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Mock Test Paper - Series II: April, 2024
Date of Paper: 2 April, 2024

Time of Paper: 2 P.M. to 5 P.M.
INTERMEDIATE COURSE: GROUP - I

PAPER – 1 : ADVANCED ACCOUNTING
Time Allowed – 3 Hours Maximum Marks – 100
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
PART I – Case Scenario based MCQs (30 Marks)
Part I is compulsory.
Case Scenario
1. Mars Ltd. is a manufacturing enterprise which is starting a new manufacturing
plant at X Village. It has commenced construction of the plant on April 1, 2023
and has incurred following expenses:
 It has acquired land for installing Plant for ` 50,00,000
 It incurred ` 35,00,000 for material and direct labour cost for developing the
Plant.
 The Company incurred ` 10,00,000 for head office expenses at New Delhi
which included rent, employee cost and maintenance expenditure.
 The Company borrowed ` 25,00,000 for construction work of Plant @12%
per annum on April 1, 2023. Director finance of the Company incurred
travel and meeting expenses amounting to ` 5,00,000 during the year for
arranging this loan.
 On November 1, 2023, the construction activities of the plant were
interrupted as the local people alongwith the activists have raised issues
relating to environmental impact of plant being constructed. Due to agitation
the construction activities came to standstill for 3 months.
 With the help of Government and NGOs, the agitation was over by February
28, 2024 and the work resumed. However, to balance the impact on
environment, government ordered the company to install certain devices
for which the Company had to incur ` 6,00,000 in March 2024.
 The rate of depreciation on Plant is 10%.
Based on the above information, answer the following questions.
(i) Which of the following expenses cannot be included in the cost of plant:
(a) Cost of Land
(b) Construction material and labour cost
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(c) Head office expenses
(d) Borrowing cost
(ii) How much amount of borrowing cost can be capitalised with the plant:
(a) ` 300,000
(b) ` 2,00,000
(c) ` 7,00,000
(d) ` 6,00,000
(iii) The total cost of plant as on march 31, 2024 will be:
(a) ` 85,00,000
(b) ` 98,00,000
(c) ` 93,00,000
(d) ` 95,00,000
(iv) The amount of depreciation to be charged for the year end March 31,
2024
(a) ` 4,30,000
(b) ` 9,30,000
(c) ` 9,80,000
(d) Nil
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks]
2. Beloved Finance Ltd. is a financial enterprise which is in the business of
lending loan to small businesses and earn interest on loans.
• During the year the Company has lend 50 crores and earned ` 1.5 crore
as interest on loans.
• The Company had surplus funds during the year and invested then in
Fixed Deposits with bank and earned interest on fixed deposits of ` 20
lacs.
• The Company also acquired a gold loan unit for ` 10 crore during the
year and the Company provided interest free loan of ` 15 crore to its
wholly-owned subsidiary.
• The Company paid a total income tax of ` 75 lacs for the year.
(i) In the Cash Flow Statement as per AS 3, the interest income of ` 1.5
crore earned on earned on loans given by the Company will be disclosed
as:
(a) Cash Flow from Operating Activities
(b) Cash Flow from Investing Activities
(c) Cash Flow from Financing Activities
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(d) Non-cash Items
(ii) In the Cash Flow Statement as per AS 3, the interest income of ` 20
Lacs earned fixed deposits with bank will be disclosed as:
(d) Non-cash Items
(iii) In the Cash Flow Statement as per AS 3, amount paid for acquiring gold
loan unit will be disclosed as:
(d) Non-cash Items
(iv) In the Cash Flow Statement as per AS 3, total income tax of ` 75 lacs
paid for the year will be disclosed as:
(d) Non-cash Items
(v) Is any specific disclosures required to made in relation to the interest
free loan of ` 15 crore provided by the Company to its wholly-owned
subsidiary, if yes, as per which Accounting Standard:
(a) Yes, disclosure is required to be made as per AS 3, Cash Flow
Statements.
(b) Yes, disclosure is required to be made as per AS 18, Related Party
Disclosures
(c) Yes, disclosure is required to be made as per AS 13, Accounting
for Investments
(d) No specific disclosures are required.
3. Kumar Ltd., a privately-held company, operates in the manufacturing industry.
Founded in 2008, the company has steadily grown its operations and
established a strong presence in the market. As of 31st March, 2023, the
company's capital structure reflects a blend of equity and debt financing.
Capital Structure Overview:
 Equity Share Capital: The company has a total of ` 30,00,000 invested
in equity shares, each valued at ` 10 and fully paid.
3
 Reserves & Surplus: Kumar Ltd. has accumulated reserves and surplus
totaling `49,00,000, comprising contributions from various sources
including General Reserve (` 32,50,000), Security Premium Account
(` 6,00,000), Profit & Loss Account (` 4,30,000), and Revaluation
Reserve (` 6,20,000).
 Loan Funds: The company has acquired loan funds amounting to
` 42,00,000 to support its operational and growth initiatives.
Buy-Back Decision:
Considering its financial position and market conditions, Kumar Ltd. has
decided to initiate a share buy-back program. The company intends to
repurchase its shares at a price of `30 per share.
In accordance with financial regulations and internal policies, Kumar Ltd. aims
to assess the maximum number of shares it can repurchase while maintaining
a prudent debt-equity ratio. By utilizing the Debt Equity Ratio Test, the
company seeks to strike a balance between its equity base and debt
obligations.
(i) What is the minimum equity Kumar Ltd. needs to maintain after buy-
back, according to the Debt Equity Ratio Test?
(a) ` 12,95,000
(b) ` 21,00,000
(c) ` 32,50,000
(d) ` 6,00,000
(ii) What is the maximum permitted buy-back of equity for Kumar Ltd.?
(a) ` 38,85,000
(b) ` 42,00,000
(c) ` 12,95,000
(d) ` 59,85,000
(iii) How many shares of Kumar Ltd. can be bought back at ` 30 per share
according to the Debt Equity Ratio Test?
(a) 43,000
(b) 1,29,500
(c) 2,00,000
(d) 78,000
4. Sahil Ltd agreed to sell its factory located in Assam to Kali Ltd on 4.12.20 23.
It entered into a sale deed (transferring all significant risks and rewards of
ownership) on 1.2.2024. But the transaction was registered with the registrar
on 30.5.2024 When should the sale and gain be recognized?
4
(a) Both sale and gain should be recognized as on the balance sheet date
i.e. 31.3.2024.
(b) Both sale and gain should be recognized on 30.5.2024.
(c) The sale should be recognized as on balance sheet date but gain should
be recognized on 30.5.2024.
(d) Both sale and gain should be recognized on 4.12.2023. (2 Marks)
5. Pratham and Associates is a manufacturer of steel rods. It invests its profits
by purchasing shares of listed companies in order to earn dividend income. It
had purchased shares of Bharti Airtel Limited in FY 2018-19. However, it sold
all the shares of Bharti Airtel Limited during the current year i.e. FY 2023-24.
What amount would be disclosed in the profit and loss account for
FY 2023-24?
(a) This transaction would not affect the profit and loss account since the
primary business of the company is manufacturing, and not investment.
(b) The carrying amount net of expenses would be disclosed in the profit
and loss account.
(c) The disposal proceeds net of expenses would be disclosed in the profit
and loss account.
(d) The difference between the carrying amount and the disposal proceeds,
net of expenses, would be disclosed in the profit and loss account.
(2 Marks)
6. As per Accounting Standards, difference between the Gross Investment and
the present value of Minimum Lease Payments under finance lease (from the
standpoint of the lessor) and Unguaranteed Residual Value accruing to the
lessor is recorded as
(a) Unearned finance income
(b) Guaranteed Residual Value
(c) Profit on lease
(d) Loss on lease (2 Marks)
PART II – Descriptive Questions (70 Marks)

Question No.1 is compulsory
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions may be made and indicated in answer
by the candidates. Working Notes should form part of the answer.
1. (a) K Ltd. launched a project for producing product X in October, 2023. The
Company incurred ` 40 lakhs towards Research and Development
expenses upto 31 st March, 2024. Due to prevailing market conditions,
the Management came to conclusion that the product cannot be
manufactured and sold in the market for the next 10 years. The
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Management hence wants to defer the expenditure write off to future
years.
Advise the Company as per the applicable Accounting Standard.
(5 Marks)
(b) Wooden Plywood Limited has a normal wastage of 5% in the production
process. During the year 2023-24, the Company used 16,000 MT of
Raw material costing ` 190 per MT. At the end of the year, 950 MT of
wastage was in stock. The accountant wants to know how this wastage
is to be treated in the books.
You are required to :
(1) Calculate the amount of abnormal loss.
(2) Explain the treatment of normal loss and abnormal loss in the
context of AS-2. (5 Marks)
(c) On 15th June, 2024, Y limited wants to re-classify its investments in
accordance with AS 13 (revised). Decide and state the amount of
transfer, based on the following information:
(1) A portion of long term investments purchased on 1 st March, 2023
are to be re-classified as current investments. The original cost of
these investments was ` 14 lakhs but had been written down by
` 2 lakhs (to recognise 'other than temporary' decline in value). The
market value of these investments on 15 th June, 2024 was
` 11 lakhs.
(2) A portion of current investments purchased on 15 th March, 2024 for
` 7 lakhs are to be re-classified as long term investments, as the
company has decided to retain them. The market value of these
investments on 31 st March, 2024 was ` 6 lakhs and fair value on
15th June 2018 was ` 8.5 lakhs. (4 Marks)
2. The following balance appeared in the books of Oliva Company Ltd. as on
31-03-2024.
Particulars ` Particulars `
Inventory Sales 17,10,000
01-04-2023
-Raw Material 30,000 Interest 3,900
-Finished goods 46,500 76,500 Profit and Loss 48,000
A/c
Purchases 12,15,000 Share Capital 3,15,000
Manufacturing 2,70,000 Secure Loans:
Expenses Short–term 4,500
Long-term 21,000 25,500
Salaries and 40,200 Deposits
wages (unsecured):
General 16,500 Short -Term 1,500
Charges
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Interim Dividend 27,000 Long-term 3,300 4,800
paid Trade payables 3,27,000
Building 1,01,000
Plant and
Machinery 70,400
Furniture 10,200
Motor Vehicles 40,800
Stores and
Spare Parts 45,000
Consumed
Investments:
Current 4,500
Non Current 7,500 12,000
Trade 2,38,500
receivables
Cash in Bank 2,71,100
24,34,200 24,34,200
From the above balance and the following information, prepare the company’s
Profit and Loss Account for the year ended 31 st March, 2024 and Company’s
Balance Sheet as on that date:
1. Inventory on 31st March,2024 Raw material ` 25,800 & finished goods
` 60,000.
2. Outstanding Expenses: Manufacturing Expenses ` 67,500 & Salaries
& Wages ` 4,500.
3. Interest accrued on Securities ` 300.
4. General Charges prepaid ` 2,490.
5. Provide depreciation: Building @ 2% p.a., Machinery @ 10% p.a.,
Furniture @ 10% p.a. & Motor Vehicles @ 20% p.a.
6. The Taxation provision of 40% on net profit is considered. (14 Marks)
3. (a) XYZ Ltd. has not made provision for warrantee in respect of certain
goods due to the fact that the company can claim the warranty cost from
the original supplier. Hence the accountant of the company says that the
company is not having any liability for warrantees on a particular date as
the amount gets reimbursed. You are required to comment on the
accounting treatment done by the XYZ Ltd. in line with the provisions of
AS 29. (4 Marks)
(b) The Balance Sheet of Radhika Ltd. as at 31-3-2024 is as follows:
Particulars Notes `
Equity and Liabilities
1 Shareholders' funds
a Share capital 1 13,80,000
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b Reserves and Surplus 2 (6,42,000)
2 Non-current liabilities
a Long-term borrowings 3 4,50,000
3 Current liabilities
a Trade Payables 3,60,000
b Short term borrowings - Bank Overdraft 2,34,000
c Other current liabilities 4 1,47,000
Total 19,29,000
Assets
1 Non-current assets
a Property, plant and equipment 5 5,70,000
b Intangible assets 6 2,01,000
c Non-current investments 7 66,000
2 Current assets
a Inventories 5,10,000
b Trade receivables 5,00,000
c Cash and Cash Equivalents 82,000
Total 19,29,000
Notes to accounts
`
1 Share Capital
Equity share capital:
9,000 Equity Shares of `100 each 9,00,000
Preference share capital:
4,800 6% Cumulative Preference Shares of `100 each 4,80,000
13,80,000
2 Reserves and Surplus
Debit balance of Profit and loss Account (6,42,000)
3 Long-term borrowings
Secured: 6% Debentures 4,50,000
4 Other current liabilities

Loan from directors 1,20,000
Interest payable on 6% debentures 27,000
1,47,000
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5 Property Plant and Equipment
Freehold property 5,10,000
Plant 60,000
5,70,000
6 Intangible assets
Goodwill 1,56,000
Patents 45,000
2,01,000
7 Non-current investments
Investments at cost 66,000
The Court approved a Scheme of re-organization to take effect on

1-4-2024, whereby:
(1) Equity Shares to be reduced to ` 20 each.
(2) Preference shareholders would give up 30% of their capital in
exchange for allotment of 11% Debentures to them.
(3) Of the Preference Share dividends which are in arrears for four
years, three fourths to be waived and Equity Shares of ` 20 each
to be allotted for the remaining quarter.
(4) Interest payable on debentures to be paid in cash.
(5) Goodwill to be written off.
(6) Inventory to be written off by `65,000.
(7) Amount of ` 68,500 to be provided for bad debts.
(8) Freehold property to be revalued at `6,49,000
(9) Investments be sold for ` 1,40,000.
(10) Directors to accept settlement of their loans as to 90% thereof by
allotment of equity shares of ` 20 each and as to 5% in cash, and
balance 5% being waived.
(11) There were capital commitments totaling ` 2,50,000. These
contracts are to be cancelled on payment of 5% of the contract
price as a penalty.
(12) Ignore taxation and cost of the scheme.
(13) Eliminate debit balance of Profit and Loss A/c
You are requested to prepare the Balance Sheet of the company after
completion of the Scheme. (10 Marks)
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4. Following is the information of Anu Ltd. and Banu Ltd. as on 31.03.2023 were
as under:
Anu Ltd. Banu Ltd.
(`) (`)
Share Capital:
50,000 Equity Shares of `10 each, Fully Paid 5,00,000
37,500 Equity Shares of `10 each, Fully Paid 3,75,000
General Reserve 3,00,000 -
Profit and Loss Account 62,500 62,500
Trade Payables 2,62,500 1,62,500
5% Debentures - 1,50,000
Freehold Property 3,75,000 3,00,000
Plant and Machinery 75,000 50,000
Motor Vehicle 37,500 25,000
Trade Receivables 2,50,000 1,00,000
Inventory 2,87,500 2,25,000
Cash at Bank 1,00,000 50,000
Anu Ltd. and Banu Ltd. carry on business of similar nature and they agreed
to amalgamate.
A new Company, Anban Ltd. is formed to take over the Assets and Liabilities
of Anu Ltd. and Banu Ltd. on the following basis:
Assets and Liabilities are to be taken at Book Value, with the following
exceptions:
(a) Goodwill of Anu Ltd. and Banu Ltd. is to be valued at `1,75,000 and
`50,000 respectively.
(b) Plant and Machinery of Anu Ltd. are to be valued at `1,25,000.
(c) The Debentures of Banu Ltd. are to be discharged by the issue of 6%
Debentures of Anan Ltd. at a premium of 5%.
You are required to:
1. Compute the basis on which shares in Anban Ltd. will be issued to
Shareholders of the existing Companies assuming nominal value of each
share of Anban Ltd. is `10.
2. Draw up a Balance Sheet of Anban Ltd. as on 1st April, 2023, when
Amalgamation is completed. (14 Marks)
5. (a) Star Ltd.acquires 70% of equity shares of Moon Ltd.as on 31st March,
2024 at a cost of ` 140 lakhs. The following information is available from
the balance sheet of Moon Ltd.as on 31st March, 2024:
` in lakhs
Property, plant and equipment 240
10
Investments 110
Current Assets 140
Loans & Advances 30
15% Debentures 180
Current Liabilities 100
The following revaluations have been agreed upon (not included in the
above figures):
Property, plant and equipment Up by 20%
Investments Down by 10%
Moon Ltd. declared and paid dividend @ 20% on its equity shares as on
31st March, 2024 (Face value - ` 10 per share). Star Ltd. purchased the
shares of Moon Ltd.@ ` 20 per share.
Calculate the amount of goodwill/capital reserve on acquisition of shares
of Moon Ltd. 31st March, 2024.
(b) Gamma Ltd. acquired 24,000 equity shares of ` 10 each, in Beta Ltd. on
October 1, 2023 for` 4,60,200. The profit and loss account of Beta Ltd.
showed a balance of ` 15,000 on April 1,2023. The plant and machinery
of Beta Ltd. which stood in the books at ` 2,25,000 on April 1,2023 was
considered worth ` 2,70,000 on the date of acquisition.
The information of the two companies as at 31-3-2024 was as follows:
Gamma Ltd. Beta Ltd.
(`) (`)
Shares capital (fully paid equity shares
of ` 10 each) 7,50,000 3,00,000
General reserve 3,60,000 1,50,000
Profit and loss account 85,800 1,23,000
Current Liabilities 2,54,700 49,500
Land and building 2,70,000 2,85,000
Plant and machinery 3,60,000 2,02,500
Investments 4,60,200
Current assets 3,60,300 1,35,000
You are required to compute impact of revaluation of Plant and
Machinery. (7+7 = 14 Marks)
6. (a) “One of the characteristics of financial statements is neutrality”- Do you
agree with this statement? (4 Marks)
Or
Opening Balance Sheet of Mr. Amit is showing the aggregate value of
assets, liabilities and equity ` 16 lakh, ` 6 lakh and ` 10 lakh respectively.
During accounting period, Mr. Amit has the following transactions:
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(1) Earned 10% dividend on 4,000 equity shares held of ` 100 each
(2) Paid ` 1,00,000 to creditors for settlement of ` 1,40,000
(3) Rent of the premises is outstanding ` 20,000
(4) Mr. A withdrew ` 18,000 for his personal use.
You are required to show the effect of above transactions on Balance
Sheet in the form of Assets - Liabilities = Equity after each transaction.
(4 Marks)
(b) C Ltd. had ` 5,00,000 authorized capital on 31-12-2021 divided into
shares of ` 100 each out of which 4,000 shares were issued and fully
paid up. In June 2022 the Company decided to convert the issued shares
into stock. But in June, 2023 the Company re-converted the stock into
shares of ` 10 each, fully paid up.
Pass entries and show how Share Capital will appear in Notes to Balance
Sheet as on 31-12-2022 and 31-12-2023. (4 Marks)
(c) Alfa of Chennai has a branch at Mumbai to which goods are sent @ 20%
above cost. The branch makes both cash and credit sales. Branch
expenses are met partly from H.O. and partly by the branch. The
statement of expenses incurred by the branch every month is sent to
head office for recording.
Following further details are given for the year ended 31st December, 2023:
`
Cost of goods sent to Branch at cost 2,00,000
Goods received by Branch till 31-12-2023 at 2,20,000
invoice price
Credit Sales for the year @ invoice price 1,65,000
Cash Sales for the year @ invoice price 59,000
Cash Remitted to head office 2,22,500
Expenses paid by H.O. 12,000
Bad Debts written off 750
Balances as on 1-1-2023 31-12-2023
` `
Stock 25,000 (Cost) 28,000 (invoice price)
Debtors 32,750 26,000
Cash in Hand 5,000 2,500
You are required to prepare Branch stock account and branch debtor account
in the books of the head office for the year ended 31st December, 2023.
(6 Marks)
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INTERMEDIATE COURSE: GROUP – I

PAPER – 1 : ADVANCED ACCOUNTING
1. (i) (c)
(ii) (b)
(iii) (c)
(iv) (d)
2. (i) (a)
(ii) (a)
(iii) (b)
(iv) (a)
(v) (b)
3. (i) (b)
(ii) (a)
(iii) (b)
4. (a)
5. (d)
6. (a)
PART II – Descriptive Questions (70 Marks)
1. (a) As per AS 26 “Intangible Assets”, expenditure on research should be
recognized as an expense when it is incurred. An intangible asset
arising from development (or from the development phase of an internal
project) should be recognized if, and only if, an enterprise can
demonstrate all of the conditions specified in para 44 of the standard.
An intangible asset (arising from development) should be derecognised
when no future economic benefits are expected from its use according
to para 87 of the standard. Thus, the manager cannot defer the
expenditure write off to future years in the given case.
Hence, the expenses amounting ` 40 lakhs incurred on the research and
development project has to be written off in the current year ending
31st March, 2024.
(b) (i) As per AS 2 ‘Valuation of Inventories’, abnormal amounts of wasted
materials, labour and other production costs are excluded from cost
of inventories and such costs are recognised as expenses in the
1
period in which they are incurred. The normal loss will be included
in determining the cost of inventories (finished goods) at the year
end.
(ii) Material used 16,000 MT @ ` 190 = ` 30,40,000
Normal Loss (5% of 16,000 MT) 800 MT (included
in calculation of cost of inventories)
Net quantity of material 15,200 MT
(iii) Abnormal Loss in quantity (950 - 800) 150 MT
Abnormal Loss ` 30,000
[150 units @ ` 200 (` 30,40,000/15,200)]
Amount of ` 30,000 (Abnormal loss) will be charged to the Profit
and Loss statement.
(c) As per AS 13 (Revised) ‘Accounting for Investments’, where long-term
investments are reclassified as current investments, transfers are made
at the lower of cost and carrying amount at the date of transfer; and
where investments are reclassified from current to long term, transfers
are made at lower of cost and fair value on the date of transfer.
Accordingly, the re-classification will be done on the following basis:
(i) In this case, carrying amount of investment on the date of transfer
is less than the cost; hence this re-classified current investment
should be carried at ` 12 lakhs in the books.
(ii) In this case, reclassification of current investment into long-term
investments will be made at ` 7 lakhs as cost is less than its fair
value of ` 8.5 lakhs on the date of transfer.
2. Oliva Company Ltd.
Statement of Profit and loss for the year ended 31.03.2024
Particulars Note Amount (`)
I Revenue from operations 17,10,000
II Other income (3,900 +300) 4,200
III Total Revenue (I +II) 17,14,200
IV Expenses:
Cost of materials consumed 10 12,64,200
Purchases of inventory-in-trade --
Changes in inventories of finished goods, 11 (13,500)
work-in-progress and inventory-in-Trade
Employee benefit expenses 12 44,700
Finance costs --
Depreciation and amortization expenses 18,240
2
Other expenses 13 3,51,510
Total Expenses 16,65,150
V Profit before exceptional and extraordinary 49,050
items and tax
VI Exceptional items --
VII Profit before extraordinary items and tax 49,050
VIII Extraordinary items --
IX Profit before tax 49,050
X Tax expense (40% of 49,050) 19,620
XI Profit/Loss for the period from continuing 29,430
operations
Oliva Company Ltd.
Balance Sheet for the year ended 31.03.2024
Particulars Note Amount
1 Equity and Liabilities
(i) Shareholders’ funds
(a) Share Capital 3,15,000
(b) Reserves and surplus 1 50,430
2) Non-current liabilities
(a) Long-term borrowings 2 24,300
(3) Current Liabilities
(a) Short -term borrowings 3 6,000
(b) Trade payables 3,27,000
(c) Other current liability 4 72,000
(d) Short term provision 5 19,620
8,14,350
II ASSETS
(1) Non current assets
(a) Property, Plant & equipment 6 2,04,160
(b) Non-current investments 7,500
(2) Current assets
(a) Current investments 4,500
(b) Inventories 7 85,800
(c) Trade receivables 2,38,500
(d) Cash and cash equivalents 2,71,100
3
(e) Short-term loans and advances 8 2,490
(f) Other current assets 9 300
8,14,350
Notes to accounts
No. Particulars Amount Amount
1. Reserve & Surplus
Profit & Loss Account: 48,000
Balance b/f
Net Profit for the year 29,430
Less: Interim Dividend (27,000) 50,430
2. Long term borrowings
Secured loans 21,000
Fixed Deposits: Unsecured 3,300 24,300
3. Short term borrowings
Secured loans 4,500
Fixed Deposits -Unsecured 1,500 6,000
4. Other current liabilities
Expenses Payable 72,000
(67,500 + 4,500)
5. Short term provisions
Provision for Income tax 19,620
6. PPE
Building 1,01,000
Less: Depreciation @ 2% (2,020) 98,980
Plant & Machinery 70,400
Furniture 10,200
Motor vehicles 40,800
Less: Depreciation @ 20% (8,160) 32,640 2,04,160
7 Inventory
Raw Material 25,800
Finished goods 60,000 85,800
8. Short term Loans &
Advances
General Charges prepaid 2,490
9. Other Current Assets
Interest accrued 300
4
10. Cost of material consumed
Opening inventory of raw 30,000
material
Add: Purchases 12,15,000
Stores & spare parts 45,000 12,90,000
consumed
Less: Closing inventory (25,800) 12,64,200
11. Changes in inventory of
Finished Goods & WIP
Closing Inventory of Finished 60,000
Goods
Less: Opening Inventory of 46,500 13,500
Finished Goods
12. Employee Benefit
expenses
Salary & Wages 44,700
(40,200 + 4,500)
13. Other Expenses
Manufacturing Expenses 3,37,500
(2,70,000 + 67,500)
General Charges 14,010 3,51,510
(16,500 – 2,490)
3. (a) As per AS 29 "Provisions, Contingent Liabilities and Contingent Assets",
where some or all of the expenditure required to settle a provision is
expected to be reimbursed by another party, the reimbursement should
be recognised when, and only when, it is virtually certain that
reimbursement will be received if the enterprise settles the obligation.
The reimbursement should be treated as a separate asset. The amount
recognised for the reimbursement should not exceed the amount of the
provision.
It is apparent from the question that the company had not made provision
for warranty in respect of certain goods considering that the company
can claim the warranty cost from the original supplier. However, the
provision for warranty should have been made as per AS 29 and the
amount claimable as reimbursement should be treated as a separate
asset in the financial statements of the company rather than omitting the
disclosure of such liability. Accordingly, it is viewed that the accounting
treatment adopted by the company with respect to warranty is not
correct.
5
(b) Balance Sheet of Radhika Ltd. (and Reduced) as on 1.4.2024
Particulars Notes `
I. Equity & Liabilities
A Shareholders' Fund
a Share Capital 1 3,16,800
b Reserves & Surplus 2 1,10,200
B Non-Current Liabilities
a Long Term Borrowings 3 7,86,000
C Current Liabilities
a Trade Payables 3,60,000
b Short Term borrowings: Bank OD 2,34,000
Total 18,07,000
II. Assets
A Non-Current Assets
a Property, Plant & Equipment 4 7,09,000
b Intangible assets: Patents 45,000
B Current Assets
a Inventory (5,10,000-65,000) 4,45,000
b Trade Receivable 5 4,31,500
c Cash & Cash Equivalent 1,76,500
Total 18,07,000
Notes to Accounts
Particulars `
1 Share Capital -
Authorised, Issued, Subscribed & Paid Up Capital
Equity share Capital
15,840 Shares of `20 Paid up 3,16,800
(Out of above 6,840 shares are issued for
consideration other cash) (W.N 1)
2 Reserves & Surplus
Capital Reserve (W.N 2) 1,10,200
3 Long Term Borrowings Secured
6% Debentures 4,50,000
a 11% Debentures (70% of 4,80,000 preference 3,36,000
b shares)
7,86,000
4 PPE
Freehold property 6,49,000
6
Plant 60,000
7,09,000
5 Trade receivable 5,00,000
Less: Provision for Doubtful Debts (68,500)
4,31,500
Working notes:
1. Computation of equity shares:
Equity No. of
share shares at
capital ` 20 each
1 After the reduction to 90,000 x 20 1,80,000 9,000
` 20 each
2. Equity shares allotted 6% of 28,800 1,440
to preference 4,80,000
shareholders for their
¼ arrears.
3. Equity shares allotted 90% of 1,08,000 5,400
to Directors in 1,20,000
settlement of their loan
Total equity shares 3,16,800 15,840
2. Calculation of capital reserve: Equity Share 7,20,000 + Preference

share 1,44,000 + Freehold property 1,39,000 +Investment 74,000
+ Director Loan 6,000 – Preference share dividend 28,800 -
Goodwill 1,56,000 – Inventory 65,000 – Bad debts 68,500 – Profit
& Loss A/c 6,42,000 = Capital Reserve 1,22,700
3. Cash balance:
`
Cash & cash equivalent 82,000
Add: Investment sold 1,40,000
Less: Directors Loan (1,20,000 x 5%) 6,000
Penalty (2,50,000x 5%) 12,500
Interest on debentures (6% on 27,000 45,500
4,50,000)
1,76,500
4. Calculation of Net Assets
Particulars Anu Ltd. (`) Banu Ltd. (`)
Goodwill 1,75,000 50,000
Freehold property 3,75,000 3,00,000
7
Plant & Machinery 1,25,000 50,000
Motor vehicle 37,500 25,000
Trade receivable 2,50,000 1,00,000
Inventory 2,87,500 2,25,000
Cash at Bank 1,00,000 50,000
Total 13,50,000 8,00,000
Less : Trade payable (2,62,500) (1,62,500)
6% debentures - (1,57,500)
Net Assets 10,87,500 4,80,000
Calculation of Purchase Consideration
Sr. Particulars Computation Anu Ltd Banu Ltd
No.
1 Amount payable to
Equity Share Holder in
the form of
1,08,750 Equity shares (1,08,750 × 10) 10,87,500
of `10 each
48,000 Equity shares of (48,000 × 10) 4,80,000
`10 each
Purchase Consideration 10,87,500 4,80,000
Balance Sheet of Anban Ltd.
as on 1st April, 2023
Particulars Note `
No.
Equity and Liabilities
(1) Shareholders' Funds
(a) Share Capital 1 15,67,500
(2) Non-current Liabilities
(a) Long term borrowings 2 1,57,500
(3) Current Liabilities
(a) Trade Payables (2,62,500 + 1,62,500) 4,25,000
Total 21,50,000
Assets
(1) Non-current Assets
(a) Property Plant and Equipment 3 9,12,500
(b) Intangible assets 4 2,25,000
(2) Current Assets
(a) Inventories (2,87,500 + 2,25,000) 5,12,500
8
(b) Trade Receivables (2,50,000 + 1,00,000) 3,50,000
(c) Cash and cash equivalents (1,00,000 + 1,50,000
50,000)
Total 21,50,000
Notes to Accounts:
Note Particulars `
No.
1 Share Capital
Equity share capital
1,56,750 equity shares of `10 each 15,67,500
(out of above shares are issued for consideration other
than cash)
2 Long term borrowings
6% Debentures 1,57,500
3 Property, Plant & Equipment’s
Freehold property (3,75,000 + 3,00,000) 6,75,000
Plant & Machinery (1,25,000 + 50,000) 1,75,000
Motor Vehicle (37,500+25,000) 62,500
9,12,500
4 Intangible assets
Goodwill (1,75,000 + 50,000) 2,25,000
5. (a) Revalued net assets of Moon Ltd.as on 31 st March, 2024
` in lakhs ` in lakhs
Property, plant and equipment [240 x 120%] 288.0
Investments [110 X 90%] 99
Current Assets 140.0
Loans and Advances 30.0
Total Assets after revaluation 557
Less: 15% Debentures 180.0
Current Liabilities 100.0 (280.0)
Equity / Net Worth 277
Star Ltd.’s share of net assets (70% of 277) 193.9
Star Ltd.’s cost of acquisition of shares of
Moon Ltd.
(` 140 lakhs – ` 14 lakhs*) 126.00
Capital reserve 67.9
* Total Cost of 70 % Equity of Moon Ltd. ` 140 lakhs
9
Purchase Price of each share ` 20
Number of shares purchased [140 lakhs /` 20] 7 lakhs
Dividend @ 20 % i.e. ` 2 per share ` 14 lakhs
Since dividend received is for pre-acquisition period, it has been reduced
from the cost of investment in the subsidiary company.
(b) Impact of Revaluation of Plant and Machinery will be as -
`
Book value of Plant and Machinery as on 01-04-2023 2,25,000
(2,25,000-2,02,500) 10%
Depreciation Rate = 22,500/2,25000 x100
2,25,000
Book value of Plant and Machinery as on 01-10-2023 after
six months depreciation @10% (2,25,000-11,250) 2,13,750
Revalued at 2,70,000
Revaluation profit (2,70,000-2,13,750) 56,250
Share of Gamma Limited in Revaluation Profit (80%) 45,000
Share of Minority in Revaluation profit (20%) 11,250
Additional Depreciation on appreciated value to be
charged from post-acquisition profits
(10% of ` 22,5,000 for 6 months) + (10% of ` 2,70,000 for
6 months) less ` 22500 (as already charged) 2,250
Share of Gamma Limited in additional depreciation that will
reduce its share (80%) in post-acquisition profit by 1,800
Share of Minority Interest in additional depreciation 450
Working note:
Percentage of holding:
No. of Shares Percentage
Holding Co. : 24,000 (80%)
Minority shareholders : 6,000 (20%)
TOTAL SHARES : 30,000
6. (a) Yes, one of the characteristics of financial statements is neutrality. To
be reliable, the information contained in financial statement must be
neutral, that is free from bias. Financial Statements are not neutral if by
the selection or presentation of information, the focus of analysis could
shift from one area of business to another thereby arriving at a totally
different conclusion on the business results.
10
Or
Effects of each transaction on Balance sheet of the trader is shown
below:
Assets Liabilities Equity
Transactions – =
` lakh ` lakh ` lakh
Opening 16.00 – 6.00 = 10.00
(1) Dividend earned 16.40 – 6.00 = 10.80
(2) Settlement of 15.40 - 4.60 = 10.80
Creditors
(3) Rent Outstanding 15.40 – 4.80 = 10.60
(4) Drawings 15.22 – 4.80 = 10.42
(b) Journal Entries
` `
2022 Equity Share Capital A/c Dr. 4,00,000
June To Equity Stock A/c 4,00,000
(Being conversion of 4,000 fully
paid Equity Shares of ` 100 into
` 4,00,000 Equity Stock as per
resolution in general meeting
dated…)
2023
June Equity Stock A/c Dr. 4,00,000
To Equity Share Capital A/c 4,00,000
(Being re-conversion of
` 4,00,000 Equity Stock into
40,000 shares of ` 10 fully paid
Equity Shares as per resolution
in General Meeting dated...)
(c) Books of Harrison
Branch Stock Account
` `
To Balance b/d – Op 30,000 By Branch Debtors 1,65,000
Stock (Sales)
To Goods Sent to 2,40,000 By Branch Cash 59,000
Branch A/c
To Branch 2,000 By Balance c/d
Adjustment A/c
11
(Balancing Figure Goods in Transit
– Excess of Sale (` 2,40,000 – 20,000
over Invoice Price) ` 2,20,000)
Closing Stock at 28,000
Branch
2,72,000 2,72,000
Branch Debtors Account
` `
To Balance b/d 32,750 By Bad debts written off 750
To Branch Stock 1,65,000 By Branch Cash (bal. fig.) 1,71,000
A/c (Sales)
By Balance c/d 26,000
1,97,750 1,97,750
12

PAPER – 2: CORPORATE AND OTHER LAWS
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
PART I – Case Scenario based MCQs (30 Marks)
Part I is compulsory
Case Scenario 1
ACC Private Limited was incorporated in July 2001. Its shares are listed on BSE
and NSE. It is registered with an authorised share capital of ` 20 crore divided into
2 crore equity shares of ` 10/- each. The paid-up share capital of the company is
` 10 crore divided into 1 crore equity shares of ` 10/- each.
The Board of Directors of the company in their meeting held on 11th August, 2023
declared interim dividend. The Annual General Meeting of the company was held
on 1st September, 2023. The company had incurred losses in the previous financial
year as well as in the current financial year upto the period ended June 30, 2023.
In the previous five financial years, the company had declared the dividend as
under:
Financial Year Dividend declared per Dividend declared
Ended share (`) rate (%)
March 31, 2023 Nil Nil
March 31, 2022 1.00 10%
March 31, 2021 1.10 11%
March 31, 2020 1.30 13%
March 31, 2019 1.20 12%
The company has deposited the amount of dividend declared in a separate account
with ABC Bank on August 14, 2023. Out of the total dividend declared, ` 60,000
payable to few equity shareholders remains unclaimed even after the expiry of
statutory period within which dividend was required to be paid and had been
transferred to a separate bank account Unpaid Dividend Account on 20th
September 2023. The company prepares a statement containing the names of
shareholders, their last known address and the unpaid dividend amount to such
each shareholder and place on its website.
1
Meanwhile, the company obtained a term loan of ` 15 crore from Laxmi Bank
Limited on August 20, 2023, securing it with a charge on the company's assets,
including its own buildings (in India and Germany) and intangible assets (trademark
right over the company’s logo). According to the Companies Act, 2013, the
company was required to register this charge with the Registrar within a specified
timeframe. However, the company failed to complete the registration process within
the prescribed timeline.
The Board of Directors has requested their Company Secretary to confirm them
whether they are required to incur expenditure towards Corporate Social
Responsibility during the financial year 2023-2024 and is required to constitute
CSR committee.
The financial particulars in respect of immediately preceding financial year are as
under:
S. No. Particulars Amount (` in crore)
1 Net worth 100
2 Turnover 1010
3 Net Profit 4.9
4 Borrowings 60
On the basis of above facts and by applying applicable provisions of the Companies
Act, 2013 and the applicable Rules therein, choose the correct answer (one out of
four) of the following Multiple Choice Questions (MCQs 1-5) given herein under: -
1. The company can create charge in favour of the lender on the assets which
are:
(a) Tangible Assets and situated in India only
(b) Intangible Assets and situated in India only
(c) Assets that are tangible or otherwise and situated in India or Germany
(d) Assets that are tangible or otherwise and situated in India only
2. The maximum rate at which interim dividend can be declared by the Board
during the current financial year is as under: -
(a) The board cannot declare the interim dividend at a rate higher than the
average dividend declared by the company immediately during
preceding two financial years, i.e. 5%.
(b) The board cannot declare the interim dividend at a rate higher than the
preceding three financial years, i.e. 7%.
(c) The board cannot declare the interim dividend at a rate higher than the
preceding four financial years, i.e. 8.5%.
(d) The board cannot declare the interim dividend at a rate higher than the
preceding five financial years, i.e. 9.2%.
2
3. In respect of dividend declared which of the Statement is not correct?
(a) The company has transferred the dividend amount to separate bank
account within 5 days from the date of declaration of dividend.
(b) The company is required to pay dividend within 30 days from the date of
declaration of dividend.
(c) The company is required to transfer the Unpaid dividend to a separate
bank account within 10 days from the date of expiry of statutory period
from the date of declaration of dividend.
(d) The company is required to prepare a statement containing the names
of shareholders, their last known address and the unpaid dividend
amount to such each shareholder and place on its website within 90 days
from the date of transferring the amount to Unpaid Dividend Account.
4. Choose the correct option in terms that whether the provisions of Corporate
Social Responsibility are applicable to ACC Private Limited.
(a) The provisions of Corporate Social Responsibility are not applicable to
ACC Private Limited as it is a private limited company.
(b) Yes, as ACC Private Limited is having turnover of more than ` 1000
crore.
(c) Yes, as ACC Private Limited is having net profit of more than ` 2.5 crore
in the immediately preceding financial year.
(d) Yes, as ACC Private Limited is having net worth of more than ` 50 crore
in the immediately preceding financial year.
5. The notice for the Annual General Meeting should be served by:
(a) 6th August 2023
(b) 7th August 2023
(c) 8th August 2023
(d) 10th August 2023
Case Scenario 2
Sudeep and Ankit are very fast friend since long. They decided to run a service unit
which will provide “Financial and Investment Consultancy Services”. For this
purpose they formed a limited liability partnership under the name M/s Etharkkum
Advisors LLP on 17th April 2020. For this purpose, they prepared a Limited Liability
Partnership Deed of which one of the clauses provides that a new partner may be
admitted in the LLP with capital contribution which may be in kind or cash. Further
new partner is also required to deposit the agreed amount of capital contribution
within six months from the date of his admission.
After some time, office of the firm was destroyed due to an earthquake and the LLP
was in urgent need of an office premises and some funds for some renovation work.
It is also informed that M/s Etharkkum Advisors LLP approached Manoj on
1st January 2023 to join the firm as third partner. Manoj was out of India for the
period from 1st September 2021 to 23rd December 2022. He agreed to join the LLP
3
and also agreed to contribute his office premises at Sanjay Place, Palwal and funds
of ` 5,00,000 as Capital Contribution in the firm. Manoj joined the firm on 25th
January 2023 as limited liability partner. The above said office premises was
purchased by Manoj five years ago for ` 25,00,000 but the fair market value of this
office on 25th January 2023 was ` 32,25,000 and on 1 st January 2023 was
` 30,00,000. Manoj has provided his office to the firm with effect from his admission
and promised to deposit the agreed amount of ` 5,00,000 within six months as
provided in the partnership deed. Before Manoj could deposit the amount with the
firm, it was dissolved. Manoj denied to deposit the amount of ` 5,00,000 with the
contention that he is liable only upto the amount contributed in the firm on the date
of dissolution. A creditor of the firm sued Manoj to deposit the said amount so that
the firm may pay off his liability.
On the basis of above facts and by applying applicable provisions of the Limited
Liability Partnership Act, 2008 and the applicable Rules therein, choose the correct
answer (one out of four) of the following Multiple Choice Questions (MCQs 6-9)
given herein under: -
6. Whether Manoj could be considered as resident or not as per the Limited
Liability Act, 2008?
(a) Manoj could not be considered resident in India as he was not in India
for 182 days in preceding one year
(b) Manoj could not be considered resident in India as he was not in India
for 120 days in preceding one year i.e. only for 33 days from 24th
December 2022 to 25 th January 2023
(c) Manoj could not be considered as he was not in India for 182 days during
the financial year
(d) Manoj will be considered as resident in India as he was in India for 120
days during the financial year (2021- 2022)
7. What would be the worth of Capital Contribution by Manoj?
(a) ` 25,00,000
(b) ` 32,25,000
(c) ` 37,25,000
(d) ` 35,00,000
8. Whether Manoj will be liable to contribute ` 5,00,000 after dissolution of the
firm?
(a) Yes, because a partner is personally liable for the deficiency arising at
the time of dissolution of LLP.
(b) No, because a partner is never personally liable for the deficiency arose
at the time of dissolution of LLP.
(c) Yes, the partner is under obligation to contribute money also to LLP as
per the agreement.
(d) No, because a partner is personally liable only upto the amount
contributed to the LLP on the date of dissolution of LLP.
4
9. Finload Limited wants to raise funds for its upcoming project. Accordingly, it
has issued private placement offer letters for issuing equity shares to 57
persons, of which six are qualified institutional buyers and remaining are
individuals.
Choose the correct statement as per the provisions of the Companies Act,
2013:
(a) Finload Limited company is a public limited company hence it can not
issue shares through private placement.
(b) Since, Finload Limited has made an offer or invitation to more than the
prescribed number of persons, it shall be deemed to be an offer to the
public and accordingly, it shall be governed by the provisions relating to
prospectus.
(c) Finload Limited has made an offer or invitation to less than the
prescribed number of persons as qualified institutional buyers are not
counted to calculate the prescribed limit.
(d) Finload Limited cannot issue shares to qualified institutional buyers, as
under private placement shares cannot be issued to qualified
institutional buyers.
10. Company X, a leading automobile manufacturer, has invested in Company Y,
a start-up specializing in electric vehicle technology. Company X holds a 25%
stake in Company Y and actively participates in its strategic decisions. Based
on the provisions of the Companies Act 2013 regarding associate companies,
which of the following statements is correct?
(a) Company X's investment in Company Y does not qualify as an associate
company because Company X does not have control of at least 50% of
the total voting power.
(b) Company Y qualifies as an associate company of Company X since
Company X holds a 25% stake in Company Y and actively participates
in its strategic decisions.
(c) Company Y cannot be considered an associate company of Company X
because it is a start-up and does not meet the minimum criteria for
significant influence.
(d) Company X's investment in Company Y falls under the category of joint
venture and does not qualify as an associate company according to the
Companies Act 2013.
Case Scenario 3
M/s Aryan & Aryan LLP was registered on 2 nd July 2019. Sudeep and Ankit were
partners in the firm. Both Sudeep and Ankit were also the designated partners in
this firm. The LLP deals in manufacturing and trading of electric ceiling fans. One
day Sudeep met with Mr. Kishore, a director of Krtiken Electronics Private Limited.
After discussion, Mr. Kishore showed interest that Krtiken Electronics Private
Limited may work with M/s Aryan & Aryan LLP as partner.
5
Krtiken Electronics Private Limited was incorporated on 1 st June 2017 with the
object to deal in electronics. The memorandum and articles of association of Krtiken
Electronics Private Limited also authorised it to work as partner in a LLP.
The partners of M/s Aryan & Aryan LLP and directors of Krtiken Electronics Private
Limited approached a professional consultant Mrs. Archika Jain for providing the
procedure for adding Krtiken Electronics Private Limited as a partner in M/s Aryan
& Aryan LLP. She advised that Krtiken Electronics Private Limited could not be the
partner in M/s Aryan & Aryan LLP because as per Limited Liability Partnership Act
2008, an individual or a body corporate can be a partner in LLP. She informed that
the term ‘body corporate’ was defined in the Limited Liability Partnership Act, 2008
as a company which is defined in section 3 of the Companies Act, 1956. As Krtiken
Electronics Private Limited is registered under Companies Act 2013, it cannot be
termed as body corporate. On the advice of Mrs. Archika Jain, M/s Aryan & Aryan
LLP dropped the idea to add Krtiken Electronics Private Limited.
It is further informed that Ms. Shanaya was admitted as a new partner in the firm
on 17th January 2024. The firm intimated the registrar about her admission on
31st January 2024. On 3rd February 2024, while going to office Ms. Shanaya met
with an accident and lost her memory. The doctor declared her of unsound mind to
work as partner in M/s Aryan & Aryan LLP. It was also confirmed by a competent
court.
On the basis of above facts and by applying applicable provisions of the General
Clauses Act, 1897 therein, choose the correct answer (one out of four) of the
following MCQs (11-13) given herein under:-
11. Whether Krtiken Electronics Private Limited could be partner in M/s Aryan &
Aryan LLP?
(a) No, as Krtiken Electronics Private Limited is not a body corporate as per
the definition of “Body Corporate” given in Limited Liability Partnership
Act, 2008.
(b) Yes, because section 8 of the General Clauses Act, 1897 provides where
any Act or Regulation made after the commencement of this Act, repeals
and re-enacts, with or without modification, any provision of a former
enactment, then references in any other enactment or in any instrument
to the provision so repealed shall, unless a different intention appears,
be construed as references to the provision so re-enacted. Therefore,
after the enactment of Companies Act, 2013, the definition of “Body
Corporate” should be construed as a company which is defined in
section 2(20) of the Companies Act, 2013.
(c) No, as provisions of section 8 of the General Clauses Act, 1897 will not
be applicable because the Limited Liability Partnership (Amendment)
Act, 2021, which amended the definition of “Body Corporate” considering
the company registered under Companies Act, 2013, come to effect from
01.04.2022.
(d) Yes, as the provisions of the General Clauses Act, 1897 are not
applicable while interpreting the provisions of the Limited Liability
Partnership Act, 2008.
6
12. Following the provisions of Limited Liability Act, 2008 read with the General
Clauses Act, 1897, what should be the last date to inform the registrar about
the admission of Ms. Shanaya.
(a) 15th February 2024
(b) 16th February 2024
(c) 17th February 2024
(d) 18th February 2024
13. What would be the status of Ms. Shanaya in the firm, M/s Aryan & Aryan LLP
after the accident?
(a) She would continue as a partner in M/s Aryan & Aryan LLP even after
being declared as of unsound mind.
(b) Section 24(2) of the Limited Liability Partnership Act, 2008 provides that
a person shall cease to be a partner of a LLP if he is declared to be of
unsound mind by a competent court. As this sub – section provides only
for male person (“he”), she would continue as a partner in M/s Aryan &
Aryan LLP.
(c) Following the provisions of the General Clauses Act, 1897 which
provides that in all legislations and regulations, unless there is anything
repugnant in the subject or context words importing the masculine
gender shall be taken to include females. Hence, Ms. Shanaya will cease
to be a partner M/s Aryan & Aryan LLP.
(d) She can continue as partner if all other partners agree for that.
14. HBL Private Limited is a project engineering, procurement and construction
company. The company has bagged a contract from the Government of State
of Tamil Nadu for construction of Water Dam. The company has involved a
project consultancy firm situated in Netherlands for preparing techno-
economic feasibility report to enable it to start construction work of dam. The
company had paid USD 7,000,000 to vendor of Netherlands.
The company also availed the services of Software Company situated in UK
for the migration of its accounting software from SAP to Oracle for which the
Company had paid USD 2,000,000 to the software company.
Considering the provisions of Foreign Exchange Management Act, 1999,
which of the below mentioned statement is correct:
(a) The company can make payment of USD 7,000,000 and USD 2,000,000
without any approval.
(b) The company can make payment of USD 7,000,000 without any
approval and USD 2,000,000 after obtaining prior approval of the
Reserve Bank of India (RBI).
(c) The company can make payment of USD 7,000,000 and USD 2,000,000
after obtaining prior approval of RBI.
(d) The company can make payment of USD 7,000,000 after obtaining prior
approval of RBI and USD 2,000,000 without any approval.
7
15. Ms. Shalini Gupta had enrolled her for management course of three years with
IIM, Ahmedabad. Out of three years, two years of educational course would
be provided at the campus of IIM, Ahmedabad and one year of educational
course would be provided at University of Auckland under student exchange
program. Ms. Shalini Gupta is required to pay tuition fee of `10 lakh directly
to IIM, Ahmedabad for two years course and USD 200,000 to University of
Auckland.
Ms. Shalini had left India on 20th August 2022 to complete her degree from
University of Auckland. In the last month of final year of the course, she got
an offer from one of the reputed company situated in Auckland and had
accepted the offer and she decided to work there. On 1st September 2023,
Ms. Shalini had visited India for 30 days to meet her family and on 1st October
2023 had left India to carry on her employment.
Considering the provisions of Foreign Exchange Management Act, 1999,
which of the below mentioned options correctly determined the residential
status of Ms. Shalini Gupta:
(a) Ms. Shalini Gupta to be treated as resident in India for Financial Year
(FY) 2023-2024 and FY 2024-2025.
(b) Ms. Shalini Gupta to be treated as resident in India for FY 2022-2023
and FY 2023-2024.
(c) Ms. Shalini Gupta to be treated as non-resident for FY 2023-2024 and
FY 2024-2025 as she left India for higher studies.
(d) Ms. Shalini Gupta to be treated as resident in India for FY 2023-2024
since she stays in India for more than 182 days and non-resident for
FY 2024-2025.
PART – II Descriptive Questions (70 Marks)

Question No.1 is compulsory.
Attempt any Four questions out of the remaining Five questions.
1. (a) Cross Limited is a company incorporated under the erstwhile the
Companies Act, 1956 while XYZ Private Limited is a company registered
under the Companies Act, 2013. XYZ Private Limited has issued
` 1,00,000 convertible preference shares (carrying right to vote) of ` 100
each and 10,00,000 equity shares of ` 10 each fully paid. Cross Limited
is holding all the preference share and 1,00,000 equity shares of XYZ
Private Limited. Examine whether:
(i) The provisions of the Companies Act, 2013 are applicable on Cross
Limited?
(ii) XYZ Private Limited is a public company as per the Companies Act,
2013? (5 Marks)
(b) HelpIndia Limited was incorporated on 1st April 2022. The balances
extracted from its audited financial statement are as given below:
8
Financial Year Net Profit before Net Profit after tax (Ignore
(FY) tax Income Tax computation)
2022-23 ` 11.00 crore ` 4 crore
2023-24 ` 10.00 crore ` 5 crore
HelpIndia Limited is considering allocating the minimum required amount
for Corporate Social Responsibility (CSR) activities to be undertaken
during the financial year 2024-25, provided it is mandatory to do so. They
seek advice on this matter.
Furthermore, HelpIndia Limited requests assistance in calculating the
minimum amount to be allocated, if necessary, considering the relevant
provisions outlined in the Companies Act, 2013. (5 Marks)
(c) Mr. Rohan Sharma, an international cricket player has started its cricket
academy, namely, Rohan Sharma Cricket Academy, a private coaching
club, which provides coaching for cricket. The Academy has a cricket
team which participates in cricket matches all over India as well as
outside India.
Rohan Sharma Cricket Academy in a collaboration with Melbourne
Cricket Academy is organizing a cricket event in Melbourne, Australia in
the month of May 2024 and June 2024. Rohan Sharma Academy is
required to remit USD 200,000 to Melbourne Cricket academy as a part
of its share for organizing the cricket event in Melbourne. Advise whether
it can get Foreign Exchange and if so, under what conditions?
(4 Marks)
2. (a) Explain the following as per the provisions of the Companies Act, 2013:
(i) Abridged Form of Annual Return
(ii) Signing of Annual Return (5 Marks)
(b) APR Limited, a company renowned for manufacturing various types of
mats, has established a strong brand presence and garnered a
commendable reputation over the years. As of March 31, 2023, its
Balance Sheet reflects the following financial position:
1. Authorized Share Capital (25,00,000 equity shares of ` 10/- each)
` 2,50,00,000
2. Issued, subscribed and paid-up Share Capital (10,00,000 equity
shares of ` 10/- each, fully paid-up) ` 1,00,00,000
3. Free Reserves ` 3,00,00,000
The Board of Directors intends to propose a bonus issue wherein
existing shareholders would receive 1 additional share for every 2 shares
held. The Board wants to know the conditions and the manner of issuing
bonus shares under the provisions of the Companies Act, 2013.
(5 Marks)
9
(c) Explain the following with reference to the provisions of the General
Clauses Act, 1897:
(i) Movable Property
(ii) Oath (4 Marks)
3. (a) Explain the provisions of the Companies Act, 2013- who can get a
licence to operate as a section 8 company (non profit organization)?
(5 Marks)
(b) Wood Limited has received ` 4,00,000 as a non-interest bearing security
deposit under a contract of employment, from its employee Mr. Cotton.
Mr. Cotton draws an annual salary of ` 3,85,000.
Analyse under the provisions of the Companies Act, 2013, whether the
said amount received by Wood Limited will be considered as deposits or
not. (5 Marks)
(c) Explain interpretation of statute aid- ‘Read the Statute as a Whole’.
(4 Marks)
4. (a) Crystal Limited recently received a communication from the Central
Government requesting the preparation of periodical financial results
along with the completion of either a full audit or a limited review of these
financial results. The Board of Directors, however, has raised an
objection, arguing that Crystal Limited, being an unlisted company, are
not obligated to prepare periodical financial results.
Analyze the situation, citing relevant provisions of the Companies Act,
2013, with respect to the company's obligation regarding the preparation
of periodical financial results. (5 Marks)
(b) Mr. Prateek (an individual) has started a Limited Liability Partnership firm
along with Brown Limited and Picture Limited. As per the provisions of
the Limited Liability Partnership Act, 2008, advise Limited Liability
Partnership firm, about who can be the designated partners of the firm.
(5 Marks)
(c) In what way is ‘Heading and Title of a Chapter’ considered as internal
aid in the interpretation of statutes. (4 Marks)
5. (a) Enumerate the circumstances in which a Limited Liability Partnership
may be wound up by the Tribunal. Give your answer in respect of the
provisions of the Limited Liability Partnership Act, 2008. (5 Marks)
(b) Kesar Limited, an unlisted company furnishes the following data:
(a) Paid-up share capital as on 31 st March 2024 ` 49 Crore.
(b) Turnover for the year ended 31st March 2024 ` 100 Crore
(c) Outstanding loan from bank as on 3rd March 2024 is ` 102 crore
(` 105 Crore loan obtained from bank) and the outstanding balance
as on 31st March 2024 ` 95 crore after repayment.
10
Considering the above scenario and in accordance with the provisions
outlined in the Companies Act, 2013, determine whether Kesar Limited
is required to appoint an Internal Auditor during the financial year
2024-2025. (5 Marks)
(c) Sheesham Limited is a company engaged in the business of
manufacturing premium quality furniture in the state of Tamil Nadu. In
light of the provisions outlined in the General Clauses Act, 1897, and the
Companies Act, 2013, please advise on the specific timelines regarding
the payment of dividends subsequent to its declaration at the Annual
General Meeting (AGM) held on 8 th August 2023. (4 Marks)
6. (a) Explain the provisions of the Companies Act, 2013, in respect of
‘Inspection of Register of Charges and Instrument of Charges’.
(5 Marks)
OR
(a) Enumerate the provisions of the Companies Act, 2013 in respect to the
following:
(i) Matters not to be included in the minute, as per the opinion of the
Chairman.
(ii) Maximum time allowed for entering minutes of proceedings.
(5 Marks)
(b) What are the documents that must be annexed to a prospectus offering
for subscription in securities of a company incorporated or to be
incorporated outside India, as per the Companies (Registration of
Foreign Companies) Rules, 2014? (5 Marks)
(c) University of Oxford is one of the leading institutes of UK. In the month
of May 2024, they are planning a cultural event in UK. The University
has invited Ms. Kanika Tripathi and her group, an Indian artist to perform
in the event.
Ms. Kanika Tripathi needs to withdrawal foreign exchange of
USD 75,000 for the purpose of visit to UK for performing at cultural event
of University of Oxford in UK. Advise whether she can withdraw Foreign
Exchange and if so, under what conditions? (4 Marks)
11
Mock Test Paper - Series I: April, 2024

PAPER – 2: CORPORATE AND OTHER LAWS
ANSWER TO PART – I CASE SCENARIO BASED MCQS
1. (c)
2. (b)
3. (c)
4. (b)
5. (a)
6. (d)
7. (c)
8. (c)
9. (b)
10. (b)
11. (b)
12. (b)
13. (c)
14. (b)
15. (c)
ANSWERS OF PART – II DESCRIPTIVE QUESTIONS
1. (a) (i) Section 1 of the Companies Act, 2013, provides that the provisions of
this Act shall apply to companies incorporated under this Act or under
any previous company law. Hence, the provisions of the Companies Act,
2013 are also applicable on Cross Limited.
(ii) According to section 2(71) of the Companies Act, 2013, public company
means a company which is not a private company.
Provided that a company which is a subsidiary of a company, not being
a private company, shall be deemed to be public company for the
purposes of this Act even where such subsidiary company continues to
be a private company in its articles.
According to section 2(87) of the Companies Act, 2013, "subsidiary
company" or "subsidiary", in relation to any other company (that is to say
the holding company), means a company in which the holding company:
(1) controls the composition of the Board of Directors; or
1
(2) exercises or controls more than one-half of the total voting power
either at its own or together with one or more of its subsidiary
companies.
In the given question, total voting power in XYZ Private Limited is:
Particulars Amount in `
Convertible Preference Shares (carrying voting 1,00,00,000
rights)
Equity Shares 1,00,00,000
Total Voting Power 2,00,00,000
Cross Limited holds more than one- half of the total voting power
[(` 10,00,000 equity shares+ ` 1,00,00,000 preference shares)/
` 2,00,00,000]. Therefore, XYZ Private Limited is a subsidiary of Cross
Limited.
Further, in terms of the provisions of section 2(71), XYZ Private Limited
being subsidiary of Cross Limited (a public company), shall also be
deemed to be a public company.
(b) According to section 135(1) of the Companies Act, 2013, every company
net worth of rupees five hundred crore or more, or turnover of rupees
one thousand crore or more or a net profit of rupees five crore or more
during the immediately preceding financial year shall constitute a
Corporate Social Responsibility Committee of the Board.
Further, according to section 135(5), the Board of every company
referred to in sub-section (1), shall ensure that the company spends, in
every financial year, at least two per cent. of the average net profits of
the company made during the three immediately preceding financial
years or where the company has not completed the period of three
financial years since its incorporation, during such immediately
preceding financial years, in pursuance of its Corporate Social
Responsibility Policy.
Also, according to sub-section 9, where the amount to be spent by a
company under sub-section 5 does not exceed fifty lakh rupees, the
requirement for constitution of the Corporate Social Responsibility
Committee shall not be applicable and the functions of such Committee
provided under this section shall, in such cases, be discharged by the
Board of Directors of such company.
Here, the “Net Profit” shall not include such sums as may be prescribed,
and shall be calculated in accordance with the provisions of section 198.
In the instant case,
1. Net Profit before tax of HelpIndia Limited for the FY 2023- 24 is
` 10 crore, hence, HelpIndia Limited is required to constitute a CSR
committee during FY 2024- 25 as the Net profit before tax for the
FY exceeds ` 5 crore.
2
2. Minimum contribution towards CSR will be: 2% of average net
profits since incorporation (HelpIndia Limited was incorporated on
1st April 2022.)
Average Net Profit since incorporation: (` 11 crore + ` 10 crore)/ 2
= ` 10.5 crore
Minimum contribution towards CSR will be: 2% of ` 10.5 crore = ` 0.21
crore or ` 21 lakh.
In the given question, since the amount to be spent by HelpIndia Limited
is not exceeding ` 50 lakh, the requirement for constitution of the
Corporate Social Responsibility Committee shall not be applicable and
the functions of such Committee provided under this section shall, in
such cases, be discharged by the Board of Directors of such company.
(c) Section 5 of the Foreign Exchange Management Act, 1999 provides that
any person may sell or draw foreign exchange to or from an authorized
person if such sale or drawal is a current account transaction. The
Central Government in consultation can, in public interest and in
consultation with Reserve Bank of India, impose reasonable restrictions
for such transactions.
Schedule II of the Foreign Exchange Management (Current Account
Transactions) Rules, 2000 provides that no person shall draw foreign
exchange for a transaction without approval of the Central Government.
One of the transaction included in Schedule II is remittance of prize
money/ sponsorship of sports activity abroad by a person other than
International/ National/ State level sports bodies, if the amount involved
exceeds USD 100,000.
Accordingly, Rohan Sharma Cricket Academy can withdraw foreign
exchange of USD 100,000 as participation fee after obtaining permission
from Ministry of Human Resource Development (Department of Youth
Affairs and Sports) as prescribed in Schedule II of Foreign Exchange
Management (Current Account Transactions) Rules, 2000.
2. (a) (i) Abridged Form of Annual Return
In terms of Second Proviso to Section 91(1) of the Companies Act,
2013, the Central Government may prescribe abridged form of
annual return for One Person Company, small company and such
other class or classes of companies as may be prescribed.
As per Rule 11 (1) One Person Company and small company shall
file the annual return in Form No. MGT-7A.
(ii) Signing of Annual Return
The annual return shall be signed by a director of the company and
the company secretary; and in case, there is no company secretary,
by a company secretary in practice.
In relation to One Person Company, small company and private
company (if such private company is a start-up), the annual return
3
shall be signed by the company secretary, or where there is no
company secretary, by the director of the company.
(b) According to section 63 of the Companies Act, 2013, a company may
issue fully paid-up bonus shares to its members, in any manner
whatsoever, out of:
(i) its free reserves;
(ii) the securities premium account; or
(iii) the capital redemption reserve account.
Provided that no issue of bonus shares shall be made by capitalising
reserves created by the revaluation of assets.
Conditions for issue of Bonus Shares: No company shall capitalise
its profits or reserves for the purpose of issuing fully paid-up bonus
shares, unless—
(i) it is authorised by its Articles;
(ii) it has, on the recommendation of the Board, been authorised in the
general meeting of the company;
(iii) it has not defaulted in payment of interest or principal in respect of
fixed deposits or debt securities issued by it;
(iv) it has not defaulted in respect of payment of statutory dues of the
employees, such as, contribution to provident fund, gratuity and
bonus;
(v) the partly paid-up shares, if any, outstanding on the date of
allotment, are made fully paid-up;
(vi) it complies with conditions as are prescribed by Rule 14 of the
Companies (Share Capital and debentures) Rules, 2014 which
states that the company which has once announced the decision of
its Board recommending a bonus issue, shall not subsequently
withdraw the same.
Further, the company has to ensure that the bonus shares shall not be
issued in lieu of dividend.
For the issue of bonus shares APR Limited will require reserves of
` 50,00,000 (i.e. half of ` 1,00,00,000 being the paid-up share capital),
which is readily available with the company. Hence, after following the
above conditions relating to the issue of bonus shares, the company may
proceed for a bonus issue of 1 share for every 2 shares held by the
existing shareholders.
(c) (i) Movable Property
According to section 3(36) of the General Clauses Act, 1897,
‘Movable Property’ shall mean property of every description, except
immovable property.
Thus, any property which is not immovable property is movable
property. Debts, share, electricity are moveable property.
4
(ii) Oath
According to section 3(37) of the General Clauses Act, 1897, ‘Oath’
shall include affirmation and declaration in the case of persons by
law allowed to affirm or declare instead of swearing.
3. (a) As per section 8 of the Companies Act, 2013, the Central Government
(ROC in its behalf) may grant a licence (to operate as a non profit
organisation) if it is proved to the satisfaction that a person or an
association of persons proposed to be registered under the Companies
Act, 2013, as a limited company:
- has in its objects the promotion of commerce, art, science, sports,
education, research, social welfare, religion, charity, protection of
environment or any such other object;
- intends to apply its profits (if any) or other income in promoting its
objects; and
- intends to prohibit payment of any dividend to its members.
(b) According to Rule 2(1)(c)(x) of the Companies (Acceptance of Deposits)
Rules, 2014, any amount received from an employee of the company not
exceeding his annual salary under a contract of employment with the
company in the nature of non-interest bearing security deposit, is not
considered as deposit .
In the above case, the amount of ` 4,00,000 received by Wood Limited
from Mr. Cotton under the contract of employment with the company
being non-interest bearing security deposit, will be considered as deposit
in terms of sub-clause (x), since the amount is more than his annual
salary of ` 3,85,000.
(c) Read the Statute as a Whole:
It is the elementary principle that construction of a statute is to be made
of all its parts taken together and not of one part only. The deed must be
read as a whole in order to ascertain the true meaning of its several
clauses, and the words of each clause should be so interpreted as to
bring them into harmony with other provisions– if that interpretation does
no violence to the meaning of which they are naturally susceptible. And
the same approach would apply with equal force with regard to Acts and
Rules passed by the legislature.
One of the safest guides to the construction of sweeping general words
is to examine other words of like import in the same enactment or
instrument to see what limitations must be imposed on them. If we find
that a number of such expressions have to be subjected to limitations
and qualifications and that such limitations and qualifications are of the
same nature, that circumstance forms a strong argument for subjecting
the expression in dispute to a similar limitation and qualification.
5
4. (a) Periodical Financial Results [Section 129A of the Companies Act,
2013]
The Central Government may, require such class or classes of unlisted
companies, as may be prescribed:
(a) to prepare the financial results of the company on periodical basis
and in prescribed form
(b) to obtain approval of the Board of Directors and complete audit or
limited review of such periodical financial results in the prescribed
manner; and
(c) file a copy with the Registrar within a period of thirty days of
completion of the relevant period with such fees as may be
prescribed.
Therefore, the objection of the Board of Directors on the ground that as
Crystal Limited is an unlisted company, periodical financial results need
not be prepared, is not correct. Section 129A clearly specifies that even
unlisted company has to prepare Periodical Financial Results.
(b) According to section 7 of the Limited Liability Partnership Act, 2008,
every Limited Liability Partnership (LLP) shall have at least two
designated partners who are individuals and at least one of them shall
be a resident in India.
Provided, if in LLP, all the partners are bodies corporate or in which one
or more partners are individuals and bodies corporate, at least two
individuals who are partners of such LLP or nominees of such bodies
corporate shall act as designated partners.
In the given question, at least Mr. Prateek and one nominee of any
bodies corporate shall be designated partners.
(c) Heading and Title of a Chapter
If we glance through any Act, we would generally find that a number of
its sections referring to a particular subject are grouped together,
sometimes in the form of chapters, prefixed by headings and/or Titles.
These Heading and Titles prefixed to sections or groups of sections can
legitimately be referred to for the purpose of construing the enactment
or its parts.
The headings of different portions of a Statute can be referred to
determine the sense of any doubtful expression in a section ranged
under any particular heading.
They cannot control the plain meaning of the words of the enactment
though, they may, in some cases be looked at in the light of preamble if
there is any ambiguity in the meaning of the sections on which they can
throw light.
It may be noted that headings may sometimes be referred to know the
scope of a section in the same way as the preamble. But a heading
cannot control or override a section.
6
5. (a) Circumstances in which LLP may be wound up by Tribunal [Section
64 of the Limited Liability Partnership Act, 2008]
A LLP may be wound up by the Tribunal:
(1) if the LLP decides that LLP be wound up by the Tribunal;
(2) if, for a period of more than six months, the number of partners of
the LLP is reduced below two;
(3) if the LLP has acted against the interests of the sovereignty and
integrity of India, the security of the State or public order;
(4) if the LLP has made a default in filing with the Registrar the
Statement of Account and Solvency or annual return for any five
consecutive financial years; or
(5) if the Tribunal is of the opinion that it is just and equitable that the
LLP be wound up.
(b) According to the Companies (Accounts) Rules, 2014, every unlisted
public company having:
(A) paid up share capital of ` 50 crore rupees or more during the
preceding financial year; or
(B) turnover of ` 200 crore rupees or more during the preceding
financial year; or
(C) outstanding loans or borrowings from banks or public financial
institutions exceeding ` 100 crore rupees or more at any point of
time during the preceding financial year; or
(D) outstanding deposits of 25 crore rupees or more at any point of time
during the preceding financial year;
shall be required to appoint an internal auditor which may be either an
individual or a partnership firm or a body corporate.
In the given question, Kesar Limited has outstanding loan from bank
exceeding 100 crore rupees i.e., ` 102 crore on 3 rd March 2024 (i.e.
during the preceding financial year 2023-24). Hence, it is required to
appoint Internal Auditor during the year 2024-25.
(c) As per section 9 of the General Clauses Act, 1897, for computation of
time, the section states that in any legislation or regulation, it shall be
sufficient, for the purpose of excluding the first in a series of days or any
other period of time to use the word “from” and for the purpose of
including the last in a series of days or any other period of time, to use
the word “to”.
In the given instance, Sheesham Limited declared dividend for its
shareholder in its Annual General Meeting held on 8 th August 2023.
Under the provisions of section 127 of the Companies Act, 2013, a
company is required to pay declared dividend within 30 days from the
date of declaration, i.e. from 9 th August 2023 to 7th September 2023. In
this series of 30 days, 8 th August 2023 will be excluded and last 30 th day,
i.e. 7th September 2023 will be included. Accordingly, Sheesham Limited
7
will be required to pay dividend within the time frame of 9th August 2023
and 7th September 2023 (both days inclusive).
6. (a) Inspection of Register of Charges and Instrument of Charges
As regards inspection, section 85 (2) of the Companies Act, 2013, states
that the register of charges and the instrument of charges shall be open
for inspection during business hours:
(1) by any member or creditor without any payment of fees; or
(2) by any other person on payment of prescribed fees. subject to such
reasonable restrictions as the company may, by its articles,
impose.
OR
(a) (i) There shall not be included in the minutes, any matter which, in the
opinion of the Chairman of the meeting–
 is or could reasonably be regarded as defamatory of any
person; or
 is irrelevant or immaterial to the proceedings; or
 is detrimental to the interests of the company.
(ii) Maximum time allowed for entering minutes of proceedings: The
minutes of proceedings of each meeting shall be entered in the
books maintained for that purpose along with the date of such entry
within 30 days of the conclusion of the meeting.
(b) According to section 389 of the Companies Act, 2013:
No person shall issue, circulate or distribute in India any prospectus
offering for subscription in securities of a company incorporated or to be
incorporated outside India, whether the company has or has not
established, or when formed will or will not establish, a place of business
in India, unless before the issue, circulation or distribution of the
prospectus in India;
✓ a copy thereof certified by the chairperson of the company and
two other directors of the company as having been approved by
resolution of the managing body has been delivered for
registration to the Registrar; and
✓ the prospectus states on the face of it that a copy has been so
delivered, and
✓ there is endorsed on or attached to the copy, any consent to the
issue of the prospectus required by section 388 and such
documents as may be prescribed.
According to the Companies (Registration of Foreign Companies) Rules,
2014, the following documents shall be annexed to the prospectus,
namely:
8
(1) any consent to the issue of the prospectus required from any
person as an expert;
(2) a copy of contracts for appointment of managing director or
manager and in case of a contract not reduced into writing, a
memorandum giving full particulars thereof;
(3) a copy of any other material contracts, not entered in the ordinary
course of business, but entered within preceding 2 years;
(4) a copy of underwriting agreement; and
(5) a copy of power of attorney, if prospectus is signed through duly
authorized agent of directors.
(c) Section 5 of the Foreign Exchange Management Act, 1999 provides that
any person may sell or draw foreign exchange to or from an authorized
person if such sale or drawal is a current account transaction. The
Central Government in consultation can, in public interest and in
consultation with Reserve Bank of India, impose reasonable restrictions
for such transactions.
Schedule II of the Foreign Exchange Management (Current Account
Transactions) Rules, 2000 provides that no person shall draw foreign
exchange for a transaction without approval of the Central Government.
One of the transaction included in Schedule II is ‘cultural tours’.
Accordingly, Ms. Kanika Tripathi can withdraw foreign exchange of
USD 75,000 for meeting expenses of cultural tour after obtaining
permission from Ministry of Human Resource Development (Department
of Education and Culture) as prescribed in Schedule II of Foreign
Exchange Management (Current Account Transactions) Rules, 2000.
9

PAPER – 3: TAXATION
SECTION – A: INCOME TAX LAW (50 MARKS)
Working Notes should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of a note.
However, in answers to Questions in Division A, working notes are not
required.
The relevant assessment year is A.Y.2024-25.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are
compulsory.
1. Mr. Pankaj, an Indian resident, purchased a residential house property at
Kanpur on 20.08.1998 for ` 20.5 lakhs. The fair market value and the stamp
duty value of such house property as on 1.4.2001 was ` 28.5 lakhs and ` 25
lakhs, respectively. On 05.02.2016, Mr. Pankaj entered into an agreement
with Mr. Gyan for the sale of such property for ` 61 lakhs and received an
amount of ` 2.5 lakhs as advance. However, as Mr. Gyan did not pay the
balance amount, Mr. Pankaj forfeited the advance.
On 10.05.2023, Mr. Pankaj sold the house property to Mr. Rohan for ` 1.50
crores, when the stamp duty value of the property was ` 2 crores. Further,
he purchased two residential house properties at Delhi and Mumbai for ` 57
lakhs each on 28.09.2024. Mr. Pankaj has no other income during the
P.Y. 2023-24.
On 31.01.2025, Mr. Pankaj decided to sell the house property at Mumbai to
his brother, Mr. Gaurav, for ` 58 lakhs, from whom ` 25,000 was received in
cash on 15.01.2025 as advance for signing the agreement to sale. Sale
deed was registered on 30.03.2025 on receipt of the balance amount
through account payee cheque from Mr. Gaurav. The stamp duty value of
house property at Mumbai on 31.01.2025 and 30.03.2025 was ` 61 lakhs
and ` 64 lakhs, respectively.
Cost inflation index –
P.Y. 2023-24: 348; P.Y. 2015-16: 254; P.Y. 2001-02: 100
1
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) What shall be the indexed cost of acquisition of residential house
property at Kanpur for computation of capital gains in the hands of
Mr. Pankaj?
(a) ` 78,30,000
(b) ` 87,00,000
(c) ` 90,48,000
(d) ` 99,18,000
(ii) The amount of capital gains taxable for A.Y. 2024-25 in the hands of
Mr. Pankaj for sale of residential house property at Kanpur is -
(a) Nil
(b) (` 1,00,000)
(c) ` 63,00,000
(d) ` 1,13,00,000
(iii) The amount of capital gains taxable for A.Y. 2025-26 in the hands of
Mr. Pankaj for sale of residential house property at Mumbai is -
(a) ` 8 lakhs
(b) ` 7 lakhs
(c) ` 4 lakhs
(d) ` 1 lakh
(iv) The amount taxable under section 56(2)(x) in the hands of Mr. Gaurav,
if any, is -
(a) Nil
(b) ` 1 lakh
(c) ` 3 lakhs
(d) ` 6 lakhs
(v) What shall be the tax credit available with Mr. Pankaj with respect to
sale of property at Kanpur during P.Y. 2023-24 assuming the tax was
fully deducted by Mr. Rohan?
(a) ` 2,00,000
(b) ` 1,50,000
(c) ` 1,00,000
(d) ` 87,000
(vi) Is Mr. Pankaj required to file his return of income for A.Y. 2024-25?
(a) Yes, since his total income exceeds the basic exemption limit
2
(b) No, since his total income does not exceed the basic exemption
limit
(c) Yes, since tax deducted in his case exceeds ` 25,000
(d) Yes, since his total income before exemption under section 54
exceeds the basic exemption limit (6 x 2 = 12 Marks)
2. Mrs. Deepika, wife of Mr. Santosh, started a business of trading in beauty
products on 15.7.2023. She invested ` 5 lakhs in the business on 15.7.2023
out of gift received from her husband, Mr. Santosh. She invested ` 4 lakhs
from her own savings on the same date. She earned profits of ` 9,00,000
from her business for the financial year 2023-24. Which of the following
statements is correct?
(a) Share of profit of ` 9,00,000 is includible in the hands of Mrs. Deepika
(b) Share of profit of ` 5,00,00 is includible in the hands of Mr. Santosh
and share of profit of ` 4,00,000 is includible in the hands of
Mrs. Deepika
(c) Share of profit of ` 4,00,000 is includible in the hands of Mr. Santosh
and share of profit of ` 5,00,000 is includible in the hands of
Mrs. Deepika
(d) Share of profit of ` 9,00,000 is includible in the hands of Mr. Santosh
(2 Marks)
3. Mr. X, a resident 47 years, has salary income (computed) of ` 7,25,000 and
agricultural income of ` 1,00,000 for the P.Y. 2023-24. Compute his tax
liability for A.Y. 2024-25 if he is paying tax under default tax regime under
section 115BAC.
(a) ` 26,000
(b) ` 33,800
(c) Nil
(d) ` 30,160 (1 Mark)
Division B – Descriptive Questions

Question No. 1 is compulsory.
Attempt any two questions from the remaining three questions.
1. Mr. Sunil, aged 48 years, a resident Indian has furnished the following
particulars for the year ended 31.03.2024:
(i) He occupies ground floor of his residential building and has let out first
floor for residential use at an annual rent of ` 2,95,000. He has paid
municipal taxes of ` 25,000 for the current financial year. Both these
floors are of equal size.
3
(ii) As per interest certificate from HDFC bank, he paid ` 1,50,000 as
interest and ` 80,000 towards principal repayment of housing loan
borrowed for the above residential building in the year 2018.
(iii) He owns an industrial undertaking established in a SEZ and which had
commenced operation during the financial year 2019-20. Total turnover
of the undertaking was ` 400 lakhs, which includes ` 150 lakhs from
export turnover. Out of ` 150 lakhs, only ` 120 lakhs have been
received in India in convertible foreign exchange on or before
30.9.2024. This industrial undertaking fulfills all the conditions of
section 10AA of the Income-tax Act, 1961. Profit from this industry is
` 40 lakhs.
(iv) He employed 20 new employees for the said industrial undertaking
during the previous year 2023-24. Out of 20 employees, 12 were
employed on 1st May 2023 for monthly emoluments of ` 18,000 and
remaining were employed on 1 st September 2023 on monthly
emoluments of ` 12,000. All these employees participate in recognised
provident fund and they are paid their emoluments directly to their bank
accounts.
(v) He earned ` 30,000 and ` 40,000 as interest on saving bank deposits
and fixed deposits, respectively.
(vi) He also sold his vacant land on 01.12.2023 for ` 15 lakhs. The stamp
duty value of land at the time of transfer was ` 16 lakhs. This land was
acquired by him on 15.10.1998 for ` 2.80 lakhs. The FMV of the land
as on 1st April, 2001 was ` 4.8 lakhs and Stamp duty value on the said
date was ` 4 lakhs. He had incurred registration expenses of
` 12,000 at that time.
The cost of inflation index for the financial year 2023-24 and 2001-02
are 348 and 100, respectively.
(vii) He paid insurance premium of ` 40,000 towards life insurance policy of
his son, who is not dependent on him.
You are requested to compute total income and tax liability of
Mr. Sunil for the Assessment Year 2024-25, in the manner so that he can
make maximum tax savings. (15 Marks)
2. (a) Mrs. Sia D’Souza is an American, got married to Mr. Kabir of India in
New York on 14.02.2023 and came to India for the first time on
18.03.2023. She left for Australia on 16.08.2023. She returned to India
again on 23.03.2024.
On 01.04.2023, she had purchased a Flat in Mumbai, which was let out
to Mr. Sameer on a rent of ` 26,000 p.m. from 1.6.2023. She had taken
loan from an Indian bank for purchase of this flat on which bank had
charged interest of ` 2,05,000 upto 31.03.2024.
While in India, during the previous year 2023-24, she had received a
gold chain from her in laws worth ` 1,50,000 and ` 1,65,000 from very
close friends of her husband.
4
From the information given above, you are required to determine her
the residential status and compute her total income chargeable to tax
for the Assessment Year 2024-25 assuming she has shifted out of the
default tax regime under section 115BAC. (6 Marks)
(b) Briefly discuss the provisions of tax deduction/collection at source
under the Income-tax Act, 1961 and determine the amount, if any, of
TDS and TCS in respect of the following payments:
(i) Mr. Harish bought an overseas tour programme package for
Switzerland for himself and his family of ` 10 lakhs on 01-11-2023
from an agent who is engaged in organising foreign tours in
course of his business. He made the payment by an account
payee cheque and provided the permanent account number to the
seller.
(ii) Mr. Aditya pays ` 55,00,000 during F.Y. 2023-24 to Mr. Naresh,
for supply of labour, for carrying out the construction work of his
factory. During the P.Y. 2022-23, Mr. Aditya’s turnover was ` 95
lakhs. (4 Marks)
3. (a) Ms. Priyanka, General Manager of ABC Ltd., Mumbai, furnishes the
following particulars for the financial year 2023-24:
(i) Salary ` 40,000 per month
(ii) Value of medical facility in a hospital maintained by the company
` 10,000
(iii) Rent free accommodation owned by the company
(iv) Housing loan of ` 7,00,000 given on 01.04.2023 at the interest
rate of 6% p.a. (No repayment made during the year). The rate of
interest charged by State Bank of India (SBI) as on 01.04.2023 in
respect of housing loan is 9.5%.
(v) A dining table was provided to Ms. Priyanka at her residence. This
was purchased on 1.6.2020 for ` 60,000 and sold to Ms. Priyanka
on 1.5.2023 for ` 30,000.
(vi) Personal purchases through credit card provided by the company
amounting to ` 10,000 was paid by the company. No part of the
amount was recovered from Ms. Priyanka.
(vii) A Maruti Suzuki car which was purchased by the company on
16.7.2021 for ` 2,50,000 was sold to the assessee on 14.7.2023
for ` 1,60,000.
Other income received by the assessee during the previous year
2023-24:
5
Particulars `
(a) Interest on Fixed Deposits with a company 7,000
(b) Income from specified mutual fund 3,000
(c) Interest on bank fixed deposits of a minor 4,000
married daughter
(viii) Deposit in PPF Account made during the year 2023-24 `40,000
Compute the gross total income of Ms. Priyanka for the Assessment
year 2024-25 if she exercised the option to shift out of the default tax
regime under section 115BAC. (6 Marks)
(b) M/s. Ravi & sons, a partnership firm consisting of two partners, reports
a net profit of ` 7,50,000 before deduction of the following items:
➢ Salary of ` 25,000 each per month payable to two working
partners of the firm (as authorized by the deed of partnership)
➢ Depreciation on plant and machinery under section 32 is
` 2,50,000
➢ Interest on capital 15% per annum (as per the deed of
partnership).
The amount of capital eligible for interest is ` 6,00,000 for both
partners
➢ Carry forward loss of P.Y. 2022-23 - ` 50,000
Compute for A.Y. 2024-25:
(i) Book-profit of the firm under section 40(b) of the Income-tax Act,
1961.
(ii) Amount of salary that can be paid to working partners as per
section 40(b). (4 Marks)
4. (a) The following are the details relating to Mr. Roshan, a resident Indian,
relating to the year ended 31.03.2024
Particulars Amount
(`)
Short term capital gain 1,50,000
Loss from house property [let out property] 2,50,000
Loss from speculative business 50,000
Loss from card games 20,000
Brought forward long term capital loss of A.Y. 2020-21 86,000
Dividend from ABC Ltd. 11,00,000
Loss from tea business 1,06,000
6
Mr. Roshan’s wife, Shamita is employed with Ray Ltd., at a monthly
salary of ` 25,000, where Mr. Roshan holds 21% of the shares of the
company. Shamita is not adequately qualified for the post held by her
in Ray Ltd.
You are required to compute taxable income of Mr. Roshan for the
A.Y. 2024-25 if he has exercised the option to shift out of the default
tax regime under section 115BAC. Ascertain the amount of losses
which can be carried forward. (6 Marks)
(b) In the following cases relating to P.Y.2023-24, the total income of the
assessee or the total income of any other person in respect of which
he/she is assessable under Income-tax Act does not exceed the basic
exemption limit. You are required to state with reasons, whether the
assessee is still required to file the return of income or loss for
A.Y.2024-25 in each of the following independent situations:
(i) Manish & Sons (HUF) sold a residential house on which there
arose a long term capital gain of ` 12 lakhs which was invested in
Capital Gain Bonds u/s 54EC so that no long term capital gain
was taxable.
(ii) Samarth has incurred an expenditure of ` 1,20,000 towards
consumption of electricity, the entire payment of which was made
through banking channels. (4 Marks)
OR
(b) Briefly mention the provisions of Income-tax Act, 1961 with regard to
quoting Aadhaar Number under section 139AA of the Act. (4 Marks)
7
SECTION B – GOODS AND SERVICES TAX (50 MARKS)
QUESTIONS
(i) Working Notes should form part of the answers. However, in answers to
Questions in Division A, working notes are not required.
(ii) Wherever necessary, suitable assumptions may be made by the candidates,
and disclosed by way of notes.
(iii) All questions should be answered on the basis of position of the GST law as
amended by provisions of the CGST Act, 2017 and the IGST Act, 2017 as
amended by the Finance Act, 2023, including significant notifications and
circulars issued, up to 31st October, 2023.
Division A - Multiple Choice Questions (MCQs)
Write the most appropriate answer to each of the following multiple-choice
questions by choosing one of the four options given. All questions are
compulsory.
Total Marks: 15 Marks
Ecotech Solutions Private Limited is engaged in manufacturing and supply of
energy products and solutions across multiple States in India. The Company
manufactures solar panels and also imports certain category of solar panels as per
the customer orders. The company also provides installation services and annual
maintenance contracts for its products.
The Company received an advance payment for a bulk order of goods in March
2024, but the delivery was completed in May 2024. The amount of advance
received by the Company was ` 1 crore.
During the month of March 2024, the Company sold goods worth ` 5 crores and
provided services amounting to ` 1 crore to its customers across India. The goods
worth ` 1 crore sold under multiple invoices were returned by a customer due to
defective quality in the month of March, 2024 which were originally sold by the
Company in December, 2023. The Company issued a GST credit note against the
returned goods in March, 2024.
The Company incurred an amount of ` 5 lakh on the repair of the returned goods
to make them resalable in the market to customers other than a related party.
Further, the customers who returned the goods issued an invoice to Gujarat unit of
the Company of ` 1 lakh for the expense related to return of goods. The goods
were initially sold from the Gujarat unit of the Company but the same were returned
to Maharashtra unit of the Company and subsequently moved by the Company
from Maharashtra unit to Gujarat Unit i.e. the original place of supply. The Company
is registered under GST in both the States i.e. Gujarat and Maharashtra.
Based on the facts of the case scenario given above, choose the most appropriate
answer to Q. Nos. 1 to 6 below:-
1. At what point of time, tax will be payable in relation to the advance received by
the Company of ` 1 crore?
(a) The tax is payable at the time of receipt of advance.
8
(b) The tax is payable at the time of supply of goods.
(c) 50% of tax is payable at the time of receipt of advance.
(d) Tax is payable at the time of issuance of receipt voucher.
2. The total amount of supply during the month of March, 2024 to be reported in
GSTR -1 by the Company is ________.
(a) ` 1 crore
(b) ` 5 crores
(c) ` 6 crores
(d) ` 7 crores
3. Which of the following options is correct in relation to the returned goods of value
` 1 crore ?
(a) Company has an option to issue single credit note against multiple invoices.
(b) Company has to mandatorily issue credit note against each invoice.
(c) The Company cannot issue credit note in any subsequent period after the
supply is made.
(d) The Company can only issue a commercial credit note and GST adjustment
cannot be made.
4. In case returned goods are sold by the Company to customers other than the
related parties, the value of supply of such goods under GST shall be
_________.
(a) equivalent to original value of supply only.
(b) equivalent to original value of supply plus the cost incurred on making the
goods reusable
(c) 110% of original value of supply plus the cost incurred on making the goods
reusable.
(d) transaction value subject to the conditions mentioned in Section 15(2) of
the CGST Act, 2017.
5. Which of the following option(s) is correct in relation to the invoice of 1 lakh issued
by the customer for the expenses relating to returned goods?
(a) The Company shall be eligible to avail full input tax credit.
(b) The Company shall not be allowed to avail input tax credit.
(c) The Company shall not be allowed to avail input tax credit in excess of 50%
of the tax amount charged on such invoice.
(d) The Company shall be allowed to claim input tax credit only if it has not
issued any credit note to the customer against such returned goods.
6. While moving the goods from Maharashtra unit to Gujarat unit by the Company,
goods shall be accompanied by ____________.
(a) Original invoice issued in December, 2023
9
(b) Invoice issued by the returning customer to the Gujarat unit of the Company
(c) Invoice by Maharashtra unit to the Gujarat unit of the Company
(d) Delivery challan issued by the Customer to the Company.
(6 x 2 Marks = 12 Marks)
7. Mr. Jambulal of Himachal Pradesh starts a new business and makes following
supplies in the first month-
(i) Intra-State supply of taxable goods amounting to ` 17 lakh
(ii) Supply of exempted goods amounting to ` 1 lakh
(iii) Inter-State supply of taxable goods amounting to ` 1 lakh
Whether he is required to obtain registration?
(a) Mr. Jambulal is liable to obtain registration as the threshold limit of ` 10
lakh is crossed.
(b) Mr. Jambulal is not liable to obtain registration as he makes exempted
supplies.
(c) Mr. Jambulal is liable to obtain registration as he makes the inter-State
supply of goods.
(d) Mr. Jambulal is not liable to obtain registration as the threshold limit of
` 20 lakh is not crossed. (2 Marks)
8. Simmo Singh, a resident of Punjab, is having a residential property in
Amritsar, Punjab which has been given on rent to a family for ` 72 lakh per
annum for residence purposes. Determine whether Simmo Singh is liable to
pay GST on such rent.
(a) Yes, as services by way of renting is taxable supply under GST.
(b) No, service by way of renting of residential property is exempt.
(c) No, service by way of renting of residential property does not constitute
supply.
(d) Simmo Singh, being individual, is not liable to pay GST. (1 Mark)
Division B - Descriptive Questions

Question No. 1 is compulsory.
Attempt any two questions out of remaining three questions.
Total Marks:35 Marks
1. (a) Mr. Nandan lal, registered under GST, is engaged in supplying services
(as discussed in the table below) in Hyderabad. He has furnished the
following information with respect to the services provided/ received by
him, during the month of February:
10
S. No. Particulars Amount (`)
(i) Carnatic music performance given by 1,40,000
Mr. Nandan lal to promote a brand of
readymade garments
(ii) Outdoor catering services availed for a 50,000
marketing event organised for his
prospective customers
(iii) Services of transportation of students 1,00,000
provided to HSMG College providing
education as part of a curriculum for
obtaining a recognised qualification
(iv) Legal services availed for official purpose 1,75,000
from an advocate located in Chennai (Inter-
State transaction)
(v) Services provided to IFMP Bank as a 2,00,000
business correspondent with respect to
accounts in a branch of the bank located in
urban area
(vi) Recovery agent’s services provided to a car 15,000
dealer
(vii) General insurance taken on a car (seating 40,000
capacity 5) used for official purposes
Note:
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
(ii) All inward and outward supplies are exclusive of taxes, wherever
applicable.
(iii) All the conditions necessary for availing the ITC have been fulfilled.
(iv) The turnover of Mr. Nandan lal was ` 2.5 crore in the previous
financial year.
(v) All the transactions mentioned above are intra-State unless
otherwise specified.
Compute the net GST payable in cash, by Mr. Nandan lal for the month
of February. (10 Marks)
(b) LSP Ltd., a registered supplier, sold a machine to Balwant Ltd. It
provides the following information in this regard: -
S. Particulars Amount
No. (`)
(i) Price of the machine [excluding taxes and other 20,000
charges mentioned at S. Nos. (ii) and (iii)]
(ii) Third party inspection charges 6,000
11
[Such charges were payable by LSP Ltd. but the
same have been directly paid by Balwant Ltd. to
the inspection agency. These charges were not
recorded in the invoice issued by LSP Ltd.]
(iii) Freight charges for delivery of the machine 1,000
[LSP Ltd. has agreed to deliver the goods at
Balwant Ltd.’s premises]
(iv) Subsidy received from the State Government on 5,000
sale of machine under Skill Development
Programme
[Subsidy is directly linked to the price]
(v) Discount of 2% is offered to Balwant Ltd. on the
price mentioned at S. No. (i) above and recorded in
the invoice
Note: Price of the machine is net of the subsidy received.
Determine the value of taxable supply made by LSP Ltd. to Balwant Ltd.
(5 Marks)
2. (a) State the person liable to pay GST in the following independent services
provided:
(i) Sapna Builders, registered in Haryana, rented out 20 residential
units owned by it in Jain Society to Anant Technologies, an IT
based company registered in the State of Haryana, for
accommodation of its employees.
(ii) M/s. Verma Consultants, a partnership firm registered in Delhi as a
regular tax payer, paid sponsorship fees of ` 1,50,000 at a seminar
organized by a private NGO (a partnership firm) in Delhi.
(4 Marks)
(b) “Little Smiles”, a photography firm, has commenced providing
photoshoot services in Delhi from the beginning of current financial year
2023-2024. It has provided the following details of turnover for the
various quarters till December, 2023 :-
S. Quarter Amount
No. (` in lakh)
1 April,2023-June,2023 20
2 July,2023-September,2023 30
3 October,2023-December,2023 40
You may assume the applicable tax rate as 18%. Little Smiles wishes
to pay tax at a lower rate and opts for the composition scheme. You are
required to advise whether it can do so and calculate the amount of tax
payable for each quarter? (6 Marks)
12
3. (a) Mr. Sohan, a trader registered under GST in Delhi is engaged in
wholesale business of toys for kids. Mr. Roshan registered under GST
in Patiala, a regular return filer supplies toys in bulk to Mr. Sohan for
selling to end consumers.
Mr. Sohan paying tax in regular scheme in Delhi, has not filed GSTR-3B
for last 2 months. Mr. Roshan wants to generate e-way bill for toys
amounting to ` 5,00,000 to be supplied to Mr. Sohan. Also Mr. Mohan
from Jammu approached Mr. Sohan for purchasing toys amounting to
` 75,000 for the purpose of return gift on his son’s first birthday party.
Sohan wants to generate an e-way bill in respect of an outward supply
of goods to Mr. Mohan.
Examine with reference to the provisions under GST law, whether
Mr. Roshan and Mr. Sohan can generate e-way bill? (5 Marks)
(b) Mr. Raj of Rajasthan intends to start business of supply of building
material to various construction sites in Rajasthan. He has taken
voluntary registration under GST in the month of April. However, he has
not commenced the business till December due to lack of working
capital. The proper officer suo-motu cancelled the registration of
Mr. Raj. You are required to examine whether the action taken by proper
officer is valid in law?
Mr. Raj has applied for revocation of cancellation of registration after 40
days from the date of service of the order of cancellation of registration.
Department contends that application for revocation of cancellation of
registration can only be made within 30 days from the date of service of
the order of cancellation of registration. You are required to comment
upon the validity of contentions raised by Department. (5 Marks)
4. (a) Discuss briefly the place of supply of goods purchased over the counter
in one State and transported to another State by the buyer. (5 Marks)
Or
(a) What would be the place of supply of services provided by an event
management company for organizing a sporting event for a Sports
Federation which is held in multiple States? (5 Marks)
(b) Discuss whether the amount available in the electronic credit ledger can
be used for making payment of any tax under the GST Laws?
(5 Marks)
13

PAPER – 3: TAXATION
SECTION – A: INCOME TAX LAW
SOLUTIONS
Division A – Multiple Choice Questions
MCQ Sub-part Most Appropriate MCQ Most Appropriate
No. Answer No. Answer
1. (i) (b) 2. (b)
(ii) (d) 3. (a)
(iii) (b)
(iv) (a)
(v) (a)
(vi) (a)
Division B – Descriptive Questions
1. Computation of total income of Mr. Sunil for A.Y. 2024-25 under default
tax regime under section 115BAC
Particulars ` ` `
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received 2,95,000
is taken as GAV, in the absence of
other information]
Less: Municipal taxes paid by him in
the P.Y. 2023-24 pertaining to let out 12,500
portion [` 25,000/2]
Net Annual Value (NAV) 2,82,500
Less: Deduction u/s 24
(a) 30% of ` 2,82,500 84,750
(b) Interest on housing loan 75,000 1,59,750
[` 1,50,000/2]
1,22,750
Self-occupied portion [Ground
Floor]
Annual Value Nil
1
[No deduction is allowable in respect
of municipal taxes paid]
Less: Interest on housing loan [Not Nil
allowable under section 115BAC]
Nil
Income from house property 1,22,750
II Profits and gains of business or
profession
Income from SEZ unit 40,00,000
III Capital Gains
Long-term capital gains on sale of
land (since held for more than 24
months)
Full Value of Consideration [Actual 15,00,000
consideration of ` 15 lakhs, since
stamp duty value of ` 16 lakhs does
not exceed actual consideration by
more than 10%]
Less: Indexed Cost of acquisition
[` 4,00,000 x 348/100] 13,92,000 1,08,000
Cost of acquisition
Higher of -
- Actual cost ` 2.80 lakhs + ` 0.12
lakhs = ` 2.92 lakhs and
- Fair Market Value (FMV) as on
1.4.2001 = ` 4.8 lakhs but cannot
exceed stamp duty value of ` 4
lakhs.
IV Income from Other Sources
Interest on savings bank deposits 30,000
Interest on fixed deposits 40,000 70,000
Gross Total Income 43,00,750
Less: Deduction under Chapter
VI-A
Deduction under section 80JJAA 7,12,800
30% of the employee cost of the new
employees employed during the P.Y.
2023-24 for 240 days or more during
the P.Y. 2023-24 allowable as
deduction [30% of ` 23,76,000 (12 x
18,000 x 11)]
As per section 115BAC, no
deduction under section 10AA or
2
under Chapter VI-A is allowable
except u/s 80JJAA
Total Income 35,87,950
Computation of tax liability of Mr. Sunil under section 115BAC
Particulars ` `
Tax on total income of ` 35,87,950
Tax on LTCG of ` 1,08,000@20% 21,600
Tax on remaining total income of ` 34,79,950
Upto ` 3,00,000 Nil
` 3,00,001 – ` 6,00,000 [@5% of ` 3 lakhs] 15,000
` 6,00,001 – ` 9,00,000 [@10% of ` 3 lakhs] 30,000
` 9,00,001 – ` 12,00,000 [@15% of ` 3 lakhs] 45,000
` 12,00,001 – ` 15,00,000 [@20% of ` 3 lakhs] 60,000
` 15,00,001 – ` 34,79,950 [@30% of ` 19,79,950] 5,93,985 7,43,985
7,65,585
Add: Health and education cess@4% 30,623
Total tax liability 7,96,208
Tax liability (rounded off) 7,96,210
Note - An individual paying tax u/s 115BAC is not liable to alternate minimum
tax u/s 115JC.
Computation of total income of Mr. Sunil for A.Y. 2024-25 under normal
provisions of the Act
Particulars ` `
Gross Total Income as per default tax regime 43,00,750
under section 115BAC
Less: Interest on borrowing in respect of self- 75,000
occupied house property [` 1,50,000/2]
Gross Total Income as per section 115BAC 42,25,750
Less: Deduction u/s 10AA 12,00,000
[Since the industrial undertaking is established in
SEZ, it is entitled to deduction u/s 10AA@100% of
export profits, since P.Y.2023-24 being the
5th year of operations]
[Profits of the SEZ x Export Turnover received in
convertible foreign exchange/Total Turnover] x
100%
[` 40 lakhs x ` 120 lakhs/ ` 400 lakhs x 100%]
Less: Deduction under Chapter VI-A
Deduction under section 80C
Repayment of principal amount of housing loan 80,000
3
Insurance premium paid on life insurance policy of
son allowable, even though not dependent on 40,000 1,20,000
Mr. Sunil
Deduction under section 80JJAA [As computed 7,12,800
above]
Deduction under section 80TTA 10,000
Interest on savings bank account, restricted to
` 10,000
Total Income as per regular provisions of the 21,82,950
Act
Computation of tax liability of Mr. Sunil for A.Y. 2024-25 under the regular
provisions of the Act
Particulars ` `
Tax on total income of ` 21,82,950
Tax on LTCG of ` 1,08,000@20% 21,600
Tax on remaining total income of ` 20,74,950
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000[@5% of ` 2.50 lakhs] 12,500
` 5,00,001 – ` 10,00,000[@20% of ` 5 lakhs] 1,00,000
` 10,00,001 – ` 20,74,950[@30% of ` 10,74,950] 3,22,485 4,34,985
4,56,585
Total tax liability 4,74,848
Tax liability (rounded off) 4,74,850
Computation of adjusted total income and AMT of Mr. Sunil for
A.Y. 2024-25
Particulars `
Computation of adjusted total income
Total income as per the normal provisions of the Act 21,82,950
Add: Deduction u/s 10AA 12,00,000
Deduction u/s 80JJAA 7,12,800
Adjusted Total Income 40,95,750
Alternative Minimum Tax@18.5% 7,57,714
AMT liability 7,88,023
AMT liability (rounded off) 7,88,020
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 cess@4%. Therefore, liability as per
section 115JC is ` 7,88,020.
4
Since, tax liability as per section 115BAC of ` 7,96,210 is higher than the tax
liability of ` 7,88,020, being higher of AMT liability and tax liability computed
as per normal provisions of the Income-tax Act, 1961, it is beneficial for
Mr. Sunil to exercise the option to shift out of the default tax regime under
section 115BAC. In such a case, his tax liability would be ` 7,88,020 and
Mr. Sunil would be eligible to carry forward the AMT credit of ` 3,13,170
(` 7,88,020 - ` 4,74,850).
2. (a) Under section 6(1), an individual is said to be resident in India in any
previous year, if he satisfies any one of the following conditions:
(i) He has been in India during the previous year for a total period of
182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the
previous year for a total period of 365 days or more and has been
in India for at least 60 days in the previous year.
If an individual satisfies any one of the conditions mentioned above, he
is a resident. If both the above conditions are not satisfied, the individual
is a non-resident.
Therefore, the residential status of Mrs. Sia D’Souza, an American, for
A.Y.2024-25 has to be determined on the basis of her stay in India during
the previous year relevant to A.Y. 2024-25 i.e. P.Y.2023-24 and in the
preceding four assessment years.
Her stay in India during the previous year 2023-24 and in the preceding
four years are as under:
P.Y. 2023-24
01.04.2023 to 16.08.2023 - 138 days
23.03.2024 to 31.03.2024 - 9 days
Total 147 days
Four preceding previous years
P.Y.2022-23 [1.4.2022 to 31.3.2023] - 14 days
P.Y.2021-22 [1.4.2021 to 31.3.2022] - Nil
P.Y.2020-21 [1.4.2020 to 31.3.2021] - Nil
P.Y.2019-20 [1.4.2019 to 31.3.2020] - Nil
Total 14 days
The total stay of Mrs. Sia D’Souza during the previous year in India was
less than 182 days and during the four years preceding this year was for
14 days. Therefore, due to non-fulfillment of any of the two conditions for
a resident, she would be treated as non-resident for the Assessment
Year 2024-25.
5
Computation of total income of Mrs. Sia D’Souza for the
A.Y. 2024-25
Particulars ` `
Income from house property
Flat located in Mumbai let-out from 01.06.2023
to 31.03.2024 @ ` 26,000 p.m.
Gross Annual Value [26,000 x 10]1 2,60,000
Less: Municipal taxes Nil
Net Annual Value (NAV) 2,60,000
Less: Deduction under section 24
30% of NAV 78,000
Interest on loan [fully allowable as 2,05,000 2,83,000 (23,000)
deduction, since property is let-out]
Income from other sources
- Gold chain worth ` 1,50,000 received from
parents of husband would be exempt, since Nil
parents of husband fall within the definition
of relatives and gifts from a relative are not
chargeable to tax.
- Gift received from friends of her husband
aggregating to ` 1,65,000 is taxable under
section 56(2)(x) since the amount of cash
gifts of ` 1,65,000 exceeds ` 50,000. 1,65,000 1,65,000
Gross Total income/ Total Income 1,42,000
(b) TDS implications
(i) Since overseas tour package is taken on or after 1.10.2023, tax @
5% till ` 7 lakhs and 20% thereafter, is required to be collected u/s
206C(1G) by the seller of an overseas tour programme package,
from Mr. Harish, being the buyer of an overseas tour package, even
if payment is made by account payee cheque.
Accordingly, tax has to be collected@5% on ` 7 lakh and 20% on
` 3 lakhs.
TCS = ` 95,000
(ii) Mr. Aditya has to deduct tax at source@5% u/s 194M, although his
turnover for the P.Y. 2022-23 does not exceed ` 1 crore and he is
not liable to deduct tax at source under section 194C, since the
payment to contractor, Mr. Naresh, exceeds ` 50 lakhs.
Accordingly, tax has to be deducted @5% on ` 55 lakhs.
TDS = ` 2,75,000
1 Actual rent received has been taken as the gross annual the value in absence of other information
(i.e. Municipal value, fair rental value and standard rent) in the question.
6
3. (a) Computation of gross total income of Ms. Priyanka for the A.Y.
2024-25 under normal provisions of the Act
Particulars ` `
(a) Income from salaries (See Working 5,81,000
Note below)
(b) Income from Other Sources
(i) Interest on fixed deposit with a 7,000
company
(ii) Income from specified mutual fund 3,000
(iii) Interest on Fixed Deposit received
by minor daughter (` 4,000 - 2,500 12,500
` 1500)
Gross total income 5,93,500
Working Note:
Computation of salary income of Ms. Priyanka for the
A.Y. 2024-25
Particulars `
Salary [` 40,000 x 12] 4,80,000
Medical facility [in the hospital maintained by the _
company is exempt]
Rent free accommodation
15% of salary from 1.4.2023 to 31.8.2023 and 10% of 58,000
salary from 1.9.2023 to 31.3.2024 (` 4,80,000 × 15% x
5/12) + (` 4,80,000 × 10% x 7/12)
Valuation of perquisite of interest on loan
[Rule 3(7)(i)] – 9.5% is taxable which is to be reduced 24,500
by actual rate of interest charged i.e. [9.5% - 6% = 3.5%]
Use of dining table for 1 month
[` 60,000 x 10/100 x 1/12] 500
Perquisite on sale of dining table
Cost 60,000
Less: Depreciation on straight line method 12,000
@ 10% for 2 years
Written Down Value 48,000
Less: Amount paid by the assessee 30,000 18,000
Purchase through credit card 10,000
Perquisite on sale of car
Original cost of car 2,50,000
Less: Depreciation from 16.7.2021 to 50,000
15.7.2022 @ 20%
7
Value as on 14.07.2023- being the date of 2,00,000
sale to employee
Less: Amount received from the assessee
on 14.07.2023 1,60,000 40,000
Gross salary 6,31,000
Less: Standard deduction upto ` 50,000 50,000
Income from Salaries 5,81,000
(b) (i) Computation of book profit of the firm under section 40(b)
Particulars Amount Amount
(`) (`)
Net Profit (before deduction of depreciation, 7,50,000
salary and interest)
Less: Depreciation under section 32 2,50,000
Interest @ 12% p.a. [being the maximum 72,000 3,22,000
allowable as per section 40(b)] (` 6,00,000 ×
12%)
Book profit 4,28,000
“Book profit” means the net profit as per the profit and loss account for
the relevant previous year computed in the manner laid down in Chapter
IV-D as increased by the aggregate amount of the remuneration paid or
payable to the partners of the firm if the same has been already deducted
while computing the net profit. Hence, brought forward loss of ` 50,000
of P.Y.2022-23 is not allowed to be set off for computation of “book
profit”.
(ii) Salary actually paid to working partners = ` 25,000 × 2 × 12 = ` 6,00,000
As per the provisions of section 40(b)(v), the maximum allowable working
partners’ salary for the A.Y. 2024-25 in this case would be:
Particulars `
On the first ` 3,00,000 of book profit [(` 1,50,000 or 90% of 2,70,000
` 3,00,000) whichever is more]
On the balance of book profit [60% of (` 4,28,000 – 76,800
` 3,00,000)]
Maximum allowable working partners’ salary 3,46,800
4. (a) Computation of Taxable Income of Mr. Roshan for the A.Y. 2024-25
under normal provisions of the Act
Particulars ` `
Salaries
Shamita’s salary (` 25,000 x 12) 3,00,000
[See Note 1]
8
Less: Standard deduction under section 50,000
16(ia) upto ` 50,000
2,50,000
Less: Loss from house property set off
against salary income as per section 71(3A) 2,00,000 50,000
[See Note 2]
Capital Gains
Short term capital gain 1,50,000
Less: Loss from tea business (` 1,06,000 x 42,400 1,07,600
40%) [See Note 3 & 4]
Income from Other Sources
Dividend income 11,00,000
Taxable Income 12,57,600
The following losses can be carried forward for subsequent
assessment years:
(i) Loss from house property to be carried forward and ` 50,000
set-off against income from house property
(ii) Long-term capital loss of A.Y. 2020-21 can be carried ` 86,000
forward and set-off against long-term capital gains
(iii) Loss from speculative business to be carried forward ` 50,000
and set-off against income from speculative business
Notes:
(1) As per section 64(1)(ii), all the income which arises directly or
indirectly, to the spouse of any individual by way of salary,
commission, fees or any other form of remuneration from a concern
in which such individual has a substantial interest shall be included
in the total income of such individual. However, where spouse
possesses technical or professional qualification and the income is
solely attributable to the application of such knowledge and
experience, clubbing provisions will not apply. Since, Mrs. Shamita
is not adequately qualified for the post and Mr. Roshan has
substantial interest in Ray Ltd by holding 21% of the shares of the
Ray Ltd., the salary income of Mrs. Shamita to be included in
Mr. Roshan’s income.
(2) As per section 71(3A), loss from house property can be set off
against any other head of income to the extent of ` 2,00,000 only.
(3) 60% of the losses from tea business is treated as agricultural
income and therefore exempt under section 10(1). Loss from an
exempt source cannot be set off against profits from a taxable
source.
9
(4) As per section 71(2A), business loss cannot be set off against
salary income. Hence, 40% of the losses from tea business i.e.,
` 42,400 can be set off against short term capital gains or dividend
income.
(5) Loss from card games can neither be set off against any other
income, nor can it be carried forward.
(6) Loss of ` 50,000 from speculative business can be set-off only
against the income from the speculative business. Hence, such
loss has to be carried forward.
(7) As per section 74(1), brought forward long-term capital loss can be
set-off only against long-term capital gain. Such loss can be carried
forward for eight assessment years immediately succeeding the
assessment year for which the loss was first computed. Since, 8
assessment years has not expired, such loss can be carried
forward to A.Y. 2025-26 for set-off against long-term capital gains.
(b) First alternative
(i) A HUF whose total income without giving effect to, inter alia,
section 54EC, exceeds the basic exemption limit, is required to file
a return of its income on or before the due date under section
139(1). In this case, since the total income without giving effect to
exemption under section 54EC is ` 12 lakhs, exceeds the basic
exemption limit, the HUF is required to file its return of income for
A.Y. 2024-25 on or before the due date under section 139(1).
(ii) If an individual has incurred expenditure exceeding ` 1 lakh towards
consumption of electricity during the previous year, he would be
required to file a return of income, even if his total income does not
exceed the basic exemption limit. Since Mr. Samarth has incurred
expenditure of ` 1,20,000 in the P.Y.2023-24 towards consumption
of electricity, he has to file his return of income for A.Y. 2024-25 on
or before the due date under section 139(1).
(b) Second alternative
Every person who is eligible to obtain Aadhaar Number is required to
mandatorily quote Aadhaar Number:
(a) in the application form for allotment of Permanent Account Number
(PAN)
(b) in the return of income
The provisions of section 139AA relating to quoting of Aadhaar Number
would, however, not apply to an individual who does not possess the
Aadhaar number or Enrolment ID and is:
(i) residing in the States of Assam, Jammu & Kashmir and Meghalaya;
10
(ii) a non-resident as per Income-tax Act, 1961;
(iii) of the age of 80 years or more at any time during the previous year;
(iv) not a citizen of India.
If a person does not have Aadhaar Number, he is required to quote
Enrolment ID of Aadhaar application form issued to him at the time of
enrolment in the application form for allotment of PAN or in the return of
income furnished by him.
11
SECTION B – GOODS AND SERVICES TAX (50 MARKS)
SUGGESTED ANSWERS
Division A - Multiple Choice Questions
Question Answer
No.
1 (b) The tax is payable at the time of supply of goods
2 (b) ` 5 crores
3 (a) Company has an option to issue single credit note against
multiple invoices.
4 (d) transaction value subject to the conditions mentioned in
Section 15(2) of the CGST Act, 2017.
5 (a) The Company shall be eligible to avail full input tax credit.
6 (c) Invoice by Maharashtra unit to the Gujarat unit of the
Company
7 (c) Mr. Jambulal is liable to obtain registration as he makes the
inter-State supply of goods.
8 (b) No, service by way of renting of residential property is
exempt.
Division B - Descriptive Questions

1. (a) Computation of GST payable
Particulars Value of CGST SGST IGST
supply @ 9% @ 9% @ 18%
(`) (`) (`) (`)
GST payable under forward
charge
Carnatic music performance 1,40,000 12,600 12,600 Nil
given to promote a brand of
readymade garments
[Carnatic music performance by
Mr. Nandan lal is not exempt
from GST even though the
consideration charged does not
exceed ` 1,50,000 since said
performance has been made by
him as a brand ambassador.]
Services of transportation of 1,00,000 9,000 9,000 Nil
students provided to HSMG
College
[Services of transportation of
12
students provided to an
educational institution other
than an institution providing
pre-school education or
education up to higher
secondary school, are not
exempt.]
Services provided to IFMP 2,00,000 18,000 18,000 Nil
Bank as a business
correspondent
[Services provided by a
business correspondent to a
banking company are not
exempt when such services are
provided with respect to
accounts in its urban area
branch.]
Services provided as a 15,000 1,350 1,350 Nil
recovery agent
[Tax is payable under forward
charge since recovery agent’s
services are being provided to a
person other than banking
company/financial institution/
non-banking financial
company.]
Total GST payable under 40,950 40,950 Nil
forward charge (A)
GST payable under reverse
charge
Legal services availed from an 1,75,000 Nil Nil 31,500
advocate
[Legal services received by a
business entity with aggregate
turnover in the preceding
financial year exceeding
threshold limit for registration
(` 20 lakh) are not exempt and
tax on the same is payable
under reverse charge.]
Total GST payable under Nil Nil 31,500
reverse charge (B)
Total GST payable [(A)+(B)] 40,950 40,950 31,500
13
Computation of total ITC available
Particulars Value of CGST SGST IGST
supply @ 9% @ 9% @ 18%
(`) (`) (`) (`)
Outdoor catering services 50,000 Nil Nil Nil
availed
[ITC on outdoor catering
services is blocked except
when such services are (i)
used by the taxpayer who is in
the same line of business or
(ii) provided by the employer
to its employees under a
statutory obligation.]
Legal services availed 1,75,000 Nil Nil 31,500
[ITC is available as said
services are used in course or
furtherance of business.]
General insurance taken on a 40,000 Nil Nil Nil
car (seating capacity 5) used
for official purposes
[ITC on motor vehicles for
transportation of persons with
seating capacity ≤ 13 persons
(including the driver) is
blocked except when the
same are used for (i) making
further taxable supply of such
motor vehicles (ii) making
taxable supply of
transportation of passengers
(iii) making taxable supply of
imparting training on driving
such motor vehicles. Further,
ITC is not allowed on services
of general insurance relating
to such ineligible motor
vehicles.]
Total ITC available Nil Nil 31,500
Computation of net GST payable in cash
Particulars CGST SGST IGST
@ 9% @ 9% @ 18%
(`) (`) (`)
GST payable under forward charge 40,950 40,950 Nil
14
Less: ITC of IGST1 [Refer Note] (15,750) (15,750) -
IGST IGST
25,200 25,200 Nil
Add: GST payable under reverse Nil Nil 31,500
charge in cash
[Tax payable under reverse charge,
being not an output tax, cannot be set
off against ITC and thus, will have to be
paid in cash.]
Net GST payable in cash 25,200 25,200 31,500
Note: ITC of IGST can be utilised towards payment of CGST and SGST
in any proportion and in any order.
(b) Computation of value of taxable supply made by M/s. LSP to
Balwant Ltd.
Particulars Amount
(`)
Price of the machine 20,000
[Since the price linked subsidy is received from the State
Government, the same is not includible in the value of
supply]
Third party inspection charges 6,000
[Any amount that the supplier is liable to pay in relation
to the supply but has been incurred by the recipient and
not included in the price actually paid or payable for the
goods, is includible in the value of supply]
Freight charges for delivery of the machine 1,000
[Since arranging freight is the liability of supplier, it is a
case of composite supply and thus, freight charges are
added in the value of principal supply.]
Total 27,000
Less: Discount @ 2% on ` 20,000 being price charged 400
to Balwant Ltd.
[Discount given before or at the time of supply if duly
recorded in the invoice is deductible from the value of
supply]
Value of taxable supply 26,600
2. (a) (i) Services provided by way of renting of residential dwelling for use
as residence except where the residential dwelling is rented to a
registered person is exempt from GST. Further, tax on service
1
Since IGST credit can be set off against CGST and SGST liability in any order and in any proportion,
the same can be set off against CGST and/or SGST liabilities in different ways as well. In all such
cases, net CGST and net SGST payable from Electronic Cash Ledger will differ though the total amount
of net GST payable ( ` 81,900) in cash will remain the same.
15
provided by way of renting of residential dwelling to a registered
person is payable by the recipient under reverse charge.
Therefore, in the given case, Anant Technologies is liable to pay
GST on the residential dwellings taken on rent by it from Sapna
Builders, under reverse charge mechanism.
(ii) In case of services provided by any person by way of sponsorship
to any body corporate or partnership firm, GST is liable to be paid
under reverse charge by such body corporate or partnership firm
located in the taxable territory.
Since in the given case, sponsorship services are being provided
by the private NGO to a partnership firm – M/s. Verma Consultants,
GST is payable by Verma Consultants on said services under
reverse charge.
(b) Section 10(2A) of the CGST Act, 2017 provides the turnover limit of ` 50
lakh in the preceding financial year for becoming eligible for composition
levy for services. Little Smiles has started the supply of services in the
current financial year (FY), thus, it’s aggregate turnover in the preceding
FY is Nil. Consequently, in the current FY, Little Smiles is eligible for
composition scheme for services. A registered person opting for
composition levy for services shall pay tax @ 3% [Effective rate 6%
(CGST+ SGST/UTGST)] of the turnover of supplies of goods and
services in the State.
Further, Little Smiles becomes eligible for the registration when the
aggregate turnover exceeds ` 20 lakh (the threshold limit of obtaining
registration). While registering under GST, Little Smiles can opt for
composition scheme for services.
The option of a registered person to avail composition scheme for
services shall lapse with effect from the day on which his aggregate
turnover during a financial year exceeds the threshold limit of ` 50 lakh.
However, for the purposes of determining the tax payable under
composition scheme, the expression “turnover in State” shall not include
the value of supplies from the first day of April of a FY up to the date
when such person becomes liable for registration under the CGST Act.
Thus, for determining the turnover of the State for payment of tax under
composition scheme for services, turnover of April,2023 – June,2023
quarter [` 20 lakh] shall be excluded. On next ` 30 lakh [turnover of
July,2023 – September, 2023 quarter], it shall pay tax @ 6% [3% CGST
and 3% SGST].
For the purposes of computing aggregate turnover of a registered person
for determining his eligibility to pay tax under this section, aggregate
turnover includes value of supplies from the 1 st April of a FY up to the
date of his becoming liable for registration.
Thus, while computing aggregate turnover for determining Little Smiles’s
eligibility to pay tax under composition scheme, value of supplies from
16
the first day of April of a financial year up to the date when it becomes
liable for registration under this Act (i.e. turnover of April,2023 –
June,2023 quarter), are included.
By the end of July, 2023 – September, 2023 quarter, the aggregate
turnover reaches ` 50 lakh. Consequently, the option to avail
composition scheme for services shall lapse by the end of July, 2023 –
September, 2023 quarter and thereafter, it is required to pay tax at the
normal rate of 18%.
Considering the above provisions, the tax payable for each quarter is as
under:-
S. Quarter GST rate Turnover GST payable
No. [CGST + (` in lakh) (` in lakh)
SGST]
1 April, 2023 – June, - 20 -
2023
2 July, 2023 – 6% 30 1.8
September, 2023
3 October, 2023 – 18% 40 7.2
December, 2023
3. (a) A user will not be able to generate e-way bill for a GSTIN if the said
GSTIN is not eligible for e-way bill generation.
The blocking of GSTIN for e-way bill generation is only for the defaulting
supplier GSTIN and not for the defaulting Recipient or Transporter
GSTIN.
A person paying tax under regular scheme who has not furnished the
returns for a consecutive period of 2 tax periods is considered as a
defaulting person.
Suspended GSTIN cannot generate e-way bill as supplier. However, the
suspended GSTIN can get the e-way bill generated as recipient or as
transporter.
In other words, e-way bill generation facility is blocked only in respect of
any outward movement of goods of the registered person who is not
eligible for e-way bill generatio. E-way bills can be generated in respect
of inward supplies of said registered person.
Thus, applying the above provisions, there will be no restriction in
generating e-way Bill by Mr. Roshan as Mr. Roshan who is making
outward movement of goods is a regular return filer.
E-way bill generation is blocked in case of movement of goods made by
Mr. Sohan to Mr. Mohan as it’s an outward movement of goods of
Mr. Sohan who has not filed GSTR-3B for past 2 months.
17
(b) The proper officer may cancel the registration of a person from such
date, including any retrospective date, as he may deem fit, where,-
(a) a registered person has contravened the prescribed provisions; or
(b) a person paying tax under composition scheme has not furnished
returns for a financial year beyond 3 months from due date of
furnishing retun; or
(c) any registered person, other than a person specified in clause (b),
has not furnished returns for a prescribed period; or
(d) any person who has taken voluntary registration has not
commenced business within six months from the date of
registration; or
(e) registration has been obtained by means of fraud, wilful
misstatement, or suppression of facts:
Thus, in view of the above-mentioned provisions, suo-motu cancellation
of registration of Mr. Raj by proper officer is valid in law since Mr. Raj, a
voluntarily registered person, has not commenced his business within 6
months from the date of registration.
Further, where the registration of a person is cancelled suo-motu by the
proper officer, such registered person may, subject to the provisions of
rule 10B, apply for revocation of the cancellation of registration to such
proper officer, within 90 days from the date of service of the order of
cancellation of registration.
However, the said period of 90 days may, on sufficient cause being
shown and for reasons to be recorded in writing, be extended by the
Commissioner or an officer authorised by him in this behalf, not below
the rank of Additional Commissioner or Joint Commissioner, as the case
may be, for a further period not exceeding 180 days.
Thus, considering the above provisions, the contention of Department is
not valid in law as he has applied for revocation within the time limit of
90 days.
4. (a) There are cases where an unregistered person purchases goods over
the counter (OTC) in one State and thereafter, transports the goods to
another State (generally, the State where he resides). For instance,
migrant workers, tourists, etc. who come to a State for work, tourism,
etc. and purchase goods in that State to take it to their respective State.
Similarly, in automobile sector, the residents of a State may travel to
another State to purchase vehicle from that State to take advantage of
lower registration charges and road tax, which vary from State to State
and thereafter, take the vehicle to their State.
Where the supply of goods is made to a person other than a registered
person, the place of supply shall be the location as per the address of
the said person recorded in the invoice issued in respect of the said
supply and the location of the supplier where the address of the said
person is not recorded in the invoice.
18
For this purpose, recording of the name of the State of the said person
in the invoice shall be deemed to be the recording of the address of the
said person.
Or
(a) In case of an event, if the recipient of service is registered, the place of
supply of services for organizing the event is the location of such person.
However, if the recipient is not registered, the place of supply is the place
where event is held.
Since the event is being held in multiple states and a consolidated
amount is charged for such services, the place of supply will be deemed
to be in each State in proportion to the value for services determined in
terms of the contract or agreement entered into in this regard.
In the absence of a contract or agreement between the supplier and
recipient of services, the proportionate value of services made in each
State (where the event is held) will be computed by the application of
generally accepted accounting principles.
(b) The amount available in the electronic credit ledger may be used for
making any payment towards output tax under the CGST Act or the IGST
Act, subject to the provisions relating to the order of utilisation of ITC.
Further, output tax in relation to a taxable person is defined as the tax
chargeable on taxable supply of goods or services or both but excludes
tax payable on reverse charge mechanism.
Accordingly, it is clarified that any payment towards output tax, whether
self-assessed in the return or payable as a consequence of any
proceeding instituted under the provisions of GST laws, can be made by
utilization of the amount available in the electronic credit ledger of a
registered person.
It is further reiterated that as output tax does not include tax payable
under reverse charge mechanism, implying thereby that the electronic
credit ledger cannot be used for making payment of any tax which is
payable under reverse charge mechanism.
19

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