TEST PAPERS
Intermediate
Group I
QUESTION PAPERS FOR POSTAL STUDENTS ONLY
(REVISED/ JULY 2009)
THE INSTITUTE OF COST AND WORKS
ACCOUNTANTS OF INDIA
DIRECTORATE OF STUDIES
Test Papers — Intermediate Group I
PAPER 5
FINANCIAL ACCOUNTING
TEST PAPER — I/5/FAC/2008/T-1
Time Allowed : 3 hours Full Marks : 100
(Answer Question No. 1 and any four Questions from the rest)
1. (a) Indicate the correct answer : (5×2 = 10)
A. The output of financial accounting is
i. The measurement of accounting income
ii. The measurement of taxable income
iii. The preparation of financial statements
iv. The preparation of financial Position
B. The basic objective of financial accounting is to:
i. Provide quantitative information to users of financial statements
ii. Satisfy the legal requirements
iii. Report income to the shareholders
iv. Satisfy listing requirements of stock exchanges
C. Information about performance is disclosed by:
i. Balance sheet
ii. Statement of cash flows
iii. Profit and loss account
iv. Both (i) and (ii)
Test Papers — Intermediate Group I 3
D. The lessee’s right to recover the short working is related to:
i. First five years
ii. Last three years
iii. Terms of the agreement
iv. None of the above.
E. In the books of lessee, short workings recoverable in future years are:
i. A revenue expense
ii. A normal loss
iii. An asset
iv. A liability.
F. Define in one sentence each : (5×2 = 10)
(i) Expenses, (ii) Equity, (iii) Liability, (iv) Asset and (v) Income.
2. (a) Write short notes on :
(i) Materiality
(ii) Principles of Government Accounting
(iii) Consolidated Fund
(iv) Proprietary ratio
(b) Indicate any three areas in respect of which different accounting policies may
adopted by different enterprises. Also indicate the requirements with regard to
disclosure of accounting policies. (3×4+8 = 20)
3. On 31st March, 2008 P. Ltd., a trading organisation owned inventory costing Rs.
3 lakhs of which inventory valued Rs. 1 lakh was with consignees. It also has in its
possession inventory valued at Rs. 10 lakhs belonging to its own principals.
During the year ended 31st March, 2009 P. Ltd. :
(a) Purchased inventory worth Rs. 50 lakhs of which 80% was dispatched to its
consignees, the transportation cost being 5% of the value of goods sent;
(b) Received from its principals inventory of Rs. 150 lakhs;
(c) Sold 90% of own goods received and lying with itself at 20% margin on sales;
(d) Sold on behalf of principals 95% of goods available at 120% of the value thereof.
P. Ltd is entitled to commission at 10% of such sales.
The consignees sold at 125% of their per unit landed cost (consignees spending
nil) 95% of goods available with them and were entitled to commission at 10%
of sales.
You are asked to work out the various figures for recording in the revenue
statement of P. Ltd. for the year ended 31st March, 2009. Prepare the revenue
statement. (20)
4. The following was the Balance Sheet of ‘X’ and ‘Y’, who were sharing profits and
losses in the ratio of 2:1 on 31.3.2009 :
Liabilities Rs. Assets Rs.
Capital Accounts Plant and machinery 12,00,000
X 10,00,000 Building 9,00,000
Y 5,00,000 Sundry debtors 3,00,000
Reserve fund 9,00,000 Stock 4,00,000
Sundry creditors 4,00,000 Cash 1,00,000
Bills payable 1,00,000 —
29,00,000 29,00,000
They agreed to admit ‘Z’ into the partnership on the following terms :
(i) The goodwill of the firm was fixed at Rs.1,05,000.
(ii) That the value of stock and plant and machinery were to be reduced by 10%.
(iii) That a provision of 5% was to be created for doubtful debts.
(iv) That the building account was to be appreciated by 20%.
(v) There was an unrecorded liability of Rs.10,000.
(vi) Investments worth Rs.20,000 (unrecorded in the Balance Sheet) were taken into
account.
(vii) That the value of reserve fund, the values of liabilities and the values of assets
other than cash are not to be altered.
(viii) ‘Z’ was to be given one-fourth share in the profit and was to bring capital equal
to his share of profit after all adjustments.
Prepare necessary ledger accounts and the Balance Sheet of the newly reconstituted
firm. (20)
5. Department X sells goods to Department Y at a profit of 25% on cost and to
Department Z at 10% profit on cost. Department Y sells goods to X and Z at a
profit of 15% and 20% on sales, respectively. Department Z charges 20% and 25%
profit on cost to Department X and Y, respectively.
Department Managers are entitled to 10% commission on net profit subject to
unrealised profit on departmental sales being eliminated. Departmental profits
after charging Managers’ commission, but before adjustment of unrealised profit
are as under :
Rs.
Department X 36,000
Department Y 27,000
Department Z 18,000
Stock lying at different departments at the end of the year are as under :
Dept. X Dept. Y Dept. Z
Rs. Rs. Rs.
Transfer from Department X — 15,000 11,000
Transfer from Department Y 14,000 — 12,000
Transfer from Department Z 6,000 5,000 —
Find out the correct departmental Profits after charging Managers’ commission. (20)
6. Head Office passes adjustment entry at the end of each month to adjust the position
arising out of inter–branch transactions during the month. From the following
inter–branch transactions in January, 2009, make the entry in the books of Head
Office :
(a) Bombay Branch
i) Received Goods : Rs. 6,000 from Calcutta Branch, Rs, 4,000 from Patna Branch.
ii) Sent Goods to Rs. 10,000 to Patna, Rs, 8,000 to Calcutta.
iii) Received B/R: Rs. 6,000 from Patna.
iv) Sent Acceptance: Rs. 4,000 to Calcutta, Rs. 2,000 to Patna.
(b) Madras Branch (Apart from the above)
i) Received Goods: Rs. 10,000 from Calcutta, Rs. 4,000 from Bombay.
ii) Cash Sent: Rs. 2,000 to Calcutta, Rs. 6,000 to Bombay.
(c) Calcutta Branch (Apart from the above)
i) Sent Goods to Patna: Rs. 6,000.
ii) Paid B/P: Rs. 4,000 to Patna, Rs. 4,000 cash to Patna. (20)
7. A Company invited the public to subscribe for 10,000,000 Equity Shares of Rs.100
each at a premium of Rs. 10 per share payable on allotment. Payments were to be
made as follows :
On application Rs. 20; on allotment Rs. 40; on first call Rs. 30 and on final call
Rs.20.
Applications were received for 13,000,000 shares; applications for 2,000,000 shares
were rejected and allotment was made proportionately to the remaining applicants.
Both the calls were made and all the moneys were received except the final call on
300,000 shares which are forfeited after due notice. Later 200,000 of the forfeited
shares were issued as fully paid at Rs. 85 per share. Pass Journal entries. (20)
PAPER 5
FINANCIAL ACCOUNTING
TEST PAPER — I/5/FAC/2008/T-2
Time Allowed : 3 hours Full Marks : 100
(Answer Question No. 1 and any four Questions from the rest)
1. (a) Fill in the blanks : (14)
i) Under stock and debtors system branch profit is ascertained by opening
account.
ii) Under debtors systems branch account is a account.
iii) In case of amalgamation of partnership firms, any profit and loss on
revaluation is transferred to accounts in the ratio.
iv) The liabilities taken over by the new firm in amalgamation are to
the new firm account.
v) When the firm sells the business as a going concern cash balance is transferred
to account.
vi) The purchasing company records the assets and liabilities taken over at
value.
vii) The excess of net worth acquired by the company from a firm over the
purchase price is to account.
viii) Under stock and debtors system branch profit is ascertained by opening
account.
ix) When an asset account of the branch is maintained in the head office, the
entry for depreciation is made by debiting account and crediting
account.
x) When goods are sent from P branch to Q branch, Q branch debits
account and credits account.
(b) Basis of allocation of common expenditure among different departments. (2)
(c) Elucidate “accounting convention of conservatism.” (2)
(d) Under what circumstances can an enterprise change its accounting policy? (2)
2. X, Y Ltd. and Z Ltd. are partners of X & Co. The partnership deed provided that :
(a) The working partner Mr. X is to be remunerated at 15% of the net profits after
charging his remuneration, but before charging interest on capital and provision
for taxation ;
(b) Interest is to be provided on capital at 15% per annum ;
(c) Balance profits after making provision for taxation, is to be shared in the ratio of
1 : 2 : 2 by the three partners.
During the year ended 31st March, 2009 :
(i) the net profit before tax and before making any payment to partners amounted
to Rs. 6,90,000;
(ii) interest on capitals at 15% per annum amounted to :
Rs. 60,000 for X; Rs. 1,50,000 for Y Ltd. and Rs. 1,80,000 for Z Ltd. The capitals
have remained unchanged during the year;
(iii) provision for tax is to be at 40% of “total income” of the firm. The total income
has been computed at Rs. 1,95,000.
You are asked by :
(a) the firm to pass closing entries in relation to the above;
(b) Y Ltd. to pass journal entries in its books pertaining to its income from the firm
and show the investment in partnership account as it would appear in its ledger ;
(c) Z Ltd. to show, how the above information will appear in its financial statements
for the year ;
(d) Shri X to show the working, if any, in relation to the above. (20)
3. The following is the Balance Sheet of Happy Ltd. as at 31.3.2008 :
Liabilities Rs. Assets Rs.
Share Capital Fixed Assets
Authorised Gross Block 3,00,000
10,000 10% Redeemable Preference Less : Depreciation 1,00,000
Shares of Rs. 10 each 1,00,000 2,00,000
90,000 Equity Shares of Rs. 10 each 9,00,000 Investments 1,00,000
10,00,000 Current Assets and
Loan and Advances
Issued, Subscribed and Paid-up Capital
10,000 10% Redeemable Preference Inventory 25,000
Shares of Rs. 10 each 1,00,000 Debtors 25,000
10,000 Equity Shares of Rs. 10 each 1,00,000 Cash and Bank Balances 50,000
(A) 2,00,000 Misc. Expenditure to the extent
Reserves and Surplus not written of 20,000
General Reserve 1,20,000
Securities Premium 70,000
Profit and Loss A/c 18,500
(B) 2,08,500
Current Liabilities and Provisions (C) 11,500
Total (A + B + C) 4,20,000 Total 4,20,000
For the year ended 31.3.2009, the company made a net profit of Rs. 15,000 after providing
Rs. 20,000 depreciation and writing off the miscellaneous expenditure of Rs. 20,000.
The following additional information is available with regard to company’s operation:
a) The preference dividend for the year ended 31.3. 2009 was paid before 31.3.
2009.
b) Except cash and bank balances other current assets and current liabilities as on
31.3. 2009, was the same as on 31.3. 2008.
c) The company redeemed the preference shares at a premium of 10%.
d) The company issued bonus shares in the ratio of one share for every equity
share held as on 31.3. 2009.
e) To meet the cash requirements of redemption, the company sold a portion of the
investments, so as to leave a minimum balance of Rs. 30,000 after such
redemption.
f) Investments were sold at 90% of cost on 31.3. 2009.
You are required to :
i) Prepare necessary journal entries to record redemption and issue of bonus shares.
ii) Prepare the cash and bank account.
iii) Prepare the Balance Sheet as at 31st March, 2009 incorporating the above
transactions. (20)
4. (a) Events occurring after the Balance Sheet Date and their disclosure requirements. (5)
(b) Prior-Period items (2)
(c) Pre–incorporation expenses (3)
(d) Provisions contained in the Accounting Standard in respect of Revaluation of
fixed assets. (10)
5. (a) ABC Ltd. could not recover Rs. 10 lakhs from a debtor. The company is aware
that the debtor is in great financial difficulty. The accounts of the company were
finalized for the year ended 31.3.2009 by making a provision @ 20% of the amount
due from the said debtor.
The debtor became bankrupt in April, 2009 and nothing is recoverable from him.
Do you advise the company to provide for the entire loss of Rs. 10 lakhs in the
books of account for the year ended 31st March, 2009?
(b) Ram Co. (P) Ltd. furnishes you the following information for the year ended
31.3.2009 :
Depreciation for the year ended 31.3.2009 Rs. 100 lakhs
(under straight line method)
Depreciation for the year ended 31.3.2009 Rs. 200 lakhs
(under written down value method)
Excess of depreciation for the earlier years calculated under
written down value method over straight line method Rs. 500 lakhs
The Company wants to change its method of claiming depreciation from straight
line method to written down value method.
Decide, how the depreciation should be disclosed in the Financial Statement for
the year ended 31.3.2009.
(c) How refund of revenue grant received from the Government is disclosed in the
Financial Statements?
(d) A major fire has damaged the assets in a factory of a limited company on 2nd
April-two days after the year end closure of account. The loss is estimated at
Rs. 20 crores out of which Rs. 12 crores will be recoverable from the insurers.
Explain briefly how the loss should be treated in the final accounts for the previous
year. (5×4 =20)
6. (a) On 31st March, 2008, Uncertain Bank Ltd. had a balance of Rs. 9 crores in
“rebate on bills discounted” account. During the year ended 31st March, 2009,
Uncertain Bank Ltd. discounted bills of exchange of Rs. 4,000 crores charging
interest at 18% per annum the average period of discount being for 73 days. Of
these, bills of exchange of Rs. 600 crores were due for realisation from the
acceptors/customers after 31st March, 2009, the average period outstanding
after 31st March, 2009 being 36.5 days.
Uncertain Bank Ltd. asks you to pass journal entries and show the ledger
accounts pertaining to :
(i) Discounting of Bills of exchange and
(ii) Rebate on Bills discounted. (10)
(b) Prepare the Fire Insurance Revenue A/c as per IRDA regulations for the year
ended 31st March, 2009 from the following details :
Rs.
Claims paid 9,80,000
Legal expenses regarding claims 20,000
Premiums received 26,00,000
Re-insurance premium paid 2,00,000
Commission 6,00,000
Expenses of management 4,00,000
Provision against unexpired risk on 1st April, 2008 11,00,000
Claims unpaid on 1st April, 2008 1,00,000
Claims unpaid on 31st March, 2009 1,60,000
(10)
7. S Ltd has a hire purchase department. Goods are sold on hire purchase at cost
plus 50%. The following information is provided for the year ending on 31st March
2009.
01.04.2008 31.03.2009
Stock out with Hire Purchase Customers (Rs.) 18,000 ?
Stock at shop (Rs.) 36,000 40,000
Instalment Due (Customers still Paying) (Rs.) 10,000 18,000
Required : Prepare Hire Purchase Trading Account in each of the following alternative
cases:
Case (a) If Cash received from hire purchasers amounted to Rs 1,20,000 and Goods
purchased during the year amounted to Rs 1,20,000.
Case (b) If Cash received from hire purchasers amounted to Rs 1,20,000 and Goods
purchased during the year amounted to Rs 1,20,000. Goods repossessed
(Instalments due Rs 4000) valued at Rs 1,000 which have not been included
in the Stock at shop at the end.
Case (c) If Cash received from hire purchasers amounted to Rs 1,20,000 and Goods
purchased during the year amounted to Rs 1,20,000. Goods repossessed
(Instalments unpaid Rs 4,000 of which Rs 2,800 were overdue) valued at
Rs 500 which have not been included in the Stock at shop at the end. (20)
PAPER 5
FINANCIAL ACCOUNTING
TEST PAPER — I/5/FAC/2008/T-3
Time Allowed : 3 hours Full Marks : 100
(Answer Question No. 1 and any four Questions from the rest)
1. A) Indicate the correct answer : (10×2 = 20)
The output of financial accounting is
i) The measurement of accounting income
ii) The measurement of taxable income
iii) The preparation of financial statements
iv) The preparation of financial Position
B. The basic objective of financial accounting is to :
i) Provide quantitative information to users of financial statements
ii) Satisfy the legal requirements
iii) Report income to the shareholders
iv) Satisfy listing requirements of stock exchanges
C. Information about performance is disclosed by :
i) Balance sheet
ii) Statement of cash flows
iii) Profit and loss account
iv) Both (i) and (ii)
D. The lessee’s right to recover the short working is related to :
i) First five years
ii) Last three years
iii) Terms of the agreement
iv) None of the above.
E. Profit or loss for the period includes
i) Ordinary activities
ii) Extraordinary activities
iii) Prior period items
iv) All the above
F. The perception of extraordinary events must be made with reference to
i) Business ordinarily carried on by an enterprise
ii) The frequency with which such events are expected to occur
iii) Both (i) and (ii)
iv) The size of the transaction
G. Prior period items must be shown
i) In the current profit and loss account along with the ordinary activities
ii) In the current profit and loss account in a manner that their impact on the
current
iii) profit or loss can be perceived as adjustments to reserves
iv) As a separate item in the balance sheet
H. A change in the estimated life of the asset, which necessitates adjustment in the
depreciation, is an example of
i) Prior period item
ii) Ordinary item
iii) Extraordinary item
iv) Change in the accounting estimate
I. A change in the accounting policy should be made
i) When states so direct
ii) For compliance with an accounting standard
iii) For better presentation of financial statements
iv) All the above.
J. Selling and distribution costs are not included in cost of inventories because
they
i) are negligible
ii) do not relate to bringing the inventories in their present location and condition
iii) are period costs
iv) are in relation to specific customers
2. The firm of Vansen & Co. has four partners and as of 31st March, 2009, its Balance
Sheet stood as follows :
Liabilities Rs. Assets Rs.
Capital A/cs : Land 1,00,000
F 4,00,000 Building 5,00,000
S 4,00,000 Office equipment 2,50,000
R 2,00,000 Computers 1,40,000
Current A/cs Debtors 8,00,000
F 1,00,000 Stocks 6,00,000
S 3,00,000 Cash at Bank 1,50,000
R 2,20,000 Other Current Assets 45,200
Loan from HSBC 10,00,000 Current A/c :
Current Liabilities 1,40,000 B 1,74,800
27,60,000 27,60,000
The partners have been sharing profits and losses in the ratio of 4:4:1:1. It has been
agreed to dissolve the firm on 1.4.2009 on the basis of the following understanding :
(a) The following assets are to be adjusted to the extent indicated with respect to
the book values :
Land 200%
Building 120%
Computers 70%
Debtors 95%
Stocks 90%
(b) In the case of the loan, the lender’s are to be paid at their insistence a prepayment
premium of 1%.
(c) B is insolvent and no amount is recoverable from him. His father, R, however,
agrees to bear 50% of his deficiency. The balance of the deficiency is agreed to be
apportioned according to law.
Assuming that the realisation of the assets and discharge of liabilities is carried out
immediately, Prepare necessary ledger accounts. (20)
3. (a) Conditions to be fulfilled by a Joint Stock Company to buy-back its equity shares.
(4)
(b) The Balance Sheet of Anita Industries Ltd. as at 31.3.2009 is as follows :
Liabilities Rs. Assets Rs.
Authorised Share Capital Sundry Assets 17,00,000
1,50,000 Equity Shares of Rs. 10 each 15,00,000
Issued, Subscribed and Paid-up
80,000 Equity Shares of
Rs. 7.50 each called-up and paid-up 6,00,000
Reserves and surplus
Capital Redemption Reserve 1,50,000
Plant Revaluation Reserve 20,000
Securities Premium Account 1,50,000
Development Rebate Reserve 2,30,000
Investment Allowance Reserve 2,50,000
General Reserve 3,00,000
17,00,000 17,00,000
The company wanted to issue bonus shares to its share holders at the rate of one share
for every two shares held. Necessary resolutions were passed; requisite legal requirements
were complied with :
(i) You are required to give effect to the proposal by passing journal entries in the
books of Anita Industries Ltd.
(ii) Show the amended Balance Sheet. (16)
4. (a) From the following particulars of Nivedita Limited, you are required to calculate
the managerial remuneration in the following situation:
(i) There is only one whole time director.
(ii) There are two whole time directors.
(iii) There are two whole time directors, a part time director and a Manager.
Rs.
Net profit before provision for income-tax and managerial
remuneration, but after depreciation and provision for repairs 17,40,820
Depreciation provided in the books 6,20,000
Provision for repairs of machinery during the year 50,000
Depreciation allowable under Schedule XIV 5,20,000
Actual expenditure incurred on repairs during the year 30,000
12
(b) Write short notes on :
i) Unexpired Risks Reserve (4)
ii) Re-insurance. (4)
5. On 01.04.09, P Ltd. issued 1,000, 15% Debentures of Rs. 100 each at a discount of
10% redeemable at par.
Required : Show the Discount on Issue of Debentures A/c if (a) such debentures
are redeemable after 4 years, and (b) such debentures are redeemable by equal annual
drawings in 4 years. A Ltd. follows financial year as its accounting year. (20)
6. A summary of Receipts and Payments of Bakers Club for the year ended 31st March,
2009.
Receipts Rs. Payments Rs.
To Opening Balance 3,000 By Salaries & Rent 1,500
“ Subscription 20,000 “ Electric Charges 300
“ Donations 5,000 ‘’ Sports Expenses 1,000
“ Entrance Fees 1,000 “ Sports goods purchase 9,000
“ Interest 100 ‘‘ Books purchase 5,000
“ Charity show Receipts 2,400 “ Miscellaneous Expenses 700
“ Charity show Expenses 2,000
“ Investment 8,000
“ Closing balance 4,000
31,500 31,500
Following information are available at the end of the year :
(i) Of the total subscriptions received Rs. 500 for 2007-08 and Rs. 600 for 2009-10
but Rs. 100 is due for 2008-09.
(ii) The total sum received on Entrance fees is to be transferred to Capital Fund.
(iii) Salary is remaining due to be paid Rs. 300.
(iv) Interest is receivable Rs. 500.
The club had the following assets on the opening day of the year Sports goods Rs.
3,000; Books Rs. 2,000; Investment Rs. 6,000.
As on 31.3.09 : sports goods valued at Rs. 10,000.
From the above information prepare an Income and Expenditure Account for the year
ended 31.3.09 and Balance sheet as on that date. (20)
7. A colliery is leased to National Coal Syndicate on a royalty of Re. 1 per tonne on
the output.
A minimum rent of Rs. 16,000 a year and allowances for shortworking are provided
in the lease. The coal actually raised in a series of years is as follows:
Tonnes
1st year 8,000
2nd year 10,000
3rd year 18,000
4th year 28,000
5th year 14,000
Draw up Royalty account, Landlord’s account, Shortworking Account and
Minimum Rent Account in the books of the National Coal Syndicate. (20)
PAPER 5
FINANCIAL ACCOUNTING
TEST PAPER — I/5/FAC/2008/T-4
Time Allowed : 3 hours Full Marks : 100
(Answer Question No. 1 and any four Questions from the rest)
1. Choose the correct answer (5×1 = 5)
A. Livestock in the case of mixed farming is
i) A fixed asset.
ii) A current asset.
iii) A wasting asset.
iv) A tangible asset.
B. Crops are valued at
i) market price
ii) Cost price
iii) Capitalized value
iv) Economic value
C. Final accounts of a farmer can be prepared under
i) Single entry method
ii) Double entry method
iii) Both single and double entry methods
iv) None of the above
D. The cash book usually maintained by the farmer is
i) petty cash book
ii) two-column cash book
iii) Analytical cash book
iv) Three column cash book
E. Livestock purchased will figure in
i) The balance sheet
ii) The trading account
iii) The profit and loss account
iv) The current account
F. Define cash and cash equivalents as suggested in AS- 3 to be used for preparing
a cash flow statement. (5)
G. What is the objective of Accounting Standard? (5)
H. State whether each of the following statement is true or false. (2)
(i) Going concern means that business has entered into a process of liquidation.
(ii) The principle of consistency requires that all business enterprises should follow
the same method of accounting.
I. When parties are considered ‘Related’ as per A.S. 18? 3
2. FGH Ltd. has three departments I.J.K. The following information is provided for
the year ended 31.3.2009 :
I J K
Rs. Rs. Rs.
Opening stock 5,000 8,000 19,000
Opening reserve for unrealised profit ¯ 2,000 3,000
Materials consumed 16,000 20,000 ¯
Direct Labour 9,000 10,000 ¯
Closing stock 5,000 20,000 5,000
Sales ¯ ¯ 80,000
Area occupied (sq. mtr.) 2,500 1,500 1,000
No. of employees 30 20 10
Stocks of each department are valued at costs to the department concerned. Stocks of
I are transferred to J at cost plus 20% and stocks of J are transferred to K at a gross
profit of 20% on sales. Other common expenses are salaries and staff welfare Rs. 18,000,
rent Rs. 6,000.
Prepare Departmental Trading, Profit and Loss Account for the year ended 31.3.2009.
20
3.
Literary Society showed the following position on 31st March 2009
Liabilities Rs. Assets Rs.
Capital Fund 79,300 Electrical Fittings 15,000
Outstanding Expenses 700 Furniture 5,000
Books 40,000
Investment in Securities 15,000
Cash at Bank 2,500
Cash in hand 2, 500
80,000 80,000
Receipts and Payments Account for the year ended on 31st March, 2009
Receipts Rs. Payments Rs.
To Balance b/d By Electric Charges 720
Cash at Bank 2,500 ‘’ Postage & Stationery 500
Cash in hand 2,500 Telephone charges 500
Entrance Fees 3,000 Books Purchased (1.4.08) 6,000
Membership Subscriptions 20,000 Outstanding Expenses 700
Sale proceeds of Old Rent Account 8,800
Newspapers 150 Investment in Securities
Hire of lecture Hall 2,000 (1.10.08) 4,000
Interest on Securities 800 Salaries A/c 6,600
Balance c/d : Cash at Bank 2,000
Cash in hand 1,130
30,950 30,950
You are required to prepare an Income & Expenditure Account for the year ended on
31.3.2009 and a Balance Sheet on that date after incorporating the following adjustments
(i) Membership subscriptions included Rs. 1.000 received in advance.
(ii) Provide for outstanding Rent Rs. 400 and Salaries Rs. 300. 20
22 Test Papers — Intermediate Group I
(iii) Books to be depreciated @ 10% including additions. Electrical Fittings and
Furniture are also to be depreciated at the same rate.
(iv) 75% of the Entrance Fees are to be capitalised.
(v) Interest on Securities to be calculated at 5% p.a.
4. Weak, Able and Lazy are in partnership business sharing profit and losses in the
ratio of 2 : 1 : 1. It is agreed that interest on capital will be allowed @ 5% p.a. and
interest on drawings will be charged @ 6% p.a. (No Interest will be charged/allowed
on current accounts).
The following are the particulars of the Capital. Current and Drawings Accounts
of the partners:
Week Able Lazy
Rs. Rs. Rs.
Capital (1.4.2008) 75,000 40,000 30,000
Current Accounts (1.4.2008) 10,000 5,000 5,000 (Dr.)
Drawings 15,000 10,000 10,000
Interest on Drawings (2008-09) 500 190 350
The draft account for 2008-09 showed a net profit of Rs. 60,000 before taking
into account interest on capital and drawings and subject to following
rectification of errors :
(a) Life Insurance Premium of Weak amounting to Rs. 1,000 paid by the firm on
30th September, 2008 has been charged to Miscellaneous Expenditure A/c.
(b) Repairs of Machinery amounting to Rs. 10,000 has been debited to Plant Account
and depreciation thereon charged @ 20%
(c) Travelling Expenses of Rs. 3,000 of Able for a pleasure trip to U.K. paid by the
firm on 30th June, 2009 has been debited to Travelling Expenses A/c.
You are required to prepare the Profit & Loss Appropriation Account for the year
ended 31st March,2009 and the Partners’ Currents Accounts for the year. 20
5. (a) Prepare a Bank Reconciliation Statement as on 31.3.09 for Ms. Neha Gonzalves :
(i) Bank balance as per Cash Book (Credit) Rs.25,000
(ii) Cheques of Rs.15,000 deposited during the month of March,2009, of which
cheques of Rs.7,000 only was credited by 31.3.09
Test Papers — Intermediate Group I 23
(iii) Cheques issued for Rs.45,000 during the month of March,2009, were sent to
the creditors on 31.3.09 by courier. The suppliers received the cheques on 2nd
April,2009
(iv) Bank Charges debited twice in the Cash Book Rs.100
(v) Interest credited by Bank not recorded in the Cash Book Rs.500
(vi) Cheques recorded as deposited into Bank Rs.1,000 instead of a payment.
(b) Pass necessary entries relating to the errors detected after the preparation of
Final Accounts and also show the effect on profit :
(i) Purchase of goods for sale Rs.25,000 wrongly debited to Furiture Account.
Depreciation @ 10% p.a. on furniture
(ii) Goods drawn by proprietor Rs.5,000 not recorded.
(iii) Credit Purchases Rs.5,000 wrongly recorded as credit sales. Provision for
Bad & Doubtful debts @ 3%.
(iv) Received goods from Ms.Z ( the consignor) for Rs.15,000 included in Purchase.
Those goods were sold for Rs.25,000 wrongly included in Sales. Commission
receivable @ 5% not accounted. 20
6. Nivedita Fertilisers Ltd. issued a prospectus inviting applications for 20,000 shares
of Rs.10 each at a premium of Rs. 2 per share, payable as follows :
Rs.
On Application 3 (including Re.1 premium)
On Allotment 4 (including Re.1 premium)
On First Call 3
On Second & Final Call 2
Applications were received for 30,000 shares and pro rata allotment was made on
the applications for 24,000 shares. It was decided to utilise excess application money
towards the amount due on allotment.
Arunavo, to whom 400 shares were allotted, failed to pay the allotment money
and on his subsequent failure to pay the first call, his shares were forfeited.
Victor, who applied for 720 failed to pay the two calls and on his such failure, his
shares of the shares forfeited, 800 shares were sold to Srijita credited as fully paid
for Rs.9 per share, the whole of Arunavo’s shares being included.
Required : Give Journal Entries to record the above transactions (including cash
transactions) 20
7. Debtors’ velocity = 3 months
Creditors’ velocity = 3 months
Stock velocity = 2 months
Fixed Assets—Turnover Ratio = 2.5 times
Capital—Turnover Ratio = 1.5 times
Gross Profit Margin = 25%
Gross Profit for the year amounts to Rs. 1,15,000. Reserve and Surplus amounts to
Rs. 40,000. Liquid Assets are Rs. 1,10,000. Closing Stock of the year is Rs. 15,000
more than the Opening Stock. Bills Receivable and Bills Payable at the end of the
year amount to Rs. 10,000 and Rs. 8,000 respectively. There is no long-term loan or
bank overdraft.
From the above information you are required to find out : (a) Sales, (b) Purchase,
(c) Sundry Creditors, (d) Sundry Debtors, (e) Closing Stock, (1) Fixed Assets, (g) Share
Capital and (h) Bank Balance. 20
PAPER 6
COMMERCIAL AND INDUSTRIAL LAW AND AUDITING
TEST PAPER — I/6/CIA/2008/T-1
PART – A
Time Allowed : 3 hours Full Marks : 100
(Answer Q. No. 1 and any two from the remaining)
1. (a) Comment on the following :
(i) An auctioneer X advertised that sale of furniture would take place on
21/2/09 on Ice Skating Ring in Kolkata. Y travelled from Dhanbad to the
auction but found that it has been withdrawn. Y sued X for loss of time and
expenses.
(ii) A, a partner of XYZ & Co buys office furnitures on behalf of the firm without
the consent of other partners.
(iii) B just signs the back of a cheque.
(iv) Y, a dealer in motorcycles sales a Yahama bike to B. B leaves it possession
The bike gets damaged. B sues Y for compensation.
(v) D, met an accident in factory premises. He filed a suit against the owner for
claim of compensation.
(vi) An A. C installed in office of ABC & CO stopped working within 2 months
of purchase. The proprietor made an complaint with District forum against
seller.
(vii) A earns a salary of Rs 10,000 per month. Bonus declared by employer was
10% of salary. Bonus received by A was Rs 3000.
(viii) X owes G. Bank a sum of Rs 100,000 repayable on 31/3/2008. Y is guarantor
of the said loan. X fails to pay up. The bank does not take any action against
X. Y feels he is no longer party to the contract.
(ix) All dealership agreements require registration (Competition Act)
(x) Limited Liability Partnership is distinct from limited partnership. (2×10)
2. (a) Discuss the essentials of a valid contract.
(b) Who cannot enter into a contract?
(c) Distinguish between void and illegal contracts. (9+3+3)
3. (a) Explain the following terms in relation to The Payment of Bonus Act , 1965.
(i) Available surplus
(ii) Gross Profits.
(iii) Sums deductible from Gross Profits. (3+3+3)
(b) Explain the following terms in relation to Payment of Gratuity Act, 1972 :
(i) Wages
(ii) Rate of Gratuity. (3+3)
4. (a) (i) Discuss the various modes of creating an agency.
(ii) When does an agent incur personal liability? (5+6)
(b) List the rights of an unpaid seller against goods. (4)
5. Write short notes on :
(i) “Delivery” in relation to Sale of Goods Act .
(ii) Forged Instrument.
(iii) Rights of a surety
(iv) ‘Consumer’ under The Competition Act, 2002 (3+3+5+4)
PART – B
(AUDITING)
Answer Q6 and any two of the remaining
:
6. State with reasons whether the following statements are True/False (any six)
i) Auditing, in India can be traced back to the days of Vedas .
ii) The concept of evidence is fundamental to auditing.
iii) Test check approach and random sampling approach are same
iv) By obtaining inventory valuation certificate from management, the auditor is
no longer responsible for verifying Closing Stock.
Test Papers — Intermediate Group I 27
v) Indirect expenditure relating to construction of a project should not be capitalized.
vi) National Advisory committee on Accounting Standards may be constituted by
Central Government u/s 210A.
vii) An Auditor is always appointed by passing a special resolution to this effect.
viii) When separate Branch Auditors are appointed, the company auditor may not
visit the branches. (6×3)
7. (a) Discuss the importance of Audit Working Papers.
(b) State the factors to be considered while drafting an Audit Report. (7+9)
8. (a) Define audit risk. Discuss the relation between materiality and audit risk.
(b) (i) What are Contingent Liabilities? Where do they appear in Balance Sheet ?
(ii) What points the Auditor should keep in mind while verifying Contingent
Liabilities. (8+8)
9. How would you voucher the followings : (4×4)
(i) Travelling Expenses
(ii) Goods sent on Consignment
(iii) Preliminary Expenses
(iv) Book Debts realised.
PAPER 6
COMMERCIAL AND INDUSTRIAL LAW AND AUDITING
TEST PAPER — I/6/CIA/2008/T-2
PART – A
Time Allowed : 3 hours Full Marks : 100
(Answer Q. No. 1 and any two from the remaining)
1. Comment on the following : (10×2)
i) A counter offer constitutes an acceptance of an offer.
ii) Delivery of goods under Bailment may be actual or constructive.
iii) A stipulation may be a condition though called warranty in the contract.
iv) A draws a cheque in favour of Y or order ‘sans recourse’.
v) Minimum Wage Rate may vary
vi) Applicability of The Consumer Protection Act,1986.
vii) ‘Competent person’ in relation to Factory Act
viii) Maximum bonus payable u/s 11 of The payment of Bonus Act, 1965.
ix) ‘Wages’ under The Workmen’s Compensation Act, 1923
x) Settling an EPF A/c.
2. (a) Define Consideration . ‘No Consideration, no Contract’; discuss the cases when
the rule is not applicable.
(b) Discuss Mistake of law and its consequences. (7+8)
3. (a) What is a Contract of Indemnity? How is it different from Contract of Guaranty.
(3+5)
(b) Discuss the rights and duties of ‘finder of lost goods’. (4)
(c) Who is a del credere agent? (3)
4. (a) Who is a ‘occupier’ under Factories Act, 1948. List the general duties of Occupier.
(4+5)
(b) Explain the term ‘appropriate Government’ under the Industrial Dispute Act,
1947. (6)
5. (a) Define ‘continuous service’ under Payment of Gratuity Act. (4)
(b) Define the term Complaint under Consumer Protection Act, 1986? Who can file
a complaint? (4+3)
(c) What are the objectives of Right to Information Act ? (4)
PART – B
(AUDITING)
Answer Q No. 6 and any two of the remaining :
6. Comment in one or two sentences :
i) How would Auditor verify charge on Goodwill?
ii) Where should ‘loose tools’ appear in Balance Sheet?
iii) What is LFAR ?
iv) Auditor of Holding Company and its Subsidiaries is always the same.
v) 100% vouching ensures 100% effectiveness as regards to verification.
vi) What is meant by CAAT?
vii) To whom is audit certificate addressed?
viii) Define ‘Disclaimer’ with respect to Audit Report.
ix) Can a company show its assets at a value below cost? (2×9)
7. (a) What is Joint Audit? How is it different from Branch Audit? (4+5)
(b) Discuss the advantages and disadvantages of Joint Audit. (7)
8. (a) State the objectives of internal check system in an organization.
(b) Discuss the duties of auditor with regard to internal check system.
(c) Discuss the difference between internal audit and internal control. (6+6+4)
9. Write short notes on : 4×4)
(a) Efficiency Audit.
(b) Qualified Report
(c) Auditing in EDI environment
(d) Audit checks in case of Depreciation.
PAPER 6
COMMERCIAL AND INDUSTRIAL LAW AND AUDITING
TEST PAPER — I/6/CIA/2008/T-3
PART – A
Time Allowed : 3 hours Full Marks : 100
(Answer Q. No. 1 and any two from the remaining)
1. Comment on the following :
(i) A promissory note is made without specifying the time for payment. The holder
added ‘on demand’ on face of the instrument. Does that amount to changing
character of the instrument?
(ii) X consigns a truck of Dussera mangoes to Y at Asansol via Kolkata through A.
Sensing that the mangoes may get destroye , A sells them at Kolkata itself.
(iii) XZ, printing press agreed to print 50,000 copies of Study Materials for an
educational institution to be supplied in batches as per requirement of the institute.
The printing press supplied the whole lot together but the institute accepted
5000 copies only. The printing press sent bill for whole 50,000 copies.
(iv) A contract of Guarantee in which W is surety does not benefit him at all. Does
the contract bind W?
(v) Staff of a nationalized bank without giving any prior notice suddenly decided
on pen down strike to press their demand against entering of private companies
in banking sector.
(vi) X was on maternity leave for 3months during the accounting year 2008-09. She
availed casual leave of another 8 days. Does this entitle her to full bonus.
(vii) Y worked in Z firm five years 1 month only. State whether Y is entitled to Gratuity?
(viii) Fast Cool Co. Ltd. launched a new line of refrigerators in market with a claim
that ice would be formed instantly. C purchased one on basis of the claim. C
later found that the claim was false , and it took atleast 20 minutes for formation
of ice. Can C claim damages?
Test Papers — Intermediate Group I 31
(ix) X and Y both workers of the same factory entered into a fight over work division
and ended up in hurting each other. State whether this is an Industrial dispute?
(2×9)
2. Distinguish between :
(a) (i) Negotiation and assignment
(b) (ii) Holder and Holder in due course
(c) (iii) Lay-off and retrenchment
(d) (iv) Award and settlement. (4×4)
3. (a) Discuss the provisions of Payment of Bonus Act relating to
(i) eligibility and disqualification.
(ii) time limit for payment of bonus. (8 )
(b) Explain the following terms in relation to Payment of Gratuity Act :
(i) employee
(ii) family (8)
4. (i) What do you mean by discharge of contract? (4)
(ii) Discuss the various modes through which a contract may be discharged. (12)
5. (a) When is a consideration considered unlawful? (12)
(b) In cases of equal guilt, the defendant is in a better position. Explain. (4)
PART – B
(AUDITING)
Answer Q No. 6 and any two from the remaining.
6. State with reasons whether the following statements are True/False (any six) :
a) Operational audit is primarily based on financial data.
b) Internal Audit may be performed by employees of an organization.
c) Management Audit is forward looking Audit.
d) AAS 28 deals with auditing in a computer information systems environment.
e) The scope of Audit depends on nature of appointment.
f) CAS 3 deals with capacity determination.
g) Auditor should qualify audit report if any Secret Reserve is created.
h) The CARO has extended the scope of audit .
i) Detection of fraud is duty of statutory auditor only. (3×6)
7. Write short notes on :
a) Propriety Audit.
b) Compliance Procedure.
c) Flow Chart.
d) Audit in online system environment. (4×4 )
8. (a) State the Audit checks involved in :
(i) Stock in Trade (6 )
(ii) Copy Rights (5)
(iii) Petty cash (5)
9. (a) State the advantages and disadvantages of Management Audit. (10)
(b) Necessity of Internal Audit to management. (6)
PAPER 6
COMMERCIAL AND INDUSTRIAL LAW AND AUDITING
TEST PAPER — I/6/CIA/2008/T-4
PART – A
Time Allowed : 3 hours Full Marks : 100
(Answer Q. No. 1 and any two from the remaining)
1. Comment on the following :
(i) A has worked for only 40 days in an accounting year. State whether he is eligible
to receive bonus.
(ii) Under what circumstances do an employee is entitled to receive Gratuity even
without completing 5 years of service?
(iii) X has balance of Rs 3000/- in YZ Bank. He draws a cheque of Rs 10,000/- in
favour of C knowing fully that he has no O/D facility.The cheque is dishonoured.
Is notice of dishonour to X necessary?
(iv) When does an agreement become Contract?(Answer in one sentence)
(v) A promises not to file case against her husband B if B pays A maintenance
allowance. What is the consideration as far as B is concerned?
(vi) A Bill of Exchange dated 30/6/2008 was made payable at 3months after date.
When was the date of maturity?
(vii) X guarantees all advances made to C within a period of one quarter by YZ bank
subject to maximum of Rs 100,000/- .What is the nature of guarantee? If X dies,
whether his legal succesors will be liable to pay the amount.
(viii) How much do the employers contribute to PF in case of Jute Industry?
(ix) Can an employer reduce his liability to pay compensation under The Workmen’s
Compensation Act ,1923 by entering into a contract with employee. (2×9)
2. (i) What is coercion?
(ii) Does threat to commit suicide amount to coercion?
34 Test Papers — Intermediate Group I
(iii) State the difference between coercion and undue influence.
(iv) Is there presumption of undue influence in relationship of husband and wife?
(4+3+6+3)
3. (i) Define ‘goods’ under Sale of Goods Act,1930.
(ii) Who is an unpaid seller?
(iii) Describe unpaid seller’s right of lien on goods.
(iv) State difference between lien and stoppage in transit. (4+4+3+5)
4. (a) (i) State the provisions of EPF Act regarding contribution to provident fund.
(ii) Discuss the Pension benefits under EPF and Miscellaneous Provision Act.
(b) Distinguish between strike and lockout.
(c) Distinguish between Bill of Exchange and Cheque. (8+4+4)
5. Write short notes on :
(a) Cartel and Domestic Nexus under Competition Act, 2002. (3+3)
(b) ‘Competent Authority’ and ‘Information’ under RTI, Act. (3+3)
(c) Treatment of limited liability partnerships under Income Tax. (4)
PART – B
(AUDITING)
Answer Q No. 6 and any two from the remaining.:
6. Comment on the following (any six) :
(i) Management audit is conducted by statutory auditor of the company
(ii) US –GAAP and INDIA’S GAAP are different
(iii) When Information System Audit is an Information Technology, auditor is
required to have detailed knowledge of auditing as well as information system
(iv) Function of Audit Trail
(v) Internal check is only necessary to comply with CARO
(vi) The first Auditor is appointed by Board of Directors
(vii) Mr. A is appointed auditor of AB Ltd. at its AGM.
(viii) Mr. A holds securities of the Co. valuing Rs.5000
(ix) Compliance certificate is signed by CEO, so auditor need not verify it. (3×6 )
7. (a) Discuss the difference between Audit Report and Audit Certificate. (8)
(b) Explain the term auditors’ independence. (5)
(c) State the provisions that safe guard the independence of auditor. (3)
8. Write short notes on : (4×4)
(i) Corporate Governance.
(ii) Auditor-Auditee relationship
(iii) Removal of a Statutory Auditor.
(iv) Compliance Audit.
9. Discuss the Statutory powers and duties of a company auditor. (16)
PAPER 7
APPLIED DIRECT TAXATION
TEST PAPER — I/7/ADT/2008/T-1
PART – A
Time Allowed : 3 hours Full Marks : 100
(Answer Q. No. 1 and any four from the remaining)
1. Choose the correct answer with reference to the provisions of the Income-tax
Act, 1961.
(i) Surcharge of 10% is payable by an individual where the total income exceeds:
a) Rs.9,50,000
b) Rs.9,99,999
c) Rs.10,00,000
d) None of these (1)
(ii) Education Cess of 2 % and Secondary & Higher Education Cess of 1% is
payable on :
a) Income tax
b) Income tax plus surcharge, if any
c) Surcharge
d) Not payable by the assessee (1)
(iii) For an employee in receipt of hostel allowance for his three children, the maximum
annual allowance exempt u/s 10(14) is :
a) Rs.10,800
b) Rs.7,200
c) Rs.9,600
d) Rs.3,600 (1)
(iv) Fill in the blanks having regard to the provisions of the Income-tax Act, 1961 :
Where a person transfers capital asset to a firm in which he becomes partner,
the full value of consideration in the context of capital gain computation, will
be..... (1)
(v) In respect of shares held as investment, while computing the capital gains,
securities transaction tax paid in respect of sale of listed shares sold in a
recognized stock exchange,
(a) Is deductible upto Rs.1,00,000
(b) Is deductible upto Rs.2,00,000
(c) Is deductible where capital gains is below Rs.5,00,000
(d) Is not deductible at all (1)
(vi) For an individual who has derived short-term capital gains of Rs.40,000 from
transfer of listed equity shares after 1.10.2004, with other income of Rs.20,000
(these two items above making up his total income), income-tax payable in
respect of short-term capital gains is
(a) Rs.4,000
(b) Rs.8,000
(c) Rs.1,000
(d) None of the above (1)
(vii) What are the exceptions to the general rule that income of the previous year
alone is taxed in an assessment year? Discuss. (6)
(viii) State whether True or False, with reasons, having regard to the provisions of the
Income-tax Act, 1961 (Answers without reasoning will not be given any mark)
An existing assessee engaged in trading activities, can claim additional
depreciation under Section 32(1)(iia) in respect of new plant acquired and
installed in the trading concern, where the increase in value of such plant as
compared to the approved base year is more than 10%. (2)
(ix) What are the transactions not regarded as transfer as per section 47 under the
Income Tax Act, 1961. (List at least six of such transactions). (6)
2. (a) Mr. Pradip Das had estates in Rubber, Tea and Coffee. He derives income from
them. He has also a nursery wherein he grows and sells plants. For the previous
year ending 31.3.2009, he furnishes the following particulars of his sources of
income from estates and sale of Plants. You are requested to compute the taxable
income for the Assessment year 2009-2010 :
Rs.
(i) Manufacture of Rubber 5,00,000
(ii) Manufacture of Coffee grown and cured 3,50,000
(iii) Manufacture of Tea 7,00,000
(iv) Sale of plants from Nursery 1,00,000
(8)
(b) John is employed in a public company and is paid a sum of Rs.6,00,000 on
Voluntary Retirement from service. The normal age of retirement in the company
is 60 and John, who was 45 at the time of retirement had completed 20 years of
service. His monthly salary at the time of retirement was as follows :
Rs.
Basic pay 10,000
Dearness allowance (50% includible for pension) 6,000
H.R.A. 3,000
Conveyance allowance 800
What is the amount of compensation taxable under the Act? (8)
3. From the following particulars furnished by Mr. X for the year ended 31.3.2009,
you are requested to compute his total income and tax payable for the assessment
year 2009-10.
(a) Mr. X retired on 31.12.2008 at the age of 58, after putting in 25 years and 9 months
of service, from a private company at Mumbai.
(b) He was paid a salary of Rs.25,000 p.m. and house rent allowance of Rs.6,000
p.m. He paid rent of Rs.6,500 p.m. during his tenure of service.
(c) On retirement, he was paid a gratuity of Rs.3,50,000. He was not covered by
the payment of Gratuity Act. His average salary in this regard may be taken as
Test Papers — Intermediate Group I 39
Rs. 24,500. Mr. X had not received any other gratuity at any point of time earlier,
other than this gratuity.
(d) He had accumulated leave of 15 days per annum during the period of his service ;
this was encashed by Mr. X at the time of his retirement. A sum of Rs.3,15,000
was received by him in this regard. His average salary may be taken as Rs.24,500.
(e) After retirement, he ventured into textile business and incurred a loss of Rs.80,000
for the period upto 31.3.08.
(f) Mr. X has invested Rs.22,500 in recognized provident fund, Rs.40,000 in public
provident fund and Rs.37,500 in National Savings Certificates. (20)
4. (a) Arvind commenced construction of a residential house intended exclusively for
his residence, on 1.11.2007. He raised a loan of Rs.5,00,000 at 16 per cent interest
for the purpose of construction 1.11.2007. Finding that there was an over-run
in the cost of construction he raised a further loan of Rs.8,00,000 at the same
rate of interest on 1.10.2008. What is the interest allowable under section 24,
assuming that the construction was completed by 31.3.2009? (8)
(b) Ram owned a house property at Madras which was occupied by him for the
purpose of his residence. He was transferred to Bombay in June, 2008 and
therefore he let out the property with effect from 1st July, 2008 on a monthly
rent of Rs.3,000. The corporation tax payable in respect of the property was
Rs.6,000 of which 50 per cent was paid by him before 31.3.09. Interest on money
borrowed for the construction of the property amounted to Rs.20,000. Compute
the income from house property for the assessment year 2009-10. (8)
(c) A car purchased by S on 10.8.2004 for Rs.3,25,000 for personal use is brought
into the business of the assessee on 01.12.2008, when its market value is
Rs.1,50,000.
Compute the actual cost of the car and the amount of depreciation for the
Assessment year 2009-10 assuming the rate of depreciation to be 20%. (4)
5. (i) Write short notes on the following : Carry forward and set off of depreciation
(6)
(ii) Expenditure involving cash payment exceeding Rs.20,000. (3)
(iii) State the cases when payment exceeding Rs.20,000 made otherwise than by a
crossed cheque or by a crossed demand bank draft will not be disallowed. 3
(iv) Discuss the provisions of Income-tax Act that relate to amortisation of expenses
for obtaining a licence to operate telecommunication services. (4)
(v) Discuss the provisions of 44AB Audit under the Income-tax Act, 1961. (4)
6. (a) Mr. Kartick is engaged in the business of plying goods carriages. On 1st April,
2008, he owns 10 trucks (out of which 6 are heavy goods vehicles). On 2nd
May, 2008, he sold one of the heavy goods vehicles and purchased a light goods
vehicle on 6th May, 2008. This new vehicle could however be put to use only on
15th June, 2008.
Compute the total income of Mr.Kartick for the assessment year 2009-10, taking
note of the following data :
Rs. Rs.
Freight charges collected 8,70,000
Less : Operational expenses 6,25,000
Depreciation as per section 32 1,85,000
Other office expenses 15,000
8,25,000
Net Profit 45,000
Other business and non – business income 70,000
(10)
(b) Ramesh owned a residential house at Kolkata, the original cost of which was
Rs.1,00,000. It was acquired on 1.9.1991. He sold the house on 1.6.2007 for
Rs.8,00,000 and purchased another house on 30.5.2008 at Tripura for
Rs.6,00,000. The second house at Tripura was sold by him for Rs.8,00,000 on
30.6.2009. Discuss the impact of these transactions with regard to assessment
to capital gains. (10)
7. (a) State whether True or False, with reasons, having regard to the provisions of the
Income-tax Act, 1961 (Answers without reasoning will not be given any mark;
all sub-divisions relate to the assessment year 2009-10) :
Where an individual repays a sum of Rs.30,000 towards principal and Rs.14,000
as interest in respect of loan taken from a bank for pursuing eligible higher studies,
the deduction allowable under Section 80E is Rs.40,000, and not Rs.30,000
(principal component only). (2)
(b) Discuss the allowability of the following:
(i) Romit has to pay to a hospital for treatment Rs.42,000 and spent nothing for
life insurance or for maintenance of handicapped dependent.
(ii) Romit has incurred for treatment Rs. Nil in the previous year and deposited
Rs.25,000 with LIC for maintenance of handicapped dependant.
(iii) Romit has incurred Rs.20,000 for treatment and Rs.25,000 was deposited
with LIC for maintenance of handicapped dependant. (3)
(c) Family pension received by a widow of a member of the armed forces where the
death of the member has occurred in the course of the operational duties in the
circumstances and subject to prescribed conditions, is
(i) Exempt upto Rs.3,00,000
(ii) Exempt upto Rs.3,50,000
(iii) Totally exempt under section 10(19)
(iv) Totally chargeable to tax (1)
(d) Gift of Rs.5,00,000 received on 10th July, 2004 through account payee cheque
from a non-relative regularly assessed to income-tax, is
(i) A capital receipt not chargeable to tax
(ii) Chargeable to tax as income from other sources
(iii) Chargeable to tax as business income
(iv) Exempt upto Rs.25,000 and balance chargeable to tax as income from other
sources. (1)
(e) Fill in the blanks having regard to the provisions of the Income-tax Act, 1961
(All sub-divisions relate to the assessment year 2009-10) :
The first item in the order of priority of set off as between current year capital
expenditure on scientific research, current year depreciation and brought forward
(1)
(f) Section 119 empowers the Central Board of Direct Taxes to issue such orders,
instructions and directions as it may deem fit, for the proper administration of
the Act. What are the exceptions to this power? (3)
(g) Fill in the blanks having regard to the provisions of the Income-tax Act, 1961
(All sub-divisions relate to the assessment year 2009-10):
42 Test Papers — Intermediate Group I
(i) The due date for filing of return under section 139(1) by a company having a
turnover of less than Rs.40 lakhs is ……….. (1)
(ii) No order of assessment or reassessment shall be made under section 147 after
the expiry of ……… from the end of ……. (½ + ½)
(h) Simran Pharma Ltd. manufacturer of drugs and pharma products provides the
following information relating to payments made to its marketing manager in
the year 2008-09 :
(a) Salary at Rs.20,000 p.m.
(b) Motor Cycle purchased for Rs.45,000 in June, 2007 was given free of cost.
(c) Conveyance allowance of Rs.5,000 p.m. which was allowed to him as exempt
u/s 10(14).
(d) Tickets worth Rs.4,000 for a cricket match between India and England.
(e) Reimbursement of medical expenses incurred actually by him of Rs.17,500.
The Company asks you to compute the amount of -
Payments covered under Fringe Benefits, amount chargeable to FBT and the
amount of such tax thereon. (7)
APPLIED DIRECT TAXATION
TEST PAPER — I/7/ADT/2008/T-2
PART – A
Time Allowed : 3 hours Full Marks : 100
(Answer Q. No. 1 and any four from the remaining)
1. Mr. Ganesh retires on 31.10.2008 voluntarily from XYZ (P) Ltd. as per the scheme
approved under section 10(10C) of the Income-tax Act, 1961. He furnishes the
following particulars: Salary Rs.10,000 p.m.; Pension Rs.6,000 p.m.; D.A. forming
part of basic pay Rs.2,000 p.m.; Compensation on voluntary retirement Rs.6,00,000;
Gratuity Rs.1,50,000;
Leave Salary Rs.40,000; He gets 60% of his pension commuted for Rs.54,000 on
31.1.2009. Completed years of service 18 years and 7 months. Leave availed while
in service 19 months. But for the voluntary retirement Mr. Ganesh would have
retired only after 45 months. The last increment he received was on 1.11.2007.
Compute his taxable salary income for the A.Y. 2009-10. (20)
2. (a) State, with reasons, whether the following statements are true or false : (10)
i) All firms have to pay surcharge @10% irrespective of their total income.
ii) Mrs. G, a non-resident Indian 68 years of age, is eligible for a basic exemption
limit of Rs.1,95,000.
iii) Sale of drawings and paintings does not attract capital gains tax.
iv) Subscription to notified bonds of NABARD qualifies for deduction under
section 80C.
v) The order of the Transfer Pricing Officer determining the arm’s length price
of an international transaction is not binding on the Assessing Officer.
vi) Medical insurance premium paid by the employer to insure the health of his
employees would qualify for deduction under section 36(1)(ib) for A.Y. 2009-
10 only if the same is paid by cheque.
vii) Under section 80E, deduction is allowable for A.Y.2009-10 in respect of interest
on loan taken for higher education of self alone
viii) Tax is deductible@5% in respect of payment of fees for professional services
to a resident
(b) Subhash discloses following particulars of his receipts during the financial year
2008-2009 : (10)
(i) Salary income earned at Pune but received in Srilanka 2,50,000
(ii) Profits earned from a business in Kenya which is controlled
in India, half of the profits being received in India. 2,20,000
(iii) Income from property, situated in Nairobi and received there 75,000
(iv) Income from agriculture in Bangladesh and brought to India 68,000
(v) Dividend-paid by an Indian company but received in London
on 15 May 2008. 22,000
(vi) Interest on USA Development Bonds and one half of which
was received in India 44,000
(vii) Past foreign untaxed income brought to India 2,10,000
(viii) Gift of $1000 from father, settled in USA, received in India 80,000
(ix) Land sold in Delhi, consideration received in Canada,
resulting into capital gain 2,50,000
(x) Income from structure-designing constancy service, set up
in Germany,
controlled from India, profits being received outside India 4,00,000
(xi) Loss from foreign business, controlled from India, sales
being received in India (-) 2,00,000
3. Style Ltd. is an Indian company engaged in the manufacture and sale of cotton
fabrics. Its net profit for the year ending 31.3.2009 after debit/credit of the following
items to the Profit and Loss Account was Rs.60 lakh.
i) Dividend received from a foreign company Rs.80,000.
ii) Retrenchment compensation paid to employees of one of the units closed down
during the year Rs.8 lakh.
iii) Interest paid under section 234B for short payment of advance tax pertaining to
the A.Y.2009-10 Rs.45,000.
Test Papers — Intermediate Group I 45
iv) Compensation received from supplier for delay in supply of raw materials
Rs.50,000.
v) Loss incurred in transactions of purchase and sale of shares of various companies
Rs.2 lakh
vi) Banking cash transaction tax paid Rs.20,000.
vii) Fringe benefit tax paid Rs.2.50 lakh.
viii) Capital expenditure incurred for the purpose of promoting family planning
amongst its employees Rs.1 lakh.
ix) Payment to two employees of Rs.3 lakh each in connection with their voluntary
retirement.
Compute the total income of Style Ltd. for the assessment year 2009-10.Furnish
explanation for the treatment of the various items given above. (20)
4. (a) Mr. Anirban has filed his return of loss under section 139(3) for A.Y.2009-10 on
13.6.2009 disclosing a loss of Rs.7 lakh. His brother, Mr. Kamal has filed his
return of income under section 139(4) for A.Y.2009-10 on 18.8.2009 disclosing
an income of Rs.5 lakh. Later, the brothers found that they had erroneously
omitted to claim deduction under section 80D in respect of medical insurance
premium paid by them. They want to file a revised return for claiming such
deduction. However, they are advised that they cannot do so, since only a return
of income filed under section 139(1) can be revised. Is this advice correct, taking
into account the provisions of the Income-tax Act ? Discuss. (6)
(b) Mr. Dey furnishes the following particulars of his income for the previous year
2008-2009 :
Particulars Rs.
A: Business loss (-) 4,00,000
Unabsorbed depreciation (-) 2,00,000
B: Business profit 10,00,000
Income from house property 2,00,000
Carried forward losses and allowance;
C business was discontinued on 31-12-2003
Apart from the abovementioned, the following unabsorbed:
1. Business loss (-) 3,00,000
2. Depreciation (-) 2,00,000
D business was discontinued on 1-3-2006 leaving the
following unabsorbed:
1. Business loss (-) 3,00,000
2. Depreciation (-) 1,00,000
Compute his total income for the Assessment Year 2009-10. (14)
5. Dr. Paul gives the particulars of the assets held by him on 31.3.2009. You are required
to compute his net wealth giving reasons for the treatment of each item of asset :
(i) He is a qualified doctor and was in possession of surgical equipments used for
his professional activity. The value of all such equipments was Rs.3 lakh.
(ii) House located in Gurgaon shown in his wealth-tax return for A.Y.2009-10 at
Rs.62 lakh was sold on 28.3.09 for Rs.70 lakh, but the sale deed thereof was
executed on 5.4.08.
(iii) Urban land located at Pune was purchased for Rs.4 lakh in April 2006, in the
name of his minor daughter who is suffering from a disability specified under
section 80U.The value of land on 31.3.2009 was Rs.8 lakh.
(iv) A flat in Bangalore purchased under installment scheme in 1990 for Rs.20 lakh
and used for own residence since then. The market value of it was Rs.52 lakh on
31.3.2009 and installment of Rs.2 lakh was also outstanding.
(v) Jewellery gifted to wife from time to time in total of Rs.2 lakh and were available
with her on the valuation date having market value of Rs.7 lakh. (20)
PAPER 7
APPLIED DIRECT TAXATION
TEST PAPER — I/7/ADT/2008/T-3
Time Allowed : 3 hours Full Marks : 100
(Answer Q. No. 1 and any four from the remaining)
1. (a) State the essentials of the concepts of : (4)
i) Diversion of income
ii) Application of income
(b) What does the term “substantial interest” denote under Income-tax Act? (2)
(c) When is an individual/HUF said to be “Resident but not ordinarily Resident”
under the Income tax Act, 1961? (4)
(d) Mr.X visited India for 100 days every year since 1999-2000. During the previous
year 2008-09, he visited India for 65 days only. Determine his Residential Status
for the Assessment Year 2009-10. Would your answer differ if he had visited
India for 110 days instead of 100 days? (6)
(e) State the activities and operations, income from which is not deemed to accrue
or arise in India. (4)
2. (a) Compute Gross Salary of Mr.G for the assessment year 2009-10 from the following
details relating to the financial year 2008-09 :
(i) Gross salary Rs. 1,25,000;
(ii) Medical expenditure for treatment of G directly paid by the employer to a
private practitioner Rs. 25,001;
(iii) Medical expenditure of Mrs.G directly paid by the employer to a hospital,
approved by the Chief Commissioner of Income Tax Rs. 50,000
(iv) Reimbursement of medical expenses incurred by G, for his son, not dependent
on him, Rs. 10,000; son was suffering from a prescribed disease under Rule
11DD and was treated in a hospital approved by the Chief Commissioner;
(v) Expenditure on G’s father, dependent on him, in USA and stay expenses of
G’s father and brother but reimbursed by the employer fully Rs. 2,50,000;
(vi) However, RBI granted permission for the foreign exchange of Rs. 2,30,000
(vii) Traveling expenses of G’s father and brother in USA, fully reimbursed by the
employer Rs. 1,00,000
(viii) Income from other sources Rs.44,999. (10)
(b) Mr. F is the manager of Z Ltd. his son is a student of Amity International School.
School fees of Rs. 3,000 pm and hostel fees of Rs. 2,000 pm., are directly paid by
Z Ltd. to the school but it recovers from F only 40%. F also joins an advanced
course of Marketing Management for 3 months at IIM, Ahmedabad, fees of the
course, Rs. 1,50,000 is paid by Z Ltd. Determine the perquisite value of the
education facility. (4)
(c) Mr. Amal is a Manager in R Ltd. He gets salary @ Rs. 20,000 pm. He is also
allowed free use of computer, video-camera and television of the company.
R Ltd. has purchased (i) Computer for Rs. 1,50,000 (ii) Video-camera for
Rs. 40,000. Their written down value on 1.4.07 is Rs. 60,000 and Rs. 30,000
respectively. Television set has been taken on lease rent @ Rs. 75pm. Compute
his gross salary for the Assessment Year 2009-10. (6)
3. (a) Ownership itself is the criteria for assessment under the head income from house
property. Discuss. (3)
(b) State the conditions for allowability of unrealised rent for the purpose of
computation of Income from House Property. (3)
(c) Discuss the tax liability in respect of arrears of rent. (3)
(d) In the following cases state the head of income under which the receipt is to be
assessed and comment. (3)
(i) X let out his property to Y. Y sublets it. How is sub-letting receipt to be
assessed in the hands of Y.
(ii) Y has built a house on a leasehold land. He has let out the property and
claims income from house property under “Other sources” and deducted
expenses on repairs, security charges, and insurance and collection charges
in all amounting to 40% of receipts.
(e) Discuss the following issues relating to Income from house property.
(i) Income earned by residents from house properties situated in foreign
countries.
(ii) Properties which are used for agricultural purposes. (3)
(f) Arvind commenced construction of a residential house intended exclusively for
his residence, on 1.11.1998. He raised a loan of Rs.5,00,000 at 16 per cent interest
for the purpose of construction 1.11.1998. Finding that there was an over-run
in the cost of construction he raised a further loan of Rs.8,00,000 at the same
rate of interest on 1.10.1999. What is the interest allowable under section 24,
assuming that the construction was completed by 31.3.2000? (5)
4. (a) State whether True or False, with reasons, having regard to the provisions of the
Income-tax Act, 1961 (Answers without reasoning will not be given any mark)
An existing assessee engaged in trading activities, can claim additional
depreciation under Section 32(1)(iia) in respect of new plant acquired and
installed in the trading concern, where the increase in value of such plant as
compared to the approved base year is more than 10%. (2)
(b) Discuss ‘Block of Assets’ concept under the Income-tax Act, 1961 (4)
(c) A car purchased by S on 10.8.2004 for Rs.3,25,000 for personal use is brought
into the business of the assessee on 01.12.2008, when its market value is
Rs.1,50,000.
Compute the actual cost of the car and the amount of depreciation for the
Assessment year 2009-10 assuming the rate of depreciation to be 20%. (4)
(d) What are the receipts to be excluded for computing “actual cost” of an asset
under Income-tax Act? (4)
(e) A non-resident is engaged in shipping business. The company also operates its
ship in India. Explain how the income from the company’s business operation
in India is computed. (6)
5. (a) Calculate the deduction allowable under section 80GG to an assessee having
the following income :
Rs.
Business income 55,000
Interest from bank and dividend income 5,000
Total income 60,000
Rent paid by him for a house occupied by him for the
purpose of his residence Rs. 1250 p.m. (6)
(b) Under what circumstances is interest u/s 234A chargeable? (4)
(c) When & how is interest u/s 234B computed? (4)
(d) Write short note on self-assessment tax under section 140A of the Income-tax
Act, 1961. (6)
6. (a) Discuss the taxability of Zero Coupon Bonds. (5)
(b) A Ltd is engaged in the construction of residential flats. For the valuation date
31.3.2009, it furnishes the following data and requests you to compute the taxable
wealth —
(a) Land in urban area (Construction is not permitted as per Municipal Laws in
force) Rs. 55,00,000
(b) Motor-cars (used on hire by the company) Rs. 10,00,000
(c) Jewellery (Investment) Rs. 25,00,000. Loan taken for purchasing the same
Rs. 20,00,000
(d) Cash Balance (as per books) Rs. 2,75,000
(e) Bank Balances Rs. 5,50,000
(f) Guest House (situated in a place which is 30 Kms away from the local limits
of the municipality) Rs. 10,00,000
(g) Residential flats occupied by the Managing Director Rs. 15,00,000. The
Managing Director is on whole time appointment and is drawing
remuneration of Rs. 2,00,000 per month.
Test Papers — Intermediate Group I 51
(h) Residential house were let out on hire for 200 days Rs. 10,00,000
The computation should be supported with proper reasoning for inclusion or
exclusion. (15)
7. (a) The W.D.V. of the block of assets as on 1.4.2008 was Rs.5 lacs. An asset of the
same block was acquired on 11.5.08 for Rs.3 lacs. There was a fire on 18.9.2008
and the assets were destroyed by fire and the assessee received a sum of Rs.11
lacs from the insurance company. Compute the capital gain assuming :
i) All the assets were destroyed by fire
ii) Part of the block was destroyed by fire
Would your answer differ if the assessee received Rs.6,00,000 from insurance
company assuming :
i) All the assets were destroyed by fire
ii) Part of the block was destroyed by fire. (10)
(b) Z Ltd is a qualifying shipping company which has got two qualifying ships
during the previous year 2008-2009 :
Ship Tonnage Weight No.of operational days
A 37,949 Tonnes and 990 kgs 300 days
B 25,550 tonnes and 275 kg 365 days
Compute its tonnage income under Tonnage Tax Scheme for the assessment
year 2009-2010. (6)
(c) Define “SPECIFIED PERSONS” for deduction of tax at source u/s 194C. (4)
PAPER 7
APPLIED DIRECT TAXATION
TEST PAPER — I/7/ADT/2008/T-4
Time Allowed : 3 hours Full Marks : 100
(Answer Q. No. 1 and any four from the remaining)
1. (a) In the Previous year 2008-09, a sailor has remained on ship for a foreign company
owning ocean going ships as follows :
i) Outside the territorial waters of India for 183 days.
ii) Inside the territorial waters of India for 183 days.
Is he considered to be resident or not for the Assessment Year 2009-10. Comment.
(3)
(b) How the following concept is defined under section 9 of the Income-tax Act,
1961? “Income arising from business connection in India. (3)
(c) Mr. X furnishes the following particulars of his income earned during previous
year ended on 31 March 2009 :
(i) Income from agriculture in Bangladesh, received there Rs. 3,80,000, but later
on remitted to India,
(ii) Interest on Pakistani Development Bonds, Rs. 60,000, one-sixth of which
received in India,
(iii) Gift of Rs. 70,000 received in foreign currency from a relative in India,
(iv) Arrears of salary Rs. 1,50,000 received in Pakistan from a former employer
in India.
(v) Income from property received outside India Rs. 3,00,000 (Rs. 1,00,000 is
used in Bahrain for the educational ex-penses of his son in Bahrain, and
Rs. 2,00,000 later on remitted to India).
(vi) Income from business in Iran which is controlled from India (Rs. 1,00,000
being received in India) Rs. 2,00,000.
(vii) Dividends received on 30.06.2008 outside India from an Indian company,
Rs. 2,50,000.
Test Papers — Intermediate Group I 53
(viii) Untaxed profit of the FY 2004-2005 brought to India in July 2008,
Rs. 2,50,000.
(ix) Profit (computed) on sale of building in India received in Pakistan
Rs. 21,00,000.
(x) Profit from business in Kolkata managed from outside India Rs. 90,000, 60%
of which is received outside India.
Find out gross total income of Mr. X for AY 2009-2010, if Mr. X is (a) resident and
ordinarily resident; (b) resident but not ordinarily resident; (c) non-resident. (10)
(d) Mr. JK is a Manager in R Ltd. He gets salary @ Rs. 20,000 pm. He is also allowed
free use of computer, video-camera and television of the company. R Ltd. has
purchased (i) Computer for Rs. 1,50,000 (ii) Video-camera for Rs. 40,000. Their
written down value on 1.4.07 is Rs. 60,000 and Rs. 30,000 respectively. Television
set has been taken on lease rent @ Rs. 75pm. Compute his gross salary for the
assessment year 2009-10. (4)
2. (a) Mr.Kabir is getting a salary of Rs.12,000 p.m. w.e.f. 1.4.2008. He is promoted
w.e.f. 31.12.2007 and got arrears of Rs.75,000. Bonus for the year 2008-09 is
Rs.15,000 remains outstanding but bonus of Rs.12,000 for the year 2007-08 was
paid on 1st January 2009. In March 2009, he got two months salary i.e. April
and May 2009 in advance. Compute the gross salary for the assessment year
2009-10. (6)
(b) Z is employed in A Ltd. As on 31.3.09, his basic salary Rs.6,000 p.m. He is also
entitled to a dearness allowance of 50% of basic salary. 70% of the dearness
allowance is considered for retirement benefits. The company gives him HRA
Rs.3,000pm. With effect from 1/1/09 he receives an increment of Rs. 1,000 in
his basic salary. was staying with his parents till 31.10.2008. From 1.11.08 he
takes an accommodation on rent in Delhi and pays Rs. 2,500 pm as rent for the
accommodation. Compute taxable HRA for the assessment year 2009-10. (8)
(c) Mr. Surya was an employee of IPC Ltd. After 38 years of service, he retired on
29.2.09. He was drawing a monthly salary of Rs. 15,000 in 2007, Rs. 16,500 in
2008 and Rs. 18,000 from 1.1.09 to 29.2.09. On retirement he received a gratuity
of Rs.4,00,000. Compute taxable gratuity. (6)
3. (a) State the circumstances when income is deemed to have escaped assessment. (3)
(b) Summary assessment u/s 143(1) of the Income Tax Act, 1961. (3)
(c) If a return of loss was not filed within the due date, what are the consequences? (3)
(d) Write short notes on best judgment assessment. (5)
(e) What do you understand by Permanent Account Number? Discuss the
procedure for allotment of this number, and its use. (6)
4. (a) Fiona received the following gifts during the year ending 31.03.2009 :
i) Rs. 40,000 from her elder sister.
ii) Rs.60,000 from the daughter of her elder sister.
iii) Rs. 1,25,000 from various friends on the occasion of her marriage,
Discuss the taxability or otherwise of these gifts in the hands of Fiona. (4)
(b) Discuss the taxability of Family Pension. (4)
(c) Mr. J is suffering with 60% locomotor disability which is certified by medical
authority. He is employed as Techni-cal Supervisor Sing Air Tel at a salary of Rs.
20,000 p.m.
Particulars Rs
(i) Income from government securities 20,000
(ii) Long-term capital loss (-) 40,000
(iii) Short-term capital gain (Sec. 111A) 1,00,000
(iv) Insurance commission (gross) 1,00,000
(v) Interest on Saving Fund a/c from bank 10,000
He has incurred the following expenses :
(i) Medical insurance paid by cheque for his father, resident in India and 70
years 18,000
(ii) Deposit with LIC for maintenance of father, mainly dependant on him for
support and maintenance and suffering from low-vision with a severe
disability of 80%, as per certificate of the medical authority
(iii) Rent paid for the year 2008-2009 for accommodation hired by him. 40,000
Compute his total income for the assessment year 2009-2010. (12)
5. (a) Mr. Kushal Sengupta owns a house at Jharkhand, which is let-out at Rs.1,35,000
per annum. The annual value of the property as per municipal records also is
Rs.1,00,000. Municipal taxes are partly borne by the owner (Rs. 5,000) and partly
by the tenant (Rs. 6,000). Repair expenses are borne by tenant (Rs. 10,000) the
difference between the un-built area and specified area does not exceed 5%. The
property was acquired on 10.5.1998 for Rs. 15,00,000.
Determine for purposes of Wealth Tax Act, the value of the property as on
31.3.2009 on the following situations —
i) The house is built on a freehold land.
ii) It is built on a leasehold land, the unexpired period of lease of the land is
more than 50 years.
iii) If the area of the plot on which the house is built is 800 sq. meters. FSI,
permissible is 1.4 and FSI utilised is 1088 sq. metres. (136 sq. metres × 8 Storeys)
iv) The tenant had made interest free deposit of Rs. 1,00,000 with the landlord.
12
(b) P Ltd. furnishes the following details in respect of Block of Assets No.5, entitled
to 60% rate of depreciation :
WDV on 1.4.06, consisting of five machines Rs. 25,00,000; Assets acquired during
the year Rs. 10,50,000.
Compute WDV/capital gain/loss in the following cases for the previous year
2008-09 under each of the following situations :
(i) 3 machines have been sold during the year for Rs. 20,50,000
(ii) Entire block is sold during the year for Rs. 30,00,000
(iii) Entire block is sold during the year for Rs. 45,00,000. 8
6. (a) From the following data provided by an individual, you are required to work
out the total income chargeable to tax and ascertain the tax thereon for
A Y 2008-2009 :
(Rs.)
(a) Business Loss 50,00,000
(b) Property Income 45,00,000
(c) Income from other Sources 1,00,000
(d) Capital Gains :
Short Term 3,00,000
Long Term 11,00,000 (6)
(b) Dr. (Ms) P. Chopra is the owner of a big house consisting of three units. Unit I
consist of 40% area and Unit II and III are equal dimension, each occupying
30% area. The construction of house was completed on 1 April 2003 at a cost of
Rs. 10,00,000. The municipal value of the house for the previous year 2008-2009
has been fixed at Rs. 2,00,000. Municipal taxes have been levied and paid @
15% of rateable value. The rent under the Rent Control Act is Rs. 1,50,000. Unit
I is let out @ 10,000 p.m. for residential purposes. Unit II is self-occupied. Unit III
is used by her for her professional purposes. The rent did not pay two months
rent and conditions of Rule 4 are satisfied. She paid ground rent, Rs. 9,000;
interest on loan, taken during 1999-2000 for the construction of the house and
payable during the PY 2008-2009 Rs. 1,50,000; insurance premium, Rs. 6,000.
She spent Rs. 30,000 on repair of the house. Depreciation for the clinic portion is
Rs. 15,000. Her gross receipt from professional during the previous year 2008-
2009 amount to Rs. 5,60,000.
Compute her gross total income for the assessment year 2009-2010. (14)
7. (a) What would be your advice regarding admissibility of the following items of
expenditure in computing the business income : (12)
i) A donation of Rs. 1 lakh made to a University for starting a laboratory for
scientific research (i) relating to the assessee’s business, (ii) not relating to the
assessee’s business.
ii) Travelling expenses include a sum of Rs. 15,000 incurred by a director in
travelling abroad for negotiating purchase of plant and purchase of plant
and machinery.
iii) Amount payable as damages to Government on account of shortfall in export
target.
iv) Overdraft from bank for payment of income tax: interest charged by the
bank is Rs. 20,000.
v) Payment of interest of Rs. 40,000 on monies borrowed from bank for payment
of dividends to shareholders.
vi) Rs. 12,000 paid for shifting of business from the original site to the present
place which is more advantageously located.
vii) Retrenchment compensation of Rs. 4 lakh paid to the workmen on the closure
of one of the units.
viii) Fees paid to the Registrar of Companies for bringing about a change in the
Memorandum and Articles of Association in regard to issue of Equity.
(b) Discuss the undisclosed sources of Income as per Income Tax Act, 1961. 8
Comment (1)
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