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Test Series: October, 2022
MOCK TEST PAPER 2
INTERMEDIATE 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 s in Division A,
working notes are not required.
The relevant assessment year is A.Y.2022-23.
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.
1. Mr. Raj, aged 45 years, commenced operations of the business of a new three-star hotel in Mumbai,
Maharashtra on 1.4.2021. He incurred capital expenditure of ` 90 lakh on land in March, 2021
exclusively for the above business, and capitalized the same in his books of account as on 1 st April,
2021. Further, during the P.Y. 2021-22, he incurred capital expenditure of ` 2.50 crore (out of which
` 1 crore was for acquisition of land and ` 1.50 crore was for acquisition of building) exclusively for
the above business. The payments in respect of the above expenditure were made by account payee
cheque. The profits from the business of running this hotel (before claiming deduction under section
35AD) for the A.Y.2022-23 is ` 75 lakh. Mr. Raj is not opting for section 115BAC.
Mr. Viraj, brother of Mr. Raj, has commenced the business of manufacture of apparel on 1.10.2021.
He employed 220 new employees during the P.Y.2021-22, the details of whom are as follows –
No. of Date of employment Regular/ Casual Total monthly emoluments
employees per employee (`)
(i) 40 1.10.2021 Regular 24,000
(ii) 80 1.10.2021 Regular 24,500
(iii) 50 1.11.2021 Casual 25,500
(iv) 30 1.11.2021 Regular 25,000
(v) 20 1.12.2021 Casual 24,000
All regular employees participate in Recognized Provident Fund and their emoluments are paid by
account payee cheque. The profits and gains derived from manufacture of apparel that year is ` 80
lakhs and his total turnover is ` 11 crores.
Based on the facts of the case scenario given above, choose the most appropriate answer to the
following questions:
(i) Assuming that Mr. Raj has fulfilled all the conditions specified for claim of deduction under
section 35AD and has not claimed any deduction under Chapter VI-A under the heading “C. –
Deductions in respect of certain incomes”, what would be the quantum of deduction under section
35AD, which he is eligible to claim as deduction for A.Y.2022-23?
(a) ` 340 lakh
(b) ` 250 lakh
(c) ` 190 lakh
(d) ` 150 lakh
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(ii) Assuming that Mr. Raj also has another existing business of running a four-star hotel in
Ahmedabad, which commenced operations twenty years back, the profits from which are ` 130
lakh for the A.Y.2022-23, what would be its income chargeable/loss under the head “Profits and
gains of business or profession” for the A.Y.2022-23?
(a) ` 130 lakh
(b) ` 55 lakh
(c) (` 20 lakh)
(d) ` 15 lakh
(iii) If, out of the amount of ` 1 crore paid for acquisition of land in the P.Y.2021-22, ` 50 lakh was
paid by way of cash, what would be the answer to questions (i) and (ii) above?
(a) ` 150 lakh; ` 55 lakh, respectively
(b) ` 100 lakh; ` 105 lakh, respectively
(c) ` 290 lakh; (` 85 lakh), respectively
(d) ` 140 lakh; ` 65 lakh, respectively
(iv) Considering the assumption given in question (ii) above, what would be the tax payable (rounded
off) by Mr. Raj for A.Y.2022-23?
(a) ` 16,73,100
(b) ` 42,03,940
(c) ` 2,73,000
(d) ` 15,21,000
(v) Would Mr. Viraj be eligible for deduction under section 80JJAA in the A.Y.2022-23? If so, what is
the quantum of deduction?
(a) No, he would not be eligible for deduction u/s 80JJAA since the employees have not been
employed for 240 days in the P.Y.2021-22. He can, however, claim deduction thereunder in
the P.Y.2022-23
(b) Yes; ` 63,81,000
(c) Yes; ` 58,68,000
(d) Yes; ` 52,56,000 (5 x 2 = 10 Marks)
2. Mr. Ashish’s total income comprises of long-term capital gains on sale of land ` 5 lakhs; short-term
capital gains on sale of STT paid listed equity shares ` 2 lakhs; income from lottery ` 1 lakh and
savings bank interest ` 30,000. He invests ` 1.50 lakhs in PPF. His tax liability for A.Y.2022-23,
assuming that he is a resident Indian of the age of 40 years and does not opt for the provisions of
section 115BAC, is –
(a) ` 1,64,800
(b) ` 1,66,400
(c) ` 1,14,400
(d) ` 1,13,300 (2 Marks)
3. Who among the following will qualify as non-resident for the previous year 2021-22?
- Mr. Bob, an Italian dancer, came on visit to India to explore Indian dance on 15.09.2021 and left
on 25.12.2021. For past four years, he visited India for dance competition and stayed in India for
120 days each year.

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- Mr. Samrat born and settled in USA, visits India each year for 100 days to meet his parents and
grandparents, born in India in 1946, living in Delhi. His Indian income is ` 15,20,000.
- Mr. Joseph, an American scientist, left India to his home country for fixed employment there. He
stayed in India for study and research in medicines from 01.01.2017 till 01.07.2021.
Choose the correct answer
(a) Mr. Bob and Mr. Joseph
(b) Mr. Samrat
(c) Mr. Bob, Mr. Samrat and Mr. Joseph
(d) None of the three (2 Marks)
4. Mr. Harish is an interior decorator declaring profits under 44ADA in the P.Y.2021 -22 and the earlier
previous years. Mr. Harish has to pay brokerage of ` 15 lakhs to Mr. Patel, a broker, to buy a
residential house, and ` 50 lakhs to Mr. Suresh, a contractor for reconstruction of the residential
house. Are TDS provisions attracted in the hands of Mr. Harish in respect of the above transactions?
(a) No; TDS provisions are not attracted in the hands of Mr. Harish in respect of payments to
Mr. Patel and Mr. Suresh
(b) Yes; Mr. Harish has to deduct tax from payment to Mr. Patel and Mr. Suresh
(c) Mr. Harish does not have to deduct tax on payment to Mr. Patel but has to deduct tax from
payment to Mr. Suresh
(d) Mr. Harish does not have to deduct tax on payment to Mr. Suresh but has to deduct tax from
payment to Mr. Patel (2 Marks)
5. Mr. Akash is constructing a residential house property in Patna for self-occupation. He has taken a
loan of ` 40 lakhs from SBI on 30.3.2021 for this purpose. He pays interest of ` 2.50 lakhs during the
P.Y.2021-22. He repays ` 1.50 lakhs towards principal on 31.3.2022. The construction is completed in
May, 2022. The stamp duty value of the house is ` 46 lakhs. This is the only house property of
Mr. Akash. For A.Y. 2022-23 -
(a) Mr. Akash is entitled for deduction of ` 2 lakhs under section 24 and ` 1.50 lakhs under section
80C
(b) Mr. Akash is entitled for deduction of ` 2 lakhs under section 24, ` 50,000 under section 80EEA
and ` 1.50 lakhs under section 80C
(c) Mr. Akash is neither entitled for deduction under section 24 nor under section 80C. He is,
however, entitled for deduction of ` 1.50 lakhs under section 80EEA
(d) Mr. Akash is not entitled for deduction under section 24, section 80C and section 80EEA
(2 Marks)
Division B – Descriptive Questions
Question No. 1 is compulsory
Attempt any two questions from the remaining three questions
1. Mr. Anmol (aged 67 years), a manufacturer, reported a profit of ` 3,95,11,290 for the previous year
2021-22 after debiting/crediting the following items:
Debits:
(a) ` 15,000 paid to a Gurudwara registered u/s 80G of the Income-tax Act, in cash where no
cheques are accepted.
3

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(b) ` 35,500 contributed to an university approved and notified u/s 35(1)(ii) to be used for scientific
research.
(c) Interest paid ` 1,75,000 on loan taken for purchase of E-vehicle on 15-07-2021 from a bank. The
E-vehicle was purchased for the personal use of his wife.
(d) He has purchased timber under a forest lease of ` 25,00,000 for the purpose of business.
Credits:
(i) Income of ` 3,50,000 from royalty on patent registered under the Patent Act received from
different resident clients. No TDS was needed to be deducted by any of the clients.
(ii) He received ` 3,00,000 from a debtor which was written off as bad in the year 2017-18. Amount
due from the debtor (which was written off as bad) was ` 4,00,000, out of which tax officer had
only allowed ` 2,50,000 as deduction in computing the total income for assessment year
2018-19.
(iii) He sold some goods to his brother for ` 6,00,000. The fair market value of such goods was
` 9,00,000.
Other information:
1. Depreciation in books of accounts is computed by applying the rates prescribed under the
Income tax laws.
2. Mr. Anmol purchased a new car of ` 14,00,000 on 1st August, 2021 and the same was put to use
in the business on the same day. No depreciation for the same has been taken on car in the
books of account.
3. Mr. Anmol had sold a house on 25th March, 2021 and deposited the long term capital gains of
` 20,00,000 in capital gain account scheme by the due date of filing return of income for that year.
On 11th March, 2022, he sold another house property in which he resided for ` 1 crore. He earned a
long term capital gain of ` 55,00,000 on sale of this property. On 25 th March, 2022, he withdrew
money out of his capital gain account and invested ` 1 crore on construction of one house.
4. Mr. Anmol also made the following payments during the previous year 2021-22
- Lump-sum premium of ` 1,20,000 paid on 30 th March, 2022 for the medical policy taken for
self and spouse. The policy shall be effective for five years i.e. from 30 th March, 2022 to
29th March, 2027.
- ` 8,000 paid in cash for preventive health check-up of self and spouse.
Compute the total income and tax payable by Mr. Anmol for the assessment year 2022-23 assuming
he does not opt for section 115BAC. (14 Marks)
2. (a) Examine the tax implications of the following transactions for the assessment year 2022-23:
(Give brief reason)
(i) Mr. Akash, an Indian citizen, is a non-resident in India for the previous year 2021-22. He
has been appointed by the Government of India as an ambassador in Japan. He received
salary of ` 7,50,000 and allowances of ` 2,40,000 during the previous year 2021-22 for
rendering his services in Japan.
(ii) Ms. Ahana, a non-resident in India, is engaged in operations which are confined to purchase
of goods in India for the purpose of export. She has earned ` 3,50,000 during the previous
year 2021-22.
(iii) Mr. Sumit, a non-resident in India, has earned ` 4,00,000 as royalty for a patent right made
available to Mr. Vikas who is also a non-resident. Mr. Vikas has utilized patent rights for
development of a product in India and 50% royalty is received in India and 50% outside
India.

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(iv) Mr. Jimmy, a NRI, borrowed ` 10,00,000 on 01.04.2021 from Mr. Naveen who is also a non-
resident and invested such money in the shares of an Indian Company. Mr. Naveen has
received interest @ 12% per annum. (2 + 1 + 2 + 2 Marks)
(b) State in brief the applicability of tax deduction at source provisions, the rate and amount of tax
deduction in the following cases for the financial year 2021-22 under the Income-tax Act, 1961.
Assume that all payments are made to residents:
(i) Sahil, a resident Indian individual, not deriving any income from business or profession
makes payments of ` 10 lakh in January, 2022, ` 25 lakh in February, 2022 and ` 25 lakh
in March, 2022 to Madan, a contractor for reconstruction of his residential house.
(ii) XYZ Ltd. makes the payment of ` 2,00,000 to Ramesh, an individual transporter who owned
6 goods carriages throughout the previous year. He does not furnish his PAN. (4 Marks)
(c) State any three conditions when a person is required to furnish Income-tax return in the
prescribed form & manner on or before the due date even if such person (other than a company
or a firm) is not otherwise required to furnish a return u/s 139(1). (3 Marks)
3. (a) Mr. Suresh entered into an agreement with Mr. Mukesh to sell his residential house located at
New Delhi on 25.05.2021 for ` 80,00,000. Mr. Mukesh was handed over the possession of the
property on 15.12.2021 and the registration process was completed on 14.02.2022.
Mr. Mukesh had paid the sale proceeds in the following manner;
(i) 25% through account payee bank draft on the date of agreement.
(ii) 50% on the date of the possession of the property.
(iii) Balance after the completion of the registration of the title of the property.
The value determined by the Stamp Duty Authority on 25.05.2021 was ` 92,00,000 whereas on
14.02.2022 it was ` 94,50,000.
Mr. Suresh had acquired the property on 01.04.2001 for ` 21,00,000. After recovering the sale
proceeds from Mukesh, he purchased another residential house property in Kanpur for
` 22,00,000.
Cost Inflation Index for Financial Year(s)
2001-02 - 100
2021-22 - 317
Compute the capital gain arising in the hands of Mr. Suresh for the Assessment Year 2022-23.
(6 Marks)
(b) Mr. Raju furnishes the following particulars for the previous year 2021-22 in respect of an
industrial undertaking established in "Special Economic Zone" in March 2016. It began
manufacturing in April 2016.
Particulars (`)
Total sales 1,70,00,000
Export sales [proceeds received in India] 90,00,000
Domestic sales 80,00,000
Profit from the above undertaking 40,00,000
Export Sales of F.Y. of 2021-22 include freight and insurance of ` 10 lakhs for delivery of goods
outside India. Compute the amount of deduction available to Mr. Raju under section 10AA for
A.Y. 2022-23. (4 Marks)

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(c) Examine the following transactions in the context of Income-tax Act, 1961:
(i) Mr. Koshi transferred 300 shares of Style Pvt Ltd. to Moksh Pvt. Ltd. on 10. 9.2021 for
` 3,00,000 when the market price was ` 5,00,000. The indexed cost of acquisition of shares
for Mr. Koshi was computed at ` 4,45,000. The transfer was not subjected to securities
transaction tax.
Determine the income chargeable to tax in the hands of Mr. Koshi and Moksh Pvt. Ltd.
because of the above said transaction.
(ii) Mr. Chetan is employed in a company with taxable salary income of ` 4,00,000. He received
a cash gift of ` 1,00,000 from Help Charitable Trust (registered under section 12AB) in
March 2022 for meeting his medical expenses.
Is the cash gift so received from the trust chargeable to tax in the hands of Mr. Chetan?
(2 x 2 = 4 Marks)
4. (a) Compute total income of Mr. Mihir for the assessment year 2022-23 from the following
information furnished by him for the financial year 2021-22.
Particulars `
Salary income (computed) 4,70,000
Loss from self-occupied house property 2,00,000
Loss from let out house property 80,000
Loss from speculation business-X 90,000
Profit from speculation business-Y 80,000
Income from trading and manufacturing business @ 8% 5,50,000
Interest on PPF deposit 95,000
Long term capital gain on sale of Vacant site (Computed) 1,10,000
Short term capital loss on sale of Jewellery 1,90,000
Investment in tax saver deposit on 31-03-2022 50,000
Brought forward loss of business of assessment year 2018-19 7,50,000
Donation to a charitable trust recognized under section 12AB and approved 1,10,000
under section 80G paid by cheque
Enhanced compensation received from government for compulsory 4,00,000
acquisition of land (held for a period of 5 years) in the year 2012

(7 Marks)
(b) Mr. Raja gifted a sum of ` 8 lakhs to his brother’s minor son on 14-5-2021. On the same date, his
brother gifted debentures worth ` 10 lakhs to Mrs. Raja. Son of Mr. Raja’s brother invested the
amount in fixed deposit with SBI@ 9% p.a. interest and Mrs. Raja received interest of ` 81,000
on these debentures during the previous year 2021-22. Discuss the tax implications under the
provisions of the Income-tax Act, 1961. (4 Marks)
(c) An amount of ` 50,000 was paid to Mr. Rakesh on 1.9.2021 towards fees for professional
services without deduction of tax at source. Subsequently, another payment of ` 60,000 was due
to Mr. Rakesh on 31.1.2022, from which tax@10% (amounting to ` 11,000) on the entire amount
of ` 1,10,000 was deducted. However, this tax of ` 11,000 was deposited only on 22.7.2022.
Compute the interest chargeable under section 201(1A). (3 Marks)

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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
notes.
(iii) All questions should be answered on the basis of position of the GST laws as amended by the Finance
Act, 2021, including significant notifications and circulars issued, up to 30 th April 2022.
Division A - Multiple Choice Questions (MCQs)
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
Sarabhai & Sarabhai Associates, a partnership firm registered under GST, is engaged in various types of
business activities. It has provided the details of the following activities undertaken by it in the current financial
year:
(i) It supplies taxable goods to Dhanush Enterprises at a price of ` 8,00,000 in the month of April, with a
credit period of 1 month for payment. Thereafter, interest @ 12% p.a. is chargeable on the
consideration. The payment is received from Dhanush Enterprises after the lapse of two months from
the date of supply.
(ii) It enters into a contract for supply of 100 office chairs @ ` 15,000 with Ashoka Mart on 21 st August.
Chairs are removed from the warehouse of Sarabhai & Sarabhai Associates on 5 th September along
with the invoice of said date. Ashoka Mart has paid 30% of the total contract value on 21 st August;
balance 70% is paid after delivery of chairs on 10 th September.
(iii) In the month of October, it provides services by way of transportation of goods in a goods carriage by
road to Fisheries Department of Government of India, registered under GST for the purpose of deducting
tax at source and not for making any taxable supply. Sarabhai & Sarabhai Associates is a registered
goods transport agency and charges `1,20,000 for the said services.
(iv) It also provides services of Direct Selling Agent to an NBFC located in Mumbai in the month of December
for ` 50,000.
(v) It organises a business exhibition in the month of December for which it re ceives a sponsorship fee of
` 3,00,000 from Dhara Ltd.
(vi) It provides free gifts to each of its employees valuing ` 50,000 at the end of each financial year.
(vii) It avails services of Dhruv Travel Agency for organizing a free vacation for its top perfo rming employees
in the month of December. GST of ` 50,000 is paid on the same. In the same month, it also pays GST
of ` 20,000 on the membership of Rudraksh Fitness Centre taken for its CEO.
All the amounts given above are exclusive of taxes, wherever applicable. All conditions for availing ITC are
fulfilled subject to the information given above.
Based on the information provided above, choose the most appropriate answer for the following que stions-
1. Value of supply made to Dhanush Enterprises, assuming the interest on delayed payment to be
exclusive of GST, is __________.
(a) ` 8,00,000

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(b) ` 8,08,000
(c) ` 7,92,000
(d) ` 8,16,000
2. The time of supply of advance money of ` 4,50,000 received for supply of office chairs to Ashoka Mart
is __________. For balance payment of ` 10,50,000 received, the time of supply is ________________.
(a) 21st August; 5 th September
(b) 5th September; 10 th September
(c) 21st August; 10 th September
(d) 5th September; 5 th September
3. Determine the value of outward supplies made by Sarabhai & Sarabhai Associates on which tax is
payable under reverse charge.
(a) ` 1,20,000
(b) ` 50,000
(c) ` 1,70,000
(d) ` 3,00,000
4. Free gifts of value of ` 50,000 provided by Sarabhai & Sarabhai Associates to each of its employee is:
(a) considered as supply of goods.
(b) considered as supply of services.
(c) exempt from GST.
(d) not a supply as per Schedule I of the CGST Act, 2017.
5. Sarabhai & Sarabhai Associates is eligible to claim input tax credit of _________ in the month of
December.
(a) ` 50,000
(b) ` 20,000
(c) ` 3,70,000
(d) Nil (5 x 2 Marks = 10 Marks)
6. ITC on ___________________________________is not blocked.
(a) trucks purchased by a company for transportation of its finished goods
(b) aircraft purchased by a manufacturing company for official use of its CEO
(c) general insurance taken on a car used by employees of a manufacturing company for official
purposes
(d) cars purchased by a manufacturing company for official use of its employees (2 Marks)

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Division B - Descriptive Questions
Question No. 1 is compulsory.
Attempt any two questions out of remaining three questions.
Total Marks: 28 Marks
1. Sreshth Pvt. Ltd., a registered supplier of goods and services in Kolkata, has furnished the following
information for the month of February:

S. Particulars Amount
No. (`)
(i) Intra-State supply of taxable goods 4,00,000
(ii) Purchase of goods destroyed due to fire before being put into the production 5,50,000
process (It is an intra-State transaction)
(iii) Services provided to a foreign diplomatic mission located in India (It is an 1,00,000
intra-State transaction)
(iv) Intra-State purchase of food items for being served to the customers, free of 1,75,000
cost. (It is an intra-State transaction)
(v) Goods transport services received from a GTA. GST is payable @ 5% (It is 2,00,000
an inter-State transaction)
(vi) Inter-State services provided to Dhruv Ltd. in respect of a business exhibition 10,000
held in Delhi
(vii) Inter-State security services provided to Torrent Higher Secondary School 15,000
(unregistered under GST) for their annual day function organised in Katyani
Auditorium outside the School campus
(vii) Inputs to be received in 3 lots, out of which 2 nd lot was received during the 40,000
month

The company has following balances of ITC with it at the beginning of the tax period:
Particulars Amount (`)
CGST 57,000
SGST Nil
IGST 50,000

Note:
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively unless otherwise mentioned.
(ii) Both inward and outward supplies are exclusive of taxes, wherever applicable.
(iii) All the conditions necessary for availing the ITC have been fulfilled.
(iv) The turnover of Sreshth Pvt. Ltd. was ` 2.5 crore in the previous financial year.
Compute the minimum GST, payable in cash, by Sreshth Pvt. Ltd. for the month of February. Make
suitable assumptions as required. (8 Marks)

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2. Determine the GST payable @ 18% with respect to each of the following independent services provided
by the registered persons:
Particulars Gross amount
charged (`)
Fees charged for ‘Swasthya Yoga Camp’ conducted by Chandra Prakash 98,000
Charitable Trust, registered under section 12AB of the Income-tax Act, 1961
Amount charged by business correspondent from Wealthy Banking Company 1,00,000
for the services provided to 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 selectors to a recognized sports body 5,20,000
(4 Marks)
(b) Examine given cases and determine the persons liable to pay tax in each of the following
independent cases:
(i) Dharam Shastri, an independent director of Universe Pvt. Ltd., has received sitting fee
amounting to ` 1 lakh from Universe Pvt. Ltd. for attending the Board meetings.
(ii) Chandan Associates provided sponsorship services to Virat Cricket Academy, an LLP.
(iii) Legal Fees is received by Gaba, an advocate, from M/s. Naveen Consultants having turnover
of ` 50 lakh in preceding financial year. (3 × 2 = 6 Marks)
3. (a) Madhav Oils, Delhi has supplied machine oil and high-speed diesel in the month of April as per the
details given in table below. Madhav Oils is not yet registered.
Sl. No. Particulars Amount (`)*
(i) Supply of machine oil in Delhi 15,00,000
(ii) Supply of high-speed diesel in Delhi 10,00,000
(iii) Supply of machine oil made in Punjab by Madhav Oils from its 10,00,000
branch located in Punjab
*excluding GST
Determine whether Madhav Oils is liable for registration. (6 Marks)
(b) Rajul is a registered software consultant. On account of her ill health, she could not provide any
services during the month of October. However, she had to incur all the expenses relating to her
office. She paid ` 75,000 to various vendors. The total input tax involved on the goods and
services procured by her is ` 13,500. Out of the total bills paid by her, one bill for ` 15,000 relates
to security services availed for security of her office, tax on which is payable under reverse charge.
Input tax involved in such bill is ` 2,700.
Rajul is of the opinion that for the month of October, no GST is payable from electronic cash ledger
as she has sufficient balance of ITC for payment of GST under reverse charge on security services.
Do you think Rajul is right? Explain with reasons. (4 Marks)
4. (a) Discuss the ITC entitlement of a newly registered person under GST law. (5 Marks)
(b) If a return has been filed, how can it be revised if some changes are required to be made?
(5 Marks)

10

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