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Direct & Indirect Tax

October 2007

Time: 3 Hours
Marks: 100
NB:
  1. Question No. 1 is compulsory carrying 18 marks. Attempt any 3 Questions carrying 14 Marks each from Question Nos. 2 to 6 from Section I .
  2. Attempt Question No. 7 & Question No. 8 carrying 10 marks each from Section II.
  3. All the sections should be written in the same answer book.

Section I

  • Q.1 From the following P & L Account of Mr. Sonavane, compute his total taxable income for Assessment year 2006-07 22  
  • Profit and Loss Account for the year ended 31st March, 2006
  • Payments
    Rs.
    Receipts
    Rs.
    To Opening Stock 3,34,000 By Sales 10,40,000
    To Purchases 9,00,000 By Closing Stock 3,05,000
    To Office Salaries 71,000 By Income Tax Refund (Including Interest Rs. 2,000) 15,000
    To Bad Debts written off 25,000 By Dividend from U.T.I 50,000
    To Advertisement 10,500 By Lottery Prize Received 1,10,000
    To Fire Insurance Premium 4,500
    To Conveyance 6,000
    To Interest on Proprietor's Capital 25,000
    To General Expenses 55,000
    To Wealth Tax 5,000
    To Sales Tax Penalty 4,000
    To Depreciation 30,000
    To Net Profit 50,000
    Total
    15,20,000
    Total
    15,20,000
     
  • Additional Information:
    1. General Expenses include Advance Income Tax Rs. 10,000 and Rs. 500 for purchase of lottery tickets.
    2. Depreciation allowable as per Income Tax Rules Rs. 25,000.
    3. Purchases include Rs. 4,00,000 paid for cash purchases exceeding the limit of Rs. 20,000 prescribed under section 40 A(3) of Income Tax Act, 1961.
    4. Office salaries include Bonus due but not paid Rs. 16,500.
    5. Mr. Sonavane who is physically handicapped person with 60% disability paid premium for LIC Pension Policy Rs. 15,000.
  • Q 2. Mr. Dattatreya Rane is employed with Hi-Tech Ltd. He furnishes the following information for the Assessment Year 2006-2007. 16
  • (1) Net salary Rs. 28,500 p.m.
    (2) Income Tax deducted at source Rs. 1,300 p.m.
    (3) Professional tax deducted Rs. 200 p.m.
    (4) Bonus received during the year Rs. 30,000
    (5) Arrears of Salary received Rs. 46,000
    (6) Perquisite value of Gas, Water and Electricity Rs. 12,000
    (7) He took advance salary of Rs. 50,000 on account of marriage of his daughter.  
    (8) Mr. Dattatreya paid a LIC premium of Rs. 15,000 and Deposited Rs. 30,000 in his PPF A/c.
    (9) Mr. Dattatreya is also a director of a company and received Rs. 5,000 as directors sitting fees.
    (10)He received Rs. 4,000 as interest on fixed Deposits with State Bank of India.
    (11) He donated Rs. 10,000 to Jawaharlal Nehru Memorial Fund during the year.

    Compute his total income for the Assessment Year 2006-07.

  • Q. 3 Mr. Shastri owns two Houses, the details regarding these houses for the year ended 31-3-06 are as follows: 16  
  • (a)The First House the fair Rent of which was Rs. 2,25,000 was let out at Rs. 20,000 p.m. He paid Rs. 6,000 as interest on Money Borrowed for construction of this house, Rs. 900 as ground Rent and Rs. 10,000 as Municipal Taxes.

    (b)The Second House of the Annual value of Rs. 5,00,000 was occupied by him for his residence. Municipal Taxes paid by him were Rs. 25,000. He has borrowed Rs. 20 lakhs from HDFC Ltd. in April 2001 for acquiring this House property. Interest due for the year was Rs. 2,00,000 and he has repaid Rs. 40,000 out of the loan amount during the year.

    The details of his other Income during the year 2005-2006 are as follows:

    (i)Directorship fees received from JDC Ltd. Rs. 1,60,000.

    (ii)Winning from lottery Rs. 1,00,000.

    Mr. Shastri donated Rs. 5,000 as medical aid to a poor person and also donated books worth Rs. 10,000 to an approved Institution.

    Compute the Net. Taxable Income of Mr. Shastri for the previous year 2005-06 relevant to Assessment Year 2006-07.

  • Q.4 (a) Mr. Sandeep has earned the following income during the previous year ended 31st March 2006. 8
  • (1) Professional fees received in India for 3 months 18,000
    (2) Payment received in U.K. for services rendered in India 16,000
    (3) Income from business in Australia, controlled from India 14,000
    (4) Income from Agriculture in Bangladesh 12,000
    (5) Dividend from a foreign company received in U.K. 10,000
    (6) Amount brought into India out of the past untaxed profits earned in U.S.A. 18,000

    Compute his total income assuming:

    (i) He is resident and Ordinarily resident.

    (ii) Non resident.

    (b) Mr. Ranade purchased a house property for Rs. 2,50,000 on 6th July 1980. He made addition to the house property by constructing a first floor during the financial year 1995-96 spending Rs. 2,00,000. He sold the entire property on 10th June 2005 for Rs. 60,00,000. He paid brokerage @ 1% on the sale value. The fair market value of the property on 1st April 1981 was Rs. 3,50,000. The cost inflation index for financial year 1981-82 is 100, for financial year 1995-96 is 281 and for financial year 2005-06 is 497. (6)

    Compute the Capital gain of Mr. Ranade chargeable to tax for Assessment Year 2006-07.

  • Q.5 (a) Define and explain the following as per Income Tax Act, 1961 (any two): 6
  • (i) Person.

    (ii) Assessee.

    (iii) Company.

    (b)Enumerate any eight income which are Taxable under the head. "Income from other sources under Income Tax Act 1961.(8)

  • Q. 6 Answer any seven of the following questions briefly with reference to Assessment Year 2006-07. 8  
  • (1) Rajaram received Rs. 7,50,000 as compensation on voluntary retirement and claims that entire amount is exempt u/s 10 (10c). Is he right?

    (2) A, B and C are co-owners of a house-property which is self occupied by the co-owners. They claim that the annual value for each co-owner shall be Nil. Are they right?

    (3) What is the maximum amount exempt in case of Leave Encashment to non-Government employees?

    (4) Sadashiv transferred his house-property to his wife Rekha with an agreement to live apart. In whose hands the income from property will be taxable?

    (5) Tushar carrying on an agency business received a sum of Rs. 12,00,000 from his principal for termination of agency. He claims that compensation received shall be exempt as it is a capital receipt. Is he right?

    (6) Kumar purchased equity shares worth Rs. 80,000 on 18th November 2004 and sold them for Rs. 1,20,000 on 25th November 2005. He claims the gain as a short term capital gain. Is he right?

    (7) Amar has earned Rs. 5,000 from a lottery ticket and claims Rs. 500 as a deduction for purchase of lottery tickets. Can he avail this deduction?

    (8) Is Interest credited to public Provident Fund fully exempt from tax?

    (9) Mr. Shashank has paid Rs. 1,00,000 towards premium on pension fund policy of LIC of India. What is the amount of deduction he can claim from his Gross total Income?

    Section - II

  • Q. 7 Define and Explain the term 'Dealer' as per provisions of the Central Sales Tax Act, 1956. 10  
  • OR

    Explain with reasons whether the following persons are 'Dealers' or not as per the provisions of the Central Sales Tax Act, 1956.

    (a) a Civil Contractor.

    (b) a Cardiologist, supplying cardiogram to his patients

    (c) a Film star.

    (d) a Teacher of 'Feng Shui!

    (e) a Chemist.

  • Q. 8 Mr. Nene Commenced his Business as a Manufacturer on 1st June 2006. From the following particulars regarding purchases and sales transactions, find out from which month he will be liable for Registration and to pay tax as per the provisions of MVAT ACT 2002. 10  
  • (Give Reasons).

    Month
    Details
    of
    Purchases
    Details of
    Sales
    Out of state
    Within
    state
    Taxable
    Tax Free
    Taxable
    Taxable
    Taxfree
    Rs.
    Rs.
    Rs.
    Rs.
    Rs.
    June 2006
    2,000
    3,000
    10,000
    12,000
    5,000
    July 2006
    6,000
    6,000
    12,000
    10,000
    25,000
    Aug.2006
    2,000
    -
    10,000
    15,000
    10,000
    Sept, 2006
    10,000
    4,000
    15,000
    18,000
    -
    Oct. 2006
    3,000
    3,000
    18,000
    20,000
    12,000
    Nov.2006
    4,000
    15,000
    12,000
    15,000
    30,000
    Dec.2006
    5,000
    3,000
    20,000
    10,000
    15,000

    OR

    M/s. Phutane & Co. Furnishes the following data, you are required to compute the amount payable as Tax under, MVAT Act 2002.

    Month
    Sales
    Purchases
    Schedule A
    Schedule C
    Schedule E
    Schedule E
    Rs.
    Rs.
    Rs.
    Rs.
    Oct. 2006
    1,00,000
    4,00,000
    3,20,000
    4,00,000
    Nov.2006
    2,00,000
    4,25,000
    4,10,000
    4,50,000
    Dec. 2006
    2,50,000
    6,00,000
    2,20,000
    5,50,000
  • There was an opening Balance of Rs. 2,500 in the Vat credit Receivable Account on 1-10-06.

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