Test Series: March, 2019

MOCK TEST PAPER - 1

INTERMEDIATE (NEW) COURSE
PAPER – 4: TAXATION
Time Allowed – 3 Hours Maximum Marks – 100
SECTION – A: INCOME TAX LAW (60 MARKS)
Working Notes should form part of the answer. Wherever necessary, suitable assumptions may be made by the
candidates and disclosed by way of a note. However, in answers to Question in Division A, working notes are
not required.
Your answers should be based on the provisions of Income-tax law as amended
by the Finance Act, 2018. The relevant assessment year is A.Y.2019-20.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice questions by choosing
one of the four options given. All questions are compulsory.
I. A, a resident individual, is engaged in the business of money lending. For the purpose of lending
money to various persons, A borrows money from other persons. As a part of his business, A to ok a
loan from B of an amount of Rs.10 lacs. B is a non-resident. On the said loan, A paid an amount of
Rs.1 lac as interest during the P.Y. 2018-19 to B in India. A did not deduct tax at source while
crediting/paying the interest amount to B. A is of the view that the amount of Rs.1 lac shall be allowed
to him as a deduction under the Income-tax Act, 1961. Whether A‟s view is correct?
(a) Correct, interest expenses incurred for business are allowed as deduction u/s 36(1)(iii).
(b) Incorrect, as tax at source has not been deducted by A on the interest amount, full amount of interest
of Rs.1 lac shall be disallowed in A.Y. 2019-20.
(c) Incorrect, as tax at source has not been deducted by A on the interest amount, amount of interest of
Rs.30,000 shall be disallowed in A.Y. 2019-20.
(d) Correct, interest expenses incurred for business are allowed as deduction u/s 37(1). (1 Mark)
II. Mrs. Gupta, resident in India, holds many equity shares of reputed domestic companies. During the
previous year 2018-19, total dividend earned by her is Rs.11,00,000. She is of the belief that dividend
income earned by her is tax free. She approaches you to assist her in filing her income tax return. As
her tax consultant, will you advise her that any dividend income earned by her is tax free?
(a) Yes, as dividend earned by her is fully exempt from tax u/s 10(34).
(b) No, as any dividend income earned by an individual is fully chargeable to tax.
(c) No, as dividend income earned above Rs.10,00,000 is chargeable to tax in her hands.
(d) Yes, as dividend income above Rs.10,00,000 is chargeable to tax only in the hands of the companies
and not in her hands. (1 Mark)
III. Mr. X receives the following gifts during the previous year 2018-19:
 On 20.09.2018, he gets a gift of Rs.7,00,000 from his grandmother.
 On 30.12.2018, he gets by way of gift a commercial flat from the elder brother of his father-in-law
(stamp duty value is Rs.25,00,000).
 On 20.01.2019, he gets a wrist watch by gift from his friend B (Fair market value: Rs.1,00,000).
 On 10.02.2019, he gets by way of gift a plot of land in Pune from a partnership firm. The partnership
firm has only two partners- father of Mr. X and Mrs. X. The stamp duty value of the plot of land is
Rs.19,00,000.
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 Compute the amount chargeable to tax in the hands of X under the head “Income from other sources” for
the A.Y. 2019-20.
(a) Rs.25,00,000
(b) Rs.44,00,000
(c) Rs.45,00,000
(d) Rs.52,00,000 (1 Mark)
IV. Which of the following statements is true for companies in the context of the Income-tax Act, 1961?
(a) Residential status of a company has an impact on the tax rate of company
(b) Tax Rate of a company depends upon the place of incorporation
(c) Residential status of a company helps to classify the company as domestic company and foreign
company
(d) Residential status of company helps classification of closely held company and widely held company.
(1 Mark)
V. Which of the following is not a consequence of late filing of return?
(a) Levy of interest under section 234A
(b) Loss (other than loss under the head “Income from house property”) cannot be carried forward
(c) No deduction under Chapter VI-A under the heading „B‟ – Deduction in respect of certain payments
(d) All of the above (1 Mark)
VI. Mr. Devansh has agricultural income of Rs.2,30,000 and business income of Rs.2,45,000. Which of
the following statements are correct?
(a) Agricultural income has to be aggregated with business income for tax rate purposes.
(b) No aggregation is required since agricultural income is less than basic exemption limit.
(c) No aggregation is required since business income is less than basic exemption limit.
(d) Agricultural income is exempt under section 10(1) but the same has to be aggregated with business
income, since it exceeds Rs.5,000. (1 Mark)
VII. X is an employee of Z Ltd who receives Rs.1,25,000 as gratuity (he is covered under the Payment of
Gratuity Act, 1972). He retires on 31.01.2019 after service of 29 years and 8 months. At the time of
retirement, X drew monthly salary of Rs.5,200 and monthly bonus of Rs.2,000. Compute the amount
of gratuity exempt from tax in the instant case u/s 10(10) of the Income-tax Act, 1961.
(a) Rs.90,000
(b) Rs.1,25,000
(c) Rs.78,000
(d) Rs.87,000 (2 Marks)
VIII. Mr. Krishna is a philanthropic person. During the P.Y. 2018-19, out of his total receipts, he gave away
Rs.8,00,000 in cash to Prime Minister‟s National Relief Fund and was left with only Rs.2,00, 000 which
is just enough money to meet his personal requirements. On these facts, Mr. Krishna is of the v iew
that as Rs.2,00,000 is below the maximum amount not chargeable to tax, no income of him is
chargeable to tax during the previous year. He approaches you to file his income tax return showing
Rs.2,00,000 as his gross total income. Do you agree with the view of Mr. Krishna? Also, compute the
amount of his total income.
(a) Yes, as income actually left in Mr. Krishna‟s hands is Rs.2,00,000 only. His total income shall be
Rs.2,00,000.
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 (b) No, as what is done after income is earned by Mr. Krishna will not give him any tax exemption. His
total income shall be Rs.10,00,000.
(c) His gross total income and total income are Rs.10 lakhs, since this is a case of application of income
and donation made in cash will not qualify for deduction under section 80G.
(e) Yes, as Rs.8,00,000 is exempt from tax, the gross total income as well as total income of Mr. Krishna
shall be Rs.2,00,000 only. (2 Marks)
IX. Ms. Jaya acquires 5,000 equity shares on 01.01.2016 at Rs.500. The Fair Market Value of the said
share on 31.01.2018 is Rs.250 and on 31.03.2018 is Rs.600. She sells the said shares on 30.04.2018
at Rs.700. Calculate the amount of long term capital gain in the hands of Ms. Jaya assuming that
Securities Transaction Tax has been paid by her on acquisition and transfer of the sai d equity share.
CII – F.Y. 2015-16: 254; F.Y. 2018-19: 280
(a) Rs.10 lakh, out of which Rs.9 lakh is taxable@10%
(b) Rs.22.50 lakh, out of which Rs.21.5 lakh is taxable@10%
(c) Rs.7.45 lakh, out of which Rs.6.45 lakh is taxable @10%
(d) Rs.5 lakh, out of which Rs.4 lakh is taxable@10% (2 Marks)
X. Which of the following persons are compulsorily required to get their accounts audited u/s 44AB of the
Income-tax Act, 1961?
(i) An assessee, who has not opted for presumptive taxation and his turnover during the P.Y. is
Rs.2 crore.
(ii) A professional whose gross receipts during the previous year amounts to Rs.50 lakh, who declares
his profits and gains from profession u/s 44ADA.
(iii) An assessee having turnover of Rs.1.5 crore, who declares his profits and gains from business u/s
44AD.
(iv) A lawyer having gross receipts of Rs.40 lakhs during the P.Y. who claims his profits and gains from
the legal profession to be 40% of the gross receipts.
(v) An individual who opts out of the presumptive taxation scheme u/s 44AD during the P.Y., however,
his total income for the said year is Rs.2,00,000.
(a) (i), (iv)
(b) (i), (iv), (v)
(c) (i), (ii), (iv)
(d) (iv), (v) (2 Marks)
XI. The following information is available with respect to Tina:
 Capital Asset acquired on 01.04.2001 for Rs.85,200
 The capital asset was converted into stock-in-trade on 30.09.2017. On the said date, the fair market
value of the said asset was Rs.6,00,000.
 The stock-in-trade so converted was sold on 15.07.2018 for Rs.8,50,000.
Determine the tax implications in the hands of Tina for A.Y. 2019-20.
Cost Inflation Index Financial year 2001-02: 100, 2017-18: 272, 2018-19: 280]
(a) Only business profits of Rs.2,50,000 shall be chargeable to tax in the hands of Tina in A.Y.
2019-20.
(b) Only long term capital gain of Rs.6,11,440 shall be chargeable to tax in the hands of Tina in A.Y.
2019-20.
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 (c) Business profits of Rs.2,50,000 and long term capital gain of Rs.3,61,440 shall be chargeable to tax
in the hands of Tina in A.Y. 2019-20.
(d) Business profits of Rs.2,50,000 and long term capital gain of Rs.3,68,256 shall be chargeable to tax
in the hands of Tina in A.Y. 2019-20. (2 Marks)
XII. Mr. Happy, a US citizen, came to India for an assignment from 11.01.2015 to 09.10.2015 and went back to
his home country on completion of the same. He thereafter, visited India on 05.07.2017 again for an
assignment, which ended on 26.05.2018. What is the latest date by which Mr. Happy should depart from
India after completing the assignment so as to qualify as non-resident for P.Y. 2018-19? (Assume that he
shall not be visiting India again during the year)
(a) 29-05-2018
(b) 30-05-2018
(c) 31-05-2018
(d) 28-09-2018 (2 Marks)
Division B – Descriptive Questions
Question No. 1 is compulsory
Attempt any two questions from the remaining three questions
1. Mr. Satish, aged 47 years, is serving in a public limited company as General Manager (Finance). His
total emoluments for the year ended 31 st March, 2019 are as follows:
Basic Salary Rs.5,40,000
HRA (Computed) Rs.1,80,000
Transport allowance Rs.22,000

Apart from the above, his employer has sold the following assets to him on 1 st January, 2019:
(i) Laptop for Rs.20,000 (Acquired in September, 2017 for Rs.1,20,000)
(ii) Car 1800 cc for Rs.3,20,000 (purchased in April, 2016 for Rs.8,50,000)
He also owns a residential house, let out for a monthly rent of Rs.15,000. The fair rental value of
the property for the let out period is Rs.1,50,000. The house was self -occupied by him from 1 st
January, 2019 to 31 st March, 2019. He has taken a loan from bank of Rs.20 lacs for the
construction of the property, and has repaid Rs.1,05,000 (including interest Rs.40,000) during the
year.
(iii) Mr. Satish sold equity shares of different Indian companies on 14 th March, 2019:
Name Sale value (per share) Purchase price (per share) Acquired on No. of shares
A Ltd. Rs.150 Rs.120 (STT paid at 2nd Feb, 2018 200
acquisition)
B Ltd. Rs.82 Rs.62 16th April, 125
2018
CII – F.Y. 2018-19: 280; F.Y. 2017-18: 272
Sale proceeds were subject to brokerage of 0.1% and securities transaction tax of 0.125% on the
gross consideration. He received income-tax refund of Rs.5,750 (including interest Rs.750)
relating to the assessment year 2017-18.
(iv) Mr. Satish made payment of Rs.80,000 vide cheque no. 245315 towards medical insurance as
lumpsum premium for himself and his wife for 4 years. He also made cash payment of Rs.8,000
towards preventive health checkup for himself and his wife.
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 (v) Mr. Satish deposited Rs.1,30,000 in Public Provident Fund and Rs.80,000 in 5 years term deposit
in the name of his minor son, Aryan.
Compute the total income and tax liability of Mr. Satish for the Assessment Year 2019 -20. (14 Marks)
2. (a) I. Explain with reasons whether the following transactions attract income-tax in India in the
hands of recipients :
(i) Salary paid to Mr. Dinesh, a citizen of India Rs.20,00,000 by the Central Government
for the services rendered in London.
(ii) Royalty paid to Raja, a non-resident by Ms. Mukta, a resident for a business carried on
in Sri Lanka. (4 Marks)
II. Ms. Anjali, a non-resident, residing in London since 1990, came back to India on
19-02-2017 for permanent settlement in India. Explain the residential status of Ms. Anjali for the
Assessment Year 2019-20 in accordance with the various provisions of Income-tax Act, 1961.
(3 Marks)
(b) I. Examine the applicability of tax deduction at source provisions, the rate and amount of tax
deduction in the following cases for the financial year 2018-19:
(i) Payment of Rs.33,000 made to John Smith, an Australian cricketer, by an Indian
newspaper agency on 22-08-2018 for contribution of articles in relation to the sport of
cricket.
(ii) Payment made by a company to sub-contractor, Mr. X, Rs.3,50,000 with outstanding
balance of Rs.1,35,000 shown in the books as on 31-03-2019. (4 Marks)
II. Examine with reasons, whether the following statements are true or false, with regard to the
provisions of the Income-tax Act, 1961:
(i) The Assessing Officer has the power, inter alia, to allot PAN to any person by whom no
tax is payable.
(ii) Where the Karta of a HUF is absent from India, the return of income can be verified by
any male member of the family. (3 Marks)
3. (a) Mr. Satinder is engaged in the business of plying goods carriages. On 1 st April, 2018, he owns 10
trucks (out of which 5 are heavy goods vehicles, the gross vehicle weight of such goods vehicle
is 17,000 kg each). On 5 th May, 2018, he sold one of the heavy goods vehicles and purchased a
light goods vehicle on 8 th May, 2018. This new vehicle could however be put to use only on 15 th
July, 2018.
Compute the total income of Mr. Satinder for the assessment year 2019 -20, taking note of the
following data:
Particulars Rs. Rs.
Freight charges collected 12,50,500
Less : Operational expenses 5,25,500
Depreciation as per section 32 1,85,000
Other office expenses 17,000 7,27,500
Net Profit 5,23,000
Other business and non- business income 70,000
(5 Marks)
(b) On 29.12.2018, Mr. Gaurav (a bank employee) received Rs.7,00,000 towards interest on
enhanced compensation from State Government in respect of compulsory acquisition of his land
effected during the financial year 2014-15.
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 Out of this interest, Rs.2,00,000 relates to the financial year 2015-16; Rs.3,45,000 to the financial
year 2016-17; and Rs.1,55,000 to the financial year 2017-18.
How much of interest on enhanced compensation would be chargeable to tax for the assessment
year 2019-20? (2 Marks)
(c) Mrs. Harsha purchased a land at a cost of Rs.45 lakhs in the financial year 2007-08 and held the
same as her capital asset till 31 st March, 2017. She started her real estate business on
1st April, 2017 and converted the said land into stock-in-trade of her business on the said date,
when the fair market value of the land was Rs.225 lakhs.
She constructed 15 flats of equal size, quality and dimension. Cost of construction of each flat is
Rs.15 lakhs. Construction was completed in January, 2019. She sold 10 flats at Rs.40 lakhs per flat
in 20th March, 2019. The remaining 5 flats were held in stock as on 31st March, 2019.
She invested Rs.50 lakhs in bonds issued by National Highways Authority of India on 31 st March,
2019 and another Rs.50 lakhs in bonds of Rural Electrification Corporation Ltd. in April, 2019.
Compute the amount of chargeable capital gain and business income in the hands of Mrs.
Harsha arising from the above transactions for Assessment Year 2019 -20 indicating clearly the
reasons for treatment for each item.
[Cost Inflation Index: FY 2007-08: 129; FY 2017-18: 272; FY 2018-19: 280]. (7 Marks)
4. (a) Compute the total income of Mr. Sahil for the assessment year 2019-20 from the following particulars:
Particulars Amount (Rs.)
Income from business before adjusting the following items: 2,50,000
(a) Business loss brought forward from assessment year 2015-16 85,000
(b) Current year depreciation 30,000
(c) Unabsorbed depreciation of earlier year 2,00,000
Income from house property (Gross Annual Value) 5,10,000
Municipal taxes paid 50,000
Mr. Sahil sold a plot at Noida on 12 th September, 2018 for a consideration
of Rs.7,90,000, which had been purchased by him on 20 th December,
2016 at a cost of Rs.6,10,000
Long-term capital loss on sale of shares sold through recognized stock 90,000
exchange (STT paid at acquisition and sale)
Long-term capital gain on sale of debentures 1,35,000
Dividend on shares held as stock in trade 25,000
Dividend from a company carrying on agricultural business 15,000
(7 Marks)
(b) Akash gifted Rs.5 lakhs to his wife, Suman on her birthday on, 1st March, 2018. Suman lent such
amount of Rs.5,00,000 to Karuna on 1 st April, 2018 for six months on which she received interest
of Rs.50,000. The said sum of Rs.50,000 was invested in shares of a listed company on 13 th
October, 2018, which were sold for Rs.70,000 on 30 th March, 2019. Securities transactions tax
was paid on such sale.
In whose hands the above income and loss shall be included in Assessment Year 2019-20.
(3 Marks)
(c) Mr. Sameer, aged 52 years, provides you the following information and requests you to
determine his advance tax liability with due dates for the financial year 2018 -19.

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 Estimated tax liability for the financial year 2018-19 Rs.80,000
Tax deducted at source for this year Rs.12,000
Would your answer change if, Mr. Sameer is eligible for and has opted for presumptive tax
provisions under section 44AD and his tax liability is entirely on account of such income (ignore
TDS)? (4 Marks)

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 Test Series: March, 2019
SECTION B - INDIRECT TAXES (40 MARKS)
QUESTIONS

(i) Working Notes should form part of the answers. However, in answers to Question in Division A, working
notes are not required.
(ii) Wherever necessary, suitable assumptions may be made by the candidates, and disclosed by way of note.
(iii) All questions should be answered on the basis of the position of GST law as amended up to 31 st October,
2018.
(iv) The GST rates for goods and services mentioned in various questions are hypothetical and may not
necessarily be the actual rates leviable on those goods and services. Further, GST compensation cess
should be ignored in all the questions, wherever applicable.
Division A - Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice questions by choosing
one of the four options given. All questions are compulsory.
Total Marks: 12 Marks
Question Nos. 1 and 2 carries 2 Marks each
1. Rama Ltd. has provided following information for the month of September:
(i) Intra-State outward supply Rs. 8,00,000/-
(ii) Inter-State exempt outward supply Rs. 5,00,000/-
(iii) Turnover of exported goods Rs. 10,00,000/-
(iv) Payment made for availing GTA services Rs. 80,000/-
Calculate the aggregate turnover of Rama Ltd.
(a) Rs. 8,00,000/-
(b) Rs. 23,80,000/-
(c) Rs. 23,00,000/-
(d) Rs. 18,00,000/-
2. Which of the following services received without consideration amount to supply?
(1) Import of services by a person in India from his son well-settled in USA
(2) Import of services by a person in India from his brother well-settled in Germany
(3) Import of services by a person in India from his brother (wholly dependent on such person in
India) in France
(4) Import of services by a person in India from his daughter (wholly dependent on such person in
India) in Russia
(a) 1), 3) and 4)
(b) 2), 3) and 4)
(c) 2) and 3)
(d) 1) and 2) (2 x 2 Marks = 4 Marks)
Question Nos. 3 to 10 are of 1 mark each.

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3. Services by way of admission to ______________ are exempt from GST.
(a) Museum
(b) National park
(c) Tiger reserve
(d) All of the above
4. A supplier takes deduction of depreciation on the GST component of the cost of capital goods as per
Income- tax Act, 1961. The supplier can-
(a) avail only 50% of the said tax component as ITC
(b) not avail ITC on the said tax component
(c) avail 100% ITC of the said tax component
(d) avail only 25% of the said tax component as ITC
5. Which of the following persons is not eligible for composition scheme even though their aggregate
turnover does not exceed Rs. 1 crore in preceding FY, in Uttar Pradesh?
(a) A person supplying restaurant services
(b) A person supplying restaurant services and earning bank interest
(c) A person supplying restaurant services and warehousing of rice
(d) A person supplying restaurant services and warehousing of processed tea.
6. The time of supply of service in case of reverse charge mechanism is
(a) Date on which payment is made to the supplier
(b) Date immediately following 60 days from the date of issue of invoice
(c) Date of invoice
(d) Earlier of (a) and (b)
7. Which of the following services does not fall under reverse charge provisions as contained und er
section 9(3) of the CGST Act?
(a) Services supplied by arbitral tribunal to business entity
(b) Sponsorship provided to any partnership firm
(c) Sponsorship provided to any body corporate
(d) None of the above
8. Transport of ______________ by rail are exempt from GST:
(a) Milk
(b) Salt
(c) Defence equipments
(d) All of the above
9. Alcoholic liquor for human consumption is subjected to
(a) State excise duty
(b) Central Sales Tax/Value Added Tax

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 (c) Both (a) and (b)
(d) GST

10. Taxes subsumed in GST are

(a) Service tax
(b) Luxury tax
(c) VAT
(d) All of the Above (8 x 1 Mark=8 Marks)
Division B - Descriptive Questions
Question No. 1 is compulsory.
Attempt any two questions out of remaining three questions.
Total Marks: 28 Marks
1. M/s. Comfortable (P) Ltd. is registered under GST in Chennai, Tamil Nadu. It is engaged in the
manufacture of iron and steel products. It has carried out following transactions in the financial year
20XX-XY:-
(a) Purchased 1,000 Metric Ton (MT) iron @ 1,000 per MT (excluding GST) from M/s. Hard Ltd. of
Chennai. M/s. Hard Ltd. has fulfilled the order as follows:
Date Quantity (MT) Taxable Value
28-Feb-20XY 200 2,00,000/-
10-Mar-20XY 250 2,50,000/-
25-Mar-20XY 250 2,50,000/-
28-Mar-20XY 200 2,00,000/-
Balance order requirement has been fulfilled by Hard Ltd. on 5-Apr-20XY. However, Hard Ltd.
has raised the invoice for full order at the time of dispatch of first lot, i.e. on 28-Feb-20XY. M/s.
Comfortable (P) Ltd. has made the full payment on 28-Feb-20XY for the order.
(b) Company has received IT engineering service from M/s. Dynamic Infotech (P) Ltd. of Chennai for
Rs. 11,00,000/- (excluding GST ) on 28-Oct-20XX. Invoice for service rendered was issued on 5-Nov-
20XX. M/s Comfortable (P) Ltd. made part-payment of Rs. 4,13,000/- on 31-Dec-20XX. Being
unhappy with service provided by M/s Dynamic Infotech (P) Ltd., it did not make the balance payment.
Deficiency in service rendered was made good by M/s Dynamic Infotech (P) Ltd. by 15-Feb-20XY.
M/s. Comfortable (P) Ltd. made payment of Rs. 2,95,000/- on 15-Feb-20XY towards full and final
settlement of the dues and did not pay the balance amount.
(c) Company has made the following intra State supplies (excluding GST) for the financial year 20XX-
XY:-
S.No. Particulars Amount (Rs.)
1. Value of intra-State supplies made to registered persons 10,00,000
2. Value of intra- State supplies made to unregistered persons 2,00,000
(i) Compute the GST liability (CGST, SGST or IGST, as the case may be) of M/s. Comfortable (P)
Ltd. for the financial year 20XX-XY:-

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 (ii) Compute the amount of input tax credit to be reversed in the FY 20XX-XY and/or in the next FY
20XY-YZ, if any.
Assume the rates of GST as under:
CGST 9%
SGST 9%
lGST 18%
Note
(i) All the conditions necessary for availing input tax credit have been fulfilled.
(ii) Ignore interest, if any (8 Marks)
2. (a) Determine taxable value of supply under GST law with respect to each of the following
independent services provided by the registered persons:
Particulars Gross amount
charged (Rs.)
Amount charged for loading, unloading, packing and warehousing of potato 25,000
chips
Fees charged for yoga camp conducted by a charitable trust registered 50,000
under section 12AA of the Income-tax Act, 1961
Amount charged by business correspondent for the services provided to 1,00,000
the rural branch of a bank with respect to Savings Bank Accounts
Amount charged by cord blood bank for preservation of stem cells 5,00,000
Amount charged for service provided by commentator to a recognized 6,00,000
sports body
Amount charged for service provided by way of right to admission to 12,000
circus where consideration for the same is Rs. 750 per person.
(6 Marks)
(b) Decide which person is liable to pay GST in the following independent cases, where the recipient
is located in the taxable territory. Ignore the Aggregate Turnover and Exemption available.
(i) Miss Shinu Ambani provided sponsorship services to Indian Love Cricket Academy, a
Limited Liability Partnership.
(ii) “Fast move”, a Goods Transport Agency, transported goods of Amba & Co., a partnership
firm which is not registered under GST. (4 Marks)
3. (a) Mr. Mayank provides Continuous Supply of Services (CSS) to M/s. Omega Limited. He furnishes
the following further information:
(i) Date of commencement of Providing CSS 01-10-20XX
(ii) Date of completion of Providing CSS 31-01-20XY
(iii) Date of receipt of payment by Mr. Mayank 30-03-20XY
Determine the time of issue of invoice as per provisions of CGST Act, 2017, in the following
circumstances:
(i) If no due date for payment is agreed upon by both under the contract of CSS.
(ii) If payment is linked to the completion of service.
(iii) If M/s. Omega Limited has to make payment on 25-03-20XY as per the contract between
them. (3 Marks)
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 (b) Draupad Fabrics has opted for composition levy scheme in the current financial year. It has
approached you for advice whether it is mandatory for it to issue a tax invoice. You are required
to advice him regarding same. (3 Marks)
(c) M/s Salty & Spicy Limited reduced the amount of Rs. 1,50,000 from the output tax liability in
contravention of provisions of section 42(10) of the CGST Act, 2017 for the month of April 20XX,
which is ineligible credit. A show cause notice was issued by the Tax Department to pay tax
along with interest. M/s Salty & Spicy Limited paid the tax and interest on 31 st July, 20XX.
Calculate Interest liability (Ignore Penalty). (4 Marks)

4. (a) Whether transfer of title and/or possession is necessary for a transaction to constitute supply of
goods? (5 Marks)
(b) If a return has been filed, how can it be revised if some changes are required to be made?
(5 Marks)

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 Test Series: March, 2019
MOCK TEST PAPER - 1
INTERMEDIATE (NEW) COURSE
PAPER – 4: TAXATION
SECTION – A: INCOME TAX LAW
SOLUTIONS
Division A – Multiple Choice Questions
I. (b)
II. (c)
III. (b)
IV. (b)
V. (c)
VI. (c)
VII. (a)
VIII. (c)
IX. (a)
X. (a)
XI. (d)
XII. (a)
Division B – Descriptive Choice Questions
1. Computation of total income of Mr. Satish for the A.Y. 2019-20
Particulars Rs.
Income from salaries [Working Note (1)] 9,66,000
Income from house property [Working Note (2)] 1,00,000
Capital gain [(Working Note 3)]
Long-term capital gains 5,970
Short-term capital gains 2,490
Income from other sources: Interest on income-tax refund 750
Gross Total Income 10,75,210
Less: Deduction under Chapter VIA
Deduction under section 80C
- Public Provident Fund 1,30,000
- 5 years Term deposit (not allowed as deduction in the name of minor -
son)
- Repayment of housing loan (principal) 65,000
Restricted to 1,95,000 1,50,000
Deduction under section 80D [Working Note (4)] 25,000
Total Income 9,00,210

© The Institute of Chartered Accountants of India

 Computation of tax payable by Mr. Satish for the A.Y. 2019-20
Particulars Rs.
Tax on LTCG of Rs.5,970 [Exempt u/s 112A] -
Tax on STCG of Rs.2,490 u/s 111A @15% 374
Tax on balance income of Rs.8,91,750 90,850
91,224
Add: Health and Education cess@4% 3,649
Total tax payable 94,873
Tax liability (Rounded off) 94,870

Working Notes:
(1) Income from salaries
Particulars Rs. Rs.
Basic Salary 5,40,000
HRA (computed) 1,80,000
Transport allowance 22,000
Perquisites (relating to sale of movable assets by employer)
Laptop
Cost [September, 2017] 1,20,000
Less: Depreciation at 50% for one completed year 60,000
WDV [September, 2018] 60,000
Less: Amount paid to the employer 20,000
Perquisite value of laptop (A) 40,000
Car
Cost [April, 2016] 8,50,000
Less: Depreciation for the 1st year
(April,16 to March,17) @ 20% of WDV 1,70,000
WDV [April, 2017] 6,80,000
Less: Depreciation for the 2nd year
(April,17 to March,18) @ 20% of WDV 1,36,000
WDV [April, 2018] 5,44,000
Less: Amount paid to the employer 3,20,000
Perquisite value of car (B) 2,24,000
Perquisite value (A) + (B) 2,64,000
Gross Salary 10,06,000
Less: Standard Deduction under section 16(ia) 40,000
Income chargeable under the head “Salaries” 9,66,000
(2) Income from house property
Section 23(2) provides that the annual value of a self-occupied house shall be taken as Nil.
However, section 23(3) provides that the benefit of self-occupation would not be available if the
2

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 house is actually let during the whole or part of the previous year. This implies that the benefit of
taking the annual value as „Nil‟ would be available only if the house is self-occupied for the
whole year.
In this case, therefore, the benefit of taking annual value as „Nil‟ is not available since the house
is self-occupied only for 3 months. In such a case, the gross annual value has to be computed
as per section 23(1). Accordingly, the fair rent for the whole year should be compared with the
actual rent for the let-out period and whichever is higher shall be adopted as the Gross Annual
Value.
Particulars Rs. Rs.
Gross Annual Value (higher of fair rent for the whole year and actual 2,00,000
rent for the let-out period)
Fair rent for the whole year = Rs.1,50,000  12/9 2,00,000
Actual rent received = Rs.15,000  9 1,35,000
Less: Municipal taxes Nil
Net Annual Value (NAV) 2,00,000
Less: Deductions under section 24
30% of NAV 60,000
Interest on loan [See Note below] 40,000 1,00,000
Income from house property 1,00,000
Note: It is presumed that the interest of Rs.40,000 paid on housing loan represents the interest
actually due for the year.
(3) Income chargeable as “Capital Gains”
Section 112A exempts long-term capital gain on sale of equity shares of a company upto
Rs.1 lakh, if securities transaction tax is paid both at the time of sale and acquisition of such
shares. Such long-term capital gain in excess of Rs.1 lakh is taxable @10%. Since Mr. Satish
has held shares of A Ltd. for more than 12 months and securities transaction tax has been paid
on such sale and at the time of acquisition of shares, the gains arising from sale of such shares
is a long-term capital gain and the same would be taxable under section 112A. As per section
48, the benefit of indexation would not be applicable on such equity shares.
The long term capital gain arising from sale of shares of A Ltd.
Particulars Rs.
Sale consideration (Rs.150 x 200) 30,000
Less: Brokerage @ 0.1% 30
Net sale consideration 29,970
Less: Cost of acquisition (Rs.120 x 200) 24,000
long-term capital gains 5,970
Since, the long term capital gain do not exceed Rs.1 lakh, the same would be exempt under
section 112A.
Shares in B Ltd. are held for less than 12 months and hence the capital gains arising on sale of
such shares is a short-term capital gain chargeable to tax @15% as per section 111A, since
the transaction is subject to securities transaction tax. It may be noted, however, that securities
transaction tax is not a deductible expenditure.
Short-term capital gains arising from sale of shares of B Ltd.
Particulars Rs.
Sale consideration (Rs. 82  125) 10,250
Less: Brokerage @ 0.1% 10
3

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 Net sale consideration 10,240
Less: Cost of acquisition (Rs. 62 x 125) 7,750
Short-term capital gains 2,490
(4) Deduction under section 80D
As per section 80D, in a case where mediclaim premium is paid in lumpsum for more than one
year by an individual, to effect or keep in force an insurance on his health or health of his
spouse, then, the deduction allowable under this section for each of the relevant previous year
would be equal to the appropriate fraction of such lump sum payment. Hence, deduction under
section 80D would be Rs.20,000 i.e, Rs.80,000 x ¼ in respect of mediclaim and Rs.8,000 for
preventive health check up, subject to maximum of Rs.5,000. Thus, overall deduction under
section 80D would be Rs.25,000.

2. (a) I. Taxability of certain receipts under the Income-tax Act, 1961

Sl. Taxable/ Amount
No. Not liable to Reason
Taxable tax (Rs.)
1 2 3 4
(i) Taxable 20,00,000 Salaries payable by the Government to a citizen of India
for service rendered outside India shall be deemed to
accrue or arise in India as per section 9(1)(iii). Mr.
Dinesh is a citizen of India. Therefore, salary paid by the
Central Government to him for services rendered in
London would be deemed to accrue or arise in India in
his hands.
(ii) Not - Royalty paid by a resident to a non-resident in respect
Taxable of a business carried on outside India would not be
taxable in the hands of the non-resident, as the same
would not be deemed to accrue or arise in India as per
the exception mentioned in section 9(1)(vi)(b).
Therefore, royalty paid by Mukta, a resident, to Raja, a
non-resident, for a business carried on in Sri Lanka
would not be deemed to accrue or arise in India.
Note - It is assumed that the royalty was not received in
India.
II. Determination of residential status of Ms. Anjali for the A.Y. 2019-20
Ms. Anjali is a resident since she has stayed in India for 365 days during the P.Y.2018 -19.
Therefore, she satisfies the condition of stay in India for a period of 182 days or more in
the relevant previous year as per the requirement under section 6(1).
As per section 6(6), an individual is said to be “not ordinarily resident” in India in any
previous year, if he has:
(a) been a non-resident in India in nine out of ten previous years preceding the relevant
previous year; or
(b) during the seven previous years immediately preceding the relevant previous year,
been in India for a period of, or periods amount in all to, 729 days or less.
Ms. Anjali must, therefore, satisfy either of the conditions to qualify as a not -ordinarily
resident.
Ms. Anjali was a non-resident in India up to A.Y.2017-18.
4

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 She was resident in India only for P.Y. 2017-18 (A.Y.2018-19) out of the ten previous
years preceding P.Y. 2018-19 (A.Y.2019-20). This implies that she has been a non-
resident in India in nine out of ten previous years preceding P.Y. 2018 -19 (A.Y. 2019-20).
Further, she was in India only for a period of 406 days [i.e., 10 days in February, 2017 +
31 days in March 2017 + 365 days during the P.Y.2017-18] in the seven previous years
preceding P.Y. 2018-19 (A.Y.2019-20).
Therefore, since Ms. Anjali satisfies both the conditions for “not-ordinarily resident”, her
residential status for A.Y.2019-20 would be “Resident but not ordinarily resident”.
(b) I. (i) Section 194E provides that the person responsible for payment of any amount to a
non-resident sportsman for contribution of articles relating to any game or sport in India
in a newspaper has to deduct tax at source @ 20%. Further, since John Smith, a n
Australian cricketer, is a non-resident, Health and education cess @4% on TDS should
also be added.
Therefore, tax to be deducted = Rs.33,000 x 20.80% = Rs. 6,864.
(ii) Provisions of tax deduction at source under section 194C are attracted in respect of
payment by a company to a sub-contractor. Under section 194C, tax is deductible at
the time of credit or payment, whichever is earlier @ 1% if the payment is made to an
individual or HUF.
The aggregate amount credited during the year is Rs.4,85,000, tax is deductible @ 1%
on Rs.4,85,000.
Tax to be deducted = Rs.4,85,000 x 1% = Rs.4,850
II. (i) True : Section 139A(2) provides that the Assessing Officer may, having regard to the
nature of transactions as may be prescribed, also allot a PAN to any other person,
whether any tax is payable by him or not, in the manner and in accordance with the
procedure as may be prescribed.
(ii) False: Section 140(b) provides that where the Karta of a HUF is absent from India, the
return of income can be verified by any other adult member of the family; such member
can be a male or female member.
3. (a) Section 44AE would apply in the case of Mr. Satinder since he is engaged in the bu siness of
plying goods carriages and owns not more than ten goods carriages at any time during the
previous year.
Section 44AE provides for computation of business income of such assessees on a presumptive
basis. The income shall be deemed to be Rs.1,000 per ton of gross vehicle weight or unladen
weight, as the case may be, per month or part of the month for each heavy goods vehicle and
Rs.7,500 per month or part of month for each goods carriage other than heavy goods vehicle,
owned by the assessee in the previous year or such higher sum as declared by the assessee in
his return of income.
Mr. Satinder‟s business income calculated applying the provisions of section 44AE is
Rs.13,82,500 [See Notes (1) & (2) below] and his total income would be Rs.14,52,500.
However, as per section 44AE(7), Mr. Satinder may claim lower profits and gains if he keeps and
maintains proper books of account as per section 44AA and gets the same audited and furnishes
a report of such audit as required under section 44AB. If he does so, then his income for tax
purposes from goods carriages would be Rs.5,23,000 instead of Rs.13,82,500 and his total
income would be Rs.5,93,000.
Notes:
(1) Computation of total income of Mr. Satinder for A.Y. 2019-20

© The Institute of Chartered Accountants of India

 Particulars Presumptive Where books
income are maintained
Rs. Rs.
Income from business of plying goods carriages
[See Note (2) Below] 13,82,500 5,23,000
Other business and non-business income 70,000 70,000
Total Income 14,52,500 5,93,000
(2) Calculation of presumptive income as per section 44AE
Type of carriage No. of Rate per ton per Ton Amount
months month/per month Rs.
(1) (2) (3) (1) x (2) x
(3) = (4)
Heavy goods vehicle
1 goods carriage upto 2 1,000 17 (17,000/ 1,000) 34,000
5th May
4 goods carriage held 12 1,000 17 (17,000/ 1,000) 8,16,000
throughout the year
Goods vehicle other
than heavy goods
vehicle
1 goods carriage from 11 7,500 - 82,500
8th May
5 goods carriage held 12 7,500 - 4,50,000
throughout the year
Total 13,82,500
(b) Section 145B provides that interest received by the assessee on enhanced compensation shall
be deemed to be the income of the assessee of the year in which it is received, irrespective of
the method of accounting followed by the assessee and irrespective o f the financial year to which
it relates.
Section 56(2)(viii) states that such income shall be taxable as „Income from other sources‟.
50% of such income shall be allowed as deduction by virtue of section 57(iv) and no other
deduction shall be permissible from such Income.
Computation of interest on enhanced compensation taxable as “Income from other sources”
for the A.Y 2019-20:
Particulars Rs.
Interest on enhanced compensation taxable under section 56(2)(viii) 7,00,000
Less: Deduction under section 57(iv) (50% x Rs.7,00,000) 3,50,000
Taxable interest on enhanced compensation 3,50,000
(c) Computation of capital gains and business income of Harsha for A.Y. 2019 -20
Particulars Rs.
Capital Gains
Fair market value of land on the date of conversion deemed as the full value 2,25,00,000
of consideration for the purposes of section 45(2)
Less: Indexed cost of acquisition [Rs.45,00,000 × 272/129] 94,88,372
6

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 1,30,11,628
Proportionate capital gains arising during A.Y.2019-20 86,74,419
[Rs.1,30,11,628 × 2/3]
Less: Exemption under section 54EC 50,00,000
Capital gains chargeable to tax for A.Y.2019-20 36,74,419
Business Income
Sale price of flats [10 × Rs.40 lakhs] 4,00,00,000
Less: Cost of flats
Fair market value of land on the date of conversion [Rs.225 lacs × 2/3] 1,50,00,000
Cost of construction of flats [10 × Rs.15 lakhs] 1,50,00,000
Business income chargeable to tax for A.Y.2019-20 1,00,00,000
Notes:
(1) The conversion of a capital asset into stock-in-trade is treated as a transfer under section
2(47). It would be treated as a transfer in the year in which the capital asset is converted into
stock-in-trade.
(2) However, as per section 45(2), the capital gains arising from the transfer by way of
conversion of capital assets into stock-in-trade will be chargeable to tax only in the year in
which the stock-in-trade is sold.
(3) The indexation benefit for computing indexed cost of acquisition would, however, be
available only up to the year of conversion of capital asset into stock -in-trade and not up to
the year of sale of stock-in-trade.
(4) For the purpose of computing capital gains in such cases, the fair market value of the capital
asset on the date on which it was converted into stock-in-trade shall be deemed to be the full
value of consideration received or accruing as a result of the transfer of the capital asset.
In this case, since only 2/3rd of the stock-in-trade (10 flats out of 15 flats) is sold in the
P.Y.2018-19, only proportionate capital gains (i.e., 2/3rd) would be chargeable to tax in the
A.Y.2019-20.
(5) On sale of such stock-in-trade, business income would arise. The business income
chargeable to tax would be the difference between the price at which the stock -in-trade is
sold and the fair market value on the date of conversion of the capital asset into stock -in-
trade.
(6) In case of conversion of capital asset into stock-in-trade and subsequent sale of stock-in-trade,
the period of 6 months is to be reckoned from the date of sale of stock-in-trade for the purpose
of exemption under section 54EC [CBDT Circular No.791 dated 2.6.2000]. In this case, since
the investment in bonds of NHAI has been made within 6 months of sale of flats, the same
qualifies for exemption under section 54EC. With respect to long-term capital gains arising on
land or building or both in any financial year, the maximum deduction under section 54EC
would be Rs.50 lakhs, whether the investment in bonds of NHAI or RECL are made in the
same financial year or next financial year or partly in the same financial year and partly in the
next financial year.
Therefore, even though investment of Rs.50 lakhs has been made in bonds o f NHAI during
the P.Y.2018-19 and investment of Rs.50 lakhs has been made in bonds of RECL during the
P.Y.2019-20, both within the stipulated six month period, the maximum deduction allowable
for A.Y.2019-20, in respect of long-term capital gain arising on sale of long-term capital
asset(s) during the P.Y. 2018-19, is only Rs.50 lakhs.

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4. (a) Computation of total income of Mr. Sahil for the A.Y. 2019-20
Particulars Rs. Rs.
I. Income from house property
Gross Annual Value 5,10,000
Less: Municipal taxes paid 50,000
Net Annual Value (NAV) 4,60,000
Less: Deductions under section 24
30% of NAV 1,38,000
Interest on housing loan - 3,22,000
II Income from business
2,50,000
Less : Current year depreciation under section 32(1) 30,000
2,20,000
Less: Set-off of brought forward business loss of A.Y. 2015-16
under section 72 85,000
1,35,000
Less:Unabsorbed depreciation set-off [See Note 3] 1,35,000 Nil
III. Capital gains
Long-term capital gain on sale of debentures 1,35,000
Less: Long-term capital loss on sale of shares (STT is paid at
acquisition and sale) [See Note 1] 90,000
45,000
Less: Unabsorbed depreciation set-off [See Note 3] 45,000 Nil

Short term capital gain on sale of land [See Note 2] 1,80,000

Less:Unabsorbed depreciation set-off [See Note 3] 20,000 1,60,000
IV. Income from other sources
Dividend on shares (whether held as stock-in-trade or from a
company carrying on agricultural operations) – exempt
under section 10(34) - Nil
Total income 4,82,000
Notes:
(1) Long-term capital loss on sale of listed equity shares through a recognized stock exchange
on which STT is paid at the time of acquisition and sale of such shares can be set-off
against long-term capital gains on sale of debentures applying the provisions of section
70(3).
(2) Since land is held for a period of less than 24 months, the gain of Rs.1,80,000 arising from
sale of such land is a short-term capital gain.
(3) Brought forward unabsorbed depreciation can be adjusted against any head of income.
However, it is more beneficial to set-off unabsorbed depreciation first against long-term
capital gains, since it is taxable at a higher rate of 20% (the other income of the assessee
falling in the 5% slab rate). Therefore, unabsorbed depreciation is first set -off against long-
term capital gains to the extent of Rs.45,000. The remaining unabsorbed depreciation is
8

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 adjusted against business income to the extent of Rs.1,35,000 and the balance of
Rs.20,000 is adjusted against short-term capital gains.
In the alternative, the balance of Rs.20,000 may also be set-off against income from house
property, in which case, the net income from house property would be Rs.3,02,000 and
short-term capital gains would be Rs.1,80,000. The gross total income and total income
would, however, remain unchanged.
(b) In computing the total income of any individual, there shall be included all such income as arises
directly or indirectly, to the spouse of such individual from assets transferred directly or indirectly,
to the spouse by such individual otherwise than for adequate consideration or in connection with
an agreement to live apart.
Interest on loan: Accordingly, Rs.50,000, being the amount of interest on loan received by
Mrs. Suman, wife of Mr. Akash, would be includible in the total income of Mr. Akash, since such
loan was given by her out of the sum of money received by her as gift from her husband.
Short-term capital gain: The short-term capital gain of Rs.20,000 (Rs.70,000, being the sale
consideration less Rs.50,000, being the cost of acquisition) arising in the hands of Ms. Suman
from sale of shares acquired by investing the interest income of Rs.50,000 earned by her (from
the loan given out of the sum gifted to her by her husband), would not be included in th e hands of
Mr. Akash. Since securities transaction tax has been paid, such short-term capital gain on sale of
listed shares is taxable@15%
Income from the accretion of the transferred asset is not liable to be included in the hands of the
transferor and, therefore, such income is taxable in the hands of Ms. Suman.
(c) Determination of Advance Tax Liability of Mr. Sameer
Particulars Rs.
Estimated tax liability for the financial year 2018-19 80,000
Less: Tax deducted at source 12,000
Tax payable 68,000

Due Date of Amount payable Rs.

installment
On or before Not less than 15% of
15th June, 2018 advance tax liability 10,200
On or before Not less than 45% of 20,400
15th September, advance tax liability (Rs.30,600, being 45% of Rs.68,000 -
2018 less amount paid in Rs.10,200)
earlier installment
On or before Not less than 75% of 20,400
15th December, advance tax liability (51,000, being 75% of Rs.68,000 -
2018 less amount paid in Rs.30,600)
earlier installment(s)
On or before Whole of the advance 17,000
15th March, tax liability less amount (68,000, being 100% of Rs.68,000 -
2019 paid in earlier Rs.51,000)
installment(s)
In case he is eligible for presumptive tax provisions under section 44AD and his entire tax liability
is on account of such income, he can pay his entire advance tax liability in one installment on or
before 15.3.2019, without attracting interest under section 243C.

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 SECTION B - INDIRECT TAXES (40 MARKS)
SUGGESTED ANSWERS
Division A - Multiple Choice Questions Answer
1. (c)
2. (a)
3. (d)
4. (b)
5. (d)
6. (d)
7. (d)
8. (d)
9. (c)
10. (d)
Division B - Descriptive Answer
1. (i) Computation of net GST payable for the financial year 20XX-XY
Particulars Value (Rs.) CGST (Rs.) SGST (Rs.)
Tax liability
Intra-State supplies made to registered persons 10,00,000 90,000 90,000
Intra State supplies made to unregistered persons 2,00,000 18,000 18,000
Total (A) 1,08,000 1,08,000
Input Tax credit
Supply of iron in lots by M/s Hard Limited [Note-1] 10,00,000 - -
Supply of IT engineering service [Note-2] 11,00,000 99,000 99,000
Total (B) 99,000 99,000
Net GST payable (A)-(B) 9,000 9,000
Notes:-
1. Section 16 of CGST Act, 2017 provides that where the goods against an invoice are received in
lots or installments, the registered person shall be entitled to take credit upon receipt of the last
lot or installment. Although 900 tonnes of iron are received in financial year 20XX-XY, the last lot
of iron has been received after FY 20XX-XY only, i.e. on 5, April 20XY, thus no input tax credit is
available in FY 20XX-XY.
In view of above provisions, full input tax credit in respect of transaction (a) will b e claimed in
financial year 20XY-20YZ i.e. on receipt of last installment.
2. Section 16 of CGST Act, 2017 inter alia provides that every registered person is entitled to take
credit of input tax charged on supply of services to him which are used in the course of business
on receipt of the said services.
Thus, in view of the above mentioned provisions full input tax credit of Rs. 1,98,000/ - can be
claimed in financial year 20XX-XY.
(ii) Section 16 of CGST Act, 2017 provides that where a recipient fails to pay to the supplier of goods
or services or both, other than the supplies on which tax is payable on reverse charge basis, the
amount towards the value of supply along with tax payable thereon within a period of 180 days
1

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 from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed
by the recipient shall be added to his output tax liability, along with interest thereon, in the
prescribed manner.
However, the recipient shall be entitled to avail of the credit of input tax on payment made by him
of the amount towards the value of supply of goods or services or both along with tax payable
thereon.
Since the full amount of value alongwith tax payable thereon has not been paid by M/s
Comfortable (P) Ltd. to M/s Dynamic Infotech (P) Ltd within a period of 180 days from the date of
issue of invoice, the proportionate amount of input tax credit availed needs to be reversed.
However, the reversal will be done in the financial year 20XY-YZ during when the time period of
180 days expire.
Input tax credit to be reversed in financial year 20XY-YZ
Particulars Amount (Rs.)
Total value of procurement of IT engineering service 11,00,000
Add: Total GST on the above value @ 18%[CGST + SGST] 1,98,000
Value including GST 12,98,000
Amount paid for the said service including GST 7,08,000
[Rs. 4,13,000 + Rs. 2,95,000]
Amount [value alongwith tax payable thereon] not paid for the said service 5,90,000
ITC to be reversed [Rs. 5,90,000 x 18/118] 90,000

2. (a) Computation of value of taxable supply

Particulars (Rs.)
Amount charged for loading, unloading, packing and warehousing of potato chips 25,000
[Note-1]
Fees charged for yoga camp conducted by a charitable trust registered under Nil
section 12AA of the Income-tax Act, 1961 [Note-2]
Amount charged by business correspondent for the services provided to the Nil
rural branch of a bank with respect to Savings Bank Accounts [Note-3]
Amount charged by cord blood bank for preservation of stem cells [Note-4] Nil
Service provided by commentator to a recognized sports body [Note-5] 6,00,000
Amount charged for service provided by way of right to admission to circus 12,000
where consideration for the same is Rs. 750 per person. [Note-6]
Notes:
1. Services by way of loading, unloading, packing, storage or warehousing of agricultural
produce are exempt from GST. Further, potato chips are manufactured through processes
which alter the essential characteristic of agricultural produce, thus is not covered under
definition of agricultural produce.
2. Services by an entity registered under section 12AA of the Income -tax Act, 1961 by way of
charitable activities are exempt from GST. The activities relating to advancement of yoga
are included in the definition of charitable activities. So, such activities are exempt from
GST.

© The Institute of Chartered Accountants of India

 3. Services by business facilitator or a business correspondent to a banking company with
respect to accounts in its rural area branch have been exempted from GST.
4. Services provided by cord blood banks by way of preservation of stem cells or any other
service in relation to such preservation are exempt from GST.
5. Services provided to a recognized sports body only by an individual as a player, referee,
umpire, coach or team manager for participation in a sporting event organized by a
recognized sports body are exempt from GST. Thus, services provided by commentators
are liable to GST.
6. Services provided by way of right to admission to circus where consideration for the same is
upto Rs. 500 per person are exempt from GST. Since in the present case, the consideration
is more than Rs. 500 per person, so the same is liable to GST.
(b) (i) In case of services provided by any person by way of sponsorship to any body corporate or
partnership firm / limited liability partnership (LLP), GST is liable to be paid under reverse
charge by such body corporate or partnership firm / LLP located in the taxable territory.
Therefore, in the given case, Indian Love Cricket Academy is liable to pay GST under
reverse charge.
(ii) In case of services provided by Goods Transport Agency (GTA) in respect of transportation
of goods by road to, inter alia, any partnership firm whether registered or not under any law;
GST is liable to be paid by such partnership firm. Therefore, in the given case, Amba & Co.
is liable to pay GST under reverse charge.
3. (a) (i) Where the due date of payment is not ascertainable from the contract , the invoice shall be
issued before or at the time when the supplier of service receives the payment.
Thus, in the given case, the invoice should be issued on or before 30.03.20XY (date of
receipt of payment by Mr. Mayank).
(ii) If payment is linked to the completion of an event, the invoice should be issued on or before
the date of completion of that event.
Since in the given case payment is linked to the completion of service, invoice should b e
issued on or before 31.01.20XY (date of completion of service).
(iii) Where the due date of payment is ascertainable from the contract, the invoice should be
issued on or before the due date of payment.
If M/s. Omega Limited has to make payment on 25.03.20XY as per the contract between
them, the invoice should be issued on or before 25.03.20XY.
(b) A registered person paying tax under the provisions of section 10 [composition levy] shall issue,
instead of a tax invoice, a bill of supply containing such particulars and in such manner as may
be prescribed.
Therefore, in the given case, Draupad Fabrics cannot issue tax invoice. Instead, it shall issue a
Bill of Supply.
(c) A taxable person who makes an undue or excess claim of input tax credit shall pay interest
@ 24% p.a. on such undue or excess claim in terms of section 50 of CGST Act, 2017. The
period of interest will be from the date following the due date of payment to the actual date of
payment of tax.
Due date of payment is 20 th May, 20XX.
Period for which interest is due = 21 st May, 20XX to 31st July, 20XX
=72 days
Thus, interest liability = Rs. 1,50,000 x 24% x 72/365
3

© The Institute of Chartered Accountants of India

 =Rs. 7,101 (approx.)

4. (a) Title as well as possession both have to be transferred for a transaction to be considered as a
supply of goods. In case title is not transferred, the transaction would be treated as supply of
service in terms of Schedule II(1)(b) of the CGST Act. In some cases, possession may be
transferred immediately but title may be transferred at a future date like in case of sale on
approval basis or hire purchase arrangement. Such transactions will also be termed as supply of
goods.
(b) In GST since the returns are built from details of individual transactions, there is no requirement
for having a revised return. Any need to revise a return may arise due to the need to change a
set of invoices or debit/ credit notes. Instead of revising the return already sub mitted, the system
allows changing the details of those transactions (invoices or debit/credit notes) that are required
to be amended. They can be amended in any of the future GSTR- 1 in the tables specifically
provided for the purposes of amending previously declared details.
As per section 39(9), omission or incorrect particulars discovered in the returns filed u/s 39 can
be rectified in the return to be filed for the month/quarter during which such omission or incorrect
particulars are noticed. Any tax payable as a result of such error or omission will be required to
be paid along with interest. The rectification of errors/omissions is carried out by entering
appropriate particulars in “Amendment Tables” contained in GSTR-1.

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