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Answer Paper

Taxation Duration: 75

Details: Test- 4 Marks: 40

Instructions:

 All the questions are compulsory

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 In case of multiple choice questions, mention option number only Working notes are
compulsory wherever required in support of your solution
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Ans-1

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Computation of total income of Mr. Raghav for A.Y. 2023-24 (Amount in Rs.)

Particulars Rs. Rs.

Income from salary

[Since Mrs. Raghav along with her brother holds shares Nil
carrying 100% voting power in M/s M Pvt. Ltd, they have a
substantial interest in the company. Since Mr. Raghav is
working in the same company without any professional
qualifications commensurate with his salary, the salary of
Rs.3,75,000 received by him would be included in the
hands of Mrs. Raghav.]

Income from house property

House 1 – Self occupied

Net annual value Nil

Less: Interest on loan [upto Rs.2,00,000] (2,00,000) (2,00,000)

House 2 – Let out

Gross annual value [60,000 × 12][rent receivable has 7,20,000

been taken as the gross annual value in the absence of
other information]

Less: Municipal taxes paid Nil

Net annual value 7,20,000

Less: Deduction from Net Annual value

Less: 30% of Net Annual value (2,16,000)

Less: Interest on loan (5,00,000) 4,000

House in Delhi
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[Since Mr. Raghav receives direct or indirect benefit from
income arising to his sister’s daughter, Ms. Vamika from
the transfer of house to her without consideration, such
income is to be included in the total income of Mr. Raghav
as per proviso to section 62 (1), even though the transfer
may not be revocable during life time of Ms. Vanika’s]

Gross annual value 5,50,000

Less: Municipal taxes paid _

Net annual value 5,50,000

Less: deduction from Net Annual value 30% of NAV (1,65,000)

(a) 30% of Net Annual value _

(b) Interest on loan 3,85,000

1,89,000

Profits and gains of business or profession

Share of profit from firm: Exempt u/s 10(2A)

Exempt income cannot be clubbed -

Income from other sources

Dividend on preference shares[Taxable in the hands of Mr. 13,00,000

Raghav as per section 60, since he transferred the income
i.e dividend, without transferring the assets. i.e.,
Preference shares]

Interest on debentures 7,50,000

Interest on savings bank account 2,00,000

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Cash gift [Taxable, since sum of money exceeding 75,000
Rs.50,000 received from his niece, who is not a relative as
per section 56(2).

23,25,000

Gross total income 25,14,000

Less: Deductions u/c VI-A:

Deduction U/s 80C [Principal repayment of loan Rs. 5 lakh, 1,50,000

restricted to Rs.1,50,000]

Deduction U/s 80TTA [Interest from savings bank account] 10,000 1,60,000

Total income 23,54,000

(8 Marks)

Ans-2

Computation of Gross Total Income of Mr. X for A. Y. 2023-24 (amount in Rs.):

Salaries

Income from salary (computed) 2,22,000

Less: Set-off of loss from house property of Rs. 2,58,000 to the extent 2,00,000 22,000
of Rs. 2 lakhs by virtue of section 71(3A)

Income from house property

-House in Delhi 22,000

-House in Chennai (2,60,000)

-House in Mumbai (self-occupied) (20,000)

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 (2,58,000)

Loss upto Rs. 2 lakhs can be set off against income from salary.

Profits and gains from business or profession

Profits from Speculative business - 2 46,000

Less: Loss of Rs. 74,000 from speculation business - 1 set-off to the (46,000) -
extent of profits of Rs.46,000 as per section 73(1) from another
speculation business. Loss from speculation business cannot be set-
off against any income other than profit and gains of another
speculation business.

Hence, the balance loss of Rs. 28,000 from speculative business has to
be carried forward to assessment year 2024-25.

Profits from textile business 18,000

Less: Loss from cosmetic business of Rs. 22,000 set off against profits (18,000) -
from textile business to the extent of Rs. 18,000 as per section 70(1).

Balance loss of Rs.4,000 from cosmetic business has to be carried

forward to A.Y. 2024-25, since the same cannot be set-off against
salary income.

Capital Gains

Long term capital gain from sale of property 15,400

Less: Short-term capital loss can be set-off against both short-term (15,400) -
capital gains and long-term capital gains. Short term capital loss of Rs.
16,000 set off against long-term capital gains to the extent of Rs.
15,400 as per section 74(1).

Balance short term capital loss of Rs. 600 has to be carry forward to
A. Y. 2024-25

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Income from Other Sources

Income from betting [No loss is allowed to be set off against such 34,000
income]

Income from card games [No loss is allowed to be set off against such 46,000
income]

Loss on activity of owning and maintenance of race horses [Loss Nil 80,000
incurred on activity of owning and maintenance of race horses cannot
be set-off against income from any source other than the activity of
owning and maintaining race horses. Hence, such loss of Rs. 14,600
has to be carried forward to A. Y. 2024-25]

Gross Total Income 1,02,000

(6 Marks)

Ans-3

Computation of Gross Total income of Mr. Dinesh (amount in Rs.)

Income under the head salary:

Salary including dearness allowance 6,50,000

Conveyance allowance ( Rs. 10,800- Rs. 10,800) [W. N. 1] -

Bonus 50,000

Salary of servant provided by the employee(Taxable as perquisite) 48,000

Bills paid by the employer for gas, electricity and water provided 82,000
free of cost at the residence of Mr. Dinesh (Taxable as perquisite)

Education facility(Rs. 2,500x 12) [W. N. 2] 30,000

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Gross salary 8,60,000

Less: standard deduction/s 16(ia) 50,000 8,10,000

Income from House property:

Flat at Dwarka ( self-occupied)

Annual value Nil

Less: interest on borrowed capital (Rs. 18,50,000x 11% subject to (2,00,000)

maximum of Rs. 2,00,000)

House at Rohini ( let out)

Gross annual value (GAV) (Rent Receivable is taken as GAV in the 4,20,000
absence of other information) [RS.35,000X 12]

Less: Municipal taxes paid 12,000

Net annual value (NAV) 4,08,000

standard deduction @ 30% of NAV 1,22,400

2,85,600 85,600

income from other sources:

Income on account of interest earned from advancing money gifted 5,700

to his minor son is includible in the hands of Dinesh as per section
64 (IA) ( Rs.40,000 x 18%)= Rs. 7,200.

However, as per section 10(32) an exemption of Rs. 1,500 shall be

available (Rs.7,200-Rs.1,500) interest income earned from
7,200
advancing money gifted to wife has to be clubbed with the income
of assessee as per section 64(1) ( Rs.40,000 x 18%)=

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Gift from two friends @ Rs. 45,00 each – since the aggregate 90,000 1,02,900
amount exceeds Rs. 50,000,hence ,whole of the sum will be taxable
u/s 56(2)(X)

Gross total income 9,98,500

Working notes:

1. Conveyance Allowance is exempt from tax to the extend for official purpose .Assuming
that entire amount is expended the same is claimed as exempt from tax.

2. In determining the value of perquisite resulting from the provision of free or concessional
educational abilities, from a plain reading of the proviso to rule 3(5). It is apparent that if the
cost of education per child exceeds Rs. 1,000 per month, the entire cost will be taken as the
value of the perquisite. Accordingly, the full amount of Rs. 2,500 per month is taxable as
perquisite. In such a case, the value of the perquisite would be Rs. 30,000 (i.e. Rs.2,500 x
12).

(6 Marks)

Ans-4

As per Section 22 of the CGST Act, 2017, a supplier is liable to be registered in the
State/Union territory from where he makes a taxable supply of goods or services or both, if
his aggregate turnover in a financial year exceeds Rs 20 lakh.

However, if such taxable supplies are made from any of the specified special category
States, namely, State of Manipur, Mizoram, Nagaland, and Tripura, he shall be liable to be
registered if his aggregate turnover in a financial year exceeds Rs 10 lakh.

In the given question, since Rishabh Enterprises is engaged in making taxable supplies of
goods and services from Maharashtra which is not a specified Special Category State, the
threshold limit for obtaining registration is Rs 20 lakh. It will not get the benefit of higher

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threshold limit of Rs 40 lakhs since it is not engaged in exclusive supply of goods as it is also
providing exempt services.

The threshold limit is not reduced to Rs 10 lakh in this case, as sale of alcoholic liquor for
human consumption from Nagaland (one of the specified Special Category States) are non-
taxable supplies in terms of Section 9(1) of CGST Act, 2017.

As per Section 2(6) of the CGST Act, 2017, aggregate turnover includes the aggregate value
of -

(i) All taxable supplies,

(ii) All exempt supplies,

(iii) Exports of goods and/or services and

(iv) All inter-State supplies of persons having the same PAN.

The above is computed on all India basis. Further, the aggregate turnover excludes central
tax, State tax, Union territory tax, integrated tax and cess. Moreover, the value of inward
supplies on which tax is payable under reverse charge is not taken into account for
calculation of 'aggregate turnover’.

In the light of the aforementioned provisions, the aggregate turnover of Rishabh Enterprises
is computed as under:

Computation of aggregate turnover of Rishabh Enterprises (amount in Rs):

Particulars Turnover of Cumulative turnover of

February February & March

Serving of cooked food and cold 5,50,000 12,00,000

drinks/non-alcoholic beverage in restaurant
[ Rs 5,50,000 + Rs 6,50,000]
in Maharashtra

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Add :Sale of alcoholic liquor for human 5,00,000
consumption in Nagaland

Add: Supply of wholly exempt services 1,00,000 2,00,000

[ Rs 1,00,000 + Rs 1,00,000]

Add: Export of packed food items from 1,50,000 3,50,000

restaurant in Maharashtra
[Rs 1,50,000 + Rs 2,00,000]

Aggregate Turnover 8,00,000 22,50,000

Working Notes:

(a) As per Section 2(47) of the CGST Act, 2017, exempt supply includes non-taxable supply.
Thus, supply of alcoholic liquor for human consumption in Nagaland, being a non-taxable
supply, is an exempt supply and is, therefore, includible while computing the aggregate
turnover

(2)Supply of wholly exempt services is includible while computing the aggregate turnover.

Conclusion: Rishabh Enterprises was not liable to be registered in the month of February
since its aggregate turnover did not exceed Rs 20 lakh in that month. However, since its
aggregate turnover exceeds Rs 20 lakh in the month of March, it should apply for
registration within 30 days from the date on which it becomes liable to registration

(8 Marks)

Ans-5

(a)The validity period of e-way bill under rule 138(10) of the CGST Rules, 2017 for transport
of cargo by road between two cities situated at a distance of 368 km is as under:

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(1) If it is over dimensional cargo: The validity period of the e-way bill is one day from
relevant date upto 20 km and one additional day for every 20km or part thereof thereafter.

Thus, Validity period in given case:

= 1day + 18 days

= 19 days

(2) if it is a cargo other than over dimensional cargo: the validity period of the e-way bill is
one day from relevant date upto 200km and one additional day for every 200km or part
thereof thereafter.

Thus, validity period in given case:

= 1day + 1day

= 2 days

(4 Marks)

(b) The statement is invalid.

Multiple invoices cannot be clubbed to generate one e-way bill. If multiple invoices are
issued by the supplier to recipient, for movement of such goods, multiple e-way bills have to
be generated.

Thus, for each invoice, one e-way bill has to be generated, irrespective of the fact whether
same or different consignors or consignees are involved.

However, after generating all these e-way, one consolidated e-way bill can be prepared for
transportation purpose, if goods are going in one vehicle.

(3 Marks)

MCQ ANSWER
CATESTSERIES.ORG
1. (c) Rs.2,52,000

Reason

To calculate the income liable for clubbing in the hands of Mr. X, we need to consider the
rental income earned by his wife from the let-out residential property and the interest
income from the fixed deposit made with that rental income.

Given data:

Rental income earned by Mr. X's wife during the year = Rs. 30,000 per month

Interest income from the fixed deposit = Rs. 21,000

Total rental income for the year (12 months) = Rs. 30,000 x 12 = Rs. 3,60,000

The income liable for clubbing in the hands of Mr. X is the total rental income earned by his
wife from the let-out property, which is Rs. 3,60,000.

So, the correct answer is:

(c) Rs. 2,52,000 (Rs. 3,60,000 - Rs. 1,08,000)

2. (c) Rs. 6,00,000

Reason:

To answer option (c), let's calculate the total income of GGC (P) Ltd. for the AY 2023-2024:

Brought Forward Business Loss: Rs. 12,00,000

(This is the loss carried forward from the previous Assessment Year.)

Income from the specified business (cold chain storage) during PY 2022-2023: Rs. 9,00,000

Profit from trade in food grains during PY 2022-2023: Rs. 6,00,000

Now, let's calculate the total income:

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Total Income = Income from specified business + Profit from trade in food grains - Brought
Forward Business Loss

Total Income = Rs. 9,00,000 + Rs. 6,00,000 - Rs. 12,00,000

Total Income = Rs. 3,00,000

In this case, the total income of GGC (P) Ltd. for the AY 2023-2024 (PY 2022-2023) is Rs.
3,00,000.

Hence, option (c) is the correct answer.

3. (d) 100% of royalty income or Rs. 3,00,000 whichever is less

Reason:

To answer option (d), we need to understand the provisions of section 80RRB of the Income
Tax Act.

Section 80RRB provides a deduction for royalty income received by the authors of certain
specified works like books, patents, copyrights, etc. The deduction allowed under this
section is the lower of the following two amounts:

100% of the royalty income received during the previous year.

Rs. 3,00,000.

So, the correct answer is:

(d) 100% of royalty income or Rs. 3,00,000, whichever is less.

Hence, option (d) is the correct answer.

4. (c) For the period specified in the application for registration or 90 days from the effective
date of registration whichever is earlier

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Reason:

The correct answer is:

(c) For the period specified in the application for registration or 90 days from the effective
date of registration, whichever is earlier.

For a casual taxable person (CTP) or a non-resident taxable person (NRTP), the validity of the
certificate of registration is determined based on certain factors. Let's break down the
options:

(a) For the period specified in the application for registration:

This means that the certificate of registration will be valid for the duration mentioned by the
CTP or NRTP in their application for registration.

(b) 90 days from the effective date of registration:

This means that the certificate of registration will be valid for a fixed period of 90 days from
the date of registration.

(c) For the period specified in the application for registration or 90 days from the effective
date of registration, whichever is earlier:

This option states that the certificate of registration will be valid either for the period
mentioned in the application for registration or for a maximum of 90 days from the effective
date of registration, whichever is earlier.

(d) For the period specified in the application for registration or 120 days from the effective
date of registration, whichever is earlier:

This option states that the certificate of registration will be valid either for the period
mentioned in the application for registration or for a maximum of 120 days from the
effective date of registration, whichever is earlier.

The correct answer is (c) For the period specified in the application for registration or 90
days from the effective date of registration, whichever is earlier. This means that if the
registration period specified in the application is less than 90 days, the certificate will be
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valid for that period. If the registration period specified is more than 90 days, the certificate
will be valid for a maximum of 90 days from the date of registration.

5. (c) Yes, on all supplies, if the revised invoice is raised within one months.

Reason:

According to the statement in option (c), the law permits the collection of tax on all supplies
if a revised invoice is raised within one month, even if those supplies were effected prior to
registration but after applying for registration.

To summarize, if the supplier has applied for registration, and subsequently, before
obtaining registration, supplies goods or services but issues a revised invoice within one
month after obtaining registration, they are allowed to collect tax on those supplies.

Therefore, the correct answer is:

(c) Yes, on all supplies, if the revised invoice is raised within one month.

(1 × 5 = 5 Marks)

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