Mock Test Paper - Series II: April, 2024

Date of Paper: 2 April, 2024

Time of Paper: 2 P.M. to 5 P.M.

INTERMEDIATE COURSE: GROUP – I

PAPER – 1 : ADVANCED ACCOUNTING

1. (i) (c)
(ii) (b)
(iii) (c)
(iv) (d)
2. (i) (a)
(ii) (a)
(iii) (b)
(iv) (a)
(v) (b)
3. (i) (b)
(ii) (a)
(iii) (b)
4. (a)
5. (d)
6. (a)
PART II – Descriptive Questions (70 Marks)
1. (a) As per AS 26 “Intangible Assets”, expenditure on research should be
recognized as an expense when it is incurred. An intangible asset
arising from development (or from the development phase of an internal
project) should be recognized if, and only if, an enterprise can
demonstrate all of the conditions specified in para 44 of the standard.
An intangible asset (arising from development) should be derecognised
when no future economic benefits are expected from its use according
to para 87 of the standard. Thus, the manager cannot defer the
expenditure write off to future years in the given case.
Hence, the expenses amounting ` 40 lakhs incurred on the research and
development project has to be written off in the current year ending
31st March, 2024.
(b) (i) As per AS 2 ‘Valuation of Inventories’, abnormal amounts of wasted
materials, labour and other production costs are excluded from cost
of inventories and such costs are recognised as expenses in the
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 period in which they are incurred. The normal loss will be included
in determining the cost of inventories (finished goods) at the year
end.
(ii) Material used 16,000 MT @ ` 190 = ` 30,40,000
Normal Loss (5% of 16,000 MT) 800 MT (included
in calculation of cost of inventories)
Net quantity of material 15,200 MT
(iii) Abnormal Loss in quantity (950 - 800) 150 MT
Abnormal Loss ` 30,000
[150 units @ ` 200 (` 30,40,000/15,200)]
Amount of ` 30,000 (Abnormal loss) will be charged to the Profit
and Loss statement.
(c) As per AS 13 (Revised) ‘Accounting for Investments’, where long-term
investments are reclassified as current investments, transfers are made
at the lower of cost and carrying amount at the date of transfer; and
where investments are reclassified from current to long term, transfers
are made at lower of cost and fair value on the date of transfer.
Accordingly, the re-classification will be done on the following basis:
(i) In this case, carrying amount of investment on the date of transfer
is less than the cost; hence this re-classified current investment
should be carried at ` 12 lakhs in the books.
(ii) In this case, reclassification of current investment into long-term
investments will be made at ` 7 lakhs as cost is less than its fair
value of ` 8.5 lakhs on the date of transfer.
2. Oliva Company Ltd.
Statement of Profit and loss for the year ended 31.03.2024
Particulars Note Amount (`)
I Revenue from operations 17,10,000
II Other income (3,900 +300) 4,200
III Total Revenue (I +II) 17,14,200
IV Expenses:
Cost of materials consumed 10 12,64,200
Purchases of inventory-in-trade --
Changes in inventories of finished goods, 11 (13,500)
work-in-progress and inventory-in-Trade
Employee benefit expenses 12 44,700
Finance costs --
Depreciation and amortization expenses 18,240
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 Other expenses 13 3,51,510
Total Expenses 16,65,150
V Profit before exceptional and extraordinary 49,050
items and tax
VI Exceptional items --
VII Profit before extraordinary items and tax 49,050
VIII Extraordinary items --
IX Profit before tax 49,050
X Tax expense (40% of 49,050) 19,620
XI Profit/Loss for the period from continuing 29,430
operations
Oliva Company Ltd.
Balance Sheet for the year ended 31.03.2024
Particulars Note Amount
1 Equity and Liabilities
(i) Shareholders’ funds
(a) Share Capital 3,15,000
(b) Reserves and surplus 1 50,430
2) Non-current liabilities
(a) Long-term borrowings 2 24,300
(3) Current Liabilities
(a) Short -term borrowings 3 6,000
(b) Trade payables 3,27,000
(c) Other current liability 4 72,000
(d) Short term provision 5 19,620
8,14,350
II ASSETS
(1) Non current assets
(a) Property, Plant & equipment 6 2,04,160
(b) Non-current investments 7,500
(2) Current assets
(a) Current investments 4,500
(b) Inventories 7 85,800
(c) Trade receivables 2,38,500
(d) Cash and cash equivalents 2,71,100
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 (e) Short-term loans and advances 8 2,490
(f) Other current assets 9 300
8,14,350
Notes to accounts
No. Particulars Amount Amount
1. Reserve & Surplus
Profit & Loss Account: 48,000
Balance b/f
Net Profit for the year 29,430
Less: Interim Dividend (27,000) 50,430
2. Long term borrowings
Secured loans 21,000
Fixed Deposits: Unsecured 3,300 24,300
3. Short term borrowings
Secured loans 4,500
Fixed Deposits -Unsecured 1,500 6,000
4. Other current liabilities
Expenses Payable 72,000
(67,500 + 4,500)
5. Short term provisions
Provision for Income tax 19,620
6. PPE
Building 1,01,000
Less: Depreciation @ 2% (2,020) 98,980
Plant & Machinery 70,400
Less: Depreciation @ 10% (7,040) 63,360
Furniture 10,200
Less: Depreciation @ 10% (1,020) 9,180
Motor vehicles 40,800
Less: Depreciation @ 20% (8,160) 32,640 2,04,160
7 Inventory
Raw Material 25,800
Finished goods 60,000 85,800
8. Short term Loans &
Advances
General Charges prepaid 2,490
9. Other Current Assets
Interest accrued 300
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 10. Cost of material consumed
Opening inventory of raw 30,000
material
Add: Purchases 12,15,000
Stores & spare parts 45,000 12,90,000
consumed
Less: Closing inventory (25,800) 12,64,200
11. Changes in inventory of
Finished Goods & WIP
Closing Inventory of Finished 60,000
Goods
Less: Opening Inventory of 46,500 13,500
Finished Goods
12. Employee Benefit
expenses
Salary & Wages 44,700
(40,200 + 4,500)
13. Other Expenses
Manufacturing Expenses 3,37,500
(2,70,000 + 67,500)
General Charges 14,010 3,51,510
(16,500 – 2,490)
3. (a) As per AS 29 "Provisions, Contingent Liabilities and Contingent Assets",
where some or all of the expenditure required to settle a provision is
expected to be reimbursed by another party, the reimbursement should
be recognised when, and only when, it is virtually certain that
reimbursement will be received if the enterprise settles the obligation.
The reimbursement should be treated as a separate asset. The amount
recognised for the reimbursement should not exceed the amount of the
provision.
It is apparent from the question that the company had not made provision
for warranty in respect of certain goods considering that the company
can claim the warranty cost from the original supplier. However, the
provision for warranty should have been made as per AS 29 and the
amount claimable as reimbursement should be treated as a separate
asset in the financial statements of the company rather than omitting the
disclosure of such liability. Accordingly, it is viewed that the accounting
treatment adopted by the company with respect to warranty is not
correct.

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(b) Balance Sheet of Radhika Ltd. (and Reduced) as on 1.4.2024
Particulars Notes `
I. Equity & Liabilities
A Shareholders' Fund
a Share Capital 1 3,16,800
b Reserves & Surplus 2 1,10,200
B Non-Current Liabilities
a Long Term Borrowings 3 7,86,000
C Current Liabilities
a Trade Payables 3,60,000
b Short Term borrowings: Bank OD 2,34,000
Total 18,07,000
II. Assets
A Non-Current Assets
a Property, Plant & Equipment 4 7,09,000
b Intangible assets: Patents 45,000
B Current Assets
a Inventory (5,10,000-65,000) 4,45,000
b Trade Receivable 5 4,31,500
c Cash & Cash Equivalent 1,76,500
Total 18,07,000
Notes to Accounts
Particulars `
1 Share Capital -
Authorised, Issued, Subscribed & Paid Up Capital
Equity share Capital
15,840 Shares of `20 Paid up 3,16,800
(Out of above 6,840 shares are issued for
consideration other cash) (W.N 1)
2 Reserves & Surplus
Capital Reserve (W.N 2) 1,10,200
3 Long Term Borrowings Secured
6% Debentures 4,50,000
a 11% Debentures (70% of 4,80,000 preference 3,36,000
b shares)
7,86,000
4 PPE
Freehold property 6,49,000
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 Plant 60,000
7,09,000
5 Trade receivable 5,00,000
Less: Provision for Doubtful Debts (68,500)
4,31,500
Working notes:
1. Computation of equity shares:
Equity No. of
share shares at
capital ` 20 each
1 After the reduction to 90,000 x 20 1,80,000 9,000
` 20 each
2. Equity shares allotted 6% of 28,800 1,440
to preference 4,80,000
shareholders for their
¼ arrears.
3. Equity shares allotted 90% of 1,08,000 5,400
to Directors in 1,20,000
settlement of their loan
Total equity shares 3,16,800 15,840

2. Calculation of capital reserve: Equity Share 7,20,000 + Preference

share 1,44,000 + Freehold property 1,39,000 +Investment 74,000
+ Director Loan 6,000 – Preference share dividend 28,800 -
Goodwill 1,56,000 – Inventory 65,000 – Bad debts 68,500 – Profit
& Loss A/c 6,42,000 = Capital Reserve 1,22,700
3. Cash balance:
`
Cash & cash equivalent 82,000
Add: Investment sold 1,40,000
Less: Directors Loan (1,20,000 x 5%) 6,000
Penalty (2,50,000x 5%) 12,500
Interest on debentures (6% on 27,000 45,500
4,50,000)
1,76,500
4. Calculation of Net Assets
Particulars Anu Ltd. (`) Banu Ltd. (`)
Goodwill 1,75,000 50,000
Freehold property 3,75,000 3,00,000
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Plant & Machinery 1,25,000 50,000
Motor vehicle 37,500 25,000
Trade receivable 2,50,000 1,00,000
Inventory 2,87,500 2,25,000
Cash at Bank 1,00,000 50,000
Total 13,50,000 8,00,000
Less : Trade payable (2,62,500) (1,62,500)
6% debentures - (1,57,500)
Net Assets 10,87,500 4,80,000
Calculation of Purchase Consideration
Sr. Particulars Computation Anu Ltd Banu Ltd
No.
1 Amount payable to
Equity Share Holder in
the form of
1,08,750 Equity shares (1,08,750 × 10) 10,87,500
of `10 each
48,000 Equity shares of (48,000 × 10) 4,80,000
`10 each
Purchase Consideration 10,87,500 4,80,000
Balance Sheet of Anban Ltd.
as on 1st April, 2023
Particulars Note `
No.
Equity and Liabilities
(1) Shareholders' Funds
(a) Share Capital 1 15,67,500
(2) Non-current Liabilities
(a) Long term borrowings 2 1,57,500
(3) Current Liabilities
(a) Trade Payables (2,62,500 + 1,62,500) 4,25,000
Total 21,50,000
Assets
(1) Non-current Assets
(a) Property Plant and Equipment 3 9,12,500
(b) Intangible assets 4 2,25,000
(2) Current Assets
(a) Inventories (2,87,500 + 2,25,000) 5,12,500

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 (b) Trade Receivables (2,50,000 + 1,00,000) 3,50,000
(c) Cash and cash equivalents (1,00,000 + 1,50,000
50,000)
Total 21,50,000
Notes to Accounts:
Note Particulars `
No.
1 Share Capital
Equity share capital
1,56,750 equity shares of `10 each 15,67,500
(out of above shares are issued for consideration other
than cash)
2 Long term borrowings
6% Debentures 1,57,500
3 Property, Plant & Equipment’s
Freehold property (3,75,000 + 3,00,000) 6,75,000
Plant & Machinery (1,25,000 + 50,000) 1,75,000
Motor Vehicle (37,500+25,000) 62,500
9,12,500
4 Intangible assets
Goodwill (1,75,000 + 50,000) 2,25,000
5. (a) Revalued net assets of Moon Ltd.as on 31 st March, 2024
` in lakhs ` in lakhs
Property, plant and equipment [240 x 120%] 288.0
Investments [110 X 90%] 99
Current Assets 140.0
Loans and Advances 30.0
Total Assets after revaluation 557
Less: 15% Debentures 180.0
Current Liabilities 100.0 (280.0)
Equity / Net Worth 277
Star Ltd.’s share of net assets (70% of 277) 193.9
Star Ltd.’s cost of acquisition of shares of
Moon Ltd.
(` 140 lakhs – ` 14 lakhs*) 126.00
Capital reserve 67.9
* Total Cost of 70 % Equity of Moon Ltd. ` 140 lakhs

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 Purchase Price of each share ` 20
Number of shares purchased [140 lakhs /` 20] 7 lakhs
Dividend @ 20 % i.e. ` 2 per share ` 14 lakhs
Since dividend received is for pre-acquisition period, it has been reduced
from the cost of investment in the subsidiary company.
(b) Impact of Revaluation of Plant and Machinery will be as -
`
Book value of Plant and Machinery as on 01-04-2023 2,25,000
(2,25,000-2,02,500) 10%
Depreciation Rate = 22,500/2,25000 x100
2,25,000
Book value of Plant and Machinery as on 01-10-2023 after
six months depreciation @10% (2,25,000-11,250) 2,13,750
Revalued at 2,70,000
Revaluation profit (2,70,000-2,13,750) 56,250
Share of Gamma Limited in Revaluation Profit (80%) 45,000
Share of Minority in Revaluation profit (20%) 11,250
Additional Depreciation on appreciated value to be
charged from post-acquisition profits
(10% of ` 22,5,000 for 6 months) + (10% of ` 2,70,000 for
6 months) less ` 22500 (as already charged) 2,250
Share of Gamma Limited in additional depreciation that will
reduce its share (80%) in post-acquisition profit by 1,800
Share of Minority Interest in additional depreciation 450
Working note:
Percentage of holding:
No. of Shares Percentage
Holding Co. : 24,000 (80%)
Minority shareholders : 6,000 (20%)
TOTAL SHARES : 30,000
6. (a) Yes, one of the characteristics of financial statements is neutrality. To
be reliable, the information contained in financial statement must be
neutral, that is free from bias. Financial Statements are not neutral if by
the selection or presentation of information, the focus of analysis could
shift from one area of business to another thereby arriving at a totally
different conclusion on the business results.

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 Or
Effects of each transaction on Balance sheet of the trader is shown
below:
Assets Liabilities Equity
Transactions – =
` lakh ` lakh ` lakh
Opening 16.00 – 6.00 = 10.00
(1) Dividend earned 16.40 – 6.00 = 10.80
(2) Settlement of 15.40 - 4.60 = 10.80
Creditors
(3) Rent Outstanding 15.40 – 4.80 = 10.60
(4) Drawings 15.22 – 4.80 = 10.42
(b) Journal Entries

` `
2022 Equity Share Capital A/c Dr. 4,00,000
June To Equity Stock A/c 4,00,000
(Being conversion of 4,000 fully
paid Equity Shares of ` 100 into
` 4,00,000 Equity Stock as per
resolution in general meeting
dated…)
2023
June Equity Stock A/c Dr. 4,00,000
To Equity Share Capital A/c 4,00,000
(Being re-conversion of
` 4,00,000 Equity Stock into
40,000 shares of ` 10 fully paid
Equity Shares as per resolution
in General Meeting dated...)
(c) Books of Harrison
Branch Stock Account
` `
To Balance b/d – Op 30,000 By Branch Debtors 1,65,000
Stock (Sales)
To Goods Sent to 2,40,000 By Branch Cash 59,000
Branch A/c
To Branch 2,000 By Balance c/d
Adjustment A/c

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 (Balancing Figure Goods in Transit
– Excess of Sale (` 2,40,000 – 20,000
over Invoice Price) ` 2,20,000)
Closing Stock at 28,000
Branch
2,72,000 2,72,000
Branch Debtors Account
` `
To Balance b/d 32,750 By Bad debts written off 750
To Branch Stock 1,65,000 By Branch Cash (bal. fig.) 1,71,000
A/c (Sales)
By Balance c/d 26,000
1,97,750 1,97,750

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 Mock Test Paper - Series I: April, 2024
Date of Paper: 4 April, 2024
Time of Paper: 2 P.M. to 5 P.M.

INTERMEDIATE COURSE: GROUP – I

PAPER – 2: CORPORATE AND OTHER LAWS
ANSWER TO PART – I CASE SCENARIO BASED MCQS
1. (c)
2. (b)
3. (c)
4. (b)
5. (a)
6. (d)
7. (c)
8. (c)
9. (b)
10. (b)
11. (b)
12. (b)
13. (c)
14. (b)
15. (c)
ANSWERS OF PART – II DESCRIPTIVE QUESTIONS
1. (a) (i) Section 1 of the Companies Act, 2013, provides that the provisions of
this Act shall apply to companies incorporated under this Act or under
any previous company law. Hence, the provisions of the Companies Act,
2013 are also applicable on Cross Limited.
(ii) According to section 2(71) of the Companies Act, 2013, public company
means a company which is not a private company.
Provided that a company which is a subsidiary of a company, not being
a private company, shall be deemed to be public company for the
purposes of this Act even where such subsidiary company continues to
be a private company in its articles.
According to section 2(87) of the Companies Act, 2013, "subsidiary
company" or "subsidiary", in relation to any other company (that is to say
the holding company), means a company in which the holding company:
(1) controls the composition of the Board of Directors; or
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 (2) exercises or controls more than one-half of the total voting power
either at its own or together with one or more of its subsidiary
companies.
In the given question, total voting power in XYZ Private Limited is:
Particulars Amount in `
Convertible Preference Shares (carrying voting 1,00,00,000
rights)
Equity Shares 1,00,00,000
Total Voting Power 2,00,00,000
Cross Limited holds more than one- half of the total voting power
[(` 10,00,000 equity shares+ ` 1,00,00,000 preference shares)/
` 2,00,00,000]. Therefore, XYZ Private Limited is a subsidiary of Cross
Limited.
Further, in terms of the provisions of section 2(71), XYZ Private Limited
being subsidiary of Cross Limited (a public company), shall also be
deemed to be a public company.
(b) According to section 135(1) of the Companies Act, 2013, every company
net worth of rupees five hundred crore or more, or turnover of rupees
one thousand crore or more or a net profit of rupees five crore or more
during the immediately preceding financial year shall constitute a
Corporate Social Responsibility Committee of the Board.
Further, according to section 135(5), the Board of every company
referred to in sub-section (1), shall ensure that the company spends, in
every financial year, at least two per cent. of the average net profits of
the company made during the three immediately preceding financial
years or where the company has not completed the period of three
financial years since its incorporation, during such immediately
preceding financial years, in pursuance of its Corporate Social
Responsibility Policy.
Also, according to sub-section 9, where the amount to be spent by a
company under sub-section 5 does not exceed fifty lakh rupees, the
requirement for constitution of the Corporate Social Responsibility
Committee shall not be applicable and the functions of such Committee
provided under this section shall, in such cases, be discharged by the
Board of Directors of such company.
Here, the “Net Profit” shall not include such sums as may be prescribed,
and shall be calculated in accordance with the provisions of section 198.
In the instant case,
1. Net Profit before tax of HelpIndia Limited for the FY 2023- 24 is
` 10 crore, hence, HelpIndia Limited is required to constitute a CSR
committee during FY 2024- 25 as the Net profit before tax for the
FY exceeds ` 5 crore.

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 2. Minimum contribution towards CSR will be: 2% of average net
profits since incorporation (HelpIndia Limited was incorporated on
1st April 2022.)
Average Net Profit since incorporation: (` 11 crore + ` 10 crore)/ 2
= ` 10.5 crore
Minimum contribution towards CSR will be: 2% of ` 10.5 crore = ` 0.21
crore or ` 21 lakh.
In the given question, since the amount to be spent by HelpIndia Limited
is not exceeding ` 50 lakh, the requirement for constitution of the
Corporate Social Responsibility Committee shall not be applicable and
the functions of such Committee provided under this section shall, in
such cases, be discharged by the Board of Directors of such company.
(c) Section 5 of the Foreign Exchange Management Act, 1999 provides that
any person may sell or draw foreign exchange to or from an authorized
person if such sale or drawal is a current account transaction. The
Central Government in consultation can, in public interest and in
consultation with Reserve Bank of India, impose reasonable restrictions
for such transactions.
Schedule II of the Foreign Exchange Management (Current Account
Transactions) Rules, 2000 provides that no person shall draw foreign
exchange for a transaction without approval of the Central Government.
One of the transaction included in Schedule II is remittance of prize
money/ sponsorship of sports activity abroad by a person other than
International/ National/ State level sports bodies, if the amount involved
exceeds USD 100,000.
Accordingly, Rohan Sharma Cricket Academy can withdraw foreign
exchange of USD 100,000 as participation fee after obtaining permission
from Ministry of Human Resource Development (Department of Youth
Affairs and Sports) as prescribed in Schedule II of Foreign Exchange
Management (Current Account Transactions) Rules, 2000.
2. (a) (i) Abridged Form of Annual Return
In terms of Second Proviso to Section 91(1) of the Companies Act,
2013, the Central Government may prescribe abridged form of
annual return for One Person Company, small company and such
other class or classes of companies as may be prescribed.
As per Rule 11 (1) One Person Company and small company shall
file the annual return in Form No. MGT-7A.
(ii) Signing of Annual Return
The annual return shall be signed by a director of the company and
the company secretary; and in case, there is no company secretary,
by a company secretary in practice.
In relation to One Person Company, small company and private
company (if such private company is a start-up), the annual return

3
 shall be signed by the company secretary, or where there is no
company secretary, by the director of the company.
(b) According to section 63 of the Companies Act, 2013, a company may
issue fully paid-up bonus shares to its members, in any manner
whatsoever, out of:
(i) its free reserves;
(ii) the securities premium account; or
(iii) the capital redemption reserve account.
Provided that no issue of bonus shares shall be made by capitalising
reserves created by the revaluation of assets.
Conditions for issue of Bonus Shares: No company shall capitalise
its profits or reserves for the purpose of issuing fully paid-up bonus
shares, unless—
(i) it is authorised by its Articles;
(ii) it has, on the recommendation of the Board, been authorised in the
general meeting of the company;
(iii) it has not defaulted in payment of interest or principal in respect of
fixed deposits or debt securities issued by it;
(iv) it has not defaulted in respect of payment of statutory dues of the
employees, such as, contribution to provident fund, gratuity and
bonus;
(v) the partly paid-up shares, if any, outstanding on the date of
allotment, are made fully paid-up;
(vi) it complies with conditions as are prescribed by Rule 14 of the
Companies (Share Capital and debentures) Rules, 2014 which
states that the company which has once announced the decision of
its Board recommending a bonus issue, shall not subsequently
withdraw the same.
Further, the company has to ensure that the bonus shares shall not be
issued in lieu of dividend.
For the issue of bonus shares APR Limited will require reserves of
` 50,00,000 (i.e. half of ` 1,00,00,000 being the paid-up share capital),
which is readily available with the company. Hence, after following the
above conditions relating to the issue of bonus shares, the company may
proceed for a bonus issue of 1 share for every 2 shares held by the
existing shareholders.
(c) (i) Movable Property
According to section 3(36) of the General Clauses Act, 1897,
‘Movable Property’ shall mean property of every description, except
immovable property.
Thus, any property which is not immovable property is movable
property. Debts, share, electricity are moveable property.

4
 (ii) Oath
According to section 3(37) of the General Clauses Act, 1897, ‘Oath’
shall include affirmation and declaration in the case of persons by
law allowed to affirm or declare instead of swearing.
3. (a) As per section 8 of the Companies Act, 2013, the Central Government
(ROC in its behalf) may grant a licence (to operate as a non profit
organisation) if it is proved to the satisfaction that a person or an
association of persons proposed to be registered under the Companies
Act, 2013, as a limited company:
- has in its objects the promotion of commerce, art, science, sports,
education, research, social welfare, religion, charity, protection of
environment or any such other object;
- intends to apply its profits (if any) or other income in promoting its
objects; and
- intends to prohibit payment of any dividend to its members.
(b) According to Rule 2(1)(c)(x) of the Companies (Acceptance of Deposits)
Rules, 2014, any amount received from an employee of the company not
exceeding his annual salary under a contract of employment with the
company in the nature of non-interest bearing security deposit, is not
considered as deposit .
In the above case, the amount of ` 4,00,000 received by Wood Limited
from Mr. Cotton under the contract of employment with the company
being non-interest bearing security deposit, will be considered as deposit
in terms of sub-clause (x), since the amount is more than his annual
salary of ` 3,85,000.
(c) Read the Statute as a Whole:
It is the elementary principle that construction of a statute is to be made
of all its parts taken together and not of one part only. The deed must be
read as a whole in order to ascertain the true meaning of its several
clauses, and the words of each clause should be so interpreted as to
bring them into harmony with other provisions– if that interpretation does
no violence to the meaning of which they are naturally susceptible. And
the same approach would apply with equal force with regard to Acts and
Rules passed by the legislature.
One of the safest guides to the construction of sweeping general words
is to examine other words of like import in the same enactment or
instrument to see what limitations must be imposed on them. If we find
that a number of such expressions have to be subjected to limitations
and qualifications and that such limitations and qualifications are of the
same nature, that circumstance forms a strong argument for subjecting
the expression in dispute to a similar limitation and qualification.

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4. (a) Periodical Financial Results [Section 129A of the Companies Act,
2013]
The Central Government may, require such class or classes of unlisted
companies, as may be prescribed:
(a) to prepare the financial results of the company on periodical basis
and in prescribed form
(b) to obtain approval of the Board of Directors and complete audit or
limited review of such periodical financial results in the prescribed
manner; and
(c) file a copy with the Registrar within a period of thirty days of
completion of the relevant period with such fees as may be
prescribed.
Therefore, the objection of the Board of Directors on the ground that as
Crystal Limited is an unlisted company, periodical financial results need
not be prepared, is not correct. Section 129A clearly specifies that even
unlisted company has to prepare Periodical Financial Results.
(b) According to section 7 of the Limited Liability Partnership Act, 2008,
every Limited Liability Partnership (LLP) shall have at least two
designated partners who are individuals and at least one of them shall
be a resident in India.
Provided, if in LLP, all the partners are bodies corporate or in which one
or more partners are individuals and bodies corporate, at least two
individuals who are partners of such LLP or nominees of such bodies
corporate shall act as designated partners.
In the given question, at least Mr. Prateek and one nominee of any
bodies corporate shall be designated partners.
(c) Heading and Title of a Chapter
If we glance through any Act, we would generally find that a number of
its sections referring to a particular subject are grouped together,
sometimes in the form of chapters, prefixed by headings and/or Titles.
These Heading and Titles prefixed to sections or groups of sections can
legitimately be referred to for the purpose of construing the enactment
or its parts.
The headings of different portions of a Statute can be referred to
determine the sense of any doubtful expression in a section ranged
under any particular heading.
They cannot control the plain meaning of the words of the enactment
though, they may, in some cases be looked at in the light of preamble if
there is any ambiguity in the meaning of the sections on which they can
throw light.
It may be noted that headings may sometimes be referred to know the
scope of a section in the same way as the preamble. But a heading
cannot control or override a section.
6
5. (a) Circumstances in which LLP may be wound up by Tribunal [Section
64 of the Limited Liability Partnership Act, 2008]
A LLP may be wound up by the Tribunal:
(1) if the LLP decides that LLP be wound up by the Tribunal;
(2) if, for a period of more than six months, the number of partners of
the LLP is reduced below two;
(3) if the LLP has acted against the interests of the sovereignty and
integrity of India, the security of the State or public order;
(4) if the LLP has made a default in filing with the Registrar the
Statement of Account and Solvency or annual return for any five
consecutive financial years; or
(5) if the Tribunal is of the opinion that it is just and equitable that the
LLP be wound up.
(b) According to the Companies (Accounts) Rules, 2014, every unlisted
public company having:
(A) paid up share capital of ` 50 crore rupees or more during the
preceding financial year; or
(B) turnover of ` 200 crore rupees or more during the preceding
financial year; or
(C) outstanding loans or borrowings from banks or public financial
institutions exceeding ` 100 crore rupees or more at any point of
time during the preceding financial year; or
(D) outstanding deposits of 25 crore rupees or more at any point of time
during the preceding financial year;
shall be required to appoint an internal auditor which may be either an
individual or a partnership firm or a body corporate.
In the given question, Kesar Limited has outstanding loan from bank
exceeding 100 crore rupees i.e., ` 102 crore on 3 rd March 2024 (i.e.
during the preceding financial year 2023-24). Hence, it is required to
appoint Internal Auditor during the year 2024-25.
(c) As per section 9 of the General Clauses Act, 1897, for computation of
time, the section states that in any legislation or regulation, it shall be
sufficient, for the purpose of excluding the first in a series of days or any
other period of time to use the word “from” and for the purpose of
including the last in a series of days or any other period of time, to use
the word “to”.
In the given instance, Sheesham Limited declared dividend for its
shareholder in its Annual General Meeting held on 8 th August 2023.
Under the provisions of section 127 of the Companies Act, 2013, a
company is required to pay declared dividend within 30 days from the
date of declaration, i.e. from 9 th August 2023 to 7th September 2023. In
this series of 30 days, 8 th August 2023 will be excluded and last 30 th day,
i.e. 7th September 2023 will be included. Accordingly, Sheesham Limited
7
 will be required to pay dividend within the time frame of 9th August 2023
and 7th September 2023 (both days inclusive).
6. (a) Inspection of Register of Charges and Instrument of Charges
As regards inspection, section 85 (2) of the Companies Act, 2013, states
that the register of charges and the instrument of charges shall be open
for inspection during business hours:
(1) by any member or creditor without any payment of fees; or
(2) by any other person on payment of prescribed fees. subject to such
reasonable restrictions as the company may, by its articles,
impose.
OR
(a) (i) There shall not be included in the minutes, any matter which, in the
opinion of the Chairman of the meeting–
 is or could reasonably be regarded as defamatory of any
person; or
 is irrelevant or immaterial to the proceedings; or
 is detrimental to the interests of the company.
(ii) Maximum time allowed for entering minutes of proceedings: The
minutes of proceedings of each meeting shall be entered in the
books maintained for that purpose along with the date of such entry
within 30 days of the conclusion of the meeting.
(b) According to section 389 of the Companies Act, 2013:
No person shall issue, circulate or distribute in India any prospectus
offering for subscription in securities of a company incorporated or to be
incorporated outside India, whether the company has or has not
established, or when formed will or will not establish, a place of business
in India, unless before the issue, circulation or distribution of the
prospectus in India;
✓ a copy thereof certified by the chairperson of the company and
two other directors of the company as having been approved by
resolution of the managing body has been delivered for
registration to the Registrar; and
✓ the prospectus states on the face of it that a copy has been so
delivered, and
✓ there is endorsed on or attached to the copy, any consent to the
issue of the prospectus required by section 388 and such
documents as may be prescribed.
According to the Companies (Registration of Foreign Companies) Rules,
2014, the following documents shall be annexed to the prospectus,
namely:

8
 (1) any consent to the issue of the prospectus required from any
person as an expert;
(2) a copy of contracts for appointment of managing director or
manager and in case of a contract not reduced into writing, a
memorandum giving full particulars thereof;
(3) a copy of any other material contracts, not entered in the ordinary
course of business, but entered within preceding 2 years;
(4) a copy of underwriting agreement; and
(5) a copy of power of attorney, if prospectus is signed through duly
authorized agent of directors.
(c) Section 5 of the Foreign Exchange Management Act, 1999 provides that
any person may sell or draw foreign exchange to or from an authorized
person if such sale or drawal is a current account transaction. The
Central Government in consultation can, in public interest and in
consultation with Reserve Bank of India, impose reasonable restrictions
for such transactions.
Schedule II of the Foreign Exchange Management (Current Account
Transactions) Rules, 2000 provides that no person shall draw foreign
exchange for a transaction without approval of the Central Government.
One of the transaction included in Schedule II is ‘cultural tours’.
Accordingly, Ms. Kanika Tripathi can withdraw foreign exchange of
USD 75,000 for meeting expenses of cultural tour after obtaining
permission from Ministry of Human Resource Development (Department
of Education and Culture) as prescribed in Schedule II of Foreign
Exchange Management (Current Account Transactions) Rules, 2000.

9
 Mock Test Paper - Series II: April, 2024
Date of Paper: 6 April, 2024
Time of Paper: 2 P.M. to 5 P.M.

INTERMEDIATE COURSE: GROUP - I

PAPER – 3: TAXATION
SECTION – A: INCOME TAX LAW
SOLUTIONS
Division A – Multiple Choice Questions
MCQ Sub-part Most Appropriate MCQ Most Appropriate
No. Answer No. Answer
1. (i) (b) 2. (b)
(ii) (d) 3. (a)
(iii) (b)
(iv) (a)
(v) (a)
(vi) (a)
Division B – Descriptive Questions
1. Computation of total income of Mr. Sunil for A.Y. 2024-25 under default
tax regime under section 115BAC
Particulars ` ` `
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received 2,95,000
is taken as GAV, in the absence of
other information]
Less: Municipal taxes paid by him in
the P.Y. 2023-24 pertaining to let out 12,500
portion [` 25,000/2]
Net Annual Value (NAV) 2,82,500
Less: Deduction u/s 24
(a) 30% of ` 2,82,500 84,750
(b) Interest on housing loan 75,000 1,59,750
[` 1,50,000/2]
1,22,750
Self-occupied portion [Ground
Floor]
Annual Value Nil

1
 [No deduction is allowable in respect
of municipal taxes paid]
Less: Interest on housing loan [Not Nil
allowable under section 115BAC]
Nil
Income from house property 1,22,750
II Profits and gains of business or
profession
Income from SEZ unit 40,00,000
III Capital Gains
Long-term capital gains on sale of
land (since held for more than 24
months)
Full Value of Consideration [Actual 15,00,000
consideration of ` 15 lakhs, since
stamp duty value of ` 16 lakhs does
not exceed actual consideration by
more than 10%]
Less: Indexed Cost of acquisition
[` 4,00,000 x 348/100] 13,92,000 1,08,000
Cost of acquisition
Higher of -
- Actual cost ` 2.80 lakhs + ` 0.12
lakhs = ` 2.92 lakhs and
- Fair Market Value (FMV) as on
1.4.2001 = ` 4.8 lakhs but cannot
exceed stamp duty value of ` 4
lakhs.
IV Income from Other Sources
Interest on savings bank deposits 30,000
Interest on fixed deposits 40,000 70,000
Gross Total Income 43,00,750
Less: Deduction under Chapter
VI-A
Deduction under section 80JJAA 7,12,800
30% of the employee cost of the new
employees employed during the P.Y.
2023-24 for 240 days or more during
the P.Y. 2023-24 allowable as
deduction [30% of ` 23,76,000 (12 x
18,000 x 11)]
As per section 115BAC, no
deduction under section 10AA or
2
 under Chapter VI-A is allowable
except u/s 80JJAA
Total Income 35,87,950
Computation of tax liability of Mr. Sunil under section 115BAC
Particulars ` `
Tax on total income of ` 35,87,950
Tax on LTCG of ` 1,08,000@20% 21,600
Tax on remaining total income of ` 34,79,950
Upto ` 3,00,000 Nil
` 3,00,001 – ` 6,00,000 [@5% of ` 3 lakhs] 15,000
` 6,00,001 – ` 9,00,000 [@10% of ` 3 lakhs] 30,000
` 9,00,001 – ` 12,00,000 [@15% of ` 3 lakhs] 45,000
` 12,00,001 – ` 15,00,000 [@20% of ` 3 lakhs] 60,000
` 15,00,001 – ` 34,79,950 [@30% of ` 19,79,950] 5,93,985 7,43,985
7,65,585
Add: Health and education cess@4% 30,623
Total tax liability 7,96,208
Tax liability (rounded off) 7,96,210
Note - An individual paying tax u/s 115BAC is not liable to alternate minimum
tax u/s 115JC.
Computation of total income of Mr. Sunil for A.Y. 2024-25 under normal
provisions of the Act
Particulars ` `
Gross Total Income as per default tax regime 43,00,750
under section 115BAC
Less: Interest on borrowing in respect of self- 75,000
occupied house property [` 1,50,000/2]
Gross Total Income as per section 115BAC 42,25,750
Less: Deduction u/s 10AA 12,00,000
[Since the industrial undertaking is established in
SEZ, it is entitled to deduction u/s 10AA@100% of
export profits, since P.Y.2023-24 being the
5th year of operations]
[Profits of the SEZ x Export Turnover received in
convertible foreign exchange/Total Turnover] x
100%
[` 40 lakhs x ` 120 lakhs/ ` 400 lakhs x 100%]
Less: Deduction under Chapter VI-A
Deduction under section 80C
Repayment of principal amount of housing loan 80,000
3
 Insurance premium paid on life insurance policy of
son allowable, even though not dependent on 40,000 1,20,000
Mr. Sunil
Deduction under section 80JJAA [As computed 7,12,800
above]
Deduction under section 80TTA 10,000
Interest on savings bank account, restricted to
` 10,000
Total Income as per regular provisions of the 21,82,950
Act
Computation of tax liability of Mr. Sunil for A.Y. 2024-25 under the regular
provisions of the Act
Particulars ` `
Tax on total income of ` 21,82,950
Tax on LTCG of ` 1,08,000@20% 21,600
Tax on remaining total income of ` 20,74,950
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000[@5% of ` 2.50 lakhs] 12,500
` 5,00,001 – ` 10,00,000[@20% of ` 5 lakhs] 1,00,000
` 10,00,001 – ` 20,74,950[@30% of ` 10,74,950] 3,22,485 4,34,985
4,56,585
Add: Health and education cess@4% 18,263
Total tax liability 4,74,848
Tax liability (rounded off) 4,74,850
Computation of adjusted total income and AMT of Mr. Sunil for
A.Y. 2024-25
Particulars `
Computation of adjusted total income
Total income as per the normal provisions of the Act 21,82,950
Add: Deduction u/s 10AA 12,00,000
Deduction u/s 80JJAA 7,12,800
Adjusted Total Income 40,95,750
Alternative Minimum [email protected]% 7,57,714
Add: Health and education cess@4% 30,309
AMT liability 7,88,023
AMT liability (rounded off) 7,88,020
Since the regular income-tax payable is less than the alternate minimum tax
payable, the adjusted total income shall be deemed to be the total income and
tax is leviable @18.5% thereof plus cess@4%. Therefore, liability as per
section 115JC is ` 7,88,020.

4
 Since, tax liability as per section 115BAC of ` 7,96,210 is higher than the tax
liability of ` 7,88,020, being higher of AMT liability and tax liability computed
as per normal provisions of the Income-tax Act, 1961, it is beneficial for
Mr. Sunil to exercise the option to shift out of the default tax regime under
section 115BAC. In such a case, his tax liability would be ` 7,88,020 and
Mr. Sunil would be eligible to carry forward the AMT credit of ` 3,13,170
(` 7,88,020 - ` 4,74,850).
2. (a) Under section 6(1), an individual is said to be resident in India in any
previous year, if he satisfies any one of the following conditions:
(i) He has been in India during the previous year for a total period of
182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the
previous year for a total period of 365 days or more and has been
in India for at least 60 days in the previous year.
If an individual satisfies any one of the conditions mentioned above, he
is a resident. If both the above conditions are not satisfied, the individual
is a non-resident.
Therefore, the residential status of Mrs. Sia D’Souza, an American, for
A.Y.2024-25 has to be determined on the basis of her stay in India during
the previous year relevant to A.Y. 2024-25 i.e. P.Y.2023-24 and in the
preceding four assessment years.
Her stay in India during the previous year 2023-24 and in the preceding
four years are as under:
P.Y. 2023-24
01.04.2023 to 16.08.2023 - 138 days
23.03.2024 to 31.03.2024 - 9 days
Total 147 days
Four preceding previous years
P.Y.2022-23 [1.4.2022 to 31.3.2023] - 14 days
P.Y.2021-22 [1.4.2021 to 31.3.2022] - Nil
P.Y.2020-21 [1.4.2020 to 31.3.2021] - Nil
P.Y.2019-20 [1.4.2019 to 31.3.2020] - Nil
Total 14 days
The total stay of Mrs. Sia D’Souza during the previous year in India was
less than 182 days and during the four years preceding this year was for
14 days. Therefore, due to non-fulfillment of any of the two conditions for
a resident, she would be treated as non-resident for the Assessment
Year 2024-25.
5
 Computation of total income of Mrs. Sia D’Souza for the
A.Y. 2024-25
Particulars ` `
Income from house property
Flat located in Mumbai let-out from 01.06.2023
to 31.03.2024 @ ` 26,000 p.m.
Gross Annual Value [26,000 x 10]1 2,60,000
Less: Municipal taxes Nil
Net Annual Value (NAV) 2,60,000
Less: Deduction under section 24
30% of NAV 78,000
Interest on loan [fully allowable as 2,05,000 2,83,000 (23,000)
deduction, since property is let-out]
Income from other sources
- Gold chain worth ` 1,50,000 received from
parents of husband would be exempt, since Nil
parents of husband fall within the definition
of relatives and gifts from a relative are not
chargeable to tax.
- Gift received from friends of her husband
aggregating to ` 1,65,000 is taxable under
section 56(2)(x) since the amount of cash
gifts of ` 1,65,000 exceeds ` 50,000. 1,65,000 1,65,000
Gross Total income/ Total Income 1,42,000
(b) TDS implications
(i) Since overseas tour package is taken on or after 1.10.2023, tax @
5% till ` 7 lakhs and 20% thereafter, is required to be collected u/s
206C(1G) by the seller of an overseas tour programme package,
from Mr. Harish, being the buyer of an overseas tour package, even
if payment is made by account payee cheque.
Accordingly, tax has to be collected@5% on ` 7 lakh and 20% on
` 3 lakhs.
TCS = ` 95,000
(ii) Mr. Aditya has to deduct tax at source@5% u/s 194M, although his
turnover for the P.Y. 2022-23 does not exceed ` 1 crore and he is
not liable to deduct tax at source under section 194C, since the
payment to contractor, Mr. Naresh, exceeds ` 50 lakhs.
Accordingly, tax has to be deducted @5% on ` 55 lakhs.
TDS = ` 2,75,000

1 Actual rent received has been taken as the gross annual the value in absence of other information
(i.e. Municipal value, fair rental value and standard rent) in the question.
6
3. (a) Computation of gross total income of Ms. Priyanka for the A.Y.
2024-25 under normal provisions of the Act
Particulars ` `
(a) Income from salaries (See Working 5,81,000
Note below)
(b) Income from Other Sources
(i) Interest on fixed deposit with a 7,000
company
(ii) Income from specified mutual fund 3,000
(iii) Interest on Fixed Deposit received
by minor daughter (` 4,000 - 2,500 12,500
` 1500)
Gross total income 5,93,500
Working Note:
Computation of salary income of Ms. Priyanka for the
A.Y. 2024-25
Particulars `
Salary [` 40,000 x 12] 4,80,000
Medical facility [in the hospital maintained by the _
company is exempt]
Rent free accommodation
15% of salary from 1.4.2023 to 31.8.2023 and 10% of 58,000
salary from 1.9.2023 to 31.3.2024 (` 4,80,000 × 15% x
5/12) + (` 4,80,000 × 10% x 7/12)
Valuation of perquisite of interest on loan
[Rule 3(7)(i)] – 9.5% is taxable which is to be reduced 24,500
by actual rate of interest charged i.e. [9.5% - 6% = 3.5%]
Use of dining table for 1 month
[` 60,000 x 10/100 x 1/12] 500
Perquisite on sale of dining table
Cost 60,000
Less: Depreciation on straight line method 12,000
@ 10% for 2 years
Written Down Value 48,000
Less: Amount paid by the assessee 30,000 18,000
Purchase through credit card 10,000
Perquisite on sale of car
Original cost of car 2,50,000
Less: Depreciation from 16.7.2021 to 50,000
15.7.2022 @ 20%
7
 Value as on 14.07.2023- being the date of 2,00,000
sale to employee
Less: Amount received from the assessee
on 14.07.2023 1,60,000 40,000
Gross salary 6,31,000
Less: Standard deduction upto ` 50,000 50,000
Income from Salaries 5,81,000
(b) (i) Computation of book profit of the firm under section 40(b)
Particulars Amount Amount
(`) (`)
Net Profit (before deduction of depreciation, 7,50,000
salary and interest)
Less: Depreciation under section 32 2,50,000
Interest @ 12% p.a. [being the maximum 72,000 3,22,000
allowable as per section 40(b)] (` 6,00,000 ×
12%)
Book profit 4,28,000
“Book profit” means the net profit as per the profit and loss account for
the relevant previous year computed in the manner laid down in Chapter
IV-D as increased by the aggregate amount of the remuneration paid or
payable to the partners of the firm if the same has been already deducted
while computing the net profit. Hence, brought forward loss of ` 50,000
of P.Y.2022-23 is not allowed to be set off for computation of “book
profit”.
(ii) Salary actually paid to working partners = ` 25,000 × 2 × 12 = ` 6,00,000
As per the provisions of section 40(b)(v), the maximum allowable working
partners’ salary for the A.Y. 2024-25 in this case would be:
Particulars `
On the first ` 3,00,000 of book profit [(` 1,50,000 or 90% of 2,70,000
` 3,00,000) whichever is more]
On the balance of book profit [60% of (` 4,28,000 – 76,800
` 3,00,000)]
Maximum allowable working partners’ salary 3,46,800
4. (a) Computation of Taxable Income of Mr. Roshan for the A.Y. 2024-25
under normal provisions of the Act
Particulars ` `
Salaries
Shamita’s salary (` 25,000 x 12) 3,00,000
[See Note 1]

8
Less: Standard deduction under section 50,000
16(ia) upto ` 50,000
2,50,000
Less: Loss from house property set off
against salary income as per section 71(3A) 2,00,000 50,000
[See Note 2]
Capital Gains
Short term capital gain 1,50,000
Less: Loss from tea business (` 1,06,000 x 42,400 1,07,600
40%) [See Note 3 & 4]
Income from Other Sources
Dividend income 11,00,000
Taxable Income 12,57,600
The following losses can be carried forward for subsequent
assessment years:
(i) Loss from house property to be carried forward and ` 50,000
set-off against income from house property
(ii) Long-term capital loss of A.Y. 2020-21 can be carried ` 86,000
forward and set-off against long-term capital gains
(iii) Loss from speculative business to be carried forward ` 50,000
and set-off against income from speculative business
Notes:
(1) As per section 64(1)(ii), all the income which arises directly or
indirectly, to the spouse of any individual by way of salary,
commission, fees or any other form of remuneration from a concern
in which such individual has a substantial interest shall be included
in the total income of such individual. However, where spouse
possesses technical or professional qualification and the income is
solely attributable to the application of such knowledge and
experience, clubbing provisions will not apply. Since, Mrs. Shamita
is not adequately qualified for the post and Mr. Roshan has
substantial interest in Ray Ltd by holding 21% of the shares of the
Ray Ltd., the salary income of Mrs. Shamita to be included in
Mr. Roshan’s income.
(2) As per section 71(3A), loss from house property can be set off
against any other head of income to the extent of ` 2,00,000 only.
(3) 60% of the losses from tea business is treated as agricultural
income and therefore exempt under section 10(1). Loss from an
exempt source cannot be set off against profits from a taxable
source.
9
 (4) As per section 71(2A), business loss cannot be set off against
salary income. Hence, 40% of the losses from tea business i.e.,
` 42,400 can be set off against short term capital gains or dividend
income.
(5) Loss from card games can neither be set off against any other
income, nor can it be carried forward.
(6) Loss of ` 50,000 from speculative business can be set-off only
against the income from the speculative business. Hence, such
loss has to be carried forward.
(7) As per section 74(1), brought forward long-term capital loss can be
set-off only against long-term capital gain. Such loss can be carried
forward for eight assessment years immediately succeeding the
assessment year for which the loss was first computed. Since, 8
assessment years has not expired, such loss can be carried
forward to A.Y. 2025-26 for set-off against long-term capital gains.
(b) First alternative
(i) A HUF whose total income without giving effect to, inter alia,
section 54EC, exceeds the basic exemption limit, is required to file
a return of its income on or before the due date under section
139(1). In this case, since the total income without giving effect to
exemption under section 54EC is ` 12 lakhs, exceeds the basic
exemption limit, the HUF is required to file its return of income for
A.Y. 2024-25 on or before the due date under section 139(1).
(ii) If an individual has incurred expenditure exceeding ` 1 lakh towards
consumption of electricity during the previous year, he would be
required to file a return of income, even if his total income does not
exceed the basic exemption limit. Since Mr. Samarth has incurred
expenditure of ` 1,20,000 in the P.Y.2023-24 towards consumption
of electricity, he has to file his return of income for A.Y. 2024-25 on
or before the due date under section 139(1).
(b) Second alternative
Every person who is eligible to obtain Aadhaar Number is required to
mandatorily quote Aadhaar Number:
(a) in the application form for allotment of Permanent Account Number
(PAN)
(b) in the return of income
The provisions of section 139AA relating to quoting of Aadhaar Number
would, however, not apply to an individual who does not possess the
Aadhaar number or Enrolment ID and is:
(i) residing in the States of Assam, Jammu & Kashmir and Meghalaya;

10
(ii) a non-resident as per Income-tax Act, 1961;
(iii) of the age of 80 years or more at any time during the previous year;
(iv) not a citizen of India.
If a person does not have Aadhaar Number, he is required to quote
Enrolment ID of Aadhaar application form issued to him at the time of
enrolment in the application form for allotment of PAN or in the return of
income furnished by him.

11
 SECTION B – GOODS AND SERVICES TAX (50 MARKS)
SUGGESTED ANSWERS
Division A - Multiple Choice Questions

Question Answer
No.
1 (b) The tax is payable at the time of supply of goods
2 (b) ` 5 crores
3 (a) Company has an option to issue single credit note against
multiple invoices.
4 (d) transaction value subject to the conditions mentioned in
Section 15(2) of the CGST Act, 2017.
5 (a) The Company shall be eligible to avail full input tax credit.
6 (c) Invoice by Maharashtra unit to the Gujarat unit of the
Company
7 (c) Mr. Jambulal is liable to obtain registration as he makes the
inter-State supply of goods.
8 (b) No, service by way of renting of residential property is
exempt.

Division B - Descriptive Questions

1. (a) Computation of GST payable
Particulars Value of CGST SGST IGST
supply @ 9% @ 9% @ 18%
(`) (`) (`) (`)
GST payable under forward
charge
Carnatic music performance 1,40,000 12,600 12,600 Nil
given to promote a brand of
readymade garments
[Carnatic music performance by
Mr. Nandan lal is not exempt
from GST even though the
consideration charged does not
exceed ` 1,50,000 since said
performance has been made by
him as a brand ambassador.]
Services of transportation of 1,00,000 9,000 9,000 Nil
students provided to HSMG
College
[Services of transportation of
12
students provided to an
educational institution other
than an institution providing
pre-school education or
education up to higher
secondary school, are not
exempt.]
Services provided to IFMP 2,00,000 18,000 18,000 Nil
Bank as a business
correspondent
[Services provided by a
business correspondent to a
banking company are not
exempt when such services are
provided with respect to
accounts in its urban area
branch.]
Services provided as a 15,000 1,350 1,350 Nil
recovery agent
[Tax is payable under forward
charge since recovery agent’s
services are being provided to a
person other than banking
company/financial institution/
non-banking financial
company.]
Total GST payable under 40,950 40,950 Nil
forward charge (A)
GST payable under reverse
charge
Legal services availed from an 1,75,000 Nil Nil 31,500
advocate
[Legal services received by a
business entity with aggregate
turnover in the preceding
financial year exceeding
threshold limit for registration
(` 20 lakh) are not exempt and
tax on the same is payable
under reverse charge.]
Total GST payable under Nil Nil 31,500
reverse charge (B)
Total GST payable [(A)+(B)] 40,950 40,950 31,500

13
 Computation of total ITC available
Particulars Value of CGST SGST IGST
supply @ 9% @ 9% @ 18%
(`) (`) (`) (`)
Outdoor catering services 50,000 Nil Nil Nil
availed
[ITC on outdoor catering
services is blocked except
when such services are (i)
used by the taxpayer who is in
the same line of business or
(ii) provided by the employer
to its employees under a
statutory obligation.]
Legal services availed 1,75,000 Nil Nil 31,500
[ITC is available as said
services are used in course or
furtherance of business.]
General insurance taken on a 40,000 Nil Nil Nil
car (seating capacity 5) used
for official purposes
[ITC on motor vehicles for
transportation of persons with
seating capacity ≤ 13 persons
(including the driver) is
blocked except when the
same are used for (i) making
further taxable supply of such
motor vehicles (ii) making
taxable supply of
transportation of passengers
(iii) making taxable supply of
imparting training on driving
such motor vehicles. Further,
ITC is not allowed on services
of general insurance relating
to such ineligible motor
vehicles.]
Total ITC available Nil Nil 31,500
Computation of net GST payable in cash
Particulars CGST SGST IGST
@ 9% @ 9% @ 18%
(`) (`) (`)
GST payable under forward charge 40,950 40,950 Nil

14
 Less: ITC of IGST1 [Refer Note] (15,750) (15,750) -
IGST IGST
25,200 25,200 Nil
Add: GST payable under reverse Nil Nil 31,500
charge in cash
[Tax payable under reverse charge,
being not an output tax, cannot be set
off against ITC and thus, will have to be
paid in cash.]
Net GST payable in cash 25,200 25,200 31,500
Note: ITC of IGST can be utilised towards payment of CGST and SGST
in any proportion and in any order.
(b) Computation of value of taxable supply made by M/s. LSP to
Balwant Ltd.
Particulars Amount
(`)
Price of the machine 20,000
[Since the price linked subsidy is received from the State
Government, the same is not includible in the value of
supply]
Third party inspection charges 6,000
[Any amount that the supplier is liable to pay in relation
to the supply but has been incurred by the recipient and
not included in the price actually paid or payable for the
goods, is includible in the value of supply]
Freight charges for delivery of the machine 1,000
[Since arranging freight is the liability of supplier, it is a
case of composite supply and thus, freight charges are
added in the value of principal supply.]
Total 27,000
Less: Discount @ 2% on ` 20,000 being price charged 400
to Balwant Ltd.
[Discount given before or at the time of supply if duly
recorded in the invoice is deductible from the value of
supply]
Value of taxable supply 26,600
2. (a) (i) Services provided by way of renting of residential dwelling for use
as residence except where the residential dwelling is rented to a
registered person is exempt from GST. Further, tax on service
1
Since IGST credit can be set off against CGST and SGST liability in any order and in any proportion,
the same can be set off against CGST and/or SGST liabilities in different ways as well. In all such
cases, net CGST and net SGST payable from Electronic Cash Ledger will differ though the total amount
of net GST payable ( ` 81,900) in cash will remain the same.
15
 provided by way of renting of residential dwelling to a registered
person is payable by the recipient under reverse charge.
Therefore, in the given case, Anant Technologies is liable to pay
GST on the residential dwellings taken on rent by it from Sapna
Builders, under reverse charge mechanism.
(ii) In case of services provided by any person by way of sponsorship
to any body corporate or partnership firm, GST is liable to be paid
under reverse charge by such body corporate or partnership firm
located in the taxable territory.
Since in the given case, sponsorship services are being provided
by the private NGO to a partnership firm – M/s. Verma Consultants,
GST is payable by Verma Consultants on said services under
reverse charge.
(b) Section 10(2A) of the CGST Act, 2017 provides the turnover limit of ` 50
lakh in the preceding financial year for becoming eligible for composition
levy for services. Little Smiles has started the supply of services in the
current financial year (FY), thus, it’s aggregate turnover in the preceding
FY is Nil. Consequently, in the current FY, Little Smiles is eligible for
composition scheme for services. A registered person opting for
composition levy for services shall pay tax @ 3% [Effective rate 6%
(CGST+ SGST/UTGST)] of the turnover of supplies of goods and
services in the State.
Further, Little Smiles becomes eligible for the registration when the
aggregate turnover exceeds ` 20 lakh (the threshold limit of obtaining
registration). While registering under GST, Little Smiles can opt for
composition scheme for services.
The option of a registered person to avail composition scheme for
services shall lapse with effect from the day on which his aggregate
turnover during a financial year exceeds the threshold limit of ` 50 lakh.
However, for the purposes of determining the tax payable under
composition scheme, the expression “turnover in State” shall not include
the value of supplies from the first day of April of a FY up to the date
when such person becomes liable for registration under the CGST Act.
Thus, for determining the turnover of the State for payment of tax under
composition scheme for services, turnover of April,2023 – June,2023
quarter [` 20 lakh] shall be excluded. On next ` 30 lakh [turnover of
July,2023 – September, 2023 quarter], it shall pay tax @ 6% [3% CGST
and 3% SGST].
For the purposes of computing aggregate turnover of a registered person
for determining his eligibility to pay tax under this section, aggregate
turnover includes value of supplies from the 1 st April of a FY up to the
date of his becoming liable for registration.
Thus, while computing aggregate turnover for determining Little Smiles’s
eligibility to pay tax under composition scheme, value of supplies from
16
 the first day of April of a financial year up to the date when it becomes
liable for registration under this Act (i.e. turnover of April,2023 –
June,2023 quarter), are included.
By the end of July, 2023 – September, 2023 quarter, the aggregate
turnover reaches ` 50 lakh. Consequently, the option to avail
composition scheme for services shall lapse by the end of July, 2023 –
September, 2023 quarter and thereafter, it is required to pay tax at the
normal rate of 18%.
Considering the above provisions, the tax payable for each quarter is as
under:-
S. Quarter GST rate Turnover GST payable
No. [CGST + (` in lakh) (` in lakh)
SGST]
1 April, 2023 – June, - 20 -
2023
2 July, 2023 – 6% 30 1.8
September, 2023
3 October, 2023 – 18% 40 7.2
December, 2023
3. (a) A user will not be able to generate e-way bill for a GSTIN if the said
GSTIN is not eligible for e-way bill generation.
The blocking of GSTIN for e-way bill generation is only for the defaulting
supplier GSTIN and not for the defaulting Recipient or Transporter
GSTIN.
A person paying tax under regular scheme who has not furnished the
returns for a consecutive period of 2 tax periods is considered as a
defaulting person.
Suspended GSTIN cannot generate e-way bill as supplier. However, the
suspended GSTIN can get the e-way bill generated as recipient or as
transporter.
In other words, e-way bill generation facility is blocked only in respect of
any outward movement of goods of the registered person who is not
eligible for e-way bill generatio. E-way bills can be generated in respect
of inward supplies of said registered person.
Thus, applying the above provisions, there will be no restriction in
generating e-way Bill by Mr. Roshan as Mr. Roshan who is making
outward movement of goods is a regular return filer.
E-way bill generation is blocked in case of movement of goods made by
Mr. Sohan to Mr. Mohan as it’s an outward movement of goods of
Mr. Sohan who has not filed GSTR-3B for past 2 months.

17
 (b) The proper officer may cancel the registration of a person from such
date, including any retrospective date, as he may deem fit, where,-
(a) a registered person has contravened the prescribed provisions; or
(b) a person paying tax under composition scheme has not furnished
returns for a financial year beyond 3 months from due date of
furnishing retun; or
(c) any registered person, other than a person specified in clause (b),
has not furnished returns for a prescribed period; or
(d) any person who has taken voluntary registration has not
commenced business within six months from the date of
registration; or
(e) registration has been obtained by means of fraud, wilful
misstatement, or suppression of facts:
Thus, in view of the above-mentioned provisions, suo-motu cancellation
of registration of Mr. Raj by proper officer is valid in law since Mr. Raj, a
voluntarily registered person, has not commenced his business within 6
months from the date of registration.
Further, where the registration of a person is cancelled suo-motu by the
proper officer, such registered person may, subject to the provisions of
rule 10B, apply for revocation of the cancellation of registration to such
proper officer, within 90 days from the date of service of the order of
cancellation of registration.
However, the said period of 90 days may, on sufficient cause being
shown and for reasons to be recorded in writing, be extended by the
Commissioner or an officer authorised by him in this behalf, not below
the rank of Additional Commissioner or Joint Commissioner, as the case
may be, for a further period not exceeding 180 days.
Thus, considering the above provisions, the contention of Department is
not valid in law as he has applied for revocation within the time limit of
90 days.
4. (a) There are cases where an unregistered person purchases goods over
the counter (OTC) in one State and thereafter, transports the goods to
another State (generally, the State where he resides). For instance,
migrant workers, tourists, etc. who come to a State for work, tourism,
etc. and purchase goods in that State to take it to their respective State.
Similarly, in automobile sector, the residents of a State may travel to
another State to purchase vehicle from that State to take advantage of
lower registration charges and road tax, which vary from State to State
and thereafter, take the vehicle to their State.
Where the supply of goods is made to a person other than a registered
person, the place of supply shall be the location as per the address of
the said person recorded in the invoice issued in respect of the said
supply and the location of the supplier where the address of the said
person is not recorded in the invoice.
18
 For this purpose, recording of the name of the State of the said person
in the invoice shall be deemed to be the recording of the address of the
said person.
Or
(a) In case of an event, if the recipient of service is registered, the place of
supply of services for organizing the event is the location of such person.
However, if the recipient is not registered, the place of supply is the place
where event is held.
Since the event is being held in multiple states and a consolidated
amount is charged for such services, the place of supply will be deemed
to be in each State in proportion to the value for services determined in
terms of the contract or agreement entered into in this regard.
In the absence of a contract or agreement between the supplier and
recipient of services, the proportionate value of services made in each
State (where the event is held) will be computed by the application of
generally accepted accounting principles.
(b) The amount available in the electronic credit ledger may be used for
making any payment towards output tax under the CGST Act or the IGST
Act, subject to the provisions relating to the order of utilisation of ITC.
Further, output tax in relation to a taxable person is defined as the tax
chargeable on taxable supply of goods or services or both but excludes
tax payable on reverse charge mechanism.
Accordingly, it is clarified that any payment towards output tax, whether
self-assessed in the return or payable as a consequence of any
proceeding instituted under the provisions of GST laws, can be made by
utilization of the amount available in the electronic credit ledger of a
registered person.
It is further reiterated that as output tax does not include tax payable
under reverse charge mechanism, implying thereby that the electronic
credit ledger cannot be used for making payment of any tax which is
payable under reverse charge mechanism.

19