INTERMEDIATE COURSE

GROUP – I

REVISION TEST PAPERS

SEPTEMBER, 2024

BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
New Delhi
¤THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

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Edition : July, 2024

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 Contents
Page Nos.
Objective & Approach............................................................................................... i – vii
Objective of RTP ..................................................................................................................... i
Planning & Preparing for Examination ........................................................................... ii
Subject-wise Applicability .................................................................................................. iv

Paper-wise RTPs
Paper 1: Advanced Accounting ........................................................................... 1 – 26
Paper 2: Corporate and Other Laws ................................................................27 – 46

Part-I: Announcements Stating Applicability & Non-Applicability .............27 – 29

Part-II: Questions and Answers ................................................................. 29 – 46

Paper 3: Taxation .............................................................................................................. 47 – 80

Section A: Income-tax Law .......................................................................... 47 – 66

Section B: Goods and Services Tax .......................................................... 67 – 80
Applicability of Standards/Guidance Notes/Legislative Amendments etc.
for September, 2024 – Intermediate Examination .............................. 81 – 85
 REVISION TEST PAPER, SEPTEMBER, 2024 – OBJECTIVE &
APPROACH
(Students are advised to go through the following paragraphs carefully to
derive maximum benefit out of this RTP)
I. Objective of Revision Test Paper
Revision Test Papers are one among the many educational inputs
provided by the Board of Studies (BOS) to its students. Popularly
referred to as RTP by the students, it is one of the very old publications
of the BOS whose significance and relevance from the examination
perspective has stood the test of time.
The primary objectives of the RTP are:
x To help students get an insight of their preparedness for the
forthcoming examination;
x To update them on the latest developments relevant for the
forthcoming examination in select subjects;
x To enhance the confidence level of the students adequately.
Students must bear in mind that the RTP contains a variety of questions
based on different topics of the syllabi and thus a comprehensive study
of the entire syllabus is a pre-requisite before answering the questions
of the RTP. In other words, in order to derive maximum benefit out of
the RTPs, it is advised that before proceeding to solve the questions
given in the RTP, students ought to have thoroughly read the Study
Materials and Statutory Update, wherever applicable.
The topics on which the questions are set herein have been carefully
selected and meticulous attention has been paid in framing different
types of questions. Detailed answers are provided to enable the
students to do a self-assessment and have a focused approach for
effective preparation.
Live Virtual Classes by renowned subject experts conducted free of
charge for the students of Foundation, Intermediate and Final levels
provide the students much required support in preparing for their exams
conveniently at home as these classes can be accessed live or viewed
later as recorded lectures through hand-held devices such as smart
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INTERMEDIATE EXAMINATION

phones, laptops, I-pads, tablets, etc. anytime anywhere. Further,

students are advised to attempt the Multiple-Choice Questions (MCQs)
at MCQ Paper Practice Portal which is a holistic platform for self-
assessment within the stipulated timeframe.
Students are welcome to send their suggestions for fine tuning the RTP
to the Joint Director, Board of Studies, The Institute of Chartered
Accountants of India, A-29, Sector-62, Noida 201309 (Uttar Pradesh).
RTP is also available on BOS Knowledge Portal at https://boslive.icai.org
for downloading.
II. Planning and preparing for examination
Ideally, when the RTP reaches your hand, you must have finished reading
the relevant Study Materials of all the subjects (along with the Statutory
Update in case of Paper 3A and Paper 3B) available at the BoS
Knowledge Portal. Get a good grasp of the concepts/ provisions/
amendments/ cases discussed therein.
After reading the Study Materials alongwith Statutory Update
thoroughly, then, proceed to solve the questions given in the RTP on
your own. RTP is an effective tool to revise and refresh the concepts and
provisions discussed in the Study Material. RTPs are provided to you to
help you assess your level of preparation. Hence you must solve the
questions given therein on your own and thereafter compare your
answers with the answers given therein.
Examination tips
How well a student fares in the examination depends upon the level and
depth of his preparation. However, there are certain important points
which can help a student better his performance in the examination.
These useful tips are given below:
y Reach the examination hall well in time.
y As soon as you get the question paper, read it carefully and
thoroughly. You are given separate 15 minutes for reading the
question paper.
y Plan your time so that appropriate time is awarded for each
question.

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y First impression is the last impression. The question which you can
answer in the best manner should be attempted first.
y Always attempt to do all questions. Therefore, it is important that
you must finish each question within allocated time. Keep
sometime for checking the answers as well.
y Read the question carefully more than once before starting the
answer to understand very clearly as to what is required.
y Answer all parts of a question one after the other; do not answer
different parts of the same question at different places.
y Write in a neat and legible hand-writing.
y Always be concise and write to the point and do not try to fill
pages unnecessarily.
y There must be logical expression of the answer.
y In case a question is not clear, you may state your assumptions
and then answer the question.
y Check your answers carefully and underline important points
before leaving the examination hall.
y In case of case scenario based MCQs, read the facts given in the
case attentively. Also, read each MCQ based thereon and all the
options carefully, before choosing the correct answer.
III. Subject-wise Applicability
PAPER – 1 : ADVANCED ACCOUNTING
The April, 2023 edition of the Study Material, comprising of three
modules, is applicable for the students appearing for May, 2024
Examination. For understanding the coverage of syllabus, it is important
to read the Study Material carefully.
You must read the study material thoroughly to attain conceptual clarity.
The tables, diagrams and flow charts in study material have been
extensively prepared to facilitate easy understanding of concepts.
Likewise, examples and illustrations given in the Study Material would
enable you to grasp the application of theoretical concepts in real-world

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scenarios. After covering the concepts and illustrations, work out the
exercise questions at the end of each chapter and then compare your
answers with the answers given to test your level of understanding.
Also, solve the MCQs and case scenario based MCQs uploaded in MCQ
Practice Dashboard. This will help you to maximize your speed and
accuracy in solving independent MCQs and case scenario based MCQs
in the Examination.
The RTP consists of twenty questions together with their answers on
different topics discussed in the study material. Answers to the questions
have been given in detail along with the working notes for easy
understanding and comprehending the steps in solving the problems.
Moreover, the answers have been presented in the same manner as
expected from the students in the examination. The students are
expected to solve the questions under examination conditions and then
compare their solutions with the solutions given in the RTP. This will
facilitate them to further strategize their preparation for scoring good
marks in the examination.
PAPER – 2: CORPORATE AND OTHER LAWS
The April, 2023 edition of the Study Material is applicable for
Intermediate Course Paper 2: Corporate and Other Laws. The Study
Material has been divided into three modules (Modules 1, 2 & 3) for
ease of handling by students.
The Study Material is based on the provisions of the Companies Act,
2013, the Limited Liability Partnership Act, 2008, the General Clauses Act,
1897 and the Foreign Exchange Management Act, 1999, as amended
upto 30th April, 2023.
The amendments in the Companies Act, 2013 for the period
1st May, 2023 to 30th October, 2023 are given under the Part I of the RTP.
These amendments have been uploaded on the website at
https://resource.cdn.icai.org/77836bos62488.pdf. Further amendments
for the period 1st November 2023 to 29th February, 2024, there are no
relevant amendments.

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The students are advised to read the Study Material thoroughly to attain
conceptual clarity. Tables, diagrams and flow charts have been
extensively used to facilitate easy understanding of concepts. Examples
and Illustrations given in the Study Material would help the students to
understand the application of concepts. Work out the exercise questions
at the end of each chapter and then, compare your answers with the
answers given to test your level of understanding. Thereafter, solve the
MCQs and case scenarios based MCQs uploaded in MCQ Paper Practice
Dashboard and assess your level of understanding.
Finally, solve the questions given in this RTP independently and compare
the same with the answers given to assess your level of preparedness for
the examination.
PAPER – 3: TAXATION
Section A: Income-tax Law (50 Marks)
The Income-tax law, as amended by the Finance Act, 2023 and
significant notifications, circulars and other legislative amendments upto
29.02.2024 are relevant for September, 2024 Examination. The relevant
assessment year for September, 2024 examination is A.Y. 2024-25.
The June, 2023 edition of the Study Material, comprising of two modules
(Modules 1 & 2), is based on the provisions of income-tax law, as
amended by the Finance Act, 2023 and significant notifications and
circulars issued upto 30.04.2023. Hence, the same is applicable for
September, 2024 Examination. Further, a list of topic-wise exclusions
from the syllabus and inclusions with reference to section 10 in the
syllabus has been specified by way of “Study Guidelines” and the same
has been webhosted at https://resource.cdn.icai.org/76864bos61928.pdf
at BoS Knowledge Portal.
The above referred study material has to be read along with Statutory
Update for September, 2024 Examination webhosted at
https://resource.cdn.icai.org/80049bos64172.pdf at BoS Knowledge Portal,
which contains the significant notifications/circulars issued between
01.05.2023 and 29.02.2024, which are also relevant for September, 2024
Examination.

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You have to read the Study Material thoroughly to attain conceptual

clarity. Tables, diagrams and flow charts have been extensively used to
facilitate easy understanding of concepts. The amendments made by the
Finance Act, 2023 and latest notifications and circulars have been given
in italics/bold italics. Examples and Illustrations given in the Study
Material would help you understand the application of concepts. Work
out the exercise questions at the end of each chapter and then, compare
your answers with the answers given to test your level of understanding.
Thereafter, solve the MCQs and case scenarios based MCQs uploaded in
MCQ Paper Practice Dashboard and assess your level of understanding.
Finally, solve the questions given in this RTP independently and compare
the same with the answers given to assess your level of preparedness for
the examination.
Section B: Goods and Services Tax (50 Marks)
For Section B: Goods and Services Tax of Paper 3: Taxation, the provisions
of the CGST Act, 2017 and the IGST Act, 2017 as amended by the Finance
Act, 2023, including significant notifications and circulars issued and other
legislative amendments made, up to 29th February, 2024, are applicable for
September 2024 examination.
Further, a list of topic-wise exclusions from the syllabus has been specified
by way of “Study Guidelines for September, 2024 Examination”. The
same is given as part of “Applicability of Standards/Guidance
Notes/Legislative Amendments etc. for September, 2024 -
Intermediate Examination” appended at the end of this Revision Test
Paper.
The June, 2023 edition of the Study Material alongwith the Statutory
updates for September, 2024 examination is applicable for Intermediate
Course Paper 3: Taxation, Section B: Goods and Services Tax. The Study
Material has been divided into two modules for ease of handling by
students.
Study Material is based on the provisions of the CGST Act, 2017 and the
IGST Act, 2017 as amended upto 30.04.2023. The amendments in the GST
law made between 01.05.2023 and 29.02.2024 are covered in the Statutory

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Updates for September 2024 examination. For the ease of reference, the
amendments have been grouped into Chapters which correspond with the
Chapters of the Study Material.
You have to read the Study Material alongwith the Statutory Update
thoroughly to attain conceptual clarity. You are advised to solve the
questions given in this RTP independently and compare the same with the
answers given to assess your level of preparedness for the examination.

vii SEPTEMBER 2024 EXAMINATION

 PAPER – 1:
ADVANCED ACCOUNTING

QUESTIONS

PART – I: Multiple Choice Questions based on Case Scenarios

1. Suman Ltd. is in the business of manufacturing electronics equipment
and selling these at its various outlets. It provides installation services
for the equipment sold and also provide free 1 year warranty on all the
sold products.
Beach Resorts are leading resorts in the city. It purchased 5 air
conditioners (AC) from Suman Ltd. for its resort. Suman Ltd. sold 5 AC to
Beach resort for ` 45,000 each which includes installation fees of ` 1,000
for each AC. The Company also offers 1 year warranty for any repair etc.
The Company also offered ` 500 per AC as trade discount. Beach resort
placed order on March 15, 2024 and made payment on March 20, 2024.
The ACs were delivered on March 27, 2024 and the installation was
completed on April 5, 2024.
(a) How much revenue should be recognised by the Company as on
March 31, 2024:
(i) ` 2,25,000
(ii) ` 2,17,500
(iii) ` 2,00,000
(iv) ` 2,30,000
(b) How much revenue should be recognised by the Company in the
financial year 2024-25:
(i) ` 5000
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(ii) ` 2,20,000
(iii) ` 10,000
(iv) ` 2,40,000
(c) What will be the accounting for trade discount:
(i) The same will be recognised separately in the profit and loss.
(ii) The trade discounts are deducted in determining the
revenue.
(iii) Trade discount will be recognised after one year, when the
warranty will be over.
(iv) Trade discount will be recognised after installation is
complete.
(d) Is the Company required to do any accounting for 1 year warranty
provided by it:
(i) No accounting treatment is required till some warranty claim
is actually received by the Company.
(ii) As there exist a present obligation to provide warranty to
customers for 1 year, the Company should estimate the
amount that it may have to incur considering various factors
including past trends and create a provision as per AS 29.
(iii) Accounting for claims will be done on cash basis i.e. expense
will be recognised when expense is made.
(iv) As the Company is not charging separately for the warranty
provided, there is no need to create any provision.
General MCQs
2. As per AS 2, Inventories include materials awaiting use in production
process, what should be included in Inventories from the following:
(a) Secondary Packing material required for transporting and
forwarding the material.
(b) Spare parts, servicing equipment and standby equipment

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(c) Primary packing material which is essential to bring an item of

inventory to its saleable condition, for example, bottles, cans etc.,
in case of food and beverages industry.
(d) Publicity material
Part II - Descriptive Questions
Applicability of Accounting Standards
3. Kirti Ltd. is in the business of manufacturing computers. During the year
ended 31st March, 2024, the company manufactured 550 computers. It
has the policy of valuing finished stock of goods at a standard cost of
` 1.8 lakh per computer. The details of the costs are as under:

(` in lakh)
Raw material consumed 400
Direct Labour 250
Variable production overheads 150
Fixed production overheads (including interest of 290
` 100 lakh)
Compute the value cost per computer for the purpose of closing stock.
AS 3
4. Purse Ltd., a non financial company has the following entries in its Bank
Account. It has sought your advice on the treatment of the same for
preparing Cash Flow Statement.
(i) Loans and Advances given to the following and interest earned on
them:
(1) to suppliers
(2) to employees
(3) to its subsidiaries companies

(ii) Investment made in subsidiary Wallet Ltd. and dividend received

(iii) Dividend paid for the year

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(iv) Insurance claim received against loss of property, plant and

equipment by fire.
Discuss in the context of AS 3 ‘Cash Flow Statement’.
AS 4
5. For five companies whose financial year ended on 31st March, 2023, the
financial statements were approved by their approving authority on 15th
June, 2023.
During 2023-2024, the following material events took place:
a. A Ltd. sold a major property which was included in the balance
sheet at ` 1,00,000 and for which contracts had been exchanged
on 15th March, 2023. The sale was completed on 15th May, 2023 at
a price of ` 2,50,000.
b. On 30th April, 2023, a 100% subsidiary of B Ltd. declared a dividend
of ` 3,00,000 in respect of its own shares for the year ended on
31st March, 2023.
c. On 31st May, 2023, the mail order activities of C Ltd. (a retail
trading group) were shut down with closure costs amounting to `
2.5 million.
d. On 1st July, 2023 the discovery of sand under D Ltd.'s major civil
engineering contract site causes the cost of the contract to
increase by 25% for which there would be no corresponding
.

recovery from the customer.

e. A fire, on 2nd April, 2023, completely destroyed a manufacturing
plant of E Ltd. It was expected that the loss of ` 10 million would
be fully covered by the insurance company.

You are required to state with reasons, how each of the above
items numbered (a) to (e) should be dealt with in the financial
statement of the various companies for the year ended 31st
March, 2023.

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AS 5
6. Explain whether the following will constitute a change in accounting
policy or not as per AS 5:
(i) Introduction of a formal retirement gratuity scheme by an
employer in place of ad hoc ex-gratia payments to employees on
retirement.
(ii) Management decided to pay pension to those employees who
have retired after completing 5 years of service in the organistaion.
Such employees will get pension of ` 20,000 per month. Earlier
there was no such scheme of pension in the organization.
AS 7
7. Mehta ltd. has undertaken bridge construction contract wherein, bridge
will be constructed in 3 years. The details of the contracts are as follows:
(i) Initial contract revenue ` 900 crore
(ii) Initial contract cost ` 800 crore

Years
I II III
` in crore ` in crore ` in crore
Estimated contract cost 805
Increase in contract revenue - 20
Estimated additional increase cost - 15
Contract cost incurred upto 161 584 820

At the end of year II, cost incurred includes ` 10 crore, for material
stored at the sites to be used in year III to complete the project.
State the amount of revenue, expenses and profit to be recognized in
the Statement of Profit and Loss in these three years.
AS 9
8. When will the revenue be recognized in the case of inter divisional
transfers?

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AS 11
9. (a) Alfa Ltd. purchased an item of property, plant and equipment for US
$ 50 lakh on 01.04.2023 and the same was fully financed by the
foreign currency loan [i.e. US $] repayment in five equal instalments
annually. (Exchange rate at the time of purchase was 1 US $ = ` 60].
As on 31.03.2024 the first instalment was paid when 1 US $ fetched `
62.00. The entire loss on exchange was included in cost of goods
sold. Alfa Ltd. normally provides depreciation on an item of property,
plant and equipment at 20% on WDV basis and exercised the option
to adjust the cost of asset for exchange difference arising out of loan
restatement and payment. Calculate the amount of exchange loss
and its treatment and depreciation.
AS 12
10. Energy Ltd. has acquired a generator on 1.4.2023 for ` 100 lakh. On
2.4.2023, it applied to Indian Renewal Energy Development Authority
(IREDA) for a subsidy. The subsidy was granted in June, 2024 after the
accounts for 2023-2024 were finalized. The company has not accounted
for the subsidy for the year ended 31.3.2024.
State
(i) Is this a prior period item?
(ii) How should the subsidy be accounted in the accounting year
2024-2025?
AS 13
11. A company is engaged in the business of refining, transportation and
marketing of petroleum products. During the financial year ended
31st March, 2024, the company acquired controlling interest from
Government of India in another public sector undertaking @ ` 1,551 per
share as against the book value of ` 192.58 per share and market value
of ` 876 per share as on 18th February, 2024.
Thus, the strategic premium of ` 675 per share has been paid
considering various tangible and intangible factors.

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The above investment in the shares of the acquired company has been
considered as long term strategic investment and, therefore, has been
accounted for at cost, i.e. at ` 1,551 per share in the financial
statements. No provision for diminution in value has been made in the
books of account.
As per the requirement of Schedule III to the Companies Act, 2013, the
aggregate market value of the quoted shares has been properly
reflected in the financial statements.
On 28th March, 2024, the acquired shares were quoted at ` 880 per share
on BSE and the current market price as on 18th July was around ` 300.
Considering the tangible and intangible benefits the Management is of
the view that there is no permanent diminution in the value of the
strategic investment in the acquired company, as the same has been
considered as a long-term investment. Therefore, there is no need for
provision for diminution in the value of the shares of the acquired
company.
Required:
(i) Whether the accounting treatment 'at cost' under the head ‘Long
Term Investments’ without providing for any diminution in value is
correct and in accordance with the provisions of AS 13.
(ii) If any provision for diminution in the value is to be made, whether
such provision should be charged to the profit and loss account or
whether same can be considered as deferred expenditure and
amortised over a period of 5 years. Whether it is open for the
company to charge off such diminution in the value in the books
of account instead of creating provision.
(iii) Whether the premium paid for strategic benefits for investment
described in facts of the case, can be accounted for separately in
the books of account keeping in view that AS 13 specifies that
long term investments should be recorded at cost and there is no
specific provision in the standard in respect of accounting for
premium paid for strategic benefits.

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AS 16
12. Loyal Ltd. has undertaken a project for expansion of capacity as per the
following details:
Plan (`
`) Actual (`` )
October, 2023 5,00,000 4,00,000
November, 2023 6,50,000 7,95,000
December, 2023 20,00,000 -
January, 2024 2,00,000 50,000
February, 2024 9,00,000 2,00,000
March, 2024 10,00,000 12,00,000
The company pays to its bank interest at a rate of 15% p.a., which is
debited on a monthly basis. During the half year, company had ` 20
lakh overdraft up to 31st December, surplus cash in January and again
overdraft of ` 14 lakh from 1.2.2024 and ` 30 lakh from 1.3.2024. The
company had a strike during December and hence could not continue
the work during said period. However, the substantial administrative
work related to the project was continued. Onsite work was again
commenced on 1st January and all the work were completed on 31st
March. Assume that expenditure was incurred on 1st day of each month.
Calculate interest to be capitalized giving reason wherever necessary.
Assume overdraft will be less, if there is no capital expenditure.
AS 17
13. Whether interest expense relating to overdrafts and other operating
liabilities identified to a particular segment should be included in the
segment expense or not?
AS 20
14. The following information is available in respect of High-end Ltd. for the
accounting year 2022-2023 and 2023-2024:
Net profit for `
Year 2022-2023 22,00,000
Year 2023-2024 30,00,000

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Number of shares outstanding prior to right issue 10,00,000 shares.

Right issue: One new share for each five shares outstanding i.e. 2,00,000
shares.
: Right issue price ` 25
: Last date to exercise right 31st July, 2023.
Fair value of one equity share immediately prior to exercise of rights on
31.07.2023 is ` 32.
You are required to compute, as per AS 20:
(i) Basic earnings per share for the year 2022-2023.
(ii) Restated basic earnings per share for the year 2022-20223 for right
issue.
(iii) Basic earnings per share for the year 2023-2024.
AS 23
15. Hill Ltd. has a share capital of 50,000 shares @ ` 100 per share. Sun Ltd.
acquired 15% shares in Hill Ltd. on 1.4.2024. It also acquired all the
5,000, 12% convertible debentures of ` 100 each of Hill Ltd. These
debentures will be converted at par into equity shares of Hill Ltd. after 3
years. State whether, as per AS 23, Hill Ltd. is an Associate of Sun Ltd.
or not with reasons?
AS 24
16. Arzoo Ltd. is in the business of manufacture of Passenger cars and
commercial vehicles. The company is working on a strategic plan to
shift from the Passenger car segment over the coming 5 years.
However, no specific plans have been drawn up for sale of neither the
division nor its assets. As part of its plan it will reduce the production of
passenger cars by 20% annually. It also plans to commence another new
factory for the manufacture of commercial vehicles plus transfer of
employees in a phased manner.
(i) You are required to comment if mere gradual phasing out in itself
can be considered as a ‘Discontinuing Operation' within the
meaning of AS 24.

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(ii) lf the company passes a resolution to sell some of the assets in the
passenger car division and also to transfer few other assets of the
passenger car division to the new factory, does this trigger the
application of AS 24?
(iii) Would your answer to the above be different if the company
resolves to sell the assets of the Passenger Car Division in a
phased but time bound manner?
AS 28
17. A publisher owns 150 magazine titles of which 70 were purchased and
80 were self-created. The price paid for a purchased magazine title is
recognised as an intangible asset. The costs of creating magazine titles
and maintaining the existing titles are recognised as an expense when
incurred. Cash inflows from direct sales and advertising are identifiable
for each magazine title. Titles are managed by customer segments. The
level of advertising income for a magazine title depends on the range of
titles in the customer segment to which the magazine title relates.
Management has a policy to abandon old titles before the end of their
economic lives and replace them immediately with new titles for the
same customer segment.
Whether it will be a cash-generating unit as per AS 28?
AS 29
18. A company incorporated under Section 8 of the Companies Act, 2013,
have main objective to promote the trade by organizing trade fairs /
exhibitions. When company was organizing the trade fair and
exhibitions it decided to charge 5% contingency charges for the
participants/outside agencies on the income received from them by the
company, while in the case of fairs organized by outside agencies, 5%
contingency charges are levied separately in the invoice, the
contingency charges in respect of fairs organized by the company itself
are inbuilt in the space rent charged from the participants. Both are
credited to Income and Expenditure Account of the company.
The intention of levying these charges is to meet any unforeseen
liability, which may arise in future. The instances of such unforeseen
liabilities could be on account of injury/loss of life to visitors/ exhibitors,

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ADVANCED ACCOUNTING

etc., due to fire, terrorist attack, stampede, natural calamities and other
public and third party liability. The chances of occurrence of these
events are high because of large crowds visiting the fair. The decision to
levy 5% contingency charges was based on assessment only as actual
liability on this account cannot be estimated.
The following accounting treatment and disclosure was made by the
company in its financial statements:
1. 5% contingency charges are treated as income and matching
provision for the same is also being made in accounts.
2. A suitable disclosure to this effect is also made in the notes
forming part of accounts.
Required:
(i) Whether creation of provision for contingencies under the facts
and circumstances of the case is in conformity with AS 29.
(ii) If the answer of (i) is "No" then what should be the treatment of
the provision which is already created in the balance sheet.
Buy back of Securities
19. Purpose Ltd. resolves to buy back 4 lakhs of its fully paid equity shares
of ` 10 each at ` 22 per share. This buyback is in compliance with the
provisions of the Companies Act and does not exceed 25% of
Company’s paid up capital in the financial year. For the purpose, it issues
1 lakh 11 % preference shares of ` 10 each at par, the entire amount
being payable with applications. The company uses ` 16 lakhs of its
balance in Securities Premium Account apart from its adequate balance
in General Reserve to fulfill the legal requirements regarding buy-back.
Give necessary journal entries to record the above transactions.
Branch Accounting
20. From the following particulars relating to Pune branch for the year
ending December 31, 2024, prepare Branch Account in the books of
Head office.
`
Stock at Branch on January 1, 2024 10,000

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Branch Debtors on January 1, 2024 4,000

Branch Debtors on Dec. 31, 2024 4,900
Petty cash at branch on January 1, 2024 500
Furniture at branch on January 1, 2024 2,000
Prepaid fire insurance premium on January 1, 2024 150
Salaries outstanding at branch on January 1, 2024 100
Good sent to Branch during the year 80,000
Cash Sales during the year 1,30,000
Credit Sales during the year 40,000
Cash received from debtors 35,000
Cash paid by the branch debtors directly to the 2,000
Head Office
Discount allowed to debtors 100
Cash sent to branch for Expenses:
Rent 2,000
Salaries 2,400
Petty Cash 1,000
Annual Insurance up to March 31, 2025 600 6,000
Goods returned by the Branch 1,000
Goods returned by the debtors 2,000
Stock on December 31,2024 5000
Petty Cash spent by branch 850
Provide depreciation on furniture 10% p.a.

Goods costing ` 1,200 were destroyed due to fire and a sum of ` 1,000
was received from the Insurance Company.

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SUGGESTED ANSWERS/HINTS

Answer to Case Scenario and MCQ

Q. No. Hints
1. (a) (ii)
(b) (i)
(c) (ii)
(d) (ii)
2. (c)

Descriptive Answers
3. As per para 9 of AS 2 ‘Valuation of Inventories’, for inclusion in the cost
of inventory, allocation of fixed production overheads is based on the
normal capacity of the production facilities.
In this, case finished stock has been valued at a standard cost of ` 1.8
lakh per computer which incidentally synchronizes with the value
computed on the basis of absorption costing as under:
(` in lakh)
Materials 400
Direct Labour 250
Variable production overheads 150
Fixed production overheads 290
Less: Interest (100) 190
Total cost 990
Number of computers produced = 550 computers (Assumed to be
normal production)
Cost per computer ` 990 lakh / 550 computers = ` 1.80 lakh
4. Treatment as per AS 3 ‘Cash Flow Statement’
(i) Loans and advances given and interest earned
(1) to suppliers Cash flows from operating activities

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(2) to employees Cash flows from operating activities

(3) to its subsidiary companies Cash flows from investing activities
(ii) Investment made in subsidiary company and dividend received
Cash flows from investing activities
(iii) Dividend paid for the year Cash flows from financing activities
(iv) Insurance claim received against loss of property, plant and
equipment by fire.
5. Treatment as per AS 4 ‘Contingencies and Events Occurring After the
Balance Sheet Date’

(a) A Ltd. The sale of property should be treated as an

adjusting event since contracts had been exchanged
prior to the year-end. The effect of the sale would
be reflected in the financial statements ended on
31.3.2023 and the profit on sale of property `
1,50,000 would be treated as an extraordinary item.
(b) B Ltd. The declaration of dividend on 30th April, 2023 of
` 3,00,000 would be treated as a non-adjusting event
in the financial statements of 2022-2023. This is
because, the dividend has been declared after the
balance sheet date and no conditions existed on the
balance sheet date for such declaration of dividend.
Further as per AS 9, right to receive dividend is
established when it is declared and not before that.
(c) C Ltd. A closure not anticipated at the year-end would be
treated as a non-adjusting event. Memorandum
disclosure would be required for closure of mail
order activities since non disclosure would affect
user's understanding of the financial statements.
(d) D Ltd. The event took place after the financial statements
were approved by the approving authority and is
thus outside the purview of AS 4. However, in view
of its significance of the transaction, the directors
may consider publishing a separate financial

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statement/additional statement for the attention of

the members in general meeting.
(e) E Ltd. The event is a non-adjusting event since it occurred
after the year-end and does not relate to the
conditions existing at the year-end. However, it is
necessary to consider the validity of the going
concern assumption having regard to the extent of
insurance cover. Also, since it is said that the loss
would be fully recovered by the insurance company,
the fact should be disclosed by way of a note to the
financial statements.

6. As per para 31 of AS 5 ‘Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies’, the adoption of an
accounting policy for events or transactions that differ in substance from
previously occurring events or transactions, will not be considered as a
change in accounting policy.
(i) Accordingly, introduction of a formal retirement gratuity scheme
by an employer in place of ad hoc ex-gratia payments to
employees on retirement is not a change in an accounting policy.
(ii) Similarly, the adoption of a new accounting policy of paying
pension to retired employees is a policy for events or transactions
which did not occur previously. Hence, it will not be treated as a
change in an accounting policy.
7. Statement showing analysis of the contract details

(` in crore)
Year I Year II Year III
(a) Initial revenue agreed 900 900 900
(b) Increase in contract - 20 20
revenue
(c) Total Contract Value 900 920 920
(d) Contract cost incurred 161 574 820
upto the date of
reporting

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(excluding
` 10* crore of
material stored)
(e) Estimated cost to 644 246 -
complete
(f) Total estimated contract 805 820(805+15) 820
(g) Stage of Completion 20% 70% 100%
[(d/f) x 100)] (161/805 (574/820 (820/820
x 100) x 100) x 100)

* Note: 10 crore, for material stored at the sites to be used in its 1st
year. i.e. in IInd year it is already included so it will be deducted in II
year only.
Statement showing amount of revenue, expenses and profit to
be recognized in the Statement of Profit and Loss in three years
(`` in crore)

Upto Recognised Recognized

reporting in the prior in the
date year current year
Year I
Revenue (900 x 20/100) 180 - 180
Expenses 161 - 161
Profit 19 - 19
Year II
Revenue (920 x 70/100) 644 180 464
Expenses (820 x 70/100) 574 161 413
Profit 70 19 51
Year llI
Revenue 920 644 276
Expenses 820 574 246
Profit 100 70 30

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8. The Accounting Standard Board of lCAl has come up with an

announcement in the earlier years wherein it clarified that the inter-
divisional transfers/sales are not revenue as per AS 9 "Revenue
Recognition”. According to it, in case of inter-divisional transfers, risks
and rewards remain within the enterprise and also there is no
consideration from the point of view of the enterprise as a whole.
Therefore, the recognition criteria for revenue recognition are also not
fulfilled in respect of inter-divisional transfers. Hence, no revenue is
recognized in the case of inter-divisional transfers.
9. Exchange differences arising on restatement or repayment of liabilities
incurred for the purpose of acquiring an item of property, plant and
equipment should be adjusted in the carrying amount of the respective
item of property, plant and equipment as Alfa Ltd. has exercised the
option and it is long term foreign currency monetary item.
Thus, the entire exchange loss due to variation of ` 20 lakh on
31.03.2023 on payment of US $ 10 lakh, should be added to the carrying
amount of an item of property, plant and equipment and not to the cost
of goods sold. Further, depreciation on the unamortized depreciable
amount should also be provided.
Calculation of Exchange loss:
Foreign currency loan (in `) = (50 lakh $ x ` 60) = ` 3,000 lakh
Exchange loss on outstanding loan on 31.03.2024 = ` 40 lakh US $ x
(62.00-60.00) = ` 80 lakh.
So, ` 80 lakh should also be added to cost of an item of property, plant
and equipment with corresponding credit to outstanding loan in
addition to ` 20 lakh on account of exchange loss on payment of
instalment. The total cost of an item of property, plant and equipment
to be increased by ` 100 lakh.
Total depreciation to be provided for the year 2023 - 2024 = 20% of
(` 3,000 Iakh + 100 lakh) = ` 620 lakh.
10. (i) Whether a subsidy applied is to be classified as prior period item as
per AS 5, depends upon whether the company has committed an
error in 2023-2024 by not recognising the subsidy?

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The answer is in para 13 of AS 12 “Accounting for Government

Grants” which permits recognition of grant only when there is
reasonable assurance that -
(i) the enterprise will comply with the conditions attached to
them and
(ii) the subsidy will be received.
Mere making of an application does not provide the reasonable
assurance that the subsidy will be received. Letter of sanction
from IREDA is required to provide this assurance. Since, the
subsidy was granted in June, 2024 after approval of accounts,
non-recognition of grant in 2023-2024 will not be considered as
an error. Hence, this is not a prior period item. Therefore, the
company was right in not recognizing the grant.
Further, AS 4 requires adjustment of events occurring after the
balance sheet date only upto the date of approval of accounts by
the Board of Directors. In view of this, the company is correct in
not adjusting the same in the accounts in the year 2023-2024.
(ii) The subsidy should be deducted from the cost of the generator.
The revised unamortised amount of generator should be written
off over the remaining useful life.
Alternatively, the same may be treated as ‘deferred income’ and
allocated over the remaining useful life in the proportion in which
depreciation is charged.
11. (i) The accounting treatment 'at cost' under the head 'Long Term
Investment’ in the separate financial statements of the company
without providing for any diminution in value is correct and is in
accordance with the provisions of AS 13 provided that there is no
decline, other than temporary, in the value of investment.
(ii) The provision for diminution in the value of investment should be
a charge to the profit and loss statement. As per the requirements
of AS 13, the diminution in the value of investment can neither be
accounted for as deferred revenue expenditure nor it can be
written off in the statement of profit and loss.

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(iii) The long-term investments should be carried at cost as per the

requirements of AS 13. The amount paid over and above the
market price should be treated as cost and cannot be accounted
for separately.
12. Loyal Ltd.
Month Actual Interest on Interest Outstanding Cumulativ
Expenditu outstanding capitalized amount e amount
re ( ` ) amount @ (`) (`)
15% p.a.
1 2 3
October, 4,00,000 4,00,000*15% 5,000 4,05,000 4,05,000
2023 *1/12
November, 7,95,000 (4,05,000 15,000 (4,05,000 + 12,15,000
2023 +7,95,000) 7,95,000 +
*15%*1/12 15,000)
December, - (12,15,000) 15,188 12,15,000 + 12,30,188
2023 *15%*1/12 15,188
January, 50,000 - 12,30,188 + 12,80,188
2024 50,000
February, 2,00,000 14,00,000 17,500 12,80,188 + 14,97,688
2024 *15%*1/12 2,00,000 +
17,500
March, 12,00,000 (14,97,688 + 33,721 14,97,688 + 27,31,409
2024 12,00,000)*15 12,00,000 +
%*1/12 33,721
26,45,000 86,409

Note:
1. As per para 18 of AS 16, ‘Borrowing Cost’, capitalisation of
borrowing costs is not normally suspended during a period when
substantial technical and administrative work is being carried out.
Therefore, the interest for that period i.e. for the month of
December has also been capitalized.
2. During January, the company did not incur any interest as there
was surplus cash in January. Therefore, no amount should be
capitalized during January as per para 14(b) of AS 16.

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3. During February, actual overdraft (borrowings) was ` 14 lakh only.

Hence, interest of ` 17,500 on ` 14,00,000 has been calculated
even though actual expenditure on project exceed ` 14 lakh.
13. The interest expense relating to overdrafts and other operating liabilities
identified to a particular segment should not be included as a part of
the segment expense unless the operations of the segment are primarily
of a financial nature or unless the interest is included as a part of the
cost of inventories.
14. Computation of basic earnings per share

2022-2023 2023-2024
(` ) (` )
EPS for the year 2022-2023 as originally
reported
= Net profit for the year attributable to
equity shareholders / weighted average
number of equity shares outstanding
during the year 2.20
= ` 22,00,000 / 10,00,000 shares
EPS for the year 2022-2023 restated for
the right issue = ` 22,00,000 / 2.12
(10,00,000 x 1.04)
EPS for the year 2023-2024 (including
effect of right issue)
= ` 30,00,000 / {(10,00,000 x 1.04 x 4/12) 2.62
+ (12,00,000 x 8/12)}

Working Notes:
1. Computation of theoretical ex-rights fair value per share = (fair
value of all outstanding shares immediately prior to exercise of
rights + Total value received from exercise of rights) / (number of
shares outstanding prior to exercise + number of shares issued on
the exercise)

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= (` 32 x 10,00,000 + ` 25 x 2,00,000) / (10,00,000 + 2,00,000)

= ` 30.83
2. Computation of adjustment factor
= Fair value per share prior to exercise of rights / Theoretical ex-
right value per share
= ` 32/` 30.83
= 1.04 (approx.)
15. As per para 3 of AS 23 ‘Accounting for Investments in Associates in
Consolidated Financial Statements’, an associate is an enterprise in
which the investor has significant influence and which is neither a
subsidiary nor a joint venture of the investor.
Standard further explains in para 4 that as regards share ownership, if an
investor holds, directly or indirectly through subsidiary (ies), 20% or
more of the voting power of the investee, it is presumed that the
investor has significant influence, unless it can be clearly demonstrated
that this is not the case. Conversely, if the investor holds, directly or
indirectly through subsidiary (ies), less than 20% of the voting power of
the investee, it is presumed that the investor does not have significant
influence, unless such influence can be clearly demonstrated.
Further as per an explanation to para 4 of the standard, for the
purpose of classification of associate, the potential equity shares of the
investee held by the investor will not be taken into account for
determining the voting power of the investor. In other words, the
voting power should be determined on the basis of the current
outstanding securities with voting rights.
As per the information given in the question, Sun Ltd. presently holds
indirectly 22.7% shares (with and without voting rights) (Refer W.N.) in
Hill Ltd. However, the current outstanding securities with voting rights
in Hill Ltd. is only 15% and the remaining holding is on account of
potential equity shares. Since potential equity shares do not have
voting rights they will not be taken into consideration while
determining the significant influence of Sun Ltd. on Hill Ltd. Hence,
Hill Ltd. is not an associate of Sun Ltd.

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Working Note:
Calculation of percentage of holding of shares after conversion
`
Current holding is 15% i.e. 7,500 shares of ` 100 each 7,50,000
Potential equity shares i.e. 5,000 shares of ` 100 each 5,00,000
12,50,000
Total share capital of Hill Ltd. after conversion of debentures into
equity shares will be = ` 50,00,000 + ` 5,00,000 = ` 55,00,000
Percentage of holding = ` (12,50,000/55,00,000) x 100 = 22.7% approx.
16. Mere gradual phasing out is not considered as discontinuing operation
as defined under para 3 of AS 24, ‘Discontinuing Operations’.
Examples of activities that do not necessarily satisfy criterion of the
definition, but that might do so in combination with other circum-
stances, include:
(1) Gradual or evolutionary phasing out of a product line or class of
service;
(2) Discontinuing, even if relatively abruptly, several products within
an ongoing line of business;
(3) Shifting of some production or marketing activities for a particular
line of business from one location to another; and
(4) Closing of a facility to achieve productivity improvements or other
cost savings.
In view of the above the answers are:
(i) No, the companies’ strategic plan has no final approval from the
board through a resolution and there is no specific time bound
activities like shifting of assets and employees. Above all, the new
segment i.e. commercial vehicle production line in a new factory
has not started.
(ii) No, the resolution is salient about stoppage of the Car segment in
definite time period. Though, sale of some assets and some

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transfer proposal were passed through a resolution to the new

factory, closure road map and new segment starting roadmap are
missing. Hence, AS 24 will not be applicable.
(iii) Yes, phased and time bound programme resolved in the board
clearly indicates the closure of the passenger car segment in a
definite time frame and will constitute a clear roadmap. Hence,
this action will attract compliance of AS 24.
17. It is likely that the recoverable amount of an individual magazine title
can be assessed. Even though the level of advertising income for a
title is influenced, to a certain extent, by the other titles in the
customer segment, cash inflows from direct sales and advertising are
identifiable for each title. In addition, although titles are managed by
customer segments, decisions to abandon titles are made on an
individual title basis.
Therefore, it is likely that individual magazine titles generate cash
inflows that are largely independent one from another and that each
magazine title is a separate cash-generating unit.
18 (i) Para 14 of AS 29 "Provisions, Contingent Liabilities and Contingent
Assets" states that a provision should be recognised when (a) An
enterprise has a present obligation as a result of a past event and (b)
It is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and (c) A reliable
estimate can be made of the amount of the obligation. If these
conditions are not met, no provision should be recognised.
From the above, it is clear that in the contingencies considered by
the company, neither a present obligation exists as a result of past
event, nor a reliable estimate can be made of the amount of the
obligation. Accordingly, a provision cannot be recognised for such
contingencies under the facts and circumstances of the case.
(ii) "Provision" is the amount retained by the way of providing for any
known liability. Since the contingencies stipulated by the company
are not known at the balance sheet date, the provision in this
regard cannot be created. Therefore, the provision so created by
the company shall be treated as a ‘Reserve’.

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19. Journal Entries in the books of Purpose Ltd.

` `
1. Bank A/c Dr. 10,00,000
To 11% Preference share
application & allotment A/c 10,00,000
(Being receipt of application money on
preference shares)
2. 11% Preference share application &
allotment A/c Dr. 10,00,000
To 11% Preference share capital 10,00,000
A/c
(Being allotment of 1 lakh preference
shares)
3. General reserve A/c Dr. 30,00,000
To Capital redemption reserve A/c 30,00,000
(Being creation of capital redemption
reserve for buy back of shares)
4. Equity share capital A/c Dr. 40,00,000
Premium payable on buyback A/c Dr. 48,00,000
To Equity shareholders/Equity
shares buy back A/c 88,00,000
(Amount payable to equity shareholder
on buy back)
5. Equity shareholders/ Equity shares buy Dr. 88,00,000
back A/c
To Bank A/c 88,00,000
(Being payment made for buy back of
shares)
6. Securities Premium A/c Dr. 16,00,000

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General reserve A/c 32,00,000

To Premium payable on buyback 48,00,000
A/c
(Being premium on buyback charged
from securities premium and general
reserve)

Working Notes:
1. Calculation of amount used from General Reserve Account
`
Amount paid for buy back of shares (4,00,000 shares x ` 22) 88,00,000
Less: Proceeds from issue of Preference Shares (10,00,000)
(1,00,000 shares x `10)
Less: Utilization of Securities Premium Account (16,00,000)
Balance used from General Reserve Account 62,00,000
* Used under Section 68 for buy back 32,00,000
Used under Section 69 for transfer to CRR (W.N 2) 30,00,000
62,00,000

2. Amount to be transferred to Capital Redemption Reserve

account
`
Nominal value of shares bought back 40,00,000
(4,00,000 shares x ` 10)
Less: Nominal value of Preference Shares issued for such
buy (10,00,000)
back (1,00,000 shares x ` 10)
Amount transferred to Capital Redemption Reserve 30,00,000
Account

20. Pune Branch Account

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Particulars ` Particulars ` `
To Opening Balance By Opening Balance:
Stock 10,000 Salaries outstanding 100
Debtors 4,000 By Remittances:
Petty Cash 500 Cash sales 1,30,000
Furniture 2,000 Cash received from 35,000
debtors
Prepaid 150 Cash paid by debtors 2,000
Insurance directly to H.O.
To Goods sent to 80,000 Received from 1,000 1,68,000
Branch Account Insurance Company
To Bank (expenses) By Goods sent to branch 1,000
(return of goods by
the branch to H.O.)
Rent 2,000 By Closing Balances:
Salaries 2,400 Stock 5,000
Petty Cash 1,000 Petty Cash 650
Insurance 600 6,000 Debtors 4,900
To Net Profit 78,950 Furniture (2,000 – 10% 1,800
depreciation)
Prepaid insurance 150
(1/4 x ` 600)
1,81,600 1,81,600

Working Note:

Calculation of petty cash balance at the end: `

Opening balance 500
Add: Cash received form the Head Office 1,000
Total Cash with branch 1,500
Less: Spent by the branch 850
Closing balance 650

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 PAPER – 2:
CORPORATE AND OTHER
LAWS

PART – I: ANNOUNCEMENTS STATING APPLICABILITY FOR SEPTEMBER,

2024 EXAMINATIONS
Applicability for September, 2024 examinations
The Study Material (April 2023 edition) is applicable for September, 2024
examinations. This study material is updated for all amendments till 30th April,
2023.
Further, all relevant amendments/ circulars/ notifications etc. in the Company
law part for the period 1st May, 2023 to 31st October, 2023 are mentioned.
Further amendments for the period 1st November 2023 to 29th February, 2024,
there are no relevant amendments.
THE COMPANIES ACT, 2013
I. Chapter 3: Prospectus and Allotment of Securities
Notification S.O. 4744(E) dated 30th October, 2023
The Central Government has inserted sub- section (3) and sub- section
(4) to section 23 of the Companies Act, 2013, through the Companies
(Amendment) Act, 2020.
Amendment:
In section 23, the following sub- sections to be included:
“(3) Such class of public companies may issue such class of securities
for the purposes of listing on permitted stock exchanges in
permissible foreign jurisdictions or such other jurisdictions, as may
be prescribed.
(4) The Central Government may, by notification, exempt any class or
classes of public companies referred to in sub-section (3) from any
of the provisions of this Chapter, Chapter IV, section 89, section 90
REVISION TEST PAPER
INTERMEDIATE EXAMINATION

or section 127 and a copy of every such notification shall, as soon

as may be after it is issued, be laid before both Houses of
Parliament.”
[Enforcement Date: 30th October, 2023]

(Pg 3.6)
Sub- section (3) and sub- section (4) to section 23 have been inserted
through the Companies (Amendment) Act, 2020. However, the said sub-
sections have been enforced w.e.f. 30th October, 2023.
II. Chapter 7: Management and Administration
Notification S.O. G.S.R. 801(E) dated 27th October, 2023
The Central Government has amended the Companies (Management
and Administration) Rules, 2014, through the Companies (Management
and Administration) Second Amendment Rules, 2023.
Amendment:
in Rule 9, after sub-rule (3), the following sub- rules shall be inserted,
namely:-
“(4) Every company shall designate a person who shall be responsible
for furnishing, and extending co-operation for providing,
information to the Registrar or any other authorised officer with
respect to beneficial interest in shares of the company.
(5) For the purpose of sub-rule(4), the company may designate-
(i) a company secretary, if there is a requirement of
appointment of such company secretary under the Act and
the rules made thereunder; or
(ii) a key managerial personnel, other than the company
secretary; or
(iii) every director, if there is no company secretary or key
managerial personnel.
(6) Until a person is designated as referred under sub-rule (4), the
following persons shall be deemed to have been designated
person;

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(i) company secretary, if there is a requirement of appointment

of such company secretary under the Act and the rules made
thereunder; or
(ii) every Managing Director or Manager, in case a company
secretary has not been appointed; or
(iii) every director, if there is no company secretary or a
Managing Director or Manager.
(7) Every company shall inform the details of the designated person in
Annual return.
(8) If the company changes the designated person at any time, it shall
intimate the same to the Registrar in e-form GNL-2 specified under
the Companies (Registration Offices and Fees) Rules, 2014.”

Old Law (Pg 7.13)

Sub- rule (4), (5), (6), (7) and (8) of Rule 9 is newly inserted

PART – II: QUESTIONS AND ANSWERS

QUESTIONS

DIVISION A: MULTIPLE CHOICE QUESTIONS

Case Scenario 1
Tejas Infra Limited was incorporated by Tejasvi Singh and his wife Meenakshi
along with seven other family members in the year 2001 with an aim to
undertake infrastructure projects relating to transportation in the country.
The company had successfully completed construction of roads and canals in
Delhi, UP and Chandigarh and rose to become one of the prominent
construction companies in India.
The Registered Office of the company is situated in Connaught Place, New
Delhi with a capital base of ` 100 crore divided into ten crore equity shares of
`10 each. The company has eight directors of which three are independent
directors. In the year 2019, the company got new projects from the State

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Government of Punjab to build four flyovers and underpasses in different

cities of Punjab.
In order to increase its capital base, Tejas Infra Limited decided to issue
1,00,000 preference shares of ` 100 each to the existing shareholders. For this,
purpose it was decided to increase the Authorised Capital by ` 500,00,000
divided into 5,00,000 shares of ` 100 each.
The projects went off well and the turnover rose to the tune of ` 3600 crore in
the immediately preceding financial year 2022-23. The net worth of the
company stood at ` 550 crore.
As they crossed the threshold limit in the immediately preceding financial year
2022-23, a Board level Committee headed by one of the independent
directors, namely, Paritosh was constituted to allocate budget, review the
progress and provide guidance on various Corporate Social Responsibility
(CSR) and sustainability initiatives. It was decided to spend the requisite
amount towards skill development, vocational training, provision of safe
drinking water facility, etc. Lokesh, one of the directors, is also a member of
this Corporate Social Responsibility Committee. He is in favour of Janta
Andolan Manch, a political party. This party is quite prominent in undertaking
social work. As per his advice, the Board by a unanimous resolution resolved
to contribute ` 5,00,000 to the said political party i.e. Janta Andolan Manch
and to treat such contribution as part of CSR activity.
Multiple Choice Questions
1. From the case scenario, it is evident that Tejas Infra Limited decided to
issue 1,00,000 preference shares of ` 100 each to the existing
shareholders. From the options given below choose the one which
indicates the maximum period which is permitted to the company for
redemption of preference shares.
(a) Tejas Infra Limited being involved in infrastructural activities is
permitted to specify maximum period of thirty-five years for
redemption of preference shares subject to the condition that it
shall redeem minimum 20% of preference shares per year
commencing from 31st year onwards or earlier, on proportionate
basis at the option of preference shareholders.

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(b) Tejas Infra Limited being involved in infrastructural activities is

permitted to specify maximum period of thirty-five years for
redemption of preference shares subject to the condition that it
shall redeem minimum 10% of preference shares per year
commencing from 26th year onwards or earlier, on proportionate
basis at the option of preference shareholders.
(c) Tejas Infra Limited being involved in infrastructural activities is
permitted to specify maximum period of thirty years for
redemption of preference shares subject to the condition that it
shall redeem minimum 10% of preference shares per year
commencing from 21st year onwards or earlier, on proportionate
basis, at the option of preference shareholders.
(d) Tejas Infra Limited being involved in infrastructural activities is
permitted to specify maximum period of thirty years for
redemption of preference shares subject to the condition that it
shall redeem minimum 20% of preference shares per year
commencing from 26th year onwards or earlier, on proportionate
basis, at the option of preference shareholders.
2. The case scenario states that the turnover of Tejas Infra Limited rose to
the tune of ` 3600 crore and net worth of the company stood at ` 550
crore in the immediately preceding financial year 2022-23 which
required formation of CSR Committee. What is the third criterion which
if crossed shall also require that a CSR Committee be formed. Choose
the correct option from those stated below:
(a) The third criterion which also requires formation of CSR
Committee is that the company has net profit of ` two crore or
more in the immediately preceding financial year.
(b) The third criterion which also requires formation of CSR
Committee is that the company has net profit of ` three crore or
more in the immediately preceding financial year.
(c) The third criterion which also requires formation of CSR
Committee is that the company has net profit of ` five crore or
more in the immediately preceding financial year.

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(d) The third criterion which also requires formation of CSR

Committee is that the company has net profit of ` six crore or
more in the immediately preceding financial year.
3. According to the legal provisions, it is mandatory to redeem preference
shares at the stipulated time. Keeping in view the above case scenario,
which source is required to be used by Tejas Infra Limited for the
redemption of outstanding preference shares:
(a) Tejas Infra Limited is required to redeem preference shares out of
the profits which would otherwise be available for dividend.
(b) Tejas Infra Limited is required to redeem preference shares out of
the proceeds of a fresh issue of shares made for the purposes of
such redemption.
(c) Both (a) and (b).
(d) Tejas Infra Limited is required to redeem preference shares out of
its Capital Redemption Reserve.
4. While constituting a CSR Committee, how many minimum directors are
required to be appointed by Tejas Infra Limited:
(a) CSR Committee formed by Tejas Infra Limited shall have minimum
two directors.
(b) CSR Committee formed by Tejas Infra Limited shall have minimum
three directors of which at least one director shall be an
independent director.
(c) CSR Committee formed by Tejas Infra Limited shall have minimum
four directors of which at least one director shall be an
independent director.
(d) CSR Committee formed by Tejas Infra Limited shall have minimum
four directors of which at least two directors shall be independent
director.
Case scenario 2
Greenfield LLP and Bluewave LLP were two thriving businesses operating in
the renewable energy sector. Greenfield LLP specialized in solar panel
manufacturing, while Bluewave LLP was known for its innovations in wind

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turbine technology. Both companies saw a strategic opportunity to join forces

and create a more comprehensive renewable energy solution provider. They
decided to merge into a single entity, to be named EcoFuture LLP.
To facilitate this merger, the management of both companies proposed a
scheme of compromise and arrangement under Section 60 of the LLP Act.
They approached the Tribunal to sanction this scheme, which involved
transferring all assets, liabilities, and ongoing legal proceedings of both
Greenfield LLP and Bluewave LLP to EcoFuture LLP.
The Tribunal reviewed the proposal and found that the merger scheme was
designed for the reconstruction and amalgamation of Greenfield LLP and
Bluewave LLP. The Tribunal issued an order under Section 62, sanctioning the
scheme and setting forth several provisions to ensure a smooth transition:
1. All assets and liabilities of Greenfield LLP and Bluewave LLP were to be
transferred to EcoFuture LLP.
2. Any ongoing legal proceedings involving either of the original LLPs
would continue under the name of EcoFuture LLP.
3. Both Greenfield LLP and Bluewave LLP would be dissolved without the
need for winding up.
However, a few partners from Greenfield LLP were not in favor of the merger.
They dissented from the compromise and arrangement. The Tribunal provided
specific directions to ensure that their interests were adequately addressed.
After the order was made, both LLPs had to file a certified copy of the
Tribunal’s order with the Registrar within 30 days for registration.
Unfortunately, due to some administrative delays, this filing was not
completed within the stipulated time, leading to penalties for both EcoFuture
LLP and its designated partners.
Answer the following MCQs in the light of the Limited Liability
Partnership Act, 2008
5. What was the main purpose of the scheme proposed between
Greenfield LLP and Bluewave LLP?
(a) To dissolve both LLPs.
(b) To transfer all assets to a third party.

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(c) For the reconstruction and amalgamation of the LLPs.

(d) To liquidate the companies.
6. What authority does the Tribunal have when it sanctions a compromise
or arrangement under Section 60?
(a) It can only supervise the arrangement.
(b) It has no authority after sanctioning the arrangement.
(c) It can supervise, modify, and give directions for the arrangement.
(d) It can dissolve the LLPs directly without any conditions.
7. What penalty applies if an LLP fails to comply with the 30-day filing
requirement?
(a) Immediate dissolution of the LLP.
(b) A fine of `10,000 and additional penalties for continuing
contravention.
(c) Suspension of all business activities.
(d) Revocation of the Tribunal’s order.
Independent MCQs
8. Mr. X had resided in India for less than 182 days during the financial
year 2022-2023. He arrived in India on April 1, 2023, to conduct business
and intends to leave the business on April 30, 2024, with plans to depart
from India on June 30, 2024. What is Mr. X's residential status for the
financial year 2023-2024 under the FEMA, 1999? How many days did
Mr. X stay in India during the financial year 2023-2024?
(a) Non-Resident, 182 days
(b) Resident, 365 days
(c) Resident but Not Ordinarily Resident (RNOR), 240 days
(d) Resident, 91 days
9. Apex Manufacturing is an industrial company based in India. Recently,
the company found itself embroiled in legal issues concerning two
separate offences under different enactments. The first offence involved

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a violation of environmental regulations, for which the company was

prosecuted and fined. Subsequently, Apex Manufacturing was charged
under a different law for a similar but not identical environmental
violation.
The first offence was under the Environment Protection Act, 1986, for
failing to dispose of hazardous waste properly. The second offence,
under the Water (Prevention and Control of Pollution) Act, 1974,
involved discharging untreated wastewater into a river.
Mr. Sharma, the company's legal advisor, consulted on said issue. He
determined the prosecution outlined in Section 26 of the General
Clauses Act, 1897, and Article 20(2) of the Constitution of India, which
protects against double jeopardy. Comment upon the validity of
protection that can be given to the Apex Manufacturing.
(a) Yes valid, because both involve environmental violations.
(b) Not valid, because the specific actions and legal provisions
violated are different.
(c) Its valid, because both result in environmental harm.
(d) Its valid, though were prosecuted under different Acts but nature
of act is similar.
10. Regal Textiles, a well-established fabric manufacturing company, has
been operating under the Textile Regulations Act of 1980 for several
decades. Over the years, various provisions of this Act have been subject
to interpretation by both the company and the industry at large. One
such provision pertains to the definition of "sustainable practices," which
has been a point of contention. "Sustainable practices" to include the
use of organic materials and recycling waste products. This
interpretation has been widely accepted and acted upon without any
legal challenges.
Recently, a new regulatory body has argued that "sustainable practices"
should be strictly defined to include only carbon-neutral processes,
excluding the use of non-organic recycled materials. This new
interpretation has created confusion and potential compliance issues for
Regal Textiles, which has long adhered to the established understanding
of the term. He prepares to argue that the long-standing interpretation

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of "sustainable practices" should be upheld. What principle will Mr.

Kumar likely rely on to argue against the new interpretation proposed
by the regulatory body?
(a) The principle of judicial activism.
(b) The principle of strict construction.
(c) The principle of historical usage.
(d) The principle of prospective overruling.
Descriptive questions
11. Prashant incorporated a "One Person Company" making his sister Priya
as the nominee. Priya is an Indian citizen. She was born and brought up
in Kanpur. However, now Priya and her husband are leaving India
permanently to stay with their son who is settled abroad for the last 15
years. Due to this fact, she is withdrawing her consent of nomination in
the said One Person Company. Taking into considerations the provisions
of the Companies Act, 2013 answer the questions given below.
(i) If Priya is leaving India permanently, is it mandatory for her to
withdraw her nomination in the said One Person Company?
(ii) In case Priya withdraws her nomination as a nominee to the OPC,
whether Prashant can appoint his minor son Rushang as the
nominee of the OPC?
12. (i) In the light of the provisions of the Companies Act, 2013, discuss the
status of Gram Pte, which is a company registered in Singapore, that
is conducting online business through telemarketing in India without
a physical place of business. It is also informed that for the
telemarketing business in India, its main server located outside India.
(ii) In continuance of (i) above, Prism Ltd. (registered in India), a
wholly owned subsidiary company of Gram Pte decided to follow
different financial year for consolidation of its accounts outside
India. State the procedure to be followed in this regard.
13. XYZ Ltd., a prominent manufacturing company, is in the process of
appointing a new auditor for the upcoming financial years. Mr. A is a

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renowned auditor being considered for the role. During the due
diligence process, the following details come to light:
1. Mr. B and Mr. A are partners in ABC & Co. Mr. B has taken a
personal loan of `4 Lacs from XYZ Ltd.'s subsidiary, EFG Ltd., six
months ago.
2. Mr. A's relative, Ms. C, has an outstanding debt of `2 Lacs with DEF
Ltd., an associate company of XYZ Ltd., which was taken three
months ago.
Discuss about the eligibility of Mr. A for being appointed as an auditor
of XYZ Ltd. in view of the provisions of the Companies Act, 2013.
14. Om Ltd. served a notice of General Meeting upon its members. The
notice stated that the following resolutions will be considered at such
meeting:
(i) Resolution to increase the authorised share capital of the
company.
(ii) Appointment and fixation of the remuneration of Mr. Pramod as
the statutory auditor.
A shareholder complained that the amount of the proposed increase
and the remuneration was not specified in the notice. Is the notice valid
under the provisions of the Companies Act, 2013.
15. (i) K Ltd. in its first year of incorporation maintained its books of account
under Single Entry System of Accounting. Is it permitted under the
provisions of the Companies Act, 2013?
(ii) State the person responsible for complying with the provisions
regarding maintenance of Books of Accounts, etc. of a Company.
16. ABC Pvt. Ltd., a company that has been operational for two years, was
incorporated with the submission of false information and suppression
of material facts. The company’s founders, Mr. X and Ms. Y, provided
incorrect financial statements and concealed significant liabilities during
the incorporation process. This misrepresentation was recently
uncovered during an internal audit initiated by the company's new CFO,
Mr. Z.

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Upon discovering these fraudulent actions, Mr. Z has filed an application

with the National Company Law Tribunal (NCLT). Explain the provisions
of the Companies Act, 2013 in respect where a company has been
incorporated by furnishing false or incorrect information.
The Limited Liability Partnership Act, 2008
17. XYZ LLP was registered under the Limited Liability Partnership Act, 2008
(LLP Act) with a name that was later found to be identical to an existing
company's name, XYZ OPC Pvt Ltd. This similarity was not noticed at the
time of registration.
Explain the provisions of the Limited Liability Partnership Act, 2008, in
respect of the following:
(i) When the name of LLP is identical.
(ii) Formalities with the Registrar of Companies after name change of
LLP.
The General Clauses Act, 1897
18. Mr. Chaggan Lal is an importer dealing in luxury perfumes. Recently, a
new enactment was passed which imposes a duty of 15% on the value of
luxury goods, including perfumes.
Now Mr. Chaggan Lal has approached you to explain to him the
provisions in relation to ‘Duty to be taken pro rata in enactments’ of the
General Clauses Act, 1897. Also, help him to calculate the amount of
duty on a Shipment of 100 bottles of perfumes, each valued at $50.
Interpretation of Statutes
19. Imagine you are a legal advisor for a company drafting a new contract.
One of the clauses in the contract states: "Notwithstanding anything
contained in any other provisions of this agreement, the company
reserves the right to terminate the agreement without notice if there is a
breach of confidentiality by the employee." Explain to the management
of the company the meaning of a non-obstante clause in legal
documents and its effect on overriding other provisions with reference
to decided case law.

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The Foreign Exchange Management Act, 1999

20. Mr. Arjun, an Indian resident, had been working abroad for the past 10
years. During his tenure abroad, he acquired foreign currency and held
investments in foreign securities. He also inherited a property located in
New York from his late grandfather, who was a non-resident Indian.
After returning to India permanently, Mr. Arjun wishes to understand the
provisions under the Foreign Exchange Management Act, 1999 (FEMA)
regarding the ownership and utilization of his foreign assets.

SUGGESTED ANSWERS/HINTS

MCQ No. Most Appropriate Answer

1. (c)
2. (c)
3. (c)
4. (b)
5. (c)
6. (c)
7. (b)
8. (b)
9. (b)
10. (c)

Descriptive questions
11. (i) According to Rule 3 of the Companies (Incorporation) Rules, 2014,
only a natural person who is an Indian citizen whether resident in
India or otherwise shall be eligible to incorporate a One Person
Company.
In the given question Priya is an Indian citizen and a resident of
India.

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Thus, if Priya is able to maintain her Indian citizenship status in

India after moving abroad then she can remain as nominee in OPC
of Prashant irrespective of her residential status.
(ii) The memorandum of One Person Company shall also indicate the
name of the natural person, other than minor; who is an Indian
citizen, whether resident in India or otherwise (as nominee), along
with his prior written consent, who shall, in the event of the
subscriber’s death or his incapacity to contract become the
member of the company.
In the light of the above provision, it is clear that a minor cannot
be appointed as a nominee/ member of OPC. Hence, Prashant
cannot appoint his son Rushang as a nominee to his OPC.
12. (i) According to section 2(42) of the Companies Act, 2013, “foreign
company” means any company or body corporate incorporated
outside India which –
(a) has a place of business in India whether by itself or through
an agent, physically or through electronic mode; and
(b) conducts any business activity in India in any other manner.
According to Rule 2(1)(c)(iv) of the Companies (Registration of
Foreign Companies) Rules, 2014, “electronic mode” means carrying
out electronically based, whether main server is installed in India
or not, including, but not limited to, online services such as
telemarketing, telecommuting, telemedicine, education and
information research.
In view of the above provisions of the Companies Act, 2013 and
the facts of the question, it can be said that being involved in
online business of telemarketing services in India having its main
server outside India, Gram Pte will be treated as foreign company.
(ii) Where a company or body corporate, which is a holding company
or a subsidiary or associate company of a company incorporated
outside India and is required to follow a different financial year for
consolidation of its accounts outside India, the Central
Government may, on an application made by that company or

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body corporate in such form and manner as may be prescribed,

allow any period as its financial year, whether or not that period is
a year.
Here, Prism Ltd. is advised to follow the above procedure
accordingly.
13. According to section 141(3)(d)(ii) of the Companies Act, 2013, an auditor
is disqualified to be appointed as an auditor if he or his relative or
partner is indebted to the company, or its subsidiary, or its holding or
associate company or a subsidiary of such holding company, in excess of
` 5 Lacs.
In this scenario:
1. Mr. A's partner, Mr. B, has a debt of ` 4 Lacs from EFG Ltd., a
subsidiary of XYZ Ltd.
2. Mr. A's relative, Ms. C, has a debt of ` 2 Lacs from DEF Ltd., an
associate company of XYZ Ltd.
The total indebtedness linked to Mr. A's partner and relative is ` 6 Lacs
(` 4 Lacs + ` 2 Lacs), which exceeds the ` 5 Lacs threshold mentioned in
the provision.
Therefore, Mr. A is disqualified from being appointed as the auditor of
XYZ Ltd. under section 141(3)(d)(ii) of the Companies Act, 2013, as the
combined indebtedness of his partner and relative surpasses the
permissible limit.
14. Under section 102(2)(b) of the Companies Act, 2013, in the case of any
meeting other than an Annual General Meeting, all business transacted
thereat shall be deemed to be special business.
Further, under section 102(1), a statement setting out the following
material facts concerning each item of special business to be transacted
at a general meeting, shall be annexed to the notice calling such
meeting, namely:-
(a) the nature of concern or interest, financial or otherwise, if any, in
respect of each items, of:
(i) every director and the manager, if any;

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(ii) every other key managerial personnel; and

(iii) relatives of the persons mentioned in sub-clauses (i) and (ii);
(b) any other information and facts that may enable members to
understand the meaning, scope and implications of the items of
business and to take decision thereon.
The information about the amount is also a material fact that may
enable members to understand the meaning and implication of
items of business to be transacted and to take decision thereon.
Section 102 also prescribes ordinary businesses for which
explanatory statement is not required.
Part (i) of the question relating to increase in the Authorized
Capital falls under special business and hence in the absence of
amount of proposed increase of share capital, the notice will be
treated as invalid.
Part (ii) is an ordinary business and hence explanatory statement is
not required. However, considering the two resolutions mentioned
in the question are to be passed in the same meeting, notice of
the meeting is invalid.
Thus, the objection of the shareholder is valid since the details on
the item to be considered are lacking.
The information about the amount is a material fact with reference
to the proposed increase of authorized share capital and
remuneration of Mr. Pramod as the auditor.
The notice is, therefore, not a valid notice under Section 102 of the
Companies Act, 2013.
15. (i) According to section 128(1) of the Companies Act, 2013, every
company shall prepare books of account and other relevant books
and papers and financial statement for every financial year, which
give a true and fair view of the state of the affairs of the company,
including that of its branch office(s) if any, and explain the
transactions effected both at the registered office and its branches
and such books shall be kept on accrual basis and according to the
double entry system of accounting.

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Hence, maintenance of books of account under Singly Entry

System of Accounting by K Ltd. is not permitted.
(ii) Persons responsible to maintain books
As per section 128 (6) of the Companies Act, 2013, the person
responsible to take all reasonable steps to secure compliance by
the company with the requirement of maintenance of books of
accounts etc. shall be:
(a) Managing Director,
(b) Whole-Time Director, in charge of finance
(c) Chief Financial Officer
(d) Any other person of a company charged by the Board with
duty of complying with provisions of section 128.
16. Order of the Tribunal: According to section 7(7) of the Companies Act,
2013, where a company has been got incorporated by furnishing false or
incorrect information or representation or by suppressing any material
fact or information in any of the documents or declaration filed or made
for incorporating such company or by any fraudulent action, the
Tribunal may, on an application made to it, on being satisfied that the
situation so warrants—
(a) pass such orders, as it may think fit, for regulation of the
management of the company including changes, if any, in its
memorandum and articles, in public interest or in the interest of
the company and its members and creditors; or
(b) direct that liability of the members shall be unlimited; or
(c) direct removal of the name of the company from the register of
companies; or
(d) pass an order for the winding up of the company; or
(e) pass such other orders as it may deem fit.
However, before making any order under this sub-section, -
(i) the company shall be given a reasonable opportunity of being
heard in the matter; and

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(ii) the Tribunal shall take into consideration the transactions entered
into by the company, including the obligations, if any, contracted
or payment of any liability.
17. According to section 17 of the LLP Act, 2008,
(i) Notwithstanding anything contained in sections 15 and 16, if
through inadvertence, or otherwise, the LLP, on its first registration
or on its registration by new name, is registered by a name which
is identical with or too nearly resembles to-
(a) that of any other LLP or a company; or
(b) a registered trade mark of a proprietor under the Trade
Marks Act, 1999
as likely to be mistaken, then on an application of such LLP or
proprietor referred to in clauses (a) and (b) respectively or a
company, the Central Government may direct such LLP to change
its name or new name within a period of 3 months from the date
of issue of such direction,
Provided that an application of the proprietor of the registered
trade marks shall be maintainable within a period of 3 years from
the date of incorporation or registration or change of name of the
LLP under this Act.
(ii) Where an LLP changes its name or obtains new name, it shall
within a period of 15 days from the date of such change, give
notice of the change to Registrar along with the order of the
Central Government, who shall carry out necessary changes in the
certificate of incorporation and within 30 days of such change in
the certificate of incorporation, such LLP shall change its name in
the LLP agreement.
18. According to section 12 of the General Clauses Act, 1897, where, by any
enactment now in force or hereafter to be in force, any duty of customs
or excise or in the nature thereof, is leviable on any given quantity, by
weight, measure or value of any goods or merchandise, then a like duty
is leviable according to the same rate on any greater or less quantity.
The amount of duty would be= (100* 50)*15%= $750.

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19. A clause that begins with the words “notwithstanding anything

contained” is called a non-obstante clause. Unlike the “subject to” clause,
the notwithstanding clause has the effect of making the provision
prevail over others. When this term is used then the clause will prevail
over the other provision(s) mentioned therein. (K. Parasurammaiah v.
Pakari Lakshman AIR 1965 AP 220)
In conclusion, a non-obstante clause plays a crucial role in legal drafting
by ensuring that the specified provision prevails over conflicting
provisions, thereby enhancing legal certainty and consistency in judicial
interpretation.
20. Under the provisions of the Foreign Exchange Management Act, 1999
(FEMA), Mr. Arjun, being a resident in India, can hold, own, transfer, or
invest in foreign currency, foreign securities, or immovable property
situated outside India under certain conditions. These conditions are
clarified by the RBI through A.P. (DIR Series) Circular No. 90 dated 9th
January, 2014, which elaborates on section 6(4) of the Act.
Clarifications under section 6(4) of FEMA
1. Foreign Currency Accounts
o Mr. Arjun can maintain foreign currency accounts that were
opened and maintained by him when he was resident outside
India.
2. Income and Investments
o Income earned through employment, business, or vocation
outside India while Mr. Arjun was a non-resident.
o Investments made abroad during his non-resident status.
o Gifts or inheritance received from a non-resident Indian.
3. Foreign Exchange and Income therefrom
o Foreign exchange holdings, including income arising from
them, held outside India by Mr. Arjun, acquired through
inheritance from a non-resident Indian.

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4. Utilization of Assets After Return to India

o Mr. Arjun may freely utilize all eligible assets abroad, including
the income on such assets or sale proceeds received after his
return to India.
o He can make payments or fresh investments abroad without
the approval of the Reserve Bank of India, provided the funds
used are from eligible assets held by him abroad and the
transaction complies with FEMA provisions.
Therefore, Mr. Arjun is eligible to hold and utilize his foreign assets
as per the provisions outlined in section 6(4) of FEMA and the RBI
circular. These provisions allow him to manage his foreign
currency, securities, and inherited property located outside India in
compliance with the regulations governing residents' dealings in
foreign assets under FEMA.

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 PAPER – 3: TAXATION

SECTION A: INCOME TAX LAW

The Income-tax law, as amended by the Finance Act, 2023, including
significant notifications/ circulars issued upto 29th February, 2024, is applicable
for September, 2024 examination. The relevant assessment year for
September, 2024 examination is A.Y.2024-25. The June, 2023 edition of the
Study Material is based on the provisions of Income-tax law as amended by
the Finance Act, 2023 and significant notifications/circulars issued upto
30.04.2023, and hence, the same is relevant for September, 2024 examination.
The Statutory Update containing significant notifications/circulars issued
between 1.5.2023 and 29.2.2024 which are relevant for September, 2024
examination is webhosted at https://resource.cdn.icai.org/80049bos64172.pdf

QUESTIONS

Case Scenario
Mr. Naveen, aged 40 years, is engaged in the manufacturing business. He follows
mercantile system of accounting. The details pertaining to his business for the
year ending on 31.3.2024 is as under –

Particulars Amount (``)

Capital receipts 1.20 crores
Turnover 2.80 crores
Amount received in cash [out of turnover] 8 lakhs
Amount received in cash [out of capital receipts] 2 lakhs
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Amount received through account payee cheque/ NEFT and 2.50 crores
other prescribed mode on or before the specified date under
section 139(1) [out of turnover]
Total payment 1.60 crores
Cash payment [out of total payments] 9 lakhs
Net profit as per books of account 10.50 lakhs

An analysis of profit and loss for the year ended on 31.3.2024 revealed the
following information
1. Salary incudes wages of ` 15,000 p.m. each paid to 1 security guard, 2
housekeeping staff in cash.
2. Other administration expenses include ` 70,000 paid in cash (Payment in a
day is less than ` 8,000).
3. Interest charges includes interest payable on loan to Kamal of ` 70,000 on
which TDS has not been deducted. Loan was taken for the business
purpose.
On the basis of the facts given above, choose the most appropriate answer to Q.1
to Q.5 below -
1. Is Mr. Naveen eligible to declare income on presumptive basis under the
provisions of the Income-tax Act, 1961 for A.Y. 2024-25?
(a) No, since turnover of Mr. Naveen exceeds the threshold limit of ` 2
crores.
(b) Yes, since aggregate cash receipts during the year do not exceed 5%
of total amount received.
(c) Yes, since amount received in cash during the year do not exceed 5%
of turnover.
(d) No, as cash payments during the year exceed 5% of aggregate
payments.
2. What would be your answer to MCQ 1, assuming for the purpose of
answering this MCQ and MCQ 3 that Mr. Naveen has additionally received

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` 10 lakhs by way of crossed cheque [out of turnover] during the

P.Y. 2023-24?
(a) No, since turnover of Mr. Naveen exceeds the threshold limit of
` 2 crore.
(b) No, since the aggregate cash receipts during the year exceed 5% of
turnover.
(c) No, as cash payments during the year exceed 5% of aggregate
payments.
(d) No, due to both (a) and (b)
3. Is Mr. Naveen required to get his books of account audited during the
P.Y. 2023-24?
(a) No, since turnover of Mr. Naveen does not exceed the threshold limit
of ` 10 crores.
(b) Yes, since amount received in cash during the year exceeds 5% of
turnover.
(c) Yes, since cash payments during the year exceed 5% of aggregate
payments.
(d) No, since the amount received in cash during the year does not
exceed 5% of total amount received.
4. What is the amount of profits and gains of business chargeable to tax in
the hands of Mr. Naveen as per books of account?
(a) ` 10,50,000
(b) ` 16,11,000
(c) ` 16,81,000
(d) ` 16,60,000
5. What is the amount of profits and gains of business chargeable to tax in
the hands of Mr. Naveen if he does not want to get his books of account
audited?
(a) ` 17,40,000
(b) ` 16,96,000

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(c) ` 22,40,000
(d) ` 16,80,000
6. Mrs. Sarika, an Indian citizen, is in employment with an overseas company
located in UAE. She is not liable to tax in UAE. During the P.Y. 2023-24, she
comes to India for 121 days. She was in India for 50 days, 100 days, 76 days
and 145 days in the financial years 2019-20, 2020-21, 2021-22 and 2022-23,
respectively. Her annual income for the previous year 2023-24 is as follows:

Particulars Amount (``)

(i) Salary accrued or arisen in UAE 15,00,000
(ii) Income accrued and arisen in India 2,00,000
(iii) Income deemed to be accrued and arisen in India 7,00,000
(iv) Income arising and received in UAE, from a 5,00,000
business set up in India
(v) Life Insurance premium paid by cheque in India 1,00,000

Mrs. Sarika has opted out of the default tax regime under section
115BAC. From the information given above,
(i) You are required to determine the residential status and total income
of Mrs. Sarika for the A.Y. 2024-25.
(ii) What would be your answer if income arising and received in UAE,
from a business set up in India is ` 10,00,000 instead of ` 5,00,000?
(iii) In continuation to point (ii), what would be your answer if Mrs. Sarika
comes to India in P.Y. 2022-23 for 45 days instead of 145 days?
7. Mr. Anshul, a salaried employee in a private company, furnishes you the
following information for the year ended on 31-03-2024:
(i) Basic salary ` 75,000 p.m.
From 1st December 2023, basic salary increased to 85,000 p.m.
(ii) Dearness allowance @50% of basic salary (40% of D.A. forms part of
salary for retirement benefits).
(iii) Entertainment allowance ` 10,000

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(iv) Contribution of employer to recognized provident fund account of

the employee @18% of basic salary. Employees also contribute an
equivalent amount.
(v) Professional tax paid ` 2,200 of which ` 1,800 was paid by the
employer.
(vi) House rent allowance of ` 16,000 p.m. He paid rent of ` 17,000 p.m.
for accommodation in Meerut.
(vii) Conveyance allowance of ` 1,500 p.m. by the company towards
actual reimbursement of conveyance spent on official duty.
(viii) Loan of ` 2,00,000 was taken from the employer on 1.7.2023 for
medical treatment of his brother for tuberculosis treatment. Interest
charged on such loan is 5%. The entire loan is outstanding as on
31.3.2024. No medical insurance has been taken for his brother. SBI
rate of interest on 1.4.2023 was 11%.
(ix) Free education was provided to the sister of Mr. Anshul in a school
maintained and owned by the company. The cost of such education
facility is computed at ` 900 p.m. No amount was recovered by the
company for such education facility from Anshul.
(viii) Leave travel concession given to Anshul, his wife and three children
(one daughter aged 6 and twin sons aged 4). Cost of air tickets
(economy class) reimbursed by the employer ` 20,000 for adults and
lumpsum of ` 25,000 for three children. Anshul is eligible for availing
exemption this year to the extent it is permissible under the Income-
tax Act, 1961.
Compute the taxable salary of Mr. Anshul if he has shifted out of the
default tax regime under section 115BAC.
8. Karan, a resident aged 50 years, furnishes the following information for
the year ended on 31-03-2024:

Particulars Amount (``)

Salary (Gross) 2,75,000
Income from let out house property (2,85,000)
Interest on loan paid for self-occupied house property 1,20,000

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Income from sale of rubber products from rubber plants 2,00,000

Business income - Retail business 1,20,000
Business income - wholesale business (1,00,000)
Brought forward business loss (A.Y. 2023-24) (1,35,000)
Dividend received from ABC Ltd., an Indian company 13,500
carrying on agricultural operations
Long term capital gain from sale of listed equity shares 2,00,000
(STT paid on sale and purchase of shares)
Short-term capital gains on sale of shares (1,10,000)
Lottery winnings (gross) 45,000
Contribution to provident fund and NSC 1,50,000
Income of minor son Raju from special talent 1,50,000
Interest from Bank received by Raju on deposit made out 10,000
of his special talent

Compute Karan’s total income under the default tax regime under
section 115BAC for the A.Y. 2024-25 assuming his wife does not earn
any income.
9. In each of the following independent situations, you are required to
examine whether these persons are required to file their return of
income or loss for A.Y.2024-25 if their total income for the P.Y. 2023-24
do not exceed the basic exemption limit:
(i) The turnover of Mr. Ashish’s business is ` 65 lakhs during the
P.Y. 2023-24.
(ii) Mr. Subhash has incurred a total expenditure of ` 90,000 towards
consumption of electricity during the P.Y. 2023-24.
(iii) Mr. Deepak has savings bank account in SBI and HDFC and a
current account in Axis Bank with opening balance of ` 20 lakhs,
` 10 lakhs and ` 30 lakhs, respectively. He deposited ` 40 lakhs in
SBI account, ` 25 lakhs in HDFC account and ` 75 lakhs in Axis
account during the P.Y. 2023-24.

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(iv) Mr. Kumar, aged 50 years, has withdrawn cash of ` 1,20,00,000

during the P.Y. 2023-24 from his saving account in HDFC Bank.
Mr. Kumar regularly filed his return of income till A.Y. 2023-24.
10. Mr. Anand, a resident Indian aged 45 years, has provided you the
following information for the previous year ended on 31.03.2024
(i) He owns an industrial undertaking established in a SEZ and which
had commenced operation during the financial year 2019-20. Total
turnover of the undertaking was ` 200 lakhs. Export turnover
received in India in convertible foreign exchange on or before
30.9.2024 is ` 120 lakhs. This industrial undertaking fulfills all the
conditions of section 10AA of the Income-tax Act, 1961. Profit
from this industry is ` 35 lakhs.
(ii) Mr. Anand sold equity shares of different Indian companies on
14th March, 2024:

Name Sale value Purchase Acquired No. of FMV as

(per price (per on shares on
share) share) 31.1.2018
Sam Ltd. ` 150 ` 120 (STT 2nd Feb, 2000 -
paid at 2024
acquisition)
Jam Ltd. ` 100 ` 72 (STT 16th April, 1250 50
paid at 2017
acquisition)

CII – F.Y. 2017-18: 272; F.Y. 2023-24: 348

Sale proceeds were subject to brokerage of 0.1% and securities
transaction tax of 0.125% on the gross consideration.
(iii) He made payment of ` 90,000 on 1.9.2023 vide cheque towards
medical insurance as lumpsum premium for himself and his wife
till 31.8.2027. He also made cash payment of ` 7,500 towards
preventive health checkup for himself and his wife.
(iv) He received royalty of ` 2,88,000 from abroad for a book authored
by him in the nature of artistic. The rate of royalty as 16% of value

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of books and expenditure made for earning this royalty was

` 40,000. The amount remitted to India till 30th September, 2024 is
` 2,50,000.
(v) He received income-tax refund of `15,750 (including interest
` 1,750) relating to the assessment year 2023-24.
(v) He occupies ground floor of his residential building and has let out
first floor for residential use for a monthly rent of ` 15,000. He has
paid municipal taxes of ` 30,000 for the current financial year. Both
floors are of equal size. He has taken a loan from bank of ` 50
lakhs for the construction of this property in 2020 and has repaid
` 2,05,000 (including interest `1,00,000) during the year 2023-24.

(vi) Mr. Anand deposited ` 1,30,000 in Public Provident Fund and

` 80,000 in 5 years term deposit in the name of his minor son,
Aman.

You are required to compute the total income and tax liability of
Mr. Anand under section 115BAC as well as under normal provisions for
the A.Y. 2024-25. Ignore AMT provisions.

SUGGESTED ANSWERS/HINTS

MCQ No. Most Appropriate Answer

1. (c)
2. (d)
3. (c)
4. (b)
5. (a)

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6. (i) Mrs. Sarika is an Indian citizen and in employment in UAE. She comes
on a visit to India during the P.Y.2023-24 for 121 days. Her stay in
India in the four immediately preceding previous years i.e., in
P.Y. 2019-20 to P.Y. 2022-23 is 371 days (50 + 100 +76 + 145 days).
Her total income, other than the income from foreign sources,
during the P.Y. 2023-24 would be -
Particulars Amount (``)
Salary accrued or arisen in UAE (income from a -
foreign source, hence, to be excluded)
Income accrued and arisen in India 2,00,000
Income deemed to be accrued and arisen in India 7,00,000
Income arising in UAE, from a business set up in
India (to be included since the business is
controlled from India, even though such income
accrues and is received outside India) 5,00,000
14,00,000
Less: Deduction u/s 80C (LIC premium paid by
cheque in India) 1,00,000
Total income (excluding income from foreign 13,00,000
sources)
Mrs. Sarika, an Indian citizen, having total income other than
income from foreign sources not exceeding ` 15 lakhs and visiting
India during the P.Y 2023-24, would be a resident in India for the
A.Y.2024-25, if she has stayed in India for 182 days or more during
the P.Y. 2023-24.
Since she has stayed only for 121 days in India during the P.Y.
2023-24, she is a non-resident for the A.Y. 2024-25. Her total
income during the P.Y. 2023-24 would be –
Particulars Amount (``)
Salary accrued or arisen in UAE (income from a -
foreign source, hence, to be excluded)
Income accrued and arisen in India 2,00,000
Income deemed to be accrued and arisen in India 7,00,000

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Income arising in UAE, from a business set up in

India (not taxable) -
Gross Total Income 9,00,000
Less: Deduction u/s 80C (LIC premium paid by
cheque in India) 1,00,000
Total income 8,00,000
(ii) If Income arising and received in UAE, from a business set up in
India is ` 10,00,000 instead of ` 5,00,000, her total income, other
than the income from foreign sources, during the P.Y. 2023-24
would have been ` 18 lakhs.
In such a case, Mrs. Sarika, an Indian citizen, having total income
other than income from foreign sources exceeding ` 15 lakhs and
visiting India during the P.Y 2023-24, can be a resident in India for
A.Y.2024-25, if she has been in India for 120 days or more but less
than 182 days in the P.Y. 2023-24 and during the 4 years
immediately preceding the P.Y. 2023-24 for a total period of 365
days or more.
Since she has stayed in India for 121 days during the P.Y. 2023-24
and her stay in India in the four immediately preceding previous
years is 371 days, she would a resident in India for A.Y. 2024-25 and
by default, she would be treated as resident but not ordinarily
resident.
In such case, income arising and received in UAE, from a business set
up in India would also form part of total income of Mrs. Sarika and
her total income during the P.Y. 2023-24 would be ` 18 lakhs
[` 8,00,000 (computed in (i) above) plus ` 10,00,000].
(iii) If Mrs. Sarika comes to India in P.Y. 2022-23 for 45 days instead of
145 days, she would not be a resident in India for the P.Y. 2023-24
as per section 6(1) since her stay in India in the four immediately
preceding previous years would be less than 365 days.
However, since she is an Indian citizen having total income
(excluding income from foreign sources) of ` 18 lakhs, which
exceeds the threshold of ` 15 lakhs during the previous year; and

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not liable to tax in UAE, she would be a deemed resident in India

for the P.Y. 2023-24 by virtue of section 6(1A).
A deemed resident is always a resident but not ordinarily resident.
In such case, her total income during the P.Y. 2023-24 would be
same i.e., ` 18 lakhs as computed in point (ii) above.
7. Computation of taxable salary of Mr. Anshul for the A.Y. 2024-25

Particulars ` `
Basic Salary [(` 75,000 x 8) + (` 85,000 x 4)] 9,40,000
Dearness allowance [50% of basic salary] 4,70,000
Employer’s contribution to recognized 1,69,200
provident fund [18% x ` 9,40,000]
Less: Exempt upto 12% of basic salary and
D.A. forms part of retirement benefit
[12% x ` 11,28,000] 1,35,360 33,840
Taxable allowances
Entertainment allowance 10,000
Conveyance allowance [Exempt, since it is -
based on actual reimbursement for official
purpose]
House rent allowance 1,92,000
Less: Least of the following exempt under
section 10(13A) 91,200 1,00,800
(i) HRA received 1,92,000
(ii) Rent paid (-) 10% of salary 91,200
[` 2,04,000 – 10% x ` 11,28,000]
(iii) 40% of salary [40% x 4,51,200
` 11,28,000]

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Taxable Perquisite
Professional tax paid by the employer 1,800
[Perquisite includes any sum paid by the
employer in respect of any obligation which
would have been payable by the employee]
Interest on loan [Not a perquisite, since loan -
is for medical treatment of his brother for
tuberculosis treatment]
Provision of education facility [` 900 x 12] 10,800
Leave travel concession 45,000
Less: Exempt 45,000 -
[Mr. Anshul can avail exemption on the entire
amount of ` 45,000 reimbursed by the
employer towards leave travel concession
since the leave travel concession was availed
for himself, wife and three children and the
journey was undertaken by economy class
airfare. The restriction imposed for two
children is not applicable in case of multiple
birth which take place after the first child.]
Gross Salary 15,67,240
Less: Deduction under section 16
Professional tax paid 2,200
Standard Deduction, lower of salary or
` 50,000 50,000 52,200
Taxable Salary 15,15,040

8. Computation of total income of Mr. Karan for A.Y.2024-25

Particulars ` `
Salary
Gross salary 2,75,000
Less: Standard deduction under section 16(ia) 50,000 2,25,000

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Income from house property

Interest on loan paid for self occupied property -
[Not allowable under section 115BAC]
Loss from let out house property 2,85,000
[Loss from house property is not allowed to be set 2,85,000
off against income under any other head while
computing income under section 115BAC.]

Profits and gains from business and

profession
Income from sale of rubber products from rubber 70,000
plants [` 70,000 (35% of ` 2,00,000) is business
income and ` 1,30,000 (65% of ` 2,00,000) is
agricultural income which is exempt from tax]
Business Income- Retail business 1,20,000
1,90,000
Less: Set-off of wholesale business loss of
` 1,00,000 1,00,000
90,000
Less: Set-off of brought forward business loss of
` 1,35,000 of A.Y.2023-24 allowable to the
extent of ` 90,000 by virtue of section 72(1) 90,000 Nil
[Balance brought forward business loss of
`45,000 (i.e., ` 1,35,000 – ` 90,000) to be carry
forward to A.Y. 2025-26 for set-off against
business income of that year]
Capital Gains
Long-term capital gain on sale of listed equity 2,00,000
shares on which STT is paid
Less: Set-off of short term capital loss of
` 1,10,000 1,10,000 90,000

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Income from Other Sources

Dividend from Indian companies [13,500/90 x 100] 15,000
Lottery winnings 45,000
Income of minor son from special talent [Not -
included in Karan’s income since it is earned
from special talent]
Interest from bank received by minor son on 10,000
deposit made out of his income from special
talent [Includible in the income of
Mr. Karan, since Mrs. Karan does not earn any
income]
Less: Exemption under section 10(32) [Not
allowable under section 115BAC] - 70,000
Gross Total Income 3,85,000
Less: Deduction under section 80C [Not -
allowable under section 115BAC
Total Income 3,85,000

9. (i) If an individual has total sales, turnover or gross receipts, as the case
may be, in the business exceeding ` 50 lakhs during the previous
year, he would be required to file a return of income, even if his total
income does not exceed the basic exemption limit.
Since Mr. Ashish’s turnover from the business is ` 65,00,000 for the
P.Y. 2023-24, he is required to file his return of income for
A.Y. 2024-25 on or before the due date under section 139(1).
(ii) If an individual has incurred aggregate amount of expenditure
exceeding ` 1 lakh towards consumption of electricity during the
previous year, he would be required to file a return of income,
even if his total income does not exceed the basic exemption limit.
Since Mr. Subhash does not have total income exceeding the basic
exemption limit and has incurred a total expenditure of ` 90,000
only in the P.Y.2023-24 towards consumption of electricity, he is
not required to file his return of income for A.Y. 2024-25.

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(iii) Even though the total income of an individual does not exceed the
basic exemption limit, he would be required to file his return of
income if
- he has deposited an amount or aggregate of the amounts
exceeding ` 1 crore in one or more current accounts
maintained with a banking company or a co-operative bank
during the previous year or
- the deposit in one or more savings bank account of the person,
in aggregate, is ` 50 lakhs or more during the previous year
In this case, he has deposited only ` 75 lakhs in current account in Axis
account during the P.Y. 2023-24 but has deposited ` 65 lakhs in
savings bank account (` 40 lakhs in SBI and ` 25 lakhs in HDFC) during
the P.Y. 2023-24, hence, he is required to file a return of income for
A.Y. 2024-25 on or before the due date under section 139(1).
(iv) If an individual has aggregate TDS and TCS credit of ` 25,000 or
more during the previous year, he would be required to file a
return of income, even if his total income does not exceed the
basic exemption limit.
In this cash, TDS of ` 40,000 i.e., @2% on ` 20 lakhs, would have
been deducted by HDFC Bank under section 194N on cash
exceeding ` 1 crore withdrawn by Mr. Kumar during the
P.Y. 2023-24. Hence, he is required to file his return of income for
A.Y. 2024-25 on or before the due date under section 139(1).
10. Computation of total income and tax liability of Mr. Anand for
A.Y. 2024-25 under section 115BAC

Particulars ` ` `
I. Income from house
property
Let out portion [First floor]
Gross Annual Value [Rent 1,80,000
received is taken as GAV, in
the absence of other
information]

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Less: Municipal taxes paid by 15,000

him in the P.Y. 2023-24
pertaining to let out portion
[` 30,000/2]
Net Annual Value (NAV) 1,65,000
Less: Deduction u/s 24
(a) 30% of ` 1,65,000 49,500
(b) Interest on loan 50,000 99,500
[` 1,00,000/2]
65,500
Self-occupied portion
[Ground Floor]
Annual Value Nil
[No deduction is allowable in
respect of municipal taxes
paid]
Net Annual Value (NAV) Nil
Less: Interest on loan [Not
allowable under section
115BAC] Nil 65,500
II. Profits and gains of
business or profession
Income from SEZ unit 35,00,000
III. Capital Gains
Short-term capital gains on
sale of equity shares of Sam
Ltd. (since held for not
more than 12 months)
Full Value of Consideration 3,00,000
[2000 x ` 150]
Less: Brokerage @ 0.1% 300
Net sale consideration 2,99,700

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Less: Cost of acquisition

[` 2000 x 120] 2,40,000 59,700
Long-term capital gains on
sale of equity shares of Jam
Ltd. (since held for more
than 12 months)
Full Value of Consideration 1,25,000
[1250 x ` 100]
Less: Brokerage @ 0.1% 125
Net sale consideration 1,24,875
Less: Cost of acquisition [No
indexation benefit would be
available] 90,000 34,875 94,575
Higher of cost of acquisition
of ` 90,000 (72 x 1250) and
` 62,500, being lower of FMV
of ` 62,500 and full value of
consideration of ` 1,25,000
IV. Income from Other Sources
Royalty from artistic book 2,88,000
Less: Expenses incurred for
earning royalty 40,000
2,48,000
Interest on income-tax refund 1,750
2,49,750
Gross Total Income 39,09,825
Less: Deduction under -
Chapter VI-A [Not
allowable under section
115BAC]
Total Income 39,09,825
Total Income (Rounded off) 39,09,830

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Tax on total income of ` 39,09,830

Tax on LTCG exceeding ` 1 lakhs @10% -
u/s 112A
Tax on STCG of ` 59,700 @15% u/s 8,955
111A
Tax on remaining total income of
` 38,15,255
Upto ` 3,00,000 Nil
` 3,00,001 - ` 6,00,000[@5% of ` 3 15,000
lakhs]
` 6,00,001 - ` 9,00,000[@10% of ` 3 30,000
lakhs]
` 9,00,001 - ` 12,00,000[@15% of ` 3 45,000
lakhs]
` 12,00,001 - ` 15,00,000[@20% of ` 3 60,000
lakhs]
` 15,00,001 - ` 38,15,255[@30% of 6,94,577 8,44,577
` 23,15,255]
8,53,532
Add: Health and education cess@4% 34,141
Tax liability 8,87,673
Tax liability (Rounded off) 8,87,670

Computation of total income and tax liability of Mr. Anand for

A.Y. 2024-25 under normal provisions of the Act

Particulars ` ` `
Gross Total Income as per 39,09,825
section 115BAC
Less: Interest on loan for self
occupied property [` 1,00,000/2] 50,000
Gross Total Income as per 38,59,825
normal provisions of the Act

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Less: Deduction u/s 10AA [Since 21,00,000

the industrial undertaking is
established in SEZ, it is entitled to
deduction u/s 10AA @100% of
export profits, since P.Y.2023-24,
being the 5th year of operations]
[Profits of the SEZ x Export
Turnover received in India in
convertible foreign exchange on or
before 30.9.2024/Total Turnover] x
100%
[` 35 lakhs x ` 120 lakhs/ ` 200
lakhs x 100%]
Less: Deduction under Chapter
VI-A
Deduction under section 80C
Repayment of housing loan 1,05,000
Public Provident Fund 1,30,000
5 years Term deposit (not allowed
as deduction in the name of minor
son) -
2,35,000
Restricted to 1,50,000
Deduction under section 80D
Medical insurance premium 18,000
[90,000 x 1/5]
Preventive health check up of
` 7,500, subject to maximum of
` 5,000 5,000 23,000
Deduction under section 80QQB 2,10,000
Royalty [` 2,88,000 x 15/16
= ` 2,70,000, restricted to amount
brought into India in convertible

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foreign exchange ` 2,50,000 minus

` 40,000 expenses already allowed
as deduction while computing
royalty income]
3,83,000
Total Income 13,76,825
Total Income (Rounded off) 13,76,830
Tax on total income of ` 13,76,830
Tax on LTCG exceeding ` 1 lakhs @10% u/s -
112A
Tax on STCG of ` 59,700 @15% u/s 111A 8,955
Tax on remaining total income of
` 12,82,255
Upto ` 2,50,000 Nil
` 2,50,001 - ` 5,00,000[@5% of ` 2,50,000] 12,500
` 5,00,001 - ` 10,00,000[@20% of ` 5,00,000] 1,00,000
` 10,00,001 - ` 12,82,255[@30% of ` 2,82,255] 84,677 1,97,177
2,06,132
Add: Health and education cess@4% 8,245
Tax liability 2,14,377
Tax liability (rounded off) 2,14,380

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SECTION B: GOODS AND SERVICES TAX

The provisions of the CGST Act, 2017 and the IGST Act, 2017 as amended by
the Finance Act, 2023 including significant notifications and circulars issued
and other legislative amendments made, which have become effective up to
29.02.2024, are applicable for September 2024 examination.
The subject matter of June, 2023 edition of the Study Material of Goods and
Services Tax is based on the provisions of the CGST Act, 2017 and the IGST
Act, 2017 as amended by the notifications and circulars issued up to
30.04.2023. The amendments made vide relevant Finance Acts, which have
become effective till 30.04.2023, and significant notifications and circulars
issued upto 30.04.2023 have been incorporated in the Study Material. Further,
students are advised to read all the amendments made by the Finance Act,
2023 given at the end of relevant chapters for September 2024 examinations
as all such amendments have become effective.
The Statutory Update containing significant notifications and circulars issued
between 01.05.2023 and 29.02.2024 in GST laws as well as the amendments
made by the CGST Amendment Act, 2023 and IGST Amendment Act, 2023,
which are relevant for September, 2024 examination is webhosted at
https://resource.cdn.icai.org/77999bos62625.pdf

(1) All questions should be answered on the basis of the position of

GST law as amended up to 29.02.2024.
(2) 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.

QUESTIONS

Case Scenario
XYZ Private Limited is a mid-sized company, registered in Delhi, dealing in the
manufacturing and distribution of electronic goods in India. The company has
been operating for over a decade and has a robust supply chain network

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across the Country. The Company needs to ensure compliance with various
GST regulations related to return filing, registration, and payment of tax.
The company is exploring to expand its sales channel in India through
distributors in each State. In view of the same, the company has undertaken
following activities in the month of June.
(a) Organized a distributor conclave in Udaipur, Rajasthan, where the
distributors from Rajasthan, Gujarat and Madhya Pradesh participated in
the conclave held in Rajasthan. The total cost of hotel accommodation
was ` 25 lakh, which was paid by the Delhi office to the Hotel located in
Rajasthan.
(b) The company purchased certain gift items for distribution to the
participants in the conclave. The gift items were purchased from the
vendor located in Ludhiana, Punjab and were delivered to the hotel in
Udaipur, Rajasthan for distribution to the participants of the conclave.
The cost of such gift items was ` 25 lakh. However, the value of
individual gift items was restricted to ` 75,000.
(c) The company purchased an insurance policy for its employees travelling
for the conclave and the premium for such insurance policy was ` 1 lakh
which was paid by the company. There is no requirement under any law
requiring such insurance policy.
(d) The company took on rent, a new warehouse near its factory in Delhi for
storage and dispatch of goods. The goods are being transported
between the factory and new warehouse in non-motorized cart. The
value of such goods transported in single trip is up to ` 5 lakh. Further,
the rent of warehouse is ` 18 lakh for the initial 11 months and the same
shall be revised to ` 21 lakh after expiry of initial 11 months.
The rate of tax applicable is 18% IGST, 9% CGST and SGST each unless
otherwise specified.
On the basis of the facts given above, choose the most appropriate answer to
Q.1 to Q.5 below -
1. Which of the following statements is correct under GST law in relation to
the hotel accommodation service received by the Company?

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(a) The hotel shall charge CGST and SGST in the invoice issued to the
Company.
(b) The hotel shall charge IGST in the invoice issued to the Company
(c) The hotel shall issue a bill of supply to the Company.
(d) The hotel shall charge CGST and SGST to the extent the charges
are related to participants of Rajasthan and IGST to the extent
charges are related to the participants of Gujarat and Madhya
Pradesh, on the invoice issued to the Company.
2. What shall be the place of supply in relation to the gift items purchased
by XYZ Private Limited?
(a) Rajasthan i.e. the location where the goods were received
(b) Delhi i.e. the principal place of business of the Company
(c) Punjab i.e. the location from where the goods were dispatched
(d) Permanent location of participants receiving the gifts
3. Which of the following statements is true in relation to the gift items
and the insurance policy purchased by the Company?
(a) The company is not eligible to avail the input tax credit in relation
to both, gift items and the insurance policy.
(b) The company is eligible to avail the input tax credit related to gifts
valuing less than ` 50,000.
(c) The company is eligible to avail the input tax credit only on
insurance policy as the same is provided to employees i.e. related
person of the Company.
(d) There is no restriction in availment of input tax credit related to
gifts and insurance policy.
4. Which of the following statements is correct in relation to the issuance
of e-way bill for transportation of goods between factory and warehouse
in non-motorized cart?
(a) E-way bill is required to be issued by the company for each
instance of transportation of goods irrespective of the
consignment value of goods.

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(b) E-way bill is not required to be issued in the given case

irrespective of the consignment value of the goods.
(c) E-way bill is required to be issued for goods of the consignment
value above ` 50,000
(d) E-way bill is required to be issued for goods of the consignment
value above ` 1,00,000
5. Which of the following statements is most appropriate in relation to the
new warehouse taken on rent by the Company?
(a) Separate GST registration is not required mandatorily.
(b) Separate GST registration is required mandatorily.
(c) GST registration is required as a casual taxable person for the term
of rent agreement.
(d) Separate GST registration is required once the rent is more than
` 20 lakh per annum.
6. Craftmodel Limited, a registered dealer in Patna (Bihar), is engaged in
various types of supplies. It is not engaged in renting of cars business.
The company provided the following details for the month of January,
2024.
Sl. Particulars Amount in
No. `
(i) Outward supply of goods made during the As given in
month to various non-related persons: particulars
Particulars Market Transaction column
value Value
(`` ) (`` )
a. in the State of 3,00,000 4,00,000
Bihar (Intra-State)
b. to other States 7,50,000 6,00,000
(Inter-State)
(ii) The company pledged its 5% equity shares to the
merchant banker for the purpose of proposed
initial public offer.

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(iii) Stock transfer of goods worth ` 58,000 without

consideration to its branch at Gaya (Bihar).
Branch has been declared as an additional place
of business in the registration certificate.
(iv) Intra-State inward supply of various services for use 12,00,000
in the course or furtherance of business (30
invoices). Out of 30 invoices, details of 10 invoices
amounting to ` 2,50,000 were not furnished by the
suppliers in their GSTR-1s and resultantly, were not
reflected in Craftmodel Limited’s GSTR-2B.
(v) Outward supply of services of milling of paddy 2,00,000
into rice (Intra-State)
(vi) Outward supply of services of giving trucks on 1,50,000
hire to a Governmental authority (Intra-State)
(vii) Amount paid to IIM Ahmedabad, Gujarat for 5,00,000
providing 15 days’ management training to 10
managers from 10th January. The IIM provided
Participation Certificates at the end of the
training program.
(viii) Purchased air tickets for its employees from
Patna to Guwahati, Assam airport in economy
class. Total fare was ` 1,00,000, out of which
basic fare was ` 80,000.
Additional Information:
(a) All the amounts given above are exclusive of taxes, wherever
applicable.
(b) During the course of arranging and filing documents, the
Accountant of Craftmodel Limited observed that an invoice for
` 30,000 (excluding tax) dated 2nd December, 2023 was omitted to
be recorded in the books of accounts and no payment was made
against the same till the end of January, 2024. This invoice was
issued by Mr. Rahuketu of Patna, from whom Craftmodel Limited
had taken cars on rental basis. Invoice included cost of fuel also.

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(c) Regarding pledging of shares, the face value of shares is

` 5,00,000. The market value of shares is ` 8,00,000.

(d) Rate of GST applicable on various supplies are as follows:

Nature of supply CGST SGST IGST

Car rental service 2.5% 2.5% 5%
Transportation of passengers by air 2.5% 2.5% 5%
All other inward and outward supplies 9% 9% 18%

(e) No opening balance of input tax credit exists in the beginning of

the relevant tax period.
(f) Subject to the information given above, conditions necessary for
claiming ITC were complied with.
You are required to calculate the amount of net GST liability payable in
cash by Craftmodel Limited for the month of January, 2024.
7. Briefly examine the taxable value of supply in the following independent
cases:
(i) Jivan Limited, registered under GST, provided services amounting
to ` 10,00,000 to a Governmental Authority by way of sanitation
conservancy.
(ii) Raju Transporters, a registered Goods Transport Agency (GTA)
provided service of transportation of goods to Kukreja & Kukreja
Co.-a unregistered partnership firm. Kukreja & Kukreja Co. paid
` 8,000 to Raju Transporters as consideration.
(iii) Amardeep Hospital provided services in Neo natal Intensive Care
for 2 days for which ` 15,000 are charged per day from Mr. Chopra
for his new born son, Viraat.
8. Ranmo Limited, a registered entity under GST has demerged its
operations with effect from 31st October, 2023. The registration of
Ranmo Limited has been cancelled suo-motu by the Proper Officer. The
order of cancellation of registration was passed on 4th November, 2023
and was served on 7th November, 2023.

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Ranmo Limited wishes to apply for revocation of cancellation of

registration on 4th February, 2024. The tax consultant of Ranmo Limited
advised that application for revocation of cancellation or registration is
time barred and hence not valid in law.
You are required to examine the technical veracity of the advice given by
Tax Consultant of Ranmo Limited.
9. Mr. X, a registered person under GST has aggregate turnover in the
preceding financial year amounting to ` 8 crore. He is desirous to know
whether e-invoicing is applicable for supplies made by registered person
to Government Departments or establishments/Government
agencies/local authorities/PSUs which are registered solely for the
purpose of deduction of tax at source as per provisions of section 51 of
the CGST Act, 2017. You are required to advise Mr. X.
10. Briefly explain the manner of dealing with difference in ITC available in
auto-generated statement containing the details of ITC and that availed
in return prescribed in terms of rule 88D of the CGST Rules, 2017.

SUGGESTED ANSWERS/HINTS

MCQ No. Most Appropriate Answer

1. (a)
2. (b)
3. (a)
4. (b)
5. (a)

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6. Computation of net GST payable in cash by Craftmodel Ltd. for the

month of January,2024

Particulars CGST (`
`) SGST (``) IGST (`` )
Outward intra-State supply of 36,000 36,000
goods made in the State of [4,00,000 [4,00,000
Bihar. × 9%] × 9%]
[Value of supply is the
transaction value of the goods.]
Outward supply of goods made 1,08,000
to other States. [6,00,000
[Value of supply is the × 18%]
transaction value of the goods.]
Pledging of 5% equity shares to Nil
the merchant banker [Supply
includes supply of goods and
services. Shares being securities
are neither goods nor services.
Thus, transfer of shares which is
neither goods nor services is not
a supply.]
Intra-State stock transfer to - -
Gaya Branch with no separate
registration.
[Stock transfer between 2 units
of a legal entity under single
registration is not a deemed
supply under GST and hence, the
same is not liable to tax under
GST since branch with same
GSTIN is not a distinct person.]
Services of milling of paddy 18,000 18,000
into rice. (2,00,000 (2,00,000
[Milling of paddy into rice x 9%) x 9%)
cannot be considered as an

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intermediate production
process in relation to
cultivation of plants for food,
fibre or other similar products
or agricultural produce. Thus,
it is not eligible for exemption.]
Services of giving trucks on 13,500 13,500
hire to a Governmental (1,50,000 (1,50,000
authority [Services by way of x 9%) x 9%)
giving motor vehicles on hire
to a Governmental authority
are taxable.]
Total output tax 67,500 67,500 1,08,000
Less: Input Tax Credit [Refer (90,000)
Working Note below] IGST
credit should first be utilized
towards payment of IGST.
ITC of CGST should be utilized (67,500) (18,000)
for payment of CGST and IGST in (CGST) (CGST)
that order. ITC of CGST cannot
be utilized for payment of SGST
ITC of SGST should be utilized (67,500) -
for payment of SGST and IGST in (SGST)
that order. However, ITC of
SGST should be utilized for
payment of IGST, only after ITC
of CGST has been utilized fully.
ITC of SGST cannot be utilized
for payment of CGST.
Minimum Net GST payable in Nil Nil Nil
cash
ITC balance to be carried - 18,000 -
forward next month

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Working Note:
Computation of ITC available

Particulars CGST (`
`) SGST (``) IGST (`` )
Intra-State inward supply of 85,500 85,500 -
services used in the course of (9,50,000 (9,50,000
business. x 9%) x 9%)
[ITC cannot be availed by a
registered person in respect of
invoices, the details of which
have not been furnished by the
supplier in GSTR-1.]
Training course organized by - - 90,000
IIM, Gujarat. (5,00,000
[Not exempt. Short duration x 18%)
programmes offered by IIMs for
which participation certificate is
awarded are not ‘qualification
recognized by law’. ITC is
available in respect of supply of
services which are used in the
course or furtherance of his
business. Further, the place of
supply of services in relation to
training and performance
appraisal to a registered person,
shall be the location of such
person. Thus, place of supply is
Patna (Bihar). Further, where the
location of the supplier and the
place of supply are in two
different States, it shall be
treated as inter-State supply of
services.
Air tickets from Patna to
Guwahati.

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[Transport of passengers by air

terminating in an airport located
in Assam is exempt from GST as
said transportation is in
economy class.]
Cars taken on rental basis from -- -- --
Mr. Rahuketu.
[Tax on renting of motor car
services wherein cost of fuel is
included in consideration
provided by a non-body
corporate to a body corporate
and CGST/SGST is charged @
2.5% each, is payable under
reverse charge.
Time of supply of such services is
1st February being earlier of date of
payment, or date immediately
following 60 days since issue of
invoice by the supplier. Since the
time of supply of renting of motor
car services in the given case does
not fall in January, 2024, tax liability
on the same does not arise in said
month.
Further, ITC on renting of motor car
services received is blocked since
the recipient - Craftmodel Ltd. is
not in the same line of business]
Total ITC available 85,500 85,500 90,000
7. (i) Services provided to a Governmental Authority by way of inter alia
sanitation conservancy is exempt under GST. Thus, services provided
by Jivan Limited, registered under GST amounting to ` 10,00,000 to a
Governmental Authority by way of sanitation conservancy is exempt
under GST.

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(ii) Services provided by a GTA to an unregistered person, including

an unregistered casual taxable person other than, inter alia, any
partnership firm whether registered or not under any law including
association of persons is exempt under GST. Thus, GTA services
provided to partnership firm including AOP – whether or not
registered under GST law, are liable to tax. Hence, consideration
of ` 8,000 paid by Kukreja & Kukreja Co. is taxable under GST.
(iii) The services provided by a clinical establishment by way of
providing room [other than Intensive Care Unit (ICU)/Critical Care
Unit (CCU)/Intensive Cardiac Care Unit (ICCU)/Neo natal Intensive
Care Unit (NICU)] having room charges exceeding ` 5000 per day
to a person receiving health care services is taxable under GST.
Since, in the given case Amardeep Hospital provided services in
Neo natal Intensive Care, so the entire amount of ` 30,000 charged
from Mr. Chopra is exempt under GST law.
8. A registered person, whose registration is cancelled by the proper officer
on his own motion, may, subject to the provisions of rule 10B of the
CGST Rules, 2017, submit an application for revocation of cancellation of
registration, in prescribed form, to such proper officer, within a period of
90 days from the date of the service of the order of cancellation of
registration.
However, such period may, on sufficient cause being shown, and for
reasons to be recorded in writing, be extended by the Commissioner or
an officer authorised by him in this behalf, not below the rank of
Additional Commissioner or Joint Commissioner, as the case may be, for
a further period not exceeding 180 days.
Thus, in the given case, Ranmo Limited can apply for revocation of
cancellation of registration within a period of 90 days from the date of
the service of the order of cancellation of registration, i.e. within 90 days
from 7th November, 2023.
The application submitted for revocation of cancellation of registration
is valid in law as the same has been submitted within the prescribed
time limits.

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Thus, the advice given by Tax Consultant of Ranmo Limited is not valid in
law.
9. Government Departments or establishments/ Government agencies/
local authorities/ PSUs, which are required to deduct TDS under section
51 of the CGST Act, 2017, are liable for compulsory registration in
accordance with section 24(vi) of the CGST Act, 2017.
Therefore, Government Departments or establishments/ Government
agencies/ local authorities/ PSUs, registered solely for the purpose of
deduction of TDS, are to be treated as registered persons under the GST
law as per provisions of section 2(94) of the CGST Act, 2017.
Accordingly, the registered person, whose turnover exceeds the
prescribed threshold for generation of e-invoicing, is required to issue
e-invoices for the supplies made to such Government Departments or
establishments/ Government agencies/ local authorities/ PSUs, etc.
under rule 48(4) of the CGST Rules, 2017 [Circular No. 198/10/2023 GST
dated 17.07.2023].
10. Rule 88D of the CGST Rules, 2017 provides as follows:
Where the amount of ITC availed by a registered person in the return for
a tax period(s) furnished by him in Form GSTR-3B exceeds the ITC
available to such person in accordance with the auto-generated
statement containing the details of ITC in Form GSTR-2B in respect of
the said tax period(s), by specified amount and percentage, the said
registered person shall be given an intimation in prescribed form
electronically on the common portal, and a copy of such intimation shall
also be sent to his e-mail address provided at the time of registration or
as amended from time to time. Said intimation shall highlight the said
difference and will direct him to—
(a) pay an amount equal to the excess ITC availed in the said Form
GSTR-3B, along with interest payable under section 50 of the CGST
Act, 2017, through prescribed form, or
(b) explain the reasons for the aforesaid difference in ITC on the
common portal,
within a period of 7 days.

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Such registered person shall, upon receipt of said intimation, either,

(a) pay an amount equal to the excess ITC, as specified in intimation,
fully or partially, along with interest payable, through prescribed
form and furnish the details thereof, electronically on the common
portal, or

(b) furnish a reply, electronically on the common portal, incorporating

reasons in respect of the amount of excess ITC that has still
remained to be paid,

within 7 days’ period.

Where any amount specified in the intimation remains to be paid within
7 days’ period and where no explanation/reason is furnished by the
registered person in default or where the explanation/reason furnished
by such person is not found to be acceptable by the proper officer, the
said amount shall be liable to be demanded in accordance with the
provisions of section 73/section 74 of the CGST Act, 2017.

80 SEPTEMBER 2024 EXAMINATION

Applicability of Standards/Guidance Notes/Legislative Amendments etc. for
September, 2024 Examination
Intermediate Level

Paper 2: Corporate and Other Laws

The provisions of the Companies Act, 2013 and the Limited Liability Partnership
Act, 2008 along with significant Rules / Notifications / Circulars / Clarification /
Orders issued by the Ministry of Corporate Affairs, and the laws covered under
Part II: Other Laws, as amended by concerned authority, including significant
notifications and circulars issued up to 29.02.2024 are applicable for September
2024 examination.
The Study Material has to be read along with the 'Relevant Legislative
amendments for September 2024 examinations' for the period of 1.5.2023 to
29.02.2024.

Paper 3: Taxation

Section A: Income-tax Law

The provisions of income-tax law, as amended by the Finance Act, 2023,
including significant circulars, notifications, press releases issued and legislative
amendments made upto 29.02.2024, are applicable for September, 2024
examination. The relevant assessment year for income-tax is A.Y. 2024-25.
The Study Material for Intermediate Paper 3A, based on the provisions of
income-tax law, as amended by the Finance Act, 2023, is relevant for September,
2024 examination. The Study Material has to be read along with the Statutory
Update covering significant notifications and circulars issued between 1.5.2023
to 29.02.2024. Statutory Update for September, 2024 examination has been
webhosted at https://resource.cdn.icai.org/80049bos64172.pdf
Note –The Study Guidelines specifying the list of topic-wise exclusions from the
scope of syllabus and topic-wise inclusion of clauses of section 10 in the syllabus is
webhosted at https://resource.cdn.icai.org/76864bos61928.pdf
REVISION TEST PAPER
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Section B: Goods and Services Tax

Applicability of the GST law

The provisions of the CGST Act, 2017 and the IGST Act, 2017 as amended by
the Finance Act, 2023 including significant notifications and circulars issued
and other legislative amendments made, which have become effective up to
29.02.2024, are applicable for September 2024 examination.
The amendments made by the Annual Union Finance Acts in the CGST Act,
2017 and the IGST Act, 2017 are made effective from the date notified
subsequently. Thus, only those amendments made by the relevant Finance Acts
which have become effective till 29.02.2024 are applicable for September 2024
examination. Accordingly, all the amendments made by the Finance Act, 2023
are applicable for September 2024 examination.
Further, since the amendments made by the Central Goods and Services
Tax (Amendment) Act, 2023 and Integrated Goods and Services Tax
(Amendment) Act, 2023, (enacted as on 18.08.2023) have become
effective from 01.10.2023, the same are also applicable for September
2024 examination.
The Study Guidelines given below specify the exclusions from the syllabus for
September 2024 examination.

List of topic-wise exclusions from the syllabus

(1) (2) (3)

S. No. in Topics of the Exclusions
the syllabus (Provisions which are excluded from the
syllabus corresponding topic of the syllabus)
2(iii) Charge of tax CGST Act, 2017
including reverse (i) Rate of tax prescribed for supply of
charge goods*
(ii) Rate of tax prescribed for supply of
services*
(iii) Categories of supply of goods, tax on
which is payable on reverse charge
basis under section 9(3)

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IGST Act, 2017

(i) Rate of tax prescribed for supply of
goods
(ii) Rate of tax prescribed for supply of
services
(iii) Categories of supply of goods, tax on
which is payable on reverse charge
basis under section 5(3)
2(iv) Exemption from CGST Act, 2017 & IGST Act, 2017
tax Exemptions for supply of goods
3(ii) Basic concepts of IGST Act, 2017 & IGST Rules, 2017
place of supply (i) Place of supply of goods imported
into, or exported from India
(ii) Place of supply of services where
location of supplier or location of
recipient is outside India
(iii) Special provision for payment of tax by
a supplier of online information and
database access or retrieval [OIDAR]
services
(iv) Refund of integrated tax paid on
supply of goods to tourist leaving
India
(v) Special provision for specified
actionable claims supplied by a person
located outside taxable territory
3(iii) Basic concepts of CGST Act, 2017 & CGST Rules, 2017
time of supply Provisions relating to change in rate of tax
in respect of supply of goods or services
3(iv) Basic concepts of CGST Act, 2017 & CGST Rules, 2017
value of supply Chapter IV: Determination of Value of
Supply [Rules 27-35] of CGST Rules, 2017

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3(v) Basic concepts of CGST Act, 2017 read with CGST Rules,
input tax credit 2017
(i) Manner of determination of input tax
credit in respect of inputs or input
services and reversal thereof [Rule 42].
(ii) Manner of determination of input tax
credit in respect of capital goods and
reversal thereof in certain cases [Rule
43].
(iii) Input tax credit provisions in respect of
inputs and capital goods sent for job
work.
(iv) Input tax credit provisions relating to
distribution of credit by Input Service
Distributor [ISD].
(v) Manner of recovery of credit
distributed in excess.
(vi) Manner of reversal of credit of
additional duty of customs in respect
of Gold dore bar.

*Rates specified for computing the tax payable under composition levy are
included in the syllabus.
Note: The syllabus includes select provisions of the CGST Act, 2017 and IGST Act,
2017 and not the entire CGST Act, 2017 and the IGST Act, 2017. The provisions
covered in any topic(s) of the syllabus which are related to or correspond to the
topics not covered in the syllabus shall also be excluded.
In the above table, in respect of the topics of the syllabus specified in column
(2) the related exclusion is given in column (3). Where an exclusion has been
so specified in any topic of the syllabus, the provisions corresponding to such
exclusions, covered in other topic(s) forming part of the syllabus, shall also be
excluded. For example, since provisions relating to ISD are excluded from the
topics “Input tax credit”, the provisions relating to (i) registration of ISD and
(ii) filing of returns by an ISD are also excluded from the topics “Registration”
and “Returns” respectively.

84 SEPTEMBER 2024 EXAMINATION

REVISION TEST PAPER
INTERMEDIATE EXAMINATION

The entire content included in the Study Material and the Statutory Update for
September 2024 examination shall be relevant for the said examination. The
amendments in the GST law made after the issuance of the Study Material - to
the extent covered in the Statutory Update for September 2024 examination
alone shall be relevant for the said examination. Statutory Update has been
webhosted at the following link:
https://resource.cdn.icai.org/77999bos62625.pdf
Though the Statutory Update for September 2024 examination shall provide
the precise scope and coverage of the amendments, for the sake of clarity, it
may be noted that the amendments made in the various provisions of the GST
law for providing relief to the taxpayers of Manipur shall not be applicable for
September 2024 examination.

85 SEPTEMBER 2024 EXAMINATION