CERTIFICATE IN ACCOUNTING TECHNICIANS: — ‘Wherever required the candidate may make suitable assumptions and state them clearly in the Please (i) Answer all bits of a question at one place (i) Open a new page for answer to a new question PART—A (25 Marks) ‘Question: 1a) In each of the cases glven below one out of four answers is correct. Indicate the correct answer (= 1 mack) and glve working/reasons briefly in support of your answer (=1 mark) i. MS ANUSIKTA, an officer of the Government of Bihar draws Rs.30,000 per month as basic pay. The Government has provided her a rent-free un-{urnished flat whose market rent is Rs,9000 per month. If Licence fee of the flat, as per the Government rules, is Rs.1500 per month, the value of the perquisite in respect of rent free un-furnished flat for the assessment year 2010-11 wil be, AL Rs.18,000 8. Rs.36,000 c.Rs.1,08,000 ._ Insufficient information. i, MR PETER, a Consulting engineer, raised a bill of Rs.198540 (including Service Tax) on his client for Consultancy Services rendered by him in the month of January 2010. fa partial payment of Rs.154420 is received by Mr, Peter, in the month of March 2010 what would be ‘the amount of Service Tax payable by him for the quarter ending March 31, 2010? AL 5.18540 B. Rs.21,840 c. Rs.24,420 D. None of the above, Lop IFALLIANCE LTD reported sales turnover of Rs. 18,30,000 during the quarter ended ‘March,31,2010. This includes Excise duty of Rs. 1,50,000 and deposit for returnable containers for Rs 3,00,000. Sales tax was not included separately in the Sales Invoice. Ifthe applicable CST rate is 2%,the amount of CST payable will be. A. Rs.30,000 B._Rs.33,600 C Rs.36,600 D. Insufficient data (On June 15,2009, RONAK LTD, a manufacturer of Car air Conditioners, installed a new ‘machine for Rs.6,00,000 due to which the installed capacity has increased by 20%. I the new machine falls in the block of assets for which the depreciation is 40%,the amount of ‘depreciation Ronak Ltd can claim for the assessment year 2010-11 on the new machine will be’ s.2,40,000 s.3, 60,000 s.3,90,000 None of the above COMFORT LTD, a manufacturer sells goods to buyer at Rs.250 per piece. This price is inclusive of State VAT and Central excise duty. State VAT rate is 4%, What would be the excise duty payable per piece, if excise duty rate is 16% plus education cess and SAH education Cess as applicable? (rounded up to nearest Rupee) AL 5.35.00 B. Rs.34.00 c Rs33.00 . None of the above 2x5 =10 (b Fillin the blanks in the following sentences with the most appropriate words: 1. Bonus payable under Payment of Bonus Act shal be pad within a period of {Eighe/S0) month rom the cosure of Accounting year (ection- 19) a li. Provision of payment of excise duty on the basis of production capacity (does not/does} apply to FOU. li, SStunits which produces or manufactures excisable goods and eligible for ‘concession is required under rule 12 (1) of Central Excise Rule tofile quarterly return In Form (ER-3/ER-1) by 20” of next month of the quarter. iv. Unabsorbed depreciation which could not be set off in the same assessment year can be carried forward for (8 years/indefinitely). v. Waste & Scrap can be goods but dutiable only f manufactured and mentioned in the ‘vi. Baggage includes unaccompanised baggage but does not include __asper section 2(3) of the Customs Act 1975. vi, E-Payment of Service Tax is mandatory where the Service Tax paid in the immediate preceding year is not less than (Rs.50 lakhs/Rs.25 lakhs) 2p IFwi, The Audit Committee shall meet atleast (twice/thrice a year ix. Incase of death resulting from injury, minimum compensation is RS (100,000/80,000) under the Workmen's Compensation Act 1923 19:9 stakermeds i} are TRUE or FALSE (Answers without (c) State with reasons whether the following at any reasoning will not deserve any credit) |. Commissioner of Customs is required to approve proper place for unloading of imported or loading of goods for export under the Customs Act. li, Petrol is ‘declared goods’ under the Central Sales Tax Act, 1956. Wi, Brand owner's considered as a Manufacturer under the Central Excise Act 1944. 23=6 PART-A, ‘Answer to Question No.1 (a) (a: Rs 18000 AAs Ms Anusikta is a Government employee, valuation of the perquisite in respect of rent free unfurnished flat would be Rs 18000 being the licence fee of the flat as per Government rules (ie Rs 1500*12) (i) CRs 14420 ‘Service tax payable to the Government on the amount actually received towards the value of taxable services, Hence, the service tax payable in this case will be: (154420+2.103)x0,103=Rs 14420, (ii) A: Rs 30000 Central sales taxis not payable on deposit for returnable containers but is payable on E.duty. Hence, the aggregate sale price for CST is 1830000-300000=1530000 CCST payable will be: (25300001.02}x0,02=Rs 30000, (iv) B:Rs 360000 ‘As RONAK LTD installed plant and machinery due to which the installed capacity increased by more than 20% Ronak Ltd can claim Additional depreciation 20% of 600000, Total depreciatior Nominal depreciation +Additional depreciation) =600000(0.40+0.20) = Rs 360000. () —B:Rs34.00 Since Excise duty is 16% plus education cess 2% and SAH education cess 1% price including excise will be 1.1648, State VAT= 43 of 1.1648-0,046592 Hence, Price inclusive af VAT and excise duty will be 1.211392, Excise duty payable will be= (250+1.211392)x0,1648-Rs 34 ‘Ansauer ta Questinn Nat (ble (Eight, (ii Does not, (i) ER:3,, ((v)- indefinitely, (v)-CETA, (v)- Motor vehicles, (vi $0 lakh , (iil Thrice , (x) Rs 80000 39 IFnn | Answer t ns No U4 (i) TRUE: Commissioner of customs is approved proper places in any customs Port, customs airport or coastal port for unloading and loading of goods or any class ‘of goods and specify the limits of customs Area U/s ~8 of customs Act (i) FALSE: Petrol does not find a place in the list of goods specified as declared goods Under the Central Sales Act 1956. (ia) FALSE: Infact Brand owner is not the manufacturer. Supreme Court in CIBATUL LTD \V.UOI - 1978(22) ELT 302 (SC)-have held that if the goods are produced with customer's Brand name under his quality control, t does not mean under that the customer is the Manufacturer. PART-B (75 Marks) lstio 2. (a) Distinguish between Pilferage of goods and Loss/destruction of goods under the Customs Act, 1962. 34366 (b) MS, BISHAKA, a registered dealer in Patna (Bihar) furnishes the following information ‘relating to Inter-State Sales made by her during the year ended March 31, 2010. Sefestumoner Above includes: 22,03,200 i. Excise duty 41,92,000 Freight (out of this Rs, 18000 is shown separately in Sales Invoices): 66,000 li, ‘Transfer to branch (Covered by FORM-F) 7,29,000 iv. Packing charges 21,000 1. Deposit for returnable Containers 31,44,000, Further the dealer has deducted the following for ascertaining the Sales turnover (inclusive of CST) above, 1) Turnover relating to goods worth Rs. 6000 (exclusive of CST) covered by Invoice dated 12.5.2009 which were returned on 2.11.2008. 2) Goods worth Rs, 7440 {inclusive of CST) covered by invoice dated 16.4.2009 were rejected by the customer and the same were received back on 15.11.2008 The Sale Tax Rate in respect of such goods in the States 296 Required: Find out the Taxable and the tax payable under the Central Sales Tax Act 1956 for the financial year 2009-2010. 2-9 j Answer to Question No. 2 (al: | 4h IFSection 13 deals with Pilferage. ‘The different between Pilferage and Loss or distraction of goods under Customs Act are as follows, Pilferage of Goods | |Loss or distraction of goods Section 23(2) deals with Loss or distraction of goods, ‘No duty is payable at all but liability revives of duty iF goods are restored. Duty is payable under section 23(3), but itis remitted by Assistant Commissioner of Customs. Importer does not have to prove plferage Pilferage should be before order for clearance is made ‘Burden of proof is on importer to prove loss or destruction. | Tos or destruction can be anytime before dearance Toss must be only due to pilferage. | Toss or destruction may be due to fire, accident etc. Expect, pilferage., i datyis paid before examination of ods, refund can | be claimed to be pilfered during examination but | before order for clearance is made. THis not applieable for warehoused goods. Answer to {tis applicable for warehoused goods also (as goods Tf duty s paid, then refund can be obtained only if remission is granted by Customs Authorities. transferred to warehouse are not cleared for home consumption) uestion No 2 (b COMPUTATION TAXABLE TURNOVER AND TAX PAYABLE OF MS BISHAKA FOR THE FINANCIAL YEAR 2009-20. Sales Turnover (inclusive CST) tess: Goods rejected by Customers | Time iit of 6 months does not apply to | deductea Total Turnover (inclusive of CST) Less: Central Sales Tax @ 2% Excise duty (Forms part of turnover-not deductible Freight of Rs, 18000 shown separately in sales invoice- deductible Transfer to branch ~ covered by form-F-not a sale Packing charges-form an integral part of turnover-not deductible Deposit for returnable containers-nat form part of Turnover-deductible 144000 Sales return within 6 month—has been correctly deducted T Rs | 2203200 ws | | 18000 | 729000 | rejected goods —has been correctly | 891000 [1312200 siplr[1312200%0.02 = 25729.00] a 25728 ‘TAXABLE TURNOVER [ieee ‘Taxable Turnover : 85 1286472 Tax payable (CST) Rs 25729 question: 3. (a) MR. DAGA, an indian Resident returned to India after visting England on 08.01.2010.0n his ‘way back to india he brought the following goods with him. LL) His personal effects ike cloths ete valued at Rs. 60,000. 1 tk) 2 (one) ite of wineyRs. 2,000 i) A Microwave oven worth Rs. 40,000 iv) AVIDEO Cassette Recordeatof Rs. 22000 Recorder Required What's this custom duty payable, if duty on baggage is 35% plus education cesses as applicable? 4 (bi What measures have been taken by SEBI to bring transparency and disclosures in case of isting ‘the Securities of Companies? [ii}ow does McA-21 Programme serve the interest of all the stakeholders of a Company, Corporate professionals and the public at large? Beae7 (6) Explain as to how and when the amendments made in a Finance Bil, in respect of Service tax matters come into force? 4 Answer to Question No 3 (a (i) There is no duty on person at effects Total dutiable goods: (2000+22000+40000) = Rs 64000, Less: GFA (General Free Allowance}: (As per Rule) Rs 25000 Duty payable on 39000 (A) Customs Duty payable: (35% of 39000) Rs. 13650.00 Education cess: [2% on (A) 273.00 ‘SAH education cess [1% on (A) 137.00 Total duty payable 114060.00 6 IFAnswer to Question No 3 (b) (i) SEBI has initiated many amendments in the listing agreements (besides clause 49) to bring transparency and ensures adequate disclosures to members and public. Some important measures a) Publication of quarterly un-aucited reports with segment reporting within one month, 1b) Quarterly limited review by the Auditors €}_ Disclosures in the important events in a company 4) Disclosures in the Directors Report (ii) Documents which are required to be filed with the Registrar of Companies at various point of time are for example, Form No. 1A for checking availability of Name, Form no..1 for dectaration for registration of a company, Form No.18 for notice situation/change of registered office of the company, Fling of Memorandum, Annual return ete. Eafier all these documents were filed physically with the Registrar of companies. According to section 52 of the Companies Act these documents are either submitted personally or by post. But after introduction of MCA 21 project almost al the documents can be filed electronically with ROC. This programme serves the interest of all the stakeholders as follows: 41. Company: Can file almost all the documents electronically. Even payment of registration fees and stamp duty can be made online, This will save lot of paperwork, time and money of ‘more than 6 lakhs companies’ registration in our country 2. Corporate Professionals: willbe able to offer efficient services to their company clients. 3. Public at Large: As per companies act, General public have access to many document fled with ROC. Earlier to inspect these documents orto get a certified copy, one need to goto ROC office. But now one can easily access all these documents online. Also redressal of arlevancethas become faster 4. Financia Institutions can easily find charges created on properties before granting finance to the company. Answer to Question No. 3¢ “Amendment in Service Tax Service Tax amendments made by a Finance Bill are generally applicable from the date when Finance Bilis given assent by the President of inca. immediately after the president's assent. The Finance Bill becomes Finance Act. f, however, the amendment in the Finance Bill provides that the amendment is applicable from a date RESELAGRaaNR? to be notified by the Central Government inthe official Gazette, then such amendment is applicable from the date notified by the Central Government. These notifications are issued after the Financial Bill is given assent by the President and the amendment i applicable fram the notified date. 4. (a) MR. PRAKASH KUMAR, an Union leader, has been terminated from services by his employer PRUTHIB LTO for riotous and disorderly conduct shown during the course of employment. The 4% IFemployer forfeited his Gratuity payable underthe Payment of Gratulty Act 2972-1 the action taken by the employer sustainable? 4 {by cane workman dim compensation under the Workmen's Compensation At and ESI Act simultaneously in case of accident injury? Explain 3 {c) MR SANAIB KUMAR (Ages years) sin the teaching staff of 2 private legen PUNE owned by NEERA) LTO. During the previous year 2003-10 he gets the following emoluments Basie salary fs, 4,86,000 Dearness Allowance Rs, 92300 (forming part of salary) city Compensatory allowance fs, 33100 Children's education allowance fs. 2340 (R's. 65 per month for 3 children) House rent allowance fs. 46200 (rent paid Rs. $8000) seftremuneration from te Delhi University for acting as paper setter and examiner: Rs 36400. {Expenditure incurred by Mr. Sanjib Kumar Rs. 3400) ‘The employer provides 1200 ec Car for oficial and private purposes. The entire expenditure on Tolan of driver and running and maintenance of cr (hich approximately comes 0 52300) is borne by the employer. se Sanjb kumar contributes 11% of his salary to Recognised Provident fund to which a matching contribution is made by the employer. He makes an expenelture of Ris. 16000 as insurance premium on His own Life Insurance Policy (Sum assured: Rs. 50000). Required: petermine the taxable income and tax iblity of MR SANIIB KUMAR forthe assessment Yea" 2010- 2011. 2-8 Answerte Question No. (a): an employer can forfeit gratuity wholly or patalyif() an employee has Deen removed from service Tor otous or cis-orderiy conductor act of violence on his part or (i If service Wal terminated for any act whichis offence of moral turpitude is committed by employee urn employment of the company, (ection 4(6) (b) ofthe payment of gratuity Act ~1972) Soin the present case the action of Pruthib Ltd against Mr Prakash Kumar sustainable as the otous and dlsorderly activities have been Committed during the employment ‘Answer to Question No. 4b}: eof IFNo, the workman cannot claim Compensation under the workmen's Compensation Act and ESI Act simultaneously in case of accident injury Section 53 of the ESI Act, 1948 debars any person insured under the Act and his dependents from recovering any Compensation or damages under the Workmen's Compensation Act 1923 or any other laws in respect of an employment injury. Therefore, a person (workman) is not allowed to aim Compensation under the workmen's Compensation Act 1923 in case he makes any claim under the ESI Act. ‘Answer to Question No. 4(cl: DETERMINATION OF TAXABLE INCOME OF MR SANJIB KUMAR FOR THE ASSESSMENT YEAR 2010-11 Basie Salary Dearness Allowance City Compensatory Allowance Education Allowance Less: Exempt (Note-2) | | House cen allowance | Less: Exempt (Note-1) Car [22x{Rs 1200+ Rs 600)] Gross Salary | £ | tesoeductin v/s 16+ Net Salary Income from other sources (36,400-3400) Gross Total Income | Less: Deduction under section 80c (under chapter VIA) (Note-3) ‘Total Taxable Income (rounded off) TAXLABILIT: ‘Tax on Rs 639200 [ Iricome tax: (54000441760) — | Add: Surcharge | Rs. ~ Rs. ~ | 7 — 46200 | fo |679810 679810 72810 | [639200 | : i [95760[Teen Surcharge |Add: Education cess (2% of tax and surcharge) |Add: SAH education cess (1% of tax and surcharge) | Taxpoyaie{runded ot Ean - Notes: 11. House rent Allowance is exempt from tax to the extent of the least of the following: ‘a. Rs. 231320 (being 40% of Rs, 578300) b. Rs. 46200 (being the amount of HRA) _R5.170 (being the excess of rent, paid over 10% of salary ie Rs 58000-10% of 378300) 2. Education allowance for children is not chargeable to tax up to Rs 100 per child per month for a maximum of 2 chlldren, The amount not chargeable to tax= Rs 65x12x2= Rs 1560 3. Deduction u/s-80¢: Contribution to Recognised Provident Fund 112% of Rs (886000492300) = Rs 63613, Insurance Premium {Maximum 20% sum assured) = Rs 10000 73613 Question: 5.(a) Explain the concept of ‘taxable event’ and the significance of the ‘date of removal’ of goods in the context of levy and collection of Central Excise Outy. 4 (b) Is there any obligation to file Service Tax Returh, even if no service tax is payable? 3 (q) VASUDHA MACHINE LTD, a manufacturer has agreed to supply a Machine on the following terms and condition: i. Price of Machine Rs, 408000 (Exclusive of taxes and duties) li, Machine erection expenses fs. 31000 ii, Packing for transporation of Machine : Rs, 5000 iv. Design and drawing Relating to manufacture of machine: Rs. 36000 (Exclusive of taxes and duties) v. Central Sales tax ERS. 2% vi. Central Excise duty 1.16% plus education cess and SAH education cess as applicable vii) Cash discount of Rs. 6000 will be offered if full payment is received before despatch of goods « ‘Additional information: a) The buyer made all payment before delivery of machine. bb) The manufacturer incurred a cost of Rs. 1200 in loading the Machine in the truck in his factory. These are not charged separately to buyer. Required: Loop leDetermine the Assessable Value and Excise Duty payable. 61228 Answer to Question No. 5(a ‘Taxable event: Taxable event isthe event the happening of which attracts the liability to pay tax. The taxable event in Central Excise is production or manufacture of excisable goods, Relevant date for rate of duty and tariff valuation [Rule 4 and 5 of Central Excise Rules, 2002] Rule 4 states that duty is payable at the time of goods from the factory or warehouse. Rule 5 states that the relevant date for determining the rate of duty and tariff valuation shall be ‘the date of actual removal of goods from the factory or warehouse. ‘Accordingly, though the taxable event for the purpose of Central Excise is manufacture or production of excisable goods but a person shal be liable to pay excise duty at the rate prevalent atthe time of clearance of excisable goods from the factory/warehouse and not at the rate prevalent at the time of manufacture. ‘Answer to Question No. 5(b) Filing of NIL Service Tax Return: Once a person is registered, he has to file return even if there isno tax liability. Depending upon the status of the assessee, due dates have been laid ‘down for submission of service tax returns. He should file NIL return, even if there is no Service tax payable for the quarter/half year. However, if he does not file return, penalty can be waived/reduced, if non-filing of return was for sufficient cause (Rule-7c). ‘Answer to Question No. Sic \ASUDHA MACHINE LTD DETERMINATION OF ASSESSABLE VALUE (AV): AND EXCISE DUTY PAYA = Rs. Price of Machine (Exclusive of taxes and duties) 408000 Packing for transporation of Machine 5000 36000 Design and drawing relating to manufacture of machine "449000 tess: Cash Discount {000} ‘ASSESSABLE VALUE (AV) “| 443000 Excise Duty @ 16% on 443000 ee 70880 Education cess: @ 2% on Rs. 70880 18 ‘SAH education cess @ 1% on Rs. 70880 708 ‘TOTAL (EXCISE) DUTY PAYABLE: : | sone Note: 41. Erection Expenses are not includable in AV. 2. The cost of Rs 1200 is already included in the selling price of Machine (as tis not charged separately) and hence is not to be added again, Question: ULF6.{a)s adjustment of a Customary or interim Bonus paid permissible against Bonus payable under the Payment of Bonus Act 19867 | 4 © 4 (b] What isa Belated Return of income as envisaged by section-139(8) of the Income Tax Act 1961? 3 (6) ANURIM LTD, a service provider for the first time made an agreement on 15” August 2009 with BEEKAY LTD to provide different services covered under Business Auxiliary Services at a price of Rs 40 lakh (inclusive of Service tax) for the year ended March, 31,2010, The bills raised and amount. received are given below: "Particulars Bill raised i “Amount Received : Date ‘Amount Date ‘Amount Rs Rs 01 | Advance received from Beekay | 2082009 | 17,00,000 [248.2009 112,00,000 | Ltd for Service to be provided, | | | | 02 | service provided for September | 10.10.2009 | 10,00,000 | 1.12.2009 10,00,000 | 2008 03 | Service provided for December | 11.01.2010 | 13,00,000 5.22010, 13,00,000 | 2009 04 | For Balance Service of 20.3.2010 | 5,00,000 28,3,2010 5,009,000 fs, 500.000 ‘The Company (Anurim Ltd) has complied with the provision of registration and collection of Service tax as per Service Tax laws, Required: i. Can Anurim Lté aval threshhold limit forthe year 2009-10, if so what is the amount?” fi. Compute the value of taxable Services and Services tax payable for the ended March 31, 0 | 2010. 14(542)=8 ‘Answer to Question No. 6(a): ‘Section-17 of the payment of Bonus Act-1965 provides that where in any Accounting year 2.) An employer has paid any Puja Bonus or other customary Bonus to an employee, or ‘bs An employer has paid part of the bonus payable under the Act to an employee before the {ate on which such bonus becomes payable, then the employer shall be entitled to deduct the amount of bonus so paid from the amount of benus payable by him to the employee under this Act in respect of that accounting, year and the employee shall be entitled to recelve only the balance. Answer to Quest [29%Belated Return of income [section 139/44 ‘AnY Berson who has not Furnished the return of income, ‘Within the time allowed under section 139(2) or Within the time allowed in the notice under retumn of income Belatedly. Section 142(1) may furnish the The same should be however furnished within one year from the end ofthe ‘Assessment year or before Completion of assessment, which is earer ‘Answer to Question No. 6(¢ (1s, ANURIM LTD has the option to avail thresnhod imi of Rs 10 lakh during the year 2009-10, wy COMPUTATION OF VALUE OF TAXABLE MARCH 31, 2010, ANURIM LTD. SERVICES AND SERVICE TAX PAYABLE FOR THE YEAR ENDED [ Bill No Pariailars “Amount Received [Value of aatie|] ee ei Services Re | Date “amount wm | Advance eceivedis | 2583008 1700000 | 320000071.303 | —i087sa2 chargeable tS. Tax | Sendice for September [01-11-2008 7000000 100000071.103 | —sossia 2008 | | ~~ | Service for December | 05.0220i0 700000 1300000/3.103 | 1378608 2009 7 Balance Amount [38.03.2030 ——} spgage sa00007i103 | — 453305 received fr Balance | Services | J | ee Total Vale of Taxable Serces 3626073 Less: Exemption (Threshhold limit) (Note} 1090000 Chargeable value of Taxable Services 2626473 {alService Tax on 2626473 @ 10% 262647 ‘Add: Eucation cess @ 2% on (a) 5253 ‘SAH education cess @ 1% on (a) 2627 TOTAL SERVICE TAX PavABLE: 270527 13% le lSNote: ANURIM LTD Started providing business auxiliary services for the "time on 15" August 2009 that sin the financial year 2009-10 and No other services is provided during the year 2008-08. thas complied the provisions of Registration as per service Tax Laws. So, the company can aval the threshold limit of Rs 10 lakh during the year 2008-10 Question: 7. (a) Indicate with reasons whether the following expenses are deductible in the Computation of the Income from Business for the assessment year 2010-11. |. Accompany paid Rs. 20000 to a Lawyer to examine the title deed of a land which it intends to purchase. |i, The compensation of Rs. 2 lakh was paid by a company to the buyer due to delay in delivery, lof the goods as per contract. Wi, -A.company paid Rs. 30000 to a lawyer for conducting Income Tax Appeal. The appeal was however dismissed. 2326 (b) ASLEENA LTD. Cleared various manufactured final products during September 2009. ‘The duty payable for September 2009 on his final products was as follows: Basie: Rs. 2,50,000 Education cess and SAH education cess as applicable. During the month, he received various inputs on which total duty paid by the suppliers of inputs was as follows: Basic duty Rs. 60000 Education Coss Rs, 1200and SAH education Cess = Rs.600 Excise duty paid on Capital goods cecelved during the month was as follows: Basic duty -Rs, 18000 Education Cess =e. 360 SAH education Cess -Rs. 180 Service tax paid on input Service was as follows: Service Tax ~ Rs. 15000 Education Cess Rs. 300 SAH education Ces -Rs. 150 How much duty ASLEENA LTD (assessee) will be required to pay by GAR-7 Challan for the month of September 2009 if there was no opening balance in his PLA account? 5e4=9 IG OEIFAnswer to Question No. 7a i. Amount (Rs 20000) paid to a Lawyer for examining the Tite of Deed ofa land which has not yet been acquired —isa capital expenditure and hence not deductible u/s-37(2), Ti. The payment of Compensation for delay in delivery of goods to the buyer is treated as a ‘normal loss incidental to business and hence itis allowable as revenue expenditure. — u/s 3713). ii, Amount (s 30000) paid to @ lawyer for Conducting income Tax appeals allowable as deduction (as revenue Expenditure). ‘Answer to Question No, 7(b ASLEENA.LTD ‘THE CENVAT CREDIT AVAILABLE FOR THE MONTH OF SEPTEMBER, 2009 is as follows: Deserntion Basie duty Service Tax Education ess | SAW education (Rs) (Rs) (Rs) Ces (Rs) [inpors : 0000 a 7200 600 Capital Goods (50% will be eligible | 9000 180 90 1 | and Balance next year) | ror sence 35000 300 le 69000 15000 ~ | 1680 840, Education Cess payable in final product is Rs 5000 {2% of Rs 250000). SAH education Cess payable is £s 2500 (1% of Rs 250000). Credited of Rs 84000 (69000+15000) can be utilized for Basic duty. Credited of Rs, 1680 for education Cess and Rs 840 for SAH education cess can be utilized for Payment of Education Cess and SAH education cess of final product only. Hence, Duty payable through GAR-7 Challan for the month of September 2009 is as follows: (a) { Description Basie Duty Education Cess SAH education Cess (Rs) (Rs) (Rs) (A) Duty Payable 250000 ‘5000 2500 (8) CENVAT Credit ‘84000 1680 840 ‘Net Amount Payable 1166000 3320 ~— | 2660Question: 8. Write short notes on any three out ofthe following: a) Audit Committee. b) Q Cc) “Manufacture * under the Central Excise Act Reverse Mortgage under the .T. Act. Dutiability of waste and scrap under the central Excise Act 3x5 = 15, ‘Answer to Question No. 8 SHORT NOTE! a) » ‘AUDIT COMMITTEE: (One of the key features of Corporate Governance is ‘Audit Committee’. An audit committee Is a sub-committee of Board of Directors. It should consist of independent directors with no management responsibilty for company’s financial eperationsThe Committee should report directly to Board, ‘Audit Committee aims in strengthening the audit process in a company. It helps in good Corporate Governance and increase credibility, acceptability ‘and reliability of a company. Audit committees should consist of non- ‘executive directors so that the committee can work without any bias Ideally, it should consist of at least three directors. The committee should keep liaison with external as well as internal auditors and to review and analyse their reports, company's financial statements etc. The committee should report to Board of Directors. In Government companies also, C & AG is stressing the need of such auait committees in Government companies. Chairman of Audit Committee- The Chairman of the Audit Committee shall be an independent director. The Chairman shall be present at Annual General Meeting to answer shareholder queries [clause 49jt (A){iijoF Listing Agreement] - Meeting of Audit Committee-The aucit committee shall meet atleast thrice a year. One meeting shall be held before finalization of annual accounts and fone every six months. The quorum shall be either two members or one-third of the members of the audit committee, whichever is higher and minimum of two independent directors. (Clause 49(1I8) of Listing Agreement| ‘Manufacture! under Central Excise Ac ‘The term has been explained by the Supreme Court as under “Manufacture implies change but any change is not manufacture. Change of {an article Isa result of treatment, labour and manipulation but something ‘more is necessary and there must be a transformation. A new, a different article must emerge having @ distinct name, character or use.” It becomes ear from the above that the following ingredients must be present before can be said that there is a manufacture of an article, which attracts levy of Excise Duty: (1) Acertain commodity was produced (6 ople4) | 1) The process of production involved either labour or machinery, and ii.) The en product which came into existence after the manufacturing process was complete,has a commodity name and normally has undergone such a change as to lose its original character. Example: fa ball oftwicelis cut into smaller lengths for distribution to students during exam, for tying up the paper, the small piece of ‘wipgis still a twine. It has not transformed into a new commodity. Therefore, there is no manufacture. Reverse mortgage: A reverse mortgage isa scheme for the benefit of senior citizens, under which Banks can take on the properties from such senior citizens and Provide loans in Lumpsum or lnstalments. The intention is to secure a stream of cash flows to citizens against the mortgage of a residential property (senior citizens 62 years of age). In order to achieve this section 10(43) has been introduced in IT Act to provide that any loan received in 3 transaction of reverse mortgage either in lump or in instalments would not be treated as income. Amendment to section 47 dealing in transaction not ‘regarded as transfer to provide that transfer of property if any in a case of a reverse mortgage shall not be regarded as transfer. Accordingly the transaction is free from chargeability to tax under Capital Gains. In the case of reguiar mortgage, the borrower makes monthly/annual repayment to lender whereas in the case of reverse mortgage a lender ‘makes payments to the borrower while R.M. loan is outstanding, the borrower owns the house and holds tite tot without having to make any ‘monthly mortgage payments. Dutiability of Waste and Scrap under The Central Excise Act: Waste and Scrap are excisable goods if they are known in market parlance and are marketable. CE Act has identified waste products that have revenue potential and such products have been mentioned under applicable Chapter headings. Once an item is mentioned in CE Tariff Act, it is excisable goods provided marketability is satisfied. Examples are: Plastic waste, copper waste and scrap, cotton waste etc. Thus, Waste and Serap will be goods and hence taxable only if specifically mentioned in CETA (Tariff), Waste is dutiable only if there is manufacture. Scrap etc produced while ‘manufacturing final product is exempt. IF 17