CS Excutive Programme Module I (New Course) Appendix Final June 2010

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Appendix

CS Executive Programme Module-I (New Course)

June - 2010

INDEX

Paper 1 — General and Commercial Laws I. 1

Paper 2A — Company Accounts I. 5

Paper 2B — Cost and Management Accounting I. 11

Paper 3 — Tax Laws I.15

PAPER'S

Paper - 1 : General and Commercial Laws

Chapter-1 : Constitution of India

2010 - June [1] {C} (a) “Constitution of India is basically federal with strong

unitary features.” Discuss. (8 marks)

(b) Explain the writ jurisdictions of the Supreme Court and High Courts as

provided in the Constitution of India. (6 marks)

Chapter-2: Interpretation of Statutes

2010 - June [1] {C} (c) Explain the mischief rule in the interpretation of

statutes. (6 marks)

Chapter-3 : An Overview of Law Relating to Specific Relief; Arbitration

and Conciliation Torts; Limitation and Evidence

2010 - June [3] Distinguish between the following :

(iii) ‘Battery’ and ‘assault’.

(iv) ‘Condition precedent’ and ‘condition subsequent’.

(v) ‘Primary evidence’ and ‘secondary evidence’. (4 marks each)

2010 - June [4] Write notes on the following :

(ii) Setting aside of an award

(iii) Perpetual injunction

(iv) Rectification of an instrument

(v) Specific performance of a contract (4 marks each)

CS Executive Programme Module- I (New Course) I-2

2010 - June [7] (c) Alok contracts to sell a piece of land to Vimal consisting

of 100 bighas for Rs. 10 lakh and it turns out that only 50 bighas of land

belongs to Alok. W ho can demand specific performance of contract and who

cannot ? If there is a demand of specific performance from rightful party, what

will be the consideration ? (5 marks)

2010 - June [8] (c) Kamini informed Ajay in the year 2001 that she had

committed theft of jewellery of her neighbour. Thereafter, Kamini and Ajay

were married in 2002. In the year 2003, criminal proceeding were instituted

against Kamini in respect of the theft of jewellery. Ajay is called to give

evidence in the case. Decide whether Ajay can disclose the communication

made to him by Kamini. (5 marks)

Chapter-4 : Law relating to Transfer of Property

2010 - June [2] Attempt the following :

(i) State the circumstances in which a property may be transferred in

favour of an unborn person.

(ii) Explain the rule of lis pendens as provided in the Transfer of Property

Act, 1882. (4 marks each)

2010 - June [7] (b) Kamal transfers his property worth Rs. 10,000 to Shyam

and by the same instrument asked Shyam to transfer his property worth Rs.

5,000 to Manoj. Kamal dies before Shyam made his election. Can Manoj get

compensation ? If so, from whom and how much ? (5 marks)

Chapter-5 : Law relating to Stamps


(v) Explain the consequences of the instruments which are not duly

stamped under the Indian Stamp Act, 1899. (4 marks each)

Chapter-6 : Law relating to Registration of Documents


(iv) State the documents which are required to be compulsorily registered

under the Registration Act, 1908. (4 marks)

2010 - June [5] (a) A document was executed outside India and it was

presented for registration after a lapse o f four months from the date of its

arrival in India. Whether the document may be accepted for registration by the

Registrar ? Decide. (6 marks)

2010 - June [7] (a) Ashok sells a house to Vinay by a written document and

delivers possession to Vinay, but the document is not registered. After one

year, Ashok sues Vinay to take back the possession of the property on the

ground that non-registration of a document has no validity. Will Ashok

succeed ? Which doctrine of law can be invoked by Vinay in his defence ?

(6 marks)


Chapter-7 : Law Relating to Information Technology


(iii) What are ‘cyber offences’ under the Information T echnology Act,

2000 ? (4 marks)

2010 - June [4] Write notes on the following :

(i) E-governance (4 marks)

Chapter-8 : The Code of Civil Procedure, 1908 (C.P.C.)

2010 - June [8] (a) Anil was a trustee of a trust. After Anil’s death, Brij

wrongfully takes the possession of the trust property. Chandan, the son of Anil

files a suit for recovery of possession of the property against Brij as the legal

heir of Anil in his individual capacity. But Chandan did not succeed. Then

Chandan files another suit for recovery of trust property against Brij in the

capacity of trustee as he was appointed as trustee after the death of Anil.

Whether the second suit is barred by the doctrine of constructive res judicata ?

Explain. (6 marks)

(b) Mohan filed a suit against Sohan and Rohan for partition of coparcenery

property ‘P-1'. The suit has been decided . Mohan files another suit against

Sohan and Rohan for the partition of coparcenery property ‘P-2', which was

in existence at the time of filing of the first suit. Decide. (5 marks)

Chapter-9 : The Code of Criminal Procedure, 1973

2010 - June [3] Distinguish between the following :

(i) ‘Summons cases’ and ‘warrant cases’.

(ii) ‘Bailable offences’ and ‘non-bailable offences’. (4 marks each)

Chapter-11 : Objective Questions

2010 - June [5] (b) Choose the most appropriate answer from the given options

in respect of the following :

(i) Under the Transfer of Property Act, 1882, the transfer of property may

be made—

(a) Orally

(b) By written document

(c) By written document with its registration

(d) By delivery of property except where transfer is required to be in

writing under the law.

(ii) The right to foreclosure is available to the mortgagee when it is—

(a) English mortgage

(b) Simple mortgage

(c) Mortgage by conditional sale

(d) Usufructuary mortgage.


(iii) The income of transferred property may be accumulated for an

unlimited time where the property is transferred with condition—

(a) For the payment of debts taken by the transferor

(b) For the maintenance of the property itself

(c) For the maintenance of the descendants of the transferor

generation after generation

(d) All of the above.

(iv) Under the Specific Relief Act, 1963, the relief of cancellation of a

written instrument is available—

(a) When an instrument is void or voidable at the option of the

plaintiff

(b) Where the plaintiff may apprehend serious injury if the instrument

is left outstanding

(c) Where the instrument requires registration but is not registered

(d) Where conditions mentioned (a) and (b) above are fulfilled.

(v) The definition of the ‘State’ as given under Article 12 of the

Constitution of India includes—

(a) The Central Government and Parliament of India

(b) The Government and the Legislature of each State

(c) All local or other authorities within India and under the control of

the Government of India

(d) All of the above. (1 mark each)

2010 - June [5] (c) Re-write the following sentences after filling-in the blank

spaces with appropriate word(s)/figure(s) :

(i) Perpetual injunction is granted under section of the Specific

Relief Act, 1963.

(ii) A police officer may arrest an accused without warrant in case of

.

(iii) The Court of a Judicial Magistrate of the First Class is authorised to

pass a sentence of .

(iv) The right to maintenance under section 125 of the Code of Criminal

Procedure, 1973 is available to .

(v) The application of revision under the provisions of the Code of Civil

Procedure, 1908 is made to . (1 mark each)

2010 - June [6] State, with reasons in brief, whether the following statements

are correct or incorrect :

(i) The Constitution of India makes a few exceptions in which the

Parliament is authorised to make the laws even on the subjects

included in the State List.


(ii) Article 174 of the Constitution of India empowers the Governor of the

State to dissolve the State Legislature.

(iii) The Right to Information Act, 2005 confers on all citizens of India a

right to information.

(iv) Certain categories of information have been exempted from disclosure

under the Right to Information Act, 2005.

(v) Under certain circumstances, a person is liable for the torts committed

by another.

(vi) On the same cause of action, a fresh suit is barred by law.

(vii) Decree is a formal expression of an adjudication, whereas an order is

the decision of the court.

(viii) The procedure provided under any special or local law is not affected

by the procedure given under the Code of Civil Procedure, 1908.

(2 marks each)

Paper - 2 : Company Accounts

Chapter-1 : Accounting Standards

2010 - June [2] (a) Write short notes on the following:

(i) Non-acceptability of International Accounting Standards (3 marks)

Chapter-2 : Accounting for Share Capital

2010 - June [4] (c) “Buy-back may be misused by the corporate entities at the

cost of innocent investors.” Give your comments. (3 marks)

Chapter-4 : Underwriting of Issues and Acquisition of Business

2010 - June [4] (b) Rax Ltd. invited applications from public for 1,00,000

equity shares of Rs. 10 each at a premium of Rs. 5 per share. The entire issue

is underwritten by the underwriters A, B, C, and D to the extent of 30%, 30%,

20%, and 20% respectively with the provision of firm underwriting of 3,000,

2000, 1,000 and 1,000 share respectively. Underwriters are entitled to

maximum commission as per law. The company has received applications for

70,000 shares from public out of which applications for 19,000, 10,000, 21,000

and 8,000 shares were marked in favour of A, B, C and D respectively.

Calculate the liability of each underwriter treating firm underwriting on par

with marked applications. Also ascertain the underwriting commission @ 2.5%

payable to each underwriter. (6 marks)


Chapter-5 : Final Accounts of Joint Stock Companies


(ii) Capitalisation of profits and reserves (6 marks)

2010 - June [3] The following balances have been extracted from the books

of Pioneer Traders Ltd. as on 30 th September, 2009:

(Rs. ‘000)

Dr. Cr.

Share capital (Authorised and issued):

Equity (15,00,000) Shares of Rs. 100 each) — 1,50,000

8% Redeemable preference (40,000 shares) — 4,000

Securities premium — 2,500

Preference share redemption 4,800 —

General reserve — 10,000

Land (cost) 30,000 —

Buildings (cost less depreciation) 70,000 —

Furniture (cost less depreciation) 2,000 —

Motor vehicle (cost less depreciation) 3,500 —

Trading account!Gross profit — 90,000

Establishment charges 25,000 —

Rate, taxes and insurance 1,200 —

Commission 600 —

Discount received — 500

Interest on investments — 800

Depreciation 6,000 —

Sundry office expenses 6,000 —

Payment to auditors 400 —

Sundry debtors and creditors 10,660 2,560

Profit and loss account (as on 30.9.2008) — 1,000

Unpaid dividend — 200

Cash in hand 1,200 —

Cash at bank in current account 19,500 —

Security deposit 1,000 —

Outstanding expenses — 600

Investments in G.P. Notes 20,000 —

Stock in trade (at or below cost) 35,300 —

Provision for taxation (year ended 30.9.2008) — 7,000

Income-tax paid under dispute (year ended 30.9.2008) 10,000 —

Advance payment of income-tax 22,000 —

2,69,160 2,69,160


The following further details are available:

(i) The preference shares were redeemed on 1 st October, 2008 at a

premium of 20% but no entries were passed for giving effect thereto,

expect payment standing to the debit of preference share redemption

account.

(ii) Depreciation as provided upto 30th September, 2009 is as follows:

(a) Building!Rs. 2,10,00,000.

(b) Furniture!Rs. 20,00,000.

(c) Motor vehicles!Rs. 60,00,000.

(iii) Establishment charges include Rs. 18,00,000 paid to managing

director as remuneration in terms of agreement which provides for a

remuneration of 5% of annual net profits.

(iv) Payment to auditors includes Rs. 1 ,00,000 for taxation work in

addition to audit fees.

(v) Market value of investments on 30th September, 2009 is Rs.

1,80,00,000.

(vi) Sundry debtors include Rs. 40,00,000 due for a period exceeding six

months.

(vii) All receivables and deposits are considered good for realisation.

(viii) Income-tax demand for the year ended 30 th September, 2008 Rs.

1,00,00,000. has not been provided for agains t which appeal is

pending.

(ix) Income-tax is to be provided @ 34% . Also provide for tax on divisible

profit @ 16%.

(x) Directors recommended payment of dividend on equity shares at the

rate of 12%.

(xi) Ignore previous year’s figures.

You are required to prepare the profit and loss account for the year

ended 30th September, 2009 and a balance sheet as at that date.

Chapter-6 : Consolidation of Accounts

2010 - June [2] (b) Following are balance sheets of H Ltd. and S Ltd. as at 31st

March, 2009:

Liabilities H Ltd. S Ltd.

(Rs.) (Rs.)

Share capital (Shares of Rs. 100 each) 5,00,000 2,00,000

General reserve as on 1st April, 2008 1,00,000 60,000

Profit and loss account 1,40,000 90,000

Bills payable — 40,000

Creditors 80,000 50,000

8,20,000 4,40,000


Assets

Goodwill 40,000 30,000

Other fixed assets 3,60,000 2,20,000

1,500 Shares in S Ltd. at cost 2,40,000 —

Stock 1,00,000 90,000

Debtors 20,000 75,000

Cash at bank 60,000 25,000

8,20,000 4,40,000

The profit and loss account of S Ltd. showed a balance of Rs. 50,000 on 1 st

April, 2008. A dividend of 15% was paid on 15 th October, 2008 for the year

2007-08. The dividend was credited by H Ltd. to its profit and loss account. H

Ltd. acquired shares on 1st October, 2008. The bills payable of S Ltd. were all

issued in favour of H Ltd. and the same were got discounted by H Ltd.

Included in the creditors of S Ltd. are Rs. 20,000 for goods supplied by H Ltd.

The stock of S Ltd. includes goods to the value of Rs. 8,000 which were

supplied by H Ltd. at a profit of 33.33% on cost. Prepare consolidated balance

sheet of H Ltd. and S Ltd. as on 31st March, 2009. (9 marks)

Chapter-7 : Valuation of Shares and Intangible Assets


(iii) Phases of generation of intangible assets. (3 marks)

2010 - June [4] (a) Balance sheet of Diamond Ltd. as at 30 th June, 2009 is

given below:

Liabilities Rs.

Share capital: 40,000 Shares of Rs. 10 each 4,00,000

General reserve 80,000

Profit and loss account 64,000

Sundry creditors 2,56,000

Income-tax reserve 1,20,000

9,20,000

Assets

Land and buildings 2,20,000

Plant and machinery 2,60,000

Patents and trade marks 40,000

Preliminary expenses 24,000

Stock 96,000

Debtors 1,76,000

Bank balance 1,04,000

9,20,000


The expert valuer valued the land and buildings at Rs. 4,80,000, goodwill

at Rs. 3,20,000 and plant and machinery at Rs. 2,40,000. Out of the total

debtors, it is found that debtors of Rs. 16,000 are bad. The profits of the

company have been as follows:

31st March, 2007 : Rs. 1,84,000

31st March, 2008 : Rs. 1,76,000

31st March, 2009 : Rs. 1,92,000

The company follows the practice of transferring 25% of profits to

general reserve. Similar type of companies earn at 10% of the value of their

shares. Plant and machinery, and land and buildings have been depreciated at

15% and 10% respectively. Ascertain the value of shares of the company by

using—

(i) Intrinsic value method;

(ii) Yield value method; and

(iii) Fair value method. (6 marks)


2010 - June [1] {C} (a) State, with reasons in brief, whether the following

statements are correct or incorrect:

(i) Accounting policies vary from enterprise to enterprise.

(ii) In the absence of declaration of dividend, there is no need to provide

for depreciation in the accounts of companies.

(iii) Securities premium money can be distributed as dividend.

(iv) For calculating minority interest, there is a need to distinguish between

capital and revenue profits of the subsidiary.

(v) While preparing the consolidated balance sheet, a contingent liability

in respect of a transaction between the holding and the subsidiary

companies is disappeared from the foot note. (2 marks each)

2010 - June [1]{C} (b) Choose the most appropriate answer from the given

options in respect of the following:

(i) Indian accounting standards are formulated under the authority of the

of the—

(a) Council of the Institute of Chartered Accountants of India

(b) National Advisory Committee on Accounting Standards

(c) International Accounting Standard Board

(d) Accounting Standard Board.

(iii) As per section 79 of the Companies Act, 1956 from the date of

receiving the sanction of the Central Government, a company must

issue shares at discount within a period of—

(a) One month

(b) Two months


(c) Three months

(d) Six months.

(iii) As per section 387 of the Companies Act, 1956, total remuneration to

manager should not exceed the rate of net profit of the company except

with approval of the Central Government—

(a) 5%

(b) 2%

(c) 11%

(d) 10%

(iv) Profit on cancellation of own debentures should be transferred to—

(a) Profit and loss account

(b) Profit and loss appropriation account

(c) Capital reserve account

(d) Reserve capital account.

(v) Profit prior to incorporation is transferred to—

(a) General reserve

(b) Capital reserve

(c) Goodwill account

(d) Profit and loss account. (1 mark each)

2010 - June [1] {C} (c) Re-write the following sentences after filling-in the

blank spaces with appropriate word(s)/figure(s):

(i) Goodwill is asset.

(ii) Preliminary expenses being of capital nature may be written-off against

.

(iii) Collateral security implies security given for a loan.

(iv) Interim dividend is a dividend declared at any time between the

where the final dividend is declared.

(v) Stock reserve for unrealised profit in respect of inter-company

transactions should be created by debiting and crediting

while preparing consolidated profit and loss account.

(1 mark each)


Paper - 2B : Cost and Management Accounting

Chapter-1 : Introduction to Cost and Management Accounting


(ii) Activity based costing (3 marks)

Chapter-2 : Material Cost

2010 - June [8] (a) A company manufactures 5,000 units of a product per

month. The cost of placing an order is Rs. 100. The purchase price of the raw

material is Rs. 10 per kg. The re-order period is 4 to 8 weeks. The consumption

of raw materials varies from 100 kgs. to 450 kgs. per week, the average

consumption being 275 kgs. The carrying cost of inventory is 20% per annum.

You are required to calculate—

(i) Re-order quantity

(ii) Re-order level

(iii) Maximum level

(iv) Minimum level

(v) Average stock level

Assume 52 weeks in a year. (6 marks)

Chapter-4 : Direct Expenses and Overheads

2010 - June [8] (b) Following information is availab le for a factory for the year

2008:

Rs.

Direct material .......... 3,00,000

Direct wages .......... 2,50,000

Factory overheads .......... 1,50,000

Administrative overheads .......... 1,68,000

Selling overheads .......... 1,12,000

Distribution overheads .......... 70,000

Profit .......... 2,10,000

A work order has been executed in the year 2008 and the expenses incurred

were—materials Rs. 4,000; and wages Rs. 2,500.

Assuming that in the year 2009 the rate of factory overheads has

increased by 20%, distribution overheads have gone down by 10% and selling

and administration overheads have each gone up by 12.5%, at what price

should the product be sold so as to earn the same rate of profit on the selling

price as in the year 2008? Factory overheads are based on direct wages while

other overheads are based on factory cost. (9 marks)


Chapter-6 : Budgetary Control


(i) Superiority of zero base budgeting (ZBB) to traditional budgeting

(3 marks)

Chapter-7 : Marginal Costing

2010 - June [7] (b) Two manufacturing companies which have the following

operating details decided to merge:

Company!I Company!II

Capacity utilisation (%) 90 60

Sales (Rs. in lakhs) 540 300

Variable costs (Rs. in lakhs) 396 225

Fixed costs (Rs. in lakhs) 80 50

Assuming that the proposal is implemented, calculate—

(i) Break-even sales of the merged plant and the capacity utilisation at

that stage.

(ii) Profitability of the merged plant at 80% capacity utilisation.

(iii) Sales turnover of the merged plant to earn a profit of Rs. 75 lakh.

(iv) When the merged plant is working at a capacity to earn a profit of

Rs. 75 lakh, what percentage increase in selling price is required to

sustain an increase of 5% in fixed overheads? (9 marks)

Chapter-8 : Analysis & Interpretation of Financial Statements

2010 - June [6] Summarised income statement and balance sheet of

Progressive Ltd. are given below:

Income Statement for the year ended 31st December, 2009

(Rs. ‘000)

Sales 1,600

Less: Cost of goods sold 1,310

Gross margin 290

Less: Selling and administration expenses 40

Net operating income (EBIT) 250

Less: Interest 45

Earnings before tax 205

Less: Tax paid 82

Net income after tax 123

Earnings per share (EPS) is Rs. 3.075.

Balance Sheet as at 31st December, 2009

Liabilities (Rs. ‘000)

Paid-up capital (40,000) shares of Rs. 10 each fully paid) 400

Retained earnings 120

Debentures 700


Creditors 180

Bills payable 20

Other current liabilities 80

1,500

Assets (Rs. ‘000)

Net fixed assets 800

Inventory 400

Debtors 175

Marketable securities 50

Cash 1,500

Price per share is Rs. 15.

Industry’s average ratios are:

Current ratio .......... 2.4

Quick ratio .......... 1.5

Sales to inventory .......... 8.0

Average collection period .......... 36 days

Price per share/book value of share .......... 1.6

Debts to assets .......... 40%

Times interest earned .......... 6

Profit margin .......... 7%

Price to earnings ratio .......... 15

Return to total assets .......... 11%

(i) Progressive Ltd. would like to borrow Rs. 5,00,000 form a bank for

less than a year. Evaluate the firm’s current financial position by

calculating ratios that you feel would be useful for the bank’s

evaluation.

(ii) What problem areas are suggested by your ratio analysis? What are the

possible reasons for them?

(iii) Do you think that the bank should give the loan?

(iv) If Progressive Ltd.’s inventory utilisation ratio (sales to inventory)

and average collection period were reduced to industry average, what

amount of funds would be generated? (15 marks)

Chapter-9 : Cash Flow Statement


(iii) Cash, cash equivalents and cash flows. (3 marks)



2010 - June [5] {C} (a) State, with reasons in brief, whether the following

statements are correct or incorrect:

(i) Under Flux M ethod , labour turnover is calculated by number of

workers left divided by average number of workers.

(ii) In cost plus contracts, the contractor runs a risk of incurring a loss.

(iii) There is no need to record attendance of piece rate workers since

attendance is not relevant for ascertaining the amount of wages to be

paid.

(iv) A profit centre whose performance is measured by its return on

investment (ROI) is known as investment centre.

(v) Contribution is not only the criterion for deciding profitability.

(2 marks each)

2010 - June [5] {C} (b) Choose the most appropriate answer from the given

options in respect of the following:

(i) The rate of change of labour force in an orgainsation during a

specified period is called—

(a) Labour efficiency

(b) Labour turnover

(c) Labour productivity

(d) None of the above.

(ii) When a contract is not complete at the end of the year, profit on

incomplete contract—

(a) Is not considered

(b) Is considered for inclusion in the profit for the year

(c) Is considered for the inclusion of a part of the year


(iii) When prices fluctuate widely, the method that will avoid the efect of

fluctuations is—

(a) FIFO

(b) LIFO

(c) Simple average

(d) Weighted average.

(iv) Fixed costs remain fixed—

(a) Over a short period

(b) Over a long period and within relevant range

(c) Over a short period and within a relevant range

(d) Over a long period.


(v) When the under or over absorbed overheads amount is significant, it

should be disposed off by—

(a) Transferring to costing profit and loss account

(b) Using a supplementary ra te

(c) Carry over to next year

(d) None of the above. (1 mark each)

2010 - June [5] {C} (c) Re-write the following sentences after filling-in the

blank spaces with appropriate word(s):

(i) expenses are excluded from cost.

(ii) An account giving details of cost of production, cost of sales and profit

made during a particular period is called .

(iii) The process of apportionment of factory overheads among production

and service department is called of factory overheads.

(iv) The time for which the employer pays remuneration to workers but

obtains no direct benefit is called .

(v) A system that keeps a running and continuous record that tracks

inventories and cost of goods sold on day-to-day basis is called

. (1 mark each)

Paper - 3 : Tax Laws

Chapter-4 : Incomes Which Do Not Form Part of Total Income

2010 - June [3] (b) Distinguish between the following:

(ii) ‘Free trade zone’ and ‘special economic zone’.

Chapter-5 : Computation of Total Income Under Various Heads

2010 - June [1] {C} (c) Particulars of income received by Mrs. Sarita for the

year ended 31st March, 2010 are as follows:

(i) Family pension received from the Government of Madhya Pradesh

Rs.15,000.

(ii) Royalty received from a publisher Rs.42,700. She spent Rs. 2,700 on

books, stationery, typing etc.

(iii) Winnings from lotteries (gross) Rs. 90,000.

(iv) Winnings from horse race (net) Rs.35,000.

(v) Interest from tax-free debentures of a public company (listed)

Rs.18,000.

(vi) Interest on tax free notified government bonds Rs. 10,000.


(vii) Dividend received from a foreign company (net) Rs.8,000. Nothing

has been paid to the Government of India out of tax deducted at

source.

From the above information, compute income from other sources of Mrs.

Sarita for the assessment year 2010-11. (5 marks)

2010 - June [2] (b)Write short notes on the following:

(ii) Taxation of zero coupon bonds

(iii) Profit in lieu of salary. (3 marks each)


(i) ‘Mercantile system of accounting’ and ‘cash system of accounting’.

(iii) ‘Exemption to capital gains under section 54G’ and ‘exemption to

capital gains under section 54GA’. (2 marks each)

2010 - June [4] (c) Discuss the cases in which payment by way of

loan/advance to the extent of accumulated profits by a closely held company

is treated as dividend under section 2(22)(e). (4 marks)

2010 - June [5] (a) Amit is a cloth merchant in Ghaziabad. From the following

profit and loss account for the year ended 31th March, 2010, compute his

taxable income and tax payable for the assessment year 2010-11 :

Rs. Rs.

Opening stock 1,00,000 Sales 40,00,000

Purchases 25,00,000 Closing stock 3,00,000

Reserve for bad debts 10,000 Gift from friend 70,000

Household expenses 20,000 Gift from brother 80,000

Advertisement 40,000

Depreciation 20,000

Salaries and wages 1,20,000

Reserve for future losses 20,000

Travelling expenses 15,000

Expenditure on scientific

research 50,000

Net profit 15,55,000

44,50,000 44,50,000

Additional information :

(i) Household expenses include an amount of Rs. 5,000 paid for premium

on life insurance policy of Amit.

(ii) Depreciation admissible as per the income-tax rules is Rs. 30,000.

(iii) Advertisement costing Rs. 10,000 appeared in a newspaper owned by

a political party is included in the total amount spent on advertisement.


(iv) Expenditure on air fare from Delhi to Bangalore and from Bangalore

to Delhi of a sales manager costing Rs. 10,000 is included in travelling

expenses. The sales manager is otherwise entitled for a second class

AC train where the expenditure would be Rs. 4,000.

(v) Expenditure on scientific research relates to the money spent by Amit

on conducting research relating to the business of cement which he

proposes to undertake in future. (7 marks)

(b) Explain with the help of suitable illustration how capital gains are

computed under section 45(2) in case of conversion of capital asset into stock-

in-trade. (4 marks)

2010 - June [6] (a) Naveen owns a house at Indore. Its municipal valuation is

Rs. 24,000. He incurred the following expenses in respect of the house

property :

Municipal tax @ 20%, fire insurance premium Rs. 2,000 and land revenue Rs.

2,400. He took a loan of Rs. 25,000 @ 16% per annum on 1st April, 2006. The

whole amount is still unpaid. The house was completed on 1 st April, 2009. Find

out the income from house property for the assessment year 2010-11 in respect

of the following options:

(i) If the house is used by the assessee throughout the previous year for

his residential purpose; and

(ii) If the house is let-out for residential purposes on monthly rent of Rs.

2,000 from 1st April, 2009 to 31st January, 2010 and self-occupied for

the remaining period. (6 marks)

Chapter-6 : Aggregation of Income, Set-off or Carry Forward of Losses

and Deductions from Total Income

2010 - June [3] (a) An asset is transferred by a person to another person under

a partly revocable transfer whereby a part of the asset will revert back to the

transferor. Who shall be liable to pay tax in respect of income from the asset

transferred as per section 61? (2 marks)


(iv) ‘Intra-head adjustment’ and ‘inter-head adjustment’. (2 marks)

Chapter-7 : Taxation of Individuals, HUF, Firms, Association of Persons,

Cooperative Societies and Non Residents

2010 - June [3] (c) Ram and Shyam are partners in Mozart Co., a partnership

firm, which is engaged in manufacturing carpets. They share profits and losses

in the ratio of 2:3. The profit and loss account of the firm for the year ended

31st March, 2010 is as follows:

Liabilities Rs.

Cost of goods sold 10,00,000

Depreciation 50,000


Salary to staff 1,00,000

Remuneration to partners:

Ram Rs. 2,50,000

Shyam Rs. 1,20,000 3,70,000

Interest on capital @ 15% :

Ram Rs. 45,000

Shyam Rs. 67,500 1,12,500

Sundry expenses 1,00,500

Net profit 7,35,200

24,68,200

Assets

Sales 23,00,000

Dividends 28,200

Winnings from lotteries (Rs.2,00,000) 1,40,000

24,68,200

Additional information :

(i) The firm donated Rs. 30,000 to National Defence Fund and this

amount is included in sundry expenses.

(ii) Depreciation admissible under the income-tax rules is Rs. 68,000.

(iii) The firm is evidenced by partnership deed.

Compute the taxable income and amount of tax liab ility of the firm for the

assessment year 2010-11. (7 marks)

Chapter-8 : Filing of Returns, Signatures, E-Filings, Assessment and

Reassessment

2010 - June [2] (b)Write short notes on the following:

(i) Belated return (3 marks)

2010 - June [2] (c) Discuss the procedure for rectification of mistakes under

the Income-tax Act, 1961. (4 marks)

2010 - June [5] (c) Describe the powers of Central Board of Direct Taxes

(CBDT) under the Income-tax Act, 1961. (4 marks)

Chapter-9 : TDS and O ther Related Tax Matter

2010 - June [4] (b) State the provisions regarding deduction of tax at source

in respect of the following incomes:

(i) Winnings from horse races.

(ii) Payment by way of fees or royalty for professional or technical

services.

(iii) Payment of compensation on acquisition of immovable property.

(2 marks each)


2010 - June [6] (b) What are due dates of payment of advance tax in the case

of corporate and non-corporate assessees? (3 marks)

2010 - June [6] (c) How is the liability to advance tax computed as per

provisions of section 210? (3 marks)

2010 - June [6] (d) Explain the deductions which are available to an assessee

under section 57 while computing taxab le income chargeable under the head

‘income from other sources’. (3 marks)

Chapter-12 : The Wealth Tax Act, 1957

2010 - June [4] (a) Raman has following assets and liabilities as on 31st

March, 2010. Compute his net wealth and wealth-tax liability for the

assessment year 2010-11:

Market Value

(Rs.)

(i) Cash in hand 75,000

(ii) Cash at bank 10,00,000

(iii) Residential house (Loan taken to purchase

this house Rs. 5,00,000) 45,00,000

(iv) Land in rural area (it is within 5 kms. from Delhi) 48,00,000

(v) Land in urban area (construction not permitted

under the law, loan taken to purchase this land

Rs.3,00,000) 28,00,000

(vi) Motor car for personal use 14,00,000

(vii) Jewellery 6,00,000

(viii) Aircraft for personal use (Loan taken to purchase

aircraft Rs. 20,00,000) 1,00,00,000

(ix) Farm house situated within 20 kms. from local

limits of municipality 24,00,000

(x) One let-out residential house given on rent throughout

the year (Loan taken to construct this house

Rs. 2,00,000) 20,00,000

(5 marks)

Chapter-14 : Levy, Collection and Payment of Service Tax along w ith

CENVAT Credit Rules

2010 - June [7] Attempt the following:

(a) As per rule 2(1)(d) of the Service Tax Rules, 1994, who is the person

specified to be liable for paying service tax in respect of the following

services—


(i) Telecommunication services.

(ii) Services in relation to general insurance business.

(iii) Services in relation to any taxable service or service to be provided by

any person from a foreign country to any person in India.

(iv) Business auxiliary service of distribution of mutual fund by a mutual

fund distributor or an agent, as the case may be.

(v) Sponsorship services provided to any body corporate or firm located

in India. (1 mark each)

(b) (i) Which category of persons must mandatorily obtain registration under

Chapter V of the Finance Act, 1994? (3 marks)

(ii) What are time limits for making application for registration and

granting registration for service tax under Chapter V of the Finance

Act, 1994? (2 marks)

(c) (i) When is an assessee registered under service tax required to surrender

the registration certificate?

(ii) On which amount—amount of bill raised on client or amount actually

received from the client, service tax is payable?

(iii) If an assessee pays service tax on the billed amount but he gets less

amount from his customers, can he get refund from the government?

(iv) If the service provider fails to recover service tax on a bill of Rs.

12,000 where service tax is not shown separately in the invoice, what

will be the amount of service tax?

(v) When will the small service provider claiming exemption from paying

service tax apply for registration under service tax? (1 mark each)

(d) Comment on the following statements—

(i) “Service tax is payable as soon as advance is received even if the

service is provided later.” (2 marks)

(ii) “Excess service tax collected is to be paid to the Central Government”.

(3 marks)

(e) Discuss the exemption available to small service providers from paying

service tax. (5 marks)

Chapter-15 : Value Added Tax (VA T)—A n Overview

2010 - June [8] Attempt of the following:

(i) “As a result of introduction of value added tax (VAT ), the central sales

tax will be phased out.” Explain the statement. (5 marks)


Chapter-16 : Computation and Other Procedural Aspects Relating to

VAT


(iii) “VAT liability of a dealer is calculated by deducting input tax credit

from tax collected on sales during the payment period”. Discuss with

the help of a suitable illustration.

(iv) Discuss the cases of purchases in respect of which generally no input

tax credit is available.

(v) Explain the various methods of computation of VAT liab ility.

(5 marks each)

Chapter-17 : Appointment, Jurisdiction and Powers Authorities and The

Certifications for Professionals


(ii) Discuss in what respects VAT system as adopted in India is deficient

in the direction of getting maximum benefits of VAT. (5 marks)


2010 - June [1] {C} (a) Choose the most appropriate answer from the given

options in respect of the following having regard to the provisions of the

relevant direct tax laws:

(i) Which of the following income is agricultural income—

(a) Rent received from agricultural land

(b) Income from dairy farm

(c) Income from poultry farm

(d) Dividend from a company engaged in agriculture.

(ii) The term ‘income includes the following types of incomes—

(a) Legal

(b) Illegal

(c) Legal and illegal both


(iii) Every year, the residential status of an assessee—

(a) May change

(b) Will certainly change

(c) Will not change


(iv) Sneha is an employee in a private company. In the previous year she

received salary Rs. 1,80,000 and entertainment allowance Rs. 12,000.

She spent Rs. 6000 on enterta inment. Under section 16(ii), she is

entitled to deduction of-


(a) Rs.12,000

(b) Rs. 6,000

(c) Rs. 5,000

(d) Nil

(v) In whose total income, the income of a minor child is included—

(a) Father

(b) Mother

(c) Father and mother both

(d) Parent whose total income is greater (1 mark each)

(b) State, with reasons in brief, whether the following statements are correct or

incorrect:

(i) An Indian company is always resident in India no matter where and to

what extent its control and management is situated.

(ii) Rent from house property let-out by an assessee to his employees

when such letting is incidental to his main business, will be chargeable

to tax under the head ‘income from house property’.

(iii) Income by way of winnings from lotteries in the hands of a dealer as

a regular business activity is not chargeable to tax under the head

‘profits and gains of business or profession’.

(iv) Income from transfer of self-generated goodwill of a profession is not

chargeable to tax under the head ‘capital gains’.

(v) Literary awards instituted by the Central Government are exempted

from income-tax. (1 mark each)

2010 - June [2] (a)Re-write the following sentences after filling-in the blank

spaces with appropriate word(s)/figure(s):

(i) The maximum exemption limit under the Income-tax Act, 1961 in case

of a woman who is less than 65 years of age and who is non-resident

in India is Rs.____________.

(ii) The time limit for filing an appeal before the appellate tribunal on

receipt of an appeal order from the Commissioner is _______ days.

(iii) Wealth-tax is charged at the rate of ______ % on net wealth in excess

of Rs._________ lakh under the Wealth-tax Act, 1957.


(iv) Business loss relating to illegal business is ________ as deduction.

(v) Marriage gift from a non-relative is ________ to tax. (1 mark each)

Shuchita Prakashan (P) Ltd.25/19, L.I.C. Colony, Tagore Town,

Allahabad - 211002Visit us : www.shuchita.com

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