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TEST PAPER 2

INTERMEDIATE COURSE

PAPER – 3: TAXATION

Date: 27-04-2025 Maximum Marks: 84

Test By: CA Nishant Kumar Time Allowed (in Minutes): 152

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SECTION – A: INCOME TAX LAW (10 MARKS)

Working Notes should form part of the answer. Wherever necessary, suitable assumptions may be
made by the candidates and disclosed by way of a note. However, in answers to Questions in Division
A, working notes are not required.

The relevant assessment year is A.Y. 2025-26

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Division A – Multiple Choice Questions

Question 1 – 1 Mark

Mr. Ramesh, a citizen of India, is employed in the Indian embassy in Australia. He is a non-resident for
A.Y. 2024-25. He received salary and allowances in Australia from the Government of India for the year
ended 31.03.2024 for services rendered by him in Australia. In addition, he was allowed perquisites by
the Government. Which of the following statements are correct?

a. Salary, allowances and perquisites received outside India are not taxable in the hands of Mr.
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Ramesh, since he is non-resident.
b. Salary, allowances and perquisites received outside India by Mr. Ramesh are taxable in India
since they are deemed to accrue or arise in India.
c. Salary received by Mr. Ramesh is taxable in India but allowances and perquisites are exempt.
d. Salary received by Mr. Ramesh is exempt in India but allowances and perquisites are taxable.
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Question 2 – 2 Marks

A building was acquired on 1.4.1995 for Rs. 20,00,000 and sold for Rs. 80,00,000 on 01.09.2024. The
fair market value of the building on 1.4.2001 was Rs. 25,00,000. Its stamp duty value on the same date
was Rs. 22,00,000. Determine the capital gains on sale of such building for the A.Y. 2025-26?

CII for F.Y. 2001-02: 100; F.Y. 2024-25: 363

a. Rs. 58,00,000
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b. Rs. 55,00,000
c. Rs. 60,00,000
d. Rs. 14,000

Question 3 – 2 Marks
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Mr. Vikas received a gold ring worth ₹60,000 on the occasion of his daughter’s wedding from his best
friend Mr. Vishnu. Mr. Vishnu also gifted a gold chain to Kavya, daughter of Mr. Vikas, worth ₹80,000
on the said occasion. Would such gifts be taxable in the hands of Mr. Vikas and Ms. Kavya?

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a. Yes, the gift of gold ring and gold chain is taxable in the hands of Mr. Vikas and Ms. Kavya,
respectively
b. Such gifts are not taxable in the hands of Mr. Vikas nor in the hands of Ms. Kavya
c. Value of gold ring is taxable in the hands of Mr. Vikas but value of gold chain is not taxable in
the hands of Ms. Kavya
d. Value of gold chain is taxable in the hands of Ms. Kavya but value of gold ring is not taxable in

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the hands of Mr. Vikas

Question 4 – 2 Marks

Mr. A (aged 45 years) sold an agricultural land for Rs. 52 lakhs on 04.10.2024 acquired at a cost of Rs.
49.25 lakhs on 13.09.2023 situated at 7 kms from the jurisdiction of municipality having population of
4,00,000 and also sold another agricultural land for Rs. 53 lakhs on 12.12.2024 acquired at a cost of Rs.
46 lakhs on 15.02.2023 situated at 1.5 kms from the jurisdiction of municipality having population of

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12,000. What would be the amount of capital gain chargeable to tax in the hands of Mr. A for the A.Y.
2025-26? CII for F.Y. 2022-23: 331; 2023-24: 348; 2024-25: 363.

a. Short-term capital gain of Rs. 9.75 lakhs

b. Short-term capital gain of Rs. 7 lakhs
c. Long-term capital gain of Rs. 2,72,212
d. Long-term capital gain of Rs. 2,50,158
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Question 5 – 2 Marks

Anirudh stays in New Delhi. His basic salary is Rs. 10,000 p.m., D.A. (60% of which forms part of pay) is
Rs. 6,000 p.m., HRA is Rs. 5,000 p.m. and he is entitled to a commission of 1% on the turnover achieved
by him. Anirudh pays a rent of Rs. 5,500 p.m. The turnover achieved by him during the current year is
Rs. 12 lakhs. The amount of HRA exempt under section 10(13A), if he exercises the option of shifting
out of the default regime provided under section 115BAC(1A), is:
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a. ₹48,480
b. ₹45,600
c. ₹49,680
d. ₹46,800

Question 6 – 1 Mark
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Unexhausted basic exemption limit of a resident individual can be adjusted against:

a. only LTCG taxable @20% u/s 112

b. only STCG taxable @15% u/s 111A
c. both (a) and (b)
d. casual income taxable @30% u/s 115BB
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Division B – Descriptive Questions

All questions are compulsory.

Question 1 – 7 Marks

Mrs. Disha Khanna, a resident of India, owns a house property at Bhiwani in Haryana. The Municipal

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value of the property is ₹7,50,000, Fair Rent of the property is ₹6,30,000 and Standard Rent is ₹7,20,000
per annum.

The property was let out for ₹75,000 per month for the period April 2024 to December 2024.

Thereafter, the tenant vacated the property and Mrs. Disha Khanna used the house for self-occupation.
Rent for the months of November and December 2024 could not be realized from the tenant. The
tenancy was bona-fide but the defaulting tenant was in occupation of another property of the assessee,
paying rent regularly.

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She paid municipal taxes @ 12% during the year and paid interest of ₹35,000 during the year for
amount borrowed towards repairs of the house property.

You are required to compute her income from “House Property” for the A.Y. 2025-26.

Question 2 – 2 Marks

Mr. Ravi received an advance of ₹2,00,000 on 10.5.2024 from a closely held manufacturing company
(private company in which the public are not substantially interested) in which he holds 22%
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shareholding. The company had an accumulated profit of ₹1,00,000 at the time of giving the advance.
Compute the amount of income to be included in the hands of Mr. Ravi for the assessment year 2025-
26 and also state the head under which it is to be included.

Question 3 – 4 Marks
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From the following calculate the taxable amount under the proper head of income for the Financial
Year 2024-25 of Mr L, who is resident and 56 years old. The reasons should form part of your answer:

1. Dividend of ₹50,000 received in April 2024. The dividend was declared by the company LMN
Limited at its annual general meeting held in October 2023.
2. Advance forfeited amounting to ₹1,00,000 on 01.05.2024 as the negotiation for transfer of
capital asset did not result in transfer of Capital Asset.
3. Cash Gift received from non-relative on the occasion of marriage of Son. ₹51,000.
4. During the Financial Year 2024-25, he received ₹99,000 as pension from employer of deceased
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wife.

Question 4 – 8 Marks

Ms. Neelima had purchased 500 equity shares in A Ltd. at a cost of ₹ 30 per share (brokerage 1%) in
February 1995. She got 50 bonus shares in September 1999. She again got 550 bonus shares by virtue
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of her holding on March 2005. Fair market value of the shares of A Ltd. on April, 2001 is ₹ 45. On 01-
07-2024, she transferred all her shares @ ₹ 280 per share (brokerage 2%). The FMV of shares as on 31-
01-2018 is ₹ 150 per share. Compute the capital gains taxable in the hands of Ms. Neelima assuming:

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1. A Ltd. is an unlisted company and securities transaction tax was not applicable at the time of
sale.
2. A Ltd. is a listed company and the shares are sold in a recognised stock exchange and securities
transaction tax was paid at the time of purchase and sale.

CII for F.Y. 2004-05: 113

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Question 5 – 6 Marks

Mr. Ranjan provides you the following details with regard to sale of certain securities by him during F.Y.
2024-25:

1. Sold 10000 shares of A Ltd. on 05-04-2024 @ ₹ 650 per share: A Ltd. is a listed company. These
shares were acquired by Mr. Ranjan on 05-04-2017 @ ₹ 100 per share. STT was paid both at
the time of acquisition as well as at the time of transfer of such shares which was affected

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through a recognized stock exchange. On 31-01-2018, the shares of A Ltd. were traded on a
recognized stock exchange as under:
Highest Price = ₹ 300 per share
Average Price = ₹ 290 per share
Lowest Price = ₹ 280 per share
2. Sold 1000 units of B Mutual Fund on 20-04-2024 @ ₹ 50 per unit: B Mutual Fund is an equity
oriented fund. These units were acquired by Mr. Ranjan on 15-04-2017 @ ₹ 10 per unit. STT
was paid only at the time of transfer of such units. On 31-01-2018, the Net Asset Value of the
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units of B Mutual Fund was ₹ 55 per unit.
3. Sold 100 shares of C Ltd. on 25-04-2024 @ ₹ 250 per share: C Ltd. is an un-listed company.
These shares were issued by the company as bonus shares on 30-09-1997. The fair market
value of these shares as on 01-04-2001 was ₹ 50 per share.

Calculate the amount chargeable to tax under the head Capital Gains and also calculate tax on such
gains for assessment year 2025-26 assuming that the other incomes of Mr. Ranjan exceed the
maximum amount not chargeable to tax. (Ignore surcharge and cess).
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Cost Inflation Indices for F.Y. 2001-02 = 100; 2016-17 = 264; 2017-18 = 272; 2020-21 = 301; 2024-25 =
363

Question 6 – 5 Marks

Mr. Govind purchased 600 shares of “Y” Limited at ₹ 130 per share on 26-02-1979. “Y” Limited issued
him, 1,200 bonus shares on 20-02-1984. The fair market value of these shares at Mumbai Stock
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Exchange as on 01-04-2001 was ₹ 900 per share and ₹ 2,200 per share as on 31-01-2018. On 31-01-
2024 he converted 1000 shares as his stock in trade. The shares were traded at Mumbai Stock Exchange
on that date at a high of ₹ 2,200 per share and closed for the day at ₹ 2,100 per share. On 07-07-2024,
Mr. Govind sold all 1,800 shares @ ₹ 2,400 per share at Mumbai Stock Exchange and securities
transaction tax was paid. Compute total income of Mr. Govind for the A.Y. 2025-26.
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SECTION B - INDIRECT TAXES (10 MARKS)

QUESTIONS

1. Working Notes should form part of the answers. However, in answers to Questions in Division
A, working notes are not required.
2. Wherever necessary, suitable assumptions may be made by the candidates, and disclosed by

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way of notes.
3. All questions should be answered on the basis of position of the GST law as amended by the
Finance Act, 2024, including significant notifications and circulars issued, up to 30th June 2025.

Division A - Multiple Choice Questions (MCQs)

Question 1 – 1 Mark

X & Co., a supplier registered under GST in Meghalaya, wants to opt for composition levy. The aggregate
turnover limit for composition levy is

a.
b.
c.
d.
₹50 lakh
₹75 lakh
₹1.5 crore
none of the above

Question 2 – 2 Marks
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GST is not payable by recipient of services in the following cases:

i. Services provided by way of sponsorship to ABC Ltd. located in India.

ii. Services supplied by a director (registered under GST) of Galaxy Ltd. to Mr. Krishna
iii. Services by Department of Posts by way of speed post to MNO Ltd. located in India.
iv. Services supplied by a recovering agent to SNSP Bank located in India.
a. (i) & (iii)
b. (i) & (iv)
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c. (ii) & (iii)

d. (ii) & (iv)

Question 3 – 1 Mark

Which of the following persons engaged in making intra-state supplies from Uttar Pradesh, as
prescribed below, is not eligible for composition levy under sub-sections (1) and (2) of the CGST Act,
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2017 even though their aggregate turnover does not exceed ₹1.5 crore in preceding FY?

a. A person supplying restaurant services

b. A person supplying restaurant services and earning bank interest
c. A person trading in ice cream
d. A person supplying service of repairing of electronic items
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Question 4 – 2 Marks

Which of the following is not considered as ‘goods’ under the CGST Act, 2017?

i. Ten-paisa coin having sale value of ₹100.

ii. Shares of unlisted company
iii. Lottery tickets

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a. (i)
b. (ii)
c. (ii) and (iii)
d. (i), (ii) and (iii)

Question 5 – 2 Marks

Sham Ltd., located in Mumbai, is receiving legal services from a lawyer Mr. Gyan, registered under GST.

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The aggregate turnover of Sham Ltd. in the preceding financial year is ₹42 lakh. The information
regarding date of payment, invoice etc. is as follows:

• Invoice issued by Mr. Gyan on 15th April

• Payment debited in the bank account of Sham Ltd. on 5th May
• Date of payment entered in books of accounts of Sham Ltd.: 1st May

What is time of supply of services?

a. 1st May
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b. 5th May
c. 15th June
d. 15th April

Question 6 – 2 Marks
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Determine which of the following independent transactions even if made without consideration in
terms of Schedule I of the CGST Act, 2017, will be deemed as supply?

i. AB & Associates transfers stock of goods from its Mumbai branch to Kolkata depot for sale of
such goods at the depot.
ii. Mr. Raghuveer, a dealer of air-conditioners permanently transfers the motor vehicle free of
cost. ITC on said motor vehicle was blocked and therefore, was not availed.
iii. Mrs. Riddhi, an employee of Sun Ltd., received gift from her employer on the occasion of Diwali
worth ₹21,000.
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a. (i)
b. (ii)
c. (iii)
d. Both (i) and (ii)
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Division B – Descriptive Questions

All questions are compulsory.

Question 1 – 5 Marks

"Under the GST law, taxes on taxable services supplied by the Central Government or the State

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Government to a business entity in India are payable by recipient of services".

State the exceptions of the above statement.

Question 2 – 5 Marks

Mr. Anurag a famous Author is engaged in supply of services by the way of transfer or permitting the
use or enjoyment of a copyright covered under clause (a) of subsection (1) of section 13 of the
Copyright Act, 1957 relating to original literary works to a publisher.

Question 3 – 5 Marks TK
Explain in brief the conditions under which an Author can choose to pay tax under forward charge.

M/s. T is a registered dealer of Andhra Pradesh trading in different types of machinery and its related
different types of services. Their aggregate turnover for the preceding financial year 2022-23 for sale
of machinery was ₹1.32 crores, it was first year so they had not started for providing service related to
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machinery. From FY 2023-24 they are planning to provide repair and maintenance service of ₹6.25 lakh
for which they have to purchase some raw material of ₹5 lakh from the other State (till date they are
purchasing within State only).

From the information given above, examine whether M/s. T can opt for composition scheme under
Section 10(1), 10(2A) or 10(2) of the CGST Act, 2017 for FY 2023-24?
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Question 4 – 2.5 Marks

Who are not eligible to opt for composition scheme for goods under GST Laws?

Question 5 – 2 Marks

Garima, having its permanent residence in Bhavnagar, Gujarat purchased car from Kiara Motors of
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Jaipur, Rajasthan to take the advantage of lower registration charges and road tax. Garima took the
delivery of the car from Jaipur and returned with car to her residence in Bhavnagar, Gujarat. The
address of Garima recorded in the invoice issued by Kiara Motors mentions only the name of the State
i.e., Gujarat.

Garima is an unregistered person whereas Kiara Motors is a registered person under GST. Determine
the place of supply for supply made by Kiara Motors to Garima.
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Question 6 – 2.5 Marks

An order is placed to T & Co., Sholapur on 18th August, 2022 for supply of fabrics to make garments.
Company delivered the fabrics on 4th September, 2022 and after completion of the order issued the
invoice on 15th September, 2022. The payment against the same was received on 30th September, 2022.
Determine the time of supply for the purpose of payment under CGST Act, 2017 with your explanations.

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Question 7 – 5 Marks

HM Industries Ltd. engaged the services of a transporter for road transport of a consignment on 20 th
May, 2022. However, the consignment could not be sent immediately on account of a strike in the
factory, and instead was sent on 20th July, 2022. Invoice was received from the transporter on 20th June,
2022 and payment was made on 25th August, 2022. What is the time of supply of the transporter’s
service?

Question 8 – 5 Marks

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Describe the conditions to be satisfied for availing deduction of post supply discounts from the value
of supply as per the provisions of section 15(3) of the CGST Act 2017.
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