PAPER – 4 : TAXATION

SECTION A: INCOME TAX LAW

Part - II
Question No.1 is compulsory.
Candidates are also required to answer any two questions from the remaining three
questions.
Working notes should form part of the respective answers.
All questions relate to Assessment Year 2023-24, unless otherwise stated.
Question 1
Mr. Bhasin, a resident individual, aged 52 years, provides management consultancy services to
various corporate and non-corporate clients. His Income & Expenditure A/c for the year ended
31st March, 2023 is as under:
Expenditure Amount (`) Income Amount (`)
To Employees’ 15,00,000 By Gross Receipts from 60,60,000
Remuneration Profession (last year
` 75,00,000) (No
TDS was deducted
from any of the
receipts)
To Office & Administrative 5,00,000 By Interest on Savings 25,000
Expenses Bank Account
To Rates and Taxes 15,000 By Winnings from 99,500
Lottery (Net of cost of
lottery tickets of
` 500)
To Interest Expenses 80,000 By Rent Received 2,40,000
To Office Rent 2,40,000
To Insurance Premium 72,000
To Professional Fees 2,00,000
To Depreciation on 1,20,000
Computers

The Suggested Answers for Paper 4A: Income-tax Law are based on the provisions of Income-
tax Act as amended by the Finance Act, 2022 which are relevant for May, 2023 Examination.
The relevant assessment year is A.Y.2023-24.

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 2 INTERMEDIATE EXAMINATION: MAY, 2023

To Excess of Income
over Expenditure 36,97,500
64,24,500 64,24,500
The following details relates to F.Y. 2022-23:
(i) Employees’ Remuneration includes a sum of ` 3,00,000 paid to his wife, Mrs. Beena who
is working as a manager in his office. She does not have any technical or professional
qualification or experience required for the job. The payment of salary was as per market
rates in comparison to similar work profile.
(ii) Mr. Bhasin owns a big house with 2 independent units. Unit - 1 (with 50% floor area) has
been let our for residential purposes at a monthly rent of ` 20,000 for the entire year.
Unit - 2 (with the balance 50% of the floor area) is used by Mr. Bhasin as his residence -
cum-office. Other particulars of the house are:
Municipal Valuation - ` 3,60,000 p.a.
Fair Rent - ` 4,20,000 p.a.
Standard Rent under Rent Control Act -` 4,00,000 p.a.
(iii) Rates and taxes include a sum of ` 10,000 paid as municipal taxes of the house.
(iv) Interest expenses represent interest on capital borrowed from a nationalised bank for the
construction of the house. The construction was completed in F.Y.2010-11. Neither the
loan nor the interest was paid till the due date of filing the return of income.
(v) Based on the actual rent received for Unit-1, Mr. Bhasin has debited ` 2,40,000 as notional
rent for Unit-2 which is used for his profession.
(vi) The expense on insurance premium of ` 72,000 represents lump-sum health insurance
premium paid by Mr. Bhasin for 3 years effective from 1 stJuly, 2022 to 30 thJune, 2025 for
himself, his spouse and two dependent children. The said insurance premium was paid
through account payee cheque.
(vii) The expenses on professional fees paid includes a sum of ` 1,00,000 paid to Mr. Raunak,
an Indian resident on which no tax was deducted at source.
(viii) There was only one block containing computers which came into existence only on
2nd April, 2022 when new laptops (for ` 1,60,000), printers and scanners (for ` 40,000)
were purchased. He charged depreciation @ 60% in the entire cost of ` 2,00,000 and
debited the amount to Income & Expenditure A/c.
(ix) Mr. Bhasin has also taken a loan of ` 5,00,000 from a nationalised bank for higher
education of his son. During F.Y.2022-23, he repaid principal of ` 75,000 along with
interest of ` 40,000. This amount is not reflected in Income and Expenditure Account.

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 PAPER – 4 : TAXATION 3

You are required to compute the total income under proper heads of income of Mr. Bhasin for
A.Y. 2023-24 under regular provisions of Income-tax Act 1961, assuming that he has not opted
to pay tax under section 115BAC. Also calculate the total tax payable by him. (14 Marks)
Answer
Computation of total income and tax payable by Mr. Bhasin for A.Y. 2023 -24
Particulars ` ` `
I Income from Salaries
Salary of Mrs. Beena [Remuneration paid by 3,00,000
Mr. Bhasin to his wife Mrs. Beena who is
employed as a manager in his office would be
included in his hands, since Mrs. Beena does
not have any technical or professional
qualification or experience required for the job]
Less: Standard deduction u/s 16(ia) 50,000 2,50,000
II Income from house property
Let out portion (Unit 1 – 50% area)
Gross Annual Value [Higher of expected rent of 2,40,000
` 2,00,000 and actual rent of ` 2,40,000
(` 20,000 x 12)]
[Expected rent is higher of municipal value of
` 1,80,000 (3,60,000 x 50%) and fair rent of
` 2,10,000 (` 4,20,000 x 50%), restricted to
standard rent of ` 2,00,000 (` 4,00,000 x 50%)]
Less: Municipal taxes paid for let out portion 5,000
(` 10,000 x 50%)
Net Annual Value (NAV) 2,35,000
Less: Deduction under section 24
(a) 30% of NAV 70,500
(b) Interest on capital borrowed for 40,000
construction of house relating to let out
portion (80,000 x 50%) (allowed on
accrual basis)
Income from let out portion 1,24,500
Self-occupied (Unit 2 – 25%)
[Since Unit 2 representing 50% of the floor area
is used for residence as well as business

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 4 INTERMEDIATE EXAMINATION: MAY, 2023

purpose, it is assumed that it is equally used for

residence and business purpose]
Gross Annual Value Nil
Less: Municipal taxes [not allowed for self- Nil
occupied property]
Net Annual Value Nil
Less: Deduction under section 24(b)
Interest on loan for construction of house, 20,000
` 80,000 x 50% x 1/2 (allowable on accrual
basis)
Loss from self-occupied portion (20,000)
[Loss from self-occupied portion can be set off 1,04,500
against income from let out portion]
III Profits and gains from business and
profession
Excess of income over expenditure 36,97,500
Add: Expenses debited to Income &
Expenditure A/c but not allowable as
deduction
Remuneration paid to his wife Mrs. Beena [As -
per section 40A(2) remuneration paid to Mrs.
Beena is allowed, since it is as per market rates]
Municipal taxes attributable to let out and self- 7,500
occupied portions not allowable [` 10,000 x
75%]
Interest on capital borrowed for construction 60,000
of house attributable to let out and self-
occupied portion not allowable [` 80,000 x 75%]
Interest on capital borrowed from bank for 20,000
construction of house attributable to business
portion i.e., 25% of ` 80,000 [not allowable,
since it is not paid on or before due date of filing
return of income by virtue of section 43B]
Notional rent for Unit 2 used for business or 2,40,000
profession [not allowable under section 30, since
Mr. Bhasin himself is the owner of the property]
Insurance premium [Personal expenditure not 72,000
allowable]

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 PAPER – 4 : TAXATION 5

Professional fees to Mr. Raunak without 30,000

deducting TDS [` 1,00,000 x 30%]
[Mr. Bhasin is required to deduct TDS on
professional fees payment to Mr. Raunak since
his gross receipts from profession exceeds ` 50
lakhs during the P.Y. 2021-22. 30% of the sum
paid to Mr. Raunak, resident without deducting
tax to be disallowed in P.Y. 2022-23]
Depreciation as per books 1,20,000 5,49,500
42,47,000
Less: Income credited to Income &
Expenditure A/c but not taxable as business
income
Interest on savings bank account [taxable under 25,000
the head “Income from other sources”]
Winnings from lottery [taxable under the head 99,500
“Income from other sources”]
Rent received [taxable under the head “Income
from house property”] 2,40,000 3,64,500
38,82,500
Less: Depreciation allowable [2,00,000 80,000
(` 1,60,000, being new laptops + ` 40,000,
being printers) x 40%, i.e., 64,000+16,000 as it
was put to use for more than 180 days in the
P.Y. 2022-23. Printers and scanners for
` 40,000 are eligible for higher depreciation of
40%]
38,02,500
IV Income from Other Sources
Interest on savings bank account 25,000
Winnings from Lottery [No expenditure or
allowance is allowed from lottery income] 1,00,0001
1,25,000
Gross Total Income 42,82,000

1 Assumed to be the gross amount (inclusive of TDS) in the absence of any information.

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 6 INTERMEDIATE EXAMINATION: MAY, 2023

Less: Deduction under Chapter VI-A

Deduction under section 80D
Medical insurance premium [` 72,000 x 1/4, 18,000
being the previous years in which insurance
would be in force] [allowable for self, spouse and
dependent children]
Deduction under section 80E
Interest on loan taken from a nationalised bank 40,000
for higher education of son
Deduction under section 80TTA
Interest on saving bank account to the extent of 10,000 68,000
Total Income 42,14,000
Tax Payable
On lottery income [30% of ` 1,00,000] 30,000
On other income of ` 41,14,000
Upto ` 2,50,000 Nil
` 2,50,000 @5% [` 2,50,000 – ` 5,00,000] 12,500
` 5,00,000 @20% [` 5,00,000 – ` 10,00,000] 1,00,000
` 31,14,000 @30% [` 10,00,000 – ` 41,14,000] 9,34,200
10,46,700
10,76,700
Less: HEC@4% 43,068
Tax liability 11,19,768
Less: TDS on lottery winnings @30% u/s 194B 30,000
Tax payable 10,89,768
Tax payable (rounded off) 10,89,770
Question 2
(a) (i) Mr. Jai Chand (an Indian citizen) left India for employment in country X on 5 thJune,
2014. He regularly visited India and stayed for 60 days in every previous year since
then. However, in the financial year 2022-23, he did not come to India at all. He owns
a commercial building in Delhi which is let out. He has also set a retail store in India
which is controlled by his brother from India. He provides the following information to
you regarding his income for the financial year 2022-23:
Income from commercial building in Delhi - ` 12,00,000 (computed as per the
provisions of the Act).

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 PAPER – 4 : TAXATION 7

Income from the retail store - ` 4,50,000 (computed as per the provisions of the Act)
Country X does not tax any individual on their income as there is no personal
income-tax regime there.
Determine the residential status of Mr. Jai Chand for the Assessment year 2023-24.
Will your answer change if he is a citizen of Country X? (3 Marks)
(ii) Mr. Prashant (aged 35 years) is an Australian citizen who is settled in Australia and
visits India for 125 days in every financial year since past 11 years. During the F.Y.
2022-23, he visited India for a total period of 200 days. The purpose of his visit was
to meet his family members who are settled in India and also for managing his family
members who are settled in India and also for managing his business in Sri Lanka
through his office in Chennai, India.
During the P.Y. 2022-23, he has the following incomes:
(A) Income from business in Australia controlled form Australia - ` 20,00,000
(B) Income from business in Sri Lanka controlled form Chennai - ` 16,00,000
(C) Short-term capital gains on sale of shares of an Indian company received in
Australia - ` 50,000. The shares were sold online from Australia.
(D) Income from agricultural land in Australia, received there and then brought to
India - ` 2,00,000
Find out the residential status of Mr. Prashant and compute his total income for
Assessment Year 2023-24. (4 Marks)
(b) Answer the following:
(i) Miss Tara, resident individual aged 32 years, is a social media influencer. She makes
videos reviewing various electronic items and posts those videos on social media. On
1st December 2022, XYZ Ltd., an Indian company manufacturer of electronic cars
gave her a brand new car having fair market value of ` 6 lakhs to promote on her
social media page. She used that car for 7 months for her personal purposes,
recorded a video reviewing the car and then returned the car to the company. You
are required to discuss the applicable provisions in the Income-tax Act regarding the
deduction of tax at source in respect of such transaction.
(ii) Ms. Aruna is a Chief Executive Officer of a multi-national company. She hires
Mr. Suresh for supply of her housing staff (like gardener, chefs and drivers etc.) and
makes the following payments to him:
` 25,00,000/- on 10th August, 2022 and ` 30,00,000 on 22 nd November, 2022.
Determine the amount of tax to be deducted/ collected at source, if any.

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 8 INTERMEDIATE EXAMINATION: MAY, 2023

Would your answer be different, if Ms. Aruna is a business woman and her books are
not audited in immediately preceding financial year and payment to Mr. Suresh is for
business purposes.
(iii) By virtue of an agreement with Nationalized Bank, M/s ABC Pvt Ltd., a company
engaged in catering business received ` 60,000 p.m. towards supply of food, water,
snacks, etc. during office hours to the employees of the bank. Discuss the TDS
implication of this transaction/agreement. (7 Marks)
Answer
(a) (i) Determination of residential status of Mr. Jai Chand for A.Y. 2023-24
Since Mr. Jai Chand, an Indian citizen employed in Country X, did not come to India
at all during the P.Y. 2022-23, he would not be a resident for A.Y.2023-24 as per
section 6(1).
However, since he is an Indian citizen
- having total income (excluding income from foreign sources) of ` 16,50,000
[` 12,00,000, being income from commercial building in India + ` 4,50,000,
being Income from retail store in India], which exceeds the threshold of ` 15
lakhs during the previous year; and
- not liable to tax in Country X,
he would be deemed resident in India for the P.Y. 2022-23.
A deemed resident is always a resident but not ordinarily resident in India (RNOR).
Yes, in case Mr. Jai Chand is a citizen of Country X, he would be non-resident in India
for the P.Y. 2022-23, since the provisions of deemed resident are applicable only to
an Indian citizen.
(ii) Determination of Residential Status of Mr. Prashant 2
Mr. Prashant is an Australian citizen who comes on a visit to India for 125 days in
every financial year since the past 11 years. During the P.Y. 2022-23, he visited India
for 200 days. Since he stayed in India for 182 days or more during the P.Y. 2022-23,
he would be resident in India for the A.Y. 2023-24.
An individual is said to be “Resident and ordinarily resident [ROR]” in India in any
previous year, if he satisfies both the following conditions:
- He is a resident in at least 2 out of 10 previous years preceding the relevant
previous year; and
- His stay in India in the last 7 years preceding the relevant previous year is 730
days or more [Refer Note 1 below for alternate presentation]

2 In the absence of information, it is assumed that he is not a person of Indian Origin

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 PAPER – 4 : TAXATION 9

First condition
Residential status for P.Y.2021-22 (A.Y.2022-23) – Resident, since he has stayed in
India for ≥ 60 days (125 days) in the said P.Y. and ≥ 365 days ( 500 days, being 125
days x 4) in the four immediately preceding PYs.
Residential status for P.Y.2020-21 (A.Y.2021-22) – Resident, since he has stayed in
India for ≥ 60 days (125 days) in the said P.Y. and ≥ 365 days ( 500 days, being 125
days x 4) in the four immediately preceding PYs.
Therefore, he satisfies the first condition of being resident in India in atleast 2 out of
10 previous years preceding the relevant P.Y. 3
Second condition
Stay in India in 7 immediately preceding PYs = 7 x 125 days = 875 days > 730 days
Since both the conditions are satisfied, he is Resident and Ordinarily Resident
(ROR).
In case of ROR, global income would be taxable in India. Accordingly, his total income
for A.Y. 2023-24 would as follows:
Computation of Total Income of Mr. Prashant for A.Y.2023-24
Particulars `
(i) Income from business in Australia 20,00,000
(ii) Income from business in Sri Lanka 16,00,000
(iii) Short-term capital gains on sale of shares of an Indian 50,000
company
(iv) Income from agricultural land in Australia [would not be
exempt, since it is not from an agricultural land in India] 2,00,000
Total income 38,50,000
Notes - (1) Alternative manner of determination of whether Mr. Prashant is ROR/
RNOR -
“An individual is said to be “Resident but not ordinarily resident [RNOR]” in India in
any previous year, if he satisfies any one of the following conditions:
- He is a non-resident in at least 9 out of 10 previous years preceding the
relevant previous year; or
- His stay in India in the last 7 years preceding the relevant previous year is 729
days or less.

3He is a resident in 8 out of 10 PYs immediately preceding P.Y.2022-23

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 10 INTERMEDIATE EXAMINATION: MAY, 2023

Mr. Prashant does not satisfy either of the above conditions on account of being
resident in more than 1 year out of 10 years and stay in India for 875 days in the 7
years preceding the P.Y.2022-23. Hence, he is a Resident and Ordinarily Resident in
the P.Y.2022-23.
(2) In the absence of information relating to whether Mr. Prashant is a person of
Indian origin, the above solution has been worked out assuming that Mr. Prashant is
not a person of Indian origin.
However, alternate assumption that Mr. Prashant is a person of Indian origin is also
possible since the purpose of his visit was to meet his family members who are settled
in India. Accordingly, if it is assumed that he is a person of Indian origin, then, for
determining whether he is resident in P.Y.2020-21 and P.Y.2021-22, information
relating to his total income (excluding income from foreign sources) for the said P.Y.s
is required for ascertaining whether the condition of 120 days in the relevant P.Y. +
365 days in the 4 immediately preceding P.Ys would be attracted in his case. This
information is not given in the question. Accordingly, assumptions would have to be
made relating to the applicability of this condition.
It may be noted that the condition of 120 days in the P.Y. + 365 days in the four
immediately preceding PYs for a PIO whose total income (other than income from
foreign sources) exceed ` 15 lakhs for determination of residential status came into
effect only from A.Y.2021-22. Therefore, in the previous years prior to that, he would
be non-resident irrespective of his total income since the number of days of his stay
< 182 days each year.
In case if it is assumed that his total income (other than income from foreign sources)
for the P.Y.2020-21 and P.Y.2021-22 > ` 15 lakhs, he would be ROR since he would
be resident in 2 out of 10 years immediately preceding the current P.Y. and he stayed
for 730 days or more in 7 previous years immediately preceding current P.Y.. In such
case, his total income would be same as determined in the above solution.
In case if it assumed that he is a PIO whose total income (other than income from
foreign sources) for the P.Y.2020-21 and P.Y.2021-22 ≤ ` 15 lakhs, he would be
non-resident for P.Y.2020-21 and P.Y.2021-22, since his stay in India is for less than
182 days in those years. In such a case, for P.Y.2022-23, he would be RNOR, since
he would be non-resident in all the 10 years immediately preceding the current P.Y.
In such case, the computation of total income for A.Y.2023-24 would be as follows –
Computation of Total Income of Mr. Prashant for A.Y.2023-24
Particulars `
(i) Income from business in Australia controlled from Australia -
(not taxable in case of RNOR, since it accrues and arises
outside India)

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 PAPER – 4 : TAXATION 11

(ii) Income from business in Sri Lanka (taxable since it is 16,00,000

controlled from India)
(iii) Short-term capital gains on sale of shares of an Indian 50,000
company (taxable, irrespective of residential status)
(iv) Income from agricultural land in Australia [would not be
taxable in case of RNOR since it accrues and arises outside
India] -
Total Income 16,50,000
(b) (i) Under section 194R, the person who is responsible for providing to a resident, any
benefit or perquisite whether convertible into money or not, arising from business or
the exercise of a profession by such resident, has to first ensure deduction of
tax@10% of the value of such benefit or perquisite, if the same exceeds ` 20,000.
However, in case of benefit or perquisite being a product like car, mobile etc. if the
product is returned to the manufacturing company after using for the purpose of
rendering service, then it will not be treated as a benefit/perquisite for the purposes
of section 194R.
Accordingly, in the present case, since Miss Tara has returned the car to XYZ Ltd.,
TDS provisions under section 194R would not apply.
(ii) The provisions of section 194C would not apply in the hands of Ms. Aruna since the
amount paid to Mr. Suresh is for supply of her housing staff. Hence, it is used
exclusively for her personal purposes.
In this case, tax is required to be deducted at source from such amount under section
194M @5%, since the aggregate payment made to Mr. Suresh for the said contract
exceeds ` 50 lakhs during the P.Y.2022-23.
Accordingly, ` 2,75,000, being 5% of ` 55,00,000 [` 25,00,000 + ` 30,00,000], is
required to be deducted at source.
In case Ms. Aruna made payment to Mr. Suresh for business purposes and she is not
required to get her books of account audited [assuming her turnover from such
business does not exceed ` 1 crore in P.Y. 2021-22], she is not required to deduct
tax at source under section 194C. In such case also, she is required to deducted tax
at source of ` 2,75,000 under section 194M.
Note – In the question, it is mentioned that Ms. Aruna is a business woman and her
books are not audited in immediately preceding financial year. However, whether the
provisions of section 194C would be attracted are dependent on whether the turnover
of business carried on by her during the financial year immediately preceding the
financial year in which the sum credited or paid exceeds ` 1 crore. In the absence of
this information, it is possible that audit may not be required in her case due to the
following reasons-

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 12 INTERMEDIATE EXAMINATION: MAY, 2023

- her turnover exceeds ` 1 crore but does not exceed ` 10 crores and receipts
and payments in cash does not exceed 5% of such receipts or payments,
respectively.
- her turnover exceeds ` 1 crore but does not exceed ` 2 crore and she is
declaring profits under the presumptive provisions of section 44AD.
Accordingly, following alternate answer is also possible based on the assumption that
turnover of Ms. Aruna’s business exceeds ` 1 crore.
Alternative answer - In case Ms. Aruna made payment to Mr. Suresh for business
purposes during the P.Y. 2021-22, she would be required to deduct tax at source
@1% under section 194C amounting to ` 55,000 (since payment is made to
Mr. Suresh, an individual) of ` 55,00,000.
(iii) According to section 194C, the definition of “work” include catering. In the present
case, nationalised bank is required to deduct tax source @2% on ` 7,20,000
[` 60,000 x 12] paid to ABC Pvt. Ltd. for providing catering services to the bank, since
amount of ` 60,000 paid every month exceeds the threshold of ` 30,000.
Therefore, nationalised bank is required to deduct tax at source of ` 1,200 per month
amounting to ` 14,400 for the year.
Question 3
(a) Mr. Bhagat, an individual aged 50 years, set up a unit in Special Economic Zone (SEZ) in
F.Y.2017-18 for the production of computers. The unit fulfils all the conditions of section
10AA of the Income-tax Act, 1961. During F.Y. 2021-22, he set up a hospital in a district
of Maharashtra with 110 beds for patients. It fulfils all the conditions of section 35AD.
Capital expenditure in respect of the said hospital amounted to ` 65 lakhs (comprising of
cost of land ` 15 lakhs and the balance was the cost of construction of building). The
hospital became operational with effect from 1 st April, 2022 and the expenditure of ` 65
lakhs was capitalized in the books of accounts on that date
Relevant details for F.Y. 2022-23 are as follows:
Particulars Amount
(` in lakhs)
Profit of unit located in SEZ 36
Export sales of SEZ unit 75
Domestic sales of SEZ unit 25
Profit form operation of hospital facility (before considering deduction 90
under Section 35AD)

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Compute the income-tax (including AMT under section 115JC and AMT credit, if any, under
section 115JEE) payable by Mr. Bhagat for A.Y. 2023-24 under regular provisions of the
Income-tax Act i.e. ignoring the provisions of section 115BAC. Ignore marginal relief, if
any. (7 Marks)
(b) Mr. Rohan retired from M/s. QRST Ltd. a private sector company, on 31 st March, 2023 after
completing 28 years and 3 months of service. He received the following sums/gifts on his
retirement:
(i) Gratuity of ` 7,50,000. He was covered under the Payment of Gratuity Act, 1972.
(ii) Leave encashment of ` 3,25,000 for 210 days leave balance in his account. He was
credited with 30 days leave for each completed year of service.
(iii) Crockery set worth ` 4,500 from his employer at the farewell party which was
organised by the HR department a day before his retirement.
He drew a basic salary of ` 25,000 per month alongwith 50% of basic salary as dearness
allowance (not forming part of retirement benefits) for the period from 1 st April, 2022 to 31 st
March, 2023.
Further, during the year, his employer provided him a motor car of 1800 cc which was used
by him and his family solely for personal purposes. The cost of fuel and repairs were met
by Mr. Rohan himself. The car was purchased by the employer on 1 st April, 2021 at a cost
of ` 8,00,000. Salary of driver amounting to ` 10,000 per month was met by the employer
only. Upon retirement, he gave the car back to the employer.
You are required to compute the taxable salary of Mr. Rohan for A.Y.2023 -24 assuming
that he neither claims any relief under section 89 nor does he opt to pay tax under section
115BAC. (7 Marks)
Answer
(a) Computation of total income and tax payable of Mr. Bhagat for A.Y.2023 -24
(under the regular provisions of the Income-tax Act, 1961)
Particulars ` `
Profits and gains of business or profession
Profit from unit in SEZ 36,00,000
Profit from operation of hospital 90,00,000
Less: Deduction u/s 35AD 50,00,000
In this case, since the capital expenditure of ` 50
lakhs (i.e., ` 65 lakhs – ` 10 lakhs, being expenditure
on acquisition of land) has been incurred in the
F.Y.2021-22 and capitalized in the books of account
on 1.4.2022, being the date when the hospital

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 14 INTERMEDIATE EXAMINATION: MAY, 2023

became operational, the said amount would be

eligible for deduction under section 35AD.
Business income from hospital chargeable to tax 40,00,000
Gross Total Income 76,00,000
Less: Deduction u/s 10AA 13,50,000
Export turnover of
SEZ unit
Profit of SEZ unit x -------------------------- x 50%
Total turnover of SEZ
unit

` 75,00,000
= ` 36,00,000 x --------------------- x 50%
` 1,00,00,000

= ` 27,00,000 x 50% = ` 13,50,000

Deduction would be 50% of eligible profits, since

P.Y.2022-23 is the 6 th year of operation
Total Income 62,50,000
Computation of tax payable (under the regular provisions of the `
Act)
Tax on ` 62,50,000 [` 1,12,500 plus 30% of ` 52,50,000] 16,87,500
Add: Surcharge @10%, since total income exceeds ` 50 lakhs but
does not exceed ` 1 crore 1,68,750
18,56,250
Add: Health and Education cess@4% 74,250
Total tax payable 19,30,500
Computation of adjusted total income of Mr. Bhagat for levy of Alternate
Minimum Tax
`
Total Income (computed above as per regular provisions of 62,50,000
income tax)
Add: Deduction under section 10AA 13,50,000
76,00,000

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 PAPER – 4 : TAXATION 15

Add: Deduction under section 35AD 50,00,000

Less: Depreciation under section 32
On building @10% of ` 50 lakhs 5,00,000 45,00,000
Adjusted Total Income 1,21,00,000
Alternate Minimum Tax@18.5% 22,38,500
Add: Surcharge@15% (since adjusted total income 3,35,775
> ` 1 crore but does not exceed ` 2 crores)
25,74,275
Add: Health and education cess@4% 1,02,971
26,77,246
Tax liability u/s 115JC (rounded off) 26,77,250
Since the regular income-tax payable is less than the
alternate minimum tax payable, the adjusted total
income shall be deemed to be the total income and
tax is leviable @18.5% thereof plus surcharge@15%
and cess@4%. Therefore, tax payable as per section
115JC is ` 26,77,250.
AMT Credit to be carried forward under section
115JEE
Tax liability under section 115JC 26,77,250
Less: Tax liability under the regular provisions of the 19,30,500
Income-tax Act, 1961
7,46,750
(b) Computation of taxable salary of Mr. Rohan for A.Y. 2023-24
Particulars `
Basic Salary ` 25,000 x 12 3,00,000
Dearness Allowance (50% of basic salary) 1,50,000
Gratuity [` 7,50,000 – ` 6,05,769] 1,44,231
Less: Exempt under section 10(10) - Least of the `
following:
(i) Notified limit 20,00,000
(ii) Actual gratuity received 7,50,000

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 16 INTERMEDIATE EXAMINATION: MAY, 2023

(iii) 15/26 x last drawn salary x no. of 6,05,769

completed years of services or part in
excess of 6 months [15/26 x 37,500 4 x 28]
Leave encashment [` 3,25,000 – ` 1,75,000] 1,50,000
Less: Exempt under section 10(10AA) - Least of the
following:
(iv) Notified limit 3,00,000
(v) Actual leave salary received 3,25,000
(vi) 10 months x ` 25,000 2,50,000
(vii) Cash equivalent of leave to his credit 1,75,000
[` 25,000 x 210/30]
Crockery set [not a perquisite, since value of gift does -
not exceed ` 5,000]
Perquisite value of car [Driver’s salary met by employer 2,00,000
` 1,20,000 (i.e., ` 10,000 x 12) + ` 80,000 (10% of
` 8,00,000), being normal wear and tear on car]
Gross Salary 9,44,231
Less: Standard deduction u/s 16(ia) 50,000
Taxable Salary 8,94,231

Question 4
(a) Mr. Chaman who is 50 years old and his wife Mrs. Chaman who in 48 years old furnish the
following information (all the amount of incomes/gains/losses are computed as per the
provisions of Income-tax Act):
(i) Mr. Chaman's salary income - ` 11,00,000
(i) Mrs. Chaman's income from Kathak performances - ` 2,50,000. She is a professional
Kathak dancer and pursue dancing as her profession.
(iii) Mrs. Chaman earned long-term capital gains of ` 5,50,000 from sale of shares.
(iv) Mrs. Chaman gifted ` 2,00,000 to Mr. Chaman out of her Stridhan on 1.4.2023,
Mr. Chaman invested the entire amount in stock market but suffered a short -term
capital loss of ` 5,10,000

4 Since gratuity is received under the Payment of Gratuity Act, both basic salary and dearness allowance has
to be considered for computation of this limit, even though dearness allowance does not form part of retirement
benefits.

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 PAPER – 4 : TAXATION 17

(v) Miss Naina, their minor daughter, earned ` 3,56,000 by performing in various quiz
competitions held online during the year 2022-23. She kept that amount in savings
bank account and earned interest of ` 15,000 during the year 2022-23.
(vi) Master Neelabh, their minor son earned ` 35,000 from fixed deposit which was made
out of the cash he received on his birthday from his friends and family. Neelabh
suffers from disability as mentioned under section 80U. The medical certificate shows
a disability of upto 75%.
Compute the total income in the hands of Mr. and Mrs. Chaman and their minor children
for the Assessment Year 2023-24. Ignore section 115BAC pertaining to alternative tax
regime. (6 Marks)
(b) Mr. Ray, a resident individual, aged 37 years gives the following information with respect
to various loans taken by him from scheduled banks for various purposes-
(i) A housing loan of ` 36,00,000/- taken on 15 th March, 2022 for the purchase of a house
to be used for self-residence at a cost of ` 47,00,000/-. The stamp duty value of the
house was ` 42,00,000/- at the time of purchase. Amount of re-payment of loan during
P.Y.2022-23 was:
(A) towards principal - ` 1,25,000/-
(B) towards interest - ` 3,65,000/-
This is the first and only residential house owned by Mr. Ray.
(ii) A vehicle loan of ` 16,00,000/- taken on 31 st October, 2021 for the purchase of electric
vehicle for personal use. Amount of re-payment of loan during P.Y.2022-23 was:
(A) towards principal - ` 75,000/-
(B) towards interest - ` 1,90,000/-
Besides these loans, he has also paid a sum of ` 15,000 to a political party as contribution.
The entire amount was paid in cash.
You are required to compute the amount of deduction(s) available to Mr. Ray under various
provisions of Income-tax Act for A.Y.2023-24 so that he gets the maximum benefits
assuming that he does not opt to pay tax under section 115BAC. (4 Marks)
(c) What is the time limit within which an updated return can be filed? Also enumerate the
circumstances in which updated return cannot be furnished.
OR
A person other than a company or a firm who is otherwise not required to furnish the return
of income, needs to furnish return of income provided they fulfil certain c onditions
prescribed. Enumerate. (4 Marks)

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 18 INTERMEDIATE EXAMINATION: MAY, 2023

Answer
(a) Computation of total income of Mr. Chaman, Mrs. Chaman and their
minor children for the A.Y.2023-24
Particulars Mr. Mrs. Naina, Neelabh,
Chaman Chaman minor minor
daughter son
` ` ` `
Income under the head “Salaries”
Salaries (computed) 11,00,000
Profits and gains from business
or profession
Income from Kathak performances 2,50,000
Capital Gains
Long term capital gains from sale of 5,50,000
shares
Less: Set off of short-term capital 2,00,000
loss from long term capital gain
[Short term capital loss to the extent
of ` 2 lakhs would be included in the
income of Mrs. Chaman, since the
shares are purchased by
Mr. Chaman from the amount of ` 2
lakhs gifted by Mrs. Chaman out of
her Stridhan. Clubbing provisions
would be attracted even if it is a loss
and not income] [Refer Note 1 and
2 below]
The balance short-term capital loss
of ` 3,10,000 has to be carried
forward by Mr. Chaman, since it
cannot be set-off against salary
income.
3,50,000
Income [before considering 11,00,000 6,00,000
income of minor son and minor
daughter]
Income of Naina, minor daughter, 3,56,000
from performances in various quiz
competitions would not be included
in the hands of either parent, since

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 PAPER – 4 : TAXATION 19

such income arises from her own 13,500

skills/talent.
However, interest of ` 15,000 on
saving bank account [after providing
for deduction of ` 1,500, being
exempt under section 10(32)] is to
be included in the hands of
Mr. Chaman, since his income is
higher than that of his wife
[` 15,000 -` 1,500]5
Income of Neelabh, minor son
suffering from disability u/s 80U,
from fixed deposits would not be
included in the income of parent but 35,000
would be taxable in his hands.
Gross Total Income 11,13,500 6,00,000 3,56,000 35,000
Less: Deductions under Chapter
VI-A
- Under section 80TTA 10,000
In respect of interest on saving
bank account to the extent of
- Under section 80U 35,000
Flat deduction of ` 75,000 to a
person with disability. However,
deduction would be restricted to
gross total income
Total Income 11,03,500 6,00,000 3,56,000 Nil
Note – (1) The question mentions that Mrs. Chaman gifted ` 2 lakh to Mr. Chaman out of
her Stridhan on 1.4.2023 and that Mr. Chaman invested the entire amount in stock market
but suffered a short-term capital loss of ` 5,10,000. It is not possible to invest ` 2 lakhs
and incur short-term capital loss of ` 5.10 lakhs. Accordingly, in the above solution, it has
been assumed that the remaining ` 3,10,000 is invested by Mr. Chaman and hence the
same would be a short-term capital loss to be carried forward by him.
Due to the use of the words “invested the entire amount in the stock market” in the question,
it is possible to take a view that the entire capital loss of ` 5,10,000 has to be set off against
long-term capital gains of ` 5,50,000 in the hands of Mrs. Chaman. In which case the total
income of Mrs. Chaman would be ` 2,90,000 instead of ` 6,00,000. Also, there would be
no short-term capital loss in the hands of Mr. Chaman.

5 Assumed that this is the first year of clubbing

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 20 INTERMEDIATE EXAMINATION: MAY, 2023

Since the relevant assessment year for May 2023 examination is A.Y. 2023 -24,
accordingly, the relevant previous year is P.Y. 2022-23. The above solution has been
worked out considering the date of gift as 1.4.2022.
(2) Item (iv) mentions that the gift was made by Mrs. Chaman to Mr. Chaman on 1.4.2023,
which falls outside the P.Y. 2022-23. Since the date of gift has been mentioned as 1.4.2023
in the question, as per the plain reading, such short-term capital loss cannot be set-off
against long-term capital gains of ` 5,50,000. In such a case, the total income of
Mr. Chaman would be ` 8,00,000.
(b) Computation of amount of deductions available to Mr. Ray for A.Y. 2023-24
Amount (`)
(i) Deduction allowable while computing income under
the head “Income from house property”
Deduction under section 24(b) for interest on loan of 2,00,000
` 3,65,000 in respect of self-occupied property restricted to
(ii) Deduction under Chapter VI-A from Gross Total Income
Deduction under section 80C
For repayment of loan of ` 1,25,000 to bank 1,25,000
Deduction under section 80EEA
Since stamp duty value does not exceed ` 45 lakhs and
Mr. Ray does not own any residential house, he is eligible
for deduction of upto ` 1,50,000 in respect of such interest
on loan since loan is sanctioned between 1.4.2019 and
31.3.2022.
` 3,65,000 – ` 2,00,000 [claimed as deduction u/s 24(b)] =
` 1,65,000 restricted to ` 1,50,000, being the maximum
permissible deduction 1,50,000
Deduction under section 80EEB
Deduction for interest on loan for purchase of electric
vehicle of ` 1,90,000 restricted to ` 1,50,000, being the
maximum permissible deduction, since loan is sanctioned
between 1.4.2019 and 31.3.2023. 1,50,000
No deduction in respect of principal repayment of loan for
purchase of electric vehicle is allowable
Deduction under section 80GGC
Contribution of ` 15,000 to political party not allowable Nil
since the sum is paid in cash
Deduction under Chapter VI-A from Gross Total Income 4,25,000

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 PAPER – 4 : TAXATION 21

(c) [First Alternative]

Any person may furnish an updated return of his income or the income of any other person
in respect of which he is assessable, for the previous year relevant to the assessment year
at any time within 24 months from the end of the relevant assessment year.
Circumstances in which updated return cannot be furnished
No updated return can be furnished by any person for the relevant assessment year, where
(a) an updated return has been furnished by him for the relevant assessment year
(b) any proceeding for assessment or reassessment or recomputation or revision of
income is pending or has been completed for the relevant assessment year in his
case;
(c) he is such person or belongs to such class of persons, as may be notified by the
CBDT.
(d) an updated return is a loss return
(e) the updated return has the effect of decreasing the total tax liability determined on
the basis of return furnished under section 139(1)/(4)/(5) / original or revised return
(f) the updated return results in refund or increases the refund due on the basis of return
furnished under section 139(1)/(4)/(5) / original or revised return.
Note – Any three of the above circumstances can be mentioned.
(c) [Second Alternative]
A person, other than a company or a firm, who is not required to furnish a return under
section 139(1), has to furnish their return of income on or before the due date if they fulfill
any of the following conditions -
(i) if his total sales, turnover or gross receipts, as the case may be, in the business
> ` 60 lakhs during the previous year; or
(ii) if his total gross receipts in profession > ` 10 lakhs during the previous year; or
(iii) if the aggregate of TDS and TCS during the previous year, in the case of the person,
is ` 25,000 or more; or
However, a resident individual who is of the age of 60 years or more, at any time
during the relevant previous year would be required to file return of income only, if
the aggregate of TDS and TCS during the previous year, in his case, is ` 50,000 or
more.
(iv) the deposit in one or more savings bank account of the person, in aggregate , is ` 50
lakhs or more during the previous year

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 22 INTERMEDIATE EXAMINATION: MAY, 2023

SECTION B: INDIRECT TAXES

1. Section B comprises of questions from 5-8. In Section B, answer question no. 5 which is
compulsory and any two questions from question nos. 6-8.
2. Working notes should form part of the answer.
3. All questions in Section B should be answered on the basis of position of GST law as
amended by Finance Act, 2022 and the significant notifications/ circulars issued upto
31st October, 2022.

Question 5
Jino Enterprises, a partnership firm is a regular taxable person registered in Guwahati, Assam
and is engaged in supply of Air conditioners and its accessories as well as air conditioned
repairing services. Details of their various activities for the month of October 2022 are as follows:
(i) Intra State supply of Air conditioner to customers in Assam. Freight is separately charged
in invoices for delivery of goods at customer's doorstep.
`
Value of goods 4,00,000
Value of freight charges charged separately in above invoices. 1,00,000
(ii) Intra State supply of repairing services wherein apart from charging service charges, cost
of parts/ spares provided to customers is also charged and consideration for the same is
separately mentioned in the invoices.
`
Value of services component of invoices 3,00,000
Value of parts / spares component in invoices 50,000

(iii) In order to enhance their sales and to clear the stock of old models of air- conditioner, Jino
Enterprises made combo offers to customers wherein, if a customer purchases an
Air-conditioner along with a stabilizer, the same is offered at a combo price of ` 20,000 as
against the original price of ` 30,000 (Air-conditioner ` 22,000 & stabilizer ` 8,000) if these
are purchased separately. During October, 2022, Jino Enterprises had made inter-State
supply of 10 numbers of such combo products.
(iv) Purchased business class air tickets for intra State travel from Guwahati Airport, Assam to
Dibrugarh Airport, Assam for its executive employees relating to business of the concern.
Basic air fare was ` 40,000 and airlines charges GST @ 2.5% CGST, SGST each on basic
freight, in case the same is applicable.

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 PAPER – 4 : TAXATION 23

Additional Information:
(a) All the figures mentioned above are exclusive of taxes.
(b) In respect of few of the invoices relating to F.Y. 2021-2022, involving ITC of CGST
` 20,000, SGST of ` 20,000, IGST ` 80,000 was not taken earlier. Jino Enterprises
now want to avail credit in respect of such invoices in the current month.
(c) The rates of GST applicable on various supplies are as follows:
Nature of Supply CGST SGST IGST
Air-Conditioner, Parts and accessories (Except 6% 6% 12%
Stabilizers)
Services 9% 9% 18%
Stabilizers 9% 9% 18%
Freight 6% 6% 12%
Calculate the amount of minimum CGST, SGST & IGST tax payable in cash by Jino Enterprises
for the month of October, 2022.
Note: Working Notes (legal provisions) should form part of your answer. (8 Marks)
Answer
Computation of minimum CGST, SGST and IGST payable in cash by Jino Enterprises for
the month of October, 2022
Particulars Value CGST (`) SGST (`) IGST
(`) (`)
Intra-State supply of air-conditioners 5,00,000 30,000 30,000
[Since goods are agreed to be delivered at [4,00,000 [5,00,000 [5,00,000
customer’s doorsteps, supply of air- + 1,00,000] × 6%] × 6%]
conditioners along with transportation thereof
is a composite supply which is treated as the
supply of the principal supply (viz. air-
conditioners). Accordingly, rate of principal
supply, i.e. air-conditioners will be charged.]
Intra-State supply of [Since parts/ spares 3,00,000 27,000 27,000
repairing services 1 and repair services are [3,00,000 [3,00,000
not naturally bundled, × 9%] × 9%]
Intra-State supply they are taxable 50,000 3,000 3,000
of parts / spares separately at the [50,000 [50,000
applicable rates.] × 6%] × 6%]

1
Based on the view taken in Circular No. 47/21/2018 GST dated 08.06.2018. However, it is also possible
to consider the supply of repairing services along with parts/spares as a composite supply .

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 24 INTERMEDIATE EXAMINATION: MAY, 2023

Inter-State supply of 10 combos of air- 2,00,000 36,000

conditioners and stabilizers [20,000 [2,00,000
[Since supplies are not naturally bundled and × 10] × 18%]
a single price is being charged, it is a
mixed supply. It is treated as supply of that
particular supply which attracts highest tax
rate(i.e., stabilizers).]
Total output tax 60,000 60,000 36,000
Less: Input Tax Credit [Refer Working Note (36,000)
below] (22,000) (22,000) (IGST)
[IGST credit is first utilized for payment of (IGST) (IGST)
IGST liability. Remaining IGST credit has (21,000) (21,000)
been utilised for payment of CGST and SGST (CGST) (SGST)
in such proportion to keep the liability at its
minimum. After exhausting IGST credit,
CGST and SGST credits have been utilized.
CGST credit is utilized for payment of CGST
and SGST credit is utilised for the payment of
SGST. ITC of CGST cannot be utilized for
payment of SGST and vice versa.]
Minimum net GST payable in cash 17,000 17,000 Nil
Working Note: Computation of ITC available
Particulars CGST (`) SGST (`) IGST (`)
Purchase of business class air tickets for travel from 1,000 1,000
Assam [40,000 [40,000
[Not exempt, since air travel embarking from Assam × 2.5%] × 2.5%]
is not being undertaken in economy class. Further,
ITC is available since service is used in the
course/furtherance of business.]
Invoices relating to FY 2021-222 20,000 20,000 80,000
[ITC in respect of any invoice can be taken upto
30th November following the end of FY to which such
invoice relates or furnishing of the relevant annual
return, whichever is earlier.]
Total ITC available 21,000 21,000 80,000

2It has been most logically assumed that the annual return for the FY 2021-22 has not yet been furnished.

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Question 6
(a) Mr. Jayesh, a registered supplier of Mumbai, received the following amounts in respect of
the various activities undertaken by him during the month of October, 2022.
S. No Particulars Amount (`)
(i) Commission received as a recovery agent from a Non-Banking 80,000
Finance Company (NBFC)
(ii) Actionable claim received from normal business debtors 10,50,000
(iii) Amount received from ABC Ltd. for performance of classical 1,74,500
dance in one program.
(iv) Business assets (old computers) given to a friend free of cost, No amount
the market value of all the computers was ` 51,000. Charged
No input tax credit has been availed on such computers when
used for business.
(v) Consideration received for one month rent from a registered 15,200
individual person for renting of residential dwelling for use as
residence.
Details of Input services:
S. No. Particulars Amount (`)
Paid to an unregistered Goods Transport agency for various 15,100
consignments of transportation of goods by road.
(Each individual consignment in a single carriage was of less
than ` 1,450.)
Notes:
(i) All the amount stated above in both the tables are exclusive of GST, wherever
applicable.
(ii) Aggregate turnover of Mr. Jayesh in previous year was ` 42,00,000.
You are required to compute Gross value of supplies, on which GST to be paid by
Mr. Jayesh for the month of October, 2022. (6 Marks)
(b) Mr. Shyam Das was admitted to Suraksha Hospital in Mumbai for 2 days in relation to
diagnosis of removal of stones from his kidney. For the said services, Surkasha hospital
charged following from Mr. Das:
(i) Room rent ` 7,000 per day for 2 days.
(ii) Operation theatre charges ` 5,000
(iii) Doctors Consultation Charges ` 8,000

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 26 INTERMEDIATE EXAMINATION: MAY, 2023

(iv) Other services ` 4,000

In each of the above scenario explain whether Suraksha Hospital should levy GST or not
in line with the relevant provisions of the GST laws. (4 Marks)
Answer
(a) Computation of gross value of taxable supply on which GST is to be paid by
Mr. Jayesh
Particulars Amount (`)
Commission received as a recovery agent from Non-Banking Financial -
Company
[Tax is payable by NBFC under reverse charge.]
Actionable claim received from normal business debtors -
[No tax is payable as actionable claims other than lottery, betting and
gambling are covered under Schedule III, i.e. they are neither supply of
goods nor supply of services.]
Amount received from ABC Ltd. for performance of classical dance 1,74,500
[Taxable since consideration for classical dance performance exceeds
` 1,50,000.]
Business assets given free of cost -
[Not a supply as it is made without consideration and not covered in
Schedule I because ITC is not availed on the same.]
Rent from registered individual person -
[Tax is payable by the registered individual person under reverse
charge3]
Services from unregistered GTA 15,100
[Tax on services provided by unregistered GTA is payable under reverse
charge by Mr. Jayesh being a registered person.]
Gross value of taxable supply on which GST is to be paid by 1,89,600
Mr. Jayesh
(b) Health care services by a clinical establishment are exempt from GST.
However, services provided by a clinical establishment by way of providing room having
room charges exceeding ` 5,000 per day to a person receiving health care services are
not exempt.
In view of the same, only the room rent of ` 14,000 (` 7,000 per day × 2 days) is liable to
GST.

3 Based on the position of law as existing on 31.10.2022.

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 PAPER – 4 : TAXATION 27

Other than room rent, all other nature of services provided by Suraksha Hospital are
exempt from GST.
Question 7
(a) Mr. Manik provides the following information regarding his tax & other liabilities under GST
law as per Electronic Liability Register:
Sr. No. Particulars Amount (`)
1. Tax due for the month of May 25,000
2. Interest due for the month of May 2,000
3. Penalty due for the month of May 3,000
4 Tax due for the month of June 35,000
5. Liability arising out of demand notice u/s 73 48,000
Mr. Manik wants to clear his liability of demand notice u/s 73 first.
Discuss the provision of order of discharge of GST liability u/s 49 (8) of the CGST Act &
advice to Mr. Manik. (5 Marks)
(b) (i) Mr. Sumit is a registered dealer in the state of Punjab. In the month of May, he decides
to apply for QRMP scheme. As he wants to switch to QRMP scheme, he had not filed
his returns for the months of May and June.
Please guide to Mr. Sumit regarding the following:
(A) Conditions and restrictions of QRMP scheme.
(B) Manner of exercising option of QRMP scheme. (3 Marks)
(ii) When goods are transferred by principal to job worker, there is no need to issue
e-way bill. Comment on the validity of the above statement with reference to GST
Laws. (2 Marks)
Answer
(a) The order of discharge of GST liability under section 49(8) of the CGST Act is as under:
(i) self-assessed tax, interest, penalty, fee or any other amount related to returns of the
previous tax periods.
(ii) self-assessed tax, interest, penalty, fee or any other amount related to returns of the
current tax period.
(iii) any other amount payable including demand determined under section 73 or section 74,
In view of the above provisions, Mr. Manik cannot clear his liability of demand notice
u/s 73 first.

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 28 INTERMEDIATE EXAMINATION: MAY, 2023

The order of discharge of liability of Mr. Manik will be as under:

1. Tax, interest and penalty for the month of May, ` 30,000
2. Tax due for the month of June, ` 35,000
3. Liability arising out of demand notice u/s 73, ` 48,000
(b) (i) (A) Conditions and restrictions of QRMP scheme
Mr. Sumit has to fulfil the following conditions and restrictions for opting for
QRMP scheme:
• His aggregate annual turnover (PAN based) is up to ` 5 crore in the
preceding financial year.
• He has furnished the return for the preceding month, as due on the date of
exercising such option.
• He is not required to exercise the option every quarter.
(B) Manner of exercising option of QRMP scheme
Registered person – Mr. Sumit - intending to opt for QRMP scheme for any
quarter should indicate his preference for furnishing of return on a quarterly
basis from 1st day of the 2 nd month of the preceding quarter till the last day of
the 1st month of the quarter for which the option is being exercised.
(ii) The said statement is not valid.
When goods are transferred by principal to job worker, e-way bill is required to be
mandatorily issued:
• in case of intra-State transfer, if consignment value exceeds ` 50,000, and
• in case of inter-State transfer, irrespective of the value of the consignment.
Question 8
(a) (i) Who are not eligible to opt for composition scheme for goods under GST Laws?
(5 Marks)
(ii) GTA services provided to an unregistered person (including unregistered casual
taxable person) are exempt from GST by virtue of Entry 21 A of GST Laws. Discuss
the validity of above statement.
OR
List any 5 (Five) activities/transactions specified under Schedule III of the CGST Act, 2017
which shall be neither treated as supply of goods nor as supply of services. Detailed
explanations is not required. (5 Marks)

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 PAPER – 4 : TAXATION 29

(b) “Rule 86A of the CGST Rules, 2017 provides that in certain specified circum stances,
Commissioner on the basis of reasonable belief may not allow debit of an amount
equivalent to such credit in electronic credit ledger.”
State the grounds (as guided by CBIC) on which the reasons for such belief must be based
on. (5 Marks)
Answer
(a) (i) The registered person who is not eligible for composition scheme for goods under
GST law are as under:
(i) Supplier engaged in making any supply of goods or services which are not
leviable to tax.
(ii) Supplier engaged in making any inter-State outward supplies of goods or
services.
(iii) Person supplying any goods or services through an electronic commerce
operator who is required to collect tax at source (under section 52).
(iv) Manufacturer of ice cream, panmasala, tobacco, aerated waters, fly ash bricks;
fly ash aggregate, fly ash blocks, bricks of fossil meals or similar siliceous
earths, building bricks, earthen or roofing tiles.
(v) Supplier who is either a casual taxable person or a non-resident taxable person
(vi) Supplier of services exceeding an amount which is higher of 10% of the turnover
in a State/U.T. in the preceding financial year or ` 5 lakh.
(ii) The said statement is invalid.
Services provided by a GTA to an unregistered person, including an unregistered
casual taxable person are exempt except when provided to a:
(a) factory
(b) society
(c) co-operative society
(d) body corporate
(e) partnership firm
(f) registered casual taxable person
(a) Alternative
Activities or transactions which shall be treated neither as a supply of goods nor a supply
of services are as under:-
(1) Services by an employee to the employer in the course of or in relation to his
employment.

© The Institute of Chartered Accountants of India

 30 INTERMEDIATE EXAMINATION: MAY, 2023

(2) Services by any court or Tribunal established under any law for the time being in
force.
(3) Functions performed by the Members of Parliament, Members of State Legislature,
Members of Panchayats, Members of Municipalities and Members of other local
authorities.
(4) Duties performed by any person who holds any post in pursuance of the provisions
of the Constitution in that capacity.
(5) Duties performed by any person as a Chairperson or a Member or a Director in a
body established by the Central Government or a State Government or local authority
and who is not deemed as an employee before the commencement of this clause.
(6) Services of funeral, burial, crematorium or mortuary including transportation of the
deceased.
(7) Sale of land and, subject to paragraph 5(b) of Schedule II, sale of building . (i.e. in
case, where entire consideration for sale of building received after issuance of
completion certificate or after its first occupation, whichever is earlier).
(8) Actionable claims, other than lottery, betting and gambling.
(9) Supply of goods from a place in the non-taxable territory to another place in the
non-taxable territory without such goods entering into India (OR) Merchant Trading /
High-sea Sales
(10) Supply of warehoused goods to any person before clearance for home consumption.
(11) Supply of goods by the consignee to any other person, by endorsement of documents
of title to the goods, after the goods have been dispatched from the port of origin
located outside India but before clearance for home consumption.
(b) The reasons for such belief must be based on one or more of the following grounds:
(1) The credit is availed by the registered person on the invoices/debit note s issued by a
supplier, who is found to be non-existent or is found not to be conducting any business
from the place declared in registration.
(2) The credit is availed by the registered person on invoices/debit notes, without actually
receiving any goods and/or services.
(3) The credit is availed by the registered person on invoices/debit notes, the tax in
respect of which has not been paid to the Government.
(4) The registered person claiming the credit is found to be non-existent or is found not
to be conducting any business from the place declared in registration.
(5) The credit is availed by the registered person without having any invoice/debit note
or any other valid document for it.

© The Institute of Chartered Accountants of India