GUIDELINE ANSWERS

EXECUTIVE PROGRAMME

DECEMBER 2020

MODULE 1

ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003
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These answers have been written by competent persons
and the Institute hope that the GUIDELINE ANSWERS will
assist the students in preparing for the Institute's
examinations. It is, however, to be noted that the answers
are to be treated as model answers and not as exhaustive
and the Institute is not in any way responsible for the
correctness or otherwise of the answers compiled and
published herein.

The Guideline Answers contain the information based on the

Laws/Rules applicable at the time of preparation. However,
students are expected to be well versed with the amendments
in the Laws/Rules made upto six months prior to the date of
examination.

C O N T E N T S
Page
MODULE 1
1. Company Law ... 1
2. Cost and Management Accounting ... 23
(OMR Based Exam)

3. Economic and Commercial Laws ... 48

4. Tax Laws and Practice (OMR Based Exam) ... 65
 1 EP–CL–December 2020
EXECUTIVE PROGRAMME EXAMINATION
DECEMBER 2020

COMPANY LAW
Time allowed : 3 hours Maximum marks : 100
NOTE : 1. Answer ALL Questions.
2. All references to sections relate to the Companies Act, 2013 unless stated
otherwise.
Question 1
Comment on the following:
(a) Is it mandatory for every public company to appoint Key Managerial Personnel?
(b) A petition to the National Company Law Tribunal for winding up of a company
shall be presented only by the company and not by any contributory.
(c) It is not mandatory for every company issuing debentures to create a debenture
redemption reserve account.
(d) The Articles of Association may contain provisions for entrenchment.
(5 marks each)
Answer 1(a)
Section 203 of the Companies Act, 2013 read with Rule 8 of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 mandates the
appointment of whole-time Key Managerial Personnel and makes it obligatory for every
listed company and every other public company having a paid- up share capital of rupees
`10 crores or more, to appoint the following whole-time key managerial personnel:
(i) Managing Director, or Chief Executive Officer or Manager and in their absence,
a Whole-Time Director;
(ii) Company Secretary; and
(iii) Chief Financial Officer.
Accordingly, it is mandatory for only those Public Limited Companies which are
covered under the aforesaid mentioned provisions to appoint whole-time Key Managerial
Personnel.
Answer 1(b)
Section 272(1) of the Companies Act, 2013 provides that subject to the provisions of
this section, a petition to the Tribunal for the winding up of a company shall be presented
by—
(a) the company;
(b) any contributory or contributories;
(c) all or any of the persons specified in clauses (a) and (b);
1
EP–CL–December 2020 2
(d) the Registrar;
(e) any person authorised by the Central Government in that behalf; or
(f) in a case falling under clause (b) of section 271 of the Companies Act, 2013 i.e.,
if the company has acted against the interests of the sovereignty and integrity of
India, by the Central Government or a State Government.
In terms of Section 272(2) of the Companies Act, 2013, a contributory is entitled to
present a petition for the winding up of a company, notwithstanding that he may be the
holder of fully paid-up shares, or that the company may have no assets at all or may have
no surplus assets left for distribution among the shareholders after the satisfaction of its
liabilities, and shares in respect of which he is a contributory or some of them were either
originally allotted to him or have been held by him, and registered in his name, for at least
6 months during the 18 months immediately before the commencement of the winding
up or have devolved on him through the death of a former holder.
Therefore, a Contributory can also present a petition for winding up of a
company to the National Company Law Tribunal (NCLT) in addition to the Company
and other parties as mentioned in Section 272(1) of the Companies Act, 2013.
Answer 1(c)
Section 71(4) of the Companies Act. 2013, provides that when debentures are issued
by a company under this section, the company is required to create a Debenture
Redemption Reserve Account out of the profits of the company available for payment of
dividend and the amount credited to such account shall not be utilized by the company
except for the redemption of debentures.
The provisions for creation of Debenture Redemption Reserve Account (DRR) for
various classes of companies as per Rule 18 of the Companies (Share Capital and
Debentures) Rules, 2014 are as follows:
(i) All India Financial Institutions (AIFIs) regulated by Reserve Bank of India
and Banking Companies- No DRR is required for debentures issued by them
for both public as well as privately placed debentures.
(ii) Financial Institutions (FIs) within the meaning of clause (72) of Section 2
of the Companies Act, 2013- DRR shall be as applicable to NBFCs registered
with RBI.
(iii) For NBFCs registered with the RBI under Section 45 – IA of the RBI Act,1934,
and for Housing Finance Companies registered with the National Housing
Bank:
- Listed NBFCs and Housing Finance Companies- No DRR is required in
case of both public issue of debentures as well as privately placed
debentures.
- Unlisted NBFCs and Housing Finance Companies- No DRR is required
in case of privately placed debentures.
(iv) Listed Companies- No DRR is required in case of both public issue of debentures
as well as privately placed debentures.
 3 EP–CL–December 2020
(v) Unlisted companies- Adequacy of DRR shall be 10% of the value of the
outstanding debentures.

Therefore, Debenture Redemption Reserve is not mandatory for every

company issuing Debentures.

Answer 1(d)

Section 5(3) of the Companies Act, 2013 has prescribed that the Articles may contain
provisions for entrenchment to the effect that specified provisions of the articles may be
altered only if conditions or procedures that are more restrictive than those applicable in
the case of a special resolution, are met or complied with.

The Companies Act 2013, recognizes an interesting concept of entrenchment.

Essentially, the entrenchment provisions allow for certain clauses in the articles to be
amended upon satisfaction of certain conditions or restrictions greater than those
prescribed under the Companies Act, 2013 (such as obtaining 100% consent). This
provision acts as a protection to the minority shareholders and is of specific interest to
the investment community. This shall empower the enforcement of any pre-agreed rights
and provide greater certainty to investors, especially in joint ventures.

Section 5(4) of the Companies Act, 2013 provides that the provisions for entrenchment
referred to in Section 5(3) of the Companies Act, 2013, shall only be made either:

(a) on formation of a company, or

(b) by an amendment in the articles agreed to by all the members of the company
in the case of a private company and by a special resolution in the case of a
public company.

Section 5(5) of t he Compani es Act, 2013 read wi th Rule 10 of the

Companies(Incorporation) Rules, 2014 stipulates that, where the articles contain provisions
for entrenchment, the company shall give notice to the Registrar of Companies of such
provisions in web-form SPICe+ [Simplified Proforma for Incorporating company
Electronically Plus: (INC-32)], along with specified fees at the time of incorporation of
the company or in case of existing companies, the same shall be filed in Form
No.MGT.14 within 30 days from the date of entrenchment of the articles, as the case
may be, along with the specified fees.
Attempt all parts of either Q.No. 2 or Q.No. 2A
Question 2

Distinguish between the following:

(a) Winding up and striking off name of companies.

(b) Limited Liability Partnership and Partnership firm.

(c) Pre-scrutiny and Check form.

(d) Mortgage and Charge. (4 marks each)

EP–CL–December 2020 4
OR (Alternate question to Q. No. 2)
Question 2A
(i) Malafied Ltd. would like to forfeit the shares allotted to a shareholder for non-
payment of final call. The company has sent the notice to the address as per the
records of the company and forfeited the shares. The defaulter objects the
forfeiture on the ground that he did not receive the notice. Explain the validity of
the objections raised by the defaulted shareholder.
(ii) ‘‘Every company can issue shares with differential voting rights up to 50% of its
share capital”. Validate this statement with a brief answer.
(iii) Your company has constituted an Audit Committee. As the Company Secretary,
prepare a note on the role of Audit Committee on related party transactions.
(iv) Arohan Ltd., an unlisted company is having its corporate office in Kolkata. It is
having registered office in New Delhi and wants to call its annual general meeting
in Mumbai on 1st September 2019. Can the company do so as per the provisions
of the Companies Act, 2013? (4 marks each)
Answer 2(a)

S. No. Winding up of Companies Striking off name of Companies

1. Winding up is a proceeding by Striking off name of a company is an

means of which the dissolution alternative method of winding up of a
of a company is brought about & company subject to statutory criterion
in the course of which its assets specified under Section 248 of the
are collected and realised; and Companies Act, 2013.
applied in payment of its debts;
and when these are satisfied, the
remaining amount is applied for
returning to its members the sums
which they have contributed to
the company in accordance with
Articles of the Company.
2. To be authorized by way of special Either through Notice by ROC under
resolution passed by the company Section 248(1), when he has reasonable
or by order of the Tribunal for cause to believe that the company has
winding up (Section- 271). either failed to commence its business
within 1 year of its incorporation or it is not
carrying any business or operation for a
period of 2 immediately preceding financial
years and has also not applied for being
classified as a Dormant Company; or
By voluntary application by company
under Section 248(2), authorized by a
special resolution or through consent of
75% members in terms of paid-up share
capital of the company.
 5 EP–CL–December 2020
3. Tribunal will appoint a Provisional The company after extinguishing all its
Liquidator or a Company liabilities, file the application to the ROC
Liquidator, as the case may be. and liquidator is not required to be
appointed.
4. Section 272(1) allows for the Section 248 provides that strike-off/removal
petition for winding up to be filed of name of the company can be done
by either of the company or any either :·
contributory(s) or the Registrar or - By Registrar of Companies on
any other persons specified in suo-motto basis;
that sub-section. - By Application of Company.
5. The name of the company will be Once the Registrar is convinced that the
struck off from the Register of conditions and requirements mentioned
Companies only after completion under Section 248 are fulfilled only then
of the winding-up and dissolution the name of the company will be struck off
procedures. from the Register of Companies.

Answer 2(b)

S. No. Limited Liability Partnership (LLP) Partnership Firm

1. LLP is a body corporate and a A partnership firm is not distinct from the
legal entity separate from its several persons (Partners) who compose
partners and therefore can be it.
sued in its own name or it can sue
others in its own name without
involving the partners.
2. It is governed by the provisions of It is governed by the provisions of the
Limited Liability Partnership Act, Partnership Act, 1932.
2008.
3. Partners of LLP would have limited Partners of Partnership firm would have
liability i.e., they would not be unlimited liability.
held liable beyond the money
contributed by them.
4. Retirement or death of a partner Retirement or death of partner would
would not dissolve the LLP. dissolve the Partnership Firm.
5. LLP is formed by an incorporation Partnership firm may be formed either orally
of document and agreement to or by a deed of agreement, whether
give it a legality and compulsory registered or not.
registration.
6. A  minimum  of 2 partners will be A  minimum of 2 partners will be required
required for formation of an LLP. Maximum Number of Partners will be 50.
There will not be any limit to the
maximum number of partners.
EP–CL–December 2020 6
7. Properties of the LLP are not Properties of the Partnership Firm are
property of individual partners. properties of individual partners comprising
it.
8. Individual partner can enter into In Partnership Firm an individual partner is
business transactions with LLP not allowed to enter into business
as the LLP is a separate legal transactions with the firm in which he is a
entity by itself. partner.

Answer 2(c)
Difference between Pre-Scrutiny and Check Form:
Pre-scrutiny is a functionality that is used for checking whether certain core aspects
are properly filled in an e- Form and are not in conflict with the existing data of the
company available on the MCA portal. The necessary attachments and digital signatures
should be affixed to the e-form before submitting the e-Form for pre-scrutiny. Internet
connection is required to carry out the pre-scrutiny functions.
By clicking “Check Form”, the user will be in a position to find out whether the
mandatory fields in an e-Form are duly filled-in. For example, if the user enters alphabets
in “Date of Appointment of Director” field, he/she will be asked to correct the entered
information.
Thus, the Check form is a basic verification done at the e-form level only by internal
features of the form which ensure that all the mandatory and required field are filled up
and attachment are made to the e-from, while Pre-Scrutiny is a complete legal and
technical scrutiny of an e-form done in comparison to the data of the company available
with the MCA portal before accepting the form.
Answer to Question No. 2 (d)

S.No. Mortgage Charge

1. A mortgage is created by the act A charge may be created either through

of the parties the act of parties or by operation of law.
2. A mortgage requires registration A charge created by operation of law does
under the Transfer of Property not require registration but a charge created
Act,1882. by act of parties requires registration
3. A mortgage is a transfer of an A charge only gives a right to receive
interest in specific immovable payment out of a particular property.There
property. is no such transfer of interest in the case
of a charge. Charge does not operate as
transfer of an interest in the property and a
transferee of the property gets the property
free from the charge provided, he purchases
it for value without notice of the charge.
4. A mortgage is for a fixed term. The charge may be in perpetuity.
 7 EP–CL–December 2020
5. A mortgage is good against A charge is good against subsequent
subsequent transferees. transferees with notice.
6. A simple mortgage carries In case of charge, no personal liability is
personal liability unless excluded created. But where a charge is the result
by express contract. of a contract, there may be a personal
remedy.

Answer 2A(i)
Forfeiture of shares means taking back of shares by the Company from the
shareholders. Article 28 of Table-F of Schedule-I of the Companies Act, 2013 stipulates
that, if a member of the company fails to pay any call, or instalment of a call, on the day
appointed for payment thereof, the Board may, at any time thereafter during such time as
any part of the call or instalment remains unpaid, serve a notice on him requiring payment
of so much of the call or instalment as is unpaid, together with any interest which may
have accrued.
For a valid forfeiture, satisfaction of following conditions is necessary:
(i) Articles of Association must authorize the forfeiture of shares;
(ii) Proper Notice is required to be sent to the shareholder;
(iii) Board Resolution is required to be passed for forfeiture of shares;
(iv) Power of forfeiture must be exercised bona fide and for the benefit of the company.
In terms of Article 29 of Table F, the notice shall specify a further day, which shall not
be earlier than the expiry of 14 days from the date of service of notice, on or before which
the payment required by the notice is to be made. Further, the notice shall also mention
that in the event of non-payment, on or before the day so named, the shares in respect
of which the call was made shall be liable to be forfeited.
According to Article 30 of Table F, if the requirements of any such notice as aforesaid
are not complied with, any share in respect of which the notice has been given may, at
any time thereafter, before the payment required by the notice has been made, be forfeited
by a resolution of the Board to that effect.
As per the conditions stipulated as above, the Malafied Ltd. has sent the notice to
the shareholders at the address available as per records of the Company.
In the case of Sparks vs. Liverpool Water Works Co., Accidental non-receipt of
notice of forfeiture by the defaulter is not a ground for relief against forfeiture regularly
effected.
Thus, the objection of defaulter is not valid.
Answer 2A(ii)
Section 43 of the Companies Act, 2013, provides that a company limited by shares
can issue equity shares with differential rights as to dividend, voting or otherwise in
accordance with the conditions which are prescribed under Rule 4 of the Companies
(Share Capital and Debentures) Rules, 2014.
EP–CL–December 2020 8
Rule 4 of Companies (Share capital and Debentures) Rules, 2014 specifies a condition
w.r.t. the limit on issue of shares with differential rights i.e., a company limited by shares
can issue equity shares with differential rights complying with the condition that the
voting power in respect of shares with differential rights of the company shall not exceed
74% of total voting power including voting power in respect of equity shares with differential
rights issued at any point of time.

Hence, the statement that every company can issue shares with differential
voting rights up to 50% of its share capital is well within the limit mentioned in
Rule 4 of Companies (Share Capital and Debentures) Rules, 2014. Thus, this
statement is correct.

Answer 2A(iii)

Role of Audit Committee on Related Party Transactions

Section 177(4)(iv) of the Companies Act, 2013 specifies that the terms of reference
of Audit Committee includes approval or any subsequent modification of transactions of
the company with related parties.

The Audit Committee may make omnibus approval for related party transactions
proposed to be entered into by the company subject to such conditions as prescribed
under Rule 6A of the Companies (Meetings of Board and its Powers) Rules, 2014, namely–

(i) The Audit Committee shall, after obtaining approval of the Board of Directors,
specify the criteria for making the omnibus approval which shall include the
following, namely: -

(a) maximum value of the transactions, in aggregate, which can be allowed

under the omnibus route in a year;

(b) the maximum value per transaction which can be allowed;

(c) extent and manner of disclosures to be made to the Audit Committee at the
time of seeking omnibus approval;

(d) review, at such intervals as the Audit Committee may deem fit, related party
transaction entered into by the company pursuant to each of the omnibus
approval made;

(e) transactions which cannot be subject to the omnibus approval by the Audit
Committee.
(ii) The Audit Committee shall consider the following factors while specifying the
criteria for making omnibus approval, namely: -
(a) repetitiveness of the transactions (in past or in future);
(b) justification for the need of omnibus approval.
(iii) The Audit Committee shall satisfy itself on the need for omnibus approval for
transactions of repetitive nature and that such approval is in the interest of the
company.
 9 EP–CL–December 2020
(iv) The omnibus approval shall contain or indicate the following: -
(a) name of the related parties;
(b) nature and duration of the transaction;
(c) maximum amount of transaction that can be entered into;
(d) the indicative base price or current contracted price and the formula for
variation in the price, if any; and
(e) any other information relevant or important for the Audit Committee to take a
decision on the proposed transaction:
However, where the need for related party transaction cannot be foreseen and
aforesaid details are not available, audit committee may make omnibus approval
for such transactions subject to their value not exceeding `1 crore per transaction.
(v) Omnibus approval shall be valid for a period not exceeding one financial year and
shall require fresh approval after the expiry of such financial year.
(vi) Omnibus approval shall not be made for transactions in respect of selling or
disposing of the undertaking of the company.
(vii) Any other conditions as the Audit Committee may deem fit.
Answer 2A(iv)
Section 96(2) of the Companies Act, 2013 states that every Annual General Meeting
of the company shall be held either at the registered office of the company or at some
other place within the city, town or village in which the registered office of the company is
situated.
However, the first proviso to Section 96(2) of the Companies Act, 2013 provides that
the Annual General Meeting of an unlisted company may be held at any place in India if
consent is given in writing or by electronic mode by all the members in advance.
Accordingly, Arohan Ltd. as an unlisted company can call its Annual General
Meeting in Mumbai on September 01, 2019 subject to consent given in writing or
by electronic mode by all the members in advance.
Attempt all parts of either Q. No. 3 or Q. No. 3A
Question 3
(a) Sec. 186 and Sec. 185 dealing with loans and investments by companies speak
about loan given to directors and employees and not about any investment
made by one corporate body in another. Referring to the provisions of the
Companies Act, 2013 validate the above statement. (4 marks)
(b) An investigation into the affairs of a company has been ordered by National
Company Law Tribunal in public interest (Sec. 210). As a Company Secretary to
handle the investigation with courage and confidence, what are the major aspects
to be considered ? (4 marks)
(c) Beauty Ltd. wants to include additional grounds for vacation of office of directors
in the Articles of Association of the company. Can the company do so under the
EP–CL–December 2020 10
provisions of the Companies Act, 2013? What will be your answer if this company
is private Ltd.? (4 marks)
(d) ESS Ltd., a government company was incorporated on 1st June 2018 and
appointed first auditor on 15th July 2018. Explain as to whether ESS Ltd. has
complied with the provisions of the Companies Act, 2013? (4 marks)

OR (Alternate question to Q. No. 3)

Question 3A
(i) ABC Ltd. has accepted deposits from the public for three years with interest
payable at 8% p.a annually or at the end of three years at 9% p.a. One depositor
‘‘D’’ has requested the company for repayment of deposit after one year. Is the
depositor eligible to get repayment before maturity period? Answer with legal
provisions. (4 marks)
(ii) A widow applies for transmission of shares standing in the name of her deceased
husband without producing a succession certificate. The company officials insist
for succession certificate as mandatory for transmission of shares of the deceased
person. The widow represents again and again requesting for transmission
explaining her inability to submit the succession certificate. Can the directors of
the company transmit the shares to the widow? Advise the company.
(4 marks)
(iii) Shyam Agarwal wants to incorporate a company in the name and style of Raghav
Forest Corporation Ltd. in the state of Himachal Pradesh. Can a company be
incorporated with the said name? Referring to the provisions of the Companies
Act, 2013 and you being a practicing Company Secretary, advise the promoters.
(4 marks)
(iv) Gopal Kabra who is a member of Shakti Ltd. wants to inspect the Register of
deposits maintained by the company as required under the provisions of the
Companies Act, 2013 and rules made thereunder. The Company Secretary has
refused to show the register for inspection. Comment on the action of the
Company Secretary referring to the provisions of the Companies Act, 2013.
(4 marks)
Answer 3(a)
As per Section 185(1) of the Companies Act, 2013, no company can directly or
indirectly advance any loan, including any loan represented by a book debt to, or give
any guarantee or provide any security in connection with any loan taken by:
— any of its directors or of a company which is its holding company or any partner
or relative of any such director; or
— any firm in which any such director or relative is a partner.
However, Section 185(2) of the Companies Act, 2013, subject to fulfilling of certain
conditions prescribed therein, does allows a company to advance any loan including any
loan represented by a book debt, or give guarantee, or provide any security in connection
with any loan taken by any person in whom any of the director of the company is interested.
 11 EP–CL–December 2020
Further, Section 185(3) of the Companies Act, 2013 allows giving of loans by the
companies to their Managing or Whole-time Directors if the loan is given as a part of
conditions of service extended by the company to all its employees or pursuant to any
scheme approved by the members by way of a special resolution.
Whereas Section 186 of the Companies Act, 2013, is more of a procedural requirement
only which prescribes that a company shall unless otherwise prescribed, make investment
through not more than two layers of investment companies and that no company shall
directly or indirectly give any loan to any person or other body corporate, give any guarantee
or provide security in connection with a loan to any other body corporate or person and
acquire by way of subscription, purchase or otherwise, the securities of any other body
corporate, exceeding 60% of its paid-up share capital, free reserves and securities premium
account or 100% of its free reserves and securities premium account, whichever is more
unless previously authorised by Special Resolution.
Accordingly, the statement, that “Section 186 and Sec 185 of the Companies Act,
2013 dealing with Loans and investments by companies speak about loan given to directors
and employees and not about any investment made by one corporate body in another” is
not fully correct as while Section 185 of the Companies Act, 2013 does talks about loans
to directors and employees, Sec 186 of the Companies Act, 2013 specifically talks
about loans and investments by one corporate entity into another.
Answer 3(b)
Before an inspector commences investigation under Section 210 of the Companies
Act, 2013 into the affairs of a company, it is advisable for the Company Secretary to
prepare a report touching upon various aspects of the activities of his company particularly
those transactions in respect of which fraud or misfeasance or mismanagement is alleged.
This exercise will enable the secretary to handle the investigation into the affairs of his
company with courage and confidence. The aspects which should be considered by the
secretary include:

i. Basic information about the company—Name of the company; date of

incorporation; location of the registered office, branches, factories and other
offices; status of the company—public or private; objects of the company—
capital structure; voting rights attached to the shares; shareholding pattern of
the company.

ii. Business activities—Nature of existing business, licensed and installed capacities,

expansion programme and sources of finance, whether the company belongs to
a particular group; if so the names of other companies falling within the same
group.

iii. Debentures, bank finance and deposits.

iv. Foreign collaboration agreements.

v. Management—Brief history of past management set up; existing management

set up; composition of Board of Directors; whether the terms and conditions of
the appointment of managerial personnel are being adhered to; details regarding
appointment of directors and their relatives to an office or place of profit.
EP–CL–December 2020 12
vi. Whether all the statutory registers including minute’s books are being maintained
up-to-date?

vii. Whether the internal checks and internal control system is being properly followed?

viii. Working results and financial position—General assessment of working of the

company, evaluation of the level of performance and efficiency of the management,
a review of the profits of the company, performance data, financial position of the
company in the context of its working results for the last three years.

ix. Compliance by the company and its officers with the provisions of the Companies
Act, 2013.

x. Compliance with the provisions of other Acts applicable to the company.

xi. Whether the loans taken and loans advanced to Directors, the firms in which
they are partners or companies in which they are Directors are in accordance
with the provisions of the Companies Act, 2013.

xii. The investments made by the company.

xiii. Sole selling agency agreement.

xiv. Instance of mismanagement and other irregularities.

xv. Acquisition/disposal of substantial assets.

xvi. A scrutiny of abnormal/heavy expenditure items.

xvii. Complaints, if any, against the company and its management and steps taken
to redress them.

xviii. Brief particulars of the litigations against the company and the reasons thereof.

xix. Management’s relations with the employees and labour.

xx. Shareholders—Instance of oppression of minority shareholders, allegations of

non-receipt of dividend, notices of meetings, accounts, share certificates, etc.;
illegal forfeiture of shares, etc. and steps taken to redress Investors, complaints.

xxi. Auditors—Name and address of Statutory auditors, Secretarial Auditor and Cost
Auditor, compliance as per the provisions of the Companies Act, 2013.
Answer 3(c)
No, it is not allowed, for a Public Limited Company under the provisions of Section
167 of the Companies Act, 2013, to amend its Article of Association to include additional
grounds for vacation of office of Directors over and above what is specifically prescribed
under Sec 167(1) of the Companies Act, 2013.
However, if Beauty Ltd had been a Private Limited Company then as provided under
Sec 167(4) of the Companies Act, 2013, it may, by its Articles, provide any other ground
for the vacation of the office of a director in addition to provisions mentioned in section
167(1) of the Companies Act, 2013.
 13 EP–CL–December 2020
Answer 3(d)
In terms of Section 139(7) of the Companies Act, 2013, in case of a Government
Company or any other company owned or controlled, directly or indirectly, by the Central
Government, or by any State Government, or Governments, or partly by the Central
Government and partly by one or more State Governments, the first auditor shall be
appointed by the Comptroller and Auditor General of India within 60 days from the date of
registration of the company and in case the Comptroller and Auditor-General of India
does not appoint such auditor within the said period, the Board of Directors shall appoint
such auditor within the next 30 days; and in the case of failure to do so by the Board of
Directors, it shall inform the members, who shall appoint the auditor within 60 days at an
extraordinary general meeting (EGM), such auditor shall hold office till conclusion of the
first Annual General Meeting of the company.
The above provisions shall be applicable to ESS Ltd., as it is a government company
and it has appointed its first auditor on July 15, 2018 i.e., well within 60 days from the
date of incorporation. Hence, it has duly complied with the applicable provisions of the
Companies Act, 2013.
Answer 3A(i)
As per Rule 15 of the Companies (Acceptance of Deposits) Rules, 2014, when a
company makes a repayment of deposits, on the request of the depositor, after the
expiry of a period of 6 months from the date of such deposit but before the expiry of the
period for which such deposit was accepted, the rate of interest payable on such deposit
shall be reduced by 1% from the rate which the company would have paid had the
deposit been accepted for the period for which such deposit had actually run and the
company shall not pay interest at any rate higher than the rate so reduced.
However, this rule shall not apply to the repayment of any deposit before the expiry
of the period for which such deposit was accepted by the company, if such repayment is
made solely for the purpose of—
(a) complying with the provisions of Rule 3 of the Companies (Acceptance of
Deposits) Rules, 2014; or
(b) providing war risk or other related benefits to the personnel of the naval, military
or air forces or to their families, on an application made by the associations or
societies formed by such personnel, during the period of emergency declared
under article 352 of the Constitution.
In view of the above provision, D can get repayment of deposit after one
year of deposit with reduction of 1% i.e., 7% per annum from ABC Ltd.
Answer 3A(ii)
Where any person acquires any right to securities by operation of any law, the
company may register the transmission of shares in favour of such person if the company
receives intimation of transmission from such person, and in such a case no transfer
deed shall be necessary.
Article 23(i) of Table F of Schedule I of the Companies Act, 2013, states that on the
death of a member, the survivor or survivors where the member was a joint holder, and his
EP–CL–December 2020 14
nominee or nominees or legal representatives where he was a sole holder, shall be the
only persons recognised by the company as having any title to his interest in the shares.
Further, according to Section 56(2) of the Companies Act, 2013, a company shall
have power to register on receipt of an intimation of transmission of any right to securities
by operation of law from any person to whom such right has been transmitted. The legal
heirs have to produce the succession certificates for transmission of securities.
However, if a widow applies for transmission of the shares standing in the name of
her deceased husband without producing succession certificate and if the Articles of
Association of the Company so authorizes, the directors may dispense with the production
of succession certificate, probate or letter of administration upon such terms as to
indemnity, as the Directors may consider necessary, and transmit the shares to the
widow of the deceased by obtaining an Indemnity bond, (Pushpa Vadera vs. Thomas
Cook (India) Ltd.).
Answer 3A(iii)
In terms of Sec 4(3)(b) of the Companies Act, 2013 read with Rule 8B(u) of the
Companies (Incorporation) Rules, 2014, the word “Forest Corporation” shall not be used
in the name of a company in English or any of the languages depicting the same meaning
unless the previous approval of the Central Government has been obtained for the use of
any such word or expression.
Hence, Raghav Forest Corporation Ltd. cannot be formed without such previous
approval of the Central Government for the use of any such word or expression. The
promoters of the proposed company have been advised accordingly.
Answer 3A(iv)
According to Rule 14 of the Companies (Acceptance of deposits) Rules, 2014, every
company accepting deposits is required to, maintain at its registered office one or more
separate registers for deposits accepted or renewed, in which prescribed particulars
shall be entered separately in the case of each depositor.
The provisions of the Companies Act, 2013 do not contain any provisions governing
the inspection of the Register for deposits and therefore it can be said that in absence of
any enabling provision, this register is not open for inspection by members and company
may refuse to open it for inspection.
Accordingly, the Company Secretary has not defaulted under any provision
of the Companies Act, 2013 by refusing an inspection of Register of Deposits to
Gopal Kabra, member of the Company.
Question 4
(a) MNO International Financial Service Company is a subsidiary of Lee Ltd of
Japan, established in SEZ of India. The holding company Lee Ltd follows calendar
year as financial year. MNO-IFSC also proposes to follow the same financial
year as of holding company. Is it necessary to take approval of the National
Company Law Tribunal? (4 marks)
(b) ‘‘Shareholders are liable to pay on the money due on shares even if assets of
the company exceed its liability.’’ Is this statement true as per the provisions of
the Companies Act, 2013? (4 marks)
 15 EP–CL–December 2020
(c) XY Ltd. is the holding company of Z Ltd. Can Z Ltd acquire shares of its holding
company XY Ltd.? Advise as a practicing Company Secretary. (4 marks)
(d) P Ltd. intends to raise share capital by issuing equity shares in different stages
over a certain period of time. However, the company does not wish to issue
prospectus each and every time of issue of shares. Considering the provisions
of the Companies Act 2013, discuss what formalities P Ltd. should follow to
avoid repeated issuance of prospectus? (4 marks)
Answer 4(a)
International Financial Services Centre (IFSC) is a hub of financial services within a
country which has laws and regulations different from the rest of the country. Usually,
these centres have low tax rates and flexible regulations for securities and currency
trading, banking and insurance, which make them attractive for foreign investment. It can
be said that these centres deal mainly with the flow of money, financial product and
services across borders.
As stipulated under Clause 41 of Section 2 of the Companies Act 2013, in case of
Specified IFSC Public/ Private Company, which is a subsidiary of a foreign company, the
financial year of the subsidiary may be same as the financial year of its holding company
and approval of the Tribunal shall not be required.
Accordingly, MNO-IFSC, being a subsidiary of Lee Ltd., of Japan, a holding company
established in SEZ of India can also follow the calendar year as financial year as followed
by its holding company without requiring to take any approval of the National Company
Law Tribunal.
Answer 4(b)
“The privilege of limited liability for business debts is one of the principal advantages
of doing business under the corporate form of organisation.” The company, being a separate
person, is the owner of its assets and bound by its liabilities. The liability of a member as
shareholder, extends to the contribution to the capital of the company up to the nominal
value of the shares held and not paid by him.
Members, even as a whole, are neither the owners of the company’s undertakings,
nor liable for its debts. In other words, a shareholder is liable to pay the balance, if any,
due on the shares held by him, when called upon to pay and nothing more, even if the
liabilities of the company exceed its assets. This means that the liability of a member is
limited. For e.g. If A holds shares of the total nominal value of `1000 and has already paid
`500 (or 50% of the value) as part payment at the time of allotment, he cannot be called
upon to pay more than `500, the amount remaining unpaid on his shares.
Hence, Shareholders are only liable to pay on the money due on shares,
even if the assets of the company exceeds its liabilities.
Answer 4(c)
Section 19(1) of the Companies Act, 2013 provides that a subsidiary company shall
not either by itself or through its nominees, hold any shares in its holding company and
no holding company shall allot or transfer its shares to any of its subsidiary companies
EP–CL–December 2020 16
and any such allotment or transfer of shares of a company to its subsidiary company
shall be void.
The reference in the above mentioned section w.r.t. the shares of a holding company
which is a company limited by guarantee or an unlimited company, not having a share
capital, shall be construed as a reference to the interest of its members, whatever be the
form of interest.
Therefore, no subsidiary company shall hold any interest in its holding company.
However, following are the circumstances where a subsidiary company can hold the
shares of its holding company:
(a) Where the subsidiary company holds such shares as the legal representative of
a deceased member of the holding company; or
(b) Where the subsidiary company holds such shares as a trustee; or
(c) Where the subsidiary company is a shareholder even before it became a
subsidiary company of the holding company.
Accordingly, in the present case Z Ltd. cannot acquire shares of its holding
company XY Ltd.
Answer 4(d)
“Shelf prospectus” means a prospectus in respect of which the securities or class of
securities included therein are issued for subscription in one or more issues over a
certain period without the issue of a further prospectus.
(1) According to Section 31 of the Companies Act 2013, any class or classes of
companies as the Securities and Exchange Board of India may provide by
regulations in this behalf, may file a shelf prospectus with the Registrar of
Companies at the stage:
- of the first offer of securities included therein which shall indicate a period
not exceeding 1 year as the period of validity of such prospectus which shall
commence from the date of opening of the first offer of securities under that
prospectus, and
- in respect of a second or subsequent offer of such securities issued during
the period of validity of that prospectus, no further prospectus is required.
(2) The other formalities related to such repeated/ subsequent issue of shares:
A company filing a shelf prospectus shall be required to file an information
memorandum containing all material facts relating to new charges created,
changes in the financial position of the company as have occurred between the
first or previous offer of securities and the succeeding offer of securities and
such other prescribed changes, with the Registrar of Companies within the
prescribed time, prior to the issue of a second or subsequent offer of securities
under the Shelf Prospectus.
Thus, P. Limited can follow the above mentioned provisions and issue a Shelf
Prospectus, to avoid repeated issuance of prospectus.
 17 EP–CL–December 2020
Question 5
(a) The basic principle of non-interference with internal management of company
by the court was laid down in a celebrated case of Foss Vs. Harbottle. Discuss
the rule with its exceptions.
(b) Rahul has to claim certain shares and unclaimed dividend from Ocean Ltd which
has transferred it to Investor Education and Protection Fund (IEPF). Discuss
the procedure to be followed by Rahul in terms of relevant rules notified in this
regard. (8 marks each)
Answer 5(a)
The Company Law provides for adequate protection for the minority shareholders
when their rights are trampled by the majority. However, the protection of the minority is
not generally available when the majority does anything in the exercise of their powers
for internal administration of a company. The court will not usually intervene at the instance
of shareholders in matters of internal administration, and will not interfere with the
management of a company by its directors, so long they are acting within the powers
conferred on them under the Articles of the company. In other words, the Articles are the
protective shield for the majority of shareholders who compose the Board of directors for
carrying out their object at the cost of minority shareholders. The basic principle of non-
interference with the internal management of company by the court was laid down in a
celebrated case of Foss vs. Harbottle that no action can be brought by a member against
the directors in respect of a wrong alleged to be committed to a company. The company
itself is the proper party of such an action.
However, the rule in Foss vs. Harbottle is not absolute but is subject to certain
exceptions. In other words, the rule of supremacy of the majority is subject to certain
exceptions and thus, minority shareholders are not left helpless, but they are protected by;
a) The common law and
b) The provision of the Companies Act, 2013
The cases in which the majority rule does not prevail are commonly known as
exceptions to the rule in Foss vs. Harbottle and are available to the minority. In all these
cases an individual member may sue for declaration that the resolution complained of is
void, or for an injunction to restrain the company from passing it. The said rule will not
apply in the following cases:
(1) Ultra Vires Acts- Where the directors representing the majority of shareholders
perform an illegal or ultra vires act for the company, an individual shareholder
has right to bring an action. The majority of shareholders have no right to confirm
an illegal or ultra vires transaction of the company. In such case a shareholder
has the right to restrain the company by an order or injunction of the court from
carrying out an ultra vires act.
(2) Fraud on Minority- Where an act done by the majority amounts to a fraud on
the minority; an action can be brought by an individual shareholder.
(3) Wrongdoers in Control of the company- If the wrongdoers are in control of
the company, the minority shareholders’ representative action for fraud on the
minority will be entertained by the court
EP–CL–December 2020 18
(4) Resolution requiring Special Majority but is passed by a Simple Majority-
A shareholder can sue if an act requires a special majority but is passed by a
simple majority. Simple or rigid, formalities are to be observed if the majority
wants to give validity to an act which purports to impede the interest of minority.
(5) Personal Actions- Individual membership rights cannot be invaded by the majority
of shareholders. It is to be noted that shareholder is entitled to all the rights and
privileges appertaining to his status as a member.
(6) Breach of duty- The minority shareholder may bring an action against the
company, where although there is no fraud, there is a breach of duty by directors
and majority shareholders to the detriment of the company.
(7) Prevention of oppression and mismanagement - The minority shareholders
are empowered to bring action with a view to preventing the majority from
oppression and mismanagement.
Answer 5(b)
Rule 7 of the Investor Education and Protection Fund Authority (Accounting, Audit,
Transfer and Refund) Rules, 2016, details the procedure of refund to claimants from the
Investor Education Protection Fund (Fund). It provides as under:
- Any person whose shares, unclaimed dividend, matured deposits, matured
debentures, application money due for refund, or interest thereon, sale proceeds
of fractional shares, redemption proceeds of preference shares etc., has been
transferred to the Fund, may claim the shares under proviso to Section 124 (6) of
the Companies Act, 2013 or apply for refund under clause (a) of Section 125(3)
or under proviso to Section 125(3) of the Companies Act, 2013, as the case may
be, to the Authority by submitting an online application in Form IEPF-5 available
on the website www.iepf.gov.in along with fee specified by the Authority from
time to time in consultation with the Central Government.
- Upon submission, Form No. IEPF-5 shall be transmitted online to the Nodal
Officer of the company for verification of claim. Further, the claimant after making
an application in Form No. IEPF-5 , shall send original physical share certificate,
original bond, deposit certificate, debenture certificate, as the case may be,
along with Indemnity Bond, Advance Receipts, and any other document as
enumerated in Form No. IEPF-5, duly signed by him, to the Nodal Officer of the
concerned company at its registered office for verification of the claim.
- The company shall, within 30 days from the date of receipt of claim, send an
online verification report to the Authority after verification of details in Form No.
IEPF-5 in the format specified by the Authority along with all the documents
submitted by the claimant and shall attach the scanned copy of all the original
documents submitted by the claimant in physical form duly certified by its nodal
officer along with the e-verification report along with a scanned copy of both
sides of original physical share certificate or original bond or deposit or debenture
certificate/s duly cancelled and certified.
- If the online verification report is not sent by the company within 30 days of filing
of claim, the company may do so by paying additional fee of `50 for every day
 19 EP–CL–December 2020
subject to maximum of `2500. Further, the company shall be liable to maintain
the original documents submitted to it by the claimant and shall produce such
documents whenever required.
- In case of non-receipt of verification report along with documents by the Authority
after the expiry of 60 days from the date of filing of Form No. IEPF-5, the Authority
may reject Form No. IEPF-5, after sending a communication to the claimant
and the concerned company, on the e-mail address of the claimant and the
company, to furnish response within a period of 15 days.
- After verification of the entitlement of the claimant:
- to the amount claimed, the Authority and then Drawing and Disbursement
Officer of the Authority shall present a bill to the Pay and Accounts Office for
e-payment as per the guidelines,
- to the shares claimed, the Authority shall issue a refund sanction order with
the approval of the Competent Authority and shall credit the shares to the
DEMAT account of the claimant to the extent of the claimant’s entitlement.
- An application received for refund of any claim duly verified by the concerned
company shall be disposed off by the Authority within 60 days from the date of
receipt of the verification report from the company, complete in all respects and
any delay beyond 60 days shall be recorded in writing specifying the reasons for
the delay and the same shall be communicated to the claimant in writing or by
electronic means.
- Where the Authority, on examining any application for claim, finds it necessary
to call for further information or finds such application or e-form or document to
be defective or incomplete in any respect, the Authority shall give intimation of
such information called for or defects or incompleteness, by e-mail on the email
address of the claimant and the company, which has filed such application or e-
form or document, directing him or it to furnish such information or to rectify
such defects or incompleteness or to re-submit such application or e-Form or
document within 15 days from the date of receipt of such communication, failing
which the Authority may reject the claim or e-form No. IEPF-5.
- If such information or incompleteness is called from the claimant, he shall file
the e-form and shall send such documents as called for within 15 days, duly
signed by him, to the Nodal Officer of the concerned company at its registered
office for verification of the claim and company shall send a revised verification
report. Provided further, if any such information or incompleteness is called from
the company, the company shall file the revised verification report and shall send
such documents as called for within 30 days.
- In case, claimant is a legal heir or successor or administrator or nominee of the
registered share holder, the claimant shall ensure to submission of self-attested
scanned copy of all prescribed documents online along with the Form No. IEPF-
5.
- In case, claimant is a legal heir or successor or administrator or nominee of any
other registered security or in cases where request of transfer or transmission of
EP–CL–December 2020 20
shares is received after the transfer of shares by company to the Authority, the
company shall verify all requisite documents required for registering transfer or
transmission and shall issue letter to the claimant indicating his entitlement to
the said security and furnish a copy of the same to the Authority while verifying
the claim of such claimant through its e-verification report. Further, the authority
shall dispose such request of transfer or transmission based on the e-verification
report of the company subject to verification of such request.
- The company shall be liable under all circumstances whatsoever to indemnify
the Authority in case of any dispute or lawsuit that may be initiated due to any
incongruity or inconsistency or disparity in the verification report or otherwise
and the Authority shall not be liable to indemnify the security holder or Company
for any liability arising out of any discrepancy in verification report submitted
etc., leading to any litigation or complaint arising thereof.
- Any fraudulent claim by the claimant shall be deemed to be fraud within the
meaning of Section 447 of the Companies Act, 2013 and the claimant shall be
liable accordingly.

Accordingly, Rahul has to follow the above mentioned procedure to claim

certain shares and unclaimed dividend from the company, which has been
transferred into Investor Education Protection Fund.

Question 6

(a) RST Ltd. proposes to convene the board meeting for approval of the Board’s
report through video conferencing and seeks your advice for the same. Further
clarify who will be signing the Board’s report as per the provisions of the Companies
Act, 2013? (4 marks)

(b) With reference to the following queries of Sangita, Chief Executive Officer of
South Village Fresh Farmers Producer Company Ltd., how would you deal with
them as per the Companies Act, 2013?

(i) There has arisen a dispute relating to management of the entity.

(ii) The entity wants to amend its Articles relating to quorum for general meeting
which would stipulate that three fourth of total members shall be the required
quorum for its general meeting. (4 marks)

(c) Independent directors (ID) of a listed company decided to convene a meeting of

IDs on their own. Non-Independent directors objected to and called it as illegal.
Offer your views referring to the provisions of the Companies Act, 2013 and
rules made thereunder. (4 marks)

(d) Bispasha is the Vice President (Business Development) of Embee Hardwares

Ltd., a listed entity. The company decided to terminate the services of Bispasha
due to gross misconduct and negligence in her duties. The company also found
that Bispasha has not returned the laptop given to her for official work. Discuss
what action can be taken by the company to regain possession of the laptop?
(4 marks)
 21 EP–CL–December 2020
Answer 6(a)
The Board’s Report should be considered, approved and signed at a meeting of the
Board, convened in accordance with the provisions of the Companies Act, 2013 and shall
not be dealt with in any meeting held through video conferencing or other audio visual
means as per Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014.
However, where there is quorum is present in a meeting through physical presence
of directors, any other director may participate through video- conferencing or other audio-
visual means for approval of the restricted item.
Accordingly, the proposal of RST Limited to convene the Board Meeting for
approval of the Board’s report through video conferencing is not permissible.
Signing of Board’s Report
As per Section 134(6) of the Companies Act, 2013, the Board’s report and any
annexures thereto under section 134(3) of the Companies Act, 2013 shall be signed by
the chairperson of the company if he is authorised by the Board and where he is not so
authorised, shall be signed by at least two directors, one of whom shall be a managing
director, or by the director where there is one director.
It is recommended as per Secretarial Standard-4, the annexures to the Board Report
is required to be signed in the similar manner as the Board Report, except the Report on
CSR activities of the company, which is required to be signed by the Chief Executive
Officer or the Managing Director or any other Director of the company and by the Chairman
of the CSR Committee of the company.
Answer 6(b)
First Proviso to Section 465(1) of the Companies Act, 2013, provides that the provisions
of Part IX A of the erstwhile Companies Act, 1956 shall be applicable mutatis mutandis to
the Producer Companies in a manner as if the Companies Act, 1956 has not been
repealed until a Special Act is enacted for Producer Companies.
(i) Section 581ZO of the erstwhile Companies Act 1956, provides that any dispute
relating to the formation, management or business of a Producer Company shall
be settled by conciliation or arbitration as provided under the Arbitration and
Conciliation Act, 1996.
(ii) Section 581Y of the erstwhile Companies Act 1956, provides that unless articles
of association provide for a larger number, one-fourth of total membership shall
constitute quorum at a general meeting. If the Article provide for a larger number,
it is a valid provision. Hence, the provision in articles requiring the quorum for
general meeting to be three-fourth of total members is valid.
Thus, Sangita Chief Executive of South Village Fresh Farmers Producer Company
Ltd. should be informed accordingly.
Answer 6(c)
Section 149(8) read with Schedule IV of the Companies Act, 2013 provides for the
separate meeting of the Independent Director within the ambit of the code for the
Independent Directors:
EP–CL–December 2020 22
(1) The independent directors of the company shall hold at least one meeting in a
financial year, without the attendance of non-independent directors and members
of management;
(2) All the independent directors of the company shall strive to be present at such
meeting;
(3) The meeting shall:
(a) review the performance of non-independent directors and the Board as a
whole;
(b) review the performance of the Chairperson of the company, taking into account
the views of executive directors and non-executive directors;
(c) assess the quality, quantity and timeliness of flow of information between
the company management and the Board that is necessary for the Board to
effectively and reasonably perform their duties.
Hence, holding of such separate meeting of Independent Directors is valid within the
applicable provisions of the Companies Act, 2013 and Non- Independent Directors cannot
challenge this.
Answer 6(d)
According to Section 452 of the Companies Act, 2013, if any officer or employee of
a company:
- wrongfully obtains possession of any property, including cash of the company;
or
- having any such property including cash in his possession, wrongfully withholds
it or knowingly applies it for the purposes other than those expressed or directed
in the Articles and authorized by the Companies Act, 2013.
Such an offence on the complaint of the company or of any member or creditor or
contributory thereof, is punishable with fine which shall not be less than `1 lakh but
which may extend to `5 lakhs. Further the court may also order such officer or employee
to deliver up or refund to the company, within a time to be fixed by it, any such property
or cash wrongfully obtained or wrongfully withheld or knowingly misapplied, the benefits
that have been derived from such property or cash or in default, to undergo imprisonment
for a term which may extend to 2 years.
The Supreme Court in the matter of Gopika Chandrabhushan Saran vs. XLO India
Ltd. held and prescribe circumstances where Section 630 of the erstwhile Companies
Act, 1956 (presently Section 452 of the Companies Act, 2013) can get attracted: “it was
observed that once right of an employee or officer of company to retain possession of
property, either on account of termination of services, retirement, resignation or death,
gets extinguished, persons in occupation of property are under an obligation to return
property back to company as per Section 630 of the erstwhile Companies Act, 1956.
Hence, Embee Hardwares Ltd. can file a complaint under Section 452 of the
Companies Act, 2013 to initiate action against Bispasha in order to regain the
possession of the Laptop wrongfully withheld by her after termination of her
service.
***
 23 EP–CMA–December 2020

COST AND MANAGEMENT ACCOUNTING - SELECT SERIES

Time allowed : 3 hours Maximum marks : 100
Total number of Questions : 100

1. From the following information of XYZ Ltd., in respect of semi-variable costs,

the variable cost per unit will be :
Month Production Semi-variable
(in units) costs (`)

January 150 600

February 225 750
March 165 630
April 140 580
May 200 700
June 180 660

(A) `4
(B) `3
(C) `2
(D) `1
2. You are given the following information:
Per unit `
Selling Price 30
Direct Material Cost 10
Direct Labour Cost 6

Variable overhead 65% on direct labour cost, trade discount 5% and fixed cost
`43,000. What will be the profit if sales is above 25% of the break-even volume?

(A) `10,750

(B) `12,750

(C) `11,000

(D) `27,000
23
EP–CMA–December 2020 24
3. Which of the followings is not true?

Marginal Contribution
(A) P/V Ratio =
Sales

Proft
(B) Margin of safety =
P/V Ratio

Variable Cost
(C) P/V Ratio = 1 –
Sales Value

Fixed Cost
(D) Break-even point (in `) =
Contribution per Unit

4. Which of the followings is not an application of Marginal Costing?

(A) Maintaining adequate stock
(B) Make or buy decision-making
(C) Offering quotations
(D) Solving problem of key factor
5. Statement I:
Although the Law of supply and demand to a great extent determine the price of
an article, cost to the producer plays an important role.
Statement II:
Adequate costing records do not provide a reliable basis for making estimates
and quoting tenders.
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement I is incorrect but Statement II is correct
(D) Statement II is incorrect but Statement I is correct
6. These costs are incurred to maintain certain facilities and cannot be quickly
eliminated. The management has little or no discretion in these costs. These
costs are termed as :
(A) Policy and Managed Costs
(B) Committed Costs
(C) Discretionary Costs
(D) Step Costs
 25 EP–CMA–December 2020
7. .......................... is not included in tools and techniques of Management
Accounting.
(A) Financial Planning
(B) Financial Statement Analysis
(C) Statutory Audit
(D) Decision-making
8. ‘Cost which can be influenced by its budget holder’ is known as :
(A) Non-controllable Cost
(B) Controllable Cost
(C) Opportunity Cost
(D) Traceable Cost
9. For paper manufacturing industry which method of costing shall be used :
(A) Single-output costing
(B) Batch costing
(C) Process costing
(D) Composite costing
10. Match the following Cost Accounting Standards with titles :
CAS Title
(a) CAS 6 (1) Direct Expenses
(b) CAS 10 (2) Manufacturing Cost
(c) CAS 19 (3) Material Cost
(d) CAS 22 (4) Joint Costs
Codes:
(a) (b) (c) (d)
(A) (3) (2) (1) (4)
(B) (4) (3) (1) (2)
(C) (3) (1) (4) (2)
(D) (1) (2) (3) (4)
11. Cost Accounting is mostly ........................ in its approach.
(A) Historical
(B) Futuristic
EP–CMA–December 2020 26
(C) Static
(D) Dynamic
12. What will be the total wages of A, a worker, as per Barth’s scheme for the
following data?
Time Allowed : 9 Hours Time
Taken : 6.25 Hours
Time Saved : 2.75
Hours Hourly Rate : `25 per hour
(A) `225
(B) `190.63
(C) `187.50
(D) `204.00
13. In which of the following situations, ‘Time Rate System’ is most suitable ?
(A) The quality of work is more important.
(B) The work is of standard or repetitive nature.
(C) There is uninterrupted flow of work
(D) It is necessary for the employer to get maximum production.
14. Cost of training is an example for :
(A) Preventive Cost
(B) Replacement Cost
(C) Direct Cost
(D) Qualitative Cost
15. Which of the followings is not a characteristic of Taylor’s differential piece rate
system?
(A) Time and motion studies are done
(B) The standard output is determined
(C) Wages are calculated on the basis of two widely different piece rates
(D) Minimum wage is guaranteed
16. A worker in PQR Ltd., is paid a guaranteed wages of `60 per hour. The standard
time per unit for a particular product is 4 hours. X, a machine man, has been paid
wages under the Rowan incentive plan and he had earned an effective hourly rate
of `75 on the manufacture of that particular product. Had he been put on Halsey
incentive scheme, his effective hourly rate would be:
(A) `67.50
(B) `52.50
(C) `70.00
(D) `65.00
 27 EP–CMA–December 2020
17. Which of the followings is not an idle time arising due to administrative causes?
(A) Poor planning
(B) Improper Instructions
(C) Unutilized capacity due to management decisions
(D) Waiting for instructions
18. Which Premium Bonus Plan has the following features?
(a) Time wages are guaranteed
(b) The standard time is set in terms of standard man minutes called ‘manits’
(c) Bonus is given for the time saved
(A) Barth’s Scheme
(B) Hayne’s Scheme
(C) Bedauxe Point System
(D) Diemer Scheme
19. The following data are given :
Direct Material `40,000
Indirect Material `20,000
Direct Labour `24,000
Indirect Labour `18,000
Direct Expenses `14,000
Indirect Expenses `10,000
Carriage Inwards `4,000
Carriage Outwards `5,000
Prime Cost is :
(A) `1,31,000
(B) `83,000
(C) `82,000
(D) `1,26,000
20. Which of the following items is not included in cost sheet ?
(A) Octroi Duty
(B) Indirect Expenses
(C) Trade discount on Materials
(D) Interest Paid
EP–CMA–December 2020 28
21. You are given the following data related to Job No. 555 :
Direct Materials `3,600
Direct Wages for 90 hours @ `4
Variable overhead incurred for all jobs `9,000 for 4,500 hours.
If 25% profit on selling price is expected, the selling price is :
(A) `4,140
(B) `5,175
(C) `5,520
(D) `4,968
22. Assertion (A) :
Batch costing is used for calculating total cost of each batch.
Reason (R) :
It is used in industries where output is done for a batch of customers.
Codes:
(A) A is false but R is true
(B) A is true but R is false
(C) Both A & R are true but R is not the correct explanation of A
(D) Both A & R are true and R is the correct explanation of A
23. You are given the following information :
Contract Price `75,00,000
Cumulative figures :
(i) To end of previous period — profit recognized `12,25,000
(ii) To end of current period — total costs `41,50,000
(iii) Cost of work certified ` 54,00,000
(iv) Estimated future costs to completion `7,25,000
(v) Estimated rectification costs 15% of contract price
The profit/loss to be recognized as per AS 7 in the current period is :
(A) Profit `21,00,000
(B) Profit `3,00,000
(C) Profit `1,25,000
(D) Loss `2,75,000
 29 EP–CMA–December 2020
24. Which are not the features of Process Costing ?
(i) The production is continuous
(ii) The product is not homogeneous
(iii) The process is standardized
(iv) The output of each process is transferred to finished stock account
(A) (i)
(B) (ii) and (iv)
(C) (i) and (iii)
(D) (ii), (iii) and (iv)
25. The following information is available in respect of Process Z :
Units introduced 5,000 units `50,000
Material received from store `24,000
Direct Labour `16,000
Overheads `6,000
Output of Process Z 4,800 units
Normal wastage 5% of units introduced
Scrap value of wastage `4 per unit
The value of Abnormal Gain is:
(A) `1,000
(B) `404.21
(C) `395.83
(D) `400.84
26. Gasoline, diesel, paraffin and asphalt which are obtained from Crude Oil are :
(A) Joint Products
(B) Co-Products
(C) By-Products
(D) Unique Products
27. ........................... is also known as De nova budgeting.
(A) Preformance Budgeting
(B) Cash Basis Budgeting
(C) Zero Base Budgeting
(D) Programme Budgeting
EP–CMA–December 2020 30
28. Rajesh Ltd., produces and sells a single product. Sales budget for the current
year (quarterwise) is as follows:
Quarter Units to be Sold
I 24,000
II 30,000
III 33,000
IV 36,000
The year is expected to be opened with an inventory of 8,000 units of finished
product and closed with an inventory of 13,000 units of finished product.
Production is customarily scheduled to provide for two-thirds of the current quarter’s
sales demand plus one-third of the immediately following quarter’s demand. The
required production for Quarter IV would be :
(A) 32,000 units
(B) 37,000 units
(C) 33,000 units
(D) 35,000 units
29. A retail store makes 30% of its sales for cash and the remainder on credit. Due
to faulty credit collection practice, there have been losses from bad debts to the
extent of 2% credit sales on an average in the past.
It is experienced that normally 50% of credit sales are collected in the month
following the sale, 30% in the second following month and 18% in the third
following month. Sales in the preceding three months have been — January
2019 `4,00,000, February `5,00,000 and March `7,00,000. Sales for the next
three months are estimated as April `7,50,000, May `5,50,000 and June `
5,00,000.
The cash receipt from credit sales in the month of June would be :
(A) `5,15,300
(B) `4,76,400
(C) `4,38,200
(D) `5,88,200
30. You are given the following semi-variable overheads of a company at 60% level of
activity
(`)
Electricity (40% Fixed) 40,000
Repairs (80% Variable) 6,000
Total 46,000
 31 EP–CMA–December 2020
The total estimated semi-variable overhead at 70% level of activity would be :
(A) `53,300
(B) `57,600
(C) `50,800
(D) `61,000
31. From the following data, Raw Materials Purchase Budget for January 2020 will
be:
Estimated Stock on Jan. 1 46,000 units
Estimated Stock on Jan. 31 50,000 units
Estimated Consumption 1, 50,000 units
Standard Price per unit `2.50
(A) `3,75,000
(B) `3,85,000
(C) `6,15,000
(D) `3,65,000
32. Material Y is used to produce a toy. It is budgeted that each toy will require 4
kgs of material @ `9 per kg. During a month 1,000 pieces of toys were produced
using 4,200 kgs of material purchased at `50,400. The material price variance
is:
(A) `12,600 (A)
(B) `15,000 (A)
(C) `12,600 (F)
(D) `12,000 (A)
33. You are given the following data:
Standard Actual
Material P 7 kg @ `3 880 kg @ `3.10
Material Q 3 kg @ `5 320 kg @ `4.90
The material mix variance would be:
(A) `120 (A)
(B) `320 (F)
(C) `80 (F)
(D) `80 (A)
EP–CMA–December 2020 32
34. Following data are given :
(i) Gross Direct Wages `15,000
(ii) Standard hours produced = 7600
(iii) Standard Rate per hour = `2.10
(iv) Actual hours paid @ `2.40 are 7500, out of which hours not worked (abnormal
idle time) are 75 hours.
Labour efficiency variance is :
(A) `240 (A)
(B) ` 210 (F)
(C) `367.50 (F)
(D) `420 (F)
35. The records of a manufacturing company reveals the following information :
Budgeted production for Dec. : 400 units
Budgeted variable overhead : ` 8,000
Standard time for one unit : 25 hours
Actual production for Dec. : 300 units
Actual hours worked : 7600 hours
Actual variable overhead : ` 6,840
Variable Overhead Expenditure Variance is :
(A) `760 (A)
(B) `840 (A)
(C) `1,600 (A)
(D) `1,160 (F)
36. You are given the following data :
Standard fixed overhead rate per hour `5
Actual fixed cost `1,00,000
Standard production 19,000 units
Actual production 20,000 units
What will be the Fixed Overhead Efficiency Variance ?
(A) `5,000 (A)
(B) ` 5,000 (F)
(C) `10,000 (A)
(D) ` NIL
 33 EP–CMA–December 2020
37. Which of the followings is not a cause of ‘Material Usage Variance’ ?
(A) Lack of due care in the use of materials
(B) Defective production necessitating additional materials for correction
(C) Abnormal wastage due to pilferage
(D) Purchase of material in Economic Order Quantity
38. You are given the following information of a company regarding material S :
Material % in total units % in total cost
S 5% 40%
This material will be classified in ABC analysis of inventory control as :
(A) A item
(B) B item
(C) C item
(D) Z item
39. Raja manufacturing company requires 2000 units of raw material per month.
The ordering cost is `25 per order. The carrying cost, in addition to `3 per unit,
also estimated to be 10% of the average inventory cost per unit per year. The
purchase price of the raw material is `20 per unit.
The Economic Order Quantity is :
(A) 141.42 units
(B) 489.90 units
(C) 632.46 units
(D) 774.60 units
40. You are given the following information in respect of Material Y :
Re-order Quantity : 360 units
Re-order Period : 3 to 5 weeks
Maximum Consumption : 90 units per week
Normal Consumption : 60 units per week
Minimum Consumption : 30 units per week
The maximum stock level would be :
(A) 810 units
(B) 720 units
(C) 690 units
(D) 960 units
EP–CMA–December 2020 34
41. Which of the following is not an objective of store-keeping?
(A) To protect stores against losses
(B) To provide maximum service at minimum cost
(C) To facilitate perpetual inventory
(D) To supply inventory at lower price
42. ‘Standard Price Method’ of pricing material issues is :
(A) A Cost Price Method
(B) An Average Price Method
(C) A Notional Price Method
(D) A Market Price Method
43. Statement 1 :
Financial statements are always expressed in monetary terms.
Statement 2 :
Financial statements are exact final reports of the financial gain or loss and
those can never be interim.
Select the correct answer from the following :
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement 1 is correct but Statement 2 is incorrect
(D) Statement 2 is correct but Statement 1 is incorrect
44. You are given the following information by P Company :
`
Cash 12,00,000
Debtors 3,00,000
Stock 4,00,000
Prepaid Expenses 50,000
Creditors 2,00,000
Bills Payable 50,000
Acid-test ratio is :
(A) 6.2 times
(B) 7.8 times
(C) 7.6 times
(D) 6 times
 35 EP–CMA–December 2020
45. Vertical analysis of financial statements is also known as :
(A) Internal Analysis
(B) External Analysis
(C) Static Analysis
(D) Dynamic Analysis
46. The analysis of financial statements by a shareholder is an example for :
(A) Internal Analysis
(B) External Analysis
(C) Horizontal Analysis
(D) Vertical Analysis
47. Raman company has issued 13% debentures for `10,00,000 in cash at par. The
impact of this item:
(A) Increase in current assets and working capital
(B) Increase in current liabilities and working capital
(C) Increase in current assets but no increase in working capital
(D) Decrease in current assets and working capital
48. RST company produces a single product M which passes through three
production departments: manufacturing, grinding and finishing. Following details
are given :
Direct Factory
Wages Overheads
(`) (`)
Manufacturing Dept. 1,00,000 60,000
Grinding Dept. 4,00,000 6,00,000
Finishing Dept. 60,000 68,000
The blanket overhead rate (based upon direct wages) would be :
(A) 60%
(B) 150%
(C) 113.33%
(D) 130%
49. There are two machines X and Y in production department. The combined
insurance and depreciation of these machines is ? 40,000. Following details are
further given :
X Y
Capital value (`) 3,00,000 2,00,000
Light points 25 15
Number of workers 20,000 20,000
Horse power 30 10
EP–CMA–December 2020 36
The amount of insurance and depreciation apportioned to Machine Y is:
(A) `16,000
(B) `15,000
(C) `20,000
(D) `10,000
50. Which is not a method for secondary distribution of overheads?
(A) Ability to pay method
(B) Incentive method
(C) General use of indices method
(D) Trial and error method
51. Match the following:
(P) Maintenance (1) Area department
(Q) Welfare (2) Value of department Materials
(R) Stores-keeping (3) Number of department Employees
(S) Building service (4) Hours department Worked
(P) (Q) (R) (S)
(A) (1) (2) (3) (4)
(B) (4) (1) (2) (3)
(C) (4) (3) (2) (1)
(D) (2) (3) (4) (1)
52. If cost of machine is `1,00,000, installation charges `5,000, scrap `3,000 and
life of machine is 50,000 hours, then depreciation per hour would be :
(A) `2.00
(B) `2.04
(C) `1.96
(D) `1.94
53. You are given the following data:
Cost of machine `8,40,000
Estimated scrap value `40,000
Effective working hours 40,000
Hours worked during 4 weeks 300 Weekly repairs payment ` 500
 37 EP–CMA–December 2020
Standing charges for 4 weekly period: ` 4,000
Power consumed by machine: 10 units per hour @ `1.50 per unit Machine hour
rate will be:
(A) `40.00
(B) `41.50
(C) `42.00
(D) ` 55
54. Which section of the Companies Act, 2013, deals with audit of ‘Cost Accounting
Records’?
(A) Section 139
(B) Section 158
(C) Section 159
(D) Section 148
55. Which of the following is not the purpose of Cost Audit ?
(A) Verification of Cost Accounts
(B) Facilitating the fixation of price of goods and services
(C) Promoting corporate governance through various operational disclosures
(D) Inculcation of law and order consciousness
56. The requirement of Cost Audit is applicable to which of the following category of
companies:
(A) Whose revenue from exports, in foreign exchange, exceeds 75% of its total
revenue.
(B) Which is operating from a special economic zone.
(C) Which is engaged in production of defence items.
(D) Which is engaged in the generation of electricity for captive consumption
through captive generating plant.
57. The filling of a casual vacancy in the office of a cost auditor shall be informed by
the company to the Central Government in:
(A) Form CRA-1
(B) Form CRA-2
(C) Form CRA-3
(D) Form CRA-4
EP–CMA–December 2020 38
58. Match the following in the light of cost audit techniques :
(P) Accounting (1) Exponential Technique Smoothing
(Q) Scientific (2) Ergonomic Technique
(R) Statistical (3) Computer Technique models
(S) Personnel (4) Break-even Technique analysis
(P) (Q) (R) (S)
(A) (4) (3) (2) (1)
(B) (4) (3) (1) (2)
(C) (4) (1) (2) (3)
(D) (1) (2) (3) (4)
59. Under activity based costing, which activity is considered as ‘Product level
activity’?
(A) Use of indirect materials
(B) Inspection of products
(C) Keeping technical drawings of products
(D) Production plant security
60. The following entry is recorded under Non-integrated system:
Work in Progress Control A/c Dr.
To General Ledger Adjustment A/c
The transaction is:
(A) Materials Purchased

(B) Materials Purchased for a Special job

(C) Issue of direct materials to production department

(D) None of the above

61. Which of the following statements is not true with regard to ‘Integrated Accounting
System’?

(A) Easy method to maintain accounts

(B) Economy of scale

(C) Saving of time

(D) Periodically reconciliation of profit as per Financial Accounts is made with

profit as per Cost Accounts
 39 EP–CMA–December 2020
62. Which of the following items is not an appropriation of profits?
(A) Taxes on income and profit
(B) Preliminary expenses written off
(C) Provision for bad-debts
(D) Dividend paid
63. Depreciation charged in cost books is `15,000 and in financial books `10,000.
What will be the profit as per financial books when profit as per cost books is `
18,500 ?
(A) `13,500
(B) `23,500
(C) `18,500
(D) `21,000
64. Difference between the purchase price of an asset and its salvage value is:
(A) Differential Cost
(B) Sunk Cost
(C) Out of Pocket Cost
(D) Replacement Cost
65. The loss of interest and dividend that would be earned otherwise from an amount
invested in plant and machinery is :
(A) Imputed Cost
(B) Opportunity Cost
(C) Controllable Cost
(D) Out of Pocket Cost
66. The technique where standardized principles and methods of cost accounting
are employed by a number of different companies and firms is:
(A) Standard Costing
(B) Uniform Costing
(C) Single Costing
(D) Absorption Costing
67. The use of LIFO system is suitable:
(A) At falling prices of materials
(B) At constant prices of materials
EP–CMA–December 2020 40
(C) At rising prices of materials
(D) In all the above situations
68. The personnel department of Zenith Ltd., has computed its labour turnover rates
for the quarter ending 31st December, 2018 as 8%, 12% and 16% respectively
under ‘Separation method’, ‘Replacement method’ and ‘Flux method’. If the
number of workers replaced during the quarter is 108, find the number of workers
who left and discharged:
(A) 72
(B) 108

(C) 144

(D) 128

69. The incentive scheme is a combination of Halsey’s and Gantt’s scheme. A straight
line increasing incentive is given in it beyond 100% efficiency. The scheme is :

(A) Hayne’s Scheme

(B) Diemer Scheme

(C) Scanlon Plan

(D) Rucker’s Plan

70. In Activity Based Costing (ABC), the item for which measurement of cost is
required is termed as:

(A) Cost driver

(B) Cost object

(C) Cost pool

(D) Cost unit

71. Which of the following items is not included in Cost Accounts?
(A) Goodwill written off
(B) Interest on debentures
(C) Tax paid
(D) All of the above
72. You are given the following data:
Sales `40,00,000
Variable Cost `24,00,000
Net Profit `4,00,000
 41 EP–CMA–December 2020
Break-even point in this case would be :
(A) `10,00,000
(B) `30,00,000
(C) `12,00,000
(D) None of the above
73. The following data are given : Sales `15,00,000 Fixed Cost `4,00,000 P/V Ratio
40% The Profit is :
(A) `3,00,000
(B) `1,50,000
(C) `2,00,000
(D) `3,20,000
74. In a concern, sales increased from `4,00,000 to `8,00,000 and corresponding
profit from `2,00,000 to `3,00,000, then P/V ratio is :
(A) 50%
(B) 25%
(C) 37.5%
(D) None of the above
75. Following data are given :
Fixed Cost `7,50,000
Margin of Safety `10,00,000
Profit `3,00,000
Break-even point would be :
(A) ` 22,50,000
(B) ` 25,00,000
(C) ` 10,50,000
(D) ` 13,50,000
76. Debt Service Ratio from the following data will be :
Interest charges `6,50,000
Net Profit `15,00,000 after charging :
Interest `3,00,000
Salary `2,40,000
Rent `60,000
Taxes `2,00,000
EP–CMA–December 2020 42
(A) 3.08 times
(B) 2.31 times
(C) 2.77 times
(D) 3.54 times
77. Which one of the following is not treated as cash equivalent ?
(A) Treasury Bill
(B) Public Deposit
(C) Certificate of Deposit
(D) Commercial Paper
78. Cash flows from sale of fixed assets is treated as:
(A) Cash flow from operating activities
(B) Cash flow from investing activities
(C) Cash flow from financing activities
(D) Cash flow from sales activities
79. Opening debtors `1,00,000, Closing debtors `2,00,000 and Net profit `5,00,000.
Then cash flow from operations would be :
(A) `6,00,000
(B) `4,00,000
(C) `8,00,000
(D) `3,00,000
80. “Higher the ratio, the more favourable it is.” This presumption does not apply to:
(A) Operating ratio
(B) Stock turnover ratio
(C) Gross profit ratio
(D) Net profit ratio
81. Which of the following would not cause either an under or over absorption of
overhead ?
(A) Actual direct labour time per unit being greater than budgeted
(B) Actual cost of direct labour being greater than budgeted
(C) Actual overhead incurred being less than budgeted
(D) The number of units produced being greater than budgeted
 43 EP–CMA–December 2020
82. Break-even chart is prepared by assuming that :
(A) There is no opening stock
(B) There is no closing stock
(C) There is no change in operating efficiency
(D) All of the above
83. If fixed cost decreases while variable cost per unit remains constant, the new
B.E.P. in relation to the old B.E.P. will be:
(A) Lower
(B) Higher
(C) Unchanged
(D) Indeterminate
84. From the following information, determine by how much amount the sales must
be increased to attain break-even :
Net Sales `4,00,000
Fixed Costs `2,00,000
Variable Costs `2,40,000
(A) `40,000
(B) `1,00,000
(C) ` 5,00,000
(D) `60,000
85. In absorption costing emphasis is given on :
(A) Production
(B) Sales
(C) Profit
(D) Production and Sales

86. In standard costing standards are established in respect of :

(A) Quantities

(B) Qualities

(C) Costs

(D) Quantities and Qualities

EP–CMA–December 2020 44
87. .................... are more realistic standards.
(A) Attainable Standards
(B) Current Standards
(C) Normal Standards
(D) Ideal Standards
88. The standard material required to produce one unit of product Z is 5 kgs and the
standard price per kg of material is `30. The Cost Accounts show that 16,000
kgs of material were used for producing 3,000 units. If the material cost variance
is `70,000 unfavourable, the actual price per kg of material is :

(A) `27.50

(B) `29.33

(C) `32.50

(D) `34.67

89. .................... is attainable under standard conditions.

(A) Basic Budget

(B) Current Budget
(C) Zero Base Budget
(D) Fixed Budget
90. The attribute consistency, which should be possessed by the financial statements
prepared by an enterprise, has a direct bearing upon the other attribute namely:
(A) Comparability
(B) Authenticity
(C) Promptness
(D) Relevance
91. In a contract for a consideration of `50 lakh commenced on 1-4-2017, cash
received on 31-3-2018 was `18 lakhs (90% of work certified). Work completed
but not certified was `one lakh. If notional profit calculated as on 31-3-2018 was
`2,43,000, the amount of work-in-progress shown in the balance sheet prepared
as on that date shall be :
(A) `29,900
(B) `1,29,900
(C) ` 2,29,900
(D) `1,70,100
 45 EP–CMA–December 2020
92. If Orange Ltd.’s current ratio is 5.5 : 1, Quick ratio is 4 : 1 and Inventory is
`24,000, its current liabilities are :
(A) ` 8,000
(B) `16,000
(C) `30,000
(D) `32,000
93. Market price of a share having a face value of `10 is `40. The profits available
for equity shareholders are `2,00,000. If the paid-up share capital of the company
is `5,00,000, the Earning Yield Ratio is :
(A) 8%
(B) 10%
(C) 40%
(D) 25%
94. Which of the following will result into flow of funds ?
(A) Purchase of fixed assets on credit
(B) Purchase of fixed assets in exchange of shares
(C) Purchase of fixed assets in exchange of old fixed assets
(D) None of the above
95. Management reporting is the instrument for :
(A) Planning and control
(B) Control and decision-making
(C) Planning and decision-making
(D) Planning and organising
96. While apportioning total process costs upto the point of separation over the joint
products ……………….... is considered to be the more equitable than other
methods.
(A) Physical unit method
(B) Average unit cost method
(C) Survey method
(D) Net realisable value method

97. A transport service company incurred a total operating cost of `1,40,500 in

June, 2019 to operate five buses between two places which are 50 kms apart.
Each bus is having a seating capacity of 50 passengers and all buses run on all
EP–CMA–December 2020 46
days with one round trip only. If the operating cost per passenger km, is `0.25,
then the capacity occupied in each bus is :

(A) 60%

(B) 75%

(C) 80%

(D) 100%
98. Besides the management, .................. and .................. are also benefitted in
many ways by installing a good cost accounting system in an organisation.
(A) Shareholders and Creditors
(B) Creditors and Employees
(C) Employees and Customers
(D) Customers and Government
99. In ........................... the contractee has the right to conduct cost audit to ensure
that he is not being cheated by the contractor.
(A) Sub-contract
(B) Cost plus contract
(C) Contract with escalation clause
(D) Government contract
100. The Balance Sheet of a company shows an opening balance of `1,80,000 and
`60,000 respectively in Plant A/c and Provision for Depreciation on Plant A/c.
The closing balances of these accounts are ` 2,88,000 and ` 66,000 respectively.
An old plant costing `36,000 with an accumulated depreciation of `24,000 was
sold at a profit of `600. The amount of cash outflow from plant was :
(A) `1,44,000
(B) ` 1,24,000
(C) ` 1,24,600
(D) ` 1,36,400
 47 EP–CMA–December 2020
ANSWER KEY
COST AND MANAGEMENT ACCOUNTING - SELECT SERIES
Q.no. Ans Q.no. Ans Q.no. Ans
1 C 34 C 67 C
2 A 35 A 68 A
3 D 36 B 69 B
4 A 37 D 70 B
5 D 38 A 71 D
6 B 39 B 72 B
7 C 40 B 73 C
8 B 41 D 74 B
9 C 42 C 75 B
10 C 43 C 76 A
11 A 44 D 77 B
12 C 45 C 78 B
13 A 79 B
46 B
80 A
14 B 47 A
81 B
15 D 48 D
82 D
16 C 49 A
83 A
17 D 50 D
84 B
18 B 51 C
85 D
19 C 52 B 86 D
20 D 53 D 87 B
21 C 54 D 88 C
22 B 55 D 89 A
23 C 56 C 90 A
24 B 57 B 91 B
25 A 58 B 92 B
26 A 59 C 93 B
27 C 60 B 94 A
28 B 61 D 95 B
29 C 62 C 96 C
30 C 63 B 97 B
31 B 64 B 98 B
32 A 65 B 99 B
33 C 66 B 100 A
EP–ECL–December 2020 48

ECONOMIC AND COMMERCIAL LAWS

Time allowed : 3 hours Maximum marks : 100

NOTE : Answer ALL Questions.

PART A
Question 1
(a) What is meant by Liberalised Remittance Scheme (LRS) ? State the permissible
capital account transactions which may be handled by an individual in this
process, under the Foreign Exchange Management Act (FEMA), 1999.
(b) State the genesis of the Trade Related Aspects of Intellectual Property Rights
(TRIPS).
(c) Explain the general principles, which are applicable in exercising the powers
conferred for working of patents and compulsory licenses, under the Patent
Act, 1970.
(d) What is meant by money laundering? State the punishment, which may be
inflicted for committing the offence of money laundering, under the Prevention
of Money Laundering Act (PMLA), 2002.
(e) Explain the powers and functions of ‘Approval Committee’ constituted, under
Special Economic Zones (SEZ) Act, 2005. (5 marks each)
Answer 1(a)
Under the Liberalised Remittance Scheme (LRS), Authorised Dealers may freely
allow remittances by resident individuals up to USD 2, 50,000 per Financial Year (April-
March) for any permitted current or capital account transaction or a combination of both.
The permissible capital account transactions by an individual under LRS are:
• opening of foreign currency account abroad with a bank;
• purchase of property abroad;
• making investments abroad- acquisition and holding shares of both listed and
unlisted overseas company or debt instruments; acquisition of qualification
shares of an overseas company for holding the post of Director; acquisition of
shares of a foreign company towards professional services rendered or in lieu of
Director’s remuneration; investment in units of Mutual Funds, Venture Capital
Funds, unrated debt securities, promissory notes;
• setting up Wholly Owned Subsidiaries and Joint Ventures;
48
 49 EP–ECL–December 2020
• extending loans including loans in Indian Rupees to Non-resident Indians (NRIs)
who are relatives as defined in Companies Act, 2013
Answer 1(b)
The TRIPS Agreement plays a critical role in facilitating trade in knowledge and
creativity, in resolving trade disputes over intellectual property, and in assuring WTO
members the latitude to achieve their domestic objectives. Ideas and knowledge are an
increasingly important part of trade. Creators can be given the right to prevent others
from using their inventions, designs or other creations and to use that right to negotiate
payment in return for others using them. These are “intellectual property rights”. They
take a number of forms. For example books, paintings and films come under copyright;
inventions can be patented; brand names and product logos can be registered as
trademarks; and so on. Governments and Parliaments have given creators these rights
as an incentive to produce ideas that will benefit society as a whole.
The extent of protection and enforcement of these rights varied widely around the
world; and as intellectual property became more important in trade, these differences
became a source of tension in international economic relations. New internationally-
agreed trade rules for intellectual property rights were seen as a way to introduce more
order and predictability, and for disputes to be settled more systematically.
The World Trade Organization’s TRIPS Agreement is an attempt to narrow the gaps
in the way these rights are protected around the world, and to bring them under common
international rules. It establishes minimum levels of protection that each government
has to give to the intellectual property of fellow WTO members.
Answer 1(c)
Section 83 of the Patents Act, 1970 dealing with general principles applicable to
working of patented invention provides that in exercising the powers conferred for working
of patents and compulsory licences, regard shall be had to the following general
considerations, namely:
(a) that patents are granted to encourage inventions and to secure that the
inventions are worked in India on a commercial scale and to the fullest extent
that is reasonably practicable without undue delay;
(b) that they are not granted merely to enable patentees to enjoy a monopoly for
the importation of the patented article;
(c) that the protection and enforcement of patent rights contribute to the promotion
of technological innovation and to the transfer and dissemination of technology,
to the mutual advantage of producers and users of technological knowledge
and in a manner conducive to social and economic welfare, and to a balance of
rights and obligations;
(d) that patents granted do not impede protection of public health and nutrition and
should act as instrument to promote public interest specially in sectors of vital
importance for socio-economic and technological development of India;
(e) that patents granted do not in any way prohibit Central Government in taking
measures to protect public health;
EP–ECL–December 2020 50
(f) that the patent right is not abused by the patentee or person deriving title or
interest on patent from the patentee, and the patentee or a person deriving title
or interest on patent from the patentee does not resort to practices which
unreasonably restrain trade or adversely affect the international transfer of
technology; and
(g) that patents are granted to make the benefit of the patented invention available
at reasonably affordable prices to the public.
Section 84 of the Patents Act, 1970 provides that at any time after the expiration of
three years from the date of the grant of a patent, any person interested may make an
application to the Controller for grant of compulsory licence on patent on any of the
following grounds, namely:
(a) that the reasonable requirements of the public with respect to the patented
invention have not been satisfied, or
(b) that the patented invention is not available to the public at a reasonably affordable
price, or
(c) that the patented invention is not worked in the territory of India.
Answer 1(d)
Money laundering is the processing of criminal proceeds to disguise its illegal origin.
Fundamentally, money laundering or processing of criminal proceeds is intrinsically
linked to the underlying criminal activity that generates it.
According to Section 2(1) (p) of the Prevention of Money Laundering Act, 2002
"money-laundering" has the meaning assigned to it in section 3 of the Act.

Section 3 of the Prevention of Money Laundering Act, 2002 states that whosoever
directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or
actually involved in any process or activity connected with the proceeds of crime including
its concealment, possession, acquisition or use and projecting or claiming it is an untainted
property shall be guilty of offence of money laundering.

Section 4 provides that any person who commits the offence of money laundering
shall be punishable with rigorous imprisonment for a term which shall not be less than
three years but which may extend to seven years and also liable to fine. However, where
the proceeds of crime involved in money laundering relates to any offence specified
under the Narcotic Drugs and Psychotropic Substances Act, the punishment may extend
to rigorous imprisonment for ten years.

Answer 1(e)

Section 14 of the Special Economic Zones Act, 2005, empowers every Approval
Committee to discharge the functions and exercise the powers in respect of the following
matters:
(a) approve, the import or procurement of goods from the Domestic Tariff Area, for
carrying on the authorised operations by a Developer in the Special Economic
Zone;
 51 EP–ECL–December 2020
(b) approve providing of services by a service provider from outside India or from
the Domestic Tariff Area for carrying on the authorised operations by the
Developer, in the Special Economic Zone;
(c) monitor the utilisation of goods or services or warehousing or trading in the
Special Economic Zone;
(d) approve, modify or reject proposals for setting up Units for manufacturing or
rendering of services or warehousing or trading in SEZ in accordance with the
provisions of Section 15(8) of the Act;
(e) allow on receipt of approval foreign collaborations and foreign direct investments,
including investments by a person outside India for setting up a Unit;
(f) monitor and supervise compliance of conditions subject to which the letter of
approval or permission, if any, is granted to the Developer or entrepreneur; and
(g) perform any other functions as may be entrusted to it by the Central Government
or the State Government concerned, as the case may be.
Attempt all parts of either Q. No. 2 or Q. No. 2A
Question 2
(a) Alok consigns 500 bales of jute to Aswin, who has made advance to him on
such jute. Alok desires, Aswin to sell the jute and to repay himself out of the
sale prices and recoup the advance. Which type of agency it is ? Can it be
terminated. State also the condition, under which such agency may be created?
(b) Atul travelled by railway from Kanpur to Lucknow, after purchasing a ticket from
the Railway Authorities. When he tried to alight at Lucknow railway station in the
darkness, the train started without a whistle. He fell down and his legs were
chopped off by the wheels of the train. Atul filed a suit against this. The Railway
Authorities contended that the fault was of the Electricity Distribution Company,
who failed to supply the electricity at that time. Decide, whether the contention
of Railway Authorities is tenable ? Is it a deficiency in the service on the part of
the Railway Authorities, under the Consumer Protection Act, 1986.
(c) Which agreement may be called as an anti-competitive agreement, under the
Competition Act, 2002.
(d) State the various ways in which an offer lapses under the Indian Contract Act,
1872.
(e) When would the Arbitral Tribunal shall issue an order for the termination of
Arbitral Proceedings under Arbitral and Concilliation Act, 1996. (3 marks each)
OR (Alternate question to Q. No. 2)
Question 2A
(i) Which documents are compulsorily required for the export of goods, from India
and for import of goods in India, under Foreign Trade Policy ? (5 marks)
(ii) Examine with reasons, whether the following transactions are exempted under
the Indian Stamp Act, 1899 :
EP–ECL–December 2020 52
(a) A lease is executed and got registered. A second document is executed
altering the terms of the first document. (1 mark)
(b) A purchaser of land executes a mortgage of the land in favour of the vendor
for a portion of the purchase money. (1 mark)
(c) Any instrument executed by the developer or unitor in connection with carrying
out of purposes of the Special Economic Zone (SEZ). (1 mark)
(d) A scheme for corporatisation or demutualisation or both of a recognised
stock exchange. (1 mark)
(e) The transfer of beneficial ownership of securities, dealt with by a depository.
(1 mark)
(iii) State the absolute grounds for refusal of the registration of trade mark, under
the Trade Marks Act, 1999. (5 marks)
Answer 2(a)
The problem asked in the question is related to the agency coupled with interest. An
agency is coupled with an interest when the agent has an interest in the authority granted
to him or when the agent has an interest in the subject matter with which he is authorised
to deal. Where the agent was appointed to enable him to secure some benefit already
owed to him by the principal, the agency was coupled with an interest.
An agency coupled with interest cannot be terminated in the absence of a contract
to the contrary to the prejudice of such interest.
The principal laid down in Section 202 of the Indian Contract Act, 1872, applies only
if the following conditions are fulfilled:
(i) The interest of the agent should exist at the time of creation of agency and
should not have arisen after the creation of agency.
(ii) Authority given to the agent must be intended for the protection of the interest of
the agent.
(iii) The interest of the agent in the subject matter must be substantial and not
ordinary.
(iv) The interest of the agent should be over and above his remuneration. Mere
prospect of remuneration is not sufficient interest.
Answer 2(b)
According to Section 2(1)(g) of the Consumer Protection Act, 1986, deficiency means
any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of
performance which is required to be maintained by or under any law for the time being in
force or has been undertaken to be performed by a person in pursuance of a contract or
otherwise in relation to any service. The terms consumer and service are defined under
Section 2 of the Consumer Protection Act, 1986 as well.
Passengers travelling by trains on payment of the stipulated fare charged for the
ticket are ‘consumers’ and the facility of transportation by rail provided by the railway
 53 EP–ECL–December 2020
administration is a ‘service’ rendered for consideration as defined in the Consumer
Protection Act, 1986. Failure to maintain the quality of performance required by the law
or failure to provide services as per warranties given, by the provider of the service
would amount to ‘deficiency’.
In given problem Atul travelled by railway is a consumer and Atul suffered injury due
to deficiency of service of railway.
Hence the contention of the Railway Authority that it was the fault of the electricity
distribution company who failed to supply electricity at that point in time, is not tenable.
Not providing the proper and required facilities will be covered under the deficiency in
service as per the Consumer Protection Act, 1986 and Railway Authority is liable to
compensate to Atul.
Answer 2(c)
An anti-competitive agreement under the Competition Act, 2002 is an agreement
having appreciable adverse effect on competition. Anti-competitive agreements include,
but are not limited to:-
• agreement to limit production and/or supply;
• agreement to allocate markets;
• agreement to fix price;
• bid rigging or collusive bidding;
• conditional purchase/ sale (tie-in arrangement);
• exclusive supply / distribution arrangement;
• resale price maintenance; and
• refusal to deal.
Answer 2(d)
Section 6 of the Indian Contract Act, 1872 deals with various modes of lapse of an
offer. It states that an offer lapses if—
(a) It is not accepted within the specified time (if any) or after a reasonable time, if
none is specified.
(b) It is not accepted in the mode prescribed or if no mode is prescribed in some
usual and reasonable manner, e.g., by sending a letter by mail when early reply
was requested;
(c) The offeree rejects it by distinct refusal to accept it;
(d) Either the offeror or the offeree dies before acceptance;
(e) The acceptor fails to fulfill a condition precedent to an acceptance.
(f) The offeree makes a counter offer, it amounts to rejection of the offer and an
offer by the offeree may be accepted or rejected by the offeror.
EP–ECL–December 2020 54
Answer 2(e)
As per section 32 (1) of the Arbitration and Conciliation Act, 1996, the arbitral
proceedings shall be terminated by the final arbitral award or by an order of the arbitral
tribunal under sub-section (2).
Under section 32 (2) the arbitral tribunal shall issue an order for the termination of
the arbitral proceedings where
a. the claimant withdraws his claim, unless the respondent objects to the order
and the arbitral tribunal recognizes a legitimate interest on his part in, obtaining
a final settlement of the dispute,
b. the parties agree on the termination of the proceedings, or
c. the arbitral tribunal finds that the continuation of the proceedings has for any
other mason become unnecessary or impossible.
Section 32(3) says that the mandate of the arbitral tribunal terminates with the
termination of the arbitral proceedings subject to Section 33 and Section 34 (4) of the
Arbitration and Conciliation Act, 1996.
The aforesaid are circumstances wherein the arbitral proceedings can stand
terminated.
Answer 2A(i)
Mandatory documents required for export of goods from India are as under:
1. Bill of Lading/Airway Bill
2. Commercial Invoice cum Packing List
3. Shipping Bill/Bill of Export
Mandatory documents required for import of goods into India are as under:

1. Bill of Lading/Airway Bill

2. Commercial Invoice cum Packing List

3. Bill of Entry
For export or import of specific goods or category of goods, which are subject to any
restrictions/policy conditions or require No Objection Certificate (NOC) or product specific
compliances under any statute, the regulatory authority concerned may notify additional
documents for purposes of export or import.
In specific cases of export or import, the regulatory authority concerned may
electronically or in writing seek additional documents or information, as deemed necessary
to ensure legal compliance.
Answer 2A(ii)(a)
Section 4 of the Indian Stamp Act, 1899 provides that, where in the case of any
sale, mortgage or settlement, several instruments are employed for completing the
 55 EP–ECL–December 2020
transaction, only the principal instrument shall be chargeable with the duty prescribed
for the conveyance, mortgage or settlement.
A lease is executed and got registered. A second document is executed altering the
terms of the first document. The second document has to be stamped as a lease.
Section 4 does not apply.
Answer 2A(ii)(b)
Section 4 of the Indian Stamp Act, 1899 provides that, where in the case of any
sale, mortgage or settlement, several instruments are employed for completing the
transaction, only the principal instrument shall be chargeable with the duty prescribed
for the conveyance, mortgage or settlement.
A purchaser of land executes a mortgage of the land in favour of the vendor for a
portion of the purchase money. The mortgage is liable to full duty as a separate instrument.
Section 4 does not apply.
Answer 2A(ii)(c)
According to Section 3 of the Indian Stamp Act, 1899 no duty shall be chargeable in
respect of any instrument executed by, or, on behalf of, or in favour of, the Developer or
Unit or in connection with the carrying out of purposes of the Special Economic Zone.
Accordingly, this instrument is not chargeable with stamp duty.
Answer 2A(ii)(d)
According to Section 8B of the Indian Stamp Act, 1899 a scheme for corporatisation
or demutualisation, or both of a recognized stock exchange shall not be liable to duty
under the Act or any other law for the time being in force. . Accordingly, this instrument
is not liable to stamp duty.
Answer 2A(ii)(e)
As per Section 8A of the of the Indian Stamp Act, 1899, the transfer of registered
ownership of securities from a person to a depository or from a depository to a beneficial
owner shall not be liable to duty under the Act or any other law for the time being in force.
Accordingly, this instrument is not liable to stamp duty.
Answer 2A(iii)
Section 9(1) of the Trade Marks Act, 1999 containing provisions relating to absolute
grounds for refusal for registration prohibit the registration of those trade marks which
are devoid of any distinctive character or which consist exclusively of marks or indications
which may serve in trade to designate the kind, quality, quantity, intended purpose, etc.,
or which consist exclusively of marks or indications which have become customary in
the current language or in the bona fide and established practices of the trade. However,
a trademark shall not be refused registration, if the mark has in fact acquired a distinctive
character as a result of use or is a well-known trade mark before the date of application.
In short, a trade mark which has been demonstrated to be distinctive in the market place
shall be regarded as distinctive in law as well and be registerable.
Section 9(3) of the Act prohibits registration of a mark, if it consists exclusively of
shape of goods which result from the nature of the goods themselves or which is
EP–ECL–December 2020 56
necessary to obtain a technical result or which gives substantial value to the goods. It
is, however, explained that the nature of goods or services in relation to which the Trade
Mark is used or proposed to be used shall not be a ground for refusal of registration.
Question 3
(a) A person has been arrested for a cognizable and non-bailable offence, punishable
for a term of imprisonment for more than three years, under the Prevention of
Money Laundering Act, 2002.
Advise him, as to how he can be released on bail.
(b) Ram promised to pay `5,000 per month to his wife Sunita. She was living in
Delhi. On receiving information that she was unfaithful to him, Ram stopped
payment of `5,000 to Sunita. Sunita approaches you to file a case against
Ram. Advise her referring to the Provision of the Indian Contract Act, 1872.
(c) Avtar made an unconditional gift of property to Ashok but continued in possession
of the gifted property. Having possession of the gifted property Avtar revoked
the gift and transfered it to Suresh. Ashok wants to recover possession from
Suresh. State in the context of the transfer of Property Act, 1882, whether
Suresh can withhold the property ? (5 marks each)
Answer 3(a)
Section 45 of the Prevention of Money Laundering Act, 2002 deals with offences to
be cognizable and non-bailable.
According to Section 45 of the Act, notwithstanding anything contained in the Code
of Criminal Procedure, 1973, no person accused of an offence under this Act shall be
released on bail or on his own bond unless--
(i) the Public Prosecutor has been given an opportunity to oppose the application
for such release; and
(ii) where the Public Prosecutor opposes the application, the court is satisfied that
there are reasonable grounds for believing that he is not guilty of such offence
and that he is not likely to commit any offence while on bail:
A person, who, is under the age of sixteen years, or is a woman or is sick or infirm,
or is accused either on his own or along with other co-accused of money-laundering a
sum of less than one crore rupees may be released on bail, if the Special Court so
directs. The Special Court shall not take cognizance of any offence punishable under
section 4 except upon a complaint in writing made by
(i) the Director; or
(ii) any officer of the Central Government or a State Government authorised in
writing in this behalf by the Central Government by a general or special order
made in this behalf by that Government.
The limitation on granting of bail specified in is in addition to the limitations under
the Code of Criminal Procedure, 1973 or any other law for the time being in force on
granting of bail.
 57 EP–ECL–December 2020
Accordingly, the accused would have to satisfy the court and adopt the procedure
as stated in Section 45 and the other related provisions, in order to enable him to get
bail.
Answer 3(b)
The present problem is based upon a domestic arrangements between husband and
wife. In Balfour v. Balfour (1919) 2 KB 571, a husband working in Ceylone, had agreed
in writing to pay a housekeeping allowance to his wife living in England. On receiving
information that she was unfaithful to him, he stopped the allowance. The Court Held, he
was entitled to do so. This was a mere domestic arrangement with no intention to create
legally binding relations. Therefore, there was no contract.
In the present case no legally binding contract has been made between Ram and
Sunita and the promise is in the nature of domestic arrangement between a husband and
wife. Therefore there is no valid contract.
Answer 3(c)
The most essential thing for the validity of a gift is its acceptance. If the gift is
accepted but not registred it is a valid gift. The Privy Council in the case of Kalyan
Sundram v. Kumarappa, A.I.R. 1925 P.C. 42, decided that after acceptance of the deed
of gift and before registration, the donor cannot revoke the gift. The gift which is accepted
by the donee, will take effect from the date of the execution of the document by the
donor, even though it is registered at a later date.
If the deed of gift is executed but never communicated to the intended donee and
remains in the possession of the donor undelivered, it cannot be compulsory registered
at the instance of the donee. The reason is that the donee did not accept the gift, the
donor can at any time before such acceptance revoke the gift. But once a gift is accepted
by the donee, the donor cannot revoke it. A gift may, however, be revoked if it is brought
about by a fraud or misrepresentation or undue influence.
In the present case Avtar has made unconditional gift to Ashok but he remains in
possesion of the gifted property and the fact provided it seems the gift was not accepted
by the Ashok. Hence Avtar may transfer the property to Suresh. Therefore, Ashok can
not recover possession of the property from Suresh as per Section 123 of the Transfer
of Property Act, 1882.
Question 4
(a) State the objectives of the foreign trade policy from 2015-2020. Also explain the
frame work of the foreign trade policy, regarding enhancement and promotion of
the exports. (8 marks)
(b) What is meant by ‘Fast Track Procedure’ to resolve the dispute between the
parties, under the Arbitration and Conciliation Act, 1996. State the procedure to
be followed by the arbitral tribunal while conducting arbitration proceedings.
(7 marks)
Answer 4(a)
The focus of Foreign Trade Policy has been to promote a framework of rules and
EP–ECL–December 2020 58
procedure for exports and imports and a set of incentives for promoting exports. The
India’s Foreign Trade Policy for 2015-2020 seeks to achieve the following objectives:
(i) To provide a stable and sustainable policy environment for foreign trade in
merchandise and services;

(ii) To link rules, procedures and incentives for exports and imports with other
initiatives such as “Make in India”, “Digital India” and “Skills India” to create an
“Export Promotion Mission? for India;

(iii) To promote the diversification of India’s export basket by helping various sectors
of the Indian economy to gain global competitiveness with a view to promoting
exports;

(iv) To create an architecture for India’s global trade engagement with a view to
expanding its markets and better integrating with major regions, thereby increasing
the demand for India’s products and contributing to the government’s flagship
“Make in India” initiative;

(v) To provide a mechanism for regular appraisal in order to rationalise imports and
reduce the trade imbalance.
The frame work of the Foreign Trade Policy, regarding enhancement of and promotion
of the exports:
— Employment creation in both manufacturing and services through the generation
of foreign trade opportunities
— Zero defect products with a focus on quality and standards;
— A stable agricultural trade policy encouraging the import of raw material where
required and export of processed products;
— A focus on higher value addition and technology infusion;
— Investment in agriculture overseas to produce raw material for the Indian industry;
— Lower tariffs on inputs and raw materials; and
— Development of trade infrastructure and provision of production and export
incentives.
Additionally, the Export from India Schemes is to provide rewards to exporters to
offset infrastructural inefficiencies and associated costs involved and to provide exporters
a level playing field. There are two schemes for exports of Merchandise and Services
respectively. They are (i) Merchandise Exports from India Scheme (MEIS), (ii) Service
Exports from India Scheme (SEIS).
Answer 4(b)
According to Section 29B of the Arbitration and Conciliation Act, 1996, the parties
to an arbitration agreement, may, at any stage either before or at the time of appointment
of the arbitral tribunal, agree in writing to have their dispute resolved by fast track
procedure.
 59 EP–ECL–December 2020
The arbitral tribunal shall follow the following procedure while conducting arbitration
proceedings:
(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings,
documents and submissions filed by the parties without any oral hearing;
(b) The arbitral tribunal shall have power to call for any further information or
clarification from the parties in addition to the pleadings and documents filed by
them;
(c) An oral hearing may be held only, if, all the parties make a request or if the
arbitral tribunal considers it necessary to have oral hearing for clarifying certain
issues;
(d) The arbitral tribunal may dispense with any technical formalities, if an oral hearing
is held, and adopt such procedure as deemed appropriate for expeditious disposal
of the case.
The award shall be made within a period of six months from the date the arbitral
tribunal enters upon the reference.
PART B
Question 5
(a) To whom the appeal shall lie against the award, decision or order of the National
Green Tribunal, under the National Green Tribunal Act, 2010.
(b) Describe the functions of the National Board for Micro, Small and Medium
Enterprises under the Micro, Small and Medium Enterprises (MSME)
Development Act, 2006.
(c) Distinguish between seizure and confiscation as stated in Essential Commodities
Act, 1955.
(d) When a sub-registrar may refuse to register a document? Whether registration
of a document may be refused, on the ground of undervaluation of stamp duty,
under the Registration Act, 1908.
(e) Explain the ‘Environmental Audit’ as stated under rule of 14 of Environmental
Protection Rules, 1986. (3 marks each)
Answer 5(a)
Section 22 of the National Green Tribunal Act, 2010 states that any person aggrieved
by any award, decision or order of the Tribunal, may, file an appeal to the Supreme
Court, within ninety days from the date of communication of the award, decision or order
of the Tribunal, to him, on any one or more of the grounds specified in section 100 of the
Code of Civil Procedure, 1908. However, the Supreme Court may entertain any appeal
after the expiry of ninety days, if it is satisfied that the appellant was prevented by
sufficient cause from preferring the appeal.
Answer 5(b)
Section 5 of the Micro, Small and Medium Enterprises Development Act, 2006
EP–ECL–December 2020 60
empowers the National Board for Micro, Small and Medium Enterprises subject to the
general directions of the Central Government to, perform all or any of the following
functions, namely:
(a) Examine the factors affecting the promotion and development of micro, small
and medium enterprises and review the policies and programmes of the Central
Government in regard to facilitating the promotion and development and enhancing
the competitiveness of such enterprises and the impact thereof on such
enterprises;
(b) Make recommendations on matters referred to above or on any other matter
referred to it by the Central Government which, in the opinion of that Government,
is necessary or expedient for facilitating the promotion and development and
enhancing the competitiveness of the micro, small and medium enterprises;
and
(c) Advice the Central Government on the use of the Fund or Funds constituted
under Section 12 of the Act.
Answer 5(c)
Essential Commodities Act, 1955 uses the expressions ‘confiscation’ and ‘seizure’
in Section 6A and under this section a commodity which has been seized in pursuance
of an order under Section 3 can be confiscated under the circumstances mentioned in
Section 6A.
‘Confiscation’ according to Wharton’s Law Lexicon, is condemnation and adjudication
of property to the public treasury as of goods seized under the Customs Act. Confiscation,
according to Stroud’s judicial Dictionary, must be an act done in some way on the part
of the Government of the country where it takes place and in some way beneficial to that
Government, though the proceeds may not strictly speaking be brought into its treasury.
The expression ‘seize’ means to take possession contrary to the wishes of the
owner of the property and that such action is unilateral action of the person seizing. The
person from whom anything is seized loses, from the moment of seizure, the right or
power to control or regulate the use of that thing.
Answer 5(d)
Grounds for refusal to registration of documents
According to Section 71 of the Registration Act, 1908, every Sub-Registrar refusing
to register a document, except on the ground that the property to which it relates is not
situate within his sub-district, shall make an order of refusal and record his reasons for
such order in his Book No. 2 and endorse the words “Registration refused” on the
document; and, on application made by any person executing or claiming under the
document, shall without payment and unnecessary delay, give him a copy of the reasons
so recorded.
No registering officer shall accept for registration a document so endorsed unless
and until, under the provisions hereinafter contained, the document is directed to be
registered.
 61 EP–ECL–December 2020
Further, if it is presented by a person who has no right to present it (Section 32).
Registration cannot be refused on the ground of undervaluation for stamp or any
other extraneous reason. (Mulla (1998), page 308)
Answer 5(e)
Rule 14 of the Environment Protection Rules, 1986 provides for the submission of
environmental audit report. Accordingly, every person carrying on an industry, operation
or process requiring consent under Section 25 of the Water (Prevention and Control of
Pollution) Act or Section 23 of the Air (Prevention and Control of Pollution) Act or both or
authorisation under the Hazardous Wastes (Management and Handling) Rules, 1989 is
required to submit an environmental audit report in Form V for the financial year ending
on 31st March every year on or before the 15th of May, beginning 1993 to the concerned
State Pollution Control Board.
Attempt All Parts of either Q. No. 6 or Q. No. 6A
Question 6
(a) Arun bequeaths certain property to Varun, requesting him to distribute it, among
such members of Sohan’s family, as Varun should think most deserving. Examine
the validity of the trust. (5 marks)
(b) Discuss the law and procedure regarding sale of the confiscated commodity
and disposal of sale proceeds of confiscated goods under the Essential
Commodities Act, 1955. (5 marks)
(c) Who is under an obligation to furnish the information to the State Boards, regarding
emission of air pollution ? State the liability of such person, under the Air
(Prevention and Control of Pollution) Act, 1981. (5 marks)
OR (Alternate to question to Q. No. 6)
Question 6A
(i) “A society registered, under the Societies Registration Act, 1860, is a legal
entity which is capable to sue and be sued.” Analyse this statement referring to
the provisions of the Societies Registration Act, 1860.
(ii) A executes a will of his all moveable and immovable property in favour of B, his
grandson. He wants to register the will. Advise A regarding the presentment for
its registration and deposit of will with reference to the provisions of the
Registration Act, 1908.
(iii) Who is empowered to establish ‘Central Advisory Council’ under the Industries
(Development and Registration) Act, 1951 ? State its composition also.
(5 marks each)
Answer 6(a)
For creating a trust the author of the trust should indicate with reasonable certainty
the following:
(1) Certainty in words : The words used to create a trust must be clear and certain
so as to explain a clear intention to create a trust. Recommendatory words like
"I hope" "I wish" are not sufficient.
EP–ECL–December 2020 62
(2) Certainty in the object of the trust : The beneficiary, for whose benefit the trust
is created, must be shown clearly.
(3) Certainty in the subject-matter of the trust : The subject matter of the trust must
be clear, i.e., the property, in respect of which a trust is created, must be shown
clearly. Purpose of the trust should be certain.
In the present case Arun bequeaths certain property to Varun, requesting him to
distribute it amongst such members of Sohan's family as Varun should think most
deserving. This does not create a trust, for the beneficiaries are not indicated with
reasonable certainty.
Answer 6(b)
Section 6A(2) of the Essential Commodities Act, 1955 provides that where the
collector, on receiving a report of seizure or on inspection of any essential commodity
under Sub-section (1), is of the opinion that the essential commodity is subject to speedy
and natural decay or it is otherwise expedient in the public interest so to do he may (i)
order the same to be sold at the controlled price, if any, fixed for such essential commodity
under this Act or under any other law for the time being in force; (ii) where no such price
is fixed, order the same to be sold by public auction. Provided that in case of food
grains, the collector may, for its equitable distribution arid availability at fair prices, order
the same to be sold through fair price shops at the price fixed by the Central Government
or by the State Government as the case may be, for the retail sale of such food grains
to the public.
In terms of Section 6A(3) of the Essential Commodities Act, 1955 , the sale proceeds
of the essential commodity sold, after deduction of the expenses of any such sale or
auction or other incidental expenses relating thereto shall be paid to the owner or person
from whom it is seized in the following circumstances: (a) where no order of confiscation
is ultimately passed by the Collector; (b) where an order passed on appeal under Section
6C(1) so requires, or (c) where in a prosecution instituted for the contravention of the
order in respect of which an order of confiscation has been made under this section, the
person concerned is acquitted.
Answer 6(c)
Section 23 of the Air (Prevention and Control of Pollution) Act, 1981 imposes an
obligation on the person in charge of the premises where emission of any air pollutant
occurs or is apprehended, to furnish the fact of any occurrence or apprehension of
emission of any air pollutant into the atmosphere in excess of the standards laid down
by the State Board. Even where the person in charge of the premises apprehends that
any air pollutant in excess of these standards is likely to occur due to any accident or
other unforeseen act or event, he has to intimate such apprehension to the State Board
and to such authorities or agencies as may be prescribed.
The State Board or any authority or agency, as the case may be, shall, on receipt of
such information, cause such remedial measures to be taken as are necessary to mitigate
the emission of such air pollutants. Expenses if any, incurred by the State Board, authority
or agency as the case may be, with respect to any such remedial measure shall be
recovered from the person in charge of the premises as if they are arrears of land
revenue or of public demand.
 63 EP–ECL–December 2020
Answer 6A(i)
A Society registered under the Societies Registration Act, 1860 is a legal entity.
According to Section 6 of the Act, it is capable of suing and be sued in the name of the
president, chairman or principal, secretary or trustees as determined by the rules and
regulations. If there is no such prescribed determination then the society can be sued in
the name of such person as appointed by the governing body for the occasion. If no
such person is nominated by the governing body on an application made to it, then a
person having a claim against society may sue the president or chairman or secretary or
trustee.
As per Section 7 of the Act, no suit or proceeding in any Civil Court shall abate or
discontinue if the person in whose name the suit has been brought has died or ceased to
fill the character. Such suit shall be continued in the name of or against the successor
of such person.
The section is merely an enabling provision and does not take away the right of
society to sue or be sued in its own name (Govind Prasad v. Laxminarain 1960 MPLJ
145).
Answer 6A(ii)
Who is entitled to present Wills and authorises to adopt
According to Section 40 of the Registration Act, 1908 the testator, or after his
death, any person claiming as executor or otherwise under a will, may present it to any
Registrar or Sub-Registrar for registration. In case of authority for adoption, the donor or
(after his death) the donee, or any authority to adopt, or the adoptive son, may present
it to any Registrar or Sub-Registrar for registration.
Registration of will and authority to adopt
(i) A will, or an authority to adopt, if presented by the testator or the donor, may be
registered in the same manner as any other document. [Section 41(1)]
(ii) If presented by any other person entitled to present it, it shall be registered if the
registering officer is satisfied about the particulars mentioned in Section 41(2).
Deposit of will

Any testator may, either personally or by duly authorised agent, deposit with any
Registrar his will in a sealed cover superscribed with the name of the testator and that of
his agent, if any, and with a statement of the nature of the document.

On receiving such documents, the Registrar on being satisfied shall transcribe in

his Registrar Book No. 5, the superscription and shall note the date, time, month, etc. of
such receipt and shall then place and retain the sealed cover in his fire-proof box.

However, the testator may withdraw it by applying for the same and the Registrar
shall deliver it accordingly. (Sections 42 to 46).
Answer 6A(iii)
Section 5 of the Industries (Development and Regulation) Act, 1951 empowers the
EP–ECL–December 2020 64
Central Government to establish by notified order, a Council to be called the Central
Advisory Council, for advising the Government on matters concerning the development
and regulation of scheduled industries.
Section 5(2) of the Industries (Development and Regulation) Act, 1951 deals with
composition of Advisory Council and provides that it shall consist of a chairman and
such other members not exceeding thirty in number, to be appointed by the Central
Government from among persons who are, in its opinion, capable of representing the
interest of owners of industrial undertakings in Scheduled Industries; persons employed
in industrial undertakings in Scheduled Industries; consumers of goods manufactured or
produced by Scheduled Industries; and such other class of persons including primary
producers, as in the opinion of the Central Government ought to be represented on the
Advisory Council.

***
 65 EP–TLP–December 2020

TAX LAWS AND PRACTICE - SELECT SERIES

Time allowed : 3 hours Maximum marks : 100
Total number of Questions : 100
Note : All questions in Part-A relate to the Income Tax Act, 1961 and Assessment
Year 2020-21, unless stated otherwise.

PART - A

1. Judicial decisions are being pronounced by various appellate authorities, tribunals,

courts and by High Courts on the disputed matters which are binding specifically
whereas the decisions pronounced by the Supreme Court become judicial
precedent and are binding on ___________
(A) All the Courts & Appellate Tribunals
(B) Income Tax Authorities
(C) An Assesse
(D) All in (A), (B) & (C)
2. Taxes and duties referred to in the Union list except those referred to in Articles
268 and 269, surcharge on taxes and duties and any cess levied by the _______
for specific purpose are to be collected by the Government of India and are to
be distributed between the Union and the States.
(A) Parliament
(B) Central Board of Direct Taxes
(C) Finance Minister
(D) Revenue Administration Authority
3. The incidence of tax on income under the Act is linked with residential status of
an assessee. Ram, an individual brought into India during the previous year
2019-20 past untaxed profits of ` 2,00,000 of the business in UK. State in which
case amount of ` 2,00,000 brought into India be put to tax in A.Y. 2020-21 when
Ram is (a) Resident and Ordinary resident (R&OR); (b) Resident and not Ordinary
resident (R&NOR) and (c) Non-Resident (NR).
(A) Taxable in case of R&OR and R&NOR
(B) Taxable in case of R&OR and Non Resident
(C) Not taxable in all R∨ R&NOR and Non-Resident
(D) Taxable in all R∨ R&NOR and Non-Resident
4. Radhika during the previous year 01.04.2019 to 31.03.2020 received (1) Dividend
from XYZ Ltd of UK, a Foreign Company of `12,00,000 (2) Agriculture income
65
EP–TLP–December 2020 66
from land in Rajasthan of `50,000 (3) Short term capital gain on sale of shares
of Indian company received in London of `60,000. Total Income of Radhika
when she is a Resident and not Ordinarily Resident (R&NOR) for Assessment
Year 2020-21 shall be :
(A) `13,10,000
(B) `60,000
(C) `1,10,000
(D) `12,00,000
5. Sita Raman born in U.K. is a foreign citizen. His father Radha Raman was born
in Rajasthan in 1960 and mother Geeta was born in South Africa in 1965. His
grandfather was also born in Rajasthan in 1935. Sita Raman for the first time to
see historical places comes to India on 25th November, 2019 and remained till
June, 2020 for 200 days. Residential status for assessment year 2020-21 of
Sita Raman shall be :

(A) Resident and Ordinarily Resident

(B) Not Ordinarily Resident

(C) Non-Resident

(D) None of the above

6. Section 87A provides a rebate from the tax payable by an assessee, being an
individual, whose total income does not exceed ? ------------ for the assessment
year 2020-21.

(A) `2,50,000

(B) `3,00,000

(C) `3,50,000

(D) `5,00,000

7. The Income Tax Department is governed by the _________ and is a part of the
________ under the Ministry of Finance, Government of India.

(A) Central Board of Direct Taxes(CBDT), Taxation Cell

(B) Central Board of Direct Taxes(CBDT), Department of Revenue

(C) Department of Revenue , Central Board of Direct Taxes(CBDT)

(D) Department of Revenue, Revenue Administration Authority

8. A resident assessee, who is of the age of 60 years or more but less than 80
years at any time during the previous year 2019- 20 shall not be paying tax on
 67 EP–TLP–December 2020
income up to ` ________ but shall be paying surcharge at the rate of ________
of income tax where total income exceeds `1 crore.
(A) `2,50,000, 10%
(B) `3,00,000, 10%
(C) `2,50,000, 15%
(D) `3,00,000, 15%
9. Any voluntary contributions received by an electoral trust not be included in the
total income where such electoral trust distributes to any political parties
_________ of the aggregate donations received by it during the previous year
along with the surplus, if any, brought forward from any earlier previous year. A
political party, for this purpose, means a political party registered under section
_______ of the Representation of the People Act, 1951.
(A) 85%, 29
(B) 95%, 29A
(C) 95%, 29B
(D) 85%, 29A
10. Kamal has established in the previous year 2018-19 two industrial undertakings,
one in a SEZ and one in a normal DTA. The summarized results for both the
Units for previous year 2019-20 are :
Amount in Lakh (`)
Item SEZ Normal (DTA)
Domestic turnover 100 200
Export turnover 300 0
Gross Profit 75 25
Expenses & Depreciation 15 15
Deduction available under section 10AA of the Act to Kamal in Asst. Year 2020-
21 shall be of ` __________
(A) 45
(B) 60
(C) 75
(D) 70
11. Income derived from sale of coffee grown, cured, roasted and grounded in India
as per Rule 7B (1A) of Income Tax Rules shall be treated both as agricultural
income and business income in the ratio of ___________ of such income.
(A) 60% & 40%
EP–TLP–December 2020 68
(B) 65% & 35%
(C) 75% & 25%
(D) 70% & 30%
12. Which out of the following is not the correct statement as to the definition/
scheme of “Reverse Mortgage”?
(A) A person (generally a senior citizen) who owns a house property have the
option to mortgage the property with a schedule bank or finance company
to get a regular income in periodical installments.
(B) Scheme is not applicable for a person (generally a senior citizen) who does
not have regular income.
(C) The lender will recover the amount paid i.e. principle and interest thereon by
selling the property after the death of borrower.
(D) The lender will have to give the option to the legal heirs to repay the loan
amount along with interest for the release of property.
13. House property owned by Pankaj located at Ajmer having municipal valuation :
` 1,55,000, fair rent: ` 1,40,000, standard rent: `1,24,000 was let out for the
period 1st April, 2019 to 15th November, 2019 on a rent of ` 8,000 per month
and from 16th Nov. 2019 to 31st January 2020 on a rent of `13,000 per month.
Pankaj transferred the property to Shyam on 1st February, 2020. The gross
annual value (GAV) of the house property for assessment year 2020-21 shall be
taken at _____
(A) `1,03,333
(B) `92,500
(C) `1,24,000
(D) `1,30,000
14. Chandra owns a house property constructed with the borrowed capital on
31.03.2008 and since then used by him for own residential purposes. Municipal
value of the property is `1,00,000 whereas fair rent is `80,000 and standard rent
is `90,000. Expenses incurred by Chandra during the previous year 2019-20 for
Municipal tax : `15,000, insurance : `2,000, interest on capital borrowed to
construct the property `70,000. Income/loss chargeable under the head house
property for the assessment year 2020-21 shall be __________
(A) (` 70,000)
(B) (` 85,000)
(C) (` 30,000)
(D) (` 2,00,000)
15. The Gross Annual Value (GAV) as per section 23(1) of the Act of a house
 69 EP–TLP–December 2020
property owned by Suresh covered by Rent Control Act, remained let out during
the previous year 2019-20 for which (i) Municipal Valuation is `3,00,000; (ii)
Actual (de facto) Rent is ` 3,20,000; (iii) Fair rent is `3,60,000 and (iv) Standard
rent is `4,00,000 shall be taken at -------
(A) `3,60,000
(B) `4,00,000
(C) `3,20,000
(D) `3,00,000
16. Car having cubic capacity of engine not exceeding 1.6 liters owned or hired by
employer provided to the employee for use wholly for private purposes of which
running and maintenance expenses are being borne/ met by the employee than
find out from the following as to value chargeable to tax in the hands of employee
as a perquisite :
(A) It is not a perquisite, hence not taxable.
(B) Value of perquisite shall be 10% of the actual cost of car or hire charges if
car is taken on hire plus salary of chauffeur if any paid or payable by the
employer.
(C) Value of perquisite shall be taken at `600 p.m. and at `900 p.m. if chauffeur
is provided.
(D) Value of perquisite shall be the actual expenditure incurred by the employer
plus normal wear and tear @ 10% of the cost of car or hire charges if car is
taken on hire.
17. Nitesh, working in a factory at Kolkata received during the previous year 2019-
20 `2,00,000 as basic salary and ` 50,000 as house rent allowance. Rent paid
by him for residence in Kolkata was ` 50,000. Amount of house rent allowance
taxable in assessment year 2020-21 is ________
(A) `20,000
(B) `30,000
(C) `50,000
(D) `25,000
18. Subodh Kumar, IAS, a Central Government employee received total salary of `
18,00,000 and `10,000 as entertainment allowance during the previous year
2019-20. Actual expenditure incurred by him on entertainment for the official
purposes was `9,500. The deduction available for entertainment allowance
received or for actual amount spent on entertainment for the assessment year
2020-21 is __________
(A) `4,750
(B) `9,500
EP–TLP–December 2020 70
(C) `10,000
(D) `5,000
19. Rate at which depreciation shall be allowed in case of Ocean-going ships including
dredgers, lugs, barges, survey launches and other similar ships used mainly for
dredging purposes and fishing vessels with wooden hull as per Rule-5 under the
Income Tax for Asst. Year 2020-21 is ________
(A) 15%
(B) 20%
(C) 30%
(D) 40%
20. ABC limited engaged in the business of growing and manufacturing tea in India
deposited `80 lakh in the “Special Account” during the previous year 2018-19
and claimed the same as deduction under section 33AB (40% of business profits
of 200 lakh). During the previous year 2019-20, company withdrawn ? 40 lakh
from the “Special Account” which was utilized as (i) `30 lakh on 31st December,
2019 for the scheme framed by the Tea Board (ii) `4 lakh on 25th January, 2020
for other purposes and `6 lakh was not utilized till 31st March, 2020. The amount
chargeable to tax in assessment year 2020-21 shall be--------
(A) `6 lakh
(B) `16 lakh (40% of `40 lakh)
(C) `10 lakh
(D) `40 lakh
21. XYZ limited commenced production on 1st December 2019 of paper boards
made payments (i) on 1st January 2020 of `1,00,000 to the Indian Agricultural
Research Association, Jaipur being an approved research association under
section 35(1)(ii) for the purpose of carrying out scientific research in natural
science and (ii) on 15th January 2020 of `50,000 to the Indian Institute of
Management, Ahmadabad being an approved institute under section 35(1)(iii)
for the purpose of carrying out research in social or statistical science. The
amount of deduction available to XYZ limited under section 35(1) for the
assessment year 2020-21, if the scientific research not related to the business
of the assessee-company is _________
(A) `2,00,000
(B) `2,25,000
(C) `1,50,000
(D) `1,62,500
22. Any expenditure incurred by an assessee on the activities relating to the corporate
social reasonability (CSR) referred to in section 135 of the Companies Act,
 71 EP–TLP–December 2020
2013 for the purpose of allowability as deduction under section 37(1) of the
Income Tax Act, 1961 _________ for the purpose of the business.
(A) shall be deemed to be an expenditure incurred
(B) shall not be deemed to be an expenditure incurred
(C) shall be capitalized
(D) shall be amortized in five equal installments
23. XYZ Ltd paid an amount of `2,00,000 towards rent for the business premises to
Ramavtar on 12.01.2020 and did not deduct tax at source. Ramavtar also had
not paid the tax on such income. Treatment according to provision under the
Income Tax Act, 1961 in the hands of XYZ Ltd in Assessment Year 2020-21 in
respect of expenditure of rent be __________
(A) disallowance of 10% of such expenditure
(B) disallowance of 20% of such expenditure
(C) disallowance of 30% of such expenditure
(D) disallowance of 100% of such expenditure
24. Maintenance of such books of accounts and other documents is compulsory
under section 44AA of the Income Tax Act, 1961 when every person who is
carrying on business or profession and whose income from business and
profession exceeds _________ or the total sales, turnover or gross receipts
exceeds _________ in any one of the three years immediately preceding the
previous year.
(A) `2,50,000, `25,00,000
(B) ` 2,50,000, `10,00,000
(C) ` 5,00,000, `25,00,000
(D) `1,20,000, `10,00,000
25. GG Goods Transporters engaged in the business of carriage of goods owns on
1st April, 2019 trucks consisting (i) 6 heavy goods vehicles having weight of
each of 14 ton and (ii) 3 light goods vehicles having weight of each of 5 ton. On
4th May, 2019 one of the heavy goods vehicle was sold and 1 light goods
vehicle was purchased on 15th May 2019. The newly purchased light goods
vehicle was put to use only from 25th June 2019. The assessee wants to declare
the income as per section 44AE of the Act; which for A.Y. 2020-21 is to be
taken at ___________
(A) `12,20,500
(B) `12,06,500
(C) ` 12,13,000
(D) `11,99,000
EP–TLP–December 2020 72
26. Monika enters into an agreement on 7th April, 2019 to transfer a piece of land
for an agreed consideration of `66,00,000 by taking an advance payment of `
10,00,000 by an account payee cheque. Sale deed of the piece of land was
executed on 28th December 2019. Indexed cost of acquisition of the piece of
land as per provision of the Act is computed at `34,00,000. Stamp valuation
Authority determined the value of land on 07.04.2019 at `68,50,000 and on
28.12.2019 at `71,00,000. Find out the amount of long- term capital gain which
shall be chargeable to tax in the assessment year 2020-21.
(A) `32,00,000
(B) `34,50,000
(C) `35,00,000
(D) `37,00,000
27. Rahim converted into stock in trade on 10th May 2007 his capital asset which
was acquired by him on 15th June, 2002 for `70,000. Subsequently the stock in
trade so converted was sold for `18,00,000 on 15th July 2019. Fair market
value of the asset on 10th May 2007 was `4,80,000. By taking the CII for the
years 2002-03 as 105, 2007-208 as 129 and of 2019-20 as 289; determine the
amount of capital gain taxable in assessment year 2020-21.
(A) `3,23,179
(B) `13,20,000
(C) ` 2,87,333
(D) `4,10,000
28. Mark to market loss computed in accordance with income computation and
disclosure standards (ICDS) is being allowable as deduction from the Income
computed under the head ______________
(A) Profits and gains of business or profession
(B) Income from other sources
(C) Salaries
(D) Capital Gains
29. Ratan Lal, aged 55 years, resident in India having during the previous year
2019-20 income of winnings from races : ` 20,000 (expenditure incurred : `
200), Short Term Capital Gain : ` 1,75,000 (applicable STT paid) Interest on
Bank Fixed Deposits : ` 2,31,000 and had made contribution in public provident
fund: ` 1,14,000. Total income of Ratan Lal for assessment year 2020-21 shall
be __________
(A) `4,26,000
(B) `3,12,000
(C) `3,02,000
(D) `2,62,000
 73 EP–TLP–December 2020
30. Identify and find out which in the following is the false statement regarding
applicability of ICDS.
(A) ICDS provisions shall apply for computation of MAT

(B) ICDS apply to tax payers following mercantile system of accounting

(C) ICDS also apply to the person computing Income under the relevant
presumptive taxation schemes

(D) ICDS applies to all tax payers except individual and HUF who are not covered
under the tax audit provision under section 44AB

31. Carried forward losses of normal business can be set off against any other
income in subsequent assessment year except _________

(A) income from speculation business

(B) income under the head house property

(C) income under the head other sources

(D) income under the head salaries

32. Where the income of an individual includes any income of his minor child as per
section 64(1A) of the Act; such individual shall be entitled to claim exemption of
a certain amount (not exceeding the income clubbed) as per section 10(32). The
amount of exemption available is --------

(A) `1,500 in respect of each minor child

(B) `1,500 in respect of each minor child but maximum of two children

(C) ` 2,000 in respect of each minor child

(D) ` 3,000 in respect of each minor child

33. Rajkamal has four minor children (2 daughters and 2 sons). The annual income
of two daughters was `9,000 and `4,500 and of two sons was `6,000 and `
4,000 for the financial year 2019-20. The income does not accrue or arise to any
of the minor children on account of any manual work done by them or activity
involving application of their skill, talent or specialized knowledge and experience.
The daughter who has income of `4,500 was suffering from a disability specified
under section 80U. The amount of income earned by all the minor children to be
clubbed as per section 64(1A) of Act in the hands of Rajkamal for the assessment
year 2020-21 is ________
(A) `23,500
(B) `14,500
(C) `17,500
(D) `19,000
EP–TLP–December 2020 74
34. Income of interest received by a minor child on a fixed deposit with a bank
made out of/from the amount of scholarship received from the State Government
is _________
(A) exempt from tax
(B) to be clubbed with the income of father
(C) to be assessed in the hands of the minor child
(D) to be clubbed with the income of that parent whose total income, before
including minor’s income is higher
35. Rama Farm Pvt Ltd is a producer company as specified under section 581A (i)
of the Companies Act, 1956. In order to avail/ taking the benefit of deduction
under section 80PA, the total turnover of the company is to be less than
_________ in any previous year.
(A) `100 crores
(B) `200 crores
(C) `300 crores
(D) `500 crores
36. Zubin is intending/going to purchase agriculture lands in the rural area located in
Gujrat for `70,00,000 in the previous year 2019-20. He wants to know whether
there is any obligation on him to deduct tax at source from the payment to be
made and if so at what rate ?
(A) deduct tax @ 1%
(B) deduct tax @ 2%
(C) deduct tax @ 5%
(D) not to deduct tax at source
37. The maximum amount which can be donated in cash for claiming benefit of
deduction under section 80G of the Act is ________
(A) `1,000
(B) `2,000
(C) ` 5,000
(D) `10,000
38. An individual resident senior citizen tax payer can claim an amount of `
_________ as deduction in respect of specified income of interest on bank
deposits, post office deposits and deposits held in a banking cooperative society.
(A) `10,000
(B) `30,000
(C) `50,000
(D) `75,000
 75 EP–TLP–December 2020
39. A deduction of an amount of ` _______ under section 80EEA in respect to
interest paid on home loan for acquisition of residential house under affordable
housing is available to _______ in A.Y. 2020-21.
(A) 50,000; Individual
(B) 1,50,000; Individual & HUF
(C) 2,00,000; Individual
(D) 1,50,000; Individual
40. Sandeep during the previous year 2019-20 receives royalty on books of `
1,00,000 at a rate of 17% and incurs `10,000 as expenditure for earning the
amount of royalty. The books are covered under section 80QQB and the entire
royalty was to be received from UK. `50,000, however shall be remitted to India
till 30th September, 2020 out of the total amount of Royalty of `1,00,000.
Deduction under section 80QQB for the assessment year 2020-21 available to
Sandeep is ______________
(A) `90,000
(B) `50,000
(C) `40,000
(D) `1,00,000
41. The rates of income tax excluding cess and surcharge if any applicable to a co-
operative society for the assessment year 2020-21 where the total income
exceeds `20,000 be _________
(A) 10% of the total income
(B) `2,000 plus 20% of the amount by which the total income exceeds `20,000
(C) `3,000 plus 30% of the amount by which the total income exceeds `20,000
(D) `3,000 plus 25% of the amount by which the total income exceeds `20,000
42. Credit for tax (tax credit) paid by a person on account of AMT under Chapter XII-
BA shall be allowed which can be carried forward up to __________immediately
succeeding the assessment year in which such credit becomes allowable.
(A) 20th assessment years
(B) 15th assessment years
(C) 10th assessment years
(D) 5th assessment years
43. Provisions of section 115JC under Chapter XII-BA shall not apply to an Individual
or a HUF or an AOP or a body of Individual (whether incorporated or not) or any
artificial judicial person, if the adjusted total income of such person does not
exceed ? __________
(A) 5 lakh
(B) 10 lakh
(C) 20 lakh
(D) 30 lakh
EP–TLP–December 2020 76
44. Hindu Undivided Families (HUFs) according to Hindu law are governed by two
schools being Mitakshara and Dayabhaga. Mitakshara School applies to whole
of India except the states of ________
(A) West Bengal and Assam
(B) Jammu and Kashmir
(C) West Bengal
(D) Assam and Bihar
45. Amount of salary paid to a working partner by a partnership firm is taxable in the
hands of partner in the assessment year as per provisions of Income tax Act,
1961 under ___________
(A) Salaries
(B) Profits & Gain of Business and Profession
(C) Income from other sources
(D) Personal Income
46. As per section 115BBD where the total income of an Indian company includes
any income by way of dividends declared, distributed or paid by a specified
foreign company, such income of divided shall be chargeable to tax at the rate
of ________ with applicable surcharge and cess.
(A) 5%
(B) 10%
(C) 15%
(D) 20%
47. Where the total income of an assessee includes any income by way of transfer
of Carbon Credits, the tax payable thereon in Asst. Year 2020-21 shall be at the
rate of ------------ with applicable surcharge and cess.
(A) 2%
(B) 5%
(C) 7%
(D) 10%
48. As per section 176 of Income Tax Act, 1961 where any business or profession
is discontinued in any assessment year than as per section 176(3), person
discontinuing their business or profession shall give to the A.O. a notice of such
discontinuance within __________ thereof.
(A) 5 days
(B) 10 days
(C) 15 days
(D) 30 days
 77 EP–TLP–December 2020
49. As per section 234B, where the advance tax paid during the previous year
01.04.2019 to 31.03.2020 on or before March, 2020 is less than 90% of the
assessed tax as reduced by the amount of tax deducted at source, the assessee
shall be making payment of simple interest on the amount of shortfall per month
at the rate of __________.
(A) 1%
(B) 1.25%
(C) 1.50%
(D) 1.75%
50. Person paying any sum on which tax is collectible at source as per provisions
of section 206CC shall furnish his PAN to the person responsible for collecting
such tax at source. A lower tax collection certificate under this section shall not
be granted unless application in ________ made contains his ________ .
(A) Form no. 10, PAN
(B) Form no. 10, TAN
(C) Form no. 13, PAN
(D) Form no. 13, TAN
51. Section 244A provides where the refund is out of any tax paid under section
140A, simple interest shall be calculated at the rate of ________ comprised in
the period from the date of furnishing of return or payment of tax, whichever is
later, to the date on which the refund is granted.
(A) 1% for every month
(B) 1% for every month or part of a month
(C) 1½% for every month
(D) 1½% for every month or part of a month
52. XYZ Ltd during the previous year 2019- 20 has made payments for Professional
Services of `15,000 and of ` 20,000 towards Royalty to Mahesh Kumar. TDS
required to be deducted by XYZ Ltd for Assessment Year 2020-21 out of such
payments shall be ________
(A) NIL being not required
(B) 10% of `35,000
(C) 10% of `15,000
(D) 10% of `20,000
53. A return of income where furnished after the due date than the period for which
the interest is payable under section 234A commences from __________
(A) first day of relevant Assessment Year to ending on the date of furnishing of
the return
(B) the date immediately following the due date for filing the return and ending
on the date of furnishing of the return
EP–TLP–December 2020 78
(C) first day of relevant Assessment Year to due date for filing the return
(D) the date immediately following the date for filing the return and ending on
the end of relevant Assessment Year
54. The payer as per section 194N of Income tax Act, 1961 is required to deduct tax
at source at the rate of ________ on the cash payments, if aggregate of
withdrawals during the financial year from any account maintained with a banking
company or cooperative bank or post office exceeds _______ .
(A) 1%,`1 crore
(B) 2%, `1 crore
(C) 1%, `2 crore
(D) 1%, ` 5 crore
55. Any person being an individual or a HUF (other than those who are not required
to deduct tax under section 194C or 194H or 194J) paying any sum to any
resident contractor or professional required to deduct tax at source under section
194M at the rate of _______, if aggregate payment during the year exceeds
_________.
(A) 10%, 20 lakh
(B) 5%, 20 lakh
(C) 5%, 50 lakh
(D) 10%, 50 lakh
56. State and find out in which of the following transactions quoting of PAN is not
compulsory/mandatory?
(A) Payment in cash in connection with travel to any foreign country of an
amount exceeding `50,000 at any one time
(B) Contract for sale/purchase of securities exceeding `1,00,000
(C) Sale/Purchase of any immovable property valued at `10 lakhs or more and
valued by the stamp valuation authority under section 50C at an amount
exceeding `10 lakhs
(D) Sale or purchase, by any person of goods or services of any nature other
than those specified where amount exceeding `1,00,000 per transaction
57. Ram Nath a resident individual having income of salary and interest on deposits
has computed his total income at `9,00,000 for assessment year 2020-21. He
wants to furnish his return of income for assessment year 2020-21 after the due
date as prescribed under section 139(1) likely on or by 30.01.2021. As per
section 234F of Income Tax Act, 1961, he is liable to pay fee of __________
(A) `1,000
(B) `5,000
(C) `10,000
(D) `15,000
 79 EP–TLP–December 2020
58. State which out of the following, statement relating to Dispute Resolution Panel
(DRP) is a wrong or incorrect statement :
(A) If the member of the Dispute Resolution Panel differs in opinion on any
point, the point shall be decided according to the opinion of the majority of
the members.
(B) Every direction issued by the Dispute Resolution Panel shall be binding on
the Assessing Officer.
(C) No direction shall be issued unless an opportunity of being heard is given to
the assessee and the Assessing Officer on such directions which are
prejudicial to the interest of the assessee or the interest of the revenue.
(D) No direction shall be issued after 12 months from the end of the month in
which the draft order is forwarded to the eligible assessee.
59. The Chief Commissioner or the Commissioner or an assessee aggrieved by
any order passed by the Income Tax Appellate Tribunal (ITAT) may file an
appeal before the high court and such appeal shall be filed within ______ of the
date on which the order appealed against is received by the assessee or the
chief commissioner.
(A) 120 days
(B) 90 days
(C) 60 days
(D) 30 days
60. An assessee may at any stage of a case relating to him make an application in
Form No. ______ to the Settlement Commission to settle the case. Such
application other than the case of specified person can be made to the Settlement
Commission only where the additional amount of income tax payable on the
income disclosed in the application as per section 245C(1A) exceeds ______.
(A) 34A; `5,00,000
(B) 34B; `10,00,000
(C) 34A; `25,00,000
(D) 34B; `50,00,000
61. In case of failure to file the income tax return, prosecution proceeding may be
initiated against the assessee under section 276CC of the Act where the tax
payable on the returned income exceeds _____________.
(A) `3,000
(B) `5,000
(C) `10,000
(D) `20,000
EP–TLP–December 2020 80
62. “_______” will be used to describe every attempt by legal means to prevent or
reduce tax liability which would otherwise be incurred by taking advantage of
some provision or lack of provision of law. It excludes fraud, concealment or
other illegal measures.
(A) Tax Evasion
(B) Tax Planning
(C) Tax Avoidance
(D) Tax Management
63. Tax planning is legitimate, honest and rightful approach to the attainment of
maximum benefits of taxation laws within their frame work having certain basic
objectives. Find from the following which is not the basic objective of Tax Planning:
(A) Reduction of tax liability
(B) Healthy growth of economy
(C) Minimization of litigation
(D) Non Productive Investment
64. Instructions issued by CBDT as per section 119 of the Act have statutory force
and are equally binding on all concerned. State which out of the following is the
false statement in this context:
(A) The instructions of the board are binding on the department and assessee
both
(B) The instructions have to be followed by the department officers
(C) In the exercise of its power, the board cannot impose a burden or put the
assessee in a worse position
(D) Instruction adverse to an assessee’s interest can be challenged by him
65. Tax Planning exercise ranges from devising a model for specific transaction as
well as for systematic corporate planning. In this context find from the following
which is not a type of tax planning :
(A) Short range and long range tax planning
(B) Permissive tax planning
(C) Presumptive tax panning
(D) Purposive tax planning
66. Ram & Associates entered into an international transaction or specified domestic
transaction failed to furnish information and documents in respect of such
international transaction or specified domestic transaction. State the quantum
of penalty to be imposed by Assessing Officer or Commissioner (appeals) for
such failure on Ram & Associates.
 81 EP–TLP–December 2020
(A) 1% of the value of each international transaction
(B) 2% of the value of each international transaction
(C) 3% of the value of each international transaction
(D) 4% of the value of each international transaction
67. The Advance Pricing Agreement (APA) shall be valid for a period as specified in
the Advance Pricing Agreement. However this period will not be more than
_________.
(A) Six consecutive previous years
(B) Five consecutive previous years
(C) Four consecutive previous years
(D) Three consecutive previous years
68. Chapter X-A of the Act contains General Anti-Avoidance Rule (GAAR) and section
102 in this chapter contains various definitions. Find and state the meaning
assigned to “Tax Treaty” under this section :
(A) An agreement referred to in sub section (1) of section 90 or subsection (1)
of section 90A
(B) A measure or an action, particularly one of a series taken in order to deal
with or achieve a particular thing or object
(C) A reduction or avoidance or deferral of tax or other amount that would be
payable under this Act as a result of a tax treaty
(D) A reduction in total income or an increase in loss in the relevant previous
year or any other previous year
69. The application for obtaining an advance ruling as per section 245Q (2) shall be
made in __________ and it should be accompanied by a fee of ________ or
such fees as may be prescribed stating the question on which the advance
ruling is sought.
(A) Triplicate, ` 10,000
(B) Triplicate, ` 20,000
(C) Quadruplicate, ` 10,000
(D) Quadruplicate, ` 20,000
70. State which amongst the following is not a power of Authority for Advance
Ruling (AAR) under section 245U of Income Tax Act, 1961 :
(A) Compelling the production of books of account and other document specific
Anti-Avoidance Rules
(B) Power of arrest
(C) Enforcing the attendance of any person, including any officer of a banking
company and examining him on oath.
(D) Issuing commissions
EP–TLP–December 2020 82
PART B
71. Integrated Goods & Service Tax (IGST) Act, 2017 was passed by the Parliament
under ____________ of the Constitution and it provides that goods and services
tax on __________ in the course of interstate trade or commerce shall be received
and collected by the Government of India.
(A) Article 246; turnover
(B) Article 268; supplies
(C) Article 269; sales
(D) Article 269A; supplies
72. “-------------------------” is based on Canada Model wherein taxes are being collected
by the Centre. However, it also provides that two different rates of tax are to be
levied by the Centre and the States.
(A) Australian Model
(B) Dual Tax Model
(C) Kelkar - Shah Model
(D) Bagchi - Poddar Model
73. State and find from the following which hierarchy of Administrative Mechanism
is being in operation at the central level for GST :
(A) Ministry of Finance Revenue Department CBIT Regions Zones
Commissionerates
Division

(B) Ministry of Finance Revenue Department CBIT Zones Regions

Commissionerates Division

(C) Ministry of Finance Revenue Department CBIT Division Regions

Zones Commissionerates

(D) Revenue Department
Ministry of Finance CBIT Zones

Regions Commissionerates
Division
74. The Constitution (One Hundred and First Amendment) Act, 2016 provides that
the GST Council, in its discharge of various functions shall be guided by the
need for a -------------- structure of GST and that every decision of the GST
Council shall be taken at meeting by a majority of not less than ----------- of the
weighted votes of the member present and voting.
(A) harmonized; 3/4th
(B) synchronized; 3/4th
(C) simplified; 2/3rd
(D) harmonized; 2/3rd
 83 EP–TLP–December 2020
75. The Constitution (One Hundred and First Amendment) Act, 2016 provides for
compensation to the states for loss of revenue arising on account of
implementation of the Goods and Services Tax for a period of --------------.
(A) 3 Years
(B) 5 Years
(C) 7 Years
(D) 10 Years
76. Goods and Services Tax Net Work (GSTN) is a Central Agency providing the
whole Information Technology (IT) infrastructure to achieve the objects of tax
administration under GST. In this context find which is a false statement regarding
“Functioning GSTN is the IT backbone of GST” :
(A) It puts in place the IT infrastructure for the new taxation system.
(B) It enables the transition of tax payers from the multiple existing systems to
a single one system.
(C) It unifies a large number of taxation systems working at different levels of
administration into multiple interfaces.
(D) It establishes a uniform interface for the tax payer and a common and
shared IT infrastructure between the Center and States.
77. According to Rule - 3 of CGST Rules, any registered person opts to pay tax
under section 10 of the CGST Act, 2017 shall file an intimation in Form GST
________ prior to commencement of financial year and shall also furnish the
statement in Form GST ________ within 60 days from the commencement of
relevant financial year.
(A) CMP-01, ITC-1
(B) CMP-02, ITC-3
(C) CMP-03, ITC-3
(D) CMP-02, ITC-2
78. Scope of supply has been given under section 7 of the CGST Act, 2017 and
schedules I, II and III list various activities to be treated as supply or otherwise.
Find from the following activities which is not being covered in Schedule - II of
the CGST Act, 2017 :
(A) Permanent transfer or disposal of goods forming part of business assets by
or under the direction of the person carrying on the business whether or not
for consideration
(B) Supply by unincorporated association to a member thereof for cash
(C) Supply of goods between principal to his agent and vice versa
(D) Development, design, programming, customization, up-gradation,
enhancement, implementation of information technology software
EP–TLP–December 2020 84
79. Section 10(2) of the CGST Act, 2017 lays down various conditions and restrictions
relating to eligibility for composition levy. Find from the following in this context,
which of the statement is not correct :
(A) The scheme is not available for service sector, except restaurants
(B) Tax payer who is not a manufacturer of such goods as may be notified by
the government on the recommendation of the council is also not eligible for
composition scheme
(C) Tax payer making supplies through e-commerce operators who are required
to collect tax at source shall also be eligible for composition scheme.
(D) Tax payers making interstate supplies are eligible for composition scheme
which implies that there is no bar on interstate inward supplies
80. Under GST regime, a category by the name “North Eastern and Special Category
States” has been defined which comprise of :
(A) Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland,
Tripura, Sikkim and Himachal Pradesh
(B) Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Arunachal
Pradesh
(C) Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and
Himachal Pradesh
(D) Assam, Manipur, Meghalaya, Nagaland, Tripura, Sikkim and Arunachal
Pradesh
81. Under section 14 of the CGST Act, 2017 where the payment has been received
before the change in rate of tax but the invoice for the same is issued after the
change in rate of tax, the time of supply shall be the ----------
(A) date of issue of invoice
(B) date of receipt of payment
(C) (A) & (B) whichever is later
(D) date of supply of goods or services
82. Section 7(2) of the CGST Act, 2017 provides that notwithstanding anything
contained in section 7(1) of the CGST Act, 2017, activities which are neither of
goods nor supply of services as specified in schedule-III include _________
(A) Supply of goods by any unincorporated association or body of person to
member for cash, deferred payment or other valuable consideration
(B) Temporary transfer or permitting the use or enjoyment of any intellectual
property right
(C) Actionable claim, other than lottery, batting and gambling
(D) Renting of immovable property
 85 EP–TLP–December 2020
83. Main difference between Composite supply and Mixed supply is that :
(A) Composite supply is naturally bundled i.e. goods or services are usually
provided together in normal course of business whereas in Mixed supply,
the goods or services can be sold separately.
(B) Mixed supply, is naturally bundled i.e. goods or services are usually provided
together in normal course of business whereas in Composite supply, the
goods or services can be sold separately.
(C) Mixed supply is naturally bundled but Composite supply is not naturally
bundled.
(D) There is no difference between Composite supply and Mixed supply.
84. Form GST CMP-07 is used for :
(A) Issue show cause notice (SCN) to registered person by proper officer
(B) Issue an order within 30 days of receipts of reply by proper officer
(C) Intimation of withdrawal from the Composition scheme
(D) Giving details of stocks on date of opting for Composition Levy
85. Under GST regime, when goods are sent from a taxable person to a job worker
it shall be treated as supply and will be liable to GST, if the goods so sent are
being not received back within __________ or _________ in case of inputs or
capital goods as the case may be.
(A) 6 months; 1 year
(B) 1 year; 18 months
(C) 1 year; 3 years
(D) 1 year; 2 years
86. Input Service Distributor (ISD) is required to file monthly return by ---------- of the
following month in form ----------------.
(A) 13th; GSTR-6
(B) 18th; GSTR-5
(C) 13th; GSTR-4
(D) 18th; GSTR-3
87. A GST registered manufacturing company provides the information and particulars
of GST paid for the month of December, 2019 on (a) goods and services where
tax has been paid by supplier under section 10 of the CGST Act, 2017 of `
20,000 (b) capital goods used for construction of building of `10,000 (c) laptops
to be used within factory office of `35,000. You are required to work out the
amount of available input tax credit (ITC).
(A) `45,000
(B) `55,000
(C) `65,000
(D) `35,000
EP–TLP–December 2020 86
88. As per Section 11 of CGST Act, 2017 where Government is satisfied that it is
necessary in the public interest so to do, it may, on the recommendations of the
council, by special order in each case, under circumstances of an exceptional
nature to be stated in such order, exempt from payment of tax any goods or
services or both on which tax is leviable. However, if it considers necessary,
the Government for clarifying the scope or applicability may insert an explanation
in such order. State the time limit for insertion of an explanation by the
Government in such order/notifications :
(A) Within 6 months
(B) Within 18 months
(C) Within one year
(D) Within two years
89. Ascertain the value of taxable supply under GST with respect to the given
independent services provided by the registered persons (1) Fee charged for
yoga camp conducted by a charitable trust registered under section 12AA of the
Income Tax Act, 1961 of `2,00,000 (2) Fee charged for services provided by
commentator to a recognized sports body of `1,00,000 (3) Amount charged for
service provided by way of vehicle parking to general public in a shopping mall
of `60,000.
(A) `3,60,000
(B) `1,60,000
(C) `1,00,000
(D) `60,000
90. As per section 36 of CGST Act, 2017 the time duration for retention of accounts
and records under GST is until expiry of ------------------- from the due date of
furnishing of ------------------ for the year pertaining to such accounts and records.
(A) 36 Months; annual return
(B) 72 Months; annual return
(C) 36 Months; monthly return
(D) 72 Months; monthly return
91. A specialized agency of the UNO and/or Embassy of foreign countries entitled
to a refund of tax paid by it on inward supplies of goods or services or both, may
make an application for such refund, in such form and manner as may be
prescribed before the expiry of ----------------- in which such supply was received.
(A) six months from the last day of the quarter
(B) one year from the last day of the quarter
(C) six months from the last day of the financial year
(D) one year from the last day of the financial year
 87 EP–TLP–December 2020
92. A return in Form GSTR-11 under GST giving details of inward supplies is required
to be furnished by 28th of the month following the month for which statement is
filed by -----------.
(A) Input Service Distributor
(B) Person having UIN and claiming refund
(C) E-commerce Operator/Tax Collector
(D) Non Resident taxable person
93. Section 52 of CGST Act, 2017 specifies that electronic commerce operator to
collect tax not exceeding------------- of the net value and to deposit within ---------
---- of the expiry of the month in which he collected the tax.
(A) ½%; 10 days
(B) ½%; 15 days
(C) 1%; 15 days
(D) 1%; 10 days
94. As per section 50 of CGST Act, 2017 interest not exceeding -------------- calculated
from the next day of the due date has to be paid for delay of payment. Interest
on undue or excess claim of ITC or excess reduction in output tax liability shall
be not exceeding ---------------
(A) 24%; 18%
(B) 12%; 18%
(C) 18%; 24%
(D) 18%; 12%
95. A return under GST in form ------------- is required to be filed by a Non-resident
taxable person by -------------.
(A) GSTR-4; 18th of the next month
(B) GSTR-5; 20th of the next month
(C) GSTR-6; 13th of the next month
(D) GSTR-7; 10th of the next month
96. A registered taxable supplier of services in case of continuous supply of services
having unascertainable due date is required to raise the invoice as per section
31 of the CGST Act, 2017 within the timeline -------
(A) on or before the date of completion of that event
(B) on or before the due date of payment
(C) before or at the time when the supplier of services receives the payment
(D) at the time when the supply ceases and such invoice shall be issued to the
extent of the supply made before such cessation
EP–TLP–December 2020 88
97. The -------------------- under Section 49(1) shall be maintained for each person,
liable to pay tax, interest, penalty, late fee or any other amount, on the common
portal for crediting the amount deposited and debiting the payment there from
towards tax, interest, penalty, fee or any other amount.
(A) Electronic Cash Ledger
(B) Electronic Credit Ledger
(C) Electronic Tax Ledger
(D) Electronic Tax Liability Ledger
98. As per section 5 of the IGST Act, 2017 a maximum rate of tax of --------- can be
imposed on interstate supply of goods and services.
(A) 28%
(B) 35%
(C) 40%
(D) 50%
99. The place of supply (POS) as per section 10 of the IGST Act, 2017 in case of
where supply not involving movement of goods whether by the supplier or the
recipient shall be ------------.
(A) location of such goods at the time at which the movement of goods
terminates for delivery to the recipient
(B) deemed that the third person has received such goods and principal place
of business of such person shall be the place of supply
(C) location at which such goods are taken on conveyance
(D) location of such goods at the time of the delivery to the recipient
100. If the goods so seized are of perishable or hazardous nature, such goods can
be released by an order under -------------- only after taxable person pays an
amount equivalent to the market price of such goods or things or the amount of
tax, interest and penalty that is or may become payable by the taxable person,
whichever is lower.
(A) GST INS-05
(B) GST INS-04
(C) GST INS-03
(D) GST INS-02
 89 EP–TLP–December 2020
ANSWER KEY
TAX LAWS AND PRACTICE - SELECT SERIES

Q.no. Ans Q.no. Ans Q.no. Ans

PART - A 33 B 68 A
1 D 34 D 69 C
2 A 35 A 70 B
3 C 36 D
PART - B
4 B 37 B
71 D
38 C
5 C 72 C
39 D
6 D 73 A
40 C*
7 B 74 A
41 C
8 D 75 B
42 B
9 B 76 C
43 C
10 A 77 B
44 A
11 A 78 C
45 B
12 B 46 C 79 C
13 A 80 A*
47 D
14 A&C 81 A/B*
48 C
82 C
15 A 49 A
83 A
16 B 50 C
84 B
17 A 51 *
85 C
18 D 52 A
86 A
19 B 53 B
87 D
20 C 54 B
88 C
21 A 55 C
56 D 89 B*
22 B
57 C 90 B
23 *
58 D 91 A
24 A&D
59 A 92 B
25 A
60 B 93 D
26 B
61 C 94 C
27 *
62 C 95 B
28 A
63 D 96 C
29 B
64 A 97 A
30 A
65 C 98 C
31 B,C&D
66 B 99 D
32 A
67 B 100 A
EP–TLP–December 2020 90
Notes
Q. No. 14 Option A & C Both are correct. Option A is correct, assuming condition for
claming higher deduction (such as contruction has been completed within 5
years from the end of the financial year in which capital was borrowed) is
fulfiled. Otherwise, Option C is correct.
Q. No. 23 All options are Incorrect. As per section 194I of the Income tax Act, 1961,
no TDS is required to be deducted where the amount of rent does not exceeding
Rs. 240000. Since the payment of Rent made is Rs. 200000 only, therefore
no TDS is requred to be deducted. Accordingly, will not result in disallowance
of rental expenditure.
Q. No. 24 A & D Both options are correct. Option A is correct in case assessee is an
Individual and HUF. Option D is correct is case assessee is any other person
other than Individual and HUF.
Q. No. 27 All options are Incorrect. Correct Answer is Rs. 3,94,000 (480000 - 70000*129/
105).
Q. No. 31 Options B, C & D are correct. Carried forward of normal business loss can
be set-off against any PGBP Income.
Q. No. 40 Correct option is C i.e. 40000 (50000 -10000). However, while calculating
deduction proportinate expendiutre is deducted, thus, no options are correct.
Q. No. 51 All options are Incorrect. Correct Answer is .05 % for every month or part of
the month.
Q .No. 80 Section 22 of the CGST Act, 2017, relating to composition levy specifies
Special Category of states which are falling in North-Eastern Area. However,
section states "Special Category State''. The question requires to give answer
in respect of that Special Category State which have been specified in section
22 of the CGST Act, 2017 and accordingly Option - A is the correct Option.
However, the wordings ''North Eastern and Special Category States" given
in the question were in the Excise Law which was subsumed in GST.
Q .No. 81 Question is incomplete as it does not tell about whether services completed
before change or after change. In case services stands completed before
change in rate of tax then in that case Option B is correct and whereas the
service stands completed after the date of change in rate of tax then option
A will be correct.
Q. No. 89 As per Notification 12/2017-CT(Rate), the fee charged for yoga camp
conducted by a charitable trust is exempt but the fee charged for services
provided by commentator to a recognized sports body and amount charged
for service provided by way of vehicle parking to general public in shopping
mall are taxable. The amount of Rs. 1,00,000 recieved by Commentator
and Rs. 60,000 amount charged for vehicle parking are taxable and total
value thus arrives at Rs. 1,60,000. Hence Option - B, Rs. 1,60,000 is correct.

***
© THE INSTITUTE OF COMPANY SECRETARIES OF INDIA