 during the year, which had not been charged to tax in the earlier year.
Compute the income under the head “Income from House Property” for the assessment year 2021-22.
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:
1. The NAV of the house property is determined as under:
Step 1: Computation of Expected Rent
(a) Municipal Valuation : ₹ 1,50,000
(b) Fair Valuation : NA
(c) Higher of (a) and (b) : ₹ 1,50,000
(d) Standard Rent : NA
Expected Rent = Lower of (c) and (d) = ₹ 1,50,000

Step 2: Computation of Gross Annual value
(i) Expected Rent (As per step 1) : ₹ 1,50,000
(ii) Actual Rent received/receivable (After unrealized Rent)
(a) If there is no vacancy (18,000 × 12) : ₹ 2,16,000
(b) In case of Vacancy (18,000 × 8) : ₹ 1,44,000
Gross Annual value: The rent received/receivable is lower than expected rent due to vacancy. Thus, the rent received or receivable (considering vacancy) i.e. ₹ 1,44,000 shall be GAV.

2. As per section 25A, the arrears of rent received are taxable in the year in which areas have been received. However, deduction shall be allowed @ 30% of such arrears and only the balance amount is taxable.

Question 24.
Mr. Singhania constructed a residential house property in Kanpur. Construction was completed on 1st April, 2020. The house was vacant from 1st April, 2020 to 30th June, 2020. The house was let out at rent of ₹ 7,500 per month from 1st July 2020. Mr. Singhania obtained loan for the purpose of construction. Interest paid on such loan during two years prior to completion of construction amounted to ₹ 30,000. Interest paid during the year 2020-21 is ₹ 16,000. Fire Insurance premium paid is ₹ 2,000. Municipal value of the property has been assessed at ₹ 40,000. Annual corporation tax paid ? 3,000.
Compute income under the Assessment year 2021-22.
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:
1. The NAV of the house property is determined as under:
Step 1: Computation of Expected Rent
(a) Municipal Valuation : ₹ 40,000
(b) Fair Valuation : NA
(c) Higher of (a) and (b) : ₹ 40,000
(d) Standard Rent : NA
Expected Rent = Lower of (c) and (d) = ₹ 40,000

Step 2: Computation of Gross Annual value
(i) Expected Rent (As per step 1) : ₹ 40,000
(ii) Actual Rent received/receivable (After unrealized Rent)
(a) If there is no vacancy (7,500 × 12) : ₹ 90,000
(b) In case of Vacancy (7,500 × 9) : ₹ 67,500
Gross Annual value: The rent received/receivable is higher than expected rent even if there is vacancy. Thus, in accordance with section 23(1)(c), the rent received or receivable (considering vacancy) i.e. ₹ 67,500 shall be GAY.

Question 25.
Mr. Arjun furnishes the following details relating to three house properties at Erode, Tamil Nadu, let out by him during the previous year 2020-21:

Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Total taxable Income from House Property = 24,500 + 2,13,500 + (7,000) = 2,31,000

Working Notes:
1. The GAV of the houses have been determined as under:

Gross Annual value: The rent received/receivable is lower than expected rent due to vacancy. Thus, the rent received or receivable (considering vacancy) i.e. ₹ 80,000 shall be GAV.

Question 26.
Mr. X owns one residential house in Mumbai. The house is having two units. First unit of the house is self-occupied by Mr. X and another unit is rented for ₹ 8,000 p.m. The rented unit was vacant for 2 months during the year. The particular of house for the previous year 2020-21 are as under:

Compute income from house property of Mr. X for the Assessment year 2021-22, [Nov. 2008, 9 Marks]
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:
1. The NAV of self-occupied property is always taken as nil.
2. The GAY of 2nd unit is determined as under:
Step 1: Computation of Expected Rent
(a) Municipal Valuation (1,90,000 × 50%) : ₹ 95,000
(b) Fair Valuation (1,85,000 × 50%) : ₹ 92,500
(c) Higher of (a) and (b) : ₹ 95,000
(d) Standard Rent (1,62,000 × 50%) : ₹ 81,000
Expected Rent = Lower of (c) and (d) = ₹ 81,000

Step 2: Computation of Gross Annual value
(i) Expected Rent (As per step 1) : ₹ 81,000
(ii) Actual Rent received/receivable (After unrealized Rent)
(c) If there is no vacancy (8,000 × 12) : ₹96,000
(d) In case of Vacancy (8,000 × 10) : ₹ 80,000

3. Gross Annual value: The rent received/receivable is lower than I expected rent due to vacancy. Thus, the rent received or receivable (considering vacancy) i.e. ₹ 80,000 shall be GAV.
4. As per section 70, the loss from one house property can be set off against income from another property.

5. Light and water charges, insurance charges and painting expenses are not allowable as deduction under section 24.

Question 27.
Mr. Krishna owns a residential house in Delhi. The house is having two identical units. First unit of the house is self-occupied by Mr. Krishna and another unit is rented for ₹ 12,000 p.m. The rented unit was vacant for three months during the year. The particulars of the house for the previous year 2020-21 are as under:

Compute income from house property of Mr. Krishna for the assessment year 2021-22. [Nov. 2013, 8 Marks]
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:
1. The NAV of self-occupied property is always taken as nil.
2. The GAV of 2nd unit is determined as under:
Step 1: Computation of Expected Rent
(a) Municipal Valuation (2,44,000 × 50%) : ₹ 1,22,000
(b) Fair Valuation (2,35,000 × 50%) : ₹ 1,17,500
(c) Higher of (a) and (b) : ₹ 1,22,000
(d) Standard Rent (2,20,000 × 50%) : ₹ 1,10,000
Expected Rent = Lower of (c) and (d) = ₹ 1,10,000

Step 2: Computation of Gross Annual value
(i) Expected Rent (As per step 1) : ₹ 1,10,000
(ii) Actual Rent received/receivable (After unrealized Rent)
(a) If there is no vacancy (12,000 × 12) : ₹ 1,44,000
(b) In case of Vacancy (12,000 × 9) : ₹ 1,08,000
Gross Annual value: The rent received/receivable is lower than expected rent due to vacancy. Thus, the rent received or receivable (considering vacancy) i.e. ₹ 1,08,000 shall be GAV.

3. As per section 70, the loss from one house property can be set-off against income from another property.
4. Light and water charges, insurance charges and painting expenses are not allowable as deduction under section 24.

Property Self-Occupied For Part Of The Year & Let Out For The Remaining Part

Question 28.
Mrs. Disha Khanna, a resident of India, owns a house property at Bhiwani in Haryana. The Municipal, value of the property is ₹ 7,50,000, Fair Rent of the property is ₹ 6,30,000 and Standard Rent is ₹ 7,20,000 per annum.

The property was let out for ₹ 75,000 per month for the period April 2020 to December 2020. Thereafter, the tenant vacated the property and Mrs. Disha Khanna used the house for self-occupation. Rent for the months of November and December 2020 could not be realized from the tenant. The tenancy was bona fide but the defaulting tenant was in occupation of another property of the assessee, paying rent regularly.

She paid municipal taxes @ 12% during the year and paid interest of ₹ 35,000 during the year for amount borrowed towards repairs of the house property.

You are required to compute her income from “House Property” for the A.Y. 2021-22. [Nov. 2018, 7 Marks]
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:
1. The GAV of the house property is determined as under:
Step 1: Computation of Expected Rent
(a) Municipal Valuation : ₹ 7,50,000
(b) Fair Valuation : ₹ 6,30,000
(c) Higher of (a) and (b) : ₹ 7,50,000
(d) Standard Rent : ₹ 7,20,000
Expected Rent = Lower of (c) and (cl) = ₹ 7,20,000

Step 2: Computation of Gross Annual value
(i) Expected Rent (As per step 1) : ₹ 7,20,000
(ii) Actual Rent Received (75,000 × 9) : ₹ 6,75,000 (Note 2)
Gross Annual value: The expected rent is higher than rent received/ receivable. Thus, the expected rent i.e. ₹ 7,20,000 shall be GAV.

2. As per one of the conditions given in Rule 4, the defaulting tenant should not be in occupation of any other property of the assessee. Hence, in the given case, unrealized rent of two months is not deductible from rent received or receivable.

Question 29.
Ramesh owns a house at Hyderabad. Its municipal valuation is ₹ 24,000. He incurred the following expenditure in respect of the house property:
(i) Municipal Tax at 20%;
(ii) Fire insurance premium ₹ 2,000; and
(iii) Land revenue ₹ 2,400
He had taken bank loan of ₹ 25,000 at 16% per annum on April 1, 2018; the whole amount is still unpaid. The house was completed on April 1, 2020.

Find the income from house property for the assessment year 2021-22 for the following situations:
(i) If the assessee uses house for self-occupation throughout the previous year, and
(ii) If the house is let out for residential purpose on monthly rent of ₹ 2,500 from April 1, 2020 to December 31, 2020 and self-occupied for the remaining period.
Answer:
(i) When property is self-occupied throughout the previous year:
Computation of Income from House Property
(Assessment Year 2021-22)

(ii) When property is let out for part of the year and self occupied for part of the year:
Where a house is self-occupied for a part of the year and let out for remaining part of the year, the benefit of section 23(2)(a) is not available i.e. there will I be no consideration of self-occupancy. The house will be treated as let out throughout the previous year.

Computation of Income from House Property (Assessment Year 2021-22)

Working Notes:
1. The NAV of the house property is determined as under:
Step 1: Computation of Expected Rent
(a) Municipal Valuation : ₹ 24,000
(b) Fair Valuation : NA
(c) Higher of (a) and (b) : ₹ 24,000
(d) Standard Rent : NA
Expected Rent = Lower of (c) and (d) = ₹ 24,000

Step 2: Computation of Gross Annual value
(i) Expected Rent (As per step 1) : ₹ 24,000
(ii) Actual Rent Received (2,500 × 9) : ₹ 22,500
(iii) Gross Annual Value (Higher) : ₹ 24,000

Question 30.
Mr. Sridhar constructed his house on a plot of land acquired by him in Kolkata. The house has two floors of equal size. He started construction of the house on 1st April, 2019 and completed construction on 30th June, 2020. He occupied the ground floor on 1st July, 2020 and let out the first floor at a rent of ₹ 20,000 per month on the same date. However, the tenant vacated the first floor on 31st January, 2021 and Mr. Sridhar occupied the entire house from 1st February, 2021 to 31st March, 2021.

Other information.

Mr. Sridhar obtained a housing loan of ₹ 15 lacs at interest of 10% per annum on 15th July, 2019. He did not repay any part of the loan till 31st March, 2021.

Compute income from house property in the hands of Mr. Sridhar for the Assessment year 2021-22.
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:

1. The NAV of self-occupied property is always taken as nil.
2. As per section 70, the loss from one house property can be set-off against income from another property.

Co-Ownership [Section 26]

Question 31.
Mr. Raman is a co-owner of a house property along with his brother.

The loan for the construction of this property is jointly taken and the interest charged by the bank is ₹ 25,000 out of which ₹ 21,000 have been paid. Interest on the unpaid interest is ₹ 450. To repay this loan, Raman and his brother have taken a fresh loan and interest charged on this loan is ₹ 5,000.

The Municipal Taxes of ? 5,100 have been paid by the tenant.

Compute the income from this property chargeable in the hands of Mr. Raman for AY 2021-22. [Nov. 2009, 6 Marks]
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Share of Raman in taxable income = ₹ 96,000 × 5096 = ₹ 48,000

Working Notes:
1. The GAV of the house property is determined as under:
Step 1: Computation of Expected Rent
(a) Municipal Valuation : ₹ 1,60,000
(b) Fair Valuation : ₹ 1,50,000
(c) Higher of (a) and (&) : ₹ 1,60,000
(d) Standard Rent : ₹ 1,70,000
Expected Rent = Lower of (c) and (d) = ₹ 1,60,000

Step 2: Computation of Gross Annual value
(i) Expected Rent (As per step 1) : ₹ 1,60,000
(it) Actual Rent Received (15,000 × 12) : ₹ 1,80,000
Gross Annual value: The rent received/receivable is higher than expected rent. Thus, the rent received i.e. ₹ 1,80,000 shall be GAV.

2. Since the Municipal Taxes have been paid by tenant, deduction is not allowed.
3. Interest on unpaid interest is not deductible. (Shew Kissen Bhatterv. Commissioner of Income Tax, 1973)

Question 32.
X and Y are co-owners of two houses with equal share of both the houses. While the first house is used by them for their residence, the second house is let to a tenant at a monthly rent of ₹ 2,500. The other relevant particulars of the houses for the year 2020-21 are as follows:

Compute income from house property of X and Y for the relevant assessment year.
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Since Mr. X and Mr. Y are co-owners of both houses, taxable income is equally divided between them as ₹ 125 each.

Working Notes:

1. The NAV of self-occupied property is always taken as nil.
2. As per section 70, the loss from one house property can be set-off against income from another property.

Question 33.
Ram and Shyam are members of a firm “R and S” and also joint owners (50% each) of a two storied house property (of equal area), the details of which’ are as follows:
(1) Ground Floor: let out at a monthly rent of ₹ 30,000
(2) First Floor: used for partnership business of Ram and Shyam.
(3) Ram and Shyam received the following amounts in respect of another property which they had sold it on 31.03.2020:
(a) Unrealized Rent of same property pertaining to FY 2020-21 amounting to ₹ 50,000
(b) Arrears of rent of sold out property pertaining to FY 2019-20 amounting to ₹ 1,00,000
(4) Municipal taxes paid for the entire house property is ₹ 15,000 p.a.
(5) Interest on borrowings for the entire house property (Joint loan taken from HDFC) is given at ₹ 3,00,000
Compute the income from house property and also explain how such income will be assessed in the hands of R and S.
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Since R and S are joint owners (50% each), taxable amount in the hands of them is ₹ 65,875 each.

Working Notes:
1. As per section 25A, the arrears of rent received are taxable in the year in which arrears have been received. However, deduction shall be allowed @ 30% of such arrears and only the balance amount is taxable.

Question 34.
Two brothers Rama and Shankar are co-owners of a house property with equal shares. The property was constructed during the Financial year 2001-2002. The property consists of 8 identical units and is situated at Salem. During the Financial Year 2020-2021 each owner occupied 1 unit for residence and balance 6 units were let out at a rent of ₹ 14,000 per unit per month. The municipal value of property is ₹ 9,00,000 and municipal tax are 10% of municipal value, paid during the year. The other expenses are as follows:
(i) Repairs ₹ 90,000
(ii) Insurance premium paid ₹ 15,000
(iii) Interest payable on loan taken ₹ 3,50,000

One of the let out remained vacant for 4 months during the year. Rama could not occupy his unit for 6 months as he was transferred to Bangalore. He does not own any other house. The other income of Rama and Shankar are ₹ 3,50,000 and ₹ 1,80,000 respectively for the Financial Year 2020-21. The co-owners received during the year ₹ 1,40,000 as unrealized rent for 2017-2018 and ₹ 50,000 as arrears of rent. Compute the income under the head “Income from House Property” and total income of the two brothers for the Assessment Year 2021-2022.
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Computation of Total Income of Rama and Shankar
(Assessment Year 2021-22)

Working Notes:

1. The NAV of self-occupied property is always taken as nil.
2. The actual rent received from 6 identical units may be calculated as under:
   
3. As per section 25A, the arrears of rent received are taxable in the year in which arrears have been received. However, deduction shall be allowed @ 30% of such arrears and only the balance amount is taxable.
4. As per section 70, the loss from one house property can be set-off against income from another property.

Deemed Ownership [Section 27]

Question 35.
Explain briefly the applicability of section 22 for chargeability of income tax for house property with disputed ownership. [Nov. 2010, 2 Marks]
Answer:

Decision of Income Tax Department	If title of ownership of house property is under dispute in a court of law, the decision rests with the Income Tax Department.
Assessment	The assessment will be held even if suit has been filed.
Assessee	The person who is in receipt of income or person who enjoys the possession as owner is assessable to tax under section 22, though his claim is disputed.

Question 36.
Ashok has constructed a house on a leasehold land. He has let-out the said property and has treated the rent from such property under the head “Income from other sources” and deducted expenses on repairs, security charges, insurance and collection charges, in all amounting to 35% of receipts.
In this case, state the head of income under which the relevant receipt is to be assessed, along with the reason.
Answer:

Deemed ownership	As per section 27, where the property has been con­structed on a leasehold land, the income from house property is taxable in the hands of such person. Thus, Ashok is deemed owner.
Charging head	The receipt is assessable as “Income from House Property’’.
Deduction available	The section 24(a) of the Income Tax Act allows 30% of “Net Annual Value” as standard deduction irrespective of any expenditure incurred. It may be noted that no other deduction can be claimed in respect of expenses on repairs, security charges, insurance, collection charges, etc.

Property Situated Outside India

Question 37.
Explain briefly the applicability of section 22 for chargeability of income tax for house property situated in foreign country. [Nov. 2010, 2 Marks]
Answer:
The following are the provisions as regards house property situated in foreign country:

Resident Ordinarily Resident (ROR)	Taxable in India
Not Ordinarily Resident (NOR) & Non-Resident (NR)	Exempt: If income is received outside India. Taxable: If received in India.
Municipal Taxes	For a property situated outside India, Municipal Taxes levied by Foreign Local Authority can be claimed as deduction.

Question 38.
Mr. Aditya, a resident but not ordinarily resident in India during the Assessment Year 2021-22. He owns two houses, one in Dubai and the other in Mumbai. The house in Dubai is let out there at a rent of DHS 20,000 p.m. (1 DHS = INR 18). The entire rent is received in India. He paid Property tax of DHS 2,500 and Sewerage Tax DHS 1,500 there, for the Financial Year 2020-21. The house in Mumbai is self-occupied. He had taken a loan of ₹ 25,00.000 to construct the house on 1st June, 2017 @12%.

The construction was completed on 31st May, 2019 and he occupied the house on 1st June, 2019. The entire loan is outstanding as on 31st March, 2021. Property tax paid in respect of the second house is ₹ 2,400 for the Financial Year 2020-21. Compute the income chargeable under the head “Income from House property” in the hands of Mr. Aditya for the Assessment Year 2021-22. [Nov. 2017, 5 Marks]
Answer:
Computation of Income from House Property
(Assessment Year 2021-22)

Working Notes:

1. The NAV of self-occupied property is always taken as nil.
2. The interest for pre-construction period deductible in previous year is determined as under:
   
3. The maximum allowable amount for interest on loan for construction on self-occupied is ₹ 2,00,000.
4. Rental income from let out house property in a foreign country is taxable in the hands of a not-ordinarv on the basis of received in India.

Deductions from Gross Total Income – CA Inter Taxation Study Material is designed strictly as per the latest syllabus and exam pattern.

Deductions from Gross Total Income – CA Inter Taxation Study Material

Question 1.
Answer the following with regard to the provisions of the Income-tax Act, 1961 :
Briefly explain provisions of section 80U of the Income-tax Act, 1961, in respect of deduction available on permanent physical disability [Nov. 2008, 4 Marks]
Answer:

Section

Explanation

80U

Deduction from Gross Total Income under section 80U is allowed to a resident individual who is certified by appropriate medical authority as a person of disability. The deduction is fixed ₹ 75,000. But in case of severe disability the amount of deduction is ₹ 1,25,000. In all cases a certificate of disability is required to be submitted along with return of income. This certificate is valid for the period mentioned in it. Normal disability means 40% to less than 80% and severe disability means 80% or more. Disability covers blindness, very low vision searing impairment locanto disability, leprosy cured, mental retardation, mental illness, etc.

Question 2.
Mr. Abhik, an individual made payment of health insurance premium to GIC in an approved scheme. Premium paid on his health ₹ 10,000 and his spouse ₹ 15,000 during the year 2020-21. He also paid health insurance premium of ₹ 25,000 on his father’s health who is a senior citizen and not dependent on him. The payments have not been by cash. Compute the amount of deduction under chapter VI-A of the Income Tax Act, 1961 available to Mr. Abhik from his total income for the assessment year 2021-22. [May 2009, 4 Marks]
Answer:
As per provisions of deductions from gross total income u/s 80D re-garding payment of medical insurance premium, the maximum deduction allowable for self and family (wife and children) is ₹ 25,000/-. Additional deduction of ₹ 25,000/- is available for senior parents, whether dependent upon assessee or not.

In the instant case the amount paid as medical insurance premium u/s | SOD is within permissible limit, hence fully deductible as under:

Particulars	Amount(₹)	Amount(₹)
i. For Self	10,000
ii. For Spouse	15,000	25,000
iii. For Father (Senior Citizen)		25,000
Total		50,000

Question 3.
Determine the eligibility and quantum of deduction under chapter VIA in the following case:
Contribution to notified pension scheme (referred to in section 80CCD) by the employer ₹ 40,000 for an employee whose basic salary plus dearness allowance is ₹ 3,00,000 for the year. [Nov. 2014, 4 Marks]
Answer:

Section	Explanation
80CCD(2)	Contribution by employer in National Pension System is deductible from gross total income u/s 80CCD(2) upto 14% of Salary. In this case ₹ 40,000 contributed by employer on salary ₹ 3,00,000 is less than 14%, hence fully deductible. This deduction is in addition to monetary ceiling of ₹ 1,50,000 under section 80CCE.

Question 4.
Compute the eligible deduction under Chapter VI-A for the Assessment Year 2021-22 of Ms. Roma, who has a gross total income of ₹ 15,00,000 for the Assessment Year 2021-22 and provide the following information’s about his investments/payments during the year 2020-21:

S.No.	Particulars	Amount(₹)
1	Life Insurance premium paid (Policy taken on 01.01.2012 and sum assured is ₹ 1,50,000)	35,000
2	Public Provident Fund Contribution	90,000
3	Repayment of Housing Loan to Bhartiya Mahila Bank Bangalore.	20,000
4	Payment to LIC Pension Fund	25,000
5	Mediclaim Policy taken for self, wife and dependent children, premium paid	20,000
6	Medical Insurance premium paid for parents (Senior Citizen)	25,000

[May. 2009, 4 Marks]
Answer:
Eligible deductions from gross total income

Particulars	Amount(₹)	Amount(₹)
(1) U/s 80CEE –
Life Insurance Premium (Maximum 20°o of sum Assured)	30,000
Contribution in Public Provident Fund	90,000
Repayment of Housing Loan	20,000
	1,40,000
U/s 80CCC –
Total Deduction is restricted to ₹ 1,50,000/- U/s 80CCE	25,000
(2) U/s 80D –	1,65,000
Medical Insurance Premium for self, spouse and children		1,50,000
For Senior Citizen Parents	20,000	45,000
Total		1,95,000

Question 5.
Mr. Srivastava, aged 40 years, a salaried employee of Nirja Ltd. was contributing to National Pension Scheme ₹ 50,000 every year since 2017 and was claiming deduction under section 80CCD. In December 2019, he opted out of the pension scheme and withdrew a lump sum amount of ₹ 2,00,000. Is the amount so withdrawn taxable? If yes, how much is amount? [Nov. 2017, 5 Marks]
Answer:

Section	Explanation
10(12 A)	As per section 10(12A) payment received from National Pension System Trust at the time of closure is exempt upto 40% of total amount received (including contribution plus amount accrued thereupon). Hence is this case ₹ 80,000 (40% of 2,00,000) is exempt and balance ₹ 1,20,000 (2,00,000 – 80,000) is taxable under head ‘Income from other Sources’ in the previous year of withdrawal.

CA Inter Advanced Accounts Paper May 2019 – Advanced Accounts CA Inter Study Material is designed strictly as per the latest syllabus and exam pattern.

CA Inter Advanced Accounting Question Paper May 2019

Question 1.
(a)

(i) AP Ltd., a construction contractor, undertakes the construction of com-mercial complex for Kay Ltd. AP Ltd. submitted separate proposals for each of 3 units of commercial complex. A single agreement is entered into between the two parties. The agreement lays down the value of each of the 3 units, i.e. ₹ 50 Lakh, ₹ 60 Lakh and ₹ 75 Lakh respectively. Agreement also lays down the completion time for each unit. Comment, with reference to AS-7, whether AP Ltd., should treat it as a single contract or three separate contracts.

(ii) On 1st December, 2017, GR Construction Co. Ltd. undertook a contract to construct a building for ₹ 45 lakhs. On 31 st March, 2018, the company found that it had already spent ₹ 32.50 lakhs on the construction. Additional cost of completion is estimated at ₹ 15.10 lakhs. What amount should be charged to revenue in the final accounts for the year ended 31st March, 2018 as per provision of AS-7? [5 × 4 = 20 Marks]
Answer:
(i) As per AS 7, when a contract covers a number of assets, the construc-tion of each asset should be treated as a separate construction contract when:

(a) separate proposals have been submitted for each asset;
(b) each asset has been subject to separate negotiation and the con-tractor and customer have been able to accept or reject that part of the contract relating to each asset; and
(c) the costs and revenues of each asset can be identified.

Analysis:

• AP Ltd. submitted separate proposals for each of 3 units of commercial complex.
• Agreement also lays down the completion time for each unit.
• The agreement lays down the value of each of the 3 units, i.e. ₹ 50 Lakhs, ₹ 60 Lakhs and ₹ 75 Lakhs respectively

Conclusion:
Mr. AP Ltd. is required to treat construction of each unit as a separate con-struction contract as the above mentioned conditions of AS 7 are met.

(ii)

	₹ in lakhs
Cost of construction incurred till date	32.50
Add. Estimated future cost	15.10
Total estimated cost of construction	47.60

Percentage of completion:
= \(\frac{32.50}{47.60}\) × 100

Revenue recognition for the year ended 31st March, 2018:
= Contract price × percentage of completion = ₹ 45 lakhs × 68.2896 = ₹ 30.73 lakhs.

	₹ in lakhs
Total cost of construction Less: Total contract price Less: Total contract price Total foreseeable loss to be recognized as expense immediately	47.60 (45.00) 2.60

Question 1.
(b) Given below are the following information of M/s. B.S. Ltd.

(i) Goods of ₹ 50,000 were sold on 18-03-2018 but at the request of the buyer these were delivered on 15-04-2018.

(ii) On 13-01-2018 goods of ₹ 1,25,000 were sent on consignment basis of which 2096 of the goods unsold are lying with the consignee as on 31 – 03-2018. ”

(iii) ₹ 1,00,000 worth of goods were sold on approval basis 01-12-2017. The period of approval was 3 months after which they were considered sold. Buyer sent approval for 7596 goods up to 31 -01 -2018 and no approval or disapproval received for the remaining goods till 31-03-2018.

You are required to advise the accountant of M/s. B.S. Ltd., with valid reasons, the amount to be recognized as revenue for the year ended 31st March, 2018 in above cases in the context of AS-9.
Answer:
As per AS 9 “Revenue Recognition”, in a transaction involving the sale of goods, performance should be regarded as being achieved when the following conditions are fulfilled:

(i) the seller of goods has transferred to the buyer the property in the goods for a price or all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership; and

(ii) no significant uncertainty exists regarding the amount of the consider-ation that will be derived from the sale of the goods.

Analysis and conclusion:

Part (i)
The sale is complete but delivery has been postponed at buyer’s request.
B.S. Ltd. should recognize the entire sale of ₹ 50,000 for the year ended 31st March, 2018.

Part (ii)
In case of consignment sale revenue should not be recognized until the goods are sold to a third party.
2096 goods lying unsold with consignee should be treated as closing inventory and sales should be recognized for ₹ 1,00,000 (80% of ₹ 1,25,000).

Part (iii)
Tn case of goods sold on approval basis, revenue should not be recognized until the goods have been formally accepted by the buyer or the buyer has done an act adopting the transaction or the time period for rejection has elapsed or where no time has been fixed, a reasonable time has elapsed.

Therefore, revenue should be recognized for the total sales amounting ₹ 1,00,000 as the time period for rejecting the goods had expired.

Overall conclusion:

Thus, total revenue amounting ₹ 2,50,000 (50,000 + 1,00,000 + 1,00,000) will be recognized for the year ended 31st March, 2018 in the books of B.S. Ltd.

Question 1.
(c) Jaya Ltd. took a machine on lease from Deluxe Ltd., the fair value being ₹ 11,50,000. Economic life of the machine as well as lease term is 4 years. At the end of each years, lessee pays ₹ 3,50,000 to lessor. Jaya Ltd. has guaranteed a residual value of ₹ 70,000 on expiry of the lease to Deluxe Ltd., however Deluxe Ltd. estimates that residual value will be only ₹ 25,000. The implicit rate of return is 10% p.a. and present value factors at 10% are: 0.909, 0.826, 0.751 and 0.683 at the end of 1st, 2nd, 3rd and 4th year respectively.
Calculate the value of machinery to be considered by Jaya Ltd. and the value of the lease liability as per AS-19.
Answer:
According to para 11 of AS 19 “Leases”, the lessee should recognize the lease as an asset and a liability at an amount equal to the fair value of the leased asset at the inception of the finance lease. However, if the fair value of the leased asset exceeds the present value of the minimum lease payments from the standpoint of the lessee, the amount recorded as an asset and a lia-bility should be the present value of the minimum lease payments from the standpoint of the lessee.

Computation of Present value of MLP:

Year	Minimum Lease Payment ₹	Discount rate @10%	Present value ₹
1	3,50,000	0.909	3,18,150
2	3,50,000	0.826	2,89,100
3	3,50,000	0.751	2,62,850
4	4,20,000	0.683	2,86,860
Total	14,70,000		11,56,960

Conclusion:

The lease liability and machinery should be recognized in the books at ₹ 11,50,000. i.e. Lower of Present value of minimum lease payments ₹ 11,56,960 and fair value ₹ 11,50,000.

Question 1.
(d) Identify the related parties in the following cases as per AS-18

(i) Maya Ltd. holds 61% shares of Sheetal Ltd.
Sheetal Ltd. holds 51% shares of Fair Ltd.
Care Ltd. holds 49% shares of Fair Ltd.
(Give your answer Reporting Entity wise for Maya Ltd., Sheetal Ltd., Care Ltd. and Fair Ltd.)

(ii) Mr. Subhash Kumar is Managing Director of A Ltd. and also holds 72% capital of B Ltd. (B Ltd. is subsidiary of A Ltd.)
Answer:
(i)
(a) Reporting entity- Maya Ltd.

• Sheetal Ltd. (subsidiary) is a related party
• Fair Ltd. (subsidiary) is a related party

(b) Reporting entity- Sheetal Ltd.

• Maya Ltd. (holding company) is a related party
• Fair Ltd. (subsidiary) is a related party

(c) Reporting entity- Fair Ltd.

• Maya Ltd. (holding company) is a related party
• Sheetal Ltd. (holding company) is a related party
• Care Ltd. (investor/investing party) is a related party

(d) Reporting entity- Care Ltd.

• Fair Ltd. (associate) is a related party

(ii) Mr. Subhash Kumar is Key management personnel (KMP) as he has the authority for planning, directing and controlling the activities of A Ltd. He also holds substantial interest in B Ltd. as he holds 72% capital of B Ltd. Thus, Mr. Subhash is related party for both A Ltd. and B Ltd. Moreover, as per the definition of related party relationship described in para 3 of AS 18, enterprises over which Subhash is able to exercise significant influence are also related parties. Thus, a Ltd. and B Ltd. will also be construed as related to each other.

Question 2.
(a) Following is the summarized Balance Sheet of Super Ltd. as on 31st March, 2018.

Super Limited wants to buy back 35,000 equity shares of ₹ 10 each fully paid up on 1st April, 2018 at ₹ 30 per share.

Buy back of shares is fully authorized by its articles and necessary resolutions have been passed by the company towards this. The payment for buy back of shares will be made by the company out of sufficient bank balance available as part of the Current Assets.

Comment with calculations, whether the Buy Back of shares by the company is within the provisions of the Companies Act, 2013. [10 Marks]
Answer:
Shares Outstanding Test
Computation of maximum no. of shares that can be bought back as per the Companies Act, 2013
1.

Particulars	(Shares)
Number of shares outstanding	1,70,000
25% of the shares outstanding	42,500

2. Resources Test:
Maximum permitted limit
25% of Equity paid up capital + Free Reserves

3. Debt Equity Ratio Test:
Loans cannot be in excess of twice the Equity Shareholder’s Funds post buy back

	Particulars	₹
(A)	Loan funds (₹) (22,50,000+8,50,000+15,50,000)	46,50,000
(B)	Minimum equity to be maintained after buy back in the ratio of 2:1 (₹) (A/2) ‘	23,25,000
(C)	Present equity/shareholders fund (₹)	45,00,000
(D)	Future equity/shareholders fund (₹) (see Working Note) (45,00,000 – 5,43,750)	39,56,250
(E)	Maximum permitted buy back of Equity (₹) [(D) – (B)]	16,31,250
(F)	Maximum number of shares that can be bought back @ ₹ 30 per share	54,375 shares
(G)	Actual Buy Back Proposed	35,000 shares

Statement showing computation of maximum number of shares which can be bought back

Particulars	Number of shares
Shares Outstanding Test (1)	42,500
Resources Test (2)	37,500
Debt Equity Ratio Test (3)	54,375
Maximum number of shares that can be bought back [least of 1,2 and 3]	37,500

Since the company wants to buy-back only 35,000 equity shares @ ₹ 30. Therefore, buy-back of 35,000 shares, as desired by the company is within the provisions of the Companies Act, 2013.

Working Note:

Amount transferred to CRR and maximum equity to be bought back will be calculated by simultaneous equation method.
Suppose amount transferred to CRR account is ‘X’ and maximum permitted buy-back of equity is ‘Y’.

We can create the following equations:

(45,00,000 – X) – 23,25,000 = Y Equation (1)
(\(\frac{y}{30}\) × 10) = X or 3X = Y Equation (2)
Solving both the above equations, we get the values of:
X = ₹ 7 5,43,750
Y = ₹ 7 16,31,250

Question 2.
(b) Arohi Ltd. made a public issue of 11,00,000 equity shares of ₹ 10 each at a premium of ₹ 10, the amounts payable on application were ₹ 4 long with the full amount of premium and ₹ 6 at allotment. Out of the above 1,00,000 equity shares were issued to promoters and the balance was offered to the public which was underwritten by three underwriters Ashish, Alok and Ajay as follows:

Ashish – 4,00,000 shares including firm underwriting 80,000 shares
Alok – 3,00,000 shares including firm underwriting 30,000 shares
Ajay- 3,00,000 shares including firm underwriting 1,10,000 shares
Total subscriptions received by Aarohi Ltd. were 1,50,000 shares (excluding firm underwriting and marked applications)

The marked applications (excluding firm underwriting) were,
Ashish-97,500 shares,
Alok-1,95,000 shares and
Ajay-1,48,500 shares.

Underwriters are entitled to maximum commission permissible by law on the issue price of shares. The underwriting contract provides that benefit of firm underwriting is to be give to individual underwriters.

You are required to:

(i) Determine the liability of each underwriter in number of shares;
(ii) Compute the amounts payable or due from underwriters; and
(iii) Pass Journal Entries in the books of the company relating to underwriting.

Answer:

(i) Statement showing computation of total liability of underwriters:

(ii) Computation of amount payable to or due from underwriters:

(iii) Journal Entries in the books of the company:

Question 3.
(a) The following are the summarized Balance Sheet of VT Ltd. and MG Ltd. as on 31st March, 2018:

Details of Trade receivables and trade payables are as under:

• Fixed Assets of both the companies are to be revalued at 15% above book value.
• Inventory in Trade and Debtors are taken over 5% lesser than their book value.
• Both the companies are to pay 10% equity dividend, Preference divided having been already paid.

After the above transactions are given effect to, VT Ltd. will absorb MG Ltd. on the following terms:

1. VT Ltd. will issue 16 Equity Shares of ₹ 10 each at par against 12 Shares of MG Ltd.
2. 10% Preference Shareholders of MG Ltd. will be paid at 10% discount by issue of 10% Preference Shares of ₹ 100 each at par in VT Ltd.
3. 12% Debenture holders of MG Ltd. are to be paid at 8% premium by 12% Debentures in VT Ltd. issued at a discount of 10%.
4. ₹ 60,000 is to be paid by VT Ltd. to MG Ltd. for Liquidation expenses.
5. Sundry Debtors of MG Ltd. includes ₹ 20,000 due from VT Ltd.

You are required to prepare:

(1) Journal entries in the books of VT Ltd.
(2) Statement of consideration payable by VT Ltd. [10 Marks]

Answer:
(i) Journal Entries in the Books of VT Ltd.

(ii) Statement of Consideration payable by VT Ltd. (Net payment method)

Question 3.
(b) BT Ltd. went into Voluntary Liquidation on 31st March, 2018, when their detailed Balance Sheet read as follows:

Preference dividends were in arrear for 1 year. Creditors include preferential creditors of ₹ 75,000. Balance creditors are discharged subject to 5% discount.
Assets are realized as under:—

• Expenses of liquidation amounted to ₹ 45,000.
• The liquidator is entitled to a remuneration of 3% on all assets realized (except cash at bank).
• All payments were made on 30th June, 2018.

You are required to prepare the Liquidator’s Final Statement of Account as on 30th June, 2018. Working Notes should form part of the answer. [10 Marks]
Answer:
BT Limited

Working Notes:

Working Note 1:
Liquidator’s remuneration 43,20,000 × 3/100 = ₹ 1,29,600

Working Note 2:
As the company is solvent, interest on the debentures will have to be paid for the period 1-4-2018 to 30-6-2018
10,00,000 X 12% × 3/12 = ₹ 30,000

Working Note 3:

Loss to be borne by 30,000 equity shares:
Loss per share ₹ 27.005
Hence, Refund for share on ₹ 60 paid share (60 – 27.005) ₹ 32.995
Refund for share on ₹ 75 paid (75 – 27.005) ₹ 47.995

Question 4.
(a)
(i) The following is an extract of Trial Balance of SM Bank, an overseas bank as on 31st March, 2018.

31st March, 2017
An analysis of bill discounted is as follows:

You are required to calculate Rebate on Bills Discounted as on 31st March,
2018 and show necessary Journal Entries.
(ii) The following informations are also given for SM Bank:

Additional Information:

1. Standard Assets includes ₹ 15,00 Lakhs Advances to Commercial Real Estate (CRE).
2. Out of ₹ 60,00 Lakhs of Sub-Standard Asset ₹ 20,00 Lakhs are unsecured. Unsecured includes ₹ 5,00 Lakhs in respect of Infrastructure Loan Accounts with ESCROW safeguard.
3. Doubtful Asset for more than 3 Years includes ₹ 4,00 Lakhs, which is covered by 5096 ECGC, value of security of which is ₹ 150 Lakhs.

You are required to find out the amount of provision to be shown in the Profit & Loss Account of SM Bank. [10 Marks]
Answer:
(i) Statement showing computation of rebate on bills discounted:

In the books of SM Bank Ltd.
Journal Entries

Credit to Profit and Loss A/c will be as follows:
= ₹ (1,26,859 + 26,592 – 42,681) = ₹ 1,10,770

(ii) Statement showing provisions on Assets:

Working Note:

Provision required for assets covered by ECGC cover:

Question 4.
(b) Babu Bhai Financiers Ltd. is an NBFC providing Hire Purchase Solutions for acquiring consumer durables. The following information is extracted from its books for the year ended 31st March, 2018:

You are required to calculate the amount of provision to be made.
Answer:
Computation of additional provision:

Question 4.
(c) From the following information given by M/s. Short Live Insurance Co. Ltd., you are required to pass necessary Journal Entries relating to Unexpired Risk Reserve.

(i) On 31.03.2017, it has reserve for unexpired risks amounting to ₹ 160 crores. Its composition was as under—
(a) ₹ 60 crores in respect of Marine Insurance Business
(b) ₹ 80 crores in respect of Fire Insurance Business
(c) ₹ 20 crores in respect of Misc. Insurance Business

(ii) M/s. Short Live Insurance Co. Ltd. reserves 100°6 of net premium income in respect of Marine Insurance Business and 50% of net premium income in respect of Fire and Misc. income policies.

(iii) During 2017-18, the following business was conducted:

	₹ In crores
Premium Collected From:	Marine	Fire	Misc.
Insured in respect of Policies issued	72	172	48
Other Insurance Companies in respect of Risks undertaken	28	20	16
Premium paid/payable to other insurance Com­panies on business ceded	40	20	30

[5 Marks]
Answer:
Journal of M/s. Short Live Insurance Co. Ltd.

Question 5.
(a) H Ltd. acquire 70% of equity share of S Ltd. as on 1st January, 2011 at a cost of ₹ 5,00,000 when S Ltd. had an equity share capital of ₹ 5,00,000 and reserve and surplus of ₹ 40,000.

Both the companies follow calendar year as the accounting year.
In the four consecutive years, S Ltd. fared badly and suffered losses of ₹ 1,25,000, ₹ 2,00,000, ₹ 2,50,000 and ₹ 60,000 respectively.

Thereafter in 2015, S Ltd. experienced turnaround and registered an annual profit of ₹ 25,000. In the next two years i.e. 2016 and 2017, S Ltd. recorded annual profits of ₹ 50,000 and ₹ 75,000 respectively.
Show the Minority Interests and Cost of Control at the end of each year for the purpose of consolidation. [10 Marks]
Answer:
Computation of MI and COC:

Working Note:

Computation of Minority interest and Cost of control on 1.1.2011

Question 5.
(b) The summarized Balance Sheet of T Ltd. for the year ended on 31st March, 2016, 2017 and 2018 are as follows:

Additional Information:

(i) Actual Valuations were as under:

Building & Machinery less depreciation	1,800	2,000	2,200
Inventory	1,200	1,400	1,600
Net Profit (including opening balance after writing off depreciation, goodwill, tax pro­vision and transferred to general reserve	420	620	820

(ii) Capital employed in the business at market value at the beginning of 2015-16 was ₹ 36,60,000 which included the cost of goodwill. The normal annual return on average capital employed in the line of business engaged by T Ltd. is 12.596.

(iii) The balance in the general reserve on 1st April, 2015 was ₹ 10 lakhs.

(iv) The goodwill shown on 31.03.2016 was purchases on 1.4.2015 for 110 lakhs on which date the balance in the Profit & Loss account was ₹ 1,20,000. You are required to find out the average capital employed in each year. Also, compute Goodwill, to be valued at 5 year’s purchase of Super profit (Simple average method). [10 Marks]
Answer:
Computation of Capital Employed at the end of each year:

# Since the goodwill has been purchased, it is taken as a part of Capital employed. Alternatively, it may be excluded and a note to that affect given in the exam.

Valuation of Goodwill:

Average Super Profit — ₹ (250+423.75+560) ÷ 3 = ₹ 411.25 (thousand).
Thus,
Value of Goodwill at five years’ purchase= ₹ 411.25 × 5 = ₹ 2056.25 (thousand).

Question 6.
Answer any four of the following :
(a) Distinguish between Amalgamation, Absorption and External Reconstruc-tion of Company. [5 Marks]
Answer:

Particulars	Amalgamation	Absorption	External
Meaning	Two or more com­panies are wound up and a new company is formed to takeover their business.	In this case, an existing company takes over the busi­ness of one or more existing companies.	In this Case, a new­ly formed company takes over the busi­ness of an existing company.
Minimum number of Companies in­volved	At least three com­panies are involved.	At least two compa­nies are involved.	Only two compa­nies are involved.
Number of new re­sultant companies	Only one resultant company is formed. Two companies are wound up to form a single resultant company.	No new resultant company is formed.	Only one resultant company is formed. Under this case a newly formed com­pany takes over the business of an existing company.
Objective	Amalgamation is done to cut compe­tition and reap the economies in large scale.	Absorption is done to cut competition and reap the econo­mies in large scale.	External recon­struction is done to reorganize the financial structure of the company.
Example	A Ltd. and B Ltd. amalgamate to form C Ltd.	A Ltd. takes over the business of another existing company B Ltd.	B Ltd. is formed to take over the busi­ness of an existing company A Ltd.

Question 6.
(b) Bee Co. Ltd. has its share capital divided into Equity Shares of ₹ 10 each. On 1st April, 2017, the company offered 250 shares to each of its 520 employees at ₹ 60 per share, when the market price was ₹ 150 per share. The options were to be exercised between 01-03-2018 to 31-03-2018.

410 employees accepted the offer and paid ₹ 60 per share purchased and the remaining options lapsed.
The company closes its books on 31st March every year.

You are required to show Journal Entries (with narrations) as would appear in the books of Bee Co. Ltd. for the year ended 31st March, 2018 with regard to employee stock options. [5 Marks]
Answer:
Journal Entries
[In the books of Bee Ltd.]

Question 6.
(c) Zest Ltd. gives the following information about its past profits:

Year	Profit before Tax (₹ in ‘000′
2014-15	1,42
2015-16	2,70
2016-17	3,00
2017-18	2,75

Additional informations are given as below:

1. In Year 2014-15, Zest Ltd. earned an extraordinary income of ₹ 25,000 due to a foreign contract.
2. In September 2016, there was an earthquake, due to which the company lost ₹ 50,000 property and it was not covered by any Insurance Policy.
3. There is a 1096 Non-trading Investment of ₹ 5,00,000 which was purchased at par by the company on 1st April, 2016.
4. Income tax rate is 35%
5. Capital Employed as on 31st March, 2018 is ₹ 6,00,000.
6. Normal rate of return for the industry in which the company is engaged is 20%. ”
   You are required to calculate the value of Goodwill at three years purchase of super profits. Consider simple average profits for calculation of Goodwill. [5 Marks]

Answer:
Computation of FMP:

Valuation of Goodwill
(Based on Super Profit Method)

	₹
Future maintainable profits	1,48,200
Less: Normal profits (2096 of ₹ 6,00,000)	(1,20,000)
Super profit	28,200

Goodwill at 3 years’ purchase of super profits = 3 × 1,28,200 = ₹ 84,600.

Question 6.
(d) A Mutual Fund purchased 20,000 debentures of a company on June 1, 2017 for ₹ 21.40 lakh and further 10,000 debentures on 1st November, 2017 for ₹ 10.90. lakh. The debentures carry fixed annual coupon of 12%, payable on every 31st March and 30th September. On Feb. 28, 2018 the fund sold 12,000 of these debentures for ₹ 13.56 lakh. Nominal value per debenture is ₹ 100.
Show Investment in Debenture A/c in books of the Mutual Fund. [5 Marks]
Answer:
Investment in Debentures A/c

Working Notes:

Note 1:
20,000 × 100 × 12/100 × 2/12 = ₹ 0.40 Lakh
Note 2:
10,000 × 100 × 12/100 × 1/12 = ₹ 0.10 Lakh
Note 3:
12,000 × 100 × 12/100 × 5/12 = ₹ 0.60 Lakh
Note 4:
Cost of investments (per unit)
= [(21,40,000 – 40,000) +(10,90,000 – 10,000)]/30,000 units = [21,00,000 + 10,80,000]/30,000 = ₹ 106
Cost of investments sold = ₹ 106 × 12,000 = ₹ 12,72,000
Sale proceeds = ₹ 13,56,000 – ₹ 60,000 (interest) = ₹ 12,96,000
Profit = ₹ 12,96,000 – ₹ 12,72,000 = ₹ 24,000

Question 6.
(e) What do you mean by ‘Accrual’ in reference to AS-1? Also, specify any three reasons for ‘Accrual Basis of Accounting’. [5 Marks]
Answer:
The term “Accrual” has been explained in the AS-1, as under:
“Revenues and costs are accrued, that is, recognized as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate”.

Reasons for Accrual Basis of Accounting

1. Accrual basis of accounting, attempts to record the financial effects of the transactions, events, and circumstances of an enterprise in the period in which they occur rather than recording them in the period(s) in which cash is received or paid by the enterprise.
2. Receipts and payments of the period will not coincide with the buying, producing or selling events and other economic events that affect entity performance.
3. The goal of Accrual basis of accounting is to follow the matching concept of income and expenditure so that reported net income measures an enterprise’s performance during a period instead of merely listing its cash receipts and payments.
4. Accrual basis of accounting recognizes assets, liabilities or components of revenues and expenses for amounts received or paid in cash in past, and amounts expected to be received or paid in cash in the future.

Tax Invoice, Credit and Debit Notes – CA Inter Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Tax Invoice, Credit and Debit Notes – CA Inter Taxation Study Material

Question 1.
Examine the following independent cases of supply of goods and services and determine the time of issue of invoice under each of the cases as per the provisions of CGST Act, 2017 :
(i) Sakthi Enterprises, Kolkata entered into a contract with Suraj Enterprises, Surat for supply of goods on 3rd October, 2018. The goods were removed from the factory at Kolkata on 11th October, 2018. As per the agreement, the goods were to be delivered by 31st October, 2018. Suraj Enterprises has received the goods on 14th October, 2018.

(ii) Trust and Fun Ltd., an event management company, has provided its services for an event at Kapoor Film Agencies, Mumbai on 5th June, 2018. Payment for the event was made on 19th June, 2018. [May 2019, 4 Marks]
Answer:

	Case	Statutory provision	In the given case
(i)	Sakthi Enterprises	A registered person supplying taxable goods shall issue a tax invoice, before or at the time of removal of goods for sup­ply to the recipient, where the supply involves movement of goods.	The invoice has to be is­sued on or before, 11th October 2018 (the time of removal of goods).
(ii)	Trust and Fun Ltd.	A registered person [other than an insurer/banking company/financial institu­tion, including an NBFC] supplying taxable services shall issue a tax invoice be­fore or after the provision of service, but within a period of 30 days from the date of supply of service.	The invoice has to be issued within 30 days of 5th June 2018 (date of supply of service), ie. on or before, 5th July 2018.

Question 2.
Mr. Lakhan provides Continuous Supply of Services (CSS) to M/s. TNB Limited. He furnishes the following further information:  [Nov. 2018, 5 Marks]

(i)	Date of commencement of Providing CSS	01-10-2017
(ii)	Date of completion of Provision CSS	31-01-2018
(iii)	Date of receipt of payment by Mr. Lakhan	30-03-2018

Determine the time of issue of invoice as per provisions of CGST Act, 2017, in the following circumstances:

1. If no due date for payment is agreed upon by both under the contract of CSS.
2. If payment is linked to the completion of service.
3. If M/s. TNB Limited has to make payment on 25-03-2018 as per the contract between them.

Answer:

	Statutory provision	In the given case
(i)	Where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment.	The invoice should be issued on or before 30-3-2018 (date of receipt of payment by Mr. Lakhan).
(ii)	If payment is linked to the com­pletion of an event, the invoice should be issued on or before the date of completion of that event.	The invoice should be issued on or before 31-10-2018 (date of completion of service).
(iii)	Where the due date of pay­ment is ascertainable from the contract, the invoice should be issued on or before the due date of payment.	If M/s. TNB Limited has to make payment on 25-3-2018 as per the contract between them, the invoice should be issued on or before 25-3-2018.

Question 3.
Jolla provides continuous supply of services regarding Annual Maintenance Contract, (AMC) of Air conditioner and all electronic items in Khotu Ltd. He provides following details regarding same:

They made contract for the AMC. As mentioned in contract AMC will be starts from 1-10-2017 and AMC is valid for a year. AMC ends on 30-09-2018. Jolla receives payment for the AMC on 31-10-2018.

Explain time of issue of invoice in Continuous Supply of Service (CSS) as per provisions of CGST Act, 2017 and accordingly determine time of issue of Invoice in following different circumstances :  [May 2019 Old Course, 4 Marks]

1. As mentioned in contract Khotu Ltd. have to make payment on 5-11 – 2018.
2. If terms of payment is not mentioned in AMC and also not agreed by both the parties.

Answer:

Statutory provision

In the given case

In case of continuous supply of services Where due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment. Where due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment Where payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

The time of issue of invoice will be as follows in the given different circumstances:  If it is mentioned in contract that Khotu Ltd. has to make payment on 05-11 -2018, the invoice shall be issued on or before 05-11-2018. If terms of payment are not men­tioned in AMC and are also not agreed by both the parties, the invoice shall be issued on or before 31-10-2018.

Assumption:
The annual maintenance contract has been considered as continuous supply of service. However, as per section 2(33) of the CGST Act, 2017 “continuous supply of services” inter alia means a supply of services with periodic payment obligations.

Question 4.
Chidanand Products Pvt. Ltd. started its business of supply of goods on 1st August, 2017. It’s turnover exceeds ₹ 20,00,000 on 5th September, 2017. It applied for registration on 28th September, 2017 & granted registration certificate on 6th October, 2017. Guide the company regarding invoices to be issued between 5th September, 2017 to 6th October, 2017 to registered dealers. Further it had also made supplies to unregistered dealers in that period. How it can raise invoices? [May 2018 Old Course, 4 Marks]
Answer:

Statutory provision

In the given case

♦ A supplier whose aggregate turn­over in a financial year exceeds ₹ 20 lakh in a State/UT is liable to apply for registration within 30 days from the date of becoming liable to registration (i.e„ the date of crossing the threshold limit of ₹ 20 lakh) vide section 22 of CGST Act, 2017. ♦ Where the application is submitted within the said period, the effective date of registration is the date on which the person becomes liable to registration; otherwise it is the date of grant of registration. ♦ Every registered person who has been granted registration with effect from a date earlier than the date of issuance of registration cer­tificate to him, may issue revised tax invoices in respect of taxable supplies effected during this period within 1 month from the date of issuance of registration certificate.

For supplies between 5th September, 2017 to 6th October, 2017 to registered dealers. ♦ The Chidanand Products Pvt. Ltd. may issue revised tax invoices against the invoices already is­sued during the period between effective date of registration (5th September, 2017) and the date of issuance of registration certificate (6th October, 2017), within 1 month from 6th October, 2017. Supplies to unregistered dealers: ♦ The Company may issue a con­solidated revised tax invoice in respect of all taxable supplies made to unregistered dealers during such period. However, in case of inter-State supplies made to unregistered dealers, a consol­idated revised tax invoice cannot be issued if the value of a supply exceeds ₹ 2,50,000.

Question 4A.
Avtaar Enterprises, Kanpur started trading in Ayurvedic medicines from July 1, 20XX. Its turnover exceeded ₹ 20 lakh on October 3, 20XX. The firm applied for registration on October 31, 20XX and was issued registration certificate on November 5, 20XX.

Examine whether any revised invoice can be issued in the given scenario. If the answer to the first question is in affirmative, determine the period for which the revised invoices can be issued as also the last date upto I which the same can be issued.
Answer:
Statutory Provision:
(a) As per section 31(3)(a) of the CGST Act

• A registered person may
• within one month from the date of issuance of certificate of registration
• issue a revised invoice against the invoice already issued
• during the period beginning with the effective date of registration till the date of issuance of certificate of registration to him.

(b) As per Rule 10(2) of CGST Rules

• the registration shall be effective
• from the date on which the person becomes liable to registration
• where the application for registration has been submitted
• within a period of 30 days from such date.

In the given cases:

• Avtaar Enterprises has applied for registration within 30 days of becoming liable for registration and the registration has been granted.
• Thus, the effective date of registration is the date on which Avtaar Enterprises became liable for registration i.e., October 3, 20XX.
• Therefore, since in the given case there is a time lag between the effective date of registration (October 3, 20XX) and the date of grant of certificate of registration (November 5,20XX), revised invoices can be issued.
• The same can be issued for supplies made during this intervening period i.e., for the period beginning with October 3, 20XX till November 5, 20XX.
• Further, the revised invoices can be issued for the said period till December 5, 20XX.

Question 5.
Determine with reason whether the following statements are true or false:
(i) A registered person shall issue a separate invoice for supplying both taxable as well as exempted goods to an unregistered person.
(ii) A Non-banking financial company can issue a consolidated tax invoice at the end of every month for the supply made during that month. [May 2018, 3 Marks]
Answer:

	The given statement is	Explanation
(i)	False	Where a registered person is supplying taxable as well as exempted goods or services or both to an unregistered person, a single “invoice-cnm-bill of supply” may be issued for all such supplies.
(ii)	True	By virtue of an amendment, a non-banking financial company has been allowed to issue a consolidated tax invoice or any other document in lieu thereof for the supply of services made during a month at the end of the month.

Question 6.
List out the situations in which a Credit note/Debit note may be issued under the CGST Act, 2017. [May 18 Old Course, Nov. 2018 Old Course, May 2019, 5 Marks]
Answer:
CREDIT NOTE is required to be issued by the Supplier in the following situations

1. If taxable value charged in the tax invoice is found to exceed the taxable value in respect of supply of goods and/or services, or
2. If tax charged in the tax invoice is found to exceed the tax payable in respect of supply of goods and/or services, or
3. if goods supplied are returned by the recipient, or
4. if goods and/or services supplied are found to be deficient.

DEBIT NOTE is required to be issued by the Supplier in the following situations

1. if taxable value charged in the tax invoice is found to be less than the taxable value in respect of supply of goods and/or services or
2. if tax charged in the tax invoice is found to be less than the tax payable in respect of supply of goods and/or services

Question 7.
Kartik & Co., a registered supplier under GST, provides the following information regarding various tax invoices issued by it during the month of March 2019:

1. Value of supply charged in an invoice was ₹ 2,50,000 against actual taxable value of ₹ 2,30,000.
2. Tax Charged in an Invoice was ₹ 32,000 against the actual tax liability of ₹ 68,000 due to wrong HSN code being chosen while issuing invoice.
3. Value charged in an Invoice was ₹ 3,20,000 as against the actual value of ₹ 4,20,000 due to wrong quantity considered while billing.

Kartik & Co., asks you to the following:

1. Who shall issue a Debit/Credit Note under CGST Act, 2017?
2. Whether Debit Note or Credit Note has to be issued in each of the above circumstances and, if so, quantify the amount for which it is to be issued?
3. What is the maximum time-limit available for declaring the credit note in the GST Return ? [Nov. 2019 Old Course, 5 Marks]

Answer:

1. The debit/credit note shall be issued by the registered person who has supplied the goods and/or services, Le. Kartik & Co.
2. The debit/credit note need to be issued in each of the circumstances as under:
   1. A credit note is required to be issued as the taxable value in invoice exceeds the actual taxable value. The credit note should be issued for the excess value of supply charged in the invoice, i.e. ₹ 20,000.
   2. A debit note is required to be issued as the tax charged in the invoice is less than the actual tax payable. The debit note should be issued for the amount of tax which is charged less, i.e. ₹ 36,000.
   3. A debit note is required to be issued as the value of supply charged in the invoice is less than the actual value. The debit note should be issued for the amount of value which is charged less, i.e. ₹ 1,00,000.
3. The details of the credit note cannot be declared later than the return for the month of September following the end of the financial year in which such supply was made or the date of furnishing of the relevant annual return, whichever is earlier.

Question 8.
Explain the meaning of consignment note in relation to Goods Transport Agency and state its contents as per provisions of the CGST Act, 2017.    [May 2019 Old Course, 4 Marks]
Answer:
Meaning: Consignment note means a document, issued by a Goods Transport Agency (GTA) against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered.

Contents: The contents of consignment note are as follows:-

1. gross weight of the consignment
2. the name of the consignor and consignee (anyone),
3. registration number of the goods carriage in which the goods are transported,
4. details of the goods transported,
5. details of the place of origin and destination,
6. GSTIN of the person liable for paying tax
7. other information as prescribed for a tax invoice, under rule 46 of CGST Rules, 2017.

Question 9.
Mr. Shah, a consignor is required to move goods from Ahmedabad (Gujarat) to Nadiad (Gujarat). He appoints Mehta Transporter for movement of goods. Mehta Transporter moves the goods from Ahmedabad (Gujarat) to Kheda (Gujarat). For completing the movement of goods from Kheda (Gujarat) to Nadiad (Gujarat), Mehta Transporter now hands over the goods to Parikh Transporter.

Explain the procedure regarding e-way bill to be followed by consignor and transporter as per provisions of GST law and rules made thereunder. [Nov. 2019, 5 Marks]
Answer:

• In the given scenario, only one e-way bill is required to be issued.
• Part A can be filled by either Mr. Shah or recipient of goods or Mehta Transporter on the appropriate authorisation.
• Where the goods are transferred from one conveyance to another, the consignor or the recipient, who has provided information in Part A, or the transporter shall, before such transfer and further movement of goods, update the details of conveyance in the e-way bill on the common portal in Part B.
• On reaching Kheda, Mr. Shah or the recipient of the goods, who has filled Part A of the e-way bill, or Mehta Transporter can, before the transfer and further movement of goods, update the details of conveyance in Part B of the e-way bill.
• Further, the consignor or the recipient, who has furnished the informa-tion in Part A, or the transporter, may assign the e-way bill number to another registered or enrolled transporter for updating the information in Part B for further movement of the consignment.
• On reaching Kheda, Mr. Shah or the recipient of the goods, or Mehta Transporter can assign the said e-way bill to Parikh Transporter who will thereafter update the details of conveyance in Part B.
• However, upon updation of the details of the conveyance by Parikh transporter in Part B, Mr. Shah or recipient, as the case may be, who has furnished the information in Part A shall not be allowed to assign the e-way bill number to another transporter.

Registration – CA Inter Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Registration – CA Inter Taxation Study Material

Question 1.
With the help of the following information in the case of M/s Jayant Enterprises, Jaipur (Rajasthan) for the year 2019-20, determine the aggregate turnover for the purpose of registration under the CGST Act, 2017.

S. No.	Particulars	Amount (₹)
(i)	Sale of diesel on which Sale Tax (VAT) is levied by Rajasthan Government.	1,00,000
(ii)	Supply of goods, after completion of job work, from the place of Jayant Enterprises directly by principal.	3,00,000
(iii)	Export supply to England (U.K.)	5,00,000
(iv)	Supply to its own additional place of business in	5,00,000
	Rajasthan.
(v)	Outward supply on which GST is to be paid by recipient under reverse charge.	1,00,000

Answer
Computation of Aggregate Turnover for the purpose of registration:

Particulars	Amount (₹)
Sales of diesel [WN 1]	1,00,000
Goods directly supplied from the job worker’s premises. [WN 2]	Nil
Export Supply to England (UK) [WN 3]	5,00,000
Supply to its own additional place of business in Rajasthan. [WN 4]	5,00,000
Outward supply on which GST is to be paid by recipient under reverse charge. [WN 5]	1,00,000
Total aggregate turnover	12,00,000

Working Notes:

1. Petroleum products are covered under non-taxable supply. Therefore it includes under exempt supply and aggregate turnover includes exempt supplies
2. Goods directly supplied from the job worker’s premises, it would be included in the ‘aggregate turnover of the principal
3. Export supplies are specifically included in aggregate turnover
4. Supply to its own additional place of business in Rajasthan, Since they are deemed to be supply. Hence, it is part of aggregate turnover
5. Aggregate turnover excludes value of inward supplies on which tax is payable under reverse charge basis. However, outward supplies on which tax is payable by recipient are not excluded.

Question 2.
List the inclusions and exclusions for computing the “Aggregate Turnover” under CGST Act, 2017. [May 2018, 5 Marks]
Answer:
Aggregate turnover

Inclusions

1. Taxable supplies,
2. Exempt supplies,
3. Exports of goods and/or services and
4. Inter-State supplies of persons having the same PAN, to be computed on all India basis

Exclusions

1. Value of inward supplies on which tax is payable by a person on reverse charge basis.
2. Central tax, State tax, Union territory tax, integrated tax and cess

Question 3.
With reference to GST Laws, what is CIN? [May 2018 Old Course, 1 Mark]
Answer:
‘CIN’ refers to “Challan Identification Number”. It is generated by the I banks indicating that the payment has been realized and credited to the appropriate government account against a generated challan.

Question 4.
Examine the liability of compulsory registration under section 24 of the CGST Act, 2017, in each independent cases mentioned below:
(i) Meenu is a supplier in Maharashtra, is engaged in supply of potatoes within Maharashtra and also outside Maharashtra, whose turnover exceeds threshold limit under GST Law.

(ii) Jinu Oils, Gujarat, is engaged in supplying machine oil (including related services) as well as petrol. Total turnover of machine oil is ₹ 20 lakh (including supply of services for ₹ 4,00,000) and of petrol is ₹ 15 lakh.

(iii) Tilu is working as an agent, he is supplying goods as an agent of Tiku (who is registered taxable person) and its aggregate turnover does not exceed ₹ 20 lakh during the financial year. [May 2019 Old Course Modified, 2+2+1 Marks]
Answer:

	Case	Statutory provision	In the given case
(i)	Meenu	♦  Section 24 of the CGST Act provides that persons making any inter-State taxable supply of goods are required to obtain registra­tion compulsorily under GST laws irrespective of the quantum of aggregate turnover. ♦ However, an agriculturist, to the extent of supply of produce out of cultivation of land, is not liable to reg­istration.	♦ Assuming that Meenu is engaged in cultivation and supply of potatoes, she is NOT LIABLE to regis­tration irrespective of the fact that she is engaged in making inter-State supply and her turnover exceeds the threshold limit. (Refer Note 1)
(ii)	Jinu Oils	♦  Section 24 of the CGST Act specifies the catego­ries of persons who are required to be mandatorily registered under GST irre­spective of the quantum of aggregate turnover. ♦  However, as per section 22 of the CGST Act, 2017, if the aggregate turnover of the person exceeds ₹ 20 lakhs in a financial year or exceeds ₹10 lakhs for persons in a specified state, is liable for registration.	♦    Liability under section 24: In the given case, Jinu Oils does not fall in any of the specified categories. There­fore, it is NOT required to obtain registration com­pulsorily under section 24 of CGST Act, 2017.♦  Liability under section 22: Jinu Oils is LIABLE obtain registration on the basis of the turnover since its aggregate turnover [₹ 35 lakh – including turnover of exempt supply of petrol] exceeds the threshold limit of ₹ 20 lakhs
(iii)	Tilu	♦ Section 24 of the CGST Act provides that persons who make taxable supply of goods and/or services on behalf of other taxable per­sons whether as an agent or otherwise are required to obtain registration com­pulsorily under GST laws irrespective of the quantum of aggregate turnover.	♦ Tilu will be mandatorily REQUIRED to obtain registration under section 24 even though he does not trigger the provisions prescribed in section 22.

Note: Any person engaged exclusively in the business of supplying exempted 1 goods is not liable to registration. Since potatoes are exempted goods, Meenu is not liable to obtain registration irrespective of the fact that she is engaged in making inter-State supply and her turnover exceeds the threshold limit.

Question 5.
State the persons who are not liable for registration as per provisions of Section 23 of Central Goods and Services Tax Act, 2017. [Nov. 2018, 5 Marks]
Answer:
As per provisions of Section 23 of CGST Act, 2017, the persons who are not liable for registration are as under-
(a) Person engaged exclusively in supplying goods/services/both that are wholly exempt from tax.
(b) Person engaged exclusively in supplying goods/services/both that are not liable to tax.
(c) Agriculturist to the extent of supply of produce out of cultivation of land.
(d) Persons only engaged in making supplies of taxable goods or services jg, or both liable to reverse charge.

(e) Persons making inter-State supplies of taxable services up to an aggregate turnover of ₹ 20 lakh (₹ 10 lakh in case of special category States except Jammu and Kashmir).

(f) Casual Taxable Persons making taxable supplies of specified handicraft goods up to an aggregate turnover of ₹ 20 lakh (₹ 10 lakh in case of special category States except Jammu and Kashmir) subject to specified conditions.

(g) Persons making inter-State supplies of specified handicraft goods up to an aggregate turnover of ₹ 20 lakh (₹ 10 lakh in case of special category States except Jammu and Kashmir) subject to specified conditions.

(h) Job workers making inter-State supply of services to a registered person up to an aggregate turnover of ₹ 20 lakh (₹ 10 lakh in case of special category States except Jammu and Kashmir) subject to specified conditions.

(i) Persons making supplies of services through an electronic commerce operator (other than supplies specified under section 9(5) of the CGST Act) up to an aggregate turnover of ₹ 20 lakh (₹ 10 lakh in case of special category States except Jammu and Kashmir).

Question 6.
Answer the following questions with respect to casual taxable person under the CGST Act, 2017 : [May 2019, 5 Marks]
(i) Who is a casual taxable person?
(ii) Can a casual taxable person opt for the composition scheme?
(iii) When is the casual taxable person liable to get registered?
(iv) What is the validity period of the registration certificate issued to a casual taxable person?
(v) Can the validity of registration certificate issued to a casual taxable person be extended? If yes, what will be the period of extension?
Answer:
(i) Casual taxable person means a person who occasionally undertakes transactions involving supply of goods and/or services in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State/UT where he has no fixed place of business.

(ii) No, a casual taxable person cannot opt for the composition scheme.

(iii) A casual taxable person (CTP) is liable to obtain registration compulsorily under GST laws, at least 5 days prior to commencement of business. However, threshold limit of ₹ 20 lakh (₹ 10 lakh in case of Special Category States other than Jammu & Kashmir) is available in case of CTP making taxable supplies of specified handicraft goods.

(iv) The Registration Certificate issued to a casual taxable person will be valid for:
(a) Period specified in the registration application, or
(b) 90 days from the effective date of registration whichever is earlier.

(v) Yes, the validity of his registration certificate issued to a casual taxable person can be extended. It can be extended by a further period not exceeding 90 days.

Question 7.
There is a dairy farm selling milk and milk products in Delhi. The turnover of his dairy farm is as below :
Milk (Exempted) : ₹ 19,90,000
Butter (Taxable) : ₹ 50,000
What is the registration liability under GST for the abovementioned person assuming he has same PAN? [Nov. 2018 Old Course, 2 Marks]
Answer:

Statutory provision	In the given case
♦ Every supplier becomes liable to registration if his aggregate turn­over in a financial year exceeds ₹ 20 lakh in a State/UT [₹ 10 lakh in case of Special Category States other than Jammu and Kashmir]. ♦ Further, aggregate turnover, inter alia, means the aggregate value of all taxable supplies as well as exempt supplies.	♦  The aggregate turnover is ₹ 20,40,000 [₹ 19,90,000 + ₹ 50,000] ♦ Since aggregate turnover of the dairy farm in Delhi exceeds t 20 lakh, it is LIABLE to get registered.

Question 8.
Amit, a taxable person, is operating in Tamil Nadu, Punjab and West Bengal, with the same PAN. Can he operate with a single registration in West Bengal? [Nov. 2018 Old Course, 2 Marks]
Answer:
Statutory Provision:
Every person who is liable to take a registration will have to get registered z separately for each of the States where he has a business operation and is liable to pay GST.

In the given case:

Is there any taxable supplies from Tamil Nadu and Punjab	Can he operate with single registration
Yes	No, Amit cannot operate with a single registration in West Bengal
No	Yes, he can operate with a single registration in West Bengal.

Question 9.
Mr. Allan, a non-resident person, wishes to provide taxable supply of goods. He has no fixed place of business or residence in India. He seeksyour advise on the following aspects, relating to CGST Act, 2017: [Nov. 2018, 5 Marks]
(i) When shall he apply for registration?
(ii) Is PAN mandatory for his registration?
(iii) What is the period of validity of RC granted to him?
(iv) Will he able to extend the validity of his registration? IF yes, what will be the period of extension?
Answer:
Ans.
(i) Mr. Allan, being a non-resident person, should apply for registration, irrespective of the threshold limit, at least 5 days prior to the commencement of business.

(ii) No, PAN is not mandatory for his registration.
He has to submit a self-attested copy of his valid passport along with the application signed by his authorized signatory who is an Indian Resident having valid PAN.

However, in case of a business entity incorporated or established outside India, the application for registration shall be submitted along with its tax identification number or unique number on the basis of which the entity is identified by the Government of that country’ or its PAN, if available.

(iii) Registration Certificate granted to Mr. Allan will be valid for:
(a) Period specified in the registration application, or
(b) 90 days from the effective date of registration whichever is earlier.

(iv) Yes, Mr. Allan can get the validity of his registration extended. Registration can be extended further by a period not exceeding 90 days.

Question 10.
Can a person get himself voluntarily registered though he may not be liable to pay GST ? [Nov. 2018 Old Course, 2 Marks]
Answer:
Yes, a person, though not liable to be registered under section 22 or 24 of CGST Act, 2017 may get himself registered voluntarily. Once a person obtains voluntary registration, he has to pay tax even though his aggregate turnover does not exceed ₹ 20 Lakhs/ ₹ 10 Lakhs.

Question 11.
State with brief reason, whether following suppliers of taxable goods are required to register under the GST Law:
(i) Mr. Raghav Is engaged in wholesale-cum-retail trading of medicines in the State of Assam. His aggregate turnover during the financial year is ₹ 9,00,000 which consists of ₹ 8,00,000 as intra-State supply and ₹ 1,00,000 as inter-State supply.

(ii) Mr. S.N. Gupta of Rajasthan is engaged in trading of taxable goods on his own account and also acting as an agent of Mr. Rishi of Delhi. His turnover in the financial year 2017-18 is of ₹ 12 lakhs on his own account and ₹ 9 lakhs on behalf of principal. Both turnovers are intra-State supply. [May 2019, 4 Marks]
Answer:

Case	Statutory provision	In the given case
Mr. Raghav	♦ Person making any in­ter-State taxable supply of goods is required to obtain registration Compulsorily under GST laws irrespective of the quantum of aggregate turnover.	♦ Mr. Raghav is REQUIRED to obtain registration com­pulsorily under GST laws even though his aggregate turnover does not exceed the threshold limit of ₹ 10 lakh [since Assam is a Spe­cial Category State] in the financial year.
Mr. S.N. Gupta	♦ Persons who make taxable supply of goods on behalf of other taxable persons whether as an agent or oth­erwise are required to obtain registration compulsorily under GST laws irrespective of the quantum of aggregate turnover. ♦ Aggregate turnover includes all supplies made by the taxable person, whether on his own account or made on behalf of all his principals.	♦ Since Mr. S.N. Gupta is also acting as an agent of Mr. Rishi of Delhi, he is REQUIRED to obtain registration com­pulsorily under GST laws.

Question 12.
Examine, with reason, whether registration is required under CGST Act, 2017 in the following independent Cases:
(i) Aadhav Computers of Gujarat is providing Computer Maintenance Service. Aggregate Turnover of Aadhav Computers is ₹ 15 Lakhs which comprises both inter-State and intra-State supply.

(ii) Soft Wings of West Bengal, exclusively trading in garments, supplies its taxable goods to various States in India. Aggregate Turnover of Soft Wings is ₹ 35 Lakhs [A/bv. 2019 Old Course, 4 Marks]
Answer:

 

	Case	Statutory provision	In the given case
(0	Aadhav Computers	♦ Registration is com­pulsory for suppliers engaged in inter-State supply. ♦ However, threshold ex­emption of ₹ 20 lakh [₹ 10 lakh in case of Specified Special Category States] is available in case of inter-State supply of taxable services only.	Aadhav Computers (aggre­gate turnover ₹ 15 lakh) is NOT REQUIRED to obtain registration as it is engaged in inter-State supply of taxable services and thus, is eligible for threshold exemption of ₹ 20 lakh applicable for Gujarat.
(ii)	Soft Wings	♦ The threshold limit for registration in the State of West Bengal for the persons engaged exclu­sively in supply of goods, is ₹ 40 lakh. ♦ However, registration is compulsory if the suppli­er is engaged inter-State supply of goods. The benefit of threshold limit is not available.	Thus, Soft Wings is RE­QUIRED to obtain registra­tion.

Question 13.
Explain the registration requirements under GST law in the following independent cases:
(i) Mr. Ahmad of Jammu engaged in the business of intra-State supplying tobacco based Pan Masala with an aggregate turnover of ₹ 24 lacs.
(ii) Mr. Lepcha of Mizoram is engaged in the supply of papers with an aggregate turnover of ₹ 13 lacs. Will your answer be different if Mr. Lepcha is located in Meghalaya? [Nov. 2019 Modified, 5 Marks]
Answer:

Case	Statutory provision	In the given case
Mr. Ahmad	♦ A person is eligible for enhanced threshold limit of ₹ 40 lakh in the UT of Jammu and Kashmir if he is engaged exclusively in intra-State supply of goods. ♦ However, the enhanced threshold limit is not ap­plicable if the person is engaged, inter alia, in the supply of pan masala and all goods of chapter 24 i.e. To­bacco and manufactured tobacco substitutes. In that case, the normal threshold limit of ₹ 20 lakh will be applicable.	Mr. Ahmad is LIABLE to register since his aggregate turnover (₹ 24 lakh) exceeds the applicable threshold limit for registration of ₹ 20 lakh.
Mr. Lepcha	CASE – 1: If located in Mizoram ♦ The enhanced threshold limit of ₹ 40 lakh as appli­cable to a person engaged exclusively in intra-State supply of goods is NOT applicable to Mizoram [a specified Special Category State]. ♦ Instead, a lower threshold limit of ₹ 10 lakh for reg­istration is applicable for Mizoram. CASE – 2: If located in Meghalaya ♦ The enhanced threshold limit of ₹ 40 lakh is also specifically not applicable in the State of Meghalaya. Instead, the normal thresh­old limit of ₹ 20 lakh for registration is applicable to it.	CASE – 1:  If located in Mizoram Mr. Lepcha of Mizoram is LIABLE to register since his aggregate turnover (₹ 13 lakh) exceeds the applicable threshold limit for registration of ₹ 10 lakh. CASE – 2: If located in Meghalaya If Mr. Lepcha is located in Meghalaya, he is NOT LIABLE to register since his aggregate turnover (₹ 13 lakh) does not exceed the applicable threshold limit for registration of ₹ 20 lakh.

Question 14.
Determine the effective date of registration under CGST Act, 2017 in respect of the following cases with explanation:
(i) The aggregate turnover of Varun Industries of Mumbai has exceeded ₹ 20 lakhs on 1st August, 2020. It submits the application for registration on 20th August, 2020. Registration certificate granted on 25th August, 2020.

(ii) Sweta InfoTech Services are the provider of internet services in Pune. The aggregate turnover of them exceeds ₹ 20 lakhs on 25th September, 2020. It submits the application for registration on 27th October, 2020. Registration certificate is granted on 5th November, 2020.    [May 2018 Old Course Modified, 4 Marks]
Answer:
Statutory Provision:
(1) When become liable for registration: A supplier whose aggregate turnover in a financial year exceeds ₹ 20 lakh in a State/UT [₹ 10 lakh in Manipur, Mizoram, Nagaland and Tripura] is liable to apply for registration within 30 days from the date of becoming liable to registration (i.e., the date of crossing the threshold limit of ₹ 20 lakh/₹ 10 lakh) vide section 22 of CGST Act, 2017.

(2) Effective date of registration: Where the application is submitted within said period, the effective date of registration is the date on which the person becomes liable to registration: otherwise it is the date of grant of registration.

In the given cases:
The applicable turnover limit for registration will be ₹ 20 lakh as Maharashtra (Mumbai and Pune) is not a Special Category State.

	Date when becomes liable for registration	Date of application for registration	Whether applied within 30 days	Effective date of registration
(i)	1st August, 2020	20th August, 2020	Yes	1st August, 2020
(ii)	25th September, 2020	27th October, 2020	No	5th November, 2020

Question 15.
The Aggregate Turnover of Vikas Enterprise of Mumbai (Maharashtra) has exceeded ₹ 20 Lakhs on 25th January, 2020. It submits the application for Registration on 15th February, 2020.

Registration certificate is granted on 20th February, 2020. Determine the effective date of Registration under CGST Act, 2017. [Nov. 2018 Old Course, 2 Marks]
Answer:
Effective date of registration: Where the application is submitted within said period, the effective date of registration is the date on which the person becomes liable to registration; otherwise it is the date of grant of registration.

In the given case:

Date when becomes liable for registration	25th January, 2020
Date of application for registration	15th February, 2020
Whether applied within 30 days	Yes
Effective date of registration	Date when becomes liable i.e. 25th January, 2020

Question 16.
Determine the effective date of registration in the following instances:
(i) The aggregate turnover of Madhu Ltd., engaged in taxable supply of services in the state of Punjab, exceeded ₹ 20 Lakhs on 25th August, 2018. It applies for registration on 19th September, 2018 and is granted registration certificate on 29th September, 2018.

(ii) What will be your answer, if in the above scenario; Madhu Ltd. submits the application for registration on 27th September, 2018 and is granted registration on 5th October, 2018? [May 2018, 4 Marks]
Answer:
Statutory Provision:
(1) When become liable for registration: A supplier whose aggregate turnover in a financial year exceeds ₹ 20 lakh in a State/UT [2 10 lakh in Manipur, Mizoram, Nagaland and Tripura] is liable to apply for registration within 30 days from the date of becoming liable to registration (i.e., the date of crossing the threshold limit of ₹ 20 lakh/₹ 10 lakh) vide section 22 of CGST Act, 2017.

(2) Effective date of registration: Where the application is submitted within said period, the effective date of registration is the date on which the person becomes liable to registration; otherwise it is the date of grant of registration.

In the given cases:
The applicable turnover limit for registration will be ₹ 20 lakh as Maharashtra (Mumbai and Pune) is not a Special Category State.

	Date when becomes liable for registration	Date of application for registration	Whether applied within 30 days	Effective date of registration
(i)	25th August, 2017	19th September, 2017	Yes	25th August, 2017
(ii)	25th August, 2017	27th September, 2017	No	5th October, 2017

Question 17.
State with reason whether following statement is true or false:
“When there is change in constitution of business results in change in PAN, the business entity can apply for amendment of registration in prescribed manner within 15 days.” [May 2018 Old Course, 2 Marks]
Answer:
The said statement is FALSE:

When a change in constitution of a business results in change of PAN of the registered person, the said person shall apply for fresh registration. The reason for the same is that GSTIN is PAN based. Any change in PAN would warrant a new registration.

Question 18.
Determine with brief reasons, whether the following statements are True or False:

Registration under the CGST Act, 2017 can be cancelled by the proper officer, if the voluntarily registered person has not commenced the business within three months from the date of Registration. [Nov. 2018, 1.5 Marks]
Answer:
The said statement is False

Registration under the CGST Act, 2017 can be cancelled by the proper officer, if the voluntarily registered person has not commenced the business within six months from the date of registration.

CA Inter Taxation Income Tax Multiple Choice Questions (MCQs) – CA Inter Taxation Study Material is designed strictly as per the latest syllabus and exam pattern.

CA Inter Taxation Income Tax Multiple Choice Questions (MCQs) – CA Inter Taxation Study Material

Question 1.
Mr. X earned income of ₹ 5,00,000 from long term capital gain and lost ₹ 2,00,000 as short term capital loss. His taxable income as long term capital gain would be:
(a) ₹ 5,00,000
(b) ₹ 3,00,000
(c) ₹ 2,00,000
(d) Nil
Answer:
(b) ₹ 3,00,000

Question 2.
Mr. Ajay Sahu, proprietor of M/s Blue Bird Enterprises having turnover of ₹ 65 lakhs and not subject to tax audit under the Income-tax Act, 1961 during P.Y. 2019-20, has received two bills for payment. The first bill is for ₹ 42,00,000 from Vijay Associates, an advocate and property dealer firm, for his daughter’s hearing and ₹ 21,00,000 from same Vijay Associates for brokerage service provided in relation to purchase of one property. Both bills were raised on 21-12-2020 but payment were made in instalments.

1st Instalment of ₹ 5,00,000 as advance was payment on 15-11-2020, 2nd Instalment of ₹ 45,00,000 on 25-03-2021 and balance amount ₹ 13,00,000 on 11-05-2021. Determine the TDS liability for Mr. Ajay Sahu, if any, for A. Y. 2021 -22?
(a) ₹ 2,50,000
(b) ₹ 3,15,000
(c) ₹ 65,000
(d) Nil [ICAI Mock Test Paper: October 2020, 2 Marks]
Answer:
(b) ₹ 3,15,000

Question 3.
Sham Singh spends ₹ 1,00,000 on cultivation and harvesting of his agricultural produce. 50% of the production is sold for ₹ 1,10,000 and rest is stored for self-consumption. What is the amount of the agricultural income?
(a) ₹ 60,000
(b) ₹ 1,10,000
(c) ₹ 1,20,000
(d) ₹ 1,00,000 [ICAI Mock Test Paper: October 2020, 2 Marks]
Answer:
(a) ₹ 60,000

Question 4.
Mr. Square, an Indian citizen, currently resides in Dubai. He came to India on a visit and his total stay in India during the F.Y. 2020-21 was 135 days. He has no source of Income in India. Following is his details of stay in India in the preceding previous years:

Financial Year	Days of stay in India
2019-20	125
2018-19	106
2017-18	83
2016-17	78
2015-16	37
2014-15	40
2013-14	35

You are his tax consultant. Advise him on his residential status for the P. Y. 2020-21.
(a) Resident but Not Ordinary Resi-dent (RNOR)
(b) Resident and Ordinary Resident
(c) Non-Resident
(d) Resident but information incom-plete to know whether resident but not ordinarily resident or resident and ordinarily resident [ICAI Mock Test Paper: October 2020, 2 Marks]
Answer:
(c) Non-Resident

Question 5.
Ms. Dilar who is not required to furnish return u/s 139(1) as his gross total income itself is less than basic exemption limit, has incurred expenditure of X 2,00,000 for her daughter for travel to U.S.A. during P.Y. 2020-21. Is she required to file return for A.Y. 2021-22? If yes, what is the due date?
(a) Yes; 31st July, 2021
(b) Yes; 30th September, 2021
(c) Yes; 31 st August, 2021
(d) No, she is not required to file return of income for A.Y. 2021-22 [ICAI Mock Test Paper: October 2020, 2 Marks]
Answer:
(d) No, she is not required to file return of income for A.Y. 2021-22

Question 6.
A Ltd. is 100% holding company of B Ltd. A Ltd. transfers a capital asset (acquired in 2003 for ₹ 50,000) on 16.06.2020 for ₹ 3,70,000 to B Ltd. B Ltd. is an Indian company, while A Ltd. is a foreign company. The capital asset is transferred as stock-in-trade to B Ltd. Determine whether any capital gains shall be chargeable to tax in the instant case?
(a) Any transfer between a holding company and 100% subsidiary company is not treated as a transfer at all. Hence, no capital gains tax liability shall arise.
(b) Any transfer between a holding company and 100% subsidiary company is not treated as a transfer if the transferee company is an Indian company. Hence, no capital gains tax liability shall arise.
(c) A transfer between a holding company and 100% subsidiary company is treated as a “transfer” as there is no specific exclusion in this regard. Hence, capital gains tax liability shall arise.
(d) Any transfer between a holding company and 100% subsidiary company is not treated as a transfer if the transferee company is an Indian company. However, this rule is not applicable if the capital asset is transferred as stock-in-trade. Hence, capital gains tax liability shall arise.
Answer:
(d) Any transfer between a holding company and 100% subsidiary company is not treated as a transfer if the transferee company is an Indian company. However, this rule is not applicable if the capital asset is transferred as stock-in-trade. Hence, capital gains tax liability shall arise.

Question 7.
Mr. X, a businessman, whose total income (after allowing deduction under chapter VI-A except under section 80GG) for A.Y. 2021-22 is Rs.5,95,000. He does not own any house property and is staying in a rented accommodation in Lucknow for a monthly rent of ₹ 9,000. Deduction allowance under section 80GG for A.Y. 2021-22 is:
(a) ₹ 48,500
(b) ₹ 1,48,750
(c) ₹ 60,000
(d) ₹ 1,08,000
Answer:
(a) ₹ 48,500

Question 8.
Mr. X, a resident aged 45 years, has a total income of ₹ 4,95,000 for A.Y. 2021 – 22, his tax liability would be :
(a) ₹ 12,740
(b) ₹ 10,140
(c) ₹ 12,250
(d) Nil
Answer:
(d) Nil

Question 9.
Mr. X has agricultural income of Rs. 2,30,000 and business income of Rs. 2,45,000. Which of the following statements are correct?
(a) Agricultural income has to be ag-gregated with business income for tax rate purposes.
(b) No aggregation is required since agricultural income is less than basic exemption limit.
(c) No aggregation is required since business income is less than basic exemption limit.
(d) Agricultural income is exempt under section 10(1) but the same has to be aggregated with business income, since it exceeds Rs.5,000.
Answer:
(c) No aggregation is required since business income is less than basic exemption limit.

Question 10.
Mr. X, aged 40 years, earned total income of Rs.6,00,000 during P.Y. 2020-21 including interest from post office savings bank account, ₹ 5,000 his taxable income for A.Y. 2021-22 is:
(a) Rs.6,00,000
(b) Rs.5,95,000
(c) Rs.5,96,500
(d) Nil
Answer:
(c) Rs.5,96,500

Question 11.
In case of Revocable Transfer of asset its income will be taxable in the hands of:
(a) Transferee
(b) Transferor
(c) Transferor for 5 years
(d) Transferee for 5 years
Answer:
(b) Transferor

Question 12.
The benefit of payment of advance tax in one instalment on or before 15th March is available to assessee computing profits on presumptive basis:
(a) under section 44AD
(b) under section 44 AD A
(c) under section 44AE
(d) Above all sections
Answer:
(d) Above all sections

Question 13.
Provision of rent free accommodation by employer (Non-Govt.) to its employee during A.Y. 2021-22 is taxable at:
(a) Fair market rent
(b) Uniform rate at all plans
(c) Different percentages of salary on the basis of population
(d) Totally exempt
Answer:
(c) Different percentages of salary on the basis of population

Question 14.
Interest credited in Recognised Provident Fund is exempt upto rate:
(a) 9%
(b) 9.5%
(c) 10%
(d) 10.5%
Answer:
(b) 9.5%

Question 15.
Mr. X has invested in debt securities of a Pvt. Ltd., company deriving its main source of income from business of growing and processing organic vegetables and fruits. Thus, the company has 80% of income exempt as agricultural income and 20% is taxable as business income. During the P.Y. 2020-21, Jenny derived Rs.5,000 as interest income from the above investments. Which of the following statements are correct on taxability:
(a) 80% Interest is exempt from tax
(b) 20% Interest is exempt from tax
(c) Interest is fully taxable
(d) Interest is fully exempt
Answer:
(c) Interest is fully taxable

Question 16.
Mr. X’s total income (before allowing deduction under section 80GG) for AY. 2021-22 is ₹ 9,00,000, paid house rent ₹ 2,00,000 in respect of residential accommodation occupied by him. The deduction allowable to him under section 80GG for A.Y. 2021-22 is:
(a) ₹ 90,000
(b) ₹ 1,35,000
(c) ₹ 60,000
(d) ₹ 2,25,000
Answer:
(c) ₹ 60,000

Question 17.
Mr. X received gifts of ₹ 2,00,000 from his father, ₹ 1,00,000 from his friend and ₹ 1,00,000 on his marriage. Taxable amount for A.Y. 2021-22 is:
(a) ₹ 4,00,000
(b) ₹ 3,00,000
(c) ₹ 2,00,000
(d) ₹ 1,00,000
Answer:
(d) ₹ 1,00,000

Question 18.
When the following return of income can be revised under section 139(5)?
(a) Up to end of relevant A.Y.
(b) Up to date of assessment
(c) Up to date of assessment or at end of relevant A.Y. whichever is earlier
(d) Never
Answer:
(c) Up to date of assessment or at end of relevant A.Y. whichever is earlier

Question 19.
A firm pays salary and interest on capital to its resident partners. The salary and interest paid fall within the limits specified in section 40(b). Which of the following statements is true?
(a) The firm cannot claim these as expenditure
(b) These are exempt in hand of part-ners
(c) These are taxable in hands of part-ners
(d) No treatment
Answer:
(c) These are taxable in hands of part-ners

Question 20.
Mr. X donated ₹ 2,00,000 in National Defence Fund and ₹ 2,00,000 in Jawaharlal Memorial fund. Deduction u/s 80G A.Y. 2021-22 would be-
(a) ₹ 2,00,000
(b) ₹ 3,00,000
(c) ₹ 4,00,000
(d) Nothing
Answer:
(b) ₹ 3,00,000

Question 21.
In respect of loss from house property, which of the following statements are correct?
(a) While computing income from any house property, the maximum interest deduction allowable under section 24 is ₹ 3 lakhs.
(b) Loss from house property relating to a particular year can be set-off against income under any other head during that year only to the extent of Rs. 2 lakhs.
(c) The loss in excess of Rs. 2 lakh, which is not set-off during the year, cannot be carried forward for setoff.
(d) None of the above
Answer:
(b) Loss from house property relating to a particular year can be set-off against income under any other head during that year only to the extent of Rs. 2 lakhs.

Question 22.
Loss from owning and maintaining race- horses can be set-off:
(a) From income of any head in same P.Y.
(b) From business income in same P.Y.
(c) Can be carried forward for set-off from income of any head
(d) Can be carried forward upto 4 years for set-off from same source of income
Answer:
(d) Can be carried forward upto 4 years for set-off from same source of income

Question 23.
Mr. X celebrated his 50th marriage anniversary. On this occasion, his wife received a diamond necklace worth ₹ 5,00,000 from Kishore’s brother. Kishore’s son gifted him a luxurious car worth ₹ 15,00,000, His grandchildren gifted them a new furniture set worth ₹ 3,00,000. Also, he received cash gifts from his friends amounting collectively to ₹ 80,000.
(a) Neither Mr. X nor Mrs. X will be liable for tax for any gifts since they have been received on occasion of marriage anniversary.
(b) Both are liable to Pay tax on gifts
(c) Mr. X will be liable to pay tax on cash gifts only.
(d) None is taxable.
Answer:
(c) Mr. X will be liable to pay tax on cash gifts only.

Question 24.
Mr. X, a foreign national, working with a USA company, came to India during the P.Y. 2020-21 for rendering services on behalf of the employer. He wishes to claim his salary income earned during his stay in India as exempt because he is a foreign national. Answer whether:
(a) His income is exempt as desired
(b) His income is taxable in India
(c) His income to be conveyed to his country
(d) Taxable after allowing deduction if claimed
Answer:
(b) His income is taxable in India

Question 25.
X, a student, aged 16 years, received scholarship of ₹ 50,000 during the previous year 2020-21. Which of the following statements are true regarding taxability of such income:
(a) Such income shall be assessed in hands of X
(b) Such income to be included with the income of parent whose income before such clubbing is higher
(c) Such income is completely exempt from tax
(d) Such income to be clubbed with father’s income.
Answer:
(c) Such income is completely exempt from tax

Question 26.
Mr. X, an Indian citizen and a Government employee, left India for the first time on 31.01.2020 on account of his transfer to High Commission in United Kingdom. During P.Y. 2020-21, he visited India only for a week on occasion of his brother marriage. During A.Y. 2021-22, his income composition includes salary, foreign allowances, rent from property in Singapore and interest earned from fixed deposits maintained with SBI. His taxable income for P.Y. 2020-21 will include:
(a) All of them, since Mr. X is a resident in India, hence his global income will be taxable
(b) Only interest earned from fixed deposits maintained in India
(c) No income shall be taxable since Mr. X is a non-resident in India for P.Y. 2020-21
(d) Salary and interest income of fixed deposits with SBI
Answer:
(d) Salary and interest income of fixed deposits with SBI

Question 27.
₹ 5 lakh is paid to Mr. Vallish, a resident individual on 15.1.2021 by the government on compulsory acquisition of his urban agricultural land.
(a) No tax is deductible at source
(b) Tax is deductible @1%
(c) Tax is deductible @ 5%
(d) Tax is deductible @ 10%
Answer:
(a) No tax is deductible at source

Question 28.
Which of the following statements is true with respect to the A.Y. 2021-22:
(a) No exemption under section 80TTA would be available to resident se-nior citizens
(b) Share of profit will be exempt in § the hands of partner
(c) Exemption will not be available in respect of long term capital gains
(d) Exemption under section 10(32) on income of minor child is allowed for ₹ 5,000
Answer:
(b) Share of profit will be exempt in § the hands of partner

Question 29.
Mr. X income of ₹ 22 lakhs from manufacture and sale of coffee grown, cured, roasted and grounded by him in India. The business income chargeable to tax in his hands would be:
(a) ₹ 8,80,000
(b) ₹ 5,50,000
(c) ₹ 13,20,000
(d) ₹ 16,50,000
Answer:
(a) ₹ 8,80,000

Question 30.
Mr. X took possession of property on 31st August 2020 booked by him three years back at ₹ 25 lakhs, The Stamp Duty Value (SDV) of the property as on 31st August 2020 was ₹ 31 lakh and on date of booking it was ₹ 29 lakh. He had paid ₹ 2 lakh by A/c payee cheque as down payment on date of booking. Which of the following will be considered as income, if any, and in which previous year?
(a) ₹ 4 lakhs in P.Y. 2020-21
(b) ₹ 4 lakhs in P.Y. 2017-18
(c) ₹ 6 lakhs in P.Y. 2020-21
(d) No income shall be taxable
Answer:
(a) ₹ 4 lakhs in P.Y. 2020-21

Question 31.
A company wants 400 customized backpacks which will be distributed by the company to its employees on the annual event. He hires a local vendor for this task and informs the local vendor about its specifications for the backpacks. The local vendor procures its own raw material and supplies the required backpacks to the Company. He charges ₹ 1,00,000 for the backpacks from the company. While making payment to the p vendor, at what rate company is required to deduct tax at source?
(a) 1%
(b) 2%
(c) 10%
(d) No tax is required to be deducted at source.
Answer:
(d) No tax is required to be deducted at source.

Question 32.
Mr. X incurred loss of ₹ 2 lakhs in the A.Y.2021-22 in business. Against which of the following incomes earned during the same year, can he set-off such loss?
(a) profit of ₹ 3 lakh from wholesale cloth business
(b) long-term capital gains of ₹ 1.50 lakhs on sale of land
(c) speculative business income of ₹ 40,000
(d) None of the above
Answer:
(a) profit of ₹ 3 lakh from wholesale cloth business

Question 33.
Which of the following benefits are NOT allowable to a non-resident, while computing his total income and tax liability for A.Y. 2021-22 under the Income-tax Act, 1961?
(a) Deduction of 30% of gross annual value while computing her income from house property in Bangalore
(b) Tax rebate of ₹ 9,500 from tax payable on her total income of ₹ 4,40,000
(c) Deduction for donation made by her to Prime Minister’s National Relief Fund
(d) Deduction for interest earned by her on NRO savings account.
Answer:
(b) Tax rebate of ₹ 9,500 from tax payable on her total income of ₹ 4,40,000

Question 34.
Unexhausted basic exemption limit, if any, of a non-resident for A.Y. 2021 -22 can be adjusted against:
(a) Long-term capital gain
(b) Short-term capital gain
(c) Income from other sources
(d) None
Answer:
(d) None

Question 35.
During the P.Y. 2020-21, Mr. X, a non-resident, received ₹ 75,00,000 on account of sale of agricultural land in Mauritius. The money was first received in Mauritius and then remitted to his Indian bank account. Is the sum taxable in India?
(a) No, as agricultural income is ex-empt u/s 10(1).
(b) No, as the income has accrued and arisen outside India
(c) Yes, since it is remitted to India in the same year.
(d) Yes, as agricultural income earned outside India is not exempted in India in the hands of a non-resident.
Answer:
(b) No, as the income has accrued and arisen outside India

Question 36.
X Ltd. credits a sum of ₹ 45,000 as commission to Y Ltd., an Indian company on 25.06.2020 without deducting tax at source. Y Ltd. paid its entire tax liability on its income by way of advance payment of tax during P.Y. 2020- 21 and filed its return of income for A.Y. 2021-22 on 15.07.2020. X Ltd. also has a certificate in Form No. 26A from a chartered accountant. Compute the amount of deduction that shall be allowed to X Ltd. in respect of the commission credited to Y Ltd. assuming that X Ltd. follows mercantile system of accounting:
(a) ₹ 45,000
(b) Nil
(c) ₹ 13,500
(d) ₹ 31,500
Answer:
(a) ₹ 45,000

Question 37.
Mr. X (a non-resident and aged 70 years) is a retired person, earning rental income of ₹ 40,000 per month from a property located in Delhi. He is residing in Canada. Apart from rental income, he does not have any other source of income. Is he liable to pay advance tax in India?
(a) Yes, he is liable to pay advance tax in India as he is a non-resident and his tax liability in India exceeds ₹ 10,000.
(b) No, he is not liable to pay advance tax in India as his tax liability in India is less than ₹ 10,000
(c) No, he is not liable to pay advance tax in India as he has no income chargeable under the head “Profits and gains of business or profession”
(d) Both (b) and (c)
Answer:
(b) No, he is not liable to pay advance tax in India as his tax liability in India is less than ₹ 10,000

Question 38.
Mr. X sold his old residential house in April, 2020 for 7 28,00,000. Long-term capital gain arising on transfer of old house amounted to ₹ 8,40,000. In December, 2020, he purchased another residential house worth 7 5,00,000. The new house was however, sold in April, 2021 for ₹ 14,00,000 (stamp duty value of the new house was ₹ 12,00,000). What will be amount of taxable capital gains in the hands of Mr. X for the AY. 2021-22 and 2022-23?
(a) Long term capital gain of ₹ 3,40,000 in AY. 2021 -22 and short-term capital gain of ₹ 14,00,000 in AY. 2022-23
(b) Long term capital gain of ₹ 3,40,000 in A.Y. 2021 -22 and long term capital gain of ₹ 5,00,000 and short-term capital gain of ₹ 14,00,000 in AY. 2022-23
(c) Long term capital gain of ₹ 3,40,000 in AY. 2021-22 and long term capital gain of ₹ 5,00,000 and short-term capital gain of ₹ 9,00,000 in A.Y. 2022-23
(d) Long term capital gain of ₹ 3,40,000 in A.Y. 2021 -22 and long term capital gain of ₹ 5,00,000 and short-term capital gain of ₹ 7,00,000 in A.Y. 2022-23
Answer:
(a) Long term capital gain of ₹ 3,40,000 in AY. 2021 -22 and short-term capital gain of ₹ 14,00,000 in AY. 2022-23

Question 39.
Gross total income of Mr. X for P.Y. 2020-21 is ₹ 6,00,000. She had taken a loan of ₹ 7,20,000 in the financial year 2017-18 from a bank for her husband who is pursuing MBA course from IIM, Kolkata. On 02.04.2020, she paid the first instalment of loan of ₹ 45,000 and interest of ₹ 65,000. Compute her total income for A.Y. 2021-22
(a) ₹ 6,00,000
(b) ₹ 5,35,000
(c) ₹ 4,90,000
(d) ₹ 5,55,000
Answer:
(b) ₹ 5,35,000

Question 40.
X, aged 35 years, paid medical insurance premium of ₹ 35,000 to insure health of himself and his spouse. He also paid medical insurance premium of ₹ 43,000 to insure health of his father, aged 69 years, not dependant on him. He had also incurred ₹ 4,000 in cash on preventive health check up of his father. Total deduction admissible under section 80D is:
(a) ₹ 55,000
(b) ₹ 29,000
(c) ₹ 68,000
(d) ₹ 72,000
Answer:
(d) ₹ 72,000

Question 41.
Mr. X, a resident employee of Hindustan Company established in India, received a scholarship of ₹ 5,00,000 from his employer to meet the cost of education of his children. X actually spent an amount of ₹ 4,50,000 on education of his children. What will be the amount of income exempt in the hands of X?
(a) Nil
(b) ₹ 4,50,000
(c) ₹ 50,000
(d) ₹ 5,00,000
Answer:
(d) ₹ 5,00,000

Question 42.
Mr. X, aged 45 years, received interest on investment in following securities.-
5% Govt, securities for ₹ 70,000
7.5% Municipal bonds of ₹ 50,000
9% debentures of a company for ₹ 30,000
7% capital investment bonds for ₹ 20,000
Compute the amount of taxable income for A.Y. 2021-22.
(a) ₹ 9,000
(b) ₹ 10,500
(c) ₹ 9,950
(d) Nil
Answer:
(c) ₹ 9,950

Question 43.
A firm paid managerial remuneration to its partners. The same was in accordance permission. Partners are also entitled to interest on capital @ 11% as per partnership deed. Total interest paid during the year is ₹ 2,00,000. The book profit before interest on capital and remuneration is ₹ 25,00,000 allowable managerial remuneration is:
(a) ₹ 14,70,000
(b) ₹ 12,50,000
(c) ₹ 10,00,000
(d) ₹ 23,00,000
Answer:
(a) ₹ 14,70,000

Question 44.
Mr. X took a property on rent for his residential purpose on 1.4.2020. However, the property was not fully occupied by him. He let out the property to his friend at ₹ 15,000 p.m. from 01.04.2020 to 31.03.2021. Mr. X is of the view that income from subletting of property is taxable as Income from House Property. Find out whether his view is correct?
(a) Correct, as any income from a house property is taxable under the head Income from House Property.
(b) Incorrect, as Mr. X is not the owner of the property let out by him.
(c) Incorrect, as income from sublet-ting of a property is not taxable
(d) Incorrect, as income from sublet-ting shall be taxable under the head income from other sources.
Answer:
(d) Incorrect, as income from sublet-ting shall be taxable under the head income from other sources.

Question 45.
Mr. X, a US citizen, came to India during P.Y. 2016-17 to 2019-20 for 120 days every year and in P.Y. 2020-21 for 90 days. What is his residential status for A.Y. 2021-22
(a) Ordinary resident
(b) Not-ordinary resident
(c) Non-resident
(d) Not certain
Answer:
(a) Ordinary resident

Question 46.
A firm carrying on business, furnishes the following particulars for the P.Y. 2020-21

Particulars	₹
Book profits (before setting of unabsorbed depreciation and brought forward business loss)	2,70,000
Unabsorbed depreciation of P.Y. 2013-14	1,20,000
Brought forward business loss of P.Y. 2019-20	2,00,000

Compute the amount of remuneration allowable under section 40(b) from the book profit.
(a) ₹ 2,43,000
(b) ₹ 1,80,000
(c) ₹ 1,50,000
(d) Nil
Answer:
(c) ₹ 1,50,000

Question 47.
A foreign company non-resident in India for A.Y. 2021-22, engaged in the business of trading of tube-lights outside India. The principal officer of the company has approached you to enlighten him regarding the provisions of the Income-tax Act, 1961 pertaining to the person who is required to verify the return of income.

I. The return of income in case of can be verified by the managing director.
II. The return of income in case can be verified by any director.
III. The return of income in case may be verified by a person who holds a valid power of attorney from such company to do so.
(a) I or II or III
(b) Only I
(c) I or II depending upon the avail-ability of the managing director
(d) Only III
Answer:
(d) Only III

Question 48.
Mr. X acquires 1000 equity shares on 01.01.2018 at ₹ 200. The Fair Market Value of the said shares on 31.01.2019 is ₹ 500. He sold the said shares on 30.04.2020 at ₹ 400. Calculate the amount of capital gain assuming that securities transaction tax has been paid by Mr. X on acquisition and transfer of the said equity shares.
(a) Nil
(b) (-) ₹ 1,00,000
(c) ₹ 2,00,000
(d) ₹ 3,00,000
Answer:
(a) Nil

Question 49.
Mr. X owns 9 goods vehicle and declares profit on presumptive basis under section 44AE for A.Y. 2021-22.
He is:
(a) liable to pay advance tax in four instalments in June, September, December and March
(b) liable to pay advance tax in three instalments in September, December and March
(c) liable to pay advance tax in one instalment in March
(d) not liable to pay advance tax since he is declaring profit on presumptive basis.
Answer:
(a) liable to pay advance tax in four instalments in June, September, December and March

Question 50.
During the A.Y. 2020-21, Mr. X has a loss of ₹ 5 lakhs under the head “Income from house property” which could not be set off from any other head of income as per the provisions of section 71. The due date for filing return of income u/s 139(1) has already expired and Mr. X forgot to file his return of income within the said due date. However, he filed his belated return of income for alongwith return of income for A.Y. 2021-22, (P.Y. j 2020-21). Determine whether Mr. X can claim the said set-off?
(a) No, Mr. X cannot claim set-off of loss of ₹ 5 lakhs during A.Y. 2021-22 as he failed to file his return of income u/s 139(1) for A.Y. 2020-21.
(b) Yes, Mr. X can claim set-off of loss of ₹ 2 lakhs, out of ₹ 5 lakhs, from its income from house property during A.Y. 2021 -22, if any, and the balance has to be carried forward.
(c) Yes, Mr. X can claim set off a loss of ₹ 5 lakhs during A.Y. 2021-22 from its income from house property, if any, and the balance has to be carried forward.
(d) Yes, Mr. X can claim set off of loss of ₹ 2 lakhs, out of ₹ 5 lakhs, from its income from any head during A. Y. 2021-22 and the balance, if any, has to be carried forward.
Answer:
(c) Yes, Mr. X can claim set off a loss of ₹ 5 lakhs during A.Y. 2021-22 from its income from house property, if any, and the balance has to be carried forward.

Question 51.
Mr. X aged 64 years has filed his return of income for A.Y 2021-22 showing total income of ₹ 9 lakhs. The tax payable by him. He did not opt for new tax regime.
(a) ₹ 96,200
(b) ₹ 93,600
(c) ₹ 83,200
(d) Nil
Answer:
(b) ₹ 93,600

Question 52.
Mr. X, aged 57 years, has a total income of ₹ 36 lakhs for A.Y 2021-22. His tax liability with concessional slab rates would be-
(a) ₹ 8,50,200
(b) ₹ 10,80,00
(c) ₹ 8,63,200
(d) ₹ 9,00,000
Answer:
(a) ₹ 8,50,200

Question 53.
Mr. X has a house property whose Municipal value is ₹ 1,50,000 and the Fair Rental Value is ₹ 1,80,000. The standard rent is fixed at ₹ 1,20,000. It was self-occupied from 01.04.2020 to 1.05.2020 and from 01.06.2020, it was let out at ₹ 15,000 per month. Compute taxable income of the house property for A.Y. 2021-22. Municipal taxes paid by him during P.Y. 2020-21 were 20% of municipal valuation. Interest on loan 30,000.
(a) ₹ 1,20,000
(b) ₹ 84,000
(c) ₹ 66,000
(d) ₹ 54,000
Answer:
(d) ₹ 54,000

Question 54.
Mr. X purchased furniture worth ₹ 80,000 on 05.09.2020 and makes the payment of ₹ 45,000 by account payee cheque and ₹ 20,000 in cash on the same date. The balance of ₹ 15,000 is paid by the assessee by bearer cheque
on 06.09.2020 when the furniture is delivered in his office. Compute the amount of actual cost of furniture to the assessee
(a) ₹ 45,000
(b) ₹ 80,000
(c) ₹ 60,000
(d) ₹ 65,000
Answer:
(a) ₹ 45,000

Question 55.
On 20.10.2020, Pihu (minor child) gets a gift of ₹ 20,00,000 from his father’s friend. On the same day, the amount is deposited in his bank account. On the said deposit, interest of ₹ 13,000 was earned during the P.Y. 2020-21. In whose hands the income of Pihu shall be taxable?
(a) Income of ₹ 20,11,500 shall be taxable in the hands of Pihu’s father.
(b) Income of ₹ 20,13,000 shall be taxable in the hands of Pihu’s father.
(c) Income of ₹ 20,11,500 shall be taxable in the hands of Pihu’s father or mother, whose income before this clubbing is higher.
(d) Income of ₹ 20,13,000 shall be taxable in the hands of Pihu’s father or mother, whose income before this clubbing is higher.
Answer:
(c) Income of ₹ 20,11,500 shall be taxable in the hands of Pihu’s father or mother, whose income before this clubbing is higher.

Question 56.
Mr. X had bought 3,000 STT paid listed shares of a company on 25.02.2020 at ₹ 300 per share. The company announces and allots bonus shares in the ratio of 3:1 on 01.07.2020. After the allotment of bonus shares, the shares were sold on 10.03.2021 at ₹ 400 per share and STT was paid on it. Compute the amount of capital gain/loss in her hands for AY. 2021-22.
CII- F.Y. 2019-20: =289; F.Y. 2020- 21=301
(a) Long term capital gain of ₹ 7,00,000.
(b) Long term capital gain on sale of original shares of ₹ 3,00,000. Short term capital gain on sale of bonus shares of ₹ 4,00,000
(c) Long term capital of ₹ 6,62,630
(d) Long term capital gain on sale of original shares ₹ 2,62,500. Short term capital gain on sale of bonus shares of ₹ 4,00,000.
Answer:
(d) Long term capital gain on sale of original shares ₹ 2,62,500. Short term capital gain on sale of bonus shares of ₹ 4,00,000.

Question 57.
A partnership firm, owns a house property which is utilized by the partners for their residence. On 31.10.2020, the firm sells the property at a long-term capital gain of ₹ 6,00,000. Can the firm or partners claim exemption under section 54?
(a) Yes, the firm can claim exemption u/s 54 as the firm has earned long term capital gains from the transfer of a residential house.
(b) Yes, the partners can claim ex-emption u/s 54 as the property was used by them for residential purpose and the said property has been indirectly transferred by the partners only in the capacity of a firm.
(c) Neither the firm nor the partners can claim deduction u/s 54 as the said deduction is allowed only in case of a commercial property
(d) The firm cannot claim deduction u/s 54 as deduction under the said section is allowed only to an individual or HUF. Further, the partners cannot claim deduction u/s 54 as the transferor in the instant case is the firm.
Answer:
(d) The firm cannot claim deduction u/s 54 as deduction under the said section is allowed only to an individual or HUF. Further, the partners cannot claim deduction u/s 54 as the transferor in the instant case is the firm.

Question 58.
Which of the following persons is/ are liable to pay advance tax as per the provisions of Income-tax Act, 1961?
I. A resident individual aged 62 years having only income from capital gains of ₹ 20,00,000 (estimated) during P.Y. 2020-21.
II. A resident individual aged 58 years having only income from other sources of ₹ 2,00,000 (estimated) during P.Y. 2020-21.
III. A private company having estimated total income of ₹ 1,00,000 during P.Y. 2020-21.
IV. A partnership firm which has es-timated its total income to be Nil for P.Y. 2020-21.
V. A HUF having estimated total income of ₹ 6,00,000 during P.Y. 2020-21
(a) I, III, V
(b) I, II, III, IV, V
(c) III, V
(d) III, IV, V
Answer:
(c) III, V

Question 59.
Mr. X and his brother jointly own a bungalow. They had taken a housing loan to purchase the bungalow. The loan is sanctioned in the name of Mr. X and his brother in the year 2015. Interest on housing loan for the P.Y. 2020-21 amounted to ₹ 5,00,000 which is paid by Mr. X (₹ 2,50,000) and his brother (₹ 2 ,50,000). The bungalow is used by them for their residence. In this case, what will be the amount of deduction available under section 24(b) to Mr. X and his brother
(a) ₹ 30,000 each
(b) ₹ 2,00,000 each
(c) ₹ 2,50,000 each
(d) ₹ 5,00,000 each
Answer:
(b) ₹ 2,00,000 each

Question 60.
Mr. X filled his belated return of income u/s 139(4) on 5.02.2022 showing total income of ₹ 9,00,000. What is fee payment u/s 234
(a) ₹ 10,000
(b) ₹ 8,000
(c) ₹ 1,000
(d) ₹ 2,000
Answer:
(a) ₹ 10,000

Question 61.
A proprietorship firm following j cash system of accounting incurred the following expenditure during the P.Y. 2020-21:

• Customs duty of A.Y. 2021-22 : ₹ 75,000 paid on 15.5.2021
• Income tax for A.Y. 2020-21: ₹ 84,000 paid on 16.6.2021

Calculate the amount of expenditure allowable while computing its business income for A.Y. 2021-22
(a) ₹ 1,59,000
(b) ₹ 75,000
(c) Nil
(d) ₹ 84,000
Answer:
(c) Nil

Question 62.
ABC a partnership firm was dissolved on 1-5-2020. A machine acquired on 1-5-2018 for ₹ 3,50,000 was distributed amongst the partners on dissolution for ₹ 3,00,000. The value of machinery as per books of account and Fair Market Value on 1-5-2020 was ₹ 2,50,000 and ₹ 4,00,000, respectively. What will be the full value of consideration of this machine?
(a) ₹ 3,00,000
(b) ₹ 4,00,000
(c) ₹ 3,50,000 0
d) ₹ 2,50,000
Answer:
(b) ₹ 4,00,000

Question 63.
Mr. X purchased a house property valued at ₹ 42 lakhs as on 1.4.2020. The house was let out at ₹ 25,000 per month throughout the P.Y. Compute income from house property for A.Y.2021 -22 if Mr. X paid Municipal taxes 18,000 and spent 6,000 on minor repairs.
(a) ₹ 2,82,000
(b) ₹ 2,76,000
(c) ₹ 3,00,000
(d) ₹ 1,97,400
Answer:
(d) ₹ 1,97,400

Question 64.
Mr. X, a resident Indian, has incurred ₹ 60,000 for medical treatment of his dependent brother aged 37 years, who is a person with 40% disability and has deposited ₹ 20,000 with LIC for his maintenance. For A.Y. 2021-22, Rajan would be eligible for deduction under section 80DD of an amount equal to:
(a) ₹ 60,000
(b) ₹ 80,000
(c) ₹ 75,000
(d) ₹ 1,25,000
Answer:
(c) ₹ 75,000

Question 65.
In which of the following transactions, quoting of PAN is mandatory by the person entering into the said transaction?
I. Opening a Basic savings bank deposit account with a bank.
II. Applying to a bank for issue of a credit card.
III. Payment of ₹ 40,000 to mutual fund for purchase of its units.
IV. Cash deposit with a post office of ₹ 1,00,000 during a day.
V. A fixed deposit of ₹ 30,000 with a NBFC registered with RBI.
VI. Sale of shares of an unlisted com-pany for an amount of ₹ 60,000.
(a) II, IV
(b) II, III, IV
(c) I, II, III, V, VI
(d) II, IV, VI
Answer:
(a) II, IV

Question 66.
Mr. X incurred loss of X 4 lakh in the P.Y. 2020-21 in leather business. Against which of the following incomes earned during the same year, can he set-off such loss?
(i) Profit of ₹ 1 lakh from apparel business
(ii) Long-term capital gains of ₹ 2 lakhs on sale of jewellery
(iii) Salary income of ₹ 1 lakh
Choose the correct answer.
(a) Only (i)
(b) Only (ii)
(c) Only (iii)
(d) Both (i) and (ii)
Answer:
(d) Both (i) and (ii)

Question 67.
Mr. X acquired a building of ₹ 15 lakh in June, 2018 in addition to the cost of ₹ 3 lakh in respect of the land on which the building is situated. It was used for personal purposes until he commenced business in June, 2020 and since then it was used for business purposes. The amount of depreciation eligible in his case for the A.Y. 2021-22 would be:
(a) ₹ 1,21,500
(b) ₹ 1,50,000
(c) ₹ 1,45,800
(d) ₹ 1,80,000
Answer:
(a) ₹ 1,21,500

CA Inter Taxation GST Multiple Choice Questions (MCQs) – CA Inter Taxation Study Material is designed strictly as per the latest syllabus and exam pattern.

CA Inter Taxation GST Multiple Choice Questions (MCQs) – CA Inter Taxation Study Material

Multiple Choice Questions

Question 1.
GST Council has been established under ………. of the Constitution of India.
(a) Article 246
(b) Article 254
(c) Article 279
(d) Article 279A
Answer:
(d) Article 279A

Question 2.
At present, the ‘alcoholic liquor for human consumption’ is subjected to which of the following?
(a) GST
(b) State excise duty
(c) Central Sales Tax/Value Added Tax
(d) Article 279A
Answer:
(d) Article 279A

Question 3.
Consequent to section 118 of the Finance Act, 2020, the section 2(114) of the CGST Act, 2017 has been amended. Which of the following Union Territories have been merged into a single Union Territory?
(i) Andaman and Nicobar Islands
(ii) Lakshadweep
(iii) Dadra and Nagar Haveli
(iv) Daman and Diu
(v) Chandigarh
(vi) Ladakh
(a) (i)and(ii)
(b) (iii) and (iv)
(c) (v)and(vi)
(d) (i) and (iii)
Answer:
(b) (iii) and (iv)

Question 4.
The erstwhile state “Jammu and Kashmir” has been removed as state and framed into two Union Territories of Jammu and Kashmir and UT of Ladakh. Which of these two has its own legislative body?
(a) UT of Jammu and Kashmir
(b) UT of Ladakh
(c) Both (a) and (b)
(d) None of these
Answer:
(a) UT of Jammu and Kashmir

Question 5.
In accordance with Article 279A(9), the vote of the Central Government shall have a weightage of ………. of the total votes cast.
(a) One half
(b) One third
(c) One fourth
(d) None of these
Answer:
(b) One third

Question 6.
The functions of GST Council include
(a) To decide policy matters
(b) To formulate principles for administration
(c) The implementation of GST
(d) All of the above
Answer:
(d) All of the above

Question 7.
As per section 2(52) of the CGST Act, 2017, the term “Goods” includes ………..
(a) Actionable claims
(b) Growing crops, Grass
(c) Every kind of movable property other than money and securities
(d) All of the above
Answer:
(d) All of the above

Question 8.
……….. Are consumption based taxes on goods and services
(a) Direct Taxes
(b) Indirect Taxes
(c) Both (a) & (b)
(d) None of the above
Answer:
(b) Indirect Taxes

Question 9.
Which of the following is an example of transaction in money under GST laws?
(a) Deposit of principal amount in bank
(b) Amount withdrawn from bank
(c) Exchange of ₹ 2,000 note for 10 notes of ₹ 200 (without consideration)
(d) All of the above
Answer:
(d) All of the above

Question 10.
The section 2(52) defines goods. Which of the following is not considered in this definition of ‘goods’?
(a) Sale of shares of unlisted company
(b) Sale of perishable items of goods
(c) Sale of lottery tickets
(d) Sale of old twenty five-paisa coin at ₹ 25
Answer:
(a) Sale of shares of unlisted company

Question 11.
Which of the following countries was the first to introduce GST?
(a) United States
(b) Britain
(c) Canada
(d) France
Answer:
(d) France

Question 12.
As per Schedule II of CGST Act, 2017, which of the following is a supply of services?
(a) Transfer of title in goods
(b) Title in goods to be passed in future, as per existing agreement
(c) Repairing of Mobile Phone
(d) All of the above
Answer:
(c) Repairing of Mobile Phone

Question 13.
Which of the following has been omit-ted at the time of introduction of GST?
(a) Article 268(1)
(b) Article 268(2)
(c) Article 268A
(d) Article 269
Answer:
(c) Article 268A

Question 14.
Which of the following is not a supply of services?
(a) Renting of immovable property
(b) Payment of Non-Compete Fee by an ex-employee to his previous employer
(c) Repairing of Laptop
(d) Transfer of title in goods at a future date
Answer:
(d) Transfer of title in goods at a future date

Question 15.
………. was the first state to pass State GST Bill.
(a) Arunachal Pradesh
(b) Maharashtra
(c) Assam
(d) Telangana
Answer:
(d) Telangana

Question 16.
Which of the following transactions does not qualify as supply under GST law?
(a) Import of services by Suresh without consideration for the purposes of his business from his son “Mukesh” living outside India.
(b) Supplies made by the principal to his agent (registered) situated within the same State.
(c) Disposal of car without consideration (ITC has not been claimed)
(d) Supply of service by Head Office (Delhi) to its own branch situated in Mumbai
Answer:
(c) Disposal of car without consideration (ITC has not been claimed)

Question 17.
GST Council has its headquarters in
(a) Delhi
(b) Mumbai
(c) Madras
(d) Kolkata
Answer:
(a) Delhi

Question 18.
Considering the definition of exempt goods given under section 2(47) of CGST Act, 2017, which of the following is
treated as exempt supply?
(a) Supply of electricity
(b) Sale of liquor
(c) Supply of health care services
(d) All of the above
Answer:
(d) All of the above

Question 19.
Who amongst the following is the chairperson of GST Council?
(a) Union Finance Minister
(b) President
(c) State Finance Minister
(d) Prime Minister
Answer:
(a) Union Finance Minister

Question 20.
Which of the following services received without consideration will not considered as supply under GST?
(a) Import of services by a person in India from his sister (wholly dependent on such person in India) in America
(b) Import of services by a person in India from his brother well-settled in Japan (Independent)
(c) Import of services by a person in India from his son (wholly dependent on such person in India) in China
(d) Import of services by a person in India from his son well-settled in Germany
Answer:
(b) Import of services by a person in India from his brother well-settled in Japan (Independent)

Question 21.
As per Article 279A, ……… Of the total number of members of GST Council shall constitute the quorum at its meetings?
(a) One third
(b) One half
(c) One fourth
(d) One tenth
Answer:
(b) One half

Question 22.
The Schedule III of CGST Act, 2017 specifies the transactions and activities which shall be neither treated as supply neither of goods nor as services. Which of the following will not be included in this category?
(a) Salary paid to director under em-ployment agreement
(b) Sitting fees to independent direc-tors for attending AGMs
(c) Payment to employee for providing broking services to the employer for purchase of commercial property. Such services do not form part of the employment contract entered into by the employer with the employee.
(d) Both (b) and (c)
Answer:
(d) Both (b) and (c)

Question 23.
The major reason for implementation of GST was:
(a) Plethora of taxes
(b) Plenty of taxable events
(c) Double taxation
(d) All of the above
Answer:
(d) All of the above

Question 24.
As per Government notification the services by way of transportation of passengers by a …….. shall be considered under section 9(5).
(a) Radio Taxi
(b) Motor Cab and maxi cab
(c) Motor Cycle
(d) All of the above
Answer:
(d) All of the above

Question 25.
Under GST, the final tax is borne by
(a) The end consumer
(b) The interim parties
(c) The supplier
(d) Partly by Government and balance by Supplier
Answer:
(a) The end consumer

Question 26.
Mr. Kamal is interested to opt for composition scheme. Which of the following goods can be supplied by Kamal under Composition scheme?
(a) Milk
(b) Aerated water
(c) Pan masala
(d) Tobacco
Answer:
(a) Milk

Question 27.
For intra-State sales, the GST is divided between Centre and the State in the ratio
(a) Equally
(b) 60:40
(c) 40:60
(d) 25:75
Answer:
(a) Equally

Question 28.
Which of the following has been kept out of the GST levy?
(a) Generator
(b) Computer
(c) Jewellery
(d) Electricity
Answer:
(d) Electricity

Question 29.
Shiv Steels is a renowned furniture house. As a part of their business policy, the firm donated 5 office tables to charitable school. The ITC has been taken in respect of these goods. Under GST:
(a) It is supply of goods as per Schedule I
(b) It is supply of services as per Schedule I
(c) It is supply of goods as per Schedule II
(d) It is not supply as per Schedule III
Answer:
(a) It is supply of goods as per Schedule I

Question 30.
Mr. Vikas, a registered supplier of Himachal Pradesh, wants to opt for composition levy. The turnover limit for composition levy is
(a) ₹ 50 lakh
(b) ₹ 75 lakh
(c) ₹ 1.5 crore
(d) none of the above
Answer:
(c) ₹ 1.5 crore

Question 31.
In which of the following case, GST is payable by recipient of services?
(a) Services supplied by a recovering agent to ICICI Bank
(b) Insurance Agent services
(c) Services provided by way of sponsorship to Reliance Industries Ltd.
(d) All of the above
Answer:
(d) All of the above

Question 32.
When employer gifts goods to his employees, it will not be considered as taxable supply for the purpose of GST if the value of supply to an employee does not exceed:
(a) ₹ 5,000
(b) ₹ 20,000
(c) ₹ 50,000
(d) ₹ 1,00,000
Answer:
(c) ₹ 50,000

Question 33.
A hotel provides 5 days-4 nights pack-age wherein the facility of breakfast and dinner is provided along with the room accommodation. This supply is
(a) Composite Supply
(b) Mixed Supply
(c) Neither Composite nor Mixed Supply
(d) Both Composite and Mixed Supply
Answer:
(a) Composite Supply

Question 34.
A service would be called as “con-tinuous supply of service”, if the service under a contract is provided continuously or on recurrent basis exceeding:
(a) One year
(b) 6 months
(c) 3 months
(d) 1 month
Answer:
(c) 3 months

Question 35.
Mr. A of Delhi supplied goods to Mr. B of Chandigarh (Union-Territory). Which law will govern this transaction?
(a) CGST
(b) SGST
(c) UTGST
(d) IGST
Answer:
(d) IGST

Question 36.
The payment of tax by electronic operator who does not have physical presence in taxable territory in India be made by ………
(a) ECO himself
(b) His appointed representative in India
(c) The person who receives supply
(d) Either (a) or (b)
Answer:
(b) His appointed representative in India

Question 37.
A registered person of Delhi is buying and selling goods only in Puducherry. The applicable law for GST ¡n this case
will be:
(a) SGST & CGST
(b) UTGST&CGST
(c) SGST & UTGST
(d) IGST
Answer:
(a) SGST & CGST

Question 38.
Section 8 deals with taxability of Composite and Mixed Supplies. What would be the tax rate in case of Mixed Supply?
(a) Tax rate as applicable on supply attracting the lowest rate of tax
(b) Tax rate as applicable on supply attracting the highest rate of tax
(c) Flat rate@ 1896
(d) None of the above
Answer:
(b) Tax rate as applicable on supply attracting the highest rate of tax

Question 39.
In case of Goods Transport Agency (GTA) services, tax Is to be paid under forward charge If:
(a) Services supplied to body corporate established under law (GST is payable @ 596)
(b) Services supplied to Casual Taxable Person located in taxable territory (GST is payable @ 5%)
(c) Services supplied to cooperative society established under law (GST is payable @ 5%)
(d) Services supplied to factory registered under Factories Act (GST is payable @ 12%)
Answer:
(d) Services supplied to factory registered under Factories Act (GST is payable @ 12%)

Question 40.
Schedule I of CGST Act, 2017 deals with
(a) Supplies made with consideration
(b) Supplies made without consider-ation
(c) Both (a) and (b)
(d) None of the above
Answer:
(a) Supplies made with consideration

Question 41.
In which of the following cases, the RCM provision is optional subject to fulfilment of certain conditions?
(a) Services by director
(b) Recovery agent services
(c) Services by an author by way of transfer of copyright
(d) Services provided by business facilitator to a banking company
Answer:
(c) Services by an author by way of transfer of copyright

Question 42.
There are some products which have temporarily been kept out of GST and GST Council shall decide the date from which these shall be included in GST. These products are:
(a) Petroleum Crude
(b) High Speed Diesel & Motor Spirit
(c) Natural Gas and ATF
(d) All of the above
Answer:
(d) All of the above

Question 43.
Which of the following services does not fall under reverse charge provisions as contained under section 9(3) of the CGST Act?
(a) Services supplied by arbitral tribunal to business entity
(b) Sponsorship provided to any partnership firm
(c) Sponsorship provided to anybody corporate
(d) None of the above
Answer:
(d) None of the above

Question 44.
Which of the following activities are exempt from GST?
(a) Religious pilgrimage organised by Ajmer Charitable Trust.
(b) Milling of paddy into rice.
(c) Loading, packing and warehousing of jaggery and pulses.
(d) None of the above
Answer:
(d) None of the above

Question 45.
Sumit has opted for composition scheme in the financial year 2019-2020. His aggregate turnover in Financial Year 2018-2019 is ₹ 90 Lakh. In Financial Year 2019-2020, Mr. Sumit can supply services (other than restaurant services) up to a value
(a) ₹ 5,00,000
(b) ₹ 9,00,000
(c) ₹ 50,00,000
(d) Nil
Answer:
(b) ₹ 9,00,000

Question 46.
As per the amendment made in sec-tion 10 through CGST (Amendment) Act, 2017, a composition dealer can provide supply of services (other than restaurant services) not exceeding:

I. 10% of turnover in preceding finan-cial year
II. 10% of taxable supplies in preceding financial year
III. ₹ 5,00,000
IV. ₹ 10,00,000

(a) I or III, whichever is Lower
(b) I or III, whichever is Higher
(c) II or IV, whichever is Lower
(d) II or IV, whichever is Higher
Answer:
(a) I or III, whichever is Lower

Question 47.
The following categories of registered persons are not being eligible for the Composition Scheme under the CGST Act, 2017:

(i) Supplier of the Restaurant Services
(ii) Manufacturer of notified goods
(iii) Non-resident taxable persons
(iv) Casual taxable person
(a) (iii) and (iv)
(b) (ii), (iii) and (iv)
(c) (ii) and (iv)
(d) (i), (iii) and (iv)
Answer:
(d) (i), (iii) and (iv)

Question 48.
As per Entry No. 17, service of transportation of passengers by ……….. is exempt from GST.
(a) Railway (Other than first class and AC)
(b) Metro, monorail and tramway
(c) Inland waterways
(d) All of the above
Answer:
(d) All of the above

Question 49.
A registered supplier under composi-tion levy can withdraw at any time and be required to file the Form for withdrawal from composition levy in :
(a) GST CMP-03
(b) GST CMP-04
(c) GST MIS-01
(d) GST PCT-02
Answer:
(b) GST CMP-04

Question 50.
Which of the following form of classical art or folk is included under exemption in Entry 78?
(a) Music
(b) Dance
(c) Theater
(d) All of the above
Answer:
(d) All of the above

Question 51.
Mr. Jethalal was registered taxpayer (in Delhi) under composition scheme during 2018-2019. His aggregate turnover in financial year 2018-2019 was ₹ 40,00,000. In view of Second Proviso inserted to section 10(1) w.e.f. 1 -4-2019, the taxpayer is willing to supply services in Financial Year 2019-2020. What is the maximum value of services (other than restaurant) which may be provided in such a manner so that he may continue to remain in composition scheme?
(a) ₹ 4,00,000
(b) ₹ 5,00,000
(c) ₹ 6,00,000
(d) None of the above
Answer:
(b) ₹ 5,00,000

Question 52.
For the purpose of eligibility for composition scheme, the following particulars are given:
(i) Intra-State supply of 46,00,000 NIL rated goods
(ii) Intra-state supplies 95,00,000 made under forward charge
(iii) Intra-state supplies of 9,00,000 exempted goods
(iv) Inward supplies of 4,00,000 goods on which tax is payable under RCM

The aggregate turnover is ……. And composition scheme is ………
(a) ₹ 1.5 Crore; available
(b) ₹ 1.5 Crore; Not available
(c) ₹ 1.54 Crore; Not available
(d) ₹ 1.54 Crore; Not available
Answer:
(a) ₹ 1.5 Crore; available

Question 53.
Mr. S, a manufacturer of medicines, whose turnover for financial year 2018-19 was of ₹ 1.2 Crore opted to pay under GST as per composition scheme from 1st April, 2019. His turnover crosses ₹ 1.5 Crore on 30th November, 2019. Will he be allowed to pay tax under composition scheme for the remainder of year i.e. from 1st December, 2019 to 31st March, 2020?
(a) Yes, he can avail the benefit till 31 st March, 2020
(b) No, the option availed shall lapse from the day on which his aggre-gate turnover during the financial year 2019-2020 exceeds ₹ 1.5 Crore
(c) Yes, the option can be availed up to completion of financial year i.e. till 30th September, 2019
(d) None of the above
Answer:
(b) No, the option availed shall lapse from the day on which his aggre-gate turnover during the financial year 2019-2020 exceeds ₹ 1.5 Crore

Question 54.
The supply of lottery is covered under reverse charge mechanism vide section 9(3), if the supplier of goods is …….
& recipient is ……….
I. State Government; Union Territory or any Local Authority
II. Lottery Distributor or selling agent
III. Registered person
IV. Manufacturer
(a) I; II
(b) I; III
(c) II; I
(d) I; IV
Answer:
(a) I; II

Question 55.
Which of the following services, subject to respective conditions, are covered under section 9(3) i.e. reverse charge mechanism?
I. Goods Transport Agency
II. Sponsorship Services
III. Services by Director
IV. Insurance Agent Services
V. Recovery Agent Services
VI. Services by business facilitator to a banking company
(a) I & II
(b) I, II & III
(c) I, II, III & IV
(d) All the six services
Answer:
(d) All the six services

Question 56.
What is the limit on consideration for exemption of services by way of right to admission to circus, dance or theater?
(a) ₹ 250 per person
(b) ₹ 500 per person
(c) ₹ 750 per person
(d) ₹ 1,000 per person
Answer:
(b) ₹ 500 per person

Question 57.
Kapil and Jaithmalani are partners in a firm of advocates. The firm has provided legal professional services to the following:
I. An advocate of Delhi High Court
II. A firm of Five advocates
III. ABC Limited, a business entity whose turnover of the preceding year is more than ₹ 20 Lakhs
IV. Rakesh Kumar, an individual Out of above, which service(s) is/are not exempted and Reverse Charge Mechanism is applicable.
(a) I
(b) II
(c) III
(d) IV
Answer:
(c) III

Question 58.
Kalyan Limited, a trader has aggre-gate turnover of outward supply up to 12th July, 2019 is ₹ 7,00,000. The company is under threshold limit, hence not registered under GST. Kalyan has taken sponsorship services from Mr. Rahul on 21 st July, 2019. Who is liable to pay GST on the amount of sponsorship services.
(a) Kalyan limited under reverse charge mechanism
(b) Mr. Rahul under forward charge mechanism
(c) Both Kalyan and Rahul
(d) It is exempt
Answer:
(a) Kalyan limited under reverse charge mechanism

Question 59.
Indusind bank located in Delhi, appointed Mr. Bahubali as a recovery agent for collecting outstanding balance amount of loan from a customer, Bal- labhdev. Bahubali provided service to the bank for which he charged ₹ 20,000 as fee. Who is liable to pay GST on ₹ 20,000?
(a) Bahubali
(b) Ballabhdev
(c) Indusind bank
(d) No one as it is exempt
Answer:
(c) Indusind bank

Question 60.
Which of the following service is not exempt under GST?
(a) Loading and unloading of tea bags
(b) Loading and unloading of sugar-cane
(c) Loading and unloading of paddy
(d) Loading and unloading of potato
Answer:
(a) Loading and unloading of tea bags

Question 61.
Tyagi Limited availed services of “Jaipur Golden”, (GTA) for transporta-tion of goods by road from warehouse (Delhi) to its factory (Delhi) and paid freight ₹ 2,40,000. Which of the following statement is true?
(a) If GTA pays tax @ 1296 with ITC, then GTA is liable to pay tax
(b) If GTA pays tax @ 1296 with ITC, then Tyagi Limited is liable to pay tax
(c) If GTA pays tax @ 596 without benefit of ITC, then GTA is liable to pay tax
(d) Irrespective of tax rate availed (z.e. with or without ITC)
Answer:
(a) If GTA pays tax @ 1296 with ITC, then GTA is liable to pay tax

Question 62.
The CGST (Amendment) Act, 2018 has amended section 9(4), which is ef-fective from 1-2-2019. As per amended provisions of section 9(4), the tax under reverse charge mechanism is payable:
I. By registered persons
II. By notified class of registered persons
III. By notified categories of intra-State supplies of goods and/or services
IV. On all intra-State supplies of goods and/or services
V. Received by such registered persons from any unregistered supplier
VI. Received by unregistered persons from registered supplier
(a) I, III and V
(b) I, IV and VI
(c) II, III and V
(d) II, IV and VI
Answer:
(a) I, III and V

Question 63.
On 4th September, 2019, A.R. Rehman, a famous music composer, received ₹ 4 Crore as consideration from T Series Limited for sale of copyright of his original music album “LARA”. Who is liable to pay GST?
(a) A.R. Rehman under forward charge mechanism
(b) A. R. Rehman under reverse charge mechanism
(c) T Series Limited under forward charge mechanism
(d) T Series Limited under forward charge mechanism
Answer:
(d) T Series Limited under forward charge mechanism

Question 64.
Transportation of …….. by rail from Delhi to Haryana are exempt from GST.
(a) Defence equipments
(b) Organic manure
(c) Milk, salt and food grain
(d) All of the above
Answer:
(d) All of the above

Question 65.
Services by way of warehousing of …….. is exempt from
(a) processed coffee
(b) Processed tea
(c) Rice
(d) Jaggery
Answer:
(c) Rice

Question 66.
Services by way of admission to …….. are exempt from GST.
(a) Museum
(b) National park
(c) Tiger reserve
(d) All of the above
Answer:
(d) All of the above

Question 67.
Which of the following goods have been notified by the Government under reverse charge mechanism under section 9(3);
(a) Shelled cashew nuts
(b) Peeled cashew nuts
(c) Silk yarn
(d) Fabricated cotton
Answer:
(c) Silk yarn

Question 68.
G D Goenka school is an educational institution providing education up to higher secondary school. The school is covered under Entry No. 66. Identify which of the following services is not covered in exemption notification?
(a) Transportation of students, faculty and staff
(b) Catering services
(c) Cleaning services performed in such educational institution
(d) All of the above are exempt
Answer:
(d) All of the above are exempt

Question 69.
The time of supply in case of voucher is “time of issue of voucher”, if the supply is ……… against the voucher.
(a) Identifiable
(b) Not identifiable
(c) Variable
(d) Indecisive
Answer:
(a) Identifiable

Question 70.
The Government has exempted the payment of tax by any taxable person on supply of footwear costing less than ₹ 100. It is
(a) Absolute Exemption
(b) Conditional Exemption
(c) Special Exemption
(d) Ancillary Exemption
Answer:
(b) Conditional Exemption

Question 71.
Mr. Kalakar is a famous painter registered under GST in UP. In an art exhibition organised by “Lalit Kala Academy” in Delhi, he sends his art work. The visitor is allowed to purchase any painting exhibited for cash immediately. Suppose, the painting of Mr. Kalakar is purchased by one visitor, then at what point of time, supply is considered to have been made under GST?
(a) When painting is completed by Mr. Kalakar
(b) When painting is sent from UP to Delhi for exhibition
(c) When painting is displayed at the exhibition by Lalit Kala Academy
(d) When painting is sold to one of the visitors in the exhibition
Answer:
(d) When painting is sold to one of the visitors in the exhibition

Question 72.
Mr. Krishna has received an advance of ₹ 1,00,000 from his client in respect of service to be provided. But, Mr. Krishna is not sure about the rate of tax and the nature of supply of this service, which will be determined at the time of provision of service only. What will be the rate of tax and nature of supply of a service?
(a) 10%, Inter-State supply
(b) 10%, Intra-State supply
(c) 18%, Inter-State supply
(d) 18%, Intra-State supply
Answer:
(c) 18%, Inter-State supply

Question 73.
Which of the following goods is not exempt from GST?
(a) Fish seed
(b) Ice Cream
(c) Pappad
(d) Plastic Bangles
Answer:
(b) Ice Cream

Question 74.
“GM Sales Ltd.” is a public limited company duly incorporated under the Companies Act, 2013 with its registered office in Delhi, where it ordinarily carries on its business of taxable goods. The company has a warehouse in NOID A for storage of such taxable goods. What will be the place of business of “GM Sales Ltd.” under GST laws?
(a) Delhi only
(b) NOIDA only
(c) Both (a) and (b)
(d) Either (a) or (b)
Answer:
(c) Both (a) and (b)

Question 75.
Transport of passengers by …….. Are exempt from GST.
(a) Railway in First Class
(b) Railway in an air conditioner coach
(c) Metro rail
(d) All of the above
Answer:
(c) Metro rail

Question 76.
Mr. Roshan Singh is employed as a full time teacher in a Government school in Ghaziabad, UP. He has to purchase a laptop for his son. He visited the computer market situated in Nehru Place, Delhi. At the time of purchase, the shopkeeper insisted on demand draft instead of cash. Mr. Roshan got the demand draft generated at State Bank of India, registered in Delhi against cash. Mr. Roshan does not have a bank account in State Bank of India. Determine the place of supply of service provided by State Bank of India, Delhi to Mr. Roshan.
(a) Ghaziabad
(b) Delhi
(c) Any of the above
(d) None of the above
Answer:
(b) Delhi

Question 77.
What is the rate of interest as per Rule 37(3) applicable in case of reversal of ITC in case of non-payment of consideration within 180 days.
(a) 5% p.a.
(b) 10% p.a.
(c) 12% p.a.
(d) 18% p.a.
Answer:
(d) 18% p.a.

Question 78.
Which of the following services provided by Department of Posts are exempt from GST?
(a) Speed Post
(b) Life Insurance
(c) Express Parcel Posts
(d) None of the above
Answer:
(d) None of the above

Question 79.
The liability of taxable person, as reflected in the Electronic Liability Register can be paid through …………..
(a) Debit in Electronic Debit Ledger
(b) Credit in Electronic Debit Ledger
(c) Debit in Electronic Cash Ledger
(d) Both (a) and (c)
Answer:
(d) Both (a) and (c)

Question 80.
Select the goods not exempt from GST, out of the following:
(a) Puja Samagri
(b) Betel Leaves
(c) Precious Metal Bangles
(d) Hearing Aids
Answer:
(c) Precious Metal Bangles

Question 81.
What is the threshold limit for registration under Notification No. 10/2019 dated 7-3-2019?
(a) ₹ 10 lakhs
(b) ₹ 20 lakhs
(c) ₹ 30 lakhs
(d) ₹ 40 lakhs
Answer:
(d) ₹ 40 lakhs

Question 82.
Mr. Amitabh Bachchan is the brand ambassador of GST in India. The con-sideration charged by him up to is
exempt vide entry No. 78.
(a) ₹ 75,000
(b) ₹ 1,50,000
(c) ₹ 2,50,000
(d) Nil (ie. 100% is taxable)
Answer:
(d) Nil (ie. 100% is taxable)

Question 83.
The section 30 of CGST Act, 2017 read with Rule 23 of CGST Rules, 2017 provide that an application for revocation of cancellation of registration can be made within …………….. days from the date of . ……………of the cancellation order
(a) 7, service
(b) 15, issue
(c) 30, service
(d) 45, issue
Answer:
(c) 30, service

Question 84.
The limit of nautical miles from base line of sea coast into the sea in order to determine the supply in territorial water as per section 9 of the IGST Act, 2017 is:
(a) Upto 7 nautical miles
(b) Upto 10 nautical miles
(c) Upto 12 nautical miles
(d) Upto 20 nautical miles
Answer:
(c) Upto 12 nautical miles

Question 85.
Which one of the following is inter-State supply?
(a) Supplier and Recipient are in same State
(b) Supplier and Recipient are in same Union Territory
(c) Supplier and Recipient are in different States/Union Territory
(d) All are intra-State supplies
Answer:
(c) Supplier and Recipient are in different States/Union Territory

Question 86.
Mr. Ram supplied goods to Mr. Laxman. The invoice is dated 30-7-2018. Payment was received for the supply on 30-10-2018. The goods were dispatched on 5-8-2018. What is the time of supply under CGST Act?
(a) 5-8-2018
(b) 30-7-2018
(c) 30-10-2018
(d) None of the above
Answer:
(b) 30-7-2018

Question 87.
ABC Ltd. of Mumbai supplied goods to XYZ Ltd. of Delhi under a contract for the goods to be delivered at the factory of the buyers. Goods removed from the factory of ABC Ltd. on 09-08-2018 and were delivered in the factory of XYZ Ltd. of Delhi on 16-08-2018. Invoice for the supplies was raised by ABC Ltd. on 18-08-2018. Payment of the bill was received on 20-09-2018. The time of supply in this case under GST be taken as :
(a) 09-08-2018
(b) 16-08-2018
(c) 18-08-2018
(d) 20-09-2018
Answer:
(a) 09-08-2018

Question 88.
Section 12(6) prescribes that the time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which ………
(a) the supplier receives such addition in value
(b) the supplier becomes entitled to such addition in value
(c) Earlier of (a) and (b)
(d) None of the above
Answer:
(a) the supplier receives such addition in value

Question 89.
What is the time of supply of service if the invoice is not issued within 30 days from the date of provision of service?
(a) Date of issue of invoice
(b) Date on which the supplier receives payment
(c) Date of provision of service
(d) Earlier of (b) & (c)
Answer:
(d) Earlier of (b) & (c)

Question 90.
Allahabad Bank has provided the following detail in respect of a service provided by it.
1. Date of Supply of Ser- 6-12-2017 vices
2. Date of issue of Invoice 10-1-2018 (Within 45 days of provision of service)
3. Date of receipt of pay- 18-12-2017 ment
Determine the time of supply of service:
(a) 6-12-2017
(b) 10-1-2018
(c) 18-12-2017
(d) None of the above
Answer:
(c) 18-12-2017

Question 91.
Jindal Consultancy services, provides the following details:


Determine the time of supply of service:
(a) 16-12-2017
(b) 29-1-2018
(c) 1-2-2018
(d) None of the above
Answer:
(a) 16-12-2017

Question 92.
Determine the time of supply from the following information:

(a) 4 May
(b) 4 June
(c) 12 June
(d) 3 July
Answer:
(b) 4 June

Question 93.
Discount given after the supply is deducted from the value of supply, if:
(a) Such discount is given as per the agreement entered into at/or be-fore the supply
(b) Such discount is linked to the relevant invoices
(c) Proportionate input tax credit is reversed by the recipient of supply
(d) All of the above
Answer:
(d) All of the above

Question 94.
Subsidy given by the Central Gov-ernment or a State Government while determining value of taxable supply under Goods and Services Tax (GST) as per section 15 of the CGST Act, 2017 :
(a) Included in the transaction value ie. (value of taxable supply)
(b) Just ignored no treatment
(c) Shall not be included in transaction value Le. (value of taxable supply)
(d) Deducted from the transaction value Le. (value of taxable supply)
Answer:
(c) Shall not be included in transaction value Le. (value of taxable supply)

Question 95.
Which of the following though shown in bill not be included in determining the value of supply for the purpose of GST?
(a) Packing
(b) Discount
(c) Interest for late payment
(d) Installation Charges
Answer:
(b) Discount

Question 96.
In respect of supplies notified by the Central Government, on the recommen-dation of GST Council, the valuation is done as per
(a) Section 15(5)
(b) Rule 32
(c) Both (a) & (b)
(d) None of the above
Answer:
(c) Both (a) & (b)

Question 97.
When supplier and recipient are related and price is NOT the sole con-sideration, the valuation is done as per:
(a) Section 15(1)/(2)/(3)
(b) Section 15(4) and Rules (27 to 31)
(c) Section 15(5) and Rule 32
(d) None of the above
Answer:
(b) Section 15(4) and Rules (27 to 31)

Question 98.
A film training Institute has subsi-dized its course on account of subsidies received. Which of the following shall be included in the value of supply?
(a) Subsidy from Cine Association, Mumbai
(b) Subsidy from US Government
(c) Subsidy from Warren Brothers of Hollywood
(d) All of the above
Answer:
(d) All of the above

Question 99.
Where a laptop is supplied for ₹ 40,000 along with the barter of a printer that is manufactured by the recipient and the value of the printer known at the time of supply is ₹ 4,000 but the open market value of the laptop is not known, the value of the supply of the laptop is ……….
(a) ₹ 44,000
(b) ₹ 40,000
(c) ₹ 6,000
(d) ₹ 4,000
Answer:
(a) ₹ 44,000

Question 100.
As per Notification No. 2/2017, the Supply of lottery is exempt from GST if:
(a) The Supplier of lottery is any person other than Government/Union territory/Local authority.
(b) The appropriate GST was paid when lottery was supplied by Government/Union territory/ Local authority to the authorized distributor.
(c) Both (a) and (b) conditions are satisfied
(d) No such condition is there
Answer:
(c) Both (a) and (b) conditions are satisfied

Question 101.
Shivani Enterprises has sold goods with list price ₹ 40,000 to a customer. A discount of 10% is given to the customer, which is reflected in invoice, to arrive at the final price of ₹ 36,000. The transaction value is ……….
(a) ₹ 40,000
(b) ₹ 36,000
(c) ₹ 44,000
(d) None of the above
Answer:
(b) ₹ 36,000

Question 102.
X Limited and Y Limited are related person as per explanation to section 15 of CGST Act, 2017. X Limited sold goods to Y Limited at ₹ 80,000. The similar goods are sold by X Limited in the open market at ₹ 1,25,000. Is the valuation possible as per section 15? Also find out the transaction value as per the applicable provisions:
(a) Yes, ₹ 1,25,000
(b) No, ₹ 1,25,000
(c) Yes, ₹ 80,000
(d) No, ₹ 80,000
Answer:
(b) No, ₹ 1,25,000

Question 103.
“Santosh Interiors” have charged ₹ 3,77,600 from their client in respect of services provided in the month of Febru-ary, 2018. The rate of GST is 18%. The amount ₹ 3,77,600 is inclusive of GST and Tax has not been shown separately in the invoice. Determine the amount of total Tax included in invoice:
(a) ₹ 3,77,600
(b) ₹ 2,15,000
(c) ₹ 65,000
(d) ₹ 57,600
Answer:
(d) ₹ 57,600

Question 104.
The selling price of a notebook is ₹ 50. For notebooks sold to students in Government schools, a company uses its CSR funds to pay the seller ₹ 30, so that the students pay only ₹ 20 per note book.
The value of the notebook will be ……….., as this is a non-government subsidy.
(a) ₹ 20
(b) ₹ 30
(c) ₹ 50
(d) ₹ 80
Answer:
(c) ₹ 50

Question 105.
A supply priced at ₹ 10,000 is made, with a credit period of 1 month for payment. Thereafter interest of 12% is charged. The payment is received after the lapse of three months from the date of supply. The amount of 12% p.a. (i.e. 1 % per month) on ₹ 10,000 for two months after the free credit period is ₹ 300. Such interest will be to the value.
(a) Added
(b) Deducted
(c) Added at 50%
(d) None of the above
Answer:
(a) Added

Question 106.
The amount of ITC shall be
(a) Credited to the Electronic Cash Ledger
(b) Credited to the Electronic Credit Ledger
(c) Debited to the Electronic Cash Ledger
(d) Debited to the Electronic Credit Ledger
Answer:
(b) Credited to the Electronic Credit Ledger

Question 107.
As per section 16(1) of CGST Act, 2017, ITC is available:
I. Only to registered person
II. Only to unregistered person
III. Both registered and unregistered person
IV. Supplies are used in the course or furtherance of business
V. Supplies are intended to be used in the course or furtherance of business
VI. No condition of use of supply in business
Which of the following combination is correct?
(a) I, IV & V
(b) II, V & V
(c) III, IV, V& VI
(d) I, IV & VI
Answer:
(a) I, IV & V

Question 108.
If the goods are received in lots/ instalment,………
(a) 50% of ITC can be taken on receipt of 1st instalment and balance 50% on receipt of last instalment
(b) ITC can be availed upon receipt of last instalment
(c) 100% ITC can be taken on receipt of 1st Instalment
(d) Proportionate ITC can be availed on receipt of each lot/instalment
Answer:
(b) ITC can be availed upon receipt of last instalment

Question 109.
As per section 16(2) of CGST Act, 2017, the registered person is entitled to the credit of any Input Tax Credit on fulfilment of conditions:
I. Possession of Tax Invoice or Debit Note
II. Receipt of goods and services
III. Payment of tax to the Government
IV. Filing of valid return under section 39
V. Filing of valid return under section
VI. Payment of invoice by recipient to supplier
(a) I & II
(b) I, II, III & IV
(c) I, II, III & V
(d) I, III, V&VI
Answer:
(b) I, II, III & IV

Question 110.
As per second Proviso to section 16(2) of CGST Act, 2017, the time limit to pay the value of supply with taxes to avail the ITC is:
(a) 3 months
(b) 6 months
(c) 180 days
(d) Till the date of filing of Annual Return
Answer:
(c) 180 days

Question 111.
Where the registered person has claimed depreciation on the ……. Of the Capital Goods, ITC shall not be allowed.
(a) Cost
(b) Tax component of cost
(c) Both (a) & (b)
(d) None of the above
Answer:
(b) Tax component of cost

Question 112.
ABC Limited purchased a machine for ₹ 10,00,000 plus GST @ 18%. It has been capitalized in the books at ₹ 11,80,000 (i.e. inclusive of GST paid). Accordingly, the depreciation was claimed @ 15% on ₹ 11,80,000 under the Income Tax Act. What is the amount of ITC to be allowed?
(a) ₹ 1,80,000
(b) 15% of ₹ 1,80,000
(c) 85% of ₹ 1,80,000
(d) ITC will not be allowed
Answer:
(d) ITC will not be allowed

Question 113.
A manufacturer takes deduction of depreciation on the GST component of the cost of capital goods as per Income- tax Act, 1961. The manufacturer
(a) Can avail only 25% of the said tax component as ITC
(b) Can avail only 50% of the said tax component as ITC
(c) Can avail only 100% of the said tax component as ITC
(d) Cannot avail ITC on the said tax component
Answer:
(d) Cannot avail ITC on the said tax component

Question 114.
If debit note is issued in respect of an invoice subsequently, in the next financial year, ……. will be relevant in
determining the time limit.
(a) Date of invoice
(b) Date of debit note
(c) Date of debit note, if issued within 6 months
(d) Time limit is one year after the issue of debit note
Answer:
(a) Date of invoice

Question 115.
If the payment is not made by the re -cipient to the supplier within …….. from the date of invoice, then the taxpayer needs to reverse the credit already taken.
(a) 45 Days
(b) 90 Days
(c) 180 Days
(d) 200 Days
Answer:
(c) 180 Days

Question 116.
What is the time limit for reclaiming ITC reversed due to non-payment within 180 days?
(a) 3 months
(b) 1 financial year
(c) 2 financial years
(d) No time limit, as section 16(4) is not applicable in this case
Answer:
(d) No time limit, as section 16(4) is not applicable in this case

Question 117.
Mukesh purchased goods for the business, in respect of which ITC ad-missible is ₹ 36,000. 20% of such goods have been used for personal purposes, 60% sold and 20% goods are still lying in godown. Considering section 17(1) of CGST Act, ITC will be available for
(a) ₹ 36,000
(b) 20% of ₹ 36,000
(c) 60% of ₹ 36,000
(d) 8096 of ₹ 36,000
Answer:
(d) 8096 of ₹ 36,000

Question 118.
The turnover of taxable and exempt-ed goods are ₹ 6,00,000 and ₹ 4,00,000 respectively. The common inputs on which GST paid is ₹ 1,08,000. The common inputs on which GST paid is ₹ 1,08,000. The eligible ITC on common input as per section 17(2) is:
(a) ₹ 1,08,000
(b) 6096 of ₹ 1,08,000
(c) 4096 of ₹ 1,08,000
(d) None of the above
Answer:
(b) 6096 of ₹ 1,08,000

Question 119.
What is the time limit for availing the ITC, as given in section 16(4)
(a) Due date of furnishing of return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains
(b) Furnishing of the relevant Annual Return
(c) Earlier of (a) or (b)
(d) Later of (a) or (b)
(d) None of the above
Answer:
(c) Earlier of (a) or (b)

Question 120.
Determine the amount of ITC, available to ABC Bank as per section 17(4)

(a) ₹ 10,00,000
(b) ₹ 15,50,000
(c) ₹ 17,00,000
(d) None of the above
Answer:
(a) ₹ 10,00,000

Question 121.
ITC on aircraft purchased by an aviation school providing training on flying aircraft is ………
(a) Allowed
(b) Allowed but 8096 only
(c) Allowed but 5096 only
(d) Not allowed
Answer:
(a) Allowed

Question 122.
A company has paid for membership of a health club Centre for employees. The related ITC is
(a) Allowed, if provided by employer to its employees under statutory obligation
(b) Allowed, if it is provided by others working in the same industry
(c) Not allowed, in case it is provided under voluntary move
(d) Not Allowed, in any case
Answer:
(a) Allowed, if provided by employer to its employees under statutory obligation

Question 123.
Raj & Co., applied for voluntary registration under CGST Act, 2017 on 5th July, 2017 and the registration was granted on 15th July, 2017. Raj & Co., was having the stock available against the invoices for a period of 3 months old. Raj & Co., shall be eligible for input tax credit on such stock as held as on :
(a) 30th June, 2017
(b) 5th July, 2017
(c) 15th July, 2017
(d) 14th July, 2017
Answer:
(d) 14th July, 2017

Question 124.
Capital goods were brought in the factory on 1-10-2017 worth 110,00,000 on which IGST of 18% was paid. These capital goods were sold at 17,80,000 on 2-2-2019. The ITC to be reversed is
(a) Nil
(b) ₹ 1,26,000
(c) ₹ 1,40,000
(d) None of the above
Answer:
(c) ₹ 1,40,000

Question 125.
Calculate the amount of ITC avail able from the following Information:

The above ITC includes ITC on input and input services used:
(a) Exclusively for Non-Business Purpose = ₹ 70,000
(b) Exclusively for Exempt Supplies = ₹ 30,000
(a) ₹ 3,00,000
(b) ₹ 4,80,000
(c) ₹ 4,10,000
(d) ₹ 3,80,000
Answer:
(d) ₹ 3,80,000

Question 126.
X Limited purchased goods on 20-2-20 18. A debit note was issued in respect of the same invoice on 7-4-2018. The last date for claiming ITC will be:

I. Due date of furnishing of return under section 39 for the month of September following financial year 2017-20 18
II. Due date of furnishing of return under section 39 for the month of September following financial year 2018-2019
III. Furnishing of the Annual return for financial year 2017-20 18
IV. Furnishing of the Annual return
for financial year 2018-2019
(a) Earlier of I & III
(b) Later of I & III
(c) Earlier of II & IV
(d) Later of II & IV
Answer:
(a) Earlier of I & III

Question 127.
Determine the amount of ITC admissible to XYZ Limited in respect of following:


(a) 36,900
(b) 35,900
(c) 33,500
(a) 30,500
Answer:
(c) 33,500

Question 128.
Mr Kamal becomes liable to registration on 25th October, 2018. Accordingly, he has applied for GST registration
on 7th November, 2018. As per section 18(1)(a), Kamal shall be eligible for ITC on Inputs held in stock as on:
(a) 24th October
(b) 25th October
(c) 26th October
(d) 7th November
Answer:
(a) 24th October

Question 129.

What is the amount of ITC available as per section 18(1)(a)?
(a) ₹ 1,00,000
(b) ₹ 76,000
(c) ₹ 38,000
(D) ₹ 86,000
Answer:
(b) ₹ 76,000

Question 130.
KMB limited is a registered person engaged in supply of goods which are ex-empt from tax. On 22-6-2018, exemption notification was rescinded and the goods become liable for tax. Determine the eligible credit in respect of capital goods purchased on 4-12-2017 for ₹ 7,00,000 plus GST @ 12%. These capital goods have been exclusively used in supplying exempted goods. What is the amount of ITC available on capital goods?
(a) ₹ 84,000
(b) ₹ 71,400
(c) ₹ 12,600
(d) ₹ 7,00,000
Answer:
(b) ₹ 71,400

Question 131.
When a person under regular scheme changes to composition scheme, he shall pay an amount by way of debit in the Electronic Credit Ledger or Electronic cash ledger, equivalent to credit of input tax in respect of inputs held in stock and inputs contained in semi-finished stock and on capital goods on the:
(a) Day preceding the date of exercising such option
(b) Date of exercising such option
(c) Day after the date of exercising such option
(d) None of the above
Answer:
(a) Day preceding the date of exercising such option

Question 132.
Mr. A bought a machinery for ₹ 1,00,000 on which IGST was paid @ 18% (i.e. ₹ 18,000). After use of machine for 3 years, 7 months and 15 days. Mr. A decided to convert from normal to composition scheme. The amount to be reversed in this case is :
(a) ₹ 18,000
(b) ₹ 4,800
(c) ₹ 9,000
(d) ₹ 4,000
Answer:
(b) ₹ 4,800

Question 133.
Mohan is registered under normal scheme in GST. He wants to shift from normal scheme to composition scheme. At the time of exercise of such option, the machine has already been used for 4 years, 8 months and 2 days. The ITC taken at the time of purchase of machine was ₹ 2,10,000. How much ITC needs to be reversed in respect of this machine (capital goods)?
(a) ₹ 2,10,000
(b) ₹ 1,05,000
(c) ₹ 21,000
(d) ₹ 10,500
Answer:
(d) ₹ 10,500

Question 134.
When a person under regular scheme changes to composition scheme, the ITC in respect of inputs held in stock, inputs contained in semi-finished and finished goods held in stock and capital goods (subject to deduction) is reversed. After reversing the ITC so calculated, the balance in the credit of Electronic Credit ledger will ………
(a) Be refunded
(b) Be adjusted for other business vertical
(c) Be lapsed
(d) None of the above
Answer:
(c) Be lapsed

Question 135.
Dev Anand becomes liable to pay tax on 15-7-2019 and has applied for registration on 19-7-2019. He obtained registration on 24-7-2019. As per section 18(1 )(d), Dev is entitled to take credit of input tax paid in respect of inputs held in stock, inputs contained in finished and semi-finished goods held in stock on:
(a) 14-7-2019
(b) 15-7-2019
(c) 16-7-2019
(d) 24-7-2019
Answer:
(a) 14-7-2019

Question 136.
Shashi acquired a capital asset on 1-11-2017, at a cost of ₹ 4,00,000 plus GST @ 18%. He used this machinery
for production of exempt supplies only. On 15-5-2019, his supplies becomes taxable. As per section 18(1)(d) ………. will be available as ITC on capital goods.
(a) ₹ 72,000
(b) ₹ 25,200
(c) ₹ 46,800
(d) ₹ 36,000
Answer:
(c) ₹ 46,800

Question 137.
Radhey & Company registered sup-plier paying GST under regular scheme had made inter-State Taxable Supply of ₹ 8,00,000 and intra-State Taxable Supply of ₹ 6,00,000 chargeable under CGST, SGST, and IGST at the rates of 9%, 9% and 18% respectively. He is having available amount of ITC under CGST of ₹ 30,000 and under SGST of ₹ 20,000. Supplies made are exclusive of taxes. Amount of the total tax payable as CGST, SGST and IGST after availing the amount of ITC by Radhey & Company on such supplies shall be of ₹ ………
(a) 2,30,000
(b) 2,00,000
(c) 2,02,000
(d) 2,26,000
Answer:
(c) 2,02,000

Question 138.
Consider the following:

What would be the balance in ITC to be carried forward after utilisation as per sections 49, 49A, 49B and Rule 88A
(a) ₹ 64,000 (IGST), ₹ 10,000 (CGST) and ₹ 08,000 (SGST)
(b) ₹ 04,000 (IGST), ₹ 40,000 (CGST) and ₹ 38,000 (SGST)
(c) ₹ 34,000 (IGST), ₹ 40,000 (CGST) and ₹ 08,000 (SGST)
(d) ₹ 34,000 (IGST), ₹ 10,000 (CGST) and ₹ 38,000 (SGST)
Answer:
(b) ₹ 04,000 (IGST), ₹ 40,000 (CGST) and ₹ 38,000 (SGST)

Question 139.
Mr. Pankaj of Delhi supplied goods to Mr. Krishna of Delhi for ₹ 1 lakh, on which total GST was charged @ 12%. Mr. Krishna, after purchase of goods, added 20% margin of profit (on cost) and sold the entire goods to Mr. Ravi of Delhi. The total amount of tax payable after claiming input tax on such transaction by Mr. Krishna is :
(a) ₹ 12,000
(b) ₹ 14,400
(c) ₹ 2,400
(d) None of the above
Answer:
(a) ₹ 12,000

Question 140.
Consider the following:

Considering the changes made vide the j Central GST (Amendment) Act, 2018, what would be the balance of IGST, CGST & SGST to be carried forward?
(a) ₹ 4,00,000 (IGST), ₹ Nil (CGST) and ₹ Nil (SGST)
(b) ₹ 2,36,000 (IGST), ₹ 65,000 (CGST) and ₹ Nil (SGST)
(c) ₹ 72,000 (IGST), ₹ 65,000 (CGST) and ₹ 48,000 (SGST)
(d) ₹ Nil (IGST), ₹ Nil (CGST) and ₹ Nil (SGST)
Answer:
(c) ₹ 72,000 (IGST), ₹ 65,000 (CGST) and ₹ 48,000 (SGST)

Question 141.
Consider the following:

Considering the changes made vide the Central GST (Amendment) Act, 2018, what would be the amounts of IGST, CGST & SGST payable through Cash Ledger?
(a) ₹ 6,90,000 (IGST), ₹ 3,10,000 (CGST) and ₹ 4,00,000 (SGST)
(b) ₹ Nil (IGST), ₹ 4,30,000 (CGST) and ₹ 4,00,000 (SGST)
(c) ₹ Nil (IGST), ₹ 3,10,000 (CGST) and ₹ 7,90,000 (SGST)
(d) None of the above
Answer:
(a) ₹ 6,90,000 (IGST), ₹ 3,10,000 (CGST) and ₹ 4,00,000 (SGST)

Question 142.
Section 2(6) of the CGST/SGST jg Act, 2017 defines aggregate turnover H which is being computed on all India basis excluding the taxes charged under CGST Act, SGST Act, UTGST Act and IGST Act. Aggregate turnover shall include all supplies made by a taxable person comprising of:
I. Taxable supply
II. Exempt supply
III. Export of goods
IV. All Inter-State supply of persons having same PAN
V. Inward supply on which tax is levied on reverse charge basis
VI. Value of all inward supply
(a) I, III, IV and V
(b) I, III, IV and VI
(c) I, II, III and IV
(d) All the above (I to VI)
Answer:
(d) All the above (I to VI)

Question 143.
Consider the following information:

Find out the value of aggregate turnover as per Explanation I of section 22 of CGST Act, 2017?
(a) ₹ 1,90,000
(b) ₹ 8,00,000
(c) ₹ 9,90,000
(d) ₹ 12,90,000
Answer:
(a) ₹ 1,90,000

Question 144.
Section 24 of the CGST Act, 2017 lists categories of persons who are re-quired to take registration even if they are not covered under section 22 of the Act. Find out from the following categories of persons who are being required to take registration as per section 24 of the CGST Act, 2017:
I. Casual Taxable Person
II. Non-resident Taxable Person
III. Recipient of service under Reverse Charge
IV. Inter-State supplier
V. Input service distributor
(a) I, III and V
(b) I, II, IV and V
(c) I, III and V
(d) All the persons in I to V
Answer:
(d) All the persons in I to V

Question 145.
State which shall be taken as the effective date of registration as per CGST Act, 2017 where the aggregate turnover of Madhur company engaged in supply of taxable services in the State of Rajasthan exceeded ₹ 20 Lakh during the year on 25th September, 2017, the application for registration under GST was filed on 19th October, 2017 and the registration certificate was granted on 29th October, 2017 by the authority:
(a) 25-9-20 17
(b) 19-10-2017
(c) 24-10-2017
(d) 29-10-2017
Answer:
(a) 25-9-20 17

Question 146.
For CTP & NRTP, registration is required compulsorily at least …….. Prior to commencement of business.
(a) 5 days
(b) 9 days
(c) 1 days
(d) 14 days
Answer:
(a) 5 days

Question 147.
The GST system is based on electronic networking. Under GST, invoices may be issued:
(a) Manually
(b) Electronically
(c) Any of (a) or (b)
(d) Electronic issue of invoice is mandatory
Answer:
(c) Any of (a) or (b)

Question 148.
Debit Note is issued by the supplier of goods when:
(a) Tax charged in the invoice is excessive
(b) When the goods are returned by the recipient
(c) Tax charged is less than the tax payable
(d) When the goods supplied are deficient
Answer:
(c) Tax charged is less than the tax payable

Question 149.
Where at the time of receipt of advance, the rate of tax of supply is not determinable, then tax shall be paid at the rate of ………..
(a) 12%
(b) 18%
(c) 24%
(d) 28%
Answer:
(b) 18%

Returns – CA Inter Taxation Study Material is designed strictly as per the latest syllabus and exam pattern.

Returns – CA Inter Taxation Study Material

Question 1.
What kinds of invoice details of outward supplies are required to be furnished in GSTR-1 for outward supplies? [Nov. 2018 Old Course, 5 Marks]
Answer:
The invoice details of outward supplies required to be furnished in GSTR-1 are the following:

• The name of Buyer
• GSTN of buyer
• Invoice no.
• date tg
• value
• taxable value
• rate of tax
• amount of tax
• HSN code in respect of supply of goods
• accounting code in respect of supply of services and place of supply.

The following invoice details of outward supplies are required to be fur-nished invoice wise in GSTR-1:

1. intra-State supplies made to the registered persons;
2. inter-State supplies made to the registered persons;
3. inter-State supplies made to unregistered persons with invoice value exceeding ₹ 2,50,000.

Note: The question may be answered either on the basis of invoice details of outward supplies required to be furnished in GSTR-1 or on the basis of invoice details of outward supplies required to be furnished invoice-wise in GSTR-1.

Question 2.
A taxpayer can file GSTR-1 under CGST Act, 2017, only after the end of the current tax period. State exceptions to this. [Nov. 2018, 2 Marks]
Answer:
A taxpayer can file GSTR-1 under CGST Act, 2017, only after the end of the current tax period. However, following are the exceptions to this rule:

1. Casual taxpayers, after the closure of their business
2. Cancellation of GSTIN of a normal taxpayer.

Question 3.
Mr. Anand Kumar, a regular taxpayer, filed his return of outward supply (GSTR-1) for the month of August, 2019 before the due date. Later on, in February, 2020 he discovered error in the GSTR-1 return of August, 2019 already filed and wants to revise it. You are required to advise him as to the future course of action to be taken by him according to statutory provisions.
Answer:
Statutory Provisions:

• The mechanism of filing revised return for any correction of errors/ omission is not available under GST. The rectification of errors/omis-sion is allowed in the subsequent returns.
• However, as per section 37(3) of the CGST Act, 2017, no rectification of details furnished in GSTR-1 shall be allowed after:

(i) Filing of monthly return/GSTR-3 (Now: GSTR 3B) for the month of September following the end of the financial year to which such details pertain or
(ii) Filing of the relevant annual return, whichever is earlier.

In the given case:

• Mr. Anand Kumar who discovered an error in GSTR-1 for August, 2019, cannot revise it.
• However, he should rectify said error in the GSTR-1 filed for February, 2020 and should pay the tax and interest, if any, in case there is short payment, in the return to be furnished for February, 2020.
• The error can be rectified by furnishing appropriate particulars in the “Amendment Tables” contained in GSTR-1.

Question 4.
Please answer the following individual independent cases with reference to Section 37 of the CGST Act, 2017 and Rule 59 of CGST Rules, 2017 :

(1) Mr. Kolly is registered supplier in the State of Gujarat. He is filling GSTR 1 every month. During the month of February, 2018 he was out of India and so did not do any transaction during the month. He believes that as there is no transaction there is no need to file GSTR 1 for the month of February, 2018. Is he correct?

(2) Mr. Kaji is a registered dealer in Kerala. He was registered as a nor-mal tax payer for FY 2017-18. But on 15-01-2018, he converted from normal taxpayer to composition taxpayer. Is he liable to file GSTR-1 for the month of February, 2018?

(3) Mrs. Zeel a registered dealer in Rajasthan did not file GSTR-1 for the month of June, 2018 but she wants to file GSTR-1 for the month of July, 2018. Is it possible? [May 2019 Old Course, 1+2+1 Marks]
Answer:

	Statutory Provision	In the given case
(1)	GSTR-1 needs to be filed even if there is no business activity in the tax period. This type of return is called as Nil Return.	Therefore, even though Mr. Kolly was out of India and thus had not done any transaction during February 2018, he is STILL REQUIRED TO FILE GSTR-1 for the said month. Thus, Mr. Kolly is not correct.
(2)	A person paying tax under composition scheme is not liable to furnish the details of outward supplies in GSTR-1. Further, in cases where a taxpayer has been converted from a normal taxpayer to composition taxpayer, GSTR-1 is to be filed only for the period during which the taxpayer was registered as normal taxpayer.	Therefore, Mr. Kaji is NOT LIABLE TO FILE GSTR-1 for February, 2018 since he had already shifted to composition scheme on 15.01.2018.
(3)	There is no specific bar under the law on filing of GSTR-1 for current month when GSTR-1 for the previous month has not been filed.	Therefore, Mrs. Zeel CAN FILE GSTR-1 for July, 2018 even though she has not filed GSTR-1 for the preceding month, i.e., June, 2018.

Note: The given question specifies that Mr. Kaji has converted from normal taxpayer to composition taxpayer on 15.01.2018. However, as per rule 4(1) of the CGST Rules, 2017, the option to pay tax under composition scheme shall be effective from the beginning of the financial year, where the intimation is filed by any registered person who opts to pay tax under section 10.

Further, as per rule 3(3A) of the CGST Rules, 2017, a person who has been granted certificate of registration under sub-rule (1) of rule 10 may opt to pay tax under composition scheme with effect from the first day of the month immediately succeeding the month in which he files an intimation on the common portal on or before the 31st day of March, 2018.

Question 5.
State the Form Number and the due date for its filing under CGST Act, 2017 of the return by:
(i) a composition scheme taxable person
(ii) a registered person deducting tax at source
(iii) an input service distributor.
Answer:

Question 6.
Mr. Alok, a registered supplier of taxable goods, filed GSTR 3B for the month of January 2019 on 15th April, 2019. The prescribed due date to file the said GSTR 3B was 20th February, 2019. The amount of net GST payable on supplies made by him for the said month worked out to ₹ 36,500 which was paid on the same date of filing the return.

Briefly explain the related provisions and compute the amount of interest payable under the CGST Act, 2017 by Mr. Alok. [Nov. 2019 Old Course, 4 Marks]

Answer:

Interest is payable in case of delayed payment of tax @ 18% per an-num from the date following the due date of payment to the actual date of payment of tax.

Thus, the amount of interest payable by Mr. Alok is as under:- Period of delay = From 21st February, 2019 to 15th April, 2019 = 54 days Amount of interest = ₹ 36,000 × 18% × 54/365 = ₹ 972

Question 7.
Explain First Return?
Answer:

• When a person becomes liable to registration after his turnover cross-ing the threshold limit of registration (10 lakhs/20 lakhs/40 lakhs as the case may be), he may apply for registration within 30 days of so becoming liable.
• Thus, there might be a time lag between a person becoming liable to registration and grant of registration certificate.
• During the intervening period, such person might have made the . outward supplies, i.e. after becoming liable to registration but before grant of the certificate of registration.
• Now, in order to enable such registered person to declare the taxable supplies made by him for the period between the date on which he became liable to registration till the date on which registration has been granted so that ITC can be availed by the recipient on such supplies:
• Firstly, the registered person may issue Revised Tax Invoices against the invoices already issued during said period within 1 month from the date of issuance of certificate of registration.
• Further, section 40 provides that registered person shall declare his outward supplies made during said period in the first return furnished by him after grant of registration. The format for this return is the same as that for regular return.

Question 8.
Explain the provision relating to filing of Annual Return under section 44 of CGST Act, 2017 and Rules thereunder.
[May 2018 Old Course, 5 Marks]
Answer:

(1)	Who is required to file	Every registered person, other than an Input Service Distributor, a person deducting/collecting tax at source, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in prescribed form on or before 31 st December following the end of such financial year.
(2)	Reconciliation Statement	Every registered person who is required to get his accounts audited under section 35(5) of the CGST Act, 2017 shall furnish the annual return electronically along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and other prescribed particulars.

Question 9.
Who is required to furnish Final Return under CGST Act, 2017 and what is the time limit for the same?
Discuss [May 2018, 5 Marks]
Answer:
Every registered person who is required to furnish a return u/s 39(1) of the CGST Act, 2017 and whose registration has been surrendered or cancelled shall file a Final Return electronically in the prescribed form through the common portal.

Final Return has to be filed within 3 months of the:

1. date of cancellation or
2. date of order of cancellation whichever is later.

Question 10.
Discuss about the nature of default and the late fee levied for delay in filing :
(i) Final Return
(ii) Annual Return [Nov. 2019 Old Course Modified, 5 Marks]
Answer:
(1) Late fee for delay in filing return:

Nature of Default	Quantum of Late Fee
Any registered person who fails to furnish following by the due date: (A) Statement of Outward Supplies [Section 37] (B) Statement of Inward Supplies [Section 38] (C) Returns [Section 39] (D) Final Return [Section 45], shall pay a late fee.	(a)₹ 100 for every day during which such fail­ure continues OR (b) ₹ 5,000 Whichever is Lower

(2) Late Fee for delay in filing ANNUAL RETURN

Nature of Default	Quantum of Late Fees
Any registered person who fails to furnish the Annual Return by the due date shall be liable to pay a late fee.	(c) ₹ 100 for every day during which such failure continues OR
	(d) 0.25°6 of the turnover of registered person in the state/UT. Whichever is Lower

Question 11.
Explain the consequences, if the taxable person under GST law files the GST return under section 39(1) of the CGST Act, 2017, but does not make payment of self-assessment tax. [Nov. 2019, 2 Marks]
Answer:

1. If the taxable person under GST law files the GST return under section 39(1) of the CGST Act, 2017, but does not pay the self-assessment tax, the return is not considered as a valid return.
2. Since the input tax credit can be availed only on the basis of a valid return, the taxable person, in the given case, will not be able to claim any input tax credit.
3. He shall pay interest, penalty, fees or any other amount payable under the CGST Act, 2017 for filing return without payment of tax.

Question 12.
Vishnu, a registered person under GST has filed GSTR-1, GSTR-2 and GSTR-3 for the concerned months in related with 2017-18. The turnover was ₹ 21,60,000. Calculate the amount of late fee, if for FY 2017-18, the annual return has been filed on:
CASE 1. 25th July 2018
CASE 2. 18th Nov. 2018
CASE 3. 10th Jan. 2019
CASE 4. 21st March, 2019
Answer:
Cases 1 & 2: Calculation of late fee under section 47(2)
In respect of financial year 2017-18, the due date for filing Annual Return is 31st December, 2018. Since, the return has been filed before 31st De-cember, no late fee is payable under section 47(2).

Cases 3 & 4: Calculation of late fee under section 47(2)

Question 13.
Discuss the provisions of section 39(9) of the COST Act, 2017, relating to rectification of errors/omissions in GST returns already filed and also gj state its exceptions. State the time limit for making such rectification. [Nov. 2019, 5 Marks]
Answer:
Provisions relating to rectification of errors/omissions in GST returns:

1. Omission or incorrect particulars discovered in the returns filed under section 39 can be rectified in the return to be filed for the month/ quarter during which such omission or incorrect particulars are no-ticed.
2. Any tax payable as a result of such error or omission will be required to be paid along with interest.

Exception:

Section 39(9) of the CGST Act does not permit rectification of error/omis-sion discovered on account of scrutiny, audit, inspection or enforcement activities by tax authorities.

Time Limit:

The time limit for making such rectification is earlier of the following dates:

1. Due date for filing return for September month of next financial year or
2. Actual date of filing annual return.

Profits and Gains from Business or Profession – CA Inter Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Profits and Gains from Business or Profession – CA Inter Taxation Study Material

Introduction

Question 1.
State with reason, whether the following statements are true, or false with regard to the provisions of the Income-tax Act, 1961 for the Assessment year 2021-22: [Nov. 2008, 2 Marks]
(a) Rural branches of the Cooperative banks are not allowed to claim provision for bad and doubtful debts.
(b) Depreciation is allowed only when it is claimed.
Answer:
(a) The Statement is false.
Section : 36(1) (viiia)

Explanation :
The Cooperative Bank can claim deduction for bad and doubtful debts in respect of advances made by rural branches of such bank subject to max. 10% of aggregate average advances made and computed in prescribed manner.

(b) The Statement is false
Section : 32
Explanation :

• Of depreciation shall be made compulsorily
• Whether or not the assessee
• Has claimed the deduction in computing his total income
• But it is compulsorily deducted to compute next year opening WDV

Question 2.
Answer the following with regard to the provisions of the Income-tax Act, 1961:

Can an Assessing Officer make a request for withdrawal of approval which was granted to an institution by National committee for carrying out eligible project or scheme, eligible u/s 35AC of the Income-tax Act, 1961? [Nov. 2008, 4 Marks]
Answer:
Section : 35AC-Expenditure on eligible projects or scheme

Explanation :
If a few conditions are satisfied then approval can be withdrawn
Contribution to institution is qualified for deduction

• Even if after the date of making contribution, the approval granted to the institution is withdrawn.
• The benefit of deduction under section 35AC of the IT Act is available only up to previous year ending 31-3-2017 (assessment year 2017-18) in respect of payments made to association or institution already approved by the national committee for carrying out any eligible project or scheme.
• In view of the above, it may be noted that requests received after 31-12-2016 for the grant/modification/ extension of approval beyond 31-3-2017 under section 35AC of the Income-tax Act shall not be considered/ entertained by the national committee.

Question 3.
Answer the following questions with regard to the Provisions of the Income-tax Act, 1961:

State the concessions granted to transport operators from 1st October 2010 onwards in the context of cash payments under section 40A(3) and deduction of tax at source under section 194C. [May 2010, 4 Marks]
Answer:
Section : 40A(3)

Explanation :

• Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account exceeds ₹ 20,000 (₹ 10,000 on or after 01.04.2017) no deduction shall be allowed in respect of such expenditure.
• With effect from 01.10.2009, in case of payment made for plying, hiring or leasing goods carriage, section 40A(3) and 40A(3A) shall be applicable if such amount paid exceeds ₹ 35,000 instead of 20,000 (10,000 on or after 01.04.2017).

Section : 194C

Explanation :
No deduction is required to be made.

• From any sum credited or paid or likely to be credited or paid during the previous year.
• To the account of a contractor.
• During the course of the business of plying, hiring or leasing goods carriages.
• If the contractor furnishes his permanent account number (PAN) to the person paying or crediting such sum.

Question 4.
State any four of the specified businesses eligible for deduction under section 35AD of the Income-tax Act, 1961. [Nov. 2011, 4 Marks]
Answer:
Four of the specified businesses eligible for deduction under section 35AD of the Income-tax Act, 1961.

S.No.	Particulars
1	Setting up and operating a warehousing facility for storage of agricultural produce.
2	Laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network.
3	Setting up and operating a cold chain facility.
4	The business of building and operating anywhere in India, a hotel of two- star or above category, as classified by the Central Government.

Question 5.
Name any four specified businesses covered under section 35AD and state the fiscal incentives available to such businesses. [Nov. 2014, 4 Marks]
Answer:
Four of the specified businesses eligible for deduction under section 35AD of the Income-tax Act, 1961.

S.No.	Particulars
1	Setting up and operating a warehousing facility for storage of agricultural produce.
2	Laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network.
3	Setting up and operating a cold chain facility.
4 .	The business of building and operating anywhere in India, a hotel of two- star or above category, as classified by the Central Government.

Fiscal Incentives Available To Such Businesses.

S.No.	Particulars
1	Capital expenditure incurred in the previous year, wholly and exclusively for specified business (including capital expenditure incurred before commencement of operations and capitalized in the books of account on the date of commencement of operations) will be allowed as deduction from the business income, but expenditure incurred on acquisition of any land, goodwill or financial instrument would not be eligible for deduction.
2	100% of capital expenditure is allowed as deduction.
3	As per Section 73 A, the loss from specified business can be carried forward indefinitely to set-off against profits of the same or any other specified business. It is not essential that the return of income should be filed within the time specified under section 139(1) for carrying forward such losses.

Question 6.
Sai Ltd. has a block of assets carrying 15% rate of depreciation, whose written down value on 01.04.2020 was ₹ 40 lacs. It purchased another asset of the same block on 01.11.2020 for ₹ 14.40 lacs and put to use on the same day. Sai Ltd. was amalgamated with Shirdi Ltd. with effect from 01.01.2021. You are required to compute the depreciation allowable to Sai Ltd. & Shirdi Ltd. for the previous year ended on 31.03.2021 assuming the assets transferred to Shirdi Ltd. at ₹ 60 lacs. [Nov. 2010, 8 Marks]
Answer:
Computation of Depreciation to be apportioned between amalgamating company Sai Limited and Amalgamated Company Shirdi Limited for previous year ending on 31.03.2021 (Assessment Year 2021-22)

Calculation of Total Depreciation for Previous Year
Particulars	Amount (₹)
Depreciation on ₹ 40,00,000 for full year @15% p.a.	6,00,000
Depreciation on ₹ 14,40,000 for half year @15% p.a.	1,08,000
Total amount of Depreciation	7,08,000

Apportionment of Total Depreciation between Both Companies

Particulars	Amount (₹)	Amount (₹)
Amalgamation Company Sai Limited (01.04.2020 to 31.12.2020) = 275 days
7,08,000 × 275/365		5,33,425
Amalgamated Company Shirdi Limited (01.01.2021 to 31.03.2021) 90 days
7,08,000 × 90/365		1,74,575
Total Depreciation		7,08,000

Question 7.
Mr. Praveen Kumar has furnished the following particulars relating to payments made towards scientific research for the year ended 31-3-2021

s.No.	Particulars	Amount (₹ in Lakhs)
1	Payments made to K Research Ltd.	20
2	Payment made to LMN College	15
3	Payment made to OPQ College	10
4	Payment made to National Laboratory	8
5	Machinery purchased for in-house scientific research	25
6	Salaries to research staff engaged in in-house scientific research	12

Note: K Research Ltd. and LMN College are approved institutions and these payments’ are to be used for the purposes of scientific research. Compute the amount of deduction available under section 35 of the Income- tax Act, 1961 while arriving at the business income of the assessee. [May 2011, 4 Marks]
Answer:
Computation of deductions from business income under section 35 of the Income-tax Act 1961

Question 8.
Harish Jayaraj Pvt. Ltd. is converted into Harish Jayaraj LLP on 1-1-2021.
The following particulars are available to you:

S. No.	Particulars	Amount (₹)
1	WDV of land as on 1-4-2020	5,00,000
2	WDV of machinery as on 1-4-2020	3,3,30,000
3	Patents acquired on 1-6-2020	3,00,000
4	Building acquired on 12-3-2019 for which deduction was allowed under Section 35AD.	7,00,000
5	Above building was revalued as on the date of conversion into LLP as	12,00,000
6	Unabsorbed business loss as on 1-4-2020 AY. 2017-18	9,00,000

Though the conversion into LLP took place on 1-1-2021, there was disruption of business and the assets were put into use by the LLP only from 1st March, 2021 onwards. The company earned profits of ₹ 8 lacs, prior to computation of depreciation. Assuming that the necessary conditions laid down in Section 47(xiiib) of the Income-tax Act, 1961 have been complied with. Explain the tax treatment of the above in the hands of the LLP. [May 2011, 8 Marks]
Answer:
Computation of Apportionable Depreciation

Asset	Particulars about Computation	Amount of Apportionable Depreciation (₹)
Land	Land is not a depreciable asset	NIL
Machinery	330000 × 15/100	49,500
Patents	330000 × 25/100	75,000
Building	Eligible for 100% deduction in the year of purchase	NIL
	Total Apportionable Depreciation	1,24,500

Question 9.
Rao and Jain, a partnership firm consisting of two partners, reports a net profit of 7,00,000 before deduction of the following items:

1. Salary of ₹ 20,000 each per month payable to two working partners of the firm (as authorized by the deed of partnership),
2. Depreciation on plant and machinery under section 32 (computed) ₹ 1,50,000,
3. Interest on capital at 15% per annum (as per the deed of partnership), the amount of capital eligible for interest ₹ 5,00,000.

Compute:
(i) Book-profit of the firm under Section 40(b) of the Income-tax Act, 1961.
(ii) Allowable working partner salary for the assessment year 2021-22 as per Section 40(b) of the Income-tax Act, 1961. [Nov. 2011, 5 Marks]
Answer:
Computation of Profit and Gains from Business and Profession for the Assessment Year 2021-22

Question 10.
Ramji Ltd., engaged in manufacture of medicines (pharmaceuticals) furnishes the following information for the year ended 31.03.2021:

S. No	Particulars
i	Municipal tax relating to office building ₹ 51,000 not paid till 30.09.2021.
2	Patent acquired for ₹ 20,00,000 on 01.09.2020 and used from the same month
3	Capital expenditure on scientific research ₹ 10,00,000 which includes cost of land ₹ 2,00,000
4	Amount due from customer X outstanding for more than 3 years written off as bad debt in the books ₹ 5,00,000.
5	Income tax paid ₹ 90,000 by the company in respect of non-monetary perquisites provided to its employees.
6	Provident fund contribution of employees ₹ 5,50,000 remitted in July 2021.
7	Expenditure towards advertisement in souvenir of a political party ₹ 1,50,000.
8	Refund of sales tax ₹ 75,000 received during the year, which was claimed as expenditure in an earlier year.

State with reasons the taxability or deductibility of the items given above under the Income-tax Act, 1961.
Note: Computation of total income is not required. [Nov. 2011, 8 Marks]
Answer:

Question 11.
MNP Ltd. commenced operations of the business of a new four-star hotel in Chennai on 1-4-2020. The company incurred capital expenditure of ₹ 40 lakh during the period January, 2020 to March, 2020 exclusively for the above business, and capitalized the same in its books of account as on 1st April, 2020.

Further, during the Previous Year 2020-21, it incurred capital expenditure of ₹ 2.5 crore (out of which 1 crore was for acquisition of land) exclusively for the above business.

Compute the income under the heading “profits and gains of business or profession” for the assessment year 2021-22, assuming that MNP Ltd. has fulfilled all the conditions specified for claim of deduction under Section 35AD and has not claimed any deduction under Chapter VI-A under the heading “C:-Deductions in respect of certain incomes”.

The profits from the business of running this hotel (before claiming deduction under Section 35AD) for the Assessment Year 2021-22 is ₹ 80 lakhs.

Assume that the company also has another existing business of running a four-star hotel in Kanpur, which commenced operations 6 years back, the profits from which was ₹ 130 lakhs for assessment year 2021-22. [May 2012, 8 Marks]
Answer:
Computation of Income from Business or profession for the Assessment Year 2021-22

Particulars	Amount (₹ in Lakhs)	Amount (₹ in Lakhs)
Income from Four Star Hotel in Chennai		80
Less: Eligible deductions under section 35AD
(a) Prior Period expenditure is	40
(b) Capital Expenditure (₹ 250 Lakhs – 100 Lakhs)	150	190
Total Loss from Four Star Hotel in Chennai		(110)
Income from four star hotel in Kanpur (It is specified business)		130
Income from Business or profession		20

Note:

1. As Per Section 73A, Loss can be set of only against the income from any Specified Business. Chennai business loss is eligible.
2. Expenditure relating to acquisition of Land is not allowable as deduction u/s 35AD.

Question 12.
Following is the profit and loss account of Mr. Q for the year ended 31-03-2021

Following additional informations are furnished:
(1) Repairs on building includes ₹ 1,00,000 being cost of laying a toilet roof.
(2) Interest payments include ₹ 50,000 paid to a Resident on which TDS has not been deducted and penalty for contravention of Central Sales Tax Act of ₹ 24,000.
Compute the income chargeable under the head “Profits and gains of Business or Profession” of Mr. Q for the year ended 31-03-2021 ignoring depreciation. [Nov. 2012, 8 Marks]
Answer:
Computation of Income from Business or profession for the Assessment Year 2021-22

Particulars	Amount (₹)	Amount (₹)
Net Profit as per Profit and Loss Account		93,950
Add.
1. Current Repair of Capital nature of the Building	1,00,000
2. Interest paid to Resident without deduction of tax at source (Note f)	15,000
3. Penalty in contravention of Central Sales Tax Act	24,000	1,39,000
Less:
1. Amount paid to IIT for Scientific Programme	50,000
2. Income tax refund – not an Income	8,100
3. Interest on Company Deposit – Other sources income	6,400	(64,500)
Profits and Gains of Business or Profession		1,68,450

Notes:

1. Section 36(1)(xiii), Banking cash transaction tax is allowed expense.
2. Section 40(a)(ia) Interest paid to Resident is disallowed to the extent of 30%. It is allowed in year of TDS remittance.
3. On Toilet roof depreciation at 10% can be claimed. But in question it is mentioned that depreciation is to be ignored.

Question 13.
Mr. Abhimanyu is engaged in the business of generation and distribution of electric power. He always opts to claim depreciation on written down value for income-tax purposes. From the following details, compute the depreciation allowable as per the provisions of the Income- tax Act, 1961 for the assessment year 2021-22: [Nov. 2013, 4 Marks]

S. No.	Particulars	Amount (₹ in Lacs)
1	Opening WDV of block (15% rate)	42
2	New machinery purchased on 12-10-2020	10
3	Machinery imported from Colombo on 12-4-2020. This machine had been used only in Colombo earlier and the assessee is the first user in India.	9
4	New computer installed in generation wing of the unit on 15-7-2020	2

Answer:
Computation of Depreciation allowable under section 32

	Block 1 (15%)	Block 2 (40%)
Particulars	Amount (₹)	Amount (₹)
Opening written down value on 01.04.2020	42,00,000	0
Add: Additions made during the year
Second hand Machinery imported from Colombo (02.04.2020)	9,00,000
New Machinery (12.10.2020)	10,00,000
New Computer Installation (15.07.2020)		2,00,000
Value of block before depreciation (A)	61,00,000	2,00,000
Less: Depreciation for the year
Normal Depreciation for the whole year
Block 1: [(42,00,000 + 9,00,000) × 15%] = 7,65,000	(7,65,000)
Block 2: [(2,00,000) × 40%] = 80,000		(80,000)
Depreciation on new machinery put use for less than 180 days on Plant 1: [(10,00,000 × 15%X50%)] = 75,000″	(75,000)
Additional Depreciation on New Machinery (Note 1) [(10,00,000 × 20% × 50%)] = 1,00,000	(1,00,000)
Total Depreciation u/s 32(B)	(9,40,000)	(80,000)
Closing written down value on 31.03.2021	51,60,000	1,20,000

Notes:

1. Balance 50% of additional depreciation can be carried forward to next assessment year 2022-23.
2. Additional Depreciation is allowed only for Plant and Machinery. It is not applicable for computer and second hand machinery.

Question 14.
JK Ltd., a manufacturing company purchased the following New Plant and Machinery:

Date of Acquisition and Installation	Actual Cost (in ₹ Crores)
25.05.2020	10
31.10.2020	22

From the above information compute the amount of depreciation available u/s 32, additional depreciation, if any and deduction u/s 32AC for the Assessment Year 2021-22. [Modified May 2014, 8 Marks]
Answer:
Computation of Depreciation allowable under section 32

Particulars	Amount (₹ in Crore)	Amount (₹ in Crore)
New Plant and Machinery acquired		32.00
Depreciation for previous year 2020-21 @15% of 10 crore	1.50
Depreciation for previous year 2020-21 @7.5% of 22 crore	1.65
Additional Depreciation @20% of 10 Crore	2.00
Additional Depreciation @10% of 22 Crore	2.20	7.35
Closing written down value on 31.03.2021		24.65

Question 15.
Mr. Gopi carrying on business as proprietor converted the same into a limited company by name Gopi Pipes (P) Ltd. from 01-07-2020. The details of the assets are given below:

Block-IWDV of plant & machinery (rate of depreciation @ 15%) ₹ 12,00,000 Block- II WDV of building (rate of depreciation @ 10%) ₹ 25,00,000

The company Gopi Pipes (P) Ltd. acquired plant and machinery in December 2020 for ₹ 10,00,000. It has been doing the business from 01.07.2020.

Compute the quantum of depreciation to be claimed by Mr. Gopi and Successor Gopi Pipes (Pvt) Limited for the assessment year 2021-22. Note: Ignore additional depreciation. [Nov. 2014, 4 Marks]
Answer:
Computation of days for apportionment of Depreciation

For	days	Total days
Proprietor (01.04.2020 to 30.06.2020)	30 + 31 + 30 = 91	91
Company (01.07.2020 to 31.03.2021)	365 – 91 = 274	274

Depreciation for the year on Assets Transferred

For	Depreciation Calculation	Dep. Amt.
Plant and Machinery on opening WDV	12,00,000 × 15%	1,80,000
Building on Opening WDV	25,00,000 × 10%	2,50,000

Apportionment of Depreciation and Allowable Depreciation

Question 16.
State with reasons, the allowability of the following expenses incurred by MN Limited, a wholesale dealer of commodities under the Income-tax Act, 1961 while computing Profits & Gains from business or profession for the Assessment Year 2020-21 . [Nov. 2015, 8 Marks]

S. No.	Particulars
1	Construction of school building in compliance with CSA activities amounting to ₹ 5,60,000
2	Purchase of building for setting up a warehousing facility for storage of food grains amounting to ₹ 4,50,000
3	Interest on loan paid to Mr. X (a resident) ₹ 50,000 on which tax has not been deducted
4	Commodity transaction tax paid ₹ 20,000 on sale of bullion

Answer:

Question 17.
Venus Ltd., engaged in manufacture of pesticides, furnishes the following particulars relating- to its manufacturing unit at Chennai (for the year ending 31-3-2021):

S.No.	Particulars	Amount (₹ in Lacs)
1	Opening WDV of Plant and Machinery	20
2	New Machinery purchased on 01.09.2020	10
3	New Car Purchased on 01.12.2020	8
4	Computer Purchased on 03.01.2021	40

Additional information:

• All assets were put to use immediately.
• Computer has been installed in the office.
• During the year ended 31-3-2020, a new machinery had been purchased on 31-10-2019 for ₹ 10 Lacs. Additional depreciation, besides normal depreciation, had been claimed thereon.
• Depreciation rate for machinery may be taken as 15%.

Compute the depreciation available to the assessee as per the provisions of the Income-tax Act, 1961 and the WDV of different blocks of assets as on 31.03.2021._ [May 2016, 8 Marks]
Answer:
Computation of Depreciation allowable under section 32

Question 18.
Mr. Rangamannar resides in Delhi. As per new rule in the city, private cars can be plied in the city only on alternate days. He has purchased a car on 21-09-2019, for the purpose of his business as per following details:

Cost of car (excluding GST) ₹ 12,00,000
Add: Delhi GST at 14% ₹ 1,68,000
Add: Central GST at 14% ₹ 1,68,000
Total price of car ₹ 15,36,000

He estimates the usage of the car for personal purposes will be 25%. He is advised that since the car has run only on alternate days, half the depreciation, which is otherwise allowable, will be actually allowed. He has started using the car immediately after purchase.

Determine the depreciation allowable on car for the Assessment Year 2021-22, if this is the only asset in the block. Rate of depreciation may be taken at 15%.

If this car were to be used in the subsequent Assessment Year 2022-23 on the same terms and conditions above, what will be the depreciation allowable? Assume that there is no change in the legal position under the Income-tax Act, 1961. [Nov. 2018, 4 Marks]
Answer:
Computation of Depreciation allowable

Particulars	Amount (₹)
Depreciation for previous year 2020-21 = 12,00,000 × 1596 × 75% = 1,35,000	1,35,000
Written Down Value on 01.04.2021 = 12,00,000 – 135000= 10,65,000
Depreciation for previous year 2021-22 = 10,65,000 × 15% × 75% = 1,19,813	1,19,813

Notes:

1. In the previous year 2020-21 the car was put into use for more than 180 days in the previous year 2020-21 hence full year depreciation @15% is allowed on the actual cost of ₹ 12,00,000 exclusive of GST of 336000. It is presumed that input tax credit is available in respect of GST.
2. Depreciation is allowed for 75% for business use only.

Question 19.
Mr. prakash is in the business of operating goods vehicles. As on 01.04.2020, he had the following vehicles:

During previous year 2020-21 he purchased the following vehicles.

Compute his income under section 44AE of the income-tax Act 1961 for Assessment Year 2021-22.
Answer:
Computation of Presumptive income of Mr. Prakash under section 44AE

Provision for Filing of Return of Income and Self-Assessment – CA Inter Taxation Study Material is designed strictly as per the latest syllabus and exam pattern.

Provision for Filing of Return of Income and Self-Assessment – CA Inter Taxation Study Material

Question 1.
Answer the following with regard to the provisions of the Income-tax Act, 1961 :

Explain with brief reason whether the return of income can be revised u/s. 139(5) of the Income-tax Act, 1961 in following cases:

1. Defective or incomplete return filed under Section 139(9).
2. Belated return filed under Section 139(4).
3. Return already revised once u/s 139(5).
4. Return of loss filed under Section 139(3). [Nov. 2008, 4 Marks]

Answer:

Section	Particulars
139(9)	When assessing officer considers that return of income furnished by the assessee is defective, he may intimate such defects to the assessee and give him an opportunity to rectify the defect within 15 days of such intimation. If assessee applies for extension of time, this time limit can be extended by assessing officer. In case defect is not rectified within such time, the return will be treated as invalid. However, if defect is rectified before assessment is made, assessing officer can done delay and treat the return valid.
139(4)	Can be filed before the end of relevant assessment year or completion of assessment, whichever is earlier. Belated Return can be revised.
139(5)	In case assessee has already filed a revised return and finds some discrepancy thereafter, he may file once again revised return at any time during relevant assessment or before date of assessment, whichever is earlier.
139(3)	In case assessee has loss under heads ‘Profits and Gains of Business or Profession’ or ‘Capital Gain’, he can file return of loss within time limit mentioned in this section and such return of loss will be treated as normal return under section 139(1). Return of loss can be revised.

Question 2.
Answer the following questions with regard to the Provisions of the Income-tax Act, 1961 :
What are the particulars required to be furnished with the return income, as per Section 139(6)? [May 2010, 4 Marks]
Answer:

Section	Particulars
139(6)	Particulars of following items are required to be furnished with the return of income as per section 139(6): – 1. Incomes exempt from tax. 2.Assets of prescribed nature with their value. 3. Details of bank account and credit card. 4. Certain expenditure in excess of prescribed limit. Other details, concerned with assessee, required.

Question 3.
Answer the following:
Specify the persons who are authorized to sign and verify under section 140, the return of income filed under Section 139 of the Income-tax Act, 1961 in the case of :
1. Political party
2. Local authority
3. Association of persons
4. Limited Liability Partnership (LLP). [May 2011, 4 Marks]
Answer:

Section

Particulars

139 and 140

The following persons are authorized to sign verify and return of income under sections 140 and 139:- 1. Political Party – The chief executive officer of party, whatever his designation is. 2. Local Authority – The Principal officer of Local Body. 3. Association of Persons – Principal/Authorized person or any member of AOP. 4. Limited Liability Partnership Firm – Authorized/Designated Partner. In its absence any partner.

Question 4.
Enumerate the circumstances in which an individual assessee is empowered to sign & verify his return of income u/s 139 by himself or otherwise by an authorized signatory. [Nov. 2012, 4 Marks]
Answer:

Section

Particulars

139

In following circumstances an individual assessee is empowered to sign and verify his return of income under section 139 by himself or  by his authorized person: 1. When assessee is present in India – Himself. 2. When assessee is outside India – By a person duly authorized by him through Power of Attorney. A copy of such Power of Attorney will be attached with return. 3. When assessee is in capable – A person legally competent to sign on his behalf. 4. In unspecified circumstances – As per position of circumstances.

Question 5.
When the Karta of a Hindu undivided family is absent from India the return of income can be signed by any male member of the family? Give reasoning for the statement to be true or false. [May 2014, 2 Marks]
Answer:
When karta of Hindu Undivided family is absent from India, return of income can be signed by any of its members (not necessarily male mem-bers). Hence the statement is false.

Question 6.
“Filing of Return of Income on or before due date is necessary for carry forward of losses.” Discuss the correctness of this statement.” [Nov. 2014, 4 Marks]
Answer:
Filing of return of income or on before due date is necessary for carry forward of following losses:-

1. Ordinary business loss u/s 72(1).
2. Speculation business loss u/s 73(2).
3. Loss under head Capital Gains u/s 74(1).
4. Loss from activity of owning and maintaining Race Horses u/s 74A(3).
5. Specified business loss u/s 73A(2).

However, following losses can be carried forward even when return of loss has not been filed on before due date for filing of return:

1. Loss under head ‘Income from House Property’ u/s 7IB.
2. Unabsorbed Depreciation u/s 32(2)

Accordingly statement in question is partly correct.

Question 7.
Is a Political party required to file return of Income? State the provisions applicable under the Income-tax Act. [Nov. 2014, 4 Marks]
Answer:
The Chief Executive Officer of Political Party is responsible for filing of return of income of party on or before due date under section 139(1), without consideration of exemptions under section 13A for exemption accounts to be audited by practicing Chartered Accountant. The return of political party must be filed in prescribed form and verified by the chief executive officer of the Political Party. Hence a Political Party is required to file return of income.

Question 8.
Explain the term “return of loss” under the Income-tax Act, 1961. Can any loss be carried forward even if return of loss has not been filed as required? [May 2015, 4 Marks]
Answer:
Return of loss means Return of Income showing loss instead of in-come. Following losses can be carried forward without filing of return or on before due date.

1. Loss under head Income from House Property u/s 7IB.
2. Unabsorbed Depreciation u/s 32(2).

Question 9.
Who are the Persons authorized to verify return of income in the case % of Individual under Section 139 of the Income-tax Act 1961. [Nov. 2015, 4 Marks]
Answer:

Section

Particulars

139

Following persons are authorized to verify return of income in case of individual u/s 139. 1. When assessee is present in India – Himself. 2. When assessee is outside India – By an authorized person through Power of Attorney, a copy of which to be filed with return of income. 3. When assessee is in capable – A person legally competent to sign on his behalf. In unspecified circumstances – As per circumstances.

Question 10.
Specify the persons who are authorized to verify u/s 140, the return of income filed u/s 139 of the Income-tax Act, 1961 in case of a company. [Nov. 2016, 2 Marks]
Answer:
The following persons are authorized to verify the return of income (filed u/s 139) u/s 140:

1. WhenManagingDirectorispresent in India	Managing Director
2. When Managing Director is not available in India or not able to act.	Any Director
3. When company is Non-Resident	A person holding Power of Attorney to act as such.
4. When company is in Liquidation	Official Liquidator
5. When management of company has been taken over by any gov­ernment	Principal officer appointed by the government
6. When corporate insolvency is under process by Adjudicating Authority	Insolvency Professional appointed by Adjudicating Authority.

Question 11.
By whom should the return of Income be signed in the case of following persons:
1. Political party
2. Company which is being wound up
3. Hindu Undivided Family, when karta is unable to sign, and
4. Scientific research association. [May 2017, 4 Marks]
Answer:
The return of income will be signed for following persons as under:

1. Political Party	Chief Executive Officer
2. Company which is wound up	Liquidator
3. Hindu Undivided family when karta is unable to sign	Any adult member of HUF whether male or female
4 Scientific Research Association	Principal Officer or such Association

Question 12.
Briefly mention the provisions of Income-tax Act where to Quoting Aadhaar Number u/s 139AA of the Act. [May 2018, 5 Marks]
Answer:
Provisions regarding quoting Aadhaar Number under section 139AA are as follows:

Category A – Every person who is eligible to obtain Aadhaar is required to quote Aadhaar Number in –

i. in application for allotment of PAN
ii. in return of Income

However, if a person has applied for Aadhaar but not received as yet, he can quote Enrolment ID of Aadhaar application form.

Category B – Every person who has been allotted PAN and eligible to obtain Aadhaar Number shall intimate to appropriate authority in prescribed form.

An sequences of non-intimate of Aadhaar
In case of failure to intimate Aadhaar number the PAN allotted shall become inoperative.

When provisions of Section 139AA shall not apply

a. Person residing in Assam, Meghalaya and Jammu & Kashmir.
b. A non-resident.
c. Person aged 80 years at any time during previous year.
d. Persons who is not Citizen of India.

Question 13.
Briefly mention the ‘concept of Self-Assessment tax u/s 140A of the Income-tax Act, 1961 and it components. [May 2018, 2 Marks]
Answer:

Section

Particulars

140A

1. Self-Assessment under section 140A means the assessee must compute his taxable income and tax-liability himself before filing return of income. While doing so, he must consider various items of income in different heads, exemptions and deductions. There after net taxable income (total). 2. Tax liability will be calculated keeping in mind some special tax rates on certain incomes (such as long term capital gains, income from winning of lottery, etc). 3. At the end out of total tax-liability TDS and Advance Tax paid ‘ will be deducted. Balance amount of still payable tax is to be de­posited before filing of return of income while doing so sections 90, 90A and 91 (if applicable) will also be considered. 4. This is concept of self-Assessment Tax under section 140A of Income-tax Act, 1961.

Question 14.
Indicate the three situations where the Return of Income has to be compulsorily filed u/s 139(1) of the Income-tax Act, 1961. [May 2018, 3 Marks]
Answer:
Return of Income has to be compulsorily filed under section 139(1) in following three situations:

1. Companies and firms are required to submit return of income or loss compulsorily irrespective of quantum of income or loss,
2. A person whose total taxable income exceeds minimum exemption limit (other than an individual, HUF, AOP, BOI, Artificial Juridical person, company firm).
3. Individual, HUF, AOP, BOI, Artificial Juridical person, are required to submit return of income when it exceeds minimum exemption limit, without claiming deductions and exemptions under sections 10A, 10B, 10BA, 80C to 80U and from Assessment Year 2021-22 under sections 54, 54B, 54D, 54EC, 54G, 54GA, 54GB.

Question 15.
Explain the quantum of late fees under section 234F for delay in furnishing return of income within the prescribed time limit under section 139(1) for Assessment Year 2021-22. [Nov. 2018, 3 Marks]
Answer:
If any person who has to filed return of income under section 139 and fails to file the return within the time limit under section 139(1) then following late fee is attracted under section 234F.

Quantum of Late Fee	Circumstances
₹ 5,000	If the return is furnished on or before the 31 st December of the Assessment Year
₹ 10,000	In any other case
If the total income of the assessee does not exceed ₹ 50,000 in that case fee payable is ₹ 1,000

Question 16.
Every person is required to file a return of income on or before due date in the prescribed form and manner as per Section 139( 1). What is the meaning of due date of filing Income Tax Returns for different categories of assessee as per Section 139(1) of the Income-tax Act, 1961? [Nov. 2018, 4 Marks]
Answer:
Due date of furnishing the return of income:

1. Where the assessee (other than an assessee referred to in clause (aa) is :

1. a company, or
2. a person (other than a company) whose accounts are required to be audited under this Act or under other law for the time being in force; or
3. a working partner of a firm whose accounts are required to be audited under this Act or under other law for the time being in force.
   • due date of furnishing of return of income is 30th September of assessment year
     (aa) in the case of an assessee who is required to furnish a report referred to in section 92E (ie. international transaction or specified domestic transaction)
   • due date of furnishing of return of income is 30th November of assessment year

2. in case of a person other than company, referred to in the first proviso to section 139(1) (specially notified by central govt, who fulfil any of the certain specified conditions)

• due date of furnishing of return of income is 31st October of assessment year

3. in case of any other assessee

• due date of furnishing of return of income is 31st July of assess-ment year

Question 17.
Discuss the provisions of Section 139A(1) which provides the persons who are compulsorily required to apply for allotment of Permanent Account Number (PAN) with the assessing officer [May 2019, 4 Marks]
Answer:
Following persons are compulsorily required to apply for allotment of permanent Account Number (PAN): –

1. Every persons whose total taxable income during the previous year exceeds minimum exemption limit.
2. Every person who is carrying on business or profession, whose total turnover or gross receipts likely to exceed ₹ 5 lacs during the previous year.
3. Charitable Trust is required to obtain PAN before end of previous year.
4. Where TDS is applicable, so that tax deducted at source can be de-posited to the credit of recipient of income.
5. Every resident person (except individual) who is doing financial transaction to ₹ 2.5 lacs or more in a financial year.
6. Managing Director, director, partner, trustee, author, founder, karta, executive officer, principal officer, working on behalf of other persons (like company, trust, etc.).
7. A person who intends to enter into a prescribed transition is required to obtain PAN.

Question 18.
What is the fee for default in furnishing return of income u/s 234F? [May 2019, 4 Marks]
Answer:
Fee for default in furnishing return of income under section 234F as under:
a. ₹ 5,000/- if return is furnished on or before 31st December of assess-ment year.
b. ₹ 10,000/- if return is furnished after 31st December of assessment year.
Note : If total income of such person does not exceed ₹ 5 lacs, fee would be ₹ 1,000/-.

Question 19.
To whom the provisions of Section 139AA relating to quoting of Aadhaar Number do not apply? [May 2019, 4 Marks]
Answer:
Provisions of section 139AA shall not apply to the following, in which Aadhaar is not compulsorily required :
a. Persons residing in Assam, Meghalaya and Jammu & Kashmir.
b. A non-resident.
c. Person aged 80 years at any time during previous year.
d. Person who is not Citizen of India.

Question 20.
Elaborate the conditions, non-fulfilment of which would render a return of income filed by an assessee not maintaining regular books of account, defective. [Nov. 2019, 4 Marks]
Answer:
A return of income filed by the assessee regarded as defective in following cases:

1. When return of income has not been filled properly and completely by using appropriate Form among ITR-1 to ITR-7. No column has been left blank, without writing not applicable.
2. When return of income has been filed without depositing amount of balance tax payable, if any under Self-Assessment along with applicable interest amount if any.
3. When annexures, statements, accounts, etc. were not submitted along with return of income, as proof of items mentioned in the return such as certificates, reports, computation of tax details, final accounts, pre-paid taxes (as advance tax), TDS details, etc.

Question 21.
State with reasons whether you agree or disagree with the following statements:
(a) Return of income of Limited Liability Partnership (LLP) could be signed by any partner.
(b) Time limit for filing return under Section 139(1) in the case of Mr. A having total turnover of ₹ 45 lakhs for the year ended 31.03.2021, whether or not opting to offer presumptive income under section 44AD is 30th September 2021. [Alov. 2011, 4 Marks]
Answer:
(a) Return of Income of limited liability partnership can be signed by the designator partner only. However when there is no designated partner or under unavoidable circumstances any other partner can sign.

(b)

1. In case Mr. A opts for presumptive taxation under section 44AD, then due date for filing of return shall be 31st July, 2021.
2. In case Mr. A does not opt for presumptive taxation u/s 44AD, he is required to maintain books of account under section 44AA and get the accounts audited under section 44AB. In such case due date for filing of return shall be 30th September, 2021.

Question 22.
Paras is resident of India. During the Financial Year 2020-2021 interest of ₹ 1,88,000 was credited to his Non-resident (External) Account with State Bank of India. ₹ 30,000 being interest on fixed deposit with State Bank of India was credited to his saving bank account during this period. He also earn interest on this saving account. Is Paras required to file the return of income? What will be your answer, if he owns one shop in Kerala having area of 150 sq. ft ? [May 2012, 4 Marks]
Answer:
Computation of Taxable Income of Mr. Paras

Particulars	Amount (₹)
Income from other Sources :
Interest in Non-resident (external) Account is exempt u/s 10(4)07)	Nil
Interest on Fixed Deposit in SBI	30,000
Interest on Saving Bank A/c in SBI	3,000
Gross Total Income	33,000
Deduction U/s 80TTA (Interest on S.B. A/c)	3,000
Total Income	30,000

Since Total Income of Mr. Paras is less than minimum exemption limit, he is not required to file return of income. One shop of 150 sq. ft. is immaterial.

Question 23.
Mr. Sachin filed return on 30th September, 2021 related to Assessment Year 2021 -22. In the month of October 2021, his tax consultant found that the interest on fixed deposit was omitted in the tax return.

1. What is the time for filing a belated return?
2. Can Mr. Sachin file a revised return?

Justify the above with the relevant provisions under Section 139.

Assume that the due date for furnishing return of income was 31st July, 2020 and the assessment was not completed till the month of October 2020. [Nov. 2017, 5 Marks]
Answer:

1. As per section 139(4), belated return of income can be filed before end of relevant assessment year or before completion of assessment, whichever is earlier.
2. As per section 139(5) revised return of income can be furnished before expiry of one year from end of relevant assessment year or before completion of assessment, whichever is earlier. Mr. Sachin can file a revised return.

Question 24.
State whether quoting of PAN in the following transactions is mandatory or not, as per the provisions of Income-tax Act, 1961 for Assessment Year 2021-22:

1. Mr. A makes cash payment to a hotel Radisson Blu, Ahmedabad of ₹ 50 000 against the bill raised by the hotel.
2. Mr. Abhishek, in a single transaction, makes contract of 1,20,000 for sale/purchase of securities (other than shares) as defined in section 2(h) of the Securities Contacts (Regulation) Act, 1956.
3. Payment to Mutual Funds of ₹ 70,000 for purchase of units. Your answers must be supported with reasons. [May 2018, 3 Marks]

Answer:

1. Cash payment to a Hotel exceeding ₹ 50,000/-requires quoting of PAN compulsorily. But in the instant case the amount is ₹ 50,000/- only, Hence quoting of PAN is not mandatory.
2. In Sale/purchase of securities (other than shares/M. funds), quoting of PAN is mandatory, if consideration exceeds ₹ One lac per transac-tion. In the instant case value of one transaction is ₹ 1,20,000. Hence quoting of PAN is mandatory.
3. Payment to Mutual Fund for purchase of its units exceeding ₹ 50,000/ -, quoting of PAN is mandatory. Hence in the instant case payment of ₹ 70,000/- for purchase of mutual fund units requires quoting of PAN.