Description
taxation que and sol ipcc
Page 1 of 18 Solution of mock test Taxation for Nov 2012 Exam Answer : 1.(a) Computation of total income of Mr. Amit for the Assessment Year 2012-13 Particulars ` Income from Salary Basic Salary ( ` 35,000 ??12) CCA (` 1,500 ??12) HRA (` 7,000 ??12) Less: Exempt under section 10(13A) [See Note 1 below] Education Allowance (600´12´3) Less: Exempt under section 10(14) (100?12?2) Income from Salary Profits and gains from business or profession Income from the business of letting on hire, a heavy vehicle under section 44AE (5,000?8) [See Note 2 below] Income from Other Sources Interest from company deposits Bank interest Less: Deduction under section 57 ` 2,00,000 @ 10% for 6 months – towards loan interest Gross Total Income Less: Deduction under Chapter VI-A ` 4,20,000 18,000 84,000 54,000 21,600 2,400 30,000 19,200 4,87,200
40,000
22,000 8,000 30,000 10,000 20,000 5,47,200 1,23,000 18,000 1,41,000 1,00,000 4,47,200
Under section 80C [See Note 4 below]
Under section 80CCC restricted to Total Income
Computation of tax payable for the A.Y.2012-13 Particulars Tax on ` 4,47,200 Add: Education cess@2% and SHEC@1% Tax Payable ` 26,720 802 27,522
Notes: (1) HRA is exempt to the extent of the least of the following under section 10(13A) (1) 50% of salary (as the city is Delhi ) i.e. 50% of ` 4,20,000 = ` 2,10,000 (2) Excess of rent paid over 10% of salary = ` 96,000 – ` 42,000 = ` 54,000 (3) Actual HRA received = 7,000 × 12 = ` 84,000 Least of the above i.e.` 54,000 is exempt under section 10(13A)
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Page 2 of 18 Solution of mock test Taxation for Nov 2012 Exam (2) In the case of a person owning not more than 10 vehicles at any time during the previous year, estimated income from each heavy vehicle will be deemed to be ` 5,000/- for every month or part of the month during which the heavy vehicle is owned by the assessee during the previous year [Section 44AE]. Presumptive income = ` 5,000 × 8 = 40,000 If, however, the assessee declares a higher amount, such amount will be considered as income. In the instant case, since the assessee declares a lower amount, it cannot be considered, since no books of account are maintained. Also, interest is not deductible, since under section 44AE, all deductions under sections 30 to 38 are deemed to have been allowed. (3) Brought forward loss from speculation business can be set off only against income from speculation business and not against other business income. (4) Deduction under section 80C: Investment in notified equity linked saving scheme of UTI Investment in PPF Life insurance premium on own life restricted to 20% of sum assured Tuition fees paid for two of his children (Most favourable to Ram) 15,000 64,000 10,000 34,000
1,23,000 (5) Contribution to pension fund of LIC ` 18,000 is deductible under section 80CCC. (6) Total deduction under sections 80C, 80CCC and 80CCD(1) is limited to ` 1,00,000 as per section 80CCE. Answer In the case of X Ltd. point of taxation will be on accrual basis with effect from April 1, 2011. Service tax liability may be calculated for April 2011 (or subsequent months) in the format given below –
Rs. Step 1 – Amount received during April 2011 for service rendered before April 1, 2011 xxx
Step 2 – Add: Value of invoice issued in the month of April 2011
xxx
Step 3 – Add: Advance received in the month of April 2011
xxx
Step 4 – Less: Advance which is received during April 2011 or before April 2011) adjusted against invoices issued during April 2011
xxx
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Page 3 of 18 Solution of mock test Taxation for Nov 2012 Exam Value of taxable services for April 2011 (Step 1 + Step 2 + Step 3 – Step 4)
Service tax liability for April 2011 shall be as follows –
Different activities during April 2011
Value before service tax Rs. (2)
Service tax [10.3% of (2)] Rs (3)
(1) Step 1 – Amount received during April 2011 for services rendered up to March 31, 2011 (up to March 31, 2011service tax was chargeable on receipt basis) Amount received during April 2011 for service rendered during January 2011 (Rs. 6,59,594 is inclusive of service tax) Amount received during April 2011 for services rendered during March 2011 (Rs. 4,84,100 is inclusive of service tax) Amount received during April 2011 for services rendered during March 2011 9Rs. 19,19,220 is inclusive of service tax) Step 2 – Add: Value of invoice issued in the month of April 2011 (Rs. 10,72,000 + Rs. 5,15,000 = Rs. 15,87,000) Step 3 – Add : Advance received during April 2011 (service not rendered) Step 4 – Less : Advance received on March 1, 2011 and adjusted against invoices issued during April 2011 Total
Value inclusive of service tax [(2) + (3)] Rs. (4)
5,98,000
61,594
6,59,594
4,38,894
45,206
4,84,100
17,40,000
1,79,220
19,19,220
15,87,000 90,662
1,63,461 9,338
17,50,461 1,00,000
4,53,309 40,01,247
46,691 4,12,128
5,00,000 44,13,375
Note – Value (inclusive of service tax) should be posted in Column 4. In such a case, Column 2 = [Column 4 x 100 /110.3]. Column 3 will be 10.3% of Column 2
Answer 1 ( c ) Goods ` X Purchases ` 1,00,000 Input VAT credit ` Sales (Turnover) ` 1,60,000 Output VAT
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Page 4 of 18 Solution of mock test Taxation for Nov 2012 Exam Y(Refer Note) Z 2,00,000 2,00,000 5,00,000 25,000 8,000 33,000 2,40,000 3,00,000 7,00,000 30,000 12,000 42,000
Computation of the taxable turnover, Input VAT, Output VAT and Net VAT payable:Total turnover Less: Exempt Turnover Taxable turnover Opening balance of Input VAT credit Add: Input VAT credit for April, 2012 7,00,000 1,60,000 5,40,000 6,000 33,000 39,000 42,000 3,000 2,25,000 25,000
Total Input VAT credit available
Less: Output VAT payable on taxable turnover
Net VAT payable
Note: Goods Y purchase value (including VAT) Less: VAT included in above 2,25,000 × 12.5 112.5 Purchase price excluding VAT Add: Profit on above @ 20% Selling price before VAT VAT @ 12.5% on selling price
2,00,000 40,000 2,40,000 30,000
Answer : 2 (a) (i) As per section 64(1A), in computing the total income of an individual, all such income accruing or arising to a minor child shall be included. However, income of a minor child suffering from disability specified under section 80U would not be included in the income of the parent but would be taxable in the hands of the minor child. Therefore, in this case, the income of daughter suffering from disability specified under section 80U should not be clubbed with the income of Mr. Sharma. Under section 10(32), income of each minor child includible in the hands of the parent under section 64(1A) would be exempt to the extent of the actual income or ` 1,500, whichever is lower. The remaining income would be included in the hands of the parent. Computation of income earned by minor children to be clubbed with the income of Mr. Sharma Particulars ` (i) Income of one daughter 9,000
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Page 5 of 18 Solution of mock test Taxation for Nov 2012 Exam Less: Income exempt under section 10 (32) Total (A) (ii Income of two sons (` 6,200 + ` 4,300) Less: Income exempt under section 10(32) (` 1,500 + ` 1,500) Total (B) Total Income to be clubbed as per section 64(1A) (A+B) 1,500 7,500 10,500 3,000 7,500 15,000
Note It has been assumed that: (1) All the four children are minor children; (2) The income does not accrue or arise to the minor children on account of any manual work done by them or activity involving application of their skill, talent or specialized knowledge and experience; (3) The income of Mr. Sharma, before including the minor children’s income, is greater than the income of Mrs. Sharma, due to which the income of the minor children would be included in his hands; and (4) This is the first year in which clubbing provisions are attracted. Answer 2 (a) (ii) Revised return - return of income can be revised under section 139(5). A return which is submitted belatedly, after the due date of submission of return, cannot be revised – Kumar Jagdish Chandra Sinha v. CIT [1996] 86 Taxman 122 (SC). Return of loss can be revised, if original return was submitted on or before the due date. An assessee can file revised return can be filed under section 139[5] for correcting any omission or wrong statement made in the first revised return. However, it should be submitted within the statutory time, i.e., within one year from the end of the assessment year or before completion of the assessment, whichever is earlier. The period of limitation for completion of assessment prescribed under section 153(1) will run from the date of filing of second revised return, if the assessee has filed two revised returns. In case of defective return, the assessee can rectify the defect within 15 days (or within the extended period). After such rectification, the return can be revised if the original return was submitted before due date. If the defect is not rectified within 15 days (or within the extended period), then the return will become invalid return and such return cannot be revised. If the return contains a defect or if the return is incomplete (but the assessing officer has not intimated the same to the assessee), such return can be revised if the return was submitted before the due date. Answer 2 ( a) ( iii ) (ii) Computation of Total Income of Mr. Banerjee for A/Y 2012-13. Rs. Income from house property House I House II House III Income from profits and gains from business or profession 36000 (20000) 60000
76000
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Page 6 of 18 Solution of mock test Taxation for Nov 2012 Exam Textile business Automobile business Speculation business 200000 (300000) 200000
100000
Income from capital gains Long term capital gain from sale of shares (STT paid) exempt u/s 10(38) NIL Long term capital gain from sale of vacant site 200000 Short term capital loss from Sale of building (100000) Note: STCL can be set off against both STCG and LTCG Income from other sources Gift from a friend (non relative) on 5.6.11 Gift from grandfather Younger brother Total Income of Mr. Banerjee
100000
60000 100000 160000 436000
Answer : 2 (b) As per Rule 3 of the Point of Taxation Rules, point of taxation would be determined as follows:1. Date of invoice or payment, whichever is earlier, if the invoice is issued within 30 days from the date of completion of service. 2. Date of completion of provision of service or payment, if the invoice is not issued within 30 days. Point of Taxation in each of the above three cases will be as under: CASE I-The point of taxation is date of payment [25th April,2012] as date of payment [25.04.2012] falls before date of issuance of invoice[30.04.2012] and invoice has been issued within 30 days of completion of service.[15.04.2012]. CASE II- The point of taxation is date of completion of service [15th April,2012] as date of completion of service [15.04.2012] falls before date of payment [25.04.2012] and invoice [16.05.2012] has not been issued within 30 days of completion of service [15.04.2012]. CASE III- The point of taxation is 20th April, 2012 as date of invoice [20.04.2012] falls before date of payment[25.04.2012] and invoice has been issued within 30 days of completion of service [15.04.2012]. Answer : 2 ( c ) The tax paid by a registered dealer at the earlier point is called input tax. This amount will be adjusted against the tax payable by the purchasing dealer on his sales. This credit availability is called input tax credit (ITC). It can also be referred to as tax credit on a sale within the State or in the course of intra-State trade or commerce. The essence of VAT is in providing set-off for the tax paid earlier, and this is given effect through the concept of input tax credit/rebate. Thus, input tax credit in relation to any period can be set off by the registered dealer against the amount of his output tax.
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Page 7 of 18 Solution of mock test Taxation for Nov 2012 Exam
Answer 3(a) Computation of capital gains in the hands of Mr. Shivam for the A.Y.2012-13 Particulars Capital Gains: Sale price of the residential house 25,00,000 Valuation as per Stamp Valuation authority (Value to be taken is the higher of actual sale price or valuation adopted for stamp duty purpose as per section 50C) Deemed Sale Consideration for the purpose of Capital Gains Less: Expenses on transfer (Brokerage @1% of ` 25,00,000) Net Sale Consideration Less: Indexed cost of acquisition (Note 1) Indexed cost of improvement (Note 2) Less: Exemption under section 54 Long-term Capital Gain 16,87,750 7,06,500 32,00,000 25,000 31,75,000 23,94,250 7,80,750 6,00,000 1,80,750 `
Note 1: Computation of indexed cost of acquisition Cost of acquisition,
being the higher of -
2,65,000
(i) fair market value as on April 1, 1981 i.e. ` 2,60,000 (ii) actual cost of acquisition i.e.` 2,65,000 (` 2,40,000 + ` 25,000, being stamp duty @ 10% of ` 2,50,000) Less: Advance taken and forfeited Cost for the purpose of indexation Indexed cost of acquisition (` 2,15,000 x 785/100) Note 2: Computation of indexed cost of improvement Indexed cost of improvement Construction of first floor in March, 1988 (i.e. ` 1,35,000 x 785/150) 50,000 2,15,000 16,87,750 7,06,500
Note 3: Since NHAI bonds were purchased after 6 months from the date of transfer of house property, Mr. Shivam cannot avail exemption under section 54EC. Answer 3(b) In case of sale/purchase of foreign currency including money changing [Sub-rule (7B)] S.No. For an amount After amendment (With effect from 01.04.2012) 0.12 % of the gross amount of currency exchanged or
1.
Upto ` 100,000
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Page 8 of 18 Solution of mock test Taxation for Nov 2012 Exam ` 30 whichever is higher
2. 3.
Exceeding ` 1,00,000 and upto ` 10,00,000 Exceeding ` 10,00,000
` 120 + 0.06 % of the gross amount of currency exchanged ` 660 + 0.012 % of the gross amount of currency exchanged or ` 6,000 whichever is lower
Answer 3(c ) (a) False (b) False (c) False (d) True (e) False (f) False (g) False (h) True Answer 4 (a) Computation of total income of Mr. Manik for A.Y.2012-13 Particulars Income from salaries (See Working Note 1) Capital gains (See Working Note 2) Income from other sources (See Working Note 3) Gross Total Income Less: Deductions under Chapter VI-A (See Working Note 4) Total Income Working Notes: 1. Income from salaries Particulars Salary for 5 months received from Government of India (` 10,000 x 5) Pension for 4 months from Sep. 2011 to Dec. 2011 @ ` 6000 p.m. ( ` 6000 x 4) Pension for 3 months (2/3 of ` 6000) from Jan 2012 to March 2012 @ ` 4,000 p.m. (` 4,000 x 3) ` 86,000 3,75,750 62,250 5,24,000 1,15,000 4,09,000 ` 50,000 24,000 12,000
86,000 Note : Commuted value of pension of ` 2,40,000 received from the Central Government is fully exempt under section 10(10A). 2. Capital gains Particulars ` Long term capital gains on sale of house plot at Kanpur on 27.11.2011 Sale consideration received is ` 10,50,000. However, since the value 12,00,000 assessed by the stamp valuation authority (i.e. ` 12,00,000) is higher than the sale consideration, such value assessed is deemed to be the full Prepared BY : CA. AMIT KHANDAL ( B.COM, LL.B, FCA ) TAX GURU E-777/6 , NAKUL PATH , LALKHOTHI, JAIPUR MOBILE: 9314767107,9829056469
Page 9 of 18 Solution of mock test Taxation for Nov 2012 Exam value of the consideration received or accruing as a result of such transfer as per section 50C Less: Indexed cost of acquisition (` 1,05,000 x 785/100) 8,24,250 3,75,750
3. Income from other sources Particulars ` Interest on bank FDRs Dividend of ` 8,500 on units of Mutual Fund [exempt under section 10(35)] Interest on maturity of NSC Less: Interest already shown on accrual basis in the past returns
82,500 67,500
` 47,250
15,000 62250
4. Deductions under Chapter VI-A Particulars ` Under section 80C Purchase of NSC Life Insurance Premium paid Total Maximum deduction available under section 80C Under section 80D Medical insurance premium paid (` 16,000), restricted to ` 15,000, being the maximum allowable deduction ` 65,000 53,000 1,18,000 1,00,000 15,000 1,15,000 Answer 4(b) In this case , it is stated that all the invoices have been issued within the time limit of Rule 4A of the service Tax Rules , 1994. In view of provisions of Rule 3 of the Point of Taxation Rules, 2011 , the liability to pay service tax depends upon the date of invoice or the date of receipt of payment, whichever is earlier. Thus , in respect of the Advance received in May, 2012, the Point of taxation shall be the date of receipt of advance. The invoice therefor shall have to be issued within 30 days from the date of receipt of advance. In respect of the balance consideration , the date of invoice ( which falls in July, 2012 ) , being earlier in time, shall be the point of taxation. It is assumed that the invoice has been issued within 30 days from the date of completion of service. In this question, the assessee has provided total services valuing Rs. 210000 , out of which services valuing Rs. 70000 are non taxable. Therefore , 2/3rd of the total value of services is the value of taxable services. Accordingly, only the proportionate sum received towards value of taxable services will be liable to tax. I) Advance received in May 2012 – Due date for payment of service tax 5th or 6th June, 2012 Advance reveived towards all services in May 2012 60,000 rd Proportionate advance received towards taxable services ( 2/3 of total advance) 40,000 Service tax on the amount of proportionate advance i.e. 40000 × 12.36% 4,944 Balance billed in July 2012 – Due date for payment of service tax 5th or 6th August, 2012 Prepared BY : CA. AMIT KHANDAL ( B.COM, LL.B, FCA ) TAX GURU E-777/6 , NAKUL PATH , LALKHOTHI, JAIPUR MOBILE: 9314767107,9829056469
II)
Page 10 of 18 Solution of mock test Taxation for Nov 2012 Exam Balance billed towards all services in July 2012 ( 210000-60000 ) Proportionate balance towards taxable services ( 2/3rd of total balance sum ) Service tax on the amount of proportionate balance i.e. 100000 × 12.36 % 1,50,000 1,00,000 12,360
Note : The option provided in Rule 6(1) that the assessee may opt to pay service tax on receipt basis if the value of services provided in the preceding year is upto Rs. 50 Lakhs is not available to a company. Since , in this case, the assessee is a company , hence, there is no question of payment of service tax on receipt basis.
Answer 4(c)
Computation of VAT liability – Gross product variant Rs. 32,000 Consumption variant Rs. 32,000
Vat on sale (4% of Rs. 8,00,000) Less: Input credit Raw material purchased (4% of Rs. 5,00,000) Plant and machinery (4% of Rs. 2,50,000) VAT payable
20,000 -12,000
20,000 10,000 2,000
Consumption Variant is beneficial to the dealer.
Answer 5(a) Assessee: Dr. Shuba
Previous Year: 2011-2012
Assessment Year: 2012-2013
Computation of Total Income Particulars 1. Salaries: Lecturers Rs. 5,000 Rs.
Less: Deduction u/s 16 Income under the Head “Salary” 2. Income from House Property – Self Occupied, So, Annual Value u/s 22
Nil 5,000 Nil
Less: Deduction u/s 24 – Interest (6,00,000 x 10% 10% ¾)
(30,000)
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Page 11 of 18 Solution of mock test Taxation for Nov 2012 Exam ( Restricted to Rs. 30,000 ) (30,000) Income from House Property 3. Profits and Gains of Business or Profession Rs. Particulars Sale of Medicine Add 2,50,000 Deduct Rs.
Consultation Fee
50,000
Visiting Fee
2,00,000
Interest Paid (60,000 x ¼)
15,000
Payment fee Medical Journal
5,000
Depreciation on Surgical Equipment (50,000 x 15%)
7,500
Depreciation on Vehicle (4,00,000 x 15% x ¾)
45,000
Vehicle Expenses – For Business Purposes – ( 50,000 x ¾)
37,500
Interest paid on Loan – = 22,330 x ¾ Purchase of medicines
16,748 47,000 3,26,252
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Page 12 of 18 Solution of mock test Taxation for Nov 2012 Exam
3,24,625 Profits and Gains from Business 5. Income from Other Sources 5,00,000 (1,73,748)
Family Pension
2,80,000
Less: Exempt u/s 57 – Least of the following 33 1/3% of Gross Pension Amount of 93,333 15,000 (15,000) 2,65,000
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Page 13 of 18 Solution of mock test Taxation for Nov 2012 Exam
Savings Bank Interest
1,000
Interest on term Deposit (1,50,000 x 9% x 9/12)
10,125
Less: Exempt u/s 10(32) – Rs. 1,500 per Child
(1,500) 8,625
Income from lottery ( 35,000*100/70 ) 50,000 Gross Total Income 6,25,877
Less : Deduction under Chapter VI – A
U/s. 80C – Housing Loan Repayment (Principal Portion)
48,000
U/s 80D - Medical Insurance Premium
- Herself (Restricted)
15,000
- Mother (Being Senior Citizen Maximum deduction is Rs. 20,000) 16,000 Total Income (Before Agricultural Income) (Rounded off) Working Notes: 1. Share Income from HUF is exempt u/s 10(2). 2. Drawings, advance tax paid are not allowable expenditures. 31,000 (79,000) 5,46,880
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Page 14 of 18 Solution of mock test Taxation for Nov 2012 Exam Deduction of interest on loan is taken on paid basis.
Answer 5 ( b ) Section 67(1)(iii) of the Finance Act, 1994 ensures payment of service tax based on valuation even
when consideration is not ascertainable. However, these provisions apply only when there is consideration. If there is no consideration i.e., in case of free service, section 67 cannot apply. Thus, no service tax is payable when value of service is zero, as the charging section 66 provides that service tax is chargeable on the value of taxable service. Hence if the value is zero, the tax will also be zero even though the service may be taxable. However, this principle applies only when there is really a 'free service' and not when its cost is recovered through other means. Therefore, in the light of the aforesaid discussion, it may be inferred that, the service tax is not payable on service rendered by Miss Radhika to Mr. Ram Kapoor as Miss Radhika has not charged any fee from Mr. Ram Kapoor. Answer 5 ( c ) (i) The different variants of VAT are:1. Gross product variant: Under gross product variant, deduction for taxes on all inputs is allowed, but not for tax paid on capital goods. 2. Income variant: Under income variant, deductions for tax paid on inputs and depreciation on capital goods is allowed. 3. Consumption variant: Under consumption variant, deduction for taxes paid on all business inputs including capital goods is allowed. (ii) VAT is levied at each stage of production and distribution on the value added at the respective stage. Value added is the difference between the sales price and purchase price or the sum of wages, interest and other costs incurred and profits. Broadly, VAT is paid at each of the following stages of a sale transaction:Manufacturer Wholesaler Retailer Consumer Yes, entire burden of VAT falls on the final consumer and he does not get any credit of the same. Answer 6(a) (i) Section 35AD has been introduced with effect from Assessment Year 2010-11 as investment linked incentive for specified business.
With the specific objective of creating rural infrastructure and environmental friendly alternate means for transportation of bulk goods, investment linked tax incentives have been introduced for specific business which also includes 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.
(ii) 100% of the capital expenditure incurred during the previous year, wholly and exclusively for the above business would as deduction from the business investment would not be eligible for deduction.
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Page 15 of 18 Solution of mock test Taxation for Nov 2012 Exam (iii) Further, the expenditure incurred wholly and exclusively, for the purpose of specified business prior to the commencement operation would be allowed as deduction during the previous year in which the assessee commences operation of his specified business. A condition has been inserted that such amount incurred prior to the commencement should be capitalized in the books of account of the assessee on the date of commencement of its operation.
Accordingly, Alpha Ltd. will be entitled for deduction under 35AD for Assessment Year 2012-13 as under:
Capital expenditure incurred during the previous year 2011-12 (excluding the expenditure incurred on acquisition of land
100 lakhs
Capital expenditure incurred prior to 1.4.2011 (i.e. prior to commencement of business) and capitalized in the books of account as on 1.4.2011
40 lakhs
Total deduction under section 35AD for A.Y. 2012-13
140 lakhs
(ii) Answer The requirement to deduct tax at source in respect of fees for professional or technical services are covered under section 194J in case the amount exceeds Rs. 30,000 in a financial year. Further, the tax shall be deducted at source either on credit or payment, whichever is earlier. The proviso to Section 194J contemplates independent limit of Rs. 30,000 each towards
(a) fees for professional services; and (b) fees for technical services. In the given case, M/s. Nidhi Textiles Ltd. has credited Rs. 19,000 towards fees for professional services and Rs. 15,000 towards fees for technical services to the account of Mr. Suresh in its books of accounts. As the fee for professional services or fee for technical services independently does not exceed Rs. 20,000 during the financial year, the liability to deduct tax under section 194J does not arise.
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Page 16 of 18 Solution of mock test Taxation for Nov 2012 Exam
Answer 6(b) In the case of X Ltd. point of taxation will be accrual basis with effect from July 1, 2011. Service tax liability may be calculated for August 2011 (or July 2011 or subsequent months) in the format given below – Rs. xxx xxx Step 2 – Add: Value of invoice issued in the month of August 2011 xxx Step 3 – Add: Advance received in the month of August 2011 Step 4 – Less: Advance (which is received during August 2011 or before August 2011) adjusted against invoice issued during August 2011 Value of taxable services for August 2011 (Step 1 + Step 2 + Step 3 – Step 4) Service tax liability for August 2011 shall be as follows – Different activities during August 2011 Value before service tax Rs. (2) Service tax [10.3% of (2)] Rs. (3) Value inclusive of service tax [(2) + (3)] Rs. (4) xxx xxx
Step 1 – Amount received during August 2011 for service rendered before July 1, 2011
(1) Step 1 – Amount received during August 2011 for service rendered up to June 30, 2011 (up to June 30, 2011 service tax was chargeable on receipt basis) Amount received during August 2011 for service rendered during March 2011 (Rs. 3,86,050 is inclusive of service tax) Amount received during August 2011 for service rendered during April, May and June 2011 (Rs. 17,04,135 is inclusive of service tax) Step 2 – Add: Value of invoice issued in the month of August 2011 (Rs. 7,50,000 + Rs. 2,00,000 = Rs. 9,50,000) Step 3 – Add: Advance received during August 2011 (service not rendered) Step 4 – Less: Advance received on May 1, 2011 and adjusted against invoices issued during August 2011 Total
3,50,000
36,050
3,86,050
15,45,000 1,59,135
17,04,135
9,50,000 5,43,971
97,850 56,029
10,47,850 6,00,000 3,00,000 34,38,035
2,71,985 28,015 31,16,986 3,21,049
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Page 17 of 18 Solution of mock test Taxation for Nov 2012 Exam Note- Value (inclusive of service tax) should be posted in Column 4. In such a case, Column 2 = [Column 4 x 100 / 110.3] . Column 3 will be 10.3% of Column 2
Answer 6 ( c ) Computation of the tax liability for the financial year 2011-12:Inputs purchased in the month Output sold in the month (within the State) Inter-State sales Input credit (including capital goods) (` 12,500 + ` 12,500) Output tax CST for Inter-State sale State VAT liability (` 8,000 – ` 25,000) Excess credit Central sales tax to be paid (` 2,000 – ` 17,000) Excess credit carried forward to subsequent period 1,00,000 2,00,000 1,00,000 25,000 8,000 2,000 Nil 17,000 Nil 15,000
Answer 7 ( a ) Computation of income from house property for the A.Y. 2012-13 Particulars Vinay Income from house ` property I. Self-occupied portion (50%) Nil Annual value Less: Deduction under section 24(b) Interest on loan taken for 30,000 construction ` 90,000 (being 50% of ` 1.8 lakh) in total restricted to maximum of ` 30,000 for each co-owner (since the property was constructed before 01.04.1999) (30,000) Loss from self occupied Nitesh ` Nil 30,000
(30,000) 78,900 48,900
property
II. Let-out portion (50%) – See Working Note below Income from house property
78,900 48,900
Working Note Computation of income from let-out portion of house property
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Page 18 of 18 Solution of mock test Taxation for Nov 2012 Exam Particulars ` ` Let-out portion (50%) Gross Annual Value (a) Municipal value (50% of ` 8 lakh) 4,00,000 (b) Actual rent [(` 18000 x 2 x 12) – (` 18,000 x 1 x 1)] = ` 4,32,000 - ` 4,14,000 18,000 - whichever is higher 4,14,000 Less: Municipal taxes 50% of ` 1,20,000 (15% of ` 8 lakh) 60,000 Net Annual Value (NAV) 3,54,000 Less: Deduction under section 24 (a) 30% of NAV 1,06,200 (b) Interest on loan taken for the house [50% of 90,000 1,96,200 ` 1.8 lakh] Income from let-out portion of house property 1,57,800 Share of each co-owner (50%) 78,900 Note: The benefit of “Nil” Annual Value under section 23(2) in respect of a self occupied property can also be availed where the owner cannot occupy the property by reason of his employment at a different place and he resides, at such other place, in a building not belonging to him, provided he has not derived any other benefit from such property. Answer 7 ( b ) The due dates for filing of half yearly service tax return is 25th of the month following the particular half year. For the half year ending Return should be filed by 30th Sept. 25th October 31st March 25th April If the 25th of the month is a public holiday, return is to be filed on immediately succeeding working day. An assessee can submit a revised return, in Form ST-3, in triplicate, to correct a mistake or omission, within a period of 90 days from the date of submission of the original return. 7(c) Answer Following are the purchases which are not eligible for input tax credit :? Purchases from unregistered dealers. ? Purchases of goods from other states i.e. inter state purchases. ? Import of goods from outside the territory of India ( commonly known as high seas purchases) ? Purchases from registered dealer who has opted for composition scheme. ? Purchases of non credible goods as may be notified by the state government . ? Purchases of goods in cases where the selling dealer’s invoice does not show the amount of tax charged separately by such selling dealer.
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doc_657372168.docx
taxation que and sol ipcc
Page 1 of 18 Solution of mock test Taxation for Nov 2012 Exam Answer : 1.(a) Computation of total income of Mr. Amit for the Assessment Year 2012-13 Particulars ` Income from Salary Basic Salary ( ` 35,000 ??12) CCA (` 1,500 ??12) HRA (` 7,000 ??12) Less: Exempt under section 10(13A) [See Note 1 below] Education Allowance (600´12´3) Less: Exempt under section 10(14) (100?12?2) Income from Salary Profits and gains from business or profession Income from the business of letting on hire, a heavy vehicle under section 44AE (5,000?8) [See Note 2 below] Income from Other Sources Interest from company deposits Bank interest Less: Deduction under section 57 ` 2,00,000 @ 10% for 6 months – towards loan interest Gross Total Income Less: Deduction under Chapter VI-A ` 4,20,000 18,000 84,000 54,000 21,600 2,400 30,000 19,200 4,87,200
40,000
22,000 8,000 30,000 10,000 20,000 5,47,200 1,23,000 18,000 1,41,000 1,00,000 4,47,200
Under section 80C [See Note 4 below]
Under section 80CCC restricted to Total Income
Computation of tax payable for the A.Y.2012-13 Particulars Tax on ` 4,47,200 Add: Education cess@2% and SHEC@1% Tax Payable ` 26,720 802 27,522
Notes: (1) HRA is exempt to the extent of the least of the following under section 10(13A) (1) 50% of salary (as the city is Delhi ) i.e. 50% of ` 4,20,000 = ` 2,10,000 (2) Excess of rent paid over 10% of salary = ` 96,000 – ` 42,000 = ` 54,000 (3) Actual HRA received = 7,000 × 12 = ` 84,000 Least of the above i.e.` 54,000 is exempt under section 10(13A)
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Page 2 of 18 Solution of mock test Taxation for Nov 2012 Exam (2) In the case of a person owning not more than 10 vehicles at any time during the previous year, estimated income from each heavy vehicle will be deemed to be ` 5,000/- for every month or part of the month during which the heavy vehicle is owned by the assessee during the previous year [Section 44AE]. Presumptive income = ` 5,000 × 8 = 40,000 If, however, the assessee declares a higher amount, such amount will be considered as income. In the instant case, since the assessee declares a lower amount, it cannot be considered, since no books of account are maintained. Also, interest is not deductible, since under section 44AE, all deductions under sections 30 to 38 are deemed to have been allowed. (3) Brought forward loss from speculation business can be set off only against income from speculation business and not against other business income. (4) Deduction under section 80C: Investment in notified equity linked saving scheme of UTI Investment in PPF Life insurance premium on own life restricted to 20% of sum assured Tuition fees paid for two of his children (Most favourable to Ram) 15,000 64,000 10,000 34,000
1,23,000 (5) Contribution to pension fund of LIC ` 18,000 is deductible under section 80CCC. (6) Total deduction under sections 80C, 80CCC and 80CCD(1) is limited to ` 1,00,000 as per section 80CCE. Answer In the case of X Ltd. point of taxation will be on accrual basis with effect from April 1, 2011. Service tax liability may be calculated for April 2011 (or subsequent months) in the format given below –
Rs. Step 1 – Amount received during April 2011 for service rendered before April 1, 2011 xxx
Step 2 – Add: Value of invoice issued in the month of April 2011
xxx
Step 3 – Add: Advance received in the month of April 2011
xxx
Step 4 – Less: Advance which is received during April 2011 or before April 2011) adjusted against invoices issued during April 2011
xxx
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Page 3 of 18 Solution of mock test Taxation for Nov 2012 Exam Value of taxable services for April 2011 (Step 1 + Step 2 + Step 3 – Step 4)
Service tax liability for April 2011 shall be as follows –
Different activities during April 2011
Value before service tax Rs. (2)
Service tax [10.3% of (2)] Rs (3)
(1) Step 1 – Amount received during April 2011 for services rendered up to March 31, 2011 (up to March 31, 2011service tax was chargeable on receipt basis) Amount received during April 2011 for service rendered during January 2011 (Rs. 6,59,594 is inclusive of service tax) Amount received during April 2011 for services rendered during March 2011 (Rs. 4,84,100 is inclusive of service tax) Amount received during April 2011 for services rendered during March 2011 9Rs. 19,19,220 is inclusive of service tax) Step 2 – Add: Value of invoice issued in the month of April 2011 (Rs. 10,72,000 + Rs. 5,15,000 = Rs. 15,87,000) Step 3 – Add : Advance received during April 2011 (service not rendered) Step 4 – Less : Advance received on March 1, 2011 and adjusted against invoices issued during April 2011 Total
Value inclusive of service tax [(2) + (3)] Rs. (4)
5,98,000
61,594
6,59,594
4,38,894
45,206
4,84,100
17,40,000
1,79,220
19,19,220
15,87,000 90,662
1,63,461 9,338
17,50,461 1,00,000
4,53,309 40,01,247
46,691 4,12,128
5,00,000 44,13,375
Note – Value (inclusive of service tax) should be posted in Column 4. In such a case, Column 2 = [Column 4 x 100 /110.3]. Column 3 will be 10.3% of Column 2
Answer 1 ( c ) Goods ` X Purchases ` 1,00,000 Input VAT credit ` Sales (Turnover) ` 1,60,000 Output VAT
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Page 4 of 18 Solution of mock test Taxation for Nov 2012 Exam Y(Refer Note) Z 2,00,000 2,00,000 5,00,000 25,000 8,000 33,000 2,40,000 3,00,000 7,00,000 30,000 12,000 42,000
Computation of the taxable turnover, Input VAT, Output VAT and Net VAT payable:Total turnover Less: Exempt Turnover Taxable turnover Opening balance of Input VAT credit Add: Input VAT credit for April, 2012 7,00,000 1,60,000 5,40,000 6,000 33,000 39,000 42,000 3,000 2,25,000 25,000
Total Input VAT credit available
Less: Output VAT payable on taxable turnover
Net VAT payable
Note: Goods Y purchase value (including VAT) Less: VAT included in above 2,25,000 × 12.5 112.5 Purchase price excluding VAT Add: Profit on above @ 20% Selling price before VAT VAT @ 12.5% on selling price
2,00,000 40,000 2,40,000 30,000
Answer : 2 (a) (i) As per section 64(1A), in computing the total income of an individual, all such income accruing or arising to a minor child shall be included. However, income of a minor child suffering from disability specified under section 80U would not be included in the income of the parent but would be taxable in the hands of the minor child. Therefore, in this case, the income of daughter suffering from disability specified under section 80U should not be clubbed with the income of Mr. Sharma. Under section 10(32), income of each minor child includible in the hands of the parent under section 64(1A) would be exempt to the extent of the actual income or ` 1,500, whichever is lower. The remaining income would be included in the hands of the parent. Computation of income earned by minor children to be clubbed with the income of Mr. Sharma Particulars ` (i) Income of one daughter 9,000
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Page 5 of 18 Solution of mock test Taxation for Nov 2012 Exam Less: Income exempt under section 10 (32) Total (A) (ii Income of two sons (` 6,200 + ` 4,300) Less: Income exempt under section 10(32) (` 1,500 + ` 1,500) Total (B) Total Income to be clubbed as per section 64(1A) (A+B) 1,500 7,500 10,500 3,000 7,500 15,000
Note It has been assumed that: (1) All the four children are minor children; (2) The income does not accrue or arise to the minor children on account of any manual work done by them or activity involving application of their skill, talent or specialized knowledge and experience; (3) The income of Mr. Sharma, before including the minor children’s income, is greater than the income of Mrs. Sharma, due to which the income of the minor children would be included in his hands; and (4) This is the first year in which clubbing provisions are attracted. Answer 2 (a) (ii) Revised return - return of income can be revised under section 139(5). A return which is submitted belatedly, after the due date of submission of return, cannot be revised – Kumar Jagdish Chandra Sinha v. CIT [1996] 86 Taxman 122 (SC). Return of loss can be revised, if original return was submitted on or before the due date. An assessee can file revised return can be filed under section 139[5] for correcting any omission or wrong statement made in the first revised return. However, it should be submitted within the statutory time, i.e., within one year from the end of the assessment year or before completion of the assessment, whichever is earlier. The period of limitation for completion of assessment prescribed under section 153(1) will run from the date of filing of second revised return, if the assessee has filed two revised returns. In case of defective return, the assessee can rectify the defect within 15 days (or within the extended period). After such rectification, the return can be revised if the original return was submitted before due date. If the defect is not rectified within 15 days (or within the extended period), then the return will become invalid return and such return cannot be revised. If the return contains a defect or if the return is incomplete (but the assessing officer has not intimated the same to the assessee), such return can be revised if the return was submitted before the due date. Answer 2 ( a) ( iii ) (ii) Computation of Total Income of Mr. Banerjee for A/Y 2012-13. Rs. Income from house property House I House II House III Income from profits and gains from business or profession 36000 (20000) 60000
76000
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Page 6 of 18 Solution of mock test Taxation for Nov 2012 Exam Textile business Automobile business Speculation business 200000 (300000) 200000
100000
Income from capital gains Long term capital gain from sale of shares (STT paid) exempt u/s 10(38) NIL Long term capital gain from sale of vacant site 200000 Short term capital loss from Sale of building (100000) Note: STCL can be set off against both STCG and LTCG Income from other sources Gift from a friend (non relative) on 5.6.11 Gift from grandfather Younger brother Total Income of Mr. Banerjee
100000
60000 100000 160000 436000
Answer : 2 (b) As per Rule 3 of the Point of Taxation Rules, point of taxation would be determined as follows:1. Date of invoice or payment, whichever is earlier, if the invoice is issued within 30 days from the date of completion of service. 2. Date of completion of provision of service or payment, if the invoice is not issued within 30 days. Point of Taxation in each of the above three cases will be as under: CASE I-The point of taxation is date of payment [25th April,2012] as date of payment [25.04.2012] falls before date of issuance of invoice[30.04.2012] and invoice has been issued within 30 days of completion of service.[15.04.2012]. CASE II- The point of taxation is date of completion of service [15th April,2012] as date of completion of service [15.04.2012] falls before date of payment [25.04.2012] and invoice [16.05.2012] has not been issued within 30 days of completion of service [15.04.2012]. CASE III- The point of taxation is 20th April, 2012 as date of invoice [20.04.2012] falls before date of payment[25.04.2012] and invoice has been issued within 30 days of completion of service [15.04.2012]. Answer : 2 ( c ) The tax paid by a registered dealer at the earlier point is called input tax. This amount will be adjusted against the tax payable by the purchasing dealer on his sales. This credit availability is called input tax credit (ITC). It can also be referred to as tax credit on a sale within the State or in the course of intra-State trade or commerce. The essence of VAT is in providing set-off for the tax paid earlier, and this is given effect through the concept of input tax credit/rebate. Thus, input tax credit in relation to any period can be set off by the registered dealer against the amount of his output tax.
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Page 7 of 18 Solution of mock test Taxation for Nov 2012 Exam
Answer 3(a) Computation of capital gains in the hands of Mr. Shivam for the A.Y.2012-13 Particulars Capital Gains: Sale price of the residential house 25,00,000 Valuation as per Stamp Valuation authority (Value to be taken is the higher of actual sale price or valuation adopted for stamp duty purpose as per section 50C) Deemed Sale Consideration for the purpose of Capital Gains Less: Expenses on transfer (Brokerage @1% of ` 25,00,000) Net Sale Consideration Less: Indexed cost of acquisition (Note 1) Indexed cost of improvement (Note 2) Less: Exemption under section 54 Long-term Capital Gain 16,87,750 7,06,500 32,00,000 25,000 31,75,000 23,94,250 7,80,750 6,00,000 1,80,750 `
Note 1: Computation of indexed cost of acquisition Cost of acquisition,
being the higher of -
2,65,000
(i) fair market value as on April 1, 1981 i.e. ` 2,60,000 (ii) actual cost of acquisition i.e.` 2,65,000 (` 2,40,000 + ` 25,000, being stamp duty @ 10% of ` 2,50,000) Less: Advance taken and forfeited Cost for the purpose of indexation Indexed cost of acquisition (` 2,15,000 x 785/100) Note 2: Computation of indexed cost of improvement Indexed cost of improvement Construction of first floor in March, 1988 (i.e. ` 1,35,000 x 785/150) 50,000 2,15,000 16,87,750 7,06,500
Note 3: Since NHAI bonds were purchased after 6 months from the date of transfer of house property, Mr. Shivam cannot avail exemption under section 54EC. Answer 3(b) In case of sale/purchase of foreign currency including money changing [Sub-rule (7B)] S.No. For an amount After amendment (With effect from 01.04.2012) 0.12 % of the gross amount of currency exchanged or
1.
Upto ` 100,000
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Page 8 of 18 Solution of mock test Taxation for Nov 2012 Exam ` 30 whichever is higher
2. 3.
Exceeding ` 1,00,000 and upto ` 10,00,000 Exceeding ` 10,00,000
` 120 + 0.06 % of the gross amount of currency exchanged ` 660 + 0.012 % of the gross amount of currency exchanged or ` 6,000 whichever is lower
Answer 3(c ) (a) False (b) False (c) False (d) True (e) False (f) False (g) False (h) True Answer 4 (a) Computation of total income of Mr. Manik for A.Y.2012-13 Particulars Income from salaries (See Working Note 1) Capital gains (See Working Note 2) Income from other sources (See Working Note 3) Gross Total Income Less: Deductions under Chapter VI-A (See Working Note 4) Total Income Working Notes: 1. Income from salaries Particulars Salary for 5 months received from Government of India (` 10,000 x 5) Pension for 4 months from Sep. 2011 to Dec. 2011 @ ` 6000 p.m. ( ` 6000 x 4) Pension for 3 months (2/3 of ` 6000) from Jan 2012 to March 2012 @ ` 4,000 p.m. (` 4,000 x 3) ` 86,000 3,75,750 62,250 5,24,000 1,15,000 4,09,000 ` 50,000 24,000 12,000
86,000 Note : Commuted value of pension of ` 2,40,000 received from the Central Government is fully exempt under section 10(10A). 2. Capital gains Particulars ` Long term capital gains on sale of house plot at Kanpur on 27.11.2011 Sale consideration received is ` 10,50,000. However, since the value 12,00,000 assessed by the stamp valuation authority (i.e. ` 12,00,000) is higher than the sale consideration, such value assessed is deemed to be the full Prepared BY : CA. AMIT KHANDAL ( B.COM, LL.B, FCA ) TAX GURU E-777/6 , NAKUL PATH , LALKHOTHI, JAIPUR MOBILE: 9314767107,9829056469
Page 9 of 18 Solution of mock test Taxation for Nov 2012 Exam value of the consideration received or accruing as a result of such transfer as per section 50C Less: Indexed cost of acquisition (` 1,05,000 x 785/100) 8,24,250 3,75,750
3. Income from other sources Particulars ` Interest on bank FDRs Dividend of ` 8,500 on units of Mutual Fund [exempt under section 10(35)] Interest on maturity of NSC Less: Interest already shown on accrual basis in the past returns
82,500 67,500
` 47,250
15,000 62250
4. Deductions under Chapter VI-A Particulars ` Under section 80C Purchase of NSC Life Insurance Premium paid Total Maximum deduction available under section 80C Under section 80D Medical insurance premium paid (` 16,000), restricted to ` 15,000, being the maximum allowable deduction ` 65,000 53,000 1,18,000 1,00,000 15,000 1,15,000 Answer 4(b) In this case , it is stated that all the invoices have been issued within the time limit of Rule 4A of the service Tax Rules , 1994. In view of provisions of Rule 3 of the Point of Taxation Rules, 2011 , the liability to pay service tax depends upon the date of invoice or the date of receipt of payment, whichever is earlier. Thus , in respect of the Advance received in May, 2012, the Point of taxation shall be the date of receipt of advance. The invoice therefor shall have to be issued within 30 days from the date of receipt of advance. In respect of the balance consideration , the date of invoice ( which falls in July, 2012 ) , being earlier in time, shall be the point of taxation. It is assumed that the invoice has been issued within 30 days from the date of completion of service. In this question, the assessee has provided total services valuing Rs. 210000 , out of which services valuing Rs. 70000 are non taxable. Therefore , 2/3rd of the total value of services is the value of taxable services. Accordingly, only the proportionate sum received towards value of taxable services will be liable to tax. I) Advance received in May 2012 – Due date for payment of service tax 5th or 6th June, 2012 Advance reveived towards all services in May 2012 60,000 rd Proportionate advance received towards taxable services ( 2/3 of total advance) 40,000 Service tax on the amount of proportionate advance i.e. 40000 × 12.36% 4,944 Balance billed in July 2012 – Due date for payment of service tax 5th or 6th August, 2012 Prepared BY : CA. AMIT KHANDAL ( B.COM, LL.B, FCA ) TAX GURU E-777/6 , NAKUL PATH , LALKHOTHI, JAIPUR MOBILE: 9314767107,9829056469
II)
Page 10 of 18 Solution of mock test Taxation for Nov 2012 Exam Balance billed towards all services in July 2012 ( 210000-60000 ) Proportionate balance towards taxable services ( 2/3rd of total balance sum ) Service tax on the amount of proportionate balance i.e. 100000 × 12.36 % 1,50,000 1,00,000 12,360
Note : The option provided in Rule 6(1) that the assessee may opt to pay service tax on receipt basis if the value of services provided in the preceding year is upto Rs. 50 Lakhs is not available to a company. Since , in this case, the assessee is a company , hence, there is no question of payment of service tax on receipt basis.
Answer 4(c)
Computation of VAT liability – Gross product variant Rs. 32,000 Consumption variant Rs. 32,000
Vat on sale (4% of Rs. 8,00,000) Less: Input credit Raw material purchased (4% of Rs. 5,00,000) Plant and machinery (4% of Rs. 2,50,000) VAT payable
20,000 -12,000
20,000 10,000 2,000
Consumption Variant is beneficial to the dealer.
Answer 5(a) Assessee: Dr. Shuba
Previous Year: 2011-2012
Assessment Year: 2012-2013
Computation of Total Income Particulars 1. Salaries: Lecturers Rs. 5,000 Rs.
Less: Deduction u/s 16 Income under the Head “Salary” 2. Income from House Property – Self Occupied, So, Annual Value u/s 22
Nil 5,000 Nil
Less: Deduction u/s 24 – Interest (6,00,000 x 10% 10% ¾)
(30,000)
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Page 11 of 18 Solution of mock test Taxation for Nov 2012 Exam ( Restricted to Rs. 30,000 ) (30,000) Income from House Property 3. Profits and Gains of Business or Profession Rs. Particulars Sale of Medicine Add 2,50,000 Deduct Rs.
Consultation Fee
50,000
Visiting Fee
2,00,000
Interest Paid (60,000 x ¼)
15,000
Payment fee Medical Journal
5,000
Depreciation on Surgical Equipment (50,000 x 15%)
7,500
Depreciation on Vehicle (4,00,000 x 15% x ¾)
45,000
Vehicle Expenses – For Business Purposes – ( 50,000 x ¾)
37,500
Interest paid on Loan – = 22,330 x ¾ Purchase of medicines
16,748 47,000 3,26,252
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Page 12 of 18 Solution of mock test Taxation for Nov 2012 Exam
3,24,625 Profits and Gains from Business 5. Income from Other Sources 5,00,000 (1,73,748)
Family Pension
2,80,000
Less: Exempt u/s 57 – Least of the following 33 1/3% of Gross Pension Amount of 93,333 15,000 (15,000) 2,65,000
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Page 13 of 18 Solution of mock test Taxation for Nov 2012 Exam
Savings Bank Interest
1,000
Interest on term Deposit (1,50,000 x 9% x 9/12)
10,125
Less: Exempt u/s 10(32) – Rs. 1,500 per Child
(1,500) 8,625
Income from lottery ( 35,000*100/70 ) 50,000 Gross Total Income 6,25,877
Less : Deduction under Chapter VI – A
U/s. 80C – Housing Loan Repayment (Principal Portion)
48,000
U/s 80D - Medical Insurance Premium
- Herself (Restricted)
15,000
- Mother (Being Senior Citizen Maximum deduction is Rs. 20,000) 16,000 Total Income (Before Agricultural Income) (Rounded off) Working Notes: 1. Share Income from HUF is exempt u/s 10(2). 2. Drawings, advance tax paid are not allowable expenditures. 31,000 (79,000) 5,46,880
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Page 14 of 18 Solution of mock test Taxation for Nov 2012 Exam Deduction of interest on loan is taken on paid basis.
Answer 5 ( b ) Section 67(1)(iii) of the Finance Act, 1994 ensures payment of service tax based on valuation even
when consideration is not ascertainable. However, these provisions apply only when there is consideration. If there is no consideration i.e., in case of free service, section 67 cannot apply. Thus, no service tax is payable when value of service is zero, as the charging section 66 provides that service tax is chargeable on the value of taxable service. Hence if the value is zero, the tax will also be zero even though the service may be taxable. However, this principle applies only when there is really a 'free service' and not when its cost is recovered through other means. Therefore, in the light of the aforesaid discussion, it may be inferred that, the service tax is not payable on service rendered by Miss Radhika to Mr. Ram Kapoor as Miss Radhika has not charged any fee from Mr. Ram Kapoor. Answer 5 ( c ) (i) The different variants of VAT are:1. Gross product variant: Under gross product variant, deduction for taxes on all inputs is allowed, but not for tax paid on capital goods. 2. Income variant: Under income variant, deductions for tax paid on inputs and depreciation on capital goods is allowed. 3. Consumption variant: Under consumption variant, deduction for taxes paid on all business inputs including capital goods is allowed. (ii) VAT is levied at each stage of production and distribution on the value added at the respective stage. Value added is the difference between the sales price and purchase price or the sum of wages, interest and other costs incurred and profits. Broadly, VAT is paid at each of the following stages of a sale transaction:Manufacturer Wholesaler Retailer Consumer Yes, entire burden of VAT falls on the final consumer and he does not get any credit of the same. Answer 6(a) (i) Section 35AD has been introduced with effect from Assessment Year 2010-11 as investment linked incentive for specified business.
With the specific objective of creating rural infrastructure and environmental friendly alternate means for transportation of bulk goods, investment linked tax incentives have been introduced for specific business which also includes 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.
(ii) 100% of the capital expenditure incurred during the previous year, wholly and exclusively for the above business would as deduction from the business investment would not be eligible for deduction.
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Page 15 of 18 Solution of mock test Taxation for Nov 2012 Exam (iii) Further, the expenditure incurred wholly and exclusively, for the purpose of specified business prior to the commencement operation would be allowed as deduction during the previous year in which the assessee commences operation of his specified business. A condition has been inserted that such amount incurred prior to the commencement should be capitalized in the books of account of the assessee on the date of commencement of its operation.
Accordingly, Alpha Ltd. will be entitled for deduction under 35AD for Assessment Year 2012-13 as under:
Capital expenditure incurred during the previous year 2011-12 (excluding the expenditure incurred on acquisition of land
100 lakhs
Capital expenditure incurred prior to 1.4.2011 (i.e. prior to commencement of business) and capitalized in the books of account as on 1.4.2011
40 lakhs
Total deduction under section 35AD for A.Y. 2012-13
140 lakhs
(ii) Answer The requirement to deduct tax at source in respect of fees for professional or technical services are covered under section 194J in case the amount exceeds Rs. 30,000 in a financial year. Further, the tax shall be deducted at source either on credit or payment, whichever is earlier. The proviso to Section 194J contemplates independent limit of Rs. 30,000 each towards
(a) fees for professional services; and (b) fees for technical services. In the given case, M/s. Nidhi Textiles Ltd. has credited Rs. 19,000 towards fees for professional services and Rs. 15,000 towards fees for technical services to the account of Mr. Suresh in its books of accounts. As the fee for professional services or fee for technical services independently does not exceed Rs. 20,000 during the financial year, the liability to deduct tax under section 194J does not arise.
Prepared BY : CA. AMIT KHANDAL ( B.COM, LL.B, FCA ) TAX GURU E-777/6 , NAKUL PATH , LALKHOTHI, JAIPUR MOBILE: 9314767107,9829056469
Page 16 of 18 Solution of mock test Taxation for Nov 2012 Exam
Answer 6(b) In the case of X Ltd. point of taxation will be accrual basis with effect from July 1, 2011. Service tax liability may be calculated for August 2011 (or July 2011 or subsequent months) in the format given below – Rs. xxx xxx Step 2 – Add: Value of invoice issued in the month of August 2011 xxx Step 3 – Add: Advance received in the month of August 2011 Step 4 – Less: Advance (which is received during August 2011 or before August 2011) adjusted against invoice issued during August 2011 Value of taxable services for August 2011 (Step 1 + Step 2 + Step 3 – Step 4) Service tax liability for August 2011 shall be as follows – Different activities during August 2011 Value before service tax Rs. (2) Service tax [10.3% of (2)] Rs. (3) Value inclusive of service tax [(2) + (3)] Rs. (4) xxx xxx
Step 1 – Amount received during August 2011 for service rendered before July 1, 2011
(1) Step 1 – Amount received during August 2011 for service rendered up to June 30, 2011 (up to June 30, 2011 service tax was chargeable on receipt basis) Amount received during August 2011 for service rendered during March 2011 (Rs. 3,86,050 is inclusive of service tax) Amount received during August 2011 for service rendered during April, May and June 2011 (Rs. 17,04,135 is inclusive of service tax) Step 2 – Add: Value of invoice issued in the month of August 2011 (Rs. 7,50,000 + Rs. 2,00,000 = Rs. 9,50,000) Step 3 – Add: Advance received during August 2011 (service not rendered) Step 4 – Less: Advance received on May 1, 2011 and adjusted against invoices issued during August 2011 Total
3,50,000
36,050
3,86,050
15,45,000 1,59,135
17,04,135
9,50,000 5,43,971
97,850 56,029
10,47,850 6,00,000 3,00,000 34,38,035
2,71,985 28,015 31,16,986 3,21,049
Prepared BY : CA. AMIT KHANDAL ( B.COM, LL.B, FCA ) TAX GURU E-777/6 , NAKUL PATH , LALKHOTHI, JAIPUR MOBILE: 9314767107,9829056469
Page 17 of 18 Solution of mock test Taxation for Nov 2012 Exam Note- Value (inclusive of service tax) should be posted in Column 4. In such a case, Column 2 = [Column 4 x 100 / 110.3] . Column 3 will be 10.3% of Column 2
Answer 6 ( c ) Computation of the tax liability for the financial year 2011-12:Inputs purchased in the month Output sold in the month (within the State) Inter-State sales Input credit (including capital goods) (` 12,500 + ` 12,500) Output tax CST for Inter-State sale State VAT liability (` 8,000 – ` 25,000) Excess credit Central sales tax to be paid (` 2,000 – ` 17,000) Excess credit carried forward to subsequent period 1,00,000 2,00,000 1,00,000 25,000 8,000 2,000 Nil 17,000 Nil 15,000
Answer 7 ( a ) Computation of income from house property for the A.Y. 2012-13 Particulars Vinay Income from house ` property I. Self-occupied portion (50%) Nil Annual value Less: Deduction under section 24(b) Interest on loan taken for 30,000 construction ` 90,000 (being 50% of ` 1.8 lakh) in total restricted to maximum of ` 30,000 for each co-owner (since the property was constructed before 01.04.1999) (30,000) Loss from self occupied Nitesh ` Nil 30,000
(30,000) 78,900 48,900
property
II. Let-out portion (50%) – See Working Note below Income from house property
78,900 48,900
Working Note Computation of income from let-out portion of house property
Prepared BY : CA. AMIT KHANDAL ( B.COM, LL.B, FCA ) TAX GURU E-777/6 , NAKUL PATH , LALKHOTHI, JAIPUR MOBILE: 9314767107,9829056469
Page 18 of 18 Solution of mock test Taxation for Nov 2012 Exam Particulars ` ` Let-out portion (50%) Gross Annual Value (a) Municipal value (50% of ` 8 lakh) 4,00,000 (b) Actual rent [(` 18000 x 2 x 12) – (` 18,000 x 1 x 1)] = ` 4,32,000 - ` 4,14,000 18,000 - whichever is higher 4,14,000 Less: Municipal taxes 50% of ` 1,20,000 (15% of ` 8 lakh) 60,000 Net Annual Value (NAV) 3,54,000 Less: Deduction under section 24 (a) 30% of NAV 1,06,200 (b) Interest on loan taken for the house [50% of 90,000 1,96,200 ` 1.8 lakh] Income from let-out portion of house property 1,57,800 Share of each co-owner (50%) 78,900 Note: The benefit of “Nil” Annual Value under section 23(2) in respect of a self occupied property can also be availed where the owner cannot occupy the property by reason of his employment at a different place and he resides, at such other place, in a building not belonging to him, provided he has not derived any other benefit from such property. Answer 7 ( b ) The due dates for filing of half yearly service tax return is 25th of the month following the particular half year. For the half year ending Return should be filed by 30th Sept. 25th October 31st March 25th April If the 25th of the month is a public holiday, return is to be filed on immediately succeeding working day. An assessee can submit a revised return, in Form ST-3, in triplicate, to correct a mistake or omission, within a period of 90 days from the date of submission of the original return. 7(c) Answer Following are the purchases which are not eligible for input tax credit :? Purchases from unregistered dealers. ? Purchases of goods from other states i.e. inter state purchases. ? Import of goods from outside the territory of India ( commonly known as high seas purchases) ? Purchases from registered dealer who has opted for composition scheme. ? Purchases of non credible goods as may be notified by the state government . ? Purchases of goods in cases where the selling dealer’s invoice does not show the amount of tax charged separately by such selling dealer.
Prepared BY : CA. AMIT KHANDAL ( B.COM, LL.B, FCA ) TAX GURU E-777/6 , NAKUL PATH , LALKHOTHI, JAIPUR MOBILE: 9314767107,9829056469
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