CA INTERMEDIATE

SUBJECT- DIRECT TAXATION

Test Code – INP 2234
(Date :)
(Marks - 100)
TOPIC : FULL COURSE

Time Allowed – 3 Hours

SECTION – A: INCOME TAX LAW (60 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.2023-24.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice questions
by choosingone of the four options given. All questions are compulsory.

Mrs. Shalini is a retired Government employee. She was born on 01.04.1943 in India. She is
residing in Delhi. She stayed with her elder son Mr. Nakul from 1st May, 2022 to 15th
October, 2022, who is residing in Australia. She stayed in India for 361 days during the 4
previous years preceding the previous year 2022-23. During the previous year 2022-23,
pension of Rs. 7,15,461 is credited in her account with State Bank of India, Uttam Nagar
Branch, Delhi after deducting tax at source of Rs. 14,565. She received interest of Rs. 4,352
on her saving A/c with SBI during the previous year 2022-23. She also received interest of
Rs. 67,500 on Fixed Deposits with Canara Bank in the month of April, 2022.
She has purchased two life insurance policies for her son Mr. Yuvaan and married
daughterMrs. Kajal, the details of which are as follows:
Person Policy Date of payment of Sum Premium
insured purchased on premium Assured paid
Mr. Yuvaan (50 15.10.2021 23.10.2022 Rs. Rs.
years old) 9,84,655 1,00,388
Mrs. Kajal (45 20.09.2021 25.09.2022 Rs. Rs. 17,000
years old) 2,00,000
She has taken a medical insurance for herself for which she paid an amount of Rs.
35,000 towards health insurance premium by A/c payee cheque. She incurred Rs. 7,500
towards preventive health check-up of herself and her husband in cash. She also incurred
medical expenditure of Rs. 25,000 in cash in the month of January 2023 for her husband.
In the month of March 2023, she incurred medical expenditure of Rs. 10,500 for herself,
which is paid by account payee cheque. She has given a wristwatch of Rs. 10,000 on her
husband’s 85th birthday. Her husband is resident in India for the P.Y. 2022-23. Mrs. Shalini
does not opt to pay tax under section 115BAC.
Based on the facts of the case scenario given above, choose the most appropriate answer to
the following questions:
(i) What would be the amount of deduction under Chapter VI-A available to Mrs.
Shalini for the A.Y. 2023-24?
 (a) Rs. 2,05,466
(b) Rs. 2,08,466
(c) Rs. 2,07,388
(d) Rs. 2,18,466
(ii) What would be the Gross total income of Mrs. Shalini for the assessment year
2023-24?

(a) Rs. 7,87,313

(b) Rs. 8,04,878

(c) Rs. 7,59,378

(d) Rs. 8,09,378

(iii) What is the amount of net tax payable/(refundable) of Mrs. Shalini for the A.Y.
2023-24?
(a) (Rs. 10,850)
(b) (Rs. 1,790)
(c) (Rs. 1,080)
(d) (Rs. 450)
(iv) What would be the total income of Mrs. Shalini for the assessment year 2023-24,
if she opts to pay tax under section 115BAC?
(a) Rs. 7,51,880
(b) Rs. 8,01,880
(c) Rs. 7,87,310
(d) Rs. 8,09,380
(v) What is the amount of net tax payable/(refundable) of Mrs. Shalini for the A.Y.
2023-24, if she opts to pay tax under section 115BAC?
(a) Rs. 22,760
(b) Rs. 13,200
(c) Rs. 26,200
(d) Rs. 25,030 (5* 2 = 10 MARKS)
(vi) Mr. Raj, aged 65 years, is a salaried person. He has taken a LIP on his major son’s
name on 01.11.2015. The sum assured of LIP is Rs. 16,00,000 and the premium
payable is Rs. 1,70,000. He has also taken a medical policy of Rs. 10,00,000 for self
and his wife on 01.11.2022 The medical policy is valid for 5 years. He has paid one
time premium of Rs. 1,80,000. What is the total deduction available to Mr. Raj for
A.Y. 2023-24?
(a) Rs. 1,86,000
(b) Rs. 1,96,000
(c) Rs. 1,90,000
(d) Rs. 1,80,000 (2 MARKS)
 (vii) Mr. Karan completed his MBA in April 2022 and joined XYZ Ltd from 01.05.2022. His
basic salary is Rs. 2,25,000 p.m. He is paid 12% of basic salary as D.A forming part of
retirement benefits. He contributed 11% of his pay and D.A. towards recognized
provident fund and the company contributes the same amount. Accumulated
interest on provident fund as on 31.3.2023 is Rs. 49,325. What would be the income
chargeable to tax under the head “Salaries” of Mr. Karan for the A.Y. 2023-24 if he
does not opt for section 115BAC?
(a) Rs. 27,26,442
(b) Rs. 27,30,884
(c) Rs. 27,22,000
(d) Rs. 27,71,325 (2 MARKS)

(viii) Mrs. Kajal, the General Manager of M/s Gold Ltd. was paid a salary Rs. 4,50,000 per
month. The above salary includes non-monetary perquisite of Rs. 50,000 per
month. As per the terms of employment, tax on non-monetary perquisite is to be
borne by M/s Gold Ltd. Mrs. Kajal’s contribution towards PPF is Rs. 1,50,000. What
would be the amount of tax to be deducted by M/s Gold Ltd. from the salary of
Mrs. Kajal if she intimated M/s Gold Ltd. to opt for provisions of section 115BAC for
A.Y. 2023-24?
(a) Rs. 13,80,427

(b) Rs. 15,52,980

(c) Rs. 12,54,936

(d) Rs. 13,88,970 (2 MARKS)

(ix) Pankaj gifted an amount of Rs. 3,00,000 to his wife, Nikki and Rs. 2,00,000 to his
daughter, Pinki aged 20 years, on 1st April 2019. Both Nikki and Pinki invested the
amounts on the same date in Government of India 11% Taxable Bonds. The interest
accrues yearly and is reinvested in the same bonds. Determine what will be the
amount taxable in hands on Nikki for A.Y. 2023-24?
(a) Rs. 4,473

(b) Rs. 12,132

(c) Rs. 33,000

(d) Nil (2 MARKS)

Division B – Descriptive Questions

Question No. 1 is compulsory
Attempt any two questions from the remaining three questions

QUESTION : 1
Mr. Kamal, a resident and ordinarily resident aged 58 years, is engaged in the business of
manufacturing of steel. He is subject to tax audit under section 44AB of Income-tax Act,
1961. He has provided following information:
 Profit & Loss account for the year ended 31st March, 2023
Particulars (Rs.) Particulars (Rs.)
To Administrative expenses 6,45,000 By Gross Profit 88,45,000
To Salaries & wages 30,00,000 By Profit on sale of asset 2,00,000
of scientific research
To Interest on loans 11,25,000 By Winning from lottery (Net 47,250
of TDS @ 30%)
To Depreciation 9,25,500
To Professional fees 4,05,000
To Rent, rates & taxes 4,20,000
To Travelling & conveyance 2,10,000
To Net Profit 23,61,750
Total 90,92,250 Total 90,92,250
Explanatory information:
(i) Opening and closing stock of finished goods were undervalued by 10%.
Opening stock of Rs. 3,30,000 and Closing stock of Rs. 4,38,000 was shown.
(ii) Salaries & wages include following items:
(a) Contributed 20% of basic salary in National Pension Scheme referred in
section 80CCD for an employee Mr. Ganesh who has withdrawn basic salary
of Rs. 4,00,000 and Dearness allowance is 40% of basic salary. 50% of
Dearness allowance forms part of the salary.
(b) Some of the employees opted for retirement under the voluntary retirement
scheme; a sum of Rs. 3,50,000 was paid to them on 1st January, 2023.
(iii) Interest on loan includes interest paid @ 15% per annum on loan of Rs. 18,00,000
which was taken from State Bank of India on 01.07.2022 for purchase of new
electric car of Rs. 20,00,000. The car is used for personal purpose.
(iv) Depreciation allowable as per Income-tax Rules, 1962 is Rs. 5,50,000 but during
the calculation of such depreciation following addition was not considered:
Motor car purchased for Rs. 3,50,000 for supply of finished goods to dealers
on 25-09-2022.
(v) An asset was purchased for Rs. 7,00,000 on 17-11-2021 for conducting scientific
research and the deduction was claimed under section 35 of the Income-tax Act,
1961. This asset was sold on 05- 10-2022 for a consideration of Rs. 9,00,000.
Other information:
A plot of Industrial land which was used by Mr. Kamal for business purpose for last 10 years
was compulsorily acquired by Central Government on 07.10.2022. The compensation of Rs.
15,00,000 was received on 27.01.2023. Such property was purchased by him on 08.10.2007
for Rs. 2,50,000. He has purchased another plot of industrial land on 15.04.2023 for Rs.
7,00,000. Government has also paid Rs. 1,05,000 as interest on such compensation on
28.02.2023. Cost Inflation Indices:
FY 2022-23: 331, FY 2007-08: 129
Compute the total income and tax liability of Mr. Kamal for the assessment year 2023-24
assumingthat he has not opted for the provisions of section 115BAC.
(14 MARKS)
QUESTION : 2(A)
State Government of Madhya Pradesh grants a lease of coal mine to ABC Co. Ltd., an Indian
company, on 1.10.2022 and charged Rs. 8 crores for the lease. ABC Co. Ltd. sold coal for Rs.
2 crores to Mahapower Ltd., another Indian company, during the previous year 2022-23.
Mahapower Ltd. furnishes a declaration to ABC Co. Ltd. that the coal is to be utilized for the
purpose of generation of power. The turnover of ABC Co. Ltd. and Mahapower Ltd. for the
F.Y. 2021-22 amounted to Rs. 11 crores and Rs. 12 crores, respectively. What is the amount
of tax required to be deducted or collected at source in respect of the above transactions, if
any?
(7 MARKS)
QUESTION : 2(B)
Mr. Roy owns a house in Kolkata. During the previous year 2022-23, 3/4th portion of the
house was self-occupied and 1/4th portion was let out for residential purposes at a rent of
Rs. 12,000 p.m. The tenant vacated the property on 28th February, 2023. The property was
vacant during March, 2023. Rent for the months of January 2023 and February 2023 could
not be realised in spite of the owner’s efforts. All the conditions prescribed under Rule 4 are
satisfied.
Municipal value of the property is Rs. 4,50,000 p.a., fair rent is Rs. 4,70,000 p.a. and
standard rent is Rs. 5,00,000. He paid municipal taxes @10% of municipal value during the
year. A loan of Rs. 30,00,000 was taken by him during the year 2013 for acquiring the
property. Interest on loan paid during the previous year 2022-23 was Rs. 1,51,000. Compute
Roy’s income from house property for the A.Y. 2023-24.
(7 MARKS)

QUESTION : 3(A)
Ms. Akansha, a salaried employee, furnishes the following details for the financial year
2022-23:
Particulars Rs.
Basic salary 6,20,000
Dearness allowance 4,20,000
Commission 75,000
Entertainment allowance 9,000
Medical expenses reimbursed by the employer 18,000
Profession tax (of this, 50% paid by employer) 4,000
Health insurance premium paid by employer 8,000
Gift voucher given by employer on her birthday 10,000
Life insurance premium of Akansha paid by employer 26,000
Laptop provided for use at home. Actual cost of Laptop to employer Children
45,000
of the assessee are also using the Laptop at home]
Employer company owns a Maruti Suzuki Swift car, which was provided to
The assessee, both for official and personal use. Driver was also provided.
(Engine cubic capacity more than 1.6 litres).
All expenses are met by the employer Annual credit card fees paid by
employer [Credit card is not exclusively used forofficial purposes; details of
usage are not available] 7,000
You are required to compute the income chargeable under the head Salaries for the
assessment year 2023-24.
(7 MARKS)

QUESTION: 3(B)
Calculate the income-tax liability for the assessment year 2023-24 in the following cases:

Mr. A Mrs. B Mr. C Mr. D

(age 45) (age 62) (age 81) (age 82)
Status Resident Non-resident Resident Non-
resident
Total income other 2,40,000 2,80,000 5,90,000 4,80,000
thanlong-term capital
gain
Long-term capital gain 15,000 10,000 60,000 Nil
from sale from sale of from sale of
of vacant listed equity agricultural
site shares (STT land in rural
paid on sale area
and purchase
of shares)
Note - Assume that Mr. A, Mrs. B, Mr. C and Mr. D do not opt for section 115BAC.

(7 MARKS)
QUESTION : 4(A)
Mr. Manek, a person of Indian origin and citizen of USA, got married to Ms. Anjali, an Indian
citizen residing in USA, on 24th January, 2022 and came to India on 25-03-2022. He left for
Country X on 10th July, 2022. He returned to India again on 24-02-2023 with his wife to
spend some time with his parents-in law for 30 days and thereafter returned to USA. He
stayed in India for 400 days during the 4 years preceding the previous year 2022-23.
He received the following gifts from his relatives and friends of her wife during 01 – 04 -
2022 to 31-03-2023 in India:
- From wife’s parents Rs. 1,51,000
- From wife’s sister Rs. 21,000
- From very close friends of his wife Rs. 16,00,000
Determine his residential status and compute the total income chargeable to tax along
with the amount of tax liability on such income for the Assessment Year 2023-24.
(6 MARKS)
QUESTION : 4(B)
Examine the taxability of capital gains in the following scenarios for the Assessment Year
2023-24, determine the taxable amount and rate of tax applicable:

(i) On 20th December, 2022 5,000 shares of AB Ltd., a listed company are sold by Mr.
Kumar @ 500 per share and STT was paid at the time of sale of shares. These shares
were acquired by him on 5th June, 2017 @ Rs. 425 per share by paying STT at the time
of purchase. On 31st January, 2018, the shares of AB Ltd. were traded on a recognized
stock exchange at the Fair Market Value of Rs. 450 per share.
(ii) Mr. Satish is the owner of a residential house which was purchased on 1st July,
2016 for Rs. 10,50,000. He sold the said house on 14th October, 2022 for Rs.
25,00,000. Valuation as per stamp valuation authorities was Rs. 45,00,000. He
invested Rs. 15,00,000 in RECL Bonds on 20th March, 2023.
The Cost Inflation index for-
F.Y. 2016-17 264
F.Y. 2022-23 331
(4 MARKS)
QUESTION : 4(C)
Mr. Gaurav, a resident individual, furnishes the following particulars of his income
and other details for the previous year 2022-23:

Rs.
Income from Salary (computed) 22,00,000
Business loss before current year depreciation (Business 1,00,000
providing discontinued on 31.5.2022)
Current year depreciation 50,000
Interest from Fixed Deposit 10,15,000
Interest on loan in respect of self-occupied property 2,35,000
Income from specified business (eligible for deduction under 20,000
section 35AD)

Brought forward losses (Pertaining to A.Y. 2022-23)

Unabsorbed depreciation 45,000

Loss from specified business (eligible for deduction under section 20,000
35AD)

You are required to compute his gross total income for the A.Y. 2023-24 in such a way that
his tax liability is minimised.
(4 MARKS)
OR
QUESTION : 4(C)
Examine whether the following incomes are chargeable to tax, and if so, compute the
amount liable to tax:
(i) Arvind received Rs. 20,000 as his share from the income of the HUF.
(ii) Mr. Xavier, a ‘Param Vir Chakra’ awardee, who was formerly in the service of the
Central Government, received a pension of Rs. 2,20,000 during the financial year 2022-
23.
(iii) Agricultural income of Rs. 1,27,000 earned by a resident of India from a land situated in
Malaysia.
(iv) Rent of Rs. 72,000 received for letting out agricultural land for a movie shooting.
(4 MARKS)
 SECTION B - INDIRECT TAXES (40 MARKS)QUESTIONS
(i) Working Notes should form part of the answers. However, in answers to Question 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.
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.

Purvi, registered under GST in the State of Madhya Pradesh, is engaged in supplying a
bouquet of taxable goods and services. She has undertaken following
activities/transactions in the month of October in the current financial year:
(i) Donated some money to Divyaprakash Charitable Trust, Madhya Pradesh, in the
memory of her late father. The Divyaprakash Charitable Trust constructed a room in
the school run by it from such donation and wrote “Donated by Miss. Purvi in the
memory of her father” on the door of the room so constructed.
(ii) Organized a seminar in Indore which was sponsored by WE-WIN Cricket Academy, an
LLP. Purvi received a sponsorship fee of Rs.1,50,000.
(iii) Bindusar Public School intended to distribute gift packages consisting of fountain pen,
calculator and tape dispenser to its students on the occasion of Children’s Day.
Therefore, it entered into a contract with Purvi on 28th October for supply of 2,000
packages at a single price of Rs. 250. Rates of GST for fountain pen, calculator and
tape dispenser are 5%, 12% and 18% respectively.
(iv) Received following payments during the month of October:
- earned Rs. 160,000 by performing at a western music concert in Indore
- earned Rs. 50,000 for renting of space for use as a Textile Emporium
- received Rs. 70,000 for supply of farm labour
(v) Supplied a machinery with a basic price of Rs. 45,000 (before TCS under Income Tax
Act, 1961). Tax collected at source under Income-tax Act, 1961 on said machinery is
Rs. 2,500. Further, a subsidy of
Rs.50,000 is received from Green Foundation Pvt. Ltd for usage of green energy and
the subsidy was linked to energy saved during the month.
All the amounts given above are exclusive of GST, wherever applicable.
Based on the facts of the case scenario given above, choose the most appropriate
answer to Q. Nos. 1 to 5below:-
1. Donation made by Purvi to Divyaprakash Charitable Trust is ______.
(a) exempted from GST by way of a notification
(b) not a supply at all
(c) liable to GST under forward charge
(d) liable to GST under reverse charge
2. Which of the following statements is correct with respect to the sponsorship fee
received by Purvi?
(a) Tax on sponsorship services is payable by Purvi under forward charge.
(b) Tax on sponsorship services is payable by WE-WIN Cricket Academy under
reverse charge.
 (c) Sponsorship services are exempt from GST since services provided to a sports
academy areexempt.
(d) Tax on sponsorship services is payable by Purvi under reverse charge.
3. Determine the nature of supply and the applicable rate of GST for the packages
supplied by Purvi to Bindusar Public School.
(a) composite supply & applicable rate of GST is 12%
(b) mixed supply & applicable rate of GST is 18%
(c) composite supply & applicable rate of GST is 18%
(d) mixed supply & applicable rate of GST is 12%
4. Out of all the payments received by Purvi in the month of October, value of exempt
supply amounts to _____.
(a) Rs. 4,30,000

(b) Rs. 70,000

(c) Rs. 1,20,000

(d) Rs. 2,20,000

5. The value of supply of machinery supplied by Purvi is____.

(a) Rs. 45,000

(b) Rs. 47,500

(c) Rs. 48,500

(d) Rs. 51,000

6. Medhavi Industries, engaged in manufacturing of taxable goods, purchased cars for

official use of its employees. Amount of GST paid on purchase of the cars amounted to
Rs. 2,80,000. It also availed outdoor catering services for a marketing event organised
for its prospective customers. Amount of GST paid on said services was Rs.18,000.
Compute the total amount of ITC that can be claimed by Medhavi Industries.
(a) Rs. 2,98,000
(b) Rs.18,000
(c) Rs.2,80,000
(d) Nil
(6 * 2 = 12 MARKS)

QUESTION : 5(A)
Neelkanth Pvt. Ltd., a registered supplier of goods and services at Kolkata has furnished the
following information for the month of February:
S. No. Particulars Amount
(Rs.)
(i) Intra-State supply of taxable goods including Rs. 4,00,000
1,00,000 received as advance in January, the invoice
for the entire sale value is issued on 15th February
 (ii) Purchase of goods from a composition dealer, 5,50,000
registered inKolkata
(iii) Services provided by way of labour contracts for 1,00,000
repairing a single residential unit otherwise than as a
part of residential complex (It is an intra-State
transaction)
(iv) Membership of a club availed for employees working in 1,75,000
the factory (It is an intra-State transaction)
(v) Goods transport services received from a GTA. GST is 2,00,000
payable @12% (It is an inter-State transaction)
(vi) Inter-State services provided by way of training in 10,000
recreational activities relating to sports
(vii) Inter-State security services provided to ABC higher 15,000
secondary school for their annual day function
organised in Fintex Auditorium outside the School
campus
(vii) Inputs to be received in 4 lots, out of which 2nd lot was 40,000
received during the month
The company has following ITCs with it at the beginning of the tax period:

Particulars Amount (Rs.)

CGST 57,000
SGST Nil
IGST 50,000
Note:
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
(ii) Both 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 Neelkanth Pvt. Ltd. was Rs. 2.5 crore in the previous financial year.

Compute the minimum GST, payable in cash, by Neelkanth Pvt. Ltd. for the month of
February. Make suitable assumptions as required.

(8 MARKS)
QUESTION : 6(A)

Swaminathan started the business of supplying shoes in the State of Kerala from 1st April.
He makes only intra-State supplies. His turnover for April - June quarter was Rs. 20 lakh and
for July - September quarter was Rs. 100 lakh. Further, one-fourth of his total turnover in
each of the quarters was exempt from GST. Being eligible for composition scheme,
Swaminathan got himself registered under the composition scheme with effect from 1 st
July.
You are required to compute the tax payable by Swaminathan under composition scheme
assuming that he is a manufacturer. Will your answer be different if Swaminathan is trader.
(6 MARKS)
QUESTION : 6(B)
State with reasons, whether GST is payable in the following independent cases:-
(i) Services provided to recognized sports body as selector of national team.
(ii) Services provided by way of transportation of passengers in metered cab, through an
electronic commerce operator.
(4 MARKS)
QUESTION : 7(A)

Examine whether the supplier of goods is liable to get registered in the following
independent cases:
(i) Rudra Builders of Rohini, Delhi is exclusively engaged in intra-State taxable supply of
building bricks. It’s aggregate turnover in the current financial year is Rs. 23 lakh.
(ii) Heera of Himachal Pradesh is exclusively engaged in intra-State taxable supply of
footwear. His turnover in the current financial year (FY) from Himachal Pradesh
showroom is Rs. 32 lakh. He has another showroom in Nagaland with a turnover
of Rs. 11 lakh in the current FY.
(6 MARKS)
QUESTION : 7(B)

X Ltd. is winding up its business in Rajasthan. The Tax Consultant of X Ltd. has suggested that
X Ltd. will have to file either the annual return or the final return at the time of voluntary
cancellation of registration in the state of Rajasthan.
Do you agree with the stand taken by tax Consultant of X Ltd ? Offer your comments.
(4 MARKS)
QUESTION : 8(A)
Enumerate the conditions necessary for availing ITC under GST law. (5 MARKS)

QUESTION : 8(B)
Elaborate the provisions relating to annual return contained under section 44 of the CGST
Act,2017.
(5 MARKS)
OR
QUESTION : 8(B)
“Aadhaar authentication is not required for persons who are already registered under GST.”
Examine and discuss the correctness of the statement. You are required to elaborate the
relevant legal provisions.
(5 MARKS)