This Question Paper is copyrighted property of AIR1CA Career Institute.

Sharing and Circulating it without

permission is punishable offence.

CA FINAL NEW COURSE (Nov 2022)

GROUP II – PAPER 7
DIRECT TAX LAWS & INTERNATIONAL TAXATION
(Series 1)
Time Allowed: - 3 Hours Maximum Marks: 100

This question paper comprises two parts, Part I and Part II.
Part I comprises MCQ & Part II comprises questions which require descriptive answers.
All questions relate to A.Y. 2022-23 unless stated otherwise in the question.

PART – I (MCQs)
All MCQs are compulsory

Question no. 1-10 carry 2 marks each and Question no. 11-20 carry 1 mark each

This Case Scenario contains MCQ 1-6

Mr. Sam (citizen of India) whose age is 68 years returned to India on 2 nd October, 2021 at 12:00
A.M. for permanently residing in India after a stay of about 20 years in U.S., provides the sources of
his various income and seeks your opinion to know about his liability to income tax thereon in
India in assessment year 2022-23. He is also resident of US in Previous Year 2021-22 as per US Tax
Law. Assume there is no double taxation avoidance agreement between India and US. Details of
Income earned by Mr. Sam in Previous Year 2021-22 is as under:

Particulars ₹
(a) Profits from a business in Ranchi managed from US 1,23,000
(b) Income from property in US received there 36,000
(c) Income from agricultural land in Nepal received there and remitted to India later on. 33,500
(d) Interest on debentures in an Indian company received in US 6,200
(e) Income from profession in US which was set up in Patna, received there. 42,000
(f) Profits earned from business in US which is controlled from Jamshedpur, 25% of the 80,000
profits being received in Jamshedpur
(g) Fees for technical services rendered in Patna (connected with PE in India) but received 1,25,000
in US
(h) Untaxed Income from US of earlier years brought to India 15,500
(i) Dividend from a US company received in US 14,000
(j) Interest on development bonds issued in US, 40% of interest received in Patna 20,000

In the light of above facts, you are required to answer the following:
1. What would be the residential status of Mr. Sam in A.Y. 2022-23 -
(a) Resident and Ordinary Resident
(b) Resident but Not Ordinary Resident
MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)
AIR1CA Career Institute (ACI)
Page 1
 (c) Non Resident
(d) Non Resident Indian

2. Compute Total Income of Mr. Sam for the A.Y. 2022-23 -

(a) ₹ 4,79,700
(b) ₹ 3,84,200
(c) ₹ 2,82,200
(d) ₹ 2,97,700
3. Compute the Tax Liability (Before providing relief u/s 87A) of Mr. Sam for the A.Y. 2022-23 -
(a) ₹ 1,674
(b) ₹ 4,378
(c) ₹ 9,344
(d) Nil
4. Compute the relief available to Mr. Sam for the A.Y. 2022-23 u/s 91 -
(a) ₹ 4,378
(b) Nil
(c) ₹ 1,674
(d) ₹ 9,344
5. Fees for technical service earned by Mr. Sam in India is taxable at _____ rate in A.Y. 2022-23 -
(a) 10%
(b) 20%
(c) Normal Slab Rate
(d) Not Taxable
6. Assume there is Double Taxation Avoidance Agreement between India and US, then as per
Article 4 of DTAA, Mr. Sam will be treated as Resident of which country in A.Y. 2022-23 -
(a) US
(b) India
(c) Both US and India
(d) Neither India nor US

This Case Scenario contains MCQ 7-10

Ms. Chanchal, aged 45, provides the following data of her gross receipts for the financial year 2020-21
and 2021-22. She is engaged in agency business along with providing services as tarot card reader.
F.Y. Receipts from business (₹) Receipts from profession (₹ ) Total Gross Receipts (₹ )
2020-21 78,00,000 43,00,000 1,21,00,000
2021-22 85,00,000 47,00,000 1,32,00,000
During the F.Y. 2021-22, she paid an amount of ₹ 1,20,000 to a contractor for polishing her old
furniture. She has taken services from renowned interior designers for her self- occupied residential
house property for which she paid ₹ 2,50,000.

MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)

AIR1CA Career Institute (ACI)
Page 2
Further, on 27.05.2021 she sold one commercial property for ₹ 50,00,000. The value adopted for
stamp duty was ₹ 55,00,000. It was purchased for ₹ 40,00,000 on 28.05.2019. (Cost Inflation Index for
F.Y. 2021-22: 317, F.Y. 2019-20: 289).
The brought forward short-term capital loss from unlisted shares of F.Y. 2020-21 is ₹ 10,80,000.
During the year, Ms. Chanchal incurred a loss of ₹ 70,00,000 while trading in the agricultural
commodity derivatives (no CTT paid).
Mr. Nishant (Husband of Ms. Chanchal), a resident but not ordinarily resident for the previous year
2020-21 and resident and ordinarily resident for the previous year 2021-22 has received rent from
property in Canada amounting to ₹ 1,00,000 during the P.Y.2020-21. He has deposited the same in a
bank in Canada. During the financial year 2021-22, he remitted this amount to India through approved
banking channels.
From the details given above, choose the most appropriate option to the questions given below:

7. What is the total amount of tax to be deducted by Ms. Chanchal for P.Y. 2021-22?
(a) ₹ 1,200
(b) ₹ 26,200
(c) Nil
(d) ₹ 27,400

8. What is the net amount and nature of Capital gain chargeable to tax in the hands of Ms.
Chanchal?
(a) ₹ 10,00,000 and Short-term capital gain.
(b) ₹ 15,00,000 and Short-term capital gain.
(c) ₹ 7,00,000 and Long-term capital gain.
(d) Nil

9. What is the amount of losses which can be carried forward to A.Y. 2022-23, assuming that
business income is ₹ 45,00,000 and income from profession is ₹ 25,00,000 for the P.Y.
2021-22?
(a) ₹ 10,80,000 under section 74
(b) ₹ 70,00,000 under section 73
(c) ₹ 80,000 under section 74
(d) ₹ 80,000 under section 74 and ₹70,00,000 under section 73

10. Is rent received by Mr. Nishant taxable in India, and if so, how much and in which year?
(a) Yes; ₹ 70,000 was taxable in India during the previous year 2020-21.
(b) Yes; ₹ 1,00,000 was taxable in India during the previous year 2020-21.
(c) Yes; ₹ 70,000 was taxable in India during the previous year 2021-22.
(d) No; such rent is not taxable in India either during the previous year 2020-21 or during the
previous year 2021-22.

Question no. 11-20 carry 1 mark each

11. Mr. Raghav has three houses for self-occupation. What would be the tax treatment for

MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)

AIR1CA Career Institute (ACI)
Page 3
 A.Y.2022-23 in respect of income from house property?
(a) One house, at the option of Mr. Raghav, would be treated as self-occupied. The other
two houses would be deemed to be let out.
(b) Two houses, at the option of Mr. Raghav, would be treated as self -occupied. The
other house would be deemed to be let out.
(c) One house, at the option of Assessing Officer, would be treated as self-occupied. The
other two houses would be deemed to be let out.
(d) Two houses, at the option of Assessing Officer, would be treated as self -occupied.
The other house would be deemed to be let out.
12. Arun’s gross total income of P.Y. 2021-22 is ₹ 2,45,000. He deposits ₹ 45,000 in PPF. He pays
electricity bills aggregating to ₹ 1.20 lakhs in the P.Y.2021-22. Which of the statements is
correct?
(a) Arun is not required to file his return of income u/s 139(1) for P.Y. 2021-22, since his
total income before giving effect to deduction under section 80C does not exceed the
basic exemption limit.
(b) Arun is not required to file his return of income u/s 139(1) for P.Y. 2021-22, since his
electricity bills do not exceed ₹ 2,00,000 for the P.Y.2021-22.
(c) Arun is not required to file his return of income u/s 139(1) for P.Y. 2021-22, since
neither his total income before giving effect to deduction under section 80C exceeds
the basic exemption limit nor his electricity bills exceed ₹ 2 lakh for the P.Y.2021-22.
(d) Arun is required to file his return of income u/s 139(1) for P.Y. 2021-22, since his
electricity bills exceed ₹1 lakh for the P.Y.2021-22.
13. Mr. Ritvik has purchased his first house in Gwalior for self-occupation on 5.4.2021 for ₹ 45
lakhs (stamp duty value being the same) with bank loan sanctioned on 30.3.2021 and
disbursed on 3.4.2021. He paid interest of ₹ 3.8 lakhs during the P.Y.2021-22. What is the tax
treatment of interest paid by him?
(a) Interest of ₹2 lakhs allowable u/s 24
(b) Interest of ₹2 lakhs allowable u/s 24 and ₹1.8 lakhs allowable u/s 80EEA
(c) Interest of ₹2 lakhs allowable u/s 24 and ₹1.5 lakhs allowable u/s 80EEA
(d) Interest of ₹1.5 lakhs allowable u/s 24 and ₹1.5 lakhs allowable u/s 80EEA
14. During the P.Y.2021-22, Mr. Ranjit has short-term capital gains of ₹ 95 lakhs taxable under
section 111A, long-term capital gains of ₹ 110 lakhs taxable under section 112A and business
income of ₹ 90 lakhs. Which of the following statements is correct?
(a) Surcharge@25% is leviable on income-tax computed on total income of ₹ 2.95 crore,
since total income exceeds ₹ 2 crore.
(b) Surcharge@15% is leviable on income-tax computed on total income of ₹ 2.95 crore.
(c) Surcharge@15% is leviable in respect of income-tax computed on capital gains of ₹ 2.05
crore; in respect of business income, surcharge is leviable@25% on income- tax, since total
income exceeds ₹ 2 crore.
(d) Surcharge@15% is leviable in respect of income-tax computed on capital gains of ₹
2.05 crore; surcharge@10% is leviable on income-tax computed on business income, since
the same exceeds ₹ 50 lakhs but is less than ₹ 1 crore.
15. Mr. Ajay is found to be the owner of two gold chains of 50 gms each (market value of which is ₹
1,45,000 each) during the financial year ending 31.3.2022 but he could offer satisfactory
explanation for ₹ 50,000 spent on acquiring these gold chains. As per section 115BBE, Mr. Ajay
would be liable to pay tax of –
(a) ₹ 1,87,200

MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)

AIR1CA Career Institute (ACI)
Page 4
 (b) ₹ 2,26,200
(c) ₹ 1,49,760
(d) ₹ 1,80,960
16. Mr. Suhaan (aged 35 years), a non-resident earned dividend income of ₹ 12,50,000 from an
Indian Company which is credited directly to its bank account in France and ₹ 15,000 as
interest in Saving A/c from State Bank of India during the previous year 2021-22. Assuming that
he has no other income, what will be amount of income chargeable to tax in his hands in India
for A.Y. 2022-23?
(a) ₹ 12,55,000
(b) ₹ 2,65,000
(c) ₹ 15,000
(d) ₹ 5,000
17. XYZ Ltd. has two units, one unit at Special Economic Zone (SEZ) and other unit at Domestic
Tariff Area (DTA). The unit in SEZ was set up and started manufacturing from 12.3.2015 and
unit in DTA from 15.6.2018. Total turnover of XYZ Ltd. and Unit in DTA is ₹ 8,50,00,000 and
3,25,00,000, respectively. Export sales of unit in SEZ and DTA is ₹ 2,50,00,000 and ₹
1,25,00,000, respectively and net profit of Unit in SEZ and DTA is ₹ 80,00,000 and ₹
45,00,000, respectively. XYZ Ltd. would be eligible for deduction under section 10AA for -
(a) ₹ 38,09,524
(b) ₹ 19,04,762
(c) ₹ 23,52,941
(d) ₹ 11,76,471
18. Mr. Jha, an employee of FX Ltd, attained 60 years of age on 15.05.2021. He is resident in India
during F.Y. 2021-22 and earned salary income of ₹5 lacs (computed) During the year, he earned
₹ 7 lacs from winning of lotteries. Compute his advance tax liability for A.Y. 2022-23:
(a) ₹ 2,20,000 + Cess ₹ 8,800 = ₹2,28,800, being the tax payable on total income of ₹12 lacs
(b) ₹ 2,10,000 + Cess ₹ 8,400 = ₹2,18,400, being the tax payable on lottery income of ₹7 lacs
(c) ₹ 10,000 + Cess ₹400 = ₹ 20,400, being the tax payable on salary income, since tax
would have been deducted at source from lottery income.
(d) Nil
19. APM Ltd. is a pioneer company in textile industry. At the end of F.Y. 2021-22, it decided to
distribute deposit certificates (without interest) to its shareholders (preference as well as equity
shareholders). Total value of accumulated profits of APM Ltd. was ₹ 25 lakhs. Mr. A is an equity
shareholder of APM Ltd. holding 10% of share capital. During F.Y. 2021-22, Mr. A received
deposit certificates (without interest) valuing ₹ 5,00,000 from APM Ltd. Comment upon
taxability of receipt of deposit certificates in the hands of Mr. A.
(a) Deposit Receipts (without interest) are taxable to the extent of ₹2,50,000 under Income
from other sources.
(b) Deposit Receipts (without interest) are fully taxable under Income from other sources.
(c) Deposit Receipts (without interest) are exempt since DDT is payable by the company.
(d) Deposit Receipts (without interest) are fully taxable and shall be included in Gross total
income. But such receipt shall be allowed as deduction under Chapter-VI A.
20. Mr. Pawan is engaged in the business of roasting and grinding coffee beans. During F.Y. 2021-
22, his total income is ₹ 4.5 lacs. Mr. Pawan filed its return of income for A.Y. 2022-23 on 3rd
March, 2023. Compute fee payable for default in furnishing in return of income for PQ &

MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)

AIR1CA Career Institute (ACI)
Page 5
Associates for A.Y. 2022-23:
(a) ₹ 5,000
(b) Not exceeding ₹ 1,000
(c) ₹ 10,000
(d) No fees payable as total income is below ₹ 5,00,000

MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)

AIR1CA Career Institute (ACI)
Page 6
 PART – II (Descriptive Answers)
This part comprises 6 questions. Question No. 1 is compulsory. Attempt any
4 questions out of the remaining 5 questions.

1 Hind Udyog Ltd., a Private Manufacturing Company, provides following 14

information relating to the year ending on 31.03.2022:
Net profit of ₹ 28.75 lakhs, as per profit and loss account, was arrived at after
debiting/crediting the following items:
(i) The company had provided an amount of ₹ 2 lakhs being sum estimated as
payable to workers based on agreement to be entered with the workers
union towards periodical wage revision once in three years. The provision
is based on a fair estimation on wage and reasonable certainty of revision
once in three years.
(ii) Sale proceeds of import entitlements amounting to ₹ 1 lakh have been
credited to profit and loss account, which the company claims as capital
receipt not chargeable to income tax.
(iii) Goods and Service Tax demand paid includes an amount of ₹ 5,300 charged
as penalty for delayed filing of returns and ₹ 12,750 towards interest for
delay in deposit of tax.
(iv) A free air ticket was provided by a supplier for reaching a certain volume of
purchase during the F.Y. 2021-22. The same is not credited in profit & loss
account because it was encashed by the company for ₹ 2 lakhs in April 2022.
(v) The company had purchased an old building for the purpose of locating its
business. Due to old age of building, it was demolished and a new building
put up, which was used by the company from September, 2021. The cost of
new building ₹ 10 lakh was written off as revenue expenditure.
(vi) Loss incurred in transactions of purchase and sale of shares (without
delivery) of various companies ₹ 3 lakhs.
The company furnishes following additional information relating to it:
(1) A scheduled bank sanctioned and disbursed a term loan in the financial year
2018-19 for a sum of ₹ 50 lakhs. Interest of ₹ 8 lakhs was in arrears. The
bank has converted the arrear of interest into a new loan repayable in 10
equal instalments. During the year, the company has paid 2 instalments and
the amount so paid has been reduced from Funded Interest in the Balance
Sheet.
(2) Provision for audit fees ₹ 2.5 lakhs was made in the books for the year
ended on 31.03.2021 without deducting tax at source. Such fees was paid to
the auditors in September, 2021 after deducting tax under section 194J and
the tax so deducted was deposited on 7th December, 2021.
(3) The company had made an investment of ₹ 23 lakhs and ₹ 12 lakhs on the
construction of two warehouses (excluding the cost of land), in rural areas
for the purpose of storage of agricultural produce and edible oil
respectively. These were made available for use from 15.09.2021. The
profits from setting of these warehouses (before claiming deduction under
section 35AD and 32) for the A.Y. 2022-23 is ₹ 15 lakhs and ₹ 5 lakhs

MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)

AIR1CA Career Institute (ACI)
Page 7
 respectively.
(4) In July, 2021 company received a dividend of ₹ 11 lakhs from A Ltd. in
which it holds 10% of shares.
Compute the total income of Hind Udyog Ltd. for the A.Y. 2022-23 by analysing,
integrating and applying the relevant provisions of Income tax law. Explain in
brief, the reasons for the treatment of each item.

2 (a) Mahadev & Sons Ltd. is a Public Company whose accounts have been prepared in 8
accordance with provisions of Schedule III of Company's Act. Its P&L for the year
ended 31st March, 2022 shows a Net Profit of ₹ 27 Lakhs. The Company informs
the following debit/credits have been made in the P & L A/c before arriving at the
above stated Net Profit.
Credits to the P&L A/c Debits to the P&L A/c
1 Net Agricultural income in India - 1 Expenses relating to section 10AA
11 Lakhs undertaking - 16 Lakhs
2 Profits of industrial undertaking 2 Current year Depreciation - 12 lakhs
covered & qualified for deduction
u/s 10AA – 30 Lakhs
3 Amount withdrawn from reserve 3 Interest to bank not paid upto filing
created in P.Y. 2020-21 (Book of ROI – 5 Lakhs
profit was not increased by the
amount transferred to the
reserve in the year 2020-21) - 4
Lakhs
4 LTCG on sale of equity shares on 4 Provision for unascertained liability
which STT paid - 3.50 lakhs - 3 lakhs
5 Amount withdrawn from 5 Income-tax – 6 lakhs
Revaluation Reserve – 10 lakhs
6 Penalty for infraction of Law - 2
lakhs
Further Information:
- Depreciation relating to P.Y. 2020-21 b/f 13 Lakhs
- Business Loss relating to P.Y. 2020-21 b/f 10 lakhs
- Depreciation for current year includes ₹ 5 Lakhs towards revaluation of assets.
Compute the book profits of the Company for the year ended 31.03.2022 liable to
tax under MAT.

2 (b) Wioni Inc., a company incorporated in Japan, is engaged in development of 6

infrastructure and providing consultancy in the same field. During the Financial
Year 2021-22, its shareholders met in India for three times. The first two meetings
were held to discuss the modification of rights attached to various classes of
shares and the third meeting was held to discuss and decide about sale of
companies' assets situated in India. It provides the following additional
information pertaining to Financial Year 2021-22:
MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)
AIR1CA Career Institute (ACI)
Page 8
 (i) Dividend declared by a Miani Inc., a Japan based Company: ₹ 54,000 [Miani
Inc. holds 70% of its total assets in India].
(ii) Fees for technical services received from Government of India: ₹ 4,54,000.
The Government of India utilised such technical services for a development
project carried out by it in Nepal.
(iii) Interest received from Ms. O, a unit located in IFSC in respect of monies
borrowed by Ms. O: ₹ 15,400 (Date of loan 24-12-2021)
(iv) On 26-8-2021, Wioni Inc. sold 5,000 equity shares held by it in an Indian
Company for ₹ 89 per share. These shares were bought by the Wioni Inc. on
28th June, 2011 for ₹ 64 per share. Both the purchase and sale of shares
were effected through a recognized stock exchange in India. Fair Market
Value of these shares on 31-01-2018 was ₹ 70 per share.
You are required to compute the total income of Wioni Inc. for the assessment
year 2022-23 briefly explaining the relevant provisions of the Income-tax Act,
1961.

3 (a) Edu All Charitable Trust registered under section 12AB, following cash system of 8
accounting, furnishes you the following information for P.Y. 2021-22:
(i) Gross receipts from hospital ₹ 600 lakhs.
(ii) Corpus donations by way of cheque ₹ 42 lakhs and by way of cash ₹ 6 lakhs.
The corpus donation is invested in modes specified under section 11(5).
(iii) Anonymous donations by cash ₹ 12 lakhs.
(iv) Administrative expenses for hospital ₹ 415 lakhs.
(v) Fees not realized from patients ₹ 18,00,000 as on 31st March, 2022.
(vi) Depreciation on assets of the trust ₹ 37,50,000. The entire cost of assets ₹
250 lakhs claimed as application in the earlier years.
(vii) Acquired a building for ₹ 80 lakhs on 01.06.2021 for expansion of hospital
(cost of land included therein ₹ 50 lakhs). Stamp duty value of the land and
building on the date of registration of sale deed ₹ 210 lakhs.
(viii) The trust gave corpus donation of ₹ 19 lakhs to Help Aid Trust having
objects of charitable nature registered under section 12AB but not similar
to the objects of the donor trust.
You are required to compute the total income of the trust and its income-tax
liability in such a manner that it can avail the optimal benefit within the four
corners of the Income Tax Act, 1961.
Note: Trust does not want to seek accumulation of income by virtue of section
11(2) of the Act.

3 (b) Amar P Ltd., Bangalore is engaged in IT Enabled services. It is the subsidiary of 6

ABC Inc in US. It also provides similar services to a company SAK Ltd. at
Singapore. Its billings and other information is as given hereunder:
(i) Billings per month to ABC Inc. - USD 85000
(ii) Billings per month to SAK Ltd. - USD 70000
MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)
AIR1CA Career Institute (ACI)
Page 9
 (iii) ABC Inc has provided a loan of USD 100000 to Amar P Ltd. towards
purchase of hardware for executing its project. Rate of interest charged for
the said loan is at 3% p.a.
(iv) Direct and indirect cost incurred are USD 100 and USD 200 per hour,
respectively.
(v) Amar P Ltd. works 9 hours per day for 15 days to execute the projects for
ABC Inc and 8 hours per day for 15 days to execute projects for SAK Ltd.
Service was provided by the company to both its customers throughout
the year.
(vi) Warranty was provided to SAK Ltd. for a period of 2 years. Cost of
warranty is calculated at 1% of direct cost incurred. The cost of warranty
is neither included in the direct nor indirect cost.
Assume conversion rate 1 USD = ₹ 64. Compute Arm's Length Price as per the
cost-plus method and the amount to be added, if any, to the income of Amar P
Ltd.

4 (a) Examine the liability to deduct tax at source in respect of the following 8
independent situations:
(i) M/s Mexil Ltd. is engaged in the business of manufacturing certain article or
thing for which the raw material is imported from Russia. For the purpose
of making payment to the supplier, the assessee entered into a bank
guarantee with BDFH Bank, an Indian Bank against the payment of ₹
1,10,000 as bank guarantee commission for the Financial Year 2021-22.
(ii) StudyKart, an online education provider and a trust registered under
section 12AB of the Income-tax Act, pays ₹ 98,000 during the Financial Year
2021-22, to Mr. Monty, a non-resident for providing web based lectures.
(iii) On 31st December, 2021, Mr. Nitin, a resident individual whose gross
turnover was ₹ 97 lakhs during the preceding previous year, paid ₹ 65 lakhs
to Mr. Basant, a resident individual, as contract payment for repairing his
office building.
(iv) Fly Fly Ltd., an airlines company, paid ₹ 10 lakhs to Airports Authority of
India as landing and parking charges of its aircrafts.

4 (b) Mr. Shyam, aged 47 years, is a resident individual having income from the 6
following sources:
(i) Income from a sole-proprietary business in Noida = ₹ 50 lakhs.
(ii) Share of profit from a partnership firm in Gurgaon = ₹ 30 lakhs.
(iii) Agricultural Income (gross) from coffee estates in Country A, a foreign
country with which India has no DTAA, CAD 32000. Tax deducted on the
above income CAD 8,000
(iv) Brought forward business loss of F.Y.2020-21 in Country A was CAD 4,000
which is not permitted to be set off against other income as per the laws of
that country.
(v) Mr. Shyam has deposited ₹ 1,50,000 in public provident fund and paid

MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)

AIR1CA Career Institute (ACI)
Page 10
 medical insurance premium of ₹ 30,000 by account payee cheque to insure
his health. He has also paid ₹ 55,000 as insurance premium to insure the
health of his mother and father, who are resident Indians aged 70 years and
75 years, respectively. He also incurred ₹ 50,000 on the medical treatment
of his dependent sister, who is a person with disability. His sister does not
claim deduction under section 80U.
Compute total income and tax liability of Mr. Shyam for the A.Y. 2022-23,
assuming that 1 CAD = ₹ 60.

5 (a) (i) Mr. Rakesh received the draft order from the Assessing Officer as per 8
section 144C of the Income-tax Act, 1961 due to variations determined by
the Transfer Pricing Officer in the arm's length price. But Mr. Rakesh did not
prefer to file the objection against the draft order before the Dispute
Resolution Penal, instead, he prefer to do appeal before the CIT appeals
under section 246A against the final order received from the Assessing
Officer.
You are required to advise Mr. Rakesh, whether his contentions are tenable?
Discuss the issue with reference to provisions of section 144C of the
Income-tax Act, 1961.

(ii) Describe procedures to be followed by Authority of Advance ruling on

receipt of application under section 245R and the circumstances in which it
should not allow it.

5 (b) Mr. Robert, a non-resident, (aged 38) operates a ship for the carriage of goods, 6
passengers and livestock between Dubai, Mumbai and Chennai. He provides you
the following particulars for· the previous year 2021-22:
(i) Received ₹ 200 Lakhs in India on account of carriage of livestock from
Mumbai to London.
(ii) Received ₹ 50 Lakhs in India on account of carriage of passengers from
Dubai to Colombo.
(iii) Received ₹ 65 Lakhs in Dubai on account of carriage of goods from Chennai
to Dubai.
(iv) Expenses incurred during the year in respect of operation of such ships ₹
195 Lakhs.
(v) Winning from horse races in India ₹ 25 Lakhs
Compute the total income of Mr. Robert Chargeable to tax in India for the
assessment year 2022-23. Also, calculate the tax liability thereon.

6 (a) M/s. Universe Ltd. is a domestic company. Its turnover for the Previous Year 6
2019-20 was ₹ 300 crores. The following are the particulars furnished for the
Assessment Year 2022-23:
Particulars Income (₹)

MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)

AIR1CA Career Institute (ACI)
Page 11
 As per Return of Income filed under section 139(1) (8,00,000)
Determined under section 143(1)(a) (4,00,000)
Assessed under section 143(3) (70,000)
Reassessed under section 147 3,00,000
Can penalty be levied u/s 270A on M/s Universe Ltd.? If yes, compute the penalty
leviable u/s 270A, if
(i) under-reported income is not on account of mis-reporting.
(ii) under-reported income is on account of mis-reporting.

6 (b) Aditya Co. Ltd. is engaged in manufacturing activity. The machineries owned by it 4
have become old and obsolete. The company wants to know whether to replace
machineries by borrowing loan (or) buy the finished goods from open market and
sell in its brand name. Relevant details are as under:
Cost of machinery if acquired ₹ 500 lakhs. The company has own funds of ₹ 200
lakhs and would borrow ₹ 300 lakhs from bank@9% per annum interest to buy
the machinery. The sales would be ₹ 2500 lakhs with net profit of 15% before tax.
In case, the assessee decided to buy and sell the goods, the margin of profit would
be 5%. The funds so retained would earn interest income of 9% per annum.
Note: Ignore other commercial considerations and GST input tax credit. Assume
tax rate @30% (ignore Surcharge and Cess).
Advise the company suitably supporting your views.

6 (c) Examine and state the correctness or otherwise of each of the following 4
statements in the context of international tax treaties between the countries and
answer in brief with reasons thereof:
(i) "Providing assistance in the collection of the fair and legitimate share of tax
by the countries involved" is the sole objective of Tax Treaties entered
among Countries.
(ii) A Protocol is an integral part of the Tax Treaty and has the same binding
force as the main clauses therein.

MOCK TEST SERIES – By CA Atul & Ajay Agarwal (AIR-1)

AIR1CA Career Institute (ACI)
Page 12