-BY CA FAROOQ HAQUE - For Articleship Vacancies€¦CA IPCC DIRECT TAX – PAPER 4 . Paper Analysis...

CA IPCC DIRECT TAX –

PAPER 4

Paper Analysis &

Suggested Answers

For MAY – 2017

-BY CA FAROOQ HAQUE

Download From https://caknowledge.in/

CA IPCC Taxation CA Farooq Haque

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cont. no – 0712-2521444/31444/41444

CA IPCC - TAXATION – Paper Analysis May

2017

- CA Farooq Haque

Direct Tax Out of – Total Marks – 116

Topics Question no.

Marks Coverage in notes

Nature of Ques.

Basic Concept

Residential Status 2(a)(i) 4 Practical

4(a)(i) 4 Reasoning

Incidence of tax

Income exempt from tax 2(a)(ii) 4 Theory

Income under the head “Salary” 3(a) 8 Practical

House Property 1(a)(iii) 2 Practical

4(a)(ii) 4 Practical

PGBP 1(a)(i)(ii) 5 Practical

Capital Gain 5(a) 8 Practical

Income from other sources 1(a)(ii) 1 Practical

Clubbing of Income

Set off and carry forward 6(a)(i) 4 Practical

Chapter VI A Deduction 1(a)(iv) 2 Practical

6(a)(ii) 4 Practical

Rebate and Relief

Assessment procedure 7(b) 4 Theory

Advance Tax and Interest 7(c) 4 Practical

TDS and TCS 7(a) 4 Theory

Total Marks = 62 (53%)

Indirect Taxation Excise Duty

• Definition -- -- -- --

• Levy and collection of duty

-- -- -- --

• Classification of good -- -- -- --

• Mode of charging duty -- -- -- --

• Transaction Value 4(c) 4 Practical

• Central excise rule -- -- -- --

• SSI Exemption -- -- -- --

• Introduction -- -- -- --

• Type of custom duty -- -- -- --

• Rate of duty -- -- -- --

• Duty paid under different circumstances

-- -- -- --


http://www.fhconline.in/


www.fhconline.in

cont. no – 0712-2521444/31444/41444

• Exemption from custom duty

-- -- -- --

• Import procedure -- -- -- --

• Export procedure -- -- -- --

Total Marks = 4

SERVICE TAX

• Basics

5(c) 4 Theory

6(b) 4 Theory

• Negative list

• Mega exemption notification

2(b) 4 Theory

• Abatement -- -- -- --

• Principal of interpretation

-- -- -- --

• Valuation 1(b) 5 Practical

3(c) 3 Practical

• Point of taxation 4(b) 4 Practical

• Payment of service tax 7(e) 4 Theory

• Registration 7(d) 4 Theory

• Returns

Total Marks = 32

CENVAT CREDIT RULES, 2004 3(b) 5 Practical

5(b)(i)& (ii) 4 Advice & theory

Total Marks = 9

VALUE ADDED TAX 1(c) 5 Practical

Total Marks = 5

CST 2(c) 4 Practical

Total Marks = 4

Total of IDT = 54 (47%)




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cont. no – 0712-2521444/31444/41444

MARKS DISTRIBUTION – DT & IDT

Nature of Questions

Direct Tax53%

Indirect tax 47%

MARKS

69%

31%

Nature of Question

Practical

Theory

Theory Includes

• Reasoning

• Advice



IPCC TAXATION-SUGGESTED - MAY 2017 CA FAROOQ HAQUE

[1] www.fhconline.in

cont.no. – 0712-2521444/31444/41444

Taxation – Paper 4

Suggested Answers – May 2017

Question no.1

(a)

Computation of Income of Ms. Rekha for A.Y. 2017-18

Sr. No. Particulars Amount Amount

i) Income Under the head Salary -

ii) Income Under the head house property Arrears of rent received Less: Deduction @ 30%u/s 25A(2)

90,000

(27,000)

63,000

iii) Income Under the head of PGBP A) Income from Rice Mill Net profit as per Profit & Loss account Add: Advanced tax paid [Disallowed u/s 40 (a)] Add: Personal drawings (Note-1)

4,50,000 1,00,000

50,000





cont.no. – 0712-2521444/31444/41444

Less: Interest on saving bank account with SBI Less: Interest on saving accounts with post office Less: Dividend received is exempt u/s 10 (34) B) Salary as working partner C) Interest on capital (Note-2)

(12,000) (5,000)

(80,000)

5,03,000 1,00,000 2,40,000

8,43,000

iv) Income from capital Gain -

v) Income from other Sources Interest on saving bank account with SBI Interest on saving accounts with post office

12,000

5,000

17,000

Total income 9,23,000

Deduction under Chapter VI-A U/s 80C (Note-3) U/s80D (Note-4)

50,000 30,000

80,000

Taxable Income 8,43,000

Tax Liability 0-2,50,000

2,50,010-5,00,000- @10% 5,00,010-8,43,000- @20%

Total tax liability Add:- Education cess @2%

Add:- SHEC @ 1% Total Tax payable

Nil

25,000 68,600

93,600 1,872

936

96,408

Notes:-

1. Deduction of personal drawings is not allowed under the head profit and gains from business and professions.

2. As per sec. 40(b) Interest on capital paid beyond 12% is not allowed for deduction to the firm so tax on interest paid of Rs. 60,000 in excess of allowed deduction shall be paid by firm and only 2,40,000 will be taxable in the hands of partner.

3. U/s 80C Life insurance premium paid is allowed to the extent of 10% of actual capital sum assured if policy is taken after 31-03-2012. So in this case the deduction is allowed up to 50,000 (5,00,000*10%).

The actual premium paid is 60,000 which is above the limit. Therefore, the premium allowed as deduction will be 50,000.

4. U/s 80D health insurance premium paid for parents the allowed expense is lower of the following

i. Actual premium paid-35,000 or ii. Rs. 25,000 (in case of senior of very senior Rs. 30,000).

So the premium deductible is 30,000.





cont.no. – 0712-2521444/31444/41444

(b)

Computation of Service Tax Liability for Mr. Rixon for the month December, 2016

Sr. No. Particulars Amount

1 Amount received for the services to be rendered in feb.17 8,00,000

2 Free services rendered to friend -

3 Services rendered during the month 5,50,000

4 Reimbursement of expense received 2,25,000

Total 15,75,000

Service tax Liability inclusive of cess (15,75,000*15/115) 2,05,434.78

(c)

Computation of VAT payable by M/s Hindcare Ltd. For the month of January-2017 Input Tax credit

Particulars Amount VATAmount

Purchase Within state Raw material purchased ([email protected]%)6,00,000 Less: Raw Material used for production of exempted 2,50,000 goods

3,50,000

43,750

Raw material purchased (VAT@4% inclusive) 2,40,385 9,615

Total Vat credit Available 53,365

Output Tax payable

Sales within state Taxable sales (VAT@ 4%)

9,00,000

VAT-36,000

Exempted Sales 6,25,000 -

Interstate Sales Sale in the course of inter-state Trade or Commerce (CST@2%)

2,00,000

CST-4,000

Total TAX payable on sales 40,000

Tax payable or balance of credit available after payment of tax

Particulars Amount

Tax payable (VAT+ CST) 40,000

Credit utilise for payment of tax 40,000



mailto:[email protected]%25

mailto:[email protected]%25



cont.no. – 0712-2521444/31444/41444

Tax payable Nil

Balance of VAT credit 13,365





cont.no. – 0712-2521444/31444/41444

Question no. 2

(a)(i)

Under section 6(1), an individual is said to be resident in India in any previous year if he satisfies any one of the following conditions –

(i) He has been in India during the previous year for a total period of 182 days or more, or

(ii) He has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India for at least 60 days in the P.Y.

Exception – If an Indian citizen leaves India for the purpose of employment or as a member of crew of an Indian ship or if an Indian citizen or person of Indian origin who is residing outside India comes to India on a visit in any previous year, he would be considered as resident in India in that year only if he has been in India in that year for 182 days or more instead of 60 days referred to in, (ii) above. In the given case Mr. Damodharstays in India for a period of 175 days (i.e.30+2+30+31+12+11+28+31) which is less than 182 days. Mr. Damodhar does not satisfy the minimum criteria of 182 days, he is a non-resident for the A.Y. 2016-17. (a)(ii)

Rent received from letting out agricultural land for a movie shooting

Agricultural income means, any rent or revenue derived from land which is situated in India and is used for agricultural purposes. In the present case, rent is being derived from letting out of agricultural land for a movie shoot, which is not an agricultural purpose. Hence, Rent received from letting out agricultural land for a movie shooting is not Agricultural income.

Amount received from sale of seedlings in a nursery adjacent to the agricultural lands.

Income from sapling or seedling grown in nursery comes under the definition of Agricultural income U/s 2(1A). Hence, Amount received from sale of seedlings in a nursery adjacent to the agricultural lands is Agricultural income.

(b)

(i) Exempt- Services provided as a match referee to a recognised sports body is exempt from service tax.

(ii) Exempt- Security Services provided to a government recognized educational institution is exempt from service tax.





cont.no. – 0712-2521444/31444/41444

(iii) Exempt- Services by way performing artist in folk or classical art forms of music or dance or theatre, if consideration charged for such performance is <=Rs. 1,50,000 is exempt from service tax.

(iv) Taxable- Service by way of right to admission to award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event, where the consideration for admission is <= Rs 500 per person. In the present case the fees paid is Rs.1000 per person which is more than the exemption limit.

(c) Computation of taxable turnover and CST payable by Mr. Prakash for the F.Y. 2016-17

Particulars Amount Amount

Sales as per bill (including CST) 60,00,000

Less: Freight shown separately in invoice 2,80,000

Less: Goods returned by SRC Traders (Goods returned within 6 months)

50,000

Less: Goods rejected and returned by Mr. Shankar 60,000 3,90,000

Turnover including CST 56,10,000

Less: CST (56,70,000X2/102) 1,10,000

Turnover excluding CST 55,00,000

Notes:-Fright of Rs.1,00,000 not shown separately in the invoice are not deductible in calculation of the turnover.


www.rajplacements.com




cont.no. – 0712-2521444/31444/41444

Question no. 3

(a)

Computation of income chargeable under the head Salaries for the A.Y. 2016-17

Particulars Amount

Basic Salary 6,00,000

Dearness allowance 3,20,000

Commission 50,000

Entertainment Allowance 7,500

Medical Expense Reimbursement (Note-1) 6,000

Professional Tax paid by employer (50% of total) 3,500

Health insurance premium paid by employer (Note-2) -

Gift Voucher (Note-3) 12,000

Life Insurance Premium (Note-4) 34,000

Laptop Provided for use at home Nil

Motor vehicle (Note-5) 7,200

Annual credit card fees paid by employer 2,000

Total income chargeable under the head Salaries 10,42,200

Notes:-

1. Clause (v) of the proviso to section 17(2) exempts any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family to the extent of ` 15,000. Therefore, in this case, the balance of ` 10,000 (i.e., Rs.25,000 – Rs. 15,000) is a taxable perquisite. Medical insurance premium paid by employer is exempt.

2. Health insurance premium paid by the employer to effect an insurance on the health of the employee is fully exempt.

3. The value of any gift or voucher or token in lieu of gift received by the employee or by member of his household below Rs. 5,000 in aggregate during the previous year is exempt. In the given case Gift voucher received on birthday exceeds Rs 5000. Hence, entire 12,000 is taxable.

4. LIC premium of employee paid by employer shall be included in his income as it is a perquisite for an employee.

5. Value of perquisite in case of Motor vehicle provided to employee for official and personal use the perquisite value of motor car when CC engine is less than 1.6ltrs will be 600 p.m.* Therefore , total value of perquisite = 600 X 12= 7,200/- *It is assumed that the expenses of motor car are met by employee.

(b)

Computation of CENVAT credit available with IJK Manufacturing Co. Ltd.





cont.no. – 0712-2521444/31444/41444

Particulars Amount

Raw Material used in the factory 80,000

Goods used in the guest house primarily for the temporary stay of the newly recruited employees. (Note 1)

Nil

Capital goods used as parts and components in the manufacture of final product[considered as Input] (Note 2)

30,000

Office equipment used in an office within the factory (Note-3) 20,000

Light diesel oil (Note-4) Nil

Notes:-

1. As per the definition of inputs, there is specific exclusion with regard to the following:- (i) goods used in a guest house when the same are used primarily for personal use or consumption of any employee. (ii) goods used for making of structures for support of capital goods. Thus, CENVAT credit cannot be claimed in respect of the above goods.

2. Though definition of inputs specifically excludes capital goods, capital goods used as parts or components in the manufacture of a final product are included therein. Thus, CENVAT credit will be available on the same.

3. CENVAT credit is allowed on equipment or appliance which is used in an office located within the factory and not outside the factory. It is capital goods but 100% credit is allowed to SSI units.

4. As per the definition of inputs, there is specific exclusion with regard to light diesel oil. Thus, CENVAT credit cannot be claimed in respect of the said goods.

(c) Computation of value of taxable services Under rule- 2B of service tax (determination of value) rules,2006

(i) RBI reference rate is Rs. 69 per US dollar

Taxable Value= (Selling Rate - RBI reference rate at that time)X total units of Currency = (Rs.68-Rs.69) X US $10,000 = Rs. 10,000/-

(ii) RBI reference rate is not available Taxable Value= 1% of (US $ 10,000 X Rs.68) = Rs. 6,800/-

(iii) US $ are converted into UK Pound





cont.no. – 0712-2521444/31444/41444

INR value of US $ 10,000 = 10,000 X Rs. 67 = 6,70,000/- INR value of UK pond 5,000 = 5,000 X Rs.100 = 5,00,000/- Value of service = 1% of lesser of above two amounts i.e. 5,00,000/-

= 5,000/-





cont.no. – 0712-2521444/31444/41444

Question no. 4

(a)(i)

a) Taxable in India- As per the provisions of sec.9 of Income tax Act,1961, Income received by non-resident personfrom a non resident person for the purpose of use of patent for a business in India shall be deemed to accrue or arise in India.

b) Not-taxable in India- Amount received by non-resident person from a non resident person for the purpose of use of Knowhow for a business located in Sri Lanka and the amount received in Japan, shall not be taxable in India.

c) Taxable in India-Amount received for technical knowhow received by a NR from a person who is resident, except where the services are utilized in business or profession carried on by such person outside India, or for the purpose of making or earning any income from any source outside India, shall be deemed to accrue or arise in India.

d) Not-taxable in India - Amount received from R& Co. Mumbai for feasibility study for a new project in Nepal and the amount is received in Nepal shall not be taxable in

(a)(ii)

Computation of income under the head “House Property” for the A.Y. 2017-18 (Let-out property)

Particulars Amount

Gross Annual Value (GAV) (Lease rental is taken as GAV in the absence of other information) (Rs. 40,000 × 12)

4,80,000

Less: Municipal taxes paid (paid by the owner during the previous year) 18,000

Net Annual Value (NAV) 4,62,000

Less: Deductions under section 24

(a) 30% of NAV 1,38,600

(b) Interest on borrowed capital i. Interest for Current year 2,25,000

ii. Interest for pre-construction period- 29,959

2,54,959

Income from house property 68,441

Notes-Mr. Ganesh will be eligible for pre-construction interest as deduction U/s 24 for the period of 8 months i.e. 243 days (from 1-8-2014 to 31-03-2015) @15% p.a. which shall be deductible in 5 equal annual instalment.

Deductible interest= 15 lakh X 15% X 243/365 = 1,49,795/- Instalment = 1,49,795/5 = 29,959/-

(b)

Determination of Point of Taxation as per rule-3 of Point of Taxation Rules





cont.no. – 0712-2521444/31444/41444

Case Date of completion of service

Date of Invoice Date of receipt of payment

POT

i. 13-09-2016 01-11-2016 03-11-2016 13-09-2016

ii. 30-01-2017 03-12-2016 30-03-2017 03-12-2016

iii. 05-01-2017 01-01-2017 20-10-2016 20-10-2016

iv. 18-02-2017 12-02-2017 02-03-2017 12-02-2017

(c)

1. Total customs duty is payable

Particulars Amount

Assessable Value for computing basic custom duty 5,00,000

Basic custom duty (5,00,000 X 10%) 50,000

Total value for computation of additional custom duty u/s 3(1) 5,50,000

Additional custom duty u/s 3(1) [5,50,000 X 12.5%] 68,750

Total duty amount for EC and SHEC [50,000+68,750] 1,18,750

Education cess@ 2% 2,375

Secondary and higher education cess@1% 1,187.5

Total duty payable before additional custom duty u/s 3(5) 1,22,312.5

Total value for computation of additional custom duty u/s 3(5) 6,22,312.5

Additional custom duty u/s 3(5) [6,22,312.5 X 4%] 24,892.5

Total Duty Payable 1,47,205

2. Yes, Shubh Nivesh can avail CENVAT credit of custom duties paid u/s 3(1) and 3(5).

Total credit can be taken is 93,642.5/- (68750+24892.5). Question no. 5

(a) Computation of capital gain of Mr. Yuthistra for the F.Y. 2016-17

Period of Holding = More than 36 months, hence, it is a long term Capital Asset

Particulars Amount (Lakhs)

Amount (Lakhs)

Sale Consideration (Note-1) 770

Less: Brokerage incurred in connection with such transfer (1% of 700 lakhs)

7

Net Sale Consideration 763

Less: Indexed cost of acquisition of Land (88 X 1125/480) (Note-2) 206.25

Less: Indexed cost of acquisition of building (100 X 1125/519) 216.76





cont.no. – 0712-2521444/31444/41444

Total cost of acquisition of land and building 423.01

Long term capital Gain 339.99

Less: Exemption under section 54 (Note-3) (110)

Less: Exemption under section 54 EC for investment made in NHAI capital gain bonds (Note-5) (45+5)

(50)

Taxable Long term capital Gain 179.99

Notes-

1. As per section 50C, where the consideration received or accruing as a result of transfer of a capital asset, being land or building or both, is less than the value adopted by the Stamp Valuation Authority, such value adopted by the Stamp Valuation Authority shall be deemed to be the full value of the consideration received or accruing as a result of such transfer. So the value will be 770 lakhs instead of 700 lakhs. Stamp value on the date of agreement will not be taken as no consideration in cheque was received.

2. Cost of land shall be inclusive of registration charges and other expense incurred for acquisition of such land. So the cost of land will be 88 lakhs (80+10% of 80).

3. Exemption under section 54 is available if one new residential house is purchased in India within two years from the date of transfer of existing residential house, which is a long-term capital asset. Since the cost of new residential house is less than the long-term capital gains, capital gains to the extent of cost of new house, i.e., Rs.110 lakh, is exempt under section 54.

4. There will be no exemption available in respect of investment made in acquisition of residential house at London for Rs.190 lakhs.

5. As per section 54EC, an assessee can avail exemption in respect of long-term capital gains, if such capital gains are invested in the bonds issued by the NHAI redeemable after 3 years. Such investment is required to be made within a period of 6 months from the date of transfer of the asset. The maximum amount can be invested in the P.Y. of transfer and in the subsequent year (Within 6 months from transfer) is 50 lakhs. The exemption shall be the amount of capital gains or the amount of such investment made, whichever is less. In this case, the maximum deduction available is 50lakh in aggregate of F.Y. 2016-17 and 2017-18 investment. Therefore, Mr Yuthistra can claim exemption for 50 lakhs.

(b)(i) A manufacturer can avail CENVAT credit on capital goods delivered directly in the place /premise of job workers subject to the condition that the capital goods should be received back in the factory/premise of manufacturer within 2 years of such transfer. If the capital goods is not received back within 2 years, the manufacturer shall pay an amount equal to CENVAT credit attributable to the capital goods by debiting CENVAT credit or otherwise. However, CENVAT credit can be re-availed when the capital goods are received back in his factory. Therefore, the manufacturer can avail CENVAT credit in respect of such machinery delivered directly to the premise of job workers.





cont.no. – 0712-2521444/31444/41444

(b)(ii)

a) Service receiver, who has paid service tax under reverse charge mechanism, is allowed to take CENVAT credit of service tax paid on the input service underFull reverse charge mechanism on the basis of GAR-7 challan i.e. on the date when service tax is actually paid. In case of partial reverse charge mechanismcredit can be availed as follows-

(i) On part payment by service receiver:- when such tax is paid to the C.G. as per GAR-7 challan.

(ii) On part payable by service provider:- Service receiver can avail creit on the basis of Invoice/Bill/Challan received. However, if payment of value and tax is not made within 3 months, such credit shall be reversed. It can be re-availed when such value and tax is paid to the service provider.

b) The manufacturer or output service provider is not allowed to take CENVAT credit

for Inputs or Input services after 1 year from the date of issue of any documents specified in rule 9(1). Except in case of service provided by way Government, Local authority or any other person, by way of assignment of right to use any natural resources the condition of utilisation of CENVAT credit for input services within 1 year does not apply.

(c)

For the purpose of Sec.67 Valuation of taxable Services of finance Act, 1994

Consideration includes- a) Any amount that is payable for the taxable services provided or to be provided; b) Any reimbursement expenditure or cost incurred by the service provider and

charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances and subject to such conditions, as may be prescribed;

c) Any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.

Determination of consideration

Sr. No. Case Whether or not consideration

1 Voluntary Donation received by a charitable trust.

Voluntary Donation received by a charitable trust is not received for any service provided or to be provided. Hence, it is not consideration.

2 Gifts received from friend on an individual’s birthday.

Gift is not received for any service provided or to be provided. Hence, it is not consideration.





cont.no. – 0712-2521444/31444/41444

3 Stipend received by an article trainee from his employer, a CA.

The amount is received under employer employee relationship. Hence, it is not consideration.

Question no. 6

(a)(i) Computation of total income of Mr. Shyam for the A.Y. 2017-18


Profits and gains of business or profession

Profit from business of Textile

Less: Current year depreciation under section 32(1)

Less: Unabsorbed depreciation of A.Y. 2016-17

4,60,000

5,000

4,55,000

10,000

4,45,000

Income from speculation Business

Less: Brought forward speculation business losses of A.Y.

2016-17

25,000

25,000

-

Gross total income 4,45,000

Loss to be carry forward

Particulars Amount





cont.no. – 0712-2521444/31444/41444

Speculation loss (30,000-25,000) as per sec. 73 5,000

Losses from maintenance of race horses as per sec. 74A 15,000

Loss from gambling can neither be set-off nor be carried forward -

Notes-

1. Loss from speculation business cannot be set-off against any income other than profit and gains of another speculation business. Such loss can, however, be carried forward for a maximum of four years as per section 73(4) to be set-off against income from speculation business.

2. As per section 74A(3), the loss incurred in the activity of owning and maintaining race horses in any assessment year cannot be set-off against income from any other source other than the activity of owning and maintaining race horses. Such loss can be carried forward for a maximum of four assessment years.

(a)(ii)

Computation of total income of Mr. Rohan and deduction under chapter VI-A for the A.Y. 2017-18


Gross total income 7,50,000

Less:- Deduction under chapter VI-A

1. Deduction u/s 80C I. Life insurance premium (Note-1)

II. Tax saver deposit in SBI (Note-2)

60,000

90,000

(1,50,000)

2. Deduction u/s 80G ( Note-3) (25,000)

Taxable income 6,00,000

Notes-

1. In case when Life insurance policy is taken on life of Severely Disabled person (Sec.80U) on or after 1-4-2013 maximum amount eligible for deduction is 15% of the actual sum assured. In the given case, Mr Rohan has taken policy for his son who is severely disabled (Sec.80U). Therefore, the maximum deduction can be claimed is 60,000 (4,00,000 X 15%).

2. Investment made in fixed deposit scheme of a bank with a maturity of not less than 5 years shall be eligible for deduction u/s 80C.

3. Contribution made for Clean Ganga Fund, set up by the Central Government is specified investment as per list- A of sec. 80G and it is eligible for 100% deduction.





cont.no. – 0712-2521444/31444/41444

(b)

(i) Suit filing fees taken by court - Fees taken in any Court or tribunal established under any law for the time being in force has been specifically excluded from the definition of service u/s 65B(44). Therefore suit filing fee taken by court in respect of litigation is not liable to service tax.

(ii) Pre-mature termination amount- Amount received by an employee from employer on pre-mature termination is the amount received in relation to his employment.Therefore it is not liable to service tax.

(iii) Foreman of Chit Fund-Service includes Services provided by chit fund foreman by way of conducting a chit. Such services would not be considered as actionable claims as it is specifically mentioned in the explanation to actionable claim that the Transaction and actionable claim shall not include any activity carried out by a foreman of chit fund for conducting or organising a chit in any manner. Therefore it is liable to service tax.

(iv) Service provided to RBI-Service provide to RBI is liable for service tax.

(c) (i) Since Legal Metrology Act, 2009 requires declaration of retail sale price on the

package of shoes and shoes are also notified under section 4A of Central Excise Act, 1944 (RSP based valuation provisions), excise duty will be payable on the basis of RSP less abatement.

Particulars Amount

MRP marked on the package of a pair of shoes 3,000

Less: Abatement @ 25% of RSP [25% of Rs.3,000] 750

Value for purpose of excise duty 2,250

Excise duty @ 12.5% [12.5% of Rs.2,250] 281.25

Excise duty payable (rounded off) 281

(ii) Since the articles are not covered under section 4A of Central Excise Act, 1944 (RSP based valuation provisions), excise duty will be payable on the basis of assessable value under section 4 of Central Excise Act (transaction value). Thus, value for purpose of excise duty will be Rs 2,200 i.e., the price at which the articles are sold to wholesalers.





cont.no. – 0712-2521444/31444/41444

Particulars Amount

Transaction value [price at which ABC Ltd. sells articles to their wholesalers] 2,200

Excise duty @ 12.5% [12.5% of Rs. 2,200] 275

Excise duty Payable 275





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Question no. 7

(a) As per the provision of sec.194A of Income Tax Act, 1961, No TDS is required to be deducted where the aggregate of interest credited or paid by banking company, co-operative bank or post office on notified deposit schemes during the FY does not exceed Rs. 10,000/-

Such amount shall be computed with reference to total income credited or paid by the banking company, co-operative society or the public company ( not branch wise), where the banking company, co-operative society or the public company has adopted core banking solutions.

In the given case, Pallavi bank Ltd. has paid interest of Rs. 9,000/- from Chennai branch and Rs.8,000/- from Bangalore branch to Mr. A.Pallavi bank ltd. does not have core banking solution in the bank, hence we will see the limit with respect to each branch separately.

As the interest paid by each branch to Mr. A does not exceed the limit of Rs.10,000/- therefore, TDS is not required to be deducted on such payment.

(b) As per the provision of sec.140 of income tax Act, 1961 the following retur shall be signed by following person.

Case Person Who shall Sign

(i) Political Party Chief executive officer

(ii) Company which is being wound up Liquidator of the company

(iii) HUF, when Karta is unable to sign Any other adult member of such family

(iv) Scientific research association Competent person/ authorised person

(c) As per the provision of section 208 of Income tax act,1961, Advanced tax shall be payable during a FY in every case where the amount of such tax payable by the assessee during that year, is Rs.10,000/- or more.

Where, an assessee who is liable to pay advanced tax, has failed to do so or, where the advanced tax paid is less than 90% of the assessed tax, he shall be liable to pay simple interest @ 1% for every month or part of a month from the 1st April of the A.Y. to the date of determination of total income u/s 143(1) or to the date of regular assessment.

Computation of tax liability of Mr. Sachal






cont.no. – 0712-2521444/31444/41444

Particulars Amount

Income from profit and Gains from business and profession 8,10,000

Income from other sources 2,70,000

Total Income 10,80,000

Tax payable on above income of 10,80,000

0-2,50,000 Nil

2,50,010-5,00,000 @ 10% 25,000

5,00,010-10,00,000 @ 20% 1,00,000

On balance 80,000 @ 30% 24,000

Income tax liability 1,49,000

Add:- Education cess @2% 2,980

Add:- secondary higher education cess 1,490

Total Tax liablility 1,53,470

Less:- TDS 25,000

Tax payable in advance on or before 15-03-2017 1,28,470

Advanced tax actually paid on 14-03-2017 1,03,000

Advanced tax paid is less than 90% (90% of 1,28,470) Therefore, Mr. sachal is liable for payment of interest u/s 234B.

Interest is payable from 1-04-2017 to 11-12-2017 i.e. 9 months on 25,470 (1,28,470 -1,03,000)

Interest payable= 25,470 X1% X 9months = 2,292.3/-

(d) The registration certificate can be revoked in following circumstances under service tax.

1. Premises not existing or not in possession 2. Document not received within 15 days. 3. Documents are not found to be incomplete or incorrect

(e) Individual, Partnership firms (including LLP) and OPC whose aggregate value of taxable services provided from one or more premises is less than or equal to Rs. 50lakhs in the previous FY shall have the option to pay tax in the current financial year on actual receipt






cont.no. – 0712-2521444/31444/41444

basis on value of taxable services provided or agreed to be provided by him up to a total of RS. 50 lakhs.

Due dates for payment of service tax in case of Individual, Partnership firms (including LLP) and OPC

1 Payment By ECS 6th day of the month following the quarter

2 Payment by any other mode 5th day of the month following the quarter

3 Month / quarter ending march 31st March Compulsory




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