Disclaimer (Read carefully) SUGGESTED ANSWERS - Group 1 Tax (Code GST) The answers given below are prepared by the faculty of Samvit Academy as per their views and experience. The working notes, notes and assumptions, if any stated, are purely the views of the respective faculty of Samvit Academy and students are encouraged to go through them and apply the same in the examination as a good practice. No assurance is given that the answer keys of the Institute of Chartered Accountants of India used for valuation are the same. However, utmost care has been taken while designing the below suggested answers. Feedback is welcome. For the questions, please refer to the question paper. PART 1 - DIRECT TAX SOLUTIONS Question 1 (a) WN Ref Rs Capital Gains 1 2,57,920 Income from Other Sources (Note 2) (Advance forfeited on or after 01.04.2014) 7,00,000 Gross Total Income 9,57,920 Working Note 1 - Capital Gains Rs Rs Full Value of Consideration (Note 1) 98,50,000 Less: Expenses on transfer -85,500 Net Consideration 97,64,500 Less: Indexed Cost of Acquisition (Note 2) (8,30,000-6,50,000)*1024/100-18,43,200 Less: Indexed Cost of Improvement 10,50,000*1024/497-21,63,380 Gross Long Term Capital Gain 57,57,920 Less: Exemption u/s 54 (Note 3) Restricted to one house -5,00,000 Less: Exemption u/s 54 EC (Note 4) Restricted to -50,00,000 Taxable Long Term Capital Gains 2,57,920 (1)
Notes to the solution 1. As per section 50C, where the consideration received is less than the valuation by the stamp valuation authority, such value adopted or assessed by the stamp valuation authority shall be deemed to be the full value of consideration. Where a reference is made to the Valuation Officer, and the value ascertained by the Valuation Officer exceeds the value adopted by the stamp valuation authority, the value adopted by the stamp valuation authority shall be taken as the full value of consideration. Sale consideration Rs 85,50,000 Valuation made by registration authority for stamp duty Rs 98,50,000 Valuation made by the Valuation Officer on a reference Rs 98,75,000 Applying the provisions of section 50C in the present case, Rs 98,50,000, being, the value adopted by the registration authority for stamp duty, shall be taken as the full value of consideration for the purpose of computing capital gains. 2. Since the house was inherited under the will of his father and his father, the previous owner, had purchased the house before 01.04.81, the assessee has the option to adopt cost incurred by the previous owner or fair market value as on 01.04.81 as cost of acquisition. In this case, it is more beneficial to him to adopt the FMV on 01.04.1981 as the cost of acquisition of the house property. Any advance received and forfeited before 1.4.2014 would have to be reduced from the cost of acquisition. Hence, the first advance of Rs 6,50,000 received in May 2009 has been reduced and the cost of acquisition which can be considered is Rs 8,30,000-6,50,000 = Rs 1,80,000 The second advance of Rs 7,00,000 received in June, 2014 will be taxed under "Income from Other Sources" 3. Exemption u/s 54 should be restricted to only One Residential House in India as per the recent amendment. Since both houses cost the same, it is irrelevant which one we choose for the purpose of the exemption u/s 54. 4. The investment eligible for exemption cannot exceed Rs 50 lakhs, whether such investment is made in the same financial year or in the subsequent financial year or in both the years u/s 54EC. (2)
Question 2 (a) WN Ref Rs Income from Salary 1 2,79,600 Income from Business and Profession 2 75,000 Income from Other Sources 3 15,500 Gross Total Income 3,70,100 Less: Deductions under Chapter VI-A U/s 80C and 80CCC 4-1,08,000 U/s 80TTA (Note 2) -5000 Total Taxable Income 2,57,100 Computation of Tax Payable Tax on Rs 2,57,100 710 Less: Rebate under section 87A -710 Tax Payable Working Note 1 - Income from Salary NIL Rs Rs Basic Salary (20000*12) 2,40,000 CCA (1000*12) 12,000 HRA received (5000*12) 60,000 Less: Exemption u/s 10(13A) - Lowest of 1. HRA Received 60,000 2. Excess of Rent over 10% of "Salary" (72,000-10%*2,40,000) 48,000 3. 50% of "Salary" (50% * 2,40,000) 1,20,000 Taxable HRA (60000-48000) 12,000 Education allowance (500*3*12-100*2*12) 15,600 (Rs 200 p.m exempt upto a maximum of 2 children) Taxable Salary 2,79,600 "Salary" = Basic + DA part of retirement benefits + Commission "Salary" = 2,40,000 + 0 + 0 = 2,40,000 (3)
Working Note 2 - Income from Business and Profession Rs Rs Deemed Income from Transport Business u/s 44AE (Note 1) 7500*1*10 75,000 Income from Business and Profession 75,000 Working Note 3 - Income from Other Sources Rs Rs Interest from company deposits 15,000 Less: Deduction u/s 57 for expenses incurred -4,500 10,500 Interest from saving bank account 5,000 Income from Other Sources 15,500 Working Note 4 - Deduction u/s 80C and 80CCC Investment in notified equity linked saving scheme of UTI 12,000 Investment in PPF 52,000 Life insurance premium on own life restricted to 10% of sum assured 4,000 Tuition fees paid for two of his children (Most beneficial to assessee) 25,000 Total Deduction u/s 80C 93,000 Deduction u/s 80CCC (Pension Fund Contribution) 15,000 Total deduction u/s 80C and u/s 80CCC 1,08,000 (within the maximum limit of Rs 1,50,000) Notes to the solution 1. Deemed Income u/s 44AE in the case of a person owning not more than 10 vehicles at any time during the previous year will be be Rs.7,500/- for every month or part of the month during which the vehicle is owned by the assessee during the previous year. Hence deemed income u/s 44AE is Rs 7,500 x 10 months = Rs 75,000. Since the assessee has not maintained books of accounts, he cannot declare a lower amount. Further,, interest is not deductible, since under section 44AE, all deductions under sections 30 to 38 are deemed to have been allowed. 2. Deduction under section 80TTA is allowed in respect of interest from Saving Bank Account upto a maximum of Rs.10,000. Hence, the full savings bank interest of Rs 5,000 has been claimed as a deduction. (4)
Question 3 (a) Business of warehousing facility for storage of food grains and sugar (Eligible u/s 35AD for 150% and 100% deduction of Capital Expenditure respectively) Food Grains (150%) Sugar (100%) Profits before deduction u/s 35AD 15,00,000 13,00,000 Less: Pre-commencement capital expenditure Food Grains = (70 lakh - 40 lakh) * 150% -45,00,000 Sugar = (50 lakh - 30 lakh) * 100% -20,00,000 Less: Capital expenditure incurred during PY 14-15 Food Grains = 15 lakh * 150% -22,50,000 Sugar = 10 lakh* 100% -10,00,000 Loss from Specified Business -52,50,000-17,00,000 Rs Rs Total Loss from Specified Business = Rs 52.5 Lakhs + Rs 17 Lakhs = Rs 69.5 Lakhs Business of warehousing facility for storage of edible oil (taxable as per normal provisions) Edible Oil (Rs) Profits before deduction u/s 32 29,00,000 Less: Depreciation u/s 32 (40 lakh - 20 lakh + 8 lakh) * 10% -2,80,000 Income from Edible Oil Business 26,20,000 Notes to the solution 1. Loss from a specified business can be set-off only against profits from another specified business. Therefore, the loss of ` 69.50 lakh from the specified businesses of setting up and operating a warehousing facility for storage of food grains and sugar cannot be set-off against the profits of ` 26.20 lakh from the business of setting and operating a warehousing facility for storage of edible oils, since the same is not a specified business. Such loss can, however, be carried forward indefinitely for set-off against profits of the same or any other specified business. 2. In case of a specified business u/s 35AD, pre-commencement expenditure (except on land) is allowed in the year of commencement if the same is capitalised in the books of accounts when the business commences. 3. The assessee can claim depreciation at 10% under section 32 in respect of the capital expenditure incurred on buildings in the business of edible oil, a non-specified business. It is assumed that the buildings are used for more than 180 days. (5)
Question 4 (a) (i) According to section 194C, the definition of work does not include the manufacturing or supply of product according to the specification by customer in case the material is purchased from a person other than the customer. Therefore, there is no liability to deduct tax at source in respect of payment of Rs 2,20,000 to Mr. Anurag, since the contract is a contract for sale. (ii) As per section 194-IA, any person, being a transferee, responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property (other than rural agricultural land) is required to deduct tax at source at 1% of such sum, if the consideration for transfer is Rs 50 lakhs or more. Therefore, in this case, Mr. Raj, the purchaser, is required to deduct tax at source at 1% of Rs 68 lakhs, being the consideration for transfer of house property, since the sale consideration of house property exceeds Rs 50 lakhs. (iii) Since the annual premium exceeds 20% of sum assured in respect of a policy taken on or before 1.4.2012, the maturity proceeds of Rs 2,30,000 would not be exempt under section 10(10D) in the hands of Miss Sonam, a resident individual. Therefore, tax is required to be deducted at 2% under section 194DA on the maturity proceeds of Rs 2,30,000 payable to Miss Sonam, at the time of payment. (iv) As per section 194LA, any person responsible for payment to a resident, any compensation on account of compulsory acquisition under any law, of any immovable property, is responsible for deduction of tax at source if such payment or the aggregate amount of such payments to the resident during the financial year exceeds Rs 2,00,000. In the given case, no liability to deduct tax at source is attracted as the payment made to Mr. Dhawan for compulsory acquisition of his urban land does not exceed Rs 2,00,000. Question 5 (a) Determination of Residential Status 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 for at least 60 days in the previous year and for a total period of 365 days or more during the 4 years immediately preceding the previous year 01.04.2014 to 16.09.2014-169 days 22.03.2015 to 31.03.2015-10 days Total 179 days during the current previous year (PY 2014-15) (6)
Four preceding previous years P.Y.2013-14 [1.4.2013 to 31.3.2014] - 16 days P.Y.2012-13 [1.4.2012 to 31.3.2013] - Nil P.Y.2011-12 [1.4.2011 to 31.3.2012] - Nil P.Y.2010-11 [1.4.2010 to 31.3.2011] Nil Total 16 days during the preceeding 4 previous years The total stay of Anna during the previous year in India was less than 182 days and during the four years preceding this year was for 16 days. Therefore, due to non fulfilment of either of the two conditions for a resident, she would be treated as non-resident for the AY 2015-16. Computation of Total Income and Tax Payable for AY 2015-16 WN Ref Rs Income from House Property 1 2,25,000 Income from Other Sources 2 1,25,000 Gross Total Income 3,50,000 Less: Deductions under Chapter VI-A 0 Total Taxable Income 3,50,000 Computation of Tax Payable Tax on Rs 3,50,000 10,000 Less: Rebate under section 87A NIL Tax Payable 10,000 Add: Education Cess at 3% on above 300 Total Tax Payable 10,300 Working Note 1 - Income from House Property Rs Gross Annual Value (50000*10) 5,00,000 Less: Municipal Taxes Paid 0 Net Annual Value 500000 Less: Standard Deduction = 30% of NAV -150000 Less: Interest on Loan -125000 Income from House Property 225000 (7)
Working Note 2 - Income from Other Sources Gifts received during the year Rs From parents of husband 0 From married sister of husband 0 From two very close friends of her husband 125000 Income from Other Sources 125000 Notes to the solution 1. Since no additional information such as municipal value, fair rental value and standard rent is given, actual rent received is considered as the Gross Annual Value. 2. Rs 51,000 received from parents of husband and Rs 21,000 received from married sister of husband would be exempt, since they fall within the definition of relative and gifts from a relative are not chargeable to tax. 3. If the aggregate value of sum of money received without consideration from nonrelatives exceeds Rs 50,000 during the year, the entire amount received (i.e., the aggregate value of sum of money received) is taxable. Therefore, the entire amount of Rs 1,25,000 would be taxable under section 56(2)(vii). 4. Since Anna is a non-resident for the A.Y.2015-16, rebate under section 87A would not be available to her, even though her total income is less than Rs 5 lakhs Question 6 (a) Computation of Income from House Property Self occupied (2/3rd portion) Let out (1/3rd portion) Gross Annual Value (WN 1) - 1,10,400 Less: Municipal taxes paid - -11,000 Net Annual Value - 99,400 Less: Deduction u/s. 24 a) 30% of net annual value - -29,820 b) Interest on loans -2,00,000-1,30,000 Income from House Property -2,00,000-60,420 Hence, Total LOSS under House Property = Rs 2,60,420 (8)
Working Note 1 - Calculation of Gross Annual Value 1. Calculation of Fair Rent (FR) Municipal Value 3,30,000 Rent of similar house in same locality 3,00,000 Higher of 1 and 2 3,30,000 Standard Rent 3,60,000 FR = Lower of 3 and 4 3,30,000 FR attributable to let out portion (1/3rd) 1,10,000 2. Actual Rent (AR) - Received + Receivable 1,10,400 Since, AR is greater than FR, Gross Annual Value is AR of Rs 1,10,400 Notes to the solution 1. Gross Annual Value of Self-Occupied Property is NIL. No deduction for municipal taxes can be claimed. The only deduction which can be claimed for a self-occupied property is interest on loan. 2. The total interest on loan comes up to Rs 3,90,000. The interest attributable to the self-occupied portion is Rs 2,60,000. As per Section 24, interest on such property has to be restricted to Rs 2,00,000. 3. Balance interest of Rs 1,30,000 may be claimed fully for the let-out portion. Question 6 (b) Deduction u/s 80C Rs Life Insurance premium paid (restricted to 20% of sum assured) 30,000 Public Provident Fund contribution 90,000 Repayment of Housing loan to State Bank of India, Bangalore 20,000 Total eligible deduction u/s 80C 1,40,000 Deduction u/s 80CCC Rs Payment to L.I.C. Pension Fund 25,000 Total eligible deduction u/s 80CCC 25,000 Maximum deduction u/s 80C and u/s 80CCC put together is Rs 1,50,000 (Section 80CCE) (9)
Deduction u/s 80D Rs Mediclaim taken for self, wife and dependent children 15,000 Medical Insurance premium paid for parents (Senior Citizens) 20,000 Total eligible deduction u/s 80D 35,000 Summary of deductions under Chapter VI-A Rs Under Section 80C + Section 80CCC (restricted to) 1,50,000 Under Section 80D 35,000 Total deduction under Chapter VI-A 1,85,000 Notes to the solution 1. As per Section 80CCE, the aggregate amount of deduction u/s 80C, 80CCC and 80CCD shall not exceed Rs 1,50,000. 2. Deduction in respect of health insurance premium paid shall be restricted to In case of self, wife and dependent children Rs 15,000 In case of his parents (being senior citizens) Rs 20,000. Therefore, total amount of deduction = Rs (15,000 + 20,000) = Rs 35,000. 3. Repayment of Housing loan to State Bank of India, Bangalore is assumed to be fully made towards the principal in the absence of data regarding interest. 4. In case of a life insurance policy taken before 1-4-2012, deduction may be given to the extent of 20% of sum assured u/s 80C. Question 7(a) a. Where the Karta of a Hindu Undivided Family is absent from India, the return of income can be signed by any male member of the family Answer: False. Where the Karta of a Hindu Undivided Family is absent from India, the return of income can be signed by any member of the family, male or female. b. Return of income of Limited Liability Partnership (LLP) could be signed by any partner Answer: False. Return of income of Limited Liability Partnership (LLP) should be signed by the designated partner. Where for any unavoidable reason, designated partner is not able to sign or there is no designated partner, any other partner may sign. (10)
c. A listed equity oriented mutual fund and a listed debt oriented mutual fund is a long term capital asset if it is held for 20 months before the date of transfer on 15.01.2015 Answer: False. Reasons are as below. Equity Oriented Mutual Fund An equity oriented mutual fund shall be treated as a long-term capital asset if held for more than 12 months before the date of its transfer. To this extent, this statement is true. Debt Oriented Mutual Fund However, a debt oriented mutual fund should be held for more than 36 months for it to be considered as a long-term capital asset due to a recent amendment. Hence, in this case, it will be considered as a short-term capital asset as it is held only for 20 months. Hence, this statement is false. d. A Foreign Institutional Investor (FII) has invested in securities in India in accordance with the SEBI regulations. It holds it as a Stock in Trade. On sale, the income/gain is taxed as Capital Gain and not as Business Income. Answer: True. The definition of capital asset has been amended to include any securities held by a Foreign Institutional Investor (FII) which has invested in such securities in accordance with the SEBI regulations. Even if such securities are held in the nature of Stock-In-trade by the FIIs, they shall be treated as capital assets and hence any income/gain on transfer is taxed as Capital Gain. (11)
PART 2 - INDIRECT TAX SOLUTIONS Question 1(b) (i) Ms. C working as a whole time director is in the capacity of an employee for the company Success Software Limited (SSL). In accordance with the proviso to the definition of Service, A provision of service by an employee to the employer in the course of or in relation to his employment is excluded. Accordingly any compensation received by Ms. C as a whole time director is not a Service and hence not taxable under the service tax Law. (ii) As discussed in (i) above, any compensation paid in relation to the provision of Service by an employee to employer in the course of his employment is not a service. However, if Ms. C is a director providing professional service on a need basis, it is understood that Ms. C will not be paid compensation for service in the course of her employment. Hence, not only will the compensation received on termination of the contract be taxable, even monthly compensation received in the capacity of a Director attracts Service tax. (iii) If Ms. C is working as an Assistant Manager, the answer will be similar to point (i) above, as she is an employee. Hence, the compensation does not amount to consideration received on provision of service. (iv) Any other statutory provisions In case the company SSL is paying the compensation to a director who is not in capacity of an employee, the same shall attract provisions of service tax payable on Reverse charge basis, i.e. the Company SSL has to remit 100% of service tax as a Service receiver. Question 1(c) With effect from 01.03.2015, aggregators have also been brought within the service tax net by amending the Service Tax Rules, 1994. Aggregator means a person, who owns and manages a web based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator. In relation to service provided by a person involving an aggregator in any manner, the aggregator of the service is the person liable for paying service tax. Since in the given case, Speed Technologies Ltd. fulfills all the conditions of being an aggregator, it will be liable to pay service tax under reverse charge. However, where the aggregator neither has a physical presence nor does it have a representative for any purpose in the taxable territory, it will have to appoint a person in the taxable territory for the purpose of paying service tax and such person will be the person liable for paying service tax. Therefore, Speed Technologies Ltd. will have to appoint a person in India for the purpose of paying service tax if Speed Technologies Ltd. is located in New York and does not have a representative in India. (12)
Question 2(b) Computation of CENVAT credit available with Durable Manufacturing Ltd. Amount (Rs.) Raw materials used in the factory of Durable Manufacturing Ltd. 65,000 Goods used in the guest house primarily for the stay of the newly recruited employees. (Note 1) Nil Inputs used for making structures for support of capital goods [Note 1] Nil Capital goods used as parts and components for use in the manufacture of final product (Note 2) 70,000 Total CENVAT credit available 135,000 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. Question 2(c) In respect of any taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory, person liable to pay service tax is the recipient of such service, i.e. service tax has to be paid under reverse charge mechanism. Hence, in the given case, service tax is to be paid by Akshita of Sikkim. Further, rule 7 of the Point of Taxation Rules, 2011 provides that the point of taxation in respect of the persons required to pay tax under reverse charge mechanism shall be the date on which payment is made, provided payment for the same is made within a period of 3 months of the date of invoice, otherwise the point of taxation will be the date immediately following the said period of three months. (13)
In light of the aforesaid provisions, point of taxation will be as follows:- Case-I: Since the payment has been made within 3 months from the date of invoice, point of taxation shall be the date of payment i.e. 27.12.2014. Case-II: Since the payment has not been made within a period of 3 months from the date of invoice, point of taxation will be the date immediately following the said period of 3 months i.e. 08.01.2015 Question 3(b) Computation of taxable turnover and tax liability of Shine India Pvt. Ltd. Amount (Rs.) Total sales 15,000,000 Less: Goods returned by Mr. X (deductible as returned within 6 months) -150,000 Less: Goods returned by Mr. Z (not deductible as returned after 6 months) NIL Less: Goods rejected by Mr. Y after six months (Refer note below) -55,000 14,795,000 Less : Central sales tax =1,47,95,000 x 4/104-569,038 Turnover 14,225,962 Note: The period of six months for return of goods is not applicable in respect of rejected goods as it is a case of un-fructified sale Question 3(c) No, duty paid on the goods, in the instant case, cannot be remitted as the goods have been damaged after their clearance for home consumption from the warehouse. The duty on the imported goods can be remitted only when such goods are destroyed at any time before clearance for home consumption. Question 4(b) Computation of service tax liability of Samvit Coaching Classes Ltd. for the month of April, 2014 Amount of service tax (Rs.) Free coaching rendered (Note 1) Coaching fees collected from students (Note 2) (14,50,000 x 12.36/112.36) Advance received from a college (Note 2 and 3) (3,37,080 x 12.36/112.36) Nil 159,505 37,080 Total service tax liability for the month of April, 2014 1,96,585 (14)
Notes: 1. Service is an activity carried out inter alia for a consideration. Therefore, since no consideration is involved in case of free services, service tax is not payable thereon 2. Since, services agreed to be provided are chargeable to service tax, advance received will also be liable to service tax. Advanced received is taxable at the time when such advance is received [Rule 3 of the Point of Taxation Rules]. 3. Advance received from a college for teaching their students will also be chargeable to service tax. It is immaterial that no coaching was conducted and the money was returned on 12.05.2014. The amount of service tax included in the amount refunded (Rs.37,080) in the next month i.e. May, 2014 would be adjusted against service tax liability of subsequent periods. 4. Since the service tax collected in preceding finanacial year is Rs.10.2 lakh, the aggregate value of taxable services must have exceeded Rs.10 lakh. Thus, Samvit Coaching Classes Ltd. is not eligible for SSP exemption. Further, during the preceding financial year, the service tax liability met by the assessee, inclusive of CENVAT credit availed was more than Rs.1 lakh. Hence, during the current financial year, payment of service tax will have to be made electronically for all months. Therefore, the last date for making the payment of service tax by Samvit Coaching Classes Ltd. (corporate assessee) for the month of April, 2014 is 6th May, 2014. Question 4(c) Computation of excise duty payable Rs. Total invoice price 40,000 Less: State VAT (Note 1) -4,000 Less: Freight charges (Note 2) -2,000 Less: Insurance charges (Note 2) -200 Price-cum-duty (a) 33,800 Less : Excise duty @ 12.36% (incl of 3% edu cess) (Rs.33,800 x 12.36/112.36) 3718.12 Total excise duty including education cess (rounded off) (b) 3,718 Assessable value (a) (b) 30,082 Notes: 1. Invoice price includes State VAT. Thus for calculating assessable value, deduction has been allowed for State VAT. 2. Insurance charges for dispatch of final product and freight charged from factory to the place of customer are allowed as deduction as the same are incurred after the place of removal. 3. Since packing charges are includible in assessable value, deduction for the same has not been provided (15)
Question 5(b) Computation of CENVAT credit available with M/s PQ & Co. Amount (Rs) Accounting and auditing services (Note 1) 1,000,000 Legal services (Note 1) 500,000 Security services (Note 1) 50,000 Hiring of motor vehicles (Note 2) Nil Total CENVAT credit available 1,550,000 Notes: 1. As per the definition of the input services, there is a specific inclusion with regard to the following services:- (a) Accounting and auditing services (b) Legal services (c) Security services Hence, the CENVAT credit of the service tax paid on the aforesaid services is available. 2. The definition of input services specifically excludes the services of hiring of the motor vehicles, which are not eligible capital goods. Question 5(c) A service tax return must indicate inter alia, month-wise: (i) the value of taxable services charged/billed; (ii) the value of taxable service realised; (iii) the amount of service tax payable/paid etc. Therefore, Mr. Aarav cannot furnish consolidated details relating to value of taxable service charged, amount realised against the same and service tax payable in his half-yearly service tax return. Question 6(c) A person who carries out actual manufacturing process is considered as manufacturer for the purpose of levy of central excise duty even if raw material is supplied by someone else and goods are manufactured as per the specifications of such person. In other words, ownership of raw material is not relevant Therefore, in this case, N (tailor), being the actual manufacturer, will be treated as manufacturer for purpose of levy of excise duty even though the cloth (raw material) for making shirt is provided by M and the shirt is stitched as per his specifications. (16)
Question 7(b) Services provided to a recognized sports body by an individual inter alia as a referee in a sporting event organized by a recognized sports body is exempt from service tax vide Mega Exemption Notification No. 25/2012 ST dated 20.06.2012. Since in the first case, the football match is organized by Sports Authority of India, which is a recognized sports body, services provided by the individual as a referee in such football match will be exempt under the said notification. However, when he acts as a referee in a charity football match organized by a local sports club, he would not be entitled to aforementioned exemption as a local sports club is not a recognized sports body and thus, service tax will be payable in this case. Question 7(c) (i) Motor vehicle designed to carry passengers is eligible capital goods when used for providing output service of transportation of passengers provided such motor vehicle is registered in the name of service provider. Since in the given case, cars purchased by Safe Cabs Limited are not registered in the name of service provider viz., Safe Cabs Limited, such cars are not eligible as capital goods (ii) With effect from 01.03.2015, time limit for availment of CENVAT credit on inputs has been enhanced from six months to one year of the date of the issue of invoice/bill/challan etc. Thus, in case of the invoice dated 05.03.2015, Mr. Q can take CENVAT credit on inputs after six months of the date of invoice but only upto one year of the date of such invoice. Therefore, the advice of Mr. Q s consultant is not correct. (iii) With effect from 01.03.2015, time limit for receiving back the capital goods from job worker to premises of the output service provider has been enhanced from 6 months to 2 years for the purpose of availing CENVAT credit. Thus, the time limit for return of capital goods sent to a job worker on 22.03.2015 for the purpose of availing CENVAT credit is not 180 days, but two years. Therefore, information of Mr. P s consultant is not correct. (17)