PART II: QUESTIONS AND ANSWERS

OBJECTIVE TYPE QUESTIONS

(Only put descriptive

questions given in second part
of this RTP)
1. Mr. A (aged 52 years), is a CEO of XYZ Enterprise Limited. During the previous
year 2019-20, he earned salary of ` 1,65,00,000 and long-term capital gain on
sale of listed equity shares amounting to ` 1,06,500. He earned interest of `
4,82,778 on saving account.
Further, he has provided the following other information for filing his return of
income:
He does not receive house rent allowance from his employer. Mr. A took a loan
from State Bank of India on 27th October 2017 for repairing his house (self-
occupied) at Delhi and paid interest on such borrowings of ` 80,000 and `
1,50,000 towards principal amount during the previous year 2019-20.
Mr. A has made the following payments towards medical insurance premium
for health policies taken for his family members:
Medical premium for his brother: ` 13,500 (by
cheque) Medical premium for his parents: ` 17,670 (by
cheque) Medical premium for self and his wife: `
21,000 (by cheque).

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 PAPER – 4: TAXATION 13

He also incurred ` 6,400 towards preventive health check-up of his wife in cash.
He deposited ` 1,00,000 towards PPF. He also deposited ` 50,000 and 2,50,000
towards Tier I and Tier II NPS A/c, respectively.
He has paid ` 5,30,000 as advance tax. His employer has deducted tax at
source of
` 51,89,000. He is of the opinion the balance amount of tax, if any he will pay
on 27 July 2020 (i.e. before the due date for filing of return of income).
From the details given above, choose the most appropriate option to the
questions given below:
(i) Compute the amount of deduction available to Mr. A under Chapter VI-A
for the assessment year 2020-21:
(a) ` 2,04,070
(b) ` 2,42,670
(c) ` 2,52,670
(d) ` 2,02,670
(ii) Assuming Mr. A pays rent of ` 65,000 per month for his rented house at
Mumbai to Mr. C, a resident individual, is Mr. A liable to deduct TDS on
such rent. If so, what would be the rate and amount of TDS?
(a) Yes, Mr. A is liable to deduct TDS @5% amounting to ` 3,250 every
month i.e., at the time of payment of such rent
(b) Yes, Mr. A is liable to deduct TDS @10% amounting to ` 6,500 every
month i.e., at the time of payment of such rent
(c) Yes, Mr. A is liable to deduct TDS @5% amounting to ` 39,000 in the
month of March 2020
(d) No, Mr. A is not liable to deduct TDS, since he is not required to get
his books of accounts audited under section 44AB
(iii) What would be the amount of net tax payable for the assessment year
2020-21 in the hands of Mr. A?
(a) Tax payable of ` 78,230
(b) Tax payable of ` 60,290
(c) Tax payable of ` 49,530
(d) Tax payable of ` 67,470

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 14 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

(iv) Compute the amount of interest chargeable under section 234B on

account of short payment of advance tax:
(a) ` 1,980
(b) Nil
(c) ` 3,130
(d) ` 2,410
2. Ms. Chanchal, aged 45, provides the following data of her gross receipts for the
financial year 2018-19 and 2019-20. She is engaged in agency business along
with providing services as tarot card reader.
F.Y. Receipts from Receipts from Total Gross
business (`) profession (` ) Receipts (` )
2018- 78,00,00 43,00,000 1,21,00,000
19 0
2019- 85,00,00 47,00,000 1,32,00,000
20 0
During the F.Y. 2019-20, she paid an amount of ` 1,20,000 to a contractor for
polishing her old furniture. She has taken services from renowned interior
designers for her self- occupied residential house property for which she paid `
2,50,000.
Further, on 28.05.2019 she sold one commercial property for ` 50,00,000. The
value adopted for stamp duty was ` 52,00,000. It was purchased for ` 40,00,000 on
28.04.2017. (Cost Inflation Index for F.Y. 2019-20: 289, F.Y. 2017-18: 272).
The brought forward long-term capital loss from unlisted shares of F.Y.
2018-19 is
` 7,80,000.
During the year, Ms. Chanchal incurred a loss of ` 70,00,000 while trading in the
agricultural commodity derivatives (no CTT paid).
From the details given above, choose the most appropriate option to the
questions given below:
(i) Is Ms. Chanchal liable to tax audit under the Income-tax Act, 1961 for the
P.Y. 2019- 20?
(a) Yes, as the total gross receipts exceeds ` 1,00,00,000
(b) No, as the gross receipts from business or profession are below the
specified threshold limits.
(c) Yes, as the gross receipts from business exceed ` 50,00,000
(d) Yes, as the gross receipts from profession exceed ` 25,00,000

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 PAPER – 4: TAXATION 15

(ii) What is the total amount of tax to be deducted by Ms. Chanchal for P.Y.
2019-20? (a) ` 1,200
(b) ` 26,200
(c) Nil
(d) ` 27,400
(iii) What is the amount and nature of Capital gain chargeable to tax in
the hands of Ms. Chanchal?
(a) ` 10,00,000 and Short-term capital gain.
(b) ` 12,00,000 and Short-term capital gain.
(c) ` 7,50,000 and Long-term capital gain.
(d) ` 9,50,000 and Long-term capital gain.
(iv) What is the amount of losses which can be carried forward to A.Y. 2021-22,
assuming that business income is ` 45,00,000 and
income from profession is
` 25,00,000 for the P.Y. 2019-20?
(a) ` 7,80,000 under section 74
(b) ` 70,00,000 under section 73
(c) ` 30,000 under section 74
(d) ` 30,000 under section 74 and ` 70,00,000 under section 73
3. Mr. A, aged 45 years sold an agricultural land for ` 52 lakhs on 04.10.2019
acquired at a cost of ` 49.25 lakhs on 13.09.2018 situated at 7 kms from the
jurisdiction of municipality having population of 4,00,000 and also sold
another agricultural land for
` 53 lakhs on 12.12.2019 acquired at a cost of ` 46 lakhs on 15 02.2018
situated at 1.5
kms from the jurisdiction of municipality having population of 12,000. What
would be the amount of capital gain chargeable to tax in the hands of Mr. A for
the assessment year 2020-21? Cost inflation index for F.Y. 2017-18: 272;
2018-19: 280; 2019-20:289.
(a) Short-term capital gain of ` 9.75 lakhs
(b) Short-term capital gain of ` 7 lakhs
(c) Long-term capital gain of ` 4,12,500
(d) Long-term capital gain of ` 5,29,196
4. Mr. Arjun holding 1000 shares of X Ltd acquired on 01.07.2018 for ` 600 per
share, sold 500 shares to Mr. Shaurya, on 01.05.2019 for ` 550 per share. X
Ltd. declared dividend @ ` 65 per share on 20.07.2019, being the record
date for declaration of dividend. Mr. Shaurya sold 300 equity shares at ` 475
per share on 28 09.2019 and the balance 200

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 16 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

equity shares at ` 450 per share on 28.10.2019. Apart from above mentioned
information, Mr. Shaurya was having only long-term capital gains from sale
of unlisted shares of
` 50,000. Assuming that Mr. Shaurya has no other income, his total
income for A.Y. 2020-21 is –
(a) ` 7,500
(b) ` 27,000
(c) ` 50,000
(d) ` 30,000
5. An amount of ` 40,000 was paid to Mr. X on 1.7.2019 towards fees for
professional services without deduction of tax at source. Subsequently, another
payment of ` 50,000 was due to Mr. X on 28.2.2020, from which tax@10%
(amounting to` 9,000) on the entire amount of ` 90,000 was deducted. However,
this tax of ` 9,000 was deposited only on 22.6.2020. The interest chargeable
under section 201(1A) would be:
(a) ` 1,080
(b) ` 860
(c) `
1,620
(d) ` 840
6. Mr. Nishant, a resident but not ordinarily resident for the previous year 2018-
19 and resident and ordinarily resident for the previous year 2019-20 has
received rent from property in Canada amounting to ` 1,00,000 during the
P.Y.2018-19. He has deposited the same in a bank in Canada. During the
financial year 2019-20, he remitted this amount to India through approved
banking channels. Is such rent taxable in India, and if so, how much and in
which year?
(a) Yes; ` 70,000 was taxable in India during the previous year 2018-19.
(b) Yes; ` 1,00,000 was taxable in India during the previous year 2018-19.
(c) Yes; ` 70,000 was taxable in India during the previous year 2019-20.
(d) No; such rent is not taxable in India either during the previous year 2018-
19 or during the previous year 2019-20.
7. Mr. Dinesh, a resident in India, has gross total income of ` 2,30,000 comprising
of interest on saving A/c and rental income during the previous year 2019-20. He
incurred expenditure of ` 2,00,000 for his son for a study tour to Europe. Whether
he is required to file return of income for the assessment year 2020-21? If yes,
what is the due date?
(a) Yes, 31st July of A.Y

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 PAPER – 4: TAXATION 17

(b) Yes, 30th September of A.Y

(c) Yes, 31st October of A.Y
(d) No, he is not required to file return of income
8. Mr Nihar maintains a Savings A/c and a Current A/c in Mera Bank Ltd. The
. details of
withdrawals on various dates during the previous year 2019 -20 are as follows:
Date of Cash withdrawal Saving Account Current account
05.04.2019 15,00,000 -
10.05.2019 - 22,00,000
25.06.2019 20,00,000 -
17.07.2019 - 5,00,000
28.10.2019 35,00,000 -
10.11.2019 - 38,00,000
12.12.2019 25,00,000 -
Is Mera Bank Limited required to deduct tax at source on the withdrawals
made by Mr. Nihar during the previous year 2019-20? If yes, what would the
amount of tax deducted at source?
(a) No, TDS is not required to be deducted as the aggregate cash withdrawal
on or after 1.9.2019 does not exceed ` 1 crore
(b) No, TDS is not required to be deducted as the cash withdrawal does not
exceed
` 1 crore neither in saving account nor in current account
(c) TDS of ` 60,000 is required to be deducted.
(d) TDS of ` 1,20,000 is required to be deducted.
DESCRIPTIVE QUESTIONS
9. You are required to determine the residential status of Mr. Dinesh, a citizen
of India, for the previous year 2019-20. <<DT – Residential Status & Scope
of Income>>
Mr. Dinesh is a member of crew of a Singapore bound Indian ship, carrying
passengers in the international waters, which left Kochi port in Kerala, on 16th
August, 2019.
Following details are made available to you for the previous year 2019-20:
Particulars Date
Date entered into the Continuous Discharge Certificate 16th August, 2019
in respect of joining the ship by Mr. Dinesh

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 18 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

Date entered into the Continuous Discharge Certificate 21st January, 2020
in respect of signing off the ship by Mr. Dinesh

In June, 2019, he had gone out of India to Dubai on a private tour for a
continuous period of 27 days.
During the last four years preceding the previous year 2019-20, he was
present in India for 425 days. During the last seven previous years preceding
the previous year 2019 -20, he was present in India for 830 days.
10. Explain with brief reasons, whether the following income can be regarded as
agricultural income, as per the provisions of the Income-tax Act, 1961:
<<DT – Exempt Income>>
(i) Rent received for letting out agricultural land for a movie shooting.
(ii) Income from sale of seedlings in a nursery adjacent to the agricultural
lands owned by an assessee.
11. Mr. Neeraj, a salaried employee, furnishes the following details for the financial
year 2019-20:
Particulars `
Basic salary 5,40,000
Dearness allowance 3,60,000
Commission 50,000
Entertainment allowance 7,500
Medical expenses reimbursed by the employer 21,000
Profession tax (of this, 50% paid by employer) 4,000
Health insurance premium paid by employer 9,000
Gift voucher given by employer on his birthday 12,000
Life insurance premium of Neeraj paid by employer 34,000
Laptop provided for use at home. Actual cost of Laptop to
30,000
employer Children of the assessee are also using the Laptop at
home]

Annual credit card fees paid by employer [Credit card is not

5,000
exclusively used for official purposes; details of usage are not
available]
You are required to compute the income chargeable under the head Salaries
for the assessment year 2020-21. <<DT – Salaries>>

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 PAPER – 4: TAXATION 19

12. Ms. Pihu has three houses, all of which are self-occupied. The particulars of
these houses are given below:
(Value in `)
Particulars House – I House – II House-III
Municipal Valuation per annum 1,30,000 1,20,000 1,20,000
Fair Rent per annum 1,10,000 1,85,000 1,45,000
Standard rent per annum 1,00,000 1,90,000 1,30,000
Date of completion 30-01- 31-07-2008 31.5.2011
2005
Municipal taxes payable during the 12% 9% 10%
year (paid for House II & III only)
Interest on money borrowed for - 75,000 -
repair of property during current
year
You are required to compute Pihu’s income from house property for the Assessment
Year 2020-21 and suggest which houses should be opted by Pihu to be
assessed as self- occupied so that her tax liability is minimum. <<DT –
IFHP>>
13. Mr. Karan gifted a sum of ` 9 lakhs to his brother’s minor son on 1-5-
2019. On the same date, his brother gifted debentures worth ` 10 lakhs to
Mrs. Karan. Son of Mr. Karan’s brother invested the amount in fixed deposit
with Canara Bank @ 9% p.a. interest and Mrs. Karan received interest of ` 81,000
on these debentures during the previous year 2019-20. Discuss the tax
implications under the provisions of the Income- tax Act, 1961. <<DT –
Clubbing of Income>>
14. Mr. Krishan, residing in Indore, provides the following information for the
financial year 2019-20:
Particulars `
Income from textile business 4,60,000
Income from speculation business 25,000
Loss from gambling 12,000
Loss on maintenance of race horse 15,000
Current year depreciation of textile business not adjusted in the 5,000
income given above.
Unabsorbed depreciation of assessment year 2018-19 10,000
Speculation business loss of assessment year 2019-20 30,000

Compute the Gross Total Income of Mr. Krishan for the Assessment year 2020-
21 and also state the losses eligible for carry forward and period upto which
such losses can be carried forward. <<DT – Set off & cf of losses>>

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 20 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

15. Mr. Suraj aged 50 years, a resident individual, engaged in a wholesale business of
health products. He is also a partner in XYZ & Co., a partnership firm. The
following details are made available for the year ended 31.3.2020:
Sl. No. Particulars ` `
(i) Interest on capital received from XYZ & Co., at 1,50,00
15% [in accordance with the partnership 0
deed]
(ii) Share of profit from the firm 35,000
(iii) Salary as working partner (fully allowed in the 1,00,00
hands of the firm) 0
(iv) Interest from bank on fixed deposit (Net of TDS) 40,500
(v) Interest on saving bank account 12,300
(vi) Income-tax refund received relating to 34,500
assessment year 2019-20 including interest of `
2,300
(vii) Net profit from wholesale business 5,60,00
0
Amounts debited include the following:
- Depreciation as per books 34,000
- Motor car expenses 40,000
- Municipal taxes for the shop 7,000
(For two half years; payment for one half year
made on 12.7.2020 and for the other on
31.12.2020)
Salary to manager by way of a single cash 21,000
payment
(viii) The WDV of the assets (as on 1.4.2019) used in
above wholesale business is as under:
- Computers 2,40,00
0
- Computer printer 1,50,00
0
(ix) Motor car acquired on 31.12.2019 (20% used 6,80,00
for personal use) 0
(x) He owned a house property in Mumbai which was 1,15,00
sold in January, 2015. He received arrears of 0
rent in respect of the said property in October,
2019.
(x) LIP paid for independent son 60,000
(xi) PPF of his wife 70,000
(xii) Health insurance premium paid towards a 35,000
policy covering her mother aged 75 by way of
cheque. She is not dependant on him.

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 PAPER – 4: TAXATION 21

(xiii) Contribution toward Prime Minister National 50,00

Relief Fund 0

You are required to compute the total income of the Mr. Suraj for the
assessment year 2020-21 and the closing WDV of each block of assets.
<<DT – Computation of Income>>
OBJECTIVE TYPE QUESTIONS
SUGGESTED ANSWERS
MCQ Sub- Most Appropriate MCQ Most Appropriate
No. part Answer No. Answer
1. (i) (d) 3. (b)
(ii) (c) 4. (b)
(iii) (c) 5. (b)
(iv (b) 6. (d)
)
2. (i) (b) 7. (d)
(ii) (c) 8. (d)
(iii (c)
)
(iv (c)
)

DESCRIPTIVE QUESTIONS
9. Determination of residential status of Mr. Dinesh for the P.Y. 2019-20
As per Explanation 1 to section 6(1), where an Indian citizen leaves India as a
member of crew of an Indian ship, he will be resident in India only if he stayed
in India for 182 days during the relevant previous year.
As per Explanation 2 to section 6(1)1, in case of an individual, being a citizen of
India and a member of the crew of a foreign bound ship leaving India, the
period or periods of stay in India shall, in respect of an eligible voyage, not
include the period commencing from the date entered into the Continuous
Discharge Certificate in respect of joining of ship by the said individual for the
eligible voyage and ending on the date entered into the Continuous Discharge
Certificate in respect of signing off by that individual from the ship in respect of
such voyage.
Eligible voyage includes a voyage undertaken by an Indian ship engaged in
the carriage of passengers in international traffic, originating from any port in
India and having its destination at a port outside India.

1
read with Rule 126 of Income-tax Rules, 1962

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 22 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

In this case, voyage is undertaken by a foreign bound Indian ship engaged in

the carriage of passengers in international traffic, originating from a port in
India (i.e., the Kochi port) and having its destination at a port outside India
(i.e., the Singapore port). Hence, the voyage is an eligible voyage.
Therefore, the period from 16th August, 2019 and ending on 21st January, 2020
has to be excluded for computing the period of stay of Mr. Dinesh in India.
Accordingly, the period of 159 days [16+30+31+30+31+21] has to be
excluded for computing the period of his stay in India during the P.Y.2019-20.
Further, since Mr. Dinesh had also gone out of India to Dubai on a private
tour for a continuous period of 27 days in June, 2019, such period has also to
be excluded for computing his period of stay in India during the P.Y.2019-
20.
Consequently, the period of stay in India during the P.Y. 2019-20 would be 180
days [i.e., 366 days – 159 days – 27 days], which is less than 182 days.
Thus, Mr. Dinesh would be a non-resident for A.Y. 2020-21.
Since the residential status of Mr. Dinesh is “non-resident” for A.Y. 2020-21
consequent to his number of days of stay in India in P.Y. 2019-20, being less
than 182 days, his period of stay in India in the earlier previous years
become irrelevant.
10. (1) Rent received for letting out agricultural land for a movie shooting:
As per section 2(1A), “agricultural income” means, inter alia,
 any rent or revenue derived from land
 which is situated in India and is used for agricultural purposes.
In the present case, rent is being derived from letting out of agricultural
land for a movie shoot, which is not an agricultural purpose and hence, it
does not constitute agricultural income.
(2) Income from sale of seedlings in a nursery:
As per Explanation 3 to section 2(1A), income derived from saplings or
seedlings grown in a nursery is deemed to be agricultural income,
whether or not the basic operations were carried out on land.
Therefore, the amount received from sale of seedlings in a nursery
adjacent to the agricultural lands owned by the assessee constitutes
agricultural income.
11. Computation of income chargeable under the head “Salaries”
of Mr. Neeraj for A.Y.2020-21
Particulars `
Basic Salary 5,40,00
0

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 PAPER – 4: TAXATION 23

Dearness allowance 3,60,000

Commission 50,000
Entertainment allowance 7,500
Medical expenses reimbursed by the employer is fully taxable 21,000
Professional tax paid by the employer is a taxable perquisite as 2,000
per section 17(2)(iv), since it is an obligation of the employee
which is paid by the employer
Health insurance premium of ` 9,000 paid by the employer is an Nil
exempt perquisite [Clause (iii) of proviso to section 17(2)]
Gift voucher given by employer on Mr. Neeraj birthday [entire 12,000
amount is taxable since the perquisite value exceeds ` 5,000, as
per Rule 3(7)(iv)]
Life insurance premium of Mr. Neeraj paid by employer is a 34,000
taxable perquisite as per section 17(2)(v)
Laptop provided for use at home is an exempt perquisite as Nil
per Rule 3(7)(vii)
Provision of motor car (engine cubic capacity more than 1.6
litres) owned by employer provided to employee, the perquisite 28,800
value would be
` 28,800 [` 2,400 ×12] as per Rule 3(2)
Annual credit card fees paid by employer is a taxable
perquisite as per Rule 3(7)(v) since the credit card is not
exclusively used for official purposes and details of usage are 5,000
not available
Gross Salary 10,60,300
Less: Deductions under section 16
- Standard Deduction as per section 16(ia), lower of gross 50,000
salary and ` 50,000
- Entertainment allowance (deduction not allowable Nil
since Mr. Neeraj is not a Government employee)
- Professional tax paid allowable as deduction as per 4,000
section 16(iii)
Income chargeable under the head “Salaries” 10,06,300
Note: As per Rule 3(7)(iv), the value of any gift or voucher received by the employee or by
member of his household on ceremonial occasions or otherwise from the employer shall
be determined as the sum equal to the amount of such gift. However, the value of any gift
or voucher received by the employee or by member of his household below ` 5,000 in
aggregate during the previous year would be exempt as per the proviso to Rule 3(7)(iv). In
this case, the gift voucher of ` 12,000 was received by Mr. Neeraj from his employer on
the occasion of his birthday. Since the value of the gift voucher exceeds the limit of

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 24 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

` 5,000, the entire amount of ` 12,000 is liable to tax as perquisite. The above solution
has been worked out accordingly.
An alternate view possible is that only the sum in excess of ` 5,000 is taxable in view of
the language of Circular No.15/2001 dated 12.12.2001, which states that such gifts upto `
5,000 in the aggregate per annum would be exempt, beyond which it would be taxed as a
perquisite. As per this view, the value of perquisite would be ` 7,000. Accordingly, the gross
salary and net salary would be 10,55,300 and 10,01,300, respectively.
12. In this case, Pihu has more than two house properties for self-occupation. As
per section 23(4), Pihu can avail the benefit of self-occupation (i.e., benefit of
“Nil” Annual Value) only in respect of any two of the house properties, at her
option. The other house property would be treated as “deemed let-out” property,
in respect of which the Expected rent would be the gross annual value. Pihu
should, therefore, consider the most beneficial option while deciding which
house properties should be treated by her as self-occupied.
OPTION 1 [House I & II – Self-occupied and House III- Deemed to be let out]
If House I and II are opted to be self-occupied, Pihu’s income from house
property for
A.Y.2020-21 would be –
Particulars Amount in `
House I (Self-occupied) [Annual value is Nil] Nil
House II (Self-occupied) [Annual value is Nil, but interest
deduction would be available, subject to a maximum of `
30,000. In case of money borrowed for repair of self-occupied (30,000)
property, the interest deduction would be restricted to
`30,000, irrespective of the date of borrowal].
House III (Deemed to be let-out) [See Working Note below] 82,600
Income from house property 52,600
OPTION 2 [House I & III – Self-occupied and House II- Deemed to be let out]
If House I and III are opted to be self-occupied, Pihu’s income from house
property for
A.Y.2020-21 would be –
Particulars Amount in `
House I (Self-occupied) [Annual value is Nil] Nil
House II (Deemed to be let-out) [See Working Note below] 46,940
House III (Self-occupied) [Annual value is Nil] Nil
Income from house property 46,940

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OPTION 3 [House I – Deemed to be let out and House II & III – Self-occupied]
If House II and III are opted to be self-occupied, Pihu’s income from house
property for A.Y.2020-21 would be –
Particulars Amount in `
House I (Deemed to be let-out) [See Working Note below] 70,000
House II (Self-occupied) [Annual value is Nil, but interest
deduction would be available, subject to a maximum of `
30,000. In case of money borrowed for repair of self-occupied (30,000)
property, the interest deduction would be restricted to
`30,000, irrespective of the date of borrowal].
House III (Self-occupied) [Annual value is Nil] Nil
Income from house property 40,000

Since Option 3 is more beneficial, Pihu should opt to treat House – II & III as
Self- occupied and House I as Deemed to be let out, in which case, her
income from house property would be ` 40,000 for the A.Y. 2020-21.

Working Note:
Computation of income from House I, II and House III assuming that all are deemed
to be let out
Particulars Amount in Rupees
House I House II House III
Gross Annual Value (GAV)
Expected rent is the GAV of house property
Expected rent= Higher of Municipal Value 1,00,00 1,85,000 1,30,000
and Fair Rent but restricted to Standard 0
Rent
Less: Municipal taxes (paid by the Nil 10,800 12,000
owner during the previous year)
Net Annual Value (NAV) 1,00,000 1,74,200 1,18,000
Less: Deductions under section 24
(a) 30% of NAV 30,000 52,260 35,400
(b) Interest on borrowed capital
(allowed in full in case of - 75,000 -
deemed let out property)
Income from deemed to be let-out house 70,000 46,940 82,600
property

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 26 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

13. In the given case, Mr. Karan gifted a sum of ` 9 lakhs to his brother’s minor son on
1.5.2019 and simultaneously, his brother gifted debentures worth ` 10 lakhs to
Mr. Karan’s wife on the same date. Mr. Karan’s brother’s minor son invested
the gifted amount of ` 9 lakhs in fixed deposit with Canara Bank.
These transfers are in the nature of cross transfers. Accordingly, the income
from the assets transferred would be assessed in the hands of the deemed
transferor because the transfers are so intimately connected to form part of a single
transaction and each transfer constitutes consideration for the other by being
mutual or otherwise.
If two transactions are inter-connected and are part of the same transaction in
such a way that it can be said that the circuitous method was adopted as a
device to evade tax, the implication of clubbing provisions would be
attracted2.
As per section 64(1A), all income of a minor child is includible in the hands of
the parent, whose total income, before including minor’s income is higher.
Accordingly, the interest income arising to Mr. Karan’s brother’s son from fixed
deposits would be included in the total income of Mr. Karan’s brother,
assuming that Mr. Karan’s brother’s total income is higher than his wife’s total
income, before including minor’s income. Mr. Karan’s brother can claim
exemption of ` 1,500 under section 10(32).
Interest on debentures arising in the hands of Mrs. Karan would be taxable in the
hands of Mr. Karan as per section 64(1)(iv).
This is because both Mr. Karan and his brother are the indirect transferors of
the income to their spouse and minor son, respectively, with an intention to
reduce their burden of taxation.
In the hands of Mr. Karan, interest received by his spouse on debentures of ` 9
lakhs alone would be included and not the entire interest income on the
debentures of `10 lakhs, since the cross transfer is only to the extent of ` 9 lakhs.
Hence, only proportional interest (i.e., 9/10th of interest on debentures
received)
` 72,900 would be includible in the hands of Mr. Karan.
The provisions of section 56(2)(x) are not attracted in respect of sum of money
transferred or value of debentures transferred, since in both the cases, the
trans fer is from a relative.
14. Computation of Gross Total Income of Mr. Krishan for A.Y. 2020-21
Particulars ` `
Profits and gains of business or profession
Income from Textile business 4,60,000
Less: Current year depreciation allowable under
section 32(1) 5,000
4,55,000

2 It was so held by the Apex Court in CIT vs. Keshavji Morarji (1967) 66 ITR 142.

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 PAPER – 4: TAXATION 27

Less: Unabsorbed depreciation brought forward

from A.Y.2018-19 as per section 32(2) 10,000
4,45,000
Income from speculation business
Current year income from speculation business 25,000
Less: Speculation business loss for A.Y. 2019-20 set-off
as per the provisions of section 73(2) 30,000
Speculation business loss to be carried forward
(5,000) Nil
Gross Total Income 4,45,000
Losses eligible for carry forward to A.Y.2021-22
Particulars `
(1) Loss from speculation business to be carried forward as per section 5,000
73
Loss from speculation business can be set off only against
income from another speculation business. The
remaining loss from speculation business can be carried
forward for a maximum of four assessment years
immediately succeeding the assessment year for which the
loss was first computed. Thus, such loss can be carried
forward upto A.Y.2023-24
(2) Loss on maintenance of race horses to be carried forward as per 15,000
section 74A(3)
Loss on maintenance of race horses can be set-off only
against income from the activity of owning and maintaining
race horses. Such loss can be carried forward for a maximum of
four assessment years immediately succeeding the assessment
year for which the loss was first computed. Thus, such loss
can be carried forward upto A.Y.
2024-25
(3) Loss from gambling can neither be set-off nor be carried forward.
15. Computation of total income of Mr. Suraj for the A.Y.2020-21
Particulars ` `
Income from house property
Arrears of rent 1,15,000
(taxable under section 25A even if Mr. Suraj is not the
owner of the house property in the P.Y.2019-20)
Less: Deduction@30% 34,500 80,500

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 28 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

Income chargeable under this head

Profits and gains of business or profession
Income from wholesale business
Net profit as per books 5,60,000
Add: Amount debited to P & L A/c, not allowable as
deduction
- Depreciation as per books 34,000
- Disallowance of municipal taxes paid for the second
half- year under section 43B, since the same was
paid after the due date of filing of return (` 7,000/2) 3,500
- Disallowance under section 40A(3) in respect of
salary paid in cash since the same exceeds ` 10,000 21,000
- 20% of car expenses for personal use 8,000
6,26,500
Less: Depreciation allowable (Note 1) 2,37,600
3,88,900
Income from firm
Share of profit from the firm is exempt -
under section 10(2A)
Interest on capital from partnership firm 1,20,00
(Note 2) 0
Salary as working partner fully taxable 1,00,00 2,20,000 6,08,900
0
Income from other sources
Interest on bank fixed deposit (Gross) 45,000
Interest on saving bank account 12,300
Interest on income-tax refund 59,600
Gross total income 2,300 7,49,000
Less: Deduction under Chapter VIA (Note 3) 2,25,000
Total Income 5,24,000
Notes:
(1) Depreciation allowable under the Income-tax Rules, 1962
Opening Rate Depre- Closing
WDV ciation WDV
Block 1 Computers 2,40,00 40 96,000 1,44,000
0 %
Computer 1,50,00 40 60,000 90,000
printer 0 %

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 PAPER – 4: TAXATION 29

Block 2 Motor Car 6,80,00 30% 1,02,00 81,60 5,98,40

[since 0 0 0 0
acquired [50% of
during the 30% is
period allowable
23.8.2019 , since it
to is put to
31.3.2020, it use for
is less
eligible than
180
for higher days]
depreciation
of 30%]
Less: 20% disallowance
for personal use 20,400
2,37,600 8,32,400
(2) Only to the extent the interest is allowed as deduction in the hands of the
firm, the same is includible as business income in the hands of the
partner. Since interest is paid in accordance with partnership deed,
maximum interest allowable as deduction in the hands of the firm is
12% p.a. Therefore, interest @12% p.a. amounting to
` 1,20,000 would be treated as the business income of Mr. Suraj.
(3) Deduction under Chapter VI-A
Particulars ` `
Under section 80C
LIP for independent son 60,000
PPF paid in wife’s name 70,000
1,30,000
Since the maximum deduction under section 80C
and 80CCE is ` 1,50,000, the entire sum of `
1,30,000 would be allowed as deduction 1,30,000
Under section 80D
Health insurance premium taken for mother is 35,000
fully allowable as deduction, even though
she is not dependant on him. Since she is
senior citizen whole of amount is allowable
as deduction as it is within
overall limit of ` 50,000
Under section 80G
Contribution towards PM National Relief Fund 50,000
eligible for 100% deduction without any
qualifying limit
Under section 80TTA
Interest on saving bank account, restricted to 10,000
Total deduction 2,25,000

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 30 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

SECTION B: INDIRECT TAXES

QUESTIONS

(1) All questions should be answered on the basis of the provisions of GST law as
amended by the Finance (No. 2) Act, 2019, which have become effective till
30.04.2020, and significant notifications and circulars issued upto 30.04.2020.
(2) The GST rates for goods and services mentioned in various questions are
hypothetical and may not necessarily be the actual rates leviable on those goods
and services. Further, GST compensation cess should be ignored in all the
questions, wherever applicable.

1. PTL Pvt. Ltd. is a retail store of merchandise located in 25 States and/or

UTs in the country. For the purpose of clearance of stock of merchandise and
to attract consumers, PTL Pvt. Ltd. launched scheme of “Buy One Get One
Free” for the same type of merchandise, for instance, one shirt to be given
free with purchase of one shirt. For saving cost, PTL Pvt. Ltd. directly
purchases merchandise from the manufacturers.
In the month of May, in order to save employee cost, PTL Pvt. Ltd. purchased a
tempo traveller worth ` 12,00,000 with seating capacity of 25 persons
(including driver) for transportation of its employees. Further, for ensuring
the well-being of its employees, PTL Pvt. Ltd. voluntarily obtained the health
insurance cover of ` 2,00,000 for each employee in the same month. The
premium of ` 1,500 per employee has been paid by the company for 100
employees.
In the month of July, Mr. Raghav, a customer of the company, filed a law
suit in the Court, against the company for not supplying goods of the value of
` 1,00,000. PTL Pvt Ltd. engaged Mr. Ram, an advocate, to represent it in
Court for an agreed consideration of ` 25,000. As per the terms of the
contract, Mr. Ram issued an invoice on 5 th July. However, consideration
was not paid till February next year.
Note - All the amounts given above are excluding taxes and all transactions are intra-
State transactions. Rates of tax are CGST - 9% and SGST – 9%. However, for tempo
traveller, the rates of taxes are CGST - 14% and SGST – 14%.
In relation to the above, answer the following questions:
(i) With respect to “Buy One, Get One” offer, which of the following statements
is true:
(a) It will not be considered as supply at all since no consideration is
involved in one of the items.
(b) Supply of item for which consideration is charged is a supply under
section 7 of the CGST Act, 2017 while supply of the other item
supplied free of cost is not a supply.

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 PAPER – 4: TAXATION 31

(c) These are two individual supplies where a single price is charged for
the entire supply. Since a single price is charged, the same will
always be taxed as a mixed supply.
(d) These are two individual supplies where a single price is charged for
the entire supply. Their taxability will depend upon as to whether the
suppl y is a composite supply or a mixed supply.
(ii) Eligible input tax credit for the month of May (i) on the purchase of tempo
traveller and (ii) on health insurance premium paid (assuming that all
other conditions, for availing input tax credit have been complied with)
is:
(a) (i) CGST - Nil, SGST - Nil and (ii) CGST - Nil, SGST - Nil
(b) (i) CGST - ` 1,68,000, SGST - ` 1,68,000 and (ii) CGST - Nil, SGST - Nil
(c) (i) CGST - Nil, SGST - Nil and (ii) CGST - ` 18,000, SGST - ` 18,000
(d) (i) CGST - ` 1,68,000, SGST - `1,68,000 and (ii) CGST - ` 18,000,
SGST -
` 18,000
(iii) Which of the following statements is true in respect of the services of
advocate availed by the company?
(a) CGST-` 2,250 and SGST- ` 2,250 on advocate services are payable by
PTL Pvt Ltd. ITC availed thereon is to be added to its output tax
liability with interest as consideration along with tax is not paid
within 180 days of the issuance of invoice.
(b) CGST-` 2,250 and SGST- ` 2,250 on advocate services are payable by
Mr. Ram. ITC availed thereon is to be added to output tax liability of
PTL Pvt Ltd. with interest as consideration along with tax is not paid
within 180 days of the issuance of invoice.
(c) CGST-` 2,250 and SGST- ` 2,250 on advocate services are payable by
PTL Pvt. Ltd. The condition of payment of consideration along with tax
within 180 days of the issuance of invoice does not apply in the given
case.
(d) CGST-` 2,250 and SGST- ` 2,250 on advocate services are payable by
Mr. Ram. The condition of payment of consideration along with tax
within 180 days of the issuance of invoice does not apply in the
given case.

2. Mr. Kumar started interior designing practice from the month of January. His
turnover up to the month of March was ` 12,50,000. On 30th June, his
turnover exceeded
` 20,00,000 & reached to ` 20,05,000. Mr. Kumar applied for GST
registration (as regular taxpayer) on 15th July and registration was granted to
him on 25th July.

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 32 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

On 16th July, he entered into a contract for designing the flat of Mr. Shyam. The
service was completed on 22nd July and Mr. Kumar issued invoice on
the same day for
` 6,00,000. On 5th July, Mr. Kumar purchased capital goods amounting to `
4,50,000 and from 25th July to 31st July, he availed services
amounting to
` 1,75,000 for the purpose of completing the service.
On 1st August, Mr. Kumar got another contract for interior designing from Mr.
Ram, which he accepted on 2nd August. The service was completed on 6th
August and invoice was issued on 7th August for ` 5,00,000. Payment was
received on 29th August.
Note: All values are excluding taxes, unless specifically mentioned. Mr. Kumar makes
only intra-State outward supplies and all purchases are also intra-State. Rates of tax are
CGST - 9% and SGST – 9%.
In relation to the above, answer the following questions:
(i) The effective date of registration for Mr. Kumar is-
(a) 30th June
(b) 15th July
(c) 25th July
(d) 16th July
(ii) Mr. Shyam can issue a revised tax invoice till-
(a) 23rd October
(b) 8th September
(c) 25th September
(d) 25th August
(iii) Eligible input tax credit available with Mr. Kumar for the month of July is-
(a) CGST ` 40,500 & SGST ` 40,500
(b) CGST ` 15,750 & SGST ` 15,750
(c) CGST ` 56,250 & SGST ` 56,250
(d) CGST ` 36,000 & SGST ` 36,000
(iv) The time of supply of services provided by Mr. Kumar to Mr. Ram is-
(a) 7th August
(b) 1st August
(c) 29th August

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 PAPER – 4: TAXATION 33

(d) 06th August

(v) If instead of opting for regular scheme, Mr. Kumar opts to pay tax under
section 10(2A) of the CGST Act, 2017, the tax liability for the month of
July will be-
(a) Nil
(b) CGST ` 54,000 & SGST ` 54,000
(c) CGST ` 18,000 & SGST ` 18,000
(d) CGST ` 78,150 & SGST ` 78,150
3. During the month of May, Z Ltd. sold goods to Y Ltd. for ` 2,55,000 and
charged GST @ 18%. However, owing to some defect in the goods, Y Ltd.
returned the goods by issuing debit note of ` 40,000 in the same month. Z Ltd.
records the return of goods by issuing a credit note of ` 40,000 plus GST in
the same month. In this situation, GST liability of Z Ltd. for the month of
May will be-
(a) ` 45,900
(b) ` 38,700
(c) ` 53,100
(d) ` 40,000
4. C & Co., a registered supplier in Delhi, opted for composition levy under sub-
sections (1) and (2) of section 10 of the CGST Act, 2017. It sold goods in
the fourth quarter of a financial year for ` 15,00,000 (exclusive of GST). The
applicable GST rate on these goods is 12%. C & Co. purchased goods from
Ramesh & Co., registered in Delhi, for
` 9,55,000 on which Ramesh & Co. had charged CGST of ` 57,300 and
SGST of
` 57,300. C & Co. had also purchased goods from E & Co., registered in
Haryana, for
` 2,46,000 on which E & Co. had charged IGST of ` 29,520. GST liability of C
& Co. for the fourth quarter of the financial year is-
(a) CGST ` 7,500 & SGST ` 7,500
(b) CGST ` 3,180 & SGST ` 32,700
(c) CGST ` 32,700 & SGST ` 3,180
(d) Nil
5. Mr. Raghu avails services of Mr. Raja, a Chartered Accountant, as under-
(i) Audit of financial accounts ` 55,000
(ii) Tax audit and annual filing ` 10,000
(iii) Income-tax return filing of Mr. Raghu ’s wife ` 5,000

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 34 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

All the above amounts are exclusive of taxes and the applicable rate of GST
on these services is 18%.
The accountant of Mr. Raghu has booked the entire expenses of ` 70,000
plus GST in the books of account. Mr. Raghu is eligible to take input tax credit
of -
(a) ` 13,500
(b) ` 11,700
(c) ` 9,900
(d) ` 1,800
6. TT Pvt. Ltd., registered in Rajasthan, furnished following information for the
month of June:
(i) Inter-State sale of goods for ` 1,25,000 to JJ Enterprises registered in
Haryana
(ii) Inter-State purchases of goods from XYZ company, registered in
Punjab, for
` 40,000
(iii) Intra-State purchases of goods from RR Traders, registered in
Rajasthan, for
` 65,000
The applicable rate of GST is 18%. All the above amounts are exclusive of taxes .
GST liability payable in cash is-
(a) CGST ` 1,800 & SGST ` 1,800
(b) SGST ` 3,600
(c) IGST ` 3,600
(d) CGST ` 3,600
7. Pradeep Traders, registered in Haryana, sold goods for ` 2,05,000 to Balram
Pvt. Ltd. registered in Uttar Pradesh (GST is leviable @ 5% on said goods). As
per the terms of sales contract, Pradeep Traders has to deliver the goods at
the factory of Balram Pvt. Ltd. For this purpose, Pradeep Traders has charged
freight of ` 2,400 from Balram Pvt. Ltd. GST is leviable @ 12% on freight. What
would be the net GST liability to be paid in cash in this case assuming that the
amounts given herein are exclusive of GST?
(a) IGST-` 37,332
(b) IGST-` 10,370
(c) CGST-` 18,666 and SGST-` 18,666
(d) CGST-` 5,185 and SGST-` 5,185

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8. Prem & Sons had taken GST registration on 1 st January but failed to furnish GST
returns for the next 6 months. Owing to this, the proper officer cancelled its
registration on 25th July and served the order for cancellation of registration on
31st July. Now, Prem & Sons wants to revoke the cancellation of registration.
Prem & Sons can file an application for revocation of cancellation of
registration on or before.
(a) 30th August
(b) 29th August
(c) 29th September
(d) 29th October
9. XX, registered in Delhi, purchased books from PC Traders, registered in Uttar
Pradesh. Books are exempt from GST. XX arranged the transport of these
books from a goods transport agency (GTA) which charged a freight of ` 9,000
for the same. GST is payable @ 5% on such GTA services. Which of the
following statement is correct in the given context:
(a) GST of ` 450 is payable by XX on revere charge basis.
(b) Supply of goods and supply of GTA service is a composite supply wherein
supply of goods is the principal supply and since principal supply is an
exempt supply, no tax is payable on freight.
(c) Since exempt goods are being transported, service provided by GTA
for transporting the same is also exempt.
(d) GST of ` 450 is payable by the GTA.
10. Kalim & Associates made an application for cancellation of GST registration in
the month of March due to closure of its business. Its application for
cancellation of GST registration was approved on 14th September. In the given
case, Kalim & Associates is:
(a) required to file Final Return on or before 13th December
(b) not required to file Final Return
(c) required to file Final Return on or before 30th September
(d) required to file Final Return on or before 14th December
11. (a) Babla & Bros. is exclusively engaged in making exempt supply of goods and
is thus, not registered under GST. On 1st October, the exemption
available on its goods gets withdrawn. On that day, the turnover of Babla
& Bros. was ` 50 lakh. Examine the eligibility of Babla & Bros. for
availing ITC, if any. <<GST – ITC>>
(b) Mamta Sales trades in exempt goods and provides taxable services. It is
registered under GST. On 1st October, the exemption available on its
goods gets withdrawn.

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 36 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

Analyze the scenario and determine the eligibility of Mamta Sales for
availing ITC, if any, on inputs and/or capital goods used in the supply of
exempt goods. <<GST ITC>>
12. Suhasini is a registered software consultant. On account of her ill health, she
could not provide any services during the month of October. However, she had
to incur all the expenses relating to her office. She paid ` 75,000 to various
vendors. Total GST involved on the goods and services procured by her is `
13,500. Out of the total bills paid by her, one bill for ` 15,000 relates to
security services availed for security of her office, tax on which is payable
under reverse charge. GST involved in such bill is
` 2,700.
Suhasini is of the opinion that for the month of October, no GST is payable
from electronic cash ledger as she has sufficient balance of ITC for payment of
GST under reverse charge on security services.
Do you think Suhasini is right? Explain with reasons. <<GST – Payment under
GST>>
13. ‘XY’ of Kolkata is engaged in supply of various goods and services. It pays GST
under regular scheme. The following information is provided by it for the
month of July:
Payments Amount Receipts Amount
(`) (`)
Inter-State purchases 1,40,00 Inter-State supply of 2,00,000
of office 0 office stationery
stationery
Repairing of lorry used 1,00,00 Intra-State supply of 4,00,000
to transport goods from 0 500 combi packs
warehouse to clients’ containing one calculator
location [Intra-State and one diary
supply]
Intra-State supply of 1,00,000
services of business
correspondent to
Shubhvidhi Bank with
respect to accounts in
its urban area branch
The following additional information is provided by ‘XY’ in relation to the above
receipts and payments:
(i) 10% of the inter-State supply of office stationery are made to unregistered
persons.
(ii) Each combi pack (containing a calculator and a diary) is priced at `
800. The calculator and the diary are individually priced at ` 700 and `
200 respectively.
(iii) An invoice of ` 40,000 towards purchase of office stationery is missing and
no other tax paying document is available in respect of such goods.
(iv) All the figures mentioned above are exclusive of taxes, wherever applicable.

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(v) Rates of CGST, SGST and IGST for all services, office stationery and
calculator are 9%, 9% and 18% respectively. Rates of CGST, SGST and
IGST for diary are 14%, 14% and 28% respectively.
(vi) Subject to the information given above, all the necessary con ditions for
availing input tax credit have been fulfilled.
Details of opening balances of input tax credit as on 1st July is given hereunder:
Tax Amount (`)
CGST 5,000
SGST 5,000
IGST 80,000
Compute the minimum net GST [CGST, SGST or IGST, as the case may be]
payable in cash by ‘XY’ for the month of July. <<GST – ITC>.
14. Mutiservices Private Ltd., registered in Punjab, is engaged in supplying a
variety of services. Its turnover was ` 35 lakh in the preceding financial year. It
has provided the following information for the month of April:
Particulars Amount
(`)
Fee for the coaching provided to students for competitive 6,24,000
exams. The coaching centre is run by Mutiservices
Private Ltd. in Punjab (Intra-State transaction)
Receipts for services provided in relation to conduct 19,200
of examination in Pureit University, Delhi (providing
education recognized by Indian law), being an inter-State
transaction
Amount received for transportation of students and 24,000
faculty from their residence to Lotus Public School - a
higher secondary
school – and back (Intra-State transaction)
Amount received for providing the security and 36,000
housekeeping services in Dhaani Public School – a pre-
school (Intra-State transaction)
Note: Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively. All the
amounts given above are exclusive of taxes.
Compute the total GST liability of Multiservices Private Ltd. for the month of April .
<<GST – Exemptions>>

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 38 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

15. The due date for payment of tax by a person paying tax under section 10 of
the CGST Act, 2017, i.e. a composition supplier is aligned with the due date of
return to be filed by the said person. Discuss the correctness or otherwise of
the statement.

SUGGESTED ANSWERS

1. (i) (d)
(ii) (b)
(iii) (c)
2. (i) (a)
(ii) (d)
(iii) (c)
(iv) (a)
(v) (c)
3. (b)
4. (a)
5. (b)
6. (c)
7. (b)
8. (a)
9. (a)
10. (d)
11. (a) Since the exemption available on goods being supplied by Babla &
Bros. is withdrawn, it becomes liable to registration as its turnover has
crossed the threshold limit (for registration) on the day when the
exemption is withdrawn.
Assuming that Babla & Bros. applies for registration within 30 days of 1st
October and it obtains such registration, it will be entitled to take credit of
input tax in respect of inputs held in stock and inputs contained in semi-
finished or finished goods held in stock on the day immediately preceding
the date from which it becomes liable to pay tax, i.e. 30th September
[Section 18(1)(a) of the CGST Act, 2017]. Input tax paid on capital goods
will not be available as input tax credit in this case.
(b) If the exempt supply made by a registered person becomes a taxable
supply, provisions of section 18(1)(d) of the CGST Act, 2017 become
applicable. In the

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 PAPER – 4: TAXATION 39

given case, since Mamta Sales is a registered person, section 18(1)(d) will
be applicable.
As per section 18(1)(d), Mamta Sales will be entitled to take credit of input
tax in respect of inputs held in stock and inputs contained in semi-finished
or finished goods held in stock relatable to such exempt supply and on
capital goods exclusively used for such exempt supply on the day
immediately preceding the date from which such supply becomes taxable,
i.e. 30th September. Input tax credit on capital goods will be reduced by
5% per quarter or part thereof from the date of invoice.
12. The amount available in the electronic credit ledger, i.e. input tax credit may
be used for making any payment towards output tax. Output tax, in relation to
a taxable person, means the tax chargeable on taxable supply of goods or
services or both made by him or by his agent but excludes tax payable by him
on reverse charge basis.
Therefore, input tax credit cannot be used to pay the tax liability under
reverse charge. The same is always required to be paid through electronic
cash ledger and not electronic credit ledger. Thus, Suhasini is wrong and she
should pay GST of ` 2,700 on security service through electronic cash ledger.
13. Computation of minimum net GST payable in cash by ‘XY’ for the month of July
Particulars Value (`) CGST (`) SGST (`) IGST (`)
Total tax liability
Inter-State supply of stationery 2,00,000 36,000
[Note 1]
Intra-State supply of 500 combi 4,00,000 56,000 56,000
packs of calculators and diaries (500 x (4,00,000 (4,00,000
[Note-2] 800) x 14%) x 14%)
Intra-State supply of services of 1,00,000 9,000 9,000
business correspondent to a (1,00,000 (1,00,000
Shubhvidhi Bank with respect to x 9%) x 9%)
accounts in its urban area branch
[Note-3]
Total tax liability 65,000 65,000 36,000
Input tax credit (ITC)
Brought forward ITC 5,000 5,000 80,000
Inter-State purchase of office 1,00,000 18,000
stationery [Note-4]
Intra-State repairing of lorry used 1,00,000 9,000 9,000
for transportation of goods [Note-5]
Total ITC 14,000 14,000 98,000

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 40 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2020

Minimum net GST payable in cash

Total tax liability 65,000 65,000 36,000
IGST credit being set off against (36,000
IGST liability )
IGST credit being used to pay (11,000) (51,000)
CGST and SGST liability in any
order and in any proportion
CGST and SGST credit being used (14,000) (14,000)
to pay CGST and SGST liability CGST SGST
respectively
Minimum net GST payable in cash 40,000 Nil Nil
Notes:-
1. Taxable supplies made by a registered person are liable to tax
irrespective of whether they are made to a registered person or to an
unregistered person.
2. Supply of calculator and diary as a combi pack with a single price of `
800 is a mixed supply. Being a mixed supply comprising of two supplies,
it shall be treated as supply of that particular supply which attracts
highest rate of tax.
3. Services provided by a business facilitator/ business correspondent to a
banking company only with respect to accounts in its rural area branch
are exempt and not with respect to accounts in its urban area branch .
4. ITC can be taken only on the basis of a valid tax paying document. Thus,
ITC will not be available on goods for which the invoice is missing.
5. ITC on motor vehicles used for transportation of goods is allowed. Further,
ITC is allowed on repair and maintenance services relating to motor
vehicles, ITC on which is allowed.
Note: IGST credit, after being set off against IGST liability, can be utilised against CGST
and SGST liability in any order and in any proportion. Thus, there cannot be one answer
for the minimum net CGST and SGST payable in cash as the amount of CGST and SGST
liabilities are the same as also the amount of ITC for CGST and SGST is also the same.
14. Computation of net GST liability of Multiservices Private Ltd. for the month of
April:
Particulars Value of CGST SGST IGST
supply @ 9% @ 9% @ 18%
(`) (`) (`) (`)
Fee for the coaching provided 6,24,00 56,16 56,16
to 0 0 0

© The Institute of Chartered Accountants of India

 PAPER – 4: TAXATION 41

students for competitive

exams [Note-1]
Services towards conduct of 19,200 -
examination in Pureit
University, Delhi [Note-2]
Services of transportation of 24,000 -
students and faculty from
their residence to Lotus Public
School and back [Note-3]
Security and housekeeping 36,000 - -
services in Dhaani Public
School [Note-4]
Total GST liability 56,160 56,160
Notes:-
1. Coaching centre run by Mutiservices Private Ltd. is not an educational
institution since competitive exam coaching does not lead to grant of a
qualification recognized by law. Therefore, fee received for coaching
provided at such coaching centre is taxable.
2. Since Pureit University provides qualification recognized by law, it is an
educational institution and services provided to an educational
institution, in relation to conduct of examination by such institution are
exempt from GST.
3. Since Lotus Public School provides education up to higher secondary
school, it is an educational institution and services of transportation of
students, faculty and staff provided to an educational institution are
exempt.
4. Since Dhaani Public School provides pre-school education, it is an
educational institution. Security and housekeeping services provided
within the premises of an educational institution are exempt.
15. The statement is not correct. Every registered person paying tax under section
10, i.e. a composition supplier, is required to file a return annually in Form
GSTR-4. Form GSTR-4 for a financial year should be furnished by 30 th April of the
succeeding financial year. However, a composition supplier is required to
pay his tax on a quarterly basis. A quarterly statement for payment of self-
assessed tax in GST CMP-08 is required to be furnished by 18th day of the
month succeeding such quarter.
Therefore, while the return is to be furnished annually, payment of tax needs to
be mad e on a quarterly basis, by a composition supplier.

© The Institute of Chartered Accountants of India