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Direct & Indirect Taxes
Time: 3 Hours APRIL - 1999 Marks: 100
 
SECTION - I
Q. 1. Mr. Baba, a practising Chartered Accountant, gives you the following Receipts and Payment Account for the year ended 31st March, 1998.
20
 
Receipt
Rs.
Payments
Rs.
To Balance b/f (1.4.97)
4,500   
By Salary to Staff
80,000   
To Professional Fees
1,50,000   
By Printing and Stationary
5,500   
To Gift from Father
15,000   
By Household Expenses
22,400   
To Present from a Client
15,000   
By Conveyance Expenses
9,000   
To Salary from a College as a Lecturer
45,000   
By General Expenses
20,000   
To Loan from a Bank for Purchase of Car
50,000   
By Purchase of a Car in July 1997
1,00,000   
To Prize received from Rotary club as Best Member
4,500   
By Motor Car Expenses
20,000   
    By Mediclaim Insurance Premium (paid by cheque)
6,500   
    By Interest on Bank Loan
5,000   
    By Income tax
8,500   
    By Professional Tax
800   
    By Balance c/f
6,300   
Total Rs.
2,84,000   
Total Rs.
2,84,000    
 
  Other Informations:
 
  1) Depreciation allowable on motor car, as per Income-tax Rules is 20%.
 
  2) It is considered that 25% of the car expenses are for personal use.
 
  3) Household expenses include Rs. 1,000 given as a marriage gift to an employee.
 
  4) Salary includes Rs. 12,000 paid to son, who is commerce graduate. (Seems to be reasonable)
 
  5) General expenses include:
 
  Rs. 2,500 to a poor student for further studies.
 
  Rs. 5,000 to an approved educational institution of national eminence.
 
  Rs. 3,000 given to National Illness Assistance Fund.
 
  Compute the taxable income of Mr. Baba, for the Assessment Year 1998-99.
 
   
 
Q. 2. Girish employed with DCM Ltd. furnishes you with the following information -
15
  i) The details of monthly salary for the year ended 31-3-1998 is as under:
 
 
 
From 1st April, 1997 to 31st July, 1997
Rs.
From 1st August, 1997 to 31st March, 1998
Rs.
Basic Salary per month
3,000
10,000
Dearness Allowance per month
225% of Basic
20% of Basic
House Rent Allowance per month
600
30% of Basic
Income Tax Deducted per month
1,500
2,000
Professional Tax Deducted per month
80
80
 
  ii) Perquisite Value of Gas, Water and Electricity supply Rs. 2,500.
 
  iii) Arrears of Salary received as per revised payscale Rs. 58,800 (Net). Tax deducted on the arrears of Salary Rs. 25,200.
 
  iv) House Rent Allowance exempt u/s 10 (13A) for the year - Rs. Nil.
 
  v) He owned a residential house which was used for his own residence Fair Rent Rs. 45,000 and Municipal Valuation Rs. 50,000.
 
  vi) He spent the following amount during the year:
 
  a) Municipal Taxes paid Rs. 5,000.
 
  b) Repairs to House Rs. 4,000.
 
  c) Insurance of House Rs. 2,000.
 
  d) Interest on Loan from HDFC for construction of House Rs. 15,000.
 
  e) Interest on Loan from friends for repairs of House Rs. 5,000.
 
  vii) He spent Rs. 8,000 on medical treatment of his minor daughter who is permanently physically disabled.
 
  viii) He paid Rs. 3,000 by cheque to GIC for medical insurance on his health.
 
  Compute the Total Income of Girish for the Assessment Year 1998-99.
 
   
 
Q. 3. Mr. Harish, who is totally blind, has let out the house property situated at Vashi for residential purpose particulars of which are as follows for the year ending 31st March, 1998.
15
 
   
Rs.
i) Rent Received
60,000   
ii) Municipal Valuation
50,000   
iii) Fair Rent
75,000   
iv) Municipal Taxes paid by tenant
5,000   
v) Insurance Premium paid
2,800   
vi) Collection Charges incurred
4,000   
vii) Land Revenue paid(Rs. 1,500 Outstanding for 1996-97 paid during the year)
 3,500   
viii) Ground Rent due for the year(Out of which Rs. 2,000 paid during the year)
2,500   
ix) Annual Charge Paid for the year(Rs. 4,000 Outstanding for the year 1997-98)
6,000   
 
  Following are the details of other income earned by him.
 
 
   
Rs.
i) Interest accrued on Fixed Deposit with Bank.
10,000    
ii) Interest accrued on Public Provident Fund Account.
1,200    
iii) Dividend declared by Apna Co-operative Society 10th July, 1997 and received on 18th August, 1997.
2,500    
iv) Dividend declared by Century Ltd. on 30th August, 1997 and received on 5th October, 1997.
7,500    
v) Interest accrued on Private Loans to friends.
30,000    
 
  Compute the total Income of Harish for the Assessment Year 1998-99.
 
   
 
Q. 4. Mr. Abhijit, an Indian citizen, furnishes the following particulars of his income earned during the previous year relevant to assessment year 1998-99.
15
 
   
Rs.
1) Professional Fees received in India
11,000   
2) Income earned in India but received in Rome
12,000   
3) Dividend on shares of Indian Companies:  
  i) Received in India
 6,000   
  ii) Received Abroad
7,000   
4) Salary earned and received in Paris
14,000   
5) Income from agriculture in Nepal
15,000   
6) Income from business in U.K. controlled from India
16,000   
 
  Compute his total income for the assessment year 1998-99, assuming the Residential Status as:
 
  i) Resident and Ordinarily Resident
 
  ii) Resident but not Ordinarily Resident
 
  iii) Non Resident in India.
 
   
 
Q. 5. a) Define and explain the following as per Income Tax Act, 1961.
15
  i) Annual Value      ii) Assessee
 
   
 
  b) What are the expenses which are expressly not allowed as deduction while computing the income under the head, "Income from Other Sources" under the Income Tax Act, 1961?
 
SECTION - II
Q. 6. Define and explain the following as per the provisions of Central Sales Tax Act, 1956.
10
  a) Dealer
 
  b) Declared Goods
 
 
OR
 
  When is the Sale or Purchase of Goods said to take place outside a State under Central Sales Tax Act, 1956?
10
   
 
Q. 7. Define and explain any two of the following as per the provisions of the Bombay Sales tax Act, 1959.
10
  a) Resale     b)Purchase Price      c)Sale
 
 
OR
 
  Explain in detail, when a Sale to an Authorised Dealer or a Commission Agent holding permit can be made at reduced rate of tax as per the provisions of Section 11 of the Bombay Sales Tax Act, 1959.
 
   
 
Q. 8. Mr. Suman is a dealer. Find out from which month he will be liable for the payment of Sales Tax as per the Provisions of B.S.T. Act., 1959.
10
 
1997Month
Purchases
Sales
TaxableRs.
TaxfreeRs.
TaxableRs.
TaxfreeRs.
April
500    
1000    
1500    
500    
May
Nil    
2000    
Nil    
1000    
June
1000    
Nil    
500    
1000    
July
2000    
1000    
1500    
1000    
August
1000    
500    
1000    
3000    
September
Nil    
3000    
3000    
1000    
October
8000    
12000    
18000    
12000    
November
18000    
23000    
42000    
37000    
December
26000    
35000    
48000    
38000    
 
 
OR
 
  M/s. Alfa & Co., request you to compute their Sales Tax liability under Bombay Sales Tax Act, 1959, for the month of January 1998 from the following information:
10
 
            Rs.
Sales (excluding Sales Tax) of Schedule "C" goods      250,000
Sale out of Maharashtra      150,000
Labour charges received      120,000
Form No. 14        25,000
Sale of Schedule B goods        15,000
Sale of Schedule A goods        35,000
Resale        25,000
       620,000
Rate of Sales Tax on Schedule "C" goods is 13% and Schedule "B" goods @ 4%.
              Rs.
Purchase of Machinery      500,000
Purchase from Registered Dealer      200,000
Labour charges paid      100,000
U.R.D. Purchase used in manufacturing      100,000
Purchase Tax on U.R.D. Purchase         2,000
Set Off (Ignore VAT)        50,000
 
Q. 9. a) Define and explain the term "manufacture" as per the provision of the Central Excise Act, 1944.
10
   
 
  b) Explain with reasons whether the following activities are manufacturing activities as per the provisions of the Central Excise act, 1944. (any two):
 
  i) Retreading of Old Tyres
 
  ii) Assembly of T.V. from various parts
 
  iii) Reconditioning of machinery.
 
 
OR
 
  Explain the basis of charge of Excise Duty as per Section 3 of Central Excise Act, 1944.
 
   
 
Q.10. Bright & Co. has a factory at MIDC, Chiplun. It manufactures excisable product "X" chargeable to Excise Duty @ 10%. It is the practice of the company to store Finished Goods in Bonded Store Room. From the following particulars prepare RG-1 Daily Stock Account with relevant Column.
10
 
 
Date
Particulars
i)
1st January, 1998
Opening Balance of Product "X" packed 600 units.
ii)
2nd January, 1998
Quantity manufactured of Product "X" packed 450 units.
iii)
3rd January, 1998
Quantity of Product "X" cleared for home consumption packed 600 units valued at Rs. 1,20,000.
iv)
4th January, 1998
Quantity of Product "X" given as free sample packed 120 units valued at rs. 24,000.
v)
5th January, 1998
Quantity manufactured of Product "X" packed 1000 units.
vi)
6th January, 1998
Quantity exported under bond of Product "X" packed 1,250 units valued at Rs. 2,50,000.
 
   
 
 
OR
 
   
 
  Industrial Tube Ltd. manufactures an Industrial product "CN". Following particulars are available for the month of March, 1998.
 
  i) On 1st March, 1998, Balance in PLA is Rs. 2,800.
 
  ii) Manufactured 5,000 units of Product "CN".
 
  iii) Sold 1,250 units of Product "CN" to Government Department @ Rs. 100 per unit, sold 1,750 units of Product "CN" to Industrial consumer @ Rs. 120 per unit, sold 2,000 units of Product "CN" in Wholesale Market @ Rs. 125 per unit.The sale prices are exclusive of duty and taxes. The rate of Excise Duty is 15%.
 
  iv) Purchased Raw Materials, Modvat Credit Eligible Rs. 25,950.
 
   
 
  You are further informed that -
 
  i) There is no Opening Stock and Closing Stock of Product "CN" in the month of March, 1998.
 
  ii) There is no Opening Balance and Closing Balance in RG-23A Part II in the month of March, 1998.
 
  iii) The Company wished to maintain Rs. 1,000 as Closing Balance in PLA as on 31sr March, 1998.
 
   
 
  Calculate -
 
  a) Excise Duty Liability for the month of March, 1998.
 
  b) Amount Deposited through Bank in PLA during the month of March, 1998.

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