Solved Scanner. (Solution of May ) IPCC Gr. I. Paper - 4 : Taxation

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1 ISBN: Solved Scanner (Solution of May ) IPCC Gr. I Paper - 4 : Taxation [Chapter - 12] Computation of Total Income, Tax Payable, Rebate and Relief 1. (a) (10 marks) Computation of Total Income Income from House Property Arrear Rent 90,000-30% 63,000 Profit & Gains from Business or Profession Share of Profit from Firm Exempt Interest on Capital 12 2,40,000 Salary as Working Partner 1,00,000 Profit from Proprietorship 4,50,000 + Advance tax paid 1,00,000 + Personal drawings 50,000 (-) Interest on Saving Bank SBI 12,000 (-) Interest on Saving Bank PO 5,000 (-) Dividend from listed Indian Company 80,000 5,03,000 Income from Other Sources SBI SB A/c Interest 12,000 PO SB A/c Interest (5,000-3,500) 1,500 13,500 GTI 9,19,500 Deduction u/c VI - A Sec. 80C LIP 5,00,000 10% 50,000 1

2 Solved Scanner Solution IPCC Gr. I Paper Sec. 80D Medical Insurance Premium 30,000 Sec. 80TTA Interest on SB A/c 10,000 90,000 Total Income 8,29,500 Tax Liability Tax on first 2,50,000 Nil Tax on Next 10% 25,000 Tax on Bal. 20% 65,900 90, % 1, % 909 Tax Payable 93,627 Tax Payable (rounded off u/s 288B) 93, (b) (5 marks) Taxable Service Amount received for the services to be rendered in Feb ,00,000 Services rendered during the month 5,50,000 13,50,000 SSI Exemption = 10,00,000 Service Tax Liability = 3,50,000 = 45,652 [Chapter - 15] Value Added Tax (VAT) 1. (c) (5 marks) Input VAT = (6,00,000-2,50,000) 12.5% = 43,750 Output VAT = 9,00,000 4% = 36,000 VAT Payable = Nil [Chapter - 2] Basic Concepts 2. (a) (i) (4 marks) Mr. Damodhar leaves India during the previous year as member of crew of an Indian Ship. He shall be resident only if he stayed for more than 182 days during PY. Stay in India in PY April 30 May 2 June 30

3 Solved Scanner Solution IPCC Gr. I Paper July 31 August 12 January 11 February 28 March Mr. Damodhar is Non-resident in India. [Chapter - 3] Income which do not form Part of Total Income 2. (a) (ii) (4 marks) Rent for letting out agricultural land for movie shooting Taxable Income from sale of seedlings Exempt 2. (b) (4 marks) (i) Exempt (ii) Exempt (iii) (iv) Exempt Taxable Fee charged for music concert above ` 500 is liable for service tax. [Chapter - 19] Central Sales Tax (CST) 2. (c) (4 marks) Turnover including CST Interstate Sale 60,00,000 + Freight not shown separately 1,00,000 Goods returned within 6 month 50,000 60,50,000 Taxable Turnover = 60,50,000 = 59,31,373 CST Payable = 60,50,000 = 1,18,627 [Chapter - 4] Income from Salaries 3. (a) (8 marks) Computation of income under head Salary Basic Salary 6,00,000 Dearness Allowance 3,20,000 Commission 50,000 Entertainment Allowance 7,500 Medical Reimbursement (21,000-15,000) 6,000

4 Solved Scanner Solution IPCC Gr. I Paper Profession tax (Paid by Employer) 3,500 Health Insurance Premium Exempt Gift Voucher (12,000-5,000) 7,000 LIP Paid by Employer 34,000 Use of Laptop Exempt Use of Car (1,800 12) 21,600 Credit Card Fee 2,000 10,51,600 Deduction u/s 16 Profession Tax 7,000 10,44,600 [Chapter - 17] Excise Duty 3. (b) (5 marks) Cenvat Credit Available Raw-Material used in factory 80,000 Capital Goods 30,000 Office Equipment (office within factory) 20,000 1,30, (c) (3 marks) (i) Value of Taxable Service = (69-68) 10,000 = ` 10,000 (ii) 10, % = 6,800 (iii) 1% of lower of value of both in Indian Currency Dollar in Indian Currency = 10, = 6,70,000 UK Pound in Indian Currency = 5, = 5,00,000 Lower of both = 5,00,000 Value of taxable service = 5,00,000 1% = 5,000 [Chapter - 2] Basic Concepts 4. (a) (i) (4 marks) (a) ` 20 lakh for use of patent in India Taxable in India. (b) ` 15 lakh for know-how used in Sri lanka, money received in Japan Not taxable in India. (c) ` 7 lakh for know-how in India Taxable in India. (d) ` 7 lakh from R & Co. Mumbai Taxable in India. [Chapter - 5] Income from House Property 4. (a) (ii) (4 marks)

5 Solved Scanner Solution IPCC Gr. I Paper Income from House Property GAV 4,80,000 Municipal Taxes 18,000 NAV 4,62,000 Std. deduction 30% 1,38,600 Deduction on borrowed Capital 2,55,000 68,400 Working Note: Pre-Construction Period = to = 8 month Pre-Construction Interest = 15 lakh 15% = 1,50,000 Current Period Interest = 15 lakh 15% = 2,25,000 Interest deduction on borrowed capital = 1,50, ,25,000 = 2,55, (b) (4 marks) Point of Taxation Case Point of Taxation (i) (ii) (iii) (iv) [Chapter - 18] Customs Duty 4. (c) (4 marks) AV 5,00,000 + BCD (10% 5,00,000) 50,000 5,50,000 + ADD (12.5% 5,50,000) 68,750 6,18,750 + EC 2,375 + SHEC 1, ,22, Sp. ADD 24, ,47,205 (i) Total Custom Duty Payable = 6,47,205-5,00,000 = 1,47,205

6 Solved Scanner Solution IPCC Gr. I Paper (ii) Cenvat Credit of ADD available = 68,750 in 2 installment. [Chapter - 7] Capital Gains 5. (a) (8 marks) Sale Consideration 770 lakh (-) Expenses in connection with T/F (700 lakh 1%) 7 lakh Net Sale Consideration 763 lakh (-) Cost of Acquisition 88 lakh lakh 100 lakh lakh Capital Gain lakh Less: Exemption u/s lakh Exemption u/s 54EC 50 lakh Taxable Capital Gain lakh [Chapter - 17] Excise Duty 5. (b) (i) (2 marks) Cenvat Credit can be availed in respect of machinery delivered directly at the place / premises of the job worker, to whom he regularly gives his materials for conversion on job work basis. 5. (b) (ii) (2 marks) (a) Cenvat credit can be taken on making payment of value of services to the service provider and service tax to the Government. (b) Time limit is maximum 1 year from the date of invoice. 5. (c) (4 marks) (i) Consideration not present (ii) Consideration not present (iii) Consideration present. [Chapter - 10] Aggregation of Income, Set-off and Carry Forward of Losses 6. (a) (i) (4 marks) Computation of Gross Total Income Income under head PGBP Income from Textile Business 4,60,000 (-) Current Year Depreciation 5,000 (-) Unabsorbed Depreciation 10,000 4,45,000 Income from Speculation Business 25,000 (-) Set off of loss 25,000 Nil

7 Solved Scanner Solution IPCC Gr. I Paper ,45,000 Note: 1. Loss from Gambling cannot be set off. 2. Loss on maintenance of race horse shall be carried forward. 3. Brought forward speculation loss shall be adjusted from current year profit and balance carried forward. [Chapter - 12] Computation of Total Income, Tax Payable, Rebate and Relief 6. (a) (ii) (4 marks) Computation of Total Income GTI 7,50,000 Deduction u/c VI-A Sec. 80 C LIP (4,00,000 15%) 60,000 Tax Saver Deposit 90,000 Sec. 80G Clean Ganga Fund 25,000 1,75,000 Total Income 5,75, (b) (4 marks) (i) Not taxable (ii) Not taxable (iii) Taxable. Tax on 70% of the amount received (iv) Taxable [Chapter - 17] Excise Duty 6. (c) (4 marks) (i) MRP 3,000 (-) Abatement 25% 750 AV 2,250 Excise Duty Payable = 2, % = (ii) If goods not covered by Sec. 4A. AV = 2,200 Excise Duty Payable = 2, % = 275 [Chapter - 13] Advance Tax & TDS 7. (a) (4 marks) TDS need not be deducted if there is no core banking services.

8 Solved Scanner Solution IPCC Gr. I Paper If core banking services is present TDS need to be deducted if interest on FD & RD exceeds ` 10,000 p.a. [Chapter - 14] Assessment Procedure 7. (b) (4 marks) (i) Chief Executive Officer (ii) Liquidator (iii) Any Audit Member (iv) Principal officer or any member [Chapter - 13] Advance Tax & TDS 7. (c) (4 marks) Total Income 10,80,000 Tax on it 1,49,000 (-) TDS 25,000 (-) Advance Tax 1,03,000 21,000 Interest u/s 234 B = 21,000 9% = 1, (d) (4 marks) Registration certificate can be revoked under service tax if: (i) the premises are found to be non existent or not in possession of the assessee. (ii) no documents are received within 15 days of the date of filing the registration application. (iii) the documents are found to be incomplete or incorrect in any respect. 7. (e) (4 marks) Every 6 th day of the month following the month in which service is deemed to be provided. For March month, due date is 31 st March. Shuchita Prakashan (P) Ltd. 25/19, L.I.C. Colony, Tagore Town, Allahabad Visit us :