Solutions to CS EXECUTIVE TAX - JUNE 2021 (August) New Syllabus paper

1 * 2 C 3 D 4 D 5 D 6 D 7 A
8 B 9 D 10 B 11 * 12 A 13 B 14 C
15 B 16 D 17 A 18 C 19 B 20 C 21 *
22 A 23 A 24 B 25 D 26 B 27 D 28 C
29 B 30 D 31 B 32 B 33 A 34 C 35 B
36 B 37 A 38 * 39 B 40 B 41 C 42 D
43 B 44 * 45 C 46 B 47 A 48 B 49 A
50 A 51 C 52 B 53 C 54 D 55 D 56 C
57 A 58 D 59 C 60 C 61 B 62 B 63 B
64 A/B 65 D 66 C 67 C 68 B 69 D 70 B
71 C 72 B 73 C 74 D 75 C 76 C 77 A
78 A 79 B 80 B 81 C 82 A 83 D 84 C
85 A 86 B 87 A 88 C 89 C 90 C 91 D
92 C 93 C 94 A 95 B 96 A 97 1 98 D
99 D 100 A

Hints:

1.
Computation of Income from House Property

PARTICULARS Amount (₹) Amount (₹)

A. Gross Annual Value (GAV)
1. Reasonable Expected Rent
a. Municipal Value {₹35,000 * 12} 4,20,000
b. Fair Rent {₹40,000 * 12} 4,80,000
c. Higher of a and b 4,80,000
d. Standard Rent {₹32,000 * 12} 3,84,000
e. Reasonable Expected Rent {Lower of c and d} 3,84,000
2. Actual Rent for 8 months {₹30,000 * 12} 2,40,000
3. Therefore, GAV, Higher of 1 & 2 3,84,000
B. Less: Municipal Taxes paid by the owner -
C. Therefore, Net Annual Value (NAV) 3,84,000
D. Less: Deductions under section 24
a. Standard Deduction @ 30% of NAV 1,15,200
b. Interest on Borrowed Capital - (1,15,200)
E. Therefore, Income from House Property 2,68,800

Note:

Where property is self - occupied for part of the year and let out for part of the year, then to
compute Gross Annual Value, Reasonable Expected Rent is to be considered for the entire
year and the actual rent only for the months in which the property was let out.

In given MCQ, there is no option having answer of ₹2,68,800.

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 2.
Computation of Income from House Property

PARTICULARS Amount (₹)

a. Gross Annual Value {₹50,000 * 12} 6,00,000
In absence of Fair Rent, Municipal Value & Standard Rent, Actual Rent
received itself is GAV.
b. Less: Municipal Taxes paid -
c. Net Annual Value 6,00,000
d. Less: Deductions under section 24
a. Standard Deduction @ 30% of NAV (1,80,000)
b. Interest on Borrowed Capital -
e. Income from House Property 4,20,000

Note: For self-occupied property, Net Annual Value shall be Nil. Any two properties, at the option of
the assessee can be shown as self-occupied. Therefore, in this case, Income from only the Let Out
Unit shall be considered as for the two Self occupied Units, it shall be Nil.

3.
Computation of Depreciation on Motor Car for the Assessment Year 2021-22 (Relevant to
Previous Year 2020-21)
{Since it is purchased between 23.08.2019 to 31.03.2020, it carries rate of depreciation of
30%}

PARTICULARS Amount (₹)

a. Purchase Cost as on 01.11.2019 14,00,000
b. Less: Depreciation for the P.Y.2019-20 @ ½ of 30% as
put to use for less than 180 days {₹14,00,000 * 15%}
(2,10,000)
c. Opening WDV as on 01.04.2020 11,90,000
d. Therefore, Depreciation @ 30% for P.Y. 2020-21
{₹11,90,000 * 30%} 3,57,000

4.
Deduction under section 32AD of Income Tax Act was allowed only with respect to P.Y. from
2015-16 to P.Y.2019-20. Hence, no deduction under this section will be allowed for
investments made in notified backward areas in P.Y.2020-21.

5.
As per section 40(a)(ia) of Income Tax Act, 30% of the expenditure will be disallowed if Tax is
deductible at source but not deducted or tax is deducted at source but not deposited on or
before due date of filing of Income Tax Return u/s 139(1).
Therefore, Disallowance for A.Y. 2021-22 = ₹3,00,000 * 30% = ₹90,000

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 6.
As transactions given in points A, B and C are covered in Rule 6DD of the Income Tax Rules
i.e. they are allowed as deductions even if payment in cash on a single day to a single person
exceeds ₹10,000 in mode other than Account Payee Cheque, Bank Draft, ECS.

7.
Deduction claimed under section 35 = ₹5,00,000 * 150% = ₹7,50,000
Add: Sale Proceeds of the asset = ₹4,00,000
Total ₹11,50,000

Since, ₹11,50,000 exceeds ₹5,00,000 i.e. the capital expenditure, amount chargeable to tax
shall be, lower of following two:-

a. Amount of sale proceeds + deduction allowed under section 35 – amount of capital

expenditure i.e. ₹4,00,000 + ₹7,50,000 – ₹5,00,000 = ₹6,50,000

Or;

b. Deduction allowed under section 35 i.e. ₹7,50,000

Therefore, taxable amount = ₹6,50,000.

9.

As per section 44ADA of the Income Tax Act, 1961, deemed income shall be 50% of the Gross
Receipts in case of profession.

Therefore, ₹36,40,000 * 50% = ₹18,20,000

10.

Computation of Income as per section 44AE of Income Tax Act:-

PARTICULARS Amount (₹)

a. For 4 Heavy Goods Vehicles
{₹1,000 per tonne per vehicle p.m.* 13 tonnes * 4 vehicles * 12
months} 6,24,000
b. For 1 Light Goods vehicle
{₹7,500 per month per vehicle * 1 vehicle * 12 months} 90,000
c. Therefore, Total Deemed Income 7,14,000

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11. Computation of presumed Income under section 44AD for a partnership Firm:-

PARTICULARS Amount (₹)

a. On Turnover of ₹50,00,000 @ 6% as received by Account Payee cheque,
etc. 3,00,000
b. On Turnover of ₹10,00,000 @ 8% as received in cash. 80,000
c. Total Presumed Income 3,80,000

Answer of ₹3,80,000 is not mentioned in any option.

12.

Rate of Depreciation on Patents is 25%.

In given case, the acquired patent during the P.Y. 2020-21 is put to use for less than 180 days during
the P.Y. and therefore, depreciation shall be half of the normal i.e.1/2 of 25% = 12.5% for this year.
Therefore, Depreciation = ₹100 lakhs * 12.5% = ₹12.5 lakhs.

13.

Computation of Long Term Capital Gains

{Land is held for more than 24 months, therefore, it is Long Term Capital Asset}

PARTICULARS Amount (₹)

a. Full Value of Consideration 45,15,000
b. Less: Expenses on Transfer -
c. Therefore, Net Sale Consideration 45,15,000
d. Less: Indexed Cost of Acquisition {28,00,000 * 301/280} (30,10,000)
e. Less: Indexed Cost of Improvement -
f. Therefore, Long Term Capital Gains 15,05,000
g. Less: Exemption under section 54EC w.r.t. amount deposited in Rural
Electrification Bonds within 6 months from the date of transfer (5,00,000)
h. Therefore, Taxable Long Term Capital Gains 10,05,000

15.

Since the entire block of asset is sold, there shall be Short Term Capital Gains/(Loss) under section 50
of Income Tax Act.

PARTICULARS Amount (₹)

a. Full Value of Consideration i.e. Sale Proceeds of Plant and
Machinery 7,80,000
b. Less: Cost of Acquisition and Cost of Improvement i.e. Opening
WDV + Additions (6,88,000)
c. Therefore, Short Term Capital Gains 92,000

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17.

Computation of Long Term Capital Gains

PARTICULARS Amount (₹)

a. Full Value of Consideration/Net Sale Consideration 90,00,000
b. Less: Indexed Cost of Acquisition
{₹5,00,000 * 301/100} (15,05,000)
c. Therefore, Long Term Capital Gains 74,95,000
d. Less: Exemption under section 54F {Not available in this case as the
residential property purchased is not in India.} -
e. Therefore, Taxable Long Term Capital Gains 74,95,000

18.

Computation of Long Term Capital Gains under section 112A:-

PARTICULARS Amount (₹)

a. Full Value of Consideration/Net Sale Consideration 8,40,000
b. Less: Cost of Acquisition (5,50,000)
c. Therefore, Long Term Capital Gains 2,90,000

19.

Computation of Income Tax liability for Mr.Shivsagar:-

PARTICULARS Amount (₹) Amount (₹)

Income from Salaries
Pension 3,20,000
Less: Standard Deduction u/s 16(ia) (50,000) 2,70,000
Income from Other Sources (Winning from Lotteries) 6,00,000
Gross Total Income/ Total Income 8,70,000
Tax liability
On Lottery Income of ₹6,00,000, tax at 30% u/s 115BB 1,80,000
On balance Total Income of ₹2,70,000, No tax
(As it is within the basic exemption limit of ₹3,00,000) -
Total 1,80,000
Add: Health and Education Cess @ 4% 7,200 1,87,200

21.

Computation of Income to be clubbed in hands of Dr.Kumar

PARTICULARS Amount (₹) Amount (₹)

a. Gross Annual Value
{Rent received = ₹1,00,000 * 10 months} 10,00,000
b. Less: Municipal Taxes paid (30,000)
c. Net Annual Value 9,70,000

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 d. Less: Deduction under section 24
a. Standard Deduction @ 30% of NAV (2,91,000)
b. Interest on Borrowed Capital -
Income from House Property 6,79,000
Add: Arrears of Rent 4,00,000
(-) Deduction at 30% (1,20,000) 2,80,000
Total Income from House Property 9,59,000

This answer is not given in the options.

22.

Income of Minor Child is clubbed in the hands of parents. However, income of minor child earned
out of application of own skills and talent is not clubbed. Further, to the extent income of minor
child is clubbed, an exemption of ₹1,500 p.a. is allowed w.r.t. income of each minor child clubbed.

Therefore, in given case, amount of income of minor child to be clubbed in hands of parents:-

₹62,000 (-) ₹1,500 = ₹60,500

It should be noted that gift from non-relatives is not taxable in this case as the aggregate amount of
gift during the previous year does not exceed ₹50,000. Further, income from dancing is not clubbed
as it is an income earned out of application of own skills and talent.

23.

Computation of Total Income of Mrs. Padmaja:-

PARTICULARS Amount (₹) Amount (₹)

a. Income from Other Sources
Income from Lottery Winning (Taxable fully) 7,00,000
Dividend from Indian Companies 50,000
Less: Loss from business being set off (50,000) -
Therefore, Income from Other Sources/Total Income 7,00,000

26.

Computation of Total Income of Mr.Ramachari:-

PARTICULARS Amount (₹) Amount (₹)

A. Income from Salaries
Pension 7,46,000
Less: Standard Deduction under section 16(ia) (50,000) 6,96,000
B. Income from Other Sources
Interest on Fixed Deposits 65,000

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 C. Therefore, Gross Total Income 7,61,000
D. Less: Deductions under Chapter VI-A
Under section 80TTB (50,000)
E. Therefore, Total Income 7,11,000

29.

As per section 115BBG, Income Tax payable on transfer of carbon credits is at 10%.

Therefore, in given case, tax = ₹2,10,000 * 10% = ₹21,000

Add: Health and Education Cess @ 4% = ₹840

Therefore, Total Tax ₹21,840

31.

TDS under section 194J for payment of professional fees to call centre operator shall be 2%. When
the deduction is done between 14.05.2020 to 31.03.2021, it shall be 1.5%. Therefore, ₹4,25,000 *
1.50% = ₹6,375.

32.

TCS is applicable in this case as the value of Motor Car sold exceeds ₹10,00,000. TCS shall be at
0.75% as the sale is taking place on 05.03.2021 i.e. between 14.05.2020 to 31.03.2021.

TCS = ₹12,60,000 * 0.75% = ₹9,450.

33.

The threshold limit under section 194A where the interest is payable by Bank is ₹40,000 during a P.Y.

34.

Computation of tax liability on ₹8,00,000 for Resident Senior Citizen:

PARTICULARS Amount(₹)
a. On ₹3,00,000 -
b. On income between ₹3,00,000 to ₹5,00,000, Tax @ 5% 10,000
c. On income between ₹5,00,000 to ₹10,00,000, Tax @ 20%
{3,00,000 * 20%} 60,000
d. Total 70,000
e. Add: Health and Education Cess @ 4% 2,800
f. Total 72,800

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Since the advance tax payable is ₹10,000 or more, for a senior citizen having Profits and Gains from
Business or Profession, advance tax provisions shall be applicable.

Advance Tax payable by 15th December, 2020 is 75% of the advance tax liability

= 75% of ₹72,800 = ₹54,600.

38.

Time limit for serving Notice under section 143(2) is within 3 months from the end of the Financial
Year in which the return was filed.

Therefore, in given case, it should be 30.06.2022 as Return was filed in F.Y. 2021-22.

No option states the answer.

40.

Penalty for failure to furnish audit report as required under section 44AB is lower of the following
two:-

a. 0.5% of the Turnover i.e. ₹2,20,00,000 * 0.5% = ₹1,10,000

Or;
b. ₹1,50,000

Therefore, penalty payable shall be ₹1,10,000.

44.

Computation of Tax liability of Mr.A for the Assessment Year 2021-22 (P.Y.2020-21) where he has
opted for section 115BAC

PARTICULARS Amount (₹)

a. On income upto ₹2,50,000 (under section 115BAC, basic
exemption limit for resident senior citizen continues to be
₹2,50,000) -
b. On income between ₹2,50,000 to ₹5,00,000, Tax @ 5% 12,500
c. On income between ₹5,00,000 to ₹7,50,000, Tax @ 10%
{₹5,50,000 – 5,00,000}*10% 5,000
d. Total 17,500
e. Add: H&EC @ 4% 700
f. Total Tax 18,200

The answer of ₹18,200 is not mentioned in the options.

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45.

Composite Income from Coffee grown and cured in India shall be deemed as business income to the
extent of 25%, therefore, ₹8,00,000 * 25% = ₹2,00,000 shall be taxable as business income while
balance 75% of ₹8,00,000 i.e. ₹6,00,000 shall be exempt as agricultural income under section 10(1)
of Income Tax Act.

46.

Any income from transaction of Reverse Mortgage is Fully Exempt under Income Tax.

47.

Transport Allowance for handicapped employee is exempt upto ₹3,200 per month. Therefore,
exemption in this case shall be actual transport Allowance received i.e. ₹30,000 or; ₹3,200 * 12 =
₹38,400, whichever is lower.

Therefore, ₹30,000 will be exempt.

48.

Computation of House Rent Allowance exempted under section 10(13A) of Income Tax Act:-

Least of following 3:-

1. Actual House Rent Allowance received = ₹15,000 * 12 = ₹1,80,000

2. Rent Paid (-) 10% of salary
(₹20,000*12) (-) (10% of ₹12,00,000) = ₹1,20,000
3. 50% of salary {His accommodation being in Delhi}
i.e. 50% of ₹12,00,000 = ₹6,00,000

Therefore, Exemption shall be ₹1,20,000.

50.

For an individual assessee opting for section 115BAC i.e. Alternative Tax regime, a standard
deduction under section 16(ia) of Income Tax Act is not allowed.
Therefore, Taxable Salary shall be ₹80,000 p.m. * 4 months = ₹3,20,000.

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52.

Computation of Net Output tax liability:-

PARTICULARS Amount (₹)

A. Output Tax liability {₹100 lakhs * 12%} 12,00,000
B. Less: Input Tax Credit (3,00,000)
C. Net GST payable 9,00,000

64.

Computation of Net GST payable:-

PARTICULARS IGST (₹) CGST (₹) SGST (₹)

Output Tax liability 50,000 60,000 90,000
Less: ITC of IGST set off against Output Tax of
GST & balance against SGST (Note) (50,000) - (40,000)
Less: ITC -CGST set off against Output tax of CGST - (30,000) -
Less: SGST – Set off against Output tax of SGST - - (38,000)
Net GST payable - 30,000 12,000

Alternate Answer

PARTICULARS IGST (₹) CGST (₹) SGST (₹)

Output Tax liability 50,000 60,000 90,000
Less: ITC of IGST set off against Output Tax of
GST & balance against CGST & SGST (Note) (50,000) (30,000) (10,000)
Less: ITC -CGST set off against Output tax of CGST - (30,000) -
Less: SGST – Set off against Output tax of SGST - - (38,000)
Net GST payable - - 42,000

Note:

ITC of IGST is to be first utilised to pay output tax of IGST and balance, if any can be utilised to pay
output tax of CGST as well as SGST in any order and in any proportion and therefore, multiple
options are available. Therefore, we have tried in the two ways as shown above. It suits the options
given.

73.

Business goods which are imported are re-exported after 16 months i.e. more than 15 months but
not more than 18 months, therefore, duty drawback admissible shall be 60%.

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95.

Computation of Assessable Value:-

PARTICULARS Amount (₹)

a. Price of Goods 4,15,000
b. Add: Amount charges towards packing (To be included as
per section 15(2) of the CGST Act) 10,000
c. Add: Subsidy from NGO, to be included 25,000
d. TOTAL 4,50,000
e. Less: Discount @ 2% (To be excluded as per section 15(3) of
the CGST Act, 2017. (9,000)
f. Therefore, Assessable Value 4,41,000

99.

As per section 18(1)(d) of CGST Act, 2017, Input Tax Credit on Capital goods in stock in case earlier
finished goods sold were exempt but later on have become taxable can be claimed to the extent of:-

a. GST payable on purchase of Capital Goods {3,00,000 * 18%} = ₹54,000

b. (-) Amount computed at 5% points for every quarter or part thereof
{₹54,000 * 5% points for every Quarter or part thereof * 6 quarters} ₹16,200
c. Therefore, Input Tax Credit that can be claimed ₹37,800
Note: The Number of quarters is computed as follows:-

Quarter ending 30th June 2019, 30th September 2019, 31s December 2019, 31st March 2020,
30th June 2020, 30th September 2020.

100.

As per 18(6) of the CGST Act, 2017, where capital goods on which Input Tax Credit has been claimed
are sold after being put to use, then GST payable shall be higher of the following 2:-
₹
a. Input Tax Credit availed 60,000
(-) Amount at 5% points for every Quarter or part thereof (21,000)
{60,000 * 5% per quarter or part thereof * 7 quarters}
39,000
Or;

b. Transaction Value * Rate of GST 18,000

₹1,50,000 * 12%

Therefore, GST payable shall be ₹39,000.

Note: Number of Quarters including part thereof are computed as follows:-

Quarter ending June 2019, September 2019, December 2019 + 4 Quarters of 2020.

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 CS Executive Tax Laws – New Syllabus June 2021 (August) Exam paper

Sr.No. Chapter Marks

1. Basic Concepts 3
2. Residential Status 0
3. Income from Salaries 4
4. Income from House Property 2
5. Income from business or profession 10
6. Income from Capital Gains 6
7. Income from Other Sources 2
8. Clubbing of Income 2
9. Aggregation of income and Set off and carry forward of losses 2
10. Deductions from Gross Total Income 2
11. Agricultural Income and Exempted Income 2
12. Assessment of individuals and HUF 2
13. Assessment of Partnership Firms, LLP, AOP & BOI. 0
14. Assessment of Companies 2
15. Assessment of Trusts 1
16. Return of Income 2
17. TDS, TCS, Advance Tax, Interest and Refund 3
18. Types of Assessment and procedure of various assessments 4
19. Appeal, Revision, Settlement, Penalties, offences and recovery of tax 1
20. Offences and Penalties 0
21. Goods and Service Tax 42
22. Customs Act, 1962 8

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