Nov 22 RTP GRP-2

FINAL COURSE
GROUP – II
REVISION TEST PAPERS

NOVEMBER, 2022
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
New Delhi
© The Institute of Chartered Accountants of India

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Contents
Page Nos.
Objective & Approach .......................................................................................... i – vi
Objective of Revision Test Paper .................................................................................. i
Planning & Preparing for Examination ...........................................................................ii
Subject-wise Guidance – An Overview ......................................................................... iii

Paper-wise RTPs
Paper 5: Strategic Cost Management and Performance Evaluation ..................... 1 – 29
Paper 6: 6A to 6F [ELECTIVE PAPERS].................................................................30
Paper 7: Direct Tax Laws & International Taxation ........................................... 31 – 57
Paper 8: Indirect Tax Laws ............................................................................ 58 – 80
Applicability of Standards/Guidance Notes/Legislative Amendments etc. for

November, 2022 - Final Examination ................................................................ 81 – 92

REVISION TEST PAPER, NOVEMBER, 2022 – OBJECTIVE & APPROACH
(Students are advised to go through the following paragraphs carefully to derive
maximum benefit out of this RTP)
I. Objective of Revision Test Paper
Revision Test Papers are one among the many educational inputs provided by the Board
of Studies (BOS) to its students. Popularly referred to as RTP by the students, it is one of
the very old publications of the BOS whose significance and relevance from the
examination perspective has stood the test of time.
RTPs provide glimpses of not only the desirable ways in which examination questions are
to be answered but also of the professional quality and standard of the answers expected
of students in the examination. Further, aspirants can assess their level of preparation for
the examination by answering various questions given in the RTP and can also update
themselves with the latest developments in the various subjects relevant from the
examination point of view.
The primary objectives of the RTP are:
• To help students get an insight of their preparedness for the forthcoming examination;
• To provide an opportunity for a student to find all the latest developments relevant for
the forthcoming examination at one place;
• To supplement earlier studies;
• To enhance the confidence level of the students adequately; and
• To leverage the preparation of the students by giving guidance on how to approach
the examinations.
RTPs contain the following:
(i) Planning and preparing for examination
(ii) Subject-wise guidance – An overview
(iii) Updates applicable for a particular exam in the relevant subjects
(iv) Topic-wise questions and detailed answers thereof in respect of each paper
(v) Relevant announcement applicable for the particular examination
Students must bear in mind that the RTP contains a variety of questions based on different
sections of the syllabi and thus a comprehensive study of the entire syllabus is a pre-
requisite before answering the questions of the RTP. In other words, in order to derive
maximum benefit out of the RTPs, it is advised that before proceeding to solve the
questions given in the RTP, students ought to have thoroughly read the Study Materials.
It is important to remember that there can be large number of other complex questions

ii FINAL EXAMINATION: NOVEMBER, 2022
which are not covered in the RTP. In fact, questions contained herein are only illustrative
in nature.
The topics on which the questions are set herein have been carefully selected and
meticulous attention has been paid in framing different types of questions. Detailed
answers are provided to enable the students to do a self-assessment and have a focused
approach for effective preparation.
Students are welcome to send their suggestions for fine tuning the RTP to the Director,
Board of Studies, The Institute of Chartered Accountants of India, A-29, Sector-62, Noida
201 309 (Uttar Pradesh). RTP is also available on the Institute’s website www.icai.org
under the BOS knowledge portal in students section for downloading.
II. Planning and preparing for examination
Ideally, when the RTP reaches your hand, you must have finished reading the relevant
Study Materials of all the subjects. Make sure that you have read the Study Materials
thoroughly as they cover the syllabus comprehensively. Get a good grasp of the concepts/
provisions discussed therein. Solve each and every question/illustration given therein to
understand the application of the concepts and provisions.
After reading the Study Materials thoroughly, you should go through the Updates provided
in the RTP and then proceed to solve the questions given in the RTP on your own. RTP
is in an effective tool to revise and refresh the concepts and provisions discussed in the
Study Material. RTPs are provided to you to help you assess your level of preparation.
Hence you must solve the questions given therein on your own and thereafter compare
your answers with the answers given therein.
Examination tips
How well a student fares in the examination depends upon the level and depth of his
preparation. However, there are certain important points which can help a student better
his performance in the examination. These useful tips are given below:
 Reach the examination hall well in time.
 As soon as you get the question paper, read it carefully and thoroughly. You are
given separate 15 minutes for reading the question paper.
 Plan your time so that appropriate time is awarded for each question. Keep sometime
for checking the answers as well.
 First impression is the last impression. The question which you can answer in the
best manner should be attempted first.
 Always attempt to do all questions. Therefore, it is important that you must finish
each question within allocated time.
 Read the question carefully more than once before starting the answer to understand
very clearly as to what is required.

EVISION TEST PAPER iii
 Answer all parts of a question one after the other; do not answer different parts of the
same question at different places.
 Write in a neat and legible hand-writing.
 Always be concise and write to the point and do not try to fill pages unnecessarily.
 There must be logical expression of the answer.
 In case a question is not clear, you may state your assumptions and then answer the
question.
 Check your answers carefully and underline important points before leaving the
examination hall.
III. Subject-wise Guidance – An Overview
PAPER - 5: STRATEGIC COST MANAGEMENT AND PERFORMANCE EVALUATION
The Revision Test paper on Strategic Cost Management and Performance Evaluation
covers Case Studies/ Questions on the following topics:
S. No. Topic About the Verbs used Industry
Problem
1. Ethical and Non- Risk to peanut Explain, State, Manufacturer of
Financial exposure Recommend, edible snacks
Considerations Evaluate
2. Supply Chain Restructuring of Advise Supplier of packed
Management supply chain grocery
management
3. Ethical and Non- Contractors are Discuss and Sportswear
Financial hiring children Suggest manufacturer
Considerations illegally without
the local
knowledge of local
law enforcement
authorities
4. Performance Reconciliation Prepare, Explain, Fast Food
Measurement statement and its Advise Company
implications
5. Ethical Dilemma Make or buy Advise, Respond Electronic items
decision manufacturer
6. Transfer Pricing Range of Discuss Manufacturer
Negotiation having 3 divisions

iv FINAL EXAMINATION: NOVEMBER, 2022
7. Cost of Quality Measures to Prepare, Advise Automobiles

reduce non-
conformance cost
8. Decision Making Special Order Advise Fire Extinguisher
Decision Supplier
9. Life Cycle Ways to maximize Compute, Mould and Dies
Costing life cycle return Suggest manufacturer
10. CVP Analysis Profit Analyse Hotel
improvement plan
11. Balanced KPIs and TBL Prepare, Advise Pig Iron, Billets,
Scorecard framework HR Coils
manufacturer
12. Pricing Decision Application of Calculate, Mementos
learning curve Comment manufacturer
PAPER 7: DIRECT TAX LAWS AND INTERNATIONAL TAXATION

The syllabus of this paper is divided into two parts, namely, Part I: Direct Tax Laws (70
Marks) and Part II: International Taxation (30 Marks).
The provisions of direct tax laws, as amended by the Finance Act, 2021 and significant
notifications and circulars issued upto 30.4.2022 are relevant for November, 2022
examination. The relevant assessment year for November, 2022 examination is
A.Y.2022-23.
The October, 2021 edition of the Study Material, comprising of four modules
(Modules 1, 2 and 3 on Part I: Direct Tax Laws and Module 4 on Part II: International Taxation) is
based on the provisions of direct tax laws, as amended by the Finance Act, 2021 and significant
notifications and circulars issued upto 31.10.2021. For November, 2022 examination, this Study
Material has to be read along with the Statutory Update for November, 2022 examination
webhosted at https://resource.cdn.icai.org/70931bos56928s.pdf and Judicial Update for
November, 2022 examination webhosted at https://resource.cdn.icai.org/70932bos56928j.pdf.
You have to read the Study Material thoroughly to attain conceptual clarity. Tables,
diagrams and flow charts have been extensively used to facilitate easy understanding of
concepts. The amendments made by the Finance Act, 2021 and latest notifications and
circulars have been given in italics/bold italics. Examples and Illustrations given in the
Study Material would help you understand the application of concepts. Work out the
exercise questions at the end of each chapter and then, compare your answers with the
answers given to test your level of understanding.
Thereafter, solve all the questions in the January, 2022 edition of the publication “Booklet on
MCQs & Case Scenarios” to hone your analytical and problem-solving skills. This will help
you gain speed and accuracy in solving the MCQ based questions for 30 marks in this paper.

EVISION TEST PAPER v
Finally, solve the questions given in this RTP independently and compare the same with
the answers given to assess your level of preparedness for the examination.
PAPER – 8: INDIRECT TAX LAWS
For Paper 8: Indirect Tax Laws, the following are applicable for November 2022
examination:
(i) The provisions of the CGST Act, 2017 and IGST Act, 2017 as amended by the
Finance Act, 2021, which have become effective up to 30 th April, 2022, including
significant notifications and circulars issued and other legislative amendments made,
up to 30th April, 2022.
(ii) The provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975, as
amended by the Finance Act, 2021, including significant notifications and circulars
issued and other legislative amendments made, up to 30 th April, 2022.
* The amendments made by the Annual Union Finance Acts in the CGST Act, 2017 and
IGST Act, 2017 are made effective from the date notified subsequently. Thus, only those
amendments made by the Finance Act, 2021 which have become effective till 30.04.2022
are applicable for November 2022 examinations. Consequently, amendment made by the
Finance Act, 2021 in section 16 of the IGST Act, 2017 is not applicable for November 2022
examinations as the same has not become effective till 30.04.2022.
Further, it may be noted that amendments made by the Finance (No. 2) Act, 2019 in
sections 2(4), 95, 102, 103, 104, 105 and 106 of the CGST Act, 2017 and the insertion of
new sections 101A, 101B & 101C in the CGST Act, 2017 have not become effective till
30.04.2022 and thus, are not applicable for November 2022 examinations.
Further, a list of topic-wise exclusions from the syllabus has been specified by way of
“Study Guidelines for November 2022 Examination”. The same is given as part of
“Applicability of Standards/Guidance Notes/Legislative Amendments etc. for
November 2022 - Final Examination” appended at the end of this Revision Test Paper.
The subject of Indirect Tax Laws at the Final level is divided into two parts, namely,
Part I: Goods and Services Tax for 75 marks and Part II: Customs & Foreign Trade Policy
(FTP) for 25 marks.
Students may note that October 2021 Edition of the Study Material is applicable for Final
Paper 8: Indirect Tax Laws. The Study Material has been divided into four modules for
ease of handling by students. The first three modules are on GST and the fourth module
is on Customs and FTP.
The subject matter of Part I: Goods and Services Tax of the Study Material on Indirect Tax
Laws is based on the provisions of the Central Goods and Services Tax Act, 2017 and
Integrated Goods and Services Act, 2017 as amended up to 30.04.2021. The amendments
made by the notifications and circulars issued between 01.05.2021 and 30.04.2022 in GST

vi FINAL EXAMINATION: NOVEMBER, 2022
laws are given in the Statutory Update hosted on the BoS Knowledge portal on the ICAI’s
website www.icai.org.
The content discussed in Part II: Customs & FTP is based on the customs law as amended
by the Finance Act, 2021 and significant notifications and circulars issued till 30.04.2021.
The significant notifications/ circulars issued from 01.05.2021 and 30.04.2022 in Customs
& FTP are given in the Statutory Update.
You have to read the Study Material thoroughly to attain conceptual clarity. Tables,
diagrams and flow charts have been extensively used to facilitate easy understanding of
concepts. Examples and Illustrations given in the Study Material would help you
understand the application of concepts. Work out the exercise questions at the end of each
chapter and then, compare your answers with the answers given to test your level of
understanding. Read the case laws given at the end of each chapter under “Significant
Select Cases” in module on customs laws.
Since the question paper of Indirect Tax Laws has a dedicated section for 30 marks for
objective type questions in the form of MCQs, comprising of both independent MCQs and
case scenario based MCQs, it is advised to refer updated MCQ booklet in this paper. You
are advised to apply the concepts and provisions learnt after reading the Study Material in
answering the independent and case scenario based MCQs given in said booklet. You
have to read the case scenario and MCQs, identify the provisions of indirect tax laws
involved, apply the provisions correctly in addressing the issue raised/making the
computation required in the MCQ, and finally, choose the correct answer.
Finally, solve the questions given in this RTP independently and compare the same with
the answers given to assess your level of preparedness for the examination. Detailed
answers have been provided for the descriptive questions given in this RTP to facilitate in
depth understanding and appreciation of the provisions of the indirect tax laws in problem
solving. This will help in enhancing your conceptual clarity and honing your application
and analytical skills so that you are able to approach the examination with confidence and
a positive attitude.

PAPER – 5: STRATEGIC COST MANAGEMENT AND PERFORMANCE EVALUATION
×××CASE STUDY ×××
Ethical and Non- Financial Considerations

Food & Beverage
1. Nutty Bites produces many edible snacks that are very popular especially among
children. Peanuts, Peanut oil are essential ingredients in many of its products. They are
currently facing this ethical issue –
“Medical studies have indicated peanut allergic reactions are on the rise. The prevalence
is more profound among children. Reactions can range from hives around the mouth to
potentially life threatening reactions when exposed even to the slightest trace of peanuts.
There is growing media campaign to force companies like Nutty Bites to make disclosure
about the presence of peanut on its package labelling”
Nutty Bites is a mid-size company that has a growing market. Risk to peanut exposure
can come not just from the presence of peanuts in its products. Some of its bought -in
ingredients (raw material input) are cooked in peanut oil. There are risks of “cross -
contamination” amongst products. Let us say, an equipment has been used produce
cookies that has peanuts. Next, the equipment is used, without being cleaned, to produce
chips that does not have peanuts as an ingredient. Some portion of the peanuts / peanut
oil could contaminate that specific batch of chips produced. Since labels of chips would
not mention “peanuts” as an ingredient, it poses a potential risk of causing allergic
reaction to a customer unaware of this contamination.
Management of Nutty Bites has called for a meeting to discuss this issue. “The issue
need not be addressed at all. After-all Nutty Bites is doing nothing against the law” is the
opinion of many members on the board of the company.
Required
(i) EXPLAIN why Nutty Bites should attempt to address this issue.
(ii) STATE potential benefits that business can garner by addressing this issue.
(iii) RECOMMEND, with reasons, the avenues available to Nutty Bites to address this
ethical issue.
(iv) EVALUATE the recommended solutions.

2 FINAL EXAMINATION: NOVEMBER, 2022
Supply Chain Management

2. Nations’ Mart is the supplier of packed grocery items to local kirana shops and
departmental stores under a franchise model. Such local kirana shops and departmental
stores are not an exclusive franchisee of Nations’ Mart, because certain other items such
as veggies, cosmetics, eggs, and bread, etc. which are not offered by Nations’ Mart,
these local kirana shops and departmental stores are free to buy from other suppliers.
Nations’ Mart offers items under its own brand, they purchased these grocery items
either directly from manufacturers or from their established suppliers at a significant
discount, part of which it passes to such franchisee local kirana shops and departmental
stores. It is estimated that such local kirana shops and departmental stores save around
8-12% (of purchase prices) on items supplied by Nations’ Mart.
For inbound logistics since its establishment, Nations’ Mart relies upon the manufacturer
or their established suppliers and in some cases use the service of haulage contractors
working on behalf of these manufacturer or suppliers. Nation’s Mart purchases items into
their large and multi-purpose regional warehouses. Warehouses have facilities for re-
package of items in smaller units. Each regional warehouse has designated geographi cal
areas to serve.
Nations’ Mart sales representatives conduct the meeting with each franchise e (local
kirana shops and departmental stores) after every 8 weeks to decide the weekly standing
order quantity for the upcoming 8 weeks. Such weekly standing orders delivered to these
local kirana shops and departmental stores through specialist haulage contractors local
to the regional warehouse. Such local kirana shops and departmental stores can
increase the weekly order through phone or e-mail, but can’t reduce their standing order
requirements until the next meeting with a sales representative of Nations’ Mart.
Required
The board of directors recognised the need to review the supply chain to enhance the
brand recognition of Nations’ Mart and also address the issue raised by the franchisee
regarding inflexible ordering and delivery system. ADVISE the board, how Nations’ Mart
can re-structure its supply chain presuming it keep on supplying the re-packaged items.
××× CASE SCENARIO×××
Ethical and Non- Financial Considerations

3. Sprinter Sportswear is a multi-national company with that has a market presence in 23
countries. Yet, the company does not own even a single factory. Production has been
entirely outsourced to 175 factories located in places where cost of operations is low.
Factories cater entirely to Sprinter’s procurement demands. These factories operate
independently, Sprinter plays no role in their operations. Procurement from this supplier
network is the stored at distribution centers from where dispatches are made to
wholesalers of sportswear and apparel.

PAPER – 5 : STRATEGIC COST MANAGEMENT AND PERFORMANCE EVALUATION 3
Recent news reports from some of the Third World foreign

countries have indicated that high child labor employment.
Child labor although against the law in these countries is
resorted in order to keep cost of operations low. Factories in
these countries do not directly employ children. Instead they
subcontract the work to contractors. These contractors in
turn hire children illegally without the local knowledge of local
law enforcement authorities. In addition, working conditions
in these factories are very unhygienic and oppressive.
Sprinter initially turned a blind eye to this problem, since it only acts as a customer of
these factories. Sprinter, as a company, has done nothing illegal as part of company
operations. However, increased focus given to corporate social responsibility, has forced
the Board members to consider taking action against such factories.
Required
(i) DISCUSS why Sprinter sportswear should attempt to address this issue.
(ii) SUGGEST some of the actions that the company can take to address this issue.
×××QUESTIONS×××
Performance Measurement
Fast Food Company
4. Established in the year 1999, FF Company is the pioneer of fast food in Southampton. It
delivers a truly fresh, affordable, made to order sandwiches, burger, and other meal in a
friendly and relaxed environment. The popularity of the sandwiches, burger etc.
continued to grow over the decades but one thing remained the same and that was its
core values and principles:
- Always provide exceptional service to valued guests;
- Provide the highest quality menu items at a price everyone can afford and enjoy;
and
- Keep operating costs low and ensure to have great systems in place and never stop
improving.

It provides a comfortable place for people to unwind over interesting conversations. From
the beginning, as it continues to grow, it is guided by passion for delighting customers by
serving fresh, delicious food right in front of customer.
The performance report* for FY 2021-22 was presented at the management committee
meeting as follows:
Particulars Budget Actual Variance
Sales / Production (no. of burgers) 2,00,000 1,65,000 (35,000)
Sales (£) 10,50,000 8,46,450 (2,03,550)
Less: Variable Costs (£) 6,33,000 5,37,075 95,925
Less: Fixed Costs (£) 1,57,500 1,65,000 (7,500)
Profit 2,59,500 1,44,375 (1,15,125)
* burger segment
The Management Accountant of FF believed that the size of the fast-food market deriving
the budget number of burgers to be sold is over-estimated. He has computed the value of
the sales volume contribution planning variance to be 26,062.50 adverse.
Further, the report also included customer’s feedback and the majority of comments were
regarding delay in service time. One of feedback was as follows:
“I ordered two burgers at 2:10 pm. After half an hour (30 minutes) of waiting I called the
waiter and asked him what happened? he told me that he will check with kitchen. I got
the order after 45 minutes of waiting, this cafe is not good in delivery time”
The budgeted data shown in the table is based on the assumption that total market size
would be 4,00,000 units.
Required
(i) PREPARE a reconciliation statement of budgeted profit to actual profit through
marginal costing approach in as much detail as possible.
(ii) EXPLAIN the implications of the reconciliation statement.
(iii) Management is worried about customer’s feedback. ADVISE measures to improve
delivery service time.
Ethical Dilemma
5. Capson Industries is an electronic company producing office equipment known for the
printers which are cost-effective and durable. In order to maintain and improve
competitiveness, Capson focuses on strategic cost reduction through continuous
improvement. You are a management accountant and practising independently as a
freelance consultant. You are hired as a consultant by the management of Capson and
currently evaluating whether to outsource the production of a drum (item code D32) used

in its best-selling laser printer or should continue to manufacture in-house in the

upcoming year. The outsource vendor quoted the bid price of `225 per unit of D32 for the
upcoming year.
CAPSON-D32
The product engineer explained to you that the toner cartridge is the container that holds
the toner powder. The drum unit is an electrically charged cylinder that fuses that toner
powder onto paper to create text and images. Based upon the estimates of the marketing
department regarding the number of printers to be sold in the upcoming year, the
production head estimates the consumption of 40,000 units of D32.
The cost clerk in the accounts department, provided you with the following information
(annual, actual till 24 th march and budgeted for a remaining week) pertaining to D32 for
the year just about to end.
Product Summary Cost Summary (Figure in `’Lacs)
Product – Laser Drum Direct material Consumed – 33.975
Product ID – D32 Direct labour paid – 16.47
HS Code – 84439100 Production overhead (other than leases) – 23.72
Build – In house manufacturing Lease rental of space, plant & equipment – 15.60
Production during year – Administration overhead (other than leases) – 6.23
36,000 Units
You also gather the information relevant to D32, which signify during the upcoming year–
▪ Direct material prices and direct labour rate expected to increase by 6% and 5%
respectively.
▪ Leases can be terminated, but the cost of termination will be equivalent to a half-a-
month rental. Lease rentals are static over the years for the next three years. Space
and plant have sufficient idle capacity to absorb the increase in production.
▪ 60% and 30% of the production overhead and administration overhead are variable
in nature respectively. Rest is fixed and unavoidable. Total variable costs are
directly and linearly proportionated to the volume of production. Variable ove rhead
costs expected to increase by 3% due to the inflation effect.

You are crunching the numbers to advise the management, in meantime come across
VP-Production who indicates producing D32 in-house will become cheaper in the
upcoming year because the production cost will reduce significantly on account of the
initiative proposed instead of an increase in it (as quantified by you). Hence advise you to
analyse the decision ignoring the increase in the cost of production rather advise to
consider them at a level lower than the current level. Basically, his pain is something
else, he detests to see the scope of his work at Capson is getting dwindled and don’t
want the apple of his eye to be laid–off.
Required
(i) ADVISE the Board, whether to outsource or to produce D32 in-house.
(ii) You know it is nearly impossible to attain the cost reduction as described by VP -
Production in the case of in-house production of D32, but you are also dejected
afterthought of possible lay-off which largely depends upon your advice. How you
RESPOND to the dilemma.
Transfer Pricing
6. ZAP has three divisions − Z, A and P, which make products Z, A and P respectively. For
Division A, the only direct material is product Z and for P, the only direct material is
product A. Division Z purchases all its raw material from outside. Direct selling overhead,
representing commission to external sales agents are avoided on all internal transfers.
Division A additionally incurs ` 10 per unit and ` 8 per unit on units delivered to external
customers and P respectively. A also incurs ` 6 per unit picked up from Z, whereas
external suppliers supply at A’s factory at the stated price of ` 85 per unit.
Additional information is given below:
Figures (`)/unit
Z A P
Direct Materials (external supplier rate) 40 85 135
Direct Labour 30 50 45
Sales Agent’s Commission 15 15 10
Selling Price (in external market) 110 170 240
Production Capacity (units) 20,000 30,000 40,000
External Demand (units) 14,000 26,000 42,000
Required
DISCUSS the range of negotiation for Managers Z, A and P, for the number of units and
the transfer price for internal transfers.

Cost of Quality
7. K Automobile Group is among top 20 business houses in India. It has been founded in
the year 1930, at the height of India's movement for independence from the British, the
group has an illustrious history. K’s footprint stretches over a wide range of industries,
spanning automobiles (two wheelers manufacturer and three wheelers manufacturer). K’s
headquarter is located at Hyderabad. Bike Production is one of segment of K Group.
Management of K wants to analyse the following actual information for the April:
Cost Data `
Customer Complaints Centre Cost 35 per hr.
Equipment Testing Cost 18 per hr.
Warranty Repair Cost 1,560 per bike
Manufacturing Rework Cost 228 per bike
Volume and Activity Data
Bikes Requiring Manufacturing Rework 3,200 bikes
Bikes Requiring Warranty Repair 2,600 bikes
Production Line Equipment Testing Time 1,600 hrs.
Customer Complaints Centre Time 2,000 hrs.
Additional Information
Due to the quality issues in the month, the bike production line experienced unproductive
'down time' which cost ` 7,70,000. K carried out a quality review of its existing suppliers
to enhance quality levels during the month at a cost of `1,25,000.
Required
(i) PREPARE a statement showing ‘Total Quality Costs’.
(ii) ADVISE any TWO measures to reduce the non- conformance cost.
Special Order Decision
Fire Extinguisher Supplier

8. FX Co. is the manufacturer and supplier of firefighting and safety equipment for industrial
use and follows the international quality standards and uses the high grade raw material.
It is a fast-growing brand that protects millions of people across the India, every single
day. FX has been offered a bid on a prospective export contract for 20,000 commercial
fire extinguishers with following specification from USA buyer and the delivery terms is
FOB.
“two-gallon cylinder holding 10 pounds of multi-purpose dry chemical at 380 PSI”
FX is exporting first time. The price computation per fire extinguisher is as follows:
` `
Direct Material
Circle Part Cost 1,240
Necking Part 60
Bottom Part 100
Fire Extinguisher Powder 1,180
Heat Process 100
Nozzle 120
Meter 40
Pipe 100
Nitrogen 60 3,000
Direct Labor (2 hrs. × `80) 160
Leakage Testing 100
Variable Overheads (including packing) 428
Export Clearance Charges on FOB term 72
Fixed Overhead 200
Total 3,960
Add: Markup @ 10% 396
Price 4,359
USD to INR 79.9
Price in USD 54.52
After quotation of USD 54.52, the buyer is negotiating the price and ready to pay only
USD 48.

Required
ADVISE whether it is worth accepting at USD 48 considering other factors.
Life Cycle Costing
9. Mould & Dies (M&D) was established in 1980 and has enormous wealth of experience in
the mould manufacturing industry and serves wide range of plastic moulds all over
nation. Over the past decade, M&D has developed the reputation for quali ty products &
services for customer focused approach. It deals in injection moulds, blow moulds, die
sets, moulds base etc.
With a state-of-the-art infrastructure facility, M&D is able to meet the qualitative and
quantitative demands of its clients. Its vision & mission is to provide high class
manufactured products by using best quality raw materials.
M&D has developed a new product “M” which is about to be launched into the market
and anticipates to sell 80,000 of these units at a sales price of `300 over the product’s
life cycle of four years. Data pertaining to product “M” are as follows:
Costs of Design and Development `8,25,000
of Molds, Dies, and Other Tools
Manufacturing Costs `125 per unit
Selling Costs `12,500 per year + `100 per unit
Administration Costs `50,000 per year
Warranty Expenses 5 Replacement Parts per 25 units at `10 per
part; 1 Visit per 500 units (Cost `500 per visit)
Required
(i) COMPUTE the product “M”’s ‘Life Cycle Cost’.
(ii) SUGGEST two ways to maximize “M’’s lifecycle return.
Note: Ignore time value of money
CVP Analysis
10. Hotel Nikko, Zeeland, an affordable leisure hotel resort is an ideal retreat to escape,
unwind and enjoy peace of mind. Set amid expansive tropical greenery in the enclave of
Zeeland, Hotel Nikko is designed for pleasure, where services reign supreme and Italian-
style architecture of its 25 classic rooms harmonize with nature. Hotel Nikko, Zeeland is a
beachfront resort that features a good choice of swim-up pool bar, gym, and variety of
restaurants. A wide array of water sport activities like surfing, sailing, jet skiing etc. are
available from beach operators at walking distance. The hotel is synonymous with
enjoyment and value for money, with a large choice of very attractive “All Inclusive”
packages.

Nikko charges guests ZD 2,700 per room per night, irrespective of s ingle or double
occupancy. The variable cost is ZD 900 per occupied room per night. The Nikko is
available throughout 365 days a year and has a 75% budgeted occupancy rate. Fixed
costs are budgeted at ZD 9 million and are incurred evenly during the year.
During the second quarter (Q2) of the year, usually the room occupancy rates remains
substantially below the levels expected at other quarters of the year. Nikko is expecting
to sell 900 occupied room nights during Q2. Management is considering strategy to
improve profitability, including closing the Nikko for the duration of Q2 or adopting one
possible option as follows –
There is scope to extend the Nikko by creating enough space to run a Rustic Chic, Italian
Style restaurant to serve its guests. The annual revenues, costs and sales volumes for
the combined operations are given in the following graph–

Note
Zeeland’s home currency is the ZD.
Required
ANALYZE the profit improvement plan.
Balanced Scorecard
11. B. Steels is a leading manufacturer of flat and long products and have state-of the-art
plants. These plants manufacture value added products covering entire steel value chain
right from coal mining to manufacturing Pig Iron, Billets, HR Coils, Black Pipe/GI Pipe,
Cable Tapes etc. conforming to international standards. The rock-solid foundation
combined with nonstop upgradation and innovation has enabled the B. Steels to surpass
its goals constantly. Its vision and values for sustainable growth is balancing economic
prosperity and social equality while caring for the planet. It is preparing its balanced
scorecard for the year 2021-22. It has identified the following specific objectives for the
four perspectives.
▪ Improve post-sales ▪ Improve employee ▪ Improve employee job
service morale satisfaction
▪ Increase gross margin ▪ Increase number of ▪ Increase profitability of
customers core product line
▪ Increase plant safety ▪ Increase customer
retention
B. Steels has collected Key Performance Indicators (KPIs) to measure progress towards
achieving its specific objectives. The KPIs and corresponding data collected for the year
2021-22 are as follows:
Key Performance Indicator Goal Actual
Average replacement time (number of days) 2 1.5
Gross margin growth percentage 15% 16%
Number of customers 15,000 15,600
Number of plant accidents 0 2
Percentage of repeat customers 83% 81%
Core product line profit as a percentage of core-product line sales 5% 4.4%
Employee turnover rate (number of employees leaving/ Average 2% 3%
number of total employees)
Employees satisfaction rating (1-5, with 1 being the most satisfied) 1 1.2

For preparation of Balanced Scorecard report, the following format has been developed:
B. Steels
Balanced Scorecard Report
For the year ended March 31, 2022
Perspective Objective KPI Goal Actual Goal Achieved
(Yes or No)
Financial × × × × ×
Customer × × × × ×
Internal Business Process × × × × ×
Learning and Growth × × × × ×
Required
(i) PREPARE a balanced scorecard report using the above-mentioned format. Place
objective under the appropriate perspective heading in the report. Select a KPI from
the list of KPIs that would be appropriate to measure progress towards each
objective.
(ii) B. Steels desires to integrate sustainability and corporate social responsibility
related KPIs in their balance scorecard to adhere vision and values. ADVISE B.
Steels, using TBL framework.
Pricing Decision
12. The Gifts Company makes mementos for offering chief guests and other dignitaries at
functions. A customer wants 4 identical pieces of hand-crafted gifts for 4 dignitaries
invited to its function.
For this product, the Gifts Company estimates the following costs for the 1st unit of the
product.
Particulars of Costs ` / unit
Direct Variable Costs (excluding labour) 2,000
Direct Labour (20 hours @ ` 50 hour) 1,000
90 % learning curve ratio is applicable and one labourer works for one customer’s order.
Required
(i) CALCULATE the price per piece to be quoted for this customer if the targeted
contribution is ` 1,500 per unit.
(ii) If 4 different labourers made the 4 products simultaneously to ensure faster delivery
to the customer, can the price at (i) above be quoted? COMMENT.

SUGGESTED ANSWERS
1. (i) Modern organizations have a moral duty of care to a wider range of stakeholders
not just its owners / investors. In this case, it owes a duty of care to anybody who
consumes its products. The presence of peanuts or peanut oil makes it a potential
“health hazard” to some consumers. Food safety is a fiduciary duty that Nut ty Bites
owes to the society. Corporate Social Responsibility (CSR) is the duty an
organization has towards a wider community.
(ii) Addressing this ethical issue will help Nutty Bites to become a morally responsible
organization. The long- term benefits to its business could be as follows:
(a) Avoid bad publicity that could potentially damage its reputation and brand
image.
(b) Avoid potential legal action for tort, committing a civil wrong.
(c) Operating environment within the business is more ethical, giving a sense of
well-being to its employees.
(iii) Following could be some of the responses that Nutty Bites could take to address the
issue:
(a) A clear warning in the ingredients box that the factory uses peanuts while
manufacturing some of its products. This should be included even in products
that do not contain peanuts, to avoid any harm due to risk of cross-
contamination. Customers who suffer this allergy, would then be aware of the
potential risk of consuming products of Nutty Bites. Protection from potential
lawsuits counters any loss of business for Nutty Bites.
(b) Segregate areas to have separate processing lines for products with peanuts /
peanut oil and those without it. If possible, have segregated staff for the two
production lines in order to avoid the risk of cross-contamination. If this is not
possible, staff have to be well trained on the risks of cross-contamination.
Gloves need to be provided while handling material during production of food
products. This should be changed each time staff handle production changes
from “peanut variety” to the “non-peanut variety”.
(c) Equipment should be thoroughly cleaned while switching production from one
variety to another. Fewer changeovers in the production cycle, that is
producing products in larger batches, reduces the number of switches during
production of different varieties of food products.
(d) Storage of peanut material should be well segregated and monitored to avoid
contamination.
(e) If Nutty Bites has the resources, it could invest in pharma companies that are
finding a medical solution to this problem. The food industry could benefit from
research and development of treatments to address this life-threatening

allergy. A break-through would address a societal problem, while also having a

positive impact for growth of Nutty Bites.
(iv) Risk of product safety is an important issue that needs constant review. Review
would be of the production process, storage, material handling as well as ingredient
of purchased raw materials. The benefit of constant review is that Nutty Bites can
immediately identify danger of contamination. For example, is a supplier of raw
material changes the production of the ingredients to include peanut / peanut oil,
then Nutty Bites can be immediately aware of the change due to its review process.
In case of any future litigation, Nutty Bites could defend itself by proving that it had
a robust review process in place.
On the other hand, constant review requires time and money, with an ever-present
possibility of contamination. It is not feasible to ensure complete safety. Reviewers /
quality inspectors could become negligent once the process is well established. This
could lead to instances of contamination, even with a review process in place.
To conclude, Nutty Bites is morally responsible to spread awareness that some of
its products may contain allergy causing peanuts / peanut oil. It should streamline
its storage and production process to avoid risk of cross-contamination.
2. The supply chain is a network that consists of the flow of materials, goods, and relat ed
information among manufacturers, suppliers, retailers, and consumers. The supply chain
can be divided into two parts based upon flow, directions, or source and destination.
Towards the supplier side, it is termed as Upstream Supply Chain and towards the
consumer side, it is termed as Downstream Supply Chain.
Nations’ Mart can enhance its brand recognition through Upstream Supply Chain
Management in the following ways–
Process of placing the order
Nations’ Mart should review the process of placing the order, e-procurement shall be
introduced to the possible extent and information shall be shared with the manufacturers
and suppliers allowing the suppliers’ access to forecast demand. Which in turn reduces
costs and improves the efficiency of the supply chain at suppliers' end and the same will
benefit Nations’ Mart for sure.
Note - This will lead to an extended value chain that will be capable to generate
enhanced value.
Inbound logistics
Nations’ Mart can revamp its logistics in either of the following ways–
i. Develop in-house logistics capabilities – Nations’ Mart can look forward to owning
the trucks and tempos to develop in-house logistics capabilities, it can apply its logo
on the entire fleet this will enhance the brand visibility.
ii. Use third-party logistics rather than manufacturers and their established suppliers
and that too in conjunction with a review of its outbound logistics.

The cost of inbound logistics can be offset by reduced prices (FOB rather than CIF) by
such manufacturers and their established suppliers.
Note– a detailed cost-benefit analysis shall be conducted to assess whether these options
are financially viable.
Outsourcing of the warehousing and re-packaging
Nations’ Mart may look for an integrated logistic partner who also offers storage and
warehousing solutions, since it will be a large contract (especially, if consolidated for all the
warehousing needs of Nations’ Mart), for any integrated logistic partner hence able to
negotiate a good price.
Note– It is a strategic decision because if the warehousing and re-packaging are
outsourced then Nation’s Mart can strategically reposition itself and focus on brand
awareness, hence further critical evaluation of core capabilities and competencies is
required.
Nations’ Mart can enhance its brand recognition and address the issue raised by
franchisee regarding inflexible ordering and delivery system through Downstream
Supply Chain Management in the following ways–
Shift to pull model of the supply chain
The inflexibility of the ordering and delivery system can be eliminated, if Nations’ Mart
shifts to the pull model of the supply chain. This enables the franchisee (local k irana
shops and departmental stores) to have flexibility while ordering (quantity and time)
to match their need as per actual demand.
Note– This may result in low overall demand, which may cause Nations’ Mart not able to
get the same substantial discount which earlier it is getting from manufacturers or from
their established suppliers.
But if the existing practices continued then Nations’ Mart may lose some of the
franchisee (local kirana shops and departmental stores), hence cost-benefit analysis is
essential.
Use of IT solution
In order to streamline the downstream supply chain, Nations’ Mart need to use IT solut ion
(especially if the shift to the demand-driven system) for following purposes–
i. To collect and consolidate the orders from the local kirana shops and departmental
stores for each Item individually and further place the order accordingly.
ii. Use of E-POS (electronic point of sale) at local kirana shops and departmental
stores to have an overview of sales information, stock level, and customers'
buying habits and trends. This will auto streamline the ordering and distribution.
This will result in an extended value chain, hence, may be able to generate greater
value for customer.

Note– If IT is used extensively then Nations’ Mart can directly reach consumers through
the E-Commerce platform. The terms of the franchise agreement need to be
analyzed to judge the viability of direct sales by Nations’ Mart.
Note– If local kirana shops and departmental stores allowed to place orders online then
the sales representative which earlier responsible for meeting with these local kirana
shops and departmental stores can be deployed for marketing and branding
activities.
Outbound logistics and distribution arrangements
As mentioned earlier Nations’ Mart can club the contract regarding inbound and outbound
logistic requirements to negotiate with the logistic contractors. In regard to outbound
logistics specifically, rather than relying upon local haulage contractors for regional
warehouses, Nations’ Mart can go for one single integrated logistics company. This
single contract will afford economies of scale.
As mentioned earlier too own logistic abilities can be developed by owning a fleet of
vehicles which can be used for greater brand visibility by putting the logos and
advertisement material on such vehicles. Scheduling of routes shall be done
scientifically using some operation research methods such as transportation and linear
programming.
Note– The costs and benefits analysis shall be performed before a decision on such a
change.
3. (i) Work can be outsourced to locations to countries on the other side of the g lobe, in
order to achieve low cost advantage. A company may not be directly responsible for
faulty practices of its suppliers. However, modern organizations have a moral duty
of care to a wider range of stakeholders who may not directly be related to the
company. In this case, it owes a duty of care towards employees hired by factories
within its supply chain. The issue it is dealing with relates to exploitation of child
workers by factories, perpetrated by sub-contracting work to third party workers.
While Sprinter sportswear has not done anything illegal, it owes moral responsibility
towards these children. Children have a right to education, because of which child
labor is illegal in most countries. Since children are employed directly on account of
the work that has been outsourced, Sprinter should attempt to address this issue.
Also, any negative news about how its products are made, could impact its
business.
(ii) Sprinter should aim to make its products responsibly. Some actions it can take are:
▪ Sprinter can develop a Code of Conduct that details the acceptable standards
of conducting business. These standards could relate to hiring practices, of
which it can specify that workers should be above a particular age to be
employed for manufacturing a product. Others could relate to workplace
environment, safety, and environment sustainability. Sprinter should insist that
suppliers implement these Codes of Conduct along with other complying with

laws. It should insist that the supplier be open to periodic inspection by

Sprinter to ensure compliance with standards as per its Code.
▪ Sprinter can set up an audit team that regularly audits factories on the pre-
sourcing and follow-up stages. Sprinter should do business only with those
factories are complying with its standards. Any offenders to the Code of
Conduct in the follow-up stages, should be appropriately be liable to penalty or
termination of contract for serious offenses.
▪ Sprinter can list on its website location wise suppliers from whom it procures
its products. It can even give information about products made by each of its
suppliers, average age, worker diversity etc. This will enable watch groups to
know who the suppliers are and warn the company if there are any labor
issues within these factories.
4. (i) Statement of Reconciliation - Budgeted Vs Actual Profit
Particulars £
Budgeted Profit 2,59,500
Less: Sales Volume Contribution - Planning Variance (Adverse) 26,062.50
Less: Sales Volume Contribution - Operational Variance (Adverse) 46,912.50
Less: Sales Price Variance (Adverse) 19,800
Less: Variable Cost Variance (Adverse) 14,850
Less: Fixed Cost Variance (Adverse) 7,500
Actual Profit 1,44,375
Workings
Basic Workings
Budgeted Market Share (in %) = 2,00,000units = 50%

4,00,000units
Budgeted Contribution = £10,50,000 – £6,33,000 = £4,17,000
Average Budgeted Contribution (per unit)
= £4,17,000 = £2.085
2,00,000
Volume Contribution Planning = Budgeted Market Share % × (Actual Industry
Sales Quantity in units – Budgeted Industry
Sales Quantity in units) × (Average
Budgeted Contribution per unit)

⇒ £26,062.50 (A) = 50% × (Actual Industry Sales Quantity in

units – 4,00,000 units) × £2.085
⇒ Actual Industry Sales Quantity = 3,75,000 units
Actual Market Share (in %) = 1,65,000units = 44%

3,75,000units
Standard Sales Price per unit = £10,50,000 = £5.25

2,00,000
Actual Sales Price per unit = £8,46,450 = £5.13

1,65,000
Standard Variable Cost per unit = £6,33,000 = £3.165

2,00,000
Actual Variable Cost per unit = £5,37,075 = £3.255

1,65,000
CALCULATION OF VARIANCES
Sales Variances
Volume Contribution Operational = (Actual Market Share % – Budgeted
Market Share %) × (Actual Industry Sales
Quantity in units) × (Average Budgeted
Contribution per unit)
= (44% – 50 %) × 3,75,000 units × £2.085
= £46,912.50 (A)
Price = Actual Sales – Standard Sales
= Actual Sales Quantity × (Actual Price –
Standard Price)
= 1,65,000 units × (£5.13 – £5.25)
= £19,800 (A)
Variable Cost Variances
Cost = Standard Cost for Production – Actual Cost
= Actual Production × (Standard Cost per unit
– Actual Cost per unit)
= 1,65,000 units × (£3.165 – £3.255)
= £14,850 (A)

Fixed Cost Variances

Expenditure = Budgeted Fixed Cost – Actual Fixed Cost
= £1,57,500 – £1,65,000
= £7,500 (A)
(ii) Implications of Reconciliation Statement
In the revised statement, the sales volume variance has been detailed by the way of
two variances i.e. planning and operational variances. This kind of detailed
information assists the company to check, which kind of variances are under the
management control and which are not. FF has adverse volume contribution
planning variance and the reason of could be the environmental / market changes,
that was not anticipated at the time of budget preparation, so they are not under
management control and hence, no one is responsible for this. On the other hand,
the sales volume contribution operational variance was under control of the
managers and they should be held responsible for the same. The reason of adverse
sales volume contribution operational variance could be unsuccessful direct selling
efforts/marketing efforts. FF has adverse sales price variance as well. It indicates
that the burgers were sold for lower price than standard. The reason of this could be
unforeseen market competitive price, tapping new market etc.
Further, revised reconciliation statement delivers little information about the variable
cost and fixed cost variances. They both are adverse. Fixed cost consists of many
items such as salaries, annual maintenance cost, rent and insurance etc. Often
fixed cost items are not affected in short run in response to change in the level of
activity, but they might change in response to other factors such as price. This may
cause increase expenditure on fixed overheads. A meaningful analysis of fixed cost
variance requires a line to line comparison of budgeted cost with actual cost.
In case of FF, the variable cost may be made up of large individual different items
such as vegetables, compressed natural gas, indirect labor, regular maintenance
cost etc. Control of variable cost also requires line by line analysis for each
individual item. The adverse variable cost variance simply reveals that FF incurred
more on variable cost than expected. However, it is necessary to take into
consideration the causes of this adverse variance which is beyond the control of the
management, for instance, the unusual price hike in vegetables in case of
unseasonal rainfall.
(iii) Measures to Improve Fast Food Delivery Service Time
Customers expect that their food order to be delivered quickly. From customer’s
feedback in the question, it is evident that FF has a problem in food delivery, due to
which, customers go unsatisfied. The reason of late delivery could be non-
availability of raw material on time or employees not working properly etc. The

reason of employees not working properly could be job dissatisfaction which may be
due to improper working conditions, low salary, or no reward for overtime etc.
In order to reduce delivery time, raw material should be made available in stock
based on daily requirement. FF may follow quantitative approach to inventory
problems, which lays down clear guidelines that when to re-order or alert the
management in exceptional situations.
In addition, FF must also address the issues related to employee and involve them
in a loop. FF could improve the employee satisfaction with proper working
conditions, better pay, training, and growth opportunities.
Moreover, it is important that customers should be informed about approximate
delivery time since this will reduce customer’s anxiety and will proactively reduce
any complaints over long waits for delivery of food. If unexpected delays occur, it is
important to communicate with customers, apologies for the delay and inform them
about the new approximate delivery time along with valid reason.
In addition to this, FF can also introduce pagers or install electronic board
displaying ticket number or self- serve kiosk allowing customers to roam around or
order in advance so that they do not have long waiting time.
5. (i) Outsource or produce D32 in-house
Since 40,000 units of D32 are required in the upcoming year, hence comparison of
cost shall be made using relevant cost pertaining to the upcoming year for 40,000
units.
Cost of outsourcing
Particulars Amount (in `)
Cost of purchase
90,00,000
(40,000 units @ `225 each unit)
Cost of terminating lease agreements
65,000
[(15.60 lacs /12 months) × 1/2]
Total Cost 90,65,000
Cost of in-house-production
Particulars Amount (in `)
Direct material cost
40,01,500
[(33.975 lacs × 1.06) × 40,000 units/ 36,000 units]
Direct labour cost
19,21,500
[(16.47 lacs × 1.05) × 40,000 units/ 36,000 units]

Production overhead
16,28,773
[(23.72 lacs × 0.6 × 1.03) × 40,000 units/ 36,000 units]
Lease Rental 15,60,000
Administration overhead
2,13,897
[(6.23lacs × 0.3 × 1.03) × 40,000 units/ 36,000 units]
Total Cost 93,25,670
Since the calculations show there is a saving of `2,60,670 (93,25,670 – 90,65,000)
if production of D32 is outsourced, rather than producing in-house; hence
considering monetary information it is worthwhile to outsource the production of
D32. However, prior to make any decision management should consider the
following non-financial considerations also–
Reliability of outsourcing vendor in terms of–
(a) Quality of D32 – The quality of D32 delivered by outsourcing vendor must be at
par or better than the quality achieved from in-house production.
(b) Continues and timely supply of D32 – Supply of D32 shall be continues and on
time as per production schedule, else haphazard supply can obstruct the
production schedule and deliveries as Capson.
(c) Ability to supply entire requirements – There is a requirement of 40,000 unit of
D32 at Capson, the outsource vendor must be capable and ready to supply the
entire need of 40,000 units (only then lease rentals can be saved).
Impact inside Capson in terms of–
(a) Possible lay-offs – Lay-off has legal implications as well as an enhanced
financial burden in form of compensation cost (against the loss of employment)
(b) Employee morale – Lay-off or shift of idle staff from one department to another
will result in low employee morale, which will result in low productivity (but if
employee/workers union are strong then may lead to strike etc.)
(c) Control over value chain – D32 may or may not be key component according
to the engineering department, but Capson need to see from customers
perspective if it is component which enhances the overall value of printer
which customer look at then need to be produced in-house (capability shall be
enhanced for better quality). If a non-value-added component, then can be
outsourced to spare the time in order to focus on strategic aspects.
Apart from these factors, the commercial aspects such as confidentiality, technical
know-how, termination of lease as well as relations with lessor and change in
market forces (suppliers’ bargain power) shall also be considered.

(ii) Respond to the dilemma

Since it is an ethical dilemma, hence the resolution can be best guided by
fundamental ethical principles for accounts professionals. Principle of integrity,
objectivity, due diligence, and professional behaviour applies here.
Following the principle of Integrity, management shall be informed and advised
fairly, further considering the objectivity, the biased advice, indications and
descriptions of VP-production shall be ignored completely. The recommendation to
management shall be based purely on facts and fair estimates which are collected
and analysed with due diligence.
Maintaining professional behaviour and independence, fair recommendations shall
be submitted to management at Capson ignoring the personal dejection and verbal
inducements of VP-production. Recommendation to management may include the
plausible impact and effects of the decision.
6. DISCUSSION - Manager of Division Z will sell 14,000 units outside at `110 per unit
and earn contribution of `3.50 lakhs*. Excess capacity of 6,000 units can be offered
to Division A at a price between `70 (variable manufacturing cost to Division Z) and
`95 (selling price net of commission). But Division A can get the material outside at
`85. So, Division A will not pay to Division Z anything above `79 (`85 – `6) to match
external available price.
Division Z will be attracted to sell to Division A only in the range of `71 – `79 per unit at
a volume of 6,000 units. At `70, Division Z will be indifferent, but may offer to sell to
Division A to use idle capacity. [Or `71 – `79]
Division P will not buy from Division A at anything above `135. If Division Z sells to
Division A at 70 per unit, Division A can sell to Division P at `134# and earn no
contribution, only for surplus capacity and if units transferred by Division Z to Division A
at `70 per unit.
Division A Division P
Provided Division Sell 4,000 units to Division P at `134 Buy 4,000 units from
Z sells to Division (Indifferent) Division A at `134
A at `70 per unit (attracted)
Sell 4,000 units to Division P at `135 Indifferent, since market
(Willingly for a contribution of `1) price is also `135
For buying from Z at `71 – `79 price range, A will be interested in selling to P only at
prices `135 – `143, which will not interest P.
Thus A will sell to P only if Z sells to A at `70 per unit and A will supply to P maximum
4,000 units.
*(` 110 – ` 40 – ` 30 – `15) × 14,000
# (` 70 + `6 + `50 + ` 8)

7. (i) Statement Showing ‘Total Quality Costs’

Particulars of Costs `
Prevention Costs
Supplier Review 1,25,000
Appraisal Costs
Equipment Testing (`18 × 1,600 hrs.) 28,800
Internal Failure Costs
Down Time 7,70,000
Manufacturing Rework (`228 × 3,200 bikes) 7,29,600
External Failure Costs
Customer Complaints (`35 × 2,000 hrs.) 70,000
Warranty Repair (`1,560 × 2,600 bikes) 40,56,000
Total Quality Costs 57,79,400
(ii) The reporting of quality costs highlights the cost of quality activities at K. The total
quality costs statement clearly displays the relationship between conformance costs
(prevention and appraisal costs) and non-conformance costs (internal failure and
external failure costs) and the drivers of a reduction in the overall spending on
quality. Statement indicates that only 2.16% of the total quality cost is the cost of
preventing quality problems while 0.50% is the cost of appraisal activities. Thus,
prevention and appraisal costs make up only 2.66% of total quality costs. In
contrast, 97.34% of quality control costs are incurred for internal and external failure
costs. Following two measures can be used to reduce non- conformance cost:
Total Productive Maintenance (TPM) is a system of maintaining and improving the
integrity of production and quality system through keeping all equipment in top
working condition so as to avoid breakdowns and delays in manufacturing
processes. It involves identifying machines in every division (including planning,
manufacturing, maintenance) and then planning & executing a maintenance
programme covering their entire useful life.
In this scenario, TPM will help in reducing internal failure cost (i.e. downtime and
manufacturing rework cost), which constitutes 25.95% of total quality cost, by
keeping all equipment in good working conditions so that there is no downtime or
machine breakdown and ensuring that all equipment run smoothly. If machines work
properly, the chances of rework will reduce, ultimately will also reduce chances of
warranty repair and customer complaints (comprising 71.39% of total quality cost
which is the major part of total quality cost).

Total Quality Management (TQM) aims at improving the quality of organisational

output, including goods and services, through continual improvement of internal
practices. Its objective is to eradicate waste and increase efficiency without
compromising with the quality. It requires that company maintain this quality
standards in all aspects of business by ensuring that things are done right the first
time so that defects and waste are eliminated from operation.
It appears that K is not a TQM company at present due to huge disparity between
conformance costs and non-conformance costs. In order to make K to be
successful, all staff at K must be engaged in the improvement process and share in
the continuous improvement ethos. In order to establish a reputation as a high -
quality bike manufacturer K must ensure staff are focused on quality and attitudes
changed toward the importance of conformance activities, for instance, K can
conduct third party inspection of raw material at supplier’s workplace leading to
maintenances of quality standards.
Overall, while applying above two measures, in the K, consideration must therefore
be given to the optimum balance between the costs of conformance and the costs of
non-conformance.
8. Workings
Statement Showing Benefit from Prospective Export Contract
`
Direct Material 3,000
Direct Labor (2 hrs. × `40) 160
Leakage Testing 100
Variable Overheads (including packing) 428
Export Clearance Charges on FOB term 72
Total Relevant Cost 3,760
USD to INR `79.9
Relevant Cost $47.06
Price Offered by Customer $48.00
Benefit per extinguisher $0.94
No. of Extinguishers 20,000
Total Benefit $18,800
Advise
From financial perspective, it will be profitable for FX to accept the contract because of
gain of $18,800 (`15,02,120) along with export incentives of drawback. Besides this,
following consideration should also be taken into consideration while exporting fire
extinguishers:

Statutory Compliances
Before exporting to a foreign country or even agreeing to sell to a new customer in a
foreign country, FX should be aware of foreign laws that might affect the sale. Export
documentation is important as it plays a significant role in regulating the flow and
movement of goods in international markets. Each country has its own prescribed
statutory documents to be complied by exporters and importers. Thus, FX should
consider about the documentation and inspection compliances part of new buyer. It may
include third party audit, commercial invoice and packaging list requirements, certificate
requirements like- no child labour certificate, inspection certificate, reach compliance
certificate etc. If any compliance requirement is not met, what will be the consequences?
There may be stiff penalty has to be paid owing to non-compliance or failure to
accurately comply with the export obligation.
Buyer Creditworthiness
It is necessary that before shipment the exporter to carry out its own credit check on the
importer to determine creditworthiness. Thus, FX should make a proper assessment of
the creditworthiness of the foreign buyer and spend sufficient time in cross checking the
credit worthiness of his counterpart to avoid any kind of unforeseen situation in future.
Such information can be easily availed through contracts or through ECGC. Private
agencies also provide information on paid service basis. However, this risk can be
covered by asking for LC payment terms or 100% advance or opting for post shipment
insurance for goods being exported.
Industry Analysis
Industry analysis involves such things as assessing the competition in the industry; the
interplay of supply and demand in the industry; how the industry holds up against other
industries that are emerging and providing competitions; the likely future of the industry,
especially in light of technological developments; how credit works in the industry; and
the exact extent of the impact that external factors have on the industry.
For FX, it is worthwhile to know the current and future demand of fire extinguisher and
factors influencing the growth of global fire extinguisher market. FX can perform industry
analysis through three main ways i.e. the Competitive Forces Model (also known as
Porter’s 5 Forces); the broad factors analysis, also known as PEST analysis; and SWOT
Analysis. It may also arrange industry report from trusted sources.
Additional Terms
Ensure that the all terms are clear and suit the business purpose. For instance, delivery
terms should provide date of shipment or means of determining the date. In some
circumstances, a late delivery penalty may be incurred where goods are not supplied by
a specific delivery date. Therefore, FX should evaluate whether shipment date is
attainable or not. If the target shipment date could not be met, what will be the charges?

Further, FX must also check whether the foreign bank charges are subject to beneficiary
account. If yes, then the same must be considered in the quotation.
Overall, FX should accept the proposed contract only after due and careful consideration
of above factors.
9. (i) Statement Showing “M’s Life Cycle Cost (80,000 units)”
Particulars Amount (`)
Costs of Design and Development of Molds, Dies, and Other Tools 8,25,000
Manufacturing Costs (`125 × 80,000 units) 1,00,00,000
Selling Costs (`100 × 80,000 units + `12,500 × 4) 80,50,000
Administration Costs (`50,000 × 4) 2,00,000
Warranty
(80,000 units / 25 units × 5 parts × `10) 1,60,000
(80,000 units / 500 units × 1 visit × `500) 80,000
Total Cost 1,93,15,000
(ii) Following ways are suggested to maximize “M” lifecycle return:
R&D Costs
Often significant part of cost is incurred at the R&D phase of new product, hence
M&D should carefully plan and design its new product “M” as it will determine the
number of parts, production process to be used etc. M&D can apply value
engineering here. It involves improving product quality, reducing product costs,
fostering innovation, eliminating unnecessary and costly design elements, ensuring
efficient investment in product, and developing implementation procedures. Value
engineering is most successful when it is performed early in product development stage.
A value engineering study should be performed within the first 25-30% of the design
effort prior to selecting the final design alternative. Here, it is also important that R&D
team should work as a part of cross functional team i.e. (participate in a group of
people from different functional areas), to minimise lifecycle cost and the production
cycle time in new development.
Speed up the Product Launch
In cut throat competitions, it is important for M&D to get new product ’M’ launch into
the market as soon as possible since this will give “M” a long stay in the market
place without competition in the market. Competitor always try to launch a rival
product as quickly as possible in order to gain ‘competitive edge’. M&D may lose
overall profitability if it delays in launching of Product ‘M’. It is usually worthwhile
incurring extra costs to keep the launch on schedule or to speed up the launch.

10. The Present Profit of Hotel Nikko

Total Room Days = 25 Rooms × 365 days × 75% = 6,844
Profit = Total Contribution – Fixed Cost
= 6, 844 room days × (ZD 2,700 – ZD 900) - ZD 90,00,000
= ZD 33,19,200
If Nikko is Shut Down during Q2
Loss of Contribution {900 Room Days × (ZD 2,700 - ZD900)} = ZD 16,20,000
Nikko should not close its hotel during Q2. The fixed costs will still be incurred and hotel
closure would result in lost contribution of ZD16,20,000. This in turn would decrease
annual profits by ZD16,20,000. In addition, Nikko could lose guests at other quarters of
the year, particularly their regular business customers, who may perceive the Nikko as
being non-reliable.
Proposal of Opening an Italian Restaurant
Opening a restaurant will increase the fixed costs of the Nikko from ZD 9 million p.a. to
ZD 12 million p.a. Thus, annual increment of ZD 3 million.
Average Revenue per occupied room will rise from ZD 2,700 to ZD 3,636.36... (ZD 30
Million / 8,250 rooms) because increasing guest expenditure in Italian restaurant.
The total cost predicted at a level of 8,250 occupied rooms is ZD 23.75 million which
means the variable costs must be ZD 11.75 million (ZD 23.75 million – ZD 12 million
fixed costs). This is a variable cost per occupied room of ZD 1,424.24… which is an
increase of ZD 524.24…
Consequently, the breakeven point has gone up from 5,000 to 5,425 (as shown in the
diagram) occupied rooms so the Nikko is required to sell more room nights to cover
costs. However, budgeted occupancy is now 7,310 occupied room nights which is
80.11% occupancy (7,310/ 9,125). This provides a margin of safety of 1,885 occupied
room nights or 25.79%. At 7,310 occupied room nights, Nikko’s budgeted profit would be
ZD 41,70,597 {7,310 × (ZD 3,636.36 – ZD 1,424.24) – 12 million} which is more than
present budgeted profit by ZD 8,51,397. So, it is better for Nikko to go for opening an
Italian Restaurant.
11. (i) B. Steels
Balanced Scorecard Report
For the year ended March 31, 2022
Perspective Objective KPI Goal Actual Goal
Achieved
(Yes or No)
Financial Increase Gross Gross margin growth 15% 16% Yes
Margin percentage

Increase Core product line profit 5% 4.4% No

Profitability of as a percentage of core
Core Product product line sales
Line
Customer Increase number Number of Customers 15,000 15,600 Yes
of customers
Increase Percentage of repeat 83% 81% No
customer customers
retention
Internal Improve post Average replacement 2.0 1.5 Yes
Business sales service time (number of days)
Process Increase plant Number of plant 0 2 No
safety accidents
Learning Improve Employees satisfaction 1 1.2 No
and Growth employee job rating (1-5, with 1 being
satisfaction the most satisfied)
Improve Employee turnover rate 2% 3% No
employee morale (Number of employees
leaving / Average number
of total employees)
(ii) “Triple Bottom Line” concept encourages companies to measure not only their financial
profits, but also the impact that its operations have on the society and environment.
Therefore, this framework measures the full cost of doing business by measuring the
following bottom lines (i) Profit (ii) People and (iii) Planet.
Diminishing non-renewable resources have forced businesses to focus on sustainable
manufacturing. This term refers to managing manufacturing processes such that they
minimize any negative impact on the environment by conserving energy and natural
resources. In many instances, improved operational efficiency not only reduces waste
(thereby costs) but also improves product safety, it strengthens the brand’s reputation
and builds public’s trust about the company. As a long- term strategy, this improves
business viability and provides a competitive edge to the company. This concept is the
“Planet Bottom Line” within the Triple Bottom Line framework. Metrics on the following
aspects may be investigated to find out the environment impact of business operations:
▪ Material consumption
▪ Energy consumption
▪ Water utilization
▪ Emissions, treatment of effluents and waste (include emissions affecting air, water,
and land)
▪ Fuel consumption by tracking freight and transportation costs

▪ Land utilization
▪ Recyclability and disposal of product
“Corporate Social Responsibility” enables the company to become conscious of the
impact its operations has on the society. CSR programs, through philanthropy and
volunteer efforts can forge a stronger bond between itself, its employees, and the wider
community. Again, this improves both the brand image as well as builds public’s trust
about the company. This concept is the “People Bottom Line” of the Triple Bottom Line
framework. Metrics on the following aspects maybe investigated to find out the social
impact of business operations:
▪ Work place environment and labour relations
▪ Occupational health and safety, accident rates
▪ Human rights practices – child labour, employee work-place security policies
▪ Training and education
▪ Equal opportunity employer – diversity of workforce and opportunities available for
employees’ growth
▪ Suppliers – local sourcing versus sourcing from external markets
▪ Philanthropy and volunteer programs organized
▪ Product safety in terms of customer health and safety
▪ Pricing of essential products to enable wider reach within the society
▪ Transparent and ethical business practices
B. Steels can study these aspects, determine the relevant metrics, and prepare
periodic KPI reports that can help in measuring responsibilities towards
sustainability and social impact.
12. (i) Price to be Quoted
`/u
Avg. / unit (4 units)
Variable Cost 2,000
Labour 810
Target Contribution 1,500
Price to be Quoted 4,310
(ii) No, the company cannot quote this price for varying products because the learni ng
curve Ratio does not apply to non-repeated jobs. Each product will carry a different
price according to its direct labour hours.

PAPER – 6A to 6F [ELECTIVE PAPERS]
PAPER – 6 A : RISK MANAGEMENT
PAPER – 6 B : FINANCIAL SERVICES AND CAPITAL MARKET
PAPER – 6 C : INTERNATIONAL TAXATION
PAPER – 6 D : ECONOMIC LAWS
PAPER – 6 E : GLOBAL FINANCIAL REPORTING STANDARDS
PAPER – 6 F : MULTIDISCIPLINARY CASE STUDY
These papers are open book and case study based. Case Studies on all the above elective
subjects have been webhosted at the BoS Knowledge Portal.

PAPER 7: DIRECT TAX LAWS & INTERNATIONAL TAXATION
The provisions of direct tax laws, as amended by the Finance Act, 2021 and significant
notifications and circulars issued upto 30.4.2022, are relevant for November, 2022 examination.
The relevant assessment year is A.Y.2022-23. The October, 2021 edition of the Study Material,
based on the provisions of direct tax laws as amended by the Finance Act, 2021 and notifications
and circulars issued upto 31.10.2021, is relevant for November, 2022 examination. The same
has been webhosted at https://www.icai.org/post.html?post_id=17843. The Study Material has
to be read along with the Statutory Update and Judicial Update webhosted at the BoS
Knowledge Portal at https://resource.cdn.icai.org/70931bos56928s.pdf and at
https://resource.cdn.icai.org/70932bos56928j.pdf, respectively.
QUESTIONS AND ANSWERS
Case Scenario 1
Mr. Manoj (aged 45 years) is a resident Indian who has the following life insurance policies,
some of which are ULIPs. The details of such policies are given hereunder:
Particulars A B C (ULIP) D (ULIP) E (ULIP) F (ULIP)
Date of issue 1.4.2014 1.4.2015 1.2.2021 1.1.2021 1.3.2021 1.4.2021
Annual ` 50,000 ` 40,000 ` 1,00,000 ` 3,00,000 ` 1,40,000 ` 2,50,000
premium
Date when 1st April 1st April 1st Feb 1st Jan 1st March 1st April
premium falls
due every year
Date of maturity 31.3.2022 31.3.2022 31.1.2030 31.12.2029 28.2.2030 31.3.2030
Consideration ` 7,00,000 ` 4,00,000 ` 11,00,000 ` 32,00,000 ` 17,00,000 ` 28,00,000
received on
maturity
(including
bonus)
Sum assured ` 6,00,000 ` 3,50,000 ` 10,00,000 ` 30,00,000 ` 15,00,000 ` 25,00,000
During the P.Y.2021-22, Mr. Manoj has earned dividend income of ` 12 lakh from shares of
Indian companies and long-term capital gains (computed) of ` 5 lakhs on sale of land. He
deposited ` 1,50,000 in National Pension Scheme (Tier-I account) of Government. Mr. Manoj
does not opt for section 115BAC.

On the basis of the facts given above, choose the most appropriate answer to Q.1 to Q.5
below, based on the provisions of the Income-tax Act, 1961 -
1. Which are the life insurance policies (excluding ULIPs) in respect of which Mr. Manoj
would be eligible for exemption under section 10(10D) in respect of maturity proceeds
and what is the quantum of deduction which would be available under section 80C in
respect of premium paid on such policies for A.Y.2022-23? Assume that Mr. Manoj does
not have any ULIPs only for the purpose of answering this MCQ.
(a) A and B; ` 90,000
(b) A and B; ` 85,000
(c) Only A; ` 50,000
(d) Only A; ` 85,000
2. Which are the ULIPs in respect of which Mr. Manoj would be eligible for exemption under
section 10(10D) in respect of maturity proceeds? Choose the option most beneficial to
Mr. Manoj.
(a) Only C and E
(b) Only F
(c) Only C, D and E
(d) Only D and F
3. Considering the option chosen in MCQ 2 above, what would be the capital gains
computed under section 45(1B) in the hands of Mr. Manoj for A.Y.2030-31? Assume that,
for the purpose of this MCQ, no consideration was received prior to the maturity date in
case of any ULIP.
(a) ` 11,40,000
(b) ` 10,50,000
(c) ` 5,50,000
(d) ` 6,40,000
4. What is Mr. Manoj’s tax liability for A.Y.2022-23?
(a) ` 2,21,000
(b) ` 2,36,600
(c) ` 2,58,440

PAPER – 7: DIRECT TAX LAWS AND INTERNATIONAL TAXATION 33
(d) ` 2,74,040
5. What would be the total tax deductible under section 194DA during the P.Y.2021-22 on
payment of maturity proceeds of life insurance policies to Mr. Manoj?
(a) ` 3,500
(b) ` 6,000
(c) ` 20,000
(d) ` 55,000
Case Scenario 2
EduAid is a charitable trust registered under section 12AB. Its main object is education for the
economically weaker sections of the society. During the P.Y.2021-22, it received ` 60 lakhs as
voluntary contributions and ` 12 lakhs as anonymous donations. The trust borrowed ` 50 lakhs
on 1.5.2021 from SBI for construction of a primary school in a village in Tambaram near
Chennai. The trust repaid principal of `10 lakhs to SBI on 31.3.2022. The trust incurred
expenditure of ` 1 lakh on purchase of books for library and ` 10 lakhs on purchase of
computers for junior computer lab. The other applications, which are revenue in nature, is ` 7
lakhs. This sum includes ` 30,000 paid in cash on 14.4.2021 for repair work to Mr. Rajesh and
` 80,000 paid towards fees for professional services on 15.6.2021 without deduction of tax at
source. The excess application by the trust in the P.Y.2020-21 is ` 4 lakhs.
The trust also received ` 25 lakhs by way of corpus donations (for construction of Arts College
in Avadi, Tamil Nadu) during the P.Y.2021-22, out of which it –
(i) deposited ` 12 lakhs in post office savings bank account in January, 2022 (the balance in
post office savings bank account after such deposit is ` 22 lakhs); and.
(ii) invested ` 8 lakhs in shares of a public sector company in October, 2021.
However, in March, 2022, due to disinvestment by the Government, the company ceased to be
a public sector company. The trust also withdrew ` 5 lakhs from post office savings bank
account in March, 2022 and applied the same for construction of the primary school in a village
in Tambaram. During the year 2021-22, the trust spent ` 72 lakhs in total for construction of the
said school.
The trust has donated to PoorAid, another trust registered under section 12AB ` 5 lakhs out of
its current year income and ` 4 lakhs out of its accumulated income. Out of the amount of ` 5
lakhs donated out of its current year income, ` 2 lakhs was towards the corpus of PoorAid.

On the basis of the facts given above, choose the most appropriate answer to Q.6 to Q.10
below, based on the provisions of the Income-tax Act, 1961 -
6. What is the quantum of donations taxable@30% under section 115BBC?
(a) ` 12 lakhs
(b) ` 11 lakhs
(c) ` 8.40 lakhs
(d) ` 7.15 lakhs
7. Can the amount donated to PoorAid be allowed as application of income in the hands of
EduAid in the P.Y.2021-22? If so, how much?
(a) No, it is not allowed as application
(b) Yes, ` 9 lakhs is allowed as application
(c) Yes, ` 5 lakhs is allowed as application
(d) Yes, ` 3 lakhs is allowed as application
8. Can the corpus donations received by EduAid be claimed as exempt u/s 11(1)(d)? If so,
how much will be exempt?
(a) ` 7,00,000
(b) ` 12,00,000
(c) ` 20,00,000
(d) ` 25,00,000
9. What is the quantum of amount spent on construction which can be treated as application
in the hands of EduAid in the P.Y.2021-22?
(a) ` 10 lakhs
(b) ` 27 lakhs
(c) ` 32 lakhs
(d) ` 40 lakhs
10. What is the total amount which can be treated as application in the hands of EduAid in
the P.Y.2021-22 (excluding unconditional accumulation of 15%)?
(a) ` 53.46 lakhs
(b) ` 51.46 lakhs

(c) ` 47.46 lakhs

(d) ` 52.46 lakhs
11. ABC Ltd., an Indian company, purchases coal from XYZ Ltd., another Indian company,
for ` 60 lakhs during the P.Y.2021-22, to manufacture steel. ABC Ltd. furnishes a
declaration that such coal is used to manufacture steel and not for trading. What are the
TCS/TDS implications on such transaction, if the purchases were spread evenly
throughout the year and ABC Ltd.’s annual turnover was ranging between ` 12 crores
and ` 15 crores; and XYZ Ltd.’s annual turnover was ranging between ` 15 crores and
` 20 crores in the last few years?
(a) Tax@1% has to be collected by XYZ Ltd. on ` 60 lakhs under section 206C(1).
(b) Tax@0.1% has to be collected by XYZ Ltd. on ` 10 lakhs under section 206C(1H)
(c) No tax has to be collected at source by XYZ Ltd.; however, tax@0.1% has to be
deducted under section 194Q by ABC Ltd. on ` 10 lakhs.
(d) No tax has to be collected at source by XYZ Ltd.; ABC Ltd. also does not have to
deduct tax at source.
12. A survey is conducted u/s 133A in the premises of Mr. Aarav and a search is conducted
u/s 132 in the premises of his friend, Mr. Arjun, on 1.5.2021. The Assessing Officer issued
notices under section 148 for A.Y. 2019-20, A.Y.2020-21 and A.Y. 2021-22 to Mr. Aarav
and Mr. Arjun. However, such notices were not accompanied by the copy of an order
passed under section 148A. Is the action of the Assessing Officer in issuing such notices
under section 148 to Mr. Aarav and Mr. Arjun valid?
(a) No; the action of the Assessing Officer in issuing such notices under section 148
is not valid in both cases.
(b) Yes; the action of the Assessing Officer in issuing such notices under section 148
is valid in both cases.
(c) Yes, the action of the Assessing Officer in issuing such notice under section 148
is valid in the case of Mr. Arjun, but not in the case of Mr. Aarav.
(d) Yes, the action of the Assessing Officer in issuing such notice under section 148
is valid in the case of Mr. Aarav, but not in the case of Mr. Arjun.
13. The EBITDA of Ganga Ltd., an Indian company, for the F.Y.2021-22 is ` 800 lakhs. It paid
interest of ` 440 lakh to Andes Inc., Brazil, which is a specified foreign company in relation
to Ganga Ltd. The arm’s length interest applying CUP method was ` 350 lakh, and Ganga
Ltd. suo moto made the transfer pricing adjustment (primary adjustment) while computing

its total income. On the basis of the above facts, examine the correctness of the following
statements, assuming that no other interest is payable by Ganga Ltd. -
(a) The excess interest under section 94B would be ` 200 lakh. Secondary adjustment
is required to be made in respect of the said amount, unless Ganga Ltd. opts to
pay additional income-tax on such sum and has paid such additional income-tax.
(b) The excess interest under section 94B would be ` 110 lakh. Secondary adjustment
is required to be made in respect of the said amount, unless Ganga Ltd. opts to
pay additional income-tax on such sum and has paid such additional income-tax
(c) The excess interest under section 94B would be ` 110 lakh and secondary
adjustment under section 92CE is required to be made in respect of ` 90 lakh,
unless Ganga Ltd. opts to pay additional income-tax on such sum and has paid
such additional income-tax.
(d) The excess interest under section 94B would be ` 110 lakh. No secondary
adjustment is required under section 92CE.
14. M/s. ABC Ltd. has two units, Unit A and Unit B, both of which commenced operations on
1.4.2015. It sold Unit B on slump sale on 1.7.2021 for ` 1.45 crore. Unit B is engaged in
the specified business of operating a warehousing facility for storage of sugar and has
claimed deduction under section 35AD in an earlier previous year in respect of the entire
cost of eligible asset purchased.
On 1.7.2021, the following particulars relating to Unit B are given below –
Asset Value as per Other details (as on 1.7.2021)
books of account
as on 1.7.2021 (` )
Land (Revalued figure) 80,00,000 Stamp duty value – ` 95 lakhs;
Building (Cost) 50,00,000 Stamp duty value – ` 60 lakhs;
Debtors 12,00,000
Liabilities `
Unsecured loan 15,00,000
Current liabilities 5,00,000
Revaluation Reserve (Land) 6,00,000
What is the amount of capital gains on sale of Unit B in the A.Y.2022-23?

(a) ` 31 lakhs
(b) ` 75 lakhs

(c) ` 79 lakhs
(d) ` 81 lakhs
15. Mr. Akash (currently aged 40 years) is an Indian citizen who left for USA in the year 2009
for employment in Microsoft. He visited India for 15 days every year upto P.Y.2017-18.
He resigned his job in Microsoft and returned to India with his family on 15.2.2019
permanently and he opened a start-up in Pune on 1.3.2019. He visited USA from 1 st June
to 31st July both in the calendar years 2019 and 2020 for business purposes. He has a
house property in Dallas, USA from which he derives rental income of US $ 2,000 every
month which was credited to his savings bank account in Dallas. He paid municipal taxes
of US $ 200 in December 2021, out of the said account. Interest of $ 150 was credited in
the said bank account in March, 2022. In the P.Y.2021-22, he earned business income of
` 26 lakhs from his start up venture in Pune in addition to interest on fixed deposits of
` 1,70,000 from State Bank of India, Pune Branch. He deposited ` 1,50,000 in five year
term deposit with Bank of India, Pune Branch, out of rental income earned by him in USA.
Compute his tax liability (rounded off) for A.Y.2022-23, assuming that the value of 1 US
$ = ` 79 throughout the F.Y. 2021-22 and that he does not opt for section 115BAC.
(a) ` 6,22,440
(b) ` 6,69,240
(c) ` 10,36,770
(d) ` 12,17,690
16. M/s Fit & Fair, a partnership firm, commenced operations of the business of a new three-
star hotel in Pune, Maharashtra on 1.4.2021. The firm consisting of two working partners,
with equal shares, reports a net profit of ` 26,00,000 after deduction of the following items:
(i) Depreciation as per books of accounts ` 15,80,000.
(ii) Interest on capital @ 15% per annum (as per the deed of partnership). The amount
of interest is ` 50,00,000.
(iii) Interest on loan includes an amount of ` 6,00,000 paid to Mr. Rajveer, a resident, on
which tax was not deducted.
The firm purchased a new motor car for the above business for ` 7 lakh on 10th March,
2021 and capitalized the same in its books of account as on 1st April, 2021. Further, in
April, 2021, it incurred capital expenditure of ` 2 crores (out of which ` 1.50 crores was for
acquisition of land and ` 50 lakhs on building) exclusively for the above business. The firm
also installed and put to use new centralised air conditioners on 15.5.2021 costing
` 3,20,000.
The capital expenditure incurred by the firm were paid by account payee cheque or use of
ECS through bank account.

The firm also has another existing business of running a four-star hotel in Mumbai, which
commenced operations fifteen years back, the profits from which are ` 41,38,000
computed as per Income-tax Act for the A.Y.2022-23.
Compute total income and tax payable by the firm for the A.Y.2022-23, assuming that the
firm has fulfilled all the conditions specified for claim of deduction under section 35AD and
opted for claiming deduction under section 35AD; and has not claimed any deduction under
Chapter VI-A under the heading “C. – Deductions in respect of certain incomes”.
17. M/s Diamond Industries Ltd., an Indian company, is engaged in assembling and
manufacturing of automobiles and auto components in Indore, Madhya Pradesh. The net
profit after debit/credit of the following amounts to its Statement of Profit and Loss for the
year ended 31-03-2022 was ` 9,50,00,000.
(i) Depreciation calculated as per useful life of its assets ` 2,80,00,000.
(ii) Donation of ` 12,00,000 given to a political party by way of account payee cheque.
(iii) The company has paid ` 50,00,000 on 15-08-2021 to a research institution
recognized and notified by the Central Government which has as its object,
undertaking of scientific research.
(iv) Dividend received from foreign company of ` 15,00,000 in which it holds 30% of the
equity share capital.
(v) Long-term capital gain of ` 4,00,000 on sale of equity shares on which STT was paid
at the time of acquisition and sale.
(vi) Interest at 10% p.a. on ` 4,20,00,000 being amount borrowed from State Bank of
India on 01-06-2021 for purchase of machinery. The interest outstanding as on
31-03-2022 was paid on 01-12-2022.
(vii) Profit of ` 8,00,000 on sale of a plot of land to PQR Limited, an Indian company, the
entire shares of which are held by the Diamond Industries Ltd. The plot was acquired
on 30th June, 2020.
(viii) Salary of ` 1,00,00,000 to foreign technicians for installation of machinery at the
factory premises was paid.
(ix) The company sold automobile parts for ` 22,00,000 to M/s ABC Co Engineers, a sole
proprietary concern, on 01.11.2019. On 01.02.2022 ` 12,00,000 was written off in the
books as bad debts. The sole proprietor died on 01.03.2022 and the company
managed to collect ` 11,00,000 towards full and final settlement on 30.03.2022. The
entire amount collected was shown as bad debts recovered and credited to Statement
of Profit and Loss.
Additional Information:
1. Depreciation computed as per Income-tax Rules, 1962 is ` 1,50,00,000 other than
on the additions in assets made during the year.

2. Additions made to the assets were as follows:

(i) Office Building ` 3,00,00,000 - Put to use from 15-12-2021.
(ii) Computers ` 25,00,000 - Put to use on 11-05-2021.
(iii) Plant and machinery ` 5,00,00,000 - Installed and put to use on 01-01-2022.
3. The company declared and distributed dividend for the financial year 2021-22 on
31.5.2022 for ` 12,00,000.
Compute the total income of the company and tax liability for the assessment year
2022-23, assuming company opts for concessional tax regime under section 115BAA.
Total turnover of the company for the P.Y. 2019-20 was ` 402 crores.
18. Mr. Rajesh is a resident unitholder of PQR Ltd. and Shipra Ltd. PQR Ltd. is incorporated
as an Investment Fund and Shipra Ltd. is a Real Estate Investment Trust. (REIT), which
holds 100% shareholding in GPL Ltd., an Indian company. Mr. Rajesh holds 10% units in
both Shipra Ltd. and PQR Ltd. since the year 2019.
The particulars of income of Shipra Ltd. and PQR Ltd. for the previous year 2021-22 are
given below:
Particulars Shipra Ltd. PQR Ltd.
Dividend Income from GPL Ltd. ` 2 crores
Interest Income from GPL Ltd. ` 3 crores
Short-term capital gains on sale of developmental ` 1 crore
properties
Business income ` 35 lakhs.
Long-term capital losses ` 27 lakhs
Interest income ` 52 lakhs
GPL Ltd. does not exercise option under section 115BAA for A.Y. 2022-23. Shipra Ltd. and
PQR Ltd. distribute 90% of its income to the unit-holders during the year. Compute total
income and tax payable by Mr. Rajesh for the A.Y. 2022-23, assuming that he has opted
for section 115BAC.
19. Examine the applicability of provisions relating to deduction/collection of tax at source and
compute the liability, if any, for deduction/collection of tax at source in the following cases
for financial year ended 31 st March, 2022 as per provisions contained under the Income-
tax Act, 1961:
(i) Mr. Devansh, an Indian Citizen, residing in New York, came to India on a visit on
15.2.2022. He paid ` 6 lakhs to a tour operator, M/s Journey Trip, based in Mumbai
for a tour package to Malaysia for 1 week. He left for Malaysia on 1.3.2022 and
returned to India on 8.3.2022. Thereafter, he was in India upto 5.4.2022 on which

date he took his return flight to New York. He does not have any source of income in
India.
(ii) XYZ Ltd. was incorporated on 1.4.2021 for trading goods. Its turnover for the
P.Y. 2021-22 is ` 12 crores. During the P.Y.2021-22, it purchased goods from M/s.
White Ride, the details of which are as follows:
On 1.8.2021 for ` 25,00,000;
On 15.9.2021 for ` 30,00,000 and
On 15.12.2021 for ` 15,00,000.
The above dates represent the date of credit to the account of M/s. White Ride.
Payment is made after one month (i.e., on the same date in the immediately following
month). M/s White Ride’s turnover for the F.Y. 2020-21 and F.Y. 2021-22 was ` 11
crores and ` 9.7 crores, respectively.
20. Mr. Ravi Prakash, a resident Indian aged 52 years, gifted a sum of ` 30 lakhs to his wife
Mrs. Sudha on the occasion of her 50 th birthday. Out of the said sum, Mrs. Sudha
purchased a car for ` 29,52,000 inclusive of RTO charges of ` 2,15,000, insurance of
` 51,575, extended warranty of ` 25,255 and accessories charges of ` 35,460 during the
P.Y. 2021-22. These charges were shown separately in the invoice. Mrs. Sudha’s
furnished her Aadhaar No. to the dealer. She is a housewife and does not have any income
except rental income of ` 25,000 p.m. in respect of a house property gifted to her by her
father.
Mr. Ravi Prakash is of the opinion that his wife is not required to furnish return of income,
since her total income does not exceed the basic exemption limit. Examine.
21. The assessment of Mr. Arora was completed u/s 143(3) of the Income-tax Act 1961 with
an addition of income of ` 9 lakh to the returned income. Mr. Arora contends that the order
of assessment is bad in law as no notice was issued u/s 143(2) even though he had
participated in the assessment proceedings. The Assessing Officer, relying on section
292BB, contends that since Mr. Arora has participated in assessment proceedings, he
cannot raise such objection.
Examine the validity of the contentions of both Mr. Arora as well as the Assessing Officer.
22. Mr. Vijay furnished his return of income for A.Y.2021-22 declaring total income of
` 28,00,000 for the A.Y. 2021-22. He received an assessment order under section 143(3)
on 26.11.2022 enhancing the total income for the A.Y.2021-22 by ` 5,00,000. He is
aggrieved by the said order and is desirous of knowing whether he can file an application
before the Dispute Resolution Committee (DRC). He informs you that no order of detention
has been made and no prosecution proceedings have been initiated or instituted against
him under any law for the time being in force. However, penalty under section 271D has
been levied on him for failure to comply with the provisions of section 269SS.

Can Mr. Vijay file an application before the DRC?

(i) If yes, what is the time limit for making an application to DRC against such order under
the Income-tax Act, 1961. He is also keen to know, whether, in case he is aggrieved by
the order passed by the DRC, can he file appeal against such order of DRC?
(ii) Would your answer be different, if assessment order is based on information received
under a DTAA with Country X?
23. Spacecraft Ltd., an Indian company, has entered into a contract for ` 4.5 crores with DOT
Inc., Country X for the Financial Year 2021-22. DOT Inc. maintains an online web-platform
through which it provides end user computer software through an End-user Licence
Agreement (EULA) as per the contract. The broad terms of the EULA between the two
companies are as follows-
Grant of licence. DOT Inc. grants Spacecraft Ltd. a limited non-exclusive licence to install,
use, access, display and run the click wrap web-based Computer Software (CWCS) on a
single local hard disk(s) or other permanent storage media of one computer. Spacecraft
Ltd. should not make CWCS available over a network where it could be used by multiple
computers at the same time.
Reservation of rights and ownership. DOT Inc. reserves all rights not expressly granted to
Spacecraft Ltd. in this EULA. The CWCS is protected by copyright and other intellectual
property laws and treaties. DOT Inc. owns the title, copyright and other intellectual property
rights in the CWCS. The CWCS is licenced (only for use and not any other purpose), not sold.
DOT Inc. does not have any offices outside Country X.
Discuss the tax implications/TDS implications of such receipt in the hands of DOT Inc.,
Country X and payment by Spacecraft Ltd., India under Chapter VIII of the Finance Act,
2016 (as amended by the Finance Act, 2021) and Income-tax Act, 1961, considering the
India- Country X DTAA also, the relevant extract of which is given hereunder:
Extract of Article 12 of India-Country X DTAA
Royalties and Fees for Technical Services
1. Royalties and fees for technical services arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that other State.
2. However, such royalties and fees for technical services may also be taxed in the
Contracting State in which they arise and according to the laws of that Contracting
State, but if the recipient is the beneficial owner of the royalties or fees for technical
services, the tax so charged shall not exceed 10 per cent.
3. The term "royalties" as used in this Article means payments of any kind received as
a consideration for the use of, or the right to use :
(a) any copyright of a literary, artistic or scientific work, including cinematograph
film or films or tapes used for radio or television broadcasting, any patent,

trademark, design or model, plan, secret formula or process, or for information

concerning industrial, commercial or scientific experience, including gains
derived from the alienation of any such right, property or information
24. Mrs. Rajni, aged 63 years, is married and settled in Ranchi. She is a Hindustani classical
dancer and choreographer who performs in concerts in India and Country M. She visits
Country M every year in October to participate in the Spring dance concert held there. For
the rest of the year, she performs in dance programs organized in India. India does not
have a DTAA with Country M.
She earns CMD 10120 from concerts held in Country M. She also owns a residential house
property in Country M. She earned rental income of CMD 25,000 from such property. She
also paid municipal taxes of CMD 200 in respect of this property, which is not deductible
in Country M. All income from Country M is taxable in Country M @20%. The entire tax
due in Country M has been duly paid by Mrs. Rajni.
She earns ` 15 lakhs from performances in dance programs held in India. She has interest
income of ` 4.2 lakhs (gross) from bank fixed deposits in her name and ` 15,000 from
savings bank account in India.
She pays medical insurance premium of ` 29,000 to insure her health and ` 32,000 to
insure the health of her husband, a resident aged 65 years. She deposits ` 1.50 lakhs in
her public provident fund and ` 4 lakhs in five-year fixed deposit in the name of her son,
Mr. Priyanshu. The TT buying rate as on 31.3.2022 for Country M Dollar (CMD) is ` 69.
Compute the total income and net tax payable by Mrs. Rajni for A.Y.2022-23, providing for
deduction under section 91. Assume that Mrs. Rajni does not opt for section 115BAC.
25. Matrix Inc. incorporated in Country X, holds 26% controlling interest in Pilu Ltd., an Indian
Company. Pilu Ltd. declared dividend of ` 50,00,000 during the P.Y. 2021-22. The DTAA
between India and Country X, which came into force on 1.1.2018, provides for taxation of
dividend @15%. Thereafter, India entered into a DTAA with Country Y, which came into
force from 15.5.2018. The India-Country Y DTAA, inter alia, provides for concessional tax
rate of 10% in respect of dividend. Country X is an OECD member since 2015 and Country
Y is also an OECD member since 2017.
Mr. Jack, CFO of Matrix Inc. seeks your opinion on whether the concessional tax rate
provided in the DTAA between India and Country Y can be availed by a resident of Country
X and if so, are there any further conditions to be satisfied in this regard. You may assume
that the protocol annexed to India’s DTAAs with all OECD member countries contain the
relevant tax parity clause.
Would your answer change, if Country Y had become an OECD member only in the year
2020?

SUGGESTED ANSWERS
MCQ No. Most Appropriate Answer MCQ No. Most Appropriate Answer
1. (d) 9. (b)
2. (c) 10. (c)
3. (c) 11. (c)
4. (c) 12. (c)
5. (b) 13. (d)
6. (d) 14. (d)
7. (d) 15. (a)
8. (c)
16. Computation of total income and tax payable of M/s Fit & Fair for A.Y. 2022-23
Particulars `
Profits from the specified business of new hotel in Pune 26,00,000
Add: Items debited but to be considered separately or to be disallowed
Depreciation 15,80,000
Interest on capital to partners@15% p.a. (Interest allowable to 10,00,000
the extent of 12% p.a., since the same is authorized by the
partnership deed. Thus, interest of ` 10,00,000, being in
excess of 12% p.a. i.e., ` 50,00,000 x 3%/15% would be
disallowed)
30% disallowance of interest on loan on which tax is not
deducted [30% of ` 6,00,000] 1,80,000 27,60,000
53,60,000
Less: Permissible expenditures and allowances
100% of capital expenditure allowable as deduction under
section 35AD in respect of –
- Building (expenditure on land not eligible for 50,00,000
deduction)
- New Motor Car (capital expenditure for purchase 7,00,000
of car prior to 1.4.2021 (i.e., prior to
commencement of business) and capitalized in the
books of account as on 1.4.2021
- New Air conditioner 3,20,000
60,20,000
Loss from the specified business of new hotel in Pune (6,60,000)

Profit from the existing business of running a hotel in Mumbai 41,38,000

Less: Loss from the specified business of new hotel in Pune 6,60,000
Net profit from business after set-off of loss of specified business against
profits of another specified business under section 73A 34,78,000
Total Income 34,78,000
`
Income-tax @30% on total income of ` 34,78,000 10,43,400
Add: Health & education cess @4% 41,736
Tax liability 10,85,136
Tax liability (rounded off) 10,85,140
Computation of Alternate Minimum Tax liability of M/s Fit & Fair for A.Y.2022-23
Particulars `
Total income (computed above) 34,78,000
Add: Deduction under section 35AD 60,20,000
94,98,000
Less: Depreciation in respect of – `
- Building @10% of ` 50,00,000 5,00,000
- New Motor Car (capital expenditure for purchase of 1,05,000
car prior to 1.4.2021 (i.e., prior to commencement
of business) and capitalized in the books of account
as on 1.4.2021@15% of ` 7,00,000
- New Air conditioner @15% of ` 3,20,000 48,000 6,53,000
Adjusted total income 88,45,000
Alternate Minimum Tax@18.5% 16,36,325
Add: Health & education cess@4% 65,453
Tax liability under section 115JC 17,01,778
Tax liability under section 115JC (Rounded off) 17,01,780
Since the regular income-tax payable is less than the alternate minimum
tax payable, the adjusted total income shall be deemed to be the total
income and tax is leviable @18.5% thereof plus health and education
cess@4%. Therefore, the tax liability is ` 17,01,780
AMT Credit to be carried forward under section 115JD `
Tax liability under section 115JC 17,01,780
Less: Tax liability under the regular provisions of the Income-tax Act, 1961 10,85,140
AMT Credit to be carried forward 6,16,640

17. Computation of total income and tax liability of M/s Diamond Industries Ltd. for the
A.Y. 2022-23 as per section 115BAA
Particulars Amount in `
I Profits and gains of business and profession
Net profit as per Statement of Profit and Loss 9,50,00,000
Add: Items debited but to be considered
separately or to be disallowed
(i) Depreciation as per useful life of assets 2,80,00,000
(ii) Donation to political party 12,00,000
[Since donation to political party is not
wholly and exclusively for the purpose of
business or profession, it is not allowable as
deduction u/s 37. Since the amount of
contribution is debited to statement of profit
and loss, the same has to be added back]
(iii) Contribution to research institution 50,00,000
approved and notified by the Central
Government for scientific research
[As per section 35(1)(ii), 100% deduction is
allowed for amount paid to a research
institution undertaking scientific research, if
such institution is approved for this purpose
and notified by the Central Government.
However, since company is opting for
section 115BAA, deduction in respect of this
contribution is not allowed. Since the
amount of contribution is debited to
statement of profit and loss, the same is
required to be added]
(vi) Interest on borrowing paid to State Bank 35,00,000
of India (SBI) [10% x ` 420 lakhs x 10/12]
[Interest on borrowing from SBI upto
1.1.2022, being the date when machinery is
installed and put to use, is not allowable as
deduction since it has to be capitalized as
part of the cost of the asset. Interest for
January, February and March 2022 is
disallowed as per section 43B since it is not
paid on or before the due date of filing return
of income i.e., 31.10.2022. Since the entire

interest has been debited to the statement

of profit and loss, it has to be added back
while computing business income]
(viii) Salary for installation of machinery 1,00,00,000
[As per ICDS V, expenses which are
specifically attributable for bringing the fixed
asset to its working condition would form
part of actual cost. Therefore, salary to
foreign technicians for installation of
machinery is a capital expenditure and not
allowable as deduction. Since it has been
debited to the statement of profit and loss, it
has to be added back while computing
business income]
4,77,00,000
14,27,00,000
Less: Items credited but not chargeable to tax
or chargeable to tax under other head of
income/expenses allowed but not
debited
(iv) Dividend received from foreign company 15,00,000
[Dividend received from foreign company is
taxable under the head “Income from other
Source”. Since the same has been credited to
Statement of Profit and loss, it has to be
deducted while computing business income.
(v) Long-term capital gain on sale of equity 4,00,000
shares
[Long-term capital gain on sale of equity
shares is taxable under the head “Capital
Gains”. Since the same has been credited to
Statement of Profit and loss, it has to be
deducted while computing business income.
(ix) Bad debt recovered 10,00,000
[The deduction of bad debt allowed u/s 36
was ` 12 lakhs out of the total debt of ` 22
lakhs; Since the amount not written off as
bad debt is ` 10 lakhs (` 22 lakhs - ` 12
lakhs) while the amount recovered in
respect of such debt is ` 11 lakhs, only the

excess sum of ` 1 lakh would be chargeable

to tax as business income. Since the entire
amount of ` 11 lakhs recovered has been
credited to the statement of profit and loss,
` 10 lakhs has to be reduced while
computing business income.]
(vii) Profit on sale of plot of land 8,00,000
Capital gains arising on sale of plot of land
are taxable under the “Capital Gains”. Since
the same has been credited to the statement
of profit and loss, the same has to be
reduced while computing business income]
37,00,000
13,90,00,000
Less: Depreciation as per Income-tax Rules, 1,50,00,000
1962
Depreciation on assets acquired during the P.Y.
- Office building
Purchased and put to use on 15.12.2021
[` 300 lakhs x 10% x 50%, since it has been
put to use for less than 180 days during the
year] 15,00,000
- Computer
Purchased and put to use on 11.5.2021
[` 25 lakhs x 40%, since it has been put to
use for 180 days or more during the year] 10,00,000
- Plant and machinery
On P & M installed and put to use on 1.1.2022
[` 624.5 lakhs (` 500 lakhs + ` 100 lakhs of
salary for installation + ` 24.5 lakhs, being
interest from 1.6.2021 to 31.12.2021) x 15%
x 50%, since it has been put to use for less
than 180 days during the year] 46,83,750 2,21,83,750
Additional depreciation (since company is opting
for section 115BAA, additional depreciation is not
allowed) - -
Profits and gains from business or profession 11,68,16,250

II Capital Gains
Profit on sale of plot of land -
[Short-term capital gains arise on sale of plot of
land held for less than 24 months. However, in
this case, since the transfer is to a 100%
subsidiary company, which is an Indian company,
the same would not constitute a transfer for levy
of capital gains tax as per section 47(iv)]
Long-term capital gain on listed equity shares 4,00,000 4,00,000
III Income from Other Sources
Dividend received from a foreign company 15,00,000
Gross Total Income 11,87,16,250
Less: Deduction under Chapter VI-A
Deduction under section 80GGB [Donation to -
political party is not allowable as deduction to Diamond
Industries Ltd., since the company is opting for section
115BAA]
Deduction under section 80M allowable, even if, 12,00,000
company is opting for section 115BAA, to the extent of
lower of dividend received and dividend distributed.
Therefore, ` 12,00,000, being the amount of dividend
distributed allowable as deduction
Total Income 11,75,16,250
Computation of tax liability as per section 115BAA
Particulars Amount in `
Tax payable on LTCG @10% u/s 112A on ` 3,00,000, being the LTCG 30,000
in excess of ` 1,00,000
Tax payable on dividend @15% u/s 115BBD on ` 3,00,000 [15,00,000 45,000
– 12,00,000 being the amount deduction available under section 80M]
Tax @ 22% on ` 11,68,16,250 2,56,99,575
2,57,74,575
Add: Surcharge @ 10% 25,77,458
2,83,52,033
Add: Health and education cess @4% 11,34,081
Tax liability 2,94,86,114
Tax liability (rounded off) 2,94,86,110

18. Computation of total income and tax payable in the hands of Mr. Rajesh
Particulars `
(i) Dividend income from GPL Ltd. (SPV) -
As per section 10(23FD), the component of dividend income
distributed to unitholders is not taxable in the hands of unitholders,
since GPL Ltd. (SPV) has not exercised the option u/s 115BAA.
Accordingly, ` 18 lakhs (10% of ` 1.80 crore, being 90% of ` 2
crore), being the dividend component of income received by
Mr. Rajesh from Shipra Ltd. is not taxable in his hands.
(ii) Interest income from GPL Ltd. (SPV) 27,00,000
As per section 115UA(3), interest income distributed to unit holders
would be deemed as income of the unit holders. Accordingly,
` 27 lakhs [i.e., 10% of ` 2.7 crores (90% of ` 3 crores)], being the
interest component of income distributed to Mr. Rajesh, is taxable
in the hands of the Mr. Rajesh.
(iii) Short-term capital gains on sale of developmental properties -
by Shipra Ltd.
As per section 115UA(2), STCG on sale of development properties
is taxable at maximum marginal rate of 42.744% in the hands of
the REIT. No tax liability arises in the hands of Mr. Rajesh on ` 9
lakh (10% of ` 90 lakh, being 90% of ` 1 crore), being the capital
gain component of income distributed to him, by virtue of section
10(23FD).
(iv) Business Income of PQR Ltd. -
Business income of an investment fund is taxable in the hands of
investment fund. Consequently, as per section 10(23FBB),
business income accruing or arising to or received by a unitholder
of an investment fund is not taxable in his hands.
(v) Long-term capital loss of PQR Ltd. -
Long-term capital loss of ` 2,70,000 (10% of ` 27 lakhs) can be
carried forward and set-off by Mr. Rajesh, since he holds such units
for more than 12 months, against income from long-term capital
gains arising in the subsequent years, since there is no long-term
capital gain in the current year. It can be carried forward for a
maximum of 8 assessment years.
(vi) Interest income of PQR Ltd. 5,20,000
As per section 10(23FBA), interest income would be exempt in the
hands of Investment fund. As per section 115UB, ` 5,20,000 lakhs

(10% of ` 52 lakhs) would be taxable as income from other sources

in the hands of Mr. Rajesh.
Even if investment fund distributed only 90% of its income to the
unit holders during the year, the remaining 10% of income would
be deemed to be credited to the account of each unitholder on the
last day of the previous year i.e., 31.03.2022.
Further, income which has been included in the total income of the
unitholders in the previous year on accrual basis shall not once
again be included in the previous year in which such income is
actually paid to him by the investment fund.
Total income 32,20,000
Computation of tax payable by Mr. Rajesh for A.Y.2022-23
Particulars ` `
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000 @5% 12,500
` 5,00,001 – `7,50,000 @10% 25,000
` 7,50,001 – `10,00,000 @15% 37,500
`10,00,001 – `12,50,000 @20% 50,000
` 12,50,001 – ` 15,00,000 @25% 62,500
` 15,00,001 – ` 32,20,000@30% 5,16,000 7,03,500
Add: Health and education cess @4% 28,140
Tax liability 7,31,640
Less: Tax deducted at source
- under section 194LBA @ 10% by Shipra Ltd. in 2,70,000
respect of interest income from SPV
- under section 194LBB @10% by PQR Ltd. 52,000 3,22,000
Tax payable 4,09,640
19. (i) Section 206C(1G) provides for collection of tax@ 5% by every person, being a seller
of an overseas tour programme package, who receives any amount from the buyer
who purchases the package. The threshold limit of ` 7 lakh is not applicable in case
of collection of tax at source by a seller of an overseas tour programme package from
a buyer who purchases such package. Hence, tax has to be collected@5% of the
amount received by the seller of an overseas tour programme package from a buyer
even if the amount is less than ` 7 lakh.
However, as per Notification No. 20/2022 dated 30.3.2022, TCS u/s 206C(1G) would
not be applicable, if the buyer is an individual who is not a resident in India [in terms
of section 6(1) and (1A)]; and who is visiting India.

Mr. Devansh, an Indian citizen living in New York, came on a visit to India during the
P.Y. 2021-22. He does not have any source of income in India. During that previous
year, he stayed in India for only 39 days (14 days in February + 25 days in March).
Since his stay in India during the P.Y.2021-22 is less than 182 days, he is non-
resident in India for the said previous year.
Accordingly, in this case, since Mr. Devansh is a non-resident who is visiting India,
M/s. Journey trip, the tour package operator, is not required to collect tax at source
under section 206C(1G) on the amount of ` 6 lakh received from him for purchase of
tour programme package to Malaysia.
(ii) For the provisions of section 194Q to be attracted, a buyer is required to have a total
sales or gross receipts or turnover from the business carried on by it exceeding ` 10
crore during the financial year immediately preceding the financial year in which the
purchase of goods is carried out. The CBDT has, vide Circular No. 13/2021, dated
30.6.2021, clarified that since this condition would not be satisfied in the year of
incorporation, the provisions of section 194Q shall not apply in the year of
incorporation. Since XYZ Ltd. is incorporated in the P.Y. 2021-22, it would not qualify
as a “buyer” for the purpose of section 194Q for the said previous year, inspite of its
turnover exceeding ` 10 crores in the said previous year.
However, since White Ride’s turnover for the F.Y. 2020-21 exceeds ` 10 crores and
its receipts from XYZ Ltd. exceed ` 50 lakhs, TCS provisions under section 206C(1H)
would be attracted in its hands. TCS would be attracted at the time of receipt of
consideration (i.e., in respect of receipts in excess of sale consideration of Rs.50
lakhs).
No tax is to be collected u/s 206C(1H) on 1.9.2021, since the aggregate receipts till
that date i.e., ` 25 lakhs, has not exceeded the threshold of ` 50 lakhs.
Tax of ` 500 (i.e., 0.1% of ` 5 lakhs) has to be collected u/s 206C(1H) by M/s White
Ride on 15.10.2021 (` 30 lakh – ` 25 lakhs, being the balance unexhausted threshold
limit).
Tax of ` 1,500 (i.e., 0.1% of ` 15 lakhs) has to be collected u/s 206C(1H) by
M/s. White Ride on 15.1.2022.
20. Mrs. Sudha’s income from house property would be ` 2,10,000 (` 3,00,000 less 30% of
net annual value). Since this is her only source of income, her gross total income/total
income for A.Y.2022-23 would be ` 2,10,000, which is lower than the basic exemption limit.
Hence, she is not required file her return of income for A.Y.2022-23 as per section
139(1)(b), since her gross total income/total income does not exceed the basic exemption
limit of ` 2,50,000.

However, clause (iv) to seventh proviso of section 139(1) provides that a person (other
than a company or a firm) who is not required to furnish a return u/s 139(1) has to furnish
return on or before the due date if he/she fulfills such other conditions as may be prescribed
under Rule 12AB.
Rule 12AB, inter alia, prescribes that any person other than a company or a firm, who is
not required to furnish a return under section 139(1), has to file income-tax return in the
prescribed form and manner on or before the due date if, the aggregate of tax deducted at
source and tax collected at source during the previous year, in case of such person, is
` 25,000 or more.
Accordingly, it has to be examined whether, in Mrs. Sudha’s case, the requirement to file
return for A.Y.2022-23 arises due to TDS/TCS, in her case, exceeding ` 25,000 in the
P.Y.2021-22.
As per section 206C(1F), every person, being a seller, who receives any amount as
consideration for sale of a motor vehicle of the value exceeding ` 10 lakhs, has to collect
tax from the buyer @1% of the sale consideration.
Accordingly, dealer of the car is required to collect tax at source of ` 26,247 @1% on ex-
showroom price i.e., ` 26,24,710 (` 29,52,000 – ` 2,15,000 – ` 51,575 – ` 25,255 –
` 35,460) from Mrs. Sudha, being the buyer of the car.
Hence, as per the seventh proviso to section 139(1) read with Rule 12AB, Mrs. Sudha is
required to mandatorily file her return of income for A.Y.2022-23, even though her gross
total income/total income does not exceed the basic exemption limit, since tax collected at
source during the P.Y. 2021-22, in her case is ` 26,247 which exceeds the threshold of
` 25,000.
21. As per section 292BB, any notice which is required to be served upon an assessee shall
be deemed to have been duly served and the assessee would be precluded from taking
any objection that the notice was-
(a) not served upon him; or
(b) not served upon him in time; or
(c) served upon him in an improper manner,
if he had appeared in any proceedings or co-operated in any enquiry relating to
assessment or re-assessment.
Issue of notice under section 143(2) is mandatory for making a regular assessment under
section 143(3). The Apex Court in CIT v. Laxman Das Khandelwal (2019) 417 ITR 325 held
that section 292BB is a deeming provision that seeks to cure defects in any notice issued
under any provision of the Income-tax Act, 1961, if the assessee has participated in the
proceedings.

For section 292BB to apply, the notice must have emanated from the Department. It is only
the infirmities in the manner of service of notice that the section seeks to cure. The section
is not intended to cure the complete absence of notice itself.
Accordingly, non-issuance of notice under section 143(2) is not a curable defect under
section 292BB inspite of participation by the assessee in assessment proceedings.
In the present case, since the assessment of Mr. Arora was completed u/s 143(3) without
issuing notice u/s 143(2), the assessment is bad in law and not a curable defect u/s 292BB.
Therefore, the contention of Mr. Arora is valid and the contention of the Assessing Officer
is invalid in spite of the fact that Mr. Arora participated in the assessment proceedings.
22. Dispute Resolution Committee (DRC) would resolve dispute in the case of a person who
opts for dispute resolution under Chapter XIX-AA in respect of dispute arising from any
variation in the specified order in his case and who fulfils the specified conditions. Specified
order includes an assessment order passed under section 143(3), where the aggregate
sum of variations made vide such order does not exceed ` 10 lakh; the total income as per
such return furnished by the assessee for the assessment year relevant to such order does
not exceed ` 50 lakhs and such order is not based on search or requisition or survey or
any information received under a DTAA.
Accordingly, in the present case, Mr. Vijay can file an application before DRC, since the
assessment order received on 26.11.2022 is a specified order and he satisfies the
specified conditions on account of no order of detention being made and no prosecution
proceedings being initiated or instituted against him. Non-levy of penalty under income-tax
law is not a specified condition, therefore, the levy of penalty under section 271D on him
does not result in non-compliance with the specified condition. Mr. Vijay has to file an
application for resolution of dispute in the prescribed form on or before 25.12.2022 i.e.,
within one month from the date of receipt of the specified order.
However, once a modified order is passed by the DRC, no appeal or revision would lie
against such order.
If assessment order is based upon the information received under an DTAA entered with
India, Mr. Vijay, will not be eligible to make an application before DRC, since it is not a
specified order.
23. Section 165A of the Finance Act, 2016 provides for equalisation levy@2% on the amount
of consideration received or receivable by an e-commerce operator from e-commerce
supply or services made or provided or facilitated by it, inter alia, to a person resident in
India and a person who buys such goods or services or both using internet protocol
address located in India.
First, it has to be determined whether DOT Inc., Country X is an e-commerce operator.

E-Commerce Operator means a non-resident who owns, operates or manages digital or

electronic facility or platform for online sale of goods or online provision of services or both.
In the given situation, DOT Inc., Country X, a non-resident, maintains a digital platform for
providing end user computer software. Therefore, DOT Inc. is an e-commerce operator.
However, the consideration received or receivable for e-commerce supply or services
would not include the consideration, which are taxable as, inter alia, royalty or fees for
technical services in India under the Income-tax Act, read with the DTAA notified by the
Central Government under section 90 or section 90A.
The consideration paid by Spacecraft Ltd. to DOT Inc. for use of computer software as per
the terms of EULA is not “royalty” as per the meaning assigned in the DTAA, since it
does not create any interest or right to Spacecraft Ltd. which would amount to the use of
or right to use any copyright. Accordingly, the same does not give rise to any income
chargeable to tax in India. Since the provisions of the DTAA are more beneficial, the same
would apply in the case on hand as decided by Apex Court in Engineering Analysis Centre
of Excellence P. Ltd v. CIT and Another (2021) ITR 471.
In the given situation, DOT Inc. is an e-commerce operator defined in section 165A, since
it provides services through its digital platform. Further, the consideration for such services
is ` 4.5 crores which exceeds the threshold limit of ` 2 crores specified in section 165A.
Also, all the other conditions specified in section 165A are satisfied viz. namely there is no
PE for DOT Inc., Country X, in India and services are provided to a resident in India i.e.,
Spacecraft Ltd., an Indian company.
Hence, DOT Inc., Country X has to pay 2% on ` 4.5 crores which would amount to ` 9
lakhs, as equalisation levy. Spacecraft Ltd., India, the service recipient, need not deduct
the amount as equalisation levy under section 165A (e-commerce supply or services),
since the same is to be paid directly by the service provider i.e., DOT Inc., Country X.
24. Computation of total income and net tax payable by Ms. Rajni for the A.Y. 2022-23
Particulars ` `
Income from house property
Gross annual value1 [CMD 25000 x 69, being conversion 17,25,000
rate as on 31.3.2022 – Rule 115)]
Less: Municipal taxes [CMD 200 x 69] 13,800
17,11,200
1Rental income assumed to be gross annual value, in absence of information regarding standard rent, fair rent
and municipal value.

Less: Deduction u/s 24@30% 5,13,360

11,97,840
Profits and gains of business or profession
From dance programs held in India 15,00,000
From concerts held in Country M [CMD 10,120 x 69
(being conversion rate as on 31.3.2022 – Rule 115) 6,98,280
21,98,280
Income from Other Sources
Income from bank fixed deposits in her name 4,20,000
Income from savings bank account 15,000 4,35,000
Gross Total Income 38,31,120
Less: Deduction under section 80C
Deposit in PPF 1,50,000
Five year fixed deposit in the name of her son -
(does not qualify for deduction under section 80C)
Under section 80D 50,000
Medical insurance premium to insure her health
and health of spouse (` 61,000, restricted to
` 50,000, being the maximum allowable for senior
citizens)
Under section 80TTB : Interest on bank FD and 50,000
savings bank account restricted to 2,50,000
Total Income 35,81,120
Tax on Total Income
Income-tax 8,84,336
Add: Health and Education Cess @4% 35,373
9,19,709
Average rate of tax in India
(i.e., ` 9,19,709/ ` 35,81,120 × 100) 25.682%
Rate of tax in Country M 20%
Doubly Taxed Income 18,96,120

[` 11,97,840 (income from house property) + ` 6,98,280

(income from concerts)]
Lower of Indian rate of tax and Rate of tax in Country M 20%
Deduction under section 91
20% of doubly taxed income of ` 18,96,120 3,79,224
Net tax payable 5,40,485
Net tax payable (rounded off) 5,40,490
25. The CBDT has, vide Circular No. 3/2022 dated 3.2.2022, clarified that the applicability of
the Most Favoured Nation (MFN) clause and benefit of the lower rate or restricted scope
of source taxation rights in relation to certain items of income including dividends provided
in India's DTAAs with the third State (Country Y, in this case) will be available to the first
(OECD) State (Country X, in this case) only when all the following conditions are met:
Condition Satisfaction of condition in the
case on hand
(i) The second treaty (with the third State) is This condition is satisfied as India
entered into after the signature/ Entry into has entered into a DTAA with
Force of the treaty between India and the Country Y on 15.5.2018, after it has
first state entered into a DTAA with Country X
on 1.1.2018.
(ii) The second treaty is entered into between This condition is satisfied as India
India and a State which is a member of has entered into a DTAA on
the OECD at the time of signing the 15.5.2018 with Country Y, which is a
treaty with it; member of OECD since 2017.
Hence, on 15.5.2018, Country Y was
an OECD member.
(iii) India limits its taxing rights in the second This condition is satisfied since in
treaty in relation to rate or scope of DTAA between India and Country Y,
taxation in respect of relevant items of dividend is taxable@10%.
income
(iv) A separate notification has been issued In this case, conditions (i), (ii) and
by India, importing the benefits of the (iii) mentioned above have been
second treaty into the treaty with the first satisfied. The concessional rate of
State as required by the provisions of 10% can be applied for taxing the
section 90(1) of the Income-tax Act, 1961. dividend received by Matrix Inc. from
Pilu Ltd., an Indian company, only if
India has issued a separate
notification importing the benefits of
India-Country Y tax treaty into India-

Country X tax treaty, as required by

the provisions of sections 90(1). If
such notification has been issued,
then, the concessional rate of 10%
can be applied for taxing the
dividend received by Matrix Inc. from
Pilu Ltd., an Indian company;
otherwise it cannot be applied, even
if other conditions are satisfied.
In case if Country Y became an OECD member only in the year 2020, then, the
concessional rate of 10% cannot be applied for taxing dividend received by Matrix Inc. from
Pilu Ltd., since Country Y was not an OECD member on 15.5.2018, at the time when India
signed the DTAA with it. Consequently, condition (ii) mentioned above would not be
satisfied in such a case. Hence, dividend received by Matrix Inc. from Pilu Ltd. would be
subject to tax@15%.

PAPER-8: INDIRECT TAX LAWS
QUESTIONS
(1) All questions should be answered on the basis of position of (i) GST law as amended
by the Finance Act, 2021, which have become effective up to 30 th April, 2022,
including significant notifications and circulars issued, up to 30 th April, 2022 and (ii)
customs law as amended by the Finance Act, 2021, including significant
notifications and circulars issued, up to 30 th April, 2022.
(2) Unless otherwise specified, the section numbers and rules referred herein pertain to
the Central Goods and Services Tax Act, 2017 and the Central Goods and Services
Tax Rules, 2017 respectively.
(3) The GST rates for goods and services mentioned in various questions are
hypothetical and may not necessarily be the actual rates leviable on those goods
and services. The rates of customs duty are also hypothetical and may not
necessarily be the actual rates. Further, GST compensation cess should be ign ored
in all the questions, wherever applicable.
Trent Limited, a supplier of water purifiers, is a company registered with the jurisdictional GST
authorities at its principal place of business in Mumbai, Maharashtra. Trent Limited has
approached ABC India LLP, a Mumbai based event management company registered under
GST in the State of Maharashtra, to undertake following activities in relation to organization of
an event to be held on July 21 – 22 in Udaipur, Rajasthan for its employees:
a. Arrangement of accommodation services for its employees in a hotel in Udaipur, Rajasthan
b. Arrangement of souvenirs to be distributed to its employees attending the event
Trent Limited has agreed to pay a fixed sum of ` 3,00,00,000 exclusive of GST (Rates of tax
are: CGST - 9%, SGST - 9% and IGST - 18%) for the aforesaid services provided by ABC India
LLP. An amount of ` 50,00,000 is paid to ABC India LLP as advance at the time of agreement
on June 25. Balance amount is payable on July 21 upon issuance of invoice by ABC Indi a LLP
and invoice is duly issued for the full amount in the month of July.
ABC India LLP has entered into an agreement with Dream Hotels, a hotel based in Udaipur, for
the aforesaid event to be organized for employees of Trent Limited. Dream Hotels has agreed
to provide the services to ABC India LLP which includes accommodation and other ancillary
services for the aforesaid event at an agreed amount of ` 1,50,00,000 exclusive of GST (Rates
of tax are: CGST - 14%, SGST - 14% and IGST - 28%). The consideration is payable by ABC
India LLP to Dream Hotels at the time of check in of guests on July 21.
Further, ABC India LLP has also entered into an agreement with Happy Gift House, a well -
known gift shop based in Udaipur, Rajasthan for purchase of souvenirs for the employees of
Trent Limited. It was agreed that souvenirs would be purchased by ABC India LLP from Happy
Gift House at a consideration of ` 20,00,000 exclusive of GST (Rates of tax are: CGST - 9%,

PAPER – 8: INDIRECT TAX LAWS 59
SGST - 9% and IGST - 18%) and Happy Gift House would deliver them at the event location, i.e.
Dream Hotels, Udaipur. The aforesaid amount includes the cost of packaging the souvenirs
(` 20,000) and cost of delivering the same (` 50,000) at the location. The entire consideration is
payable by ABC India LLP to Happy Gift House at the time of delivery of souvenirs on July 21.
In the month of August, Trent Limited gifts each of its employees (total – 150 employees) a
water purifier in terms of their employment contract. The total open market value of such water
purifiers is ` 52.50 lakh exclusive of GST (Rates of tax are: CGST - 9%, SGST - 9% and IGST
- 18%). All water purifiers bear the same cost.
Trent Limited and ABC India LLP are not registered under GST in the State of Rajasthan. There
is no other taxable supply or taxable procurement apart from Dream Hotels and Happy Gift
House as mentioned above in the month of July for ABC India LLP. The opening balance of
input tax credit of both Trent Limited and ABC India LLP for the relevant tax periods is nil. All
the above amounts are exclusive of GST, wherever applicable.
Based on the facts of the case scenario given above, choose the most appropriate answer to
Q. Nos. 1 to 5 below:-
1. In case of the supply of the souvenirs by Happy Gift House to ABC India LLP, the place
and value of said supply are ______________ and _______________.
(a) Maharashtra; ` 20,00,000
(b) Maharashtra; ` 19,30,000
(c) Rajasthan; ` 20,00,000
(d) Rajasthan; ` 19,30,000
2. The place of supply for the hotel accommodation services provided by Dream Hotels to
ABC India LLP is ___________________ and the nature of supply is
____________________.
(a) Maharashtra, inter-State supply liable to IGST
(b) Rajasthan, inter-State supply liable to IGST
(c) Maharashtra, intra-State supply liable to CGST and SGST
(d) Rajasthan, intra-State supply liable to CGST and SGST
3. The net GST payable in cash by ABC India LLP for the month of July in the State of
Maharashtra would be ____________________. ABC India LLP wishes to keep its CGST
liability at a minimum.
(a) CGST - ` 18,90,000; SGST -` 22,50,000; IGST - Nil
(b) CGST - Nil; SGST -Nil; IGST - ` 54,00,000
(c) CGST - ` 27,00,000; SGST - ` 27,00,000; IGST - Nil
(d) CGST - ` 5,40,000; SGST - ` 13,50,000; IGST - Nil

4. The finance team is exploring the feasibility of getting ABC India LLP registered as a casual
taxable person in the State of Rajasthan with effect from 20 th June.
In such a scenario, the invoice to Trent Limited will be issued by ABC India LLP as a casual
taxable person registered in Rajasthan. Moreover, the invoice by Dream Hotels and Happy
Gift House will be issued to ABC India LLP at its GST registration number as casual taxable
person in Rajasthan.
The estimated tax liability of ABC India LLP to be paid in advance at the time of submission
of application for registration in the State of Rajasthan in the month of June would be
____________________.
(a) CGST - ` 27,00,000; SGST - ` 27,00,000; IGST - Nil
(b) CGST – Nil; SGST – Nil; IGST - ` 8,40,000
(c) CGST - ` 4,20,000; SGST - ` 4,20,000; IGST - Nil
(d) CGST – Nil; SGST - Nil; IGST - Nil
5. Compute the outward GST payable, if any, on the water purifiers gifted by Trent Limited to
its employees in the month of August.
(a) CGST – ` 7,35,000; SGST - ` 7,35,000; IGST - Nil
(b) CGST – Nil; SGST - Nil; IGST - ` 14,70,000
(c) CGST – Nil; SGST - Nil; IGST - Nil
(d) CGST – Nil; SGST - Nil; IGST - ` 7,35,000
6. Nivedita Foundation, a charitable trust registered under section 12AB of the Income-tax
Act, 1961, owns and manages a newly constructed Dharamshala “GOVINDAM” in the
precincts of a temple in Haridwar. GOVINDAM has 50 rooms, a huge party lawn and other
amenities. Nivedita Foundation has received following receipts during the period from April
to September:
1. Rent of ` 25,00,000 from renting of rooms @ ` 1,000/- per day.
2. Rent of ` 9,00,000 from renting of party lawns for marriage and social functions
@ ` 9,000/- per day.
3. Donations of ` 20,00,000 (including one donation of ` 15,00,000 received with
specific direction to advertise the business activity of the donor).
You are required to determine the value of taxable supply of GOVINDAM during the period
from April to September:
(a) ` 55,00,000
(b) ` 50,00,000

(c) ` 25,00,000
(d) ` 40,00,000
7. Which of the following statements is/are not correct for ‘similar’ goods’ for valuation
purposes under the Customs Act, 1962?
(i) Similar goods although not alike in all respects, have like characteristics and like
component materials which enable them to perform the same functions and to be
commercially interchangeable with the goods being valued having regard to the
quality, reputation and the existence of trade mark.
(ii) Similar goods must necessarily be produced in the country in which goods being
valued were produced.
(iii) Similar goods must always be produced by the same person who produced the goods
being valued.
(a) (i) and (ii)
(b) Only (iii)
(c) (i) and (iii)
(d) (ii) and (iii)
8. Which of the following supplies, items or categories are ineligible for the scheme of
Remission of Duties and Taxes on Exported Products (RoDTEP) under Foreign Trade
Policy? Choose the most correct option.
(i) Export of imported goods in same or substantially the same form.
(ii) Export products which are subject to minimum export price or export duty.
(iii) Products which are restricted/prohibited under Foreign Trade Policy.
(iv) Goods which have been taken into use after manufacture.
(a) (i), (ii) and (iii)
(b) (ii) and (iii)
(c) (i) and (iv)
(d) (i), (ii), (iii) and (iv)
9. Motopower Pvt. Ltd., registered under GST, is engaged in the manufacture of 5-seater
luxury cars at its factories located in the States of Rajasthan, Uttar Pradesh and Gujarat.
The company has obtained registration in each of these States. It also enters into contracts
for providing these cars on rent to corporate clients wherein the cost of fuel is included in
the value of supply.

The company reports the following details for a tax period pertaining to its factory located
in Gujarat:
Payments (` ) Receipts (` )
(in lakh) (in lakh)
Raw material 4.50 Sales 30
Rent paid 1.00 Car rental income 0.50
Consumables 1.50 Income from services 2.50
Security services 0.70 provided to Gujarat
Government administration
General insurance of cars 2.50
manufactured
Works contract services 1.60
Audit fee 0.50
Bank charges 0.10
Membership of Automobile 0.10
Association
All the above amounts are exclusive of all kinds of taxes, wherever applicable. However,
the applicable taxes have also been paid by the company.
Further, following additional details are furnished by the company in respect of the
payments and receipts reported by it:
(i) Raw materials worth ` 0.50 lakh, purchased from a registered supplier located in
Gujarat, were destroyed due to fire in the factory and thus, could not be used in the
manufacturing process. Remaining raw material has been procured from various
vendors located in Maharashtra.
(ii) Rent has been paid for the factory building located in Gujarat to its owner registered
in Gujarat.
(iii) Payment for security services (services provided by way of supply of security
personnel) for the tax period has been made to Safe and Secure Solutions Pvt.
Limited, a company located in Gujarat and not registered under GST.
(iv) General insurance services have been availed from Divided Insurance Company Ltd.
registered in Gujarat.
(v) Works contract services, availed from Chitra Builders, Gujarat, have been used by
the company for construction of a foundation on which machinery to be used in the
production process is to be mounted permanently.

(vi) Audit fee is paid to a firm of Chartered Accountants - M/s Pandya & Associates
(registered in West Bengal with an aggregate turnover of ` 30 crores in the preceding
financial year) - for conducting the statutory audit of the company in the preceding
financial year. The firm raises an e-invoice without IRN (Invoice Reference Number)
for said services.
(vii) Bank charges are towards various services availed by the company during a month
with regard to its current account maintained with Manimani Bank, registered in
Gujarat. The bank issued a consolidated tax invoice for all such services at the end
of the month containing the details of tax charged, description of services, total value,
GSTIN of the bank and Motopower Pvt. Ltd.
(viii) Automobile Association is registered in the State of Gujarat.
(ix) The breakup of sales is as under:
Sales in Gujarat – ` 14 lakh
Sales in States other than Gujarat – ` 6 lakh
Exports under Letter of Undertaking (LUT) – ` 10 lakh
(x) Car rental income pertains to renting of cars to Jamaze Travels Ltd., registered in
Gujarat and cost of fuel is included in the value of said supply. Further, consumables,
procured from registered suppliers located in Gujarat, include diesel (excise and VAT
paid) worth ` 0.75 lakh used for running the cars so rented out to Jamaze Travels
Ltd.
(xi) Services provided to Gujarat Government administration are under a Health Training
programme. 51% of the total expenditure for said programme is borne by Rajasthan
Government.
(xii) The opening balance of ITC with the company for the tax period is:
CGST - ` 0.50 lakh
SGST - ` 0.26 lakh
IGST - ` 0.35 lakh
Compute the total ITC available with Motopower Pvt. Ltd. for the given tax period and net
GST payable [CGST, SGST or IGST, as the case may be] from Electronic Cash Ledger by
Motopower Pvt. Ltd. for the given tax period.

Notes-
(A) CGST, SGST & IGST rates on all inward and outward supplies are 9%, 9% and 18%
respectively, except on renting of cars wherein CGST, SGST & IGST rates are 2.5%,
2.5% and 5% respectively.
It is important to note that credit of input tax charged on goods and services used in
supplying the service of transport of passengers by any motor vehicle designed to
carry passengers where the cost of fuel is included in the consideration charged from
the service recipient, is not available except the credit of the input service in the same
line of business.
(B) The necessary conditions for availing ITC have been complied with by Motopower
Pvt. Ltd., wherever applicable.
You are required to make suitable assumptions, wherever necessary.
10. Adinath Private Limited, registered under GST in the State of Uttar Pradesh, instructed
Ashok Transporters to deliver certain taxable goods to Mahavir Enterprises in
Maharashtra on 10th January 2022. The value of the goods is ₹ 6,80,000 which are
chargeable to GST @ 18% IGST. While the goods were in transit, proper officer
intercepted the goods and the truck in which goods were being transported, under
section 68. However, the driver of the truck failed to tender any document in relation to
the goods in movement. The proper officer, after conducting the physical verification of
the goods and the truck, decided to seize the goods and the truck and issued a notice
under section 129(3) specifying the penalty payable by Adinath Private Limited after
giving it an opportunity of being heard.
You are required to determine the amount of penalty payable if Adinath Private Limited
does not come forward for the payment of penalty. Further, discuss the suitable course
of action for Ashok Transporters if it intends to get its truck released.
11. Super Lever Limited is engaged in manufacture of taxable electronic goods. Its two
manufacturing units are located in Mumbai and Nagpur and both the units are registered
under GST in the State of Maharashtra. The company has another manufacturing unit in
Bangalore, registered under GST in the State of Karnataka and a retail showroom located
in Ahmedabad, registered under GST in the State of Gujarat.

The company has provided the following details of the activities/transactions undertaken
in a tax period:
S. Particulars Mumbai unit Nagpur unit
No. (`) (`)
(i) Sale of taxable goods 12,50,000 13,50,000
(ii) Interest received on fixed deposits with a 1,08,000
nationalised bank
(iii) Sale of securities [Such securities were 4,50,000
purchased for ` 2,75,000]
(iv) Sale of agricultural land in the vicinity of the 1,85,00,000
manufacturing plant
[Stamp duty was paid on ` 1,85,00,000]
(v) Sale of old factory building which was not used 90,00,000
anymore
[Stamp duty was paid on ` 75,00,000]
(vi) Transfer of actionable claims (other than lottery, 2,00,000
betting and gambling)
With the help of above information, you are required to determine the value of exempt
supply under GST law as provided by Nagpur unit and Mumbai unit. Will your answer be
different if the value of exempt supply provided by Nagpur unit and Mumbai unit is to be
determined, for the purpose of apportionment of ITC under section 17(3)?
12. In the above question, all other things remaining the same, compute the value of supply
(most beneficial) made by Bangalore unit as well as the value of supply (most benefici al)
made by Ahmedabad Retail Showroom if Super Lever Limited furnishes the following
additional information for the month of October:
(i) Bangalore unit has appointed M/s. Equilibrium Sales as its sole selling agent.
M/s. Equilibrium Sales sells the electronic goods of Bangalore unit under the invoice
issued in its own name. The Bangalore unit transferred the goods costing ` 7,25,000
to M/s. Equilibrium Sales on 20 th October which were sold by M/s. Equilibrium Sales
on 31st October at ` 7,65,000. On 20th October, another electronic goods’
manufacturer supplied the goods of like kind and quality to M/s. Equilibrium Sales as
the one supplied by the Bangalore unit at a price of ` 7,75,000.
(ii) The Retail Showroom at Ahmedabad transfers goods costing ` 85,000 to its agent,
M/s. Paridhi Sales on 12 th October. M/s. Paridhi Sales sells such goods on
18th October at ` 5,00,000 under the invoice issued in the name of Retail Showroom
at Ahmedabad. On 17 th October, M/s Paridhi Sales has sold goods of like kind and

quality as the one supplied by the Retail Showroom at Ahmedabad to an unrelated

customer at ` 4,70,000.
The Retail Showroom at Ahmedabad also transfers goods costing ` 2,25,000 to its
agent, M/s. Dhara Enterprises on 15th October. M/s. Dhara Enterprises sells such
goods on 20th October at ` 1,00,000 under the invoice issued in its own name. On
19th October, M/s Paridhi Sales has sold goods of like kind and quality as the one
supplied by the Retail Showroom at Ahmedabad to an unrelated customer at
` 98,000.
Note: M/s. Equilibrium Sales, M/s. Paridhi Sales and M/s. Dhara Enterprises are not eligible
for full input tax credit. Further, open market value of the goods is not available in any of
the above cases.
13. Sanmati Industries, registered in the State of Maharashtra, receives a machinery for repair
in its workshop located in Mumbai, Maharashtra from Titsubishi Ltd., an automobile
manufacturing company based in Japan. The repair work was carried out by Sanmati
Industries for which it was to be paid in convertible foreign exchange.
While raising the invoice for the said consideration, the accountant of Sanmati Industries
approaches you as to whether the Dynamic Quick Response (QR) code is mandatorily
required on said invoice? You are required to advise him on the same.
Note - Titsubishi Ltd. is not registered in India. Further, the aggregate turnover of Sanmati
Industries was ` 550 crores in the preceding financial year.
14. Briefly answer the following questions with reference to the provisions of rectification of
mistakes/errors apparent on the face of record by any authority, under section 161?
(a) Which documents are covered under section 161?
(b) Who can rectify the errors apparent on the face of record?
(c) What type of mistakes or errors can be rectified?
(d) What is the time limit for rectification?
15. Elaborate the difference between zero rated supplies and exempt supplies.
16. John Biden, aged 32, is a tourist of US origin. He has come to India on a travel visa and
carries with him the following articles as part of baggage:
Particulars Value in `
Used personal effects 50,000
Travel souvenirs 50,000
Laptop 1,20,000

200 gms tobacco 1,000

[Valued @ ` 5 per gram]
50 cigars [Valued @ ` 100 each] 5,000
Fire-arms 80,000
80 cartridges of fire-arms 40,000
[Valued @ ` 500 per cartridge]
1.5 litres wine 5,000
Mobile phone 80,000
With reference to the Baggage Rules, 2016, determine customs duty payable. Ignore
agriculture infrastructure and development cess.
17. BCG Ltd. imports goods from Japan and intends to avail the benefit of an exemption
notification issued under section 25(1) of the Customs Act, 1962 with regard to said goods.
However, since it does not have a manufacturing facility at all, it needs to send the goods
so imported for job work to a job worker. Its accountant advised it that as per the Customs
(Import of Goods at Concessional Rate of Duty) Rules, 2017, BCG Ltd. is not permitted to
send such goods for job work. You are required to advise BCG Ltd. on the said issue
elaborating the relevant legal provisions under the customs law.
18. Niryaat Exporters imported some goods on 1 st January. The goods were not meant for
being used in an 100% EOU, STP unit, EHTP unit. The goods were cleared from the
Mumbai port for warehousing on 8th January by presenting an ‘into Bond’ Bill of Entry. The
assessable value of the goods was US $ 10,000. On 8 th January, the exchange rate was
` 66 per US $ and the rate of basic customs duty was 15%. The order permitting the
deposit of goods in warehouse for 4 months was issued under section 60 of the Customs
Act, 1962 on 15th January. The goods were thereafter deposited in a warehouse at Pune
and were cleared from Pune warehouse on 31 st May. The rate of basic customs duty was
15% and exchange rate was ` 68.75 per 1 US $ on 31st May. IGST @ 10% is applicable
on said goods. Further, the rate of basic customs duty was 12% and exchange rate was
` 67 per 1 US $ on 15th May. IGST @ 12% is applicable on said goods. Ignore agriculture
and infrastructure development cess.
You are required to compute: (a) total customs duty payable and (b) interest, if any,
payable.
ANSWERS
1. (a)
2. (d)
3. (a)

4. (b)
5. (c)
6. (d)
7. (b)
8. (d)
9. Computation of ITC available with Motopower Pvt. Ltd. for the given tax period
S. Particulars Value of ITC
No. supply CGST* SGST* IGST* Total
` ` ` ` `
1. Opening balance of ITC 50,000 26,000 35,000 1,11,000
2. Raw Materials 4,00,000 -- -- 72,000 72,000
[` 4,50,000 – ` 50,000]
[Refer Note 1]
3. Rent paid for the factory 1,00,000 9,000 9,000 -- 18,000
building [Refer Note 2]
4. Consumables procured 75,000 6,750 6,750 -- 13,500
from suppliers in
Gujarat
[` 1,50,000 – ` 75,000]
[Refer Note 3]
5. Security services [Refer 70,000 Nil Nil Nil Nil
Note 4]
6. General insurance of 2,50,000 22,500 22,500 -- 45,000
cars manufactured
[Refer Note 5]
7. Works contract services 1,60,000 14,400 14,400 -- 28,800
[Refer Note 6]
8. Audit fee [Refer Note 7] 50,000 Nil Nil Nil Nil
9. Bank charges [Refer 10,000 900 900 -- 1,800
Note 8]
10. Membership of 10,000 900 900 -- 1,800
Automobile Association
[Refer Note 9]
Total ITC available for the 1,04,450 80,450 1,07,000 2,91,900
tax period

Computation of net GST payable

Particulars Value of CGST* SGST* IGST* Total
supply ` ` ` `
Intra-State sales in Gujarat 14,00,000 1,26,000 1,26,000 -- 2,52,000
Inter-State sales other than 6,00,000 -- -- 1,08,000 1,08,000
Gujarat
Exports under LUT 10,00,000 Nil Nil Nil Nil
[Note 10]
Car rental income (Taxable 50,000 1,250 1,250 -- 2,500
@ 2.5% CGST and SGST
each)
[Note 11]
Income from services 2,50,000 22,500 22,500 -- 45,000
provided to Gujarat
Government [Note 12]
Total output tax liability 1,49,750 1,49,750 1,08,000 4,07,500
Less: ITC available for being (1,04,450) (80,450) (1,07,000) (2,91,900)
set off [Note 13, Note 14 and
Note 15]
Net GST payable from 45,300 69,300 1,000 1,15,600
Electronic Cash Ledger
Notes:
1. Credit of input tax paid on raw materials used in the course or furtherance of business
is available in terms of section 16(1). However, ITC is not available on destroyed
inputs in terms of section 17(5)(h).
2. ITC on rent paid is available as the said service is used in the course or furtherance of
business in terms of section 16(1).
3. ITC on consumables, being inputs used in the course or furtherance of business, is
available in terms of section 16(1). However, levy of GST on diesel has been deferred
till such date as may be notified by the Government on recommendations of the GST
Council [Section 9(2)]. Hence, there being no levy of GST on diesel, there cannot be
any ITC since VAT & excise paid are not covered in the definition of input tax under
section 2(62). Moreover, credit of input tax charged on goods and services used in
supplying the service of transport of passengers by any motor vehicle designed to
carry passengers where the cost of fuel is included in the consideration charged from
the service recipient, is not available except the credit of the input service in the same
line of business. Thus, ITC on diesel will not be available.

4. Tax on security services (services provided by way of supply of security personnel)

provided by a non-body corporate to a registered person is payable under reverse
charge. Since in the given case, security services have been provided by a body
corporate - Safe and Secure Solutions Pvt. Limited to a registered person -
Motopower Pvt. Ltd., GST on the same is payable under forward charge. However,
since Safe and Secure Solutions Pvt. Limited is not registered under GST, it would
not have charged GST on the said services and hence, no ITC is available.
5. ITC on motor vehicles for transportation of persons is allowed in terms of section
17(5)(a) provided such vehicles are further supplied by the supplier. ITC is allowed
on general insurance services relating to motor vehicles, ITC on which is allowed
[Section 17(5)(ab)].
6. Section 17(5)(c) blocks ITC in respect of works contract services when supplied for
construction of an immovable property (other than plant and machinery) except where
it is an input service for further supply of works contract service. Further, the term
“plant and machinery” means, inter alia, machinery fixed to earth by foundation or
structural support that are used for making outward supply and includes such
foundation/structural support. Thus, in view of the above-mentioned provisions, ITC
is available in respect of works contract service availed by Motopower Pvt. Ltd. as
the same is used for construction of plant and machinery which is not blocked under
section 17(5)(c).
7. Audit fee are the services used in the course/ furtherance of business and thus, credit
of input tax paid on such service will be available in terms of section 16(1).
M/s Pandya & Associates is required to issue an e-invoice for audit services as
e-invoicing is mandatory for the registered persons whose aggregate turnover in any
of the preceding financial years from 2017-18 onwards exceed ` 20 crores. However,
an e-invoice without IRN is not treated as an invoice as per rule 48(5) and hence,
without a valid document, ITC cannot be claimed on such input services.
8. Bank charges are services used in the course/ furtherance of business and thus,
credit of input tax paid on such service will be available in terms of section 16(1).
However, ITC can be claimed only on the basis of valid documents. In case of a
banking company, as per rule 54(2), a consolidated tax invoice issued for supply of
services made during a month at the end of the month containing the details of tax
charged, description of services, total value, GSTIN of the supplier and the recipient
is deemed to be a tax invoice. Thus, ITC pertaining to the banking services received
is allowed.
9. As per section 17(5)(b)(ii), ITC is blocked on membership of a club, health and fitness
centre. The membership fee paid by a automobile company to Automobile
Association is not covered under said section as it is distinct from membership of a
club. Hence, ITC thereon is available.

10. Export of goods is a zero-rated supply in terms of section 16(1)(a) of the IGST Act.
A zero rated supply under LUT is made without payment of integrated tax [Section
16(3)(a) of the IGST Act].
11. Tax on services provided by way of renting of any motor vehicle designed to carry
passengers where the cost of fuel is included in the consideration charged from the
service recipient is payable under reverse charge only when said service is provided
by a non-body corporate to a body corporate and & an invoice charging GST @ 12%
is not issued to service recipient. Since in the given case, said services are provided
by a body corporate - Motopower Pvt. Ltd. to another body corporate – Jamaze
Travels Ltd., GST is payable under forward charge by Motopower Pvt. Ltd. on the
same.
12. Services provided to the Central Government, State Government, Union territory
administration under any training programme for which 75% or more of the total
expenditure is borne by the Central Government, State Government, Union territory
administration are exempt from GST. However, in the given case, since the total
expenditure borne by the Gujarat Government is less than 75%, services provided to
it by Motopower Pvt. Ltd. are liable to GST.
13. Since export of goods is a zero-rated supply, apportionment of ITC is not required
and instead, full credit will be available [Section 16 of the IGST Act read with section
17(2) of the CGST Act].
14. As per section 49(5) read with rule 88A, ITC of-
(i) IGST is utilised towards payment of IGST first and then CGST and SGST in any
proportion and in any order.
(ii) CGST is utilised towards payment of CGST and IGST in that order. ITC of CGST
shall be utilized only after ITC of IGST has been utilised fully.
(iii) SGST is utilised towards payment of SGST and IGST in that order. ITC of SGST
shall be utilized only after ITC of IGST has been utilised fully.
15. Since the value of taxable supply other than zero-rated supply in the given tax period
(` 14 lakh + ` 6 lakh+ ` 0.50 lakh+ ` 2.50 lakh) does not exceed ` 50 lakh, provisions
of rule 86B are not applicable and Motopower Ltd. can discharge its entire output tax
liability for said period from the electronic credit ledger.
*16. CGST and SGST are chargeable on intra-State inward and outward supplies and
IGST is chargeable on inter-State inward and outward supplies. Rate of CGST, SGST
and IGST applied is 9%, 9% and 18% except in case of renting of cars wherein the
rate of CGST and SGST applied is 2.5% and 2.5% respectively.

10. As per section 129(1)(b), when owner of goods does not come forward for the payment of
penalty, detained/seized goods and conveyance (used as a means of transport for carrying
said goods) and related documents are released on payment of penalty equal to higher of
the following:
(i) 50% of value of goods or
(ii) 200% of the tax payable on such goods
In view of the same, the amount of penalty payable if Adinath Private Limited does not
come forward for the payment of penalty is as follows:
(i) 50% of value of goods [` 3,40,000 (50% of ` 6,80,000)]
or
(ii) 200% of the tax payable on such goods [` 2,44,800 (200% of ₹ 6,80,000 × 18%)]
whichever is higher, i.e. ` 3,40,000.
As per first proviso to section 129(6), conveyance shall be released on payment by the
transporter the penalty as mentioned in the order or ` 1 lakh, whichever is less.
In the given case, since the owner - Adinath Private Limited has failed to come forward to
make payment of penalty, penalty of ₹ 3,40,000 shall be levied. Further, the transporter of
goods can get its truck released upon payment of the lower of the following:
(i) penalty as mentioned in the order [` 3,40,000]
(ii) ` 1,00,000
Hence, Ashok Transporters can get its truck released upon payment of ` 1,00,000.
11. As per section 2(47), exempt supply means supply of any goods or services or both which
attracts nil rate of GST or which may be wholly exempt from GST and includes non-taxable
supply. An activity or transaction which is not a supply per se is not an exempt supply.
In view of the same, the value of exempt supply by Nagpur unit and Mumbai unit has been
computed as under:
Particulars Mumbai unit Nagpur unit
(`) (`)
Sale of taxable goods -- --
Interest received on fixed deposits -- 1,08,000
[Services by way of extending deposits, loans or
advances in so far as the consideration is
represented by way of interest are exempt vide
Notification No. 12/2017 CT (R) dated 28.06.2017]

Sale of securities -- --
[Securities are neither goods nor services in terms of
sections 2(52) and 2(102). Hence, sale of securities
is neither a supply of goods nor a supply of services.
Thus, the same is not an exempt supply.]
Sale of agricultural land -- --
[Sale of land is neither a supply of goods nor a supply
of services in terms of para 5 of Schedule III to the
CGST Act, 2017. Hence, the same is not an exempt
supply.]
Sale of old factory building -- --
[Sale of building is neither a supply of goods nor a
supply of services in terms of para 5 of Schedule III
to the CGST Act, 2017, provided the entire
consideration has been received after issue of
completion certificate by the competent authority or
after its occupation, whichever is earlier. Hence, the
same is not an exempt supply.]
Transfer of actionable claims (other than lottery, -- --
[Transfer of actionable claims (other than lottery,
betting and gambling) is neither a supply of goods
nor a supply of services in terms of para 6 of
Schedule III to the CGST Act, 2017. Hence, the same
is not an exempt supply.]
Total value of exempt supply Nil 1,08,000
However, value of exempt supply by Nagpur unit and Mumbai unit for the purpose of
apportionment of ITC under section 17(3) is not same and is determined as follows:
As per section 17(3), value of exempt supply includes supplies on which the recipient is
liable to pay tax on reverse charge basis, transactions in securities, sale of land and,
subject to clause (b) of paragraph 5 of Schedule II, sale of building. As per explanation to
section 17(3), the expression "value of exempt supply" shall not include the value of
activities or transactions specified in Schedule III, except sale of land and, subject to clause
(b) of paragraph 5 of Schedule II, sale of building. Further, as per explanation to
Chapter V (Input Tax Credit) of the CGST Rules, 2017, for determining the value of an
exempt supply as referred in section 17(3), the value of exempt supply in respect of land
and building is the value adopted for paying stamp duty and for security is 1% of the sale
value of such security.

Further, as per explanation 1 to rule 43, the aggregate value of exempt supplies for the
purpose of rules 42 and 43, inter alia, excludes the value of services by way of accepting
deposits, extending loans or advances in so far as the consideration is represented by way
of interest or discount, except in case of a banking company or a financial institution
including a non-banking financial company, engaged in supplying services by way of
accepting deposits, extending loans or advances.
In view of the aforesaid provisions, value of exempt supply by Nagpur unit and Mumbai
unit for the purpose of apportionment under section 17(3) is as follows:
Particulars Mumbai unit Nagpur unit
(`) (`)
Sale of taxable goods -- --
Interest received on fixed deposits -- --
[Excluded from value of exempt supply by virtue of
explanation 1 to rule 43]
Sale of securities 4,500 --
[1% of ` 4,50,000]
[Includible as per section 17(3). Value of exempt
supply in respect for security is 1% of the sale value
of such security.]
Sale of agricultural land -- 1,85,00,000
supply in respect of land is the value adopted for
paying stamp duty.]
Sale of old factory building 75,00,000 --
supply in respect of building is the value adopted for
paying stamp duty.]
Transfer of actionable claims (other than lottery, -- --
[Excluded from value of exempt supply by virtue of
explanation to section 17(3).]
Total value of exempt supply 75,04,500 1,85,00,000
12. (i) As per clause (c) of explanation to section 15, persons who are associated in the
business of one another in that one is the sole agent or sole distributor or sole
concessionaire, howsoever described, of the other, shall be deemed to be related.
Thus, in the given case, since M/s. Equilibrium Sales is a sole selling agent of
Bangalore unit, both are related persons.

Further, an activity/transaction qualifies as supply under GST only if it is undertaken

for a consideration and is in course/furtherance of business. However, supply of
goods between ‘related persons’ made in the course or furtherance of business
qualifies as supply even if made without consideration [Section 7(1)(c) read with
Schedule I].
Furthermore, value of supply of goods between related persons (other than through
an agent) is determined as per rule 28. Accordingly, the value of supply of goods
between related persons will be determined as follows:
(a) the open market value of such supply;
(b) if open market value is not available, the value of supply of goods or services of
like kind and quality;
(c) if value cannot be determined under the above methods, it must be worked out
based on the cost of the supply plus 10% mark-up or by other reasonable
means, in that sequence.
However, where the goods are intended for further supply as such by the recipient,
the value shall, at the option of the supplier, be an amount equivalent to 90% of the
price charged for the supply of goods of like kind and quality by the recipient to his
unrelated customer.
Further, where the recipient is eligible for full input tax credit, the value declared in
the invoice shall be deemed to be the open market value of the goods.
Open market value of the goods in not available in the given case. Further, since
M/s. Equilibrium Sales is not eligible for full input tax credit, value declared in the
invoice cannot be deemed to be the open market value of the goods. Since
M/s. Equilibrium Sales further supplies the goods, value of the goods will be lower of:
(i) value of supply of goods or services of like kind and quality, i.e. ` 7,75,000 or
(ii) 90% of the price charged for the supply of goods of like kind and quality by
M/s. Equilibrium Sales to its unrelated customer, i.e. ` 6,88,500 [` 7,65,000 × 90%].
Thus, the value of supply, in the given case, will be ` 6,88,500.
(ii) An activity/transaction qualifies as supply under GST only if it is undertaken for a
consideration and is in course/furtherance of business. However, supply of goods by
a principal to his agent where the agent undertakes to supply such goods on behalf
of the principal is considered as supply even if made without consideration provided
the invoice for further supply is issued by the agent in his own name [Section 7(1)(c)
read with Schedule I to the CGST Act, 2017]. Where the invoice is issued by the agent
to the customer in the name of the principal, such agent is not an agent in terms of
Schedule I.

Since M/s. Paridhi Sales sells the goods under the invoice issued in the name of
Retail Showroom at Ahmedabad, it is not an agent in terms of Schedule I. Resultantly,
transfer of goods by Retail Showroom at Ahmedabad to M/s. Paridhi Sales does not
qualify as supply since it is made without consideration.
Further, since M/s. Dhara Enterprises sells the goods under the invoice issued in its
own name, it falls within the purview of an agent in terms of Schedule I. Resultantly,
transfer of goods by Retail Showroom at Ahmedabad to M/s. Dhara Enterprises
qualifies as supply even though it is made without consideration.
Value of supply of goods made through an agent is determined as per rule 29.
Accordingly, the value of supply of goods between the principal and his agent is the
open market value of the goods being supplied, or at the option of the supplier, is
90% of the price charged for the supply of goods of like kind and quality by the
recipient to his unrelated customer, where the goods are intended for further supply
by the said recipient.
In the given case, since open market value is not available, value of the goods
supplied to M/s. Dhara Enterprises will be ` 88,200 [90% of ` 98,000].
Thus, value of supply of Bangalore unit is ` 6,88,500 and of Retail Showroom at
Ahmedabad is ` 88,200.
13. The place of supply for the services provided by Sanmati Industries to Titsubishi Ltd. is as
follows:
As per section 13(3)(a) of the IGST Act, 2017, in case where the services are supplied in
respect of goods which are required to be made physically available by the recipient of
services to the supplier of services, the place of supply of such services shall be the
location where the services are actually performed. In the given case, for carrying out the
repair work, machinery was required to be made physically available by Titsubishi Ltd. to
Sanmati Industries. Thus, the place of supply of services in this case is the location where
the services are actually performed i.e., Maharashtra, India.
Further, sixth proviso to rule 46 read with Notification No. 14/2020 CT dated 21.03.2020
provides that all invoices issued by a registered person whose aggregate turnover in any
preceding financial year from 2017-18 onwards exceeds ` 500 crores, in respect of B2C
supplies (supply of goods or services or both to an unregistered person) will mandatorily
have a Dynamic QR code. Thus, the invoices issued by Sanmati Industries to unregistered
persons are mandatorily required to have a Dynamic QR Code. Accordingly, since
Titsubishi Ltd. is not registered in India, invoice to be raised by Sanmati Industries to it
should mandatorily have a Dynamic Quick Response (QR) code.
However, Circular No. 165/21/2021 GST dated 17.11.2021 has clarified that wherever an
invoice is issued to a recipient located outside India, for supply of services, for which the
place of supply is in India, as per the provisions of IGST Act 2017, and the payment is
received by the supplier in convertible foreign exchange, such invoice may be issued

without having a Dynamic QR Code, as such dynamic QR code cannot be used by the
recipient located outside India for making payment to the supplier.
Thus, the Dynamic Quick Response (QR) code is NOT mandatorily required on the invoice
to be issued by Sanmati Industries to Titsubishi Ltd.
14. (a) Following documents are covered under section 161:
• Decision
• Order
• Any notice
• Certificate
• Any other document
(b) Any authority who has passed or issued any decision or order or notice or certificate
or any other document may rectify any error which is apparent on the face of record
in such documents.
(c) Errors or mistakes which are apparent on the face of record may be rectified.
Rectification can only be of error apparent from record. It is a settled law that a
decision on a debatable point of law is not a mistake apparent from the record.
(d) No rectification can be made after a period of 6 months from the date of issue of such
decision, order, notice, certificate or any other document.
However, such time limit does not apply in cases where the rectification is purely in
the nature of correction of a clerical or arithmetical error or mistake, arising from any
accidental slip or omission.
15. The difference between zero rated supplies and exempted supplies is as follows:
Exempted Supplies Zero rated supplies

Exempt supply means supply of any goods Zero-rated supply means (i) export of
or services or both which attracts nil rate goods and/or services or (ii) supply of
of tax or which may be wholly exempt from goods and/or services to SEZ
tax and includes non-taxable supply. unit/SEZ developer.
No tax is payable on the outward exempted No tax is payable on the outward
supplies, however, the input supplies used supplies; Input supplies are also to be
for making exempt supplies are to be taxed tax free (by way of refund of ITC)
Credit of input tax needs to be reversed, if Credit of input tax may be availed for
taken. making zero-rated supplies, even if
No ITC is allowed on the exempted such supply is an exempt supply.
supplies. ITC is allowed on zero rated supplies.

Value of exempt supplies, for Value of zero rated supplies shall be

apportionment of ITC, shall include added along with the taxable supplies
supplies on which the recipient is liable to for apportionment of ITC.
pay tax on reverse charge basis,
transactions in securities, sale of land and,
subject to clause (b) of paragraph 5 of
Schedule II, sale of building.
Any person engaged exclusively in the A person exclusively making zero
business of supplying goods or services or rated supplies needs to register as
both that are not liable to tax or wholly refund of unutilized ITC or IGST paid
exempt from tax under the CGST or IGST shall have to be claimed.
Act shall not be liable to registration.
A registered person supplying exempted Normal tax invoice shall be issued.
goods and/or services shall issue, instead
of a tax invoice, a bill of supply.
16. As per rule 3 of the Baggage Rules, 2016, tourist of foreign origin, excluding infant, is
allowed duty free clearance of:
(i) used personal effects and travel souvenirs; and
(ii) Articles up to the value of ` 15,000 (excluding, inter alia, fire-arms, cartridges of fire
arms exceeding 50, wine in excess of 2 litres, tobacco exceeding 125 gms and cigars
exceeding 25), if carried on in person or in the accompanied baggage of the
passenger.
In view of the said provisions, customs duty shall be computed as follows
Particulars `
Used personal effects Nil
Travel souvenirs Nil
Laptop Nil
[One laptop computer is exempt when imported into India by a passenger
≥ 18 years of age]
Tobacco [` 5 × 125 gm] 625
[125 gms tobacco can be accommodated in General Free Allowance
(GFA)]
Cigars [` 100 × 25] 2,500
[25 cigars can be accommodated in GFA]

Fire-arms’ cartridges [` 500 × 50] 25,000

[50 fire-arms’ cartridges can be accommodated in GFA]
1.5 litres wine 5,000
[Wine upto 2 litres can be accommodated in GFA]
Mobile phone 80,000
[Can be accommodated in GFA]
Total value 1,13,125
Less: GFA 15,000
Baggage on which duty is payable 98,125
Duty payable on baggage @ 38.50% (including 10% Social welfare 37,778
surcharge) [rounded off]
Note: Firearms, cartridges of firearms exceeding 50, cigars exceeding 25 and tobacco
exceeding 125 gms are not chargeable to rate applicable to baggage [Notification No.
26/2016 Cus. dated 31.03.2016]. These items are charged @ 100% applicable to baggage
under Heading 9803 of the Customs Tariff.
17. As per rule 6A of the Customs (Import of Goods at Concessional Rate of Duty) Rules,
2017, the importer is permitted to send the imported goods for job work. The said rule
stipulates that the importer shall maintain a record of the goods sent for job work during
the month and mention the same in the prescribed monthly statement. The importer shall
send the goods to the premises of the job worker under an invoice or wherever applicable
through an e-way bill, mentioning the description and quantity of the goods. The maximum
period for which the goods can be sent to the job worker shall be 6 months from the date
of the invoice/e-way bill.
In case the importer is not able to establish that the goods sent for job work have been
used as per the particulars mentioned under rule 4 of the said rules, the Jurisdictional
Custom Officer shall take prescribed necessary action against the importer.
The job worker shall -
(i) maintain an account of receipt of goods, manufacturing process undertaken thereon
and the waste generated, if any, during such process;
(ii) produce the account details before the Jurisdictional Custom Officer as and when
required by the said officer; and

(iii) after completion of the job work, send the processed goods to the importer or to
another job worker as directed by the importer for carrying out the remaining
processes, if any, under the cover of an invoice or an e-way bill.
18. Computation of import duty payable by Niryaat Exporters
Particulars Amount (US $)
Assessable value 10,000
Particulars Amount (`)
Value in Indian currency (US $ 10,000 x ` 66) [Note 1] 6,60,000
Customs duty @ 12% [Note 2] 79,200
Add: Social welfare surcharge @ 10% on ` 79,200 7,920
Total customs duty payable 87,120
Notes:
1. As per third proviso to section 14(1) of the Customs Act, 1962, assessable value has
to be calculated with reference to the rate of exchange prevalent on the date on which
the into bond bill of entry is presented for warehousing under section 46 of the
Customs Act, 1962.
2. Goods which are not removed from warehouse within the permissible period are
deemed to be improperly removed in terms of section 72 of the Customs Act, 1962
on the day they should have been removed [Kesoram Rayon v. CC 1996 (86) ELT
464 (SC)]. The applicable rate of duty in such a case is the rate of duty prevalent on
the last date on which the goods should have been removed.
Computation of interest payable by Niryaat Exporters
As per section 61 of the Customs Act, 1962, if goods (not meant for being used in an 100%
EOU, STP unit, EHTP unit) remain in a warehouse beyond a period of 90 days from the
date on which the order permitting deposit of goods in warehouse under section 60 of the
Customs Act, 1962 is made, interest is payable [@ 15% p.a.], on the amount of duty
payable at the time of clearance of the goods, for the period from the expiry of said 90
days till the date of payment of duty on the warehoused goods.
Therefore, interest payable will be computed as under:
Period of 90 days commencing from the date of order made under 60 16th April
expires on
No. of days for which interest shall be payable [14 days of April + 31 days 45 days
of May]
15 45 ` 1,611
Interest payable = ` 87,120× × (rounded off)
100 365

Applicability of Standards/Guidance Notes/Legislative Amendments etc. for
November, 2022 Examination
Study Guidelines for November, 2022 Examinations
Final Course
Elective Papers
Paper 6A: Risk Management
"The pattern of examination for this paper is open-book and case study based. The entire
content included in the August 2019 edition of the Study Material (including additional topics
mentioned in the syllabus) shall be relevant for the November 2022 examination."
Paper 6B: Financial Services and Capital Markets
The pattern of examination for this paper is open-book and case study based. Part A of the
Study Material of Financial Services and Capital Markets (November 2020 Edition) shall be
relevant for the November 2022 examination. Furthermore, following SEBI Regulations
(excluding Schedules) revised upto 30th June 2022 are also relevant:
a. SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
b. SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018
c. SEBI (Prohibition of Insider Trading) Regulations, 2015
d. SEBI (Buy Back of Securities) Regulations, 2018
e. SEBI (Mutual Funds) Regulations, 1996
Paper – 6C : International Taxation
1. Applicability of amendments made by Finance Act
As far as the applicability of Finance Act is concerned, the amendments made by the
Finance Act of a particular year would be applicable for the May and November
examinations of the next year. Accordingly, the direct tax laws, as amended by the
Finance Act, 2021, would be applicable for November, 2022 examinations. The
relevant assessment year for November, 2022 examinations is A.Y.2022-23. This
would be relevant as far as the topics on International Taxation pertain to th e
Income-tax Act, 1961, equalization levy and the Black Money (Undisclosed Foreign
Income and Assets) and Imposition of Tax Act, 2015.
However, if the case study based question requires computation/determination relating to
any earlier assessment year also, then, the relevant provisions pertaining to that year
would be given in the question itself. In the alternative, the question may mention that the
relevant provisions in the earlier year were the same as they are for A.Y.2022-23.

2. Applicability of amendments made by circulars, notifications, press releases/press

notes and other legislations
Students are expected to be updated with the notifications, circulars, press releases/press
notes issued and other legislative amendments made in direct tax laws upto 6 months prior
to the examination. For instance, for November, 2022 examination, significant
notifications, circulars, press releases/press notes issued by the CBDT/Central
Government and legislative amendments made upto 30th April, 2022 would be relevant.
3. Applicability of provisions of direct tax laws dealt with in Final (New) Paper 7 while
addressing issues and making computation in case study based questions in Final
(New) Paper 6C
The questions based on case study in the Elective Paper 6C: International Taxation may
involve application of other provisions of direct tax laws dealt with in detail in Paper 7:
Direct Tax Laws and International Taxation, which the students are expected to be aware
of. Students may note that they are expected to integrate and apply the provisions of direct
tax laws (dealt with in Final Paper 7: Direct Tax Laws and International Taxation and in the
Elective Paper 6C: International Taxation) in making computations and addressing relevant
issues in questions raised in the Elective Paper 6C on International Taxation.
Therefore, the October, 2021 edition of the Study Material for Final Paper 6C: International
Taxation available at https://www.icai.org/post.html?post_id=17802 and Final Paper 7:
Direct Tax Laws and International Taxation available at
https://www.icai.org/post.html?post_id=17843 are relevant and important for answering
case-study based questions in Paper 6C. These publications have to be read along with
the relevant bare Acts and Rules to address issues and make computations in case study
based questions. The initial pages of the Study Material of Paper 6C available at
https://resource.cdn.icai.org/66899bos53930ip.pdf contains the link to the important
webpages of the income-tax department and the relevant bare Acts and Rules. The Study
Material has to be read along with the Statutory Update for November, 2022 examination
for Paper 6C and Paper 7 webhosted at the BOS Knowledge Portal.
4. Scope of coverage of certain topics
As regards certain topics on International Taxation, namely, Tax Treaties: Overview,
Features, Application & Interpretation and Anti-Avoidance Measures, only the content as
covered in the October, 2021 edition of the Study Material and Statutory Update for
November, 2022 examination would be relevant for November, 2022 Examination. US
Model Convention is excluded from the scope of the topic “Overview of Model Tax
Conventions” by way of Study Guidelines.
It may be noted that if a case study based question involves application of a double taxation
avoidance agreement (DTAA), the extract of the relevant article(s) of the DTAA would be

REVISION TEST PAPER 83
given in the question paper. Alternatively, the question may mention that the DTAA is in
line with the OECD/UN Model Tax Convention, in which case, the students have to refer
to the relevant article(s) of the Model Tax Convention. Students are expected to have the
ability to interpret the article(s) of the DTAA in answering case study based questions.
Paper 6D: Economic Laws
All the significant Rules/ Notifications/ Circulars/ Clarification/ Orders issued in the specified
Acts covered under the Economic Laws, up to 30 th April, 2022, are applicable for November
2022 examination.
(1) (2) (3)

Inclusions Exclusions
Chapters/ Topics of (Provisions which are (Provisions which are
the syllabus included from the excluded from the
corresponding chapter of corresponding chapter of
the syllabus) the syllabus)
Chapter 1 - The The entire content included in Following Sections of the
Competition Act, 2002 the October 2021 edition of the Competition Act, 2002 are
and Rules/ Regulations Study Material read with the excluded for the examination:
significant relevant 34, 37, 38, 40 are excluded.
amendments hosted on the
website, shall only be relevant.
Significant Rules/ Regulations
related to the Competition Act
are relevant for November
2022 examination to the extent
covered in the study material.
Chapter 2- Real Estate The entire content included in Regulations pertaining to
(Regulation and the October 2021 edition of the RERA are excluded.
Development) Act, 2016 Study Material read with the
and Rules / Regulations significant relevant
amendments, if any, hosted on
the website, shall only be
relevant.
Chapter 3 - The The entire content included in Following sections are
Insolvency and the October 2021 edition of the excluded of the Notified
Bankruptcy Code, 2016 Study Material read with the chapters of the Code:3(2),
significant relevant 3(3), 3(5), 3(14), 3(22), 3(24),
and Rules / Regulations
amendments hosted on the 3(25), 3(26), 3(28), 3(29),

website, if any, shall only be 3(32), 3(36), 3(37), 5(2) to

relevant for the said 5(4), 5(16), 5(19).
examinations
In specific, Regulations/
Rules related to Insolvency
and Bankruptcy, it is covered
broadly and not in entirety.
These shall only be applicable
to the extent covered in the
study material.
Chapter 4 - The The entire content included in -
Prevention of Money the October 2021 edition of the
Laundering Act, 2002 Study Material read with the
and Rules/Regulations significant relevant
relevant.
Rules to the extent covered in
the study material are relevant.
Chapter 5- The Foreign The entire content included in Following FEM(Regulations)/
Exchange Management the October 2021 edition of the Rules are entirely excluded:
Act, 1999 and Rules / Study Material read with the • Foreign Exchange
Regulations significant relevant (Authentication of
amendments, if any, hosted on Documents) Rules, 2000
• Foreign Exchange
relevant.
(Compounding
In specific following FEM
Proceedings) Rules,
(Regulations)/ Rules read
2000
with the Act, shall only be
applicable to the extent
Management
covered in the study material-
(Adjudication
Proceedings and Appeal)
Management (Current
Rules, 2000
Account Transactions)
Rules, 2000 • Foreign Exchange
Management
(Encashment of Draft,
Management
Cheque, Instrument and
(Permissible Capital

Account Transactions) Payment of Interest)

Regulations, 2000 Rules, 2000
• Foreign Exchange • Foreign Exchange
Management (Acquisition Management (Borrowing
and Transfer of and lending in Rupees)
Immovable Property in Regulations, 2000
India) Regulations, 2018 • Foreign Exchange
• Foreign Exchange Management (Deposit)
Management (Acquisition Regulations, 2016
and Transfer of • Foreign Exchange
Immovable Property Management
outside India) (Establishment in India of
Regulations, 2015 a Branch Office or a
• Foreign Exchange Liaison Office or a Project
Management (Export of Office or any other place
Goods and Services) of business) Regulations,
Regulations, 2015 2016
• Foreign Exchange • Foreign Exchange
Management Management (Export and
(Realisation, repatriation Import of Currency)
and surrender of foreign Regulations, 2015
exchange) Regulations, • Foreign Exchange
2015 Management (Foreign
• Foreign Exchange Currency Accounts by a
Management person resident in India)
(Possession and Regulations, 2015
retention of foreign • Foreign Exchange
currency) Regulations, Management (Foreign
2015 Exchange Derivative
• Liberalized Remittance Contracts) Regulations,
Scheme. 2000
• Import of Goods and • Foreign Exchange
Services Management
• External Commercial (Guarantees)
Borrowings Regulations, 2000
• Overseas Direct • Foreign Exchange
Investments Management (Insurance)
Regulations, 2015

Management (Investment
in firm or proprietary
Concern in India)
Regulations, 2000
Management (Issue of
security in India by a
Branch Office or Agency
of a person Resident in
outside India)
Regulations, 2000
Management (Manner of
Receipt and Payment)
Regulations, 2016
Management
(Remittance of Assets)
Regulations, 2016
Management (Transfer or
issue of any Foreign
security) Regulations,
2004
Management (Transfer or
issue of security by a
person resident outside
India) Regulations, 2000
Management (Withdrawal
of General permission to
Overseas Corporate
Bodies) Regulations,
2003

Management (Removal of
Difficulties) Order, 2000
Management
(Crystallization of
Inoperative Foreign
Currency Deposits)
Regulations, 2014
Management (Offshore
Banking Unit)
Regulations, 2002
Management
(International financial
Services Centre)
Regulations, 2015
Management
(Regularization of assets
held abroad by a person
Resident in India)
Regulations, 2015
The entire content included in -
Chapter 6 - Prohibition
of Benami Property the October 2021 edition of the
Transactions Act,1988Study Material read with the
significant
and Rules / Regulations relevant
the website shall only be
relevant.
Chapter 7- SARFAESI, The entire content included in -
2002 the October 2021 edition of the
Study Material read with the
significant relevant
the website shall only be
relevant.

Notes:
(1) In the above table of Inclusion/exclusion, in respect of the Chapters of the syllabus
specified in column (1) the related exclusion is given in column (3). Where an exclusion
has been so specified in any topic of the syllabus, the provisions corresponding to such
exclusions, covered in other topic(s) forming part of the syllabus, shall also be excluded.
(2) October 2021 edition of the Study Material and Booklet on Significant Case Laws of
January 2022 edition are relevant for November 2022 examinations.
(3) Except the exclusions mentioned in the column (3) of the table, the entire content of the
syllabus included in the October 2021 edition of the Study Material, shall be relevant for
the said examinations.
Paper 6E: Global Financial Reporting Standards
1. Relevant Study Material and Scope of Coverage of the content
October, 2021 edition of the Study Material is relevant for November, 2022 examination.
The study material contains the amendments in IFRS equivalent to the corresponding
amendments taken place in Ind AS till 31 st October, 2021. In case any amendment had
taken place in IFRS but the same is yet to be notified in Ind AS, then it would not be
applicable for this paper for November, 2022 examination.
As regards to the topic on ‘Significant differences between IFRS and US GAAPs’, the
content as covered in the chapter given in the study material would be relevant for
November, 2022 examination. The same file has also been uploaded on the website at
the link https://resource.cdn.icai.org/48696bos32691a.PDF.
2. Non-applicability of certain International Financial Reporting Standards (IFRS) and
IFRS Interpretations (IFRICs)
Since the Core paper on Financial Reporting does not cover Ind AS equivalent to IAS 26,
IAS 29 (including IFRIC 7), IFRS 4, IFRS 6, IFRS 14 and IFRS 17, the same IFRS shall
also not form part of this Paper. Similarly, in applicable Ind AS there are no corresponding
Appendix on IFRIC 2 and SIC 7, hence these IFRICs shall also not form part of the GFRS
Paper.
Paper 6F: Multidisciplinary Case Study
The Multi-disciplinary case study would involve application of two or more of the seven core
subjects at the Final level. List of seven core subjects at final level is given as under:
Final Paper
Paper 1: Financial Reporting
Paper 2: Strategic Financial Management
Paper 3: Advanced Auditing and Professional Ethics

Paper 4: Corporate and Economic Laws

Paper 5: Strategic Cost Management and Performance Evaluation
Paper 7: Direct Tax Laws & International Taxation
Paper 8: Indirect Tax Laws
Note: The applicability/ non-applicability of Standards/ Guidance Notes/ Legislative
Amendments etc. for Paper 6F: Multidisciplinary Case Study for November, 2022 Examination
would be same as applicable for each of the above individual papers.
Paper 7 : Direct Tax Laws and International Taxation

Applicability of Finance Act, Assessment Year etc. for November, 2022 Examination
The provisions of direct tax laws, as amended by the Finance Act, 2021 including significant
notifications, circulars and press releases issued up to 30th April, 2022, are applicable for
November, 2022 examination. The relevant assessment year is A.Y.2022-23.
The October, 2021 edition of the Study Material contains the provisions of direct tax laws
[Modules 1, 2 and 3] and international taxation [Module 4] relevant for November, 2022
examination. The same has to be read along with the Statutory Update for November, 2022
examination webhosted at the BOS Knowledge Portal.
Scope of coverage of certain topics in Part II: International Taxation
As regards certain topics on International Taxation, namely, Overview of Model Tax
Conventions, Application & Interpretation of Tax Treaties and Fundamentals of Base Erosion
and Profit Shifting, the specific content as covered in the October, 2021 edition of the Study
Material and Statutory Update for November, 2022 Examination would be relevant for
November, 2022 Examination.
Paper 8 : Indirect Tax Laws

The following are applicable for November 2022 examination:
(i) The provisions of the CGST Act, 2017 and IGST Act, 2017 as amended by the Finance
Act, 2021, which have become effective up to 30 th April, 2022, including significant
notifications and circulars issued and other legislative amendments made, up to 30 th April,
2022.
(ii) The provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975, as amended
by the Finance Act, 2021, including significant notifications and circulars issued and other
legislative amendments made, up to 30 th April, 2022.

The Study Guidelines given below specify the exclusions from the syllabus for November 2022
examination.
List of topic-wise exclusions from the syllabus
(1) (2) (3)

S. No. in Topics of the syllabus Exclusions
the (Provisions which are excluded from the
syllabus corresponding topic of the syllabus)
Part-I: Goods and Services Tax
1(ii) Levy and collection of CGST and (i) Rate of tax prescribed for supply of
IGST – Application of CGST/IGST goods*
law; Concept of supply including (ii) Rate of tax prescribed for supply of
composite and mixed supplies, services*
inter-State supply, intra-State (iii) Exemptions for supply of goods
supply, supplies in territorial
(iv) Categories of supply of goods, tax on
waters; Charge of tax including
which is payable on reverse charge
reverse charge; Exemption from
basis
tax; Composition levy
1(iv) Time and Value of supply Value of supply in cases where Kerala Flood
Cess is applicable.
1(v) Input tax credit (i) Manner of determination of input tax
credit in respect of inputs, input services
and capital goods and reversal thereof
in respect of real estate projects
(ii) Manner of reversal of credit of additional
duty of customs in respect of Gold dore
bar
1(vii) Procedures under GST including (i) Furnishing of GSTR-2, GSTR-1A and
registration, tax invoice, credit and GSTR-3
debit notes, electronic way bill,
(ii) Matching, reversal & reclaim of input tax
accounts and records, returns,
credit
payment of tax including tax
deduction at source and tax (iii) Matching, reversal & reclaim of
collection at source, refund, job reduction in output tax liability
work
1(xv) Other provisions Transitional Provisions

Part-II: Customs & FTP

1.(v) Officers of Customs; Appointment of customs ports, airports etc. Completely
1.(vii) Provisions relating to coastal goods and vessels carrying coastal excluded
goods
1.(x) Demand and Recovery
1.(xi) Provisions relating to prohibited goods, notified goods, specified
goods, illegal importation/exportation of goods
1.(xii) Searches, seizure and arrest; Offences; Penalties; Confiscation
and Prosecution
1.(xiii) Appeals and Revision; Advance Rulings; Settlement Commission
1.(xiv) Other provisions
*Rates specified for computing the tax payable under composition levy are included in
the syllabus.
Notes:
(1) The amendments made by the Annual Union Finance Acts in the CGST Act, 2017 and
IGST Act, 2017 are made effective from the date notified subsequently. Thus, only those
amendments made by the Finance Act, 2021 which have become effective till 30.04.2022
are applicable for November 2022 examinations. Consequently, amendment made by the
Finance Act, 2021 in section 16 of the IGST Act, 2017 is not applicable for November 2022
examinations as the same has not become effective till 30.04.2022.
Further, it may be noted that amendments made by the Finance (No. 2) Act, 2019 in
sections 2(4), 95, 102, 103, 104, 105 and 106 of the CGST Act, 2017 and the insertion of
new sections 101A, 101B & 101C in the CGST Act, 2017 have not become effective till
30.04.2022 and thus, are not applicable for November 2022 examinations.
(2) In the above table, in respect of the topics of the syllabus specified in column (2) the related
exclusion is given in column (3). Where an exclusion has been so specified in any topic
of the syllabus, the provisions corresponding to such exclusions, covered in other topic(s)
forming part of the syllabus, shall also be excluded.
(3) October 2021 edition of the Study Material is relevant for November 2022 examinations.
The amendments in the GST law and in the customs law and FTP - made after the issuance
of this Study Material - to the extent covered in the Statutory Update for November 2022
examination alone shall be relevant for the said examination. The Statutory Update shall
be hosted on the BoS Knowledge Portal.

Though the Statutory Update for November 2022 examination shall provide the precise
scope and coverage of the amendments, for the sake of clarity, it may be noted that the
amendments made in the various provisions of the GST law for providing relief to the
taxpayers in view of spread of Novel Corona Virus (COVID-19) shall not be applicable for
November 2022 examinations.
(4) The entire content included in the October 2021 edition of the Study Material (except the
exclusions mentioned herein) and the Statutory Update for November 2022 examination
shall be relevant for the said examination.

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FINAL COURSE

REVISION TEST PAPERS

© The Institute of Chartered Accountants of India

Edition : August, 2022

Department/Committee : Board of Studies

Published by : The Publication Department on behalf of The Institute of Chartered

Typeset and designed at Board of Studies.

© The Institute of Chartered Accountants of India

Planning & Preparing for Examination ...........................................................................ii

Subject-wise Guidance – An Overview ......................................................................... iii

Paper 5: Strategic Cost Management and Performance Evaluation ..................... 1 – 29

Paper 6: 6A to 6F [ELECTIVE PAPERS].................................................................30

Paper 7: Direct Tax Laws & International Taxation ........................................... 31 – 57

Paper 8: Indirect Tax Laws ............................................................................ 58 – 80

Applicability of Standards/Guidance Notes/Legislative Amendments etc. for

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

7. Cost of Quality Measures to Prepare, Advise Automobiles

PAPER 7: DIRECT TAX LAWS AND INTERNATIONAL TAXATION

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

×××CASE STUDY ×××

Ethical and Non- Financial Considerations

© The Institute of Chartered Accountants of India

Supply Chain Management

××× CASE SCENARIO×××

Ethical and Non- Financial Considerations

© The Institute of Chartered Accountants of India

Recent news reports from some of the Third World foreign

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

in its best-selling laser printer or should continue to manufacture in-house in the

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

allergy. A break-through would address a societal problem, while also having a

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

laws. It should insist that the supplier be open to periodic inspection by

Budgeted Market Share (in %) = 2,00,000units = 50%

© The Institute of Chartered Accountants of India

⇒ £26,062.50 (A) = 50% × (Actual Industry Sales Quantity in

Actual Market Share (in %) = 1,65,000units = 44%

Standard Sales Price per unit = £10,50,000 = £5.25

Actual Sales Price per unit = £8,46,450 = £5.13

Standard Variable Cost per unit = £6,33,000 = £3.165

Actual Variable Cost per unit = £5,37,075 = £3.255

© The Institute of Chartered Accountants of India

Fixed Cost Variances

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(ii) Respond to the dilemma

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