REVISION TEST PAPER

FINAL EXAMINATION

Levy and collection of (ii) Rate of tax prescribed for supply of

CGST and IGST – services*
Application of CGST/ (iii) Exemptions for supply of goods
IGST law; Concept of (iv) Value of supply in cases where
supply, inter-State Kerala Flood Cess is applicable.
supply, intra-State
(v) Manner of determination of input tax
supply, supplies in
credit in respect of inputs, input
territorial waters;
services and capital goods and
Charge of tax
reversal thereof in respect of real
including reverse
estate projects
charge; Exemption
(vi) Manner of reversal of credit of
from tax; Place of
additional duty of customs in respect
supply; Time of
of Gold dore bar
Supply; Value of
supply; Input tax
credit; Computation
of GST liability
(xii) Other provisions Transitional Provisions

*Rates specified for computing the tax payable under composition levy
are included in the syllabus.
Note: In the above table, in respect of the topics of the syllabus specified in
column (2) the related exclusion is given in column (3). Where an exclusion
has been so specified in any topic of the syllabus, the provisions
corresponding to such exclusions, covered in other topic(s) forming part of
the syllabus, shall also be excluded.
It is important to note that the entire content included in the Study
Material (except where it is expressly mentioned that the content is not
relevant for the examination) shall ALONE be relevant for the said
examination.

Paper 6: Integrated Business Solutions

This paper is a multi-disciplinary case study-based paper involving application
of concepts and provisions dealt with in Papers 1 to 5 at the Final level along

112 MAY 2025 EXAMINATION

REVISION TEST PAPER
FINAL EXAMINATION

with Self-paced Modules Set A & B. List of the papers at the Final level and
Self-Paced Online Modules is as under –
Final Course
Paper 1 Financial Reporting
Paper 2 Advanced Financial Management
Paper 3 Advanced Auditing, Assurance and Professional Ethics
Paper 4 Direct Tax Laws & International Taxation
Paper 5 Indirect Tax Laws
Self-Paced Online Modules
*SET A Corporate and Economic Laws
SET B Strategic Cost & Performance Management

Note: The applicability/non-applicability of Standards/ Guidance Notes/

Legislative Amendments etc. for Paper 6: Integrated Business Solutions for
May, 2025 Examination would be same as applicable for each of the above
individual papers.
*The Study Material has to be read along with the Relevant Amendments
covering notifications and circulars issued upto 31.10.2024 for May 2025
examination

113 MAY 2025 EXAMINATION

 FINAL COURSE
GROUP – II

REVISION TEST PAPERS

MAY, 2025

BOARD OF STUDIES (ACADEMIC)

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
New Delhi
 The Institute of Chartered Accountants of India

All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form, or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without prior permission,
in writing, from the publisher.

Edition : March, 2025

Website : [Link]

Department/Committee : Board of Studies (Academic)

E-mail : bosnoida@[Link]

Price :

ISBN No. :

Published by : The Publication & CDS Directorate on behalf

of The Institute of Chartered Accountants of
India, ICAI Bhawan, Post Box No. 7100,
Indraprastha Marg, New Delhi- 110 002,
India

Typeset and designed at Board of Studies.

Printed by :
 Contents
Page Nos.

Objective & Approach .............................................................................................. i – viii

Objective of Revision Test Paper ........................................................................................ i

Planning & Preparing for Examination ........................................................................... ii

Subject-wise Applicability ................................................................................................... iii

Paper-wise RTPs

Paper 4: Direct Tax Laws & International Taxation ........................................ 1 – 36

Paper 5: Indirect Tax Laws .................................................................................. 37 – 65

Paper 6: Integrated Business Solutions ........................................................ 66 – 109

Applicability of Standards/Guidance Notes/Legislative Amendments etc.

for May, 2025 Final Examination ................................................................. 110 - 113
 REVISION TEST PAPER, MAY, 2025 – OBJECTIVE & APPROACH
(Students are advised to go through the following paragraphs carefully to
derive maximum benefit out of this RTP)
I. Objective of Revision Test Paper
Revision Test Papers are one among the many educational inputs
provided by the Board of Studies (Academic) to its students. Popularly
referred to as RTP by the students, it is one of the very old publications
of the BOS whose significance and relevance from the examination
perspective has stood the test of time.
The primary objectives of the RTP are:
• To help students get an insight of their preparedness for the
forthcoming examination;
• To update them on the latest developments relevant for the
forthcoming examination in select subjects;
• To enhance the confidence level of the students adequately.
Students must bear in mind that the RTP contains a variety of questions
based on different topics of the syllabi and thus a comprehensive study
of the entire syllabus is a pre-requisite before answering the questions
of the RTP. In other words, in order to derive maximum benefit out of
the RTPs, it is advised that before proceeding to solve the questions
given in the RTP, students ought to have thoroughly read the Study
Materials and Statutory Update/Judicial Update, wherever applicable.
The topics on which the questions are set herein have been carefully
selected and meticulous attention has been paid in framing different
types of questions. Detailed answers are provided to enable the
students to do a self-assessment and have a focused approach for
effective preparation.
Live Learning Classes by renowned subject experts conducted free of
charge in virtual mode for the students of Foundation, Intermediate and
Final levels provide the students much required support in preparing for
their exams conveniently at home as these classes can be accessed live
or viewed later as recorded lectures through hand-held devices such as
smart phones, laptops, I-pads, tablets, etc. anytime anywhere. Further,
REVISION TEST PAPER FINAL EXAMINATION

students are advised to attempt the Multiple-Choice Questions (MCQs)

at MCQ Paper Practice Portal which is a holistic platform for self-
assessment within the stipulated timeframe.
Students are welcome to send their suggestions for fine tuning the RTP
to the Joint Director, Board of Studies, The Institute of Chartered
Accountants of India, A-29, Sector-62, Noida 201309 (Uttar Pradesh).
RTP is also available on BOS Knowledge Portal at [Link]
for downloading.
II. Planning and preparing for examination
Ideally, when the RTP reaches your hand, you must have finished reading
the relevant Study Materials of all the subjects (along with the Statutory
Update in case of Paper 4 and Paper 5 and Judicial Update in Paper 4)
available at the BoS Knowledge Portal. Get a good grasp of the
concepts/ provisions/ amendments/ cases discussed therein.
After reading the Study Materials alongwith Statutory Update and
Judicial Update thoroughly, then, proceed to solve the questions given
in the RTP on your own. RTP is an effective tool to revise and refresh
the concepts and provisions discussed in the Study Material. RTPs are
provided to you to help you assess your level of preparation. Hence you
must solve the questions given therein on your own and thereafter
compare your answers with the answers given therein.
Examination tips
How well a student fares in the examination depends upon the level and
depth of his preparation. However, there are certain important points
which can help a student better his performance in the examination.
These useful tips are given below:
 Reach the examination hall well in time.
 As soon as you get the question paper, read it carefully and
thoroughly. You are given separate 15 minutes for reading the
question paper.
 Plan your time so that appropriate time is awarded for each
question.

ii MAY 2025 EXAMINATION

REVISION TEST PAPER FINAL EXAMINATION

 First impression is the last impression. The question which you can
answer in the best manner should be attempted first.
 Always attempt to do all questions. Therefore, it is important that
you must finish each question within allocated time. Keep
sometime for checking the answers as well.
 Read the question carefully more than once before starting the
answer to understand very clearly as to what is required.
 Answer all parts of a question one after the other; do not answer
different parts of the same question at different places.
 Write in a neat and legible hand-writing.
 Always be concise and write to the point and do not try to fill
pages unnecessarily.
 There must be logical expression of the answer.
 In case a question is not clear, you may state your assumptions
and then answer the question.
 Check your answers carefully and underline important points
before leaving the examination hall.
 In case of case scenario based MCQs, read the facts given in the
case attentively. Also, read each MCQ based thereon and all the
options carefully, before choosing the correct answer.
III. Subject-wise Applicability
PAPER - 4: DIRECT TAX LAWS & INTERNATIONAL TAXATION
The provisions of direct tax laws, as amended by the Finance (No. 2) Act,
2024 and significant notifications, circulars issued and other legislative
amendments made upto 31.10.2024, are relevant for May, 2025
examination. The relevant assessment year for May, 2025 examination is
A.Y.2025-26.
The November 2024 edition of the Study Material, comprising of four
modules (Modules 1 to 4), is applicable for May, 2025 Examination.
The above referred study material has to be read along with Statutory Update
given in the RTP for May, 2025 Examination, which contains the significant

iii MAY 2025 EXAMINATION

REVISION TEST PAPER FINAL EXAMINATION

notifications/circulars issued upto 31.10.2024 but not covered in the

November, 2024 edition of the Study Material, which are also relevant for May,
2025 Examination. The Judicial Update for May, 2025 examination available at
[Link] is also relevant and important
for May, 2025 examination.
You have to read the November, 2024 edition of the Study Material
along with the Statutory Update and Judicial Update for May, 2025
examination thoroughly to attain conceptual clarity and understand the
impact of amendments and interpretation of court rulings. Tables,
diagrams and flow charts have been extensively used to facilitate easy
understanding of concepts. The amendments made by the Finance (No.
2) Act, 2024 and latest notifications and circulars have been given in
italics/bold italics. Examples and Illustrations given in the Study
Material would help you understand the application of concepts. Work
out the exercise questions at the end of each chapter and then, compare
your answers with the answers given to test your level of understanding.
Finally, solve the questions given in this RTP independently and compare
the same with the answers given to assess your level of preparedness for
the examination.

PAPER – 5: INDIRECT TAX LAWS

The subject of Indirect Tax Laws at the Final level is divided into two
parts, namely, Part I: Goods and Services Tax for 80 marks and Part II:
Customs & Foreign Trade Policy (FTP) for 20 marks. For this paper, the
following are applicable for May 2025 examination:
(i) The provisions of the CGST Act, 2017 and the IGST Act, 2017 as
amended by the Finance (No. 2) Act, 2024 including significant
notifications and circulars issued and other legislative amendments
made, which have become effective up to 31.10.2024.
(ii) The provisions of the Customs Act, 1962 and the Customs Tariff
Act, 1975, as amended by the Finance (No. 2) Act, 2024 including
significant notifications and circulars issued and other legislative
amendments made, which have become effective up to 31.10.2024.

iv MAY 2025 EXAMINATION

REVISION TEST PAPER FINAL EXAMINATION

Note - The amendments made by the Annual Union Finance Acts in the
CGST Act, 2017, the IGST Act, 2017, the Customs Act, 1962 and the
Customs Tariff Act, 1975 are made effective from a date notified
subsequently. Only those amendments made by the relevant Finance Acts
which have become effective till 31.10.2024 are applicable for May 2025
examination. Thus, those amendments made by the Finance Act, 2024
and the Finance (No. 2) Act, 2024 which have become effective till
31.10.2024 are applicable for May 2025 examination.
Accordingly, amendments made by the Finance (No. 2) Act, 2024 in
sections 16, 109 and 171 of the CGST Act, 2017 which have become
effective till 31.10.2024, are applicable for May 2025 examination and
remaining amendments made by the Finance Act, 2024 and the Finance
(No. 2) Act, 2024 are not applicable for the said examination.
Further, it may be noted that amendments made by the Finance Act, 2023
in sections 9, 9A and 9C of the Customs Tariff Act, 1975 and in section 65
of the Customs Act, 1962 and insertion of new section 65A in the Customs
Act, 1962 have not become effective till 31.10.2024 and thus, are not
applicable for May 2025 examination. Also, the amendments made by the
Finance (No. 2) Act, 2019 in sections 2(4), 95, 102, 103, 104, 105 and 106
of the CGST Act, 2017 and the insertion of new sections 101A, 101B &
101C in the CGST Act, 2017, have not become effective till 31.10.2024 and
thus, are not applicable for May 2025 examination.
Further, a list of topic-wise exclusions from the syllabus has been
specified by way of “Study Guidelines for May 2025 Examination”. The
same is given as part of “Applicability of Standards/Guidance
Notes/Legislative Amendments etc. for May 2025 Final Examination”
appended at the end of this Revision Test Paper.
Students may note that November 2024 edition of the Study Material is
applicable for Final Paper 5: Indirect Tax Laws. The Study Material has been
divided into four modules for ease of handling by students. The first three
modules are on GST and the fourth module is on Customs and FTP.
The subject matter of Part I: Goods and Services Tax of the Study
Material on Indirect Tax Laws is based the provisions of the CGST Act,
2017 and the IGST Act, 2017 as amended by the Finance (No. 2) Act,

v MAY 2025 EXAMINATION

REVISION TEST PAPER FINAL EXAMINATION

2024 including significant notifications and circulars issued and other

legislative amendments made, which have become effective up to
31.10.2024.
The content discussed in Part II: Customs & FTP is based on the
provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975, as
amended by the Finance (No. 2) Act, 2024 including significant
notifications and circulars issued and other legislative amendments
made, which have become effective up to 31.10.2024. Read the case
laws given at the end of each chapter under “Significant Select Cases” in
module on customs laws.
Solve the questions given in this RTP independently and compare the
same with the answers given to assess your level of preparedness for the
examination. Detailed answers have been provided for the descriptive
questions given in this RTP to facilitate in depth understanding and
appreciation of the provisions of the indirect tax laws in problem
solving. This will help in enhancing your conceptual clarity and honing
your application and analytical skills so that you are able to approach
the examination with confidence and a positive attitude.

PAPER – 6: INTEGRATED BUSINESS SOLUTIONS

Integral to the Integrated Business Solutions (IBS) curriculum is the
‘Case Study’, a vital aspect of the CA Final Level. Here, students must
apply their knowledge gathered from the five core subjects at final
level and Self-paced Modules Set A & B. In this paper, since students
are expected to integrate the knowledge acquired in different subjects
in solving case studies.
Applicable Publications
• Study Materials of core papers of Final Papers 1, 2, 3, 4, 5
(November, 2024)
• Study Material of SPOM Set-A (April, 2023) along with
amendments available at –
[Link]
• Study Material of SPOM Set-B (October, 2023)

vi MAY 2025 EXAMINATION

REVISION TEST PAPER FINAL EXAMINATION

• IBS Case Study Digest 1 (July 2024 edition)

• Case studies are also available online at –
[Link]
Note- The above inputs may be considered along with the Study
Guidelines (for May, 2025 Examination), wherever applicable.
Manner of Assessment
The manner of assessment of this paper would be 40% by way of
MCQs and 60% in the form of Descriptive Questions in each case study
of 25 marks. The examination is open book, thereby eliminating the
need for rote learning.
RTP Case Studies
This revision test paper includes two case studies. Here's the data
tabulated case study-wise:

Case Industry Subjects Topics

Study
1 Agrochemical Financial Just in Time, SA 250, Price
Industry Reporting, Sensitivity, Section 235 of
Auditing, the Companies Act, 2013,
Corporate and Competitive Advantage,
Economic Laws, Section 2(1A) of the
Strategic Income Tax Act, 1961, IND
Management, AS 20, Sales Variances,
Strategic Cost Financial Performance
Management based on EVA

1 The Case Study Digest includes 50 case studies, many of which focus on
contemporary business models used by reputable companies across various sectors.
These sectors include the beverage industry (specifically the tea segment), e-
commerce, transportation, telecommunications, the aviation sector, food and
hospitality, the construction industry, healthcare, and the fast fashion industry.
Each case study provides an in-depth analysis of the innovative strategies and
practices driving success in these fields.

vii MAY 2025 EXAMINATION

REVISION TEST PAPER FINAL EXAMINATION

2 Diamond Financial Ind AS 24, Rule 28 of

and Reporting, CGST Rules, Life Cycle
Jewelry Indirect Tax, Costing, Decentralized
industry Auditing, Structure, SA 550, Section
Strategic 2(76)(viii) of the
Management, Companies Act,
Corporate and Regulation 2(1)(zb) of
Economic Laws, SEBI LODR) Regulations,
Strategic Cost 2015, International
Management Transfer Pricing

A Holistic Approach
Solving multidisciplinary ‘Case Study’ will enhance analytical skills and
decision-making skills of students. This holistic and integrated
approach ensures that students emerge well-equipped to tackle the
challenges presented in the constantly changing business environment.
In case students face difficulty in any subject, they can refer “Saransh”
for different subjects, wherein the concepts and provisions are explained
through diagrams, charts and tables to facilitate quick assimilation of
the significant concepts and provisions dealt with in each subject.

viii MAY 2025 EXAMINATION

 PAPER – 4:
DIRECT TAX LAWS &
INTERNATIONAL TAXATION

The provisions of direct tax laws, as amended by the Finance (No. 2) Act,
2024 and the significant notifications and circulars issued upto 31.10.2024,
are relevant for May 2025 examination. The relevant assessment year is
A.Y.2025-26. The November, 2024 edition of the Study Material contains the
provisions of direct tax laws as amended by the Finance (No. 2) Act, 2024
and notifications and circulars issued upto 31.10.2024. The said study
material has to be read along with the following Statutory Update
containing notifications and circulars issued upto 31.10.2024 but not
covered in the study material and Judicial Update for May, 2025 Examination
webhosted at [Link] .

STATUTORY UPDATE

1. Non-applicability of TDS provisions in respect of certain payments

made to specified units located in IFSC [Notification No. 28/2024
dated 7.3.2024]
In accordance with the provisions of section 197A(1F) read with
section 80LA(1A)/(2) of the Income-tax Act, 1961, the Central
Government has, vide this notification notified that no tax is required
to be deducted at source in respect of the specified payments made
by any ‘payer’ to a payee, being a Unit of International Financial
Services Centre (IFSC), as specified in the following Table:-
Table: List of payments receivable by a Unit of (IFSC)

Sl. IFSC Unit Nature of receipt Relevant TDS

No. (Payee) provisions
1. Banking Unit Interest income on External Section 195
Commercial Borrowings/ Loans
Professional fees Section 194J
REVISION TEST PAPER FINAL EXAMINATION

Referral fees Section 194H

Brokerage income Section 194H
Commission income on Section 194H
factoring and forfaiting services
2. IFSC Insurance commission Section 194D
Insurance
Intermediary
office
3. Finance Interest income on External Section
Company Commercial Borrowings /Loans 195/194A
Dividend income Section 194
Commission income on Section 194H
factoring and forfaiting services
4. Finance Unit Interest income on External Section 195/
Commercial Borrowings / 194A
Loans
Dividend income Section 194
Commission income on Section 194H
factoring and forfaiting services
5. Fund Professional fee Section 194J
Management
entity
6. Broker Dealer Dividend Section 194
7. Investment Investment advisory fee Section 194J
advisor
8. Registered Distribution fee and Section 194H
Distributor Commission fee
9. Custodian Professional fee Section 194J
Commission fee Section 194H
10. Credit rating Credit rating fee Section 194J
agency
11. Investment Investment banker fee Section 194J
banker

2 MAY 2025 EXAMINATION

 DIRECT TAX LAWS & INTERNATIONAL
REVISION TEST PAPER
TAXATION

12. Debenture Trusteeship fee Section 194J

trustee
13. International Commission income Section 194H
Trade
Finance
Service or
“ITFS”
14. FinTech Technical fee/Professional fee Section 194J
Entity Commission income Section 194H

The following conditions are required to be satisfied for non-

applicability of TDS provisions in respect of above specified payments:
The ‘payee’ has to furnish a statement-cum-declaration to the payer
containing the details of the previous years relevant to the ten
consecutive assessment years for which the ‘payee’ opts for claiming
deduction under section 80LA(1A)/(2) and
Such statement-cum-declaration has to be furnished and verified for
each previous year relevant to the ten consecutive assessment years
for which the ‘payee’ opts for claiming deduction under section
80LA(1A)/(2).
The ‘payer’ would not deduct tax on such payments made or credited
to the ‘payee’ after the date of receipt of copy of such statement-cum-
declaration from the ‘payee’; and furnish the particulars of all the
payments made to ‘payee’ on which tax has not been deducted in view
of this notification in the statement of deduction of tax at source.
The above relaxation is available to the ‘payee’ only during the said
previous years relevant to the ten consecutive assessment years as
declared by the ‘payee’ for which deduction under section 80LA is
being opted. The ‘payer’ shall be liable to deduct tax on payments as
referred above for any other year.
Note – Please refer the above notification for the purpose of definitions
of these specified IFSC units.

3 MAY 2025 EXAMINATION

 REVISION TEST PAPER FINAL EXAMINATION

2. Applicability of section 197A(1D) and section 10(15)(viii) to

interest paid by IFSC Banking Units (IBUs) [Circular No. 26/2016
dated 4.7.2016]
Section 197A provides the circumstances in which deduction of tax at
source is not required to be made under Chapter XVII of the Act.
Section 197A(1D) provides that no tax is required to be deducted by
an Offshore Banking Unit from the interest paid
- on deposit made on or after 1.4.2005 by a non-resident or a
person not ordinarily resident in India, or
- on borrowing on or after 1.4.2005 from a non-resident or a
person not ordinarily resident in India.
Section 10(15)(viii) provides that such interest will not be included in
the total income of such non-resident or a person not ordinarily
resident in India.
Offshore Banking Unit is defined in section 2(u) of the Special
Economic Zones Act, 2005 as a branch of a bank located in a Special
Economic Zone, which has obtained permission under section 23(1)(a)
of the Banking Regulation Act, 1949.
IFSC Banking Units (IBUs) are branches of Indian Banks or Foreign
Banks having presence in India, which are established in accordance
with the RBI Scheme dated 1.4.2015, in the IFSC that are set up within
the Special Economic Zones, as per section 18 of the Special Economic
Zone Act, 2005. Therefore, the IBUs fulfil the necessary criteria for
being considered Offshore Banking Units as defined in section 2(u) of
the Special Economic Zones Act, 2005.
Accordingly, the CBDT has, vide this circular, clarified that in
accordance with the provisions of section 197A(1D), tax is not required
to be deducted on interest paid by such IBUs, on deposit made on or
after 1.4.2005 by a non-resident or a person who is not ordinarily
resident in India, or on borrowings made on or after 1.4.2005 from
such persons.

4 MAY 2025 EXAMINATION

 DIRECT TAX LAWS & INTERNATIONAL
REVISION TEST PAPER
TAXATION

QUESTIONS

Case Scenario I
Mr. Devansh is an Indian citizen and person of Indian origin who is living in
the UK for the last 15 years. He comes to India every year for one month to
visit his parents. For the rest of the year, he stays in UK.
He has invested in shares of Alpha Ltd., Beta Ltd., and Delta Ltd. in
convertible foreign exchange. Alpha Ltd. and Beta Ltd. are companies
incorporated in GIFT IFSC, Gujarat, carrying on business for which it has
been approved for setting up in such a Centre in a special economic zone.
Delta Ltd. is a company incorporated in New Delhi. The dividend income of
Mr. Devansh from Alpha Ltd., Beta Ltd. and Delta Ltd. during the P.Y.
2024-25 is ` 62,500, ` 87,300 and ` 21,800, respectively. The interest
expenditure incurred by him during the P.Y.2024-25 on money borrowed for
investment in these shares is ` 12,000, ` 20,000 and ` 7,000, respectively.
Mr. Devansh has also lent foreign currency equivalent to ` 50 lakhs to
Gamma Ltd., a company located in GIFT IFSC on 1st April, 2021. The rate of
interest is 10% p.a. He has also made a deposit of foreign currency
equivalent to ` 30 lakhs in IFSC banking unit of SEZ on 1st April, 2022. The
rate of interest is 8% p.a. Dividend of ` 5,41,200 is due to be received in
January, 2025 by Gamma Ltd. from Phi Ltd., which is also a company located
in GIFT IFSC. The same was received on 28th January, 2025.
Alpha Ltd. has started availing benefit of deduction u/s 80LA(1A) from A.Y.
2023-24 while Beta Ltd. has not started availing the benefit even though it
has commenced operations on 1.4.2021. Alpha Ltd. furnished the declaration
to the payers about the claim of deduction under section 80LA(1A)/(2) for
the P.Y. 2024-25
From the information given above, choose the most appropriate answer of
MCQs 1 to 6:
1. What is the tax liability on dividend income of Mr. Devansh during the
P.Y.2024-25? Ignore surcharge and cess.
(a) ` 4,360

5 MAY 2025 EXAMINATION

 REVISION TEST PAPER FINAL EXAMINATION

(b) ` 15,522
(c) ` 17,160
(d) ` 19,340
2. The tax liability on interest income of Mr. Devansh from loan to
Gamma Ltd. for the A.Y.2025-26, ignoring surcharge, if any, and cess,
is-
(a) Nil
(b) ` 25,000
(c) ` 50,000
(d) ` 1,00,000
3. The tax liability on interest income of Mr. Devansh on deposit made
with an IFSC banking unit in SEZ for the A.Y.2025-26, ignoring
surcharge, if any, and cess, is -
(a) ` 12,000
(b) ` 24,000
(c) ` 48,000
(d) Nil
4. What is the tax liability on dividend income of Gamma Ltd. from Phi
Ltd. during the P.Y.2024-25, assuming that both companies are
primarily engaged in the business of leasing of an aircraft and have
opted for section 115BAA?
(a) ` 61,913
(b) ` 1,23,827
(c) ` 1,36,209
(d) Nil
5. Assuming that, for the purpose of this MCQ, Alpha Ltd. and Beta Ltd.
are banking units located in IFSC and both the companies are due to
receive professional fee equivalent to ` 20 lakhs each in the P.Y.
2024-25, what is the tax deductible by the payer?

6 MAY 2025 EXAMINATION

 DIRECT TAX LAWS & INTERNATIONAL
REVISION TEST PAPER
TAXATION

(a) Nil, Nil

(b) Nil, ` 2 lakhs
(c) ` 2 lakhs, Nil
(d) ` 2 lakhs, ` 2 lakhs
6. Assuming that, for the purpose of this MCQ, Alpha Ltd. is a qualifying
company engaged in shipping business, by which date can it opt for
the tonnage tax scheme, if its date of incorporation is 1.4.2022?
(a) 30.6.2022
(b) 31.3.2032
(c) 30.6.2032
(d) 30.6.2033
Case Scenario II
On 01.05.2024, ABC Ltd. (a listed co.) offered right shares in the ratio of 1:10
at a value of ` 50 per share. One of the shareholders, Mr. Sahil had 50,000
shares of ABC Ltd. on the date of offer of rights issue. He retains 30% of the
rights and renounced balance right shares in favour of his friend, Mr. Jay for
` 15 per share on 28.05.2024.
Mr. Sahil transferred 10,000 shares out of his original shares on 15.07.2024
for ` 65 per share. He had acquired these 10,000 shares at a cost of
` 2,38,000 on 21.6.2021. Further, Mr. Jay transferred the shares acquired
from Mr. Sahil for ` 80 per share on 26.02.2025.
XYZ Pvt. Ltd. bought back 80,000 shares on 14.12.2024 at a value of ` 160
per share. Such shares were issued for ` 20 per share (` 10, being the face
value and ` 10, being premium) during the F.Y. 2012-13. Such bought back
include 6,250 shares of Mr. Sahil (which he acquired on 28.5.2022 for ` 36.80
per share) and 250 shares of Mr. Rahul (which was inherited from his father).
Rahul’s father acquired these shares on 24.5.2020 for ` 10 per share. Apart
from this transaction, Mr. Rahul has income under head “Salaries” of
` 12,42,000 (computed), on which no tax is withheld by the employer.
Assume Mr. Sahil does not have any other income for the P.Y. 2024-25.
STT has been paid pertaining to the shares of ABC Ltd.

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From the information given above, choose the most appropriate answer of
MCQs 7 to 12:
7. Is XYZ Pvt Ltd. required to pay additional income-tax on buy back of
shares? If yes, what would be the amount of such additional income-
tax?
(a) No, it is not required to pay additional income-tax on buy back
of shares, since it is an unlisted company.
(b) Yes, it is required to pay ` 26,09,152 as additional income-tax on
buy back of shares.
(c) No, it is not required to pay additional income tax, since buy
back takes place on or after 1.10.2024.
(d) Yes, it is required to pay additional income tax of ` 23,29,600.
8. Compute the amount of capital gains arising in the hands of Mr. Sahil
during the P.Y. 2024-25?
(a) Long-term capital gains of ` 1,82,000 and Short-term capital
gains of ` 52,500
(b) Long-term capital gains of ` 4,12,000 and Short-term capital
gains of ` 52,500
(c) Long-term capital gains of ` 2,87,000 and Short-term capital
gains of ` 75,000
(d) Long-term capital gains of ` 57,000 and Short-term capital gains
of ` 52,500
9. Compute the amount of tax liability in the hands of Mr. Sahil for the
A.Y. 2025-26. Assume Mr. Sahil is paying tax under section 115BAC.
(a) Nil
(b) ` 68,720
(c) ` 14,120
(d) ` 66,120

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10. Compute tax liability of Mr. Jay for the A.Y. 2025-26. Assume he has
salary income of ` 4,25,000 (computed) and he has opted out of the
default tax regime.
(a) Nil
(b) ` 7,020
(c) ` 4,290
(d) ` 6,750
11. Whether the income arising on buy back of shares taxable in the hands of
Mr. Rahul? If yes, what amount, and under which head it would be taxable?
(a) Income from buy back of shares would be exempt in the hands
of Mr. Rahul by virtue of section 10(34A).
(b) ` 40,000 as deemed dividend under the head “Income from other
sources” and long-term capital loss of ` 2,500 would arise.
(c) `37,500 as long-term capital gains under the head “Capital
Gains”.
(d) ` 37,500 as deemed dividend under the head “Income from other
sources”
12. Compute total income and tax payable by Mr. Rahul for the A.Y. 2025-
26. Assume he is paying tax as per section 115BAC.
(a) Total Income – ` 12,82,000; Tax Payable – ` 96,260
(b) Taxable Income – ` 12,79,500; Tax Payable – ` 99,740
(c) Taxable Income – ` 12,82,000; Tax Payable – ` 1,00,256
(d) Taxable Income – ` 12,79,500; Tax Payable – ` 95,740
13. GlobalTech Inc., a company incorporated in the USA, has global assets
worth `50 crores and Indian assets worth `25 crores. Its turnover
during the P.Y. 2024-25 is US $ equivalent to `90 crores. Out of 10
board meetings held during F.Y. 2024-25, only 4 were held in India.
However, key management and commercial decisions for the conduct
of the company’s business as a whole were made in India at these
meetings. Innovate Ltd., an Indian company, intends to remit fees for

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technical services to GlobalTech Inc. for providing services in relation

to a project in India. Assume such fees is not paid under an agreement
approved by the Central Government.
Determine the residential status of GlobalTech Inc. for the P.Y.
2024-25. Whether tax is required to be deducted on fees for technical
services paid by Innovate Ltd. If yes, at which rate (ignore surcharge
and cess)?
(a) Non-resident; and tax is deductible @20% u/s 195.
(b) Non-resident; and tax is deductible @35% u/s 195.
(c) Resident; and tax is deductible @35% u/s 195.
(d) Resident; and tax is deductible @10% u/s 194J.
14. The Statement of Profit & Loss of Tirupati Private Ltd., a domestic
company engaged in manufacturing, shows net profit of ` 1,07,00,000
for the financial year ended on 31st March, 2025, after debit/credit of
the following items.
A. Credited to the Statement of Profit and Loss:
(i) Rent received from vacant land ` 2,55,000
(ii) Rent received (gross) from a commercial property owned
by the company ` 5,30,000 (Tax deducted by tenant
@ 10%)
(iii) Interest received on income tax refund ` 48,000
(iv) Profit on sale of plot ` 8,00,000.
(v) Dividend from ABC Inc., New York, a wholly owned
subsidiary in February, 2025 ` 6,00,000
B. Debited to the Statement of Profit and Loss:
(i) Depreciation charged to the Statement of Profit and Loss
` 11,86,000.
(ii) Donation of ` 85,000 paid to Swachh Bharat Kosh.
(iii) Actual contribution to the pension scheme of employees:
` 1,90,000

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(iv) Payment made to transporter ` 68,000 by account payee

cheque, but no tax has been deducted at source.
(Transporter is having PAN and furnished declaration that
he is covered under section 44AE and not having more
than 10 goods carriages at any time during the previous
year).
(v) Bonus to employees ` 4,48,000. However, payment was
made on 18th December, 2025.
(vi) Provision made for income-tax ` 4,20,000 (including
interest of ` 70,000 thereon)
(vii) Contribution of ` 1,00,000 to a University approved and
notified under section 35(1)(ii).
(viii) Interest of ` 1,50,000 on loan borrowed for acquiring
shares in ABC Inc., New York
Additional information:

(1) Depreciation as per the Income-tax Act, 1961 ` 18,00,000.

However, while calculating such depreciation, rate applicable to
computers has been adopted for (i) accessories like printers and
scanners, and (ii) EPABX. The written down value of these items
as on 01.04.2024 is given below:
(a) Printers and Scanners ` 3,00,000
(b) EPABX ` 5,00,000
(2) Additional depreciation on plant and machinery purchased for
` 34,00,000 on 18th November, 2024 has not been considered
while calculating depreciation as per Income-tax Act, 1961 as
above.
(3) Provision for audit fee ` 1,00,000 was made in the books for the
year ended on 31st March, 2024 without deducting tax at source.
Such fee was paid to auditors in October 2024 after deducting
tax at source under Section 194J and tax so deducted was
deposited on 12th December, 2024.

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(4) During the financial year 2023-24, the company made a

provision for an outstanding bill of ` 90,000 for purchase of raw
material. Out of such outstanding amount, the company paid
` 45,000 in cash on 20th August, 2024.
(5) During the year, the company has issued 1,00,000 equity shares
of face value of ` 10 each at premium of ` 90 each. The fair
market value is ` 60 per share at the time of issue of shares.
(6) Plot was sold in March, 2025 for ` 58,00,000 was acquired by the
company in January, 2023 for ` 50,00,000.
(7) The eligible salary and dearness allowance for the pension
scheme referred to under section 80CCD is ` 10,00,000.
(8) The company declared interim dividend @10% of share capital
being ` 5,20,000 in September, 2024.
(9) Cost Inflation Index – FY 2022-23: 331; FY 2024-25: 363
Compute total income and tax liability of Tirupati Private Limited as
per section 115BAA for the Assessment Year 2025-26 stating reasons
for treatment of each item.
15. Vatsal, Vihaan & Vayu are equal partners of VSK & Co., which was
formed w.e.f. 01.06.2024. The firm is an authorized dealer of shoes
manufactured by a reputed company. It reported Net Profit as per
profit and loss account of ` 4,50,000 after debit / credit of the
following items:
(i) Depreciation on generator and computers ` 1,10,000.
(ii) Working partners' salary ` 82,000 per month for each partner.
(iii) Interest on capital to partners @ 18% per annum. The total
interest on capital of the firm debited to profit and loss account
being ` 3,60,000.
(iv) Donation to registered political parties ` 80,000 by cash and
` 70,000 by electronic transfer.
(v) Monthly rent paid to partner Vatsal for use of his premises as
godown ` 36,000 per month and it is occupied from 01.10.2024.

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The market rent for the premises is ascertained at ` 15,000 per

month. No tax was deducted at source on the rent paid.
(vi) The firm incurred ` 5 lakhs by way of expenditure towards the
cost of gold coins awarded to customers on the first day of their
showroom inauguration. The cost of each gold coin was less than
` 10,000 and one coin was given to each buyer on that day
selected through lucky draw. No tax was deducted at source on
such gold coins given to the customers.
Additional information:
(i) Depreciation on tangible assets allowable u/s 32 ` 2,43,000.
(ii) One registered trademark was acquired on 10.07.2024 for
` 3,00,000. The firm used the trademark w.e.f. 01.12.2024 since
there was some dispute in title of the previous owner and was
cleared through court decree only in November 2024.
(iii) All the partners are working partners, and the salary and interest
are authorized by the partnership deed.
You are required to compute the total income of the firm for the A.Y.
2025-26.
16. XYZ Charitable Trust, registered under Section 12AB, derives income from
property held under trust of ` 500 lakh during the financial year 2024-25.
The trust decides to pay an amount ` 200 lakh to another trust, ABC
Educational Trust, which is also registered under Section 12AB.
I. (a) How much the amount paid by XYZ Charitable Trust will be
considered as an application of income for charitable
purposes, if such contribution is given -
(i) with a direction that the same shall be used for
general charitable purposes and not as corpus.
(ii) with a specific direction that the amount shall form
part of its corpus.
(b) Would your answer change to the above questions, if such
amount is paid out of accumulations of XYZ trust. If yes,
what other tax implications arise in its hands.

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II. Also, examine the conditions which ABC Educational trust require to
satisfy for not including the amount received from XYZ Charitable
trust with specific direction for forming part as corpus in its total
income. What other tax implications arise in the hands of ABC
Educational trust if such conditions are not satisfied.
17. Mr. Amit, an Indian resident, invested in Virtual Digital Assets (VDAs)
such as cryptocurrencies and Non-fungible Tokens (NFTs).
On 15 April, 2024, he purchased 1 Bitcoin (BTC) for ` 60 lakhs. His
friend, Sushil gifted him NFTs (the transfer of these tokens does not
result in transfer of underlying tangible asset) having FMV of ` 5 lakhs
on his birthday on 16.8.2024. Sushil has bought these NFTs for ` 4.5
lakhs. Amit also buys NFTs worth ` 10 lakhs on 16.11.2024.
Due to some financial need, on 1.12.2024, he sold 0.5 BTC for ` 28
lakhs and NFTs received from friend for ` 6.50 lakhs. He incurred
expenses of 0.1% on transfer of BTC and NFTs.
He has other income of ` 6,50,000 during the P.Y. 2024-25.
Compute the tax payable by Mr. Amit for A.Y. 2025-26 assuming he
has exercised the option to shift out of section 115BAC.
18. During the previous year 2024-25, Mr. Vivek, a non-resident became
partner in a partnership firm M/s Pal & Co., India and contributed ` 50
lakhs towards capital. He was paid interest @10% as interest on capital
and his profit share every year by the firm, as per the terms of the
partnership deed. In the P.Y. 2024-25, his profit share was ` 4 lakhs.
During the P.Y. 2024-25, firm paid ` 5 lakhs to Mr. Vikas, (a non-
resident) friend of Mr. Vivek towards fees for technical services (FTS)
for rendering of services for a project in India. Mr. Vivek and Mr. Vikas
both are the resident of Country X.
(i) As a tax consultant for M/s Pal & Co., India, you need to advise
the firm regarding tax deduction at source on the payments (i.e.,
interest on capital and share of profit) made to Mr. Vivek and FTS
payment to Mr. Vivek, considering that India has no DTAA with
Country ‘X’. In case tax is not deductible at source, is there any
other related requirement to be complied with by the firm?

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(ii) If India has a DTAA with Country ‘X’ providing for deduction of
tax at 10% in respect of FTS then, what is the remedy available in
case M/s Pal & Co., India has deducted tax at the requisite rate
provided under the Income-tax Act, 1961?
19. Mr. Bhuvan proposes to purchase for his business, certain raw
materials from Mr. Srinivas. In view of the scarcity of the products,
Srinivas insists on cash payments for the purchases, to which Bhuvan
agrees. On 27-3-2025, the purchases are effected through a cash
invoice for ` 3,20,000.
In respect of the above transactions, will there be any detrimental
effect in the hands of Bhuvan and Srinivas under the provisions of the
Income-tax Act, 1961? Explain briefly.
Will your answer be different, if the cash purchases are effected by the
buyer Bhuvan on two different dates for different raw materials for
` 1,80,000 and ` 1,40,000 respectively?
20. Mrs. Sudha Sharma, aged 61 years, is married and settled in Calcutta.
She is a Hindustani classical singer and composer who performs
concerts in India and Country M. She visits Country M every year
during the music season in October to participate in the Mega music
concert held there. For the rest of the year, she performs concerts in
India.
Income from concerts held –
In India - ` 10 lakhs
In Country M - CMD 12,245
Tax deducted in Country M in October, 2024 in respect of income
earned by her in that country was 2500 CMD.
She earns income of CND 10000 by way of royalty in respect of
copyright of her musical compositions in Country N. The royalty is paid
to her every year on 25th March after deduction of tax@10%.
In India, she has interest income of ` 4 lakhs from bank fixed deposits
in her name and ` 25,000 from savings bank account. She pays medical
insurance premium of ` 27,000 to insure her health and ` 30,000 to

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insure the health of her husband, a resident aged 64 years. She

deposits ` 1.50 lakhs in public provident fund and ` 3 lakhs in five-year
fixed deposit in the name of her son, Mr. Sahil.
The conversion rates are as follows –
TT buying rate 30.9.2024 31.10.2024 28.2.2025 31.3.2025
Country M dollar (CMD) ` 80 ` 84 ` 78 ` 80
Country N dollar (CND) ` 80 ` 82 ` 78 ` 79

India has no double taxation avoidance agreement with Country M but

has a DTAA with Country N.
Relevant Extracts of DTAA between “India - Country N”
ARTICLE 12
ROYALTIES AND FEES FOR TECHNICAL SERVICES
1. Royalties and fees for included services arising in a Contracting
State and paid to a resident of the other Contracting State may be
taxed in that other State.
Article 23
ELIMINATION OF DOUBLE TAXATION
3. The amount of tax paid, under the laws of Country N and in
accordance with the provisions of the Agreement, whether directly or
by deduction, by a resident of India, in respect of income from sources
within Country N which has been subjected to tax both in India and
Country N shall be allowed as a credit against the Indian tax payable in
respect of such income but in an amount not exceeding that
proportion of Indian tax which such income bears to the entire income
chargeable to Indian tax.
Compute the total income and net tax liability (taking into account the
foreign tax credit) of Mrs. Sudha Sharma for A.Y. 2025-26, if she has
opted out of the default tax regime.
21. Manan who remained in Country X returned to India permanently in
1st February 2024. He has a house property in Country X from which he
earned and received rental income of Country X $ 30,000 and Country
X $ 34,000 for the year ended 31st March, 2024 and 31st March, 2025,

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respectively, in bank account maintained in Country X. He is eligible

for basic exemption limit of Country X $ 18,200 and on the balance
income, he paid income-tax for both the years@ 20% in Country X.
The tax was paid for the let out property on income earned in Country
X for both the years on 5th April 2024 and on 10th April 2025,
respectively, from his bank account in India. His income from business
in India is ` 12,50,000 for the year ended 31-03-2025.
He transferred land situated in Indore on 23.12.2024 to Mr. Sarthak for
` 80,00,000, which he acquired on 18.5.2022 for ` 30 lakhs.
Cost Inflation Index – FY 2022-23: 331 ; FY 2024-25: 363
The exchange rate of 1 Country X Dollar on various dates is given
below:
31st March 2024 = ` 80; 05th April 2024 = ` 80.50; 31st December
2024 = ` 81;
31st March 2025 = ` 82; 10th April 2025 = ` 81.50 and 31st December
2025 = ` 83
Compute the tax liability of Manan in India for assessment year
2025-26 under default tax regime.
22. Triveni Cement Ltd. (TCL) is an Indian company, having its head office
at Chennai. For the P.Y. 2024-25, it furnished the following information
of certain entities and the transactions undertaken with these
companies:
- Drift Inc. is a wholly owned foreign subsidiary in Japan of TCL. It is
currently paying royalty of USD 3 million per annum to TCL for
supply of know-how. For similar supply of know how to Elite LLC., a
wholly owned Government Company in Japan, TCL receives annual
royalty of USD 4 million. (1 USD = ` 82).
- TCL has borrowed a sum of equivalent of ` 220 crores from Swift
Inc., Dubai on 1.4.2024. On this date, the assets position of TCL was
as under:

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(In ` Crores)
Type of assets Market value Book value
Tangible fixed assets 350 270
Intangible assets 30 25
Other assets 40 35
Swift Inc., has charged interest at 8% and TCL has paid interest of
` 17.6 crores for the year ended 31.3.2025. Though the normal
lending rate of Swift Inc. was 7% per annum to other parties, in view
of the urgent requirement of funds and pressing financial
commitments, TCL decided to borrow this amount then.
- TCL supplies goods to True Words Ltd. (TWL), in Singapore. The
paid-up capital of TWL in foreign currency equivalent is ` 92 crores.
TCL holds shares to the tune of ` 22 crores in TWL. The voting
power in the company is directly proportional to the number of
shares held.
You are required to examine the various transactions entered into by
TCL and determine the applicability of transfer pricing provisions for
each transaction. Ignore provisions of section 94B, if applicable, in this
case.

SUGGESTED ANSWERS

MCQ No. Most Appropriate MCQ No. Most Appropriate

Answer Answer
1. (d) 8. (a)
2. (a) 9. (d)
3. (d) 10. (b)
4. (d) 11. (b)
5. (b) 12. (a)
6. (c) 13. (c)
7. (c)

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14. Computation of Total Income and Tax Liability of Tirupati Private

Ltd. as per section 115BAA for the A.Y.2025-26
Particulars Amount (`)
I Income from house property
[Rental income from commercial property]
Gross Annual Value 1/Net Annual Value 5,30,000
Less: Deduction under section 24(a)
30% of Net Annual Value 1,59,000
3,71,000
II Profits and gains of business and profession
Net profit as per profit and loss account 1,07,00,000
Add: Items debited but to be considered
separately or to be disallowed
B(ii) Donation paid to Swachh 85,000
Bharat Kosh
[Not an expenditure incurred wholly
and exclusively for the manufacturing
business. Hence, not allowable under
section 37]
B(iii) Contribution towards pension 50,000
scheme of employees
[Contribution towards pension scheme,
referred to in section 80CCD, of
employees is allowed only to the
extent of 14% of salary of the
employee in the P.Y. i.e., ` 1,40,000
being 14% of ` 10,00,000. Therefore,
the excess contribution of ` 50,000 [i.e.,
` 1,90,000 – ` 1,40,000] is disallowed
u/s 36(1)(iva).
B(iv) Payment to transport -
contractor
[As per section 194C(6), no tax is
required to be deducted at source

1 Rent received has been taken as the Gross Annual Value (GAV) in the absence of information
relating to Municipal Value, Fair Rent and Standard rent.

19 MAY 2025 EXAMINATION

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since the payment is to a transport

contractor not having more than 10
goods carriages at any time during
the previous year and he has given a
declaration to that effect along with
his PAN. Hence, disallowance under
section 40(a)(ia) for non-deduction of
tax at source is not attracted. Also,
since payment is made by account
payee cheque, no disallowance under
section 40A(3) is attracted].
B(v) Bonus to employees 4,48,000
[Since the payment is made after the
due date of filing return of income,
disallowance under section 43B is
attracted]
B(vi) Provision for income-tax 4,20,000
(including interest of ` 70,000
thereon)
[Not allowable as deduction.
Disallowance under section 40(a)(ii) is
attracted]
B(vii) Contribution to a University 1,00,000
approved and notified u/s 35(1)(ii)
No deduction is allowed u/s 115BAA
in respect of contribution to a
University approved and notified u/s
35(1)(ii)
B(viii) Interest on loan borrowed for 1,50,000 12,53,000
investing in shares of ABC Inc.
[Allowability or otherwise of
interest expenditure on earning
dividend has to be considered
separately under the head “Income
from Other Sources”]
1,19,53,000
Add: Cash Payment for purchase of 45,000
raw material deemed as income
AI(4) [Since the provision for

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outstanding bill for purchase of raw

material has been allowed as
deduction during the P.Y.2023-24, cash
payment in excess of ` 10,000 against
such bill in the P.Y. 2024-25 would be
deemed as income of P.Y.2024-25 as
per section 40A(3A)]
1,19,98,000
Less: Expenditure to be allowed
B(i) & AI(1) Depreciation 4,89,000
[Difference between the normal
depreciation of ` 16.75 lakhs as per
Income-tax Act, 1961 [See Note
below] and depreciation charged to
the statement of profit and loss of
` 11.86 lakhs].
Note – 2Printers and scanners form an
integral part of the computer system
and they cannot be used without the
computer. Thus, they are part of the
computer system, they would be eligible
for depreciation at the higher rate of
40% applicable to computers including
computer software. However, EPABX is
not a computer and is, hence, not
entitled to higher depreciation @40% 3
Accordingly, depreciation of ` 1,25,000
on EPABX computed @ 25% (40% -
15%) is to be reduced from the
depreciation given as per the Income-
tax Act, 1961 of ` 18 lakhs. Thus,
depreciation as per Income-tax Act,
1961 allowed as deduction would be
` 16.75 lakhs.
AI(2)Additional depreciation on Nil
new plant and machinery [Not

2
CIT v. BSES Yamuna Powers Ltd (2013) 358 ITR 47 (Delhi)
3
Federal Bank Ltd. v. ACIT (2011) 332 ITR 319 (Kerala)

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allowable as deduction under section

115BAA]
AI(3) Audit Fees relating to 30,000 5,19,000
P.Y.2023-24
[` 30,000, being 30% of audit fees of
` 1,00,000 provided for in the books
of account of F.Y.2023-24 would have
been disallowed due to non-
deduction of tax at source. Since tax
has been deducted in October, 2024
and paid on 12.12.2024, the amount
of ` 30,000 is deductible while
computing business income of
P.Y.2024-25].
1,14,79,000
Less: Items credited to statement
of profit and loss, but not
includible in business income
A(i) Rent received from vacant land 2,55,000
[Chargeable to tax under the head
“Income from other sources”]
A(ii) Rent received from commercial 5,30,000
property owned by the company
[Chargeable to tax under the head
“Income from house property”]
A(iii) Interest received on income tax 48,000
refund [Chargeable to tax under the
head “Income from other sources”]
A(iv) Profit on sale of plot 8,00,000
[Chargeable to tax under the head
“Capital Gains”]
A(v) Dividend from ABC Inc. company 6,00,000 22,33,000
[Dividend received from foreign
company is taxable under the head
“Income from Other Sources”]
92,46,000
Profits and gains from the business of 92,46,000
manufacturing

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III Capital Gains

Capital gain on sale of plot
Sale consideration 58,00,000
Less: Cost of Acquisition [since land is transferred 50,00,000
on or after 23.7.2024, indexation benefit will not
be to a person other than an individual or a HUF,
resident in India]
Long-term capital gain 8,00,000
IV Income from Other Sources
Rent received from vacant land 2,55,000
Interest received on income-tax refund 48,000
Excess of issue price of shares over the fair -
market value of shares is not taxable w.e.f. A.Y.
2025-26
Dividend from ABC Inc., a foreign 6,00,000
company
Less: Interest expenditure of 1,20,000 4,80,000
` 1,50,000 allowed deduction upto
20% of dividend
7,83,000
Gross Total Income 1,12,00,000
Less: Deductions under Chapter VI-A
Deduction under section 80G
Not allowable u/s 115BAA -
Deduction under section 80M 4,80,000
Deduction in respect of inter-corporate
dividend to the extent of ` 5,20,000, being 4,80,000
dividend distributed by it one month prior to
the due date specified u/s 139(1) or
` 4,80,000 dividend received to the extent
includible in the gross total income, whichever
is lower
Total Income 1,07,20,000
Computation of tax liability
Tax on long-term capital gains @ 12.5% 1,00,000
Tax on other income @22% on ` 99,20,000 21,82,400
22,82,400

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Add: Surcharge @10% 2,28,240

25,10,640
Add: Health and Education Cess @ 4% 1,00,426
Tax Liability (rounded off) 26,11,066
Tax Liability 26,11,070

15. Computation of total income of the firm, VSK & Co. for the A.Y.
2025-26 applying the regular provisions of the Income-tax
Act,1961

Particulars ` `
Net profit as per profit & loss account 4,50,000
Add: Expenditure debited to profit & loss
account but not allowable as deduction or
to be considered separately
- Depreciation as per books of accounts 1,10,000
- Salary paid to working partners 24,60,000
considered separately [` 82,000 x 3
partners x 10 months]
- Interest on capital paid to partners in 1,20,000
excess of 12% disallowed. Accordingly,
` 1,20,000 [` 3,60,000 – ` 2,40,000
(` 3,60,000 x 12/18)], is disallowed
- Donation to registered political party 1,50,000
[Donation paid to a political party is not
an allowable expenditure under section
37 since it is not laid out wholly or
exclusively for the purposes of business
or profession]
- Excess rent paid to a partner would be 1,26,000
disallowed under section 40A(2), since
partner is a related person of the firm
[(` 36,000 - ` 15,000) x 6]
[No disallowance would be attracted for
non-deduction of tax at source, since the

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amount of rent does not exceed

` 2,40,000]
- Expenditure on gold coins awarded to Nil
customers
[Allowed as expenditure u/s 37. TDS u/s
194R is not attracted since the value of 29,66,000
gold coin awarded to each customer
does not exceed ` 20,000, consequently,
no disallowance would be attracted for
non-deduction of tax at source,]
34,16,000
Less: Depreciation as per Income-tax Act, 1961
- Tangible assets 2,43,000
- Intangible asset–registered trademark
[` 3,00,000 x 12.5%] 37,500
[50% of 25%, being the depreciation
allowable as deduction, since the asset is 2,80,500
put to use for less than 180 days during
the year of acquisition]
Book Profit 31,35,500
Less: Salary to working partners:
(i) As per prescribed limits
On first ` 6,00,000 @ 90% or 5,40,000
` 3,00,000, whichever is more
On the balance of ` 25,35,500 15,21,300
@ 60%
20,61,300
(ii) Salary actually paid 24,60,000
Deduction allowed being (i) or (ii) whichever is 20,61,300
less
Profits and gains from business or 10,74,200
profession

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Gross Total Income 10,74,200

Less: Deduction under Chapter VI-A
Under section 80GGC Donation to registered
political party
• Paid by cash not allowable Nil
• ` 70,000 paid by electronic transfer
would be allowed as deduction, since
payment is made in a mode other than 70,000
70,000
cash.
Total Income 10,04,200

16. (I) (a) (i) As per Explanation 4(iii) to Section 11(1), only 85% of the
amount paid to ABC Educational trust (other than for corpus) is
considered as an application of income. Accordingly, ` 170 lakh will
be treated as an application of income for charitable purposes.
(ii) As per Explanation 2 to Section 11(1), any contribution made
by one trust to another trust or institution (even if registered
under Section 12AB or Section 10(23C)(iv)/(v)/(vi)/(via)) with a
direction that such amount shall form part of corpus is not
considered as an application of income for charitable purposes.
Therefore, the ` 200 lakhs given for corpus will not be treated as
an application of income for XYZ Charitable Trust.
(b) Where any amount of contribution given to another trust
approved under section 12AB or registered under section
10(23C)(iv)/(v)/(vi)/(via) is out of accumulations then such
amount would not qualify for application and would be deemed
as income by virtue of section 11(3) in both cases. Moreover,
such an amount would fall within the definition of specified
income u/s 115BBI and would be taxable @30%.
(II) As per section 11(1)(d), an amount received by a fund/ trust/
institution etc. would not be included in the total income, if such
amount is received with a specific direction that it shall form part
of the corpus and the said corpus contribution is invested in any
of the modes specified under section 11(5).

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However, if the same is invested in modes otherwise than

specified under section 11(5), then by virtue of section 115BBI
the same would be considered as specified income and would be
taxable @30%.
17. Tax payable by Mr. Amit for A.Y. 2025-26

Particulars Amount Amount

in ` in `
On sale of Bitcoin
Sale consideration 28,00,000
Less: Cost of acquisition [` 60 lakhs/2] 30,00,000
[Expenses on transfer of VDA is not
allowable as deduction]
Loss from transfer of VDA not allowable (2,00,000)
to be set off against any other income
On sale of NFTs
Sale consideration 6,50,000
Less: Cost of acquisition [FMV of NFTs on 5,00,000
16.8.2024, being the date of receiving the
gift]
[Expenses on transfer of VDA is not
allowable as deduction]
1,50,000
Gift received from Mr. Sushil
Taxable [Since the FMV of NFTs on 5,00,000
16.8.2024 exceeds ` 50,000]
Other income 6,50,000 11,50,000
Total Income 13,00,000
Tax on other income of ` 11,50,000 1,57,500
[` 1,12,500 plus ` 45,000 @ 30% of
` 1,50,000]

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Tax on income from transfer of VDA

income of ` 1,50,000@30% 45,000
2,02,500
Add: Health and education cess @ 4% 8,100
2,10,600
Less: TDS under section 194S [` 28 lakhs x 34,500
1% + ` 6.50 lakhs x 1%]
Net tax payable 1,76,100

18. (i) Section 194A requiring deduction of tax at source on any income
by way of interest, other than interest on securities credited or paid
to a resident, excludes from its scope, income credited or paid by a
firm to its partner. However, section 195 which requires tax
deduction at source on payment to non-residents, does not provide
for any exclusion in respect of payment of interest by firm to its
non-resident partner. Further, since FTS is deemed to accrue or
arise in India on account utilisation of services for a project in India
and chargeable to tax in the hands of Mr. Vikas, TDS is also
required to be deducted on FTS payment. Accordingly, tax has to
be deducted under section 195 @30% plus HEC@4% being the rate
in force on both interest on capital and FTS (assuming it is not in
pursuance of Central Government agreement).
As per section 10(2A), share of profit received by partner from
the total income of firm is exempt from tax. Therefore, the share
of profit paid to non-resident Indian is not liable for tax
deduction at source.
However, section 195(6) provides that the person responsible for
paying any sum, whether or not chargeable to tax, to a non-
corporate non-resident or to a foreign company shall be
required to furnish the information relating to payment of such
sum in the form and manner prescribed under Rule 37BB.
(ii) As per section 239A, where under a DTAA, the tax deductible on
any income, other than interest, under section 195 is to be borne
by the person by whom the income is payable, and such person

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having paid such tax to the credit of the Central Government,

claims that no tax was required to be deducted on such income,
such person can file an application before the Assessing Officer
for refund of such tax within 30 days from the date of payment
of such tax.
In this case, Pal & Co. has to file an application before the
Assessing Officer for refund of such tax within 30 days from the
date of payment of such tax.
The CBDT has, vide Circular No.11/2007 dated 27.9.2011
modified Circular No.7/2007 dated 23.10.2007, which laid down
the procedure for refund of tax deducted at source under section
195 of the Income-tax Act, 1961 to the person deducting tax at
source from the payment to a non-resident. The said Circular
allowed refund to the person making payment under section
195, inter alia, when there occurs payment of tax at a higher rate
under the Income-tax Act, 1961 while a lower rate is prescribed
in the relevant double taxation avoidance treaty entered into by
India.
Hence, M/s Pal & Co., India can claim tax refund of excess tax
deducted at source under section 195 where tax has been
deducted at source at the rate of 30% provided under the
Income-tax Act, 1961 while a lower rate i.e., 10% is prescribed
under the DTAA with Country ‘X’, only if Pal & Co. has borne the
tax. Otherwise, refund can be claimed by the non-resident,
Mr. Vikas.
19. (1) Where purchases are effected through cash invoice of
` 3,20,000
(i) In the hands of Mr. Bhuvan
Since Mr. Bhuvan is making cash payment of ` 3,20,000 for
purchase of raw materials from Mr. Srinivas for his
business, disallowance under section 40A(3) would be
attracted, since the payment otherwise than by way of
account payee cheque or bank draft or use of ECS through
a bank account or through other prescribed electronic

29 MAY 2025 EXAMINATION

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modes to a person in a day exceeds ` 10,000. Accordingly,

` 3,20,000 would not be allowable as deduction while
computing his business income.
(ii) In the hands of Mr. Srinivas
Section 269ST prohibits, inter alia, receipt of an amount of
` 2 lakh or more in aggregate from a person in a day
otherwise than by way of account payee cheque or account
payee bank draft or use of ECS through a bank account or
through other prescribed electronic modes. If any person
receives any sum in contravention of the provisions of
section 269ST, he shall be liable to pay penalty under
section 271DA of a sum equal to the amount of such
receipt.
In this case, since Srinivas has received ` 3,20,000 by way of
cash from Mr. Bhuvan on 27.3.2025, he has violated the
provisions of section 269ST, and hence, is liable to pay
penalty of ` 3,20,000 under section 271DA.
(2) Where cash purchases of ` 1,80,000 and ` 1,40,000 are
effected in respect of different raw materials on two
different dates
(i) In the hands of Mr. Bhuvan
Even if cash payment of ` 1,80,000 and ` 1,40,000 are made
by Mr. Bhuvan on two different dates for different raw
materials, disallowance under section 40A(3) would be
attracted, since the payment in cash in a day to Mr. Srinivas
exceeds ` 10,000.
(ii) In the hands of Mr. Srinivas
If Srinivas receives cash of ` 1,80,000 and ` 1,40,000 on two
different dates, for purchase of different raw materials, there
would be no violation of section 269ST since receipt on a day
is less than ` 2 lakh and the receipts are not in respect of the
same transaction but for purchase of different raw materials.
Hence, provision of section 271DA shall not be attracted.

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20. Computation of net tax liability of Mrs. Sudha Sharma for the
A.Y. 2025-26

Particulars ` `

Profits and gains of business or

profession
From concerts held in India 10,00,000
From royalty received from Country N [CND 7,90,000
10000 x 79 (being conversion rate as on
31.3.2025 - Rule 115)]
From concerts held in Country M [CMD
12,245 x 80 (being conversion rate as on 9,79,600
31.3.2025 – Rule 115)
27,69,600
Income from Other Sources
Income from bank fixed deposits in her 4,00,000
name
Income from savings bank account 25,000 4,25,000
Gross Total Income 31,94,600
Less: Deduction under section 80C
- Deposit in PPF 1,50,000
- Five year fixed deposit in the -
name of her son (does not
qualify for deduction under
section 80C)
Under section 80D 50,000
- Medical insurance premium to
insure her health and health of
spouse (` 57,000, restricted to
` 50,000, being the maximum
allowable for senior citizens)

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Under section 80TTB

- Interest on bank FD and savings 50,000
bank account restricted to 2,50,000

Total Income 29,44,600

Tax on Total Income
Income-tax [` 1,10,000 (upto ` 10,00,000) 6,93,380
Plus ` 5,83,380 @30% of ` 19,44,600]
Add: Health and Education Cess @4% 27,735
7,21,115
Average rate of tax in India
(i.e., ` 7,21,115/ ` 29,44,600 × 100) 24.489%
Foreign Tax Credit
Lower of tax payable under the Income-tax
Act, 1961 on income from profession and
foreign tax payable on such income
Tax covered under India-Country N 78,000
DTAA:
[Lower of ` 1,93,463 (i.e., 24.489% x
` 7,90,000) and ` 78,000 (` 78, being the
conversion rate as on 28.2.2025 as per Rule
128 x CND 1000)]
Tax paid in Country M:
Country M [Lower of ` 2,39,894 (i.e.,
24.489% x ` 9,79,600) and ` 2,00,000 (` 80,
being the conversion rate as on 30.9.2024 2,00,000
as per Rule 128 x CMD 2500)]
2,78,000
Net tax liability (` 7,21,115 – ` 2,78,000) 4,43,115
Net tax liability (rounded off) 4,43,120

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Note - As per Rule 115, for computing income from profession of

Mrs. Sudha Sharma, the TT buying rate as on 31.3.2025 has to be
considered. Royalty income from Country N and income from concerts
in Country M constitute her income from profession, since she is a
singer and a composer.
As per Rule 128, for computing foreign tax credit, TT buying rate as on
the last day of the month immediately preceding the month in which
tax was deducted or paid in that country has to be considered.
Foreign Tax Credit has been computed accordingly.
As per Article 12(1), royalty income arising in a Contracting State
(Country N, in this case) and paid to a resident of another Contracting
State (Mrs. Sudha Sharma, a resident of India, in this case) may be
taxed in that other State (India, in this case). Credit for such tax paid
by Mrs. Sudha Sharma in Source State, i.e., Country N, in this case,
would be available for an amount not exceeding that proportion of
Indian tax which such income bears to the entire income chargeable
to Indian tax.
21. Manan is a resident but not ordinarily resident for the P.Y.2024-25. He
is resident since he has stayed in India for the whole year and hence,
he satisfies the condition of stay in India for a period of 182 days or
more during the P.Y.2024-25. However, he is not ordinarily resident,
since he has stayed in India only for a period of 60 days prior to
P.Y.2024-25.
Hence, he satisfies the condition of stay in India for a period of 729
days or less in the seven previous years immediately preceding
P.Y.2024-25 stipulated under section 6(6) for being treated as a “not
ordinarily resident” in India in the P.Y.2024-25.
Also, he has been non-resident in all the ten previous years
immediately preceding P.Y.2024-25. Hence, he also satisfies the
condition in section 6(6) of being non-resident in 9 out of 10 previous
years immediately preceding P.Y.2024-25. In this case, he has satisfied
both the conditions even though satisfaction of any one condition
would suffice for being treated as “not-ordinarily resident”.

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In case of a resident but not ordinarily resident, income which is

received or is deemed to be received in India or income accrues or
arises or is deemed to accrues or arises in India would be taxable in
India. However, income which accrues or arises outside India would be
included in total income, only if it is derived from a business controlled
from or profession set up in India.
Accordingly, total income and tax liability of Mr. Manan, being resident
but not ordinarily resident would be computed in the following
manner:

Particulars `
Income from property earned and received in -
Country X would not be taxable in his hands in India.
Income from business [deemed to accrue or arise in 12,50,000
India and hence taxable in India]
Capital Gains
Sale consideration 80,00,000
Less: Cost of Acquisition [since land is 30,00,000
transferred on or after 23.7.2024, indexation
benefit will be considered while determining
the tax liability u/s 112]
Long-term capital gain 50,00,000
Total Income 62,50,000
Computation of Tax Liability
Tax on long-term capital gains 6,25,000
Lower of
- Tax @12.5% without indexation benefit 6,25,000
[` 50,00,000 x 12.5%]
- Tax @20% on LTCG of ` 47,09,970 with 9,41,994
indexation [80,00,000 – 32,90,030 (` 30
lakhs x 363/331]
Tax on total income of ` 12.5 lakh other
than LTCG u/s 115BAC

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Upto ` 3,00,000 Nil

` 3,00,001 – ` 7,00,000 [i.e., ` 4,00,000 x 20,000
5%]
` 7,00,001 – ` 10,00,000 [i.e., ` 3,00,000 x 30,000
10%]
` 10,00,001 – ` 12,00,000 [i.e., ` 2,00,000 x 30,000
15%]
` 12,00,001 – `12,50,000 [i.e., ` 50,000 x 10,000
20%]
90,000
7,15,000
Add: Surcharge @10% since total income exceeds ` 50 71,500
lakhs
7,86,500
Add: HEC@4% 31,460
Tax liability 8,17,960

22. Any income arising from an international transaction, between two or

more "associated enterprises”, shall be computed having regard to
arm's length price as per the provisions of Chapter X of the Act.
Section 92A defines an "associated enterprise" and sub-section (2) of
this section speaks of the situations when the two enterprises shall be
deemed to be associated enterprises.
Transaction with Drift Inc.
Drift Inc. is a wholly owned subsidiary of TCL and is a non-resident
company. Hence, it is an associated enterprise. Royalty falls within the
meaning of international transaction, since it is payment for supply of
know-how, being an intangible property. Drift Inc. is currently paying a
royalty of USD 3 million per annum to TCL for supply of know-how. For
similar supply of know how to Elite LLC., a wholly owned Government
Company in Japan, TCL receives annual royalty of USD 4 million.

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Under CUP Method, ALP has to be taken as USD 4 million.

Understatement of royalty is 1 million USD, i.e., 1 M USD x ` 82
= ` 820 lakhs.
Transaction with Swift Inc.
As per section 92A(2), if one enterprise advances loan to the other
enterprise of an amount of 51% or more of the book value of the total
assets of such other enterprise, the two enterprises would be deemed
to be associated enterprises.
As on the date of borrowing, the amount advanced is ` 220 crores out
of ` 330 crores, which comes to 66.67%. Hence, Swift Inc., is deemed
to be an associated enterprise of TCL. Interest payments are also
covered by the term "international transaction".
Swift Inc., has charged interest at 8% and TCL has paid interest of
` 17.6 crores for the year ended 31.3.2025. Interest rate charged to
other parties is 7%. This has to be taken as the ALP rate.
In the light of this, the interest payment should have been 17.6 x 7/8
i.e., ` 15.4 crores. There has been an excess payment of ` 2.2 crores
above the ALP.
Transaction with TWL
In TWL, TCL holds 22/92 i.e., 23.91% of the voting power. Since TCL
holds less than 26% of the voting power, TWL is not an associated
enterprise. Hence, the transfer pricing provisions would not be
applicable on sales made by TCL to TWL.

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(1) All questions have been answered on the basis of position of (i) GST
law as amended by the Finance (No. 2) Act, 2024 including
significant notifications and circulars and other legislative
amendments made, up to 31st October, 2024 and (ii) customs law as
amended by the Finance (No. 2) Act, 2024 including significant
notifications and circulars and other legislative amendments made,
up to 31st October, 2024.
(2) Unless otherwise specified, the section numbers and rules referred
in questions and answers relating to GST pertain to the Central
Goods and Services Tax Act, 2017 and the Central Goods and
Services Tax Rules, 2017 respectively.
(3) The GST rates for goods and services mentioned in various
questions are hypothetical and may not necessarily be the actual
rates leviable on those goods and services. The rates of customs
duty are also hypothetical and may not necessarily be the actual
rates. Further, GST compensation cess should be ignored in all the
questions, wherever applicable.

QUESTIONS

Case scenario - I
Vardhmaan Limited [hereinafter referred to as ‘company’], registered in Delhi,
has operations in multiple States across India. The company has taken
separate GST registration in all the States where it operates. During the month
of January, the tax team presented following information in its report to the
management:
REVISION TEST PAPER
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1. The company sold goods valuing ` 5 crore from its warehouse located at
Kandla Port, Gujarat to a buyer located in Ahmedabad by way of transfer
of title in goods. The responsibility of clearance of goods shall be on the
buyer. The goods were imported by the company from Vietnam and
were not cleared for home consumption since then.
2. The company got a favourable advance ruling order on a particular issue
from the Authority for Advance Ruling, Rajasthan. The application was
filed by the company through its registered place of business in
Rajasthan.
3. The company received an order from the Adjudicating Authority in
Maharashtra, wherein a demand of tax amounting to ` 1 crore and
penalty amounting to ` 10 lakh and interest amounting to ` 25 lakh was
confirmed by the Adjudicating Authority. The dispute in this case was
similar to the issue for which a favourable order from Advance Ruling
Authority was received by the company in the State of Rajasthan as
discussed in para 2 above. The company feels that it has a strong case in
the matter before the Appellate Authority.
4. The company has issued tax invoice in relation to certain supplies
wherein the total tax collected from the recipients amounted to
` 3 crore. Subsequently, it was noticed that the supplies were not liable
to GST and the amount has been wrongly collected by the company
from the recipients of supply.
5. A special audit was initiated by the Chartered Accountant nominated by
the State Tax authorities of Madhya Pradesh against the company in the
State of Madhya Pradesh.
Based on the facts of the case scenario given above, choose the most
appropriate answer to Q. Nos. 1 to 5 below:
1. In relation to the goods sold from its warehouse in Kandla, Gujarat, the
company shall__________________:
(a) be liable to pay customs duty and IGST as applicable.
(b) be liable to pay customs duty only.
(c) be liable to pay IGST only.
(d) not be liable to pay any tax or duty.

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2. In relation to the advance ruling order received by the company in

Rajasthan,
(a) the order is binding on the company only in Rajasthan but on
jurisdictional officers across all registrations of the company in India.
(b) the order is binding on the company across all States in India.
(c) the order is binding on the company and the jurisdictional officer,
in Rajasthan.
(d) the order is binding on the company and the jurisdictional officers
across all registrations of the company in India.
3. In case the company prefers an appeal before the Appellate Authority
against the order passed by Adjudicating Authority in Maharashtra, the
amount of pre-deposit to be made by the company is ___________.
(a) ` 11 lakh
(b) ` 13.5 lakh
(c) ` 10 lakh
(d) nil
4. In case where the tax has been wrongly collected by the company from
the recipients,
(a) the company shall pay such amount to the Government.
(b) the company shall refund back the amount to the recipients.
(c) the company shall deposit such amount with the consumer welfare fund.
(d) the company can retain such amount with itself.
5. In case of special audit being conducted in the State of Madhya Pradesh,
(a) the remuneration of Chartered Accountant is payable by company
as per agreed terms.
(b) the remuneration of Chartered Accountant is payable by the
company as directed by the Commissioner of State Tax.
(c) the remuneration of the Chartered Accountant is payable by the
Commissioner, but the expenses of the examination and audit of
records shall be reimbursed by the company.

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(d) expenses of the examination and audit of records, including the

remuneration of Chartered Accountant, shall be paid by the
Commissioner.
Case scenario II
Vidhyut Corporation Ltd. is a Public Sector Undertaking (PSU) engaged in the
business of generation of electricity from conventional & non-conventional
sources. The Government of India holds 75% equity in the said company &
balance equity is held by institutional and domestic investors. The company
has taken separate registration under GST in each State where it has business
operations. The company has its head office (HO) in Delhi & its power plants
are located in the States of Bihar, Odisha & Chhattisgarh.
Following transactions were carried out by the company during the month of
February:

Particulars Delhi Bihar Odisha Chhattisgarh

H.O. plant plant plant
(`) (`) (`) (`)
Sale of electrical energy to --- 2,50,00,000 3,50,00,000 4,50,00,000
DISCOM
Bank interest received on 18,00,000 3,00,000 5,00,000 8,00,000
saving bank account &
fixed deposit
House rent recovered from 55,000 30,000 25,000 40,000
the employees for
residential
accommodation provided
to them
Rent collected from bank, 48,000 15,000 12,000 16,000
ATM, post office & shops
located in office premises
Sale of metal scrap - 85,000 65,000 45,000
(covered under Chapter 72)
(excluding TCS @ 1% as per
the Income-tax Act, 1961)

40 MAY 2025 EXAMINATION

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to Birla Scrappers,
unregistered under GST
Other Income 2,50,000 - - 45,000

In addition to above information, following transactions were also carried out

during the month of February:
(1) A supply order for stationery items was awarded by Delhi H.O. to
M/s Stationery Mart, New Delhi for ` 3,36,000 (including GST @ 12%) in
January.
The vendor supplied stationery items worth ` 44,800 (including GST
@ 12%) & issued the tax invoice in February. Delhi H.O. had made the
payment of the said bill in February by crediting the vendor’s account
for that amount on the same date in its books. The remaining amount
was paid in April on supply of balance items.
(2) Odisha plant purchased office furniture for ` 2,80,000 during February
from an unregistered dealer. Rate of GST on said furniture item is 18%.
(3) A Board meeting for raising term loan for project expansion was held in
February. The Delhi H.O. paid ` 20,000 each as sitting fee to
4 independent directors (all registered under GST) who attended the
meeting. Further, it paid ` 80,000 to one of these directors, who had
rented the office building to Delhi H.O.
(4) For safety & security of its H.O. & power plants, the company engaged
private security as well as CISF (Central Industrial Security Force).
Following payments were made in February, in respect of said services:

Particulars Delhi H.O. Bihar plant Odisha plant Chhattisgarh

plant
(`) (`) (`) (`)
CISF --- 10,00,000 8,00,000 14,00,000
(paid on 7th (paid on 15th (paid on
February) February) 5th February)
ABS Security 5,00,000 - - -
Services Pvt. (paid on
Ltd. 11 February)
th

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(5) The Bihar plant purchased a machinery in February from

M/s Sahoo Enterprises, Patna (not registered under GST) for ` 86,000.
Full payment was made in February. Rate of GST on the said machinery
is 18%.
All the amounts mentioned above are excluding GST, wherever applicable
(unless otherwise specified).
Based on the facts of the case scenario given above, choose the most
appropriate answer to Q. Nos. 6 to 11 below:
6. The value of taxable supply on which GST is payable by Delhi H.O. under
forward charge, for the month of February is ___________.
(a) ` 18,00,000
(b) ` 2,98,000
(c) ` 21,53,000
(d) ` 48,000
7. The value of taxable inward supply on which GST shall be payable under
reverse charge by Bihar power plant is __________.
(a) ` 11,80,000
(b) ` 10,00,000
(c) ` 10,86,000
(d) ` 10,30,000
8. The value of supply on which TDS under section 51 shall be deducted by
Delhi H.O. while making payment to M/s Stationery Mart in February is
___________.
(a) ` 40,000
(b) ` 44,800
(c) ` 3,00,000
(d) TDS is not deductible since payment made in February is less than
` 2,50,000.

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9. The value of taxable inward supply on which GST shall be payable under
reverse charge by Delhi H.O. and Odisha plant is __________ and _________
respectively.
(a) ` 1,60,000 and ` 10,80,000
(b) ` 80,000 and ` 8,00,000
(c) ` 6,80,000 and ` 2,80,000
(d) ` 5,80,000 and ` 2,80,000
10. Which of the following statements is most appropriate with respect to
sale of metal scrap by Chhattisgarh plant?
(a) GST on value of supply of ` 45,000 of metal scrap is payable by
Birla Scrappers under reverse charge.
(b) GST on value of supply of ` 45,000 of metal scrap is payable by
Chhattisgarh plant under forward charge.
(c) GST on value of supply of ` 45,450 of metal scrap is payable by
Chhattisgarh plant under forward charge.
(d) Sale of metal scrap, on which TCS is being collected under
Income-tax Act, 1961, is an exempt supply under GST.
11. Which of the following supplies is/are not taxable under reverse charge
mechanism? Choose the most appropriate option.
(i) House rent recovered from the employees for residential
accommodation provided to them.
(ii) Rent collected from bank, ATM, post office & shops located in
office premises.
(iii) Sale of metal scrap (covered under Chapter 72) to Birla Scrappers.
(a) (i) and (ii)
(b) (i), (ii) and (iii)
(c) (i) and (iii)
(d) (ii) and (iii)

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12. Lamba Industry, India, has imported an ‘Article Gamma’ in large

quantities from Malaysia, a developing country, to meet the increased
domestic demand of its final product. The Central Government,
concerned about the increased imports of said product, is considering
the imposition of safeguard measures, as after conducting enquiry, it is
satisfied that such imports are threatening to cause serious injury to the
domestic industry. The share of imports of ‘Article Gamma’ from
Malaysia constitutes 4% of the total imports of that article into India.
Which of the following statements is/are correct in relation to
imposition of safeguard measures in the given case? Choose the most
appropriate option.
(i) The Central Government is empowered to impose safeguard
measures for a maximum period of 10 years from the date of its
imposition.
(ii) Safeguard measures can be imposed since share of imports of
‘Article Gamma’ from Malaysia exceeds 3% of the total imports of
that article into India.
(iii) The Central Government is empowered to impose safeguard
measures for a maximum period of 4 years from the date of its
imposition with no further extension permitted.
(iv) Safeguard measures cannot be imposed since share of imports of
‘Article Gamma’ from Malaysia exceeds 3% of the total imports of
that article into India.
(a) (i) and (ii)
(b) (iii)
(c) (iv)
(d) (ii) and (iii)
13. Poorva Impex Ltd., a registered entity under GST in the State of
Maharashtra, is engaged in making various supplies. It is not engaged
in agricultural operations. Poorva Impex Ltd., India is a subsidiary of
Poorva Inc., an entity incorporated in USA, engaged in providing
information technology services to customers in India. It provides the
following information for the month of April:

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S. Particulars Amount
No. (`)
OUTWARD SUPPLY:
(i) Undertook the promotion and marketing of 20,00,000
information technology services on principal-to-
principal basis in India for Poorva Inc.
(ii) Printed letter cards supplied to Subhashini 8,72,000
Enterprises, registered in Maharashtra. A logo
depicting the vision of the firm was to be
imprinted on each letter card and said logo was
provided by the firm. Material cost was
` 8,00,000 and printing cost was ` 72,000.
(iii) Supplied raw cotton to Dhruvtara Traders, 5,00,000
registered in Maharashtra. The raw cotton was
purchased from the local farmers during the
previous month.
(iv) Supplied maintenance services to Municipal 1,20,000
Corporation of Greater Mumbai which has
awarded a contract of maintenance of
street-lights in Greater Mumbai Municipal area.
Maintenance work involved the replacement of
defunct lights and other spares.
[Out of total value of supply of ` 1,20,000, value
of defunct lights and other spares replaced is
` 32,000.]
(v) Given on hire 10 cars (seating capacity of 5 3,00,000
persons including driver) to Gujarat State Road
Transport Corporation (GSRTC)
INWARD SUPPLY:
(i) Purchased processing machines from Bobby & 5,00,000
Co., registered under GST, in the State of Gujarat.
Machines were bought in "as is where is
condition" at Gujarat to produce taxable items.

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(ii) Purchased metal scrap (covered under Chapter 2,00,000

72) from Mansukh Traders of Maharashtra, an
unregistered person, to be used in manufacturing
process
(iii) Procured information technology services for its 1,50,000
business through electronic mode from Thomas
Inc., a company located in Germany
(iv) A machinery to be used for manufacturing was 5,00,000
sent to George Inc., USA for carrying out repair
work on the same. The consideration to George
Inc. was paid for such repair work. Machine was
received after repair, in the month of May.

The company provided the following additional information:

(i) Poorva Inc., USA provided a corporate guarantee of ` 1.5 crore on
behalf of Poorva Impex Ltd. to Manimani Bank, Maharashtra, free
of cost. The tax invoice for the same has been issued on the value
as per rule 28(2).
(ii) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively for
both inward and outward supply of services and rates of CGST,
SGST and IGST are 6%, 6% and 12% respectively for both inward
and outward supply of goods, except in case of supply of raw
cotton where the applicable rates of CGST, SGST and IGST are
2.5%, 2.5% and 5% and in case of supply of metal scrap where the
applicable rates of CGST, SGST and IGST are 9%, 9% and 18%
(iii) All the amounts given above are exclusive of taxes, wherever
applicable.
(iv) There was no opening balance of any ITC for the relevant period.
(v) All exports made by Poorva Impex Ltd. are through furnishing of
LUT without payment of IGST.
From the information given above, you are required to compute the
minimum net GST liability payable in cash (CGST, SGST or IGST, as the

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case may be) for the month of April for the Poorva Impex Ltd.,
Maharashtra.
14. In an appeal filed with the High Court by Prateek Ltd., on the question
whether activity undertaken by Prateek Ltd. amounts to supply, the
appeal was decided in favour of Prateek Ltd. The amount of tax, interest
and penalty involved were IGST of ` 1.2 crore, interest of ` 60 lakh and
penalty of ` 50 lakh.
However, the Department does not agree with the order passed by the
High Court and contends that the said activity amounts to supply under
GST. The Department wants to file an appeal before the Supreme Court
relating to the dispute pertaining to demand of tax, interest and penalty.
You are required to examine whether appeal can be filed by the
Department in the given case. Will your answer change, in case matter
is related to valuation of services instead of determining whether the
said activity amounts to supply?
15. Smith Inc., a company located in USA, charges subscription fee from its
unregistered customers in India at its online money gaming portal. The
Department contends that GST should be charged on the subscription
fees which Smith Inc. receives from Indian customers.
Smith Inc. opposes the above view stating that since online money
gaming are intangible goods and do not cross customs frontiers
physically in this case, GST is not leviable thereon.
Considering the above facts, you are required to answer the following
questions:
(i) What would be the place of supply in this case?
(ii) Whether GST is leviable on the subscription fee charged by Smith
Inc. from unregistered customers? If yes, who is required to pay
said GST?
16. Mr. Divas, a registered person in Agra, Uttar Pradesh purchased a car for
` 12,50,000 on 15th October. On 31st October, the car met with an
accident resulting in minor damage.

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Due to urgency, he got his car repaired in the local garage of a nearby
market instead of garage authorized by his general insurance company,
i.e. Suraksha Insurance Company, through which his car was insured.
The total cost of repairs was ` 54,000 (excluding GST @ 18%). On the
instructions of Mr. Divas, the invoice for the entire amount was raised by
garage in the name of Suraksha Insurance Company. The insurance
company approved the claim amount of only ` 40,000 after the survey
and reimbursed the same amount alongwith GST @ 18% to Mr. Divas.
In light of the above facts, you are required to answer the following
questions:
(i) Whether Suraksha Insurance Company is eligible to avail ITC on
the basis of the invoice raised by garage? If yes, what would the
amount of eligible input tax credit?
(ii) Would your answer be different, if garage had issued two different
invoices, one for ` 40,000 + GST @ 18% to Suraksha Insurance
Company and another for ` 14000 + GST @ 18% to Mr. Divas?
(iii) In case, the garage issued the invoice in the name of Mr. Divas,
would Suraksha Insurance Company be eligible to avail ITC?
17. List the scenarios where goods or conveyances are liable to confiscation
under section 130 of the CGST Act, 2017.
18. Mr. Manmeet imported certain goods from his son, Mr. Harbhajan
residing in US and transaction value has been rejected. Rules 4 and 5 of
the Customs Valuation (Determination of Value of Imported Goods)
Rules, 2007 are found inapplicable as no similar/ identical goods are
imported in India.
Mr. Manmeet furnishes cost-related data of imports and requests
customs authorities to determine value accordingly as per rule 8. The
relevant data are given below:-

Sr. Particulars Amount

No.
1. Cost of materials incurred by Mr. Harbhajan $ 2000
2. Fabrication charges incurred by Mr. Harbhajan $ 1000

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3. Other chargeable expenses incurred by Mr. $ 400

Harbhajan
4. Other indirect costs incurred by Mr. Harbhajan $ 250
5. Freight from Mr. Harbhajan 's factory to US $ 250
port
6. Loading charges at US port $ 100
7. Normal net profit margin of Mr. Harbhajan 20% of FOB
8. Air freight from US port to Indian port $ 1,500
9. Insurance from US port to Indian port $ 50
10. Exchange rate ` 85 per $

The customs authorities are of the opinion that since value as per rule 7
can be determined at ` 5,00,000, there is no need to apply rule 8.
Can the request of Mr. Manmeet be legally acceptable? If so, compute
the assessable value under the Customs Act, 1962.
19. Green Peppers Company imported goods valued at ` 20,00,000 vide a
Bill of Entry presented before the proper officer on 15th July, on which
date the rate of customs duty was 10%. Green Peppers Company has
produced all the necessary documents and furnished full information.
However, the proper officer deemed it necessary to make further
enquiry and therefore, the same were provisionally assessed at a value
of ` 20,00,000 and Green Peppers Company paid provisional duty of
` 2,00,000 on the same date.
Determine the amount of interest payable, if any, under section 18 of
the Customs Act, 1962 provided that:
(i) Green Peppers Company voluntarily pays duty of ` 50,000 on
20th August.
(ii) Final duty is assessed on 31st August at ` 3,00,000.
(iii) Green Peppers Company pays balance duty on the date of
assessment of final duty.
20. Briefly discuss the provisions of section 69 of the Customs Act, 1962
relating to clearance of warehoused goods for export.

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SUGGESTED ANSWERS

Question Answer
No.
1. (d) not be liable to pay any tax or duty.
2. (c) the order is binding on the company and the jurisdictional
officer, in Rajasthan.
3. (c) ` 10 lakh
4. (a) the company shall pay such amount to the Government.
5. (d) expenses of the examination and audit of records, including
the remuneration of Chartered Accountant, shall be paid by
the Commissioner.
6. (b) ` 2,98,000
7. (b) ` 10,00,000
8. (a) ` 40,000
9. (b) ` 80,000 and ` 8,00,000
10. (b) GST on value of supply of ` 45,000 of metal scrap is payable
by Chhattisgarh plant under forward charge.
11. (b) (i), (ii) and (iii)
12. (a) (i) and (ii)

13. Computation of minimum net GST payable in cash for the month of
April

Particulars Amount CGST SGST IGST

(`) (`) (`) (`)
GST payable under forward charge
Promotion and marketing of 20,00,000 - - -
information technology

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