Mumbai University Direct and Indirect Tax October 2008 Paper

Direct and Indirect Tax

October 2008

(REVISED COURSE)

Regular Students
3 Hours

Marks:80

I.D.E. Students

.

Marks: 100

NB:

1. Regular College Students enrolled during the academic year 2006-07 and thereafter shall attempt only Section I and II carrying total 80 marks. Duration of the paper is 21/2 Hours for such candidates. (Section III should not be attempted by such students.)
2. All I.D.E. Students and college students enrolled during the academic year 2005-06 or earlier shall attempt Section I, II and III carrying total 100 marks. Duration of the paper is 3 hours for such candidates.
3. Question No.1 is compulsory carrying 18 marks. Attempt any three questions carrying 14 marks each from question Nos. 2 to 6 from Section I.
4. Attempt question No. 7 and Question No. 8 carrying 10 marks each from Section II.
5. Attempt Question No. 9 and Question No. 10 carrying 10 marks each from Section III.
6. All the sections should be written in the same answer book.

Section I

• Q.1 Mrs. Prafulla provides the following profit and Loss Account for the year ended 31/03/2007. Profit and Loss Account for the year ended 31st March, 2007. 18
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Expenses	Rs.	Income	Rs.
To Salaries	2,00,000	By Gross Profit b/d	8,08,000
To Printing and Stationery	10,000	By U.T.I. dividend	10,000
To Advertisement expenses	40,000	By Winning from lottery	15,000
To Rent	50,000	By Gift from father	5,000
To Motor car expenses	30,000
To Personal drawings	50,000
To Embezzlement by an employee	5,000
To Staff welfare expenses	25,000
To Donations	15,000
To Income Tax	9,000
To Depreciation	30,000
To Sales Tax paid	4,000
To Net Profit	3,70.000
	8,38,000		8,38,000

• Additional Information:
1. Depreciation as per Income Tax Rules is Rs. 35,000.
2. 50% of the rent is paid for her residential house
3. Personal drawings includes her personal life Insurance premium of Rs. 5,000.
4. Printing includes Rs. 2,000 paid for printing birthday cards for her daughter's birthday
5. Donations are made to:
• (a) National sports fund Rs. 10,000
• (b) Indira Gandhi Memorial Trust Rs. 4,000.
• (c) Recognised Charitable Institutions of books worth Rs. 1,000.

Compute total taxable Income of Mrs. Prafulla for assessment year 2007-08.

Q 2.Mr. Sachin Abhyankar is an employee of Godrej Ltd. He furnishes the following Information for the year ended 31st March 2007.14
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(a) Basic Salary (Net of Professional Tax and T.D.S.)
01/04/2006 to 30/11/2006	Rs. 24,000 per month
01/12/2006 to 31/03/2007	Rs. 30,000 per month
(b) Tax deducted at source:
01/04/2006 to 30/11/2006	Rs. 1,000 per month
01/12/2006 to 31/03/2007	Rs. 2,000 per month
(c) Professional Tax	Rs. 2,500 per annum
(d) Bonus received in October 2006	Rs. 48,000
(e) Conveyance allowance received	Rs. 2,000 per month
(Exempt u/s 10 @ Rs. 800 per month)
(f) Dearness allowance @ 65% of Basic salary.
(g) Loan from employer for daughter's marriage	Rs. 1,00,000
(h) Interest received on Bank saving account	Rs. 3,000
(i) Interest received on Government securities	Rs.7,000
(j) LIC premium paid by Mr. Abhyankar	Rs.10,000 in cash
(k) He paid medical Insurance premium of	Rs.5,000 in cash

Compute his Net Taxable Income for Assessment year 2007-08.

• Q. 3 Mr. Kedar Patwardhan owns two house properties. Following are the details regarding these houses for the year ended 31/03/2007. 14
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(A)House Property I: self occupied,

(1) Annual value Rs. 4,00,000.

(2) Municipal Taxes paid Rs. 20,000.

(3) Loan from ICICI Bank of. Rs. 15,00,000 for acquiring the house property in 2004.

(4) Interest paid on the above loan Rs. 1,80,000 for the-year.

(5) Repayment of Principal amount on housing loan during the year Rs. 30,000.

(B) House Property II:Let out

(1) Fair rent Rs. 3,25,000

(2) Actual rent received Rs. 30,000 per month.

(3) Municipal Taxes paid 18,000.

(4) Collection charges paid Rs. 500.

(5) Interest paid on loan for construction of house property Rs. 40,000.

(C) His other income was as follows:

(1) Interest on Public Provident Fund is Rs. 6,000.

(2) Dividend from Reliance Industries Ltd. Rs. 3,000.

(D)Mr. Patwardhan is physically handicapped (upto 30%).

• Compute the Net Taxable Income of Mr. Patwardhan for the Assessment year 2007 – 08.
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• Q.4 (a) Professor Rajendra Bhatt a UK citizen (not a person of India Origin) is a visiting faculty at JNO University.provides you the details of his visit to India during the last 7 years. 8
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Previous Year	No. of Days stay in India
2006 – 07	179
2005 – 06	195
2004 - 05	15
2003 – 04	130
2002 – 03	190
2001 – 02	100
2000 - 01	125

• Prior to 01/04/2000 he did not visit India. Find out his Residential status for the Assessment year 2007-08.
• (b) Shri R. P. Chitale purchased a House property for Rs. 1, 25,000 on 4th September, 1977. He constructed a First Floor during the Financial Year 1985 – 86 for Rs. 2,25,000. 6
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• The fair market value of the property on 01/04/1981 was Rs. 3, 50,000. He sold the property on 15/11/2006 for Rs. 35 lakhs. He paid brokerage Rs. 25,000 for the sale transaction.The cost inflation Index for Financial Year 1981 – 82 is 100, for Financial Year 1985 – 86 is 133 and for Financial Year 2006 – 07 is 519.Your are required to compute the Income from Capital Gains for the assessment Year 2007-08.
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• Q.5 (a) Define and Explain the following as per Income Tax-Act 1961 (any two): 6
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• (i) Person
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• (ii) Company
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• (iii) Previous year
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• (b) Enumerate any Eight items of Investments / Payments eligible for deduction u/s 80C of the Income Tax Act, 1961. 8
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• Q. 6 Answer any seven of the following questions with reference to Assessment Year 2007-08 14
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• i. Aayushi received a gift of Rs. 11,000 from her father at the time of her marriage. Aayushi claims that Rs. 11,000 is not taxable in her hands. Is her claim correct?
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• ii. Mr. Ramdas retired from a Government Organisation. He received pension @Rs. 5,000 p.m. during the previous year 2006-07. He claims this pension as exempt being received from a Government Organisation. Is his claim correct?
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• iii. Mr. Pandharinath is working in a private organisation. He gets entertainment allowance of Rs. 7,000 during the previous year 2006-07. Can he claim entertainment allowance deduction u/s 16(ii)?
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• iv. Mr. Bhuvan paid his Life Insurance premium of Rs. 6,000 in cash. Is he eligible for deduction u/s 80C?
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• v. Miss. Aalisha receives Rs. 50,000 as rent from a vacant plot of land owned by her. She claims this income as 'Income from house property'. Is her claim correct?
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• vi. Mrs. Sanchita owns two house properties in Mumbai. She occupies both the houses for her own stay. She claims Gross Annual value of both the properties as NIL. Is she correct?
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• vii. Miss. Neha, the minor daughter of Mr. Nayak is a child artist. She earns income of Rs. 20,000 during the previous year 2006-07. Should her income be clubbed with the income of Mr. Nayak?
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• viii. Mr. Nityanand purchased a house property on 1st May 2005 and sold it on 1st June 2007. He treats this property as a long term capital asset. Is his claim correct?
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• ix. During the previous year 2006-07, Metasys Ltd. has to pay Rs. 2 lakhs as rent for their office premises. Should the company deduct tax at source while making the payment to the land lord?
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Section – II

• Q. 7 Define and Explain the term 'Dealer' as per the provisions of the Central Sales Tax Act, 1956. 10
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OR

• Q. 7 Explain with reasons whether the following persons are 'Dealers' or not as per the provisions of the Central Sales Act, 1956.
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• (i) A Teacher providing Free coaching to students
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• (ii) An Interior Decorator.
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• (iii) A watch manufacturer.
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• (iv) A Money Lender.
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• (v) Mahanagar Gas Ltd., supplying piped Gas to its customers.
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• Q. 8 Mr. Limaye commenced his business on 1 st August 2007.Find out from which month he will be Liable for Registration and to pay tax as per the provisions of MVAT Act,2002.Give reasons for your answer.The details of sales and purchases are as under: 10
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Month	Purchases		Sales
	Taxable	Tax Free	Taxable	Tax Free
	Rs.	Rs.	Rs.	Rs.
August 2007	6,000	40,000	8,000	60,000
September 2007	3,000	68,000	4,000	85,000
October 2007	2,000	98,000	3,000	1,20,000
November2007	4,000	1,12,000	10,000	1,50,000
December 2007	3,000	88,000	15,000	35,000
January 2008	2,000	1,26,000	6,000	1,46,000
February 2008	6,000	86,000	4,000	1,00,000
March 2008	6,000	1,10,000	8,000	1,40,000

OR

• Q. 8 Shri Deosthalee a Registered Dealer under MVAT Act 2002, furnishes you the following details about purchases and sales for the month of December 2007. Ascertain the Tax payable as per MVAT Act 2002.
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Sales	Rs.	Sales Returns	Rs.
Schedule 'A' Goods	1,80,000	Schedule 'B' Goods	5,000
Schedule 'B' Goods	55,000	Schedule 'C' Goods	8,000
Schedule 'C' Goods	1,08,000	Schedule 'E' Goods	6,000
Schedule 'E' Goods	2,66,000
Purchases	Rs.	Purchase Returns	Rs.
Schedule 'A' Goods	1,20,000	Schedule 'C' Goods	2,000
Schedule 'C' Goods	1,62,000	Schedule'E' Goods	4,000
Schedule 'E' Goods	2,04,000

• Shri. Deosthalee has an Opening Balance (Credit) in VAT Credit Receivable Account of Rs. 4,500.
• Rates of Tax for Schedule A, B, C and E goods are NIL, 1%, 4% and 12.5% respectively.